AngioDynamics Inc (ANGO) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the AngioDynamics fiscal fourth-quarter 2011 financial earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today -- Thursday, July 14, 2011. I would now like to turn the conference over to Mr. Doug Sherk. Please go ahead, sir.

Thank you, Operator, and thank you, everyone, for joining us today for the AngioDynamics conference call to review the results of the fiscal fourth quarter and full year, which ended on March -- excuse me, May 31, 2011. The news release announcing the results crossed the wire this afternoon after the market closed and is available on the AngioDynamics website. The call is being broadcast live on the web at www.angiodynamics.com. A replay of the call will also be archived on the AngioDynamics website. Before we get started, during the course of this conference call, the Company will make projections or forward-looking statements regarding future events, including the statements about revenue and earnings for fiscal 2012.

We encourage you to review the Company's past and future filings with the SEC, including without limitation the Company's Forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in forward-looking statements. In addition, today's presentation includes certain financial measures used to better understand our business that have not been prepared in accordance with the Generally Accepted Accounting Principles, better known as GAAP.

An explanation and reconciliation of those non-GAAP measures has been provided in today's news release issued by the Company and is available on the Company's website. AngioDynamics uses non-GAAP measures to establish operational goals, and believes that non-GAAP measures may assist investors in analyzing underlying trends of the Company's business over time. Investors should consider these non-GAAP measures in addition to, not as a substitute for or superior to, financial reporting measures prepared in accordance with GAAP.

On today's call, the Company will discuss non-GAAP EBITDA, non-GAAP EBITDA per share, and has used these measures as an internal analysis and review of operational performance. Finally, during the question-and-answer period today, we would like to request each caller to limit themselves to two questions, and encourage callers to requeue to ask additional questions. We appreciate everyone's cooperation with this procedure. And now, I would like to turn the call over to Scott Solano, Interim Chief Executive Officer of AngioDynamics.

Thank you, Doug, and good afternoon, everyone. Thanks for joining us on our fiscal 2011 fourth-quarter and full-year conference call. With me today is Joe Gersuk, our Chief Financial Officer. We have had a very busy several weeks since the leadership transition now underway at the Company. While we await the completion of the search process and the appointment of a new Chief Executive Officer, our Management team has been focused on a number of key priorities, including our Vascular business, revising our product strategy, reallocating our internal investments between our Oncology/Surgery business and our base Vascular business to maximize the opportunities for growth, and aggressively seeking potential acquisitions to support our growth.

Joe will brief you in a few minutes on the financials for both the fourth quarter and the year. I'd like to address a couple of the key results -- namely, the top-line performance, the Vascular business, and NanoKnife progress. As our release issued after the market closed notes, our annual revenues were flat compared to the prior year, and our fourth-quarter sales declined over the prior-year Q4. This is primarily a result of Vascular sales declining 13% from the fourth quarter 2010. We are obviously very disappointed with these results; and while we are operating in a very competitive environment, a large contributor to our performance was the disappointing sales of recently launched Vascular products.

The US Vascular business has been the number-one priority since the beginning of our leadership transition. We have begun taking steps to ensure a flow of effective new products, delivered to a committed sales force. We plan to increase our commitment to new product development and invest 10.6% of sales on R&D in fiscal 2012, which will represent an incremental increase over fiscal 2011 R&D spending of almost $2.5 million. We have also examined our R&D investment strategy, and we've made three major revisions. We are allocating the spending between Oncology/Surgery product development, NanoKnife clinical trials, and our base Vascular business in order to assure that short-, medium-, and long-term growth objectives can be met.

We are focusing development efforts on product areas and technologies that capitalize on our strength, and where we feel we have the opportunity to achieve true leadership in growing markets. And we also aim to strike a balance between product line extensions that have smaller impact and truly innovative but riskier product development. We feel that combining these internal investments with the careful license and acquisition of external products and technologies should create a portfolio of products that can drive our growth in both our Oncology/Surgery and Vascular divisions.

Since early June, we've had two sales meetings -- one for the domestic organization, another for the international organization, and I think that it's fair to characterize the team as focused, determined, and enthused. We spent a great deal of time during our recent national sales conference providing intensive product and sales training to our team members, both old and new, and generated a great deal of enthusiasm from the field. As a result, we're already seeing initial benefits from this effort, and some early signs of improved Vascular sales performance.

