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EX-99.2 - EX-99.2 - ev3 Inc. | c54262exv99w2.htm |
8-K - FORM 8-K - ev3 Inc. | c54262e8vk.htm |
Exhibit 99.1
CONTACT INFORMATION: |
||
INVESTORS and MEDIA: | ||
Julie Tracy | ||
Sr. Vice President, Chief Communications Officer | ||
ev3 Inc. | ||
(949) 680-1375 | ||
jtracy@ev3.net |
ev3 Reports 2009 Third Quarter Financial Results
Third Quarter Net Product Sales Increase to $112.8 million; 15% Constant Currency Growth
Third Quarter GAAP EPS Reaches $0.06
Full-Year 2009 Revenue and Earnings Guidance Increased
PLYMOUTH, Minn. October 27, 2009 ev3 Inc. (NASDAQ: EVVV), a global endovascular device
company, today reported financial results for its fiscal third quarter. ev3s net sales totaled
$112.8 million in the third quarter of 2009 versus $107.0 million in the same quarter of the prior
year. Third quarter of 2008 net sales included $7.0 million of research collaboration revenues
from our former agreement with Merck, which was terminated on July 22, 2008. Third quarter of 2009
net product sales of $112.8 million increased approximately 13% versus the prior year product
sales. Excluding approximately $1.7 million of negative impact due to foreign currency exchange
rates, net product sales increased 15% versus the prior year quarter.
Reconciliations of non-GAAP financial measures used in this release to the most comparable U.S.
GAAP measures for the respective periods can be found immediately following the detail of net sales
by geography later in this release.
Robert Palmisano, president and chief executive officer of ev3 Inc., commented, We achieved
another quarter of strong results, with exceptionally robust growth in our neurovascular and
international businesses and sequential gross margin expansion of 250 basis points to 74.6%. We
are also pleased by the addition of the Pipeline Embolization Device, which we launched in Europe
during the third quarter, to our product portfolio.
ev3s GAAP net income for the third quarter of 2009 was $6.7 million, or $0.06 per diluted share,
compared to a net loss of $(7.3) million, or $(0.07) per diluted share, in the third quarter of
2008. ev3s non-GAAP adjusted net income was $19.4 million, or $0.17 per diluted share, compared
to adjusted net income of $3.9 million, or $0.04 per diluted share, in the third quarter of 2008.
Non-GAAP adjusted net income and adjusted earnings per share for the third quarter of 2009 excludes
non-cash amortization expense of $6.8 million, non-cash stock-based compensation of $3.6 million
and charges relating to the estimated change in fair value of the future contingent consideration
associated with the acquisition of Chestnut Medical (Chestnut) of $2.3 million.
Cash and cash equivalents totaled $80.5 million as of the end of the third quarter of 2009, an
increase of $20.1 million compared to the end of the second quarter of 2009.
Palmisano concluded, Our third quarter results reflect the impact of our manufacturing efficiency
improvements and the progress we have made to enhance our business processes and improve our
operating leverage. For the remainder of 2009, our continued focus will be on achieving revenue
growth at or above market growth rates, sustaining improvement in profitability and generating
cash.
Sales Review
By product segment, peripheral vascular net product sales increased 1% versus the prior year
quarter and 2% on a constant currency basis. Excluding atherectomy, peripheral vascular net sales
increased 6% on a constant currency basis. Neurovascular net sales, which include product sales
from recently acquired Chestnut, increased 37% versus the prior year quarter and 39% on a constant
currency basis.
On a geographic basis, ev3 U.S. net product sales increased approximately 8% versus the prior year
quarter. International net product sales increased 21% versus the prior year quarter and 26% on a
constant currency basis. Changes in foreign currency exchange rates had a negative impact of
approximately $1.7 million on net sales compared to the third quarter of the prior year.
An investor presentation summarizing the companys third quarter of 2009 results is available at
http://ir.ev3.net.
Outlook
ev3 expects fiscal year 2009 net sales to be in the range of $446 to $450 million compared to
$402.2 million of net product sales in 2008. Net product sales growth is expected to be
approximately 11% to 12%. Foreign currency exchange rate fluctuations are expected to negatively
impact revenue growth by $6 to $7 million in 2009 compared to 2008. ev3 expects non-GAAP adjusted
earnings per share to be in the range of $0.58 to $0.62 per diluted share, an increase of $0.49 to
$0.53 over 2008, based on approximately 109.1 million shares outstanding. ev3s adjusted net
earnings per share guidance excludes estimated amortization expense of approximately $25.0 million,
inclusive of amortization relating to Chestnut of approximately $3.1 million, non-cash stock-based
compensation of approximately $14.6 million, charges relating to the estimated change in fair value
of the future contingent consideration associated with the Chestnut acquisition of $4.9 million,
vacant leased facilities reserve expense of $3.4 million, gain on the divestiture of non-strategic
investment assets of $4.1 million, and a tax benefit of $19.0 million resulting from the purchase
accounting for the acquisition of Chestnut.
