EXTON, Pa., Jan. 28 /PRNewswire-FirstCall/ -- Kensey Nash
Corporation (NASDAQ:KNSY), a leading medical technology company
that provides innovative solutions and technologies for a wide
range of medical procedures, today reported the results for its
three and six months ended December 31, 2009. All references in
this press release to preliminary second quarter results are to
those provided in the Company's January 15, 2010 press release.
Second Quarter Snapshot and Recent Developments -- Expanded cost
reduction plan resulting in estimated annual savings of $1.8
million and a one-time pre-tax severance and unabsorbed overhead
expense charge of approximately $1.9 million. -- Revenue of $19.1
million, including net sales of $12.5 million and royalty income of
$6.6 million, as indicated in the Company's announcement of
preliminary second quarter results. -- Adjusted EPS (excluding
pre-tax severance and unabsorbed overhead expense charges) of
$0.43*, in line with guidance range of $0.42-$0.45. -- EPS of
$0.32, within the preliminary second quarter results range of $0.31
to $0.34. -- EBITDA* of $7.7 million. President and CEO Commentary
"During the quarter we took action to reduce our costs and overall
inventory levels through the implementation of a cost reduction
plan that included headcount reductions and reduced work schedules.
These actions are expected to generate annual pre-tax cost savings
of approximately $1.8 million. As discussed in our January 15, 2010
press release, our original revenue guidance was based on the
expectation that we would see an acceleration in revenue as the
healthcare environment improved, resulting in a higher growth rate
in orthopaedic procedures in the second half of fiscal 2010.
Although we are experiencing an increase in orders, the rate of
improvement has been lower than previously expected. Consequently,
we have adjusted our revenue expectations to reflect the ongoing
challenging economic climate and taken the necessary steps to
reduce inventories and control our costs. The cost reductions will
not impact our new endeavors with the ECM and cartilage
technologies, as both programs are key to the long term growth
prospects for our Company. We are excited about the progress we are
making; we anticipate launching the ECM product in fiscal 2010 and
receiving CE Mark for our cartilage repair device in the current
quarter," commented Joe Kaufmann, President and CEO of the Company.
Second Quarter Ended December 31, 2009 (Second Quarter Fiscal 2010)
Results Revenues: Sales and Royalties. Total revenues for the
quarter of $19.1 million decreased 8% from total revenues of $20.8
million in the prior fiscal year second quarter. Net sales of $12.5
million decreased 11% from $14.0 million in the prior fiscal year
comparable period. Net sales of biomaterials products were $11.6
million compared to $13.1 million in the comparable prior fiscal
year period. Cardiovascular sales of $4.3 million, consisting
primarily of vascular closure product components to St. Jude
Medical (NYSE:STJ), decreased $1.0 million from $5.3 million in the
prior fiscal year period. Fiscal year 2009 cardiovascular sales
included a one-time cancellation fee of $0.8 million for a research
and development project. Additionally, the decline in
Cardiovascular sales is partially attributed to variations in
ordering patterns of components used in the manufacture of the
Angio-Seal device by St. Jude Medical. Orthopaedic sales,
consisting primarily of sports medicine and spine products,
decreased from $7.1 million to $6.0 million. As anticipated and
previously disclosed the Company's sales growth in the orthopaedic
market, particularly related to sports medicine products, has been
negatively affected in the short-term. Net sales of spine products
decreased $0.5 million to $2.8 million in the second quarter of
fiscal 2010 from $3.3 million in the prior fiscal year comparable
quarter. Net sales of sports medicine products decreased $0.6
million to $3.1 million in the second quarter of fiscal 2010 from
$3.7 million in the prior fiscal year comparable quarter.
Endovascular sales during the quarter were $0.8 million compared to
$0.9 million in the prior fiscal year second quarter. As planned,
the QuickCat manufacturing was transferred to Spectranetics in
December 2009; therefore, the second quarter of fiscal 2010 will be
the last quarter reflecting sales of the QuickCat device. Following
the second quarter of fiscal 2010, the Company expects its
manufacturing of endovascular products will be limited to the
ThromCat product. Royalty income for the second quarter of fiscal
2010 was $6.6 million, compared to $6.8 million in the comparable
prior fiscal year period. Royalty income in the second quarter of
fiscal 2010 included $5.0 million in Angio-Seal(TM) royalties and
$1.5 million in royalties from Orthovita, Inc. (NASDAQ:VITA).
