livn-20240930false12/312024Q300016396910.0163980.0144085Note 14. Subsequent Event
[OPEN FOR SUBSEQUENT EVENT REVIEW THROUGH FILING DATE]
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Form 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 001-37599
LivaNova PLC
(Exact name of registrant as specified in its charter)
England and Wales ................... 98-1268150
(State or other jurisdiction of .......... (I.R.S. Employer
incorporation or organization) ........ Identification No.)
20 Eastbourne Terrace, London, United Kingdom, W2 6LG
(Address of principal executive offices) ....................... (Zip Code)
Registrant’s telephone number, including area code: (44) (0) 203 325-0660
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
| Ordinary Shares - £1.00 par value per share | LIVN | The Nasdaq Stock Market LLC | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
Large accelerated filer | ☑ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
| | | | | |
Class | Outstanding at October 25, 2024 |
Ordinary Shares - £1.00 par value per share | 54,300,835 |
LIVANOVA PLC
TABLE OF CONTENTS
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| | PART I. FINANCIAL INFORMATION | | |
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| | PART II. OTHER INFORMATION | | |
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DEFINITIONS
In this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, the following terms and abbreviations have the meanings listed below. “LivaNova” and the “Company” refer to LivaNova PLC and its consolidated subsidiaries.
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Abbreviation | | Definition |
2015 Plan | | LivaNova PLC 2015 Incentive Award Plan |
2015 Plan Amendment | | Amendment No. 2 to the LivaNova PLC 2015 Incentive Award Plan |
2021 First Lien Credit Agreement | | First Lien Credit Agreement between LivaNova PLC and its wholly-owned subsidiary, LivaNova USA, Inc., and Goldman Sachs Bank USA, as First Lien Administrative Agent and First Lien Collateral Agent, entered into on August 13, 2021 |
2023 Form 10-K | | LivaNova PLC’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 |
2024 Restructuring Plan | | A plan, initiated during the first quarter of 2024, to enhance LivaNova’s focus on its core Cardiopulmonary and Neuromodulation segments |
2025 Capped Calls | | Privately-negotiated capped call transactions entered into with certain financial institutions |
2025 Notes | | $287.5 million aggregate principal amount 3.00% unsecured cash exchangeable senior notes due 2025 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, issued by LivaNova USA on June 17, 2020 |
2025 Notes Repurchase Transaction | | Repurchase of $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions from proceeds from the issuance of the 2029 Notes |
2029 Capped Calls | | Privately-negotiated capped call transactions entered into with certain financial institutions |
2029 Notes | | $345.0 million aggregate principal amount 2.50% unsecured convertible senior notes due 2029 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, issued by LivaNova PLC on March 8, 2024 |
A&R 2022 Plan | | Amended and Restated LivaNova PLC 2022 Incentive Award Plan |
A&R 2022 Plan Amendment | | Amendment No. 1 to the Amended and Restated LivaNova PLC 2022 Incentive Award Plan |
ACS | | Advanced Circulatory Support |
ALung | | ALung Technologies, Inc. |
AOCI | | Accumulated other comprehensive income (loss) |
Barclays | | Barclays Bank Ireland PLC |
Capped Call Transactions | | The 2025 Capped Calls and the 2029 Capped Calls |
CEO | | Chief Executive Officer |
CFO | | Chief Financial Officer |
CMS | | The U.S. Centers for Medicare & Medicaid Services |
CODM | | Chief Operating Decision Maker |
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Court of Appeal | | Court of Appeal in Milan |
Delayed Draw Term Facility | | $50.0 million delayed draw term facility under the 2021 First Lien Credit Agreement resulting from the Incremental Facility Amendment No. 2 |
DRE | | Drug-resistant epilepsy |
DTD | | Difficult-to-treat depression |
ECJ | | European Court of Justice |
Embedded Derivatives | | The bifurcated embedded derivatives associated with the 2025 Notes and 2029 Notes, collectively |
Exchange Act | | U.S. Securities Exchange Act of 1934, as amended |
FX | | Foreign currency exchange rate |
HLM | | Heart-lung machine |
ImThera | | ImThera Medical, Inc., acquired by LivaNova in 2018, a company developing an implantable neurostimulation device system for the treatment of obstructive sleep apnea |
Incremental Facility Amendment No. 2 | | An incremental facility amendment to the 2021 First Lien Credit Agreement, dated July 6, 2022 |
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Abbreviation | | Definition |
Incremental Facility Amendment No. 3 | | An incremental facility amendment to the 2021 First Lien Credit Agreement, dated March 8, 2024 |
Initial Term Facility | | $300.0 million term facility under the 2021 First Lien Credit Agreement, resulting from the Incremental Facility Amendment No. 2 |
ISIN | | National Inspectorate for Nuclear Safety and Radiation Protection, a sub-body of the Italian Ministry of Economic Development |
LivaNova PLC | | A public limited company organized under the laws of England and Wales on February 20, 2015 |
LivaNova USA | | LivaNova USA, Inc. |
LSM | | LivaNova Site Management S.r.l. |
MDL | | Federal multi-district litigation in the U.S. District Court for the Middle District of Pennsylvania |
MedTech | | Medical technology |
Nasdaq | | Nasdaq Global Select Market |
OCI | | Other comprehensive income (loss) |
Option Counterparties | | Certain financial institutions with whom LivaNova USA or LivaNova PLC, as applicable, has entered into the 2025 Capped Calls and 2029 Capped Calls |
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OSA | | Obstructive sleep apnea |
OSPREY clinical trial | | LivaNova’s clinical trial, “Treating Obstructive Sleep Apnea using Targeted Hypoglossal Neurostimulation” |
Pillar Two | | Organisation for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (Pillar Two) |
Public Administrations | | The Italian Ministry of the Environment and other Italian government agencies |
R&D | | Research and Development |
Report | | This Quarterly Report on Form 10-Q |
RSUs | | Restricted stock units |
SARs | | Stock appreciation rights |
SEC | | U.S. Securities and Exchange Commission |
Securities Act | | U.S. Securities Act of 1933, as amended |
SG&A | | Selling, general, and administrative expenses |
ShiraTronics | | ShiraTronics, Inc., a company developing an implantable neuromodulation therapy device for the treatment of chronic migraine attacks |
SNIA | | SNIA S.p.A. |
SNIA Litigation Guarantee | | A first demand bank guarantee of €270.0 million in connection with the SNIA environmental litigation |
Sorin | | Sorin S.p.A. |
Term Facilities | | The Initial Term Facility, together with the Delayed Draw Term Facility |
U.S. | | United States of America |
U.S. GAAP | | Generally Accepted Accounting Principles in the U.S. |
UK | | United Kingdom |
UK Act | | Finance (No. 2) Act 2023 |
USD | | U.S. dollar |
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VNS Therapy | | LivaNova Vagus Nerve Stimulation Therapy |
INTELLECTUAL PROPERTY, TRADEMARKS, AND TRADE NAMES
This report may contain references to LivaNova’s proprietary intellectual property, including among others:
•Trademarks for LivaNova’s Neuromodulation systems, the VNS Therapy™ System, and LivaNova’s proprietary pulse generator products: Model 102 (Pulse™), Model 102R (Pulse Duo™), Model 103 (Demipulse™), Model 104 (Demipulse Duo™), Model 106 (AspireSR™), Model 1000 (SenTiva™), Model 1000-D (SenTiva™ Duo), and Model 8103 (Symmetry™).
•Trademarks for LivaNova’s Cardiopulmonary products and systems: Essenz™, S5™, S5 Pro™, B-Capta™, Inspire™, Heartlink™, XTRA™, 3T Heater-Cooler™, Connect™, and Revolution™.
•Trademarks for LivaNova’s advanced circulatory support systems: TandemLife™, TandemHeart™, TandemLung™, ProtekDuo™, LifeSPARC™, ALung™, Hemolung™, Respiratory Dialysis™, and ActivMix™.
•Trademarks for LivaNova’s obstructive sleep apnea system: ImThera™ and aura6000™.
