Forward-Looking Statement

This report on Form 10-Q contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the future economic performance and financial results of the Company. The forward-looking statements relate to (i) the expansion of the Company's market share, (ii) the Company's growth into new markets, (iii) the development of new products and product lines to appeal to the needs of the Company's customers, (iv) the retention of the Company's earnings for use in the operation and expansion of the Company's business and
(v) the ability of the Company to avoid information technology system failures which could disrupt the Company's ability to function in the normal course of business by potentially causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, or resulting in the unintentional disclosure of customer or Company information.

Important factors and risks that could cause actual results to differ materially from those referred to in the forward-looking statements include, but are not limited to, the effect of economic and market conditions, the impact of the consolidation throughout the healthcare supply chain, volatility of raw material costs, volatility in oil prices, foreign currency exchange rates, the impact of healthcare reform, opportunities for acquisitions and the Company's ability to effectively integrate acquired companies, the ability of the Company to maintain its gross profit margins, the ability to obtain additional financing to expand the Company's business, the failure of the Company to successfully compete with the Company's competitors that have greater financial resources, the loss of key management personnel or the inability of the Company to attract and retain qualified personnel, the impact of current or pending legislation and regulation, as well as the risks described from time to time in the Company's filings with the Securities and Exchange Commission, which include this report on Form 10-Q and the Company's 2009 Annual Report on Form 10-K.

The forward-looking statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the actual results, performance and/or achievements of the Company to differ materially from any future results, performance or achievements, express or implied, by the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, and that in light of the significant uncertainties inherent in forward-looking statements; the inclusion of such statements should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.

Three Months ended June 30, 2009 compared to Three Months ended June 30, 2008

Overview

All dollar amounts presented in our Management's Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands, except per share data. The following table sets forth certain operational data and operational data as a percentage of net sales for the periods indicated:

                                                      Three months ended June 30,
                                                       2009                  2008
  Net sales                                      $ 70,687   100.0 %    $ 77,395   100.0 %
  Gross profit                                   $ 16,922    23.9 %    $ 15,050    19.4 %
  Selling, general and administrative expenses   $ 10,389    14.7 %    $ 10,461    13.5 %
  Income before income taxes                     $  6,063     8.6 %    $  4,105     5.3 %
  Net income                                     $  3,650     5.2 %    $  2,546     3.3 %

The Company's revenues decreased by $6,708 or 8.7% to $70,687 for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. The decrease in revenue is comprised of net unit volume decreases and price/sales mix decreases.

The net unit volume decreases were primarily from losses in the operating room disposables and sterilization products, patient bedside utensils and laboratory product categories. These categories accounted for $3,182, $2,443 and $1,504, respectively of the total net unit volume decrease.

Gross profit increases in both dollars and as a percentage of net sales were primarily the result of a decline in resin prices, decreased outbound freight costs, and decreased costs of products sourced from foreign suppliers. These improvements more than offset the declines in gross profit dollars associated with the decrease in net sales.

Selling, general and administrative expenses were consistent with the prior year period in terms of dollars but increased as a percentage of net sales due to the decline in net sales.

Results of Operations

The following table sets forth the major sales variance components for the three
months ended June 30, 2009 versus June 30, 2008:



              Three months ended June 30, 2008 net sales   $ 77,395
              Volume of existing products, net               (6,652 )
              Price/sales mix, net                              (56 )


              Three months ended June 30, 2009 net sales   $ 70,687

Net sales for the three months ended June 30, 2009 decreased $6,708 or 8.7% to $70,687 from $77,395 for the three months ended June 30, 2008. The following table sets forth the components of the decrease in net sales as well as percent increases or decreases in unit sales and average selling prices by significant product classes for the three months ended June 30, 2009 compared to the three months ended June 30, 2008:

                                            Net Sales $        Unit Sales %        Average Selling
                                             increase            increase          Price % increase
                                            (decrease)          (decrease)            (decrease)
Containment Systems for Medical Waste      $         683                 6.8 %                 (1.5 )%
Minor Procedure Kits and Trays                       355                (3.6 )%                 5.7 %
Dressings and Surgical Sponges                      (639 )             (13.4 )%                (2.1 )%
Laboratory Products                               (1,670 )             (20.8 )%                 2.4 %
Patient Bedside Utensils                          (2,361 )             (14.9 )%                 3.1 %
Operating Room Disposables and
Sterilization Products                            (3,400 )             (15.9 )%                (5.9 )%
Other, net                                           324      not meaningful         not meaningful


                                           $      (6,708 )

The net unit volume decreases were primarily from losses in the operating room disposables and sterilization products (predominantly disposable operating room towels, crutches and protective apparel), patient bedside utensils (predominantly urinals, emesis basins and pitchers and carafes) and laboratory products (predominantly petri dishes and commode specimen collectors) product categories.

