0001564590-20-036908.txt : 20200805 0001564590-20-036908.hdr.sgml : 20200805 20200805170333 ACCESSION NUMBER: 0001564590-20-036908 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200805 DATE AS OF CHANGE: 20200805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SURMODICS INC CENTRAL INDEX KEY: 0000924717 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411356149 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23837 FILM NUMBER: 201078446 BUSINESS ADDRESS: STREET 1: 9924 W 74TH ST CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 9525007000 MAIL ADDRESS: STREET 1: 9924 WEST 74TH ST CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: BSI CORP DATE OF NAME CHANGE: 19970506 10-Q 1 srdx-10q_20200630.htm 10-Q srdx-10q_20200630.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-23837

 

Surmodics, Inc.

(Exact name of registrant as specified in its charter)

 

Minnesota

41-1356149

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

9924 West 74th Street, Eden Prairie, Minnesota 55344

(Address of principal executive offices) (Zip Code)

 

(952) 500-7000

(Registrant’s telephone number, including area code)

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.05 par value

SRDX

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

    

 

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares of the registrant’s Common Stock, $0.05 par value per share, as of July 31, 2020 was 13,650,235.

 

 

 

 


TABLE OF CONTENTS

 

 

2


PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Financial Statements

Surmodics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

June 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

(in thousands, except share and per share data)

 

(Unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,386

 

 

$

30,361

 

Available-for-sale securities

 

 

24,178

 

 

 

24,931

 

Accounts receivable, net of allowance for doubtful accounts of $133 and $200 as of

June 30, 2020 and September 30, 2019, respectively

 

 

8,657

 

 

 

8,993

 

Contract assets — royalties and license fees

 

 

4,248

 

 

 

8,210

 

Inventories, net

 

 

5,872

 

 

 

4,501

 

Income tax receivable

 

 

4,867

 

 

 

558

 

Prepaids and other

 

 

3,594

 

 

 

3,866

 

Total Current Assets

 

 

87,802

 

 

 

81,420

 

Property and equipment, net

 

 

28,939

 

 

 

29,748

 

Deferred income taxes

 

 

5,585

 

 

 

6,176

 

Intangible assets, net

 

 

12,585

 

 

 

14,226

 

Goodwill

 

 

26,563

 

 

 

26,171

 

Other assets

 

 

5,024

 

 

 

2,124

 

Total Assets

 

$

166,498

 

 

$

159,865

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,375

 

 

$

2,085

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Compensation

 

 

4,320

 

 

 

4,581

 

Accrued other

 

 

4,703

 

 

 

4,790

 

Deferred revenue

 

 

5,229

 

 

 

5,553

 

Contingent consideration

 

 

 

 

 

3,200

 

Total Current Liabilities

 

 

15,627

 

 

 

20,209

 

Deferred revenue, less current portion

 

 

12,423

 

 

 

11,628

 

Other long-term liabilities

 

 

7,865

 

 

 

5,512

 

Total Liabilities

 

 

35,915

 

 

 

37,349

 

Commitments and Contingencies (Note 16)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Series A Preferred stock — $.05 par value, 450,000 shares authorized; no shares

   issued and outstanding

 

 

 

 

 

 

Common stock — $.05 par value, 45,000,000 shares authorized; 13,645,174 and

   13,504,102 shares issued and outstanding as of June 30, 2020 and

   September 30, 2019, respectively

 

 

682

 

 

 

675

 

Additional paid-in capital

 

 

13,658

 

 

 

10,740

 

Accumulated other comprehensive income

 

 

1,469

 

 

 

396

 

Retained earnings

 

 

114,774

 

 

 

110,705

 

Total Stockholders’ Equity

 

 

130,583

 

 

 

122,516

 

Total Liabilities and Stockholders’ Equity

 

$

166,498

 

 

$

159,865

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


Surmodics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands, except per share data)

 

(Unaudited)

 

(Unaudited)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

11,987

 

 

$

9,870

 

 

$

33,731

 

 

$

29,508

 

Royalties and license fees

 

 

12,398

 

 

 

11,624

 

 

 

30,767

 

 

 

31,652

 

Research, development and other

 

 

2,498

 

 

 

2,850

 

 

 

7,823

 

 

 

8,101

 

Total revenue

 

 

26,883

 

 

 

24,344

 

 

 

72,321

 

 

 

69,261

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product costs

 

 

4,443

 

 

 

3,364

 

 

 

11,415

 

 

 

9,980

 

Research and development

 

 

13,324

 

 

 

13,321

 

 

 

37,401

 

 

 

38,362

 

Selling, general and administrative

 

 

7,416

 

 

 

5,939

 

 

 

21,092

 

 

 

16,764

 

Acquired intangible asset amortization

 

 

536

 

 

 

599

 

 

 

1,671

 

 

 

1,809

 

Contingent consideration expense (gain)

 

 

 

 

 

104

 

 

 

 

 

 

(248

)

