QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading symbol | Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||
Emerging growth company |
Class | Outstanding as of October 2, 2019 | |
Common Stock, par value $.01 |
Page | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. |
Three Months Ended | ||||||||
Aug 31, 2019 | Aug 31, 2018 | |||||||
Net sales | $ | $ | ||||||
Cost of sales (exclusive of intangible amortization) | ||||||||
Gross profit | ||||||||
Operating expenses: | ||||||||
Research and development | ||||||||
Sales and marketing | ||||||||
General and administrative | ||||||||
Amortization of intangibles | ||||||||
Change in fair value of contingent consideration | ( | ) | ||||||
Acquisition, restructuring and other items, net | ||||||||
Total operating expenses | ||||||||
Operating loss | ( | ) | ( | ) | ||||
Other (expenses) income: | ||||||||
Interest expense, net | ( | ) | ( | ) | ||||
Other income (expense), net | ( | ) | ||||||
Total other expenses, net | ( | ) | ( | ) | ||||
Loss from continuing operations before income tax benefit | ( | ) | ( | ) | ||||
Income tax benefit | ( | ) | ( | ) | ||||
Net loss from continuing operations | ( | ) | ( | ) | ||||
Income from discontinued operations, net of income tax | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Loss per share - continuing operations | ||||||||
Basic | $ | ( | ) | $ | ( | ) | ||
Diluted | $ | ( | ) | $ | ( | ) | ||
Income per share - discontinued operations | ||||||||
Basic | $ | $ | ||||||
Diluted | $ | $ | ||||||
Loss per share | ||||||||
Basic | $ | ( | ) | $ | ( | ) | ||
Diluted | $ | ( | ) | $ | ( | ) | ||
Weighted average shares outstanding | ||||||||
Basic | ||||||||
Diluted |
Three Months Ended | ||||||||
Aug 31, 2019 | Aug 31, 2018 | |||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss, before tax: | ||||||||
Unrealized gain on marketable securities | ||||||||
Foreign currency translation | ( | ) | ( | ) | ||||
Other comprehensive loss, before tax | ( | ) | ( | ) | ||||
Income tax expense related to items of other comprehensive income | ||||||||
Other comprehensive loss, net of tax | ( | ) | ( | ) | ||||
Total comprehensive loss, net of tax | $ | ( | ) | $ | ( | ) |
Aug 31, 2019 | May 31, 2019 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable, net of allowances of $1,434 and $1,906 respectively | |||||||
Inventories | |||||||
Prepaid expenses and other | |||||||
Total current assets | |||||||
Property, plant and equipment, net | |||||||
Other assets | |||||||
Intangible assets, net | |||||||
Goodwill | |||||||
Total assets | $ | $ | |||||
Liabilities and stockholders' equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | $ | |||||
Accrued liabilities | |||||||
Current portion of long-term debt | |||||||
Current portion of contingent consideration | |||||||
Other current liabilities | |||||||
Total current liabilities | |||||||
Long-term debt, net of current portion | |||||||
Contingent consideration, net of current portion | |||||||
Deferred income taxes | |||||||
Other long-term liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 15) | |||||||
Stockholders' equity | |||||||
Preferred stock, par value $.01 per share, 5,000,000 shares authorized; no shares issued and outstanding | |||||||
Common stock, par value $.01 per share, 75,000,000 shares authorized; 38,359,875 and 37,984,382 shares issued and 37,989,875 and 37,614,382 shares outstanding at August 31, 2019 and May 31, 2019, respectively | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Treasury stock, 370,000 shares at August 31, 2019 and May 31, 2019, respectively | ( | ) | ( | ) | |||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total Stockholders’ Equity | |||||||
Total Liabilities and Stockholders' Equity | $ | $ |
Three Months Ended | |||||||
Aug 31, 2019 | Aug 31, 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | ( | ) | $ | ( | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Stock based compensation | |||||||
Change in fair value of contingent consideration | ( | ) | |||||
Deferred income taxes | ( | ) | ( | ) | |||
Change in accounts receivable allowances | ( | ) | ( | ) | |||
Fixed and intangible asset impairments and disposals | |||||||
Write-off of other assets | |||||||
Other | ( | ) | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | ( | ) | |||||
Inventories | ( | ) | ( | ) | |||
Prepaid expenses and other | ( | ) | ( | ) | |||
Accounts payable, accrued and other liabilities | ( | ) | ( | ) | |||
Net cash used in operating activities | ( | ) | ( | ) | |||
Cash flows from investing activities: | |||||||
Additions to property, plant and equipment | ( | ) | ( | ) | |||
Acquisition of intangibles | ( | ) | |||||
Cash paid for acquisitions | ( | ) | |||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Repayment of long-term debt | ( | ) | ( | ) | |||
Deferred financing costs on long-term debt | ( | ) | |||||
Payment of acquisition related contingent consideration | ( | ) | ( | ) | |||
Proceeds (outlays) from exercise of stock options and employee stock purchase plan | ( | ) | |||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | |||
Decrease in cash and cash equivalents | ( | ) | ( | ) | |||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ | |||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Accrual for capital expenditures incurred during the period | $ | $ |
Common Stock | Additional paid in capital | Retained earnings | Accumulated other comprehensive loss | Treasury Stock | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||
Balance at May 31, 2019 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||
Net loss | ( | ) | ( | ) | |||||||||||||||||||||||||
Exercise of stock options | |||||||||||||||||||||||||||||
Issuance/Cancellation of restricted stock units | ( | ) | ( | ) | |||||||||||||||||||||||||
Purchases of common stock under ESPP | |||||||||||||||||||||||||||||
Stock-based compensation | |||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | ( | ) | ( | ) | |||||||||||||||||||||||||
Balance at August 31, 2019 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ |
Common Stock | Additional paid in capital | Retained earnings (deficit) | Accumulated other comprehensive loss | Treasury Stock | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||
Balance at May 31, 2018 | 37,594,493 | $ | 370 | $ | 543,762 | $ | 5,129 | $ | (952 | ) | (370,000 | ) | $ | (5,714 | ) | $ | 542,595 | ||||||||||||
Net loss | (469 | ) | (469 | ) | |||||||||||||||||||||||||
Exercise of stock options | 71,336 | 1 | 607 | 608 | |||||||||||||||||||||||||
Issuance/Cancellation of restricted stock units | 149,446 | (460 | ) | (460 | ) | ||||||||||||||||||||||||
Issuance/Cancellation of performance share units | 5,235 | — | |||||||||||||||||||||||||||
Purchases of common stock under ESPP | 40,547 | 1 | 556 | 557 | |||||||||||||||||||||||||
Stock-based compensation | 2,150 | 2,150 | |||||||||||||||||||||||||||
Other comprehensive loss, net of tax | (92 | ) | (92 | ) | |||||||||||||||||||||||||
Balance at August 31, 2018 | 37,861,057 | $ | 372 | $ | 546,615 | $ | 4,660 | $ | (1,044 | ) | (370,000 | ) | $ | (5,714 | ) | $ | 544,889 |
(in thousands) | Final allocation | ||
Accounts receivable | $ | ||
Inventory | |||
Prepaid and other current assets | |||
Property, plant and equipment | |||
Intangible assets: | |||
RadiaDyne trademark | |||
OARtrac trademark | |||
RadiaDyne legacy product technology | |||
OARtrac product technology | |||
RadiaDyne customer relationships | |||
Goodwill | |||
Total assets acquired | $ | ||
Liabilities assumed | |||
Accounts payable | $ | ||
Accrued expenses | |||
Total liabilities assumed | $ | ||
Net assets acquired | $ |
(in thousands) | Final allocation | ||
Inventory | $ | ||
Property, plant and equipment | |||
Intangible assets: | |||
BioSentry trademark | |||
BioSentry product technology | |||
Customer relationships | |||
Goodwill | |||
Net assets acquired | $ |
Three Months Ended | |||
(in thousands) | Aug 31, 2018 | ||
Net sales | $ | ||
Cost of sales (exclusive of amortization) | |||
Gross profit | |||
Operating expenses | |||
Research and development | |||
Sales and marketing | |||
General and administrative | |||
Amortization of intangibles | |||
Total operating expenses | |||
Operating income | |||
Income from discontinued operations before income taxes | |||
Income tax expense | |||
Income from discontinued operations | $ |
Three Months Ended | |||
(in thousands) | Aug 31, 2018 | ||
Net cash provided by operating activities | $ | ||
Net cash provided by investing activities |
Three months ended August 31, 2019 | |||||||||||
(in thousands) | United States | International | Total | ||||||||
Net sales | |||||||||||
Vascular Interventions & Therapies | $ | $ | $ | ||||||||
Vascular Access | |||||||||||
Oncology | |||||||||||
Total | $ | $ | $ |
Three months ended August 31, 2018 | |||||||||||
(in thousands) | United States | International | Total | ||||||||
Net sales | |||||||||||
Vascular Interventions & Therapies | $ | $ | $ | ||||||||
Vascular Access | |||||||||||
Oncology | |||||||||||
Total | $ | $ | $ |
(in thousands) | Aug 31, 2019 | May 31, 2019 | |||||
Receivables | $ | $ | |||||
Contract assets | $ | $ | |||||
Contract liabilities | $ | $ |
(in thousands) | Aug 31, 2019 | May 31, 2019 | |||||
Raw materials | $ | $ | |||||
Work in process | |||||||
Finished goods | |||||||
Inventories | $ | $ |
Aug 31, 2019 | |||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||
Product technologies | $ | $ | ( | ) | $ | ||||||
Customer relationships | ( | ) | |||||||||
Trademarks | ( | ) | |||||||||
Licenses | ( | ) | |||||||||
