Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT:
Joseph W. Kaufmann
President and Chief Executive Officer
(610) 524-0188
KENSEY NASH REPORTS RECORD Q4 E.P.S. OF $0.34
-Fourth quarter net sales increased 40% over prior year-
-Plans TriActiv(R) U.S. distribution with direct sales force-
EXTON, PA, August 17, 2004 -- Kensey Nash Corporation (Nasdaq: KNSY) today
announced record revenue, net sales and earnings per share for its fourth
quarter and fiscal year ended June 30, 2004.
Fourth Quarter Results. Total revenues for the fourth quarter increased 23% to
$16.3 million compared to $13.2 million in the comparable period last year. Net
sales increased 40% to $11.6 million from $8.3 million in the prior year
quarter. Despite a 33% decrease in the contracted Angio-Seal(TM) royalty rate
during the quarter, royalty income decreased by only 2% to $4.5 million in the
fourth fiscal quarter from $4.6 million in the prior year quarter due to
continued strong Angio-Seal(TM) sales and a new royalty stream from Orthovita,
Inc. (Nasdaq: VITA). Income from operations increased 69% to $5.2 million from
$3.1 million in the two comparable periods. Net income of $4.2 million, or $0.34
per share, for the fourth quarter of fiscal 2004 increased 62% over the previous
year comparable period adjusted net income of $2.6 million, or $0.21 per share,
excluding a net $1.0 million, or $0.09 per share, historic research and
development tax credit (described below). Reported earnings per share increased
to $0.34 in the fourth quarter 2004 from $0.30 per share in the prior year
period including the effect of the research and development tax credit. The
fourth quarter earnings per share exceeded the high end of the Company's
previous guidance of $0.32.
During the fourth fiscal quarter the Company generated cash from operations of
$6.7 million and reported $61.1 million of cash and investments and no debt at
June 30, 2004.
The following table summarizes the results for the company for the three months
ended June 30, 2004 compared to the three months ended June 30, 2003:
Three months ended Three months ended Percentage
($ millions, except per share data) June 30, 2004 June 30, 2003 Change
- ------------------------------------------------- ----------------------- --------------------- ----------------------
Net Sales $11.6 $8.3 40%
- ------------------------------------------------- ----------------------- --------------------- ----------------------
Royalty Income $4.5 $4.6 (2%)
- ------------------------------------------------- ----------------------- --------------------- ----------------------
Total Revenues $16.3 $13.2 23%
- ------------------------------------------------- ----------------------- --------------------- ----------------------
Income from Operations $5.2 $3.1 69%
- ------------------------------------------------- ----------------------- --------------------- ----------------------
Earnings Per Share (excluding the historic R&D $0.34 $0.21 62%
tax credit)
- ------------------------------------------------- ----------------------- --------------------- ----------------------
Earnings Per Share (as reported) $0.34 $0.30 14%
- ------------------------------------------------- ----------------------- --------------------- ----------------------
1
Fiscal Year 2004 Results. For the fiscal year ended June 30, 2004, total
revenues increased 31% to $58.2 million compared to $44.4 million in the prior
year. Net sales increased 34% to $36.4 million from $27.1 million in the two
comparable periods and royalty income increased 30% to $21.2 million from $16.3
million, despite the 33% decline in the contracted Angio-Seal(TM) royalty rate
in April 2004. Income from operations for the fiscal year increased 66% to $17.0
million from $10.3 million in the previous year. Net income increased 64% to
$12.8 million, or $1.04 per share, for the fiscal year 2004 from $7.8 million,
or $0.67 per share, for the prior fiscal year, as adjusted for historic research
and development tax credits in both periods. As reported, unadjusted earnings
per share of $1.06 for the fiscal year 2004 increased 39% over the previous
fiscal year of $0.76 per share. Gross margin on net sales increased to 56%
during the year, compared to 55% in the prior year. The Company's effective tax
rate for the fiscal year was 28%, compared to a previously forecasted 30%,
related to increases in our tax-exempt investment interest and greater than
anticipated current year research and development tax credits.
