SEC Filing | AngioDynamics

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ango-20200229

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended February 29, 2020


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

For the transition period from to

Commission file number 0-50761

AngioDynamics, Inc.

(Exact name of registrant as specified in its charter)


Delaware						11-3146460
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

14 Plaza Drive, Latham, New York 12110

(Address of principal executive offices and zip code)

(518) 795-1400

Registrant’s telephone number, including area code

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, par value $.01

ANGO

NASDAQ Global Select Market

Preferred Stock Purchase Rights

NASDAQ Global Select Market

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

None

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(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer 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):

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding as of April 6, 2020
Common Stock, par value $.01						37,694,757

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AngioDynamics, Inc. and Subsidiaries

TABLE OF CONTENTS


		Page
	Part I: Financial Information

Item 1.	Financial Statements

	Consolidated Statements of Operations (unaudited)	3

	Consolidated Statements of Comprehensive Income (Loss) (unaudited)	4

	Consolidated Balance Sheets (unaudited)	5

	Consolidated Statements of Cash Flows (unaudited)	6

	Consolidated Statements of Stockholders’ Equity (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	42

	Part II: Other Information

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults on Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements.

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands of dollars, except per share data)


	Three Months Ended						Nine Months Ended
	Feb 29, 2020		Feb 28, 2019		Feb 29, 2020		Feb 28, 2019
Net sales	$	69,780	$	65,524	$	205,825	$	199,451
Cost of sales (exclusive of intangible amortization)	29,481		27,361		85,765		84,783
Gross profit	40,299		38,163		120,060		114,668
Operating expenses:
Research and development	8,395		6,915		22,450		21,365
Sales and marketing	20,934		18,385		60,427		56,054
General and administrative	10,203		8,718		29,651		26,414
Amortization of intangibles	5,019		4,660		13,417		12,599
Change in fair value of contingent consideration	419		609		116		865
Acquisition, restructuring and other items, net	1,565		2,550		4,486		9,700

Total operating expenses	46,535		41,837		130,547		126,997
Operating loss	(6,236)		(3,674)		(10,487)		(12,329)
Other (expenses) income:
Interest expense, net	(166)		(1,442)		(672)		(3,689)

Other expense, net	(131)		(266)		(67)		(72)
Total other expense, net	(297)		(1,708)		(739)		(3,761)
Loss from continuing operations before income tax benefit	(6,533)		(5,382)		(11,226)		(16,090)
Income tax benefit	(824)		(773)		(1,506)		(2,191)
Net loss from continuing operations	(5,709)		(4,609)		(9,720)		(13,899)
Income from discontinued operations, net of income tax	—		5,405		—		16,366
Net income (loss)	$	(5,709)	$	796	$	(9,720)	$	2,467
Loss per share - continuing operations
Basic	$	(0.15)	$	(0.12)	$	(0.26)	$	(0.37)
Diluted	$	(0.15)	$	(0.12)	$	(0.26)	$	(0.37)
Income per share - discontinued operations
Basic	$	0.00	$	0.14	$	0.00	$	0.44
Diluted	$	0.00	$	0.14	$	0.00	$	0.44
Income (loss) per share
Basic	$	(0.15)	$	0.02	$	(0.26)	$	0.07
Diluted	$	(0.15)	$	0.02	$	(0.26)	$	0.07
Weighted average shares outstanding
Basic	37,999		37,518		37,924		37,446
Diluted	37,999		37,518		37,924		37,446

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands of dollars)


	Three Months Ended						Nine Months Ended
	Feb 29, 2020		Feb 28, 2019		Feb 29, 2020		Feb 28, 2019
Net income (loss)	$	(5,709)	$	796	$	(9,720)	$	2,467
Other comprehensive income (loss), before tax:
Unrealized gain on marketable securities	—		—		—		33
Foreign currency translation	8		173		88		(158)
Other comprehensive income (loss), before tax	8		173		88		(125)
Income tax expense related to items of other comprehensive income	—		—		—		—
Other comprehensive income (loss), net of tax	8		173		88		(125)
Total comprehensive income (loss), net of tax	$	(5,701)	$	969	$	(9,632)	$	2,342

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands of dollars, except share data)


	Feb 29, 2020		May 31, 2019
Assets
Current assets
Cash and cash equivalents	$	27,160	$	227,641

Accounts receivable, net of allowances of $1,991 and $1,906 respectively	35,619		43,577
Inventories	54,898		40,071


Prepaid expenses and other	11,369		4,003
Total current assets	129,046		315,292
Property, plant and equipment, net	28,182		24,258
Other assets	13,684		3,835
Intangible assets, net	201,956		145,387
Goodwill	359,093		347,666

Total assets	$	731,961	$	836,438
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	18,304	$	22,829
Accrued liabilities	27,445		38,338

