UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
November
9, 2018 |
| Date of report (Date of earliest event reported) |
|
Surmodics, Inc. |
| (Exact Name of Registrant as Specified in its Charter) |
|
Minnesota |
0-23837 |
41-1356149 |
||
|
(State of Incorporation)
|
(Commission File Number)
|
(I.R.S. Employer Identification No.) |
|
9924 West 74th Street Eden Prairie, Minnesota |
55344 |
|
| (Address of Principal Executive Offices) | (Zip Code) |
|
(952) 500-7000 |
| (Registrant’s Telephone Number, Including Area Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company |
⃞ |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
⃞ |
Item 2.02 Results of Operations and Financial Condition.
On November 9, 2018, Surmodics, Inc. (the “Company”) issued a press release (the “Press Release”) announcing the results for the quarter ended September 30, 2018. A copy of the full text of the Press Release is furnished as Exhibit 99.1 to this report.
The information contained in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
|
(d) |
Exhibits |
||||
|
Exhibit Number |
Description | ||||
| 99.1 | Press Release dated November 9, 2018. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
|
SURMODICS, INC. |
|||
|
|
|||
| Date: | November 9, 2018 |
|
/s/ Timothy J. Arens |
|
Timothy J. Arens |
|||
|
Vice President of Corporate Development and Strategy, Interim Vice President of Finance and Chief Financial Officer |
|||
EXHIBIT INDEX
|
Exhibit |
||
|
Number |
Description |
|
Exhibit 99.1
Surmodics Reports Fourth Quarter Fiscal 2018 Results and Issues Fiscal 2019 Guidance
EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--November 9, 2018--Surmodics, Inc. (Nasdaq: SRDX), a leading provider of medical device and in vitro diagnostic technologies to the healthcare industry, today announced results for its fiscal 2018 fourth quarter ended September 30, 2018, and provided its financial outlook for fiscal 2019.
Summary of Fourth Quarter Fiscal 2018 Highlights and Fiscal 2019 Guidance
- Revenue of $23.0 million, an increase of 15% year-over-year
- GAAP EPS of ($0.13), non-GAAP EPS of $0.05
- Submitted application for first in-human study for arteriovenous (AV) access drug coated balloon (DCB)
- Fiscal 2019 revenue outlook of $92.0 to $97.0 million, GAAP EPS outlook of ($0.32) to ($0.02)
“We continue to drive strong revenue growth and solid operational performance as we execute on our strategic objectives,” said Gary Maharaj, President & CEO of Surmodics. “The positive twelve-month data recently presented from PREVEIL, the early feasibility study of our SurVeil® DCB and the recent submission for first in-human study for our AV access DCB, AVess™, demonstrate meaningful progress towards our whole-products solutions initiatives.”
Fourth Quarter Fiscal 2018 Financial Results
Total revenue for
the fourth quarter of fiscal 2018 was $23.0 million, as compared with
$20.1 million in the prior-year period. Medical Device revenue was $17.0
million in the fourth quarter of fiscal 2018, as compared with $14.7
million in the year-ago period, an increase of 15.4%, and includes $2.2
million from our SurVeil agreement with Abbott. In Vitro
Diagnostics revenue was $6.1 million for the fourth quarter of fiscal
2018 as compared with $5.3 million in the same prior-year quarter, an
increase of 13.4%.
Diluted GAAP loss per share in the fourth quarter of fiscal 2018 was $(0.13) as compared with diluted GAAP earnings per share of $0.03 in the year-ago period. On a non-GAAP basis, earnings per share were $0.05 in the fourth quarter of fiscal 2018, as compared with $0.18 in the year-ago period.
As of September 30, 2018, cash and investments were $65.0 million. Surmodics generated cash from operating activities of $34.1 million in fiscal 2018. Capital expenditures totaled $9.0 million for fiscal 2018.
Fiscal 2019 Outlook
Surmodics expects fiscal year 2019 revenue
to range from $92 million to $97 million. The Company expects diluted
EPS in the range of ($0.32) to ($0.02) per share, which reflects the
Company’s continued investment in research and development to further
its whole-product solutions strategy. Non-GAAP diluted EPS is expected
to be in the range of ($0.07) to $0.23 per share.
