Cyberonics Reports Strong Fiscal 2011 Third Quarter Results and Increases Guidance

Net Sales Increase 15% to $47.1 million

Income from Operations Increases by 30% over Q3 FY 10

Mar 02, 2011, 06:00 ET from Cyberonics, Inc.

HOUSTON, March 2, 2011 /PRNewswire/ -- Cyberonics, Inc. (Nasdaq: CYBX), a global leader in epilepsy management, today announced results for the quarter ended January 28, 2011.  

Quarterly Highlights

Operating results and achievements for the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010 include:

  • Net sales increased by 15.3% to $47.1 million;
  • U.S. net sales increased by 24%;
  • U.S. epilepsy unit sales increased by 16%; and
  • Income from operations increased by 30% to $11.7 million.

"The third quarter of fiscal year 2011 was another successful quarter for our company, once again demonstrating consistent performance with year-over-year growth in worldwide net product sales attributable to the epilepsy indication increasing by more than 15%," commented Dan Moore, Cyberonics' President and Chief Executive Officer.  "We were particularly pleased with the robust 24% sales growth in our U.S. epilepsy business, which was driven by significantly higher volume and increased average selling prices.

"Net sales in our international business were down 15% when compared with the third quarter of fiscal 2010, although the revenue of $7.1 million is consistent with last quarter.  Several of our international countries performed well during the quarter, however, execution challenges, combined with continuing economic difficulties in some markets, contributed to softness in some key EU countries.  We are increasing our efforts in these countries and expect to be in a position to restore growth in the next fiscal year.  In addition, we continue to make solid progress in Japan where we are focused on physician training and fulfilling patient registry requirements."

The company reported net income of $7.2 million, or $0.25 per diluted share, for the third quarter of fiscal 2011 compared with net income of $8.8 million, or $0.29 cents per diluted share, in the third quarter of fiscal 2010.  The decline in net income for the quarter was attributable to an increase in the effective tax rate from 3% in fiscal 2010 to 38% in fiscal 2011.

The company reported operating cash flow of $13.2 million for the quarter ended January 28, 2011.  Available cash balances were $85.3 million at quarter end, an increase of $17.4 million compared to the end of the second quarter of fiscal 2011.

Moore concluded, "Operationally, this was another very strong quarter for Cyberonics.  We continue to emphasize profitability, as well as sustainable sales growth, as our primary goals, so we were very pleased to see income from operations increase by 30% this quarter to complement our 15% revenue growth.  Recently, we announced FDA approval of our fifth generation generator, the AspireHC™ high capacity generator, which is now in a limited market release.  This approval is further evidence of our product development progress and provides an important platform for future new product introductions, including the AspireSR™ generator with seizure response for which a European clinical trial is planned to start in the first half of calendar 2011.  We expect to continue to drive shareholder value through consistent execution, improved operating leverage and an expanded product portfolio."

Fiscal 2011 Guidance

Cyberonics is increasing its net sales guidance for fiscal year 2011 to the range of $189 million to $191 million on a constant currency basis, as compared to the previously provided range of $187 million to $190 million.  At current average rates, foreign currency exchange rate fluctuations are expected to have a minimal impact on revenue in fiscal 2011 compared to 2010.

In addition, the company now expects that income from operations for fiscal year 2011 will be in the range of $47 million to $50 million, as compared to the previously provided range of $45 million to $48 million.

Additional details will be provided during the upcoming conference call and in an investor presentation summarizing the company's fiscal year 2011 third quarter results, which is available in the investor relations section of Cyberonics' corporate website at http://www.cyberonics.com.

Fiscal Year 2011 Third Quarter Results Conference Call Instructions

Cyberonics will host a conference call today, March 2, 2011, beginning at 7:30 a.m. Central Time (8:30 a.m. Eastern Time) to review its results of operations for the third quarter of fiscal 2011 and future outlook, followed by a question and answer session.

The conference call will be available to interested parties through a live audio webcast in the investor relations section of Cyberonics' corporate website at http://www.cyberonics.com, where it will be archived and accessible for approximately 12 months.  To listen to the conference call live by telephone dial 877-638-4557 (if dialing from within the U.S.) or 914-495-8522 (if dialing from outside the U.S.).  The conference ID is 43242663.

