Liquidity and Capital Resources
We have financed our operations primarily through revenues derived from product sales, research grants, proceeds and royalties from license arrangements, sales
of equity securities and issuance of convertible debt. Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.
At September 30, 2018, we had cash and cash equivalents of $190,304,000 compared to cash and cash equivalents of $173,759,000 at December 31, 2017.
On August 1, 2017, we completed our acquisition of Spectrum for approximately $122.9 million in cash and 6,153,995 unregistered shares of the
Companys common stock and a working capital adjustment of $425,000 for a total purchase price of $370.9 million.
During the third quarter of
2018, the closing price of the Companys common stock exceeded 130% of the conversion price of the Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the Notes are convertible at the option
of the holders of the Notes during the fourth quarter of 2018. The Notes have a face value of $115.0 million and a carrying value of $102.4 million and are classified as current liabilities on the Companys consolidated balance sheet
as of September 30, 2018. It is the Companys policy and intent to settle the face value of the Notes in cash and any excess conversion premium in shares of our common stock. Between the end of the third quarter and the date of this
filing, none of the Notes have been converted by the holders of such Notes.
Operating activities
For the nine-month period ended September 30, 2018, our operating activities provided cash of $27,215,000 reflecting net income of $10,979,000 and
non-cash
charges totaling $23,187,000 primarily related to depreciation, amortization,
non-cash
interest expense, deferred tax expense and stock-based compensation charges. An
increase in accounts receivable consumed $1,583,000 of cash and was primarily driven by the 43%
year-to-date
increase in revenues. An increase in inventory levels to
accommodate future revenue growth consumed $4,805,000 of cash and payment of accrued liabilities consumed $1,070,000 of cash. This utilization of cash is partially offset by $3,354,000 of cash provided by an increase in accounts payable due to the
timing of payments to vendors. The remaining cash flow used in operations resulted from net unfavorable changes in various other working capital accounts.
For the nine-month period ended September 30, 2017, our operating activities provided cash of $2,233,000 reflecting net income of $16,175,000 and
non-cash
charges totaling $1,179,000 primarily related to depreciation, amortization,
non-cash
interest expense, deferred tax expense and stock-based compensation charges. An
increase in accounts receivable consumed $8,472,000 of cash and was primarily due to the increase in revenues and timing of cash receipts from customers. Payments of accrued liabilities consumed $6,089,000 of cash and were mainly due to the payment
of contingent consideration to Refine and Atoll related to 2016 sales milestones and the payment of certain Spectrum liabilities in the third quarter of 2017. The remaining cash flow provided by operations resulted from net unfavorable changes in
various other working capital accounts.
Investing activities
Our investing activities consumed $8,580,000 of cash related to capital expenditures for the nine-month period ended September 30, 2018. Our investing
activities consumed $97,075,000 of cash for the nine-month period ended September 30, 2017, primarily due to the payment of cash consideration of $112,941,000 (net of cash received) for the Spectrum Acquisition and $3,686,000 used for fixed
asset additions, partially offset by net redemptions of marketable securities of $19,552,000.
Financing activities
For the nine-month period ended September 30, 2018, our financing activities provided $2,363,000 of cash. We received proceeds of $2,374,000 from stock
option exercises, partially offset by cash outlays of $11,000 related to the partial conversion of the Notes in the first quarter of 2018. For the nine-month period ended September 30, 2017, our financing activities provided $129,642,000 of
cash. In July 2017, we completed a public offering in which 2,807,017 shares of our common stock were sold to the public at a price of $42.75 per share. The underwriters were granted an option, which they exercised in full, to purchase an additional
421,052 shares of our common stock. Total proceeds from this offering, net of underwriting discounts, commissions and other offering expenses, totaled approximately $129.3 million. Proceeds from stock option exercises in the nine-month period
ended September 30, 2017 were $2,035,000, partially offset by contingent
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