$ | $ | ( | ) | $ |
May 31, 2019 | |||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||
Product technologies | $ | $ | ( | ) | $ | ||||||
Customer relationships | ( | ) | |||||||||
Trademarks | ( | ) | |||||||||
Licenses | ( | ) | |||||||||
$ | $ | ( | ) | $ |
(in thousands) | |||
Remainder of 2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
2025 and thereafter | |||
$ |
(in thousands) | Aug 31, 2019 | May 31, 2019 | |||||
Payroll and related expenses | $ | $ | |||||
Royalties | |||||||
Accrued severance | |||||||
Sales and franchise taxes | |||||||
Outside services | |||||||
Litigation matters | |||||||
Indemnification holdback | |||||||
Other | |||||||
$ | $ |
• | maximum leverage ratio of consolidated total indebtedness* to consolidated EBITDA* of not greater than |
• | fixed charge coverage ratio of consolidated EBITDA minus consolidated capital expenditures to consolidated interest expense paid or payable in cash plus scheduled principal payments in respect of indebtedness under the Credit Agreement of not less than |
Three Months Ended | |||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | |||
Basic | |||||
Effect of dilutive securities | |||||
Diluted | |||||
Securities excluded as their inclusion would be anti-dilutive |
Three Months Ended | |||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | |||||
Net sales | |||||||
Vascular Interventions & Therapies | $ | $ | |||||
Vascular Access | |||||||
Oncology | |||||||
Total | $ | $ |
Three Months Ended | |||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | |||||
Net sales | |||||||
United States | $ | $ | |||||
International | |||||||
Total | $ | $ |
• | Level 1 - Inputs to the valuation methodology are quoted market prices for identical assets or liabilities. |
• | Level 2 - Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs. |
• | Level 3 - Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk. |
Fair Value Measurements using inputs considered as: | Fair Value at August 31, 2019 | ||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | ||||||||||||
Financial Liabilities | |||||||||||||||
Contingent consideration for acquisition earn outs | $ | $ | $ | $ | |||||||||||
Total Financial Liabilities | $ | $ | $ | $ | |||||||||||
Fair Value Measurements using inputs considered as: | Fair Value at May 31, 2019 | ||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | ||||||||||||
Financial Liabilities | |||||||||||||||
Contingent consideration for acquisition earn outs | $ | $ | $ | $ | |||||||||||
Total Financial Liabilities | $ | $ | $ | $ |
Three Months Ended August 31, 2019 | |||
(in thousands) | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||
Balance, May 31, 2019 | $ | ||
Total gains or losses (realized/unrealized): | |||
Change in present value of contingent consideration (1) | ( | ) | |
Contingent consideration payments | ( | ) | |
Balance, August 31, 2019 | $ |
(in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range | |||||
Revenue based payments | $ | Discounted cash flow | Discount rate | 4% - 5% | |||||
Probability of payment | 66% - 100% | ||||||||
Projected fiscal year of payment | 2023 | ||||||||
Technical milestones | $ | Estimated probability | Estimated probability | ||||||
Projected year of payment | 2020 - 2022 | ||||||||
Total | $ |
(in thousands) | Balance Sheet Location | Aug 31, 2019 | |||
Assets | |||||
Operating lease ROU asset | Other assets | $ | |||
Liabilities | |||||
Current operating lease liabilities | Other current liabilities | ||||
Non-current operating lease liabilities | Other long-term liabilities | ||||
Total lease liabilities | $ |
Aug 31, 2019 | ||
Weighted average remaining term (in years) | ||
Weighted average discount rate | % |
(in thousands) | Aug 31, 2019 | ||
Remainder of 2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
2025 and thereafter | |||
Total lease payments | $ | ||
Less: Imputed Interest | |||
Total lease obligations | $ | ||
Less: Current portion of lease obligations | |||
Long-term lease obligations | $ |
(in thousands) | May 31, 2019 | ||
2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 and thereafter | |||
Total lease payments | $ |
Three Months Ended August 31, 2019 | |||
(in thousands) | Aug 31, 2019 | ||
Cash paid for amounts included in the measurement of lease liabilities | |||
Operating cash flows from operating leases | $ | ||
ROU assets obtained in exchange for lease liabilities | |||
Operating leases |
Three months ended | |||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | |||||
Legal (1) | $ | $ | |||||
Mergers and acquisitions (2) | |||||||
Transition service agreement (3) | ( | ) | |||||
Divestiture (4) | |||||||
Restructuring | |||||||
Other | |||||||
Total | $ | $ |
Three months ended August 31, 2019 | |||
(in thousands) | Foreign currency translation loss | ||
Balance at May 31, 2019 | $ | ( | ) |
Other comprehensive loss before reclassifications, net of tax | ( | ) | |
Amounts reclassified from accumulated other comprehensive loss | |||
Net other comprehensive loss | $ | ( | ) |
Balance at August 31, 2019 | $ | ( | ) |
Recently Issued Accounting Pronouncements - Adopted | |||
Standard | Description | Date Adopted | Effect on the Consolidated Financial Statements |
ASU 2016-02, Leases (Topic 842) | This ASU increases transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. | June 1, 2019 | Refer to Note 14, Leases, for the required disclosures related to adopting this standard. |
Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted | |||
Standard | Description | Effective Date | Effect on the Consolidated Financial Statements |
ASU 2018-13, Fair Value Measurement (Topic 820) | This ASU removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. | June 1, 2020 | The Company is currently assessing the impact of this standard on the consolidated financial statements. |
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | This ASU replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. | June 1, 2020 | The Company is currently assessing the impact of this standard on the consolidated financial statements. |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | Revenue increased by 3.3% to $66.0 million |
• | Gross margin increased 170 bps to 57.9% |
• | Operating loss decreased by $5.3 million to $0.8 million |
• | Loss per share from continuing operations improved by $0.12 to a loss of $0.03 |
Three months ended | |||||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | % Growth | ||||||
Net Sales by Global Business Unit | |||||||||
Vascular Interventions & Therapies | $ | 28,913 | $ | 28,598 | 1.1% | ||||
Vascular Access | 23,159 | 23,790 | (2.7)% | ||||||
Oncology | 13,970 | 11,555 | 20.9% | ||||||
Total | $ | 66,042 | $ | 63,943 | 3.3% | ||||
Net Sales by Geography | |||||||||
United States | $ | 52,937 | $ | 51,496 | 2.8% | ||||
International | 13,105 | 12,447 | 5.3% | ||||||
Total | $ | 66,042 | $ | 63,943 | 3.3% |
• | Total Vascular Interventions & Therapies sales increased $0.3 million primarily attributable to strong performance with the AngioVac business which grew $1.0 million year over year. The Company continues to see strong case volumes in AngioVac, which increased 38% from the prior year due to increased adoption of the Company's unique technology. These increases were partially offset by the decline in our Sclerotherapy business due to the termination of the Asclera distribution agreement. |
• | U.S. Vascular Interventions & Therapies sales decreased $0.2 million due to the decline in our Sclerotherapy business as a result of the termination of the Asclera distribution agreement and Core Peripheral products. This was partially offset by increased case volume in AngioVac. |
• | International Vascular Interventions & Therapies sales increased $0.5 million due to increased volume in Angiographic catheters primarily in EMEA (Europe, the Middle East and Africa). |
• | Total Vascular Access sales decreased $0.6 million due to decreases in PICCs and Ports partially offset by growth in the Dialysis business of $0.5 million and the launch of the BIIM ultrasound product in fiscal year 2019 which contributed $0.2 million in growth year over year. BioFlo product lines comprise 50% of overall Vascular Access sales, which is consistent with a year ago. |
• | U.S. Vascular Access sales decreased by $1.1 million due to competitive pressures in the PICC product lines and lower Port sales. This was partially offset by growth in Dialysis products which continue to gain traction in the marketplace. |
• | International Vascular Access sales increased by $0.5 million as the Company continues to expand its global reach of its Vascular Access product offerings. |
• | Total Oncology sales increased $2.4 million year over year primarily due to $1.7 million in sales of RadiaDyne products along with $1.0 million in sales of BioSentry products. This was partially offset by decreased sales of Radiofrequency Ablation. |
• | U.S. Oncology sales increased by $2.8 million, driven by RadiaDyne sales of $1.7 million and BioSentry sales of $0.9 million. This was partially offset by a decrease in RadioFrequency Ablation sales. |
• | International Oncology sales decreased by $0.4 million year over year as a result of decreased NanoKnife disposable sales of $0.6 million and decreased RadioFrequency and Microwave Ablation product sales of $0.2 million. This was partially offset by an increase in NanoKnife capital sales of $0.6 million. |
Three months ended | |||||||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | % Change | ||||||||
Gross profit | $ | 38,217 | $ | 35,953 | 6.3 | % | |||||
