Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. SPECTRANETICS CORP (789132) 10-Q published on Aug 08, 2017 at 4:07 pm
Reporting Period: Jun 29, 2017
Pending Acquisition by Philips
On June 27, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Philips Holding USA Inc. (“Parent”), and HealthTech Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides for the acquisition of the Company by Parent in a two-step all cash transaction, consisting of a tender offer (the “Offer”) followed by a subsequent back-end merger (the “Merger”, and collectively with the Offer the “Philips Transaction”). The Merger Agreement was approved by the Company’s Board of Directors (the “Board”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions described therein, Parent caused Merger Sub to commence the Offer for all of the Company’s outstanding shares of common stock (the “Shares”), at a purchase price of $38.50 per Share, net to the seller in cash, without interest and subject to any required withholding of taxes. The Offer commenced on July 12, 2017 and will remain open until 12:00 midnight, New York City time, on August 9, 2017 (one minute after 11:59 P.M., New York City time, on August 8, 2017), unless the Offer is extended. If at the scheduled expiration time of the Offer any of the conditions to the Offer have not been satisfied or waived by Parent and Merger Sub, Parent will cause Merger Sub to extend the Offer to permit the satisfaction of all Offer conditions. Closing of the Philips Transaction is subject to customary conditions.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled in exchange for those goods or services. To achieve this core principle, ASU 2014-09 contains a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) an entity satisfies a performance obligation. ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU 2016-10 provides for amendments to ASU 2014-09, reducing the complexity when applying the guidance for identifying performance obligations and improving the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU 2016-12 provides for amendments to ASU 2014-09, amending the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy U.S. GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which makes minor corrections or minor improvements to ASU 2014-09 that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Under ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, issued in August 2015, these amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, and either the full retrospective method or the modified retrospective transition method is allowed. The Company will adopt the guidance for the fiscal year beginning after December 15, 2017 and apply the modified retrospective method. The modified retrospective method requires the disclosure of the difference between revenue and costs that would have been recognized under U.S. GAAP in the current period and the amounts that are recognized under the new standard. While a significant portion of the Company’s revenue will continue to be in the scope of the leasing guidance, the Company is in the process of reviewing its sales contracts to identify any other changes as a result of the new guidance. The Company expects to complete its analysis by the end of the third quarter of 2017 and does not expect significant changes. The Company is not aware of other significant matters that will result from its adoption of the revenue standard.
On June 9, 2017, the Company entered into (i) an amended and restated term credit and security agreement (as amended, the “Term Loan Credit Agreement”), dated June 9, 2017 (the “Closing Date”), by and among the Company and AngioScore, as borrowers (jointly, the “Borrowers”), MidCap Financial Trust, as administrative agent (the “Term Administrative Agent”) and as a lender, and the other lenders party thereto and (ii) an amended and restated revolving credit and security agreement (as amended, the “Revolving Loan Credit Agreement,” and together with the Term Loan Credit Agreement, the “Credit Agreements”), dated the Closing Date, by and among the Borrowers, MidCap Funding IV Trust, as administrative agent (the “Revolving Administrative Agent” and, together with the Term Administrative Agent, the “Agents”) and the lenders party thereto. The Credit Agreements replace the Term Credit and Security Agreement (the “Original Term Loan Credit Agreement”) and the Revolving Credit and Security Agreement (the “Original Revolving Loan Credit Agreement” and, together with the Original Term Loan Credit Agreement, the “Original Credit Agreements”), each dated December 7, 2015, by and among the Borrowers, MidCap Financial Trust, as administrative agent and the other lenders party thereto. The Term Loan Credit Agreement provides for a $90 million term loan facility (the “Term Loan Facility”) and the Revolving Loan Credit Agreement provides for a $50 million revolving loan facility (the “Revolving Loan Facility” and together with the “Term Loan Facility”, the “Facilities”). Both Facilities expire on March 1, 2021. The Revolving Loan Facility may be increased to up to $70 million at the Company’s request and with approval of the Revolving Administrative Agent and the Revolving Loan Facility lenders. The obligations of the Borrowers under the Credit Agreements are secured by a lien on substantially all of the assets of the Borrowers.
Two putative stockholder class action lawsuits have been filed in connection with the proposed Philips Transaction (see Note 1). These actions, Aviles v. Spectranetics Corp., et al., Case No. 1:17-cv-01767, and Parshall v. Spectranetics Corp., et al., Case No. 1:17-cv-01776, were filed on July 21, 2017 in the United States District Court for the District of Colorado. The complaint in the Aviles action alleges that the Company and its directors violated federal securities laws by failing to disclose material information in the Schedule 14D-9 Recommendation Statement filed by the Company in connection with the Philips Transaction (the “Schedule 14D-9”). This complaint seeks, among other things, (i) injunctive relief preventing the consummation of the Offer and the Merger; (ii) rescissory damages or rescission in the event the Offer and the Merger are consummated; (iii) damages; and (iv) an award of plaintiffs’ expenses and attorneys’ fees. The complaint in the Parshall action alleges that Spectranetics, its directors, and other defendants including Philips violated federal securities laws by failing to disclose material information in the Schedule 14D-9. This complaint seeks, among other things, (i) injunctive relief preventing the consummation of the Offer and the Merger; (ii) rescissory damages or rescission in the event the Offer and the Merger are consummated; and (iii) an award of plaintiffs’ expenses and attorneys’ fees. On July 24, 2017, the plaintiff in the Aviles action filed a motion for expedited proceedings and a preliminary injunction. On July 26, 2017, the plaintiff in the Aviles action withdrew his motion for expedited proceedings and a preliminary injunction. At this stage, it is not possible to predict the outcome of the proceedings or their impact on the Company or the Philips Transaction.
The obligation of Merger Sub to purchase Shares tendered in the Offer is subject to customary closing conditions, including (1) Shares having been validly tendered and not properly withdrawn that represent, together with the Shares then owned by Merger Sub, at least a majority of the then outstanding Shares (the “Minimum Condition”), (2) the absence of any law, injunction, judgment or other legal restraint that prohibits the consummation of the Offer or the Merger, (3) the expiration or early termination of the waiting periods applicable to the Offer and the Merger under U.S. and foreign antitrust laws, (4) the accuracy of the Company’s representations and warranties contained in the Merger Agreement (subject to Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers), (5) the Company’s performance of its obligations under the Merger Agreement in all material respects, and (6) the absence, since the date of the Merger Agreement, of any effect, change, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect. Following the consummation of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent, without a meeting or vote of the Company’s stockholders. The Merger will be effected as soon as practicable following the acceptance of the Shares validly tendered and not properly withdrawn in the Offer.