DETROIT, July 24 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical Laboratories, Ltd. posted record net sales for Q1 of fiscal 2007, the three months ended June 30, 2006, of $24.8 million, as compared to $17.6 million for the corresponding period of fiscal 2006, representing more than 40% growth. During Q1 of fiscal 2007 net income grew to $5.0 million, compared to $1.6 million in net income for the corresponding period of fiscal 2006.
Daniel H. Movens, Caraco's Chief Executive Officer, said, "The Company continues to head in the right direction. Considering that the previous quarter, ended March 31, 2006, included initial sales from our launch of our generic version of Ultracet(R), and we still outperformed that quarter, it is satisfying to see and proves our team continues to perform well on the execution of our plan."
Q1 results Fiscal 2007
During the first quarter of fiscal 2007, net sales rose to a record $24.8 million from $17.6 million for the corresponding period of fiscal 2006. This represents a 41% increase over Q1 fiscal 2006. Gross profit during the relevant periods improved to $13.0 million, compared to $8.2 million for the corresponding period of fiscal 2006, reflecting an increase of 58.5%. The improvements in gross profit were primarily due to increased sales, an improved balance in the mix of customers or class of trade and product selection being sold, offset in part by price erosion.
SG&A expenses for the first quarter of fiscal 2007 were $2.1 million compared to $1.7 million for the corresponding period of fiscal 2006. The percentage of SG&A dropped more than 1% in Q1 of fiscal 2007 to 8.6% of sales, compared to 9.7% in the corresponding period of fiscal 2006.
Total R&D expenses were $6.1 million for Q1 of fiscal 2007, compared to $4.9 million for the corresponding period of fiscal 2006. The increase in R&D is primarily due to costs associated with our technology transfer agreement with Sun Global, and associated development activities. The agreement generally provides technical product-development support in order for Caraco to file 25 products with the FDA for approval. There are only three products remaining to be transferred and pass biostudies as part of this product agreement.
Two ANDAs were filed in Q1 fiscal 2007 bringing the total to 15 products pending approval at the FDA.
The result was net income of $5.0 million, or $0.13 per diluted share, for Q1 fiscal 2007, compared to net income of $1.6 million, or $0.05 per diluted share, for the corresponding period of fiscal 2006.
"Our current operating cash position continues to improve and we remain free of debt. We generated $6.8 million in cash in the first quarter of fiscal 2007, compared to the utilization of $0.8 million from operations during the corresponding period of fiscal 2006. Additionally, we have available a short-term line of credit from JP Morgan Chase Bank, N.A. of $10.0 million, which allows us the flexibility when determining expansion efforts for increased capacity. We believe that we have the operating cash to support operations and our continued growth.
"Our working capital continues to improve. At June 30, 2006, we had working capital of $49.9 million, compared to working capital of $41.4 million at the end of March 31, 2006. At the end of Q1 of fiscal 2007 we had shareholders' equity of $65.7 million, compared to $56.4 million at the end of March 2006.
"The first quarter of 2007 represented an improvement in net income primarily as a result of increased sales and improvement on gross profit compared to the corresponding period of 2006. Sequentially, the improvement in net income for first quarter 2007, versus the fourth quarter of fiscal 2006, is primarily due to a more realistic level of expense in our non-cash R&D expense and our continued strong sales. This, combined with maintaining control of our SG&A expense as a percentage of sales, was key to our solid performance."
Mr. Movens added, "We believe we currently have the capacity to support our growth through fiscal 2008 and are taking measures to increase our capacity for the foreseeable future. We have invested in additional personnel to fortify our staff and provide for succession planning. We have added the necessary equipment and systems to improve throughput, streamline our operation and maintain or improve quality.
"Pricing pressures are expected to continue in fiscal 2007 as they have over the past few years. This is due in part to increased competition, customer mergers and acquisitions. Continued price erosion could result in lower growth rates and gross margins for fiscal 2007. We have and will continue to work diligently to counter the pricing pressures through increased sales volumes, expansion of our customer base, improved productivity, maintaining control of operational overheads, and gain cost reductions," Mr. Movens added.
More detailed information on the quarter's results will be available in our Form 10 Q which will be publicly available this week.
Detroit-based Caraco Pharmaceutical Laboratories, Ltd., develops, manufactures, markets and distributes generic and private-label pharmaceuticals to the nation's largest wholesalers, distributors, drugstore chains and managed care providers.
Safe Harbor: This news release contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward- looking statements. These risks and uncertainties are contained in the Corporation's filings with the Securities and Exchange Commission, and by competitors of new or superior products or cheaper products or new technology for the production of products, the entry into the market of new competitors, market and include: information is of a preliminary nature and may be subject to adjustment, not obtaining or delays in obtaining FDA approval for new products, governmental restrictions on the sale of certain products, dependence on key personnel, development by competitors of new or superior products or cheaper products, customer acceptance and demand for new pharmaceutical products, availability of raw materials, timing and success of product development and launches, integrity and reliability of the Corporation's data, lack of success of attaining full compliance with regard to regulatory and cGMP compliance, experiencing difficulty in managing our recent rapid growth and anticipated future growth, dependence on limited customer base, occasional credits to certain customers reflecting price reductions on products previously sold to them and still available as shelf- stock, possibility of an incorrect estimate of chargebacks and the impact of such an incorrect estimate on net sales, gross profit and net income, dependence on few products generating majority of sales, product liability claims for which the Company may be inadequately insured, subjectivity in judgment of management in applying certain significant accounting policies derived based on historical experience, terms of contracts, our observations of trends of industry, information received from our customers and other sources, to estimate revenues, accounts receivable allowances including chargebacks, rebates, income taxes, values of assets and inventories, litigation involving claims of patent infringement, litigation involving claims for royalties relating to a prior contract for one product and other risks identified in this report and identified from time to time in our reports and registration statements filed with the Securities and Exchange Commission. These forward-looking statements represent our judgment as of the date of this report. We disclaim, however, any intent or obligation to update our forward-looking statements.
CARACO PHARMACEUTICAL LABORATORIES, LTD. UNAUDITED STATEMENTS OF OPERATIONS Quarter ended June 30, 2006 2005 Net sales 24,751,146 17,612,531 Cost of goods sold 11,743,174 9,450,818 Gross profit 13,007,971 8,161,713 Selling, general and administrative expenses 2,116,440 1,704,633 Research and development costs - affiliate - non cash 4,379,200 3,242,240 Research and development costs - other 1,697,160 1,629,907 Operating income 4,815,172 1,584,933 Other income Interest income 130,920 27,143 Other income 39,832 4,170 Other income 170,752 31,313 Net income 4,985,924 1,616,246 Net income per common share Basic 0.19 0.06 Diluted 0.13 0.05 Weighted number of Shares Basic 26,422,321 26,362,773 Diluted 38,185,021 33,272,376
Caraco Pharmaceutical Laboratories, Ltd.CONTACT: Daniel Movens or Jitendra Doshi of Caraco Pharmaceutical,+1-313-871-8400; Mike Marcotte of Marcotte Financial Relations,+1-248-656-3873
