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Somanetics Reports Financial Results for the First Quarter of Fiscal 2008

TROY, Mich., March 18 /PRNewswire-FirstCall/ -- Somanetics Corporation (Nasdaq: SMTS) reported net revenues of $8.7 million for the first quarter ended February 29, 2008, an 8 percent increase from $8.0 million in the same period of 2007.

U.S. net revenues increased 12 percent to $7.4 million from $6.6 million in the same period last year. International net revenues were $1.3 million compared to $1.4 million last year.

First quarter income before income taxes was $1.8 million compared to $2.6 million for the first quarter of 2007. During the first quarter of fiscal 2008, Somanetics recognized income tax expense at an estimated effective tax rate of 42 percent on its statement of operations, as a result of certain additional state tax expenses recorded in the quarter. Somanetics expects the effective tax rate for fiscal 2008 to approximate 36 percent. Net income was $1.0 million, or $0.07 per diluted share, compared with net income of $1.7 million, or $0.12 per diluted share, in the first quarter of 2007.

Gross margin was 88 percent in the first quarter, the same as in the first quarter of 2007. As of February 29, 2008, Somanetics' cash, marketable securities and long-term investments balance was $89.0 million, with no borrowings.

"Our U.S. SomaSensor revenue increased by 28 percent, in line with our expectations," said Bruce J. Barrett, Somanetics' president and chief executive officer. "International sales also were in line with our expectations, but U.S. INVOS System monitor sales were significantly lower than expected."

Pediatric and Neonatal ICU Market Update

During the first quarter Somanetics began commercial shipments of its new sensors for cerebral and somatic monitoring. These sensors are tailored to the small size and head shapes of smaller patients in the pediatric and neonatal ICUs. "Eight hospitals are currently using the new cerebral and somatic sensors and we plan to expand usage to a total of 15 to 20 hospitals in the second quarter. We are planning to continue to broaden the launch activity, including securing additional data, as the year progresses," Barrett said.

Sales and Marketing Activities

During the first quarter, a two-day symposium focused on use of the INVOS System in adult cardiovascular surgeries was conducted in Europe for more than 200 attendees.

Also, Somanetics participated in more than ten medical conferences, including the 28th Annual San Diego Cardiothoracic Surgery Symposium and the Cardiology 2008: Annual Update on Pediatric Cardiovascular Disease. Both conferences, held in February, featured hands-on workshops on the use of cerebral oximetry. Somanetics expects to attend six meetings in the second quarter and additional meetings throughout the year.

Business Outlook

Somanetics is updating its financial guidance for fiscal 2008 based on its current expectations for U.S. monitor revenue. Somanetics is currently forecasting:

-- Net revenues in the range of $46.2 million to $50.0 million, or 20 to

30 percent growth over 2007 revenues, compared with previously

announced guidance of net revenues of approximately $50 million. The

new guidance reflects the first quarter U.S. INVOS System hardware

results and the uncertainty inherent in forecasting U.S. INVOS System

hardware revenues. It also reflects the Company's positive experience

in the first quarter with the new, smaller cerebral and somatic

sensors and the potential for the Company to exceed its original plan

associated with the new sensors.

-- Operating margin percentage in the range of 25 to 27 percent, and

gross margin in the range of 87 to 88 percent, both unchanged from

prior guidance.

-- Income before income taxes in the range of $15.3 million to $17.5

million, compared with previous guidance of $17 million to $18

million. The new guidance reflects the change in guidance for net

revenues and lower interest income associated with lower than planned

interest rates.

Somanetics' forecasts are based on market conditions and current estimates, which reflect management's plan to invest in the clinical research, education and research and development projects to support the expansion of its efforts with infants in the pediatric and neonatal ICU markets. Somanetics undertakes no obligation to update its estimates.

Somanetics to Host Conference Call

Somanetics will web cast its 2008 first quarter conference call at 10:00 a.m. (ET) today. To join the web cast, visit the Investor Center page of Somanetics' website at and click on the "2008 First Quarter Conference Call" link. The call also will be archived on the website.

About Somanetics

Somanetics Corporation (Nasdaq: SMTS) 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, intensive care nurses and other medical professionals can use the information provided by the INVOS System, in conjunction with other available information, to identify cerebral or somatic 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. Covidien 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

Safe-Harbor Statement

Except for historical information contained herein, the matters discussed in this news release, including financial guidance for fiscal year 2008, 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' 2007 Annual Report on Form 10-K filed on February 6, 2008.

(Tables to follow)



February 29, November 30,

2008 2007

ASSETS (Unaudited) (Audited)


Cash and cash equivalents $55,505,693 $33,172,977

Marketable securities 7,986,779 18,978,074

Accounts receivable 5,520,645 7,486,571

Inventory 2,437,305 1,998,284

Prepaid expenses 528,046 560,885

Accrued interest receivable 358,299 551,117

Deferred tax asset - current 2,596,024 3,069,929

Total current assets 74,932,791 65,817,837


Demonstration and no capital cost

sales equipment at customers 3,477,844 3,386,287

Machinery and equipment 1,362,890 1,531,387

Furniture and fixtures 318,859 307,919

Leasehold improvements 197,450 196,700

Total 5,357,043 5,422,293

Less accumulated depreciation and

amortization (2,884,564) (2,931,596)

Net property and equipment 2,472,479 2,490,697


Long-term investments 25,479,678 33,653,099

Deferred tax asset - non-current 2,873,000 3,004,755

Intangible assets, net 1,369 3,097

Other 15,000 15,000

Total other assets 28,369,047 36,675,951

TOTAL ASSETS $105,774,317 $104,984,485



Accounts payable $1,333,187 $1,118,003

Accrued liabilities 790,221 1,701,481

Total current liabilities 2,123,408 2,819,484



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,

13,503,984 shares at

February 29, 2008,

and 13,443,961 shares

at November 30, 2007 135,040 134,440

Additional paid-in capital 119,536,262 119,079,383

Accumulated deficit (16,020,393) (17,048,822)

Total shareholders' equity 103,650,909 102,165,001


EQUITY $105,774,317 $104,984,485



For the Three-Month

Periods Ended

February 29, February 28,

2008 2007

NET REVENUES $8,693,274 $8,024,872

COST OF SALES 1,016,824 1,001,723

Gross Margin 7,676,450 7,023,149


Research, development and

engineering 330,436 113,366

Selling, general and administrative 6,498,148 5,319,436

Total operating expenses 6,828,584 5,432,802

OPERATING INCOME 847,866 1,590,347


Interest income 934,418 960,488

Total other income 934,418 960,488

INCOME BEFORE INCOME TAXES 1,782,284 2,550,835

INCOME TAX EXPENSE (753,855) (867,284)

NET INCOME $1,028,429 $1,683,551




OUTSTANDING - BASIC 13,450,691 13,164,210


OUTSTANDING - DILUTED 14,759,732 14,636,974

SOURCE Somanetics Corporation
Copyright©2008 PR Newswire.
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