Medical Action Industries Reports Fourth Quarter and Fiscal 2009 Results

Medical Action Industries Inc. (NASDAQ:MDCI), a leading supplier of medical and surgical disposable products, today reported fourth quarter and fiscal 2009 results, with Chief Executive Officer and President Paul D. Meringolo citing improving business trends that he expects to continue in fiscal 2010.

Net sales for the three months ended March 31, 2009 totaled $72,856,000 an increase of $757,000 or 1%, over the $72,099,000 in net sales reported for the three months ended March 31, 2008. Net income for the three months ended March 31, 2009 was $1,772,000 or $.11 per basic and diluted share versus $2,797,000 or $.18 per basic share ($.17 per diluted share), reported for the comparable three months of fiscal 2008.

Medical Action reported a 44% sequential increase in gross profit between the third and fourth quarters of fiscal 2009, with gross margin rising from 14.0% to 19.9% between the two periods.

"These and other improving business trends demonstrate that Medical Action has made significant progress in managing its near-term business challenges and, with a continued focus on improvement, is poised to take advantage of growth opportunities in fiscal 2010," Meringolo said. "We have managed through a volatile period of fluctuating commodity prices as well as the pricing of foreign sourced products. We have hedged against near term resin price volatility by taking inventory positions in our high volume resins. We have begun to benefit from better pricing of Chinese-made products and we continue to monitor both exchange rates and commodity prices. We remain focused on further increasing the efficiency of our Gallaway, Tennessee manufacturing facility after making significant equipment upgrades during the year and appointing a new plant general manager in April.

Net sales for the twelve months ended March 31, 2009 reached a record $296,070,000 an increase of $5,542,000 or 1.9%, over the $290,528,000 in net sales reported for the twelve months ended March 31, 2008. This was Medical Action's 14th consecutive year of record revenue. Net income for the period was $4,955,000 or $.31 per basic and diluted share, versus $13,225,000 or $.83 per basic share ($.81 per diluted share), reported for the comparable twelve months in fiscal 2008.

"While we are pleased with our record revenue," Meringolo said, "there's no question we have come off a challenging year that adversely affected our profitability. Our three primary business challenges -- higher resin costs due to record oil prices, increased costs for Chinese-made products and inefficiencies in the Tennessee plant - cost a combined $16,194,000 in fiscal 2009."

Meringolo further noted, "Our fiscal 2009 initiatives included the appointments of veteran, senior-level executives directing sales, sales operations, and training & development." The realignment of sales territories and the reorganization and re-training of sales teams should drive enhanced productivity and accountability.

The Company also announced that the US Food and Drug Administration, FDA, completed a re-inspection of Medical Action's Arden NC facility and it was found to be in compliance with the FDA Quality Systems Regulations with no adverse findings noted. Accordingly, the FDA has lifted a warning letter issued in January 2008.

Medical Action invites its shareholders and other interested parties to attend its conference call at 10:00 a.m. (ET) on June 4, 2009. You may participate in the conference call by calling (888) 868-9080 (domestic) or (973) 935-8511 (international); conference ID #96833546. The conference call will be simultaneously web cast on our website: www.medical-action.com. The complete call and discussion will be available for replay on our website beginning at 1:00 p.m. (ET) on June 4, 2009.

Medical Action is a diversified manufacturer and distributor of disposable medical devices and a leader in many of the markets where it competes. Its products are marketed primarily to acute care facilities in domestic and certain international markets. The Company has expanded its target market to include physician, dental and veterinary offices, out-patient surgery centers, long-term care facilities and laboratories. Medical Action's products are marketed nationally by its direct sales personnel and extensive network of healthcare distributors. The Company has preferred vendor agreements with national and regional distributors, as well as sole and multi-source agreements with group purchasing organizations. Medical Action's common stock trades on the NASDAQ Global Select Market under the symbol MDCI and is included in the Russell 2000 Index.

This news release contains forward-looking statements that involve risks and uncertainties regarding Medical Action's operations and future results. Please see the Company's filings with the Securities and Exchange Commission, including, without limitation, the Company's Form 10-K and Form 10-Qs, which identify specific factors that would cause actual results or events to differ materially from those described in the forward-looking statements.

MEDICAL ACTION INDUSTRIES INC.
Financial Highlights
(dollars in thousands, except per share data)
                                 For the Three Months           For the Twelve Months
                                 Ended                          Ended
                                      3/31/09       3/31/08          3/31/09       3/31/08
                                 (Unaudited)
Statements of Operations:
Net sales                        $    72,856   $    72,099      $    296,070  $    290,528
Cost of sales                         58,326        57,934           245,135       226,076
Gross profit                          14,530        14,165           50,935        64,452
Selling, general and                  10,891        8,972            40,161        39,672
administrative expenses
Interest expense, net                 620           615              2,678         3,328
Income before income taxes            3,019         4,578            8,096         21,452
Income tax expense                    1,247         1,781            3,141         8,227
Net income                       $    1,772    $    2,797       $    4,955    $    13,225
Net income per share basic:      $    0.11     $    0.18        $    0.31     $    0.83
Net income per share diluted:    $    0.11     $    0.17        $    0.31     $    0.81

Balance Sheets as of March 31, 2009 and
March 31, 2008 (dollars in thousands)
                                            March 31, 2009    March 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents                   $       3,459     $       2,104
Accounts receivable, net                            21,459            24,039
Inventories, net                                    43,221            33,493
Prepaid expenses and other current assets           6,404             4,618
Total Current Assets                                74,543            64,254
Property and equipment, net                         40,313            33,681
Goodwill                                            80,699            80,699
Other intangible assets, net                        15,886            17,424
Other assets                                        3,725             2,978
Total Assets                                $       215,166   $       199,036
Liabilities and Shareholders' Equity
Accounts payable                            $       8,190     $       14,112
Accrued expenses, payroll, payroll                  10,643            11,519
taxes and income
taxes
Deferred income taxes                               14,282            9,720
Total debt                                          60,046            47,906
Shareholders' equity                                122,005           115,779
Total Liabilities and                       $       215,166   $       199,036
Shareholders' Equity
Key Financial Statistics
Current ratio                                       2.9               1.6
Debt to equity ratio                                .49               .41
Book value per share                        $       7.61      $       7.23

SOURCE: Medical Action Industries Inc.

Medical Action Industries Inc. 
Charles L. Kelly, 631-231-4600 
Chief Financial Officer