NUVA Nuvasive Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 4, 2015

 

 

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		000-50744		33-0768598
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

7475 Lusk Boulevard, San Diego, California 92121

(Address of principal executive offices) (Zip Code)

(858) 909-1800

(Registrant’s telephone number, including area code)

n/a

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

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Item 2.02

Results of Operations and Financial Condition.

On May 4, 2015, NuVasive, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2015. A copy of this press release is furnished as Exhibit 99.1 hereto.

The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

99.1		Press release issued by NuVasive, Inc. on May 4, 2015, announcing its financial results for the quarter ended March 31, 2015.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press release issued by NuVasive, Inc. on May 4, 2015, announcing its financial results for the quarter ended March 31, 2015.

Exhibit 99.1

 

NEWS RELEASE

Investor/Media Contact:

Stacy Roughan

NuVasive, Inc.

1-858-909-1812

sroughan@nuvasive.com

NUVASIVE REPORTS FIRST QUARTER 2015 FINANCIAL RESULTS

First Quarter 2015 Highlights:

 

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Revenue increased 8.4% to $192.4 million, or 10.0% on a constant currency basis;

 

•

Non-GAAP operating profit margin of 12.6%; GAAP operating profit margin of 28.9%;

 

•

Adjusted EBITDA margin of 23.0%;

 

•

Non-GAAP net income of $15.1 million; GAAP net income of $31.6 million; and

 

•

Non-GAAP earnings per share of $0.30; GAAP earnings per share of $0.61

SAN DIEGO, CA – May 4, 2015 - NuVasive, Inc. (Nasdaq: NUVA) (“NuVasive” or the “Company”), a leading medical device company focused on transforming spine surgery with minimally disruptive, procedurally integrated solutions, announced today financial results for the quarter ended March 31, 2015.

“We are pleased to report strong results for the first quarter 2015, including double-digit revenue growth on a constant currency basis, as well as exceptional operating and EBITDA margin expansion. These outstanding results speak to the ongoing strength of our innovative edge in the marketplace and commitment to leveraging our scale as NuVasive evolves into a global spine player,” said Gregory T. Lucier, Chairman and Interim Chief Executive Officer of NuVasive. “Looking ahead, NuVasive’s strategy has not changed. We remain laser-focused on increasing our market share in a profitable way, driving innovation in our products and business, and making our culture and people a competitive advantage. Fueled by even greater efficiencies, accelerated globalization and the continued introduction of game-changing innovation, we are well-positioned to continue our positive momentum in 2015 and beyond.”

Lucier continued, “More recently, we are pleased to have reached an agreement in principle with the U.S. Department of Justice related to the Company’s ongoing investigation by the Office of Inspector General of the Department of Health and Human Services (“OIG”). This understanding with OIG, coupled with the March 2015 court order to reassess a proper damages award in the Company’s ongoing patent lawsuit with Medtronic, provides us with greater clarity related to these legal matters.”

A full reconciliation of non-GAAP to GAAP measures can be found in the tables of this news release.

 

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First Quarter 2015 Results

NuVasive reported first quarter 2015 total revenue of $192.4 million, an 8.4% increase compared to $177.5 million for the first quarter 2014. On a constant currency basis, first quarter 2015 total revenue increased 10.0% compared to the same period last year.

GAAP gross profit for the first quarter 2015 was $146.7 million and gross margin was 76.3% compared to a gross profit of $134.2 million and a gross margin of 75.6% for the first quarter 2014. Total GAAP operating expenses for the first quarter 2015 were $91.2 million compared to $161.6 million in the first quarter 2014. The reduction in operating expenses for the first quarter 2015 was primarily driven by a $56.4 million gain related to the partial reversal of an accrual related to a Medtronic litigation liability.

The Company reported a GAAP net income of $31.6 million, or $0.61 per share, for the first quarter 2015 compared to a GAAP net loss of $(18.3) million, or $(0.40) per share, for the first quarter 2014.

On a non-GAAP basis, the Company reported net income of $15.1 million, or $0.30 per share, for the first quarter 2015 compared to net income of $8.9 million, or $0.18 per share, for the first quarter 2014. The non-GAAP earnings per share calculations for the first quarter 2015 exclude the following amounts pre-tax: (i) amortization of intangible assets of $3.0 million; (ii) leasehold related charges of $2.9 million; (iii) one-time and acquisition related items of $2.0 million; (iv) CEO related transition charges of $3.4 million; (v) a net gain from changes in litigation liabilities of $42.6 million; and (vi) non-cash interest expense on convertible notes of $3.8 million.

Cash, cash equivalents and short and long-term marketable securities were approximately $316.8 million at March 31, 2015.

