EDWARDS LIFESCIENCES CORPORATION IRVINE, Calif., July 26, 2016 /PRNewswire/ -- Edwards Lifesciences Corporation (NYSE: EW), the global leader in patient-focused innovations for structural heart disease and critical care monitoring, today reported financial results for the quarter ended June 30, 2016.
http://photos.prnewswire.com/prnvar/20140714/126903
Second Quarter Highlights:
-- Sales grew 23.1% to $759.3 million; underlying(1) sales were up 21%
-- Global Transcatheter Heart Valve Therapy (THVT) sales grew 48.7%;
underlying grew 45%
-- U.S. THVT sales were up 71.5%; underlying grew 66%
-- GAAP EPS was $0.58, an increase of 13.7%; adjusted(2) EPS grew 33% to
$0.76
-- 2016 THVT global sales guidance raised $100 million; underlying growth
to exceed 30%(*)
-- 2016 total sales guidance at the high end of $2.7 - $3.0 billion(*)
-- 2016 adjusted EPS guidance increased to $2.78 - $2.88(*)
"We are very pleased to report strong second quarter performance, which reflected significant growth in the number of patients and physicians choosing transcatheter heart valve therapy," said Michael A. Mussallem, chairman and CEO. "Our results this quarter were better than expected, driving strong top and bottom line growth."
Second Quarter 2016 Results
Sales for the quarter ended June 30, 2016 were $759.3 million, up 23.1 percent. U.S. and international segment sales for the second quarter were $401.5 million and $357.8 million, respectively. On an underlying basis, sales grew 21.1 percent over the second quarter last year. Net income for the quarter ended June 30, 2016 was $126.6 million, or $0.58 per diluted share.
[*] 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 a
non-GAAP
basis as
adjusted for
the items
identified on
the Non-GAAP
Financial
Information
page due to
the inherent
difficulty in
forecasting
such items.
The Company is
not able to
provide a
reconciliation
of the non-
GAAP guidance
to comparable
GAAP measures
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.
For the second quarter, the company reported Transcatheter Heart Valve Therapy sales of $418.6 million, a 48.7 percent growth rate over the second quarter last year, or 45.1 percent on an underlying basis. Growth was led by continued strong therapy adoption across all geographies, with notable strength in the U.S.
In the U.S., THVT sales for the quarter were $246.4 million, a 71.5 percent growth rate over the second quarter last year, or 65.7 percent on an underlying basis. "Overall procedure growth exceeded our expectations, and strong sales were widespread in both large and small hospitals," said Mussallem. "Positive clinical results continue to drive adoption, and clinician feedback on the intermediate risk trial data presented at the ACC conference has been consistently positive."
Surgical Heart Valve Therapy product group sales for the quarter were $198.7 million. Reported sales decreased 2.6 percent compared to the second quarter last year, or down 3.3 percent on an underlying basis. Globally, sales were impacted in surgical mitral valves due to a temporary suspension of production, which was partially offset by solid growth in surgical aortic valves.
Critical Care product group sales were $142.0 million for the quarter, representing an increase of 8.0 percent versus last year, or 6.7 percent on an underlying basis. Overall growth for the quarter was strong in the company's core products and its Enhanced Surgical Recovery program.
For the quarter, the company's gross profit margin was 73.3 percent, compared to 74.3 percent in the same period last year. This decrease, which we expected, was driven primarily by the impact of foreign exchange, partially offset by a more profitable product mix reflecting strong growth in THVT and the prior year sales return reserve.
Selling, general and administrative expenses increased to $228.8 million for the quarter, or 30.1 percent of sales. This increase was driven primarily by sales and personnel related expenses.
Research and development investments for the quarter increased to $112.9 million compared to $97.5 million in the prior year period. This increase was primarily the result of continued investments in our transcatheter mitral and aortic valve programs.
Cash flow from operating activities for the quarter was $190.3 million. After capital spending of $37.1 million, free cash flow was $153.2 million.
Cash, cash equivalents and short-term investments totaled $1.1 billion at June 30, 2016. Total debt was $0.6 billion.
