Financial Highlights * Net revenues climbed 43 percent to $5.8 million. * Net income before income taxes increased 75 percent to $1.5 million. * Net income increased to $988,287, or $0.08 per diluted share. * Gross margins increased to 88 percent. * Somanetics completed a public equity offering, raising net proceeds of approximately $51.4 million.
TROY, Mich., March 15 /PRNewswire-FirstCall/ -- Somanetics Corporation reported net revenues of $5.8 million for the first quarter ended February 28, 2006, a 43 percent increase from $4.0 million in the same period of 2005.
U.S. net revenues increased 44 percent to $4.8 million from $3.4 million in the same period last year. International net revenues increased 37 percent to $918,084 from $668,067.
First quarter net income before income taxes was $1.5 million, a 75 percent increase from $854,433 in the first quarter of 2005. While Somanetics did not pay income taxes in the first quarter, taxes were recorded at an estimated effective tax rate of 34 percent. Net income increased to $988,287, or $0.08 per diluted share, from $563,926, or $0.05 per diluted share in the first quarter of 2005.
Gross margins increased to 88 percent in the first quarter from 86 percent in the 2005 first quarter. As of February 28, 2006, Somanetics’ cash balance was $14.4 million, which does not include the proceeds from Somanetics’ recent public equity offering.
Completion of Public Equity Offering
On March 6, 2006, Somanetics’ completed the sale of 2,300,000 of its newly-issued common shares, at a public offering price of $24.00 per share. The net proceeds, after deducting the underwriting discount and the estimated expense of the offering, were approximately $51.4 million. Citigroup Global Markets Inc. was the sole bookrunning manager of the offering. Cowen & Co., LLC was co-lead manager and SunTrust Robinson Humphrey was a co-manager of the offering.
“Our financial results for the first quarter were in line with our expectations, including strong sequential growth in SomaSensor units and seasonally lower hardware revenues,” said Bruce J. Barrett, Somanetics’ president and chief executive officer. “The completion of our public offering gives us the additional financial strength and flexibility to aggressively pursue our business goals. We also continued to make progress in our research and development and clinical research programs, which are aimed at expanding applications for our INVOS technology.”
Initiation of Clinical Trial Involving Diabetic Patients Undergoing Major Surgeries
In the first quarter, researchers began enrollment in a prospective, randomized, blinded clinical trial sponsored by Somanetics involving diabetic patients over age 50 undergoing major general surgery. The study consists of patients whose surgeries are managed based on information provided by the INVOS System and those whose surgeries are not managed based on information from the INVOS System, comparing them across measures of patient outcomes and hospital costs. The initial phase of this trial is being conducted at Duke University Medical Center and the neighboring Veteran’s Administration Hospital and will determine the number of patients needed in the study to expect statistically significant results. If the results of the full trial are positive, Somanetics intends to target more actively the sale of the INVOS System for use in diabetic patients undergoing major general surgeries, consistent with FDA requirements. Somanetics expects to begin this marketing in 2008.
Technology Advances
Adding to the INVOS System’s capability to monitor changes in regional cerebral blood oxygen saturation, in November 2005, Somanetics received FDA 510(k) clearance to market the INVOS System to monitor changes in blood oxygen saturation in somatic, or skeletal muscle, tissue in patients with or at risk for restricted blood flow.
In the second quarter, Somanetics expects to begin shipping its next generation INVOS System monitor that can display information from up to four SomaSensors, allowing for simultaneous monitoring of changes in blood oxygen saturation in the brain and, in patients with or at risk for restricted blood flow, the somatic tissue in other regions of the body. Somanetics expects that the INVOS System will be used to monitor simultaneously the brain and somatic tissue initially for patients in the pediatric and neonatal intensive care unit, and believes there are other applications for this combined technology and for somatic monitoring alone.
Somanetics also is developing a smaller sensor for use on smaller patients found in the pediatric ICU, as well as to support plans to launch the product into the neonatal ICU in late 2006.
Sales and Marketing Initiatives
Medical meetings and scientific conferences play an important role in promoting Somanetics’ INVOS System. To support sales and marketing initiatives focused on pediatric applications, in February, Somanetics participated in the Children’s Hospital of Philadelphia Cardiology 2006 program on pediatric cardiovascular disease.
Clinicians from various parts of the United States made presentations about the INVOS System and shared their data and experiences with the technology in a panel discussion entitled “Monitoring the Brain Before, During and After Cardiac Surgery.” During the quarter, Somanetics also participated in the Society for Thoracic Surgery annual meeting and in regional surgery and anesthesiology conferences.
Somanetics will participate in the American Association for Thoracic Surgery annual meeting in Philadelphia and the Society of Cardiovascular Anesthesiologists meeting in San Diego next month, and plans to participate in a variety of regional medical conferences.
As part of its sales initiatives, in 2006, Somanetics plans to increase its investment in its distribution network by further increasing the size of the U.S. direct sales team to approximately 50 persons. Somanetics also is evaluating placing personnel in Europe to support its European distributor, Tyco Healthcare.
Business Outlook
“This year we plan to continue to innovate to advance our technology and make investments to increase our sales and marketing efforts,” Barrett said. “Based on current business trends, we expect to achieve our previously announced fiscal 2006 guidance of net revenues up approximately 50 percent over 2005, diluted earnings per share in the range of $0.40 to $0.42 before any recognition of additional deferred tax assets, and gross margins of approximately 88 percent.”