A replay of the conference call will be available approximately two hours after the completion of the conference call by dialing 800-642-1687 (if dialing from within the U.S.) or 706-645-9291 (if dialing from outside the U.S.).  The replay conference ID access code is 43242663.  The replay will be available for one week on the above number.

About Cyberonics, Inc. and the VNS Therapy® System

Cyberonics, Inc. is a medical technology company with core expertise in neuromodulation.  The company developed and markets the VNS Therapy System, which is FDA-approved for the treatment of refractory epilepsy and treatment-resistant depression.  The VNS Therapy System uses a surgically implanted medical device that delivers electrical pulsed signals to the vagus nerve.  Cyberonics markets the VNS Therapy System in selected markets worldwide.

Additional information on Cyberonics and the VNS Therapy System is available at www.cyberonics.com.

Safe harbor statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the use of forward-looking terminology, including "may," "believe," "will," "expect," "anticipate," "estimate," "plan," "intend," "forecast," or other similar words. Statements contained in this press release are based on information presently available to us and assumptions that we believe to be reasonable. We are not assuming any duty to update this information if those facts change or if we no longer believe the assumptions to be reasonable. Investors are cautioned that all such statements involve risks and uncertainties, including without limitation, statements concerning growth in sales and operating income in fiscal 2011, improving sales in key international markets, including EU countries and Japan, fulfilling regulatory obligations in Japan, achieving key product development milestones, including commencement of a clinical study for the AspireSR generator in the first half of calendar 2011, and fiscal 2011 guidance, as follows: sales of $189 million to $191 million, and operating income of $47 million to $50 million. Our actual results may differ materially. Important factors that may cause actual results to differ include, but are not limited to: continued market acceptance of VNS therapy and sales of our products; satisfactory completion of post-market studies required by the U.S. Food and Drug Administration as a condition of approval for the treatment-resistant depression indication; adverse changes in coverage or reimbursement amounts by third-parties; intellectual property protection and potential patent infringement claims; potential litigation relating to compliance with laws and regulations pertaining to our business; product liability claims and potential litigation; reliance on single suppliers and manufacturers for certain components; the accuracy of management's estimates of future expenses and sales; the potential identification of material weaknesses in our internal controls over financial reporting; and other risks detailed from time to time in our filings with the Securities and Exchange Commission (SEC). For a detailed discussion of these and other cautionary statements, please refer to our most recent filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2010, and our Quarterly Reports on Form 10-Q for the fiscal quarters ended July 30, 2010, October 29, 2010 and January 28, 2011.

Contact:

Greg Browne

ir@cyberonics.com

281.228.7262

CYBERONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Thirteen Weeks Ended

For the Thirty-Nine Weeks Ended

January 28, 2011

January 22, 2010

January 28, 2011

January 22, 2010

Net sales

$

47,081,476

$

40,821,276

$

139,341,809

$

120,040,684

Cost of sales

5,807,402

4,952,636

16,820,874

15,410,492

Gross Profit

41,274,074

35,868,640

122,520,935

104,630,192

Operating Expenses:

Selling, general and administrative

22,078,068

21,224,801

65,374,031

64,215,712

Research and development

7,494,820

5,612,899

20,989,588

15,788,183

Total Operating Expenses

29,572,888

26,837,700

86,363,619

80,003,895

Income from Operations

11,701,186

9,030,940

36,157,316

24,626,297

Interest income

89,963

17,237

179,239

83,004

Interest expense

(94,316)

(297,143)

(299,160)

(1,230,676)

Gain on early extinguishment of debt

-

846,010

83,074

3,042,477

Other income (expense), net

(51,801)

(481,487)

(383,595)

344,308

Income before income tax

11,645,032

9,115,557

35,736,874

26,865,410

Income tax (benefit) expense

4,453,060

266,553

(3,559,639)

(39,993,170)

