IRVINE, Calif., April 23,
2015 /PRNewswire/ -- Edwards Lifesciences Corporation (NYSE:
EW), the global leader in the science of heart valves and
hemodynamic monitoring, today reported net income for the quarter
ended March 31, 2015 of $123.4
million, or $1.12 per diluted
share. Net income for the same period a year earlier was
$60.3 million, or $0.56 per diluted share, and non-GAAP net income
was $82.1 million, or $0.76 per diluted share.
Net sales for the quarter ended March 31, 2015 increased
13.0 percent to $590.3 million
compared to the same period last year.
Underlying1 sales grew 21 percent. U.S. and
international segment sales for the first quarter were $283.5 million and $306.8
million, respectively.
"For the quarter, we experienced strong performance across all
product lines and regions, again led by significant growth in
transcatheter heart valves sales," said Michael A. Mussallem, chairman and CEO.
"Our newest innovative products helped us strengthen our global
leadership positions and, most importantly, we believe even more
patients with serious needs are benefiting from our technologies
than ever before."
Sales Results
For the first quarter, the company reported Transcatheter Heart
Valve Therapy (THV) sales of $268.5
million, a 42 percent growth rate over the first quarter
last year. On an underlying basis, THV sales grew 51 percent
driven by continuing strong procedure growth in all major
geographies and sales of new innovative products. Globally, average
selling prices remained stable.
In the U.S., THV sales for the quarter, including royalties,
were $130.8 million, representing
growth of 84.0 percent over the year ago period. On an underlying
basis, sales grew 67.3 percent. International THV sales were
$137.7 million, representing 16.6
percent growth.
"Outside the U.S., THV sales grew 38 percent on an underlying
basis during the quarter, once again driven by strong procedure
growth in Europe and the ongoing
launch in Japan," said Mussallem.
"While we expect this procedure growth rate to slow and competition
to build, we continue to believe there are large numbers of
untreated patients who can benefit from transcatheter aortic valve
replacement therapy."
Surgical Heart Valve Therapy product group sales for the quarter
were $196.9 million. Sales decreased
2.8 percent over the first quarter last year, and increased 4.8
percent on an underlying basis.
"While our SAPIEN family of transcatheter valves grew rapidly,
we continued to see solid unit growth of our surgical valve
portfolio," said Mussallem. A favorable product mix also
contributed to a slightly higher overall average selling price.
Critical Care product group sales were $124.9 million for the quarter, representing a
decrease of 4.4 percent versus last year, or an increase of 3.1
percent on an underlying basis. Usage of Enhanced Surgical
Recovery products, including FloTrac and ClearSight, grew
approximately 20 percent.
Additional Operating Results
For the quarter, the company's gross profit margin was 77.0
percent, compared to 72.1 percent in the same period last year.
This increase was driven primarily by a positive impact from
foreign exchange. Last year's THV product exchange and a more
profitable product mix this year also contributed to the increase.
At current rates, as the favorable hedge contracts expire, the
company expects this rate to decline in 2016.
Selling, general and administrative expenses were $202.5 million for the quarter, or 34.3 percent
of sales. The company expects SG&A, excluding special
items, to be between 35 and 36 percent of sales for the full
year.
Research and development investments for the quarter were
$86.4 million compared to
$85.8 million in the prior year
period. Although Edwards continued to invest heavily in
transcatheter valve programs, expenses were lower than anticipated
as certain THV clinical expenses expected in the first quarter are
now expected to occur in the second.
Cash flow from operating activities for the quarter was
$73.3 million. After capital spending
of $20.8 million, free cash flow was
$52.5 million.
Cash, cash equivalents and short-term investments totaled
$1.4 billion at March 31,
2015. Total debt was $602.7
million.
Outlook
The company now expects full year 2015 total sales to be within
its original guidance of $2.3 billion to
$2.5 billion. The company narrowed its guidance for
full year 2015 diluted earnings per share, excluding special items,
to a range of $4.10 to $4.30, from
its previous range of $4.00 to
$4.30. For the second quarter of 2015, at current
foreign exchange rates, the company projects total sales to be
between $580 million and $620
million, and diluted earnings per share, excluding special
items, to be between $1.00 and
$1.10.
"We are very pleased with the strong start to the year as we
continue to focus on driving growth with leading innovative
technologies," said Mussallem. "Our foundation of leadership,
coupled with a robust product pipeline, positions us well for
continued longer-term success and greater shareholder value.
We are confident in our outlook for continued strong sales growth
and remain passionate about helping more patients around the
world."
