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Kensey Nash Reports First Quarter Fiscal Year 2008 Results
Date:10/19/2007

- Adjusted Earnings Per Share Exceeds Guidance -

EXTON, Pa., Oct. 19 /PRNewswire-FirstCall/ -- Kensey Nash Corporation (Nasdaq: KNSY) today reported the results for its first quarter of fiscal year 2008.

First Quarter Results

Revenues, Sales and Royalties. Total revenues, which include net sales and royalty income, were $17.6 million in the quarter ended September 30, 2007, an increase of 8% from $16.3 million in the prior year first quarter.

Net sales increased 9% to $11.5 million in the first quarter of fiscal 2008 from $10.6 million in the first quarter of fiscal 2007. Net sales of biomaterials products increased 3% to $10.2 million from $9.8 million in the comparable prior year fiscal quarter. Orthopaedic sales increased 40% to $6.1 million from $4.4 million in the same period of the prior fiscal year due to new product sales from the Macropore asset acquisition that was completed in late fiscal 2007 coupled with strong sales of spine products from our existing customers. Sales of vascular closure product components decreased 26% from the prior year period, as anticipated.

Sales of endovascular products for the quarter increased 93% to $1.4 million from $708,000 in the prior year period, and 69% sequentially over the June quarter. Excluding the $356,000 in credits given to customers in relation to the discontinuance of embolic protection decision in the fourth quarter of fiscal 2007, endovascular sales increased 17% sequentially over the June quarter. The results reflected both strong U.S. and international sales of the ThromCat(TM) Thrombectomy and QuickCat(TM) Aspiration Catheter products. Sales of the Safe-Cross(R) device also contributed to the U.S. performance in the f 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 Income and Earnings Per Share Reconciliation

(Unaudited) Non-GAAP Non-GAAP (Unaudited)

As Reported Adjustments Adjustments As Adjusted

Three Months One-Time Three Months

Ended Embolic Equity Ended

September 30, Protection Acceleration September 30,

2007 2007 2007 2007

Revenues:

Net sales

Biomaterials $10,167,299 $- $- $10,167,299

Endovascular 1,364,230 - - 1,364,230

Total net sales 11,531,529 - - 11,531,529

Research and

development - - - -

Royalty income 6,070,888 - - 6,070,888

Total revenues 17,602,417 - - 17,602,417

Operating costs and

expenses:

Cost of products

sold 5,644,149 (154,726) (253,879) 5,235,544

Research and

development 4,932,003 (92,630) (849,678) 3,989,695

Sales and

marketing 3,763,152 (71,474) (262,148) 3,429,530

General and

administrative 3,813,438 (4,898) (1,627,173) 2,181,367

Total operating

costs and

expenses 18,152,742 (323,728) (2,992,878) 14,836,136

(Loss) Income from

operations (550,325) 323,728 2,992,878 2,766,281

Interest and other

income, net 226,344 - - 226,344

Pre-tax (loss) income (323,981) 323,728 2,992,878 2,992,625

Income tax (benefit)

expense (101,640) 110,068 1,017,579 1,026,006

Net (loss) income $(222,341) $213,660 $1,975,299 $1,966,619

Basic (loss) earnings

per share $(0.02) $0.02 $0.17 $0.16

Diluted (loss)

earnings per share $(0.02) $0.02 $0.16 $0.16

Weighted average

common shares

outstanding 11,967,302 11,967,302 11,967,302 11,967,302

Diluted weighted

average common

shares outstanding 11,967,302 12,625,226 12,625,226 12,625,226

Note: To supplement our consolidated financial statements presented in

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

adjusted 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 the discontinuance of our embolic

protection platform and for the accelerated vesting of stock awards. As

previously announced, the Company has excluded the impact of write-offs of

inventory, certain dedicated embolic protection equipment, and other

assets related to the Company's decision in June 2007 to discontinue the

embolic protection product line. Additional charges related to severance

and clinical trial closeout costs were recorded in the first fiscal

quarter of 2008, as set forth in the reconciliation. In addition, the

Company is excluding the impact of the acceleration of vesting of the

stock awards from the first quarter results due to the "Change in Control"

as defined in the Company's equity compensation plan on August 30, 2007

when Ramius Capital Group, L.L.C. and its affiliates acquired more than 20

percent of the Company's outstanding common stock.

