SYNO Synovis Life Technologies, Inc. (MM)

Synovis Life Technologies, Inc. (Nasdaq: SYNO), today reported its financial results for the fourth quarter and fiscal year ended October 31, 2011.

Yesterday, Synovis and Baxter International Inc., (NYSE:BAX) announced a definitive agreement for Baxter to acquire Synovis. The Synovis board of directors has unanimously approved the transaction and recommends that shareholders approve the agreement at an offer price of $28 per share, which equates to $325 million of equity value or approximately $260 million net of acquired cash, cash equivalents and investments. The offer price represents a 53 percent premium above Synovis’ average stock price of the four weeks prior to announcement. The transaction is expected to close in the first calendar quarter of 2012, subject to approval by Synovis’ shareholders, customary closing conditions and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

For the fiscal fourth quarter, net revenue rose to a record $22.1 million, a 22 percent increase over $18.1 million in the year-ago period. Operating income totaled $4.2 million, an 86 percent gain over operating income of $2.2 million in the year-ago period. Net income for the fiscal 2011 fourth quarter was $2.7 million, or $0.24 per diluted share, compared to net income of $1.5 million, or $0.13 per diluted share, in the fiscal 2010 fourth quarter.

For the full fiscal year, net revenue rose to $82.4 million, up 20 percent from $68.6 million in fiscal 2010. Operating income for fiscal 2011 was $12.4 million, up 69 percent from operating income of $7.3 million last fiscal year. Net income was $8.5 million in fiscal 2011, or $0.73 per diluted share, compared to $4.9 million, or $0.43 per diluted share, in the previous fiscal year.

Conference Call CanceledGiven the acquisition announcement, Synovis Life Technologies has canceled its fourth quarter conference call which was scheduled for 10 a.m. CT today.

About Synovis Life TechnologiesSynovis Life Technologies, Inc., a diversified medical device company based in St. Paul, Minn., develops, manufactures and markets biological and mechanical products used by several surgical specialties to facilitate the repair and reconstruction of soft tissue damaged or destroyed by disease or injury. The company’s products include implantable biomaterials for soft tissue repair, devices for microsurgery and surgical tools – all designed to reduce risks and/or facilitate critical surgeries, improve patient outcomes and reduce healthcare costs. For additional information on Synovis Life Technologies and its products, visit the company’s website 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 whether and when the proposed acquisition by Baxter International, Inc. will be consummated, the timing of product introductions, the ability of the sales force to grow and sustain revenues, the impact of increased competition in various markets Synovis serves, the ability to grow Orthopedic and Wound revenue and achieve profitability, outcomes of clinical and marketing studies as well as regulatory submissions, the number of certain surgical procedures performed, the ability to identify, acquire and successfully integrate suitable acquisition candidates, any operational or financial impact from the current global economic environment, the impact of healthcare reform legislation, as well as other factors found in the Company’s filings with the Securities and Exchange Commission, such as the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2010.

   

SYNOVIS LIFE TECHNOLOGIES, INC.

 

Consolidated Statements of Income (unaudited)

(In thousands, except per share data)

  Three Months Ended Twelve Months Ended October 31, October 31,

2011

 

2010

2011

 

2010

  Net revenue $ 22,053 $ 18,116 $ 82,363 $ 68,565 Cost of revenue 5,874 5,026 22,343 19,025 Gross margin 16,179 13,090 60,020 49,540 Gross margin percentage 73% 72% 73% 72%   Selling, general and administrative expenses 10,955 9,554 42,949 37,812 Research and development expenses 1,065 1,296 4,709 4,393   Operating expenses 12,020 10,850 47,658 42,205  

Operating income

4,159

2,240

12,362

7,335

  Interest income 83 73 311 284   Income before provision for income taxes 4,242 2,313 12,673 7,619   Provision for income taxes 1,527 833 4,212 2,743   Net income $ 2,715 $ 1,480 $ 8,461 $ 4,876   Basic earnings per share $ 0.24 $ 0.13 $ 0.74 $ 0.43   Diluted earnings per share $ 0.24 $ 0.13 $ 0.73 $ 0.43  

Weighted average shares  outstanding - basic

11,344

11,284

11,381

11,262

Weighted average shares  outstanding - diluted

11,486

11,449

11,571

11,441

 

SYNOVIS LIFE TECHNOLOGIES, INC.

