UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-K
____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 7, 2014
VOLCANO CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware | | 000-52045 | | 33-0928885 |
(State or other jurisdiction of incorporation or organization) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
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3721 Valley Centre Drive, Suite 500 San Diego, California | | 92130 |
(Address of principal executive offices) | | (Zip Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 | Entry into a Material Definitive Agreement. |
On August 7, 2014, Volcano Corporation (“Volcano”) and its wholly-owned subsidiary, Axsun Technologies, Inc. (“Axsun” and together with Volcano, the “Volcano Parties”), entered into a Settlement, Release, License Agreement, and Covenants Not To Sue (the “Agreement”) with St. Jude Medical, Inc. (“St. Jude”) and its affiliates St. Jude Medical, Cardiology Division, Inc., St. Jude Medical Systems AB, St. Jude Medical S.C., Inc., and LightLab Imaging, Inc. (“LightLab”) (collectively, the “St. Jude Parties”), to settle all currently ongoing litigation among the Volcano Parties and the St. Jude Parties. The settlement covers the following civil actions:
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• | LightLab Imaging, Inc. v. Axsun Technologies, Inc. and Volcano Corporation, in the Massachusetts Superior Court and the Massachusetts Supreme Judicial Court (the “Massachusetts Proceeding”); |
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• | Axsun Technologies, Inc. and Volcano Corporation v. LightLab Imaging, Inc., in the Delaware Chancery Court; |
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• | LightLab Imaging, Inc. v. Axsun Technologies, Inc. and Volcano Corporation, in the Delaware Chancery Court; |
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• | St. Jude Medical, Cardiology Division, Inc., St. Jude Medical Systems AB, and St. Jude Medical S.C., Inc. v. Volcano Corporation, in the United States District Court for the District of Delaware; |
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• | St. Jude Medical, Cardiology Division, Inc., St. Jude Medical Systems AB, and St. Jude Medical S.C., Inc. v. Volcano Corporation, in the United States District Court for the District of Delaware; |
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• | Volcano Corporation v. St. Jude Medical, Cardiovascular and Ablation Technologies Division, Inc.; St. Jude Medical, Cardiology Division, Inc.; St. Jude Medical, U.S. Division; St. Jude Medical S.C., Inc.; and St. Jude Medical Systems AB, in the United States District Court for the District of Delaware and the United States Court of Appeals for the Federal Circuit; and |
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• | St. Jude Medical, Cardiology Division, Inc., v. Volcano Corporation, and Michelle K. Lee, Deputy Director, U.S. Patent and Trademark Office, in the United States Patent and Trademark Office and the United States Court of Appeals for the Federal Circuit. |
Additional detail regarding the foregoing actions (collectively, the “Litigations”) is described in Note 4 to Volcano’s unaudited financial statements contained in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 under the headings “Litigation—LightLab” and “Litigation—St. Jude Medical.”
No payments are being made in connection with the Agreement.
Pursuant to the Agreement, the parties agreed to cause each of the Litigations to be dismissed with prejudice and to not seek appellate review of a recent decision issued in the Massachusetts Proceeding.
The Agreement contains mutual releases covering all claims that the Volcano Parties or the St. Jude Parties, or their respective affiliates, have or may have against the other in connection with the Litigations.
The Agreement contains covenants not to sue by each party for (i) infringement of any of the patents that are the subject of any of the Litigations, (ii) infringement of any of the other party’s patents (subject to specified exceptions) by a party’s current products, products in the field of functional measurement for which regulatory approval is submitted before August 7, 2016, or features of those products, (iii) misappropriation of certain claimed trade secrets communicated each way between Axsun and LightLab and (iv) claims of any nature that relate to any of the Litigations. The covenants described in the preceding sentence do not extend to any: (a) patent infringement claims by St. Jude with respect to any (1) wireless communication of physiological pressure sensor data between a sensor and a receiver, or (2) products for intravascular optical coherence tomography (OCT); (b) patent infringement claims by Volcano with respect to any (1) iFR® patents or (2) products for intravascular ultrasound (i.e., IVUS products); or (c) products of an assignee existing prior to the assignment.
