The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by Repligen Corporation (the Company,
Repligen or we) in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC),
for Quarterly Reports on Form
10-Q
and Article 10 of Regulation
S-X
and do not include all of the information and footnote disclosures required by U.S. GAAP. These
condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Companys Annual Report on Form
10-K
for the fiscal year ended December 31, 2016.
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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
The condensed consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Repligen Sweden AB (Repligen Sweden), Repligen GmbH (acquired as Atoll GmbH on April 1, 2016 and renamed on September 20, 2016), Repligen Singapore Pte.
Ltd., our former subsidiary, TangenX Technology Corporation (TangenX, acquired on December 14, 2016 and merged into the Company as of June 30, 2017) and Spectrum LifeSciences, LLC (Spectrum, acquired on
August 1, 2017). All significant intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of management, the
accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows. The
results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year.
Recently Issued
Accounting Pronouncements
In May 2014, the FASB issued ASU
No. 2014-09,
Revenue from Contracts with
Customers (Topic 606),
which supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605,
Revenue Recognition
, and creates a new Topic 606,
Revenue from Contracts with Customers
. Two
adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial
application. The adoption of this ASU will include updates as provided under ASU
2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date; ASU
2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU
2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; and ASU
2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope
Improvements and Practical Expedients. The Company intends to adopt the provisions of Topic 606 using the modified retrospective method effective January 1, 2018. The Company has substantially completed its assessment of the impact of the
new revenue standard on the current contracts of all principal revenue streams except those related to the recently acquired business of Spectrum. The Company will complete its assessment of the impact of the new revenue standard on Spectrums
revenue arrangements in the fourth quarter of 2017. The Company is currently updating its revenue recognition policies and procedures and developing a framework for the newly required financial statement disclosures. While the Company has not made a
final determination on the impact of this new revenue standard to its consolidated financial statements, it does not expect this impact to be material.
In July 2015, the FASB issued ASU
No. 2015-11,
Inventory (Topic 330): Simplifying the Measurement of
Inventory (ASU
2015-11).
ASU
2015-11
requires inventory be measured at the lower of cost and net realizable value, and options that currently exist for
market value be eliminated. ASU
2015-11
defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. The guidance is effective prospectively for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company adopted the provisions of ASU
2015-11
as of January 1, 2017, and this standard did not have a material impact on its consolidated financial statements.
In January 2016, the FASB issued ASU
No. 2016-01,
Financial Instruments - Overall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities. (ASU
2016-01)
This guidance changes how entities measure equity
investments that do not result in consolidation and are not accounted for under the equity method. Entities will be required to measure these investments at fair value at the end of each reporting period and recognize changes in fair value in net
income. A practicability
6
exception will be available for equity investments that do not have readily determinable fair values; however, the exception requires the Company to consider relevant transactions that can
be reasonably known to identify any observable price changes that would impact the fair value. This guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. This guidance is effective for annual periods
beginning after December 15, 2017, and is applicable to the Company in 2018. Upon adoption, the Company will be required to recognize unrealized gains and losses on its equity securities directly through the Companys consolidated
statements of operations, whereas these equity securities currently are designated as available for sale, and unrealized gains and losses are recognized within accumulated other comprehensive income.
In February 2016, the FASB issued ASU No.
2016-02, Leases
(Topic 842) (ASU
2016-02).
ASU
2016-02
requires lessees to recognize a
right-of-use
asset and a lease
liability for most leases. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be
recognized from existing contracts. The accounting applied by a lessor is largely unchanged from that applied under the current standard. The standard must be adopted using a modified retrospective transition approach and provides for certain
practical expedients. This ASU is effective for public entities for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has not assessed the impact of the new standard on its consolidated financial
statements, but does expect this new standard to have a material impact on the Companys consolidated balance sheet.
In March 2016, the FASB issued
ASU No.
2016-09, CompensationStock
Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which aims to simplify several aspects of the accounting for
share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification of certain items on the statement of cash flows and accounting for forfeitures. This ASU is effective
for public entities for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company adopted the provisions of this ASU as of January 1, 2017. As a result of this standard, the Company increased its U.S.
federal and state net operating loss carryovers by approximately $5.3 million for previously unrecognized excess tax benefits outstanding as of January 1, 2017. Since the Company maintained a full valuation allowance on its net U.S.
deferred tax assets as of the adoption date, the Company recorded a corresponding increase to the valuation allowance and the impact of adopting ASU
2016-09
on retained earnings is zero.
In August 2016, the FASB issued ASU
No. 2016-15,
Statement of Cash Flows (Topic 203): Classification of
Certain Cash Receipts and Cash Payments. ASU
No. 2016-15
addresses eight specific cash flow issues and clarifies their presentation and classification in the Statement of Cash Flows. This ASU is
effective for fiscal years beginning after December 15, 2017 and is to be applied retrospectively with early adoption permitted. The Company currently classifies payments up to the amount of its contingent consideration liability recognized at
the date of its acquisition as financing activities, with additional payments classified as operating activities. As a result, the Company does not expect the adoption of ASU
2016-15
to have a material impact
on its consolidated financial statements.
In January 2017, the FASB issued ASU No.
2017-01, Business
Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should
be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for public entities for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of
ASU
2017-01
to have a material impact on the Companys consolidated financial statements.
In January 2017,
the FASB issued ASU
No. 2017-04,
IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, eliminating the requirement to calculate the implied fair value,
essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting
unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective for the Company on a prospective basis beginning on January 1, 2020, with early adoption
permitted. This new guidance is not expected to have a material impact on the Companys consolidated financial statements.
2. Acquisitions
Acquisition of Spectrum LifeSciences, LLC
On August 1, 2017, the Company completed the acquisition of Spectrum pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated
as of June 22, 2017 (such acquisition, the Spectrum Acquisition).
7
Spectrum is a diversified filtration company with a differentiated portfolio of hollow fiber cartridges,
bench-top
to commercial scale filtration and perfusion systems and a broad portfolio of disposable and
single-use
solutions. Spectrums products are primarily used for
the filtration, isolation, purification and concentration of monoclonal antibodies, vaccines, recombinant proteins, diagnostic products and cell therapies where the company offers both standard and customized solutions to its bioprocessing
customers.
Spectrums filtration products include its KrosFlo
®
line of hollow-fiber
cartridges, tangential flow filtration (TFF) systems and
single-use
flow path consumables, as well as its Spectra/Por
®
portfolio of laboratory dialysis
products and its
Pro-Connex
®
single-use
hollow fiber
Module-Bag-Tubing
(MBT) sets. Outside of filtration, the company sells its Spectra/Chrom
®
liquid chromatography products for research applications.
These bioprocessing products account for the majority of Spectrum revenues. Spectrum also offers a line of operating room products.
The Spectrum
Acquisition was accounted for as a purchase of a business under ASC 805, Business Combinations. The Spectrum Acquisition was funded through payment of approximately $122.9 million in cash, 6,153,995 unregistered shares of the Companys
common stock totaling $247.6 million and an estimated working capital adjustment of approximately $1.0 million for a total purchase price of $371.5 million.
