Deaf Today: Sonic Innovations, Inc. Announces Fourth Quarter and Full Year 2002 Results

January 27, 2003

Sonic Innovations, Inc. Announces Fourth Quarter and Full Year 2002 Results

From: Yahoo News - 27 Jan 2003

Company Achieved Profitability for 2002

SALT LAKE CITY, Jan. 27 /PRNewswire-FirstCall/ -- Sonic Innovations, Inc. (Nasdaq: SNCI - News), a leading producer of advanced digital hearing aids, today announced results for its fourth quarter and full year 2002. Net sales in 2002 of $68,018,000 were up 19% from prior year net sales of $57,267,000. Net income was $32,000, or $.00 per share, in 2002 compared to a net loss of $5,635,000, or $.28 per share, in 2001. Net sales in the fourth quarter 2002 of $17,246,000 were up 14% from fourth quarter 2001 net sales of $15,161,000. Net loss in the fourth quarter 2002 was $109,000, or $.01 per share, compared to net loss of $997,000, or $.05 per share, in the fourth quarter 2001.

Hearing aid sales of $67,062,000 in 2002 increased 28% from 2001 sales of $52,236,000. By geography, North American sales of $39,697,000 in 2002 increased 6% from 2001 levels; European sales of $14,209,000 in 2002 increased 60% from 2001 levels; and Rest of World sales of $13,156,000 in 2002 increased 128% from 2001 levels.

Hearing aid sales of $16,916,000 in the fourth quarter 2002 increased 13% from hearing aid sales of $15,022,000 in the prior year's fourth quarter. North American sales of $10,176,000 in the fourth quarter 2002, which included sales of the company's Canadian operations which were acquired in mid-year 2002, were down slightly from last year's fourth quarter sales of $10,209,000. European sales of $3,656,000 in the fourth quarter 2002 were up 67% from last year's fourth quarter sales of $2,195,000, benefiting from several acquisitions made during 2002. Rest of world sales of $3,084,000 in the fourth quarter 2002 were up 18% from last year's fourth quarter sales of $2,618,000 mainly on the strength of the company's Australian business.

Gross profit was $9,143,000 in the fourth quarter 2002, up $1,966,000, or 27%, from gross profit of $7,177,000 in last year's fourth quarter. Gross margin of 53.0% in the fourth quarter 2002 increased significantly from last year's fourth quarter level of 47.3% reflecting the company's continuing efforts to reduce its product costs and improve its manufacturing cost structure, as well as the incremental margin derived from the acquisition of several of our distributors. The company's operating loss of $507,000 in the fourth quarter 2002 improved from an operating loss of $1,432,000 in last year's fourth quarter.

At December 31, 2002, Sonic Innovations had cash and marketable securities, including long-term marketable securities, of $35.6 million compared to $45.8 million at December 31, 2001. The decrease was mainly due to cash used for acquisitions totaling $7.5 million and common stock repurchases totaling $0.7 million.

Andy Raguskus, President and CEO, stated, "While we are clearly disappointed that our fourth quarter performance was below our expectations, we are encouraged by our full year results and the progress we made in 2002. Noteworthy among our accomplishments were that we:

-- Achieved full year profitability;

-- Strengthened our international distribution by making acquisitions in
Denmark, Switzerland, Austria, Canada, the U.K. and the Netherlands;

-- Introduced our lower-priced Tribute and Quartet custom product
families and our second generation instant-fit product, Adesso,
significantly broadening our product offering; and

-- Re-organized our global sales and marketing functions under new
leadership.

Our broader product offering, expanded direct distribution capability and reorganized sales and marketing function, coupled with new products that we expect to introduce in Spring 2003, should result in our business continuing to improve in 2003."

Sonic Innovations designs, develops, manufactures and markets advanced digital hearing aids designed to provide the highest levels of satisfaction for hearing impaired consumers. Capitalizing on its advanced understanding of human hearing, the company has developed patented digital signal processing, or DSP, technologies and embedded them in the smallest single-chip DSP platform ever installed in a hearing aid. The company believes its hearing aids set the standard for consumer satisfaction because they are smaller, more comfortable and more reliable and deliver more natural sound than competing hearing aids.

