Martek Biosciences Corp. said yesterday that it will restate earnings for last year and the first quarter of this year - reducing net income over that period by nearly 18 percent - after revamping the way it accounts for asset depreciation.
Income last year, previously recorded as $17.8 million, will drop to about $15.1 million. Profits for the quarter ending Jan. 31 will fall from $3.8 million to about $2.7 million.
The Columbia nutritional-supplement maker, which disclosed the shift after market close yesterday, said the changes were prompted by a March review of its "depreciation policy," which traditionally ignored assets that weren't being used - including expanded parts of production plants. That month, the Securities and Exchange Commission also sent Martek a letter questioning the practice.
Both actions appear to have been prompted by a Wall Street Journal article March 20 that said the depreciation discounting has "led to concerns that Martek is trying to make profits look more robust than they really are."
"This issue has gotten much more attention than it probably should have," said Martek Chief Financial Officer Peter L. Buzy, who added that the company doesn't believe its accounting practices were deceptive.
Still, Martek now plans to account for asset depreciation as soon as the asset is available for use, regardless of whether it's being used.
Martek also announced yesterday that international sales of its nutritional supplements to infant formula manufacturers will likely boost second-quarter revenue this year by more than $2 million to about $76 million.