Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SURMODICS INC | d259515d8k.htm |
| EX-99.2 - PRESS RELEASE DATED NOVEMBER 17, 2011 - SURMODICS INC | d259515dex992.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On November 17, 2011, SurModics, Inc. (“SurModics”) and its wholly-owned subsidiary, SurModics Pharmaceuticals, Inc. (“Pharma”), completed the previously announced sale of substantially all of the assets of Pharma to Evonik Degussa Corporation (“Evonik”), pursuant to an Asset Purchase Agreement (the “Agreement”), dated as of November 1, 2011, between SurModics, Pharma and Evonik.
The following unaudited pro forma condensed consolidated financial statements of SurModics and its subsidiaries (the “Company”) are presented to comply with Article 11 of Regulation S-X and follow prescribed SEC regulations. The unaudited pro forma condensed consolidated financial statements do not purport to present what the Company’s results would have been had the disposition actually occurred on the dates indicated or to project the Company’s results from operations or financial position for any future period. The prescribed regulations limit pro forma adjustments to those that are directly attributable to the disposition on a factually supportable basis. Consequently, the Company was not permitted within the pro forma condensed consolidated financial statements to allocate to the disposed business any indirect corporate overhead or costs, such as administrative corporate functions, or any other costs that were shared with any retained business of the Company. As a result, such costs have not been included in the pro forma adjustments and are reflected with the retained business. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2011, presents pro forma effects of the transaction as if the sale of substantially all of the assets of Pharma had occurred on June 30, 2011. The unaudited pro forma condensed consolidated statements of operations for the nine months ended June 30, 2011 and June 30, 2010, and the fiscal years ended September 30, 2010, 2009 and 2008 present the pro forma effects as if the sale of substantially all of the assets of Pharma had occurred on October 1, 2007 (the first day of our 2008 fiscal year). The unaudited pro forma condensed consolidated statements of operations present additional periods beyond the normal prescribed regulations as SurModics expects to present the Pharma operations as discontinued beginning with the first quarter of fiscal 2012.
The unaudited pro forma condensed consolidated financial statements are presented for informational purposes. These unaudited pro forma condensed consolidated financial statements and accompanying notes should be read together with the Company’s audited consolidated financial statements and the accompanying notes, as of and for the fiscal year ended September 30, 2010 and the Company’s unaudited condensed consolidated financial statements and the accompanying notes as of and for the nine months ended June 30, 2011 and June 30, 2010.
1
SurModics, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2011
(Unaudited)
| Historical | Pro Forma Adjustments | Pro Forma (a) | ||||||||||||
| (in thousands, except share data) | ||||||||||||||
| ASSETS |
||||||||||||||
| Current Assets |
||||||||||||||
| Cash and cash equivalents |
$ | 18,437 | $ | 26,725 | (b) | $ | 45,162 | |||||||
| Restricted cash in escrow |
— | 3,275 | (c) | 3,275 | ||||||||||
| Short-term investments |
15,909 | — | 15,909 | |||||||||||
| Accounts receivable, net |
9,166 | — | 9,166 | |||||||||||
| Inventories |
3,735 | (808 | ) | (d) | 2,927 | |||||||||
| Deferred tax asset |
830 | 6,548 | (d) (g) | 7,378 | ||||||||||
| Prepaids and other |
2,526 | 374 | (d) (f) | 2,900 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total current assets |
50,603 | 36,114 | 86,717 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Property and equipment, net |
63,842 | (48,904 | ) | (d) | 14,938 | |||||||||
| Long-term investments |
28,899 | — | 28,899 | |||||||||||
| Deferred tax asset |
3,102 | 5,297 | (d) | 8,399 | ||||||||||
| Intangible assets , net |
14,097 | (8,701 | ) | (d) | 5,396 | |||||||||
| Goodwill |
8,010 | — | 8,010 | |||||||||||
| Other assets, net |
4,896 | (307 | ) | (d) | 4,589 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 173,449 | $ | (16,501 | ) | $ | 156,948 | |||||||
|
|
|
|
|
|
|
|||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||
| Current Liabilities |
||||||||||||||
| Accounts payable |
$ | 1,615 | $ | — | $ | 1,615 | ||||||||
| Accrued liabilities: |
||||||||||||||
| Compensation |
2,322 | — | 2,322 | |||||||||||
| Accrued other |
1,834 | 1,689 | (e) | 3,523 | ||||||||||
| Deferred revenue |
1,376 | (856 | ) | (d) | 520 | |||||||||
