TROY, Mich., Sept. 19 /PRNewswire-FirstCall/ -- Highlights -- Income before income taxes increased 47 percent to a record $4.2 million for the third quarter and $10.4 million for the nine months ended August 31, 2007. -- Net income increased to $2.8 million, or $0.19 per diluted share, for the third quarter and $6.9 million, or $0.47 per diluted share, for the nine months ended August 31, 2007. -- Net revenues increased 29 percent to a record $10.2 million for the third quarter and climbed 30 percent to $27.3 million for the nine months ended August 31, 2007, compared with the respective periods of fiscal 2006. -- The Society of Thoracic Surgeons (STS) has added cerebral oximetry information as a metric to be collected as part of the STS Adult Cardiac Surgery Database effective January 1, 2008.
Somanetics Corporation today reported record net revenues of $10.2 million for the third quarter ended August 31, 2007, a 29 percent increase from $7.9 million in the same period of 2006. For the nine months ended August 31, 2007, net revenues increased 30 percent to $27.3 million from $21.0 million in the same period last year.
U.S. net revenues increased 32 percent to $7.7 million from $5.8 million in the third quarter of fiscal 2006. International net revenues increased 22 percent to $2.5 million from $2.0 million. For the nine-month period, U.S. net revenues increased 34 percent to $22.1 million and international revenues increased 17 percent to $5.2 million.
Third quarter income before income taxes increased 47 percent to $4.2 million, compared with $2.9 million in the third quarter of fiscal 2006. Third quarter net income increased 47 percent to $2.8 million, or $0.19 per diluted share, from $1.9 million, or $0.13 per diluted share.
For the nine months ended August 31, 2007, income before income taxes increased 36 percent to $10.4 million from $7.7 million in the comparable period of fiscal 2006. Net income was $6.9 million for the nine-month period, or $0.47 per diluted share, compared with $5.1 million, or $0.37 per diluted share, for the nine-month period ended August 31, 2006.
Gross margin was 87 percent in the third quarter of fiscal 2007, compared with 86 percent in the fiscal 2006 third quarter, and was 88 percent for the nine-month period of 2007, compared with 87 percent for the same period in 2006. Somanetics exited the quarter with cash, marketable securities and long-term investments of $80.1 million and no borrowings.
“Our third quarter performance reflects continued growth of U.S. disposable sensor units, an indicator of INVOS System customer adoption,” said Bruce Barrett, Somanetics’ president and chief executive officer. “We believe our growth is attributable to several factors, including the expansion of our U.S. sales and education team, the publication earlier this year of data demonstrating improvements in patient outcomes with use of information from the INVOS System in adult cardiac surgery, and momentum in the pediatric cardiac and intensive care unit markets.”
“We are pleased with the contributions of our international distributors. Edwards Lifesciences received Japanese Ministry of Health approval for the four-channel INVOS Cerebral/Somatic Oximeter and made purchases to support the launch of the new model in Japan. In addition, purchases by Tyco Healthcare, our distribution partner in Europe, the Middle East, South Africa and Canada, were up in the quarter compared to last year,” he said.
The Society of Thoracic Surgeons Adds Cerebral Oximetry Information to STS Adult Cardiac Surgery Database
Somanetics recently announced that The Society of Thoracic Surgeons (STS) has added cerebral oximetry information as a metric to be collected as part of the STS Adult Cardiac Surgery Database effective January 1, 2008. According to the STS, the STS Adult Cardiac Surgery Database is the largest cardiothoracic surgery outcomes and quality improvement program in the world, and is viewed as the national gold standard for cardiothoracic surgery. This data is used for quality assessment in cardiothoracic surgery and has been used to establish benchmarks for clinical comparisons. “We are excited to be included in the database as part of this quality initiative and to showcase the value of gathering cerebral oximetry information,” Barrett said.
Neonatal ICU Market Entry
In the third quarter, Somanetics continued customer preference testing for its smaller cerebral and somatic sensors being developed for patients in the pediatric and neonatal ICUs. The customer preference testing has revealed the need to tailor sensors of different design and labeling for infants and neonates. Somanetics is in the process of incorporating these changes.
For infants, these design features will be validated in a subsequent customer preference test with plans to begin marketing early in 2008.
