Martek Announces Second Quarter 2009 Financial Results
– Record revenues of
– Record non-infant formula nutritional sales of
– Record pre-tax income of
– Earnings per share of
– Operating cash flow of
– Full fiscal year 2009 earnings guidance of
– Memory study results to be released in
Commenting on the quarter, Chief Executive Officer
Revenue Summary
Product sales in the second quarter of fiscal 2009 increased to
The following is a breakdown of product sales by market for the second quarter and year-to-date periods (in thousands):
Three months ended Six months ended
April 30, April 30,
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2009 2008 % 2009 2008 %
incr incr
(decr) (decr)
Infant formula market $77,383 $78,390 (1%) $151,974 $148,668 2%
Food and beverage market 2,979 3,172 (6%) 5,597 5,267 6%
Pregnancy and nursing,
nutritional supplements
and animal feeds 6,801 5,113 33% 12,465 10,405 20%
Non-nutritional products 989 1,200 (18%) 2,138 2,144 0%
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Total product sales $88,152 $87,875 0.3% $172,174 $166,484 3%
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In addition, contract manufacturing sales in the second quarter totaled
Gross Margin and Operating Expenses
Overall gross margin for the second quarter of fiscal 2009 was 42.3%, an increase over the 41.2% gross margin realized in the second quarter of fiscal 2008. The improvement resulted largely from ARA cost reductions and increased capacity utilization at Martek’s manufacturing facilities.
Research and development expenses in the second quarter of fiscal 2009 were
During the second quarter of fiscal 2009, selling, general and administrative expenses (“SG&A”) were
Financial Position
For the six months ended
Significant Recent Events
- Non-Infant Formula Product Launches – Several non-infant formula nutritional products with Martek’s life’sDHA(TM) were launched by Martek’s customers, including Walmart Spring Valley DHA dietary supplements and The Coca Cola Company’s Minute Maid Blueberry Pom single serve beverage, an extension of Minute Maid’s current Pomegranate Blueberry juice with life’sDHA(TM).
- Multi-Year Sole-Source Infant Formula Supply Agreements - Martek entered into multi-year, sole-source infant formula supply agreements with Rice Field Corporation (“Rice Field”) and Lactalis Nutrition Sante (“Lactalis”). Under the Rice Field agreement, Martek will supply its DHA and ARA blend for all infant formula products manufactured by Rice Field under the Prodigy brand. Rice Field will also be using Martek’s life’sDHA(TM) and life’sARA(TM) in its growing-up milks and will be using life’sDHA(TM) in its products for pregnant and nursing women, all of which will be sold under the Prodigy brand in
China . Under the Lactalis agreement, Martek will supply its life’sARA(TM) for use in infant formula and growing-up milks produced by Lactalis and sold inFrance andAlgeria .
- Multi-Year Exclusive Food and Beverage Supply Agreement - Martek entered into a multi-year supply agreement with Ragasa, one of Mexico’s largest providers of raw and refined oil products and maker of Mexico’s leading consumer cooking oil brand, Nutrioli, under which Ragasa has agreed to purchase all of its DHA omega-3 needs from Martek. Ragasa plans to launch a product featuring life’sDHA(TM) in 2009 and will display the life’sDHA(TM) logo on the product packaging and in all related promotional materials.
- Arrangement for the Production of Influenza Drug Precursor – Consistent with the services provided by Martek in 2006, Martek has been re-engaged to manufacture shikimic acid, the starting material used to produce an anti-viral drug for the treatment of influenza. Sales for such services are expected to approximate
$4.5 million , with one-half of this total anticipated to occur in Martek’s fourth quarter of fiscal 2009 and the remainder anticipated to occur during the first half of fiscal 2010.
- New Scientific Data Published on DHA - A summary document for the International Society for the Study of Fatty Acids and Lipids published in Prostaglandins, Leukotrienes and Essential Fatty Acids (
February 2009 ) discussed obtaining adequate DHA intake in light of current western diets. They concluded that with no other changes in diet, improvement of blood DHA status can be achieved with dietary supplements of preformed DHA (such as Martek’s life’sDHA(TM)), but not with supplementation of ALA, EPA, or other precursors.
Memory Study Results to be Released
Martek’s Memory Improvement With Docosahexaenoic Acid Study (MIDAS) clinical trial studying the effects of life’sDHA(TM) supplementation in improving cognitive functions (i.e. – working memory, memory retention and attention) in healthy subjects with age-related cognitive decline has concluded. Results of this study will be the subject of an oral presentation at the International Conference on Alzheimer’s Disease to be held
Financial Guidance
Based on recent retail sales data, Martek estimates that overall end consumer demand for infant formula in
Martek expects total revenues for the third quarter of fiscal 2009 to be between
For the full fiscal year 2009, Martek expects total revenues to be between
The Company anticipates that infant formula revenue will grow in fiscal 2010 as a result of continued strong end consumer demand for infant formula products containing DHA and ARA.
