ReSound Corp. Announces Fourth Quarter and 1997 AnnualResults.

REDWOOD CITY, Calif.--(BW HealthWire)--Jan. 29, 1998--ReSound Corp. (NASDAQ NMS:RSND) today announced net sales of $34.1 million for the fourth quarter ended Dec. 31, 1997, compared to $34.9 million in the same quarter in 1996.

Net sales for the year ended Dec. 31, 1997 were $130.5

million, compared to $125.6 million for the same period last year. ReSound's net sales results for both the fourth quarter and full year were adversely impacted by foreign currency exchange fluctuations. At constant exchange rates, the company's net sales increased four percent for the fourth quarter and 11 percent for the year.

Excluding the impact of previously announced special charges, ReSound had net earnings of $1.6 million or $0.08 per share, in the fourth quarter, compared to a net loss of $3.5 million, or $0.19 per share, in the same quarter of 1996. On a corresponding basis for the full year 1997, the company's net loss was $0.6 million, or $0.04 per share for the year, compared to a net loss of $1.0 million, or $0.07 per share, for 1996. Fourth quarter results include special charges of $4.4 million, which reflect the remaining balance of the $18.0 million in special charges taken in the second half of 1997 for the company's strategic restructuring program. The fourth quarter special charges pertain primarily to severance and consolidation activities, and reserves for discontinued product lines. Including special charges, ReSound reported a net loss of $2.8 million, or $0.14 per share, in the fourth quarter. The company reported a net loss of $18.4 million including special charges, or $0.96 per share for the year ended Dec. 31, 1997.

"We are continuing to integrate our acquisitions, rationalize our global facilities and create a more efficient organizational structure," said CEO and President Peter Riepenhausen. "While there is still much work to be done, we are encouraged by the progress we have made in key areas of our restructuring program such as improved efficiencies in custom manufacturing, the consolidation of certain sales and marketing activities, and the elimination of certain product lines. Benefits from these efforts and other business improvement programs initiated this year have positively impacted the company's fourth quarter operating performance."

Sales in the U.S. and Canada during the fourth quarter and for the year increased to $18.5 million and $69.0 million respectively, compared to $16.6 million and $57.1 million for the comparable 1996 periods, respectively. Sales in Europe during the fourth quarter and for the year were $14.4 million and $55.9 million respectively, compared to $16.8 million and $64.2 million for the comparable 1996 periods, respectively.

Excluding the negative impact of foreign currency exchange fluctuations, European net sales declined two percent for the fourth quarter, when compared to the equivalent period in 1996. Sales in the Asia Pacific-Latin America market during the fourth quarter and for the year were $1.1 million and $5.6 million respectively, compared to $1.5 million and $4.3 million for the comparable 1996 periods, respectively.

"We were pleased with the sales growth in the U.S. during the fourth quarter, which increased 11 percent over last year," said Riepenhausen. "This was largely the result of the continued strong customer response from our moderately-priced Encore product line -- particularly the recently-introduced IE4, increased market penetration from our ReSound Tradition Series devices, and an overall unit volume increase."

The decline in European sales for the fourth quarter and year was due partially to the impact of weaker European currencies compared to the U.S. dollar. Additionally, the European marketplace continues to become more competitive primarily resulting from increased market penetration from digital signal processing (DSP) products, pricing pressures for analog instruments, and added competition from low to mid-priced hearing device manufacturers which have negatively impacted the company's Viennatone business. The overall hearing device market in Germany declined by approximately 20 percent in the fourth quarter, due largely to the continuing impact of adverse economic conditions, reductions in governmental reimbursement programs, and adverse publicity surrounding hearing device dispensers and ear, nose and throat doctors regarding the distribution of hearing devices. ReSound's sales performance in Germany for the quarter declined eight percent, when measured at local currency rates. However, in other key European markets, including the United Kingdom, the Netherlands and Sweden, ReSound continued to experience strong sales growth.

The decline in Asia Pacific-Latin American sales performance in the fourth quarter was largely attributable to economic uncertainty in Japan, coupled with lower shipments to the company's Japanese distributor in order to improve the balance of inventory levels and in-market sales.

Gross profit was 51.8 percent of net sales in the fourth quarter of 1997, compared to 51.0 percent of net sales in the same quarter of 1996. Gross profit for 1997 was 52.1 percent of net sales compared to 54.4 percent of net sales for the prior year.

"Without the special charges, gross profit was 55.3 percent of net sale for the fourth quarter, and 54.4 percent of net sales for 1997," said Riepenhausen. "This is the fourth consecutive quarter we have had an increase in gross profit margin as a result of programs implemented to lower cost of goods sold through manufacturing process improvements and lower procurement costs of key components."

Research and Development (R&D) spending during the fourth quarter and for 1997 were $4.4 million and $16.9 million respectively, compared to $4.4 million and $14.9 million for the comparable 1996 periods, respectively. The increase in R&D spending for the full year was largely attributable to the development of new products, including the company's DSP platforms and technology to be used in conjunction with ReSound's alliance with Motorola.

"This month, we completed the successful launch of the company's first completely-in-the-canal (CIC) device in the U.S.," said Riepenhausen. "While the product has only been available on the market for a few weeks, we are encouraged by the strong, positive response from our customers.

"In addition to our CIC device, we have several exciting new product launches expected in 1998 including a new product concept that is targeted at the large and under served market of persons with mild-to-moderate hearing impairment. This product will incorporate our proprietary sound processing technology into an inconspicuous device that is easy to fit and can be attractively placed."

