First Quarter Net Sales Increase 23% to $123.9
Million
First Quarter GAAP EPS Increases to $0.09
Cash and Cash Equivalents Increase to $116.8
Million
Full-Year 2010 Revenue and Earnings Guidance
Increased
ev3 Inc. (Nasdaq:EVVV), a global endovascular device company, today
reported financial results for its fiscal first quarter and updated
financial guidance for 2010. ev3's net sales totaled $123.9 million
in the first quarter of 2010 compared to $100.4 million in the same
quarter of the prior year. Excluding $2.9 million of positive
impact due to foreign currency exchange rates, net sales increased
21% versus the prior year quarter.
Reconciliations of non-GAAP financial measures used in this
release to the most comparable U.S. GAAP measures for the
respective periods can be found immediately following the detail of
net sales by geography in this release.
Robert Palmisano, president and chief executive officer of ev3
Inc., commented, "We achieved another quarter of significant sales
growth in both our neurovascular and peripheral vascular segments
that outpaced market growth rates in U.S. and international
markets. Our neurovascular segment, which grew 44% in the first
quarter compared to the prior year quarter, reflects the broad
penetration we are making across our entire product line and the
positive response to the international launch of our Pipeline
Embolization Device and Solitaire FR Revascularization Device for
ischemic stroke."
Palmisano continued, "I am especially pleased by the 13% sales
growth we saw in our peripheral vascular segment during the
quarter, which was led by an outstanding performance from our U.S.
sales organization and the launch of our TurboHawk Plaque Excision
System, TrailBlazer Support Catheter and new PowerCross PTA
balloon."
ev3's GAAP net income for the first quarter of 2010 was $9.9
million, or $0.09 per diluted share, compared to a net loss of
$(1.8) million, or $(0.02) per diluted share, in the first quarter
of 2009. Non-GAAP adjusted net income in the first quarter of 2010
was $22.3 million, or $0.20 per diluted share, compared to adjusted
net income of $7.1 million, or $0.07 per diluted share, in the
first quarter of 2009.
Cash and cash equivalents totaled $116.8 million as of the end
of the first quarter of 2010, an increase of $18.8 million compared
to the end of the fourth quarter of 2009.
Palmisano concluded, "Operationally, this was another very
strong quarter for ev3. In addition to sales growth, we
continue to emphasize gross margin improvement and profitability as
our primary objectives, so I was very pleased to see sequential
quarter gross margin expansion of 50 basis points to 76.4%. We
will continue to focus on improving execution, driving
manufacturing efficiencies and increasing leverage."
Sales Review
By product segment, peripheral vascular net sales increased 13%
in the first quarter of 2010 versus the prior year quarter and 11%
on a constant currency basis. Neurovascular net sales
increased 44% versus the prior year quarter and 38% on a constant
currency basis.
On a geographic basis, U.S. net sales increased 18% versus the
prior year quarter. International net sales increased 31%
versus the prior year quarter and 24% on a constant currency
basis. Changes in foreign currency exchange rates had a
positive impact of $2.9 million on net sales compared to the first
quarter of the prior year.
An investor presentation summarizing the company's first quarter
of 2010 results is available at http://ir.ev3.net.
Outlook
ev3 has increased its full-year guidance and now expects fiscal
year 2010 net sales to be in the range of $520 to $530 million
compared to $449.1 million of net sales in 2009. Net sales
growth is expected to be approximately 16% to 18%. At current
average rates, foreign currency exchange rate fluctuations are
expected to have a minimal impact on revenue in 2010 compared to
2009. ev3 expects non-GAAP adjusted earnings per share to be
in the range of $0.87 to $0.92 per diluted share, an increase of
43% to 51% over prior year based on approximately 115.4 million
shares outstanding. ev3's adjusted net earnings per share
guidance excludes estimated amortization expense of approximately
$26.0 million, non-cash stock-based compensation of approximately
$15.5 million, and charges relating to the estimated change in fair
value of the future contingent consideration associated with the
Chestnut acquisition of $17.2 million.
The company expects second quarter of 2010 net sales to be in
the range of $129 to $133 million, an increase of 18% to 22% over
the second quarter of 2009. At current average rates, foreign
currency exchange rate fluctuations are expected to have a minimal
impact on revenue growth in the second quarter of 2010. ev3
expects non-GAAP adjusted earnings per share to be in the range of
$0.18 to $0.21 per diluted share, based on approximately 115.1
million shares outstanding, compared to $0.14 per diluted share in
the second quarter of 2009. ev3's non-GAAP adjusted earnings
per share for the second quarter of 2010 excludes estimated
amortization expense of approximately $6.5 million, non-cash
stock-based compensation of approximately $3.9 million and charges
relating to the estimated change in fair value of the future
contingent consideration associated with the Chestnut acquisition
of $8.1 million.
