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Volcano Announces First Quarter Results

                   Volcano Announces First Quarter Results

PR Newswire

SAN DIEGO, May 2, 2013

SAN DIEGO, May 2, 2013 /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 first quarter of 2013.

For the quarter ended March 31, 2013, Volcano reported revenues of $93.2
million, an increase of three percent on a reported basis versus the same
period a year ago and eight percent on a constant currency basis after
adjusting for a five percent negative impact from foreign currency. Medical
segment revenues increased four percent and nine percent on a reported and
constant currency basis, respectively.

The company reported a net loss on a GAAP basis of $3.2 million, or $0.06 per
share, in the first quarter of 2013, versus net income of $271,000, or $0.00
per diluted share, in the same period a year ago. The results for the first
quarter of 2013 include net interest expense of $6.2 million versus $1.2
million a year ago, reflecting the company's convertible debt offering
completed in the fourth quarter of 2012. In addition, the company recorded
other income of $1.9 million in the first quarter of 2013 related to the
proceeds from the sale of a strategic investment. The company also recorded an
exchange rate loss of $778,000 in the first quarter of 2013 compared to
$175,000 in the first quarter a year ago.

Excluding acquisition related items, amortization of intangibles and non-cash
interest expense on convertible notes, net of tax, the company reported
non-GAAP earnings per diluted share of $0.02.

"Our results for the quarter reflect continued solid growth for our FFR
(Fractional Flow Reserve) disposable revenues, which increased 33 percent and
36 percent year-over-year on a reported and constant currency basis,
respectively. However, our intravascular imaging business continued to be
impacted negatively by pressure on PCI's, especially in the U.S.," said Scott
Huenekkens, president and chief executive officer of Volcano.

Guidance for 2013

The company provided updated guidance for 2013. Based on current foreign
currency exchange rates, it now expects revenues on a reported basis of
$394.0-$400.0 million. The new expectations for revenues on a reported basis
compare with prior expectations of $406.0-$412.0 million. The company said
roughly two-thirds of the reduction in expectations for revenues on a reported
basis reflects the impact of foreign currency exchange rates, with the balance
due to reduced expectations around PCI volume. The company said it expects
revenues in 2013 on a constant currency basis will be in the range of
$418.0-$424.0 million.

With respect to its outlook for 2013 on a reported basis, the company expects
gross margins will be in the range of 64.5-65.0 percent and that operating
expenses will be 65-66 percent of revenues. On a reported basis, the company
expects a net loss on a GAAP basis of $0.26-$0.28 per share. This assumes an
expected tax benefit of approximately $0.20 per share, based on an annual tax
rate of 38.5 percent, combined with a $1 million R&D tax credit from 2012 that
was recorded in the first  quarter. On a reported basis, the company expects
non-GAAP net income of $0.03-$0.05 per diluted share in 2013. Non-GAAP results
exclude acquisition-related expenses, amortization of intangibles and non-cash
interest expense, and assume an effective tax rate of 38 percent for the GAAP
to non-GAAP adjustments. The company expects weighted average basic shares in
2013 will be approximately 54.4 million shares and approximately 56.2 million
shares on a diluted basis.

Conference Call Information

The company will hold a conference call at 2 p.m., Pacific Daylight Time, (5
p.m., Eastern Daylight Time), today. The teleconference can be accessed by
calling (631) 291-4555, passcode 34024703, or via the company's website at 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 May 9, 2013, at (404) 537-3406, passcode 34024703, and via
the company's website at

About Volcano

Volcano Corporation (Nasdaq: VOLC) 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

Note Regarding Use of Non-GAAP Financial Measures

The presentation of non-GAAP financial information is not intended to be
considered in isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP. The company uses
non-GAAP financial measures for financial and operational decision making and
as a means to compare period-to-period results. The company believes that they
provide useful information about operating results, enhance the overall
understanding of operating results and future prospects, and allow for greater
transparency with respect to key metrics used by management in its financial
and operational decision making.

Constant Currency Basis Revenue Changes: 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 results 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.

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 organic
continuing 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, such as technology and supplier agreements, are valued and
amortized over their estimated lives. Volcano believes that since intangibles
represent efforts of the acquired company to build value prior to acquisition,
Volcano management eliminates the impact of the amortization when evaluating
its current operating performance.

