nuva-8k_20190220.htm

 

 

 

 

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): February 20, 2019

 

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)

(I.R.S. Employer

Identification Number)

 

 

 

7475 Lusk Boulevard, San Diego, California 92121

(Address of principal executive offices) (Zip Code)

 

 

 

(858) 909-1800

(Registrant’s telephone number, including area code)

 

 

 

Not Applicable

(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 



Item 2.02

Results of Operations and Financial Condition.

 

On February 20, 2019, NuVasive, Inc. (the “Company”) issued a press release announcing its financial results for the quarter and full year ended December 31, 2018. A copy of this press release is furnished as Exhibit 99.1 to this Current Report.

 

Item 7.01

Regulation FD Disclosure.

 

During a conference call scheduled to be held at 1:30 p.m. Pacific Time on February 20, 2019, the Company’s Chief Executive Officer and Chief Financial Officer will discuss the Company’s results for the quarter and full year ended December 31, 2018 and the Company’s outlook for the year ending December 31, 2019.

The information contained in this Current Report and the Exhibits hereto 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.

 

 

Exhibit No.

Description

99.1

Press release issued by NuVasive, Inc. on February 20, 2019



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.

 

 

 

 

NUVASIVE, INC.

 

 

 

Date: February 20, 2019

 

/s/ Rajesh Asarpota

 

 

Rajesh Asarpota

 

 

Executive Vice President and Chief Financial Officer

 

 

nuva-ex991_6.htm

Exhibit 99.1

 

 

 


 

NEWS RELEASE

 

NUVASIVE REPORTS FOURTH QUARTER AND FULL YEAR 2018
FINANCIAL RESULTS

Company provides 2019 financial performance guidance


SAN DIEGO Feb. 20, 2019 – NuVasive, Inc. (NASDAQ: NUVA), the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally integrated solutions, today announced financial results for the quarter and full year ended Dec. 31, 2018.

Fourth Quarter 2018 Highlights:

 

Revenue increased 6.3% to $288.3 million, or 6.9% on a constant currency basis;

 

GAAP operating profit margin of 9.0%; Non-GAAP operating profit margin of 16.0%; and

 

GAAP diluted earnings per share of $0.23; Non-GAAP diluted earnings per share of $0.69.

Full Year 2018 Highlights:

 

Revenue increased 7.3% to $1,101.7 million, or 7.1% on a constant currency basis;

 

GAAP operating profit margin of 4.9%; Non-GAAP operating profit margin of 15.1%; and

 

GAAP diluted earnings per share of $0.24; Non-GAAP diluted earnings per share of $2.23.

“NuVasive delivered strong year-over-year revenue growth of more than 7% in 2018, demonstrating the Company’s ability to take share in a stable but relatively flat U.S. spine market. Additionally, we made significant progress at our West Carrollton manufacturing facility, exiting the year at 70% SKU rationalization. Collectively, these achievements serve to advance our mission to bring disruptive technology to surgeon partners to enable better, more predictable patient outcomes," said J. Christopher Barry, chief executive officer of NuVasive. “In 2019, NuVasive will focus on continuing to deliver above market revenue growth, while balancing operating leverage with reinvestment opportunities. We will demonstrate a disciplined approach toward funding key areas for long-term Company growth—furthering our product leadership in global implant systems, accelerating our Surgical Intelligence platform, and investing in surgeon training and education with an ongoing focus on globalization efforts.” 

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

Fourth Quarter 2018 Results

NuVasive reported fourth quarter 2018 total revenue of $288.3 million, a 6.3% increase on a reported basis and 6.9% increase on a constant currency basis, compared to $271.2 million for the fourth quarter 2017.


 

For the fourth quarter 2018, GAAP and non-GAAP gross profit was $202.2 million, and GAAP and non-GAAP gross margin was 70.1%. These results compared to GAAP and non-GAAP gross profit of $195.9 million and $196.3 million, respectively, and GAAP and non-GAAP gross margin of 72.2% and 72.4%, respectively for the fourth quarter 2017. Total GAAP and non-GAAP operating expenses for the fourth quarter 2018 were $176.3 million and $156.2 million, respectively. These results compared to GAAP and non-GAAP operating expenses of $166.5 million and $146.9 million, respectively, for the fourth quarter 2017.

