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8-K - FORM 8-K - Cardiac Science CORP | v55618e8vk.htm |
Exhibit 99.1
Cardiac Science Announces Q1 Results
Q1 Revenue of $33.1 Million in Line with Guidance
Growth in Cardiac Monitoring Revenue
Growth in Cardiac Monitoring Revenue
Bothell, WA April 28, 2010 Cardiac Science Corporation [NASDAQ: CSCX], a global leader
in automated external defibrillator (AED) and diagnostic cardiac monitoring devices, today
announced its financial results for the first quarter of 2010.
Revenue for the first quarter of 2010 was $33.1 million, down 17% from the first quarter of 2009.
The reduction in revenue was, as expected, due primarily to the adverse impact of a temporary
interruption in AED orders and shipments associated with the voluntary AED recall of approximately
12,000 units announced on February 3, 2010, along with a reduction of AED sales in Japan. Cardiac
monitoring revenue increased by approximately 5% in the first quarter.
We were pleased to achieve growth in our cardiac monitoring business, even without the benefit of
all the new products we plan to launch in the second half, said Dave Marver, president and chief
executive officer. This growth reflects the new leadership and more sophisticated sales and
marketing approaches weve brought to the business.
First Quarter Financial Results
First quarter revenue of $33.1 million consisted of $12.9 million in cardiac monitoring products
revenue, $15.9 million in defibrillation products revenue and $4.3 million in service revenue.
Defibrillation revenue was down 31% compared to the prior year first quarter, reflecting a
reduction of $3.5 million in sales of AEDs in Japan and the adverse effect of the recall on AED
sales activities. As previously mentioned, cardiac monitoring revenue was up 5%. Service revenue
was essentially flat compared to the same quarter last year.
Gross margin was 45.1%, down from 50.1% in the first quarter of 2009. The decrease in gross margin
was due to the reduced proportion of AED sales in the Companys total revenue mix and manufacturing
inefficiencies relating to the AED recall, among other factors.
Operating expenses for the quarter were $23.4 million, compared to $20.3 million for the first
quarter of 2009. Operating expenses for the first quarter of 2010 reflected increased spending in
both engineering and sales and marketing in anticipation of upcoming planned new product releases
along with increased spending in general and administrative expenses related to information
technology, regulatory affairs, and quality assurance functions.
The Company reported a net loss of $8.6 million, or $0.36 per share in the first quarter of 2010.
EBITDA was negative $6.9 million for the quarter and Adjusted EBITDA, which excludes stock-based
compensation expense, was negative $6.3
million. The Companys net loss and Adjusted EBITDA were in line with previously announced guidance
for the first quarter.
The Company reported net cash used in operations of $5.2 million for the first quarter of 2010,
including $1.7 million used in activities relating to the Companys ongoing corrective actions. The
Company had $21.0 million in cash and cash equivalents as of March 31, 2010.
Outlook
The Company expects revenue for the second quarter of 2010 to be in a range between $36 and $39
million with a net loss in a range between $6.0 and $7.0 million. Adjusted EBITDA for the second
quarter of 2010 is expected to be in a range between negative $3.5 and negative $4.5 million.
The Company continues to expect revenue for 2010 to be in a range between $150 and $170 million.
This revenue range includes expected growth in cardiac monitoring revenue in the second half of the
year, driven by several new product releases. The expected growth in cardiac monitoring revenue is
likely to be offset by a decline in AED revenue due to recent quality issues, possible further
regulatory challenges, the market re-entry of a significant competitor, and reduced sales in Japan.
With improving revenue in the second half of 2010, the Company expects operating losses to decrease
and cash flow to improve, other than the expected use of cash to satisfy corrective action
liabilities.
We continue to expect to maintain a positive cash balance through 2010, said Mike Matysik, senior
vice president and chief financial officer. In addition, we are very pleased to have put in place
a new $5.0 million working capital line of credit with our existing bank to provide for additional
liquidity, if needed, he concluded.
The Company cannot predict the impact of recent communication by the FDA nor possible future
actions or communications by the FDA on future financial results or liquidity. Such communications
or possible actions may adversely affect actual results.
