Medical device tax helps push Spectranetics further into the red in Q1

Spectranetics logo

Colorado-based medical device maker Spectranetics (NSDQ:SPNC) broke out the red ink in 2013, blaming the swing partly on the newly implemented medtech excise tax, which requires that companies pay a 2.3% levy on all U.S. sales of applicable medical devices.

Spectranetics shifted from a net positive the last 4 quarters to a net loss for its 1st quarter of 2013, which the company said was due in part to the $522,000 it paid in compliance with the newly implemented tax. Other costs that slashed the company’s bottom line included $366,000 in contingent consideration and acquisition-related intangible asset amortization.

The news sent SPNC shares tumbling 8.9% on Wall Street today, where they were trading at $17.56 as of about 12:10 p.m. despite strong growth and earnings in line with analysts’ expectations.

In total Spectranetics reported $959,000 in losses, or 3¢ per share, on sales of $37.7 million during its 1st quarter of 2013. That’s a 13.2% increase in sales compared with the same period last year, when the company reported revenues of $33.3 million and $12,000 in profit.

The company lumped the medical device tax in with other 1-time costs, excluding it from adjusted earnings calculations and projections. Childs told investors this week that Spectranetics will continue to carve the tax out of its EBITDA estimates for the remainder of 2013, but will cease to do so once the tax anniversaries in January 2014.

"We recorded $0.5 million related to the medical device excise tax, which became effective on January 1, 2013," CFO Guy Childs said during a conference call with investors. "We support the ongoing effort to repeal the tax, but our outlook assumes the tax will remain in place."

The company saw healthy growth in its primary product lines, reporting a 5% boost to $17.2 million in revenue for its vascular intervention business, a 22% boost to $15.1 million for lead management products and a 20% boost to $5.4 million for its laser systems, services and other products.

Excluding 1-time costs, acquisition expenses and the impact of the medical device tax, Q1 adjusted earnings amounted to $1.8 million, compared with adjusted earnings of $2.5 million reported for the same period last year.

Spectranetics expects to pay about $2.5 million in 2013 in compliance with the medical device tax, which the company says affects "a majority of our U.S. sales." The device maker maintained previous projections for 2013, expecting a 9%-11% uptick in sales and between a net break-even or 1¢ per-diluted-share profit.

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