Consideration Transferred
The Company accounted for the
Spectrum Acquisition as a purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of Spectrum were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the
Company. The fair value of the net assets acquired was approximately $371.5 million.
The estimated consideration and preliminary purchase price
information has been prepared using a preliminary valuation. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including
projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable; however, actual results may differ from these estimates.
The total consideration transferred follows (in thousands):
|
|
|
|
|
Cash consideration
|
|
$
|
122,932
|
|
Equity consideration
|
|
|
247,575
|
|
Working capital adjustment
|
|
|
955
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
371,462
|
|
|
|
|
|
|
Acquisition-related costs are not included as a component of consideration transferred, but are expensed in the periods in
which the costs are incurred. The Company has incurred $3,378,000 and $5,761,000 in costs related to the Spectrum Acquisition for the three- and nine-month periods ended September 30, 2017, respectively. These costs are primarily included in
selling, general and administrative expenses in the consolidated statements of operations.
Fair Value of Net Assets Acquired
The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of August 1, 2017, based on the preliminary
valuation. The components and allocation of the purchase price consists of the following amounts (in thousands):
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,990
|
|
Accounts receivable
|
|
|
5,124
|
|
Inventory
|
|
|
13,774
|
|
Prepaid expenses and other assets
|
|
|
547
|
|
Fixed assets
|
|
|
6,015
|
|
Deferred tax assets
|
|
|
1,102
|
|
Customer relationships
|
|
|
78,400
|
|
Developed technology
|
|
|
38,560
|
|
Trademark and tradename
|
|
|
2,160
|
|
Non-competition agreements
|
|
|
960
|
|
Goodwill
|
|
|
265,084
|
|
Accounts payable
|
|
|
(1,142
|
)
|
Unrecognized tax benefit
|
|
|
(576
|
)
|
Accrued liabilities
|
|
|
(5,535
|
)
|
Deferred tax liabilities, net
|
|
|
(43,001
|
)
|
|
|
|
|
|
Fair value of net assets acquired
|
|
$
|
371,462
|
|
|
|
|
|
|
Of the consideration paid, $78.4 million represents the fair value of customer relationships that will be amortized over
the weighted average determined useful life of 16 years, and $38.6 million represents the fair value of developed technology that will be amortized over a determined useful life of 20 years. $960,000 represents the fair value of
non-competition
agreements that will be amortized over a determined life of 3 years. $2.2 million represents the fair value of trademarks and trade names that are determined to have an indefinite useful life.
The aforementioned intangible assets will be amortized on a straight-line basis.
8
The goodwill of $265.1 million represents future economic benefits expected to arise from synergies from
combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes.
The purchase price allocation is subject to adjustment as purchase accounting is preliminary as of September 30, 2017. The final purchase price
allocation will be determined upon completion of a final valuation analysis, and the fair value allocation of assets acquired and liabilities assumed could differ materially from the preliminary valuation analysis. The final allocation may include,
but not be limited to, changes in the fair value of property, plant and equipment; changes in allocations to intangible assets and goodwill; changes in deferred tax assets and liabilities; and changes in the values of other assets and liabilities.
Revenue, Net Income and Pro Forma Presentation
The
Company recorded revenue from Spectrum of $7,550,000 from August 1, 2017 through September 30, 2017. The Company has included the operating results of Spectrum in its consolidated statements of operations since the August 1, 2017 acquisition date.
The following table presents unaudited supplemental pro forma information as if the Spectrum Acquisition had occurred as of January 1, 2016 (in thousands, except per share data):
|
|
|
|
|
|
|
Nine months ended
September 30, 2017
|
|
Total revenue
|
|
$
|
121,301
|
|
Net income
|
|
$
|
14,994
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.36
|
|
|
|
|
|
|
Prior to the Spectrum Acquisition, Spectrum did not generate monthly or quarterly financial statements that were prepared in
accordance with U.S. GAAP. Therefore, the effort to create Spectrum interim financial information for 2016 would be administratively impracticable. As a result, the unaudited supplemental pro forma information for the nine-month period ended
September 30, 2016 has been omitted.
The unaudited pro forma information for the nine-month period ended September 30, 2017 was calculated after applying
the Companys accounting policies and the impact of acquisition date fair value adjustments. The unaudited pro forma net income for the nine-month period ended September 30, 2017 was adjusted to exclude acquisition-related transaction costs,
retention costs solely related to the acquisition, the impact of the fair value step-up to inventory and the release of the valuation allowance on the Companys deferred tax assets, as these expenses would have been incurred in the prior year
assuming the Spectrum Acquisition closed on January 1, 2016.
These pro forma condensed consolidated financial results include certain adjustments to
reflect the pro forma results of operations as if the acquisition had occurred as of January 1, 2016. The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of
the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combinations occurred at the beginning of the period presented, or of future results of the
consolidated entities.
TangenX Technology Corporation
On December 14, 2016, the Company acquired TangenX, pursuant to the terms of the Share Purchase Agreement, dated as of December 14, 2016, by and
among the Company, John Connors and Novasep Process SAS (such acquisition, the TangenX Acquisition). Through the TangenX Acquisition, the Company acquired all outstanding shares and the business of TangenX, including TangenXs
innovative
single-use
Sius line of tangential flow filtration (TFF) cassettes and hardware used in downstream biopharmaceutical manufacturing processes.
TangenX TFF products are used in the filtration of biological drugs, thereby expanding Repligens filtration portfolio and complementing the OPUS
®
pre-packed
column product line in downstream purification. Effective June 30, 2017, TangenX was legally merged with and into the Company.
The TangenX Acquisition was accounted for as a purchase of a business under ASC 805, Business Combinations. The total purchase price of the
TangenX Acquisition was $37.1 million in cash.
9
Consideration Transferred
The Company accounted for the TangenX Acquisition as a purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of
TangenX were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was approximately $37.1 million.
The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future
expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.
The total consideration transferred follows (in thousands):
|
|
|
|
|
Cash consideration
|
|
$
|
37,532
|
|
Less: working capital adjustment
|
|
|
(382
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
37,150
|
|
|
|
|
|
|
Acquisition-related costs are not included as a component of consideration transferred, but are expensed in the periods in
which the costs are incurred. The Company incurred $0 and $376,000 in transaction costs for the three- and nine-month periods ended September 30, 2017, respectively, and $935,000 in transaction costs for the year ended December 31, 2016
related to the TangenX Acquisition. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.
Fair Value of Net Assets Acquired
The allocation of
purchase price was based on the fair value of assets acquired and liabilities assumed as of December 14, 2016. The components and allocation of the purchase price consists of the following amounts (in thousands):
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,218
|
|
Accounts receivable
|
|
|
459
|
|
Other receivables
|
|
|
111
|
|
Inventory
|
|
|
936
|
|
Other current assets
|
|
|
50
|
|
Fixed assets, net
|
|
|
215
|
|
Customer relationships
|
|
|
6,192
|
|
Developed technology
|
|
|
6,044
|
|
Non-competition
agreements
|
|
|
21
|
|
Trademark and trade name
|
|
|
11
|
|
Accounts payable and other liabilities assumed
|
|
|
(3,083
|
)
|
Deferred tax liabilities
|
|
|
(4,525
|
)
|
Goodwill
|
|
|
29,501
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
37,150
|
|
|
|
|
|
|
Of the consideration paid, $6.2 million represents the fair value of customer relationships that will be amortized over
the determined useful life of 13 years and $6.0 million represents the fair value of developed technology that will be amortized over a determined useful life of 20 years. $21,000 represents the fair value of
non-competition
agreements that will be amortized over a determined life of 2 years. $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of 5
years. The aforementioned intangible assets will be amortized on a straight-line basis.