The company expects fourth quarter of 2009 net sales to be in the range of $124 to $128 million and
non-GAAP adjusted earnings per share to be in the range of $0.20 to $0.24 per diluted share, based
on approximately 112.8 million shares outstanding. ev3s non-GAAP adjusted earnings per share for
the fourth quarter of 2009 excludes estimated amortization expense of approximately $6.6 million,
inclusive of amortization relating to Chestnut of approximately $1.4 million, non-cash stock-based
compensation of approximately $3.6 million and charges relating to the estimated change in fair
value of the future contingent consideration associated with the Chestnut acquisition of $2.4
million.
Earnings Call Information
ev3 will host a conference call today, October 27, 2009, beginning at 7:30 a.m. Central Time (8:30
a.m. Eastern Time) to review its results of operations for the third quarter of 2009 and future
outlook, followed by a question and answer session.
The conference call will be available to interested parties through a live audio webcast at
http://ir.ev3.net, where it will be archived and accessible for approximately 12 months. The live
dial-in number for the call is 888-680-0878 (U.S.) or +1-617-213-4855 (International). The
participant passcode is 66747346.
If you do not have access to the Internet and want to listen to an audio replay of the conference
call, dial 888-286-8010 (U.S.) or +1-617-801-6888 (International) and enter passcode 11076648. The
audio replay will be available beginning at 10:30 a.m. Central Time on Tuesday, October 27, 2009
until Tuesday, November 3, 2009.
About ev3 Inc.
Since its founding in 2000, ev3 has been dedicated to developing breakthrough and clinically proven
technologies for the endovascular treatment of peripheral vascular and neurovascular diseases. The
company offers a comprehensive portfolio of treatment options, including the primary interventional
technologies used today peripheral angioplasty balloons, stents, plaque excision systems,
embolic protection devices, liquid embolics, embolization coils, flow diversion devices,
thrombectomy catheters and occlusion balloons. More information about the company and its products
can be found at http://www.ev3.net.
ev3, the ev3 logo, SilverHawk, Axium, Onyx, Solitaire, Pipeline and Alligator are trademarks of ev3
Inc. and its subsidiaries, registered in the U.S. and other countries. All other trademarks and
trade names referred to in this press release are the property of their respective owners.
Forward-Looking Statements
Statements contained in this press release that relate to future, not past, events are
forward-looking statements under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements often can be identified by words such as expect, anticipate,
intend, will, may, believe, could, continue, future, estimate, outlook,
guidance, or the negative of these words or other words of similar meaning. Forward-looking
statements by their nature address matters that are, to different degrees, uncertain.
Uncertainties and risks may cause ev3s actual results to be materially different than those
expressed in or implied by ev3s forward-looking statements. For ev3, particular uncertainties and
risks include, among others, ev3s future operating results and financial performance, fluctuations
in foreign currency exchange rates, the effect of the current global economic crisis, ev3s ability
to implement, fund and achieve sustainable cost savings measures that will better align its
operating expenses with its anticipated net sales levels and reallocate resources to better support
growth initiatives, the timing of regulatory approvals and introduction of new products, market
acceptance of new products, success of clinical testing, availability of third party reimbursement,
impact of competitive products and pricing, the effect of regulatory actions and the cost and
effect of changes in tax and other legislation. More detailed information on these and additional
factors that could affect ev3s actual results are described in ev3s filings with the Securities
and Exchange Commission, including its most recent annual report on Form 10-K and subsequent
quarterly reports on Form 10-Q. Except as required by law, ev3 undertakes no obligation to
publicly update its forward-looking statements.
Use of Non-GAAP Financial Measures
To supplement ev3s consolidated financial statements prepared in accordance with U.S. generally
accepted accounting principles (GAAP), ev3 uses certain non-GAAP financial measures in this
release. Reconciliations of the non-GAAP financial measures used in this release to the most
comparable U.S. GAAP measures for the respective periods can be found in tables later in this
release immediately following the detail of net sales by geography. Non-GAAP financial measures
have limitations as analytical tools and should not be considered in isolation or as a substitute
for ev3s financial results prepared in accordance with GAAP.
