Commission file number 0-23837
SURMODICS, INC.
Minnesota | 41-1356149 | |||||
(State | other jurisdiction of | (IRS Employer | ||||
incorporation or organization) | Identification No.) |
9924 West 74thStreet | |||
Eden Prairie, Minnesota | 55344 | ||
(Address of Principal Executive Offices) | (Zip Code) | ||
(Registrant’s Telephone Number, Including Area Code) | |||
(952) 829-2700 | |||
Securities registered pursuant to Section 12(b) of the Act: | |||
| |||
Securities registered pursuant to Section 12(g) of the Act: | |||
None |
Large accelerated filero | Accelerated filerx | Non-accelerated filero |
Page No. | ||||||||||||
Part I | ||||||||||||
Item 1. | Business | 3 | ||||||||||
Item | Risk Factors | 16 | ||||||||||
Item 1B. | Unresolved Staff Comments | 20 | ||||||||||
Item 2. | Properties | 21 | ||||||||||
Item 3. | Legal Proceedings | 21 | ||||||||||
Item 4. | Submission of Matters to a Vote of Security Holders | 21 | ||||||||||
Executive Officers of the Registrant | ||||||||||||
Part II | ||||||||||||
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters | |||||||||||
and Issuer Purchases of Equity Securities | 25 | |||||||||||
Item 6. | Selected Financial Data | 26 | ||||||||||
Item 7. | Management’s Discussion and Analysis of Financial Condition and | |||||||||||
Results of Operations | 26 | |||||||||||
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 34 | ||||||||||
Item 8. | Financial Statements and Supplementary Data | 34 | ||||||||||
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial | |||||||||||
Disclosure | 34 | |||||||||||
Item 9A. | Controls and Procedures | 34 | ||||||||||
Item 9B. | Other Information | 37 | ||||||||||
Part III | ||||||||||||
Item 10. | Directors and Executive Officers of the Registrant | 38 | ||||||||||
Item 11. | Executive Compensation | 38 | ||||||||||
Item 12. | Security Ownership of Certain Beneficial Owners and Management | |||||||||||
Stockholder Matters | 38 | |||||||||||
Item 13. | Certain Relationships and Related Transactions | 38 | ||||||||||
Item 14. | Principal Accounting Fees and Services | 38 | ||||||||||
Part IV | ||||||||||||
Item 15. | Exhibits, Financial Statement Schedules | 39 |
ITEM 1. BUSINESS.
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implant is one of the principal InnoRx technologies we acquired.safe and well tolerated in patients with DME. If ourthis and other future clinical trials are successful,demonstrate longer term safety and the I-vation implant remainsefficacy of this product, I-vation™ TA (triamcinolone acetonide) may represent a viable commercial prospect, we believe we will
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or device enablers. In addition, the continuing trend toward minimally invasive surgical procedures, which often employ catheter-based delivery technologies, has increased the demand for hydrophilic, lubricious coatings and other technologies.
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agents, they have the potential to expand the breadth of drug delivery applications we can pursue. Biodegradable polymers can be combined with one or more drugs and applied to a medical device, and the drug is then released as the polymer degrades in the body over time. Finally, our PhotoLink technology also offers drug delivery capabilities.
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Desired Surface Property and | ||||||||||
Market Segment Served | Examples of Applications | |||||||||
Interventional cardiology and vascular access | Site specific drug/biologics | |||||||||
Cardiac rhythm management | ||||||||||
Cardiothoracic surgery | ||||||||||
In VitroDiagnostics | Lubricity:microfluidic devices Hemocompatibility: blood/glucose monitoring devices, biosensors Biomolecule Immobilization: DNA and protein arrays, protein attachment to synthetic nanofibrillar extracellular matrix for cell culture applications Cell culture growth and tissue integration: cell culture products,in vitro applications using synthetic nanofibrillar extracellular matrix to provide a more“in vivo-like” surface | |||||||||
Interventional neurology and | Lubricity:catheters, guidewires | |||||||||
neurosurgery | ||||||||||
Urology and gynecology | ||||||||||
Site specific drug/biologics delivery:prostatic stents | ||||||||||
Ophthalmology | Site specific drug/biologics delivery:sustained drug delivery implants | |||||||||
Orthopedics | Cell growth and tissue Infection Site specific drug/biologics delivery: orthopedic implants |
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fees and milestone payments, minimum royalties, and royalties based on a percentage of licensees’ product sales. We also generate revenue from sales of chemical reagents to licensees for use in their coating processes, and from licensing our proprietary diagnostic formats for use in point-of-care testing.
Genomics Products
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Recombinant Human Antigens
SurModics is the activityexclusive North American distributor (and non-exclusive in Japan) of biological componentsDIARECT AG’s line of immunoassays,recombinant autoimmune antigens. Because of the lack of high-quality antigens from natural sources, DIARECT produces these proteins and other bioanalytical techniques, resultingcomponents using biotechnological methods. DIARECT has strong capabilities in longer shelf life and improved performance. These products offer our customers the benefit ofbacilovirus/Sf9 expression system for autoimmune antigens as well asE. coli systems for particular expression tasks.
Ultra-Web™ Synthetic Extracellular Matrix (ECM)
The Ultra-Web™ Synthetic ECM product differentiation and improvement while providingline, is the ultimate end users the benefitresult of a faster testcollaboration between the Donaldson Company (providing the nanofiber technology) and SurModics (providing the surface modification technology). Ultra-Web™ is a trademark of Donaldson Company, Inc. In May 2006, SurModics and Donaldson entered into a strategic marketing and distribution agreement with fewer stepsCorning Incorporated, through which Corning Life Sciences, a subsidiary of Corning Incorporated, will provide worldwide marketing and fewer errors. Indistribution of the past two years, we have introduced newnanofiber cell culture products to improve the stability and performance of protein microarrays, and bead-based assays, a rapidly growing area forin the diagnosticsvitro cell culture research and drug discovery. We also introduced StabilZyme® Noble,discovery applications.
Ultra-Web™ Synthetic ECM is a BSA-free biomolecule stabilizer, which improves stabilization withoutnanofibrillar cell culture surface that provides a biomimetic environment for more consistent and reproduciblein vivo-like cell phenotypes, leading to more biologically accurate results. The Ultra-Web™ technology involves electrospinning various polymers to produce a nanofiber material that is a defined and reproducible cell culture surface. Modification of the complicationsnanofibers with specific surface chemistries and functional groups can further enhance the desired cell matrix interactions. Extensive laboratory testing of bovine proteins.
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expertise to capture more of the final product value. We are doing this by, in selected cases, developing or acquiring pharmaceuticalstechnologies or devices to develop from feasibility, up to and including animal and human clinical tests. There can be no assurance that we will be successful in developing or acquiring additional pharmaceuticalstechnologies or devices.
To support our marketing and sales activities, we publish technical literature on our various surface modification technologies (e.g., lubricity, hemocompatibility, drug delivery, etc.). In addition, we exhibit at major trade shows and technical meetings, advertise in selected trade journals and through our website, and conduct direct mailings to appropriate target markets.
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licensees or competitive pricing pressures within the particular device market. There can be no assurance that products employing our technologies will be successfully commercialized by our licensees or that such licensees will otherwise be able to compete effectively.
U.S. legislation allows device manufacturers, prior to obtaining FDA approval, to manufacture devices in the U.S. and export them for sale in international markets. This generally allows us to realize earned royalties sooner. However, sales of medical devices outside the U.S. are subject to international requirements that vary from country to country. The time required to obtain approval for sale internationally may be longer or shorter than that required by the FDA.
Many of these factors are outside the control and knowledge of the Company, and could result in increased volatility in period-to-period results. Investors are advised not to place undue reliance upon the Company’s forward-looking statements and to consult any further disclosures by the Company on this subject in its filings with the Securities and Exchange Commission. Many of the factors identified above are discussed in more detail below under “Risk Factors.”
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or that products incorporating newly licensed technology, including new applications, will gain regulatory approval, be commercialized or gain market acceptance. Delays or failures in these efforts could have an adverse effect on our business, financial condition and results of operations.
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prosecute intellectual property would be costly and result in significant diversion of the efforts of our management and technical personnel, regardless of outcome, and could have a material adverse effect on our business, financial condition and results of operations.
Our revenue will be harmed if we cannot purchase sufficient reagent components we use in our manufacture of reagents.
We use hazardous materials in some of our research, development and manufacturing processes.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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ITEM 2.PROPERTIES.
ITEM 3.LEGAL PROCEEDINGS.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Name | Age | Position | ||||||||||||||
Bruce J Barclay | 50 | President and Chief Executive Officer | ||||||||||||||
Aron B. Anderson, Ph.D | 43 | Vice President and Chief Scientific Officer | ||||||||||||||
Philip D. Ankeny | 43 | Senior Vice President and Chief Financial Officer | ||||||||||||||
Douglas P. Astry | 54 | General Manager, | ||||||||||||||
Lise W. Duran, Ph.D | 51 | Vice President and General Manager, Regenerative | ||||||||||||||
Technologies | ||||||||||||||||
Peter L. Ginsberg | 41 | Vice President of Business Development and | ||||||||||||||
Strategic Planning | ||||||||||||||||
Steven J. Keough | 51 | Senior Vice President and General Manager, | ||||||||||||||
Counsel | ||||||||||||||||
Paul A. Lopez | 50 | Vice President, and President, Ophthalmology | ||||||||||||||
Division | ||||||||||||||||
Loren R. Miller | 41 | Vice President and Controller | ||||||||||||||
Charles W. Olson | 42 | Vice President, | ||||||||||||||
Hydrophilic Technologies | ||||||||||||||||
Brian L. Robey | Vice President and General Manager, Drug | |||||||||||||||
Delivery | ||||||||||||||||
Michael J. Shoup | Vice President | |||||||||||||||
Affairs | ||||||||||||||||
Jan M. Webster | 47 | Vice President of Human Resources |
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investment banking with Robertson Stephens and Morgan Stanley. In addition, his operating experience includes over five years with IBM and Shiva in sales, marketing and business development roles. Mr. Ankeny also serves on the Board of Directors of Innovex, Inc., which designs and manufactures flexible
Steven J. Keough joined SurModics as its Senior Vice President and Chief Intellectual Property Counsel in January 2004 and added the duties of Vice President and General Manager of the New Ventures business unit in April of that year. The current Orthopedics business unit emerged in October 2005 from New Ventures, and is led by Mr. Keough. Before joining SurModics, Mr. Keough practiced law at Minneapolis-based Fredrikson & Byron, P.A. from 2000–2003,2000-2003, where he was a senior member and past chairman of the intellectual property department. He previously served as president and co-founder of the intellectual property law firm Patterson & Keough, P.A. from 1991–2000.1991-2000. He was also Manager of Asia-Pacific at the Minneapolis law firm of Merchant & Gould, from 1987–1991.1987-1991. Mr. Keough has extensive business and legal experience involving medical technologies, technology transfer, strategic planning, licensing and high technology business management. Mr. Keough earned a J.D. from Boston College, an M.A. from the Catholic University of America, and a Bachelor of Science degree from the United States Naval Academy.
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addition he held various positions at Mesaba Aviation Inc. from 1988 until 1995, most recently as Controller. Mr. Miller is a CPA (inactive certificate) and received a B.S. degree in Business Administration & Finance and a B.S. degree in Accounting from Minnesota State University in 1988.
