EX-99.1 2 exhibit991-february212013.htm PRESS RELEASE Exhibit 99.1 - February 21, 2013


Exhibit 99.1

VOLCANO ANNOUNCES RECORD FOURTH QUARTER REVENUES
(SAN DIEGO, CA), November 21 2013-Volcano Corporation (NASDAQ: VOLC), a leading developer and manufacturer of precision guided therapy tools designed to enhance the diagnosis and treatment of coronary and peripheral vascular disease, today reported results for the fourth quarter of 2012.
For the quarter ended December 31, 2012, Volcano reported record quarterly revenues of $102.5 million, an increase of 10 percent on a reported basis versus the same period a year ago and 12 percent on a constant currency basis after adjusting for a two percent negative impact from foreign currency. Medical segment revenues increased 10 percent on a reported basis and 12 percent on a constant currency basis versus the fourth quarter a year ago.
The company reported net income on a GAAP basis of $2.5 million, or $0.04 per diluted share, in the fourth quarter of 2012, versus net income of $29.4 million, or $0.54 per diluted share in the fourth quarter of 2011. The results for the fourth quarter of 2012 include a benefit of $4.9 million, or $0.09 per diluted share, related to the release of a portion of the company's deferred tax valuation allowance. The results for the fourth quarter of 2011 include a similar benefit of $22.0 million, or $0.40 per diluted share.
For the full year 2012, Volcano reported revenues of $381.9 million, an increase of 11 percent on a reported basis and 12 percent on a constant currency basis over revenues of $343.5 million in 2011. Medical segment revenues increased 12 percent on a reported basis and 13 percent on a constant currency basis and industrial segment revenues declined three percent year-over-year.
The company reported net income on a GAAP basis of $8.0 million, or $0.15 per diluted share, in 2012. This compares with GAAP net income of $38.1 million, or $0.70 per diluted share in 2011. The results for both periods include the benefits related to a portion of the company's deferred tax valuation allowance referenced above.
“We continued to execute our growth strategy in 2012, delivering a double digit increase in revenues, led by a 45 percent increase in annual revenues on a constant currency basis in our FFR (Fractional Flow Reserve) disposable business. Our FFR technology is emblematic of our Functional PCI strategy that provides solutions for healthcare providers seeking both improved clinical and economic outcomes,” said Scott Huennekens, president and chief executive officer.
“At the same time, we continued to position the company for long-term growth by targeting addressable markets that are double the size of those we address today through the growth of our base business, development of our pipeline and implementation of business expansion strategies.”
“During the fourth quarter,” he continued, “we realized two important milestones in this strategy with our acquisitions of Sync-RX and Crux Biomedical. Sync-RX provides us advanced imaging technology that we will incorporate into our multi-modality platform, while Crux brings Volcano a novel inferior vena cava (IVC) filter and related offerings, and is indicative of our strategy to move beyond intravascular imaging to a wide variety of diagnostic and therapeutic solutions for both coronary and peripheral applications.”
Guidance for 2013
The company provided guidance for fiscal 2013. It expects revenues will be in the range of $422.0-$428.0 million. It expects gross margins will be in the range of 65-66 percent and operating expenses will be 61-62 percent of revenues. The company expects a net loss on a GAAP basis of $0.10-$0.14 per share in 2013 and non-GAAP net income of $0.16-$0.20 per diluted share in 2013. Non-GAAP results exclude acquisition-related expenses, amortization of intangibles and non-cash interest expense. The company expects weighted average basic shares in 2013 will be approximately 54.4 million shares and approximately 56.2 million shares on a diluted basis. All guidance for 2013 is provided on a constant currency basis.
Conference Call Information
The company will hold a conference call at 2 p.m., Pacific Standard Time, (5 p.m., Eastern Standard Time), today. The teleconference can be accessed by calling (631) 291-4555, passcode 90659548, 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 February 28 at (404) 537-3406, passcode 90659548, and via the company's website at http://www.volcanocorp.com.
    





About Volcano
Volcano Corporation is revolutionizing the medical device industry with a broad suite of technologies that make imaging and therapy simpler, more informative and less invasive. Our products empower physicians around the world with a new generation of analytical tools that deliver more meaningful information-using sound and light as the guiding elements. Founded in cardiovascular care and expanding into other specialties, Volcano is changing the assumption about what is possible in improving patient outcomes by combining imaging and therapy together. For more information, visit the company's website at www.volcancocorp.com.
Note Regarding Use of Non-GAAP Financial Measures
The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The company uses non-GAAP financial measures for financial and operational decision making and as a means to compare period-to-period results. The company believes that they provide useful information about operating results, enhance the overall understanding of operating results and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

Constant Currency Basis Revenue Changes: Volcano reports changes in revenue on a constant currency basis, which is a non-GAAP financial measure. Volcano believes that investors' understanding of the company's short-term and long-term financial results is enhanced by taking into consideration the impact of foreign currency translation on revenue. In addition, Volcano's management uses results of operations before currency translation to evaluate the operational performance of Volcano and as a basis for strategic planning.
Volcano reports its expectations of earnings per share performance excluding certain expenses described below; for additional details please see the “Reconciliation of GAAP to non-GAAP EPS Guidance” table in this press release. This accompanying table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Exclusion of Acquisition-related Expenses: Volcano excludes acquisition-related expenses because it does not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drive the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions.
Exclusion of Amortization of Intangibles: Volcano excludes amortization of intangibles because it is a non-cash expense relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as technology and supplier agreements, are valued and amortized over their estimated lives. Volcano believes that since intangibles represent costs incurred by the acquired company to build value prior to acquisition, Volcano management eliminates the impact of the amortization when evaluating its current operating performance.
Exclusion of Non-cash Interest Expense: In addition to disclosing the financial statement impact of the Financial Accounting Standards Board authoritative guidance for convertible debt accounting, Volcano management believes that investors may find it useful to consider excluding the impact of this authoritative guidance because it is non-cash in nature, may provide meaningful supplemental information regarding elements of the company's borrowing costs in order to properly understand its operational performance and liquidity, and facilitates comparisons to competitors' operating 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 growth and other strategies and ability to execute on those strategies, competitive positioning, target markets, development of its base business and pipeline, benefits from recent acquisitions, benefits from its products and technologies and financial guidance. Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that may cause Volcano's actual results to differ materially and adversely from statements contained herein. Some of the potential risks and uncertainties that could cause actual results to differ include the risk that Volcano's revenue, expense, earnings, earnings per share, margin or other projections may turn out to be inaccurate or Volcano may encounter unanticipated difficultly in achieving those projections; global and regional macroeconomic conditions, generally, and in the medical device and telecom industries specifically; currency exchange rate fluctuations; the effect of competitive factors and the company's reaction to those factors; purchasing





decisions with respect to the company's products; the pace and extent of market adoption of the company's products and technologies; uncertainty in the process of obtaining regulatory approval or clearance for Volcano's products or devices; the success of Volcano's growth and other strategies including integration of recently-acquired businesses and our ability to integrate businesses from any future acquisitions; risks associated with Volcano's international operations; timing and achievement of product development milestones; outcome of ongoing or future litigation, investigations and claims; the impact and benefits of market development and the related size of Volcano's addressable markets; our ability to 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 more fully described in Volcano's filings made with the Securities and Exchange Commission, including our prospectus supplement on Form 424b2, and other filings made with the Securities and Exchange Commission. Additional information will also be set forth in our Form 10-K that will be filed for the year ended December 31, 2012, 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 Corp.
(858) 720-4020

or
Neal B. Rosen
(650) 458-3014







VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Percentage Change
 
Currency Impact
 
Constant Currency
 
2012
 
2011
 
2011 to 2012
 
Dollar
 
Percentage
 
Percentage Change
Medical segment:
 
 
 
 
 
 
 
 
 
 
 
         Consoles:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
7.1

 
$
8.2

 
(14
)%
 
$

 
 %
 
(14
)%
                   Japan
1.1

 
0.5

 
136

 

 

 
148

                   Europe
2.1

 
1.8

 
18

 
(0.1
)
 
(6
)
 
24

                   Rest of world
1.9

 
1.0

 
80

 

 

 
80

         Total Consoles
$
12.2

 
$
11.5

 
5

 
$
(0.1
)
 
(2
)
 
7

 
 
 
 
 
 
 
 
 
 
 
 
         IVUS single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
20.2

 
$
19.8

 
2
 %
 
$

 
 %
 
2
 %
                   Japan
25.4

 
26.5

 
(4
)
 
(0.8
)
 
(3
)
 
(1
)
                   Europe
5.0

 
5.8

 
(13
)
 
(0.2
)
 
(4
)
 
(9
)
                   Rest of world
1.6

 
1.5

 
8

 

 

 
8

         Total IVUS single-procedure disposables
$
52.2

 
$
53.6

 
(3
)
 
$
(1.0
)
 
(2
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
         FFR single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
14.4

 
$
10.7

 
34
 %
 
$

 
 %
 
34
 %
                   Japan
5.0

 
1.6

 
222

 
(0.2
)
 
(10
)
 
232

                   Europe
7.1

 
6.2

 
15

 
(0.3
)
 
(6
)
 
21

                   Rest of world
0.7

 
0.6

 
16

 

 

 
16

         Total FFR single-procedure disposables
$
27.2

 
$
19.1

 
42

 
$
(0.5
)
 
(3
)
 
45

 
 
 
 
 
 
 
 
 
 
 
 
         Other
$
8.4

 
$
7.0

 
21
 %
 
$
(0.2
)
 
(1
)%
 
22
 %
                   Sub-total medical segment
$
100.0

 
$
91.2

 
10

 
$
(1.8
)
 
(2
)
 
12

 
 
 
 
 
 
 
 
 
 
 
 
Industrial segment
$
2.5

 
$
1.5

 
63
 %
 
$

 
 %
 
63
 %
                   Total
$
102.5

 
$
92.7

 
10

 
$
(1.8
)
 
(2
)
 
12








VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Years Ended
December 31,
 
Percentage Change
 
Currency Impact
 
Constant Currency
 
2012
 
2011
 
2011 to 2012
 
Dollar
 
Percentage
 
Percentage Change
Medical segment:
 
 
 
 
 
 
 
 
 
 
 
         Consoles:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
24.9

 
$
25.9

 
(4
)%
 
$

 
 %
 
(4
)%
                   Japan
3.2

 
2.2

 
46

 

 

 
46

                   Europe
6.3

 
8.1

 
(22
)
 
(0.6
)
 
(8
)
 
(14
)
                   Rest of world
6.3

 
4.8

 
30

 

 

 
30

         Total Consoles
$
40.7

 
$
41.0

 
(1
)
 
$
(0.6
)
 
(2
)
 
1

 
 
 
 
 
 
 
 
 
 
 
 
         IVUS single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
79.4

 
$
76.0

 
4
 %
 
$

 
 %
 
4
 %
                   Japan
99.1

 
95.0

 
4

 
0.6

 

 
4

                   Europe
20.7

 
23.7

 
(13
)
 
(1.8
)
 
(8
)
 
(5
)
                   Rest of world
6.7

 
6.3

 
7

 

 

 
7

         Total IVUS single-procedure disposables
$
205.9

 
$
201.0

 
2

 
$
(1.2
)
 
(1
)
 
3

 
 
 
 
 
 
 
 
 
 
 
 
         FFR single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
51.7

 
$
36.8

 
40
 %
 
$

 
 %
 
40
 %
                   Japan
13.9

 
4.9

 
186

 
(0.1
)
 
(1
)
 
187

                   Europe
26.2

 
23.2

 
13

 
(2.3
)
 
(10
)
 
