More problems at CryoLife - and it goes well beyond sales or earnings.
BY EDITOR, AUGUST 11, 2003
CryoLife reported a loss of $22.3 million on sales of $15.7 million for the quarter ended June 30. Orthopedic sales, which amounted to $280,000, were less than we'd expected and appear to have been delayed from management's earlier forecasts. But all the news regarding revenues (which were down 33% from the prior year's $23 million) was overwhelmed with the news that the SEC has raised it's investigation into CryoLife from an informal inquiry to a formal one. Apparently, enough suspicious information was discovered to warrant a formal investigation and potential lawsuit. Then CryoLife's bank called the company's operating capital loan. Finally, management announced that they wanted to meet with the plaintiff's attorneys in a group to hammer out a comprehensive settlement of the 21 pending lawsuits. What, we wonder, is CryoLife's leverage? Losses continue. Cash balances are dwindling. The real asset of the corporation is its ongoing operations. So what does management say to an assembled gaggle of plaintiff's attorneys? Settle or else. Or else what? We can't help but wonder if management would threaten to throw this whole mess in the lap of a bankruptcy court judge. Wouldn't be the first time. Despite the bad news on the legal and regulatory front, CEO Steve Anderson announced that he was hiring back about 30 people. And that tissue donations were up significantly from end-of-the-year levels. Apparently he's signaling a strong second half. As we said, the company's main asset is ongoing operations. We'll see if management ultimately decides that they need court protection in order to preserve those operations.
