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Third Quarter Financial Results
Sales in the third quarter of 2008 totaled $2,618,000, a 25% decrease fromthe prior year third quarter sales of $3,486,000. The lower revenue in thecurrent year quarter is primarily attributable to a $534,000, or 59%, decreasein capital sales, and a $326,000, or 14%, decrease in disposable handpiecerevenue as compared with the prior year quarter.
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Sales in the first nine months of 2008 totaled $9,719,000, an increase ofapproximately $427,000 or 5% from sales of $9,292,000 in the first nine monthsof 2007. The year to date increase as compared with the prior year period isprimarily attributable to a $712,000, or 38%, increase in capital sales offsetby a $255,000, or 4%, decrease in disposable handpiece revenue.
The Company reported a third quarter 2008 operating loss of $310,000 ascompared with an operating income of $679,000 in the prior year quarter. TheCompany's net loss for the quarter was $308,000, or $0.01 per diluted share,as compared with a net income of $590,000, or $0.01 per diluted share, in the2007 third quarter.
For the first nine months of 2008, Cardiogenesis reported operating incomeof $235,000 as compared with $888,000 for the same period in the prior year.Net income for the first nine months of 2008 was $258,000, or $0.01 perdiluted share, compared with $662,000, or $0.01 per diluted share, for thefirst nine months of 2007.
Gross profit decreased by $603,000 to $2,144,000 in the current yearquarter as compared with $2,747,000 for the 2007 third quarter. Gross marginwas 82% of net revenues for the quarter ended September 30, 2008 as comparedwith a 79% gross margin in the third quarter of 2007. The increase in grossmargin for the three month period is primarily attributable to an increase inthe average selling price of disposable handpieces.
Gross profit increased by $751,000 to $8,130,000 for the nine months endedSeptember 30, 2008, as compared with $7,379,000 for the nine months endedSeptember 30, 2007. For the nine months ended September 30, 2008, grossmargin was 84% of net revenues as compared to 79% of net revenues for the ninemonths ended September 30, 2007. The increase in gross profit and grossmargin for the nine month period is primarily attributable to higher averageselling prices for both laser and disposable handpiece units. In addition,during the second quarter of 2008, the company recognized $234,000 of deferredrevenue for which there was no associated cost of goods sold.
Research and development costs ("R&D") were $165,000 in the third quarterof 2008 as compared with $103,000 in the 2007 third quarter. Year to date,R&D expenses of $633,000 were $21,000 or 3% higher than the prior year periodof $612,000.
Sales and marketing ("S&M") expenses of $1,536,000 in the quarter endedSeptember 30, 2008 increased $290,000, or 23%, compared with $1,246,000 forthe quarter ended September 30, 2007. For the nine months ended September 30,2008, S&M expenditures totaled $4,858,000, an increase of $1,590,000, or 49%,compared with $3,268,000 for the nine months ended September 30, 2007. Theincrease for both the quarter and year to date periods is primarily due tohigher compensation expenses related to investments made to strengthen thesales and marketing organization.
General and administrative expenditures ("G&A") for the quarter endedSeptember 30, 2008 totaled $753,000 as compared to $719,000 during the quarterended September 30, 2007. For the nine months ended September 30, 2008, G&Atotaled $2,404,000 as compared to $2,611,000 for the nine months endedSeptember 30, 2007. This reduction of $207,000, or 8%, is primarilyattributable to lower insurance expense in the current year.
Richard Lanigan, Cardiogenesis President stated, "To leverage theinvestments we have made in our sales organization, we are undertaking a majormarketing initiative to drive greater awareness of the benefits of TMR withinthe cardiology community. As we reported in October we began with asuccessful kick-off at the recent Transcatheter Cardiovascular Therapeutics(TCT) meeting." Mr. Lanigan explained, "Although intraoperative TMRprocedures are performed by the cardiothoracic surgeon, it is the cardiologistthat manages the patients and with that patient determines treatmentstrategies that may include medical management, percutaneous intervention orsurgery. Educating cardiologists on the discrete current indications for TMR,as well as future applications is critical to garner their support andreferrals for TMR. Engaging them directly will be critical to achieving theclinical and commercial potential of our technology and we plan on providingmore color on the topic during our earnings call."
