Respironics, Inc. (Form: 8-K)

RESPIRONICS REPORTS RECORD FINANCIAL RESULTS
FOR FISCAL YEAR 2007 SECOND QUARTER,
M-SERIES CPAP FULLY LAUNCHED, OPTILIFE™ PATIENT MASK INTRODUCED

MURRYSVILLE, PA, January 25, 2007—RESPIRONICS, INC. (NASDAQ/NMS Symbol: RESP) today announced record financial results for the three months and six months ended December 31, 2006.

Three Months Ended December 31, 2006
Net sales for the second quarter totaled $288.7 million, up 12 percent over the $257.9 million achieved in the second quarter a year ago.

Domestic revenues increased from $176.9 million in the second quarter a year ago to $193.2 million in the current year’s second quarter, an increase of 9%. The Company’s domestic revenue gains were led by a year-over-year increase of $13.3 million, or 13 percent, in domestic sleep therapy products. This increase in sleep therapy revenues was achieved during a quarter when the Company completed its planned transition to the new M-Series platform of positive airway pressure devices, while also working through a previously announced limited, voluntary product recall of a heated humidifier device used with its older legacy CPAP systems. The Company’s Alice^® 5 Sleep Diagnostics System continues to gain market share in sleep labs, posting $4.4 million of domestic revenues in the second quarter which represents 22 percent year-over-year growth. Additionally, the Company’s Hospital Group was led by 21 percent growth in hospital ventilation which increased from $19.3 million last year to $23.2 million in the current year second quarter. These revenue gains across key growth drivers were partially offset by year-over-year declines in sales of home respiratory care products, including oxygen concentrators, and infant monitors from our Children’s Medical Ventures business.

International revenues totaled $95.5 million for the second quarter, an 18 percent increase over the $81.1 million reported a year ago, led by 26 percent growth in the sleep therapy market. The Company also achieved 23 percent growth in its hospital products in the international markets. International revenues represented 33 percent of total revenues during the current year’s second quarter.

On a global basis, sleep therapy revenues grew by 16 percent during the second quarter, from $137.5 million to $159.9 million. Global hospital ventilation sales grew by 17 percent, from $32.8 million to $38.4 million in the second quarter of fiscal year 2007.

Net income for the current quarter was $29.6 million, or $0.40 per diluted share, including stock compensation expenses totaling $3.1 million on a pre-tax basis, or $0.03 per diluted share after tax. This represents 22 percent earnings per share growth compared to the $0.33 per diluted share reported in the prior year second quarter. The prior year second quarter included $3.1 million of stock compensation expenses on a pre-tax basis, or $0.03 per diluted share after tax. Excluding the impact of stock compensation expense in the current year second quarter, net income was $31.6 million, or $0.43 per diluted share. This represents a 20 percent increase over the $0.36 per diluted share reported a year ago, excluding stock compensation expenses.

During the current year second quarter the Company incurred $1.2 million of restructuring and acquisition-related expenses, primarily associated with the restructuring of operations at certain manufacturing facilities and the integration of acquired companies. These expenses are included in both the Company’s GAAP-basis $0.40 per diluted share and the non-GAAP $0.43 per diluted share excluding stock compensation expenses reported above.

The Company’s increase in earnings per share in the current year is primarily the result of sales growth and operating margin increases versus the prior year. With the financial information included in this press release, the Company provides a tabular reconciliation of GAAP net income with net income excluding the impact of stock compensation expenses.

Six Months Ended December 31, 2006
For the six months ended December 31, 2006, net sales increased to $555.3 million, an 11 percent increase compared to $498.1 million from the last year’s comparable six-month period.

Net income for the six months ended December 31, 2006 was $51.7 million, or $0.70 per diluted share, including stock compensation expenses totaling $6.1 million on a pre-tax basis, or approximately $0.05 per diluted share after tax. Excluding the impact of stock compensation expenses in the current year, net income was $55.8 million, or $0.75 per diluted share. This represents an 18 percent increase over $0.64 per diluted share reported a year ago, excluding the impact of stock compensation expenses.

COMMENTS FROM MANAGEMENT
Quarterly Results
John Miclot, President and Chief Executive Officer, commented on the Company’s results, “We are pleased to be reporting another quarter of record revenues and profits in line with our guidance, including approximately 20 percent year-over-year earnings per share growth. We completed the planned transition to our new family of sleep therapy products during our second quarter, and our M-series of devices is now fully launched. The new family includes a full range of CPAP devices from our advanced auto titrating unit to our basic REMstar^® CPAP device. The M-series also includes bi-level devices for those patients requiring the enhanced breathing modalities of these more sophisticated units. During the quarter our global sleep therapy revenues increased by approximately 16 percent year-over-year while we completed the transition to the M-Series. Our sleep diagnostic business also posted strong growth with year-over-year revenues increasing by 22 percent domestically,” he stated. “We have continued to increase our investment in research and development in the sleep therapy area, and we recently released our OptiLife^TM mask, our newest patient interface offering. This new pillows-based mask seals easily and effectively, is very lightweight, and enhances patient comfort. We look forward to the full roll-out of this mask to both providers and sleep labs over the next several quarters. Additionally, we are pleased to report that we have filed our 510(k) application for our BiPAP^® autoSV^TM unit for the treatment of complex apnea,” he added.