The Company reported GAAP net income of $12.2 million, or $0.23 per share, for the fourth quarter 2018 compared to GAAP net income of $23.5 million, or $0.45 per share, for the fourth quarter 2017. On a non-GAAP basis, the Company reported net income of $36.1 million, or $0.69 per share, for the fourth quarter 2018 compared to net income of $29.1 million, or $0.56 per share, for the fourth quarter 2017.

Full Year 2018 Results

NuVasive reported full year 2018 total revenue of $1,101.7 million, a 7.3% increase on a reported basis and 7.1% increase on a constant currency basis, compared to $1,026.7 million for the full year 2017.

Total GAAP and non-GAAP gross profit for the full year 2018 was $790.6 million and $791.6 million, respectively, and GAAP and non-GAAP gross margin was 71.8% and 71.9%, respectively. These results compared to gross profit of $758.2 million and $758.8 million on a GAAP and non-GAAP basis, respectively, and a GAAP and non-GAAP gross margin of 73.9% for the full year 2017. Total GAAP and non-GAAP operating expenses for the full year 2018 were $736.4 million and $624.8 million, respectively. These results compared to GAAP and non-GAAP operating expenses of $646.8 million and $589.5 million, respectively, for the full year 2017.

The Company reported GAAP net income of $12.5 million, or $0.24 per share, for the full year 2018 compared to GAAP net income of $81.6 million, or $1.48 per share, for the full year 2017. On a non-GAAP basis, the Company reported net income of $116.6 million, or $2.23 per share, for the full year 2018 compared to net income of $99.0 million, or $1.89 per share, for the full year 2017.

Annual Financial Guidance for 2019
The Company estimates revenue for full year 2019 to be in the range of $1.14 billion to $1.16 billion,  reflecting reported growth in the range of 3.5% to 5.5%. The Company expects currency to have a negative impact in 2019 of approximately $4 million. The Company estimates full year 2019 net income on a GAAP basis in the range of $1.00 to $1.10 per share and non-GAAP earnings per share in the range of $2.20 to $2.30.

 

 

 

2019 Guidance Range 1

 

 

 

 

GAAP

Non-GAAP

 

 

 

Revenue

$1.14B - $1.16B

 

$1.14B - $1.16B

 

 

 

  % Growth - Reported

3.5% - 5.5%

 

3.5% - 5.5%

 

 

 

% Growth - Constant Currency 2

 

 

3.8% - 5.8%

 

 

 

Operating margin

9.5% - 10.0%

 

15.0% - 15.5%

 

 

 

Earnings per share

$1.00 - $1.10

 

$2.20 - $2.30

 

 

 

EBITDA margin

21.2% - 21.7%

 

25.2% - 25.7%

 

 

 

Tax Rate

~24%

 

~23%

 

 

 

 

 

 

 

 

1

 

Guidance reflects the range provided on February 20, 2019.

 

2

 

Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year.

 

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

 

 

 

 

 

2018 Actuals 1

 

2019 Guidance Range  1, 2, 3

 

 

 

 

GAAP diluted net income per share

$0.24

 

 

 

$1.00 - 1.10

 

 

 

 

Impact of change to diluted share count

 

 

 

 

 

 

 

 

 

GAAP net income per share, adjusted to diluted Non-GAAP share count

$0.24

 

 

 

$1.00 - 1.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business transition costs 4

 

0.22

 

 

 

 

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 5

 

0.02

 

 

 

 

 

 

 

 

Non-cash interest expense on convertible notes

 

0.32

 

 

 

 

0.30

 

 

 

 

Litigation related expenses and settlements 6

 

0.65

 

 

 

 

0.20

 

 

 

 

Non-recurring consulting fees 7

 

0.12

 

 

 

 

 

 

 

 

Net loss on strategic investments

 

0.07

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

0.97

 

 

 

 

0.90

 

 

