CONTACT:
Joseph W. Kaufmann
President and Chief Executive Officer
(484) 713-2100
KENSEY NASH REPORTS FOURTH QUARTER AND FISCAL YEAR 2007 RESULTS
-Results reflect discontinuation of embolic protection platform -
EXTON, PA, August 20, 2007 -- Kensey Nash Corporation (NASDAQ: KNSY) today reported the results for its fourth quarter and fiscal year ended June 30, 2007.
Discontinuance of Embolic Protection Platform. As announced on July 10, 2007, the Company made a strategic decision to cease all activities related to its embolic protection platform. As a result of this action, the Company has recorded certain charges in its fourth fiscal quarter, including $4.3 million in write-offs of inventory, certain dedicated embolic protection equipment, and other assets. Additionally, KNC offered its customers credits for unused embolic protection product, which totaled $356,000 during the quarter. The total of these charges and credits is approximately $4.7 million, or $0.25 per share tax-effected, and is presented within the Company’s results of continuing operations for the quarter ended June 30, 2007. Additional charges related to severance and clinical trial closeout costs will be recorded in the first fiscal quarter of 2008, and are expected to total approximately $600,000.
Fourth Quarter Results
Revenues, Sales and Royalties. Total revenues, which include net sales and royalty income, were $17.0 million in the quarter, a decrease of 8% from $18.4 million in the prior year fourth quarter.
Net sales decreased 16% to $10.5 million from $12.5 million in the fourth quarter of fiscal 2006. Net sales of biomaterials products decreased 19% to $9.7 million from $12.0 million in the comparable prior year fiscal quarter. Overall, the decrease had been expected due to the ordering patterns from certain major customers in the Company’s biomaterials business, and a strong fourth quarter last fiscal year. Additionally, Angio-Seal component sales were negatively impacted by a $611,000 credit given to St. Jude Medical for exceeding annual volume pricing targets during the quarter.
Sales of endovascular products to customers during the quarter increased 169% to $1.2 million from $432,000 in the prior year period, and increased 11% sequentially over the March quarter. Offsetting current quarter end-user sales were the $356,000 in credits given to customers in relation to the embolic protection decision, resulting in net endovascular sales of $806,000. The results reflected both strong U.S. and international sales of the ThromCatÔ Thrombectomy and QuickCatÔ Aspiration Catheter products.
Royalty income increased 9% to $6.5 million compared to $5.9 million in the comparable prior year period. Royalty income included $5.4 million in Angio-Seal™ royalties, up 6% from the comparable quarter of the prior fiscal year, and $1.0 million in royalties from Orthovita, Inc. (NASDAQ: VITA), up 26% from the prior year fourth quarter.
Earnings Per Share. The Company reported a fourth quarter loss per share of ($0.15) compared to $0.21 diluted earnings per share for the fourth quarter of the prior year. The loss per share included $0.25 of charges and credits related to the discontinuation of the embolic protection platform, $0.03 per share for the volume discount to St. Jude Medical, and $0.01 per share for a write-off of previously deferred costs related to a prospective acquisition no longer being pursued. Earnings per share for the prior year period had been impacted by $0.02 per share of transition costs related to the facility move in fiscal 2006. Equity compensation expense was $0.03 and $0.02 per share in the periods ended June 30, 2007 and 2006, respectively.
The following chart summarizes the Company’s results for the three months ended June 30, 2007, compared to its results for the comparable period in the prior fiscal year. See attached schedules for a detailed reconciliation between the non-GAAP and reported GAAP results.
