IRVINE, Calif., April 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 March 31,
2016.
First Quarter Highlights:
- Sales grew 18.1% to $697.3
million, and underlying1 sales were up 19.7%
- THVT sales grew 37.0%, and underlying sales were up 38.3%
- GAAP EPS was $0.66, an increase
of 17.9%, and adjusted2 EPS grew 24.6% to $0.71
- 2016 sales guidance raised to $2.7 -
$3.0 billion from $2.6 - $2.85
billion
- 2016 THVT sales guidance raised to $1.4
- $1.6 billion; underlying growth >25%
- 2016 adjusted EPS guidance increased to $2.67 - $2.77
"We are very pleased to report a strong start to 2016," said
Michael A. Mussallem, chairman and
CEO. "Significant transcatheter heart valve sales once again
drove the majority of this quarter's growth, with solid performance
in our core businesses, in particular Critical Care. We are
also pleased to report strong bottom line results while
aggressively investing in new therapies that can have a meaningful
future impact. And, most importantly, even more patients are
benefiting from our life saving technologies than ever before."
First Quarter 2016
Results
Sales for the quarter ended March 31, 2016 were
$697.3 million. U.S. and
international segment sales for the first quarter were $375.6 million and $321.7
million, respectively. On an underlying basis,
sales grew 19.7 percent over the first quarter last year. Net
income for the quarter ended March 31, 2016 was $143.0 million, or $0.66 per diluted share.
For the first quarter, the company reported Transcatheter Heart
Valve Therapy (THVT) sales of $367.8
million, a 37.0 percent growth rate over the first quarter
last year, or $366.1 million and 38.3
percent growth on an underlying basis. Growth was led by continued
strong therapy adoption in the U.S.
In the U.S., THVT sales for the quarter were $216.4 million. On an underlying basis, sales
were $214.7 million and grew 64.1
percent compared to the prior year period.
"Our THVT performance was driven primarily by strong procedure
growth, which continued to exceed our expectations, and was aided
by the recent U.S. launch of our SAPIEN 3 valve," said
Mussallem.
Surgical Heart Valve Therapy product group sales for the quarter
were $195.9 million. Reported sales
decreased 0.5 percent compared to the first quarter last year, and
were up slightly over the prior year on an underlying basis.
Globally, sales were lifted by an increase in surgical heart valve
units, which the company believes was primarily driven by greater
aortic disease awareness that prompted a larger number of surgical
procedures, but were offset by the ongoing exit of non-strategic
cannula products.
Critical Care product group sales were $133.6 million for the quarter, representing an
increase of 7.0 percent versus last year, or 9.1 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 74.1
percent, compared to 77.0 percent in the same period last year.
This expected decrease was driven primarily by the foreign exchange
impact from inventories sold internationally and higher spending in
global manufacturing operations, partially offset by a more
favorable product mix.
Selling, general and administrative expenses increased to
$212.7 million for the quarter, or
30.5 percent of sales. This increase was driven primarily by sales
and marketing expenses related to transcatheter valves. This was
partially offset by the suspension of the Medical Device Excise Tax
(MDET), as well as the favorable foreign exchange impact on
expenses outside the U.S.
Research and development investments for the quarter increased
to $102.4 million compared to
$86.4 million in the prior year
period. This increase was primarily the result of continued
investments in the company's transcatheter mitral and aortic valve
programs. The suspension of the MDET provided additional
flexibility to accelerate investments in structural heart
initiatives.
Cash flow from operating activities for the quarter was
$107.1 million. After capital
spending of $27.7 million, free cash
flow was $79.4 million.
Cash, cash equivalents and short-term investments totaled
$951.8 million at March 31,
2016. Total debt was $602.2
million.
Outlook
For the full year 2016, the company now expects sales to be
between $2.7 and $3.0 billion due to
the strong first quarter momentum, a planned earlier U.S.
indication expansion for the SAPIEN 3 valve, and an anticipated
positive impact from foreign exchange. With this increase in sales
guidance, the company now expects adjusted earnings per share to be
between $2.67 and $2.77.