ev3 Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
October 4, | September 28, | October 4, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Sales: |
||||||||||||||||
Net product sales |
$ | 112,838 | $ | 100,018 | $ | 322,319 | $ | 296,577 | ||||||||
Research collaboration |
| 7,011 | | 19,426 | ||||||||||||
Net sales |
112,838 | 107,029 | 322,319 | 316,003 | ||||||||||||
Operating expenses: |
||||||||||||||||
Product cost of goods sold (a) |
28,608 | 36,182 | 90,074 | 102,442 | ||||||||||||
Research collaboration |
| 2,100 | | 5,647 | ||||||||||||
Sales, general and administrative (a) |
55,030 | 53,121 | 165,639 | 178,885 | ||||||||||||
Research and development (a) |
12,545 | 12,133 | 36,433 | 37,913 | ||||||||||||
Amortization of intangible assets |
6,802 | 8,101 | 18,444 | 24,285 | ||||||||||||
Contingent consideration |
2,271 | | 2,467 | | ||||||||||||
Intangible asset impairment |
| | | 10,459 | ||||||||||||
Total operating expenses |
105,256 | 111,637 | 313,057 | 359,631 | ||||||||||||
Income (loss) from operations |
7,582 | (4,608 | ) | 9,262 | (43,628 | ) | ||||||||||
Other expense (income): |
||||||||||||||||
Gain on investments, net |
| (142 | ) | (4,072 | ) | (542 | ) | |||||||||
Interest expense (income), net |
140 | 49 | 575 | (307 | ) | |||||||||||
Other (income) expense, net |
(143 | ) | 2,279 | 1,354 | 192 | |||||||||||
Income (loss) before income taxes |
7,585 | (6,794 | ) | 11,405 | (42,971 | ) | ||||||||||
Income tax expense (benefit) |
849 | 516 | (17,511 | ) | 1,531 | |||||||||||
Net income (loss) |
$ | 6,736 | $ | (7,310 | ) | $ | 28,916 | $ | (44,502 | ) | ||||||
Earnings per share: |
||||||||||||||||
Net income (loss) per common share: |
||||||||||||||||
Basic |
$ | 0.06 | $ | (0.07 | ) | $ | 0.27 | $ | (0.43 | ) | ||||||
Diluted |
$ | 0.06 | $ | (0.07 | ) | $ | 0.27 | $ | (0.43 | ) | ||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
110,507,687 | 104,474,600 | 107,080,500 | 104,276,029 | ||||||||||||
Diluted |
112,277,954 | 104,474,600 | 107,719,897 | 104,276,029 | ||||||||||||
(a) Includes stock-based compensation charges of: |
||||||||||||||||
Product cost of goods sold |
$ | 251 | $ | 121 | $ | 732 | $ | 596 | ||||||||
Sales, general and administrative |
2,975 | 2,572 | 9,089 | 9,608 | ||||||||||||
Research and development |
400 | 366 | 1,128 | 1,478 | ||||||||||||
$ | 3,626 | $ | 3,059 | $ | 10,949 | $ | 11,682 | |||||||||
ev3 Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(unaudited)
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(unaudited)
October 4, | December 31, | |||||||
2009 | 2008 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 80,504 | $ | 59,652 | ||||
Accounts receivable, less allowance of $8,585 and $8,098, respectively |
79,320 | 72,814 | ||||||
Inventories, net |
45,834 | 47,687 | ||||||
Prepaid expenses and other current assets |
6,630 | 6,970 | ||||||
Total current assets |
212,288 | 187,123 | ||||||
Restricted cash |
3,581 | 1,531 | ||||||
Property and equipment, net |
26,439 | 30,681 | ||||||
Goodwill |
367,311 | 315,654 | ||||||
Intangible assets, net |
261,710 | 185,292 | ||||||
Other assets |
581 | 383 | ||||||
Total assets |
$ | 871,910 | $ | 720,664 | ||||
Liabilities and stockholders equity |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ | 2,500 | $ | 2,500 | ||||
Accounts payable |
18,590 | 15,657 | ||||||
Accrued compensation and benefits |
28,657 | 29,547 | ||||||
Accrued liabilities |
22,295 | 19,744 | ||||||
Total current liabilities |
72,042 | 67,448 | ||||||
Long-term debt |
4,583 | 6,458 | ||||||
Other long-term liabilities |
58,083 | 6,217 | ||||||
Total liabilities |
134,708 | 80,123 | ||||||
Stockholders equity |
||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued
and outstanding as of October 4, 2009 and December 31, 2008 |
| | ||||||
Common stock, $0.01 par value, 300,000,000 shares authorized, shares
issued and outstanding: 112,182,735 shares as of October 4, 2009 and
105,822,444 shares as of December 31, 2008 |
1,122 | 1,058 | ||||||
Additional paid-in capital |
1,824,406 | 1,756,832 | ||||||
Accumulated deficit |
(1,087,745 | ) | (1,116,661 | ) | ||||
Accumulated other comprehensive loss |
(581 | ) | (688 | ) | ||||
Total stockholders equity |
737,202 | 640,541 | ||||||
Total liabilities and stockholders equity |
$ | 871,910 | $ | 720,664 | ||||
ev3 Inc.
