Be
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2015
Commission file number 0-23837
SURMODICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Minnesota |
41-1356149 |
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
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9924 West 74th Street |
55344 |
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(Address of Principal Executive Offices) |
(Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
(952) 500-7000
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
Name of Exchange on Which Registered |
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Common Stock, $0.05 par value |
NASDAQ Global Select Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer |
o |
Accelerated filer |
x |
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Non-accelerated filer |
o (Do not check if a smaller reporting company) |
Smaller reporting company |
o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the Common Stock held by shareholders other than officers, directors or holders of more than 5% of the outstanding stock of the registrant as of March 31, 2015 was approximately $245 million (based upon the closing sale price of the registrant’s Common Stock on such date).
The number of shares of the registrant’s Common Stock outstanding as of December 1, 2015 was 12,944,326.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the Registrant’s 2016 Annual Meeting of Shareholders are incorporated by reference into Part III.
SurModics, Inc. (the “Company,” “we,” “us,” or “our”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its annual report on Form 10-K for the fiscal year ended September 30, 2015, which was originally filed on December 4, 2015 (the “Original Filing”), to amend and revise Item 9A of Part II, “Controls and Procedures,” with respect to (1) our conclusions regarding the effectiveness of our disclosure controls and procedures and our internal control over financial reporting and (2) Deloitte & Touche LLP’s (“Deloitte”) related attestation report due to a material weakness in our internal control over financial reporting identified subsequent to the issuance of our Original Filing. Item 15 of Part IV, “Exhibits and Financial Statement Schedules”, has also been amended to revise the reference to Deloitte’s opinion on our Internal Control Over Financial Reporting in its Report of Independent Registered Public Accounting Firm on our consolidated financial statements and financial statement schedule as of and for the three years in the period ended September 30, 2015.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications of our principal executive officer and principal financial officer are also being filed as exhibits to this Amendment. This Amendment should be read in conjunction with the Original Filing, which continues to speak as of the date of the Original Filing. Except as specifically noted above, this Amendment does not modify or update disclosures in the Original Filing. Accordingly, this Amendment does not reflect events occurring after the filing of the Original Filing or modify or update any related or other disclosures.
1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
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1. |
Disclosure Controls and Procedures. |
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure control objectives.
We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015, the end of the period covered by this report. Previously, based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2015. However, due to the material weakness in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2015.
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2. |
Internal Control over Financial Reporting. |
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(a) |
Management’s Annual Report on Internal Control Over Financial Reporting (Revised) |
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15(f). In connection with the Original Filing, management conducted an evaluation of the design and operating effectiveness of our internal control over financial reporting based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its evaluation, management concluded internal control over financial reporting was effective as of September 30, 2015.
In April 2016, the Company became aware of royalty overpayments made by customers pursuant to license agreements for products incorporating certain of the Company’s technologies no longer covered by an unexpired patent. The Company did not identify that certain amounts reported by the customers were not in accordance with the terms of the license agreement and should have been deferred or refunded to the customers, resulting in an overstatement of revenue. As a result of the identification of the overstatement of royalty revenue, management reevaluated the design and operating effectiveness of internal control over financial reporting and concluded that its internal control over financial reporting as of September 30, 2015 was not effective due to a material weakness in the design and operating effectiveness of its transactional and review controls related to recognition of royalty revenue. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because the deficiencies related to the Company’s controls over recognition of royalty revenue could result in a misstatement of royalty revenue and related accounts and disclosures that could be material to the annual or interim consolidated financial statements, such deficiencies represent a material weakness in our internal control over financial reporting. Accordingly, management has revised its report on internal control over financial reporting.
Management analyzed the impact of the overstatement of royalty revenue resulting from the identified material weakness and concluded that it did not have a material impact on our previously issued consolidated financial statements. Notwithstanding the material weakness in our internal control over financial reporting, we have concluded that the consolidated financial statements and other financial information included in the Original Filing, fairly present in all material respects our financial condition, results of operations and cash flows as of, and for, the periods presented.
The foregoing has been approved by our management, including our Chief Executive Officer and Chief Financial Officer, who have been involved with the reassessment and analysis of our internal control over financial reporting.
Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K/A, has issued the attestation report below regarding the Company’s internal control over financial reporting.
2
(b) Attestation Report of the Independent Registered Public Accounting Firm.
3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
SurModics, Inc.