The agreement contains licenses by each party to the other party of the patents that are the subject of the Litigations.
Each party to the Agreement also agreed not to challenge the validity or enforceability of any of the patents that are the subject of any of the Litigations during the term of the Agreement, unless such party is accused of infringing the applicable patent. The Agreement terminates on August 7, 2036.
The foregoing description of the Agreement is only a summary and is qualified in its entirety by reference to the Agreement, a copy of which will be filed as an exhibit to Volcano’s quarterly report on Form 10-Q for the quarter ended September 30, 2014.
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Item 2.02 | Results of Operations and Financial Condition. |
On August 7, 2014, Volcano issued a press release regarding its financial results for the second quarter ended June 30, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K. The information under Item 2.02 of this Current Report on Form 8-K and the exhibit attached hereto as Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and shall not be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filings, except as shall be expressly set forth by specific reference in such a filing.
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Item 9.01 | Financial Statements and Exhibits. |
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Exhibit Number | | Description |
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99.1 | | Press Release, dated August 7, 2014 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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VOLCANO CORPORATION |
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By: | | /s/ Darin Lippoldt |
| | Darin Lippoldt Executive Vice-President, General Counsel, Secretary and Chief Compliance Officer |
Dated: August 7, 2014
Exhibit Index
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Exhibit Number | | Description |
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99.1 | | Press Release, dated August 7, 2014 |
Exhibit 99.1
VOLCANO REPORTS SECOND QUARTER RESULTS
COMPANY ANNOUNCES LITIGATION SETTLEMENT AGREEMENT WITH ST. JUDE MEDICAL AND PLAN TO DIVEST AXSUN TECHNOLOGIES SUBSIDIARY
(SAN DIEGO, CA), August 7, 2014—Volcano Corporation (Nasdaq: VOLC), a leading company focused on improving patient and economic outcomes on a global basis by developing and delivering innovative minimally invasive coronary and peripheral visualization, physiology diagnostics and therapies, today reported results for the second quarter and first six months.
The company also announced today that it will be seeking a divestiture of its Axsun Technologies, Inc. subsidiary. In addition, the company said that it and St. Jude Medical, Inc., (NYSE: STJ) have agreed to settle all existing litigation between the two companies.
For the quarter ended June 30, 2014, Volcano reported revenues of $102.6 million versus revenues of $101.3 million in the same period a year ago. Foreign currency exchange rates did not have a material impact on revenues during the quarter. Medical segment revenues increased approximately two percent on a reported basis.
The company reported net income on a GAAP basis of $282,000, or $0.01 per diluted share, in the second quarter of 2014, versus a net loss of $2.4 million, or $0.04 per share, in the same period a year ago. The results for the second quarter of 2014 included an acquisition-related benefit of $7.2 million related to an adjustment to a contingent liability resulting in a net benefit of $6.4 million, while the results for the second quarter of 2013 included a gain on a strategic investment of $2.2 million. Excluding acquisition-related items, amortization of intangibles and non-cash interest expense on convertible notes, net of tax, the company reported non-GAAP net income of $0.01 per diluted share, compared with non-GAAP earnings per diluted share of $0.03 in the second quarter a year ago.
For the first six months of 2014, Volcano reported revenues of $197.1 million versus revenues of $194.6 million in the first six months of 2013. On a constant currency basis, revenues increased three percent year-over-year after adjusting for a negative impact of approximately $2.7 million from foreign currency. Medical segment revenues increased approximately two and three percent on a reported and constant currency basis, respectively, versus the first six months of 2013.
