The Spectranetics Corporation

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Spectranetics Achieves Fourth Quarter Revenue of $36.8 Million

13% Increase Over Q4 2011

Provides Outlook for 2013

COLORADO SPRINGS, Colo., Feb. 21, 2013 (GLOBE NEWSWIRE) -- The Spectranetics Corporation (Nasdaq:SPNC) today reported financial results for the three and twelve months ended December 31, 2012. Highlights of the quarter (all compared with the quarter ended December 31, 2011) include:

  • Lead Management revenue growth of 29%, 30% on a constant currency basis1
  • Vascular Intervention revenue growth of 5%, 6% on a constant currency basis, led by U.S. peripheral atherectomy growth of 15%
  • U.S. revenue increased 14% to $30.8 million
  • International revenue increased 8% to $5.9 million, 11% growth on a constant currency basis

"The fourth quarter of 2012 marks our fifth consecutive quarter of double digit revenue growth on a constant currency basis," said President and Chief Executive Officer, Scott Drake. "We set the goal more than a year ago to be a reliable, profitable double digit growth company—and in 2012, we have cleared this bar. As we look forward to 2013, we have reason to be excited about our prospects—our core markets are growing in the range of 10% and we are gaining share. We are providing our outlook for 2013, which anticipates continued success. Over the long term, we are striving to drive further revenue acceleration and continued margin expansion, which will culminate in meaningful operating leverage over time."

Net income for the fourth quarter of 2012 was $673,000, or $0.02 per diluted share, compared with net income of $355,000, or $0.01 per diluted share, for the fourth quarter of 2011. Non-GAAP adjusted net income for the fourth quarter of 2012 was $984,000, or $0.03 per diluted share, and for the fourth quarter of 2011 was $1.3 million, or $0.04 per diluted share. Non-GAAP adjusted net income excludes special items described later in this release under the heading "Reconciliation of Non-GAAP Financial Measures."

1Constant currency is a non-GAAP financial measure. See "Reconciliation of Non-GAAP Financial Measures" later in this release.

2012 Financial Results

Revenue for the twelve months ended December 31, 2012 rose 10% (11% on a constant currency basis) to $140.3 million, from $127.3 million in 2011. Vascular Intervention revenue increased 8% (9% on a constant currency basis) to $67.3 million; Lead Management revenue increased 19% (20% on a constant currency basis) to $55.2 million; and laser system, service and other revenue decreased 4%, both on an as reported and constant currency basis, to $17.8 million.

On a geographic basis, United States revenue was $117.4 million, an increase of 11% from 2011. International revenue was $22.8 million, an increase of 7% (13% on a constant currency basis) from 2011.

Net income for the twelve months ended December 31, 2012 was $2.2 million, or $0.06 per diluted share, compared with net income of $894,000 or $0.03 per diluted share, in the twelve months ended December 31, 2011. Non-GAAP adjusted net income for the twelve months ended December 31, 2012 was $2.5 million, or $0.07 per diluted share, and for the twelve months ended December 31, 2011 was $2.7 million, or $0.08 per diluted share. Non-GAAP adjusted net income excludes special items described later in this release under the heading "Reconciliation of Non-GAAP Financial Measures."

2013 Outlook

Management projects that 2013 revenue will be in the range of $153.0 - $155.5 million, an increase of 9% - 11% from 2012.

Net income for 2013 is projected to be in the range of $0.0 - $0.5 million, or $0.00 - $0.01 per diluted share, including the impact of the Medical Device Tax which is estimated to be approximately $2.5 million for 2013. Projected net income also includes estimated non-cash amortization costs of approximately $1.6 - $2.0 million associated with the recently announced acquisition of the Quick-Access™ and Quick-Cross Capture™ devices.

Earnings before interest, taxes, depreciation, amortization, special items and the medical device tax (Adjusted EBITDA) is anticipated to be in the range of $13.5 - $14.5 million in 2013, compared with Adjusted EBITDA of $13.1 million in 2012. Adjusted EBITDA provides for comparability between periods and represents an additional measure of the operating performance of the business.

