CryoLife Gets Some Financial Breathing Room
BY ROBIN R. YOUNG CFA, FEBRUARY 2, 2004
Last week CryoLife announced that it had sold 3.4 million shares in a private placement, raising $20 million (before expenses). With cash levels sitting at approximately $11 million as of the end of 2003 and with quarterly losses running about $5 million, cash was tight. This sale of new equity clearly gives the company some breathing room. Investors in the deal paid approximately $5.88 per share, which was close to a 30% discount to the $8.10 the stock was trading at the day before the deal was announced.
Management is expecting sales will rise 12-18% in 2004 to $66-$70 million. During 2003, CryoLife resolved, or reached agreements in principle to resolve, 20 product liability cases. The Company currently has 5 lawsuits pending related to the 2002-2003 insurance policy year. Through September 30, 2003, CryoLife recorded pre-tax accruals of $12.5 million for the uninsured portion of estimated potential legal fees, settlement costs related to the Company's product liability lawsuits and potential claims that have been incurred, but not reported. These include 9 claims that were made since the end of the 2002-2003 policy year. Management is evaluating whether this accrual should be increased or decreased.