We have spoken before about our continued investments in our international sales infrastructure over the last 18 months; and the results were apparent, with international sales growing 16% over last year. We have increased our international footprint with direct presence in the Netherlands and an Asian headquarters in Hong Kong. With our current contribution from our international team at only 12% of the Company's annual revenues, we are confident that these continuous investments provide additional revenue opportunities.

The financial performance of our Oncology/Surgery division has been strong. Oncology/Surgery sales in the fourth quarter increased 10% from the prior year. For fiscal 2011, Oncology/Surgery sales increased 16%, to $66.2 million from the prior year. As we indicated in our May 24 press release, AngioDynamics will not distribute LC Beads in the US after December 31. LC Beads is one of four products sold in the US by our Oncology/Surgery sales force. Following the conclusion of the distribution agreement, the Oncology/Surgery division will continue to focus on developing and commercializing our fastest-growing product line and single largest growth opportunity, the NanoKnife System. We will also increase our attention on our ablation and surgical resection products. These efforts will be complemented by our ongoing pursuit of acquisitions to fill out our Oncology/Surgery portfolio.

NanoKnife continued to gain commercial and clinical momentum in both the US and international markets. During the fourth quarter, seven new hospitals became clinically active with the NanoKnife System. This brings the total number of active users to 36 worldwide. An additional 151 patients were treated in April through June, bringing the total number of patients treated with the NanoKnife System to 689. Going forward, we expect that the momentum in the marketplace for the NanoKnife will continue.

As we begin fiscal 2012, we are modifying how we will report our NanoKnife progress. As many centers become more experienced and independent with the procedure, it becomes more difficult for us to accurately track the total number of patients treated. As a result, we believe the best metric for measuring NanoKnife's market acceptance are revenues and progress in clinical trials.

The ultimate growth driver for the NanoKnife will be clinical evidence that clearly shows the safety and effectiveness of the system in treating specific indications. We're making steady progress in this area. Although physicians have published a number of retrospective data collections with good results, we are aggressively pursuing the kind of prospective controlled trials that will provide the evidence-based community with the information they would like to see.

In May, the FDA granted IDE approval to conduct a clinical study of the NanoKnife system for the ablation of low-risk, localized prostate cancer. The initial study will evaluate procedural and short-term post-treatment safety in a total of six patients at up to three sites in the US. The results, if positive, will provide the basis for what we currently view as two additional clinical trials before we can apply for indication approval. We are currently working with our initial investigator sites to get them up and running through their investigational review boards.

In addition, we submitted our IDE application to the FDA for a clinical study of the use of the NanoKnife System in Stage III unresectable pancreatic adenocarcinoma. All forms of pancreatic cancer represent a significant unmet need, with 43,000 cases of pancreatic cancer diagnosed in the US in 2010 and another 60,000 diagnosed internationally. The five-year survival rate for all stages is less than 5%, while the advanced stages have a median survival time measured in months. Patients with Stage III pancreatic cancer have very limited therapeutic options.

For example, in the clinical studies used to support the NDA for the most commonly used drug, Gemzar, only 22.2% of patients with Stage III or IV pancreatic cancer experienced clinical benefit, with a median survival of 5.6 months when receiving Gemzar. Based on this, it's clear there is a need to develop additional treatments for this patient population, in order to improve clinical outcomes.

As part of our recent pancreatic IDE submission, we reviewed past use of the product that had been carried out under the approved commercial indication, and retrospectively examined a total of 21 patients for which the NanoKnife was used to ablate Stage III pancreatic cancer. Key findings show that 95% of the cases were technically successful, meaning that the procedure was carried out as planned. There was no 30-day mortality, and none of the patients [that were] in this cohort developed chronic pancreatitis.

Anecdotally, there have been a number of cases that, while not proving any statistical evidence of clinical effectiveness, provide us with optimism that is worth the investment in clinical trial to openly prove that this can be a safe and effective treatment for pancreatic cancer. One patient with phase three pancreatic cancer was operated on in late 2009. Her most recent PET scan at 11 months showed that she was pancreatic cancer-free at that time; and 19 months later, she is still alive. Another patient who was kind enough to present his story to our Company at our national sales meeting had so much pain when his colon cancer metastasized to his pancreas that he could no longer travel. After palliative ablation with the NanoKnife, his improved quality of life allowed him to travel to Europe and throughout the US for in-person visits with relatives and friends.