“Our hospital ventilation business, as well as our cardio-respiratory monitoring products, performed very well during the quarter,” Mr. Miclot commented. “Domestically, these critical care products increased by 22 percent; and in the international markets, our hospital ventilators and monitors increased by 16 percent.”

Mr. Miclot commented on the Company’s progress in the international marketplace, “We continue to be pleased with our market share gains in the sleep therapy segment in the international markets. This quarter we posted 26 percent growth in international sleep therapy led by our results in the European and Asia-Pacific regions. We have now received the necessary product registrations and approvals required for the sale of our M-Series of CPAP devices into all our major international markets, and, we continued with our international expansion strategy with the recently completed acquisition of the homecare business of our Australian customer, Mayo Healthcare Group Pty Ltd. The focus of this acquisition will be to increase and optimize our presence in that country,” he noted.

Financial Position
The Company continues to maintain a strong balance sheet position, with $277.3 million of cash and short-term investments as of December 31, 2006, representing an increase of $1.6 million compared to September 30, 2006 after making $12.4 million of strategic investments and acquisition-related payments during the quarter. During the quarter, the Company’s accounts receivable days sales outstanding were reduced to 62 days from 64 days as of September 30, 2006. The Company’s long-term debt balance was $25.6 million as of December 31, 2006, compared to $26.3 million as of September 30, 2006. Respironics’ strong balance sheet positions the Company to execute its strategy which calls for optimizing the Company’s core growth drivers while investing in new areas of the sleep and respiratory markets.

Outlook
For fiscal year 2007, the Company is comfortable with earnings per share estimates (exclusive of stock compensation expense) of approximately $1.74 to $1.77. Revenue expectations for the year are approximately $1,175 million to $1,190 million. Earnings per share estimates for the quarter ending March 31, 2007 are in the range of $0.48 to $0.49.

This earnings per share outlook does not include the impact of FASB No. 123( R ), “Share-Based Payment.” During the 2007 fiscal year, the Company expects to incur approximately $13.0 million to $14.0 million of stock compensation expense on a pre-tax basis, or $0.12 to $0.13 per share after tax. The Company expects to incur $3.5 million to $4.0 million of stock compensation expense on a pre-tax basis, or $0.03 to $0.04 per share after tax during the third quarter of the 2007 fiscal year. The actual expenses recorded during the 2007 fiscal year may fluctuate based on factors such as the actual number of equity awards granted to employees and changes in the Company’s stock price and interest rates.

Respironics is a leading developer, manufacturer and distributor of innovative products and programs that serve the global sleep and respiratory markets. Focusing on emerging market needs, the Company is committed to providing valued solutions to help improve outcomes for patients, clinicians and health care providers. Respironics markets its products in 131 countries and employs more than 4,800 associates worldwide. Further information can be found on the Company’s Web site: www.respironics.com.

The Company will host a conference call at 8:30 a.m. Eastern Time today to discuss these quarterly results, market trends and future outlook. The conference call will be broadcast live over the Internet and can be accessed by all interested parties from the Company’s web site at http://www.respironics.com or at http://www.companyboardroom.com. Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast. A replay of the web cast will be available following the call.

FORWARD-LOOKING STATEMENT
This document contains forward-looking statements, including statements relating to, among other things, developments in the healthcare industry; the success of the Company’s marketing, sales, and promotion programs; future sales, acceptance, and quality of the Company’s products and programs; the timing and success of new product introductions; new product development; anticipated cost savings; FDA and other regulatory requirements, enforcement actions, product recalls or related field actions; future results from acquisitions and strategic investments; growth rates in foreign markets; regulations and other factors affecting operations and sales outside the United States; foreign currency fluctuations; the effects of a natural disaster, cyber-attack or other catastrophic event that results in the destruction or disruption of any critical business or information technology systems; customer consolidation and concentration; increasing price competition and other competitive factors in the manufacture, distribution, and sale of products; interest rate fluctuations; expiration of intellectual property rights; intellectual property and related litigation; other litigation; future levels of earnings and revenues; the number of equity awards granted to employees and changes in the Company’s stock price; and third party reimbursement; all of which are subject to change. Actual results may differ materially from those described in any forward-looking statements. Additional information on potential factors that could affect the Company’s financial results are included in the reports filed with the SEC, including the reports on Form 10-K, 10-Q and 8-K.

Condensed Statement of Operations &
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share amounts)

In managing its business, Respironics makes use of certain non-GAAP financial measures in evaluating the Company’s results of
operations from core operations. The measure, “net income, excluding the impact of stock compensation expenses,” is
reconciled with GAAP net income in the tables below.