As previously announced, during the fourth quarter of fiscal year 2003 the
company performed a research and development tax credit study looking back to
fiscal year 1993. The result of such study was a tax credit for the historical
period of 1993 through 2002, as well as a credit for the fiscal year 2003. The
net effect of the historical credit offset by professional fees paid for the
historical portion of the study was $1.0 million, or $0.09 per share, in the
fourth quarter of fiscal year 2003 and another $250,000, or $0.02 per share, in
the first quarter of fiscal year 2004.
The following table summarizes the results for the Company for the fiscal year
ended June 30, 2004 compared to the fiscal year ended June 30, 2003:
($ millions, except per share data) Fiscal year Fiscal year Percentage
ended ended
June 30, 2004 June 30, 2003 Change
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
Net Sales $36.4 $27.1 34%
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
Royalty Income $21.2 $16.3 30%
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
Total Revenues $58.2 $44.4 31%
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
Income from Operations $17.0 $10.3 66%
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
Earnings Per Share (excluding historic R&D tax
credit) $1.04 $0.67 55%
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
Earnings Per Share (as reported) $1.06 $0.76 39%
- ------------------------------------------------- ----------------------- ---------------------------- ---------------
CEO Comments on Results
General. "We are pleased to report an excellent fourth quarter and an
exceptional fiscal year," commented Joe Kaufmann, President and CEO of
Kensey Nash Corporation. "Our biomaterials business with our existing
customers continues to grow and our Orthovita relationship, new in fiscal
2004, has had an impressive start. In addition, Angio-Seal(TM) sales were up
34% for the quarter and 39% for the year. Our balance sheet is extremely
strong, with over $79.6 million in current assets, including over $61
million in cash and investments, and only $6.8 million in liabilities," he
added.
Biomaterials. "Biomaterials sales of $11.5 million continued to excel in the
quarter. The orthopaedic products, specifically sports medicine and spine
products established record sales for both the fourth quarter and fiscal
year as we continue to expand in the biomaterials markets. Our biomaterials
sales increased 40% over the previous year fourth quarter. During the third
quarter, we launched the first bone grafting products from our collaboration
with Orthovita, Inc. Since that time we have launched additional new
products and have several products planned for fiscal year 2005."
2
TriActiv(R). "Regarding our TriActiv(R) distribution plans, I am pleased to
announce that we will create a direct sales force for this exciting
technology platform. Our 510(k) application was submitted to the FDA early
in our first fiscal quarter. We hope to receive approval and plan to have
our sales team in place by the end of our second fiscal quarter. We then
plan to launch the TriActiv(R) product in the U.S. early in our third fiscal
quarter 2005."
Fiscal Year 2005 General Forecast. "Looking ahead, we expect to achieve
continued growth in fiscal 2005. With the strength in the biomaterials
product lines as well as the U.S. launch of the TriActiv(R) System we expect
sales to be in a range of $49.0 to $50.0 million, including approximately
$2.5 million in worldwide TriActiv(R) sales. Royalties are projected to be
in a range of $21.0 to $21.5 million, including a range of $18.4 to $18.8
million from Angio-Seal(TM) and a range of $2.4 to $2.7 million from our
biomaterials products. Our earnings per share guidance for the year is $1.18
to $1.21. We are estimating our 2005 effective tax rate will be
approximately 30%."
"The Company will continue to invest in research and development to provide
a solid platform for future growth. As a result of the clinical activities
associated with new applications of the TriActiv(R) System and our
biomaterials development programs, including our synthetic vascular graft
and cartilage regeneration projects, we expect our fiscal 2005 research and
development expense to be approximately $17.7 to $18.0 million, or 25% of
total revenue, as compared to $16.4 million, or 28% of total revenue, in
fiscal 2004. With the addition of the TriActiv(R) System U.S. launch
activity costs in fiscal year 2005, selling, general and administrative
expenses are expected to be in a range of $11.5 to $12.0 million in the
fiscal year." Mr. Kaufmann detailed.
First Quarter Fiscal Year 2005 Forecast. For the first quarter of fiscal year
2005, the Company expects total revenues to be in the range of $14.5 to $14.7
million, approximately 17% to 19% higher than the comparable quarter in fiscal
2004. Included in this estimate, net sales are expected to be in the range of
$10.0 to $10.2 million and royalties are expected to be in the range of $4.3 to
$4.4 million. The Company expects to record earnings per share of approximately
$0.23 to $0.24 in the first fiscal quarter ending September 30, 2004 compared to
$0.18 in fiscal year 2004, excluding the $0.02 effect of the historical research
and development tax credit.