 

 

Purchase of in-process research and development 8

 

0.17

 

 

 

 

 

 

 

 

European medical device regulation 9

 

0.01

 

 

 

 

0.10

 

 

 

 

Tax effect of adjustments 10

 

(0.56

)

 

 

 

(0.30

)

 

 

 

Non-GAAP earnings per share

$

2.23

 

 

 

$2.20 - 2.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Weighted shares outstanding - basic

 

51,382

 

 

 

 

52,017

 

 

 

 

GAAP Weighted shares outstanding - diluted

 

52,355

 

 

 

 

52,938

 

 

 

 

Non-GAAP Weighted shares outstanding - diluted 11

 

52,178

 

 

 

 

52,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Items may not foot due to rounding.

 

 

2

 

Guidance reflects the range provided on February 20, 2019.

 

 

3

 

Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.

 

 

4

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

5

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

6

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

7

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

8

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

9

 

Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

10

 

The impact on results from taxes include tax affecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual rate of ~43% benefit on a GAAP basis and ~18% on a non-GAAP basis in 2018.

 

 

11

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 

 


 

Reconciliation of Non-GAAP Operating Margin %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except %)

 

2018 Actuals 1

 

 

2019 Guidance 1, 2

 

 

 

 

Non-GAAP Gross Margin % [A]

 

71.9%

 

 

72.5% - 73.0%

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 3

 

(0.1%)

 

 

0.0%

 

 

 

 

GAAP Gross Margin [B]

 

71.8%

 

 

72.5% - 73.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Sales, Marketing & Administrative Expense [C]

 

51.1%

 

 

51.0% - 52.0%

 

 

 

 

Non-recurring consulting fees 4

 

0.6%

 

 

0.0%

 

 

 

 

Litigation related expenses 5

 

0.6%

 

 

0.7%

 

 

 

 

GAAP Sales, Marketing & Administrative Expense [D]

 

52.3%

 

 

51.7% - 52.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP and Non-GAAP Research & Development Expense [E]

 

5.6%

 

 

6.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related settlements [F] 6

 

2.5%

 

 

0.0%

 

 

 

 

Amortization of intangible assets [G]

 

4.6%

 

 

4.2%

 

 

 

 

Purchase of in-process research and development [H] 7

 

0.8%

 

 

0.0%

 

 

 

 

European medical device regulation [I] 8

 

0.0%

 

 

0.6%

 

 

 

 

Business transition costs [J] 9

 

1.0%

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Operating Margin % [A - C - E]

 

15.1%

 

 

15.0% - 15.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Margin % [B - D - E - F - G - H - I - J]

 

4.9%

 

 

9.5% - 10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Items may not foot due to rounding.

 

 

2

 

Guidance reflects the range provided on February 20, 2019.

 

 

3

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

4

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

5

 

Expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

6

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter.

 

 

7

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

8

 

Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

9

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 


 

Reconciliation of EBITDA Margin %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except %)

2018 Actuals 1, 2

 

 

2019 Guidance Range 1, 3, 4

 

 

 

 

Net Income

1.1%

 

 

4.6% - 5.0%

 

 

 

 

Interest income / expense, net

3.4%

 

 

3.3%

 

 

 

 

Income tax benefit / (expense)

(0.3%)

 

 

1.5%

 

 

 

 

Depreciation and amortization

11.8%

 

 

11.7%

 

 

 

 

EBITDA Margin

16.0%

 

 

21.2% - 21.7%

 

 

 

 

Non-cash stock based compensation

2.3%

 

 

2.7%

 

 

 

 

Business transition costs 5

1.0%

 

 

0.0%

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 6

0.1%

 

 

0.0%

 

 

 

 

Litigation related expenses and settlements 7

3.1%

 

 

0.7%

 

 

 

 

Non-recurring consulting fees 8

0.6%

 

 

0.0%

 

 

 

 

In-process research and development 9

0.8%

 

 

0.0%

 

 

 

 

European medical device regulation 10

0.0%

 

 

0.6%

 

 

 

 

Net loss on strategic investments

0.3%

 

 

0.0%

 

 

 

 

Adjusted EBITDA Margin

24.3%

 

 

25.2% - 25.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Items may not foot due to rounding.

