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8-K - FORM 8-K - ev3 Inc. | c57804e8vk.htm |
EX-99.2 - EX-99.2 - ev3 Inc. | c57804exv99w2.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 2010 First Quarter Financial Results
First Quarter Net Sales Increase 23% to $123.9 million
First Quarter GAAP EPS Increases to $0.09
Cash and Cash Equivalents Increase to $116.8 Million
Full-Year 2010 Revenue and Earnings Guidance Increased
PLYMOUTH, Minn. April 29, 2010 ev3 Inc. (NASDAQ: EVVV), a global endovascular device company,
today reported financial results for its fiscal first quarter and updated financial guidance for
2010. ev3s net sales totaled $123.9 million in the first quarter of 2010 compared to $100.4
million in the same quarter of the prior year. Excluding $2.9 million of positive impact due to
foreign currency exchange rates, net sales increased 21% 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 in this release.
Robert Palmisano, president and chief executive officer of ev3 Inc., commented, We achieved
another quarter of significant sales growth in both our neurovascular and peripheral vascular
segments that outpaced market growth rates in U.S. and international markets. Our neurovascular
segment, which grew 44% in the first quarter compared to the prior year quarter, reflects the broad
penetration we are making across our entire product line and the positive response to the
international launch of our Pipeline Embolization Device and Solitaire FR Revascularization Device
for ischemic stroke.
Palmisano continued, I am especially pleased by the 13% sales growth we saw in our peripheral
vascular segment during the quarter, which was led by an outstanding performance from our U.S.
sales organization and the launch of our TurboHawk Plaque Excision System, TrailBlazer Support
Catheter and new PowerCross PTA balloon.
ev3s GAAP net income for the first quarter of 2010 was $9.9 million, or $0.09 per diluted share,
compared to a net loss of $(1.8) million, or $(0.02) per diluted share, in the first quarter of
2009. Non-GAAP adjusted net income in the first quarter of 2010 was $22.3 million, or $0.20 per
diluted share, compared to adjusted net income of $7.1 million, or $0.07 per diluted share, in the
first quarter of 2009.
Cash and cash equivalents totaled $116.8 million as of the end of the first quarter of 2010, an
increase of $18.8 million compared to the end of the fourth quarter of 2009.
Palmisano concluded, Operationally, this was another very strong quarter for ev3. In addition to
sales growth, we continue to emphasize gross margin improvement and profitability as our primary
objectives, so I was very pleased to see sequential quarter gross margin expansion of 50 basis
points to 76.4%. We will continue to focus on improving execution, driving manufacturing
efficiencies and increasing leverage.
Sales Review
By product segment, peripheral vascular net sales increased 13% in the first quarter of 2010 versus
the prior year quarter and 11% on a constant currency basis. Neurovascular net sales increased 44%
versus the prior year quarter and 38% on a constant currency basis.
On a geographic basis, U.S. net sales increased 18% versus the prior year quarter. International
net sales increased 31% versus the prior year quarter and 24% on a constant currency basis.
Changes in foreign currency exchange rates had a positive impact of $2.9 million on net sales
compared to the first quarter of the prior year.
An investor presentation summarizing the companys first quarter of 2010 results is available at
http://ir.ev3.net.
Outlook
ev3 has increased its full-year guidance and now expects fiscal year 2010 net sales to be in the
range of $520 to $530 million compared to $449.1 million of net sales in 2009. Net sales growth is
expected to be approximately 16% to 18%. At current average rates, foreign currency exchange rate
fluctuations are expected to have a minimal impact on revenue in 2010 compared to 2009. ev3
expects non-GAAP adjusted earnings per share to be in the range of $0.87 to $0.92 per diluted
share, an increase of 43% to 51% over prior year based on approximately 115.4 million shares
outstanding. ev3s adjusted net earnings per share guidance excludes estimated amortization
expense of approximately $26.0 million, non-cash stock-based compensation of approximately $15.5
million, and charges relating to the estimated change in fair value of the future contingent
consideration associated with the Chestnut acquisition of $17.2 million.