About Edwards Lifesciences
Edwards Lifesciences is the global leader in the science of
heart valves and hemodynamic monitoring. Driven by a passion
to help patients, the company partners with clinicians to develop
innovative technologies in the areas of structural heart disease
and critical care monitoring, enabling them to save and enhance
lives. Additional company information can be found at
www.edwards.com.
Conference Call and Webcast Information
Edwards Lifesciences will be hosting a conference call today at
2:00 p.m. PT to discuss its first quarter results. To
participate in the conference call, dial (877) 407-8037 or (201)
689-8037. For 72 hours following the call, an audio replay
can be accessed by dialing (877) 660-6853 or (201) 612-7415 and
using conference number 13605453. The call will also be
available via live or archived webcast on the "Investor Relations"
section of the Edwards web site at ir.edwards.com or
www.edwards.com. A live stream and archived replay can also be
accessed via mobile devices by downloading Edwards' IR App for
iPhone and iPad or Android.
This news release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These
forward-looking statements can sometimes be identified by the use
of words such as "may," "will," "should," "anticipate," "believe,"
"plan," "project," "estimate," "expect," "intend," "guidance,"
"outlook," "optimistic," "aspire," "confident" or other forms
of these words or similar expressions and include, but are not
limited to, statements made by Mr. Mussallem, information in the
Outlook section and the company's financial guidance.
Forward-looking statements are based on estimates and assumptions
made by management of the company and are believed to be
reasonable, though they are inherently uncertain and difficult to
predict. Our forward-looking statements speak only as of the
date on which they are made and we do not undertake any obligation
to update any forward-looking statement to reflect events or
circumstances after the date of the statement. If the company
does update or correct one or more of these statements, investors
and others should not conclude that the company will make
additional updates or corrections.
Forward-looking statements involve risks and uncertainties that
could cause actual results or experience to differ materially from
that expressed or implied by the forward-looking statements.
Factors that could cause actual results or experience to differ
materially from that expressed or implied by the forward-looking
statements include uncertainties associated with the rate of
adoption of TAVR therapy; timing and effectiveness of new product
launches; competitive dynamics, particularly in the TAVR segment;
the timing and extent of regulatory approvals and reimbursement
levels for our products; the company's success in developing new
products, and avoiding manufacturing and quality issues; the impact
of currency exchange rates and currency hedge contracts; the timing
or results of pending or future clinical trials; actions by the
U.S. Food and Drug Administration and other regulatory agencies;
unexpected litigation results or expenses; and other risks detailed
in the company's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year
ended December 31, 2014, which are available at
edwards.com.
Edwards, Edwards Lifesciences, the stylized E logo, ClearSight,
Enhanced Surgical Recovery, FloTrac, Edwards SAPIEN, SAPIEN, SAPIEN
XT, and SAPIEN 3 are trademarks of Edwards Lifesciences
Corporation. All other trademarks are the property of their
respective owners.
__________
[1] "Underlying" amounts are non-GAAP items and in this press
release exclude foreign exchange fluctuations and the THV sales
return reserve. See the Non-GAAP Financial Information page and
reconciliation tables below.
EDWARDS
LIFESCIENCES CORPORATION
Unaudited
Consolidated Statements of Operations
(in millions, except
per share data)
|
|
|
Three Months
Ended
March 31,
|
|
2015
|
|
2014
|
Net sales
|
$
|
590.3
|
|
|
$
|
522.4
|
|
Cost of
sales
|
136.0
|
|
|
145.9
|
|
|
|
|
|
Gross
profit
|
454.3
|
|
|
376.5
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
202.5
|
|
|
197.2
|
|
Research and
development expenses
|
86.4
|
|
|
85.8
|
|
Intellectual property
litigation expense, net
|
0.3
|
|
|
5.5
|
|
Special
charge
|
—
|
|
|
7.5
|
|
Interest expense,
net
|
2.4
|
|
|
3.5
|
|
Other expense
(income), net
|
0.2
|
|
|
(0.3)
|
|
|
|
|
|
Income before
provision for income taxes
|
162.5
|
|
|
77.3
|
|
|
|
|
|
Provision for income
taxes
|
39.1
|
|
|
17.0
|
|
|
|
|
|
Net income
|
$
|
123.4
|
|
|
$
|
60.3
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
Basic
|
$
|
1.14
|
|
|
$
|
0.57
|
|
Diluted
|
$
|
1.12
|
|
|
$
|
0.56
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
107.8
|
|
|
106.7
|
|
Diluted
|
110.3
|
|
|
108.5
|
|
|
|
|
|
Operating
Statistics
|
|
|
|
As a percentage of
net sales:
|
|
|
|
Gross
profit
|
77.0
|
%
|
|
72.1
|
%
|
Selling, general, and
administrative expenses
|
34.3
|
%
|
|
37.7
|
%
|
Research and
development expenses
|
14.6
|
%
|
|
16.4
|
%
|
Income before
provision for income taxes
|
27.5
|
%
|
|
14.8
|
%
|
Net income
|
20.9
|
%
|
|
11.5
|
%
|
|
|
|
|
Effective tax
rate
|
24.1
|
%
|
|
22.0
|
%
|
|
|
|
|
|
|
Note: Numbers may not
calculate due to rounding.
