SOURCE: Vital Signs, Inc.

May 04, 2006 16:20 ET

Vital Signs, Inc. Announces a 29% Increase in Quarterly Earnings From Continuing Operations and an Increase in the Quarterly Dividend of $.02 to $.09 per Share

TOTOWA, NJ -- (MARKET WIRE) -- May 4, 2006 -- VITAL SIGNS, INC. (NASDAQ: VITL) today announced sales and earnings for the second quarter ended March 31, 2006.

Income from continuing operations increased 29% to $7,452,000, for the second quarter of fiscal 2006 compared to $5,768,000 for the second quarter of fiscal 2005. Earnings from continuing operations per diluted share increased 24% to $.57 per share for the second quarter of fiscal 2006 compared to $.46 per share for the second quarter of fiscal 2005. Included in the current quarter's results was $382,000 of non-cash costs for stock option compensation now required to be reported, effective for all Vital Signs, Inc. reporting periods beginning October 1, 2005, under Financial Accounting Standard Board standard No. 123(R). During the second quarter, the Company issued an additional 434,000 shares of common stock pursuant to the public offering made on February 3, 2006.

Net revenues for the second quarter of fiscal 2006 increased 9.1% to $51,293,000 compared to $47,029,000 in the comparable period last year.

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

                                    NET REVENUES BY BUSINESS SEGMENT
                                   FOR THE THREE MONTHS ENDED MARCH 31,

                                        2006       2005     PERCENT
                                                            CHANGE
                                      --------   --------   -------
Anesthesia                            $ 24,677   $ 21,567      14.4%
Respiratory/Critical Care               10,960     10,806       1.4%
Sleep                                   11,632     10,779       7.9%
Pharmaceutical Technology Services       4,024      3,877       3.8%
                                      --------   --------   -------
Net Revenues                          $ 51,293   $ 47,029       9.1%
                                      ========   ========   =======
Anesthesia net revenues increased 14.4% due in part to a 33.8% increase in sales of Limb-O™, our patented anesthesia circuit. Respiratory/Critical Care net revenues increased this quarter by 1.4% over the second quarter of fiscal 2005.

Net revenues in the Sleep business segment (Breas and SSA) increased 7.9% (16.0% excluding the effects of foreign exchange) in the second quarter of fiscal 2006 over the second quarter of 2005. Net revenues at Sleep Services of America (SSA), the Company's domestic sleep clinic business increased 21.4% over the second quarter of fiscal 2005. At Breas, our European manufacturer of personal ventilators and CPAP devices, the unfavorable effect of foreign exchange offset a 12.4% revenue increase in the second quarter of fiscal 2006 over the second quarter of fiscal 2005. With the introduction of its new product lines, Breas' gross margins have improved nearly 8% resulting in its return to profitability.

Sales in the Pharmaceutical Technology Services segment increased 3.8% to approximately $4.0 million resulting from increased services to our existing pharmaceutical customer base and the first sales in our Vital Path group.

Terry Wall, President and CEO of Vital Signs, commented, "We are pleased by the improved sales performance in our Anesthesia and Sleep segments. In our Sleep segment, SSA continues to grow as planned and Breas is now contributing to earnings."

Net revenues for the six months of fiscal 2006 increased 6.8% to $99,023,000 compared to $92,727,000 in the comparable period last year.

For the six month period ended March 31, 2006 income from continuing operations increased 21.7% to $14,113,000 as compared to $11,591,000 for the comparable fiscal 2005 period. Diluted earnings per share from continuing operations increased 19.6% to $1.10 for the six month period ended March 31, 2006 compared to $0.92 for the six month period ended March 31, 2005.

Following are the net revenues by business segment for the six months ended March 31, 2006 and 2005 (in thousands of dollars):

                                    NET REVENUES BY BUSINESS SEGMENT
                                   FOR THE SIX MONTHS ENDED MARCH 31,

                                                            PERCENT
                                        2006       2005     CHANGE
                                      --------   --------   -------
Anesthesia                            $ 47,043   $ 41,696      12.8%
Respiratory/Critical Care               21,505     20,954       2.6%
Sleep                                   21,807     21,531       1.3%
Pharmaceutical Technology Services       8,668      8,546       1.4%
                                      --------   --------   -------
Net Revenues                          $ 99,023   $ 92,727       6.8%
                                      ========   ========   =======