	GAAP						Non-GAAP			GAAP						Non-GAAP
	3 months						3 months			6 months						6 months
	Ended			FAS 123(R)			Ended			Ended			FAS 123(R)			Ended
Fiscal Year 2007	12/31/06			Impact			12/31/06			12/31/06			Impact			12/31/06
Sales	$	288,664					$	288,664		$	555,287					$	555,287
Cost of goods sold		134,145			(167	)		133,978			258,783			(337	)		258,446

Gross profit		154,519			167			154,686			296,504			337			296,841
General & administrative expense		38,425			(2,051	)		36,374			73,310			(4,066	)		69,244
Sales, marketing, & commission expense		54,864			(654	)		54,210			112,429			(1,315	)		111,114
Research & development expense		15,739			(186	)		15,553			30,252			(374	)		29,878
Contribution to foundation		0						0			0						0
Restructuring & acquisition-related expense		1,201						1,201			2,887						2,887
Other income		(2,855	)		—			(2,855	)		(4,840	)		—			(4,840	)

Net Income before income tax	$	47,145		$	3,058		$	50,203		$	82,466		$	6,092		$	88,558
Income tax		17,546			1,029			18,575			30,798			1,968			32,766

Net Income	$	29,599		$	2,029		$	31,628		$	51,668		$	4,124		$	55,792
Basic earnings per share		0.41						0.43			0.71						0.77
Basic shares outstanding		73,024						73,024			72,929						72,929
Diluted earnings per share		0.40						0.43			0.70						0.75
Diluted shares outstanding		73,844			467			74,311			73,777			443			74,220


	GAAP						Non-GAAP			GAAP						Non-GAAP
	3 months						3 months			6 months						6 months
	Ended			FAS 123(R)			Ended			Ended			FAS 123(R)			Ended
Fiscal Year 2006	12/31/05			Impact			12/31/05			12/31/05			Impact			12/31/05
Sales	$	257,901					$	257,901		$	498,124					$	498,124
Cost of goods sold	$	115,169			(178	)	$	114,991		$	222,712			(372	)		222,340

Gross profit		142,732			178			142,910			275,412			372			275,784
General & administrative expense		40,309			(2,006	)		38,303			81,861			(3,710	)		78,151
Sales, marketing, & commission expense		50,686			(735	)		49,951			101,193			(1,441	)		99,752
Research & development expense		12,962			(186	)		12,776			27,032			(356	)		26,676
Contribution to foundation		0						0			1,500						1,500
Restructuring & acquisition-related expense		224						224			1,313						1,313
Other income		(76	)		—			(76	)		(6,014	)		—			(6,014	)

Net Income before income tax	$	38,627		$	3,105		$	41,732		$	68,527		$	5,879		$	74,406
Income tax		14,574			897			15,471			25,898			1,662			27,560

Net Income	$	24,053		$	2,208		$	26,261		$	42,629		$	4,217		$	46,846

Basic earnings per share		0.33						0.36			0.59						0.65
Basic shares outstanding		72,160						72,160			72,014						72,014
Diluted earnings per share		0.33						0.36			0.58						0.64
Diluted shares outstanding		73,540			296			73,836			73,453			315			73,768

Respironics believes that presenting diluted earnings per share, excluding the impact of stock compensation expenses, is an
additional measure of performance that investors can use to compare operating results between reporting periods. Management
of the Company uses this information in evaluating the Company’s results of operations and believes that this information may
also provide investors better insight in evaluating the Company’s earnings performance from core operations in comparison to
the prior year.


	Three months ended				Six months ended
		12/31/06		12/31/05		12/31/06		12/31/05

Domestic Sleep and Home Respiratory Group	$	138,552	$	127,653	$	276,810	$	251,257
Domestic Hospital Group		54,610		49,237		97,947		91,641
International Group		95,502		81,011		180,530		155,226
Total	$	288,664	$	257,901	$	555,287	$	498,124


	At		At
	12/31/06		6/30/06
Cash and cash equivalents	$	249,292	$	259,513
Short-term investments		27,983		5,838
Trade accounts receivable		198,289		187,502
Inventories		144,676		124,149
Other current assets		71,453		65,090
Total current assets		691,693		642,092
Property, plant and equipment (net)		143,430		137,943
Other assets, including goodwill		249,750		237,343
Total assets	$	1,084,873	$	1,017,378
Current liabilities	$	203,487	$	211,042
Long-term obligations		25,578		26,756
Other non-current liabilities		20,756		15,132
Shareholders’ equity		835,052		764,448
Total liabilities and shareholders’ equity	$	1,084,873	$	1,017,378


Delaware	000-16723	25-1304989
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1010 Murry Ridge Lane, Murrysville, Pennsylvania		15668-8525
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Respironics, Inc.

January 25, 2007	By:	/s/ Daniel J. Bevevino

		Name: Daniel J. Bevevino
		Title: Vice President, and Chief Financial and Principal Accounting Officer


Exhibit No.		Description

99		Press release, dated January 25, 2007, issued by Respironics, Inc.


Dan Bevevino	Joe Calabrese	Julie Tu

Vice President & CFO	General Contact	Analyst Information

(724) 387-5235	(212) 827-3772	(212) 827-3776


Date of Report (Date of Earliest Event Reported):		January 25, 2007


Registrant’s telephone number, including area code:		724-387-5200