The goodwill of $29.5 million represents future economic
benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes.
10
Atoll GmbH
On April 1, 2016, the Companys subsidiary, Repligen Sweden, acquired Atoll GmbH (Atoll) from
UV-Cap
GmbH & Co. KG (UV Cap) pursuant to a Share Purchase Agreement (the Atoll Share Purchase Agreement), dated as of March 31, 2016 (such acquisition, the Atoll
Acquisition), by and among Repligen Sweden, UV Cap, and the Company, in its capacity as guarantor of the obligations of Repligen Sweden under the Atoll Share Purchase Agreement. The Atoll Acquisition was subject to certain closing conditions
that did not occur until April 1, 2016. Payment for the Atoll Acquisition was denominated in Euros but is reflected here in U.S. dollars for presentation purposes.
In connection with the Atoll Acquisition, the Company issued and contributed 538,700 shares of the Companys common stock, par value of $0.01 per share
valued at $14.1 million (the Atoll Stock Consideration) to Repligen Sweden through a transfer by the Company on behalf of Repligen Sweden to fulfill Repligen Swedens obligation to deliver the Atoll Stock Consideration under
the Atoll Share Purchase Agreement. The issuance of the Atoll Stock Consideration was not registered under the Securities Act of 1933, as amended (the Securities Act), in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act. The Atoll Stock Consideration was based on the fair value of the Companys common stock on April 1, 2016.
This acquisition strengthened Repligens bioprocessing business by adding a complementary extension to an existing product line while expanding its
direct sales presence worldwide. On September 20, 2016, Atoll changed its name to Repligen GmbH.
The Atoll Acquisition was accounted for as a
purchase of a business under ASC 805, Business Combinations. The total purchase price of the Atoll Acquisition was $25.3 million, consisting of an upfront cash payment of $10.2 million, less $74,000 as a result of the final
determination of working capital, issuance of the Atoll Stock Consideration, and a milestone payment of $1.1 million for achievement of specific revenue growth targets met for 2016. The $1.1 million potential contingent consideration had
an initial probability weighted fair value at the time of the closing of the Atoll Acquisition of approximately $952,000.
Consideration Transferred
The Company accounted for the Atoll Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets
of Atoll were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was approximately $25.3 million.
The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future
expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.
The total consideration transferred follows (in thousands):
|
|
|
|
|
Cash consideration, less $74 of working capital adjustments
|
|
$
|
10,176
|
|
Equity consideration
|
|
|
14,138
|
|
Estimated fair value of contingent consideration
|
|
|
952
|
|
|
|
|
|
|
Total consideration transferred
|
|
$
|
25,266
|
|
|
|
|
|
|
The fair value of contingent consideration was determined based upon a probability weighted analysis of expected future
milestone and settlement payments to be made to UV Cap. Pursuant to the terms of the Atoll Share Purchase Agreement, the Company would make a contingent consideration payment of $1.1 million if specific revenue growth targets were met for 2016.
Because the specified revenue growth targets were met for 2016, the Company made the contingent consideration payment in March 2017. No further measurement of this liability is required as of September 30, 2017.
Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. The
Company incurred $1,307,000 in transaction costs in 2016 related to the Atoll Acquisition. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.
11
Fair Value of Net Assets Acquired
The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of April 1, 2016. The components and allocation
of the purchase price consists of the following amounts (in thousands):
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,409
|
|
Accounts receivable
|
|
|
697
|
|
Inventory
|
|
|
155
|
|
Other current assets
|
|
|
169
|
|
Fixed assets, net
|
|
|
114
|
|
Customer relationships
|
|
|
5,318
|
|
Developed technology
|
|
|
2,175
|
|
Non-competition
agreements
|
|
|
57
|
|
Trademark and trade name
|
|
|
11
|
|
Deferred tax assets
|
|
|
885
|
|
Accounts payable and other liabilities assumed
|
|
|
(599
|
)
|
Deferred tax liabilities
|
|
|
(2,202
|
)
|
Goodwill
|
|
|
17,077
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
25,266
|
|
|
|
|
|
|
Of the consideration paid, $5.3 million represents the fair value of customer relationships that will be amortized over
the determined useful life of 13 years and $2.2 million represents the fair value of developed technology that will be amortized over a determined useful life of 14 years. $57,000 represents the fair value of
non-competition
agreements and $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of 2 years. The aforementioned intangible assets will be
amortized on a straight-line basis.
The goodwill of $17.1 million represents future economic benefits expected to arise from synergies from
combining operations, utilizing the Companys existing sales infrastructure to increase market presence and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes.
3. Revenue Recognition
Product Sales
The Companys revenue recognition policy is to recognize revenues from product sales and services in accordance with ASC 605,
Revenue Recognition
.
These standards require that revenues are recognized when persuasive evidence of an arrangement exists, product delivery, including customer acceptance when required, has occurred or services have been rendered, the price is fixed or determinable
and collectability is reasonably assured. Determination of whether these criteria have been met are based on managements judgments primarily regarding the fixed nature of the fee charged for the product delivered and the collectability of
those fees. The Company has a few longstanding customers who comprise the majority of revenue and have excellent payment histories and therefore the Company does not require collateral. The Company has had no significant write-offs of uncollectible
invoices in the periods presented. When more than one element such as equipment, consumables, and services are contained in a single arrangement, the Company allocates revenue between the elements based on each elements relative selling price,
provided that each element meets the criteria for treatment as a separate unit of accounting. An item is considered a separate unit of accounting if it has value to the customer on a stand-alone basis. The selling price of the undelivered elements
is determined by the price charged when the element is sold separately, or in cases when the item is not sold separately, by third-party evidence of selling price or managements best estimate of selling price.
The Companys product revenues are from the sale of bioprocessing products, equipment devices, and related consumables used with these equipment devices
to customers in the life science and biopharmaceutical industries. On product sales to end customers, revenue is recognized, net of discounts, when both the title and risk of loss have transferred to the customer, as determined by the shipping terms
provided there are no uncertainties regarding acceptance, and all obligations have been completed. Generally, our product arrangements for equipment sales are multiple element arrangements, and may include services, such as installation and
training, and multiple products, such as consumables and spare parts. In accordance with ASC
605-25,
based on terms and conditions of the product arrangements, the Company believes that these services and
undelivered products can be accounted for separately from the delivered product element, as the delivered products have value to our customers on a standalone basis. Accordingly, revenue for services not yet performed at the time of product shipment
are deferred and recognized as such services are performed. The relative selling price of any undelivered products is also deferred at the time of shipment and recognized as revenue when these products are delivered. For product sales to
distributors, the Company recognizes revenue for both equipment and consumables upon delivery to the distributor unless direct shipment to the end user is requested. In this case, revenue is recognized upon delivery to the end users location.
