UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
|
FORM
8-K
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CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): February 13,
2007
_______________________
CRYOLIFE,
INC.
(Exact
name of registrant as specified in its charter)
_________________________
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Florida
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1-13165
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59-2417093
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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1655
Roberts Boulevard, N.W., Kennesaw, Georgia 30144
(Address
of principal executive office) (zip code)
Registrant's
telephone number, including area code: (770) 419-3355
_____________________________________________________________
(Former
name or former address, if changed since last report)
_________________________
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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|
o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Section
2 Financial
Information
Item
2.02 Results
of Operations and Financial Condition.
On
February 20, 2007, CryoLife, Inc. (“CryoLife” or the “Company”) issued a press
release announcing its financial results for the fourth quarter and fiscal
year
ended December 31, 2006. CryoLife hereby incorporates by reference herein the
information set forth in its Press Release dated February 20, 2007, a copy
of
which is attached hereto as Exhibit 99.1. Except as otherwise provided in the
press release, the press release speaks only as of the date of such press
release and it shall not create any implication that the affairs of CryoLife
have continued unchanged since such date.
The
information provided pursuant to this Item 2.02 is to be considered “furnished”
pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or
otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2)
of the Securities Act of 1933, as amended, nor shall it be deemed incorporated
by reference into any of CryoLife’s reports or filings with the Securities and
Exchange Commission (“SEC”), whether made before or after the date hereof,
except as expressly set forth by specific reference in such report or
filing.
Except
for the historical information contained in this report, the statements made
by
CryoLife are forward-looking statements that involve risks and uncertainties.
All such statements are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. CryoLife’s future financial
performance could differ significantly from the expectations of management
and
from results expressed or implied in the press release. Please refer to
the last paragraph of the press release for further discussion about
forward-looking statements. For further information on risk factors, please
refer to “Risk Factors” contained in CryoLife’s Form 10-K for the year ended
December 31, 2005, as filed with the SEC, and any subsequent SEC filings.
CryoLife disclaims any obligation or duty to update or modify these
forward-looking statements.
Section
5 Corporate
Governance and Management
Item
5.02 Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
Approval
of Awards Pursuant to the 2006 Performance-Based Bonus Plan
On
February 13, 2007, the Compensation Committee (the “Committee”) of the Board of
Directors of CryoLife approved an aggregate bonus award of approximately
$880,000 and 68,455 shares of Company common stock for the Company’s corporate
officers, including its executive officers, pursuant to the Company’s 2006
Performance-Based Bonus Plan. The awards for the Company’s executive officers
were as follows:
| · |
Steven
G. Anderson, Chairman, President and Chief Executive Officer: $59,774
and
4,650 shares of common stock for the Company’s revenue performance from
products and services, $185,992 and 14,470 shares of common stock
for the
Company’s net income performance after adjustment for stock compensation
expense, $54,006 and 4,200 shares of common stock based on Mr. Anderson’s
personal performance rating, and an additional $54,006 and 4,200
shares of
common stock for the Company’s net income performance beyond that
contemplated in the primary portion of the 2006 Performance-Based
Bonus
Plan.
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| · |
D.
Ashley Lee, Executive Vice President, Chief Operating Officer, and
Chief
Financial Officer: $33,872 and 2,635 shares of common stock for the
Company’s revenue performance from products and services, $105,402 and
8,199 shares of common stock for the Company’s net income performance,
$30,603 and 2,380 shares of common stock based on Mr. Lee’s personal
performance rating, and an additional $30,603 and 2,380 shares of
common
stock for the Company’s net income performance beyond that contemplated in
the primary portion of the 2006 Performance-Based Bonus
Plan.
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| · |
Albert
E. Heacox, Ph.D., Senior Vice President, Research and Development:
$15,434
and 1,202 shares of common stock for the Company’s revenue performance
from products and services, $48,052 and 3,737 shares of common stock
for
the Company’s net income performance, $12,560 and 976 shares of common
stock based on Dr. Heacox’s personal performance rating, and an additional
$23,915 and 1,860 shares of common stock for the Company’s net income
performance beyond that contemplated in the primary portion of the
2006
Performance-Based Bonus Plan.
