Document and Entity Information
Document and Entity Information - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | May 05, 2017 | Jun. 30, 2016 | |
Document Information [Abstract] | |||
Entity Registrant Name | MERIT MEDICAL SYSTEMS INC | ||
Entity Central Index Key | 856,982 | ||
Current Fiscal Year End Date | --03-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-Q | ||
Document Period End Date | Mar. 31, 2017 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | Q1 | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 49,916,915 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 844,073,573 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 26,464 | $ 19,171 |
Trade receivables — net of allowance for uncollectible accounts — 2017 — $1,437 and 2016 — $1,587 | 95,252 | 80,521 |
Employee receivables | 161 | 198 |
Other receivables | 4,902 | 5,445 |
Inventories | 134,310 | 120,695 |
Prepaid expenses and other assets | 7,778 | 6,226 |
Prepaid income taxes | 2,604 | 2,525 |
Deferred income tax assets | 0 | 8,219 |
Income tax refund receivables | 680 | 423 |
Total current assets | 272,151 | 243,423 |
PROPERTY AND EQUIPMENT: | ||
Land and land improvements | 19,454 | 19,379 |
Buildings | 141,065 | 139,119 |
Manufacturing equipment | 186,323 | 178,110 |
Furniture and fixtures | 45,302 | 43,433 |
Leasehold improvements | 30,633 | 30,413 |
Construction-in-progress | 29,259 | 28,180 |
Total property and equipment | 452,036 | 438,634 |
Less accumulated depreciation | (168,652) | (162,061) |
Property and equipment — net | 283,384 | 276,573 |
OTHER ASSETS: | ||
Goodwill | 219,911 | 211,927 |
Deferred income tax assets | 2,047 | 171 |
Other assets | 29,098 | 28,012 |
Total other assets | 459,646 | 422,807 |
TOTAL | 1,015,181 | 942,803 |
CURRENT LIABILITIES: | ||
Trade payables | 32,625 | 30,619 |
Accrued expenses | 52,875 | 44,947 |
Current portion of long-term debt | 16,998 | 10,000 |
Advances from employees | 479 | 572 |
Income taxes payable | 2,120 | 2,193 |
Total current liabilities | 105,097 | 88,331 |
LONG-TERM DEBT | 220,408 | 314,373 |
DEFERRED INCOME TAX LIABILITIES | 20,482 | 25,981 |
LIABILITIES RELATED TO UNRECOGNIZED TAX BENEFITS | 438 | 438 |
DEFERRED COMPENSATION PAYABLE | 9,399 | 9,211 |
DEFERRED CREDITS | 2,510 | 2,550 |
OTHER LONG-TERM OBLIGATIONS | 4,505 | 3,730 |
Total liabilities | 362,839 | 444,614 |
COMMITMENTS AND CONTINGENCIES (Notes 5, 9, 10 and 13) | ||
STOCKHOLDERS’ EQUITY: | ||
Preferred stock — 5,000 shares authorized as of March 31, 2017 and December 31, 2016; no shares issued | ||
Common stock, no par value; shares authorized — 100,000; issued and outstanding as of March 31, 2017 - 49,891 and December 31, 2016 - 44,645 | 344,497 | 206,186 |
Retained earnings | 308,688 | 293,885 |
Accumulated other comprehensive loss | (843) | (1,882) |
Total stockholders’ equity | 652,342 | 498,189 |
TOTAL | 1,015,181 | 942,803 |
Developed technology — net of accumulated amortization — 2017 — $57,373 and 2016 — $52,843 | ||
OTHER ASSETS: | ||
Intangible Assets | 156,414 | 135,358 |
Other — net of accumulated amortization — 2017 — $31,459 and 2016 — $30,048 | ||
OTHER ASSETS: | ||
Intangible Assets | $ 52,176 | $ 47,339 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Trade receivables, allowances | $ 1,437 | $ 1,587 |
STOCKHOLDERS’ EQUITY: | ||
Preferred stock shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock shares issued (in shares) | 0 | 0 |
Common stock par value (in USD per share) | ||
Common stock shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock shares issued (in shares) | 49,891,000 | 44,645,000 |
Common stock shares outstanding (in shares) | 49,891,000 | 44,645,000 |
Developed technology | ||
OTHER ASSETS: | ||
Intangibles, accumulated amortization | $ 57,373 | $ 52,843 |
Other | ||
OTHER ASSETS: | ||
Intangibles, accumulated amortization | $ 31,459 | $ 30,048 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
NET SALES | $ 171,069 | $ 138,077 |
COST OF SALES | 95,127 | 77,977 |
GROSS PROFIT | 75,942 | 60,100 |
OPERATING EXPENSES: | ||
Selling, general and administrative | 57,771 | 41,704 |
Research and development | 12,525 | 10,588 |
Contingent consideration expense | 37 | 102 |
Total operating expenses | 70,333 | 52,394 |
INCOME FROM OPERATIONS | 5,609 | 7,706 |
OTHER INCOME (EXPENSE): | ||
Interest income | 83 | 9 |
Interest expense | (2,706) | (1,329) |
Gain on bargain purchase | 12,243 | 0 |
Other income (expense) — net | 264 | (480) |
Other income (expense) — net | 9,884 | (1,800) |
INCOME BEFORE INCOME TAXES | 15,493 | 5,906 |
INCOME TAX EXPENSE | 690 | 1,555 |
NET INCOME | $ 14,803 | $ 4,351 |
EARNINGS PER COMMON SHARE: | ||
Basic (in dollars per share) | $ 0.33 | $ 0.10 |
Diluted (in dollars per share) | $ 0.32 | $ 0.10 |
AVERAGE COMMON SHARES: | ||
Basic (in shares) | 44,830 | 44,275 |
Diluted (in shares) | 45,820 | 44,579 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 14,803 | $ 4,351 |
Other comprehensive income (loss): | ||
Cash Flow Hedges | 837 | (729) |
Less income tax benefit (expense) | (326) | 284 |
Foreign currency translation adjustment | 780 | 1,228 |
Less income tax benefit (expense) | (252) | (90) |
Total other comprehensive income | 1,039 | 693 |
Total comprehensive income | $ 15,842 | $ 5,044 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 14,803,000 | $ 4,351,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 12,759,000 | 9,705,000 |
Gain on bargain purchase | (12,243,000) | 0 |
Losses on sales and/or abandonment of property and equipment | 212,000 | 29,000 |
Write-off of patents and intangible assets | 18,000 | 0 |
Amortization of deferred credits | (40,000) | (43,000) |
Amortization of long-term debt issuance costs | 171,000 | 257,000 |
Deferred income taxes | (387,000) | 170,000 |
Excess tax benefits from stock-based compensation | 0 | 3,000 |
