Vascular Solutions Reports Record Fourth Quarter Results
*Q4 revenue increased 15% to a record quarterly level of $29.1 million,
exceeding the top end of guidance
*Q4 GAAP EPS of $0.20; adjusted EPS of $0.22, which excludes the impact of
a litigation settlement, exceeding the top end of guidance and increased
*2014 guidance calls for Vascular Solutions' 11^th consecutive year of
double-digit revenue growth to a range of $121 million to $125 million,
with GAAP EPS growth of over 21% to $0.79-$0.83
MINNEAPOLIS, Feb. 4, 2014 (GLOBE NEWSWIRE) -- Vascular Solutions, Inc.
(Nasdaq:VASC) today reported financial results for the fourth quarter ended
December 31, 2013, and provided financial guidance for the first quarter and
full year of 2014.
Fourth quarter revenue grew 15% to a record quarterly level of $29.1 million
from $25.3 million reported in the fourth quarter of 2012, above the company's
guidance range for the quarter of $28.0 to $29.0 million.
U.S. net revenue increased nearly 16% to $24.8 million compared to $21.5
million in the year-ago fourth quarter. International net revenue increased
12% to $4.2 million compared to $3.8 million in the year-ago fourth quarter.
Gross margin across all product lines was 66.5% in the fourth quarter compared
to 67.2% in the fourth quarter of 2012. Gross margin between quarters varies
based on product selling mix and was impacted in 2013 by the substantial
growth in the reprocessing service, which carries a relatively lower gross
Operating income for the fourth quarter, adjusted to exclude the effects of
the litigation settlement, was $5.3 million, representing an operating margin
of 18.1%. Not including the $324,000 expense associated with the U.S. medical
device excise tax that took effect January 1, 2013, adjusted operating margin
in the fourth quarter would have been 19.2%. In the year-ago fourth quarter,
operating income was $4.7 million, representing an operating margin of 18.5%.
On a GAAP basis, the fourth quarter 2013 operating income was $4.7 million,
representing an operating margin of 16.3%.
The company also reported today that it has agreed to settle the qui tam civil
lawsuit that was intervened in by the U.S. Attorney's Office for the Western
District of Texas involving allegations of off-label promotion of the
company's Vari-Lase^® Short Kit endovenous laser product. Under the terms of
the settlement, the company has agreed to make a one-time payment of $520,000
and make no admission of fault or liability, and the U.S. Attorney's Office
has agreed to dismiss the civil lawsuit with prejudice and release all civil
claims that were, or could have been, brought against the company in the civil
lawsuit. The company recorded the $520,000 payment, which is expected to be
made in February, as litigation expense during the fourth quarter of 2013. The
settlement of the civil lawsuit will have no effect on the related criminal
investigation, which the company expects will continue.
On a GAAP basis, fourth quarter net income was $3.5 million in the fourth
quarter of 2013. Adjusted net income, excluding the litigation settlement, was
$3.9 million, an increase of 29% from $3.1 million in the year-earlier fourth
On a GAAP basis, earnings per share in the fourth quarter was $0.20. Adjusted
EPS was $0.22, an increase of 22% from $0.18 reported in the year-earlier
fourth quarter. Adjusted EPS in the fourth quarter of 2013 exceeded the
company's guidance range, which was $0.19 to $0.20.
"We are very pleased to report another record quarterly performance and to
mark our tenth consecutive year of double-digit revenue growth," said Howard
Root, Chief Executive Officer of Vascular Solutions. "Both our sales and
adjusted EPS during the fourth quarter again exceeded the top end of our
guidance range, and we are generating growth in all three of our product
segments and from both our U.S. and international sales organizations. Looking
forward, we are pleased to start another year of what we believe will be
multiple product launches, double-digit revenue growth and even higher
Fourth Quarter Revenue by Product Line
Catheter Products. Net sales of catheter products, the company's largest
product line, were $17.9 million during the fourth quarter of 2013, an
increase of 14% compared to $15.6 million in the fourth quarter of 2012.
Within the catheter products category, sales of the GuideLiner^® catheter were
$5.6 million, an increase of 36% from $4.1 million in the year-ago quarter.
