2008 revenue of $206.2 million up 13% over 2007
Market capitalization changes require goodwill impairment charge
BOTHELL, Wash., March 12 /PRNewswire-FirstCall/ -- Cardiac Science Corporation , a global leader in advanced cardiac diagnosis, resuscitation, rehabilitation, and informatics products, today announced its financial results for the fourth quarter and full year ended December 31, 2008.
Revenue for the fourth quarter of 2008 was $51.1 million, 1% above last year’s fourth quarter revenue of $50.4 million. Revenue for 2008 was a record $206.2 million, an increase of 13% over 2007 revenue of $182.1 million.
As a result of required annual impairment tests, the Company incurred a fourth quarter non-cash charge of $107.7 million ($107.4 million net of tax benefits) related to the impairment of previously recorded goodwill in accordance with Statement of Financial Accounting Standards No. 142 (“SFAS 142"). Similar to the experience of many companies, Cardiac Science’s market capitalization has eroded to a level significantly below book value, due in large part to the depressed macroeconomic environment and volatility in the equity markets, creating the necessity for the impairment charge.
Including the charge for the impairment of goodwill, the Company reported a loss for the fourth quarter of $105.2 million, or $4.58 per share, and a net loss for 2008 of $98.4 million, or $4.30 per share.
Excluding the goodwill impairment charge and related income taxes, pro-forma net income would have been $2.2 million, or $0.09 per fully diluted share for the fourth quarter, and a record $9.0 million, or $0.39 per fully diluted share, for full year 2008. These results compare to fourth quarter 2007 reported GAAP net income of $2.4 million, or $0.10 per diluted share, and full year 2007 reported GAAP net income of $8.5 million, or $0.37 per fully diluted share.
Reported net income for 2007 included exceptional litigation-related items that increased net income by $1.4 million. Excluding these items, pro forma net income in 2007 was $7.1 million, or $0.31 per fully diluted share.
“Despite the challenging economy, our overall business remained strong through the fourth quarter, resulting in a record year for Cardiac Science,” said John Hinson, president and chief executive officer. “We crossed the $200 million revenue threshold in 2008, an important milestone for our company, and, excluding the goodwill impairment charge, we also had a record year in terms of profitability and operating cash flow.”
Fourth Quarter Financial Results
Fourth quarter revenue of $51.1 million represented an increase of 1% over the $50.4 million in revenue reported in the fourth quarter of 2007.
Total defibrillation revenue increased 10%, driven by strong growth in the international markets. International Automated External Defibrillator (“AED”) sales were up 54%, reflecting higher sales in Japan and Europe. North American AED sales decreased 26%, largely due to a slowdown in demand as well as a lengthening of the sales cycle related to general weakness in the U.S. economy. The cardiac monitoring business declined 13% from the prior year, reflecting the impact of continued constraints on capital spending on the buying activity of U.S. hospitals.
Service revenue increased 12%, due to growth in both global AED training and maintenance programs and cardiac monitoring contract sales.
Fourth quarter gross margin was 50.9%, an increase of 2.1 percentage points over the year-ago gross margin of 48.8%. Contributing to the increase were favorable product mix, increased margin associated with recurring service revenue and ongoing product cost reductions.
Operating expenses in the fourth quarter of 2008 totaled $131.7 million, including the $107.7 million non-cash goodwill impairment charge. In addition, the Company incurred $1.2 million in severance charges, mostly related to the reduction in force (“RIF”) implemented in January 2009. Although the Company had previously announced that the RIF charges would be recorded in the first quarter of 2009, during the preparation of the year end financial statements the Company determined that the RIF charges were more appropriately included in the 2008 results.
The Company reported an operating loss in the fourth quarter of $105.7 million. Excluding the goodwill impairment charge, pro forma operating income would have been $1.9 million.
Net loss in the fourth quarter was $105.2 million, or $4.58 per share. Excluding the goodwill impairment charge and related income taxes, pro-forma net income would have been $2.2 million, or $0.09 per fully diluted share.
The Company generated $2.6 million in cash from operating activities during the quarter and had $34.7 million in cash and short-term investments as of December 31, 2008.
Full Year 2008 Highlights
During the full year 2008, the Company:
Outlook
The Company expects revenue for the first quarter of 2009 to be in a range between $39 million and $40 million, reflecting significant softness in both North American and Japanese defibrillation sales, as well as worldwide softness in cardiac monitoring sales, partially offset by continued growth in defibrillation sales in other areas and service revenue similar to the prior year. Net income is expected to be positive, with fully diluted earnings per share in a range around $0.01. Despite normally higher seasonal cash payment requirements, the Company also expects to report positive operating cash flow for the first quarter.
“We took steps earlier in the quarter to reduce costs to provide flexibility and allow us to remain profitable under a range of economic scenarios,” said Mike Matysik, chief financial officer. These actions will provide a clear benefit as we expect to see the impact of the weakened global economy reflected on our first quarter revenues,” he concluded.
Non-GAAP and Pro Forma Financial Information
This news release contains a discussion of EBITDA, Adjusted EBITDA, Pro Forma Operating Income, and Pro Forma Net Income, which are non-GAAP financial measures provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America (“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, impairment of goodwill, and litigation expense. Pro Forma Operating Income refers to Operating Income before impairment of goodwill and litigation expense. Pro Forma Net Income refers to Net Income before impairment of goodwill and litigation expenses and the related tax effect of these expenses. None of 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, Adjusted EBITDA, Pro Forma Operating Income, and Pro Forma Net Income 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 net income, the most comparable GAAP measure, to EBITDA, Adjusted EBITDA, Pro Forma Operating Income, and Pro Forma Net Income are contained in this press release.
Conference Call Information
Cardiac Science will conduct a conference call at 4:30 p.m. Eastern Time today to discuss the Company’s financial results for the fourth quarter. The call will be hosted by John Hinson, chief executive officer, Dave Marver, chief operating officer and Mike Matysik, senior vice president and chief financial officer.
To access the conference call, please dial 800.257.3401. International participants can call 303.262.2125. The call will also be web cast live at www.cardiacscience.com. An audio replay of the call will be available for 7 days following the call at (800) 405-2236 for U.S. callers or 303.590.3000 for those calling outside the U.S. The password required to access the replay is 11125955#. An audio archive will be available at www.cardiacscience.com for 90 days following the call.
About Cardiac Science Corporation
Cardiac Science develops, manufactures, and markets a family of advanced diagnostic and therapeutic cardiology devices and systems, including automated external defibrillators (AEDs), electrocardiograph devices (ECGs), cardiac stress systems and treadmills, Holter monitoring systems, hospital defibrillators, 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(R), HeartCentrix(R), Powerheart(R), and Quinton(R) 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 www.cardiacscience.com.
Forward-Looking Statements
This 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 revenue, earnings, earnings per share and cash flow. These are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary significantly from the results expressed or implied in such statements. Factors that could cause or contribute to such varying results and other risks are more fully described in the Annual Report on Form 10-K filed by Cardiac Science Corporation for the year ended December 31, 2007. Cardiac Science Corporation undertakes no duty or obligation to update the information provided herein.
LOGO: http://www.cardiacscience.com/images/main_logo.gif
CSCX-F
(Tables to Follow)
CONTACT: Mike Matysik, Sr. Vice President and CFO of Cardiac Science
Corporation, +1-425-402-2009; or Investors, Jenifer Kirtland,
+1-415-896-6820, or Media, Christopher Gale, +1-646-201-5431 or
+1-203-570-4681, cgale@evcgroup.com, both of EVC Group, Inc., for Cardiac
Science Corporation
Web site: http://www.cardiacscience.com/
