BOTHELL, Wash., Nov. 9, 2010 /PRNewswire-FirstCall/ -- 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 third quarter of 2010.
The Company's third quarter revenue of $34.5 million consisted of $11.8 million in cardiac monitoring products revenue, $18.1 million in defibrillation products revenue and $4.5 million in service revenue.
Defibrillation products revenue was down 16% compared to the prior year third quarter, due principally to the absence of any Japanese AED revenue in the current quarter as a result of the previously announced termination of our Japanese distribution arrangement, compared to approximately $2.9 million in the third quarter of last year. As previously announced, the Company has signed an agreement with a new Japanese distributor, but does not expect meaningful AED sales in Japan until the second half of 2011.
Third quarter 2010 cardiac monitoring products revenue was down 9% compared to the prior year third quarter, due primarily to market softness and a temporary delay in availability of newly released products near quarter end. The Company was not able to ship approximately $1.0 million in recently introduced cardiac monitoring products that were ordered for delivery during the quarter due to initial delays in availability of components in quantities sufficient to meet demand. The Company expects to ship the backordered products during the fourth quarter.
Service revenue for the third quarter of 2010 was up 6% compared to the same quarter last year.
Gross margin was 46.7% for the third quarter of 2010. Gross margin for the third quarter of the prior year was 0.2%, including the effect of a charge of $18.5 million for estimated costs relating to a corrective AED field action. Excluding this charge, Pro Forma Gross Margin in the third quarter of 2009 would have been 47.8%. The slight decline in gross margin in the third quarter of 2010 compared to pro forma gross margin in the third quarter of 2009 was primarily the result of a lower proportion of defibrillation products revenue in the current year, as AEDs generally yield higher gross margins than cardiac monitoring products and services.
Operating expenses for the quarter were $22.5 million, compared to $22.8 million for the third quarter of 2009. Operating expenses in the current quarter included approximately $0.8 million in costs relating to the Company's efforts to sell all or a portion of the Company, including costs relating to the recently announced agreement with Opto Circuits (India) Ltd.
The Company reported a net loss of $6.4 million, or $0.27 loss per share, in the third quarter of 2010. This compares to a net loss of $66.5 million, or $2.85 per share, in the third quarter of 2009. Our net loss for the third quarter of 2009 included an initial charge of $18.5 million related to our AED corrective and a charge of $44.0 million to increase the valuation allowance against the Company's deferred income tax assets. EBITDA for the third quarter of 2010 was negative $4.7 million and Adjusted EBITDA, which excludes stock-based compensation expense, was negative $4.1 million.
The Company reported net cash used in operations of $4.0 million for the third quarter of 2010, including $2.7 million used in activities relating to the Company's ongoing AED corrective actions. The Company had $6.7 million in cash and cash equivalents as of September 30, 2010.
Pending Acquisition by Opto Circuits (India) LtdOn October 19, 2010 the Company announced that it had entered into an Agreement and Plan of Merger with Opto Circuits (India) Ltd. ("Opto Circuits"), pursuant to which Opto Circuits has agreed to acquire all of the outstanding shares of Cardiac Science common stock for $2.30 per share. The transaction, which has been unanimously approved by the boards of directors of both companies, will take the form of an all-cash tender offer by a wholly-owned subsidiary of Opto Circuits, followed by a second-step merger of that subsidiary with Cardiac Science, as a result of which any shares that have not been validly tendered into the offer will be converted into the right to receive cash equal to the offer price of $2.30 per share. The tender offer by Opto Circuits, which was commenced on November 1, 2010, is subject to customary conditions, including that shares representing at least sixty percent (60%) of Cardiac Science's outstanding shares of common stock are validly tendered into the offer. The companies are targeting a fourth quarter 2010 closing, assuming satisfaction of closing conditions and successful execution of the tender offer process. Upon completion of the merger, Cardiac Science will become a wholly-owned subsidiary of Opto Circuits.
