CNS, Inc. Reports Fiscal 2006 Third Quarter Results.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- CNS See Continuous net settlement. CNS See continuous net settlement (CNS). , Inc. (Nasdaq:CNXS): --Third quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $30.9 million rose 8 percent driven by strong Breathe Right Breathe Right™ Sports medicine A proprietary Band-Aid™-like nasal strip worn on the nasal bridge, said to improve breathing by opening the nasal passages Indications Temporary relief of breathing difficulties due to deviated nasal (R) international and FiberChoice(R) growth --Third quarter operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $5.9 million grew 10 percent, excluding a prior year benefit related to a refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. import duties --Company continues to estimate $1.05 to $1.12 fully diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for full year fiscal 2006 CNS, Inc. (Nasdaq:CNXS), the Breathe Right(R) company, today announced results for its fiscal 2006 third quarter ended December December: see month. 31, 2005. Net sales for the quarter were $30.9 million, up 8 percent from $28.7 million in the prior year period. Net income for the quarter ended December 31, 2005, totaled $4.0 million, or $0.26 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Net income for the prior year quarter was $4.4 million, or $0.30 per fully diluted share, which included the benefit related to a duty refund of $0.05 per fully diluted share. For the first nine months of fiscal 2006, CNS reported net sales of $80.5 million, up 23 percent compared to $65.3 million in the same period last year. Net income for the first nine months of fiscal 2006 was $12.5 million, or $0.83 per share, compared to $9.6 million, or $0.65 per fully diluted share for the first nine months of fiscal 2005. Excluding the non-recurring European import duty refund, fully diluted earnings per share for the first nine months of fiscal 2006 grew 37 percent compared to the prior year. "Overall, revenue growth in the third quarter moderated as anticipated, compared to last year's high sales volumes that resulted from the successful relaunch Relaunch can refer to several things:
CNS continues to focus on a number of key initiatives to grow the Breathe Right and FiberChoice brands including: --Growing nasal nasal /na·sal/ (na´zil) pertaining to the nose. na·sal adj. Of, in, or relating to the nose. nasal pertaining to the nose. strip sales with tested, proven marketing tactics, including an effective "How it Works" advertising demonstration to attract new nasal strip users; --Increasing FiberChoice sales with the expansion of advertising and the introduction of two new FiberChoice products which will begin shipping in February February: see month. 2006 - FiberChoice with Calcium(TM) and FiberChoice Weight Management(TM); --Conducting market testing designed to create a robust pipeline of growth tactics for Breathe Right nasal strips, both domestically and internationally; and --Building a pipeline of potential new products for both the Breathe Right and FiberChoice brands. On January January: see month. 5, 2006, CNS announced the purchase, from Onesta Nutrition, Inc., of a portfolio of domestic and international patents and patents pending related to the FiberChoice brand for approximately $8 million. The purchase, which was completed January 4, 2006, reflects CNS' commitment to further develop and grow this important brand within the company's portfolio. The purchase was funded by CNS' existing cash balances, and is expected to be earnings neutral in the fiscal year ending March 31, 2007. The gross profit rate for the fiscal 2006 third quarter was 69.6 percent, down 5.7 percentage points compared to the prior year period's gross profit rate of 75.3 percent, which included the benefit of the European import duty refund. Advertising and promotion expense for the 2006 third quarter of $11.4 million rose 6 percent compared to $10.7 million in the year earlier period, primarily due to increased advertising for FiberChoice in the U.S. and Breathe Right in several international markets. CNS generated $9.6 million in cash from operations through the third quarter of fiscal 2006 and ended the period with $59.7 million in cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . During the first nine months of fiscal 2006, CNS repurchased 435,105 shares of its common stock for $9.2 million. Yesterday, the company announced a quarterly dividend of $0.06 per share, payable on March 3, 2006, to shareholders of record as of February 17, 2006. Third Quarter Product Results Domestic Breathe Right sales in the 2006 third quarter were $21.5 million, down 1 percent compared to strong prior year period sales of $21.8 million which benefited from the clear nasal strip relaunch, including the "How it Works" component of our advertising message. For the first nine months of fiscal 2006, Breathe Right domestic revenues increased 12 percent to $54.7 million. International sales of Breathe Right products in the fiscal 2006 third quarter rose 35 percent to $5.3 million, up from international sales in the prior year period of $3.9 million. Sales growth resulted from continued strong shipments to Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , as well as normal shipments to Japan. In the first eight months of fiscal 2005, no revenues were recorded in Japan due to high inventory levels in that market. For the first nine months of fiscal 2006, international sales of Breathe Right products grew 48 percent to $11.9 million. Sales of FiberChoice during the fiscal third quarter were $4.1 million, up 38 percent from the prior year period sales of $3.0 million. Sales growth resulted from continued increases in consumer demand for the expanded range of FiberChoice products. For the two FiberChoice items launched February 2005, the assorted fruit flavored tablet See digitizer tablet and tablet computer. TABLET - A query language. ["Human Factor Comparison of a Procedural and a Non-procedural Query Language", C. Welty et al, ACM Trans Database Sys 6(4):626-649 (Dec 1981)]. has exceeded expectations and is currently the fastest selling item in the FiberChoice product line, while the hard candy candy: see confectionery. candy Sweet sugar- or chocolate-based confection. The