Selling, General and Administrative (SG&A) expenses during the fourth quarter and 1997 were $14.6 million and $54.6 million, respectively, compared to $16.0 million and $50.9 million for the comparable 1996 periods, respectively.

"Excluding the impact of the special charges, SG&A spending was $12.5 million or 36.8 percent of net sales for the fourth quarter and $52.0 million or 39.8 percent of net sales for 1997," said Riepenhausen. "Through the restructuring actions we have executed thus far, we have made good progress on eliminating duplicate infrastructures and non-value-added activities, and are well positioned to support the launch of new products successfully over this year."

ReSound is a hearing health care company that designs, develops, manufactures and markets technologically advanced hearing devices throughout the world.

This news release contains forward looking statements, based on current expectations, that involve risks and uncertainties that could cause actual results to differ materially. Many of these statements are identified by the use of words such as "expects," "anticipates," "believes," and the like. These risks and uncertainties include the completion of the restructuring activities in a timely manner, greater than anticipated restructuring costs, the ability to integrate and consolidate operations successfully, the ability to achieve the desired levels of cost and expense reductions, manufacturing efficiencies and productivity improvements, the retention of key personnel, the timely development, introduction and acceptance of new products and related technologies in existing and new markets, the impact of existing and new competitive products and pricing, the effect of foreign currency fluctuations, adverse economic conditions, governmental reimbursement policies, and the other risks detailed from time to time in the company's public disclosure filings with the U.S. Securities and Exchange Commission (SEC), including the company's Form 10-Q and Form 10-K for the most recent quarter and fiscal year. -0-

                      ReSound Corporation
              Condensed Consolidated Balance Sheets
                   (In thousands of dollars)

                                        December 31,      December 31,
                                           1997               1996
                                       (unaudited)           (Note)

ASSETS

Cash, cash equivalents and short term
 investments                              $ 19,853         $  7,980
Accounts receivable                         17,966           20,497
Inventories                                 14,183           23,853
Prepaid expenses and other                   2,125            4,218
 Total current assets                       54,127           56,548

Property and equipment, net                 10,838           13,494
Other assets                                 5,093            4,899
Goodwill                                    20,217           39,811
Total Assets                              $ 90,275         $114,752

LIABILITIES AND SHAREHOLDERS' EQUITY

Loans and current debt                    $  6,337         $  4,717
Accounts payable                             8,735            8,478
Accrued liabilities                         19,984           17,976
 Total current liabilities                  35,056           31,171

Long-term debt                              13,962           19,515
Accrued pension                              4,237            5,110
Minority interest                                -            1,360
 Total long-term liabilities                18,199           25,985

Preferred stock                                  -            5,225
Common stock                                96,323           90,680
Accumulated deficit                        (58,265)         (39,202)
Cumulative translation adjustment           (1,038)             893
 Total shareholders' equity                 37,020           57,596

Total liabilities & Shareholders Equity   $ 90,275        $ 114,752

Note:  Derived from the audited financial statements at that date.


                           ReSound Corporation
                    Consolidated Summary of Operations
                   (in thousands except per share data)

                               Three Months Ended    Twelve Months Ended
                               Dec. 31,    Dec. 31,  Dec. 31,     Dec. 31,
                                1997        1996      1997         1996(4)
                             (unaudited) (unaudited) (unaudited)

Net sales                      $34,086     $34,885    $130,463   $125,646
Cost of sales                   16,419(1)   17,102      62,486(2)  57,241

Gross profit                    17,667      17,783      67,977     68,405

Operating expenses
 Research and development        4,440(1)    4,435      16,883(2)  14,898
 Selling, general and
  administrative                14,626(1)   16,010      54,652(2)  50,899
 Restructuring & other
  charges                        1,020(1)        -      12,204(2)       -

Total operating expenses        20,086      20,445      83,739     65,797

Income (loss) from operations   (2,419)     (2,662)    (15,762)     2,608

Interest expense - net            (144)       (301)     (1,222)    (1,819)
Other expense / minority
 interest                         (208)       (169)       (578)      (359)

Income (loss) before income
 taxes                          (2,771)     (3,132)    (17,562)       430

Provision for income taxes(3)      (21)        393         876      1,397

Net loss                       $(2,750)(1) $(3,525)   $(18,438)(2)  $(967)

Net loss applicable to common
 shareholders                  $(2,763)    $(3,750)   $(18,676)   $(1,192)

Net loss per share - basic
 and diluted                   $ (0.14)    $ (0.19)   $  (0.96)   $ (0.07)

Shares used in above
 calculation                    19,980      19,415     19,518      17,591


(1)  Includes special charges of $4.4 million as follows: cost of
sales - $1.2 million; selling, general and administrative - $2.2
million; research & development - $0.1; restructuring and other -
$1 million.

(2)  Includes special charges of $18 million as follows: cost of
sales - $2.9 million, selling, general and administrative - $2.8
million; research & development - $0.1; restructuring and other -
$12.2 million (of which $10.3 million is the result of writedown of
goodwill)

(3)  Principally state and foreign income taxes

(4)  The Consolidated Summary of Operations for the year ended
December 31, 1996 has been derived from the audited financial
statements for 1996.

CONTACT: ReSound Corp.

Jane Whaley, 650/261-6932