Conference Call
Surmodics will host a webcast at 7:30 a.m. CT
(8:30 a.m. ET) today to discuss fourth quarter results. To access the
webcast, go to the investor relations portion of the Company’s website
at https://surmodics.gcs-web.com and click on the webcast icon.
The webcast will be archived on the Company’s website for 90 days. A
replay of the fourth quarter conference call will be available by
dialing 888-203-1112 and entering conference call ID passcode 1123199.
The audio replay will be available beginning at 10:30 a.m. CT on Friday,
November 9, 2018, until 10:30 a.m. CT on Friday, November 16, 2018.
About Surmodics, Inc.
Surmodics is the global leader in
surface modification technologies for intravascular medical devices and
a leading provider of chemical components for in vitro diagnostic (IVD)
immunoassay tests and microarrays. Surmodics is pursuing highly
differentiated whole-product solutions that are designed to address
unmet clinical needs for its medical device customers and engineered to
the most demanding requirements. This key growth strategy leverages the
combination of the Company’s expertise in proprietary surface
technologies, along with enhanced device design, development and
manufacturing capabilities. The Company mission remains to improve the
detection and treatment of disease. Surmodics is headquartered in Eden
Prairie, Minnesota. For more information, visit www.surmodics.com.
The content of Surmodics’ website is not part of this press release or
part of any filings that the company makes with the SEC.
Safe Harbor for Forward-Looking Statements
This press release
contains forward-looking statements. Statements that are not historical
or current facts, including statements about beliefs and expectations
regarding the Company’s performance in the near- and long-term,
including our revenue and earnings expectations for fiscal 2019, and our SurVeil
DCB and other proprietary products are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and
important factors could cause actual results to differ materially from
those anticipated, including (1) our ability to successfully develop,
obtain regulatory approval for, and commercialize our SurVeil DCB
(including realization of the full potential benefits of our agreement
with Abbott), and other proprietary products; (2) our reliance on third
parties (including our customers and licensees) and their failure to
successfully develop, obtain regulatory approval for, market and sell
products incorporating our technologies; (3) possible adverse market
conditions and possible adverse impacts on our cash flows, and (4) the
factors identified under “Risk Factors” in Part I, Item 1A of our Annual
Report on Form 10-K for the fiscal year ended September 30, 2017, and
updated in our subsequent reports filed with the SEC. These reports are
available in the Investors section of our website at https://surmodics.gcs-web.com
and at the SEC website at www.sec.gov. Forward-looking statements
speak only as of the date they are made, and we undertake no obligation
to update them in light of new information or future events.
Use of Non-GAAP Financial Information
In addition to reporting
financial results in accordance with U.S. generally accepted accounting
principles, or GAAP, Surmodics is reporting non-GAAP financial results
including EBITDA and Adjusted EBITDA, non-GAAP operating (loss) income,
non-GAAP income before income taxes, non-GAAP net income, and non-GAAP
diluted earnings per share, and the non-GAAP effective income tax rate.
We believe that these non-GAAP measures, when read in conjunction with
the Company’s GAAP financial statements, provide meaningful insight into
our operating performance excluding certain event-specific matters, and
provide an alternative perspective of our results of operations. We use
non-GAAP measures, including those set forth in this release, to assess
our operating performance and to determine payout under our executive
compensation programs. We believe that presentation of certain non-GAAP
measures allows investors to review our results of operations from the
same perspective as management and our board of directors and
facilitates comparisons of our current results of operations. The method
we use to produce non-GAAP results is not in accordance with GAAP and
may differ from the methods used by other companies. Non-GAAP results
should not be regarded as a substitute for corresponding GAAP measures
but instead should be utilized as a supplemental measure of operating
performance in evaluating our business. Non-GAAP measures do have
limitations in that they do not reflect certain items that may have a
material impact on our reported financial results. As such, these
non-GAAP measures should be viewed in conjunction with both our
financial statements prepared in accordance with GAAP and the
reconciliation of the supplemental non-GAAP financial measures to the
comparable GAAP results provided for the specific periods presented,
which are attached to this release.