Eden Prairie, Minnesota
We have audited the internal control over financial reporting of SurModics, Inc. and subsidiaries (the "Company") as of September 30, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting (Revised). Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our report dated December 4, 2015, we expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. As described in the following paragraph, a material weakness was subsequently identified as a result of deficiency in the design and operation of the Company’s controls related to recognition of royalty revenue. Accordingly, management has revised its assessment about the effectiveness of the Company’s internal control over financial reporting and our present opinion on the effectiveness of the Company’s internal control over financial reporting as of September 30, 2015, as expressed herein, is different from that expressed in our previous report.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment: a material weakness in the design and operating effectiveness of its transactional and review controls related to recognition of royalty revenue. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended September 30, 2015, of the Company and this report does not affect our report on such financial statements and financial statement schedule.
In our opinion, because of the effect of the material weakness identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of September 30, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
4
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended September 30, 2015 of the Company and our report dated December 4, 2015 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
December 4, 2015 (May 10, 2016 as to the effects of the material weakness described in Management’s Annual Report on Internal Control Over Financial Reporting (Revised))
5
c. Changes in Internal Controls Over Financial Reporting.
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2015 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
Plan for Remediation of Material Weakness
With oversight from the Audit Committee, the Company’s management is in the process of developing and implementing remediation plans to address the material weakness described above.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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(a) |
The documents filed as part of this report on the pages indicated: |
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1. |
Financial Statements |
The following statements are included in this report on the pages indicated:
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Page (s) |
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F-1 |
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F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
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F-7 to F-27 |
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2. |
Financial Statement Schedule. See Schedule II — “Valuation and Qualifying Accounts” in this section of this Form 10-K. All other schedules are omitted because they are inapplicable, not required, or the information is in the consolidated financial statements or related notes. |
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3. |
Listing of Exhibits. The following exhibits which are filed with this report: |
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23 |
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Consent of Deloitte & Touche LLP.** |
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24 |
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Power of Attorney (included on signature page of this Form 10-K).** |
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31.1 |
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.** |
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31.2 |
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.** |
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32.1 |
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Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
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32.2 |
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Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
6
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SURMODICS, INC. |
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By: |
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/s/ Andrew D. C. LaFrence |
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Andrew D. C. LaFrence |
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Vice President of Finance and |
Dated: May 10, 2016
7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBIT INDEX TO FORM 10-K
For the Fiscal Year Ended September 30, 2015
SURMODICS, INC.
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Exhibit |
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23* |
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Consent of Deloitte & Touche LLP. |
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24* |
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Power of Attorney (included on signature page of this Form 10-K). |
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31.1* |
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1* |
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Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2* |
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Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
*Filed herewith
8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
SurModics, Inc.
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheets of SurModics, Inc. and subsidiaries (the "Company") as of September 30, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of SurModics, Inc. and subsidiaries as of September 30, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of September 30, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 4, 2015, May 10, 2016 as to the effects of the material weakness described in Management’s Annual Report on Internal Control Over Financial Reporting (Revised), which expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
December 4, 2015
F-1
SurModics, Inc. and Subsidiaries
As of September 30
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2015 |
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2014 |
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(In thousands, except share and per share data) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
55,588 |
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$ |
43,511 |
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Available-for-sale securities |
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— |
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3,040 |
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Accounts receivable, net of allowance for doubtful accounts of $10 and $42 as of September 30, 2015 and 2014, respectively |
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7,478 |
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4,751 |
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Inventories |
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2,979 |
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2,817 |
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Deferred tax assets |
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546 |
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394 |
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Prepaids and other |
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1,198 |
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751 |
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Current assets of discontinued operations |
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— |
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16 |
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Total Current Assets |
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67,789 |
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55,280 |
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Property and equipment, net |
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12,968 |
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13,133 |
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Available-for-sale securities |
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— |
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16,823 |
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Deferred tax assets |
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6,704 |
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6,718 |
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Intangible assets, net |
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2,760 |
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2,946 |
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Goodwill |
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8,010 |
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8,010 |
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Other assets, net |
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479 |
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1,979 |
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Total Assets |
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$ |
98,710 |
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$ |
104,889 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
781 |
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$ |
1,028 |
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Accrued liabilities: |
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Compensation |
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2,772 |
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2,061 |
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Accrued other |
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1,099 |
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881 |
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Deferred revenue |
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48 |
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52 |
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Current liabilities of discontinued operations |
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— |
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45 |
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Total Current Liabilities |
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4,700 |
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4,067 |
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Deferred revenue, less current portion |
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217 |
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226 |
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Other long-term liabilities |
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1,920 |
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1,845 |
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Total Liabilities |
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6,837 |
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6,138 |
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Commitments and Contingencies (Note 12) |
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Stockholders’ Equity: |
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Series A preferred stock — $.05 par value, 450,000 shares authorized; no shares issued and outstanding |
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— |
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— |
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Common stock — $.05 par value, 45,000,000 shares authorized; 12,945,157 and 13,606,545 shares issued and outstanding, respectively |
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647 |
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680 |
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Additional paid-in capital |
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3,060 |
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2,662 |
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Accumulated other comprehensive income |
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5 |
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1,528 |
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Retained earnings |
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88,161 |
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93,881 |
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Total Stockholders’ Equity |
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91,873 |
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98,751 |
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Total Liabilities and Stockholders’ Equity |
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$ |
98,710 |
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$ |
104,889 |
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The accompanying notes are an integral part of these consolidated financial statements.
