Cyberonics Reports Fiscal 2013 Third Quarter Results

             Cyberonics Reports Fiscal 2013 Third Quarter Results

Sales of $63 million - 15% Growth

Income from Operations increases by 25%

Provides Depression Update

PR Newswire

HOUSTON, Feb. 22, 2013

HOUSTON, Feb. 22, 2013 /PRNewswire/ -- Cyberonics, Inc. (NASDAQ:CYBX) today
announced results for the quarter ended January 25, 2013.

Quarterly highlights

Operating results for the third quarter of fiscal 2013 compared to the third
quarter of fiscal 2012 include:

  oNet sales of $62.7 million, an increase of 15% from $54.5 million;
  oWorldwide unit sales of 3,215, an increase of 14%;
  oRecord international unit sales and revenues;
  oIncome from operations of $20.4 million, an increase of 25% from $16.4
    million; and
  oIncome per diluted share of $0.47 compared with $0.34, an increase of 38%
    ^(1).

^(1)Numbers and percentages may be affected by rounding.

As discussed below under "Use of Non-GAAP Financial Measures," the company
presents in this release certain non-GAAP financial measures: adjusted
non-GAAP net income, adjusted non-GAAP income per diluted share and adjusted
EBITDA. Investors should consider non-GAAP measures in addition to, and not
as a substitute for, or superior to, financial performance measures prepared
in accordance with GAAP. Please refer to the attached reconciliation between
GAAP net income and non-GAAP adjusted EBITDA.

Results and objectives

"We are very pleased with the sales results for the third quarter of fiscal
2013," commented Dan Moore, Cyberonics' President and Chief Executive Officer.
"Our U.S. sales team continues to deliver solid results, with sales revenue
totaling more than $50 million for the third consecutive quarter and
increasing by 11% compared to the third quarter of fiscal 2012. Our latest
generator, AspireHC™, continues to be well received by customers, reaching 20%
of total U.S. unit sales for this quarter.

"International net sales increased by 37% to a record $12.0 million from the
$8.7 million recorded in the comparable quarter of fiscal 2012, with no
material impact from foreign exchange movements.

"European unit sales growth continued in double digits and overall
international unit growth increased by a strong 36% over the third quarter of
fiscal 2012. We continued to see strength in all other international regions.


"Adjusted EBITDA for the third quarter was $23.8 million, and our available
balance of cash and short-term investments at January 25, 2013 exceeded $131
million. Our balance sheet continues to provide flexibility as we look for
ways to increase shareholder value.

"With respect to the commencement of the medical device tax on January 1,
2013, we have included the amount of $327,000 in cost of goods sold, and
adjusted our guidance as detailed below."

Depression update

"In January 2013, the fourth paper, the meta-analysis of treatment-resistant
depression ("TRD") clinical studies, was accepted for publication in a
peer-reviewed journal," continued Mr. Moore. "As planned, we have now
submitted our formal request to CMS for reconsideration of coverage for VNS
Therapy^® for TRD. Based on our understanding of the process, CMS will first
make a determination as to whether to undertake a formal review of the
submission, and we intend to update investors at that time."

Stock Repurchase update

"During the recently completed quarter, we repurchased 145,000 shares on the
open market, leaving 215,000 shares available to be repurchased under the
current program," continued Mr. Moore. "On January 28, 2013, we announced
that our Board had authorized the addition of 1,000,000 shares to this
program."

Fiscal 2013 guidance

Based on the financial and operating results through the third quarter of
fiscal 2013, the implementation of the medical device tax and the
reinstatement of the research and development tax credit, Cyberonics is
adjusting the guidance for fiscal 2013 as follows:

  oNet sales guidance in the range from $248 million to $250 million
    (previous guidance of $246 million to $249 million).
  oIncome from operations (now inclusive of the medical device tax) in the
    range from $75 million to $77 million (previous guidance of $73 million to
    $75 million exclusive of the medical device tax).
  oAdjusted net income in the range from $46 million to $48 million (previous
    guidance of $43 million to $45 million).
  oAdjusted diluted earnings per share in the range from $1.66 to $1.72
    (previous guidance of $1.56 to $1.62).

