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Otix Global Announces Results for Fourth Quarter 2009
Date:2/16/2010

SALT LAKE CITY, Feb. 16 /PRNewswire-FirstCall/ -- Otix Global, Inc. (Nasdaq: OTIX), a leading producer of advanced digital hearing aids, today announced results for the fourth quarter and year ended December 31, 2009.  

Highlights include:

  • Achieved record fourth quarter 2009 sales from Rest-of-World segment of $8.4 million; realizing a 13.4 percent organic sales growth compared to the fourth quarter 2008.
  • Generated $4.0 million and $2.2 million in operating cash flow for the fourth quarter and full year 2009, respectively.
  • Began selling to the Veterans Administration in November 2009.

"I am pleased by the improvement in year-over-year sales in some of our international operations," said Sam Westover, Chairman and CEO.   "North America operations continue to be hampered by the slow economy and our results in Germany were clearly impacted by legislative changes.  Nevertheless, we remain optimistic about improvements in these operations and we will continue to focus on aligning expenses to revenue.  We have several product launches planned in 2010.  We have also begun selling our products to the Veterans Administration and we are looking forward to serving the needs of many of our American veterans in the upcoming years."  

Net sales from continuing operations for the year ended December 31, 2009 decreased 23.3 percent over the same period in 2008 to $95.8 million.  Net sales decreased 25.8 percent in North America, 32.8 percent in Europe, and 2.2 percent for Rest-of-World for the year ended December 31, 2009, compared to 2008.  Fourth quarter 2009 net sales from continuing operations of $22.8 million were 16.3 percent lower than fourth quarter 2008 net sales of $27.3 million primarily due to legislative changes in Germany and the challenging global economic environment. North American sales of $7.3 million in the fourth quarter 2009 decreased 21.5 percent from 2008.  European sales of $7.1 million in the fourth quarter 2009 decreased 43.2 percent from 2008 primarily as a result of legislative changes in Germany. Rest-of-World sales of $8.4 million in the fourth quarter 2009 were up 53.5 percent from 2008 as a result of organic growth of 13.4 percent and the weaker U.S. dollar.  

The Company's gross margin from continuing operations for the year ended December 31, 2009 was 60.7 percent compared to 63.2 percent for the year ended December 31, 2008, primarily as a result of the strengthening of the U.S. dollar, lower volume in manufacturing and higher warranty costs due to product mix.  Gross profit from continuing operations was $14.4 million in the fourth quarter 2009 which was a decrease of 14.4 percent from 2008, and gross margin from continuing operations for the fourth quarter 2009 of 63.2 percent increased by 1.4 percent compared to 2008 gross margin of 61.8 percent primarily as a result of lower sales returns in North America wholesale, partially offset by lower volume in manufacturing.

Selling, general and administrative expense was down 4.0 percent and 16.2 percent for the three and twelve months ended December 31, 2009 compared to same periods in 2008, respectively, due to cost cuts across North America and Europe.  Research and development expense was $6.5 million in 2009 compared to $8.3 million in 2008, a year-over-year decline of $1.8 million.  Research and development expense in the fourth quarter 2009 of $1.2 million decreased $0.7 million from $1.9 million in the fourth quarter of 2008.

Goodwill and definite-lived intangible impairment charges were $30.7 million in 2009 compared to $2.1 million in 2008.  We incurred impairment charges of $14.7 million in the first quarter of 2009 as a result of a Germany healthcare legislative change.  During the third quarter of 2009 we closed one U.S. retail location and recorded a goodwill and definite-lived intangible impairment of $0.1 million.  During the fourth quarter of 2009, based on declining market valuations and sales in our U.S. retail reporting unit, we recorded a $12.4 million goodwill impairment charge and a $3.5 million customer list impairment charge, resulting in a total impairment charge of $15.9 million.

For the full year 2009, the Company recorded total restructuring charges of $0.6 million related to cost cutting initiatives.

Loss from continuing operations for the year ended December 31, 2009 was $39.3 million or $1.42 per share, as compared with a loss from continuing operations of $3.7 million or $0.14 per share, for the year ended December 31, 2008.  

