Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K (2ND QUARTER RESULTS AND EXECUTIVE BONUS PLAN - CYBERONICS INC | form8_k.htm |
| EX-99.1 - PRESS RELEASE OF CYBERONICS, INC. DATED NOVEMBER 16, 2009 - CYBERONICS INC | ex99_1.htm |
EXHIBIT
99.2
CYBERONICS
REPORTS RECORD SALES AND OPERATING PROFIT
IN
FISCAL 2010 SECOND QUARTER
Increases
Sales and Operating Income Guidance
HOUSTON,
Texas, November 18, 2009 -- Cyberonics, Inc. (NASDAQ:CYBX) today announced
results for the quarter ended October 23, 2009.
Quarterly
highlights
Results
for the second quarter of fiscal 2010 compared to the second quarter of fiscal
2009 include:
|
·
|
Net
sales of $40.7 million, a 13% increase from $36.0
million;
|
|
·
|
Income
from operations of $9.1 million, an increase of 101% over the prior
year;
|
|
·
|
U.S.
and international epilepsy unit sales increased by 6% and 13%,
respectively;
|
|
·
|
Net
income of $50.1 million;
|
|
·
|
Adjusted
non-GAAP net income of $9.1 million compared with an adjusted non-GAAP net
income of $3.9 million in the prior
year;
|
|
·
|
Adjusted
non-GAAP diluted earnings per share of $0.32, an increase of
129% over the prior year;
|
|
·
|
Announcement
of several development
collaborations.
|
As
discussed below under “Use of Non-GAAP Financial Measures,” the company presents
non-GAAP financial measures, adjusted non-GAAP net income and adjusted non-GAAP
diluted earnings per share, in this release. 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 and
non-GAAP financial measures.
Net
sales
Worldwide
sales for the second quarter of fiscal 2010 were $40.7 million compared to $36.0
million in the comparable period of fiscal 2009, representing an increase of
13%.
U.S. net
product sales attributable to the epilepsy indication increased to an estimated
$33.2 million, compared with $28.6 million in the comparable period of fiscal
2009, an increase of $4.6 million, or 16%.
International
net sales of $6.8 million increased by $0.3 million from the comparable period
of fiscal 2009. International epilepsy unit sales increased by 13% in the second
quarter of fiscal 2010. The net sales increase was impacted by a
higher percentage of sales being made through distributors.
Sales for
the six months ended October 23, 2009 were $79.2 million, an increase of $9.5
million, or 14%, when compared to the same period in fiscal 2009.
Gross
profit
The gross
profit for the second quarter of fiscal 2010 represented 87.4% of net sales
compared to 85.6% in the second quarter of fiscal 2009. This increase
is primarily a result of higher production volumes and improved manufacturing
efficiencies, as well as a higher average selling price due to product mix
changes.
Operating
expenses
Operating
expenses increased by $0.2 million to $26.5 million for the second quarter of
fiscal 2010 from the $26.3 million recorded in the comparable period of fiscal
2009 and were materially unchanged from the first quarter of the current fiscal
year. Expenses for the quarter ended October 23, 2009 included $2.2
million for stock-based compensation, a decrease of $0.5 million from the
comparable period of fiscal 2009.
For the
six-month period ended October 23, 2009, operating expenses totaled $53.2
million, an increase of $0.7 million, or 1%, over the same period of fiscal
2009.
Income
from operations
The
company reported income from operations of $9.1 million during the second
quarter of fiscal 2010, compared with income from operations of $4.5 million in
the comparable period of fiscal 2009, an increase of over 100%. This
quarterly operating profit is the highest ever recorded by the
company.
For the
six-month period ended October 23, 2009, income from operations totaled $15.6
million, compared to $7.3 million in the same period of fiscal 2009, an increase
of 114%.
Debt
repurchase / other income
During
the recently completed quarter, the company repurchased $7.5 million of its
outstanding convertible debt for a total consideration of $6.7 million and
recorded a net gain of approximately $0.7 million, including the impact of tax
and the accelerated amortization of deferred issuance
costs. Convertible debt outstanding as of October 23, 2009 totaled
$39.2 million. Subsequent to quarter end, the company repurchased a
further $8.3 million of its outstanding convertible debt, for total
consideration of $7.6 million, and expects to record a net gain of approximately
$0.5 million in its fiscal third quarter.
