Quarterly losses were $1.1 million, or 5 cents per share, down from profit of $1.4 million, or 7 cents per share, a year ago.

Sales edged down 1 percent to $25.4 million from $25.7 million last year. North American sales of $9.1 million were down 11 percent year-over-year due to competitive pressures in the U.S. marketplace. European sales of $11.9 million rose 6 percent as a result of increased sales in a number of smaller European countries and the effects of foreign currency movement.

Gross margin of 52.2 percent was down from last year's fourth-quarter level of 54.4 percent, as operating expenses climbed 17 percent to $14.8 million.

For the full year, Sonic earned $411,000, or 2 cents per share, about flat with last year's $376,000, or 2 cents. Sales grew to $98.5 million from $87.7 million a year ago.

Andy Raguskus, president and CEO, stated, "Sonic Innovations' 2004 net sales were up 12 percent from 2003 levels in a market that was up only 3 percent. Despite the competitive pressures from new products, pricing concessions and aggressive dealer incentives, we grew our sales about four times faster than our market."

Sonic Innovations said the launch of the Innova product line this March is expected to fuel growth beginning in the second quarter. The December acquisition of Tympany Inc. is expected to add further growth throughout 2005 as the company's diagnostics business gains traction.

Sonic Innovations' shares fell 29 cents, or nearly 6 percent, to close earlier at $4.61 on the Nasdaq, but fell 4 cents further to $4.57 in after-hours trading.

By Associated Press