Management believes that the declines are attributable to a fluctuation in customer ordering patterns particularly impacting our operating room disposables and sterilization products and dressings and surgical sponges product categories, an increase in competitive pressures, a decline in hospital admission rates and elective surgeries, back order positions on certain products and the termination of certain supply contracts. The termination of supply contracts negatively impacted the sales of crutches in the amount of $678, urinals of $515, disposable operating room towels of $332, and

disposable laparotomy sponges of $89 for the three months ended June 30, 2009 versus the three months ended June 30, 2008. These net unit volume declines were partially offset by volume increases primarily from our minor procedure kits and trays and containment systems for medical waste product categories which resulted from greater domestic market penetration.

The price/sales mix decreases were primarily from a change in the sales mix of our minor procedure kits and trays product category partially offset by an increase in the average selling prices of containment systems for medical waste product category. The increase in average selling prices of certain containment systems for medical waste products was due primarily to price increases implemented to recover a portion of the increases in plastic resin (the primary raw material utilized in the manufacture of these products).

The containment systems for medical waste, patient bedside utensils and laboratory product categories represent approximately 50% of the Company's revenue. The primary raw material utilized in the manufacture of these categories is plastic resin. In recent years, world events have caused the cost of plastic resin to increase and be extremely volatile. While the cost of plastic resin has declined from its peak levels reached during the month of July 2008, the volatility associated with resin costs and product acquisition costs from foreign suppliers may continue for the foreseeable future. In the past, the Company has been able, from time to time, to increase selling prices for certain of the products within these categories to recover a portion of the increased cost. However, the Company is unable to give any assurance that it will be able to pass along future cost increases to its customers, if necessary. It is anticipated that the Company will purchase in excess of 50,000,000 pounds of resin during fiscal 2010. Each $.01 fluctuation could impact cost of goods sold by $500 on an annualized basis.

The Company has entered into agreements with nearly every major group purchasing organization. These agreements, which expire at various times over the next several years, can be terminated typically on ninety (90) day advance notice and do not contain minimum purchase requirements. The Company, to date, has been able to achieve significant compliance to their respective member hospitals. The termination or non-renewal of any of these agreements may result in the significant loss of business or lower average selling prices. In some cases, as these agreements are renewed, the average selling prices could be materially lower.

Historically, the Company has participated in several reverse auctions and bid processes in order to achieve renewal of certain major group purchasing agreements. During the three months ended June 30, 2009, the Company extended certain major group purchasing agreements. No new agreements were added. The Company anticipates participating in reverse auctions or similar bid processes as deemed necessary during the remainder of fiscal 2010.

Item 2.




The following table sets forth sales, cost of sales and selling, general and
administrative expense data for the periods indicated:



                                                    Three months ended June 30,
                                                    2009                  2008
 Net sales                                      $      70,687         $      77,395
 Cost of sales                                  $      53,765         $      62,345
 Gross profit                                   $      16,922         $      15,050
 Gross profit percentage                                 23.9 %                19.4 %
 Selling, general and administrative expenses   $      10,389         $      10,461
 As a percentage of net sales                            14.7 %                13.5 %

Gross profit for the three months ended June 30, 2009 increased $1,872 or 12.4% to $16,922 from $15,050 for the three months ended June 30, 2008. Gross profit as a percentage of net sales for the three months ended June 30, 2009 increased to 23.9% from 19.4% for the three months ended June 30, 2008. Gross profit increased as a result of decreased resin costs of $3,375, decreased outbound freight costs of $1,244 and decreased costs of products sourced from foreign suppliers, principally from China, of $158. These increases were partially offset by a decrease of approximately $2,559 resulting from a decline in unit volume and average selling prices as well as a change in the mix of products sold, an increase of $334 in inventory obsolescence and net increases in inefficiencies in our manufacturing facilities of $12.