Exclusion of Non-Cash Interest Expense: 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 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

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," including statements regarding
Volcano's expected revenues, revenue growth and financial results for the year
ending December 31, 2013, its growth and other strategies and ability to
execute on those strategies, competitive positioning, target markets,
development of its base business and pipeline, benefits from recent
acquisitions and  benefits from its products and technologies. 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 other projections may turn out 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 reaction 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 obtaining regulatory approval or clearance for
Volcano's products or devices; the success of Volcano's growth and other
strategies including integration of recently-acquired businesses and our
ability to integrate businesses from future acquisitions; risks associated
with Volcano's international operations; timing and achievement of product
development milestones; outcome of ongoing or future litigation;
investigations and claims; the impact and benefits of market development and
the related size of Volcano's addressable markets; our ability to project 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 10-K
for the year ended December 31, 2012, and other filings made with the
Securities and Exchange Commission, which should be read in conjunction with
these financial results. 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.


 (in thousands) 
                                            March 31,      December 31, 
                                           2013           2012
 Current assets: 
 Cash and cash equivalents                 $   276,315    $          330,635
 Short-term available-for-sale             132,289        140,960
 Accounts receivable, net                  71,003         76,348
 Inventories                               57,157         52,811
 Prepaid expenses and other current        26,939         21,773
 Total current assets                      563,703        622,527
 Restricted cash                           692            711
 Long-term available-for-sale investments  95,783         44,385
 Property and equipment, net               106,067        104,385
 Intangible assets, net                    50,605         50,657
 Goodwill                                  51,577         51,577
 Other non-current assets                  26,712         28,102
 Total Assets                              $   895,139    $          902,344
 Liabilities and Stockholders' Equity 
 Current liabilities: 
 Accounts payable                          $      12,195  $             16,284
 Accrued compensation                      19,055         23,227
 Accrued expenses and other current        17,314         23,476
 Deferred revenues                         9,383          9,789
 Contingent consideration                  2,936          2,908
 Current maturities of long-term debt      57             53
 Total current liabilities                 60,940         75,737
 Convertible senior notes                  386,835        382,300
 Other long-term debt                      1,174          1,119
 Deferred revenues                         4,399          4,661
 Contingent consideration, non-current     28,231         27,323
 Other non-current liabilities             2,744          2,859
 Total liabilities                         484,323        493,999
 Stockholders' equity                      410,816        408,345
 Total Liabilities and Stockholders'       $   895,139    $          902,344


(in thousands, except per share data)
                                                       Three Months Ended
                                                       March 31,
                                                       2013        2012
Revenues                                               $ 93,231    $ 90,360
Cost of revenues, excluding amortization of              33,127      29,573
Gross profit                                             60,104      60,787
Operating expenses:
Selling, general and administrative                      43,829      44,345
Research and development                                 15,651      13,649
Amortization of intangibles                              834         872
Acquisition-related items                                1,578       -
Total operating expenses                                 61,892      58,866
Operating (loss) income                                  (1,788)     1,921
Interest income                                          338         230
Interest expense                                         (6,545)     (1,472)
Exchange rate loss                                       (778)       (175)
Other, net                                               1,898       (96)
(Loss) income before income tax                          (6,875)     408
Income tax (benefit) expense                             (3,714)     137
Net (loss) income                                      $ (3,161)   $ 271
Net (loss) income per share:
Basic                                                  $ (0.06)    $ 0.01
Diluted                                                $ (0.06)    $ -
Shares used in calculating net (loss) income per
Basic                                                    54,189      52,929
Diluted                                                  54,189      54,985


