SOURCE: Vital Signs Inc.

November 22, 2005 16:05 ET

Vital Signs, Inc. Announces a 42% Increase in Quarterly Earnings and an Annual Earnings Increase of 19% to $2.06 per Share

TOTOWA, NJ -- (MARKET WIRE) -- November 22, 2005 -- VITAL SIGNS, INC. (NASDAQ: VITL) today announced sales and earnings for the fourth quarter and year ended September 30, 2005.

Quarterly earnings per share from continuing operations increased 42% to $0.61.

Income from continuing operations increased 42% to $7,819,000, or $.61 per share, for the fourth quarter of fiscal 2005 compared to $5,501,000 or $.43 per share for the fourth quarter of fiscal 2004.

Net revenues for the fourth quarter of fiscal 2005 increased 10.0% to $52,619,000 compared to $47,835,000 in the comparable period last year.

Following are the net revenues by business segment for the fourth quarter of fiscal 2005 compared to the fourth quarter of fiscal 2004 (in thousands of dollars):

                                           NET REVENUES BY BUSINESS SEGMENT
                                           --------   --------   --------
                                             FOR THE THREE MONTHS ENDED
                                                    SEPTEMBER 30,
                                           --------   --------   --------
                                             2005       2004     PERCENT
                                                                  CHANGE
                                           --------   --------   --------
Anesthesia                                 $ 27,846   $ 24,076       15.7%
Respiratory/Critical Care                    10,712     10,160        5.4%
Sleep                                         9,656      9,901       (2.5)%
Pharmaceutical Technology Services            4,405      3,698       19.1%
                                           --------   --------   --------
Net Revenues                               $ 52,619   $ 47,835       10.0%
                                           ========   ========   ========
Anesthesia net revenues increased 15.7% due in part to a 33.2% increase in sales of Limb-O™, our patented anesthesia circuit, and an 18.6% increase in sales of our anesthesia breathing systems, of which $1.3 million, or 5.4%, resulted from the acquisition, on March 2, 2005, of the Baxter disposable airway management product line. For the second quarter in a row, Respiratory/Critical Care net revenues have increased, this quarter by 5.4% over the fourth quarter of fiscal 2004, resulting from increases in sales of our ABG product of 11.7% and Broselow-Luten System of 51.8%.

Net revenues in the Sleep business segment (Breas and SSA) declined 2.5% in the fourth quarter. Net revenues at Sleep Services of America (SSA), the Company's domestic sleep clinic business, increased 9.0%. Revenues for Breas, our European manufacturer of personal ventilators and CPAP devices, decreased 10.9% as revenues from the new Breas product line were negatively affected by shipping delays resulting from the inability of a vendor to supply a key component to our specifications in sufficient quantity. However, shipments of these new products began on a limited basis in the quarter ending September 30, 2005.

Sales in the Pharmaceutical Technology Services segment increased 19.1% to approximately $4.4 million resulting from increased services to our existing pharmaceutical customer base.

Terry Wall, President and CEO of Vital Signs, commented, "We are encouraged by the improved performance in our Anesthesia and Respiratory/Critical Care segments during the fourth quarter. The integration of the Baxter disposable airways product line into our core anesthesia segment is now complete. This integration and the continued increase in our Limb-O™ and traditional circuit business has resulted in a 12.7% revenue increase in Anesthesia revenues over last year. We are also pleased that we have increased revenues in our Respiratory/Critical Care segment for the second quarter in a row. After the closing of certain less profitable sleep labs in fiscal 2004, SSA experienced a 22.3% sales increase in fiscal 2005 in the continuing sleep diagnostic centers over the same period last year.

Following are the net revenues by business segment for the fiscal years ended September 30, 2005 and 2004 (in thousands of dollars):

                                           NET REVENUES BY BUSINESS SEGMENT
                                           --------   --------   --------
                                                 FOR THE YEARS ENDED
                                                    SEPTEMBER 30,
                                           --------   --------   --------
                                             2005       2004     PERCENT
                                                                  CHANGE
                                           --------   --------   --------
Anesthesia                                 $ 93,337   $ 82,791       12.7%
Respiratory/Critical Care                    42,423     42,079        0.8%
Sleep                                        41,517     44,053       (5.8)%
Pharmaceutical Technology Services           16,760     15,068       11.2%
                                           --------   --------   --------
Net Revenues                               $194,037   $183,991        5.5%
                                           ========   ========   ========
For the fiscal year ended September 30, 2005 income from continuing operations increased 18.6% to $26,300,000 as compared to $22,168,000 for the comparable fiscal 2004 period. Diluted earnings per share from continuing operations increased 20% to $2.06 for the fiscal year ended September 30, 2005 compared to $1.72 for the fiscal year ended September 30, 2004.

