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2018-05-31

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to                

Commission File Number: 000-50744

 

 

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

33-0768598

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

7475 Lusk Boulevard

San Diego, CA 92121

(Address of principal executive offices)

(858) 909-1800

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

NUVA

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of October 28, 2019 there were 52,073,661 shares of the registrant’s common stock (par value $0.001 per share) outstanding.

 

 

2


NuVasive, Inc.

Quarterly Report on Form 10-Q

September 30, 2019

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

4

 

Consolidated Balance Sheets

4

 

Consolidated Statements of Operations

5

 

Consolidated Statements of Comprehensive Income (Loss)

6

 

Consolidated Statements of Equity

7

 

Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

 

SIGNATURES

38

 

 

 

3


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NUVASIVE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par values and share amounts)

 

 

September 30, 2019

 

 

December 31, 2018

 

ASSETS

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

163,399

 

 

$

117,840

 

Accounts receivable, net of allowances of $16,444 and $16,171, respectively

 

 

203,611

 

 

 

196,487

 

Inventory, net

 

 

308,893

 

 

 

273,244

 

Prepaid income taxes

 

 

20,328

 

 

 

16,905

 

Prepaid expenses and other current assets

 

 

14,610

 

 

 

13,733

 

Total current assets

 

 

710,841

 

 

 

618,209

 

Property and equipment, net

 

 

263,135

 

 

 

238,841

 

Intangible assets, net

 

 

214,492

 

 

 

252,048

 

Goodwill

 

 

560,744

 

 

 

561,366

 

Operating lease right-of-use assets

 

 

67,128

 

 

 

 

Deferred tax assets

 

 

4,023

 

 

 

5,263

 

Restricted cash and investments

 

 

2,395

 

 

 

2,395

 

Other assets

 

 

17,094

 

 

 

29,737

 

Total assets

 

$

1,839,852

 

 

$

1,707,859

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

105,944

 

 

$

105,877

 

Contingent consideration liabilities

 

 

7,774

 

 

 

7,560

 

Accrued payroll and related expenses

 

 

66,044

 

 

 

59,960

 

Operating lease liabilities

 

 

5,792

 

 

 

 

Litigation liabilities

 

 

2,065

 

 

 

1,415

 

Income tax liabilities

 

 

5,496

 

 

 

4,648

 

Total current liabilities

 

 

193,115

 

 

 

179,460

 

Senior convertible notes

 

 

617,992

 

 

 

602,526

 

Deferred and income tax liabilities

 

 

13,491

 

 

 

4,964

 

Operating lease liabilities

 

 

72,713

 

 

 

 

Other long-term liabilities

 

 

65,927

 

 

 

86,384

 

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 September 30, 2019 and December 31, 2018, 57,420,854 and 56,648,077 issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

62

 

 

 

61

 

Additional paid-in capital

 

 

1,421,235

 

 

 

1,397,829

 

Accumulated other comprehensive loss

 

 

(11,332

)

 

 

(8,628

)

Retained earnings

 

 

52,599

 

 

 

17,241

 

Treasury stock at cost; 5,354,355 shares and 5,116,496 shares at September 30, 2019 and December 31, 2018, respectively

 

 

(585,950

)

 

 

(571,978

)

Total equity

 

 

876,614

 

 

 

834,525

 

Total liabilities and equity

 

$

1,839,852

 

 

$

1,707,859

 

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

4


Table of Contents

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(unaudited)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

260,173

 

 

$

242,030

 

 

$

765,377

 

 

$

728,232

 

Service revenue

 

 

30,662

 

 

 

29,271

 

 

 

92,339

 

 

 

85,155

 

Total revenue

 

 

290,835

 

 

 

271,301

 

 

 

857,716

 

 

 

813,387

 

Cost of revenue (excluding below amortization of intangible assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

57,164

 

 

 

54,741

 

 

 

169,263

 

 

 

168,134

 

Cost of services

 

 

19,864

 

 

 

19,419

 

 

 

59,838

 

 

 

56,896

 

Total cost of revenue

 

 

77,028

 

 

 

74,160

 

 

 

229,101

 

 

 

225,030

 

Gross profit

 

 

213,807

 

 

 

197,141

 

 

 

628,615

 

 

 

588,357

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, marketing and administrative

 

 

152,887

 

 

 

141,211

 

 

 

450,816

 

 

 

433,635

 

Research and development

 

 

18,143

 

 

 

15,254

 

 

 

53,271

 

 

 

44,601

 

Amortization of intangible assets

 

 

12,596

 

 

 

12,349

 

 

 

38,498

 

 

 

37,402

 

Purchase of in-process research and development

 

 

 

 

 

8,913

 

 

 

 

 

 

8,913

 

Litigation liability loss

 

 

 

 

