Exhibit 99.1
CONTACT:
Joseph W. Kaufmann
President and Chief Executive Officer
(484) 713-2100
KENSEY NASH REPORTS SECOND QUARTER FISCAL YEAR 2006 RESULTS
PROVIDES UPDATE ON NEW ENDOVASCULAR PRODUCTS
EXTON, PA, January 30, 2006 -- Kensey Nash Corporation (NASDAQ: KNSY) today
reported results for its second quarter of fiscal year 2006 as well as guidance
for its third quarter of fiscal 2006. The Company also provided an update on its
Endovascular product lines.
Second Quarter Results. Second quarter pro forma earnings of $0.12 per share
were in line with previously announced expectations. Reported earnings (loss)
per share for the quarter was ($0.05). Total revenues were $13.6 million for the
second fiscal quarter compared to $15.2 million in the comparable quarter of the
prior fiscal year, a decrease of 10%. Total net sales were $8.0 million compared
to $10.2 million in the prior year period, a decrease of 22%, primarily related
to shipments to one customer. Royalty income increased 13%, to $5.7 million from
$5.0 million in the previous year comparable period. Royalty income included
$4.9 million in Angio-Seal(TM) royalties, up 9% from the comparable quarter of
the prior fiscal year, and $750,000 in royalties from Orthovita (NASDAQ: VITA),
up 45% from the prior year period.
During the quarter, the Company recognized both accelerated depreciation charges
of $1.7 million and moving costs of $270,000 related to its transition to a new
facility. In addition, an equity compensation expense of $647,000 was recorded,
as is now required by the applicable accounting rules. On a pro forma basis,
excluding these charges, earnings per share were $0.12 compared to $0.27 as
reported in the prior year comparable period.
The following chart details the reconcilement from reported loss and loss per
share to the pro forma earnings and income per share for the quarter ended
December 31, 2005 (see attached schedules for the detailed reconciliation
between the non-GAAP and reported GAAP results):
ADJUSTMENTS
-------------------------------------
FACILITY EQUITY
TRANSITION COMPENSATION
AS REPORTED CHARGES EXPENSE PRO FORMA
-------------- ---------------- ----------------- ----------------
Pre-Tax Income (Loss) ($555,860) $1,943,112 $646,793 $2,034,045
Income Tax Benefit (Expense) - (464,258) (154,535) (618,793)
Net Income (Loss) ($555,860) $1,478,854 $492,258 $1,415,252
Weighted Average Shares* 11,476,546 12,245,612 12,245,612 12,245,612
(Loss) Earnings per Share ($0.05) $0.12 $0.04 $0.12
*As reported loss per share utilizes a basic weighted average shares calculation
due to the reported net loss position. Pro forma earnings per share calculation
utilizes a fully diluted weighted average share count.
Endovascular Update. Net sales of the TriActiv(R) Embolic Protection System were
$218,000 during the quarter, and included $164,000 of U.S. sales through the
Company's endovascular direct sales force. The Company continues to open new
accounts, numbering almost 90 at December 31, 2005 and continues to plan for the
near term launch of three additional products via this direct sales force.
The product line expansion, which is expected in late spring of 2006, will
include a second generation embolic protection device, the TriActiv FX(R)
system, which enhances ease of use. In addition, it will include two
thrombectomy products, the ThromCat(TM) Thombectomy Catheter System, a fully
disposable easy to use mechanical device designed to remove moderate to heavy
burdens of clot from the vasculature, and the QuickCat(TM) Extraction Catheter,
an aspiration product for the removal of soft thrombus.
During the last 40 days the Company has completed 510(k) submissions on all the
products mentioned above, completed the ASPIRE clinical trial for its
second-generation embolic protection device and initiated a pilot trial for a
new embolic protection device used during carotid stenting. In addition to
showcasing these 510(k) pending products at the American College of Cardiology
Conference (ACC), to be held in Atlanta from March 11th through the 14th, 2006,
the Company will release the data from the ASPIRE trial. The launch of these
products will be supported by the Company's planned expansion of its sales force
from 19 currently to 25 to 30 by the end of the fiscal year.