SELECTED NET SALES INFORMATION
(Dollars in thousands)
(unaudited)
SELECTED NET SALES INFORMATION
(Dollars in thousands)
(unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
October 4, | September 28, | October 4, | September 28, | |||||||||||||||||||||
NET SALES BY SEGMENT | 2009 | 2008 | % change | 2009 | 2008 | % change | ||||||||||||||||||
Peripheral vascular: |
||||||||||||||||||||||||
Atherectomy |
$ | 19,607 | $ | 20,992 | -7 | % | $ | 60,024 | $ | 68,624 | -13 | % | ||||||||||||
Stents |
28,787 | 26,772 | 8 | % | 86,620 | 77,932 | 11 | % | ||||||||||||||||
Thrombectomy and embolic
protection |
7,319 | 6,938 | 5 | % | 23,280 | 19,990 | 16 | % | ||||||||||||||||
Procedural support and other |
11,898 | 12,184 | -2 | % | 35,902 | 35,243 | 2 | % | ||||||||||||||||
Total peripheral vascular |
67,611 | 66,886 | 1 | % | 205,826 | 201,789 | 2 | % | ||||||||||||||||
Neurovascular: |
||||||||||||||||||||||||
Embolic products |
28,408 | 18,174 | 56 | % | 69,599 | 53,469 | 30 | % | ||||||||||||||||
Neuro access and delivery products |
16,819 | 14,958 | 12 | % | 46,894 | 41,319 | 13 | % | ||||||||||||||||
Total neurovascular |
45,227 | 33,132 | 37 | % | 116,493 | 94,788 | 23 | % | ||||||||||||||||
Research collaboration |
| 7,011 | -100 | % | | 19,426 | -100 | % | ||||||||||||||||
Total net sales |
$ | 112,838 | $ | 107,029 | 5 | % | $ | 322,319 | $ | 316,003 | 2 | % | ||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
October 4, | September 28, | October 4, | September 28, | |||||||||||||||||||||
NET SALES BY GEOGRAPHY | 2009 | 2008 | % change | 2009 | 2008 | % change | ||||||||||||||||||
United States |
$ | 68,430 | $ | 70,452 | -3 | % | $ | 197,779 | $ | 208,773 | -5 | % | ||||||||||||
International |
44,408 | 36,577 | 21 | % | 124,540 | 107,230 | 16 | % | ||||||||||||||||
Total net sales |
$ | 112,838 | $ | 107,029 | 5 | % | $ | 322,319 | $ | 316,003 | 2 | % | ||||||||||||
ev3 Inc.
NON-GAAP FINANCIAL MEASURES
NON-GAAP FINANCIAL MEASURES
To supplement ev3s consolidated financial statements prepared in accordance with GAAP,
ev3 uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP
financial measures used in this release to the most comparable U.S. GAAP measures for the
respective periods can be found in the tables below. In addition, an explanation of the
manner in which ev3s management uses these non-GAAP measures to conduct and evaluate its
business, the economic substance behind managements decision to use these non-GAAP measures,
the substantive reasons why management believes that these non-GAAP measures provide useful
information to investors, the material limitations associated with the use of these non-GAAP
measures and the manner in which management compensates for those limitations is included
following the reconciliation tables below.
ev3 Inc.
RECONCILIATION OF NET SALES TO
NON-GAAP NET SALES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(unaudited)
RECONCILIATION OF NET SALES TO
NON-GAAP NET SALES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(unaudited)
For the Three Months Ended | ||||||||||||||||||||||||
October 4, 2009 | September 28, 2008 | % | ||||||||||||||||||||||
Foreign | % | change | ||||||||||||||||||||||
exchange | Net sales | change | on a | |||||||||||||||||||||
impact as | on a | of net | constant | |||||||||||||||||||||
Net sales, as | compared to | constant | Net sales, as | sales, as | currency | |||||||||||||||||||
reported | prior period | currency basis | reported | reported | basis | |||||||||||||||||||
Net product sales |
||||||||||||||||||||||||
Peripheral vascular: |
||||||||||||||||||||||||
Atherectomy |
$ | 19,607 | $ | 54 | $ | 19,661 | $ | 20,992 | -7 | % | -6 | % | ||||||||||||
Stents |
28,787 | 574 | 29,361 | 26,772 | 8 | % | 10 | % | ||||||||||||||||
Thrombectomy and embolic
protection |
7,319 | 121 | 7,440 | 6,938 | 5 | % | 7 | % | ||||||||||||||||
Procedural support and other |
11,898 | 146 | 12,044 | 12,184 | -2 | % | -1 | % | ||||||||||||||||
Total peripheral vascular |
67,611 | 895 | 68,506 | 66,886 | 1 | % | 2 | % | ||||||||||||||||
Neurovascular: |
||||||||||||||||||||||||
Embolic products |
28,408 | 556 | 28,964 | 18,174 | 56 | % | 59 | % | ||||||||||||||||
Neuro access and delivery products |
16,819 | 270 | 17,089 | 14,958 | 12 | % | 14 | % | ||||||||||||||||
Total neurovascular |
45,227 | 826 | 46,053 | 33,132 | 37 | % | 39 | % | ||||||||||||||||
Total net product sales |
112,838 | 1,721 | 114,559 | 100,018 | 13 | % | 15 | % | ||||||||||||||||
Research collaboration |
| | | 7,011 | -100 | % | -100 | % | ||||||||||||||||
Total net sales |
$ | 112,838 | $ | 1,721 | $ | 114,559 | $ | 107,029 | 5 | % | 7 | % | ||||||||||||
ev3 Inc.
