BRANCHBURG, N.J., July 27 /PRNewswire-FirstCall/ -- LifeCell Corporation today reported financial results for the second quarter ended June 30, 2006. Paul Thomas, President and Chief Executive Officer, will host a conference call today at 10:00 a.m. Eastern to discuss second quarter 2006 financial results and expected financial performance for full year 2006.
Second Quarter 2006 Results
Product revenues for the second quarter were $35.7 million, up 60%, compared to $22.3 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 73% to $30.3 million in the current quarter compared to $17.6 million in the second quarter of 2005. Orthopedic product revenues, which include Graft Jacket(R) and AlloCraft(TM)DBM, increased to $2.3 million in the quarter from $2.0 million in the second quarter of 2005. GraftJacket(R) represented $1.9 million of orthopedic product revenues in the quarter compared to $1.7 million in the prior year quarter. Repliform(R) revenues increased in the quarter to $2.0 million from $1.6 million in the same quarter in 2005.
Operating income for the second quarter of 2006 increased 66% to $8.6 million compared to operating income of $5.2 million in the second 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 under SFAS 123R for the three months ended June 30, 2006 was $2.0 million, whereas there was no share-based compensation expense recognized in the second quarter of 2005.
Net income for the second quarter of 2006 was $5.1 million, or $0.15 per diluted share, compared to net income of $3.6 million, or $0.11 per diluted share in the second 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 compensation expense was recorded for share- based payments in the second quarter of 2005, adjusted net income, including share-based compensation, would have been $3.0 million, or $0.09 per diluted share. Adjusted net income is considered non-GAAP financial information and a reconciliation of reported net income to adjusted net income is included in the attached financial tables.
Year-To-Date 2006 Results
Product revenues for the first six months were $66.2 million, up 58%, compared to $42.0 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 71% to $55.6 million in the first six months of 2006 compared to $32.5 million in the first six months of 2005. Orthopedic product revenues, which include Graft Jacket(R) and AlloCraft(TM)DBM, increased to $4.5 million in the first six months from $3.8 million in the first six months of 2005. GraftJacket(R) represented $3.7 million of orthopedic product revenues in the first half of 2006 compared to $3.1 million in the prior year. Repliform(R) revenues increased in the first six months to $4.1 million from $3.3 million in the same period in 2005.
Operating income for the first six months of 2006 increased 77% to $15.2 million compared to operating income of $8.6 million in the first six months of 2005. Share-based compensation expense recognized under SFAS 123R for the first six months of 2006 was $3.8 million, whereas there was no share- based compensation expense recognized in the first six months of 2005.
Net income for the first six months of 2006 was $9.2 million, or $0.27 per diluted share, compared to net income of $5.7 million, or $0.17 per diluted share in the first six months 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 compensation expense was recorded for share- based payments in the first six months of 2005, adjusted net income, including share-based compensation, would have been $4.7 million, or $0.15 per diluted share. Adjusted net income is considered non-GAAP financial information and a reconciliation of reported net income to adjusted net income is included in the attached financial tables.
LifeCell’s balance sheet remains strong with $61.7 million of cash and investments and no debt at June 30, 2006.
Full Year 2006 Financial Outlook
Based on the Company’s second 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 $143.0 million to $148.0 million, compared to the previous range of $130.0 million to $138.0 million. The revised product revenue range represents anticipated annualized growth between 53% and 59% 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 also increased its 2006 operating income target to a range of $34.0 million to $36.0 million, compared to the previous range of $28.0 million to $32.0 million. The revised operating income range includes expected non-cash share-based compensation expense of approximately $8 million. The Company expects research and development spending in 2006 to represent approximately 12% of expected 2006 product revenue.