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 discontinuance of our

embolic protection division and the accelerated vesting of stock awards.

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

For the Fiscal Year 2008 Quarter September 30, 2007

Endovascular Sales Reconciliation

(Unaudited) (Unaudited)

Three Months Sequential

Ended Three Months Quarter %

September 30, Ended June 30, Change

2007 2007

Endovascular sales,

as reported $1,364,230 $805,574 69%

Adjustments:

Embolic protection

sales credits $0 $356,261

Non-GAAP Endovascular

sales as adjusted $1,364,230 $1,161,835 17%

Note: To supplement our forecasted guidance presented in accordance with

GAAP, Kensey Nash Corporation uses non-GAAP measures of as adjusted

Endovascular sales, which are adjusted from our GAAP results to exclude

certain expenses and credits. 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 guidance provides useful information to both

management and investors by excluding certain expenses and credits that

we believe are not indicative of our core operating results.

We have adjusted our GAAP results for embolic protection sales credits

related to the discontinuance of our embolic protection platform. As

previously announced, the Company has excluded the impact of sales

credits offered to its customers for unused embolic protection product

related to the Company's decision in June 2007 to discontinue the

embolic protection platform, as set forth in the reconciliation.

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 as a result of the

discontinuance of our embolic protection platform. 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.

irst quarter of fiscal 2008.

Royalty income increased 6% to $6.1 million compared to $5.7 million in the comparable prior fiscal year period. Royalty income included $5.0 million in Angio-Seal royalties, a 2% increase from $4.9 million in the comparable quarter of the prior fiscal year, and $1.0 million in bone void filling products royalties from Orthovita, Inc., a 29% increase from $791,000 the prior fiscal year first quarter.

First quarter results included a total of $0.18 in charges related to the discontinuance of the embolic protection platform and the acceleration of stock awards, as announced in the Company's press releases dated July 10, 2007 and September 26, 2007, respectively. The specific details related to these charges are explained below.

Earnings Per Share. The Company reported a first quarter loss per share of ($0.02) compared to $0.11 diluted earnings per share for the first quarter of the prior year. The loss per share included pre-tax charges of $3.0 million, or $0.16 per share tax-effected, for the acceleration of stock awards and approximately $325,000, or $0.02 per share tax-effected, of charges related to the discontinuation of the embolic protection platform. Adjusted earnings per share, excluding these charges of $0.16 were exceptionally strong compared to prior year due to increases in sales of both biomaterials and endovascular products as well as increased royalties and improved gross margins. The adjusted earnings per share of $0.16 exceeded the company's guidance of $0.12 to $0.14.

In the period ended September 30, 2007, the total tax-effected impact on earnings per share of equity compensation expense was $0.20, of which $0.16 related to the acceleration of stock awards and $0.04 related to equity compensation expense prior to the acceleration as well as a mark-to-market adjustment on outstanding Stock Appreciation Rights. The tax-effected impact on earnings per share of equity compensation expense was $0.04 in the period ended September 30, 2006.

The following chart summarizes the Company's results for the three months ended September 30, 2007, compared to its results for the comparable period in the prior fiscal year. See attached schedules for a detailed reconciliation between the non-GAAP and reported GAAP results.

