2007-03-14 15:26:52 -

TROY, Mich., March 14 /PRNewswire-FirstCall/ -- Somanetics Corporation reported net revenues of $8.0 million for the first quarter ended February 28, 2007, a 39 percent increase from $5.8 million in the same period of 2006.

U.S. net revenues increased 37 percent to $6.6 million from $4.8 million in the same period last year. International net revenues increased 51 percent to $1.4 million from $918,084.

First quarter income before income taxes was $2.6 million, a 70 percent increase from $1.5 million in the first quarter of 2006. While Somanetics

did not pay income taxes in the first quarter, taxes were recorded at an estimated effective tax rate of 34 percent. Net income increased 70 percent to $1.7 million, or $0.12 per diluted share from $988,287, or $0.08 per diluted share in the first quarter of 2006.

Gross margin was 88 percent in the first quarter, the same as in the first quarter of 2006. As of February 28, 2007, Somanetics' cash, cash equivalents, marketable securities and long-term investments balance was $72.4 million, with no borrowings.

"We are very pleased with our top-line results, and strong bottom line growth which includes the first quarter increase in operating expenses related to our sales force expansion," said Bruce J. Barrett, Somanetics' president and chief executive officer. "The highlight of the quarter was the publishing, in the January 2007 issue of Anesthesia and Analgesia of a randomized, prospective study by John Murkin, MD, FRCPC, professor of anesthesiology at the University of Western Ontario, Canada, that showed that using information from the INVOS System resulted in a 73 percent reduction in major organ morbidity and mortality and significantly shortened ICU stays in the intervention group," he said.

Sales and Marketing Activities

During the first quarter, Somanetics participated in the Society for Thoracic Surgery annual meeting, where a number of presentations about cerebral oximetry were made. One presentation was an abstract called "Prolonged Intraoperative Forebrain Desaturation Predicts Cognitive Decline After Cardiac Surgery," by James Slater, MD, cardiothoracic surgeon at Atlantic Health System in Morristown, NJ.

The study of 240 coronary artery bypass graft (CABG) patients determined a risk score for determining patients who may be at risk for post-operative cognitive decline and showed that intraoperative management of cerebral regional oxygen saturation may result in decreased cognitive decline after CABG surgery.

In late February, nine clinician presentations and/or NIRS (near-infrared spectroscopy) workshops were presented at Cardiology 2007: 10th Annual Update on Pediatric Cardiovascular Disease in Lake Buena Vista, Fla. During the conference, Jonathan Kaufman, MD and cardiologist at Denver Children's Hospital made a presentation showing that monitoring the abdominal site with the INVOS Cerebral/Somatic Oximeter, is helpful in monitoring for early gut ischemia and can help determine when pediatric congenital cardiac patients are ready to feed, which avoids feeding intolerance. For this study, Dr. Kaufman was presented the "Outstanding Investigator Award for Cardiology 2007" by the conference faculty.

In addition, last week three presentations were made on the use of the INVOS System in pediatric patients at the inaugural conference of the Congenital Cardiac Anesthesia Society, a subgroup of the Society for Pediatric Anesthesia.

In February and March the Discovery Health Channel broadcast a special report on congenital heart surgery that featured two INVOS System users. The INVOS System's SomaSensors were repeatedly shown on patients illustrating how the INVOS System's use has become a standard part of these hospitals' care protocols. The program will air again in April.

Business Outlook

Based on current business trends, Somanetics expects to achieve previously announced guidance for fiscal year 2007. Somanetics undertakes no obligation to update its estimates. Somanetics is currently forecasting:

* Fiscal 2007 net revenues to be approximately $40 million. * Fiscal 2007 income before income taxes in the range of $12.5 to $13.4 million. * Fiscal 2007 gross margin percentage in the range of 87 to 88 percent and operating margin percentage between 22 and 24 percent. Somanetics to Host Conference Call

Somanetics will web cast its 2007 first quarter conference call at 10:00 a.m. (ET) today. To join the web cast, visit the Investor Center page of Somanetics' website at http://www.somanetics.com/ and click on the "2007 First Quarter Conference Call" link. The call also will be archived on the website.