These trademarks and trade names are the property of LivaNova or the property of LivaNova’s consolidated subsidiaries and are protected under applicable intellectual property laws. Solely for convenience, LivaNova’s trademarks and trade names referred to in this Report may appear without the ™ symbol, but such references are not intended to indicate in any way that the Company will not assert, to the fullest extent under applicable law, LivaNova’s rights to these trademarks and trade names.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements in this Report, other than statements of historical or current fact, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. These statements include, but are not limited to, LivaNova’s plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events, and involve known and unknown risks that are difficult to predict. As a result, the Company’s actual financial results, performance, achievements, or prospects may differ materially from those expressed or implied by these forward-looking statements. Generally, forward-looking statements can be identified by the use of words such as “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “should,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” “foresee,” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by LivaNova and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties, and other important factors, many of which are beyond the Company’s control, that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Report, and include, but are not limited to, the following risks and uncertainties: volatility in the global market and worldwide economic conditions, including as caused by the invasion of Ukraine, the evolving instability in the Middle East, inflation, changing interest rates, foreign exchange fluctuations, changes to existing trade agreements and relationships between the U.S. and other countries, including the implementation of sanctions; cyber-attacks or other disruptions to the Company’s information technology systems or those of third parties with which the Company interacts; costs of complying with privacy and security of personal information requirements and laws; risks relating to supply chain pressures; changes in technology, including the development of superior or alternative technology or devices by competitors and/or competition from providers of alternative medical therapies; failure to obtain approvals or reimbursement in relation to the Company’s products; failure to establish, expand, or maintain market acceptance of the Company’s products for the treatment of the Company’s approved indications; failure to develop and commercialize new products and the rate and degree of market acceptance of such products; unfavorable results from clinical studies or failure to meet milestones; failure to comply with, or changes in, laws, regulations, or administrative practices affecting government regulation of the Company’s products; the risk of quality issues and the impacts thereof; risks relating to recalls, replacement of inventory, enforcement actions, or product liability claims; changes or reduction in reimbursement for the Company’s products or failure to comply with rules relating to reimbursement of healthcare goods and services; failure to comply with anti-bribery laws; losses or costs from pending or future lawsuits and governmental investigations, including in the case of the Company’s 3T Heater-Cooler and SNIA environmental litigations; risks associated with environmental laws and regulations as well as environmental liabilities, violations, protest voting, and litigation; product liability, intellectual property, shareholder-related, environmental-related, income tax, and other litigation, disputes, losses, and costs; failure to retain key personnel, prevent labor shortages, or manage labor costs; the failure of the Company’s R&D efforts to keep up with the rapid pace of technological development in the medical device industry; the risks relating to the impact of climate change and the risk of environmental, social, and governance pressures from internal and external stakeholders; failure to protect the Company’s proprietary intellectual property; failure of new acquisitions to further the Company’s strategic objectives or strengthen the Company’s existing businesses; the potential for impairments of intangible assets, goodwill, and other long-lived assets; risks relating to the Company’s indebtedness; effectiveness of the Company’s internal controls over financial reporting; changes in the Company’s profitability and/or failure to manage costs and expenses; fluctuations in future quarterly operating results and/or variations in revenue and operating expenses relative to estimates; changes in tax laws and regulations, including exposure to additional income tax liabilities; and other unknown or unpredictable factors that could harm the Company’s financial performance.
Other factors that could cause LivaNova’s actual results to differ from projected results are described in: (1) “Part II, Item 1A. Risk Factors” and elsewhere in this and the Company’s other Quarterly Reports on Form 10-Q, (2) the Company’s 2023 Form 10-K, (3) the Company’s reports and registration statements filed and furnished from time to time with the SEC, and (4) other announcements LivaNova makes from time to time.
Readers are cautioned not to place undue reliance on the Company’s forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise. The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes included elsewhere in this Report. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of future results, including the full fiscal year. Please also refer to the Company’s “Annual Consolidated Financial Statements,” “Notes” thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors” contained in LivaNova’s 2023 Form 10-K and in the Company’s Quarterly Reports on Form 10-Q.
FINANCIAL INFORMATION AND CURRENCY OF FINANCIAL STATEMENTS
All of the financial information included in this Report has been prepared in accordance with U.S. GAAP. The reporting currency of the Company’s condensed consolidated financial statements is USD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share amounts)
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Net revenue | | $ | 318,120 | | | $ | 286,113 | | | $ | 931,607 | | | $ | 843,413 | |
Cost of sales | | 92,856 | | | 84,310 | | | 280,088 | | | 262,330 | |
Gross profit | | 225,264 | | | 201,803 | | | 651,519 | | | 581,083 | |
Operating expenses: | | | | | | | | |
Selling, general, and administrative | | 131,661 | | | 134,794 | | | 390,642 | | | 384,795 | |
Research and development | | 48,805 | | | 46,541 | | | 139,206 | | | 147,651 | |
Other operating expenses | | 9,180 | | | 16,010 | | | 29,641 | | | 29,145 | |
Operating income | | 35,618 | | | 4,458 | | | 92,030 | | | 19,492 | |
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Interest expense | | (15,878) | | | (14,986) | | | (47,303) | | | (43,232) | |
Loss on debt extinguishment | | — | | | — | | | (25,482) | | | — | |
Foreign exchange and other income/(expense) | | 24,701 | | | 8,550 | | | 12,585 | | | 36,810 | |
Income (loss) before tax | | 44,441 | | | (1,978) | | | 31,830 | | | 13,070 | |
Income tax expense | | 11,525 | | | 5,308 | | | 24,469 | | | 11,776 | |
Income (loss) from equity method investments | | 37 | | | (32) | | | (18) | | | (87) | |
Net income (loss) | | $ | 32,953 | | | $ | (7,318) | | | $ | 7,343 | | | $ | 1,207 | |
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Basic income (loss) per share | | $ | 0.61 | | | $ | (0.14) | | | $ | 0.14 | | | $ | 0.02 | |
Diluted income (loss) per share | | $ | 0.60 | | | $ | (0.14) | | | $ | 0.13 | | | $ | 0.02 | |
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Shares used in computing basic income (loss) per share | | 54,352 | | | 53,989 | | | 54,194 | | | 53,837 | |
Shares used in computing diluted income (loss) per share | | 54,585 | | | 53,989 | | | 54,526 | | | 54,107 | |
See accompanying notes to the condensed consolidated financial statements.
5
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands)
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Net income (loss) | | $ | 32,953 | | | $ | (7,318) | | | $ | 7,343 | | | $ | 1,207 | |
Other comprehensive income (loss): | | | | | | | | |
Unrealized loss on cash flow hedges | | — | | | — | | | — | | | (966) | |
Tax effect | | — | | | — | | | — | | | — | |
Net of tax | | — | | | — | | | — | | | (966) | |
Foreign currency translation adjustment | | 26,116 | | | (19,222) | | | 1,180 | | | (5,716) | |
Other comprehensive income (loss), net of tax | | 26,116 | | | (19,222) | | | 1,180 | | | (6,682) | |
Comprehensive income (loss) | | $ | 59,069 | | | $ | (26,540) | | | $ | 8,523 | | | $ | (5,475) | |
See accompanying notes to the condensed consolidated financial statements.
6
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share amounts)
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| | September 30, 2024 | | December 31, 2023 |
ASSETS | | | | |
Current Assets: | | | | |
Cash and cash equivalents | | $ | 346,366 | | | $ | 266,504 | |
Restricted cash | | 320,210 | | | 311,368 | |
Accounts receivable, net of allowance of $12,129 at September 30, 2024 and $12,019 at December 31, 2023 | | 197,162 | | | 215,072 | |
Inventories | | 162,264 | | | 147,887 | |
Prepaid and refundable taxes | | 23,858 | | | 20,145 | |
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Prepaid expenses and other current assets | | 43,253 | | | 27,182 | |
Total Current Assets | | 1,093,113 | | | 988,158 | |
Property, plant, and equipment, net | | 169,317 | | | 154,181 | |
Goodwill | | 781,553 | | | 782,941 | |
Intangible assets, net | | 248,545 | | | 261,178 | |
Operating lease assets | | 51,599 | | | 50,845 | |
Investments | | 18,097 | | | 22,843 | |
Deferred tax assets | | 109,992 | | | 118,858 | |
Long-term derivative assets | | 35,368 | | | 38,496 | |
Other assets | | 14,374 | | | 12,063 | |
Total Assets | | $ | 2,521,958 | | | $ | 2,429,563 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Current Liabilities: | | | | |
Current debt obligations | | $ | 21,951 | | | $ | 18,111 | |
Accounts payable | | 77,893 | | | 80,845 | |
Accrued liabilities and other | | 104,523 | | | 107,301 | |
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Current litigation provision liability | | 16,098 | | | 10,756 | |
Taxes payable | | 26,507 | | | 23,340 | |
Accrued employee compensation and related benefits | | 77,430 | | | 94,630 | |
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Total Current Liabilities | | 324,402 | | | 334,983 | |
Long-term debt obligations | | 604,287 | | | 568,543 | |
Contingent consideration | | 81,240 | | | 80,902 | |
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Deferred tax liabilities | | 11,843 | | | 11,567 | |
Long-term operating lease liabilities | | 44,078 | | | 45,388 | |
Long-term employee compensation and related benefits | | 14,867 | | | 17,254 | |
Long-term derivative liabilities | | 84,157 | | | 45,569 | |
Other long-term liabilities | | 47,040 | | | 47,729 | |
Total Liabilities | | 1,211,914 | | | 1,151,935 | |
Commitments and contingencies (Note 6) | | | | |
Stockholders’ Equity: | | | | |
Ordinary Shares, £1.00 par value: unlimited shares authorized; 54,405,751 shares issued and 54,300,048 shares outstanding at September 30, 2024; 53,942,151 shares issued and 53,918,222 shares outstanding at December 31, 2023 | | 83,112 | | | 82,533 | |
Additional paid-in capital | | 2,212,932 | | | 2,189,517 | |
Accumulated other comprehensive loss | | (26,703) | | | (27,883) | |
Accumulated deficit | | (959,141) | | | (966,484) | |
Treasury stock at cost, 105,703 ordinary shares at September 30, 2024; 23,929 ordinary shares at December 31, 2023 | | (156) | | | (55) | |
Total Stockholders’ Equity | | 1,310,044 | | | 1,277,628 | |
Total Liabilities and Stockholders’ Equity | | $ | 2,521,958 | | | $ | 2,429,563 | |
See accompanying notes to the condensed consolidated financial statements.