Jan M.Webster joined SurModics as Vice President of Human Resources in January of 2006. Ms. Webster came to SurModics with over 20 years of experience in the healthcare industry. From 1987 through 2005, she held various human resources and management positions at Medtronic,St. Jude Medical, Inc. from 1988 to 2000 and at Boston Scientific, Inc. from, most recently as Director of Human Resources for the Cardiac Surgery division. From 1984 to 1988. Mr. Yung received1987, she served in several human resources roles for Fairview Health Services. Ms. Webster is a B.S.graduate of Minnesota State University, Mankato with a bachelor’s degree in business administration and marketingearned an M.A. in human resources and industrial relations from the University of Akron in 1979.Minnesota.
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Fiscal Quarter ended: | High | Low | |||
September 30, 2006 | 38.00 | 33.36 | |||
June 30, 2006 | 39.65 | 31.92 | |||
March 31, 2006 | 40.22 | 32.90 | |||
December 31, 2005 | 43.37 | 36.46 | |||
September 30, 2005 | 45.50 | 35.40 | |||
June 30, 2005 | 46.13 | 31.85 | |||
March 31, 2005 | 34.75 | 28.08 | |||
December 31, 2004 | 32.90 | 23.80 |
Fiscal Quarter ended: | High | Low | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
September 30, 2005 | 45.50 | 35.40 | ||||||||
June 30, 2005 | 46.13 | 31.85 | ||||||||
March 31, 2005 | 34.75 | 28.08 | ||||||||
December 31, 2004 | 32.90 | 23.80 | ||||||||
September 30, 2004 | 24.94 | 21.32 | ||||||||
June 30, 2004 | 25.20 | 19.00 | ||||||||
March 31, 2004 | 24.08 | 18.60 | ||||||||
December 31, 2003 | 28.30 | 20.10 |
Period | (a) Total Number of Shares Purchased(1) | (b) Average Price Paid Per Share(1) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2) | ||||||||||||
7/1/06 - 7/31/06 | 0 | 0 | NA | NA | ||||||||||||
8/1/06 - 8/31/06 | 886 | $35.43 | NA | NA | ||||||||||||
9/1/06 - 9/30/06 | 1,401 | $34.97 | 0 | 1,000,000 | ||||||||||||
Total | 2,287 | $35.15 | 0 | 1,000,000 |
(1) | All of the shares were repurchased by the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with so-called “stock swap exercises” of employee stock options issued to seven employees. | |
(2) | In September 2006, we announced that our Board of Directors had authorized the repurchase of $35 million and up to 1 million shares of the Company’s common stock but no repurchases were made during fiscal 2006. |
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ITEM 6.SELECTED FINANCIAL DATA.
Fiscal Year | |||||||||||||||||||||||
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(Dollars in thousands, except per share data) | 2005 | 2004** | 2003 | 2002 | 2001 | ||||||||||||||||||
Income Statement Data: | �� | ||||||||||||||||||||||
Total revenue | $ | 62,381 | $ | 49,738 | $ | 43,232 | $ | 29,488 | $ | 22,693 | |||||||||||||
Operating income | 2,985 | 10,474 | 20,640 | 10,709 | 7,566 | ||||||||||||||||||
Net income (loss) | (8,246 | ) | 7,242 | 13,936 | 7,796 | 5,109 | |||||||||||||||||
Diluted net income (loss) per share | (.45 | ) | .41 | .78 | .44 | .29 | |||||||||||||||||
Pro forma amounts assuming the accounting change* was applied retroactively: | |||||||||||||||||||||||
Net income (loss) | (8,246 | ) | 7,242 | 13,936 | 7,796 | 6,814 | |||||||||||||||||
Diluted net income (loss) per share | (.45 | ) | .41 | .78 | .44 | .38 | |||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||
Cash and short-term investments | $ | 24,445 | $ | 19,215 | $ | 6,647 | $ | 13,149 | $ | 14,840 | |||||||||||||
Total assets | 124,225 | 109,587 | 97,808 | 77,248 | 60,583 | ||||||||||||||||||
Retained earnings | 27,915 | 36,161 | 28,918 | 14,982 | 7,186 | ||||||||||||||||||
Total stockholders’ equity | 115,581 | 94,310 | 86,114 | 69,995 | 55,700 | ||||||||||||||||||
Pro forma amounts assuming the accounting change* was applied retroactively: | |||||||||||||||||||||||
Retained earnings | 27,915 | 36,161 | 28,918 | 14,982 | 7,186 | ||||||||||||||||||
Total stockholders’ equity | 115,581 | 94,310 | 86,114 | 69,995 | 55,700 |
Fiscal Year | ||||||||||||||||
(Dollars in thousands, except per share data) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||
Income Statement Data: | ||||||||||||||||
Total revenue | $ | 69,884 | $ | 62,381 | $ | 49,738 | $ | 43,232 | $ | 29,488 | ||||||
Operating income | 36,163 | 2,985 | 10,474 | 20,640 | 10,709 | |||||||||||
Net income (loss) | 20,334 | (8,246 | ) | 7,242 | 13,936 | 7,796 | ||||||||||
Diluted net income (loss) per share | 1.09 | (.45 | ) | .41 | .78 | .44 | ||||||||||
Balance Sheet Data: | ||||||||||||||||
Cash and short-term investments | $ | 58,813 | $ | 24,445 | $ | 19,215 | $ | 6,647 | $ | 13,149 | ||||||
Total assets | 157,402 | 124,225 | 109,587 | 97,808 | 77,248 | |||||||||||
Retained earnings | 48,273 | 27,915 | 36,161 | 28,918 | 14,982 | |||||||||||
Total stockholders’ equity | 145,203 | 115,581 | 94,310 | 86,114 | 69,995 |
MANAGEMENT’S DISCUSSIONANDANALYSISOFFINANCIALCONDITIONAND RESULTS OF |
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segment contains the In Vitro Technologies (formerly Diagnostics and Drug DiscoveryDiscovery) business unit, which includes our genomics slide technologies, our stabilization products for immunoassay diagnosticsdiagnostic tests, our in vitro diagnostic format technology and the work being performed to developour synthetic cell culture products.
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Results in the fourth quarter of fiscal year 2005 include an additional non-cash asset impairment charge of $2.5 million to reflect the fair value based on the agreed selling price. We intend to consolidateconsolidated operations at our Eden Prairie, Minnesota headquarters byat the endbeginning of the third quarter of fiscal yearApril 2006.
Years Ended September 30, 2006 and 2005 | ||||||||||||||||
Fiscal year 2006 | Fiscal year 2005 | Increase | % Increase | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenue: | ||||||||||||||||
Drug Delivery | $32,918 | $29,678 | $3,240 | 11% | ||||||||||||
Hydrophilic and Other | 22,233 | 19,065 | 3,168 | 17% | ||||||||||||
In Vitro | 14,733 | 13,638 | 1,095 | 8% | ||||||||||||
Total revenue | $69,884 | $62,381 | $7,503 | 12% |
Revenue.Fiscal 2006 revenue was $69.9 million, an increase of $7.5 million or 12% from fiscal 2005. We experienced growth in all three operating segments as detailed in the table above and further explained in the narrative below.
Drug Delivery derives a substantial majority of its revenue from royalties and license fees and product sales attributable to Cordis Corporation, a Johnson & Johnson company, on its CYPHER® Sirolimus-eluting Coronary Stent. The CYPHER® stent incorporates a proprietary SurModics polymer coating that delivers a therapeutic drug designed to reduce the occurrence of restenosis in coronary artery lesions.
Over three-fourths of the overall increase in drug delivery revenue reflects increased royalty revenue from Cordis as a result of higher CYPHER® sales. The balance of the fiscal 2006 increase was a result of increased research and development fees from drug delivery and ophthalmology customers. Fiscal 2006 sales of reagent chemicals (chemicals that we manufacture and sell to licensees for coating their medical devices) to Cordis decreased slightly when compared with the prior year. The unit volume of reagents sold to Cordis will likely be directly impacted by anticipated continued improvements in manufacturing efficiencies by Cordis in addition to relative market share positions of drug-eluting stent players.
The CYPHER® stent, from which we derive a substantial majority of our Drug Delivery revenue, faces continuing competition from Boston Scientific Corporation’s Taxus drug-eluting stent, which is sold within and outside the U.S., and stents from Medtronic, Conor Medsystems, Abbott Vascular, and others sold outside the U.S. In addition, several drug-eluting stents from others are expected to be approved in the U.S. within the next two years. These stents compete or will compete directly with the CYPHER® stent. Therefore future royalty and reagent sales revenue could decrease because of lower CYPHER® stent sales as a result this ongoing and expected future competition. We anticipate that quarterly royalty revenue from the CYPHER® stent may be volatile throughout fiscal 2007 and beyond as the various marketers of drug-eluting stents continue competing in the marketplace and as others enter the marketplace. Management expects royalties from the CYPHER® stent to continue to constitute a significant portion of our revenue in fiscal 2007. However, whether and the extent to which royalties from the CYPHER® stent continue to constitute a significant source of revenue is subject to a number of risks, including intellectual property
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litigation generally, and specifically the damages, settlements and mutual agreements that may result from various infringement suits between Boston Scientific and Cordis in which each has been found to have violated certain intellectual property rights of the other.
Hydrophilic and Other. Hydrophilic and Other revenue increased 17% to $22.2 million, primarily as a result of 19% growth in royalties and license fees and 35% growth in reagent sales, partially offset by a 15% decline in research and development revenue. In contrast to our Drug Delivery segment, where a significant percentage of revenue is attributable to Cordis, there are several dozen licensees and an even larger number of coated products generating royalties in our Hydrophilic and Other segment. The growth in royalties principally reflects increased sales of coated products already on the market, and to a lesser extent newly introduced licensed products. We believe growth in fiscal 2007 will be more significantly influenced by royalty revenue earned on newly released products. We believe that revenue will likely continue to increase in fiscal 2007, however the rate of growth will depend upon the timing and market success of newly released products.
In Vitro.Revenue in the In Vitro segment increased 8% to $14.7 million. Roughly 60% of the increase was attributable to growth in sales of our stabilization products used by diagnostic kit manufacturers in immunoassay diagnostic tests. The balance of the growth resulted from increased royalty revenue from our diagnostic format patents. We anticipate that growth in our In Vitro segment revenue in fiscal 2007 will likely be on par with fiscal 2006 on the continued strength of product sales. In Vitro derives a significant percentage of its revenue from GE Healthcare and Abbott Laboratories.
Product costs. Product costs were $3.4 million in fiscal 2006, a 19% increase from the prior year. Overall product margins averaged 70%, on par with the 70% reported for the comparable period last year. We anticipate the impact of higher depreciation costs on our recently-constructed manufacturing space at our Eden Prairie facility combined with non-cash stock-based compensation charges will decrease margins in fiscal 2007.
Research and development expenses.Research and development expenses were $20.4 million, an increase of 27% compared with fiscal 2005. Approximately $2.5 million of the $4.3 million increase was related to non-cash stock-based compensation charges following the adoption of SFAS No. 123(R). Research and development expenses included no such charge in fiscal 2005. Excluding stock-based compensation, research and development expenses increased 11% in fiscal 2006. The balance of the increase reflects higher costs associated with the clinical trial on our I-vation™ intravitreal implant, increased costs of operating the recently-constructed clean rooms and drug coating suites at our Eden Prairie headquarters, and increased personnel costs. These increased costs were partially offset by reduced legal costs. Research and development expenses are expected to continue to increase in fiscal 2007 as we expand our research and development organization. Note, in April 2006, we ceased operations at our Bloomington, Minnesota contract manufacturing facility and consolidated our operations at Eden Prairie. Therefore, facilities costs associated with research and development will increase reflecting increased depreciation on our Eden Prairie facility. However, the cost of operating the Bloomington facility (reported in general and administrative expenses) has been eliminated.
