Volcano Corporation Reports Third Quarter 2012 Results

            Volcano Corporation Reports Third Quarter 2012 Results

PR Newswire

SAN DIEGO, Nov. 6, 2012

SAN DIEGO, Nov. 6, 2012 /PRNewswire/ -- Volcano Corporation (NASDAQ: VOLC), a
leading developer and manufacturer of precision guided therapy tools designed
to enhance the diagnosis and treatment of coronary and peripheral vascular
disease, today reported results for the third quarter of 2012.

For the quarter ended September 30, 2012, Volcano reported revenues of $93.7
million, an increase of nine percent on a reported basis and 12 percent on a
constant currency basis after adjusting for a three percent negative impact
from foreign currency. Medical segment revenues increased nine percent on a
reported basis and 12 percent on a constant currency basis versus the third
quarter a year ago.

The company reported net income of $2.0 million, or $0.04 per diluted share,
in the third quarter of 2012, versus net income of $2.6 million, or $0.05 per
diluted share, in the third quarter of 2011.

For the first nine months of 2012, Volcano reported revenues of $279.4
million, an increase of 11 percent on a reported basis and 12 percent on a
constant currency basis versus the same period a year ago. The company
reported net income of $5.5 million, or $0.10 per diluted share, compared with
net income of $8.7 million, or $0.16 per diluted share, in the first nine
months of 2011.

"Volcano demonstrated strong momentum in the quarter as we continued to
execute on our functional PCI market development and market share strategies
despite a challenging economic environment, particularly in Europe," said
Scott Huennekens, president and chief executive officer.

"We generated a 13 percent increase in our disposable revenues on a constant
currency basis, driven by the continued strong growth of our FFR (Fractional
Flow Reserve) disposable business, where revenues grew 54 percent
year-over-year on constant currency basis with solid increases across all of
our key geographies," he noted.

"Helping to drive the growth of our FFR business is the growing volume of
positive data, including the FAME II data that showed the use of FFR ensured
that the right patients received stents and reduced revascularization and
rehospitalization rates," Huennekens added. "The FAME II data has been
augmented by the release of a number of important FFR studies at the recent
Transcatheter Cardiovascular Therapeutics (TCT) conference that further
portrayed FFR as not only the gold standard for determining ischemia, but also
as an important contributor to achieving improved patient outcomes in a
cost-effective manner."

"In addition to the release of favorable data at TCT, we received positive
feedback from clinicians to new products and those in our development
pipeline, including the newly-launched PrimeWire Prestige® PLUS pressure guide
wire with AccuSense™ technology, which provides additional stability during
long procedures," Huennekens noted.

"We also exhibited our new Visions® PV .035 Digital IVUS (Intravascular
Imaging) catheter, which recently received market clearance in both the U.S.
and Europe. These approvals represent an important milestone in our strategy
to expand market adoption of IVUS in new indications as the device has
applications in large vessels, such as atherectomy, venous and other complex
lesion indications," he stated.

Guidance for 2012

The company provided updated guidance for fiscal 2012. The company now expects
total revenues for 2012 will be in the range of $380-$384 million versus prior
guidance of $384-$390 million, due to its transition to a direct sales model
in Spain and continued softness in PCI activity, primarily in the U.S. It
continues to expect gross margins of 65-66 percent. It now expects operating
expenses will be 59-60 percent of revenues versus prior guidance of 58-59
percent of revenues. The company continues to expect earnings per diluted
share of $0.18-$0.21 and that weighted average shares on a diluted basis for
the year will be approximately 55.5 million shares.

Conference Call Information

The company will hold a conference call at 2 p.m., Pacific Standard Time (5
p.m., Eastern Standard Time) today. The teleconference can be accessed by
calling (631) 291-4555, passcode 40234244, or via the company's website at
http://www.volcanocorp.com. Please dial in or access the webcast 10-15 minutes
prior to the beginning of the call. A replay of the conference call will be
available through November 13 at (404) 537-3406, passcode 40234244, and via
the company's website at http://www.volcanocorp.com.

About Volcano

Volcano Corporation is revolutionizing the medical device industry with a
broad suite of technologies that make imaging and therapy simpler, more
informative and less invasive. Our products empower physicians around the
world with a new generation of analytical tools that deliver more meaningful
information—using sound and light as the guiding elements. Founded in
cardiovascular care and expanding into other specialties, Volcano is changing
the assumption about what is possible in improving patient outcomes by
combining imaging and therapy together. For more information, visit the
company's website at www.volcanocorp.com.

