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COPYRIGHT 2006 Voxant Inc.
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day, everyone, and welcome to today's Vital Signs' fiscal 2006 first-quarter results conference call. Today's call is being recorded as well as simultaneously webcast. At this time for opening or margin introductions I'd like to turn the conference over to the Chief Financial Officer, Mr. William Craig.
WILLIAM CRAIG, CFO, VITAL SIGNS: Good morning and welcome to the first-quarter conference call for Vital Signs. I am William Craig, the CFO of Vital Signs, and here with me today is Terry Wall, our President and CEO, as well as Jay Sturm, our General Counsel, and Rich Feigel, our Controller. Barry Wicker, our COO, is also on the line.
You should have received by now our press release that we just issued for the first quarter ended December 31, 2005. And it's also posted on the Web in various sites. Before getting started let me read our required disclaimer.
All statements in this conference call, including projections for fiscal 2006, 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, market conditions and competitive responses as well as other factors referred to in our annual report on Form 10-K for the year ended September 30, 2005.
We have posted a copy of our press release on our website. To access the press release, please go to www.VitalSigns.com and then click on Investor Relations and then press releases. If during this call we allude to any so-called non-GAAP financial measures other than which may appear in the press release, we will post those disclosures to the same location on our website as promptly as we can.
Our format for today -- I will review financial issues, Terry will have some comments on various topics, then we will open it up for questions. Now let's begin.
In turning to the press release, net revenues for the first quarter of fiscal 2006 increased 4.6% to 47,730,000. On a segment basis we have the following -- anesthesia increased 11% to 22,348,000 primarily due to increases with Limb-O and anesthesia circuits; respiratory critical care increased 4.1% largely due to ABG; sleep disorders declined 5.4%, and that's largely due to a changeover in product mix at Breas as new products come on stream. As noted, SSA is actually up 21% while Breas is down 19.6%. However, Breas' gross margins increased from 39% to 49%. Pharmatech is actually on plan. Their minimal decline was due to a surge in shipping a product last year as customers solve Sarb-Ox issues.
On a consolidated basis gross margins increased from 49.7% to 50.7% or from 22,709,000 to 24,203,000. Operating expenses net of interest income increased 1.6% and net income increased from 5,733,000 to 6,660,000 or 16%. On a per-share basis this works out to $0.53 per share after the 123R expense of 382,000.
The balance sheet continues to be strong; Accounts Receivable is essentially flat. Inventory is up 6.9%, mostly raw materials as we anticipate some new products that we are preparing for. The dividend of $0.07 a share was approved by the Board of Directors on January 27th, payable on February 28th to shareholders of record on February 6th.
Let me come back briefly to the earnings issue. As many of you know, we don't provide quarterly guidance. We provide annual guidance and give a sense of the profile or the slope of the line, as it were, throughout the year. With the implementation of 123R this can get a little more complicated, but not overwhelmingly so.
You may recall that we gave annual guidance of 2.35 to 2.45 per share without 123R, this was several weeks ago, and this is 14 to 16% growth. We see a similar profile in fiscal 2006 that we had in fiscal 2005 with earnings increasing throughout the year so the first quarter would appear to be in line with our own expectations. With that I will turn it over to Terry Wall, our CEO.
TERRY WALL, PRESIDENT & CEO, VITAL SIGNS: Thanks, Bill. Good morning. I'm very pleased with the quarter turned in especially by our sleep disorder segment. Despite a decrease in revenue at Breas quarter-to-quarter, our gross profit for sleep overall increased from 43.8% in the first quarter of 2005 to 52.7% in the first quarter of '06. This helped to improve our sleep disorder segment's operating result from a loss of 36,000...
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