For the first six months of 2014, the company reported a net loss on a GAAP basis of $10.6 million, or $0.21 per share, versus a net loss of $5.5 million, or $0.10 per share, in the same period a year ago. The results for the first six months of 2014 included a net acquisition-related benefit of $5.4 million, while the results for the first six months of 2013 included other income of $4.2 million. Excluding acquisition-related items, amortization of intangibles and non-cash interest expense on convertible notes, net of tax, the company reported a non-GAAP net loss of $0.10 per share in the first six months of 2014, compared with non-GAAP net earnings per diluted share of $0.06 in the first six months of 2013.
“Our results for the quarter reflect continued expansion of our IVUS (Intravascular Ultrasound) peripheral business in the U.S. and strong growth for our FFR (Fractional Flow Reserve) disposable business in Japan and Europe,” said Scott Huennekens, president and chief executive officer. “These gains helped offset the impact of the continued decline in our coronary IVUS disposable activity.”
“The second quarter was highlighted by the acquisition of AtheroMed, Inc., and its Phoenix® Atherectomy System used in the treatment of peripheral artery disease,” he continued. “We are on track to initiate a limited market release of the Phoenix device later this year and a full market release in early 2015. In addition, during the quarter we began the roll out of our iFR® (Instant Wave-Free Ratio™) FFR offering and SyncVision™ Co- Registration System in the U.S.,” he added.
With respect to the planned Axsun divestiture, Huennekens said, “This decision was driven by our long-term strategy to focus on coronary imaging and physiology leadership, peripheral expansion, profitability and business scale. The Axsun business and financial model is no longer a strategic fit with Volcano. We greatly appreciate the significant contributions of the Axsun team to Volcano over the past several years.”
Under terms of the settlement with St. Jude Medical, the parties have agreed to dismiss their lawsuits with prejudice, with neither party admitting liability to the other. Each party will be granted a release of liability for alleged misconduct, granted a license to all patents-in-suite and granted a covenant not to sue as to various current and future products. As part of the settlement agreement, no financial payments will be made to either party by the other.
“We are pleased with the resolution of these litigation matters and believe this settlement will enable us to better focus on the needs of doctors and patients,” Huennekens said.
Guidance
The company provided updated guidance for the full year 2014. Based on current foreign currency exchange rates, it expects revenues on a reported basis will be $397.0-$401.0 million, with revenues on a constant currency basis in the range of $401.0-$405.0 million. The company said it expects gross margins will be in the range of 63.0-63.5 percent and that operating expenses, including restructuring charges, will be 65.5-66.5 percent of revenues. On a reported basis, the company expects a GAAP net loss of $0.52-$0.55 per share. The company is maintaining its prior guidance for a net loss per share of $0.16-$0.19 on a non-GAAP basis. The company said it has been able to offset its revised outlook for revenues with expense reprioritization initiatives related to SG&A and R&D expenses, resulting in expected lower operating expenses as a percentage of revenues. Non-GAAP results exclude acquisition-related expenses, amortization of intangibles and non-cash interest expense, and assume an effective tax rate of 35.0 percent for the GAAP to non-GAAP adjustments. The company expects weighted average basic shares in 2014 will be approximately 51.4 million.
For the third quarter of 2014, Volcano expects revenues in the range of $95.0-$97.0 million on a reported and $95.5-$97.5 million constant currency basis. It expects gross margins will be in the range of 62.0-62.5 percent and that operating expenses will be in the range of 69.0-70.0 percent of revenues. The company expects a net loss per share of $0.17-$0.19 on a GAAP basis and $0.04-$0.06 on a non-GAAP 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 66540992, 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 August 10, at (404) 537-3406, passcode 66540992, and via the company’s website at http://www.volcanocorp.com.
About Volcano Corporation
Through its multi-modality platform, Volcano Corporation is the global leader in intravascular imaging for coronary and peripheral applications, and physiology. The company also offers a suite of peripheral therapeutic devices. The company’s broad range of technologies makes imaging and therapy simpler, more informative and less invasive and offers physicians and their patients around the world with industry-leading tools that aid diagnosis and guide and provide therapy. Founded in cardiovascular care and expanding into other specialties, Volcano is focused on improving patient and economic outcomes. For more information, visit the company’s website at www.volcanocorp.com.
