8-K 1 c87697e8vk.txt FORM 8-K -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------------------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 18, 2004 SYNOVIS LIFE TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) State of Incorporation: Minnesota I.R.S. Employer Identification No.: 41-1526554 Address of principal executive offices: 2575 University Ave. W. St. Paul, Minnesota 55114 Telephone Number: (651) 603-3700 --------------------------------------------------- ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE On August 18, 2004, Synovis Life Technologies, Inc. (Synovis) issued a press release announcing its earnings for the third fiscal quarter ended July 31, 2004. Third-quarter consolidated net revenue was $15.1 million compared to $15.3 million in the same period last year, a 1 percent decrease and a 10 percent sequential increase over the second quarter of fiscal 2004. Operating income was $194,000, after expensing $133,000 related to terminated acquisition activity, versus $2.2 million in the prior-year quarter. The operating income decrease for the quarter was driven by a $1.2 million decrease in interventional business operating income. The company reported net income of $187,000, or two cents per diluted share, versus $1.5 million or $0.14 per diluted share, in the third quarter of fiscal 2003. In the first nine months of fiscal 2004, consolidated net revenue was $40.4 million compared to $43.0 million in the same period last year. Operating income was $1.4 million compared to $5.3 million in the year-ago period, with the reduction primarily due to a $3.0 million operating income decrease in the interventional business. Consolidated net income declined to $1.1 million, or nine cents per diluted share in the first nine months of fiscal 2004 from $3.5 million or $0.34 cents per diluted share in the first nine months of fiscal 2003. SURGICAL BUSINESS Surgical business revenue rose 5 percent in the third quarter to $7.0 million from $6.6 million in the year-ago period. The business produced $623,000 in operating income, after deducting $133,000 of expense associated with the terminated acquisition and $20,000 in legal expense related to the recently filed lawsuits. Operating income of the Surgical business prior to these expenses were $776,000, compared to $1.4 million in the same period last year. The Surgical business gross margin was 60.4 percent in the quarter, down 5.2 points from the year-earlier levels due to planned higher production and overhead rates associated with fiscal 2004 manufacturing activities and lower utilization of manufacturing resources due to volume. Peri-Strips(R), the company's staple line buttress and the leading surgical product, generated $3.2 million in third-quarter revenue, essentially flat with the year-ago period, but up 15 percent sequentially over the $2.8 million of the second quarter of this fiscal year. Year-to-date, Peri-Strips sales were up 5 percent over the first nine months of fiscal 2003. INTERVENTIONAL BUSINESS Interventional business revenue was $8.2 million in the fiscal 2004 third quarter, down 5 percent from $8.7 million in the same period last year, but up 15 percent sequentially over the $7.1 million in the second quarter of this fiscal year. In this quarter, the operating loss was $429,000, versus operating income of $790,000 in the prior-year quarter. The third-quarter gross margin was 16.5 percent versus 28 percent in the prior-year quarter. Applied overhead per labor hour increased substantially as a result of lower-than-expected revenue and labor hours, reducing gross margins. Third-quarter revenue at Synovis Caribe in Puerto Rico increased sixfold to $1.6 million as production transfers continue. Precision Engineering revenue rose to $763,000, a 33 percent increase from $572,000 in the prior-year quarter. TERMINATED ACQUISITION ACTIVITY In the third quarter, Synovis recorded expenses totaling $133,000 incurred from March until July, related to the company's consideration of a significant acquisition. For a variety of reasons the acquisition process was terminated. Cash, cash equivalents and short-term investments totaled $41.0 million as of the end of the third quarter. Cash provided by operations was $1.4 million in the third quarter and $1.1 million year to date. The company invested $1.4 million in capital expenditures in the third quarter and has invested $4.6 million year to date. SYNOVIS LIFE TECHNOLOGIES, INC. Condensed Consolidated Results of Operations (unaudited) (In thousands, except per share data)
