EDEN PRAIRIE, Minn.–(BUSINESS WIRE)–Nov 6, 2012–SurModics, Inc. (Nasdaq:SRDX), a leading provider of surface modification and in vitro diagnostic technologies to the healthcare industries, today announced results for its fourth quarter and fiscal year ended September 30, 2012.
Commenting on the Company’s results, SurModics’ President and Chief Executive Officer, Gary Maharaj said, “We are pleased with our fourth quarter and full year results, which reflect the successful execution of the strategic objectives we outlined at the beginning of the year. Our focus on growing our core business generated double digit revenue growth and a doubling of our earnings per share in the fourth quarter of fiscal 2012 compared with the prior year period. Additionally, our healthy balance sheet and strong cash generation allowed us to return $55 million of cash to shareholders in the form of a major share repurchase.” Maharaj concluded, “As we move in to 2013, we are confident that our balanced approach to maximizing our core business while expanding our core offerings will support our commitment to long-term, profitable growth.”
Fourth Quarter Revenue and Earnings Summary
Revenue for the fourth quarter totaled $13.8 million, a slight decline from the $13.9 million reported in the fourth quarter of last year. Diluted earnings per share from continuing operations was $0.17 for the fourth quarter compared with $0.13 for the same period last year. Diluted earnings per share, including discontinued operations, was $0.16 for the fourth quarter. Fourth quarter results include $0.5 million of expense associated with the Company’s modified Dutch auction tender offer.
Results for the fiscal 2012 fourth quarter, when compared with the fiscal 2011 fourth quarter, benefited from in vitro diagnostic products and hydrophilic coatings revenue growth which offset a $1.5 million decline in royalty and product revenue associated with Cypher and Cypher Select Plus drug eluting stents. Excluding the impact of Cypher, non-GAAP revenue increased 12% from the year-ago period. Excluding Cypher revenue and tender offer costs, non-GAAP diluted earnings per share from continuing operations in the fourth quarter grew 111% to $0.19 compared with $0.09 last year.
Full Year Revenue and Earnings Summary
Fiscal year 2012 revenue of $51.9 million was at the upper end of our full year outlook and reflects a 2% decline from the $52.8 million reported last year. Diluted earnings per share from continuing operations declined 8% to $0.58 for fiscal 2012 compared with $0.63 for last year.
Growth in our core business helped to offset $5.4 million, or nearly 90%, of the $6.2 million revenue decline associated with Cypher. As a result, the Company’s non-GAAP revenue grew 12%. Diluted non-GAAP earnings per share from continuing operations increased 61% to $0.61 for fiscal 2012 compared with $0.38 for last year.
Medical Device Highlights
Revenue for the Medical Device business unit for the fourth quarter of fiscal 2012, which includes hydrophilic coatings and device drug delivery technologies, was $10.0 million, a decrease of 2% from the prior year period. Total Medical Device revenue for fiscal year 2012 was $37.9 million, a decrease of 4% from the prior year.
Hydrophilic coating revenue was $9.9 million in the fourth quarter, a 13% increase compared with the fourth quarter of 2011. For fiscal 2012, hydrophilic coating revenue was $36.8 million, a 10% increase from 2011.
Excluding the impact of Cypher, fourth quarter Medical Device non-GAAP revenue increased 15% from the year-ago period. Adjusting for Cypher, full year Medical Device non-GAAP revenue increased 14%. Medical Device revenue growth for the quarter and the year was driven by solid double-digit hydrophilic coating revenue growth in the neurovascular, peripheral vascular and transcatheter heart valve replacement markets.
Medical Device generated $5.2 million of operating income during the fourth quarter, a 5% increase from the year-ago period. Excluding Cypher, Medical Device non-GAAP operating income increased 52% from the year-ago period.
Medical Device operating income for fiscal year 2012 was $18.4 million, down 8% from last year. Excluding Cypher, Medical Device non-GAAP operating income increased 34% from the prior year period.
