(Source: PRNewswire-FirstCall)
PLEASANTON, Calif., Aug. 5 /PRNewswire-FirstCall/ -- Thoratec Corporation , a world leader in device-based mechanical circulatory support therapies to save, support and restore failing hearts, said today that revenues for the quarter ended July 4, 2009, were $92.1 million, versus revenues of $82.6 million in the second quarter of last year, representing a 20 percent growth in Cardiovascular Division revenues and an 11 percent increase in overall revenues for the second quarter of fiscal 2009 compared to the same period a year ago.
Net income on a GAAP basis in the second quarter of fiscal 2009 was $1.8 million or $0.03 per diluted share, compared with GAAP net income of $7.6 million, or $0.14 per diluted share, in the same period a year ago. Non-GAAP net income, which is described later in this press release, was $11.4 million, or $0.18 per diluted share, in the second quarter of fiscal 2009 versus non-GAAP net income of $12.1 million, or $0.20 per diluted share, in the same period a year ago.
For the first six months of fiscal 2009, revenues were $181.5 million, a 23 percent increase versus revenues of $147.1 million in the same period a year ago. On a GAAP basis, Thoratec reported net income of $7.5 million, or $0.13 per diluted share, versus net income of $6.9 million, or $0.13 per diluted share, in the same period a year ago. Non-GAAP net income in the first six months of 2009 was $25.1 million, or $0.40 per diluted share, compared with non-GAAP net income of $16.7 million, or $0.28 per diluted share, a year ago.
"Even with the difficult comparable created by the commercial launch of the HeartMate II LVAS (Left Ventricular Assist System) for Bridge-to-Transplantation (BTT) in the second quarter of last year, our Cardiovascular Division continued to achieve strong revenue growth of 20 percent. We saw continued adoption of the HeartMate II in both North America and Europe for BTT and solid enrollment in our U.S. trial for Destination Therapy (DT) under Continuous Access Protocols (CAPs)," said Gary F. Burbach, president and chief executive officer of Thoratec. "This growth was offset by a nine percent decline in revenues from our International Technidyne Corporation (ITC) division year-over-year due to a difficult capital equipment environment and competitive pressures," he added.
Burbach said the company added five new North American HeartMate II centers during the quarter, bringing the total to nine added this year and a total of 110 in North America. The company also said it had received what it considers to be routine questions from the FDA regarding its PMA Supplement for DT for the HeartMate II. "We expect to submit our response sometime in the next few days, and continue to believe we are on track to receive approval for the submission by early 2010," Burbach noted. "We believe the outstanding progress we have seen since the approval of the HeartMate II for BTT is a strong indicator of the potential to serve a much broader population of advanced heart failure patients and that approval for DT is another key milestone in our pursuit of that opportunity."
FINANCIAL HIGHLIGHTS
Thoratec reported revenues of $92.1 million in the second quarter of 2009 compared with revenues of $82.6 million in the second quarter of 2008. Cardiovascular Division revenues were $69.2 million versus $57.5 million in the same period a year ago. Revenues at its ITC division were $22.8 million versus $25.1 million a year ago. The company said revenues at ITC reflect the impact of the current economic environment on hospital and physician capital equipment purchasing activity and competitive pressure in its professional ProTime and skin incision businesses.
The company also provided a breakdown of year-to-date revenues by product line for both of its divisions. Cardiovascular Division revenues in the first six months of 2009 were $133.9 million versus $97.7 million a year ago. HeartMate II and HeartMate XVE product sales were $108.9 million, an increase of 58 percent year-over-year. PVAD and IVAD product sales were $17.9 million, a decrease of 19 percent over the prior year. CentriMag sales were $5.7 million, an increase of five percent year over year, and graft sales were $1.4 million, consistent with the prior year. Revenues from pump sales were $104.2 million versus $74.7 million a year ago, while revenues from equipment and accessories were $28.3 million versus $21.7 million a year ago. The balance of revenues was generated by graft sales. North American Cardiovascular Division revenues in the first six months of 2009 were $112.2 million versus $76.4 million a year ago, while international revenues were $21.7 million versus $21.3 million a year ago. For the first six months of 2009, foreign exchange had a $2.3 million unfavorable impact to revenues compared to the same period in 2008.
For the first six months of 2009, revenues at ITC were $47.7 million versus $49.3 million in the first six months of 2008. Hospital point-of-care revenues, which include HEMOCHRON coagulation, AVOX co-oximetry and IRMA blood gas products, were $24.9 million, a decrease of nine percent versus a year ago. Alternate site revenues, which are primarily from ProTime sales, were $16.4 million, a 19 percent increase over last year, while skin incision revenues were $6.4 million, a decrease of 23 percent compared to the prior year. North American revenues at ITC were $29.0 million versus $32.2 million a year ago, while international revenues were $18.7 million versus $17.1 million for the first six months of 2008.
