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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
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Delaware
|
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11-3146460
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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14 Plaza Drive Latham, New York
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12110
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
|
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Name of each exchange on which registered
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Common stock, par value $.01
|
|
NASDAQ Global Select Market
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Preferred Stock Purchase Rights
|
|
NASDAQ Global Select Market
|
|
Large accelerated filer
|
|
¨
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Accelerated filer
|
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x
|
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|||
Non-accelerated filer
|
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¨
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Smaller reporting company
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¨
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Emerging growth company
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|
o
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Class
|
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Outstanding as of September 26, 2017
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Common Stock, par value $.01
|
|
36,715,736
|
|
|
|
Page
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Item 1.
|
|
|
|
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|
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||
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||
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||
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||
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||
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||
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Item 2.
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||
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Item 3.
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||
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Item 4.
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||
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Item 1.
|
||
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|
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Item 1A.
|
||
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|
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Item 2.
|
||
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|
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Item 3.
|
||
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Item 4.
|
||
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Item 5.
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||
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Item 6.
|
|
|
Three Months Ended
|
||||||
|
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||||
Net sales
|
|
$
|
85,411
|
|
|
$
|
88,098
|
|
Cost of sales (exclusive of intangible amortization)
|
|
44,182
|
|
|
43,066
|
|
||
Gross profit
|
|
41,229
|
|
|
45,032
|
|
||
Operating expenses:
|
|
|
|
|
||||
Research and development
|
|
6,441
|
|
|
6,709
|
|
||
Sales and marketing
|
|
19,402
|
|
|
19,455
|
|
||
General and administrative
|
|
8,056
|
|
|
8,201
|
|
||
Amortization of intangibles
|
|
4,096
|
|
|
4,235
|
|
||
Change in fair value of contingent consideration
|
|
105
|
|
|
443
|
|
||
Acquisition, restructuring and other items, net
|
|
2,989
|
|
|
2,417
|
|
||
Total operating expenses
|
|
41,089
|
|
|
41,460
|
|
||
Operating income
|
|
140
|
|
|
3,572
|
|
||
Other (expenses) income:
|
