Cost of goods sold increased to $27,948,000, or 49% of net sales, for the three months ended October 31, 2012 from $23,479,000, or 41% of net sales, for the three months ended October 31, 2011. The increase in cost of goods sold as a percentage of net sales is primarily due to pricing declines for both Fluticasone Propionate nasal spray and Dorzolamide ophthalmic products. Additionally, consumer discounts related to an in-store promotion of Nasal Ease ® lowered margins in the Health Care Products division.Research and product development costs for the three months ended October 31, 2012 increased to $3,343,000, compared to $2,468,000 for the same period ended October 31, 2011. The increase in Research and Development expenditures is due to increased spending on internal projects for the generic division, which include four projects that require clinical trials. Three of these projects requiring clinical trials were undertaken in partnership with other companies. Additionally, the Company incurred a onetime expense of $209,000, in the quarter ended October 31, 2012, relating to fees required by the FDA’s new Generic Drug User Fee Act. The fee was based on the number of ANDAs currently awaiting FDA approval. Selling, general and administrative expenses increased to $11,706,000 from $10,459,000 for the three months ended October 31, 2012 and 2011, respectively. This increase is primarily due to increased freight-out expense and increased advertising expense in the Health Care Products division. Amortization expense for the quarter ended October 31, 2012 increased to $1,761,000 from $1,400,000, a 26% increase compared to the same fiscal 2012 period. The increase was due to intangible asset purchases over the last year which includes acquisitions of Tussicaps ® and Sinus Buster ®. For the three months ended October 31, 2012, the Company recorded net income of $8,924,000, a 35% decrease from net income of $13,783,000, for the same period in the prior year. On a fully diluted share basis, EPS decreased to $0.66 from $1.04 in the prior year.
David Seltzer, President and CEO, commented on the results: “We are pleased with the results reported today. Superstorm Sandy forced us to lose four days of shipping and a full week of manufacturing, but we were very fortunate not to have sustained damage to any of our facilities, and that all of our employees are safe. The lost week of production and a surge in cough, cold and flu item orders in the month of November has forced us into a backorder situation on several products. Our staff is working overtime to make up for lost production time, and we are confident that we will restock our inventory position in the coming weeks.”Conference call information The Company will hold a conference call today to discuss its financial results at 10 a.m. Eastern Time. To access the conference call, dial toll free 800-591-6944, or 617-614-4910 for international callers, five minutes before the conference. The passcode for the conference call is 70577202. A replay of the conference call will be available after 12:00 p.m. on December 6, 2012, for one week by calling toll free 888-286-8010, or 617-801-6888 for international callers. The passcode for the replay is 31691417. The call can also be accessed on the Investor Relations page on the Company’s website www.hitechpharm.com. Other Information Hi-Tech currently has twelve products awaiting approval at the FDA, targeting brand and generic sales of over $1.5 billion, including one product for which the Company has a financial interest which was filed by another company. In addition, Hi-Tech has approximately twenty products in active development targeting brand sales of over $3 billion, including sterile ophthalmic products, oral solutions and suspensions and solid dosage forms. Hi-Tech is a specialty pharmaceutical company developing, manufacturing and marketing generic and branded prescription and OTC products. The Company specializes in difficult to manufacture liquid and semi-solid dosage forms and produces a range of sterile ophthalmic, otic and inhalation products. The Company’s Health Care Products Division is a leading developer and marketer of OTC products for the diabetes marketplace. Hi-Tech’s ECR Pharmaceuticals subsidiary markets branded prescription products.
This press release contains certain future projections and forward-looking statements (statements which are not historical facts) with respect to the anticipated future performance of Hi-Tech made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such future projections and forward-looking statements are not assurances, promises or guarantees and investors are cautioned that all future projections and forward-looking statements involve significant business, economic and competitive risks and uncertainties, many of which are beyond Hi-Tech's ability to control or estimate precisely, including, but not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, the regulatory environment, including without limitation, reliance on key strategic alliances, availability of raw materials, fluctuations in operating results, loss of customers or employees, the possibility that legal proceedings may be instituted against Hi-Tech and other results and other risks detailed from time to time in Hi-Tech’s filings with the Securities and Exchange Commission. The actual results will vary from the projected results and such variations may be material. These statements are based on management's current expectations and assumptions concerning the future performance of Hi-Tech and are naturally subject to uncertainty and changes in circumstances. No representations or warranties are made as to the accuracy or completeness of any of the information contained herein, including, but not limited to, any assumptions or projections contained herein or forward-looking statements based thereon. We caution you not to place undue reliance upon any such forward-looking statements which speak only as of the date made, except to the extent specifically dated as of an earlier date. Hi-Tech is under no obligation, and expressly disclaims any such obligation, to update, alter or correct any inaccuracies herein, whether as a result of new information, future events or otherwise.
|Six Months (Unaudited)||Three Months (Unaudited)|
|Cost of goods sold||54,670,000||46,454,000||27,948,000||23,479,000|
|Selling, general, administrative expenses||22,337,000||19,255,000||11,706,000||10,459,000|
|Research & product development costs||7,815,000||5,867,000||3,343,000||2,468,000|
|Contract research income||(2,000)||(28,000)||(2,000)||(1,000)|
|Interest income and other||(123,000)||(306,000)||(77,000)||(282,000)|
|Income before income taxes||22,097,000||41,018,000||13,111,000||20,150,000|
|Provision for income taxes||7,169,000||13,462,000||4,187,000||6,367,000|
|Basic net earnings per share||$||1.13||$||2.16||$||0.67||$||1.08|
|Diluted net earnings per share||$||1.10||$||2.08||$||0.66||$||1.04|
|Weighted average shares outstanding – basic||13,154,000||12,744,000||13,238,000||12,761,000|
|Effect of potential common shares||419,000||483,000||346,000||543,000|
|Weighted average shares outstanding – diluted||13,573,000||13,227,000||13,584,000||13,304,000|