About Somanetics
Somanetics Corporation develops, manufactures and markets the INVOS(R) System, a non-invasive patient monitoring system that continuously measures changes in the blood oxygen levels in the brain. Surgeons, anesthesiologists and other medical professionals can use the information provided by the INVOS System, in conjunction with other available information, to identify brain oxygen imbalances and take necessary corrective action, potentially improving patient outcomes and reducing the costs of care. In November 2005, Somanetics received 510(k) clearance to market the INVOS System to monitor changes in blood oxygen saturation elsewhere in the body in somatic, or skeletal muscle, tissue in patients with or at risk for restricted blood flow. Somanetics supports its customers through a direct U.S. sales force and clinical education team. Globally, Edwards Lifesciences represents INVOS System products in Japan, and Tyco Healthcare markets INVOS System products in Europe, Canada, the Middle East and Africa. For more information visit http://www.somanetics.com .
Somanetics to Host Conference Call
Somanetics will web cast its 2006 first quarter conference call at 11:00 a.m. (ET) today. To join the web cast, visit the Investor Center section of Somanetics’ website at http://www.somanetics.com and click on the “2006 First Quarter Conference Call” link. The call also will be archived on the website.
Safe-Harbor Statement
Except for historical information contained herein, the matters discussed in this news release, including financial guidance for fiscal year 2006, expected U.S. and international revenue growth and anticipated investments are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Actual results may differ significantly from results discussed in the forward-looking statements. Actual results may be affected by, among other things, economic conditions in general and in the healthcare market, the demand for and market acceptance of our products in existing market segments and in new market segments we plan to pursue, our current dependence on the Cerebral Oximeter and SomaSensor, our dependence on distributors and independent sales representative firms for a substantial portion of our sales, our dependence on single-source suppliers, potential competition, the effective management of our growth, our ability to attract and retain key personnel, the potential for products liability claims, government regulation of our business, changes in our deferred tax assets, future stock option expenses, the challenges associated with developing new products and obtaining and maintaining regulatory approvals if necessary, research and development activities, the lengthy sales cycle for our products, changes in our actual or estimated future taxable income, changes in accounting rules, enforceability and the costs of enforcement of our patents, potential infringements of others’ patents and the other factors set forth from time to time in Somanetics’ Securities and Exchange Commission filings, including Somanetics’ 2005 Annual Report on Form 10-K filed on January 31, 2006.
SOMANETICS CORPORATION BALANCE SHEETS February 28, November 30, 2006 2005 ASSETS (Unaudited) (Audited) CURRENT ASSETS: Cash and cash equivalents $14,395,224 $13,148,237 Accounts receivable 2,968,919 3,531,740 Inventory 1,184,044 1,058,101 Prepaid expenses 314,427 623,303 Deferred tax asset - current 1,675,011 1,561,322 Total current assets 20,537,625 19,922,703 PROPERTY AND EQUIPMENT (at cost): Demonstration and no capital cost sales equipment at customers 2,040,906 1,916,655 Machinery and equipment 1,118,118 768,992 Furniture and fixtures 295,906 289,397 Leasehold improvements 192,615 187,135 Total 3,647,545 3,162,179 Less accumulated depreciation and amortization (1,944,237) (1,836,438) Net property and equipment 1,703,308 1,325,741 OTHER ASSETS: Deferred tax asset - non-current 7,815,871 8,438,678 Other 244,412 15,000 Intangible assets, net 15,193 16,921 Total other assets 8,075,476 8,470,599 TOTAL ASSETS $30,316,409 $29,719,043 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $955,795 $712,796 Accrued liabilities 531,673 1,165,594 Total current liabilities 1,487,468 1,878,390 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Preferred shares; authorized, 1,000,000 shares of $.01 par value; no shares issued or outstanding - - Common shares; authorized, 20,000,000 shares of $.01 par value; issued and outstanding, 10,715,885 shares at February 28, 2006, and 10,715,885 shares at November 30, 2005 107,159 107,159 Additional paid-in capital 64,864,554 64,864,554 Accumulated deficit (36,142,772) (37,131,060) Total shareholders’ equity 28,828,941 27,840,653 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $30,316,409 $29,719,043 SOMANETICS CORPORATION STATEMENTS OF OPERATIONS (Unaudited) For the Three-Month Periods Ended February 28, February 28, 2006 2005 NET REVENUES $5,753,715 $4,032,617 COST OF SALES 710,499 550,149 Gross Margin 5,043,216 3,482,468 OPERATING EXPENSES: Research, development and engineering 178,066 95,802 Selling, general and administrative 3,507,881 2,576,136 Total operating expenses 3,685,947 2,671,938 OPERATING INCOME 1,357,269 810,530 OTHER INCOME: Interest income 140,136 43,903 Total other income 140,136 43,903 NET INCOME BEFORE INCOME TAXES 1,497,405 854,433 INCOME TAX PROVISION (509,118) (290,507) NET INCOME $988,287 $563,926 NET INCOME PER COMMON SHARE - BASIC $.09 $.06 NET INCOME PER COMMON SHARE - DILUTED $.08 $.05 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 10,715,885 10,140,015 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 12,323,704 11,840,093
Somanetics Corporation
CONTACT: Mary Ann Victor, Vice President and Chief Administrative Officerof Somanetics Corporation, +1-248-689-3050, Extension 204, Fax:+1-248-689-4272
Web site: http://www.somanetics.com/
