NUVASIVE INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - NUVASIVE INC	d305634d8k.htm

Exhibit 99.1

LOGO


Contact:		Investors:
Michael J. Lambert		Patrick F. Williams
EVP & Chief Financial Officer		Vice President, Industry & Investor Relations
NuVasive, Inc.		NuVasive, Inc.
858-909-3394		858-638-5511
investorrelations@nuvasive.com		investorrelations@nuvasive.com

		Media:
		Nicholas S. Laudico
		The Ruth Group
		646-536-7030
		nlaudico@theruthgroup.com

NUVASIVE REPORTS FOURTH QUARTER 2011 FINANCIAL RESULTS

•

Fourth quarter 2011 total revenue of $150.2 million; up 16.2% from fourth quarter 2010 and up 13.0% from third quarter 2011

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Full year 2011 total revenue of $540.5 million; up 13.0% from the full year 2010

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GAAP net loss of $10.0 million, or $0.24 per share, for the fourth quarter 2011 and $69.8 million, or $1.73 per share, for the full year 2011

•

Non-GAAP earnings of $11.4 million, or $0.27 per share, for the fourth quarter 2011 and $43.9 million, or $1.07 per share, for the full year 2011

SAN DIEGO, February 22, 2012 - NuVasive, Inc. (Nasdaq: NUVA) a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter and for the full year ended December 31, 2011.

Alex Lukianov, Chairman and Chief Executive Officer, said, “Our financial performance in 2011 attests to the exceptional execution of our market share taking strategy, which drove revenue growth of 13% within a challenged US spine market that did not grow. I am very proud of the NuVasive family accomplishments to establish us as one of the top global spine companies with innovative surgical solutions that address the entire spine.”

Mr. Lukianov continued, “As the spine market shifts toward more minimally invasive procedures, NuVasive is ready to further penetrate the market and we expect to again lead the industry in market share gains in 2012. Normalized for the full year impacts of certain 2011 events, we expect to improve the operating profile of our business in 2012, with a pre-tax earnings growth rate nearly two times the rate of revenue growth. Through the breadth of our procedural offerings, increased global expansion, and continued focus on superior clinical outcomes, we are well positioned to achieve our longer term goal of becoming the #3 company in spine with $1 billion in revenue and a greatly improved profitability profile.”

NuVasive reported fourth quarter 2011 revenue of $150.2 million, a 16.2% increase over the $129.3 million for the fourth quarter 2010 and a 13.0% increase over the $132.9 million reported for the third quarter 2011.

Gross profit for the fourth quarter 2011 was $113.1 million and gross margin was 75.3%, compared to a gross profit of $106.2 million and a gross margin of 82.1% for the fourth quarter 2010. For the third quarter 2011, gross profit was $106.9 million and gross margin was 80.4%. Gross profit for the full year 2011 was $428.4 million and gross margin was 79.3%, compared to a gross profit of $393.1 million and gross margin of 82.2% for the full year 2010.

Total operating expenses for the fourth quarter 2011 were $122.9 million compared to $94.9 million in the fourth quarter 2010 and $198.3 million in the third quarter 2011. The higher operating expenses in the fourth quarter 2011 compared to the prior year resulted primarily from an intangible asset impairment charge and additional costs associated with higher revenue and infrastructure expansion. Full year 2011 operating expenses were $513.4 million compared to $361.0 million reported for the full year 2010. The higher operating expenses in 2011 resulted primarily from a charge related to intellectual property litigation, an intangible asset impairment charge, and additional costs associated with higher revenue and infrastructure expansion.

On a GAAP basis, the Company reported a net loss of $10.0 million, or $0.24 per share, for the fourth quarter 2011, and a net loss of $69.8 million, or $1.73 per share for the full year 2011.

On a Non-GAAP basis, the Company reported net income of $11.4 million, or $0.27 per share, for the fourth quarter 2011, and net income of $43.9 million, or $1.07 per share, for the full year 2011. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $8.3 million and $32.1 million; (ii) certain intellectual property litigation expenses of $1.3 million and $7.0 million; (iii) litigation award expense of nil and $101.2 million; (iv) amortization of intangible assets of $2.4 million and $6.6 million; (v) acquisition related items of $1.4 million and $3.8 million; (vi) non-cash interest expense on convertible notes of $3.0 million and $6.1 million; (vii) the positive impact from certain transactions associated with convertible notes activity of $0.4 million and $2.1 million; (viii) certain discrete tax items of $0.3 million and $6.6 million; and (ix) an intangible asset impairment charge of $18.2 million and $18.2 million.