Income
taxes
The
company recorded a non-cash tax benefit in the second quarter of fiscal 2010 of
$40.5 million resulting from the reversal of its tax valuation allowance related
to net operating losses. This benefit represents approximately 40% of
the valuation allowance previously recorded against the company’s deferred tax
asset.
Net
income
The
company reported net income of $50.1 million, or $1.73 per diluted share, for
the second quarter of fiscal 2010, compared with a net income of $8.4 million,
or $0.14 cents per diluted share, for the second quarter of fiscal
2009.
For the
second quarter of fiscal 2010, the company reported adjusted non-GAAP net income
and adjusted non-GAAP diluted earnings per share of $9.1 million and $0.32 cents
per share, respectively, compared with $3.9 million and $0.14 cents per share
for the second quarter of fiscal 2009.
The
number of diluted shares for the quarter and the year to date includes
approximately 940,000 shares resulting from the dilutive effect of the remaining
convertible notes on an as if converted basis. Although the gain on
early extinguishment of the convertible debt is included in the calculation of
net income, as per the applicable accounting rules, it is excluded from the
calculation of net income per diluted share.
Balance
sheet and cash flow
The
company generated positive operating cash flow of $16.9 million during the
six-month period ended October 23, 2009. Available cash and cash
equivalent balances were $60.5 million at quarter end, compared with debt
outstanding of $39.2 million.
Results
and objectives
“Our
performance in fiscal 2010 continues to be robust,” commented Dan Moore,
Cyberonics’ President and Chief Executive Officer. “The company
achieved record net sales, record income from operations, and significant cash
flow from operations. Our core U.S. epilepsy business continues to
reflect solid growth, and our international operations produced a third
consecutive quarter of double-digit unit growth, increasing by 13% over the
second quarter of the prior year.
“Our
stockholders’ equity has now reached $87 million. This number was
negative as recently as the first quarter of fiscal 2009. We expect
to continue producing strong cash flow and with our debt at reasonable levels,
the company’s balance sheet affords considerable flexibility.
“We
estimate that unit sales of replacement generators increased in the second
quarter of fiscal 2010 relative to the first quarter of fiscal 2010 and the
second quarter of fiscal 2009. We believe that this number is likely
to increase over the next two years, and we plan to discuss the basis for this
assertion at our previously announced investor day presentation scheduled for
December 4, 2009 in Boston.
“We
believe that both the U.S. and international epilepsy markets represent
significant opportunities for the company to realize consistent growth in both
sales and earnings in the coming years,” Mr. Moore
continued. “Specifically, the Cyberonics team is dedicated to
development efforts to improve the efficacy of VNS Therapy™ for epilepsy, with
particular attention to research efforts around seizure detection and improved
stimulation parameters. Again, these efforts will be discussed in
greater detail at the investor day presentation.
“With
respect to international markets, the Japanese authorities completed a quality
audit at our Houston office in the first week of September and a clinical audit
in Japan in November.”
Mr. Moore
concluded, “We are maintaining our longer term goals for our epilepsy business,
which include consistent annual unit growth in the range of 10% to 20% and the
achievement of an operating margin of 25% by fiscal 2011.”
Fiscal
2010 guidance
Based on
our first half performance, Cyberonics is increasing its previously provided
guidance range for income from operations from $24 million to $27 million to $28
million to $30 million, and increasing its guidance range for net sales from
$157 million to $161 million to $159 million to $162 million.
Additional
details will be provided during the upcoming conference call and in the
accompanying presentation slides, as described below.
