CryoLife's CEO Discusses Q1 2011 Results - Earnings Call Transcript

CryoLife Inc. ( CRY)

Q1 2011 Earnings Call

April 28, 2011 10:00 am ET

Executives

Steve Anderson – Chairman, President & CEO

Ashley Lee – Executive VP, COO, CFO & Treasurer

Analysts

Matt Dolan – Roth Capital Partners

Joe Munda – Sidoti & Company

Tim Lee – Piper Jaffray

Raymond Myers – Benchmark

Presentation

Operator

Greetings and welcome to the CryoLife First Quarter 2011 Financial Results 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 instructions) 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 and welcome to CryoLife’s First Quarter Conference Call. This is Steve Anderson; CryoLife’s CEO and with me today is Ashley Lee, CryoLife’s Executive VP, COO and CFO.

This morning we reported record first quarter revenues of $30.2 million and earnings of $0.06 per share. Ashley will discuss these results in more detail in a few minutes.

The agenda for today’s call is as follows. Ashley will discuss the results of the first quarter by product line and the financial implications for the potential acquisition of Cardiogenesis. I’ll discuss the recently announced planned acquisition of Cardiogenesis and the first quarter sales of PerClot, our new powdered hemostat that we acquired last September. I’ll also discuss the progress in the launch of BioFoam in Europe and I’ll discuss BioGlue in Japan.

After my comments are completed Ashley will return to give you some financial guidance for the rest of the year. At this time Ashley will discuss this morning’s press release and our financial results for the first quarter.

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 risks and uncertainties in our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include the 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’ll provide in a moment.

Additional information concerning risks 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, 2010 and our Form 10-Q for the quarter-ended March 31, 2011, 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 find the comparable GAAP measures and a reconciliation of these non-GAAP measures to the equitable GAAP measures in the press release that went out this morning. A copy of which is contained on the Investor Relations portion of our Web site.

This morning we reported our results for the first quarter of 2011. We set an all-time quarterly revenue record of $30.2 million. As of March 31, 2011 we had $42.9 million in cash, cash equivalents and restricted securities, which includes $1.6 million received from the DoD and $5.3 million in restricted securities. We generated cash flow from operations of $3.9 million in the quarter.

Net income for the first quarter of 2011 was $1.7 million or $0.06 per basic and fully diluted common share compared to net income of $1.9 million or $0.07 per basic employee diluted common share for the first quarter of 2010.

Excluding pre-tax charges of $1.2 million related to our proposed acquisition of Cardiogenesis Corporation and other business development activities, non-GAAP adjusted net income for the first quarter of 2011 was $2.4 million or $0.09 per basic and fully diluted common share.

Vascular revenues increased 5% for the first quarter of 2011 compared to the first quarter of 2010. The increase for the first quarter resulted primarily from a 2% increase in unit shipments and an increase in average service fees.

Cardiac revenues for the first quarter of 2011 decreased 5% compared to the corresponding period of 2010. The decrease for the quarter was primarily due to a decrease in shipments for cardiac valves and patch material primarily as a result of competitive pressures and cost containment practices in certain hospitals.

Product revenues which consist primarily of sales of BioGlue, PerClot and HemoStase were $14.4 million for the first quarter of 2011 compared to $14 million for the first quarter of 2010, an increase of 2%. The increase in product revenues was primarily due to the addition of PerClot revenues in the first quarter of 2011 partially offset by a decrease in HemoStase revenues.

Total gross margins were 61% and 60% for the first quarters of 2011 and 2010. Preservation Service gross margins were 41% and 40% for the first quarters of 2011 and 2010 and product gross margins were 83% and 82% for the first quarter of 2011 and 2010.

General, administrative and marketing expenses for the first quarter of 2011 were $14.3 million compared to $13.8 million for the first quarter of 2010. General, administrative and marketing expenses for the first quarter of 2011 included approximately $1.2 million in costs related to our proposed acquisition of Cardiogenesis and other business development activities.

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