Investor Conference Call Webcast
Martek will host a conference call and Webcast for investors to review its second quarter results and fiscal 2009 outlook at
General
Sections of this release contain forward-looking statements concerning, among other things: (1) Martek’s expectations regarding future revenue growth in and customer demand from the infant formula, pregnancy and nursing, nutritional supplements, animal feeds and food and beverage markets; (2) its expectations and beliefs regarding the impact of customer de-stocking on revenues in the third and fourth quarters of fiscal 2009; (3) its expectations regarding revenue, gross margin, operating expenses and income for the third quarter of and full fiscal year 2009; and (4) its expectations regarding launches by customers of products containing Martek’s life’sDHA(TM) and Martek’s contract manufacturing business. Furthermore, Martek’s operating results are subject to quarter-to-quarter fluctuations, some of which may be significant. The forward-looking statements noted above are based upon numerous assumptions which Martek cannot control and involve risks and uncertainties that could cause actual results to differ. These statements should be understood in light of the risk factors and cautionary statements set forth herein and in the Company’s filings with the Securities and Exchange Commission, including, but not limited to, Part I, Item 1A of the Company’s Form 10-K for the fiscal year ended
About Martek
Martek Biosciences Corporation (Nasdaq: MATK) is a leader in the innovation and development of omega-3 DHA products that promote health and wellness through every stage of life. The Company produces life’sDHA(TM), a vegetarian source of the omega-3 fatty acid DHA (docosahexaenoic acid), for use in foods, infant formula and supplements, and life’sARA(TM) (arachidonic acid), an omega-6 fatty acid, for use in infant formula. For more information on Martek Biosciences, visit www.martek.com.
MARTEK BIOSCIENCES CORPORATION
Summary Consolidated Financial Information
(Unaudited) - $ in thousands, except per share data
Unaudited Condensed Consolidated Statements of Income Data
Three months ended Six months ended
April 30, April 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ----- ----
Revenues:
Product sales $88,152 $87,875 $172,174 $166,484
Contract manufacturing sales 4,259 2,851 7,600 7,123
------ ------ ------- -------
Total revenues 92,411 90,726 179,774 173,607
------ ------ ------- -------
Cost of revenues:
Cost of product sales 49,299 50,579 96,208 95,676
Cost of contract manufacturing
sales 4,017 2,764 7,426 6,452
------ ------ ------- -------
Total cost of revenues 53,316 53,343 103,634 102,128
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Gross margin 39,095 37,383 76,140 71,479
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Operating expenses:
Research and development 7,157 6,819 13,906 12,800
Selling, general and
administrative 12,875 14,234 25,972 27,215
Amortization of intangible
assets 1,595 1,877 3,376 3,556
Other operating expenses 569 96 722 249
------ ------ ------ -------
Total operating expenses 22,196 23,026 43,976 43,820
------ ------ ------ -------
Income from operations 16,899 14,357 32,164 27,659
Interest income (expense) and
other, net 186 309 346 526
------ ----- ------ ------
Income before income tax
provision 17,085 14,666 32,510 28,185
Income tax provision 6,068 5,464 11,887 10,314
------ ------ ------ ------
Net income $11,017 $9,202 $20,623 $17,871
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Basic earnings per share $ 0.33 $ 0.28 $0.62 $0.54
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Diluted earnings per share $ 0.33 $ 0.28 $0.62 $0.54
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Shares used in computing basic
earnings per share 33,190 32,916 33,170 32,830
Shares used in computing diluted
earnings per share 33,310 33,231 33,349 33,151
Unaudited Condensed Consolidated Balance Sheets Data
April 30, October 31,
2009 2008
-------- ---------
Assets:
Cash and cash equivalents $117,944 $102,495
Accounts receivable, net 52,898 40,438
Inventories, net 109,603 99,553
Other current assets 3,905 4,866
Property, plant and equipment, net 259,747 265,900
Deferred tax asset 25,819 38,356
Long-term investments 11,615 11,336
Goodwill and other, net 84,029 83,037
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Total assets $665,560 $645,981
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Liabilities and stockholders' equity:
Current liabilities $43,420 $47,342
Non-current liabilities 9,301 10,056
Stockholders' equity 612,839 588,583
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Total liabilities and stockholders' equity $665,560 $645,981
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Unaudited Condensed Consolidated Cash Flow Data
Six months ended
----------------
April 30,
2009 2008
---- ----
Operating activities:
Net income $20,623 $17,871
Non-cash items 27,671 24,611
Changes in operating assets and liabilities,
net (22,663) (3,726)
------ ------
Net cash provided by operating activities 25,631 38,756
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Investing activities:
Purchase of investments and marketable
securities, net - (10,850)
Expenditures for property, plant and
equipment (5,263) (3,576)
Capitalization of intangible assets (4,435) (2,165)
----- ------
Net cash used in investing activities (9,698) (16,591)
----- ------
Financing activities:
Repayments of notes payable and other
long-term obligations, net (59) (426)
(Payments) proceeds from equity transactions,
net (425) 5,944
--- -----
Net cash (used in) provided by financing
activities (484) 5,518
--- -----
Net change in cash and cash equivalents 15,449 27,683
Cash and cash equivalents,
beginning of period 102,495 16,973
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Cash and cash equivalents, end of period $117,944 $44,656
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CONTACT
Kyle Stults
Investor Relations
(410) 740-0081
kstults@martek.com
SOURCE Martek Biosciences Corporation