Discontinued Operations

9 Months Ended

Jun. 30, 2014

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

3. Discontinued Operations

Beginning with the first quarter of fiscal 2012, the results of operations, cash flows, assets and liabilities of SurModics SMP, LLC (“SurModics Pharmaceuticals”), which were previously reported in the Pharmaceuticals segment as a separate operating segment, are classified as discontinued operations.

On November 1, 2011, the Company entered into a definitive agreement (the “Purchase Agreement”) to sell substantially all of the assets of its wholly-owned subsidiary, SurModics Pharmaceuticals, to Evonik Degussa Corporation (“Evonik”). Under the terms of the Purchase Agreement, the entire portfolio of products and services of SurModics Pharmaceuticals, including the Company’s Current Good Manufacturing Practices (“cGMP”) development and manufacturing facility located in Birmingham, Alabama, were sold. The Company retained all accounts receivable and the majority of liabilities associated with SurModics Pharmaceuticals incurred prior to closing. The sale (the “Pharma Sale”) closed on November 17, 2011. The total consideration received from the Pharma Sale was $30.0 million in cash. As part of the Pharma Sale, SurModics agreed not to compete in the restricted business (as defined in the Purchase Agreement) for a period of five years and to indemnify Evonik against specified losses in connection with SurModics Pharmaceuticals, including certain contingent consideration obligations related to the acquisition by SurModics Pharmaceuticals of the portfolio of intellectual property and drug delivery projects from PR Pharmaceuticals, Inc. (“PR Pharma”) and other specified excluded liabilities, including the litigation matter with Southern Research Institute (“SRI”) described below. SurModics retained responsibility for repayment obligations related to an agreement with various governmental authorities associated with creation of jobs in Alabama. These repayment obligations were settled or terminated in the second and third quarters of fiscal 2013 with payments totaling $325,000 repaid to the governmental authorities and a gain of $1.3 million recognized in the nine months ended June 30, 2013.

The following is a summary of the operating results of SurModics Pharmaceuticals discontinued operations for the three and nine months ended June 30, 2014 and 2013:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(Dollars in thousands)	2014			2013			2014			2013
(Loss) income from discontinued operations	$	(117	)	$	136		$	(117	)	$	1,151
Income tax benefit (provision)		41			(183	)		41			(516	)
(Loss) income from discontinued operations, net of income taxes	$	(76	)	$	(47	)	$	(76	)	$	635

The major classes of assets and liabilities of discontinued operations as of June 30, 2014 and September 30, 2013 were as follows:

	June 30,		September 30,
(Dollars in thousands)	2014		2013
Other current assets	$	85	$	46
Current assets of discontinued operations		85		46
Total assets of discontinued operations	$	85	$	46
Other current liabilities payable	$	75	$	139
Current liabilities of discontinued operations		75		139
Total liabilities of discontinued operations	$	75	$	139

In June 2014, the Company resolved the previously disclosed litigation involving SRI, two of SRI’s former employees and SurModics Pharmaceuticals. In connection with the resolution of the litigation, the Company recorded an additional expense, within discontinued operations, of $0.1 million in the three and nine months ended June 30, 2014. The assets and liabilities of discontinued operations as of June 30, 2014 represent amounts associated with the resolution of this litigation and the related deferred taxes. See Note 17 for additional discussion of the SRI litigation matter.