SOURCE: Vital Signs Inc.

December 07, 2006 23:01 ET

Vital Signs, Inc. Announces a 15% Increase in Annual Income From Continuing Operations for FY 2006

TOTOWA, NJ -- (MARKET WIRE) -- December 7, 2006 -- VITAL SIGNS, INC. (NASDAQ: VITL) today announced sales and earnings for the year ended September 30, 2006 as well as for the fourth quarter ended September 30, 2006.

For the twelve month period ended September 30, 2006 income from continuing operations increased 15% to $30,284,000 as compared to $26,300,000 for the comparable fiscal 2005 period. Diluted earnings per share from continuing operations increased 13% to $2.32 for the twelve month period ended September 30, 2006 compared to $2.06 for the twelve month period ended September 30, 2005.

Included in the twelve month results were $1,488,000 of costs for stock option compensation, now required to be expensed, effective for all reporting periods beginning October 1, 2005, under Financial Accounting Standard No. 123(R) ($.08 diluted earnings per share).

Net revenues for the twelve months of fiscal 2006 increased 5.2% to $204,058,000 compared to $194,037,000 in the comparable period last year. Anesthesia, Respiratory Critical/Care and Sleep net revenues for the twelve months increased 7.5% to $163,149,000 compared to $151,836,000 in the comparable period last year.

Following are the net revenues by business segment for the twelve months ended September 30, 2006 and 2005 (in thousands of dollars):

                                               NET REVENUES BY BUSINESS
                                                        SEGMENT
                                              -----------------------------
                                                  FOR THE YEARS ENDED
                                                     SEPTEMBER 30,
                                              -----------------------------
                                                                  PERCENT
                                                2006      2005     CHANGE
                                              --------- --------- ---------
Anesthesia (1)                                $  73,794 $  67,896     8.7 %
Respiratory/Critical Care                        44,571    42,423     5.1 %
Sleep                                            44,784    41,517     7.9 %
Interventional Cardiology/Radiology(1)           25,538    25,441     0.4 %
Pharmaceutical Technology Services               15,371    16,760    (8.3)%
                                              --------- --------- ---------
Net Revenues                                  $ 204,058 $ 194,037     5.2 %
                                              ========= ========= =========

(1)Our interventional cardiology/radiology business, which operates as Thomas Medical Products, has been included as part of our anesthesia segment since we acquired it in 1992. Given the extent of the growth of that business and the differences between the manner in which that business operates and the manner which our anesthesia business operates, we have concluded that it is appropriate to report that business as its own segment, which we refer to as "Interventional cardiology/radiology." The historical financial information presented in this press release with respect to our anesthesia segment excludes Thomas medical for all years presented.

Income from continuing operations increased 6% to $8,253,000 for the fourth quarter of fiscal 2006 compared to $7,818,000 for the fourth quarter of fiscal 2005. Earnings from continuing operations per diluted share increased 2% to $.62 per share for the fourth quarter of fiscal 2006 compared to $.61 per share for the fourth quarter of fiscal 2005. Included in the current quarter's results was $395,000 of costs for stock option compensation now required to be expensed, effective for all reporting periods beginning October 1, 2005, under Financial Accounting Standard No. 123(R).

Net revenues for the fourth quarter of fiscal 2006 increased 0.5% to $52,856,000 compared to $52,618,000 in the comparable period last year. Anesthesia, Respiratory Critical/Care and Sleep net revenues increased 8.9% to $42,553,000 compared to $39,068,000 in the comparable period last year.

Following are the net revenues by business segment for the fourth quarter of fiscal 2006 compared to the fourth quarter of fiscal 2005 (in thousands of dollars):


                                                NET REVENUES BY BUSINESS
                                                         SEGMENT
                                              -----------------------------
                                               FOR THE THREE MONTHS ENDED
                                                       SEPTEMBER 30,
                                              -----------------------------
                                                                  PERCENT
                                                2006      2005     CHANGE
                                              --------- --------- ---------
Anesthesia                                    $  19,922 $  18,700     6.5 %
Respiratory/Critical Care                        11,626    10,712     8.5 %
Sleep                                            11,005     9,656    14.0 %
Interventional Cardiology/Radiology               7,238     9,145   (20.9)%
Pharmaceutical Technology Services                3,065     4,405   (30.4)%
                                              --------- --------- ---------
Net Revenues                                  $  52,856 $  52,618     0.5 %
                                              ========= ========= =========
Anesthesia net revenues for the fourth quarter increased 6.5% due to growth led by Limb-O™ and Infusable™. Respiratory/Critical Care net revenues have increased by 8.5% over the fourth quarter of fiscal 2005, resulting from increases in sales of our resuscitation products and blood pressure cuffs.

Net revenues for our sleep segment for the fourth quarter increased 14.0% for the three months ended September 30, 2006. At Breas, our manufacturer of personal ventilators and CPAP devices, revenues increased 15.3%. The net revenues at Sleep Services of America (SSA), our domestic sleep diagnostic business, increased 12.5%.

Net revenue for the fourth quarter in our interventional cardiology/radiology segment decreased 20.9% to $7,238,000 resulting primarily from one customer discontinuing a division to which Thomas Medical supplied two types of vascular closing devices.