Angio-Seal(TM) royalties decreased by approximately $0.4 million in
the quarter over the prior fiscal year comparable quarter. The
decline in Angio-Seal(TM) royalties from the prior year was
primarily due to fewer shipping days in December 2009 as compared
to December 2008. Royalties from Orthovita increased $0.2 million
compared to the same prior fiscal year quarter. Earnings Per Share.
Second quarter adjusted diluted earnings per share* (which exclude
the charges described below) were $0.43, compared to diluted
earnings per share of $0.44 for the same period of fiscal 2009.
Second quarter fiscal 2010 diluted earnings per share were $0.32.
As previously disclosed, in the second quarter of fiscal 2010, the
Company implemented a cost reduction plan. Originally, this plan
was estimated to result in charges of approximately $0.9 million;
however, the cost reduction plan was expanded and, as a result, the
total charges increased to $1.9 million. The $1.9 million in
charges includes a pre-tax severance charge of approximately $1.0
million and a pre-tax unabsorbed overhead expense charge of
approximately $0.9 million. Adjusted diluted earnings per share*
exclude these $1.9 million in charges. During the second quarter of
fiscal 2010, the Company's total tax-effected equity compensation
expense was $0.6 million, an increase of $0.6 million from the
comparable prior year period. Second quarter fiscal 2010
tax-effected equity compensation expense was higher than the
comparable prior year period because the fiscal 2010 expense
included an additional $0.3 million of amortized expense related to
three years of equity grants, while second quarter fiscal 2009
equity compensation expense primarily included amortized expense
for only two years of equity grants, due to the fiscal 2008
acceleration of stock awards. Furthermore, fiscal 2009 included an
additional $0.3 million favorable mark-to-market adjustment on
cash-settled stock appreciation rights. Also negatively affecting
earnings per share was a $0.2 million decrease in interest income
in the second quarter of fiscal 2010 compared to the prior fiscal
year comparable quarter, due to the significant decrease in
interest rates. Six Months Ended December 31, 2009 Results
Revenues: Sales and Royalties. Total revenues for the six months
ended December 31, 2009 of $38.8 million decreased 5% from total
revenues of $40.9 million in the prior fiscal year period. Net
sales of $25.9 million decreased 6% from $27.4 million in the prior
fiscal year comparable period. Net sales of biomaterials products
were $24.2 million compared to $25.8 million in the comparable
prior fiscal year period. Orthopaedic sales, consisting primarily
of sports medicine and spine products, decreased from $15.1 million
to $12.5 million. Net sales of spine products decreased $1.4
million to $5.6 million in the six months ended December 31, 2009
from $7.0 million in the prior fiscal year comparable period.
Fiscal year 2009 spine sales included a one-time cancellation fee
of $0.8 million for a research and development project. Net sales
of sports medicine products decreased $1.0 million to $6.7 million
in the six months ended December 31, 2009 from $7.7 million in the
prior fiscal year comparable period. Cardiovascular sales of $9.3
million, consisting primarily of vascular closure product
components to St. Jude Medical, increased slightly in the six
months ended December 31, 2009 from $9.2 million in the prior
fiscal year period. Endovascular sales during the six months ended
December 31, 2009 remained constant, at $1.7 million compared to
the same amount in the prior fiscal year period, primarily due to
the increase in milestone revenue recognized under the Company's
research and development agreement with Spectranetics, offset by a
decrease in SafeCross product sales. Royalty income for the six
months ended December 31, 2009 was $12.9 million, compared to $13.5
million in the comparable prior fiscal year period. Royalty income
in the six months ended December 31, 2009 included $9.9 million in
Angio-Seal(TM) royalties and $2.9 million in royalties from
Orthovita, Inc. Angio-Seal(TM) royalties decreased by approximately
$0.8 million in the six months ended December 31, 2009 over the
prior fiscal year comparable period primarily due to fewer shipping
days in December 2009, in combination with product mix changes and
the effects of foreign currency exchange rate fluctuations.