Earnings Call Information
ev3 will host a conference call today, April 29, 2010, beginning
at 7:30 a.m. Central Time (8:30 a.m. Eastern Time) to review its
results of operations for the first quarter of 2010 and future
outlook, followed by a question and answer session.
The conference call will be available to interested parties
through a live audio webcast at http://ir.ev3.net, where it will be
archived and accessible for approximately 12 months. The live
dial-in number for the call is 888-680-0860 (U.S.) or
+1-617-213-4852 (International). The participant passcode is
68698365.
If you do not have access to the Internet and want to listen to
an audio replay of the conference call, dial 888-286-8010 (U.S.) or
+1-617-801-6888 (International) and enter passcode 82131781. The
audio replay will be available beginning at 10:30 a.m. Central Time
on Thursday, April 29, 2010 until Thursday, May 6, 2010.
About ev3 Inc.
Since its founding in 2000, ev3 has been dedicated to developing
breakthrough and clinically proven technologies for the
endovascular treatment of peripheral vascular and neurovascular
diseases. The company offers a comprehensive portfolio of
treatment options, including the primary interventional
technologies used today -- plaque excision systems, peripheral
angioplasty balloons, stents, embolic protection devices, liquid
embolics, embolization coils, flow diversion, thrombectomy
catheters and occlusion balloons. More information about the
company and its products can be found at http://www.ev3.net.
ev3, the ev3 logo, TurboHawk, TrailBlazer, PowerCross, Pipeline
and Solitaire are trademarks of ev3 Inc. and its subsidiaries,
registered in the U.S. and other countries. All other
trademarks and trade names referred to in this press release are
the property of their respective owners.
Forward-Looking Statements
Statements contained in this press release that relate to
future, not past, events are forward-looking statements under the
Private Securities Litigation Reform Act of
1995. Forward-looking statements often can be identified by
words such as "expect," "anticipate," "intend," "will," "may,"
"believe," "could," "continue," "future," "estimate," "outlook,"
"guidance," or the negative of these words, other words of similar
meaning or the use of future dates. Forward-looking statements
by their nature address matters that are, to different degrees,
uncertain. Uncertainties and risks may cause ev3's actual
results to be materially different than those expressed in or
implied by ev3's forward-looking statements. For ev3,
particular uncertainties and risks include, among others, ev3's
future operating results and financial performance, fluctuations in
foreign currency exchange rates, the effect of global economic
conditions, the timing of regulatory approvals and introduction of
new products, market acceptance of new products, success of
clinical testing, availability of third party reimbursement, impact
of competitive products and pricing, the effect of regulatory
actions and the cost and effect of changes in tax and other
legislation. More detailed information on these and additional
factors that could affect ev3's actual results are described in
ev3's filings with the Securities and Exchange Commission,
including its most recent annual report on Form 10-K. Except
as required by law, ev3 undertakes no obligation to publicly update
its forward-looking statements.
Use of Non-GAAP Financial Measures
To supplement ev3's consolidated financial statements
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), ev3 uses certain non-GAAP financial measures in
this release. Reconciliations of the non-GAAP financial measures
used in this release to the most comparable U.S. GAAP measures for
the respective periods can be found in tables later in this release
immediately following the detail of net sales by
geography. Non-GAAP financial measures have limitations as
analytical tools and should not be considered in isolation or as a
substitute for ev3's financial results prepared in accordance with
GAAP.
