Vascular Solutions Reports Third Quarter Results

Vascular Solutions Reports Third Quarter Results

  *Revenue increases 14% to a record quarterly $28 million, exceeding the top
    end of guidance
  *Adjusted EPS, excluding the impact of settling patent litigation with
    Terumo Corporation, increases 19% to $0.19, exceeding the top end of
    guidance, corresponding to GAAP EPS of $0.16
  *Raising 2013 revenue guidance to a range of $109.4-$110.4 million, an
    increase of 12% from 2012 at the mid-point of guidance
  *Raising 2013 adjusted EPS guidance, excluding the impact of the Guardian
    product recall in Q1 and the Terumo settlement in Q3, to $0.70-$0.71, an
    increase of 17%-18% from 2012, corresponding to 2013 GAAP EPS guidance of
    $0.64-$0.65

MINNEAPOLIS, Oct. 22, 2013 (GLOBE NEWSWIRE) -- Vascular Solutions, Inc.
(Nasdaq:VASC) today reported financial results for the third quarter ended
September 30, 2013. The company also announced that it has settled its patent
and trademark lawsuit with Terumo Corporation related to Vascular Solutions'
radial artery hemostasis device in exchange for a payment of $812,500 to
Terumo in October.

Third-quarter net revenue increased 14% to a record quarterly level of $28.0
million compared to $24.6 million in the third quarter of 2012. The company's
revenue guidance range for the quarter was $26.5 million to $27.5 million.

U.S. net revenue increased 16% to $23.9 million compared to $20.7 million in
the year-ago third quarter, while international revenue increased 6% to $4.1
million compared to $3.9 million in the comparable quarter last year.

Gross margin was 67.2% in the third quarter, an improvement from 66.7% in the
third quarter of 2012. Vascular Solutions expects gross margins of between 67%
and 68% during the fourth quarter of 2013.

Operating income in the third quarter, adjusted to exclude the effect of the
Terumo litigation settlement but including the U.S. medical device excise tax
that became effective on January 1, 2013, was $4.8 million, an increase of
more than 16% from $4.2 million in the year-earlier quarter. The adjusted
operating margin was 17.3%, compared to 16.9% in the year-ago third quarter.
On a GAAP basis, operating income was $4.0 million, representing an operating
margin of 14.4%. For the fourth quarter, Vascular Solutions expects operating
margins to be at or greater than 17%.

Adjusted EPS in the third quarter was $0.19, an increase of 19% from $0.16 in
the third quarter of 2012. The company's guidance called for third quarter EPS
of $0.16-$0.17. On a GAAP basis, including the cost of the Terumo settlement,
EPS in the third quarter was $0.16.

"Vascular Solutions reported another very strong quarter, with continued
double-digit sales growth that reached a new record quarterly level, along
with ongoing improvement in our operating margin despite the impact of the
device tax and some unusually high levels of legal spending," said Howard
Root, Chief Executive Officer of Vascular Solutions. "Both our sales and
adjusted EPS performance this quarter exceeded the top end of our guidance
range. We achieved growth in all three of our product categories, and both our
U.S. and overseas businesses showed solid performance. Despite the challenges
in the global health care environment, Vascular Solutions has been able to
sustain growth and improve profitability through our ability to continually
develop, distribute, and acquire clinically-relevant new products. We view
this as a sustainable business model. In addition, we are pleased to be able
to put the Terumo litigation behind us, which will help to reduce our general
and administrative expenses going forward."

Third Quarter Revenue by Product Line

Catheter Products: Net sales of catheter products, the company's largest
product line, were $18.0 million during the third quarter of 2013, an increase
of 17% compared to $15.3 million during the third quarter of 2012.

Within the catheter products category, sales of the GuideLiner^® catheter were
$5.2 million in the third quarter, an increase of 40% from the $3.7 million in
the year-ago quarter. "During the second quarter, GuideLiner became our
highest-selling product on an annualized basis after a little more than three
years on the market, and during the third quarter, sales of this clinically
important device maintained a torrid pace of growth despite attracting
competition in the guide extension category for the first time," Mr. Root
said. "The GuideLiner continues to gain acceptance as physicians increasingly
recognize the clinical benefits of this breakthrough product in challenging
interventions. We are proud to have created the market for guide extension and
we are especially pleased with the clinical performance of our
third-generation of our device, the GuideLiner V3, that is now in worldwide
launch."

Third quarter sales of Pronto^® aspiration catheters were $5.1 million, stable
sequentially and up 2% on year-over-year basis. "This marked eight consecutive
quarters of steady sales performance for Pronto, which has been our desired
result in a mature market for aspiration catheters that is marked by
competitive pricing pressures," Mr. Root said. "We are maintaining our leading
share in this market due to the superior features and benefits of the Pronto
catheter, and we remain focused on broadening our product offerings in the
aspiration catheter market."

