Cardiac Science (NASDAQ:DFIB)
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Cardiac Science Announces Preliminary 2005 First Quarter Results
Final Results Pending Completion of Goodwill Impairment Analysis
IRVINE, Calif., April 27 /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 results for the three months ended March 31, 2005. 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 prior 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.
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 3 percent. Included in operating expenses for the 2005
first quarter was 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 merger related costs during the 2005 period 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.
Under generally accepted accounting principles, the Company is required to test
goodwill for impairment on an annual basis, or whenever events or circumstances
indicate that there may be an impairment. Based on the recent decline in the
Company's stock price relative to its book value per share, it has prepared a
goodwill impairment analysis, which is currently being reviewed by its
independent registered public accounting firm, PricewaterhouseCoopers LLP. The
Company believes that PricewaterhouseCoopers LLP will complete its review in
advance of the May 10, 2005 Form 10-Q filing deadline. A goodwill impairment
charge is non-cash, and is presented as a separate line item in the statement
of operations before income/(loss) from operations.
Excluding the impact of any potential goodwill impairment charge, 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. Excluding the
impact of any potential goodwill impairment charge, 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.
Cardiac Science Chairman and CEO Raymond W. Cohen said, "During the quarter we
were encouraged that our gross profit margin exceeded 58 percent which was the
high end of our guidance range. The first quarter is traditionally a slower
quarter in terms of revenue growth for Cardiac Science while potential buyers
in the U.S. markets, particularly those in the corporate workplace segment,
organize their budgets and spending priorities for the year. Accordingly,
given our weighting of sales in the U.S. workplace segment, we expect overall
AED sales and programs to grow at a faster rate for the balance of 2005."
Cohen added, "We continue to feel pressure from our larger competitors who
point to our size and financial position as a reason not to do business with
Cardiac Science. We believe that the pending merger with Quinton helps address
this competitive issue."
With respect to sales in Japan, Cohen stated, "After very strong sales growth
in 2004, we are now awaiting news from Nihon Kohden Corp, our Japanese OEM
partner, regarding the pending approval by the Japanese Ministry of Health
("MOH") for our biphasic version AED. As demand for AEDs in Japan has grown,
so has the desire to purchase a biphasic version AED. Our submission has been
pending for some time and we are hopeful that this regulatory clearance can be
received by the end of the second quarter and therefore shipments of our Nihon
Kohden-branded biphasic version AED can begin."
With respect to the new traditional in-hospital external defibrillator which
has been under development for sale by GE Healthcare, Cohen commented, "In the
quarter, we filed a 510(k) submission with the Food and Drug Administration,
which is currently pending. We anticipate that the GE product will be released
at the end of June."
Financial Outlook
Excluding the impact of, or costs associated with, the pending merger with
Quinton Cardiology Systems, and the impact of any potential goodwill impairment
charge, the Company is maintaining its previously provided guidance for the
full year of 2005, adjusted to reflect the postponement of mandatory expensing
of stock options.
The Company anticipates its core AED product line will grow between 15 percent
and 22 percent over the 2004 level of $56.7 million and as a result, expects
total revenue for 2005 to range from $75 million to $80 million. Revenue from
AED products and the AED/CPR training business is expected to account for
approximately 95 percent of total sales.
The Company estimates that its gross profit margin will range between 55
percent and 58 percent of revenue, with quarterly variability driven by sales
mix, manufacturing volumes and market conditions which could affect average
selling prices.
The Company expects its operating expenses to range between $45 million and $48
million, with additional variability possible as a result of higher than
expected legal fees associated with the Phillips litigation.
The Company anticipates that its operating results will range from an operating
profit of $1.4 million to an operating loss of $6.7 million and its net loss to
range from $7.6 million to $15.7 million, or $0.09 loss to $0.18 loss per
share.
It should be noted that this guidance assumes receipt of Japanese MOH approval
of the biphasic AED in the second quarter of 2005, as well as receipt of
regulatory clearances for the GE defibrillator in the second quarter of 2005.
Should these approvals be delayed or not materialize, the company's expected
revenue range could be reduced by $5 million to $10 million for 2005, which in
turn would materially impact the balance of the company's results from
operations.
Conference Call Information
Management will host a conference call regarding its preliminary results for
the first quarter ended March 31, 2005 which will be broadcast live on the
Internet at 12:00 noon EDT today. Management encourages shareholders and other
interested parties to listen to the live webcast by going to the Company's
website at http://www.cardiacscience.com/. Web participants should go to the
company's website at least 15 minutes prior to the start of the call to
register, download, and install any necessary audio software. The online
archive of the call will be available immediately following the conference
call.
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
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/