GAAP gross margin for the second quarter of 2009 was 55.1 percent versus 61.5 percent a year ago. Non-GAAP gross margin, which is described later in this press release, was 55.7 percent versus 62.1 percent a year. The year-over-year decrease in gross margin was primarily attributable to a $4.3 million excess inventory reserve related to the declining utilization of the HeartMate XVE, manufacturing variances and foreign exchange.
Operating expenses on a GAAP basis in the second quarter of 2009 were $46.8 million versus $40.0 million a year ago. On a GAAP basis, operating expenses increased year-over-year due to $7.4 million in HeartWare transaction related costs. On a non-GAAP basis, operating expenses in the second quarter of 2009 were $33.9 million versus $34.5 million in the second quarter of 2008. Operating expenses on a non-GAAP basis are described later in this press release.
On a GAAP basis, other expense totaled $1.4 million in the second quarter of 2009 versus $0.5 million a year ago. On a non-GAAP basis, other income totaled $0.5 million, versus $1.1 million a year ago. Other income on a non-GAAP basis is described later in this press release. These changes in other income and expense are primarily attributable to the decline in interest rates and shortened maturities in the investment portfolio.
The company's GAAP effective tax rate for the second quarter of 2009 was 29.0 percent versus 25.9 percent a year ago. The non-GAAP tax rate, which is described later in this press release, was 36.1 percent in the second quarter of 2009 versus 32.4 percent a year ago. The increases in the tax rates were due to an increase in pre-tax earnings and lower tax-exempt interest.
On a non-GAAP basis, the company's convertible debt was dilutive to the company's fully diluted weighted average shares outstanding. The increase in shares was approximately 7.3 million.
Cash and investments at the end of the second quarter were $295 million, including $20 million of restricted cash related to a note made available to HeartWare, and $25 million of Auction Rate Securities classified as long-term investments. This compares with $275 million at the end of the first quarter of 2009 and $279 million at the end of fiscal 2008.
GUIDANCE FOR FISCAL 2009
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. For a more detailed discussion of forward looking statements, please see additional information below. The company provided an update to guidance for the full year.
Revenues for 2009 are now projected to be in the range of $355 to $365 million. Thoratec expects the Cardiovascular Division year-over-year growth rate to be in the high teens to low twenties, driven by the HeartMate product line. ITC is projected to be roughly flat with 2008 revenue levels.
GAAP and non-GAAP gross margins are expected to be consistent with those in fiscal 2008. The gross margin increase related to HeartMate II activity is offset by the XVE write-down and weakness at ITC.
Weighted average shares outstanding will be between 65 million and 66 million shares on a non-GAAP basis. We expect that our convertible debt will continue to be dilutive to non-GAAP earnings per share in 2009.
GAAP earnings per share are expected to be in a range of $0.31 to $0.37 per diluted share, including the adoption of FSPAPB 14-1 and the expenses associated with the HeartWare transaction, which combined are expected to be between $0.20 and $0.21 per diluted share. Non-GAAP earnings per share are expected to be $0.76 to $0.81 per diluted share.
CONFERENCE CALL/WEBCAST INFORMATION
Thoratec will hold a conference call to discuss its financial results and operating activities for all interested parties at 1:30 p.m., Pacific Daylight Time (4:30 p.m., Eastern Daylight Time) today. The teleconference can be accessed by calling (913) 312-1410, passcode 9454474. Please dial in 10-15 minutes prior to the beginning of the call. The webcast will be available via the Internet at http://www.thoratec.com/. A replay of the conference call will be available through Wednesday, August 12, via http://www.thoratec.com/ or by telephone at (719) 457-0820, passcode 9454474.
GAAP TO NON-GAAP RECONCILIATION
Thoratec management evaluates and makes operating decisions using various measures. These measures are generally based on revenues generated by its products and certain costs of producing that revenue, such as costs of product sales, research and development and selling, general and administrative expenses. We use the following measures, which are not calculated in accordance with Generally Accepted Accounting Principles ("GAAP"): non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other income and expense, non-GAAP tax rate, non-GAAP net income, and non-GAAP EPS. These are non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. These non-GAAP financial measures are calculated by excluding certain GAAP financial items that we believe have less significance to the day-to-day operation of our business. The company has outlined below the type and scope of these exclusions and the limitations on the use of the non-GAAP financial measures as a result of these exclusions.
Management uses these non-GAAP financial measures for financial and operational decision making, including in the determination of employee annual cash incentive compensation, as a means to evaluate period-to-period comparisons, as well as comparisons to our competitors' operating results. Management also uses this information internally for forecasting and budgeting, as it believes that the measures are indicative of Thoratec core operating results.