|
|
|
|
||||
Interest expense
|
|
(723
|
)
|
|
(719
|
)
|
||
Other income (expense)
|
|
567
|
|
|
50
|
|
||
Total other expenses, net
|
|
(156
|
)
|
|
(669
|
)
|
||
Income (loss) before income tax expense (benefit)
|
|
(16
|
)
|
|
2,903
|
|
||
Income tax expense
|
|
19
|
|
|
1,603
|
|
||
Net income (loss)
|
|
$
|
(35
|
)
|
|
$
|
1,300
|
|
Earnings (loss) per share
|
|
|
|
|
||||
Basic
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
Diluted
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
Weighted average shares outstanding
|
|
|
|
|
||||
Basic
|
|
36,919
|
|
|
36,319
|
|
||
Diluted
|
|
36,919
|
|
|
36,698
|
|
|
|
Three Months Ended
|
||||||
|
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||||
Net income (loss)
|
|
$
|
(35
|
)
|
|
$
|
1,300
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
||||
Unrealized gain (loss) on marketable securities
|
|
—
|
|
|
(6
|
)
|
||
Foreign currency translation (loss)
|
|
283
|
|
|
(294
|
)
|
||
Other comprehensive income (loss), before tax
|
|
283
|
|
|
(300
|
)
|
||
Income tax expense related to items of other comprehensive income
|
|
—
|
|
|
2
|
|
||
Other comprehensive income (loss), net of tax
|
|
283
|
|
|
(298
|
)
|
||
Total comprehensive income (loss), net of tax
|
|
$
|
248
|
|
|
$
|
1,002
|
|
|
Aug 31, 2017
|
|
May 31, 2017
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
48,200
|
|
|
$
|
47,544
|
|
Marketable securities
|
1,215
|
|
|
1,215
|
|
||
Accounts receivable, net of allowances of $3,152 and $2,945, respectively
|
41,283
|
|
|
44,523
|
|
||
Inventories
|
55,425
|
|
|
54,506
|
|
||
Prepaid income taxes
|
312
|
|
|
336
|
|
||
Prepaid expenses and other
|
4,287
|
|
|
5,790
|
|
||
Total current assets
|
150,722
|
|
|
153,914
|
|
||
Property, plant and equipment, net
|
44,353
|
|
|
45,234
|
|
||
Other assets
|
2,431
|
|
|
1,886
|
|
||
Intangible assets, net
|
141,583
|
|
|
145,675
|
|
||
Goodwill
|
361,252
|
|
|
361,252
|
|
||
Total assets
|
$
|
700,341
|
|
|
$
|
707,961
|
|
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts payable
|
$
|
17,421
|
|
|
$
|
18,087
|
|
Accrued liabilities
|
32,264
|
|
|
38,804
|
|
||
Current portion of long-term debt
|
5,000
|
|
|
5,000
|
|
||
Current portion of contingent consideration
|
9,638
|
|
|
9,625
|
|
||
Total current liabilities
|
64,323
|
|
|
71,516
|
|
||
Long-term debt, net of current portion
|
90,147
|
|
|
91,320
|
|
||
Deferred income taxes
|
26,030
|
|
|
26,112
|
|
||
Contingent consideration, net of current portion
|
1,128
|
|
|
3,136
|
|
||
Other long-term liabilities
|
829
|
|
|
850
|
|
||
Total liabilities
|
182,457
|
|
|
192,934
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
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; 37,397,986 and 37,210,091 shares issued and 37,027,986 and 36,840,091 shares outstanding at August 31, 2017 and May 31, 2017, respectively
|
368
|
|
|
367
|
|
||
Additional paid-in capital
|
535,511
|
|
|
532,705
|
|
||
Accumulated deficit
|
(11,240
|
)
|
|
(11,007
|
)
|
||
Treasury stock, 370,000 shares at August 31, 2017 and May 31, 2017, respectively
|
(5,714
|
)
|
|
(5,714
|
)
|
||
Accumulated other comprehensive loss
|
(1,041
|
)
|
|
(1,324
|
)
|
||
Total Stockholders’ Equity
|
517,884
|
|
|
515,027
|
|
||
Total Liabilities and Stockholders' Equity
|
$
|
700,341
|
|
|
$
|
707,961
|
|
|
Three Months Ended
|
||||||
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(35
|
)
|
|
$
|
1,300
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
5,793
|
|
|
6,153
|
|
||
Stock based compensation
|
1,797
|
|
|
1,684
|
|
||
Change in fair value of contingent consideration
|
105
|
|
|
443
|
|
||
Deferred income taxes
|
(82
|
)
|
|
1,565
|
|
||
Change in accounts receivable allowances
|
278
|
|
|
(197
|
)
|
||
Fixed and intangible asset impairments and disposals
|
—
|
|
|
45
|
|
||
Other
|
(567
|
)
|
|
18
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
3,103
|
|
|
2,822
|
|
||
Inventories
|
(781
