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Spectranetics Achieves Fourth Quarter Revenue Of $36.8 Million

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most directly comparable GAAP measures for the respective periods, and an explanation of our use of these non-GAAP measures, can be found in "Reconciliation of Non-GAAP Financial Measures" immediately following the financial tables. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

-Financial tables follow-

 

THE SPECTRANETICS CORPORATION
Condensed Consolidated Statements of Operations
(000's, except per share data and percentages)
(unaudited)
 
  Three Months Ended December 31, Twelve Months Ended December 31,
  2012 2011 2012 2011
Revenue $36,751 $32,524 $140,285 $127,287
Cost of products sold 9,815 8,800 37,927 35,723
Gross profit 26,936 23,724 102,358 91,564
Gross margin % 73.3% 72.9% 73.0% 71.9%
Operating expenses:        
Selling, general and administrative 20,967 17,795 82,254 70,502
Research, development and other technology 4,712 4,066 16,846 17,729
Acquisition-related costs 311 311
Federal investigation legal and accrued indemnification costs (370) (370)
Settlement costs - license agreement dispute 1,821 1,821
Litigation charge 596
Total operating expenses 25,990 23,312 99,411 90,278
Operating income 946 412 2,947 1,286
Litigation-related interest expense (230)
Other income (expense), net 2 (64) 13 69
Total other income (expense) 2 (64) 13 (161)
Income before taxes 948 348 2,960 1,125
Income tax expense (benefit) 275 (7) 734 231
Net income $673 $355 $2,226 $894
         
Net income per common share:        
Basic $0.02 $0.01 $0.06 $0.03
Diluted 0.02 0.01 0.06 0.03
Weighted average shares outstanding:        
Basic 34,698 33,720 34,377 33,458
Diluted 36,299 34,614 35,767 34,370
 
 
THE SPECTRANETICS CORPORATION
Condensed Consolidated Balance Sheets
(000's)
 
  12/31/2012 12/31/2011
  (unaudited)  
ASSETS    
Current assets:    
Cash and cash equivalents $37,775 $39,638
Accounts receivable, net 19,945 18,123
Inventories, net 9,288 8,542
Deferred  income taxes, current portion, net 313 610
Other current assets 2,506 2,421
Total current assets 69,827 69,334
Property and equipment, net 27,006 27,249
Goodwill 13,296 11,569
Other assets 640 884
Total assets $110,769 $109,036
     
LIABILITIES AND STOCKHOLDERS ' EQUITY    
Current liabilities $20,193 $27,960
Non-current liabilities 1,879 1,566
Stockholders' equity 88,697 79,510
Total liabilities and stockholders' equity $110,769 $109,036

 

THE SPECTRANETICS CORPORATION
Supplemental Financial Information
(Unaudited)
     
Financial Summary 2011 2012
(000 ' s, except laser sales and installed base amounts) 4 th Qtr 1 st Qtr 2 nd Qtr 3 rd Qtr 4 th Qtr
           
Disposable products revenue:          
Vascular Intervention revenue $15,877 $16,411 $17,420 $16,821 $16,684
Lead Management revenue 11,893 12,368 13,526 13,918 15,374
Total disposable products revenue 27,770 28,779 30,946 30,739 32,058
           
Service and other revenue 2,541 2,659 2,515 2,508 2,757
           
Laser revenue:          
Equipment sales 909 591 409 910 772
Rental fees 1,304 1,240 1,165 1,073 1,164
Total laser revenue 2,213 1,831 1,574 1,983 1,936
           
Total revenue 32,524 33,269 35,035 35,230 36,751
           
Net income 355 12 636 905 673
Non-GAAP adjusted net income excluding special items (1) 1,310 N/A N/A N/A 984
           
Cash flow generated by (used in) operating activities 3,051 (4,713) 423 3,748 5,703
Total cash and current investment securities at end of quarter 39,638 27,000 27,659 31,646 37,775
           
Laser sales summary:          
Laser sales from inventory 5 3 2 5 6
Laser sales from evaluation/rental units 3 1 1
Total laser sales 8 3 3 6 6
           
(1) Non-GAAP adjusted net income excluding special items is a non-GAAP financial measure. Please refer to the non-GAAP reconciliation tables following this table for the reconciliation of the fourth quarter of 2011 and 2012. There were no special items in the first, second or third quarters of 2012.          
           
Worldwide Installed Base Summary:          
Laser sales from inventory 5 3 2 5 6
Rental placements 21 15 18 21 30
Evaluation placements 4 7 8 4 6
Laser placements during quarter 30 25 28 30 42
Buy-backs/returns during quarter (13) (13) (14) (19) (24)
Net laser placements during quarter 17 12 14 11 18
Total lasers placed at end of quarter 1,011 1,023 1,037 1,048 1,066

Reconciliation of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures in this release. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures for the respective periods can be found in the tables below. An explanation of the manner in which our management uses these non-GAAP measures to conduct and evaluate our business and the reasons why management believes that these non-GAAP measures provide useful information to investors is provided following the reconciliation tables.  