For neonates, Somanetics believes changes recommended by its customers in labeling and to tailor the sensors to the small size and head shapes of pre- term infants will create sufficient differences from the currently marketed sensors that pursuing a new 510(k) is appropriate. Somanetics currently expects to make the 510(k) submission in mid-2008. Somanetics also is evaluating applying for additional patents related to the smaller sensors.
Basic Science Research
During the third quarter, Somanetics conducted basic science research with a neonatal piglet model to validate the use of INVOS technology for detecting ischemia of the kidney and the bowel. The neonatal piglet model is an accepted surrogate for the neonatal population. Based on this research, Somanetics will pursue expansion of its labeling. Somanetics believes these applications and expanded claims will broaden use and facilitate adoption of the INVOS technology in the neonatal and pediatric markets.
Sales and Marketing Initiatives
During the third quarter, Somanetics participated in the 5th World Congress on Pediatric Critical Care in Geneva, which included a presentation on “NIRS and Safety in the PICU” by George M. Hoffman, MD, chief of pediatric anesthesiology and associate director of the pediatric intensive care unit at Children’s Hospital of Wisconsin. Somanetics also attended the American Society of ExtraCorporeal Technology’s Pediatric Perfusion Conference, where Dr. Hoffman and Erle Austin, MD, Professor of Surgery at the University of Louisville and Chief of Cardiovascular Surgery at Kosair Children’s Hospital, made a presentation about the benefits of neurological monitoring during pediatric cardiac surgery.
Public relations activities resulted in the publication of “Noninvasive Monitoring of Cardiac Output: Benefits of NIRS Technology” in the June issue of Congenital Cardiology Today and “Cerebral Oximetry, Early Warning System” in the July issue of Nursing Spectrum. These articles were authored by clinicians to share their firsthand experience using the INVOS System.
Business Outlook
The Company’s core business is progressing as anticipated. Somanetics is updating its guidance based on the deferral of the commercial launch of the smaller sensors, the net effect of which is to reduce revenue guidance, and increase operating margin percentage and income before income taxes guidance due to the postponement of launch-related expenses for the smaller sensors, including personnel. Somanetics is currently forecasting:
-- Net revenues in the range of $38.5 million to $39 million, compared with previously announced guidance of net revenues of approximately $40 million. -- Income before income taxes in the range of $14.0 million to $14.5 million, compared with the earlier estimate of income before income taxes of $12.5 million to $13.4 million. -- Operating margin percentage in the range of 26 to 27 percent, increased from 22 to 24 percent, and gross margin percentage between 87 to 88 percent. Somanetics undertakes no obligation to update its estimates.
Somanetics to Host Conference Call
Somanetics will webcast its 2007 third quarter conference call at 10:00 a.m. (ET) today. To join the webcast, visit the Investor Center section of Somanetics’ website at www.somanetics.com and click on the “Q3 2007 Somanetics Corporation Earnings Conference Call” link. The call also will be archived on the website.
About the INVOS(R) Cerebral / Somatic Oximeter
The INVOS System is the only noninvasive oximeter to provide simultaneous cerebral/somatic monitoring of changes in regional blood oxygen saturation. It has a 10-year market track record, is supported by 500 clinical references, and is used at more than 600 U.S. hospitals conducting a total of 150,000 procedures annually. The INVOS System uses near infrared spectroscopy to “reflect the color of life” by measuring the color of de-oxygenated and oxygenated hemoglobin molecules within red blood cells.
The resulting regional oxygen saturation (rSO2) change information is a vital sign that helps critical care teams detect and correct site-specific blood oxygenation issues that can lead to complications and poor outcomes. Cerebral/somatic monitoring with the INVOS System can be used on adult, pediatric and infant patients in any clinical setting where patients are at risk of reduced-flow or no-flow ischemia.
About Somanetics
Somanetics Corporation develops, manufactures and markets the INVOS(R) Cerebral/Somatic Oximeter System, a non-invasive patient monitoring system that continuously measures changes in the blood oxygen levels in the brain and elsewhere in the body in somatic, or skeletal muscle, tissue in patients with or at risk for restricted blood flow. 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. Somanetics supports its customers through a direct U.S. sales force and clinical education team. Tyco Healthcare markets INVOS System products in Europe, Canada, the Middle East and South Africa and Edwards Lifesciences represents INVOS System products in Japan. For more information visit www.somanetics.com.
