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CryoLife 2012 Annual Revenues Grew to a Record $131.7 Million

Thu, 02/14/2013 - 8:04am
The Associated Press

Full Year Highlights: -- Total revenues grew 10% year-over-year to a record $131.7 million -- Product revenues grew 14% year-over-year to $67.5 million -- Tissue processing revenues grew 6% year-over-year to $63.6 million -- Generated $19.0 million in cash flow from operations Fourth Quarter Highlights: -- Total revenues grew 8% year-over-year to a record $32.8 million -- Product revenues grew 13% year-over-year to $17.5 million -- Tissue processing revenues grew 3% year-over-year to $15.2 million -- Generated $8.0 million in cash flow from operations CryoLife, Inc. (NYSE: CRY), a leading tissue processing and medical device company focused on cardiac and vascular surgery, announced today its results for the fourth quarter and full year of 2012.

Revenues for the fourth quarter of 2012 increased 8 percent to a record $32.8 million compared to $30.4 million for the fourth quarter of 2011.  Revenues for the full year of 2012 increased 10 percent to a record $131.7 million compared to $119.6 million for the full year of 2011.

Steven G. Anderson, president and chief executive officer, said, "In 2012 we continued to execute on our strategy to complement our established tissue processing business with an expanded offering of higher growth and margin medical device products.  During the year we acquired the HeRO Graft, a proprietary graft-based solution for certain patients with end-stage renal disease that fit this product profile.  We also enhanced our financial position by settling all significant outstanding litigation.  As a result, we generated 10 percent revenue growth for the year while also generating strong cash flow and profitability.

"Looking forward, we are well positioned to further leverage our focused sales and marketing team to drive growth of our portfolio of medical device products. This growth will be balanced with ongoing investments in our product pipeline, including the U.S. clinical trial for PerClot, which we expect to initiate in the first half of the year." Net income for the fourth quarter of 2012 was $2.1 million, or $0.08 per basic and $0.07 per fully diluted common share, compared to net income of $1.9 million, or $0.07 per basic and fully diluted common share, for the fourth quarter of 2011.  Net income for the fourth quarter of 2012 included $790,000 in business development and integration charges primarily related to the acquisition of Hemosphere and $171,000 in litigation expenses.  Additionally, the effective income tax rate benefited from the adjustment of valuation allowances on state net operating losses.  Excluding these charges, and using a 34 percent effective tax rate, proforma non-GAAP earnings per share would have been $0.08 in the fourth quarter of 2012.  Net income for the fourth quarter of 2011 included $144,000 in business development and integration charges and $843,000 in litigation expenses.

Excluding these charges and using a 34 percent effective tax rate, proforma non-GAAP earnings per share would have been $0.09 in the fourth quarter of 2011.

Net income for the full year of 2012 was $7.9 million, or $0.29 per basic and $0.28 per fully diluted common share, compared to net income of $7.4 million, or $0.26 per basic and fully diluted common share, for the full year of 2011.  Net income for the full year of 2012 included a pretax benefit of $4.7 million related to the settlement of the litigation with Medafor, pretax charges of $4.1 million related to the settlement of the litigation with CardioFocus, $3.9 million in litigation expenses offset by $3.4 million in reimbursement of certain litigation expenses from insurance carriers, and $2.7 million in business development and integration charges primarily related to the acquisition of Hemosphere.  Additionally, the effective income tax rate benefitted from the adjustment of valuation allowances on state net operating losses.  Excluding these charges and benefits, and using a 34 percent effective tax rate, proforma non-GAAP earnings per share would have been $0.34 in the full year of 2012.  Net income for the full year of 2011 included $4.2 million in costs related to business development and integration, and $1.9 million for litigation expenses net of insurance reimbursements.  Excluding these charges and using a 34 percent effective tax rate, proforma non-GAAP earnings per share would have been $0.41 in the full year of 2011.

Product segment revenues were $17.5 million for the fourth quarter of 2012, up 13 percent from $15.5 million in the fourth quarter of 2011.

Product segment revenues were $67.5 million for the full year of 2012, up 14 percent from $59.4 million in the full year of 2011.

