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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, 2021

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 29, 2021

Common Stock, $0.01 par value

39,329,580


TABLE OF CONTENTS

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

3

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Cash Flows

5

Condensed Consolidated Statements of Shareholders’ Equity

6

Notes to Condensed Consolidated Financial Statements

8

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

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

39

Item 4. Controls and Procedures.

40

Part II - OTHER INFORMATION

40

Item 1. Legal Proceedings.

40

Item 1A. Risk Factors.

41

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 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

In Thousands, Except Per Share Data

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Revenues:

Products

$

53,107

$

45,109

$

162,528

$

128,797

Preservation services

19,100

20,022

56,914

56,534

Total revenues

72,207

65,131

219,442

185,331

Cost of products and preservation services:

Products

15,503

12,998

46,592

36,078

Preservation services

8,915

9,001

26,710

26,060

Total cost of products and preservation services

24,418

21,999

73,302

62,138

Gross margin

47,789

43,132

146,140

123,193

Operating expenses:

General, administrative, and marketing

39,053

33,743

118,521

105,033

Research and development

9,972

5,755

26,086

17,633

Total operating expenses

49,025

39,498

144,607

122,666

Gain from sale of non-financial assets

(15,923)

--

(15,923)

--

Operating income

14,687

3,634

17,456

527

Interest expense

4,100

4,940

12,995

11,980

Interest income

(18)

(13)

(60)

(181)

Other expense, net

2,661

2,888

3,261

5,810

Income (loss) before income taxes

7,944

(4,181)

1,260

(17,082)

Income tax benefit

(2,638)

(1,311)

(4,006)

(3,858)

Net income (loss)

$

10,582

$

(2,870)

$

5,266

$

(13,224)

Income (loss) per share:

Basic

$

0.27

(0.08)

$

0.13

(0.35)

Diluted

$

0.26

$

(0.08)

$

0.13

$

(0.35)

Weighted-average common shares outstanding:

Basic

39,086

37,912

38,924

37,608

Diluted

44,453

37,912

39,496

37,608

Net income (loss)

$

10,582

$

(2,870)

$

5,266

$

(13,224)

Other comprehensive income (loss):

Foreign currency translation adjustments

(5,010)

8,698

(12,327)

8,669

Comprehensive income (loss)

$

5,572

$

5,828

$

(7,061)

$

(4,555)

See accompanying Notes to Condensed Consolidated Financial Statements

 

3


CryoLife, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

In Thousands

September 30,

December 31,

2021

2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

64,587

$

61,412

Restricted securities

538

546

Trade receivables, net

49,682

45,964

Other receivables

5,494

2,788

Inventories, net

78,319

73,038

Deferred preservation costs

42,619

36,546

Prepaid expenses and other

16,104

14,295

Total current assets

257,343

234,589

Goodwill

252,441

260,061

Acquired technology, net

171,788

186,091

Operating lease right-of-use assets, net

46,913

18,571

Other intangibles, net

36,001

40,966

Property and equipment, net

36,973

33,077

Deferred income taxes

3,974

1,446

Other assets

13,221

14,603

Total assets

$

818,654

$

789,404

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of contingent consideration

$

17,600

$

16,430

Accounts payable

9,528

9,623

Accrued compensation

11,990

10,192

Accrued expenses

9,091

7,472

Accrued procurement fees

3,296

3,619

Taxes payable

3,129

2,808

Current maturities of operating leases

3,053

5,763

Current portion of long-term debt

1,640

1,195

Other liabilities

1,803

3,366

Total current liabilities

61,130

60,468

Long-term debt

307,765

290,468

Non-current maturities of operating leases

45,765

14,034

Contingent consideration

47,300

43,500

Deferred income taxes

27,339

34,713

Deferred compensation liability

5,571

5,518

Other liabilities

12,243

11,990

Total liabilities

$

507,113

$

460,691

Commitments and contingencies

 

 

Shareholders' equity:

Preferred stock

--

--

Common stock (issued shares of 40,816 in 2021 and 40,394 in 2020)

408

404

Additional paid-in capital

309,290

316,192

Retained earnings

22,075

20,022

Accumulated other comprehensive (loss) income

(5,584)

6,743

Treasury stock, at cost, 1,487 shares as of September 30, 2021

and December 31, 2020, respectively

(14,648)

(14,648)

Total shareholders' equity

311,541

328,713

Total liabilities and shareholders' equity

$

818,654

$

789,404

See accompanying Notes to Condensed Consolidated Financial Statements

 

4


CryoLife, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

In Thousands 

(Unaudited)

Nine Months Ended

September 30,

2021

2020

Net cash flows from operating activities:

Net income (loss)

$

5,266

$

(13,224)

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

Depreciation and amortization

18,008

14,818

Non-cash compensation

7,471

7,432

Non-cash lease expense

5,566

5,324

Change in fair value of contingent consideration

4,970

--

Non-cash interest expense

2,025

2,261

Change in fair value of long-term loan

--

4,949

Deferred income taxes

(8,128)

(4,916)

Gain from sale of non-financial assets

(15,923)

--

Other

4,665

1,631

Changes in operating assets and liabilities:

Accounts payable, accrued expenses, and other liabilities

65

3,230

Prepaid expenses and other assets

(2,268)

(2,560)

Receivables

(8,032)

7,718

Inventories and deferred preservation costs

(16,986)

(19,744)

Net cash flows (used in) provided by operating activities

(3,301)

6,919

Net cash flows from investing activities:

Proceeds from sale of non-financial assets, net

19,000

--

Acquisition of Ascyrus, net of cash acquisition

--

(59,643)

Payments for Endospan agreements

--

(5,000)

Capital expenditures

(10,524)

(5,171)

Other

(4)

(968)

Net cash flows provided by (used in) investing activities

8,472

(70,782)

Net cash flows from financing activities:

Proceeds from exercise of stock options and issuance of common stock

3,531

2,079

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)

Redemption and repurchase of stock to cover tax withholdings

(1,898)

(1,768)

Payment of debt issuance costs

(2,219)

(3,647)

Repayment of debt

(2,397)

(3,727)

Other

(439)

(463)

Net cash flows (used in) provided by financing activities

(3,422)

95,290