Note Regarding the 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 as a measure 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 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 revenues. 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 continuing organic 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, which consist primarily of developed or in-process technology, are valued and amortized over their estimated lives. Volcano believes that since intangible assets represent efforts of the acquired company to build value prior to the acquisition, Volcano management eliminates the impact of the amortization when evaluating its current operating performance.
Exclusion of Non-Cash Interest Expenses: 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 is appropriate 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, margins, financial results and foreign currency exchange rates for the third and fourth quarter and calendar year 2014, its growth and other strategies and ability to execute on these strategies, the potential Axsun divestiture, competitive position, target markets, development of its base business and pipeline, product launches, benefits from recent acquisitions and benefits from its products and technologies, including new products. 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 risks that Volcano’s revenues or other projections may turn out to be inaccurate or Volcano may encounter unanticipated difficulty in achieving these 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 clearances for Volcano’s products or devices; the success of Volcano’s growth and other strategies, including the integration of recently-acquired businesses and our ability to integrate businesses from potential future acquisitions; risks associated with Volcano’s international operations; the ability to divest Axsun, if at all, and in a timely or beneficial manner; timing and achievement of product development milestones; outcome of ongoing and future litigation, investigations or claims; the impact and benefits of market development and the related size of Volcano’s addressable markets; 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 fully described in Volcano’s filings made with the Securities and Exchange Commission, including our 10-Q for the quarter ended March 31, 2014, 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.
Contact Information:
John Dahldorf
Chief Financial Officer
Volcano Corporation
(858) 720-4020
or
Neal B. Rosen
(650) 458-3014
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VOLCANO CORPORATION |
REVENUE SUMMARY |
(in millions) |
(unaudited) |
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| Three Months Ended June 30, | | Percentage Change | | Currency Impact | | Constant Currency Percentage Change | | |
| 2014 | | 2013 | | 2013 to 2014 | | Dollar | Percentage | | | | |
Medical segment: | | | | | | | | | | | | | | | |
Consoles: | | | | | | | | | | | | | | | |
United States | $ | 5.7 |
| | $ | 6.9 |
| | (18 | ) | % | | $ | — |
| | — |
| % | | (18 | ) | % | |
Japan | 0.2 |
| | 0.1 |
| | 16 |
| | | — |
| | (4 | ) | | | 20 |
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Europe | 3.1 |
| | 2.7 |
| | 17 |
| | | 0.2 |
| | 6 |
| | | 11 |
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Rest of world | 1.2 |
| | 1.8 |
