Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2014 |
Summary of Significant Accounting Policies | ' |
Unaudited Interim Financial Data | ' |
Unaudited Interim Financial Data |
|
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. In the opinion of management, these consolidated financial statements reflect all adjustments which are of a normal recurring nature and necessary for a fair presentation of BioTelemetry, Inc.’s (the “Company” or “BioTelemetry”) financial position as of June 30, 2014 and December 31, 2013, the results of operations for the three and six months ended June 30, 2014 and 2013, and cash flows for the six months ended June 30, 2014 and 2013. The financial data and other information disclosed in these notes to the financial statements related to the three and six months ended June 30, 2014 and 2013 are unaudited. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for any future period. |
Net Loss | ' |
Net Loss |
|
The Company computes net loss per share in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 260, Earnings Per Share. The following summarizes the potential outstanding common stock of the Company at June 30, 2014 and 2013: |
|
| | June 30, 2014 | | June 30, 2013 | | | | | | | | | |
Employee stock purchase plan estimated share options outstanding | | 88,094 | | 50,477 | | | | | | | | | |
Common stock options and restricted stock units outstanding | | 4,322,496 | | 4,129,523 | | | | | | | | | |
Common stock options and restricted stock units available for grant | | 3,105,541 | | 2,429,098 | | | | | | | | | |
Common stock | | 26,421,886 | | 25,549,762 | | | | | | | | | |
Total | | 33,938,017 | | 32,158,860 | | | | | | | | | |
|
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive common shares, including stock options and warrants, as applicable. |
|
The following table presents the calculation of basic and diluted net loss per share: |
|
| | Three Months Ended | | Six Months Ended | |
June 30, | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 | |
| | (in thousands, except share and per share amounts) | |
Numerator: | | | | | | | | | |
Net loss | | $ | (3,988 | ) | $ | (2,299 | ) | $ | (8,110 | ) | $ | (4,386 | ) |
Denominator: | | | | | | | | | |
Weighted average shares used in computing basic and diluted net loss per share | | 26,434,047 | | 25,537,358 | | 26,272,436 | | 25,370,164 | |
Basic and diluted net loss per share | | $ | (0.15 | ) | $ | (0.09 | ) | $ | (0.31 | ) | $ | (0.17 | ) |
|
If the outstanding vested options or restricted stock units were exercised or converted into common stock, the result would be anti-dilutive for the three and six months ended June 30, 2014 and 2013. Accordingly, basic and diluted net loss per share are the same for the three and six months ended June 30, 2014 and 2013. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
|
The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, other receivables, accounts payable and long-term debt. With the exception of the long-term debt, the carrying value of these financial instruments approximates their fair value because of their short-term nature (classified as Level 1). For our long-term debt, based on the borrowing rates currently available to us, the carrying value also approximates fair value as of June 30, 2014 (classified as Level 2). We did not have any Level 3 assets or liabilities for the periods ended June 30, 2014 and December 31, 2013. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
|
Cash and cash equivalents are held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. Cash equivalents are defined as liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash and have minimal interest rate risk. |
Accounts Receivable | ' |
Accounts Receivable |
|
Accounts receivable related to the Patient Services segment are recorded at the time revenue is recognized, net of contractual allowances, and are presented on the balance sheet net of allowance for doubtful accounts. The ultimate collection of accounts receivable may not be known for several months after services have been provided and billed. The Company records allowance for doubtful accounts based on the aging of receivables using historical payor specific data. The percentages and amounts used to record bad debt expense and the allowance for doubtful accounts are supported by various methods and analyses, including current and historical cash collections, and the aging of receivables by payor. Because of continuing changes in the healthcare industry and third party reimbursement, it is possible that the Company’s estimates of collectability could change, which could have a material impact on the Company’s operations and cash flows. |
|