|
Surmodics, Inc. and Subsidiaries |
||||||||||||||||
| Three Months Ended | Years Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenue: | ||||||||||||||||
| Product sales | $ | 10,704 | $ | 8,826 | $ | 37,953 | $ | 32,790 | ||||||||
| Royalties and license fees | 10,323 | 9,223 | 35,424 | 31,787 | ||||||||||||
| Research, development and other | 2,011 | 2,009 | 7,959 | 8,535 | ||||||||||||
| Total revenue | 23,038 | 20,058 | 81,336 | 73,112 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Product costs | 4,089 | 3,317 | 13,997 | 11,422 | ||||||||||||
| Research and development | 12,591 | 9,713 | 40,973 | 31,817 | ||||||||||||
| Selling, general and administrative | 6,505 | 5,307 | 24,111 | 20,478 | ||||||||||||
| Acquired in-process research and development | — | — | 7,888 | — | ||||||||||||
| Acquired intangible asset amortization | 613 | 629 | 2,491 | 2,419 | ||||||||||||
| Contingent consideration expense (gain) | 1,681 | 676 | 675 | (127 | ) | |||||||||||
| Total operating costs and expenses | 25,479 | 19,642 | 90,135 | 66,009 | ||||||||||||
| Operating (loss) income | (2,441 | ) | 416 | (8,799 | ) | 7,103 | ||||||||||
| Other income (loss), net | 411 | (224 | ) | 1,267 | (70 | ) | ||||||||||
| (Loss) income from operations before income taxes | (2,030 | ) | 192 | (7,532 | ) | 7,033 | ||||||||||
| Income tax benefit (provision) | 277 | 208 | 3,075 |
|
(3,107 | ) | ||||||||||
| Net (loss) income | $ | (1,753 | ) | $ | 400 | $ | (4,457 | ) | $ | 3,926 | ||||||
| Basic (loss) income per share: | $ | (0.13 | ) | $ | 0.03 | $ | (0.34 | ) | $ | 0.30 | ||||||
| Diluted (loss) income per share: | $ | (0.13 | ) | $ | 0.03 | $ | (0.34 | ) | $ | 0.29 | ||||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic | 13,279 | 13,041 | 13,157 | 13,153 | ||||||||||||
| Diluted | 13,279 | 13,365 | 13,157 | 13,389 | ||||||||||||
|
Surmodics, Inc. and Subsidiaries |
||||||
| September 30, | ||||||
| 2018 | 2017 | |||||
| Assets | (Unaudited) | |||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 23,318 | $ | 16,534 | ||
| Restricted cash | 350 | — | ||||
| Available-for-sale securities | 41,352 | 31,802 | ||||
| Accounts receivable, net | 8,877 | 7,211 | ||||
| Inventories, net | 4,016 | 3,516 | ||||
| Prepaids and other | 3,614 | 1,820 | ||||
| Total Current Assets | 81,527 | 60,883 | ||||
| Property and equipment, net | 30,143 | 22,942 | ||||
| Deferred tax assets | 6,304 | 4,027 | ||||
| Intangible assets, net | 17,683 | 20,562 | ||||
| Goodwill | 27,032 | 27,282 | ||||
| Other assets | 1,446 | 897 | ||||
| Total Assets | $ | 164,135 | $ | 136,593 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current Liabilities: | ||||||
| Contingent consideration, current portion | 11,041 | 1,750 | ||||
| Deferred revenue | 9,646 | 62 | ||||
| Other current liabilities | 14,446 | 7,991 | ||||
| Total Current Liabilities | 35,133 | 9,803 | ||||
| Contingent consideration, less current portion | 3,425 | 13,114 | ||||
| Deferred revenue | 11,247 | 181 | ||||
| Other long-term liabilities | 5,720 | 1,938 | ||||
| Total Liabilities | 55,525 | 25,036 | ||||
| Total Stockholders’ Equity | 108,610 | 111,557 | ||||
| Total Liabilities and Stockholders’ Equity | $ | 164,135 | $ | 136,593 | ||
|
Surmodics, Inc. and Subsidiaries |
||||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||