Total operating costs and expenses

 

 

25,719

 

 

 

23,327

 

 

 

71,579

 

 

 

66,667

 

Operating income

 

 

1,164

 

 

 

1,017

 

 

 

742

 

 

 

2,594

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income, net

 

 

124

 

 

 

269

 

 

 

584

 

 

 

850

 

Interest expense

 

 

(29

)

 

 

(38

)

 

 

(99

)

 

 

(112

)

Foreign exchange (loss) gain

 

 

(48

)

 

 

(42

)

 

 

(125

)

 

 

99

 

Impairment loss on strategic investment

 

 

 

 

 

 

 

 

(479

)

 

 

 

Other

 

 

 

 

 

 

 

 

1

 

 

 

9

 

Other income (expense)

 

 

47

 

 

 

189

 

 

 

(118

)

 

 

846

 

Income before income taxes

 

 

1,211

 

 

 

1,206

 

 

 

624

 

 

 

3,440

 

Income tax benefit

 

 

1,248

 

 

 

260

 

 

 

3,445

 

 

 

598

 

Net income

 

$

2,459

 

 

$

1,466

 

 

$

4,069

 

 

$

4,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.18

 

 

$

0.11

 

 

$

0.30

 

 

$

0.30

 

Diluted net income per share

 

$

0.18

 

 

$

0.11

 

 

$

0.30

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,601

 

 

 

13,394

 

 

 

13,577

 

 

 

13,384

 

Diluted

 

 

13,786

 

 

 

13,726

 

 

 

13,775

 

 

 

13,776

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


Surmodics, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

(Unaudited)

 

 

(Unaudited)

 

Net income

 

$

2,459

 

 

$

1,466

 

 

$

4,069

 

 

$

4,038

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains on available-for-

   sale securities, net of tax

 

 

185

 

 

 

13

 

 

 

6

 

 

 

57

 

Foreign currency translation adjustments

 

 

794

 

 

 

520

 

 

 

1,067

 

 

 

(798

)

Other comprehensive income (loss)

 

 

979

 

 

 

533

 

 

 

1,073

 

 

 

(741

)

Comprehensive income

 

$

3,438

 

 

$

1,999

 

 

$

5,142

 

 

$

3,297

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


Surmodics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

 

 

 

Three Months Ended June 30, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders’

 

(In thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Earnings

 

 

Equity

 

Balance at March 31, 2020

 

 

13,609

 

 

$

680

 

 

$

11,481

 

 

$

490

 

 

$

112,315

 

 

$

124,966

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,459

 

 

 

2,459

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

979

 

 

 

 

 

 

979

 

Issuance of common stock

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock options exercised, net

 

 

33

 

 

 

2

 

 

 

849

 

 

 

 

 

 

 

 

 

851

 

Purchase of common stock to pay employee taxes

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

(12

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,340

 

 

 

 

 

 

 

 

 

1,340

 

Balance at June 30, 2020

 

 

13,645

 

 

$

682

 

 

$

13,658

 

 

$

1,469

 

 

$

114,774

 

 

$

130,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

 

13,489

 

 

$

674

 

 

$

7,510

 

 

$

1,444

 

 

$

105,685

 

 

$

115,313

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,466

 

 

 

1,466

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

533

 

 

 

 

 

 

533

 

Issuance of common stock

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Common stock options exercised, net

 

 

1

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

Purchase of common stock to pay employee taxes

 

 

(1

)

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

(12

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,319

 

 

 

 

 

 

 

 

 

1,319

 

Balance at June 30, 2019

 

 

13,490

 

 

$

675

 

 

$

8,829

 

 

$

1,977

 

 

$

107,151

 

 

$

118,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders’

 

(In thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Earnings

 

 

Equity

 

Balance at September 30, 2019

 

 

13,504

 

 

$

675

 

 

$

10,740

 

 

$

396

 

 

$

110,705

 

 

$

122,516

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,069

 

 

 

4,069

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

1,073

 

 

 

 

 

 

1,073

 

Issuance of common stock

 

 

133

 

 

 

7

 

 

 

211

 

 

 

 

 

 

 

 

 

218

 

Common stock options exercised, net

 

 

53

 

 

 

2

 

 

 

949

 

 

 

 

 

 

 

 

 

951

 

Purchase of common stock to pay employee taxes

 

 

(45

)

 

 

(2

)

 

 

(2,279

)

 

 

 

 

 

 

 

 

(2,281

)

Stock-based compensation

 

 

 

 

 

 

 

 

4,037

 

 

 

 

 

 

 

 

 

4,037

 

Balance at June 30, 2020

 

 

13,645

 

 

$

682

 

 

$

13,658

 

 

$

1,469

 

 

$

114,774

 

 

$

130,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2018

 

 

13,398

 

 

$

670

 

 

$

7,607

 

 

$

2,718

 

 

$

97,615

 

 

$

108,610

 

Net impact from adoption of ASC Topic 606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,498