|
ev3 Inc.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Dollars in thousands, except per share amounts)
|
(unaudited)
|
|
|
For the Three Months Ended
|
|
April 4,
2010
|
April 5,
2009
|
Net sales
|
$ 123,854
|
$ 100,395
|
|
|
|
Operating expenses:
|
|
|
Cost of goods sold (a)
|
29,227
|
30,988
|
Sales, general and administrative (a)
|
61,827
|
55,648
|
Research and development (a)
|
13,839
|
11,578
|
Amortization of intangible assets
|
6,656
|
5,828
|
Contingent consideration
|
2,498
|
--
|
Total operating expenses
|
114,047
|
104,042
|
|
|
|
Income (loss) from operations
|
9,807
|
(3,647)
|
|
|
|
Other expense (income):
|
|
|
Gain on investments, net
|
--
|
(4,067)
|
Interest expense, net
|
197
|
213
|
Other expense, net
|
354
|
2,208
|
Income (loss) before income taxes
|
9,256
|
(2,001)
|
|
|
|
Income tax benefit
|
(608)
|
(192)
|
Net income (loss)
|
$ 9,864
|
$ (1,809)
|
|
|
|
Earnings per share:
|
|
|
Net income (loss) per common share:
|
|
|
Basic
|
$ 0.09
|
$ (0.02)
|
Diluted
|
$ 0.09
|
$ (0.02)
|
|
|
|
Weighted average shares outstanding:
|
|
|
Basic
|
112,674,997
|
105,030,020
|
Diluted
|
114,386,308
|
105,030,020
|
|
|
|
|
|
|
(a) Includes stock-based compensation
charges of:
|
|
Cost of goods sold
|
$ 142
|
$ 245
|
Sales, general and administrative
|
2,864
|
3,098
|
Research and development
|
308
|
368
|
|
$ 3,314
|
$ 3,711
|
|
|
ev3 Inc.
|
CONSOLIDATED BALANCE SHEETS
|
(Dollars in thousands, except per share amounts)
|
(unaudited)
|
|
|
|
|
April 4,
2010
|
December 31,
2009
|
|
|
|
Assets
|
|
|
Current assets
|
|
|
Cash and cash equivalents
|
$ 116,801
|
$ 98,050
|
Accounts receivable, less allowance of $6,843 and $7,260,
respectively
|
87,454
|
90,711
|
Inventories, net
|
46,138
|
45,054
|
Prepaid expenses and other current assets
|
9,736
|
6,645
|
Total current assets
|
260,129
|
240,460
|
|
|
|
Restricted cash
|
4,187
|
4,346
|
Property and equipment, net
|
27,909
|
29,159
|
Goodwill
|
367,575
|
367,486
|
Intangible assets, net
|
248,473
|
254,288
|
Other assets
|
509
|
550
|
Total assets
|
$ 908,782
|
$ 896,289
|
|
|
|
Liabilities and stockholders' equity
|
|
|
Current liabilities
|
|
|
Current portion of long-term debt
|
$ 2,500
|
$ 2,500
|
Accounts payable
|
14,375
|
16,737
|
Accrued compensation and benefits
|
24,662
|
32,239
|
Accrued liabilities
|
24,892
|
22,453
|
Total current liabilities
|
66,429
|
73,929
|
|
|
|
Long-term debt
|
3,333
|
3,958
|
Other long-term liabilities
|
66,425
|
63,908
|
Total liabilities
|
136,187
|
141,795
|
|
|
|
Stockholders' equity
|
|
|
Preferred stock, $0.01 par value, 100,000,000 shares authorized,
none issued
and outstanding as of April 4, 2010 and December 31,
2009
|
--
|
--
|
Common stock, $0.01 par value, 300,000,000 shares
authorized, 112,956,788 and
112,345,500 shares issued and outstanding as of April 4,
2010 and December 31, 2009,
respectively
|
1,130
|
1,123
|
Additional paid-in capital
|
1,836,789
|
1,828,655
|
Accumulated deficit
|
(1,064,880)
|
(1,074,744)
|
Accumulated other comprehensive loss
|
(444)
|
(540)
|
Total stockholders' equity
|
772,595
|
754,494
|
Total liabilities and stockholders' equity
|
$ 908,782
|
$ 896,289
|
|
|
ev3 Inc.
|
SELECTED NET SALES INFORMATION
|
(Dollars in thousands)
|
(unaudited)
|
|
|
|
|
|
|
NET SALES BY SEGMENT
|
For the Three Months Ended
|
|
|
|
April 4,
2010
|
April 5,
2009
|
% change
|
|
|
Peripheral vascular:
|
|
|
|
|
|
Plaque excision*
|
$ 20,485
|
$ 18,308
|
12%
|
|
|
Stents
|
29,873
|
28,174
|
6%
|
|
|
Thrombectomy and embolic protection
|
9,445
|
8,047
|
17%
|
|
|
Procedural support and other
|
14,974
|
11,673
|
28%
|
|
|
Total peripheral vascular
|
74,777
|
66,202
|
13%
|
|
|
|
|
|
|
|
|
Neurovascular:
|
|
|
|
|
|
Embolic products and stents
|
32,470
|
19,547
|
66%
|
|
|
Neuro access and delivery products
|
16,607
|
14,646
|
13%
|
|
|
Total neurovascular
|
49,077
|
34,193
|
44%
|
|
|
|
|
|
|
|
|
Total net sales
|
$ 123,854
|
$ 100,395
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES BY GEOGRAPHY
|
For the Three Months Ended
|
|
|
|
April 4,
2010
|
April 5,
2009
|
% change
|
|
|
United States
|
$ 72,957
|
$ 61,654
|
18%
|
|
|
International
|
50,897
|
38,741
|
31%
|
|
|
|
|
|
|
|
|
Total net sales
|
$ 123,854
|
$ 100,395
|
23%
|
|
|
|
|
|
|
|
|
* Formerly referred to as atherectomy
|
|
|
ev3 Inc.
