mygn-10q_20170930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2017

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:  0-26642

 

MYRIAD GENETICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

87-0494517

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

320 Wakara Way, Salt Lake City, UT

84108

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code: (801) 584-3600

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Check one:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

(Do not check if smaller reporting company)

Smaller reporting company

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. 

 

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

As of November 2, 2017 the registrant had 69,240,787 shares of $0.01 par value common stock outstanding.

 

 


MYRIAD GENETICS, INC.

INDEX TO FORM 10-Q

 

 

 

Page

 

PART I - Financial Information

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2017 and June 30, 2017

3

 

 

 

 

Condensed Consolidated Statements of Operations (Unaudited) for the three months ended September 30, 2017 and 2016

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended September 30, 2017 and 2016

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended September 30, 2017 and 2016

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

19

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 

 

 

Item 4.

Controls and Procedures

23

 

 

 

 

PART II - Other Information

 

 

 

 

Item 1.

Legal Proceedings

25

 

 

 

Item 1A.

Risk Factors

25

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

 

 

 

Item 3.

Defaults Upon Senior Securities

26

 

 

 

Item 4.

Mine Safety Disclosures

26

 

 

 

Item 5.

Other Information

26

 

 

 

Item 6.

Exhibits

26

 

 

 

Signatures

27

 

2


MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(In millions)

 

 

 

September 30,

 

 

June 30,

 

ASSETS

 

2017

 

 

2017

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

87.9

 

 

$

102.4

 

Marketable investment securities

 

 

60.4

 

 

 

48.3

 

Prepaid expenses

 

 

9.5

 

 

 

12.7

 

Inventory

 

 

38.9

 

 

 

42.2

 

Trade accounts receivable, less allowance for doubtful accounts of $8.6 September 30, 2017 and $8.2 June 30, 2017

 

 

113.2

 

 

 

105.6

 

Prepaid taxes

 

 

8.8

 

 

 

0.2

 

Other receivables

 

 

6.9

 

 

 

5.7

 

Total current assets

 

 

325.6

 

 

 

317.1

 

Property, plant and equipment, net

 

 

49.8

 

 

 

51.1

 

Long-term marketable investment securities

 

 

50.1

 

 

 

48.5

 

Intangibles, net

 

 

483.8

 

 

 

491.6

 

Goodwill

 

 

319.0

 

 

 

316.1

 

Total assets

 

$

1,228.3

 

 

$

1,224.4

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

22.5

 

 

$

22.0

 

Accrued liabilities

 

 

59.8

 

 

 

65.6

 

Short-term contingent consideration

 

 

54.0

 

 

 

127.3

 

Deferred revenue

 

 

2.9

 

 

 

2.6

 

Total current liabilities

 

 

139.2

 

 

 

217.5

 

Unrecognized tax benefits

 

 

31.9

 

 

 

25.2

 

Other long-term liabilities

 

 

7.4

 

 

 

7.2

 

Contingent consideration

 

 

13.8

 

 

 

13.2

 

Long-term debt

 

 

74.2

 

 

 

99.1

 

Long-term deferred taxes

 

 

91.2

 

 

 

84.4

 

Total liabilities

 

 

357.7

 

 

 

446.6

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, 69.2 and 68.4 shares outstanding at September 30, 2017 and

   June 30, 2017 respectively

 

 

0.7

 

 

 

0.7

 

Additional paid-in capital

 

 

859.6

 

 

 

851.4

 

Accumulated other comprehensive loss

 

 

(2.2

)

 

 

(5.5

)

Retained earnings (deficit)

 

 

12.8

 

 

 

(68.4

)

Total Myriad Genetics, Inc. stockholders’ equity

 

 

870.9

 

 

 

778.2

 

Non-Controlling Interest

 

 

(0.3

)

 

 

(0.4

)

Total stockholders' equity

 

 

870.6

 

 

 

777.8

 

Total liabilities and stockholders’ equity

 

$

1,228.3

 

 

$

1,224.4

 

 

See accompanying notes to condensed consolidated financial statements.