Three Months Year over

Ended Sept. 30, Year %

($ millions, except per share data) 2007 2006 Change

Data As Reported:

Net Sales - Biomaterials $10.2 $9.8 3%

Net Sales - Endovascular $1.4 $0.7 93%

Total Net Sales $11.5 $10.6 9%

Royalty Income $6.1 $5.7 6%

Total Revenues $17.6 $16.3 8%

(Loss) Income from Operations, As Reported ($0.6) $2.0 n/m

Earnings Per Share, As Reported ($0.02) $0.11 n/m

Adjustments to Income from Operations:

Discontinuation of Embolic Protection $0.3 - n/m

Acceleration of Stock Awards $3.0 - n/m

Income from Operations, As Adjusted $2.8 $2.0 41%

Earnings Per Share, As Adjusted $0.16 $0.11 45%

Supplemental Information Related to Equity Compensation

Expense:

Equity Compensation Expense Prior to

Acceleration (includes mark-to-market

adjustment for stock appreciation rights

before and after acceleration) $0.7 $0.7

Equity Compensation Related to

Acceleration of Stock Awards $3.0 -

Total Equity Compensation Expense $3.7 $0.7

Equity Compensation Expense Per Share

(net of tax) $0.20 $0.04

Biomaterials Update. Biomaterials sales for the first quarter of fiscal 2008 increased to $10.2 million from $9.8 million in the prior year first quarter. Additional details are summarized below:

Three Months Ended Year over Year

September 30, % Change

($millions) 2007 2006

Orthopaedic Products $6.1 $4.4 40%

Cardiovascular products $3.8 $5.2 (27%)

Other Products $0.2 $0.3 (11%)

Total Net Sales - Biomaterials $10.2 $9.8 3%

"Sales of orthopaedic products increased $1.7 million, of which approximately $800,000 was due to new product revenue related to our asset acquisition of Macropore, Inc. Excluding these new products, our spine business increased 42% and sports medicine increased 16%. We are excited about this growth and continue to expect that our total orthopaedic business will increase in excess of 25% for the year. Over the past few years we have made great strides in expanding our customer base and providing new and innovative biomaterials products to the marketplace. Our cardiovascular products, as anticipated, decreased year over year and we expect that these products will be flat for the remainder of the fiscal year, commented Joe Kaufmann, President and CEO.

Endovascular Update. "Sales of our endovascular products increased 93% year over year. We are pleased with the notable growth over the past year in our Thrombectomy product lines with both our QuickCat(TM) and ThromCat(TM) products. In addition, sales of our Safe-Cross(R) device for the treatment of chronic total occlusions demonstrated potential for growth in the U.S. market. We expect endovascular sales to continue to expand throughout the fiscal year," Mr. Kaufmann concluded.

Fiscal 2008 Second Quarter Forecast. For the second quarter of fiscal year 2008, the Company believes that its net sales will be in the range of $12.5 to $13.0 million and royalties will be in the range of $6.2 to $6.5 million. Total revenues are expected to be in the range of $18.7 to $19.5 million. Diluted earnings per share are expected to be $0.18 to $0.20.

Discontinuance of Embolic Protection Platform. As announced on July 10, 2007, the Company made a strategic decision to cease all activities related to its embolic protection platform. As a result of this action, the Company recorded certain charges in its fourth fiscal quarter of fiscal 2007 totaling approximately $4.7 million, or $0.25 per share tax-effected, and all of the remaining charges related to severance and clinical trial closeout costs were recorded in the first fiscal quarter of 2008. The total of the remaining charges were approximately $325,000, or $0.02 per share tax-effected. All charges related to the discontinuance are presented within the Company's results. We do not anticipate any further charges related to this decision.

Acceleration of Stock Awards. As announced on September 26, 2007, there was a "Change in Control" as defined in the Company's equity compensation plan which resulted in all outstanding unvested stock options, stock appreciation rights and restricted stock held by officers, employees, directors and others under this plan to automatically become vested (and, in the case of options and stock appreciation rights, exercisable) in full. This "Change in Control" was triggered by the acquisition by Ramius Capital Group, L.L.C. and its affiliates on August 30, 2007 of more than 20 percent of the Company's outstanding common stock, as reported by Ramius in filings with the SEC. The accelerated vesting resulted in a non-cash, tax-effected charge of approximately $2.0 million, or $0.16 per share, during the quarter ended September 30, 2007. The acceleration will remove all future equity compensation expense related to these stock options and restricted shares under the plan. However, stock appreciation rights will continue to be marked to market on a quarterly basis, as required under Generally Accepted Accounting Principles and equity compensation expense will be incurred related to new stock compensation awards.

