Operating income for the third quarter of fiscal 2009 was $623,000, compared to an operating loss of $534,000 for the year ago quarter.
For first nine months of fiscal 2009, revenue of $13.2 million resulted in operating income of $604,000 and net income of $494,000, or $0.03 per share. For the comparable period last year, revenue of $10.0 million resulted in an operating loss of $1.2 million and a net loss of $1.3 million, or $0.09 per share.
International sales, mainly to Europe, were $2.5 million and $6.5 million in the third quarter and first nine months of fiscal 2009, respectively, compared to $1.1 million and $4.4 million in the third quarter and first nine months of fiscal 2008, respectively. International sales, like all of our revenues, are subject to significant quarterly fluctuations.
Gross income of $1.6 million, or 32% of revenue, for the third quarter of fiscal 2009, was favorably impacted by sufficient revenue to cover fixed costs, favorable product mix and production efficiencies. For the third quarter and first nine months of fiscal 2009, cost of revenue, research and development and selling general and administrative included $70,000, $30,000 and $100,000, respectively, of accrued non-sales related employee incentives; no non-sales related incentives were recorded in fiscal 2008.
The company’s cash and cash equivalents were $89,000 at December 31, 2008, compared to $1.1 million at March 31, 2008. The company’s working capital was $5.2 million at December 31, 2008 compared to $4.4 million at March 31, 2008. In May 2008, Synthetech borrowed $550,000 to expand its large-scale reactor capacity and to install a distillation column, in order to meet increased customer demand and permit the recycling of certain spent solvents for cost and waste reduction. The distillation column, solvent recovery system and additional 2,000 gallon reactor were all operating during the quarter. On November 5, 2008, Synthetech borrowed an additional $500,000 to augment the company’s working capital in response to customer large order demand. In January 2009, the company received a $2 million advance from a major pharmaceutical company in support of a large order placed in November 2008, and which currently is scheduled to ship during the fourth quarter of fiscal 2009 and the first quarter of fiscal 2010, which begins on April 1, 2009.
Gregory Hahn, president and chief executive officer, said, ‘Since fiscal 2006, Synthetech continues to achieve top line growth from improved market conditions and sales plan execution. Over this period, the influx of so many new projects surfaced weaknesses in our production capabilities. With recent production management adjustments and system improvements beginning to bear fruit, we have gained more reliable and efficient production and enhanced profitability this quarter. Synthetech continues to focus on production efficiencies and raw material cost reductions as well as evaluating new revenue growth opportunities.’ Looking forward, Hahn added, ‘Synthetech’s order backlog as of December 31, 2008, was approximately $10.1 million, with most of this expected to ship during the fourth quarter of fiscal 2009 and the balance during fiscal 2010.’
The management anticipates that the company’s revenue will continue to be volatile from period to period. Variability in the company’s level of revenue is based primarily on its participation in large-scale customer projects and the timing of shipments arising from these projects. The company operates in a challenging business environment, characterized by the unpredictable dynamics and life cycle of pharmaceutical projects, which can lead to rapid fluctuations in the mix of projects and revenues. As the uncertainties inherent in drug development projects remain outside of the company’s control, it is difficult to predict the progress, timing and revenue potential of these projects.
