Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good morning. My name is Randy and I will be your conference operator today. At this time, I would like to welcome everyone to the Bradley Pharmaceuticals first quarter 2007 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS) Thank you.
Mr. Glassman, you may begin your conference.
DAN GLASSMAN, CEO, PRESIDENT, BRADLEY PHARMACEUTICALS INC.: Good morning, everybody. On Thursday, May 10th at 5 p.m., we released our first quarter results. And the purpose of this conference call is to, not only review some of the highlights of this presentation, but also to answer several questions, which have been raised by many people over the last few days. I'd like to have Alan Goldstein -- I'll introduce the people as -- they are all participating in the conference call. So I'll introduce you and -- give us some backgrounds for themselves at each particular time. Alan?
ALAN GOLDSTEIN, VP OF CORPORATE DEVELOPMENT, BRADLEY PHARMACEUTICALS INC.: Thank you, Dan. Before we begin, I'd like to remind participants that any forward-looking statements made during this call are subject to certain risks and uncertainties that may cause results to differ materially from our current expectations presented. The risks and uncertainties that are most likely to cause our results to differ from our expectations are included in our 2006 annual report on Form 10-K as amended, as well as our other filings with the Securities and Exchange Commission.
DAN GLASSMAN: Thank you, Al. Al is Vice President of Corporate Development.
Some of the accomplishments in the first quarter of 2007 were that the net sales increased by 9% compared to the same period last year, our net income was increased by $2.3 million, to earn $0.15 a share, but also remember last year that we did have a $5 million milestone payment. These earnings have to be looked at in a manner consistent -- measuring apples-to-apples.
We also generated almost $12 million in cash flow -- free cash flow, which is about $0.70 per share, increased our cash and cash equivalents and short term investments, restricted cash by almost $7 million in the quarter.
Estimated product distribution in the channels was reduced by about $3 million. We paid principal payments of $3 million on our credit facility and a $7 million payment to Bio Sante on the license agreement. ELESTRIN received new patent to extend its patent life to 2022. The product is still scheduled to be launched before the end of the second quarter. And we launched, quietly, FLORA-Q 2, which is a double-strand product of our very successful FLORA-Q product and looking forward to continued success as this product now takes the forefront in our promotion to physicians.
While there was a lot of positive things happening in the first quarter, there were things that happened that did not reflect into our balance sheets -- into our profit and loss statements. I just wanted to review certain of those things because I think it's important for everybody to recognize -- in that we hired a lot of new people at headquarters, some were replacements, but some were in new positions. And started spending the money and time towards the introduction of ELESTRIN plus two other products before the end of the first half without any revenue generation. We added new salespeople, some were new hires, some were replacement. But there's no compensating sales results in these people.
The cost of goods, as everybody noted, decreased -- actually increased by 3%, as we decided to reduce shipments of certain older products that we normally had shipped in the past, and this was directly targeted cost of goods. We also had sales of A. Aaron's product because of our stringent accounting rules regarding things of this sort. We didn't have enough experience, so we had to take it out of sales. Cost of goods was taken out also. But the people involved with A. Aaron's, their expenses remained with no particular financial benefits, just the negative benefits.
We had a tax increase because of FIN 48 in the first quarter as a reserve and this affected, obviously, the income.
Let's take a look at some of the positives that were not realized during this quarter -- that did not hit the financial statements. The new products are moving forward. We feel comfortable and confident that ELESTRIN will be introduced shortly. The returned, in inventory reduction will have positive results going forward. And we'll provide for a total improvement in returns and improve sales growth and reduce our return reserves.
New people, in both new positions and replacements, will make a major contribution to the future success of the Company. We're pretty excited in many, many different ways. The new interim Chairman Seth Hamot, and now beginning to search for a permanent Chairman, will widen our total approach to pharmaceutical business and perhaps bring us some untold benefits that time will find.
The tax benefit reserves, which I mentioned earlier, will be reduced as the liability periods will expire. So we do have some positive things coming on board that are based upon the first quarter activities, but no commensurate financial benefits. And the work done preparation for the launch of ELESTRIN will be realized for us as initial stock (inaudible -- microphone interference) in the future.
So we do have some things that I'd like to point out that did occur in the first quarter that are not reflected in some of those things I mentioned earlier. Let's also keep in mind that using the numbers of our sales people right now, the sales per sales person on net basis was $236,000 for the quarter -- if they were full-time employees for the entire quarter. That amounts to about $945,000 for the full year, if they continued at this level. But I think -- I have somewhat confidence in that, based upon the new products and the continued success of some of our old products. And of course, always the metrics on generics -- genericization of our products, will have to be taken into account. But if we continue this kind of progress, up 18% in productivity for the sales force, it's likely that we can cross the $1 million mark per sales person on net basis this year. I am looking forward to that accomplishment.
The sales for the first quarter was just under $38 million verses $35 million for the period ending March 31st to '06, the comparison increased net sales were primarily led …