7
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
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| | Nine Months Ended September 30, |
| | 2024 | | 2023 |
Operating Activities: | | | | |
Net income | | $ | 7,343 | | | $ | 1,207 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Stock-based compensation | | 26,984 | | | 28,069 | |
Loss on debt extinguishment | | 25,482 | | | — | |
Depreciation | | 18,683 | | | 18,582 | |
Amortization of debt issuance costs | | 15,692 | | | 14,246 | |
Amortization of intangible assets | | 12,960 | | | 19,129 | |
Deferred income tax expense | | 9,093 | | | 1,908 | |
Amortization of operating lease assets | | 6,918 | | | 7,270 | |
Impairment of investments | | 5,768 | | | — | |
Remeasurement of derivative instruments | | 400 | | | (25,730) | |
Remeasurement of contingent consideration to fair value | | 338 | | | 4,516 | |
Other | | 1,453 | | | 605 | |
Changes in operating assets and liabilities: | | | | |
Accounts receivable, net | | 17,425 | | | (8,239) | |
Inventories | | (13,895) | | | (33,024) | |
Other current and non-current assets | | (14,841) | | | (2,981) | |
Accounts payable and accrued current and non-current liabilities | | (23,383) | | | (8,084) | |
Taxes payable | | 2,628 | | | 6,347 | |
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Litigation provision liability | | 5,283 | | | (2,865) | |
Net cash provided by operating activities | | 104,331 | | | 20,956 | |
Investing Activities: | | | | |
Purchases of property, plant, and equipment | | (36,701) | | | (22,062) | |
Purchase of investments | | (846) | | | (6,570) | |
Other | | 95 | | | 439 | |
Net cash used in investing activities | | (37,452) | | | (28,193) | |
Financing Activities: | | | | |
Proceeds from long-term debt obligations | | 335,513 | | | 50,000 | |
Repayment of long-term debt obligations | | (243,174) | | | (16,061) | |
Payment of debt extinguishment costs | | (38,953) | | | — | |
Purchase of capped calls | | (31,637) | | | — | |
Proceeds from unwind of capped calls | | 22,523 | | | — | |
Payment of contingent consideration | | (13,750) | | | — | |
Shares repurchased from employees for minimum tax withholding | | (8,071) | | | (6,995) | |
Payment of debt issuance costs | | (5,931) | | | — | |
Proceeds from exercise of stock options | | 5,028 | | | 19 | |
Repayments of short-term borrowings (maturities greater than 90 days) | | — | | | (1,901) | |
Other | | 447 | | | 1,440 | |
Net cash provided by financing activities | | 21,995 | | | 26,502 | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | | (170) | | | (2,161) | |
Net increase in cash, cash equivalents, and restricted cash | | 88,704 | | | 17,104 | |
Cash, cash equivalents, and restricted cash at beginning of period | | 577,872 | | | 515,618 | |
Cash, cash equivalents, and restricted cash at end of period | | $ | 666,576 | | | $ | 532,722 | |
See accompanying notes to the condensed consolidated financial statements.
8
LIVANOVA PLC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Unaudited Condensed Consolidated Financial Statements
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of LivaNova and the notes thereto as of and for the three and nine months ended September 30, 2024 and 2023 have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated balance sheet of LivaNova at December 31, 2023 has been derived from audited consolidated financial statements contained in LivaNova’s 2023 Form 10-K, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the operating results of LivaNova and its subsidiaries for the three and nine months ended September 30, 2024 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The financial information presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto accompanying LivaNova’s 2023 Form 10-K.
Cybersecurity Incident
As previously disclosed, in November 2023, LivaNova detected a cybersecurity incident that resulted in a disruption of portions of the Company’s information technology systems. Promptly after detecting the issue, LivaNova began an investigation with assistance from external cybersecurity experts and coordinated with law enforcement. The Company quickly implemented remediation measures to mitigate the impact of the incident. The Company also assessed the nature and scope of the affected data, analyzed its legal notification obligations, and notified affected individuals and regulators as required by applicable law. The Company believes the incident is contained and mitigation efforts are complete.
Through September 30, 2024, LivaNova incurred direct costs totaling $10.8 million in connection with this cybersecurity incident, including $2.5 million and $8.2 million during the three and nine months ended September 30, 2024, respectively. These costs primarily include external cybersecurity expert and legal fees, system restoration costs, and a $1.2 million provision related to the class action settlement, as discussed in “Note 6. Commitments and Contingencies,” and do not include business interruption losses. The Company expects to incur additional costs related to this incident in the future. LivaNova maintains insurance, including cyber insurance, which is subject to certain retentions and policy limitations that will likely limit the amount that the insurers may pay the Company. LivaNova has filed claims for insurance reimbursement of covered costs and business interruption losses related to this incident and has submitted additional claims and supplemental requests for reimbursement as new costs have been incurred. LivaNova has not yet received reimbursement or recognized a receivable. The Company’s insurance coverage will likely be insufficient to cover all costs and expenses related to this cybersecurity incident or may be unavailable to cover all costs and expenses related to this cybersecurity incident.
Significant Accounting Policies
LivaNova’s significant accounting policies are included within “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” and “Note 3. Revenue Recognition” of LivaNova’s 2023 Form 10-K.
Note 2. Restructuring
From time to time, LivaNova initiates restructuring plans to leverage economies of scale, streamline distribution and logistics, and strengthen operational and administrative effectiveness to reduce overall costs.
On January 5, 2024, the Board of Directors of LivaNova approved the 2024 Restructuring Plan to enhance the Company’s focus on its core Cardiopulmonary and Neuromodulation segments. The main component of the 2024 Restructuring Plan was to wind down the ACS segment, which the Company anticipates will be substantially complete by the end of 2024. In connection with the 2024 Restructuring Plan, LivaNova expects to incur pre-tax restructuring charges in the range of $15.0 million to $20.0 million. The anticipated charges are comprised of $10.0 million to $12.0 million in severance expenses and retention bonuses and $5.0 million to $8.0 million in other expenses, including lease termination, facilities remediation, and asset disposal expenses. Retention bonuses will be earned over the period of service, which is expected to be over the full year of 2024. All future cash payments related to these restructuring charges are expected to be substantially paid out during 2024. These estimates are subject to change. LivaNova recognized restructuring expense under the 2024 Restructuring Plan of $1.5 million and $12.8 million in other operating expenses on its condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2024, respectively.
The following table presents a reconciliation of the beginning and ending balance of the accruals and other reserves recorded in connection with LivaNova’s restructuring plans included in accounts payable and accrued liabilities and other on the condensed consolidated balance sheets (in thousands):
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| | Employee Severance and Other Termination Costs | | Other | | Total |
Balance at December 31, 2023 (1) | | $ | 911 | | | $ | — | | | $ | 911 | |
Charges | | 10,377 | | | 2,466 | | | 12,843 | |
Cash payments | | (7,868) | | | (2,006) | | | (9,874) | |
Balance at September 30, 2024 | | $ | 3,420 | | | $ | 460 | | | $ | 3,880 | |
(1)Represents restructuring plans initiated prior to 2024.
The following table presents restructuring expense by reportable segment (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | |
Neuromodulation | | $ | — | | | $ | (6) | | | $ | — | | | $ | 554 | |
Other (1) | | 1,479 | | | 130 | | | 12,843 | | | 501 | |
| | $ | 1,479 | | | $ | 124 | | | $ | 12,843 | | | $ | 1,055 | |
(1)Other primarily includes restructuring expense not allocated to segments.
Note 3. Derivatives and Risk Management
Due to the global nature of LivaNova’s operations, the Company is exposed to FX fluctuations. LivaNova enters into FX derivative contracts to reduce the impact of FX fluctuations on earnings and cash flow.
