CryoLife CEO Discusses Q4 2010 Results - Earnings Call Transcript

CryoLife Inc. ( CRY)

Q4 2010 Earnings Conference Call

February 17, 2011, 10:00 am ET

Executives

Steve Anderson – President and CEO

Ashley Lee – EVP, COO & CFO

Analysts

Matt Palmer – Roth Capital Partners

Raymond Myers – The Benchmark Company

Joseph Munda – Sidoti & Company

Tim Lee – Piper Jaffray

Presentation

Operator

Greetings, and welcome to the CryoLife fourth quarter and year end 2010 financial conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instruction) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Steve Anderson, President and CEO for CryoLife. Thank you Mr. Anderson you may begin.

Steve Anderson

Good morning everyone. This is Steve Anderson, CryoLife’s CEO, and I would like to welcome you to CryoLife’s year end conference call. With me today is Ashley Lee, the company’s Executive Vice President, COO and CFO.

This morning we announced record revenues for CryoLife of $116.6 million and earnings of $0.14 per share. Ashley will discuss the revenues and earnings in more detail in just a few minutes. The fourth quarter of 2010 was a very busy time for CryoLife management. As you will recollect we closed on a manufacturing and distribution agreement with Starch Medical for a powdered hemostat product that they have been marketing in Europe. This assures our participation in a worldwide market estimated to be about $2 billion. This manufacturing and distribution agreement gives us access to all medical specialties in our territory. I will comment more completely on this in a few minutes.

The agenda for the conference call today is as follows

Ashley will discuss today’s press release in detail and will comment on the growth that we have seen in our business in 2010. I will comment on the manufacturing and distribution agreement with Starch Medical and our international and domestic strategies for launches this product throughout the world. I will also comment on the recent approval of BioGlue in Japan. I will comment on the pending Humane Device Exemption approval of the SynerGraft processed Aortic Valve. And I will comment on the BioFoam European post market study and the BioFoam IDE study that is beginning in the U.S.

After my comments have been completed Ashley will return to give you some financial guidance for the rest of 2011. After the guidance comments we will open the call up for questions. At this time Ashley will comment on today’s press release.

Ashley Lee

Thanks Steve. To comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995 I would like to make the following statement. Comments made in this call which look forward in time, involve risk and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future. Including the guidance for 2011 that I will provide in a moment.

Additional information concerning risk and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company's SEC filings, including the risk factor section of our previously filed Form 10-K for the year ended December 31, 2009 and our previously filed Form 10-Qs for the quarters ended March 31, June 30 and September 30, 2010, and our Form 10-K for the year ended December 31, 2010 which we expect to file shortly and in the press release that went out this morning.

On the call today I will discuss certain non-GAAP financial measures. You can also find the comparable GAAP measures and the reconciliation of these non-GAAP measures to the applicable GAAP measures as scheduled to the press release that went out this morning, a copy of which is contained on the Investor Relations portion of our website. This morning we reported our results for the fourth quarter and full year of 2010 we set all time fourth quarter and full year revenue records of $29.2 million and $116.6 million for the periods ended December 31, 2010.

As of December 31, 2010 we had $40.8 million in cash, cash equivalents and restricted securities which includes $1.7 million received from the DOD and $5.3 million in restricted securities. The $40.8 million reflects the $6.75 million paid in September 2010 in connection with the license of the PerClot technology $5.8 million paid during 2010 for the repurchase of shares of CryoLife common stock and $2.4 million paid earlier this year to invest in medical or common stock.

We generated cash flow from operations of $7 million in the quarter and $20.8 million for the year ended December 31, 2010. We expect to continue to generate significant cash flow from operations going forward which will allow us to continue our efforts on the business development firm. Net income for the fourth quarter of 2010 was $2.1 million or $0.08 per basic and fully diluted common share. We also recorded pretax charges in the fourth quarter of 2010 of approximately $474,000 related to business development activities and $268,000 in cost associated with our litigation with Medafor.

Net income for the full year of 2010 was $3.9 million or $0.14 per basic and fully diluted common share. Excluding pretax charges of $3.5 million for acquired in-process R&D related to the license of the PerClot technology $3.6 million for the impairment of our investment in medical or common stock and $1.6 million related to the write down at HemoStase inventory net income before items for the full year of 2010 was $9.5 million or $0.34 per basic and fully diluted common share.

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