| Other current liabilities |
376 | — | 376 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total current liabilities |
7,523 | 833 | 8,356 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Deferred revenue, less current portion |
3,656 | (3,422 | ) | (d) | 234 | |||||||||
| Other long-term liabilities |
4,394 | (120 | ) | (d) | 4,274 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
15,573 | (2,709 | ) | 12,864 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Commitments and contingencies |
||||||||||||||
| Stockholders’ Equity |
||||||||||||||
| Series A Preferred stock- $.05 par value, 450,000 shares authorized; no shares issued and outstanding |
— | — | — | |||||||||||
| Common stock- $.05 par value, 45,000,000 shares authorized; 17,525,477 shares issued and outstanding |
876 | — | 876 | |||||||||||
| Additional paid-in capital |
73,373 | — | 73,373 | |||||||||||
| Accumulated other comprehensive income |
568 | — | 568 | |||||||||||
| Retained earnings |
83,059 | (13,792 | ) | (d) (e) (f) (g) | 69,267 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total stockholders’ equity |
157,876 | (13,792 | ) | 144,084 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total liabilities and stockholders’ equity |
$ | 173,449 | $ | (16,501 | ) | $ | 156,948 | |||||||
|
|
|
|
|
|
|
|||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
2
SurModics, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended June 30, 2011
(Unaudited)
| Historical | Pro Forma Adjustments (h) |
Pro Forma | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenue |
||||||||||||||
| Royalties and license fees |
$ | 22,787 | $ | (148 | ) | $ | 22,639 | |||||||
| Product sales |
16,449 | (1,906 | ) | 14,543 | ||||||||||
| Research and development |
11,393 | (9,719 | ) | 1,674 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total revenue |
50,629 | (11,773 | ) | 38,856 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Operating costs and expenses |
||||||||||||||
| Product costs |
5,813 | (1,099 | ) | 4,714 | ||||||||||
| Customer research and development |
14,141 | (12,512 | ) | 1,629 | ||||||||||
| Other research and development |
8,923 | — | 8,923 | |||||||||||
| Selling, general and administrative |
14,998 | (4,243 | ) | (i) | 10,755 | |||||||||
| Goodwill impairment charge |
5,650 | (5,650 | ) | — | ||||||||||
| Restructuring charges |
1,236 | (627 | ) | 609 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total operating costs and expenses |
50,761 | (24,131 | ) | 26,630 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| (Loss) income from continuing operations |
(132 | ) | 12,358 | 12,226 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income |
||||||||||||||
| Investment income |
498 | — | 498 | |||||||||||
| Other income, net |
401 | (21 | ) | 380 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income |
899 | (21 | ) | 878 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations before income taxes |
767 | 12,337 | 13,104 | |||||||||||
| Income tax provision |
(608 | ) | (2,889 | ) | (j) | (3,497 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
$ | 159 | $ | 9,448 | $ | 9,607 | ||||||||
|
|
|
|
|
|
|
|||||||||
| Basic income from continuing operations per common share: |
$ | 0.01 | $ | 0.55 | ||||||||||
|
|
|
|
|
|||||||||||
| Diluted income from continuing operations per common share: |
$ | 0.01 | $ | 0.55 | ||||||||||
|
|
|
|
|
|||||||||||
| Weighted average number of shares outstanding: |
||||||||||||||
| Basic |
17,409 | 17,409 | ||||||||||||
| Dilutive effect of outstanding stock options and non-vested stock |
47 | 47 | ||||||||||||
|
|
|
|
|
|||||||||||
| Diluted |
17,456 | 17,456 | ||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
3
SurModics, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended June 30, 2010
(Unaudited)
| Historical | Pro Forma Adjustments (h) |
Pro Forma | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenue |
||||||||||||||
| Royalties and license fees |
$ | 26,333 | $ | (387 | ) | $ | 25,946 | |||||||
| Product sales |
15,586 | (2,441 | ) | 13,145 | ||||||||||
| Research and development |
12,430 | (9,753 | ) | 2,677 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total revenue |
54,349 | (12,581 | ) | 41,768 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Operating costs and expenses |
||||||||||||||
| Product costs |
6,820 | (2,120 | ) | 4,700 | ||||||||||
| Customer research and development |
12,748 | (10,798 | ) | 1,950 | ||||||||||
| Other research and development |
13,507 | (855 | ) | 12,652 | ||||||||||
| Selling, general and administrative |
13,667 | (4,680 | ) | 8,987 | ||||||||||
| Restructuring charges |
1,306 | (102 | ) | 1,204 | ||||||||||
| Asset impairment charges |