Current portion of long-term debt	—		7,500
Current portion of contingent consideration	889		4,635
Other current liabilities	2,074		—
Total current liabilities	48,712		73,302
Long-term debt, net of current portion	14,341		124,407
Contingent consideration, net of current portion	26,405		8,851
Deferred income taxes	24,013		14,542
Other long-term liabilities	8,015		521
Total liabilities	121,486		221,623
Commitments and contingencies (Note 15)
Stockholders' equity
Preferred stock, par value $.01 per share, 5,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $.01 per share, 75,000,000 shares authorized; 38,434,757 and 37,984,382 shares issued and 38,064,757 and 37,614,382 shares outstanding at February 29, 2020 and May 31, 2019, respectively	374		372
Additional paid-in capital	560,330		555,040
Retained earnings	56,749		66,469
Treasury stock, 370,000 shares at February 29, 2020 and May 31, 2019, respectively	(5,714)		(5,714)
Accumulated other comprehensive loss	(1,264)		(1,352)
Total Stockholders’ Equity	610,475		614,815
Total Liabilities and Stockholders' Equity	$	731,961	$	836,438

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands of dollars)


	Nine Months Ended
	Feb 29, 2020		Feb 28, 2019
Cash flows from operating activities:
Net income (loss)	$	(9,720)	$	2,467
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	17,550		19,158
Non-cash lease expense	1,567		—
Stock based compensation	5,998		7,119
Change in fair value of contingent consideration	116		865


Deferred income taxes	(1,606)		633
Change in accounts receivable allowances	186		(99)
Fixed and intangible asset impairments and disposals	395		689

Write-off of other assets	593		—
Other	70		(5)
Changes in operating assets and liabilities:
Accounts receivable	7,834		(3,853)
Inventories	(14,036)		(2,702)
Prepaid expenses and other	(9,378)		(1,508)
Accounts payable, accrued and other liabilities	(18,003)		(10,336)
Net cash (used in) provided by operating activities	(18,434)		12,428
Cash flows from investing activities:
Additions to property, plant and equipment	(5,756)		(2,303)
Acquisition of intangibles	(350)		—
Cash paid for acquisitions	(55,760)		(84,920)

Proceeds from sale of marketable securities	—		1,350
Net cash used in investing activities	(61,866)		(85,873)
Cash flows from financing activities:
Proceeds from issuance of and borrowings on long-term debt	15,000		55,000
Repayment of long-term debt	(132,500)		(13,750)
Deferred financing costs on long-term debt	(775)		—
Payment of acquisition related contingent consideration	(1,208)		(2,100)

Proceeds (outlays) from exercise of stock options and employee stock purchase plan	(706)		2,023
Net cash provided by (used in) financing activities	(120,189)		41,173
Effect of exchange rate changes on cash and cash equivalents	8		(120)
Decrease in cash and cash equivalents	(200,481)		(32,392)
Cash and cash equivalents at beginning of period	227,641		74,096
Cash and cash equivalents at end of period	$	27,160	$	41,704

Supplemental disclosure of non-cash investing and financing activities:

Accrual for capital expenditures incurred during the period	$	214	$	(42)
Fair value of contingent consideration for acquisitions	14,900		25,100
Fair value of acquisition consideration included in other long-term liabilities	—		4,691

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands of dollars, except share data)


	Common Stock					Additional paid in capital		Retained earnings		Accumulated other comprehensive loss	Treasury Stock
	Shares	Amount											Shares		Amount	Total
Balance at May 31, 2019	37,984,382	$	372	$	555,040	$	66,469	$	(1,352)	(370,000)	$	(5,714)	$	614,815
Net loss						(1,275)							(1,275)
Exercise of stock options	48,136	1		530									531
Issuance/Cancellation of restricted stock units	287,087			(2,459)									(2,459)

Purchases of common stock under ESPP	40,270			628									628
Stock-based compensation				1,984									1,984


Other comprehensive loss, net of tax								(151)					(151)
Balance at August 31, 2019	38,359,875	$	373	$	555,723	$	65,194	$	(1,503)	(370,000)	$	(5,714)	$	614,073
Net loss						(2,736)							(2,736)

Issuance/Cancellation of restricted stock units	4,051												—


Stock-based compensation				2,242									2,242


Other comprehensive income, net of tax								231					231
Balance at November 30, 2019	38,363,926	$	373	$	557,965	$	62,458	$	(1,272)	(370,000)	$	(5,714)	$	613,810
Net loss						(5,709)							(5,709)

Exercise of stock options	2,500			30									30
Issuance/Cancellation of restricted stock units	8,034			(25)									(25)

Purchases of common stock under ESPP	60,297	1		588									589
Stock-based compensation				1,772									1,772


Other comprehensive income, net of tax								8					8
Balance at February 29, 2020	38,434,757	$	374	$	560,330	$	56,749	$	(1,264)	(370,000)	$	(5,714)	$	610,475

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - continued

(unaudited)

(in thousands of dollars, except share data)