|
)
|
|
(3,049
|
)
|
||
Prepaid expenses and other
|
620
|
|
|
(869
|
)
|
||
Accounts payable, accrued and other liabilities
|
(7,195
|
)
|
|
(2,475
|
)
|
||
Net cash provided by operating activities
|
3,036
|
|
|
7,440
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Additions to property, plant and equipment
|
(501
|
)
|
|
(481
|
)
|
||
Net cash used in investing activities
|
(501
|
)
|
|
(481
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayment of long-term debt
|
(1,250
|
)
|
|
(2,500
|
)
|
||
Payment of acquisition related contingent consideration
|
(2,100
|
)
|
|
(2,100
|
)
|
||
Proceeds from exercise of stock options and employee stock purchase plan
|
812
|
|
|
2,803
|
|
||
Net cash used in financing activities
|
(2,538
|
)
|
|
(1,797
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
659
|
|
|
(84
|
)
|
||
Increase in cash and cash equivalents
|
656
|
|
|
5,078
|
|
||
Cash and cash equivalents at beginning of period
|
47,544
|
|
|
32,333
|
|
||
Cash and cash equivalents at end of period
|
$
|
48,200
|
|
|
$
|
37,411
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
||||
|
|
|
|
||||
Contractual obligations for acquisition of fixed assets
|
$
|
38
|
|
|
$
|
52
|
|
|
Common Stock
|
|
Additional
paid in
capital
|
|
Accumulated deficit
|
|
Accumulated
other
comprehensive
loss
|
|
Treasury Stock
|
|
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
Total
|
||||||||||||||||||
Balance at May 31, 2017
|
37,210,091
|
|
|
$
|
367
|
|
|
$
|
532,705
|
|
|
$
|
(11,007
|
)
|
|
$
|
(1,324
|
)
|
|
(370,000
|
)
|
|
$
|
(5,714
|
)
|
|
$
|
515,027
|
|
Net income (loss)
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
(35
|
)
|
||||||||||||
Adjustment from the adoption of ASU 2016-09
|
|
|
|
|
198
|
|
|
(198
|
)
|
|
|
|
|
|
|
|
—
|
|
|||||||||||
Exercise of stock options
|
17,897
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
89
|
|
||||||||||
Issuance/Cancellation of restricted stock units
|
119,098
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
||||||||||
Purchases of common stock under ESPP
|
50,900
|
|
|
|
|
|
722
|
|
|
|
|
|
|
|
|
|
|
722
|
|
||||||||||
Stock-based compensation
|
|
|
|
|
1,797
|
|
|
|
|
|
|
|
|
|
|
1,797
|
|
||||||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
283
|
|
|
|
|
|
|
283
|
|
||||||||||||
Balance at August 31, 2017
|
37,397,986
|
|
|
$
|
368
|
|
|
$
|
535,511
|
|
|
$
|
(11,240
|
)
|
|
$
|
(1,041
|
)
|
|
(370,000
|
)
|
|
$
|
(5,714
|
)
|
|
$
|
517,884
|
|
|
Aug 31, 2017
|
|
May 31, 2017
|
||||
(in thousands)
|
|
||||||
Raw materials
|
$
|
18,389
|
|
|
$
|
17,563
|
|
Work in process
|
11,313
|
|
|
12,602
|
|
||
Finished goods
|
25,723
|
|
|
24,341
|
|
||
Inventories
|
$
|
55,425
|
|
|
$
|
54,506
|
|
|
August 31, 2017
|
||||||||||
|
Gross
carrying
value
|
|
Accumulated
amortization
|
|
Net carrying
value
|
||||||
(in thousands)
|
|
||||||||||
Product technologies
|
$
|
147,172
|
|
|
$
|
(61,916
|
)
|
|
$
|
85,256
|
|
Customer relationships
|
56,455
|
|
|
(20,290
|
)
|
|
36,165
|
|
|||
Trademarks
|
28,400
|
|
|
(9,782
|
)
|
|
18,618
|
|
|||
Licenses
|
4,487
|
|
|
(3,919
|
)
|
|
568
|
|
|||
Distributor relationships
|
1,250
|
|
|
(274
|
)
|
|
976
|
|
|||
|
$
|
237,764
|
|
|
$
|
(96,181
|
)
|
|
$
|
141,583
|
|
|
May 31, 2017
|
||||||||||
|
Gross
carrying
value
|
|
Accumulated
amortization
|
|
Net carrying
value
|
||||||
(in thousands)
|
|
||||||||||
Product technologies
|
$
|
147,172
|
|
|
$
|
(59,696
|
)
|
|
$
|
87,476
|
|
Customer relationships
|
56,375
|
|
|
(19,194
|
)
|
|
37,181
|
|
|||
Trademarks
|
28,400
|
|
|
(9,069
|
)
|
|
19,331
|
|
|||
Licenses
|
4,487
|
|
|
(3,821
|
)
|
|
666
|
|
|||
Distributor relationships
|
1,250
|
|
|
(229
|
)
|
|
1,021
|
|
|||
|
$
|
237,684
|
|
|
$
|
(92,009
|
)
|
|
$
|
145,675
|
|
(in thousands)
|
|
||
Remainder of 2018
|
$
|
12,362
|
|
2019
|
16,081
|
|
|
2020
|
14,525
|
|
|
2021
|
13,571
|
|
|
2022
|
12,893
|
|
|
2023 and thereafter
|
72,151
|
|
|
|
$
|