The company expects second quarter of 2010 net sales to be in the range of $129 to $133 million, an
increase of 18% to 22% over the second quarter of 2009. At current average rates, foreign currency
exchange rate fluctuations are expected to have a minimal impact on revenue growth in the second
quarter of 2010. ev3 expects non-GAAP adjusted earnings per share to be in the range of $0.18 to
$0.21 per diluted share, based on approximately 115.1 million shares outstanding, compared to $0.14
per diluted share in the second quarter of 2009. ev3s non-GAAP adjusted earnings per share for
the second quarter of 2010 excludes estimated amortization expense of approximately $6.5 million,
non-cash stock-based compensation of approximately $3.9 million and charges relating to the
estimated change in fair value of the future contingent consideration associated with the Chestnut
acquisition of $8.1 million.
Earnings Call Information
ev3 will host a conference call today, April 29, 2010, beginning at 7:30 a.m. Central Time (8:30
a.m. Eastern Time) to review its results of operations for the first quarter of 2010 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 888-680-0860 (U.S.) or +1-617-213-4852 (International).
The participant passcode is 68698365.
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 82131781. The
audio replay will be available beginning at 10:30 a.m. Central Time on Thursday, April 29, 2010
until Thursday, May 6, 2010.
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 plaque excision systems, peripheral angioplasty balloons, stents,
embolic protection devices, liquid embolics, embolization coils, flow diversion, 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, TurboHawk, TrailBlazer, PowerCross, Pipeline and Solitaire 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, other words of similar meaning or the use of future
dates. 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 global economic
conditions, 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. 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 | ||||||||
April 4, | April 5, | |||||||
2010 | 2009 | |||||||
Net sales |
$ | 123,854 | $ | 100,395 | ||||
Operating expenses: |
||||||||
Cost of goods sold (a) |
29,227 | 30,988 | ||||||
Sales, general and administrative (a) |
61,827 | 55,648 | ||||||
Research and development (a) |
13,839 | 11,578 | ||||||
Amortization of intangible assets |
6,656 | 5,828 | ||||||
Contingent consideration |
2,498 | | ||||||
Total operating expenses |
114,047 | 104,042 | ||||||
Income (loss) from operations |
9,807 | (3,647 | ) | |||||
Other expense (income): |
||||||||
Gain on investments, net |
| (4,067 | ) | |||||
Interest expense, net |
197 | 213 | ||||||
Other expense, net |
354 | 2,208 | ||||||
Income (loss) before income taxes |
9,256 | (2,001 | ) | |||||
Income tax benefit |
(608 | ) | (192 | ) | ||||
Net income (loss) |
$ | 9,864 | $ | (1,809 | ) | |||
Earnings per share: |
||||||||
Net income (loss) per common share: |
||||||||
Basic |
$ | 0.09 | $ | (0.02 | ) | |||
Diluted |
$ | 0.09 | $ | (0.02 | ) | |||
Weighted average shares outstanding: |
||||||||
Basic |
112,674,997 | 105,030,020 | ||||||
Diluted |
114,386,308 | 105,030,020 | ||||||
(a) | Includes stock-based compensation charges of: |
Cost of goods sold |
$ | 142 | $ | 245 | ||||
Sales, general and administrative |
2,864 | 3,098 | ||||||
Research and development |
308 | 368 | ||||||
$ | 3,314 | $ | 3,711 | |||||
ev3 Inc. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (unaudited) |
April 4, | December 31, | |||||||
2010 | 2009 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 116,801 | $ | 98,050 | ||||
Accounts receivable, less allowance of $6,843 and $7,260, respectively |
87,454 | 90,711 | ||||||
Inventories, net |
46,138 | 45,054 | ||||||
Prepaid expenses and other current assets |
9,736 | 6,645 | ||||||
Total current assets |
260,129 | 240,460 | ||||||
Restricted cash |
4,187 | 4,346 | ||||||
Property and equipment, net |
27,909 | 29,159 | ||||||
Goodwill |
367,575 | 367,486 | ||||||
Intangible assets, net |
248,473 | 254,288 | ||||||
Other assets |
509 | 550 | ||||||
Total assets |
$ | 908,782 | $ | 896,289 | ||||
Liabilities and stockholders equity |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ | 2,500 | $ | 2,500 | ||||
Accounts payable |
14,375 | 16,737 | ||||||
Accrued compensation and benefits |
24,662 | 32,239 | ||||||
Accrued liabilities |
24,892 | 22,453 | ||||||
Total current liabilities |
66,429 | 73,929 | ||||||
Long-term debt |
3,333 | 3,958 | ||||||
Other long-term liabilities |
66,425 | 63,908 | ||||||
Total liabilities |
136,187 | 141,795 | ||||||
Stockholders equity |
||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued
and outstanding as of April 4, 2010 and December 31, 2009 |
| | ||||||
Common stock, $0.01 par value, 300,000,000 shares authorized,
112,956,788 and 112,345,500 shares issued and outstanding as of
April 4, 2010 and December 31, 2009, respectively |
1,130 | 1,123 | ||||||
Additional paid-in capital |
1,836,789 | 1,828,655 | ||||||
Accumulated deficit |
(1,064,880 | ) | (1,074,744 | ) | ||||
Accumulated other comprehensive loss |
(444 | ) | (540 | ) | ||||
Total stockholders equity |
772,595 | 754,494 | ||||||
Total liabilities and stockholders equity |
$ | 908,782 | $ | 896,289 | ||||
ev3 Inc.
