e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended February 28, 2010
OR
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o |
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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 0-19095
SOMANETICS CORPORATION
(Exact name of registrant as specified in its charter)
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Michigan
(State or other jurisdiction of incorporation or organization)
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38-2394784
(I.R.S. Employer Identification No.) |
2600 Troy Center Drive
Troy, Michigan
48084-4771
(Address of principal executive offices)
(Zip Code)
(248) 244-1400
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 þ No o
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 during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
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):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller-reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes o No þ
Number of common shares outstanding at March 29, 2010: 11,949,384
PART I FINANCIAL INFORMATION
SOMANETICS CORPORATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
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February 28, |
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November 30, |
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2010 |
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2009 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
24,660,515 |
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$ |
28,964,273 |
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Marketable securities |
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8,381,289 |
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24,763,854 |
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Accounts receivable |
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7,374,943 |
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8,878,942 |
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Inventory |
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3,336,832 |
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3,622,531 |
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Prepaid expenses |
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545,819 |
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1,087,450 |
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Accrued interest receivable |
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94,483 |
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138,099 |
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Deferred tax asset current |
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51,060 |
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51,060 |
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Total current assets |
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44,444,941 |
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67,506,209 |
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PROPERTY AND EQUIPMENT (at cost): |
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Demonstration and no capital cost sales equipment at customers |
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4,407,883 |
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4,285,163 |
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Machinery and equipment |
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2,058,911 |
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1,886,582 |
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Furniture and fixtures |
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990,817 |
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545,796 |
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Leasehold improvements |
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454,423 |
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197,450 |
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Total |
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7,912,034 |
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6,914,991 |
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Less accumulated depreciation and amortization |
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(3,787,422 |
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(3,966,645 |
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Net property and equipment |
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4,124,612 |
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2,948,346 |
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OTHER ASSETS: |
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Long-term investments |
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43,792,506 |
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26,004,995 |
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Deferred tax asset non-current |
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2,961,381 |
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2,795,963 |
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Intangible assets, net |
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230,924 |
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234,003 |
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Goodwill |
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1,783,712 |
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1,783,712 |
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Other |
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15,000 |
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15,000 |
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Total other assets |
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48,783,523 |
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30,833,673 |
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TOTAL ASSETS |
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$ |
97,353,076 |
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$ |
101,288,228 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
1,301,686 |
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$ |
1,466,497 |
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Accrued liabilities |
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703,021 |
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1,788,552 |
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Total current liabilities |
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2,004,707 |
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3,255,049 |
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OTHER LIABILITIES: |
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Deferred rent |
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102,153 |
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Total other liabilities |
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102,153 |
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TOTAL LIABILITIES |
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2,106,860 |
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3,255,049 |
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COMMITMENTS
AND CONTINGENCIES |
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SHAREHOLDERS EQUITY: |
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Preferred shares; authorized, 1,000,000 shares of $.01 par value;
no shares issued or outstanding |
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Common shares; authorized, 20,000,000 shares of $.01 par value;
issued and outstanding, 11,909,200 shares at February 28, 2010,
and 12,104,462 shares at November 30, 2009 |
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119,092 |
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121,045 |
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Additional paid-in capital |
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92,864,993 |
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97,696,229 |
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Retained Earnings |
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2,262,131 |
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215,905 |
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Total shareholders equity |
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95,246,216 |
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98,033,179 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
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$ |
97,353,076 |
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$ |
101,288,228 |
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See notes to financial statements
2
SOMANETICS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three-Month |
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Periods Ended |
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February 28, |
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February 28, |
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2010 |
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2009 |
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NET REVENUES |
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$ |
13,139,684 |
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$ |
11,155,354 |
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COST OF SALES |
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1,745,454 |
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1,580,481 |
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Gross Margin |
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11,394,230 |
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9,574,873 |
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OPERATING EXPENSES: |
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Research, development and engineering |
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613,153 |
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423,161 |
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Selling, general and administrative |
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7,976,276 |
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7,314,699 |
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Total operating expenses |
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8,589,429 |
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7,737,860 |
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OPERATING INCOME |
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2,804,801 |
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1,837,013 |
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OTHER INCOME: |
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Interest income |
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252,468 |
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271,386 |
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Total other income |
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252,468 |
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271,386 |
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INCOME BEFORE INCOME TAXES |
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3,057,269 |
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2,108,399 |
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INCOME TAX EXPENSE |
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(1,011,044 |
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(806,220 |
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NET INCOME |
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$ |
2,046,225 |
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$ |
1,302,179 |
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NET INCOME PER COMMON SHARE BASIC |
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$ |
.17 |
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$ |
.11 |
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NET INCOME PER COMMON SHARE DILUTED |
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$ |
.16 |
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$ |
.10 |
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WEIGHTED AVERAGE SHARES OUTSTANDING BASIC |
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12,029,231 |
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12,038,368 |
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WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED |
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12,907,776 |
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12,898,920 |
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See notes to financial statements
3