Stock-based compensation expense | 577,000 | 624,000 |
Changes in operating assets and liabilities, net of effects from acquisitions: | ||
Trade receivables | (5,757,000) | (835,000) |
Employee receivables | 36,000 | (43,000) |
Other receivables | 374,000 | 1,367,000 |
Inventories | 844,000 | (2,272,000) |
Prepaid expenses and other assets | 229,000 | (498,000) |
Prepaid income taxes | (89,000) | (38,000) |
Income tax refund receivables | (350,000) | 424,000 |
Other assets | (1,172,000) | 109,000 |
Trade payables | 1,039,000 | 2,400,000 |
Accrued expenses | 3,285,000 | (3,936,000) |
Advances from employees | (86,000) | (388,000) |
Income taxes payable | (22,000) | 578,000 |
Deferred compensation payable | 187,000 | (305,000) |
Other long-term obligations | 790,000 | (76,000) |
Total adjustments | 375,000 | 7,232,000 |
Net cash provided by operating activities | 15,178,000 | 11,583,000 |
Capital expenditures for: | ||
Property and equipment | (10,178,000) | (10,991,000) |
Intangible assets | (668,000) | (482,000) |
Proceeds from sale of cost method investment | 0 | 1,089,000 |
Proceeds from the sale of property and equipment | 3,000 | 0 |
Cash paid in acquisitions, net of cash acquired | (47,461,000) | (21,500,000) |
Net cash used in investing activities | (58,304,000) | (31,884,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of common stock | 138,569,000 | 557,000 |
Payment of offering costs related to issuance of common stock | (833,000) | 0 |
Proceeds from issuance of long-term debt | 83,723,000 | 55,184,000 |
Payments on long-term debt | (170,723,000) | (34,376,000) |
Excess tax benefits from stock-based compensation | 0 | (3,000) |
Contingent payments related to acquisitions | (15,000) | (167,000) |
Net cash provided by financing activities | 50,721,000 | 21,195,000 |
EFFECT OF EXCHANGE RATES ON CASH | (302,000) | 91,000 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 7,293,000 | 985,000 |
CASH AND CASH EQUIVALENTS: | ||
Beginning of period | 19,171,000 | 4,177,000 |
End of period | 26,464,000 | 5,162,000 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Interest (net of capitalized interest of $119 and $91, respectively) | 2,743,000 | 1,378,000 |
Income taxes | 1,571,000 | 428,000 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Property and equipment purchases in accounts payable | 756,000 | 1,584,000 |
Contingent receivable in exchange for sale of cost method investment | $ 0 | $ 681,000 |
CONSOLIDATED STATEMENTS OF CAS7
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Net capitalized interest | $ 119 | $ 91 |
Common Stock | ||
Company's common stock surrendered in exchange for the exercise of stock options (in shares) |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | Basis of Presentation. The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three-month periods ended March 31, 2017 and 2016 are not audited. Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2017 and December 31, 2016 , and our results of operations and cash flows for the three-month periods ended March 31, 2017 and 2016 . The results of operations for the three-month periods ended March 31, 2017 and 2016 are not necessarily indicative of the results for a full-year period. These interim consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K (the "2016 Form 10-K") for the year ended December 31, 2016 , which was filed with the Securities and Exchange Commission (the "SEC") on March 1, 2017. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories. Inventories at March 31, 2017 and December 31, 2016 consisted of the following (in thousands): March 31, December 31, 2017 2016 Finished goods $ 69,130 $ 63,852 Work-in-process 15,724 11,008 Raw materials 49,456 45,835 Total $ 134,310 $ 120,695 |
Stock Based Compensation
Stock Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Employee Stock Purchase Plan Stock Options and Warrants | Stock-Based Compensation . Stock-based compensation expense before income tax expense for the three-month periods ended March 31, 2017 and 2016 , consisted of the following (in thousands): Three Months Ended March 31, 2017 2016 Cost of goods sold $ 96 $ 123 Research and development 52 42 Selling, general, and administrative 429 459 Stock-based compensation expense before taxes $ 577 $ 624 As of March 31, 2017 , the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $7.2 million and is expected to be recognized over a weighted average period of 3.19 years. During the three-month period ended March 31, 2017 , we did not grant any new stock-based awards. During the three-month period ended March 31, 2016, we granted stock-based awards representing 563,500 shares of our common stock. We use the Black-Scholes methodology to value the stock-based compensation expense for options. In applying the Black-Scholes methodology to the options granted during the three-month period ended March 31, 2016 , the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below: Three months ended March 31, 2016 Risk-free interest rate 1.4% Expected option life 5.0 years Expected dividend yield —% Expected price volatility 37.06% For the purpose of the foregoing analysis, the average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock option. We determine the expected term of the stock options using the historical exercise behavior of employees. The expected price volatility was determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option life and implied volatility based on recent trends of the daily historical volatility. For options with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period. |
Earnings Per Common Share (EPS)
