Operating cash flow increases 48% to over $7 million on 7% revenue drop during first half of 2009 Revenue declines 1% in first half on constant currency basis Conference Call Webcast Live Today at 1:30 pm Pacific/4:30 pm Eastern
BOTHELL, WA - July 27, 2009 - Sonosite, Inc. (Nasdaq:SONO), the world leader and specialist in hand-carried ultrasound for the point-of-care, today reported financial results for the second quarter and first half ended June 30, 2009.
Worldwide revenue in the second quarter of 2009 was $52.3 million, a decrease of 12% compared to the second quarter of 2008. For the first half of 2009, worldwide revenue was $104.1 million; a decrease of 7% compared with the first half of 2008. Changes in foreign currency rates decreased worldwide revenue by approximately 4% in the quarter and 6% in the first half of 2009.
OPERATING CASH FLOW
Operating cash flow was $7.4 million for the first half of 2009 compared to $5.0 million for the first half of 2008, an increase of 48% over the prior year period.
INCOME Operating income
The company reported operating income of $3.0 million for the second quarter of 2009 compared to $5.3 million for the second quarter of 2008. Operating income, excluding stock based compensation expense, was $4.4 million compared to $6.9 million in the second quarter of 2008. For the first half, the company reported operating income of $4.5
million in 2009 compared to $7.7 million in 2008. Operating income excluding stock based compensation expense was $8.5 million for the first half of 2009 compared to $11.2 million in the comparative period of 2008.
For the second quarter of 2009, the company reported net income of $425,000 or $0.02 per share compared to $1.4 million or $0.08 per share in 2008. For the first half of 2009, the company reported net income of $1.3 million or $0.07 per share compared to $1.6 million or $0.09 per share.
"Although the economic environment continues to be challenging, we held our own in the second quarter," said Kevin M. Goodwin, Sonosite President and CEO. "As expected, the slowdown in US hospital capital spending and a stronger US dollar affected our operating results. We did see some improvement in buying trends toward the end of the quarter, yet our forward planning is focused on earnings and cash flow growth through 2010 as we await a recovery in hospital based capital spending." "In the second quarter we made initial progress on structural spending reductions which we plan to build upon in the second half of the year," Mr. Goodwin stated.
"In parallel, on the growth side of the equation, we launched and initiated shipments of our newest product innovation the NanoMaxx„¢ system1, a 6 pound marvel, providing excellent imaging performance and yet designed for patient safety applications and related length of stay risks. The NanoMaxx also offers the lowest cost of ownership of any point-of- care ultrasound tool in the industry."
_____________________________________ 1 Availability in the USA pending FDA 510(k) clearance "We also announced an agreement to acquire CardioDynamics, Inc., a leader in impedance cardiography designed for private practice medicine, which we expect to close in the third quarter," Mr. Goodwin said. "This acquisition will bring us an established sales channel and franchise in cardiovascular disease management markets which we estimate will have outstanding long term growth and healthcare cost reduction potential." "During the quarter we also improved pricing and manufacturing efficiency which had a positive effect on gross margins," Mr. Goodwin added. "Our outlook in the 'mid term' remains quite positive as we have listened carefully to the many voices within healthcare reform," Mr. Goodwin continued. "The mandated need for improving patient safety and the related cost of delivering care positions ultrasound, in particular our highly miniaturized technology, as a clear and still underleveraged 'cost avoidance technology.' This message has been consistent from the provider marketplace over the past several quarters."
SECOND QUARTER REVENUE DRIVERS
In the second quarter, US revenue decreased 15% compared to the second quarter of 2008 and accounted for 46% of the company's worldwide revenue. For the six months of 2009, US revenue decreased 6% as compared to 2008 and accounted for 45% of worldwide revenue. International revenue decreased 8% in the second quarter and 7% for the six months of 2009 as compared to the same periods in 2008. On a constant currency basis, international revenue was flat for the quarter and up 4% year-to-date.
OPERATING EXPENSE DRIVERS
Total operating expenses were $34.0 million in the second quarter, down 6% from the prior year. SG&A expenses decreased 6% to $27.6 million and R&D expense increased 6% to $7.4 million. For the first half of 2009, operating expenses decreased 6% to $67.5 million from the first half of 2008. SG&A expenses decreased 9% to $53.4 million and R&D expense increased 15% to $15.1 million. The loss on the other income line was driven by non-cash interest expense of $1.2 million for the second quarter and $2.5 million for the first half related to APB 14-1, a new accounting treatment for convertible debt. As of June 30, 2009, the company held $263 million in cash and investments and had outstanding senior convertible notes of $120 million.
COMPANY'S OUTLOOK FOR REMAINDER OF THE YEAR
The company maintained its outlook that the economy will continue to be challenging for the next four quarters and is providing the following update to its annual outlook:
- In 2009, revenue could decrease between 5 - 10%, which includes a negative 4% currency impact assumption;
- Gross margin is expected to decline by one percentage point based on the assumption of a stronger dollar in the second half;
- The company is targeting an operating expense reduction of 5-10% for the year versus 2008;
- Non-cash interest expense from APB 14-1 is projected at $4.9 million for the year; and
- An annual tax rate of 39% is projected.
Conference Call Information
Sonosite will hold a conference call on July 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 July 27, 2009, 5:30 pm PT and will be available until August 10, 2009, 9:59 pm PT by dialing (719) 457-0820 or toll-free (888) 203-1112. The confirmation code 4668347 is required to access the replay. The call will also be archived on Sonosite's website.
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, including the effects of proposed health care reform legislation in the U.S., 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 and effectively integrate acquired products and operations, 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. Financial Information Download Condensed Consolidated Statements of Income (PDF) Three and six months with and without the impact of APB 14-1 for comparison purposes (PDF)