EX-99.2 5 c199-20160309xex992.htm EX-99.2 8KA Project Metal 3-9-16 Exh 992

Exhibit 99.2

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL INFORMATION

 

The unaudited pro forma combined condensed consolidated financial statements are based upon the historical consolidated financial statements of CryoLife, Inc. and its subsidiaries (“CryoLife,” the “Company,”  “we,” or “us”) and On-X Life Technologies Holdings, Inc. ("On-X") and have been prepared to illustrate the effect of CryoLife’s acquisition of On-X for approximately $130.0 million, subject to certain adjustments.  Per the Company’s preliminary analysis, the purchase price of the transaction totaled approximately  $128.1 million in cash and stock.  

 

The unaudited pro forma combined condensed consolidated balance sheet combines the historical consolidated balance sheets of CryoLife and On-X as of September 30, 2015 and reflects the pro forma effect as if the acquisition of On-X had occurred on that date.  The unaudited pro forma combined condensed consolidated statements of operations for the nine months ended September 30, 2015 and the year ended December 31, 2014 combine the historical statements of operations of CryoLife and On-X, adjusted to reflect the pro forma effect as if the acquisition of On-X had occurred on January 1, 2014 (the first day of the Company’s 2014 fiscal year).  The historical consolidated financial statements referred to above for CryoLife were included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2015 and Annual Report on Form 10-K for the year ended December 31, 2014.   The historical financial statements referred to above for On-X for the comparable periods are included in this Current Report on Form 8-K.  The accompanying unaudited pro forma combined condensed consolidated financial information and the historical consolidated financial information presented therein should be read in conjunction with the historical consolidated financial statements and notes thereto for CryoLife described above.  The historical financial statements of On-X have been adjusted to reflect certain reclassifications to conform to the Company's financial statement presentation.

 

The unaudited pro forma combined condensed consolidated balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the acquisition, (b) are factually supportable, and (c) with respect to the statement of operations, are expected to have a continuing impact on consolidated results.  The pro forma adjustments are described in the accompanying combined notes to the unaudited pro forma combined condensed consolidated financial statements.

 

The unaudited pro forma combined condensed consolidated financial information does not reflect future events that may occur after the acquisition, including potential general and administrative savings.  The unaudited pro forma combined condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the acquisition of On-X had occurred on January  1, 2014 nor is it necessarily indicative of our future operating results.  The pro forma adjustments are subject to change and are based upon currently available information.

 

 

[Insert pro forma financias from separate file here.]

 

 

 

 

 

 

 

 

CryoLife, Inc. and Subsidiaries

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2015

(In Thousands)

 

 

 

 

 

 

 

 

 

CryoLife

 

On-X

 

Pro Forma Adjustments

 

Pro Forma

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$             38,497 

 

$               1,891 

 

$           (18,472)

(b)

$             21,916 

 

 

 

 

 

 

 

 

Restricted securities

 848 

 

 344 

 

 -

 

 1,192 

Receivables, net

 24,443 

 

 7,084 

 

 -

 

 31,527 

Inventories

 14,432 

 

 10,103 

 

 3,081 

(c)

 27,616 

Deferred preservation costs

 23,480 

 

 -

 

 -

 

 23,480 

Deferred income taxes

 5,729 

 

 731 

 

 (2,531)

(a), (f)

 3,929 

Prepaid expenses and other

5,399 

 

 366 

 

 -

 

 5,765 

Total current assets

 112,828 

 

 20,519 

 

 (17,922)

 

 115,425 

 

 

 

 

 

 

 

 

Property and equipment, net

 12,036 

 

 4,977 

 

 1,036 

(d)

 18,049 

Restricted cash

 5,000 

 

 -

 

 -

 

 5,000 

Goodwill

 11,365 

 

 -

 

 65,563 

(g)

 76,928 

Patents, net

 1,446 

 

 -

 

 -

 

 1,446 

Trademarks and other intangibles, net

 17,713 

 

 -

 

 53,950 

(e)

 71,663 

Deferred income taxes, long-term

 14,141 

 

 2,385 

 

 (14,608)

(a), (f)

 1,918 

Other

 5,452 

 

