Criticare Systems, Inc. Reports Fiscal 2007 Year To Date and Second Quarter Results

MILWAUKEE–(BUSINESS WIRE)–CRITICARE SYSTEMS, INC. (AMEX:CMD). Criticare Systems, Inc. today announced financial results for the second quarter and six months ended December 31, 2006.


For the second year in a row, the Company reported record net sales for the first six months of any fiscal year, as net sales of $16,669,334 for the six months ended December 31, 2006 eclipsed the previous record net sales for the first six months of $16,443,126 in fiscal 2006. Income from operations for the first six months of fiscal 2007 was $641,537 compared to $305,489 for the same period in fiscal 2006. The Company also reported net income of $683,609 for the six months ended December 31, 2006, compared with net income of $744,315 for the same period in fiscal 2006. Fiscal 2006 net income included a one-time patent license fee of $300,000. Operating expenses for the first six months ended December 31, 2006 decreased $310,602 from the same period in fiscal 2006. This decrease occurred in spite of a $268,445 increase in administrative expenses due to $362,693 of expenses incurred during the first six months of fiscal 2007 in connection with the two consent solicitation actions initiated by BlueLine Partners. Without this added expense the Companys income from operations and net income for the first six months fiscal 2007 would have been $362,693 higher. This would have resulted in near record income from operations for the first six months of any fiscal year in the history of the Company.


Net sales were $8,462,740 for the three months ended December 31, 2006 compared to $8,770,813 for the same period in fiscal 2006. The small decrease in net sales was made up of a $116,564 increase in domestic alternate care sales which was offset by a $398,503 decrease in international and OEM sales. Income from operations for the three months ended December 31, 2006 was $315,096 compared to $248,418 for the same period in fiscal 2006. Net income for the first three months of fiscal 2007 was $350,733 compared to $606, 937 for the same period in fiscal 2006. As previously stated, fiscal 2006 net income included a one-time patent license fee of $300,000. Operating expenses for the three months ended December 31, 2006 decreased $227,006 from the same period in fiscal 2006. This decrease occurred in spite of an increase of $176,964 in administrative expenses due to $271,153 of expenses incurred during the second quarter of fiscal 2007 in connection with the two consent solicitation actions initiated by BlueLine Partners. Absent this expense the Companys second quarter net income would have increased by an additional $271,153.


The Company continued to focus on the balance sheet fundamentals during the second quarter of fiscal 2007, as cash and equivalents increased 47.5% from $2,675,450 as of September 30, 2006 to $3,947,297 as of December 31, 2006. Additionally, inventories decreased 13.3% from $9,311,435 to $8,077,732, accounts payable decreased 46.6% from $5,900,109 to $3,148,887 and accounts receivable decreased 27.0% from $8,441,194 to $6,161,894. The Company continues to operate with no long-term bank debt and has an unused line of credit of $2,000,000.


Going forward, the Company expects to release a new product line, which supports the growing practice of conscious sedation, in the fourth quarter of fiscal 2007. This will be marketed under the Criticare label on a worldwide basis. Additionally, Criticare has begun development to integrate its MR monitoring technology, including respiratory gas, into a leading product line that carries global recognition. The Company anticipates the product launch to be during fiscal 2008.


Criticare will hold a quarterly conference call on Thursday, February 8, 2007 at 10:00 am central standard time to discuss the year to date and second quarter results of fiscal 2007. Dialing 1-877-407-0782 can access the call.


Criticare (www.csiusa.com) designs, manufactures, and markets cost-effective patient monitoring systems and noninvasive sensors for a wide range of hospitals and alternate health care environments throughout the world.


This press release contains forward-looking statements. Such statements refer to the Company’s beliefs and expectations. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those described. Such uncertainties include, but are not limited to, the timely completion of new products, regulatory approvals for new products, the risk of new and better technologies, risks relating to international markets, as well as general conditions and competition in the Company’s markets. Criticare does not believe its backlog of any date is indicative of its future sales. Other risks are set forth in Criticare’s reports and documents filed from time to time with the Securities and Exchange Commission.
































































































































































































CRITICARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED DECEMBER 31, 2006 AND 2005
 
(UNAUDITED)
 