 

 

 

 

 

 

 

 

2

 

Effective tax expense rate of ~43% benefit applied to GAAP earnings and ~18% applied to Non-GAAP earnings.

 

 

3

 

Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.

 

 

4

 

Guidance reflects the range provided on February 20, 2019.

 

 

5

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

6

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

7

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

8

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

9

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

10

 

Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 


 

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating profit margin, which exclude amortization of intangible assets, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses from strategic investments, and non-cash interest expense (excluding debt issuance cost). Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency utilizes an exchange rate that eliminates fluctuations when calculating financial performance numbers. 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, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses on strategic investments, 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.

During the quarter ended June 30, 2018, the Company began excluding from its non-GAAP financial results certain litigation related expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property. For consistency and comparability, the Company has re-casted non-GAAP financial results for each of the quarters ended Dec. 31, 2017 and March 31, 2018 to exclude these litigation expenses in such periods, which were $0.4 million and $0.6 million, respectively.


 

 

 

For the Three Months Ended December 31, 2018

 

 

 

 

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

 

 

 

 

(Unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

Operating Profit

 

Net Income

 

Diluted EPS

 

Diluted WASO 5

 

Net Income to Adjusted EBITDA

 

 

 

 

Reported GAAP

$

202,198

 

$

25,856

 

$

12,157

 

$

0.23

 

 

52,530

 

$

12,157

 

 

 

 

% of revenue

 

70.1

%

 

9.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

13,268

 

 

13,268

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related expenses and settlements 1

 

 

 

 

2,750

 

 

2,750

 

 

 

 

 

 

 

 

2,750

 

 

 

 

Business transition costs 2

 

 

 

 

3,779

 

 

3,779

 

 

 

 

 

 

 

 

3,779

 

 

 

 

European medical device regulation 3

 

 

 

 

373

 

 

373

 

 

 

 

 

 

 

 

373

 

 

 

 

Non-cash interest expense on convertible notes

 

 

 

 

 

 

 

4,262

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain on strategic investments

 

 

 

 

 

 

 

(30

)

 

 

 

 

 

 

 

(30

)

 

 

 

Tax effect of adjustments 4

 

 

 

 

 

 

 

(444

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense/(income), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,193

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,175

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,356

 

 

 

 

Non-cash stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,699

 

 

 

 

Adjusted Non-GAAP

$

202,198

 

$

46,026

 

$

36,115

 

$

0.69

 

 

52,471

 

$

69,452

 

 

 

 

% of revenue

 

70.1

%

 

16.0

%

 

 

 

 

 

 

 

 

 

 

24.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Represents expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

2

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

3

 

Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

4

 

The impact on results from taxes include tax affecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual rate of ~43% benefit on a GAAP basis and ~18% on a non-GAAP basis.

 

 

5

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 

 


 

 

 

For the Year Ended December 31, 2018

 

 

 

 

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

 

 

 

 

(Unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

Operating Profit

 

Net Income

 

Diluted EPS

 

Diluted WASO 8

 

Net Income to Adjusted EBITDA

 

 

 

 

Reported GAAP

$

790,555

 

$

54,168

 

$

12,479

 

$

0.24

 

 

52,355

 

$

12,479

 

 

 

 

% of revenue

 

71.8

%

 

4.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 1

 

1,080

 

 

1,080

 

 

1,080

 

 

 

 

 

 

 

 

1,080

 

 

 

 

Non-recurring consulting fees 2

 

 

 

 

6,084

 

 

6,084

 

 

 

 

 

 

 

 

6,084

 

 

 

 

Amortization of intangible assets

 

 

 

 

50,670

 

 

50,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related expenses and settlements 3

 

 

 

 

34,052

 

 

34,052

 

 

 

 

 

 

 

 

34,052

 

 

 

 

Business transition costs 4

 

 

 

 

11,473

 

 

11,473

 

 

 

 

 

 

 

 