New Facility. "In July 2005, in order to provide for the ongoing and future
growth of the company, we broke ground on our new facility. This new facility
will be located in Chester County, Pennsylvania, approximately two miles from
our existing location. The long-term facility plan will provide 175,000 square
feet to house all of our manufacturing, research and development, clinical,
sales and marketing and administrative activities. The first phase of the
project will include the completion of the shell and 90,000 square feet of
interior fit-out. We estimate the current cost of this first phase to be
approximately $26 million, of which $15 to $20 million will be paid out during
fiscal 2005 with available cash. We expect phase one project completion within
eighteen months," Mr. Kaufmann stated.
Fiscal Year 2005 Cash Flow Analysis. "Given our strong cash position ($61.1
million) in combination with the current interest rate environment and the
recent trading price of our stock, we believe we will be able to complete the
U.S. market launch of the TriActiv(R) System, the current year portion of our
facility plan and any necessary portion of the share repurchase plan announced
today, while maintaining the required financial flexibility to continue to grow
our business," commented Mr. Joseph W. Kaufmann, President and CEO of Kensey
Nash Corporation.
3
Conference Call and Webcast. A live webcast of the fiscal year end conference
call will be broadcast August 18, 2004 at 11:00 AM eastern time. Please visit
the financial information page at www.kenseynash.com for the link. To
participate in the conference call, interested parties may call 651-291-5254. A
replay of the call will also be available starting August 18, 2004 at 2:30 PM
Eastern until August 23, 2004 at midnight eastern time by calling 800-475-6701,
access code 740902.
About Kensey Nash Corporation. Kensey Nash Corporation has significant expertise
and experience in designing, developing, manufacturing and processing
proprietary absorbable biomaterials products for the cardiology, orthopedics,
drug and biologics delivery, periodontal/dental and wound care markets. The
Company is also a leader in the development of cardiovascular medical technology
devices for arterial puncture closure. The Company's TriActiv(R) Balloon
Protected Flush Extraction System for the treatment of saphenous vein graft
disease is available for sale in the European Union and is under 510(k) review
in the United States. Angio-Seal is a trademark of St. Jude Medical, Inc. The
TriActiv System is designed to prevent heart attacks during the treatment of
saphenous vein grafts (SVGs) in patients who previously received coronary bypass
surgery, but now have blockages in the grafts. The device incorporates three
features to address the common problem of distal embolization - a protection
balloon guidewire, a flush catheter, and an extraction system to remove debris
from the grafts.
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, without limitation, the revenue and
earnings guidance provided by the Company for its first quarter of and fiscal
year 2005. The Company tried to identify these forward looking statements by
using words such as "expects," "anticipates," "estimates," "plans," "will,"
"forecasts," 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, St. Jude Medical's success in marketing the
Angio-Seal(TM) device, demand for and the Company's ability to develop and
manufacture biomaterial products, including Angio-Seal(TM) components, clinical,
sales and marketing success of the TriActiv(R) System, additional regulatory
approvals, and competition from other technologies in the marketplace. For a
more detailed discussion of these and other factors, please see the Company's
SEC 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.
The Company also cautions that results of operations in any past period should
not be considered indicative of the results to be expected for future periods.
Fluctuations in operating results may also result in fluctuations in the price
of the Common Stock.