Overall, our registry data indicates that there are 11 patients who have been alive a year or more after NanoKnife pancreatic procedures, with a number of others expected to hit that important milestone over the next few months. Now, we cannot draw any clinical conclusions or make any specific claims based on anecdotes or these limited retrospectively collected data, nor can we use them to predict the ultimate efficacy of the NanoKnife treatment. However, the longer-term outcomes we have observed provide us with optimism that it's certainly worth the investment in clinical trials to openly determine whether this is a safe and effective palliative treatment for stage three pancreatic cancer. We are continuing the dialogue with the FDA in order to begin these important trials.

It's very important to note that at this time, the NanoKnife System is cleared only for the ablation of soft tissue and not for the treatment of any specific disease or condition. We will need FDA clearance, along with the evidence from clinical trials, before we can discuss or make claims relating to the use of the NanoKnife in pancreatic cancer, prostate cancer, or any other specific condition. In other NanoKnife clinical progress, we have reached the two-thirds of our enrollment target by treating the 18th patient in our first controlled, multi-center clinical trial, the European Hepatocell Carcinoma trial.

This trial is co-principaled by the renowned liver cancer treatment specialist, Professor Riccardo Lencioni of Pisa, Italy, and Professor Jordi Bruix of the Barcelona Clinic for Liver Cancer, and should provide us with the first real clinical evidence of the effectiveness of the NanoKnife System in treating a specific form of cancer. Enrollment has accelerated over the last few months, as 6 centers have come online and begun actively enrolling patients. And we are optimistic that we can complete the enrollment phase of this study by the end of our second quarter.

We have initiated our first controlled pancreatic cancer trial in Verona, Italy, under the very capable leadership of Professor Claudio Bassi, a leading pancreatic surgeon. He's enrolled his first patient, and we are very excited about generating our first clinical evidence for this important disease state.

In summary, we're all confident in the long-term potential for AngioDynamics. I want to recognize and thank the entire Management team for stepping up during the transition and exhibiting true leadership in helping to build a stronger Company as we move forward. We continue to make necessary investments in infrastructure, R&D, sales, and our innovation pipeline to drive long-term, sustainable growth.

We are focused on executing our plan to generate growth and shareholder value, and are confident that our operating performance will show substantial improvement in fiscal 2012. At this point, Joe will now take you through a more detailed look at our financial results. Joe?

Thank you, Scott, and good afternoon, ladies and gentlemen. We ended fiscal 2011 with a difficult quarter and the implementation of the CEO transition. Needless to say, as the leadership team of a Company, we are extremely disappointed with the results we are reporting today. As Scott mentioned, the near-term challenges we face are squarely in our US Vascular business. And given the size of this unit, it offsets the outstanding results we are delivering in our Oncology business, in the commercial success of our NanoKnife program, and in our international business.

Challenges notwithstanding, the important perspective to keep in mind is that AngioDynamics still managed to generate nearly $12 million in cash flow from operations in the fourth quarter. As to the specifics of the quarter, the resumption of sales growth we saw in the third quarter reversed in the fourth; and as a result, sales for the fiscal year were flat from 2010. The 6% year-over-year decline in the fourth quarter was driven by weakness in Vascular product sales, which declined 13% and offset 10% growth in Oncology/Surgery sales. While the US Vascular market remained challenging from both a competitive and a pricing standpoint, the lingering effects of the sales force reorganization at the beginning of the fiscal year, slow sales of recently introduced products, and some manufacturing issues were all contributing factors in these results.

Regarding the sales force, we continue to believe that the combining of the peripheral Vascular and access sales forces at the beginning of the fiscal year was the right business decision. However, we have seen some attrition over the course of the year, and it takes about six months for a newly hired rep to reach full productivity. We have hired a number of new reps over the course of the year, and all reps recently completed extensive training at our national sales conference. We've also redesigned our commission plan, and are optimistic that we will see better sales performance in fiscal 2012.

With regard to recently introduced products, our split-tip dialysis catheter, the Centros, has not gained much traction in the marketplace, and sales have been disappointing. As a result, we have written down $2.2 million of royalties advanced to the Company which created it. Another sales disappointment has been Benephit, an excellent product for the treatment of contrast-induced nephropathy, but not one readily reimbursed.

We also experienced several product supply outages, which caused us to miss approximately $800,000 in fourth-quarter sales. These issues have largely been addressed, and we do not expect supply outages to be a significant factor in the future. We also continue to see intensive pricing pressure in the Vascular business in the fourth quarter, as ASPs declined 4% year-over-year in the division as a whole. The price erosion in the quarter was fairly broad based across most of the Vascular product categories and reflects the competitive intensity in the marketplace.

