8-K

United States
Securities and Exchange Commission
Washington D.C. 20549

_________________

FORM 8-K

_________________

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  February 17, 2009

MTS Medication Technologies, Inc.

(Exact Name of registrant as specified in its charter)

Delaware	001-31578	59-2740462
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)

2003 Gandy Boulevard North, St. Petersburg, Florida   33702

(Address of principal executive offices)  (Zip Code)

(Registrant's telephone number, including area code):  (727) 576-6311

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-42(c))

Item 2.02   Results of Operations and Financial Condition.

        On February 17, 2009, MTS Medication Technologies, Inc. (“MTS”) issued a press release announcing its results of operations for the third quarter and nine months ended December 17, 2009.  A copy of the press release is furnished as Exhibit 99.1 to this Report and is incorporated into this Report by reference.

        The information in this Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information contained in this Form 8-K and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by MTS, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 7.01   Regulation FD Disclosure

        The information set forth under Item 2.02 of this Report on Form 8-K is hereby incorporated in this Item 7.01 by reference.  

Item 9.01    Financial Statements and Exhibits

                       (d)     Exhibits.

Exhibit	Description
99.1	Press Release of MTS Medication Technologies, Inc., dated February 17, 2009 related to the third quarter and nine months ended December 31, 2008* (furnished pursuant to Item 2.02).

*Such information is being "furnished" and not "filed."

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SIGNATURES

                Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	MTS Medication Technologies, Inc.
	(Registrant)
Date:   February 17, 2009	By:	/s/ Michael P. Conroy
		Michael P. Conroy
		Vice President and Chief Financial Officer

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EX-99.1

Exhibit 99.1

NEWS RELEASE

Corporate Contact	Investor Relations
MTS Medication Technologies, Inc.	Porter, LeVay & Rose, Inc.
Michael P. Conroy, CFO	Michael Porter, Investor Relations
Phone:  727-576-6311, Ext. 464	Phone:  212-564-4700
Fax:  727-579-8067	Fax:  212-244-3075
ir@mts-mt.com	plrmail@plrinvest.com

MTS MEDICATION TECHNOLOGIES, INC. ANNOUNCES
THIRD QUARTER AND NINE-MONTH FINANCIAL RESULTS REVENUE AND EPS INCREASE IN THE THIRD QUARTER

ST. PETERSBURG, Fla. – (February 17, 2009) –MTS Medication Technologies, Inc. (NasdaqCM:MTSI), an international provider of medication adherence packaging systems, today announced its financial results for its third quarter and nine months ended December 31, 2008.

Third Quarter

Net sales for the third quarter increased 30.7% to $19.2 million from $14.7 million in the prior year’s third quarter. Net income was $687,000, or $0.10 per diluted common share, compared with $611,000, or $0.09 per diluted common share, in the prior year’s third quarter. Net sales associated with consumables in the U.S. long-term care market increased approximately 7%. Net sales through European operations decreased approximately 8% when expressed in U.S. dollars, but increased approximately 16% when expressed in the functional currency in which the sales are made.

Gross margin for the third quarter was 32.2% compared with 38.3% in the prior year’s third quarter. The decrease in gross profit margin percentage was due primarily to the difference in gross margins between OnDemand® machines and that of consumables and pre-pack machines and also lower gross margins on European sales due to fluctuations in currency rates.

Approximately $3.6 million of revenue was recorded during this quarter as a result of acceptance of 5 OnDemand machines related to an agreement with Omnicare. The gross margin realized on these machines is significantly lower than that of consumables and pre-pack machines, and therefore, accounts for a significant portion of the decline in total gross margins. In addition, the strengthening of the U.S. dollar has resulted in lower gross margins in Europe because a large percentage of revenue in Europe is derived from sales of consumables manufactured and paid for in U.S. dollars.

SG&A expenses for the third quarter were $4.5 million, or 23.6% of revenue, compared with $3.7 million, or 25.4% of revenue, in the prior year’s third quarter. The increase in SG&A expenses was primarily due to increased costs associated with service and support of OnDemand machines, costs associated with European operations and increased research and development expenses.

Operating profit for the third quarter was $970,000, or 5.0% of net sales, compared with $1.2 million, or 8.1% of net sales, in the prior year’s third quarter. Lower operating margins result primarily from higher SG&A costs and depreciation expense, as well as lower gross margins.

