Fourth quarter 2008 worldwide revenue grew to $70.2 million, an increase of 8% over the fourth quarter of 2007. Changes in foreign currency rates decreased worldwide revenue in the fourth quarter by 4.2% and had a favorable impact of 0.6% on the year.
The company reported a net income increase of 184% for the fourth quarter of 2008 to $12.1 million or $0.69 per diluted share, compared to $4.3 million or $0.25 per diluted share in 2007.
Net income in the fourth quarter and full year 2008 included a non-recurring, pre-tax charge of $3.0 million from terminated acquisition talks and severance payments, as well as a $15.7 million pre-tax gain from the repurchase of $80.3 million of senior convertible notes.
During the fourth quarter of 2008, US revenue grew 3% to $33.7 million and was impacted by a slowdown in capital spending at US hospitals. International business grew 14% to $36.5 million in the fourth quarter and continued to deliver broad-based double digit growth, but was negatively impacted by 8.5% from foreign exchange rate changes. For the full year, US revenue grew approximately 12% to $116.7 million and international revenue grew 26% to $126.8 million.
Total operating expenses in the fourth quarter increased 8% to $42.7 million, and increased 7% for the full year to $147.4 million. Including the previously mentioned $3.0 million non- recurring charge, SG&A expenses grew 4% in the fourth quarter and 6% for the full year. R&D expenses increased 30% in the fourth quarter and 11% for the full year. Stock-based compensation increased by $1.9 million in the fourth quarter, primarily as the result of a change in the future forfeiture rate assumptions.
As of December 31, 2008, the company held $279.7 million in cash and investments and long-term debt of $144.7 million, for net liquidity of $135.0 million.
“2008 marked a year of excellent progress for the company. We exceeded our original full year guided targets of 15% revenue growth with 7-8% operating margins,” said Kevin M. Goodwin, SonoSite president and chief executive officer. “The drivers of our performance included the new M-Turbo® and S Series™ product lines alongside excellent execution throughout the company. We delivered a 5-fold increase in operating income with more than a quadrupling of operating margins. We began to demonstrate operating leverage from our business model that we have always believed possible. Further, our net liquidity improved by $50 million during the year.”
“Our international business delivered another strong quarter and year with double digit gains across all major geographic regions,” Mr. Goodwin said. “Our US business performed well throughout the year, although it was significantly hampered by customers deferring orders which had an estimated negative impact of 10% on worldwide revenue for the quarter. During the year, we delivered several new products and upgrades to our S Series and M-Turbo product lines which extended their footprint into new clinical markets. In 2009, we plan to continue entering new clinical markets while delivering more new products that will continue our tradition of innovation that helps make healthcare faster and less expensive while improving patient safety.”
Company Updates Outlook for 2009
“We expect that the worldwide economy will continue to be challenging and difficult to predict and now do not expect there to be any meaningful recovery until 2010,” Mr. Goodwin said. “Our primary financial objective in 2009 is to maintain and build upon our long-term earnings power and growth capacity. Our goal is to increase operating income at least 10% in 2009. To position ourselves for improved profitability in this difficult economic environment we are targeting a 5% reduction in our operating expenses from 2008 levels to approximately $140 million. Assuming current exchange rates, foreign currency will have a negative impact of 3-4% on revenue growth. Given the continued deterioration of the global economic markets and the slowdown in US hospital capital spending, we are not providing revenue or other financial guidance at this time.”
“While the current economic environment is uncertain, we are in the strongest position in our history as a company in terms of market share, innovation and growth opportunities,” Mr. Goodwin said. “Our products are becoming essential tools for patient safety and clinical productivity. We expect to continue building our financial strength, growth and earnings power going forward.”