141,583
|
|
|
Aug 31, 2017
|
|
May 31, 2017
|
||||
(in thousands)
|
|
||||||
Payroll and related expenses
|
$
|
6,139
|
|
|
$
|
11,383
|
|
Royalties
|
2,293
|
|
|
2,885
|
|
||
Accrued severance
|
1,931
|
|
|
2,075
|
|
||
Sales and franchise taxes
|
829
|
|
|
856
|
|
||
Outside services
|
1,899
|
|
|
1,622
|
|
||
Litigation matters
|
12,500
|
|
|
12,500
|
|
||
Acculis recall liability
|
1,001
|
|
|
2,563
|
|
||
Other
|
5,672
|
|
|
4,920
|
|
||
|
$
|
32,264
|
|
|
$
|
38,804
|
|
|
Three Months Ended
|
||||
(in thousands)
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||
Basic
|
36,919
|
|
|
36,319
|
|
Effect of dilutive securities
|
—
|
|
|
379
|
|
Diluted
|
36,919
|
|
|
36,698
|
|
|
|
|
|
||
Securities excluded as their inclusion would be anti-dilutive
|
1,085
|
|
|
1,503
|
|
|
Three Months Ended
|
||||||
(in thousands)
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||||
Net sales
|
|
|
|
||||
Peripheral Vascular
|
$
|
49,865
|
|
|
$
|
52,029
|
|
Vascular Access
|
23,238
|
|
|
25,005
|
|
||
Oncology/Surgery
|
12,308
|
|
|
11,064
|
|
||
Total
|
$
|
85,411
|
|
|
$
|
88,098
|
|
•
|
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, 2017
|
||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
||||||||
Financial Assets:
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
|
|
|
|
|
|
|
||||||||
U.S. government agency obligations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,215
|
|
|
$
|
1,215
|
|
Total Financial Assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,215
|
|
|
$
|
1,215
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration for acquisition earn out
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,766
|
|
|
$
|
10,766
|
|
Total Financial Liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,766
|
|
|
$
|
10,766
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
Fair Value Measurements using
inputs considered as:
|
|
Fair Value at May 31,
2017
|
||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
||||||||
Financial Assets:
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
|
|
|
|
|
|
|
||||||||
U.S. government agency obligations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,215
|
|
|
$
|
1,215
|
|
Total Financial Assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,215
|
|
|
$
|
1,215
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration for acquisition earn out
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,761
|
|
|
$
|
12,761
|
|
Total Financial Liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,761
|
|
|
$
|
12,761
|
|
|
Three Months Ended August 31, 2017
|
||||||
|
Financial Assets
|
|
Financial Liabilities
|
||||
(in thousands)
|
Fair Value Measurements
Using Significant Unobservable Inputs (Level 3) |
|
Fair Value Measurements
Using Significant Unobservable Inputs (Level 3) |
||||
Balance, May 31, 2017
|
$
|
1,215
|
|
|
$
|
12,761
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
|
||
Change in present value of contingent consideration
|
—
|
|
|
105
|
|
||
Contingent consideration payments
|
—
|
|
|
(2,100
|
)
|
||
Balance, August 31, 2017
|
$
|
1,215
|
|
|
$
|
10,766
|
|
|
Fair value at
|
|
Valuation
|
|
|
|
|
||
(in thousands)
|
Aug 31, 2017
|
|
Technique
|
|
Unobservable Input
|
|
Range
|
||
Revenue based payments
|
$
|
10,766
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
4%
|
|
|
|
|
|
Probability of payment
|
|
100%
|
||
|
|
|
|
|
Projected fiscal year of payment
|
|
2018-2020
|
|
August 31, 2017
|
||||||||||||||
(in thousands)
|
Amortized
cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Government agency obligations
|
$
|
1,350
|
|
|
$
|
—
|
|
|
$
|
(135
|
)
|
|
$
|
1,215
|
|
|
$
|
1,350
|
|
|
$
|
—
|
|
|
$
|
(135
|
)
|
|
$
|
1,215
|
|
|
May 31, 2017
|
||||||||||||||
(in thousands)
|
Amortized
cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Government agency obligations
|
$
|
1,350
|
|
|
$
|
—
|
|
|
$
|
(135
|
)
|
|
$
|
1,215
|
|
|
$