3


MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Molecular diagnostic testing

 

$

178.8

 

 

$

165.1

 

Pharmaceutical and clinical services

 

 

11.4

 

 

 

12.4

 

Total revenue

 

 

190.2

 

 

 

177.5

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of molecular diagnostic testing

 

 

36.2

 

 

 

34.3

 

Cost of pharmaceutical and clinical services

 

 

6.8

 

 

 

5.7

 

Research and development expense

 

 

17.8

 

 

 

19.4

 

Change in the fair value of contingent consideration

 

 

(73.2

)

 

 

0.5

 

Selling, general, and administrative expense

 

 

115.2

 

 

 

111.9

 

Total costs and expenses

 

 

102.8

 

 

 

171.8

 

Operating income

 

 

87.4

 

 

 

5.7

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

0.4

 

 

 

0.3

 

Interest expense

 

 

(0.9

)

 

 

(0.7

)

Other

 

 

(0.3

)

 

 

(1.3

)

Total other income (expense):

 

 

(0.8

)

 

 

(1.7

)

Income before income tax

 

 

86.6

 

 

 

4.0

 

Income tax provision

 

 

5.6

 

 

 

5.2

 

Net income (loss)

 

$

81.0

 

 

$

(1.2

)

Net loss attributable to non-controlling interest

 

 

(0.1

)

 

 

 

Net income (loss) attributable to Myriad Genetics, Inc. stockholders

 

$

81.1

 

 

$

(1.2

)

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.18

 

 

$

(0.02

)

Diluted

 

$

1.15

 

 

$

(0.02

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

68.6

 

 

 

68.8

 

Diluted

 

 

70.4

 

 

 

68.8

 

 

See accompanying notes to condensed consolidated financial statements.

4


MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In millions)

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Net income (loss) attributable to Myriad Genetics, Inc. stockholders

 

$

81.1

 

 

$

(1.2

)

Unrealized gain (loss) on available-for-sale securities, net of tax

 

 

 

 

 

(0.4

)

Change in foreign currency translation adjustment, net of tax

 

 

3.3

 

 

 

4.3

 

Comprehensive income

 

 

84.4

 

 

 

2.7

 

Comprehensive income attributable to non-controlling interest

 

 

 

 

 

 

Comprehensive income attributable to Myriad Genetics, Inc.

   shareholders

 

$

84.4

 

 

$

2.7

 

 

See accompanying notes to condensed consolidated financial statements.

5


MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

 

 

 

 

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net Income  (loss) attributable to Myriad Genetics, Inc. stockholders

 

$

81.1

 

 

 

(1.2

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13.2

 

 

 

9.2

 

Non-cash interest expense

 

 

0.1

 

 

 

0.1

 

Gain on disposition of assets

 

 

(0.1

)

 

 

(0.2

)

Share-based compensation expense

 

 

6.4

 

 

 

7.8

 

Bad debt expense

 

 

8.0

 

 

 

7.2

 

Deferred income taxes

 

 

4.7

 

 

 

3.2

 

Unrecognized tax benefits

 

 

6.7

 

 

 

0.4

 

Change in fair value of contingent consideration

 

 

(73.2

)

 

 

0.5

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

3.2

 

 

 

7.8

 

Trade accounts receivable

 

 

(16.5

)

 

 

(5.9

)

Other receivables

 

 

0.3

 

 

 

(1.8

)

Inventory

 

 

3.3

 

 

 

(13.0

)

Prepaid taxes

 

 

(8.9

)

 

 

(1.0

)

Accounts payable

 

 

0.4

 

 

 

(5.0

)

Accrued liabilities

 

 

(5.8

)

 

 

(10.0

)

Deferred revenue

 

 

0.6

 

 

 

(1.0

)

Net cash provided by (used in) operating activities

 

 

23.5

 

 

 

(2.9

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1.6

)

 

 

(1.5

)

Acquisitions, net of cash acquired

 

 

 

 

 

(213.0

)

Purchases of marketable investment securities

 

 

(31.5

)

 

 

(32.2

)

Proceeds from maturities and sales of marketable investment securities

 

