Exhibit 99.1
NEWS RELEASE
NUVASIVE REPORTS SECOND QUARTER 2017
FINANCIAL RESULTS
SAN DIEGO, CA – July
27, 2017 -
NuVasive, Inc. (Nasdaq: NUVA), a leading medical device company focused on
transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced today financial results for the quarter ended June 30, 2017.
Second Quarter 2017 Highlights
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Revenue increased 10.3% to $260.6 million, or 10.7% on a constant currency basis;
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GAAP operating profit margin of 11.4%;
Non-GAAP
operating profit margin up 40 basis points from prior year to 16.3%;
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GAAP diluted earnings per share of $0.22;
Non-GAAP
diluted earnings per share up 15.0% from prior year to $0.46; and
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Company reiterates revenue,
non-GAAP
operating margin and
non-GAAP
diluted earnings per share guidance for 2017.
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“NuVasive delivered better than expected operating profitability and earnings per share results in the second quarter 2017, along with continued strength across
our International business, growing at more than 20% for the third quarter in a row,” said Gregory T. Lucier, chairman and chief executive officer of NuVasive. “In addition, several of our industry-disrupting technologies completed alpha
and beta testing this quarter and will commercially launch over the next few months, giving surgeons and patients access to some of the most innovative technologies to address spine and trauma conditions, as well as radiation reduction in the
operating room.”
A full reconciliation of GAAP to
non-GAAP
measures can be found in the tables of this news release.
Second Quarter 2017 Results
NuVasive reported second quarter
2017 total revenue of $260.6 million, a 10.3% increase compared to $236.2 million for the second quarter 2016. On a constant currency basis, second quarter 2017 total revenue increased 10.7% compared to the same period last year.
For the second quarter 2017, both GAAP and
non-GAAP
gross profit was $194.2 million, while both GAAP and
non-GAAP
gross margin was 74.5%. These results compared to GAAP and
non-GAAP
gross profit of $176.5 million and $183.8 million, respectively, and GAAP and
non-GAAP
gross margin of 74.7% and 77.8% respectively, for the second quarter 2016. Total GAAP and
non-GAAP
operating expenses were $164.4 million and
$151.7 million, respectively, for the second quarter 2017. These results compared to GAAP and
non-GAAP
operating expenses of $116.4 million and $146.4 million, respectively, for the second
quarter 2016.
NuVasive reported a GAAP net income of $12.7 million, or $0.22 per share, for the second quarter 2017 compared to $30.2 million, or $0.57
per share, for the second quarter 2016.
On a
non-GAAP
basis, the Company reported net income of $24.1 million, or
$0.46 per share for the second quarter 2017 compared to $20.6 million, or $0.40 per share, for the second quarter 2016.
Cash, cash equivalents and short and
long-term marketable securities were approximately $130.9 million at June 30, 2017.
1
Annual Guidance for 2017
The Company reiterated full year 2017 financial guidance in line with prior expectations, with the exception of the impact of updated foreign exchange rates.
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2017 Guidance
1
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(in Million’s; except %‘s and EPS)
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GAAP
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Non-GAAP
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Revenue
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$
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1,065
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$
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1,065
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% Growth - Reported
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10.7%
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10.7%
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% Growth -
Constant Currency
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11.1%
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Operating margin
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12.4%
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17.1%
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Earnings per share
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$
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1.13
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$
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2.00
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EBITDA
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23.6%
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26.7%
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Tax Rate
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~33%
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~35%
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1
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Current guidance reflects guidance provided July 27, 2017.
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2
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Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year.
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●
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Revenue of $1.065 billion, which now includes approximately $4 million in year-over-year currency headwinds, and reflects 10.7% growth on a reported basis and 11.1% growth on a constant currency basis compared
to revenue of $962.1 million for 2016;
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Non-GAAP
diluted earnings per share of $2.00, an increase of 20% compared to
non-GAAP
diluted earnings per share of $1.66 for 2016;
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Non-GAAP
operating profit margin of 17.1%, an increase of 100 basis points compared to 16.1% for 2016; and
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Adjusted EBITDA margin of 26.7%, an increase of 150 basis points compared to 25.2% for 2016.
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Supplementary
Financial Information
For additional financial detail, please visit the Investor Relations section at
www.nuvasive.com
to access Supplementary Financial Information.
2
Reconciliation of Full Year EPS Guidance
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2017 Guidance
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2016
Actuals
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Prior
1, 2
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Current
1, 3
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GAAP net income per share
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$
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0.69
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$
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1.13
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$
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1.13
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Impact of change to diluted share count
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0.02
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0.07
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0.09
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GAAP net income per share, adjusted to diluted
Non-GAAP
share count
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$
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0.71
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$
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1.20
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$
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1.22
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Litigation liability gain
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(0.83)
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-
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-
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Business transition costs
4
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0.35
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0.04
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0.05
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Non-cash
interest expense on convertible notes
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0.38
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0.33
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0.33
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Non-cash
purchase accounting adjustments on acquisitions
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0.28
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-
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-
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Loss on repurchase of convertible notes
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0.37
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-
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-
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Amortization of intangible assets
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0.78
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0.89
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0.88
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Tax effect of adjustments
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(0.38)
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(0.46)
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(0.48)
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Non-GAAP
earnings per share
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$
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1.66
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$
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2.00
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$
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2.00
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GAAP Weighted shares outstanding - basic
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50,077
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50,967
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50,864
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GAAP Weighted shares outstanding - diluted
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54,102
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56,269
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56,617
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Non-GAAP
Weighted shares outstanding - diluted
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51,981
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53,069
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52,738
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1
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Prior guidance provided April 25, 2017. Current guidance reflects guidance provided July 27, 2017.
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2
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Effective tax expense rate of ~34% applied to GAAP earnings and ~35% applied to
Non-GAAP
earnings.
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3
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Effective tax expense rate of ~33% applied to GAAP earnings and ~35% applied to
Non-GAAP
earnings.
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4
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Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party
merger and acquisitions costs and other costs directly associated with such activities.
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5
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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.
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6
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Excludes the amortization associated with
non-controlling
interest.
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7
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The impact on results from taxes include tax effecting 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 estimated rate of ~35% on a
non-GAAP
basis.
