DFIB Cardiac Science (MM)

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/

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