Non-GAAP and Pro Forma Financial Information
This news release contains a discussion of EBITDA and Adjusted EBITDA which are non-GAAP financial
measures provided as a complement to results provided in accordance with U.S. generally accepted
accounting principles (GAAP). The term EBITDA refers to a financial measure defined as earnings
before net interest, income taxes, depreciation, and amortization. Adjusted EBITDA refers to
EBITDA before stock-based compensation. These measures are a substitute for measures determined in
accordance with GAAP, and may not be comparable to the same measures as reported by other
companies. EBITDA and Adjusted EBITDA are an integral part of the internal management reporting and
planning process and are the primary measures used by management to evaluate the operating
performance of the Company. The components of these measures include the key revenue and expense
items for which operating managers are responsible and upon which their performance is evaluated.
The Company also uses Adjusted EBITDA for planning purposes and in presentations to its board of
directors. Reconciliations of EBITDA and Adjusted EBITDA to net income, the most comparable GAAP
measure, are contained in this press release.
Conference Call Information
Cardiac Science will conduct a conference call today at 4:30 p.m. Eastern Standard Time to discuss
the Companys financial results for the first quarter. The call will be hosted by Dave Marver,
president and chief executive officer, and Mike Matysik, senior vice president and chief financial
officer.
To access the conference call, please dial 888.549.7750 and reference conference ID 4286943.
Callers outside the U.S. can dial 480.629.9866. The call will also be webcast live at
www.cardiacscience.com. An audio replay of the call will be available for 7 days following the call
at 800.406.7325 for U.S. callers or 303.590.3030 for those calling from outside the U.S. The
password required to access the replay is 4286943#. An archived webcast will also be available at
www.cardiacscience.com for 90 days.
About Cardiac Science
Cardiac Science develops, manufactures, and markets a family of advanced diagnostic and therapeutic
cardiology devices and systems, including automated external defibrillators (AED),
electrocardiograph devices (ECG/EKG), cardiac stress treadmill and systems, Holter monitoring
systems, hospital defibrillators, vital signs monitors, cardiac rehabilitation telemetry systems,
and cardiology data management systems (informatics) that connect with hospital information (HIS),
electronic medical record (EMR), and other information systems. The company sells a variety of
related products and consumables and provides a portfolio of training, maintenance, and support
services. Cardiac Science, the successor to the cardiac businesses that established the trusted
Burdick®, HeartCentrix®, Powerheart®, and Quinton®
brands, is headquartered in Bothell, Washington. With customers in more than 100 countries
worldwide, the company has operations in North America, Europe, and Asia. For information, call
425.402.2000 or visit http://www.cardiacscience.com.
Forward-Looking Statements
This press release contains forward-looking statements. The word believe, expect, intend,
anticipate, variations of such words, and similar expressions identify forward-looking
statements, but their absence does not mean that the statement is not forward-looking.
Forward-looking statements in this press release include, but are not limited to, those relating to
Cardiac Science Corporations future financial results and condition, actual costs of the voluntary
corrective actions, potential negative impact on future sales of AED products resulting from
previously announced voluntary corrective actions and anticipated new product introductions. These
are forward-looking statements for purposes of the safe harbor provisions under the Private
Securities Litigation Reform Act of 1995. Actual results and performance may vary significantly
from those expressed or implied in such statements. The Companys liquidity and operating results
for the balance of the year could be adversely affected if the Company is unable to resolve
concerns raised by the FDA in a warning letter disclosed in the Companys Form 8-K filed February
17, 2010, and in particular concerns relating to the previously announced field corrective action
initiated by the Company to address a potential component problem affecting approximately 300,000
AEDs manufactured between August 2003 and August 2009. If the Company is unable to resolve the
FDAs concerns, the FDA may take adverse regulatory steps, including seizure, injunction and/or
assessment of civil monetary penalties that could significantly disrupt the Companys ongoing
business and operations and have a material adverse impact on its liquidity. Additional factors
that could cause or contribute to such varying results and other risks include those with respect
to the quality of processes, products and services, additional corrective actions or recalls,
additional communications from regulatory agencies, challenging
economic conditions, increased competition, and potential delays in or challenges impacting
introductions of new products, as well as those more fully described in the Annual Report on Form
10-K filed by Cardiac Science Corporation for the year ended December 31, 2009, as updated by
subsequent quarterly reports on Form 10-Q. Cardiac Science Corporation undertakes no duty or
obligation to update the information provided herein.