Mr.Wall added: "Our guidance for fully diluted earnings per share from continuing operations for fiscal 2006, remains at between $2.35 and $2.45 per share (excluding the effects of FASB 123(R)), which would be a 14% to 19% increase over fiscal 2005 results. Including the effects of FASB 123(R), and assuming that there are no additional grants of stock options in fiscal 2006, our guidance for fully diluted earnings per share from continuing operations for fiscal 2006 is between $2.28 and $2.38 per share, which would be a 10% to 16% increase over fiscal 2005 results." Vital Signs believes that excluding the impact of FASB 123(R) is a beneficial disclosure, given the difficulty of comparison between a period in which 123(R) applies and a period in which it does not apply.

On May 3, 2006 the Board approved an $0.02 increase in the quarterly dividend to $0.09 per share payable on May 31, 2006 to shareholders of record on May 24, 2006.

All non-historical statements in this press release, including Vital Signs' guidance with respect to fully diluted earnings per share from continuing operations for fiscal 2006, 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, 2005.

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, we provide pharmaceutical technology services to the pharmaceutical and medical device industry. Vital Signs is ISO 13485 certified and has CE Mark approval for its products.


                             VITAL SIGNS, INC.
                           FINANCIAL HIGHLIGHTS
                            STATEMENT OF INCOME

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

                                 Three Months Ended     Six Months Ended
                                      March 31,             March 31,
                                --------------------  --------------------
                                   2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
Gross revenues                  $  68,181  $  61,162  $ 132,085  $ 120,991
   Rebates                        (15,704)   (13,235)   (30,837)   (26,476)
   Other deductions                (1,184)      (898)    (2,225)    (1,788)
                                ---------  ---------  ---------  ---------

Net revenues                       51,293     47,029     99,023     92,727
Cost of goods sold and services
 provided                          25,232     23,614     48,759     46,603
                                ---------  ---------  ---------  ---------
Gross Profit                       26,061     23,415     50,264     46,124

Expenses:
   Selling, general and
    administrative                 13,443     12,596     26,166     24,604
   Research and development         1,739      1,882      3,397      3,666
   Restructuring charge                 -        305          -        360
   Interest and other
    (income)/expense, net            (591)      (500)    (1,123)      (721)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before income taxes
 and minority interest             11,470      9,132     21,824     18,215
Provision for income taxes          3,830      3,245      7,339      6,396
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before minority
 interest                           7,640      5,887     14,485     11,819
Minority interest                     188        119        372        228
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                         7,452      5,768     14,113     11,591
(Loss) Income from discontinued
 operations, net                       16         58         15        (32)
                                ---------  ---------  ---------  ---------
Net income                      $   7,468  $   5,826  $  14,128  $  11,559
                                =========  =========  =========  =========

Earnings (loss) per common share:
Basic:
   Income per share from
    continuing operations       $    0.58  $    0.46  $    1.11  $    0.93
   Discontinued operations           0.00       0.01       0.00      (0.01)
                                ---------  ---------  ---------  ---------
   Net  earnings                $    0.58  $    0.47  $    1.11  $    0.92
                                =========  =========  =========  =========
Diluted:
   Income per share from
    continuing operations       $    0.57  $    0.46  $    1.10  $    0.92
   Discontinued operations           0.00       0.00       0.00      (0.01)
                                ---------  ---------  ---------  ---------
   Net  earnings                $    0.57  $    0.46  $    1.10  $    0.91
                                =========  =========  =========  =========
Basic weighted average number
 of shares                         12,898     12,456     12,743     12,498
Diluted weighted average number
 of shares                         13,001     12,618     12,840     12,655



                              VITAL SIGNS, INC.
                            FINANCIAL HIGHLIGHTS

                          BALANCE SHEET HIGHLIGHTS:

                                       (In Thousands)
                                         (Unaudited)
                                          March 31,
                                ----------------------------
                                    2006             2005
                                -----------      -----------
Cash and cash equivalents       $   108,254      $    74,084
Accounts Receivable                  31,086           30,699
Inventory                            19,387           18,216
Current Assets                      163,714          128,370
Total Assets                    $   284,872      $   243,084
                                ===========      ===========

Current Liabilities             $   14,918       $    15,746
Total Liabilities                   14,918            15,746
Shareholders equity             $  265,806       $   223,938
                                ===========      ===========

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