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3
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Reconciliation of
Non-GAAP
Operating Margin %
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2017 Guidance
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(in thousands, except %)
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2016
Actuals
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Prior
1
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Current
1
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Non-GAAP
Gross Margin %
[A]
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76.6%
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76.1%
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75.6%
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Non-cash
purchase accounting adjustments on acquisitions
2
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(1.5%)
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0.0%
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0.0%
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GAAP Gross Margin [B]
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75.0%
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76.1%
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75.6%
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GAAP &
Non-GAAP
Sales,
Marketing & Administrative Expense [C]
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55.5%
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54.0%
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53.5%
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Non-GAAP
Research &
Development Expense [D]
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5.0%
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5.0%
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5.0%
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In-process
research &
development
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0.0%
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0.0%
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0.0%
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GAAP Research & Development Expense [E]
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5.0%
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5.0%
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5.0%
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Litigation liability [F]
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(4.5%)
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0.0%
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0.0%
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Amortization of intangible
assets [G]
3
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4.4%
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4.6%
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4.5%
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Business transition costs
[H]
4
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1.9%
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0.2%
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0.2%
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Non-GAAP
Operating Margin % [A - C
- D]
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16.1%
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17.1%
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17.1%
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GAAP Operating Margin % [B - C - E - F - G - H]
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12.8%
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12.3%
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12.4%
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1
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Prior guidance provided April
25, 2017. Current guidance reflects guidance provided July
27, 2017.
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2
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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.
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3
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Excludes the amortization associated with
non-controlling
interest.
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4
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Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third
party merger and acquisitions costs and other costs directly associated with such activities.
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4
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Reconciliation of EBITDA %
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2017 Guidance
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(in thousands, except %)
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2016
Actuals
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Prior
1
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Current
1
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Net Income / (Loss)
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3.9%
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6.0%
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6.0%
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Interest (income) / expense, net
2
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6.1%
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3.5%
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3.6%
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Provision for income taxes
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3.0%
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3.0%
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2.9%
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Depreciation and amortization
3
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10.5%
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11.1%
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11.0%
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EBITDA
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23.5%
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23.6%
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23.6%
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Non-cash
stock based compensation
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2.8%
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3.0%
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3.0%
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Business transition costs
4
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1.9%
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0.2%
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0.2%
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Non-cash
purchase accounting adjustments on acquisitions
5
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1.5%
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0.0%
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0.0%
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In-process
research & development
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0.0%
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0.0%
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0.0%
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Litigation liability gain
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(4.5%)
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0.0%
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0.0%
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Adjusted EBITDA
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25.2%
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26.7%
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26.7%
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1
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Prior guidance provided April 25, 2017. Current guidance reflects guidance provided July 27, 2017.
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2
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Interest (income) / expense, net for the quarter and year ended December 31, 2016 includes loss on extinguishment of debt for $1.6 million and
$19.1 million, respectively.
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3
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Excludes the amortization associated with
non-controlling
interest.
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4
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Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party
merger and acquisitions costs and other costs directly associated with such activities.
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5
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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.
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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, purchase accounting related charges, leasehold related charges, integration related expenses associated with acquired businesses,
one-time
restructuring and acquisition related items, CEO transition related costs, certain litigation charges,
non-cash
interest expense and/or losses on convertible
notes, and the impact from taxes related to these items, including those taxes that would have occurred in lieu of these items. Management also uses certain
non-GAAP
measures which are intended to exclude the
impact of foreign exchange currency fluctuations. The measure constant currency is the use of 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, purchase accounting related changes, leasehold related
charges, integration related expenses associated with acquired businesses, CEO transition related costs, certain litigation liabilities, acquisition related items 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
5
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.
Reconciliation of Second Quarter 2017 Results
GAAP Net Income per Share to
Non-GAAP
Earnings per Share
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(in thousands, except per share data)
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Adjustments
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Diluted Earnings Per
Share
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GAAP net income
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$
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12,661
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$
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0.22
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Business transition costs
1
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1,369
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Non-cash
interest expense on convertible notes
|
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4,665
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Amortization of intangible assets
2
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11,028
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Tax effect of adjustments
3
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(5,661
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)
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Adjustments to GAAP net income
|
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11,401
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Non-GAAP
earnings
|
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$
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24,062
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$
|
0.46
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GAAP weighted shares outstanding - diluted
|
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58,330
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Non-GAAP
weighted shares outstanding - diluted
4
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52,743
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|
1
|
Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly
associated with such activities.
|
|
|
|
2
|
Excludes the amortization associated with
non-controlling
interest.
|
|
|
|
3
|
The impact on results from taxes include tax effecting 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 estimated rate
of ~35% on a non-GAAP basis.
|
|
|
|
4
|
Excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.
|
|
6
Reconciliation of Year To Date 2017 Results
GAAP Net Income per Share to
Non-GAAP
Earnings
per Share
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
|
Adjustments
|
|
|
Diluted Earnings Per
Share
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
25,429
|
|
|
$
|
0.44
|
|
|
|
|
|
|
Business transition costs
1
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
Non-cash
interest expense on convertible notes
|
|
|
9,264
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
2
|
|
|
22,766
|
|
|
|
|
|
|
|
|
|
|
Tax effect of adjustments
3
|
|
|
(14,784)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to GAAP net income
|
|
|
18,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
earnings
|
|
$
|
44,099
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP weighted shares outstanding - diluted
|
|
|
|
|
|
|
58,059
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
weighted shares outstanding - diluted
4
|
|
|
|
|
|
|
52,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly
associated with such activities.
|
|
|
|
2
|
Excludes the amortization associated with
non-controlling
interest.
|
|
|
|
3
|
The impact on results from taxes include tax effecting 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 estimated rate
of ~35% on a non-GAAP basis.
|
|
|
|
4
|
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 Second Quarter and Six Months 2017 Results
GAAP net income to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
(in thousands, except per share data)
|
|
June 30, 2017
|
|
|
June 30, 2017
|
|
|
GAAP net income
|
|
$
|
12,661
|
|
|
$
|
25,429
|
|
|
|
|
|
|
Interest expense/(income), net
|
|
|
9,944
|
|
|
|
19,606
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
7,079
|
|
|
|
8,569
|
|
|
|
|
|
|
Depreciation and amortization
1
|
|
|
28,856
|
|
|
|
58,014
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
58,540
|
|
|
$
|
111,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business transition costs
2
|
|
|
1,369
|
|
|
|
1,424
|
|
|
|
|
|
|
Non-cash
stock based compensation
|
|
|
8,394
|
|
|
|
15,411
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
68,303
|
|
|
$
|
128,453
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percentage of revenue
|
|
|
26.2%
|
|
|
|
25.2%
|
|
|
|
1
|
Excludes the amortization associated with
non-controlling
interest.
|
|
|
2
|
Costs related to acquisition, integration and business transition activities which includes severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly
associated with such activities.
|
|
Investor Conference Call
NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the second quarter 2017. The
dial-in
numbers are
1-877-407-9039
for domestic
7
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
August 28, 2017. In addition, a telephone replay of the call will be available until August 3, 2017. The replay
dial-in
numbers are
1-844-512-2921
for domestic callers and
1-412-317-6617
for international callers.
Please use pin number: 13665648.
About NuVasive
NuVasive, Inc. (NASDAQ: NUVA) is transforming spine surgery and beyond with minimally invasive, procedurally-integrated solutions designed to deliver reproducible and
clinically-proven surgical outcomes. The Company’s portfolio includes access instruments, implantable hardware, biologics, software systems for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for
spine and orthopedics, and intraoperative monitoring service offerings. With $962 million in revenues (2016), NuVasive has an approximate 2,300 person workforce in more than 40 countries serving surgeons, hospitals and patients. For more
information, please visit
www.nuvasive.com
.
