Exhibit 99.1
COMPANY CONTACT:
Rhonda Rhyne, President
rrhyne@cardiodynamics.com
800-778-4825, Ext. 1013
CARDIODYNAMICS REPORTS PRELIMINARY SECOND QUARTER 2006 RESULTS
SAN DIEGO, CA--July 6, 2006--CardioDynamics (Nasdaq: CDIC), the innovator and
leader of BioZ(R) Impedance Cardiography (ICG), today reported its preliminary
financial results for its fiscal second quarter 2006. Highlights include a 17%
revenue increase over first quarter 2006, the completion of a $5.25 million
convertible debt financing and publication of three landmark BioZ(R) clinical
trials, CONTROL, ED-IMPACT, and PREDICT.
PRELIMINARY SECOND QUARTER 2006 RESULTS:
Net sales for the second quarter of 2006 were $7.6 million, an increase of 17%
over the $6.5 million reported in the first fiscal quarter of 2006, and a
decrease of 19% compared to net sales of $9.4 million for the same period last
year. ICG revenue for the quarter increased 17% to $4.8 million from $4.1
million in the first quarter of 2006, but decreased 30% from $6.9 million
reported in the same period in 2005. The Company attributed the 17% sequential
revenue growth over the first quarter of 2006 to the positive transition of the
Company's sales team from a largely distributor-assisted model to a more
clinically focused, direct selling approach and the increased productivity of
new sales representatives which were hired in the fourth fiscal quarter of 2005
and the first quarter of 2006. The year over year revenue decrease is primarily
due to the ongoing adverse effects from Medicare's hypertension policy
restriction, 36% fewer territory sales managers versus the same quarter in 2005,
and the short-term productivity loss associated with the Company's two corporate
restructurings.
The Company reported a net loss of $2.0 million, or $0.04 per diluted share for
the second quarter of 2006, an improvement of $1.5 million over first quarter
2006 and compares with a net loss of $682,000, or $0.01 per diluted share
reported in the second quarter last year. The improvement in net loss during the
second quarter was driven primarily by the Company's cost containment efforts
and the absence of year-end audit fees experienced during the first quarter. For
the six months ended May 31, 2006, net loss was $5.5 million, or $0.11 per
diluted share, compared with a net loss of $1.3 million, or $0.03 per diluted
share, for the same period in 2005.
Cash and cash equivalents increased to $5.9 million from $2.7 million at the end
of first quarter 2006 due to the $5.25 million convertible debt financing
completed early in the second quarter 2006 though offset to some extent by the
Company's reduction of its bank loan by $1.3 million. Operating cash use for the
second quarter of 2006 was $690,000, compared with positive operating cash flow
of $300,000 in the same quarter of last year.
OPERATING HIGHLIGHTS:
During the second quarter of 2006, sales of ICG devices totaled 232 units,
including 115 ICG modules, and 117 ICG monitors, 70 of which were BioZ Dx
systems, 29 BioZ monitors, and 18 Medis ICG monitors. There has been over 6,350
ICG systems sold worldwide, an increase of 16% over sales to date as of second
quarter 2005, and include nearly 1,400 ICG modules.
Combined ICG and electrocardiograph (ECG) sensor revenue in the second quarter
of 2006 was $4.4 million, representing 58% of total sales. During the quarter,
Vermed's ECG sensor revenue was a record $2.8 million representing an 11%
increase over the same quarter in fiscal 2005. ICG sensor revenue for the second
quarter of 2006 was $1.6 million, or 34% of total ICG net sales, a decrease of
10%, compared with $1.8 million, or 27% of total ICG net sales, in the same
quarter in 2005. ICG sensor revenue increased 8% sequentially over first quarter
2006 and reversed the prior three quarters' sequential decline.
Overall gross margin percentage for the second quarter of 2006 was 47% compared
to 56% in the second quarter of 2005. Gross margin percentage for the ICG
business was 53% and for the ECG business 36%, compared to 63% and 40%,
respectively, in the same quarter last year. The decrease in gross margin for
the ICG business was a result of additional BioZ monitor inventory reserves for
clinical and field demonstration systems and units returned under BioZ Dx
upgrade promotions and a greater mix of the BioZ Dx units that carry a higher
manufactured cost. Additionally, as a result of reduced subassembly purchase
prices established from cross-border suppliers, there was a decrease in on-hand
inventory value which created a charge to cost of sales. Despite the future
benefits of these lower costs, this inventory revaluation negatively impacted
second quarter ICG cost of sale by 8.4 gross margin percentage points. The lower
gross margin in the ECG business is primarily the result of higher material
costs, particularly the cost of snaps which contain silver.