Annual Guidance for 2015

The Company provided the following updated projections to its full year 2015 guidance:

 

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Revenue of approximately $810.0 million, which includes an approximate $12.0 million of currency headwinds versus a prior expectation of an approximate $10.0 million currency impact for 2015, or approximately 6.0% growth compared to revenue of $762.4 million for 2014; on a constant currency basis revenue is expected to grow approximately 7.8%;

 

•

GAAP earnings per share of approximately $1.12 compared to GAAP loss per share of ($0.36) for 2014; versus a prior expectation of $0.67 for 2015;

 

•

Non-GAAP earnings per share of approximately $1.10, an increase of approximately 64.0% compared to non-GAAP earnings of $0.67 for 2014; unchanged from prior expectations for 2015;

 

•

Non-GAAP operating margin of approximately 14.4%, an increase of approximately 300 basis points compared to 11.4% for 2014; unchanged from prior expectations for 2015;

 

•

Adjusted EBITDA margin of approximately 24.6%, an increase of approximately 270 basis points compared to 21.9% for 2014; unchanged from prior expectations for 2015;

 

•

GAAP effective tax expense rate of approximately 46.0%; versus a prior expectation of 49.0% for 2015; and

 

•

Non-GAAP effective tax expense rate of approximately 46.0%; unchanged from prior expectations for 2015.

 

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Supplementary Financial Information

For additional financial detail, please visit the Investor Relations section of the Company’s website at www.nuvasive.com to access Supplementary Financial Information.

 

Reconciliation of Full Year EPS Guidance
						2015 Guidance
		2014     Actuals				Prior 1				Current 2
GAAP earnings (loss) per share		$	(0.36)			$	0.67			$	1.12
Impact of change from basic to diluted share count			0.02				-				-
Impact of treasury method on convertible notes 3			-				0.02				0.03
Adjusted GAAP earnings (loss) per share, adjusted to diluted share count		$	(0.34)			$	0.69			$	1.15
Amortization of intangible assets			0.16				0.14				0.14
Leasehold related charges			0.13				0.03				0.03
Litigation liability			0.36				-				(0.50)
Intangible asset impairment			0.13				-				-
CEO transition related costs			-				-				0.04
One-time and acquisition related items 4			0.05				0.05				0.05
Non-cash interest expense on convertible notes			0.18				0.19				0.19
Non-GAAP earnings per share		$	0.67			$	1.10			$	1.10
GAAP Weighted shares outstanding - basic			46,715				48,593				48,593
GAAP Weighted shares outstanding - diluted			46,715				52,607				52,607
Non-GAAP Weighted shares outstanding - diluted 3			49,676				51,431				51,431
1    Effective tax expense rate of ~49% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments   2    Effective tax expense rate of ~46% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments   3    Excludes the impact of share dilution of the convertible bond for which the Company has a hedge in place but is considered anti-dilutive under US GAAP in weighted average shares outstanding   4    Acquisition related items include expenses associated with M&A related activity and as incurred

 

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Reconciliation of Non-GAAP Operating Margin %
		2014   Actuals				2015 Guidance
(in thousands, except %)						Prior				Current
Non-GAAP Gross Margin % [A]			76.1%				77.6%				77.3%
GAAP Gross Margin [D]			76.1%				77.6%				77.3%
Non-GAAP Sales, Marketing & Administrative Expense [B]			59.9%				58.2%				57.9%
Leasehold related charges			1.4%				0.4%				0.4%
CEO transition related costs			-				-				0.4%
One-time and acquisition related items 1			0.3%				0.5%				0.5%
GAAP Sales, Marketing & Administrative Expense [E]			61.6%				59.1%				59.2%
Non-GAAP Research & Development Expense [C]			4.8%				5.0%				5.0%
One-time and acquisition related items 1			0.2%				-				-
GAAP Research & Development Expense [F]			5.0%				5.0%				5.0%
Litigation liability [G]			3.9%				-				-5.3%
Intangible asset impairment [H]			1.4%				-				-
Amortization of intangible assets [I]			1.8%				1.5%				1.5%
Non-GAAP Operating Margin % [A-B-C]			11.4%				14.4%				14.4%
GAAP Operating Margin % [D-E-F-G-H-I]			2.4%				12.0%				16.9%
1  Acquisition related items include expenses associated with M&A related activity and as incurred

 