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| · |
Gerald
B. Seery, Senior Vice President, Sales and Marketing: $28,421 and
2,210
shares of common stock for the Company’s net income performance after
adjustment for stock compensation expense, and an additional $22,503
and
1,750 shares of common stock for the Company’s net income performance
beyond that contemplated in the primary portion of the 2006
Performance-Based Bonus Plan.
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| · |
David
M. Fronk, Vice President, Regulatory Affairs and Quality Assurance:
$11,955 and 930 shares of common stock for the Company’s revenue
performance from products and services, $37,199 and 2,894 shares
of common
stock for the Company’s net income performance after adjustment for stock
compensation expense, $10,261 and 798 shares of common stock based
on Mr.
Fronk’s personal performance rating, and an additional $21,602 and 1,680
shares of common stock for the Company’s net income performance beyond
that contemplated in the primary portion of the 2006 Performance-Based
Bonus Plan.
|
All
common shares were issued on February 15, 2007 and are unrestricted shares
of
CryoLife common stock, valued at $8.57 per share, which was the closing price
of
the common stock on the New York Stock Exchange (“NYSE”) on February 13,
2007.
Adoption
of the CryoLife, Inc. 2007 Executive Incentive Plan
On
February 13, 2007, the Compensation Committee recommended to the Board for
approval the CryoLife, Inc. 2007 Executive Incentive Plan (the “Plan”), which
was subsequently adopted by the Board of Directors on February 14, 2007. The
Plan became effective on February 14, 2007.
The
purpose of the Plan is to reward key management personnel for outstanding
performance in the service of the Company. The material terms of the Plan are
as
follows:
3
| · |
the
total number of shares of Company common stock that may be awarded
under
the Plan shall not exceed 200,000 shares, subject to adjustment pursuant
a
recapitalization event, and no participant may receive a bonus in
excess
of $1.5 million in any fiscal year;
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| · |
all
shares issued under the Plan will be issued pursuant to the Company’s 2004
Employee Stock Incentive Plan;
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| · |
the
Committee is charged with the Plan’s implementation, administration, and
interpretation;
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| · |
the
participants in the Plan for each fiscal year will be designated
by the
Committee from Company employees. Once designated as a Plan participant,
the Committee may remove a participant with or without cause at any
time
prior to the payment of the bonus, and the participant will not be
entitled to any bonus following his or her removal as a
participant;
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| · |
the
bonus that a participant may earn will be based on one or more of
the
following:
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| o |
Company
revenues, adjusted in the Committee’s
discretion;
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| o |
Company
net earnings, adjusted in the Committee’s
discretion;
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| o |
the
participant’s personal performance;
and
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| o |
any
other performance criteria designated by the
Committee;
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| · |
the
Company will determine and pay the amount of any bonus earned by
any
participant within 75 days following fiscal
year-end;
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| · |
unless
otherwise determined by the Committee, the bonus will be payable
70% in
cash and 30% in unrestricted shares of common stock, valued at the
closing
price of the common stock on the New York Stock Exchange on the date
the
bonus is approved by the Committee;
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| · |
to
the extent provided by the Committee, participants will also have
the
opportunity to receive an additional bonus above and beyond the bonus
describe above should the Company achieve additional adjusted net
income
goals for a fiscal year;
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| · |
within
75 days following a change of control, as defined in the Plan,
participants will be paid a pro-rated cash bonus pursuant to a formula
set
forth in the Plan based on Company performance during the fiscal
year
prior to the change of control;
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| · |
at
the discretion of the Committee, awards under the Plan are subject
to
repayment in the event of a significant restatement of financial
results
with respect to any portion of the bonus that would not have been
paid
based on the restated financial
results;
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| · |
the
Committee may, in its discretion, reduce the amount of any award
or bonus
payable pursuant to the Plan or determine not to pay any award or
bonus at
any time prior to payment; and
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4
| · |
the
Plan may be amended or terminated by the Board of Directors at any
time;
however, the Plan will terminate in accordance with its terms on
December
31, 2011.