| Revenue: | % of Total | % of Total |
% |
|||||||||||||||
| Medical Device | $ | 16,986 | 73.7% | $ | 14,723 |
73.4% |
|
15.4% | ||||||||||
| In Vitro Diagnostics | 6,052 | 26.3% | 5,335 |
26.6% |
|
13.4% | ||||||||||||
| Total revenue | $ | 23,038 | $ | 20,058 | 14.9% | |||||||||||||
| Years Ended September 30, | ||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||
| Revenue: | % of Total | % of Total |
% |
|||||||||||||||
| Medical Device | $ | 60,513 | 74.4% | $ | 53,983 |
73.8% |
|
12.1% | ||||||||||
| In Vitro Diagnostics | 20,823 |
25.6% |
|
19,129 |
26.2% |
|
8.9% | |||||||||||
| Total revenue | $ | 81,336 | $ | 73,112 | 11.2% | |||||||||||||
| Three Months Ended |
Years Ended |
|||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Operating (loss) income: | ||||||||||||||||||
| Medical Device | $ | (2,127 | ) | $ | 276 | $ | (8,478 | ) | $ | 6,902 | ||||||||
| In Vitro Diagnostics | 2,350 | 2,371 | 8,619 | 8,293 | ||||||||||||||
| Total segment operating income | 223 | 2,647 | 141 | 15,195 | ||||||||||||||
| Corporate | (2,664 | ) | (2,231 | ) | (8,940 | ) | (8,092 | ) | ||||||||||
| Total (loss) income from operations | $ | (2,441 | ) | $ | 416 | $ | (8,799 | ) | $ | 7,103 | ||||||||
|
Surmodics, Inc. and Subsidiaries |
||||||||||||||||
| Three Months Ended | Years Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net (loss) income | $ | (1,753 | ) | $ | 400 | $ | (4,457 | ) | $ | 3,926 | ||||||
| Income tax (benefit) provision | (277 | ) | (208 | ) | (3,075 | ) | 3,107 | |||||||||
| Depreciation and amortization | 1,720 | 1,549 | 6,431 | 5,555 | ||||||||||||
| Investment income, net | (285 | ) | (116 | ) | (851 | ) | (390 | ) | ||||||||
| EBITDA | (595 | ) | 1,625 | (1,952 | ) | 12,198 | ||||||||||
| Adjustments: | ||||||||||||||||
| Contingent consideration expense (gain) (1) | 1,681 | 676 | 675 | (127 | ) | |||||||||||
| Foreign exchange (gain) loss (2) | (74 | ) | 347 | (148 | ) | 474 | ||||||||||
| Gain on strategic investment (4) | — | (43 | ) | (177 | ) | (43 | ) | |||||||||
| Claim settlement accrual (6) | — | — | 1,000 | — | ||||||||||||
| Acquired in-process research and development (7) | — | — | 7,888 | — | ||||||||||||
| Asset impairment (8) | — | 427 | — | 427 | ||||||||||||
| Adjusted EBITDA | $ | 1,012 | $ | 3,032 | $ | 7,286 | $ | 12,929 | ||||||||
| Net Cash Provided by Operating Activities | $ | 4,830 | $ | 6,397 | $ | 34,052 | $ | 14,053 | ||||||||
|
Estimated Non-GAAP Net Earnings per Common Share Guidance
Reconciliation |
||||||||
| Fiscal 2019 Full-Year Estimate | ||||||||
| Low | High | |||||||
| GAAP results | $ | (0.32 | ) | $ | (0.02 | ) | ||
| Contingent consideration adjustments (1) | 0.08 | 0.08 | ||||||
| Amortization of acquired intangibles (3) | 0.17 | 0.17 | ||||||
| Non-GAAP results | $ | (0.07 | ) | $ | 0.23 | |||
|
Surmodics, Inc., and Subsidiaries |
||||||||||||||||||||||||||
| For the Three Months Ended September 30, 2018 | ||||||||||||||||||||||||||
|
Total |
Operating |
Operating |
(Loss) Income |
Net |
Diluted |
Effective |
||||||||||||||||||||
| GAAP | $ | 23,038 | $ | (2,441 | ) | (10.6 | )% | $ | (2,030 | ) | $ | (1,753 | ) | $ | (0.13 | ) | 13.6 | % | ||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Contingent consideration expense (1) | ― | 1,681 | 7.3 | 1,681 | 1,681 | 0.13 | ||||||||||||||||||||