Guidance for adjusted net income and adjusted diluted earnings per share
excludes a loss of $2.5 million (net of tax), or $0.09 cents per share, for an
investment write-down in the first quarter, and a gain on warrant liability of
$1.3 million, or $0.05 cents per share.

Additional details will be provided during today's conference call and in an
investor presentation summarizing the company's third quarter fiscal year 2013
results, which is available in the investor relations section of Cyberonics'
corporate website at http://www.cyberonics.com.

Use of non-GAAP financial measures

In this press announcement, management has disclosed financial measurements
that present financial information not in accordance with Generally Accepted
Accounting Principles (GAAP). These measurements are not a substitute for
GAAP measurements, although company management uses these measurements as aids
in monitoring the company's ongoing financial performance from quarter to
quarter and year to year on a regular basis and for benchmarking against other
medical technology companies. Adjusted non-GAAP net income guidance and
adjusted non-GAAP income per diluted share guidance measure the net income and
income per share of the company excluding for fiscal 2013 the impairment of
investment and the gain on warrant liability which management considers
relevant for an investor's understanding of the company's financial
performance. Management uses and presents adjusted non-GAAP net income and
adjusted non-GAAP income per diluted share measures because management
believes they facilitate an understanding of the financial impact of such
unusual items on the company's short- and long-term financial trends.
Management also uses such adjusted non-GAAP items to forecast and to evaluate
the operational performance of the company, as well as to compare results of
current periods to prior periods on a consistent basis. Adjusted earnings
before interest, tax, depreciation and amortization ("EBITDA") measures the
income from operations of the company and excludes the aforementioned item, as
well as non-cash equity compensation and other income (expense) items.

Non-GAAP financial measures used by the company may be calculated differently
from, and therefore may not be comparable to, similarly titled measures used
by other companies. Investors should consider non-GAAP measures in addition
to, and not as a substitute for, or superior to, financial performance
measures prepared in accordance with GAAP.

Please refer to the attached reconciliation between GAAP net income and
non-GAAP adjusted EBITDA financial measures.

Fiscal Year 2013 third quarter results conference call instructions

Cyberonics will host a conference call today, February 22, 2013, beginning at
8:00 a.m. Central Time (9:00 a.m. Eastern Time) to review its results of
operations for the fiscal year 2013 third quarter, followed by a question and
answer session.

The conference call will be available to interested parties through a live
audio webcast in the Investor Relations section of Cyberonics' corporate
website at http://www.cyberonics.com. To listen to the conference call live
by telephone, dial 877-638-4557 (if dialing from within the U.S.) or
914-495-8522 (if dialing from outside the U.S.). The conference ID is
88747937.

Within 24 hours of the webcast, a replay will be available under the "Events &
Presentations" section of the Investor Relations portion of the Cyberonics
website, where it will be archived and accessible for approximately 12 months.

About Cyberonics, Inc. and the VNS Therapy^® System

Cyberonics, Inc. is a medical technology company with core expertise in
neuromodulation. The company developed and markets the VNS Therapy System,
which is FDA-approved for the treatment of refractory epilepsy and
treatment-resistant depression. The VNS Therapy System uses a surgically
implanted medical device that delivers pulsed electrical signals to the vagus
nerve. Cyberonics markets the VNS Therapy System in selected markets
worldwide.

Additional information on Cyberonics and the VNS Therapy System is available
at www.cyberonics.com.

