EXTON, Pa., Feb. 2, 2012 /PRNewswire/ -- Kensey Nash
Corporation (NASDAQ: KNSY), a medical device company primarily
focused on regenerative medicine for a wide range of medical
procedures, today reported the results for its second fiscal
quarter ended December 31, 2011.
Second Quarter Snapshot and Recent Developments
- Adjusted diluted earnings per share* of $0.51 (which excludes Norian inventory step-up
amortization; see discussion below), a 34% increase from prior year
diluted earnings per share of $0.38.
As reported diluted earnings per share for the second quarter
of fiscal 2012 were $0.49.
- Revenue of $23.0 million, a 32%
increase from the prior year comparable quarter's revenue of
$17.4 million.
- Net sales of $18.0 million, a 65%
increase from the prior year comparable quarter's net sales of
$10.9 million.
- Royalty income of $5.0 million,
23% below the prior year comparable quarter's royalty income of
$6.5 million.
- Cash from operations of $6.2
million in the quarter.
- Adjusted EBITDA* of $9.0 million
in the quarter.
- During the quarter, achieved a $6.0
million milestone upon Spectranetics Corporations reaching
of $20 million cumulative end-user
sales from the endovascular product line.
- On January 3, 2012, declared a
quarterly cash dividend of $0.25 per
share of the Company's common stock.
President and CEO Commentary
"Our performance in the second quarter either met or exceeded
our expectations in our core regenerative business. Our core
regenerative business primarily consists of orthopaedic and general
surgery products. Core regenerative business sales for the
quarter were $12.8 million, an
increase of 96% over prior year. Sports Medicine, Spine,
Trauma and Craniomaxillofacial products sales all showed
significant growth over the prior year. Sales to Stryker
increased 157% to $3.1 million in the
quarter and sales from our Norian products contributed $4.6 million in the quarter. Excluding
sales of Norian products, our core regenerative business increased
26% from the prior year. Royalty income from our core
regenerative products increased 9% to $1.5
million from the prior year quarter. Royalties from
Stryker for Vitoss foam and Bioactive products increased 7% and
royalties from Synthes for Extracellular Matrices products
increased 27% from the prior year quarter. The growth that we
are experiencing in both product sales to our partners and
royalties from end user sales in our regenerative medicine business
is demonstrating the success of our initiatives in this exciting
and growing field of medicine," commented Joe Kaufmann, President and CEO of the Company.
"Consistent with our public disclosure on December 16, 2011, our Angio-Seal™ royalties in
the quarter were impacted by St. Jude Medical's reduction in the
rate at which it is paying royalties to us on sales of the
Angio-Seal device. Also as we previously disclosed, we have
agreed to non-binding mediation to attempt to resolve the issues
with St. Jude Medical. This mediation is scheduled to take
place in mid February 2012, and we
will provide an update at an appropriate time on the outcome of the
mediation."
Supplemental Sales Data. Details of the Company's
net sales for the three and six months ended December 31, 2011 and 2010 are summarized below.
|
Three Months
Ended
December 31,
|
Year
over
Year %
Change
|
Six Months
Ended
December 31,
|
Year
over
Year %
Change
|
|
($
millions)
|
2011
|
2010
|
|
2011
|
2010
|
|
|
Core Regenerative Medicine
Products
|
|
|
|
|
|
Orthopaedic
Products
|
|
|
|
|
|
|
|
Sports
Medicine Products
|
$3.2
|
$2.6
|
20%
|
$6.8
|
$5.3
|
28%
|
|
Spine
Products
|
5.0
|
2.0
|
154%
|
10.4
|
4.5
|
131%
|
|
Trauma & Craniomaxillofacial Products
|
3.7
|
0.2
|
n/c
|
7.4
|
0.3
|
n/c
|
|
Total Orthopaedic
Products
|
$11.9
|
$4.8
|
148%
|
$24.6
|
$10.1
|
144%
|
|
General Surgery
Products
|
0.4
|
1.4
|
(70%)
|
1.1
|
2.0
|
(47%)
|
|
Other Regenerative
Products
|
0.5
|
0.3
|
39%
|
0.7
|
0.6
|
24%
|
|
Total Core Regen. Medicine
Products
|
$12.8
|
$6.5
|
96%
|
$26.4
|
$12.7
|
108%
|
|
Cardiovascular
Products
|
0.1
|
4.1
|
(98%)
|
0.3
|
8.4
|
(97%)
|
|
Total Biomaterials
Products
|
$12.9
|
$10.6
|
21%
|
$26.7
|
$21.1
|
27%
|
|
Endovascular
|
5.1
|
0.3
|
n/c
|
5.3
|
0.7
|
633%
|
|
Total Net Sales
|
$18.0
|
$10.9
|
65%
|
$32.0
|
$21.8
|
47%
|
|
|
|
|
|
|
|
|
Second Quarter Ended December 31,
2011 (Second Quarter Fiscal 2012) Results
Revenues: Sales and Royalties. Total revenues for
the second quarter of $23.0 million
increased 32% from $17.4 million in
the prior year second quarter.