|
EDWARDS
LIFESCIENCES CORPORATION
Unaudited Balance
Sheets
(in
millions)
|
|
|
March 31,
2015
|
|
December 31,
2014
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
457.0
|
|
|
$
|
653.8
|
|
Short-term
investments
|
913.8
|
|
|
785.0
|
|
Accounts and other
receivables, net
|
345.3
|
|
|
325.0
|
|
Inventories,
net
|
298.5
|
|
|
296.8
|
|
Deferred income
taxes
|
57.0
|
|
|
63.5
|
|
Prepaid
expenses
|
44.8
|
|
|
48.8
|
|
Other current
assets
|
138.4
|
|
|
121.7
|
|
Total current
assets
|
2,254.8
|
|
|
2,294.6
|
|
|
|
|
|
Long-term accounts
receivable, net
|
5.7
|
|
|
5.8
|
|
Long-term
investments
|
255.6
|
|
|
240.9
|
|
Property, plant, and
equipment, net
|
445.1
|
|
|
442.9
|
|
Goodwill
|
368.4
|
|
|
376.0
|
|
Other intangible
assets, net
|
20.5
|
|
|
23.4
|
|
Deferred income
taxes
|
84.9
|
|
|
91.5
|
|
Other
assets
|
53.4
|
|
|
49.2
|
|
|
|
|
|
Total
assets
|
$
|
3,488.4
|
|
|
$
|
3,524.3
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
405.3
|
|
|
$
|
434.4
|
|
|
|
|
|
Long-term
debt
|
602.7
|
|
|
598.1
|
|
Other long-term
liabilities
|
266.5
|
|
|
300.4
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
Common
stock
|
129.4
|
|
|
128.9
|
|
Additional paid-in
capital
|
925.0
|
|
|
878.4
|
|
Retained
earnings
|
2,965.3
|
|
|
2,841.9
|
|
Accumulated other
comprehensive loss
|
(147.9)
|
|
|
(100.9)
|
|
Treasury stock, at
cost
|
(1,657.9)
|
|
|
(1,556.9)
|
|
Total stockholders'
equity
|
2,213.9
|
|
|
2,191.4
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
3,488.4
|
|
|
$
|
3,524.3
|
|
EDWARDS LIFESCIENCES CORPORATION
Non-GAAP Financial
Information
To supplement the consolidated financial results prepared in
accordance with Generally Accepted Accounting Principles ("GAAP"),
the Company uses non-GAAP historical financial
measures. The Company uses the term "underlying" when
referring to non-GAAP sales information, which excludes foreign
exchange fluctuations, adjustments for discontinued and acquired
products, and sales return reserves associated with transcatheter
heart valve therapy ("THV") product upgrades, and "excluding
special items" to also exclude gains and losses from special items
such as significant investments, litigation, and business
development transactions. Guidance for sales and sales growth
rates is provided on an "underlying basis," and projections for
diluted earnings per share, net income and growth, gross profit
margin, taxes, and free cash flow are also provided on the same
non-GAAP (or "excluding special items") basis due to the inherent
difficulty in forecasting such items. The Company is not able
to provide a reconciliation of these non-GAAP items to expected
reported results due to the unknown effect, timing, and potential
significance of special charges or gains, and management's
inability to forecast charges associated with future transactions
and initiatives. Management does not consider the excluded items or
adjustments as part of day-to-day business or reflective of the
core operational activities of the Company as they result from
transactions outside the ordinary course of business.
Management uses non-GAAP financial measures internally for
strategic decision making, forecasting future results, and
evaluating current performance. These non-GAAP financial
measures are used in addition to and in conjunction with results
presented in accordance with GAAP and reflect an additional way of
viewing aspects of the Company's core operations that, when viewed
with its GAAP results, provide a more complete understanding of
factors and trends affecting the Company's business. Non-GAAP
financial measures are not prepared in accordance with GAAP;
therefore, the information is not necessarily comparable to other
companies and should be considered as a supplement to, and not as a
substitute for, or superior to, the corresponding measures
calculated in accordance with GAAP. A reconciliation of
non-GAAP historical financial measures to the most comparable GAAP
measure is provided in the tables below.