RECONCILIATION OF PERIPHERAL VASCULAR NET SALES TO
NON-GAAP LEGACY PERIPHERAL VASCULAR NET PRODUCT SALES ON A CONSTANT
CURRENCY BASIS AND
NON-GAAP TOTAL LEGACY NET PRODUCT SALES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(unaudited)
RECONCILIATION OF PERIPHERAL VASCULAR NET SALES TO
NON-GAAP LEGACY PERIPHERAL VASCULAR NET PRODUCT SALES ON A CONSTANT
CURRENCY BASIS AND
NON-GAAP TOTAL LEGACY NET PRODUCT SALES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(unaudited)
For the Three Months Ended | ||||||||||||||||||||||||
October 4, 2009 | September 28, 2008 | % | ||||||||||||||||||||||
Foreign | % | change | ||||||||||||||||||||||
exchange | Net sales | change | on a | |||||||||||||||||||||
impact as | on a | of net | constant | |||||||||||||||||||||
Net sales, as | compared to | constant | Net sales, as | sales, as | currency | |||||||||||||||||||
reported | prior period | currency basis | reported | reported | basis | |||||||||||||||||||
Peripheral vascular segment net sales,
as reported |
$ | 67,611 | $ | 895 | $ | 68,506 | $ | 66,886 | 1 | % | 2 | % | ||||||||||||
Atherectomy |
19,607 | 54 | 19,661 | 20,992 | -7 | % | -6 | % | ||||||||||||||||
Legacy peripheral vascular net sales
(non-GAAP) |
48,004 | 841 | 48,845 | 45,894 | 5 | % | 6 | % | ||||||||||||||||
Neurovascular net sales |
45,227 | 826 | 46,053 | 33,132 | 37 | % | 39 | % | ||||||||||||||||
Total legacy net product sales
(non-GAAP) |
$ | 93,231 | $ | 1,667 | $ | 94,898 | $ | 79,026 | 18 | % | 20 | % | ||||||||||||
ev3 Inc.
RECONCILIATION OF NET SALES BY GEOGRAPHY TO
NON-GAAP NET SALES BY GEOGRAPHY ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(unaudited)
RECONCILIATION OF NET SALES BY GEOGRAPHY TO
NON-GAAP NET SALES BY GEOGRAPHY ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(unaudited)
For the Three Months Ended | ||||||||||||||||||||||||
October 4, 2009 | September 28, 2008 | % | ||||||||||||||||||||||
Foreign | % | change | ||||||||||||||||||||||
exchange | Net sales | change | on a | |||||||||||||||||||||
impact as | on a | of net | constant | |||||||||||||||||||||
Net sales, as | compared to | constant | Net sales, as | sales, as | currency | |||||||||||||||||||
reported | prior period | currency basis | reported | reported | basis | |||||||||||||||||||
United States |
$ | 68,430 | $ | | $ | 68,430 | $ | 70,452 | -3 | % | -3 | % | ||||||||||||
International |
44,408 | 1,721 | 46,129 | 36,577 | 21 | % | 26 | % | ||||||||||||||||
Total net sales |
$ | 112,838 | $ | 1,721 | $ | 114,559 | $ | 107,029 | 5 | % | 7 | % | ||||||||||||
ev3 Inc.
