Cyberonics Reports Fiscal 2014 First Quarter Results

             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
ir@cyberonics.com

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
 
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