 -

 

 -

 

 5,452 

Total Assets

$           179,981 

 

$             27,881 

 

$             88,019 

 

$           295,881 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$               4,637 

 

$               1,532 

 

$                       - 

 

$               6,169 

Accrued compensation

 7,952 

 

 -

 

 -

 

 7,952 

Accrued procurement fees

 4,683 

 

 -

 

 -

 

 4,683 

Accrued expenses and other

 4,596 

 

 3,194 

 

 -

 

 7,790 

Deferred income

 362 

 

 260 

 

 (260)

(a)

 362 

Current portion of indebtedness, net

 -

 

 1,231 

 

 (1,231)

(a)

 -

Total current liabilities

 22,230 

 

 6,217 

 

 (1,491)

 

 26,956 

 

 

 

 

 

 

 

 

Long-term debt

 

 

 1,097 

 

 73,903 

(a), (b)

 75,000 

Other

 5,858 

 

 835 

 

 746 

(e)

 7,439 

Total liabilities

 28,088 

 

 8,149 

 

 73,158 

 

 109,395 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Preferred stock

 -

 

 48,086 

 

 (48,086)

(a)

 -

Common stock

 297 

 

 2 

 

 35 

(a), (b)

 334 

Additional paid-in capital

 141,480 

 

 15,409 

 

 19,147 

(a), (b)

 176,036 

Retained earnings (deficit)

 21,584 

 

 (43,765)

 

 43,765 

(a)

 21,584 

Accumulated other comprehensive loss

 (245)

 

 -

 

 -

 

 (245)

Treasury stock at cost

 (11,223)

 

 -

 

 -

 

 (11,223)

Total shareholders' equity

 151,893 

 

 19,732 

 

 14,861 

 

 186,486 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

$           179,981 

 

$             27,881 

 

$             88,019 

 

$           295,881 

 

See accompanying notes to unaudited pro forma combined condensed consolidated financial statements.

2

 

 

 

 

 

 

 

 

 

 

CryoLife, Inc. and Subsidiaries

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Nine Months Ended September 30, 2015

(In Thousands Except Per Share Amounts)

 

 

 

 

 

 

 

 

 

CryoLife

 

On-X

 

Pro Forma Adjustments

 

Pro Forma

Products

$             59,168 

 

$             25,083 

 

$                       - 

 

$             84,251 

Preservation Services

 46,892 

 

 -

 

 -

 

 46,892 

  Total revenues

 106,060 

 

 25,083 

 

 -

 

 131,143 

 

 

 

 

 

 

 

 

Cost of Products

 13,555 

 

 7,557 

 

 406 

(j)

 21,518 

Cost of Preservation Services

 28,302 

 

 -

 

 -

 

 28,302 

  Total costs

 41,857 

 

 7,557 

 

 406 

 

 49,820 

 

 

 

 

 

 

 

 

Gross margin

64,203 

 

 17,526 

 

 (406)

 

 81,323 

 

 

 

 

 

 

 

 

General, administrative, and marketing

 55,790 

 

 11,913 

 

 1,839 

(k)

 69,542 

Research and development

 7,896 

 

 2,806 

 

 -

 

 10,702 

  Operating expenses

 63,686 

 

 14,719 

 

 1,839 

 

 80,244 

 

 

 

 

 

 

 

 

Operating income (loss)

 517 

 

 2,807 

 

 (2,245)

 

 1,079 

 

 

 

 

 

 

 

 

Interest expense

 (18)

 

 77 

 

 2,370 

(l)

 2,429 

Interest income

 (29)

 

 -

 

 -

 

 (29)

Gain on sale of Medafor investment

 (891)

 

 -

 

 -

 

 (891)

Other expense (income), net

 204 

 

 (135)

 

 -

 

 69 

  Total other (income) expenses

(734)

 

 (58)

 

 2,370 

 

 1,578 

 

 

 

 

 

 

 

 

Income (loss)  before income taxes

 1,251 

 

 2,865 

 

 (4,615)

 

 (499)

Income tax expense (benefit)

 (118)

 

 820 

 

 (1,754)

(m)

 (1,052)

Net Income (loss)

