TOTOWA, N.J., Dec. 13, 2007 (PRIME NEWSWIRE) -- Vital Signs, Inc. (Nasdaq:VITL) today announced sales and earnings for the year ended September 30, 2007 as well as for the fourth quarter ended September 30, 2007.
For the twelve month period ended September 30, 2007, income from continuing operations decreased 37% to $19.2 million compared with $30.3 million for the comparable fiscal 2006 period. Diluted earnings per share from continuing operations decreased 38% to $1.45 for the twelve month period ended September 30, 2007 compared with $2.32 for the twelve month period ended September 30, 2006.
The decreases principally resulted from four non-cash charges aggregating to $21.0 million recognized during the Company's fourth quarter. These charges consisted of the following:
* Operating expenses included a goodwill impairment charge of $13.2 million for the pharmaceutical technology services segment that was previously classified as discontinued operations. As previously announced, the Company sought to sell its Stelex subsidiary during fiscal 2007. The Company received no acceptable offers and ultimately re-classified the segment to continuing operations during the fourth quarter of fiscal 2007. The offers that were received served as the basis to estimate the segment's fair value for the impairment write-off. * The Company increased its distributor rebate allowance by $4.7 million after obtaining new information from its two largest distributors on their inventory levels. The increase in allowance is reflected as a reduction in sales and gross profit. While increasing the allowance, the Company confirmed that the procedures it has utilized for tracking rebates since fiscal 2005 continues to accurately reflect rebates taken by distributors. * Operating expenses included a long-lived asset impairment of $1.9 million reflecting a business decline at a sleep disorder company acquired in April 2007. The Company is pursuing legal action against the seller asserting fraudulent misrepresentations, breach of non-competition agreement, and other substantial claims. * Operating expenses included a $1.2 million increase in an allowance for unauthorized customer cash payment discounts. The Company is currently engaged in a dispute with one of its distributors. The Company may commence legal proceedings to resolve this dispute.
These four items resulted in after-tax charges of $13.6 million, or $1.02 per diluted share.
The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measured used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. See the Table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the years ended September 30, 2007 and 2006. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
Following is a comparison of the Company's results in accordance with GAAP excluding the last three non-cash charges mentioned above. Inasmuch as the Company classified Pharmaceutical Technology Services segment as a discontinued operation for the first three quarters of fiscal 2007, the adjustments in the table below also present the segment as discontinued operations for all of fiscal 2007 and fiscal 2006.
---------------------------------------------------------------------
Year ended 2007 Non-GAAP Adjustments 2007
September 30,
2007
Pharm
Tech Reserve
(Dollars in One-time Presented for
thousands, Rebate as Discon- Unauthor- SSA After
except per As Allowance tinued ised Acquisition Adjust-
share Reported Increase Operation Discounts Impairment ments
amounts) (GAAP) (1) (2) (3) (4) (Non-GAAP)
---------------------------------------------------------------------
Condensed
Consolidated
statement of
income data:
Net revenue 205,257 4,733 (11,487) 198,503
Cost of
goods sold
and
services
performed 101,438 (8,457) 92,981
------- -------
Gross profit 103,819 105,522
------- -------
Gross Margin 50.6% 53.2%
Operating
expenses:
Selling,
general and
administra-
tive 57,134 (3,712) (1,176) 52,246
Research and
development 7,511 (50) 7,461
Restructuring
charge -- 0
Impairment
and other
charges 15,122 (13,180) (1,942) 0
Other
(income)
expense -
net 527 1 528
------- -------
Total
operating
expenses 80,294 60,235
------- -------
Operating
income 23,525 45,287
