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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
By: /s/ Nicholas Malden TUCSON, AZ -- 02/02/2007 -- Ventana Medical Systems, Inc. (NASDAQ: VMSI)
today reported sales of $66.1 million for the quarter ending December 31,
2006, a 22% increase over fourth quarter 2005. Net income for the fourth
quarter was $11.5 million, or $0.32 per diluted share compared with net
income of $10.6 million and $0.29 per diluted share for the same period
last year. Current period results include net expenses of $0.8 million, or
$0.02 per share in share-based compensation.
Reagents and other revenues grew 24% versus the fourth quarter of 2005,
while instrument revenues increased by 12% versus the comparable period in
2005. R&D investment was $8.3 million in the quarter, up 31% versus fourth
quarter 2005.
"Our core advanced staining business continues to perform well with strong
placements and solid consumables growth," commented Christopher Gleeson,
President and CEO. Gleeson went on to say that "the installed base of our
new primary staining system, Symphony, tripled in the quarter as expected
and we're entering 2007 with positive momentum."
YEAR-TO-DATE 2006
Net sales for the twelve months ended December 31, 2006, increased 20% to
$238.2 million from $199.1 million in 2005. Reagents and other revenues
grew by 21% year-over-year while gross margins improved 63 basis points and
R&D spending increased by 24%. Net income for the year ended December 31,
2006, was $31.6 million, or $0.87 per diluted share, compared to $25.5
million, or $0.69 per diluted share, for the twelve months ending December
31, 2005. Current year results include net expenses of $3.3 million, or
$0.09 per share for share-based compensation as a result of the adoption of
SFAS 123(R) on January 1, 2006 and $0.4 million, or $0.01 per share for
Vision transaction related expenses incurred last quarter. Results from
last year include a $5.0 million pre-tax ($3.3 million tax-effected, or
$0.09 per diluted share) non-cash charge taken to record a potential
liability associated with the on-going litigation with Cytologix.
"2006 was a productive year for Ventana," Gleeson further commented. "We
placed nearly 800 advanced staining systems and launched the Symphony
system. On the reagent side, we have successfully developed a number of
key antibodies and expanded our molecular probe and related product
capabilities. Additionally, our development teams have been working on new
software connectivity solutions to interface our systems and improve
laboratory workflow and patient sample integrity."
CALENDAR YEAR 2007 and 2008 OUTLOOK
The Company projects 2007 revenue growth of approximately 20% and about
$1.25 in earnings per share. The 2007 earnings estimate includes the
Company's expected one-time after-tax gain on Vision shares, net of plans
to re-invest in R&D and Commercial activities focused on accelerating
certain product development and technology programs while strengthening the
global sales and support organizations.
For 2008 the Company expects revenue growth of in excess of 20% and
earnings consistent with currently published estimate range of $1.48 to
$1.54.
USE OF NON-GAAP FINANCIAL MEASURES
SFAS 123(R) requires the Company to estimate the cost of certain forms of
share-based compensation, including employee stock options and awards under
the Company's employee stock purchase plan (ESPP Plan), and to record a
commensurate expense in the income statement. Share-based compensation
expense is a non-cash expense that varies in amount from period to period
and is affected by market forces that are difficult to predict and are not
within the control of management, such as the price of the Company's common
stock.
In 2006, the Company incurred $0.6 million of expenses in connection with
its proposed acquisition of Vision Systems Limited.
In 2005, the Company recorded a $5.0 million special charge for potential
patent infringement damages associated with its Cytologix litigation.
The Company excludes these items from its internal operating forecasts and
models and is providing here non-GAAP gross margin, non-GAAP research and
development expenses, non-GAAP selling, general and administration
expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP
diluted earnings per share, all of which excludes all share-based
compensation expense, to permit additional analysis of Company performance.