Sales and marketing expenses.Sales and marketing expenses were $1.4 million in fiscal 2006, an 18% increase from the prior year. Approximately $205,000 of the $215,000 increase was related to stock-based compensation. Sales and marketing expenses included no such costs in fiscal 2005. Excluding stock-based compensation, sales and marketing expenses increased 1%. We expect sales and marketing expenses to increase modestly in fiscal 2007.
General and administrative expenses.General and administrative expenses were $8.5 million, an increase of 31% compared with fiscal 2005. We recorded approximately $2.7 million in non-cash stock-based compensation charges compared with $588,000 in fiscal 2005. Excluding the impact of stock-based compensation, general and administrative expenses decreased approximately 2% as a result of the cost savings realized since we exited our contract manufacturing facility in Bloomington in April 2006. The majority of the operating costs of the Bloomington facility were reported in general and administrative expenses. We expect general and administrative expenses to be lower when compared with prior year results for the next couple of quarters reflecting lower facility operating costs.
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Asset impairment charge.Results in fiscal 2005 included a non-cash asset impairment charge of $2.5 million against our Bloomington, Minnesota, contract manufacturing facility. Results in the fiscal 2004 included a non-cash asset impairment charge of $16.5 million against the facility. In September 2005, we entered into an agreement to sell the Bloomington facility and consolidated operations at our Eden Prairie, Minnesota, headquarters in April 2006.
Purchased in-process research and development.In January 2005, the Company acquired all of the assets of InnoRx, Inc. by paying cash and issuing shares of SurModics common stock to InnoRx stockholders. Results in the second quarter of fiscal 2005 include a non-cash in-process research and development charge of $30.3 million. The fair value of the in-process research and development was determined by an outside valuation consultant.
Other income, net.Other income resulted in a loss of $598,000 in fiscal 2006 compared with income of $1.4 million in fiscal 2005, primarily as a result of the $4.7 million impairment loss on our investment in Novocell we recorded in the second quarter of fiscal 2006. Income from investments was $4.2 million in fiscal 2006, an increase of $2.2 million, compared with $2.0 million in fiscal 2005. The increase reflects higher levels of investable cash and higher yields generated from our investment portfolio. Prior year other income results also include a $500,000 loss related to the impact of accounting for the InnoRx acquisition under the equity method. We recorded no such comparable transaction in fiscal 2006.
Income tax expense. The income tax provision was $15.2 million in fiscal 2006 compared with $12.6 million in fiscal 2005. Excluding the impact of the $4.7 million impairment loss, (since the Company does not currently foresee offsetting capital gains to offset this capital loss, no tax benefit has been recorded), the effective tax rate was 38.2% in fiscal 2006, compared with 36.8% for fiscal 2005 when the impact of non-tax deductible purchased in-process research and development is excluded. The impact of adopting SFAS No. 123(R) accounts for bulk of the increase in the effective tax rate from fiscal 2006.
Years Ended September 30, 2005 and 2004
Fiscal year | Fiscal year | |||||||||||||||||
(Dollars in thousands) | 2005 | 2004 | Increase | % Increase | ||||||||||||||
Revenue: | ||||||||||||||||||
Drug Delivery | $ 29,678 | $25,690 | $ | 3,988 | 16% | |||||||||||||
Hydrophilic and Other | 19,065 | 15,527 | 3,538 | 23% | ||||||||||||||
In Vitro | 13,638 | 8,521 | 5,117 | 60% | ||||||||||||||
Total revenue | $ 62,381 | $49,738 | $ | 12,643 | 25% |
(Dollars in thousands) | Fiscal Year 2005 | Fiscal Year 2004 | Increase | % Increase | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue: | ||||||||||||||||||
Drug Delivery | $ | 29,678 | $ | 25,690 | $ | 3,988 | 16 | % | ||||||||||
Hydrophilic and Other | 19,065 | 15,527 | 3,538 | 23 | % | |||||||||||||
Diagnostics | 13,638 | 8,521 | 5,117 | 60 | % | |||||||||||||
Total revenue | $ | 62,381 | $ | 49,738 | $ | 12,643 | 25 | % |
Asset impairment charge.Results in fiscal year 2006.2005 included a non-cash asset impairment charge of $2.5 million against our Bloomington, Minnesota, contract manufacturing facility. Results in fiscal 2004 included a non-cash asset impairment charge of $16.5 million against the facility. In September 2005, we entered into an agreement to sell the Bloomington facility.
(Dollars in thousands) | Fiscal year 2004 | Fiscal year 2003 | Increase (Decrease) | % Increase (Decrease) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue: | ||||||||||||||||||
Drug Delivery | $ | 25,690 | $ | 20,168 | $ | 5,522 | 27 | % | ||||||||||
Hydrophilic and Other | 15,527 | 12,380 | 3,147 | 25 | % | |||||||||||||
Diagnostics | 8,521 | 10,684 | (2,163 | ) | (20 | %) | ||||||||||||
Total revenue | $ | 49,738 | $ | 43,232 | $ | 6,506 | 15 | % |
Certain information in the paragraphs that follow.
Income tax provision. Our income tax provision was $4.4 million in fiscal year 2004 compared to $8.6 million in fiscal year 2003. The effective tax rate was 37.2% in fiscal year 2004, a decrease from 38.0% in fiscal year 2003.
32
in Novocell, OctoPlus and ThermopeutiX and the revenue they may ultimately generate. There is no assurance that the development stage companies listed above will successfully meet their immediate or future financing needs or that their financing needs will be met when required. If adverse results occur in the development of their respective technology, or if their respective financing needs are not continually met, the viability of such companies, the value of our investment and their ability to be future sources of revenue for the Company will be in jeopardy, and our investment in such companies would likely be considered impaired and charged against earnings at such time.
As of September 30, 2005,2006, we had no debt, nor did we have any credit agreements. We believe that our existing capital resources will be adequate to fund our operations into the foreseeable future.
Maturity by Fiscal Year | |||||||||||||||
Contractual obligations | Total | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | ||||||||
(in millions) | |||||||||||||||
Other long-term liabilities reflected on | |||||||||||||||
balance sheet under GAAP | $2.0 | $1.0 | $1.0 | — | — | — | — | ||||||||
Total | $2.0 | $1.0 | $1.0 | — | — | — | — |
Maturity by Fiscal Year | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual obligations | Total | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | |||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||
Other long-term liabilities reflected on balance sheet under GAAP | $ | 2.0 | — | $ | 1.0 | $ | 1.0 | — | — | — | ||||||||||||||||||||
Total | $ | 2.0 | — | $ | 1.0 | $ | 1.0 | — | — | — |
33
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement establishes a consistent framework for measuring fair value and expands disclosures on fair value measurements. SFAS No. 157 is effective for the Company starting in fiscal year 2005.2008. The Company has not determined the impact, for fiscal year 2006.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
ITEM 9A. | CONTROLS AND PROCEDURES. |
1. Disclosure Controls and Procedures.
(a) | Management’s Report on Internal Control Over Financial Reporting.Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal |
34
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, |
(b) | Attestation Report of the Independent Registered Public Accounting Firm. |
There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. | OTHER INFORMATION. |
ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
ITEM 11. | EXECUTIVE COMPENSATION. |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
None.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a) | 1.Financial statements | ||
The following statements are included in this report on the pages indicated: |
Page (s) |
Report of Independent Registered Public Accounting Firm | F-1 | |||||
Balance Sheets | F-2 | |||||
Statements of Operations | F-3 | |||||
Statements of Stockholders’ Equity | F-4 | |||||
Statements of Cash Flows | F-5 | |||||
Notes to Financial Statements | F-6 – F-15 |
2.Financial Statement Schedules. All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission other than the ones listed above are not required under the related instructions or are not applicable, and, therefore, have been omitted. | ||||
3.Listing of Exhibits. The exhibits which are filed with this report or which are incorporated herein by reference are set forth in the Exhibit Index following the signature page. |
Dated: December 14, | By: | /s/ Bruce J Barclay | |
Bruce J Barclay | |||
Chief Executive Officer |
Signature | |||||||||||
Title | Date | ||||||||||
/s/ Bruce J Barclay | President and Chief Executive Officer | December 14, | |||||||||
Bruce J Barclay | |||||||||||
/s/ Philip D. Ankeny | Senior Vice President and Chief Financial Officer, (principal | December 14, | |||||||||
Philip D. Ankeny | financialofficer) | ||||||||||
/s/ Loren R. Miller | Vice President and Controller (principal accounting officer) | December 14, | |||||||||
Loren R. Miller | |||||||||||
/s/ | Director | December 14, | |||||||||
Jose H. Bedoya | |||||||||||
/s/ | Director | December 14, | |||||||||
John W. Benson | |||||||||||
/s/ | Director | December 14, | |||||||||
Gerald B. Fischer | |||||||||||
/s/ | Director | December 14, | |||||||||
Kenneth H. Keller | |||||||||||
/s/ | Director | December 14, | |||||||||
David A. Koch | |||||||||||
/s/ | Director | December 14, | |||||||||
Kendrick B. Melrose | |||||||||||
/s/ | Director | December 14, | |||||||||
Dale R. Olseth | |||||||||||
/s/ John A. Meslow | Director | December 14, 2006 | |||||||||
John A. Meslow |
40
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBIT INDEX TO FORM 10-K
For the Fiscal Year Ended September 30, 2006
SURMODICS, INC.
