Portland, OR - Sonus Corp. (AMEX: SSN), the largest audiology-based retailer of hearing instruments in North America with 1,248 Company-owned and affiliated hearing centers, today announced financial results for its fiscal year ended July 31, 2001 (see attached tables).
Prior to discussing the results for fiscal 2001, Dan Kohl, Chief Executive Officer of Sonus Corp., highlighted the progress that the Company has made on several fronts during the last fiscal year and commented on the development of Sonus' internal efforts to position the Company for growth in fiscal 2002.
He stated, "Since joining Sonus in late May 2001, I strengthened our senior management team with the appointment of a new Chief Financial Officer, Chief Information Officer and Vice President of Marketing. These talented executives bring a wealth of experience and expertise to Sonus and together we have created, and are acting on, a clear set of priorities for fiscal 2002. Our primary objectives are to develop a cost-effective IT infrastructure that more fully reflects our national presence, improve our collections processes and procedures, strengthen our financial foundation and grow our triad business model (Company-owned clinics, Sonus Network and Hear PO) through the delivery of high-quality products and services. Additionally, we will continue to assist our partners in the growth of their businesses by delivering quality marketing programs and utilization strategies.
"The Sonus brand name has already become synonymous with hearing health care within our industry. Reflective of this stature, membership in the Sonus Network increased 104% during fiscal 2001 to 511 members in 50 states compared to 250 members in 43 states last year. Membership in Hear PO, the largest provider of hearing benefits in the United States with over 100 million covered lives, increased by 65 million lives since July 31, 2000. We secured $20 million in acquisition financing from an affiliate of GN ReSound and extended our existing supply relationship with the company. We also took a hard look at our collection history, processes and procedures and adjusted our allowance for payments from third-party payors such as insurance carriers, heath maintenance organizations, and government agencies accordingly. At the same time, we adopted new revenue recognition policies in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101."
Mr. Kohl continued, "We are not where we need to be and we know that we still have quite a bit of work to do to take advantage of our potential."
Revenues for the three months ended July 31, 2001 rose 14% to $13.0 million compared to $11.4 million in the same period last year. For the year ended July 31, 2001, revenues increased 11% to $48.9 million from $44.0 million for the fiscal year ended July 31, 2000. The increase in revenues for fiscal 2001 is directly attributable to the continued growth of The Sonus Network. During the fourth quarter of fiscal 2001, Sonus adopted Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101"), effective retroactive to August 1, 2000, which provides clearer guidance related to revenue recognition policies. As a result, Sonus has changed its revenue recognition practices to defer revenue related to the provision of future services associated with product sales to the year that services are rendered. This change resulted in the deferral of $1,319,000 in product revenue from fiscal 2001 to future years and the recognition of $1,313,000 in service revenue in fiscal 2001 that was previously recognized in fiscal 2000, 1999 and 1998. The adoption of SAB 101 also resulted in the Company recognizing the cumulative effect of a change in accounting principle for the year ended July 31, 2001 in the amount of $2,114,000, which adversely affected results.
The Company also recorded non-cash deemed dividends to the holder of its Series B Convertible Preferred Shares of $7.4 million to account for a change in the conversion rate of these preferred shares and the effect of a change in the exercise price of outstanding warrants to purchase common stock that took place in October 1999. This action contributed to Sonus reporting a net loss attributable to common shareholders of $14.7 million, or $2.41 per fully diluted outstanding common share. Management expects to record non-cash deemed dividends to the holder of its Series B Convertible Preferred Shares in future quarters.
Prior to the deemed dividends, the net loss for the fiscal 2001 fourth quarter was $3.2 million, or $0.52 per fully diluted outstanding common share, versus a net loss of $2.1 million, or $0.34 per fully diluted outstanding share, for the fourth quarter of fiscal 2000. During the fourth quarter, the Company also recorded $3.3 million in charges, of which $2.0 million resulted from adjustments in amounts due to or from suppliers and $1.0 million from revisions to the Company's estimated contractual allowances. For the fiscal 2001 year, the loss prior to the deemed dividend and the cumulative effect of the change in accounting principle was $5.2 million or $0.86 per fully diluted outstanding share, as compared to a loss of $3.1 million, or $0.51 per fully diluted outstanding share, last year.
Mark Richards, Chief Financial Officer, stated, "Implementation of SAB 101 adversely affected our bottom line, and masked many important developments. Sonus continues to place an emphasis on outstanding receivables, having improved cash collections 45% during the most recent six months as compared to the immediately preceding six months. Selling, general and administrative expenses did increase during fiscal 2001 as a result of costs related to building the Company's infrastructure, increased advertising for the Sonus Network, increased professional consulting and accounting fees, and costs for electronic connectivity between the Company's hearing care centers and the corporate headquarters. We are confident that our efforts will have a positive impact on the Company's financial results in fiscal 2002."
The following chart summarizes the Company's recent quarterly operating results, which have been restated from the results previously reported to reflect certain adjustments made during the fourth quarter of fiscal 2001 that were material to the results of each quarter:
Sonus Corp. is the largest audiology-based retailer of hearing instruments in North America. Sonus' 1,248 company-owned and affiliated hearing centers provide a full range of products and services to hearing impaired patients. The Company's vision is to become the premier network of hearing centers in North America. To learn more about the Company, visit the Sonus website at www.sonus.com.
This news release contains forward looking statements which may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Sonus Corp. to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors with respect to Sonus Corp. include economic trends in Sonus Corp.'s market areas, the ability of Sonus Corp. to manage its growth and integrate new acquisitions into its network of hearing care clinics, the development of new or improved medical or surgical treatments for hearing loss or of technological advancements in hearing instruments, changes in the application or interpretation of applicable governmental laws and regulations, the ability of Sonus Corp. to complete additional acquisitions of hearing care clinics on terms favorable to Sonus Corp., the degree of consolidation in the hearing care industry, Sonus Corp.'s success in attracting and retaining qualified audiologists and staff to operate its hearing clinics, the ability of Sonus Corp. to attract audiology centers as members of The Sonus Network, product and professional liability claims brought against Sonus Corp. that exceed its insurance coverage, Sonus Corp.'s ability to collect accounts receivable in a timely manner, and the availability of and costs associated with potential sources of financing. Sonus Corp. disclaims any obligation to update any such factors or to publicly announce the results of any revision to the forward looking statements contained herein to reflect future events or developments.
Sonus Corp Announces Fiscal 2001 Final Results
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