The Company is also making progress on the expansion of indications of its
TriActiv(R) System. The Company is currently enrolling patients in a U.S. pilot
study of its TriActiv(R) ProGuard(TM) System in the carotid anatomy. The
TriActiv(R) ProGuard(TM) System incorporates a Local Flush and eXtraction (LFX)
technology designed for use in branched arteries, such as those of the carotid
blood vessels. The Company anticipates enrollment in the study will be completed
by the end of the third fiscal quarter. The Company also expects to complete
enrollment in a European CE Mark study of the ProGuard(TM) system by the end of
the third fiscal quarter and anticipates approval in Europe during the first
half of fiscal 2007. The carotid market represents an important annual market
opportunity of over 500,000 people who suffer from carotid artery disease.
Biomaterials Update. Net sales of cardiology products during the quarter were
$3.5 million, a 13% decline from the prior year and a 21% increase sequentially
over the first quarter of fiscal 2006. As anticipated, sales of the collagen
component for the Angio-Seal, under the exclusive supply agreement with St. Jude
Medical, increased more than 20% both sequentially and from the prior year.
Sales of the anchor component were down approximately 70% from prior year due to
exceptionally large orders during the second fiscal quarter of 2005.
Net sales of orthopaedic products, which were $3.8 million in the second quarter
of fiscal 2006, declined 33% from the prior year second quarter, however were
consistent with the first quarter of fiscal 2006. Orthopaedic sales included
$665,000 of sales of Vitoss(R) Foam(TM) products to Orthovita, Inc., an increase
over the September quarter sales of $425,000 but a decrease compared to $2.4
million in the prior year period. As anticipated and previously reported by the
Company, this decrease in sales to Orthovita is related to Orthovita Vitoss
Foam(TM) product launches in the prior year. The large volume of products
shipped to Orthovita last year in support of these product launches continues to
flow through the distribution channels and the Company is beginning to see
sequential increases in its quarterly shipments to Orthovita. Meanwhile,
Orthovita's end-user sales of the Vitoss(R) Foam(TM) products increased 55% over
the prior year comparable quarter, signifying the success of the products in the
marketplace. As mentioned in the previous quarter, Kensey Nash continues to
anticipate that the launch of several new products with both existing and new
customers, expected in the spring of 2006, will continue to diversify the
Company's revenue base in the orthopaedic sector.
Cash and investments on Kensey Nash's balance sheet as of December 31, 2005 were
$31.5 million, total assets were $112.9 million, stockholder's equity was $104.9
million and no debt was reported at December 31, 2005.
Year-to-Date Results. Total revenues for the six months ended December 31, 2005
were $26.4 million compared to $30.3 million in the prior year period. Net sales
were $15.5 million down from $20.3 million in the comparable six months of the
prior fiscal year. Royalty income was $10.9 million compared to $9.7 million, a
12% increase. Royalty income included $9.5 million in Angio-Seal(TM) royalties,
up 10% from the comparable period of the prior fiscal year, and $1.4 million in
royalties from Orthovita, up 25% from the prior year period.
As described above, the Company recognized accelerated depreciation charges of
$3.3 million and moving costs of $270,000 as well as equity compensation expense
of $1.1 million during the six months ended December 31, 2005. On a pro forma
basis, excluding these charges, earnings per share were $0.21 compared to $0.53
as reported in the prior year comparable period. The reported loss per share for
the six month period was ($0.06).
The following chart details the reconcilement from reported loss and loss per
share to the pro forma earnings and income per share for the six months ended
December 31, 2005 (see attached schedules for the detailed reconciliation
between the non-GAAP and reported GAAP results):
ADJUSTMENTS
-------------------------------------
FACILITY EQUITY
TRANSITION COMPENSATION
AS REPORTED CHARGES EXPENSE PRO FORMA
-------------- ---------------- ----------------- ----------------
Pre-Tax Income (Loss) ($1,075,940) $3,616,237 $1,067,541 $3,607,838
Income Tax Benefit (Expense) 337,327 (1,027,409) (303,299) (993,381)
Net Income (Loss) ($738,613) $2,588,828 $764,242 $2,614,457
Weighted Average Shares* 11,466,702 12,299,244 12,299,244 12,299,244
(Loss) Earnings per Share ($0.06) $0.21 $0.06 $0.21
*As reported loss per share utilizes a basic weighted average shares calculation
because of a reported net loss position. Pro forma earnings per share
calculation utilizes a fully diluted weighted average shares.
