Volcano Corp. Reports Operating Results (10-Q)

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Aug 03, 2012
Volcano Corp. (VOLC, Financial) filed Quarterly Report for the period ended 2012-06-30.

Volcano Corporation has a market cap of $1.47 billion; its shares were traded at around $27.03 with a P/E ratio of 98.6 and P/S ratio of 4.3.

Highlight of Business Operations:

At June 30, 2012, we had a worldwide installed base of over 7,300 consoles. We intend to grow and leverage this installed base to drive recurring sales of our single-procedure disposable catheters and guide wires. In the six months ended June 30, 2012, the sale of our single-procedure disposable catheters and guide wires accounted for $148.2 million, or 82.1% of our medical segment revenues, a $19.3 million, or 15.0% increase from the same period in 2011, in which the sale of our single-procedure disposable catheters and guide wires accounted for $128.9 million, or 81.4% of our medical segment revenues.

In the six months ended June 30, 2012 and 2011, 46.7% and 47.6%, respectively, of our revenues and 23.0% and 22.9%, respectively, of our operating expenses were denominated in various non-U.S. dollar currencies, primarily the Japanese yen, or yen, and the euro. We expect that a significant portion of our revenue and operating expenses will continue to be denominated in non-U.S. dollar currencies. As a result, we are subject to risks related to fluctuations in foreign currency exchange rates, which could affect our operating results in the future. If our yen or euro denominated sales exceed our yen or euro denominated costs, and the U.S. dollar strengthens relative to the yen or euro, there is an adverse effect on our results of operations. Conversely, if the U.S. dollar weakens relative to the yen or euro, there is a positive effect on our results of operations. For example, the average exchange rate of one U.S. dollar to yen decreased 2.9% from 81.71 in the six months ended June 30, 2011 to 79.34 in the six months ended June 30, 2012, which resulted in a net positive impact to our operational results in the amount of approximately $1.1 million. On the other hand, the average exchange rate of one euro to U.S. dollar decreased 6.4% from 1.41 in the six months ended June 30, 2011 to 1.32 in the six months ended June 30, 2012, which resulted in a net negative impact to our operational results in the amount of approximately $1.4 million.

telecommunications and other industrial companies. In the six months ended June 30, 2012, we generated $185.7 million of revenues which is composed of $180.5 million from our medical segment and $5.2 million from our industrial segment. In the six months ended June 30, 2012, 10.4% of our medical segment revenues were derived from the sale of our consoles, as compared with 12.4% in the six months ended June 30, 2011. In the six months ended June 30, 2012, IVUS single-procedure disposables accounted for 58.2% of our medical segment revenues, compared to 61.6% during the same period in 2011, while in the six months ended June 30, 2012, 23.9% of our medical segment revenues were derived from the sale of our FFR single-procedure disposables, as compared with 19.8% in the six months ended June 30, 2011. Other revenues consist primarily of revenue from rental revenues, service and maintenance revenues, other medical revenues, shipping and handling revenues, sales of distributed products, spare parts sales, and license fees.

Cash Provided by Operating Activities. Cash provided by operating activities of $28.1 million for the six months ended June 30, 2012 reflected our net income of $3.6 million, adjusted for non-cash expenses of $12.9 million of depreciation and amortization, including amortization or accretion of investment premium or discount, $7.5 million of stock-based compensation expense and $2.5 million of accretion of debt discount on convertible notes. Additional sources of cash include an increase of accounts payable, accrued compensation and accrued expenses and other liabilities of $3.8 million. Uses of cash primarily included an increase of accounts receivable of $2.8 million related to increased sales and increase of inventories of $3.4 million

Cash provided by operating activities of $14.5 million for the six months ended June 30, 2011 reflected our net income of $6.0 million, adjusted for non-cash expenses of $12.9 million of depreciation and amortization, including amortization or accretion of investment premium or discount, $6.3 million of stock-based compensation expense and $2.3 million of accretion of debt discount on convertible notes. Uses of cash primarily included decreases in accrued expenses of $2.5 million primarily related to payments made to Fukuda Denshi Co., Ltd. pursuant to an agreement which terminated our distributor relationship with them during the fourth quarter of 2010, accrued compensation of $1.8 million, and increases in inventories of $6.3 million primarily related to forecast sales demand.

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