2,265 | (1,890 | ) | 375 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total operating costs and expenses |
50,313 | (20,445 | ) | 29,868 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
4,036 | 7,864 | 11,900 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income (loss) |
||||||||||||||
| Investment income |
819 | (1 | ) | 818 | ||||||||||
| Impairment loss on investments |
(2,577 | ) | (2,577 | ) | ||||||||||
| Other income, net |
301 | — | 301 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income (loss) |
(1,457 | ) | (1 | ) | (1,458 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations before income taxes |
2,579 | 7,863 | 10,442 | |||||||||||
| Income tax provision |
(2,005 | ) | (3,208 | ) | (j) | (5,213 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
$ | 574 | $ | 4,655 | $ | 5,229 | ||||||||
|
|
|
|
|
|
|
|||||||||
| Basic income from continuing operations per common share: |
$ | 0.03 | $ | 0.30 | ||||||||||
|
|
|
|
|
|||||||||||
| Diluted income from continuing operations per common share: |
$ | 0.03 | $ | 0.30 | ||||||||||
|
|
|
|
|
|||||||||||
| Weighted average number of shares outstanding: |
||||||||||||||
| Basic |
17,373 | 17,373 | ||||||||||||
| Dilutive effect of outstanding stock options and non-vested stock |
12 | 12 | ||||||||||||
|
|
|
|
|
|||||||||||
| Diluted |
17,385 | 17,385 | ||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
4
SurModics, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Year Ended September 30, 2010
(Unaudited)
| Historical | Pro Forma Adjustments (h) |
Pro Forma | ||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Revenue |
||||||||||||||||
| Royalties and license fees |
$ | 34,277 | $ | (433 | ) | $ | 33,844 | |||||||||
| Product sales |
20,184 | (2,821 | ) | 17,363 | ||||||||||||
| Research and development |
15,437 | (12,155 | ) | 3,282 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
69,898 | (15,409 | ) | 54,489 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Operating costs and expenses |
||||||||||||||||
| Product costs |
9,425 | (2,620 | ) | 6,805 | ||||||||||||
| Customer research and development |
18,147 | (15,531 | ) | 2,616 | ||||||||||||
| Other research and development |
17,916 | (1,559 | ) | 16,357 | ||||||||||||
| Selling, general and administrative |
18,451 | (5,941 | ) | 12,510 | ||||||||||||
| Goodwill impairment charge |
13,810 | (13,810 | ) | — | ||||||||||||
| Restructuring charges |
1,306 | (102 | ) | 1,204 | ||||||||||||
| Asset impairment charges |
4,896 | (1,890 | ) | 3,006 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total operating costs and expenses |
83,951 | (41,453 | ) | 42,498 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| (Loss) income from continuing operations |
(14,053 | ) | 26,044 | 11,991 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Other income (loss) |
||||||||||||||||
| Investment income |
1,023 | — | 1,023 | |||||||||||||
| Impairment loss on investments |
(7,943 | ) | — | (7,943 | ) | |||||||||||
| Other income, net |
314 | (1 | ) | 313 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Other income (loss) |
(6,606 | ) | (1 | ) | (6,607 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (Loss) income from continuing operations before income taxes |
(20,659 | ) | 26,043 | 5,384 | ||||||||||||
| Income tax provision |
(430 | ) | (4,991 | ) | (j) | (5,421 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Loss from continuing operations |
$ | (21,089 | ) | $ | 21,052 | $ | (37 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||||
| Basic loss from continuing operations per common share: |
$ | (1.21 | ) | $ | 0.00 | |||||||||||
|
|
|
|
|
|||||||||||||
| Diluted loss from continuing operations per common share: |
$ | (1.21 | ) | $ | 0.00 | |||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average number of shares outstanding: |
||||||||||||||||
| Basic |
17,372 | 17,372 | ||||||||||||||
| Dilutive effect of outstanding stock options and non-vested stock |
— | — | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
17,372 | 17,372 | ||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
5
SurModics, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Year Ended September 30, 2009
(Unaudited)
| Historical | Pro Forma Adjustments (h) |
Pro Forma | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenue |
||||||||||||||
| Royalties and license fees |
$ | 75,464 | $ | (487 | ) | $ | 74,977 | |||||||
| Product sales |
19,333 | (2,486 | ) | 16,847 | ||||||||||
| Research and development |
26,737 | (15,225 | ) | 11,512 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total revenue |
121,534 | (18,198 | ) | 103,336 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Operating costs and expenses |
||||||||||||||
| Product costs |