Forward-Looking Statements
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 second quarter 2017, as well as projections for 2017 financial guidance and longer-term financial performance goals. The numbers for the second quarter 2017 are prior to the completion of review procedures by the Company’s external
auditors and are subject to adjustment. In addition, the Company’s projections for 2017 financial guidance and longer-term financial performance goals represent current estimates, including initial estimates of the potential benefits, synergies
and cost savings associated with acquisitions, which 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; the risk that acquisitions will not be integrated successfully or that the benefits and synergies from the acquisition may not be fully realized or may take longer to realize than expected; 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
. The forward-looking statements contained herein are based on the current expectations and assumptions of NuVasive and not on historical facts.
NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.
8
NuVasive, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
(unaudited)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Revenue
|
|
$
|
260,573
|
|
|
$
|
236,210
|
|
|
$
|
510,437
|
|
|
$
|
451,314
|
|
|
Cost of goods sold (excluding below amortization of intangible assets)
|
|
|
66,421
|
|
|
|
59,745
|
|
|
|
128,034
|
|
|
|
113,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
194,152
|
|
|
|
176,465
|
|
|
|
382,403
|
|
|
|
337,343
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, marketing and administrative
|
|
|
139,109
|
|
|
|
134,487
|
|
|
|
279,611
|
|
|
|
259,325
|
|
|
Research and development
|
|
|
12,572
|
|
|
|
11,871
|
|
|
|
24,986
|
|
|
|
22,500
|
|
|
Amortization of intangible assets
|
|
|
11,349
|
|
|
|
10,603
|
|
|
|
23,410
|
|
|
|
18,474
|
|
|
Litigation liability (gain)
|
|
|
—
|
|
|
|
(43,310)
|
|
|
|
—
|
|
|
|
(43,310)
|
|
|
Business transition costs
|
|
|
1,369
|
|
|
|
2,756
|
|
|
|
1,424
|
|
|
|
8,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
164,399
|
|
|
|
116,407
|
|
|
|
329,431
|
|
|
|
265,052
|
|
|
Interest and other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
139
|
|
|
|
406
|
|
|
|
276
|
|
|
|
734
|
|
|
Interest expense
|
|
|
(10,083)
|
|
|
|
(10,537)
|
|
|
|
(19,882)
|
|
|
|
(19,009)
|
|
|
Loss on repurchases of convertible notes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,444)
|
|
|
Other expense, net
|
|
|
(501)
|
|
|
|
(246)
|
|
|
|
(243)
|
|
|
|
(196)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other expense, net
|
|
|
(10,445)
|
|
|
|
(10,377)
|
|
|
|
(19,849)
|
|
|
|
(35,915)
|
|
|
Income before income taxes
|
|
|
19,308
|
|
|
|
49,681
|
|
|
|
33,123
|
|
|
|
36,376
|
|
|
Income tax expense
|
|
|
(7,079)
|
|
|
|
(19,891)
|
|
|
|
(8,569)
|
|
|
|
(10,411)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
$
|
12,229
|
|
|
$
|
29,790
|
|
|
$
|
24,554
|
|
|
$
|
25,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back net loss attributable to
non-controlling
interest
|
|
$
|
(432)
|
|
|
$
|
(423)
|
|
|
$
|
(875)
|
|
|
$
|
(880)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to NuVasive, Inc.
|
|
$
|
12,661
|
|
|
$
|
30,213
|
|
|
$
|
25,429
|
|
|
$
|
26,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to NuVasive, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.25
|
|
|
$
|
0.60
|
|
|
$
|
0.50
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.22
|
|
|
$
|
0.57
|
|
|
$
|
0.44
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
51,082
|
|
|
|
50,027
|
|
|
|
50,825
|
|
|
|
49,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
58,330
|
|
|
|
53,159
|
|
|
|
58,059
|
|
|
|
52,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
NuVasive, Inc.
Consolidated Balance Sheets
(in thousands, except par values and share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
130,932
|
|
|
$
|
153,643
|
|
|
Restricted cash and investments
|
|
|
2,402
|
|
|
|
—
|
|
|
Accounts receivable, net of allowances of $9,399 and $8,912, respectively
|
|
|
190,169
|
|
|
|
171,595
|
|
|
Inventory, net
|
|
|
236,839
|
|
|
|
208,249
|
|
|
Prepaid income taxes
|
|
|
19,576
|
|
|
|
31,926
|
|
|
Prepaid expenses and other current assets
|
|
|
12,310
|
|
|
|
10,030
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
592,228
|
|
|
|
575,443
|
|
|
Property and equipment, net
|
|
|
214,601
|
|
|
|
181,524
|
|
|
Intangible assets, net
|
|
|
268,466
|
|
|
|
291,143
|
|
|
Goodwill
|
|
|
486,439
|
|
|
|
485,685
|
|
|
Deferred tax assets
|
|
|
5,961
|
|
|
|
5,810
|
|
|
Restricted cash and investments
|
|
|
4,945
|
|
|
|
7,405
|
|
|
Other assets
|
|
|
33,744
|
|
|
|
23,794
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,606,384
|
|
|
$
|
1,570,804
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
82,933
|
|
|
$
|
77,585
|
|
|
Contingent consideration liabilities
|
|
|
19,271
|
|
|
|
49,742
|
|
|
Accrued payroll and related expenses
|
|
|
49,323
|
|
|
|
51,000
|
|
|
Income tax liabilities
|
|
|
11,995
|
|
|
|
2,469
|
|
|
Short-term borrowings
|
|
|
20,000
|
|
|
|
—
|
|
|
Senior convertible notes
|
|
|
63,302
|
|
|
|
61,701
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
246,824
|
|
|
|
242,497
|
|
|
Long-term senior convertible notes
|
|
|
573,532
|
|
|
|
564,412
|
|
|
Deferred and income tax liabilities,
non-current
|
|
|
16,110
|
|
|
|
18,607
|
|
|
Other long-term liabilities
|
|
|
46,312
|
|
|
|
44,764
|
|
|
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 June 30, 2017 and December 31, 2016,
58,081,702 and 55,184,660 issued and outstanding at June 30, 2017 and December 31, 2016, respectively
|
|
|
58
|
|
|
|
55
|
|
|
Additional
paid-in
capital
|
|
|
1,033,546
|
|
|
|
1,010,238
|
|
|
Accumulated other comprehensive loss
|
|
|
(8,131)
|
|
|
|
(10,631)
|
|
|
Accumulated deficit
|
|
|
(53,077)
|
|
|
|
(66,859)
|
|
|
Treasury stock at cost; 4,974,534 shares and 4,758,828 shares at June 30, 2017 and
December 31, 2016, respectively
|
|
|
(253,503)
|
|
|
|
(237,867)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NuVasive, Inc. stockholders’ equity
|
|
|
718,893
|
|
|
|
694,936
|
|
|
Non-controlling
interest
|
|
|
4,713
|
|
|
|
5,588
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
723,606
|
|
|
|
700,524
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,606,384
|
|
|
$
|
1,570,804
|
|
|
|
|
|
|
|
|
|
|
|
10
NuVasive, Inc.