"The GuideLiner catheter continues to gain acceptance as physicians around the
world recognize the clinical benefits of this breakthrough device in
challenging procedures. When we launched the GuideLiner four years ago, we
created the important clinical technique of rapid-exchange guide extension,
and the device last year became our largest-selling product. We have continued
to innovate, and during 2013 we successfully completed the launch of our
third-generation device, the GuideLiner V3, with very favorable customer
reaction," Mr. Root said.
"We recently had two very important developments for the GuideLiner that will
positively impact future sales," Mr. Root noted. "First, in December we
received Shonin approval from the Japanese Ministry of Health, Labour, and
Welfare to sell the GuideLiner in Japan with a favorable reimbursement
designation that took effect January 1. We have now completed the initial
training and have launched the GuideLiner in Japan through our distributor
partner Japan Lifeline Co, Ltd. Second, in January, the Federal Circuit Court
of Appeals denied Boston Scientific's motions to stay the previously-issued
preliminary injunction that prohibits Boston Scientific from making, using,
offering for sale, or selling its competing Guidezilla™ catheter in the United
States during the pendency of our ongoing patent infringement suit, which is
currently scheduled to be ready for trial on or after March 2015. The
preliminary injunction took effect on January 13 and remains subject to an
appeal filed by Boston Scientific with the Federal Circuit Court of Appeals
that is expected to be decided in the second quarter."
Fourth quarter sales of Pronto^® aspiration catheters were $5.0 million,
stable both sequentially and on a year-over-year basis. Other catheter
products that contributed significantly to the year-over-year sales increase
during the fourth quarter of 2013 were specialty guidewires for interventional
procedures, which grew 46%; the Langston^® dual-lumen catheter for measuring
pressure at the aortic valve, which grew 17%; the SmartNeedle^® vascular
access device, which also grew 17%; and Micro-Introducer kits, which grew 16%.
The Venture^® catheter, which was acquired in 2012 and re-launched by Vascular
Solutions in the U.S. in April 2013 and in European markets during August
2013, contributed $491,000 in sales during the fourth quarter.
Hemostat Products. Net sales of hemostat products (mainly consisting of
D-Stat^® Dry, D-Stat Flowable, and D-Stat Radial) were $6.0 million in the
fourth quarter, an increase of 10% from $5.4 million in the year-ago quarter.
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 $956,000 in sales during the
fourth quarter. "We are still in the early stages of our new product
initiatives for radial artery access, but the shift to radial access in the
U.S. has continued and our focus on this shift has allowed us already to
achieve our goal of restoring growth to our hemostat business," Mr. Root said.
Vein Products and Services. Net sales of vein products and services were $5.1
million in the fourth quarter, an increase of 24% from $4.1 million in the
year-earlier quarter. Included in fourth quarter vein product revenue was $2.9
million from reprocessing of the Covidien ClosureFAST^® radiofrequency
catheter, an increase of 73% from $1.7 million in the fourth quarter of 2012.
"For the full year 2013, reprocessing contributed $8.2 million to our revenue,
up from $4.4 million in 2012, as a growing number of vein clinics acknowledge
the reliability of reprocessed ClosureFAST catheters and embrace the
opportunity to significantly reduce their costs and medical waste," Mr. Root
said. "Since the introduction of our reprocessing service in January of 2012,
our reprocessing partner has established an excellent record of safety with
nearly 45,000 successfully reprocessed catheters and no serious adverse
patient events reported."
Full Year Financial Highlights
Vascular Solutions' net revenue increased 12% to $110.5 million in 2013 from
$98.4 million in 2012. U.S. product sales grew 14% to $93.7 million compared
to $82.6 million, while product sales in international markets grew more than
6% to $16.5 million compared to $15.5 million in 2012.
On a worldwide basis, Vascular Solutions' 2013 sales of catheter products grew
14% to $69.9 million from $61.3 million in 2012. Within catheter products, the
GuideLiner guide extension catheter grew 41% to $20.8 million, and the Venture
catheter, which was acquired and re-launched during 2013, contributed more
than $1.5 million to sales.
Hemostat products resumed their sales growth in 2013, increasing by 5% to
$23.8 million in 2013 from $22.7 million in 2012. The main drivers of growth
in hemostat products were the new Vasc Band and Accumed products for radial
access, which combined contributed nearly $3.2 million to 2013 revenue.