Egyptians made candy from honey (combined with figs, dates, nuts, and spices), sugar being unknown. fiber drop has fallen short of our expectations. FiberChoice also continues to benefit from the expansion of advertising coverage to 100 percent of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . For the first nine months of fiscal 2006, FiberChoice revenues increased 69 percent to $13.8 million. Outlook for Fiscal 2006 and Fiscal 2007 For the year ending March 31, 2006, CNS has updated its estimate for record sales in the range of $109 million to $112 million, up 16 percent to 19 percent versus the 2005 fiscal year. Sales growth in the first three quarters of fiscal 2006 rose 23 percent as the company benefited from the launch of the two new FiberChoice products, strong consumer demand for domestic nasal strips and the resumption RESUMPTION. To reassume; to promise again; as, the resumption of payment of specie by the banks is general. It also signifies to take things back; as the government has resumed the possession of all the lands which have not been paid for according to the requisitions of the law, and the of a normal shipping pattern to Japan. CNS continues to anticipate record fully diluted earnings per share for fiscal 2006 to be in the range of $1.05 to $1.12. This estimated range represents 19 percent to 27 percent growth, excluding the $0.05 earnings per share benefit of the one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. duty refund recorded in the third quarter of fiscal 2005. For the fiscal year ending March 31, 2007, the company's preliminary estimates for revenue growth are in line with its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. planning guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. of 10 percent to 15 percent, with earnings growth expected to be slightly higher than revenue growth. The company will provide further estimates for fiscal 2007 revenues and earnings with its earnings release for the fourth quarter of fiscal 2006 in May. Conference Call Webcast A conference call to review the third quarter results is scheduled today at 4 p.m. CT (5 p.m. ET). Interested participants may listen to the live conference call or replay over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by logging onto CNS' Web site at www.cns.com. A replay of the third quarter conference call may also be accessed by dialing toll-free 1-800-405-2236, conference call ID 11050570, between 6 p.m. CT on Wednesday, January 25, and 6 p.m. CT on Wednesday, February 1. About CNS, Inc. CNS, based in Minneapolis, designs and markets consumer health care products, including Breathe Right(R) nasal strips and FiberChoice(R) dietary fiber dietary fiber n. Coarse, indigestible plant matter, consisting primarily of polysaccharides, that when eaten stimulates intestinal peristalsis. supplements. The company focuses on products that address important consumer needs within the aging well/self-care market, including better breathing and digestive Ulcers (Digestive) Definition In general, an ulcer is any eroded area of skin or a mucous membrane, marked by tissue disintegration. In common usage, however, ulcer usually is used to refer to disorders in the upper digestive tract. health. Its common stock is listed on the Nasdaq National Market under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors "CNXS." More information about CNS and its products is available at www.cns.com. Some of the statements contained in this news release contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are subject to certain business risks, including those risks described in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended March 31, 2005, as well as other filings with the Securities and Exchange Commission. The Company undertakes no duty or obligation to update any of the forward-looking statements after the date of this release.
CNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $30,929 $28,737 $80,525 $65,310
Cost of goods sold 9,401 7,099 23,991 18,208
--------- --------- --------- ---------
Gross profit 21,528 21,638 56,534 47,102
--------- --------- --------- ---------
Operating expenses:
Advertising and promotion 11,403 10,721 25,070 21,520
Selling, general and
administrative 4,203 4,506 12,969 11,605
--------- --------- --------- ---------
Total operating expenses 15,606 15,227 38,039 33,125
--------- --------- --------- ---------
Operating income 5,922 6,411 18,495 13,977
Investment income 330 256 964 670
--------- --------- --------- ---------
Income before income taxes 6,252 6,667 19,459 14,647
Income tax expense 2,284 2,262 6,916 5,084
--------- --------- --------- ---------
Net income $3,968 $4,405 $12,543 $9,563
========= ========= ========= =========
Diluted net income per share $.26 $.30 $.83 $.65
========= ========= ========= =========
Weighted average number of
common and potential common
shares outstanding 15,023 14,740 15,057 14,648
========= ========= ========= =========
CNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
December 31, March 31,
2005 2005
------------ ------------
Current assets:
Cash and marketable securities $59,702 $60,750
Accounts receivable, net 17,181 15,030
Inventories 7,211 4,531
Other current assets 4,669 3,403
------------ ------------
Total current assets 88,763 83,714
Long-term assets 3,259 3,501
------------ ------------
Total assets $92,022 $87,215
============ ============
Current liabilities 18,332 16,064
Stockholders' equity 73,690 71,151
------------ ------------
Total liabilities and stockholders'
equity $92,022 $87,215
============ ============
CNS, INC.
RECONCILIATION OF GAAP TO NON GAAP DISCLOSURES
(in thousands) (unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Operating income, as reported $5,922 $6,411 $18,495 $13,977
Proforma Adjustment (1) - 1,050 - 1,050
--------- --------- --------- ---------
Operating income, excluding
favorable impact of European
import duty refund $5,922 $5,361 $18,495 $12,927
========= ========= ========= =========
(1) The Company received a $1.1 million refund of previously paid
European Community import duties on Breathe Right nasal strips
relating to an import duty appeal. The Company recorded this non-
recurring item as a reduction in cost of goods sold during the quarter
ended December 31, 2004.
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