Record Annual Sales from Continuing Operations SALT LAKE CITY, Feb.
5 /PRNewswire-FirstCall/ -- Sonic Innovations, Inc. (NASDAQ:SNCI),
a leading producer of advanced digital hearing aids, today
announced results for the fourth quarter and year ended December
31, 2008. Highlights include: -- Achieved record annual sales from
continuing operations of $124.9 million; realizing a 4.9 percent
sales growth compared to 2007. -- Strengthened product lineup by
launching one new product during the fourth quarter. -- Entered
into an agreement with Bose Corporation to sell a digital signal
processing patent while retaining the rights to utilize such
technology in Sonic-branded products and services. -- Completed
restructuring activities which were initiated in the first quarter
of 2008. "I am pleased by the increase in year-over-year sales
growth in a soft economy," said Sam Westover, Chairman and CEO.
"Our on-going international operations continue to improve. North
American operations continue to be hampered by the economy;
however, we remain committed to expense reductions that are
responsive to revenue fluctuations. The launch of an additional
product in the fourth quarter continues to enhance our product
offerings and I am looking forward to several product launches in
2009." Net sales from continuing operations for the year ended
December 31, 2008 increased 4.9 percent over the same period in
2007 to $124.9 million. Net sales decreased 2.9 percent in North
America, increased 8.5 percent in Europe, and increased 12.6
percent for Rest-of-World for the year ended December 31, 2008
compared to 2007. Fourth quarter 2008 net sales from continuing
operations of $27.3 million were 14.5 percent lower than fourth
quarter 2007 net sales of $31.9 million primarily due to the
challenging global economic situation and the strengthening of the
U.S. dollar. The stronger U.S. dollar reduced sales by $3.1 million
or 9.7 percent on a year-over-year basis for the fourth quarter
2008. North American sales of $9.3 million in the fourth quarter
2008 decreased 18.9 percent from 2007. European sales of $12.5
million in the fourth quarter 2008 decreased 5.1 percent from 2007
and Rest-of-World sales of $5.5 million in the fourth quarter 2008
were down 24.6 percent from 2007. Gross profit from continuing
operations of $17.0 million in the fourth quarter 2008 decreased
17.6 percent from 2007. Gross margin from continuing operations for
the fourth quarter was 62.3 percent in 2008 compared to 64.6
percent in the same period of 2007 primarily as a result of the
strengthening of the U.S. dollar and lower average selling prices
in North America. The Company's gross margin from continuing
operations remained flat at 63.3 percent for the years ended
December 31, 2008 and 2007. Selling, general and administrative
expense as a percentage of net sales from continuing operations
increased from 54.5 percent in 2007 to 56.5 percent in 2008, and
increased from 55.5 percent in the fourth quarter 2007 to 56.8
percent in the fourth quarter 2008 primarily as a result of retail
acquisitions, which carry a higher percentage of selling, general
and administrative expense. Research and development expense was
$8.3 million in 2008 compared to $8.6 million in 2007, a
year-over-year decline of $0.3 million. Research and development
expense in the fourth quarter 2008 of $1.9 million decreased $0.1
million from $2.0 million in the prior year. For the fourth quarter
of 2008, the Company recorded total restructuring charges of $0.6
million, or $0.02 per share. For the full year 2008, the Company
recorded total restructuring charges of $4.7 million, or $0.17 per
share, of which $2.5 million was non-cash and $2.2 million was
cash. Excluding discontinued operations, in the fourth quarter of
2008, the Company recorded restructuring charges of $0.5 million,
or $0.02 per share, and $2.1 million, or $0.08 per share, on a
year-to-date basis. The Company also recorded a $2.1 million charge
related to goodwill impairment during the fourth quarter 2008.
During the fourth quarter of 2008, the Company entered into an
agreement with Bose Corporation to sell a digital signal processing
patent while retaining the rights to utilize such technology in
Sonic-branded products and services. This gain is recognized as a
component of Other Income in the Condensed Consolidated Statements
of Operations. During 2008, the Company closed one of its European
operations and sold another operation in Europe as part of its
consolidation efforts. These units have been classified as
discontinued operations for the three months and years ended
December 31, 2008, and 2007, respectively. Loss from continuing
operations for the year ended December 31, 2008 was $3.6 million or
$0.13 per share, as compared with income from continuing operations
of $1.8 million or $0.07 per share, for the year ended December 31,
2007. Excluding restructuring charges and goodwill impairment, the
annual income from continuing operations for year ended 2008 was
$0.6 million, or $0.02 per share, as compared with income from
continuing operations of $1.8 million or $0.07 per share, for the
year ended December 31, 2007. As of December 31, 2008, the Company
had cash and cash equivalents of $13.4 million and an available
line of credit of $6.0 million. Sonic Innovations designs,
develops, manufactures and markets advanced digital hearing aids
designed to provide the highest levels of satisfaction for hearing
impaired consumers. This press release contains "forward-looking
statements" as defined under securities laws. Actual results may
differ materially and adversely from those described herein
depending on a number of factors but not limited to, the following
risks: we face aggressive competition in our business; acquisitions
could be difficult to integrate and disrupt our current business
and therefore may harm our operating results; we may poorly operate
newly acquired businesses; our consolidation initiative may not
produce the cost savings we anticipate; our new products may not
increase sales; we may lose a large customer or suffer a reduction
in orders from a large customer; we must have innovative,
technologically superior products to compete effectively; our
products, due to their complexity, may contain errors or defects
that are only discovered after sales by our customers, thus harming
our reputation and business; we may have issues with intellectual
property; and we have important international operations, which
expose us to a variety of risks including government reimbursement
and foreign currency exchange fluctuations, that could impact sales
and operating results. For additional information regarding the
risks inherent in our business, please see "Factors That May Affect
Future Performance" included in our Annual Report on Form 10-K for
the year ended December 31, 2007, as filed with the Securities and
Exchange Commission. This press release contains one non-GAAP
("Generally Accepted Accounting Principles") financial measure
("EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES,
NON-CASH ITEMS, AND DEPRECIATION AND AMORTIZATION.") We believe the
inclusion of this non-GAAP financial measure improves the
transparency of our disclosure. We have provided a reconciliation
of this non-GAAP financial measure to the most directly comparable
GAAP measure. We undertake no obligation to revise our
forward-looking statements to reflect events or circumstances after
the date hereof as a result of new information, future events or
otherwise. The Company will host a teleconference call in
connection with this release on Thursday, February 5, 2009 at 3:00
p.m. Mountain Time (5:00 p.m. Eastern Time). To participate in the
conference call, please call toll free (866) 804-6928, or (857)
350-1674 outside the U.S., and use participant passcode: 59678322.
