CryoLife discloses financial results for fourth-quarter and full-year 2009

CryoLife, Inc. (NYSE: CRY), an implantable biological medical device and cardiovascular tissue processing company, announced today that revenues for the fourth quarter of 2009 increased 12 percent to a quarterly record of $28.6 million compared to $25.5 million for the fourth quarter of 2008.  This was the 12th consecutive quarter of profitability for the Company.

"CryoLife is continuing to thrive in very demanding economic conditions.  In addition to reporting record revenues and continued, consistent profitability, our ability to significantly increase our cash balances over the past year is a very encouraging sign of the health of our business.  Looking ahead, we expect to achieve record revenues and operating earnings in 2010 by continuing to execute on our strategy and invest in our growth," stated Steven G. Anderson, president and chief executive officer.

Net income for the fourth quarter of 2009 was $2.4 million, or $0.08 per basic and fully diluted common share, compared to $21.7 million, or $0.78 per basic and $0.76 per fully diluted common share for the fourth quarter of 2008.  The Company's effective income tax rate was 36 percent for the fourth quarter of 2009, compared to a tax benefit for the fourth quarter of 2008.  The Company had a tax benefit in 2008 due to the reversal of the Company's valuation allowance on its deferred tax assets during 2008.  If the Company had recorded 2008 income taxes at a comparable 36 percent effective tax rate, net income for the fourth quarter of 2008 would have been $1.7 million and fully diluted earnings per share would have been $0.06.  The Company recorded a pretax charge of approximately $377,000 in the fourth quarter of 2009 in connection with a reduction in workforce, which resulted from several process improvements and expense control and cost cutting initiatives that the Company implemented during the fourth quarter of 2009.  Excluding these charges, net income for the fourth quarter of 2009 would have been $2.6 million, or $0.09 per fully diluted common share.

Revenues for the full year of 2009 increased 6 percent to a record $111.7 million compared to $105.1 million for the full year of 2008.  

Net income for the full year of 2009 was $8.7 million, or $0.31 per basic and fully diluted common share, compared to $32.0 million, or $1.15 per basic and $1.13 per fully diluted common share for the full year of 2008.  The Company's effective income tax rate was 40 percent for the full year of 2009, compared to a tax benefit for the full year of 2008.  If the Company had recorded 2008 income taxes at a comparable 40 percent effective tax rate, net income for the full year of 2008 would have been $8.1 million and fully diluted earnings per share would have been $0.29.  Excluding pretax charges of $377,000 in the fourth quarter of 2009 as mentioned above, net income for the full year of 2009 would have been $8.9 million, or $0.32 per fully diluted common share.

Preservation service revenues for the fourth quarter of 2009 increased 12 percent to $13.8 million compared to $12.3 million for the fourth quarter of 2008.  The increase in preservation service revenues was primarily due to increased shipments of cardiac and vascular tissues for the fourth quarter of 2009 compared to the fourth quarter of 2008.  

Preservation service revenues for the full year of 2009 increased 5 percent to $56.5 million compared to $53.7 million for the full year of 2008.  Excluding orthopaedic tissue processing revenues of $181,000 and $725,000 for the full year of 2009 and 2008, respectively, preservation service revenues increased 6 percent to $56.3 million for the full year of 2009 compared to $52.9 million for the full year of 2008.  The increase in preservation service revenues was primarily due to increased revenues from vascular tissue for the full year of 2009 compared to the full year of 2008.

Revenues from the distribution of CryoValve® SG pulmonary heart valves ("CryoValve SGPV") and CryoPatch® SG pulmonary cardiac patches ("CryoPatch SG") increased to $2.2 million for the fourth quarter of 2009 from $1.7 million for the fourth quarter of 2008, representing 33 percent of the Company's cardiac tissue processing revenues for the fourth quarter of 2009.  Revenues from the distribution of CryoValve SGPV and CryoPatch SG increased to $6.8 million for the full year of 2009 from $5.1 million for the full year of 2008, representing 26 percent of the Company's cardiac tissue processing revenues for the full year of 2009.  

Product revenues, which consist primarily of sales of BioGlue® Surgical Adhesive and HemoStase®, were $14.5 million for the fourth quarter of 2009 compared to $13.0 million for the fourth quarter of 2008, an increase of 12 percent.  Product revenues were $54.2 million for the full year of 2009 compared to $50.5 million for the full year of 2008, an increase of 7 percent.  The increase year over year primarily reflects the growing usage of HemoStase in cardiac and vascular surgical indications in the U.S., and cardiac, vascular and general surgery indications in many markets outside of the U.S.  

Total preservation services and product gross margins were 61 percent and 64 percent for the fourth quarters of 2009 and 2008, respectively.  Total preservation services and product gross margins were 62 percent and 64 percent for the full year of 2009 and 2008, respectively.

Preservation services gross margins were 39 percent and 45 percent for the fourth quarters of 2009 and 2008, respectively.  Preservation services gross margins were 42 percent and 46 percent for the full year of 2009 and 2008, respectively.  

Product gross margins were 82 percent for each of the fourth quarters of 2009 and 2008.  Product gross margins were 83 percent and 84 percent for the full year of 2009 and 2008, respectively.

General, administrative, and marketing expenses for the fourth quarter of 2009 were $12.6 million compared to $12.3 million for the fourth quarter of 2008.  General, administrative, and marketing expenses for the full year of 2009 were $50.0 million compared to $48.8 million for the full year of 2008.  These expenses included personnel costs, advertising, physician education and training, and promotional materials to support current revenue growth and the Company's efforts to increase its preservation service and product offerings.  

General, administrative, and marketing expenses for the fourth quarters of 2009 and 2008 included benefits of $165,000 and $530,000, respectively, related to the adjustment of reserves for product liability losses.  General, administrative, and marketing expenses for the full year of 2009 and 2008 included benefits of $570,000 and $980,000, respectively, related to the adjustment of reserves for product liability losses.  The fourth quarter of 2009 also includes a charge of approximately $377,000 related to a reduction in workforce.

Research and development expenses were $1.4 million for each of the fourth quarters of 2009 and 2008.  Research and development expenses were $5.2 million and $5.3 million for the full years of 2009 and 2008, respectively.  Research and development spending in 2009 was primarily focused on the Company's BioGlue and related products and SynerGraft® tissues and products.

As of December 31, 2009, the Company had $35.1 million in cash, cash equivalents, and restricted securities, compared to $22.8 million at December 31, 2008.  Of this $35.1 million, $2.6 million was received from the U.S. Department of Defense as advance funding for the development of BioFoam® protein hydrogel technology, and $5.0 million was designated as long-term restricted money market funds due to a financial covenant requirement under the Company's credit agreement.  The Company has net operating loss carryforwards that will reduce required cash payments for federal and state income taxes for the 2010 tax year.

2010 Financial Guidance

The Company expects total revenues for the full year of 2010 to be between $118.0 million and $123.0 million, which includes between $1.5 million and $2.5 million related to funding received from the Department of Defense in connection with the development of BioFoam.  The Company expects tissue processing revenues and BioGlue revenues to each increase between mid-single and low-double digits on a percentage basis in 2010 compared to 2009, with HemoStase revenues increasing significantly more than that on a percentage basis.

The Company expects earnings per share of between $0.36 and $0.40 for 2010.  Our earnings guidance contains general expenses associated with business development opportunities, but does not include significant expenses associated with specific targets, such as Medafor or potential changes in the value of the Medafor-related derivative.  Depending upon our course of action and the ultimate result of those actions, such as a proxy contest or the completion of an acquisition, we could incur expenses or changes in the value of the derivative that could materially affect our guidance.