|
1,350
|
|
|
$
|
—
|
|
|
$
|
(135
|
)
|
|
$
|
1,215
|
|
Type of cost
|
|
Total estimated amount expected to be incurred (in millions)
|
Termination benefits
|
|
$1.75 to $2.25
|
Plant Consolidation (1)
|
|
$2.25 to $2.50
|
Regulatory filings
|
|
$0.75 to $1.00
|
Contract cancellations
|
|
$0.75 to $1.00
|
Other
|
|
$0.75 to $1.00
|
|
|
$6.25 to $7.75
|
|
|
|
|
|
|
|
|
Contract
|
|
|
|
|
||||||||||||
|
|
Termination
|
|
Plant
|
|
Regulatory
|
|
Cancellation
|
|
Other
|
|
|
||||||||||||
|
|
Benefits
|
|
Consolidation
|
|
Filings
|
|
Costs
|
|
Costs
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance at May 31, 2017
|
|
$
|
851
|
|
|
$
|
111
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
962
|
|
Charges
|
|
594
|
|
|
600
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
1,216
|
|
||||||
Non-cash adjustments
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(108
|
)
|
||||||
Cash payments
|
|
(71
|
)
|
|
(555
|
)
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
(647
|
)
|
||||||
Balance at August 31, 2017
|
|
$
|
1,374
|
|
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1,423
|
|
(in thousands)
|
|
Foreign currency translation gain (loss)
|
|
Unrealized gain (loss) on marketable securities
|
|
Total
|
||||||
Balance at May 31, 2017
|
|
$
|
(1,305
|
)
|
|
$
|
(19
|
)
|
|
$
|
(1,324
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
|
283
|
|
|
—
|
|
|
283
|
|
|||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net other comprehensive income (loss)
|
|
$
|
283
|
|
|
$
|
—
|
|
|
$
|
283
|
|
Balance at August 31, 2017
|
|
$
|
(1,022
|
)
|
|
$
|
(19
|
)
|
|
$
|
(1,041
|
)
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
•
|
the FDA clearance for the Solero Microwave Tissue Ablation System;
|
•
|
migration from independent US and international sales strategies to a global sales strategy; and
|
•
|
a lawsuit filed against C.R. Bard for violating Federal Antitrust Laws.
|
•
|
Revenue decreased by 3% to
$85.4 million
|
•
|
Gross margin decreased by 2.8% to
48.3%
|
•
|
Operating income decreased by $3.4 million to $0.1 million
|
•
|
Earnings per share decreased by $0.04 to $0.00
|
•
|
Cash flow from operations decreased by $4.4 million to
$3.0 million
|
|
Three months ended
|
||||||||
|
Aug 31, 2017
|
|
Aug 31, 2016
|
|
% Growth
|
||||
Net Sales by Product Category
|
|
|
|
|
|
||||
Peripheral Vascular
|
$
|
49,865
|
|
|
$
|
52,029
|
|
|
(4)%
|
Vascular Access
|
23,238
|
|
|
25,005
|
|
|
(7)%
|
||
Oncology/Surgery
|
12,308
|
|
|
11,064
|
|
|
11%
|
||
Total
|
$
|
85,411
|
|
|
$
|
88,098
|
|
|
(3)%
|
|
|
|
|
|
|
||||
Net Sales by Geography
|
|
|
|
|
|
||||
United States
|
$
|
68,931
|
|
|
$
|
72,208
|
|
|
(5)%
|
International
|
16,480
|
|
|
15,890
|
|
|
4%
|
||
Total
|
$
|
85,411
|
|
|
$
|
88,098
|
|
|
(3)%
|
|
|
|
|
|
|
•
|
Consolidated and U.S. net sales decreased from the prior year as a result of decreased net sales from Peripheral Vascular and Vascular Access. This decrease was partially offset by 11% year over year growth in our Oncology/Surgery Global Business Unit.
|
•
|
Total Peripheral Vascular sales
decreased
$2.2 million
primarily attributable to decreased sales volume of Venous and Angiographic products of $3.1 million. The decrease in our Angiographic product line is related to the prior year volume from backorders related to a competitor recall. Softness in Venous was offset by strong performance in our Fluid Management product line, which increased $1.2 million year over year. The increase in Fluid Management was attributed to the Fluid Management dedicated sales team being fully staffed and promoting new custom kits.
|
•
|
U.S. Peripheral Vascular sales decreased $1.3 million and international Peripheral Vascular sales decreased $0.8 million, which was primarily due to decreased sales volume of Venous and Angiographic products. This decreased sales volume was offset by an increase in volume in Fluid Management.
