CNS, Inc. Reports Strong Fiscal 2006 Second-Quarter Results.MINNEAPOLIS -- CNS See Continuous net settlement. CNS See continuous net settlement (CNS). , Inc. (Nasdaq:CNXS): --Second-quarter sales of $26.1 million, up 30% versus the prior year, driven by strong growth of 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) and FiberChoice(R) brands --Second-quarter net income of $4.5 million, up 30% versus the prior-year period CNS, Inc. (Nasdaq:CNXS), the Breathe Right(R) company, today announced results for its fiscal 2006 second quarter ended September 30, 2005. 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 for the second quarter were $26.1 million, an increase of 30 percent compared to $20.0 million in the prior-year period. Net income for the second quarter grew 30 percent to $4.5 million, or $0.30 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, versus net income of $3.5 million, or $0.24 per fully diluted share, in the second quarter of fiscal 2005. For the first six months of fiscal 2006, CNS reported net sales of $49.6 million, up 36 percent compared to $36.6 million in the same period last year. Net income for the first half of fiscal 2006 rose 66 percent to $8.6 million, or $0.57 per fully diluted share, versus $5.2 million, or $0.35 per fully diluted share, in the prior-year period. "We are pleased to announce very strong second-quarter results. Sales grew very nicely on the Breathe Right(R) brand, both domestically and internationally, as well as the FiberChoice(R) brand," said Marti Morfitt, CNS' president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Our growth resulted from the effectiveness of important initiatives begun in the previous year, such as market testing designed to drive growth of Breathe Right 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. strips, new product development to expand the FiberChoice brand and lower distributor inventories in Japan." Morfitt added, "We also were honored hon·or n. 1. High respect, as that shown for special merit; esteem: the honor shown to a Nobel laureate. 2. a. Good name; reputation. b. to be named to the Forbes 'Best Small Companies List' during the quarter. Additionally, on October 20, 2005, CNS was added to the Standard & Poor's SmallCap 600 Index." In fiscal 2006, CNS continues to focus on a number of key initiatives including: --Growing nasal 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 geographical expansion of advertising and the introduction of two new FiberChoice items in February 2005 (FiberChoice tropical orange fiber drops and FiberChoice sugar-free chewable chew v. chewed, chew·ing, chews v.tr. 1. To bite and grind with the teeth; masticate. 2. To meditate on; ponder: chew a problem over. v. tablets in assorted fruit flavors); --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. The gross margin rate for the 2006 second quarter was 71 percent, down slightly compared to the prior-year period's gross margin rate, primarily due to changes in product mix. Advertising and promotion expense for the 2006 second quarter of $7.3 million was up 30 percent compared to $5.7 million in the prior-year period, primarily due to increased advertising on both the FiberChoice and Breathe Right brands. The company expects to carry somewhat higher inventory levels than it typically has in the past, due to the addition of new FiberChoice and Breathe Right products in its portfolio and to support the continued growth of its Breathe Right nasal strip business. CNS generated $6.3 million in cash from operations year-to-date through the second quarter of fiscal 2006 and ended the period with $58.9 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 half of fiscal 2006, CNS repurchased 355,105 shares of its common stock for $7.3 million. Yesterday, the company announced a quarterly dividend of $0.06 per share, payable on December 2, 2005, to shareholders of record as of November 18, 2005. Second-Quarter Product Results Domestic Breathe Right sales in the 2006 second quarter were $18.4 million, growing 22 percent compared to prior-year period sales of $15.1 million. This marks the third consecutive quarter that Breathe Right sales growth has exceeded 20 percent. Domestic nasal strips continued to grow behind the strong new advertising message, the new consumer trial generated by last year's relaunch Relaunch can refer to several things:
n. A white crystalline organic compound, CH3C6H9(C3H7)OH, obtained from peppermint oil or synthesized. Strips. International sales of Breathe Right products in the fiscal 2006 second quarter rose 39 percent to $3.0 million, up from sales in the prior-year period of $2.1 million. Sales growth resulted from continued strong shipments to Canada and Europe, as well as normalized shipments to Japan. In the first half of fiscal 2005, no revenues were recorded in Japan due to high inventory levels in that market. Sales of FiberChoice were $4.5 million, up 67 percent from the prior-year period sales of $2.7 million. Sales growth resulted from continued increases in consumer demand for the existing orange flavored tablets, as well as the FiberChoice new products launched February 2005. FiberChoice also benefited from 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. compared to 85 percent of the United States in the prior-year period. "We are very pleased to see another quarter of strong revenue growth in each of our product lines," said Morfitt. "Our flagship product A primary product of a company, which is typically why the company was founded and/or what made it well known. For example, MS-DOS, Windows and the Microsoft Office suite have been flagship products of Microsoft. CorelDRAW is a flagship product of Corel Corporation. , Breathe Right nasal strips, benefited from rising consumer demand, both domestically and internationally; and our FiberChoice brand has achieved a higher growth rate by the strength of new products, increased shelf space and continued effective advertising support." CNS Introduces Two New FiberChoice Fiber Products Today, CNS announced the introduction of two new, innovative products under its FiberChoice brand which will begin shipping to retailers in February 2006. --FiberChoice with Calcium(TM) chewable tablets provide the same 4 grams of fiber along with 500 mg of calcium and 200 international units international units, n.pl a unit of measurement that evaluates the potency of a substance. Because it