Edwards Lifesciences Corp. (NYSE:EW) posted fourth-quarter sales of $346.7 million for the three months ended Dec. 31, 2009, up 11.9 percent compared with $309.7 million during the same period last year. Net income rose 24.9 percent to $47.6 million, compared with $38.1 million during Q4 2008:
Edwards Lifesciences Reports Strong Fourth Quarter Results
Company Achieves Double Digit Sales Growth
2009 Transcatheter Heart Valve Sales More Than Double to $112 Million
IRVINE, CA, February 04, 2010 — Edwards Lifesciences Corporation (NYSE: EW), a world leader in products and technologies to treat advanced cardiovascular disease, today reported net income for the quarter ended December 31, 2009 of $47.6 million, or $0.80 per diluted share, compared to net income of $38.1 million, or $0.66 per diluted share, for the same period in 2008. Excluding special items detailed in the reconciliation table below, fourth quarter 2009 net income was $49.8 million, or $0.84 per diluted share, compared to net income of $45.2 million, or $0.78 per diluted share, for the same period last year. Fourth quarter diluted earnings per share increased 21.2 percent over last year. Excluding special items, diluted earnings per share grew 7.7 percent.
Fourth quarter net sales increased 11.9 percent to $346.7 million. Underlying(1) sales growth was 10.2 percent, which excludes a $16.6 million positive impact from foreign exchange and an $11.7 million reduction primarily from divested products.
“The fourth quarter caps a very strong year of financial results and progress on our exciting new technologies,” said Michael A. Mussallem, Edwards Lifesciences’ chairman and CEO. “We are particularly proud to have brought revolutionary transcatheter technology to so many previously underserved patients in only our second year since launch. In 2009, we more than doubled our SAPIEN sales to $112 million.”
“This quarter’s results were also highlighted by U.S. share gains in surgical heart valve therapy. In addition, we continued to make steady progress on our next generation heart valve systems.”
For the fourth quarter, the company reported Heart Valve Therapy sales of $188.3 million, representing 25.8 percent growth over last year. Underlying sales grew 15.4 percent, excluding an $8.8 million contribution from foreign exchange. Results were driven by strong transcatheter heart valve sales and recent U.S surgical product introductions.
“In the U.S., we continued to see strong adoption of our premium Magna Ease aortic valve. Additionally, we achieved transcatheter heart valve sales of $34.9 million, driven by robust demand in Europe and continued international expansion,” said Mussallem.
Critical Care sales were $120.8 million for the quarter, representing 2.2 percent growth over last year. Underlying sales grew 7.2 percent over prior year, excluding an $11.3 million impact from the divested hemofiltration product line, partially offset by a $5.9 million contribution from foreign exchange. Growth was driven by strong sales of FloTrac systems, pressure monitoring products and PreSep oximetry catheters.
Cardiac Surgery Systems sales for the quarter were $23.9 million. Excluding foreign exchange, sales were relatively unchanged compared to the prior year due to the voluntary product recall discussed last quarter.
Vascular sales were $13.7 million, a decline from $18.9 million in the same quarter last year due primarily to the divestiture of the LifeStent product line.
Domestic and international sales for the fourth quarter were $140.7 million and $206.0 million, respectively.
Additional Operating Results
For the quarter, Edwards’ gross profit margin was 70.7 percent compared to 68.1 percent in the same period last year. This improvement was due primarily to product mix, which was partially offset by foreign exchange.
Selling, general and administrative expenses were $132.3 million for the quarter, or 38.2 percent of sales, compared to $120.2 million in the prior year. The increase was driven by foreign exchange and higher Heart Valve Therapy sales and marketing expenses.
Research and development expenses (R&D) for the quarter were $48.3 million, or 13.9 percent of sales. As a result of additional spending on transcatheter heart valve technology and glucose monitoring, R&D investments increased 34.9 percent compared to the prior year.
During the quarter, Edwards recorded a $3.7 million special charge related to the write-off of previously capitalized patent enforcement costs.
Free cash flow for the quarter was $45.7 million, calculated as cash from operating activities of $65.9 million, minus capital expenditures of $23.7 million, plus $3.5 million in tax payments related to a previous milestone associated with the LifeStent product line divestiture.
Total debt at December 31, 2009 was $90.3 million. Cash and cash equivalents were $334.1 million at the end of the quarter, resulting in net cash of $243.8 million.
During the quarter, the company repurchased 207,500 shares of common stock for $15.9 million.
For the twelve months ended December 31, 2009, the company recorded net income of $229.1 million, or $3.90 per diluted share, compared to $128.9 million, or $2.19 per diluted share, for 2008. Excluding special items detailed in the reconciliation table below, full year 2009 net income was $179.0 million, or $3.05 per diluted share, compared to $150.3 million, or $2.55 per diluted share, for the same period last year. For full year 2009, diluted earnings per share increased 78.1 percent over last year. Excluding special items, diluted earnings per share grew 19.6 percent.
Net sales for the year increased 6.8 percent to $1.32 billion. Underlying sales growth was 11.1 percent, which excludes a $15.2 million negative impact from foreign exchange and a $31.9 million reduction primarily from discontinued products.
Free cash flow generated for the year was $178.1 million, calculated as cash flow from operating activities of $165.3 million, minus capital expenditures of $64.0 million, plus the $39.0 million impact of terminating the company’s Japan securitization program, $22.8 million in tax payments related to the sale of the LifeStent product line, and $15.0 million related to the charitable fund contribution.
Domestic and international sales for the full year were $556.1 million and $765.3 million, respectively.
During the year, the company repurchased 1.5 million shares of common stock for $95.5 million.
“We look forward to another year of strong performance in 2010 and expect a bright future for Edwards,” said Mussallem.
“For 2010, our financial goals remain unchanged. Excluding special items, we expect to generate total sales of $1.43 to $1.50 billion, which represents 10 to 13 percent underlying growth. In addition, we anticipate increasing our gross profit margin by 50 to 100 basis points, achieving net income growth of 17 to 19 percent, and generating free cash flow of $190 to $200 million.
“Finally, we estimate that first quarter 2010 diluted EPS will be between $0.77 and $0.81, and between $3.50 and $3.60 for the full year.”