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Kensey Nash Reports Fourth Quarter and Fiscal Year 2008 Results
Date:8/21/2008

- 4th Quarter revenues of $22.0M increased 29% and adjusted EPS* of $0.35

increased 218% - - Total Fiscal Year Revenues of $79.8M increased 15% and adjusted EPS* of

$0.99 increased 87% -

EXTON, Pa., Aug. 21 /PRNewswire-FirstCall/ -- Kensey Nash Corporation (Nasdaq: KNSY) today reported the results for its fourth quarter and fiscal year ended June 30, 2008.

Fourth Quarter Results

Revenues: Sales and Royalties. Total revenues increased 29% to a record level of $22.0 million in the Company's fourth fiscal quarter ended June 30, 2008, from $17.0 million in the comparable prior year period.

Net sales increased 42% to $15.0 million from $10.5 million in the fourth quarter of fiscal 2007. Net sales of biomaterials products increased 37% to $13.3 million from $9.7 million in the comparable prior year period due to strong sales in both orthopaedic and cardiovascular product lines. Orthopaedic sales increased 39% to $8.4 million from $6.0 million in the prior year period, primarily due to increased sales of products in the Company's sports medicine and spine product portfolios. Cardiovascular sales of $4.2 million, consisting primarily of sales of vascular closure product components to St. Jude Medical, increased 29%, from $3.2 million in the prior year period.

Sales of endovascular products during the quarter increased 103% to $1.6 million from $806,000 in the prior year period. Endovascular sales included direct sales to customers for the months of April and May, as well as sales of product to Spectranetics Corporation (Nasdaq: http://www.kenseynash.com and clicking on Webcast. The teleconference call will also be available for replay starting Thursday, August 21, 2008 at 11:00 a.m. Eastern Time through Thursday, August 28, 2008 at 11:59 p.m. Eastern Time by dialing 1-800-475-6701 with an access code of 956292.

About Kensey Nash Corporation. Kensey Nash Corporation is a leading medical technology company providing innovative solutions and technologies for a wide range of medical procedures. The Company provides an extensive range of products into multiple medical markets, primarily sports medicine, spine, and endovascular markets. Many of the products are based on the Company's significant expertise in the design, development, manufacturing and processing of absorbable biomaterials, which has led to partnerships to commercialize technologies. Kensey Nash has also developed and commercialized a series of innovative endovascular products and recently completed the sale of this product line to Spectranetics Corporation. In conjunction with the sale transaction, the Company will continue to manufacture and develop these products for Spectranetics for a period of time. The Company is known as 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.

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 statement regarding anticipated growth of the products sold to Spectranetics, the forecasts for the first quarter of fiscal 2009 and the full year fiscal 2009. The Company has tried to identify these forward looking statements by using words such as "expect," "anticipate," "estimate," "plan," "will," "would," "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, risks associated with the Company's continued research and development efforts with respect to the endovascular products (including the risk that those efforts will not be successful and that some or all of the associated milestone payments will not be received) and Spectranetics' success in selling the ThromCat and SafeCross products, as well as competition from other technologies, the Company's success in distributing its products into the marketplace, the Company's dependence on four major customers (St. Jude Medical, Arthrex, Orthovita and Spectranetics) and their success in selling Kensey Nash related products in the marketplace, the impact of product recalls and other manufacturing issues, and competition from other technologies. For a detailed discussion of factors that could affect the Company's future operating results, 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 Fiscal Year

Ended June 30, Ended June 30,

2008 2007 2008 2007

Revenues:

Net sales

Biomaterial

sales $13,330,890 $9,701,925 $47,538,923 $41,116,112

Endovascular

sales 1,637,713 805,574 6,221,942 3,786,257

Total net sales 14,968,603 10,507,499 53,760,865 44,902,369

Royalty income 7,003,252 6,471,459 26,030,032 24,592,076

Total revenues 21,971,855 16,978,958 79,790,897 69,494,445

Operating costs and

expenses:

