Cardiac Science (NASDAQ:DFIB)
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Cardiac Science Announces Final 2005 First Quarter Results
Non-Cash Reduction of Goodwill Recorded in First Quarter
IRVINE, Calif., May 10 /PRNewswire-FirstCall/ -- Cardiac Science, Inc.
(NASDAQ:DFIB), a leading manufacturer of life-saving automatic public-access
defibrillators (AEDs) and provider of comprehensive AED/CPR training services,
today announced its final results for the three months ended March 31, 2005.
These results include a $47.3 million reduction of goodwill that the Company
had previously reported was under review. These results supersede the
preliminary results reported on April 27, 2005.
Goodwill is an intangible asset related to the Company's past acquisitions.
Under generally accepted accounting principles, the Company is required to test
the carrying value of its goodwill on an annual basis, or whenever events or
circumstances indicate that a decrease in the value may be warranted. As
previously disclosed, based on the recent decline in its stock price relative
to its book value per share, the Company prepared a goodwill impairment
analysis and concluded that the carrying value of its goodwill should be
reduced by $47.3 million. This reduction of goodwill is a non-cash charge
which does not impact the Company's ability to generate cash flow in the
future. The Company's debt covenants have been amended to exclude the impact of
the reduction of goodwill.
With respect to the pending merger with Quinton Cardiology Systems, Inc., this
goodwill reduction would not impact the financial statements of the merged
company. For accounting purposes, Quinton would be the acquirer and would
establish a fair value on all of Cardiac Science's assets and liabilities,
including goodwill, at the time the transaction closes.
Revenue from the sale of AEDs and related services for the 2005 first quarter
totaled $14.6 million, a 6 percent increase over the $13.8 million in the same
period last year. This increase was a result of higher levels of international
AED revenue, partially offset by lower sales to distributors in the U.S. Total
revenue for the first quarter was $15.0 million compared to $15.6 million in
the same period last year. Revenue for the first quarter of last year included
$1.4 million in sales of CPR Prompt and patient monitoring product lines, which
were divested and discontinued in the second half of 2004.
The gross profit margin for the 2005 first quarter was 58.3 percent which was
consistent with the prior year period and up sequentially from the 54.5 percent
in the fourth quarter of 2004. The increase was primarily a result of changes
in product mix reflecting lower sales of OEM products.
Including the reduction of goodwill, operating expenses for the three months
ended March 31, 2005 were $59.2 million compared to $12.3 million in the same
quarter in 2004. Excluding the reduction of goodwill, operating expenses for
the three months ended March 31, 2005 were $12.0 million, compared to $12.3
million in the same quarter in 2004, representing a decrease of $377,000 or
three percent. Included in operating expenses for the 2005 first quarter were
approximately $630,000 in expenses related to the pending merger with Quinton
Cardiology Systems, as well as approximately $887,000 in legal expenses,
primarily attributable to patent litigation against Phillips. Excluding the
reduction of goodwill, merger related costs for the 2005 first quarter and
legal expenses for both periods, operating expenses for the quarter decreased
$1.3 million or 11 percent from the same period last year, primarily as a
result of a series of expense reductions implemented throughout 2004.
Including the reduction of goodwill, the operating loss for the 2005 first
quarter was $50.5 million compared to $3.2 million for the same quarter in
2004. Excluding the $47.3 million reduction of goodwill, the operating loss for
the first quarter ended March 31, 2005 was $3.2 million, which was consistent
with the operating loss for the same period in 2004. Including the reduction
of goodwill, the net loss for the 2005 first quarter was $53.8 million or $0.63
loss per share. Excluding the reduction of goodwill, the net loss for the 2005
first quarter was $6.6 million, or $0.08 loss per share, including a previously
disclosed $1.4 million charge for cash and stock issued as consideration for
delays in filing a contractually required registration statement. The net loss
for the first quarter of 2004 was $4.8 million, or $0.06 loss per share.
The March 31, 2005 balance sheet showed cash and cash equivalents of $9.6
million.