 

17.9

 

 

 

88.7

 

Net cash used in investing activities

 

 

(15.2

)

 

 

(158.0

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Net proceeds from (payments for) common stock issued under share-based compensation plans

 

 

1.7

 

 

 

(1.9

)

Net proceeds from issuance of debt

 

 

 

 

 

199.0

 

Repayment of revolving credit facility

 

 

(25.0

)

 

 

 

Repurchase and retirement of common stock

 

 

 

 

 

(21.3

)

Net cash provided by (used in) financing activities

 

 

(23.3

)

 

 

175.8

 

Effect of foreign exchange rates on cash and cash equivalents

 

 

0.5

 

 

 

3.5

 

Net increase (decrease) in cash and cash equivalents

 

 

(14.5

)

 

 

18.4

 

Cash and cash equivalents at beginning of the period

 

 

102.4

 

 

 

68.5

 

Cash and cash equivalents at end of the period

 

$

87.9

 

 

$

86.9

 

 

See accompanying notes to condensed consolidated financial statements. 

6


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars and shares in millions, except per share data)

(1)

BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared by Myriad Genetics, Inc. (the “Company” or “Myriad”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements in accordance with GAAP. The condensed consolidated financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2017, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. Operating results for the three months ended September 30, 2017 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The consolidated financial statements include the accounts of the Company’s majority-owned subsidiary, Assurex Canada, Ltd. which is 85% owned by Assurex Health, Inc. (“Assurex”), a wholly owned subsidiary of the Company, and 15% owned by the Centre for Addiction and Mental Health. Assurex Canada, Ltd. is a consolidated subsidiary of Assurex Health, Inc. The value of the non-controlling interest represents the portion of Assurex Canada, Ltd.’s profit or loss and net assets that is not held by Assurex Health, Inc. The Company attributes comprehensive income or loss of the subsidiary between the Company and the non-controlling interest based on the respective ownership interest.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Immaterial error correction to consolidated statements of operations

In connection with the preparation of the financial statements for the quarter ended September 30, 2017, the Company determined that the amounts for the change in the fair value of contingent consideration were improperly reported as a component of other income (expense) and should have been reported as a component of operating income on the consolidated statements of operations at September 30, 2016.  As a result, total costs and expenses and operating income were understated by $0.5 and other income (expense) and total other income were overstated $0.5.  There was no impact to Net Income or earnings per share.  The Company concluded that the error was not material to the consolidated statements of operations, but has elected to correct the error in the accompanying financial statements for consistent presentation.  The classification error had no effect on the on the previously reported consolidated balance sheets, statements of comprehensive income or cash flows for the quarter ended September 30, 2016.

New Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of fiscal 2019. Early adoption of ASU 2016-02 is permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company’s management is currently evaluating the impact of adopting ASU 2016-02 on the Company’s consolidated financial statements.

In May 2014, the Financial Accounting Standards Board (FASB) issued the converged standard on revenue recognition with the objective of providing a single, comprehensive model for all contracts with customers to improve comparability in the financial statements of companies reporting using International Financial Reporting Standards and U.S. GAAP. The standard contains principles that an entity must apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity must recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. An entity can apply the revenue standard retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings (modified retrospective method). The standard will be effective for the Company first quarter of fiscal 2019, with early adoption permitted for annual periods beginning after December 16, 2016.  The Company plans to adopt the standard July 1, 2018 using the full retrospective method.  The Company continues to assess the impact of this standard on its results of operations, financial position and cash flows.  Based on its preliminary assessment, the Company expects the majority of the amounts that have historically been classified as bad debt expense, primarily related to patient responsibility, will be reflected as a reduction of the transaction price

7


and therefore as a reduction in revenue. The Company anticipates an increase in the level of required financial statement disclosures due to the standard.