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Grants
Pursuant to the CryoLife, Inc. 2007 Executive Incentive Plan
On
February 13, 2007, the Compensation Committee approved, contingent on Board
approval of the Plan, grants under the Plan to specified participants, including
the executive officers. The range of potential bonuses for the participants
varies. Subject to meeting performance thresholds, CryoLife executive officers
may earn bonuses as follows:
| · |
up
to 39.7% of base salary, with a target of 24%, for Messrs. Anderson
and
Lee, up to 23.1% of base salary, with a target of 14% for Dr. Heacox,
up
to 17.4% of base salary, with a target of 10.5% for Mr. Seery and
up to
19.8% of base salary, with a target of 12%, for Mr. Fronk, based
on the
Company’s adjusted net income for 2007. Adjusted net income excludes
interest expense, interest income, stock compensation, other than
stock
compensation related to the 2007 Executive Incentive Plan, changes
in the
value of the derivative related to the Company’s preferred stock, other
income and expense, and amortization associated with intangibles
recorded
in connection with the previously announced exchange and service
agreement
with Regeneration Technologies, Inc. and related parties, if any.
A
minimum threshold is required to be met before any bonus may be earned
under this measure;
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| · |
up
to 36% of base salary, with a target of 24%, for Messrs. Anderson
and Lee,
up to 21% of base salary, with a target of 14%, for Dr. Heacox, up
to
26.3% of base salary, with a target of 17.5%, for Mr. Seery and up
to 18%
of base salary, with a target of 12%, for Mr. Fronk, based on the
Company’s annual revenues from the sale of products and services. Annual
revenues for bonus purposes consists solely of revenues from cardiac
and
vascular allograft tissue processing, BioGlue and CardioWrap. A minimum
threshold is required to be met before any bonus may be earned under
this
measure; and
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| · |
up
to 15% of base salary, with a target of 12%, for Messrs. Anderson
and Lee,
up to 8.8% of base salary, with a target of 7%, for Dr. Heacox and
Mr.
Seery and up to 7.5% of base salary, with a target of 6%, for Mr.
Fronk,
based on personal performance. In considering personal performance,
the
Committee will consider the recommendations of management as well
as its
own subjective determination.
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Subject
to meeting minimum performance thresholds, the executive officers may earn
bonuses as follows:
| · |
Mr.
Anderson, from 36% to 91% of base salary, with the target level set
at
60%;
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Mr.
Lee, from 36% to 91% of base salary, with the target level set at
60%;
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Dr.
Heacox, from 21% to 53% of base salary, with the target level set
at
35%.
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Mr.
Seery, from 21% to 52% of base salary, with the target level set at 35%;
and
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Mr.
Fronk, from 18% to 45% of base salary, with the target level set
at
30%.
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5
Pursuant
to the terms of the Plan, unless otherwise determined by the Committee, the
bonus will be payable 70% in cash and 30% in unrestricted shares of common
stock, valued at the closing price of the common stock on the New York Stock
Exchange on the date the bonus is approved by the Committee.
Additional
performance bonuses of up to 20% of the participants’ base salaries may be
earned if specified adjusted net earnings targets, calculated as described
above, are reached which reflect performance improvements beyond that
contemplated in the primary bonus plan.
Discontinuance
of Mr. Seery’s Quarterly Bonus
In
2006,
Mr. Seery received a quarterly bonus plus consisting of .5% of the net increase
in fiscal 2006 Company quarterly revenues over fiscal 2005 Company quarterly
revenues. Because Mr. Seery received this revenue-based bonus, Mr. Seery did
not
participate in the revenue-based or personal performance components of the
2006
Performance-Based Bonus Plan. However, Mr. Seery’s quarterly bonus was
terminated by the Committee on February 13, 2007, effective January 1, 2007,
and, as a result, Mr. Seery will participate fully in the 2007 Executive
Incentive Plan.
Option
and Restricted Stock Grants to Certain Executive Officers
On
February 14, 2007, the Company’s Compensation Committee granted stock options
and restricted stock under the Company’s 1998 Long-Term Incentive Plan
and 2004
Employee Stock Incentive Plan to certain executive officers, as
follows:
| · |
Steven
G. Anderson: stock options to purchase 63,750 shares of CryoLife
common
stock and 10,625 shares of restricted CryoLife common
stock;
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| · |
D.