Note Regarding Use of Non-GAAP Financial Measures

Volcano reports changes in revenue 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 trends is enhanced by taking
into consideration the impact of foreign currency translation on revenue. 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. Investors should consider these non-GAAP measures in
addition to, and not as a substitute for, or superior to, financial
performance measures prepared in accordance with U.S. GAAP.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the U.S. Private Securities Litigation Reform Act of 1995. Any statements in
this press release regarding Volcano's business that are not historical facts
may be considered "forward-looking statements." Forward-looking statements are
based on management's current expectations and are subject to risks and
uncertainties that may cause Volcano's actual results to differ materially and
adversely from statements contained herein. Some of the potential risks and
uncertainties that could cause actual results to differ include the risk that
Volcano's revenue, expense, earnings, earnings per share, margin or tax rate
projections may turn out to be inaccurate or Volcano may encounter
unanticipated difficulty in achieving those projections; global and regional
macroeconomic conditions, generally, and in the medical device and telecom
industries specifically; currency exchange rate fluctuations; the effect of
competitive factors and the company's reactions to those factors; purchasing
decisions with respect to the company's products; the pace and extent of
market adoption of the company's products and technologies; uncertainty in the
process of obtaining regulatory approval or clearance for Volcano's products
or devices; the success of Volcano's growth strategies; risks associated with
Volcano's international operations; timing and achievement of product
development milestones; outcome of ongoing or future litigation; the impact
and benefits of market development; our ability to protect our intellectual
property; dependence upon third parties; unexpected new data, safety and
technical issues; market conditions and other risks inherent to medical and/or
telecom device development and commercialization. These and additional risks
and uncertainties are more fully described in Volcano's filings made with the
Securities and Exchange Commission, including our most recent quarterly report
on Form 10-Q, and other filings made with the Securities and Exchange
Commission. Undue reliance should not be placed on forward-looking statements,
which speak only as of the date they are made. Volcano disclaims any
obligation to update any forward-looking statements to reflect new
information, events or circumstances after the date they are made, or to
reflect the occurrence of unanticipated events.







VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                       September 30,      December 31,
                                       2012                 2011
Assets
Current assets:
Cash and cash equivalents            $      68,707  $     107,016
Short-term available-for-sale         173,079              112,327
investments
Accounts receivable, net             71,134               69,469
Inventories                          49,392               41,306
Prepaid expenses and other current    19,797               19,939
assets
Total current assets                 382,109              350,057
Restricted cash                      693                  692
Long-term available-for-sale          17,348               30,919
investments
Property and equipment, net          103,006              81,097
Intangible assets, net               15,865               15,245
Goodwill                             2,487                2,487
Other non-current assets             17,463               16,227
Total Assets                         $     538,971   $     496,724
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                     $      14,160  $      12,911
Accrued compensation                 18,655               20,251
Accrued expenses and other current    23,512               16,689
liabilities
Deferred revenues                    8,603                7,077
Current maturities of long-term debt 48                   72
Total current liabilities            64,978               57,000
Convertible senior notes             99,238               95,663
Other long-term debt                 38                   74
Deferred revenues                    3,719                3,168
Other non-current liabilities        1,801                1,582
Total liabilities                    169,774              157,487
Stockholders' equity                 369,197              339,237
Total Liabilities and Stockholders'   $     538,971   $     496,724
Equity







VOLCANO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                                 Three Months Ended      Nine Months Ended
                                 September 30,           September 30,
                                 2012        2011        2012        2011
Revenues                         $ 93,656    $ 85,767    $ 279,389   $ 250,798
Cost of revenues, excluding        33,248      29,538      94,797      84,175
amortization of intangibles
Gross profit                       60,408      56,229      184,592     166,623
Operating expenses:
Selling, general and               40,699      36,034      127,035     106,982
administrative
Research and development           13,032      13,928      40,560      40,337
Amortization of intangibles        710         860         2,470       2,572
Total operating expenses           54,441      50,822      170,065     149,891
Operating income                   5,967       5,407       14,527      16,732
Interest income                    223         226         656         701
Interest expense                   (1,844)     (1,834)     (4,993)     (5,895)
Exchange rate loss                 (218)       (502)       (319)       (1,181)
Other expense, net                 (23)        -           (31)        (2)
Income before income tax           4,105       3,297       9,840       10,355
Income tax expense                 2,130       669         4,295       1,684
Net income                       $ 1,975     $ 2,628     $ 5,545     $ 8,671
Net income per share:
Basic                            $ 0.04      $ 0.05      $ 0.10      $ 0.17
Diluted                          $ 0.04      $ 0.05      $ 0.10      $ 0.16
Shares used in calculating net
income per share:
Basic                              53,659      52,517      53,309      52,188
Diluted                            55,265      54,947      55,097      54,605







