-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EtP/RVZcor8/sUhJ9++pv6GCY8ILl0RgfDvtXWFUOCb6E6sOtwGTSyyMBBLM2VCs 0mtOp4MYa0CQJ4doEWH31g== 0000950134-05-016580.txt : 20050824 0000950134-05-016580.hdr.sgml : 20050824 20050824101041 ACCESSION NUMBER: 0000950134-05-016580 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050824 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050824 DATE AS OF CHANGE: 20050824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNOVIS LIFE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000780127 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 411526554 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13907 FILM NUMBER: 051044951 BUSINESS ADDRESS: STREET 1: 2575 UNIVERSITY AVENUE CITY: ST PAUL STATE: MN ZIP: 55114-1024 BUSINESS PHONE: 6516033700 FORMER COMPANY: FORMER CONFORMED NAME: BIO VASCULAR INC DATE OF NAME CHANGE: 19920703 8-K 1 c98021e8vk.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 24, 2005 SYNOVIS LIFE TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) State of Incorporation: Minnesota Commission File No.: 0-13907 I.R.S. Employer Identification No.: 41-1526554 Address of principal executive offices: 2575 University Ave. W. St. Paul, Minnesota 55114 Telephone Number: (651) 796-7300 -------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION On August 24, 2005, Synovis Life Technologies, Inc. (Synovis) issued a press release announcing its earnings for the three and nine months ended July 31, 2005. A copy of the press release is furnished herewith as Exhibit 99.1. Synovis will also publish the press release, including the supplemental information contained therein, on its website at www.synovislife.com. ITEM 8.01 OTHER EVENTS In the August 24, 2005 press release, Synovis reported third-quarter consolidated net revenue of $15.6 million, a 3 percent increase over $15.1 million in the same period last year. The company reported net income of $355,000, or $0.03 per diluted share, versus net income of $187,000, or $0.02 per diluted share, in the year-earlier period. In the first nine months of fiscal 2005, consolidated net revenue rose 7 percent to $43.4 million from $40.4 million in the first nine months of fiscal 2004. Consolidated net income was $601,000, or $0.05 per diluted share, compared with $1.1 million, or $0.09 per diluted share, in the first nine months of last fiscal year. The consolidated gross margin was 35 percent in the quarter compared to 37 percent in the third quarter of last fiscal year. Cash, cash equivalents and short-term investments totaled $42.4 million at July 31, 2005, compared to $41.8 million at the end of the fiscal second quarter. The cash and investment balances generated $263,000 of interest income in the third quarter, and nearly all is exempt from federal income tax. Year-to-date, the effective tax rate was 15 percent, down from 30 percent for the first six months of fiscal 2005, due to the level of tax-exempt interest income and R&D credits relative to pretax income. The third-quarter tax provision was zero, the result of applying the lower effective tax rate to year-to-date pretax income. INTERVENTIONAL BUSINESS Interventional business revenue rose to $9.0 million in the fiscal 2005 third quarter, up 10 percent over revenue of $8.2 million in the same period of fiscal 2004. Revenue from manufacturing transferred to Synovis Caribe during the third quarter increased to $2.4 million, up 49 percent from the same quarter of fiscal 2004. The interventional business reported operating income of $171,000, compared to an operating loss of $412,000 in the year-ago period. The third-quarter interventional margin was 22 percent, a five-point increase over the same period of last year. SURGICAL BUSINESS In the third quarter, surgical business revenue was $6.6 million, down 5 percent from $7.0 million in the year-ago period. The surgical business generated $428,000 in operating income, a decrease of $743,000 from the same period last year, and an increase of 102 percent over the second quarter of fiscal 2005. In the quarter, revenue from Peri-Strips(R), the company's staple line buttress, totaled $2.1 million compared to $3.2 million in the year-ago period. On a sequential quarter basis, Peri-Strips revenue is down 3 percent. The surgical business' third-quarter gross margin was 53 percent, a seven percent decrease form the same period of last year, largely due to the discontinuation