As a result of cost containment measures, operating expenses for the second
quarter of 2006 decreased 13% to $5.3 million compared with $6.1 million for the
same period in 2005. A contributor to the expense savings has been the reduction
in territory sales managers, which was associated with Medicare's hypertension
policy restriction, and the Company's subsequent focus on enhanced productivity
from more experienced territory managers and consolidation of low
revenue-generating sales territories.
In March 2006, the Company had a workforce reduction in support services,
operations and research totaling approximately 12% of the ICG segment personnel
to better balance operating expenses with current revenue levels. The workforce
reduction, coupled with not filling previously open positions and deferral of
certain project expenses, is expected to save approximately $3 million in cash
expenditures in 2006.
ACCOUNTING TREATMENT OF CONVERTIBLE NOTES:
These results do not reflect an anticipated non-cash adjustment resulting from
the Company's issuance of subordinated convertible notes during the second
quarter. The Company is working with an independent valuation expert to
determine the appropriate valuation to be assigned to the conversion feature of
the notes, which it believes should be accounted for under Statement of
Financial Accounting Standards 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133). SFAS 133 requires that the conversion feature be
separated and classified as an embedded derivative liability and recorded at
fair value as of the April funding date and revalued at each reporting date,
with changes in the fair value reported as charges or credits to earnings. The
remaining proceeds will be allocated to the convertible instrument and a
corresponding discount recorded from the face of the notes. This adjustment will
have no effect on the Company's cash position or results from operations in any
period. The preliminary financial results will be made final upon resolution of
this accounting issue and reflected in the Company's quarterly report on Form
10-Q.
CEO COMMENTS:
"We were pleased with the sequential improvement in the business during the
second quarter for both the BioZ ICG capital business and recurring sensor
revenue," stated Michael K. Perry, Chief Executive Officer, of CardioDynamics.
"The 2004 Medicare clarification restricting ICG hypertension use in all but
resistant hypertensive patients remains a significant factor in the overall
year-over-year downturn in ICG growth.
We believe the recent publications of new clinical evidence and the adjustments
we have made to our sales strategies will now lead to steady growth ahead,
albeit at a slower rate than was realized prior to the policy change. We were
especially pleased to have the much-anticipated publication of our multi-center
CONTROL study which permitted the re-opening of Medicare's hypertension
reconsideration. A draft decision memorandum is due by the end of summer which,
given the decidedly positive clinical results of CONTROL, lead us to be hopeful
about a positive outcome in broadening Medicare's hypertension coverage for BioZ
ICG technology and represents a sizable upside for our business."
Perry added, "In addition to the publication of the CONTROL trial, we were also
encouraged to have two additional powerful BioZ ICG studies, Cleveland Clinic's
ED-IMPACT shortness of breath trial and Milton Packer's PREDICT heart failure
trial, published during the quarter. The PREDICT trial publication in the
leading cardiology journal, Journal of American College of Cardiology, was the
culmination of over six years of planning and research. We anticipate that all
three clinical study publications will facilitate our sales and clinical sales
teams to drive continued market adoption of our BioZ ICG technology."
