Restore medical improved gross profit margin in 2007

Medical Product Outsourcing, May, 2008

Lower production costs and more efficient manufacturing operations helped Restore Medical Inc. improve its profit margin last year.

Gross profit for the fourth quarter of 2007, which ended Dec. 31, was $566,000, or 72% of net sales, compared with a gross profit of $697,000, or 63% of net sales, for the fourth quarter of 2006. Gross profit for 2007 was $3.1 million, or 75% of net sales, compared with a gross profit of $4.2 million, or 71% of net sales for 2006.

Net sales, however, were down sharply for the final quarter of 2007 and for the entire year. The St. Paul, MN-based firm, which makes devices to treat sleep-breathing disorders, reported fourth-quarter 2007 net sales of $788,000, a 28% drop from the $1.1 million in sales it recorded for the same quarter in the prior year. Domestic and international sales also were down for both the final quarter and entire year. Fourth-quarter domestic sales fell 18.8% in 2007 to $764,000, while international sales plummeted 85%, tumbling to just $24,000.

Net sales for all of 2007 plunged 30%, dropping to $4.1 million from $5.9 million in 2006. Total US sales were off 19.5% for the year, dipping to $3.7 million from $4.6 million in 2006. International sales fell from $1.3 million in 2006 to $410 in 2007, a 67.7% decrease.

President and CEO Bob Paulson attributed the declines to the company's shift in focus to its domestic business and a decision to leave five sales territories throughout the country unstaffed. He noted, however, that the number of reorders from US customers jumped 24% in the fourth quarter of 2007.

"Our quarterly results reflect our ongoing strategic shift to emphasize repeat business from existing customers over attracting new ENT [ear, nose and throat] customers," Paulson said in a statement.

Sales are expected to improve in the first quarter of 2008, with estimates of more than $1.2 million. With US sales amounting to more than $1 million in the projections, that would represent a 30% increase over the fourth quarter of 2007.