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Table of Contents
        
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
OR
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)
https://cdn.kscope.io/0ed3a175957107aca25d81d80ec78ad0-ango-20200229_g1.gif
 

Delaware11-3146460
(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 classTrading symbolName of each exchange on which registered
Common stock, par value $.01ANGONASDAQ Global Select Market
Preferred Stock Purchase RightsNASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None


Table of Contents
(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  



Table of Contents
AngioDynamics, Inc. and Subsidiaries
TABLE OF CONTENTS
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

Table of Contents
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 EndedNine Months Ended
Feb 29, 2020Feb 28, 2019Feb 29, 2020Feb 28, 2019
Net sales$69,780  $65,524  $205,825  $199,451  
Cost of sales (exclusive of intangible amortization)29,481  27,361  85,765  84,783  
Gross profit40,299  38,163  120,060  114,668  
Operating expenses:
Research and development8,395  6,915  22,450  21,365  
Sales and marketing20,934  18,385  60,427  56,054  
General and administrative10,203  8,718  29,651  26,414  
Amortization of intangibles5,019  4,660  13,417  12,599  
Change in fair value of contingent consideration419  609  116  865  
Acquisition, restructuring and other items, net1,565  2,550  4,486  9,700  
Total operating expenses46,535  41,837  130,547  126,997  
Operating loss(6,236) (3,674) (10,487) (12,329) 
Other (expenses) income:
Interest expense, net(166) (1,442) (672) (3,689) 
Other expense, net(131) (266) (67) (72) 
Total other expense, net(297) (1,708) (739) (3,761) 
Loss from continuing operations before income tax benefit(6,533) (5,382) (11,226) (16,090) 
Income tax benefit(824) (773) (1,506) (2,191) 
Net loss from continuing operations(5,709) (4,609) (9,720) (13,899) 
Income from discontinued operations, net of income tax  5,405    16,366  
Net income (loss)$(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
Basic37,999  37,518  37,924  37,446  
Diluted37,999  37,518  37,924  37,446  
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands of dollars)
 
Three Months EndedNine Months Ended
Feb 29, 2020Feb 28, 2019Feb 29, 2020Feb 28, 2019
Net income (loss)$(5,709) $796  $(9,720) $2,467  
Other comprehensive income (loss), before tax:
Unrealized gain on marketable securities      33  
Foreign currency translation 8  173  88  (158) 
Other comprehensive income (loss), before tax8  173  88  (125) 
Income tax expense related to items of other comprehensive income        
Other comprehensive income (loss), net of tax8  173  88  (125) 
Total comprehensive income (loss), net of tax$(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, 2020May 31, 2019
Assets
Current assets
Cash and cash equivalents$27,160  $227,641  
Accounts receivable, net of allowances of $1,991 and $1,906 respectively35,619  43,577  
Inventories54,898  40,071  
Prepaid expenses and other11,369  4,003  
Total current assets129,046  315,292  
Property, plant and equipment, net28,182  24,258  
Other assets13,684  3,835  
Intangible assets, net201,956  145,387  
Goodwill359,093  347,666  
Total assets$731,961  $836,438  
Liabilities and stockholders' equity
Current liabilities
Accounts payable$18,304  $22,829  
Accrued liabilities27,445  38,338  
Current portion of long-term debt  7,500  
Current portion of contingent consideration889  4,635  
Other current liabilities2,074    
Total current liabilities48,712  73,302  
Long-term debt, net of current portion14,341  124,407  
Contingent consideration, net of current portion26,405  8,851  
Deferred income taxes24,013  14,542  
Other long-term liabilities8,015  521  
Total liabilities121,486  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, respectively374  372  
Additional paid-in capital560,330  555,040  
Retained earnings56,749  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’ Equity610,475  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, 2020Feb 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 amortization17,550  19,158  
Non-cash lease expense1,567  —  
Stock based compensation5,998  7,119  
Change in fair value of contingent consideration116  865  
Deferred income taxes(1,606) 633  
Change in accounts receivable allowances186  (99) 
Fixed and intangible asset impairments and disposals395  689  
              Write-off of other assets 593    
Other70  (5) 
Changes in operating assets and liabilities:
Accounts receivable7,834  (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 debt15,000  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 equivalents8  (120) 
Decrease in cash and cash equivalents(200,481) (32,392) 
Cash and cash equivalents at beginning of period227,641  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 acquisitions14,900  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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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands of dollars, except share data)

 
Common StockAdditional
paid in
capital
Retained earningsAccumulated
other
comprehensive
loss
Treasury Stock
SharesAmountSharesAmountTotal
Balance at May 31, 201937,984,382  $372  $555,040  $66,469  $(1,352) (370,000) $(5,714) $614,815  
Net loss(1,275) (1,275) 
Exercise of stock options48,136  1  530  531  
Issuance/Cancellation of restricted stock units287,087  (2,459) (2,459) 
Purchases of common stock under ESPP40,270  628  628  
Stock-based compensation1,984  1,984  
Other comprehensive loss, net of tax(151) (151) 
Balance at August 31, 201938,359,875  $373  $555,723  $65,194  $(1,503) (370,000) $(5,714) $614,073  
Net loss(2,736) (2,736) 
Issuance/Cancellation of restricted stock units4,051    
Stock-based compensation2,242  2,242  
Other comprehensive income, net of tax231  231  
Balance at November 30, 201938,363,926  $373  $557,965  $62,458  $(1,272) (370,000) $(5,714) $613,810  
Net loss(5,709) (5,709) 
Exercise of stock options2,500  30  30  
Issuance/Cancellation of restricted stock units8,034  (25) (25) 
Purchases of common stock under ESPP60,297  1  588  589  
Stock-based compensation1,772  1,772  
Other comprehensive income, net of tax8  8  
Balance at February 29, 202038,434,757  $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 StockAdditional
paid in
capital
Retained earningsAccumulated
other
comprehensive
loss
Treasury Stock
SharesAmountSharesAmountTotal
Balance at May 31, 201837,594,493  $370  $543,762  $5,129  $(952) (370,000) $(5,714) $542,595  
Net loss(469) (469) 
Exercise of stock options71,336  1  607  608  
Issuance/Cancellation of restricted stock units149,446  (460) (460) 
Issuance/Cancellation of performance share units5,235    
Purchases of common stock under ESPP40,547  1  556  557  
Stock-based compensation2,150  2,150  
Other comprehensive loss, net of tax(92) (92) 
Balance at August 31, 201837,861,057  $372  $546,615  $4,660  $(1,044) (370,000) $(5,714) $544,889  
Net income2,140  2,140  
Exercise of stock options10,571  149  149  
Issuance/Cancellation of restricted stock units3,901    
Stock-based compensation2,591  2,591  
Other comprehensive loss, net of tax(206) (206) 
Balance at November 30, 201837,875,529  $372  $549,355  $6,800  $(1,250) (370,000) $(5,714) $549,563  
Net income796  796  
Exercise of stock options40,346  603  603  
Issuance/Cancellation of restricted stock units7,703  $(49) (49) 
Purchases of common stock under ESPP32,316  615  615  
Stock-based compensation2,378  2,378  
Other comprehensive income, net of tax173  173  
Balance at February 28, 201937,955,894  $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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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  
Inventory150  —  150  
Prepaid and other current assets54  —  54  
Long-term deposits51  51  
Property, plant and equipment397  —  397  
Intangible assets:
Product technology59,000  1,300  60,300  
Goodwill12,428  (1,001) 11,427  
Total assets acquired$72,130