|
•
|
Total Vascular Access sales
decreased
$1.8 million
primarily in our non-BioFlo businesses. Our BioFlo product lines grew 1% year over year and now comprise 49% of our overall vascular access sales, compared to 45% a year ago.
|
•
|
U.S. Vascular Access sales declined by 7% due to softness across the portfolio offset by Midline, BioFlo Dialysis and BioFlo Ports which continued to gain traction in the marketplace.
|
•
|
International Vascular Access sales decreased 8% which was partially offset by the market penetration of BioFlo PICCs.
|
•
|
Total Oncology/Surgery sales
increased
$1.2 million
year over year primarily due to the successful launch of our Solero product line, which generated $1.6 million of growth year over year. Growth in NanoKnife disposables was 13% year over year, which was offset with timing of capital sales compared to prior year.
|
•
|
U.S. Oncology/Surgery declined by 8%, driven primarily by the timing of NanoKnife capital sales of $0.6 million and market challenges in the Radiofrequency Ablation product line of $0.5 million partially offset by increased Microwave disposable sales of $0.7 million.
|
•
|
International Oncology/Surgery sales increased 41% year over year as a result of Microwave capital and disposable sales of $0.9 million and NanoKnife disposable sales of $0.6 million.
|
|
|
Three months ended
|
|||||||||
|
|
Aug 31, 2017
|
|
Aug 31, 2016
|
|
% Change
|
|||||
Gross profit
|
|
$
|
41.2
|
|
|
$
|
45.0
|
|
|
(8
|
)%
|
Gross profit % of sales
|
|
48.3
|
%
|
|
51.1
|
%
|
|
|
|||
Research and development
|
|
$
|
6.4
|
|
|
$
|
6.7
|
|
|
(4
|
)%
|
% of sales
|
|
7.5
|
%
|
|
7.6
|
%
|
|
|
|||
Selling and marketing
|
|
$
|
19.4
|
|
|
$
|
19.5
|
|
|
(1
|
)%
|
% of sales
|
|
22.7
|
%
|
|
22.1
|
%
|
|
|
|||
General and administrative
|
|
$
|
8.1
|
|
|
$
|
8.2
|
|
|
(1
|
)%
|
% of sales
|
|
9.4
|
%
|
|
9.3
|
%
|
|
|
•
|
In first quarter of fiscal year 2018, gross profit was negatively impacted by the market withdrawal of Acculis capital systems by $0.5 million. Softer volume in the plant resulted in a negative $1.0 million impact on gross profit, along with $0.9 million of pricing headwinds and mix of product sales compared to prior year.
|
•
|
Timing of project spend in the first quarter of fiscal year 2018 compared to prior year was down $0.2 million along with open positions contributing $0.1 million of favorability.
|
•
|
R&D expense as a percentage of sales decreased slightly year over year as a result of the lower R&D expense along with lower sales in the first quarter of fiscal year 2018.
|
•
|
A decrease in compensation and benefits of approximately $0.6 million, which was primarily the result of a new commissions plan implemented fiscal year 2018 offset by higher compensation and bonus due to additional employees and accrued severance. The new commissions plan structure is better aligned with the organizations product and revenue growth goals.
|
•
|
The decrease in compensation and benefits was partially offset by increased travel of clinical specialists of $0.2 million, increased sample expense related to Solero of $0.2 million and other expenses of approximately $0.2 million.
|
•
|
As a result of the lower S&M expenses along with lower sales in the first quarter of fiscal year 2018, the percentage of S&M to sales increased 0.6%.
|
•
|
Decreased benefits expense of approximately $0.3 million, lower depreciation of $0.2 million and a decrease in recruiting and relocation expenses of approximately $0.3 million.
|
•
|
The decreases above were partially offset by increased professional fees of $0.5 million and other miscellaneous expenses of $0.2 million.
|
|
|
Three months ended
|
||||||||||
|
|
Aug 31, 2017
|
|
Aug 31, 2016
|
|
$ Change
|
||||||
Amortization of intangibles
|
|
$
|
4.1
|
|
|
$
|
4.2
|
|
|
$
|
(0.1
|
)
|
Change in fair value of contingent consideration
|
|
$
|
0.1
|
|
|
$
|
0.4
|
|
|
$
|
(0.3
|
)
|
Acquisition, restructuring and other items, net
|
|
$
|
3.0
|
|
|
$
|
2.4
|
|
|
$
|
0.6
|
|
Other expense
|
|
$
|
(0.2
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
0.5
|
|
•
|
The decrease of $0.1 million is primarily related to intangible assets that became fully amortized.