	Common Stock					Additional paid in capital		Retained earnings		Accumulated other comprehensive loss	Treasury Stock
	Shares	Amount											Shares		Amount	Total
Balance at May 31, 2018	37,594,493	$	370	$	543,762	$	5,129	$	(952)	(370,000)	$	(5,714)	$	542,595
Net loss						(469)							(469)
Exercise of stock options	71,336	1		607									608
Issuance/Cancellation of restricted stock units	149,446			(460)									(460)
Issuance/Cancellation of performance share units	5,235												—
Purchases of common stock under ESPP	40,547	1		556									557
Stock-based compensation				2,150									2,150
Other comprehensive loss, net of tax								(92)					(92)
Balance at August 31, 2018	37,861,057	$	372	$	546,615	$	4,660	$	(1,044)	(370,000)	$	(5,714)	$	544,889
Net income						2,140							2,140
Exercise of stock options	10,571			149									149
Issuance/Cancellation of restricted stock units	3,901												—
Stock-based compensation				2,591									2,591
Other comprehensive loss, net of tax								(206)					(206)
Balance at November 30, 2018	37,875,529	$	372	$	549,355	$	6,800	$	(1,250)	(370,000)	$	(5,714)	$	549,563
Net income						796							796
Exercise of stock options	40,346			603									603
Issuance/Cancellation of restricted stock units	7,703			$	(49)								(49)
Purchases of common stock under ESPP	32,316			615									615
Stock-based compensation				2,378									2,378
Other comprehensive income, net of tax								173					173
Balance at February 28, 2019	37,955,894	$	372	$	552,902	$	7,596	$	(1,077)	(370,000)	$	(5,714)	$	554,079

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

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AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Balance Sheet as of February 29, 2020, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended February 29, 2020 and February 28, 2019, the Consolidated Statements of Stockholders’ Equity for the three months ended February 29, 2020 and February 28, 2019 and the Consolidated Statements of Cash Flows for the nine months ended February 29, 2020 and February 28, 2019 have been prepared by us and are unaudited. The Consolidated Balance Sheet as of May 31, 2019 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to state fairly the financial position, changes in stockholders’ equity and comprehensive income, results of operations and cash flows as of and for the period ended February 29, 2020 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three and nine months ended February 29, 2020 and February 28, 2019 include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries, collectively, the “Company”. All intercompany balances and transactions have been eliminated.

On May 31, 2019, the Company completed the sale of the Fluid Management business and all of the assets used primarily in connection with the Fluid Management business (Note 3). As the disposal of this business represents a strategic shift with a major effect on the Company's operations, for all periods presented in our Consolidated Statements of Operations and Comprehensive Loss, all sales, costs, expenses, gains and income taxes attributable to Fluid Management have been reported under the captions, “Income from Discontinued Operations, Net of Income Tax.” Cash flows used in or provided by Fluid Management have been reported in the Consolidated Statements of Cash Flows under operating and investing activities.

2. ACQUISITIONS

C3 Wave Tip Location Acquisition

On December 17, 2019, the Company acquired the C3 Wave tip location asset from Medical Components Inc. for an aggregate purchase price of $10.0 million with $5.0 million of potential future contingent consideration related to technical milestones. This acquisition fills a gap in the Vascular Access portfolio and supports the Company's strategic plan. The Company accounted for this acquisition as an asset purchase. The Company recorded the amount paid at closing as inventory of $0.6 million and intangible assets of a trademark of $0.9 million and product technology of $8.5 million. The intangible assets will be amortized over 15 years. The contingent consideration is comprised of technical milestones and will be accounted for when the contingency is resolved or becomes probable and reasonably estimable.

Eximo Acquisition

On October 2, 2019, the Company entered into a share purchase agreement to acquire Eximo Medical, Ltd., a pre-commercial stage medical device company and its proprietary 355nm B Laser Atherectomy technology. The aggregate purchase price of $60.7 million included an upfront payment of $45.8 million and contingent consideration with an estimated fair value of $14.9 million. This acquisition expands and complements the Company’s Vascular Interventions and Therapies product portfolio by adding the 355nm B Laser Atherectomy technology which treats Peripheral Artery Disease.

The Company accounted for the Eximo acquisition under the acquisition method of accounting for business combinations. Accordingly, the cost to acquire the assets was allocated to the underlying net assets in proportion to estimates of their respective fair values. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. Goodwill is non-deductible for income tax purposes.

The Company has not disclosed the amount of revenue and earnings for sales of Eximo products since acquisition, nor proforma information, because these amounts are not significant to the Company's financial statements. Acquisition-related costs associated with the Eximo acquisition, which are included in "acquisition, restructuring and other items, net" in the accompanying Consolidated Statements of Operations, were approximately $0.6 million in fiscal year 2020. The following table summarizes the preliminary aggregate purchase price allocated to the net assets acquired:

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(in thousands)	Preliminary allocation		Adjustments ⁽¹⁾		Revised allocation
Accounts receivable	$	50	$	—	$	50
Inventory	150		—		150
Prepaid and other current assets	54		—		54
Long-term deposits	51				51
Property, plant and equipment	397		—		397
Intangible assets:
Product technology	59,000		1,300		60,300
Goodwill	12,428		(1,001)		11,427
Total assets acquired	$	72,130