Non-GAAP and Pro Forma Financial InformationThis news release contains a discussion of EBITDA, Adjusted EBITDA and Pro Forma Gross Margin which are non-GAAP financial measures provided as a complement to results provided in accordance with U.S. generally accepted accounting principles ("GAAP"). We define the term "EBITDA" as earnings before net interest, income taxes, depreciation, and amortization. We define "Adjusted EBITDA" as EBITDA before stock-based compensation and, in the case of the third quarter of 2009, before corrective action costs associated with a corrective AED field action. "Pro Forma Gross Margin" for the third quarter of 2009 refers to Gross Profit before costs associated with corrective actions as a percentage of Total Revenues. These measures are not substitutes 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. Pro Forma Gross Margin for the third quarter of 2009 is being presented because of the impact of the extraordinary charges related to the corrective actions on the Company's Gross Margin for the three month period ended September 30, 2009. Presentation of Gross Margin excluding this charge allows for a comparison of the Company's performance on a basis that management believes is more consistent from period to period. Reconciliations of EBITDA and Adjusted EBITDA to Net Loss and Pro Forma Gross Margin to Gross Margin, the most comparable GAAP measures, are contained in this press release.
About Cardiac ScienceCardiac 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, PC-based diagnostic workstations, 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 almost 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 StatementsThis press release contains forward-looking statements. The words "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 Corporation's future AED sales in Japan, expected shipments of backordered products in the fourth quarter of 2010, and expectations regarding the closing of the transaction with Opto Circuits. 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. Factors that could cause or contribute to such varying results and other risks include 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
Cardiac Science Corporation
Senior Vice President and CFO
Allen & Caron
EVC Group Inc.
– Tables to Follow –Cardiac Science Corporation and SubsidiariesCondensed Consolidated Statements of Operations (unaudited)(in thousands, except share and per share amounts) Three Months Ended September 30,20102009$%$%Revenues:Cardiac monitoring products
55.7%Total product revenues29,98587.0%34,64689.1%Service
10.9%Total revenues34,480100.0%38,884100.0%Cost of revenues:Products
49.6%Corrective action costs
73.0%Total cost of revenues18,39353.3%38,78999.8%Gross profit:Products
27.0%Gross profit16,08746.7%950.2%Operating expenses:Research and development
11.0%Sales and marketing
30.7%General and administrative
16.9%Total operating expenses22,53965.4%22,76458.5%Operating loss(6,452)-18.7%(22,669)-58.3%Other income:Interest income
0.1%Other income, net
0.4%Total other income 2360.7%1810.5%Loss before income tax expense:(6,216)-18.0%(22,488)-57.8%Income tax expense
-113.0%Net loss(6,333)-18.4%(66,411)-170.8%Less: Net income attributable to noncontrolling interests
-0.3%Net loss attributable to Cardiac Science Corporation$
(66,546)-171.1%Net loss per share attributable to Cardiac Science Corporation:Basic
(2.85)Weighted average shares outstanding:Basic
23,831,80723,368,778Cardiac Science Corporation and SubsidiariesCondensed Consolidated Statements of Operations (unaudited)(in thousands, except share and per share amounts) Nine Months Ended September 30,20102009$%$%Revenues:Cardiac monitoring products
53.6%Total product revenues90,42487.2%101,56488.6%Service
11.4%Total revenues103,690100.0%114,662100.0%Cost of revenues:Products
48.5%Corrective action costs
71.6%Total cost of revenues66,81864.4%77,13767.3%Gross profit:Products
28.4%Gross profit36,87235.6%37,52532.7%Operating expenses:Research and development
9.9%Sales and marketing
30.0%General and administrative
16.2%Total operating expenses70,18167.7%64,28656.1%Operating loss(33,309)-32.1%(26,761)-23.3%Other income:Interest income
0.0%Other income, net
0.5%Total other income3480.3%6100.5%Loss before income tax expense:(32,961)-31.8%(26,151)-22.8%Income tax expense