Safe-Harbor Statement
Except for historical information contained herein, the matters discussed in this news release, including financial guidance for fiscal year 2007, 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 and 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 equity compensation 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, sales employee turnover, 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’ 2006 Annual Report on Form 10-K filed on February 8, 2007 and the first and second quarter 2007 Quarterly Reports on Form 10-Q filed on April 3, 2007 and June 29, 2007, respectively.
(Tables to follow) SOMANETICS CORPORATION BALANCE SHEETS August 31, November 30, 2007 2006 ASSETS (Unaudited) (Audited) CURRENT ASSETS: Cash and cash equivalents $26,153,614 $28,734,869 Marketable securities 26,978,827 20,918,134 Accounts receivable 6,604,695 4,740,043 Inventory 2,499,835 2,172,458 Accrued interest receivable 597,655 351,666 Prepaid expenses 202,058 494,822 Deferred tax asset - current 3,246,702 2,761,217 Total current assets 66,283,386 60,173,209 PROPERTY AND EQUIPMENT (at cost): Demonstration and no capital cost sales equipment at customers 3,197,741 2,650,939 Machinery and equipment 1,433,073 1,263,015 Furniture and fixtures 304,012 300,037 Leasehold improvements 199,225 195,565 Total 5,134,051 4,409,556 Less accumulated depreciation and amortization (2,774,196) (2,285,279) Net property and equipment 2,359,855 2,124,277 OTHER ASSETS: Long-term investments 26,979,323 21,917,764 Deferred tax asset - non-current 4,323,627 8,182,783 Intangible assets, net 4,825 10,009 Other 15,000 15,000 Total other assets 31,322,775 30,125,556 TOTAL ASSETS $99,966,016 $92,423,042 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $960,301 $1,045,727 Accrued liabilities 1,156,152 1,159,770 Total current liabilities 2,116,453 2,205,497 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, 13,194,461 shares at August 31, 2007, and 13,163,627 shares at November 30, 2006 131,945 131,636 Additional paid-in capital 117,566,025 116,817,012 Accumulated deficit (19,848,407) (26,731,103) Total shareholders’ equity 97,849,563 90,217,545 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $99,966,016 $92,423,042 STATEMENTS OF OPERATIONS (Unaudited) Three Months Six Months Ended August 31, Ended August 31, 2007 2006 2007 2006 NET REVENUES $10,163,509 $7,867,739 $27,310,559 $21,016,310 COST OF SALES 1,338,418 1,081,890 3,387,258 2,716,886 Gross Margin 8,825,091 6,785,849 23,923,301 18,299,424 OPERATING EXPENSES: Research, development and engineering 157,657 135,063 435,445 454,140 Selling, general and administrative 5,444,836 4,533,565 16,034,364 11,894,113 Total operating expenses 5,602,493 4,668,628 16,469,809 12,348,253 OPERATING INCOME 3,222,598 2,117,221 7,453,492 5,951,171 OTHER INCOME: Interest income 1,008,749 751,523 2,974,835 1,709,603 Total other income 1,008,749 751,523 2,974,835 1,709,603 INCOME BEFORE INCOME TAXES 4,231,347 2,868,744 10,428,327 7,660,774 INCOME TAX PROVISION 1,438,658 975,373 3,545,631 2,604,663 NET INCOME $2,792,689 $1,893,371 $6,882,696 $5,056,111 NET INCOME PER COMMON SHARE - BASIC $0.21 $0.14 $0.52 $0.41 NET INCOME PER COMMON SHARE - DILUTED $0.19 $0.13 $0.47 $0.37 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 13,186,754 13,071,340 13,174,355 12,238,600 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 14,549,298 14,460,299 14,579,710 13,713,731
Somanetics Corporation
CONTACT: Mary Ann Victor, Vice President and Chief Administrative Officer,+1-248-689-3050, ext. 204, or Bill Iacona, Chief Financial Officer,+1-248-689-3050, ext. 229, both of Somanetics Corporation
Web site: http://www.somanetics.com/