Exhibit | ||
2.1 | Agreement of Merger, dated January 18, 2005, with InnoRx, Inc.--incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated January 18, 2005, SEC File No. 0-23837. | |
Restated Articles of Incorporation, as amended--incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 1999, SEC File No. 0-23837. | ||
3.2 | Bylaws, as amended to date--incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 1998, SEC File No. 0-23837. | |
4.1 | Rights Agreement, dated as of April 5, 1999, between the Company and Firstar Bank Milwaukee, NA., as Rights Agent, including as: Exhibit A Statement of Designation of Series A Preferred Stock of the Company; Exhibit B Summary of Rights to Purchase Shares of Series A Preferred Stock; and Exhibit C Form of Right Certificate--incorporated by reference to Exhibit 1 to the Company’s Registration of Securities on Form 8-A, SEC File No. 0-23837. | |
10.1* | Company’s Incentive 1987 Stock Option Plan, including specimen of Incentive Stock Option Agreement--incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on form SB-2, Reg. No. 333-43217. | |
10.2* | Company’s Incentive 1997 Stock Option Plan, including specimen of Incentive Stock Option Agreement--incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on form SB-2, Reg. No. 333-43217. | |
10.3* | Form of Restricted Stock Agreement under 1997 Plan--incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on form SB-2, Reg. No. 333-43217. | |
10.4* | Form of Non-qualified Stock Option Agreement under 1997 Plan--incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on form SB-2, Reg. No. 333-43217. | |
10.5 | Form of License Agreement--incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on form SB-2, Reg. No. 333-43217. | |
10.6* | SurModics, Inc. Executive Income Continuation Plan--incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999, SEC File No. 0-23837. | |
10.7 | Adjusted License Agreement by and between the Company and Cordis Corporation effective as of January 1, 2003--incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002, SEC File No. 0-23837. | |
10.8 | Reagent Supply Agreement by and between the Company and Cordis Corporation effective as of January 1, 2003--incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002, SEC File No. 0-23837. | |
10.9* | Form of officer acceptance regarding employment/compensation – incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005, SEC File No. 0-23837. | |
10.10* | 2003 Equity Incentive Plan (as amended and restated December 13, 2005) (adopted December 13, 2005 by the board of directors and approved by the shareholders on January 30, 2006) —incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed February 3, 2006, SEC File No. 0-23837. | |
10.11* | Form of SurModics, Inc. 2003 Equity Incentive Plan Nonqualified Stock Option Agreement—incorporated by reference to Exhibit 99.1 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. |
Exhibit | ||
10.12* | Form of SurModics, Inc. 2003 Equity Incentive Plan Incentive Stock Option Agreement—incorporated by reference to Exhibit 99.2 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.13* | Form of SurModics, Inc. 2003 Equity Incentive Plan Restricted Stock Agreement—incorporated by reference to Exhibit 99.3 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.14* | Form of SurModics, Inc. 2003 Equity Incentive Plan Performance Share Award Agreement—incorporated by reference to Exhibit 99.4 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.15* | Form of SurModics, Inc. 2003 Equity Incentive Plan Performance Unit Award (cash settled) Agreement—incorporated by reference to Exhibit 99.5 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.16* | Form of SurModics, Inc. 2003 Equity Incentive Plan Restricted Stock Unit Agreement—incorporated by reference to Exhibit 99.6 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.17* | Form of SurModics, Inc. 2003 Equity Incentive Plan Stock Appreciation Rights (cash settled) Agreement—incorporated by reference to Exhibit 99.7 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.18* | Form of SurModics, Inc. 2003 Equity Incentive Plan Stock Appreciation Rights (stock settled) Agreement—incorporated by reference to Exhibit 99.8 to the Company’s 8-K filed March 20, 2006, SEC File No. 0-23837. | |
10.19* | The Company’s 2005 Bonus Plan--incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December | |
10.20* | The Company’s FY 2006 Bonus Plan, as adopted by the Compensation Committee of the Board of Directors on September 30, 2005 -- incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005, SEC File No. 0-23837. | |
10.21* | The Company’s FY 2007 Bonus Plan, as adopted by the Compensation Committee of the Board of Directors of the Company on September 15, 2006.** | |
10.22* | The Company’s Board Compensation Policy, Amended and Restated in its entirety as of July 31, 2006.** | |
10.23* | FY 06 Summary of Compensation Arrangements for Named Executive Officers of the Company -- -- incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005, SEC File No. 0-23837. | |
10.24* | FY 07 Summary of Compensation Arrangements for Named Executive Officers of the Company.** | |
10.25* | Change of Control Agreement with Bruce J Barclay, dated April 19, 2006—incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K filed April 25, 2006, SEC File No. 0-23837. | |
10.26* | Change of Control Agreement with Philip D. Ankeny, dated April 19, 2006—incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K filed April 25, 2006, SEC File No. 0-23837. | |
10.27* | Change of Control Agreement with Paul A. Lopez, dated November 15, 2006.** | |
10.28* | Description of certain retirement benefits for Dale R. Olseth.** | |
23.1 | Consent of Deloitte & Touche LLP.** | |
24 | Power of Attorney (included on signature page of this Form 10-K).** | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.** | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.** | |
32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.** | |
32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.** |
* | Management contract or compensatory plan or arrangement | |
** | Filed herewith | |
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of September 30, 2005,2006, based on the criteria established inInternal Control — Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 8, 200512, 2006, expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
(thousands, except share data) | 2005 | 2004 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash and cash equivalents | $ | 3,921 | $ | 2,709 | ||||||
Short-term investments | 20,524 | 16,506 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $40 as of September 30, 2005 and 2004 | 10,996 | 8,130 | ||||||||
Income taxes receivable | 3,640 | — | ||||||||
Inventories | 1,091 | 1,040 | ||||||||
Deferred tax asset | 353 | 379 | ||||||||
Prepaids and other | 1,079 | 805 | ||||||||
Total current assets | 41,604 | 29,569 | ||||||||
Property and Equipment, net | 14,832 | 15,738 | ||||||||
Long-Term Investments | 48,874 | 44,088 | ||||||||
Deferred Tax Asset | 2,868 | 5,579 | ||||||||
Other Assets, net | 16,047 | 14,613 | ||||||||
Total Assets | $ | 124,225 | $ | 109,587 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current Liabilities | ||||||||||
Accounts payable | $ | 1,163 | $ | 683 | ||||||
Accrued liabilities — | ||||||||||
Compensation | 1,629 | 894 | ||||||||
Accrued income taxes payable | — | 3,827 | ||||||||
Accrued other | 1,917 | 5,857 | ||||||||
Deferred revenue | 414 | 528 | ||||||||
Total current liabilities | 5,123 | 11,789 | ||||||||
Deferred Revenue, less current portion | 1,521 | 1,488 | ||||||||
Other Long-Term Liabilities | 2,000 | 2,000 | ||||||||
Total liabilities | 8,644 | 15,277 | ||||||||
Commitments and Contingencies (Note 6) | ||||||||||
Stockholders’ Equity | ||||||||||
Series A preferred stock — $.05 par value, 450,000 shares authorized, no shares issued and outstanding | — | — | ||||||||
Common stock — $.05 par value, 45,000,000 shares authorized 18,535,761 and 17,536,656 shares issued and outstanding | 927 | 877 | ||||||||
Additional paid-in capital | 89,721 | 57,849 | ||||||||
Unearned compensation | (2,621 | ) | (632 | ) | ||||||
Accumulated other comprehensive income (loss) | (360 | ) | 56 | |||||||
Retained earnings | 27,914 | 36,160 | ||||||||
Total stockholders’ equity | 115,581 | 94,310 | ||||||||
Total Liabilities and Stockholders’ Equity | $ | 124,225 | $ | 109,587 |
SurModics, Inc. | ||||||||
Balance Sheets | ||||||||
As of September 30 | ||||||||
(thousands, except share data) | 2006 | 2005 | ||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 3,751 | $ | 3,921 | ||||
Short-term investments | 55,062 | 20,524 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $40 as of | ||||||||
September 30, 2006 and 2005 | 14,493 | 10,996 | ||||||
Income taxes receivable | — | 3,640 | ||||||
Inventories | 952 | 1,091 | ||||||
Deferred tax asset | 435 | 353 | ||||||
Prepaids and other | 1,403 | 1,079 | ||||||
Total current assets | 76,096 | 41,604 | ||||||
Property and Equipment, net | 11,686 | 14,832 | ||||||
Long-Term Investments | 47,758 | 48,874 | ||||||
Deferred Tax Asset | 4,883 | 2,868 | ||||||
Other Assets, net | 16,979 | 16,047 | ||||||
Total Assets | $ | 157,402 | $ | 124,225 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 963 | $ | 1,163 | ||||
Accrued liabilities- | ||||||||
Compensation | 1,275 | 1,629 | ||||||
Accrued income taxes payable | 1,910 | — | ||||||
Accrued other | 1,605 | 1,917 | ||||||
Deferred revenue | 2,236 | 414 | ||||||
Other current liabilities | 1,000 | — | ||||||
Total current liabilities | 8,989 | 5,123 | ||||||
Deferred revenue, less current portion | 2,210 | 1,521 | ||||||
Other long-term liabilities | 1,000 | 2,000 | ||||||
Total liabilities | 12,199 | 8,644 | ||||||
Commitments and Contingencies (Note 5) | ||||||||
Stockholders’ Equity | ||||||||
Series A preferred stock- $.05 par value, 450,000 shares authorized, | ||||||||
no shares issued and outstanding | — | — | ||||||
Common stock- $.05 par value, 45,000,000 shares authorized 18,830,455 | ||||||||
and 18,535,761 shares issued and outstanding | 942 | 927 | ||||||
Additional paid-in capital | 96,281 | 89,721 | ||||||
Unearned compensation | — | (2,621 | ) | |||||
Accumulated other comprehensive income (loss) | (293 | ) | (360 | ) | ||||
Retained earnings | 48,273 | 27,914 | ||||||
Total stockholders’ equity | 145,203 | 115,581 | ||||||
Total Liabilities and Stockholders Equity | $ | 157,402 | $ | 124,225 | ||||
The accompanying notes are an integral part of these financial statements. |
SurModics, Inc. | |||||||||||||
Statements of Operations | |||||||||||||
For the Years Ended September 30 | |||||||||||||
(thousands, except net income per share) | 2006 | 2005 | 2004 | ||||||||||
Revenue | |||||||||||||
Royalties and license fees | $ | 53,008 | $ | 47,582 | $ | 34,836 | |||||||
Product sales | 11,172 | 9,403 | 10,478 | ||||||||||
Research and development | 5,704 | 5,396 | 4,424 | ||||||||||
Total revenue | 69,884 | 62,381 | 49,738 | ||||||||||
Operating Costs and Expenses | |||||||||||||
Product | 3,399 | 2,855 | 3,035 | ||||||||||
Research and development | 20,391 | 16,072 | 12,633 | ||||||||||
Sales and marketing | 1,424 | 1,209 | 1,683 | ||||||||||
General and administrative | 8,507 | 6,496 | 5,416 | ||||||||||
Asset impairment charge | — | 2,487 | 16,497 | ||||||||||
Purchased in-process research & development | — | 30,277 | — | ||||||||||
Total operating costs and expenses | 33,721 | 59,396 | 39,264 | ||||||||||
Income from Operations | 36,163 | 2,985 | 10,474 | ||||||||||
Other Income (Loss), net | |||||||||||||
Investment income | 4,210 | 1,967 | 1,185 | ||||||||||
Impairment loss on investment | (4,651 | ) | — | — | |||||||||
Other loss | (157 | ) | (602 | ) | (7 | ) | |||||||
Other income (loss), net | (598 | ) | 1,365 | 1,178 | |||||||||
Income Before Income Taxes | 35,565 | 4,350 | 11,652 | ||||||||||
Income Tax Provision | (15,231 | ) | (12,596 | ) | (4,410 | ) | |||||||
Net income (loss) | $ | 20,334 | ($ | 8,246 | ) | $ | 7,242 | ||||||
Basic net income (loss) per share | $1.10 | ($0.45 | ) | $ | 0.41 | ||||||||
Diluted net income (loss) per share | $1.09 | ($0.45 | ) | $ | 0.41 | ||||||||
Weighted Average Shares Outstanding | |||||||||||||
Basic | 18,527 | 18,131 | 17,501 | ||||||||||
Dilutive effect of outstanding stock options | 192 | — | 299 | ||||||||||
Diluted | 18,719 | 18,131 | 17,800 |
The accompanying notes are an integral part of these financial statements.
