Sonic Innovations Announces Results For First Quarter 2005

SALT LAKE CITY, April 28 /PRNewswire-FirstCall/ -- Sonic Innovations, Inc. , a leading producer of advanced digital hearing aids, today announced results for the first quarter ended March 31, 2005. Net sales were $25,891,000 in the first quarter 2005, down 2% from the Company's all time quarterly record net sales of $26,306,000 in the first quarter 2004. Net loss was $3,477,000, or $.16 per share, in the first quarter 2005 compared to net income of $1,588,000, or $.07 per share, in the first quarter 2004.

North American sales of $9,594,000 in the first quarter 2005 were in line with first quarter 2004 sales of $9,605,000, but first quarter 2005 included sales from Tympany, which was acquired in December 2004. European sales of $12,278,000 in the first quarter 2005 were down 2% from first quarter 2004 sales of $12,584,000. Rest-of-world sales of $4,019,000 in the first quarter 2005 were also down 2% from first quarter 2004 sales of $4,117,000.

Gross profit of $13,857,000 in the first quarter 2005 was down 5% from gross profit of $14,577,000 in last year's first quarter. Gross margin of 53.5% in the first quarter 2005 was down from last year's first quarter level of 55.4% as a result of lower-margin Tympany sales in 2005. Operating expenses in the first quarter 2005 of $17,206,000 increased 37% from operating expenses of $12,598,000 in last year's first quarter principally as a result of Tympany and significant training and marketing costs associated with the introduction of the Company's next generation hearing aid product, Innova.

Andy Raguskus, President and CEO, stated, "I am pleased that we were able to achieve our principal goal of launching our revolutionary Innova product family in late March. The early reactions to Innova by our hearing care professional customers and hearing impaired consumers have been very positive, and we very much expect Innova to fuel our sales growth beginning immediately. In addition, we expect the results from Tympany to be less dilutive through the balance of 2005 as our diagnostics business gains traction."

As of March 31, 2005, Sonic Innovations had cash and marketable securities, including restricted and long-term marketable securities, of $30.0 million, and debt of $7.7 million.

Sonic Innovations designs, develops, manufactures and markets advanced digital hearing aids designed to provide the highest levels of satisfaction for hearing impaired consumers, and proprietary auditory testing equipment that automates the four most commonly performed hearing tests.

This press release contains "forward-looking statements" as defined under securities laws, including statements concerning the Innova product family fueling sales growth beginning immediately and the Tympany business gaining traction and producing less dilution through the balance of 2005. Actual results may differ materially and adversely from those described herein depending on a number of factors including, but not limited to, the following risks: we face aggressive competition in our business; acquisitions could be difficult to integrate, disrupt our business and harm our operating results; 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; we may harm our relationships with our traditional customers by selling in non-traditional ways, such as to high volume general retail or electronics retail stores, or through ear-nose-throat physicians, or by having the primary care physician make referrals of Otogram-tested hearing impaired patients through our Hearing Health Network; and we have important international operations, particularly in Germany and Australia, which expose us to a variety of risks that could result in lower sales. 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, 2004, as filed with the Securities and Exchange Commission.

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, April 28, 2005 at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time).

To participate in the conference call, please call toll free (800) 561-2731, or (617) 614-3528 outside the U.S., and ask to be connected to the Sonic Innovations teleconference. 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 call (888) 286-8010 within the U.S., or (617) 801-6888 outside the U.S., and enter confirmation code 39020754 (available through May 3, 2005), or access the playback through our website.

Sonic Innovations, Inc. Consolidated Statement of Operations Information (In thousands, except per share data) (Unaudited) Quarter ended March 31 2005 2004 Net sales $25,891 $26,306 Cost of sales 12,034 11,729 Gross profit 13,857 14,577 Selling, general and administrative expense 14,854 10,044 Research and development expense 2,352 2,554 Operating profit (loss) (3,349) 1,979 Other expense, net 40 49 Income (loss) before income tax provision (3,389) 1,930 Income tax provision 88 342 Net income (loss) $(3,477) $1,588 Basic earnings (loss) per common share $(.16) $.08 Diluted earnings (loss) per common share $(.16) $.07 Weighted average number of common shares outstanding: Basic 21,215 20,408 Diluted 21,215 22,790 Sonic Innovations, Inc. Consolidated Balance Sheet Information (In thousands) (Unaudited) March 31, December 31, 2005 2004 Assets: Cash and marketable securities $29,971 $32,349 Accounts receivable 15,586 16,092 Inventories 11,170 9,799 Property and equipment 9,779 10,086 Goodwill and intangibles 41,023 42,300 Other 5,348 4,660 Total assets $112,877 $115,286 Liabilities: Accounts payable $9,311 $8,315 Accrued liabilities and other 20,683 17,444 Loan payable 7,748 8,525 Deferred revenue 8,543 9,899 Total liabilities 46,285 44,183 Shareholders' equity: Common stock 22 22 Additional paid-in capital 118,211 118,135 Accumulated deficit (54,274) (50,797) Other 2,633 3,743 Total shareholders' equity 66,592 71,103 Total liabilities and shareholders' equity $112,877 $115,286

Sonic Innovations, Inc.

CONTACT: Stephen L. Wilson, Sr. Vice President and CFO of SonicInnovations, Inc., +1-801-365-2804

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