Many of the Company's products are produced from petroleum derived raw materials such as plastic resin. The Company also bears the cost of both inbound and outbound freight shipments of raw materials and finished products, which are significantly impacted by the cost of oil. The cost of crude oil has declined significantly from its peak levels reached during the month of July 2008. Consequently, the Company has experienced the benefits from lower plastic resin costs during the three months ended June 30, 2009 as much of the resin that was used in production during this period was purchased at a lower average cost than resin used during the three months ended June 30, 2008.

The volatility associated with resin costs and product acquisition costs from foreign suppliers may continue for the foreseeable future. In the past, we have been able, from time to time, to increase selling prices for certain products subject to such cost volatility as a means to recover a portion of the increases. However, we are unable to give any assurance that we will be successful in passing along future cost increases to our customers, if deemed necessary.

Selling, general and administrative expenses for the three months ended June 30, 2009 decreased to $10,389 from $10,461 for the three months ended June 30, 2008. As a percentage of net sales, selling, general and administrative expenses increased to 14.7% for the three months ended June 30, 2009 from 13.5% for the three months ended June 30, 2008 as a result of the decline in net sales.

Distribution expenses (which are included in selling, general and administrative expenses) decreased $187 to $1,831 for the three months ended June 30, 2009 as compared to $2,018 for the three months ended June 30, 2008. The decrease in distribution expenses was primarily due to decreased labor costs, primarily temporary labor and overtime expenses, as a result of the overall decline in net sales.

Interest expense for the three months ended June 30, 2009 decreased to $470 from $485 for the three months ended June 30, 2008. The decrease in interest expense was attributable to a net decrease in the average principal loan balances outstanding and a decrease in interest rates during the three months ended June 30, 2009 as compared to the three months ended June 30, 2008.

Income tax expense amounted to $2,413 and $1,559 for the three months ended June 30, 2009 and 2008, respectively. Income tax expense as a percent of income before income taxes was 39.8% and 38.0% for the three months ended June 30, 2009 and 2008, respectively. The increase in the tax rate was the result of a change in state apportionment factors and an increase in our federal statutory rate resulting from the increase in profitability.

Net income for the three months ended June 30, 2009 increased to $3,650 from $2,546 for the three months ended June 30, 2008. The increase in net income is attributable to the aforementioned increase in gross profit, which was partially offset by an increase in income tax expense.

Liquidity and Capital Resources

Cash Flows

Cash and cash equivalents decreased as follows for the three months ended
June 30:



                                                          2009           2008
      Cash provided by (used in) operating activities   $  17,840      $ (1,846 )
      Cash used in investing activities                    (1,582 )      (3,373 )
      Cash (used in) provided by financing activities     (17,125 )       4,247
      Decrease in cash and cash equivalents                  (867 )        (972 )

Historically, the Company's primary sources of liquidity and capital resources have included cash provided by operations and the use of available borrowing facilities while the primary uses of liquidity and capital resources have included acquisitions, capital expenditures and payments on debt.

Cash provided by operating activities during the three months ended June 30, 2009 is primarily comprised of income from operations of $3,650, a decline in
(i) inventories of $5,289, (ii) accounts receivable of $2,437 and (iii) prepaid income taxes of $2,118 and an increase in accounts payable of $2,068. The cash provided by operating activities was used to fund the payment of debt as well as working capital requirements and the cost of capital expenditures.

Cash used in investing activities during the three months ended June 30, 2009 consisted solely of purchases of property, plant and equipment. The majority of these capital expenditures related to machinery and equipment for our injection molding facility located in Gallaway, Tennessee. The Company's credit facilities contain certain covenants and restrictions, which include limitations on capital expenditures. During the year ended March 31, 2010, the Company is permitted under the terms of its credit agreements, to spend up to $4,000 on capital expenditures. Management expects to spend substantially all monies permissible for capital expenditures on machinery and equipment to improve production efficiencies at the Company's manufacturing facilities.

Cash used in financing activities during the three months ended June 30, 2009 consisted primarily of payments on the Company's credit facilities. During the three months ended June 30, 2009, the Company reduced its term loan by $1,625 and its revolving credit loan by $15,465.

