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02:26:36 EDT Thu 02 Oct 2014
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NUVASIVE INC
Symbol U : NUVA
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NuVasive Reports Fourth Quarter and Full Year 2012 Financial Results

2013-02-26 16:30 ET - News Release

SAN DIEGO, CA -- (Marketwire) -- 02/26/13

NuVasive, Inc. (NASDAQ: NUVA)

  • Fourth quarter 2012 total revenue of $165.8 million; up 10.4% from fourth quarter 2011 and up 11.7% from third quarter 2012

  • Full year 2012 total revenue of $620.3 million; up 14.8% from the full year 2011

  • GAAP operating margin of 2.5% for the fourth quarter 2012 and 6.0% for the full year 2012

  • Non-GAAP operating margin of 15.0% for the fourth quarter 2012 and 14.5% for the full year 2012

  • GAAP net loss of $2.7 million, or $0.06 per share, for the fourth quarter 2012 and GAAP net earnings of $3.1 million, or $0.07 per share, for the full year 2012

  • Non-GAAP earnings of $15.0 million, or $0.34 per share, for the fourth quarter 2012 and $45.8 million, or $1.04 per share, for the full year 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, 2012.

Alex Lukianov, Chairman and Chief Executive Officer, said, "We are very proud of our strong close to 2012 and excellent revenue growth of 15% with profit translation. As we embark on 2013, we are excited to build upon our momentum with growing clinical evidence, game-changing new product launches, an energized sales force, and our expansion into new international markets. Over the last decade, NuVasive has positively changed the lives of over 100,000 spine patients through minimally invasive surgery with our XLIF procedure. We are highly focused on continually disrupting the global spine industry through innovation with advanced procedural solutions and executing to a long term plan of evolving into a $1 billion company with steadily increasing profitability. Our proven, three pillar market share taking strategy of Superior Outcomes, Absolute Responsiveness, and Speed of Innovation will sustain our future growth toward the #3 position within the global spine industry."

NuVasive reported fourth quarter 2012 revenue of $165.8 million, a 10.4% increase over the $150.2 million for the fourth quarter 2011 and an 11.7% increase over the $148.4 million reported for the third quarter 2012.

Gross profit for the fourth quarter 2012 was $123.6 million and gross margin was 74.5%, compared to a gross profit of $113.1 million and a gross margin of 75.3% for the fourth quarter 2011. For the third quarter 2012, gross profit was $110.6 million and gross margin was 74.6%. Gross profit for the full year 2012 was $466.8 million and gross margin was 75.3%, compared to a gross profit of $428.4 million and gross margin of 79.3% for the full year 2011.

Total operating expenses for the fourth quarter 2012 were $119.4 million compared to $122.9 million in the fourth quarter 2011 and $98.1 million in the third quarter 2012. The higher operating expenses in the fourth quarter 2011 resulted from a higher 2011 asset impairment charge. Full year 2012 operating expenses were $429.8 million compared to $513.4 million reported for the full year 2011. The higher operating expenses for the full year 2011 resulted primarily from a 2011 charge related to a litigation liability.

On a GAAP basis, the Company reported a net loss of $2.7 million, or $0.06 per share, for the fourth quarter 2012, and net income of $3.1 million, or $0.07 per share for the full year 2012.

On a Non-GAAP basis, the Company reported net income of $15.0 million, or $0.34 per share, for the fourth quarter 2012, and net income of $45.8 million, or $1.04 per share, for the full year 2012. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $5.9 million and $26.3 million; (ii) certain intellectual property litigation expenses of $852,000 and $2.4 million; (iii) amortization of intangible assets of $3.6 million and $12.4 million; (iv) acquisition related items of $639,000 and $2.1 million; (v) non-cash interest expense on convertible notes of $3.3 million and $12.7 million; and (vi) intangible asset and goodwill impairment charges of $9.7 million and $9.7 million.

Cash, cash equivalents and short and long-term marketable securities were $346.1 million at December 31, 2012.

