Medical Action Industries Inc., a medical and surgical products supplier, said its profit plunged 86 percent in its fiscal first quarter due to damage to a warehouse, rising raw material costs and the weak economy's effect on sales.

Shares sank to an annual low of $10.45, losing as much as 23 percent of their value.

Medical Action said its profit fell to $496,000, or 3 cents per share, in the quarter ended June 30, from $3.7 million, or 23 cents per share, a year ago. The latest quarter included a charge of $1.5 million, or 5 cents per share, related to flood damage at a warehouse site in Tennessee. The company said its insurance claim on the warehouse was denied.

The flood damage did not affect production or sales, Medical Action said. It expects to resolve an appeal on the insurance claim within the next six months.

Excluding the charge, the company would have earned 8 cents per share in the latest period, well below the 23 cents per share expected by analysts polled by Thomson Reuters.

Medical Action said revenue declined 6 percent to $66.8 million from $70.7 million. The company said demand fell because fewer people are seeking medical care because of the weak economy and loss of employer-sponsored health care. It also cited a restructuring of its sales operations and order fluctuations by two major customers for the sales drop.

"We continue to manage the effect of inflationary pressure on raw material costs, principally China sourced products, and identify methods to manage resin costs in a volatile marketplace," said CEO and President Paul D. Meringolo, in a statement. "We anticipate some adverse effect on gross margin and other measures as we work through this transition period and reluctantly choose not to pass along our higher costs to customers in a tough competitive environment."

Shares of Medical Action dropped $3.13 to $10.46 in afternoon trading.