The effective income tax rate for the third quarter was 19.9% compared with 39.1% in the prior year third quarter. The decrease results primarily from adjustments made to the estimated liability for uncertain tax positions in both periods. In addition, the income tax expense has been reduced to account for certain federal income tax credits for manufacturing expenditures that are being made this fiscal year.

Segment Reporting

Consumables

	Three Months Ended December 31,
	2008			2007
	(In Thousands)
Net Sales	$	13,527		$	13,054
Gross Margin		40.7	%		42.9	%
Operating Profit	$	1,874		$	2,363
Operating Margin		13.9	%		18.1	%

Net sales for consumables in the third quarter increased $473,000, or 3.6%, primarily due to sales in the U.S. long-term care market. The growth in the U.S. is primarily attributable to new sales to pharmacies servicing nursing homes and assisted living facilities, as well as an increase in the number of long-term care customers served. The European growth is primarily the result of increased penetration of both community and nursing home markets, although currency fluctuations have significantly impacted net sales growth in Europe when net sales are translated to U.S. dollars.

Operating margins declined in the third quarter primarily due to: (a) increases in raw material costs compared to the previous year; (b) additional costs added and allocated to this segment based on revenue; (c) higher depreciation expense related to new assets acquired in this segment; and (d) foreign currency fluctuations.

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Packaging Automation

	Three Months Ended December 31,
	2008			2007
	(In Thousands)
Net Sales	$	5,546		$	1,642
Gross Margin		12.9	%		5.0	%
Operating Loss	$	(455	)	$	(863	)
Operating Margin		(8.2	%)		(52.6	%)

Net sales for packaging automation in the third quarter increased $3.9 million, or 237.8%, primarily as a result of the acceptance of OnDemand machines under an agreement with Omnicare. During the third quarter, MTS recorded $3.6 million of revenue associated with 5 machines that were accepted by Omnicare.

Operating margin during the third quarter improved over the prior year as a result of the realization of additional gross profit on increased net sales, which offset a portion of the indirect costs attributed to this segment.

Medication Administration Systems

	Three Months Ended December 31,
	2008			2007
	(In Thousands)
Net Sales	$	161		$	24
Gross Margin		(15.3	%)		(150.0	%)
Operating Loss	$	(271	)	$	(149	)
Operating Margin		(168.3	%)		(620.8	%)

Net sales for medication administration systems in the third quarter consisted of MedLocker(R)installations.

Operating loss this quarter increased over the prior year because of increased R&D expenditures and new personnel added to support MedTimes product and market development.

Nine Months

Net sales for the nine months increased 35.8% to $59.3 million from $43.7 million in the prior year period. Net income was $1,616,000 or $0.24 per diluted common share, compared with $1,919,000, or $0.28 per diluted common share, in the prior year. Net sales associated with consumables in the U.S. long-term care market increased approximately 7%. Net sales through European operations increased approximately 10%. However, net sales in Europe increased approximately 22% when expressed in the functional currency in which the sales are made.

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Gross margin for the nine months was 31.8% compared with 38.9% in the prior year. The decrease in gross profit margin percentage was due primarily to the difference in gross margins between OnDemand machines and those of consumables and pre-pack machines. Approximately $12.8 million of revenue was recorded during this year as a result of the installation and acceptance of 21 OnDemand machines related to the agreement with Omnicare.

SG&A expenses for the nine months were $13.9 million, or 23.5% of revenue, compared with $11.4 million, or 26.0% of revenue, in the prior year. The increase in SG&A expenses was primarily due to increased costs associated with service and support of OnDemand machines, costs associated with European operations, increased research and development expenses and increased employee benefit costs.

Operating profit for the nine months was $2.7 million, or 4.5% of net sales, compared with $3.7 million, or 8.4% of net sales, in the prior year. Lower operating margins result from higher SG&A costs and depreciation expense, as well as lower gross margins.

The effective income tax rate for nine months was 30.1% compared with 39.8% in the prior year nine months. The decrease results primarily from adjustments made to the estimated liability for uncertain tax positions in both periods.

Segment Reporting

Consumables

	Nine Months Ended December 31,
	2008			2007
	(In Thousands)
Net Sales	$	40,358		$	37,719
Gross Margin		40.4	%		43.3	%
Operating Profit	$	5,257		$	6,791
Operating Margin		13.0	%		18.0	%

Net sales for consumables in the nine months increased $2.6 million, or 7.0%, primarily due to growth in sales in both the U.S. long-term care market and the European markets. The growth in the U.S. is primarily attributable to new sales to pharmacies servicing nursing home and assisted living facilities. The European growth is primarily the result of increased penetration of both community and nursing home markets.

