Adams Respiratory Therapeutics, Inc. (Nasdaq: ARxT) today announced
financial results for the fourth quarter and fiscal year ended June 30, 2007.
Commenting on the quarterly results, COO Robert D. Casale, said, "Solid
retail consumption and strong market share gains of our key brands during this
non-seasonal quarter represent a healthy business."
Casale added, "During the fiscal 2007 fourth quarter we were intently
focused on preparations for the market introduction of our new OTC products.
Our teams did a great job securing trade distribution and promotional
programs. At this time we already have commitments and programs to support a
20 percent display increase over last year. We're expecting another year of
strong promotional support across all our major drug customers. It is safe to
say, based on initial trade orders and acceptances, that we will have all of
our new products and segments in distribution at most outlets in the Food,
Drug and Mass channels. By the end of this week, we expect to have shipped
all of these products except grape Delsym. The adult and children's versions
of grape-flavored Delsym are awaiting final FDA approval. We remain confident
about the potential for our new products to further strengthen our OTC
business."
Summary of Fiscal 2007 Results
Annual net sales of $331.6 million were in line with the Company's
previously disclosed net sales projection of between $320 and $335 million,
and represent an increase of $92.5 million or 39 percent over net sales of
$239.1 million in fiscal 2006. The solid top-line growth was primarily due to
higher sales of new products such as the line of Mucinex for Children products
and Delsym, as well as the continued market penetration of Mucinex DM and
Mucinex D. The annual sales growth was tempered by a decline in sales of
Mucinex SE, primarily due to a greater availability of and patient conversion
to Mucinex DM. Overall net sales in fiscal 2007 were tempered by a lower
severity of upper respiratory illness during the 2006-2007 cough/cold season.
As a percentage of net sales, Adams produced a gross margin of 71.1
percent for fiscal 2007, compared to 79.4 percent in fiscal 2006. The
significant decline in the gross margin was primarily due to $9.2 million of
non-recurring expenses relating to the repurchase of the Ft. Worth, Texas,
manufacturing operations in July 2006; year-over-year changes in the Company's
product sales mix resulting from the integration of new products such as
Delsym and the line of Mucinex for Children products and higher sales of
Mucinex DM, all of which carry lower margins than single-ingredient Mucinex;
and increases in raw material costs. The fiscal 2007 gross margin was lower
than the Company's projected 72 percent guidance primarily due to charges
associated with the disposal of some inventory.
Selling, marketing and administrative expenses in fiscal 2007 increased 65
percent to $162.9 million from $99.0 million in fiscal 2006. The increase was
primarily driven by increased spending on sales, promotional and marketing
programs, including spending related to consumer advertising; higher costs
related to increased sales force size; and higher distribution and storage
fees. In addition, higher legal expenses were incurred related to the patent
infringement lawsuit against Mutual Pharmaceutical Co., which the Company
settled in March 2007. The fiscal 2007 selling, marketing and administrative
expenses were slightly lower than the Company's previous guidance of between
$165 and $168 million, due to lower than projected stock compensation expense
resulting from the non-achievement of certain financial performance targets in
fiscal 2007.
Adams' effective tax rate for fiscal 2007 was 35.8 percent compared to
39.1 percent in fiscal 2006, in line with the Company's projected effective
tax rate of 35.5 percent. The year-over-year decline in the effective tax
rate was
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