Earnings Per Common Share (EPS) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Earnings Per Common Share (EPS) | Earnings Per Common Share (EPS). The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the following periods consisted of the following (in thousands, except per share amounts): Net Income Shares Per Share Amount Three-month period ended March 31, 2017: Basic EPS $ 14,803 44,830 $ 0.33 Effect of dilutive stock options and warrants 990 Diluted EPS $ 14,803 45,820 $ 0.32 Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive 96 Three-month period ended March 31, 2016: Basic EPS $ 4,351 44,275 $ 0.10 Effect of dilutive stock options and warrants 304 Diluted EPS $ 4,351 44,579 $ 0.10 Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive 978 |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Acquisitions | . On January 31, 2017, we signed a purchase agreement with Argon Medical Devices, Inc. ("Argon") to acquire Argon’s critical care business including a manufacturing facility in Yishun, Singapore, the related commercial operations in Europe and Japan, and certain inventories and intellectual property rights within the United States. We made an initial payment of approximately $10.9 million which is subject to a working capital adjustment. We accounted for the acquisition as a business combination. Acquisition-related costs associated with the Argon acquisition during the three-month period ended March 31, 2017, which are included in selling, general, and administrative expenses in the accompanying consolidated statements of income, were approximately $1.1 million . The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the three-month period ended March 31, 2017, our net sales of Argon products were approximately $7.2 million . It is not practical to separately report the earnings related to the Argon acquisition, as we cannot split out sales costs related solely to the products we acquired from Argon, principally because our sales representatives sell multiple products (including the products we acquired from Argon) in our cardiovascular business segment. The assets and liabilities in the initial purchase price allocation for the Argon acquisition are stated at fair value based on estimates of fair value using available information and making assumptions management believes are reasonable. The following table summarizes the preliminary purchase price allocated to the net tangible and intangible assets acquired and liabilities assumed (in thousands): Assets Acquired Cash and cash equivalents $ 1,436 Trade receivables 8,351 Inventories 12,217 Prepaid expenses 1,275 Property and equipment 2,667 Deferred tax assets 184 Intangibles Developed technology 2,600 Customer lists 1,300 Trademarks 1,500 Total assets acquired 31,530 Liabilities Assumed Trade payables (2,306 ) Accrued expenses (5,083 ) Income taxes payable (2 ) Deferred income tax liabilities (999 ) Total liabilities assumed (8,390 ) Total net assets acquired 23,140 Gain on bargain purchase (12,243 ) Total purchase price $ 10,897 With respect to the Argon assets, we are amortizing developed technology over seven years and customer lists on an accelerated basis over five years. While U.S. trademarks can be renewed indefinitely, we currently estimate that we will generate cash flow from the acquired trademarks for a period of five years from the acquisition date. The total weighted-average amortization period for these acquired intangible assets is 6.0 years . The total fair value of the net assets acquired from Argon, including identifiable intangible assets, exceeded the purchase price resulting in a gain on bargain purchase which was recorded within other income (expense) in our consolidated statements of income for the three-month period ended March 31, 2017. We believe the reason for the provisional gain on bargain purchase was a result of the divestiture of a non-strategic, slow growth critical care business for Argon. It is our understanding that the divestiture allows Argon to focus on its higher growth interventional portfolio. Given the circumstances of this acquisition, which closed during the first quarter, as well as the complexity of the transaction, the entire purchase price allocation disclosed herein (as well as the gain on bargain purchase) is considered provisional at this time and subject to adjustment to reflect information obtained about factors and circumstances that existed as of the acquisition date that if known would have affected the measurement of the amounts recognized as of that date. We are currently reassessing whether we have correctly identified all the assets acquired and the liabilities assumed, and the measurement period remains open. On January 31, 2017, we acquired substantially all the assets, including intellectual property covered by approximately 40 patents and pending applications, and assumed certain liabilities, of Catheter Connections, Inc. (“Catheter Connections”), in exchange for payment of $38 million , which is subject to a working capital adjustment. Catheter Connections, which is based in Salt Lake City, Utah, developed and marketed the DualCap® System, an innovative family of disinfecting products designed to protect patients from intravenous infections resulting from infusion therapy. We accounted for this acquisition as a business combination. Acquisition-related costs associated with the Catheter Connections acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, were not material. The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the three-month period ended March 31, 2017, our net sales of the products acquired from Catheter Connections were approximately $1.8 million . It is not practical to separately report the earnings related to the products acquired from Catheter Connections, as we cannot split out sales costs related solely to those products, principally because our sales representatives sell multiple products (including the DualCap