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Kensey Nash Reports Second Quarter EPS of $0.21 and Revenue of $19.6 Million
Date:1/25/2008

-EPS and Revenue Growth of 62% and 14%, Respectively, Over Prior Year

Period-

EXTON, Pa., Jan. 25 /PRNewswire-FirstCall/ -- Kensey Nash Corporation (Nasdaq: KNSY) today reported the results for its second quarter and six months of fiscal year 2008.

Second Quarter Results

Revenues, Sales and Royalties. Total revenues, which include net sales and royalty income, increased 14% to $19.6 million in the Company's second fiscal quarter ended December 31, 2007, from $17.3 million in the comparable prior year period.

Net sales increased 17% to $13.1 million in the second quarter from $11.2 million in the comparable prior year period. Net sales of biomaterials products increased 15% to $11.5 million from $10.0 million in the second quarter of fiscal 2007 driven by orthopaedic product sales, which increased 67% to $7.2 million from $4.3 million. Sales of spine products increased 140%, including approximately $400,000 of new product sales resulting from the MacroPore Biosurgery asset acquisition, and 115% excluding this new product revenue. Additionally, sales of sports medicine products increased 23% over the prior year. Sales of vascular closure product components to St. Jude Medical decreased $1.7 million, or 33%, from the prior year period, as anticipated and previously disclosed.

Sales of endovascular products increased 36% to $1.7 million in the second quarter of fiscal 2008 from $1.2 million in the comparable prior year period, and 22% sequentially from $1.4 million in the first quarter of fiscal 2008. International endovascular sales were very strong, more than doubling year over year. U.S. sales increased 13% year over year and 28% sequentially, although the growth was ham>Pre-tax income 3,767,354 2,019,311 3,443,373 4,122,933

Income tax expense 1,159,188 440,149 1,057,548 1,115,952

Net income $2,608,166 $1,579,162 $2,385,825 $3,006,981

Basic earnings per

share $0.22 $0.13 $0.20 $0.26

Diluted earnings per

share $0.21 $0.13 $0.19 $0.24

Weighted average common

shares outstanding 12,108,682 11,709,604 12,037,997 11,669,507

Diluted weighted

average common shares

outstanding 12,645,134 12,568,341 12,633,529 12,534,953

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31,

2007 June 30,

(Unaudited) 2007

Assets

Current assets:

Cash, cash equivalents and

investments $60,332,869 $34,331,454

Trade receivables 6,269,680 6,220,727

Other receivables 7,301,853 6,799,369

Inventory 9,254,513 7,392,116

Prepaids and other assets 2,633,454 1,977,592

Deferred tax asset, current 3,744,023 3,151,350

Total current assets 89,536,392 59,872,608

Property, plant and equipment, net 62,835,323 63,821,312

Other non-current assets 16,497,780 16,831,544

Total assets $168,869,495 $140,525,464

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued

expenses $6,269,585 $6,178,026

Current portion of debt 1,400,000 186,667

Share-based compensation

liability 618,201 -

Deferred revenue 625,399 350,739

Total current liabilities 8,913,185 6,715,432

Long term portion of deferred revenue 559,419 611,196

Long term portion of debt 33,483,333 7,813,333

Deferred tax liability, non-current 271,706 995,395

Other non-current liabilities 2,627,241 740,321

Total stockholders' equity 123,014,611 123,649,787

Total liabilities and stockholders'

equity $168,869,495 $140,525,464

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

Adjusted Income and Earnings Per Share Reconciliation

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

As Reported Adjustments Adjustments As Adjusted

Six Months Six Months

Ended Embolic One-Time Equity Ended

December 31, Protection Acceleration December 31,

2007 2007 2007 2007

Revenues:

Net sales

Biomaterials $21,652,211 $- $- $21,652,211

Endovascular 3,026,181 - - 3,026,181

Total net sales 24,678,392 - - 24,678,392

Royalty income 12,561,950 - - 12,561,950

Total revenues 37,240,342 - - 37,240,342

Operating costs

and expenses:

Cost of

products sold 11,821,673 (154,726) (253,879) 11,413,068

Research and

development 8,891,594 (92,630) (849,678) 7,949,286

Sales and

marketing 7,506,077 (71,474) (262,148) 7,172,455

General and

administrative 5,999,887 (4,898) (1,627,173) 4,367,816

Total

operating

costs and

expenses 34,219,231 (323,728) (2,992,878) 30,902,625

Income from

operations 3,021,111 323,728 2,992,878 6,337,717

Interest and other

income, net 422,262 - - 422,262

Pre-tax income 3,443,373 323,728 2,992,878 6,759,979

Income tax expense 1,057,548 110,068 1,017,579 2,185,194

Net income $2,385,825 $213,660 $1,975,299 $4,574,785

Basic earnings per

share $0.20 $0.02 $0.16 $0.38

Diluted earnings per

share $0.19 $0.02 $0.16 $0.36

Weighted average

common shares

outstanding 12,037,997 12,037,997 12,037,997 12,037,997

Diluted weighted

average common

shares

outstanding 12,633,529 12,633,529 12,633,529 12,633,529

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.

pered by the size of the sales force, which was smaller than projected by approximately 35%.