Safe harbor statement

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements can be
identified by the use of forward-looking terminology, including "may,"
"believe," "will," "expect," "anticipate," "estimate," "plan," "intend,"
"forecast," or other similar words. Statements contained in this press
release are based on information presently available to us and assumptions
that we believe to be reasonable. We are not assuming any duty to update this
information if those facts change or if we no longer believe the assumptions
to be reasonable. Investors are cautioned that all such statements involve
risks and uncertainties, including without limitation, statements concerning
obtaining CMS's reconsideration of its depression non-coverage decision and
CMS's reimbursement approval for our depression indication, completing our
current share repurchase program and the repurchase of the additional
1,000,000 shares added to the program, and achieving our fiscal guidance for
net sales, income from operations, adjusted net income, and adjusted diluted
EPS. Our actual results may differ materially. Important factors that may
cause actual results to differ include, but are not limited to: continued
market acceptance of VNS Therapy™ and sales of our products; the development
and satisfactory completion of clinical trials and/or market test and/or
regulatory approval of new products, including VNS Therapy™ for the treatment
of other indications; satisfactory completion of the post-market registry
required by the U.S. Food and Drug Administration as a condition of approval
for the treatment-resistant depression indication; adverse changes in coverage
or reimbursement amounts by third-parties; intellectual property protection
and potential infringement claims; maintaining compliance with government
regulations and obtaining necessary government approvals for new products and
indications; product liability claims and potential litigation; reliance on
single suppliers and manufacturers for certain components; the accuracy of
management's estimates of future expenses and sales; the potential
identification of material weaknesses in our internal controls over financial
reporting; and other risks detailed from time to time in our filings with the
Securities and Exchange Commission (SEC). For a detailed discussion of these
and other cautionary statements, please refer to our most recent filings with
the SEC, including our Annual Report on Form 10-K for the fiscal year ended
April 27, 2012, our Quarterly Report on Form 10-Q for fiscal quarter ended
July 27, 2012 and our Quarterly Report on Form 10Q for fiscal quarter ended
October 26, 2012.

Contact information
Greg Browne, CFO
Cyberonics, Inc.
100 Cyberonics Blvd.
Houston, TX 77058
Main: (281) 228-7262
Fax: (281) 218-9332
ir@cyberonics.com



CYBERONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
                  For the Thirteen Weeks Ended  For the Thirty-Nine Weeks
                                                Ended
                  January 25,    January 27,    January 25,     January 27,
                  2013           2012           2013            2012
Net sales         $ 62,700,033   $ 54,536,585   $ 185,976,849   $ 160,893,723
Cost of sales       5,367,218      4,099,489      15,548,199      15,182,188
Gross profit        57,332,815     50,437,096     170,428,650     145,711,535
Operating
expenses:
Selling, general
and                 26,646,935     24,941,131     82,539,731      76,529,794
administrative
Research and        10,244,322     9,097,722      30,006,041      26,206,572
development
Total operating     36,891,257     34,038,853     112,545,772     102,736,366
expenses
Income from         20,441,558     16,398,243     57,882,878      42,975,169
operations
Interest income     21,129         84,124         40,634          244,443
Interest expense    (12,271)       (69,478)       (101,043)       (250,297)
Loss on early
extinguishment      -              (3,670)        -               (3,670)
of debt
Other income        (118,487)      (266,130)      (2,907,464)     (478,060)
(expense), net
Income before       20,331,929     16,143,089     54,915,005      42,487,585
income taxes
Income tax          7,148,435      6,640,905      20,089,574      17,073,073
expense
Net income        $ 13,183,494   $ 9,502,184    $ 34,825,431    $ 25,414,512
Basic income per  $ 0.48         $ 0.34         $ 1.26          $ 0.91
share
Diluted income    $ 0.47         $ 0.34         $ 1.24          $ 0.90
per share
Shares used in
computing basic     27,736,639     27,559,729     27,626,387      27,912,114
income per share
Shares used in
computing           28,124,433     28,034,515     28,045,437      28,374,784
diluted income
per share



CYBERONICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited except where indicated)
                                            January 25, 2013  April 27, 2012
                                                               (Audited)
ASSETS
Current Assets
Cash and cash equivalents                   $  116,531,170     $ 96,654,275
Short-term investments                         15,000,000        -
Accounts receivable, net                       35,690,855        29,266,847
Inventories                                    17,427,845        14,385,875
Deferred tax assets                            5,988,392         16,994,209
Other current assets                           3,113,665         3,801,705
Total Current Assets                           193,751,927       161,102,911
Property, plant and equipment, net             25,878,293        22,160,671
Intangible assets, net                         6,376,383         4,509,612
Long-term investments                          8,038,200         9,508,768
Deferred tax assets                            15,958,202        14,265,574
Other assets                                   407,282           360,659
Total Assets                                $  250,410,287     $ 211,908,195
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payables and accrued liabilities   $  21,658,197      $ 23,032,636
Convertible notes                              -                 4,000
Total Current Liabilities                      21,658,197        23,036,636
Long-term Liabilities                          4,359,870         5,402,189
Total Liabilities                              26,018,067        28,438,825
Total Stockholders' Equity                     224,392,220       183,469,370
Total Liabilities and Stockholders' Equity  $  250,410,287     $ 211,908,195



CYBERONICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
                                           For the Thirty-Nine Weeks Ended
                                           January 25, 2013  January 27, 2012
Cash Flow From Operating Activities:
Net income                                 $  34,825,431     $ 25,414,512
Non-cash items included in net income:
Depreciation                                  2,807,785        2,515,066
Amortization                                  633,229          1,056,917
Stock-based compensation                      9,109,422        8,430,939
Deferred income taxes                         16,388,319       15,671,383
Deferred license revenue amortization         (1,120,476)      (1,120,476)
Impairment of investment                      4,058,768        —
Gain on warrants' liability                   (1,325,574)      —
Unrealized loss in foreign currency           154,629          1,867,503
transactions and other
Changes in operating assets and
liabilities:
Accounts receivable, net                      (6,225,989)      1,117,222
Inventories                                   (3,044,106)      1,124,147
Other current assets                          723,698          (570,475)
Other assets                                  (989)            51,196
Accounts payable and accrued liabilities      (1,278,862)      (2,821,873)
Net cash provided by operating activities     55,705,285       52,736,061
Cash Flow From Investing Activities:
Short-term investments                        (15,000,000)     —
Investment in convertible preferred stock     (2,588,200)      (4,000,000)
Intangible asset purchases                    (2,500,000)      (500,000)
Purchases of property, plant and equipment    (6,515,509)      (16,586,464)
Net cash used in investing activities         (26,603,709)     (21,086,464)
Cash Flow From Financing Activities:
Proceeds from exercise of options for         8,969,626        2,041,546
common stock
Purchase of treasury stock                    (20,105,481)     (38,815,838)
Repurchase of convertible notes               —                (7,044,000)
Realized excess tax benefits – stock          2,040,699        —
compensation based
Net cash used in financing activities         (9,095,156)      (43,818,292)
Effect of exchange rate changes on cash       (129,525)        991,576
and cash equivalents
Net increase (decrease) in cash and cash      19,876,895       (11,177,119)
equivalents
Cash and cash equivalents at beginning of     96,654,275       89,313,850
period
Cash and cash equivalents at end of period $  116,531,170    $ 78,136,731



RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

(Unaudited)


The following table sets forth the reconciliation between net income and our
non-GAAP financial measure for adjusted EBITDA (unaudited):
                            Thirteen Weeks Ended
                            January 25, 2013            January 27, 2012
Net income                  $     13,183,494            $    9,502,184
Interest (income)                 (8,858)                    (14,646)
expense, net
Other expense, net                116,375                    269,800
Warrant gain                      2,112                      -
Income tax expense                7,148,435                  6,640,905
Income from Operations      $     20,441,558            $    16,398,243
Depreciation and                  1,123,427                  1,125,086
amortization
Impairment of                     -                          482,603
intangibles, net
Equity based                      2,263,234                  2,841,344
compensation
Adjusted EBITDA             $     23,828,219            $    20,847,276

SOURCE Cyberonics, Inc.

Website: http://www.cyberonics.com
 
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