Ashley Lee: stock options to purchase 37,500 shares of CryoLife common
stock and 6,250 shares of restricted CryoLife common
stock;
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| · |
Albert
E. Heacox, Ph.D.: stock options to purchase 22,500 shares of CryoLife
common stock and 3,750 shares of restricted CryoLife common
stock;
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| · |
Gerald
B. Seery: stock options to purchase 22,500 shares of CryoLife common
stock
and 3,750 shares of restricted CryoLife common stock;
and
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| · |
David
M. Fronk: stock options to purchase 15,000 shares of CryoLife common
stock
and 2,500 shares of restricted CryoLife common
stock.
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The
options and restricted stock are governed by the terms of the plan under which
they are issued and separate option and restricted stock
agreements.
The
option agreements provide in part that the options will have an exercise price
equal to the mean of the high and low reported sales prices for the Company’s
common stock on the New York Stock Exchange on February 23, 2007 and will become
exercisable, subject to the employee remaining continuously employed by
CryoLife, as follows: one-third of the shares will become exercisable on the
first anniversary of February 23, 2007, and an additional one-third will become
exercisable on each subsequent anniversary thereof until all shares (100%)
of
the option are exercisable (on the third anniversary, assuming continuous
employment). The option has a term of seven years
but
the option may terminate earlier as stated in the option agreement.
6
The
restricted stock will vest on February 14, 2010 if the grantee remains in the
continuous employ of the Company. Any unvested portion of the grant will be
forfeited upon the grantee’s ceasing to serve as an employee of the Company for
any reason.
Messrs.
Anderson, Lee, Seery, and Fronk and Dr. Heacox have no material relationships
with the Company and its affiliates other than their positions as officers
and
Mr. Anderson’s positions as a director and Chairman of the Board.
Section
9 Financial
Statements and Exhibits.
Item
9.01(c) Exhibits.
(a)
Financial Statements.
Not
applicable.
(b)
Pro
Forma Financial Information.
Not
applicable.
(c)
Shell
Company Transactions.
Not
applicable.
(d)
Exhibits.
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Exhibit
Number
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Description
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99.1*
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Press
release dated February 20, 2007
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*
This
exhibit is furnished, not filed.
7
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, CryoLife, Inc.
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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CRYOLIFE,
INC.
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Date:
February 19, 2007
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By:
/s/
D. Ashley Lee
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Name:
D. Ashley Lee
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Title: Executive
Vice President, Chief
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|
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Operating
Officer and Chief
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Financial
Officer
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8
EXHIBIT
99.1
FOR
IMMEDIATE RELEASE
Media
Contacts:
|
D.
Ashley Lee
|
Katie
Brazel
|
|
Executive
Vice President, Chief Financial Officer and
|
Fleishman
Hillard
|
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Chief
Operating Officer
|
Phone:
404-739-0150
|
|
Phone:
770-419-3355
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CryoLife
Returns to Profitability in 2006
Revenues
increase 17 percent in 2006 compared to 2005;
Recent
transactions provide platform for future growth
ATLANTA,
GA… (February 20, 2007)… CryoLife, Inc. (NYSE: CRY),
a
biomaterials, medical device and tissue processing company, announced today
that
revenues for the fourth quarter of 2006 increased 17 percent to $21.1 million
compared to $18.0 million in the fourth quarter of 2005. Net loss in the fourth
quarter of 2006 was ($50,000), and ($0.01) per basic and fully diluted common
share, compared to a net loss of ($681,000), and ($0.04) per basic and fully
diluted common share, in the fourth quarter of 2005.
The
fourth quarter of 2006 included a non-cash charge of $2.8 million and a net
gain
of $2.6 million, (comprised of a non-cash gain of $2.9 million offset by
approximately $300,000 in transaction costs), related to the Company’s exit from
orthopedic tissue processing, a $751,000 charge for stock-based compensation,
and benefits related to the adjustment of reserves for product liability and
other legal losses of $333,000. The fourth quarter of 2005 included benefits
related to the adjustment of reserves for product liability and other legal
losses of $683,000, a $118,000 charge for stock-based compensation and a
non-cash gain for the change in value of the derivative related to the Company’s
six percent convertible preferred stock of $512,000.
