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The company also announced today that it will be seeking a divestiture of its Axsun Technologies, Inc. subsidiary. In addition, the company said that it and St. Jude Medical, Inc., (NYSE: STJ) have agreed to settle all existing litigation between the two companies. For the quarter ended June 30, 2014, Volcano reported revenues of $102.6 million versus revenues of $101.3 million in the same period a year ago. Foreign currency exchange rates did not have a material impact on revenues during the quarter. Medical segment revenues increased approximately two percent on a reported basis. The company reported net income on a GAAP basis of $282,000, or $0.01 per diluted share, in the second quarter of 2014, versus a net loss of $2.4 million, or $0.04 per share, in the same period a year ago. The results for the second quarter of 2014 included an acquisition-related benefit of $7.2 million related to an adjustment to a contingent liability resulting in a net benefit of $6.4 million, while the results for the second quarter of 2013 included a gain on a strategic investment of $2.2 million. Excluding acquisition-related items, amortization of intangibles and non-cash interest expense on convertible notes, net of tax, the company reported non-GAAP net income of $0.01 per diluted share, compared with non-GAAP earnings per diluted share of $0.03 in the second quarter a year ago. For the first six months of 2014, Volcano reported revenues of $197.1 million versus revenues of $194.6 million in the first six months of 2013. On a constant currency basis, revenues increased three percent year-over-year after adjusting for a negative impact of approximately $2.7 million from foreign currency. Medical segment revenues increased approximately two and three percent on a reported and constant currency basis, respectively, versus the first six months of 2013. For the first six months of 2014, the company reported a net loss on a GAAP basis of $10.6 million, or $0.21 per share, versus a net loss of $5.5 million, or $0.10 per share, in the same period a year ago. The results for the first six months of 2014 included a net acquisition-related benefit of $5.4 million, while the results for the first six months of 2013 included other income of $4.2 million. Excluding acquisition-related items, amortization of intangibles and non-cash interest expense on convertible notes, net of tax, the company reported a non-GAAP net loss of $0.10 per share in the first six months of 2014, compared with non-GAAP net earnings per diluted share of $0.06 in the first six months of 2013. "Our results for the quarter reflect continued expansion of our IVUS (Intravascular Ultrasound) peripheral business in the U.S. and strong growth for our FFR (Fractional Flow Reserve) disposable business in Japan and Europe," said Scott Huennekens, president and chief executive officer. "These gains helped offset the impact of the continued decline in our coronary IVUS disposable activity." "The second quarter was highlighted by the acquisition of AtheroMed, Inc., and its Phoenix® Atherectomy System used in the treatment of peripheral artery disease," he continued. "We are on track to initiate a limited market release of the Phoenix device later this year and a full market release in early 2015. In addition, during the quarter we began the roll out of our iFR® (Instant Wave-Free Ratio™) FFR offering and SyncVision™ Co- Registration System in the U.S.," he added. With respect to the planned Axsun divestiture, Huennekens said, "This decision was driven by our long-term strategy to focus on coronary imaging and physiology leadership, peripheral expansion, profitability and business scale. The Axsun business and financial model is no longer a strategic fit with Volcano. We greatly appreciate the significant contributions of the Axsun team to Volcano over the past several years." Under terms of the settlement with St. Jude Medical, the parties have agreed to dismiss their lawsuits with prejudice, with neither party admitting liability to the other. Each party will be granted a release of liability for alleged misconduct, granted a license to all patents-in-suite and granted a covenant not to sue as to various current and future products. As part of the settlement agreement, no financial payments will be made to either party by the other. "We are pleased with the resolution of these litigation matters and believe this settlement will enable us to better focus on the needs of doctors and patients," Huennekens said. Guidance For the third quarter of 2014, Volcano expects revenues in the range of $95.0-$97.0 million on a reported and $95.5-$97.5 million constant currency basis. It expects gross margins will be in the range of 62.0-62.5 percent and that operating expenses will be in the range of 69.0-70.0 percent of revenues. The company expects a net loss per share of $0.17-$0.19 on a GAAP basis and $0.04-$0.06 on a non-GAAP basis. Conference Call Information About Volcano Corporation Note Regarding the Use of Non-GAAP Financial Measures Constant Currency Basis Revenue Changes: Volcano reports changes on a constant currency basis, which is a non-GAAP financial measure. Volcano believes that investors' understanding of the company's short-term and long-term financial results is enhanced by taking into consideration the impact of foreign currency translation on revenues. In addition, Volcano's management uses results of operations before currency translation to evaluate the operational performance of Volcano and as a basis for strategic planning. Volcano reports its expectations of earnings per share performance excluding certain expenses described below; for additional details please see the "Reconciliation of GAAP to non-GAAP EPS Guidance," table in this press release. This accompanying table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. Exclusion of Acquisition-Related Expenses: Volcano excludes acquisition-related expenses because it does not consider these acquisition-related costs and adjustments to be related to the continuing organic operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drive the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. Exclusion of Amortization of Intangibles: Volcano excludes amortization of intangibles because it is a non-cash expense relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, which consist primarily of developed or in-process technology, are valued and amortized over their estimated lives. Volcano believes that since intangible assets represent efforts of the acquired company to build value prior to the acquisition, Volcano management eliminates the impact of the amortization when evaluating its current operating performance. Exclusion of Non-Cash Interest Expenses: In addition to disclosing the financial statement impact of the authoritative guidance for convertible debt accounting, Volcano management believes that excluding the impact of this authoritative guidance is appropriate because it is non-cash in nature, may provide meaningful supplemental information regarding elements of the company's borrowing costs in order to properly understand its operational performance and liquidity, and facilitates comparisons to competitors' results. Forward-Looking Statements |