Financial Position

The following table sets forth certain liquidity and capital resources data for
the periods indicated:



                                              June 30,      March 31,
                                                2009           2009
                                             (Unaudited)
                Cash and Cash Equivalents   $       2,592   $    3,459
                Accounts Receivable, net    $      19,004   $   21,459
                Days Sales Outstanding               29.8         27.7
                Inventories, net            $      37,932   $   43,221
                Inventory Turnover                    5.6          6.7
                Current Assets              $      64,157   $   74,543
                Working Capital             $      34,028   $   48,811
                Current Ratio                         2.1          2.9
                Total Borrowings            $      42,827   $   60,007
                Shareholder's Equity        $     126,047   $  122,005
                Debt to Equity Ratio                 0.34         0.49

The Company is committed to maintaining a strong financial position through maintaining sufficient levels of available liquidity, managing working capital and generating cash flows necessary to meet operating requirements. Total borrowings outstanding were $42,827 with a debt to equity ratio of .34:1 at June 30, 2009 as compared to $60,007 with a debt to equity ratio of .49:1 at March 31, 2009.

Cash and cash equivalents at June 30, 2009 were $2,592 and the Company had $17,928 available for borrowing under its revolving credit loan.

Working capital at June 30, 2009 was $34,028 compared to $48,811 at March 31, 2009, and the current ratio at June 30, 2009 was 2.1:1 compared to 2.9:1 at March 31, 2009. The decrease in working capital is primarily due to the declines in inventories, accounts receivable and prepaid income taxes as well as increases in accounts payable and the current portion of long-term debt.

The decline in inventories is due to the use of resin purchased in large quantities prior to March 31, 2009 at favorable terms. The increase in accounts payable is due to the normalization of payments due to vendors when compared with March 31, 2009, when payments were made, under conditions deemed favorable by management, on certain trade accounts payable, prior to March 31, 2009 which were not due until after March 31, 2009. The increase in the current portion of long-term debt is the result of amendments made to the Company's credit facilities on September 30, 2008.

Borrowing Arrangements

On October 17, 2006, the Company entered into a credit agreement with certain lenders and a bank acting as administration agent for the lenders (the "Credit Agreement") and is described in more detail in Note 9 "Long-Term Debt" of the Company's "Notes to Consolidated Financial Statements" in the Company's 2009 Annual Report on Form 10-K. The Credit Agreement, as amended April 7, 2009, provides for total borrowings of up to $85,000, consisting of i) a term loan with a principal amount of $65,000, and (ii) a revolving credit loan, which amounts may be borrowed, repaid and re-borrowed up to $20,000.

Borrowings under this agreement are collateralized by substantially all the assets of the Company, and the agreement contains certain restrictive covenants, which, among other matters, impose limitations with respect to the incurrence of liens, guarantees, mergers, acquisitions, capital expenditures, specified sales of assets and prohibits the payment of dividends. The Company is also required to maintain various financial ratios which are measured quarterly. As of June 30, 2009, the Company is in compliance with all such covenants and financial ratios.

Certain contractual cash obligations and other commercial commitments will impact our short and long-term liquidity. At June 30, 2009, such obligations and commitments are as follows:

                                                            Less than 1     1 - 3     4 - 5     After 5
                                                 Total         Year         Years     Years      Years
Principal payments of long-term debt            $ 42,827   $       8,485   $ 33,792   $  550   $      -
Purchase Obligations                               4,893           4,893         -        -           -
Operating Leases                                   1,029             734        258       37          -
Defined Benefit Plan Payments                        458              36         71       86         266
Capital Lease                                         15              15         -        -           -


Total Contractual Obligations                   $ 49,222   $      14,163   $ 34,121   $  673   $     266

The Company believes that the anticipated future cash flow from operations, coupled with its cash on hand and available funds under its revolving credit loan will be sufficient to meet working capital requirements. Although we have borrowing capacity on our revolving credit loan, cash on

hand and anticipate future cash flows from operations, we may be limited in our ability to allocate funds for purposes such as potential acquisitions, capital expenditures, marketing, development and other general corporate purposes. In addition, we may be limited in our flexibility in planning for, or responding to, changing conditions in our business and our industry, making us more vulnerable to general economic downturns and adverse developments in our business.

Item 3.