Question-and-Answer Session
Operator
Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. (Operator Instructions) Your first question comes from Ailon Grushkin from Nano-Cap Growth Funds. Please go ahead.
Ailon Grushkin - Nano-Cap Growth Funds
Hi, how are you?
David Holtz
Good Ailon, how are you?
Ailon Grushkin - Nano-Cap Growth Funds
Good. Alright, my first question is the Smith & Nephew sold more products, but it was smaller on the dollar amount because of the euro and their inventory is being the carrying lower levels and that’s why you shipped less two them.
David Holtz
Yes, I mean there’s two different components there. The year-over-year decline in units shipped is a result of Smith & Nephew’s efforts to reduce the level of inventory they’ve been carrying; that’s been going on for several quarters now and really the first quarter of last year was the last quarter that we had shipped an amount that was larger than their current rate.
So, really for the last three quarters now or four quarter I should say, we have been shipping at a lower level than as Smith & Nephew reduces their inventory levels. The thing to remember about the Acticoat business inside of Smith & Nephew is the significant component of it is outside the U.S. in terms of end sales. So, the significant increase in the value of the dollar had a major impact really on the whole advance wound management business, but certainly on the Acticoat sales that are reported to us in US dollars.
Ailon Grushkin - Nano-Cap Growth Funds
Okay. Is there a certain run rate at which NUCRYST actually turned cash flow breakeven?
David Holtz
Well, as I stated in our remarks, that is our objective for the year, we are driving towards it. The first quarter, you can see on the development side that the significant reductions with the facility, is sort of coming through there.
On the G&A side, we just had a number of events in the current quarter-on-quarter, including the transition of the management team, that sort of resulted in a number of charges that I do not expect to continue and so I look for the second quarter to see a decline in G&A, both year-over-year as well as certainly sequentially, because the first quarter is a pretty big number.
So, our objective is within the current context of the business to get to a sustainable level of profitability. That is depended on Smith & Nephews sales and capability with the product, but again we remain positive in that light, in the sense that the Acticoat Flex product should be a good launch for the business and provide some positive output and really the objective of achieving profitability is really our focus on costs, as long as the revenues can sustain where they have been historically.
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