Cyanotech Reports Financial Results for the First Quarter of Fiscal 2012

KAILUA KONA, Hawaii--(BUSINESS WIRE)--Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in microalgae-based, high-value nutrition and health products, today announced financial results for the first quarter of fiscal year 2012, ended June 30, 2011.

First Quarter 2012

For the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011, revenues were $5,950,000 compared to $3,856,000. Gross profit was $2,104,000, with gross profit margin of 35%, compared to gross profit of $1,659,000 and gross profit margin of 43%. Net income was $486,000 or $.09 per diluted share, compared to net income of $399,000 or $0.07 per diluted share.

Trailing 12 Months

For the trailing 12 months ended June 30, 2011, compared to the trailing 12 months ended June 30, 2010, revenues were $18,921,000 compared to revenues of $15,577,000. Gross profit was $6,786,000, with gross profit margin of 36%, compared to gross profit of $6,558,000 and gross profit margin of 42%. Net income was $1,817,000 or $.33 per diluted share, including a non-cash tax benefit of $552,000 due to a reduction in the deferred tax valuation allowance and recording of a net deferred tax asset in the fourth quarter of fiscal 2011, compared to $1,377,000, or $0.25 per diluted share. Income before the income tax benefit was $1,256,000 compared to $1,401,000.

Brent Bailey, President and CEO, said, “Cyanotech continued its sound performance in the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011:

• Net Sales were a record $5,950,000 (+$2,094,000 or +54%)
  • Natural astaxanthin sales increased 97%, primarily due to an increase of 94% in bulk astaxanthin products. Packaged astaxanthin sales increased 108%.
  • Spirulina sales increased 12%, primarily due to an increase of 35% in packaged spirulina sales. Bulk spirulina sales increased by 2%.
• Cash increased to $3,109,000 (+$2,241,000 or +258%)
• Inventories declined to $2,809,000 (-$1,368,000 or -33%)

Gross Margin was a disappointing 35% (-8 pts) largely due to lower Spirulina production over the last three quarters and should improve as we sell our higher cost inventory and production levels return to normal.

“The significant increases in packaged product sales are attributed to our focus on the growing consumer market for health and nutrition supplement products, combined with recent media reports regarding the benefits of both astaxanthin and spirulina.”

“We believe that Cyanotech’s high-quality, Hawaiian spirulina and natural astaxanthin will continue to benefit from increasing general consumer demand for natural nutritional products with proven value,” Bailey concluded.

Cash and cash equivalents at June 30, 2011 compared to March 31, 2011 were $3,109,000 compared to $2,062,000. Working capital was $6,715,000 compared to $6,285,000. Inventory was $2,809,000 compared to $3,627,000.

For the first quarter of fiscal 2011, Spirulina sales accounted for 37% of total revenues and natural Astaxanthin sales for 63%. International sales were 40% of total sales.

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 its 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 54 countries worldwide. Cyanotech was the first microalgae company in the world to obtain quality management standards ISO 9001:2000 certification and is GMP-certified by the Natural Products Association^TM. 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 recent Form 10-Q and 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 June 30, 2011. As such the following Financial Tables are provided only as a guide and other factors are more fully detailed in the Company’s Form 10-Q and annual Form 10-K filings with the Securities and Exchange Commission.)

CYANOTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except par value and number of shares)
(Unaudited)
	June 30, 2011			March 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	3,109		$	2,062
Accounts receivable, net of allowance for doubtful accounts of $58 at June 30, 2011 and March 31, 2011	2,762			2,641
Inventories, net	2,809			3,627
Deferred tax assets	17			17
Prepaid expenses and other assets	147			134
Total current assets	8,844			8,481
Equipment and leasehold improvements, net	4,649			4,557
Deferred tax assets	535			535
Other assets	279			287
Total assets	$	14,307		$	13,860
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	217		$	204
Customer deposits	97			115
Accounts payable	981			1,054
Accrued expenses	834			823
Total current liabilities	2,129			2,196
Long-term debt, excluding current maturities	531			553
Total liabilities	2,660			2,749
Commitments and contingencies
Stockholders’ equity:
Common stock of $0.02 par value, shares authorized 7,500,000; 5,395,168 shares issued and outstanding at June 30, 2011 and 5,395,168 at March 31, 2011	108			108
Additional paid-in capital	27,853			27,803
Accumulated deficit	(16,314		)	(16,800		)
Total stockholders’ equity	11,647			11,111
Total liabilities and stockholders’ equity	$	14,307		$	13,860

CYANOTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
	Three Months Ended June 30,
	2011			2010
NET SALES	$	5,950		$	3,856
COST OF SALES	3,846			2,197
Gross Profit	2,104			1,659
OPERATING EXPENSES:
General and administrative	948			763
Sales and marketing	567			383
Research and development	71			84
Loss on disposal of equipment and leasehold improvements	2			—
Total operating expenses	1,588			1,230
Income from operations	516			429
Interest expense, net	(14		)	(20		)
Income before income taxes	502			409
PROVISION FOR INCOME TAXES	16			10
NET INCOME	$	486		$	399
NET INCOME PER SHARE:
Basic	$	0.09		$	0.08
Diluted	$	0.09		$	0.07
SHARES USED IN CALCULATION OF NET INCOME PER SHARE:
Basic	5,395			5,253
Diluted	5,460			5,321