Circon Announces First Quarter 1998 Results.

SANTA BARBARA, Calif.--(BUSINESS WIRE)--May 1, 1998--Richard A. Auhll, chairman of the board and chief executive officer, Friday announced that Circon's (Nasdaq/NM:CCON) first quarter 1998 net income and EPS increased 54 percent and 53 percent, respectively, over the same period last year.

Gross profit as a percent of sales increased to 56.3 percent from 55.9 percent in the first quarter 1997. This improvement is the result of selling price stability and reduced manufacturing overhead coupled with manufacturing efficiency gains.

Total domestic sales for the first quarter were up to $31.6 million from $31.1 million in the prior year. Sales by the U.S. sales force totalled $28.3 million compared with $28.1 million last year. International and other sales were $4.7 million compared with $7.3 million in the first quarter 1997.

Operating expenses were down $1.8 million or 9.3 percent to $17.7 million compared with the first quarter 1997, due to the cost reduction programs instituted over the past year.

Sales and marketing expenses have been cut 11 percent due to general economies including reduced sales meeting expenses and tighter controls over field inventory/samples. General and adminstrative expenses were down 9.8 percent for the quarter, due to the closure of the German facility, reduced amortization, and other factors. R&D expense remained essentially level with last year.

1998 first quarter operating expenses were 48.7 percent of sales, down from 50.7 percent of the same 1997 period. Operating income grew to 7.6 percent of sales from 5.2 percent in 1997.

International sales were down due to recent strengthening in the U.S. dollar, reduced health care expenditures in Pacific Rim countries, and the requirement by some European dealers for CE marking, although not legally required until June 1998. Virtually all of Circon's products received CE mark approval in April.

New higher-performing and lower-cost video systems and other products have been recently introduced to international markets.

Favorable cash flow has enabled the company to reduce total debt by $5.0 million during the first quarter 1998 and $28 million in the past 27 months.

For the trailing 12 months ending March 31, 1998, compared with the same period a year earlier, sales were up 4 percent to $158 million, operating income was up 113 percent to $11 million and net income was up 360 percent to $5.5 million.

Circon is the leading U.S. supplier of products for minimally invasive urological and gynecological surgery, including such hardware products as endoscopes and video systems and such disposable products as urological stents and laparoscopic suction-irrigation devices. -0-

                            Circon Corp.
                   Comparative Summary of Income
            Unaudited, in millions, except per share data

                                          First Quarter
                                       1998          1997

Domestic sales                         $31.6         $31.1
International & other sales              4.7           7.3
 Total sales                           $36.3         $38.4

Gross profit                            20.4          21.5
Operating expenses                      17.6          19.5
Operating income                        $2.8          $2.0
Income before taxes                     $1.9          $1.2
Net income taxes                         0.7           0.4
 Net income                             $1.2          $0.8

Shares outstanding - Basic            13,308        13,241
Earnings per share - Basic             $0.09         $0.06

                       Condensed Balance Sheet
                       Unaudited, in millions

                                             March 31,
                                        1998         1997

Cash and equivalents                    $4.5          $5.3
Total current assets                    82.8          83.1
All other assets, net                   84.3          87.3
 Total assets                         $167.1        $170.4

Total current liabilities              $18.3         $18.6
Total debt                              43.8          52.6

Shareholders' equity                   105.0          99.2
 Total liabilities and
   shareholders' equity                $167.1       $170.4

CONTACT: Circon Corp., Santa Barbara

R. Bruce Thompson, 805/685-5100