Six-Month Results
For the six months ended June 30, 2016, the company recorded net income of $269.6 million, or $1.24 per diluted share, compared to $236.1 million, or $1.07 per diluted share, for the same period in 2015. Net income increased for the six months by 14.2 percent, or 26.9 percent, on an adjusted basis. And, diluted earnings per share increased 15.9 percent over last year, or increased 28.1 percent, on an adjusted basis.
Net sales for the first six months of 2016 grew 20.7 percent to $1.5 billion. On an underlying basis, sales grew 20.4 percent.
U.S. and international segment sales for the first six months of 2016 were $777.1 million and $679.5 million, respectively.
During the first six months of 2016, the company repurchased 4.6 million shares of common stock for $415.7 million.
Outlook
For the full year 2016, the company now expects sales to be at the high end of its previous $2.7 to $3.0 billion range based on its strong first half results, an anticipated third quarter approval of intermediate risk in the U.S., and the momentum of therapy adoption globally. With this increase in sales guidance, the company now expects adjusted earnings per share to be between $2.78 and $2.88.
For the third quarter of 2016, at current foreign exchange rates, the company projects sales to be between $720 and $760 million, and adjusted earnings per share to be between $0.62 and $0.68.
"We are very pleased with our strong performance achieved through the first half of this year," said Mussallem. "As patients and clinicians increasingly prefer TAVR, and based on the substantial body of compelling evidence, we remain as optimistic as ever about the long-term growth opportunity represented by transcatheter therapies. Overall, we remain committed to aggressively investing in structural heart disease and critical care technologies. We are confident this will result in more patients being treated with our innovative therapies and continued strong organic growth."
About Edwards Lifesciences
Edwards Lifesciences, based in Irvine, Calif., is the global leader in patient-focused medical innovations for structural heart disease, as well as critical care and surgical monitoring. Driven by a passion to help patients, the company collaborates with the world's leading clinicians and researchers to address unmet healthcare needs, working to improve patient outcomes and enhance lives. For more information, visit www.Edwards.com and follow us on Twitter @EdwardsLifesci.
Conference Call and Webcast Information
Edwards Lifesciences will be hosting a conference call today at 2:00 p.m. PT to discuss its second 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 13639912. 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, financial guidance, and information in the Outlook section, including the company's expectations for therapy adoption. 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 new product launches, competitive dynamics and rate of therapy adoption, particularly for THVT; the timing and scope 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 related 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, 2015. These filings, along with important safety information about our products, may be found at edwards.com.
Edwards, Edwards Lifesciences, the stylized E logo, and Enhanced Surgical Recovery Program 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
excludes
foreign
exchange
fluctuations,
and sales
return
reserves
associated
with THVT
product
upgrades. See
the Non-GAAP
Financial
Information
page and
reconciliation
tables below.
[2] Adjusted income
and earnings
per share are
non-GAAP
items and
exclude
amortization
of
intellectual
property,
gains and
losses from
significant
investments,
impairments,
litigation,
and business
development
transactions.
EDWARDS LIFESCIENCES CORPORATION
Unaudited Consolidated Statements of Operations
(in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Net sales $759.3 $616.8 $1,456.6 $1,207.1
Cost of sales 202.5 158.6 382.8 294.6
----- ----- ----- -----
Gross profit 556.8 458.2 1,073.8 912.5
Selling, general, and
administrative
expenses 228.8 213.9 441.5 416.4
Research and
development expenses 112.9 97.5 215.3 183.9
Intellectual property
litigation expenses 9.1 1.0 21.3 1.3
Special charges 34.5 - 34.5 -
Interest expenses, net 2.4 1.8 4.8 4.2
Other expenses, net 0.1 1.8 4.1 2.0
--- --- --- ---
Income before
provision for income
taxes 169.0 142.2 352.3 304.7
Provision for income
taxes 42.4 29.5 82.7 68.6
---- ---- ---- ----
Net income $126.6 $112.7 $269.6 $236.1
====== ====== ====== ======
Earnings per share: (A)
----------------------
Basic $0.60 $0.52 $1.27 $1.10
Diluted $0.58 $0.51 $1.24 $1.07
Weighted-average common shares
outstanding:(A)
------------------------------
Basic 212.2 215.3 212.6 215.4
Diluted 217.3 219.9 217.6 220.3
Operating Statistics
--------------------
As a percentage of net sales:
Gross profit 73.3% 74.3% 73.7% 75.6%
Selling, general, and
administrative
expenses 30.1% 34.7% 30.3% 34.5%
Research and
development expenses 14.9% 15.8% 14.8% 15.2%
Income before
provision for income
taxes 22.3% 23.1% 24.2% 25.2%
Net income 16.7% 18.3% 18.5% 19.6%
Effective tax rate 25.1% 20.7% 23.5% 22.5%
_______________
Note: Numbers may not calculate due to
rounding.