Cost of products

sold 9,097,198 8,658,502 27,211,681 24,621,727

Research and

development 4,339,583 5,844,513 17,200,762 20,265,046

Sales and

marketing 4,232,527 3,269,628 14,747,333 12,524,501

General and

administrative 4,851,947 2,331,032 12,827,771 8,299,525

Loss on sale of

endovascular

assets 1,212,478 - 1,212,478 -

Total operating

costs and

expenses 23,733,733 20,103,675 73,200,025 65,710,799

(Loss) Income from

operations (1,761,878) (3,124,717) 6,590,872 3,783,646

Interest and other

(loss) income, net (263,568) 106,278 15,088 636,921

Pre-tax (loss) income (2,025,446) (3,018,439) 6,605,960 4,420,567

Income tax (benefit)

expense (930,480) (1,273,666) 1,816,179 787,416

Net (loss) income $(1,094,966) $(1,744,773) $4,789,781 $3,633,151

Basic (loss) earnings

per share $(0.09) $(0.15) $0.40 $0.31

Diluted (loss)

earnings per share $(0.09) $(0.15) $0.38 $0.29

Weighted average

common shares

outstanding 11,608,026 11,913,480 11,891,469 11,773,317

Diluted weighted

average common shares

outstanding 11,608,026 11,913,480 12,471,298 12,580,526

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,

2008 June 30,

(Unaudited) 2007

Assets

Current assets:

Cash, cash equivalents and

investments $63,496,141 $34,331,454

Trade receivables 6,617,156 6,220,727

Other receivables 9,030,699 6,799,369

Inventory 9,270,864 7,392,116

Prepaids and other assets 1,859,958 1,977,592

Deferred tax asset, current 4,277,864 3,151,350

Total current assets 94,552,682 59,872,608

Property, plant and equipment, net 59,598,308 63,821,312

Other non-current assets 8,277,574 16,831,544

Total assets $162,428,564 $140,525,464

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued

expenses $8,972,222 $6,178,026

Current portion of debt 1,399,997 186,667

Deferred revenue 601,131 350,739

Other current liabilities 686,267 -

Total current liabilities 11,659,617 6,715,432

Long term portion of deferred revenue 507,642 611,196

Long term portion of debt 32,783,333 7,813,333

Deferred tax liability, non-current 420,598 995,395

Other non-current liabilities 2,487,718 740,321

Total stockholders' equity 114,569,656 123,649,787

Total liabilities and stockholders'

equity $162,428,564 $140,525,464

Non-GAAP Financial Measures and Reconciliations

We use various numerical measures in this news release, as well as 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 Earnings Per Share Reconciliation

Year over

Three Months Three Months Year %

Ended Ended Change

June 30, 2008 June 30, 2007

Loss Per Share - GAAP $(0.09) $(0.15)

Special Charges (a) 0.44 0.25

Adjusted Diluted Earnings Per Share $0.35 $0.11 218%

(a) Loss per share for the fourth quarter of fiscal year 2008 includes

$8.1 million in net charges ($5.4 million in after-tax charges, or

$0.44 per share tax-effected), related to the sale of the Company's

endovascular business. Loss per share for the fourth quarter of

fiscal year 2007 included $4.7 million in charges ($3.1 million in

after-tax charges, or $0.25 per share tax effected), related to the

discontinuance of the Company's embolic protection platform.