Net sales for the quarter of $18.0
million increased 65% from $10.9
million in the prior fiscal year.
Orthopaedic sales of $11.9 million
increased 148% from $4.8 million in
the prior fiscal year quarter. Excluding sales attributable
to the Company's May 2011 Norian
asset acquisition, orthopaedic sales of $7.4
million increased 53% from the prior fiscal year comparable
quarter. Both sports medicine and spine product sales in the
prior year second quarter were negatively impacted by an overall
weakness in the markets and reductions in inventory levels by two
of the Company's major customers. Sports medicine product
sales of $3.2 million increased 20%
from $2.6 million in the prior fiscal
year quarter. The increase from the prior year second quarter
sales was primarily due to a recovery from the effect of reductions
in customer inventory levels in the prior year second quarter and
to a lesser degree an improvement in the overall market.
Spine product sales of $5.0
million, including $1.0
million in product sales resulting from the Company's Norian
asset acquisition, increased 154% from $2.0
million in the prior fiscal year quarter. The increase
in spine product sales was primarily due to the impact of Stryker
Corporation's (NYSE: SYK) June 2011
acquisition of Orthovita, the Company's strategic partner.
Stryker has a significantly larger sales force and broader
distribution channels than did Orthovita on a standalone basis.
In addition, the second quarter of fiscal 2012 spine product
sales reflect a recovery from the effect of reductions in customer
inventory levels in the first half of the prior fiscal year.
Sales of trauma and craniomaxillofacial (CMF) products,
consisting almost entirely of $3.6
million in sales resulting from the Norian asset
acquisition, increased to $3.7
million in the quarter from $0.2
million in the prior fiscal year quarter.
General surgery sales of $0.4
million decreased 70% from $1.4
million in the prior fiscal year. Sales of ECM
products were $0.1 million in the
second quarter of fiscal 2012, a decrease from $1.1 million in the prior year quarter due to the
impact of inventory stocking orders in the prior fiscal year.
The Company expects to experience future increases in ECM
product sales in the second half of fiscal 2012 from continued
expansion of end-user sales in the U.S., as well as markets outside
the U.S.
Cardiovascular sales of $0.1
million decreased 98% from $4.1
million in the prior fiscal year. Under the Company's
current supply agreement with St. Jude Medical (NYSE: STJ), which
became effective January 1, 2011, the
Company received orders for $4.0
million of collagen products to be shipped in the third and
fourth quarters of fiscal 2012; however, there were no shipments to
St. Jude Medical during the second quarter.
Endovascular sales of $5.1 million
increased from $0.3 million in the
prior fiscal year period due to the achievement of a $6.0 million milestone from Spectranetics
Corporation (SPNC). This milestone was due to the Company
when SPNC reached a cumulative $20
million in end user sales of the product lines purchased by
SPNC from the Company in May 2008.
During the period, the Company recognized $5.0 million of the $6.0
million milestone and the remaining will be recognized over
the expected period of performance. As specified in the
contract with SPNC, the milestone payment will be made during the
third quarter of fiscal 2012.
Royalty income of $5.0 million
decreased 23% from $6.5 million in
the prior fiscal year quarter. Royalty income in the second quarter
included $3.5 million in Angio-Seal™
royalties and $1.4 million in
royalties from Stryker, following their acquisition of Orthovita.
Angio-Seal™ royalties decreased $1.5
million, or 30%, in the second quarter of fiscal 2012
compared to the prior fiscal year quarter, due to the previously
announced reduction in rate at which St. Jude Medical is paying
royalties from 6% to 2% on United
States and certain International end-user Angio-Seal sales.