| Foreign exchange gain (2) | ― | — | — | (74 | ) | (74 | ) | (0.01 | ) | |||||||||||||||||
| Amortization of acquired intangible assets (3) | ― | 613 | 2.7 | 613 | 561 | 0.04 | ||||||||||||||||||||
| Tax reform impact (5) | ― | — | — | — | 327 | 0.02 | ||||||||||||||||||||
| Dilutive effect of outstanding stock awards (9) | ― | — | — | — | — | (0.01 | ) | |||||||||||||||||||
| Non-GAAP | $ | 23,038 | $ | (147 | ) | (0.6 | )% | $ | 190 | $ | 742 | $ | 0.05 | (290.5 | )% | |||||||||||
| For the Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||
|
Total |
Operating |
Operating |
Income Before |
Net |
Diluted |
Effective |
||||||||||||||||||||
| GAAP | $ | 20,058 | $ | 416 | 2.1 | % | $ | 192 | $ | 400 | $ | 0.03 | (108.3 | )% | ||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Contingent consideration expense (1) | ― | 676 | 3.4 | 676 | 676 | 0.05 | ||||||||||||||||||||
| Foreign exchange loss (2) | ― | — | — | 347 | 347 | 0.03 | ||||||||||||||||||||
| Amortization of acquired intangible assets (3) | ― | 629 | 3.1 | 629 | 550 | 0.04 | ||||||||||||||||||||
| Gain on strategic investment (4) | ― | — | — |
(43 |
) |
(43 |
) |
(0.00 |
) | |||||||||||||||||
| Asset impairment (8) | ― | 427 | 2.1 | 427 | 427 | 0.03 | ||||||||||||||||||||
| Non-GAAP | $ | 20,058 | $ | 2,148 | 10.7 | % | $ | 2,228 | $ | 2,357 | $ | 0.18 | (5.8 | )% | ||||||||||||
| For the Year Ended September 30, 2018 | |||||||||||||||||||||||||
|
Total |
Operating |
Operating |
(Loss) Income |
Net |
Diluted |
Effective |
|||||||||||||||||||
| GAAP | $ | 81,336 | $ | (8,799 | ) | (10.8 | )% | $ | (7,532 | ) | $ | (4,457 | ) | $ | (0.34 | ) | 40.8 | % | |||||||
| Adjustments: | |||||||||||||||||||||||||
| Contingent consideration expense (1) | ― | 675 | 0.8 | 675 | 675 | 0.05 | |||||||||||||||||||
| Foreign exchange gain (2) | ― | — | — | (148 | ) | (148 | ) | (0.01 | ) | ||||||||||||||||
| Amortization of acquired intangible assets (3) | ― | 2,491 | 3.1 | 2,491 | 2,282 | 0.17 | |||||||||||||||||||
| Gain on strategic investment (4) | ― | — | — | (177 | ) | (177 | ) |
(0.01 |
) |
||||||||||||||||
| Tax reform impact (5) | ― | — | — | — | 1,573 | 0.12 | |||||||||||||||||||
| Claim settlement accrual (6) | ― | 1,000 | 1.2 | 1,000 | 755 | 0.06 | |||||||||||||||||||
|
Acquired in-process research and development (7) |
― | 7,888 | 9.7 | 7,888 | 6,232 | 0.47 | |||||||||||||||||||
| Dilutive effect of outstanding stock awards (9) | ― | — | — | — | — | (0.02 | ) | ||||||||||||||||||
| Non-GAAP | $ | 81,336 | $ | 3,255 | 4.0 | % | $ | 4,197 | $ | 6,735 | $ | 0.49 | (60.5 | )% | |||||||||||
| For the Year Ended September 30, 2017 | |||||||||||||||||||||||||
|
Total |
Operating |
Operating |
Income |
Net |
Diluted |
Effective |
|||||||||||||||||||
| GAAP | $ | 73,112 | $ | 7,103 | 9.7 | % | $ | 7,033 | $ | 3,926 | $ | 0.29 | 44.2 | % | |||||||||||
| Adjustments: | |||||||||||||||||||||||||
| Contingent consideration gain (1) | ― | (127 | ) | (0.2 | ) | (127 | ) | (127 | ) | (0.01 | ) | ||||||||||||||
| Foreign exchange loss (2) | ― | — | — | 474 | 474 | 0.04 | |||||||||||||||||||
| Amortization of acquired intangible assets (3) | — | 2,419 | 3.3 | 2,419 | 2,105 | 0.16 | |||||||||||||||||||
| Gain on strategic investment (4) | ― | — | — | (43 | ) | (43 | ) | (0.00 | ) | ||||||||||||||||