Year over

Fiscal Year Fiscal Year Year %

Ended Ended Change

June 30, 2008 June 30, 2007

Diluted Earnings Per Share - GAAP $0.38 $0.29 31%

Special Charges (b) 0.61 0.25

Adjusted Diluted Earnings Per Share $0.99 $0.53 87%

(b) Diluted earnings per share for fiscal year 2008 includes

$3.0 million in net charges ($2.0 million in after-tax charges, or

$0.16 per share tax -effected), for the acceleration of stock

awards, approximately $324,000 in charges ($215,000 in after-tax

charges, or $0.02 per share tax-effected), related to the

discontinuation of the Company's embolic protection platform, both

of which were incurred during the first quarter of fiscal 2008, and

$8.1 million in net charges ($5.4 million, or $0.44 per share

tax-effected), related to the sale of the Company's endovascular

business during the fourth quarter of fiscal year 2008. Diluted

earnings per share for the fourth quarter of fiscal year 2007

included $4.7 million in charges ($3.1 million in after-tax charges,

or $0.25 per share tax effected), related to the discontinuance of

the Company's embolic protection platform.

Three Months Three Months Year over Year %

Ended Ended Change

September 30, 2008 September 30, 2007

Range Range

Low High Low High

Diluted Earnings

Per Share -

GAAP $0.37 $0.38 $(0.02)

Special Charges

( c ) 0.18

Adjusted Diluted

Earnings Per

Share $0.37 $0.38 $0.16 131% 138%

( c ) Diluted earnings per share for the first quarter of fiscal year 2008

included $3.0 million in charges ($2.0 million in after-tax charges,

or $0.16 per share tax -effected), for the acceleration of stock

awards, and approximately $324,000 in charges ($215,000 in after-tax

charges, or $0.02 per share tax-effected), related to the

discontinuation of the Company's embolic protection platform.

Fiscal Year Fiscal Year Year over Year %

Ended Ended Change

June 30, 2009 June 30, 2008

Range Range

Low High Low High

Diluted

Earnings Per

Share - GAAP $1.60 $1.67 $0.38

Special Charges

(d) 0.61

Adjusted Diluted

Earnings Per

Share $1.60 $1.67 $0.99 62% 69%

(d) Diluted earnings per share for fiscal year 2008 included

$3.0 million in charges ($2.0 million in after-tax charges, or $0.16

per share tax -effected), for the acceleration of stock awards,

approximately $324,000 in charges ($215,000 in after-tax charges, or

$0.02 per share tax-effected), related to the discontinuation of the

Company's embolic protection platform, and $8.1 million in net

charges ($5.4 million, or $0.44 per share tax-effected), related to

the sale of the Company's endovascular business during the fourth

quarter of fiscal year 2008.

Note: To supplement our consolidated financial statements presented in

accordance with GAAP, Kensey Nash Corporation uses non-GAAP measures

of adjusted 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.

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 future presentation. 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.

Supplemental Non-GAAP Financial Measures and Reconciliations

Kensey Nash Corporation

Non-GAAP Financial Measures and Reconciliations

Adjusted Income and Earnings Per Share Reconciliation

(Unaudited) (Unaudited)

As Reported Non-GAAP Adjustments As Adjusted

Three Embolic One-Time Sale of Three

Months Protection Equity Endovas- Months

Ended Disconti- Accelera- cular Ended

June 30, nuance tion Business June 30,

2008 2008 2008 2008 2008

Revenues:

Net sales

Biomate-

rials $13,330,890 $- $- $- $13,330,890

Endovas-

cular 1,637,713 - - - 1,637,713

Total net

sales 14,968,603 - - - 14,968,603

Research

and

development - - - - -

Royalty

income 7,003,252 - - - 7,003,252

Total

revenues 21,971,855 - - - 21,971,855

Operating costs

and expenses:

Cost of

products

sold 9,097,198 - - (2,012,734) 7,084,464

Research

and

development 4,339,583 - - (10,250) 4,329,333

Sales and

marketing 4,232,527 - - (2,382,915) 1,849,612

General and

admini-

strative 4,851,947 - - (2,482,929) 2,369,018

Loss on

sale of

endovascular

assets 1,212,478 (1,212,478) -

Total

operating

costs and

expenses 23,733,733 - - (8,101,306) 15,632,427

(Loss) Income

from

operations (1,761,878) - - 8,101,306 6,339,428

Interest and

other income,

net (263,568) - - - (263,568)

Pre-tax (loss)

income (2,025hd1 = document.getElementById('headline'); s.tl(this,'o',getLinkName('Company Sanpshot'));" >SPNC) in June, after the Company's completion of the sale of its endovascular business (see below).