Turning to the Oncology/Surgery business, we achieved 10% sales growth in the quarter, led by record NanoKnife sales. It was our fifth consecutive quarter with more than $1 million in NanoKnife sales, and our first $2 million plus sales quarter. 7 additional sites entered the commercial program in the quarter, and we are very pleased to report our first NanoKnife System sales in Japan, Sweden, and Switzerland. We end the year with a total of $7.3 million in NanoKnife sales.

The 10% overall growth in Oncology/Surgery sales reflects modest growth in LC Bead, and you'll recall that last year LC Beads had a very strong fourth quarter as a result of Ethiodol being off the market. ASPs were firm in the Oncology/Surgery business in the quarter, rising by 3%. This partially offset the impact of price erosion in the Vascular division. However, the net price decline to the Company in the aggregate was a 2% decline, which in turn affected our gross margins in the quarter.

From a geographic perspective, 86% of fourth-quarter sales were in the US; and 14%, or $7.9 million, came from international markets. International sales grew 28% from the prior year on a reported basis and 25% on a constant currency basis. This was an outstanding quarter from our international group, as they delivered the highest growth rate in international sales in 9 quarters. In addition to the 3 NanoKnife System sales mentioned earlier, our new direct sales operation in the Netherlands performed well following the transfer of the business from our local -- a long-time local distributor. Finally, our sales in the Asia-Pacific region were also strong, following the opening of a sales office in Hong Kong.

Continuing down the income statement, gross profit totaled $32.6 million, or 57.7% of sales in the quarter. This was 30 basis points better than the margin -- or below the margin we reported in the third quarter and the fourth quarter a year ago. This is attributable to the pricing pressure in the Vascular division mentioned earlier, which offset the positive impact of the material and manufacturing cost reduction programs that continue to reduce our product costs.

Operating expenses totaled $34.6 million in this quarter, which included $6.4 million of impairment charges relating to our decision to not continue development of the Medron [light port] technology, and the write-down of the Centros prepaid royalty that I mentioned earlier. Excluding those items, operating expenses decreased 1% from the prior-year fourth quarter, as we continued to control SG&A costs to minimize the impact of lower sales and pressure on gross margin. Operating expenses for the NanoKnife program amounted to $2.7 million in the quarter, and the net effect of the program was a loss of just $0.01 per share in the quarter, compared with a $0.06 loss per share a year ago, as NanoKnife revenues are rising faster than the associated cost of the program. For the fiscal year, the net effect of the NanoKnife program was a $0.14 loss per share.

The tax rate was 24% in the fiscal year, compared with 37% in fiscal 2010. The tax provision benefited from the reenactment of the R&D tax credit, which expired in December 2009, as well as manufacturing tax credits. For fiscal 2012, we expect our tax rate to be 37%.

Turning to the other financial statements, cash generation continued to be excellent, as operating cash flow was $11.9 million in the quarter and $33.9 million in the year. As a result, we ended the fiscal year with $131 million in cash and liquid investment -- an increase of $31 million since the fiscal year began. As for our guidance for fiscal '12, you notice in the release that we have provided guidance on a quarterly basis. While we have not provided quarterly guidance in the past, the situation this year was unique with the planned end of distribution of LC Beads on December 31. Once this happens, we expect our organic sales growth rate to slow and our gross profit margin to increase significantly, as this is reflected in the quarterly guidance.

There's some important assumptions you should keep in mind when considering the guidance. One -- it reflects only our base business, and therefore does not include any M&A activity. As everyone is aware, we are actively looking for accretive acquisition opportunities which fit our strategy and enable us to accelerate top- and bottom-line growth. As we announce acquisitions, we will modify our guidance accordingly. Two -- in general, sales guidance reflects the industry growth rates of the underlying markets and segments in which we compete.

Three -- the EPS guidance is inclusive of a $0.16 loss per share impact from the NanoKnife program, and an increase in R&D spending to approximately 10.6% of sales. The increase in R&D spending is primarily to support NanoKnife clinical trials and additional Vascular product development programs. We consider this increase in R&D spending an important investment for future growth. And four -- we refer to known items in the guidance, and those are the costs associated with the departure of the CEO and the possible transfer of laser manufacturing from our UK facility to our US manufacturing center in Queensbury, New York.

