SonoSite, Inc. (SonoSite), a diagnostic imaging company, has reported total operating expenses of $33.5 million for the first quarter of 2009, down 5%, compared with the total operating expenses of $35.4 million in the year-ago quarter. It has also reported net income of $0.86 million, or $0.05 per diluted share, for the first quarter of 2009, compared with net income of $0.19 million, or $0.01 per diluted share, in the year-ago quarter.
First quarter 2009 worldwide revenue was $51.8 million, a decrease of 1% over the prior year’s first quarter as previously announced. Changes in foreign currency rates decreased worldwide revenue in the first quarter of 2009 by approximately 8%.
Total US revenue grew 5% in the quarter to $23.2 million driven by more than doubling of revenue in the enterprise channel. US direct hospital sales were negatively impacted by the slowdown in hospital capital spending – down 14%. International sales were down 6% to $28.6 million due to a 14% negative foreign exchange impact. On a constant currency basis, international sales were up 8%.
The company reported operating income (EBIT) of $1.6 million compared to $2.4 million, a decline of 34% compared to Q1 2008. Operating income excluding stock-based compensation expense (EBITS) was $4.1 million compared to $4.3 million in the prior year.
“We made expense reduction and efficiency progress in the quarter in the face of expected revenue softness,” said Kevin M. Goodwin, SonoSite president and chief executive officer. “We also improved our balance sheet in the quarter by repurchasing $25 million of our long-term convertible notes at a discount. Additionally, we reduced the quarter’s operating expenses by $1.9 million and have revised our expense improvement goal for up to a 10% reduction over the prior year. We expect the economic environment and visibility to remain challenging for several quarters, thus our priority is to remain focused on continuous streamlining or “leaning” of our business model while setting up a return to growth with key strategic investments.”
The company reduced SG&A expense by 12% to $25.8 million compared to the prior year quarter. R&D investment grew 24% in the first quarter to $7.7 million, as planned.
Other expense in the quarter included $2.6 million of interest expense, of which $1.2 million was from the adoption of APB 14-1, that offsets a $1.3 million gain from the repurchase of $25.0 million of senior convertible notes.
As of March 31, 2009, the company held $258 million in cash and investments and outstanding senior convertible notes of $120 million.
Company Updates Outlook for 2009
“Our view remains that the worldwide economy will continue to be challenging with difficult visibility. We see signs of opportunity and growth offset by a strong headwind from US Hospital market softness and the stronger dollar,” Goodwin said. “We assume that the US dollar will continue to strengthen and that changes in foreign currency will have a negative effect of 4 -5% on revenue. We therefore expect that the company’s 2009 revenue could potentially be flat to down 10% as compared to 2008. We are responding by increasing our expense reduction targets to a range of 5-10%, from the previous goal of 5%.”
“We intend to continue introducing innovative and cost effective new products as the year proceeds,” Goodwin said.
The company expects non-cash interest expense of $4.9 million for the year from the adoption of APB 14-1 and an annual tax rate of approximately 39%.