F-2
SurModics, Inc. and Subsidiaries
Consolidated Statements of Income
For the Years Ended September 30
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2015 |
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2014 |
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2013 |
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(In thousands, except per share data) |
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Revenue: |
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Royalties and license fees |
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$ |
31,763 |
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$ |
30,277 |
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$ |
29,774 |
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Product sales |
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24,925 |
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22,798 |
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22,506 |
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Research and development |
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5,210 |
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4,364 |
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3,852 |
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Total revenue |
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61,898 |
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57,439 |
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56,132 |
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Operating costs and expenses: |
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Product costs |
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8,619 |
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8,016 |
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7,898 |
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Research and development |
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16,165 |
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15,550 |
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15,079 |
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Selling, general and administrative |
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15,525 |
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15,297 |
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13,859 |
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Restructuring charges |
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— |
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— |
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476 |
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Claim settlement |
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2,500 |
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— |
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— |
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Total operating costs and expenses |
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42,809 |
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38,863 |
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37,312 |
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Operating income from continuing operations |
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19,089 |
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18,576 |
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18,820 |
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Other income (loss): |
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Investment income, net |
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156 |
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238 |
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268 |
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Impairment losses on strategic investments |
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(1,500 |
) |
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(1,184 |
) |
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(158 |
) |
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Gains on sale of strategic investments |
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— |
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709 |
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1,293 |
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Other income, net |
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496 |
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133 |
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137 |
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Other (loss) income |
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(848 |
) |
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(104 |
) |
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1,540 |
