Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 - CRYOLIFE INC | d503121dex992.htm |
| EX-99.1 - EX-99.1 - CRYOLIFE INC | d503121dex991.htm |
| EX-23.1 - EX-23.1 - CRYOLIFE INC | d503121dex231.htm |
| 8-K/A - FORM 8-K/A - CRYOLIFE INC | d503121d8ka.htm |
EXHIBIT 99.3
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” or the “Company”) and JOTEC AG, a Swiss public limited corporation and its subsidiaries (“JOTEC”) and have been prepared to illustrate the effect of CryoLife’s acquisition of JOTEC for approximately $225.0 million, subject to certain adjustments. Per the Company’s preliminary analysis, the purchase price of the transaction totaled approximately $221.9 million in cash and stock.
The unaudited pro forma combined condensed consolidated balance sheet combines the historical consolidated balance sheets of CryoLife and JOTEC as of September 30, 2017 and reflects the pro forma effect as if the acquisition of JOTEC had occurred on that date. The unaudited pro forma combined condensed consolidated statements of operations for the nine months ended September 30, 2017 and the year ended December 31, 2016 combine the historical statements of operations of CryoLife and JOTEC, adjusted to reflect the pro forma effect as if the acquisition of JOTEC had occurred on January 1, 2016 (the first day of the Company’s 2016 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, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016. The historical financial statements referred to above for JOTEC 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 JOTEC 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 JOTEC had occurred on January 1, 2016 nor is it necessarily indicative of the Company’s future operating results. The pro forma adjustments are preliminary estimates subject to change and are based upon currently available information.
41
CRYOLIFE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2017
(in thousands)
| CryoLife | Jotec | Pro Forma Adjustments |
Pro Forma | |||||||||||||
| ASSETS |
||||||||||||||||
| Current Assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 54,242 | $ | 2,626 | $ | (20,496 | )(b) | $ | 36,372 | |||||||
| Restricted securities |
771 | — | — | 771 | ||||||||||||
| Receivables, net |
33,659 | 12,031 | — | 45,690 | ||||||||||||
| Inventories |
27,763 | 15,089 | 3,777 | (c) | 46,630 | |||||||||||
| Deferred preservation costs |
35,008 | — | — | 35,008 | ||||||||||||
| Prepaid expenses and other |
4,142 | 659 | — | 4,801 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total current assets |
155,585 | 30,406 | (16,719 | ) | 169,272 | |||||||||||
| Property and equipment, net |
20,607 | 13,232 | (374 | )(d) | 33,465 | |||||||||||
| Goodwill |
78,294 | — | 112,692 | (g) | 190,986 | |||||||||||
| Patents, net |
827 | — | — | 827 | ||||||||||||
| Trade Name |
— | — | 6,513 | (e) | 6,513 | |||||||||||
| Customer Relationships and Other Intangibles |
— | 3,868 | (661 | )(e) | 3,207 | |||||||||||
| Developed Technology |
62,454 | — | 92,584 | (e) | 155,038 | |||||||||||
| IP Developed Technology |
— | — | 13,747 | (e) | 13,747 | |||||||||||
| Deferred income taxes |
1,190 | 1,846 | — | 3,036 | ||||||||||||
| Investment in company owned life insurance |
4,360 | — | — | 4,360 | ||||||||||||
| Other |
2,823 | — | 912 | (b) | 3,735 | |||||||||||
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|
|
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|
|||||||||
| Total Assets |
$ | 326,140 | $ | 49,351 | $ | 208,694 | $ | 584,185 | ||||||||
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42
CRYOLIFE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2017
(in thousands)
| CryoLife | Jotec | Pro Forma Adjustments |
Pro Forma | |||||||||||||
| Current liabilities: |
||||||||||||||||
| Accounts payable |
$ | 5,066 | $ | 1,702 | $ | — | $ | 6,768 | ||||||||
| Accrued expenses and other |
17,813 | 7,197 | 1,087 | (a) | 26,097 | |||||||||||
| Current portion of indebtedness, net |
3,234 | 1,173 | (984 | )(b) | 3,423 | |||||||||||
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|
|||||||||
| Total current liabilities |
26,113 | 10,072 | 103 | 36,289 | ||||||||||||
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|
|||||||||
| Long-term debt and Capital Lease Obligation |
64,835 | 36,388 | 123,828 | (b) | 225,051 | |||||||||||
| Deferred compensation liability |
3,753 | — | — | 3,753 | ||||||||||||
| Deferred rent obligations |
2,982 | — | — | 2,982 | ||||||||||||
| Deferred Income Taxes |
— | — | 32,706 | (f) | 32,706 | |||||||||||
| Other |
5,101 | 1,828 | — | 6,929 | ||||||||||||
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|
|||||||||
| Total liabilities |
102,784 | 48,288 | 156,638 | 307,710 | ||||||||||||
| Shareholders’ equity: |
||||||||||||||||
| Preferred stock |
