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.
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.
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."
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(R) 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.
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.
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.
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.
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.
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.
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.
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.
Non-GAAP net income consists of GAAP net income (loss), excluding, as applicable, the tax effected impact of share-based compensation expense under SFAS No. 123R, amortization of purchased intangibles, expenses associated with the adoption of FASB Staff Position ("FSP") Accounting Principles Board ("APB") 14-1, Accounting For Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) ("FSP APB 14-1"), and HeartWare transaction costs.
Non-GAAP gross profit and gross margin consist of GAAP gross profit and gross margin excluding share-based compensation expense under SFAS No. 123R.
Non-GAAP other income and expense consists of GAAP other income and expenses excluding expenses under APB 14-1.
Management believes that it is useful in measuring Thoratec's operations to exclude amortization of intangibles. These costs are primarily fixed at the time of an acquisition and, unlike other fixed costs that result from ordinary operations, are the result of infrequent and irregular events.
Due to the subjective assumptions used to develop a non cash interest expense related to FSP APB 14-1, Thoratec management believes that providing non-GAAP financial measures that exclude FSP APB 14-1 allows investors to compare Thoratec's recurring core business operating results to those of other companies and over multiple periods. The exclusion also enhances investors' ability to review Thoratec's business from the same perspective as Thoratec management.
There are a number of limitations related to the use of non-GAAP financial measures. First, non-GAAP financial measures exclude some costs, namely share-based compensation, that are recurring expenses. Second, share-based compensation is part of an employee's compensation package and as such may be useful for investors to consider. Third, the components of costs that we exclude in our non-GAAP financial measures calculations may differ from components that our peer companies exclude when they report their results from operations.
The following table includes the GAAP income statement for the three and six month periods ending 2009 and 2008.
The following table reconciles the specific items excluded from GAAP net income in the calculation of non-GAAP net income for the periods shown below:
The following table reconciles the specific items excluded from GAAP gross profit and gross margin in the calculation of non-GAAP gross profit and gross margin for the periods shown below:
The following table reconciles the specific items excluded from GAAP operating expenses in the calculation of non-GAAP operating expenses for the periods shown below:
The following table reconciles the specific items excluded from GAAP other income and expense in the calculation of non-GAAP other income and expense for the periods shown below:
The following table reconciles the GAAP tax rate adjusted for the tax effect of the adjustments from GAAP net income to non-GAAP net income.
The following table reconciles the guidance on a GAAP and non-GAAP basis for the periods shown below:
Thoratec is a world leader in therapies to address advanced-stage heart failure. The company's product lines include the Thoratec(R) VAD (Ventricular Assist Device) and HeartMate LVAS (Left Ventricular Assist System) with more than 13,000 devices implanted in patients suffering from heart failure. Additionally, its International Technidyne Corporation (ITC) Division is a leader in point-of-care blood testing and skin incision products. Thoratec is headquartered in Pleasanton, California. For more information, visit the company's web sites at http://www.thoratec.com or http://www.itcmed.com.
Many of the preceding paragraphs, particularly but not exclusively those addressing guidance for fiscal 2009 financial results, future performance or timelines and milestones for clinical trials, contain forward-looking statements within the meaning of Section27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements can be identified by the words, "believes," "views," "expects," "plans," "projects," "hopes," "could," "will," and other similar words. Actual results, events or performance could differ materially from these forward-looking statements based on a variety of factors, many of which are beyond Thoratec's control. Therefore, readers are cautioned not to put undue reliance on these statements. Investors are cautioned that all such statements involve risks and uncertainties, including risks related to regulatory approvals, the development of new markets including Destination Therapy, the growth of existing markets for our products, customer and physician acceptance of Thoratec products, changes in the mix of existing markets for our products and related gross margin for such products sales, the results of enrollment in and timing of clinical trials, including the HeartMate II, the ability to improve financial performance, the effects of FDA regulatory requirements, our ability to address issues raised by FDA inspections adequately and on a timely basis without a resulting recall of product or interruption of manufacturing or shipment of product, the effects of healthcare reimbursement and coverage policies, the effects of seasonality on Thoratec product sales, the effects of competition and the effects of any merger and acquisition related activities. Forward-looking statements contained in this press release should be considered in light of these factors and those factors discussed from time to time in Thoratec's public reports filed with the Securities and Exchange Commission, such as those discussed under the heading, "Risk Factors," in Thoratec's most recent annual report on Form 10-K and in Thoratec's first quarter 2009 quarterly report on Form 10-Q, and as may be updated in subsequent SEC filings. These forward-looking statements speak only as of the date hereof. Thoratec undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.
Thoratec Corporation