(thousands, except net income per share) | 2005 | 2004 | 2003 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | ||||||||||||||
Royalties and license fees | $ | 47,582 | $ | 34,836 | $ | 25,833 | ||||||||
Product sales | 9,403 | 10,478 | 11,804 | |||||||||||
Research and development | 5,396 | 4,424 | 5,595 | |||||||||||
Total revenue | 62,381 | 49,738 | 43,232 | |||||||||||
Operating Costs and Expenses | ||||||||||||||
Product | 2,855 | 3,035 | 2,649 | |||||||||||
Research and development | 16,072 | 12,633 | 12,000 | |||||||||||
Sales and marketing | 1,209 | 1,683 | 2,014 | |||||||||||
General and administrative | 6,496 | 5,416 | 5,929 | |||||||||||
Asset impairment charge | 2,487 | 16,497 | — | |||||||||||
Purchased in-process research & development | 30,277 | — | — | |||||||||||
Total operating costs and expenses | 59,396 | 39,264 | 22,592 | |||||||||||
Income from Operations | 2,985 | 10,474 | 20,640 | |||||||||||
Other Income, net | ||||||||||||||
Investment income | 1,967 | 1,185 | 1,398 | |||||||||||
Other income (loss) | (602 | ) | (7 | ) | 461 | |||||||||
Other income, net | 1,365 | 1,178 | 1,859 | |||||||||||
Income Before Income Taxes | 4,350 | 11,652 | 22,499 | |||||||||||
Income Tax Provision | (12,596 | ) | (4,410 | ) | (8,563 | ) | ||||||||
Net income (loss) | ($8,246 | ) | $ | 7,242 | $ | 13,936 | ||||||||
Basic net income (loss) per share | ($0.45 | ) | $ | 0.41 | $ | 0.80 | ||||||||
Diluted net income (loss) per share | ($0.45 | ) | $ | 0.41 | $ | 0.78 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||
Basic | 18,131 | 17,501 | 17,363 | |||||||||||
Dilutive effect of outstanding stock options | — | 299 | 474 | |||||||||||
Diluted | 18,131 | 17,800 | 17,837 |
SurModics, Inc. | |||||||||||||||||||||||||||||
Statements of Stockholders’ Equity | |||||||||||||||||||||||||||||
For the Years Ended September 30, 2006, 2005 and 2004 | |||||||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||||||
Additional | Other | Total | |||||||||||||||||||||||||||
Common Stock | Paid-In | Unearned | Comprehensive | Retained | Stockholders’ | ||||||||||||||||||||||||
(in thousands) | Shares | Amount | Capital | Compensation | Income (Loss) | Earnings | Equity | ||||||||||||||||||||||
Balance, September 30, 2003 | 17,439 | $ | 872 | $ | 56,453 | $ | (466 | ) | $ | 337 | $ | 28,918 | $ | 86,114 | |||||||||||||||
Components of comprehensive income, | |||||||||||||||||||||||||||||
net of tax: | |||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 7,242 | 7,242 | ||||||||||||||||||||||
Unrealized holding losses on available- | |||||||||||||||||||||||||||||
for-sale securities arising during the | |||||||||||||||||||||||||||||
period | — | — | — | — | (164 | ) | — | (164 | ) | ||||||||||||||||||||
Less reclassification for gains included | |||||||||||||||||||||||||||||
in net income, net of tax | — | — | — | — | (117 | ) | — | (117 | ) | ||||||||||||||||||||
Comprehensive income | 6,961 | ||||||||||||||||||||||||||||
Issuance of common stock | 19 | 1 | 344 | — | — | — | 345 | ||||||||||||||||||||||
Common stock options exercised, net | 63 | 3 | 350 | — | — | — | 353 | ||||||||||||||||||||||
Tax benefit from exercise of stock | |||||||||||||||||||||||||||||
options | — | — | 325 | — | — | — | 325 | ||||||||||||||||||||||
Restricted stock activity | 16 | 1 | 377 | (378 | ) | — | — | — | |||||||||||||||||||||
Amortization of unearned compensation | — | — | — | 212 | — | — | 212 | ||||||||||||||||||||||
Balance, September 30, 2004 | 17,537 | 877 | 57,849 | (632 | ) | 56 | 36,160 | 94,310 | |||||||||||||||||||||
Components of comprehensive income, | |||||||||||||||||||||||||||||
net of tax: | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (8,246 | ) | (8,246 | ) | ||||||||||||||||||||
Unrealized holding losses on available- | |||||||||||||||||||||||||||||
for-sale securities arising during the | |||||||||||||||||||||||||||||
period | — | — | — | — | (481 | ) | — | (481 | ) | ||||||||||||||||||||
Add reclassification for losses included | |||||||||||||||||||||||||||||
in net income, net of tax | — | — | — | — | 65 | — | 65 | ||||||||||||||||||||||
Comprehensive loss | — | (8,662 | ) | ||||||||||||||||||||||||||
Issuance of common stock | 682 | 34 | 25,731 | — | — | — | 25,765 | ||||||||||||||||||||||
Common stock options exercised, net | 244 | 12 | 2,310 | — | — | — | 2,322 | ||||||||||||||||||||||
Tax benefit from exercise of stock | |||||||||||||||||||||||||||||
options | — | — | 1,258 | — | — | — | 1,258 | ||||||||||||||||||||||
Restricted stock activity | 73 | 4 | 2,573 | (2,577 | ) | — | — | — | |||||||||||||||||||||
Amortization of unearned compensation | — | — | — | 588 | — | — | 588 | ||||||||||||||||||||||
Balance, September 30, 2005 | 18,536 | 927 | 89,721 | (2,621 | ) | (360 | ) | 27,914 | 115,581 | ||||||||||||||||||||
Components of comprehensive loss, net | |||||||||||||||||||||||||||||
of tax: | |||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 20,334 | 20,334 | ||||||||||||||||||||||
Unrealized holding losses on available- | |||||||||||||||||||||||||||||
for-sale securities arising during the | |||||||||||||||||||||||||||||
period | — | — | — | — | (31 | ) | — | (31 | ) | ||||||||||||||||||||
Add reclassification for losses included | |||||||||||||||||||||||||||||
in net income, net of tax | — | — | — | — | 98 | — | 98 | ||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | 20,401 | ||||||||||||||||||||||
Issuance of common stock | 125 | 7 | 392 | — | — | — | 399 | ||||||||||||||||||||||
Common stock options exercised, net | 169 | 8 | 2,854 | — | — | — | 2,862 | ||||||||||||||||||||||
Tax benefit from exercise of stock | |||||||||||||||||||||||||||||
options | — | — | 249 | — | — | — | 249 | ||||||||||||||||||||||
Stock based compensation | — | — | 5,526 | — | — | — | 5,526 | ||||||||||||||||||||||
Accounting change due to adoption of | |||||||||||||||||||||||||||||
SFAS 123R | — | — | (2,461 | ) | 2,621 | — | 25 | 185 | |||||||||||||||||||||
Balance, September 30, 2006 | 18,830 | $ | 942 | $ | 96,281 | $ | — | ($ | 293 | ) | $ | 48,273 | $ | 145,203 | |||||||||||||||
The accompanying notes are an integral part of these financial statements. |
SurModics, Inc. | ||||||||||||
Statements of Cash Flows | ||||||||||||
For the Years Ended September 30 (in thousands) | 2006 | 2005 | 2004 | |||||||||
Operating Activities | ||||||||||||
Net income (loss) | $ | 20,334 | ($ | 8,246 | ) | $ | 7,242 | |||||
Adjustments to reconcile net income (loss) to net cash provided by | ||||||||||||
operating activities- | ||||||||||||
Depreciation and amortization | 3,710 | 3,733 | 3,125 | |||||||||
Loss on sales of investments and equity method loss on | ||||||||||||
InnoRx | 157 | 602 | 7 | |||||||||
Amortization of discount on investments | (1,534 | ) | — | — | ||||||||
Asset impairment charge | 4,651 | 2,487 | 16,497 | |||||||||
Noncash compensation | 5,711 | 588 | 212 | |||||||||
Purchased in-process research & development | — | 30,277 | — | |||||||||
Deferred tax | (2,134 | ) | 5,143 | (5,640 | ) | |||||||
Tax benefit from exercise of stock options | (249 | ) | 1,258 | 325 | ||||||||
Loss (gain) on disposals of property and equipment | (169 | ) | (65 | ) | 22 | |||||||
Change in operating assets and liabilities: | ||||||||||||
Accounts receivable | (3,497 | ) | (2,866 | ) | 1,015 | |||||||
Inventories | 139 | (51 | ) | (177 | ) | |||||||
Accounts payable and accrued liabilities | (532 | ) | 912 | (966 | ) | |||||||
Income taxes | 5,799 | (7,467 | ) | 2,269 | ||||||||
Deferred revenue | 2,489 | (81 | ) | (663 | ) | |||||||
Prepaids and other | 404 | (274 | ) | (78 | ) | |||||||
Net cash provided by operating activities | 35,279 | 25,950 | 23,190 | |||||||||
Investing Activities | ||||||||||||
Purchases of property and equipment | (5,857 | ) | (2,109 | ) | (5,474 | ) | ||||||
Sales of property and equipment | 238 | — | — | |||||||||
Purchases of available-for-sale investments | (193,966 | ) | (98,716 | ) | (45,976 | ) | ||||||
Sales/maturities of available-for-sale investments | 161,778 | 88,955 | 27,092 | |||||||||
Purchase of equity in OctoPlus, Novocell and other | (160 | ) | (5,133 | ) | (302 | ) | ||||||
Purchase of licenses | (1,592 | ) | (5,238 | ) | (64 | ) | ||||||
Investment in and acquisition costs for InnoRx | — | (5,181 | ) | (2,331 | ) | |||||||
Repayment of notes receivable | 600 | — | 1,869 | |||||||||
Net cash used in investing activities | (38,959 | ) | (27,422 | ) | (25,186 | ) | ||||||
Financing Activities | ||||||||||||
Tax benefit from exercise of stock options | 249 | — | — | |||||||||
Issuance of common stock | 3,261 | 2,684 | 698 | |||||||||
Net cash provided by financing activities | 3,510 | 2,684 | 698 | |||||||||
Net increase (decrease) in cash and cash equivalents | (170 | ) | 1,212 | (1,298 | ) | |||||||
Cash and Cash Equivalents | ||||||||||||
Beginning of year | 3,921 | 2,709 | 4,007 | |||||||||
End of year | $ | 3,751 | $ | 3,921 | $ | 2,709 | ||||||
Supplemental Information | ||||||||||||
Cash paid for taxes | $ | 11,338 | $ | 13,780 | $ | 7,265 | ||||||
Noncash transaction-purchase Abbott Laboratories sublicense | — | — | $ | 7,020 | ||||||||
Noncash proceeds from sale of property | $ | 6,655 | — | — | ||||||||
Noncash transaction-acquisition of property, plant, and equipment | ||||||||||||
on account | $ | 989 | $ | 1,268 | $ | 248 | ||||||
The accompanying notes are an integral part of these financial statements. |
SurModics, Inc.Statements of Stockholders’ EquityFor the Years Ended September 30, 2005, 2004 and 2003
Common Stock | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | Shares | Amount | Additional Paid-In Capital | Unearned Compensation | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||
Balance, September 30, 2002 | 17,272 | $ | 864 | $ | 53,936 | $ | (460 | ) | $ | 673 | $ | 14,982 | $ | 69,995 | ||||||||||||||||
Components of comprehensive income, net of tax: | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 13,936 | 13,936 | |||||||||||||||||||||||
Unrealized holding losses on available-for-sale securities arising during the period | — | — | — | — | (51 | ) | — | (51 | ) | |||||||||||||||||||||
Less reclassification for gains included in net income, net of tax | — | — | — | — | (285 | ) | — | (285 | ) | |||||||||||||||||||||
Comprehensive income | 13,600 | |||||||||||||||||||||||||||||
Issuance of common stock | 17 | 1 | 404 | — | — | — | 405 | |||||||||||||||||||||||
Common stock options exercised, net | 149 | 7 | 765 | — | — | — | 772 | |||||||||||||||||||||||
Tax benefit from exercise of stock options | — | — | 1,186 | — | — | — | 1,186 | |||||||||||||||||||||||