— | — | — | — | ||||||||||||
| Common stock |
348 | 1,036 | (1,009 | )(a),(b) | 375 | |||||||||||
| Additional paid-in capital |
194,958 | 19,592 | 33,500 | (a),(b) | 248,050 | |||||||||||
| Retained earnings (deficit) |
40,616 | (17,713 | ) | 17,713 | (a),(b) | 40,616 | ||||||||||
| Accumulated other comprehensive income |
153 | (1,949 | ) | 1,949 | (a),(b) | 153 | ||||||||||
| Non controlling Interests |
— | 98 | (98 | )(a),(b) | — | |||||||||||
| Treasury stock at cost |
(12,719 | ) | — | — | (12,719 | ) | ||||||||||
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|||||||||
| Total shareholders’ equity |
223,356 | 1,063 | 52,056 | 276,475 | ||||||||||||
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|||||||||
| Total liabilities and shareholders’ equity |
$ | 326,140 | $ | 49,351 | $ | 208,694 | $ | 584,185 | ||||||||
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43
CRYOLIFE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2017
(in thousands except per share data)
| CryoLife | Jotec | Pro Forma Adjustments |
Pro Forma | |||||||||||||
| Products |
$ | 84,519 | $ | 36,239 | $ | — | $ | 120,758 | ||||||||
| Preservation Services |
52,357 | — | — | 52,357 | ||||||||||||
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|||||||||
| Total revenues |
136,876 | 36,239 | — | 173,115 | ||||||||||||
| Cost of Products |
21,196 | 11,248 | 378 | (i) | 32,821 | |||||||||||
| Cost of Preservation Services |
23,401 | — | — | 23,401 | ||||||||||||
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|||||||||
| Total costs |
44,597 | 11,248 | 378 | 56,222 | ||||||||||||
| Gross margin |
92,279 | 24,992 | (378 | ) | 116,893 | |||||||||||
| General, administrative, and marketing |
71,016 | 17,376 | 978 | (j),(k) | 89,370 | |||||||||||
| Research and development |
13,098 | 3,855 | — | 16,953 | ||||||||||||
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|||||||||
| Operating expenses |
84,114 | 21,231 | 978 | 106,323 | ||||||||||||
| Operating income (loss) |
8,165 | 3,761 | (1,355 | ) | 10,570 | |||||||||||
| Interest expense |
2,486 | 2,092 | 8,336 | (l) | 12,914 | |||||||||||
| Interest income |
(159 | ) | (816 | ) | — | (975 | ) | |||||||||
| Other expense (income), net |
(70 | ) | (3,543 | ) | — | (3,613 | ) | |||||||||
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| Total other (income) expenses |
2,257 | (2,267 | ) | 8,336 | 8,326 | |||||||||||
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|||||||||
| Income (loss) before income taxes |
5,908 | 6,028 | (9,691 | ) | 2,245 | |||||||||||
| Income tax expense (benefit) |
(803 | ) | 1,817 | (3,439 | )(m) | (2,425 | ) | |||||||||
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| Net Income (loss) |
$ | 6,711 | $ | 4,211 | $ | (6,252 | ) | $ | 4,670 | |||||||
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| Income Per Common Share—Basic |
$ | 0.20 | $ | (0.06 | ) | $ | 0.13 | |||||||||
| Income Per Common Share—Diluted |
$ | 0.19 | $ | (0.06 | ) | $ | 0.13 | |||||||||
| Weighted Average Common Shares Outstanding |
||||||||||||||||
| Basic |
32,665 | 2,012 | (n) | 34,677 | ||||||||||||
| Diluted |
33,851 | 2,012 | (n) | 35,863 | ||||||||||||
44
CRYOLIFE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve Months Ended December 31, 2016
(in thousands except per share data)
| CryoLife | Jotec | Pro Forma Adjustments |
Pro Forma | |||||||||||||
| Products |
$ | 113,992 | $ | 44,516 | $ | — | $ | 158,508 | ||||||||
| Preservation Services |
66,388 | — | — | 66,388 | ||||||||||||
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|||||||||
| Total revenues |
180,380 | 44,516 | — | 224,896 | ||||||||||||
| Cost of Products |
28,033 | 14,767 | 3,399 | (i) | 46,199 | |||||||||||
| Cost of Preservation Services |
33,448 | — | — | 33,448 | ||||||||||||
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| Total costs |
61,481 | 14,767 | 3,399 | 79,647 | ||||||||||||
| Gross margin |
118,899 | 29,749 | (3,399 | ) | 145,249 | |||||||||||
| General, administrative, and marketing |
91,548 | 21,195 | 1,471 | (j),(k) | 114,214 | |||||||||||
| Research and development |
13,446 | 3,676 | — | 17,122 | ||||||||||||
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| Operating expenses |
104,994 | 24,871 | 1,471 | 131,336 | ||||||||||||
| Gain from sale of business components |
(7,915 | ) | — | — | (7,915 | ) | ||||||||||
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|||||||||
| Operating income (loss) |
21,820 | 4,878 | (4,870 | ) | 21,828 | |||||||||||
| Interest expense |
3,043 | 2,954 | 11,196 | (l) | 17,193 | |||||||||||
| Interest income |
(72 | ) | (29 | ) | — | (101 | ) | |||||||||
| Other expense (income), net |
437 | 938 | — | 1,375 | ||||||||||||
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| Total other (income) expenses |