System) in the cardiovascular business segment. The purchase price was preliminarily allocated as follows (in thousands): Assets Acquired Trade receivables $ 952 Inventories 2,244 Prepaid expenses and other current assets 181 Property and equipment 1,472 Intangibles Developed technology 22,900 Customer lists 100 Trademarks 2,900 Goodwill 7,612 Total assets acquired 38,361 Liabilities Assumed Trade payables (338 ) Accrued expenses (23 ) Total liabilities assumed (361 ) Net assets acquired $ 38,000 We are amortizing the developed technology asset over 12 years, the related trademarks over 10 years, and the associated customer list over eight years. We have estimated the weighted average life of the intangible Catheter Connections assets acquired to be approximately 11.8 years . On July 6, 2016, we acquired all the issued and outstanding shares of DFINE Inc. ("DFINE"). The DFINE acquisition added a line of vertebral augmentation products for the treatment of vertebral compression fractures ("VCF") as well as medical devices used to treat metastatic spine tumors. We made an initial payment of $97.5 million to certain DFINE stockholders on July 6, 2016 and paid approximately $578,000 related to a net working capital adjustment subject to review by Merit and the preferred stockholders of DFINE. We accounted for the acquisition as a business combination. In the three-month period ended December 31, 2016, we negotiated the final net working capital adjustment resulting in a reduction to the purchase price of approximately $1.1 million . As a result, we recorded measurement period adjustments to reduce inventories by approximately $89,000 , reduce property and equipment by approximately $109,000 , reduce goodwill by approximately $1.2 million , reduce accrued expenses by approximately $407,000 and increase the associated deferred tax liabilities by approximately $113,000 . Under GAAP, measurement period adjustments are recognized on a prospective basis in the period of change, instead of restating prior periods. There was no impact to reported earnings in connection with these measurement period adjustments. Acquisition-related costs associated with the DFINE acquisition during the year ended December 31, 2016, which were included in selling, general, and administrative expenses in the consolidated statements of income included in the 2016 Form 10-K, were approximately $1.6 million . The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the year ended December 31, 2016, our net sales of DFINE products were approximately $13.5 million . It is not practical to separately report the earnings related to the DFINE acquisition, as we cannot split out sales costs related solely to the DFINE products, principally because our sales representatives sell multiple products (including DFINE products) in the cardiovascular business segment. The purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on estimated fair values, as follows (in thousands): Assets Acquired Trade receivables $ 4,054 Other receivables 6 Inventories 8,585 Prepaid expenses 630 Property and equipment 1,630 Other long-term assets 145 Intangibles Developed technology 67,600 Customer lists 2,400 Trademarks 4,400 Goodwill 24,818 Total assets acquired 114,268 Liabilities Assumed Trade payables (1,790 ) Accrued expenses (5,298 ) Deferred income tax liabilities - current (701 ) Deferred income tax liabilities - noncurrent (10,844 ) Total liabilities assumed (18,633 ) Net assets acquired, net of cash received of $1,327 $ 95,635 The gross amount of trade receivables we acquired in the DFINE acquisition was approximately $4.3 million , of which approximately $224,000 was expected to be uncollectible or returned. With respect to the DFINE assets, we are amortizing developed technology over fifteen years and customer lists on an accelerated basis over nine years. While U.S. trademarks can be renewed indefinitely, we currently estimate that we will generate cash flow from the acquired trademarks for a period of fifteen years from the acquisition date. The total weighted-average amortization period for these acquired intangible assets is 14.8 years . On February 4, 2016, we purchased the HeRO® Graft device and other related assets from CryoLife, Inc., a developer of medical devices based in Kennesaw, Georgia ("CryoLife"). The HeRO Graft is a fully subcutaneous vascular access system intended for use in maintaining long-term vascular access for chronic hemodialysis patients who have failing fistulas, grafts or are catheter dependent due to a central venous blockage. The purchase price was $18.5 million , which was paid in full during 2016. We accounted for this acquisition as a business combination. The purchase price was allocated as follows (in thousands): Assets Acquired Inventories $ 2,455 Property and equipment 290 Intangibles Developed technology 12,100 Trademarks 700 Customers Lists 400 Goodwill 2,555 Total assets acquired $ 18,500 We are amortizing the developed HeRO Graft technology asset over ten years, the related trademarks over 5.5 years, and the associated customer lists over 12 years. We have estimated the weighted average life of the intangible HeRO Graft assets acquired to be approximately 9.82 years. Acquisition-related costs related to the HeRO Graft device and other related assets during the year ended December 31, 2016, which were included in selling, general and administrative expenses in the consolidated statements of income included in the 2016 Form 10-K, were not material. The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the year ended December 31, 2016, our net sales of the products acquired from CryoLife were approximately $7.1 million . It is not practical to separately report the earnings related to the products acquired from CryoLife, as we cannot