SOMANETICS CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Three-Month |
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Periods Ended |
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February 28, |
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February 28, |
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2010 |
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2009 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
2,046,225 |
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$ |
1,302,179 |
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Adjustments to reconcile net income to net cash provided by operations: |
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Income tax expense |
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876,650 |
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737,516 |
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Depreciation and amortization |
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280,228 |
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254,714 |
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Stock compensation expense |
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418,150 |
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384,430 |
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Excess tax benefits from stock option exercises |
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(1,039,471 |
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Changes in assets and liabilities: |
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Accounts receivable decrease |
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1,503,999 |
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674,461 |
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Accrued interest income decrease (increase) |
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43,616 |
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(75,969 |
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Inventory decrease (increase) |
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140,910 |
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(391,424 |
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Deferred income tax benefit (increase) |
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(2,597 |
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Prepaid expenses decrease |
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541,631 |
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67,968 |
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Accounts payable (decrease) |
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(164,811 |
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(200,288 |
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Accrued liabilities (decrease) |
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(1,085,531 |
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(1,028,800 |
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Deferred rent increase |
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102,154 |
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Accrued income tax expense (increase) |
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(20,659 |
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Net cash provided by operating activities |
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3,661,153 |
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1,704,128 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of marketable securities and long-term investments |
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(34,553,268 |
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(15,023,401 |
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Proceeds from maturities of marketable securities and
long-term investments |
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33,148,321 |
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203,846 |
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Acquisition of property and equipment |
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(1,308,625 |
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(103,914 |
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Net cash (used in) investing activities |
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(2,713,572 |
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(14,923,469 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Repurchase of common shares |
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(6,449,210 |
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Excess tax benefits from stock option exercises |
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1,039,471 |
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Proceeds from issuance of common shares due to exercise of stock options |
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158,400 |
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Net cash (used in) financing activities |
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(5,251,339 |
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS |
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(4,303,758 |
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(13,219,341 |
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
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28,964,273 |
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37,166,141 |
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CASH AND CASH EQUIVALENTS, END OF PERIOD |
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$ |
24,660,515 |
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$ |
23,946,800 |
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Supplemental Disclosure of Non cash investing activities: |
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Demonstration and no capital cost sales equipment capitalized
from inventory (Note 2) |
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$ |
144,789 |
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$ |
151,493 |
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Supplemental Disclosure of Taxes paid: |
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Federal and state income taxes (Note 3) |
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$ |
55,264 |
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$ |
68,704 |
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See notes to financial statements
4
SOMANETICS CORPORATION
Notes to Financial Statements
(Unaudited)
February 28, 2010
1. |
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FINANCIAL STATEMENT PRESENTATION |
We prepared our unaudited interim financial statements pursuant to the Securities and Exchange
Commissions rules. These interim financial statements do not include all of the information and
notes normally included in our annual financial statements prepared in accordance with generally
accepted accounting principles. We believe, however, that the disclosures are adequate to make the
information presented not misleading.
The unaudited interim financial statements in this report reflect all adjustments which are,
in our opinion, necessary for a fair statement of the results for the interim periods presented.
All of these adjustments that are material are of a normal recurring nature. Our operating results
for the three-month period ended February 28, 2010 do not necessarily indicate the results that you
should expect for the fiscal year ending November 30, 2010. You should read the unaudited interim
financial statements together with the financial statements and related notes for the fiscal year
ended November 30, 2009 included in our Annual Report on Form 10-K for the fiscal year ended
November 30, 2009.
2. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Marketable Securities and Long-Term Investments consist of Aaa-rated United States government
agency bonds, classified as held to maturity, at February 28, 2010 maturing approximately two years
to five years from the date of acquisition, are stated at an amortized cost of $52,173,795, and
have a market value of $52,600,932 at February 28, 2010.
Inventory is stated at the lower of cost or market on a first-in, first-out (FIFO) basis.
Inventory consists of:
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February 28, |
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November 30, |
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2010 |
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2009 |
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Purchased components |
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$ |
2,185,773 |
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$ |
2,358,037 |
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Finished goods |
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885,982 |
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1,042,205 |
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Work in process |
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265,077 |
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222,289 |
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Total |
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$ |
3,336,832 |
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$ |
3,622,531 |
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Property and Equipment are stated at cost. Depreciation and amortization are computed using
the straight-line method over the estimated useful lives of the assets, which range from two to
twelve years. Depreciation expense was $277,149 and $251,635 for the quarters ended February 28,
2010 and February 28, 2009, respectively. We offer to our United States customers a no capital
cost sales program whereby we ship the INVOS System monitor to the customer at no charge. The
INVOS System monitors that are shipped to our customers are classified as no capital cost sales
equipment and are depreciated over five years to cost of goods sold. All other depreciation
expense is recorded as a selling, general and administrative expense. As of February 28, 2010, we
have capitalized $4,407,883 in costs for INVOS System monitors being used as demonstration and no
capital cost sales equipment, and these assets had a net book value of $1,848,268. As of November
30, 2009, we have capitalized $4,285,163 in costs for INVOS System monitors being used as
demonstration and no capital cost sales equipment, and these assets had a net book value of
$1,868,706. Property and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the net book value of the asset may not be recovered.
Intangible Assets and Goodwill consist of technology acquisition costs and goodwill. The
carrying amount and accumulated amortization of these technology acquisition costs are as follows:
5
SOMANETICS CORPORATION
Notes to Financial Statements- Continued
(Unaudited)
February 28, 2010
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February 28, |
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November 30, |
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|
2010 |
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2009 |
|
Technology acquisition costs |
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$ |
246,318 |
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$ |
246,318 |
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Less: accumulated amortization |
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(15,394 |
) |
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(12,315 |
) |
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Total |
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$ |
230,924 |
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$ |
234,003 |
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Amortization expense was approximately $3,100 for the three months ended February 28, 2010 and
February 28, 2009 for our technology acquisition costs intangible asset. Amortization expense for
each of the next 19 fiscal years related to the technology acquisition costs intangible asset is
expected to be approximately $12,300 per year. As of November 30, 2009, the carrying value of the
technology acquisition costs intangible asset was $234,003 and the carrying value of the goodwill
was $1,783,712. As of February 28, 2010, the carrying value of the technology acquisition costs
intangible asset was $230,924 and the carrying value of the goodwill was $1,783,712. Intangible
assets and goodwill are reviewed annually for impairment at the end of our fiscal year, and
whenever events or changes in circumstances indicate that the carrying value of the asset may not
be recovered.