Conference Call and Webcast. The Company will host a conference call on Friday, October 19, 2007 at 9:00 a.m. Eastern Time. To participate in the conference call, interested parties should dial 651-291-5254. In addition, a live webcast of the call can be accessed by visiting the Investor Relations page under the Conferences & Webcasts link of the Kensey Nash website at http://www.kenseynash.com and clicking on Webcast. The teleconference call will also be available for replay starting Friday, October 19, 2007 at 12:30 p.m. Eastern Time through Friday, October 26, 2007 at 11:59 p.m. Eastern Time by dialing 1-800-475-6701 with an access code of 886702.

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 in the endovascular, sports medicine and spine 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 commercialized a series of innovative products through its own direct endovascular sales force. 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 Company's forecast of operating results for the second quarter and fiscal 2008. 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 Company's success in launching its endovascular products into the marketplace, the Company's dependence on three major customers (St. Jude Medical, Arthrex and Orthovita) and their success in selling KNC related products in the marketplace, the impact of product recalls and other manufacturing issues, and competition from other technologies, among other important risks. 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

Ended September 30,

2007 2006

Revenues:

Net sales

Biomaterial sales $10,167,299 $9,845,477

Endovascular sales 1,364,230 707,712

Total net sales 11,531,529 10,553,189

Royalty income 6,070,888 5,718,146

Total revenues 17,602,417 16,271,335

Operating costs and expenses:

Cost of products sold 5,644,149 4,847,830

Research and development 4,932,003 4,375,629

Sales and marketing 3,763,152 3,028,302

General and administrative 3,813,438 2,059,469

Total operating costs and

expenses 18,152,742 14,311,230

(Loss) Income from operations (550,325) 1,960,105

Interest and other income, net 226,344 143,517

Pre-tax (loss) income (323,981) 2,103,622

Income tax (benefit) expense (101,640) 675,803

Net (loss) income $(222,341) $1,427,819

Basic (loss) earnings per share $(0.02) $0.12

Diluted (loss) earnings per share $(0.02) $0.11

Weighted average common shares

outstanding 11,967,302 11,629,410

Diluted weighted average common

shares outstanding 11,967,302 12,475,218

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

2007 June 30,

(Unaudited) 2007

Assets

Current assets:

Cash, cash equivalents and

investments $36,866,244 $34,331,454

Trade receivables 5,501,086 6,220,727

Other receivables 7,184,170 6,799,369

Inventory 8,893,499 7,392,116

Prepaids and other assets 2,443,722 1,977,592

Deferred tax asset, current 3,564,652 3,151,350

Total current assets 64,453,373 59,872,608

Property, plant and equipment, net 63,451,720 63,821,312

Other non-current assets 16,770,769 16,831,544

Total assets $144,675,862 $140,525,464

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued

expenses $6,799,203 $6,178,026

Current portion of debt 266,667 186,667

Share-based compensation

liability 1,238,542 -

Deferred revenue 236,558 350,739

Total current liabilities 8,540,970 6,715,432

Long term portion of deferred revenue 585,307 611,196

Long term portion of debt 7,733,333 7,813,333

Deferred tax liability, non-current 865,724 995,395

Other non-current liabilities 1,378,426 740,321

Total stockholders' equity 125,572,102 123,649,787

Total liabilities and stockholders'

equity $144,675,862 $140,525,464

Non-GAAP Financial Measures
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SOURCE Kensey Nash Corporation
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