For the second quarter of 2016, at current foreign exchange
rates, the company projects sales to be between $700 and $740 million, and adjusted earnings per
share to be between $0.67 and
$0.73.
"Our strong start to 2016 positions us well for another
successful year," said Mussallem. "We are enthusiastic about the
continued expansion of transcatheter-based therapies for the many
structural heart patients still in need. We are confident in our
outlook for strong sales growth, and we remain passionate about
developing impactful therapies to help more patients around the
world."
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 at @EdwardsLifesci.
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 13633520. 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 and information in the
Outlook section, including the company's financial guidance, and
expectations for trends in 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 therapy expansion, particularly
for THV; 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 related 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, 2015. These
filings, along with important safety information about our
products, may be found at edwards.com.
Edwards, Edwards Lifesciences, the stylized E logo, Edwards
SAPIEN, Edwards SAPIEN 3, Enhanced Surgical Recovery Program,
SAPIEN 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 THVT sales
return reserve. See the Non-GAAP Financial Information page and
reconciliation tables below.
[2] Adjusted earnings per share is a non-GAAP item and
excludes the impact of the THVT product exchange, amortization
expense, and gains and losses from special items, such as
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
March 31,
|
|
2016
|
|
2015
|
Net sales
|
$
|
697.3
|
|
|
$
|
590.3
|
|
Cost of
sales
|
180.3
|
|
|
136.0
|
|
|
|
|
|
Gross
profit
|
517.0
|
|
|
454.3
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
212.7
|
|
|
202.5
|
|
Research and
development expenses
|
102.4
|
|
|
86.4
|
|
Intellectual property
litigation expenses
|
12.2
|
|
|
0.3
|
|
Interest expense,
net
|
2.4
|
|
|
2.4
|
|
Other expense,
net
|
4.0
|
|
|
0.2
|
|
|
|
|
|
Income before
provision for income taxes
|
183.3
|
|
|
162.5
|
|
|
|
|
|
Provision for income
taxes
|
40.3
|
|
|
39.1
|
|
|
|
|
|
Net income
|
$
|
143.0
|
|
|
$
|
123.4
|
|
|
|
|
|
Earnings per
share: (A)
|
|
|
|
Basic
|
$
|
0.67
|
|
|
$
|
0.57
|
|
Diluted
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
|
|
|
Weighted-average
common shares outstanding:(A)
|
|
|
|
Basic
|
213.1
|
|
|
215.5
|
|
Diluted
|
217.8
|
|
|
220.6
|
|
|
|
|
|
Operating
Statistics
|
|
|
|
As a percentage of
net sales:
|
|
|
|
Gross
profit
|
74.1
|
%
|
|
77.0
|
%
|
Selling, general, and
administrative expenses
|
30.5
|
%
|
|
34.3
|
%
|
Research and
development expenses
|
14.7
|
%
|
|
14.6
|
%
|
Income before
provision for income taxes
|
26.3
|
%
|
|
27.5
|
%
|
Net income
|
20.5
|
%
|
|
20.9
|
%
|
|
|