VOLCANO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                      Nine Months Ended
                                                      September 30,
                                                      2012         2011
Operating activities
Net income                                            $ 5,545      $ 8,671
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                           17,448       17,159
Amortization of investment premium, net                2,023        2,727
Accretion of debt discount on convertible senior        3,700        3,470
notes
Non-cash stock-based compensation expense               11,428       9,605
Other non-cash adjustments                              2,502        80
Changes in operating assets and liabilities             (5,362)      (21,159)
Net cash provided by operating activities               37,284       20,553
Investing activities
Purchase of short-term and long-term                    (237,669)    (255,261)
available-for-sale investments
Sale or maturity of short-term and long-term            188,556      266,363
available-for-sale investments
Capital expenditures                                    (36,589)     (30,374)
Cash paid for intangible assets and other investments   (3,107)      (1,673)
Proceeds from foreign currency exchange contracts       1,187        1,164
Payment for foreign currency exchange contracts         (215)        (3,962)
Net cash used in investing activities                   (87,837)     (23,743)
Financing activities
Repayment of debt                                       (68)         (46)
Proceeds from sale of common stock under employee
stock purchase plan and                                 12,288       12,620
 exercise of common stock options
Net cash provided by financing activities               12,220       12,574
Effect of exchange rate changes on cash and cash        24           278
equivalents
Net (decrease) increase in cash and cash equivalents    (38,309)     9,662
Cash and cash equivalents, beginning of period          107,016      43,429
Cash and cash equivalents, end of period              $ 68,707     $ 53,091





VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(unaudited)
                    Three Months    Percentage                      Constant
                    Ended           Change     Currency Impact    Currency
                    September 30,                                   Percentage
                    2012    2011    2011 to     Dollar  Percentage  Change (a)
                                    2012
Medical segment:
Consoles:
United States       $ 6.0  $ 6.0  -      %    $     -      %    -      %
                                                -
Japan               0.8     0.6     31          -       (1)         32
Europe              1.4     1.5     (8)         (0.2)   (14)        6
Rest of world       1.5     1.6     (6)         -       -           (6)
Total Consoles      $ 9.7  $ 9.7  -           $(0.2)  (2)         2
IVUS
single-procedure
disposables:
United States       $19.1   $18.3   5      %    $     -      %    5      %
                                                -
Japan               23.1    23.7    (2)         (0.2)   -           (2)
Europe              4.7     6.2     (23)        (0.7)   (11)        (12)
Rest of world       1.7     1.6     1           -       -           1
Total IVUS
single-procedure    $48.6   $49.8   (2)         $(0.9)  (1)         (1)
disposables
FFR
single-procedure
disposables:
United States       $13.0   $ 9.3  40     %    $     -      %    40     %
                                                -
Japan               4.0     1.4     192         -       (3)         195
Europe              6.5     5.7     15          (1.0)   (17)        32
Rest of world       1.1     0.3     213         -       -           213
Total FFR
single-procedure    $24.6   $16.7   48          $(1.0)  (6)         54
disposables
Other               $ 7.8  6.8     15     %    (0.1)   (1)    %    16     %
Sub-total medical   $90.7   $83.0   9           $(2.2)  (3)         12
segment
Industrial segment  $ 3.0  2.8     5           -       -           5
Total               $93.7   $85.8   9           $(2.2)  (3)         12







VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(unaudited)
                  Nine Months       Percentage                      Constant
                  Ended             Change     Currency Impact     Currency
                  September 30,                                     Percentage
                  2012     2011     2011 to     Dollar  Percentage  Change (a)
                                    2012
Medical segment:
Consoles:
United States     $ 17.8  $ 17.6  1      %    $     -      %    1      %
                                                -
Japan             2.1      1.7      22          0.1     2           20
Europe            4.2      6.3      (33)        (0.5)   (8)         (25)
Rest of world     4.4      3.8      16          -       -           16
Total Consoles    $ 28.5  $ 29.4  (3)         $(0.4)  (2)         (1)
IVUS
single-procedure
disposables:
United States     $ 59.3  $ 56.2  5      %    $     -      %    5      %
                                                -
Japan             73.7     68.6     8           1.4     2           6
Europe            15.6     17.8     (12)        (1.6)   (8)         (4)
Rest of world     5.1      4.8      6           -       -           6
Total IVUS
single-procedure  $153.7   $147.4   4           $(0.2)  -           4
disposables
FFR
single-procedure
disposables:
United States     $ 37.4  $ 26.1  43     %    $     -      %    43     %
                                                -
Japan             8.9      3.3      169         0.1     3           166
Europe            19.1     17.0     12          (2.0)   (12)        24
Rest of world     2.3      1.5      51          -       -           51
Total FFR
single-procedure  $ 67.7  $ 47.9  41          $(1.9)  (4)         45
disposables
Other             $ 21.3  $ 16.6  29     %    $(0.1)  -      %    29     %
Sub-total medical $271.2   $241.3   12          $(2.6)  (1)         13
segment
Industrial        $       $       (13)        $     -           (13)
segment           8.2     9.5                 -
Total             $279.4   $250.8   11          $(2.6)  (1)         12



SOURCE Volcano Corporation

Website: http://www.volcanocorp.com
Contact: John Dahldorf, Chief Financial Officer, Volcano Corp.,
+1-858-720-4020; or Neal B. Rosen, +1-650-458-3014
 
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