Feb 5 2013
Thoratec Corporation (NASDAQ: THOR), a world leader in device-based mechanical circulatory support therapies to save, support and restore failing hearts, today reported its financial results for the fourth quarter of 2012.
"Thoratec had an impressive year in 2012, with sales growth of 16 percent driven by our HeartMate II® and CentriMag® product lines, highlighting our leadership positions in chronic and acute mechanical circulatory support," said Gary F. Burbach, President and Chief Executive Officer. "We were particularly pleased to finish the year with strong fourth quarter results, including 20 percent unit growth for HeartMate II on a worldwide basis, reflecting continued adoption in the U.S. Destination Therapy indication as well as in international markets."
For the quarter ended December 29, 2012, Thoratec reported revenues of $128.5 million, a 17 percent increase over revenues of $109.4 million in the fourth quarter of 2011. Net loss on a GAAP basis was $(14.4) million, or $(0.25) per diluted share, compared with GAAP net income of $15.3 million, or $0.25 per diluted share, in the same period a year ago. 2012 results include a pre-tax impairment charge of $50.2 million related to certain purchased intangible assets associated with the PVAD™ and IVAD™ product line. Non-GAAP net income, which is described later in this press release, was $22.6 million, or $0.38 per diluted share, compared with non-GAAP net income of $22.7 million, or $0.38 per diluted share, in the same period a year ago.
For the year ended December 29, 2012, revenues were $491.7 million, an increase of 16 percent over revenues of $422.7 million for fiscal year 2011. Net income from continuing operations on a GAAP basis was $56.2 million, or $0.94 per diluted share, compared with GAAP net income from continuing operations of $72.6 million, or $1.20 per diluted share, for fiscal year 2011. Non-GAAP net income from continuing operations was $109.2 million, or $1.83 per diluted share, compared with non-GAAP net income from continuing operations of $97.0 million, or $1.56 per diluted share, for fiscal year 2011.
"We look forward to driving continued market growth and solidifying our leadership position in chronic and acute mechanical circulatory support during 2013," Burbach commented. "Additionally, we remain focused on investing in longer-term strategic initiatives, including late-stage development activities related to HeartMate III™ and HeartMate PHP™, both of which we plan to bring into pivotal clinical trials later this year."
Fourth Quarter and Fiscal Year 2012 Financial Results
For the fourth quarter of 2012, Thoratec reported revenues of $128.5 million, an increase of 17 percent compared to the same quarter last year. The HeartMate product line contributed $110.8 million, an increase of 18 percent, while the CentriMag product line contributed $11.5 million, an increase of 31 percent. The PVAD and IVAD product line contributed $5.6 million, a decrease of 8 percent.
For the fiscal year ended December 29, 2012, Thoratec reported revenues of $491.7 million, an increase of 16 percent compared to fiscal year 2011. The HeartMate product line contributed $434.6 million to revenues, an increase of 19 percent, while the CentriMag product line contributed $35.7 million, an increase of 39 percent, including revenues of $6.1 million related to the acquisition of Levitronix Medical. The PVAD and IVAD product line contributed $19.0 million, a decrease of 33 percent.
For the fourth quarter of 2012, GAAP gross margin was 30.6 percent compared to 67.1 percent in the same quarter last year. The decrease in GAAP gross margin was due primarily to an impairment of purchased intangible assets related to the PVAD and IVAD product line. Non-GAAP gross margin, described later in this press release, was 71.7 percent compared to 71.4 percent in the same quarter last year. The increase in non-GAAP gross margin was primarily driven by volume-based efficiencies and favorable product mix, offset in part by a volume-based tax on our VAD sales in France, which we recorded for the first time in the fourth quarter of 2012.
GAAP gross margin in 2012 was 59.3 percent versus 68.0 percent a year ago. The year-over-year decrease in GAAP gross margin was mainly attributable to the impairment of PVAD and IVAD intangible assets. Non-GAAP gross margin was 71.7 percent versus 71.2 percent in 2011. The year-over-year increase in gross margin was due to volume-based efficiencies, favorable product mix, and the contribution from the acquisition of Levitronix Medical.
For the fourth quarter of 2012, GAAP operating expenses were $64.1 million compared to $48.3 million in the same quarter last year. Non-GAAP operating expenses, described later in this press release, were $57.6 million compared to $43.0 million in the same quarter last year. The increase in non-GAAP operating expenses was due primarily to product and market development initiatives, project-related payments, and incentive compensation.
Operating expenses on a GAAP basis in 2012 were $215.7 million versus $173.5 million a year ago. On a non-GAAP basis, operating expenses in 2012 were $192.6 million versus $153.6 million in 2011. The year-over-year increase in operating expenses was due primarily to project-related payments, spending on product and market development initiatives, the addition of research and development personnel, and acquisition-related charges. Non-GAAP operating expenses are described later in this press release.
On a GAAP basis, other income was $1.7 million in 2012 versus other expense of $2.3 million in 2011. On a non-GAAP basis, other income totaled $1.7 million versus other income of $0.8 million a year ago. Other income and expense on a non-GAAP basis is described later in this press release.
The company's GAAP effective tax rate in 2012 was 27.4 percent versus 35.1 percent in 2011. The non-GAAP tax rate, which is described later in this press release, was 32.4 percent in 2012 compared with 34.5 percent in 2011. The decrease in the GAAP effective tax rate was primarily due to the impairment of purchased intangible assets related to the PVAD and IVAD product line, and a greater percentage of earnings generated in lower-tax jurisdictions. The decrease in the non-GAAP effective tax rate was primarily attributable to a greater percentage of earnings generated in lower-tax jurisdictions.
Cash and investments were $260.4 million as of December 29, 2012, compared to $307.9 million as of September 29, 2012 and $209.5 million as of December 31, 2011. During the fourth quarter of 2012 the company used $75.0 million in cash to fund an accelerated share repurchase agreement as part of our stock repurchase program.
GUIDANCE FOR FISCAL YEAR 2013
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 expects revenues will be in the range of $490 to $510 million, driven by growth of the HeartMate and CentriMag product lines, and partially offset by a continued decline in the PVAD and IVAD product line.
Gross margin is expected to be approximately 68.5 percent on a GAAP basis and approximately 70.5 percent on a non-GAAP basis. Included in these estimates for gross margin is the impact of the U.S. medical device excise tax, which we estimate will contribute approximately $6 million to cost of goods sold in 2013.
We expect the effective tax rate to be approximately 30.5 to 31.0 percent on both a GAAP and non-GAAP basis.
GAAP net income per diluted share is expected to be in the range of $1.32 to $1.42 and non-GAAP net income per diluted share is expected to be in the range of $1.76 to $1.86.