LivaNova is also exposed to equity price risk in connection with its 2025 Notes and 2029 Notes, including exchange/conversion and settlement provisions based on the price of its ordinary shares at exchange/conversion or maturity of the 2025 Notes and 2029 Notes. The Capped Call Transactions associated with the 2025 Notes and 2029 Notes also include settlement provisions that are based on the price of LivaNova’s ordinary shares, subject to a capped price per share. LivaNova does not enter into derivative contracts for speculative purposes.
LivaNova measures all outstanding derivatives each period end at fair value and reports the fair value as either financial assets or liabilities on the condensed consolidated balance sheets. At inception of the contract, the derivative is designated as either a freestanding derivative or a hedge. Derivatives that are not designated as hedging instruments are referred to as freestanding derivatives with changes in fair value included in earnings. These derivatives are intended to serve as economic hedges and follow the cash flows of the economic hedged item. The cash flows from these derivative contracts are reported as operating activities on LivaNova’s condensed consolidated statements of cash flows.
If the derivative qualifies for hedge accounting, changes in the fair value of the derivative will be recorded in AOCI until the hedged item is recognized in earnings upon settlement/termination. Interest rate swap gains and losses in AOCI are reclassified to interest expense on LivaNova’s condensed consolidated statements of income (loss). LivaNova evaluates hedge effectiveness at inception. LivaNova had no designated hedging instruments as of September 30, 2024 and December 31, 2023.
Freestanding FX Derivatives
The gross notional amount of freestanding FX derivative contracts not designated as hedging instruments outstanding as of September 30, 2024 and December 31, 2023 was $158.9 million and $223.4 million, respectively. These derivative contracts are designed to offset the FX effects in earnings of various intercompany loans and trade receivables. LivaNova recorded net losses of $5.0 million and net gains of $5.0 million for these freestanding derivatives for the three months ended September 30, 2024 and 2023, respectively, and net losses of $0.1 million and net gains of $4.1 million for the nine months ended September 30, 2024 and 2023, respectively. These gains and losses are included in foreign exchange and other income/(expense) on LivaNova’s condensed consolidated statements of income (loss).
Capped Call Derivatives
The Capped Call Transactions are carried on the condensed consolidated balance sheets as a derivative asset at their estimated fair value and are adjusted at the end of each reporting period, with unrealized gain or loss reflected in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). The Capped Call Transactions are measured at fair value using the Black-Scholes model utilizing observable and unobservable market data, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield, as applicable. For additional information, refer to “Note 5. Financing Arrangements.”
2025 Capped Calls
In June 2020, LivaNova issued the 2025 Notes. In connection with the pricing of the 2025 Notes, the Company entered into related privately-negotiated capped call transactions with certain financial institutions. Under the 2025 Capped Calls, the Company purchased a capped call option with an initial strike price of $60.98 and an initial cap price of $100.00 per share. The strike price, which is subject to certain adjustments, corresponds to the initial exchange price of the 2025 Notes. The 2025 Capped Calls are intended to offset any cash payments upon exchange of the 2025 Notes in excess of the principal amount; however, the proceeds are limited to the initial cap price in the event the Company’s share price exceeds the cap price at the time of an exchange. The 2025 Capped Calls expire on December 15, 2025, and must be settled in cash. The 2025 Capped Calls are subject to anti-dilution adjustments substantially similar to those applicable to the 2025 Notes and cover the number of LivaNova’s ordinary shares underlying the 2025 Notes. If the 2025 Capped Calls are terminated early, settlement occurs at their termination value, which is equal to their fair value at the time of the early termination. In connection with the issuance of the 2029 Notes, the Company repurchased an aggregate principal amount of $230.0 million of the 2025 Notes and unwound a corresponding portion of the 2025 Capped Calls at the fair value of such portion of the 2025 Capped Calls. The Company received $22.5 million in cash consideration, the fair value of the terminated portion, upon settlement. The terms of the remaining 2025 Capped Calls remain unchanged and continue to be classified as long-term derivative assets.
2029 Capped Calls
In March 2024, LivaNova issued the 2029 Notes. In connection with the pricing of the 2029 Notes, the Company entered into related privately-negotiated capped call transactions with certain financial institutions. Under the 2029 Capped Calls, the Company purchased a capped call option with an initial strike price of $69.40 and an initial cap price of $94.28 per share. The strike price, which is subject to certain adjustments, corresponds to the initial conversion price of the 2029 Notes. The 2029 Capped Calls are intended to offset any cash payments and/or cash equivalent value of ordinary shares upon conversion of the 2029 Notes if the market value per ordinary share is greater than the strike price, with such offsets being subject to the initial cap price of $94.28 per share. However, the proceeds under the 2029 Capped Calls are limited to the initial cap price in the event the Company’s share price exceeds the cap price at the time of conversion. The 2029 Capped Calls expire on March 15, 2029, and must be settled in cash. The 2029 Capped Calls are subject to anti-dilution adjustments substantially similar to those applicable to the 2029 Notes and cover the number of LivaNova’s ordinary shares underlying the 2029 Notes. If the 2029 Capped Calls are terminated early, settlement occurs at their termination value, which is equal to their fair value at the time of the early termination. For transaction costs associated with entering into the 2029 Capped Calls, refer to “Additions” in the “Reconciliation of Level 3 Assets and Liabilities” table within “Note 4. Fair Value Measurements.”
Embedded Derivatives
The 2025 Notes and 2029 Notes each include terms resulting in a bifurcated embedded derivative. The Embedded Derivatives are measured at fair value using a binomial lattice model and estimated discounted cash flows that utilize observable and unobservable market data and are adjusted at the end of each reporting period, with the unrealized gain or loss reflected in foreign exchange and other income/(expense) in the condensed consolidated statements of income (loss). For additional information, refer to “Note 5. Financing Arrangements.”
Counterparty Credit Risk
LivaNova is exposed to credit risk in the event of non-performance by the counterparties to the Company’s derivatives.
The Option Counterparties are financial institutions. To limit LivaNova’s credit risk, the Company selected financial institutions with a minimum long-term investment grade credit rating. LivaNova’s exposure to the credit risk of the Option Counterparties is not secured by any collateral. If such an Option Counterparty becomes subject to insolvency proceedings, LivaNova will become an unsecured creditor in those proceedings, with a claim equal to the Company’s exposure at that time under the 2025 Capped Calls and/or 2029 Capped Calls, as applicable, with that Option Counterparty.
To manage credit risk with respect to LivaNova’s other derivatives, the Company selects and periodically reviews counterparties based on credit ratings, limits its exposure with respect to each counterparty, and monitors their respective
market positions. However, if one or more of these counterparties were in a liability position to the Company and were unable to meet their obligations, any transactions with the counterparty could be subject to early termination, which could result in substantial losses for the Company.
Cash Flow Hedges
Historically, LivaNova entered into interest rate swaps associated with the Initial Term Facility, which qualified for and were designated as cash flow hedges. The Company’s outstanding interest rate swaps expired on April 6, 2023. LivaNova elected not to renew the interest rate swaps. Interest expense associated with the Initial Term Facility is principally offset by holding a significant portion of the Term Facilities in a depository account, which earns a floating rate of interest.
The pre-tax gains (losses) for derivative contracts designated as cash flow hedges recognized in OCI and the amount reclassified to earnings from AOCI were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Nine Months Ended September 30, 2023 |
Description of Derivative Contract | | Location in Earnings of Reclassified Gain or Loss | | | | | | Loss Recognized in OCI | | Gain Reclassified from AOCI to Earnings |
Interest rate swap contracts | | Interest expense | | | | | | $ | (433) | | | $ | 533 | |
| | | | | | | | | | |
Balance Sheet Presentation
LivaNova offsets fair value amounts associated with its derivative instruments that are executed with the same counterparty under master netting arrangements on the Company’s condensed consolidated balance sheets. Master netting arrangements include a right to set off or net together purchases and sales of similar products in the settlement process.