(A) All share and per share
amounts for the prior year
were adjusted for the
December 11, 2015 two-for-
one stock split.
EDWARDS LIFESCIENCES CORPORATION
Unaudited Balance Sheets
(in millions)
June 30, 2016 December 31, 2015
------------- -----------------
ASSETS
Current assets
Cash and
cash
equivalents $369.9 $718.4
Short-
term
investments 690.3 506.3
Accounts
and
other
receivables,
net 425.8 344.1
Inventories,
net 367.6 339.9
Prepaid
expenses 50.0 45.1
Other
current
assets 81.5 94.1
---- ----
Total
current
assets 1,985.1 2,047.9
Long-
term
accounts
receivable,
net 5.3 3.6
Long-
term
investments 391.7 379.9
Property,
plant,
and
equipment,
net 516.2 482.5
Goodwill 629.4 628.3
Other
intangible
assets,
net 208.7 205.4
Deferred
income
taxes 188.6 180.5
Other
assets 126.4 131.2
----- -----
Total
assets $4,051.4 $4,059.3
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts
payable
and
accrued
liabilities $478.2 $476.2
------ ------
Long-
term
debt 602.5 599.9
----- -----
Other
long-
term
liabilities 499.5 480.1
----- -----
Stockholders' equity
Common
stock 241.0 239.1
Additional
paid-in
capital 1,020.2 946.8
Retained
earnings 3,606.4 3,336.8
Accumulated
other
comprehensive
loss (178.7) (182.6)
Treasury
stock,
at cost (2,217.7) (1,837.0)
-------- --------
Total
stockholders'
equity 2,471.2 2,503.1
------- -------
Total
liabilities
and
stockholders'
equity $4,051.4 $4,059.3
======== ========
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 ("THVT") product upgrades; and "adjusted" to also exclude amortization of intellectual property, gains and losses from significant investments, impairments, 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 a non-GAAP basis as adjusted for the items identified below due to the inherent difficulty in forecasting such items. The Company is not able to provide a reconciliation of the non-GAAP guidance to comparable GAAP measures 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 its 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 considers free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by business operations, after deducting payments for capital expenditures, which cash can then be used for strategic opportunities or other business purposes including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock.
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 operations by investors 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:
THVT Sales Return Reserve and Related Costs - In the first quarter of 2016, the Company recorded a $1.7 million reversal of the sales return reserve ($1.5 million net of related costs) upon delivery of the next-generation THVT products in the United States. In addition, in the first quarter of 2016, the Company recorded inventory reserves of $1.6 million related to estimated excess THVT inventory expected upon introduction of next-generation THVT products in Japan. In the second quarter of 2015, the Company recorded a net sales return reserve and related costs, primarily related to inventory reserves, of $15.9 million related to estimated THVT product returns expected upon introduction of next-generation THVT products.
Intellectual Property Litigation Expenses - The Company incurred intellectual property litigation expenses of $12.2 million and $0.3 million in the first quarter of 2016 and 2015, respectively, and $9.1 million and $1.0 million in the second quarter of 2016 and 2015, respectively.
Amortization of Intellectual Property - The Company recorded amortization expense of $1.7 million and $1.8 million in the first quarter of 2016 and 2015, respectively, and $1.9 million and $1.7 million in the second quarter of 2016 and 2015, respectively, related to intellectual property.