| Asset impairment (8) | ― | 427 | 0.6 | 427 | 427 | 0.03 | |||||||||||||||||||
| Non-GAAP | $ | 73,112 | $ | 9,822 | 13.4 | % | $ | 10,183 | $ | 6,762 | $ | 0.51 | 33.6 | % | |||||||||||
| (1) | Represents accounting adjustments to state acquisition-related contingent consideration liabilities at their estimated fair value, including accretion for the passage of time as well as adjustments to the liabilities’ fair values related to changes in the timing and/or probability of achieving milestones. The tables include contingent consideration liability adjustments in each respective historical period and do not include in future-period fair value changes, other than estimated accretion expense as determined at the end of the current quarter. These amounts are not taxable or tax deductible. | |
| (2) | Foreign exchange gains and losses are related to marking non-U.S. dollar contingent consideration to period-end exchange rates. The tables include foreign currency exchange loss or gain recorded in each respective historical period and do not include forecasted currency fluctuations in future periods. These gains and losses are not taxable or tax deductible. | |
| (3) | Amortization of acquisition-related intangible assets and associated tax impact. A significant portion of the acquisition-related amortization is not tax deductible. | |
| (4) | Represents the gain recognized on the sale of a strategic investment which was not tax-affected as it was offset by previously recognized capital losses. | |
| (5) | Income tax expense from the re-measurement of net deferred tax assets recognized after the enactment of the Tax Cuts and Jobs Act in December 2017. | |
| (6) | Represents an estimated royalty-related customer claim settlement accrued in the second quarter of fiscal 2018 and associated tax impact. | |
| (7) | Represents the acquisition of the Embolitech in-process research and development assets during the third quarter of fiscal 2018 and associated tax impact. | |
| (8) | Impairment of indefinite-lived intangible assets which were not tax deductible. | |
| (9) | Options to purchase common stock as well as unvested restricted stock and performance stock units are considered to be potentially dilutive common shares but have been excluded from the calculation of GAAP net loss per share as their effect is anti-dilutive for three months and year ended September 30, 2018 as a result of the net loss for those periods on a GAAP basis. However, as the Non-GAAP adjustments result in Non-GAAP net income, the dilutive effect of these options and other outstanding stock awards have been included in the calculation of Non-GAAP earnings per share. Accordingly, Diluted EPS includes these adjustments. | |
| (10) | Net (loss) income includes the effect of the above adjustments on the income tax provision, taking into account deferred taxes and non-deductible items. Effective rates of 24.5% (fiscal 2018) and between 34-35% (fiscal 2017) were used to estimate the income tax impact of the adjustments, except that expenses occurring in Ireland have not been tax-affected as all tax benefits are offset by a full valuation allowance and acquired in-process research and development, which will be deductible at a 21% statutory tax rate. |
CONTACT:
Surmodics, Inc.
Tim Arens, 952-500-7000
ir@surmodics.com