| | (35 | ) | | | — |
| | — |
| | | (35 | ) | | |
Total Consoles | $ | 10.2 |
| | $ | 11.5 |
| | (12 | ) | % | | $ | 0.2 |
| | 1 |
| % | | (13 | ) | % | |
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IVUS single-procedure disposables: | | | | | | | | | | | | | | | |
United States | $ | 22.7 |
| | $ | 20.7 |
| | 10 |
| % | | $ | — |
| | — |
| % | | 10 |
| % | |
Japan | 15.8 |
| | 20.6 |
| | (23 | ) | | | (0.9 | ) | | (4 | ) | | | (19 | ) | | |
Europe | 6.9 |
| | 6.4 |
| | 9 |
| | | 0.4 |
| | 6 |
| | | 3 |
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Rest of world | 2.9 |
| | 2.2 |
| | 33 |
| | | — |
| | — |
| | | 33 |
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Total IVUS single-procedure disposables | $ | 48.3 |
| | $ | 49.9 |
| | (3 | ) | % | | $ | (0.5 | ) | | (1 | ) | % | | (2 | ) | % | |
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FFR single-procedure disposables: | | | | | | | | | | | | | | | |
United States | $ | 15.2 |
| | $ | 15.1 |
| | 2 |
| % | | $ | — |
| | — |
| % | | 2 |
| % | |
Japan | 5.5 |
| | 4.4 |
| | 23 |
| | | (0.3 | ) | | (6 | ) | | | 29 |
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Europe | 10.6 |
| | 8.0 |
| | 32 |
| | | 0.6 |
| | 7 |
| | | 25 |
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Rest of world | 0.8 |
| | 1.2 |
| | (33 | ) | | | — |
| | — |
| | | (33 | ) | | |
Total FFR single-procedure disposables | $ | 32.1 |
| | $ | 28.7 |
| | 12 |
| % | | $ | 0.3 |
| | 1 |
| % | | 11 |
| % | |
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Other | $ | 10.2 |
| | $ | 8.9 |
| | 13 |
| % | | $ | (0.1 | ) | | (1 | ) | % | | 14 |
| % | |
Sub-total medical segment | $ | 100.7 |
| | $ | 99 |
| | 2 |
| % | | $ | (0.1 | ) | | — |
| % | | 2 |
| % | |
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Industrial segment | $ | 1.9 |
| | $ | 2.3 |
| | (19 | ) | % | | $ | — |
| | — |
| % | | (19 | ) | % | |
Total | $ | 102.6 |
| | $ | 101.3 |
| | 1 |
| % | | $ | (0.1 | ) | | — |
| % | | 1 |
| % | |
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VOLCANO CORPORATION |
REVENUE SUMMARY |
(in millions) |
(unaudited) |
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| Six Months Ended June 30, | | Percentage Change | | Currency Impact | | Constant Currency Percentage Change | |
| 2014 | | 2013 | | 2013 to 2014 | | Dollar | Percentage | | |
Medical segment: | | | | | | | | | | | | | | | |
Consoles: | | | | | | | | | | | | | | | |
United States | $ | 9.3 |
| | $ | 11.7 |
| | (21 | ) | % | | $ | — |
| | — |
| % | | (21 | ) | % | |
Japan | 1.2 |
| | 1.1 |
| | 4 |
| | | (0.1 | ) | | (11 | ) | | | 15 |
| | |
Europe | 5.5 |
| | 4.2 |
| | 30 |
| | | 0.3 |
| | 6 |
| | | 24 |
| | |
Rest of world | 2.7 |
| | 3.5 |
| | (23 | ) | | | — |
| | — |
| | | (23 | ) | | |
Total Consoles | $ | 18.7 |
| | $ | 20.5 |
| | (9 | ) | % | | $ | 0.2 |
| | 1 |
| % | | (10 | ) | % | |
| | | | | | | | | | | | | | | |
IVUS single-procedure disposables: | | | | | | | | | | | | | | | |
United States | $ | 43.7 |
| | $ | 40.0 |
| | 10 |
| % | | $ | — |
| | — |
| % | | 10 |
| % | |
Japan | 32.2 |
| | 41.3 |
| | (22 | ) | | | (3.2 | ) | | (8 | ) | | | (14 | ) | | |
Europe | 13.5 |
| | 12.2 |
| | 11 |
| | | 0.6 |
| | 5 |
| | | 6 |
| | |
Rest of world | 5.6 |
| | 4.4 |
| | 27 |
| | | — |
| | — |
| | | 27 |
| | |
Total IVUS single-procedure disposables | $ | 95 |
