Circon announces third-quarter 1996 results.

SANTA BARBARA, Calif.--(BUSINESS WIRE)--Oct. 25, 1996--Richard A. Auhll, chairman and president of Circon Corp. (NASDAQ/NMS:CCON), Friday announced that third-quarter 1996 sales by the U.S. sales force were the highest of any quarter since the merger with Cabot Medical in August 1995 and up 5 percent over the second quarter of 1996.

Operating income for the third quarter of $2.4 million was up 145 percent, and related earnings per share after interest and taxes of 7 cents were up from break-even, excluding unusual nonrecurring charges, over the respective results for the immediately preceding second quarter.

Auhll said, ``We are encouraged by the third-quarter progress toward implementing our strategic plan in spite of the significant distractions which occurred.''

Sales by the U.S. sales force totaled $30 million, up 5 percent over the immediately preceding second quarter but 3 percent below the record third quarter of 1995. Third-quarter 1996 total sales of $38.4 million were 9 percent below the all-time-high third quarter of 1995.

The focused attention on improving the performance of the sales force is showing early signs of sales growth returning to normal levels.

Although third-quarter total sales were up 4 percent over the immediately preceding second quarter, operating expenses, excluding unusual nonrecurring charges, were down $650,000, or 3 percent, from the same period. The 5 percent reduction in selling, general and administrative expenses from the second quarter was partially offset by increased R&D expenses.

Third-quarter R&D expenditures were $3.2 million, or 8 percent of sales.

When the company announced the closure of Cabot Medical's Langhome, Pa., facility in May, it forecasted closure-related expenses in the third quarter and has separately noted the one-time $500,000 charge. The company expects that partial benefits of this closure will begin in the fourth quarter of 1996 and full benefits will occur in 1997 and subsequent years.

In addition, an unusual nonoperating charge of $3.2 million, associated with the U.S. Surgical hostile tender offer and shareholder lawsuits, is included in the third-quarter and nine- months results.

While third-quarter operating income was $2.4 million, the $3.7 million nonrecurring charges caused Circon to record a net loss for the 1996 quarter of $1.5 million, compared with a $7.4 million loss in the 1995 quarter, which included Circon-Cabot merger charges. On the same basis, EPS for the third quarter of 1996 is (11 cents), compared with (56 cents) for the same 1995 period.

Circon's balance sheet remains strong. In the third quarter of 1996, Circon's total debt was reduced $4.4 million. Over the past year, total debt has been reduced $16.9 million.

This release may contain forward-looking statements that are made pursuant to the safe-harbor provision of the Private Securities Litigation Reform Act of 1995.

Important factors that could cause actual results to differ materially include the risk that measures being implemented will not achieve the targeted results, as well as other risks described in the company's Securities and Exchange Commission filings, particularly the company's Form 10Q for the second quarter of 1996. -0-

                            CIRCON CORP.
                   Comparative Summary of Income
                            (Unaudited)
                (In millions, except per-share data)

                                Third quarter          Nine months
                               1996       1995       1996       1995
Sales                         $38.4      $42.1     $115.4     $121.9
Gross profit                   21.3       23.5       64.1       66.5
Operating income before
 nonrecurring charges         $ 2.4      $ 5.1     $  6.9     $  9.4
Langhome facility closure       0.5         --        2.6         --
Cabot business integration       --        8.4         --        8.4
Operating income                1.9       (3.4)       4.3        1.0
USSC tender offer               3.2         --        3.2         --
Cabot transaction costs          --        4.9         --        4.9
Income before taxes            (2.3)      (9.5)      (1.9)      (7.4)
Income-tax benefit              0.8        2.1        0.7        1.0
NOL benefit                      --         --        2.0         --
Net tax benefit                 0.8        2.1        2.7        1.0
Net income                    $(1.5)     $(7.4)    $  0.8     $ (6.4)
Shares outstanding           13,431     13,198     13,201     13,017
Earnings per share        (11 cents) (56 cents)   6 cents  (49 cents)
-0-

                       Condensed Balance Sheet
                             (Unaudited)
                            (In millions)

                                             Sept. 30,
                                          1996       1995
Cash and equivalents                    $ 12.6     $ 23.8
Total current assets                      82.5       94.4
All other assets, net                     89.8       87.2
Total assets                            $172.3     $181.6
Total current liabilities               $ 20.0     $ 22.1
Total debt                                54.5       71.4
All other liabilities, net                 2.0        5.1
Shareholders' equity                      95.8       83.0
Total liabilities and shareholders'
 equity                                 $172.3     $181.6

CONTACT: Circon Corp., Santa Barbara

R. Bruce Thompson, 805/685-5100