Accounts receivable related to the Product and Research Services segments are recorded at the time revenue is recognized, or when the services or products are billable, net of discounts. The Company estimates allowance for doubtful accounts on a specific account basis, and considers several factors in its analysis including customer specific information and aging of the account. |
|
The Company writes off receivables when the likelihood for collection is remote and when the Company believes collection efforts have been fully exhausted and it does not intend to devote additional resources in attempting to collect. The Company performs write-offs on a monthly basis. In the Patient Services segment, the Company wrote off $2,851 and $4,637 of receivables for the six months ended June 30, 2014 and 2013, respectively. The impact was a reduction of gross receivables and a reduction in the allowance for doubtful accounts. There were no material write-offs in the Product and Research Services segments. For the three and six months ended June 30, 2014, the Company recorded bad debt expense of $2,745 and $5,104, respectively. For the three and six months ended June 30, 2013, the Company recorded bad debt expense of $1,967 and $4,434, respectively. |
Inventory | ' |
Inventory |
|
Inventory consists of the following: |
|
| | June 30, | | December 31, | | | | | | | |
2014 | 2013 | | | | | | |
Raw materials and supplies | | $ | 2,686 | | $ | 2,404 | | | | | | | |
Finished goods | | 284 | | 150 | | | | | | | |
Total inventories | | $ | 2,970 | | $ | 2,554 | | | | | | | |
|
Inventories, which include purchased parts, materials, direct labor and applied manufacturing overhead, are stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method. |
Goodwill | ' |
Goodwill |
|
Goodwill is the excess of purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in a business combination. In accordance with ASC 350, Intangibles—Goodwill and Other, goodwill is reviewed for impairment annually, or when events arise that could indicate that impairment exists. The provisions of ASC 350 require that the Company perform a two-step impairment test. In the first step, the Company compares the fair value of its reporting units to the carrying value of the reporting units. If the carrying value of the net assets assigned to the reporting units exceeds the fair value of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the reporting units’ goodwill. If the carrying value of the reporting units’ goodwill exceeds its implied fair value, an impairment loss equal to the difference is recorded. |
|
For the purpose of performing its goodwill impairment analysis, the Company considers its business to be comprised of three reporting units: Patient Services, Product and Research Services. The Company calculates the fair value of the reporting units utilizing a weighting of the income and market approaches. The income approach is based on a discounted cash flow methodology that includes assumptions for, among other things, forecasted income, cash flow, growth rates, income tax rates, expected tax benefits and long-term discount rates, all of which require significant judgment. The market approach utilizes the Company’s market data as well as market data from publicly traded companies that are similar to the Company. There are inherent uncertainties related to these factors and the judgment applied in the analysis. The Company believes that the combination of an income and a market approach provides a reasonable basis to estimate the fair value of its reporting units. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
|
ASC 718, Compensation — Stock Compensation, addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 requires that an entity measure the cost of equity-based service awards based on the grant-date fair value of the award and recognize the cost of such awards over the period during which the employee is required to provide service in exchange for the award (the vesting period). ASC 718 requires that an entity measure the cost of liability-based service awards based on current fair value that is re-measured subsequently at each reporting date through the settlement date. The Company accounts for equity awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. |
|
As a result of stock-based compensation expense incurred, the Company’s loss before income taxes was increased by $965 and $1,968, respectively, during the three and six months ended June 30, 2014. As a result of stock-based compensation expense incurred, the Company’s loss before income taxes was increased by $1,011 and $1,711 during the three and six months ended June 30, 2013, respectively. For the three and six months ended June 30, 2014, the impact of stock-based compensation expense on basic and diluted earnings per share was $(0.04) and $(0.07). For the three and six months ended June 30, 2013, the impact of stock-based compensation expense on basic and diluted earnings per share was $(0.04) and $(0.07). |