------- -------
Interest
income (4,909) (4,909)
Interest
expense 56 56
Income
unconsoli-
dated
investment (1,498) (1,498)
------- -------
Total other
(income)
expense (6,351) (6,351)
------- -------
Income from
continuing
operations
before
provision
for income
taxes and
non-
controlling
interest 29,876 51,638
Provision for
income taxes 9,985 1,609 4,735 400 660 17,389
------- -------
Income from
continuing
operations
before
non-
controlling
interest 19,891 34,249
Non-control-
ling interest
in net income
of subsidiary 683 486 1,169
Income from
continuing
operations 19,208 33,080
------- -------
(Loss)/Income
from
discontinuing
operations,
net (49) (521) (570)
Net Income 19,159 32,510
Earnings
(loss)
per common
share:
Basic:
Continuing
Operations 1.45 2.50
Discontin-
ued Opera-
tions (0.00) (0.04)
Net
Earnings 1.45 2.46
Diluted:
Continuing
Operations 1.45 2.49
Discontin-
ued Opera-
tions (0.01) (0.04)
Net
Earnings 1.44 2.45
Basic
weighted-
average
number of
shares
outstanding 13,238 13,238
Diluted
weighted-
average
number of
shares
outstanding 13,277 13,277
---------------------------------------------------------------------
----------------------------------------------------------- ---------
2006 Non-GAAP 2006 Non-GAAP
Adjustments
Pharm Tech
Presented as
As Discontinued After
(Dollars in thousands, Reported Operation Adjustments Percent
except per share amounts) (GAAP) (2) (Non-GAAP) Change
----------------------------------------------------------- ---------
Condensed Consolidated
statement of income
data:
Net revenue 202,124 (15,372) 186,752 6.3%
Cost of goods sold and
services performed 100,027 (10,127) 89,900 3.4%
--------- --------- ---------
Gross profit 102,097 96,852 9.0%
--------- --------- ---------
Gross Margin 50.5% 51.9%
Operating expenses:
Selling, general and
administrative 52,182 (3,977) 48,205 8.4%
Research and development 7,034 -- 7,034 6.1%
Restructuring charge -- 0
Impairment and other
charges -- 0
Other (income) expense
- net 880 (149) 731 -27.8%
--------- --------- ---------
Total operating
expenses 60,096 55,970 7.6%
--------- --------- ---------
Operating income 42,001 40,882 10.8%
--------- --------- ---------
Interest income (3,294) (3,294) 49.0%
Interest expense -- 0
Income unconsolidated
investment (1,728) (1,728) -13.3%
--------- --------- ---------
Total other (income)
expense (5,022) (5,022) 26.5%
--------- --------- ---------
Income from continuing
operations before
provision for income
taxes and non-
controlling interest 47,023 45,904 12.5%
Provision for income
taxes 15,828 (414) 15,414 12.8%
--------- --------- ---------
Income from continuing
operations before non-
controlling interest 31,195 30,490 12.3%
Non-controlling interest
in net income of
subsidiary 911 911 28.3%
Income from continuing
operations 30,284 29,579 11.8%
--------- --------- ---------
(Loss)/Income from
discontinuing
operations, net 705 705
Net Income 30,284 30,284
Earnings (loss) per
common share:
Basic
Continuing Operations: 2.34 2.28
Discontinued
Operations: 0.00 0.05
Net Earnings: 2.34 2.34
Diluted
Continuing Operations: 2.32 2.27
Discontinued
Operations: 0.00 0.05
Net Earnings: 2.32 2.32
Basic weighted-average
number of shares
outstanding 12,966 12,966
Diluted weighted-average
number of shares
outstanding 13,040 13,040
----------------------------------------------------------- ---------
(1) The Company increased its distributor rebate allowance by an
additional $4.7 million after obtaining new information from our
two largest distributors on their inventory levels. The increase
in allowance is reflected as a reduction in sales and gross
profit. While increasing the allowance the Company confirmed
that the procedures it has utilized for tracking rebates since
fiscal 2005 continues to accurately reflect rebates taken by
distributors.
(2) For the first 3 quarters of fiscal 2007 the company reported its
Pharmaceutical Technology Services segment as a discontinued
operation. Earnings guidance was provided under the assumption
that the segment will not contribute to earnings from continuing
operations. This pro forma adjustment shows the effect of the
segment as a discontinued operation for all of fiscal 2007 and
fiscal 2006.