Net income

$

7,191,972

$

8,849,004

$

39,296,513

$

66,858,580

Basic income per share

$

0.26

$

0.32

$

1.41

$

2.42

Diluted income per share

$

0.25

$

0.29

$

1.38

$

2.26

Shares used in computing basic income per share

28,121,852

27,763,768

27,949,256

27,681,615

Shares used in computing diluted income per share

28,753,197

28,145,068

28,471,403

28,810,757

CYBERONICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited except where indicated)

January 28, 2011

April 30, 2010

(Audited)

ASSETS

Current Assets

Cash and cash equivalents

$

85,273,721

$

59,229,911

Restricted cash

-

1,000,000

Accounts receivable, net

23,715,442

26,185,143

Inventories

15,726,818

14,207,759

Deferred tax assets

14,522,636

12,126,758

Other current assets

4,071,113

2,495,019

Total Current Assets

143,309,730

115,244,590

Property and equipment, net

8,282,206

7,510,864

Intellectual property, net

4,810,951

1,948,266

Long-term investments

5,134,795

-

Deferred tax assets

44,855,897

29,624,489

Other assets

1,072,665

1,435,768

Total Assets

$

207,466,244

$

155,763,977

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payables and accrued liabilities

$

19,918,260

$

23,325,253

Convertible notes

7,048,000

-

Total Current Liabilities

26,966,260

23,325,253

Long-term liabilities:

Convertible notes

-

15,460,000

Deferred license revenue and other

7,234,213

6,119,077

Total Long-Term Liabilities

7,234,213

21,579,077

Total Liabilities

34,200,473

44,904,330

Total Stockholders' Equity

173,265,771

110,859,647

Total Liabilities and Stockholders' Equity

$

207,466,244

$

155,763,977

CYBERONICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Thirty-Nine Weeks Ended

January 28, 2011

January 22, 2010

Cash Flow From Operating Activities:

Net Income

$

39,296,513

$

66,858,580

Non-Cash items included in Net Income:

Gain on early extinguishment of debt

(83,074)

(3,042,477)

Stock-base compensation

4,752,137

6,520,302

Deferred income tax

(4,422,670)

(40,760,354)

Unrealized gain in foreign currency transactions

(623,980)

(283,227)

Other

1,186,893

792,762

Changes in Operating Assets and Liabilities:

Accounts receivable, net

2,486,979

(1,815,988)

Inventories

(1,465,189)

(872,049)

Other

(4,030,294)

118,364

Net Cash Provided By Operating Activities

37,097,315

27,515,913

Cash Flow From Investing Activities:

Release of restricted cash

1,000,000

-

Acquired intellectual property

(3,245,000)

(900,000)

Purchases of property and equipment

(2,794,256)

(2,550,566)

Investments in convertible debt securities

(5,000,000)

(100,000)

Net Cash Used in Investing Activities

(10,039,256)

(3,550,566)

Cash Flow From Financing Activities:

Repurchase of convertible notes

(8,241,260)

(36,256,250)

Proceeds from exercise of options for common stock

14,390,448

945,840

Purchase of treasury stock

(6,857,039)

(37,551)

Net Cash Used in Financing Activities

(707,851)

(35,347,961)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

(306,398)

(163,597)

Net Increase (Decrease) in Cash and Cash Equivalents

26,043,810

(11,546,211)

Cash and Cash Equivalents at Beginning of Period

59,229,911

66,225,479

Cash and Cash Equivalents at End of Period

$

85,273,721

$

54,679,268

CYBERONICS, INC. AND SUBSIDIARY

Table of Sales Data

(Unaudited)

For the Thirteen Weeks Ended

For the Thirty-Nine Weeks Ended

January 28, 2011

January 22, 2010

January 28, 2011

January 22, 2010

US Units(1)

1,925

1,667

5,824

5,108

US Revenue ($000s)

$

39,655

$

32,108

$

117,544

$

96,525

International Units(1)

604

699

1,873

1,915

International Revenue ($000s)

$

7,053

$

8,340

$

20,668

$

22,395

TOTAL UNITS

2,529

2,366

7,697

7,023

TOTAL REVENUE(2) ($000s)

$

46,708

$

40,448

$

138,212

$

118,920

(1) Includes units sold for both epilepsy and depression indications

(2) Excludes license revenue

SOURCE Cyberonics, Inc.



RELATED LINKS

http://www.cyberonics.com