For more information, | ||||
Company Contact: | Investor Contact: | Media Contact: | ||
Mike Matysik |
Matt Clawson | Christopher Gale | ||
Cardiac Science Corporation |
Allen & Caron | EVC Group Inc. | ||
Senior Vice President and CFO |
949.474.4300 | 646.201.5431 | ||
425.402.2009 |
matt@allencaron.com | 203.570.4681 | ||
cgale@evcgroup.com |
LOGO: http://www.cardiacscience.com/images/main_logo.gif
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Tables to Follow
Cardiac Science Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except share and per share amounts)
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except share and per share amounts)
Three Months Ended March 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
$ | % | $ | % | |||||||||||||
Revenues: |
||||||||||||||||
Cardiac monitoring products |
$ | 12,905 | 39.0 | % | $ | 12,349 | 31.1 | % | ||||||||
Defibrillation products |
15,862 | 47.9 | % | 22,916 | 57.8 | % | ||||||||||
Total product revenues |
28,767 | 86.9 | % | 35,265 | 88.9 | % | ||||||||||
Service |
4,340 | 13.1 | % | 4,399 | 11.1 | % | ||||||||||
Total revenues |
33,107 | 100.0 | % | 39,664 | 100.0 | % | ||||||||||
Cost of revenues: |
||||||||||||||||
Products |
15,028 | 52.2 | % | 16,634 | 47.2 | % | ||||||||||
Service |
3,163 | 72.9 | % | 3,151 | 71.6 | % | ||||||||||
Total cost of revenues |
18,191 | 54.9 | % | 19,785 | 49.9 | % | ||||||||||
Gross profit: |
||||||||||||||||
Products |
13,739 | 47.8 | % | 18,631 | 52.8 | % | ||||||||||
Service |
1,177 | 27.1 | % | 1,248 | 28.4 | % | ||||||||||
Gross profit |
14,916 | 45.1 | % | 19,879 | 50.1 | % | ||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
4,205 | 12.7 | % | 3,471 | 8.8 | % | ||||||||||
Sales and marketing |
12,802 | 38.7 | % | 11,198 | 28.2 | % | ||||||||||
General and administrative |
6,393 | 19.3 | % | 5,616 | 14.2 | % | ||||||||||
Total operating expenses |
23,400 | 70.7 | % | 20,285 | 51.1 | % | ||||||||||
Operating loss |
(8,484 | ) | -25.6 | % | (406 | ) | -1.0 | % | ||||||||
Other income (loss): |
||||||||||||||||
Interest income |
10 | 0.0 | % | 13 | 0.0 | % | ||||||||||
Other income (loss), net |
131 | 0.4 | % | (148 | ) | -0.4 | % | |||||||||
Total other income (loss) |
141 | 0.4 | % | (135 | ) | -0.3 | % | |||||||||
Loss before income tax benefit (expense): |
(8,343 | ) | -25.2 | % | (541 | ) | -1.4 | % | ||||||||
Income tax benefit (expense) |
(133 | ) | -0.4 | % | 166 | 0.4 | % | |||||||||
Net loss |
(8,476 | ) | -25.6 | % | (375 | ) | -0.9 | % | ||||||||
Less: Net income attributable to noncontrolling interests |
(111 | ) | -0.3 | % | (163 | ) | -0.4 | % | ||||||||
Net loss attributable to Cardiac Science Corporation |
$ | (8,587 | ) | -25.9 | % | $ | (538 | ) | -1.4 | % | ||||||
Net loss per share attributable to Cardiac Science Corporation: |
||||||||||||||||
Basic |
$ | (0.36 | ) | $ | (0.02 | ) | ||||||||||
Diluted |
$ | (0.36 | ) | $ | (0.02 | ) | ||||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
23,593,905 | 23,056,214 | ||||||||||||||
Diluted |
23,593,905 | 23,056,214 |
Cardiac Science Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)
March 31, 2010 | December 31, 2009 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 21,005 | $ | 26,866 | ||||
Accounts receivable, net |
21,384 | 24,228 | ||||||
Inventories |
25,556 | 23,581 | ||||||
Prepaid expenses and other current assets |
3,139 | 3,702 | ||||||
Total current assets |
71,084 | 78,377 | ||||||
Other assets |
852 | 872 | ||||||
Machinery and equipment, net of accumulated depreciation |
8,457 | 8,406 | ||||||
Deferred income taxes |
31 | 31 | ||||||
Intangible assets, net of accumulated amortization |