RECONCILIATION OF U.S. NET SALES TO
NON-GAAP U.S. NET PRODUCT SALES
(Dollars in thousands)
(unaudited)
RECONCILIATION OF U.S. NET SALES TO
NON-GAAP U.S. NET PRODUCT SALES
(Dollars in thousands)
(unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
October 4, | September 28, | October 4, | September 28, | |||||||||||||||||||||
2009 | 2008 | % change | 2009 | 2008 | % change | |||||||||||||||||||
U.S. net sales, as reported |
$ | 68,430 | $ | 70,452 | -3 | % | $ | 197,779 | $ | 208,773 | -5 | % | ||||||||||||
Research collaboration |
| (7,011 | ) | -100 | % | | (19,426 | ) | -100 | % | ||||||||||||||
U.S. net product sales (non-GAAP) |
$ | 68,430 | $ | 63,441 | 8 | % | $ | 197,779 | $ | 189,347 | 4 | % | ||||||||||||
ev3 Inc.
RECONCILIATION OF NET INCOME (LOSS) TO
NON-GAAP ADJUSTED NET INCOME
(Dollars in thousands)
(unaudited)
RECONCILIATION OF NET INCOME (LOSS) TO
NON-GAAP ADJUSTED NET INCOME
(Dollars in thousands)
(unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
October 4, | September 28, | October 4, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income (loss), as reported |
$ | 6,736 | $ | (7,310 | ) | $ | 28,916 | $ | (44,502 | ) | ||||||
Amortization expense |
6,802 | 8,101 | 18,444 | 24,285 | ||||||||||||
Stock-based compensation |
3,626 | 3,059 | 10,949 | 11,682 | ||||||||||||
Contingent consideration |
2,271 | | 2,467 | | ||||||||||||
Intangible asset impairment |
| | | 10,459 | ||||||||||||
FoxHollow lease reserve adjustment |
| | 3,421 | | ||||||||||||
Realized gain on investments |
| | (4,081 | ) | | |||||||||||
Non-cash tax benefit from acquisitions |
| | (18,998 | ) | | |||||||||||
Non-GAAP adjusted net income |
$ | 19,435 | $ | 3,850 | $ | 41,118 | $ | 1,924 | ||||||||
ev3 Inc.
RECONCILIATION OF NET INCOME (LOSS) PER DILUTED SHARE TO
NON-GAAP ADJUSTED NET EARNINGS PER DILUTED SHARE
(unaudited)
RECONCILIATION OF NET INCOME (LOSS) PER DILUTED SHARE TO
NON-GAAP ADJUSTED NET EARNINGS PER DILUTED SHARE
(unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
October 4, | September 28, | October 4, | September 28, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income (loss) per diluted share, as reported |
$ | 0.06 | $ | (0.07 | ) | $ | 0.27 | $ | (0.43 | ) | ||||||
Amortization expense |
0.06 | 0.08 | 0.18 | 0.24 | ||||||||||||
Stock-based compensation |
0.03 | 0.03 | 0.10 | 0.11 | ||||||||||||
Contingent consideration |
0.02 | | 0.02 | | ||||||||||||
Intangible asset impairment |
| | | 0.10 | ||||||||||||
FoxHollow lease reserve adjustment |
| | 0.03 | | ||||||||||||
Realized gain on investment |
| | (0.04 | ) | | |||||||||||
Non-cash tax benefit from acquisitions |
| | (0.18 | ) | | |||||||||||
Non-GAAP adjusted net earnings
per diluted share |
$ | 0.17 | $ | 0.04 | $ | 0.38 | $ | 0.02 | ||||||||
Weighted average diluted shares outstanding |
112,277,954 | 104,474,600 | 107,719,897 | 104,276,029 | ||||||||||||
ev3 Inc.
RECONCILIATION OF ESTIMATED NET EARNINGS PER DILUTED SHARE TO
ESTIMATED NON-GAAP ADJUSTED NET EARNINGS PER DILUTED SHARE
(unaudited)
RECONCILIATION OF ESTIMATED NET EARNINGS PER DILUTED SHARE TO
ESTIMATED NON-GAAP ADJUSTED NET EARNINGS PER DILUTED SHARE
(unaudited)
For the Three Months Ended | For the Twelve Months Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Estimate (Low) | Estimate (High) | Estimate (Low) | Estimate (High) | |||||||||||||
Estimated net earnings per diluted share |
$ | 0.09 | $ | 0.13 | $ | 0.36 | $ | 0.40 | ||||||||
Amortization expense |
0.06 | 0.06 | 0.23 | 0.23 | ||||||||||||
Stock-based compensation |
0.03 | 0.03 | 0.13 | 0.13 | ||||||||||||
Contingent consideration |
0.02 | 0.02 | 0.05 | 0.05 | ||||||||||||
FoxHollow lease reserve adjustment |
| | 0.03 | 0.03 | ||||||||||||
Realized gain on investment |
| | (0.04 | ) | (0.04 | ) | ||||||||||
Non-cash tax benefit from acquisitions |
| | (0.18 | ) | (0.18 | ) | ||||||||||
Estimated non-GAAP adjusted
net earnings per diluted share |
$ | 0.20 | $ | 0.24 | $ | 0.58 | $ | 0.62 | ||||||||
Estimated weighted average diluted
shares outstanding |
112,800,000 | 112,800,000 | 109,100,000 | 109,100,000 | ||||||||||||
Use and Economic Substance of Non-GAAP Financial Measures Used by ev3 and Usefulness of Such
Non-GAAP Financial Measures to Investors
ev3 uses the non-GAAP financial measures described above as supplemental measures of performance
and believes these measures facilitate operating performance comparisons from period to period and
company to company by factoring out potential differences caused by acquisitions, dispositions,
non-recurring, unusual or infrequent charges not related to ev3s regular, ongoing business,
variations in capital structure, tax positions, depreciation, non-cash charges and certain large
and unpredictable charges. ev3s management uses the non-GAAP financial measures used in this
release to analyze the underlying trends in ev3s business, assess the performance of ev3s core
operations, establish operational goals and forecasts that are used in allocating resources and
evaluate ev3s performance period over period and in relation to its competitors operating
results. Additionally, ev3s management is evaluated on the basis of some of these non-GAAP
financial measures when determining achievement of their incentive compensation performance
targets.