of a mature product line, the Biograft. This action led to discounted sales of this product, as well as a one-time $185,000 write-off of raw material and finished goods inventory. The combination of discounted product and inventory write-offs reduced the gross margin by more than 5 percentage points in the period. Microsurgery product sales rose 91 percent to $772,000 in the third quarter of fiscal 2005 compared to the year-ago period. Within this category, sales of our Microvascular Anastomotic Coupler and Coupler delivery instruments showed a 70 percent quarter-over-quarter increase. The Neurotube(R), a product used to regenerate nerves, which Synovis acquired in December 2004, contributed $110,000 of revenue in the quarter. 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 2005 2004 2005 2004 ---- ---- ---- ---- Net revenue $ 15,636 $ 15,145 $ 43,425 $ 40,407 Cost of revenue 10,196 9,593 27,358 23,592 Gross margin 5,440 5,552 16,067 16,815 Gross margin percentage 35% 37% 37% 42% Selling, general and administrative 4,407 4,076 12,807 12,324 Research and development 897 1,129 3,069 2,933 Other 44 153 130 153 Operating income 92 194 61 1,405 Interest, net 263 86 645 211 Income before provision for income taxes 355 280 706 1,616 Provision for income taxes -- 93 105 527 Net income $ 355 $ 187 $ 601 $ 1,089 Basic earnings per share $ 0.03 $ 0.02 $ 0.05 $ 0.09 Diluted earnings per share $ 0.03 $ 0.02 $ 0.05 $ 0.09 Weighted average basic shares outstanding 11,809 11,532 11,766 11,496 Weighted average diluted shares outstanding 11,985 11,876 12,008 12,002
Business Segment Information (unaudited) (In thousands)
Three Months Ended Nine Months Ended July 31 July 31 2005 2004 2005 2004 ---- ---- ---- ---- Net revenue Surgical business $ 6,608 $ 6,950 $ 19,101 $ 20,250 Interventional business 9,028 8,195 24,324 20,157 --------- --------- --------- --------- Total $ 15,636 $ 15,145 $ 43,425 $ 40,407 Gross margin Surgical business $ 3,484 $ 4,200 $ 10,976 $ 12,903 Interventional business 1,956 1,352 5,091 3,912 --------- --------- --------- --------- Total 5,440 $ 5,552 $ 16,067 $ 16,815 Gross margin percentage Surgical business 53% 60% 57% 64% Interventional business 22% 17% 21% 19% Total 35% 37% 37% 42% Operating income (loss) Surgical business $ 428 $ 1,171 $ 1,517 $ 4,016 Interventional business 171 (412) 65 (1,236) Corporate and other (507) (565) (1,521) (1,375) --------- --------- --------- --------- Total $ 92 $ 194 $ 61 $ 1,405
Condensed Consolidated Balance Sheets (unaudited) As of July 31, 2005 and Oct. 31, 2004 (in thousands, except share and per share data)
2005 2004 ------------------ ------------------ ASSETS Current assets: Cash and cash equivalents $ 6,378 $ 15,369 Short-term investments 36,045 26,931 Accounts receivable, net 8,232 7,722 Inventories 10,375 11,591 Other 3,136 3,555 ------------ ----------- Total current assets 64,166 65,168 Property, plant and equipment, net 13,882 13,704 Goodwill and other intangible assets, net 7,672 6,853 ------------ ----------- Total assets $ 85,720 $ 85,725 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 5,184 $ 6,457 Current maturities of long-term obligations 12 40 ------------ ----------- Total current liabilities 5,196 6,497 Deferred income tax liability, net 1,001 1,227 ------------ ----------- Total liabilities 6,197 7,724 ------------ ----------- 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, 11,849,710 and 11,713,700 at July 31, 2005 and October 31, 2004, 118 117 respectively Additional paid-in capital 73,534 72,614 Retained earnings 5,871 5,270 ------------ ----------- Total shareholders' equity 79,523 78,001 ------------ ----------- Total liabilities and shareholders' equity $ 85,720 $ 85,725 ============ ===========
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. (99.1) Synovis Life Technologies, Inc. News Release August 24, 2005. 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. Dated: August 24, 2005 By: /s/ Brett Reynolds -------------------------------- Brett Reynolds Vice-President of Finance, Chief Financial Officer and Corporate Secretary EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION METHOD OF FILING - ------------- --------------------------------------------------------- -------------------------------------------- (99.1) Synovis Life Technologies, Inc. News Release dated Filed herewith electronically. August 24, 2005