A live webcast will also be available through our website at
http://www.sonici.com/. You may also visit our website for an
archive of prior press releases and earnings announcements. If you
wish to hear a digital playback of the call, please dial (888)
286-8010 within the U.S., or (617) 801-6888 outside the U.S., and
enter passcode 87073848 (available through February 9, 2009,
midnight), or access the playback through our website. SONIC
INNOVATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) (unaudited) Three months
ended Year ended December 31, December 31, 2008 2007 2008 2007 Net
sales $27,280 $31,908 $124,878 $119,062 Cost of sales 10,283 11,286
45,864 43,676 Gross profit 16,997 20,622 79,014 75,386 Selling,
general and administrative expense 15,502 17,717 70,515 64,932
Research and development expense 1,879 1,975 8,266 8,547 Goodwill
impairment 2,111 - 2,111 - Restructuring charges 491 - 2,052 -
Operating income (loss) (2,986) 930 (3,930) 1,907 Other income, net
302 165 412 880 Income (loss) before income taxes (2,684) 1,095
(3,518) 2,787 Provision for income taxes 383 336 62 977 Income
(loss) from continuing operations (3,067) 759 (3,580) 1,810 Loss
from discontinued operations, net of income taxes (180) (660)
(3,904) (1,093) Net income (loss) $(3,247) $99 $(7,484) $717 Basic
income (loss) per common share: Continuing operations $(0.11) $0.03
$(0.13) $0.07 Discontinued operations (0.01) (0.03) (0.14) (0.04)
Net income (loss) $(0.12) $- $(0.27) $0.03 Diluted income (loss)
per common share: Continuing operations $(0.11) $0.03 $(0.13) $0.07
Discontinued operations (0.01) (0.03) (0.14) (0.04) Net income
(loss) $(0.12) $- $(0.27) $0.03 Weighted average number of common
shares outstanding: Basic 27,540 26,762 27,305 26,518 Diluted
27,540 27,801 27,305 27,570 SONIC INNOVATIONS, INC. CONDENSED
CONSOLIDATED BALANCE SHEET INFORMATION (in thousands) (unaudited)
December 31, December 31, 2008 2007 Assets: Cash and cash
equivalents $13,413 $20,684 Accounts receivable 17,524 21,996
Inventories 10,269 13,451 Property and equipment 6,869 8,267
Goodwill and intangibles 51,310 52,837 Other assets 7,701 6,466
Total assets $107,086 $123,701 Liabilities: Accounts payable and
accrued liabilities $22,562 $26,546 Loans payable 6,855 10,820
Deferred revenue 9,618 10,102 Total liabilities 39,035 47,468
Shareholders' equity: Common stock 29 28 Additional paid-in capital
143,965 139,853 Accumulated deficit (78,752) (71,268) Treasury
stock and other comprehensive income 2,809 7,620 Total
shareholders' equity 68,051 76,233 Total liabilities and
shareholders' equity $107,086 $123,701 SONIC INNOVATIONS, INC.
CONSOLIDATED STATEMENT OF NET SALES INFORMATION (in thousands)
(unaudited) Three months ended Year ended December 31, December 31,
2008 2007 2008 2007 Net sales: North America $9,261 $11,416 $45,392
$46,731 Europe 12,520 13,197 51,077 47,092 Rest-of-World 5,499
7,295 28,409 25,239 Total $27,280 $31,908 $124,878 $119,062
EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES,
NON-CASH ITEMS, AND DEPRECIATION AND AMORTIZATION (in thousands)
(unaudited) Three months ended Year ended December 31, December 31,
2008 2007 2008 2007 Income (loss) from continuing operations
$(3,067) $759 $(3,580) $1,810 Add back (deduct): Interest (income)
expense, net 42 (148) 149 (478) Taxes 383 336 1,367 977 Non-cash
items: Deferred tax asset valuation allowance reversal - - (1,305)
- Stock based compensation 488 403 1,867 1,436 Goodwill impairment
2,111 - 2,111 - Depreciation and amortization 1,065 1,151 4,823
4,271 Total $1,022 $2,501 $5,432 $8,016 DATASOURCE: Sonic
Innovations, Inc. CONTACT: Sam Westover, Chairman and CEO,
+1-801-365-2800, or Michael Halloran, Vice President and CFO,
+1-801-365-2854, both of Sonic Innovations, Inc. Web Site:
http://www.sonici.com/
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