UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
washington,
d.c. 20549
|
FORM
8-K
|
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): July 31,
2008
_______________________
CRYOLIFE,
INC.
(Exact
name of registrant as specified in its charter)
_________________________
|
Florida
|
1-13165
|
59-2417093
|
|
(State
or Other Jurisdiction
of
Incorporation)
|
(Commission
File Number)
|
(IRS
Employer
Identification
No.)
|
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):
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
o
|
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 July 31, 2008, CryoLife, Inc.
(“CryoLife” or the “Company”) issued a press release announcing its financial
results for the first quarter ended June 30, 2008. CryoLife hereby incorporates
by reference herein the information set forth in its Press Release dated July
31, 2008, 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 press release includes a
supplemental non-GAAP financial measure, non-GAAP revenues, which have been
adjusted from the comparable GAAP revenue numbers to exclude revenues related to
orthopedic tissue preservation services. The press release also
includes projections of product and tissue revenues for fiscal
2008. Combined cardiac and vascular preservation services revenues
have been adjusted from the comparable segment revenue numbers to exclude
revenues related to orthopedic tissue preservation services. The
additional non-GAAP financial information is not meant to be considered in
isolation or as a substitute for total revenues prepared in accordance with
GAAP.
Non-GAAP revenues have been adjusted to
exclude revenues from orthopedic tissue processing because the Company
discontinued procuring and processing such tissue as of January 1, 2007 and is
no longer distributing those tissues. Because the Company’s revenues
from these tissues will be reduced to zero in the near future, the Company
believes that the non-GAAP revenue numbers presented provide investors with a
more accurate measure of the relative revenue performance of the Company’s
continuing tissue preservation business. Accordingly, CryoLife
believes that this non-GAAP measure, when read in conjunction with the Company’s
GAAP financials, provides useful information to investors by
offering:
|
·
|
the
ability to make more meaningful period-to-period comparisons of the
Company’s on-going operating
results;
|
|
·
|
the
ability to better identify trends in the Company’s underlying business and
perform related trend analyses; and
|
|
·
|
a
better understanding of how management plans and measures the Company’s
underlying business.
|
The Company’s GAAP revenues consist of
product and tissue processing revenues and other revenues. Combined
product and tissues processing revenues are projected due to the Company’s
inability to accurately predict other revenues, which for fiscal 2008 are
expected to be largely dependent on actual expenses incurred in connection with
the BioFoam product.
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.
-2-
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, 2007, 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
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.
|
Exhibit
Number
|
Description
|
|
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99.1*
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Press
release dated July 31, 2008
|
|
|
* This
exhibit is furnished, not
filed.
|
-3-
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.
| CRYOLIFE, INC. | ||||
|
|
||||
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Date: July
30, 2008
|
By:
|
/s/ D.A. Lee | ||
| Name: | D. Ashley Lee | |||
| Title: | Executive Vice President, Chief | |||
| Operating Officer and Chief | ||||
| Financial Officer | ||||
-4-
EXHIBIT 99.1
FOR
IMMEDIATE RELEASE
Media
Contacts:
|
D.
Ashley Lee
|
Katie
Brazel
|
|
Executive
Vice President, Chief Financial Officer and
|
Fleishman
Hillard
|
|
Chief
Operating Officer
|
Phone:
404-739-0150
|
|
Phone:
770-419-3355
|
CryoLife’s
Earnings Per Share Increased 180 Percent to $0.14 in Second Quarter of 2008 from
$0.05 in Second Quarter of 2007
Company
posts record quarterly revenues of $27.2 million
ATLANTA, GA…(July 31, 2008)…CryoLife,
Inc. (NYSE: CRY), a biomaterials, medical device and tissue processing
company, announced today that revenues for the second quarter of 2008 increased
18 percent to $27.2 million compared to $23.0 million in the second quarter of
2007. Excluding orthopaedic tissue processing revenues of $297,000
and $1.2 million in the second quarters of 2008 and 2007, respectively, total
revenues increased 23 percent for the second quarter of 2008.
