Synovis Life Technologies Reports 22 Percent Revenue Increase and Earnings Per Share of $0.24 in Fiscal 2011 Fourth Quarter

Diversified Product Portfolio Lifts Revenue 20 Percent and Net Income 74 Percent for Full Fiscal Year

ST. PAUL, Minn.--(BUSINESS WIRE)--Synovis Life Technologies, Inc. (Nasdaq: SYNO), today reported its financial results for the fourth quarter and fiscal year ended October 31, 2011.

Yesterday, Synovis and Baxter International Inc., (NYSE:BAX) announced a definitive agreement for Baxter to acquire Synovis. The Synovis board of directors has unanimously approved the transaction and recommends that shareholders approve the agreement at an offer price of $28 per share, which equates to $325 million of equity value or approximately $260 million net of acquired cash, cash equivalents and investments. The offer price represents a 53 percent premium above Synovis’ average stock price of the four weeks prior to announcement. The transaction is expected to close in the first calendar quarter of 2012, subject to approval by Synovis’ shareholders, customary closing conditions and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

For the fiscal fourth quarter, net revenue rose to a record $22.1 million, a 22 percent increase over $18.1 million in the year-ago period. Operating income totaled $4.2 million, an 86 percent gain over operating income of $2.2 million in the year-ago period. Net income for the fiscal 2011 fourth quarter was $2.7 million, or $0.24 per diluted share, compared to net income of $1.5 million, or $0.13 per diluted share, in the fiscal 2010 fourth quarter.

For the full fiscal year, net revenue rose to $82.4 million, up 20 percent from $68.6 million in fiscal 2010. Operating income for fiscal 2011 was $12.4 million, up 69 percent from operating income of $7.3 million last fiscal year. Net income was $8.5 million in fiscal 2011, or $0.73 per diluted share, compared to $4.9 million, or $0.43 per diluted share, in the previous fiscal year.

Conference Call Canceled
Given the acquisition announcement, Synovis Life Technologies has canceled its fourth quarter conference call which was scheduled for 10 a.m. CT today.

About Synovis Life Technologies
Synovis Life Technologies, Inc., a diversified medical device company based in St. Paul, Minn., develops, manufactures and markets biological and mechanical products used by several surgical specialties to facilitate the repair and reconstruction of soft tissue damaged or destroyed by disease or injury. The company’s products include implantable biomaterials for soft tissue repair, devices for microsurgery and surgical tools – all designed to reduce risks and/or facilitate critical surgeries, improve patient outcomes and reduce healthcare costs. For additional information on Synovis Life Technologies and its products, visit the company’s website at www.synovislife.com.

Forward-looking statements contained in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements can be identified by words such as “should”, “could”, “may”, “will”, “expect”, “believe”, “anticipate”, “estimate”, “continue”, or other similar expressions. Certain important factors that could cause results to differ materially from those anticipated by the forward-looking statements made herein include whether and when the proposed acquisition by Baxter International, Inc. will be consummated, the timing of product introductions, the ability of the sales force to grow and sustain revenues, the impact of increased competition in various markets Synovis serves, the ability to grow Orthopedic and Wound revenue and achieve profitability, outcomes of clinical and marketing studies as well as regulatory submissions, the number of certain surgical procedures performed, the ability to identify, acquire and successfully integrate suitable acquisition candidates, any operational or financial impact from the current global economic environment, the impact of healthcare reform legislation, as well as other factors found in the Company’s filings with the Securities and Exchange Commission, such as the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2010.

SYNOVIS LIFE TECHNOLOGIES, INC.
Consolidated Statements of Income (unaudited)
(In thousands, except per share data)
	Three Months Ended				Twelve Months Ended
	October 31,				October 31,
	2011		2010		2011		2010
Net revenue	$	22,053	$	18,116	$	82,363	$	68,565
Cost of revenue		5,874		5,026		22,343		19,025
Gross margin		16,179		13,090		60,020		49,540
Gross margin percentage		73%		72%		73%		72%
Selling, general and administrative expenses		10,955		9,554		42,949		37,812
Research and development expenses		1,065		1,296		4,709		4,393
Operating expenses		12,020		10,850		47,658		42,205
Operating income		4,159		2,240		12,362		7,335
Interest income		83		73		311		284
Income before provision for income taxes		4,242		2,313		12,673		7,619
Provision for income taxes		1,527		833		4,212		2,743
Net income	$	2,715	$	1,480	$	8,461	$	4,876
Basic earnings per share	$	0.24	$	0.13	$	0.74	$	0.43
Diluted earnings per share	$	0.24	$	0.13	$	0.73	$	0.43
Weighted average shares   outstanding - basic		11,344		11,284		11,381		11,262
Weighted average shares   outstanding - diluted		11,486		11,449		11,571		11,441