     

Consolidated Revenues (unaudited)

(In thousands)

  Three Months Ended Twelve Months Ended October 31, October 31,

2011

 

2010

2011

 

2010

  Peri-Strips $ 6,614 $ 5,153 $ 23,675 $ 19,414 Tissue-Guard 4,970 4,221 18,407 16,550 Veritas 3,956 3,661 15,829 14,368 Microsurgery 4,326 3,123 15,190 11,020

Orthopedic and Wound

752 685 3,514 1,878 Surgical tools and other   1,435   1,273   5,748   5,335 Total Revenue $ 22,053 $ 18,116 $ 82,363 $ 68,565  

Domestic

$

18,675

$

15,247

$

70,130

$

57,700

International   3,378   2,869   12,233   10,865 Total Revenue $ 22,053 $ 18,116 $ 82,363 $ 68,565   SYNOVIS LIFE TECHNOLOGIES, INC.       Consolidated Balance Sheets As of October 31, 2011 (unaudited) and October 31, 2010 (In thousands, except share and per share data) October 31,

October 31,

2011

2010

ASSETS Current assets: Cash and cash equivalents $ 18,013 $ 12,951 Short-term investments 41,203 41,119 Accounts receivable, net 11,262 8,701 Inventories 9,998 9,433 Deferred income tax asset, net 447 367 Other current assets   1,973   1,715 Total current assets 82,896 74,286   Investments, net 7,335 7,854 Property, plant and equipment, net 4,154 3,401 Goodwill 3,620 3,620 Other intangible assets, net 5,764 6,182 Deferred income tax asset, net   2,166   2,139 Total assets $ 105,935 $ 97,482   LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,235 $ 1,644 Accrued expenses   7,780   6,371 Total current liabilities   10,015   8,015 Total liabilities   10,015   8,015   Shareholders’ equity:

Preferred stock: authorized 5,000,000 shares of $.01 par  value; none issued or outstanding at both dates

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Common stock: authorized 20,000,000 shares of $.01 par  value; issued and outstanding 11,167,690 and  11,228,654 at October 31, 2011 and October 31,  2010, respectively

112 112 Additional paid-in capital 59,832 61,780 Accumulated other comprehensive (loss) income

(34

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26 Retained earnings   36,010   27,549 Total shareholders’ equity   95,920   89,467 Total liabilities and shareholders’ equity $ 105,935 $ 97,482   SYNOVIS LIFE TECHNOLOGIES, INC.     CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)   For the fiscal years ended October 31,   2011     2010     CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,461 $ 4,876   Adjustments to reconcile net income to net cash provided by operating activities:   Depreciation and amortization of property, plant and equipment 1,154 1,228 Amortization of intangible assets 734 782 Amortization of investment premium, net 1,263 1,626 Provision for uncollectible accounts 250 204 Stock-based compensation 1,231 1,455 Tax benefit from stock option exercises (522 ) (296 ) Loss on sale or disposal of property, plant and equipment 25 192 Deferred income taxes (107 ) (117 )   Changes in operating assets and liabilities: Accounts receivable (2,811 ) (1,980 ) Inventories (565 ) (1,709 ) Other current assets (258 ) 40 Accounts payable 591 (318 ) Accrued expenses   1,931     920   Net cash provided by operating activities   11,377     6,903     CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,932 ) (1,102 ) Investments in identifiable intangible assets (316 ) (125 ) Purchases of investments (51,116 ) (79,397 ) Redemptions of investments   50,228     73,618   Net cash used in investing activities   (3,136 )   (7,006 )   CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds related to stock-based compensation plans 3,879 1,996 Repurchase of the Company's common stock (7,580 ) (5,101 ) Excess tax benefit of stock option exercises   522     296   Net cash used in financing activities   (3,179 )   (2,809 )   Net change in cash and cash equivalents 5,062 (2,912 ) Cash and cash equivalents at beginning of year   12,951     15,863   Cash and cash equivalents at end of year $ 18,013   $ 12,951