In general, distributors are responsible for shipment to the end customer along with installation, training and acceptance of the equipment by the end customer. Sales to distributors are not contingent upon resale of the product.
12
At the time of sale, the Company also evaluates the need to accrue for warranty and sales returns. The supply
agreements the Company has with its customers and the related purchase orders identify the terms and conditions of each sale and the price of the goods ordered. Due to the nature of the sales arrangements, inventory produced for sale is tested for
quality specifications prior to shipment. Since the product is manufactured to order and in compliance with required specifications prior to shipment, the likelihood of sales return, warranty or other issues is largely diminished. Furthermore, there
is no customer right of return in our sales agreements. Sales returns and warranty issues are infrequent and have not had a material impact on the Companys financial statements historically.
Shipping and handling fees are recorded as a component of product revenue, with the associated costs recorded as a component of cost of product revenue.
Therapeutics Licensing Agreements
Activities under
licensing agreements are evaluated in accordance with ASC
605-25
to determine if they represent a multiple element revenue arrangement. The Company identifies the deliverables included within the agreement and
evaluates which deliverables represent separate units of accounting. The Company accounts for those components as separate units of accounting if the following two criteria are met:
|
|
|
The delivered item or items have value to the customer on a stand-alone basis; and
|
|
|
|
If there is a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and within the Companys control.
|
Factors considered in this determination include, among other things, whether any other vendors sell the items separately and if the licensee could use the
delivered item for its intended purpose without the receipt of the remaining deliverables. If multiple deliverables included in an arrangement are separable into different units of accounting, the Company allocates the arrangement consideration to
those units of accounting. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. Arrangement consideration is allocated at the inception of the arrangement to the identified units of accounting based
on their relative selling price. Revenue is recognized for each unit of accounting when the appropriate revenue recognition criteria are met.
Future
milestone payments, if any, under a license agreement will be recognized under the provisions of ASC
605-28,
which the Company adopted on January 1, 2011. The Company has elected to recognize a payment
that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is substantive if:
|
|
|
It can only be achieved based in whole or in part on either the Companys performance or the occurrence of a specific outcome resulting from the Companys performance;
|
|
|
|
There is substantive uncertainty at the date an arrangement is entered into that the event will be achieved; and
|
|
|
|
It would result in additional payments being due to the entity.
|
The commercial milestone payments and royalty
payments received under license agreements, if any, will be recognized as revenue when they are earned.
Sale of Intellectual Property to BioMarin
In January 2014, the Company entered into an asset purchase agreement (the BioMarin Asset Purchase Agreement) with BioMarin Pharmaceutical
Inc. (BioMarin) to sell Repligens histone deacetylase inhibitor (HDACi) portfolio. Pursuant to the terms of the BioMarin Asset Purchase Agreement, the Company is entitled to receive up to $160 million in potential future
milestone payments, comprised of:
|
|
|
Up to $60 million related to the achievement of specified clinical and regulatory milestone events; and
|
|
|
|
Up to $100 million related to the achievement of specified commercial sales events, specifically the first commercial sale in specific territories.
|
In addition, Repligen is eligible to receive royalties on sales of therapeutic products originating from the HDACi portfolio. The royalty rates are tiered and
begin in the
mid-single-digits
for the first HDACi portfolio product and for the first
non-HDACi
portfolio product with lesser amounts for any backup products developed
under the BioMarin Asset Purchase Agreement. The Companys receipt of these royalties is subject to customary offsets and deductions. There are no refund provisions in this agreement. Any milestones earned upon specified clinical development or
commercial sales events or future royalty payments, under the BioMarin Asset Purchase Agreement will be recognized as revenue when they are earned.
13
Activities under this agreement were evaluated in accordance with ASC
605-25
to determine if they represented a multiple element revenue arrangement. The Company identified the following deliverables in the BioMarin Asset Purchase Agreement:
|
|
|
The assignment by the Company to BioMarin of its intellectual property rights in the HDACi portfolio and the Scripps Agreement (the Transferred Assets); and
|
|
|
|
The transfer of certain notebooks, data, documents, biological materials (if any) and other such documents in our possession that might be useful to further development of the program (the Technology
Transfer).
|
Two criteria must be met in order for a deliverable to be considered a separate unit of accounting. The first criterion
requires that the delivered item or items have value to the customer on a stand-alone basis. The second criterion, which relates to evaluating a general right of return, is not applicable because such a provision does not exist in the BioMarin Asset
Purchase Agreement. The deliverables outlined above were deemed to have stand-alone value and to meet the criteria to be accounted for as separate units of accounting. Factors considered in this determination included, among other things,
BioMarins right under the agreement to assign the Transferred Assets, whether any other vendors sell the items separately and if BioMarin could use the delivered item for its intended purpose without the receipt of the remaining deliverables.
If multiple deliverables included in an arrangement are separable into different units of accounting, the multiple-element arrangements guidance addresses how to allocate the arrangement consideration to those units of accounting. The amount of
allocable arrangement consideration is limited to amounts that are fixed or determinable. Arrangement consideration is allocated at the inception of the arrangement to the identified units of accounting based on their relative selling price.
The Company evaluated the potential milestones in accordance with ASC
605-28,
which allows an entity to make an
accounting policy election to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. This evaluation included an assessment of the risks that must be
overcome to achieve the respective milestone as well as whether the achievement of the milestone was due in part to our initial clinical work, the level of effort and investment required to achieve the respective milestone and whether the milestone
consideration is reasonable relative to all deliverables and payment terms in the arrangement. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is
substantive. Milestones that are not considered substantive are recognized as earned if there are no remaining performance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met.
The Company believes that the $60 million of specified clinical and regulatory milestone payments are substantive. Therefore, any such milestones
achieved will be recognized as revenue when earned.
Any milestones achieved upon specified commercial sales events or future royalty payments are
considered contingent revenue under the BioMarin Asset Purchase Agreement, and will be recognized as revenue when they are earned as there are no undelivered elements remaining and no continuing performance obligations under the arrangement.
4. Accumulated Other Comprehensive Income
The following
table summarizes the changes in accumulated other comprehensive income by component (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Unrealized gain
(loss) on
investments
|
|
|
Foreign currency
translation gain
(loss)
|
|
|
Total
|
|
Balance at December 31, 2016
|
|
$
|
(5
|
)
|
|
$
|
(13,744
|
)
|
|
$
|
(13,749
|
)
|
Other comprehensive income
|
|
|
5
|
|
|
|
7,097
|
|
|
|
7,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017
|
|
$
|
|
|
|
$
|
(6,647
|
)
|
|
$
|
(6,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Earnings Per Share
The Company reports earnings per share in accordance with ASC Topic 260, Earnings Per Share, which establishes standards for computing and
presenting earnings per share. Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by
dividing net income available to common shareholders by the weighted-average number of common shares and dilutive common share equivalents then outstanding. Potential common share equivalents consist of restricted stock awards and the incremental
common shares issuable upon the exercise of stock options. Under the treasury stock method, unexercised
in-the-money
14
stock options and warrants are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market
price during the period. Share-based payment awards that entitle their holders to receive
non-forfeitable
dividends before vesting are considered participating securities and are considered in the calculation
of basic and diluted earnings per share. There were no such participating securities outstanding during the three- and nine-month periods ended September 30, 2017 and 2016.
