HOUSTON, Feb. 23 /PRNewswire-FirstCall/ -- Cyberonics, Inc. today announced financial results for the third quarter of fiscal 2007, ended January 26, 2007. Net sales increased 1.2% to $31.7 million, compared to net sales of $31.3 million for the third quarter last year. U.S. net sales for the third quarter were $26.6 million, a decrease of 3.6% as compared to U.S. net sales of $27.6 million for the third quarter last year. International sales for the third quarter were $5.1 million, an increase of 36.3% as compared to $3.7 million for the third quarter last year.
Net sales for the nine months ended January 26, 2007 were a record $99.5 million compared to $87.4 million for the nine months ended January 27, 2006. Net sales for the nine months ended January 26, 2007 included $85.7 million from the U.S. market and $13.8 million from international markets, compared to net sales of $76.1 million from the U.S. market and $11.3 million from international markets for the same period last year.
Gross profit margin for the quarter ended January 26, 2007 was 84.4%, compared to 87.6% for the quarter ended January 27, 2006. Gross profit margin for the nine months ended January 26, 2007 was 87.4%, compared to 86.9% for the same period last year. Operating expenses for the quarter ended January 26, 2007 were $45.4 million, compared to $42.2 million for the same period last year. Operating expenses for the nine months ended January 26, 2007 were $126.3 million, compared to $131.2 million for the same period last year.
Net loss for the quarter ended January 26, 2007, including $7.2 million in non-cash stock-based compensation expense and $8.2 million of charges related to the resignations of Robert Cummins, former Chief Executive Officer and Pamela Westbrook, former Chief Financial Officer, the Audit Committee and Securities and Exchange Commission ("SEC") review of our stock option grants, practices and procedures, and our recent contested Board election, was $19.4 million, or $0.76 per fully diluted share, compared to net loss for the quarter ended January 27, 2006 of $14.8 million, or $0.60 per fully diluted share, which included $0.2 million in non-cash stock-based compensation expense. Net loss for the nine months ended January 26, 2007, including non- cash stock-based compensation expense of $16.4 million and charges of $15.4 million related to the matters referenced above, was $40.4 million, or $1.59 per fully diluted share, compared to net loss of $54.8 million, or $2.20 per fully diluted share for the nine months ended January 27, 2006, which included ($0.7) million in non-cash stock-based compensation expense due to variable accounting treatment for certain stock option grants and a drop in the price of our common stock. Cash, cash equivalents and restricted cash as of January 26, 2007 were $85.2 million.
"Since completion of the Audit Committee's investigation last November, we have taken significant steps to enhance our corporate governance and transparency, including the election of a new Chairman of the Board, the addition of three new directors to our Board, adoption of a number of governance best practices such as a policy requiring a non-executive Chairman and a policy governing equity incentive grants, becoming current on our SEC reporting, and achieving full compliance with all NASDAQ listing requirements," commented Reese S. Terry, Jr., Cyberonics' Interim Chief Executive Officer. "Our priority for the current quarter is to continue our efforts to increase shareholder value by renewing our focus on patients suffering from refractory epilepsy, completing the search for a new Chief Executive Officer, executing a plan to achieve parity in access to VNS Therapy for patients suffering from treatment-resistant depression, and better aligning our expenses with reasonable revenue expectations based on the current reimbursement environment."
ABOUT VNS THERAPY AND CYBERONICS
Information on Cyberonics, Inc. and VNS Therapy(TM) is available at http://www.cyberonics.com/ and http://www.vnstherapy.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," and "forecast," or other similar words. Statements contained in this press release are based upon information presently available to the Company and assumptions that the Company believes to be reasonable. The Company is not assuming any duty to update this information should those facts change or should 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 renewing our focus on patients suffering from refractory epilepsy, completing the search for a new Chief Executive Officer, executing a plan to achieve parity of access to VNS Therapy for patients suffering from treatment-resistant depression, and better aligning our expenses with reasonable revenue expectations. The Company's actual decisions, performance and 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 the Company's product; the development and satisfactory completion of clinical trials and/or market test and/or regulatory approval of VNS Therapy for the treatment of Alzheimer's disease, anxiety, or other indications; adverse changes in coverage or reimbursement amounts by third-parties; intellectual property protection and potential infringement claims; maintaining compliance with government regulations and obtaining necessary government approvals for new applications; 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 results of the previously disclosed governmental inquiries; the impact of restatement of the Company's financial statements or other actions that might be taken or required as a result of such inquiries or the review by the Audit Committee of the Company's Board of Directors of the Company's stock option grants, procedures, and practices, including an alleged default under credit facilities or debt instruments; the potential identification of new material weaknesses in the Company's internal controls over financial reporting; risks and costs associated with such inquiries or review and any litigation relating thereto or to the Company's stock option grants, procedures, and practices (including the previously disclosed private litigation); uncertainties associated with stockholder litigation and other risks detailed from time to time in the Company's filings with the SEC. For a detailed discussion of these and other cautionary statements, please refer to the Company's most recent filings with the SEC, including its Form 10-K for the fiscal year ended April 28, 2006 and its Form 10-Q for the period ended October 27, 2006.
CYBERONICS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
January 26, 2007 April 28, 2006
(Unaudited)
ASSETS
Current Assets
Cash, cash equivalents and
restricted cash $85,152,862 $93,355,071
Accounts receivable, net 18,929,968 21,341,942
Inventories 18,870,278 17,304,794
Other current assets 3,181,035 5,274,133
Total Current Assets 126,134,143 137,275,940
Property and equipment, net and other
assets 12,880,177 15,024,344
$139,014,320 $152,300,284
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities $30,208,627 $21,521,961
Convertible Notes 125,000,000 125,000,000
Total current liabilities 155,208,627 146,521,961
Long term liabilities 309,461 1,148,457
Stockholders' equity (deficit) (16,503,768) 4,629,866
$139,014,320 $152,300,284
CYBERONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Thirteen For the Thirty-Nine
Weeks Ended Weeks Ended
January 27, January 27,
January 26, 2006 January 26, 2006
2007 As Restated 2007 As Restated
Net sales $31,664,282 $31,304,205 $99,536,598 $87,393,962
Cost of sales 4,927,368 3,882,778 12,532,642 11,470,528
Gross Profit 26,736,914 27,421,427 87,003,956 75,923,434
Operating Expenses:
Selling,
general and
administrative 37,965,880 34,644,483 104,970,499 109,615,977
Research and
development 7,431,792 7,600,284 21,359,752 21,574,056
Total Operating
Expenses 45,397,672 42,244,767 126,330,251 131,190,033
Loss From
Operations (18,660,758) (14,823,340) (39,326,295) (55,266,599)
Interest income 1,197,520 1,139,165 3,616,238 2,168,184
Interest expense (1,564,336) (1,150,418) (4,360,277) (1,731,583)
Other income
(expense), net (336,451) 4,651 (260,195) 91,056
Loss before income
taxes (19,364,025) (14,829,942) (40,330,529) (54,738,942)
Income tax expense 21,275 1,800 81,861 57,972
Net Loss $(19,385,300) $(14,831,742) $(40,412,390) $(54,796,914)
Basic loss per share $(0.76) $(0.60) $(1.59) $(2.20)
Diluted loss per share $(0.76) $(0.60) $(1.59) $(2.20)
Shares used in
computing basic
loss per share 25,478,530 24,872,249 25,403,666 24,878,569
Shares used in
computing diluted
loss per share 25,478,530 24,872,249 25,403,666 24,878,569