$               1,369 

 

$               2,045 

 

$             (2,861)

 

$                  553 

 

 

 

 

 

 

 

 

Net income allocated to participating securities

 (31)

 

 

 

 9 

(n)

 (22)

Net income (loss) applicable to common shares - Basic

$               1,338 

 

$               2,045 

 

$             (2,852)

 

$                  531 

 

 

 

 

 

 

 

 

Net income allocated to participating securities

 (32)

 

 

 

 9 

(n)

 (23)

Net income (loss) applicable to common shares - Diluted

$               1,337 

 

$               2,045 

 

$             (2,852)

 

$                  530 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Per Common Share - Basic

$                 0.05 

 

 

 

 

 

$                 0.02 

Income Per Common Share - Diluted

$                 0.05 

 

 

 

 

 

$                 0.02 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

 

  Basic

 27,687 

 

 

 

 3,704 

(o)

 31,391 

  Diluted

 28,487 

 

 

 

 3,704 

(o)

 32,191 

 

See accompanying notes to unaudited pro forma combined condensed consolidated financial statements.

3

 

 

 

 

 

 

 

 

 

 

CryoLife, Inc. and Subsidiaries

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31, 2014

(In Thousands Except Per Share Amounts)

 

 

 

 

 

 

 

 

 

CryoLife

 

On-X

 

Pro Forma Adjustments

 

Pro Forma

Products

$             81,883 

 

$             33,080 

 

$                       - 

 

$           114,963 

Preservation Services

 62,758 

 

 -

 

 -

 

 62,758 

  Total revenues

 144,641 

 

 33,080 

 

 -

 

 177,721 

 

 

 

 

 

 

 

 

Cost of Products

 17,167 

 

 12,247 

 

 3,450 

(i), (j)

 32,864 

Cost of Preservation Services

 36,183 

 

 -

 

 -

 

 36,183 

  Total costs

 53,350 

 

 12,247 

 

 3,450 

 

 69,047 

 

 

 

 

 

 

 

 

Gross margin

91,291 

 

 20,833 

 

 (3,450)

 

 108,674 

 

 

 

 

 

 

 

 

General, administrative, and marketing

 73,754 

 

 13,291 

 

 2,452 

(k)

 89,497 

Research and development

 8,699 

 

 4,356 

 

 -

 

 13,055 

  Operating expenses

 82,453 

 

 17,647 

 

 2,452 

 

 102,552 

 

 

 

 

 

 

 

 

Operating income (loss)

 8,838 

 

 3,186 

 

 (5,902)

 

 6,122 

 

 

 

 

 

 

 

 

Interest expense

 175 

 

 95 

 

 3,250 

(l)

 3,520 

Interest income

 (50)

 

 -

 

 -

 

 (50)

Gain on Medafor investment

 (530)

 

 -

 

 -

 

 (530)

Other expense (income), net

 540 

 

 (221)

 

 -

 

 319 

  Total other expenses (income)

 135 

 

 (126)

 

 3,250 

 

 3,259 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 8,703 

 

 3,312 

 

 (9,152)

 

 2,863 

Income tax expense (benefit)

 1,381 

 

 (3,753)

 

 (3,478)

(m)

 (5,850)

Net Income (loss)

$               7,322 

 

$               7,065 

 

$             (5,674)

 

$               8,713 

 

 

 

 

 

 

 

 

Net income allocated to participating securities

 (161)

 

 -

 

 (21)

(n)

 (182)

Net income (loss) applicable to common shares - Basic

$               7,161 

 

$               7,065 

 

$             (5,695)

 

$               8,531 

 

 

 

 

 

 

 

 

Net income allocated to participating securities

 (158)

 

 -

 

 (21)

(n)

 (179)

Net income (loss) applicable to common shares - Diluted

$               7,164 

 

$               7,065 

 

$             (5,695)

 

$               8,534 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Per Common Share - Basic

$                 0.26 

 

 

 

 

 

$                 0.27 

Income Per Common Share - Diluted

$                 0.25 

 

 

 

 

 

$                 0.27 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

 

  Basic

 27,379 

 

 

 

 3,704 

(o)

 31,083 

  Diluted

 28,313 

 

 

 

 3,704 

(o)

 32,017 

 

See accompanying notes to unaudited pro forma combined condensed consolidated financial statements.