|
|
Effective tax
rate
|
22.0
|
%
|
|
24.1
|
%
|
|
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)
|
|
|
March 31,
2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
501.4
|
|
|
$
|
718.4
|
|
Short-term
investments
|
450.4
|
|
|
506.3
|
|
Accounts and other
receivables, net
|
388.5
|
|
|
344.1
|
|
Inventories,
net
|
356.6
|
|
|
339.9
|
|
Prepaid
expenses
|
48.8
|
|
|
45.1
|
|
Other current
assets
|
73.6
|
|
|
94.1
|
|
Total current
assets
|
1,819.3
|
|
|
2,047.9
|
|
|
|
|
|
Long-term accounts
receivable, net
|
5.8
|
|
|
3.6
|
|
Long-term
investments
|
369.2
|
|
|
379.9
|
|
Property, plant, and
equipment, net
|
497.3
|
|
|
482.5
|
|
Goodwill
|
630.9
|
|
|
628.3
|
|
Other intangible
assets, net
|
203.7
|
|
|
205.4
|
|
Deferred income
taxes
|
196.5
|
|
|
180.5
|
|
Other
assets
|
131.1
|
|
|
131.2
|
|
|
|
|
|
Total
assets
|
$
|
3,853.8
|
|
|
$
|
4,059.3
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
458.3
|
|
|
$
|
476.2
|
|
|
|
|
|
Long-term
debt
|
602.2
|
|
|
599.9
|
|
Other long-term
liabilities
|
494.0
|
|
|
480.1
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
Common
stock
|
239.8
|
|
|
239.1
|
|
Additional paid-in
capital
|
933.4
|
|
|
946.8
|
|
Retained
earnings
|
3,479.8
|
|
|
3,336.8
|
|
Accumulated other
comprehensive loss
|
(172.6)
|
|
|
(182.6)
|
|
Treasury stock, at
cost
|
(2,181.1)
|
|
|
(1,837.0)
|
|
Total stockholders'
equity
|
2,299.3
|
|
|
2,503.1
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
3,853.8
|
|
|
$
|
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
("THV") product upgrades, and "adjusted" or "excluding special
items" to also exclude amortization of intellectual property and
gains and losses from special items such as 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 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 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 THV 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 THV inventory expected
upon introduction of next-generation THV products in Japan.
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.
Amortization of Intellectual Property - The Company
recorded $1.7 million and
$1.8 million of amortization expense
in the first quarter of 2016 and 2015, respectively, related to
intellectual property.
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
March 31,
|
|
|
2016
|
|
2015
|
GAAP Net
Income
|
|
$
|
143.0
|
|
|
$
|
123.4
|
|
Growth Rate
%
|
|
15.9
|
%
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
(A)
|
|
|
|
|
THV sales return
reserve and related costs
|
|
0.1
|
|
|
—
|
|
Intellectual property
litigation expenses
|
|
12.2
|
|
|
0.3
|
|
Amortization of
intellectual property
|
|
1.7
|
|
|
1.8
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
|
|
Tax effect on
reconciling items (B)
|
|
(3.4)
|
|
|
(0.5)
|
|
Adjusted Net
Income
|
|
$
|
153.6
|
|
|
$
|
125.0
|
|
Growth Rate
%
|
|
22.9
|
%
|
|
|
|
RECONCILIATION OF
GAAP TO ADJUSTED DILUTED EARNINGS PER SHARE