Three Months Ended Nine Months Ended July 31 July 31 2004 2003 2004 2003 ---- ---- ---- ---- Net revenue $ 15,145 $ 15,279 $ 40,407 $ 43,046 Cost of revenue 9,593 8,551 23,592 24,309 Gross margin 5,552 6,728 16,815 18,737 Gross margin percentage 37% 44% 42% 44% Selling, general and administrative 4,076 3,604 12,324 10,585 Research and development 1,129 903 2,933 2,817 Other operating expenses 153 -- 153 -- Operating income 194 2,221 1,405 5,335 Interest, net 86 (2) 211 (3) Income before provision for income taxes 280 2,219 1,616 5,332 Provision for income taxes 93 756 527 1,829 Net income $ 187 $ 1,463 $ 1,089 $ 3,503 Basic earnings per share $ 0.02 $ 0.15 $ 0.09 $ 0.36 Diluted earnings per share $ 0.02 $ 0.14 $ 0.09 $ 0.34 Weighted average basic shares outstanding 11,532 9,820 11,496 9,707 Weighted average diluted shares outstanding 11,876 10,519 12,002 10,308
Business Segment Information (unaudited) (In thousands)
Three Months Ended Nine Months Ended July 31 July 31 2004 2003 2004 2003 ---- ---- ---- ---- Net revenue Surgical business $ 6,950 $ 6,608 $20,250 $ 19,004 Interventional business 8,195 8,671 20,157 24,042 --------- ------- ------- --------- Total $ 15,145 $15,279 $40,407 $ 43,046 Gross margin Surgical business $ 4,200 $ 4,332 $12,903 $ 12,290 Interventional business 1,352 2,396 3,912 6,447 --------- ------- ------- --------- Total 5,552 $ 6,728 $16,815 $ 18,737 Gross margin percentage Surgical business 60% 66% 64% 65% Interventional business 16% 28% 19% 27% Total 37% 44% 42% 44% Operating income Surgical business $ 623 $ 1,431 $ 2,692 $ 3,633 Interventional business (429) 790 (1,287) 1,702 --------- ------- ------- --------- Total $ 194 $ 2,221 $ 1,405 $ 5,335
Condensed Consolidated Balance Sheets (unaudited) As of July 31, 2004, and October 31, 2003 (in thousands, except share and per share data)
July 31, October 31, 2004 2003 ------------------ ----------------- ASSETS Current assets: Cash and cash equivalents $ 14,015 $ 44,102 Short-term investments 26,959 -- Accounts receivable, net 7,748 6,541 Inventories 10,458 10,849 Other 2,286 1,891 ------------ ----------- Total current assets 61,466 63,383 Property, plant and equipment, net 13,391 10,559 Goodwill and other intangible assets, net 6,873 6,892 Other 11 11 ------------ ----------- Total assets $ 81,741 $ 80,845 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 4,997 $ 5,903 Current maturities of long-term obligations 77 281 ------------ ----------- Total current liabilities 5,074 6,184 Long-term obligations and deferred income taxes 559 599 ------------ ----------- Total liabilities 5,633 6,783 ------------ ----------- Shareholders' equity: Preferred stock: authorized 5,000,000 shares of $.01 par value; none issued or outstanding at both dates -- -- Common stock: authorized 20,000,000 shares of $.01 par value; issued and outstanding, 11,540,539 and 11,435,638 at July 31, 2004 and October 31, 2003, respectively 115 114 Additional paid-in capital 70,912 69,956 Retained earnings 5,081 3,992 ------------ ----------- Total shareholders' equity 76,108 74,062 ------------ ----------- Total liabilities and shareholders' equity $ 81,741 $ 80,845 ============ ===========
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. (99.1) Synovis Life Technologies, Inc. News Release dated August 18, 2004. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On August 18, 2004, Synovis Life Technologies, Inc. (Synovis) issued a press release announcing its earnings for the three and nine months ended July 31, 2004. A copy of the press release is attached hereto as Exhibit 99.1, and is furnished in accordance with Item 12 of Form 8-K. In accordance with General Instruction B.6 of Form 8-K, all of the information in this Item and the accompanying exhibit shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act. Synovis will also publish the press release, including the supplemental information contained therein, on its website at www.synovislife.com. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SYNOVIS LIFE TECHNOLOGIES, INC. By: /s/ Connie L. Magnuson --------------------------------- August 18, 2004 Connie L. Magnuson Vice-President of Finance, Chief Financial Officer and Corporate Secretary