The following tables present the fair value and the location of derivative contracts reported on the condensed consolidated balance sheets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Derivative Assets | | Derivative Liabilities |
September 30, 2024 | | Balance Sheet Location | | Fair Value (1) | | Balance Sheet Location | | Fair Value (1) |
|
| | | | | | | | |
| | | | | | | | |
Derivatives Not Designated as Hedging Instruments: |
Capped call derivatives (2025 Notes) | | Long-term derivative assets | | $ | 5,771 | | | | | |
Capped call derivatives (2029 Notes) | | Long-term derivative assets | | 29,597 | | | | | |
Embedded derivative (2025 Notes) | | | | | | Long-term derivative liabilities | | $ | 7,188 | |
Embedded derivative (2029 Notes) | | | | | | Long-term derivative liabilities | | 76,969 | |
FX derivative contracts | | Prepaid expenses and other current assets | | — | | | Accrued liabilities and other | | 2,245 | |
Total derivatives not designated as hedging instruments | | | | $ | 35,368 | | | | | $ | 86,402 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Derivative Assets | | Derivative Liabilities |
December 31, 2023 | | Balance Sheet Location | | Fair Value (1) | | Balance Sheet Location | | Fair Value (1) |
Derivatives Not Designated as Hedging Instruments: |
| | | | | | | | |
Capped call derivatives (2025 Notes) | | Long-term derivative assets | | $ | 38,496 | | | | | |
Embedded derivative (2025 Notes) | | | | | | Long-term derivative liabilities | | $ | 45,569 | |
FX derivative contracts | | | | | | Accrued liabilities and other | | 3,883 | |
| | | | | | | | |
| | | | | | | | |
Total derivatives not designated as hedging instruments | | | | $ | 38,496 | | | | | $ | 49,452 | |
| | | | | | | | |
(1)For the classification of inputs used to evaluate the fair value of LivaNova’s derivatives, refer to “Note 4. Fair Value Measurements.”
Note 4. Fair Value Measurements
LivaNova reviews its fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities in the fair value hierarchy. There were no transfers between Level 1, Level 2, or Level 3 during the nine months ended September 30, 2024 and 2023.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the level in the fair value hierarchy at which the Company’s assets and liabilities are measured on a recurring basis (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance Sheet Location | | September 30, 2024 | | Fair Value Measurements Using Inputs Considered as: |
| | | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | | | |
| | | | | | | | | | |
Derivative assets - capped call derivatives (2025 Notes) | | Long-term derivative assets | | $ | 5,771 | | | $ | — | | | $ | — | | | $ | 5,771 | |
Derivative assets - capped call derivatives (2029 Notes) | | Long-term derivative assets | | 29,597 | | | — | | | — | | | 29,597 | |
| | | | | | | | | | |
| | | | $ | 35,368 | | | $ | — | | | $ | — | | | $ | 35,368 | |
Liabilities: | | | | | | | | | | |
Derivative liabilities - freestanding instruments (FX) | | Accrued liabilities and other | | $ | 2,245 | | | $ | — | | | $ | 2,245 | | | $ | — | |
Derivative liabilities - embedded derivative (2025 Notes) | | Long-term derivative liabilities | | 7,188 | | | — | | | — | | | 7,188 | |
Derivative liabilities - embedded derivative (2029 Notes) | | Long-term derivative liabilities | | 76,969 | | | — | | | — | | | 76,969 | |
Contingent consideration arrangement | | Contingent consideration | | 81,240 | | | — | | | — | | | 81,240 | |
| | | | $ | 167,642 | | | $ | — | | | $ | 2,245 | | | $ | 165,397 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance Sheet Location | | December 31, 2023 | | Fair Value Measurements Using Inputs Considered as: |
| | | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | | | |
Derivative assets - capped call derivatives (2025 Notes) | | Long-term derivative assets | | $ | 38,496 | | | $ | — | | | $ | — | | | $ | 38,496 | |
Convertible notes receivable | | Other assets | | 275 | | | — | | | — | | | 275 | |
| | | | $ | 38,771 | | | $ | — | | | $ | — | | | $ | 38,771 | |
Liabilities: | | | | | | | | | | |
Derivative liabilities - freestanding instruments (FX) | | Accrued liabilities and other | | $ | 3,883 | | | $ | — | | | $ | 3,883 | | | $ | — | |
Derivative liabilities - embedded derivative (2025 Notes) | | Long-term derivative liabilities | | 45,569 | | | — | | | — | | | 45,569 | |
Contingent consideration arrangement | | Contingent consideration | | 80,902 | | | — | | | — | | | 80,902 | |
Contingent consideration arrangement | | Accrued liabilities and other | | 13,750 | | | — | | | — | | | 13,750 | |
| | | | $ | 144,104 | | | $ | — | | | $ | 3,883 | | | $ | 140,221 | |
Reconciliation of Level 3 Assets and Liabilities
The following tables present reconciliations of recurring fair value measurements that use significant unobservable inputs (Level 3) (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2024 |
| | Capped Call Derivative Assets (2025 Notes) | | Capped Call Derivative Assets (2029 Notes) | | Convertible Notes Receivable | | Embedded Derivative Liability (2025 Notes) | | Embedded Derivative Liability (2029 Notes) | | Contingent Consideration Liability Arrangement |
June 30, 2024 | | $ | 7,439 | | | $ | 32,114 | | | $ | 275 | | | $ | 10,017 | | | $ | 95,392 | | | $ | 81,174 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Changes in fair value | | (1,668) | | | (2,517) | | | (275) | | | (2,829) | | | (18,423) | | | 66 | |
September 30, 2024 | | $ | 5,771 | | | $ | 29,597 | | | $ | — | | | $ | 7,188 | | | $ | 76,969 | | | $ | 81,240 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2023 |
| | Capped Call Derivative Assets (2025 Notes) | | Convertible Notes Receivable | | Embedded Derivative Liability (2025 Notes) | | Contingent Consideration Liability Arrangements |
June 30, 2023 | | $ | 42,034 | | | $ | 275 | | | $ | 53,705 | | | $ | 92,626 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Changes in fair value | | 1,635 | | | — | | | (402) | | | (2,818) | |
September 30, 2023 | | $ | 43,669 | | | $ | 275 | | | $ | 53,303 | | | $ | 89,808 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2024 |
| | Capped Call Derivative Assets (2025 Notes) | | Capped Call Derivative Assets (2029 Notes) | | Convertible Notes Receivable | | Embedded Derivative Liability (2025 Notes) | | Embedded Derivative Liability (2029 Notes) | | Contingent Consideration Liability Arrangements |
December 31, 2023 | | $ | 38,496 | | | $ | — | | | $ | 275 | | | $ | 45,569 | | | $ | — | | | $ | 94,652 | |
Additions | | — | | | 31,637 | | | — | | | — | | | 87,457 | | | — | |
Cash receipt | | (22,524) | | | — | | | — | | | — | | | — | | | — | |
Payment | | — | | | — | | | — | | | (36,915) | | | — | | | (13,750) | |
Changes in fair value | | (10,201) | | | (2,040) | | | (275) | | | (1,466) | | | (10,488) | | | 338 | |
September 30, 2024 | | $ | 5,771 | | | $ | 29,597 | | | $ | — | | | $ | 7,188 | | | $ | 76,969 | | | $ | 81,240 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2023 |
| | Capped Call Derivative Assets (2025 Notes) | | Convertible Notes Receivable | | Embedded Derivative Liability (2025 Notes) | | Contingent Consideration Liability Arrangements |
December 31, 2022 | | $ | 54,393 | | | $ | 285 | | | $ | 85,675 | | | $ | 85,292 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Changes in fair value | | (10,724) | | | (10) | | | (32,372) | | | 4,516 | |
September 30, 2023 | | $ | 43,669 | | | $ | 275 | | | $ | 53,303 | | | $ | 89,808 | |
Stock Price Volatility
The following table presents the stock price volatility utilized in determining the fair value of LivaNova’s capped call derivative assets and embedded derivative liabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2024 | | Capped Call Derivative Assets (2025 Notes) | | Capped Call Derivative Assets (2029 Notes) | | Embedded Derivative Liability (2025 Notes) | | Embedded Derivative Liability (2029 Notes) |
Stock price volatility (1) | | 40 | % | | 37 | % | | 40 | % | | 37 | % |
| | | | | | | | |
|
| | | | | | | | |
| | | | | | | | |
(1) The Embedded Derivatives and Capped Call Transactions are classified as Level 3 because the Company uses historical volatility and implied volatility from actual options traded to determine expected stock price volatility, an unobservable input that is significant to the valuation. In general, an increase in LivaNova’s stock price or stock price volatility would increase the fair value of the Embedded Derivatives and Capped Call Transactions which would result in an increase in net expense. As the remaining time
to the expiration of the derivatives decreases, the fair value of the derivatives decreases. The future impact of the derivatives on net income depends on how significant inputs such as stock price, stock price volatility, and time to the expiration of the derivatives change in relation to other inputs.