|
•
|
The decrease is due to the fact that in the second quarter of fiscal year 2017 the future sales projections for the AngioVac product were updated which resulted in the elimination of any payments above minimums. The normal amortization of the present value discount on the contingent liabilities is now approximately $0.1 million per quarter.
|
•
|
There was $1.2 million of expense related to the plant consolidation that was announced in the third quarter of fiscal year 2017. The expense consisted mainly of severance of $0.6 million and start-up costs to move the product lines including equipment transfer expenses, accelerated depreciation for assets that will not be transferred, validation and other start up costs of $0.6 million.
|
•
|
Legal expenses of $1.8 million were recorded in both the first quarter of fiscal years 2018 and 2017.
|
•
|
The decrease in other expenses of
$0.5 million
was due to unrealized foreign currency gains from re-measurement.
|
|
|
Three months ended
|
||||||
|
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||||
Income tax expense (benefit)
|
|
$
|
—
|
|
|
$
|
1.6
|
|
Effective tax rate including discrete items
|
|
(118.8
|
)%
|
|
55.2
|
%
|
|
Three Months Ended
|
||||||
(in thousands)
|
Aug 31, 2017
|
|
Aug 31, 2016
|
||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
3,036
|
|
|
$
|
7,440
|
|
Investing activities
|
(501
|
)
|
|
(481
|
)
|
||
Financing activities
|
(2,538
|
)
|
|
(1,797
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
659
|
|
|
(84
|
)
|
||
Net change in cash and cash equivalents
|
$
|
656
|
|
|
$
|
5,078
|
|
•
|
Net loss was driven by lower sales and gross margins.
|
•
|
With regards to working capital, the Company focused on optimizing DSO which contributed to $3.1 million of working capital improvement. This working capital improvement was offset by a $7.2 million decrease in accounts payable and accrued liabilities from May 31, 2017, along with a decrease in the Acculis inventory reserve of $0.5 million and inventory build related to the plant consolidation.
|
•
|
$0.5 million in fixed asset additions which is consistent with the prior year.
|
•
|
$1.3 million in repayments on long-term debt in the first quarter of fiscal year 2018 compared to $2.5 million in the first quarter of fiscal year 2017. The decrease from the prior year is the result of the Credit Agreement that was entered into in the second quarter of fiscal 2017 that had decreased principal payments.
|
•
|
$0.8 million of proceeds from stock option and ESPP activity compared to $2.8 million in the first quarter of the prior year. The large decrease is related to the exercise of stock based awards from executive management turnover that took place in fiscal year 2017.
|
•
|
$2.1 million payment on earn-out liabilities which is consistent with 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
|
||||||||||||
Period
|
Total
Number of
Shares
Purchased
(1)
|
|
Average
Price Paid
per Share
|
|
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Programs
|
|
Maximum
Approximate
Dollar Value
of Shares
that May Yet
Be
Purchased
Under Plans
or Programs
|
||||||
June 1 - June 30, 2017
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
July 1 - July 31, 2017
|
5,761
|
|
|
$
|
16.09
|
|
|
—
|
|
|
$
|
—
|
|
August 1 - August 31, 2017
|
2,169
|
|
|
$
|
16.61
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
7,930
|
|
|
$
|
16.23
|
|
|
—
|
|
|
—
|
|
(1)
|
The Company repurchased 7,930 shares during the three months ended
August 31, 2017
from employees to satisfy tax withholding requirements on the vesting of restricted shares from equity-based awards.
|
Item 3.
|
Defaults on Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
|
|
|
|
ANGIODYNAMICS, INC.
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(Registrant)
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Date:
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September 29, 2017
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/ S / JAMES C. CLEMMER
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James C. Clemmer, President,
Chief Executive Officer
(Principal Executive Officer)
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Date:
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September 29, 2017
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/ S / MICHAEL C. GREINER
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Michael C. Greiner, Executive Vice President,
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
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TSR Performance
Percentile Rank
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Performance Share Units
as a Percent of Target
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75th Percentile or above
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200%
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50th Percentile
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100%
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25th Percentile
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50%
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Below 25th Percentile
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0%
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Abaxis Inc.
