Thoratec Reports 44 Percent Increase in Second Quarter Revenues; |
PERFORMANCE DRIVEN BY SUCCESSFUL U.S. COMMERCIAL LAUNCH OF HEARTMATE II(R)
FOR BRIDGE-TO-TRANSPLANTATION
PLEASANTON, Calif., July 31 /PRNewswire-FirstCall/ -- Thoratec
Corporation (Nasdaq: THOR), a world leader in device-based mechanical
circulatory support therapies to save, support and restore failing hearts,
today said that revenues for the second quarter of 2008 increased 44
percent over revenues in the same period a year ago.
Revenues for the quarter ended June 28, 2008 were $82.6 million versus
$57.3 million in the second quarter of 2007. Net income on a GAAP basis in
the second quarter of fiscal 2008 was $8.7 million, or $0.15 per diluted
share, compared with net income on a GAAP basis of $1.3 million, or $0.02
per diluted share, in the second quarter of 2007. Non-GAAP net income,
which is described later in this press release, was $12.1 million, or $0.20
per diluted share, in the second quarter of 2008, compared with non-GAAP
net income of $5.3 million, or $0.09 per diluted share, in the same period
a year ago.
For the first six months of fiscal 2008, revenues were $147.1 million
versus $114.6 million in the first six months a year ago, or an increase of
28 percent. On a GAAP basis, Thoratec reported net income of $9.0 million,
or $0.16 per diluted share, versus net income of $1.0 million, or $0.02 per
diluted share, a year ago. Non-GAAP net income for the first six months of
fiscal 2008 was $16.7 million, or $0.28 per diluted share, compared with
non- GAAP net income of $9.6 million, or $0.17 per diluted share, in the
first six months of fiscal 2007.
"We were extremely pleased with our performance for the quarter, which
was driven by a 68 percent increase in sales at our Cardiovascular Division
year- over-year," said Gary F. Burbach, president and chief executive
officer.
"The key contributor to this growth was our successful launch of the
HeartMate II LVAS (Left Ventricular Assist System) for bridge-to-
transplantation (BTT) following its approval by the FDA in April. Our
program to bring on new centers is ahead of expectations, as we added 26
during the quarter. We have also seen increased activity at existing
centers and benefited from favorable pricing for the HeartMate II. In
addition, we are seeing continued strong adoption of the HeartMate II in
Europe," he added.
Burbach said that the company believes that factors contributing to
increased utilization of mechanical circulatory support include the ongoing
flow of favorable data around the HeartMate II, increasing clinician
comfort with the device-based on the patient experience and ease of the
procedure-and an improved reimbursement environment.
"Our financial performance also reflects solid growth at our
International Technidyne Corporation (ITC) Division. Our ProTime(R)
alternate site business had strong growth, as did our HEMOCHRON(R)
coagulation product line, and our AVOX co-oximetry systems," Burbach noted.
The company also updated enrollment in the Destination Therapy (DT) arm
of its Pivotal clinical trial for the HeartMate II. As of July 25, 2008,
there were 570 patients enrolled in the DT arm of the trial. Enrollment in
the randomized portion of the DT arm was 350 patients.
FINANCIAL HIGHLIGHTS
Thoratec reported revenues of $82.6 million in the second quarter of
2008 compared with revenues of $57.3 million in the second quarter of 2007.
Cardiovascular Division revenues were $57.5 million versus $34.2 million in
the same period a year ago. Revenues at ITC were $25.1 million versus $23.1
million a year ago.
GAAP gross margin for the second quarter of 2008 was 61.5 percent
versus 58.8 percent a year ago. Non-GAAP gross margin, which excludes SFAS
No. 123R expense and is described later in this press release, was 62.1
percent versus 59.4 percent a year ago. The improvement in gross margin
reflects primarily the increase in average selling prices associated with
U.S. commercial approval of the HeartMate II and favorable pump mix at the
Cardiovascular Division combined with favorable manufacturing variances.
This was offset by lower margins at ITC primarily related to geographic and
product mix and competitive pricing pressure in our skin incision business.
Operating expenses for the second quarters of 2008 and 2007 on a GAAP
basis were $40.0 million and $33.0 million, respectively. On a non-GAAP
basis, operating expenses in the second quarter of 2008 were $34.5 million
compared with $27.6 million in the second quarter of 2007. Operating
expenses on a non- GAAP basis are described later in this press release.