2013 Full Year Financial Guidance

  • Revenue of approximately $655 million
  • GAAP EPS of approximately $0.07
  • Non-GAAP EPS of approximately $1.00
  • Non-GAAP Operating Margin of approximately 14%
  • GAAP effective tax expense rate of approximately 60%



                  Reconciliation of Full Year EPS Guidance

                                                                    2013
                                                                Guidance (2)
                                                               -------------
GAAP earnings per share guidance (1)                           $        0.07
  Non-cash stock based compensation                                     0.39
  Certain intellectual property litigation expenses                     0.06
  Amortization of intangible assets                                     0.27
  Acquisition related items (3)                                         0.03
  Non-cash interest expense on convertible notes                        0.18
                                                               -------------
Non-GAAP earnings per share guidance (1)                       $        1.00
                                                               =============

Weighted shares outstanding - basic                                   45,500
                                                               =============
Weighted shares outstanding - diluted                                 46,500
                                                               =============

(1) Includes negative impact of Medical Device Excise Tax of ~$0.13
(2) Effective tax rate of ~60% applied to GAAP earnings and ~40% applied to
 Non-GAAP adjustments
(3) Acquisition related items include expenses associated with prior M&A
 activity and as incurred



                Reconciliation of Non-GAAP Operating Margin %

                                                 2012 Actuals        2013
                                            ---------------------
                                              Fourth      Full     Full Year
                                              Quarter     Year     Guidance
                                            ---------- ---------- ----------
                         Gross Margin % [A]    74.5%      75.3%   ~74.0% (1)

            Non-GAAP Operating Expenses [B]    59.5%      60.8%     ~60.0%
          Non-cash stock-based compensation    3.5%       4.2%       ~5.0%
   Certain intellectual property litigation
                                   expenses    0.5%       0.4%       ~1.0%
          Amortization of intangible assets    2.2%       2.0%       ~3.0%
   Intangible asset and goodwill impairment
                                     charge    5.9%       1.5%         -
              Acquisition related items (2)    0.4%       0.3%       ~0.3%
                                            ---------- ---------- ----------
                    GAAP Operating Expenses    72.0%      69.3%     ~69.3%

                                            ---------- ---------- ----------
          Non-GAAP Operating Margin % [A-B]    15.0%      14.5%   ~14.0% (1)
                                            ---------- ---------- ----------

(1) Includes negative impact of Medical Device Excise
 Tax of ~1.5%, or ~150bps
(2) 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, amortization of intangible assets, acquisition related items, non-cash interest expense on convertible notes, and intangible asset and goodwill impairment charges. 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 2012 Results

                                                                   (Loss)
                                        Pre-Tax     Net of Tax    Earnings
(in thousands, except per share data) Adjustments      (1)       Per Share
                                      -----------  -----------  -----------
GAAP net income                                    $    (2,746) $     (0.06)
Impact of change from basic to
 diluted share count                                                      -
                                                   -----------  -----------
GAAP net loss, adjusted to diluted
 share count                                       $    (2,746) $     (0.06)
  Non-cash stock-based compensation   $     5,912        3,547         0.08
  Certain intellectual property
   litigation expenses                        852          511         0.01
  Amortization of intangible assets         3,600        2,160         0.05
  Acquisition related items                   639          383         0.01
  Non-cash interest expense on
   convertible notes                        3,262        1,957         0.04
  Intangible asset impairment charge        1,400          840         0.02
  Goodwill impairment charge                8,300        8,300         0.19
                                                   -----------  -----------
Non-GAAP earnings                                  $    14,953  $      0.34
                                                   ===========  ===========

GAAP weighted shares outstanding - basic and
 diluted                                                             43,628
                                                                ===========
Non-GAAP weighted shares outstanding
 - diluted                                                           44,634
                                                                ===========

(1) 40% tax rate applied to Non-GAAP adjustments, except for non-deductible
 goodwill impairment charge


                  Reconciliation of Full Year 2012 Results

                                                                   Earnings
                                         Pre-Tax     Net of Tax      Per
(in thousands, except per share data)  Adjustments      (1)         Share
                                       -----------  -----------  -----------
GAAP net income                                     $     3,144  $      0.07
  Non-cash stock-based compensation    $    26,312       15,787         0.36
  Certain intellectual property
   litigation expenses                       2,419        1,451         0.03
  Amortization of intangible assets         12,430        7,458         0.17
  Acquisition related items                  2,059        1,235         0.03
  Non-cash interest expense on
   convertible notes                        12,697        7,618         0.17
  Intangible asset impairment charge         1,400          840         0.02
  Goodwill impairment charge                 8,300        8,300         0.19
                                                    -----------  -----------
Non-GAAP earnings                                   $    45,834  $      1.04
                                                    ===========  ===========

Weighted shares outstanding - diluted                                 44,272
                                                                 ===========

(1) 40% tax rate applied to Non-GAAP adjustments, except for non-deductible
 goodwill impairment charge

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 26, 2013. In addition, a telephonic replay of the call will be available until March 12, 2013. 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 406960.