Consolidated Statements of Cash Flows
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
(unaudited)
|
|
2017
|
|
|
2016
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
$
|
24,554
|
|
|
$
|
25,965
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
58,688
|
|
|
|
46,329
|
|
|
Loss on repurchases of convertible notes
|
|
|
—
|
|
|
|
17,444
|
|
|
Amortization of
non-cash
interest
|
|
|
10,882
|
|
|
|
10,943
|
|
|
Stock-based compensation
|
|
|
15,411
|
|
|
|
12,357
|
|
|
Reserves on current assets
|
|
|
(95)
|
|
|
|
6,751
|
|
|
Other
non-cash
adjustments
|
|
|
7,380
|
|
|
|
8,387
|
|
|
Deferred income taxes
|
|
|
(2,570)
|
|
|
|
14,691
|
|
|
Changes in operating assets and liabilities, net of effects from acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(17,586)
|
|
|
|
(8,615)
|
|
|
Inventory
|
|
|
(29,012)
|
|
|
|
(12,019)
|
|
|
Prepaid expenses and other current assets
|
|
|
(2,485)
|
|
|
|
728
|
|
|
Contingent consideration liabilities
|
|
|
(11,200)
|
|
|
|
—
|
|
|
Accounts payable and accrued liabilities
|
|
|
4,987
|
|
|
|
14,384
|
|
|
Litigation liability
|
|
|
—
|
|
|
|
(43,310)
|
|
|
Accrued payroll and related expenses
|
|
|
(2,004)
|
|
|
|
(4,356)
|
|
|
Income taxes
|
|
|
10,172
|
|
|
|
10,534
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
67,122
|
|
|
|
100,213
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of Ellipse Technologies, net of cash acquired
|
|
|
—
|
|
|
|
(380,080)
|
|
|
Other acquisitions and investments
|
|
|
(14,417)
|
|
|
|
(8,079)
|
|
|
Purchases of intangible assets
|
|
|
(1,695)
|
|
|
|
(5,918)
|
|
|
Purchases of property and equipment
|
|
|
(68,690)
|
|
|
|
(52,566)
|
|
|
Purchases of marketable securities
|
|
|
—
|
|
|
|
(128,956)
|
|
|
Proceeds from sales of marketable securities
|
|
|
—
|
|
|
|
339,320
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(84,802)
|
|
|
|
(236,279)
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of common stock
|
|
|
5,369
|
|
|
|
6,150
|
|
|
Purchase of treasury stock
|
|
|
(10,844)
|
|
|
|
(22,549)
|
|
|
Payment of contingent consideration
|
|
|
(18,800)
|
|
|
|
—
|
|
|
Proceeds from issuance of convertible debt, net of issuance costs
|
|
|
—
|
|
|
|
634,140
|
|
|
Proceeds from sale of warrants
|
|
|
—
|
|
|
|
44,850
|
|
|
Purchase of convertible note hedge
|
|
|
—
|
|
|
|
(111,150)
|
|
|
Repurchases of convertible notes
|
|
|
—
|
|
|
|
(343,835)
|
|
|
Proceeds from revolving line of credit
|
|
|
20,000
|
|
|
|
50,000
|
|
|
Repayments on revolving line of credit
|
|
|
—
|
|
|
|
(50,000)
|
|
|
Other financing activities
|
|
|
(2,205)
|
|
|
|
(1,545)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
|
(6,480)
|
|
|
|
206,061
|
|
|
Effect of exchange rate changes on cash
|
|
|
1,449
|
|
|
|
748
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(22,711)
|
|
|
|
70,743
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
153,643
|
|
|
|
192,339
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
130,932
|
|
|
$
|
263,082
|
|
|
|
|
|
|
|
|
|
|
|
Investor Contact:
Suzanne
Hatcher
NuVasive, Inc.
1-858-458-2240
shatcher@nuvasive.com
Media Contact:
11
Stefanie Mazer
NuVasive, Inc.
1-858-320-2240
media@nuvasive.com
12
Exhibit 99.2
NEWS RELEASE
NUVASIVE ANNOUNCES NEW ORGANIZATIONAL
STRUCTURE TO DRIVE GROWTH AND
PROFITABILITY GOALS
New structure designed to align strategy and innovation, integrate global commercial channels and transform business operations
SAN DIEGO, CA – July
27, 2017
– NuVasive, Inc. (NASDAQ: NUVA), a leading medical device company focused on transforming spine
surgery with minimally disruptive, procedurally-integrated solutions, today announced a new organizational structure to drive the Company’s growth and profitability goals, supporting its strategy to help deliver safer, more predictable spine
surgery.
“As the innovation pioneer and largest, pure-play spine technology company, NuVasive continues to deliver significant value to its customers and
shareholders,” said Gregory T. Lucier, NuVasive’s chairman and chief executive officer. “With incredible opportunities ahead, we are taking steps to refine the company’s operating structure to tightly align strategy, product
development and marketing and integrate our global commercial channels, while scaling global operations to best address the growing needs of our partners and patients.”
Today the Company announced that
Jason Hannon
, president and chief operating officer, is stepping down from his position to pursue other interests. He will
remain with NuVasive through the end of the year in an advisory capacity. During Mr. Hannon’s successful
12-year
career at NuVasive, he has made countless important contributions to the Company. In
connection with Mr. Hannon’s departure, the Company has accelerated its timeline to implement organizational changes that will position NuVasive to execute against the Company’s strategic goals. Effective August 1, the Company
will:
|
|
-
|
Align strategy, technology and marketing to build a world-class product development and commercialization capability;
|
|
|
-
|
Integrate its U.S. Commercial and International sales functions into a scalable global commercial organization; and
|
|
|
-
|
Transform global operations to drive operational efficiencies through the combination of manufacturing, supply chain, information technology (IT), regulatory affairs and quality assurance (RA/QA).
|
Matt Link
, president, U.S. Commercial is being promoted to a key leadership role as executive vice president, Strategy, Technology and Corporate Development, a
newly created position to further drive the Company’s innovation agenda. Mr. Link is a long-tenured NuVasive executive with more than 15 years of industry experience, including extensive knowledge of the U.S. spine marketplace, as well as
surgeon and hospital dynamics. In this role, he will lead product and systems development, global marketing, surgeon education, clinical research and corporate development. Mr. Link’s experience in surgeon requirements and commercial
operations will be key as NuVasive continues to bring leading innovation to market.
