-----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, EQSnlBZeYSFcc5CWp3HKeekbVuYcEUyFEHrHIy8H+GQ3gzcRZgM7q/FlvIoQazLM xlQp33AXTDeC/2vkUjad2w== 0000950134-06-010523.txt : 20060524 0000950134-06-010523.hdr.sgml : 20060524 20060524085126 ACCESSION NUMBER: 0000950134-06-010523 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060524 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060524 DATE AS OF CHANGE: 20060524 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: 06862921 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 c05639e8vk.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): May 24, 2006 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 May 24, 2006, Synovis Life Technologies, Inc. (Synovis) issued a press release announcing its earnings for the three and six months ended April 30, 2006. 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 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. (99.1) Synovis Life Technologies, Inc. News Release dated May 24, 2006. 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: May 24, 2006 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. Filed herewith electronically. News Release dated May 24, 2006
EX-99.1 2 c05639exv99w1.txt NEWS RELEASE EXHIBIT 99.1 (SYNOVIS(R) LOGO) LIFE TECHNOLOGIES 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 REPORTS SECOND-QUARTER RESULTS BOTH THE SURGICAL AND INTERVENTIONAL BUSINESSES REPORT REVENUE GAINS ST. PAUL, Minn., May 24, 2006 - Synovis Life Technologies, Inc. (Nasdaq: SYNO), today reported its financial results for the second fiscal quarter ended April 30, 2006. Second-quarter consolidated net revenue was $14.9 million, a 4 percent increase over $14.4 million in the year-ago period. The company reported a net loss of $475,000, or $0.04 per share, compared to net income of $41,000, or $0.00 per diluted share, in the year-earlier period. In the first half of fiscal 2006, consolidated net revenue increased to $28.2 million from $27.8 million in the first six months of last fiscal year. The consolidated net loss was $1.0 million, or $0.09 per share, compared with net income of $246,000, or $0.02 per diluted share, in the first half of last year. "Fiscal 2006 is a year of significant and forward-looking change for Synovis - a year that bears the costs of building a domestic direct sales force in the surgical business, and implementing operating efficiencies in the interventional business as we expand its customer and market bases," said Karen Gilles Larson, Synovis Life Technologies president and chief (more) Synovis Life Technologies, Inc. May 24, 2006 Page 2 executive officer. "We feel continuing energy and growing excitement about what we believe the two businesses and our shareholders will gain from these changes." The consolidated gross margin in the quarter was 36 percent, compared to 38 percent in the second quarter of fiscal 2005, reflecting lower margins in both business segments. Consolidated operating expenses totaled $6.7 million in the quarter, up $1.1 million from the year-ago period. All of the increase can be attributed to the costs of the transition to a direct sales force; the now discontinued colorectal study; and the recent reorganization of development services, project management and certain other functions within the interventional business. The company maintains a strong cash position, allowing it to continue to consider a broad range of acquisition opportunities. Cash, cash equivalents and short-term investments totaled $43.8 million at April 30, 2006, compared to $43.3 million at January 31, 2006. Cash provided by operations was $627,000 in the fiscal second quarter. INTERVENTIONAL BUSINESS Interventional business revenue rose to $8.7 million in the second quarter, a 4 percent gain over $8.4 million in the year-ago period and up sequentially 23 percent over the fiscal 2006 first quarter. Synovis Caribe, the interventional facility in Puerto Rico, contributed $2.0 million of revenue in the second quarter, up 7 percent from the year-ago period. "The interventional business is bringing in business from new markets and new customers," said Larson. "In the second quarter, we grew revenue from non-CRM (cardiac rhythm management) customers by 30 percent over the same quarter of last year. The interventional segment identified and executed key strategies focused on gaining operational efficiencies throughout fiscal 2005 and is continuing the process this fiscal year. The most significant this year was the reorganization of development services during the second quarter. We maintained the capability, increased its efficiency and aligned it with the appropriate manufacturing groups. This new structure requires fewer employees and eliminates unnecessary paperwork. We have already demonstrated this streamlined development process to customers, who have been very pleased with the results." The annualized cost savings from this initiative, along with initiatives in project management and certain other functions, are expected to be approximately $1.2 million. (more) Synovis Life Technologies, Inc. May 24, 2006 Page 3 Seventy-five percent of these savings are within the cost of goods sold category, with the remaining 25 percent in G&A. As a result of these changes, severance expense of approximately $150,000 was recorded in G&A expense in the second quarter. The interventional segment gross margin was 20 percent in the second quarter of 2006, compared to 22 percent in the same period of 2005. The operating income for this segment was $4,000 in the quarter, versus $169,000 in the year-ago period. Operating income for the just-completed quarter was impacted by the severance expense noted above. SURGICAL BUSINESS The second quarter marked the first time in seven quarters that surgical business revenue rose over the year-earlier period. Surgical business revenue totaled $6.2 million in the second quarter, versus $6.0 million in the year-ago period. Net revenue from Tissue-Guard products, a major product line, grew by 12 percent. Tissue-Guard revenue was $2.3 million in the second quarter, a $243,000 increase over the second quarter of last fiscal year, and accounted for 37 percent of surgical business revenue. Revenue from linear Peri-Strips(R) Dry (PSD) with Veritas(R), the remodelable version of the buttress, grew by 255 percent, while net revenue from PSD-Apex, the original version, declined by 28 percent. Total Peri-Strips revenue was $2.1 million in the quarter compared to $2.2 million in the year-ago period and accounted for 33 percent of surgical business revenue. Microsurgery product revenue was $836,000, a 31 percent gain over the prior-year period, and accounted for 14 percent of second-quarter surgical business revenue. "Our transition to a domestic direct sales force from independent distributors and rep groups is going very well," noted Larson. "Synovis has hired 23 of its targeted 25 sales representatives. We are very pleased with the early progress of our new sales force. As the second quarter began, we had 18 sales reps on board with an average tenure at Synovis of two and a half months. We hired four sales reps during the second quarter and one following the close of the second quarter. We provide our sales representatives with in-depth two-phased training covering Synovis' surgical products and the surgeries in which they are used." (more) Synovis Life Technologies, Inc. May 24, 2006 Page 4 As a part of the transition to a direct sales force, stocking distributors are paid a commission on sales in their territories for a contracted period of time after they cease to be a stocking distributor. Most of the company's domestic distributors entered into this commission phase during the second quarter and will complete it during the third quarter of fiscal 2006. The two remaining stocking distributors and some independent rep groups are expected to make this transition later in the year or in early fiscal 2007. As a result of the phase out, commission expense increased to $487,000 in the second quarter from $129,000 in the year-ago period. Commission expense is deducted from revenue to arrive at net revenue. Domestic commission expense will be eliminated when the transition to a direct sales force is completed. The surgical business' second-quarter gross margin was 59 percent, versus 60 percent in the same period of last year. The gross margin decrease was affected by the expected complexities of the transitions in fiscal 2006. The gross margin benefited from higher sales prices resulting from the transition to a direct sales force, partially offset by higher commission expense. However, the gross margin was unfavorably affected by lower production volumes, which increased overhead rates and manufacturing variances. This segment reported a second-quarter operating loss of $719,000, after incurring approximately $1.2 million in additional expenses in the quarter related to its direct sales force transition and the previously announced closure of its colorectal marketing clinical. This compares with operating income of $212,000 in the same period of last year. In March, Synovis discontinued a clinical market evaluation using the company's PSD with Veritas for circular staplers in colorectal surgery for colon cancer. Larson commented, "Colorectal surgeries are complex cases involving many variables with the potential for complications. It became apparent that, due to the presence of so many variables, the study would not yield clear information. We expect shortly to begin the process of gathering data for marketing purposes, through the product's use in the hands of a few selected colorectal surgeons. We plan to use their data to demonstrate the benefits of this product to other surgeons in the field. This is a process we have routinely used to develop marketing information when introducing other products." (more) Synovis Life Technologies, Inc. May 24, 2006 Page 5 Larson added, "Circular staplers are used in bariatric surgery, as well as colorectal surgery; only the stapler size varies. Our circular PSD with Veritas buttress was cleared to market for both bariatric and colorectal surgeries. We have been validating each size through surgeons' experience with it and selling the circular buttress for bariatric surgery on a very limited basis." Synovis is the worldwide leader in bringing innovative buttressing products to market. The Synovis staple-line buttress product line includes: the linear Apex format of PSD; the linear remodelable format, PSD-Veritas; and the circular remodelable format, Circular PSD-Veritas. The