LivaNova(LIVN) - 2019 Q3 - Quarterly Report

Financial Performance - Net sales for the three months ended September 30, 2019, were $268.6 million, a decrease of 1.7% compared to $272.1 million in the same period of 2018[17]. - Operating income from continuing operations for the three months ended September 30, 2019, was $25.8 million, compared to a loss of $5.8 million in the same period of 2018[17]. - Net income for the three months ended September 30, 2019, was $32.1 million, compared to a net loss of $7.2 million in the same period of 2018[19]. - Basic income per share from continuing operations for the three months ended September 30, 2019, was $0.66, compared to a loss of $0.13 in the same period of 2018[17]. - Total comprehensive income for the three months ended September 30, 2019, was $3.7 million, compared to a loss of $4.8 million in the same period of 2018[19]. - The total comprehensive loss for the nine months ended September 30, 2019, was $41,610, compared to a loss of $40,932 for the same period in 2018[106]. Expenses and Costs - Research and development expenses for the three months ended September 30, 2019, were $45.9 million, an increase of 8.8% from $42.4 million in the same period of 2018[17]. - Costs of sales for the three months ended September 30, 2019, were $86.1 million, down from $94.3 million in the same period of 2018[17]. - The company incurred merger and integration expenses of $6.7 million for the three months ended September 30, 2019, compared to $12.7 million in the same period of 2018[17]. - The company recognized approximately $60 million in right-of-use assets and lease liabilities due to the adoption of new lease accounting standards on January 1, 2019[130]. - The company incurred a total lease cost of $11,789,000 for the nine months ended September 30, 2019[74]. Assets and Liabilities - Total assets decreased from $2,549,701 thousand at December 31, 2018 to $2,509,941 thousand at September 30, 2019, a decline of approximately 1.6%[21]. - Current liabilities decreased from $496,746 thousand at December 31, 2018 to $469,191 thousand at September 30, 2019, a reduction of approximately 5.6%[21]. - Long-term debt obligations increased significantly from $139,538 thousand at December 31, 2018 to $272,887 thousand at September 30, 2019, an increase of approximately 95.4%[21]. - Total liabilities decreased to $1.01 billion as of September 30, 2019, from $1.05 billion as of December 31, 2018[21]. - Total stockholders' equity decreased from $1,503,738 thousand at December 31, 2018 to $1,495,282 thousand at September 30, 2019, a decline of approximately 0.6%[21]. Cash Flow - Cash and cash equivalents increased from $47,204 thousand at the beginning of the period to $75,313 thousand at the end of the period, representing a net increase of $28,109 thousand[25]. - Cash used in operating activities for the nine months ended September 30, 2019 was $94,008 thousand, compared to cash provided of $99,599 thousand in the same period of 2018[24]. - The company reported a net cash used in investing activities of $30,519 thousand for the nine months ended September 30, 2019[24]. Acquisitions and Investments - The company completed the acquisition of Miami Instruments for cash consideration of up to $17.0 million, integrating it into the Cardiovascular business franchise[36]. - The company recognized $14.7 million in developed technology and in-process research and development intangible assets from the Miami Instruments acquisition[36]. - An impairment of $50.3 million was recorded for the IPR&D asset related to the obstructive sleep apnea product due to commercialization delays[54]. Tax and Legal Matters - The company experienced a tax benefit of $10.7 million for the three months ended September 30, 2019, compared to an expense of $2.7 million in the same period of 2018[17]. - The effective income tax rate for the three months ended September 30, 2019, was (49.6)%, compared to 29.8% for the same period in 2018, primarily due to a release of uncertain tax positions[112][113]. - The total amount of losses in dispute regarding tax matters is €62.6 million (approximately $68.2 million) as of September 30, 2019[102]. - A reserve for uncertain tax positions of €15.4 million (approximately $16.8 million) was recognized as of September 30, 2019[102]. Segment Performance - Cardiovascular segment operating income for the three months ended September 30, 2019, was $36.2 million, compared to $9.8 million in 2018, showing significant improvement[124]. - Neuromodulation segment operating income decreased to $30.0 million in Q3 2019 from $36.4 million in Q3 2018[124]. - Neuromodulation segment revenue includes VNS Therapy System and an implantable device for obstructive sleep apnea, contributing to overall sales growth[120]. Litigation and Remediation - The company entered into a settlement framework for personal injury cases with a total payment of up to $225 million, with the first payment of $135 million made in July 2019[86]. - The total litigation provision liability decreased from $294.1 million at December 31, 2018, to $153.0 million at September 30, 2019[88]. - The company recognized an insurance recovery of $33.8 million related to the litigation involving the 3T device[90]. - The company continues to offer a no-charge deep disinfection service for 3T device users as part of its remediation plan[50]. Derivative Contracts and Financial Instruments - The gross notional amount of FX derivative contracts not designated as hedging instruments was $273.1 million as of September 30, 2019, down from $320.2 million at December 31, 2018[69]. - The company recorded net gains of $3.1 million from freestanding FX derivative contracts for the three months ended September 30, 2019, compared to $5.6 million for the same period in 2018[69]. - The fair value of total derivatives designated as hedging instruments was $1,977,000 as of September 30, 2019[72]. - The company reported an after-tax net loss of $1.450 million associated with derivatives designated as cash flow hedges as of September 30, 2019[71].