Conference Call Today at 1:30 PM Pacific Time
BOTHELL, WA - April 27, 2009 - Sonosite, Inc. (Nasdaq:SONO), the world leader and specialist in hand-carried and point-of-care ultrasound, today announced financial results for the first quarter ended March 31, 2009. First quarter 2009 worldwide revenue was $51.8 million, a decrease of 1% over the prior year's first quarter as previously announced. Changes in foreign currency rates decreased worldwide revenue in the first quarter of 2009 by approximately 8%. Total US revenue grew 5% in the quarter to $23.2 million driven by more than doubling of revenue in the enterprise channel. US direct hospital sales were negatively impacted by the slowdown in hospital capital spending - down 14%. International sales were down 6% to $28.6 million due to a 14% negative foreign exchange impact. On a constant currency basis, international sales were up 8%.
The company reported operating income (EBIT) of $1.6 million compared to $2.4 million, a decline of 34% compared to Q1 2008. Operating income excluding stock-based compensation expense (EBITS) was $4.1 million compared to $4.3 million in the prior year. "We made expense reduction and efficiency progress in the quarter in the face of expected revenue softness," said Kevin M. Goodwin, Sonosite President and CEO. "We also improved our balance sheet in the quarter by repurchasing $25 million of our long-term convertible notes at a discount. Additionally, we reduced the quarter's operating expenses by $1.9 million and have revised our expense improvement goal for up to a 10% reduction over the prior year.
We expect the economic environment and visibility to remain challenging for several quarters, thus our priority is to remain focused on continuous streamlining or "leaning" of our business model while setting up a return to growth with key strategic investments."
The company reported net income of $863,000 for the first quarter of 2009, or $0.05 per diluted share, compared to $190,000 or $0.01 per diluted share in 2008. These results were significantly affected by the adoption of APB 14-1, as of January 1, 2009 relating to the accounting treatment for convertible debt. Total operating expenses in the first quarter declined 5% to $33.5 million compared to the first quarter of 2009. The company reduced SG&A expense by 12% to $25.8 million compared to the prior year quarter. R&D investment grew 24% in the first quarter to $7.7 million, as planned. Other expense in the quarter included $2.6 million of interest expense, of which $1.2 million was from the adoption of APB 14-1, that offsets a $1.3 million gain from the repurchase of $25.0 million of senior convertible notes. As of March 31, 2009, the company held $258 million in cash and investments and outstanding senior convertible notes of $120 million.
Company Updates Outlook for 2009
"Our view remains that the worldwide economy will continue to be challenging with difficult visibility. We see signs of opportunity and growth offset by a strong headwind from US Hospital market softness and the stronger dollar," Mr. Goodwin said. "We assume that the US dollar will continue to strengthen and that changes in foreign currency will have a negative effect of 4 -5% on revenue. We therefore expect that the company's 2009 revenue could potentially be flat to down 10% as compared to 2008. We are responding by increasing our expense reduction targets to a range of 5-10%, from the previous goal of 5%." "We intend to continue introducing innovative and cost effective new products as the year proceeds," Mr. Goodwin said. The company expects non-cash interest expense of $4.9 million for the year from the adoption of APB 14-1 and an annual tax rate of approximately 39%.
Note on Adoption of FSP No. APB 14-1
The company adopted FSP APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)," ("APB 14-1") on January 1, 2009, which required the company to account separately for the liability and equity components of its convertible debt in a manner that reflects a nonconvertible debt borrowing rate. APB 14-1 requires retrospective application of this standard. Accordingly, the company's operating results since the issuance of the senior convertible debt and future operating results will reflect additional non-cash interest expense. The following table presents the three months ended March 31, 2009 and 2008 with and without the impact of APB 14-1 for comparison purposes (unaudited):
The following table presents our 2008 quarterly results as adjusted for the impact of APB 14-1 (unaudited):
Conference Call Information
Sonosite will hold a conference call on April 27th at 1:30 pm PT/4:30 pm ET. The call will be broadcast live and can be accessed via the "Investors" Section of Sonosite's website at www.sonosite.com. A replay of the audio webcast will be available beginning April 27, 2009, 5:30 pm PT and will be available until May 11, 2009, 9:59 pm PT by dialing (719) 457-0820 or toll-free (888) 203-1112. The confirmation code 8899954 is required to access the replay. The call will also be archived on Sonosite's website.
Sonosite, Inc. (www.sonosite.com) is the innovator and world leader in hand-carried ultrasound. Headquartered near Seattle, the company is represented by ten subsidiaries and a global distribution network in over 100 countries. Sonosite's small, lightweight systems are expanding the use of ultrasound across the clinical spectrum by cost-effectively bringing high performance ultrasound to the point of patient care. The company employs approximately 650 people worldwide.
Forward-looking Information and the Private Litigation Reform Act of 1995 Certain statements in this press release relating to the market acceptance of our products, possible future sales relating to expected orders, and our future financial position and operating results are "forward-looking statements" for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the opinions and estimates of our management at the time the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those expected or implied by the forward-looking statements. These statements are not guaranties of future performance and are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions. Factors that could affect the rate and extent of market acceptance of our products, the receipt of expected orders, and our financial performance include our ability to successfully manufacture, market and sell our ultrasound systems, our ability to accurately forecast customer demand for our products, our customers' ability to finance the purchase of our systems, including the effect of reduced spending by hospitals, our ability to manufacture and ship our systems in a timely manner to meet customer demand, variability in quarterly results caused by the timing of large project orders from governmental or international entities and the seasonality of hospital purchasing patterns, timely receipts of regulatory approvals to market and sell our products, regulatory and reimbursement changes in various national health care markets, constraints in government and public health spending, the ability of our distribution partners and other sales channels to market and sell our products and any changes to such channels, the impact of patent litigation, our ability to execute our acquisition strategy, the effect of transactions and activities associated with our issuance of senior convertible debt in July 2007, including a repurchase of a portion of the debt, on the market price of our common stock, and as well as other factors contained in the Item 1A. "Risk Factors" section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. We caution readers not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. We undertake no obligation to publicly revise any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.