Microvascular Anastomotic Coupler continues to lead growth in the microsurgery product line. An article published in the April 2006 issue of the Annals of Plastic Surgery summarized a study showing that using the Coupler in breast reconstruction surgery produces a reliable, reproducible connection of arteries without sutures in less time than a sutured connection. Historically, the Coupler has been used primarily in veins. In March, Synovis expanded its microsurgery product offerings by signing an exclusive U.S. distribution agreement with S&T(R) AG, a surgical equipment manufacturer based in Switzerland, and has started to offer S&T products. Synovis is committed to becoming the microsurgeons' most trusted resource. The ongoing expansion of its product offerings drives it toward that vision. CONFERENCE CALL AND WEBCAST Synovis Life Technologies will host a live Webcast of its fiscal second-quarter conference call today, May 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, and click on the Webcast icon. A Webcast replay will be available beginning at noon CT, Wednesday, May 24, 2006. If you prefer to listen to an audio replay of the conference call, dial (800) 405-2236 and enter access number 11060593. The audio replay will be available beginning at 1 p.m. CT on Wednesday, May 24, through 6:00 p.m. CT on Friday, May 26. (more) Synovis Life Technologies, Inc. May 24, 2006 Page 6 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 and market trials as well as regulatory submissions, the number of certain surgical procedures performed, the level of orders from contract manufacturing customers, and the effectiveness of the company's transition to a domestic direct sales force in its surgical business, as well as the other factors found in the company's Annual Report on Form 10-K for the year ended October 31, 2005. (more) Synovis Life Technologies, Inc. May 24, 2006 Page 7 SYNOVIS LIFE TECHNOLOGIES, INC. Condensed Consolidated Results of Operations (unaudited) (In thousands, except per share data)
Three Months Ended Six Months Ended April 30 April 30 ------------------ ----------------- 2006 2005 2006 2005 ------- ------- ------- ------- Net revenue $14,922 $14,366 $28,201 $27,789 Cost of revenue 9,521 8,966 18,014 17,162 Gross margin 5,401 5,400 10,187 10,627 Gross margin percentage 36% 38% 36% 38% Selling, general and administrative 5,833 4,238 11,030 8,400 Research and development 818 1,264 1,638 2,172 Other -- 50 -- 86 Operating loss (1,250) (152) (2,481) (31) Interest, net 300 197 578 382 Income (loss) before provision for income taxes (950) 45 (1,903) 351 Provision (benefit) for income taxes (475) 4 (856) 105 Net income (loss) $ (475) $ 41 $(1,047) $ 246 Basic earnings (loss) per share $ (0.04) $ 0.00 $ (0.09) $ 0.02 Diluted earnings (loss) per share $ (0.04) $ 0.00 $ (0.09) $ 0.02 Weighted average basic shares outstanding 11,968 11,762 11,951 11,744 Weighted average diluted shares outstanding 11,968 12,006 11,951 12,004
(more) Synovis Life Technologies, Inc. May 24, 2006 Page 8 SYNOVIS LIFE TECHNOLOGIES, INC. Business Segment Information (unaudited) (In thousands)
Three Months Ended Six Months Ended April 30 April 30 ------------------ ----------------- 2006 2005 2006 2005 ------- ------- ------- ------- Net revenue Surgical business $ 6,190 $ 5,950 $12,351 $12,493 Interventional business 8,732 8,416 15,850 15,296 ------- ------- ------- ------- Consolidated $14,922 $14,366 $28,201 $27,789 Gross margin Surgical business $ 3,649 $ 3,582 $ 7,007 $ 7,492 Interventional business 1,752 1,818 3,180 3,135 ------- ------- ------- ------- Consolidated $ 5,401 5,400 $10,187 $10,627 Gross margin percentage Surgical business 59% 60% 57% 60% Interventional business 20% 22% 20% 21% Consolidated 36% 38% 36% 38% Operating income (loss) Surgical business $ (719) $ 212 $(1,025) $ 1,089 Interventional business 4 169 (348) (106) Corporate and other (535) (533) (1,108) (1,014) ------- ------- ------- ------- Consolidated $(1,250) $ (152) $(2,481) $ (31)
(more) Synovis Life Technologies, Inc. May 24, 2006 Page 9 SYNOVIS LIFE TECHNOLOGIES, INC. Condensed Consolidated Balance Sheets (unaudited) As of April 30, 2006 and October 31, 2005 (In thousands, except share and per share data)
April 30, October 31, 2006 2005 --------- ----------- ASSETS Current assets: Cash and cash equivalents $ 6,270 $ 8,183 Short-term investments 37,518 36,128 Accounts receivable, net 8,735 8,019 Inventories 9,718 10,500 Other 2,291 2,603 ------- ------- Total current assets 64,532 65,433 Property, plant and equipment, net 13,140 13,931 Goodwill and other intangible assets, net 7,523 7,599 Deferred income taxes 493 -- ------- ------- Total assets $85,688 $86,963 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 5,993 $ 6,066 ------- ------- Total current liabilities 5,993 6,066 Deferred income taxes -- 555 ------- ------- Total liabilities 5,993 6,621 ------- ------- 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, 11,992,367 and 11,933,628 at April 30, 2006 and October 31 2005, respectively 120 119 Additional paid-in capital 74,469 74,070 Retained earnings 5,106 6,153 ------- ------- Total shareholders' equity 79,695 80,342 ------- ------- Total liabilities and shareholders' equity $85,688 $86,963 ======= =======
# # # -----END PRIVACY-ENHANCED MESSAGE-----