Contingent Consideration Arrangements
The following table presents the fair value of LivaNova’s Level 3 contingent consideration arrangements by acquisition (in thousands):
| | | | | | | | | | | | | | |
| | September 30, 2024 | | December 31, 2023 |
ImThera | | $ | 81,240 | | | $ | 80,902 | |
ALung | | — | | | 13,750 | |
| | $ | 81,240 | | | $ | 94,652 | |
The ImThera business combination involved contingent consideration arrangements comprised of potential cash payments upon the achievement of a certain regulatory milestone and a sales-based earnout associated with sales of products. The sales-based earnouts are valued using projected sales from LivaNova’s internal strategic plan. These arrangements are Level 3 fair value measurements and included the following significant unobservable inputs as of September 30, 2024:
| | | | | | | | | | | | | | | | | | | | |
ImThera Acquisition | | Valuation Technique | | Unobservable Input | | Inputs |
Regulatory milestone-based payment | | Discounted cash flow | | Discount rate | | 7.7% |
| | | | Probability of payment | | 85% |
| | | | Projected payment year | | 2026 |
| | | | | | |
Sales-based earnout | | Monte-Carlo simulation | | Risk-adjusted discount rate | | 14.6% - 14.7% |
| | | | Credit risk discount rate | | 7.8% - 8.2% |
| | | | Revenue volatility | | 27.1% |
| | | | Probability of payment | | 85% |
| | | | Projected years of earnout | | 2027 - 2030 |
Note 5. Financing Arrangements
The following table presents a summary of LivaNova’s long-term debt obligations (in thousands, except interest rates):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2024 | | December 31, 2023 | | Maturity | | Interest Rate |
Term Facilities | | $ | 316,803 | | | $ | 328,459 | | | July 2027 | | 8.66% |
2029 Notes | | 253,863 | | | — | | | March 2029 | | 2.50% |
2025 Notes | | 52,919 | | | 255,500 | | | December 2025 | | 3.00% |
Bank of America, U.S. | | 1,500 | | | 1,500 | | | January 2025 | | 8.19% |
Other | | 455 | | | 568 | | | | | |
Total long-term facilities | | 625,540 | | | 586,027 | | | | | |
Less: Current portion of long-term debt | | 21,253 | | | 17,484 | | | | | |
Total long-term debt obligations | | $ | 604,287 | | | $ | 568,543 | | | | | |
Revolving Credit and Term Facilities
The outstanding principal amount of LivaNova’s short-term unsecured revolving credit agreements and other agreements with various banks was $0.7 million at September 30, 2024 and $0.6 million at December 31, 2023, with an average interest rate of 4.94% and loan terms ranging from overnight to 364 days as of September 30, 2024.
On March 8, 2024, LivaNova and LivaNova USA entered into Incremental Facility Amendment No. 3, which provides for LivaNova USA to obtain revolving commitments in an aggregate principal amount of $225.0 million. The $225.0 million revolving facility is subject to the terms and conditions of the 2021 First Lien Credit Agreement, as amended thereof, and replaced the previously existing $125.0 million revolving facility under the 2021 First Lien Credit Agreement. The $225.0 million revolving facility is available for working capital and other general corporate purposes and, if drawn, can be repaid at any time without premium or penalty. The $225.0 million revolving facility matures on March 8, 2029. There were no
outstanding borrowings under the revolving facilities under the 2021 First Lien Credit Agreement as of September 30, 2024 and December 31, 2023.
The 2021 First Lien Credit Agreement, as amended, also requires the payment of certain commitment fees on the unused portion of the commitments, at a variable percentage based on LivaNova’s Total Net Leverage Ratio. As of September 30, 2024 and December 31, 2023, the applicable commitment fee percentage was 0.5% per annum.
The 2021 First Lien Credit Agreement, as amended, contains customary representations, warranties, and covenants, including the requirement to maintain a Senior Secured First Lien Net Leverage Ratio of not more than 3.50 to 1.00, calculated as the ratio of Consolidated Senior Secured First Lien Net Indebtedness to Consolidated EBITDA, as defined in the credit agreement, for the period of four consecutive fiscal quarters ended on the calculation date and an Interest Coverage Ratio of not less than 2.00 to 1.00, calculated as the ratio of Consolidated EBITDA to Consolidated Interest Expense, both as defined in the credit agreement, for the period of four consecutive fiscal quarters ended on the calculation date. As of September 30, 2024, the Company was in compliance with the financial covenants contained in the 2021 First Lien Credit Agreement.
Debt discount and issuance costs related to the Initial Term Facility were $9.6 million. The unamortized debt discount and issuance costs related to the Initial Term Facility were $5.4 million and $6.8 million as of September 30, 2024 and December 31, 2023, respectively.
2029 Notes Issuance and 2025 Notes Repurchase Transactions
On March 8, 2024, LivaNova issued $345.0 million aggregate principal amount of 2.50% notes due 2029 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which included exercise in full of the initial purchasers’ option to purchase up to an additional $45.0 million principal amount of the 2029 Notes. The 2029 Notes are senior unsecured obligations of the Company. The Company used part of the proceeds from the issuance of the 2029 Notes to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions for an aggregate cash repurchase consideration of $270.5 million.
The 2025 Notes Repurchase Transaction was treated as a debt extinguishment. The carrying value of the related 2025 Notes, which included the unamortized debt discount and issuance costs and the fair value of the embedded derivative, was derecognized, and the 2029 Notes issued were recognized at fair value. The difference between the consideration used to extinguish the 2025 Notes, the carrying value of the 2025 Notes, and the fair value of the embedded derivative was recognized as a loss on debt extinguishment of $25.5 million on LivaNova’s condensed consolidated statements of income (loss) during the nine months ended September 30, 2024. Third-party costs incurred directly related to the 2025 Notes Repurchase Transaction were deferred and capitalized as additional debt issuance costs to be amortized on the 2029 Notes.
Contemporaneously with the 2025 Notes Repurchase Transaction, the Company and the financial institutions party to the 2025 Capped Calls agreed to terminate a portion of the 2025 Capped Calls in a notional amount corresponding to the amount of 2025 Notes repurchased. The Company received $22.5 million in cash consideration, the fair value of the terminated portion, upon settlement. The terms of the remaining 2025 Capped Calls remain unchanged and continue to be classified as long-term derivative assets. For additional information on LivaNova’s capped call and embedded derivatives, refer to “Note 3. Derivatives and Risk Management.”
2029 Notes
The sale of the 2029 Notes resulted in $332.1 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on March 15 and September 15 of each year. The effective interest rate of the 2029 Notes was 9.79% as of September 30, 2024. The 2029 Notes mature on March 15, 2029, unless earlier repurchased, redeemed or converted.
Debt discount and issuance costs related to the 2029 Notes were $99.6 million, including $87.5 million of discount attributable to the embedded derivative and $12.1 million of new debt issuance costs related to the 2029 Notes. The debt discount and issuance costs are amortized as interest expense using the effective interest method over the term of the 2029 Notes. The unamortized debt discount and issuance costs related to the 2029 Notes as of September 30, 2024 were $91.1 million.
Holders are entitled to convert the 2029 Notes at any time during specified periods, at their option, subject to certain conditions. This includes the right to convert the 2029 Notes during any calendar quarter if the last reported sale price of LivaNova’s ordinary shares is greater than or equal to 130% of the conversion price, or $90.22 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. The initial conversion rate for the 2029 Notes is 14.4085 ordinary shares per $1,000 principal amount of 2029 Notes (equivalent to an initial conversion price of $69.40 per share). The conversion rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the 2029 Notes.
As of September 30, 2024, the conditions for conversion were not met. As a result, the Company included its obligations from the 2029 Notes and the associated embedded derivative as long-term liabilities on the condensed consolidated balance sheet as of September 30, 2024, and the 2029 Notes are not convertible during the three months ending December 31, 2024.
Upon any conversion of the 2029 Notes, LivaNova will be required to pay cash up to the aggregate principal amount of the 2029 Notes to be converted and may elect to settle the conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted in cash, shares, or a combination of the two.
On or after December 15, 2028, holders may convert their 2029 Notes at their option at any time until the close of business on the second Scheduled Trading Day (as defined in the indenture governing the 2029 Notes) immediately preceding the maturity date.
The Company may redeem the 2029 Notes, in whole or in part, at its option on or after March 22, 2027 for cash if the last reported sale price of LivaNova’s ordinary share has been at least 130% of the conversion price, or $90.22 per share, then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. Additionally, the Company may redeem the 2029 Notes at its option, prior to the stated maturity, in whole but not in part, in connection with certain tax-related events.
Holders may require the Company to repurchase their 2029 Notes upon the occurrence of a Fundamental Change (as defined in the indenture governing the 2029 Notes) at a repurchase price equal to the principal amount thereof plus accrued and unpaid interest to, but excluding, the repurchase date. In addition, in connection with certain corporate events or if the Company issues a notice of redemption, the Company will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2029 Notes in connection with such corporate event or during the relevant redemption period.
The indenture governing the 2029 Notes contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee (as defined in the indenture governing the 2029 Notes) or holders of at least 25% in aggregate principal amount of the 2029 Notes then outstanding may declare the entire principal amount of all the 2029 Notes, and accrued and unpaid interest on such 2029 Notes, to be immediately due and payable. Upon events of default in connection with specified bankruptcy events involving the Company, the 2029 Notes will become due and payable immediately.