Net
income in the second quarter of 2008 was $3.9 million, or $0.14 per basic and
fully diluted common share, compared to $1.3 million, or $0.05 per basic and
fully diluted common share in the second quarter of 2007. Net income
in the second quarters of 2008 and 2007 included gains of $610,000 and $490,000,
respectively, related to the adjustment of reserves for product liability
losses.
Revenues
for the first six months of 2008 increased 11 percent to $52.7 million compared
to $47.5 million in the first six months of 2007. Excluding
orthopaedic tissue processing revenues of $624,000 and $3.1 million in the first
six months of 2008 and 2007, respectively, total revenues increased 17 percent
for the first six months of 2008.
Net
income in the first six months of 2008 was $6.7 million, or $0.24 per basic and
fully diluted common share, compared to $2.6 million, or $0.10 per basic and
$0.09 per fully diluted common share in the first six months of 2007. Net
income in the first half of 2008 and 2007 included gains of $530,000 and
$505,000, respectively, related to the adjustment of reserves for product
liability losses.
- more
- -
Page 1of 7
Tissue
processing revenues in the second quarter of 2008 increased 17 percent to $13.7
million compared to $11.7 million in the second quarter of
2007. Tissue processing revenues in the first six months of 2008
increased 10 percent to $27.1 million compared to $24.7 million in the first six
months of 2007. Tissue processing revenues increased primarily due to
increased demand for the Company’s cardiac and vascular processed tissues, the
introduction of the CryoValveâ
SG pulmonary heart valve and, to a lesser extent, price increases, partially
offset by a decline in orthopaedic tissue processing revenues.
Combined
cardiac and vascular tissue processing revenues in the second quarter of 2008
increased 28 percent to $13.4 million compared to $10.5 million in the second
quarter of 2007. Combined cardiac and vascular tissue processing
revenues in the first six months of 2008 increased 23 percent to $26.5 million
compared to $21.6 million in the first six months of 2007.
Revenues
from the distribution of CryoValve SG pulmonary heart valves were $1.4 million
and $1.6 million, respectively, for the three and six months ended June 30,
2008.
Orthopaedic
tissue processing revenues in the second quarter of 2008 decreased 76 percent to
$297,000 compared to $1.2 million in the second quarter of
2007. Orthopaedic tissue processing revenues in the first six months
of 2008 decreased 80 percent to $624,000 compared to $3.1 million in the first
six months of 2007. These revenue declines were anticipated as the
Company discontinued procuring and processing orthopaedic tissue in the first
quarter of 2007 pursuant to the exchange and service agreement signed with a
third party in December of 2006.
BioGlue® Surgical
Adhesive revenues were $13.0 million for the second quarter of 2008 compared to
$10.9 million in the second quarter of 2007, an increase of 19
percent. BioGlue revenues were $24.9 million for the first six months
of 2008 compared to $22.1 million in the first six months of 2007, an increase
of 13 percent.
U.S.
BioGlue revenues were $9.1 million and $7.7 million in the second quarter of
2008 and 2007, respectively. U.S. BioGlue revenues were $17.7 million
and $16.0 million in the first six months of 2008 and 2007,
respectively. International BioGlue revenues were $3.9 million and
$3.2 million in the second quarter of 2008 and 2007, respectively.
International BioGlue revenues were $7.2 million and $6.1 million in the first
six months of 2008 and 2007, respectively.
Other
implantable medical device revenues for the second quarter of 2008 were
$308,000, compared to $226,000 in the second quarter of 2007. Other
implantable medical device revenues for the first six months of 2008 were
$401,000 compared to $458,000 in the first six months of 2007. Other
implantable medical device revenues in the second quarter and first six months
of 2008 included $177,000 for Hemostase MPHâ,
which was added to the CryoLife product portfolio in the second quarter of
2008.
