Business context and reporting period
Issuer discrepancy: The supplied filing is CryoLife, Inc.’s Form 10-K for the fiscal year ended December 31, 2020, filed February 22, 2021. It is not identified in the filing as Artivion, Inc.; verify the intended issuer before relying on this summary. CryoLife makes and distributes medical devices and preserves human tissues for cardiac and vascular surgery. Its reportable segments are Medical Devices and Preservation Services.
Key financial metrics
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Revenue | $253.2 million | $276.2 million |
| Gross margin | $167.8 million; 66% | $183.0 million; 66% |
| Operating income | $2.4 million | $17.0 million |
| Net income (loss) | $(16.7) million | $1.7 million |
| Diluted earnings (loss) per share | $(0.44) | $0.05 |
| Cash from operating activities | $12.4 million | $15.8 million |
| Capital expenditures | $7.3 million | $8.1 million |
| Cash and cash equivalents at year-end | $61.4 million | $33.8 million |
| Net working capital at year-end | $174.1 million; current ratio about 3.9 | $142.2 million; current ratio about 4.1 |
| Debt at year-end | $300.1 million before unamortized issuance costs; $291.7 million net carrying amount | $223.2 million before unamortized issuance costs; $215.7 million net carrying amount |
Fourth-quarter 2020 revenue was $67.9 million, down 3% year over year; net loss was $3.5 million versus a $0.7 million loss in fourth-quarter 2019. Full-year operating cash flow less capital expenditures was approximately $5.0 million, versus $7.8 million in 2019.
Material changes versus the prior comparable period
- Revenue fell 8% for the year, principally reflecting lower procedure volumes amid COVID-19 hospital restrictions and patient reluctance, with some sequential improvement in the second half.
- Medical Devices revenue declined 9% to $179.3 million; Preservation Services revenue declined 6% to $73.9 million. PhotoFix was the exception among the principal product lines, growing 11% to $4.2 million.
- BioGlue revenue declined 10% to $62.1 million; aortic stents and stent grafts declined 5% to $61.7 million; On-X declined 4% to $48.1 million. CardioGenesis revenue dropped 92% to $0.5 million amid a handpiece supply interruption.
- Operating income declined to $2.4 million from $17.0 million. Interest expense rose to $16.7 million from $14.9 million, and the company moved from net income to a net loss.
- Operating cash flow decreased by $3.5 million. Higher inventory and deferred preservation costs used $24.8 million of cash, while the Ascyrus acquisition drove $59.1 million of net investing outflow.
- Cash increased after issuance of $100 million of 4.25% convertible notes; the company used proceeds in part to repay a $30 million revolver draw and fund the Ascyrus acquisition.
Outlook, risks and unusual items
- Management said cash and cash equivalents plus operating cash flow should meet current operational liquidity needs for at least 12 months. It gave no specific revenue or earnings guidance and cautioned that COVID-19 could continue to affect 2021 results, clinical trials, and procedure volumes.
- Management’s growth priorities are new products, expanded indications, international expansion, and business development. Key stated milestones include a planned PerClot U.S. PMA submission in third-quarter 2021, On-X mitral trial submission targeted for mid-2021, and continued PROACT Xa enrollment through 2021; timelines and approvals remain uncertain.
- The September 2020 Ascyrus acquisition added AMDS. Closing consideration was $63.1 million cash and $20.0 million in stock; estimated total fair value including contingent consideration was $138.5 million. Year-end contingent consideration liability was $59.9 million, and additional payments depend on regulatory and commercial milestones.
- A contaminated saline-solution lot led to an $826,000 tissue write-off. Another approximately $5.0 million of tissue remained quarantined pending review; management considered release probable, but disclosed potential for a further write-off up to that amount and an expected revenue impact, primarily in first-quarter 2021.
- Debt covenants restrict certain actions, including dividends; the credit facility is secured by substantially all U.S. assets. The company reported $100 million of convertible notes due July 2025 and term-loan maturities through December 2024. No dividends were paid in 2020.
- Regulatory risks include possible FDA Class III reclassification of CryoValve SGPV, transfer of BioGlue and PhotoFix European certifications to a new notified body by December 31, 2021, and implementation of stricter European medical-device requirements. Single-source suppliers, tissue availability and processing yields, competition, foreign exchange, and product liability are also material risks.
- The company reported effective internal control over financial reporting and received unqualified audit opinions. Ascyrus, acquired in September, was excluded from the year-end internal-control assessment; its assets were $138.7 million at year-end.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing names CryoLife, Inc., despite the request naming Artivion, Inc.
- Track procedure-volume recovery and whether COVID-19-related demand effects persist, particularly in tissue preservation and core product lines.
- Check the disposition of the quarantined tissue and any further write-offs or revenue effects.
- Monitor liquidity, cash conversion, debt repayment and covenant requirements, and potential Ascyrus milestone payments.
- Verify regulatory progress and timing for PerClot, On-X mitral, AMDS, and BioGlue/PhotoFix European certification transfers.