Vein products and services revenue grew 17% to $16.5 million from $14.1
million in 2012. The growth driver in this business segment was reprocessing,
which grew 87% to $8.2 million from $4.4 million in 2012.
On a GAAP basis, earnings per diluted share gained 8% to $0.65 in 2013 from
$0.60 in 2012. Excluding the impact of the Guardian recall expenses in Q1, the
Terumo litigation settlement in Q3 and the U.S. Attorney civil litigation
settlement in Q4, Vascular Solutions' 2013 adjusted EPS grew 22% to $0.73.
During 2013, Vascular Solutions generated $19.4 million in cash from operating
For net revenue in 2014, Vascular Solutions is providing guidance of between
$121 million and $125 million. The mid-point of this range represents an
increase of 12% from $110.5 million in net revenue for 2013.
For GAAP net earnings in 2014, Vascular Solutions is providing guidance of
between $0.79 and $0.83 per fully diluted share. The mid-point of this range
represents an increase of 25% from GAAP 2013 EPS of $0.65 and 11% from
adjusted 2013 EPS of $0.73. Included in the company's 2014 earnings guidance
are $3.5 million in non-cash stock-based compensation, $1.6 million in
amortization of intangibles, between $1.4 million and $1.5 million for the
U.S. medical device excise tax, and an assumed 35% income tax rate.
The company expects to generate cash from operations during 2014 of between
$23 million and $24 million.
For the first quarter of 2014, Vascular Solutions is providing guidance for
net revenue of between $29.5 million and $30.5 million, which at the mid-point
would represent growth of 15% from $26.1 million in the first quarter of 2013.
Guidance for net earnings for the first quarter of 2014 is between $0.17 and
$0.18 per diluted share. At the mid-point of guidance, EPS would be an
increase of 35% from GAAP EPS of $0.13, or 9% from adjusted EPS of $0.16,
reported in the first quarter of 2013. Included in the company's net earnings
guidance for the first quarter of 2014 are $1.2 million 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 35% income tax rate.
Cash Flow and Balance Sheet Highlights
Vascular Solutions ended 2013 with $30.8 million in cash and equivalents, up
from $24.1 million at the end of the third quarter. The company had $11.6
million in cash and cash equivalents at the end of 2012. During the fourth
quarter of 2013, the company generated $5.7 million in cash from operations
and used cash of approximately $750,000 for capital expenditures and $320,000
to acquire rights to a vein product. The company continues to have no debt.
"During 2013, Vascular Solutions once again demonstrated the success of our
business model, which is defined by strong revenue growth and increasing
operating leverage as we launch multiple clinically-relevant products each
year through our existing direct sales force in the U.S. and our distributor
network in nearly 50 countries," Mr. Root said. "As we enter 2014, we are
excited about our outlook for the year and for many years to come. Our
internal pipeline of new products, which consists of more than 40 projects at
various stages of development, is the strongest in the company's history.
Additionally, our large direct U.S. sales force and established distributor
network make Vascular Solutions a sought-after distribution partner and our
strong cash position and working capital flexibility give us the ability to
pursue tuck-in acquisitions that will enhance our growth."
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, February 11, 2014, by dialing 888-203-1112 and
entering conference ID# 2330936. A recording of the call will also be archived
on the Company's web site, www.vasc.com, until Tuesday, February 11, 2014.
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 Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
Product revenue $ 29,000 $ 25,215 $ 110,197 $ 98,036
License and collaboration 72 89 301 350
Total revenue 29,072 25,304 110,498 98,386
Product costs and operating
Cost of goods sold 9,724 8,309 36,156 32,561
Collaboration expenses 19 -- 60 --
Research and development 3,165 2,907 13,191 11,870
Clinical and regulatory 1,149 1,032 4,408 4,358
Sales and marketing 6,910 6,498 27,372 25,777
General and administrative 2,120 1,509 8,991 6,522
Litigation 520 -- 1,332 --
Medical device excise taxes 324 -- 1,319 --
Amortization of purchased 410 361 1,572 1,393
technology and intangibles
Operating earnings 4,731 4,688 16,097 15,905
Interest expense (3) (3) (13) (13)
Foreign exchange gain/(loss) -- 11 (1) --
Earnings before income taxes 4,728 4,696 16,083 15,892
Income tax expense (1,191) (1,645) (4,941) (5,983)
Net earnings $ 3,537 $ 3,051 $ 11,142 $ 9,909
Net earnings per share - basic $ 0.21 $ 0.19 $ 0.68 $ 0.62
Weighted average shares used in 16,599 15,996 16,412 16,004
calculating - basic
Net earnings per share - $ 0.20 $ 0.18 $ 0.65 $ 0.60
Weighted average shares used in 17,325 16,603 17,025 16,456
calculating - diluted
Note: Derived from the audited financial statements for the period.
