Martek Announces Second Quarter 2009 Financial Results
We continue to be encouraged by recent infant formula sales data which indicates that end consumer demand for infant formula is stable despite the weak global economic environment.
05/06/09 Martek Biosciences Corporation announced its financial results for the second quarter of fiscal 2009. Revenues for the second quarter were $92.4 million, up 2% from $90.7 million in the second quarter of fiscal 2008. Net income was $11.0 million, or $0.33 per diluted share, for the second quarter of fiscal 2009, a 20% increase compared with $9.2 million, or $0.28 per diluted share, in last year's second quarter.
Commenting on the quarter, Chief Executive Officer Steve Dubin said, "The continued execution of our business plan allowed Martek to generate record revenues and profits in the second quarter. These results were achieved despite the challenges of a struggling global economy. We continue to be encouraged by recent infant formula sales data which indicates that end consumer demand for infant formula is stable despite the weak global economic environment. As such, while infant formula related revenue in the second half of our fiscal 2009 will be impacted by some inventory de-stocking, Martek is still expecting strong 2009 earnings as a result of growth in our non-infant formula business and controlling our expenses during this period. I believe our growing non-infant formula business coupled with an expected resumption in growth in our infant formula business in 2010 will lay a solid foundation for 2010."
Revenue Summary
Product sales in the second quarter of fiscal 2009 increased to $88.2 million from $87.9 million in the second quarter of fiscal 2008. Second quarter revenue growth was driven by sales of life'sDHA to non-infant formula nutritional markets which grew to a record level of $9.8 million, up from $8.3 million in the prior year's second quarter. The 18% increase in non-infant formula nutritional products was led by significantly higher sales to the pregnancy and nursing market.
In addition, contract manufacturing sales in the second quarter totaled $4.3 million, compared with $2.9 million a year ago. This increase was primarily due to a change in the timing of orders from one existing customer. While the Company expects to continue reducing the scope of its contract manufacturing activities, Martek will, at times, provide such services to both existing and new customers if reasonable profit margins are expected and there is no impact to the Company's higher margin nutritional oils business.
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 $7.2 million, an increase of 5% over the corresponding quarter of last year. Research and development as a percentage of revenue increased to 7.7% from 7.5% in the prior year's second quarter. The increase relates primarily to development work focusing on offerings for new markets and broadening the array of foods and beverages in which the Company's life'sDHA can be incorporated. The Company continues to expect quarter-to-quarter fluctuations in research and development expenses mainly due to the timing of outside services, including third-party clinical trial services.
During the second quarter of fiscal 2009, selling, general and administrative expenses ("SG&A") were $12.9 million, or 13.9% of revenue, a decrease from $14.2 million or 15.7% of revenue in last year's second quarter. The Company continues to closely manage its SG&A spending levels. Martek expects that for fiscal 2009, SG&A will be lower than fiscal 2008 levels on both a percentage of revenue and absolute dollar basis reflecting the cost management measures employed by the Company to address economic challenges.
Financial Position
For the six months ended April 30, 2009, the Company generated $25.6 million of cash from operating activities, with the second quarter providing $17.0 million of this total. As of the end of the second quarter, Martek had $117.9 million in cash and cash equivalents, a minimal amount of debt and the entire balance of its long-term revolving credit facility ($135 million) available for future borrowing.