Gross profit % of sales | 57.9 | % | 56.2 | % | |||||||
Research and development | $ | 6,292 | $ | 7,374 | (14.7 | )% | |||||
% of sales | 9.5 | % | 11.5 | % | |||||||
Selling and marketing | $ | 19,380 | $ | 18,405 | 5.3 | % | |||||
% of sales | 29.3 | % | 28.8 | % | |||||||
General and administrative | $ | 8,453 | $ | 8,435 | 0.2 | % | |||||
% of sales | 12.8 | % | 13.2 | % |
• | Sales volume of BioSentry and RadiaDyne products contributed $2.2 million to gross profit. |
• | Sales volume and mix positively contributed $0.7 million year over year. |
• | Net productivity contributed $0.5 million of favorability. |
• | Currency and pricing headwinds negatively impacted gross margin by $0.5 million year over year, primarily driven by pricing. |
• | The termination of the Asclera distribution agreement negatively impacted gross margin by $0.6 million. |
• | Outside consultant spend decreased $0.5 million. |
• | Compensation and benefits decreased approximately $0.1 million due to decreased headcount as part of a process to streamline the R&D function. |
• | Other R&D expenses, including facilities, samples and project initiatives timing resulted in a decrease of $0.5 million. |
• | Compensation and benefits increase of approximately $0.7 million which is primarily attributed to increased headcount as a result of the BioSentry and RadiaDyne acquisitions. |
• | Other sales and marketing expenses increased $0.3 million. |
• | Compensation and benefits decrease of approximately $0.6 million primarily as a result of the timing of fully vested stock based compensation awards and lower high cost benefit claims. |
• | Legal and professional fees relating to ongoing litigation that is within the normal course of business increased $0.3 million. |
• | Outside consultant spend increased $0.2 million. |
Three months ended | ||||||||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | $ Change | |||||||||
Amortization of intangibles | $ | 3,868 | $ | 3,434 | $ | 434 | ||||||
Change in fair value of contingent consideration | $ | (448 | ) | $ | 12 | $ | (460 | ) | ||||
Acquisition, restructuring and other items, net | $ | 1,500 | $ | 4,422 | $ | (2,922 | ) | |||||
Other expense | $ | (563 | ) | $ | (803 | ) | $ | 240 |
• | The change in amortization expense from the prior year is due to intangible asset additions as a result of the BioSentry and RadiaDyne acquisitions. The BioSentry acquisition increased intangible assets by $26.0 million and resulted in additional amortization expense of $0.5 million. The RadiaDyne acquisition increased intangible assets by $25.6 million and resulted in additional amortization expense of $0.6 million. This was partially offset by the write-off of the Merz intangible in the fourth quarter of fiscal year 2019 and other intangibles that became fully amortized. |
• | The change from the prior year is due to the gain of $0.6 million that was recorded on the technical milestones and revenue milestones for the RadiaDyne contingent consideration. This gain was partially offset by normal amortization |
• | M&A expense of $0.2 million was incurred in the first quarter of fiscal year 2020 compared to $1.3 million in the prior year. |
• | Legal expense, related to litigation that is outside of the normal course of business, of $1.1 million was recorded in the first quarter of fiscal year 2020, partially offset by the Biolitec bankruptcy settlement of $0.4 million, compared to $2.9 million in the prior year. |
• | In the first quarter of fiscal year 2020, the Company incurred $0.8 million of expense to move manufacturing facilities as a result of the sale of the Fluid Management business. |
• | As part of the sale of the Fluid Management business, the Company entered into a transition services agreement with Medline for certain legal, human resource, tax, accounting and information technology services from the Company for a period not to exceed 24 months. As a result of the transition services agreement, the Company invoiced Medline $0.7 million in the first quarter of fiscal year 2020. |
• | Other expenses of $0.5 million in the first quarter of fiscal year 2020 consists of expenses to move the manufacturing of BioSentry products and severance associated with the sale of the Fluid Management business. |
• | The decrease in other expenses from the prior year of $0.2 million is due to decreased interest expense of $0.9 million as the Credit Facility was paid down in full at the beginning of the first quarter of fiscal year 2020. In addition to the decrease in interest expense, interest income increased $0.2 million from the prior year as a result of increased cash due to proceeds from the sale of the Fluid Management business. These increases are partially offset by the write-off of the deferred financing fees that were associated with the old Credit Facility of $0.6 million. Other expenses also include foreign currency fluctuations which increased by $0.3 million. |
Three months ended | ||||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | ||||||
Income tax expense (benefit) | $ | (0.1 | ) | $ | (1.2 | ) | ||
Effective tax rate including discrete items | 8.3 | % | 17.7 | % |
Three Months Ended | |||||||
(in thousands) | Aug 31, 2019 | Aug 31, 2018 | |||||
Cash used in: | |||||||
Operating activities | $ | (6,534 | ) | $ | (8,873 | ) | |
Investing activities | (1,541 | ) | (37,682 | ) | |||
Financing activities | (135,749 | ) | (2,645 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (168 | ) | (134 | ) | |||
Net change in cash and cash equivalents | $ | (143,992 | ) | $ | (49,334 | ) |
• | Net loss of $1.3 million plus the non-cash items, primarily driven by depreciation and amortization, contributed to cash used in operations of $6.5 million. |
• | Working capital was negatively impacted by increased inventory on hand of $5.2 million and decreased accounts payable and accrued liabilities of $17.6 million. Accounts receivable had a favorable impact on working capital as a result of the sale of the Fluid Management business. |
• | Net loss was driven by higher operating expenses in research and development, selling and marketing and general administrative as well as costs related to our acquisition and restructuring activities. Partially offsetting the higher operating expenses was an increase in gross profit. |
• | The Company continues to focus on optimizing its cash conversion cycle. In the first quarter of fiscal year 2019 working capital was negatively impacted by increased inventory on hand of $0.8 million. Additionally, days sales outstanding ("DSO") increased by two days for a $0.6 million impact. Also, the $12.5 million DOJ settlement payment that was made during the first quarter of fiscal year 2019 negatively impacted working capital from accounts payable and accrued liabilities. |
• | $1.4 million in fixed asset additions versus $0.7 million in the prior year. |
• | $37.0 million cash payment in the prior year to acquire the BioSentry product from SSC as described in Note 2 to the financial statements. |
• | $132.5 million repayment of long-term debt in conjunction with the new Credit Agreement that was entered into at the beginning of the first quarter of fiscal year 2020. Refer to Note 8 of the financial statements. |
• | $1.3 million repayment on the Term Loan in the prior year. This was consistent with the required amortization payment on the Term Loan. |
• | $1.3 million of outlays from stock option and ESPP activity versus $0.7 million in proceeds in the prior year. |
• | $1.2 million payment on earn-out liabilities in the current year compared to $2.1 million in the prior year. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 4. | Controls and Procedures. |
Item 1. | Legal Proceedings. |
Item 1A. | Risk Factors. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Issuer Purchases of Equity Securities | |||||||||||||
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs (1) | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs (1) | ||||||||||
June 1, 2019 - June 30, 2019 | — | $ | — | — | $ | — | |||||||
July 1, 2019 - July 31, 2019 | 10,496 | $ | 20.99 | — | $ | — | |||||||
August 1, 2019 - August 31, 2019 | 103,309 | $ | 19.39 | — | $ | — | |||||||
Total | 113,805 | $ | 19.54 | — | — |
(1) | These amounts are not applicable as the Company currently does not have a share repurchase program in effect. |
Item 3. | Defaults on Senior Securities. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Other Information. |
Item 6. | Exhibits. |
No. | Description | ||
21 | |||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101.INS | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document | ||
101.SCH | XBRL Schema Document | ||
101.CAL | XBRL Calculation Linkbase Documents | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Labels Linkbase Documents | ||
101.PRE | XBRL Presentation Linkbase Documents |
ANGIODYNAMICS, INC. | ||||
(Registrant) | ||||
Date: | October 4, 2019 | / S / JAMES C. CLEMMER | ||
James C. Clemmer, President, Chief Executive Officer (Principal Executive Officer) | ||||
Date: | October 4, 2019 | / S / MICHAEL C. GREINER | ||
Michael C. Greiner, Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |
Subsidiary | State of Incorporation or Organization | |
Vortex Medical | Delaware | |
NM Holding Company, Inc. | Delaware | |
Navilyst Medical Holdings, Inc. | Delaware | |
Navilyst Medical, Inc. | Delaware | |
AngioDynamics UK Limited | United Kingdom | |
AngioDynamics Netherlands B. V. | Netherlands | |
RITA Medical Systems, LLC | Delaware | |
AngioDynamics France, SARL | France | |
AngioDynamics Canada Inc. | British Columbia | |