-37.1%Net loss(33,269)-32.1%(68,714)-59.9%Less: Net income attributable to noncontrolling interests
-0.4%Net loss attributable to Cardiac Science Corporation$
(69,190)-60.3%Net loss per share attributable to Cardiac Science Corporation:Basic
(2.98)Weighted average shares outstanding:Basic
23,717,28723,209,181Cardiac Science Corporation and SubsidiariesCondensed Consolidated Balance Sheets (unaudited)(in thousands)September 30, 2010December 31, 2009ASSETSCurrent assets:Cash and cash equivalents
26,866Accounts receivable, net
23,90223,581Prepaid expenses and other current assets
2,7753,702Total current assets54,14878,377Other assets
687872Machinery and equipment, net of accumulated depreciation
8,0198,406Deferred income taxes
3131Intangible assets, net of accumulated amortization
25,18327,988Investments in unconsolidated entities
,060LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
7,7447,919Corrective action liabilities
18,75715,249Total current liabilities54,32550,442Deferred income taxes
5,3895,389Total liabilities59,71455,831Equity:Cardiac Science Corporation shareholders' equity
1,4511,293Total equity28,66260,229Total liabilities and equity$
,060Cardiac Science Corporation and SubsidiariesCondensed Consolidated Statements of Cash Flows (unaudited)(in thousands)Three Months EndedSeptember 30,20102009Operating Activities:Net loss
$ (66,411)Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation
674Depreciation and amortization
1,595Amortization of debt issuance costs
-Deferred income taxes
43,996Changes in operating assets and liabilities, net of businesses acquired:Accounts receivable, net
9Prepaid expenses and other assets
56Corrective action liabilities
539Net cash used in operating activities
(5,085)Investing Activities:Purchases of machinery and equipment
(1,034)Proceeds from repayment of note
27Purchase of intangible assets
(370)Net cash used in investing activities
(1,377)Financing Activities:Proceeds from exercise of stock options and issuance of shares under employee stock purchase plan
161Minimum tax withholding on restricted stock awards
(13)Debt issuance costs
-Net cash provided by (used in) financing activities
148Effect of exchange rate changes on cash and cash equivalents
74Net change in cash and cash equivalents
(6,240)Cash and cash equivalents, beginning of period
37,868Cash and cash equivalents, end of period
$ 31,628Cardiac Science Corporation and SubsidiariesCondensed Consolidated Statements of Cash Flows (unaudited)(in thousands)Nine Months EndedSeptember 30,20102009Operating Activities:Net loss
$ (68,714)Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation
1,887Depreciation and amortization
4,662Amortization of debt issuance costs
-Deferred income taxes
42,231Changes in operating assets and liabilities, net of businesses acquired:Accounts receivable, net
(1,321)Prepaid expenses and other assets
65Corrective action liabilities
(131)Net cash used in operating activities
(859)Investing Activities:Purchases of machinery and equipment
(2,688)Proceeds from repayment of note
110Purchase of intangible assets
(370)Cash paid for acquisitions
(54)Net cash used in investing activities
(3,002)Financing Activities:Proceeds from exercise of stock options and issuance of shares under employee stock purchase plan
897Minimum tax withholding on restricted stock awards
(110)Debt issuance costs
-Net cash provided by (used in) financing activities
787Effect of exchange rate changes on cash and cash equivalents
47Net change in cash and cash equivalents
(3,027)Cash and cash equivalents, beginning of period
34,655Cash and cash equivalents, end of period
$ 31,628Cardiac Science Corporation and SubsidiariesReconciliation of GAAP Results to Non-GAAP Results (unaudited)(in thousands)Reconciliation of Net Loss Attributable to Cardiac Science Corporation to Adjusted EBITDAThree Months EndedThree Months EndedSeptember 30, 2010September 30, 2009% of revenue% of revenueNet loss attributable to Cardiac Science Corporation
-171.1%Depreciation and amortization
-0.1%Income tax expense
1.7%Corrective action costs
-4.8%Reconciliation of Gross Margin to Pro Forma Gross MarginThree Months EndedSeptember 30, 2009% of revenueGross profit
0.2%Corrective action costs
47.6%Pro forma gross profit
|SOURCE Cardiac Science Corporation|
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