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Integra Lifesciences Holdings Corporation
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Abiomed Inc.
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Intricon Corporation
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Accuray Inc.
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Intuitive Surgical, Inc.
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AlphaTec Holdings Inc.
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Invacare Corporation
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Articure, Inc.
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Lakeland Industries Inc.
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Atrion Corporation
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Lemaitre Vascular, Inc.
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C.R. Bard, Inc.
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Masimo Corporation
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Becton, Dickinson & Company
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Merit Medical Systems, Inc.
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Boston Scientific Corporation
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Mine Safety Appliances Company
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Cantel Medical Corp.
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Natus Medical Incorporated
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Conmed Corporation
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NuVasive, Inc.
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CryoLife, Inc.
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NxStage Medical, Inc.
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Cutera, Inc.
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Resmed Inc.
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Cynosure, Inc.
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RTI Surgical, Inc.
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Dexcom, Inc.
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Span-America Medical Systems, Inc.
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Digirad Corp
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Spectranetics Corporation
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Edwards Lifesciences Corporation
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St. Jude Medical, Inc.
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Endologix, Inc.
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Steris Corporation
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Exactech, Inc.
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Stryker Corporation
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Haemonetics Corporation
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Teleflex Incorporated
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ICU Medical, Inc.
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Varian Medical Systems, Inc.
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Insulet Corporation
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Vascular Solutions, Inc.
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I.
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Company Performance Levels
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TSR Performance
Percentile Rank
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Performance Share Units
as a Percent of Target
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75th Percentile or above
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200%
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50th Percentile
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100%
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25th Percentile
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50%
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Below 25th Percentile
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0%
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II.
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The Peer Group (as defined in the Program) with respect to this Agreement is set forth below.
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Abaxis Inc.
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Integra Lifesciences Holdings Corporation
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Abiomed Inc.
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Intricon Corporation
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Accuray Inc.
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Intuitive Surgical, Inc.
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AlphaTec Holdings Inc.
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Invacare Corporation
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Articure, Inc.
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Lakeland Industries Inc.
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Atrion Corporation
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Lemaitre Vascular, Inc.
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C.R. Bard, Inc.
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Masimo Corporation
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Becton, Dickinson & Company
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Merit Medical Systems, Inc.
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Boston Scientific Corporation
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Mine Safety Appliances Company
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Cantel Medical Corp.
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Natus Medical Incorporated
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Conmed Corporation
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NuVasive, Inc.
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CryoLife, Inc.
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NxStage Medical, Inc.
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Cutera, Inc.
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Resmed Inc.
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Cynosure, Inc.
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RTI Surgical, Inc.
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Dexcom, Inc.
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Span-America Medical Systems, Inc.
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Digirad Corp
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Spectranetics Corporation
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Edwards Lifesciences Corporation
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St. Jude Medical, Inc.
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Endologix, Inc.
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Steris Corporation
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Exactech, Inc.
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Stryker Corporation
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Haemonetics Corporation
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Teleflex Incorporated
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ICU Medical, Inc.
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Varian Medical Systems, Inc.
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Insulet Corporation
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Vascular Solutions, Inc.
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1.
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I have reviewed this quarterly report on Form 10-Q of AngioDynamics, Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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(a)
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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;
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(b)
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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;
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(c)
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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
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(d)
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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
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5.
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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):
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(a)
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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
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(b)
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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.
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1.
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I have reviewed this quarterly report on Form 10-Q of AngioDynamics, Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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(a)
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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;
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(b)
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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;
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(c)
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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
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(d)
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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
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5.
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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):
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(a)
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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
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(b)
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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.
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1.
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the quarterly report on Form 10-Q of the Company for the fiscal quarter ended August 31, 2017 (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
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/ s / James C. Clemmer
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James C. Clemmer, President,
Chief Executive Officer
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1.
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the quarterly report on Form 10-Q of the Company for the fiscal quarter ended August 31, 2017 (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
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/ s / Michael C. Greiner
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Michael C. Greiner, Executive Vice President and
Chief Financial Officer
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