The Company believes these non-GAAP measures are useful to investors
because they enhance the understanding of historical financial performance
and comparability between periods. The Company uses these non-GAAP measures
to manage and assess the profitability of its business and does not
consider these expenses in managing its operations. The determination of
the above non-GAAP measures might not be the same as similarly titled
measures used by other companies, and it should not be construed as a
substitute for gross margin; research and development expenses; selling,
general and administrative expenses; operating income; net income and
diluted earnings per share determined in accordance with GAAP. There are
limitations associated with using non-GAAP measures, including that they
exclude financial information that some may consider important in
evaluating our performance. The Company compensates for this by presenting
information on both a GAAP and non-GAAP basis for investors and providing
reconciliations of the GAAP and non-GAAP results.
CONFERENCE CALL
Ventana will hold a conference call to discuss fourth quarter 2006 results
at 10:00 a.m. eastern on Friday, February 2, 2007. The call can be
accessed live and will be available for replay over the Internet via
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=79080&eventID=1464030
..
ABOUT VENTANA
Ventana develops, manufactures, and markets instrument/reagent systems that
automate tissue preparation and slide staining in clinical histology and
drug discovery laboratories worldwide. The Company's clinical systems are
important tools used in the diagnosis and treatment of cancer and
infectious diseases. Ventana's drug discovery systems are used to
accelerate the discovery of new drug targets and evaluate the safety of new
drug compounds.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements within the meaning
of the Federal Securities laws. These forward-looking statements include
our expected revenue growth and profitability for 2007 and 2008. These
forward-looking statements are subject to numerous risks and uncertainties,
and actual results may vary materially. We may not achieve anticipated
future operating results, and product development activities may not be as
successful as we expect in terms of the timing of product availability to
the market or customer rates of adoption. Other risks and uncertainties
include risks associated with the development, manufacturing, marketing,
and sale of medical products, competitive factors, general economic
conditions, legal disputes, government actions, and those other risks and
uncertainties contained in our most recent Annual Report filed with the
Securities and Exchange Commission (SEC) on Form 10-K, and all subsequent
SEC filings. Copies of filings made with the SEC are available through the
SEC's electronic data gathering analysis retrieval system (EDGAR) at
www.sec.gov. We undertake no obligation following the date of this release
to update or revise our forward-looking statements or to update the reasons
actual results could differ materially from those anticipated in
forward-looking statements. We caution you not to place undue reliance
upon any such forward-looking statements, which speak only as of the date
such statements are made. Past performance is not indicative of future
results. We cannot guarantee any future operating results, activity,
performance, or achievement.
Visit the Ventana Medical Systems, Inc., website at www.ventanamed.com.
FINANCIAL TABLES FOLLOW:
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Securities Exchange Act of 1934.
Date of Report: February 02, 2007
(Date of earliest event reported)
Ventana Medical Systems, Inc.
(Exact name of registrant as specified in its charter)
AZ
(State or other jurisdiction
of incorporation)
000-20931
(Commission File Number)
94-2976937
(IRS Employer
Identification Number)
1910 Innovation Park Drive
(Address of principal executive offices)
85755
(Zip Code)
(520) 887-2155
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Item 9.01. Financial Statements and Exhibits
(a) Financial statements:
None
(b) Pro forma financial information:
None
(c) Shell company transactions:
None
(d) Exhibits
99.1 Press Release of Ventana Medical Systems, Inc. dated February 02, 2007
Dated: February 02, 2007
VENTANA MEDICAL SYSTEMS, INC.
Nicholas Malden
Senior Vice President, Chief Financial Officer and Secretary
Exhibit No.