Royalty income increased 8% to $7.0 million compared to $6.5 million in the comparable prior year period. Royalty income included $5.7 million in Angio-Seal(TM) royalties and $1.2 million in royalties from Orthovita, Inc. (Nasdaq: VITA). Angio-Seal royalties were up 5% from the comparable quarter of the prior fiscal year due to higher than expected end-user sales while Orthovita royalties were up 21% primarily due to the full launch of the new VITOSS(R) Bioactive Foam product during the quarter and continued strong end-user sales by Orthovita in the marketplace.

"We are extremely pleased with our fourth quarter and fiscal 2008 results as we exceeded our previous expectations. Our orthopaedic biomaterials sales were excellent in the quarter and throughout the fiscal year. Angio-Seal royalties were better than expected in the quarter and the Orthovita royalties continued strong, increasing 21% in the quarter and 19% in the fiscal year. Additionally, we closed the sale of our endovascular business to Spectranetics during the quarter and are looking forward to a successful partnership with them," commented Joe Kaufmann, President and CEO of the Company.

Earnings Per Share. Fourth quarter adjusted diluted earnings per share* of $0.35 represent an increase of 218% when compared with the $0.11 adjusted diluted earnings per share for the same period in fiscal year 2007. Adjusted diluted earnings per share* exclude the $8.1 million in net charges ($5.4 million in after-tax charges, or $0.44 per share tax-effected), related to the sale of th,446) - - 8,101,306 6,075,860

Income tax

(benefit)

expense (930,480) - - 2,702,892 1,772,412

Net (loss)

income $(1,094,966) $- $- $5,398,414 $4,303,448

Basic (loss)

earnings per

share $(0.09) $- $- $0.47 $0.37

Diluted (loss)

earnings per

share $(0.09) $- $- $0.44 $0.35

Weighted

average

common shares

outstanding 11,608,026 11,608,026 11,608,026 11,608,026 11,608,026

Diluted

weighted

average

common

shares

outstanding 12,163,840 12,163,840 12,163,840 12,163,840 12,163,840

(Unaudited)

As Reported Non-GAAP Adjustments As Adjusted

Twelve Embolic One-Time Sale of Twelve

Months Protection Equity Endovas- Months

Ended Disconti- Accelera- cular Ended

June 30, nuance tion Business June 30,

2008 2008 2008 2008 2008

Revenues:

Net sales

Biomate-

rials $47,538,923 $- $- $- $47,538,923

Endovas-

cular 6,221,942 - - - 6,221,942

Total net

sales 53,760,865 - - - 53,760,865

Research

and

development - - - - -

Royalty

income 26,030,032 - - - 26,030,032

Total

revenues 79,790,897 - - - 79,790,897

Operating

costs and

expenses:

Cost of

products

sold 27,211,681 (154,726) (253,879)(2,012,734) 24,790,342

Research

and

development 17,200,762 (92,630) (849,678) (10,250) 16,248,204

Sales and

marketing 14,747,333 (71,474) (262,148)(2,382,915) 12,030,796

General

and

admini-

strative 12,827,771 (4,898)(1,627,173)(2,482,929) 8,712,771

Loss on

sale of

endovascular

assets 1,212,478 - - (1,212,478) -

Total

operating

costs

and

expenses 73,200,025 (323,728)(2,992,878)(8,101,306) 61,782,113

Income from

operations 6,590,872 323,728 2,992,878 8,101,306 18,008,784

Interest and

other income,

net 15,088 - - - 15,088

Pre-tax

income 6,605,960 323,728 2,992,878 8,101,306 18,023,872

Income tax

expense 1,816,179 108,606 1,004,066 2,717,867 5,646,717

Net income $4,789,781 $215,122 $1,988,812 $5,383,439 $12,377,155

Basic

earnings

per share $0.40 $0.02 $0.17 $0.45 $1.04

Diluted

earnings

per share $0.38 $0.02 $0.16 $0.43 $0.99

Weighted

average

common

shares

outstand-

ing 11,891,469 11,891,469 11,891,469 11,891,469 11,891,469

Diluted

weighted

average

common

shares

outstanding 12,471,298 12,471,298 12,471,298 12,471,298 12,471,298

e Company's endovascular business. Adjusted diluted earnings per share* for the fourth quarter of fiscal year 2007 excluded $4.7 million in charges ($3.1 million in after-tax charges, or $0.25 per share tax effected), for the discontinuance of the Company's embolic protection platform. Including these items, the fiscal year 2008 fourth quarter loss per share was ($0.09) compared to a loss of ($0.15) per share for the same period in fiscal year 2007. Tax-effected equity compensation expense, which is included in adjusted earnings per share, was $0.04 and $0.03 per share for the periods ended June 30, 2008 and 2007, respectively.

* Diluted earnings per share excluding after-tax special charges are non-GAAP financial measures and should not be considered replacements for GAAP results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the accompanying table to this release.

The following chart presents a summary reconciliation of the Company's adjusted earnings per share for the three months ended June 30, 2008, and the comparable period of the prior fiscal year. See attached schedules for a detailed reconciliation between the non-GAAP and reported GAAP results.

Three Months Year over

Ended June 30, Year %

($ millions, except per share data) 2008 2007 Change

Data as Reported:

Pre-tax Loss, As Reported ($2.0) ($3.0) 33%

Adjust for:

Discontinuation of Embolic

Protection - $4.7 n/m

Sale of Endovascular

Business, Net $8.1 - n/m

Pre-tax Income, As Adjusted $6.1 $1.7 265%

Earnings Per Share, As Adjusted $0.35 $0.11 218%

Supplemental Information

related to Equity Compensation

Expense:

Equity Compensation Expense $0.7 $0.5

Equity Compensation Expense

Per Share (net of tax) $0.04 $0.03

Fiscal Year 2008 Results

Revenues: Sales and Royalties. Total revenues for the fiscal year ended June 30, 2008 were $79.8 million, up 15% from total revenues of $69.5 million for the fiscal year ended June 30, 2007.

Net sales increased 20% to $53.8 million from $44.9 million recorded in the prior fiscal year. Net sales of biomaterials products increased 16% to $47.5 million from $41.1 million, primarily due to orthopaedic product sales, which increased 35% to $29.4 million from $21.8 million. Sports medicine and spine product sales increased, 27% and 47%, respectively, over the prior fiscal year period. Sports medicine product sales were led by a 27% increase in product sales to the Company's most significant customer in this market. The increase in spine product sales included $2.0 million of new product sales resulting from the Company's MacroPore Biosurgery asset acquisition, completed in May 2007. Sales to Orthovita increased $1.9 million due to strong end user sales of existing products and initial shipments for the new VITOSS(R) Bioactive Foam product line launched by Orthovita in the second calendar quarter of 2008. Sales of vascular closure product components to St. Jude Medical decreased $1.8 million, or 10%, from the prior year period, as anticipated and previously disclosed.

Sales of endovascular products during the 2008 fiscal year increased 64% to $6.2 million from $3.8 million in the prior year. Endovascular sales included direct sales to customers through the month of May, as well as sales of product to Spectranetics during the month of June, after the Company's completion of the sale of its endovascular business (see below).

Royalty income for the fiscal year increased 6% to $26.0 million compared to $24.6 million in the prior year. Royalty income included $21.4 million in Angio-Seal(TM) royalties, up 3% from the prior year, and $4.4 million in royalties from Orthovita, up 19% from the prior year. Orthovita royalty growth was primarily due to the sales and marketing efforts of Orthovita, increase in its sales force and the full launch of the new VITOSS(R) Bioactive Foam product in the fourth fiscal quarter.