Use
of Non-GAAP Financial Measures
Management
has disclosed financial measurements in this press announcement that present
financial information that is not in accordance with Generally Accepted
Accounting Principles (GAAP). These measurements are not substitutes
for GAAP measurements, although company management uses these measurements as an
aid in monitoring the company’s on-going financial performance from
quarter-to-quarter and year-to-year on a regular basis and for benchmarking
against other medical technology companies. Non-GAAP net income and
non-GAAP diluted earnings per share measure the income of the company excluding
the gain on early extinguishment of the company’s convertible debt, which is
considered by management to be outside of the normal on-going operations of the
company. Non-GAAP net income also measures the income of the company
excluding the income tax benefit resulting from the partial reversal of its tax
valuation allowance related to net operating losses. Management uses
and presents non-GAAP net income and non-GAAP diluted earnings per share because
management believes that in order to properly understand the company’s short and
long-term financial trends, the impact of these unusual items should be
eliminated from on-going operating activities. Management also uses
non-GAAP net income and non-GAAP diluted earnings per share to forecast and
evaluate the operational performance of the company as well as to compare
results of current periods to prior periods on a consistent basis.
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 a substitute for, or superior to, financial performance measures
prepared in accordance with GAAP.
Please
refer to the attached reconciliation between GAAP and non-GAAP financial
measures.
Fiscal
Year 2010 Second Quarter Results Conference Call Instructions
A
conference call to discuss fiscal year 2010 second quarter results will be held
at 9:00 AM EST on Thursday, November 19, 2009. To listen to the
conference call live by telephone dial 877-313-8035 (if dialing from within the
U.S.) or 706-679-4838 (if dialing from outside the U.S.). The
conference ID is 40115998. Presentation slides will be available
on-line at www.cyberonics.com no later than 8:00 AM EST on Thursday, November
19, 2009. A replay of the conference call will be available
approximately two hours after the completion of the live call by dialing
800-642-1687 (if dialing from within the U.S.) or 706-645-9291 (if dialing from
outside the U.S.). The replay conference ID access code is
40115998. The replay will be available for one week on the above
number and subsequently on the Company’s website for a period of six
months.
About
VNS Therapy™ and Cyberonics
Cyberonics,
Inc. (NASDAQ:CYBX) is a medical technology company with core expertise in
neuromodulation. The company developed and markets the Vagus Nerve
Stimulation (VNS) Therapy™ System, which is FDA-approved for the treatments of
epilepsy and depression. The VNS Therapy System uses a surgically
implanted medical device that delivers electrical pulsed signals to the vagus
nerve. Cyberonics markets the VNS Therapy System in selected markets
worldwide.
Additional
information on Cyberonics, Inc. and VNS TherapyTM is
available at www.cyberonics.com and www.vnstherapy.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 the company’s
balance sheet affording considerable flexibility, increasing unit sales of
replacement generators over the next two years, consistent growth in both sales
and earnings in the coming years in the U.S. and international epilepsy markets,
developing technology to improve the efficacy of VNS Therapy™ for epilepsy,
including devices incorporating seizure detection and improved stimulation
parameters, obtaining regulatory approval in Japan, achieving consistent annual
unit growth in the range of 10% to 20% and an operating margin of 25% by fiscal
2011, and fiscal 2010 guidance for net sales and income from
operations. 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 product; the development and satisfactory completion of clinical
trials and/or market test and/or regulatory approval of VNS Therapy™ for the
treatment of other indications; satisfactory completion of post-market studies
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 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 results of the previously disclosed
governmental inquiries; the potential identification of material weaknesses in
our internal controls over financial reporting; risks and costs associated with
such governmental inquiries and any litigation relating thereto or to our stock
option grants, procedures, and practices 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 24, 2009,and
Quarterly Report on Form 10-Q for the fiscal quarter ended July 23,
2009.