As a result of seasonal operating expenses that are higher in the first half of the year, investments in research, development and commercial programs, non-cash amortization costs associated with the previously announced acquisition, and the impact of the medical device tax, a net loss of up to $2.5 million is anticipated in the first half of 2013, mostly in the first quarter.

Conference Call

Management will host an investment community conference call today beginning at 9:00 a.m. Mountain time, 11:00 a.m. Eastern time, to discuss these results and answer questions. Individuals interested in listening to the conference call may do so by dialing (877) 561-2747 for domestic callers, or (973) 409-9689 for international callers, or from the webcast on the investor relations section of the Company's Web site at: www.spectranetics.com. The webcast will be available on the Company's Web site for 14 days following the completion of the call.

About Spectranetics

Spectranetics develops, manufactures, markets and distributes single-use medical devices used in minimally invasive procedures within the cardiovascular system. The Company's products are sold in more than 40 countries and are used to treat arterial blockages in the heart and legs, as well as the removal of pacemaker and defibrillator leads.

The Company's Vascular Intervention (VI) products include a range of peripheral and cardiac laser catheters for ablation of occluded arteries above and below the knee and within coronary arteries. The Company also markets aspiration and thrombectomy catheters for the removal of thrombus and support catheters to facilitate crossing of coronary and peripheral arterial blockages.

The Lead Management (LM) product line includes excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads.

For more information, visit www.spectranetics.com.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as "anticipate,""will,""estimate,""expect,""look forward," "strive," "project," "intend," "should," "plan," "believe," "hope," "enable," "potential," and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and product development. These forward-looking statements include, but are not limited to, statements regarding our expectation of continued growth and the reasons for that growth, growth rates, and 2013 outlook including projected revenue and net income. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements and to note that they speak only as of the date hereof. These risks and uncertainties may include market acceptance of excimer laser atherectomy technology and our lead removal products, increasing price and product competition, increased pressure on expense levels resulting from expanded sales, marketing, product development and clinical activities, uncertain success of our strategic direction, dependence on new product development, uncertain success of or delays in our clinical trials, adverse results in connection with any ongoing legal proceeding, or any legal proceeding in which we may become involved, adverse impact to our business of the healthcare reform and related legislation, continued or worsening adverse conditions in the general domestic and global economic markets and continued volatility and disruption of the credit markets, which, among other things, affects the ability of hospitals and other health care systems to obtain credit and may impede our access to capital, intellectual property claims of third parties, availability of inventory from suppliers, adverse outcome of FDA inspections, the receipt of FDA approval to market new products or applications and the timeliness of any approvals, market acceptance of new products or applications, product defects, ability to manufacture sufficient volumes to fulfill customer demand, availability of vendor-sourced components at reasonable prices, unexpected delays or costs associated with any planned improvements to our manufacturing processes, and share price volatility due to the initiation or cessation of coverage, or changes in ratings, by securities analysts. For a further list and description of such risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any anticipated results, performance or achievements, please see our previously filed SEC reports, including those risks set forth in our 2011 Annual Report on Form 10-K. We disclaim any intention or obligation to update or revise any financial or other projections or other forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most directly comparable GAAP measures for the respective periods, and an explanation of our use of these non-GAAP measures, can be found in "Reconciliation of Non-GAAP Financial Measures" immediately following the financial tables. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

-Financial tables follow-

 

THE SPECTRANETICS CORPORATION
Condensed Consolidated Statements of Operations
(000's, except per share data and percentages)
(unaudited)
 
  Three Months Ended
December 31,
Twelve Months Ended
December 31,
  2012 2011 2012 2011
Revenue $36,751 $32,524 $140,285 $127,287
Cost of products sold 9,815 8,800 37,927 35,723
Gross profit 26,936 23,724 102,358 91,564
Gross margin % 73.3% 72.9% 73.0% 71.9%
Operating expenses:        
Selling, general and administrative 20,967 17,795 82,254 70,502
Research, development and other technology 4,712 4,066 16,846 17,729
Acquisition-related costs 311 311
Federal investigation legal and accrued indemnification costs (370) (370)
Settlement costs - license agreement dispute 1,821 1,821
Litigation charge 596
Total operating expenses 25,990 23,312 99,411 90,278
Operating income 946 412 2,947 1,286
Litigation-related interest expense (230)
Other income (expense), net 2 (64) 13 69
Total other income (expense) 2 (64) 13 (161)
Income before taxes 948 348 2,960 1,125
Income tax expense (benefit) 275 (7) 734 231
Net income $673 $355 $2,226 $894
         