The year-over-year increase in operating expenses is primarily due to
product and market development initiatives, commercialization efforts
around the HeartMate II, and higher compensation expense.
The company's GAAP effective tax rate for the second quarter of 2008
was 27.8 percent versus 6.1 percent in the second quarter of 2007. The
non-GAAP tax rate for the second quarter of 2008, which is described later
in this press release, was 32.4 percent versus 26.8 percent in the prior
year. This increase is primarily related to an increase in projected pre
tax earnings and the absence of R&D tax credits in 2008, which will be
recognized in a future period upon Congressional approval.
On a GAAP and non-GAAP basis, the company's convertible debt was
dilutive to the company's fully diluted weighted average shares
outstanding. The increase in shares was approximately 7.3 million.
Cash and investments at the end of the quarter were $228 million, an
increase of $10 million from the end of fiscal 2007. The cash and
investments balance includes $32.0 million of Auction Rate Securities
classified as long term investments.
The company also provided a breakdown of sales by product line
year-to-date for both of its divisions. The Cardiovascular Division
year-to-date revenue was $97.7 million. HeartMate II and HeartMate(R) XVE
product sales were $69.0 million, an increase of 59 percent year-over-year.
PVAD and IVAD product line sales were $22.0 million, a decrease of two
percent year-over year. CentriMag(R) sales were $5.4 million, an increase
of 108 percent year-over-year, and graft sales were $1.3 million,
consistent with prior year.
The ITC Division year-to-date revenue was $49.3 million. Hospital
point-of-care revenues, which include HEMOCHRON coagulation, AVOX
co-oximetry and IRMA(R) blood gas products, were $27.2 million, an increase
of 16 percent year-over-year. Alternate site revenues, which are primarily
from ProTime sales, were $13.8 million, a seven percent increase over last
year, while skin incision revenues were $8.3 million, a decrease of three
percent versus last year.
GUIDANCE FOR FISCAL 2008
The following statements are based on current expectations. These
statements are forward-looking and actual results may differ materially.
For a more detailed discussion of forward looking statements, please see
additional information below. The company provided an update to guidance
for the full year. Revenues are projected to be between $285 million and
$295 million. GAAP gross margins are expected to be between 58% and 59%,
with non-GAAP gross margins between 59% and 60%. GAAP EPS is expected to be
between $0.20 and $0.26, while non-GAAP EPS is expected to be in a range of
$0.47 to $0.52.
CONFERENCE CALL/WEBCAST INFORMATION
Thoratec will hold a conference call to discuss its financial results
and operating activities for all interested parties at 1:30 p.m., Pacific
Daylight Time (4:30 p.m., Eastern Daylight Time) today. The teleconference
can be accessed by calling (913) 312-0379, passcode 4566478. Please dial in
10-15 minutes prior to the beginning of the call. The webcast will be
available via the Internet at http://www.thoratec.com. A replay of the
conference call will be available through Thursday, August 7, 2008, via
http://www.thoratec.com or by telephone at (719) 457-0820, passcode
4566478.
GAAP TO NON-GAAP RECONCILIATION
Thoratec management evaluates and makes operating decisions using
various measures. These measures are generally based on revenues generated
by its products and certain costs of producing that revenue, such as costs
of product sales, research and development and selling, general and
administrative expenses. We use the following measures, which are not
calculated in accordance with Generally Accepted Accounting Principles
("GAAP"): non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP tax rate, non-GAAP net income, and non-GAAP EPS. These
are non-GAAP financial measures under Section 101 of Regulation G under the
Securities Exchange Act of 1934, as amended. These non-GAAP financial
measures are calculated by excluding certain GAAP financial items that we
believe have less significance to the day-to-day operation of our business.
The company has outlined below the type and scope of these exclusions and
the limitations on the use of the non-GAAP financial measures as a result
of these exclusions.
Management uses these non-GAAP financial measures for financial and
operational decision making, including in the determination of employee
annual cash incentive compensation, as a means to evaluate period-to-period
comparisons, as well as comparisons to our competitors' operating results.
Management also uses this information internally for forecasting and
budgeting, as it believes that the measures are indicative of Thoratec core
operating results. Management also believes that non-GAAP financial
measures provide useful supplemental information to management and
investors regarding the performance of the company's business operations,
provide a greater transparency with respect to key metrics used by
management in its decision making, facilitate comparisons of results for
current periods and guidance for future periods with our historical
operating results, and assist in analyzing future trends.
