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Volcano Achieves 22 Percent Increase in First Quarter Revenues; Sales Growth, Margin Expansion Drive Profitability

SAN DIEGO, May 4, 2011 /PRNewswire/ -- Volcano Corporation (NASDAQ: VOLC), a leading developer and manufacturer of precision intravascular diagnosis and therapy guidance tools designed to enhance the treatment of coronary and peripheral artery disease, said today that revenues in the first quarter of 2011 increased 22 percent versus revenues in the first quarter of 2010.

For the quarter ended March 31, 2011, Volcano reported revenues of $81.0 million, compared with revenues of $66.6 million in the first quarter a year ago, and gross margin was 65.6 percent in the first quarter of 2011 compared to gross margin of 60.0 percent in the first quarter a year ago.

The company reported net income on a GAAP basis of $1.2 million, or $0.02 per diluted share, in the first quarter of 2011, versus a net loss on a GAAP basis of $4.0 million, or $0.08 per share, in the first quarter of 2010.

In a separate press release today, the company announced the signing of a supply agreement with ev3, a Covidien company, under which Volcano will supply its IVUS (Intravascular Ultrasound) technology for use in ev3's Plaque Excision Systems, which will work on Volcano's installed base of more than 5,000 multi-modality systems

"Our strong revenue performance for the quarter reflects our continued success at achieving market share gains and driving utilization. Sales of our IVUS disposables increased nearly 24 percent, driven primarily by a 40 percent increase in Japan, while FM (Functional Measurement) disposable revenues increased 39 percent, including 52 percent in the U.S. This revenue growth, combined with a very solid increase in gross margin and continued operating leverage, drove our bottom line performance in the quarter," said Scott Huennekens, president and chief executive officer.

The company said that the natural disasters in Japan negatively impacted revenues by approximately $1 million in the first quarter of 2011 and that it expects an additional combined total impact of $4 million in the second and third quarters of 2011, with activity returning to historical levels by the fourth quarter.

"In spite of the current situation in Japan, we continue to be excited about our opportunities there, not only because of our current strong position in the market, but also due to our continued product innovation," Huennekens noted. "During the first quarter, we received clearance to market both the Eagle Eye Platinum digital IVUS catheter - the most advanced digital IVUS catheter on the market - and the PrimeWire PRESTIGE FFR guide wire in Japan. In addition, we recently received regulatory approval for our VIBE RX Vascular Imaging Balloon Catheter in Japan and expect to initiate the product launch during the current quarter. We believe the VIBE, which combines imaging and therapy on a single catheter, will provide us a meaningful competitive advantage in the market," he added.

"Volcano has started 2011 with an excellent performance and we believe our one system, many solutions strategy will continue to drive growth, not only with our existing offerings, but also through a rich pipeline of products we plan to roll out over the next two years that could more than double the size of our addressable markets. Despite the short-term issues in Japan, we are on track to meet our long-term revenue, margin expansion, operating leverage and profitability goals," Huennekens said.

Guidance for 2011

The company provided updated guidance for fiscal 2011. Because of the expected $5 million impact on revenues resulting from events in Japan, the company now expects revenues for fiscal 2011 will be in the range of $342-$347 million compared to prior guidance for revenues of $347-$352 million. Its outlook for gross margins of 64-65 percent and operating expenses of 57-59 percent of revenues for the full year remain unchanged. The company now expects GAAP earnings per share on a diluted basis will be in the range of $0.19-$0.21 compared to prior guidance of $0.22-$0.24 per diluted share, with weighted average shares on a diluted basis of approximately 55.0 million shares.