Restricted stock activity | 1 | — | 162 | (162 | ) | — | — | — | ||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | 156 | — | — | 156 | |||||||||||||||||||||||
Balance, September 30, 2003 | 17,439 | 872 | 56,453 | (466 | ) | 337 | 28,918 | 86,114 | ||||||||||||||||||||||
Components of comprehensive income, net of tax: | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 7,242 | 7,242 | |||||||||||||||||||||||
Unrealized holding losses on available-for-sale securities arising during the period | — | — | — | — | (164 | ) | — | (164 | ) | |||||||||||||||||||||
Less reclassification for gains included in net income, net of tax | — | — | — | — | (117 | ) | — | (117 | ) | |||||||||||||||||||||
Comprehensive income | 6,961 | |||||||||||||||||||||||||||||
Issuance of common stock | 19 | 1 | 344 | — | — | — | 345 | |||||||||||||||||||||||
Common stock options exercised, net | 63 | 3 | 350 | — | — | — | 353 | |||||||||||||||||||||||
Tax benefit from exercise of stock options | — | — | 325 | — | — | — | 325 | |||||||||||||||||||||||
Restricted stock activity | 16 | 1 | 377 | (378 | ) | — | — | — | ||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | 212 | — | — | 212 | |||||||||||||||||||||||
Balance, September 30, 2004 | 17,537 | 877 | 57,849 | (632 | ) | 56 | 36,160 | 94,310 | ||||||||||||||||||||||
Components of comprehensive loss, net of tax: | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (8,246 | ) | (8,246 | ) | |||||||||||||||||||||
Unrealized holding losses on available-for-sale securities arising during the period | — | — | — | — | (481 | ) | — | (481 | ) | |||||||||||||||||||||
Less reclassification for losses included in net income, net of tax | — | — | — | — | 65 | — | 65 | |||||||||||||||||||||||
Comprehensive loss | — | — | — | — | — | — | (8,662 | ) | ||||||||||||||||||||||
Issuance of common stock | 682 | 34 | 25,731 | — | — | — | 25,765 | |||||||||||||||||||||||
Common stock options exercised, net | 244 | 12 | 2,310 | — | — | — | 2,322 | |||||||||||||||||||||||
Tax benefit from exercise of stock options | — | — | 1,258 | — | — | — | 1,258 | |||||||||||||||||||||||
Restricted stock activity | 73 | 4 | 2,573 | (2,577 | ) | — | — | — | ||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | 588 | — | — | 588 | |||||||||||||||||||||||
Balance, September 30, 2005 | 18,536 | $ | 927 | $ | 89,721 | ($2,621 | ) | ($360 | ) | $ | 27,914 | $ | 115,581 |
For the Years Ended September 30 (in thousands) | 2005 | 2004 | 2003 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating Activities | ||||||||||||||
Net income (loss) | ($8,246 | ) | $ | 7,242 | $ | 13,936 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities — | ||||||||||||||
Depreciation and amortization | 3,733 | 3,125 | 2,583 | |||||||||||
Loss (gain) on InnoRx equity method and sales of investments | 602 | 7 | (461 | ) | ||||||||||
Asset impairment charge | 2,487 | 16,497 | — | |||||||||||
Noncash compensation | 588 | 212 | 156 | |||||||||||
Purchased in-process research & development | 30,277 | — | — | |||||||||||
Deferred tax | 5,143 | (5,640 | ) | 839 | ||||||||||
Tax benefit from exercise of stock options | 1,258 | 325 | 1,186 | |||||||||||
Loss (gain) on disposals of property and equipment | (65 | ) | 22 | 1 | ||||||||||
Change in operating assets and liabilities: | ||||||||||||||
Accounts receivable | (2,866 | ) | 1,015 | (3,639 | ) | |||||||||
Inventories | (51 | ) | (177 | ) | (117 | ) | ||||||||
Accounts payable and accrued liabilities | 912 | (966 | ) | 447 | ||||||||||
Income taxes | (7,467 | ) | 2,269 | 2,043 | ||||||||||
Deferred revenue | (81 | ) | (663 | ) | 202 | |||||||||
Prepaids and other | (274 | ) | (78 | ) | (124 | ) | ||||||||
Net cash provided by operating activities | 25,950 | 23,190 | 17,052 | |||||||||||
Investing Activities | ||||||||||||||
Purchases of property and equipment | (2,109 | ) | (5,474 | ) | (15,454 | ) | ||||||||
Purchases of available-for-sale investments | (98,716 | ) | (45,976 | ) | (42,896 | ) | ||||||||
Sales/maturities of available-for-sale investments | 88,955 | 27,092 | 35,885 | |||||||||||
Purchase of equity in OctoPlus, Novocell and other | (5,133 | ) | (302 | ) | (925 | ) | ||||||||
Purchase of licenses | (5,238 | ) | (64 | ) | (10 | ) | ||||||||
Investment in and acquisition costs for InnoRx | (5,181 | ) | (2,331 | ) | — | |||||||||
Repayment of notes receivable | — | 1,869 | (30 | ) | ||||||||||
Net cash used in investing activities | (27,422 | ) | (25,186 | ) | (23,430 | ) | ||||||||
Financing Activities | ||||||||||||||
Issuance of common stock | 2,684 | 698 | 1,178 | |||||||||||
Net cash provided by financing activities | 2,684 | 698 | 1,178 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 1,212 | (1,298 | ) | (5,200 | ) | |||||||||
Cash and Cash Equivalents | ||||||||||||||
Beginning of year | 2,709 | 4,007 | 9,207 | |||||||||||
End of year | $ | 3,921 | $ | 2,709 | $ | 4,007 | ||||||||
Supplemental Information | ||||||||||||||
Cash paid for taxes | $ | 13,780 | $ | 7,265 | $ | 4,327 | ||||||||
Noncash transaction-purchase Abbott Laboratories sublicense | — | $ | 7,020 | — | ||||||||||
Noncash transaction-acquisition of property, plant, and equipment on account | $ | 1,268 | $ | 248 | $ | 4,298 |
2005 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Original Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||
U.S. government obligations | $ | 32,392 | $ | 36 | ($256 | ) | $ | 32,172 | |||||||||||
Mortgage-backed securities | 15,782 | 37 | (157 | ) | 15,662 | ||||||||||||||
Asset-backed securities | 10,744 | 3 | (81 | ) | 10,666 | ||||||||||||||
Municipal bonds | 10,127 | 1 | (154 | ) | 9,974 | ||||||||||||||
Corporate bonds | 927 | 1 | (4 | ) | 924 | ||||||||||||||
Total | $ | 69,972 | $ | 78 | ($652 | ) | $ | 69,398 |
2006 | ||||||||||||||||
Original Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
U.S. government obligations | $ | 70,085 | $ | 18 | ($227 | ) | $ | 69,876 | ||||||||
Mortgage-backed securities | 12,312 | 42 | (123 | ) | 12,231 | |||||||||||
Municipal bonds | 10,595 | 20 | (124 | ) | 10,491 | |||||||||||
Asset backed securities | 8,658 | 3 | (76 | ) | 8,585 | |||||||||||
Corporate bonds | 1,639 | — | (2 | ) | 1,637 | |||||||||||
Total | $ | 103,289 | $ | 83 | ($552 | ) | $ | 102,820 | ||||||||
2005 | ||||||||||||||||
Original Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
U.S. government obligations | $ | 32,392 | $ | 36 | ($256 | ) | $ | 32,172 | ||||||||
Mortgage-backed securities | 15,782 | 37 | (157 | ) | 15,662 | |||||||||||
Municipal bonds | 10,127 | 1 | (154 | ) | 9,974 | |||||||||||
Asset backed securities | 10,744 | 3 | (81 | ) | 10,666 | |||||||||||
Corporate bonds | 927 | 1 | (4 | ) | 924 | |||||||||||
Total | $ | 69,972 | $ | 78 | ($652 | ) | $ | 69,398 |
2004 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Original Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||
Mortgage-backed securities | $ | 28,035 | $ | 82 | ($ 56 | ) | $ | 28,061 | |||||||||||
U.S. government obligations | 15,172 | 95 | (64 | ) | 15,203 | ||||||||||||||
Asset-backed securities | 6,015 | 6 | (16 | ) | 6,005 | ||||||||||||||
Municipal bonds | 9,949 | 57 | (31 | ) | 9,975 | ||||||||||||||
Corporate bonds | 1,350 | — | — | 1,350 | |||||||||||||||
Total | $ | 60,521 | $ | 240 | ($167 | ) | $ | 60,594 |
Original Cost | Fair Value | ||||
Debt securities due within: | |||||
One year | $ | 55,091 | $ | 55,062 | |
One to five years | 32,208 | 31,875 | |||
Five years or more | 15,990 | 15,883 | |||
Total | $ | 103,289 | $ | 102,820 |
Original Cost | Fair Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Debt securities due within: | ||||||||||
One year | $ | 20,504 | $ | 20,524 | ||||||
One to five years | 33,765 | 33,260 | ||||||||
Five years or more | 15,703 | 15,614 | ||||||||
Total | $ | 69,972 | $ | 69,398 |
2006 | 2005 | 2004 | ||||||||
Proceeds from sales | $ | 161,778 | $ | 88,955 | $ | 27,092 | ||||
Gross realized gains | $24 | $17 | $187 | |||||||
Gross realized losses | ($181 | ) | ($119 | ) | $0 |
Inventories
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Proceeds from sales | $88,955 | $27,092 | $35,885 | |||||||||||
Gross realized gains | $17 | $187 | $506 | |||||||||||
Gross realized losses | ($119) | $0 | ($45) |
2006 | 2005 | ||||
Raw materials | $ | 512 | $ | 512 | |
Finished products | 440 | 579 | |||
Total | $ | 952 | $ | 1,091 |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Raw materials | $ | 512 | $ | 634 | ||||||
Finished products | 579 | 406 | ||||||||
Total | $ | 1,091 | $ | 1,040 |
Useful life | |||||||||
2006 | 2005 | (in years) | |||||||
Laboratory fixtures and equipment | $ | 10,531 | $ | 9,550 | 3 to 10 | ||||
Building and improvements | 12,083 | 7,306 | 5 to 20 | ||||||
Building subject to sale agreement | — | 6,650 | 5 to 30 | ||||||
Office furniture and equipment | 3,022 | 2,718 | 3 to 10 | ||||||
Construction-in-progress | 94 | 2,456 | |||||||
Less accumulated depreciation | (14,044 | ) | (13,848 | ) | |||||
Property and equipment, net | $ | 11,686 | $ | 14,832 |
2005 | 2004 | Useful life (in years) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Laboratory fixtures and equipment | $ | 9,550 | $ | 9,954 | 3 to 5 | |||||||||
Building and improvements | 7,306 | 7,411 | 5 to 30 | |||||||||||
Building subject to sale agreement | 6,650 | 8,955 | 5 to 30 | |||||||||||
Office furniture and equipment | 2,718 | 3,152 | 3 to 5 | |||||||||||
Construction-in-progress | 2,456 | 127 | ||||||||||||
Less accumulated depreciation and amortization | (13,848 | ) | (13,861 | ) | ||||||||||
Property and equipment, net | $ | 14,832 | $ | 15,738 |
In January 2005, the Company made an equity investment of approximately $3.9 million in OctoPlus, a privately owned company based in the Netherlands active in the development of pharmaceutical formulations incorporating novel biodegradable polymers. In May 2006, we made an additional investment of approximately $160,000. As of September 30, 2006 our $4.1 million investment, which is accounted for under the cost method, represents an ownership interest of less than 20%. In May 2005, the Company invested $1.0 million in ThermopeutiX, an early stage company developing novel medical devices for the treatment of vascular and neurovascular diseases, including stroke. In addition to the investment, SurModics has licensed its hydrophilic and hemocompatible coating technologies to ThermopeutiX for use with its devices. The $1.0 million investment, which is accounted for under the cost method, represents an ownership interest of less than 20%.