Additional Medical Device highlights during the quarter include:
Two medical device customers launched new products utilizing SurModics hydrophilic coatings
Double-digit hydrophilic royalty growth in key medical device growth segments – neurovascular, peripheral vascular and transcatheter valves
Record quarterly hydrophilic coating royalty revenue
In Vitro Diagnostics Highlights
For the fourth quarter, our In Vitro Diagnostics (“IVD”) revenue was $3.8 million, an increase of 5% compared with the fourth quarter of fiscal 2011. Total IVD revenue for fiscal year 2012 was $14.0 million, an increase of 7% from 2011.
The IVD business unit generated $1.3 million of operating income during the fourth quarter, an increase of 35% from the year ago period, driven by revenue growth and lower operating expenses. Total operating income for fiscal year 2012 was $4.5 million, an increase of 5% from the prior year period.
Additional In Vitro Diagnostic highlights during the quarter include:
Eight consecutive quarters of year-over-year product revenue growth
Record quarterly product revenue
Addition of 15 new diagnostic test kit manufacturer customers
Full-Year Fiscal 2013 Revenue and Earnings Outlook
The Company estimates revenue for fiscal 2013 to be in the range of $55.0 to $58.0 million, reflecting 6% to 12% year-over-year revenue growth. The Company estimates fully-diluted earnings to be in the range of $0.75 to $0.87 per share, reflecting 29% to 50% year-over-year earnings per share growth. Earnings per share outlook reflects 14.7 million shares outstanding and a 38% income tax rate.
SurModics will host a webcast at 5:00 p.m. ET (4:00 p.m. CT) today to discuss the fourth quarter and full fiscal year 2012 results. To access the webcast, go to the investor relations portion of the Company’s website at www.surmodics.com and click on the webcast icon. A replay of the fourth quarter conference call will be available by dialing 800-406-7325 and entering conference call ID passcode 4573630. The audio replay will be available beginning at 8:00 p.m. ET on Tuesday, November 6, until 8:00 p.m. ET on Tuesday, November 13.
About SurModics, Inc.
SurModics’ mission is to exceed our customers’ expectations and enhance the well-being of patients by providing the world’s foremost, innovative surface modification technologies and in vitro diagnostic chemical components. The Company partners with the world’s leading and emerging medical device, diagnostic and life science companies to develop and commercialize innovative products designed to improve patient diagnosis and treatment. Core offerings include surface modification coating technologies that impart lubricity, prohealing, and biocompatibility capabilities; and components for in vitro diagnostic test kits and microarrays. SurModics is headquartered in Eden Prairie, Minnesota. For more information about the Company, visit http://www.surmodics.com. The content of SurModics’ website is not part of this press release or part of any filings that the Company makes with the SEC.
Safe Harbor for Forward-Looking Statements
This press release contains forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations regarding our ability to achieve sustainable long-term growth and value creation, our expectations regarding the Company’s performance in the near- and long-term, including our revenue and earnings expectations for fiscal 2013, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including (1) reliance on third parties (including our customers and licensees) and their failure to successfully develop, obtain regulatory approval for, market and sell products incorporating our technologies may adversely affect our business operations, our ability to realize the full potential of our pipeline, and our ability to achieve our corporate goals; (2) possible adverse market conditions and possible adverse impacts on our cash flows, and (3) the factors identified under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, and updated in our subsequent reports filed with the SEC. These reports are available in the Investors section of our website at www.surmodics.com and at the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, SurModics is reporting non-GAAP financial results including non-GAAP revenue, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per share. We believe that these non-GAAP measures provide meaningful insight into our operating performance excluding certain event-specific charges, and provide an alternative perspective of our results of operations. We use non-GAAP measures, including those set forth in this release, to assess our operating performance and to determine payout under our executive compensation programs. We believe that presentation of certain non-GAAP measures allows investors to review our results of operations from the same perspective as management and our board of directors and facilitates comparisons of our current results of operations. The method we use to produce non-GAAP results is not in accordance with GAAP and may differ from the methods used by other companies. Non-GAAP results should not be regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures presented should be viewed in conjunction with both our financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP results provided for the specific periods presented, which are attached to this release.
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