Stock Compensation For the first quarter of fiscal 2010, we have recorded stock compensation
expense of $418,150 as a result of stock options and restricted common shares granted to our
officers, employees, directors and one of our consultants. For the first quarter of fiscal 2009,
we recorded stock compensation expense of $384,430. During the first quarter of fiscal 2010, we
granted 74,500 stock options to our employees in February 2010 at an exercise price of $16.18 on
the date of grant. In addition, we issued 152,650 restricted common shares to our employees,
officers and a consultant in February 2010 with a market value of $16.18 per share on the date of
grant. The restricted common shares issued in the first quarter of fiscal 2010 will vest and be
expensed in the financial statements over 10 years. During the first quarter of fiscal 2009, no
stock options were granted and we issued 8,588 restricted common shares to our employees in
February 2009 with a market value of $16.31 per share on the date of grant. These options
described above were granted under the 2005 Stock Incentive Plan, expire 10 years after grant and
were granted at the closing sale price of the common shares as of the date of grant. The
weighted-average grant-date fair value of the options granted during the first quarter of fiscal
2010 was $8.17. The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average assumptions: expected
volatility (the measure by which the stock price has fluctuated or is expected to fluctuate during
the period) 50.06% for 2010 and 53.97% for 2009, risk-free interest rate (approximate U.S. Treasury
yield in effect at the time of grant) 2.82% for 2010 and 2.50% for 2009, expected lives of
approximately 6 years and a dividend yield of 0%. The fair value of the restricted common shares
was estimated based on the market value of the common shares on the date of issuance.
During the first quarter of 2010, no stock options and 2,773 restricted common shares vested
with a total fair value of $51,031. During the first quarter of 2009, no stock options vested and
1,055 restricted common shares vested with a total fair value of $23,010. During the three months
ended February 28, 2010, 55,000 stock options were exercised by an officer and one of our employees
for gross proceeds to us of $158,400. The intrinsic value of these exercised stock options was
$695,960. There were no stock option exercises during the three months ended February 28, 2009.
As of February 28, 2010, there was $7,097,853 of total unrecognized compensation cost related
to nonvested share-based compensation awards granted under the 2005 Plan. This cost is expected to
be recognized over a weighted average period of approximately 4 years. As of February 28, 2009,
there was $5,003,431 of total unrecognized compensation cost related to nonvested share-based
compensation awards granted under the 2005 Plan. In addition, as of February 28, 2010, the
aggregate intrinsic value of stock options outstanding was
6
SOMANETICS CORPORATION
Notes to Financial Statements- Continued
(Unaudited)
February 28, 2010
$15,077,041, and the aggregate intrinsic value of stock options exercisable was $14,166,352,
and as of February 28, 2009, the aggregate intrinsic value of stock options outstanding and
exercisable was $9,904,577.
No modifications were made to any share awards that required an accounting charge, and no cash
was paid for share-based liabilities during the first quarter of fiscal 2010 or during the first
quarter of fiscal 2009.
Net Income Per Common Share basic and diluted is computed using the weighted average number
of common shares outstanding during each period. Weighted average shares outstanding diluted
includes the potential dilution that could occur for common shares issuable under stock options.
The difference between weighted average shares diluted and weighted average shares basic is
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
February 28, 2010 |
|
|
February 28, 2009 |
|
Weighted average shares basic |
|
|
12,029,231 |
|
|
|
12,038,368 |
|
Add: effect of dilutive common
shares |
|
|
878,545 |
|
|
|
860,552 |
|
|
|
|
|
|
|
|
Weighted average shares diluted |
|
|
12,907,776 |
|
|
|
12,898,920 |
|
For the three months ended February 28, 2010, there were 278,500 stock options outstanding
that were excluded from the computation of net income per common share diluted, and for the three
months ended February 28, 2009, there were 746,257 stock options outstanding that were excluded
from the computation of net income per common share diluted, as the exercise price of these
options exceeded the average market price per share of our common shares. As of February 28, 2010
we had outstanding 1,834,137 stock options to purchase common shares and as of February 28, 2009 we
had outstanding 1,821,187 stock options to purchase common shares.
Common Share Repurchase Program During the first quarter of fiscal 2010, we repurchased
401,992 common shares at an average price of $16.04 per share and an aggregate cost of $6,449,210.
All of the shares were purchased by us in open-market transactions pursuant to our
publicly-announced share repurchase program.
We have performed the required assessment of positive and negative evidence regarding
realization of our deferred tax assets in accordance with generally accepted accounting principles,
including our past operating results, the existence of cumulative losses over our history up to the
most recent seven fiscal years, and our forecast for future net income. Our assessment of our
deferred tax assets included making assumptions about our net revenues and pre-tax income in future
years, making allowance for the uncertainties regarding, among other things, our future net
revenues, the rate of adoption of our products in the marketplace and the competition in the
marketplace. As of February 28, 2010, we have concluded that it was more likely than not that
approximately $3,012,000 of such assets will be realized.
Given the assumptions inherent in our financial plans, it is possible to calculate a different
value for our deferred tax asset by changing one or more of the variables in our assessment.
However, we believe that our evaluation of our financial plans was reasonable, and that the
judgments and assumptions that we made at the time of developing the plan were appropriate.
During the first quarter of fiscal 2010, we recognized income tax expense on our statement of
operations at an estimated effective tax rate of 33% as a result of approximately $163,000 in tax
benefits related to research and development tax credits recorded in the quarter. In addition,
during fiscal 2010, we have recognized deferred tax assets related to the exercise of stock options
in prior years of approximately $1,039,500. These assets were recognized as an increase in
additional paid in capital on our balance sheet because they were utilized and reduced
7
SOMANETICS CORPORATION
Notes to Financial Statements- Continued
(Unaudited)
February 28, 2010
current taxes payable. During the first quarter of fiscal 2009, we recognized income tax
expense in our statement of operations at an estimated effective tax rate of 38% as a result of
certain additional state tax expenses recorded in the quarter.
During the first quarter of fiscal 2010 we paid income taxes of approximately $2,600 for
alternative minimum tax due and approximately $55,300 for state income taxes due. During the first
quarter of fiscal 2009 we paid no income taxes for alternative minimum tax due and approximately
$68,700 for state income taxes due.
Accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
February 28, |
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
Incentive Compensation |
|
$ |
362,339 |
|
|
$ |
1,185,225 |
|
Professional Fees |
|
|
168,500 |
|
|
|
159,458 |
|
Sales Commissions |
|
|
152,332 |
|
|
|
425,969 |
|
Warranty |
|
|
19,850 |
|
|
|
17,900 |
|
|
|
|
|
|
|
|
Total |
|
$ |
703,021 |
|
|
$ |
1,788,552 |
|
|
|
|
|
|
|
|
5. |
|
COMMITMENTS AND CONTINGENCIES |
We may become subject to product liability claims by patients or physicians, and may become a
defendant in product liability or malpractice litigation.
We operate our business in one reportable segment, the development, manufacture and marketing
of medical devices. Our products have similar characteristics, customers, distribution and
marketing strategies, and are subject to similar regulatory requirements. In making operating and
strategic decisions, our management evaluates net revenues based on the worldwide net revenues of
our products, and also profitability on an enterprise-wide basis due to shared costs.
Approximately 98% of our net revenues in the first quarter of fiscal 2010 and 100% of our net
revenues in the first quarter of fiscal 2009 were derived from our INVOS System product line.
We evaluated all subsequent events from the date of the balance sheet and there were no events or
transactions that have occurred which require recognition or disclosure in the financial
statements.
8
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results
of operations together with our financial statements and the related notes and other financial data
included elsewhere in this report. Some of the information contained in this discussion and
analysis or set forth elsewhere in this report, including information with respect to our plans and
strategy for our business, includes forward-looking statements that involve risks and
uncertainties. You should review the Risk Factors section of our Annual Report on Form 10-K for
a discussion of important factors that could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in the following
discussion and analysis. See also Forward-Looking Statements in Item 1A of our Annual Report on
Form 10-K.
Overview
We develop, manufacture and market the INVOS System, a non-invasive patient monitoring system
that provides accurate, real-time blood oxygen measurements in the brain and elsewhere in the body
in tissues beneath the sensor in patients greater than 2.5 kilograms, and continuously measures
changes in blood oxygen levels for individuals of any weight. Our four-channel cerebral and
somatic INVOS System monitor can display information from four disposable sensors simultaneously.
The INVOS System is the only commercially-available cerebral/somatic Oximeter proven to improve
outcomes. In May 2008, we received 510(k) clearance from the FDA to market our INVOS System to
monitor changes in blood oxygen saturation in any tissues beneath the sensor, not limited to brain
and somatic tissue, in any individual. In April 2009, we received 510(k) clearance from the FDA to
expand the indications for use to reflect the INVOS Systems ability to provide accurate, immediate
blood oxygen saturation measurements in patients greater than 2.5 kilograms at risk for restricted
or no blood flow, in addition to our previous FDA clearance to measure changes in blood oxygen
saturation in any individual.
In November 2008, we acquired substantially all of the assets of ICU Data Systems, Inc., a
technology development company, for approximately $2,000,000 in cash plus the assumption of
specified liabilities. ICU Data Systems has developed a patented technology that integrates data
from a broad array of hospital bedside devices, such as physiological monitors, ventilators and
infusion devices, into a single bedside display for comparison, data management and storage. We
launched our newly-acquired data integration technology, as a stand-alone device that we call Vital
Sync, in the third quarter of fiscal 2009. The INVOS System is one of many devices whose data can
be integrated into the stand-alone device. To support the addition of the derived parameter
features to the system, or calculated parameters based on the combination of two or more discrete
parameters, we have filed a new FDA 510(k) premarket notification in the fourth quarter of fiscal
2009. In addition, we continue to invest to combine the Vital Sync System and INVOS System
technologies into a single product in fiscal 2010. Upon completion of development of a single
product combining the Vital Sync System with our INVOS System technology, we also plan to pursue a
new FDA 510(k) clearance for this integrated device for a launch currently expected in mid-2011.
Net Revenues and Cost of Sales
We derive our revenues primarily from sales of INVOS Systems, although we expect to derive
modest revenues in fiscal 2010 from sales of our Vital Sync System, which we launched as a
stand-alone device in the third quarter of 2009. In the United States, such sales are made
primarily to hospitals through our direct sales team and an independent sales representative firm.
Outside the United States, we have distribution agreements with independent distributors for the
INVOS System, including Covidien in Europe, Canada, the Middle East and South Africa, and Edwards
Lifesciences Ltd. in Japan. Our cost of sales represent the cost of producing monitors and
disposable sensors. Revenues from outside the United States contributed 20% to our first quarter
fiscal 2010 net revenues. As
9
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
a percentage of net revenues, the gross margins from our
international sales are typically lower than gross margins from our U.S. sales, reflecting the
difference between the prices we receive from distributors and from direct customers.
We offer to our customers in the United States a no capital cost sales program whereby we ship
the INVOS System monitor to the customer at no charge. Under this program, we do not recognize any
revenue upon the shipment of the monitor. At the time of shipment of the monitor, we capitalize
the monitor as an asset and depreciate this asset over five years, and this depreciation is
included in cost of goods sold. We recognize sensor revenue when we receive purchase orders and
ship the product to the customer.
Operating Expenses
Selling, general and administrative expenses generally consist of:
|
|
|
salaries, wages and related expenses of our employees and consultants; |
|
|
|
|
sales and marketing expenses, such as employee sales commissions, commissions to
independent sales representatives, travel, entertainment, advertising, education and
training expenses, depreciation of demonstration monitors and attendance at selected
medical conferences; |
|
|
|
|
clinical research expenses, such as costs of supporting clinical trials; and |
|
|
|
|
general and administrative expenses, such as the cost of corporate operations,
professional services, stock compensation, insurance, warranty and royalty expenses,
investor relations, depreciation and amortization, facilities expenses and other general
operating expenses. |
We have increased the size of our U.S. direct sales team and expect to increase the size of
our U.S. direct sales team in fiscal 2010. In addition, we have hired and may hire additional
direct salespersons and clinical specialists in Europe to support Covidien. We also expect
selling, general and administrative expenses to increase in fiscal 2010, primarily as a result of
the patent infringement action that we have filed against CAS Medical Systems, Inc. in 2009,
expenses associated with the lease agreement that we have entered into for our new corporate
headquarters and assembly and storage facility and increased stock compensation expense.