 
THE SPECTRANETICS CORPORATION
Reconciliation of revenue by geography to non-GAAP revenue by geography
on a constant currency basis
(000's, except percentages)
(unaudited)  
  Three Months Ended  
  December 31, 2012 December 31, 2011 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
United States $30,819 $— $30,819 $27,050 14% 14%
International 5,932 159 6,091 5,474 8% 11%
Total revenue $36,751 $159 $36,910 $32,524 13% 13%
 
  Twelve Months Ended  
  December 31, 2012 December 31, 2011 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
United States $117,436 $— $117,436 $105,933 11% 11%
International 22,849 1,227 24,076 21,354 7% 13%
Total revenue $140,285 $1,227 $141,512 $127,287 10% 11%
 
 
THE SPECTRANETICS CORPORATION
Reconciliation of revenue by product line to non-GAAP revenue by product line
on a constant currency basis
(000's, except percentages)
(unaudited)
     
  Three Months Ended  
  December 31, 2012 December 31, 2011 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
Vascular Intervention $16,684 $108 $16,792 $15,877 5% 6%
Lead Management 15,374 77 15,451 11,893 29% 30%
Laser System, Service & Other 4,693 (26) 4,667 4,754 (1)% (2)%
Total revenue $36,751 $159 $36,910 $32,524 13% 13%
     
     
  Twelve Months Ended  
  December 31, 2012 December 31, 2011 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
Vascular Intervention $67,336 $533 $67,869 $62,264 8% 9%
Lead Management 55,186 588 55,774 46,480 19% 20%
Laser System, Service & Other 17,763 106 17,869 18,543 (4)% (4)%
Total revenue $140,285 $1,227 $141,512 $127,287 10% 11%
 
 
THE SPECTRANETICS CORPORATION
Reconciliation of Net Income to Non-GAAP Adjusted Net Income Excluding Special Items and
Net Income per Diluted Share to Non-GAAP Adjusted Net Income Excluding Special Items
per Diluted Share
(000's, except per share data)
(unaudited)
 
  Three Months Ended December 31, Twelve Months Ended December 31,
  2012 2011 2012 2011
  Net income Per diluted share (1) Net income Per diluted share (1) Net income Per diluted share (1) Net income Per diluted share (1)
Net income, as reported $673 $0.02 $355 $0.01 $2,226 $0.06 $894 $0.03
Acquisition-related costs (2) 311 0.01 311 0.01
Federal investigation legal and accrued indemnification costs (3) (370) (0.01) (370) (0.01)
Settlement costs --- license agreement dispute (4) 1,821 0.05 1,821 0.05
Litigation charge (5) 596 0.02
Litigation-related interest expense (5) 230 0.01
Decrease in valuation allowance against deferred tax asset (6) (496) (0.01) (496) (0.01)
Non-GAAP adjusted net income excluding special items $984 $0.03 $1,310 $0.04 $2,537 $0.07 $2,675 $0.08
 
1) Per share amounts may not add due to rounding. Per diluted share is calculated based on the fully diluted weighted average shares outstanding for all periods. The fully diluted weighted average shares were 36,298,552 and 35,766,970 for the three and twelve months ended December 31, 2012, respectively, and 34,614,334 and 34,370,124 for the three and twelve months ended December 31, 2011.
 
2) In the fourth quarter of 2012, we incurred $0.3 million in legal and other costs related to our acquisition of certain product lines from Upstream Peripheral Technologies Ltd. Further information regarding this matter is included in our Form 8-K filed on January 7, 2013.
 
3) In the third quarter of 2010, we accrued a $6.5 million charge to record our estimated liability related to indemnification obligations that we had with three former employees. In the fourth quarter of 2011, we reversed $0.4 million of the original accrual based on developments in the court proceedings, including the conclusion of the trial of two of the defendants and the dismissal of charges against a third defendant. Further information regarding this matter is included in our Annual Report on Form 10-K for the year ended December 31, 2011.
 
4) In January 2012, we entered into a Termination and Mutual Release ("Agreement") with Medtronic, Inc. The Agreement terminated the License Agreement between us and Medtronic dated February 28, 1997. Under the Agreement, we paid Medtronic $3.0 million in January 2012. We had accrued royalty expenses in the amount of $1.2 million prior to the settlement; therefore, the amount of $1.8 million was recorded as settlement costs—license agreement dispute. The Agreement includes a mutual release and no further royalty expenses will be incurred subsequent to the effective date of the Agreement. 
 
5) In the third quarter of 2011, the Dutch Court of Appeal issued a ruling in favor of Cardiomedica S.p.A., requiring us to pay $0.6 million plus $0.2 million of interest to Cardiomedica. Further information regarding this matter is included in our Annual Report on Form 10-K for the year ended December 31, 2011.
 
6) In the fourth quarter of 2011, we entered into a strategic tax transaction with the approval of the Dutch tax authority that effectively extended the life of a portion of a net operating loss (NOL) carryforward in the Netherlands, which had previously been scheduled to expire on December 31, 2011 and which had previously been fully reserved. As a result, we recorded a $0.5 million tax benefit representing our estimate of the actual utilization of the extended deduction in future years.
 
THE SPECTRANETICS CORPORATION
Reconciliation of Net Income to
EBITDA and Adjusted EBITDA 
(000's)
(unaudited)
   
  Twelve Months Ended December 31,
  2012
Net income, as reported $2,226
Provision for income taxes 734
Interest income, net (8)
Depreciation and amortization 9,854
EBITDA 12,806
   
Acquisition-related costs 311
Adjusted EBITDA $13,117

Management uses the non-GAAP financial measures as supplemental measures to analyze the underlying trends in our business, assess the performance of our core operations, establish operational goals and forecasts that are used in allocating resources and evaluate our performance period over period and in relation to our competitors' operating results.

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