NON-GAAP FINANCIAL MEASURES
To supplement ev3's consolidated financial statements prepared
in accordance with GAAP, ev3 uses certain non-GAAP financial
measures in this release. Reconciliations of the non-GAAP
financial measures used in this release to the most comparable U.S.
GAAP measures for the respective periods can be found in the tables
below. In addition, an explanation of the manner in which
ev3's management uses these non-GAAP measures to conduct and
evaluate its business, the economic substance behind management's
decision to use these non-GAAP measures, the substantive reasons
why management believes that these non-GAAP measures provide useful
information to investors, the material limitations associated with
the use of these non-GAAP measures and the manner in which
management compensates for those limitations is included following
the reconciliation tables below.
ev3 Inc.
|
RECONCILIATION OF NET SALES TO
NON-GAAP NET SALES ON A CONSTANT CURRENCY
BASIS
|
(Dollars in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
April 4, 2010
|
April 5, 2009
|
|
|
|
|
Net sales, as reported
|
Foreign
exchange
impact as
compared to
prior period
|
Net sales
on a
constant currency basis
|
Net sales, as reported
|
%
change of
net sales,
as
reported
|
%
change on
a constant currency
basis
|
|
Net sales
|
|
|
|
|
|
|
|
Peripheral vascular:
|
|
|
|
|
|
|
|
Plaque excision
|
$ 20,485
|
$ (65)
|
$ 20,420
|
$ 18,308
|
12%
|
12%
|
|
Stents
|
29,873
|
(550)
|
29,323
|
28,174
|
6%
|
4%
|
|
Thrombectomy and embolic protection
|
9,445
|
(130)
|
9,315
|
8,047
|
17%
|
16%
|
|
Procedural support and other
|
14,974
|
(246)
|
14,728
|
11,673
|
28%
|
26%
|
|
Total peripheral vascular
|
74,777
|
(991)
|
73,786
|
66,202
|
13%
|
11%
|
|
|
|
|
|
|
|
|
|
Neurovascular:
|
|
|
|
|
|
|
|
Embolic products and stents
|
32,470
|
(1,291)
|
31,179
|
19,547
|
66%
|
60%
|
|
Neuro access and delivery products
|
16,607
|
(587)
|
16,020
|
14,646
|
13%
|
9%
|
|
Total neurovascular
|
49,077
|
(1,878)
|
47,199
|
34,193
|
44%
|
38%
|
|
|
|
|
|
|
|
|
|
Total net sales
|
$ 123,854
|
$ (2,869)
|
$ 120,985
|
$ 100,395
|
23%
|
21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ev3 Inc.
|
RECONCILIATION OF NET SALES BY GEOGRAPHY TO
NON-GAAP NET SALES BY GEOGRAPHY ON A CONSTANT CURRENCY
BASIS
|
(Dollars in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
April 4, 2010
|
April 5, 2009
|
|
|
|
|
Net sales, as reported
|
Foreign
exchange
impact as compared to
prior period
|
Net sales
on a
constant currency
basis
|
Net sales, as reported
|
%
change of
net sales, as reported
|
%
change on
a constant currency
basis
|
|
United States
|
$ 72,957
|
$ --
|
$ 72,957
|
$ 61,654
|
18%
|
18%
|
|
International
|
50,897
|
(2,869)
|
48,028
|
38,741
|
31%
|
24%
|
|
|
|
|
|
|
|
|
|
Total net sales
|
$ 123,854
|
$ (2,869)
|
$ 120,985
|
$ 100,395
|
23%
|
21%
|
|
|
|
ev3 Inc.