Non-GAAP net income (loss) consists of GAAP net income (loss) before
taxes, excluding, as applicable, share-based compensation expense under
SFAS No. 123R, amortization of purchased intangibles, the 2007 changes in
the value of the make-whole provision of our convertible notes, as adjusted
by the amount of additional taxes payable or tax benefit that the company
would accrue if it used non-GAAP results instead of GAAP results to
calculate the company's tax liability.
Non-GAAP EPS is defined as non-GAAP net income divided by the weighted
average number of shares on a fully-diluted basis.
Non-GAAP gross profit and gross margin consist of GAAP gross profit and
gross margin excluding share-based compensation expense under SFAS No 123R.
Non-GAAP operating expenses consist of GAAP operating expenses
excluding share-based compensation expense under SFAS No. 123R and
amortization of purchased intangibles
Non-GAAP tax rate consists of the GAAP tax rate adjusted for the tax
effect of the adjustments from GAAP net income to non-GAAP net income.
Management believes that it is useful in measuring Thoratec's
operations to exclude amortization of intangibles, and in-process research
and development expenses. These costs are primarily fixed at the time of an
acquisition and, unlike other fixed costs that result from ordinary
operations, are the result of infrequent and irregular events. Management
believes it is useful to exclude 2007 changes in the value of the
make-whole provision of our convertible notes as this item is also not
indicative of Thoratec's core operating business. The make-whole provision
is a non- operating item that is included in other income (expense) and is
part of our financing activities in 2007.
Because of varying valuation methodologies, subjective assumptions and
the variety of award types that companies can use under SFAS No. 123R,
Thoratec management believes that providing non-GAAP financial measures
that exclude share-based compensation allows investors to compare
Thoratec's recurring core business operating results to those of other
companies and over multiple periods. The exclusion also enhances investors'
ability to review Thoratec's business from the same perspective as Thoratec
management, which believes that share-based compensation expense is not
directly attributable to the underlying performance of the company's
business operations.
There are a number of limitations related to the use of non-GAAP
financial measures. First, non-GAAP financial measures exclude some costs,
namely share-based compensation, that are recurring expenses. Second,
share-based compensation is part of an employee's compensation package and
as such may be useful for investors to consider. Third, the components of
costs that we exclude in our non-GAAP financial measures calculations may
differ from components that our peer companies exclude when they report
their results from operations.
Non-GAAP financial measures should not be considered as a substitute
for measures of financial performance in accordance with GAAP. However,
these measures may provide additional insight into Thoratec's financial
results. Investors and potential investors are strongly encouraged to
review the reconciliation of non-GAAP financial measures contained within
this press release with their most directly comparable GAAP financial
results and not to rely on any single financial measure to evaluate our
business.
The reconciliations of the forward looking non-GAAP financial measures
to the most directly comparable GAAP financial measures in the tables below
include all information reasonably available to Thoratec at the date of
this press release. These tables include adjustments that we can reasonably
predict. Events that could cause the reconciliation to change include
acquisitions and divestitures of business, goodwill and other asset
impairments and sales of marketable equity securities.
The following table includes the GAAP income statement for the three
and six month periods ending in 2008 and 2007.