(2)

ACQUISITIONS

Assurex

On August 31, 2016, the Company completed the acquisition of Assurex, pursuant to the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated August 3, 2016. Pursuant to the terms of the Merger Agreement, Myriad Merger Sub, Inc., a wholly owned subsidiary of the Company, was merged with and into Assurex, with Assurex continuing as the surviving corporation, and wholly owned subsidiary of Myriad.  We acquired Assurex for total consideration of $351.6, net of cash acquired of $5.5, including a cash payment of $216.1, and two potential performance-based milestones totaling $185.0 with a fair value of $130.0.  The fair value of the performance-based milestones was determined by using the Monte Carlo Method.

Of the cash consideration, $19.1 was deposited into an escrow account to fund (i) any post-closing adjustments payable to Myriad based upon differences between the estimated working capital and the actual working capital of Assurex at closing, and (ii) any indemnification claims made by Myriad against Assurex within 18 months following closing.

Total consideration transferred was allocated to tangible assets acquired and liabilities assumed based on their fair values as of the acquisition date including current adjustments as set forth below.  We believe the acquisition establishes the foundation for our neuroscience business and leverages our existing preventative care business unit with the addition of a product, GeneSight, which has growth potential.  These factors contributed to consideration transferred in excess of the fair value of Assurex’s net tangible and intangible assets acquired, resulting in the Company recording goodwill in connection with the transaction.  During the three months ended September 30, 2017 there was a fair value increase as of the date of the acquisition to equipment totaling $0.1  and $0.2 change in the non-controlling interest at the date of acquisition, which resulted in a net increase to goodwill of $0.1 due to updated 3rd party valuations. Also during that period there was a $1.8 increase in the deferred tax liability due to differences in GAAP and tax purchase accounting as of the date of acquisition which increased goodwill by the same amount.  

Management estimated the fair value of tangible and intangible assets and liabilities in accordance with the applicable accounting guidance for business combinations and utilized the services of third-party valuation consultants. The allocation of consideration transferred is now considered final.  The final purchase price allocation is as follows:

 

 

 

Estimated Fair

Value

 

Current assets

 

$

18.2

 

Intangible assets

 

 

295.6

 

Equipment

 

 

1.9

 

Goodwill

 

 

121.1

 

Current liabilities

 

 

(18.9

)

Deferred tax liability

 

 

(66.3

)

Total fair value purchase price

 

$

351.6

 

Less: Contingent consideration

 

 

(130.0

)

Less: Cash acquired

 

 

(5.5

)

Total cash consideration transferred

 

$

216.1

 

 

Identifiable Intangible Assets

The Company acquired intangible assets that consisted of developed technology which had an estimated fair value of $256.5 and a database with an estimated fair value of $39.1. The fair value of the developed technology was determined using a probability-weighted income approach that discounts expected future cash flows to present value. The fair value of the database was determined using a combination of the lost profits and replacement cost methods.  The estimated net cash flows were discounted using a discount rate of 16% which is based on the estimated internal rate of return for the acquisition and represents the rate that market participants might use to value the intangible assets. The projected cash flows were based on key assumptions such as estimates of revenues and operating profits; the time and resources needed to recreate databases and product and commercial development and approval; the life of the commercialized product; and associated risks related to viability and product alternatives. The Company will amortize the intangible assets on a straight-line basis over their estimated useful lives of 17 years for the developed technology and 5 years for the database. This amortization is not deductible for income tax purposes.  

8


Goodwill

The goodwill represents the excess of consideration transferred over the fair value of assets acquired and liabilities assumed and is attributable to the benefits expected from combining the Company’s research and commercial operations with Assurex’s. This goodwill is not deductible for income tax purposes.  Change in goodwill from the date of acquisition is shown below:

 

 

 

Carrying

 

 

 

amount

 

Balance June 30, 2016

 

$

119.2

 

Fair value adjustment to equipment

 

 

(0.1

)

Non-controlling interest adjustment

 

 

0.2

 

Change in deferred tax liability

 

 

1.8

 

Ending balance September 30, 2017

 

$

121.1

 

 

Pro Forma Information

The unaudited pro-forma results presented below include the effects of the Assurex acquisition as if it had been consummated as of July 1, 2016, with adjustments to give effect to pro forma events that are directly attributable to the acquisition which includes adjustments related to the amortization of acquired intangible assets, interest income and expense, and depreciation. The unaudited pro forma results do not reflect any operating efficiency or potential cost savings which may result from the consolidation of Assurex. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operation of the combined company would have been if the acquisition had occurred at the beginning of the period presented nor are they indicative of future results of operations and are not necessarily indicative of results that might have been achieved had the acquisition been consummated as of July 1, 2016.

