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

— Consumer products business continues strong growth of 47%; Astaxanthin products reach 53.8% market share in US natural products channel —

KAILUA KONA, Hawaii (November 7, 2013) — Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in microalgae-based, high-value nutrition and health products, today announced financial results for the second quarter and first six months of fiscal year 2014, ended September 30, 2013.

Second Quarter 2014
For the second quarter of fiscal 2014 compared to the second quarter of fiscal 2013, net sales were $7,299,000 compared to $6,936,000, an increase of 5.2%. Gross profit was $2,993,000, with gross profit margin of 41%, compared to gross profit of $2,812,000 and gross profit margin of 40.5%. Net income was $106,000 or $0.02 per diluted share, compared to net income of $476,000 or $0.08 per diluted share.

Regarding the second quarter of fiscal 2014 results (changes shown versus the second quarter of fiscal 2013), Brent Bailey, President and CEO, stated, “Total company net sales growth was only +5% largely due to our inability to meet Astaxanthin demand. In spite of the Astaxanthin supply constraint, our consumer products business (Nutrex) grew +47% in the quarter. Net sales growth for these products, by area, was:

  • Nutrex Mainland: +60%
  • Nutrex Hawaii: +9%
  • Nutrex Direct: +29%
  • Nutrex International +75%

Retail sales growth of our Astaxanthin products in the U.S. natural products channel was +81% with a market share of 53.8% (+18.4 pts.). Our Spirulina retail dollar growth for the quarter was +28% with a market share of 50.7% (+6.2 pts.).”

“Continuing the focus on building our consumer packaged business, the West Coast test of our Hawaii marketing plan continues to produce outstanding results with growth 49% greater than the remainder of the country during the second quarter. In addition, we are developing a 30-minute BioAstin infomercial. Also encouraging was the +59% growth of our Bulk Spirulina business. Spirulina production has recovered after a difficult FY2013 and was up +109% versus second quarter fiscal 2013.”

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

  • Continued strong growth of Astaxanthin in both the bulk and consumer markets
  • Poor yields from a major extraction supplier due to a switch from batch to continuous processing. They have since gone back to batch processing and yields have returned to historical levels. Since Bulk utilizes 85% of our Astaxanthin raw material, second quarter net sales was significantly impacted and we expect third quarter to be impacted as well.
  • Environmental factors that have affected the quantity, but not the quality, of our output during the second quarter. We continue to adjust the culture parameters to increase production rates; however, lower production rates could persist until the fourth quarter of fiscal 2014.”

“Operating income for the second quarter was below year ago due to the planned cost of the West Coast test market and the infomercial production as well as the costs associated with the people and infrastructure investments that were begun in fiscal 2013 and which are driving the strong top line growth we continue to see in our consumer business.”

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 during the quarter ended September 30, 2013 and is higher than the statutory rate due 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 second quarter was $335,000 compared to $486,000 for the second quarter of fiscal 2013

First Six Months 2014
For the first six months of fiscal 2014 compared to the first six months of fiscal 2013, net sales were $14,208,000 compared to $13,442,000, an increase of 5.7%. Gross profit was $5,845,000, with gross profit margin of 41.1%, compared to gross profit of $5,386,000 and gross profit margin of 40.1%. Pretax income was $471,000 compared to $989,000, and net income was $136,000 or $0.02 per diluted share, compared to net income of $969,000 or $0.17 per diluted share.

Trailing 12 Months
For the trailing 12 months ended September 30, 2013 compared to the trailing 12 months ended September 30, 2012, net sales were $28,347,000 compared to $26,134,000 an increase of 8.5%. Gross profit was $11,417,000, with gross profit margin of 40.3%, compared to gross profit of $10,266,000 and gross profit margin of 39.3%. Pretax income was $1,671,000 compared to $2,438,000 compared to $3,892,000 and net income was $3,376,000 or $0.43 per diluted share, compared to net income of $3,240,000 or $0.58 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 September 30, 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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