Purchased In-process Research and Development - The Company recorded a $34.5 million charge in the second quarter of 2016 related to the acquisition of technology for use in its transcatheter heart valve programs.
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 "Reconciliation of Sales by Product Group and Region."
EDWARDS LIFESCIENCES CORPORATION
Unaudited Reconciliation of GAAP to Non-GAAP Financial Information
(in millions, except per share data)
RECONCILIATION OF GAAP TO ADJUSTED NET INCOME
---------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
GAAP Net Income $126.6 $112.7 $269.6 $236.1
Growth Rate % 12.3% 14.2%
Non-GAAP adjustments: (A)
------------------------
THVT sales return reserve and related
costs - 15.9 0.1 15.9
Intellectual property litigation
expenses 9.1 1.0 21.3 1.3
Amortization of intellectual property 1.9 1.7 3.6 3.5
Purchased in-process research and
development 34.5 - 34.5 -
Provision for income taxes
Tax effect on reconciling items (B) (7.5) (5.6) (10.9) (6.1)
---- ----
Adjusted Net Income $164.6 $125.7 $318.2 $250.7
====== ====== ====== ======
Growth Rate % 30.9% 26.9%
RECONCILIATION OF GAAP TO ADJUSTED DILUTED EARNINGS PER SHARE
-------------------------------------------------------------
GAAP Diluted Earnings Per Share (C) $0.58 $0.51 $1.24 $1.07
Growth Rate % 13.7% 15.9%
Non-GAAP adjustments: (A), (D)
-----------------------------
THVT sales return reserve and related
costs - 0.05 - 0.05
Intellectual property litigation
expenses 0.03 - 0.07 -
Amortization of intellectual property 0.01 0.01 0.01 0.02
Purchased in-process research and
development 0.14 - 0.14 -
Adjusted Diluted Earnings Per Share $0.76 $0.57 $1.46 $1.14
===== ===== ===== =====
Growth Rate % 33.3% 28.1%
_______________
Note: Numbers may not calculate due to
rounding.
(A) See description of non-GAAP
adjustments on the "Non-GAAP
Financial Information" page.
(B) The tax effect on non-GAAP
adjustments is calculated based
upon the impact of the relevant
tax jurisdictions' statutory
tax rates on the Company's
estimated annual effective tax
rate, or discrete rate in the
quarter, as applicable.
(C) All per share amounts for the
prior year were adjusted for
the December 11, 2015 two-for-
one stock split.
(D) All amounts are tax effected,
calculated based upon the
impact of the relevant tax
jurisdictions' statutory tax
rates on the Company's
estimated annual effective tax
rate, or discrete rate in the
quarter, as applicable.
EDWARDS LIFESCIENCES CORPORATION
Unaudited Reconciliation of GAAP to Non-GAAP Financial Information
($ in millions)
THVT UNITED STATES UNDERLYING SALES GROWTH
------------------------------------------
Three Months Ended
June 30,
--------
2016 2015
---- ----
THVT United States GAAP
Sales $246.4 $143.7
Adjustment for THVT sales
return reserve - 5.0
--- ---
THVT United States
Underlying Sales $246.4 $148.7
====== ======
Underlying Growth Rate % 65.7%
EDWARDS LIFESCIENCES CORPORATION
Unaudited Reconciliation of GAAP to Non-GAAP Financial Information
($ in millions)
RECONCILIATION OF SALES BY PRODUCT GROUP AND REGION
---------------------------------------------------
2016 Adjusted 2015 Adjusted
------------- -------------