Royalty income increased 7% to $6.5 million in the second quarter of fiscal 2008 compared to $6.1 million in the comparable prior fiscal year period. Royalty income included $5.4 million in Angio-Seal royalties, a 5% increase from $5.1 million in the comparable quarter of the prior fiscal year, and $1.1 million in bone void filling product royalties from Orthovita, Inc., an 11% increase from $968,000 in the prior fiscal year second quarter.

Earnings Per Share. The Company reported second quarter earnings per share of $0.21, exceeding the Company's previous guidance of $0.18 to $0.20, and the prior year second quarter of $0.13. Earnings per share were exceptionally strong compared to the prior fiscal year period due to the increases in both sales and royalties and an 18% reduction in R&D expenses primarily related to endovascular spending, all of which more than offset increases in selling, general and administrative expenses.

The following chart summarizes the Company's results for the three months ended December 31, 2007, compared to its results for the comparable period in the prior fiscal year.

Three Months Year over

Ended December 31, Year %

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

Data As Reported:

Net Sales - Biomaterials $11.5 $10.0 15%

Net Sales - Endovascular $1.7 $1.2 36%

Total Net Sales $13.1 $11.2 17%

Royalty Income $6.5 $6.1 7%

Total Revenues $19.6 $17.3 14%

Income from Operations, As Reported $3.6 $1.8 100%

Earnings Per Share, As Reported $0.21 $0.13 62%

Supplemental Information Related to Equity

Compensation Expense:

Total Equity Compensation Expense $0.7 $0.9 (24%)

Equity Compensation Expense Per Share (net

of tax) $0.04 $0.05 (20%)

Six Month Results

Revenues, Sales and Royalties. Total revenues were $37.2 million for the six months ended December 31, 2007, an increase of 11% from $33.6 million in the prior year six-month period.

Net sales increased 13% to $24.7 million for the first six months of fiscal 2008 from $21.8 recorded in the comparable prior year period. Net sales of biomaterials products increased 9% to $21.7 million from $19.8 million driven by orthopaedic product sales, which increased 54% to $13.4 million from $8.7 million. Spine product sales increased 123% from the prior year, including approximately $1.2 million of new product sales resulting from the Company's MacroPore Biosurgery asset acquisition, and 83% excluding these new product sales. Additionally, sales of sports medicine products increased 19% over the prior year period. Sales of vascular closure product components to St. Jude Medical decreased $3.0 million, or 30%, from the prior year period, as anticipated and previously disclosed.

Sales of endovascular products for the quarter increased 56% to $3.0 million from $1.9 million in the prior year period. International endovascular sales were very strong, more than tripling year over year. U.S. sales increased 23% year over year although the growth was hampered by the size of the sales force, which was smaller than projected by approximately 35%.

Royalty income increased 6% to $12.6 million in the first six months of fiscal 2008 compared to $11.8 million in the comparable prior fiscal year period. Royalty income included $10.4 million in Angio-Seal royalties, a 4% increase from $10.0 million in the comparable period of the prior fiscal year, and $2.1 million in bone void filling products royalties from Orthovita, Inc., a 19% increase from $1.8 million in the prior fiscal year six-month period.

Earnings Per Share. The Company reported earnings per share of $0.19 for the six-months ended December 31, 2007 compared to $0.24 diluted earnings per share for the six months ended December 31, 2006. Earnings 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 Company's embolic protection platform, incurred during the first quarter of fiscal 2008. Adjusted earnings per share, excluding these charges, was $0.36 for the six months ending December 31, 2007, a 50% increase over the prior year six-month period.

In the six-month period ended December 31, 2007, the total tax-effected impact on earnings per share of equity compensation expense was $0.23, of which $0.16 related to the acceleration of stock awards and $0.08 related to equity compensation expense prior to the acceleration, equity compensation from current year equity grants as well as a mark-to-market adjustment on Stock Appreciation Rights. The tax-effected impact on earnings per share of equity compensation expense was $0.09 in the six-month period ended December 31, 2006.

The following chart summarizes the Company's results for the six months ended December 31, 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.