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 OPERATIONS
(Unaudited)
|
For
the Thirteen Weeks Ended
|
For
the Twenty-Six Weeks Ended
|
|||||||||||||||
|
October
23, 2009
|
October
24, 2008
|
October
23, 2009
|
October
24, 2009
|
|||||||||||||
|
Net
sales
|
$
|
40,718,172
|
$
|
36,031,971
|
$
|
79,219,409
|
$
|
69,763,829
|
||||||||
|
Cost
of sales
|
5,117,712
|
5,177,800
|
10,457,857
|
9,994,562
|
||||||||||||
|
Gross
Profit
|
35,600,460
|
30,854,171
|
68,761,552
|
59,769,267
|
||||||||||||
|
Operating
Expenses:
|
||||||||||||||||
|
Selling,
general and administrative
|
21,372,020
|
21,531,424
|
42,990,911
|
43,056,191
|
||||||||||||
|
Research
and development
|
5,145,194
|
4,806,220
|
10,175,283
|
9,414,395
|
||||||||||||
|
Total
Operating Expenses
|
26,517,214
|
26,337,644
|
53,166,194
|
52,470,586
|
||||||||||||
|
Income
from Operations
|
9,083,246
|
4,516,527
|
15,595,358
|
7,298,681
|
||||||||||||
|
Interest
income
|
23,504
|
433,646
|
65,767
|
941,933
|
||||||||||||
|
Interest
expense
|
(430,848
|
)
|
(929,018
|
)
|
(933,533
|
)
|
(2,090,668
|
)
|
||||||||
|
Gain
on early extinguishment of debt
|
672,137
|
4,612,845
|
2,196,466
|
4,612,845
|
||||||||||||
|
Other
income, net
|
332,905
|
(162,494
|
)
|
825,795
|
(145,260
|
)
|
||||||||||
|
Income
before income tax
|
9,680,944
|
8,471,506
|
17,749,853
|
10,617,531
|
||||||||||||
|
Income
tax (benefit) expense
|
(40,463,173
|
)
|
121,304
|
(40,259,723
|
)
|
214,528
|
||||||||||
|
|
||||||||||||||||
|
Net
income
|
$
|
50,144,117
|
$
|
8,350,202
|
$
|
58,009,576
|
$
|
10,403,003
|
||||||||
|
Basic
income per share
|
$
|
1.81
|
$
|
0.31
|
$
|
2.10
|
$
|
0.39
|
||||||||
|
Diluted
income per share
|
$
|
1.73
|
$
|
0.14
|
$
|
1.96
|
$
|
0.23
|
||||||||
|
|
||||||||||||||||
|
Shares
used in computing basic income per share
|
27,748,669
|
26,680,551
|
27,640,539
|
26,550,667
|
||||||||||||
|
Shares
used in computing diluted income per share
|
28,876,518
|
27,516,723
|
28,873,183
|
27,632,656
|
||||||||||||
|
CYBERONICS,
INC. AND SUBSIDIARY
|
|||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||||
|
(Unaudited except where
indicated)
|
|||||||||
|
October
23, 2009
|
April
24, 2009
|
||||||||
|
(Audited)
|
|||||||||
|
ASSETS
|
|||||||||
|
Current
Assets
|
|||||||||
|
Cash
and cash equivalents
|
$
|
60,498,938
|
$
|
66,225,479
|
|||||
|
Restricted
cash
|
1,000,000
|
1,000,000
|
|||||||
|
Accounts
receivable, net
|
24,838,576
|
22,250,653
|
|||||||
|
Inventories
|
13,830,193
|
12,841,064
|
|||||||
|
Deferred
tax assets
|
6,068,009
|
9,804
|
|||||||
|
Other
current assets
|
1,857,438
|
2,206,902
|
|||||||
|
Total
Current Assets
|
108,093,154
|
104,533,902
|
|||||||
|
Property
and equipment, net and other assets
|
8,096,628
|
7,103,390
|
|||||||
|
Deferred
tax assets
|
34,967,682
|
406,336
|
|||||||
|
Total
Assets
|
$
|
151,157,464
|
$
|
112,043,628
|
|||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||||
|
Current
Liabilities
|
$
|
17,577,088
|
$
|
17,645,240
|
|||||
|
Long
term liabilities:
|
|||||||||
|
Convertible
notes
|
39,215,000
|
62,339,000
|
|||||||
|
Deferred
license revenue and other
|
6,898,404
|
7,647,544
|
|||||||
|
Total
Long Term Liabilities
|
46,113,404
|
69,986,544
|
|||||||
|
Total
Liabilities
|
63,690,492
|
87,631,784
|
|||||||
|
Total