Total
product and tissue processing gross margins were 66 percent in the second
quarter of 2008 compared to 61 percent in the second quarter of
2007. Total product and tissue processing gross margins were 65
percent in the first six months of 2008 compared to 61 percent in the first six
months of 2007.
Tissue
processing gross margins in the second quarter of 2008 were 46 percent compared
to 40 percent in the second quarter of 2007. Tissue processing gross
margins in the first six months of 2008 were 46 percent compared to 41 percent
in the first six months of 2007. Tissue processing gross margins
improved in 2008 compared to 2007 primarily as a result of fee increases and a
favorable tissue mix in 2008.
Page 2of 7
General,
administrative, and marketing expenses in the second quarter of 2008 were $12.4
million compared to $10.8 million in the second quarter of
2007. General, administrative, and marketing expenses in the second
quarters of 2008 and 2007 include benefits of $610,000 and $490,000,
respectively, related to the adjustment of reserves for product liability
losses.
General,
administrative, and marketing expenses in the first six months of 2008 were
$24.4 million compared to $23.2 million in the first six months of
2007. General, administrative, and marketing expenses in the first
half of 2008 and 2007 include benefits of $530,000 and $505,000, respectively,
related to the adjustment of reserves for product liability losses.
The
increase in general, administrative, and marketing expenses for the three and
six months ended June 30, 2008 was primarily due to increases in marketing
expenses. These expenses included personnel costs, corporate
advertising, and promotional materials to support the Company’s expanding tissue
service and product offerings and revenue growth. Additionally, there
were increases in stock compensation expense over the prior year
periods.
Research
and development expenses were $1.3 million and $1.0 million in the second
quarters of 2008 and 2007, respectively. Research and development
expenses were $2.8 million and $2.0 million in the first six months of 2008 and
2007, respectively. Research and development spending in 2008
primarily focused on the Company’s SynerGraftâ
products and tissues, protein hydrogel technologies, and research on cold
storage and preservation of internal organs.
As of
June 30, 2008, the Company had $17.3 million in cash, cash equivalents and
marketable securities, of which $1.8 million was received from the U.S.
Department of Defense as advance funding for the development of BioFoam protein
hydrogel technology for use on the battlefield and $5.0 million was designated
as long-term restricted money market funds due to a financial covenant
requirement under the Company’s credit agreement.
“CryoLife’s
many life-saving services and products have achieved dominant positions in the
field of cardiac reconstruction. The clinical results achieved by
these products and services have become known throughout the surgical community
resulting in increasing demand and use by the cardiovascular surgeons we serve,”
stated Steven G. Anderson, president and chief executive officer.
Financial
Guidance
The
Company’s GAAP revenues are composed of product and tissue processing revenues
plus other revenues. The Company now expects product and tissue
processing revenues for the full year of 2008 to be in the middle to upper end
of its previously announced range of revenue guidance, which is between $102.0
million and $107.0 million. Other revenues for 2008 may reach between
$700,000 and $900,000, primarily related to funding received from the Department
of Defense in connection with the development of BioFoam®. The
actual amount of other revenues is largely dependent upon actual expenses
incurred related to the development of BioFoam.
Page 3of 7
The
Company expects tissue processing revenues to be between $53.0 million and $56.0
million and BioGlue revenues to be between $47.0 million and $49.0 million for
the full year of 2008. Other implantable medical device revenues are
expected to be approximately $2.0 million in 2008, which includes an estimated
$1.0 million in revenues from the distribution of Hemostase MPH.
The
Company expects general, administrative, and marketing expenses of between $49.0
million and $51.0 million, and research and development expenses of between $6.0
million and $8.0 million for the full year of 2008. The research and
development expectations include an estimated range of between $700,000 and
$900,000 to be funded by the Department of Defense in connection with the
development of BioFoam.
Webcast
and Conference Call Information
The
Company will hold a teleconference call and live webcast today at 10:00 a.m.
Eastern Time to discuss the 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 July 31
through August 7 and can be accessed by calling 877-660-6853 (toll free) or
201-612-7415. The account number for the replay is 244 and the
conference number is 290785.
