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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 June 30, 2020

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 July 24, 2020

Common Stock, $0.01 par value

37,858,008


TABLE OF CONTENTS

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

3

Summary Consolidated Statements of Operations and Comprehensive Income (Loss)

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.

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

39

Item 4. Controls and Procedures.

39

Part II - OTHER INFORMATION

40

Item 1. Legal Proceedings.

40

Item 1A. Risk Factors.

40

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

59

Item 3. Defaults Upon Senior Securities.

59

Item 4. Mine Safety Disclosures.

59

Item 5. Other Information.

59

Item 6. Exhibits.

60

Signatures

61

 

2


Part I – FINANCIAL INFORMATION  

Item 1. Financial Statements.  

CryoLife, Inc. and Subsidiaries 

Summary Consolidated Statements of Operations and Comprehensive Income (Loss)

In Thousands, Except Per Share Data

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Revenues:

Products

$

37,268

$

51,168

$

83,688

$

99,569

Preservation services

16,503

19,971

36,512

39,075

Total revenues

53,771

71,139

120,200

138,644

Cost of products and preservation services:

Products

10,040

14,489

23,080

28,315

Preservation services

7,841

9,684

17,059

19,090

Total cost of products and preservation services

17,881

24,173

40,139

47,405

Gross margin

35,890

46,966

80,061

91,239

Operating expenses:

General, administrative, and marketing

32,288

34,623

71,290

71,143

Research and development

5,522

5,841

11,878

11,389

Total operating expenses

37,810

40,464

83,168

82,532

Operating (loss) income

(1,920)

6,502

(3,107)

8,707

Interest expense

3,652

3,811

7,040

7,705

Interest income

(66)

(233)

(168)

(349)

Other (income) expense, net

(740)

185

2,922

262

(Loss) income before income taxes

(4,766)

2,739

(12,901)

1,089

Income tax benefit

(1,077)

(93)

(2,547)

(1,446)

Net (loss) income

$

(3,689)

$

2,832

$

(10,354)

$

2,535

(Loss) income per common share:

Basic

$

(0.10)

$

0.08

$

(0.27)

$

0.07

Diluted

$

(0.10)

$

0.07

$

(0.27)

$

0.07

Weighted-average common shares outstanding:

Basic

37,520

37,156

37,455

36,968

Diluted

37,520

37,838

37,455

37,789

Net (loss) income

$

(3,689)

$

2,832

$

(10,354)

$

2,535

Other comprehensive income (loss):

Foreign currency translation adjustments

4,434

2,995

(29)

(786)

Comprehensive income (loss)

$

745

$

5,827

$

(10,383)

$

1,749

See accompanying Notes to Summary Consolidated Financial Statements

 

3


CryoLife, Inc. and Subsidiaries

Summary Consolidated Balance Sheets

In Thousands

June 30,

December 31,

2020

2019

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

125,627

$

33,766

Restricted securities

491

528

Trade receivables, net

45,218

52,940

Other receivables

3,042

2,921

Inventories

62,708

53,071

Deferred preservation costs

34,808

32,551

Prepaid expenses and other

15,227

11,613

Total current assets

287,121

187,390

Property and equipment, net

31,527

32,150

Operating lease right-of-use assets, net

20,007

21,994

Goodwill

186,349

186,697

Acquired technology, net

110,935

115,415

Other intangibles, net

40,884

42,319

Deferred income taxes

2,422

5,481

Other assets

14,009

14,208

Total assets

$

693,254

$

605,654

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

10,079

$

9,796

Accrued compensation

10,129

12,260

Accrued procurement fees

3,631

4,362

Current maturities of operating leases

5,522

5,487

Current portion of long-term debt

1,138

1,164

Taxes payable

4,244

2,984

Accrued expenses and other

14,190

9,142

Total current liabilities

48,933

45,195

Long-term debt

288,946

214,571

Deferred income taxes

25,886

25,844

Non-current maturities of operating leases

15,797

17,918

Deferred compensation liability

4,645

4,434

Other

12,491

11,996

Total liabilities

$

396,698

$

319,958

Commitments and contingencies

 

 

Shareholders' equity:

Preferred stock

--

--

Common stock (issued shares of 39,288 in 2020 and 39,018 in 2019)

393

390

Additional paid-in capital

293,022

271,782

Retained earnings

26,350

36,704

Accumulated other comprehensive loss

(8,618)

(8,589)

Treasury stock at cost (shares of 1,484 in each of 2020 and 2019)

(14,591)

(14,591)

Total shareholders' equity

296,556

285,696

Total liabilities and shareholders' equity

$

693,254

$

605,654

See accompanying Notes to Summary Consolidated Financial Statements.

 

4


CryoLife, Inc. and Subsidiaries

Summary Consolidated Statements of Cash Flows

In Thousands 

(Unaudited)

Six Months Ended

June 30,

2020

2019

Net cash flows from operating activities:

Net (loss) income

$

(10,354)

$

2,535

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

Depreciation and amortization

9,642

8,731

Non-cash compensation

5,074

4,119

Deferred income taxes

(1,894)

(301)

Other non-cash adjustments to net (loss) income

5,594

4,032

Changes in operating assets and liabilities:

Receivables

7,644

(10,446)

Inventories and deferred preservation costs

(12,902)

262

Prepaid expenses and other assets

(3,422)

(3,131)

Accounts payable, accrued expenses, and other liabilities

(142)

(3,894)

Net cash flows (used in) provided by operating activities

(760)

1,907

Net cash flows from investing activities:

Capital expenditures

(3,776)

(3,344)

Other

(705)

(302)

Net cash flows used in investing activities

(4,481)

(3,646)

Net cash flows from financing activities:

Proceeds from issuance of convertible debt

100,000

--

Proceeds from revolving line of credit

30,000

--

Proceeds from financing insurance premiums

2,816

--

Repayment of revolving line of credit

(30,000)

--

Payment of debt issuance costs

(3,647)

--

Repayment of term loan

(1,389)

(1,393)

Proceeds from exercise of stock options and issuance of common stock

1,175

3,582

Redemption and repurchase of stock to cover tax withholdings

(1,728)

(2,664)

Other

(1,041)

(349)

Net cash flows provided by (used in) financing activities

96,186

(824)

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

879

582

Increase (decrease) in cash, cash equivalents, and restricted securities

91,824

(1,981)

Cash, cash equivalents, and restricted securities beginning of period