measures potency instead of quantity, there is a different international unit-to-mg conversion ratio for each particular substance. of Vitamin D vitamin D Any of a group of fat-soluble alcohols important in calcium metabolism in animals to form strong bones and teeth and prevent rickets and osteoporosis. It is formed by ultraviolet radiation (sunlight) of sterols (see steroid) present in the skin. . This product offers consumers a great tasting, easy way to get the fiber and calcium their bodies need in a convenient form. --FiberChoice Weight Management(TM) chewable tablets also offer 4 grams of fiber, 200 mcg of Chromax(R)(a) as well as green tea. Chromax(R) chromium chromium (krō`mēəm) [Gr.,=color], metallic chemical element; symbol Cr; at. no. 24; at. wt. 51.996; m.p. about 1,857°C;; b.p. 2,672°C;; sp. gr. about 7.2 at 20°C;; valence +2, +3, +6. picolinate has been clinically shown to help promote fat metabolism Noun 1. fat metabolism - a metabolic process that breaks down ingested fats into fatty acids and glycerol and then into simpler compounds that can be used by cells of the body and weight control. "We believe these two new product offerings represent excellent extensions of our successful FiberChoice brand," said Morfitt. "Both are expected to add incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. sales to our rapidly growing FiberChoice brand." Company Raises Outlook for Fiscal 2006 With two quarters completed, CNS is raising its estimates for fiscal 2006. For the year ending March 31, 2006, CNS anticipates that sales will be between $109 million and $113 million, up 16 percent to 21 percent versus the 2005 fiscal year. Sales growth in the first half of fiscal 2006 rose 36 percent as the company benefited from the launch of the two new FiberChoice products, strong consumer demand trends 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. Growth in the second half of fiscal 2006 is expected to moderate to between 5 percent and 12 percent, as results compare against the high sales volumes resulting from the domestic Breathe Right clear strips relaunch during the third and fourth quarters of fiscal 2005. CNS anticipates 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 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 duty 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 recorded in the third quarter of fiscal 2005. CNS Chairman Implements Rule 10b5-1 Pre-Arranged Stock Sales Plan The chairman and founder of the company, Daniel E. Cohen cohen or kohen (Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. , has adopted a Rule 10b5-1 trading plan to sell a portion of his company stock over time, as part of an individual long-term strategy for asset diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. . The stock trading plan is set up in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Rule 10b5-1 under the Securities and Exchange Act of 1934 and the company's policies regarding stock transactions. Cohen's plan covers the sale of up to 250,000 shares of CNS stock. The plan took effect on September 6, 2005, and expires on September 5, 2007. Rule 10b5-1 permits corporate officers and directors to adopt written, pre-arranged stock trading plans when they are not in possession of material, non-public information. Using these plans, insiders can gradually diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. their investment portfolios and spread stock trades over a period of time regardless of any material, non-public information they may receive after adopting their plans. The transactions under these plans will be disclosed publicly through Form 144 and Form 4 filings with the Securities and Exchange Commission. Conference Call Webcast A conference call to review the second-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 by logging onto CNS' Web site at www.cns.com. A replay of the second-quarter conference call may also be accessed by dialing toll-free 1-800-405-2236, conference call ID 11042183, between 6 p.m. CT on Thursday, October 27, and 6 p.m. CT on Thursday, November 3. 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. (a) Chromax(R) is a registered trademark of Nutrition 21, Inc. Some of the information contained in this news release is forward-looking and subject to certain business risks as described in the company's filings with the Securities and Exchange Commission, including those referred to in its 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. This news release contains 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. , which involve risks and uncertainties.
CNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2005 2004 2005 2004
-------- -------- ------- -------
Net sales $ 26,058 $ 20,041 $49,598 $36,572
Cost of goods sold 7,625 5,716 14,590 11,109
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Gross profit 18,433 14,325 35,008 25,463
-------- -------- ------- -------
Operating expenses:
Advertising and promotion 7,341 5,652 13,668 10,800
Selling, general and
administrative 4,422 3,519 8,766 7,097
-------- -------- ------- -------
Total operating
expenses 11,763 9,171 22,434 17,897
-------- -------- ------- -------
Operating income 6,670 5,154 12,574 7,566
Investment income 312 200 634 414
-------- -------- ------- -------
Income before income taxes 6,982 5,354 13,208 7,980
Income tax expense 2,452 1,870 4,633 2,822
-------- -------- ------- -------
Net income $ 4,530 $ 3,484 $ 8,575 $ 5,158
======== ======== ======= =======
Diluted net income per share $ .30 $ .24 $ .57 $ .35
======== ======== ======= =======
Weighted average number of common
and
potential common shares
outstanding 15,046 14,691 15,073 14,631
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CNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
September 30, March 31,
2005 2005
------------- ----------
Current assets:
Cash and marketable securities $ 58,881 $ 60,750
Accounts receivable, net 15,080 15,030
Inventories 7,991 4,531
Other current assets 3,682 3,403
------------- ----------
Total current assets 85,634 83,714
Long-term assets 3,133 3,501
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Total assets $ 88,767 $ 87,215
============= ==========
Current liabilities 16,893 16,064
Stockholders' equity 71,874 71,151
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Total liabilities and
stockholders' equity $ 88,767 $ 87,215
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