Skip Kiil
, executive vice president, International is named executive
vice president, Global Commercial. Mr. Kiil joined NuVasive in June and has more than 15 years of experience as a global medical technologies and life sciences business leader. He was previously with Alcon, a division of Novartis Corporation,
where he most recently served as surgical head, Europe, Middle East, Africa and Russia. He is a proven leader in managing and growing complex, global commercial enterprises internationally and domestically within the healthcare and spine technology
industries. His strategic and operational expertise in market entry and development are critical as NuVasive seeks to double its International market share in the coming years and further expand the Company’s position in the U.S. marketplace.
Steve Rozow
, vice president, Global Operations, assumes an elevated role as executive vice president, Global
Process Transformation, including IT and RA/QA, in addition to his current Global Operations responsibilities. Since joining NuVasive in 2015, Mr. Rozow has led improvements in supply chain and fulfillment, as well as the successful development
of the Company’s new manufacturing facility in West Carrollton, Ohio. Mr. Rozow is an experienced medical device leader including more than 20 years with Zimmer, where he served in various manufacturing and operational leadership roles.
His position is critical as the Company focuses on scaling global operations and driving operational improvement initiatives.
Unrelated to the organizational
updates announced today, the Company has accepted the resignation of its chief financial officer,
Quentin Blackford
, effective August 25, 2017. Mr. Blackford is pursuing another opportunity outside the spine industry and has agreed
to remain with the company during this transition period. Mr. Blackford’s resignation is not the result of any dispute or disagreement with NuVasive, including any matters relating to the Company’s accounting practices or financial
reporting.
Vickie Capps, in her role as an independent member of NuVasive’s board of directors and a member of the audit committee,
will provide guidance and support to the Company’s financial organization during the
transition period. Ms. Capps is a well-respected financial executive, having served as CFO of DJO Global, as well as CFO of several public and private companies. Ms. Capps will also assist the Company in its search for a successor to
Mr. Blackford.
“Since becoming CEO over two years ago, I have been working with our board to build a world-class leadership team to support our revenue
growth and profitability goals. Together, we are executing against our
5-year
strategic plan and building a deep bench of talent, positioning us well to execute against our short- and long-term initiatives. I
remain more confident than ever in our Company’s position to take on the next $1 billion in growth,” said Lucier.
About NuVasive
NuVasive, Inc. (NASDAQ: NUVA) is transforming spine surgery and beyond with minimally invasive, procedurally-integrated solutions designed to deliver
reproducible and clinically-proven surgical outcomes. The Company’s portfolio includes access instruments, implantable hardware, biologics, software systems for surgical planning, navigation and imaging solutions, magnetically adjustable
implant systems for spine and orthopedics, and intraoperative monitoring service offerings. With $962 million in revenues (2016), NuVasive has an approximate 2,300 person workforce in more than 40 countries serving surgeons, hospitals and
patients. For more information, please visit
www.nuvasive.com
.
Forward-Looking Statements
NuVasive cautions you that statements included in this news release 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. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, risks associated with acceptance of the Company’s surgical products and procedures by spine surgeons,
development and acceptance of new products or product enhancements, clinical and statistical verification of the benefits achieved via the use of NuVasive’s products (including the
iGA
®
platform), the Company’s ability to effectually manage inventory as it continues to release new products, its ability to recruit and retain management and key personnel, and the
other risks and uncertainties described in NuVasive’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.
# # #
Investor Contact:
Suzanne Hatcher
NuVasive, Inc.
858-458-2240
investorrelations@nuvasive.com
Media Contact:
Michael Farrington
NuVasive, Inc.
858-909-1940
media@nuvasive.com
Exhibit 99.3
CONSULTING AND SERVICES AGREEMENT
This Consulting and Services Agreement (“Agreement”) is made as of July 27, 2017 by and between NuVasive, Inc.
(“NuVasive” or “Company”) and Jason Hannon, an individual (“Consultant”) (individually referred to herein as a “Party” or collectively the “Parties”).
WHEREAS, NuVasive is a medical device company that develops, manufactures and supplies certain spinal and orthopedic implants and other
associated equipment, supplies and services and desires to retain Consultant for the performance of certain strategic sales and operational consulting services, as more fully described herein.
WHEREAS, Consultant has the appropriate expertise and qualifications to consult with the Company regarding the sales of certain of its
products and services.
NOW, THEREFORE, the Parties agree as follows:
(a)
Services
. Consultant shall perform the Services specified in
Exhibit A
(the “Services”). Consultant represents, warrants and covenants that Consultant will perform the Services under this Agreement in a timely,
professional and workmanlike manner and that all materials, information and deliverables provided to Company will comply with the requirements set forth in
Exhibit A
.
(b)
Payment
. The Company will pay to Consultant, as full and complete payment for the performance of the Services, the compensation described in Exhibit A, in the time and manner of payment described on Exhibit A. Consultant acknowledges that he
is not entitled to any other compensation or remuneration of any kind whatsoever, except as outlined in this Agreement.
(c)
Expenses
. Consultant is not expected nor required to generate any business related expenses; however, should he do
so without advance written notice to Company and the Company’s approval of such expenses, he is responsible for all such expenses. The Company shall reimburse Consultant for all pre-approved out-of-pocket expenses incurred by Consultant in
connection with the performance of the Services, provided that Consultant provides accounts or invoices therefor evidencing such expenses.
|
|
2.
|
Relationship of Parties
.
|
(a)
Independent Consultant
. Consultant is an independent contractor and is not an agent or employee of, and has no authority to bind, the Company by contract or otherwise in any matter whatsoever, unless otherwise specifically provided in writing
by the
Company. Consultant will perform the Services under the general direction of the Company, but Consultant will determine, in Consultant’s sole discretion, the manner and means by which the
Services are to be accomplished, subject to the requirement that Consultant shall at all times comply with applicable law. The Company has no right or authority to control the manner or means by which the Services are accomplished. Consultant shall
not be considered under the provisions of this Agreement or otherwise as having any employee status or as being entitled to participate in any benefit plans or arrangements by the Company provided to its regular employees.
