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Hi-Tech Pharmacal Co., Inc. (HITK)
F2Q09 (Qtr End 10/31/08) Earnings Call Transcript
December 9, 2008, 10:00 am ET
David Seltzer – Chairman, President and CEO
Bill Peters – VP and CFO
Tim Chiang – FTN Midwest
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Forward-looking statements, statements which are not historical facts in this conference call, are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not promises or guarantees, and investors are cautioned that all forward-looking statements involve risks and uncertainties, 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 and other results and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission.
These statements are based on management's current expectations and naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward-looking statements which speak only as of the date made. Hi-Tech is under no obligation to and expressly disclaims any such obligation to update or alter forward-looking statements, whether as a result of new information, future events or otherwise. As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the call over to your host for today, Mr. David Seltzer, CEO. Please proceed, sir.
Thank you, good morning. I am David Seltzer, President and CEO of Hi-Tech Pharmacal Co. Inc. and I would like to welcome all listeners to our conference call this morning.
The purpose of today's call is to discuss this morning's earning release for the second quarter of fiscal 2009, which ended October 31, 2008. Joining me on the call today is our Chief Financial Officer, Mr. Bill Peters. In a moment, I'll turn the call over to Bill who will review the financial results for the quarter, and then I'll discuss some of the highlight for the same period and give an update on more current events. After that time, we will be happy to take questions.
With that, I'd like to turn the call over to Bill.
Thank you, David.
I am pleased to report that sales for the quarter increased 58% to a record $25.1 million from $15.9 million for the same period last year. Sales of generic prescription products increased 44% to $19.5 million due to sales of new generic prescription items, including Dorzolamide with Timolol ophthalmic solution, Dorzolamide ophthalmic solution and Fluticasone propionate nasal spray. In addition to the generic sales, the company recorded sales of $2.3 million from the Midlothian division, which was acquired last December.
Sales for our Health Care Products division increased to $3.3 million from $2.3 million, as we saw strong sales of our newly launched Zostrix Neuropathy and Nasal Ease products. Gross profit increased to 48% of sales from 36% of sales due to the sales of these newly launched generic products. Research and development costs increased to $1.8 million from $1.5 million as the company increased its investments in external projects. Selling, general and administrative expenses increased to $7.5 million from $5.7 million due to SG&A expenses related to our Midlothian division and amortization of Midlothian intangibles and legal costs associated with the launch of Dorzolamide with Timolol.
As a result of these factors, the company earned approximately $1.1 million or $0.09 per share. The company ended the quarter with $12.9 million of cash. This quarter we used some of our cash to increase our inventory to $21.9 million to support the Dorzolamide and Dorzolamide with Timolol launches and due to increases in cough and flu products ahead of the winter season. Our receivables increased to $22.9 million due to large sales of our newly launched products released in the quarter.
During the quarter, the company used some of its cash to purchase approximately 94,000 shares of its own stock at an average price of approximately $7 per share. Subsequent to quarter end, the company spent just under $1 million repurchasing shares to complete all of the company’s outstanding repurchase programs. At this time, the primary future use of our remaining cash would be to increase the growth prospects for the company, including acquisitions, capital expenditures and research and development spending.
I'll now turn the call back over to David.
Thank you, Bill.
We are quite pleased with our overall performance in our second fiscal quarter as sales increased by 58% to $25million. Generic sales increased by 44% to $19.5 million dollars, which did not include sales of our Midlothian division, which added an additional $2.3 million in sales in the quarter. Our net income for the quarter was $1.1 million versus a net loss of $1 million for the same period last year. In addition, our cost of sales decreased as a percentage of sales in the quarter to 52% of net sales from 64% in the comparable quarter last year.