Operating margins declined during the nine months ended December 31, 2008 primarily due to: (a) increases in raw material costs and scrap rates; (b) additional costs allocated to this segment based on revenue; (c) higher depreciation expense associated with assets related to this segment; (d) higher employee benefit costs; and (e) foreign currency fluctuations.

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Packaging Automation

	Nine Months Ended December 31,
	2008			2007
	(In Thousands)
Net Sales	$	18,634		$	5,792
Gross Margin		13.7	%		10.6	%
Operating Loss	$	(858	)	$	(2,112	)
Operating Margin		(4.6	%)		(36.5	%)

Net sales for packaging automation in the nine months increased $12.8 million, or 221.7%, as a result of acceptance of OnDemand machines under an agreement with Omnicare. During this period, MTS recorded $12.8 million of revenue associated with 21 machines that were accepted by Omnicare.

Operating margin during the nine months improved over the prior year as a result of the realization of additional gross profit on increased net sales, which offset a portion of the indirect costs attributed to this segment.

Medication Administration Systems

	Nine Months Ended December 31,
	2008			2007
	(In Thousands)
Net Sales	$	310		$	147
Gross Margin		6.2	%		(15.9	%)
Operating Loss	$	(1,176	)	$	(635	)
Operating Margin		(379.4	%)		(432.0	%)

Net sales for medication administration systems in the nine months increased because more MedLocker systems were sold and installed this year.

Operating loss increased over the prior year primarily because of increased R&D expenditures and new personnel added to support the MedTimes product and market development.

Operating income (loss), as presented above, is net sales less the cost of sales and other operating expenses that are directly identifiable to the respective segment or allocated on the basis of sales or manpower. Operating income (loss) is reconciled to earnings before income taxes in the Consolidated Financial Statements included in the Company’s Form 10-Q filed with the SEC.

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Todd Siegel, President and Chief Executive Officer, said, “We are very pleased to achieve increases in both revenue and earnings per share during our third quarter, especially in light of these difficult economic times. We anticipate continued improvement in margins for our consumables segment due to lower freight costs, reduction in plastic prices, improved manufacturing processes and selective price increase to customers. We are also encouraged by the growth in revenue in our medication administration segment that resulted from increased sales of our MedLocker product.”

“Although the strengthening of the U.S. dollar has adversely affected the financial results of our European operations by approximately $300,000 for the nine month period, we continue to grow our business as we penetrate the nursing home and domiciliary markets in Europe. We remain encouraged with the growing interest and acceptance of our Multi-Med adherence packaging and our ability to automate the prescription fulfillment process.”

Siegel continued, “We have now installed and received acceptance of 23 of 24 OnDemand machines that were sold to Omnicare. The last system is being held on our floor awaiting completion of the customer’s site preparation, which may now occur in our first quarter ending June 30, 2009. The results of the delivery and acceptance phase of this important commitment has improved our operating cash flow and helped us reduce debt by $1.5 million during this quarter.”

“Our medication administration segment continues to use operating cash flow. However, we are optimistic that once we implement the pre-production pilot sites we will begin to validate the benefit to the pharmacy and nursing home markets. We believe that two pilot sites will be up and running within 60 days and by the end of our fiscal 2010 second quarter we will have the data we need to support the continued investment we are making to bring this exciting product to market. We were pleased to receive positive responses from the Boards of Pharmacy in both Ohio and Indiana where we expect to implement the pilot sites.”

“We will continue to analyze the market and the economic impact on our customers’ ability to purchase equipment. Current indications are that equipment sales may be slower over the next six to twelve months. In the event a slowdown occurs, we may need to reduce operating costs in our packaging automation segment.”

Siegel concluded, “We believe that our continued growth in the long-term care pharmacy provider market in the U.S. and Europe, along with a very measured approach to our costs, will continue to provide strong operating cash flow and provide us with the liquidity we need to grow our business. We remain focused on improving our operating profit to help drive value for our stockholders while entering new markets and delivering new products.”

Notice of Conference Call

Management of the Company will host a conference call today at 11:00 a.m. EST. To access the conference call, please telephone 888-459-5609 and enter 83360289 for the conference ID number. A digital replay will be available and may be accessed by visiting the Company’s web site at www.mts-mt.com.