AngioDynamics Medical Brasil Participacoes Ltda. | Sao Paulo | |
RadiaDyne LLC | Texas | |
Eximo Medical, Ltd. | Israel |
1. | I have reviewed this quarterly report on Form 10-Q of AngioDynamics, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this quarterly report on Form 10-Q of AngioDynamics, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | the quarterly report on Form 10-Q of the Company for the fiscal quarter ended August 31, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and | |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/ s / James C. Clemmer | |
James C. Clemmer, President, Chief Executive Officer |
1. | the quarterly report on Form 10-Q of the Company for the fiscal quarter ended August 31, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and | |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/ s / Michael C. Greiner | |
Michael C. Greiner, Executive Vice President and Chief Financial Officer |
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end
Acquisition, Restructuring and Other Items, Net - Summary (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 31, 2019 |
Aug. 31, 2018 |
|
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | $ 1,500 | $ 4,422 |
Legal | ||
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | 669 | 2,880 |
Mergers and acquisitions | ||
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | 246 | 1,318 |
Transition service agreement | ||
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | (737) | 0 |
Divestiture | ||
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | 758 | 0 |
Restructuring | ||
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | 26 | 130 |
Other | ||
Restructuring Cost and Reserve [Line Items] | ||
Acquisition, restructuring and other items, net | $ 538 | $ 94 |
Consolidated Financial Statements |
3 Months Ended |
---|---|
Aug. 31, 2019 | |
Accounting Policies [Abstract] | |
Consolidated Financial Statements | CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Balance Sheet as of August 31, 2019, the Consolidated Statements of Operations, Consolidated Statements of Comprehensive Loss, Consolidated Statements of Cash Flows, and the Consolidated Statements of Stockholders’ Equity for the three months ended August 31, 2019 and 2018, have been prepared by us and are unaudited. The Consolidated Balance Sheet as of May 31, 2019 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to state fairly the financial position, changes in stockholders’ equity and comprehensive income, results of operations and cash flows as of and for the period ended August 31, 2019 (and for all periods presented) have been made. The unaudited interim consolidated financial statements for the three months ended August 31, 2019 and 2018 include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries, collectively, the “Company”. All intercompany balances and transactions have been eliminated. On May 31, 2019, the Company completed the sale of the Fluid Management business and all of the assets used primarily in connection with the Fluid Management business (Note 3). As the disposal of this business represents a strategic shift with a major effect on the Company's operations, for all periods presented in our Consolidated Statements of Operations and Comprehensive Loss, all sales, costs, expenses, gains and income taxes attributable to Fluid Management have been reported under the captions, “Income from Discontinued Operations, Net of Income Tax.” Cash flows used in or provided by Fluid Management have been reported in the Consolidated Statements of Cash Flows under operating and investing activities.
|
Accrued Liabilities - Summary of Accrued Liabilities (Detail) - USD ($) $ in Thousands |
Aug. 31, 2019 |
May 31, 2019 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Payroll and related expenses | $ 5,970 | $ 14,987 |
Royalties | 1,439 | 2,088 |
Accrued severance | 616 | 504 |
Sales and franchise taxes | 3,417 | 807 |
Outside services | 1,781 | 3,514 |
Litigation matters | 0 | 2,700 |
Indemnification holdback | 4,866 | 4,807 |
Other | 4,604 | 8,931 |
Total | $ 22,693 | $ 38,338 |
Earnings Per Share - Reconciliation of Basic to Diluted Weighted-Average Shares Outstanding (Detail) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Aug. 31, 2019 |
Aug. 31, 2018 |
|
Earnings Per Share [Abstract] | ||
Basic (shares) | 37,783 | 37,323 |
Effect of dilutive securities (shares) | 0 | 0 |
Diluted (shares) | 37,783 | 37,323 |
Securities excluded as their inclusion would be anti-dilutive (shares) | 2,503 | 2,309 |
Fair Value (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Assets and Liabilities Measured on a Recurring Basis | The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis as of August 31, 2019 and May 31, 2019:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements Using Significant Unobservable Inputs | The table below presents the changes in fair value components of Level 3 instruments in the three months ended August 31, 2019: (1) Change in the fair value of contingent consideration is included in earnings and comprised of changes in estimated earn out payments based on projections of Company performance and amortization of the present value discount.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Showing the Recurring Fair Value Measurements of the Contingent Consideration Liability | The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of August 31, 2019:
|
Goodwill and Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Intangible assets consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Amortization Expense | Expected future amortization expense related to the intangible assets is as follows:
|
Segment and Geographic Information |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Information | SEGMENT AND GEOGRAPHIC INFORMATION The Company considers the business to be a single operating segment engaged in the development, manufacture and sale of medical devices for vascular access, peripheral vascular disease and oncology on a global basis. The Company's chief operating decision maker, the President and Chief Executive Officer (CEO), evaluates the various global product portfolios on a net sales basis. Executives reporting to the CEO include those responsible for commercial operations, manufacturing operations, regulatory and quality and certain corporate functions. The CEO evaluates profitability, investment and cash flow metrics on a consolidated worldwide basis due to shared infrastructure and resources. The table below summarizes net sales by Global Business Unit:
The table below presents net sales by geographic area based on external customer location:
|
Revenue from Contracts with Customers |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contracts with Customers | REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue Recognition Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company has one primary revenue stream which is the sales of its products. Disaggregation of Revenue The following tables summarize net product revenue by Global Business Unit ("GBU") and geography for the three months ended August 31, 2019 and 2018:
Net Product Revenue The Company's products consist of a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. The Company's devices are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be implanted for short or long term use. The Company sells its products to its distribution partners and to end users, such as interventional radiologists, interventional cardiologists, vascular surgeons, urologists, interventional and surgical oncologists and critical care nurses. Contracts and Performance Obligations The Company contracts with its customers based on customer purchase orders, which in many cases are governed by master purchasing agreements. The Company’s contracts with customers are generally for product only, and do not include other performance obligations such as services or other material rights. As part of its assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. Transaction Price and Allocation to Performance Obligations Transaction prices of products are typically based on contracted rates. Product revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method. As such, revenue is recorded net of rebates, returns and other deductions. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products underlying each performance obligation. The Company has standard pricing for its products and determines standalone selling prices based on the price at which the performance obligation is sold separately. Revenue Recognition Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which occurs at a point in time, and may be upon shipment from the Company’s manufacturing site or delivery to the customer’s named location, based on the contractual shipping terms of a contract. In determining whether control has transferred, the Company considers if there is a present right to payment from the customer and when physical possession, legal title and risks and rewards of ownership have transferred to the customer. The Company typically invoices customers upon satisfaction of identified performance obligations. As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue. Variable Consideration Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established for discounts, returns, rebates and allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a current liability. Rebates and Allowances: The Company provides certain customers with rebates and allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes a liability for such amounts, which is included in accrued expenses in the accompanying Consolidated Balance Sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes and administrative fees the Company is required to pay to group purchasing organizations. Product Returns: The Company generally offers customers a limited right of return. Product returns after 30 days must be pre-approved by the Company and customers may be subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and have at least twelve months remaining prior to its expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls. During the three months ended August 31, 2019, such product returns were not material. Contract Balances with Customers A receivable is recognized in the period the Company ships the product. Payment terms on invoiced amounts are based on contractual terms with each customer and generally coincide with revenue recognition. Accordingly, the Company does not have any contract assets associated with the future right to invoice its customers. In some cases, if control of the product has not yet transferred to the customer or the timing of the payments made by the customer precedes the Company’s fulfillment of the performance obligation, the Company recognizes a contract liability that is included in deferred revenue in the accompanying Consolidated Balance Sheets. The following table presents changes in the Company’s receivables, contract assets and contract liabilities with customers:
During the three months ended August 31, 2019, the Company recognized $0.2 million in revenue that was included in contract liabilities as of the beginning of the period. This was offset by additions to contract liabilities of $0.1 million. Costs to Obtain or Fulfill a Customer Contract Under ASC 606, the Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company’s sales incentive compensation plans qualify for capitalization since these plans are directly related to sales achieved during a period of time. However, the Company has elected the practical expedient under ASC 340-40-25-4 to expense the costs as they are incurred within selling and marketing expenses since the amortization period is less than one year. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs, associated with the distribution of finished products to customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer. Amounts charged to customers for shipping are recorded in net sales.
|
Long Term Debt |
3 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Long Term Debt | LONG TERM DEBT On June 3, 2019 and in connection with the completion of the Fluid Management divestiture, the Company repaid all amounts outstanding under its existing Credit Agreement and entered into a new Credit Agreement with the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Bank of America, N.A. and KeyBank National Association, as co-syndication agents. The Credit Agreement provides for a $125.0 million secured revolving credit facility (the “Revolving Facility”), which includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $75.0 million. The proceeds may be used to refinance certain existing indebtedness of the Company and its subsidiaries, to finance the working capital needs, and for general corporate purposes (including permitted acquisitions), of the Company and its subsidiaries. The Credit Agreement has a five year maturity. Interest on the facility will be based, at the Company’s option, on a base rate of LIBOR plus an applicable margin tied to the Company’s total leverage ratio and having ranges between 0.25% and 0.75% for base rate loans and between 1.25% and 1.75% for LIBOR loans. After default, the interest rate may be increased by 2.0%. The facility will also carry a commitment fee of 0.20% to 0.25% per annum on the unused portion. The Company's obligations under the Revolving Facility are unconditionally guaranteed, jointly and severally, by the Company's material direct and indirect domestic subsidiaries (the “Guarantors”). All obligations of the Company and the Guarantors under the Revolving Facility are secured by first priority security interests in substantially all of the assets of the Company and the Guarantors. The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, two quarterly financial covenants as follows:
* The definitions of consolidated total indebtedness and consolidated EBITDA are maintained in the credit agreement included as an exhibit to Form 8-k filed on June 6, 2019. The Company was in compliance with the Credit Agreement covenants as of August 31, 2019. As of August 31, 2019, there was no outstanding balance on the Revolving Facility. As of May 31, 2019 the carrying value of long-term debt approximates its fair market value.
|
Acquisition, Restructuring and Other Items, Net |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition, Restructuring and Other Items, Net | ACQUISITION, RESTRUCTURING, AND OTHER ITEMS, NET Acquisition, Restructuring and Other Items For the three months ended August 31, 2019 and 2018 acquisition, restructuring and other items, net consisted of:
(1) Legal expenses related to litigation that is outside the normal course of business. (2) Mergers and acquisitions expenses related to investment banking, legal and due diligence. (3) Transition services agreement that was entered into as a result of the sale of the Fluid Management business. (4) Divestiture expenses incurred to transition manufacturing from Glens Falls, NY to Queensbury, NY. Included in the $0.7 million in legal for the three months ended August 31, 2019 is a $0.4 million settlement received for the Biolitec bankruptcy litigation. The settlement received offsets legal expenses paid related to the settlement proceedings. Restructuring The Company evaluates its performance and looks for opportunities to improve the overall operations of the Company on an ongoing basis. As a result of this evaluation, certain restructuring initiatives are taken to enhance the Company’s overall operations. Operational Consolidation On February 1, 2017, the Company announced to employees an operational consolidation plan (the “plan”) to consolidate its manufacturing facilities in Manchester, GA and Denmead, UK into the Glens Falls and Queensbury, NY facilities. This plan will streamline and optimize the manufacturing functions into one centralized location increasing the utilization of the Glens Falls and Queensbury facilities, optimizing inventory and reducing cost of goods sold through savings in overhead expenses and direct labor. The restructuring activities associated with the plan were completed in the fourth quarter of fiscal year 2018 with immaterial regulatory filing costs to be incurred. The Company recorded restructuring charges related to the plan during the three months ended August 31, 2019 and 2018 of less than $0.1 million and $0.1 million, respectively. Total restructuring charges recorded to date are $6.3 million. The Company’s remaining restructuring liability is comprised of regulatory expenses which are expected to be paid in the next twelve months and are included in "accrued liabilities" on the Consolidated Balance Sheet.
|
Recently Issued Accounting Pronouncements (Policies) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contracts with Customers | Revenue Recognition Revenue Recognition Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which occurs at a point in time, and may be upon shipment from the Company’s manufacturing site or delivery to the customer’s named location, based on the contractual shipping terms of a contract. In determining whether control has transferred, the Company considers if there is a present right to payment from the customer and when physical possession, legal title and risks and rewards of ownership have transferred to the customer. The Company typically invoices customers upon satisfaction of identified performance obligations. As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue. Variable Consideration Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established for discounts, returns, rebates and allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a current liability. Rebates and Allowances: The Company provides certain customers with rebates and allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes a liability for such amounts, which is included in accrued expenses in the accompanying Consolidated Balance Sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes and administrative fees the Company is required to pay to group purchasing organizations. Product Returns: The Company generally offers customers a limited right of return. Product returns after 30 days must be pre-approved by the Company and customers may be subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and have at least twelve months remaining prior to its expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls.Costs to Obtain or Fulfill a Customer Contract Under ASC 606, the Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company’s sales incentive compensation plans qualify for capitalization since these plans are directly related to sales achieved during a period of time. However, the Company has elected the practical expedient under ASC 340-40-25-4 to expense the costs as they are incurred within selling and marketing expenses since the amortization period is less than one year. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs, associated with the distribution of finished products to customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer. Amounts charged to customers for shipping are recorded in net sales.