Although the Company disagrees with St. Jude's determination
of the royalty rate, the Company is reporting revenue at the rate
at which St. Jude is actually paying royalties. Royalties
from Stryker related to the Vitoss Foam and Bioactive products of
$1.4 million increased 7% from the
prior year comparable quarter. This increase was offset by a
$0.1 million decrease in the royalty
from a license based upon the Vitoss technology, which expired in
July 2011.
Earnings Per Share. Adjusted second quarter fiscal
2012 diluted earnings per share* were $0.51 (which excludes pre-tax non-cash expense to
cost of goods sold of $0.3 million
from Norian inventory step-up) compared to diluted earnings per
share of $0.38 for the same quarter
of fiscal 2011. As reported diluted earnings per share in the
second quarter of fiscal 2012 were $0.49. Negatively affecting the Company's
second quarter fiscal 2012 diluted earnings per share were reduced
royalties of approximately $1.5
million, or $0.12 per share,
primarily due to the reduced rate at which St. Jude is paying
Angio-Seal royalties to the Company.
Six Months Ended December 31,
2011 Results
Revenues: Sales and Royalties. Total revenues for
the six months ended December 31,
2011 of $43.0 million
increased 25% from $34.3 million in
the prior year comparable period.
Net sales for the six months ended December 31, 2011 of $32.0
million increased 47% from $21.8
million in the prior fiscal year.
Orthopaedic sales for the six months ended December 31, 2011 of $24.6
million increased 144% from $10.1
million in the prior fiscal year comparable period.
Excluding sales attributable to the Company's May 2011 Norian asset acquisition, orthopaedic
sales of $15.4 million increased 53%
from the prior year comparable period. Both sports medicine
and spine product sales in the prior year six month period were
negatively impacted by an overall weakness in the markets and
reductions in inventory levels by two of the Company's major
customers. Sports medicine product sales of $6.8 million increased 28% from $5.3 million in the prior year comparable period.
Spine product sales of $10.4
million, including $2.0
million in product sales resulting from the Company's Norian
asset acquisition, increased 131% from $4.5
million in the prior fiscal year comparable period.
Sales of trauma and CMF products, consisting almost entirely
of $7.2 million in sales resulting
from the Norian asset acquisition, increased to $7.4 million in the six month period from
$0.3 million in the prior year
comparable period.
General surgery sales of $1.1
million for the six months ended December 31, 2011 decreased 47% from $2.0 million in the prior fiscal year.
Sales of ECM products were $0.5
million in the first half of fiscal 2012, compared to
$1.7 million in the prior year
comparable period.
Cardiovascular sales of $0.3
million for the six months ended December 31, 2011 decreased 97% from $8.4 million in the prior fiscal year comparable
period.
Endovascular sales of $5.3 million
for the six months ended December 31,
2011 increased from $0.7
million in the prior fiscal year period due to the
achievement of a $6.0 million
milestone from SPNC. During the six month period, the Company
recognized $5.2 million of milestone
revenue from milestones achieved under the agreements with SPNC.
Royalty income of $11.0 million
during the six months ended December 31,
2011 decreased 12% from $12.5
million in the prior year comparable period. Royalty income
in the period included $7.9 million
in Angio-Seal™ royalties and $2.7
million in royalties from Stryker. Angio-Seal™
royalties decreased $1.6 million, or
17%, in the six months ended December 31,
2011 compared to the prior fiscal year period, primarily due
to the reduction in the rate at which St. Jude is paying royalties.
Royalties from Stryker related to the Vitoss Foam and
Bioactive products of $2.7 million
increased 8% from the prior fiscal year comparable period.
This increase was offset by a $0.3
million decrease in the royalty from a license based upon
the Vitoss technology, which expired in July
2011.
Earnings Per Share. Adjusted diluted earnings per
share* for the six months ended December 31,
2011 were $0.83 (which
excludes pre-tax non-cash expense to cost of goods sold of
$1.0 million from Norian inventory
step-up) compared to diluted earnings per share of $0.79 for the same period of fiscal 2011.
As reported diluted earnings per share for the six months
ended December 31, 2011 were
$0.75.
During the six months ended December 31,
2011, the Company generated cash from operations of
$13.9 million and, at December 31, 2011, had $32.8 million of cash and investment balances and
total debt of $29.3 million.
Third Quarter Fiscal 2012 Guidance. The Company is
currently estimating that third quarter fiscal 2012 total revenues
will be in the range of $20.2 to $20.8
million. Net sales are currently expected to be in the
range of $16.1 to $16.3 million.
