Cyanotech Corp. (Nasdaq Capital Market: CYAN), a world leader in microalgae-based, high-value nutrition and health products, announced financial results for the third quarter and first nine months of fiscal year 2014, ended Dec. 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 percent. Gross profit was $3,145,000, with gross profit margin of 42.3 percent, compared to gross profit of $2,865,000 and gross profit margin of 39.6 percent. 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 percent due to our inability to meet Astaxanthin demand. Our consumer products business (Nutrex) grew +37 percent in the quarter:
- Nutrex Mainland: +31 percent
- Nutrex Hawaii: +47 percent
- Nutrex Direct: +60 percent
- Nutrex International: +131 percent
“Retail sales growth of our Astaxanthin products in the U.S. natural products channel was +42 percent with a market share of 51.9 percent (+8.2 pts.). Our Spirulina retail dollar growth for the quarter was +28 percent with a market share of 47.2 percent (+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 percent 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 percent 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 Dec. 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 percent. Gross profit was $8,990,000, with gross profit margin of 41.5 percent, compared to gross profit of $8,251,000 and gross profit margin of 39.9 percent. 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 Dec. 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 percent. Gross profit was $11,697,000, with gross profit margin of 41.0 percent, compared to gross profit of $10,304,000 and gross profit margin of 38.6 percent. 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.