Martek Biosciences Corporation (Nasdaq: MATK) has announced that it plans to restructure its Winchester, Ky., manufacturing facilities in an effort to streamline operations, improve capacity utilization, and reduce manufacturing costs and operating expenses. As part of the restructuring, to be completed by the end of fiscal 2010, Martek plans to reduce its workforce and transfer certain manufacturing and distribution processes currently being performed in Winchester, Ky., to the company's Kingstree, S.C., site. Martek plans to maintain a strong presence in Winchester after the restructuring, with approximately 50 highly skilled employees focused primarily on lab and pilot scale development, innovation and production, as well as supply-chain management.
These changes are consistent with the company's strategy to offset a significant portion of price reductions that result from its infant formula contract extensions by implementing manufacturing cost savings and product innovation initiatives, and by growing its non-infant formula business. Notwithstanding the plant restructuring, when combined with DSM's current ARA production capabilities, Martek's DHA and ARA production capacity will be substantially in excess of current and forecasted requirements for the next several years.
The company's workforce in Winchester will be reduced by approximately 45 people. In connection with this workforce reduction, Martek expects to incur total cash charges of approximately $1.5 million in fiscal 2010, of which $0.5 million will be recognized in the third quarter and $1.0 million in the fourth quarter of fiscal 2010. In addition, Martek is evaluating the potential sale or lease of a portion of its Winchester operations. Any such sale or lease would be contingent upon Martek's ability to maintain the necessary production redundancies through continuing access to certain key processes at the Winchester facility and/or arrangements with contract manufacturers.
Martek expects that the plant restructuring will likely result in a non-cash asset impairment charge or loss upon sale of $30 million - $40 million in the third or fourth quarter of fiscal 2010.
"These actions are essential to Martek becoming a stronger and more efficient company that is better able to serve its customers, execute on its growth strategies, and create shareholder value," said Steve Dubin, CEO of Martek Biosciences Corporation. "I continue to be encouraged by the demand for Martek's products as our base infant formula business is expected to post solid growth this year, our non-infant formula DHA business is growing rapidly, and our Amerifit division continues to perform well." Further information concerning the matters discussed in this press release will be provided on the company's third quarter fiscal year 2010 conference call which is expected to take place in early September.
Martek Biosciences Corporation (Nasdaq: MATK) is a leader in the innovation, development, production and sales of high-value products from microbial sources that promote health and wellness through nutrition. The company's technology platform consists of its core expertise, broad experience and proprietary technology in areas such as microbial biology, algal genomics, fermentation and oil processing. This technology platform has resulted in Martek's development of a number of products including the company's flagship product, life'sDHA™, a sustainable and vegetarian source of algal DHA (docosahexaenoic acid) important for brain, heart and eye health throughout life for use in infant formula, pregnancy and nursing products, foods and beverages and dietary supplements. The company also produces life'sARA™ (arachidonic acid), an omega-6 fatty acid, for use in infant formula and growing-up milks. Martek's subsidiary, Amerifit Brands, develops, markets and distributes branded consumer health and wellness products and holds leading brand positions in all of its key product categories. Amerifit products are sold in most major mass, club, drug, grocery and specialty stores and include: Culturelle®, a leading probiotic supplement; AZO, the leading OTC brand addressing symptom relief, detection and prevention of urinary tract infections; and ESTROVEN®, the leading all-natural nutritional supplement brand addressing the symptoms of menopause. Martek currently has a number of nutritional health and wellness products under development that it plans to commercialize and distribute through Amerifit's distribution channels.
Martek's technology platform has also made it a sought-after partner on a range of groundbreaking projects in process, including the development of microbially-derived biofuels and the development of DHA-containing oilseeds. For more information on Martek Biosciences, visit http://www.martek.com/ < http://www.martek.com/> . For a complete list of life'sDHA and life'sARA products, visit http://www.lifesdha.com/ < http://www.lifesdha.com/> . For more information about Amerifit Brands, visit www.amerifit.com < http://www.amerifit.com/> .
Sections of this release contain forward-looking statements. These statements, including statements about (i) Martek's planned restructuring initiatives in Winchester, Ky., and its plans with respect to future activities at that site, (ii) expected future production and economic benefits of the restructuring, (iii) expected charges resulting from the restructuring, (iv) expected production capacity for DHA and ARA, (v) expected future growth in demand for, and sales of, Martek products, and (vi) performance of the Amerifit division, are based upon numerous assumptions which Martek cannot control and involve risks and uncertainties that could cause actual results to differ. These statements should be understood in light of the risk factors set forth in the company's filings with the Securities and Exchange Commission, including, but not limited to, the company's Form 10-K for the fiscal year ended October 31, 2009 and other filed reports on Form 10-K, Form 10-Q and Form 8-K.