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 4th largest player in the $8.2 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 may 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 may significantly improve surgical outcomes 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 a complete portfolio of products spanning lumbar, thoracic, and cervical applications, the Company will continue to expand and evolve its offering predicated on its focus on innovation 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; the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability; 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.


                               NuVasive, Inc.
         Unaudited Condensed Consolidated Statements of Operations
                   (in thousands, except per share data)

                                  Three Months Ended        Year Ended
                                     December 31,          December 31,
                                 --------------------  --------------------
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------

Revenue                          $ 165,754  $ 150,194  $ 620,255  $ 540,506
Cost of goods sold (excluding
 amortization of purchased
 technology)                        42,196     37,062    153,409    112,111
                                 ---------  ---------  ---------  ---------
Gross profit                       123,558    113,132    466,846    428,395

Operating expenses:
  Sales, marketing and
   administrative                   97,713     93,428    372,416    349,052
  Research and development           8,398      8,888     35,296     38,408
  Amortization of intangible
   assets                            3,600      2,368     12,430      6,609
  Impairment of goodwill and
   intangible assets                 9,700     18,167      9,700     18,167
  Litigation award                       -          -          -    101,200
                                 ---------  ---------  ---------  ---------
Total operating expenses           119,411    122,851    429,842    513,436

Interest and other expense, net:
  Interest income                      254        241        915        832
  Interest expense                  (7,028)    (6,971)   (27,710)   (17,933)
  Other income (expense), net          901       (225)     1,047      2,078
                                 ---------  ---------  ---------  ---------
Total interest and other
 expense, net                       (5,873)    (6,955)   (25,748)   (15,023)
                                 ---------  ---------  ---------  ---------

(Loss) income before income
 taxes                              (1,726)   (16,674)    11,256   (100,064)
Income tax expense (benefit)         1,050     (6,328)     8,814    (29,043)
                                 ---------  ---------  ---------  ---------
Consolidated net (loss) income   $  (2,776) $ (10,346) $   2,442  $ (71,021)
                                 =========  =========  =========  =========
Net loss attributable to
 noncontrolling interests        $     (30) $    (310) $    (702) $  (1,172)
                                 =========  =========  =========  =========
Net (loss) income attributable
 to NuVasive, Inc.               $  (2,746) $ (10,036) $   3,144  $ (69,849)
                                 =========  =========  =========  =========

Net (loss) income per share
 attributable to NuVasive, Inc.:
  Basic                          $   (0.06) $   (0.24) $    0.07  $   (1.73)
                                 =========  =========  =========  =========
  Diluted                        $   (0.06) $   (0.24) $    0.07  $   (1.73)
                                 =========  =========  =========  =========
Weighted average shares
 outstanding:
  Basic                             43,628     42,172     43,328     40,372
                                 =========  =========  =========  =========
  Diluted                           43,628     42,172     44,272     40,372
                                 =========  =========  =========  =========

Stock-based compensation is included in
 expenses in the following categories:
  Sales, marketing and
   administrative                $   5,373  $   7,627  $  24,096  $  29,583
  Research and development             514        654      2,138      2,487
  Cost of goods sold                    25          -         78          -
                                 ---------  ---------  ---------  ---------
                                 $   5,912  $   8,281  $  26,312  $  32,070
                                 =========  =========  =========  =========


                               NuVasive, Inc.
              Unaudited Condensed Consolidated Balance Sheets
                               (in thousands)

                                                December 31,   December 31,
                                                    2012           2011
                                               -------------  -------------
ASSETS
Current assets:
  Cash and cash equivalents                    $     123,299  $     163,492
  Short-term marketable securities                   138,405        146,228
  Accounts receivable, net                            88,958         87,736
  Inventory                                          126,335        119,313
  Deferred tax assets, current                        28,236         54,550
  Prepaid expenses and other current assets            8,516         20,518
                                               -------------  -------------
Total current assets                                 513,749        591,837
Property and equipment, net                          125,123        124,754
Long-term marketable securities                       84,412         32,503
Intangible assets, net                               101,362        108,140
Goodwill                                             154,106        159,349
Deferred tax assets                                   40,575         19,857
Restricted cash and investments                      118,995         68,600
Other assets                                          25,463         18,522
                                               -------------  -------------
Total assets                                   $   1,163,785  $   1,123,562
                                               =============  =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities     $      62,048  $      51,744
  Accrued payroll and related expenses                27,916         22,215
  Litigation liability                                     -        101,200
  Acquisition-related liabilities                          -         32,221
  Senior Convertible Notes, current                   74,311              -
                                               -------------  -------------
Total current liabilities                            164,275        207,380
Senior Convertible Notes                             332,404        394,019
Deferred tax liabilities                               3,129          3,952
Litigation liability                                 101,200              -
Other long-term liabilities                           15,199         13,461
Commitments and contingencies
Noncontrolling interests                              10,003         10,705
Stockholders' equity:
  Preferred stock                                          -              -
  Common stock                                            44             42
  Additional paid-in capital                         714,865        674,790
  Accumulated other comprehensive income                 786            477
  Accumulated deficit                               (178,120)      (181,264)
                                               -------------  -------------
Total stockholders' equity                           537,575        494,045
                                               -------------  -------------
Total liabilities and stockholders' equity     $   1,163,785  $   1,123,562
                                               =============  =============