About Cardiac Science
Cardiac Science develops, manufactures and markets a complete line of
Powerheart(R) brand, automatic public access defibrillators (AEDs), and offers
comprehensive AED/CPR training and AED program management services that
facilitate successful deployments. The company makes the Powerheart(R) CRM(R),
the only FDA-cleared therapeutic bedside patient monitor that instantly and
automatically treats hospitalized cardiac patients who suffer life-threatening
heart rhythms. Cardiac Science also manufactures its AED products on a private
label basis for other leading medical companies such as Nihon Kohden (Japan),
Quinton Cardiology Systems and GE Healthcare. For more information please
visit http://www.cardiacscience.com/ or call (949) 797-3800.
This news release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. In addition, from time to
time Cardiac Science, or its representatives, have made or may make
forward-looking statements orally or in writing. The words "estimate,"
"potential," "intended," "expect," "anticipate," "believe," and other similar
expressions or words are intended to identify forward looking statements. .
Cardiac Science has based these forward-looking statements on current
expectations, assumptions, estimates and projections. While Cardiac Science
believes these expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions and involve
known and unknown risks and uncertainties, many of which are beyond our
control. Such forward-looking statements include, but are not limited to any
potential goodwill impairment charge, to the achievement of future revenue
growth and other expected financial results. Cardiac Science cautions that
these statements are subject to substantial risks and uncertainties and are
qualified by important factors that could cause actual results to differ
materially from those reflected by the forward-looking statements and should
not be relied upon by investors when making an investment decision. . Such
risks and uncertainties include, but are not limited to, in no particular
order: slower than anticipated growth of the worldwide AED market, failure to
successfully compete against new or existing competitors, erosion in the price
of Cardiac Science's AED products, pending entry into hospital marketplace,
uncertain customer decision processes and long sales cycles, and supply
shortages. Information on these and other factors is detailed in Cardiac
Science's Form 10-K for the year ended December 31, 2004, subsequent quarterly
filings, and other documents filed by Cardiac Science with the Securities and
Exchange Commission. Given these risks and uncertainties, you are cautioned
not to place undue reliance on such forward-looking statements. Cardiac
Science does not undertake any obligation to update any such statements or to
publicly announce the results of any revisions to any such statements to
reflect future events or developments.
Contact: Matt Clawson (Investors) or Roderick de Greef
Len Hall (Media) EVP & Chief Financial Officer
Allen & Caron Inc Cardiac Science, Inc.
(949) 474-4300 (949) 797-3800
Cardiac Science, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
In thousands, except share and per share amounts
Three Months Ended
March 31,
2005 2004
Revenue $15,011 $15,604
Cost of goods sold 6,267 6,508
Gross profit 8,744 9,096
Operating expenses:
Sales and marketing 4,906 6,003
Research and development 1,457 1,669
General and administrative 5,198 4,166
Amortization of intangible assets 403 503
Goodwill impairment charge 47,269 --
Total operating expenses 59,233 12,341
Loss from operations (50,489) (3,245)
Interest and other expense, net (3,353) (1,587)
Loss before income taxes (53,842) (4,832)
Provision for income taxes -- --
Net loss $(53,842) $(4,832)
Net loss per share (basic and diluted) $(0.63) $(0.06)
Weighted average number of shares
used in the computation of net loss
per share 86,018,766 80,532,811
Cardiac Science, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
In thousands
March 31, December 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $9,624 $13,913
Accounts receivable, net 13,623 17,978
Inventory 12,180 9,680
Prepaid expenses 4,323 2,517
Total current assets 39,750 44,088
Property and equipment, net 4,816 4,932
Goodwill and other intangibles, net 101,446 150,221
Other assets 6,559 4,093
$152,571 $203,334
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,629 8,266
Accrued expenses and other
current liabilities 5,932 6,836
Deferred revenue 1,375 1,940
Total current liabilities 15,936 17,042
Senior secured promissory notes 54,113 52,623
Other long term liabilities 710 754
Total stockholders' equity 81,812 132,915
$152,571 $203,334
DATASOURCE: Cardiac Science, Inc.
CONTACT: Matt Clawson (Investors), , or Len Hall
(Media), , both of Allen & Caron Inc, +1-949-474-4300, for
Cardiac Science, Inc.; or Roderick de Greef, EVP & Chief Financial Officer of
Cardiac Science, Inc., +1-949-797-3800,
Web site: http://www.cardiacscience.com/