ADDITIONAL HIGHLIGHTS:
. Conclusion of initial comment period for the hypertension coverage
review for CardioDynamics' BioZ(R) ICG Technology by Centers for
Medicare and Medicaid Services
. Completion of a $5.25 million subordinated convertible debt financing
to the Company's largest institutional shareholder
. Publication of the Company's multicenter, randomized trial called
CONTROL (Consideration Of Noninvasive Hemodynamic Monitoring To Target
Reduction Of Blood Pressure Levels) in Hypertension, an American Heart
Association journal, demonstrating more than double blood pressure
control as compared to traditional care
. Publication of Cleveland Clinic's ED-IMPACT trial, which demonstrated
that use of BioZ ICG data resulted in change in treatment 39% of the
time and change in diagnosis 13% of the time in patients presenting
with shortness of breath, in Academic Emergency Medicine, a leading
emergency medicine journal
. Publication of the Company's PREDICT (Prospective Evaluation and
Identification of Decompensation by ICG Test) study in the Journal of
the American College of Cardiology (JACC), the leading cardiology
journal and the official journal of the American College of Cardiology
(ACC) demonstrating BioZ ICG variables to be the most powerful
predictor, versus standard clinical variables, of short-term heart
failure emergency department visits and hospitalizations
. Announcement of a three-year, multi-source contract with Premier
Purchasing Partners, L.P., the group purchasing division of Premier,
Inc. to become the sole provider of ICG products through Premier
CONFERENCE CALL INFORMATION:
Michael K. Perry, Chief Executive Officer, and Steve P. Loomis, Chief Financial
Officer, will host a summary of CardioDynamics' second quarter 2006 results in a
conference call today, July 6, 2006, at 4:30 p.m. (EDT). To access the
conference call, dial 800-346-7359 (Code 7784). International participants can
call 973-528-0008 (Code 7784). A replay of the call will be available for one
month following the call at 800-332-6854 (Code 7784). The international replay
number is 973-528-0005 (Code 7784). The Internet webcast can be accessed through
the Investor Relations section of the Company's website at www.cdic.com or at
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=86923&event
ID=1343740
ABOUT CARDIODYNAMICS:
CardioDynamics (Nasdaq: CDIC), the ICG Company, is the innovator and leader of
an important medical technology called BioZ(R) impedance cardiography (ICG). The
Company develops, manufactures and markets noninvasive BioZ(R) ICG products and
medical device electrodes. The Company's ICG Systems are being used by
physicians around the world to help battle the number one killer of men and
women--cardiovascular disease. Partners include GE Healthcare and Philips
Medical Systems. For additional information, please refer to the company's Web
site at www.cdic.com.
FORWARD-LOOKING (SAFE HARBOR) STATEMENT:
Except for historical and factual information contained herein, this press
release contains forward-looking statements, such as preliminary quarterly
operating results, future reimbursement, publication of clinical trials and
sales growth, the accuracy of which is necessarily subject to uncertainties and
risks including the Company's primary dependence on the BioZ product line, and
various uncertainties characteristic of early growth companies, as well as other
risks detailed in the Company's filings with the SEC, including its 2005 Form
10-K. The Company does not undertake to update the disclosures contained in this
press release.
UNAUDITED RESULTS:
The results reported in this press release are unaudited and remain subject to
completion of the quarterly financial review by the Company's independent
registered public accounting firm and are therefore subject to adjustments as
result of such review including adjustments related to SFAS 133 Embedded
Derivative accounting related to the Subordinated Convertible Note issued during
the quarter.
CARDIODYNAMICS INTERNATIONAL CORPORATION
In thousands, except per share data (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
MAY 31, MAY 31,
---------------------- ----------------------
SELECTED CONSOLIDATED OPERATIONAL RESULTS 2006 2005 2006 2005
- --------------------------------------------------------- --------- --------- --------- ---------
Net sales $ 7,612 $ 9,370 $ 14,140 $ 19,048
Cost of sales 4,053 4,077 6,929 7,424
--------- --------- --------- ---------
Gross margin 3,559 5,293 7,211 11,624
--------- --------- --------- ---------
Research and development 582 587 1,191 1,251
Selling and marketing 3,691 4,339 8,259 9,522
General and administrative 913 1,102 2,642 2,439
Amortization of intangible assets 128 92 247 223
--------- --------- --------- ---------
Loss from operations (1,755) (827) (5,128) (1,811)
Other expense, net (139) (7) (218) (65)
--------- --------- --------- ---------
Loss before income taxes (1,894) (834) (5,346) (1,876)
Income tax benefit (provision) (62) 145 (90) 572
Minority interest in income (loss) of subsidiary (14) 7 (20) (21)
--------- --------- --------- ---------
Net loss $ (1,970) $ (682) $ (5,456) $ (1,325)
========= ========= ========= =========
Net loss per common share, basic and diluted $ (0.04) $ (0.01) $ (0.11) $ (0.03)
========= ========= ========= =========
Weighted-average shares used in per share calculation:
Basic and diluted 48,813 48,792 48,809 48,771
========= ========= ========= =========
MAY 31, NOVEMBER 30,
SELECTED CONSOLIDATED BALANCE SHEET DATA 2006 2005
- ------------------------------------------------ ------------ ------------
Cash and cash equivalents $ 5,858 $ 3,615
Accounts receivable, net 4,450 7,359
Inventory, net 5,471 5,379
Current assets 17,092 18,203
Long-term assets 21,272 21,795
Total assets 38,364 39,998
Current liabilities 5,996 7,217
Long-term liabilities 7,317 2,777
Total liabilities 13,313 9,994
Minority interest 325 241
Shareholders' equity 24,726 29,763