Research, development and engineering expenses consist of:
|
|
|
salaries, wages and related expenses of our research and development personnel and
consultants; |
|
|
|
|
costs of various development projects; and |
|
|
|
|
costs of preparing and processing applications for FDA clearance of new products. |
We expect our research, development and engineering expenses to increase in fiscal 2010,
excluding the $2,000,000 of expense incurred in the fourth quarter of 2009 in connection with new
licenses, primarily as a result of the hiring of additional research and development personnel,
development costs associated with the integration of the INVOS System and Vital Sync System,
development costs associated with our Exclusive Sublicense Agreement with Raba Equity Partners II,
LLC, development costs associated with our Contract Development Agreement with Shirley Research
Corporation, and development costs associated with advances to the design and performance features
of the INVOS System, including the disposable sensor.
10
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
Results of Operations
Three Months Ended February 28, 2010 Compared to Three Months Ended February 28, 2009
Net Revenues. Our net revenues increased $1,984,330, or 18% from $11,155,354 in the
three-month period ended February 28, 2009 to $13,139,684 in the three-month period ended
February 28, 2010. The increase in net revenues is primarily attributable to:
|
|
|
an increase in U.S. sales of $1,717,633, or 20%, from $8,744,219 in the first quarter of
fiscal 2009 to $10,461,852 in the first quarter of fiscal 2010. The increase in U.S. sales
was primarily due to an increase in sales of disposable sensors of $1,028,750, or 13%,
primarily as a result of a 12% increase in sensor unit sales. In addition, sales of the
INVOS System monitor increased by $393,863 or 43%, primarily as a result of increased
purchases by hospitals and $320,000 of monitors sold in connection with the compartment
syndrome study and sales of the Vital Sync System increased by $295,020, primarily as a
result of monitors sold in connection with the compartment syndrome study; and |
|
|
|
|
an increase in international sales of $266,697, or 11%, from $2,411,135 in the first
quarter of fiscal 2009 to $2,677,832 in the first quarter of fiscal 2010. The increase in
international sales was primarily due to increased sales of our disposable sensor of
$226,204, or 19%, primarily as a result of increased purchases by Edwards Lifesciences in
Japan. In addition, we recognized increased purchases of our INVOS System monitor by
Edwards of approximately $405,000. Edwards Lifesciences made stocking orders of product
manufactured in our previous facility in the first quarter of fiscal 2010 while they await
the required Japanese regulatory approval to purchase product from our new facility. We
expect sales to Edwards to decrease in the second quarter as a result of these stocking
orders in the first quarter. These increased purchases by Edwards Lifesciences in Japan
were partially offset by decreased purchases of our INVOS System monitor by Covidien in
Europe of approximately $304,000 in the first quarter. For the three months ended February
28, 2010, international sales represented 20% of our net revenues, compared to 22% of our
net revenues in the first quarter of fiscal 2009. Purchases by Covidien accounted for 11%
of net revenues in the first quarter of fiscal 2010 compared to 15% in the first quarter of
fiscal 2009. |
We sold 81,157 disposable sensors in the United States and 50,150 internationally in the first
quarter of fiscal 2010. We placed 109 INVOS System monitors in the United States and 144
internationally in the first quarter of fiscal 2010, and our installed base of INVOS System
monitors in the United States was approximately 3,000, in approximately 780 hospitals, as of
February 28, 2010.
Sales of our products as a percentage of net revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Product |
|
February 28, 2010 |
|
|
February 28, 2009 |
|
Sensors |
|
|
78 |
% |
|
|
81 |
% |
INVOS System Monitors |
|
|
20 |
% |
|
|
19 |
% |
Vital Sync System |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
We believe that the current economic downturn in the United States and abroad could continue
to significantly lengthen the sales cycle for our products and reduce the growth in our net
revenues in fiscal 2010. We expect international net revenues to increase as a result of higher
prices negotiated as part of our distribution agreement extension with Covidien effective
February 2010.
11
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
Gross Margin. Gross margin as a percentage of net revenues was 87% for the three months ended
February 28, 2010 and 86% for the three months ended February 28, 2009. The increase in our gross
margin percentage is primarily attributable to increased INVOS System monitor sales in the United
States, and decreased international sales in the first quarter of fiscal 2010 compared to 2009. We
expect international gross margin to increase as a result of higher prices negotiated as part of
our distribution agreement extension with Covidien effective February 2010.
Research, Development and Engineering Expenses. Our research, development and engineering
expenses increased $189,992, or 45%, from $423,161 in the first quarter of fiscal 2009 to $613,153
in the first quarter of fiscal 2010. The increase is primarily attributable to an $80,578 increase
in salaries, primarily due to the addition of research and development personnel in fiscal 2009 and
2010, a $70,929 increase in development costs associated with our INVOS System, and a $36,561
increase in development costs associated with our Contract Development Agreement with Shirley
Research Corporation. We expect our research, development and engineering expenses to increase in
fiscal 2010 primarily as a result of the hiring of additional research and development personnel,
development costs associated with the integration of the INVOS System and Vital Sync System,
development costs associated with our Exclusive Sublicense Agreement with Raba Equity Partners II,
LLC, development costs associated with our Contract Development Agreement with Shirley Research
Corporation, and
development costs associated with advances to the design and performance features of the INVOS
System, including the disposable sensor.