Facility Transition Plan. In conjunction with its move to a new 198,000 square
foot facility, the Company is recording an acceleration of depreciation charge
related to the abandonment of leasehold improvement assets at its four leased
facilities, which will be phased throughout fiscal year 2006. The total value of
assets to be abandoned was $4.9 million at April 30, 2005 of which an
acceleration of depreciation charge of $813,000 was recorded during the
Company's quarter ended June 30, 2005. During the three and six months ended
December 31, 2005, the Company recorded a pre-tax $1.7 and $3.3 million, or
$0.10 and $0.19 per share tax effected charge for the acceleration of
depreciation, respectively. The Company will record the remaining acceleration
of depreciation charge over the next two fiscal quarters ($454,000 and $324,000
in the third and fourth fiscal quarters, respectively). In addition, moving
charges associated with the transition to the new facility of approximately
$270,000, or $0.02 per share tax-effected were incurred during the Company's
second fiscal quarter. It is anticipated that moving costs to transition the
remaining employees, furniture and equipment to the new facility will take place
during the third and fourth fiscal quarters and will cost approximately $200,000
to $250,000, with total estimated moving costs of $470,000 to $520,000 for the
entire fiscal year 2006. The Company successfully completed the transition of
the entire manufacturing operation to the new facility during the second fiscal
quarter 2006.
Equity Compensation Expense. Since the quarter ended September 30, 2005, the
Company has been accounting for equity compensation under the provisions of
Statement of Financial Accounting Standards No. 123(R), which requires the cost
of share-based payment transactions to be recognized in the financial
statements. The Company utilized the Black-Scholes method to determine such
compensation expense and recorded a charge of $647,000 and $1.1 million, or
$0.04 and $0.06 per share tax effected, for equity compensation for the three
and six month period ended December 31, 2005, respectively. The Company
estimates a total fiscal year 2006 equity compensation charge of $2.4 million
(or $0.15 per share tax effected).
Third Quarter Fiscal 2006 Forecast. The Company's expectations for the third
fiscal quarter are net sales in a range of $9.0 to $9.5 million, royalties in a
range of $5.8 to $6.0 million and earnings per share on a pro forma basis to be
in a range of $0.19 to $0.21. As reported earnings per share is forecasted at
$0.13 to $0.15, including estimated facility transition costs and equity
compensation expenses of $505,000 and $655,000, respectively. Due to the recent
submissions for 510(k) clearance of three endovascular products, the
ThromCat(TM), QuickCat(TM) and TriActiv FX(R) devices, and the uncertainties
related to the timing of regulatory clearance for these products as well as
regulatory submission and approvals of other products, the Company will not be
providing detailed guidance beyond the third quarter.
Conference Call and Webcast. A live webcast of the second quarter fiscal year
2006 conference call will be broadcast January 30, 2006 at 9:00 AM Eastern
Standard Time. Please visit the financial information page at www.kenseynash.com
for the link. To participate in the conference call, interested parties may call
1-888-428-4474. The teleconference call will also be available for replay
starting Monday, January 30, 2006 at 12:30 p.m. Eastern Standard Time through
Tuesday, February 7, 2006 at 11:59 p.m. Eastern Standard Time by dialing
1-800-475-6701 with an access code of 813618.
About Kensey Nash Corporation. Kensey Nash Corporation is a leading developer
and manufacturer of absorbable biomaterials-based products with applications in
the cardiology, orthopaedics, spine, drug and biologics delivery,
periodontal/dental, surgical and wound care markets. The Company was a pioneer
in the field of arterial puncture closure, as the inventor and developer of the
Angio-Seal(TM) Vascular Closure Device, which is licensed to St. Jude Medical,
Inc. The TriActiv(R) System, a novel embolic protection system, is cleared for
sale in the U.S. The TriActiv FX(R) System, the second generation of the
TriActiv(R) System, is approved for sale in the European Union. Regulatory
clearance for the TriActiv FX(R) is pending in the U.S.