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Revenue

 

$

190.2

 

 

$

188.9

 

Income from operations

 

 

87.4

 

 

 

(0.8

)

Net income (loss)

 

 

81.1

 

 

 

(19.2

)

Net income (loss) per share, basic

 

$

1.18

 

 

$

(0.28

)

Net income (loss) per share, diluted

 

$

1.15

 

 

$

(0.28

)

 

To complete the purchase transaction, we incurred approximately $5.0 million of acquisition costs, which were recorded as selling, general and administrative expenses for the year ended June 30, 2017.  For the three months ended September 30, 2017, Assurex contributed revenue of approximately $28.8.  For the three months ended September 30, 2017, operating expenses related to Assurex were approximately $25.8.

 

9


(3)

MARKETABLE INVESTMENT SECURITIES

The Company has classified its marketable investment securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses, net of the related tax effect, included in accumulated other comprehensive loss in stockholders’ equity until realized. Gains and losses on investment security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned. The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of security at September 30, 2017 and June 30, 2017 were as follows:

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

unrealized

 

 

unrealized

 

 

 

 

 

 

 

Amortized

 

 

holding

 

 

holding

 

 

Estimated

 

 

 

cost

 

 

gains

 

 

losses

 

 

fair value

 

At September 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

82.3

 

 

$

 

 

$

 

 

$

82.3

 

Cash equivalents

 

 

5.6

 

 

 

 

 

 

 

 

$

5.6

 

Total cash and cash equivalents

 

 

87.9

 

 

 

 

 

 

 

 

 

87.9

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds and notes

 

 

62.2

 

 

 

0.1

 

 

 

(0.1

)

 

 

62.2

 

Municipal bonds

 

 

31.2

 

 

 

 

 

 

 

 

 

31.2

 

Federal agency issues

 

 

9.5

 

 

 

 

 

 

 

 

 

9.5

 

US government securities

 

 

7.6

 

 

 

 

 

 

 

 

 

7.6

 

Total

 

$

198.4

 

 

$

0.1

 

 

$

(0.1

)

 

$

198.4

 

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

unrealized

 

 

unrealized

 

 

 

 

 

 

 

Amortized

 

 

holding

 

 

holding

 

 

Estimated

 

 

 

cost

 

 

gains

 

 

losses

 

 

fair value

 

At June 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

83.5

 

 

$

 

 

$

 

 

$

83.5

 

Cash equivalents

 

 

18.9

 

 

 

 

 

 

 

 

 

18.9

 

Total cash and cash equivalents

 

 

102.4

 

 

 

 

 

 

 

 

 

102.4

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds and notes

 

 

45.4

 

 

 

0.1

 

 

 

(0.1

)

 

 

45.4

 

Municipal bonds

 

 

32.7

 

 

 

 

 

 

 

 

 

32.7

 

Federal agency issues

 

 

11.6

 

 

 

 

 

 

(0.1

)

 

 

11.5

 

US government securities

 

 

7.2

 

 

 

 

 

 

 

 

 

7.2

 

Total

 

$

199.3

 

 

$

0.1

 

 

$

(0.2

)

 

$

199.2

 

 

Cash, cash equivalents, and maturities of debt securities classified as available-for-sale securities are as follows at September 30, 2017:

 

 

 

Amortized

 

 

Estimated

 

 

 

cost

 

 

fair value

 

Cash

 

$

82.3

 

 

$

82.3

 

Cash equivalents

 

 

5.6

 

 

 

5.6

 

Available-for-sale:

 

 

 

 

 

 

 

 

Due within one year

 

 

60.4

 

 

 

60.4

 

Due after one year through five years

 

 

50.1

 

 

 

50.1

 