(3) Operating expenses included a $1.2 million increase in an
allowance for unauthorized customer cash payment discounts. The
Company is currently engaged in a dispute with one of its
distributors. The Company may commence legal proceedings to
resolve this dispute
(4) Operating expenses included a long-lived asset impairment of $1.9
million reflecting a business decline at a sleep disorder segment
acquisition made in April 2007. The Company is pursuing legal
action against the seller asserting fraudulent
misrepresentations, breach of non-competition agreement, and
other substantial claims
GAAP net revenues for the twelve months of fiscal 2007 increased 1.6% to $205,257,000 compared to $202,124,000 in the comparable period last year. As adjusted to exclude the $4.7 million rebate adjustments and effect of Pharmaceutical Technology Services segment reclassified as discontinued operation in fiscal 2006 and 2007 as described in the table above, net revenues for the twelve months of fiscal 2007 increased 6.3% to $198,503,000. Increases in the Company's core segments were partially offset by a decline in the Company's Pharmaceutical Technology Services segment.
Following are the net revenues by business segment for the twelve months ended September 30, 2007 and 2006 (in thousands of dollars):
NET REVENUES BY
BUSINESS SEGMENT
-----------------------------
FOR THE YEARS ENDED
SEPTEMBER 30,
-----------------------------
2007 2006 PERCENT
CHANGE
-----------------------------
Anesthesia $74,800 $73,794 1.4%
Respiratory/Critical Care 46,296 44,571 3.9%
Sleep Disorder 48,770 42,850 13.8%
Interventional Cardiology/Radiology(1) 28,637 25,538 12.1%
Pharmaceutical Technology Services 11,487 15,371 (25.3)%
Rebate allowance adjustment (4,733) -- (100.0)%
-----------------------------
Net Revenues $205,257 $202,124 1.6%
=============================
GAAP income/(loss) from continuing operations decreased 165% to ($5,347,000) for the fourth quarter of fiscal 2007 compared to $8,252,000 for the fourth quarter of fiscal 2006. GAAP earnings/(loss) from continuing operations per diluted share decreased 165% to ($0.40) per share, for the fourth quarter of fiscal 2007 compared to $0.62 per share for the fourth quarter of fiscal 2006.
GAAP net revenues for the fourth quarter of fiscal 2007 decreased 3.5% to $50,484,000 compared to $52,334,000 in the comparable period last year. Anesthesia, Respiratory Critical/Care and Sleep net revenues increased 3.0% to $43,279,000 compared to $42,032,000 in the comparable period last year.
Following are the net revenues by business segment for the fourth quarter of fiscal 2007 compared to the fourth quarter of fiscal 2006 (in thousands of dollars):
NET REVENUES BY
BUSINESS SEGMENT
-----------------------------
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2007 2006 PERCENT
CHANGE
-----------------------------
Anesthesia $18,348 $19,925 (7.9)%
Respiratory/Critical Care 11,515 11,626 (1.0)%
Sleep Disorder 13,416 10,481 28.0%
Interventional Cardiology/Radiology 8,841 7,239 22.1%
Pharmaceutical Technology Services 3,097 3,063 1.11%
Rebate allowance adjustment (4,733) -- (100.0)%
-----------------------------
Net Revenues $50,484 $52,334 (3.5)%
=============================
The reduction in Anesthesia and Respiratory/Critical Care net revenues in the fourth quarter was primarily caused by a temporary disruption in supply of facemasks from Respironics due to a delay between the termination of the 26 year supply agreement and the start-up of the current six month transition agreement. As of August 2007 Respironics sold all of its tooling, equipment, know-how, and intellectual property for manufacturing air-filled cushion masks to the Company, agreed to continue manufacturing masks during the transition process, and agreed to cooperate with the startup of the Company's Chinese joint venture. The joint venture is ramping up mask production and is currently supplying 40% to 50% of the Company's mask needs.
Net revenues in the Company's sleep segment increased 28.0% for the three months ended September 30, 2007. At Breas, the Company's manufacturer of personal ventilators and CPAP devices, revenues increased 20.7%.
Net revenue for the fourth quarter in the Company's interventional cardiology/radiology segment increased 22.1% to $8,841,000 due to strong demand for its flagship products.
Net revenues in the Company's Pharmaceutical technology services segment for the fourth quarter increased 1.1% to $3,097,000 million.
On December 10, 2007, the Board approved a quarterly dividend of $0.10 per share payable on January 2, 2008 to shareholders of record on December 21, 2007.