VASCULAR SOLUTIONS, INC.
CONDENSED BALANCE SHEETS
December 31, December 31,
Cash and cash equivalents $ 30,785 $ 11,554
Accounts receivable, net 14,481 13,780
Inventories 14,002 13,737
Prepaid expenses and other 2,472 2,670
Current portion of deferred tax assets 6,000 6,800
Total current assets 67,740 48,541
Property, plant and equipment, net 16,187 14,756
Goodwill 10,532 10,387
Intangible assets, net 11,943 12,325
Deferred tax assets, net of current portion and 1,739 1,993
Total assets $ 108,141 $ 88,002
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $ 11,385 $ 10,525
Long-term deferred revenue and contingent 406 610
consideration, net of current portion
Total shareholders' equity 96,350 76,867
Total liabilities and shareholders' equity $ 108,141 $ 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)
December 31, Litigation Non-GAAP
2013 (a) Adjusted
Operating earnings 4,731 520 5,251
Operating margin 16.30% 18.10%
Net earnings 3,537 389 (b) 3,926
Net earnings per
share (diluted) -
$ 0.20 $ 0.02 (b) $ 0.22
December 31, Recall Litigation Non-GAAP
2013 (c) (a) & (d) Adjusted
Revenue $ 110,498 $ 350 $ 110,848
Cost of goods sold 36,156 (425) 35,731
Gross profit 74,342 775 75,117
Operating earnings 16,097 775 1,332 (f) 18,204
Net earnings per
share (diluted) - $ 0.65 $ 0.03 (e) $ 0.05 (f) $ 0.73
(a) On January 22, 2014, Vascular Solutions agreed with the U.S.
Attorney's Office to settle a civil lawsuit related to allegations of
off-label promotion of the company's Vari-Lase Short Kit endovenous
laser product. The terms of the settlement are that the company will
make a payment of $520,000, the company will make no admission of fault
or liability, and the U.S. Attorney's Office will dismiss the civil
lawsuit with prejudice and release all civil claims that were, or could
have been, brought against the company in the civil lawsuit. Settlement
of the civil lawsuit will have no effect upon the criminal
investigation, which the company expects will continue.
(b) Reflecting $520,000 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 $550,000
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, less estimated cost of goods sold
reduction of $125,000 due to lost revenue.
(d) On October 11, 2013, Vascular Solutions and Terumo Corporation
reached an agreement to settle their patent and trademark infringement
litigation, whereby the company agreed to 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.
(e) Reflecting $350,000 of lost revenue and $425,000 of Guardian
product recall net costs, net of taxes.
(f) Reflecting $520,000 and $812,500 of litigation settlement expense,
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 80 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 Covidien LP
Limited Partnership, and Guidezilla, which is a trademark of Boston Scientific
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 profitability and margin,
earnings per share, non-cash stock-based compensation, amortization of
intangibles, medical device taxes and income tax rate, as well as statements
about the U.S. Attorney's Office criminal investigation related to our
Vari-Lase Short Kit. 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, 2013 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, current or future government investigations,
significant variability in quarterly results, exposure to possible product
liability claims, the development of new products by others, constraints or
interruptions in production from key suppliers, 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 for the quarter and full-year ended December 31, 2013, adjusted for
the effects of the settlement of the U.S. Attorney's Office civil lawsuit,
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
measures 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 measures presented should be viewed
in conjunction with both our financial statements prepared in accordance with
GAAP and the reconciliation of the supplemental non-GAAP measures to the
comparable GAAP measures, which is attached to this release.
For further information, connect to www.vasc.com.
CONTACT: Vascular Solutions, Inc.
James Hennen, CFO
Phil Nalbone, VP
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