A final decision on this transfer has not been made. We have included the possibility of the transfer in our guidance, which is a $1.6 million or $0.04 per share impact over the course of the fiscal year. The costs associated with the departing CEO of $1 million, or $0.04 per share, will be recorded in the first fiscal quarter. Additional items that relate to the recruitment of the new CEO and any restructuring costs that result from his hiring are not reflected in this guidance. And now, Operator, we are ready for your questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Jayson Bedford.

Just a couple quick ones. I guess growth in the Oncology segment, it looks like all of the year-over-year growth either came from NanoKnife or the LC Beads. And I'm just wondering, it seems to imply that the RF business or resection was down. The question is -- one, is that correct? And then, two -- how does that turn around in fiscal '12?

Yes. The sales of the RF products and the Bead have been slow, much slower growing, modest, very modest growth. And most of the growth we believe that we will see next year will be on the international side of the business. And the rate of growth in the domestic market has been nominal, at best.

Okay. And just on the fiscal '12 revenue guidance, it seems to imply kind of an acceleration here in the base business. And I guess if you could just kind of highlight where that growth comes from, whether it's just share gains, new products, and then maybe the impact of pricing that you expect in fiscal '12. Thanks.

Yes. Well, we expect pricing to continue to be a challenge for us, and have assumed that continued softness on the Vascular side and slight increasing of pricing on the Oncology side of the business. As to the growth, we have got some sales force productivity assumptions that are built in. As we mentioned, we saw some attrition last year. We have been adding additional reps already for the new year. All of the reps have been trained at the beginning of the fiscal year, so we're expecting some increased sales force productivity.

And then beyond that, we are expecting better performance out of some of the new products that we have released over the course of this past year. To some extent, the slower sales that we saw was attributable -- just sort of the ramp-up and getting them into consideration for sales. And so, I think that with that period behind us that we'll start to see some better sales results out of the products, now that they've been in the market for a while. And of course, our fastest growth expectations next year are with the NanoKnife products, which as we saw rising traction this year, we expect it to do significantly better next year.

Joe, are there new products in the pipeline that you -- like a few key ones that you plan to launch, that will kind of spur that growth in fiscal '12?

There are a few new products, but to tell you the truth, our plan here is not assuming significant revenue -- actually any revenue from any of the new products next year. There will be some growth from the products that were introduced in fiscal '11. But our business plan was built on the assumption that there is no incremental sales from the new products that will be released over the course of fiscal '12. So, therefore, that will all be upside to our plan and our expectations.

Okay. Thank you.

Matt Hewitt.

Couple questions. First, I'm somewhat surprised -- I guess pleasantly surprised, to see the expectations for the top line even being flattish in the back half of the year. And I think this might touch on one of the previous questions. Given that you're losing the LC Bead business at the end of the calendar year, if I'm correct, I know you're talking about the new salespeople and better efficiency from some of the existing salespeople. But what gives you confidence that you can hit flattish revenues in the back half of the year?

The first thing to keep in mind is that there will be some LC Beads sales in our third fiscal quarter. So, as you noted, it ends at the end of the calendar year, and so we have one month there. And as to the fourth quarter, sales are actually projected to go down, as we said, between a range of minus 2% and 5% on a year-over-year basis. So, the guidance does reflect a slight decline in sales in the fourth quarter, entirely attributable to the absence of LC Beads.

The issue we're dealing with there is we have a rapidly rising revenue stream from NanoKnife, with significantly dramatically better gross margins in that product, but the absence of LC Beads at much lower gross margin coming out of the business starting in January. So, it's that dynamic that we're looking at.

All right. And then, maybe you could -- it appeared at least in the press release that came out when Jan left that a search was at least close to starting, if it hadn't started already. Can you update us on where you sit with that, and is that something that we could even anticipate this quarter? This is not to discredit you, Scott. I think you've done a fantastic job already. But just curious where the CEO search sits at this point.

I can take that. No harm intended, no harm taken. The CEO search is being carried out by a search committee of the Board. Obviously, I'm not directly involved in that, but it is being carried out. My understanding is that they've narrowed a list of candidates, but it's really very difficult to provide a very definitive time frame to when that would actually occur. These things don't go quickly, typically. But nonetheless, I think it is underway, and the Board's assured me that they have a -- kind of a short list of candidates at this point.

All right. Thank you. You know what? I'll jump back in the queue. Thank you.

Charles [Crawson].