Conference Call Information

The company will hold a conference call at 2 p.m., Pacific Daylight Time (5 p.m., Eastern Daylight Time), today. The teleconference can be accessed by calling (631) 291-4555, passcode 60754968, or via the company's website at Please dial in or access the webcast 10-15 minutes prior to the beginning of the call. A replay of the conference call will be available through May 11, at (706) 645-9291, passcode 60754968, and via the company's website at

About Volcano Corporation

Volcano Corporation is revolutionizing the medical device industry with a broad suite of technologies that make imaging and therapy simpler, more informative and less invasive. Our products empower physicians around the world with a new generation of analytical tools that deliver more meaningful information—using sound and light as the guiding elements. Founded in cardiovascular care and expanding into other specialties, Volcano is changing the assumption about what is possible in improving patient outcomes by combining imaging and therapy together. For more information, visit the company's website at

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements in this press release regarding Volcano's business that are not historical facts may be considered "forward-looking statements." Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that may cause Volcano's actual results to differ materially and adversely from statements contained herein. Some of the potential risks and uncertainties that could cause actual results to differ include the pace and extent of market adoption of the company's products and technologies, growth strategies, the impact of events in Japan, timing and achievement of product development milestones, outcome of ongoing litigation, the impact and benefits of market development, dependence upon third parties, product introductions, unexpected new data, safety and technical issues, market conditions and other risks inherent to medical device development and commercialization. These and additional risks and uncertainties are more fully described in Volcano's filings made with the Securities and Exchange Commission, including our recent annual  report on Form 10-K for the year ended December 31, 2010, and other filings made with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Volcano disclaims any obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events.VOLCANO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) March 31, December 31,20112010 Assets Current assets: Cash and cash equivalents

43,429 Short-term available-for-sale investments  

153,228175,283 Accounts receivable, net

60,32959,133 Inventories

43,85840,499 Prepaid expenses and other current assets

7,6346,643 Total current assets

318,053324,987 Long-term available-for-sale investments

33,28526,804 Property and equipment, net

58,44056,503 Intangible assets, net

16,55817,103 Goodwill

2,4872,487 Other non-current assets

3,9413,682$   432,764$
431,566 Liabilities and Stockholders' Equity Current liabilities: Accounts payable

3,895 Accrued compensation

13,93518,241 Accrued expenses and other current liabilities

17,10521,960 Deferred revenues

5,9735,898 Current maturities of long-term debt

7056 Total current liabilities

51,87160,050 Long-term debt

92,33491,236 Deferred revenues

2,6402,466 Other

3,1273,478 Total liabilities

149,972157,230 Stockholders' equity

282,792274,336$   432,764$
431,566VOLCANO CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(Unaudited)Three Months Ended
March 31,20112010Revenues



66,572Cost of revenues27,87426,638Gross profit53,12139,934Operating expenses:Selling, general and administrative35,46033,079Research and development13,0889,858Amortization of intangibles855573In-process research and development-32Total operating expenses49,40343,542Operating income (loss)3,718(3,608)Interest income24385Interest expense(2,005)(7)Exchange rate loss(388)(121)Other, net-(10)Income (Loss) before provision for income taxes1,568(3,661)Provision for income taxes412375Net income (loss)



(4,036)Net income (loss) per share:Basic






(0.08)Shares used in calculating net income (loss) per share:Basic51,76649,743Diluted54,21549,743VOLCANO CORPORATIONREVENUE SUMMARY(in millions)(unaudited)Three Months Ended
March 31,Percentage Change 201120102010 to 2011Medical segment:Consoles:United States

$  5.9$  4.241 %Japan


2.41.924Rest of world

1.01.3(23)Total Consoles

$  9.9$  8.715IVUS single-procedure disposables:United States

$18.2$16.412 %Japan


5.55.33Rest of world

1.71.153Total IVUS single-procedure disposables

$47.6$38.624FM single-procedure disposables:United States

$  8.1$  5.352 %Japan


5.14.028Rest of world

0.60.441Total FM single-procedure disposables


$  4.93.732 %Sub-total medical segment

$77.1$61.526Industrial segment

$  3.95.1(24)Total


SOURCE Volcano Corporation
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