EX-99.1 2 c98021exv99w1.txt NEWS RELEASE EXHIBIT 99.1 [SYNOVIS LIFE TECHNOLOGIES LOGO] FROM: FOR: Padilla Speer Beardsley Inc. Synovis Life Technologies, Inc. 1101 West River Parkway 2575 University Ave. Minneapolis, Minnesota 55415 St. Paul, Minnesota 55114 CONTACT: CONTACT: Nancy A. Johnson/Marian Briggs Brett Reynolds, CFO (612) 455-1745/(612) 455-1742 (651) 796-7300 FOR IMMEDIATE RELEASE - --------------------- SYNOVIS LIFE TECHNOLOGIES ANNOUNCES RECORD THIRD-QUARTER REVENUE INTERVENTIONAL BUSINESS SETS QUARTERLY REVENUE RECORD; EARNINGS PER SHARE IMPROVE ST. PAUL, Minn., August 24, 2005 - Synovis Life Technologies, Inc. (NASDAQ: SYNO), today reported record revenue and improved earnings for the third fiscal quarter ended July 31, 2005. Third-quarter consolidated net revenue rose to $15.6 million, a 3 percent increase over $15.1 million in the year-ago period. The company reported net income of $355,000, or $0.03 per diluted share, versus net income of $187,000, or $0.02 per diluted share, in the year-earlier period. In the first nine months of fiscal 2005, consolidated net revenue rose 7 percent to $43.4 million from $40.4 million in the first nine months of fiscal 2004. Consolidated net income was $601,000, or $0.05 per diluted share, compared with $1.1 million, or $0.09 per diluted share, in the first nine months of last fiscal year. "We are pleased to report record quarterly consolidated revenue and improved quarterly earnings per share over the year-ago quarter and sequentially over the fiscal 2005 second quarter. The growing strength of the interventional business and the strong momentum of the microsurgery product line offset a substantial third-quarter decrease in bariatric Peri-Strips(R) revenue, where challenges continue, " said Karen Gilles Larson, Synovis Life Technologies president and chief executive officer. (more) Synovis Life Technologies, Inc. August 24, 2005 Page 2 The consolidated gross margin was 35 percent in the quarter compared to 37 percent in the third quarter of last fiscal year and led to a slight decrease in operating income. The lower gross margin resulted from the revenue mix between the interventional and surgical businesses, as well as a lower gross margin in the surgical business which was primarily due to discontinuing a mature product, the Biograft. Consolidated quarterly operating expenses were flat compared to the same quarter last fiscal year. Cash, cash equivalents and short-term investments totaled $42.4 million at July 31, 2005, compared to $41.8 million at the end of the fiscal second quarter. The cash and investment balances generated $263,000 of interest income in the third quarter, and nearly all is exempt from federal income tax. Year-to-date, the effective tax rate was 15 percent, down from 30 percent for the first six months of fiscal 2005, due to the level of tax-exempt interest income and R&D credits relative to pretax income. The third-quarter tax provision was zero, the result of applying the lower effective tax rate to year-to-date pretax income. INTERVENTIONAL BUSINESS Interventional business revenue rose to $9.0 million in the fiscal 2005 third quarter, up 10 percent over revenue of $8.2 million in the same period of fiscal 2004. Revenue from manufacturing transferred to Synovis Caribe in Puerto Rico during the third quarter increased to $2.4 million, up 49 percent from the same quarter of fiscal 2004. The interventional business reported operating income of $171,000, compared to an operating loss of $412,000 in the year-ago period. "The interventional business generated record quarterly revenue and improved its operating profit by more than half a million dollars compared to last year," noted Larson. "Strong quarter-over-quarter growth with two major customers accounted for much of the increase. The third-quarter interventional margin was 22 percent, a five-point increase over the same period of last year. The increase is due to improved manufacturing efficiencies and the continued transfer of manufacturing to Synovis Caribe, where labor rates are lower. A sizeable component order received from and sold to a customer in the third quarter involved start-up costs which constrained the quarterly gross margin, but we believe this represents a good investment in this account." SURGICAL BUSINESS In the third quarter, surgical business revenue was $6.6 million, down 5 percent from $7.0 (more) Synovis Life Technologies, Inc. August 24, 2005 Page 3 million in the year-ago period. The