The Cost of manufactured product increased by 0.8% principally due to higher unit costs offset by lower volumes. Profit margins can fluctuate depending upon, among other things, the cost of manufactured product and the capitalized cost of product recorded in inventory, as well as product sales mix. Royalty expense increased 1.2% due to higher gross revenues. Rebates have a significant impact on the ratio of gross sales to net sales.Gross profit decreased 1.9% primarily due to higher cost of manufacturing and slightly lower revenues. Operating expenses decreased 8.6%. The decrease was due to suspension of the medical device excise tax, reduced donations of product, severance benefits not incurred in 2016, and lower bad debt accruals. A non-recurring recognition of $7,724,826 received from BD in the second quarter of 2015 pursuant to a patent infringement case had a significant impact on income for the nine months ended September 30, 2015. Our operating loss was $1.6 million compared to an operating loss for the same period last year of $2.3 million due primarily to lower operating expenses. Our effective tax rate on the net earnings (loss) before income taxes was (0.1)% and 0.1% for the nine months ended September 30, 2016 and September 30, 2015, respectively. Cash makes up 37.5% of total assets. Working capital was $20.6 million at September 30, 2016, a decrease of $2.2 million from December 31, 2015. Approximately $1.6 million in cash flow in the nine months ended September 30, 2016 was used by operating activities. Further details concerning the results of operations as well as other matters are available in Retractable's Form 10-Q filed on November 14, 2016 with the U.S. Securities and Exchange Commission. Retractable manufactures and markets VanishPoint® and Patient Safe® safety medical products and the EasyPoint® needle. The VanishPoint® syringe, blood collection, and IV catheter products are designed to prevent needlestick injuries and product reuse by retracting the needle directly from the patient, effectively reducing exposure to the contaminated needle. Patient Safe® syringes are uniquely designed to reduce the risk of bloodstream infections resulting from catheter hub contamination. The EasyPoint® is a retractable needle that can be used with luer lock syringes, luer slip syringes, and prefill syringes to give injections. The EasyPoint® needle also can be used to aspirate fluids and for blood collection. Retractable's products are distributed by various specialty and general line distributors.
For more information on Retractable, visit its website at www.vanishpoint.com.Forward-looking statements in this press release are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and reflect Retractable's current views with respect to future events. Retractable believes that the expectations reflected in such forward-looking statements are accurate. However, Retractable cannot assure you that such expectations will materialize. Actual future performance could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: Retractable's ability to maintain liquidity; Retractable's maintenance of patent protection; the impact of current and future Court decisions regarding current litigation; Retractable's ability to maintain favorable third party manufacturing and supplier arrangements and relationships; Retractable's ability to quickly increase capacity in response to an increase in demand; Retractable's ability to access the market; Retractable's ability to maintain or lower production costs; Retractable's ability to continue to finance research and development as well as operations and expansion of production; the impact of larger market players, specifically Becton, Dickinson and Company, in providing devices to the safety market; and other risks and uncertainties that are detailed from time to time in Retractable's periodic reports filed with the U.S. Securities and Exchange Commission.