11,473

 

 

 

 

Purchase of in-process research and development 5

 

 

 

 

8,913

 

 

8,913

 

 

 

 

 

 

 

 

8,913

 

 

 

 

European medical device regulation 6

 

 

 

 

373

 

 

373

 

 

 

 

 

 

 

 

373

 

 

 

 

Non-cash interest expense on convertible notes

 

 

 

 

 

 

 

16,722

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss on strategic investments

 

 

 

 

 

 

 

3,837

 

 

 

 

 

 

 

 

3,837

 

 

 

 

Tax effect of adjustments 7

 

 

 

 

 

 

 

(29,126

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense/(income), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37,271

 

 

 

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,756

)

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129,765

 

 

 

 

Non-cash stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,761

 

 

 

 

Adjusted Non-GAAP

$

791,635

 

$

166,813

 

$

116,557

 

$

2.23

 

 

52,178

 

$

267,332

 

 

 

 

% of revenue

 

71.9

%

 

15.1

%

 

 

 

 

 

 

 

 

 

 

24.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

2

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

3

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

4

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

5

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

6

 

Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

7

 

The impact on results from taxes include tax affecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual rate of ~43% benefit on a GAAP basis and ~18% on a non-GAAP basis.

 

 

8

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 

 


 

 

 

 

For the Three Months Ended December 31, 2017

 

 

 

 

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

 

 

 

 

(Unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

Operating Profit

 

Net Income

 

Diluted EPS

 

Diluted WASO 6

 

Net Income to Adjusted EBITDA

 

 

 

 

Reported GAAP 1

$

195,917

 

$

29,408

 

$

23,477

 

$

0.45

 

 

51,857

 

$

23,477

 

 

 

 

% of revenue

 

72.2

%

 

10.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 2

 

404

 

 

404

 

 

404

 

 

 

 

 

 

 

 

404

 

 

 

 

Amortization of intangible assets 3

 

 

 

 

12,999

 

 

12,677

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related expenses and settlements

 

 

 

 

4,133

 

 

4,133

 

 

 

 

 

 

 

 

4,133

 

 

 

 

Business transition costs 4

 

 

 

 

2,518

 

 

2,518

 

 

 

 

 

 

 

 

2,518

 

 

 

 

Non-cash interest expense on convertible notes

 

 

 

 

 

 

 

4,046

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax effect of adjustments 5

 

 

 

 

 

 

 

(18,155

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense/(income), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,156

 

 

 

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,949

)

 

 

 

Depreciation and amortization 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,055

 

 

 

 

Non-cash stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,407

 

 

 

 

Adjusted Non-GAAP

$

196,321

 

$

49,462

 

$

29,100

 

$

0.56

 

 

51,857

 

$

75,201

 

 

 

 

% of revenue

 

72.4

%

 

18.2

%

 

 

 

 

 

 

 

 

 

 

27.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Reported GAAP figures for 2017 have been recasted and presented based on the full retrospective method of adoption of ASC 606.

 

 

2

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

3

 

When reconciling from reported GAAP net income, the adjustment for amortization of intangible assets excludes the amortization associated with non-controlling interest. In January 2018, the Company completed the acquisition of the non-controlling interest.

 

 

4

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

5

 

The impact on results from taxes include tax affecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual rate of ~10% benefit on a GAAP basis and ~33% on a non-GAAP basis.

 

 

6

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 


 

 

 

 

For the Year Ended December 31, 2017

 

 

 

 

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

 

 

 

 

(Unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

Operating Profit

 

Net Income

 

Diluted EPS

 

Diluted WASO 6

 

Net Income to Adjusted EBITDA

 

 

 

 

Reported GAAP 1

$

758,244

 

$

111,486

 

$

81,598

 

$

1.48

 

 

55,193

 

$

81,598

 

 

 

 

% of revenue

 

73.9

%

 

10.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 2

 

540

 

 

540

 

 

540

 

 

 

 

 

 

 

 

540

 

 

 

 

Amortization of intangible assets 3

 

 

 

 

48,039

 

 

46,750