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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 1-13165   

CRYOLIFE INC.

(Exact name of registrant as specified in its charter)

Florida

59-2417093

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1655 Roberts Boulevard, NW, Kennesaw, Georgia

30144

(Address of principal executive offices)

(Zip Code)

(770) 419-3355  

(Registrant’s telephone number, including area code)  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

CRY

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       Yes x     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

     

Large Accelerated Filer

x     

Accelerated Filer     

o     

     

Non-accelerated Filer     

o     

Smaller Reporting Company     

o     

Emerging Growth Company     

o     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class

Outstanding at October 21, 2019

Common Stock, $0.01 par value

37,503,707


TABLE OF CONTENTS

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

3

Summary Consolidated Statements of Operations and Comprehensive (Loss) Income

3

Summary Consolidated Balance Sheets

4

Summary Consolidated Statements of Cash Flows

5

Summary Consolidated Statements of Shareholders’ Equity

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

36

Item 4. Controls and Procedures.

36

Part II - OTHER INFORMATION

37

Item 1. Legal Proceedings.

37

Item 1A. Risk Factors.

37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

54

Item 3. Defaults Upon Senior Securities.

54

Item 4. Mine Safety Disclosures.

54

Item 5. Other Information.

54

Item 6. Exhibits.

55

Signatures

56

 

2


Part I – FINANCIAL INFORMATION  

Item 1. Financial Statements.  

CRYOLIFE, INC. AND SUBSIDIARIES  

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)  

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(Unaudited)

(Unaudited)

Revenues:

Products

$

47,484

$

45,152

$

147,053

$

138,063

Preservation services

20,397

19,446

59,472

56,979

Total revenues

67,881

64,598

206,525

195,042

Cost of products and preservation services:

Products

12,706

12,459

41,021

40,166

Preservation services

9,953

9,425

29,043

27,083

Total cost of products and preservation services

22,659

21,884

70,064

67,249

Gross margin

45,222

42,714

136,461

127,793

Operating expenses:

General, administrative, and marketing

34,259

32,871

105,402

104,946

Research and development

6,259

5,225

17,648

16,314

Total operating expenses

40,518

38,096

123,050

121,260

Operating income

4,704

4,618

13,411

6,533

Interest expense

3,555

4,104

11,260

11,863

Interest income

(259)

(52)

(608)

(141)

Other expense (income), net

2,400

(1,542)

2,662

(257)

(Loss) income before income taxes

(992)

2,108

97

(4,932)

Income tax (benefit) expense

(858)

543

(2,304)

(2,868)

Net (loss) income

$

(134)

$

1,565

$

2,401

$

(2,064)

(Loss) income per common share:

Basic

$

0.00

$

0.04

$

0.06

$

(0.06)

Diluted

$

0.00

$

0.04

$

0.06

$

(0.06)

Weighted-average common shares outstanding:

Basic

37,255

36,526

37,065

36,331

Diluted

37,255

37,610

37,850

36,331

Net (loss) income

$

(134)

$

1,565

$

2,401

$

(2,064)

Other comprehensive (loss) income:

Foreign currency translation adjustments

(8,017)

(514)

(8,803)

(5,140)

Comprehensive (loss) income

$

(8,151)

$

1,051

$

(6,402)

$

(7,204)

See accompanying Notes to Summary Consolidated Financial Statements.

 

3


CRYOLIFE, INC. AND SUBSIDIARIES

SUMMARY CONSOLIDATED BALANCE SHEETS  

(IN THOUSANDS)

September 30,

December 31,

2019

2018

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

36,685

$

41,489

Restricted securities

492

747

Trade receivables, net

50,550

47,108

Other receivables

4,322

4,324

Inventories

48,403

45,478

Deferred preservation costs

32,352

33,174

Prepaid expenses and other

8,550

6,848

Total current assets

181,354

179,168

Property and equipment, net

30,434

31,028

Operating lease right-of-use assets, net

21,841

--

Goodwill

183,368

188,781

Acquired technology, net

107,863

118,184

Other intangibles, net

49,806

41,897

Deferred income taxes

3,872

4,111

Other assets

14,064

7,922

Total assets

$

592,602

$

571,091

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

7,455

$

7,547

Accrued compensation

11,628

10,733

Current portion of long-term debt

1,144

1,160

Current maturities of operating leases

5,270

--

Taxes payable

2,324

2,250

Accrued expenses and other

14,369

12,833

Total current liabilities

42,190

34,523

Long-term debt

214,793

215,721

Non-current maturities of operating leases

18,046

--

Deferred income taxes

24,699

27,267

Other

15,373

18,513

Total liabilities

315,101

296,024

Commitments and contingencies

 

 

Shareholders' equity:

Preferred stock

--

--

Common stock (issued shares of 38,988 in 2019 and 38,463 in 2018)

390

385

Additional paid-in capital

269,192

260,361

Retained earnings

37,385

34,984

Accumulated other comprehensive loss

(14,875)

(6,072)

Treasury stock at cost (shares of 1,484 in each of 2019 and 2018)

(14,591)

(14,591)

Total shareholders' equity

277,501

275,067

Total liabilities and shareholders' equity

$

592,602

$

571,091

See accompanying Notes to Summary Consolidated Financial Statements.

 

4


CRYOLIFE, INC. AND SUBSIDIARIES  

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS  

(IN THOUSANDS)  

Nine Months Ended

September 30,

2019

2018

(Unaudited)

Net cash flows from operating activities:

Net income (loss)

$

2,401

$

(2,064)

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation and amortization

13,257

13,636

Non-cash compensation

6,581

4,685

Other non-cash adjustments to income (loss)

5,021

(1,330)

Changes in operating assets and liabilities:

Receivables

(4,496)

(2,310)

Inventories and deferred preservation costs

(3,864)

1,697

Prepaid expenses and other assets

(3,020)

(2,481)

Accounts payable, accrued expenses, and other liabilities

(1,113)

(12,473)

Net cash flows provided by (used in) operating activities

14,767

(640)

Net cash flows from investing activities:

Payments for Endospan agreements

(15,000)

--

Capital expenditures

(5,222)

(4,275)

Other

(531)

(722)

Net cash flows used in investing activities

(20,753)

(4,997)

Net cash flows from financing activities:

Repayment of term loan

(2,072)

(2,098)

Proceeds from exercise of stock options and issuance of common stock

4,519

3,793

Redemption and repurchase of stock to cover tax withholdings

(2,723)

(2,085)

Other

(560)

(888)

Net cash flows used in financing activities

(836)

(1,278)

Effect of exchange rate changes on cash, cash equivalents, and restricted securities

1,763

1,473

Decrease in cash, cash equivalents, and restricted securities

(5,059)

(5,442)

Cash, cash equivalents, and restricted securities beginning of period

42,236

40,753

Cash, cash equivalents, and restricted securities end of period

$

37,177

$

35,311

See accompanying Notes to Summary Consolidated Financial Statements

 

5


CRYOLIFE, INC. AND SUBSIDIARIES  

SUMMARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 

(IN THOUSANDS)  

Accumulated

Additional

Other

Total

Common

Paid-In

Retained

Comprehensive

Treasury

Shareholders'

Stock

Capital

Earnings

Loss

Stock

Equity

Shares

Amount

Shares

Amount

Balance at June 30, 2019

38,943 

$

389 

$

265,694 

$

37,519 

$

(6,858)

(1,484)

$

(14,591)

$

282,153 

Net loss

--

--

--