Other catheter products that contributed significantly to the year-over-year
sales increase in the third quarter were specialty guidewires for
interventional procedures, which grew 51%; the Langston^® dual-lumen pressure
measurement catheters, which grew 22%; micro-introducer kits, which grew 16%;
and the SuperCross™ line of microcatheters, which grew 14%. The Venture^®
catheter, acquired in 2012, was re-launched in the U.S. on April 29 and in
European markets on a staged roll out that began in August. During the third
quarter, worldwide sales of the Venture catheter were $533,000.

In August, Vascular Solutions commenced the global re-launch of the Guardian^®
hemostasis valve, which had been the subject of a recall in February. Third
quarter sales of Guardian and its related inflation device were approximately
$488,000, a decrease of 24% compared to sales of $643,000 in the year-ago
third quarter.

Hemostat Products: Net sales of hemostat products (mainly consisting of
D-Stat^® Dry hemostat, D-Stat Flowable hemostat and radial catheterization
products) were $6.0 million in the third quarter, an increase of 7% from the
year-earlier $5.6 million. Growth in the category was driven by sales of the
Vasc^™ Band radial hemostasis device and the Accumed^™ wrist positioning
splint for radial catheterizations. These two new products combined
contributed approximately $859,000 in sales during the third quarter. "Through
our focus on the fast-growing radial artery catheterization mark, we have
achieved our goal of restoring growth in our hemostat products category this
year," Mr. Root said. "We are still in the early stages of our new product
initiatives in the radial access market, and we expect to launch several
additional products targeting this category over the next year."

Vein Products and Services: In the vein products category, third quarter net
revenues increased 11% to $4.0 million from $3.6 million in the year-ago
quarter. Vein product revenue during the third quarter included $2.1 million
from the reprocessing service for ClosureFAST^® radiofrequency catheters,
compared to $1.2 million in reprocessing revenue in the year-ago third quarter
and approximately $1.8 million in the second quarter of this year.

"Since the ClosureFAST reprocessing service was launched in January of 2012,
our reprocessing partner, Northeast Scientific, Inc., has established an
excellent safety record with more than 30,000 catheters successfully
reprocessed and no serious adverse patient events reported," Mr. Root said.
"During the third quarter, we launched our new 0.025" guidewire, which is
commonly used during radiofrequency ablation procedures to facilitate
placement of the catheter into desired treatment locations. Vascular Solutions
now offers a full range of accessory products for RF vein ablation
procedures."

Financial Guidance

For 2013, Vascular Solutions is raising revenue guidance to a range of $109.4
million and $110.4 million. The mid-point of this range represents an increase
of 12% from 2012 revenues of $98.4 million. Previously, the company's revenue
guidance for 2013 was a range of $107 million to $110 million.

Vascular Solutions is also raising its guidance for 2013 net earnings. On an
adjusted basis, which excludes the effects of the Guardian product recall
during the first quarter and the Terumo litigation settlement in the third
quarter, the company now estimates earnings of between $0.70 and $0.71 per
fully diluted share, which represents growth of 17%-18% from $0.60 in 2012. On
a GAAP basis, this adjusted earnings guidance corresponds to net earnings of
between $0.64 and $0.65 per fully diluted share. Both the adjusted and GAAP
earnings per share guidance for 2013 include between $1.3 million and $1.5
million for the U.S. medical device excise tax, and an assumed 33% effective
income tax rate.

For the fourth quarter of 2013, Vascular Solutions is providing guidance for
net revenue of between $28.0 million and $29.0 million, which at the mid-point
would represent growth of approximately 13% from revenues of $25.3 million in
the fourth quarter of 2012. Net earnings for the fourth quarter of 2013 are
projected to be between $0.19 and $0.20 per fully diluted share, compared to
$0.18 in the fourth quarter of 2012. The company's net earnings guidance for
the fourth quarter of 2013 includes $800,000 in non-cash stock-based
compensation, $400,000 in amortization of intangibles, $350,000 for the U.S.
medical device excise tax, and an assumed effective income tax rate of
34%-35%.

Cash Flow and Balance Sheet Highlights

Vascular Solutions ended the third quarter of 2013 with $24.1 million in cash
and equivalents, up from $19.7 million at the end of the second quarter.
During the third quarter, the company generated $4.7 million in cash from
operations and used cash of approximately $665,000 for capital expenditures
and $500,000 to acquire U.S. distribution rights from Northeast Scientific for
a reprocessing service for a commercial medical device that Northeast
Scientific is pursuing regulatory approval. Vascular Solutions has no debt and
has an untapped $10 million revolving credit line.

