Cyberonics Reports Fiscal 2014 First Quarter Results Net Product Sales of $67.4 million, 12.4% Increase Strong International Sales led by Europe PR Newswire HOUSTON, Aug. 22, 2013 HOUSTON, Aug. 22, 2013 /PRNewswire/ --Cyberonics, Inc. (NASDAQ:CYBX) today announced results for the quarter ended July 26, 2013. Quarterly highlights Operating results for the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013, and other achievements, include: oNet product sales of $67.4 million, an increase of 12.4%; oNet sales of $68.9 million (including $1.5 million of license revenue), an increase of 14.2%; oWorldwide unit sales of 3,354, an increase of 9.8%; oRecord U.S. net product sales of $56.4 million, an increase of 10.8%; oStrong International unit sales of 899, an increase of 20.8%; oAdjusted non-GAAP income from operations increased by 21.9% to $21.0 million and adjusted non-GAAP income per diluted share increased by 27.9% to $0.48;¹ oShare repurchases of $13 million; and oSignificant progress in three clinical studies, E-36, E-37, and ANTHEM. The reported results shown above for net sales, adjusted non-GAAP income from operations and adjusted non-GAAP income per diluted share for the most recent quarter reflect the impact of $1.5 million of license revenue compared to $0.4 million included in the comparable quarter of the prior year as a result of recognizing all remaining such license revenue. 1.Operating results for the fiscal quarter ended July 26, 2013 include a $7.4 million, $4.8 million net of tax, adjustment for a litigation settlement. The operating results for the fiscal quarter ended July 27, 2012 include an after-tax $2.5 million write-down associated with an impaired investment. The impact of these amounts is excluded for the purposes of non-GAAP comparisons between the fiscal quarter ended July 26, 2013 and the fiscal quarter ended July 27, 2012. As discussed below under "Use of non-GAAP Financial Measures," in this release, the company refers to and makes comparisons with certain non-GAAP financial measures, including adjusted non-GAAP income from operations, adjusted non-GAAP net income, and adjusted non-GAAP income per diluted share. 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 non-GAAP reconciliation. Results and objectives "Net sales in the first quarter of fiscal 2014 met our expectations and provides a good start to the fiscal year," commented Dan Moore, Cyberonics' President and Chief Executive Officer. "Our U.S. sales team followed a record fourth-quarter performance with a near-record quarter in both unit sales and net product sales. Estimates of new patient and replacement growth rates are consistent with those provided in our annual guidance. International unit sales were well ahead of the first quarter of last year, with Europe in particular continuing the strong performance seen in fiscal 2013. "Adjusted EBITDA for the first quarter was $25.6 million, and with our available cash and short-term investments of $131 million, the company is well-positioned to continue to deliver stockholder value with investments in next-generation products and stock repurchases. "Our AspireSR™ clinical studies, E-36 and E-37, have both progressed this quarter. Enrollment in E-36 is now complete, and the first five patients in our U.S.-based study, E-37, have received the AspireSR generator. Further, we completed enrollment in our ANTHEM study, assessing Autonomic Regulation Therapy for patients with chronic heart failure. We are pleased to have achieved each of these important clinical steps while continuing to grow our global epilepsy sales," concluded Mr. Moore. Stock Repurchase Update During the recently completed quarter, Cyberonics repurchased 205,000 shares on the open market, completing the previously authorized program, and leaving 740,000 shares available to be repurchased under the current program, and expected to be completed in the current fiscal year. Fiscal 2014 guidance Cyberonics is re-affirming guidance for fiscal 2014 as follows: oNet sales are expected to be in the range of $279 million to $283 million. oAdjusted non-GAAP income from operations is expected to be in the range of $85 million to $88 million. oAdjusted non-GAAP net income for fiscal 2014 is expected to be in the range from $53 million to $56 million. oAdjusted non-GAAP income per diluted share (EPS) will be in the range from $1.93 to $2.01. Guidance for income from operations, net income and diluted earnings per share (EPS) has been adjusted by $7.4 million, $4.8 million (net of tax) and $0.17 cents per share, respectively, for the litigation settlement referenced above. Additional details will be provided during today's conference call and in an investor presentation summarizing the company's first quarter 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 income from operations, adjusted non-GAAP net income and adjusted non-GAAP income per diluted share measure the income from operations, net income and income per diluted share of the company excluding unusual items. Management uses and presents adjusted non-GAAP income from operations, adjusted non-GAAP net income and adjusted non-GAAP income per diluted share measures because management believes that such adjustments facilitate an understanding of the financial impact of unusual items on the company's short- and long-term financial trends. Management also uses 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 adjusted non-GAAP income from operations of the company and excludes the aforementioned items, 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 reconciliations between GAAP and non-GAAP financial measures. First Quarter Results Webcast and Conference Call Instructions Cyberonics will host a conference call today, August 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 2014 first 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 19970149. 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 an implanted medical device that delivers pulsed electrical signals to the vagus nerve. Cyberonics offers 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 continuing to deliver stockholder value with investments in next-generation products, completing our stock repurchase program, and financial guidance for fiscal 2014. 