Volcano Corp - FORM 8-K - EX-99.1 - PRESS RELEASE - November 6, 2012

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Exhibit 99.1

VOLCANO CORPORATION REPORTS THIRD QUARTER 2012 RESULTS
(SAN DIEGO, CA), November 6, 2012-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 third quarter of 2012.
For the quarter ended September 30, 2012, Volcano reported revenues of $93.7 million, an increase of nine percent on a reported basis and 12 percent on a constant currency basis after adjusting for a three percent negative impact from foreign currency. Medical segment revenues increased nine percent on a reported basis and 12 percent on a constant currency basis versus the third quarter a year ago.
The company reported net income of $2.0 million, or $0.04 per diluted share, in the third quarter of 2012, versus net income of $2.6 million, or $0.05 per diluted share, in the third quarter of 2011.
For the first nine months of 2012, Volcano reported revenues of $279.4 million, an increase of 11 percent on a reported basis and 12 percent on a constant currency basis versus the same period a year ago. The company reported net income of $5.5 million, or $0.10 per diluted share, compared with net income of $8.7 million, or $0.16 per diluted share, in the first nine months of 2011.
“Volcano demonstrated strong momentum in the quarter as we continued to execute on our functional PCI market development and market share strategies despite a challenging economic environment, particularly in Europe,” said Scott Huennekens, president and chief executive officer.
“We generated a 13 percent increase in our disposable revenues on a constant currency basis, driven by the continued strong growth of our FFR (Fractional Flow Reserve) disposable business, where revenues grew 54 percent year-over-year on constant currency basis with solid increases across all of our key geographies,” he noted.
“Helping to drive the growth of our FFR business is the growing volume of positive data, including the FAME II data that showed the use of FFR ensured that the right patients received stents and reduced revascularization and rehospitalization rates,” Huennekens added. “The FAME II data has been augmented by the release of a number of important FFR studies at the recent Transcatheter Cardiovascular Therapeutics (TCT) conference that further portrayed FFR as not only the gold standard for determining ischemia, but also as an important contributor to achieving improved patient outcomes in a cost-effective manner.”
“In addition to the release of favorable data at TCT, we received positive feedback from clinicians to new products and those in our development pipeline, including the newly-launched PrimeWire Prestige® PLUS pressure guide wire with AccuSense™ technology, which provides additional stability during long procedures,” Huennekens noted.     
“We also exhibited our new Visions® PV .035 Digital IVUS (Intravascular Imaging) catheter, which recently received market clearance in both the U.S. and Europe. These approvals represent an important milestone in our strategy to expand market adoption of IVUS in new indications as the device has applications in large vessels, such as atherectomy, venous and other complex lesion indications,” he stated.
Guidance for 2012
The company provided updated guidance for fiscal 2012. The company now expects total revenues for 2012 will be in the range of $380-$384 million versus prior guidance of $384-$390 million, due to its transition to a direct sales model in Spain and continued softness in PCI activity, primarily in the U.S. It continues to expect gross margins of 65-66 percent. It now expects operating expenses will be 59-60 percent of revenues versus prior guidance of 58-59 percent of revenues. The company continues to expect earnings per diluted share of $0.18-$0.21 and that weighted average shares on a diluted basis for the year will be approximately 55.5 million shares.
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 40234244, 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 November 13 at (404) 537-3406, passcode 40234244, 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.volcanocorp.com.
Note Regarding Use of Non-GAAP Financial Measures
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 trends 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. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with U.S. GAAP.
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.” 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 tax rate projections may turn out to be inaccurate or Volcano may encounter unanticipated difficulty 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 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 clearance for Volcano's products or devices; the success of Volcano's growth strategies; risks associated with Volcano's international operations; timing and achievement of product development milestones; outcome of ongoing or future litigation; the impact and benefits of market development; 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 most recent quarterly report on Form 10-Q, and other filings made with the Securities and Exchange Commission. 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
September 30,
 
Percentage Change
 
Currency Impact
 
Constant Currency
 
2012
 
2011
 
2011 to 2012
 
Dollar
 
Percentage
 
Percentage Change
Medical segment:
 
 
 
 
 
 
 
 
 
 
 
         Consoles:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
6.0

 
$
6.0

 
—
 %
 
$
—

 
—
 %
 
—
 %
                   Japan
0.8

 
0.6

 
31

 
—

 
(1
)
 
32

                   Europe
1.4

 
1.5

 
(8
)
 
(0.2
)
 
(14
)
 
6

                   Rest of world
1.5

 
1.6

 
(6
)
 
—

 
—

 
(6
)
         Total Consoles
$
9.7

 
$
9.7

 
—

 
$
(0.2
)
 
(2
)
 