The live
webcast and replay 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 U.S. and Canada. The Company recently received FDA
clearance for the CryoValve® SG
pulmonary human heart valve, processed using CryoLife’s proprietary
SynerGraft®
Technology. 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. CryoLife distributes Hemostase MPHâ,
a hemostatic agent, in much of the U.S. for use in cardiac and vascular surgery
and in the United Kingdom and Germany for cardiac, vascular, and general
surgery, subject to certain exclusions. The Company also distributes
the CryoLife-O'Brien®
Stentless Porcine Aortic Bioprosthesis, which is CE marked for distribution
within the European Community.
Page 4of 7
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 2008
performance. 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 is dependent on revenues from BioGlue, the Company's key growth
strategies identified as a result of our strategic review may not generate the
anticipated benefits, competitive pressures and tissue availability may
adversely affect the Company’s ability to grow revenues, the Company's efforts
to develop and introduce new products outside the U.S. may be unsuccessful, 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, FDA and other approvals for products in
development may not be obtained, and if obtained, may be costly and require
lengthy review periods, products and services under development may not be
commercially feasible, CryoValve SG may not perform as well as expected or
provide all the benefits anticipated, demand for CryoValve SG may not reach
anticipated levels, and accordingly, the Company may choose not to process the
majority of its pulmonary valves with the Company’s SynerGraft technology, the
SynerGraft post-clearance study requested by the FDA may not provide the
expected positive results, the Company may be unable to effectively leverage its
existing sales force to sell Hemostase MPH, that surgeons may not choose to
utilize Hemostase MPH, that Hemostase MPH may not perform as expected or provide
all expected benefits, that other distributors of the Hemostase MPH product may
impede our ability to sell to new or existing customers, we are reliant on one
supplier for significant components of BioGlue, our products and tissues we
process and preserve have allegedly caused and may in the future cause injury to
patients, pending or future litigation cannot be settled on terms acceptable to
the Company, 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 Company may be unable to obtain sufficient financing to
fully pursue its strategic plan and future healthcare policies, healthcare
reimbursement methods, and healthcare reimbursement policies may affect the
availability, amount, and timing of the Company’s revenues. These
risks and uncertainties include the risk factors detailed in CryoLife's
Securities and Exchange Commission filings, including CryoLife's Form 10-K
filing for the year ended December 31, 2007, its most recent Form 10-Q, and the
Company's other SEC filings. The
Company does not undertake to update its forward-looking
statements.
Page 5of 7
CRYOLIFE,
INC. AND SUBSIDIARIES
Financial
Highlights
(In
thousands, except per share data)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June 30,
|
June 30,
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|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
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(Unaudited)
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(Unaudited)
|
|||||||||||||||
|
Revenues:
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||||||||||||||||
|
Preservation
services
|
$ | 13,725 | $ | 11,711 | $ | 27,149 | $ | 24,672 | ||||||||
|
Products
|
13,280 | 11,156 | 25,260 | 22,551 | ||||||||||||
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Other
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150 | 144 | 314 | 312 | ||||||||||||
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Total
revenues
|
27,155 | 23,011 | 52,723 | 47,535 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Preservation