split out sales costs related solely to those products, principally because our sales representatives sell multiple products (including the HeRO Graft device) in the cardiovascular business segment. The following table summarizes our consolidated results of operations for the three-month periods ended March 31, 2017 and 2016, as well as unaudited pro forma consolidated results of operations as though the DFINE acquisition had occurred on January 1, 2015 and the acquisition of the Argon critical care business had occurred on January 1, 2016 (in thousands, except per share amounts): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 As Reported Pro Forma As Reported Pro Forma Net Sales $ 171,069 $ 173,829 $ 138,077 $ 156,390 Net Income 14,803 1,725 4,351 12,281 Earnings per common share: Basic $ 0.33 $ 0.04 $ 0.10 $ 0.28 Diluted $ 0.32 $ 0.04 $ 0.10 $ 0.28 The unaudited pro forma information set forth above is for informational purposes only and includes adjustments related to the step-up of acquired inventories, amortization expense of acquired intangible assets, interest expense on long-term debt and changes in the timing of the recognition of the gain on bargain purchase. The pro forma information should not be considered indicative of actual results that would have been achieved if the DFINE acquisition had occurred on January 1, 2015 and the acquisition of the Argon critical care business had occurred on January 1, 2016, or results that may be obtained in any future period. The pro forma consolidated results of operations do not include the Catheter Connections or HeRO Graft acquisitions as we do not deem the pro forma effect of these transactions to be material. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Reporting and Foreign Operations | Segment Reporting. We report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of cardiology and radiology medical device products which assist in diagnosing and treating coronary artery disease, peripheral vascular disease and other non-vascular diseases and includes embolotherapeutic, cardiac rhythm management ("CRM"), electrophysiology ("EP"), and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology medical device products which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors. We evaluate the performance of our operating segments based on operating income. Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three-month periods ended March 31, 2017 , and 2016 , are as follows (in thousands): Three Months Ended March 31, 2017 2016 Net Sales Cardiovascular $ 164,787 $ 132,544 Endoscopy 6,282 5,533 Total net sales 171,069 138,077 Operating income Cardiovascular 4,004 6,648 Endoscopy 1,605 1,058 Total operating income 5,609 7,706 |
Recent Accounting Pronouncement
Recent Accounting Pronouncements (Notes) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | Recently Issued Financial Accounting Standards . In January 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under these amendments, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. We adopted ASU 2017-04 effective January 1, 2017 on a prospective basis, and it did not have a material impact on our consolidated financial statements for the three months ended March 31, 2017. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which provides guidance to entities to assist with evaluating when a set of transferred assets and activities is a business and provides a screen to determine when a set is not a business. Under the new guidance, when substantially all the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to produce outputs. We adopted ASU 2017-04 effective January 1, 2017 on a prospective basis. The implementation of ASU 2017-04 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2017. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory , which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 will be effective for us on January 1, 2018. We are currently evaluating the anticipated impact of adopting ASU 2016-16 on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for us on January 1, 2018 with early adoption permitted. We do not presently anticipate that the adoption of ASU 2016-15 will have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which requires companies to record excess tax benefits and deficiencies in income rather than the current requirement to record them through equity. ASU 2016-09 also allows companies the option to recognize forfeitures of share-based awards when they occur rather than the current requirement to make an estimate upon the grant of the awards. We adopted ASU 2016-09 effective January 1, 2017 on a prospective basis. The implementation of ASU 2016-09 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2017. In February 2016, the FASB issued ASU No. 2016-02, Leases , which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance regarding the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 will be effective for us on January 1, 2018. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Upon adoption of ASU 2016-01, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. We do not presently anticipate that the adoption of ASU 2016-01 will have a material impact on our financial statements. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes , which requires all deferred tax assets and deferred tax liabilities to be presented as noncurrent within a classified balance sheet. We adopted ASU 2015-17 effective January 1, 2017 on a prospective basis and did not reclassify presentation of prior year balances. The adoption of this standard did not have a material impact on our consolidated financial statements for the three months ended March 31, 2017. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory . ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory measured using last-in, first-out or the retail inventory method are excluded from the scope of ASU 2015-11 which is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The implementation of ASU 2015-11 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2017. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , to update the financial reporting requirements for revenue recognition. Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also 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 and assets recognized from costs incurred to fulfill a contract. This guidance is effective for us beginning on January 1, 2018, and entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. We have not yet reached a final conclusion on whether we will adopt this new standard on a prospective or retrospective basis. We are concluding the assessment phase of implementing this guidance. We have evaluated each of the five steps in Topic 606, which are as follows: 1) Identify the contract with the customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations; and 5) Recognize revenue when (or as) performance obligations are satisfied. Our preliminary conclusion is that we expect to identify similar performance obligations under ASC Topic 606 as compared with deliverables and separate units of account previously identified. As a result, we expect the timing of our revenue to remain the same in comparison to the current revenue recognition guidance. There are also certain considerations related to internal control over financial reporting that are associated with implementing Topic 606. We are currently evaluating our control framework for revenue recognition and identifying any changes that may need to be made in response to the new guidance. Disclosure requirements under the new guidance in Topic 606 have been significantly expanded in comparison to the disclosure requirements under the current guidance. Designing and implementing the appropriate controls over gathering and reporting the information required under Topic 606 is currently in process. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes. Our overall effective tax rate for the three months ended March 31, 2017 and 2016 was 4.5% and 26.3% , respectively, which resulted in a provision for income taxes of approximately $690,000 and $ 1.6 million , respectively. The decrease in the effective income tax rate for the first quarter of 2017, when compared to the first quarter of 2016, was due primarily to the nontaxable gain on the bargain purchase recorded in connection with the acquisition of the critical care division of Argon. |
Revolving Credit Facility and L
Revolving Credit Facility and Long-Term Debt | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Revolving Credit Facility and Long-Term Debt | Revolving Credit Facility and Long-term Debt. Our outstanding debt obligations as of March 31, 2017 and December 31, 2016 , consisted of the following (in thousands): March 31, 2017 December 31, 2016 2016 Term loan $ 92,500 $ 145,000 2016 Revolving credit loans 138,500 180,000 2017 Debt facility 6,998 — Less debt issuance costs (592 ) (627 ) Total long-term debt 237,406 324,373 Less current portion 16,998 10,000 Long-term portion $ 220,408 $ 314,373 2017 Debt Facility On February 23, 2017, we entered into a loan agreement with HSBC Bank, whereby HSBC Bank agreed to provide us with a loan in the amount of approximately $7.0 million . The loan matures on February 1, 2018, with an extension available at the Company's option, subject to certain conditions. The loan agreement bears interest at the three-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.0%, which resets quarterly. The loan is secured by assets equal to the currently outstanding loan balance. The loan contains covenants, representations and warranties and other terms customary for loans of this nature. Our interest rate as of March 31, 2017 was a variable rate of 2.06% . 2016 Term Loan and Revolving Credit Loans On July 6, 2016, we entered into a Second Amended and Restated Credit Agreement (as amended to date, the “Second Amended Credit Agreement”), with Wells Fargo Bank, National Association, as administrative agent, swingline lender and a lender, and Wells Fargo Securities, LLC, as sole lead arranger and sole bookrunner. In addition to Wells Fargo Bank, National Association, Bank of America, N.A., U.S. Bank, National Association, and HSBC Bank USA, National Association, are parties to the Second Amended Credit Agreement as lenders. The Second Amended Credit Agreement amends and restates in its entirety Merit’s previously outstanding Amended and Restated Credit Agreement and all amendments thereto. The Second Amended Credit Agreement was amended on September 28, 2016 to allow for a new revolving credit loan to our wholly-owned subsidiary and on March 20, 2017 to allow flexibility in how we apply net proceeds received from equity issuances to prepay outstanding indebtedness. The Second Amended Credit Agreement provides for a term loan of $150 million and a revolving credit commitment up to an aggregate amount of $275 million , which includes a reserve of $25 million to make swingline loans from time to time. The term loan is payable in quarterly installments in the amounts provided in the Second Amended Credit Agreement until the maturity date of July 6, 2021, at which time the term and revolving credit loans, together with accrued interest thereon, will be due and payable. At any time prior to the maturity date, we may repay any amounts owing under all revolving credit loans, term loans, and all swingline loans in whole or in part, subject to certain minimum thresholds, without premium or penalty, other than breakage costs. Revolving credit loans denominated in dollars and term loans made under the