Sales by Product Group (QTD) 2Q 2016 2Q 2015 Change GAAP Sales Return 2Q 2016 Sales Return FX Impact 2Q 2015
Underlying Sales Underlying Sales Underlying
Growth Reserve Reserve Growth
Rate* Rate *
--- ---- -----
Transcatheter Heart Valve Therapy $418.6 $281.4 $137.2 48.7% $ - $418.6 $5.0 $2.0 $288.4 45.1%
Surgical Heart Valve Therapy 198.7 204.0 (5.3) (2.6)% - 198.7 - 1.5 205.5 (3.3)%
Critical Care 142.0 131.4 10.6 8.0% - 142.0 - 1.7 133.1 6.7%
----- ----- ---- --- ----- --- --- -----
Total $759.3 $616.8 $142.5 23.1% $ - $759.3 $5.0 $5.2 $627.0 21.1%
------ ------ ------ --- --- ------ ---- ---- ------
2016 Adjusted 2015 Adjusted
------------- -------------
Sales by Product Group (YTD) YTD 2Q 2016 YTD 2Q 2015 Change GAAP Sales Return YTD 2Q 2016 Sales Return FX Impact YTD 2Q 2015
Underlying Sales Underlying Sales Underlying
Growth Reserve Reserve Growth
Rate* Rate *
--- ---- -----
Transcatheter Heart Valve Therapy $786.4 $549.9 $236.5 43.0% $(1.7) $784.7 $5.0 $(1.8) $553.1 41.9%
Surgical Heart Valve Therapy 394.6 400.9 (6.3) (1.6)% - 394.6 - (1.3) 399.6 (1.3)%
Critical Care 275.6 256.3 19.3 7.5% - 275.6 - (0.7) 255.6 7.8%
----- ----- ---- --- ----- --- ---- -----
Total Sales $1,456.6 $1,207.1 $249.5 20.7% $(1.7) $1,454.9 $5.0 $(3.8) $1,208.3 20.4%
-------- -------- ------ ----- -------- ---- ----- --------
2016 Adjusted 2015 Adjusted
------------- -------------
Sales by Region (QTD) 2Q 2016 2Q 2015 Change GAAP Sales Return 2Q 2016 Sales Return FX Impact 2Q 2015
Underlying Sales Reserve Underlying Sales Underlying
Growth Rate* Reserve Growth
Rate *
--- -----
United States $401.5 $302.7 $98.8 32.6% $ - $401.5 $5.0 $ - $307.7 30.5%
------ ------ ----- --- --- ------ ---- --- --- ------
Europe 203.6 181.9 21.7 11.9% - 203.6 - - 181.9 11.9%
Japan 79.9 62.3 17.6 28.3% - 79.9 - 7.8 70.1 14.0%
Rest of World 74.3 69.9 4.4 6.2% - 74.3 - (2.6) 67.3 10.4%
---- ---- --- --- ---- --- ---- ----
International 357.8 314.1 43.7 13.9% - 357.8 - 5.2 319.3 12.1%
----- ----- ---- --- ----- --- --- -----
Total $759.3 $616.8 $142.5 23.1% $ - $759.3 $5.0 $5.2 $627.0 21.1%
------ ------ ------ --- --- ------ ---- ---- ------
2016 Adjusted 2015 Adjusted
------------- -------------
Sales by Region (YTD) YTD 2Q 2016 YTD 2Q 2015 Change GAAP Sales Return YTD 2Q 2016 Sales Return FX Impact YTD 2Q 2015
Underlying Sales Reserve Underlying Sales Underlying
Growth Rate* Reserve Growth
Rate *
--- -----
United States $777.1 $586.2 $190.9 32.6% $(1.7) $775.4 $5.0 $ - $591.2 31.2%
------ ------ ------ ----- ------ ---- --- --- ------
Europe 392.1 367.2 24.9 6.8% - 392.1 - (4.5) 362.7 8.1%
Japan 146.5 120.4 26.1 21.7% - 146.5 - 9.3 129.7 13.0%
Rest of World 140.9 133.3 7.6 5.7% - 140.9 - (8.6) 124.7 13.0%
----- ----- --- --- ----- --- ---- -----
International 679.5 620.9 58.6 9.4% - 679.5 - (3.8) 617.1 10.1%
----- ----- ---- --- ----- --- ---- -----
Total $1,456.6 $1,207.1 $249.5 20.7% $(1.7) $1,454.9 $5.0 $(3.8) $1,208.3 20.4%
-------- -------- ------ ----- -------- ---- ----- --------
_______________
* Numbers may not calculate due to
rounding.
Logo - http://photos.prnewswire.com/prnh/20140714/126903
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/edwards-lifesciences-reports-second-quarter-results-300304245.html
SOURCE Edwards Lifesciences Corporation