| | $ | 97.8 |
| | (3 | ) | % | | $ | (2.6 | ) | | (3 | ) | % | | — |
| % | |
| | | | | | | | | | | | | | | |
FFR single-procedure disposables: | | | | | | | | | | | | | | | |
United States | $ | 28.9 |
| | $ | 28.7 |
| | 1 |
| % | | $ | — |
| | — |
| % | | 1 |
| % | |
Japan | 9.9 |
| | 8.9 |
| | 12 |
| | | (0.9 | ) | | (10 | ) | | | 22 |
| | |
Europe | 20.0 |
| | 15.9 |
| | 26 |
| | | 0.9 |
| | 5 |
| | | 21 |
| | |
Rest of world | 2.0 |
| | 2.0 |
| | — |
| | | — |
| | — |
| | | — |
| | |
Total FFR single-procedure disposables | $ | 60.9 |
| | $ | 55.5 |
| | 10 |
| % | | $ | — |
| | — |
| % | | 10 |
| % | |
| | | | | | | | | | | | | | | |
Other | $ | 19.2 |
| | $ | 16.9 |
| | 13 |
| % | | $ | (0.3 | ) | | (2 | ) | % | | 15 |
| % | |
Sub-total medical segment | $ | 193.7 |
| | $ | 190.7 |
| | 2 |
| % | | $ | (2.7 | ) | | (1 | ) | % | | 3 |
| % | |
| | | | | | | | | | | | | | | |
Industrial segment | $ | 3.4 |
| | $ | 3.8 |
| | (12 | ) | % | | $ | — |
| | — |
| % | | (12 | ) | % | |
Total | $ | 197.1 |
| | $ | 194.6 |
| | 1 |
| % | | $ | (2.7 | ) | | (2 | ) | % | | 3 |
| % | |
|
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VOLCANO CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except per share data) |
(unaudited) |
| | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | Six Months Ended June 30, |
| | 2014 | | | 2013 | | | 2014 | | | 2013 |
Revenues | | $ | 102,605 |
| | | $ | 101,344 | | | $ | 197,133 |
| | | $ | 194,575 |
Cost of revenues, excluding amortization of intangibles | | | 37,711 |
| | | | 36,039 | | | | 72,794 |
| | | | 69,166 |
Gross profit | | | 64,894 |
| | | | 65,305 | | | | 124,339 |
| | | | 125,409 |
Operating expenses: | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 49,353 |
| | | | 45,734 | | | | 99,664 |
| | | | 89,563 |
Research and development | | | 13,700 |
| | | | 17,954 | | | | 27,657 |
| | | | 33,605 |
Amortization of intangibles | | | 1,818 |
| | | | 820 | | | | 3,601 |
| | | | 1,654 |
Acquisition related items | | | (6,441 | ) | | | | 911 | | | | (5,405 | ) | | | | 2,489 |
Restructuring items | | | (841 | ) | | | | 0 | | | | 32 |
| | | | 0 |
Total operating expenses | | | 57,589 |
| | | | 65,419 | | | | 125,549 |
| | | | 127,311 |
Operating income (loss) | | | 7,305 |
| | | | (114) | | | | (1,210) |
| | | | (1,902) |
Interest income | | | 281 |
| | | | 305 | | | | 596 |
| | | | 643 |
Interest expense | | | (7,320) |
| | | | (6,607) | | | | (14,498) |
| | | | (13,152) |
Exchange rate (loss) gain | | | (13) |
| | | | (301) | | | | 71 |
| | | | (1,079) |
Other, net | | | 14 |
| | | | 2,279 | | | | 124 |
| | | | 4,177 |
Income (loss) before income tax | | | 267 |
| | | | (4,438) | | | | (14,917) |
| | | | (11,313) |
Income tax benefit | | | (15) |
| | | | (2,050) | | | | (4,295) |
| | | | (5,764) |
Net income (loss) | | $ | 282 |
| | | $ | (2,388) | | | $ | (10,622) |
| | | $ | (5,549) |
Net income (loss) per share: | | | | | | | | | | | | | | | |
Basic | | $ | 0.01 |
| | | $ | (0.04) | | | $ | (0.21) |
| | | $ | (0.10) |
Diluted | | $ | 0.01 |
| | | $ | (0.04) | | | $ | (0.21) |
| | | $ | (0.10) |
Shares used in calculating net income (loss) per share: | | | | | | | | | | | | | | | |
Basic | | | 51,300 |
| | | | 54,574 | | | | 51,630 |
| | | | 54,389 |
Diluted | | | 51,674 |
| | | | 54,574 | | | | 51,630 |
| | | | 54,389 |