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Reconciliation of EBITDA %
						2015 Guidance
(in thousands, except %)		2014     Actuals				Prior				Current
Net Income / (Loss)			-2.2%				4.4%				7.3%
Interest (income) / expense, net			3.5%				3.5%				3.5%
Provision for income taxes			0.8%				4.1%				6.0%
Depreciation and amortization 1			8.1%				7.5%				7.5%
EBITDA			10.2%				19.5%				24.3%
Non-cash stock based compensation			4.4%				4.2%				4.2%
Leasehold related charges			1.4%				0.4%				0.4%
Litigation liability			3.9%				-				-5.3%
Intangible asset impairment			1.4%				-				-
CEO transition related costs 2			-				-				0.4%
One-time and acquisition related items 3			0.5%				0.5%				0.5%
Adjusted EBITDA			21.9%				24.6%				24.6%
1   Included in leasehold related charges are accelerated depreciation as a result of early leasehold terminations, which thereby were excluded from the depreciation line   2   Included in CEO related transition costs are $1.2m of stock based compensation charges, which thereby were excluded from the non-cash stock based compensation line   3   Acquisition related items include expenses associated with M&A related activity and as incurred

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating margin, which exclude amortization of intangible assets, leasehold related charges, one-time and acquisition related items, CEO related transition costs, net gain from changes in litigation liabilities and non-cash interest expense on convertible notes.

The Company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital. Additionally, the Company uses an adjusted EBITDA measure which represents earnings before interest, taxes, depreciation and amortization and excludes the impact of stock-based compensation, a leasehold related charge, acquisition related items, an intangible asset impairment charge, and other significant one-time items. 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 further and more consistently analyze the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional 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.

 

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Reconciliation of First Quarter 2015 Results GAAP Earnings per Share to Non-GAAP Earnings per Share
(in thousands, except per share data)		Pre-Tax   Adjustments				Net of Tax				Earnings Per Share
GAAP net income						$	31,560			$	0.66
GAAP impact of change from basic to diluted share count											(0.05)
GAAP net income, adjusted to diluted share count										$	0.61
Impact of treasury method on convertible notes 1											0.01
Amortization of intangible assets			2,996				1,798				0.04
Leasehold related charges			2,881				1,729				0.03
Litigation liability			(42,575	)			(25,545)				(0.50)
CEO transition related costs			3,360				2,016				0.04
One-time and acquisition related items 2			2,019				1,211				0.02
Non-cash interest expense on convertible notes			3,842				2,305				0.05
Non-GAAP earnings						$	15,074			$	0.30
GAAP weighted shares outstanding - basic											47,989
GAAP weighted shares outstanding - diluted											51,716
Non-GAAP weighted shares outstanding - diluted 1											50,825
1    Excludes the impact of share dilution of the convertible bond for which the Company has a hedge in place but is considered anti-dilutive under US GAAP in weighted average shares outstanding (891k shares)   2    Acquisition related items include expenses associated with M&A related activity and as incurred

 

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Investor Conference Call

The Company will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its first quarter 2015 financial performance. 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 website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive’s website through June 4, 2015. In addition, a telephone replay of the call will be available until May 18, 2015. 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: 13605837.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally-integrated solutions for the spine. The Company is the third largest player in the $9.0 billion global spine market. NuVasive offers a comprehensive spine portfolio of more than 90 unique products developed to improve spine surgery and patient outcomes. The Company’s principal procedural solution is its Maximum Access Surgery, or MAS^®, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

 

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NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein 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. In addition, this news release contains selected financial results from the first quarter 2015, as well as financial projections for 2015. The numbers for first quarter 2015 are prior to the completion of review and audit procedures by the Company’s external auditors and are subject to adjustment. In addition, the Company’s projections for 2015 represent its initial estimates, and are subject to the risk of being inaccurate because of the preliminary nature of the forecasts, the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability. 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 to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and those other risks and uncertainties more fully described in the Company’s news 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.

Consolidated Statements of Operations

(in thousands, except per share data)

 

		Three Months Ended March 31,
		2015				2014
		(Unaudited)				(Unaudited)
Revenue		$	192,383			$	177,496
Cost of goods sold (excl. below amortization of intangible assets)			45,664				43,294
Gross profit			146,719				134,202
Gross profit %			76.3%				75.6%
Operating expenses:
Sales, marketing and administrative			116,096				118,104
Research and development			9,264				9,455
Amortization of intangible assets			2,996				3,998
Litigation liability			(42,575)				30,000
Business transition costs			5,373				-
Total operating expenses			91,154				161,557
Operating margin			55,565				(27,355)
Operating margin %			28.9%				-15.4%
Interest and other expense, net:
Interest income			419				217
Interest expense			(7,126)				(6,865)
Other income (expense), net			424				375
Total interest and other expense, net			(6,283)				(6,273)
Income (loss) before income taxes			49,282				(33,628)
Income tax (expense) benefit			(17,885)				15,095
Consolidated net income (loss)		$	31,397			$	(18,533)
Add back net loss attributable to non-controlling interests		$	(163)			$	(257)
Net income (loss) attributable to NuVasive, Inc.		$	31,560			$	(18,276)
Net income (loss) per share attributable to NuVasive, Inc.:
Basic		$	0.66			$	(0.40)
Diluted		$	0.61			$	(0.40)
Weighted average shares outstanding:
Basic			47,989				45,798
Diluted			51,716				45,798

 

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NuVasive, Inc.