Basic and diluted weighted average shares outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Weighted average common shares
|
|
|
41,236,554
|
|
|
|
33,779,141
|
|
|
|
36,435,591
|
|
|
|
33,485,448
|
|
Dilutive common stock options and restricted stock units
|
|
|
484,242
|
|
|
|
533,746
|
|
|
|
454,340
|
|
|
|
526,086
|
|
Dilutive effect of senior convertible notes
|
|
|
842,206
|
|
|
|
|
|
|
|
496,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares, assuming dilution
|
|
|
42,563,002
|
|
|
|
34,312,887
|
|
|
|
37,386,333
|
|
|
|
34,011,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2017, there were outstanding options to purchase 749,669 shares of the Companys common stock at a
weighted average exercise price of $20.84 per share and 515,468 restricted stock units. For the three- and nine-month periods ended September 30, 2017, 162,544 and 326,572 options to purchase shares of the Companys common stock,
respectively, were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore anti-dilutive. As provided by
the terms of the indenture underlying the Companys 2.125% Convertible Senior Notes due 2021 (the Notes), the Company has a choice to settle the conversion obligation for the Notes in cash, shares or any combination of the
two. The Company currently intends to settle the face value of the Notes in cash and any excess conversion premium in shares. During the third quarter of 2017, 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 2017; however, no holders have
elected to convert any of their Notes as of the date of this filing. The Company applies the provisions of ASC 260,
Earnings Per Share,
Subsection
10-45-44,
to
determine the diluted weighted average shares outstanding as it relates to the conversion spread on the Notes. Accordingly, the face value of the Notes is not included in the calculation of diluted income per share, but the dilutive effect of the
conversion premium is considered in the calculation of diluted net income per share using the treasury stock method. The share figures in the table above represent the estimated incremental shares that would be issued related to the conversion
premium, assuming conversion of all the outstanding Notes as of September 30, 2017.
At September 30, 2016, there were outstanding options to
purchase 1,198,673 shares of the Companys common stock at a weighted average exercise price of $12.03 per share. For the three- and nine-month periods ended September 30, 2016, 253,754 and 348,608 options to purchase shares of the
Companys common stock, respectively, were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore
anti-dilutive. The Company applies the provisions of ASC 260,
Earnings Per Share,
Subsection
10-45-44,
to determine the diluted weighted average shares
outstanding as it relates to the conversion spread on the Notes. Accordingly, the face value of the Notes is not included in the calculation of diluted income per share. There is no dilutive effect of the conversion premium on the Notes for the
three- and nine-month periods ended September 30, 2016, as the weighted average price of the Companys common stock was less than the conversion price of the Notes
6. Cash, Cash Equivalents and Marketable Securities
At
September 30, 2017, the Company did not have any marketable securities.
As of December 31, 2016, the Companys investments included money
market funds and short-term marketable securities. These marketable securities were classified as
available-for-sale.
Marketable securities are investments with original
maturities of greater than 90 days. Long-term marketable securities are securities with maturities of greater than one year.
15
Investments in marketable securities consisted of the following at December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gain
|
|
|
Gross
Unrealized
Loss
|
|
|
Fair
Value
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency securities
|
|
$
|
807
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
807
|
|
Corporate and other debt securities
|
|
|
18,745
|
|
|
|
2
|
|
|
|
(7
|
)
|
|
|
18,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,552
|
|
|
$
|
2
|
|
|
$
|
(7
|
)
|
|
$
|
19,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no long-term marketable securities as of December 31, 2016.
Management reviewed the Companys investments as of December 31, 2016 and concluded that there are no securities with other than temporary
impairments in the investment portfolio. The Company did not intend to sell any investments in an unrealized loss position, and it was not more likely than not that the Company will be required to sell the investments before recovery of their
amortized cost bases.
7. Inventories
Inventories
relate to the Companys bioprocessing business. The Company values inventory at cost or, if lower, market value, using the
first-in,
first-out
method. The Company
reviews its inventories at least quarterly and records a provision for excess and obsolete inventory based on its estimates of expected sales volume, production capacity and expiration dates of raw materials,
work-in-process
and finished products. Expected sales volumes are determined based on supply forecasts provided by key customers for the next 3 to 12 months. The Company writes down inventory that has become
obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order and tested for
quality specifications prior to shipment. Reserves for excess and obsolete inventory were approximately $406,000 at September 30, 2017 and $435,000 at December 31, 2016.
A change in the estimated timing or amount of demand for the Companys products could result in additional provisions for excess inventory quantities on
hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying financial statements,
there have been no material adjustments related to a revised estimate of inventory valuations.
Work-in-process
and finished products inventories consist of material, labor, outside processing costs and manufacturing overhead. Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Raw Materials
|
|
$
|
22,235
|
|
|
$
|
14,954
|
|
Work-in-process
|
|
|
3,633
|
|
|
|
2,789
|
|
Finished products
|
|
|
12,795
|
|
|
|
6,953
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,663
|
|
|
$
|
24,696
|
|
|
|
|
|
|
|
|
|
|
16
8. Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Land
|
|
$
|
1,021
|
|
|
$
|
|
|
Buildings
|
|
|
768
|
|
|
|
|
|
Leasehold improvements
|
|
|
15,743
|
|
|
|
14,592
|
|
Equipment
|
|
|
19,543
|
|
|
|
15,214
|
|
Furniture and fixtures
|
|
|
4,111
|
|
|
|
3,218
|
|
Construction in progress
|
|
|
3,286
|
|
|
|
1,264
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
44,472
|
|
|
|
34,288
|
|
Less: accumulated depreciation
|
|
|
(22,416
|
)
|
|
|
(19,332
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
22,056
|
|
|
$
|
14,956
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense totaled approximately $2,988,000 and $2,360,000 for the nine-month periods ended September 30, 2017
and 2016, respectively.
9. Intangible Assets
Intangible assets are amortized over their useful lives using the straight-line method, as applicable, and the amortization expense is recorded within selling,
general and administrative expense in the Companys statements of comprehensive income.
The Company reviews its indefinite-lived intangible assets
not subject to amortization to determine if adverse conditions exist or a change in circumstances exists that would indicate an impairment. Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse
conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions
to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for our products or changes in the size of the market for our products. An
impairment results if the carrying value of the asset exceeds the estimated fair value of the asset. If the estimate of an intangible assets remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life. The Company continues to believe that its intangible assets are recoverable at September 30, 2017.