|
||||||||||||||||||||||||||||||||||||||||||||
Recently Issued Accounting Pronouncements | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The following table provides a description of recent accounting pronouncements that may have a material effect on the Company's consolidated financial statements:
|
Commitments and Coontingencies - Additional Information (Detail) |
10 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Mar. 07, 2019
patent
|
Mar. 29, 2016
claim
|
Mar. 24, 2016
claim
|
Mar. 11, 2016
claim
|
Jun. 01, 2015
motion
|
Jan. 11, 2012
Petition
reexamination_appeal
claim
|
Jan. 31, 2017
reexamination_appeal
|
Aug. 31, 2019
claim
|
|
C.R. Bard, Inc. | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of petitions filed for reexamination of patents | Petition | 3 | |||||||
The Utah Action | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of claims dismissed | 20 | 8 | 6 | 40 | ||||
Number of reexaminations | reexamination_appeal | 3 | |||||||
Number of pending claims | 10 | 10 | 41 | |||||
Number of claims reversed | 2 | 4 | ||||||
The Utah Action | C.R. Bard, Inc. | Pending Litigation | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of reexaminations | reexamination_appeal | 3 | |||||||
The Delaware Action | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of patents allegedly infringed upon | 3 | 2 | ||||||
Construction Issues | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of pending claims | 2 |
Fair Value - Fair Value Measurements Using Significant Unobservable Inputs (Detail) $ in Thousands |
3 Months Ended |
---|---|
Aug. 31, 2019
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Financial liabilities, begining balance | $ 13,486 |
Change in present value of contingent consideration | (448) |
Financial liabilities, ending balance | 11,830 |
Clinical Devices Bv | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Contingent consideration payments | $ 1,208 |
Leases - Supplemental Balance Sheet Information (Details) $ in Thousands |
Aug. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Operating lease ROU asset | $ 5,104 |
Less: Current portion of lease obligations | 1,606 |
Long-term lease obligations | 3,489 |
Total lease obligations | $ 5,095 |
Weighted average remaining term (in years) | 3 years 8 months 12 days |
Weighted average discount rate (percent) | 4.30% |
Revenue from Contracts with Customers - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Aug. 31, 2019
USD ($)
| |
Disaggregation of Revenue [Line Items] | |
Days after purchase after which pre-approval is required for product return | 30 days |
Restocking charge (as percent) | 20.00% |
Minimum remaining period prior to product expiration | 12 months |
Revenue recognized from contract liability balances in respective periods | $ 0.2 |
Additions to contract liabilities | $ 0.1 |
Minimum | |
Disaggregation of Revenue [Line Items] | |
Payment term | 30 days |
Maximum | |
Disaggregation of Revenue [Line Items] | |
Payment term | 90 days |
Commitments and Contingencies |
3 Months Ended |
---|---|
Aug. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company is involved in various legal proceedings, including commercial, intellectual property, product liability, and regulatory matters of a nature considered normal for its business. The Company accrues for amounts related to these matters if it is probable that a liability has been incurred, and an amount can be reasonably estimated. The Company discloses such matters when there is at least a reasonable possibility that a material loss may have been incurred. However, the Company cannot predict the outcome of any litigation or the potential for future litigation. C.R. Bard, Inc. v. AngioDynamics, Inc. On January 11, 2012, C.R. Bard, Inc. (“Bard”) filed a suit in the United States District Court of Utah claiming certain of the Company's implantable port products infringe on three U.S. patents held by Bard (the "Utah Action"). Bard’s complaint sought unspecified damages and other relief. The Company filed petitions for reexamination in the US Patent and Trademark Office ("USPTO") seeking to invalidate all three patents asserted by Bard in the litigation. The Company's petitions were granted and 40 of Bard's 41 patent claims were rejected and, following further proceedings, the Patent Office issued a Final Rejection of all 40 claims subject to reexamination. Thereafter, Bard filed appeals to the USPTO Board of Appeals and Interferences for all three reexaminations which were decided as follows: In one (issued on March 11, 2016 for US Patent No. 7,785,302), the rejections of six of the ten claims under reexamination were affirmed, but were reversed on four of the ten claims. In the second (issued on March 24, 2016 for U.S. Patent No. 7,959,615), the rejections of eight of the ten claims under reexamination were affirmed but the rejections of the other two of the ten claims were reversed. In the third (issued on March 29 for U.S. Patent No. 7,947,022) the rejections of all twenty claims under reexamination were affirmed. Thereafter, Bard sought Rehearing in all three appeals and the Company sought Rehearing in the ‘302 and ‘615 appeals. The PTO denied all three Rehearing Requests, but modified its characterization of one prior art reference for the ‘302 and ‘022 decisions. Bard filed appeals to the Federal Circuit Court of Appeals in all three reexams and the Company filed Cross-Appeals for the ‘302 and the ‘615 reexams and completed briefing. Medcomp also filed an Amicus Brief in support of the Company on November 22, 2017. An oral hearing was held on September 5, 2018 and the Court rendered its decision on September 28, 2018, affirming that claims 1-5 and 10 of the ‘615 patent were invalid, but that claims 6-7 of the 615 patent and 1-4 of the 302 patent were valid over the prior art references considered in the Reexamination proceedings. The Federal Circuit also reversed the PTAB’s claim construction ruling and remanded for consideration of obviousness for the remaining claims under the new claim construction ruling and for further findings with respect to whether one of the asserted references qualified as a printed publication. On January 28, 2019, on remand, the USPTO reversed the rejections of the ‘302 claims 1-10, ‘022 claims 1-20 and ‘615 claims 6-9. The USPTO has since issued Inter Partes Reexamination Certificates for the ‘302 Patent (confirming validity of claims 1-10) on June 10, 2019, and for the ‘022 patent (confirming validity of claims 1-20) on July 2, 2019, and for the ‘615 patent on August 26, 2019. The Company has since filed a Motion to Unstay the Utah Case; that motion is fully briefed and awaiting decision by the Utah Court. Meanwhile, on July 12, 2017, Bard assigned the asserted patents to Bard Peripheral Vascular, Inc. (“BPV”) which was added as Co-Appellant before the Federal Circuit and as a co-Plaintiff in the Utah action. The Company believes these claims are without merit and intends to defend them vigorously. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable. On March 10, 2015, Bard and BPV filed suit in the United States District Court for the District of Delaware (the “Delaware Action") claiming certain of the Company's implantable port products infringe on three other U.S. patents held by Bard, which are different from those asserted in the Utah action. Bard's complaint seeks unspecified damages and other relief. On June 1, 2015, the Company filed two motions in response to Bard’s Complaint - one sought transfer to the District of Utah where the Utah Action is currently pending, and the other sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter under Section 101 of the Patent Statute and in light of recent authority from the U. S. Supreme Court. On January 12, 2016, the Court issued a decision denying both motions. A Markman hearing was held on March 10, 2017 and the Court issued its Claim Construction Order on May 19, 2017. On May 19, 2017, Bard served its Final Infringement Contentions and on June 2, 2017, the Company served its Final Invalidity Contentions. On October 20, 2017, the scheduling order for the case was amended to, among other things, set a trial date commencing July 23, 2018. The parties completed Expert Discovery in January 2018 and completed briefing on their respective case dispositive motions on April 27, 2018. On June 26, 2018, the Court denied all case dispositive motions, ruling that issues of material fact remained in dispute. On July 9, 2018, the Court continued the trial until March 2019. On January 9, 2019 the Court held a further claim construction hearing to resolve two outstanding claim construction issues prior to trial. A Report and Recommendation was issued on February 11, 2019 and entered by the Court on February 28, 2019. Jury selection was held on Friday March 1, 2019 and trial began on March 4, 2019. On day four of the jury trial, at the close of C.R. Bard’s case (Plaintiff), Judge Bataillon granted judgment as a matter of law under rule 50(a) in favor of AngioDynamics, dismissing Bard’s suit. On April 5, 2019, Bard filed a precautionary Notice of Appeal to the Federal Circuit. On April 26, 2019, the District Court issued a Memorandum and Order confirming the grant of judgment in the Company’s favor of patent ineligibility, non-infringement, patent invalidity and no willful infringement. Meanwhile, on May 10, 2019, the Company filed a Motion for Attorney fees and non-taxable expenses under 35 USC Sec. 285. On May 21, 2019, the Court issued a Memorandum and Order which, inter alia, stayed proceedings on the Company’s fee Motion and the Company’s equitable claims pending appeal; and entered Final Judgment on May 21, 2019 as well. Bard filed a second Notice of Appeal on May 23, 2019. Both appeals have since been consolidated and Bard’s opening brief was served on September 27, 2019 and the Company's answering brief is currently due on November 6, 2019. We maintain our belief that Bard’s claims are without merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable. AngioDynamics, Inc. v. C.R. Bard, Inc. On May 30, 2017, the Company commenced an action in the United States District Court for the Northern District of New York entitled AngioDynamics, Inc. v. C.R. Bard, Inc. and Bard Access Systems, Inc. (“Bard”). In this action, the Company alleges that Bard has illegally tied the sales of its tip location systems to the sales of its PICCs. The Company alleges that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market for PICCs. The Company seeks both monetary damages and injunctive relief. Bard moved to dismiss on September 8, 2017. On August 6, 2018 the court denied Bard’s motion in its entirety. The parties are currently engaged in discovery, which is set to close in February 2020. Merz North America Settlement On May 16, 2019, Merz North America, Inc. (“Merz”) commenced an action in the United States District Court for the Southern District of New York entitled Merz North America, Inc. v. AngioDynamics, Inc. In this action, Merz alleged breach of contract against AngioDynamics based on a March 1, 2016 Distribution Agreement. On June 28, 2019, AngioDynamics reached a settlement with Merz. AngioDynamics made a lump-sum payment of $2.5 million to Merz in return for dismissal of the case with prejudice during the first quarter. Merz filed a stipulation of dismissal with the Court on July 23, 2019.
|
Subsequent Events |
3 Months Ended |
---|---|
Aug. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS |
Fair Value - Fair Value of Assets and Liabilities Measured on a Recurring Basis (Detail) - USD ($) $ in Thousands |
Aug. 31, 2019 |
May 31, 2019 |
---|---|---|
Financial Liabilities | ||
Contingent consideration for acquisition earn outs | $ 11,830 | $ 13,486 |
Recurring | ||
Financial Liabilities | ||
Total Financial Liabilities | 11,830 | 13,486 |
Level 1 | Recurring | ||
Financial Liabilities | ||
Contingent consideration for acquisition earn outs | 0 | 0 |
Total Financial Liabilities | 0 | 0 |
Level 2 | Recurring | ||
Financial Liabilities | ||
Contingent consideration for acquisition earn outs | 0 | 0 |
Total Financial Liabilities | 0 | 0 |
Level 3 | Recurring | ||
Financial Liabilities | ||
Contingent consideration for acquisition earn outs | 11,830 | 13,486 |
Total Financial Liabilities | $ 11,830 | $ 13,486 |
Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 31, 2019 |
Jun. 01, 2019 |
|
Lessee, Lease, Description [Line Items] | ||
Operating lease ROU asset | $ 5,104 | |
Total lease liabilities | 5,095 | |
Lease expense | $ 700 | |
Building | Seven Year Building Lease | ||
Lessee, Lease, Description [Line Items] | ||
Lease term (years) | 7 years | |
Lease payments | $ 6,500 | |
Building | Two Year Building Lease | ||
Lessee, Lease, Description [Line Items] | ||
Lease term (years) | 2 years | |
Lease payments | $ 400 | |
Accounting Standards Update 2016-02 | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease ROU asset | $ 5,600 | |
Total lease liabilities | $ 5,600 | |
Cost of Sales | ||
Lessee, Lease, Description [Line Items] | ||
Lease expense | 300 | |
General and Administrative Expense | ||
Lessee, Lease, Description [Line Items] | ||
Lease expense | $ 400 |
Leases - Supplemental Cash Flow Information (Details) $ in Thousands |
3 Months Ended |
---|---|
Aug. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows from operating leases | $ 563 |
Operating leases | $ 0 |
Revenue from Contracts with Customers - Contract Balances with Customers (Details) - USD ($) $ in Thousands |
Aug. 31, 2019 |
May 31, 2019 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Receivables | $ 32,540 | $ 43,577 |
Contract assets | 0 | 0 |
Contract liabilities | $ 607 | $ 681 |
Divestitures (Details) $ in Millions |
3 Months Ended |
---|---|
May 31, 2019
USD ($)
| |
NAMIC Fluid Management Business | Discontinued Operations, Disposed of by Sale | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Consideration received | $ 169.2 |
Gain on divestiture | 46.6 |
Working capital adjustments | $ 0.6 |
Medline | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Service period duration (months) | 24 months |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Aug. 31, 2019 |
May 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 1,434 | $ 1,906 |
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 75,000,000 | 75,000,000 |
Common stock, shares issued (in shares) | 38,359,875 | 37,984,382 |
Common stock, shares outstanding (in shares) | 37,989,875 | 37,614,382 |
Treasury stock, shares (in shares) | 370,000 | 370,000 |
Acquisition, Restructuring and Other Items, Net - Narrative (Detail) - USD ($) $ in Thousands |
3 Months Ended | 31 Months Ended | |
---|---|---|---|
Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2019 |
|
Restructuring Cost and Reserve [Line Items] | |||
Acquisition, restructuring and other items, net | $ 1,500 | $ 4,422 | |
Restructuring charges | 100 | 100 | $ 6,300 |
Legal | |||
Restructuring Cost and Reserve [Line Items] | |||
Acquisition, restructuring and other items, net | 669 | $ 2,880 | |
Biolitec Bankruptcy | |||
Restructuring Cost and Reserve [Line Items] | |||
Proceeds from Legal Settlements | $ 400 |
Acquisitions |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS RadiaDyne Acquisition On September 21, 2018, the Company acquired RadiaDyne, a privately held medical diagnostic and device company that designs and develops patient dose monitoring technology to improve cancer treatment outcomes. The aggregate purchase price of $75.0 million included an upfront payment of $47.9 million, contingent consideration with an estimated fair value of $22.3 million, an indemnification holdback of $4.6 million and a purchase price holdback of $0.2 million. The fair value of $22.3 million in contingent consideration is comprised of $16.5 million for the revenue milestones and $5.8 million for the technical milestones. The $4.6 million indemnification holdback is recorded in accrued liabilities at August 31, 2019 and the $0.2 million purchase price holdback was initially recorded in accrued liabilities, and was paid during the third quarter of fiscal year 2019. This acquisition expands the Company’s growing Oncology business by adding RadiaDyne’s early-stage, proprietary OARtrac® real-time radiation dose monitoring platform and other market-leading oncology solutions, including the IsoLoc®/ImmobiLoc® and Alatus® balloon stabilizing technologies. The Company accounted for the RadiaDyne acquisition under the acquisition method of accounting for business combinations. Accordingly, the cost to acquire the assets was allocated to the underlying net assets in proportion to estimates of their respective fair values. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. Goodwill is deductible for income tax purposes. The Company has not disclosed the amount of revenue and earnings for sales of RadiaDyne products since acquisition, nor proforma information, because these amounts are not significant to the Company's financial statements. Acquisition-related costs associated with the RadiaDyne acquisition, which are included in "acquisition, restructuring and other expenses, net" in the accompanying Consolidated Statements of Operations, were approximately $1.6 million in fiscal year 2019. The following table summarizes the preliminary and final aggregate purchase price allocated to the net assets acquired:
The Company finalized the allocation of the purchase price to the assets acquired and liabilities assumed in the fourth quarter of FY19. The values assigned to the RadiaDyne and OARtrac trademark and product technologies were derived using the relief-from-royalties method under the income approach. This approach is used to estimate the cost savings that accrue for the owner of an intangible asset who would otherwise have to pay royalties or licensing fees on revenues earned through the use of the asset if they had not owned the rights to use the assets. The net after-tax royalty savings are calculated for each year in the remaining economic life of the intangible asset and discounted to present value. The trademarks are deemed to have a useful life of five to seven years and the product technologies are deemed to have a useful life of seven to ten years. Both are amortized on a straight-line basis over their useful life. The value assigned to customer relationships was derived using the multi-period excess earnings method under the income approach. This approach estimates the excess earnings generated over the lives of the customers that existed as of the acquisition date and discounts such earnings to present value. Customer relationships are amortized on a straight-line basis over fifteen years. The goodwill arising from the acquisition consists largely of synergies and economies of scale the Company hopes to achieve from combining the acquired assets with the Company's current operations. BioSentry Acquisition On August 14, 2018, the Company acquired the BioSentry product from Surgical Specialties, LLC (“SSC”), for an aggregate purchase price of $39.8 million of which $37.0 million was paid on August 14, 2018 and $2.8 million was recorded as contingent consideration. The contingent consideration liability was recorded at fair value and was paid in the fourth quarter of fiscal year 2019 upon fulfillment of hydrogel orders by SSC. The Company accounted for the BioSentry acquisition under the acquisition method of accounting for business combinations. Accordingly, the cost to acquire the assets was allocated to the underlying net assets in proportion to estimates of their respective fair values. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. Goodwill is deductible for income tax purposes. The Company has not disclosed the amount of revenue and earnings for sales of BioSentry products since acquisition, nor proforma information, because these amounts are not significant to the Company's financial statements. Acquisition-related costs associated with the BioSentry acquisition, which are included in "acquisition, restructuring and other expenses, net" in the accompanying Consolidated Statements of Operations, were approximately $1.0 million in fiscal year 2019. The following table summarizes the preliminary and revised final purchase price allocated to the net assets acquired:
The Company finalized the allocation of the purchase price to the assets acquired and liabilities assumed in the fourth quarter of FY19. The values assigned to the BioSentry trademark and product technologies were derived using the relief-from-royalties method under the income approach. This approach is used to estimate the cost savings that accrue for the owner of an intangible asset who would otherwise have to pay royalties or licensing fees on revenues earned through the use of the asset if they had not owned the rights to use the assets. The net after-tax royalty savings are calculated for each year in the remaining economic life of the intangible asset and discounted to present value. The trademark and product technologies are deemed to have a fifteen year useful life and are amortized on a straight-line basis over their useful life. The value assigned to customer relationships was derived using the multi-period excess earnings method under the income approach. This approach estimates the excess earnings generated over the lives of the customers that existed as of the acquisition date and discounts such earnings to present value. Customer relationships are amortized on a straight-line basis over ten years. The goodwill arising from the acquisition consists largely of synergies and economies of scale the Company hopes to achieve from combining the acquired assets with the Company's current operations.
|
'@S,3$Q
M+FAT;>U;;6_;MA;^W/X*SL-V4\".K#AI5\<-D-H>EJ%O-_-%L8^T1%E$*%$C
M*3O>K[_/H>3$;T63M6OFS 'BA.3A.8<\?'A>)/>^&[SOCW[_,&2IRQ3[\+_7
M;R[ZK-$*@H^=?A ,1@/VR^CM&W9\V [9R/#<2B=USE40#-\U6"-UKN@&P6PV
M.YQU#K69!*/+@%@=!TIK*PYC%S?.GO:HZ^SIDUXJ>(R_3WK?M5ILH*,R$[EC
MD1' 0
M;4D110;-JQU:W%HY97Q /4JT4Z@U63&JM?JP3VKO:(4&E>Z-D!6P(8#(839!
M)C.!D5]7QI#XPDN$IJG@*#[%H!-"TX>S,R/RWM!RXNWQPMQTR'K8IGPD@*
M862$V8@B:!C4,1VN(YOG^X3 07CECMQ\J^)3Z 9Y>MFP43@X>L-&X=;21XO#
MI2K@AL$Q)08G0-.1R?,R4B;D&*TX 2'=Q;G(D2^O^=!$FG@+5GUM8>+'Q EI;"2]12_NB
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MD6VRBSPZW+9!C^J('^V/^&X:[C6W.-@XPMF<7>5ZID0\$
'@S,3(Q+FAT;>U;;6_;.!+^W/X*KA>[EP)V9,=)
M-W7< *GCW!KHV^5\5]Q'6J(L(I2H)2D[OE]_SU"RX[>BR?8EYZP#Q G)(6?(
MX<-YAI*[/UU^Z W_\['/$I
?!C9;X?.5(-AXM=A3T84:HZ(4Y*L:_L:(*-DX5J#=)'E
M"X*F2@%3E(%]I@@7"E(\4Y+-2$)S?;SB= VV+Q5%A4O#LH"+^K2.YE:,92K*
MB*"Y*$\)F-&\8(G7\#$12TZ#.>W<;ZBW^%,2!-C-=!63CIFN2GZ6J!TLQML*
M$I'%A'"1AYY]?TL!3Y(W3S[_,HM&WM7,L$X7D8I.0$7
MX4WDRO3IZZ?'VW#R7,X%GC!3U4R+()/;%!N<,N1 ;C!!*&*%G&_H6"GG2303
M8BY_ULR($XEG"[14QD+?/KIR9_X,GRBSP)_/SBP>GRQ/U[F,0/Q&<@JS*?N@
M3R;A=XG 3AA9X>PVN9M-]%'JJ<57WLCSO[FW$R]#BK* 280E8B619C #FP0*
MS$U758LGDA8!LZGGR$'%#! CFE.6FO(E5R1F.D&AI5*8,V8XQ: LNX0W(*
M- ,Z!:D;.@I2B<";G4A%)4J#V9Q'JXBMTK_NCT+_+F1$FB""J:60A$'L"V6?
MJEWC2=HDA:QD*MH0 C+.5/*S!SFN'_W=G8@^3XM?_^:+QPFQ>OHDOCY)G[;2
M_3R8SI(X[8#K'_G9<^-9E JS$PGK23KPU<\K]93+*)9/D/?LP:4^Z>N7:7W>
M^B4*;]U;?R+P+[RK)EZ^.9VW&V_T$/AB?$N#6VVV!/)+3O/&IAL_.((3EQ$G
M9U)#GH3PXM@,'V_]('U&S8I]\K,Q/A]^B76%3@.F,# 44U=MTW3T7EF#7%H
MT$)];^HH6/?=P+?MX=NZ#CF;70E%>)PL"RU;=QS39-@&T-2$CB16QHD,< L6
MEOZ&CL*N> ?4 [%LV=496+:/4,L!T(FFJJ:P %2HVP['F3^G&83K!=]NZBCY
MEM*!;]O"M]V%6D"XZMA4%?ZZ:J@6-@SQUYP3!4<:A0NWJ6,*M60'ECV_<)8M
M>.'%7S^XD;>=TR+(?PR#N1?G1I=1ZO>-TZ4N'K0@4S@>#@64 =-450)TS<29
M;4,=9%I%+&!3QY1,N!\RJQR6'
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M/^[#(U^2R1/IKKM+0N]J/IL$DKOJ*952ET#_YZM_A,-9\F=U8>5),\K2O
M^@:7.S>**XXFGWT=:92--%+;]2."71)%,B1(AHY-J^0^(BA;2NY[>GM&_>O%
M((,J0I.,"KWFSX=WW!]Q/KAZ&"<+*7\UG?1+?U-4^G;Y6QG.V8N]'2)X#PE^
M#.W!37K$GLNUR;
M3]E?"!S0&*=>7^=YOT[
MX,A"A=S[.OPZ"[O]P7T(QMMV$V*ACA^@@&,OE"$6CHT1
ZMYS(Z>X6W#VX:W#6\;WC:\;7C;
M\+;A[3#5
MT1DOXF()J[9DGCP-5:\V1%B/XR[](X-7!J\,7NTJDB,;N/(CZ0< 5=26E*+(
M=A#84U4D)Z)R=8_W->"JBR ,ICUT GM0.H7E3Y/X>IC,OM?_MH8S3$?)^[LR
M.P03],