Royalties are currently expected to be in the range of
$4.1 to $4.5 million. Third
quarter fiscal 2012 diluted earnings per share are expected to be
approximately $0.22 to $0.24.
The Company's third quarter fiscal 2012 pre-tax income and
diluted earnings per share estimated are expected to be negatively
impacted by approximately $2.5
million or $0.20 per share due
to the Company's receiving St. Jude royalty revenue at the lower
rate at which St. Jude is paying, as well as dispute related
expenses. This guidance assumes that there is no resolution
of the St. Jude dispute during the quarter. As stated in the
December 16, 2011 press release,
pending the resolution of the St. Jude matter, the Company intends
to provide guidance only on a quarterly basis.
Income Taxes. The Company currently estimates that
its fiscal 2012 effective tax rate will be approximately 33% - 34%.
In the course of estimating the Company's annual effective
tax rate and recording its quarterly income tax provision, the
Company considers many factors, including its expected earnings,
state income tax apportionment, estimated manufacturing and
research and development tax credits, non-taxable interest income
and other estimates. Material changes in, or differences from,
these estimates could have a significant impact on the Company's
effective tax rate.
Declared Cash Dividend. On January
3, 2012, the Company's board of directors announced that the
board has declared a cash dividend of $0.25 per share of the Company's common stock,
payable to stockholders of record on January
31, 2012. The dividend will be paid on February 29, 2012 and the total dividend will
approximate $2.2 million. This
declaration reflects the initial dividend under a new policy
whereby the board of directors expects to declare a total annual
dividend of $1.00 per share of common
stock, to be paid in equal quarterly installments, commencing with
the dividend announced on January 3,
2012. Any decision to pay future cash dividends will,
however, be made by the board of directors and will depend on the
Company's future earnings and financial condition and other
relevant factors.
* Adjusted EBITDA and adjusted diluted earnings per share are
non-GAAP financial measures and should not be considered
replacements for GAAP results or guidance. For a
reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures, see the accompanying
table to this release.
Conference Call and Webcast. The Company will be
hosting a teleconference discussing the earnings results on
Thursday, February 2, 2012 at
9:00 A.M. Eastern Time. To
participate in the teleconference call, please dial 1-703-639-1429.
Individuals interested in listening to the teleconference may also
do so over the Internet at www.kenseynash.com. To do so,
please go to www.kenseynash.com and choose Conferences and Webcasts
on the Investor Relations page. Please allow 15 minutes prior
to the start of the call to register and download and/or install
any necessary software. A replay of the teleconference will
be archived at www.kenseynash.com and may be accessed following the
teleconference. The teleconference call will also be
available for replay starting Thursday,
February 2, 2012 at 11:00 A.M.
Eastern Time through Thursday,
February 9, 2012 at 11:59 P.M.
Eastern Time by dialing 1-800-475-6701 with an access code
of 233975.
About Kensey Nash Corporation. Kensey Nash Corporation is
a medical device company primarily focused on regenerative medicine
utilizing its proprietary collagen and synthetic polymer
technology. The Company is recognized as a leader for
innovative product development and unique technology in the field
of resorbable biomaterials. The Company has an extensive
range of products, which are sold through strategic partners in
multiple medical markets, including the cardiology, orthopaedic,
sports medicine, spine, endovascular and general surgery
markets.
Cautionary Note for Forward-Looking Statements.