Stockholders' Equity
|
87,466,972
|
24,411,844
|
|||||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
151,157,464
|
$
|
112,043,628
|
|||||
|
CYBERONICS,
INC. AND SUBSIDIARY
|
||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
|
(Unaudited)
|
||||||||
|
For
the Twenty-Six Weeks Ended
|
||||||||
|
October
23, 2009
|
October
24, 2008
|
|||||||
|
Cash
Flow From Operating Activities:
|
||||||||
|
Net
Income
|
$
|
58,009,576
|
$
|
10,403,003
|
||||
|
Non-Cash
items included in Net Income
|
||||||||
|
Gain
on early extinguishment of debt
|
(2,196,466
|
)
|
(4,612,845
|
)
|
||||
|
Stock-base
compensation
|
4,455,545
|
5,221,077
|
||||||
|
Deferred
income tax
|
(40,619,551
|
)
|
2,626
|
|||||
|
Unrealized
(gain) loss in foreign currency transactions
|
(719,792
|
)
|
412,790
|
|||||
|
Other
|
519,463
|
819,027
|
||||||
|
Changes
in Operating Assets and Liabilities
|
||||||||
|
Accounts
receivable, net
|
(1,782,473
|
)
|
(1,117,839
|
)
|
||||
|
Inventories
|
(1,182,686
|
)
|
405,696
|
|||||
|
Other
|
429,041
|
(896,865
|
)
|
|||||
|
Net
Cash Provided By Operating Activities
|
16,912,657
|
10,636,670
|
||||||
|
Cash
Flow From Investing Activities:
|
||||||||
|
Net
Cash Used in Investing Activities
|
(2,537,564
|
)
|
(659,361
|
)
|
||||
|
Cash
Flow From Financing Activities:
|
||||||||
|
Repurchase
of convertible notes
|
(20,565,400
|
)
|
(34,902,750
|
)
|
||||
|
Proceeds
from exercise of options for common stock
|
597,692
|
4,256,353
|
||||||
|
Purchase
of treasury stock
|
(37,551
|
)
|
(532,293
|
)
|
||||
|
Net
Cash Used in Financing Activities
|
(20,005,259
|
)
|
(31,178,690
|
)
|
||||
|
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
(96,375
|
)
|
(516,456
|
)
|
||||
|
Net
Decrease in Cash and Cash Equivalents
|
(5,726,541
|
)
|
(21,717,837
|
)
|
||||
|
Cash
and Cash Equivalents at Beginning of Period
|
66,225,479
|
91,058,692
|
||||||
|
Cash
and Cash Equivalents at End of Period
|
$
|
60,498,938
|
$
|
69,340,855
|
||||
|
RECONCILIATION
OF NON-GAAP FINANCIAL MEASURE
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
For
the Thirteen Weeks Ended
|
For
the Twenty-Six Weeks Ended
|
|||||||||||||||
|
October
23, 2009
|
October
24, 2008
|
October
23, 2009
|
October
24, 2008
|
|||||||||||||
|
Net
income
|
$
|
50,144,117
|
$
|
8,350,202
|
$
|
58,009,576
|
$
|
10,403,003
|
||||||||
|
Deduct
effect of gain on early extinguishment of debt
|
(636,467
|
)
|
(4,440,387
|
)
|
(2,035,462
|
)
|
(4,081,999
|
)
|
||||||||
|
Deduct
effect of reduction in valuation allowance
|
(40,450,068
|
)
|
-
|
(40,450,068
|
)
|
-
|
||||||||||
|
|
||||||||||||||||
|
Non-GAAP
adjusted net income
|
$
|
9,057,582
|
$
|
3,909,815
|
$
|
15,524,046
|
$
|
6,321,004
|
||||||||
|
|
||||||||||||||||
|
Diluted
weighted average shares outstanding
|
28,876,518
|
27,516,723
|
28,873,183
|
27,632,656
|
||||||||||||
|
Effect
of reduction of valuation allowance on outstanding Convertible
Notes
|
(944,940
|
)
|
-
|
(944,940
|
)
|
-
|
||||||||||
|
Non-GAAP
adjusted diluted weighted average shares outstanding
|
27,931,578
|
27,516,723
|
27,928,243
|
27,632,656
|
||||||||||||
|
|
||||||||||||||||
|
Diluted
income per share
|
$
|
1.73
|
$
|
0.14
|
$
|
1.96
|
$
|
0.23
|
||||||||
|
Non-GAAP
adjusted diluted income per share
|
$
|
0.32
|
$
|
0.14
|
$
|
0.56
|
$
|
0.23
|
||||||||