Financial Statement Details | 12 Months Ended |
Dec. 31, 2013 |
Financial Statement Details [Abstract] | ' |
Financial Statement Details | ' |
Financial Statement Details |
Cash and Cash Equivalents and Available-for-Sale Investments |
We invest our excess funds in U.S. government securities, corporate fixed income securities, commercial paper, certificates of deposit and money market funds. As of December 31, 2013, all of our investments were classified as available-for-sale and will mature within 18 months. These investments are recorded at their estimated fair value including accrued interest receivable, with unrealized gains or losses reported as a separate component of accumulated other comprehensive income or loss. |
At December 31, 2013 and 2012, available-for-sale investments are detailed as follows (in thousands): |
At December 31, 2013 |
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| | Amortized | | Gross Unrealized | | Gross Unrealized | | Estimated |
Cost | Gains | Losses | Fair Value |
Short-term: | | | | | | | | |
Corporate debt securities | | $ | 165,598 | | | $ | 72 | | | $ | 4 | | | $ | 165,666 | |
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U.S. Treasury and agency debt securities | | 66,214 | | | 2 | | | 18 | | | 66,198 | |
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Short-term available-for-sale investments | | $ | 231,812 | | | $ | 74 | | | $ | 22 | | | $ | 231,864 | |
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Long-term: | | | | | | | | |
Corporate debt securities | | $ | 11,814 | | | $ | 30 | | | $ | — | | | $ | 11,844 | |
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U.S. Treasury and agency debt securities | | 23,028 | | | 15 | | | — | | | 23,043 | |
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Long-term available for sale investments | | $ | 34,842 | | | $ | 45 | | | $ | — | | | $ | 34,887 | |
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At December 31, 2012 |
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| | Amortized | | Gross Unrealized | | Gross Unrealized | | Estimated |
Cost | Gains | Losses | Fair Value |
Short-term: | | | | | | | | |
Corporate debt securities | | $ | 121,883 | | | $ | 52 | | | $ | 5 | | | $ | 121,930 | |
|
U.S. Treasury and agency debt securities | | 19,020 | | | 10 | | | — | | | 19,030 | |
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Short-term available-for-sale investments | | $ | 140,903 | | | $ | 62 | | | $ | 5 | | | $ | 140,960 | |
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Long-term: | | | | | | | | |
Corporate debt securities | | $ | 33,384 | | | $ | 6 | | | $ | 17 | | | $ | 33,373 | |
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U.S. Treasury and agency debt securities | | 11,010 | | | 2 | | | — | | | 11,012 | |
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Long-term available for sale investments | | $ | 44,394 | | | $ | 8 | | | $ | 17 | | | $ | 44,385 | |
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Available-for-sale investments that are in an unrealized loss position at December 31, 2013 and 2012 are detailed as follows (in thousands): |
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| | At December 31, 2013 | | | | | | | | |
| | Estimated | | Gross Unrealized | | | | | | | | |
Fair Value | Losses | | | | | | | | |
Corporate debt securities | | $ | 21,464 | | | $ | 4 | | | | | | | | | |
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U.S. Treasury and agency debt securities | | 41,034 | | | 18 | | | | | | | | | |
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| | $ | 62,498 | | | $ | 22 | | | | | | | | | |
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At December 31, 2013, eight of our corporate debt securities and two of our U.S. Treasury and agency debt securities are in an unrealized loss position. We fully expect to receive par value with full principal and interest when these securities mature. These investments have been in an unrealized loss position for less than 12 months. We do not consider these investments to be other-than-temporarily impaired at December 31, 2013. |
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| | At December 31, 2012 | | | | | | | | |
| | Estimated | | Gross Unrealized | | | | | | | | |
Fair Value | Losses | | | | | | | | |
Corporate debt securities | | $ | 46,987 | | | $ | 22 | | | | | | | | | |
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U.S. Treasury and agency debt securities | | — | | | — | | | | | | | | | |
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| | $ | 46,987 | | | $ | 22 | | | | | | | | | |
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Derivative Financial Instruments |
Foreign Currency Forward Contracts |
We are exposed to foreign currency risks through our global operations, primarily in Japan and Europe, and when we enter into transactions in non-functional currencies. Exchange rate fluctuations between the U.S. dollar and foreign currencies, primarily Japanese yen and euro, could adversely affect our financial results. We use derivative financial instruments to mitigate our foreign currency exposures. We do not enter into derivative instruments for speculative purposes. |
We enter into derivative financial instruments, principally forward contracts, to manage a portion of the foreign currency risk related to transactions in non-functional currencies. We record derivative financial instruments as either assets or liabilities in our consolidated balance sheets and measure them at fair value. Certain of the derivative instruments we use to mitigate this exposure are not designated for hedge accounting treatment, and as a result, changes in their fair values are recorded in exchange rate gain (loss) in the consolidated statement of operations. |
Commencing April 2013, we broadened our currency hedging program to hedge certain forecasted intercompany inventory transactions that are denominated in yen and euro. These forward contracts are designated as cash flow hedges and have maturity dates of up to 13 months. Changes in the fair value of cash flow hedges, excluding time value of the hedges which is recorded as interest expense, are reported as a component of accumulated other comprehensive income (loss), or AOCI, within stockholders' equity. Once the underlying hedged transaction occurs, we de-designate the derivative, cease to apply hedge accounting treatment to the transaction, reclassify the gain or loss recorded to date from AOCI into cost of goods sold, and record any further gains or losses to exchange rate gain (loss). We evaluate hedge effectiveness at the inception of the hedge and on an ongoing basis. To the extent we experience ineffectiveness in our hedges, the gains or losses accumulated in other comprehensive income associated with the ineffective portion of the hedge are reclassified immediately into exchange rate gain (loss). We adjust the level and use of derivatives as soon as practicable after learning that an exposure has changed. We review all exposures on derivative positions on a regular basis. |
At December 31, 2013 and December 31, 2012, the notional amount of our outstanding forward contracts was $97.3 million and $64.4 million, respectively, of which $40.3 million and $0, respectively, were designated as cash flow hedges. At December 31, 2013, our outstanding forward contracts mature through January 2015. |
As of December 31, 2013, the deferred gain, net of tax, for those derivative contracts that qualified for hedge accounting treatment was $501,000, all of which will be reclassified from accumulated other comprehensive loss into cost of sales at the then-current values over the next twelve months as the underlying hedged transactions are recognized. |
The following tables summarize the location and fair values of derivative instruments on our consolidated balance sheets (in thousands) at December 31, 2013 and December 31, 2012. The fair value amounts are presented on a gross basis and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not. |
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| As of December 31, 2013 | | | | | |
| Asset Derivatives | | Liability Derivatives | | | | | |
Balance sheet location | | Fair Value | | Balance sheet location | | Fair Value | | | | | |
Derivatives Designated as Hedging Instruments | | | | | | | | | | | | |
Foreign exchange forward contracts | Other current assets | | $ | 954 | | | Other current liabilities | | $ | 251 | | | | | | |
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Foreign exchange forward contracts | Other long-term assets | | 81 | | | Other long-term liabilities | | — | | | | | | |
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Total Derivatives Designated as Hedging Instruments | | | 1,035 | | | | | 251 | | | | | | |
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Derivatives Not Designated as Hedging Instruments | | | | | | | | | | | | |
Foreign exchange forward contracts | Other current assets | | 1,953 | | | Other current liabilities | | 1,164 | | | | | | |
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Total Derivatives Not Designated as Hedging Instruments | | | 1,953 | | | | | 1,164 | | | | | | |
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Total Derivatives | | | $ | 2,988 | | | | | $ | 1,415 | | | | | | |
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| As of December 31, 2012 | | | | | |
| Asset Derivatives | | Liability Derivatives | | | | | |
Balance sheet location | | Fair Value | | Balance sheet location | | Fair Value | | | | | |
Derivatives Designated as Hedging Instruments | | | | | | | | | | | | |
Foreign exchange forward contracts | Other current assets | | $ | — | | | Other current liabilities | | $ | — | | | | | | |
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Foreign exchange forward contracts | Other long-term assets | | — | | | Other long-term liabilities | | — | | | | | | |
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Total Derivatives Designated as Hedging Instruments | | | — | | | | | — | | | | | | |
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Derivatives Not Designated as Hedging Instruments | | | | | | | | | | | | |
Foreign exchange forward contracts | Other current assets | | 3,886 | | | Other current liabilities | | 425 | | | | | | |
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Total Derivatives Not Designated as Hedging Instruments | | | 3,886 | | | | | 425 | | | | | | |
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Total Derivatives | | | $ | 3,886 | | | | | $ | 425 | | | | | | |
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The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The following table provides information (in thousands) as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation. |
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| As of December 31, 2013 | |
| | | Gross Amount Not Offset on the Balance Sheet | | | |
| Gross Amount of Recognized Assets (Liabilities) | | Financial Instruments | | Cash Collateral (Received) or Pledged | | Net Amount | |
Derivative Assets | | | | | | | | |
Foreign exchange forward contracts | $ | 2,988 | | | $ | (1,415 | ) | | $ | — | | | $ | 1,573 | | |
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Derivative Liabilities | | | | | | | | |
Foreign exchange forward contracts | (1,415 | ) | | 1,415 | | | — | | | — | | |
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Total | $ | 1,573 | | | $ | — | | | $ | — | | | $ | 1,573 | | |
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| As of December 31, 2012 | |
| | | Gross Amount Not Offset on the Balance Sheet | | | |
| Gross Amount of Recognized Assets (Liabilities) | | Financial Instruments | | Cash Collateral (Received) or Pledged | | Net Amount | |
Derivative Assets | | | | | | | | |
Foreign exchange forward contracts | $ | 3,886 | | | $ | — | | | $ | — | | | $ | 3,886 | | |
|
Derivative Liabilities | | | | | | | | |
Foreign exchange forward contracts | (425 | ) | | — | | | — | | | (425 | ) | |
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Total | $ | 3,461 | | | $ | — | | | $ | — | | | $ | 3,461 | | |
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The following table summarizes the effect of our foreign exchange forward contracts on our consolidated statements of operations (in thousands). |
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| | Year Ended | | | | | |
December 31, | | | | | |
| | 2013 | | 2012 | 2011 | | | | | |
Derivatives Designated as Hedging Instruments | | | | | | | | | | |
Gain (loss) recognized in other comprehensive income on foreign currency forward contracts (effective portion) | | $ | 449 | | | $ | — | | $ | — | | | | | | |
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Gain (loss) reclassified from accumulated other comprehensive income into cost of revenue (effective portion) | | (319 | ) | | — | | — | | | | | | |
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Gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing) | | 49 | | | — | | — | | | | | | |
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Derivatives Not Designated as Hedging Instruments | | | | | | | | | | |
Gain (loss) recognized in exchange rate gain (loss), net | | $ | 6,413 | | | $ | 4,786 | | $ | (2,772 | ) | | | | | |
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Options and Warrants Related to Our Convertible Notes |
In connection with our convertible debt offering in December 2012, we purchased call options on our common stock. The call options give us the right to purchase up to approximately 14.0 million shares of our common stock at $32.8286 per share subject to certain adjustments that generally correspond to the adjustments to the conversion rate for the underlying debt. Additionally, we sold warrants, which gave the purchasers of the warrants the right to purchase up to approximately 14.0 million shares of our common stock at $37.59 per share, subject to certain adjustments. In accordance with the authoritative guidance, we concluded that the call options and warrants were indexed to our stock. Therefore, the call options and warrants were classified as equity instruments and are not being marked to market prospectively unless certain conditions as described in the 2017 Notes occur. |
In connection with our convertible debt offering in September 2010, we purchased call options on our common stock. The call options give us the right to purchase up to approximately 3.9 million shares of our common stock at $29.64 per share subject to certain adjustments that generally correspond to the adjustments to the conversion rate for the underlying debt. Additionally, we sold warrants, which gave the purchaser of the warrants the right to purchase up to approximately 3.9 million shares of our common stock at $34.875 per share, subject to certain adjustments. In accordance with the authoritative guidance, we concluded that the call options and warrants were indexed to our stock. Therefore, the call options and warrants were classified as equity instruments and are not being marked to market prospectively unless certain conditions as described in the 2015 Notes occur. In December 2012, $90.0 million of the $115 million in aggregate principal amount of 2015 Notes were repurchased by the Company and the proportionate call option and warrant related to the convertible notes were also retired. The remaining call options give us the right to purchase up to approximately 850,000 shares of our common stock at $29.64 per share, subject to certain adjustments, and the remaining warrants give the counterparty the right to purchase up to approximately 850,000 shares of our common stock at $34.875 per share, subject to certain adjustments. The remaining call options and warrants continue to be classified as equity instruments and are not being marked to market prospectively unless certain conditions as described in the 2015 Notes occur. |
Fair Value Measurements |
Fair value is defined as an exit price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Authoritative guidance establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities. |
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• | Level 1—Valuations based on quoted prices for identical assets or liabilities in active markets at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Our Level 1 assets consist of money market funds and U.S. Treasury and agency debt securities. | | | | | | | | | | | | | | | |
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• | Level 2—Valuations based on quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data, such as alternative pricing sources with reasonable levels of price transparency. Our Level 2 assets consist of corporate debt securities including commercial paper, corporate bonds, certificates of deposit and foreign currency forward contracts. | | | | | | | | | | | | | | | |
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• | Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Our Level 3 liability includes the contingent consideration related to the Crux acquisition and the other long-term debt related to the Sync-Rx acquisition. | | | | | | | | | | | | | | | |
We utilize a third-party pricing service to assist us in obtaining fair value pricing for our investments. Pricing for certain securities is based on proprietary models. Inputs are documented in accordance with the fair value disclosure hierarchy. We also utilize third-party financial institutions to assist us in obtaining fair value pricing for our foreign currency forward contracts. |
Contingent consideration arrangements obligate us to pay former shareholders of an acquired entity if specified future events occur or conditions are met such as the achievement of certain technological milestones or the achievement of targeted revenue milestones. We measure such liabilities using Level 3 unobservable inputs, applying the income approach, such as the discounted cash flow technique, or the probability-weighted scenario method. We used various key assumptions, such as the probability of achievement of the agreed milestones and the discount rate, in our determination of the fair value of contingent consideration. We monitor the fair value of the contingent consideration and the subsequent revisions are reflected in our consolidated statements of operations. For a further discussion on the key assumptions used in determining the fair value and the change in the estimated fair value of the contingent consideration during the year ended December 31, 2013 and 2012, refer to Note 2, "Acquisitions - Crux Acquisition". |
In connection with the Sync-Rx acquisition, we recorded a contingent liability related to a government grant received to develop an underlying technology. The timing of repayment of the grant is contingent upon the generation of revenues derived from the technology for which grant proceeds were received. We measure such liability using Level 3 unobservable inputs, applying the income approach, such as the discounted cash flow technique, or the probability-weighted scenario method. The grant was recorded as other long term debt at its present value using various estimates, including revenue projections, discount rate and estimated years of re-payment. This fair value measurement is based on significant inputs not observable in the market, representing a Level 3 measurement within the fair value hierarchy. We monitor the fair value of the contingent liability and the subsequent revisions are reflected in our consolidated statements of operations. For a further discussion on the key assumptions used in determining the fair value, refer to Note 2, "Acquisitions - Sync-Rx Acquisition". |
During the years ended December 31, 2013 and 2012, no transfers were made into or out of the Level 1, 2, or 3 categories. We will continue to review our fair value inputs on a quarterly basis. |
Financial assets and liabilities measured at fair value on a recurring basis are summarized below at December 31, 2013 and 2012 (in thousands): |
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| | Fair Value Measurements at December 31, 2013 |
| | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Current: | | | | | | | | |
Cash | | $ | 98,436 | | | $ | 98,436 | | | $ | — | | | $ | — | |
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Money market funds | | 8,723 | | | 8,723 | | | — | | | — | |
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Corporate debt securities | | 165,666 | | | — | | | 165,666 | | | — | |
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U.S. Treasury and agency debt securities | | 66,198 | | | 66,198 | | | — | | | — | |
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Foreign currency forward contracts | | 2,907 | | | — | | | 2,907 | | | — | |
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Non-current: | | | | | | | | |
Corporate debt securities | | 11,844 | | | — | | | 11,844 | | | — | |
|
U.S. Treasury and agency debt securities | | 23,043 | | | 23,043 | | | — | | | — | |
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Foreign currency forward contracts | | 81 | | | — | | | 81 | | | — | |
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Total assets measured at fair value | | $ | 376,898 | | | $ | 196,400 | | | $ | 180,498 | | | $ | — | |
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Liabilities: | | | | | | | | |
Current: | | | | | | | | |
Foreign currency forward contracts | | $ | 1,415 | | | $ | — | | | $ | 1,415 | | | $ | — | |
|
Contingent consideration, current portion (1) | | 3,750 | | | — | | | — | | | 3,750 | |
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Non-current: | | | | | | | | |
Other long-term debt | | 1,268 | | | — | | | — | | | 1,268 | |
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Contingent consideration | | 29,888 | | | — | | | — | | | 29,888 | |
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Total liabilities measured at fair value | | $ | 36,321 | | | $ | — | | | $ | 1,415 | | | $ | 34,906 | |
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(1) This amount is reflected net of the fair value of the working capital receivable in the amount of $1.2 million at December 31, 2013. |
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| | Fair Value Measurements at December 31, 2012 |
| | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Current: | | | | | | | | |
Cash | | $ | 41,636 | | | $ | 41,636 | | | $ | — | | | $ | — | |
|
Money market funds | | 288,999 | | | 288,999 | | | — | | | — | |
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Corporate debt securities | | 121,930 | | | — | | | 121,930 | | | — | |
|
U.S. Treasury and agency debt securities | | 19,030 | | | 19,030 | | | — | | | — | |
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Foreign currency forward contracts | | 3,886 | | | — | | | 3,886 | | | — | |
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Non-current: | | | | | | | | |
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Corporate debt securities | | 33,373 | | | — | | | 33,373 | | | — | |
|
U.S. Treasury and agency debt securities | | 11,012 | | | 11,012 | | | — | | | — | |
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Total assets measured at fair value | | $ | 519,866 | | | $ | 360,677 | | | $ | 159,189 | | | $ | — | |
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Liabilities: | | | | | | | | |
Current: | | | | | | | | |
Foreign currency forward contracts | | $ | 425 | | | $ | — | | | $ | 425 | | | $ | — | |
|
Contingent consideration, current portion | | 2,908 | | | — | | | — | | | 2,908 | |
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Non-current: | | | | | | | | |
Other long-term debt | | 1,088 | | | — | | | — | | | 1,088 | |
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Contingent consideration (1) | | 27,323 | | | — | | | — | | | 27,323 | |
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Total liabilities measured at fair value | | $ | 31,319 | | | $ | — | | | $ | — | | | $ | 31,319 | |
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(1) This amount is reflected net of the fair value of the working capital receivable in the amount of $907,000 at December 31, 2012. |
Accounts Receivable, Net |
Accounts receivable, net consists of the following (in thousands): |
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| | December 31, | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | |
Trade accounts receivable | | $ | 82,409 | | | $ | 76,717 | | | | | | | | | |
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Less: allowance for doubtful accounts | | 447 | | | 369 | | | | | | | | | |
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| | $ | 81,962 | | | $ | 76,348 | | | | | | | | | |
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The change in the allowance for doubtful accounts for the years ended December 31, 2013, 2012 and 2011 is summarized in the following table (in thousands): |
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| | Years Ended December 31, | | | | |
| | 2013 | | 2012 | | 2011 | | | | |
Balance at beginning of year | | $ | 369 | | | $ | 84 | | | $ | 29 | | | | | |
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Additions charged to selling, general and administrative expense | | 78 | | | 285 | | | 55 | | | | | |
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Balance at end of year | | $ | 447 | | | $ | 369 | | | $ | 84 | | | | | |
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Inventories |
Inventories consist of the following (in thousands): |
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| | December 31, | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | |
Finished goods (1) | | $ | 27,237 | | | $ | 19,002 | | | | | | | | | |
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Work-in-process | | 12,051 | | | 15,780 | | | | | | | | | |
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Raw materials | | 21,682 | | | 18,029 | | | | | | | | | |
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| | $ | 60,970 | | | $ | 52,811 | | | | | | | | | |
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(1) Finished goods inventory includes consigned inventory of $5.6 million and $5.3 million at December 31, 2013 and 2012, respectively. |
Property and Equipment |
Property and equipment consists of the following (in thousands): |
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| | December 31, | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | |
Medical diagnostic equipment | | $ | 68,923 | | | $ | 65,548 | | | | | | | | | |
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Other equipment | | 52,523 | | | 44,879 | | | | | | | | | |
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Leasehold improvements | | 12,641 | | | 9,289 | | | | | | | | | |
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Software | | 34,392 | | | 5,447 | | | | | | | | | |
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Land | | 3,046 | | | 3,046 | | | | | | | | | |
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Building | | 33,245 | | | 29,098 | | | | | | | | | |
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Construction-in-progress (1) | | 9,975 | | | 27,730 | | | | | | | | | |
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| | 214,745 | | | 185,037 | | | | | | | | | |
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Less: Accumulated depreciation and amortization | | (96,651 | ) | | (80,652 | ) | | | | | | | | |
| | $ | 118,094 | | | $ | 104,385 | | | | | | | | | |
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-1 | At December 31, 2012, construction-in-process includes $1.0 million of capitalized interest related to the implementation of ERP systems worldwide. The implementation was completed during 2013. | | | | | | | | | | | | | | | |
Property and equipment includes certain medical diagnostic equipment that is located at customer premises. We retain the ownership of the equipment and have the right to remove the equipment if it is not being utilized according to expectations. Depreciation expense relating to the equipment of $8.3 million, $9.6 million and $10.9 million is recorded in cost of revenues during the years ended December 31, 2013, 2012 and 2011, respectively. The net book value of this equipment was $16.5 million and $21.7 million at December 31, 2013 and December 31, 2012, respectively. Also included in medical diagnostic equipment is property and equipment used for demonstration and evaluation purposes. Depreciation expense for equipment used for demonstration and evaluation purposes recorded in selling, general and administrative expenses totaled $416,000, $816,000 and $1.2 million during the years ended December 31, 2013, 2012 and 2011, respectively. The net book value of this equipment was $939,000 and $869,000 at December 31, 2013 and December 31, 2012, respectively. Medical diagnostic equipment is recorded at our cost to acquire or manufacture the equipment and is depreciated over its estimated useful life (generally three to five years). |
Depreciation and amortization expense for the years ended December 31, 2013, 2012 and 2011 was $22.0 million, $19.9 million, and $19.8 million, respectively. |
Intangible Assets |
Intangible assets consisted of acquired developed technology, licenses, customer relationships, patents and trademarks, and covenants-not-to-compete, as well as acquired in-process research and development technology. Intangible assets, except for acquired in-process research and development technology, are amortized using the straight-line method over their estimated useful lives of up to 20 years. Amortization of acquired in-process research and development technology will not commence until the technology reaches market feasibility. If the related project is terminated or abandoned, we may have an impairment related to the in-process research and development technology, calculated as the excess of the asset’s carrying value over its fair value. |
During the year ended December 31, 2013, we recorded developed technology additions of $35.7 million, including $11.6 million from the Pioneer acquisition in August 2013 and $24.1 million IPR&D associated with the Crux IVC filter that was transferred to developed technology when the product launched in the fourth quarter of 2013. Other additions in intangible assets include a $5.6 million addition in patents and trademark, including a $4.7 million addition to internally developed patents and a $0.9 million addition in trademark and trade names from the Pioneer acquisition in August 2013. |
We also recorded $6.3 million of net intangible asset impairments due to the restructuring plan we executed in 2013, including a $4.1 million impairment for the IPR&D assets associated with the Forward-Looking IVUS project we acquired from Novelis in 2008, a $1.7 million impairment (cost of $3.2 million and accumulated amortization of $1.6 million) for the developed technology associated with the Optical Coherence Tomography project we acquired from CardioSpectra, Inc. in 2007, and a $566,000 impairment (cost of $2.1 million and accumulated amortization of $1.5 million) for the developed technology associated with the discontinuation of our ReFLOW Aspiration Catheter product line. Refer to "Note 3 - Financial Statement Details - Restructuring Activity" for details. |
During the year ended December 31, 2012, we recorded intangible asset additions of $4.4 million related to developed technology, $150,000 related to licenses, $4.0 million related to internally developed patents and trademarks, $300,000 related to covenants-not-to-compete, and $29.7 million related to in-process research and development technology acquired from acquisitions. |
Intangible assets subject to amortization, by major class, consist of the following (in thousands): |
|
| | |
| | | | | | | | | | | | | | | | |
| | December 31, 2013 | | |
Intangible assets subject to amortization | | Cost | | Accumulated | | Net | | Weighted- | | |
Amortization | Average Life | | |
| (in years) (1) | | |
Developed technology | | $ | 57,507 | | | $ | 16,393 | | | $ | 41,114 | | | 8.6 | | |
| |
Licenses | | 7,441 | | | 7,102 | | | 339 | | | 8.8 | | |
| |
Customer relationships | | 4,441 | | | 4,312 | | | 129 | | | 6.1 | | |
| |
Patents and trademarks | | 13,668 | | | 2,894 | | | 10,774 | | | 13.2 | | |
| |
Covenants-not-to-compete | | 300 | | | 108 | | | 192 | | | 3 | | |
| |
| | 83,357 | | | 30,809 | | | 52,548 | | | 9.2 | | |
| |
Intangible assets not yet subject to amortization | | | | | | | | | | |
In-process research and development | | 5,560 | | | — | | | 5,560 | | | n/a | | |
| |
| | $ | 88,917 | | | $ | 30,809 | | | $ | 58,108 | | | | | |
| |
|
| | |
| | | | | | | | | | | | | | | | |
| | December 31, 2012 | | |
Intangible assets subject to amortization | | Cost | | Accumulated | | Net | | Weighted- | | |
Amortization | Average Life | | |
| (in years) (1) | | |
Developed technology | | $ | 27,051 | | | $ | 17,408 | | | $ | 9,643 | | | 8.8 | | |
| |
Licenses | | 7,345 | | | 6,709 | | | 636 | | | 10 | | |
| |
Customer relationships | | 4,177 | | | 3,756 | | | 421 | | | 6 | | |
| |
Patents and trademarks | | 8,029 | | | 2,114 | | | 5,915 | | | 13.2 | | |
| |
Covenants-not-to-compete | | 300 | | | 8 | | | 292 | | | 3 | | |
| |
| | 46,902 | | | 29,995 | | | 16,907 | | | 9.4 | | |
| |
Intangible assets not yet subject to amortization | | | | | | | | | | |
In-process research and development | | 33,750 | | | — | | | 33,750 | | | n/a | | |
| |
| | $ | 80,652 | | | $ | 29,995 | | | $ | 50,657 | | | | | |
| |
| | | | | | | | | | | | | | | | |
-1 | Weighted average life of intangible assets is presented excluding fully amortized assets. | | | | | | | | | | | | | | | |
We recorded amortization of intangible assets totaling $3.8 million, $3.2 million and $3.4 million for the years ended December 31, 2013, 2012 and 2011, respectively. |
At December 31, 2013, future amortization expense related to our intangible assets subject to amortization is expected to be as follows (in thousands): |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
2014 | $ | 7,187 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
2015 | 7,027 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
2016 | 6,821 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
2017 | 6,309 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
2018 | 6,182 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Thereafter | 19,022 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| $ | 52,548 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Goodwill |
The change in goodwill for the years ended December 31, 2013 and 2012 is summarized in the following table (in thousands): |
|
| | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | |
Balance at beginning of year | | $ | 51,577 | | | $ | 2,487 | | | | | | | | | |
| | | | | | | |
Additions | | 3,510 | | | 49,090 | | | | | | | | | |
| | | | | | | |
Balance at end of year | | $ | 55,087 | | | $ | 51,577 | | | | | | | | | |
| | | | | | | |
In 2013, goodwill of $817,000 was recorded in connection with finalizing the purchase price allocation for the Crux acquisition, goodwill of $1.2 million was recorded in connection with finalizing the purchase price allocation for the Sync-Rx acquisition, and goodwill of $1.5 million was recorded in connection with the Pioneer acquisition. |
In 2012, goodwill of $12.4 million was recorded in connection with the Sync-Rx acquisition, and goodwill of $36.7 million was recorded in connection with the Crux acquisition. |
Accrued Warranty |
Accrued warranty liability is included in accrued expenses and other current liabilities in the consolidated balance sheets. The change in the accrued warranty liability for the years ended December 31, 2013, 2012 and 2011 is summarized in the following table (in thousands): |
|
| | | | |
| | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2013 | | 2012 | | 2011 | | | | |
Balance at beginning of year | | $ | 1,176 | | | $ | 1,077 | | | $ | 852 | | | | | |
| | | |
Warranties issued | | 2,135 | | | 1,898 | | | 1,864 | | | | | |
| | | |
Settlements | | (2,159 | ) | | (1,799 | ) | | (1,639 | ) | | | | |
Balance at end of year | | $ | 1,152 | | | $ | 1,176 | | | $ | 1,077 | | | | | |
| | | |
Capital Lease Obligations |
We lease certain equipment under capital lease arrangements. See Note 4 “Commitments and Contingencies - Leases” for more information. |
Restructuring Activity |
Disposables Manufacturing Transition to Costa Rica Initiative |
During the second quarter of 2013, our management approved plans to consolidate and transition our manufacturing resources related to the manufacture of disposables to Costa Rica. Activities under this restructuring plan were initiated in the second quarter of 2013 and are expected to be substantially completed by the end of 2014. We estimate that this restructuring plan will result in total pre-tax charges of approximately $2.8 million, all of which are one-time termination benefits, including severance payments and continuing medical benefits. |
A summary of the activities related to this initiative during 2013 is presented below (in thousands): |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Employee Termination Cost | | | | | | | | | | | | |
Balance at beginning of year | | $ | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Restructuring charges | | 333 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Payments | | (333 | ) | | | | | | | | | | | | |
Balance at end of year | | $ | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
All charges were recorded in the restructuring charges line item within our consolidated statement of operations. |
Strategic Reorganization Initiative |
During the third quarter of 2013, our management evaluated various development projects, product lines and functional areas in an effort to reprioritize and reallocate our resources within our distribution, research and development, and clinical programs to focus on development and commercial efforts that we believe better advance our key strategies. The key elements under this restructuring plan include the discontinuation of development programs for our FL.IVUS, FL.ICE and OCT intravascular coronary imaging development programs, the termination of the commercial sale of the ReFLOW product line, and a modest reorganization of several functional areas and business units within the Company. |
Activities under this restructuring plan were initiated in the third quarter of 2013 and are expected to be substantially completed by mid-year 2014. We estimate that this restructuring plan will result in total pre-tax charges of approximately $19.2 million, of which $19.0 million incurred during 2013. Approximately $7.8 million of these charges resulted or will result in cash outlay. The following provides a summary of our expected total costs associated with the plan by major type of costs (in thousands): |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Type of Cost | | Total Estimated Amount | | | | | | | | | | | | |
Employee termination cost | | $ | 2,812 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Asset write-off | | 11,402 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other associated cost | | 4,983 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 19,197 | | | | | | | | | | | | | |
| | | | | | | | | | | |
A summary of the restructuring charges related to this initiative during 2013 is presented below (in thousands): |
|
| | | | | | | | | | | | | | | | |
| | Employee Termination Cost | | Asset Write-Off | | Other Associated Cost | | Total |
Balance at beginning of year | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
|
Restructuring charges | | 2,867 | | | 11,402 | | | 4,772 | | | 19,041 | |
|
Payments/write-off | | (797 | ) | | (11,402 | ) | | — | | | (12,199 | ) |
|
Balance at end of year | | $ | 2,070 | | | $ | — | | | $ | 4,772 | | | $ | 6,842 | |
|
The employee termination cost includes severance payments and continuing medical and other benefits. The asset write-off is related to the discontinued programs and includes impairment of properties, plant and equipments of $2.0 million, impairment of intangible assets of $6.3 million and other tangible asset impairment of $3.1 million. The other associated costs include our estimate of the probable contract termination costs related to our purchase and lease commitments, and other costs directly related to the restructuring activities. |
All charges were recorded in the restructuring charges line item within our consolidated statement of operations. |
Both restructuring initiatives are related to our medical segment. |
Debt |
1.75% Convertible Note Due December 1, 2017 |
In December 2012, we issued $460 million aggregate principal amount of 1.75% Convertible Senior Notes due 2017 ("2017 Notes"), in an offering registered under the Securities Act of 1933, as amended. Interest is payable semiannually in arrears on June 1 and December 1, commencing on June 1, 2013. |
The 2017 Notes are general unsecured obligations that rank the same with our other existing and future unsecured obligations. Prior to August 7, 2017, the 2017 Notes are convertible only upon certain specified events. The initial conversion rate for the 2017 Notes is 30.4612 shares of common stock per $1,000 principal amount of the 2017 Notes, representing an initial effective conversion price of approximately $32.83 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 2017 Notes but will not be adjusted for accrued and unpaid interest. |
We received net proceeds of $409.3 million from issuance of the 2017 Notes, net of $14.6 million debt issuance costs and net payments of $36.1 million related to our hedge transactions. We recorded total debt issuance costs (including broker fees) of approximately $14.6 million, which have been allocated on a pro-rata basis to the debt ($11.8 million) and equity ($2.8 million) components of the transaction. The long-term debt component is included in non-current liabilities and is being accreted to interest expense over 5 years, the term of the 2017 Notes. The equity component was netted against the proceeds and included in additional paid-in capital. |
We may not redeem the 2017 Notes prior to maturity. However, in the event of a fundamental change, as defined in the indenture, the holders of the 2017 Notes may require us to purchase all or a portion of their 2017 Notes at a purchase price equal to 100% of the principal amount of the 2017 Notes, plus accrued and unpaid interest, if any, to the repurchase date. Holders, who convert their 2017 Notes in connection with a make-whole fundamental change, as defined in the indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. |
Prior to August 7, 2017, the 2017 Notes are convertible only under the following circumstances: (1) during any fiscal quarter commencing after March 31, 2013 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “ 2017 Notes Measurement Period”) in which, for each trading day of such 2017 Notes Measurement Period, the trading price per $1,000 principal amount of 2017 Notes on such trading day was less than 98% of the product of the last reported sale price of our common stock on such trading day and the applicable conversion rate on such trading day; or (3) upon the occurrence of specified distributions and corporate events. As of December 31, 2013, none of the conditions allowing holders of the 2017 Notes to convert had been met. |
We determined that the embedded conversion option in the 2017 Notes is not required to be separately accounted for as a derivative under ASC 815, Derivatives and Hedging. However, since the 2017 Notes are within the scope of ASC 470, Topic 20, Debt with Conversion and Other Options, we are required to separate the 2017 Notes into a liability component and equity component. The carrying amount of the liability component is calculated by measuring the fair value of a similar liability (including any embedded features other than the conversion option) that does not have an associated equity component. The carrying amount of the equity component representing the embedded conversion option is determined by deducting the fair value of the liability component from the initial proceeds ascribed to the 2017 Notes as a whole. The excess of the principal amount of the liability component over its carrying amount is amortized to interest cost over the expected life of a similar liability that does not have an associated equity component using the effective interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification in ASC 815, Topic 40, Contracts in an Entity’s Own Equity, or ASC 815. |
We are using an effective interest rate of 7.00% to calculate the accretion of the bond discount, which is being recorded as interest expense over the expected remaining term of the 2017 Notes. (The amount by which interest expense calculated using the effective interest rate of 7.00% exceeds the interest expense related to the coupon rate of 1.75%, is non-cash interest expense.) The effective rate is based on the interest rate for a similar instrument that does not have a conversion feature. We may be required to pay additional interest upon occurrence of certain events as outlined in the indenture governing the 2017 Notes. As of December 31, 2013, the remaining term of the 2017 Notes is 3.92 years. |
Upon conversion of a note, holders of the 2017 Notes will receive up to the principal amount of the converted note in cash and any excess conversion value (conversion spread) in shares of our common stock. The amount of cash and the number of shares of our common stock, if any, will be based on an 80 trading day observation period as described in the indenture. As described in Note 1 - “Organization and Summary of Significant Accounting Policies”, the conversion spread will be included in the denominator for the computation of diluted net income (loss) per common share, using the treasury stock method, if the effect is dilutive. |
As discussed above, to hedge against potential dilution upon conversion of the 2017 Notes, we also purchased call options on our common stock from counterparties. The call options give us the right to purchase up to approximately 14.0 million shares of our common stock at $32.83 per share subject to certain adjustments that generally correspond to the adjustments to the conversion rate for the 2017 Notes. We paid an aggregate of $89.8 million to purchase these call options. The call options will expire on December 1, 2017, unless earlier terminated or exercised. To reduce the cost of the hedge, in a separate transaction we sold warrants to counterparties. These warrants give the counterparties the right to purchase up to approximately 14.0 million shares of our common stock at $37.59 per share, subject to certain adjustments. These warrants will be exercisable and will expire in equal installments for a period of 120 trading days beginning on March 15, 2018. We received an aggregate of $53.7 million from the sale of these warrants. In accordance with ASC 815, we concluded that the call options and warrants were indexed to our stock. Therefore, the call options and warrants were classified as equity instruments and will not be marked to market prospectively unless certain conditions as described in the 2017 Notes occur. The net amount of $36.1 million was recorded as a reduction to additional paid-in capital. The settlement terms of the call options provide for net share settlement and the settlement terms of the warrants provide for net share or cash settlement at our option. |
2.875 Convertible Note Due September 1, 2015 |
In September 2010, we issued $115 million aggregate principal amount of 2.875% Convertible Senior Notes due 2015 ("2015 Notes"), in an offering registered under the Securities Act of 1933, as amended. Interest is payable semiannually in arrears on March 1 and September 1, commencing on March 1, 2011. |
The 2015 Notes are general unsecured obligations that rank the same with our other existing and future unsecured obligations. Prior to June 1, 2015, the 2015 Notes are convertible only upon certain specified events. The initial conversion rate for the 2015 Notes is 33.7339 shares of common stock per $1,000 principal amount of the 2015 Notes, representing an initial effective conversion price of approximately $29.64 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 2015 Notes but will not be adjusted for accrued and unpaid interest. |
We received proceeds of $100.5 million from issuance of the 2015 Notes, net of debt issuance costs of $4.4 million and net payments related to our hedge transactions of $10.0 million which are described in more detail below. We recorded total debt issuance costs (including broker fees) of approximately $4.4 million, which have been allocated on a pro-rata basis to the debt ($3.5 million) and equity ($866,000) components of the transaction. The debt component is primarily included in non-current liabilities and is being accreted to interest expense over 5 years, the term of the 2015 Notes. The equity component was netted against the proceeds and included in additional paid-in capital. |
We may not redeem the 2015 Notes prior to maturity. However, in the event of a fundamental change, as defined in the indenture, the holders of the 2015 Notes may require us to purchase all or a portion of their 2015 Notes at a purchase price equal to 100% of the principal amount of the 2015 Notes, plus accrued and unpaid interest, if any, to the repurchase date. Holders, who convert their 2015 Notes in connection with a make-whole fundamental change, as defined in the indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. |
Prior to June 1, 2015, the 2015 Notes are convertible only under the following circumstances: (1) during any fiscal quarter commencing after December 31, 2010 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “2015 Notes Measurement Period”) in which, for each trading day of such 2015 Notes Measurement Period, the trading price per $1,000 principal amount of 2015 Notes on such trading day was less than 98% of the product of the last reported sale price of our common stock on such trading day and the applicable conversion rate on such trading day; or (3) upon the occurrence of specified distributions and corporate events. As of December 31, 2013, the “if-converted” value of the 2015 Notes did not exceed its principal amount and none of the conditions allowing holders of the 2015 Notes to convert had been met. |
We determined that the embedded conversion option in the 2015 Notes is not required to be separately accounted for as a derivative under ASC 815, Derivatives and Hedging. However, since the 2015 Notes are within the scope of ASC 470, Topic 20, Debt with Conversion and Other Options, we are required to separate the 2015 Notes into a liability component and equity components. The carrying amount of the liability component is calculated by measuring the fair value of a similar liability (including any embedded features other than the conversion option) that does not have an associated equity component. The carrying amount of the equity component representing the embedded conversion option is determined by deducting the fair value of the liability component from the initial proceeds ascribed to the 2015 Notes as a whole. The excess of the principal amount of the liability component over its carrying amount is amortized to interest cost over the expected life of a similar liability that does not have an associated equity component using the effective interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification in ASC 815, Topic 40, Contracts in an Entity’s Own Equity, or ASC 815. |
We are using an effective interest rate of 7.65% to calculate the accretion of the bond discount, which is being recorded as interest expense over the expected remaining term of the 2015 Notes. (The amount by which interest expense calculated using the effective interest rate of 7.65% exceeds the interest expense related to the coupon rate of 2.875%, is non-cash interest expense.) The effective rate is based on the interest rate for a similar instrument that does not have a conversion feature. We may be required to pay additional interest upon occurrence of certain events as outlined in the indenture governing the 2015 Notes. As of December 31, 2013, the remaining term of the 2015 Notes is 1.67 years. |
Upon conversion of a note, holders of the 2015 Notes will receive up to the principal amount of the converted note in cash and any excess conversion value (conversion spread) in shares of our common stock. The amount of cash and the number of shares of our common stock, if any, will be based on a 25 trading day observation period as described in the indenture. As described in Note 1 - “Organization and Summary of Significant Accounting Policies”, the conversion spread will be included in the denominator for the computation of diluted net income (loss) per common share, using the treasury stock method. |
As discussed above, to hedge against potential dilution upon conversion of the 2015 Notes, we also purchased call options on our common stock from a counterparty. The call options give us the right to purchase up to approximately 3.9 million shares of our common stock at $29.64 per share subject to certain adjustments that generally correspond to the adjustments to the conversion rate for the 2015 Notes. We paid an aggregate of $27.2 million to purchase these call options. The call options will expire on September 1, 2015, unless earlier terminated or exercised. To reduce the cost of the hedge, in a separate transaction we sold warrants to a counterparty. These warrants give the counterparty the right to purchase up to approximately 3.9 million shares of our common stock at $34.875 per share, subject to certain adjustments. These warrants will be exercisable and will expire in equal installments for a period of 50 trading days beginning on December 1, 2015. We received an aggregate of $17.1 million from the sale of these warrants. In accordance with ASC 815, we concluded that the call options and warrants were indexed to our stock. Therefore, the call options and warrants were classified as equity instruments and will not be marked to market prospectively unless certain conditions as described in the 2015 Notes occur. The net amount of $10.0 million paid to the counterparty was recorded as a reduction to additional paid-in capital. The settlement terms of the call options provide for net share settlement and the settlement terms of the warrants provide for net share or cash settlement at our option. |
Concurrently with the issuance of the 2017 Notes in December 2012, the Company repurchased $90.0 million of its 2015 Notes with a $104.9 million cash payment, including $711,000 of accrued interest. Since the 2015 Notes are within the scope of ASC 470, we allocated the consideration to the extinguishment of the liability component and the reacquisition of the equity component. We recognized a $5.0 million loss on repurchasing the 2015 Notes, which is the difference between the carrying value of the liability component, including any unamortized debt issuance costs, and the consideration attributed to the liability component as loss from debt extinguishment in other expenses in December 2012. The consideration attributed to the liability component of $83.0 million is calculated by measuring the fair value of a similar liability that does not have an associated equity component. The consideration attributable to the equity component of $21.8 million was recorded as a reduction of additional paid-in capital. In addition, the proportionate call options and warrants related to the 2015 Notes were also retired in December 2012. We received an aggregate of $15.2 million for the proportionate call option retirement and paid an aggregate of $11.6 million for buying back the proportionate portion of the warrants. The net amount of $3.6 million was recorded as an addition to additional paid-in capital. |
Carrying value, fair value and interest expense |
The carrying values of the liability and equity components of both the 2017 Notes and the 2015 Notes, together the "Notes", are reflected in our consolidated balance sheets as follows (in thousands): |
|
| | | | | | | | |
| | | | | | | | | | | | | | | | |
| | As of December 31, | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | |
Long-term debt: | | | | | | | | | | | | |
2.875% Convertible Senior Notes due 2015: | | | | | | | | | | | | |
Principal amount | | $ | 25,000 | | | $ | 25,000 | | | | | | | | | |
| | | | | | | |
Unamortized discount of liability component | | (1,818 | ) | | (2,830 | ) | | | | | | | | |
Unamortized debt issuance costs | | (204 | ) | | (326 | ) | | | | | | | | |
Carrying value of liability component | | $ | 22,978 | | | $ | 21,844 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | |
1.75% Convertible Senior Notes due 2017: | | | | | | | | | | | | |
Principal amount | | $ | 460,000 | | | $ | 460,000 | | | | | | | | | |
| | | | | | | |
Unamortized discount of liability component | | (72,902 | ) | | (88,536 | ) | | | | | | | | |
Unamortized debt issuance costs | | (9,064 | ) | | (11,008 | ) | | | | | | | | |
Carrying value of liability component | | $ | 378,034 | | | $ | 360,456 | | | | | | | | | |
| | | | | | | |
Total long-term debt | | $ | 401,012 | | | $ | 382,300 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | |
Equity—net carrying value | | | | | | | | | | | | |
2.875% Convertible Senior Notes due 2015 | | $ | 452 | | | $ | 452 | | | | | | | | | |
| | | | | | | |
1.75% Convertible Senior Notes due 2017 | | $ | 89,415 | | | $ | 89,415 | | | | | | | | | |
| | | | | | | |
The fair values of the Notes, which are all Level 2 measurements, are summarized as follows (in thousands): |
| | | | | | | | | |
| | | | | | | | | | | | | | | | |
| As of December 31, | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | |
2.875% Convertible Senior Notes due 2015 | $ | 25,950 | | | $ | 26,950 | | | | | | | | | | |
| | | | | | | | |
1.75% Convertible Senior Notes due 2017 | 456,320 | | | 462,850 | | | | | | | | | | |
| | | | | | | | |
Total | $ | 482,270 | | | $ | 489,800 | | | | | | | | | | |
| | | | | | | | |
Interest expense related to the Notes was included in interest expense on the consolidated statements of operations as follows (in thousands): |
|
| | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Year Ended December 31, | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | |
Contractual coupon interest | $ | 8,769 | | | $ | 3,625 | | | | | | | | | | |
| | | | | | | | |
Amortization of debt issuance costs | 2,217 | | | 811 | | | | | | | | | | |
| | | | | | | | |
Accretion of debt discount | 16,646 | | | 4,932 | | | | | | | | | | |
| | | | | | | | |
Capitalized interest | (939 | ) | | (1,638 | ) | | | | | | | | | |
| $ | 26,693 | | | $ | 7,730 | | | | | | | | | | |
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