RECONCILIATION OF NET INCOME (LOSS) TO
NON-GAAP ADJUSTED NET INCOME
(Dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
For the Three Months Ended
|
|
April 4,
2010
|
April 5,
2009
|
Net income (loss), as reported
|
$ 9,864
|
$ (1,809)
|
|
|
|
Amortization expense
|
6,656
|
5,828
|
Stock-based compensation
|
3,314
|
3,711
|
Contingent consideration
|
2,498
|
--
|
FoxHollow lease reserve adjustment
|
--
|
3,421
|
Realized gain on investment
|
--
|
(4,081)
|
|
|
|
Non-GAAP adjusted net income
|
$ 22,332
|
$ 7,070
|
|
|
|
|
|
|
ev3 Inc.
RECONCILIATION OF NET INCOME (LOSS) PER DILUTED
SHARE
TO NON-GAAP ADJUSTED NET EARNINGS PER DILUTED
SHARE
(unaudited)
|
|
|
|
|
|
For the Three Months Ended
|
|
April 4,
2010
|
April 5,
2009
|
Net income (loss) per diluted share, as
reported
|
$ 0.09
|
$ (0.02)
|
|
|
|
Amortization expense
|
0.06
|
0.06
|
Stock-based compensation
|
0.03
|
0.04
|
Contingent consideration
|
0.02
|
--
|
FoxHollow lease reserve adjustment
|
--
|
0.03
|
Realized gain on investment
|
--
|
(0.04)
|
|
|
|
Non-GAAP adjusted net earnings
per diluted share
|
$ 0.20
|
$ 0.07
|
|
|
|
Weighted average diluted shares outstanding
|
114,386,308
|
105,157,042
|
|
|
ev3 Inc.
RECONCILIATION OF ESTIMATED NET EARNINGS PER DILUTED
SHARE TO
ESTIMATED NON-GAAP ADJUSTED NET EARNINGS PER DILUTED
SHARE
(unaudited)
|
|
|
|
|
|
For the Three Months Ended
|
For the Twelve Months Ended
|
|
July 4,
2010
Estimate (Low)
|
July 4,
2010
Estimate (High)
|
December 31,
2010
Estimate (Low)
|
December 31,
2010
Estimate (High)
|
Estimated net earnings per diluted share
|
$ 0.02
|
$ 0.05
|
$ 0.36
|
$ 0.41
|
Amortization expense
|
0.06
|
0.06
|
0.23
|
0.23
|
Stock-based compensation
|
0.03
|
0.03
|
0.13
|
0.13
|
Contingent consideration
|
0.07
|
0.07
|
0.15
|
0.15
|
|
|
|
|
|
Estimated non-GAAP adjusted
net earnings per diluted share
|
$ 0.18
|
$ 0.21
|
$ 0.87
|
$ 0.92
|
|
|
|
|
|
Estimated weighted average diluted shares outstanding
|
115,100,000
|
115,100,000
|
115,400,000
|
115,400,000
|
Use and Economic Substance of Non-GAAP Financial Measures
Used by ev3 and Usefulness of Such Non-GAAP Financial Measures to
Investors
ev3 uses the non-GAAP financial measures described above as
supplemental measures of performance and believes these measures
facilitate operating performance comparisons from period to period
and company to company by factoring out potential differences
caused by acquisitions, dispositions, charges not related to ev3's
regular, ongoing business, variations in capital structure, tax
positions, depreciation, non-cash charges and certain large and
unpredictable charges. ev3's management uses the non-GAAP financial
measures used in this release to analyze the underlying trends in
ev3's business, assess the performance of ev3's core operations,
establish operational goals and forecasts that are used in
allocating resources and evaluate ev3's performance period over
period and in relation to its competitors' operating
results. Additionally, ev3's management is evaluated on the
basis of some of these non-GAAP financial measures when determining
achievement of their incentive compensation performance
targets.
ev3 believes that presenting the non-GAAP financial measures
used in this release provides investors greater transparency to the
information used by ev3's management for its financial and
operational decision-making and allows investors to see ev3's
results "through the eyes" of management. ev3 also believes that
providing this information better enables ev3's investors to
understand ev3's operating performance and evaluate the methodology
used by ev3's management to evaluate and measure such
performance. ev3's management believes that non-GAAP financial
measures are useful to investors to evaluate ev3's performance
period over period and in relation to its competitors' operating
results. Because ev3 historically has reported some of these
non-GAAP results to the investment community, management also
believes that the disclosure of these non-GAAP measures provides
consistency in ev3's financial reporting and facilitates investors'
understanding of ev3's historic operating trends by providing an
additional basis for comparisons to prior periods.