Intangible assets consisted of the following at September 30, 2017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Weighted
Average
Useful Life
(in years)
|
|
Technology developed
|
|
$
|
51,775
|
|
|
$
|
(2,491
|
)
|
|
|
19
|
|
Patents
|
|
|
240
|
|
|
|
(230
|
)
|
|
|
8
|
|
Customer relationships
|
|
|
102,090
|
|
|
|
(7,774
|
)
|
|
|
15
|
|
Trademark indefinite lived
|
|
|
2,860
|
|
|
|
|
|
|
|
|
|
Other intangibles
|
|
|
1,062
|
|
|
|
(116
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
158,027
|
|
|
$
|
(10,611
|
)
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Intangible assets consisted of the following at December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Weighted
Average
Useful Life
(in years)
|
|
Technology developed
|
|
$
|
12,911
|
|
|
$
|
(1,468
|
)
|
|
|
17
|
|
Patents
|
|
|
240
|
|
|
|
(208
|
)
|
|
|
8
|
|
Customer relationships
|
|
|
22,555
|
|
|
|
(4,995
|
)
|
|
|
11
|
|
Trademark/ tradename
|
|
|
711
|
|
|
|
|
|
|
|
|
|
Other intangibles
|
|
|
84
|
|
|
|
(24
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
36,501
|
|
|
$
|
(6,695
|
)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for amortized intangible assets was approximately $3,476,000 and $1,484,000 for the nine-month periods
ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the Company expects to record amortization expense as follows (in thousands):
|
|
|
|
|
Years Ending
|
|
Amortization Expense
|
|
December 31, 2017 (three months remaining)
|
|
$
|
2,625
|
|
December 31, 2018
|
|
|
10,308
|
|
December 31, 2019
|
|
|
10,214
|
|
December 31, 2020
|
|
|
9,619
|
|
December 31, 2021
|
|
|
9,046
|
|
10. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Employee compensation
|
|
$
|
6,497
|
|
|
$
|
5,586
|
|
Accrued interest payable
|
|
|
806
|
|
|
|
204
|
|
Accrued purchases
|
|
|
448
|
|
|
|
382
|
|
Taxes
|
|
|
591
|
|
|
|
1,692
|
|
Contingent consideration
|
|
|
|
|
|
|
6,119
|
|
Royalties
|
|
|
1,064
|
|
|
|
248
|
|
Professional fees
|
|
|
734
|
|
|
|
411
|
|
Accrued warranty
|
|
|
528
|
|
|
|
178
|
|
Unearned revenue
|
|
|
1,299
|
|
|
|
408
|
|
Other accrued expenses
|
|
|
1,826
|
|
|
|
786
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,793
|
|
|
$
|
16,014
|
|
|
|
|
|
|
|
|
|
|
11. Convertible Senior Notes
The carrying value of the Companys convertible senior notes is as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
2.125% Convertible Senior Notes due 2021:
|
|
|
|
|
|
|
|
|
Principal amount
|
|
$
|
115,000
|
|
|
$
|
115,000
|
|
Unamortized debt discount
|
|
|
(14,261
|
)
|
|
|
(16,777
|
)
|
Unamortized debt issuance costs
|
|
|
(2,508
|
)
|
|
|
(2,951
|
)
|
|
|
|
|
|
|
|
|
|
Total convertible senior notes
|
|
$
|
98,231
|
|
|
$
|
95,272
|
|
|
|
|
|
|
|
|
|
|
On May 24, 2016, the Company issued $115 million aggregate principal amount of its 2.125% Convertible Senior
Notes due 2021 (the Notes). The net proceeds from the sale of the Notes, after deducting the underwriting discounts and commissions and other related offering expenses, were approximately $111.1 million. The Notes bear interest
at the rate of 2.125% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2016.
18
The Notes will mature on June 1, 2021, unless earlier repurchased, redeemed or converted in accordance with
their terms. Prior to March 1, 2021, the Notes will be convertible at the option of holders of the Notes only upon satisfaction of certain conditions and during certain periods, and thereafter, the notes will be convertible at any time until
the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, holders of the Notes will receive shares of the Companys common stock, cash or a combination thereof, at the Companys
election. It is the Companys current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in
shares of the Companys common stock.
During the third quarter of 2017, 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 2017. As a result, the
Company reclassified the carrying value of the Notes to current liabilities from long term liabilities on the Companys consolidated balance sheet as of September 30, 2017. In the event the closing price conditions are met in the fourth
quarter of 2017 or a future fiscal quarter, the Notes will be convertible at a holders option during the immediately following fiscal quarter. As of September 30, 2017, the
if-converted
value of the
Notes exceeded the aggregate principal amount by approximately $39.8 million. As of the date of this filing, none of the Notes have been converted by the holders of such Notes.
The conversion rate for the Notes will initially be 31.1813 shares of the Companys common stock per $1,000 principal amount of Notes, which is
equivalent to an initial conversion price of approximately $32.07 per common share, and is subject to adjustment under the terms of the Notes. Holders of the Notes may require the Company to repurchase their Notes upon the occurrence of a
fundamental change prior to maturity for cash at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The Company will not have the right to redeem the Notes prior to June 5, 2019, but may redeem the Notes, at its option, in whole or in part, on any
business day on or after June 5, 2019 and prior to the maturity date if the last reported sale price of the Companys common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not
consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption. The redemption price will be equal to 100% of the
principal amount of the principal amount of Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.
The Notes
contain customary terms and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the holders of at least 25% in aggregate principal amount
of the outstanding Notes may declare 100% of the principal of, and any accrued and unpaid interest on, all of the Notes to be due and payable. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company,
100% of the principal of and accrued and unpaid interest, if any, on all of the Notes will become due and payable automatically. Notwithstanding the foregoing, the Notes provide that, to the extent the Company elects and for up to 270 days, the sole
remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants consist exclusively of the right to receive additional interest on the Notes. The Company is not aware of any events of default,
current events or market conditions that would allow holders to call or convert the Notes as of September 30, 2017, except as noted below.
The cash
conversion feature of the Notes required bifurcation from the Notes and was initially accounted for as an equity instrument classified to stockholders equity, as the conversion feature was determined to be clearly and closely related to the
Companys stock. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and asset base and with similar maturity, the Company estimated the implied interest rate, assuming
no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2
observable inputs. The estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $96,289,000 upon issuance, calculated as the present value of implied future payments based on the
$115 million aggregate principal amount. The equity component of the Notes was recognized as a debt discount, recorded in additional
paid-in
capital, and represents the difference between the aggregate
principal of the Notes and the fair value of the Notes without conversion option on their issuance date. The debt discount is amortized to interest expense using the effective interest method over five years, or the life of the Notes. The
Company assesses the equity classification of the cash conversion feature quarterly, and it is not remeasured as long as it continues to meet the conditions for equity classification.
Interest expense recognized on the Notes during the three-month period ended September 30, 2017 includes $611,000, $852,000
and $150,000 for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. Interest expense recognized on the Notes during the nine-month period ended
September 30, 2017 includes $1,833,000, $2,516,000 and $442,000 for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The effective interest rate on
the Notes is 6.6%, which includes the interest on the Notes, amortization of the debt discount and debt issuance costs. As of September 30, 2017, the carrying value of the Notes was approximately $98.2 million and the fair value of the
principal was approximately $154.8 million. The fair value of the Notes was determined based on the most recent trade activity of the Notes as of September 30, 2017.
19
12. Equity and Stock-Based Compensation
Public Offering of Common Stock
On July 3, 2017, the
Company completed a public offering in which 2,807,017 shares of its 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 the Companys common stock. The total proceeds from this offering, net of underwriting discounts, commissions and other offering expenses, totaled approximately $129.3 million.