I guess just again, not to beat a dead horse here, but just speaking to the other two guys, I also am a little taken away by the guidance here, particularly in Q3. I mean, I know you're going to still have about a month of Bead sales there, but it seems -- I mean, it seems to me that it would be -- there would be a little bit of a de-emphasization of that product. So, I'm kind of curious why the guidance is a little bit higher than it would seem to be, given the loss of that contract, even with that extra month.

Again, it comes down to NanoKnife coming online fast and at least having a month to sell LC Beads in the course of the quarter. I would tell you, as well, that our own internal plans in all respects of the guidance are either at the high end or above what you see for guidance. And one of our biggest goals for this year is to exceed your expectations. So, we're comfortable in what we've indicated here as the guidance. It is flat to up 3% in the third quarter, and we're reasonably comfortable with what we show you there.

Okay. I appreciate that. Thanks, Joe. Then, just speaking to the international side, I know you guys said a lot of that seemed to come from the Hong Kong office and then the acquisition in the Netherlands. Was there anything else there that happened?

Just strong sales across the whole Asia Pacific region. And we've planted some seeds over there that we think will continue to drive our growth. And NanoKnife had, as would be indicated with those three sales overseas, had an outstanding quarter. Actually, we sold more NanoKnife internationally than we did domestically, which has certainly caused some rivalry to exist with our domestic sales team.

And so, we think we've -- we hired a new general manager there to run the international business about 18 months ago, Stephen McGill. He's hired a number of really talented people. And we've -- as I said, planted a number of seeds and we're starting to really get some good traction in our international business. And as Scott said, it is a low percentage of our total Company's revenues; and so, we think we have a lot of headroom here to continue to drive the international growth. So, it's really a strong part of our business, and we expect it to stay on track for the new year, and beyond that as well.

Okay. I appreciate that. Just one more, then, and I'll go back in the queue. Speaking to the deals, how realistic -- and this isn't trying to speak poorly of your guys' ability to manage or to take it on, but how realistic can we expect a deal getting done, since we have to give a decent amount of time for a CEO transition in there? What can we expect on that side?

This is Scott. We are continuing to pursue the things that we have been looking -- we were looking at before. And the Board's made it very clear that they'll support whatever reasonable type of acquisitions that we had in the pipeline already. So, we are continuing to move forward. Nothing has stopped. Nothing has slowed down, even. I've called everyone that we were involved with, and everyone's willing to move forward. So, we continue to look at acquisitions that fit our strategy and that take advantage of our call points, relationships. And obviously, they have to make financial sense for us, as well.

Okay. I appreciate that, Scott. All right, guys, that's it. Thank you.

Robert Goldman.

Couple things. First, Joe, I'm trying to reconcile the guidance that you had for the fourth quarter of $0.10 to $0.11 to what you just reported. I think the $0.10 to $0.11 guidance included depreciation and amortization of intangibles. So, if you were to restate your non-GAAP reported numbers in your press release to include those, which was included in your guidance, what would the earnings per share have been in the fourth quarter?

We had -- what would we have earned absent the charges, you mean?

Well, let's put it this way. You guided to $0.10 to $0.11. Apples-to-apples, what did you report in the fourth quarter?

$0.11.

$0.11?

Yes. So, I think the major new item was the Centros impairment charge of $2.2 million.

Okay.

But absent those two items, it would have been $0.11, compared to the $0.10 to $0.11 guidance that we had offered -- the range we had reported earlier.

Thank you for that. And also, Joe, you gave the earnings guidance for 2012 for sure. Could you offer any guidance relative to free cash flow?

No, I would say that operating cash flow is a pretty good proxy for -- or EBITDA is a good proxy for operating cash flow. And then you look at the historical capital expenditures of the business, and they have been in the order of $3 million to $4 million a year, and I think you would have a pretty good representation of free cash flow.

Okay. If I could ask something more strategically, finally. The Company was very, I think, strongly saying that you're committed to funding NanoKnife and to continue seeking acquisitions. Is it safe to say that the CEO you bring on has to agree with that right up front? Or is the strategy subject to change, based on the CEO that you bring on?

Well, I would hope that the strategy of sales are kind of based on the fundamentals of the business, and that the CEO who comes on board will certainly be willing to take a look across our business and see the opportunities with NanoKnife that the rest of us see. So, you certainly hope that they would see that as a critical area of investment for us moving forward. I'm not sure how they could miss it.