4

 

CRYOLIFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(In Thousands)

 

Description of Transaction and Basis of Presentation

 

The unaudited pro forma combined condensed consolidated financial statements are based upon the historical consolidated financial statements of CryoLife, Inc. and its subsidiaries (“CryoLife,” the “Company,”  “we,” or “us”) which were included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2015 and Annual Report on Form 10-K for the year ended December 31, 2014 and On-X, Inc. ("On-X") financial statements for these periods which are included in this Current Report on Form 8-K/A.   The unaudited pro forma combined condensed consolidated statements of operations reflect the acquisition of On-X as if it had occurred on January 1, 2014 (the first day of our 2014 fiscal year).  The unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2015 reflects such acquisition as if it had occurred on that date.

 

In accordance with generally accepted accounting principles in the United States, the acquisition of On-X is being accounted for using the purchase method of accounting.  As a result, the unaudited pro forma combined condensed consolidated balance sheet has been adjusted to reflect the preliminary allocation of the purchase price to identifiable net assets acquired based primarily on the Company's fair value assessment and the excess purchase price to goodwill.  The purchase price allocation in these unaudited pro forma combined condensed consolidated financial statements is based upon a purchase price of approximately $128.1 million.

 

Pro Forma Adjustments

 

On January 20, 2016 CryoLife completed its acquisition of 100% of the outstanding equity of On-X, a privately held company, for $93.5 million in cash and 3,703,699 shares of CryoLife common stock, with an estimated value of $34.6 million as determined on the date of the closing, for a total purchase price of approximately $128.1 million.  In connection with the closing of the On-X acquisition, the Company entered into the Third Amended and Restated Credit Agreement with Capital One, National Association; Healthcare Financial Solutions, LLC; Fifth Third Bank; and Citizens Bank National Association that provides CryoLife with a senior secured credit facility in an aggregate principal amount of $95.0 million, which includes a $75.0 million term loan and a $20.0 million revolving credit facility.  CryoLife used the $75.0 million term loan to finance, in part, the acquisition.  CryoLife operates On-X as a wholly owned subsidiary.

 

The following pro forma adjustments are included in the unaudited pro forma combined condensed consolidated balance sheet and/or the unaudited pro forma combined condensed consolidated statements of operations:

 

 

 

(a)

The elimination of On-X non-retained assets, liabilities, and equity.

(b)

The reduction in cash, issuance of debt, and issuance of CryoLife common stock representing the total purchase price consideration paid to the Sellers.

(c)

Fair value adjustment to inventories.

(d)

Fair value adjustment to property and equipment.

(e)

Fair value of intangible assets acquired and liabilities assumed.

(f)

Estimated deferred tax assets and liabilities acquired.

(g)

Goodwill is the estimated excess of the purchase price over the tangible assets acquired as of the unaudited pro forma combined condensed consolidated balance sheet date.

 

5

 

CRYOLIFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(In Thousands)

 

 

 

(h)

The preliminary allocation of purchase price and estimated goodwill as of January 20, 2016, the date of the transaction, is summarized below:

 

 

 

Total purchase price

 $128,065 

Tangible assets acquired:

 

Cash and cash equivalents

 2,472 

Receivables

 6,332 

Intangible assets

 53,950 

Other assets

 6,971 

Liabilities assumed

 (18,299)

 

 

Goodwill (estimated)

 $63,528 

 

 

 

(i)

The effect of fair value adjustment to inventories on cost of products.

(j)

The effect of additional depreciation included in cost of products resulting from the fair value adjustment to property and equipment.

(k)

Net increase in amortization of intangible assets acquired.

(l)

Net increase in interest expense as a result of the debt issued as a result of the transaction.

(m)

The effect of the pro forma income statement adjustments on income taxes as calculated using an estimated combined U.S. federal and state statutory tax rate of 38%.

(n)

The change in net income allocated to common shareholders as a result of the transaction.

(o)

The change in weighted average common shares outstanding as a result of the common shares issued as a result of the transaction.

 

6