Stock-Based Compensation
For the three-month periods
ended September 30, 2017 and 2016, the Company recorded stock-based compensation expense of approximately $1,817,000 and $1,282,000, respectively, for share-based awards granted under the Second Amended and Restated 2001 Repligen Corporation
Stock Plan (the 2001 Plan) and the Repligen Corporation Amended and Restated 2012 Stock Option and Incentive Plan (the 2012 Plan, and collectively with the 2001 Plan and the 1992 Repligen Corporation Stock Option Plan, the
Plans). The Company recorded stock-based compensation expense of approximately $4,845,000 and $3,341,000 for the nine-month periods ended September 30, 2017 and 2016, respectively, for share-based awards granted under the Plans.
The following table presents stock-based compensation expense included in the Companys consolidated statements of comprehensive income (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Cost of product revenue
|
|
$
|
197
|
|
|
$
|
116
|
|
|
$
|
491
|
|
|
$
|
260
|
|
Research and development
|
|
|
127
|
|
|
|
177
|
|
|
|
338
|
|
|
|
362
|
|
Selling, general and administrative
|
|
|
1,493
|
|
|
|
989
|
|
|
|
4,016
|
|
|
|
2,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,817
|
|
|
$
|
1,282
|
|
|
$
|
4,845
|
|
|
$
|
3,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2012 Plan allows for the granting of incentive and nonqualified options to purchase shares of common stock, restricted
stock and other equity awards. Employee grants under the Plans generally vest over a three to five-year period, with
20%-33%
vesting on the first anniversary of the date of grant and the remainder vesting in
equal yearly installments thereafter. Nonqualified options issued to
non-employee
directors under the Plans generally vest over one year. Options granted under the Plans have a maximum term of ten years from
the date of grant and generally, the exercise price of the stock options equals the fair market value of the Companys common stock on the date of grant. At September 30, 2017, options to purchase 749,669 shares and 515,468 restricted
stock units were outstanding under the Plans. At September 30, 2017, 1,228,987 shares were available for future grant under the 2012 Plan.
The
Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date, and the Company uses the value of the common stock as of the grant date to value restricted stock units. The Company measures
stock-based compensation cost at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards with service based vesting over the employees requisite service period on a straight-line basis. In the
third quarter of 2017, the Company issued performance stock units to certain individuals related to the Spectrum Acquisition which are tied to the achievement of certain revenue and gross margin metrics and the passage of time. The Company
recognizes expense on performance based awards over the vesting period of each tranche when it is probable that the performance metrics will be achieved. The Company recognizes stock-based compensation expense for options that are ultimately
expected to vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.
20
Information regarding option activity for the nine-month period ended September 30, 2017 under the Plans is
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
|
|
(in thousands)
Aggregate
Intrinsic
Value
|
|
Options outstanding at December 31, 2016
|
|
|
882,748
|
|
|
$
|
16.88
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
101,844
|
|
|
|
33.38
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(201,966
|
)
|
|
|
10.08
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled
|
|
|
(32,957
|
)
|
|
|
20.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at September 30, 2017
|
|
|
749,669
|
|
|
$
|
20.84
|
|
|
|
6.72
|
|
|
$
|
13,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at September 30, 2017
|
|
|
423,217
|
|
|
$
|
15.86
|
|
|
|
5.53
|
|
|
$
|
9,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2017
(1)
|
|
|
739,381
|
|
|
$
|
20.74
|
|
|
|
6.70
|
|
|
$
|
13,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the number of vested options as of September 30, 2017 plus the number of unvested options expected to vest as of September 30, 2017 based on the unvested outstanding options at September 30,
2017 adjusted for estimated forfeiture rates of 8% for awards granted to
non-executive
level employees and 3% for awards granted to executive level employees.
|
The aggregate intrinsic value in the table above represents the total
pre-tax
intrinsic value (the difference between
the closing price of the common stock on September 30, 2017 of $38.32 per share and the exercise price of each
in-the-money
option) that would have been received by
the option holders had all option holders exercised their options on September 30, 2017.
The weighted average grant date fair value of options
granted during the nine-month periods ended September 30, 2017 and 2016 was $16.94 and $13.55, respectively. The total fair value of stock options that vested during the nine-month periods ended September 30, 2017 and 2016 was
approximately $2,074,000 and $1,590,000, respectively.
Information regarding restricted stock unit and performance stock unit activity for the nine-month
period ended September 30, 2017 under the Plans is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
Outstanding
|
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
|
|
(in thousands)
Aggregate
Intrinsic
Value
|
|
Restricted stock units outstanding at December 31, 2016
|
|
|
353,838
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
279,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(100,221
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled
|
|
|
(17,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units outstanding at September 30, 2017
|
|
|
515,468
|
|
|
$
|
|
|
|
|
2.80
|
|
|
$
|
19,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30,
2017
(1)
|
|
|
488,104
|
|
|
$
|
|
|
|
|
2.66
|
|
|
$
|
18,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the number of vested restricted stock units as of September 30, 2017 plus the number of unvested restricted stock units expected to vest as of September 30, 2017 based on the unvested outstanding
restricted stock units at September 30, 2017 adjusted for estimated forfeiture rates of 8% for awards granted to
non-executive
level employees and 3% for awards granted to executive level employees.
|
The aggregate intrinsic value in the table above represents the total
pre-tax
intrinsic value
(equal to the closing price of the common stock on September 30, 2017 of $38.32 per share) that would have been received by the restricted stock unit holders had all restricted stock units vested on September 30, 2017. The aggregate
intrinsic value of restricted stock units vested during the nine-month periods ended September 30, 2017 and 2016 was approximately $3,480,000 and $1,479,000, respectively.
The weighted average grant date fair value of restricted stock units granted during the nine-month periods ended September 30, 2017 and 2016 was $36.85
and $26.28, respectively. The total grant date fair value of restricted stock units that vested during the nine-month periods ended September 30, 2017 and 2016 was approximately $2,565,000 and $1,315,000, respectively.
As of September 30, 2017, there was $18,114,000 of total unrecognized
compensation cost related to unvested share-based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 2.66 years.
21
13. Income Taxes
The Companys effective tax rate for the three- and nine-month periods ended September 30, 2017 was 330.9% and (183.8%),
respectively, compared to 47.8% and 34.3%, respectively, for the corresponding periods in the prior year.
In the second quarter of 2017,
the Company completed a sale of intellectual property to Repligen Sweden AB that allowed for the Company to utilize certain of its U.S. deferred tax assets. Accordingly, the Company reduced its valuation allowance on its U.S. deferred tax assets by
approximately $9,200,000 in the second quarter of 2017 and recorded a $5,625,000 tax benefit on the Companys consolidated statement of operations as a result of the sale of the intellectual property.
In the third quarter of 2017, in conjunction with the Spectrum Acquisition, the Company determined that its U.S. deferred tax assets were more likely than not
to be realized after considering deferred tax liabilities related to the acquired intangible assets. Accordingly, the Company reduced its valuation allowance on its U.S. deferred tax assets by approximately $6,611,000 in the third quarter of 2017.