 

 

 

 

 

 

 

27,800

 

Business transition costs

 

 

(333

)

 

 

1,443

 

 

 

5,146

 

 

 

7,694

 

Total operating expenses

 

 

183,293

 

 

 

179,170

 

 

 

547,731

 

 

 

560,045

 

Interest and other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

620

 

 

 

130

 

 

 

1,356

 

 

 

380

 

Interest expense

 

 

(9,654

)

 

 

(9,035

)

 

 

(28,817

)

 

 

(28,458

)

Other (expense) income, net

 

 

(5,696

)

 

 

4,239

 

 

 

(6,053

)

 

 

(7,843

)

Total interest and other expense, net

 

 

(14,730

)

 

 

(4,666

)

 

 

(33,514

)

 

 

(35,921

)

Income (loss) before income taxes

 

 

15,784

 

 

 

13,305

 

 

 

47,370

 

 

 

(7,609

)

Income tax (expense) benefit

 

 

(4,774

)

 

 

2,618

 

 

 

(12,012

)

 

 

7,931

 

Consolidated net income

 

$

11,010

 

 

$

15,923

 

 

$

35,358

 

 

$

322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.21

 

 

$

0.31

 

 

$

0.68

 

 

$

0.01

 

Diluted

 

$

0.21

 

 

$

0.30

 

 

$

0.67

 

 

$

0.01

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

52,057

 

 

 

51,439

 

 

 

51,901

 

 

 

51,341

 

Diluted

 

 

53,056

 

 

 

53,189

 

 

 

52,667

 

 

 

52,296

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

 

5


Table of Contents

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(unaudited)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Consolidated net income

 

$

11,010

 

 

$

15,923

 

 

$

35,358

 

 

$

322

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments, net of tax

 

 

(2,780

)

 

 

(1,318

)

 

 

(2,704

)

 

 

(3,261

)

Other comprehensive loss

 

 

(2,780

)

 

 

(1,318

)

 

 

(2,704

)

 

 

(3,261

)

Total consolidated comprehensive income (loss)

 

$

8,230

 

 

$

14,605

 

 

$

32,654

 

 

$

(2,939

)

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

6


Table of Contents

 

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

Treasury Stock

 

 

Stockholders'

 

(unaudited)

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Retained Earnings

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance at December 31, 2018

 

 

56,648

 

 

$

61

 

 

$

1,397,829

 

 

$

(8,628

)

 

$

17,241

 

 

 

(5,116

)

 

$

(571,978

)

 

$

834,525

 

Issuance of common stock under employee and director equity option and purchase plans

 

 

399

 

 

 

 

 

 

202

 

 

 

 

 

 

 

 

 

(146

)

 

 

(8,379

)

 

 

(8,177

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,766

 

Issuance of common stock in connection with royalty milestone achievement

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,386

 

 

 

 

 

 

 

 

 

9,386

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(494

)

 

 

 

 

 

 

 

 

 

 

 

(494

)

Balance at March 31, 2019

 

 

57,119

 

 

$

61

 

 

$

1,402,797

 

 

$

(9,122

)

 

$

26,627

 

 

 

(5,262

)

 

$

(580,357

)

 

$

840,006

 

Issuance of common stock under employee and director equity option and purchase plans

 

 

238

 

 

 

1

 

 

 

4,315

 

 

 

 

 

 

 

 

 

(66

)

 

 

(3,952

)

 

 

364

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,822

 

Consolidated net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,962

 

 

 

 

 

 

 

 

 

14,962

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

570

 

 

 

 

 

 

 

 

 

 

 

 

570

 

Balance at June 30, 2019

 

 

57,357

 

 

$

62

 

 

$

1,413,934

 

 

$

(8,552

)

 

$

41,589

 

 

 

(5,328

)

 

$

(584,309

)

 

$

862,724

 

Issuance of common stock under employee and director equity option and purchase plans

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

(1,641

)

 

 

(1,641

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,096

 

Consolidated net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,010

 

 

 

 

 

 

 

 

 

11,010

 

Consideration paid in excess of non-controlling interests

 

 

 

 

 

 

 

 

205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

205

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(2,780

)

 

 

 

 

 

 

 

 

 

 

 

(2,780

)

Balance at September 30, 2019

 

 

57,421

 

 

$

62

 

 

$

1,421,235

 

 

$

(11,332

)

 

$

52,599

 

 

 

(5,354

)

 

$

(585,950

)

 

$

876,614

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

7


Table of Contents

 

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF EQUITY – (Continued)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NuVasive, Inc.

 

 

Non-

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained Earnings

 

 

Treasury Stock

 

 

Stockholders'

 

 

Controlling

 

 

Total

 

(unaudited)

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

(Accumulated Deficit)

 

 

Shares