BRANCHBURG, N.J., Oct. 25 /PRNewswire-FirstCall/ -- LifeCell Corporation today reported financial results for the third quarter ended September 30, 2006. Paul Thomas, President and Chief Executive Officer, will host a conference call today at 10:00 a.m. Eastern to discuss third quarter 2006 financial results and expected financial performance for full year 2006.
Third Quarter 2006 Results
Product revenues for the third quarter were $35.1 million, up 45%, compared to $24.3 million reported for the same period in 2005. The increase in product revenues was primarily due to a significant increase in demand for the Company's flagship reconstructive surgical product, AlloDerm(R) Regenerative Tissue Matrix, which increased 55% to $29.9 million in the current quarter compared to $19.3 million in the third quarter of 2005. Orthopedic product revenues, which include Graft Jacket(R) and AlloCraft(TM)DBM, increased to $2.4 million in the quarter from $2.0 million in the third quarter of 2005. GraftJacket(R) represented $2.0 million of orthopedic product revenues in the quarter compared to $1.5 million in the prior year quarter. Repliform(R) revenues increased in the quarter to $2.0 million from $1.8 million in the same quarter in 2005.
Operating income for the third quarter of 2006 increased 144% to $8.7 million compared to operating income of $3.6 million in the third quarter of 2005. Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment," ("SFAS 123R") which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, based on estimated fair values. The Company elected to adopt the modified prospective transition method as provided by SFAS 123R and, accordingly, prior year results have not been restated. Share-based compensation expense recognized for the three months ended September 30, 2006 was $2.6 million compared to $677,000 recognized in the third quarter of 2005. The increase in 2006 was primarily associated with the expensing of stock options under SFAS 123R. Additionally, prior year third quarter operating results were negatively impacted by $1.9 million of pre-tax charges associated with a previously announced product recall.
Net income for the third quarter of 2006 was $5.1 million, or $0.15 per diluted share, compared to net income of $2.5 million, or $0.07 per diluted share in the third quarter of 2005. As noted above, since the Company adopted the provisions of SFAS 123R on a prospective basis, we did not adjust prior year reported results. If share-based compensation expense for the third quarter of 2005 had been recorded under the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), adjusted net income would have been $1.9 million, or $0.06 per diluted share. A reconciliation of reported net income to adjusted net income is included in the attached financial tables. During the prior year third quarter the Company also recognized a non-cash income tax benefit of $185,000.
Year-To-Date 2006 Results
Product revenues for the first nine months of 2006 were $101.3 million, up 53%, compared to $66.3 million reported for the same period in 2005. The increase in product revenues was primarily due to a significant increase in demand for AlloDerm(R) Regenerative Tissue Matrix, which increased 65% to $85.5 million in the first nine months of 2006 compared to $51.8 million in the first nine months of 2005. Orthopedic product revenues increased to $6.9 million in the first nine months from $5.8 million in the first nine months of 2005. GraftJacket(R) represented $5.8 million of orthopedic product revenues in the first half of 2006 compared to $4.6 million in the prior year. Repliform(R) revenues increased in the first nine months to $6.0 million from $5.1 million in the same period in 2005.
Operating income for the first nine months of 2006 increased 97% to $23.9 million compared to operating income of $12.1 million in the first nine months of 2005. Share-based compensation expense recognized for the first nine months of 2006 was $6.5 million compared to $677,000 recognized in the first nine months of 2005. The increase in 2006 was primarily associated with the expensing of stock options under SFAS 123R. Additionally, operating results for the nine months ended September 30, 2005 included $1.9 million of pre-tax charges associated with a previously announced product recall.