Diluted net income per share is expected to be in the range of $0.59 to $0.63, including expected share-based compensation of approximately $0.17 per share. The Company’s previous range for diluted net income per share was $0.50 to $0.56. Excluding share-based compensation, the revised range for diluted net income per share is $0.76 to $0.80. Diluted net income per share excluding share-based compensation is considered non-GAAP financial information. The Company has included this information as a supplement to the GAAP basis presentation to enhance the overall understanding of the Company’s expected future financial performance. Actual results of operations in 2006 will include the impact of stock based compensation.
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) 565-5442 / domestic or (913) 312-1298 / international. A simultaneous webcast of the call will be available via LifeCell’s website at www.lifecell.com Corporate Information - Investor Relations.
A recording of the live-call will be available until August 1, 2006. The dial-in number to listen to the recording is (888) 203-1112 or (719) 457-0820. The replay access code is 4643041.
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 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 June 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.
Non-GAAP Financial Information
As noted above, 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. The table below shows what prior year adjusted net income would have been if share-based compensation expense was recorded in the three-month and six-month periods ended June 30, 2005. The Company provides non-GAAP financial measures including adjusted net income and adjusted net income per share as a supplement to GAAP financial 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. Investors should consider these non-GAAP measures as a supplement to, and not a substitute for financial information prepared on a GAAP basis.
Reconciliation of Non-GAAP Net Income and Net Income per Share (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, 2005 June 30, 2005 Net income, as reported (GAAP) $3,580,000 $5,709,000 Less: Total share-based compensation expenses determined under fair value based method for all awards net of related tax effects (532,000) (1,031,000) Adjusted net income (non-GAAP) $3,048,000 $4,678,000 Diluted net income per common share: As Reported (GAAP) $ 0.11 $ 0.17 Adjusted (non-GAAP) $ 0.09 $ 0.15 LIFECELL CORPORATION Financial Highlights (Unaudited) Three Months Ended Six Months Ended Statement of Operations June 30, June 30, Data: 2006 2005 2006 2005 Revenues: Product revenues $35,684,000 $22,302,000 $66,207,000 $42,016,000 Research grant revenues 437,000 385,000 579,000 551,000 Total revenues 36,121,000 22,687,000 66,786,000 42,567,000 Costs and Expenses: Cost of products sold 10,329,000 6,551,000 19,310,000 12,735,000 Research and development 3,976,000 2,660,000 7,431,000 4,686,000 General and administrative 4,709,000 2,752,000 9,024,000 5,164,000 Selling and marketing 8,519,000 5,545,000 15,802,000 11,405,000 Total costs and expenses 27,533,000 17,508,000 51,567,000 33,990,000 Income from operations 8,588,000 5,179,000 15,219,000 8,577,000 Interest and other income , net 637,000 191,000 1,125,000 312,000 Income before income taxes 9,225,000 5,370,000 16,344,000 8,889,000 Income tax provision, net 4,117,000 1,790,000 7,173,000 3,180,000 Net income $ 5,108,000 $ 3,580,000 $ 9,171,000 $ 5,709,000 Net income per common share: Basic $ 0.16 $ 0.12 $ 0.28 $ 0.19 Diluted $ 0.15 $ 0.11 $ 0.27 $ 0.17 Shares used in computing net income per common share: Basic 32,724,000 30,391,000 32,601,000 29,817,000 Diluted 33,904,000 32,965,000 33,738,000 32,623,000 Selected Balance Sheet Data: June 30, December 31, 2006 2005 Cash, cash equivalents and investments $61,674,000 $48,067,000 Receivables, net of allowance 20,124,000 15,786,000 Inventories 16,595,000 12,536,000 Accounts payable & accrued liabilities 17,857,000 14,725,000 Working capital 89,513,000 73,209,000 Total assets 128,975,000 106,998,000 Total debt obligations - - Total stockholders’ equity 111,118,000 92,070,000
LifeCell Corporation
CONTACT: Steven T. Sobieski, Chief Financial Officer, LifeCell,+1-908-947-1106, ssobieski@lifecell.com; Kevin McGrath, Cameron Associates,+1-212-245-8800, kevin@cameronassoc.com
Web site: http://www.lifecell.com/