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 guidance regarding
operating results for the third quarter of fiscal 2006. 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 ability of the Company and its customers to
obtain necessary regulatory approvals (including future regulatory approvals for
the TriActiv(R) and thrombectomy product pipelines) and the timing thereof, the
Company's dependence on three major customers: St. Jude Medical, Arthrex and
Orthovita, St. Jude Medical's success in marketing the Angio-Seal(TM) device,
Orthovita's success in selling co-developed products, demand for and the
Company's ability to develop and manufacture biomaterial products, including
Angio-Seal(TM) components, sales and marketing success of the TriActiv(R)
System, 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, 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 STATEMENT OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended December 31, Ended December 31,
------------------------------- -------------------------------
2005 2004 2005 2004
-------------- -------------- -------------- --------------
Revenues:
Net sales $ 7,962,264 $ 10,193,030 $ 15,460,721 $ 20,299,662
Research and
development - - - 253,292
Royalty income 5,664,701 5,027,687 10,892,416 9,745,157
Total revenues 13,626,965 15,220,717 26,353,137 30,298,111
Operating costs and
expenses:
Cost of products
sold 5,247,868 4,303,856 10,041,497 8,350,360
Research and
development 4,913,131 3,734,925 9,863,552 8,118,449
Selling, general
and administrative 4,331,881 2,789,267 8,143,902 5,263,456
Total
operating
costs and
expenses 14,492,880 10,828,048 28,048,951 21,732,265
(Loss)/income from
operations (865,915) 4,392,669 (1,695,814) 8,565,846
Interest and other
income, net 310,055 306,813 619,874 641,760
Pre-tax (loss)/income (555,860) 4,699,482 (1,075,940) 9,207,606
Income tax
(benefit)/expense - 1,409,845 (337,327) 2,762,282
Net (loss)/income $ (555,860) $ 3,289,637 $ (738,613) $ 6,445,324
Basic (loss)/earnings
per share $ (0.05) $ 0.29 $ (0.06) $ 0.56
Diluted (loss)/earnings
per share $ (0.05) $ 0.27 $ (0.06) $ 0.53
Weighted average common
shares outstanding 11,476,546 11,383,208 11,466,702 11,441,755
Diluted weighted
average common shares
outstanding 11,476,546 12,189,891 11,466,702 12,226,596
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
2005 2005
-------------- --------------
Assets
Current assets:
Cash, cash equivalents and
investments $ 31,500,414 $ 44,889,435
Trade receivables 4,325,441 7,863,940
Other receivables 6,601,336 6,594,240
Inventory 7,136,605 5,657,791
Prepaids and other assets 2,140,307 3,568,141
Deferred tax asset, current 1,199,466 656,047
Total current assets 52,903,569 69,229,594
Property, plant and equipment, net 52,602,880 38,607,641
Acquired patents and proprietary
rights, net 4,140,424 4,515,583
Deferred tax asset, non-current - 37,347
Goodwill 3,284,303 3,284,303
Total assets $ 112,931,176 $ 115,674,468
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
expenses $ 6,713,797 $ 10,811,430
Deferred revenue 182,962 271,681
Total current liabilities 6,896,759 11,083,111
Long term portion of deferred
revenue 695,924 738,719
Deferred tax liability, non-current 457,690 -
Total stockholders' equity 104,880,803 103,852,638
Total liabilities and stockholders'
equity $ 112,931,176 $ 115,674,468
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
measure and an associated reconciliation.
Kensey Nash Corporation
Non-GAAP Financial Measures and Reconciliations
Adjusted (Loss)/Income and Earnings Per Share Reconciliation
Non-GAAP Adjustments
---------------------------------------------------------------------
Acceleration
As Reported of Pro forma
Six Months Depreciation Equity Six Months
Ended and Moving Compensation Ended
December 31, Costs Expense December 31,
2005 2005 2005 2005
--------------- --------------- --------------- ---------------
Revenues:
Net sales $ 15,460,721 $ - $ - $ 15,460,721
Research and
development - - - -
Royalty income 10,892,416 - - 10,892,416
Total revenues 26,353,137 - - 26,353,137
Operating costs and
expenses:
Cost of products
sold 10,041,497 (1,952,866) (79,475) 8,009,156
Research and
development 9,863,552 (1,148,371) (377,740) 8,337,441
Selling, general and
administrative 8,143,902 (515,000) (610,326) 7,018,576
Total operating
costs and
expenses 28,048,951 (3,616,237) (1,067,541) 23,365,173
(Loss)/income from
operations (1,695,814) 3,616,237 1,067,541 2,987,964
Interest and other
income, net 619,874 - - 619,874
Pre-tax (loss)/income (1,075,940) 3,616,237 1,067,541 3,607,838
Income tax
(benefit)/expense (337,327) 1,027,409 303,299 993,381
Net (loss)/income $ (738,613) $ 2,588,828 $ 764,242 $ 2,614,457
Basic (loss)/earnings
per share $ (0.06) $ 0.23 $ 0.07 $ 0.23
Diluted (loss)/earnings
per share $ (0.06) $ 0.21 $ 0.06 $ 0.21
Weighted average common
shares outstanding 11,466,702 11,466,702 11,466,702 11,466,702
Diluted weighted average
common shares
outstanding 11,466,702 12,299,244 12,299,244 12,299,244
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. 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.