surgical business generated $428,000 in operating income, a decrease of $743,000 from the same period last year due to both lower revenue and lower gross margin. However, third-quarter surgical business operating income increased by 102 percent over the second quarter of this year. In the quarter, revenue from Peri-Strips, the company's staple line buttress, totaled $2.1 million compared to $3.2 million in the third quarter of fiscal 2004 when Peri-Strips quarterly revenue reached an all-time high. On a sequential quarter basis, Peri-Strips revenue is down just 3 percent. "While we are obviously disappointed with Peri-Strip sales, we are systematically executing the steps in our plan aimed at reversing this trend," said Larson. "A key element in our plan was to hire a vice president of sales for our Surgical Innovations division. Very recently, we brought Tom Doorley on board to lead the sales effort. We expect his broad medical sales experience will be a significant asset in this role. We are also adding sales specialists to work with distributor and rep organizations and directly with physicians and hospitals -- another key element in our plan." The surgical business' third-quarter gross margin was 53 percent, a 7 percent decrease from the same period of last year, largely due to the discontinuation of a mature product line, the Biograft. This action led to the discounted sales of most of the finished goods inventory, and a one-time $185,000 write-off of raw material and the remaining finished goods inventory. The combination of discounted product and inventory write-offs reduced the gross margin by more than 5 percentage points in the period. Synovis is in the early stages of a prospective, randomized clinical market evaluation of the use of Peri-Strips Dry with Veritas(R) Collagen Matrix (PSD Veritas) for circular staplers in colorectal surgery for colon cancer. Four medical sites have completed their institutional review board approvals, signed investigator contracts and either have or will shortly begin enrolling patients. This clinical study is expected to include up to 15 clinical sites and enroll as many as 950 patients. Statistics indicate colorectal surgeries have an average leak rate of approximately 7 percent. The company believes, based on R&D work and historical buttress performance, that PSD Veritas could significantly reduce this leak rate and associated complications, improving outcomes. Microsurgery products had an excellent third quarter with sales rising by 91 percent from the same period of last fiscal year to $772,000. Within this category, sales of the Microvascular Anastomotic Coupler and Coupler delivery instruments showed a 70 percent quarter-over-quarter (more) Synovis Life Technologies, Inc. August 24, 2005 Page 4 increase. Microsurgeons in several specialties use the Coupler to connect extremely small veins or arteries without sutures. In the third quarter, the company completed the requirements to bring the 3.5mm and 4.0mm Coupler sizes to market. Beginning in August, these sizes were released on a controlled basis. Early feedback from physicians has been very positive. Synovis is planning a full product launch for these additional sizes in the fiscal fourth quarter, after sufficient experience is gained through the controlled release. The Neurotube, a product used to regenerate nerves, which Synovis acquired in December 2004, contributed $110,000 of revenue in the quarter. In addition, Synovis recorded its first sale of a Varioscope(R) system, an advanced head-mounted microscope for use in microsurgery procedures. CONFERENCE CALL AND WEBCAST Synovis Life Technologies will host a live Webcast of its fiscal third-quarter conference call today, August 24, at 10:00 a.m. CT to discuss the company's results. To access the live Webcast, go to the investor information section of the company's Web site, www.synovislife.com, on the day of the conference call and click on the Webcast icon. A Webcast replay will be available beginning at noon CT, Wednesday, August 24, 2005. If you prefer to listen to an audio replay of the conference call, dial (800) 405-2236 and enter access number 11037126. The audio replay will be available beginning at noon CT on Wednesday, August 24, through 6:00 p.m. CT on Friday, August 26. ABOUT SYNOVIS LIFE TECHNOLOGIES Synovis Life Technologies, Inc., based in St. Paul, Minn., is a diversified medical device company engaged in