| | | Three Months Ended June 30, | | Year over Year % | |
($ millions, except per share data) | | 2007 | | 2006 | | Change | |
Data as Reported: | | | | | | | |
| (Loss) Income from Operations, As Reported | | | ($ 3.1 | ) | $ | 3.0 | | | n/m | |
Adjust for: | | | | | | | | | | |
| Discontinuation of Embolic Protection | | $ | 4.7 | | | - | | | n/m | |
| Facility Transition Charges | | | - | | $ | 0.6 | | | n/m | |
| Income from Operations, As Adjusted | | $ | 1.6 | | $ | 3.6 | | | (57 | %) |
Earnings Per Share, As Adjusted | | $ | 0.11 | | $ | 0.23 | | | (52 | %) |
| | | | | | | | | | | |
Supplemental Information related to Equity Compensation Expense: | | | | | | | | | | |
Equity Compensation Expense | | $ | 0.5 | | $ | 0.6 | | | | |
Equity Compensation Expense Per Share | | $ | 0.03 | | $ | 0.02 | | | | |
Fiscal Year 2007 Results. Total revenues for the fiscal year ended June 30, 2007 were $69.5 million, up 15% from total revenues of $60.4 million for the prior year ended June 30, 2006. Net sales increased 19% to $44.9 million from $37.9 million recorded in the prior year. The Company’s sales of biomaterials products increased 12% to $41.1 million for the current year from $36.7 million in the prior year period. Sales of endovascular products to customers increased 251% to $4.1 million from $1.2 million for the year ended June 30, 2006. Offsetting endovascular end-user sales were the $356,000 in credits given to customers in relation to the discontinuance of embolic protection decision, resulting in net endovascular sales of $3.8 million.
Royalty income for the fiscal year increased 9% to $24.6 million compared to $22.5 million in the prior year. Royalty income included $20.8 million in Angio-Seal™ royalties, up 6% from the prior year, and $3.7 million in royalties from Orthovita, up 26% from the prior year.
Diluted earnings were $0.29 per share compared to $0.30 diluted earnings per share for the prior year. Earnings per share were net of the $0.25 per share of charges and credits related to the discontinuance of the embolic protection platform. Earnings per share for the prior year period were net of $0.25 per share of transition costs related to the facility move in fiscal 2006. Equity compensation expense was recorded in both periods and was $0.15 per share for the fiscal year ended June 30, 2007, compared to $0.13 per share for the fiscal year ended June 30, 2006.
The following chart summarizes the Company’s results for the fiscal year ended June 30, 2007, compared to its results for the prior fiscal year. See attached schedules for a detailed reconciliation between the non-GAAP and reported GAAP results.
| | | Fiscal Year Ended June 30, | | Year over Year % | |
($ millions, except per share data) | | 2007 | | 2006 | | Change | |
Data as Reported: | | | | | | | |
| (Loss) Income from Operations, As Reported | | $ | 3.8 | | $ | 3.5 | | | 8 | % |
Adjust for: | | | | | | | | | | |
| Discontinuation of Embolic Protection | | $ | 4.7 | | | - | | | n/m | |
| Facility Transition Charges | | | - | | $ | 4.7 | | | n/m | |
| Income from Operations, As Adjusted | | $ | 8.5 | | $ | 8.2 | | | 3 | % |
Earnings Per Share, As Adjusted | | $ | 0.53 | | $ | 0.56 | | | (5 | %) |
| | | | | | | | | | | |
Supplemental Information related to Equity Compensation Expense: | | | | | | | | | | |
Equity Compensation Expense | | $ | 2.9 | | $ | 2.4 | | | | |
Equity Compensation Expense Per Share | | $ | 0.15 | | $ | 0.13 | | | | |
Biomaterials Update. Biomaterials sales for the fourth quarter of fiscal 2007 were $9.7 million down from $12.0 million in the prior year fourth quarter. This decrease had been anticipated, primarily due to the ordering patterns of certain major customers, primarily St. Jude Medical related to Angio-SealÔ components. Additional details are summarized below:
| | | Three Months Ended June 30, | | | | Fiscal Year | | | |
($ thousands) | | 2007 | | 2006 | | % Change | | 2007 | | 2006 | | % Change | |
Angio-SealÔ Components | | $ | 3,235 | | $ | 4,995 | | | (35 | %) | $ | 17,380 | | $ | 14,823 | | | 17 | % |
| Orthopaedic Products | | $ | 5,992 | | $ | 6,786 | | | (12 | %) | $ | 21,804 | | $ | 20,592 | | | 6 | % |
| Other Products | | $ | 475 | | $ | 240 | | | 98 | % | $ | 1,932 | | $ | 1,284 | | | 51 | % |
| Total Net Sales - Biomaterials | | $ | 9,702 | | $ | 12,022 | | | (19 | %) | $ | 41,116 | | $ | 36,699 | | | 12 | % |
“Looking ahead to fiscal 2008, we believe that sales of orthopaedic products will increase in excess of 25%, driven by continuing product launches by our major customers, new product sales from the Macropore asset acquisition that we completed last quarter, and continuing expansion of our customer base,” commented Joe Kaufmann, President and CEO. “In addition, we expect to see increases in product sales outside of the orthopaedics market, a sign of our continuing diversification in our biomaterials business. Sales of Angio-SealÔ components are expected to decrease year over year related to the significant volume in the current year,” Mr. Kaufmann stated.
