Unaudited Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2021

Unaudited Condensed Consolidated Financial Statements

Note 1. Unaudited Condensed Consolidated Financial Statements

Basis of Presentation

The accompanying condensed consolidated financial statements of LivaNova as of, and for the three and six months ended June 30, 2021 and 2020, 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, 2020 has been derived from audited financial statements contained in our 2020 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 six months ended June 30, 2021, and are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The financial information presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto accompanying our 2020 Form 10-K.

Recent Developments Regarding COVID-19

Due to the COVID-19 pandemic (“COVID-19”), we have experienced and may continue to experience significant and unpredictable reductions in the demand for our products as healthcare customers have diverted medical resources and priorities towards the treatment of COVID-19. In addition, public health bodies have delayed elective procedures during the COVID-19 pandemic, which has negatively impacted the usage of our products, including the number of Neuromodulation procedures. Further, some people are avoiding seeking treatment for non-COVID-19 emergency procedures, which has also negatively impacted the demand for our products.

Procedure volumes in Neuromodulation continue to recover, especially replacement implant volumes. Across our business, certain countries in our Europe and Rest of World regions remain challenged by COVID-19. Despite shifting market dynamics resulting from the pandemic, we continue to gain momentum in Neuromodulation sales growth across all regions.

Reclassifications

We have reclassified certain prior period amounts on the condensed consolidated statements of income (loss) and the condensed consolidated statements of cash flows for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows. The prior period reclassifications on the condensed consolidated statements of income (loss) are summarized and presented below (in thousands):

•Product remediation has been reclassified to cost of sales

•Merger and integration expenses have been reclassified to other operating expenses

•Restructuring expenses have been reclassified to other operating expenses

•Litigation provision, net has been reclassified to other operating expenses and

•Amortization of intangibles has been reclassified to cost of sales or selling, general and administrative based on the nature of the underlying intangible asset.


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	As Previously Reported		Reclassifications		Current Presentation		As Previously Reported		Reclassifications		Current Presentation
Net sales	$	182,206	$	—	$	182,206	$	424,603	$	—	$	424,603
Cost of sales	56,762		8,968		65,730		125,685		15,946		141,631
Product remediation	4,269		(4,269)		—		5,735		(5,735)		—
Gross profit	121,175		(4,699)		116,476		293,183		(10,211)		282,972
Operating expenses:
Selling, general and administrative	98,048		4,695		102,743		218,225		9,450		227,675
Research and development	25,152		—		25,152		61,054		—		61,054
Merger and integration expenses	2,048		(2,048)		—		5,522		(5,522)		—
Restructuring expenses	794		(794)		—		2,374		(2,374)		—
Amortization of intangibles	9,394		(9,394)		—		19,661		(19,661)		—
Litigation provision, net	976		(976)		—		976		(976)		—
Other operating expenses	—		3,818		3,818		—		8,872		8,872
Operating loss from continuing operations	$	(15,237)	$	—	$	(15,237)	$	(14,629)	$	—	$	(14,629)

Significant Accounting Policies

Our significant accounting policies are detailed in “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” and “Note 3. Revenue Recognition” of our 2020 Form 10-K.