ev3 believes that presenting the non-GAAP financial measures used in this release provides
investors greater transparency to the information used by ev3s management for its financial and
operational decision-making and allows investors to see ev3s results through the eyes of
management. ev3 also believes that providing this information better enables ev3s investors to
understand ev3s operating performance and evaluate the methodology used by ev3s management to
evaluate and measure such performance. ev3s management believes that non-GAAP financial measures
are useful to investors to evaluate ev3s performance period over period and in relation to its
competitors operating results. Because ev3 historically has reported some of these non-GAAP
results to the investment community, management also believes that the disclosure of these non-GAAP
measures provides consistency in ev3s financial reporting and facilitates investors understanding
of ev3s historic operating trends by providing an additional basis for comparisons to prior
periods.
The following is an explanation of each of the items that management excluded from one or more of
the non-GAAP financial measures used in this release and the reasons for excluding each of these
individual items:
| Foreign exchange impact and estimated foreign exchange impact. The impact of foreign exchange rates is highly variable and difficult to predict. The foreign exchange impact is the impact from foreign exchange rates on current period sales compared to prior period sales using the prior periods foreign exchange rates. Estimated foreign exchange impact is the estimated impact of foreign exchange rates on future net sales compared to prior period net sales using estimated future period foreign exchange rates. ev3s management believes that in order to properly understand the underlying business trends and performance of ev3s ongoing operations, management has found and investors may find it useful to consider the impact of excluding changes in foreign exchange rates from ev3s net sales. | ||
| Atherectomy net product sales. In the fourth quarter of 2007, ev3 acquired FoxHollow Technologies, Inc. (FoxHollow). Prior to this acquisition, ev3 did not recognize any atherectomy net sales. In addition to disclosing net sales and growth rates that are determined in accordance with GAAP, ev3s management believes that in order to properly understand underlying business trends in and performance of ev3s legacy peripheral vascular segment business, management has found and investors may find it useful to consider the impact of excluding atherectomy net product sales from ev3s peripheral vascular net product sales and ev3s total net product sales. | ||
| Research collaboration revenue. As a result of the FoxHollow acquisition, ev3 was engaged in research collaboration with Merck & Co., Inc. (Merck). Prior to this acquisition, ev3 did not recognize any research collaboration revenue. This research collaboration was terminated by Merck effective in July 2008. ev3s management believes that in order to properly understand underlying business trends in and performance of ev3s ongoing operations, management has found and investors may find it useful to consider the impact of excluding research collaboration revenue from ev3s net sales. | ||
| Intangible asset impairment. During the second quarter of 2008, as a result of the termination of ev3s research collaboration with Merck, ev3 recorded an asset impairment charge of $10.5 million to write off the remaining carrying value of the related Merck intangible asset that was established at the time of ev3s acquisition of FoxHollow. In addition to disclosing net income that is determined in accordance with GAAP, ev3s management believes that in order to properly understand the underlying business trends and performance of ev3s ongoing operations, management has found and investors may find it useful to consider the impact of excluding the $10.5 million research collaboration asset impairment charges recorded by ev3 in the second quarter of 2008. |
| FoxHollow lease reserve adjustment. In the first quarter of 2009, ev3 recorded an adjustment to its lease reserve for leases acquired in connection with the FoxHollow acquisition. This reserve adjustment is not indicative of ev3s ongoing operating performance. Therefore, ev3s management believes that in order to properly understand the underlying business trends and performance of ev3s ongoing operations, management has found and investors may find it useful to consider the impact of excluding the $3.4 million lease reserve adjustment recorded by ev3 in the first quarter of 2009. | ||
| Realized gain on the divestiture of non-strategic investment assets. In the first quarter of 2009, ev3 recorded a gain of $4.1 million on the sale of certain non-strategic investment assets. This gain was a one-time item and is not indicative of ev3s ongoing operating performance. In order to properly understand the underlying business trends and performance of ev3s ongoing operations, management has found and investors may find it useful to consider the impact of excluding the $4.1 million gain on the divestiture of non-strategic investment assets recorded by ev3 in the first quarter of 2009. | ||