Second Amended Credit Agreement bear interest, at our election, at either a Base Rate or Eurocurrency Base Rate (as such terms are defined in the Second Amended Credit Agreement) plus the applicable margin, which increases as our Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) increases. Revolving credit loans denominated in an Alternative Currency (as defined in the Second Amended Credit Agreement) bear interest at the Eurocurrency rate plus the applicable margin. Swingline loans bear interest at the base rate plus the applicable margin. Upon an event of default, the interest rate may be increased by 2.0% . The revolving credit commitment will also carry a commitment fee of 0.15% to 0.40% per annum on the unused portion. The Second Amended Credit Agreement is collateralized by substantially all our assets. The Second Amended Credit Agreement contains covenants, representations and warranties and other terms customary for loans of this nature. The Second Amended Credit Agreement requires that we maintain certain financial covenants, as follows: Covenant Requirement Consolidated Total Leverage Ratio (1) Through March 31, 2017 4.5 to 1.0 April 1, 2017 through June 30, 2017 4.0 to 1.0 July 1, 2017 through December 31, 2017 3.75 to 1.0 January 1, 2018 through March 31, 2018 3.5 to 1.0 April 1, 2018 and thereafter 3.25 to 1.0 Consolidated EBITDA (2) 1.25 to 1.0 Consolidated Net Income (3) $0 Facility Capital Expenditures (4) $30 million (1) Maximum Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) as of any fiscal quarter end. (2) Minimum ratio of Consolidated EBITDA (as defined in the Second Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Fixed Charges (as defined in the Second Amended Credit Agreement) for any period of four consecutive fiscal quarters. (3) Minimum level of Consolidated Net Income (as defined in the Second Amended Credit Agreement) for certain periods, and subject to certain adjustments. (4) Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Second Amended Credit Agreement) in any fiscal year. Additionally, the Second Amended Credit Agreement contains customary events of default and affirmative and negative covenants for transactions of this type. As of March 31, 2017 , we believe we were in compliance with all covenants set forth in the Second Amended Credit Agreement. As of March 31, 2017 , we had outstanding borrowings of approximately $231.0 million under the Second Amended Credit Agreement, with available borrowings of approximately $136.5 million , based on the leverage ratio required pursuant to the Second Amended Credit Agreement. Our interest rate as of March 31, 2017 was a fixed rate of 3.12% on $46.3 million and a fixed rate of 2.98% on $128.8 million as a result of interest rate swaps (see Note 10), and a variable floating rate of 2.98% on $56.0 million . Our interest rate as of December 31, 2016 was a fixed rate of 3.12% on $45.0 million and 2.98% on $130.0 million as a result of interest rate swaps and a variable floating rate of 2.77% on approximately $150.0 million . Future Payments Future minimum principal payments on our long-term debt as of March 31, 2017 , are as follows (in thousands): Years Ending Future Minimum December 31 Principal Payments Remaining 2017 7,500 2018 19,498 2019 15,000 2020 17,500 2021 178,500 Total future minimum principal payments $ 237,998 |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | Derivatives General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of these risks by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative programs are classified as operating activities in the accompanying consolidated statements of cash flows. We formally document, designate and assess the effectiveness of transactions that receive hedge accounting initially and on an ongoing basis. Changes in the fair value of derivatives that qualify for hedge accounting treatment are recorded, net of applicable taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity in the accompanying consolidated balance sheets. For the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative. Interest Rate Risk. A portion of our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Second Amended Credit Agreement that is solely due to changes in the benchmark interest rate. Derivatives Designated as Cash Flow Hedges On December 19, 2012, we entered into a pay-fixed, receive-variable interest rate swap having an initial notional amount of $150 million with Wells Fargo to fix the one-month LIBOR rate at 0.98% . The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). The interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid, on a monthly basis. The notional amount of the interest rate swap is reduced quarterly by 50% of the minimum principal payment due under the terms of our Second Amended Credit Agreement. The interest rate swap is scheduled to expire on December 19, 2017. On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap having an initial notional amount of $42.5 million with Wells Fargo to fix the one-month LIBOR rate at 1.12% . The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The notional amount of the interest rate swap increases quarterly by an amount equal to the decrease of the hedge entered into on December 19, 2012, up to the amount of $175.0 million . The interest rate swap is scheduled to expire on July 6, 2021. At March 31, 2017 and 2016 , our interest rate swaps qualified as cash flow hedges. The fair value of our interest rate swaps at March 31, 2017 was an asset of approximately $5.4 million , which was partially offset by approximately $2.1 million in deferred taxes. The fair value of our interest rate swap at December 31, 2016 was an asset of approximately $5.0 million , which was offset by approximately $1.9 million in deferred taxes. Foreign