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CNS, Inc. Reports Fiscal 2005 Second-Quarter Results

NS, Inc. (Nasdaq: CNXS - News), the Breathe Right® company, today announced results for the fiscal 2005 second quarter ended September 30, 2004. Net sales for the quarter were $20.0 million versus $20.6 million in the prior-year period. Net income totaled $3.5 million, or $0.24 per fully diluted share, exceeding the company's guidance of $0.18 to $0.23 per fully diluted share. For the same period in the prior year, earnings were $4.2 million, or $0.29 per fully diluted share.

For the first six months of fiscal 2005, CNS reported net sales of $36.6 million versus $38.1 million in the same period last year. Net income for the first six months of fiscal 2005 was $5.2 million, or $0.35 per fully diluted share, versus $7.0 million, or $0.49 per fully diluted share, in the first six months of fiscal 2004.

"Second-quarter profitability surpassed our expectations on sales that were in line with our estimate," said Marti Morfitt, CNS' president and CEO. "While our prior-year sales were lifted by pipeline shipments of a new product, fiscal 2005 is a building year for CNS, as we prepare to introduce new products and new growth initiatives next fiscal year. We remain focused on laying a foundation for future revenue growth."

CNS is pursuing initiatives to expand the market penetration of Breathe Right nasal strips in the U.S. and abroad, and further grow the FiberChoice® brand, including the:

-- relaunch of Clear nasal strips which began late in the September 2004 quarter, targeting consumers with sensitive skin types;
-- preparation of new products for launch next year under both the Breathe Right and FiberChoice brands;
-- marketing testing designed to drive significant long-term growth in household penetration and consumer demand for Breathe Right nasal strips; and
-- preparation of key international markets for strong growth later in fiscal 2005 and fiscal 2006, most significantly Mexico, where CNS announced a new distribution agreement last month and recently began shipping Breathe Right nasal strips.

Gross margins improved versus the prior-year period by nearly 3 percentage points in the 2005 second quarter and 1 percentage point year-to-date. CNS generated $2.7 million in cash from operations during the 2005 second quarter, and ended the period with $52.0 million in cash and marketable securities.

Yesterday, the company announced a quarterly dividend of $0.05 per share, payable on December 3, 2004, to shareholders of record as of November 19, 2004.


With one additional quarter completed, CNS has tightened its estimated range for sales in the current fiscal year. For the 2005 fiscal year ending March 31, 2005, CNS anticipates that sales will be between $87 million and $90 million, from flat to a 3 percent increase versus the prior year. The company intends to manage operating expenses accordingly and, therefore, CNS' estimate for fully diluted earnings per share remains unchanged from previous estimates at between $0.63 and $0.68, an increase of 7 percent to 16 percent over fiscal 2004.
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