3,408 | 3,862 | 11,196 | 18,467 | ||||||||||||
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| Income (loss) before income taxes |
18,412 | 1,015 | (16,066 | ) | 3,361 | |||||||||||
| Income tax expense (benefit) |
7,634 | 680 | (5,774 | )(m) | 2,539 | |||||||||||
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| Net Income (loss) |
$ | 10,778 | $ | 335 | $ | (10,292 | ) | $ | 822 | |||||||
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| Income Per Common Share—Basic |
$ | 0.33 | $ | (0.30 | ) | $ | 0.02 | |||||||||
| Income Per Common Share—Diluted |
$ | 0.32 | $ | (0.30 | ) | $ | 0.02 | |||||||||
| Weighted Average Common Shares Outstanding |
||||||||||||||||
| Basic |
31,855 | 2,683 | (n) | 34,538 | ||||||||||||
| Diluted |
32,822 | 2,683 | (n) | 35,505 | ||||||||||||
45
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” or the “Company,” ) which were included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016 and JOTEC AG and its subsidiaries (“JOTEC”) 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 JOTEC as if it had occurred on January 1, 2016 (the first day of the Company’s 2016 fiscal year). The unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2017 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 JOTEC 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 $221.9 million, including debt and cash acquired. Total purchase consideration, net of debt and cash acquired is approximately $194.0 million.
Pro Forma Adjustments
On December 1, 2017 CryoLife completed its acquisition of 100% of the outstanding equity of JOTEC, a Swiss public limited corporation (“the Acquisition”), for $168.8 million in cash and 2,682,754 shares of CryoLife common stock, with an estimated value of $53.1 million as determined on the date of the closing, for a total purchase price of approximately $221.9 million. In connection with the closing of the JOTEC acquisition, CryoLife entered into a Credit and Guaranty Agreement (“Credit Agreement”) with certain financial institutions as lenders, and Deutsche Bank AG New York Branch, as administrative and collateral agent, a senior secured credit facility in an aggregate principal amount of $255.0 million, which includes a $225.0 million term loan and a $30.0 million revolving credit facility. CryoLife borrowed the entire $225.0 million available under the term loan, the proceeds of which were used along with cash on hand and shares of CryoLife’s common stock, to (i) fund the Acquisition, (ii) pay certain fees and expenses related to the Acquisition and the Credit Agreement and (iii) pay off CryoLife’s existing credit facility under the Third Amended and Restated Credit Agreement with Capital One, National Association; Healthcare Financial Solutions, LLC; Fifth Third Bank; and Citizens Bank National Association. CryoLife operates JOTEC as a wholly owned subsidiary.
The historical financial information of JOTEC was prepared in accordance with GAAP and presented in Euros. The historical financial information was translated from Euros to US dollars using the following historical exchange rates: Condensed Consolidated Balance Sheet – 1.18 EUR/USD exchange rate as of September 30, 2017 Condensed Consolidated Statements of Operations – 1.11 EUR/USD average exchange rate for the year ended December 31, 2016 and 1.10 EUR/USD average exchange rate for the nine months ended September 30, 2017.
46
CRYOLIFE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in thousands)
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 JOTEC 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 in the acquisition. |
| (c) | Estimated fair value adjustment to inventories. |
| (d) | Estimated fair value adjustment to property and equipment. |
| (e) | Estimated 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. |
| (h) | The preliminary allocation of purchase price and estimated goodwill as of December 1, 2017, the date of the transaction, is summarized below: |
| Total purchase consideration |
$ | 221,868 | ||
| Assets acquired: |
||||
| Cash and cash equivalents |
4,089 | |||
| Receivables |
13,204 | |||
| Inventories |
17,341 | |||
| Other current assets |
2,210 | |||
| PP&E |
12,921 | |||
| Intangible assets |
115,820 | |||
| Other assets |
1,646 | |||
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| 167,231 | ||||
| Debt Acquired |
(3,770 | ) | ||
| Liabilities assumed |
(52,045 | ) | ||
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| Goodwill (preliminary estimate) |
$ | 110,452 | ||
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| (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, state and international statutory tax rate of 36.8% . |
| (n) | The change in weighted average common shares outstanding as a result of the common shares issued as a result of the transaction. |
47