                               NuVasive, Inc.
         Unaudited Condensed Consolidated Statements of Cash Flows
                               (in thousands)

                                                Year Ended December 31,
                                            -------------------------------
                                               2012       2011       2010
                                            ---------  ---------  ---------

Operating activities:
  Consolidated net income (loss)            $   2,442  $ (71,021) $  76,533
  Adjustments to reconcile net income
   (loss) to net cash provided by operating
   activities:
    Depreciation and amortization              51,909     36,242     36,737
    Deferred income tax expense (benefit)       4,525    (30,967)   (53,664)
    Amortization of debt discount              12,697      6,108          -
    Amortization of debt issuance costs         1,872      1,816      1,493
    Stock-based compensation                   26,312     32,070     28,225
    Impairment of goodwill and intangible
     assets                                     9,700     18,167          -
    Loss on repurchase of Senior
     Convertible Notes, net                         -        332          -
    Gain recognized on change in fair value
     of derivatives                                 -     (2,387)         -
    Allowance for doubtful accounts and
     sales return reserve                         103      1,345       (995)
    Allowance for excess and obsolete
     inventory, net of write-offs               5,475      6,028      1,607
    Accretion of contingent consideration       1,364        980        962
    Other non-cash adjustments                  5,919      5,247      3,844
  Changes in operating assets and
   liabilities, net of effects from
   acquisitions:
    Accounts receivable                        (2,005)    (9,929)   (17,865)
    Inventory                                 (11,022)   (17,170)   (18,664)
    Prepaid expenses and other current
     assets                                    12,725    (14,396)    (2,105)
    Accounts payable and accrued
     liabilities                                2,938     (3,385)    11,596
    Litigation liability                            -    101,200          -
    Accrued payroll and related expenses        5,128      2,685     (1,877)
                                            ---------  ---------  ---------
Net cash provided by operating activities     130,082     62,965     65,827
Investing activities:
    Cash paid for business and asset
     acquisitions                             (11,088)   (37,574)      (973)
    Purchases of property and equipment       (41,189)   (53,370)   (45,846)
    Purchases of marketable securities       (235,919)  (253,210)  (203,415)
    Sales of marketable securities            246,504    151,966    204,439
    Purchases of restricted investments      (113,281)    (4,536)         -
    Sales of restricted investments             7,079          -          -
    Payment for specific rights in
     connection with supply agreement, net
     of refund received                             -     (5,000)         -
                                            ---------  ---------  ---------
Net cash used in investing activities        (147,894)  (201,724)   (45,795)
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                        3,003        463        186
    Proceeds from the issuance of common
     stock                                      4,884      6,852     14,831
    Payment of contingent consideration       (29,722)    (1,800)         -
    Other assets                                 (721)      (718)    (7,935)
                                            ---------  ---------  ---------
Net cash (used in) provided by financing
 activities                                   (22,556)   209,879      7,082
Effect of exchange rate changes on cash           175       (225)        70
                                            ---------  ---------  ---------
(Decrease) increase in cash and cash
 equivalents                                  (40,193)    70,895     27,184
Cash and cash equivalents at beginning of
 year                                         163,492     92,597     65,413
                                            ---------  ---------  ---------
Cash and cash equivalents at end of year    $ 123,299  $ 163,492  $  92,597
                                            =========  =========  =========

Contact:
Michael J. Lambert
EVP & Chief Financial Officer
NuVasive, Inc.
858-909-3394
Email Contact

Investors:
Stephan Ogilvie
VP, Corporate Development & Investor Relations
NuVasive, Inc.
201-322-6515
Email Contact

Media:
Nicholas S. Laudico
The Ruth Group
646-536-7030
Email Contact

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