Medical Action Industries Reports Strong Second Quarter 2010 Fiscal Results

November 6, 2009 7:30 AM EST

Company Achieves Increases in Net Income per Share and Continued Strong Gross Margin

BRENTWOOD, N.Y.--(BUSINESS WIRE)-- Medical Action Industries Inc. (NASDAQ/MDCI), a leading supplier of medical and surgical disposable products, today reported second quarter 2010 results highlighted by increases in both net income and gross margin versus the prior year period.

Net sales for the three months ended September 30, 2009 totaled $75,060,000, an increase of $1,236,000, or 1.7% above the $73,824,000 in net sales reported for the three months ended September 30, 2008. Net income for the second quarter of fiscal 2010 was $3,987,000, or $.25 per basic and diluted share, up significantly from the $480,000, or $.03 per basic and diluted share, reported for the comparable three months of fiscal 2009.

Net sales for the six months ended September 30, 2009 amounted to $145,747,000, a decrease of $5,472,000 or 3.6% from the $151,219,000 in net sales reported for the six months ended September 30, 2008. Net income for the six months ended September 30, 2009 amounted to $7,637,000 or $0.48 per basic and diluted share, an increase of $4,611,000 or $0.29 per basic and diluted share from the $3,026,000 or $0.19 per basic and diluted share reported for the comparable six months in fiscal 2009.

"Medical Action's second quarter results reflect continued benefits from relative price stability in resin and products sourced from China-based vendors. We are continuing to see improvements at our Tennessee plant, with our new leadership team making positive changes in our business processes while our ongoing expenditures on capital equipment have contributed to improved quality and increased production efficiencies. We have a sharpened focus on sales and marketing to leverage relationships with customers and grow revenue in this highly competitive environment," said Chief Executive Officer and President Paul D. Meringolo. "While we are pleased with our results of operations, our reported earnings have only just returned to profitability levels attained in fiscal 2008. Together with our customers and vendor base we remain challenged by the unsettled economy, however we believe that excellent opportunities exist to grow revenues organically and efficiently manage costs. We have strengthened our balance sheet during the past two quarters which included a reduction of our debt from $60 million to $39 million. With our improved results of operations and financial condition we can now look for opportunities for acquisitions that could add to our product lines, supply chain and base of customers. With the changes we're making to build this solid foundation, Medical Action is now on its way to strengthening our market position and extending our leadership in the manufacturing and distribution of disposable medical devices."

Medical Action invites its shareholders and other interested parties to attend its conference call at 10:00 a.m. (ET) on November 6, 2009. You may participate in the conference call by calling (888) 334-3932 (domestic) or (973) 935-8511 (international); conference ID #34393624. The conference call will be simultaneously web cast on our website: www.medical-action.com. The complete call and discussion will be available for replay on our website beginning at 1:00 p.m. (ET) on November 6, 2009.

Medical Action is a diversified manufacturer and distributor of disposable medical devices and a leader in many of the markets where it competes. Its products are marketed primarily to acute care facilities in domestic and certain international markets. The Company has expanded its target market to include physician, dental and veterinary office, out-patient surgery centers, long-term care facilities and laboratories. Medical Action's products are marketed nationally by its direct sales personnel and extensive network of healthcare distributors. The Company has preferred vendor agreements with national and regional distributors, as well as sole and multi-source agreements with group purchasing organizations. Medical Action's common stock trades on the NASDAQ Global Select Market under the symbol MDCI and is included in the Russell 2000 Index.

This news release contains forward-looking statements that involve risks and uncertainties regarding Medical Action's operations and future results. Please see the Company's filings with the Securities and Exchange Commission, including, without limitation, the Company's Form 10-K and Form 10-Qs, which identify specific factors that would cause actual results or events to differ materially from those described in the forward-looking statements.

MEDICAL ACTION INDUSTRIES INC.

Financial Highlights

(dollars in thousands, except per share data)

                              For the Three Months  For the Six Months
                              Ended September 30,   Ended September 30,

                              2009      2008        2009       2008

                              (Unaudited)           (Unaudited)

Statements of Operations:

Net sales                     $ 75,060  $ 73,824    $ 145,747  $ 151,219

Cost of sales                   57,831    62,552      111,596    124,897

Gross profit                    17,229    11,272      34,151     26,322

Selling, general and
                                10,243    9,923       20,632     20,384
administrative expenses

Interest expense, net           363       629         833        1,113

Income before income taxes      6,623     720         12,686     4,825

Income tax expense              2,636     240         5,049      1,799

Net income                    $ 3,987   $ 480       $ 7,637    $ 3,026

Net income per share basic    $ .25     $ .03       $ .48      $ .19

Net income per share diluted  $ .25     $ .03       $ .48      $ .19

Condensed Balance Sheets as of September 30, 2009 and

March 31, 2009 (dollars in thousands)

                                           September 30,  March 31,

                                           2009           2009

                                           (Unaudited)

Current Assets:

Cash and cash equivalents                  $ 5,794        $ 3,459

Accounts receivable, net                     20,727         21,459

Inventories, net                             35,301         43,221

Prepaid expenses and other current assets    5,608          6,404

Total Current Assets                         67,430         74,543

Property, plant and equipment, net           40,776         40,313

Goodwill                                     80,699         80,699

Other intangible assets, net                 15,159         15,886

Other assets, net                            3,577          3,725

Total Assets                               $ 207,641      $ 215,166

Liabilities and Shareholders' Equity:

Accounts payable                           $ 11,287       $ 8,190

Accrued expenses                             11,785         10,643

Deferred income taxes                        14,282         14,282

Total debt                                   39,044         60,046

Shareholders' equity                         131,243        122,005

Total Liabilities and
                                           $ 207,641      $ 215,166
Shareholders' Equity

Key Financial Statistics

Current ratio                                2.0            2.9

Debt to equity ratio                         .30            .49

Book value per share                       $ 8.15         $ 7.61

    Source: Medical Action Industries Inc.

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