(b)
Employment Taxes and Benefits
. No part of the Compensation paid to Consultant pursuant to this Agreement will be subject to withholding by the Company for the payment of any social security, federal, state, or any other employee payroll
taxes. The Company will regularly report amounts paid to Consultant under this Agreement to the Internal Revenue Services as required by law, and Consultant will be issued an IRS Form 1099 regarding any payments he receives from the Company. The
Consultant is solely responsible for payment of all income, social security, employment-related, or other taxes incurred as a result of the performance of Services by Consultant under this Agreement. Consultant will indemnify and hold harmless the
Company from and against any and all tax liability related to this Agreement as well as any claim, actions, or charges arising out of or cause by Consultant’s classification as an independent contractor.
|
|
3.
|
Confidentiality, Non-Interference, and Non-Solicitation
.
|
(a)
Confidential Information
. Consultant recognizes and acknowledges that Consultant will acquire information and materials from the Company and knowledge about the business, products, methods, policies, plans, strategies, processes, procedures,
reports, analyses, finances, experimental work, intellectual property, trade secrets, computer programs, designs, technology, know-how, inventions (whether patentable or not), works of authorship, customers, clients, employees, consultants and
suppliers and other data of the Company and its affiliates from the Company and that all such knowledge, information and materials acquired are and will be the trade secrets and confidential and proprietary information of the Company (collectively
“Confidential Information”). Consultant understands that the foregoing list of information and materials is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as
confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used. Consultant further understands that the goodwill of the
Company depends, among other things, upon keeping such information confidential and that unauthorized disclosure of the Confidential Information would irreparably damage the Company; and that by reason of Consultant’s duties under this
Agreement and any other agreement between the Company and Consultant pertaining to Consultant’s Services, Consultant may come into possession of Confidential Information, even though Consultant may not himself take any direct part in or furnish
the services performed for the Company’s clients or customers. Consultant’s obligations under this section do not apply to any
Confidential Information that Consultant can demonstrate (a) was in the public domain at or subsequent to the time the Confidential Information was communicated to Consultant by Company
through no fault of Consultant; (b) was rightfully in Consultant’s possession free of any obligation of confidence at or subsequent to the time the Confidential Information was communicated to Consultant by Company; or (c) was
independently developed by employees of Consultant without use of, or reference to, any Confidential Information communicated to Consultant by Company. A disclosure of any Confidential Information by Consultant (a) in response to a valid order
by a court or other governmental body or (b) as otherwise required by law will not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that Consultant provides prompt prior
written notice thereof to Company to enable Company to seek a protective order or otherwise prevent the disclosure.
(b)
Nondisclosure and Nonuse
. Consultant agrees to hold all Confidential Information in confidence, not to directly or
indirectly disclose, publish communicate or make available Confidential Information, or allow it to be disclosed, published, communicated or made available, in whole or in part, to any entity or person or use it commercially, except in performing
the Services, and not to allow any unauthorized person access to it. Consultant will not at any time during or after the Term of this Agreement disclose any Confidential Information to any third-party person or entity, or permit any third-party
person or entity to examine and/or make copies of any reports or any documents prepared by Consultant or that come into the possession or under the control of the Consultant by reason of Consultant’s Services without the Company’s express
written consent.
(c)
Assignment of Rights
. All Confidential Information and all title, patents, patent rights, copyrights, trade secret rights, sui generis database rights and other intellectual or industrial property rights of any sort anywhere in the world
(collectively “Rights”) in connection therewith shall be the sole property of the Company. Consultant hereby assigns to the Company any Rights Consultant may have or acquire in such Confidential Information. At all times, both during the
Term of this Agreement and after its termination, Consultant will keep in confidence and trust and will not use or disclose any Confidential Information or anything related to it without the prior written consent of an officer of the Company.
(d)
Injunctive Relief
. Consultant acknowledges that disclosure or unauthorized use of any Confidential Information by Consultant and/or breach of the covenants set forth above will give rise to irreparable injury to the Company or the owner of
such information, inadequately compensable in damages. Consultant further acknowledges and agrees that the covenants contained in this Agreement are necessary for the protection of the Company’s legitimate business interests and are reasonable
in scope and content. In the event of a breach or threatened breach by Consultant of any of the provisions hereof, Consultant hereby consents and agrees that the Company shall be entitled to pre-judgment injunctive relief or similar equitable relief
to restrain Consultant from
committing or continuing any such breach or threatened breach.
(e)
Non-Interference with Business
. During the Term of this Agreement, Contractor agrees not to perform any service
that may utilize any of the Confidential Information obtained from the Company or any Confidential Information developed during the course of performing the Services for the Company or during Consultant’s prior employment with the Company, for
any other person or entity, and - in particular - any other person or entity engaged in the development, manufacture, distribution, or sales of health care products or services.
(f)
Non-Solicitation
. Consultant agrees that during the Term, he shall not, for any or no reason, whether directly on such person’s own behalf or as an employee, independent contractor, partner, owner, officer, director of any entity, or in
any other capacity: (1) solicit, entice, persuade, induce, call upon or provide services to any of the customers, accounts or clients that Consultant worked with, had responsibility or oversight of, provided services related to, or learned
significant information about during the course of Consultant’s engagement with the Company for any purpose other than for the benefit of the Company; and/or (2) induce or influence, or seek to induce or influence, any person who is
employed or engaged by the Company (as an agent, employee, independent contractor, or in any other capacity), or any successor thereto, with the purpose of obtaining such person as an employee, consultant or independent contractor for a business
competitive with the Company, or causing such person to terminate or reduce his or her employment, agency or relationship with the Company, or any successor thereto.
(a)
Consultant will indemnify and hold harmless Company from and against any and all claims, suits, actions, demands, and proceedings against Company and all losses, costs, and liabilities directly related to such claims, suits, actions, demands, and
proceedings against Company or its subsidiaries or affiliated entities, arising out of or related to (i) any material breach of this Agreement by Consultant or (ii) Consultant’s gross negligence and/or fraud in the performance of the
Services under this Agreement.
(b)
The Indemnification Agreement entered into as of May 14, 2014 by the Parties is hereby amended by changing the definition of “Agent” therein to include Consultant’s capacity pursuant to this Agreement as a consultant.
|
|
5.
|
Observance of Company Rules
.
|
At all times, Consultant will observe Company’s rules and regulations with respect to Consultant’s conduct, health, safety,
anti-harassment/discrimination/retaliation and protection of persons and property.
|
|
6.
|
Intellectual Property
.
|
(a)
Ownership
. NuVasive is, and shall be, the sole and exclusive owner of all right, title and interest in and to all Company Innovations that are created, made, conceived, reduced to practice or authored by Consultant in the course of performing
the Services including any and all intellectual property rights therein. In this Agreement, “Company Innovations” means all discoveries, designs, developments, improvements, inventions (whether or not protectable under patent laws), works
of authorship, information fixed in any tangible medium of expression (whether or not protectable under copyright laws), trade secrets, know-how, ideas (whether or not protectable under trade secret laws), mask works, trademarks, service marks,
trade names and trade dress that Consultant, solely or jointly with others, creates, derives, conceives, develops, makes or reduces to practice under the Services Consultant provides pursuant to this Agreement.
