May 4 2011
Thoratec Corporation (NASDAQ: THOR), a world leader in device-based mechanical circulatory support therapies to save, support and restore failing hearts, said today that revenues from continuing operations in the first quarter of fiscal 2011 were $99.5 million versus revenues of $99.3 million in the same period a year ago. Revenues in the quarter were driven by strong underlying performance in North America, where VAD units increased 13% sequentially, compared to the fourth quarter of 2010.
Results for all periods of fiscal 2010 exclude contributions from the company's International Technidyne Corporation (ITC) Division. Thoratec completed the divestiture of ITC in November 2010.
For the quarter ended April 2, 2011, Thoratec reported net income on a GAAP basis of $16.5 million, or $0.27 per diluted share, versus GAAP net income of $13.4 million, or $0.23 per diluted share, in the first quarter of 2010. Non-GAAP net income, which is described later in this press release, was $21.8 million, or $0.34 per diluted share, in the first quarter of fiscal 2011, versus non-GAAP net income of $18.5 million, or $0.29 per diluted share, in the same period a year ago.
"Thoratec had a solid first quarter, highlighted by 13% sequential VAD unit growth in North America. We believe this performance reflects favorably on our market and center development activities and shows continued momentum in the DT market. We were particularly pleased with the contributions made by centers that have adopted HeartMate II since commercial approval," said Gary Burbach, president and chief executive officer. "Our international revenues declined 3% year-over-year on a constant currency basis, as we believe the broader market softened in the first quarter following robust growth in the fourth quarter of 2010."
The company said it ended the first quarter of 2011 with 265 HeartMate II centers globally, including 142 in North America and 123 internationally, versus 254 at the end of fiscal 2010. Ninety-four centers in North America have received CMS (Centers for Medicare and Medicaid Services) certification for DT reimbursement.
"There have been a number of important clinical education and market development events over the past four months, including our Thoratec Mechanical Circulatory Support Users' Conference and our largest summit for community cardiologists to date. In addition, there have been a number of data presentations at recent professional meetings that have continued to demonstrate the unrivaled clinical performance of the HeartMate II. Despite the challenging patient populations and broad base of centers in which HeartMate II has been studied, it has generated impressive survival outcomes and the lowest reported rates of catastrophic adverse events, including pump thrombosis and stroke."
"We also realized some important milestones with our product pipeline during the first quarter, including the full commercial launch of our sealed inflow and outflow grafts for the HeartMate II. Feedback so far has been excellent, with clinicians commenting favorably on the grafts' ease of implant and potential to reduce peri-operative bleeding," Burbach added.
Thoratec also said that it will redeem all of the outstanding Senior Subordinated Convertible Notes due 2034 (CUSIP No. 885175AA7 and CUSIP No. 885175AB5) on May 17, 2011. In the event that holders decide to exercise their conversion right, the company intends to deliver cash in exchange for the principal value of the Notes, with the remaining in-the-money portion to be paid for through a mix of cash and shares of common stock. The company intends to communicate the exact mix to noteholders prior to the redemption date. As of April 30, 2011, there were 243,382 notes outstanding. Information on the redemption can be obtained through U.S. Bank National Association, the Trustee for the Notes, at (800) 934-6802.
During the first quarter, Thoratec repurchased approximately 1.8 million shares of its common stock for approximately $50.0 million under a repurchase program authorized by its board of directors in February 2011.
FINANCIAL HIGHLIGHTS FROM CONTINUING OPERATIONS
Thoratec reported revenues of $99.5 million in the first quarter of 2011 versus revenues of $99.3 million in the first quarter of 2010. The HeartMate product line accounted for $87.3 million in revenues versus $86.1 million a year ago. The Thoratec® product line, which includes the PVAD and IVAD, accounted for sales of $7.3 million compared to revenues of $8.8 million a year ago. CentriMag® Blood Pump sales in the first quarter of 2011 were $4.4 million versus revenues of $3.7 million in the same period a year ago. The balance of the company's revenues reflects contributions from its graft business. In the first quarter of 2011, pump sales accounted for $70.8 million compared to revenues of $69.5 million a year ago. Non-pump sales were $28.2 million versus sales of $29.1 million in the first quarter of 2010. Revenues in North America were $85.2 million versus revenues of $84.0 million a year ago. International revenues in the first quarter of 2011 were $14.3 million versus revenues of $15.3 million a year ago. Foreign exchange rate fluctuations had a negative impact of $0.5 million in the first quarter of 2011 compared to the first quarter of 2010.
GAAP gross margin in the first quarter of 2011 was 70.1 percent versus 68.2 percent a year ago. Non-GAAP gross margin, which is described later in this press release, was 70.5 percent versus 68.5 percent a year ago. The year-over-year increase in gross margin was due to favorable pump to non-pump mix and lower inventory reserves.
Operating expenses on a GAAP basis in the first quarter of 2011 were $42.7 million versus $44.2 million a year ago. On a non-GAAP basis, operating expenses were $36.8 million in the first quarter of 2011 versus $38.5 million a year ago. Non-GAAP operating expenses are described later in this press release. The year-over-year decrease in operating expenses was due primarily to the $8.5 million expense recorded in the first quarter of 2010 related to the acquisition of the Percutaneous Heart Pump (PHP), offset by increased spending on product and market development initiatives, including the continued expansion of our field organization and investment in our next generation pump platforms.
On a GAAP basis, other expense was $2.1 million in the first quarter of 2011 versus other expense of $3.3 million in the prior year. On a non-GAAP basis, other expense totaled $0.2 million versus other expense of $1.2 million a year ago.
The company's GAAP effective tax rate in the first quarter of 2011 was 34.1 percent versus 33.8 percent a year ago. The non-GAAP tax rate, which is described later in this press release, was 34.1 percent versus 34.5 percent in the first quarter of 2010.
Cash and investments at the end of the first quarter of 2011 were $438.0 million versus $469.5 million at the end of fiscal 2010, primarily reflecting the $50.0 million used for the repurchase of shares.
GUIDANCE FOR FISCAL 2011 CONTINUING OPERATIONS
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 the additional information below. The company updated guidance for the full year.
The company continues to expect that revenues from continuing operations for fiscal 2011 will be in the range of $410-$425 million, with GAAP net income per diluted share expected to be in the range of $1.02-$1.12 and non-GAAP net income per diluted share expected to be in the range of $1.35-$1.45.
Gross margin is expected to increase to a range of 67.5 to 68.5 percent on a GAAP basis and 68 to 69 percent on a non-GAAP basis.
GAAP operating expenses are expected to increase 11 to 15 percent over 2010, while non-GAAP operating expenses are expected to increase approximately 10 to 14 percent versus 2010. The projected growth reflects the continued investment in our product development and market expansion activities as we move forward with key initiatives.
SOURCE Thoratec Corporation