TROY, Mich. (Map) - TROY, Mich., March 18 /PRNewswire-FirstCall/ -- Somanetics Corporation (Nasdaq: SMTS) reported net revenues of $8.7 million for the first quarter ended February 29, 2008, an 8 percent increase from $8.0 million in the same period of 2007.

U.S. net revenues increased 12 percent to $7.4 million from $6.6 million in the same period last year. International net revenues were $1.3 million compared to $1.4 million last year.

First quarter income before income taxes was $1.8 million compared to $2.6 million for the first quarter of 2007. During the first quarter of fiscal 2008, Somanetics recognized income tax expense at an estimated effective tax rate of 42 percent on its statement of operations, as a result of certain additional state tax expenses recorded in the quarter. Somanetics expects the effective tax rate for fiscal 2008 to approximate 36 percent. Net income was $1.0 million, or $0.07 per diluted share, compared with net income of $1.7 million, or $0.12 per diluted share, in the first quarter of 2007.

Gross margin was 88 percent in the first quarter, the same as in the first quarter of 2007. As of February 29, 2008, Somanetics' cash, marketable securities and long-term investments balance was $89.0 million, with no borrowings.

"Our U.S. SomaSensor revenue increased by 28 percent, in line with our expectations," said Bruce J. Barrett, Somanetics' president and chief executive officer. "International sales also were in line with our expectations, but U.S. INVOS System monitor sales were significantly lower than expected."

Pediatric and Neonatal ICU Market Update

During the first quarter Somanetics began commercial shipments of its new sensors for cerebral and somatic monitoring. These sensors are tailored to the small size and head shapes of smaller patients in the pediatric and neonatal ICUs. "Eight hospitals are currently using the new cerebral and somatic sensors and we plan to expand usage to a total of 15 to 20 hospitals in the second quarter. We are planning to continue to broaden the launch activity, including securing additional data, as the year progresses," Barrett said.

Sales and Marketing Activities

During the first quarter, a two-day symposium focused on use of the INVOS System in adult cardiovascular surgeries was conducted in Europe for more than 200 attendees.

Also, Somanetics participated in more than ten medical conferences, including the 28th Annual San Diego Cardiothoracic Surgery Symposium and the Cardiology 2008: Annual Update on Pediatric Cardiovascular Disease. Both conferences, held in February, featured hands-on workshops on the use of cerebral oximetry. Somanetics expects to attend six meetings in the second quarter and additional meetings throughout the year.

Business Outlook

Somanetics is updating its financial guidance for fiscal 2008 based on its current expectations for U.S. monitor revenue. Somanetics is currently forecasting:

-- Net revenues in the range of $46.2 million to $50.0 million, or 20 to 30 percent growth over 2007 revenues, compared with previously announced guidance of net revenues of approximately $50 million. The new guidance reflects the first quarter U.S. INVOS System hardware results and the uncertainty inherent in forecasting U.S. INVOS System hardware revenues. It also reflects the Company's positive experience in the first quarter with the new, smaller cerebral and somatic sensors and the potential for the Company to exceed its original plan associated with the new sensors. -- Operating margin percentage in the range of 25 to 27 percent, and gross margin in the range of 87 to 88 percent, both unchanged from prior guidance. -- Income before income taxes in the range of $15.3 million to $17.5 million, compared with previous guidance of $17 million to $18 million. The new guidance reflects the change in guidance for net revenues and lower interest income associated with lower than planned interest rates.

Somanetics' forecasts are based on market conditions and current estimates, which reflect management's plan to invest in the clinical research, education and research and development projects to support the expansion of its efforts with infants in the pediatric and neonatal ICU markets. Somanetics undertakes no obligation to update its estimates.

Somanetics to Host Conference Call

Somanetics will web cast its 2008 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 www.somanetics.com and click on the "2008 First Quarter Conference Call" link. The call also will be archived on the website.

About Somanetics

Somanetics Corporation (Nasdaq: SMTS) develops, manufactures and markets the INVOS(R) Cerebral/Somatic Oximeter System, a non-invasive patient monitoring system that continuously measures changes in the blood oxygen levels in the brain and elsewhere in the body, in somatic, or skeletal muscle, tissue in patients with or at risk for restricted blood flow. Surgeons, anesthesiologists, intensive care nurses and other medical professionals can use the information provided by the INVOS System, in conjunction with other available information, to identify cerebral or somatic oxygen imbalances and take necessary corrective action, potentially improving patient outcomes and reducing the costs of care. Somanetics supports its customers through a direct U.S. sales force and clinical education team. Covidien markets INVOS System products in Europe, Canada, the Middle East and South Africa and Edwards Lifesciences represents INVOS System products in Japan. For more information visit 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 2008, 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' 2007 Annual Report on Form 10-K filed on February 6, 2008.

(Tables to follow) SOMANETICS CORPORATION BALANCE SHEETS February 29, November 30, 2008 2007 ASSETS (Unaudited) (Audited) CURRENT ASSETS: Cash and cash equivalents $55,505,693 $33,172,977 Marketable securities 7,986,779 18,978,074 Accounts receivable 5,520,645 7,486,571 Inventory 2,437,305 1,998,284 Prepaid expenses 528,046 560,885 Accrued interest receivable 358,299 551,117 Deferred tax asset - current 2,596,024 3,069,929 Total current assets 74,932,791 65,817,837 PROPERTY AND EQUIPMENT (at cost): Demonstration and no capital cost sales equipment at customers 3,477,844 3,386,287 Machinery and equipment 1,362,890 1,531,387 Furniture and fixtures 318,859 307,919 Leasehold improvements 197,450 196,700 Total 5,357,043 5,422,293 Less accumulated depreciation and amortization (2,884,564) (2,931,596) Net property and equipment 2,472,479 2,490,697 OTHER ASSETS: Long-term investments 25,479,678 33,653,099 Deferred tax asset - non-current 2,873,000 3,004,755 Intangible assets, net 1,369 3,097 Other 15,000 15,000 Total other assets 28,369,047 36,675,951 TOTAL ASSETS $105,774,317 $104,984,485 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $1,333,187 $1,118,003 Accrued liabilities 790,221 1,701,481 Total current liabilities 2,123,408 2,819,484 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, 13,503,984 shares at February 29, 2008, and 13,443,961 shares at November 30, 2007 135,040 134,440 Additional paid-in capital 119,536,262 119,079,383 Accumulated deficit (16,020,393) (17,048,822) Total shareholders' equity 103,650,909 102,165,001 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $105,774,317 $104,984,485 STATEMENTS OF OPERATIONS (Unaudited) For the Three-Month Periods Ended February 29, February 28, 2008 2007 NET REVENUES $8,693,274 $8,024,872 COST OF SALES 1,016,824 1,001,723 Gross Margin 7,676,450 7,023,149 OPERATING EXPENSES: Research, development and engineering 330,436 113,366 Selling, general and administrative 6,498,148 5,319,436 Total operating expenses 6,828,584 5,432,802 OPERATING INCOME 847,866 1,590,347 OTHER INCOME: Interest income 934,418 960,488 Total other income 934,418 960,488 INCOME BEFORE INCOME TAXES 1,782,284 2,550,835 INCOME TAX EXPENSE (753,855) (867,284) NET INCOME $1,028,429 $1,683,551 NET INCOME PER COMMON SHARE - BASIC $.08 $.13 NET INCOME PER COMMON SHARE - DILUTED $.07 $.12 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 13,450,691 13,164,210 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 14,759,732 14,636,974