(b)
Disclosure and Assignment of Company Innovations
. Consultant agrees to maintain adequate and current records of all Company Innovations, which records shall be and remain the property of Company. Consultant agrees to promptly disclose and
describe to Company all Company Innovations. Consultant represents, warrants and covenants that all Company Innovations shall be free and clear of any liens and encumbrances. Consultant hereby does and will irrevocably assign to Company or
Company’s designee all of Consultant’s right, title and interest in and to any and all Company Innovations and all associated records, such assignment to occur with respect to each Company Innovation at the time the Company Innovation is
first conceived, made, derived, developed, written or created, and regardless of when the Company Innovation is first conceived, made, derived, developed, written or created. To the extent any of the rights, title and interest in and to Company
Innovations cannot be assigned by Consultant to Company, Consultant hereby grants to Company an exclusive, royalty-free, transferable, irrevocable, worldwide, fully paid-up license (with rights to sublicense through multiple tiers of sublicensees)
to fully use, practice and exploit those non-assignable rights, title and interest, including, but not limited to, the right to make, use, sell, offer for sale, import, have made, and have sold, the Company Innovations. To the extent any of the
rights, title and interest in and to the Company Innovations can neither be assigned nor licensed by Consultant to Company, Consultant hereby irrevocably waives and agrees never to assert the non-assignable and non-licensable rights, title and
interest against Company, any of Company’s successors in interest, or any of Company’s customers. If any Company Innovations include any work of authorship that qualifies as a “work made for hire” as defined in subclause
(2) under Section 101 of the Copyright Law of the United States (Title 17 of the United States Code, as may be amended from time to time), Company and Consultant agree that Company owns such work of authorship as a work made for hire under
such section.
(c)
Assistance
. Consultant agrees to perform, during and after the Term of this Agreement, all acts that Company deems necessary or desirable to permit and assist Company, at its expense, in obtaining, perfecting and enforcing the full benefits,
enjoyment, rights and title throughout the world in the Company Innovations as provided to Company under this Agreement. If Company is unable for any reason to secure Consultant’s signature to any document required to file, prosecute, register
or memorialize the assignment of any
rights under any Company Innovations as provided under this Agreement, Consultant hereby irrevocably designates and appoints Company and Company’s duly authorized officers and agents as
Consultant’s agents and attorneys-in-fact to act for and on Consultant’s behalf and instead of Consultant to take all lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance and
enforcement of rights in, to and under the Company Innovations, all with the same legal force and effect as if executed by Consultant. The foregoing is deemed a power coupled with an interest and is irrevocable.
|
|
7.
|
Consultant’s Representations and Obligations
.
|
(a)
No Conflict
. Consultant represents and warrants to the Company that he is not now nor shall he be a party to any other agreement or under any obligation to or restriction by any third-party which would prevent Consultant from entering into or
performing this Agreement.
(b)
Notice; Non-Disclosure
. During the Term of the Agreement, Consultant agrees to promptly and properly advise NuVasive of all matters coming to his attention that could, in any manner, materially and adversely affect the business or interests
of NuVasive. This is not a material term, but Consultant shall comply with this provision in good faith.
(c)
Compliance with Laws and Policies
. Consultant represents and warrants that he will in providing the Services comply
with all applicable federal, state, local, municipal, regulatory and/or governmental agency laws, statutes, regulations, edicts, guidance, directives, and ordinances, including, without limitation, (a) HIPAA, (b) all federal and state
health care anti-fraud, anti-kickback and abuse laws such as 42 U.S.C. § 1320a-7b(b); (c) the Federal Food, Drug, and Cosmetic Act and its implementing regulations; (d) all rules, regulations, and guidance of the FDA; and (e) all
rules and regulations of the Center for Medicare and Medicaid Services (CMS). Without limiting the generality of the foregoing, except to the extent allowed by applicable law, Consultant will comply with the MDMA Code of Conduct on Interactions with
Healthcare Providers.
(d)
Debarment
. Consultant represents and warrants that he has not been nor is debarred, suspended, excluded or are otherwise ineligible under Section 306 of the Federal Food, Drug and Cosmetic Act (as amended by the Generic Drug Enforcement
Act of 1992), 21 U.S.C. § 336, or are listed on any applicable federal exclusion list including the then-current: (a) HHS/OIG List of Excluded Individuals/Entities (http://www.oig.hhs.gov); (b) General Services Administration’s
List of Parties Excluded from Federal Programs (http://www.epls.gov); and (c) FDA Debarment List (http://www.fda.gov/ora-/compliance_ref/debar/).
(e)
Additional Obligations
. Consultant agrees and warrants that he will use reasonable efforts to cooperate fully with NuVasive personnel with regard to performing the Services under this Agreement. Consultant further agrees to maintain all
records required to substantiate Consultant’s compliance with the provisions of this Agreement and with all laws,
regulations, policies, procedures and guidelines related to Consultant’s performance of his obligations under this Agreement.
(f)
Publicity
. The Parties agree that no press releases, literature, advertising, publicity, or publicly available written statements in connection with work under this Agreement having or containing any reference to the Company shall be made by
Consultant without the prior written consent of the Company.
(a)
Term
. The “Term” of this Agreement shall commence and be effective on September 1, 2017 at 11:59 p.m. Pacific Time and shall end on December 31, 2017. The Term may be extended or modified by mutual written agreement of the
Parties. The Parties agree (for Consultant’s benefit) that the Term is intended to follow immediately upon the end of Consultant’s time of service as a Company employee, such that there is no break in Consultant’s status as a service
provider to Company.
(b)
Termination by the Company
. The Company may terminate this Agreement: (a) upon the inability of Consultant to render the Services to NuVasive by reason of death, permanent disability, or permanent incapacity; or (b) for any material
uncured breach of this Agreement. If Company believes that Consultant materially breached this Agreement, Company will notify Consultant in writing and allow Consultant to cure any material breach within ten (10) calendar days after delivery of
Company’s written notice of material breach. It is expressly agreed that Consultant’s sole obligation is to exert reasonable efforts in good faith and that he gives no guarantee of results; poor results (despite the exertion of reasonable
efforts in good faith) does not constitute material breach.
(c)
Termination by the Consultant
. Consultant may not terminate this Agreement during the Term except or unless Company materially breaches this Agreement. If Consultant
believes that the Company materially breached this Agreement, Consultant will notify Company in writing and allow the Company to cure any material breach within ten (10) calendar days after delivery of Consultant’s written notice of
material breach.
(d)
Conduct Following Expiration or Termination
. Upon expiration or termination of this Agreement, Consultant shall promptly: (i) cease performing the Services; (ii) deliver to NuVasive all Company Innovations, documents, work product
and other materials whether or not complete, prepared by or on behalf of Consultant in the course of performing the Services; and (iii) remove any Consultant-owned property, equipment or materials located at NuVasive’s locations.
(e)
Continuing Obligations under Agreement
. Upon the expiration or termination of this Agreement each Party will be released from all obligations to the other arising after the date of expiration or termination, except that expiration or
termination of this Agreement will not relieve Consultant or the Company of their respective obligations
under Sections 3, 4, 6, 8 and 9, nor will expiration or termination of this Agreement relieve Consultant or the Company from any liability arising from any breach of this Agreement.
(f)
Duty to Return Confidential Information and Company Property
. Consultant will promptly notify the Company of all Nuvasive property, equipment, or materials, including any Confidential Information, in Consultant’s direct or indirect
possession or control and, at the expense of the Company and in accordance with the Company’s instructions, will promptly deliver to the Company all such property, equipment, or materials in Consultant’s possession, custody and/or control,
without retaining copies thereof.