Net income for the first nine months of 2006 was $14.2 million, or $0.42 per diluted share, compared to net income of $8.2 million, or $0.25 per diluted share in the first nine months of 2005. As noted above, since the Company adopted the provisions of SFAS 123R on a prospective basis, prior year reported results were not restated. If share-based compensation expense for the first nine months of 2005 had been recorded under fair value recognition provisions of SFAS 123, adjusted net income would have been $6.5 million, or $0.20 per diluted share. A reconciliation of reported net income to adjusted net income is included in the attached financial tables. Net income for the nine months ended September 30, 2005 was favorably impacted by the recognition of $481,000 of non-cash income tax benefits.
LifeCell's balance sheet remains strong with $69.4 million of cash and investments and no debt at September 30, 2006. During the first nine months of 2006, the Company generated cash flow from operating activities of $23.3 million, offset by $9.1 million used for capital expenditures. Additionally, the Company received net proceeds of $2.9 million from the exercise of stock options.
Full Year 2006 Financial Outlook
Based on the Company's third quarter 2006 operating results and expectations for the remainder of 2006, the Company now anticipates product revenues for full year 2006 in the range of $138.0 million to $140.0 million, compared to the previously announced range of $143.0 million to $148.0 million. The revised product revenue range represents anticipated annualized growth between 48% and 50% compared with 2005 product revenues of $93.3 million. The Company expects its product revenue mix in 2006 to be approximately 88% reconstructive, 6% orthopedic and 6% urogynecology.
The Company expects full year 2006 operating income to be in the range of $32.5 million to $33.5 million compared to the previously announced range of $34.0 million to $36.0 million.
Diluted net income per share is expected to be in the range of $0.57 to $0.59, including expected share-based compensation of approximately $0.19 per share. The Company's previously announced range for diluted net income per share was $0.59 to $0.63.
Conference Call Information
As previously announced, the Company will host a live conference call today at 10:00 a.m. Eastern. The dial-in number for the live call is (800) 289-0572 / domestic or (913) 981-5543 / international. A simultaneous webcast of the call will be available via LifeCell's website at http://www.lifecell.com/ Corporate Information - Investor Relations.
A recording of the live-call will be available until November 1, 2006. The dial-in number to listen to the recording is (888) 203-1112 or (719) 457-0820. The replay access code is 7825482.
About LifeCell
LifeCell develops and markets products made from human tissue for use in reconstructive, orthopedic and urogynecologic surgical procedures. The Company's patented technology produces a unique regenerative human tissue matrix -- a complex three-dimensional structure that contains an array of proteins, growth factor binding sites and vascular channels -- that provides a complete template for the regeneration of normal human tissue. LifeCell's current products include: AlloDerm(R) for plastic reconstructive, general surgical, burn and periodontal procedures; Cymetra(R), a particulate form of AlloDerm suitable for injection; GraftJacket(R) and GraftJacket(R) Xpress for orthopedic applications and lower extremity wounds; AlloCraft(TM)DBM, for bone grafting procedures; and Repliform(R) for urogynecologic surgical procedures. LifeCell markets AlloDerm for plastic reconstructive, general surgical and burn applications through its direct sales organization. The Company's strategic sales and marketing partners include: Wright Medical Group, Inc. for GraftJacket, Stryker Corporation for AlloCraftDBM, Boston Scientific for Repliform, and BioHorizons for periodontal applications of AlloDerm. The Company's research and development initiatives include programs focused on extending the use of its regenerative tissue matrix products into new surgical applications, leveraging its core technology to other tissues, including non-human tissues and expanding its product line in the rapidly growing biosurgery market. LifeCell maintains a website at http://www.lifecell.com/.
Forward-looking Statements
The 2006 financial results contained in this news release are subject to finalization in connection with the preparation of the Company's Form 10-Q report for the quarter ended September 30, 2006. This release also contains "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, such as the Company's outlook for 2006 operating results. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. These forward-looking statements may not be realized due to a variety of factors, including, without limitation: the failure to maintain or increase revenues from the sale of our AlloDerm products; the failure to comply with government regulations, including the FDA; claims for damages by third-parties, including product liability claims; our dependence on a limited number of sources for human cadaveric tissue; negative publicity about the use of donated human tissue in medical procedures; our ability to increase market penetration of our current products and to develop and commercialize new products; changes in third party reimbursement practices; the failure of third party sales representatives and distributors to adequately promote, market and sell our products; our inability to protect our intellectual property; the effects of competition; and the other factors listed under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2005. The Company assumes no obligation to update the information contained in this news release.