developing, manufacturing and bringing to market medical devices for the surgical and interventional treatment of disease. For additional information on Synovis Life Technologies and its businesses, visit the company's Web site at www.synovislife.com. Forward-looking statements contained in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements can be identified by words such as "should", "could", "may", "will", "expect", "believe", "anticipate", "estimate", "continue", or other similar expressions. Certain important factors that could cause results to differ materially from those anticipated by the forward-looking statements made herein include the timing of product introductions, outcomes of clinical trials and regulatory submissions, the number of certain surgical procedures performed, the level of orders from contract manufacturing customers, the results of the ongoing securities litigation, and the effectiveness of the company's plan to address surgical business revenue trends, as well as the other factors found in the company's Annual Report on Form 10-K for the year ended October 31, 2004. (more) Synovis Life Technologies, Inc. August 24, 2005 Page 5 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 2005 2004 2005 2004 ---- ---- ---- ---- Net revenue $ 15,636 $ 15,145 $ 43,425 $ 40,407 Cost of revenue 10,196 9,593 27,358 23,592 Gross margin 5,440 5,552 16,067 16,815 Gross margin percentage 35% 37% 37% 42% Selling, general and administrative 4,407 4,076 12,807 12,324 Research and development 897 1,129 3,069 2,933 Other 44 153 130 153 Operating income 194 61 1,405 92 Interest, net 263 86 645 211 Income before provision for income taxes 355 280 706 1,616 Provision for income taxes -- 93 105 527 Net income $ 355 $ 187 $ 601 $ 1,089 Basic earnings per share $ 0.03 $ 0.02 $ 0.05 $ 0.09 Diluted earnings per share $ 0.03 $ 0.02 $ 0.05 $ 0.09 Weighted average basic shares outstanding 11,809 11,532 11,766 11,496 Weighted average diluted shares outstanding 11,985 11,876 12,008 12,002
(more) Synovis Life Technologies, Inc. August 24, 2005 Page 6 SYNOVIS LIFE TECHNOLOGIES, INC. Business Segment Information (unaudited) (In thousands)
Three Months Ended Nine Months Ended July 31 July 31 2005 2004 2005 2004 ---- ---- ---- ---- Net revenue Surgical business $ 6,608 $ 6,950 $ 19,101 $ 20,250 Interventional business 9,028 8,195 24,324 20,157 --------- --------- --------- --------- Total $ 15,636 $ 15,145 $ 43,425 $ 40,407 Gross margin Surgical business $ 3,484 $ 4,200 $ 10,976 $ 12,903 Interventional business 1,956 1,352 5,091 3,912 --------- --------- --------- --------- Total $ 5,440 $ 5,552 $ 16,067 $ 16,815 Gross margin percentage Surgical business 53% 60% 57% 64% Interventional business 22% 17% 21% 19% Total 35% 37% 37% 42% Operating income (loss) Surgical business $ 428 $ 1,171 $ 1,517 $ 4,016 Interventional business 171 (412) 65 (1,236) Corporate and other (507) (565) (1,521) (1,375) --------- --------- --------- --------- Total $ 92 $ 194 $ 61 $ 1,405
(more) Synovis Life Technologies, Inc. August 24, 2005 Page 7 SYNOVIS LIFE TECHNOLOGIES, INC. Condensed Consolidated Balance Sheets (unaudited) As of July 31, 2005, and October 31, 2004 (in thousands, except share and per share data)
July 31, October 31, 2005 2004 ------------------ ------------------ ASSETS Current assets: Cash and cash equivalents $ 6,378 $ 15,369 Short-term investments 36,045 26,931 Accounts receivable, net 8,232 7,722 Inventories 10,375 11,591 Other 3,136 3,555 ------------ ----------- Total current assets 64,166 65,168 Property, plant and equipment, net 13,882 13,704 Goodwill and other intangible assets, net 7,672 6,853 ------------ ----------- Total assets $ 85,720 $ 85,725 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 5,184 $ 6,457 Current maturities of capital lease obligations 12 40 ------------ ----------- Total current liabilities 5,196 6,497 Deferred income tax liability, net 1,001 1,227 ------------ ----------- Total liabilities 6,197 7,724 ------------ ----------- 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, 11,849,710 and 11,713,700 at July 31, 2005, and October 31, 2004, 118 117 respectively Additional paid-in capital 73,534 72,614 Retained earnings 5,871 5,270 ---------- ---------- Total shareholders' equity 79,523 78,001 ------------ ----------- Total liabilities and shareholders' equity $ 85,720 $ 85,725 ============ ===========
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