|
| | | | | | | | |
VOLCANO CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) |
(unaudited) |
| Six Months Ended June 30, | |
| 2014 | | 2013 | |
Operating activities | | | | | | |
Net loss | $ | (10,622 | ) | | $ | (5,549 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Depreciation and amortization | | 15,212 |
| | | 12,223 |
| |
Amortization of investment premium, net | | 1,866 |
| | | 1,378 |
| |
Accretion of debt discount on convertible senior notes and other long-term debt | | 9,881 |
| | | 9,341 |
| |
Changes in contingent consideration | | (6,204 | ) | | | 1,656 |
| |
Non-cash stock compensation expense | | 7,515 |
| | | 7,847 |
| |
Asset impairment related to restructuring | | 818 |
| | | — |
| |
Gain on sale of other long-term investment | | (365 | ) | | | (1,925 | ) | |
Effect of exchange rate changes and others | | (953 | ) | | | 9,139 |
| |
Deferred income taxes | | 1,014 |
| | | — |
| |
Changes in operating assets and liabilities, net of acquisitions | | (20,103 | ) | | | (32,583 | ) | |
Net cash (used in) provided by operating activities | | (1,941 | ) | | | 1,527 |
| |
Investing activities | | | | | | |
Purchase of short-term and long-term available-for-sale securities | | (120,514 | ) | | | (154,887 | ) | |
Sale or maturity of short-term and long-term available-for-sale securities | | 198,621 |
| | | 139,494 |
| |
Capital expenditures | | (14,661 | ) | | | (18,490 | ) | |
Cash paid for intangible assets and other investments | | (4,941 | ) | | | (1,692 | ) | |
Proceeds from sale of other long-term investments | | 365 |
| | | 3,426 |
| |
Cash paid for acquisitions, net of cash acquired | | (114,791 | ) | | | — |
| |
Net cash used in investing activities | | (55,921 | ) | | | (32,149 | ) | |
Financing activities | | | | | | |
Repayment of capital lease liability | | (19 | ) | | | (15 | ) | |
Cash paid to settle contingent liability related to acquisition | | (2,900 | ) | | | — |
| |
Proceeds from sale of common stock under employee stock purchase plan | | 1,851 |
| | | 1,713 |
| |
Proceeds from exercise of common stock options | | 7,691 |
| | | 1,185 |
| |
Net cash provided by financing activities | | 6,623 |
| | | 2,883 |
| |
Effect of exchange rate changes on cash and cash equivalents | | 262 |
| | | (1,136 | ) | |
Net decrease in cash and cash equivalents | | (50,977 | ) | | | (28,875 | ) | |
Cash and cash equivalents, beginning of period | | 107,159 |
| | | 330,635 |
| |
Cash and cash equivalents, end of period | $ | 56,182 |
| | $ | 301,760 |
| |
|
| | | | | | | |
VOLCANO CORPORATION |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
| | | |
| June 30, | | December 31, |
| 2014 | | 2013 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 56,182 |
| | $ | 107,159 |
|
Short-term available-for-sale investments | 149,981 |
| | 230,775 |
|
Accounts receivable, net | 85,097 |
| | 81,962 |
|
Inventories | 72,170 |
| | 60,970 |
|
Prepaid expenses and other current assets | 24,960 |
| | 28,525 |
|
Total current assets | 388,390 |
| | 509,391 |
|
| | | |
Long-term available-for-sale investments | 35,510 |
| | 34,750 |
|
Property and equipment, net | 122,471 |
| | 118,094 |
|
Intangible assets, net | 126,970 |
| | 58,108 |
|
Goodwill | 150,882 |
| | 55,087 |
|
Other non-current assets | 56,330 |
| | 56,489 |
|
Total Assets | $ | 880,553 |
| | $ | 831,919 |