Earnings Per Share. Fiscal year 2008 adjusted diluted earnings per share* of $0.99, represents an increase of 87% compared to fiscal year 2007 adjusted diluted earnings per share of $0.53. Adjusted diluted earnings per share* for fiscal year 2008 excludes $11.4 million in net charges ($7.6 million in after-tax charges, or $0.61 per share tax effected), for the acceleration of stock awards, discontinuation of the Company's embolic protection platform, and sale of the Company's endovascular business. Adjusted diluted earnings per share* for fiscal year 2007 of $0.53 excludes $4.7 million in charges ($3.1 million in after-tax charges, or $0.25 per share tax effected) for the discontinuance of the Company's embolic protection platform. Including these items, reported diluted earnings per share for fiscal 2008 of $0.38, represents a 31% increase compared to fiscal year 2007 reported diluted earnings per share of $0.29.

* Diluted earnings per share excluding after-tax special charges are non-GAAP financial measures and should not be considered replacements for GAAP results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the accompanying table to this release.

In the fiscal year ended June 30, 2008, the total tax-effected impact on earnings per share of equity compensation expense was $0.28, of which $0.16 related to the acceleration of stock awards and $0.12 related to equity compensation expense prior to the acceleration, equity compensation from current year equity grants and a mark-to-market adjustment on stock appreciation rights. The tax-effected impact on earnings per share of equity compensation expense was $0.15 in the fiscal year ended June 30, 2007.

The following chart presents a summary reconciliation of the Company's adjusted earnings per share for the fiscal year ended June 30, 2008, and the prior fiscal year. See attached schedules for a detailed reconciliation between the non-GAAP and reported GAAP results.

Fiscal Year Year over

Ended June 30, Year %

($ millions, except per share data) 2008 2007 Change

Data as Reported:

Pre-tax Income, As Reported $6.6 $4.4 49%

Adjust for:

Discontinuation of Embolic

Protection $0.3 $4.7 (93%)

Acceleration of Stock Awards $3.0 - n/m

Sale of Endovascular Business,

Net $8.1 - n/m

Pre-tax Income, As Adjusted $18.0 $9.1 98%

Earnings Per Share, As Adjusted $0.99 $0.53 87%

Supplemental Information Related

to Equity Compensation Expense:

Fiscal Year

Ended June 30,

2008 2007

Fiscal Year Equity

Compensation Expense excluding

Acceleration (includes

mark-to-market adjustment for

stock appreciation rights before

and after acceleration) $2.3 $2.9

Equity Compensation Related to

Acceleration of Stock Awards $3.0 -

Total Equity Compensation Expense $5.3 $2.9

Equity Compensation Expense

Per Share (net of tax) $0.28 $0.15

Supplemental Sales Data. Sales for the fourth quarter and for the fiscal year 2008 increased to $15.0 and $53.8 million up from $10.5 and $44.9 million, respectively, in the prior fiscal year periods. Additional details are summarized below.

Three Months Fiscal Year

Ended Year over Ended Year over

June 30, Year % June 30, Year %

($ millions) 2008 2007 Change 2008 2007 Change

Endovascular

Products $1.6 $0.8 103% $6.2 $3.8 64%

Orthopaedic

Products $8.4 $6.0 39% $29.4 $21.8 35%

Cardiovascular

Products $4.2 $3.2 29% $15.9 $17.6 (10%)

Other Products $0.8 $0.5 65% $2.3 $1.7 33%

Total Net Sales $15.0 $10.5 42% $53.8 $44.9 20%

Guidance for Fiscal Quarter Ending September 30, 2008 (First Quarter of Fiscal 2009)

