Martek Product Sales Up 10% in Q4

Both the fourth quarter of fiscal 2008 and 2007 included a non-recurring tax benefit with such tax benefits totaling $1.5 million and $10.8 million in the fiscal 2008 and fiscal 2007 periods, respectively.

12/12/08 Martek Biosciences Corporation has announced its financial results for the fourth quarter and fiscal year ended October 31, 2008. Revenues for the fourth quarter were $90.4 million, up 10% from $82.0 million in the fourth quarter of fiscal 2007. Net income was $10.5 million, or $0.31 per diluted share, for the fourth quarter of fiscal 2008 compared with $18.3 million, or $0.55 per diluted share, in last year's fourth quarter. Both the fourth quarter of fiscal 2008 and 2007 included a non-recurring tax benefit with such tax benefits totaling $1.5 million and $10.8 million in the fiscal 2008 and fiscal 2007 periods, respectively.

Excluding the impact of the tax benefits, the Company's net income on a non-GAAP basis would have been $8.9 million, or $0.27 per diluted share, in the fourth quarter of fiscal 2008 compared to $7.5 million, or $0.23 per diluted share, in the fourth quarter of fiscal 2007, a 17% increase. (see "Reconciliation of GAAP to Non-GAAP Net Income Measure" below).

Commenting on the quarter, Chief Executive Officer Steve Dubin said, "Our results in this year's fourth quarter as well as the full fiscal year 2008 reflect the continued execution of our business plan. During the year, we increased penetration in international infant formula markets, expanded the use of DHA outside of infant formula and significantly improved our profitability and cash flow generation. These solid results have yielded a strong year-end balance sheet that includes over $100 million in cash and cash equivalents and is essentially debt-free. While economic conditions will present challenges, I believe that Martek is well-positioned to deliver revenue and profit growth in the year ahead."

Product sales in the fourth quarter of fiscal 2008 increased 10% year-over-year to $86.6 million, and product sales for FY08 grew to $336.6 million, a 15% increase over prior year levels. These increases reflect higher revenues from Martek's infant formula customers, particularly outside of the United States, and a solid growth in sales of life'sDHA to non-infant formula markets which grew more than 30% in both the fourth quarter and full fiscal year periods.

Overall gross margin for the fourth quarter of fiscal 2008 was 41.3%, an increase over the 40.2% gross margin realized in the fourth quarter of fiscal 2007. The improvement resulted largely from enhanced DHA production yields, increased capacity utilization at Martek's manufacturing facilities, and reductions in ARA costs. These margin improvements were attained by the Company despite experiencing increases in both utility and raw material costs during fiscal 2008.

Research and development expenses in the fourth quarter of fiscal 2008 were $7.1 million, or approximately 8% of revenue, consistent, on a percentage of revenue basis, with the fourth quarter of fiscal 2007. The Company's research and development efforts continue to focus on developing new food and beverage applications for life'sDHA, broadening the scientific evidence supporting the benefits of life'sDHA throughout life, improving manufacturing processes and developing new products to expand the Company's market offerings. In the future, the Company expects to continue to experience quarter-to-quarter fluctuations in research and development expenses primarily due to the timing of outside services, including third-party clinical trial services. Research and development expenses in fiscal 2008 were $26.2 million, or 7.4% of revenue, fairly consistent, on a percentage of revenue basis, with research and development spending levels in fiscal 2007.

During the fourth quarter of fiscal 2008, selling, general and administrative expenses were $13.4 million, or 14.8% of revenue, which is consistent with the prior year's fourth quarter. For the full fiscal year 2008, selling, general and administrative expenses as a percentage of revenue were approximately 15.4%, compared to 14.6% in fiscal 2007.