This press release contains forward-looking statements,
including statements regarding the current expectations of Kensey
Nash Corporation (the "Company") about its prospects and
opportunities, including the guidance for the Company's third
quarter of fiscal year, under the heading "Third Quarter
Fiscal 2012 Guidance" and in the table of non-GAAP financial
measures and reconciliations accompanying this release. The
Company has tried to identify these forward looking statements by
using words such as "expect," "anticipate," "estimate," "plan,"
"will," "would," "should," "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 mediation with St. Jude Medical
and any other legal proceeding relating to the Company's disputes
with St. Jude Medical (including the uncertainty of any outcome
thereof and the incurrence of expenses, the diversion of
management's time and attention and any disruption to normal
business operations and to the Company's relationship with St. Jude
Medical, in each case in connection therewith), the Company's
success in and the uncertainty of transitioning the Norian
manufacturing operations to the Company and Synthes success in
distributing the Norian products, St. Jude Medical's success in
selling the Angio-Seal device and the extent to which St. Jude
Medical is able to and does in fact rely on its internal
manufacturing to fulfill its requirements for collagen plugs for
the Angio-Seal device, the success of the Company's other customers
and partners (including Arthrex, Stryker and Synthes) in selling
Kensey Nash related products in the
marketplace, the Company's success in its research and development
efforts (including in its cartilage repair, extracellular matrix
and adhesive materials programs), the success of clinical trials in
both the U.S. and outside the U.S. to support regulatory approval
of the Company's products, and competition from other technologies,
as well as tax and other risks associated with healthcare reform,
economic conditions and foreign currency fluctuations. For a
detailed discussion of factors that could affect the Company's
future operating results, please see the Company's SEC filings,
including the disclosures 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 STATEMENTS OF INCOME
|
|
(in
thousands, except share and per share data)
|
|
(Unaudited)
|
|
|
|
Three
Months
|
|
Six
Months
|
|
|
|
Ended
December 31
|
|
Ended
December 31
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
17,998
|
|
$ 10,900
|
|
$ 32,010
|
|
$ 21,780
|
|
Royalty
income
|
|
4,990
|
|
6,455
|
|
11,000
|
|
12,540
|
|
Total revenues
|
|
22,988
|
|
17,355
|
|
43,010
|
|
34,320
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
7,837
|
|
6,340
|
|
16,063
|
|
10,560
|
|
Research and
development
|
|
5,654
|
|
3,970
|
|
10,772
|
|
8,247
|
|
Selling, general
and administrative
|
|
2,713
|
|
2,065
|
|
5,517
|
|
4,364
|
|
Total operating costs and expenses
|
|
16,204
|
|
12,375
|
|
32,352
|
|
23,171
|
|
Income from
operations
|
|
6,784
|
|
4,980
|
|
10,658
|
|
11,149
|
|
Other expense, net
|
|
(415)
|
|
(292)
|
|
(850)
|
|
(648)
|
|
Pre-tax income
|
|
6,369
|
|
4,688
|
|
9,808
|
|
10,501
|
|
Income tax expense
|
|
2,072
|
|
1,354
|
|
3,248
|
|
3,323
|
|
Net income
|
|
$
4,297
|
|
$
3,334
|
|
$
6,560
|
|
$
7,178
|
|
Basic earnings per
share
|
|
$
0.50
|
|
$
0.39
|
|
$
0.76
|
|
$
0.82
|
|
Diluted earnings per
share
|
|
$
0.49
|
|
$
0.38
|
|
$
0.75
|
|
$
0.79
|
|
Weighted average common shares
outstanding
|
|
8,652,648
|
|
8,511,339
|
|
8,638,779
|
|
8,774,481
|
|
Diluted weighted average common
shares outstanding
|
|
8,749,797
|
|
8,816,750
|
|
8,741,719
|
|
9,035,543
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands)
|
|
(Unaudited)
|
|
|
|
December
31,
|
|
June
30,
|
|
|
|
2011
|
|
2011
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
17,245
|
|
$ 10,219
|
|
Investments
|
|
15,594
|
|
11,722
|
|
Trade
receivables
|
|
4,649
|
|
5,804
|
|
Other
receivables
|
|
9,834
|
|
6,727
|
|
Inventory
|
|
14,987
|
|
16,629
|
|
Deferred tax
asset, current
|
|
2,043
|
|
1,564
|
|
Prepaid expenses
and other assets
|
|
1,936
|
|
2,807
|
|
Total current assets
|
|
66,288
|
|
55,472
|
|
Property, plant and equipment,
net
|
|
56,577
|
|
57,949
|
|
Deferred tax asset,
non-current
|
|
8,640
|
|
8,372
|
|
Other non-current
assets
|
|
25,927
|
|
25,127
|
|
Total assets
|
|
$
157,432
|
|
$ 146,920
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
$
6,738
|
|
$
4,705
|
|
Other current
liabilities
|
|
1,500
|
|
1,505
|
|
Current portion of
debt
|
|
1,400
|
|
1,400
|
|
Deferred
revenue
|
|
905
|
|
947
|
|
Short-term
deferred acquisition payments
|
|
14,000
|
|
-
|
|
Total current liabilities
|
|
24,543
|
|
8,557
|
|
Long-term portion of
debt
|
|
27,883
|
|
28,583
|
|
Deferred revenue,
non-current
|
|
2,143
|
|
2,466
|
|
Long-term deferred acquisition
payments
|
|
1,500
|
|
15,500
|
|
Other non-current
liabilities
|
|
5,563
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|
4,977
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|
Total stockholders'
equity
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|
95,800
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|
86,837
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|
Total liabilities and
stockholders' equity
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|
$
157,432
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|
$ 146,920
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|
Non-GAAP
Financial Measures and Reconciliations
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As used
herein, “GAAP” refers to generally accepted accounting principles
in the United States. 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 measures and associated
reconciliations.