Royalties from Orthovita increased modestly compared to the prior
fiscal period. Earnings Per Share. For the six months ended
December 31, 2009, adjusted diluted earnings per share* (which
exclude the second quarter charges described above) were $0.86,
compared to diluted earnings per share of $0.87 for the same period
of fiscal 2009. For the six months ended December 31, 2009, diluted
earnings per share were $0.75. During the six months ended December
31, 2009, the Company's total tax-effected equity compensation
expense was $1.0 million, an increase of $0.8 million from $0.2
million in the prior year comparable period. Tax-effected equity
compensation expense for the six months ended December 31, 2009 was
higher than the comparable prior year period because fiscal 2010
equity expense included an additional $0.5 million due to an
additional year of amortized expense and fiscal 2009 included an
additional $0.3 million favorable mark-to-market adjustment on
cash-settled stock appreciation rights. Also negatively affecting
earnings per share was a $0.5 million decrease in interest income
in the six months ended December 31, 2009 compared to the prior
fiscal year comparable period, due to the significant decrease in
interest rates. During the six month period ended December 31,
2009, the Company generated cash from operations of $9.2 million,
and at December 31, 2009, the Company had $82.0 million of cash and
investment balances and total debt of $32.1 million. Supplemental
Sales Data. Details of the Company's net sales for the three and
six months ended December 31, 2009 and 2008 are summarized below.
Three Months Six Months Ended Year over Ended Year over December
31, Year % December 31, Year % 2009 2008 Change 2009 2008 Change
---- ---- ------- ---- ---- ------ ($ millions) Biomaterials
Products Orthopaedic Products Sports Medicine Products $3.1 $3.7
(16%) $6.7 $7.7 (13%) Spine Products 2.8 3.3 (14%) 5.6 7.0 (21%)
Other Orthopaedic Products 0.1 0.2 (30%) 0.2 0.4 (46%) Total
Orthopaedic Products $6.0 $7.1 (16%) $12.5 $15.1 (18%)
Cardiovascular Products 4.3 5.3 (17%) 9.3 9.2 0% General Surgery
1.1 0.5 102% 2.2 1.1 108% Other Biomaterial Products 0.2 0.2 12%
0.2 0.4 (30%) Biomaterials Products $11.6 $13.1 (11%) $24.2 $25.8
(6%) Endovascular Products $0.8 $0.9 (5%) $1.7 $1.7 1% Total Net
Sales - $12.5 $14.0 (11%) $25.9 $27.4 (6%) Fiscal 2010 Guidance The
Company is reiterating its revenues and earnings guidance provided
in its January 15, 2010 news release. Total revenues for fiscal
year 2010 are expected to be in the range of $79.0 to $81.0
million, including net sales and royalties in the ranges of $52.0
to $53.5 million and $27.0 to $27.5 million, respectively. Adjusted
diluted earnings per share* are expected to be in the range of
$1.81 to $1.85 and diluted earnings per share are expected to be in
the range of $1.70 to $1.74. The Company currently expects that its
operating margins will continue to exceed 35% in fiscal 2010 and
that its balance sheet will continue to be strengthened by adding
cash from operations of approximately $16.0 million in the second
half of the fiscal year. Fiscal 2010 will include a significant
investment in research and development, with total spending for
fiscal 2010 estimated to be approximately $18.0 to $18.5 million.
