Kensey Nash Corporation (KNSY)
F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
April 22, 2009 9:00 am ET
Joseph Kaufmann – President & CEO
Mike Celano – CFO
Doug Evans – COO
Josh Jennings – Jefferies & Co.
Dave Turkaly – SIG
Ben Forrest – Summer Street
James Sidoti – Sidoti & Company
Previous Statements by KNSY
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Ladies and gentlemen, thank you for standing by and welcome to the third quarter earnings release. At this time all participants are in a listen-only mode. Later there will be an opportunity for questions. Instructions will be given at that time. (Operator instructions) As a reminder this conference is being recorded. I’d now like to turn the conference over to your host, Mr. Joseph Kaufmann. Please go ahead.
Thank you. Good morning, everyone. Welcome to the Kensey Nash fiscal third quarter conference call. Joining me today are Doug Evans, our Chief Operating Officer, and Mike Celano, our CFO. Mike will start out with the Safe Harbor.
Thank you, Joe. The statements made by Kensey Nash and its representatives in this conference call will contain certain forward-looking statements, including financial forecasts that are based on the current beliefs of management as well as assumptions made by and information currently available to management. Wherever possible, we will try to identify these forward-looking statements by using words such as belief, expect, anticipate, forecast, and similar expressions. Please note these words are not the exclusive means for identifying such statements.
Please see today’s press release and Kensey Nash’s SEC filings, including our Annual Report on Form 10-K for the year ended June 30, 2009, and our other fiscal year Form 10-Qs, particularly the information under the caption “Risk Factors” for discussions of risks, uncertainties, and other factors that could cause actual results in the remainder of fiscal year 2010 and beyond to differ materially from those expressed in or implied by our forward-looking statements.
Great, thank you. Well, I am pleased to report very solid financial results for the third quarter and also would like to take this time to thank all of our employees for the outstanding job that they have performed over the – this past quarter and past year during – earlier this year some maybe difficult times. However, I think it has – as the results reflect today, and what we see going forward, you can see the efforts and the fruits of all the hard work of the people at Kensey Nash.
Our total revenue of just under $20 million was 3% below prior year, but increased 5% sequentially. Total net sales of $13.2 million were 5% below prior year, but increased 6% sequentially. Our biomaterials sales, which exclude of the endovascular business that was sold to Spectranetics in 2008 were $13 million, a 1% increase from prior year and a 12% increase sequentially. Royalty income of $6.7 million was flat year-over-year, but increased 2% sequentially.
We were certainly pleased and encouraged to see the 12% sequential growth in our biomaterials business, and the strength of our overall business for the – as far as orders and also what we see as incoming orders for the fourth quarter. This sequential growth occurred primarily in our orthopedic business, specifically sports medicine, which increased 53% sequentially to $4.7 million. We believe this reflects an improvement in the overall healthcare environment and also recovery from depleted inventories of our customers and also at the hospitals. We expect our fourth quarter sports medicine will continue strong with sales in the same range as we had in the third quarter.
Moving on to our spine business, although it was – our spine business at $2.5 million were down 10% sequentially in the quarter, orders have improved dramatically and we expect our fourth quarter sales will increase over 30% sequentially, again, reflecting a dramatic improvement from where we have been over the past couple of quarters and also reflecting the improvement in the overall healthcare environment.
Cardiovascular products, largely Angio-Seal components, were at $4.9 million, increasing 8% year-over-year and 14% sequentially. We expect our sales in the fourth quarter will be in the approximate same range as our third quarter. Angio-Seal royalties of $5.2 million were flat year-over-year, but increased 4% sequentially and Orthovita royalties of $1.4 million were flat year-over-year and down 7% sequentially.
We do expect to see an improvement in our royalties from VITA in the fourth quarter. You may have notices that they published – Orthovita published their sales results, preliminary sales results for their quarter and pointed out that they have basically in the quarter there was an emphasis on the new Cortoss product that Kensey Nash is not associated with, but did have an impact on the products that Kensey Nash manufactures and co-develop with VITA. But we think that as they indicated in their press release that the emphasis, reemphasis on these products in the fourth quarter will help our royalties going forward.
EPS for the quarter was $0.46, a 10% increase year-over-year and a 7% sequential increase on a pro forma basis.
Our balance sheet continues to be very strong. Cash and investments at March 31
was $71 million. Operating cash flow on a year-to-date basis was slightly over $19 million and for the quarter was just under $10 million.
At this time I would like to make some comments about our collagen supply agreement with St. Jude Medical. Again, at this time we do not have an agreement in place beyond December, 2010. We have exchanged proposals, but I cannot provide any further information regarding terms, including units, pricing, or length of contract. We will continue to supply under our existing contract, and we’ll certainly like to continue to supply collagen going forward. Regardless of the outcome of this situation Kensey Nash is well-positioned to grow our business going forward.