Revenues
for the full year of 2006 increased 17 percent to $81.3 million compared to
$69.3 million for the full year of 2005. Net income in the full year of 2006
was
$365,000, with a net loss of ($0.02) per basic and fully diluted common share,
compared to a net loss of ($19.5) million, and ($0.85) per basic and fully
diluted common share, in the full year of 2005. The net loss of ($0.02) per
share in 2006 results primarily from dividends related to the Company’s
convertible preferred stock.
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The
full
year of 2006 included a non-cash charge of $2.8 million and a net gain of $2.6
million, (comprised of a non-cash gain of $2.9 million offset by approximately
$300,000 in transaction costs), related to the Company’s exit from orthopedic
tissue processing, a net $2.1 million gain related to the settlement
of insurance coverage disputes, a $1.6 million charge for stock-based
compensation, a $784,000 gain related to the adjustment of reserves for product
liability losses, and a $448,000 charge related to post-employment benefits.
The
full year of 2005 included an $11.6 million charge for the settlement of the
shareholder class action lawsuit, an $851,000 charge related to post-employment
benefits, a $285,000 charge for stock-based compensation and a $961,000 benefit
related to the adjustment of reserves for product liability and other legal
losses.
Steven
G.
Anderson, president and chief executive officer of CryoLife, Inc., stated,
“Our
return to profitability in 2006 reflects the ongoing recovery of the Company.
The recent announcements concerning agreements with Regeneration Technologies,
the Cleveland Clinic and MAST BioSurgery reflect the continued implementation
of
our strategic initiatives outlined during late 2006.”
BioGlue®
revenues
were $10.5 million for the fourth quarter of 2006 compared to $9.6 million
in
the fourth quarter of 2005, an increase of nine percent. U. S. BioGlue revenues
were $7.7 million and $7.2 million in the fourth quarter of 2006 and 2005,
respectively. International BioGlue revenues were $2.8 million and $2.4 million
in the fourth quarter of 2006 and 2005, respectively.
BioGlue
revenues were $40.0 million for the full year of 2006 compared to $38.0 million
in the full year of 2005, an increase of five percent. U.S. BioGlue revenues
were $29.8 million and $28.7 million in the full year of 2006 and 2005,
respectively. International BioGlue revenues were $10.2 million and $9.3 million
in the full year of 2006 and 2005, respectively.
Tissue
processing revenues in the fourth quarter of 2006 increased 27 percent to $10.2
million compared to $8.1 million in the fourth quarter of 2005. Tissue
processing revenues for the full year of 2006 increased 32 percent to $40.1
million compared to $30.3 million in the full year of 2005. In addition to
increases in tissue prices, the growth in tissue processing revenues was
primarily due to an increase in unit shipments resulting from an increase in
tissue procurement and an improvement in processing yields.
Total
product and tissue processing gross margins were 47 percent in the fourth
quarter of 2006 compared to 54 percent in the fourth quarter of 2005. Tissue
processing gross margins in the fourth quarter of 2006 were 10 percent compared
to 21 percent in the fourth quarter of 2005. Excluding a non-cash charge of
$2.8
million related to the Company’s exit from orthopedic tissue processing, total
product and tissue processing gross margins were 60 percent and tissue
processing gross margins were 37 percent in the fourth quarter of 2006. See
attached schedule for a reconciliation of these numbers.
Total
product and tissue processing gross margins were 54 percent in the full year
of
2006 compared to 53 percent in the full year of 2005. Tissue processing gross
margins in the full year of 2006 were 25 percent compared to 20 percent in
the
first year of 2005. Excluding a non-cash charge of $2.8 million related to
the
Company’s exit from orthopedic activities, total product and tissue processing
gross margins were 57 percent and tissue processing gross margins were 32
percent for the full year of 2006. See attached schedule for a reconciliation
of
these numbers. Tissue processing gross margins improved in 2006 compared to
2005, primarily as a result of price increases and improved tissue processing
yields, as well as an increase in the number of tissues processed.
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General,
administrative, and marketing expenses in the fourth quarter of 2006 were $11.4
million compared to $10.5 million in the fourth quarter of 2005. General,
administrative, and marketing expenses in the fourth quarter of 2006 included
a
$751,000 charge for stock-based compensation and a $333,000 gain related to
the
adjustment of reserves for product liability and other legal losses. General,
administrative, and marketing expenses in the fourth quarter of 2005 included
a
$683,000 gain related to the adjustment of reserves for product liability and
other legal losses and a $118,000 charge for stock-based
compensation.
