Cardionet Inc. has a market cap of $239.1 million; its shares were traded at around $9.98 with and P/S ratio of 1.7.
Highlight of Business Operations:Revenues. Total revenues for the three months ended March 31, 2010 decreased to $31.8 million from $35.7 million for the three months ended March 31, 2009, a decrease of $3.9 million, or 10.9%. MCOT revenue was lower by $3.3 million due to a decrease in MCOT reimbursement rates, offset by an increase in volume of 23%. Additionally, there was a decrease in event, Holter and other revenue of $0.6 million for the three months ended March 31, 2010 compared to the three months ended March 31, 2009.
Gross Profit. Gross profit decreased to $20.1 million for the three months ended March 31, 2010 from $23.9 million for the three months ended March 31, 2009. The decrease of $3.8 million was due to a decrease in revenue, offset slightly by a decrease in cost of sales of $0.1 million for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Gross profit as a percentage of revenue declined to 63.1% for the three months ended March 31, 2010 compared to 66.9% for the three months ended March 31, 2009.
Integration, Restructuring and Other Charges. The Company incurred restructuring costs of $1.7 million and other charges of $0.3 million for the three months ended March 31, 2010. The restructuring costs included $1.4 million of severance and employee related costs and $0.3 million of other charges related to the 2010 restructuring plan. The 2010 restructuring plan included the consolidation of the Companys sales and service organizations, the closure of the Companys event monitoring facility in Georgia and consolidation with its monitoring facilities in Pennsylvania and Minnesota, and an overall reduction of administrative costs company-wide. Integration, restructuring and other charges were 6.1% of total revenues for the three months ended March 31, 2010. The other charges related to legal costs and other miscellaneous items.
The Company used $3.0 million of its cash in its operations for the three months ended March 31, 2010. Cash was used primarily to fund the Companys ongoing operations during the three month period that resulted in a $5.4 million net loss, and to fund its net working capital requirements of $1.6 million. The Companys working capital requirements were driven primarily by the prepayment of certain licenses and insurances costs that routinely occur in the first quarter of the fiscal year and the repayment of certain payor overpayments that were recorded in accounts payable. These working capital requirements were offset by favorable cash collections related to the Companys accounts receivables. The net loss and net working capital requirements were offset by non-cash items related to deprecation and stock compensation expense. The Company used $1.5 million for the investment in medical devices for use in its ongoing operations for the three months ended March 31, 2010.
On April 2, 2009 CardioNet entered into a Merger Agreement to acquire (Biotel) Inc. for $14.0 million. On July 14, 2009, CardioNet exercised its contractual right to terminate the Merger Agreement due to Biotels breach of certain covenants in the agreement. The next day, CardioNet notified Biotel of its obligation to pay the Company $1.4 million for a termination fee and expenses in accordance with the Merger Agreement. On or about July 16, 2009, Biotel subsequently commenced litigation against CardioNet in Minnesota District Court in Hennepin County, Fourth Judicial District, alleging that CardioNet had breached and improperly terminated the Merger Agreement. CardioNet removed the action to the United States District Court for the District of Minnesota on the basis of diversity jurisdiction, and Biotel did not seek to remand the action. Biotel is seeking specific performance and damages in an amount in excess of $10.0 million. CardioNet has counterclaimed under the terms of the Merger Agreement for its termination fee and associated expenses; the current amount of that counterclaim is $1.4 million. The case is to be ready for trial by July 15, 2010. Discovery is underway. The Company plans to vigorously defend its position and prosecute its counterclaim.
The initial public offering of our common stock was effected through a Registration Statement on Form S-1 (File No. 333-145547) that was declared effective by the Securities and Exchange Commission on March 18, 2008, which registered an aggregate of 5,175,000 shares of our common stock, including 675,000 shares that the underwriters had the option to purchase to cover over-allotments. On March 25, 2008, 3,000,000 shares of common stock were sold on our behalf and 1,500,000 shares of common stock were sold on behalf of a selling stockholder at an initial public offering price of $18.00 per share, for an aggregate gross offering price of $54.0 million to us, and $27.0 million to the selling stockholders. On April 8, 2008, 1,014,286 shares of common stock were sold on behalf of the selling stockholder upon a partial exercise of the underwriters over-allotment option, at an initial public offering price of $18.00 per share, for an aggregate gross offering price of $1.8 million to the selling stockholder. Following the sale of the shares in connection with the over-allotment closing of our initial public offering, the offering terminated.
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