The following is an explanation of each of the items that
management excluded from one or more of the non-GAAP financial
measures used in this release. ev3's management believes that
in order to properly understand the underlying business trends and
performance of ev3's ongoing operations, management has found and
investors may find it useful to consider excluding the following
items recorded for the first quarter of 2010 and 2009:
-
Foreign exchange impact and estimated foreign exchange
impact. The impact of foreign exchange rates is highly
variable and difficult to predict. The foreign exchange impact
is the impact from foreign exchange rates on current period sales
compared to prior period sales using the prior period's foreign
exchange rates. Estimated foreign exchange impact is the
estimated impact of foreign exchange rates on future net sales
compared to prior period net sales using estimated future period
foreign exchange rates.
-
Contingent consideration. In the second quarter of
2009, ev3 acquired Chestnut Medical Technologies, Inc. (Chestnut).
Under the terms of the agreement and plan of merger with Chestnut,
ev3 made an initial closing payment in the amount of $79.4
million. In addition to the initial closing payment, ev3 may
be obligated to make an additional contingent consideration payment
of up to $75.0 million if the Food and Drug Administration issues a
letter granting pre-market approval for the commercialization of
Chestnut's Pipeline Embolization Device in the United States
pursuant to an indication to treat intracranial aneurysms on or
before December 31, 2012. At each reporting date, ev3
remeasures the contingent consideration at fair value until the
contingency is resolved. The change in fair value of $2.5
million for the first quarter of 2010 was recognized in ev3's
consolidated statements of operations.
-
FoxHollow lease reserve adjustment. In the first
quarter of 2009, ev3 recorded a $3.4 million adjustment to its
lease reserve for leases acquired in connection with the FoxHollow
acquisition. This reserve adjustment is not indicative of
ev3's ongoing operating performance.
-
Realized gain on the divestiture of non-strategic investment
assets. In the first quarter of 2009, ev3 recorded a gain
of $4.1 million on the sale of certain non-strategic investment
assets. This gain is not indicative of ev3's ongoing operating
performance.
-
Non-cash stock-based compensation. ev3 excludes
stock-based compensation expense from its non-GAAP financial
measures primarily because such expense, while constituting an
ongoing and recurring expense, is not an expense that requires cash
settlement and is not used by ev3's management to assess the core
profitability of ev3's business operations.
-
Amortization expense. ev3 excludes amortization
expense from its non-GAAP financial measures primarily because such
expense, while constituting an ongoing and recurring expense, is
not an expense that requires cash settlement and is not used by
ev3's management to assess the core profitability of ev3's business
operations.
Material Limitations Associated with the Use of Non-GAAP
Financial Measures and Manner in which ev3 Compensates for these
Limitations
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as a substitute for
ev3's financial results prepared in accordance with GAAP. Some of
the limitations associated with ev3's use of these non-GAAP
financial measures are as follows:
-
Items such as amortization expense, stock-based compensation,
and contingent consideration do not directly affect ev3's cash flow
position; however, such items reflect economic costs to ev3 and are
not reflected in ev3's "non-GAAP adjusted net income" or "non-GAAP
adjusted net earnings per share," and therefore these non-GAAP
measures do not reflect the full economic effect of these
items.
-
Items such as the FoxHollow lease reserve adjustment and
realized gain on the divestiture of non-strategic investment assets
are items that do not reflect ev3's ongoing business activities.
The effect of these items is not included in ev3's "non-GAAP
adjusted net income" or "non-GAAP adjusted net earnings per share."
However, these items involve economic costs that are not reflected
in the non-GAAP measures.
-
Non-GAAP financial measures are not based on any comprehensive
set of accounting rules or principles and therefore other companies
may calculate similarly titled non-GAAP financial measures
differently than ev3, limiting the usefulness of those measures for
comparative purposes.
-
ev3's management exercises judgment in determining which types
of charges or other items should be excluded from the non-GAAP
financial measures ev3 uses.
ev3 compensates for these limitations by relying primarily upon
its GAAP results and only using non-GAAP financial measures on a
supplemental basis. ev3 provides full disclosure of each
non-GAAP financial measure ev3 uses and detailed reconciliations of
each non-GAAP measure to its most directly comparable GAAP
measure. ev3 encourages investors to review these
reconciliations. ev3 qualifies its use of non-GAAP financial
measures with cautionary statements as to their limitations.
CONTACT: ev3 Inc.
INVESTORS and MEDIA:
Julie Tracy, Sr. Vice President, Chief Communications Officer
(949) 680-1375
jtracy@ev3.net
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