General,
administrative, and marketing expenses in the full year of 2006 were $41.5
million compared to $53.2 million in the full year of 2005. General,
administrative, and marketing expenses for the full year of 2006 included a
net
$2.1 million gain from the settlement of insurance coverage disputes, a
$1.6 million charge for stock based compensation, a $784,000 gain related to
the
adjustment of reserves for product liability losses, and a $448,000 charge
related to post employment benefits. General, administrative, and marketing
for
the full year of 2005 included an $11.6 million charge for the settlement of
the
shareholder class action lawsuit, an $851,000 charge related to post-employment
benefits, a $285,000 charge for stock-based compensation and a $961,000 benefit
related to the adjustment of reserves for product liability and other legal
losses.
R&D
expenses were $975,000 and $980,000 in the fourth quarters of 2006 and 2005,
respectively. R&D expenses were $3.5 million and $3.7 million in the full
year of 2006 and 2005, respectively.
As
of
February 16, 2007, the Company had $9.3 million in cash, cash equivalents,
marketable securities (at market), and restricted securities.
2007
Guidance
The
Company expects annual product and tissue processing revenues for the full
year
of 2007 to be between $89.0 million and $92.0 million, exceeding the company’s
previous record of $87.7 million recorded in 2002. The Company expects tissue
processing revenues between $45.0 million and $47.0 million, and BioGlue
revenues between $43.0 million and $44.0 million for the full year of
2007.
The
Company expects continuing improvements in its gross margins for the full year
of 2007. The Company believes that with more of its tissue processing revenues
being generated from cardiac and vascular tissue shipments versus orthopedic
tissue shipments, gross margins should improve.
The
Company expects general, administrative and marketing expenses of between $45.0
million and $48.0 million, and research and development expenses of between
$4.0
million and $5.0 million, for the full year of 2007.
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Webcast
and Conference Call Information
The
Company will hold a teleconference call and live webcast at 10:00 a.m. Eastern
Time, February 20, 2007, to discuss fourth quarter and full year 2006 financial
results, followed by a question and answer session hosted by Mr.
Anderson.
To
listen
to the live teleconference, please dial 201-689-8261 a few minutes prior to
10:00 a.m. A replay of the teleconference will be available February 20 - 28,
2007 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415.
The account number for the replay is 244 and the conference number is
230323.
The
live
webcast and replay, as well as a copy of this press release, can be accessed
by
going to the Investor Relations section of the CryoLife web site at www.cryolife.com
and
selecting the heading Webcasts & Presentations.
About
CryoLife, Inc.
Founded
in 1984, CryoLife, Inc. is a leader in the processing and distribution of
implantable living human tissues for use in cardiac and vascular surgeries
throughout the United States and Canada. The Company's BioGlue®
Surgical
Adhesive is FDA approved as an adjunct to sutures and staples for use in adult
patients in open surgical repair of large vessels. BioGlue is also CE marked
in
the European Community and approved in Canada and Australia for use in soft
tissue repair. The Company also distributes the CryoLife-O'Brien®
stentless porcine heart valve and the SG Model 100 vascular graft, which are
CE
marked for distribution within the European Community.
Statements
made in this press release that look forward in time or that express
management's beliefs, expectations or hopes are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements include those regarding anticipated revenues, expenses and
gross margin improvements for 2007 and future growth and financial improvement.
These future events may not occur as and when expected, if at all, and, together
with the Company's business, are subject to various risks and uncertainties.
