May 1, 2008
Sonic Innovations Inc, has announced results for the first quarter ended March 31, during which time the company says it achieved record first quarter sales of $31.9 million and gross margin of 64 percent. The figures also show the company realized 10% sales growth compared to first quarter 2007.
Two new products were launched during the first quarter, ion 400 and Velocity miniBTE while data from that same period indicated continued financial improvement in vertically integrated operations, according to a Sonic Innovations source. Four acquisitions with annualized revenue of approximately $4.2 million were also completed in the first quarter, during a period when the company announced the kick-off of its 10-year anniversary celebration.
"I am pleased with the performance of the Company’s core business units in North America, Europe and Australia which was fueled by our newest products, ion 400 and Velocity miniBTE, enhanced customer service and marketing programs, continued manufacturing cost savings and gross margin expansion," says Sam Westover, president and CEO. "Industry data shows the U.S. hearing aid market experienced more than a 5% decline in sales during the month of March. While we have also experienced some softness in the North American market as a result of the downturn in the economy, we believe this situation is temporary. We are executing our business strategies, producing significant customer satisfaction and introducing exciting new products."
The company reports that in the first quarter it began to consolidate several of its European operations in an effort designed to reduce expenses and focus management and resources on those markets that provide the greatest opportunity for increased profitability. The Sonic Innovations expects that the consolidation activities will result in a total of approximately $1.3 million in non-cash and $2.5 million in cash restructuring charges in 2008. For the first quarter of 2008, the Company recorded a restructuring charge of $0.6 million, or $0.02 per share.
Regarding the Company’s announcement to consolidate some of its European operations, Sam Westover stated, "During the past two years, we have been very successful in improving our gross margin from 55 percent to 64 percent. We expect that the consolidation of some of our European operations will improve our administrative costs as a percentage of revenue which is an important next step. I continue to be optimistic that, excluding charges related to this initiative, we will achieve our earnings targets for 2008 and we will be even better positioned for earnings growth going forward."
Sonic CFO, Mike Halloran, adds: "In the fourth quarter of 2007 and first quarter of 2008, the European operations included in this consolidation initiative incurred operating losses of approximately $900,000 and $600,000, respectively. The consolidation of European operations is expected to eliminate these losses and allow us to leverage our administrative expenses throughout our businesses and position the remaining European operations to positively contribute to our bottom line."
On net sales of $31.9 million in the first quarter 2008, and excluding the restructuring charge, the Company’s net income was slightly positive. The Company recognized losses from continuing operations of $0.5 million, or $0.02 per share with the inclusion of the restructuring charge.
Record first quarter 2008 net sales were 10.0 percent higher than first quarter 2007 sales of $29.0 million. North American sales of $11.9 million in the first quarter 2008 increased 8.7% from 2007. European sales of $13.1 million in the first quarter 2008 increased 3.4 percent from 2007. Rest-of-world sales of $6.9 million in the first quarter 2008 were up 28.2% from 2007.
Gross profit of $20.4 million in the first quarter 2008 was up 15.1% from 2007. Gross margin hit a first quarter record of 64.0 percent in 2008 compared to last year’s first quarter level of 61.2 percent as a result of lower return rates and warranty costs, cost reduction activities in manufacturing and sales mix.
Selling, general and administrative expense as a percentage of net sales increased from 50.8% in the first quarter 2007 to 57.1% in the first quarter 2008 as a result of increased vertical integration and the operating expense to sales ratio in the European operations subject to the Company’s consolidation activities. Research and development expense in the first quarter 2008 of $2.2 million was down $0.1 million from $2.3 million in the prior year.
The auditory testing equipment division was sold in February 2007 and has been reflected as a discontinued operation.
As of March 31, 2008, Sonic Innovations had cash and cash equivalents of $14.1 million and a line of credit of $6.0 million.
Source: PR Newswire