THORATEC CORPORATION
Condensed Consolidated Statement of Operations
(Unaudited)
(in thousands, except for per share data)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Product sales $82,648 $57,333 $147,075 $114,643
Cost of product sales 31,825 23,648 60,415 46,445
Gross profit 50,823 33,685 86,660 68,198
Operating expenses:
Selling, general and
administrative 23,857 19,134 44,493 41,079
Research and development 12,839 10,767 25,358 21,660
Amortization of purchased
intangible assets 3,296 3,143 6,592 6,296
Total operating expenses 39,992 33,044 76,443 69,035
Income (loss) from operations 10,831 641 10,217 (837)
Other income and (expense):
Interest expense (1,131) (1,074) (2,021) (2,142)
Interest income and other 2,281 1,766 4,459 3,953
Income before income taxes 11,981 1,333 12,655 974
Income tax benefit (expense) (3,330) (80) (3,655) 4
Net income $8,651 $1,253 $9,000 $978
Net income per share
Basic $0.16 $0.02 $0.17 $0.02
Diluted $0.15 $0.02 $0.16 $0.02
Shares used to compute net income
per share:
Basic 54,556 53,370 54,389 53,055
Diluted 62,624 54,728 62,396 54,421
The following table reconciles the specific items excluded from GAAP
net income in the calculation of non-GAAP net income for the periods shown
below:
THORATEC CORPORATION
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited)
(in thousands, except for per share data)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
Net income/(loss) reconciliation 2008 2007 2008 2007
Net income on a GAAP basis $8,651 $1,253 $9,000 $978
Share-based compensation expense:
- Cost of product sales 471 381 913 738
Share-based compensation expense:
- Selling, general and
administrative 1,562 1,757 3,236 4,105
- Research and development 596 591 1,344 1,389
Amortization of purchased
intangibles 3,296 3,143 6,592 6,296
Make-whole provision - (B) 11 - (80)
Income tax effect of non-GAAP
adjustments (2,471) (1,851) (4,433) (3,864)
Net income on a non-GAAP basis $12,105 $5,285 $16,652 $9,562
Three Months Ended Six Months Ended
Diluted net income (loss) per June 28, June 30, June 28, June 30,
share reconciliation 2008 2007 2008 2007
(in thousands, except per
share data)
Diluted net income per share
on a GAAP basis $0.15 $0.02 $0.16 $0.02
Share-based compensation
expense:
- Cost of product sales 0.01 0.01 0.01 0.01
Share-based compensation
expense:
- Selling, general and
administrative 0.02 0.03 0.05 0.08
- Research and development 0.01 0.01 0.02 0.03
Amortization of purchased
intangibles 0.05 0.06 0.11 0.12
Make-whole provision - - - -
Income tax effect of non-GAAP
adjustments (0.04) (0.03) (0.07) (0.07)
Convertible debt dilution
impact - (A) (0.01) (A) - (A) (0.02) (A)
Diluted net income per share
on a non-GAAP basis $0.20 $0.09 $0.28 $0.17
Shares used in calculation of
diluted net income per share
--GAAP 62,624 54,728 62,396 54,421
Shares used in calculation of
diluted net income per share
-- Non-GAAP 62,624 62,018 62,396 61,711
(A) The company's total diluted share count on a non-GAAP basis in Q2 2008
and Q2 2007 & GAAP basis in Q2 2008 includes approximately 7.3 million
shares underlying its convertible notes as they were dilutive for the
quarter.
(B) The Make-whole provision is included in Non-GAAP earnings for Q2 2008.
The following table reconciles the specific items excluded from GAAP
gross profit and gross margin in the calculation of non-GAAP gross profit
and gross margin for the periods shown below:
THORATEC CORPORATION
Reconciliation of GAAP to Non-GAAP Gross Profit
(Unaudited)
(in thousands, except for per share data)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Gross profit
on a GAAP
basis $50,823 61.5% $33,685 58.8% $86,660 58.9% $68,198 59.5%
Share-based
compensation
expense 471 381 913 738
Gross profit on
a non-GAAP
basis $51,294 62.1% $34,066 59.4% $87,573 59.5% $68,936 60.1%
The following tables reconcile the specific items excluded from GAAP
operating expenses in the calculation of non-GAAP operating expenses for
the periods shown below:
THORATEC CORPORATION
Reconciliation of GAAP to Non-GAAP Operating Expenses
(Unaudited)
(in thousands, except for per share data)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Operating expenses on a GAAP basis $39,992 $33,044 $76,443 $69,035
Share-based compensation expense:
- Selling, general and
administrative (1,562) (1,757) (3,236) (4,105)
- Research and development (596) (591) (1,344) (1,389)
Amortization of purchased intangibles (3,296) (3,143) (6,592) (6,296)
Operating expenses on a non-GAAP
basis $34,538 $27,553 $65,271 $57,245
The following table reconciles the GAAP tax rate adjusted for the tax
effect of the adjustments from GAAP net income to non-GAAP net income.