These risks and uncertainties include that the Company’s recently announced
strategic directives may not generate anticipated revenue and earnings growth,
the RTI exchange and service agreement may not result in some or all of the
positive benefits anticipated, that sources of cardiovascular and vascular
tissue procurement for RTI may choose not to make that tissue available to
the
Company or may not be able to meet the Company's tissue processing standards,
or
the Company may otherwise be unable to replace the orthopedic revenues that
it
expects to decrease as a result of the RTI agreement with cardiovascular or
vascular revenues, that expected cost savings and synergies from the RTI
agreement may not occur when and as anticipated, the Company's efforts to
continue to increase revenue may not be effective, since their effectiveness
is
subject to such factors as competitive pressures and tissue availability, that
the Company's efforts to develop and introduce new products outside the U.S.
may
be unsuccessful, that the Company's efforts to improve procurement and tissue
processing yields may not continue to prove effective, the possibility that
the
FDA could impose additional restrictions on the Company's operations, require
a
recall, or prevent the Company from processing and distributing tissues or
manufacturing and distributing other products, that products and services under
development, including BioDisc, may not be commercially feasible, the Company’s
SynerGraft products may not receive FDA approval when anticipated or at all,
that the Company may not have sufficient borrowing or other capital availability
to fund its business, that pending litigation cannot be settled on terms
acceptable to the Company, that the Company may not have sufficient resources
to
pay punitive damages (which are not covered by insurance) or other liabilities
in excess of available insurance, the possibility of decreases in the Company's
working capital if cash flow does not improve, that to the extent the Company
does not have sufficient resources to pay the claims against it, it may be
forced to cease operations or seek protection under applicable bankruptcy laws,
changes in laws and regulations applicable to CryoLife, and other risk factors
detailed in CryoLife's Securities and Exchange Commission filings, including
CryoLife's Form 10-K filing for the year ended December 31, 2005, its most
recent Form 10-Q, and the Company's other SEC filings.
The
Company does not undertake to update its forward-looking
statements.
--
more --
CRYOLIFE,
INC.
Financial
Highlights
(In
thousands, except share data)
|
Three
Months Ended
|
Twelve
Months Ended
|
||||||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
|
Revenues:
|
|||||||||||||
|
Products
|
$
|
10,729
|
$
|
9,830
|
$
|
41,037
|
$
|
38,932
|
|||||
|
Human
tissue preservation services
|
10,239
|
8,088
|
40,078
|
30,307
|
|||||||||
|
Research
grants
|
122
|
43
|
196
|
43
|
|||||||||
|
Total
revenues
|
21,090
|
17,961
|
81,311
|
69,282
|
|||||||||
|
Costs
and expenses:
|
|||||||||||||
|
Products
|
1,882
|
1,930
|
7,463
|
8,065
|
|||||||||
|
Human
tissue preservation services
|
9,207
|
6,373
|
29,958
|
24,357
|
|||||||||
|
General,
administrative, and marketing
|
11,439
|
10,499
|
41,545
|
53,225
|
|||||||||
|
Gain
on exit activities
|
(2,620
|
)
|
--
|
(2,620
|
)
|
--
|
|||||||
|
Research
and development
|
975
|
980
|
3,547
|
3,724
|
|||||||||
|
Interest
expense
|
153
|
126
|
657
|
346
|
|||||||||
|
Interest
income
|
(105
|
)
|
(123
|
)
|
(409
|
)
|
(531
|
)
|
|||||
|
Change
in valuation of derivative
|
10
|
(512
|
)
|
121
