Do Breathe Right nasal strips conjure up images of NFL players enhancing their performance the drug-free way? CNS
CNS's latest earnings report shows the company benefiting from the U.S.'s longer cold and flu season. Fourth-quarter sales increased a strong 27% and net income increased almost 14 times from the year-ago quarter, although a low $300,000 profit last year certainly amplified that advance.
Curiously, a $2.9 million, or 25%, decrease in advertising and promotional spending in the fourth quarter inflated earnings (decreases in advertising spending for the year were heavily weighted to that quarter). The company promised advertising would be spread more evenly over the year, but the lower spending, coupled with robust sales, is a clear sign that CNS has found a cost-effective way of getting its message out without disrupting sales. Bravo!
Breathe Rights accounted for 85.6% of total sales, and the strong demand for the relaunched clear strips helped produce a 22% sales increase for the quarter. International sales, up 38% over the same period, benefited from a strong allergy season in Japan and the product's introduction in Mexico.
Sales of FiberChoice, a dietary fiber supplement, bulked up an impressive 58% to become 14.4% of the fourth quarter's total sales, compared with the same period last year. For the year, FiberChoice sales turned in a solid 32% increase in revenue.
The story at CNS is cash, and lots of it. From the $14.5 million generated from operations in fiscal 2005 -- that's up 68.6% from fiscal 2004 -- the company cash reserves increased to a cool $11.3 million. Cash now stands at $60.8 million, which is $4.29 a share, or roughly 64.8% of fiscal 2005 revenue.
There is ample cash for acquisitions, share buybacks, or dividend hikes without sullying the balance sheet with debt. In fact, it announced yesterday that it would raise the dividend 20% to $0.06 a share, or a 1.5% yield.
CNS expects fiscal 2006 sales to rise 11% to 17% and earnings to increase 10% to 15%, excluding 2005's one-time import duty refund. At the high end of company guidance, the stock is priced at 16 times forward guidance for 2006 -- a modest price for a company with strong products and a cash hoard, although the stock is up substantially over the last 52 weeks.