|
| | | |
Liabilities and Stockholders' Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 13,207 |
| | $ | 19,137 |
|
Accrued compensation | 28,277 |
| | 26,918 |
|
Accrued expenses and other current liabilities | 29,979 |
| | 28,453 |
|
Deferred revenues | 11,119 |
| | 10,652 |
|
Contingent consideration | 14,450 |
| | 3,750 |
|
Total current liabilities | 97,032 |
| | 88,910 |
|
Convertible senior notes | 410,868 |
| | 401,012 |
|
Other long-term debt | 1,208 |
| | 1,268 |
|
Deferred revenues | 4,802 |
| | 5,079 |
|
Contingent consideration, non-current portion | 52,984 |
| | 29,888 |
|
Other non-current liabilities | 6,523 |
| | 5,960 |
|
Total liabilities | 573,417 |
| | 532,117 |
|
Stockholders' equity | 307,136 |
| | 299,802 |
|
Total Liabilities and Stockholders' Equity | $ | 880,553 |
| | $ | 831,919 |
|
|
| | | | | | | | | | | | |
VOLCANO CORPORATION |
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS |
(in thousands, except per share data) |
(Unaudited) |
| | | | | | |
| | | | | | |
Three Months Ended June 30, 2014 | Pre-tax Adjustments | | Net of Tax (1) | | Earnings / (Loss) Per Share | |
| | | | | | |
GAAP net income | | | $ | 282 |
| | $ | 0.01 |
| |
Acquisition related items | (6,441 | ) | | (4,187 | ) | | (0.08 | ) | |
Amortization of intangibles | 1,818 |
| | 1,182 |
| | 0.02 |
| |
Non-cash interest expense on convertible notes | 5,011 |
| | 3,257 |
| | 0.06 |
| |
Non-GAAP net income | $ | 388 |
| | $ | 534 |
| | $ | 0.01 |
| |
| | | | | | |
Weighted average shares outstanding—diluted | | | | | 51,674 |
| |
| | | | | | |
Six Months Ended June 30, 2014 | Pre-tax Adjustments | | Net of Tax (1) | | Earnings / (Loss) Per Share | |
| | | | | | |
GAAP net loss | | | $ | (10,622 | ) | | $ | (0.21 | ) | |
Acquisition related items | (5,405 | ) | | (3,513 | ) | | (0.07 | ) | |
Amortization of intangibles | 3,601 |
| | 2,341 |
| | 0.05 |
| |
Non-cash interest expense on convertible notes | 9,935 |
| | 6,458 |
| | 0.13 |
| |
Non-GAAP net loss | $ | 8,131 |
| | $ | (5,336 | ) | | $ | (0.1 | ) | |
| | | | | | |
Weighted average shares outstanding—basic | | | | | 51,630 |
| |
| | | | | | |
(1) Effective tax rate of 35% applied to non-GAAP adjustments | | | | | |
|
| | | | | | | |
VOLCANO CORPORATION |
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE |
(in thousands, except per share data) |
(Unaudited) |
| | | |
| Q3 2014 |
| Guidance Range |
| From | | To |
| | | |
GAAP net loss per share—basic | $ | (0.17 | ) | | $ | (0.19 | ) |
Acquisition related items | 0.03 |
| | 0.03 |
|
Amortization of intangibles | 0.04 |
| | 0.04 |
|
Non-cash interest expense | 0.06 |
| | 0.06 |
|
Non-GAAP net loss per share—basic | $ | (0.04 | ) | | $ | (0.06 | ) |
Weighted average shares outstanding—basic | 51,415 |
| | 51,415 |
|
| | | |
| | | |
| 2014 |
| Guidance Range |
| From | | To |
| | | |
GAAP net loss per share—basic | $ | (0.52 | ) | | $ | (0.55 | ) |
Acquisition related items | (0.02 | ) | | (0.02 | ) |
Amortization of intangibles | 0.12 |
| | 0.12 |
|
Non-cash interest expense | 0.26 |
| | 0.26 |
|
Non-GAAP net loss per share—basic | $ | (0.16 | ) | | $ | (0.19 | ) |
Weighted average shares outstanding—basic | 51,440 |
| | 51,440 |
|
| | | |
| | | |
Note: Effective tax rate of 35% applied to non-GAAP adjustments | | |
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