Surgical sealant and hemostat revenues, which consisted primarily of sales of BioGlue@ and PerClot@ in 2012, were $14.4 million for the fourth quarter of 2012 compared to $13.0 million for the fourth quarter of 2011, an increase of 10 percent.  The increase in surgical sealant and hemostat revenues was primarily due to an increase in BioGlue shipments into international markets, primarily Europe, and an increase in PerClot revenues.

Surgical sealant and hemostat revenues were $56.3 million for the full year of 2012 compared to $53.7 million for the full year of 2011, an increase of 5 percent.  The increase in surgical sealant and hemostat revenues was primarily due to an increase in BioGlue shipments into international markets, and an increase in PerClot revenues, partially offset by the lack of HemoStase revenues in the full year of 2012.

The Company discontinued U.S. and international sales of HemoStase at the end of the first quarter of 2011.

Revascularization technologies revenues were $2.0 million for the fourth quarter of 2012 compared to $2.4 million for the fourth quarter of 2011.  The decrease in revascularization technologies revenues was due to a decrease in laser console revenues partially offset by a 6 percent increase in handpiece and accessory revenues.

Revascularization technologies revenues were $8.1 million for the full year of 2012 compared to $5.7 million in the full year of 2011.  The increase in revascularization technologies year-over-year is a result of the Company's acquisition of Cardiogenesis in May 2011.

HeRO@ Graft revenues were $1.1 million for the fourth quarter of 2012 and $3.1 million for the full year of 2012 as a result of the Company's acquisition of Hemosphere in May 2012.

Preservation services revenues were $15.2 million for the fourth quarter of 2012 compared to $14.8 million for the fourth quarter of 2011, an increase of 3 percent.  Cardiac preservation services revenues increased 7 percent for the fourth quarter of 2012 primarily due to an increase in shipments of cardiac tissues, while vascular preservation service revenues in the fourth quarter of 2012 were flat compared to the fourth quarter of 2011.

Preservation services revenues were $63.6 million for the full year of 2012 compared to $59.8 million in the full year of 2011, an increase of 6 percent.  Cardiac preservation services revenues increased 12 percent for the full year of 2012 primarily due to an increase in shipments of cardiac tissues.  Vascular preservation service revenues increased 2 percent for the full year of 2012 due to an increase in shipments of vascular tissues.

Total gross margins were 64 percent in each of the fourth quarters of 2012 and 2011.  Preservation services gross margins were 43 percent and 42 percent in the fourth quarters of 2012 and 2011, respectively.

 Product gross margins were 82 percent and 85 percent for the fourth quarters of 2012 and 2011, respectively.

Total gross margins increased to 64 percent in the full year of 2012, up from 63 percent in the full year of 2011, driven by higher gross margins from the Company's existing tissues business, and an increase in the mix of higher margin products partially resulting from the acquisition of the Cardiogenesis and Hemosphere product lines.

Preservation services gross margins were 44 percent and 43 percent for the full year of 2012 and 2011, respectively.  Product gross margins were 83 percent and 84 percent for the full year of 2012 and 2011, respectively.

General, administrative, and marketing expenses for the fourth quarter of 2012 were $16.8 million compared to $14.6 million for the fourth quarter of 2011.  General, administrative, and marketing expenses for the fourth quarter of 2012 increased compared to 2011 primarily due to an increase in marketing expenses, including costs of the Company's expanded sales staff and increases in spending on advertising, partially offset by a decrease in litigation expense.  General, administrative, and marketing expenses for the fourth quarter of 2012 and 2011 included approximately $790,000 and $144,000, respectively, in business development and integration expenses.

General, administrative, and marketing expenses for the full year of 2012 were $65.1 million compared to $57.3 million for the full year of 2011.  General, administrative, and marketing expenses for the full year of 2012 increased compared to 2011 due to the cumulative effect of the following: the settlement of the litigation with CardioFocus, an increase in marketing expenses, including costs of the Company's expanded sales staff, increases in spending on advertising, and an increase in litigation expenses, partially offset by a benefit from the settlement of the litigation with Medafor and the reimbursement of certain litigation expenses from insurance carriers.  General, administrative, and marketing expenses for the full year of 2012 and 2011 included approximately $2.7 million and $4.2 million, respectively, in business development and integration expenses.