Endovascular Update. “We continue to make progress with both our QuickCatÔ and ThromCatÔ products in both the U.S. and international markets and we plan to expand our launch of our Safe-CrossÒ product for the treatment of chronic total occlusions in the U.S. market in September 2007,” continued Mr. Kaufmann.
“We made significant progress in the restructuring of our sales force, including a realignment of field personnel with territories, and believe that this reconfigured team will deliver solid growth of endovascular product sales in fiscal year 2008. We believe the discontinuance of the embolic protection platform will allow our sales personnel to better focus their efforts on the thrombectomy and chronic total occlusion products and produce a higher return on invested time in each account,” Mr. Kaufmann concluded.
Prior Year Facility Transition Charges. During its fiscal 2006 year, the Company successfully completed construction of, and moved its operations to a new facility, which resulted in significant transition expenses related to the acceleration of depreciation of certain abandoned leasehold improvement assets at its previous locations and moving charges. The impact of these charges was $4.7 million, or $0.25 per share, during fiscal 2006, of which $0.6 million or $0.02 per share was recorded in the prior year fourth quarter. The transition to the new facility is complete and no additional charges were recorded in fiscal 2007.
Fiscal 2008 First Quarter Forecast. For the first quarter of fiscal year 2008, the Company believes that its net sales will be in the range of $11.0 to $11.5 million and royalties in the range of $6.0 to $6.2 million. Total revenues are expected to be in the range of $17.0 to $17.7 million.
Diluted earnings per share are expected to be $0.09 to $0.11 per share. This anticipated earnings per share range reflects the additional charges the Company is taking related to the discontinuation of embolic protection, expected to total approximately $600,000 or $0.03 per share during the first quarter. No further charges are anticipated during the remainder of fiscal 2008.
“We expect our fiscal year 2008 to be a year of significant growth in both our top line revenues and earnings per share. We anticipate that revenue growth will be driven primarily by our endovascular business and our orthopaedic products. We expect our earnings per share will benefit from the revenue expansion, improved operating efficiencies and the cost savings from the elimination of our embolic protection platform,” commented Joe Kaufmann.
Conference Call and Webcast. The Company will host a conference call on Monday, August 20, 2007 at 9:00 a.m. Eastern Time. To participate in the conference call, interested parties should dial 612-332-0637. In addition, a live webcast of the call can be accessed by visiting the Investor Relations page under the Conferences & Webcasts link of the Kensey Nash website at www.kenseynash.com and clicking on Webcast. The teleconference call will also be available for replay starting Monday, August 20, 2007 at 12:30 p.m. Eastern Time through Monday, August 27, 2007 at 11:59 p.m. Eastern Time by dialing 1-800-475-6701 with an access code of 872680.
About Kensey Nash Corporation. Kensey Nash Corporation is a leading medical technology company providing innovative solutions and technologies for a wide range of medical procedures. The Company provides an extensive range of products into multiple medical markets, primarily in the endovascular, sports medicine and spine markets. Many of the products are based on the Company’s significant expertise in the design, development, manufacturing and processing of absorbable biomaterials, which has led to partnerships to commercialize technologies. Kensey Nash has also commercialized a series of innovative products through its own direct endovascular sales force. 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 the Company’s forecast of operating results for the first quarter and fiscal 2008. The Company has tried to identify these forward looking statements by using words such as “expect,” “anticipate,” “estimate,” “plan,” “will,” “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, the Company’s success in launching its endovascular products into the marketplace, the Company’s dependence on three major customers (St. Jude Medical, Arthrex and Orthovita) and their success in selling KNC related products in the marketplace, the impact of product recalls and other manufacturing issues, and competition from other technologies, among other important risks. For a more detailed discussion of these and other factors, 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 -