The Company plans to continue to invest in its cartilage repair
technology during the remainder of fiscal 2010, including costs
associated with the expected initiation of its U.S. clinical
trials. In addition, the Company currently expects to launch with
its partner Synthes, an extracellular matrix (ECM) product line in
the second half of the fiscal year. Also included in the EPS
estimate for fiscal 2010 is an expected increase in stock-based
compensation expense, compared to fiscal 2009, by an estimated $1.5
million. This higher stock-based compensation expense is primarily
due to the fiscal 2008 acceleration of stock-based awards. The
Company is currently estimating that third quarter fiscal 2010
total revenues will be in the range of $19.5 to $20.2 million. Net
sales are currently expected to be in the range of $12.7 to $13.0
million, and royalties are currently expected to be in the range of
$6.8 to $7.2 million. The Company currently expects third quarter
fiscal 2010 diluted earnings per share of $0.43 to $0.45. Stock
Repurchase Update. On December 10, 2009, the Company announced that
its Board of Directors approved a stock repurchase program allowing
the Company to repurchase up to an additional 400,000 of its issued
and outstanding shares of Common Stock. During the six months ended
December 31, 2009, the Company repurchased 247,977 shares of Common
Stock at a total cost of approximately $6.0 million, or an average
market price of $24.16 per share, under both the current 400,000
share repurchase program and the previous stock repurchase program,
using available cash. As of December 31, 2009, there were 343,228
shares remaining for repurchase under the current 400,000 stock
repurchase program. As of December 31, 2009, the Company had
10,975,384 shares of Common Stock outstanding. Income taxes. The
Company currently estimates that its fiscal 2010 effective tax rate
will be approximately 33%, the same as the Company's effective tax
rate for fiscal 2009. In the course of estimating the Company's
annual effective tax rate and recording its quarterly income tax
provision, the Company considers many factors including its
expected earnings, state income tax apportionment, estimated
manufacturing and research and development tax credits, non-taxable
interest income and other estimates. Material changes in, or
differences from, these estimates could have a significant impact
on the Company's effective tax rate. * EBITDA and adjusted diluted
earnings per share excluding after-tax severance and unabsorbed
overhead charges are non-GAAP financial measures and should not be
considered replacements for GAAP results or guidance. For a
reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures, see the accompanying
table to this release. Conference Call and Webcast. The Company
will be hosting a teleconference discussing the earnings results on
Thursday, January 28, 2010 at 9:00 A.M. Eastern Time. To
participate in the teleconference call, dial 1-612-234-9960. The
teleconference call will also be available for replay starting
Thursday, January 28, 2010 at 11:00 A.M. Eastern Time through
Thursday, February 4, 2010 at 11:59 P.M. Eastern Time by dialing
1-800-475-6701 with an access code of 140560. Individuals
interested in listening to the teleconference may also do so over
the Internet at http://www.kenseynash.com/. To listen to the live
teleconference call, please go to the http://www.kenseynash.com/
website and choose the Investor Relations page. Please allow 15
minutes prior to the start of the call to register and download
and/or install any necessary software. A replay of the
teleconference will be archived on the http://www.kenseynash.com/
website and may be accessed following the teleconference. About
Kensey Nash Corporation. Kensey Nash Corporation is a leader in
developing, manufacturing and processing resorbable biomaterial
products, incorporating its proprietary collagen and synthetic
polymer technologies. This expertise is used to develop and
commercialize its products through strategic partners. The Company
has an extensive range of products, which are sold in multiple
medical markets, including the cardiology, orthopaedic, sports
medicine, spine, endovascular and general surgery markets. The
Company is known as a pioneer in the field of arterial puncture
closure, as the inventor and developer of the Angio-Seal Vascular
Closure Device, which is licensed to St. Jude Medical, Inc.