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 26, 2013. Contact information Greg Browne, CFO Cyberonics, Inc. 100 Cyberonics Blvd. Houston, TX 77058 Main: (281) 228-7262 Fax: (281) 218-9332 firstname.lastname@example.org CYBERONICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Thirteen Weeks Ended July 26, 2013 July 27, 2012 Net sales $ 68,872,357 $ 60,321,172 Cost of sales 6,544,033 5,011,177 Gross profit 62,328,324 55,309,995 Operating expenses: Selling, general and administrative 29,306,271 28,323,316 Research and development 11,975,165 9,719,303 Litigation settlement 7,442,847 –– Total operating expenses 48,724,283 38,042,619 Income from operations 13,604,041 17,267,376 Interest income 43,415 7,079 Interest expense –– (28,784) Other expense, net (130,691) (3,991,420) Income before income tax 13,516,765 13,254,251 Income tax expense 4,842,839 5,179,218 Net income $ 8,673,926 $ 8,075,033 Basic income per share $ 0.32 $ 0.29 Diluted income per share $ 0.31 $ 0.29 Shares used in computing basic income per share 27,513,191 27,493,419 Shares used in computing diluted income per 27,845,495 27,937,237 share CYBERONICS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited except where indicated) July 26, 2013 April 26, 2013 (Audited) ASSETS Current Assets Cash and cash equivalents $ 106,321,835 $ 120,708,572 Short-term investments 25,399,702 15,099,573 Accounts receivable, net 39,927,966 39,450,113 Inventories 17,684,428 17,718,454 Deferred tax assets 10,579,525 10,297,991 Other current assets 3,755,320 4,083,640 Total Current Assets 203,668,776 207,358,343 Property, plant and equipment, net 33,093,311 28,555,742 Intangible assets, net 10,123,837 9,219,999 Long-term investments 10,588,202 10,588,202 Deferred tax assets 7,849,048 7,825,286 Other assets 475,591 495,738 Total Assets $ 265,798,765 $ 264,043,310 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payables and accrued liabilities $ 19,787,709 $ 29,025,478 Litigation settlement 7,111,090 –– Total Current Liabilities 26,898,799 29,025,478 Long-term Liabilities 4,256,706 5,449,604 Total Liabilities 31,155,505 34,475,082 Total Stockholders' Equity 234,643,260 229,568,228 Total Liabilities and Stockholders' $ 265,798,765 $ 264,043,310 Equity CYBERONICS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Thirteen Weeks Ended July 26, 2013 July 27, 2012 Cash Flow From Operating Activities: Net income $ 8,673,926 $ 8,075,033 Non-cash items included in net income: Depreciation 1,010,839 924,637 Amortization 346,162 198,471 Stock-based compensation 3,153,499 4,406,533 Deferred income tax (483,988) 4,112,304 Deferred license revenue amortization (1,467,869) (373,492) Impairment of investment –– 4,058,768 Unrealized loss (gain) in foreign (13,497) 152,980 currency translation and other Changes in operating assets and liabilities: Accounts receivable, net (366,782) (2,801,911) Inventories 149,041 (136,270) Other current assets 376,748 996,345 Other assets 47,705 4,846 Litigation settlement 7,111,090 –– Accounts payable and accrued liabilities (9,049,218) (4,686,429) Net cash provided by operating 9,487,656 14,931,815 activities Cash Flow From Investing Activities: Short-term investments (10,300,129) –– Intangible asset purchases (1,250,000) (2,500,000) Purchases of property, plant and equipment (5,533,847) (1,165,358) Net cash used in investing activities (17,083,976) (3,665,358) Cash Flow From Financing Activities: Proceeds from exercise of options for common 2,613,639 6,179,777 stock Cash Settlement of share units (936,115) –– Purchase of treasury stock (12,964,495) (11,964,983) Realized excess tax benefit 4,474,196 400,311 Net cash used in financing activities (6,812,775) (5,384,895) Effect of exchange rate changes on cash and 22,358 (243,814) cash equivalents Net increase (decrease) in cash and cash (14,386,737) 5,637,748 equivalents Cash and cash equivalents at beginning of 120,708,572 96,654,275 period Cash and cash equivalents at end of period $ 106,321,835 $ 102,292,023 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited) The following tables set forth the reconciliation between U.S. GAAP and our non-GAAP financial measures for income from operations, net income and diluted income per share (unaudited): Thirteen Weeks Ended July 26, 2013 July 27, 2012 Income from $ 13,604,041 $ 17,267,376 Operations^(1) Litigation settlement 7,442,847 — Adjusted non-GAAP net income from $ 21,046,888 $ 17,267,376 Operations^(1) Net income $ 8,673,926 $ 8,075,033 Litigation settlement – 4,776,075 — net of tax Impairment of investment — 2,472,601 – net of tax ^(2) Adjusted non-GAAP Net $ 13,450,001 $ 10,547,634 Income^(1) Diluted income per share $ 0.31 $ 0.29 Litigation settlement 0.17 — Impairment of investment — 0.09 ^(2) Adjusted non-GAAP diluted $ 0.48 $ 0.38 income per share^(1) The reported results shown above for income from operations, adjusted non-GAAP income from operations, adjusted non-GAAP net income and ^(1) adjusted non-GAAP income per diluted share for the most recent quarter reflect the impact of $1.5 million of license revenue compared to $0.4 million included in the comparable quarter of the prior year as a result of recognizing all remaining such license revenue. ^(2) The impairment relates to our investment in the convertible debt instrument of Neurovista. The following table sets forth the reconciliation between adjusted non-GAAP net income and our non-GAAP financial measure for adjusted EBITDA (unaudited): Thirteen Weeks Ended July 26, 2013 July 27, 2012 Adjusted non-GAAP net $ 13,450,001 $ 10,547,634 income Interest (income) expense, (43,415) 21,705 net Other (income) expense, net 130,691 (67,348) Depreciation and 1,357,001 1,123,108 amortization Equity based compensation 3,153,499 4,406,533 Income tax expense – 7,509,611 6,765,385 adjusted for non-GAAP items Adjusted EBITDA $ 25,557,388 $ 22,797,017 SOURCE Cyberonics, Inc. Website: http://www.cyberonics.com
Cyberonics Reports Fiscal 2014 First Quarter Results
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