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Cyanotech Reports Financial Results for the Third Quarter of Fiscal Year 2014

KAILUA KONA, Hawaii (February 6, 2014) — Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in microalgae-based, high-value nutrition and health products, today announced financial results for the third quarter and first nine months of fiscal year 2014, ended December 31, 2013.

Third Quarter 2014
For the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013, net sales were $7,438,000 compared to $7,242,000, an increase of 2.7%. Gross profit was $3,145,000, with gross profit margin of 42.3%, compared to gross profit of $2,865,000 and gross profit margin of 39.6%. Pretax income was $293,000 compared to $619,000, and net income was $36,000 or $0.01 per diluted share, compared to net income of $607,000 or $0.11 per diluted share.

Regarding the third quarter of fiscal 2014 results (changes shown versus the third quarter of fiscal 2013), Brent Bailey, President and CEO, stated, “Total company net sales growth was a modest +3% due to our inability to meet Astaxanthin demand. Our consumer products business (Nutrex) grew +37% in the quarter:

  • Nutrex Mainland: +31
  • Nutrex Hawaii: +47%
  • Nutrex Direct: +60%
  • Nutrex International: +131%

“Retail sales growth of our Astaxanthin products in the U.S. natural products channel was +42% with a market share of 51.9% (+8.2 pts.). Our Spirulina retail dollar growth for the quarter was +28% with a market share of 47.2% (+2.3 pts.). A new, higher dose, 12 mg. BioAstin was launched last September and is now the #1 selling item on our website. In December we introduced a new Spearmint flavor Hawaiian Spirulina on our website. Initial results are very promising.

“Gross margin was up nearly +3 pts. due to strong Spirulina production, which has recovered after a difficult year and was up +39% versus third quarter fiscal 2013.

“We were unable to keep pace with Astaxanthin demand in the third quarter due to:

  • Continued strong growth of the Astaxanthin market.
  • Environmental factors that affected the quantity, but not the quality, of our output. Lower production rates are expected to continue through the fourth quarter of fiscal 2014. Since our bulk business utilizes the lion’s share of our Astaxanthin raw material, it was disproportionately impacted.

“We have successfully completed an initial scale up of a +50% Astaxanthin productivity improvement, and feel there is upside beyond that. While this does not guarantee the same level of results in full production, we do expect it to improve output in the next fiscal year. Our extraction plant arrives in Kona early in fiscal 2015 and is expected to be producing by the end of the calendar year, enhancing efficiency and reducing production lead time.
“Operating income for the third quarter was below a year ago due to insufficient Astaxanthin production to meet demand, planned costs associated with people and infrastructure investments that are driving the strong top line growth we continue to see in our consumer business as well as an increase in legal costs.”

At the end of fiscal 2013, the Company released a valuation allowance against deferred tax assets and now recognizes a provision for income taxes. As a result, the Company’s effective tax rate increased beginning fiscal 2014. During the quarter ended December 31, 2013, the effective tax rate is higher than the statutory rate due primarily to stock option expenses that are not deductible for tax purposes. The provision for income tax is primarily non-cash as the Company is utilizing net operating losses (NOL’s) for federal and Hawaii state income tax purposes. Pretax income for the third quarter was $293,000 compared to $619,000 for the third quarter of fiscal 2013.

First Nine Months 2014
For the first nine months of fiscal 2014 compared to the first nine months of fiscal 2013, net sales were $21,646,000 compared to $20,684,000, an increase of 4.7%. Gross profit was $8,990,000, with gross profit margin of 41.5%, compared to gross profit of $8,251,000 and gross profit margin of 39.9%. Pretax income was $764,000 compared to $1,608,000, and net income was $172,000 or $0.03 per diluted share, compared to net income of $1,576,000 or $0.28 per diluted share.

Trailing 12 Months
For the trailing 12 months ended December 31, 2013 compared to the trailing 12 months ended December 31, 2012, net sales were $28,543,000 compared to $26,670,000 an increase of 7.0%. Gross profit was $11,697,000, with gross profit margin of 41.0%, compared to gross profit of $10,304,000 and gross profit margin of 38.6%. Pretax income was $1,334,000 compared to $1,907,000, and net income was $2,805,000 or $0.47 per diluted share, compared to net income of $2,735,000 or $0.32 per diluted share.

About Cyanotech — Cyanotech Corporation, a world leader in microalgae technology, produces BioAstin® Natural Astaxanthin and Hawaiian Spirulina Pacifica®—all natural, functional nutrients that leverage our experience and reputation for quality, building nutritional brands which promote health and well being. Cyanotech's Spirulina products offer complete nutrition, and augment energy and immune response. They are FDA-reviewed and accepted as Generally Recognized as Safe (GRAS) for use in food products. BioAstin's superior antioxidant activity and ability to support and maintain a natural anti-inflammatory response enhance skin, muscle and joint health. All Cyanotech products are produced from microalgae grown at our 90-acre facility in Kona, Hawaii using patented and proprietary technology. Cyanotech distributes to nutritional supplement, nutraceutical and cosmeceutical manufacturers and marketers in more than 40 countries worldwide. Cyanotech is GMP-certified by the Natural Products AssociationTM. Visit www.cyanotech.com for more information.

“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995 Besides statements of present fact and historical fact, this press release may contain forward-looking statements. Forward-looking statements relate to the future and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by forward-looking statements. We caution against relying on forward-looking statements. Important factors that could change actual, future results include: changes in sales levels to our largest customers, weather patterns in Hawaii, production problems, risks associated with new products, foreign exchange fluctuations, and availability of financing, as well as national and global political, economic, business, competitive, market and regulatory conditions. Other factors are more fully detailed in the Company’s annual Form 10-K filings with the Securities and Exchange Commission.

(Financial Tables Follow: The following tables do not contain footnotes or other information contained in the Company’s Form 10-Q for the period ended December 31, 2013. As such the following Financial Tables are provided only as a guide and other factors are more fully detailed in the Company’s annual Form 10-K filings with the Securities and Exchange Commission.)


Contact:
Bruce Russell: [email protected]
(310) 346-6131

 



 
 
 
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