Net income per common share:        
Basic $0.02 $0.01 $0.06 $0.03
Diluted 0.02 0.01 0.06 0.03
Weighted average shares outstanding:        
Basic 34,698 33,720 34,377 33,458
Diluted 36,299 34,614 35,767 34,370
 
 
THE SPECTRANETICS CORPORATION
Condensed Consolidated Balance Sheets
(000's)
 
  12/31/2012 12/31/2011
  (unaudited)  
ASSETS    
Current assets:    
Cash and cash equivalents $37,775 $39,638
Accounts receivable, net 19,945 18,123
Inventories, net 9,288 8,542
Deferred  income taxes, current portion, net 313 610
Other current assets 2,506 2,421
Total current assets 69,827 69,334
Property and equipment, net 27,006 27,249
Goodwill 13,296 11,569
Other assets 640 884
Total assets $110,769 $109,036
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities $20,193 $27,960
Non-current liabilities 1,879 1,566
Stockholders' equity 88,697 79,510
Total liabilities and stockholders' equity $110,769 $109,036

 

THE SPECTRANETICS CORPORATION
Supplemental Financial Information
(Unaudited)
     
Financial Summary 2011 2012
(000's, except laser sales and installed base amounts) 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
           
Disposable products revenue:          
Vascular Intervention revenue $15,877 $16,411 $17,420 $16,821 $16,684
Lead Management revenue 11,893 12,368 13,526 13,918 15,374
Total disposable products revenue 27,770 28,779 30,946 30,739 32,058
           
Service and other revenue 2,541 2,659 2,515 2,508 2,757
           
Laser revenue:          
Equipment sales 909 591 409 910 772
Rental fees 1,304 1,240 1,165 1,073 1,164
Total laser revenue 2,213 1,831 1,574 1,983 1,936
           
Total revenue 32,524 33,269 35,035 35,230 36,751
           
Net income 355 12 636 905 673
Non-GAAP adjusted net income excluding special items (1) 1,310 N/A N/A N/A 984
           
Cash flow generated by (used in) operating activities 3,051 (4,713) 423 3,748 5,703
Total cash and current investment securities at end of quarter 39,638 27,000 27,659 31,646 37,775
           
Laser sales summary:          
Laser sales from inventory 5 3 2 5 6
Laser sales from evaluation/rental units 3 1 1
Total laser sales 8 3 3 6 6
           
(1) Non-GAAP adjusted net income excluding special items is a non-GAAP financial measure. Please refer to the non-GAAP reconciliation tables following this table for the reconciliation of the fourth quarter of 2011 and 2012. There were no special items in the first, second or third quarters of 2012.          
           
Worldwide Installed Base Summary:          
Laser sales from inventory 5 3 2 5 6
Rental placements 21 15 18 21 30
Evaluation placements 4 7 8 4 6
Laser placements during quarter 30 25 28 30 42
Buy-backs/returns during quarter (13) (13) (14) (19) (24)
Net laser placements during quarter 17 12 14 11 18
Total lasers placed at end of quarter 1,011 1,023 1,037 1,048 1,066

Reconciliation of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures in this release. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures for the respective periods can be found in the tables below. An explanation of the manner in which our management uses these non-GAAP measures to conduct and evaluate our business and the reasons why management believes that these non-GAAP measures provide useful information to investors is provided following the reconciliation tables.  