2

 
 
 
 
 
 
 
 
 
 
 
 
         IVUS single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
19.1

 
$
18.3

 
5
 %
 
$
—

 
—
 %
 
5
 %
                   Japan
23.1

 
23.7

 
(2
)
 
(0.2
)
 
—

 
(2
)
                   Europe
4.7

 
6.2

 
(23
)
 
(0.7
)
 
(11
)
 
(12
)
                   Rest of world
1.7

 
1.6

 
1

 
—

 
—

 
1

         Total IVUS single-procedure disposables
$
48.6

 
$
49.8

 
(2
)
 
$
(0.9
)
 
(1
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
         FFR single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
13.0

 
$
9.3

 
40
 %
 
$
—

 
—
 %
 
40
 %
                   Japan
4.0

 
1.4

 
192

 
—

 
(3
)
 
195

                   Europe
6.5

 
5.7

 
15

 
(1.0
)
 
(17
)
 
32

                   Rest of world
1.1

 
0.3

 
213

 
—

 
—

 
213

         Total FFR single-procedure disposables
$
24.6

 
$
16.7

 
48

 
$
(1.0
)
 
(6
)
 
54

 
 
 
 
 
 
 
 
 
 
 
 
         Other
$
7.8

 
$
6.8

 
15
 %
 
$
(0.1
)
 
(1
)%
 
16
 %
                   Sub-total medical segment
$
90.7

 
$
83.0

 
9

 
$
(2.2
)
 
(3
)
 
12

 
 
 
 
 
 
 
 
 
 
 
 
Industrial segment
$
3.0

 
$
2.8

 
5
 %
 
$
—

 
—
 %
 
5
 %
                   Total
$
93.7

 
$
85.8

 
9

 
$
(2.2
)
 
(3
)
 
12







VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30,
 
Percentage Change
 
Currency Impact
 
Constant Currency
 
2012
 
2011
 
2011 to 2012
 
Dollar
 
Percentage
 
Percentage Change
Medical segment:
 
 
 
 
 
 
 
 
 
 
 
         Consoles:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
17.8

 
$
17.6

 
1
 %
 
$
—

 
—
 %
 
1
 %
                   Japan
2.1

 
1.7

 
22

 
0.1

 
2

 
20

                   Europe
4.2

 
6.3

 
(33
)
 
(0.5
)
 
(8
)
 
(25
)
                   Rest of world
4.4

 
3.8

 
16

 
—

 
—

 
16

         Total Consoles
$
28.5

 
$
29.4

 
(3
)
 
$
(0.4
)
 
(2
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
         IVUS single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
59.3

 
$
56.2

 
5
 %
 
$
—

 
—
 %
 
5
 %
                   Japan
73.7

 
68.6

 
8

 
1.4

 
2

 
6

                   Europe
15.6

 
17.8

 
(12
)
 
(1.6
)
 
(8
)
 
(4
)
                   Rest of world
5.1

 
4.8

 
6

 
—

 
—

 
6

         Total IVUS single-procedure disposables
$
153.7

 
$
147.4

 
4

 
$
(0.2
)
 
—

 
4

 
 
 
 
 
 
 
 
 
 
 
 
         FFR single-procedure disposables:
 
 
 
 
 
 
 
 
 
 
 
                   United States
$
37.4

 
$
26.1

 
43
 %
 
$
—

 
—
 %
 
43
 %
                   Japan
8.9

 
3.3

 
169

 
0.1

 
3

 
166

                   Europe
19.1

 
17

 
12

 
(2.0
)
 
(12
)
 
24

                   Rest of world
2.3

 
1.5

 
51

 
—

 
—

 
51

         Total FFR single-procedure disposables
$
67.7

 
$
47.9

 
41

 
$
(1.9
)
 
(4
)
 
45

 
 
 
 
 
 
 
 
 
 
 
 
         Other
$
21.3

 
$
16.6

 
29
 %
 
$
(0.1
)
 
—
 %
 
29
 %
                   Sub-total medical segment
$
271.2

 
$
241.3

 
12

 
$
(2.6
)
 
(1
)
 
13

 
 
 
 
 
 
 
 
 
 
 
 
Industrial segment
$
8.2

 
$
9.5

 
(13
)%
 
$
—

 
—
 %
 
(13
)%
                   Total
$
279.4

 
$
250.8

 
11

 
$
(2.6
)
 
(1
)
 
12






VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues
$
93,656

 
$
85,767

 
$
279,389

 
$
250,798

Cost of revenues, excluding amortization of intangibles
33,248

 
29,538

 
94,797

 
84,175

Gross profit
60,408

 
56,229

 
184,592

 
166,623

Operating expenses:
 
 
 
 
 