Selling, General and Administrative Expenses. Selling, general and administrative expenses
increased $661,577, or 9%, from $7,314,699 for the three months ended February 28, 2009 to
$7,976,276 for the three months ended February 28, 2010, primarily due to:
|
|
|
a $673,266 increase in salaries, wages, commissions and related expenses, primarily as a
result of an increase in the number of employees, principally in sales and marketing (from
an average of 115 employees for the three months ended February 28, 2009 to an average of
135 employees for the three months ended February 28, 2010) and an increase in employee
insurance premiums and salaries of existing employees; |
|
|
|
|
a $309,681 increase in legal costs associated with the patent infringement action that
we have filed against CAS Medical Systems, Inc. in 2009; and |
|
|
|
|
a $239,582 increase in facility expenses, primarily due to the expenses associated with
the lease agreement that we have entered into for our new corporate headquarters and
assembly and storage facility. |
These increases were partially offset by a $342,090 decrease in sales training expenses as a result
of the timing of our national sales meeting which will be held in the second quarter of fiscal
2010, compared to the first quarter of fiscal 2009, and a $172,180 decrease in trade show expenses
as a result of the timing of trade shows in fiscal 2010.
We expect our selling, general and administrative expenses to increase in fiscal 2010, primarily as
a result of the hiring of additional sales employees, the patent infringement action that we have
filed against CAS Medical Systems, Inc., expenses associated with the lease agreement that we have
entered into for our new corporate headquarters and assembly and storage facility, and increased
stock compensation expense.
Other Income. During the first quarter of fiscal 2010, interest income decreased to
$252,468, from $271,386 in the first quarter of 2009, primarily due to decreased interest rates,
partially offset by our increased cash, cash equivalents and investments balances compared to the
first quarter of fiscal 2009.
Income Taxes. During the first quarter of fiscal 2010, we recognized income tax expense on
our statement of operations at an estimated effective tax rate of 33% as a result of approximately
$163,000 in tax benefits related to research and development tax credits recorded in the quarter.
In the first quarter of 2009, we recognized income tax expense on our statement of operations at an
estimated effective tax rate of 38%, as a result of certain additional
12
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
state tax expenses recorded
in the quarter. In addition, during fiscal 2010, we have recognized deferred tax assets of
approximately $1,039,500 related to the exercise of stock options in prior years. These assets
were recognized as an increase in additional paid in capital on our balance sheet because they were
utilized and reduced current taxes payable.
Liquidity and Capital Resources
General
Our principal sources of operating funds have been the proceeds from sales of our common
shares and cash provided by operating activities.
As of February 28, 2010, we did not have any outstanding or available debt financing
arrangements, we had working capital of $42.4 million and our primary sources of liquidity were
$24.7 million of cash and cash equivalents, $8.4 million of marketable securities and $43.8 million
of long-term investments. Marketable securities and long-term investments consist of Aaa-rated
United States Government agency bonds, and cash and cash equivalents are currently invested in bank
savings accounts and money market accounts, pending their ultimate use.
We believe that cash, cash equivalents, marketable securities and long-term investments on
hand at February 28, 2010 will be adequate to satisfy our operating and capital requirements for
more than the next twelve months.
Cash Flows From Operating Activities
Net cash provided by operations during the first quarter of fiscal 2010 and 2009 was
$3,661,153 and $1,704,128, respectively. In the first quarter of fiscal 2010, cash was provided
primarily by:
|
|
|
$2,581,782 of income before income taxes and non-cash depreciation, amortization, stock
compensation expense and excess tax benefits from stock option exercises; |
|
|
|
|
a $1,503,999 decrease in accounts receivable, primarily as a result of lower first
quarter sales in fiscal 2010 than in the fourth quarter of fiscal 2009, and the timing of
more of the sales in the fourth quarter of 2009 towards the end of the quarter than in the
first quarter of fiscal 2010; |
|
|
|
|
a $541,631 decrease in prepaid expenses, primarily as a result of property and equipment
and leasehold improvements associated with our new facility that were capitalized as
machinery and equipment, furniture and fixtures and leasehold improvements during the first
quarter of 2010; |
|
|
|
|
a $140,910 decrease in inventories, primarily due to higher than expected first quarter
2010 sales, partially offset by acquisitions of components due to anticipated sales;
inventories on our balance sheet decreased more because we capitalized INVOS System
monitors to property and equipment that are being used as demonstration units and no
capital cost sales equipment, as described below; |
|
|
|
|
a $102,154 increase in deferred rent associated with the new lease agreement for our new
facility; and |
|
|
|
|
a $43,616 decrease in accrued interest income, primarily due to decreased interest rates
on our marketable securities and long-term investments balances. |
Cash provided by operations in the first quarter of fiscal 2010 was partially offset by:
|
|
|
a $1,085,531 decrease in accrued liabilities, primarily as a result of the payment of
year-end 2009 accruals, including incentive compensation and sales commissions, partially
offset by accruals in fiscal 2010 for incentive compensation and sales commissions; and |
|
|
|
|
a $164,811 decrease in accounts payable, primarily as a result of decreased inventory
purchases and more timely payments to vendors, partially offset by increased operating
expenses. |
13
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
We expect our working capital requirements to increase as sales increase.
The decrease in inventories described above is less than shown on our balance sheet because it
includes INVOS System monitors that we capitalized because they are being used as demonstration
units and no capital cost sales equipment. We capitalized $144,789 of costs from inventory for
INVOS System monitors being used as demonstration units and no capital cost sales equipment at
customers during the first quarter of fiscal 2010, compared to $151,493 in the first quarter of
fiscal 2009. As of February 28, 2010, we have capitalized $4,407,883 in costs for INVOS System
monitors being used as demonstration and no capital cost sales equipment, and these assets have a
net book value of $1,848,268. We depreciate these assets over five years.
Cash Flows From Investing Activities
Net cash used in investing activities in the first quarter of fiscal 2010 and in the first
quarter of fiscal 2009 was $2,713,572 and $14,923,469, respectively. In the first quarter of
fiscal 2010, we acquired $1,308,625 of property and equipment, primarily furniture, equipment and
leasehold improvements for our new corporate headquarters and storage and assembly facility, and
invested $34,553,268 in marketable securities and long-term investments, partially offset by
maturities of marketable securities and long-term investments of $33,148,321.
Cash Flows From Financing Activities
Net cash used in financing activities in the first quarter of fiscal 2010 was $5,251,339.