- FINANCIAL INFORMATION TO FOLLOW -
4
KENSEY NASH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Fiscal Year
Ended June 30, Ended June 30,
---------------------------------- -----------------------------------
2004 2003 2004 2003
---------------------------------- -----------------------------------
Revenues:
Net sales $ 11,604,086 $ 8,306,671 $ 36,360,535 $ 27,071,992
Research and development 226,145 351,395 688,353 962,706
Royalty income 4,505,006 4,591,111 21,165,911 16,316,956
---------------------------------- -----------------------------------
Total revenues 16,335,237 13,249,177 58,214,799 44,351,654
---------------------------------- -----------------------------------
Operating costs and expenses:
Cost of products sold 4,928,755 3,592,521 16,084,377 12,152,601
Research and development 3,777,115 4,244,632 16,411,081 14,490,116
Selling, general and administrative 2,447,229 2,353,616 8,702,372 7,443,940
---------------------------------- -----------------------------------
Total operating costs and expenses 11,153,099 10,190,769 41,197,830 34,086,657
---------------------------------- -----------------------------------
Income from operations 5,182,138 3,058,408 17,016,969 10,264,997
Interest and other income, net 279,899 236,430 1,077,937 1,070,818
---------------------------------- -----------------------------------
Pre-tax income 5,462,037 3,294,838 18,094,906 11,335,815
Income tax expense (benefit) 1,273,258 (289,489) 5,144,123 2,549,480
---------------------------------- -----------------------------------
Net income $ 4,188,779 $ 3,584,327 $ 12,950,783 $ 8,786,335
================================== ===================================
Income per common share, assuming dilution $ 0.34 $ 0.30 $ 1.06 $ 0.76
================================== ===================================
Weighted average common shares outstanding 12,303,158 11,978,161 12,168,322 11,498,473
================================== ===================================
5
KENSEY NASH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, June 30,
2004 2003
------------------ ------------------
Assets
Current assets:
Cash, cash equivalents and investments $ 61,096,487 $ 48,411,397
Trade receivables 6,005,702 3,760,286
Other receivables 4,943,878 5,149,497
Inventory 3,481,599 3,481,322
Prepaids and other assets 1,418,528 2,564,179
Deferred tax asset, current 2,607,669 2,097,147
------------------ ------------------
Total current assets 79,553,863 65,463,828
------------------ ------------------
Property, plant and equipment, net 15,984,900 13,399,717
Acquired puncture closure patents, net 2,410,623 2,673,648
Deferred tax asset, non-current 2,825 1,017,513
Goodwill 3,284,303 3,284,303
------------------ ------------------
Total assets $ 101,236,514 $ 85,839,009
================== ==================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 6,483,366 $ 5,038,025
Current portion of debt 219,147 836,989
Deferred revenue 109,773 195,060
------------------ ------------------
Total current liabilities 6,812,286 6,070,074
------------------ ------------------
Long-term debt - 219,147
------------------ ------------------
Total stockholders' equity 94,424,228 79,549,788
------------------ ------------------
Total liabilities and stockholders' equity $ 101,236,514 $ 85,839,009
================== ==================
6
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
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
measures, including the most directly comparable GAAP measure and an associated
reconciliation.
KENSEY NASH CORPORATION
Non-GAAP Financial Measures and Reconciliations
Adjusted Income and Earnings Per Share Reconciliation
(In Millions, except per share data)
Three Fiscal Three Fiscal
Months Year Months Year
Ended Ended Ended Ended
June 30, June 30, September 30, June 30,
-----------------------------------------------------
2003 2003 2003 2004
----------- ---------- ------------- ----------
Adjusted Income
Net Income, as reported $ 3.6 $ 8.8 $ 2.5 $ 13.0
Exclude:
Historical R&D Tax Credits (1.3) (1.3) (0.3) (0.3)
Historical R&D Tax Credit Engagement Fees 0.3 0.3 0.1 0.1
----------- ---------- ------------- ----------
Net Income, as adjusted $ 2.6 $ 7.8 $ 2.3 $ 12.8
=========== ========== ============= ==========
Diluted Earnings Per Share
Earnings Per Share, as reported $ .30 $ .76 $ .20 $ 1.06
Exclude:
Historical R&D Tax Credits (0.11) (0.11) (0.02) (0.02)
Historical R&D Tax Credit Engagement Fees 0.02 0.02 0.00 0.00
----------- ---------- ------------- ----------
Earnings Per Share, as adjusted $ 0.21 $ 0.67 $ 0.18 $ 1.04
=========== ========== ============= ==========
Diluted weighted average common shares outstanding 11.978 11.498 12.312 12.168
Note: To supplement our consolidated financial statements presented in
accordance with GAAP, Kensey Nash Corporation uses non-GAAP measures of pro
forma net income and earnings per share, which are adjusted from our GAAP
results to exclude certain expenses and credits. 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 and credits that we believe are not indicative of our
core operating results.
The non-GAAP measures are included to provide investors
and management with an alternative method for assessing Kensey Nash's operating
results in a manner that is focused on the performance of Kensey Nash's ongoing
operations and to provide a more consistent basis for comparison between years.
Further, these non-GAAP results are one of the 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.
7