2025 Notes
On June 17, 2020, LivaNova USA issued $287.5 million aggregate principal amount of 3.00% notes due 2025 by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2025 Notes are senior unsecured obligations of the Company. The sale of the 2025 Notes resulted in $278.0 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on June 15 and December 15 of each year. On March 8, 2024, in connection with the issuance of the 2029 Notes, the Company used part of the net proceeds to repurchase $230.0 million aggregate principal amount of the 2025 Notes in privately-negotiated transactions. For additional information, refer to “2029 Notes Issuance and 2025 Notes Repurchase Transactions” above. The effective interest rate of the 2025 Notes was 9.16% as of September 30, 2024. The 2025 Notes mature on December 15, 2025, unless earlier exchanged, repurchased, or redeemed.
Debt discount and issuance costs related to the 2025 Notes were $82.0 million, including $75.0 million of discount attributable to the embedded derivative and $7.0 million of allocated issuance costs to the 2025 Notes related to legal, bank, and accounting fees. The debt discount and issuance costs are amortized as interest expense using the effective interest method over the term of the 2025 Notes. Upon the closing of the 2025 Notes Repurchase Transaction in March 2024, the remaining unamortized debt discount and issuance costs related to the 2025 Notes were $5.8 million. The unamortized debt discount and issuance costs related to the 2025 Notes as of September 30, 2024 and December 31, 2023 were $4.6 million and $32.0 million, respectively.
Holders are entitled to exchange the 2025 Notes at any time during specified periods, at their option, subject to certain conditions. This includes the right to exchange the 2025 Notes during any calendar quarter if the last reported sale price of LivaNova’s ordinary shares is greater than or equal to 130% of the exchange price, or $79.27 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. The 2025 Notes are exchangeable solely into cash and are not exchangeable into ordinary shares of LivaNova or any other security under any circumstances. The initial exchange rate for the 2025 Notes is 16.3980 ordinary shares per $1,000 principal amount of 2025 Notes (equivalent to an initial exchange price of $60.98 per share). The exchange rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the 2025 Notes.
As of September 30, 2024, the conditions for exchange were not met. As a result, the Company included its obligations from the 2025 Notes and the associated embedded derivative as long-term liabilities on the condensed consolidated balance sheet as of September 30, 2024, and the 2025 Notes are not exchangeable during the three months ending December 31, 2024.
On or after September 15, 2025, holders may exchange their 2025 Notes at their option at any time until the close of business on the second Scheduled Trading Day (as defined in the indenture governing the 2025 Notes) immediately preceding the maturity date.
The Company may redeem the 2025 Notes, in whole or in part, at its option prior to the 51st scheduled trading day immediately preceding the maturity date if the last reported sale price per ordinary share has been at least 130% of the exchange price, or $79.27 per share, then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Additionally, the Company may redeem the 2025 Notes at its option, prior to the stated maturity, in whole but not in part, in connection with certain tax-related events.
Note 6. Commitments and Contingencies
Saluggia Site Hazardous Substances
LSM, formerly a subsidiary of Sorin, one of the companies that merged into LivaNova PLC in 2015, manages site services for the campus in Saluggia, Italy. In addition to being a former LivaNova manufacturing facility, the Saluggia campus is also the location of manufacturing facilities of third parties, a cafeteria for workers, and storage facilities for hazardous substances and equipment previously used in a nuclear research center, later turned nuclear medicine business, between the 1960s and the late 1990s. Pursuant to authorization from the Italian government, LSM performs ordinary maintenance, secures the facilities, monitors air and water quality, and files applicable reports with the competent environmental authorities.
In 2020, LSM received correspondence from ISIN requesting that, within five years, LSM demonstrate the financial capacity to meet its obligations under Italian law to clean and dismantle any contaminated buildings and equipment, as well as to deliver hazardous substances to a national repository. This repository will be built by the Italian government at a location and time yet to be determined. ISIN subsequently published Technical Guide n. 30, which identifies the technical criteria, and general safety and protection requirements for the design, construction, operation, and dismantling of temporary storage facilities for the hazardous substances. In January 2021, a list of 67 potential sites for the national repository was published.
Although there is no legal obligation to begin any work or deliver the hazardous substances, as the performance of these obligations is contingent on the construction of the as-yet unbuilt national repository, based on the aforementioned factors, the Company concluded its obligation to clean, dismantle, and deliver any hazardous substances to a national repository is probable and reasonably estimable. The estimated liability as of September 30, 2024 was €35.5 million ($39.6 million), which represented the low end of the estimated range of loss of €35.5 million ($39.6 million) to €45.3 million ($50.6 million). The estimated liability as of December 31, 2023 was €35.8 million ($39.7 million).
SNIA Environmental Litigation
Sorin was created as a result of a spin-off from SNIA in 2004 and in 2015, Sorin was merged into LivaNova. SNIA subsequently became insolvent, and the Public Administrations sought compensation from SNIA in an aggregate amount of approximately $3.8 billion for remediation costs relating to the environmental damage at chemical sites previously operated by SNIA’s other subsidiaries.
There are proceedings relating to the SNIA bankruptcy to which LivaNova is not a party in the Bankruptcy Court of Udine and the Bankruptcy Court of Milan. In 2011, the Bankruptcy Court of Udine held that the Public Administrations were not creditors of either SNIA or its subsidiaries in connection with their claims in the Italian insolvency proceedings. The Public Administrations appealed. In 2016, the Court of Udine rejected the appeal, and the Public Administrations appealed to the Italian Supreme Court. Similarly, in 2014, the Bankruptcy Court of Milan held that the Public Administrations were not creditors of either SNIA or its subsidiaries. The Public Administrations appealed. In April 2022, the Bankruptcy Court of Milan declared the Public Administrations to be a non-privileged creditor of SNIA for up to €454.0 million, and the Public Administrations appealed to the Italian Supreme Court.
In 2012, SNIA filed a civil action against Sorin in the Civil Court of Milan asserting joint liability of a parent and a spun-off company; the Public Administrations entered voluntarily into the proceeding, asking Sorin, as jointly liable with SNIA, to pay compensation for SNIA’s environmental damages. In 2016, the Court of Milan dismissed all legal actions of SNIA and of the Public Administrations further requiring the Public Administrations to pay Sorin €292,000 ($326,191 as of September 30,
2024) for legal fees. The Public Administrations appealed the 2016 Decision to the Court of Appeal. On March 5, 2019, the Court of Appeal issued a partial decision on the merits declaring Sorin/LivaNova jointly liable with SNIA for SNIA’s environmental liabilities in an amount up to the fair value of the net worth received by Sorin because of the spin-off of Sorin from SNIA in 2004, an estimated €572.1 million ($639.1 million as of September 30, 2024). LivaNova appealed the partial decision on liability to the Italian Supreme Court in August 2019.
In 2021, the Court of Appeal delivered the remainder of its decision, ordering LivaNova to pay damages of €453.6 million ($506.7 million as of September 30, 2024). LivaNova appealed the decision on damages in December 2021. On February 21, 2022, the Court of Appeal notified the Company that it granted the Company a suspension with respect to the payment of damages until a decision has been reached on the appeal to the Italian Supreme Court. This suspension was subject to LivaNova providing a first demand bank guarantee of €270.0 million ($301.6 million as of September 30, 2024) within 30 calendar days, and on March 21, 2022, LivaNova delivered the guarantee, thereby satisfying the condition. For additional information on the financing of the guarantee, refer to “Note 12. Supplemental Financial Information.”
In 2022, in response to one of a number of appeals asserted by LivaNova, the Italian Supreme Court issued an ordinance, a procedural document, whereby the Italian Supreme Court referred a question on interpretation of a European directive on demergers to the ECJ. Specifically, the ordinance asked the ECJ to provide a binding decision as to whether a company resulting from a demerger can be held jointly and severally liable not only for the established liabilities of the demerged company that were articulated at the time of demerger, but also for the environmental liabilities of the demerged company that materialized after the demerger which are derived from actions performed prior to the demerger. On July 29, 2024, the ECJ issued a judgment in response to the ordinance. The ECJ judgment states that a demerged company can be held responsible for liabilities not established prior to a demerger as long as the liabilities derive from the conduct of a demerged company prior to the demerger. The ECJ judgment also states that national law should determine whether liability for damages stemming from conduct after a demerger can be assigned to a demerged company. The Italian Supreme Court is expected to issue a decision in response to all of the appeals of LivaNova, and counter-appeals submitted by the Public Administrations. While the timing of the decision by the Italian Supreme Court is uncertain, the Company does not expect that a decision will be issued until at least 2025. LivaNova has not recognized a liability in connection with this matter because any potential loss is not currently probable.
