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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

o 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: 1-13165   

ARTIVION, INC.

(Exact name of registrant as specified in its charter)

Delaware

59-2417093

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1655 Roberts Boulevard, NW, Kennesaw, Georgia

30144

(Address of principal executive offices)

(Zip Code)

(770) 419-3355  

(Registrant’s telephone number, including area code)  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

AORT

New York Stock Exchange

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 x     No o 

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 x     No o 

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

x     

Accelerated Filer     

o     

     

Non-accelerated Filer     

o     

Smaller Reporting Company     

o     

Emerging Growth Company     

o     

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 Exchange Act). Yes o    No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class

Outstanding at April 29, 2022

Common Stock, $0.01 par value

40,201,565


TABLE OF CONTENTS

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

3

Condensed Consolidated Statements of Operations and Comprehensive Loss

3

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Cash Flows

5

Condensed Consolidated Statements of Shareholders’ Equity

6

Notes to Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

32

Item 4. Controls and Procedures.

33

Part II - OTHER INFORMATION

34

Item 1. Legal Proceedings.

34

Item 1A. Risk Factors.

34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

49

Item 3. Defaults Upon Senior Securities.

49

Item 4. Mine Safety Disclosures.

49

Item 5. Other Information.

49

Item 6. Exhibits.

50

Signatures

51

 

2


Part I – FINANCIAL INFORMATION  

Item 1. Financial Statements.  

Artivion, Inc. and Subsidiaries 

Condensed Consolidated Statements of Operations and Comprehensive Loss

In Thousands, Except Per Share Data

(Unaudited)

Three Months Ended

March 31,

2022

2021

Revenues:

Products

$

57,542

$

53,345

Preservation services

19,671

17,742

Total revenues

77,213

71,087

Cost of products and preservation services:

Products

17,408

14,911

Preservation services

9,086

8,338

Total cost of products and preservation services

26,494

23,249

Gross margin

50,719

47,838

Operating expenses:

General, administrative, and marketing

38,955

38,638

Research and development

10,128

7,754

Total operating expenses

49,083

46,392

Operating income

1,636

1,446

Interest expense

3,948

4,040

Interest income

(16)

(24)

Other expense, net

133

1,931

Loss before income taxes

(2,429)

(4,501)

Income tax expense (benefit)

960

(1,363)

Net loss

$

(3,389)

$

(3,138)

Loss per share:

Basic

$

(0.08)

(0.08)

Diluted

$

(0.08)

$

(0.08)

Weighted-average common shares outstanding:

Basic

39,850

38,738

Diluted

39,850

38,738

Net loss

$

(3,389)

$

(3,138)

Other comprehensive loss:

Foreign currency translation adjustments

(3,775)

(10,290)

Comprehensive loss

$

(7,164)

$

(13,428)

See accompanying Notes to Condensed Consolidated Financial Statements

 

3


Artivion, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

In Thousands

March 31,

December 31,

2022

2021

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

51,408

$

55,010

Trade receivables, net

54,998

53,019

Other receivables

4,577

5,086

Inventories, net

76,208

76,971

Deferred preservation costs, net

43,964

42,863

Prepaid expenses and other

13,378

14,748

Total current assets

244,533

247,697

Goodwill

247,829

250,000

Acquired technology, net

162,458

166,994

Operating lease right-of-use assets, net

44,365

45,714

Property and equipment, net

37,459

37,521

Other intangibles, net

33,697

34,502

Deferred income taxes

3,489

2,357

Other assets

8,026

8,267

Total assets

$

781,856

$

793,052

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

9,230

$

10,395

Accrued compensation

9,571

13,163

Accrued expenses

9,396

7,687

Taxes payable

5,575

3,634

Accrued procurement fees

2,206

3,689

Current maturities of operating leases

3,362

3,149

Current portion of long-term debt

1,622

1,630

Other liabilities

1,875

1,606

Total current liabilities

42,837

44,953

Long-term debt

307,232

307,493

Contingent consideration

47,600

49,400

Non-current maturities of operating leases

43,679

44,869

Non-current finance lease obligation

4,156

4,374

Deferred income taxes

26,373

28,799

Deferred compensation liability

5,766

5,952

Other liabilities

6,721

6,484

Total liabilities

$

484,364

$

492,324

Commitments and contingencies

 