During the first quarter of fiscal 2010, we repurchased 401,992 common shares for a total of
$6,449,210. We currently have approximately $7,100,000 remaining under our $45 million common
share repurchase program. This cash used in financing activities was partially offset by the
excess tax benefits from the previous exercise of stock options of $1,039,471 and gross proceeds of
$158,400 from the issuance of 55,000 common shares as a result of the exercise of stock options by
an officer and an employee.
Contractual Obligations
As of February 28, 2010, there have been no material changes outside the ordinary course of
business in the contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal
year ended November 30, 2009 under the caption Contractual Obligations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or financing activities.
Critical Accounting Policies
We believe our most significant accounting policies relate to our accounting treatment of
stock compensation of employees, our accounting treatment for income taxes, our revenue recognition
associated with our no capital cost sales program and our recognition of a technology acquisition
cost intangible asset and goodwill.
Stock Compensation
For the first quarter of fiscal 2010, we have recorded stock compensation expense of $418,150
as a result of stock options and restricted common shares granted to our officers, employees,
directors and one of our consultants. For the first quarter of fiscal 2009, we recorded stock
compensation expense of $384,430. During the first quarter of fiscal 2010, we granted 74,500 stock
options to our employees at an exercise price of $16.18 per share and we issued
14
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
152,650 restricted
common shares to our employees, officers and a consultant with a market value of $16.18 per share
on the date of grant. The restricted common shares issued in the first quarter of fiscal 2010 will
vest and be expensed in the financial statements over 10 years. During the first quarter of fiscal
2009, no stock options were granted and we issued 8,588 restricted common shares to our employees
with a market value of $16.31 per share on the date of grant.
As of February 28, 2010, there was $7,097,853 of total unrecognized compensation cost related
to nonvested share-based compensation awards granted under the 2005 Plan. That cost is expected to
be recognized over a weighted average period of approximately 4 years. No modifications were made
to any share awards that required an accounting charge, and no cash was paid for share-based
liabilities during the first quarter of fiscal 2010 or during the first quarter of fiscal 2009.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions: expected volatility (the
measure by which the stock price has fluctuated or is expected to fluctuate during the period)
50.06% for 2010 and 53.97% for 2009, risk-free interest rate (approximate U.S. Treasury yield in
effect at the time of grant) 2.82% for 2010 and 2.50% for 2009, expected lives of approximately 6
years and a dividend yield of 0%. The fair value of the restricted common shares was estimated
based on the market value of the common shares on the date of issuance. Different assumptions
could significantly change the calculated grant date fair value and, therefore, the amount of stock
compensation expense we recognize over the vesting period of the awards. We believe, however, that
our estimates are appropriate.
Income Taxes
We have performed the required assessment of positive and negative evidence regarding
realization of our deferred tax assets in accordance with generally accepted accounting principles,
including our past operating results, the existence of cumulative losses over our history up to the
most recent seven fiscal years, and our forecast for future net income. Our assessment of our
deferred tax assets included making assumptions about our net revenues and pre-tax income in future
years, making allowance for the uncertainties regarding, among other things, our future net
revenues, the rate of adoption of our products in the marketplace and the competition in the
marketplace. As of February 28, 2010, we have concluded that it is more likely than not that
approximately $3,012,000 of such assets will be realized.
Given the assumptions inherent in our financial plans, it is possible to calculate a different
value for our deferred tax asset by changing one or more of the variables in our assessment.
However, we believe that our evaluation of our financial plans was reasonable, and that the
judgments and assumptions that we made at the time of developing the plan were appropriate.
During the first quarter of fiscal 2010, we recognized income tax expense on our statement of
operations at an estimated effective tax rate of 33% as a result of approximately $163,000 in tax
benefits related to research and development tax credits recorded in the quarter. In addition,
during fiscal 2010, we have recognized deferred tax assets related to the exercise of stock options
in prior years of approximately $1,039,500. These assets were recognized as an increase in
additional paid in capital on our balance sheet because they were utilized and reduced current
taxes payable.
No Capital Cost Sales Revenue Recognition
We offer to our customers in the United States a no capital cost sales program whereby we ship
the INVOS System monitor to the customer at no charge. Under this program, we do not recognize any
revenue upon the shipment of the INVOS System monitor. At the time of shipment of the monitor, we
capitalize the INVOS System
15
SOMANETICS CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
February 28, 2010
monitor as an asset and depreciate this asset over five years. We
recognize sensor revenue when we receive purchase orders and ship the product to the customer. We
believe this is consistent with our stated revenue recognition policy, which is compliant with the
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 605
Revenue Recognition and Securities and Exchange Commission Staff Accounting Bulletin (SAB)
No. 104.
Technology Acquisition Costs Intangible Asset and Goodwill
Technology acquisition costs and goodwill are related to our November 2008 acquisition of
substantially all of the assets of ICU Data Systems, Inc., a technology development company, for
approximately $2,000,000 in cash plus the assumption of specified liabilities. Goodwill represents
the amount by which the purchase price of the acquired business exceeds the estimated fair value of
the net tangible and separately identifiable intangible assets of the acquired business, in
addition to transaction costs recorded at cost. Goodwill is not amortized, but is tested at least
annually for impairment. The technology acquisition costs intangible asset has an estimated useful
life of 20 years, based on several patents that we have filed related to the technology, and is
being amortized on a straight-line basis over the estimated useful life. Intangible assets and
goodwill are reviewed annually for impairment at the end of our fiscal year, and whenever events or
changes in circumstances indicate that the carrying value of the asset may not be recovered. We
evaluate impairment by comparing the fair value of the intangible asset, determined using a cash
flow method, with its carrying value.
We estimated the value of the technology acquisition costs intangible asset based on a
valuation model that included estimating the future cash flows of the technology and discounting
the net cash flows back to their present value using an appropriate risk-adjusted rate of return
(discount rate). The discount rate used was determined at the time of the acquisition in
accordance with accepted valuation methods. Our assessment of the estimated fair value included
making assumptions about the expected net revenues and operating income related to the acquired
technology in future years, making allowance for the uncertainties regarding, among other things,
the time and cost
associated with the further advancement of the design and performance of the technology, the
rate of adoption of the technology, and the potential for competition related to the technology.