SYNOVIS LIFE TECHNOLOGIES, INC.
Consolidated Revenues (unaudited)
(In thousands)
	Three Months Ended				Twelve Months Ended
	October 31,				October 31,
	2011		2010		2011		2010
Peri-Strips	$	6,614	$	5,153	$	23,675	$	19,414
Tissue-Guard		4,970		4,221		18,407		16,550
Veritas		3,956		3,661		15,829		14,368
Microsurgery		4,326		3,123		15,190		11,020
Orthopedic and Wound		752		685		3,514		1,878
Surgical tools and other		1,435		1,273		5,748		5,335
Total Revenue	$	22,053	$	18,116	$	82,363	$	68,565
Domestic	$	18,675	$	15,247	$	70,130	$	57,700
International		3,378		2,869		12,233		10,865
Total Revenue	$	22,053	$	18,116	$	82,363	$	68,565

SYNOVIS LIFE TECHNOLOGIES, INC.
Consolidated Balance Sheets
As of October 31, 2011 (unaudited) and October 31, 2010
(In thousands, except share and per share data)
	October 31,			October 31,
	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	18,013		$	12,951
Short-term investments		41,203			41,119
Accounts receivable, net		11,262			8,701
Inventories		9,998			9,433
Deferred income tax asset, net		447			367
Other current assets		1,973			1,715
Total current assets		82,896			74,286
Investments, net		7,335			7,854
Property, plant and equipment, net		4,154			3,401
Goodwill		3,620			3,620
Other intangible assets, net		5,764			6,182
Deferred income tax asset, net		2,166			2,139
Total assets	$	105,935		$	97,482
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,235		$	1,644
Accrued expenses		7,780			6,371
Total current liabilities		10,015			8,015
Total liabilities		10,015			8,015
Shareholders’ equity:
Preferred stock: authorized 5,000,000 shares of $.01 par   value; none issued or outstanding at both dates	---			---
Common stock: authorized 20,000,000 shares of $.01 par   value; issued and outstanding 11,167,690 and   11,228,654 at October 31, 2011 and October 31,   2010, respectively		112			112
Additional paid-in capital		59,832			61,780
Accumulated other comprehensive (loss) income		(34	)		26
Retained earnings		36,010			27,549
Total shareholders’ equity		95,920			89,467
Total liabilities and shareholders’ equity	$	105,935		$	97,482

SYNOVIS LIFE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the fiscal years ended October 31,		2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	8,461		$	4,876
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, plant and equipment			1,154			1,228
Amortization of intangible assets			734			782
Amortization of investment premium, net			1,263			1,626
Provision for uncollectible accounts			250			204
Stock-based compensation			1,231			1,455
Tax benefit from stock option exercises			(522	)		(296	)
Loss on sale or disposal of property, plant and equipment			25			192
Deferred income taxes			(107	)		(117	)
Changes in operating assets and liabilities:
Accounts receivable			(2,811	)		(1,980	)
Inventories			(565	)		(1,709	)
Other current assets			(258	)		40
Accounts payable			591			(318	)
Accrued expenses			1,931			920
	Net cash provided by operating activities		11,377			6,903
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment			(1,932	)		(1,102	)
Investments in identifiable intangible assets			(316	)		(125	)
Purchases of investments			(51,116	)		(79,397	)
Redemptions of investments			50,228			73,618
	Net cash used in investing activities		(3,136	)		(7,006	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds related to stock-based compensation plans			3,879			1,996
Repurchase of the Company's common stock			(7,580	)		(5,101	)
Excess tax benefit of stock option exercises			522			296
	Net cash used in financing activities		(3,179	)		(2,809	)
Net change in cash and cash equivalents			5,062			(2,912	)
Cash and cash equivalents at beginning of year			12,951			15,863
Cash and cash equivalents at end of year		$	18,013		$	12,951