Cash, cash equivalents and short and long-term marketable securities were $342.2 million at December 31, 2011.

2012 Full Year Financial Guidance

Compared to 2011 financial results, 2012 guidance reflects the full year impacts of convertible note activity, the Impulse Monitoring business, an accrual for estimated patent litigation royalties, and a tax expense rate in comparison to a tax benefit rate.

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Revenue of approximately $615 million

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GAAP EPS of approximately $0.09

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Non-GAAP EPS of approximately $0.93

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Non-GAAP Operating Margin of approximately 14%

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GAAP effective tax expense rate of approximately 60%

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Non-GAAP effective tax expense rate of approximately 40%

Reconciliation of Full Year EPS Guidance


	2012 Guidance ¹
GAAP earnings (loss) per share guidance	$	0.09
Non-cash stock-based compensation		0.46
Certain intellectual property litigation expenses		0.03
Amortization of intangible assets		0.16
Acquisition related items ²		0.02
Non-cash interest expense on convertible notes		0.17

Non-GAAP earnings per share guidance	$	0.93


Weighted shares outstanding - basic ²		43,500

Weighted shares outstanding - diluted ³		45,000


¹ Effective tax rate of ~60% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments ² Acquisition related items include expenses associated with prior M&A activity and as incurred ³ Weighted shares outstanding shown as pre “if-converted” method

2012 Guidance Reconciliation of Non-GAAP Operating Margin %


	FY 11 Actual	FY 12 Guidance
Gross Margin % [A]	79.3%	~76.0%

Non-GAAP Operating Expenses [B]	63.8%	~62.0%
Non-cash stock-based compensation	5.9%	~5.5%
Certain intellectual property litigation expenses	1.3%	~0.5%
Litigation award	18.7%	-
Amortization of intangible assets	1.2%	~2.0%
Acquisition related items*	0.7%	~0.2%
Intangible asset impairment charge	3.4%	-

GAAP Operating Expenses	95.0%	~70.2%


Non-GAAP Operating Margin % [A-B]	15.5%	~14.0%

* Acquisition related items include expenses associated with prior M&A activity and as incurred

Reconciliation of Non-GAAP Information

Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, a litigation award expense, amortization of intangible assets, acquisition related items, non-cash interest expense on convertible notes, a positive impact from certain transactions associated with convertible notes activity, certain discrete tax items, and an intangible asset impairment charge. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the Non-GAAP financial measures provided in this earnings release excluding these costs and uses these Non-GAAP financial measures to enable it to analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these Non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company’s current and future continuing operations. These Non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from Non-GAAP measures used by other companies. Set forth below are reconciliations of the Non-GAAP financial measures to the comparable GAAP financial measure.

Reconciliation of Fourth Quarter 2011 Results


(in thousands, except per share data)	Pre-Tax Adjustments			Net of Tax			(Loss) Earnings Per Share


GAAP net loss				$	(10,036	)	$	(0.24	)
Impact of change from basic to diluted share count								-

GAAP net loss, adjusted to diluted share count				$	(10,036	)	$	(0.24	)
Non-cash stock-based compensation	$	8,281			5,134			0.12
Certain intellectual property litigation expenses		1,254			777			0.02
Amortization of intangible assets		2,368			1,468			0.04
Acquisition related items		1,437			891			0.02
Non-cash interest expense on convertible notes		3,033			1,880			0.04
Certain transactions associated with convertible notes activity		(390	)		(242	)		(0.01	)
Certain discrete tax items		300			300			0.01
Intangible asset impairment charge		18,167			11,264			0.26


Non-GAAP earnings				$	11,437		$	0.27


GAAP weighted shares outstanding - basic and diluted								42,172

Non-GAAP weighted shares outstanding - diluted								42,690

Reconciliation of Full Year 2011 Results


(in thousands, except per share data)	Pre-Tax Adjustments			Net of Tax			(Loss) Earnings Per Share


GAAP net loss				$	(69,849	)	$	(1.73	)
Impact of change from basic to diluted share count								0.04

