Kensey Nash Corporation (Kensey) has reported total revenues of $20.7 million for the second quarter of fiscal 2009, compared with the total revenues of $19.6 million in the year-ago quarter. It has also reported net income of $5.24 million, or $0.44 diluted earnings per share, for the second quarter of fiscal 2009, compared with net loss of $2.61 million, or $0.21 diluted earnings per share, in the year-ago quarter.
First Six Months Highlights
EPS of $0.87, representing an increase of 142% and 358% from prior fiscal year period earnings per share as adjusted and as reported, respectively.
EBITDA of $19.0 million, representing an increase of 92% from prior fiscal year period adjusted EBITDA* (188% from prior fiscal year period EBITDA unadjusted).
Operating cash flow of $13.6 million.
Biomaterial product sales of $25.8 million, representing an increase of 19% from prior fiscal year period.
Orthopaedic royalties of $2.9 million, representing an increase of 33% from prior fiscal year period.
President and chief executive officer (CEO) Commentary
“Our second quarter results demonstrated that our business fundamentals remain solid,” said Joe Kaufmann, president and CEO of the company. “For the second consecutive quarter, we have achieved record earnings and double digit increases in our biomaterial sales and orthopaedic royalties. Our balance sheet continued to strengthen by generating $4.7 million in operating cash flow in the quarter and $13.6 million through the first half of our fiscal year, and we currently expect our operating cash flow for the full fiscal year will be over $25 million. Our Angio-Seal royalties remained solid at $5.4 million despite the negative impact of foreign currency exchange of about $200,000. We have continued to make significant progress with both of our cartilage repair and extracellular matrix technology programs during the quarter and both programs remain on schedule. Additionally, our endovascular development programs have continued on schedule and we expect to achieve an additional milestone by the end of our fiscal year. Obviously, the current economic climate continues to be a concern and the deterioration of the Euro has adversely impacted our Angio-Seal royalties in the second quarter and our royalty expectations for the fiscal year.”
Revenues: Sales and Royalties. Total revenues for the six months ended December 31, 2008 were $40.9 million, up 10% from total revenues of $37.2 million in the prior fiscal year six-month period.
Net sales increased 11% to $27.4 million for the first six months of fiscal 2009 from $24.7 million in the comparable prior fiscal year period. Net sales of biomaterials products increased 19%, to $25.8 million from $21.7 million in the comparable prior fiscal year period, due to strong sales in both orthopaedic and cardiovascular product lines. Orthopaedic sales increased 13%, to $15.1 million from $13.4 million in the prior fiscal year period, primarily due to increased sales of products in the company’s sports medicine and spine product portfolios. Sports medicine sales increased 18% over the prior fiscal year six months, and spine product sales increased 7% from the prior fiscal year. Cardiovascular sales of $9.2 million, consisting primarily of sales of vascular closure product components to St. Jude Medical, increased 26%, from $7.4 million in the prior fiscal year period.
Sales of endovascular products during the first six months of fiscal 2009 decreased 45% to $1.7 million from $3.0 million in the prior fiscal year period, although overall net unit sales to Spectranetics increased compared to prior fiscal year end-user unit sales.
Royalty income increased 8% to $13.5 million for the six months ended December 31, 2008 when compared with $12.6 million in the comparable prior fiscal year period. Royalty income in the first six months of fiscal 2009 included $10.6 million in Angio-Seal(TM) royalties and $2.8 million in royalties from Orthovita, Inc. (Nasdaq: VITA). Angio-Seal royalties were up 2% from the comparable six months of the prior fiscal year. Orthovita royalties increased 33% which was attributable to the recent successful introduction by Orthovita of its new VITOSS(R) Bioactive Foam products, as well as the continuing sales of existing VITOSS(R) FOAM products by Orthovita in the end-user marketplace.
Earnings Per Share. The company reported diluted earnings per share of $0.87 for the six months ended December 31, 2008, which represented an increase of 142% when compared with the $0.36 adjusted diluted earnings per share* for the same period in fiscal 2008. Adjusted diluted earnings per share for the first six months of fiscal 2008 exclude after-tax charges of $2.2 million, or $0.17 per share, for the acceleration of stock awards and discontinuation of the company’s embolic protection platform. Including these items, diluted earnings per share increased 358% in the first six months of fiscal 2009 over the fiscal 2008 comparable period reported diluted earnings per share of $0.19.
In the six-month period ended December 31, 2008, the total tax-effected impact on earnings per share of equity compensation expense was $0.02, which included a favorable mark-to-market adjustment on stock appreciation rights. In the six-month period ended December 31, 2007, the total tax-effected impact on earnings per share of equity compensation expense was $0.23, of which $0.16 related to the acceleration of stock awards and $0.08 related to equity compensation expense prior to the acceleration, equity compensation from fiscal 2008 equity grants and a mark-to-market adjustment on Stock Appreciation Rights.
During the six-month period, the company generated cash from operations of $13.6 million and reported $71.3 million of cash and interest bearing investment balances and total debt of $33.5 million at December 31, 2008.
Guidance for Fiscal Quarter Ending March 31, 2009 (Third Quarter of Fiscal 2009)
For the third quarter of fiscal 2009, the company currently anticipates that its net sales will be in a range of $13.5 to $14.0 million, representing a slight decrease from the comparable prior fiscal year quarter. The company expects this decrease because of its shift from a direct sales model of the endovascular products in fiscal year 2008 to a strategic partnership resulting from the sale of the endovascular business in May 2008. Biomaterial sales are expected to be in the range of $12.7 million to $13.1 million, representing an increase of 1% to 4% from the comparable prior fiscal year quarter, and endovascular sales are expected to be about $900,000, representing a decrease of 42% from the comparable prior fiscal year quarter. Royalties are expected to be in the range of $6.9 to $7.1 million, representing a 7% to 10% increase from the comparable prior fiscal year quarter. Total revenues are anticipated to be in the range of $20.4 to $21.1 million.
The company expects fiscal 2009 third quarter diluted earnings per share of $0.40 to $0.42 per share, representing an increase of 43% to 50% compared to diluted earnings per share of $0.28 for the same period of fiscal year 2008. The company expects this significant improvement from the prior fiscal year primarily due to anticipated increases in biomaterial sales and royalties, coupled with the elimination of the endovascular sales and marketing expenses, partially offset by an anticipated increase in biomaterials research and development expenses.
Updated Guidance for Fiscal Year Ending June 30, 2009 (Fiscal 2009)
The company is reaffirming its previous guidance estimate for diluted earnings per share in a range of $1.62 to $1.69 for fiscal 2009. Net sales are currently estimated to be in a range of $55.0 to $55.5 million, representing a 2% to 3% increase from the prior fiscal year.