 
THE SPECTRANETICS CORPORATION
Reconciliation of revenue by geography to non-GAAP revenue by geography
on a constant currency basis
(000's, except percentages)
(unaudited)
 
  Three Months Ended  
 
December 31, 2012
December 31,
2011

Change
 



Revenue,
as reported
Foreign
exchange
impact as
compared
to prior
period


Revenue on
a constant
currency
basis




Revenue, as
reported





As reported



Constant
currency
basis
United States $30,819 $— $30,819 $27,050 14% 14%
International 5,932 159 6,091 5,474 8% 11%
Total revenue $36,751 $159 $36,910 $32,524 13% 13%
 
  Twelve Months Ended  
 
December 31, 2012
December 31,
2011

Change
 



Revenue,
as reported
Foreign
exchange
impact as
compared
to prior
period


Revenue on
a constant
currency
basis




Revenue, as
reported





As reported



Constant
currency
basis
United States $117,436 $— $117,436 $105,933 11% 11%
International 22,849 1,227 24,076 21,354 7% 13%
Total revenue $140,285 $1,227 $141,512 $127,287 10% 11%
 
 
THE SPECTRANETICS CORPORATION
Reconciliation of revenue by product line to non-GAAP revenue by product line
on a constant currency basis
(000's, except percentages)
(unaudited)
     
  Three Months Ended  
 
December 31, 2012
December 31,
2011

Change
 



Revenue,
as reported
Foreign
exchange
impact as
compared
to prior
period


Revenue on
a constant
currency
basis




Revenue, as
reported





As reported



Constant
currency
basis
Vascular Intervention $16,684 $108 $16,792 $15,877 5% 6%
Lead Management 15,374 77 15,451 11,893 29% 30%
Laser System, Service & Other 4,693 (26) 4,667 4,754 (1)% (2)%
Total revenue $36,751 $159 $36,910 $32,524 13% 13%
     
     
  Twelve Months Ended  
 
December 31, 2012
December 31,
2011

Change
 



Revenue,
as reported
Foreign
exchange
impact as
compared
to prior
period


Revenue on
a constant
currency
basis




Revenue, as
reported





As reported



Constant
currency
basis
Vascular Intervention $67,336 $533 $67,869 $62,264 8% 9%
Lead Management 55,186 588 55,774 46,480 19% 20%
Laser System, Service & Other 17,763 106 17,869 18,543 (4)% (4)%
Total revenue $140,285 $1,227 $141,512 $127,287 10% 11%
 
 
THE SPECTRANETICS CORPORATION
Reconciliation of Net Income to Non-GAAP Adjusted Net Income Excluding Special Items and
Net Income per Diluted Share to Non-GAAP Adjusted Net Income Excluding Special Items
per Diluted Share
(000's, except per share data)
(unaudited)
 
  Three Months Ended December 31, Twelve Months Ended December 31,
  2012 2011 2012 2011
  Net income Per diluted share (1) Net income Per diluted share (1) Net income Per diluted share (1) Net income Per diluted share (1)
Net income, as reported $673 $0.02 $355 $0.01 $2,226 $0.06 $894 $0.03
Acquisition-related costs (2) 311 0.01 311 0.01
Federal investigation legal and accrued indemnification costs (3) (370) (0.01) (370) (0.01)
Settlement costs --- license agreement dispute (4) 1,821 0.05 1,821 0.05
Litigation charge (5) 596 0.02
Litigation-related interest expense (5) 230 0.01
Decrease in valuation allowance against deferred tax asset (6) (496) (0.01) (496) (0.01)
Non-GAAP adjusted net income excluding special items $984 $0.03 $1,310 $0.04 $2,537 $0.07 $2,675 $0.08
 
1) Per share amounts may not add due to rounding. Per diluted share is calculated based on the fully diluted weighted average shares outstanding for all periods. The fully diluted weighted average shares were 36,298,552 and 35,766,970 for the three and twelve months ended December 31, 2012, respectively, and 34,614,334 and 34,370,124 for the three and twelve months ended December 31, 2011.
 
2) In the fourth quarter of 2012, we incurred $0.3 million in legal and other costs related to our acquisition of certain product lines from Upstream Peripheral Technologies Ltd. Further information regarding this matter is included in our Form 8-K filed on January 7, 2013.
 
3) In the third quarter of 2010, we accrued a $6.5 million charge to record our estimated liability related to indemnification obligations that we had with three former employees. In the fourth quarter of 2011, we reversed $0.4 million of the original accrual based on developments in the court proceedings, including the conclusion of the trial of two of the defendants and the dismissal of charges against a third defendant. Further information regarding this matter is included in our Annual Report on Form 10-K for the year ended December 31, 2011.
 
4) In January 2012, we entered into a Termination and Mutual Release ("Agreement") with Medtronic, Inc. The Agreement terminated the License Agreement between us and Medtronic dated February 28, 1997. Under the Agreement, we paid Medtronic $3.0 million in January 2012. We had accrued royalty expenses in the amount of $1.2 million prior to the settlement; therefore, the amount of $1.8 million was recorded as settlement costs—license agreement dispute. The Agreement includes a mutual release and no further royalty expenses will be incurred subsequent to the effective date of the Agreement. 
 
5) In the third quarter of 2011, the Dutch Court of Appeal issued a ruling in favor of Cardiomedica S.p.A., requiring us to pay $0.6 million plus $0.2 million of interest to Cardiomedica. Further information regarding this matter is included in our Annual Report on Form 10-K for the year ended December 31, 2011.
 
6) In the fourth quarter of 2011, we entered into a strategic tax transaction with the approval of the Dutch tax authority that effectively extended the life of a portion of a net operating loss (NOL) carryforward in the Netherlands, which had previously been scheduled to expire on December 31, 2011 and which had previously been fully reserved. As a result, we recorded a $0.5 million tax benefit representing our estimate of the actual utilization of the extended deduction in future years.
 
THE SPECTRANETICS CORPORATION
Reconciliation of Net Income to
EBITDA and Adjusted EBITDA 
(000's)
(unaudited)
   
  Twelve Months Ended
December 31,
  2012
Net income, as reported $2,226
Provision for income taxes 734
Interest income, net (8)
Depreciation and amortization 9,854
EBITDA 12,806
   
Acquisition-related costs 311
Adjusted EBITDA $13,117

Management uses the non-GAAP financial measures as supplemental measures to analyze the underlying trends in our business, assess the performance of our core operations, establish operational goals and forecasts that are used in allocating resources and evaluate our performance period over period and in relation to our competitors' operating results.

The impact of foreign exchange rates is highly variable and difficult to predict. We use a constant currency basis to show the impact from foreign exchange rates on current period revenue compared to prior period revenue using the prior period's foreign exchange rates. In order to properly understand the underlying business trends and performance of our ongoing operations, we believe that investors may find it useful to consider the impact of excluding changes in foreign exchange rates from our revenue.

We believe that presenting the non-GAAP financial measures used in this release provides investors greater transparency to the information used by our management for financial and operational decision-making and allows investors to see our results "through the eyes" of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by management to evaluate and measure such performance.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Some of the limitations associated with our use of these non-GAAP financial measures are provided below:

  • Management exercises judgment in determining which types of charges or other items should be excluded from the non-GAAP financial measures used.
  • Items such as the acquisition-related costs, federal investigation legal and accrued indemnification costs, the license agreement termination charge and the litigation charge and related interest that are excluded from net income and net income per share can have a material impact on cash flows, GAAP net income and net income per share and reflect economic costs to us that are not reflected in non-GAAP adjusted net income and non-GAAP adjusted net income per share.
  • Depreciation and amortization expense, while not requiring cash settlement, are ongoing and recurring expenses and have a material impact on GAAP net income and reflect economic costs to us that are not reflected in Adjusted EBITDA.
  • The decrease in the valuation allowance against the deferred tax assets represents a change in the value of assets. The benefit associated with this change in value is not included in our non-GAAP adjusted net income or non-GAAP adjusted net income per share.
  • Revenue growth rates stated on a constant currency basis, by their nature, exclude the impact of foreign exchange, which may have a material impact on GAAP revenue.
  • Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
CONTACT: The Spectranetics Corporation
         Guy Childs, Chief Financial Officer
         (719) 633-8333

         INVESTOR CONTACTS
         Westwicke Partners
         Lynn Pieper
         (415) 202-5678
         lynn.pieper@westwicke.com
Source: The Spectranetics Corporation
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