The items described below are adjustments to the GAAP
financial results in the reconciliations that follow:
THV Sales Return Reserve and Related Costs - In the first
quarter of 2014, the Company recorded a net sales return reserve
and related costs, primarily related to inventory reserves, of
$15.6 million, related to estimated
THV product returns expected upon introduction of next-generation
THV products.
Intellectual Property Litigation Expense, net - The
Company incurred intellectual property litigation expenses of
$0.3 million and $5.5 million in the first quarter of 2015 and
2014, respectively.
Settlement - The Company recorded a $7.5 million charge in the first quarter of 2014
to settle past and future obligations related to one of its
intellectual property agreements.
Foreign Exchange - Fluctuations in exchange rates impact
the comparative results and sales growth rates of the Company's
underlying business. Management believes that excluding the impact
of foreign exchange rate fluctuations from its sales growth
provides investors a more meaningful comparison to historical
financial results. The impact of foreign exchange rate fluctuations
has been detailed in the "Unaudited Reconciliation of Sales by
Product Group and Region."
Free Cash Flow - The Company defines free cash flow as
cash flows from operating activities less capital expenditures.
EDWARDS
LIFESCIENCES CORPORATION
Unaudited
Reconciliation of GAAP to Non-GAAP Financial
Information
RECONCILIATION OF
GAAP TO NON-GAAP NET INCOME
|
|
|
|
Three Months
Ended
March 31,
|
(in millions, except per share data)
|
|
2015
|
|
2014
|
GAAP Net
Income
|
|
$
|
123.4
|
|
|
$
|
60.3
|
|
Growth Rate
%
|
|
104.6
|
%
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
(A)
|
|
|
|
|
|
|
|
|
|
THV sales return
reserve and related costs
|
|
—
|
|
|
15.6
|
|
Intellectual property
litigation expense, net
|
|
0.3
|
|
|
5.5
|
|
Settlement
|
|
—
|
|
|
7.5
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
|
|
Tax effect on
reconciling items (B)
|
|
—
|
|
|
(6.8)
|
|
|
|
|
|
|
Non-GAAP Net
Income
|
|
$
|
123.7
|
|
|
$
|
82.1
|
|
Growth Rate
%
|
|
50.7
|
%
|
|
|
|
RECONCILIATION OF
GAAP TO NON-GAAP DILUTED EARNINGS PER SHARE
|
|
GAAP Diluted
Earnings Per Share
|
|
$
|
1.12
|
|
|
$
|
0.56
|
|
Growth Rate
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
(A), (C)
|
|
|
|
|
|
|
|
|
|
THV sales return
reserve and related costs
|
|
—
|
|
|
0.10
|
|
Intellectual property
litigation expense, net
|
|
—
|
|
|
0.04
|
|
Settlement
|
|
—
|
|
|
0.06
|
|
|
|
|
|
|
Non-GAAP Diluted
Earnings Per Share
|
|
$
|
1.12
|
|
|
$
|
0.76
|
|
Growth Rate
%
|
|
47.4
|
%
|
|
|
|
__________
|
Note: Numbers may not
calculate due to rounding.
|
|
|
(A)
|
See description of
"THV Sales Return Reserve and Related Costs," "Intellectual
Property Litigation Expense, net," and "Settlement" on the Non-GAAP
Financial Information page.
|
(B)
|
The tax effect on
non-GAAP adjustments is calculated based upon the impact of the
relevant tax jurisdictions' statutory tax rates on the Company's
estimated annual effective tax rate, or discrete rate in the
quarter, as applicable.
|
(C)
|
All amounts are tax
effected, calculated based upon the impact of the relevant tax
jurisdictions' statutory tax rates on the Company's estimated
annual effective tax rate, or discrete rate in the quarter, as
applicable.