7,508 | (1,810 | ) | 5,698 | ||||||||||
| Customer research and development |
13,183 | (10,964 | ) | 2,219 | ||||||||||
| Other research and development |
21,179 | (1,844 | ) | 19,335 | ||||||||||
| Selling, general and administrative |
17,200 | (5,487 | ) | 11,713 | ||||||||||
| Purchased in-process research and development |
3,200 | (3,200 | ) | — | ||||||||||
| Restructuring charges |
1,763 | — | 1,763 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total operating costs and expenses |
64,033 | (23,305 | ) | 40,728 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
57,501 | 5,107 | 62,608 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income |
||||||||||||||
| Investment income |
1,839 | (28 | ) | 1,811 | ||||||||||
| Other income, net |
184 | 205 | 389 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income |
2,023 | 177 | 2,200 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations before income taxes |
59,524 | 5,284 | 64,808 | |||||||||||
| Income tax provision |
(21,974 | ) | (1,902 | ) | (j) | (23,876 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
$ | 37,550 | $ | 3,382 | $ | 40,932 | ||||||||
|
|
|
|
|
|
|
|||||||||
| Basic income from continuing operations per common share: |
$ | 2.15 | $ | 2.35 | ||||||||||
|
|
|
|
|
|||||||||||
| Diluted income from operations per common share: |
$ | 2.15 | $ | 2.34 | ||||||||||
|
|
|
|
|
|||||||||||
| Weighted average number of shares outstanding: |
||||||||||||||
| Basic |
17,435 | 17,435 | ||||||||||||
| Dilutive effect of outstanding stock options and non-vested stock |
34 | 34 | ||||||||||||
|
|
|
|
|
|||||||||||
| Diluted |
17,469 | 17,469 | ||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
6
SurModics, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
Year Ended September 30, 2008
(Unaudited)
| Historical | Pro Forma Adjustments (h) |
Pro Forma | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenue |
||||||||||||||
| Royalties and license fees |
$ | 51,788 | $ | (5 | ) | $ | 51,783 | |||||||
| Product sales |
20,052 | (3,018 | ) | 17,034 | ||||||||||
| Research and development |
25,211 | (17,049 | ) | 8,162 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total revenue |
97,051 | (20,072 | ) | 76,979 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Operating costs and expenses |
||||||||||||||
| Product costs |
8,476 | (2,399 | ) | 6,077 | ||||||||||
| Customer research and development |
19,187 | (12,187 | ) | 7,000 | ||||||||||
| Other research and development |
21,311 | (336 | ) | 20,975 | ||||||||||
| Selling, general and administrative |
20,816 | (4,253 | ) | 16,563 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total operating costs and expenses |
69,790 | (19,175 | ) | 50,615 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
27,261 | (897 | ) | 26,364 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Other income (loss) |
||||||||||||||
| Investment income |
3,329 | (88 | ) | 3,241 | ||||||||||
| Impairment loss on investments |
(4,314 | ) | — | (4,314 | ) | |||||||||
| Other income, net |
616 | 87 | 703 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Other loss |
(369 | ) | (1 | ) | (370 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations before income taxes |
26,892 | (898 | ) | 25,994 | ||||||||||
| Income tax provision |
(12,153 | ) | 334 | (j) | (11,819 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||
| Income from continuing operations |
$ | 14,739 | $ | (564 | ) | $ | 14,175 | |||||||
|
|
|
|
|
|
|
|||||||||
| Basic income from continuing operations per common share: |
$ | 0.82 | $ | 0.79 | ||||||||||
|
|
|
|
|
|||||||||||
| Diluted income from continuing operations per common share: |
$ | 0.80 | $ | 0.77 | ||||||||||
|
|
|
|
|
|||||||||||
| Weighted average number of shares outstanding: |
||||||||||||||
| Basic |
18,026 | 18,026 | ||||||||||||
| Dilutive effect of outstanding stock options and non-vested stock |
304 | 304 | ||||||||||||
|
|
|
|
|
|||||||||||
| Diluted |
18,330 | 18,330 | ||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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SurModics, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Description of Transaction and Basis of Presentation
On November 17, 2011, the Company and Evonik closed the Pharma transaction and completed the sale. The total consideration paid by Evonik on the closing date was $30.0 million in cash, subject to post-closing adjustment if the closing date inventory value is less than $0.7 million. $3.3 million of the purchase price was placed in escrow at closing for a maximum of three months. In connection with the transaction, the Company also agreed to enter into an agreement to not compete with the business being sold for a period of five years.
