Martek Revenues Down 3% in Q4
The revenue decrease in the current year's fourth quarter was caused largely by declines in infant formula revenues due to the continuing effects of de-stocking by certain infant formula customers as well as slight declines in the number of births in the U.S.
17 Dec 2009 --- Martek Biosciences Corporation has announced its financial results for the fourth quarter and fiscal year ended October 31, 2009. Revenues for the fourth quarter were $87.6 million, down 3% from $90.4 million in the fourth quarter of fiscal 2008. Net income was $11.0 million, or $0.33 per diluted share, for the fourth quarter of fiscal 2009, a 5% increase compared with $10.5 million, or $0.31 per diluted share, in last year's fourth quarter. The fourth quarter of fiscal 2008 included a non-recurring tax benefit of $1.5 million. Excluding this tax benefit, the fiscal 2008 fourth quarter earnings would have been $8.9 million, or $0.27 per diluted share. Compared to these prior year non-GAAP amounts, the Company's net income rose by 24% in the fourth quarter of fiscal 2009.
Commenting on the quarter and year, Chief Executive Officer Steve Dubin said, "Martek's solid fiscal 2009 financial results, though impacted by the many global economic factors affecting business in general, reflect the quality of Martek's products and the desire of consumers to improve their health and well-being, even in times of economic uncertainty. Sales to our infant formula customers decreased by 5% from 2008 primarily due to the de-stocking issues we have previously discussed as well as declining U.S. birth rates; however, our sales of DHA outside of infant formula increased by over 25% in fiscal 2009, with record quarterly sales achieved in Q4 2009. This increase was substantial in light of the global economy. I expect formula sales to increase slightly in 2010, as we believe that continued growth in international markets is expected to more than offset the impact of declining U.S. births or any additional de-stocking of inventory by our customers."
Mr. Dubin continued, "I also believe we are well-positioned for another year of strong growth in our non-formula markets with a number of new product launches from current customers set to go over the next two quarters and important new customers coming into the market with products over the next several months. Our pre-tax earnings improvement of just over 10% in fiscal 2009 was achieved by controlling costs and by improving the efficiencies of our production processes. Our continuous efforts to improve our manufacturing efficiencies coupled with additional decreases in our ARA costs should result in further gross margin improvements in 2010 and, along with an expected increase in sales, should further improve our profitability over 2009. We also made significant progress on our product pipeline in 2009 and we will be sharing information about these exciting developments publicly early next year."
Product sales in the fourth quarter of fiscal 2009 decreased to $81.9 million from $86.6 million in the fourth quarter of fiscal 2008. The revenue decrease in the current year's fourth quarter was caused largely by declines in infant formula revenues due to the continuing effects of de-stocking by certain infant formula customers as well as slight declines in the number of births in the U.S. These revenue declines were partially offset by non-infant formula nutritional revenues of $10.6 million in the fourth quarter of fiscal 2009 which represents a 32% increase from last year's fourth quarter.
In addition, contract manufacturing and services revenues in the fourth quarter totaled $5.7 million, compared with $3.7 million a year ago. This increase was due primarily to the continued production of shikimic acid, a starting material used to produce an anti-viral drug for the treatment of influenza, as well as the initial revenues associated with Martek's joint development agreement with a subsidiary of BP p.l.c. ("BP") for work on microbial oils for use as biofuels. As previously communicated, the Company anticipates exiting most of its historical contract manufacturing activities over the course of fiscal 2010; however, its development services with BP are expected to continue through at least 2011.
Overall gross margin for the fourth quarter of fiscal 2009 was 43.8%, a significant increase over the 41.3% gross margin realized in the fourth quarter of fiscal 2008. The continued improvement resulted largely from ARA cost reductions and DHA productivity increases.
Research and development expenses in the fourth quarter of fiscal 2009 were $6.9 million, essentially flat compared to the corresponding quarter of last year. Research and development expenses in fiscal 2009 were $27.4 million, or 8.0% of revenue, a slight increase, on a percentage of revenue basis, from research and development spending levels in fiscal 2008. Martek's research and development focuses on both broadening the market applications for the Company's life'sDHA(TM) as well as leveraging the Company's microbial technology to develop new product offerings. 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 fourth quarter of fiscal 2009, selling, general and administrative expenses ("SG&A") were $12.6 million, a decrease from $13.4 million in last year's fourth quarter. For the full fiscal year 2009, SG&A expenses as a percentage of revenue were approximately 14.5%, compared to 15.4% in fiscal 2008. The Company closely managed its SG&A spending levels and for fiscal 2009, SG&A was lower than in fiscal 2008 on both a percentage of revenue and absolute dollar basis.
As of the end of the fourth quarter, Martek had $141.1 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. For the fiscal year ended October 31, 2009, the Company generated $65.8 million of cash from operating activities. Martek's year-end inventory value of approximately $116 million is consistent with previously disclosed expectations and reflects a reduction of over 7% from amounts held at the end of the Company's third quarter.