(in thousands)
                                                     Three Months Ended
                                                     March 31,
                                                     2013         2012
Operating activities
Net (loss) income                                    $ (3,161)    $ 271
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization                          6,123        5,791
Amortization (accretion) of investment premium         631          269
(discount), net
Accretion of debt discount on convertible senior       4,572        1,212
Accretion of contingent consideration                  936          -
Non-cash stock-based compensation expense              3,598        3,617
Gain on other long-term investment                     (1,925)      -
Effect of exchange rate changes and others             4,604        306
Changes in operating assets and liabilities            (23,249)     (961)
Net cash (used in) provided by operating activities    (7,871)      10,505
Investing activities
Purchase of short-term and long-term                   (110,520)    (110,762)
available-for-sale investments
Sale or maturity of short-term and long-term           67,137       67,577
available-for-sale securities
Capital expenditures                                   (7,290)      (14,437)
Cash paid for other intangible assets and              (870)        (758)
Proceeds from sale of long-term investments            3,426        -
Net cash used in investing activities                  (48,117)     (58,380)
Financing activities
Repayment of capital lease liability                   (11)         (22)
Proceeds from sale of common stock under employee      1,712        1,899
stock purchase plan
Proceeds from exercise of common stock options         691          2,988
Net cash provided by financing activities              2,392        4,865
Effect of exchange rate changes on cash and cash       (724)        (562)
Net decrease in cash and cash equivalents              (54,320)     (43,572)
Cash and cash equivalents, beginning of period         330,635      107,016
Cash and cash equivalents, end of period             $ 276,315    $ 63,444


(in millions)
                      Three Months  Percentage                      Constant
                      Ended         Change      Currency Impact     Currency
                      March 31,     2012 to
                                    2013                            Percentage
                      2013   2012               Dollar  Percentage  Change
Medical segment:
United States         $      $      (8)    %    $       -      %    (8)    %
                      4.7    5.2                 -
Japan                 1.0    0.9    7           (0.1)   (16)        23
Europe                1.6    1.1    48          -       (1)         49
Rest of world         1.6    0.9    73          -       -           73
Total Consoles        $      $      10          $(0.1)  (2)         12
                      8.9    8.1
IVUS single-procedure
United States         $19.3  $19.7  (2)    %    $       -      %    (2)    %
Japan                 20.7   26.6   (22)        (3.2)   (12)        (10)
Europe                5.8    5.4    7           -       -           7
Rest of world         2.2    1.8    20          -       -           20
Total IVUS
single-procedure      $48.0  $53.5  (10)        $(3.2)  (6)         (4)
FFR single-procedure
United States         $13.7  $11.7  17     %    $       -      %    17     %
Japan                 4.5    1.8    150         (0.7)   (38)        188
Europe                7.8    6.2    27          -       -           27
Rest of world         0.8    0.5    68          -       -           68
Total FFR
single-procedure      $26.8  $20.2  33          $(0.7)  (3)         36
Other                 $      $      20     %    $(0.2)  (4)    %    24     %
                      8.0    6.6
Sub-total medical     $91.7  $88.4  4           $(4.2)  (5)         9
Industrial segment    $      $      (25)        -       (1)         (24)
                      1.5    2.0
Total                 $93.2  $90.4  3           $(4.2)  (5)         8


(in thousands, except per share data)
Three Months Ended March 31, 2013  Pre-tax         Net of Tax    Earnings Per
                                   Adjustments     (1)           Share
 GAAP net loss                                     $             $     (0.06)
 Acquisition related items         1,578           978           0.02
 Amortization of intangibles       834             517           0.01
 Non-cash interest expense on      4,572           2,835         0.05
convertible notes 
 Non-GAAP net income income        $               $             $       0.02
                                   6,984             1,169
 Weighted average shares                                         54,189
(1) Effective tax rate of 38% applied to non-GAAP adjustments


(in thousands, except per share data)
                                              Guidance Range
                                              From       To
 GAAP net loss per share—basic                $  (0.28)  $  (0.26)
 GAAP net loss per share—diluted              $  (0.28)  $  (0.26)
 Acquisition related items                    $    0.06  $    0.06
 Amortization of intangibles                  $    0.04  $    0.04
 Non-cash interest expense                    $    0.21  $    0.21
 Non-GAAP net income per share—diluted        $    0.03  $    0.05
 Weighted average shares outstanding—basic    54,400     54,400
 Weighted average shares outstanding—diluted  56,200     56,200
Note: Effective tax rate of 38% applied to non-GAAP adjustments


SOURCE Volcano Corporation

Contact: John Dahldorf, Chief Financial Officer, Volcano Corporation,
+1-858-720-4020, or, Neal B. Rosen, +1-650-458-3014
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