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Three months
Ended December 31, 2011 Adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA)
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Three Months
Ended
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|
|
|
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|
December 31,
2011
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($ millions)
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Net Income - GAAP
|
|
|
|
|
$
4.3
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|
|
|
Inventory Step-up
Amortization expense (a)
|
|
|
|
|
0.2
|
|
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|
Net Income - As
Adjusted
|
|
|
|
|
$
4.5
|
|
|
|
Income Tax
Expense
|
|
|
|
|
2.1
|
|
|
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Interest
Income
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|
|
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|
(0.1)
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|
|
|
Interest
Expense
|
|
|
|
|
0.5
|
|
|
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Depreciation and
Amortization
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|
|
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2.0
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|
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Adjusted EBITDA
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|
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|
|
$
9.0
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|
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Three and
Six Months Ended December 31, 2011 Adjusted Earnings Per
Share
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|
|
|
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Actual
|
|
Actual
|
|
|
|
|
|
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Three Months
Ending
|
|
Six Months
Ending
|
|
|
|
|
|
|
December 31,
2011
|
|
December 31,
2011
|
|
|
|
|
|
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|
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Earnings Per Share -
GAAP
|
|
|
|
|
$
0.49
|
|
$
0.75
|
|
Inventory Step-up Amortization
expense (a)
|
|
|
|
|
0.02
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|
0.08
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|
Adjusted Diluted Earnings Per
Share
|
|
|
|
|
$
0.51
|
|
$
0.83
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(a) Diluted
earnings per share for the three and six months ended December 31,
2011 includes acquired inventory step-up non-cash expense of
approximately $255,000 ($170,000 net of tax), or $0.02 diluted per
share tax-effected, and $1,030,000 ($670,000 net of tax), or $0.08
diluted per share tax-effected, respectively, recorded in
connection with the Norian asset acquisition. This represents
the purchase accounting adjustment related to assigning a fair
value to the acquired inventory at the date of acquisition to
adjust inventory for the estimated capitalized manufacturing profit
in the acquired inventory. This non-recurring, non-cash
charge to cost of products sold was recorded over the expected
inventory turn-over period, as the capitalized manufacturing profit
added to inventory under purchase accounting was sold within
approximately five months of the date of acquisition.
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Note: To supplement its
consolidated financial statements presented in accordance with
GAAP, Kensey Nash Corporation provides and uses non-GAAP measures,
such as Adjusted EBITDA and Adjusted Diluted Earnings Per Share,
because Kensey Nash management believes that in order to properly
understand the Company's short-term and long-term financial trends,
investors may wish to consider the impact of certain adjustments
(such as in-process research and development charges, acquisition
related charges including inventory step-up and related income tax
adjustments). These adjustments result from facts and circumstances
(such as business development activities and acquisitions) that
vary in frequency and impact on the Company's results of
operations. Kensey Nash management uses these non-GAAP measures to
forecast and evaluate the operational performance of the Company
and for planning purposes, as well as to compare results of current
periods to prior periods on a consolidated basis. Adjusted
EBITDA represents the Company's GAAP net income adjusted for
inventory step-up amortization and excludes interest, taxes,
depreciation and amortization. Adjusted Diluted Earnings Per
Share is adjusted from GAAP results to exclude certain expenses
described above. These non-GAAP measures are provided to
enhance the user's overall understanding of historical and current
financial performance. The Company believes the non-GAAP
results provide useful information to both management and investors
by excluding certain non-operating items, non-cash expenses and
expenses that the Company believes are not indicative of its core
operating results or future performance.
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These non-GAAP measures
provide investors and management with an alternative method for
assessing Kensey Nash’s operating results. Further, these
non-GAAP measures are among several primary indicators management
uses for planning and forecasting. Non-GAAP financial
measures used by the Company may be calculated differently from,
and therefore may not be comparable to, similarly titled measures
used by other companies. Investors should consider non-GAAP
measures in addition to, and not as a substitute for, or as
superior to, financial performance measures prepared in accordance
with GAAP.
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SOURCE Kensey Nash Corporation