|
EDWARDS
LIFESCIENCES CORPORATION Unaudited Reconciliation of GAAP
to Non-GAAP Financial Information
THV UNITED STATES
UNDERLYING SALES GROWTH
|
|
|
|
Three Months
Ended
March 31,
|
(in millions)
|
|
2015
|
|
2014
|
GAAP THV United
States Sales
|
|
$
|
130.8
|
|
|
$
|
71.1
|
|
Adjustment for THV
sales returns reserve
|
|
—
|
|
|
7.1
|
|
THV United States
Underlying Sales
|
|
$
|
130.8
|
|
|
$
|
78.2
|
|
Underlying Growth
Rate %
|
|
67.3
|
%
|
|
|
|
THV OUTSIDE THE
UNITED STATES UNDERLYING SALES GROWTH
|
|
|
|
Three Months
Ended
March 31,
|
(in millions)
|
|
2015
|
|
2014
|
GAAP THV Outside
the United States Sales
|
|
$
|
137.7
|
|
|
$
|
118.1
|
|
Adjustment for THV
sales returns reserve
|
|
—
|
|
|
(1.0)
|
|
Foreign exchange
impact
|
|
—
|
|
|
(17.2)
|
|
THV Outside the
United States Underlying Sales
|
|
$
|
137.7
|
|
|
$
|
99.9
|
|
Underlying Growth
Rate %
|
|
37.8
|
%
|
|
|
EDWARDS
LIFESCIENCES CORPORATION
Unaudited
Reconciliation of Sales by Product Group and Region
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
2014 Adjusted
|
|
|
Sales by Product Group (QTD)
|
|
1Q 2015
|
|
1Q 2014
|
|
Change
|
|
GAAP
Growth
Rate*
|
|
Sales Return
Reserve
|
|
FX Impact
|
|
1Q 2014
Underlying
Sales
|
|
Underlying
Growth
Rate *
|
Transcatheter
Heart Valve Therapy
|
|
$
|
268.5
|
|
|
$
|
189.2
|
|
|
$
|
79.3
|
|
|
41.9
|
%
|
|
$
|
6.1
|
|
|
$
|
(17.2)
|
|
|
$
|
178.1
|
|
|
50.8
|
%
|
Surgical Heart
Valve Therapy
|
|
196.9
|
|
|
202.6
|
|
|
(5.7)
|
|
|
(2.8)%
|
|
|
—
|
|
|
(14.7)
|
|
|
187.9
|
|
|
4.8
|
%
|
Critical
Care
|
|
124.9
|
|
|
130.6
|
|
|
(5.7)
|
|
|
(4.4)%
|
|
|
—
|
|
|
(9.4)
|
|
|
121.2
|
|
|
3.1
|
%
|
Total
Sales
|
|
$
|
590.3
|
|
|
$
|
522.4
|
|
|
$
|
67.9
|
|
|
13.0
|
%
|
|
$
|
6.1
|
|
|
$
|
(41.3)
|
|
|
$
|
487.2
|
|
|
21.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2014 Adjusted
|
|
|
Sales by Region (QTD)
|
|
1Q 2015
|
|
1Q 2014
|
|
Change
|
|
GAAP
Growth Rate*
|
|
Sales Return
Reserve
|
|
FX Impact
|
|
1Q 2014
Underlying
Sales
|
|
Underlying
Growth
Rate *
|
United
States
|
|
$
|
283.5
|
|
|
$
|
222.4
|
|
|
$
|
61.1
|
|
|
27.5
|
%
|
|
$
|
7.1
|
|
|
$
|
—
|
|
|
$
|
229.5
|
|
|
23.5
|
%
|
Europe
|
|
185.3
|
|
|
180.3
|
|
|
5.0
|
|
|
2.8
|
%
|
|
(1.0)
|
|
|
(29.9)
|
|
|
149.4
|
|
|
24.0
|
%
|
Japan
|
|
58.1
|
|
|
58.7
|
|
|
(0.6)
|
|
|
(0.9)%
|
|
|
—
|
|
|
(7.8)
|
|
|
50.9
|
|
|
14.2
|
%
|
Rest of
World
|
|
63.4
|
|
|
61.0
|
|
|
2.4
|
|
|
3.8
|
%
|
|
—
|
|
|
(3.6)
|
|
|
57.4
|
|
|
10.5
|
%
|
International
|
|
306.8
|
|
|
300.0
|
|
|
6.8
|
|
|
2.3
|
%
|
|
(1.0)
|
|
|
(41.3)
|
|
|
257.7
|
|
|
19.5
|
%
|
Total
|
|
$
|
590.3
|
|
|
$
|
522.4
|
|
|
$
|
67.9
|
|
|
13.0
|
%
|
|
$
|
6.1
|
|
|
$
|
(41.3)
|
|
|
$
|
487.2
|
|
|
21.3
|
%
|
|
__________
|
* Numbers may not
calculate due to rounding.
|
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SOURCE Edwards Lifesciences Corporation