For the three- and nine-month periods ended September 30, 2017, the effective tax rate differed from the U.S. statutory tax rate of 34% primarily
due to valuation allowance releases related to the sale of intellectual property, the Spectrum Acquisition and lower statutory tax rates on foreign profits. For the three-month period ended September 30, 2016, the effective tax rate was
higher than the U.S. statutory tax rate of 34% primarily due to unbenefited domestic losses, partially offset by lower statutory tax rates in foreign jurisdictions.
At December 31, 2016, the Company had net operating loss carryforwards of approximately $48,550,000 in the U.S., net operating loss carryforwards of
approximately 2,287,000 (approximately $2,407,000) in Germany, federal business tax credit carryforwards of $1,745,000 and state business tax credit carryforwards of approximately $442,000 available to reduce future domestic income taxes, if
any. The net operating loss and business tax credits carryforwards will continue to expire at various dates through December 2036. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the
Internal Revenue Service. While an IRC Section 382 study was completed in the second quarter of 2017, and no current limitations were identified, use of these net operating loss and business tax credit carryforwards may be limited in the future
based on certain changes in the ownership interest of significant stockholders.
ASU
2016-09
states that
previously unrecognized excess tax benefits related to stock based compensation should be recognized on a modified retrospective basis. As such, the Company increased its U.S. federal and state net operating loss carryovers by approximately
$5.3 million as of January 1, 2017 for previously unrecognized stock based compensation excess tax benefits outstanding as of the beginning of the period. Because the Company maintained a full valuation allowance on its U.S. deferred tax
assets at that date, the Company recorded a corresponding increase to the valuation allowance as of January 1, 2017, and the impact of adopting ASU
2016-09
on retained earnings is zero.
In the first quarter of 2017, Repligen Germany GmbH was subject to a tax examination for the years 2012 through 2015. The examination was general in nature,
covering all aspects of the subsidiarys operations prior to the Atoll Acquisition on April 1, 2016. There were no material findings as a result of this examination, and the examination was closed by the German tax authorities.
The Companys tax returns are subject to examination by federal, state and international taxing authorities for the following periods:
|
|
|
Jurisdiction
|
|
Fiscal years subject
to examination
|
United States federal and state
|
|
2014-2016
|
Sweden
|
|
2011-2016
|
Germany
|
|
2016
|
Netherlands
|
|
2012-2016
|
14. Fair Value Measurement
In determining the fair value of its assets and liabilities, the Company uses various valuation approaches. The Company employs a hierarchy for inputs used in
measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the
asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Companys assumptions about the inputs that market participants would use in pricing the asset or
liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:
|
|
|
|
|
Level 1
|
|
Valuations based on unadjusted quoted prices in active markets
for identical assets or liabilities that the Company has the ability to access
|
22
|
|
|
|
|
Level 2
|
|
Valuations based on quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly
|
|
|
Level 3
|
|
Valuations based on inputs that are unobservable and significant to
the overall fair value measurement
|
The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that
the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the
fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair
value measurement.
The Companys fixed income investments have historically comprised of obligations of U.S. government agencies and corporate
marketable securities. These investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services
utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer
quotes, bids, offers, current spot rates and other industry and economic events. At least annually, the Company validates applicable prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market
values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.
As of
September 30, 2017, the Company had no assets or liabilities for which fair value measurement is either required or has been elected to be applied.
As of December 31, 2016, the Company had accrued liabilities with a fair value of $6,119,000 related to contingent consideration in connection with the
Refine and Atoll business combinations. The contingent consideration related to Refine was based on actual 2016 revenues. The contingent consideration related to Atoll was based on meeting revenue growth targets in 2016. These valuations are
Level 3 valuations, as the primary inputs are unobservable. All contingent consideration liabilities were paid in the first quarter of 2017.
The
following table provides a rollforward of the fair value of contingent consideration (in thousands):
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
6,119
|
|
Payments
|
|
|
(6,119
|
)
|
|
|
|
|
|
Balance at September 30, 2017
|
|
$
|
|
|
|
|
|
|
|
In May 2016, the Company issued $115 million aggregate principal amount of the Notes due June 1, 2021. Interest
is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2016. As of September 30, 2017, the carrying value of the Notes was approximately $98.2 million, net of unamortized
discount, and the fair value of the Notes was approximately $154.8 million. The fair value of the Notes was determined based on the most recent trade activity of the Notes as of September 30, 2017. These valuations are
Level 1 valuations, as the valuations are based on unadjusted quoted prices in active markets that the Company has the ability to access. The Notes are discussed in more detail in Note 11, Long Term Debt
.
There were no
re-measurements
to fair value during the three months ended September 30, 2017 of financial assets
and liabilities that are not measured at fair value on a recurring basis.
15. Commitments and Contingencies
Future minimum rental commitments under the Companys leases as of September 30, 2017 are as follows (in thousands):
|
|
|
|
|
|
|
Minimum Rental
Commitments
|
|
2017 (three months remaining)
|
|
$
|
939
|
|
2018
|
|
|
3,644
|
|
2019
|
|
|
3,367
|
|
2020
|
|
|
3,060
|
|
2021
|
|
|
2,751
|
|
Thereafter
|
|
|
2,319
|
|
23
16. Related Party Transactions
In July 2017, in conjunction with the Spectrum Acquisition, the Board of Directors engaged one of the Companys independent directors to serve as the
chairperson of the Spectrum Integration Committee. In this role, this Director will work directly with the Companys executive team on general integration strategy and focus on the integration of Spectrums operations and commercial
organization with the Company. As of September 30, 2017, the Company has accrued approximately $95,000 of expense related to this directors services.
Additionally, certain facilities leased by Spectrum are owned by the former owner of Spectrum, who currently holds greater than 10% of the Companys
outstanding common stock. The lease amounts paid to this shareholder were negotiated in connection with the Spectrum Acquisition. The Company has incurred rent expense totaling $134,000 for the three-month period ended September 30, 2017
related to these leases.
17. Segment Reporting
The
Company views its operations, makes decisions regarding how to allocate resources and manages its business as one operating segment. As a result, the financial information disclosed herein represents all of the material financial information related
to the Companys principal operating segment.
The following table represents the Companys total revenue by geographic area (based on the
location of the customer):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
United States
|
|
|
45
|
%
|
|
|
45
|
%
|
|
|
40
|
%
|
|
|
40
|
%
|
Sweden
|
|
|
15
|
%
|
|
|
23
|
%
|
|
|
23
|
%
|
|
|
29
|
%
|
United Kingdom and Ireland
|
|
|
10
|
%
|
|
|
11
|
%
|
|
|
13
|
%
|
|
|
14
|
%
|
Other
|
|
|
30
|
%
|
|
|
21
|
%
|
|
|
24
|
%
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from significant customers as a percentage of the Companys total revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
GE Healthcare
|
|
|
17
|
%
|
|
|
23
|
%
|
|
|
24
|
%
|
|
|
29
|
%
|
MilliporeSigma
|
|
|
14
|
%
|
|
|
28
|
%
|
|
|
18
|
%
|
|
|
30
|
%
|
Significant accounts receivable balances as a percentage of the Companys total trade accounts receivable are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
GE Healthcare
|
|
|
20
|
%
|
|
|
26
|
%
|
MilliporeSigma
|
|
|
11
|
%
|
|
|
8
|
%
|
24