MTS Announces Financial Results for Fourth Quarter and Fiscal Year Ended March 31, 2009

Business Wire, June 16, 2009

Revenue up 32% - EPS up 19% for the Year Provides General Business Update

ST. PETERSBURG, Fla. -- MTS Medication Technologies, Inc. (NASDAQ: MTSI), an international provider of medication adherence packaging systems, today announced its financial results for its fourth quarter and year ended March 31, 2009.

Fourth Quarter

Revenue for the fourth quarter increased 20% to $17.0 million from $14.2 million in the prior year. Net income was $865,000, or $0.13 per diluted common share, compared with $136,000, or $0.02 per diluted common share, in the prior year. Gross margin for the fourth quarter increased to 37.8% compared with 35.1% in the prior year. SG&A expenses were down to $4.3 million from $4.4 million in the prior year. Operating profit was $1.4 million, or 8.3%, compared to an operating loss of $259,000 in the prior year.

Fiscal Year

Revenue for the 2009 fiscal year increased 32% to $76.3 million from $57.8 million in the prior year. Net income increased to $2.5 million, or $0.37 per diluted common share, from $2.1 million, or $0.31 per diluted common share, in the prior year. Gross margin for the fiscal year declined to 33.2% compared with 37.9% the prior year. SG&A expenses rose to $18.3 million compared with $15.7 million in the prior year. Operating profit was $4.1 million, or 5.4%, compared with $3.4 million, or 5.9%, in the prior year. Operating cash flow was $5.6 million compared with $859,000 in the prior year. Total outstanding debt was reduced by $3.6 million in fiscal year 2009.

Todd E. Siegel, President and Chief Executive Officer, commented, “Our consolidated revenue for both the fourth quarter and the 2009 fiscal year increased over the prior year primarily due to the delivery of twenty-three OnDemand® machines to our largest customer. We are very pleased with the progress made on this significant contract, and we believe we have been successful in providing a new generation of state-of-the-art pharmacy automation.”

“In the U.S., we continue to be successful in adding and retaining new independent pharmacy customers and also benefit from the growth experienced by our existing national accounts. As a result, our consumable product sales in the U.S. increased almost 9% this year. In Europe, our sales growth was approximately 19% when expressed in both the British Pound and the Euro. However, a strengthened U.S. Dollar affected our dollar-denominated European sales, and therefore, European net sales increased only 4% when expressed in the U.S. Dollar.”

Our gross margin decreased in fiscal year 2009 compared with the prior year because of the lower gross margins we realized on the OnDemand machine sales and the impact of a stronger U.S. Dollar on European consumable sales. Despite these factors, we were successful in generating $5.6 million in operating cash flow and used our free cash flow to reduce our debt by 31%.

Although we saw an increase in our SG&A expenses, we had anticipated that it would be necessary to add costs to the organization to fully install, train and support the OnDemand contract with Omnicare. In addition, our R&D spending in fiscal 2009 was much higher than the prior year as we continued to invest in the development of new products and markets to help fuel our future growth.

Segment Results

Net Sales

[Table Omitted]

Gross Margin

[Table Omitted]

Operating Profit (Loss)/Margin

Operating profit (loss), as presented below, is net sales less the cost of sales and other operating expenses that are directly identifiable to the respective segment, or if not directly identifiable to a segment, allocated on the basis of sales or manpower. Operating profit (loss) is reconciled to earnings before income taxes in the Consolidated Financial Statements included in the Company’s Form 10-K filed with the SEC.

[Table Omitted]

Todd Siegel continued, “Our operating margins in the Consumables segment felt the effect of the stronger U.S. Dollar as it relates to punch cards manufactured in the U.S. and sold in Europe. We also experienced increases in our raw material costs during the first half of fiscal 2009 as the price of oil spiked. We reacted to these cost increases, as well as higher transport fuel costs, by adjusting selling prices and introducing cost saving measures in our manufacturing processes.

“We were successful in significantly reducing our operating losses in the Packaging Automation segment by virtue of the additional profit realized on the OnDemand machines we sold this year. Although we expect this segment to operate at a loss for the near future, we continue to view this as an important investment in light of its contribution to the Consumables segment.