|
(140
|
)
|
|||||||
|
Other
expense, net
|
51
|
(13
|
)
|
399
|
199
|
||||||||
|
Total
costs and expenses
|
20,992
|
19,260
|
80,661
|
89,245
|
|||||||||
|
Earnings
(loss) before income taxes
|
98
|
(1,299
|
)
|
650
|
(19,963
|
)
|
|||||||
|
Income
tax expense (benefit)
|
148
|
(618
|
)
|
285
|
(428
|
)
|
|||||||
|
Net
(loss) income
|
$
|
(50
|
)
|
$
|
(681
|
)
|
$
|
365
|
$
|
(19,535
|
)
|
||
|
Effect
of preferred stock
|
(243
|
)
|
(244
|
)
|
(973
|
)
|
(777
|
)
|
|||||
|
Net
loss applicable to common shares
|
$
|
(293
|
)
|
$
|
(925
|
)
|
$
|
(608
|
)
|
$
|
(20,312
|
)
|
|
|
Loss
per common share:
|
|||||||||||||
|
Basic
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.85
|
)
|
|
|
Diluted
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.85
|
)
|
|
|
Weighted
average common shares outstanding:
|
|||||||||||||
|
Basic
|
24,904
|
24,314
|
24,829
|
23,959
|
|||||||||
|
Diluted
|
24,904
|
26,755
|
24,829
|
23,959
|
|||||||||
|
Revenues
from:
|
|||||||||||||
|
BioGlue
|
$
|
10,491
|
$
|
9,645
|
$
|
40,025
|
$
|
37,985
|
|||||
|
Bioprosthetic
devices
|
238
|
185
|
1,012
|
947
|
|||||||||
|
Total
products
|
10,729
|
9,830
|
41,037
|
38,932
|
|||||||||
|
Cardiovascular
|
4,438
|
3,355
|
15,988
|
13,762
|
|||||||||
|
Vascular
|
3,890
|
3,172
|
16,956
|
11,453
|
|||||||||
|
Orthopaedic
|
1,911
|
1,561
|
7,134
|
5,092
|
|||||||||
|
Total
preservation services
|
10,239
|
8,088
|
40,078
|
30,307
|
|||||||||
|
Other
|
122
|
43
|
196
|
43
|
|||||||||
|
Total
revenues
|
$
|
21,090
|
$
|
17,961
|
$
|
81,311
|
$
|
69,282
|
|||||
|
Domestic
revenues
|
$
|
17,970
|
$
|
15,275
|
$
|
69,467
|
$
|
58,869
|
|||||
|
International
revenues
|
3,120
|
2,686
|
11,844
|
10,413
|
|||||||||
|
Total
revenues
|
$
|
21,090
|
$
|
17,961
|
$
|
81,311
|
$
|
69,282
|
|||||
--
more --
CRYOLIFE, INC.
Financial
Highlights
(In
thousands)
|
December
31,
|
December
31,
|
||||||
|
2006
|
2005
|
||||||
|
(Unaudited)
|
(Audited)
|
||||||
|
Cash
and cash equivalents, marketable securities,
|
$
|
8,669
|
$
|
12,159
|
|||
|
at market, and restricted securities
|
|||||||
|
Trade
receivables, net
|
12,553
|
10,153
|
|||||
|
Other
receivables
|
1,403
|
1,934
|
|||||
|
Deferred
preservation costs, net
|
19,278
|
13,959
|
|||||
|
Inventories
|
5,153
|
4,609
|
|||||
|
Total
assets
|
79,865
|
76,809
|
|||||
|
Shareholders’
equity
|
52,088
|
50,621
|
|||||
--
more --
CRYOLIFE,
INC.
Unaudited
Reconciliation of Adjusted Gross Margin
(In
thousands, except percent data)
|
Three
Months Ended
|
Twelve
Months Ended
|
||||||||||||
|
December
31, 2006
|
December
31, 2006
|
||||||||||||
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||
|
in
Dollars
|
of
Revenue
|
in
Dollars
|
of
Revenue
|
||||||||||
|
Total
product and human tissue preservation services:
|
|||||||||||||
|
Revenue
|
$
|
20,968
|
$
|
81,115
|
|||||||||
|
Cost
|
(11,089
|
)
|
(37,421
|
)
|
|||||||||
|
Gross
margin
|
$
|
9,879
|
47%
|
|
$
|
43,694
|
54%
|
|
|||||
|
Adjustments
to gross margin:
|
|||||||||||||
|
Loss
on exit activities
|
2,779
|
13%
|
|
2,779
|
3%
|
|
|||||||
|
Adjusted
gross margin
|
$
|
12,658
|
60%
|
|
$
|
46,473
|
57%
|
|
|||||
|
Human
tissue preservation services:
|
|||||||||||||
|
Revenue
|
$
|
10,239
|
$
|
40,078
|
|||||||||
|
Cost
|
(9,207
|
)
|
(29,958
|
)
|
|||||||||
|
Gross
margin
|
$
|
1,032
|
10%
|
|
$
|
10,120
|
25%
|
|
|||||
|
Adjustments
to gross margin:
|
|||||||||||||
|
Loss
on exit activities
|
2,779
|
27%
|
|
2,779
|
7%
|
|
|||||||
|
Adjusted
gross margin
|
$
|
3,811
|
37%
|
|
$
|
12,899
|
32%
|
|
|||||
For
additional information about the company, visit CryoLife’s Web
site:
http://www.cryolife.com
END