SELECTED NET SALES INFORMATION
(Dollars in thousands)
(unaudited)
SELECTED NET SALES INFORMATION
(Dollars in thousands)
(unaudited)
NET SALES BY SEGMENT
For the Three Months Ended | ||||||||||||
April 4, | April 5, | |||||||||||
2010 | 2009 | % change | ||||||||||
Peripheral vascular: |
||||||||||||
Plaque excision* |
$ | 20,485 | $ | 18,308 | 12 | % | ||||||
Stents |
29,873 | 28,174 | 6 | % | ||||||||
Thrombectomy and embolic protection |
9,445 | 8,047 | 17 | % | ||||||||
Procedural support and other |
14,974 | 11,673 | 28 | % | ||||||||
Total peripheral vascular |
74,777 | 66,202 | 13 | % | ||||||||
Neurovascular: |
||||||||||||
Embolic products and stents |
32,470 | 19,547 | 66 | % | ||||||||
Neuro access and delivery products |
16,607 | 14,646 | 13 | % | ||||||||
Total neurovascular |
49,077 | 34,193 | 44 | % | ||||||||
Total net sales |
$ | 123,854 | $ | 100,395 | 23 | % | ||||||
NET SALES BY GEOGRAPHY
For the Three Months Ended | ||||||||||||
April 4, | April 5, | |||||||||||
2010 | 2009 | % change | ||||||||||
United States |
$ | 72,957 | $ | 61,654 | 18 | % | ||||||
International |
50,897 | 38,741 | 31 | % | ||||||||
Total net sales |
$ | 123,854 | $ | 100,395 | 23 | % | ||||||
* | Formerly referred to as atherectomy |
ev3 Inc.
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 | ||||||||||||||||||||||||
April 4, 2010 | April 5, 2009 | |||||||||||||||||||||||
Foreign | Net sales | % | % | |||||||||||||||||||||
exchange | on a | change of | change on | |||||||||||||||||||||
impact as | constant | net sales, | a constant | |||||||||||||||||||||
Net sales, as | compared to | currency | Net sales, as | as | currency | |||||||||||||||||||
reported | prior period | basis | reported | reported | basis | |||||||||||||||||||
Net sales |
||||||||||||||||||||||||
Peripheral vascular: |
||||||||||||||||||||||||
Plaque excision |
$ | 20,485 | $ | (65 | ) | $ | 20,420 | $ | 18,308 | 12 | % | 12 | % | |||||||||||
Stents |
29,873 | (550 | ) | 29,323 | 28,174 | 6 | % | 4 | % | |||||||||||||||
Thrombectomy and embolic protection |
9,445 | (130 | ) | 9,315 | 8,047 | 17 | % | 16 | % | |||||||||||||||
Procedural support and other |
14,974 | (246 | ) | 14,728 | 11,673 | 28 | % | 26 | % | |||||||||||||||
Total peripheral vascular |
74,777 | (991 | ) | 73,786 | 66,202 | 13 | % | 11 | % | |||||||||||||||
Neurovascular: |
||||||||||||||||||||||||
Embolic products and stents |
32,470 | (1,291 | ) | 31,179 | 19,547 | 66 | % | 60 | % | |||||||||||||||
Neuro access and delivery products |
16,607 | (587 | ) | 16,020 | 14,646 | 13 | % | 9 | % | |||||||||||||||
Total neurovascular |
49,077 | (1,878 | ) | 47,199 | 34,193 | 44 | % | 38 | % | |||||||||||||||
Total net sales |
$ | 123,854 | $ | (2,869 | ) | $ | 120,985 | $ | 100,395 | 23 | % | 21 | % | |||||||||||
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 | ||||||||||||||||||||||||
April 4, 2010 | April 5, 2009 | |||||||||||||||||||||||
Foreign | Net sales | % | % | |||||||||||||||||||||
exchange | on a | change of | change on | |||||||||||||||||||||
impact as | constant | net sales, | a constant | |||||||||||||||||||||
Net sales, as | compared to | currency | Net sales, as | as | currency | |||||||||||||||||||
reported | prior period | basis | reported | reported | basis | |||||||||||||||||||
United States |
$ | 72,957 | $ | | $ | 72,957 | $ | 61,654 | 18 | % | 18 | % | ||||||||||||
International |
50,897 | (2,869 | ) | 48,028 | 38,741 | 31 | % | 24 | % | |||||||||||||||