|
The Company estimates the fair value of its share-based awards to employees and directors using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the use of certain subjective assumptions. The most significant of these assumptions are the estimates of the expected volatility of the market price of the Company’s stock and the expected term of the award. For the six months ended June 30, 2014 and 2013, the Company based the estimates of expected volatility on the historical average of our stock price. The expected term represents the period of time that stock-based awards granted are expected to be outstanding. Other assumptions used in the Black-Scholes option valuation model include the risk-free interest rate and expected dividend yield. The risk-free interest rate for periods pertaining to the contractual life of each option is based on the U.S. Treasury yield of a similar duration in effect at the time of grant. The Company has never paid, and does not expect to pay, dividends in the foreseeable future. |
|
The Company utilized the Black-Scholes valuation model for estimating the fair value of stock options granted using the following weighted average assumptions: |
|
| | Six months Ended | | | | | | | | | |
June 30, | | | | | | | | |
| | 2014 | | 2013 | | | | | | | | | |
Expected dividend yield | | 0 | % | 0 | % | | | | | | | | |
Expected volatility | | 62 | % | 60 | % | | | | | | | | |
Risk-free interest rate | | 1.85 | % | 1.28 | % | | | | | | | | |
Expected life | | 6.46 | | 6.75 | | | | | | | | | |
|
Based on the Company’s historical experience of options that cancel before becoming fully vested, the Company has assumed an annualized forfeiture rate of 15% for all options. Under the true-up provision of ASC 718, the Company will record additional expense if the actual forfeiture rate is lower than estimated, and will record a recovery of prior expense if the actual forfeiture rate is higher than estimated. |
|
Based on the above assumptions, the per share weighted average fair value of the options granted under the stock option plan for the six months ended June 30, 2014 and 2013 was $4.96 and $1.47, respectively. |
|
The following table summarizes activity under all stock award plans from December 31, 2013 through June 30, 2014: |
|
| | | | Options Outstanding | | | | | | |
| | Shares | | | | Weighted | | | | | | |
| | Available | | Number | | Average | | | | | | |
| | for Grant | | of Shares | | Exercise Price | | | | | | |
Balance — December 31, 2013 | | 2,404,498 | | 3,993,590 | | $ | 5.25 | | | | | | |
Additional options available for grant | | 1,291,200 | | — | | — | | | | | | |
Granted | | (623,650 | ) | 623,650 | | 8.38 | | | | | | |
Canceled | | 68,044 | | (68,044 | ) | 3.59 | | | | | | |
Exercised | | — | | (192,580 | ) | 4.52 | | | | | | |
| | | | | | | | | | | | |
Balance — March 31, 2014 | | 3,140,092 | | 4,356,616 | | 5.78 | | | | | | |
Granted | | (125,985 | ) | 125,985 | | 8.2 | | | | | | |
Canceled | | 91,434 | | (91,434 | ) | 4.51 | | | | | | |
Exercised | | — | | (68,671 | ) | 4.55 | | | | | | |
| | | | | | | | | | | | |
Balance — June 30, 2014 | | 3,105,541 | | 4,322,496 | | $ | 5.91 | | | | | | |
|
The Employee Stock Option (ESOP) Plans have an automatic increase in the shares available for grant every January the plans are active. The increase in the shares available for grant under the ESOP plan is equal to 4% of the total shares outstanding at December 31, 2013. |
|
Additional information regarding options outstanding is as follows: |
|
| | June 30, 2014 | | June 30, 2013 | | | | | | | |
Range of exercise prices (per option) | | $ | 0.70 - $31.18 | | $ | 0.70 - $31.18 | | | | | | | |
Weighted average remaining contractual life (years) | | 7.31 | | 7.77 | | | | | | | |
| | | | | | | | | | | | | |
|
Employee Stock Purchase Plan |
|
In 2014, 169,610 shares were purchased in accordance with the Employee Stock Purchase Plan (ESPP). Net proceeds to the Company from the issuance of shares of common stock under the ESPP for the six months ended June 30, 2014 were $397. In January 2014, the number of shares available for grant was increased by 258,240, per the ESPP documents. At June 30, 2014, approximately 606,086 shares remain available for purchase under the ESPP. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
|
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The new standard will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration in which the company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition and is effective for the annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact the adoption of this standard will have on the consolidated financial statements. |