| Contingent consideration. In the second quarter of 2009, ev3 acquired Chestnut Medical Technologies, Inc. (Chestnut). Under the terms of the agreement and plan of merger with Chestnut, ev3 made an initial closing payment in the amount of $79.4 million. In addition to the initial closing payment, ev3 may be obligated to make an additional contingent consideration payment of up to $75 million if the Food and Drug Administration issues a letter granting pre-market approval for the commercialization of Chestnuts Pipeline Embolization Device in the United States pursuant to an indication to treat intracranial aneurysms on or before December 31, 2012. At each reporting date, ev3 remeasures the contingent consideration at fair value until the contingency is resolved. The changes in fair value are recognized in ev3s consolidated statements of operations. ev3s management believes that in order to properly understand the underlying business trends and performance of ev3s ongoing operations, management has found and investors may find it useful to consider excluding the impact of the accounting charge related to contingent consideration of $2.3 million and $2.5 million recorded by ev3 for the third quarter and first nine months of 2009, respectively. | ||
| Non-cash tax benefit from acquisitions. As a result of ev3s acquisition of Chestnut, ev3 recorded a one-time non-cash tax benefit of $19.0 million in the second quarter of 2009. ev3s management believes that in order to properly understand the underlying business trends and performance of ev3s ongoing operations, management has found and investors may find it useful to consider excluding the impact of the tax benefit from the Chestnut acquisition recorded by ev3 in the second quarter of 2009. | ||
| Non-cash stock-based compensation. ev3 excludes stock-based compensation expense from its non-GAAP financial measures primarily because such expense, while constituting an ongoing and recurring expense, is not an expense that requires cash settlement and is not used by ev3s management to assess the core profitability of ev3s business operations. ev3s management also believes that excluding this item from ev3s non-GAAP results is useful to investors to understand the accounting for stock-based compensation and its impact on ev3s operating performance, liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures and it allows for greater transparency to certain line items in ev3s financial statements. | ||
| Amortization expense. ev3 excludes amortization expense from its non-GAAP financial measures primarily because such expense, while constituting an ongoing and recurring expense, is not an expense that requires cash settlement and is not used by ev3s management to assess the core profitability of ev3s business operations. ev3s management also believes that excluding this item from ev3s non-GAAP results is useful to investors to understand ev3s operating performance, liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures and it allows for greater transparency to certain line items in ev3s financial statements. |
Material Limitations Associated with the Use of Non-GAAP Financial Measures and Manner in which ev3
Compensates for these Limitations
Non-GAAP financial measures have limitations as analytical tools and should not be considered in
isolation or as a substitute for ev3s financial results prepared in accordance with GAAP. Some of
the limitations associated with ev3s use of these non-GAAP financial measures are as follows:
| Items such as amortization expense and stock-based compensation do not directly affect ev3s cash flow position; however, such items reflect economic costs to ev3 and are not reflected in ev3s non-GAAP adjusted net income or non-GAAP adjusted net earnings per share, and therefore these non-GAAP measures do not reflect the full economic effect of these items. | ||
| Items such as the FoxHollow lease reserve adjustment and realized gain on the divestiture of non-strategic investment assets are unusual items that do not reflect ev3s regular business activities. The effect of the lease reserve adjustment and the income associated with the divestiture of non-strategic investment assets is not included in ev3s non-GAAP adjusted net income or non-GAAP adjusted net earnings per share. However, these items involve economic costs that are not reflected in the non-GAAP measures. | ||
| Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than ev3, limiting the usefulness of those measures for comparative purposes. | ||
| ev3s management exercises judgment in determining which types of charges or other items should be excluded from the non-GAAP financial measures ev3 uses. |
ev3 compensates for these limitations by relying primarily upon its GAAP results and using non-GAAP
financial measures only supplementally. ev3 provides full disclosure of each non-GAAP financial
measure ev3 uses and detailed reconciliations of each non-GAAP measure to its most directly
comparable GAAP measure. ev3 encourages investors to review these reconciliations. ev3 qualifies
its use of non-GAAP financial measures with cautionary statements as to their limitations.
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