The transferred assets include inventory identifiable to the sold business, fixed assets including the cGMP development and manufacturing facility in Birmingham, Alabama, and contracts with specific customers and suppliers. In addition, as part of the transaction all Pharma employees have accepted positions with Evonik. Evonik will also purchase specified transitional services from Pharma.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2011, presents pro forma effects of the transaction as if the sale had occurred on June 30, 2011. The unaudited pro forma condensed consolidated statements of operations for the nine months ended June 30, 2011 and June 30, 2010, and the fiscal years ended September 30, 2010, 2009 and 2008 present the pro forma effects as if the sale of substantially all of the assets of Pharma had occurred on October 1, 2007 (the first day of our 2008 fiscal year).
Pro Forma Adjustments
The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:
| (a) | The unaudited pro forma condensed consolidated balance sheet balance sheet as of June 30, 2011, presents pro forma effects of the transaction as if the sale had occurred on June 30, 2011. Certain assets and liabilities, such as accounts receivable and accounts payable related to Pharma, were not transferred with the transaction and are therefore still reflected in the pro forma condensed consolidated balance sheet as of June 30, 2011. |
| (b) | This amount reflects the sale price of $30.0 million less $3.3 million which will be placed in an escrow account to cover any inventory shortfall or for milestone events associated with SurModics’ purchase of Pharma that may occur in the future. |
| (c) | This amount is the amount placed in escrow to cover any inventory shortfall or for milestone events associated with SurModics’ original acquisition of Pharma in July 2007 that may occur in the future. |
| (d) | This amount represents the elimination of assets and liabilities transferred to Evonik in the asset sale. The net difference between the selling price and the carrying value of the assets and liabilities transferred is a pre-tax loss of $19.7 million. The loss is calculated as follows (in thousands): |
| Cash proceeds from the sale, before customary post-closing adjustments |
$ | 30,000 | ||
| Net assets sold |
(49,743 | ) | ||
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|
|
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| Loss on sale before income taxes |
$ | (19,743 | ) | |
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|
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The transaction costs which were accrued and associated tax impact are included in footnotes (e) and (f) below. In addition, the income tax benefit associated with the pre-tax loss above is included in footnote (g) below.
Certain assets (cash, accounts receivable and income tax receivables) of Pharma, totaling $5.7 million as of June 30, 2011, were retained by SurModics. In addition, certain liabilities of Pharma (accounts payable, accrued compensation, accrued other liabilities, current liabilities and certain other long-term liabilities) totaling $4.1 million as of June 30, 2011, were retained by SurModics. The retained assets and liabilities are not included in the above loss on sale calculation.
| (e) | This amount represents the accrual of $1.7 million of transaction costs which result directly from the sold business and which will be included in the income of the registrant within the twelve months following the transaction. |
| (f) | This amount includes a $0.7 million tax benefit associated with the accrued transaction costs using the consolidated statutory tax rate. |
| (g) | This amount includes $6.9 million of current deferred tax benefits associated with the loss on the sale calculated using a 35% statutory tax rate as the state benefit for Pharma would be offset by a valuation allowance. |
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| (h) | The pro forma data reflects the elimination of Pharma’s revenue and expenses. Pro forma adjustments exclude indirect and fixed costs attributable to or allocated to the sold business. |
| (i) | The pro forma adjustment amount includes $0.3 million of transaction costs directly attributable to the disposition of the business. These costs are excluded from continuing operations. |
| (j) | This amount represents the adjusted income tax expense associated with the pre-tax pro forma adjustments, using the consolidated statutory tax rate for the applicable period. In a fiscal year with non-deductible goodwill or impairment of investments, the pre-tax income or loss is adjusted appropriately. |
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