23

                   Rest of world
3.1

 
2.1

 
41

 

 

 
41

         Total FFR single-procedure disposables
$
94.9

 
$
67.0

 
41

 
$
(2.4
)
 
(4
)
 
45

 
 
 
 
 
 
 
 
 
 
 
 
         Other
$
29.7

 
$
23.5

 
26
 %
 
$
(0.2
)
 
(1
)%
 
27
 %
                   Sub-total medical segment
$
371.2

 
$
332.5

 
12

 
$
(4.4
)
 
(1
)
 
13

 
 
 
 
 
 
 
 
 
 
 
 
Industrial segment
$
10.7

 
$
11.0

 
(3
)%
 
$

 
 %
 
(3
)%
                   Total
$
381.9

 
$
343.5

 
11

 
$
(4.4
)
 
(1
)
 
12







VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
2012
 
2011
 
2012
 
2011
Revenues
$
102,477

 
$
92,748

 
$
381,866

 
$
343,546

Cost of revenues, excluding amortization of intangibles
34,118

 
30,358

 
128,915

 
114,533

Gross profit
68,359

 
62,390

 
252,951

 
229,013

Operating expenses:
 
 
 
 
 
 
 
         Selling, general and administrative
45,759

 
40,075

 
172,794

 
147,057

         Research and development
14,909

 
12,761

 
55,469

 
53,098

         Amortization of intangibles
770

 
875

 
3,240

 
3,447

         Acquisition-related items
1,858

 

 
1,858

 

                   Total operating expenses
63,296

 
53,711

 
233,361

 
203,602

Operating income
5,063

 
8,679

 
19,590

 
25,411

Interest income
246

 
207

 
902

 
908

Interest expense
(2,982
)
 
(1,212
)
 
(7,975
)
 
(7,107
)
Exchange rate (loss) gain
(257
)
 
184

 
(576
)
 
(997
)
Loss from debt extinguishment
(4,969
)
 

 
(4,969
)
 

Other, net
2,749

 
(110
)
 
2,717

 
(112
)
Income (loss) before income tax
(151
)
 
7,748

 
9,689

 
18,103

Income tax (benefit) expense
(2,628
)
 
(21,674
)
 
1,667

 
(19,990
)
Net income
$
2,477

 
$
29,422

 
$
8,022

 
$
38,093

Net income per share:
 
 
 
 
 
 
 
         Basic
$
0.05

 
$
0.56

 
$
0.15

 
$
0.73

         Diluted
$
0.04

 
$
0.54

 
$
0.15

 
$
0.70

Shares used in calculating net income per share:
 
 
 
 
 
 
 
         Basic
53,924

 
52,634

 
53,475

 
52,300

         Diluted
55,371

 
54,459

 
55,195

 
54,596






VOLCANO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Years Ended
December 31,
 
2012
 
2011
Operating activities
 
 
 
Net income
$
8,022

 
$
38,093

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
         Depreciation and amortization
23,503

 
23,214

         Amortization (accretion) of investment premium (discount), net
3,256

 
3,805

         Accretion of debt discount on convertible senior notes
5,743

 
4,668

         Loss on debt extinguishment
4,969

 

         Acquisition-related items
231

 

         Non-cash stock compensation expense
15,079

 
12,991

         Other non-cash adjustments
907

 
(2,350
)
         Deferred income taxes
1,009

 
(22,771
)
         Changes in operating assets and liabilities
(12,901
)
 
(14,054
)
Net cash provided by operating activities
49,818

 
43,596

Investing activities
 
 
 
Purchase of short-term and long-term available-for-sale securities
(298,260
)
 
(310,573
)
Sale or maturity of short-term and long-term available-for-sale securities
252,937

 
365,639

Capital expenditures
(43,842
)
 
(43,248
)
Cash paid for acquisitions, net of cash acquired
(54,462
)
 

Cash paid for other intangible assets and investments
(5,824
)
 
(3,482
)
Proceeds from sale of long-term investments
1,500

 