At this time the Company is increasing its earnings per share guidance for the first quarter of fiscal 2009 to a range of $0.37 to $0.38 per share, an increase of 131% to 138% compared to adjusted diluted earnings per share of $0.16 for the same period in fiscal year 2008. Previous guidance for the first quarter of fiscal year 2009 was $0.34 to $0.36 per share. This increase is primarily due to an anticipated increase in royalties and a reduction in operating expenses. Adjusted diluted earnings per share for the first quarter of fiscal year 2008 exclude after-tax charges of $2.2 million, or $0.17 per share, for the acceleration of stock awards and discontinuation of the Company's embolic protection platform. Including these items, the 2008 first quarter reported diluted loss per share was ($0.02).

The Company expects that its net sales will be in a range of $13.0 to $13.4 million, which would represent a 13% to 16% increase from the prior year period. The Company is raising its previously announced royalty income guidance and is now expecting to be in a range of $6.5 to $6.6 million, a 7% to 9% increase from the prior year period. Previous royalties guidance was expected to be in a range of $6.4 to $6.5 million. Total revenues are now anticipated to be in a range of $19.5 to $20.0 million, an 11% to 14% increase from the prior year period.

Guidance for Fiscal Year Ending June 30, 2009 (Fiscal 2009)

The Company expects total revenues for fiscal 2009 will be in a range of $86.7 to $89.0 million, which would represent growth of approximately 9% to 12% over fiscal 2008 total revenues, and that net sales will be in a range of $58.0 to $60.0 million, an 8% to 12% increase from fiscal 2008. The Company anticipates fiscal 2009 royalty income to be in a range of $27.8 to $28.1 million, a 7% to 8% increase from fiscal 2008. Revenue under certain arrangements with Spectranetics, excluding sales, is expected to generate approximately $900,000 during fiscal 2009.

Total research and development spending for fiscal 2009 is estimated to be $21.0 million, with approximately 60% of this funding dedicated to the biomaterials side of its business. The Company is forecasting significant investment in its cartilage repair product this coming year, where efforts will be dedicated to pre-clinical and clinical programs to further this product toward regulatory approval. Even with this increase in research and development spending, the Company expects that its operating margins will continue to substantially improve and exceed 30% in fiscal year 2009. The Company believes earnings per share for fiscal 2009 will increase between 62% and 69% over its 2008 adjusted results, to a range of $1.60 to $1.67 per share.

Sale of Endovascular Business. As previously announced, the Company completed the sale of its endovascular business to Spectranetics Corporation on May 30, 2008. This transaction included the sale of the ThromCat(R), QuickCat(TM) and SafeCross(R) products in consideration for $10 million in closing payments, an opportunity for up to an additional $14 million in various research and development and sales related milestones, as well as additional royalty payments based on future sales of the ThromCat(R) and SafeCross(R) products. The transaction included a manufacturing agreement, under which the Company will continue to manufacture the endovascular products for Spectranetics, and a research and development agreement, under which the Company will continue to perform defined development activities in pursuit of various FDA 510(k) approvals for next generation product approvals (please see the Company's news release dated May 13, 2008 for further information on the details of this transaction). The Company recognized a net loss of approximately $5.4 million (net of taxes of $2.7 million), or $0.44 per share tax-effected on the sale, which is presented within the Company's results of continuing operations for the quarter ended June 30, 2008. This loss does not include the benefit or expenses of achieving future milestones or royalties to be received under the transaction, which are expected to exceed the cost of accomplishing such milestones.

Share Repurchase Update. During the fourth quarter and the fiscal year ended June 30, 2008, the Company repurchased approximately 245,000 and 868,000 shares of its common stock, respectively for a total of $7.2 million and $24.4 million, respectively, with approximately $0.6 million remaining under the previously announced $25 million share repurchase program. On June 23, 2008, the Company announced that its board of directors had expanded its existing $25.0 million stock repurchase program, to provide for the repurchase of up to an addi
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SOURCE Kensey Nash Corporation
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