Due after five years

 

 

 

 

 

 

Total

 

$

198.4

 

 

$

198.4

 

 

10


(4)

PROPERTY, PLANT AND EQUIPMENT, NET

 

 

 

September 30,

 

 

June 30,

 

 

 

2017

 

 

2017

 

Land

 

$

2.4

 

 

$

2.3

 

Buildings and improvements

 

 

17.5

 

 

 

17.1

 

Leasehold improvements

 

 

22.1

 

 

 

22.1

 

Equipment

 

 

108.7

 

 

 

106.9

 

 

 

 

150.7

 

 

 

148.4

 

Less accumulated depreciation

 

 

(100.9

)

 

 

(97.3

)

Property, plant and equipment, net

 

$

49.8

 

 

$

51.1

 

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Depreciation expense

 

$

3.9

 

 

$

3.7

 

 

(5)

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company has recorded goodwill of $319.0 from the acquisitions of Assurex that was completed on August 31, 2016, Sividon that was completed on May 31, 2016, Privatklinik Dr. Robert Schindlbeck GmbH & Co. KG (the “Clinic”) that was completed on February 27, 2015, Crescendo Bioscience, Inc. that was completed on February 28, 2014 and Rules-Based Medicine, Inc. that was completed on May 31, 2011.  Of this goodwill, $253.1 relates to the Company’s diagnostic segment and $65.9 relates to the other segment.  The following summarizes changes to the goodwill balance for the three months ended September 30, 2017:

 

 

 

Carrying

amount

 

Beginning balance July 1, 2017

 

$

316.1

 

Adjustments to acquisitions (see note 2)

 

 

1.9

 

Translation adjustments

 

 

1.0

 

Ending balance September 30, 2017

 

$

319.0

 

 

Intangible Assets

Intangible assets primarily consist of amortizable assets of purchased licenses and technologies, customer relationships, and trade names as well as non-amortizable intangible assets of in-process technologies and research and development.  The following summarizes the amounts reported as intangible assets:

 

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

Accumulated

 

 

 

 

 

 

 

Amount

 

 

Amortization

 

 

Net

 

At September 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

Purchased licenses and technologies

 

$

526.7

 

 

$

(70.4

)

 

$

456.3

 

Customer relationships

 

 

4.7

 

 

 

(3.0

)

 

 

1.7

 

Trademarks

 

 

3.0

 

 

 

(0.9

)

 

 

2.1

 

Total amortized intangible assets

 

 

534.4

 

 

 

(74.3

)

 

 

460.1

 

In-process research and development

 

 

23.7

 

 

 

 

 

 

23.7

 

Total unamortized intangible assets

 

 

23.7

 

 

 

 

 

 

23.7

 

Total intangible assets

 

$

558.1

 

 

$

(74.3

)

 

$

483.8

 

 

11


 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

Accumulated

 

 

 

 

 

 

 

Amount

 

 

Amortization

 

 

Net

 

At June 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

Purchased licenses and technologies

 

$

525.7

 

 

$

(61.2

)

 

$

464.5

 

Customer relationships

 

 

4.6

 

 

 

(2.8

)

 

 

1.8

 

Trademarks

 

 

3.0

 

 

 

(0.8

)

 

 

2.2

 

Total amortized intangible assets

 

 

533.3

 

 

 

(64.8

)

 

 

468.5

 

In-process research and development

 

 

23.1

 

 

 

 

 

 

23.1

 

Total unamortized intangible assets

 

 

23.1

 

 

 

 

 

 

23.1

 

Total intangible assets

 

$

556.4

 

 

$

(64.8

)

 

$

491.6

 

 

The Company recorded amortization expense during the respective periods for these intangible assets as follows:

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Amortization of intangible assets

 

$

9.3

 

 

$

5.5

 

 

(6)

ACCRUED LIABILITIES

 

 

 

September 30,

 

 

June 30,

 

 

 

2017

 

 

2017

 

Employee compensation and benefits

 

$

37.2

 

 

$

44.4

 

Accrued taxes payable

 

 

8.6

 

 

 

7.1

 