Consolidated Balance Sheets

(in thousands, except par values and share amounts)

 

		March 31, 2015				December 31, 2014
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	88,494			$	142,387
Short-term marketable securities			200,809				220,329
Accounts receivable, net of allowances of $6,119 and $5,844, respectively			111,547				118,959
Inventory, net			163,413				154,638
Deferred and prepaid taxes			59,608				59,233
Prepaid expenses and other current assets			8,992				10,325
Total current assets			632,863				705,871
Property and equipment, net			139,541				128,565
Long-term marketable securities			27,501				43,042
Intangible assets, net			92,640				96,555
Goodwill			154,273				154,443
Deferred tax assets, non-current			65,196				65,330
Restricted cash and investments			156,155				123,233
Other assets			27,439				26,420
Total assets		$	1,295,608			$	1,343,459
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	71,507			$	133,324
Accrued payroll and related expenses			27,702				38,032
Litigation liability			14,000				30,000
Deferred and income tax liabilities			750				13,543
Total current liabilities			113,959				214,899
Senior Convertible Notes			364,588				360,746
Deferred and income tax liabilities, non-current			23,517				12,526
Non-Current Litigation liability			117,430				93,700
Other long-term liabilities			12,633				13,230
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding			—				—
Common stock, $0.001 par value; 120,000,000 shares authorized at March 31,    2015 and December 31, 2014; 49,674,361 and 47,691,744 issued and    outstanding at March 31, 2015 and December 31, 2014, respectively			50				48
Additional paid-in capital			884,469				847,145
Accumulated other comprehensive loss			(11,722)				(9,670)
Accumulated deficit			(155,378)				(186,938)
Treasury stock at cost; 1,345,606 shares and 233,369 shares at March 31, 2015 and    December 31, 2014, respectively			(62,085)				(10,537)
Total NuVasive, Inc. stockholders’ equity			655,334				640,048
Non-controlling interests			8,147				8,310
Total equity			663,481				648,358
Total liabilities and equity		$	1,295,608			$	1,343,459

 

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NuVasive, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

		Three Months Ended March 31,
		2015				2014
Operating activities:		(Unaudited)				(Unaudited)
Consolidated net income (loss)		$	31,397			$	(18,533)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			16,051				15,363
Amortization of non-cash interest			4,331				4,000
Stock-based compensation			7,611				7,764
Deferred income taxes			11,015				—
Reserves on current assets			633				1,366
Other non-cash adjustments			6,172				1,661
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable			5,931				(1,194)
Inventory			(11,367)				(11,743)
Prepaid expenses and other current assets			444				(2,807)
Accounts payable and accrued liabilities			17,428				17,951
Income taxes			(13,731)				(16,751)
Accrued royalties			(47,459)				3,291
Litigation liability			7,730				30,000
Accrued payroll and related expenses			(10,163)				(7,068)
Net cash provided by operating activities			26,023				23,300
Investing activities:
Cash paid for acquisitions and investments			(1,357)				—
Purchase of intangible assets			(27,389)				—
Purchases of property and equipment			(30,694)				(13,390)
Purchases of marketable securities			(71,129)				(46,126)
Sales of marketable securities			105,794				36,257
Purchases of restricted investments			(32,616)				—
Net cash used in investing activities			(57,391)				(23,259)
Financing activities:
Incremental tax benefits related to stock-based compensation awards			8,092				—
Proceeds from the issuance of common stock			1,403				8,749
Payment of contingent consideration			(514)				(498)
Purchase of treasury stock			(30,944)				—
Other financing activities			(45)				(596)
Net cash (used in) provided by financing activities			(22,008)				7,655
Effect of exchange rate changes on cash			(517)				256
(Decrease) increase in cash and cash equivalents			(53,893)				7,952
Cash and cash equivalents at beginning of period			142,387				102,825
Cash and cash equivalents at end of period		$	88,494			$	110,777
Net cash provided by operating activities		$	26,023			$	23,300
Purchases of property and equipment			(30,694)				(13,390)
Free cash flow		$	(4,671)			$	9,910

 

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