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About the Company

Founded in 1984, MTS Medication Technologies (www.mts-mt.com) is an international provider of medication adherence packaging systems designed to improve medication dispensing and administration. MTS manufactures automated packaging machines and related consumables for prescription medications and nutritional supplements.

This press release contains forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Additional written or oral forward-looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission or otherwise. Statements contained herein that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions described above. Forward-looking statements may include, but are not limited to, projections of revenue, income or losses, the value of contracts, capital expenditures, plans for future operations, the elimination of losses under certain programs, financing needs or plans, compliance with financial covenants in loan agreements, plans for sale of assets or businesses, plans relating to products or services of the Company, assessments of materiality, predictions of future events and the effects of pending and possible litigation, as well as assumptions relating to the foregoing. In addition, when used in this discussion, the words “anticipates”, “estimates”, “expects”, “intends”, “believes”, “plans” and variations thereof and similar expressions are intended to identify forward-looking statements. In particular, all statements regarding the continuing of any trend or expected sales are forward-looking statements, as is any statement regarding the potential growth of our core business and incremental revenue from our OnDemand, MedLocker and MedTimes product, as are any statements related to future equipment sales or concerning general economic conditions in the United States and elsewhere. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained herein. Statements in the Press Release describe factors, among others, that could contribute to or cause such differences. Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated increases in operating costs, changes in the United Kingdom or German healthcare regulatory system, labor disputes, customer rejection of any installed OnDemand machine, capital requirements, increases in borrowing costs, product demand, pricing, market acceptance, hurricanes, intellectual property rights and litigation ,foreign exchange rate risks, risks in product and technology development and other risk factors detailed in the Company’s Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions of these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events.

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MTS MEDICATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)

ASSETS

	December 31, 2008		March 31, 2008
	(Unaudited)
Current Assets:
Cash	$	189	$	662
Restricted Cash		2		158
Accounts Receivable, Net		10,235		8,213
Inventories, Net		10,111		14,504
Prepaids and Other		1,418		2,528
Deferred Tax Asset		497		495
Total Current Assets		22,452		26,560
Property and Equipment, Net		8,357		7,746
Goodwill		894		1,161
Other Intangible Assets, Net		567		783
Other Assets, Net		1,943		2,198
Total Assets	$	34,213	$	38,448

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable and Accrued Liabilities	$	8,686		$	8,653
Current Maturities of Long-Term Debt		31			74
Current Maturities of Related Party Note Payable		–			106
Customer Deposits		1,370			4,123
Total Current Liabilities		10,087			12,956
Long-Term Debt, Less Current Maturities		9,509			11,691
Other Liabilities		815			834
Deferred Tax Liability		283			376
Total Liabilities		20,694			25,857
Stockholders' Equity:
Common Stock		64			64
Capital In Excess of Par Value		10,422			10,137
Accumulated Other Comprehensive (Loss) Income		(599	)		374
Retained Earnings		3,960			2,344
Treasury Stock		(328	)		(328	)
Total Stockholders' Equity		13,519			12,591
Total Liabilities and Stockholders' Equity	$	34,213		$	38,448

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MTS MEDICATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands; Except Earnings Per Share Amounts)
(Unaudited)

	Three Months Ended December 31,				Nine Months Ended December 31,
	2008		2007		2008		2007
Net Sales	$	19,234	$	14,720	$	59,302	$	43,658
Costs and Expenses:
Cost of Sales		13,042		9,075		40,416		26,691
Selling, General and Administrative		4,545		3,738		13,933		11,361
Depreciation and Amortization		677		719		2,264		1,919
Total Costs and Expenses		18,264		13,532		56,613		39,971
Operating Profit		970		1,188		2,689		3,687
Interest Expense		112		184		376		501
Income Before Taxes		858		1,004		2,313		3,186
Income Tax Expense		171		393		697		1,267
Net Income		687		611		1,616		1,919
Net Income Per Basic Common Share	$	0.11	$	0.10	$	0.25	$	0.30
Net Income Per Diluted Common Share	$	0.10	$	0.09	$	0.24	$	0.28
Weighted Average Shares Outstanding - Basic		6,454		6,393		6,454		6,324
Weighted Average Shares Outstanding - Diluted		6,600		6,809		6,672		6,763

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