|
|
GAAP Diluted
Earnings Per Share (C)
|
|
$
|
0.66
|
|
|
$
|
0.56
|
|
Growth Rate
%
|
|
17.9
|
%
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
(A), (D)
|
|
|
|
|
Intellectual property
litigation expenses
|
|
0.04
|
|
|
—
|
|
Amortization of
intellectual property
|
|
0.01
|
|
|
0.01
|
|
Adjusted Diluted
Earnings Per Share
|
|
$
|
0.71
|
|
|
$
|
0.57
|
|
Growth Rate
%
|
|
24.6
|
%
|
|
|
|
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)
|
|
THV UNITED STATES
UNDERLYING SALES GROWTH
|
|
|
|
Three Months
Ended
March 31,
|
|
|
2016
|
|
2015
|
THV United States
GAAP Sales
|
|
$
|
216.4
|
|
|
$
|
130.8
|
|
Adjustment for THV
sales return reserve
|
|
(1.7)
|
|
|
—
|
|
THV United States
Underlying Sales
|
|
$
|
214.7
|
|
|
$
|
130.8
|
|
Underlying Growth
Rate %
|
|
64.1
|
%
|
|
|
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)
|
|
1Q
2016
|
|
1Q
2015
|
|
Change
|
|
GAAP
Growth
Rate*
|
|
Sales Return
Reserve
|
|
1Q 2016 Underlying
Sales
|
|
Sales Return
Reserve
|
|
FX Impact
|
|
1Q 2015 Underlying
Sales
|
|
Underlying
Growth
Rate *
|
Transcatheter
Heart Valve Therapy
|
|
$
|
367.8
|
|
|
$
|
268.5
|
|
|
$
|
99.3
|
|
|
37.0
|
%
|
|
$
|
(1.7)
|
|
|
$
|
366.1
|
|
|
$
|
—
|
|
|
$
|
(3.8)
|
|
|
$
|
264.7
|
|
|
38.3
|
%
|
Surgical Heart
Valve Therapy
|
|
195.9
|
|
|
196.9
|
|
|
(1.0)
|
|
|
(0.5)%
|
|
|
—
|
|
|
195.9
|
|
|
—
|
|
|
(2.8)
|
|
|
194.1
|
|
|
0.9
|
%
|
Critical
Care
|
|
133.6
|
|
|
124.9
|
|
|
8.7
|
|
|
7.0
|
%
|
|
—
|
|
|
133.6
|
|
|
—
|
|
|
(2.4)
|
|
|
122.5
|
|
|
9.1
|
%
|
Total
|
|
$
|
697.3
|
|
|
$
|
590.3
|
|
|
$
|
107.0
|
|
|
18.1
|
%
|
|
$
|
(1.7)
|
|
|
$
|
695.6
|
|
|
$
|
—
|
|
|
$
|
(9.0)
|
|
|
$
|
581.3
|
|
|
19.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2016 Adjusted
|
|
2015 Adjusted
|
|
|
Sales by Region (QTD)
|
|
1Q
2016
|
|
1Q
2015
|
|
Change
|
|
GAAP
Growth Rate*
|
|
Sales Return
Reserve
|
|
1Q 2016 Underlying
Sales
|
|
Sales Return
Reserve
|
|
FX Impact
|
|
1Q 2015 Underlying
Sales
|
|
Underlying
Growth
Rate *
|
United
States
|
|
$
|
375.6
|
|
|
$
|
283.5
|
|
|
$
|
92.1
|
|
|
32.5
|
%
|
|
$
|
(1.7)
|
|
|
$
|
373.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
283.5
|
|
|
31.9
|
%
|
Europe
|
|
188.5
|
|
|
185.3
|
|
|
3.2
|
|
|
1.7
|
%
|
|
—
|
|
|
188.5
|
|
|
—
|
|
|
(4.5)
|
|
|
180.8
|
|
|
4.3
|
%
|
Japan
|
|
66.6
|
|
|
58.1
|
|
|
8.5
|
|
|
14.6
|
%
|
|
—
|
|
|
66.6
|
|
|
—
|
|
|
1.5
|
|
|
59.6
|
|
|
11.7
|
%
|
Rest of
World
|
|
66.6
|
|
|
63.4
|
|
|
3.2
|
|
|
5.1
|
%
|
|
—
|
|
|
66.6
|
|
|
—
|
|
|
(6.0)
|
|
|
57.4
|
|
|
16.0
|
%
|
International
|
|
321.7
|
|
|
306.8
|
|
|
14.9
|
|
|
4.9
|
%
|
|
—
|
|
|
321.7
|
|
|
—
|
|
|
(9.0)
|
|
|
297.8
|
|
|
8.0
|
%
|
Total
|
|
$
|
697.3
|
|
|
$
|
590.3
|
|
|
$
|
107.0
|
|
|
18.1
|
%
|
|
$
|
(1.7)
|
|
|
$
|
695.6
|
|
|
$
|
—
|
|
|
$
|
(9.0)
|
|
|
$
|
581.3
|
|
|
19.7
|
%
|
|
* Numbers may not
calculate due to rounding.
|
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SOURCE Edwards Lifesciences Corporation