"Vascular Solutions has excellent operating cash flows, a strong balance
sheet, and good working capital flexibility, which has allowed us to expand
our revenue opportunities through tuck-in acquisitions and alliances while
continuing to make the capital investments that are necessary to support our
future growth objectives," Mr. Root said."We have a strong pipeline of
internally-developed new products in development and we remain committed to
acquisitions or alliances that will allow us to leverage our existing call
points in interventional cardiology, interventional radiology,
electrophysiology, and the vein market."

Conference Call & Webcast Information

Vascular Solutions will host a live webcast starting at 3:30 p.m., Central
Time today to discuss the information contained in this press release.The
live web cast may be accessed on the investor relations portion of the
company's web site at www.vasc.com.An audio replay of the call will be
available until Tuesday, October 29, 2013, by dialing 888-203-1112 and
entering conference ID # 8813709.A recording of the call will also be
archived on the Company's web site, www.vasc.com, until Tuesday, October 29,
2013. During the conference call the Company may answer one or more questions
concerning business and financial developments and trends, the Company's view
on earnings forecasts and new product development and financial matters
affecting the Company, some of the responses to which may contain information
that has not been previously disclosed.

VASCULAR SOLUTIONS, INC.
CONDENSED STATEMENTS OF EARNINGS
(In thousands, except per share data)
                                                                  
                                         Three Months Ended Nine Months Ended
                                         September 30,      September 30,
                                         2013      2012     2013     2012
                                         (unaudited)        (unaudited)
                                                                  
Revenue:                                                           
Product revenue                           $27,926   $24,465  $81,197  $72,821
License and collaboration revenue         83        87       230      262
Total revenue                             28,009    24,552   81,427   73,083
                                                                  
Product costs and operating expenses:                              
Cost of goods sold                        9,197     8,183    26,432   24,252
Collaboration expenses                    32        --       41       --
Research and development                  3,140     2,936    10,027   8,964
Clinical and regulatory                   997       1,022    3,259    3,326
Sales and marketing                       6,706     6,188    20,462   19,279
General and administrative                2,362     1,714    6,871    5,013
Litigation                                812       --       812      --
Medical device excise taxes               339       --       995      --
Amortization of purchased technology and  404       359      1,162    1,032
intangibles
Operating earnings                        4,020     4,150    11,366   11,217
                                                                  
Interest expense                          (3)       (3)      (9)      (10)
Foreign exchange gain (loss)              7         9        (2)      (11)
Earnings before income taxes              4,024     4,156    11,355   11,196
                                                                  
Income tax expense                        (1,352)   (1,591)  (3,750)  (4,338)
Net earnings                              $2,672    $2,565   $7,605   $6,858
                                                                  
Net earnings per share - basic            $0.16     $0.16    $0.47    $0.43
Weighted average shares used in           16,451    15,885   16,299   15,960
calculating - basic
                                                                  
Net earnings per share - diluted          $0.16     $0.16    $0.45    $0.42
Weighted average shares used in           17,067    16,389   16,894   16,341
calculating - diluted


VASCULAR SOLUTIONS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
                                                                
                                                   September 30, December 31,
                                                   2013          2012
                                                   (unaudited)   (note)
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                           $24,102       $11,554
Accounts receivable, net                            14,460        13,780
Inventories                                         14,260        13,737
Prepaid expenses and other                          2,806         2,670
Current portion of deferred tax assets              6,800         6,800
Total current assets                                62,428        48,541
                                                                
Property, plant and equipment, net                  16,173        14,756
Goodwill                                            10,431        10,387
Intangible assets, net                              12,089        12,325
Deferred tax assets, net of current portion and     1,049         1,993
liabilities
Total assets                                        $102,170      $88,002
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY                             
Current liabilities:                                             
Total current liabilities                           $11,735       $10,525
                                                                
Long-term deferred revenue and contingent           457           610
consideration, net of current portion
                                                                
Shareholders' equity:                                            
Total shareholders' equity                          89,978        76,867
Total liabilities and shareholders' equity          $102,170      $88,002
                                                                
Note: Derived from the audited financial statements at that date.


VASCULAR SOLUTIONS, INC.
NON-GAAP RECONCILIATION OF ADJUSTED EARNINGS
(Unaudited, in thousands, except per share data and percentages)

                     Three Months                                
                     Ended                                       
                     September 30,     Litigation    Non-GAAP     
                     2013               (a)           Adjusted     
Revenue               $28,009                         $28,009      
Cost of goods sold    9,197                           9,197        
Gross profit          18,812                          18,812       
                                                                
Operating earnings    4,020              812           4,832        
                                                                
Operating margin      14.4%                           17.3%        
                                                                
Net earnings per
share (diluted) -     $0.16              $0.03 (b)     $0.19        
current period
                                                                