Cautionary Note for Forward-Looking Statements. This press release
contains forward-looking statements that reflect the Company's
current expectations about its prospects and opportunities,
including financial forecasts for the third quarter of fiscal 2010
and the full year fiscal 2010 under the caption "Fiscal 2010
Guidance" and other captions. The Company has tried to identify
these forward looking statements by using words such as "expect,"
"anticipate," "estimate," "plan," "will," "would," "forecast,"
"believe," "guidance," "projection" or similar expressions, but
these words are not the exclusive means for identifying such
statements. The Company cautions that a number of risks,
uncertainties and other important factors could cause the Company's
actual results to differ materially from those in the
forward-looking statements including, without limitation, current
economic conditions, foreign currency fluctuations, risks
associated with the Company's continued research and development
efforts with respect to the endovascular products (including the
risk that those efforts will not be successful and that some of the
associated milestone payments will not be received), Spectranetics'
success in selling the endovascular products, the Company's success
in distributing its products into the marketplace, the Company's
dependence on three major customers (St. Jude Medical, Arthrex and
Orthovita) and their success in selling Kensey Nash related
products in the marketplace, the impact of product recalls and
other manufacturing issues, the Company's success in its research
and development efforts in its cartilage repair and extracellular
matrix technologies programs, Synthes' success in selling the
Company's extracellular matrix products, the completion of
additional clinical trials in both the U.S. and Europe to support
regulatory approval of future generations of its products and
competition from other technologies. For a detailed discussion of
factors that could affect the Company's future operating results,
please see the Company's SEC filings, including the disclosure
under "Risk Factors" in those filings. Except as expressly required
by the federal securities laws, the Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, changed circumstances or
future events or for any other reason. - FINANCIAL INFORMATION TO
FOLLOW - KENSEY NASH CORPORATION CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited) Three Months Six Months Ended December
31, Ended December 31, ------------------- ------------------- 2009
2008 2009 2008 ---- ---- ---- ---- Revenues: Net sales Biomaterial
sales $11,634,701 $13,097,049 $24,209,747 $25,768,987 Endovascular
sales 834,990 877,874 1,692,646 1,669,660 ------- ------- ---------
--------- Total net sales 12,469,691 13,974,923 25,902,393
27,438,647 Royalty income 6,600,941 6,822,905 12,910,057 13,508,864
--------- --------- ---------- ---------- Total revenues 19,070,632
20,797,828 38,812,450 40,947,511 ---------- ---------- ----------
---------- Operating costs and expenses: Cost of products sold
6,491,985 6,493,026 12,030,385 12,206,481 Research and development
4,686,515 4,539,173 8,962,086 8,962,922 Selling, general and
administrative 2,104,307 2,119,628 4,284,238 4,405,227 ---------
--------- --------- --------- Total operating costs and expenses
13,282,807 13,151,827 25,276,709 25,574,630 ---------- ----------
---------- ---------- Income from operations 5,787,825 7,646,001
13,535,741 15,372,881 Interest and other (expense)/income, net
(334,737) (171,798) (715,397) (43,979) -------- -------- --------
------- Pre-tax income 5,453,088 7,474,203 12,820,344 15,328,902
Income tax expense 1,793,559 2,233,933 4,280,006 4,841,075
--------- --------- --------- --------- Net income $3,659,529
$5,240,270 $8,540,338 $10,487,827 ========== ========== ==========
=========== Basic earnings per share $0.33 $0.45 $0.77 $0.90 =====
===== ===== ===== Diluted earnings per share $0.32 $0.44 $0.75
$0.87 ===== ===== ===== ===== Weighted average common shares
outstanding 11,048,532 11,633,990 11,084,961 11,700,891 ==========
========== ========== ========== Diluted weighted average common
shares outstanding 11,367,673 11,934,095 11,422,716 12,122,547
========== ========== ========== ========== CONDENSED CONSOLIDATED
BALANCE SHEETS (Unaudited) December 31, June 30, 2009 2009 ----
---- Assets Current assets: Cash and cash equivalents $22,419,734
$49,474,255 Investments 59,563,557 30,230,131 Trade receivables
5,894,492 4,657,850 Other receivables 6,850,571 6,788,877 Inventory
9,633,603 10,585,065 Prepaid expenses and other assets 2,854,259
941,966 Deferred tax asset, current 1,111,085 2,490,406 ---------