We have adjusted our GAAP results for equity compensation expense and an
acceleration of depreciation charge. The Company has excluded the impact of
equity compensation related to adopting Statement of Financial Accounting
Standards No. 123(R), Share-Based Payment, which became effective for the
Company July 1, 2005 and the impact of the acceleration of depreciation charge
related to the Company's move to a new facility expected in June 2006. For the
period ending December 31, 2005 equity compensation has been and will continue
to be included in the Company's consolidated results of operations. The
acceleration of depreciation charge began in May 2005 and will be complete by
June 2006. Both of these non-GAAP measures are non-cash charges and will have no
impact on the cash flows of the Company.
These non-GAAP measures will provide investors and management with an
alternative method for assessing Kensey Nash's operating results in a manner
consistent with the presentation prior to the adoption of FAS 123(R) and the
acceleration of depreciation charge related to the transition to the new
facility. 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.
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
measure and an associated reconciliation.
Kensey Nash Corporation
Non-GAAP Financial Measures and Reconciliations
Adjusted (Loss)/Income and Earnings Per Share Reconciliation
Non-GAAP Adjustments
---------------------------------------------------------------------
Acceleration
As Reported of Pro forma
Three Months Depreciation Equity Three Months
Ended and Moving Compensation Ended
December 31, Costs Expense December 31,
2005 2005 2005 2005
--------------- --------------- --------------- ---------------
Revenues:
Net sales $ 7,962,264 $ - $ - $ 7,962,264
Research and
development - - - -
Royalty income 5,664,701 - - 5,664,701
Total revenues 13,626,965 - - 13,626,965
Operating costs and
expenses:
Cost of products sold 5,247,868 (1,071,470) (53,870) 4,122,528
Research and
development 4,913,131 (597,514) (241,597) 4,074,020
Selling, general and
administrative 4,331,881 (274,128) (351,326) 3,706,427
Total operating
costs and
expenses 14,492,880 (1,943,112) (646,793) 11,902,975
(Loss)/income from
operations (865,915) 1,943,112 646,793 1,723,990
Interest and other income,
net 310,055 - - 310,055
Pre-tax (loss)/income (555,860) 1,943,112 646,793 2,034,045
Income tax
(benefit)/expense - 464,258 154,535 618,793
Net (loss)/income $ (555,860) $ 1,478,854 $ 492,258 $ 1,415,252
Basic (loss)/earnings per
share $ (0.05) $ 0.13 $ 0.04 $ 0.12
Diluted (loss)/earnings
per share $ (0.05) $ 0.12 $ 0.04 $ 0.12
Weighted average common
shares outstanding 11,476,546 11,476,546 11,476,546 11,476,546
Diluted weighted average
common shares outstanding 11,476,546 12,245,612 12,245,612 12,245,612
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. 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.
We have adjusted our GAAP results for equity compensation expense and an
acceleration of depreciation charge. The Company has excluded the impact of
equity compensation related to adopting Statement of Financial Accounting
Standards No. 123(R), Share-Based Payment, which became effective for the
Company July 1, 2005 and the impact of the acceleration of depreciation charge
related to the Company's move to a new facility expected in June 2006. For the
period ending December 31, 2005 equity compensation has been and will continue
to be included in the Company's consolidated results of operations. The
acceleration of depreciation charge began in May 2005 and will be complete by
June 2006. Both of these non-GAAP measures are non-cash charges and will have no
impact on the cash flows of the Company.
These non-GAAP measures will provide investors and management with an
alternative method for assessing Kensey Nash's operating results in a manner
consistent with the presentation prior to the adoption of FAS 123(R) and the
acceleration of depreciation charge related to the transition to the new
facility. 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.