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Income from continuing operations before income taxes |
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18,241 |
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18,472 |
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20,360 |
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Income tax provision |
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(6,294 |
) |
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(6,265 |
) |
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(5,781 |
) |
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Income from continuing operations |
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11,947 |
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12,207 |
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14,579 |
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Discontinued operations: |
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(Loss) income from discontinued operations, net of income taxes |
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— |
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|
(176 |
) |
|
|
588 |
|
|
Loss on sale of discontinued operations, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
(Loss) Income from discontinued operations |
|
|
— |
|
|
|
(176 |
) |
|
|
588 |
|
|
Net income |
|
$ |
11,947 |
|
|
$ |
12,031 |
|
|
$ |
15,167 |
|
|
Basic income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.92 |
|
|
$ |
0.90 |
|
|
$ |
1.01 |
|
|
Discontinued operations |
|
|
(0.00 |
) |
|
|
(0.01 |
) |
|
|
0.04 |
|
|
Net income |
|
$ |
0.92 |
|
|
$ |
0.88 |
|
|
$ |
1.05 |
|
|
Diluted income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.90 |
|
|
$ |
0.88 |
|
|
$ |
0.99 |
|
|
Discontinued operations |
|
|
(0.00 |
) |
|
|
(0.01 |
) |
|
|
0.04 |
|
|
Net income |
|
$ |
0.90 |
|
|
$ |
0.87 |
|
|
$ |
1.03 |
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,029 |
|
|
|
13,632 |
|
|
|
14,464 |
|
|
Diluted |
|
|
13,289 |
|
|
|
13,876 |
|
|
|
14,731 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SurModics, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended September 30
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||
|
|
|
(In thousands) |
|
|||||||||
|
Net income |
|
$ |
11,947 |
|
|
$ |
12,031 |
|
|
$ |
15,167 |
|
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding (losses) gains on available-for-sale securities arising during the period |
|
|
(1,208 |
) |
|
|
1,559 |
|
|
|
235 |
|
|
Reclassification adjustment for realized gains included in net income |
|
|
(315 |
) |
|
|
(89 |
) |
|
|
(217 |
) |
|
Other comprehensive (loss) income |
|
|
(1,523 |
) |
|
|
1,470 |
|
|
|
18 |
|
|
Comprehensive income |
|
$ |
10,424 |
|
|
$ |
13,501 |
|
|
$ |
15,185 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SurModics, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Years Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
Total |
|
|||
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Retained |
|
|
Stockholders’ |
|
|||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||
|
Balance at September 30, 2012 |
|
|
14,657 |
|
|
$ |
733 |
|
|
$ |
18,346 |
|
|
$ |
40 |
|
|
$ |
75,869 |
|
|
$ |
94,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,167 |
|
|
|
15,167 |
|
|
Other comprehensive income, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
18 |
|
|
Issuance of common stock |
|
|
20 |
|
|
|
1 |
|
|
|
274 |
|
|
|
— |
|
|
|
— |
|
|
|
275 |
|
|
Common stock repurchased |
|
|
(796 |
) |
|
|
(40 |
) |
|
|
(18,769 |
) |
|
|
— |
|
|
|
— |
|
|
|
(18,809 |
) |
|
Common stock options exercised, net |
|
|
10 |
|
|
|
1 |
|
|
|
143 |
|
|
|
— |
|
|
|
— |
|
|
|
144 |
|
|
Purchase of common stock to pay employee taxes |
|
|
— |
|
|
|
— |
|
|
|
(41 |
) |
|
|
— |
|
|
|
— |
|
|
|
(41 |
) |
|
Reduction of excess tax benefit from stock-based compensation plans |
|
|
— |
|
|
|
— |
|
|
|
(477 |
) |
|
|
— |
|
|
|
— |
|
|
|
(477 |
) |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
2,552 |
|
|
|
— |
|
|
|
— |
|
|
|
2,552 |
|
|
Balance at September 30, 2013 |
|
|
13,891 |
|
|
|
695 |
|
|
|
2,028 |
|
|
|
58 |
|
|
|
91,036 |
|
|
|
93,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,031 |
|
|
|
12,031 |
|
|
Other comprehensive income, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,470 |
|
|
|
— |
|
|
|
1,470 |
|
|
Issuance of common stock |
|
|
163 |
|
|
|
8 |
|
|
|
261 |
|
|
|
— |
|
|
|
— |
|
|
|
269 |
|
|
Common stock repurchased |
|
|
(485 |
) |
|
|
(25 |
) |
|
|
(2,330 |
) |
|
|
— |
|
|
|
(9,186 |
) |
|
|
(11,541 |
) |
|
Common stock options exercised, net |
|
|
38 |
|
|
|
2 |
|
|
|
241 |
|
|
|
— |
|
|
|
— |
|
|
|
243 |
|
|
Purchase of common stock to pay employee taxes |
|
|
— |
|
|
|
— |
|
|
|
(1,111 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,111 |
) |
|
Excess tax benefit from stock-based compensation plans |
|
|
— |
|
|
|