As of February 28, 2010, the carrying value of the technology acquisition costs intangible asset
was $230,924, and the carrying value of the goodwill was $1,783,712.
Given the assumptions inherent in our valuation model, it is possible to calculate a different
value for our technology acquisition costs intangible asset by changing one or more of the
variables within our model. However, we believe that our evaluation of our valuation model was
reasonable, and that the judgments and assumptions that we made in our valuation model were
appropriate.
16
|
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|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The table below provides information about our financial instruments that are sensitive to
changes in interest rates, consisting of investments in United States government agency bonds. For
these financial instruments, the table presents principal cash flows and related weighted average
interest rates by expected maturity dates. Weighted average fixed rates are based on the contract
rates. The actual cash flows of all instruments are denominated in U.S. dollars. We invest our
cash on hand not needed in current operations in United States government agency bonds and treasury
bills with varying maturity dates with the intention of holding them until maturity.
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
February 28, 2010 |
|
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|
|
|
|
|
|
|
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|
Expected Maturity Dates By Fiscal Year |
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
Thereafter |
|
|
Total |
|
|
Fair Value |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Marketable Securities and Long-term Investments: |
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|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Fixed Rate ($) |
|
|
6,272,769 |
|
|
|
22,423,574 |
|
|
|
12,005,733 |
|
|
|
11,471,719 |
|
|
|
|
|
|
|
|
|
|
|
52,173,795 |
|
|
|
52,600,932 |
|
Average interest rate |
|
|
3.52 |
% |
|
|
2.45 |
% |
|
|
3.03 |
% |
|
|
3.84 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
3.02 |
% |
|
|
|
|
During the first quarter of fiscal 2010, three of our bonds matured for approximately
$23,160,000 and one of our bonds that was due to mature in 2011 was called for approximately
$10,000,000. We reinvested the proceeds, along with approximately an additional $1,400,000, into
six new bonds with maturity dates in fiscal 2010 of approximately $4,660,000, 2011 of approximately
$12,420,000, 2012 of approximately $11,000,000 and 2013 of approximately $6,480,000.
17
|
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|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Our management has evaluated, with the participation of our principal executive and principal
financial officers, the effectiveness of our disclosure controls and procedures as of February 28,
2010 and any change in our internal control over financial reporting that occurred during our first
fiscal quarter ended February 28, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. Based on their evaluation, our
principal executive and principal financial officers have concluded that these controls and
procedures are effective as of February 28, 2010. There was no change in our internal control over
financial reporting identified in connection with such evaluation that occurred during our first
fiscal quarter ended February 28, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Disclosure controls and procedures are our controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our principal executive and principal financial
officers, as appropriate to allow timely decisions regarding required disclosure.
Internal control over financial reporting is a process designed by, or under the supervision
of, our principal executive and principal financial officers, and effected by our board of
directors, management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and includes those policies
and procedures that: (1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect our transactions and dispositions of assets, (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and directors, and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on the financial statements.
18
PART II OTHER INFORMATION
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The following table provides information with respect to any purchase made by or on behalf of
us or any affiliated purchaser of our common shares for each month during our first quarter ended
February 28, 2010:
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Approximate |
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Dollar Value |
|
|
|
|
|
|
|
|
|
|
|
Purchased |
|
|
of Shares |
|
|
|
Total |
|
|
|
|
|
|
as Part of |
|
|
That May Yet |
|
|
|
Number of |
|
|
Average |
|
|
Publicly |
|
|
Be Purchased |
|
|
|
Shares |
|
|
Price Paid |
|
|
Announced Plans |
|
|
Under the Plans |
|
Period |
|
Purchased |
|
|
Per Share |
|
|
or Programs |
|
|
or Programs |
|
December 1-31, 2009 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
13,550,580 |
|
January 1-31, 2010 |
|
|
121,017 |
|
|
|
16.11 |
|
|
|
121,017 |
|
|
|
11,600,670 |
|
February 1-28, 2010 |
|
|
280,975 |
|
|
|
16.01 |
|
|
|
280,975 |
|
|
|
7,101,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
401,992 |
|
|
|
16.04 |
|
|
|
401,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On April 3, 2008, we publicly announced that our Board of Directors authorized the repurchase
of up to $15 million of our common shares. Purchases may be made from time to time in the open
market or in privately negotiated transactions. The prices, timing and amount of, and purposes
for, any purchases will be determined by management. On May 9, 2008, we publicly announced that
our Board of Directors approved an increase in the limit on the share repurchase program and
authorized the repurchase of up to an additional $15 million of our common shares, and on July 1,
2008, we publicly announced that our Board of Directors approved an increase in the limit on the
share repurchase program and authorized the repurchase of up to an additional $15 million of our
common shares, for a total of $45 million of our common shares under the repurchase program.
During the first quarter of fiscal year 2010, we repurchased 401,992 common shares at an average
price of $16.04 per share and an aggregate cost of $6,449,210. All of the shares were purchased by
us in open-market transactions pursuant to this publicly-announced share repurchase program. The
program does not have an expiration date, except upon purchase of the maximum authorized dollar
amount of our common shares.
19
|
|
|
31.1
|
|
Certifications of Chief Executive Officer Pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
|
|
31.2
|
|
Certifications of Chief Financial Officer Pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
|
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
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|
|
|
|
Somanetics Corporation
(Registrant)
|
|
Date: March 29, 2010 |
By: |
/s/ William M. Iacona
|
|
|
|
William M. Iacona |
|
|
|
Vice President, Chief Financial Officer,
Controller and Treasurer (Duly Authorized and
Principal Financial Officer) |
|
21
EXHIBIT INDEX
|
|
|
Exhibit |
|
Description |
31.1
|
|
Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
31.2
|
|
Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
22