2006  2005 
NET SALES $ 16,669,334  $ 16,443,126 
 
COST OF GOODS SOLD 10,132,140  9,931,378 
 
GROSS PROFIT 6,537,194  6,511,748 
 
OPERATING EXPENSES:
Sales and marketing 2,813,618  3,292,693 
Research, development and engineering 1,199,694  1,299,666 
Administrative 1,882,345  1,613,900 
Total 5,895,657  6,206,259 
 
INCOME FROM OPERATIONS 641,537  305,489 
 
OTHER INCOME (EXPENSE):
Interest expense (7,889) (10,565)
Interest income 62,661  41,974 
Other (expense) income (12,700) 407,417 
Total 42,072  438,826 
 
INCOME BEFORE INCOME TAXES 683,609  744,315 
 
INCOME TAX PROVISION    
 
NET INCOME $ 683,609  $ 744,315 
 
NET INCOME PER COMMON SHARE:
Basic $0.06  $0.06 
Diluted $0.06  $0.06 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
 
Basic 12,295,483  11,935,933 
Diluted 12,362,820  12,241,949 
































































































































































































CRITICARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005
 
(UNAUDITED)
 

2006  2005 
NET SALES $ 8,462,740  $ 8,770,813 
 
COST OF GOODS SOLD 5,046,620  5,194,365 
 
GROSS PROFIT 3,416,120  3,576,448 
 
OPERATING EXPENSES:
Sales and marketing 1,517,496  1,805,862 
Research, development and engineering 557,411  673,015 
Administrative 1,026,117  849,153 
Total 3,101,024  3,328,030 
 
INCOME FROM OPERATIONS 315,096  248,418 
 
OTHER INCOME (EXPENSE):
Interest expense (3,770) (5,122)
Interest income 28,936  21,718 
Other income 10,471  341,923 
Total 35,637  358,519 
 
INCOME BEFORE INCOME TAXES 350,733  606,937 
 
INCOME TAX PROVISION    
 
NET INCOME $ 350,733  $ 606,937 
 
NET INCOME PER COMMON SHARE:
Basic $0.03  $0.05 
Diluted $0.03  $0.05 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
 
Basic 12,297,193  12,027,943 
Diluted 12,357,641  12,334,894 


























































































































































































































































CRITICARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND JUNE 30, 2006
 
(UNAUDITED)
 

ASSETS

December 31,

2006

June 30,

2006

CURRENT ASSETS:
Cash and cash equivalents $ 3,947,297  $ 3,793,781 
Accounts receivable, less allowance for doubtful accounts of $698,372 and $829,700, respectively
6,161,894  6,187,351 
Other receivables 420,843  591,008 
Short-term note receivable 50,000  50,000 
Inventories 8,077,732  9,464,037 
Prepaid expenses 119,288  227,606 
Total current assets 18,777,054  20,313,783 
 
Property, plant and equipment net 2,401,237  2,452,314 
 
License rights and patents net 59,480  62,981 
Long-term note receivable 100,000  150,000 
Total other assets 159,480  212,981 
 
TOTAL ASSETS $21,337,771  $22,979,078 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,148,887  $ 5,408,746 
Accrued liabilities:
Compensation and commissions 937,699  914,889 
Product warranties 388,000  425,000 
Obligations under capital lease 71,114  68,205 
Other 112,774  174,667 
Total current liabilities 4,658,474  6,991,507 
 
LONG-TERM LIABILITIES:
Obligations under capital lease 97,526  133,826 
Other long-term obligations   659 
Total long-term liabilities 97,526  134,485 
 
TOTAL LIABILITIES 4,756,000  7,125,992 
 
STOCKHOLDERS’ EQUITY:
Preferred stock – $.04 par value, 500,000 shares authorized no shares issued or outstanding
   
Common stock – $.04 par value, 15,000,000 shares authorized, 12,399,631 and 12,398,131 shares issued, and 12,298,073 and 12,291,454 shares outstanding, respectively
495,985  495,925 
Additional paid-in capital 26,223,139  26,156,864 
Common stock held in treasury at cost (101,558 and 106,677 shares, respectively) (366,278) (375,813)
Retained earnings (accumulated deficit) (9,753,186) (10,436,794)
Other comprehensive income (loss) (17,889) 12,904 
Total stockholders’ equity 16,581,771  15,853,086 
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $21,337,771  $22,979,078