— |
|
|
|
236 |
|
|
|
— |
|
|
|
— |
|
|
|
236 |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
3,337 |
|
|
|
— |
|
|
|
— |
|
|
|
3,337 |
|
|
Balance at September 30, 2014 |
|
|
13,607 |
|
|
|
680 |
|
|
|
2,662 |
|
|
|
1,528 |
|
|
|
93,881 |
|
|
|
98,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,947 |
|
|
|
11,947 |
|
|
Other comprehensive loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,523 |
) |
|
|
— |
|
|
|
(1,523 |
) |
|
Issuance of common stock |
|
|
139 |
|
|
|
7 |
|
|
|
272 |
|
|
|
— |
|
|
|
— |
|
|
|
279 |
|
|
Common stock repurchased |
|
|
(848 |
) |
|
|
(42 |
) |
|
|
(2,485 |
) |
|
|
— |
|
|
|
(17,473 |
) |
|
|
(20,000 |
) |
|
Common stock options exercised, net |
|
|
47 |
|
|
|
2 |
|
|
|
429 |
|
|
|
— |
|
|
|
— |
|
|
|
431 |
|
|
Purchase of common stock to pay employee taxes |
|
|
— |
|
|
|
— |
|
|
|
(631 |
) |
|
|
— |
|
|
|
(194 |
) |
|
|
(825 |
) |
|
Excess tax benefit from stock-based compensation plans |
|
|
— |
|
|
|
— |
|
|
|
432 |
|
|
|
— |
|
|
|
— |
|
|
|
432 |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
2,381 |
|
|
|
— |
|
|
|
— |
|
|
|
2,381 |
|
|
Balance at September 30, 2015 |
|
|
12,945 |
|
|
$ |
647 |
|
|
$ |
3,060 |
|
|
$ |
5 |
|
|
$ |
88,161 |
|
|
$ |
91,873 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SurModics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended September 30
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||
|
|
|
(In thousands) |
|
|||||||||
|
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
11,947 |
|
|
$ |
12,031 |
|
|
$ |
15,167 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (income) from discontinued operations |
|
|
— |
|
|
|
176 |
|
|
|
(588 |
) |
|
Depreciation and amortization |
|
|
2,805 |
|
|
|
2,715 |
|
|
|
2,886 |
|
|
Gains on sales of available-for-sale securities, net and strategic investments |
|
|
(492 |
) |
|
|
(842 |
) |
|
|
(1,430 |
) |
|
Impairment losses on strategic investments |
|
|
1,500 |
|
|
|
1,184 |
|
|
|
158 |
|
|
Stock-based compensation |
|
|
2,381 |
|
|
|
3,337 |
|
|
|
2,552 |
|
|
Deferred taxes |
|
|
93 |
|
|
|
(352 |
) |
|
|
(492 |
) |
|
Excess tax (benefit) deficiency from stock-based compensation plans |
|
|
(432 |
) |
|
|
(236 |
) |
|
|
477 |
|
|
(Gain) loss on disposals of property and equipment |
|
|
(39 |
) |
|
|
2 |
|
|
|
(62 |
) |
|
Change in operating assets and liabilities, excluding the impact of discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,727 |
) |
|
|
581 |
|
|
|
(263 |
) |
|
Inventories |
|
|
(162 |
) |
|
|
511 |
|
|
|
196 |
|
|
Prepaids and other |
|
|
141 |
|
|
|
(23 |
) |
|
|
(40 |
) |
|
Accounts payable and accrued liabilities |
|
|
373 |
|
|
|
(738 |
) |
|
|
238 |
|
|
Income taxes |
|
|
(309 |
) |
|
|
116 |
|
|
|
(989 |
) |
|
Deferred revenue |
|
|
(13 |
) |
|
|
75 |
|
|
|
(29 |
) |
|
Net cash provided by operating activities from continuing operations |
|
|
15,066 |
|
|
|
18,537 |
|
|
|
17,781 |
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(1,877 |
) |
|
(2,278) |
|
|
|
(1,919 |
) |
|
|
Cash proceeds from sale of property and equipment |
|
|
42 |
|
|
|
— |
|
|
|
77 |
|
|
Purchases of available-for-sale securities |
|
|
(3,376 |
) |
|
|
(138,363 |
) |
|
|
(45,053 |
) |
|
Sales and maturities of available-for-sale securities |
|
|
22,199 |
|
|
|
162,673 |
|
|
|
44,853 |
|
|
Business combination |
|
|
(270 |
) |
|
|
— |
|
|
|
— |
|
|
Cash received from sale of strategic investments |
|
|
21 |
|
|
|
709 |
|
|
|
2,236 |
|
|
Cash transferred to discontinued operations |
|
|
(45 |
) |
|
|
(354 |
) |
|
|
(116 |
) |
|
Net cash provided by investing activities from continuing operations |
|
|
16,694 |
|
|
|
22,387 |
|
|
|
78 |
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit (deficiency) from stock-based compensation plans |
|
|
432 |
|
|
|
236 |
|
|
|
(477 |
) |
|
Issuance of common stock |
|
|
710 |
|
|
|
512 |
|
|
|
419 |
|
|
Repurchase of common stock |
|
|
(20,000 |
) |
|
|
(12,545 |
) |
|
|
(17,805 |
) |
|
Purchases of common stock to pay employee taxes |
|
|
(825 |
) |
|
|
(1,111 |
) |
|
|
(41 |
) |
|
Net cash used in financing activities from continuing operations |
|
|
(19,683 |
) |
|
|
(12,908 |
) |
|
|
(17,904 |
) |
|
Net cash provided by (used in) continuing operations |
|
|
12,077 |
|
|
|
28,016 |
|
|
|
(45 |
) |
|
Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(45 |
) |
|
|
(354 |
) |
|
|
(116 |
) |
|
Net cash provided by investing activities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net cash provided by financing activities |
|
|
45 |
|
|
|
354 |
|
|
|
116 |
|
|
Net cash provided by discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net change in cash and cash equivalents |
|
|
12,077 |
|
|
|
28,016 |
|
|
|
(45 |
) |
|
Cash and Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
|
43,511 |
|
|
|
15,495 |
|
|
|
15,540 |
|
|
End of year |
|
$ |
55,588 |
|
|
$ |
43,511 |
|||||