 

Shareholders' equity:

Preferred stock

--

--

Common stock (issued shares of 41,688 in 2022 and 41,397 in 2021)

417

414

Additional paid-in capital

326,799

322,874

Retained (deficit) earnings

(1,414)

1,975

Accumulated other comprehensive loss

(13,662)

(9,887)

Treasury stock, at cost, 1,487 shares as of March 31, 2022
and December 31, 2021, respectively

(14,648)

(14,648)

Total shareholders' equity

297,492

300,728

Total liabilities and shareholders' equity

$

781,856

$

793,052

See accompanying Notes to Condensed Consolidated Financial Statements

 

4


Artivion, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

In Thousands 

(Unaudited)

Three Months Ended

March 31,

2022

2021

Net cash flows from operating activities:

Net loss

$

(3,389)

$

(3,138)

Adjustments to reconcile net loss to net cash from operating activities:

Depreciation and amortization

5,881

6,006

Non-cash compensation

3,166

2,480

Non-cash lease expense

1,920

1,758

Write-down of inventories and deferred preservation costs

989

1,274

Change in fair value of contingent consideration

(1,800)

970

Deferred income taxes

(2,966)

(4,241)

Other

496

787

Changes in operating assets and liabilities:

Prepaid expenses and other assets

1,494

(1,291)

Inventories and deferred preservation costs

(1,359)

(5,933)

Receivables

(1,710)

(3,301)

Accounts payable, accrued expenses, and other liabilities

(3,320)

1,590

Net cash flows used in operating activities

(598)

(3,039)

Net cash flows from investing activities:

Capital expenditures

(2,239)

(1,502)

Other

(469)

692

Net cash flows used in investing activities

(2,708)

(810)

Net cash flows from financing activities:

Proceeds from exercise of stock options and issuance of common stock

2,318

861

Repayment of debt

(694)

(701)

Redemption and repurchase of stock to cover tax withholdings

(1,730)

(1,813)

Other

(129)

(442)

Net cash flows used in financing activities

(235)

(2,095)

Effect of exchange rate changes on cash and cash equivalents

(61)

1,088

Decrease in cash and cash equivalents

(3,602)

(4,856)

Cash and cash equivalents beginning of period

55,010

61,958

Cash and cash equivalents end of period

$

51,408

$

57,102

See accompanying Notes to Condensed Consolidated Financial Statements

 

5


Artivion, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

In Thousands

(Unaudited)

Accumulated

Additional

Retained

Other

Total

Common

Paid-In

Earnings

Comprehensive

Treasury

Shareholders'

Stock

Capital

(Deficit)

Loss

Stock

Equity

Shares

Amount

Shares

Amount

Balance at December 31, 2021

41,397

$

414

$

322,874

$

1,975

$

(9,887)

(1,487)

$

(14,648)

$

300,728

Net loss

--

--

--

(3,389)

--

--

--

(3,389)

Other comprehensive loss

--

--

--

--

(3,775)

--

--

(3,775)

Equity compensation

205

2

3,338

--

--

--

--

3,340

Exercise of options

140

2

1,678

--

--

--

--

1,680

Employee stock purchase plan

37

--

638

--

--

--

--

638

Redemption and repurchase of stock to cover tax withholdings

(91)

(1)

(1,729)

--

--

--

--

(1,730)

Balance at March 31, 2022

41,688

$

417

$

326,799

$

(1,414)

$

(13,662)

(1,487)

$

(14,648)

$

297,492

Accumulated

Additional

Other

Total

Common

Paid-In

Retained

Comprehensive

Treasury

Shareholders'

Stock

Capital

Earnings

Income (Loss)

Stock

Equity

Shares

Amount

Shares

Amount

Balance at December 31, 2020

40,394 

$

404 

$

316,192 

$

20,022 

$

6,743 

(1,487)

$

(14,648)

$

328,713 

Net loss

--

--