THORATEC CORPORATION
GAAP to Non-GAAP Tax Benefit (Expense) Reconciliation
(Unaudited)
(in thousands, except for per share data)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Tax benefit
(expense) on
a GAAP
basis $(3,330) 27.8% $(80) 6.0% $(3,655) 28.9% $4 -0.4%
Amorti-
zation
of
purchased
intan-
gibles (1,318) (1,219) (2,637) (2,440)
Make-whole
pro-
vision - - - 35
Equity plan
review
adjustment - - - (38)
Share-based
compensation
expense and
other (1,153) (632) (1,795) (1,421)
Tax expense
on a
non-GAAP
basis $(5,801) 32.4% $(1,931) 26.8% $(8,087) 32.7% $(3,860) 28.8%
The following tables reconcile the Guidance on a GAAP and Non GAAP
basis for the periods shown below:
THORATEC CORPORATION
Reconciliation of GAAP to Non-GAAP Forward-Looking Guidance
(Unaudited)
(in thousands, except for per share data)
Gross margin For the Fiscal Year Ended 2008
From To
(in thousands)
Gross profit on a GAAP basis 58% 59%
Share-based compensation expense:
- Cost of product sales 1% 1%
Gross profit on a non-GAAP basis 59% 60%
Diluted net income/(loss) per share
reconciliation For the Fiscal Year Ended 2008
From To
(in thousands, except per share data)
Diluted net income (loss) per share on a
GAAP basis $0.20 $0.26
Share-based compensation expense 0.20 0.20
Amortization of purchased intangibles 0.21 0.21
Income tax effect of non-GAAP
adjustments (0.14) (0.15)
Diluted net income per share on a
non-GAAP basis $0.47 $0.52
Shares used in calculation of diluted
net income (loss) per share -- GAAP 62,801 62,801
Shares used in calculation of
diluted net income per share -- non-
GAAP (a) 62,801 62,801
(a) Shares used in the per share calculation for reconciling items
between GAAP and non-GAAP financial measures.
Thoratec is a world leader in therapies to address advanced stage heart
failure. The company's product lines include the Thoratec(R) VAD and
HeartMate LVAS with nearly 12,000 devices implanted in patients suffering
from heart failure. Additionally, its International Technidyne Corporation
(ITC) Division supplies point-of-care blood testing and skin incision
products. Thoratec is headquartered in Pleasanton, California. For more
information, visit the company's web sites at http://www.thoratec.com or
http://www.itcmed.com.
Thoratec, the Thoratec logo, HeartMate, and HeartMate II are registered
trademarks of Thoratec Corporation, and IVAD is a trademark of Thoratec
Corporation. ITC, A-VOX Systems, AVOXimeter, HEMOCHRON, ProTime, and IRMA
are registered trademarks of International Technidyne Corporation.
CentriMag is a registered trademark of Levitronix LLC.
Many of the preceding paragraphs, particularly but not exclusively
those addressing guidance for fiscal 2008 financial results, future
performance or timelines and milestones for clinical trials, contain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements can be identified by the words, "believes," "views,"
"expects," "projects," "hopes," "could," "will," and other similar words.
Actual results, events or performance could differ materially from these
forward-looking statements based on a variety of factors, many of which are
beyond Thoratec's control. Therefore, readers are cautioned not to put
undue reliance on these statements. Investors are cautioned that all such
statements involve risks and uncertainties, including risks related to the
development of new markets including Destination Therapy, the growth of
existing markets for our products, customer and physician acceptance of
Thoratec products, changes in the mix of existing markets for our products
and related gross margin for such product sales, the results of enrollment
in and timing of clinical trials, including for the HeartMate II, the
ability to improve financial performance, regulatory approval processes,
the effects of healthcare reimbursement and coverage policies, the effects
of seasonality in Thoratec product sales, the effects of price competition
from any Thoratec competitors and the effects of any merger and acquisition
related activities. Forward-looking statements contained in this press
release should be considered in light of these factors and those factors
discussed from time to time in Thoratec's public reports filed with the
Securities and Exchange Commission, such as those discussed under the
heading, "Risk Factors," in Thoratec's most recent annual report on Form
10-K, and as may be updated in subsequent SEC filings. These forward-
looking statements speak only as of the date hereof. Thoratec undertakes no
obligation to publicly release the results of any revisions to these
forward- looking statements that may be made to reflect events or
circumstances after the date hereof, or to reflect the occurrence of
unanticipated events.
SOURCE Thoratec Corporation
back to topRelated links:
CONTACT:
David Smith, Executive Vice President, Chief
Financial Officer of Thoratec Corporation, +1-925-847-8600; or
Neal Rosen of Ruder-Finn, +1-415-692-3058, for Thoratec
Corporation