Product Liability Litigation
The Company continues to be involved in litigation involving LivaNova’s 3T device. The litigation includes the cases remaining in the MDL, various U.S. state court cases, and claims in jurisdictions outside the U.S. As of October 30, 2024, the Company was aware of approximately 65 filed and unfiled claims worldwide. The complaints generally seek damages and other relief based on theories of strict liability, negligence, breach of express and implied warranties, failure to warn, design and manufacturing defect, fraudulent and negligent misrepresentation or concealment, unjust enrichment, and violations of various state consumer protection statutes.
During the three and nine months ended September 30, 2024, LivaNova recorded an additional liability of $7.7 million and $16.8 million, respectively, due to new information received about the nature of certain claims. As of September 30, 2024 and December 31, 2023, the provision for these matters was $19.2 million and $13.9 million, respectively. While the amount accrued represents LivaNova’s best estimate for those filed and unfiled claims worldwide of which LivaNova is aware and believes are both probable and estimable at this time, the actual liability for resolution of these matters may vary from the Company’s provision. A provision for the remaining claims has not been recorded, because a potential loss is not determined to be probable, or a potential loss or range of potential loss is not reasonably estimable at this time.
The following table presents the changes in the litigation provision liability for the nine months ended September 30, 2024 (in thousands):
| | | | | | | | |
Total litigation provision liability at December 31, 2023 | | $ | 13,860 | |
Payments | | (11,515) | |
Adjustments (1) | | 16,798 | |
FX and other | | 86 | |
Total litigation provision liability at September 30, 2024 | | 19,229 | |
Less: Current portion of litigation provision liability at September 30, 2024 | | 16,098 | |
Long-term portion of litigation provision liability at September 30, 2024 (2) | | $ | 3,131 | |
(1)Adjustments to the litigation provision are included in other operating expenses on the condensed consolidated statements of income (loss).
(2)Included in other long-term liabilities on the condensed consolidated balance sheets.
Italian MedTech Payback Measure
As previously disclosed, in 2015, the Italian Parliament introduced rules regarding public contracts with the National Healthcare System for the supply of goods and services. In particular, the law introduced a payback measure requiring companies selling medical devices in Italy to repay a percentage of the healthcare expenditures exceeding the regional maximum caps for medical devices. In the intervening years since the rules were first issued, there has been considerable uncertainty about how the law will operate and what the exact timeline is for finalization. In August 2022, a decree was published which provided guidance and timetables for the rule. In response, LivaNova filed an appeal at the Administrative Court against the Decree of the Ministry of Health, assessing the amount payable and against the payback law. LivaNova also filed appeals against the regions requesting payments. In August 2023, the Administrative Court upheld LivaNova’s request to suspend the effect of the requests for payment by the regions, pending the decision by the Administrative Court on the merits of the case. In November 2023, the Administrative Court, in a separate matter, asked the Constitutional Court whether the payback law was compliant with the Italian Constitution and pending the decision by the Constitutional Court, all cases brought by medical device companies in this matter were suspended. On July 22, 2024, the Constitutional Court determined that the payback law is compliant with the Italian Constitution and that companies may reduce their payment obligations between 2015-2018 to 48% of the amount originally charged to companies. Based on market and product information, as previously disclosed, and the recent ruling by the Constitutional Court, the amount reserved for this matter was $16.8 million and $8.2 million as of September 30, 2024 and December 31, 2023, respectively, and is included in accrued liabilities and other in the condensed consolidated balance sheets. However, the actual liability could vary. Amounts recognized associated with the Italian MedTech payback measure are recorded as a reduction to net revenue in the condensed consolidated statements of income (loss).
Cyber Litigation
In connection with the cybersecurity incident initially reported on November 20, 2023, LivaNova USA was named as a defendant in six putative class action lawsuits filed in the United States District Court for the Southern District of Texas in June and July 2024. Those cases were consolidated in a single action, and the plaintiffs filed against LivaNova USA a consolidated class action complaint, which asserted claims of negligence, breach of contract, and violation of various state consumer protection laws. The plaintiffs sought damages, equitable/injunctive relief, and attorney’s fees, costs, and expenses, among other relief. The parties entered into mediation and have agreed to a settlement, for which the Company recorded an accrual of $1.2 million during the quarter ended September 30, 2024. The settlement is currently being memorialized and will be subject to court approval.
Other Matters
Additionally, LivaNova is the subject of various pending or threatened legal actions and proceedings that arise in the ordinary course of LivaNova’s business. These matters are subject to many uncertainties and outcomes that are not predictable and that may not be known for extended periods of time. Since the outcome of these matters cannot be predicted with certainty, the costs associated with them could have a material adverse effect on LivaNova’s consolidated results of operations, financial position, or liquidity.
Note 7. Stockholders' Equity
The tables below present the condensed consolidated statements of stockholders’ equity as of and for the three and nine months ended September 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ordinary Shares | | Ordinary Shares - Amount | | Additional Paid-In Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity |
June 30, 2024 | | 54,404 | | | $ | 83,070 | | | $ | 2,204,580 | | | $ | (195) | | | $ | (52,819) | | | $ | (992,094) | | | $ | 1,242,542 | |
Stock-based compensation plans | | 2 | | | 42 | | | 8,352 | | | 39 | | | — | | | — | | | 8,433 | |
Net income | | — | | | — | | | — | | | — | | | — | | | 32,953 | | | 32,953 | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 26,116 | | | — | | | 26,116 | |
September 30, 2024 | | 54,406 | | | $ | 83,112 | | | $ | 2,212,932 | | | $ | (156) | | | $ | (26,703) | | | $ | (959,141) | | | $ | 1,310,044 | |
| | | | | | | | | | | | | | |
June 30, 2023 | | 53,904 | | | $ | 82,441 | | | $ | 2,169,346 | | | $ | (95) | | | $ | (35,579) | | | $ | (975,505) | | | $ | 1,240,608 | |
| | | | | | | | | | | | | | |
Stock-based compensation plans | | — | | | 50 | | | 11,315 | | | 39 | | | — | | | — | | | 11,404 | |
Net loss | | — | | | — | | | — | | | — | | | — | | | (7,318) | | | (7,318) | |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (19,222) | | | — | | | (19,222) | |
September 30, 2023 | | 53,904 | | | $ | 82,491 | | | $ | 2,180,661 | | | $ | (56) | | | $ | (54,801) | | | $ | (982,823) | | | $ | 1,225,472 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ordinary Shares | | Ordinary Shares - Amount | | Additional Paid-In Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity |
December 31, 2023 | | 53,942 | | | $ | 82,533 | | | $ | 2,189,517 | | | $ | (55) | | | $ | (27,883) | | | $ | (966,484) | | | $ | 1,277,628 | |
Issuance of shares | | — | | | 440 | | | — | | | (440) | | | — | | | — | | | — | |
Stock-based compensation plans | | 464 | | | 139 | | | 23,415 | | | 339 | | | — | | | — | | | 23,893 | |
Net income | | — | | | — | | | — | | | — | | | — | | | 7,343 | | | 7,343 | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 1,180 | | | — | | | 1,180 | |
September 30, 2024 | | 54,406 | | | $ | 83,112 | | | $ | 2,212,932 | | | $ | (156) | | | $ | (26,703) | | | $ | (959,141) | | | $ | 1,310,044 | |
| | | | | | | | | | | | | | |
December 31, 2022 | | 53,852 | | | $ | 82,424 | | | $ | 2,157,724 | | | $ | (375) | | | $ | (48,119) | | | $ | (984,030) | | | $ | 1,207,624 | |
| | | | | | | | | | | | | | |
Stock-based compensation plans | | 52 | | | 67 | | | 22,937 | | | 319 | | | — | | | — | | | 23,323 | |
Net income | | — | | | — | | | — | | | — | | | — | | | 1,207 | | | 1,207 | |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (6,682) | | | — | | | (6,682) | |
September 30, 2023 | | 53,904 | | | $ | 82,491 | | | $ | 2,180,661 | | | $ | (56) | | | $ | (54,801) | | | $ | (982,823) | | | $ | 1,225,472 | |
The tables below present the change in each component of AOCI, net of tax, and the reclassifications out of AOCI into net income for the nine months ended September 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | |
| | | | Foreign Currency Translation Adjustments (1) | | |
December 31, 2023 | | | | $ | (27,883) | | | |
Other comprehensive income before reclassifications, before tax | | | | 1,180 | | | |
Tax expense | | | | — | | | |
Other comprehensive income net of reclassifications, before tax | | | | 1,180 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net current-period other comprehensive income, net of tax | | | | 1,180 | | | |
September 30, 2024 | | | | $ | ( |