(a)
Binding Effect; Assignment
. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, legal representatives, successors, and assigns. This Agreement is personal in nature, and Consultant shall
not, without the prior written consent of the Company, assign or transfer this Agreement or any rights or obligations hereunder. The Company may assign or transfer this Agreement to a successor or affiliated organization.
(b)
No Election of Remedies
. The election by the Company or Consultant to terminate this Agreement shall not be deemed an election of remedies, and all other remedies provided by this Agreement or available at law or in equity shall survive any
termination.
(c)
Non Disparagement
. Unless subject to a valid trial subpoena or court order, Consultant agrees that Consultant will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame,
disparage or in any way criticize the personal and/or business reputation, practices or conduct of Company. Unless subject to a valid trial subpoena or court order, Company agrees that it will not issue any press release that any way defames,
disparages or in any way criticizes the personal and/or business reputation, practices or conduct of Consultant. Company will also instruct Company’s executive officers: “not make any voluntary statements, written or oral, or to direct
others to make any such statements, that defame, disparage or in any way criticize the personal and/or business reputation, practices or conduct of Consultant”.
(d)
Governing Law; Jurisdiction; Venue
. All matters arising out of or relating to this Agreement will be governed by and construed in accordance with the substantive laws of the State of California without regard to choice of law or conflict of
laws and all disputes arising under or relating to this Agreement shall be brought and resolved solely and exclusively in the courts located in San Diego County, California. The Parties irrevocably consent to the exclusive personal jurisdiction of
the courts located in the state of San Diego County, California. Should any legal action be commenced in connection with this Agreement, the prevailing party in such action shall be entitled to recover, in
addition to court costs, such amount as the court may adjudge as reasonable attorneys’ fees, its out-of-pocket cost, expert witness fees, in addition to any other relief to which the
prevailing party may be entitled.
(e)
Complete Understanding; Modification
. This Agreement, along with the exhibit to this Agreement, Consultant’s documented Company stock options, the Proprietary Information, Inventions Assignment, Arbitration, Restrictive Covenants
Agreement executed on May 24, 2014 (the “PIIA”), and Consultant’s resignation letter of even date herewith (collectively “the Agreements”), contain all of the Parties’ contractual obligations to each other, and
cannot be modified or amended unless the modification or amendment is in a writing signed by both Parties.
(f)
Severability
. It is the desire and intent of the Parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies in each jurisdiction in which enforcement is sought. If any particular provisions or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement
shall be deemed amended to delete therefrom such provisions or portion adjudicated to be invalid or unenforceable, such amendment to apply only with respect to the operation of such provisions in the particular jurisdiction in which such
adjudication is made.
(g)
Construction of Agreement
. This Agreement will in all events be construed as a whole, according to its fair meaning, and not strictly for or against a Party merely because that Party (or Party’s legal representative) drafted this
Agreement. Ay ambiguity contained in this Agreement shall be construed to permit the Parties to comply with applicable law. The headings, titles, and captions contained in this Agreement are merely for reference and do not define, limit, extend, or
describe the scope of this Agreement. Unless the context requires otherwise, (a) gender (or lack of gender) of all words in this Agreement includes the masculine, feminine, and neuter, and (b) the word “including” means
“including, without limitation.”
(h)
Waiver
. The waiver or failure of a Party to exercise in any respect any right provided for under this Agreement shall not be deemed to be a waiver of any future right
under this Agreement.
(i)
Counterparts/Signature Pages
. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any signature page delivered by a fax machine,
telecopy machine, or via electronic mail in .pdf or equivalent format shall be binding to the same effect as an original signature page.
[Signature page follows.]
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the date first written
above.
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COMPANY:
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CONSULTANT:
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NuVasive, Inc.
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By:
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/s/ Brian Johnson
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By:
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/s/ Jason Hannon
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EXHIBIT A
Services:
Consultant will provide upon and at the request and direction of NuVasive’s Chairman and Chief Executive Officer (or such other
Company Officer as designated by the Company), and to the reasonable satisfaction of the Chairman and Chief Executive Offer, the following Services:
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Advise with respect to the specific merger and acquisition prospects/transactions identified in the proposed term sheet
dated July 24, 2017;
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Assist with change management efforts to retain identified major customer relationships and internal personnel;
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Assist with efforts to hire, onboard and relocate to the United States a key person specified in the proposed term sheet
dated July 24, 2017;
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Communication of any particular item or items of institutional knowledge, client, or business information possessed by
Consultant;
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Consultant will make himself reasonably available regarding pending legal actions; and
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Assist with the content development of materials for the November 2017 strategy session with the Company’s Board of
Directors pertaining to any particular item or items of institutional knowledge, client, or business information possessed by Consultant or as otherwise reasonably requested by the Chairman and Chief Executive Officer.
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Consultant will perform the Services under the general direction of the Company, but Consultant will determine, in Consultant’s sole discretion,
the manner and means by which the Services are to be accomplished, subject to the requirement that Consultant shall at all times comply with applicable law. The Services to be performed under this Agreement are personal in nature and may not be
subcontracted to or performed by any agent or representative of Consultant absent the Company’s express written consent.
Non-Exclusivity:
During the
Term of this Agreement, Consultant may render services for other companies or individuals subject to the terms of the Agreement, including, but not limited to Paragraph 3(a) (Confidential Information) 3(b) (Non-Disclosure and Non Use), 3(e)
(Non-Interference with Business), 3(f) (Non-Solicitation), and 7(a) (No Conflict) and, and provided that such a company is not Medtronic, Johnson & Johnson, Zimmer Biomet, Seaspine, Striker, Alphatec, or Globus. A violation of this
provision is considered a material breach.
Tools and Materials:
Consultant will use his own equipment and materials to perform the Services. Consultant
shall not have access to the Company’s property, including its facilities, computers, laptops, software or networks, unless the Company deems such access necessary for the Consultant to perform the Services in the Company’s sole
discretion.
Compensation:
Subject to Consultant’s compliance with his obligations and duties under this Agreement and the
PIIA: (1) the Company will pay the Consultant a monthly fee of $49,167 US Dollars; (2) Company will direct-pay Consultant’s tax services for in accordance with Consultants expatriate benefits and assignment agreement; and
(3) notwithstanding the end of Consultant’s employee status on September 1, 2017 and notwithstanding the end of Consultant’s service-provider status on December 31, 2017, Consultant will remain eligible for a pro-rata
(244/365) 2017 annual discretionary bonus based on an existing annual target of $590,000 US Dollars payable in March 2018 in accordance with, and subject to, the terms and conditions of the annual discretionary Company bonus plan. Except as set
forth above, no other compensation or benefits will be due to, or paid to, Consultant by NuVasive with respect to this Agreement or any Services performed thereunder.