                                                                
                     Nine Months                                 
                     Ended              Guardian                  
                     September 30,      Recall        Litigation   Non-GAAP
                     2013               (c)           (a)          Adjusted
Revenue               $81,427            $350                      $81,777
Cost of goods sold    26,432             (425)                     26,007
Gross profit          54,995             775                       55,770
                                                                
Operating earnings    11,366             775           812          12,953
                                                                
Gross margin          67.5%                                       68.2%
Operating margin      14.0%                                       15.8%
                                                                
Net earnings per
share (diluted) -     $0.45              $0.03 (d)     $0.03 (b)    $0.51
current period
                                                                
                                                                
Net earnings per                                                    $0.70 to
share (diluted) -     $0.64 to $0.65     $0.03 (d)     $0.03 (b)    $0.71
full year guidance
                                                                
(a) On October 11, 2013, Vascular Solutions and Terumo Corporation reached an
agreement to settle their patent and trademark infringement litigation,
whereby the company will make a one-time payment to Terumo Corporation in the
amount of $812,500 during the fourth quarter of 2013.The settlement amount
was recognized as litigation expense in the quarter ended September 30, 2013.
                                                                
(b) Reflecting $812,500 of litigation settlement expense, net of taxes.
                                                                
(c) On February 28, 2013, Vascular Solutions Zerusa Ltd., a subsidiary of
Vascular Solutions, Inc., initiated a recall of its Guardian hemostasis
valves.The company resumed shipping Guardian hemostasis valves in August
2013.The company estimated lost Guardian product revenue of $350,000 due to
the recall in the first quarter of 2013.The company also recorded additional
expenses of approximately $425,000 related to scrap, product returns, and
freight associated with recalling the product, all of which was included as
additional cost of goods sold in the first quarter of 2013.
                                                                
(d) Reflecting $350,000 of lost revenue and $425,000 of Guardian product
recall costs, net of taxes.

About Vascular Solutions

Vascular Solutions, Inc. is an innovative medical device company that focuses
on developing unique clinical solutions for coronary and peripheral vascular
procedures.The company's product line consists of more than 75 products and
services in three categories: catheter products, hemostat products and vein
products.Vascular Solutions delivers its products and services to
interventional cardiologists, interventional radiologists,
electrophysiologists and vein specialists through its direct U.S. sales force
and international independent distributor network.

All listed trademarks are the property of Vascular Solutions, Inc. with the
exception of ClosureFAST, which is a registered trademark of VNUS Medical
Technologies, Inc.

Safe Harbor for Forward-Looking Statements

The information in this press release contains forward-looking statements that
involve risks and uncertainties. Those statements include expectations about
our future revenues, gross margin, operating margin, and earnings per share,
and expected future radial artery catheterization products. Our actual results
could differ materially from those anticipated in these forward-looking
statements. Important factors that may cause such differences include those
discussed in our Annual Report on Form 10-K for the year ended December 31,
2012 and other recent filings with the Securities and Exchange Commission. The
risks and uncertainties include, without limitation, risks associated with the
need for adoption of our new products, exposure to intellectual property
claims and the costs of intellectual property litigation, significant
variability in quarterly results, exposure to possible product liability
claims, the development of new products by others, doing business in
international markets, the availability of third party reimbursement, the mix
of our revenues between products we manufacture and sell in the United States,
products we sell internationally, service reviews and sales of purchased
finished goods, and actions by the FDA.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, we are providing non-GAAP financial
results and guidance on full-year earnings per share adjusted for the effects
of the settlement of the Terumo litigation and the Guardian product recall. We
believe that the non-GAAP financial measures presented provide meaningful
insight to investors by adjusting for unpredictable events that vary in
frequency and magnitude and allowing investors to evaluate our financial
performance without the effects of such events.We use non-GAAP financial
measures to assess our operating performance and to compare results between
periods. We also may use non-GAAP financial measures in determining
achievement levels under corporate objectives for incentive compensation.The
method we use to produce non-GAAP earnings per share is not in accordance with
GAAP and may differ from the methods used by other companies. Non-GAAP
guidance should not be regarded as a substitute for corresponding GAAP
measures but instead should be utilized as supplemental information in
evaluating our business. Non-GAAP measures do have limitations in that they do
not reflect certain items that may have a material impact upon our reported
financial results. As such, the non-GAAP guidance presented should be viewed
in conjunction with both our financial statements prepared in accordance with
GAAP and the reconciliation of the supplemental non-GAAP guidance to the
comparable GAAP guidance, which is attached to this release.

For further information, connect to www.vasc.com.

CONTACT: Vascular Solutions, Inc.
         James Hennen, CFO
         JHennen@vasc.com
         (763) 656-4352
         Phil Nalbone, VP
         PNalbone@vasc.com
         (763) 656-4371
 
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