Other

 

 

14.0

 

 

 

14.1

 

Total accrued liabilities

 

$

59.8

 

 

$

65.6

 

 

(7)

LONG-TERM DEBT

On December 23, 2016, the Company entered into a senior secured revolving credit facility (the “Facility”) by and among Myriad, as borrower, the lenders from time to time party thereto, providing for the Facility in an aggregate principal amount of up to $300.0, which amount shall include $10.0 sublimits, in each case, for swingline loans and letters of credit. Pursuant to the Facility, Myriad borrowed revolving loans in an aggregate principal amount of $205.0 with $0.7 upfront fees and $0.3 debt issuance costs recorded as a debt discount to be amortized over the term of the Facility resulting in current net long-term debt of $204.0. The Facility matures on December 23, 2021.  There are no scheduled principal payments of the Facility prior to its maturity date.  

The proceeds of the Facility were used (i) to refinance in full the obligations under the Term Loan, (ii) to pay any fees and expenses related thereto, and (iii) for working capital and general corporate purposes.

The Facility contains customary loan terms, interest rates, representations and warranties, affirmative and negative covenants, in each case, subject to customary limitations, exceptions and exclusions. The Credit Agreement also contains certain customary events of default.

Covenants in the Facility impose operating and financial restrictions on the Company. These restrictions may prohibit or place limitations on, among other things, the Company’s ability to incur additional indebtedness, create certain types of liens, mergers or consolidations, and/or change in control transactions. The Facility may also prohibit or place limitations on the Company’s ability to sell assets, pay dividends or provide other distributions to shareholders. The Company must maintain a specified leverage and interest ratios measured as of the end of each quarter as a financial covenant in the Facility.  We were in compliance with all financial covenants at September 30, 2017.

During the quarter ended September 30, 2017, the company made $25.0 in principal repayments.

12


The Facility is secured by a first-lien security interest in substantially all of the assets of Myriad and certain of its domestic subsidiaries and each such domestic subsidiary of Myriad has guaranteed the repayment of the Facility. Amounts outstanding under the Facility were as follows:

 

 

 

September 30,

 

 

June 30,

 

 

 

2017

 

 

2017

 

Long-term debt

 

$

75.1

 

 

$

100.0

 

Long-term debt discount

 

 

(0.9

)

 

 

(0.9

)

Net long-term debt

 

$

74.2

 

 

$

99.1

 

 

(8)

OTHER LONG TERM LIABILITIES

 

 

 

September 30,

 

 

June 30,

 

 

 

2017

 

 

2017

 

Pension obligation

 

 

6.1

 

 

 

5.9

 

Other

 

 

1.3

 

 

 

1.3

 

Total other long term liabilities

 

$

7.4

 

 

$

7.2

 

 

 

The Company has two non-contributory defined benefit pension plans for its current and former Clinic employees. Participation in the plans excludes those employees hired after 2002. As of September 30, 2017 the fair value of the plan assets were approximately $0.1 resulting in a net pension liability of $6.1.

 

(9)

PREFERRED AND COMMON STOCKHOLDER’S EQUITY

The Company is authorized to issue up to 5.0 shares of preferred stock, par value $0.01 per share.  There were no preferred shares outstanding at September 30, 2017.

The Company is authorized to issue up to 150.0 shares of common stock, par value $0.01 per share. There were 69.2 shares issued and outstanding at September 30, 2017.

Common shares issued and outstanding

 

 

 

 

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Common stock issued and outstanding at July 1

 

 

68.4

 

 

 

69.1

 

Common stock issued upon exercise of options and employee

   stock plans

 

 

0.8

 

 

 

0.3

 

Repurchase and retirement of common stock

 

 

 

 

 

(1.0

)

Common stock issued and outstanding at September 30

 

 

69.2

 

 

 

68.4

 

 

Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding.  Diluted earnings per share is computed based on the weighted-average number of shares of common stock, including the dilutive effect of common stock equivalents, outstanding.

The following is a reconciliation of the denominators of the basic and diluted earnings per share (“EPS”) computations:

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Denominator: