Spectranetics Corp. is a medical device company engaged in the development manufacturing marketing and distribution of its technology for interventional cardiovascular therapy. The Company's CVX-300 excimer laser system is the only excimer laser system approved by the FDA for multiple cardiovascular procedures. The technology has been designed for use in multiple cardiovascular applications including coronary angioplasty and the removal of pacemaker and ICD leads. (press release) Spectranetics Corp. has a market cap of $129.9 million; its shares were traded at around $4.04 with and P/S ratio of 1.2.
Highlight of Business Operations:During 2008, we recorded temporary impairment charges totaling $2.1 million against the $17.7 million par value of our ARS to their estimated fair market value of $15.6 million, and the $2.1 million temporary unrealized loss was reported in accumulated other comprehensive loss within total stockholders equity. The reduction in fair value was deemed necessary due to the impact on the valuation of these securities of the worsening global financial crisis and the continued failure of auctions of these securities throughout 2008. The fair value of our ARS at March 31, 2009 is based on third-party pricing models and is classified as a Level 3 pricing category in accordance with SFAS 157. We utilized a discounted cash flow model to estimate the current fair market value for each of the securities we owned as there was no recent activity in the secondary markets in these types of securities. This model used unique inputs for each security including discount rate, interest rate currently being paid and maturity. At December 31, 2008, we also performed a sensitivity analysis in the valuation of our ARS using an estimated date to liquidation of plus or minus two years and a discount rate of plus or minus 50 basis points. The sensitivity analysis with these parameters calculated a valuation ranging from $14.6 million to $16.2 million. No further reduction of fair value was deemed to have occurred in the first quarter of 2009.
The above uses of cash from operating activities were offset by a $1.5 million increase in accounts payable and accrued liabilities as well as non-cash expenses of $3.0 million, including depreciation and amortization of $2.3 million and stock-based compensation expense of $0.7 million.
For the three months ended March 31, 2009, cash provided by investing activities was $3.3 million, consisting of proceeds from the maturity of investment securities of $3.8 million and a decrease in restricted cash of $0.6 million offset by capital expenditures of $1.1 million. The decrease in restricted cash was due to a payment made in the Rentrop case; see Part II, Item 1, Legal Proceedings, for more information. The capital expenditures included manufacturing capacity expansion projects as well as additional capital items for research and development projects and additional computer equipment purchases.
As of March 31, 2009, the unrealized loss on our auction rate securities was approximately $2.1 million, recorded in 2008, reducing the par value of the securities of $17.5 million to their fair value of $15.4 million. No further reduction of fair value was deemed to have occurred in the first quarter of 2009. At December 31, 2008, we also performed a sensitivity analysis in the valuation of our auction rate securities using an estimated date to liquidation of plus or minus two years and a discount rate of plus or minus 50 basis points. The sensitivity analysis with these parameters calculated a valuation ranging from $14.6 million to $16.2 million.
Our exposure to foreign currency fluctuations is primarily related to sales of our products in Europe, which are denominated in the euro. Changes in the exchange rate between the euro and the U.S. dollar could adversely affect our revenue and net income. Exposure to foreign currency exchange rate risk may increase over time as our business evolves and our products continue to be introduced into international markets. Currently, we do not hedge against any foreign currencies and, as a result, could incur unanticipated gains or losses. For the three months ended March 31, 2009, approximately $0.4 million of decreased revenue and $0.1 million of decreased operating expenses were the result of exchange rate fluctuations of the U.S. dollar in relation to the euro as compared to the prior year period. Accordingly, the net impact of exchange rate fluctuations on consolidated net loss for the three months ended March 31, 2009 was an increase in net loss of $0.3 million as compared to the prior year.
In January 2004, Dr. Peter Rentrop filed a complaint for patent infringement against us in the United States District Court for the Southern District of New York (the New York Court). The complaint alleges that certain of our Point 9 laser devices infringe a patent held by Dr. Rentrop. After various legal proceedings and an attempt at mediation, the case was returned to the New York Court for trial, which began in late November 2006. In December 2006, the trial was concluded and the jury returned a verdict in favor of Dr. Rentrop, awarding him a total of $500,000 in royalties and $110,261 in prejudgment interest, along with an order of post-judgment interest at the rate of 4.16% per annum. The Company filed an appeal to the Federal Circuit Court of Appeals on September 3, 2008. On December 18, 2008, the Court of Appeals upheld the District Courts ruling. The Companys rights of further appeal were exhausted in March 2009. In February 2009, the Company paid $0.6 million to Dr. Rentrop in satisfaction of the judgment and commenced an effort to negotiate a license that reflects the value of his patent claims.
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