services (including write-downs of
|
||||||||||||||||
|
$307
for the three months and $453 for the
|
||||||||||||||||
|
six
months ended June 30, 2007)
|
7,449 | 6,976 | 14,767 | 14,608 | ||||||||||||
|
Products
|
1,840 | 1,881 | 3,832 | 3,829 | ||||||||||||
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General,
administrative, and marketing
|
12,358 | 10,842 | 24,425 | 23,177 | ||||||||||||
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Research
and development
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1,307 | 978 | 2,752 | 2,036 | ||||||||||||
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Interest
expense
|
69 | 187 | 139 | 340 | ||||||||||||
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Interest
income
|
(71 | ) | (105 | ) | (193 | ) | (202 | ) | ||||||||
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Change
in valuation of derivative
|
-- | 866 | -- | 821 | ||||||||||||
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Other
expense (income), net
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55 | 13 | (27 | ) | 102 | |||||||||||
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Total
costs and expenses
|
23,007 | 21,638 | 45,695 | 44,711 | ||||||||||||
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Income
before income taxes
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4,148 | 1,373 | 7,028 | 2,824 | ||||||||||||
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Income
tax expense
|
260 | 82 | 375 | 179 | ||||||||||||
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Net
income
|
$ | 3,888 | $ | 1,291 | $ | 6,653 | $ | 2,645 | ||||||||
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Effect
of preferred stock dividends
|
-- | -- | -- | (243 | ) | |||||||||||
|
Net
income applicable to common shares
|
$ | 3,888 | $ | 1,291 | $ | 6,653 | $ | 2,402 | ||||||||
|
Income
per common share:
|
||||||||||||||||
|
Basic
|
$ | 0.14 | $ | 0.05 | $ | 0.24 | $ | 0.10 | ||||||||
|
Diluted
|
$ | 0.14 | $ | 0.05 | $ | 0.24 | $ | 0.09 | ||||||||
|
Weighted
average common shares outstanding:
|
||||||||||||||||
|
Basic
|
27,756 | 25,480 | 27,661 | 25,234 | ||||||||||||
|
Diluted
|
28,381 | 26,333 | 28,211 | 25,969 | ||||||||||||
Page 6of 7
CRYOLIFE,
INC. AND SUBSIDIARIES
Financial
Highlights
(In
thousands)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June 30,
|
June 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
|
Preservation
services:
|
||||||||||||||||
|
Cardiac
tissue
|
$ | 6,348 | $ | 5,048 | $ | 12,586 | $ | 10,021 | ||||||||
|
Vascular
tissue
|
7,080 | 5,428 | 13,939 | 11,567 | ||||||||||||
|
Orthopaedic
tissue
|
297 | 1,235 | 624 | 3,084 | ||||||||||||
|
Total
preservation services
|
13,725 | 11,711 | 27,149 | 24,672 | ||||||||||||
|
Products:
|
||||||||||||||||
|
BioGlue
|
12,972 | 10,930 | 24,859 | 22,093 | ||||||||||||
|
Other
implantable medical devices
|
308 | 226 | 401 | 458 | ||||||||||||
|
Total
products
|
13,280 | 11,156 | 25,260 | 22,551 | ||||||||||||
|
Other
|
150 | 144 | 314 | 312 | ||||||||||||
|
Total
revenues
|
$ | 27,155 | $ | 23,011 | $ | 52,723 | $ | 47,535 | ||||||||
|
Revenues:
|
||||||||||||||||
|
Domestic
revenues
|
$ | 22,833 | $ | 19,410 | $ | 44,833 | $ | 40,812 | ||||||||
|
International
revenues
|
4,322 | 3,601 | 7,890 | 6,723 | ||||||||||||
|
Total
revenues
|
$ | 27,155 | $ | 23,011 | $ | 52,723 | $ | 47,535 | ||||||||
|
June
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
(Unaudited)
|
||||||||
|
Cash
and cash equivalents, marketable securities,
|
$ | 12,282 | $ | 17,447 | ||||
|
at
market, and restricted marketable securities
|
||||||||
|
Trade
receivables, net
|
14,040 | 12,311 | ||||||
|
Other
receivables
|
1,035 | 1,373 | ||||||
|
Deferred
preservation costs, net
|
31,443 | 26,903 | ||||||
|
Inventories
|
6,254 | 5,607 | ||||||
|
Restricted
money market funds, long-term
|
5,000 | -- | ||||||
|
Total
assets
|
98,096 | 92,684 | ||||||
|
Shareholders’
equity
|
71,654 | 62,627 | ||||||
For
additional information about the company, visit CryoLife’s Web
site: www.cryolife.com.
END
Page 7of 7