This press release contains "forward-looking statements" as defined under securities laws, including statements concerning our expectations for a broader product offering, expanded direct distribution capability, a reorganized sales and marketing function and new product introductions leading to business improvement in 2003. Actual results may differ materially and adversely from those described in this press release depending on a number of factors, including general economic conditions; hearing aid market conditions; problems with product manufacturing, distribution or market acceptance of our products, particularly our newer products; the competitive performance of our products; difficulties in relationships with our customers; delays in completing or introducing new products; regulatory requirements; difficulties in managing international operations; difficulties in integrating and managing acquired operations that could result in poor performance and writedowns of acquired intangible assets; the effect of future acquisitions, if any; component availability and pricing; the effect of international conflicts and threats; and other business factors beyond our control. For additional information regarding the risks inherent in our business, please see "Factors That May Affect Future Performance" included in Item 1 of our Report on Form 10-K for the year ended December 31, 2001 and Item 3 of our Report on Form 10- Q for the quarter ended September 30, 2002, as filed with the Securities and Exchange Commission. 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 Monday, January 27, 2003 at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time).

To participate in the conference call, please call toll free 877-679-9045, or 952-556-2802 outside the U.S., and ask to be connected to the Sonic Innovations teleconference. A live webcast will also be available through our web-site at www.sonici.com . You may also visit our web-site for an archive of prior press releases and earnings announcements.

If you wish to hear a digital playback of the call, please call 800-615-3210 within the U.S. and 703-326-3020 outside the U.S. and enter confirmation code 6349459 (available through January 30, 2003), or access the playback through our website.

Sonic Innovations will also be presenting at the U.S. Bancorp Piper Jaffray 15th Annual Health Care Conference being held at the Pierre Hotel in New York January 29, 2003 at 9:30 am. To hear a live broadcast of the presentation you may log on to www.gotoanalysts.com/hccwebcast . An archive of this broadcast will also be available one hour after the presentation and will run for 30 days.

Sonic Innovations, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three months ended Twelve months ended
December 31, December 31,
2002 2001 2002 2001

Net sales $17,246 $15,161 $68,018 $57,267
Cost of sales 8,103 7,984 32,597 31,249
Gross profit 9,143 7,177 35,421 26,018
Selling, general and
administrative expense 7,663 6,340 28,148 23,962
Research and development expense 1,921 2,155 8,300 9,057
Stock-based compensation 66 114 351 727
Operating loss (507) (1,432) (1,378) (7,728)
Other income, net 464 435 1,476 2,093
Income (loss) before taxes (43) (997) 98 (5,635)
Income tax provision 66 -- 66 --
Net income (loss) $(109) $(997) $32 $(5,635)

Earnings (loss) per common share:
Basic $(.01) $(.05) $.00 $(.28)
Diluted $(.01) $(.05) $.00 $(.28)

Weighted average number of
common shares outstanding:
Basic 19,775 19,595 19,595 19,822
Diluted 19,775 19,595 20,869 19,822

Sonic Innovations, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

December 31, December 31,
2002 2001
Current assets:
Cash and marketable securities $29,945 $35,484
Accounts receivable 8,208 7,044
Inventories 6,485 6,075
Prepaid expenses and other 1,809 938

Total current assets 46,447 49,541

Long-term marketable securities 5,616 10,322
Property and equipment 5,862 4,920
Intangible assets 13,811 5,445
Other assets 3,010 628

Total assets $74,746 $70,856

Current liabilities:
Accounts payable and accrued expenses $14,799 $13,241
Current portion of long-term liabilities 102 349

Total current liabilities 14,901 13,590

Long-term liabilities -- 102

Shareholders' equity:
Common stock 21 20
Additional paid-in capital 113,434 112,288
Deferred stock-based compensation (156) (507)
Accumulated deficit (51,584) (51,616)
Accumulated other comprehensive
income (loss) 1,533 (276)
Treasury stock, at cost (3,403) (2,745)

Total shareholders' equity 59,845 57,164

Total liabilities and shareholders' equity $74,746 $70,856

Source: Sonic Innovations, Inc.