Reconciliation of Reported Net Income to Adjusted Net Income
As previously disclosed, effective January 1, 2006, the Company adopted SFAS 123R which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, based on estimated fair values. The Company elected to adopt the modified prospective transition method as provided by SFAS 123R and, accordingly, prior year results have not been restated. The table below shows what prior year net income for the three-month and nine-month periods ended September 30, 2005 would have been if the Company had applied the fair value recognition provisions of SFAS 123 for all stock-based compensation expense. Adjusted net income is not considered to be information prepared in accordance with generally accepted accounting principles ("GAAP"). Investors should consider adjusted net income as a supplement to, and not a substitute for financial information prepared in accordance with GAAP. The Company is providing this non-GAAP supplemental information to enhance the overall understanding of the Company's financial performance and to assist investors in evaluating the Company's results of operations, period over period.
Reconciliation of Reported Net Income to Adjusted Net Income
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2005
Net income, as reported $ 2,504,000 $ 8,213,000
Add: Total stock-based
compensation expense
included in reported net
income, net of related
tax effects 436,000 436,000
Less: Total stock-based
compensation expense
determined under fair
value based method for
all awards, net of
related tax effects (1,076,000) (2,106,000)
Adjusted net income (non-GAAP) $ 1,864,000 $ 6,543,000
Diluted net income per
common share:
As reported $ 0.07 $ 0.25
Adjusted (non-GAAP) $ 0.06 $ 0.20
LIFECELL CORPORATION
Financial Highlights
(Unaudited)
Three Months Ended Nine Months Ended
Statement of Operations September 30, September 30,
Data: 2006 2005 2006 2005
Revenues:
Product revenues $35,103,000 $24,260,000 $ 101,310,000 $ 66,276,000
Research grant
revenues 162,0000 272,000 741,000 823,000
Total revenues 35,265,000 24,532,000 102,051,000 67,099,000
Costs and Expenses:
Cost of products
sold 10,524,000 8,551,000 29,834,000 21,286,000
Research and
development 4,180,000 3,013,000 11,611,000 7,699,000
General and
administrative 4,832,000 3,170,000 13,856,000 8,334,000
Selling and
marketing 7,021,000 6,230,000 22,823,000 17,635,000
Total costs and
expenses 26,557,000 20,964,000 78,124,000 54,954,000
Income from operations 8,708,000 3,568,000 23,927,000 12,145,000
Interest and other
income , net 803,000 302,000 1,928,000 614,000
Income before income
taxes 9,511,000 3,870,000 25,855,000 12,759,000
Income tax provision,
net 4,439,000 1,366,000 11,612,000 4,546,000
Net income $5,072,000 $2,504,000 $ 14,243,000 $ 8,213,000
Net income per common
share:
Basic $ 0.15 $ 0.08 $ 0.44 $ 0.27
Diluted $ 0.15 $ 0.07 $ 0.42 $ 0.25
Shares used in computing
net income per common
share:
Basic 32,894,000 31,720,000 32,699,000 30,459,000
Diluted 34,084,000 33,734,000 33,854,000 33,163,000
Selected Balance Sheet Data: September 30, December 31,
2006 2005
Cash, cash equivalents and investments $ 69,396,000 $48,067,000
Receivables, net of allowance 19,851,000 15,786,000
Inventories 20,148,000 12,536,000
Accounts payable & accrued liabilities 21,078,000 14,725,000
Working capital 97,289,000 73,209,000
Total assets 141,342,000 106,998,000
Total debt obligations - -
Total stockholders' equity 120,264,000 92,070,000