Six Months Year over

Ended December 31, Year %

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

Data As Reported:

Net Sales - Biomaterials $21.7 $19.8 9%

Net Sales - Endovascular $3.0 $1.9 56%

Total Net Sales $24.7 $21.8 13%

Royalty Income $12.6 $11.8 6%

Total Revenues $37.2 $33.6 11%

Income from Operations, As Reported $3.0 $3.7 (19%)

Earnings Per Share, As Reported $0.19 $0.24 (21%)

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 $6.3 $3.7 69%

Earnings Per Share, As Adjusted $0.36 $0.24 50%

Supplemental Information Related to Equity

Compensation Expense:

1st Quarter Equity Compensation

Expense Prior to Acceleration

(includes mark-to-market adjustment

for stock appreciation rights before

and after acceleration) $0.7 $0.7

2nd Quarter Equity Compensation

Expense $0.7 $0.9

Equity Compensation Related to

Acceleration of Stock Awards $3.0 -

Total Equity Compensation Expense $4.4 $1.6

Equity Compensation Expense Per

Share (net of tax) $0.23 $0.09

Biomaterials Update. Biomaterials sales for the second quarter and six months of fiscal 2008 increased to $11.5 and $21.7 million, respectively, from $10.0 and $19.8 million, respectively, in the prior fiscal year periods. Additional details are summarized below:

Three Months Year over Six Months Year over

Ended December 31, Year % Ended December 31, Year %

($ millions) 2007 2006 Change 2007 2006 Change

Orthopaedic

Products $7.2 $4.3 67% $13.4 $8.7 54%

Cardiovascular

Products $3.5 $5.2 (32%) $7.4 $10.4 (30%)

Other Products $0.7 $0.4 68% $0.9 $0.7 38%

Total Net

Sales -

Biomaterials $11.5 $10.0 15% $21.7 $19.8 9%

"Sales of orthopaedic products increased $2.9 million in the second quarter of fiscal 2008 over the comparable prior fiscal year quarter, of which approximately $400,000 was due to new product revenue related to the acquisition of the MacroPore Biosurgery assets. The success of the biomaterial products in the end user markets demonstrates the strengths of our core technologies and the accomplishments of our strategic partners. We expect this success will continue over the remainder of our fiscal year. Our biomaterials cardiovascular product sales, as anticipated, decreased year over year and we expect these sales to be relatively steady for the remainder of the fiscal year," commented Joe Kaufmann, President and CEO.

Endovascular Update. "Sales of our endovascular products increased 36% year over year. We are pleased with the notable growth over the past year in our thrombus removal product lines with both our QuickCat(TM) and ThromCat(TM) products. In addition, sales of our Safe-Cross(TM) device for the treatment of chronic total occlusions demonstrated strong growth in the U.S. market. We expect endovascular sales to continue to expand throughout the fiscal year, however as previously noted our U.S. growth has been impacted by the smaller than anticipated size of our sales force. The Company is actively developing second generation products for both the Safe-Cross(TM) and the ThromCat(TM) devices, each of which are expected to be market-ready by the end of the calendar year. As we previously announced, we are currently exploring partnering, licensing, and other strategic alternatives for the endovascular business and we will report back as soon as that review process is completed," Mr. Kaufmann concluded.

Mortgage Draw and Share Repurchase Update. During the quarter the Company took the final $27 million advance under the Company's secured commercial mortgage with Citibank, F.S.B. The mortgage, which is secured by the Company's facility, had provided the Company with the ability to take aggregate advances of up to $35 million through November 25, 2007, all of which have now been taken. Additionally, during the quarter the Company repurchased 323,000 shares of its common stock for a total of $8.8 million under the previously announced $25 million share repurchase program.

Fiscal 2008 Third Quarter Forecast. For the third quarter of fiscal year 2008, the Company believes that its net sales will be in the range of $13.7 to $14.2 million and royalties will be in the range of $6.6 to $6.8 million. Total revenues are expected to be in the range of $20.3 to $21.0 million. Diluted earnings per share are expected to be $0.25 to $0.27.

Conference Call and Webcast. The Company will host a conference call on Friday, January 25, 2008 at 9:00 a.m. Eastern Time. To participate in the conference call, interested parties should dial 1-612-332-0637. 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, January 25, 2008 at 11:00 a.m. Eastern Time through Friday, February 8, 2008 at 11:59 p.m. Eastern Time by dialing 1-800-475-6701 with an access code of 905138.

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 third 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 distributing 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 Six Months

Ended December 31, Ended December 31,

2007 2006 2007 2006

Revenues:

Net sales

Biomaterial sales $11,484,912 $9,971,821 $21,652,211 $19,817,298

Endovascular sales 1,661,951 1,226,295 3,026,181 1,934,007

Total net sales 13,146,863 11,198,116 24,678,392 21,751,305

Royalty income 6,491,062 6,093,938 12,561,950 11,812,083

Total revenues 19,637,925 17,292,054 37,240,342 33,563,388

Operating costs and

expenses:

Cost of products sold 6,177,524 5,261,524 11,821,673 10,109,353

Research and

development 3,959,591 4,814,726 8,891,594 9,190,355

Sales and marketing 3,742,925 3,385,835 7,506,077 6,414,137

General and

administrative 2,186,449 2,045,684 5,999,887 4,105,153

Total operating

costs and expenses 16,066,489 15,507,769 34,219,231 29,818,998

Income from operations 3,571,436 1,784,285 3,021,111 3,744,390

Interest and other

income, net 195,918 235,026 422,262 378,543

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SOURCE Kensey Nash Corporation
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