About Somanetics

Somanetics Corporation develops, manufactures and markets medical devices that can help medical professionals potentially improve surgical outcomes and patient recovery in critical care settings. Somanetics currently has two product lines. The INVOS(R) System provides noninvasive regional blood oxygenation change data that helps address clinical challenges faced by surgeons, anesthesiologists, perfusionists and critical care nurses. The CorRestore System is used in cardiac repair and reconstruction, including an operation called Surgical Ventricular Restoration (SVR) for the treatment of certain patients with severe congestive heart failure. Somanetics supports its customers through a direct U.S. sales force and clinical education team. Globally, Tyco Healthcare markets INVOS System products in Europe, Canada, the Middle East and Africa and Edwards Lifesciences represents INVOS System products in Japan. For more information visit http://www.somanetics.com/.

Safe-Harbor Statement

Except for historical information contained herein, the matters discussed in this news release, including financial guidance for fiscal year 2007, are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Actual results may differ significantly from results discussed in the forward-looking statements and may be affected by, among other things, economic conditions in general and in the healthcare market, the demand for and market acceptance of our products in existing market segments and in new market segments we plan to pursue, our current dependence on the Cerebral Oximeter and SomaSensor, our dependence on distributors and independent sales representative firms for a substantial portion of our sales, our dependence on single-source suppliers, potential competition, the effective management of our growth, our ability to attract and retain key personnel, the potential for products liability claims, government regulation of our business, changes in our deferred tax assets, future equity compensation expenses, the challenges associated with developing new products and obtaining and maintaining regulatory approvals if necessary, research and development activities, the lengthy sales cycle for our products, sales employee turnover, changes in our actual or estimated future taxable income, changes in accounting rules, enforceability and the costs of enforcement of our patents, potential infringements of others' patents and the other factors set forth from time to time in Somanetics' Securities and Exchange Commission filings, including Somanetics' 2006 Annual Report on Form 10-K filed on February 8, 2007.

SOMANETICS CORPORATION BALANCE SHEETS February 28, November 30, 2007 2006 ASSETS (Unaudited) (Audited) CURRENT ASSETS: Cash and cash equivalents $29,517,749 $28,734,869 Marketable securities 29,943,348 20,918,134 Accounts receivable 5,567,039 4,740,043 Inventory 2,608,378 2,172,458 Prepaid expenses 374,916 494,822 Accrued interest receivable 345,986 351,666 Deferred tax asset - current 3,143,495 2,761,217 Total current assets 71,500,911 60,173,209 PROPERTY AND EQUIPMENT (at cost): Demonstration and no capital cost sales equipment at customers 2,830,665 2,650,939 Machinery and equipment 1,294,853 1,263,015 Furniture and fixtures 300,639 300,037 Leasehold improvements 197,575 195,565 Total 4,623,732 4,409,556 Less accumulated depreciation and amortization (2,455,271) (2,285,279) Net property and equipment 2,168,461 2,124,277 OTHER ASSETS: Long-term investments 12,964,923 21,917,764 Deferred tax asset - non-current 6,955,181 8,182,783 Intangible assets, net 8,281 10,009 Other 15,000 15,000 Total other assets 19,943,385 30,125,556 TOTAL ASSETS $93,612,757 $92,423,042 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $990,439 $1,045,727 Accrued liabilities 522,642 1,159,770 Total current liabilities 1,513,081 2,205,497 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred shares; authorized, 1,000,000 shares of $.01 par value; no shares issued or outstanding - - Common shares; authorized, 20,000,000 shares of $.01 par value; issued and outstanding, 13,165,127 shares at February 28, 2007, and 13,163,627 shares at November 30, 2006 131,651 131,636 Additional paid-in capital 117,015,576 116,817,012 Accumulated deficit (25,047,551) (26,731,103) Total shareholders' equity 92,099,676 90,217,545 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $93,612,757 $92,423,042 STATEMENTS OF OPERATIONS (Unaudited) For the Three-Month Periods Ended February 28, February 28, 2007 2006 NET REVENUES $8,024,872 $5,753,715 COST OF SALES 1,001,723 710,499 Gross Margin 7,023,149 5,043,216 OPERATING EXPENSES: Research, development and engineering 113,366 178,066 Selling, general and administrative 5,319,436 3,507,881 Total operating expenses 5,432,802 3,685,947 OPERATING INCOME 1,590,347 1,357,269 OTHER INCOME: Interest income 960,488 140,136 Total other income 960,488 140,136 INCOME BEFORE INCOME TAXES 2,550,835 1,497,405 INCOME TAX PROVISION (867,284) (509,118) NET INCOME $1,683,551 $988,287 NET INCOME PER COMMON SHARE - BASIC $.13 $.09 NET INCOME PER COMMON SHARE - DILUTED $.12 $.08 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 13,164,210 10,715,885 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 14,636,974 12,323,704

Source: Somanetics Corporation