GAAP net loss, adjusted to diluted share count				$	(69,849	)	$	(1.69	)
Non-cash stock-based compensation	$	32,070			19,883			0.48
Certain intellectual property litigation expenses		6,974			4,324			0.10
Litigation award		101,200			62,744			1.52
Amortization of intangible assets		6,609			4,098			0.10
Acquisition related items		3,774			2,340			0.06
Non-cash interest expense on convertible notes		6,108			3,787			0.09
Certain transactions associated with convertible notes activity		(2,056	)		(1,275	)		(0.03	)
Certain discrete tax items		6,616			6,616			0.16
Instangible asset impairment charge		18,167			11,264			0.27


Non-GAAP earnings				$	43,932		$	1.07


GAAP weighted shares outstanding - basic and diluted								40,372

Non-GAAP weighted shares outstanding - diluted								41,231

Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive’s website, www.nuvasive.com, through March 23, 2012. In addition, a telephonic replay of the call will be available until March 7, 2012. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number 385036.

About NuVasive

NuVasive is a medical device company focused on developing minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 5^th largest player in the $7.8 billion global spine market.

NuVasive’s principal product offering is based on its Maximum Access Surgery, or MAS^® platform. The MAS platform combines several categories of solutions that collectively minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: a proprietary software-driven nerve avoidance system and intra-operative monitoring support; MaXcess^®, a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers. MAS significantly reduces surgery time and returns patients to activities of daily living much faster than conventional approaches. Having redefined spine surgery with the MAS platform’s lateral approach, known as eXtreme Lateral Interbody Fusion, or XLIF^®, NuVasive has built an entire spine franchise. With over 70 products today spanning lumbar, thoracic and cervical applications, the Company will continue to expand and evolve its offering predicated on its R&D focus and dedication to outstanding service levels supported by a culture of Absolute Responsiveness^®.

NuVasive cautions you that statements included in this press release that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive’s results to differ materially from historical results or those expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive’s revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts and the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability; the uncertain process of seeking regulatory approval or clearance for NuVasive’s products or devices, including risks that such process could be significantly delayed; the possibility that the FDA may require significant changes to NuVasive’s products or clinical studies; the risk that products may not perform as intended and may therefore not achieve commercial success; the risk that competitors may develop superior products or may have a greater market position enabling more successful commercialization; the risk that additional clinical data may call into question the benefits of NuVasive’s products to patients, hospitals and surgeons; and other risks and uncertainties more fully described in NuVasive’s press releases and periodic filings with the Securities and Exchange Commission. NuVasive’s public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

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NuVasive, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)


	Three Months Ended December 31,				Year Ended December 31,
	2011		2010		2011		2010

Revenue	$	150,194	$	129,304	$	540,506	$	478,237
Cost of goods sold (excluding amortization of purchased technology)		37,062		23,102		112,111		85,139

Gross profit		113,132		106,202		428,395		393,098

Operating expenses:
Sales, marketing and administrative		92,732		82,018		346,757		312,122
Research and development		9,584		11,490		40,703		43,479
Amortization of intangible assets		2,368		1,360		6,609		5,407
Intangible asset impairment charge		18,167		—		18,167		—
Litigation award		—		—		101,200		—

Total operating expenses		122,851		94,868		513,436		361,008

Interest and other expense, net:
Interest income		241		193		832		760
Interest expense		(6,971)		(1,667)		(17,933)		(6,672)
Other (expense) income, net		(225)		(345)		2,078		(264)

Total interest and other expense, net		(6,955)		(1,819)		(15,023)		(6,176)


(Loss) income before income taxes		(16,674)		9,515		(100,064)		25,914
Income tax (benefit) expense		(6,328)		(52,018)		(29,043)		(50,619)

Consolidated net (loss) income	$	(10,346)	$	61,533	$	(71,021)	$	76,533

Net loss attributable to noncontrolling interests	$	(310)	$	(399)	$	(1,172)	$	(1,752)

Net (loss) income attributable to NuVasive, Inc.	$	(10,036)	$	61,932	$	(69,849)	$	78,285


Net (loss) income per share attributable to NuVasive, Inc.:
Basic	$	(0.24)	$	1.57	$	(1.73)	$	1.99

Diluted	$	(0.24)	$	1.39	$	(1.73)	$	1.85

Weighted average shares outstanding:
Basic		42,172		39,486		40,372		39,251

Diluted		42,172		45,488		40,372		45,514


Stock-based compensation is included in operating expenses in the following categories:
Sales, marketing and administrative	$	7,627	$	6,099	$	29,583	$	24,945
Research and development		654		822		2,487		3,280