Proceeds from foreign currency exchange contracts
1,260

 
2,355

Payment for foreign currency exchange contracts
(525
)
 
(3,962
)
Net cash provided by (used in) investing activities
(147,216
)
 
6,729

Financing activities
 
 
 
Repayment of capital lease liability
(90
)
 
(51
)
Proceeds from issuance of 1.75% convertible senior notes due 2017
460,000

 

Payment of debt issuance costs in connection with the 1.75% convertible senior notes due 2017
(14,611
)
 

Purchase of call options in connection with the 1.75% convertible senior notes due 2017
(89,798
)
 

Proceeds from warrants issuance in connection with the 1.75% convertible senior
    notes due 2017
53,686

 

Repurchase of a portion of 2.875% convertible senior notes due 2015
(104,832
)
 

Retirement of call options in connection with the retirement of a portion of 2.875%
    convertible senior notes due 2015
15,156

 

Retirement of warrants in connection with the retirement of a portion of 2.875%
    convertible senior notes due 2015
(11,603
)
 

Proceeds from sale of common stock under employee stock purchase plan and
    exercise of common stock options
13,812

 
13,026

Tax benefit related to stock-based compensation
34

 
165

Net cash provided by financing activities
321,754

 
13,140

Effect of exchange rate changes on cash and cash equivalents
(737
)
 
122

Net increase in cash and cash equivalents
223,619

 
63,587

Cash and cash equivalents, beginning of year
107,016

 
43,429

Cash and cash equivalents, end of year
$
330,635

 
$
107,016






 VOLCANO CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 (unaudited)
 
 
 
 
 
December 31,
 
 December 31,
 
2012
 
2011
Assets
 
 
 
         Current assets:
 
 
 
         Cash and cash equivalents
$
330,635

 
$
107,016

         Short-term available-for-sale investments
140,960

 
112,327

         Accounts receivable, net
76,348

 
69,469

         Inventories
52,811

 
41,306

         Prepaid expenses and other current assets
21,773

 
19,939

                   Total current assets
622,527

 
350,057

         Restricted cash
711

 
692

         Long-term available-for-sale investments
44,385

 
30,919

         Property and equipment, net
104,385

 
81,097

         Intangible assets, net
50,657

 
15,245

         Goodwill
51,577

 
2,487

         Other non-current assets
28,102

 
16,227

Total Assets
$
902,344

 
$
496,724

 


 
 
 Liabilities and Stockholders' Equity
 
 
 
 Current liabilities:
 
 
 
         Accounts payable
$
16,284

 
$
12,911

         Accrued compensation
23,227

 
20,251

         Accrued expenses and other current liabilities
23,476

 
16,689

         Deferred revenues
9,789

 
7,077

         Contingent consideration
2,908

 

         Current maturities of long-term debt
53

 
72

                  Total current liabilities
75,737

 
57,000

 Convertible senior notes
382,300

 
95,663

 Other long-term debt
1,119

 
74

 Deferred revenues
4,661

 
3,168

Contingent consideration, non-current portion
27,323

 

 Other non-current liabilities
2,859

 
1,582

         Total liabilities
493,999

 
157,487

 Stockholders' equity
408,345

 
339,237

 Total Liabilities and Stockholders' Equity
$
902,344

 
$
496,724









 VOLCANO CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP EPS GUIDANCE
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
2013
 
 
Guidance Range
 
 
From
 
To
GAAP net loss net per share - basic
$
(0.14
)
 
$
(0.10
)
GAAP net loss net per share - diluted
$
(0.14
)
 
$
(0.10
)
    Acquisition-related items
0.05

 
0.05

    Amortization of intangibles
0.04

 
0.04

    Non-cash interest expense
0.21

 
0.21

Non-GAAP net income per share - diluted
$
0.16

 
$
0.20

Weighted average shares outstanding - basic
54,400

 
54,400

Weighted average shares outstanding - diluted
56,200

 
56,200