Research and development expenses were $2.1 million and $1.8 million for the fourth quarters of 2012 and 2011, respectively.  Research and development expenses were $7.3 million and $6.9 million for the full year of 2012 and 2011, respectively.  Research and development spending in the fourth quarter and full year of 2012 was focused on PerClot, HeRO Graft, revascularization technologies, SynerGraft@ tissues and products, and BioFoam.

During the full year of 2012, the Company purchased 639,000 shares of the Company's common stock at an average price of $5.15, resulting in aggregate purchases of $3.3 million.

As of December 31, 2012, the Company had $18.3 million in cash, cash equivalents, and restricted cash and securities, compared to $27.0 million at December 31, 2011.  Of this $18.3 million in cash, cash equivalents, and restricted cash and securities, $5.0 million was designated as restricted cash and securities primarily due to a financial covenant requirement under the Company's credit agreement.

The Company's net cash flows provided by operations were $8.0 million for the fourth quarter of 2012 compared to $3.0 million for the fourth quarter of 2011, and $19.0 million for the full year of 2012 compared to $16.8 million for the full year of 2011.

2013 Financial Guidance The Company expects total revenues for the full year of 2013 to be between $139.0 million and $143.0 million.  This represents annual total revenue growth of 6 percent to 9 percent.  The Company expects tissue processing revenues to grow in the low to mid-single digits full year of 2013 compared to 2012.  Revenues from the Company's higher margin product segment are expected to grow between 9 percent and 13 percent for the full year of 2013.  This includes expectations for BioGlue and BioFoam revenues to increase in the mid-single digits on a percentage basis in 2013 compared to 2012, and PerClot revenues to be between $3.5 million and $4.0 million, which represents growth of 13 percent to 29 percent compared to 2012.  The Company expects revenues from the HeRO Graft to increase to between $6.0 and $7.0 million, which represents growth of 20 percent to 40 percent compared to the annualized fourth quarter 2012 run rate.  The Company expects revenues from revascularization technologies to be between $8.5 million and $9.0 million in 2013, which represents growth of 5 percent to 11 percent.

Research and development expenses are expected to be between $11.0 million and $12.0 million in 2013, a 52 percent to 65 percent increase, primarily as a result of the Company's investments in its U.S. clinical trials for PerClot.

The Company expects earnings per share of between $0.25 and $0.28 in 2013, which includes the increased research and development expenses described above and the anticipated impact of the U.S. medical device excise tax implemented in 2013 as part of the Affordable Care Act.

The Company's earnings per share guidance excludes expenses related to business development and potential share repurchases, which cannot currently be estimated.

The Company expects the effective income tax rate for 2013 to be in the mid thirty percent range.

The Company's financial guidance for the full year of fiscal 2013 is subject to the risks described below in the last paragraph of this press release, prior to the financial tables.

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 February 14 through February 21 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415.  The conference number for the replay is 408394.

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
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., certain countries in Europe, and Canada.  CryoLife's CryoValve@ SG pulmonary heart valve, processed using CryoLife's proprietary SynerGraft@ technology, has FDA 510(k) clearance for the replacement of diseased, damaged, malformed, or malfunctioning native or prosthetic pulmonary valves.  CryoLife's CryoPatch@ SG pulmonary cardiac patch has FDA 510(k) clearance for the repair or reconstruction of congenital heart defects.  CryoLife'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 for use in soft tissue repair and approved in Japan for use in the repair of aortic dissections.  Additional marketing approvals for BioGlue have been granted in several other countries throughout the world.

CryoLife, through its subsidiary Cardiogenesis Corporation, specializes in the treatment of coronary artery disease for severe angina using a laser console system and single use, fiber-optic handpieces to perform a surgical procedure known as Transmyocardial Revascularization (TMR).  In addition, CryoLife and its subsidiary Hemosphere, Inc. market the HeRO@ Graft, which is a solution for end-stage renal disease in certain hemodialysis patients.  CryoLife distributes PerClot@, an absorbable powder hemostat, in the European Community and other select international countries.  CryoLife's BioFoam@ Surgical Matrix is CE marked in the European Community for use as an adjunct to hemostasis in cardiovascular surgery and on abdominal parenchymal tissues (liver and spleen) when control of bleeding by ligature or conventional methods is ineffective or impractical.

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