	$	8,281	$	6,921	$	32,070	$	28,225

NuVasive, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)


	December 31,
	2011		2010
ASSETS
Current assets:
Cash and cash equivalents	$	163,492	$	92,597
Short-term marketable securities		146,228		86,458
Accounts receivable, net		88,350		74,361
Inventory		119,313		107,577
Deferred tax assets		54,550		4,425
Prepaid expenses and other current assets		19,904		6,353

Total current assets		591,837		371,771
Property and equipment, net		124,754		102,165
Long-term marketable securities		32,503		50,635
Intangible assets, net		108,140		107,121
Goodwill		159,349		103,070
Deferred tax assets, non-current		19,857		52,033
Restricted cash and investments		68,600		5,529
Other assets		18,522		9,705

Total assets	$	1,123,562	$	802,029

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	51,744	$	58,995
Accrued payroll and related expenses		22,215		17,266
Litigation liability		101,200		-
Acquisition-related liabilities		32,221		32,715

Total current liabilities		207,380		108,976
Senior Convertible Notes		394,019		230,000
Long-term acquisition-related liabilities		—		326
Deferred tax liabilities		3,952		3,685
Other long-term liabilities		13,461		12,810
Commitments and contingencies
Noncontrolling interests		10,705		11,877
Stockholders’ equity:
Common stock		42		40
Additional paid-in capital		674,790		545,114
Accumulated other comprehensive income		477		616
Accumulated deficit		(181,264)		(111,415)

Total stockholders’ equity		494,045		434,355

Total liabilities and stockholders’ equity	$	1,123,562	$	802,029

NuVasive, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

		0000000000		0000000000		0000000000
	Year Ended December 31,

	2011		2010		2009

Operating activities:
Consolidated net (loss) income	$	(71,021)	$	76,533	$	4,437
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		36,242		36,737		29,841
Deferred income tax benefit		(30,967)		(53,664)		—
Amortization of debt discount		6,108		—		—
Amortization of debt issuance costs		1,816		1,493		1,493
Stock-based compensation		32,070		28,225		23,793
Intangible asset impairment charge		18,167		—		—
Loss on repurchase of Senior Convertible Notes, net		332		—		—
Gain recognized on change in fair value of derivatives		(2,387)		—		—
Leasehold abandonment (reversal)		—		—		(1,997)
Allowance for doubtful accounts and sales return reserve		1,345		(995)		2,211
Allowance for excess and obsolete inventory, net of write-offs		6,028		1,607		2,297
Accretion of contingent consideration		980		962		5
Other non-cash adjustments		5,247		3,844		1,861
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(9,929)		(17,865)		(7,828)
Inventory		(17,170)		(18,664)		(23,133)
Prepaid expenses and other current assets		(14,396)		(2,105)		6
Accounts payable and accrued liabilities		(3,385)		11,596		5,932
Litigation liability		101,200		—		—
Accrued payroll and related expenses		2,685		(1,877)		7,501

Net cash provided by operating activities		62,965		65,827		46,419
Investing activities:
Cash paid for acquisitions and investments		(35,375)		(973)		(46,055)
Purchases of property and equipment		(53,370)		(45,846)		(32,878)
Purchases of marketable securities		(253,210)		(203,415)		(157,278)
Sales of marketable securities		151,966		204,439		108,308
Purchases of restricted investment		(4,536)		—		—
Payment for specific rights in connection with supply agreement, net of refund received		(5,000)		—		—
Other assets		(2,199)		—		—

Net cash used in investing activities		(201,724)		(45,795)		(127,903)
Financing activities:
Proceeds from the sale of warrants		47,898		—		—
Proceeds from the issuance of convertible debt, net of issuance costs		391,445		—		—
Purchase of convertible note hedges		(80,097)		—		—
Repurchase of 2013 Senior Convertible Notes		(154,164)		—		—
Tax benefits related to stock-based compensation awards		463		186		1,902
Proceeds from the issuance of common stock		6,852		14,831		12,556
Payment of contingent consideration		(1,800)		—		—
Other assets		(718)		(7,935)		—

Net cash provided by financing activities		209,879		7,082		14,458
Effect of exchange rate changes on cash		(225)		70		121

Increase (decrease) in cash and cash equivalents		70,895		27,184		(66,905)
Cash and cash equivalents at beginning of year		92,597		65,413		132,318

Cash and cash equivalents at end of year	$	163,492	$	92,597	$	65,413

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