Edwards Lifesciences Corporation (Edwards Lifesciences), a cardiovascular devices company, has reported net sales of $313.5 million for the first quarter of 2009, up 5.6%, compared with the net sales of $296.8 million in the year-ago quarter. It has also reported a net income of $60.5 million, or $1.03 per diluted share, for the first quarter of 2009, compared with the net income of $18.2 million, or $0.31 per diluted share, in the year-ago quarter.
Excluding special items detailed in the reconciliation table below, first quarter 2009 net income was $41 million, or $0.70 per diluted share, compared to net income of $33.2 million, or $0.56 per diluted share, for the same period last year. First quarter diluted earnings per share excluding special items increased 25% over last year.
Our strong first quarter results were highlighted by robust heart valve sales and significant progress in bringing innovative products to clinicians and patients, said Michael A. Mussallem, Edwards Lifesciences’ chairman and chief executive officer. Our earnings growth was achieved while increasing our investments in research and development by more than 20% in the quarter.
For the first quarter, the company reported Heart Valve Therapy sales of $170.4 million. Underlying growth of 20.3% over prior year excluded a $5.1 million negative impact from foreign exchange. Edwards SAPIEN transcatheter heart valves sales grew to $24.6 million.
This quarter’s sales growth was driven by momentum from our transcatheter heart valves in Europe and continued share gains in surgical heart valves, said Mussallem. Based on our strong start, we now expect to achieve more than $100 million dollars in transcatheter heart valve sales this year. We are gratified that an increasing number of patients previously untreated by surgery have benefited from this technology.
Critical Care sales were $104.5 million for the quarter. Underlying growth of 1.7% over prior year excluded a $3.3 million reduction from foreign exchange. Sales of new products, particularly our FloTrac disposables, continued to grow rapidly, said Mussallem. This new product growth was substantially offset by lower hardware sales, reflecting restrained capital spending in U.S. hospitals.
We expect several upcoming product introductions, including the expansion of FloTrac to the intensive care setting to elevate growth and we remain committed to our original goal of increasing Critical Care underlying sales growth by 6 to 9% for the year, added Mussallem.
Cardiac Surgery Systems sales for the quarter were $22.5 million. Underlying growth was 8.8% over prior year excluding foreign exchange, due primarily to growth of minimally invasive surgery products.
Vascular sales were $16.1 million, a decline from $22.0 million in the same quarter last year, due primarily to the divestiture of the LifeStent product line.
Domestic and international sales for the first quarter were $134.9 million and $178.6 million, respectively.
Additional Operating Results
For the quarter, Edwards’ gross profit margin was 69.1% compared to 65.3% in the same period last year. This improvement was driven by a more profitable product mix and the favorable impact of foreign exchange hedge agreements, partially offset by Critical Care manufacturing variations.
Selling, general and administrative expenses were $121.9 million for the quarter, or 38.9% of sales, compared to $114.6 million in the prior year. The increase was due primarily to spending in Europe, the majority of which was for the Edwards SAPIEN transcatheter heart valve program, partially offset by foreign exchange.
Research and development expenses (R&D) for the quarter were $39.9 million, or 12.7% of sales. As a result of additional spending on transcatheter heart valve and glucose programs, R&D investments increased 21.3% compared to the prior year.
During the quarter, Edwards recorded a $30.8 million pre-tax special gain, including a $27.0 million milestone payment for the PMA approval specified in the LifeStent transaction.
Free cash flow for the quarter was negative $8.1 million, calculated as cash used in operating activities of $36.0 million, minus capital expenditures of $11.1 million, plus a $39.0 million impact of terminating the company’s Japan securitization program. For 2009, the company continues to expect free cash flow to be $160 to $170 million, excluding the impact of special items.
Total debt at March 31, 2009 was $123.0 million. Cash and cash equivalents were $146.7 million at the end of the quarter, resulting in net cash of $23.7 million.
During the quarter, the company repurchased 463,000 shares of common stock for $26.8 million.
We expect this year’s underlying sales growth to be between 10 to 12% and continue to project total sales at the upper end of our full year guidance of $1.24 billion to $1.30 billion, said Mussallem.
Excluding special items, we estimate that second quarter 2009 diluted earnings per share will be between $0.73 and $0.77. For full year 2009, we are increasing the low end of our diluted earnings per share estimate by $0.02 to between $2.95 and $3.03, and we remain comfortable with our goal of increasing diluted earnings per share by 15 to 19%.