For the fiscal year ended September 30, 2005, the Company reported net income of $26,389,000, or $2.06 per share on a diluted basis, as compared to $22,053,000, or $1.71 per share on a diluted basis, for the fiscal year ended September 30, 2004.

Net cash provided from operations for the three months and fiscal year ended September 30, 2005 was approximately $5.7 million and $30.8 million, respectively. For the three months and fiscal year ended September 30, 2005 the Company bought back 27,800 shares of its common stock for $1.2 million and 238,400 shares for $9.1 million, respectively.

On November 9, 2005 the Board approved a quarterly dividend of $0.07 per share payable on November 30, 2005 to shareholders of record on November 23, 2005.

All statements in this press release, 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, 2004.

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 pharmaceutical technology services to the pharmaceutical and medical device industry. Vital Signs is ISO 9001 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     FISCAL YEAR ENDED
                                    SEPTEMBER 30          SEPTEMBER 30,
                                --------   --------   --------   --------
                                  2005       2004       2005       2004
                                --------   --------   --------   --------
Gross revenues                  $ 68,990   $ 61,307   $253,965   $235,512
Rebates                          (15,148)   (12,610)   (55,917)   (47,810)
Other deductions                  (1,223)      (862)    (4,011)    (3,711)
                                --------   --------   --------   --------

Net revenues                      52,619     47,835    194,037    183,991
Cost of goods sold and services
 provided                         25,484     24,334     95,507     91,374
                                --------   --------   --------   --------
Gross Profit                      27,135     23,501     98,530     92,617

Expenses:
   Selling, general and
    administrative                13,210     12,745     51,025     50,115
   Research and development        1,422      1,629      7,011      7,036
   Restructuring charge              (11)       539        213        539
   Interest and other
    (income)/expense, net           (339)      (118)    (1,714)      (186)
                                --------   --------   --------   --------
Income from continuing
 operations before income taxes
 and minority interest            12,853      8,706     41,995     35,113
Provision for income taxes         4,851      3,131     15,093     12,498
                                --------   --------   --------   --------
Income from continuing operations
 before minority interest          8,002      5,575     26,902     22,615
Minority interest                    183         74        602        447
                                --------   --------   --------   --------
Income from continuing
 operations                        7,819      5,501     26,300     22,168
(Loss) Income from discontinued
 operations, net                      (6)       (13)        89       (115)
                                --------   --------   --------   --------
Net income                      $  7,813   $  5,488   $ 26,389   $ 22,053
                                ========   ========   ========   ========

Earnings (loss) per common share:
Basic:
   Income per share from
    continuing operations       $   0.62   $   0.43   $   2.08   $   1.73
   Discontinued operations          0.00       0.00       0.01      (0.01)
                                --------   --------   --------   --------
   Net  earnings                $   0.62   $   0.43   $   2.09   $   1.72
                                ========   ========   ========   ========
Diluted:
   Income per share from
    continuing operations       $   0.61   $   0.43   $   2.06   $   1.72
   Discontinued operations          0.00       0.00       0.00      (0.01)
                                --------   --------   --------   --------
   Net  earnings                $   0.61   $   0.43   $   2.06   $   1.71
                                ========   ========   ========   ========
Basic weighted average number
 of shares                        12,609     12,683     12,616     12,793
Diluted weighted average number
 of shares                        12,811     12,771     12,789     12,907


                        VITAL SIGNS, INC.
                      FINANCIAL HIGHLIGHTS

                    BALANCE SHEET HIGHLIGHTS:
                    ------------------------

                                             (In Thousands)
                                               (Unaudited)
                                              September 30,
                                           --------   --------
                                             2005       2004
                                           --------   --------
Cash and cash equivalents                  $ 81,767   $ 76,468
Accounts Receivable                          35,040     31,876
Inventory                                    16,659     16,766
Current Assets                              136,776    129,522
Total Assets                               $252,665   $235,676
                                           ========   ========

Current Liabilities                        $ 16,184   $ 16,281
Total Liabilities                            16,184     16,281
Shareholders equity                        $232,706   $216,223
                                           ========   ========

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