--------- Total current assets 108,327,301 105,168,550 -----------
----------- Property, plant and equipment, net 56,274,532
57,972,895 Deferred tax asset, non-current 1,799,637 807,538 Other
non-current assets 6,993,642 7,141,447 --------- --------- Total
assets $173,395,112 $171,090,430 ============ ============
Liabilities and Stockholders' Equity Current liabilities: Accounts
payable and accrued expenses $4,629,501 $7,642,049 Other current
liabilities 225,658 295,764 Current portion of debt 1,399,997
1,399,997 Deferred revenue 839,906 782,906 ------- ------- Total
current liabilities 7,095,062 10,120,716 --------- ----------
Long-term portion of debt 30,683,333 31,383,333 Deferred revenue,
non-current 2,454,081 1,808,902 Other non-current liabilities
4,195,764 4,502,900 --------- --------- Total stockholders' equity
128,966,872 123,274,579 ----------- ----------- Total liabilities
and stockholders' equity $173,395,112 $171,090,430 ============
============ Non-GAAP Financial Measures and Reconciliations As
used herein, "GAAP" refers to generally accepted accounting
principles in the United States. We use various numerical measures
in conference calls, investor meetings and other forums which are
or may be considered "Non-GAAP financial measures" under Regulation
G. We have provided below for your reference supplemental financial
disclosure for these measures, including the most directly
comparable GAAP measure and an associated reconciliation. Second
Quarter Fiscal 2010 Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) Three Months Ended December 31, 2009
----------------- ($ millions) Net Income - GAAP $3.7 Income Tax
Expense 1.8 Interest Income (0.2) Interest Expense 0.5 Depreciation
and Amortization 1.9 --- EBITDA $7.7 ==== Three and Six Months
Ended December 31, 2009 Adjusted Earnings Per Share Three Months
Ended Six Months Ended December 31, 2009 December 31, 2009
----------------- ----------------- Diluted Earnings Per Share -
GAAP $0.32 $0.75 Cost Reduction Plan Charges (a) 0.11 0.11 ----
---- Adjusted Diluted Earnings Per Share $0.43 $0.86 ===== =====
Third Quarter and Full-Year Fiscal 2010 Earnings Guidance
Reconciliation Three Months Twelve Months Ending Ending March 31,
2010 June 30, 2010 Range Range ----------------- ---------------
Low High Low High Diluted Earnings Per Share - GAAP $0.43 $0.45
$1.70 $1.74 Cost Reduction Plan Charges (a) - - 0.11 0.11 --- ---
---- ---- Adjusted Diluted Earnings Per Share $0.43 $0.45 $1.81
$1.85 ===== ===== ===== ===== (a) Diluted earnings per share for
the second quarter of fiscal 2010 included total charges of
approximately $1.9 million incurred in connection with a cost
reduction plan primarily associated with reduced endovascular
activities and to lower overall inventory levels. This plan
included approximately $1.0 million in severance charges ($660,000
in after-tax charges), or $0.06 per share tax-effected, incurred as
a result of headcount reduction, and approximately $0.9 million in
unabsorbed overhead expense charges ($610,000 in after-tax
charges), or $0.05 per share tax-effected, incurred as a result of
reduced work schedules during the second quarter of fiscal 2010.
Note: To supplement our consolidated financial statements presented
in accordance with GAAP, Kensey Nash Corporation uses non-GAAP
measures, such as EBITDA and Adjusted Diluted Earnings Per Share.
EBITDA represents our GAAP results adjusted to exclude interest,
taxes, depreciation and amortization. Adjusted Diluted Earnings Per
Share is adjusted from our GAAP results to exclude certain expenses
described above. These non-GAAP adjustments are provided to enhance
the user's overall understanding of our historical and current
financial performance and our prospects for the future. We believe
the non-GAAP results provide useful information to both management
and investors by excluding certain expenses that we believe are not
indicative of our core operating results. These non-GAAP measure
will provide investors and management with an alternative method
for assessing Kensey Nash's operating results in a manner
consistent with future presentation. Further, these non-GAAP
results are one of several primary indicators management uses for
planning and forecasting in future periods. The presentation of
this additional information should not be considered in isolation
or as a substitute for results prepared in accordance with
accounting principles generally accepted in the United States.
DATASOURCE: Kensey Nash Corporation CONTACT: Joseph W. Kaufmann,
President and Chief Executive Officer, +1-484-713-2100 Web Site:
http://www.kenseynash.com/
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