 
 
         Selling, general and administrative
40,699

 
36,034

 
127,035

 
106,982

         Research and development
13,032

 
13,928

 
40,560

 
40,337

         Amortization of intangibles
710

 
860

 
2,470

 
2,572

                   Total operating expenses
54,441

 
50,822

 
170,065

 
149,891

Operating income
5,967

 
5,407

 
14,527

 
16,732

Interest income
223

 
226

 
656

 
701

Interest expense
(1,844
)
 
(1,834
)
 
(4,993
)
 
(5,895
)
Exchange rate loss
(218
)
 
(502
)
 
(319
)
 
(1,181
)
Other expense, net
(23
)
 
—

 
(31
)
 
(2
)
Income before income tax
4,105

 
3,297

 
9,840

 
10,355

Income tax expense
2,130

 
669

 
4,295

 
1,684

Net income
$
1,975

 
$
2,628

 
$
5,545

 
$
8,671

Net income per share:
 
 
 
 
 
 
 
         Basic
$
0.04

 
$
0.05

 
$
0.10

 
$
0.17

         Diluted
$
0.04

 
$
0.05

 
$
0.10

 
$
0.16

Shares used in calculating net income per share:
 
 
 
 
 
 
 
         Basic
53,659

 
52,517

 
53,309

 
52,188

         Diluted
55,265

 
54,947

 
55,097

 
54,605





VOLCANO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended
September 30,
 
2012
 
2011
Operating activities
 
 
 
Net income
$
5,545

 
$
8,671

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
         Depreciation and amortization
17,448

 
17,159

         Amortization of investment premium, net
2,023

 
2,727

         Accretion of debt discount on convertible senior notes
3,700

 
3,470

         Non-cash stock compensation expense
11,428

 
9,605

         Other non-cash adjustments
2,502

 
80

         Changes in operating assets and liabilities
(5,362
)
 
(21,159
)
Net cash provided by operating activities
37,284

 
20,553

Investing activities
 
 
 
Purchase of short-term and long-term available-for-sale securities
(237,669
)
 
(255,261
)
Sale or maturity of short-term and long-term available-for-sale securities
188,556

 
266,363

Capital expenditures
(36,589
)
 
(30,374
)
Cash paid for other intangibles and investments
(3,107
)
 
(1,673
)
Proceeds from foreign currency exchange contracts
1,187

 
1,164

Payment for foreign currency exchange contracts
(215
)
 
(3,962
)
Net cash used in investing activities
(87,837
)
 
(23,743
)
Financing activities
 
 
 
Repayment of debt
(68
)
 
(46
)
Proceeds from sale of common stock under employee stock purchase plan and
    exercise of common stock options
12,288

 
12,620

Net cash provided by financing activities
12,220

 
12,574

Effect of exchange rate changes on cash and cash equivalents
24

 
278

Net (decrease) increase in cash and cash equivalents
(38,309
)
 
9,662

Cash and cash equivalents, beginning of year
107,016

 
43,429

Cash and cash equivalents, end of year
$
68,707

 
$
53,091





 VOLCANO CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 (unaudited)
 
 
 
 
 
September 30,
 
 December 31,
 
2012
 
2011
Assets
 
 
 
         Current assets:
 
 
 
         Cash and cash equivalents
$
68,707

 
$
107,016

         Short-term available-for-sale investments
173,079

 
112,327

         Accounts receivable, net
71,134

 
69,469

         Inventories
49,392

 
41,306

         Prepaid expenses and other current assets
19,797

 
19,939

                   Total current assets
382,109

 
350,057

         Restricted cash
693

 
692

         Long-term available-for-sale investments
17,348

 
30,919

         Property and equipment, net
103,006

 
81,097

         Intangible assets, net
15,865

 
15,245

         Goodwill
2,487

 
2,487

         Other non-current assets
17,463

 
16,227

Total Assets
$
538,971

 
$
496,724

 
 
 
 
 Liabilities and Stockholders' Equity
 
 
 
 Current liabilities:
 
 
 
         Accounts payable
$
14,160

 
$
12,911

         Accrued compensation
18,655

 
20,251

         Accrued expenses and other current liabilities
23,512

 
16,689

         Deferred revenues
8,603

 
7,077

         Current maturities of long-term debt
48

 
72

                  Total current liabilities
64,978

 
57,000

 Convertible senior notes
99,238

 
95,663

 Other long-term debt
38

 
74

 Deferred revenues
3,719

 
3,168

 Other non-current liabilities
1,801

 
1,582

         Total liabilities
169,774

 
157,487

 Stockholders' equity
369,197

 
339,237

 Total Liabilities and Stockholders' Equity
$
538,971

 
$
496,724




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