Description
99.1
Press Release of Ventana Medical Systems, Inc. dated February 02, 2007
VENTANA MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
December 31,
--------------------
2006 2005
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 31,761 $ 17,519
Short-term investments 68,325 27,892
Trade accounts receivable, net of allowance for
doubtful accounts of $1,716 and $1,536,
respectively 47,455 38,170
Inventories, net 18,277 12,888
Deferred tax assets 2,502 7,969
Prepaids and other current assets 5,646 2,412
--------- ---------
Total current assets 173,966 106,850
Property and equipment, net 65,405 54,195
Deferred tax assets, net of current portion 14,195 13,056
Long-term investments 1,187 6,209
Goodwill 2,804 2,804
Intangible assets, net 6,349 8,779
Capitalized software development costs, net 3,131 2,741
Other assets 1,593 1,898
--------- ---------
Total assets $ 268,630 $ 196,532
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,634 $ 10,660
Other current liabilities 36,487 30,954
--------- ---------
Total current liabilities 52,121 41,614
Long-term debt 2,069 1,996
Other long-term liabilites 661 618
Commitments and Contingencies
Stockholders' equity
Common stock -- $.001 par value; 50,000 shares
authorized, 37,490 and 36,226 shares issued and
outstanding at December 31, 2006 and 2005,
respectively 37 36
Additional paid-in-capital 234,149 199,580
Deferred stock-based
compensation - (382)
Accumulated income 43,206 11,628
Accumulated other comprehensive income (loss) 10,252 (783)
Treasury stock -- 2,570 and 2,140 shares, at cost,
at December 31, 2006 and 2005, respectively (73,865) (57,775)
--------- ---------
Total stockholders' equity 213,779 152,304
--------- ---------
Total liabilities and stockholders'
equity $ 268,630 $ 196,532
========= =========
VENTANA MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Sales:
Reagents and other $ 55,862 $ 45,115 $ 205,474 $ 169,739
Instruments 10,240 9,139 32,749 29,393
--------- --------- --------- ---------
Total net sales 66,102 54,254 238,223 199,132
Cost of goods sold 17,142 13,807 58,117 49,832
--------- --------- --------- ---------
Gross margin 48,960 40,447 180,106 149,300
Operating expenses:
Research and development 8,332 6,345 31,871 25,657
Selling, general and
administrative 23,947 18,598 100,729 79,491
Amortization of intangible assets 453 590 2,291 2,121
Special charge - - - 5,000
--------- --------- --------- ---------
Income from operations 16,228 14,914 45,215 37,031
Interest and other income 206 301 2,355 961
--------- --------- --------- ---------
Income before taxes 16,434 15,215 47,570 37,992
Provision for income taxes 4,932 4,632 15,992 12,504
--------- --------- --------- ---------
Net income $ 11,502 $ 10,583 $ 31,578 $ 25,488
========= ========= ========= =========
Net income per common share:
--Basic $ 0.33 $ 0.31 $ 0.92 $ 0.74
========= ========= ========= =========
--Diluted $ 0.32 $ 0.29 $ 0.87 $ 0.69
========= ========= ========= =========
Shares used in computing net income
per common share:
--Basic 34,643 34,060 34,324 34,349
========= ========= ========= =========
--Diluted 36,383 36,359 36,210 36,761
========= ========= ========= =========
VENTANA MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Years Ended December 31,
----------- -----------
2006 2005
----------- -----------
Net income $ 31,578 $ 25,488
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 16,544 13,676
Share-based compensation expense related to
employee stock options and employee stock
purchases 4,973 -
Deferred income taxes (2,953) (3,125)
Tax benefit from employee stock option plans 11,965 9,064
Non-cash litigation, intangibles and property
and equipment charges - 5,000
Amortization of deferred compensation - 59
Excess tax benefits from share-based
compensation (10,691) -
Change in operating assets and liabilities:
Accounts receivable (9,285) (4,878)
Inventory (5,389) (2,011)
Other assets (2,498) (955)
Accounts payable 3,960 (108)
Other liabilities 5,856 174
----------- -----------
Net cash provided by operating activities 44,060 42,384
Cash flows from investing activities:
Purchase of property and equipment (24,451) (18,071)
Purchase of intangible assets (916) (3,453)
Purchases of investments (189,601) (59,712)
Proceeds from sale of investments 172,288 46,635
----------- -----------
Net cash used in investing activities (42,680) (34,601)
Cash flows from financing activities:
Issuance of common stock 15,999 13,657
Purchases of common stock for treasury (14,119) (36,290)
Excess tax benefits from share-based
compensation 10,691 -
Repayments of debt (487) (215)
----------- -----------
Net cash provided by (used in) financing
activities 12,084 (22,848)
Effect of exchange rate change on cash and cash
equivalents 778 (770)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 14,242 (15,835)
Cash and cash equivalents, beginning of period 17,519 33,354
----------- -----------
Cash and cash equivalents, end of period $ 31,761 $ 17,519
=========== ===========
Supplemental cash flow information:
Income taxes paid $ 7,614 $ 1,994
Interest paid $ 112 $ 113
Non-cash investing and financing activities:
Tendered common stock for stock option
exercises $ 1,971 $ 359
Payments related to business and
intangible acquisitions $ - $ 350
Reconciliation of Gross Margin to Non-GAAP Gross Margin
Three Months Ended Twelve Months Ended December 31, December 31, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Gross margin, as reported $ 48,960 $ 40,447 $ 180,106 $ 149,300 Share-based compensation 64 - 205 - --------- --------- --------- --------- Non-GAAP Gross margin $ 49,024 $ 40,447 $ 180,311 $ 149,300 ========= ========= ========= =========
Reconciliation of Research and Development Expenses to Non-GAAP Research and Development Expenses
Three Months Twelve Months Ended Ended December 31, December 31, ----------------- ----------------- 2006 2005 2006 2005 -------- -------- -------- -------- Research and development, as reported $ 8,332 $ 6,345 $ 31,871 $ 25,657 Share-based compensation 251 17 1,042 86 -------- -------- -------- -------- Non-GAAP Research and development $ 8,081 $ 6,328 $ 30,829 $ 25,571 ======== ======== ======== ========
Reconciliation of Selling, General and Administrative Expenses to Non-GAAP Selling, General and Administrative Expenses
Three Months Ended Twelve Months Ended December 31, December 31, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Selling, general and administrative, as reported $ 23,947 $ 18,598 $ 100,729 $ 79,491 Share-based compensation 861 - 3,726 - Vision-related acquisition costs - - 608 - --------- --------- --------- --------- Non-GAAP Selling, general and administrative $ 23,086 $ 18,598 $ 96,395 $ 79,491 ========= ========= ========= =========
Reconciliation of Income from Operations to Non-GAAP Income from Operations
Three Months Twelve Months Ended Ended December 31, December 31, ----------------- ----------------- 2006 2005 2006 2005 -------- -------- -------- -------- Income from operations, as reported $ 16,228 $ 14,914 $ 45,215 $ 37,031 Adjustments to reconcile income from operations to Non-GAAP Income from operations: Share-based compensation 1,176 17 4,973 86 Vision-related acquisition costs - - 608 - Cytologix litigation accrual - - - 5,000 -------- -------- -------- -------- Non-GAAP Income from operations $ 17,404 $ 14,931 $ 50,796 $ 42,117 ======== ======== ======== ========
Reconciliation of Net Income and Diluted Earnings Per Share to Non-GAAP Net Income and Non-GAAP Diluted Earnings Per Share
Twelve Months Three Months Ended Ended December 31, December 31, ------------------ ------------------ 2006 2005 2006 2005 -------- -------- -------- -------- Net income, as reported $ 11,502 $ 10,583 $ 31,578 $ 25,488 Adjustments to reconcile net income to non-GAAP net income: Share-based compensation 1,176 17 4,973 86 Vision-related acquisition costs - - 608 - Cytologix litigation accrual - - - 5,000 Income tax effects (353) (5) (1,876) (1,753) -------- -------- -------- -------- Non-GAAP net income $ 12,325 $ 10,595 $ 35,283 $ 28,821 ======== ======== ======== ======== Diluted earnings per share, as reported $ 0.32 $ 0.29 $ 0.87 $ 0.69 Adjustments to reconcile diluted earnings per share to non-GAAP diluted earnings per share: Impact of Share-based compensation, net of tax effect 0.02 - 0.09 - Impact of Vision-related acquisition costs, net of tax effect - - 0.01 - Impact of Cytologix litigation accrual, net of tax effect - - - 0.09 -------- -------- -------- -------- Non-GAAP diluted earnings per share $ 0.34 $ 0.29 $ 0.97 $ 0.78 ======== ======== ======== ========
Contact: Christopher M. Gleeson President and CEO (520) 229-3787 Nick Malden Chief Financial Officer (520) 229-3857 VENTANA MEDICAL SYSTEMS, INC. 1910 E. Innovation Park Drive Tucson, Arizona 85755 (520) 887-2155-----END PRIVACY-ENHANCED MESSAGE-----