About Cardiogenesis Corporation
Cardiogenesis is a medical device company specializing in the treatment ofcardiovascular disease and is a leader in devices that treat severe angina.The Company's market leading holmium:YAG laser system and single usefiber-optic delivery systems are used to perform a FDA-cleared surgicalprocedure known as Transmyocardial Revascularization (TMR).
For more information on Cardiogenesis and its products, please visit theCompany's website at http://www.cardiogenesis.com or the direct to patientwebsite at http://www.heartofnewlife.com.
Safe Harbor Statement
With the exception of historical information, the statements set forthabove include forward-looking statements. Any forward-looking statements inthis news release related to the possible effectiveness of the Company'stechnologies and the effect of such technologies on the Company's sales,profitability, the adoption of its technology and products and FDA clearancesare based on current expectations and beliefs and are subject to numerousrisks and uncertainties, many of which are outside the Company's control, thatcould cause actual results to differ materially. Factors that could affectthe accuracy of these forward-looking statements include, but are not limitedto: any inability by the Company to sustain profitable operations or obtainadditional financing on favorable terms if and when needed; any failure toobtain required regulatory approvals; failure of the medical community toexpand its acceptance of TMR procedures; possible adverse governmental rulingsor regulations, including any FDA regulations or rulings; the Company'sability to comply with international and domestic regulatory requirements;possible adverse Medicare or other third-party reimbursement policies oradverse changes in those policies; any inability by the Company to shipproduct on a timely basis; the Company's ability to manage its growth; theeffects of recent disruptions in global credit and equity markets and otheradverse economic developments that could adversely affect the market for ourproducts or our ability to raise needed financing; actions by our competitors;and the Company's ability to protect its intellectual property. Other factorsthat could cause Cardiogenesis' actual results to differ materially arediscussed in the "Risk Factors" section of the Company's Annual Report on Form10-KSB for the year ended December 31, 2007 and the Company's other recent SECfilings. The Company disclaims any obligation to update any forward-lookingstatements as a result of developments occurring after the date of this pressrelease.CARDIOGENESIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 Net revenues $2,618 $3,486 $9,719 $9,292 Cost of revenues 474 739 1,589 1,913 Gross profit 2,144 2,747 8,130 7,379 Operating expenses: Research and development 165 103 633 612 Sales and marketing 1,536 1,246 4,858 3,268 General and administrative 753 719 2,404 2,611 Total operating expenses 2,454 2,068 7,895 6,491 Operating (loss) income (310) 679 235 888 Other income (expense): Interest expense (1) (10) (22) (59) Interest income 13 29 55 94 Non-cash interest expense -- (13) -- (89) Change in fair value of derivatives -- (133) -- (323) Other non-cash income, net -- 38 -- 151 Total other income (expense), net 12 (89) 33 (226) (Loss) income before income taxes (298) 590 268 662 Tax provision 10 -- 10 -- Net (loss) income $(308) $590 $258 $662 Net (loss) earnings per share: Basic $(0.01) $0.01 $0.01 $0.01 Diluted $(0.01) $0.01 $0.01 $0.01 Weighted average shares outstanding: Basic 45,292 45,274 45,292 45,274 Diluted 45,292 45,274 45,328 45,274 CARDIOGENESIS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September December 30, 2008 31, 2007 (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $3,439 $2,824 Accounts receivable, net of allowance for doubtful accounts of $49 and $28, respectively 1,319 1,763 Inventories 1,380 1,602 Prepaids and other current assets 466 486 Total current assets 6,604 6,675 Long-term investments in marketable securities 75 -- Property and equipment, net 341 457 Other assets, net 27 27 Total assets $7,047 $7,159 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $338 $169 Accrued liabilities 1,124 1,458 Deferred revenue 902 1,210 Current portion of capital lease obligation 8 12 Total current liabilities 2,372 2,849 Capital lease obligation, less current portion 14 19 Total liabilities 2,386 2,868 Commitments and Contingencies Shareholders' equity: Preferred stock: no par value; 5,000 shares authorized; none issued and outstanding -- -- Common stock: no par value; 75,000 shares authorized; 45,314 and 45,274 shares issued and outstanding, respectively 173,938 173,826 Accumulated deficit (169,277) (169,535) Total shareholders' equity 4,661 4,291 Total liabilities and shareholders' equity $7,047 $7,159
SOURCE Cardiogenesis Corporation