Fourth quarter 2009 loss from continuing operations, excluding restructuring charges and goodwill and definite-lived intangibles impairment charges, was $1.8 million or $0.07 per share compared with a fourth quarter 2008 loss of $0.6 million or $0.02 per share; the loss from continuing operations for the year ended 2009 was $8.0 million, or $0.29 per share, compared with income from continuing operations of $0.4 million or $0.02 per share, for the year ended December 31, 2008.

As of December 31, 2009, the Company had cash and cash equivalents of $12.2 million.

Otix Global designs, develops, manufactures and markets advanced digital hearing aids designed to provide the highest levels of satisfaction for hearing impaired consumers.

This press release contains "forward-looking statements" as defined under securities laws. Actual results may differ materially and adversely from those described herein depending on a number of factors but not limited to, the following risks: we face aggressive competition in our business; acquisitions could be difficult to integrate and disrupt our current business and therefore may harm our operating results; we may poorly operate newly acquired businesses; our consolidation initiative may not produce the cost savings we anticipate; our new products may not increase sales; we may lose a large customer or suffer a reduction in orders from a large customer; we must have innovative, technologically superior products to compete effectively; our products, due to their complexity, may contain errors or defects that are only discovered after sales by our customers, thus harming our reputation and business; we may have issues with intellectual property; and we have important international operations, which expose us to a variety of risks including government reimbursement and foreign currency exchange fluctuations, that could impact sales and operating results. For additional information regarding the risks inherent in our business, please see "Factors That May Affect Future Performance" included in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission.

This press release contains one non-GAAP ("Generally Accepted Accounting Principles") financial measure ("EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, NON-CASH ITEMS, AND DEPRECIATION AND AMORTIZATION.")  We believe the inclusion of this non-GAAP financial measure improves the transparency of our disclosure.  We have provided a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure.

We undertake no obligation to revise our forward-looking statements to reflect events or circumstances after the date hereof as a result of new information, future events or otherwise.

The Company will host a teleconference call in connection with this release on Tuesday, February 16, 2010 at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time).

To participate in the conference call, please call toll free (866) 383-8108, or (617) 597-5343 outside the U.S., and use participant passcode: 13406881.  A live webcast will also be available through our website at www.otixglobal.com.  You may also visit our website for an archive of prior press releases and earnings announcements. 

If you wish to hear a digital playback of the call, please dial (888) 286-8010 within the U.S., or (617) 801-6888 outside the U.S., and enter passcode 68147432 (available through February 26, 2010, midnight), or access the playback through our website.

    
    
    
                               OTIX GLOBAL, INC. 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
                    (in thousands, except per share data) 
                                (unaudited) 
    
    
                                    Three months ended      Year ended
                                       December 31,         December 31,
                                       ------------         ------------
                                     2009        2008      2009     2008
                                     ----        ----      ----     ----
     Net sales                    $22,823      $27,280   $95,814 $124,878
     Cost of sales                  8,399       10,423    37,693   46,004
                                    -----       ------    ------   ------
    
     Gross profit                  14,424       16,857    58,121   78,874
     Selling, general and
      administrative expense       14,886       15,502    59,065   70,515
     Research and development
      expense                       1,239        1,879     6,487    8,266
     Goodwill and definite-
      lived intangibles
      impairment charges           15,872        2,111    30,665    2,111
     Restructuring charges             11          491       634    2,052
                                      ---          ---       ---    -----
    
     Operating loss               (17,584)      (3,126)  (38,730)  (4,070)
     Interest expense                (102)        (182)     (481)    (755)
     Other income (loss), net         (69)         484       234    1,167
                                      ---          ---       ---    -----
    
     Loss before income taxes     (17,755)      (2,824)  (38,977)  (3,658)
     Provision (benefit) for
      income taxes                    (66)         383       324       62
                                      ---          ---       ---      ---
    
     Loss from continuing
      operations                  (17,689)      (3,207)  (39,301)  (3,720)
     Loss from discontinued
      operations, net of income
      taxes                           (39)        (180)      (51)  (3,904)
                                      ---         ----       ---   ------
    