And then, in terms of acquisitions, I think we've talked about them before. We continue to talk about them, and it would make sense for anyone, again, to do reasonable acquisitions based on the ones that would fit our strategy, make financial sense for us.

Okay. Thank you.

Jamar Ismail.

This is Jamar for Jason Mills from Canaccord. Can I just ask for a little bit more color on your NanoKnife guidance? Could you give us more of an estimate range for fiscal '12?

No, I don't think so. I mean, I think we just offer you that single point of guidance in terms of the bottom-line impact. We expect to have a very significant revenue growth on NanoKnife next year, without quantifying it, and it's a product with outstanding gross margins, as you would expect. So, we have a case here where much higher revenue growth will be offset to a degree by the significant investments that we'll be making in clinical trials associated with the program. But at the end of the day, we're comfortable in terms of the bottom-line impact, as we mentioned in the release.

Okay. What about your thoughts for US versus OUS? Where do you think is going to be the higher growth in NanoKnife?

We expect it -- well, the higher growth rate will be OUS, by virtue of their sales weren't that much in the current fiscal year. But we're expecting very significant dollar growth, both domestically and OUS with NanoKnife. And hard to say whether they'll be greater on the international side, but they'll be very meaningful; and that's a significant part of our growth aspirations and expectations internationally, is with NanoKnife. We don't think the strength we saw in Q4 was a fluke at all, in terms of the strong NanoKnife sales internationally.

Okay. Thanks a lot.

Thank you, Jamar.

(Operator Instructions) Ronald Goodson.

Hi. It's Ron Goodson. With what you're expecting from NanoKnife, wouldn't it make sense to look at a buyback, instead of acquisitions that would dilute the reported growth rate for the firm as a whole?

Well, we remain committed to acquisitions, Ron. And needless to say, having $131 million of cash in the bank, earning very low rates of return, is not the optimum long-term capital structure for the Company. But we really believe that we will be able to deploy substantial amounts of that capital in operating assets in time. While we haven't done any acquisitions of note -- of significance in the last couple of years -- the AngioCare acquisition in the Netherlands was quite small.

And so, while we haven't done any of consequence, it isn't for the lack of looking at many, and some of which would have used substantial amounts of that cash. And as Scott said, we continue to look at many today -- some small, some large. So, our expectation remains that we will deploy that capital in operating assets that will help us enlarge the Company, generate more top- and bottom-line growth for the Company. And that remains the Company's business strategy and financing strategy, capital allocation strategy at this time.

Jeff Jonas.

I was wondering if you guys could give a little bit of color on new product launches for the coming year, in terms of how many and what areas of the business they would be coming from.

We have a number of product launches that -- some of them coming from the Vascular side of the business, and a few coming from the Oncology/Surgery side, as well. It's -- I prefer not to lay out our product plan for the next year, only because it lets our competitors get ready for it. So I hate to be specific. But I think the flow of products that we saw last year will probably continue through this year, as well. And we do plan on being very aggressive about getting new products to the marketplace, as we've increased our R&D investment across the board.

Okay, thanks. And could you give us any more detail within the Vascular division, between some of the product lines, like varicose veins, ports and PICCs, dialysis?

No. Again, I really prefer not to highlight our strategic plan. I would certainly love to hear our competitors, because it would help us plan as we move forward. Again, it's -- we're taking a look to see what makes sense, looking at areas where we have some leadership in growing markets and upping our investments in those areas, and just trying to push forward with some of these products.

I guess I didn't mean in terms of new product launches, I meant in terms of reviewing the Q4 and past year's performance, and what areas are strongest and weakest within Vascular.

Well, we talked about that a bit. We mentioned the Centros product. We mentioned Benephit, were some that were disappointing to us, and more broadly speaking, some of the others that didn't do as well, either. But we really wouldn't want to go into any more specific terms -- discussions about which -- exactly what products sold what. But think of it in the aggregate, we were very disappointed with the performance of the new products that we introduced last half of the year.

Okay. Thank you.

Thank you. Sorry we can't be more specific.

And Management, I'm showing there are no further questions at this time. Please continue with any closing remarks.

Well, we thank you very much for joining us on the call. And we look forward to an improved operating performance next fiscal year, and we thank you for your participation and value your interest in AngioDynamics. Thank you very much.

Ladies and gentlemen, this concludes the AngioDynamics fiscal fourth-quarter 2011 financial earnings conference call. Thank you for using AT&T Conferencing. You may now disconnect.