SurModics has invested a total of $5.2 million in Novocell, Inc., a privately-held Irvine, California-based biotech firm that is developing a unique treatment for diabetes using coated islet cells, the cells that produce insulin in the human body. After reviewing updated guidance provided by FASB Staff Position 115-1 (“FSP 115-1”), The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, combined with Novocell valuation information gathered in conjunction with a prospective round of financing, the Company determined its investment in Novocell was impaired and that the impairment was other-than-temporary. During the second quarter of fiscal 2006, we recorded an impairment loss of approximately $4.7 million. The balance of our investment, $559,000, which is accounted for under the cost method, is included in other assets and represents an ownership interest of less than 5%.
In February 2004, the Company invested $2.1 million in InnoRx, Inc., an Alabama-based, early-stage company developing drug delivery devices and therapies for the ophthalmology market. SurModics made an additional investment of approximately $1.6 million in the first quarter of fiscal year 2005. OnIn January 18, 2005, SurModics acquired via a merger all of InnoRx’s assets by paying approximately $4.1 million in cash, issuing 600,064 shares of SurModics common stock to InnoRx stockholders and agreeing to issue up to an additional 600,064 shares if certain development and commercial milestones are met. OnIn July 1, 2005, the Company issued 60,002 shares of SurModics common stock to the shareholders of InnoRx upon the successful completion of the first milestone involving the InnoRx technology acquired in the purchase of InnoRx. In March 2006, the Company issued an additional 60,007 shares a result of completion of the second milestone. Upon the successful completion of the remaining development and commercial milestones involving InnoRx technology acquired in the transaction, the Company will be required to issue up to an aggregate 540,062approximately 480,060 additional shares of our common stock to the stockholders of InnoRx. As the transaction was accounted for as a purchase of assets, SurModics was required to determine the fair value of the assets acquired and the total consideration given. The assets of InnoRx we acquired consisted almost exclusively of in-process research and development assets. In the second fiscal quarter of 2005, we recorded a charge of $30.3 million to write-off the value of these in-process research and development assets. In connection with the purchase, the Company recorded an $8.1 million credit to additional paid-in capital to record the aggregate estimated value of the contingent payment obligations. Since the contingent payment obligations are recorded as additional paid-in capital, the obligations will not have any impact on future results of operations.
2006 | 2005 | ||||||
Abbott license | $ | 7,037 | $ | 7,037 | |||
Long-term portion of note receivable | 5,635 | — | |||||
Investment in OctoPlus | 4,095 | 3,935 | |||||
Investment in ThermopeutiX | 1,000 | 1,000 | |||||
Patents and other | 2,262 | 732 | |||||
Investment in Novocell | 559 | 5,210 | |||||
Less accumulated amortization of intangible assets | (3,609 | ) | (1,867 | ) | |||
Other assets, net | $ | 16,979 | $ | 16,047 |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Abbott license | $ | 7,037 | $ | 7,020 | ||||||
Investment in Novocell | 5,210 | 5,210 | ||||||||
Investment in InnoRx | — | 1,968 | ||||||||
Investment in OctoPlus | 3,935 | — | ||||||||
Investment in ThermopeutiX | 1,000 | — | ||||||||
Patents and other | 732 | 599 | ||||||||
Less accumulated amortization | (1,867 | ) | (184 | ) | ||||||
Other assets, net | $ | 16,047 | $ | 14,613 |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net income (loss) | ||||||||||||||
As reported | ($8,246 | ) | $ | 7,242 | $ | 13,936 | ||||||||
Fair value compensation expense, net of tax | (2,746 | ) | (1,742 | ) | (1,574 | ) | ||||||||
Pro forma | ($10,992 | ) | $ | 5,500 | $ | 12,362 | ||||||||
Basic net income (loss) per share: | ||||||||||||||
As reported | ($0.45 | ) | $ | 0.41 | $ | 0.80 | ||||||||
Fair value compensation expense, net of tax | (0.16 | ) | (0.10 | ) | (0.09 | ) | ||||||||
Pro forma | ($0.61 | ) | $ | 0.31 | $ | 0.71 | ||||||||
Diluted net income (loss) per share: | ||||||||||||||
As reported | ($0.45 | ) | $ | 0.41 | $ | 0.78 | ||||||||
Fair value compensation expense, net of tax | (0.16 | ) | (0.10 | ) | (0.09 | ) | ||||||||
Pro forma | ($0.61 | ) | $ | 0.31 | $ | 0.69 |
New Accounting Pronouncements
In December 2004,September 2006, the FASB issued SFAS 123(R), Share-Based Payment. The revision requires all entities to recognize compensation expense in an amount equal to theNo. 157, “Fair Value Measurements.” This statement establishes a consistent framework for measuring fair value of share-based payments granted to employees. The statement eliminates the alternative method of accounting for employee share-based payments previously available under APB Opinionand expands disclosures on fair value measurements. SFAS No. 25. The Statement157 is effective for the Company beginningstarting in the first quarter of fiscal year 2006.
As of September 30, 2006, approximately $18.7 million of total unrecognized compensation costs related to non-vested awards is expected to be recognized over a weighted average period of approximately 3.4 years.
Prior to adopting SFAS 123(R), the Company accounted for stock-based compensation under the intrinsic value method pursuant to Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company has applied the modified prospective method in adopting SFAS 123(R). Accordingly, periods prior to adoption have not been restated. The Company did not amend or alter outstanding stock-based awards in anticipation of adopting SFAS 123(R). The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to the years ended September 30(in thousands, except per share data):
2005 | 2004 | ||||||
Reported net income (loss) | ($ | 8,246 | ) | $ | 7,242 | ||
Restricted stock expense previously recorded, net of tax | 374 | 134 | |||||
Stock-based compensation determined under fair value based method, | |||||||
net of related tax effects | (3,120 | ) | (1,876 | ) | |||
Pro forma net income (loss) | ($ | 10,992 | ) | $ | 5,500 | ||
Income (loss) per common equivalent share: | |||||||
Basic - as reported | ($0.45 | ) | $0.41 | ||||
Diluted - as reported | ($0.45 | ) | $0.41 | ||||
Basic - pro forma | ($0.61 | ) | $0.31 | ||||
Diluted - pro forma | ($0.61 | ) | $0.31 |
F-10
The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options. The weighted average fair value of options granted during fiscal 2006, 2005 and 2004 there was approximately $233,000$16.58, $20.26, and $255,000, respectively, of employee contributions included in accrued liabilities in the accompanying balance sheets.
Number of | Weighted Average | |||||
shares | Exercise Price | |||||
Outstanding at September 30, 2005 | 1,529,935 | $ | 26.60 | |||
Granted | 317,900 | 36.87 | ||||
Exercised | (176,735 | ) | 16.52 | |||
Forfeited | (160,320 | ) | 28.95 | |||
Outstanding at September 30, 2006 | 1,510,780 | $ | 29.69 | |||
Exercisable at September 30, 2006 | 546,920 | $ | 25.99 |
Weighted Average | ||||||||||||||||||||
Shares | Remaining | Shares | ||||||||||||||||||
Outstanding at | Weighted Average | Contractual | Exercisable at | Weighted Average | ||||||||||||||||
Exercise Price Range | September 30, 2006 | Exercise Price | Life (in years) | September 30,2006 | Exercise Price | |||||||||||||||
$ | 2.50–$14.06 | 64,600 | $ | 6.57 | 2.20 | 64,600 | $ | 6.57 | ||||||||||||
$ | 20.64–$24.27 | 261,270 | 21.57 | 4.91 | 113,510 | 21.54 | ||||||||||||||
$ | 25.09–$29.89 | 617,330 | 28.77 | 4.58 | 249,890 | 27.90 | ||||||||||||||
$ | 30.13–$ 35.75 | 230,240 | 34.85 | 5.13 | 74,620 | 34.92 | ||||||||||||||
$ | 36.37–$48.85 | 337,340 | 38.55 | 6.27 | 44,300 | 39.88 | ||||||||||||||
1,510,780 | $ | 29.69 | 5.00 | 546,920 | $ | 25.99 |
Restricted Stock Awards
The Company has entered into restricted stock agreements with certain key employees, covering the issuance of Common Stock (“Restricted Stock”). Under SFAS 123(R), these shares are considered to be non-vested shares. The Restricted Stock will be released to the key employees if they are employed by the Company at the end of the vesting period. Compensation has been recognized for the estimated fair value of the 153,000 common shares and is being charged to income over the vesting term. Stock compensation expense recognized related to these awards totaled $879,000, $588,000 and $212,000 during fiscal 2006, 2005 and 2004, respectively.Exercise Price Range | Shares Outstanding at September 30, 2005 | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Shares Exercisable at September 30, 2005 | Weighted Average Exercise Price | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$2.50–$ 8.44 | 151,575 | $ | 7.00 | 1.68 | 151,575 | $ | 7.00 | |||||||||||||||
$10.25–$21.82 | 311,240 | 21.19 | 5.69 | 81,400 | 20.26 | |||||||||||||||||
$22.46–$25.09 | 117,000 | 24.95 | 2.58 | 103,368 | 25.07 | |||||||||||||||||
$27.00–$29.89 | 669,950 | 29.38 | 6.03 | 60,020 | 29.32 | |||||||||||||||||
$30.13–$53.00 | 280,170 | 37.24 | 5.42 | 72,260 | 36.02 | |||||||||||||||||
1,529,935 | $ | 26.60 | 5.16 | 468,623 | $ | 20.62 |
2005 | 2004 | 2003 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Options | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||||||||||
Outstanding, beginning of year | 1,147,563 | $ | 20.12 | 982,965 | $ | 19.57 | 964,215 | $ | 14.86 | ||||||||||||||||||
Granted | 698,100 | 31.38 | 352,700 | 21.54 | 241,100 | 30.01 | |||||||||||||||||||||
Exercised | (244,418 | ) | 9.58 | (62,052 | ) | 5.69 | (155,418 | ) | 6.30 | ||||||||||||||||||
Canceled | (71,310 | ) | 27.54 | (126,050 | ) | 26.90 | (66,932 | ) | 20.26 | ||||||||||||||||||
Outstanding, end of year | 1,529,935 | $ | 26.60 | 1,147,563 | $ | 20.12 | 982,965 | $ | 19.57 | ||||||||||||||||||
Exercisable, end of year | 468,623 | $ | 20.62 | 568,367 | $ | 14.52 | 505,025 | $ | 11.61 | ||||||||||||||||||
Weighted average fair value of options granted | $ | 20.26 | $ | 14.57 | $ | 20.69 |
Number of | Weighted Average | |||||
Shares | Grant Price | |||||
Balance at September 30, 2005 | 108,000 | $ | 30.15 | |||
Granted | 65,000 | 36.07 | ||||
Vested | (5,500 | ) | 35.10 | |||
Forfeited | (14,500 | ) | 33.24 | |||
Balance at September 30, 2006 | 153,000 | $ | 32.14 |
The Company has entered into Performance Share agreements with certain key employees, covering the issuance of Common Stock (“Performance Shares”). The Performance Shares will vest upon the achievement of all or a portion of certain performance objectives which must be achieved during the performance period. Compensation has been recognized for the estimated fair value of the 42,000 shares awarded in March 2006 that are estimated to vest during fiscal 2006. Fiscal 2006 stock compensation expense related to the Performance Share awards expected to vest totaled $764,000. No such expense was recorded in fiscal 2005 or 2004.
5.1999 Employee Stock Purchase Plan
Under the 1999 Employee Stock Purchase Plan (“Stock Purchase Plan”) the Company is authorized to issue up to 200,000 shares of Common Stock. All full-time and part-time employees can choose to have up to 10% of their annual compensation withheld to purchase the Company’s Common Stock at purchase prices defined within the provisions of the Stock Purchase Plan. As of September 30, 2006, there was approximately $283,000 of employee contributions included in accrued liabilities in the accompanying balance sheets. Stock compensation expense recognized related to Stock Purchase Plan totaled $162,000 during fiscal 2006. No such expense was recorded in fiscal 2005 or 2004.