Terry Wall, President and CEO of Vital Signs, commented "We are issuing guidance of $2.80-$2.85, fully diluted EPS for Fiscal 2008. We foresee this growth to be back-end loaded, as a result of the timing of new product introductions and cost savings projects which we have included in our estimates.
"We expect approximately 7% growth in net revenues from the Company's Anesthesia and Respiratory/Critical Care segments as a result of the introductions of enFlow(tm), SteeLite(tm) and Redi-Tube(tm) and the continued success of our patented Limb-O circuit. We are expecting approximately 10% growth in our Interventional Cardiovascular/Radiology segment and 15% growth in Sleep (The percentage growth is based upon the fiscal 2007 results after non-GAAP adjustments)."
The company has not yet completed its audit review process. The Company expects to file its audited financial statements as part of its Annual Report on Form 10-K by December 14, 2007.
All statements in this press release (including our guidance for fiscal 2008) 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,
------------------ -----------------
2007 2006 2007 2006
-------- -------- -------- --------
Gross revenues $ 73,404 $ 70,634 $283,364 $271,182
Rebates (22,467) (17,176) (74,798) (64,642)
Other deductions (453) (1,124) (3,309) (4,416)
-------- -------- -------- --------
Net revenues 50,484 52,334 205,257 202,124
Cost of goods sold and
services performed 26,815 26,056 101,438 100,027
-------- -------- -------- --------
Gross profit 23,669 26,277 103,819 102,097
Expenses:
Selling, general and
administrative 16,025 12,660 57,135 52,182
Research and development 1,860 1,740 7,511 7,034
Impairment charge 15,121 -- 15,121 --
Interest and other (income)/
expense, net (1,615) (871) (5,824) (4,142)
-------- -------- -------- --------
Income/(loss) from continuing
operations before provision
for income taxes and
non-controlling interest (7,722) 12,748 29,876 47,023
Provision for income taxes (2,285) 4,248 9,985 15,828
-------- -------- -------- --------
Income/(loss) from continuing
operations before
non-controlling interest
(5,437) 8,500 19,891 31,195
Non-controlling share in net
income of subsidiary (90) 247 683 911
-------- -------- -------- --------
Income/(loss) from continuing
operations (5,347) 8,253 19,208 30,284
Income/(loss) from discontinued
operations, net (14) (208) (49) (167)
-------- -------- -------- --------
Net income/(loss) $ (5,361) $ 8,045 $ 19,159 $ 30,117
======== ======== ======== ========
Earnings (loss) per common
share:
Basic:
Income/(loss) per share from
continuing operations $ (0.40) $ 0.62 $ 1.45 $ 2.34
Discontinued operations (0.00) (0.01) (0.01) (0.01)
-------- -------- -------- --------
Net earnings $ (0.40) $ 0.61 $ 1.44 $ 2.33
======== ======== ======== ========
Diluted:
Income/(loss) per share from
continuing operations $ (0.40) $ 0.62 $ 1.45 $ 2.32
Discontinued operations (0.00) (0.01) (0.01) (0.01)
-------- -------- -------- --------
Net earnings $ (0.40) $ 0.61 $ 1.44 $ 2.31
======== ======== ======== ========
Basic weighted average number
of shares 13,275 13,217 13,238 12,966
Diluted weighted average
number of shares 13,289 13,273 13,277 13,040
VITAL SIGNS, INC.
FINANCIAL HIGHLIGHTS
BALANCE SHEET HIGHLIGHTS:
-------------------------
(In Thousands)
------------
(Unaudited)
September 30,
-------------------
2007 2006
-------------------
Cash and cash equivalents $ 51,720 $ 41,242
Short Term Investments 86,671 85,565
Accounts Receivable 36,915 34,284
Inventory 19,778 19,006
Current Assets 206,989 185,146
Non-Current Assets 124,946 120,708
Total Assets $331,935 $305,854
======== ========
Current Liabilities $ 17,825 $ 15,355
Total Liabilities 19,302 15,355
Shareholders' equity 306,582 285,813
Total Liabilities and Shareholders' equity $331,935 $305,854
======== ========