26,996 | 27,988 | ||||||
Investments in unconsolidated entities |
493 | 386 | ||||||
Total assets |
$ | 107,913 | $ | 116,060 | ||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
11,075 | 11,030 | ||||||
Accrued liabilities |
13,082 | 12,216 | ||||||
Warranty liability |
4,053 | 4,028 | ||||||
Deferred revenue |
8,448 | 7,919 | ||||||
Corrective action liabilities |
13,505 | 15,249 | ||||||
Total current liabilities |
$ | 50,163 | $ | 50,442 | ||||
Deferred income taxes |
5,389 | 5,389 | ||||||
Total liabilities |
$ | 55,552 | $ | 55,831 | ||||
Equity: |
||||||||
Cardiac Science Corporation shareholders equity |
51,025 | 58,936 | ||||||
Noncontrolling interests |
1,336 | 1,293 | ||||||
Total equity |
52,361 | 60,229 | ||||||
Total liabilities and equity |
$ | 107,913 | $ | 116,060 | ||||
Cardiac Science Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Operating Activities: |
||||||||
Net loss |
$ | (8,476 | ) | $ | (375 | ) | ||
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities: |
||||||||
Stock-based compensation |
585 | 659 | ||||||
Depreciation and amortization |
1,588 | 1,525 | ||||||
Deferred income taxes |
| (367 | ) | |||||
Changes in operating assets and liabilities, net of businesses acquired: |
||||||||
Accounts receivable, net |
2,644 | 7,987 | ||||||
Inventories |
(2,018 | ) | (1,241 | ) | ||||
Prepaid expenses and other assets |
574 | 428 | ||||||
Accounts payable |
133 | (2,339 | ) | |||||
Accrued liabilities |
969 | (1,336 | ) | |||||
Warranty liability |
57 | (102 | ) | |||||
Corrective action liabilities |
(1,744 | ) | | |||||
Deferred revenue |
529 | (1,096 | ) | |||||
Net cash provided by (used in) operating
activities |
(5,159 | ) | 3,743 | |||||
Investing Activities: |
||||||||
Purchases of machinery and equipment |
(676 | ) | (885 | ) | ||||
Proceeds from repayment of notes |
2 | 73 | ||||||
Cash paid for acquisitions |
| (54 | ) | |||||
Net cash used in investing activities |
(674 | ) | (866 | ) | ||||
Financing Activities: |
||||||||
Proceeds from exercise of stock options and issuance of
shares under employee stock purchase plan |
95 | 234 | ||||||
Minimum tax withholding on restricted stock awards |
(30 | ) | (97 | ) | ||||
Net cash provided by financing activities |
65 | 137 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(93 | ) | (106 | ) | ||||
Net change in cash and cash equivalents |
(5,861 | ) | 2,908 | |||||
Cash and cash equivalents, beginning of period |
26,866 | 34,655 | ||||||
Cash and cash equivalents, end of period |
$ | 21,005 | $ | 37,563 | ||||
Cardiac Science Corporation and Subsidiaries
Reconciliation of GAAP Results to Non-GAAP Results (unaudited)
(in thousands)
Reconciliation of GAAP Results to Non-GAAP Results (unaudited)
(in thousands)
Reconciliation of Net Loss Attributable to Cardiac Science Corporation to | ||||||||||||||||
Adjusted EBITDA | ||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
March 31, 2010 | March 31, 2009 | |||||||||||||||
% of revenue | % of revenue | |||||||||||||||
Net loss attributable to Cardiac Science Corporation |
$ | (8,587 | ) | -25.9 | % | $ | (538 | ) | -1.4 | % | ||||||
Depreciation and amortization |
1,588 | 4.8 | % | 1,525 | 3.8 | % | ||||||||||
Interest income |
(10 | ) | 0.0 | % | (13 | ) | 0.0 | % | ||||||||
Income tax (benefit) expense |
133 | 0.4 | % | (166 | ) | -0.4 | % | |||||||||
EBITDA |
(6,876 | ) | -20.8 | % | 808 | 2.0 | % | |||||||||
Stock-based compensation |
585 | 1.8 | % | 659 | 1.7 | % | ||||||||||
Adjusted EBITDA |
$ | (6,291 | ) | -19.0 | % | $ | 1,467 | 3.7 | % | |||||||
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