4. Income Taxes
2006 | 2005 | 2004 | ||||||||
Current provision: | ||||||||||
Federal | $ | 14,701 | $ | 7,059 | $ | 8,697 | ||||
State and foreign | 1,501 | 371 | 1,179 | |||||||
Total current provision | 16,202 | 7,430 | 9,876 | |||||||
Deferred provision (benefit): | ||||||||||
Federal | (774 | ) | 4,592 | (4,827 | ) | |||||
State | (197 | ) | 574 | (639 | ) | |||||
Total deferred provision (benefit) | (971 | ) | 5,166 | (5,466 | ) | |||||
Total provision | $ | 15,231 | $ | 12,596 | $ | 4,410 |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current provision: | ||||||||||||||
Federal | $ | 7,059 | $ | 8,697 | $ | 6,524 | ||||||||
State and foreign | 371 | 1,179 | 1,032 | |||||||||||
Total current provision | 7,430 | 9,876 | 7,556 | |||||||||||
Deferred provision (benefit): | ||||||||||||||
Federal | 4,592 | (4,827 | ) | 981 | ||||||||||
State | 574 | (639 | ) | 26 | ||||||||||
Total deferred provision (benefit) | 5,166 | (5,466 | ) | 1,007 | ||||||||||
Total provision | $ | 12,596 | $ | 4,410 | $ | 8,563 |
The reconciliation of the difference between amounts calculated at the statutory federal tax rate and the Company’s effective tax rate was as follows (in thousands):
2006 | 2005 | 2004 | |||||||||
Amount at statutory federal income tax rate | $ | 12,440 | $ | 1,513 | $ | 4,146 | |||||
Change due to: | |||||||||||
State taxes | 720 | 496 | 351 | ||||||||
Other | (102 | ) | (10 | ) | (87 | ) | |||||
Stock Option Compensation | 365 | — | — | ||||||||
Valuation Allowance | 1,808 | — | — | ||||||||
Write-off of in-process R&D | — | 10,597 | — | ||||||||
Income tax provision | $ | 15,231 | $ | 12,596 | $ | 4,410 |
In fiscal 2006, the Company recorded a valuation allowance against the capital loss created by our impairment of the Novocell investment (see Note 2). The valuation allowance was recorded as the Company does not currently foresee future offsetting capital gains to offset this capital loss. As such, no tax benefit has been recorded in our statement of operations.
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount at statutory federal income tax rate | $ | 1,513 | $ | 4,146 | $ | 7,870 | ||||||||
Change due to: | ||||||||||||||
State taxes | 496 | 351 | 676 | |||||||||||
Other | (10 | ) | (87 | ) | 17 | |||||||||
Write-off of in-process R&D | 10,597 | — | — | |||||||||||
Income tax provision | $ | 12,596 | $ | 4,410 | $ | 8,563 |
2006 | 2005 | ||||||
Depreciable assets | $ | 2,192 | $ | 1,584 | |||
Deferred revenue | 552 | 611 | |||||
Accruals and reserves | 354 | 362 | |||||
Restricted stock amortization | 616 | 273 | |||||
Stock Options | 1,302 | — | |||||
Impaired Asset | 1,733 | — | |||||
Equity items | 176 | (33 | ) | ||||
Other | 201 | 424 | |||||
Valuation Allowance | (1,808 | ) | — | ||||
Total deferred tax asset | 5,318 | 3,221 | |||||
Less current deferred tax asset | (435 | ) | (353 | ) | |||
Noncurrent deferred tax asset | $ | 4,883 | $ | 2,868 |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Depreciable assets | $ | 1,584 | $ | 4,851 | ||||||
Deferred revenue | 611 | 625 | ||||||||
Accruals and reserves | 362 | 379 | ||||||||
Restricted stock amortization | 273 | 149 | ||||||||
Equity items | (33 | ) | (33 | ) | ||||||
Other | — | (13 | ) | |||||||
Net operating loss | 424 | — | ||||||||
Total deferred tax asset | 3,221 | 5,958 | ||||||||
Current deferred tax asset | 353 | 379 | ||||||||
Noncurrent deferred tax asset | $ | 2,868 | $ | 5,579 |
SurModics manages its business on the basis of the operating segments noted in the table below, which are comprised of the Company’s six business units. The three operating segments are aggregated into one reportable segment. The “Drug Delivery” operating segment contains the Drug Delivery business unit, which is responsible for technologies dedicated to site specific delivery of drugs, and the Ophthalmology division, which is dedicated to the advancement of treatments for eye diseases, such as age-related macular degeneration (AMD) and diabetic macular edema (DME), two of the leading causes of blindness. The “Hydrophilic and Other” operating segment consists of three business units: (1) Hydrophilic Technologies business unit, which focuses on enhancing medical devices with advanced lubricious coatings that facilitate their placement and maneuverability in the body; (2) Regenerative Technologies business unit, which is developing platforms intended to augment or replace tissue/organ function (e.g., cell encapsulation applications), or to modify medical devices to facilitate tissue/organ recovery through natural repair mechanisms (e.g., hemo/biocompatible coatings); and (3) Orthopedics business unit, which is committed to innovative solutions for orthopedics patients using proven SurModics technologies, and creating new technology solutions to existing patient care gaps in the orthopedics field. The “Diagnostics”“In Vitro” operating segment contains the In Vitro Technologies (formerly Diagnostics and Drug DiscoveryDiscovery) business unit, which includes our genomics slide technologies, our stabilization products for immunoassay diagnostics tests, our in vitro diagnostic format technology and the work being performed to develop synthetic cell culture products.
2006 | 2005 | 2004 | ||||||
Operating segment: | ||||||||
Drug Delivery | $ | 32,918 | $ | 29,678 | $ | 25,690 | ||
Hydrophilic and Other | 22,233 | 19,065 | 15,527 | |||||
In Vitro | 14,733 | 13,638 | 8,521 | |||||
Total Revenue | $ | 69,884 | $ | 62,381 | $ | 49,738 |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating segment: | ||||||||||||||
Drug Delivery | $ | 29,678 | $ | 25,690 | $ | 20,168 | ||||||||
Hydrophilic and Other | 19,065 | 15,527 | 12,380 | |||||||||||
Diagnostics | 13,638 | 8,521 | 10,684 | |||||||||||
Total Revenue | $ | 62,381 | $ | 49,738 | $ | 43,232 |
2006 | 2005 | 2004 | ||||||
Cordis Corporation | 47 | % | 46 | % | 52 | % | ||
Abbott Laboratories | 12 | % | 14 | % | 8 | % |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cordis Corporation | 46 | % | 52 | % | 48 | % | ||||||||
Abbott Laboratories | 14 | % | 8 | % | 10 | % | ||||||||
GE Healthcare (formerly Amersham plc) | 6 | % | 7 | % | 13 | % |
2006 | 2005 | 2004 | ||||||
Domestic | 84 | % | 85 | % | 79 | % | ||
Foreign | 16 | % | 15 | % | 21 | % |
8. Subsequent Events
In September 2006, the Board of Directors authorized the repurchase of $35 million and up to 1 million shares of the Company’s stock. In November 2006, the Company entered into a Rule 10b5-1 agreement and purchased $17.5 million of the $35 million in shares authorized at an average price of $32.87 per share.2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Domestic | 85 | % | 79 | % | 66 | % | ||||||||
Foreign | 15 | % | 21 | % | 34 | % |
In October 2006, our fiscal 2007, we made an additional investment of $1.9 million in OctoPlus, a company based in the Netherlands active in the development of pharmaceutical formulations incorporating novel biodegradable polymers, bringing our total investment to slightly more than $6.0 million, representing an ownership interest of approximately 9%.
9. Quarterly Financial Data (Unaudited)
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal Year 2005 | ||||||||||||||||||
Revenue | $ | 14,069 | $ | 15,705 | $ | 16,518 | $ | 16,090 | ||||||||||
Income (loss) from operations | 8,638 | (21,148 | ) | 9,148 | 6,346 | |||||||||||||
Net income (loss) | 5,682 | (24,371 | ) | 6,095 | 4,793 | |||||||||||||
Net income (loss) per share: | ||||||||||||||||||
Basic | 0.32 | (1.34 | ) | 0.33 | 0.26 | |||||||||||||
Diluted | 0.32 | (1.34 | ) | 0.32 | 0.25 | |||||||||||||
Fiscal Year 2004 | ||||||||||||||||||
Revenue | $ | 12,087 | $ | 12,738 | $ | 11,444 | $ | 13,469 | ||||||||||
Income (loss) from operations | 6,287 | 6,678 | (10,787 | ) | 8,295 | |||||||||||||
Net income (loss) | 4,111 | 4,305 | (6,551 | ) | 5,378 | |||||||||||||
Net income (loss) per share: | ||||||||||||||||||
Basic | 0.24 | 0.25 | (0.37 | ) | 0.31 | |||||||||||||
Diluted | 0.23 | 0.24 | (0.37 | ) | 0.30 | |||||||||||||
Fiscal Year 2003 | ||||||||||||||||||
Revenue | $ | 8,048 | $ | 9,742 | $ | 12,819 | $ | 12,623 | ||||||||||
Income from operations | 2,856 | 3,992 | 6,958 | 6,834 | ||||||||||||||
Net income | 2,171 | 2,750 | 4,572 | 4,443 | ||||||||||||||
Net income per share: | ||||||||||||||||||
Basic | 0.13 | 0.16 | 0.26 | 0.25 | ||||||||||||||
Diluted | 0.12 | 0.15 | 0.26 | 0.25 |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Fiscal 2006 | ||||||||||||||||
Revenue | $ | 16,465 | $ | 17,707 | $ | 18,139 | $ | 17,573 | ||||||||
Income from operations | 8,580 | 8,953 | 9,463 | 9,167 | ||||||||||||
Net income | 6,218 | 1,465 | 6,358 | 6,293 | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | 0.34 | 0.08 | 0.34 | 0.34 | ||||||||||||
Diluted | 0.33 | 0.08 | 0.34 | 0.34 | ||||||||||||
Fiscal 2005 | ||||||||||||||||
Revenue | $ | 14,069 | $ | 15,705 | $ | 16,518 | $ | 16,090 | ||||||||
Income (loss) from operations | 8,638 | (21,148 | ) | 9,148 | 6,346 | |||||||||||
Net income (loss) | 5,237 | (24,371 | ) | 6,095 | 4,793 | |||||||||||
Net income (loss) per share: | ||||||||||||||||
Basic | 0.30 | (1.34 | ) | 0.33 | 0.26 | |||||||||||
Diluted | 0.29 | (1.34 | ) | 0.32 | 0.25 | |||||||||||
Fiscal 2004 | ||||||||||||||||
Revenue | $ | 12,087 | $ | 12,738 | $ | 11,444 | $ | 13,469 | ||||||||
Income (loss) from operations | 6,287 | 6,678 | (10,787 | ) | 8,295 | |||||||||||
Net income (loss) | 4,111 | 4,305 | (6,551 | ) | 5,378 | |||||||||||
Net income (loss) per share: | ||||||||||||||||
Basic | 0.24 | 0.25 | (0.37 | ) | 0.31 | |||||||||||
Diluted | 0.23 | 0.24 | (0.37 | ) | 0.30 |
In the second quarter of fiscal 2005, we recorded a charge of $30.3 million to write-off the value of in-process research and development assets acquired in the purchase of InnoRx. In addition, fiscal year 2005 fourth quarter results include a $2.5 million impairment charge recorded against our Bloomington, Minnesota contract manufacturing facility.