     Net loss                    $(17,728)     $(3,387) $(39,352) $(7,624)
                                 ========      =======  ========  =======
    
     Basic and diluted loss per
      common share:
     Continuing operations         $(0.64)      $(0.12)   $(1.42)  $(0.14)
     Discontinued operations            -            -         -    (0.14)
                                      ---          ---       ---    -----
    
     Net loss                      $(0.64)      $(0.12)   $(1.42)  $(0.28)
                                   ======       ======    ======   ======
    
     Weighted average number of
      common shares outstanding:
     Basic and Diluted             27,774       27,540    27,682   27,305
                                   ======       ======    ======   ======
    
    
                                   OTIX GLOBAL, INC. 
                 CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
                                  (in thousands) 
                                   (unaudited)
                                             
    
                                                December 31,   December 31,
                                                    2009           2008
                                                    ----           ----
    Assets: 
                                                           
    Cash and cash equivalents                      $12,225       $ 13,413
    Accounts receivable                             10,625         17,524
    Inventories                                      8,754         10,129
    Property and equipment                           8,755          6,869
    Goodwill and intangibles                        20,156         51,310
    Other assets                                     6,610          7,701
                                                     -----          -----   
    Total assets                                   $67,125       $106,946
                                                   =======       ========   
    Liabilities:                                          
                                                           
    Accounts payable and accrued liabilities       $19,082       $ 22,562
    Loans payable                                    5,375          6,855
    Deferred revenue                                 9,866          9,618
                                                     -----          -----   
    Total liabilities                               34,323         39,035
                                                    ------         ------   
    Shareholders' equity:                                 
                                                           
    Common stock                                        29             29
    Additional paid-in capital                     145,359        143,965
    Accumulated deficit                           (118,244)       (78,892)
    Treasury stock and other comprehensive income    5,658          2,809
                                                     -----          -----   
    Total shareholders' equity                      32,802         67,911
                                                    ------         ------   
    Total liabilities and shareholders' equity     $67,125       $106,946
                                                   =======       ========   
    
    
    
                              OTIX GLOBAL, INC. 
               CONSOLIDATED STATEMENT OF NET SALES INFORMATION
                                (in thousands) 
                                 (unaudited)
    
                            Three months ended          Year ended 
                               December 31,             December 31,
                            ------------------      --------------------
                            2009         2008        2009           2008
                            ----         ----        ----           ----
     Net sales:
        North America      $7,272       $9,261     $33,687        $45,392
        Europe              7,108       12,520      34,343         51,077
        Rest-of-World       8,443        5,499      27,784         28,409
                            -----        -----      ------         ------
    
     Total                $22,823      $27,280     $95,814       $124,878
                          =======      =======     =======       ========
    
    
    
    
         EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, NON-CASH
                       ITEMS, AND DEPRECIATION AND AMORTIZATION
                                  (in thousands) 
                                   (unaudited)
    
    
                            Three months ended             Year ended 
                               December 31,                December 31,
                            ------------------          -----------------
                            2009          2008          2009         2008
                            ----          ----          ----         ----
    
    Loss from continuing
     operations          $(17,689)      $(3,207)     $(39,301)     $(3,720)
    Add back (deduct):
      Interest expense        102           182           481          755
      Taxes                   441           383           831        1,367
      Non-cash items:
        Deferred tax asset 
         valuation allowance
         reversal and deferred 
         tax liability
         reversal            (507)            -          (507)      (1,305)
        Restructuring
         charges               22             -            25          262
        Goodwill and
         definite-lived
         intangibles
         impairment
         charges           15,872         2,111        30,665        2,111
        Stock based
         compensation         322           488         1,420        1,867
        Depreciation and
         amortization       1,001         1,065         4,059        4,823
                            -----         -----         -----        -----
    
    Total                   $(436)       $1,022       $(2,327)      $6,160
                            =====        ======       =======       ======

SOURCE Otix Global, Inc.

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SOURCE Otix Global, Inc.
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