Net revenues in our Pharmaceutical technology services segment for the fourth quarter decreased 30.4% to $3,065,000 resulting in part from a decrease in spending within its major pharmaceutical customer base and increasing competition in the market.

On December 7, 2006, the Board approved a quarterly dividend of $.09 per share payable on January 2, 2007 to shareholders of record on December 22, 2006.

Terry Wall, President and CEO of Vital Signs, commented, "I am pleased that we were within the range of our guidance, after adjusting for 123R ($1,488,000, or $.08 diluted share), and by the continual progress that we have made in improving our sleep businesses. The gross profit margin at Sleep Services of America increased from 53.1% in fiscal 2005 to 58.1% in fiscal 2006. The gross margins at Breas improved from 43.4% in fiscal 2005 to 50.7% in fiscal 2006."

Mr. Wall added: "Our guidance for fully diluted earnings per share from continuing operations for fiscal 2007 is $2.66-$2.76 (GAAP), which equates to 15%-20% growth over fiscal 2006."

All statements in this press release, (including our guidance for fiscal 2007), other than historical statements, constitute Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from such statements as a result of a variety of risks and uncertainties, including unanticipated delays in bringing products to market, regulatory approval of new products, market conditions, and competitive responses as well as other factors referred to by Vital Signs in its Annual Report on Form 10-K for the year ended September 30, 2006.

Vital Signs, Inc. and its subsidiaries design, manufacture and market primarily single-use medical products for the Anesthesia, Respiratory/Critical Care and Sleep/Ventilation markets, achieving the number one market share position in five of its major product categories. In addition, Vital Signs provides single-use products for interventional cardiology/radiology and pharmaceutical technology services to the pharmaceutical and medical device industry. Vital Signs is ISO 13485 certified and has CE Mark approval for its products. In 2006, Forbes Magazine named Vital Signs, Inc. as "one of the 200 Best Small Companies in America" based on financial criteria.

                              VITAL SIGNS, INC.
                            FINANCIAL HIGHLIGHTS
                             STATEMENT OF INCOME

                  (In Thousands, Except Per Share Amounts)
                                  (Unaudited)

                                 Three months ended     Fiscal Year ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
Gross revenues                  $  71,156  $  68,990  $ 273,116  $ 253,960
 Rebates                          (17,176)   (15,148)   (64,642)   (55,917)
 Other deductions                  (1,124)    (1,224)    (4,416)    (4,006)
                                ---------  ---------  ---------  ---------

Net revenues                       52,856     52,618    204,058    194,037
Cost of goods sold and
 services provided                 26,056     25,484    100,027     95,507
                                ---------  ---------  ---------  ---------
Gross Profit                       26,800     27,134    104,031     98,530

Expenses:
 Selling, general and
  administrative                   12,660     13,210     52,182     51,025
 Research and development           1,740      1,422      7,034      7,011

 Restructuring charge                 3/4        (11)       3/4        213
 Interest and other
  (income)/expense, net              (348)      (339)    (2,208)    (1,714)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before income
 taxes and minority interest       12,748     12,852     47,023     41,995
Provision for income taxes          4,248      4,851     15,828     15,093
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before minority
 interest                           8,500      8,001     31,195     26,902
Minority interest                     247        183        911        602
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                         8,253      7,818     30,284     26,300
(Loss) Income from discontinued
 operations, net                     (208)        (6)      (167)        89
                                ---------  ---------  ---------  ---------
Net income                      $   8,045  $   7,812  $  30,117  $  26,389
                                =========  =========  =========  =========

Earnings (loss) per common
 share:
Basic:
      Income per share from
       continuing operations    $    0.62  $    0.62  $    2.34  $    2.08
      Discontinued operations       (0.01)      0.00      (0.01)      0.01
                                ---------  ---------  ---------  ---------
      Net earnings              $    0.61  $    0.62  $    2.33  $    2.09
                                =========  =========  =========  =========
Diluted:
      Income per share from
       continuing operations    $    0.62  $    0.61  $    2.32  $    2.06
      Discontinued operations       (0.01)      0.00      (0.01)      0.00
                                ---------  ---------  ---------  ---------
      Net earnings              $    0.61  $    0.61  $    2.31  $    2.06
                                =========  =========  =========  =========
Basic weighted average number
 of shares                         13,217     12,609     12,966     12,616
Diluted weighted average number
 of shares                         13,273     12,811     13,040     12,789



                              VITAL SIGNS, INC.
                            FINANCIAL HIGHLIGHTS

                          BALANCE SHEET HIGHLIGHTS:

                                                          (In Thousands)
                                                           (Unaudited)
                                                           September 30,
                                                        -------------------
                                                          2006      2005
                                                        --------- ---------

Cash and cash equivalents                               $  41,242 $  18,412
Short Term Investments                                     85,565    63,355
Accounts Receivable                                        34,284    34,417
Inventory                                                  19,006    16,659
Current Assets                                            185,146   136,776
Total Assets                                            $ 305,854 $ 253,702
                                                        ========= =========

Current Liabilities                                     $  15,355 $  17,221
Total Liabilities                                          15,355    17,221
Shareholders equity                                     $ 285,813 $ 232,706
                                                        ========= =========

Contact Information