Total net sales |
$ | 123,854 | $ | (2,869 | ) | $ | 120,985 | $ | 100,395 | 23 | % | 21 | % | |||||||||||
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 | ||||||||
April 4, | April 5, | |||||||
2010 | 2009 | |||||||
Net income (loss), as reported |
$ | 9,864 | $ | (1,809 | ) | |||
Amortization expense |
6,656 | 5,828 | ||||||
Stock-based compensation |
3,314 | 3,711 | ||||||
Contingent consideration |
2,498 | | ||||||
FoxHollow lease reserve adjustment |
| 3,421 | ||||||
Realized gain on investment |
| (4,081 | ) | |||||
Non-GAAP adjusted net income |
$ | 22,332 | $ | 7,070 | ||||
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 | ||||||||
April 4, | April 5, | |||||||
2010 | 2009 | |||||||
Net income (loss) per diluted share, as reported |
$ | 0.09 | $ | (0.02 | ) | |||
Amortization expense |
0.06 | 0.06 | ||||||
Stock-based compensation |
0.03 | 0.04 | ||||||
Contingent consideration |
0.02 | | ||||||
FoxHollow lease reserve adjustment |
| 0.03 | ||||||
Realized gain on investment |
| (0.04 | ) | |||||
Non-GAAP adjusted net earnings
per diluted share |
$ | 0.20 | $ | 0.07 | ||||
Weighted average diluted shares outstanding |
114,386,308 | 105,157,042 | ||||||
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 | |||||||||||||||
July 4, | July 4, | December 31, | December 31, | |||||||||||||
2010 | 2010 | 2010 | 2010 | |||||||||||||
Estimate (Low) | Estimate (High) | Estimate (Low) | Estimate (High) | |||||||||||||
Estimated net earnings per diluted share |
$ | 0.02 | $ | 0.05 | $ | 0.36 | $ | 0.41 | ||||||||
Amortization expense |
0.06 | 0.06 | 0.23 | 0.23 | ||||||||||||
Stock-based compensation |
0.03 | 0.03 | 0.13 | 0.13 | ||||||||||||
Contingent consideration |
0.07 | 0.07 | 0.15 | 0.15 | ||||||||||||
Estimated non-GAAP adjusted
net earnings per diluted share |
$ | 0.18 | $ | 0.21 | $ | 0.87 | $ | 0.92 | ||||||||
Estimated weighted average diluted shares outstanding |
115,100,000 | 115,100,000 | 115,400,000 | 115,400,000 | ||||||||||||
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,
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. 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 following items
recorded for the first quarter of 2010 and 2009:
| 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. | ||
| 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 $75.0 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 change in fair value of $2.5 million for the first quarter of 2010 was recognized in ev3s consolidated statements of operations. | |||
| FoxHollow lease reserve adjustment. In the first quarter of 2009, ev3 recorded a $3.4 million 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. | ||
| 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 is not indicative of ev3s ongoing operating performance. | ||
| 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. | ||
| 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. |
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, stock-based compensation, and contingent consideration 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 items that do not reflect ev3s ongoing business activities. The effect of these items 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 only using
non-GAAP financial measures on a supplemental basis. 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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