Currency Risk . We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Euros, British Pounds, Chinese Yuan Renminbi, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Singapore Dollars, Japanese Yen, Korean Won, and Danish Krone. Our consolidated financial statements are denominated in, and our principal currency is, the U.S. Dollar. We do not use derivative financial instruments for trading or speculative purposes. We are not subject to any credit risk contingent features related to our derivative contracts, and counterparty risk is managed by allocating derivative contracts among several major financial institutions. Derivatives Designated as Cash Flow Hedges For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded from the assessment of effectiveness, are recognized in earnings during the current period. We enter into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies. We enter into approximately 100 cash flow foreign currency hedges every month. As of March 31, 2017, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with the following notional amounts (in thousands and in local currencies): Currency Symbol Forward Notional Amount Euro EUR 9,635 Swiss Franc CHF 1,568 Danish Krone DKK 9,895 British Pound GBP 3,600 Mexican Peso MXN 88,825 Swedish Krona SEK 15,100 Derivatives Not Designated as Cash Flow Hedges We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 20 foreign currency fair value hedges every month. As of March 31, 2017 , we had entered into foreign currency forward contracts related to those balance sheet accounts with the following notional amounts (in thousands and in local currencies): Currency Symbol Forward Notional Amount Euro EUR 23,215 British Pound GBP 824 Chinese Yuan Renminbi CNY 40,300 Mexican Peso MXN 14,374 Brazilian Real BRL 3,700 Australian Dollar AUD 4,742 Hong Kong Dollar HKD 11,000 Swiss Franc CHF 240 Swedish Krona SEK 3,561 Canadian Dollar CAD 1,320 Singapore Dollar SGD 3,900 Japanese Yen JPY 106,000 South Korean Won KRW 1,500,000 Balance Sheet Presentation of Derivatives. As of March 31, 2017 and December 31, 2016, all derivatives, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded gross at fair value on our consolidated balance sheets. We are not subject to any master netting agreements. The fair value of derivative instruments on a gross basis is as follows (in thousands): As of March 31, 2017 As of December 31, 2016 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives designated as hedging instruments Assets Interest rate swaps Prepaid expenses and other assets (current) $ 334 N/A Interest rate swaps Other assets (long-term) 5,042 Other assets (long-term) $ 4,991 Foreign currency forward contracts Prepaid expenses and other assets (current) 298 Prepaid expenses and other assets 116 Foreign currency forward contracts Other assets (long-term) 88 Other assets (long-term) 18 (Liabilities) Foreign currency forward contracts Accrued Expenses (current) $ (119 ) Accrued Expenses $ (275 ) Foreign currency forward contracts Other long-term obligations (17 ) Other long-term obligations (18 ) Derivatives not designated as hedging instruments Assets Foreign currency forward contracts Prepaid expenses and other assets (current) $ 134 Prepaid expenses and other assets (current) $ 220 (Liabilities) Foreign currency forward contracts Accrued Expenses (current) (340 ) Accrued Expenses (current) (171 ) Income Statement Presentation of Derivatives Derivatives Designated as Cash Flow Hedges Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income and net earnings in our consolidated statements of earnings, consolidated statements of comprehensive income and consolidated balance sheets (in thousands): Amount of Gain/(Loss) recognized in OCI Amount of Gain/(Loss) reclassified from AOCI Three months ended March 31, Three months ended March 31, 2017 2016 2017 2016 Derivative instrument Location in statements of income Interest rate swaps $ 385 $ (729 ) Interest Expense $ (104 ) $ (245 ) Foreign currency forward contracts 388 — Revenue 1 — Cost of goods sold (65 ) — The net amount recognized in earnings during the three months ended March 31, 2017 and 2016 due to ineffectiveness and amounts excluded from the assessment of hedge effectiveness were not significant. As of March 31, 2017, approximately $156,000 , or $95,000 after taxes, was expected to be reclassified from accumulated other comprehensive income to earnings in revenue and cost of sales over the succeeding twelve months. As of March 31, 2017, approximately $ 334,000 , or $204,000 after taxes, was expected to be reclassified from accumulated other comprehensive income to earnings in interest expense over the succeeding twelve months. Derivatives Not Designated as Hedging Instruments The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands): Three months ended March 31, 2017 2016 Derivative Instrument Location in statements of income Foreign currency forward contracts Other (expense) $ (858 ) $ (343 ) See Note 11 for more information about our derivatives. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements. Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of March 31, 2017 and December 31, 2016 , consisted of the following (in thousands): Fair Value Measurements Using Total Fair Quoted prices in Significant other Significant Value at active markets observable inputs Unobservable inputs Description March 31, 2017 (Level 1) (Level 2) (Level 3) Interest rate contracts (1) $ 5,376 $ — $ 5,376 $ — Foreign currency contract assets, current and long-term (2) $ 520 $ — $ 520 $ — Foreign currency contract liabilities, current and long-term (3) $ (476 ) $ — $ (476 ) $ — Fair Value Measurements Using Total Fair Quoted prices in Significant other Significant Value at active markets observable inputs Unobservable inputs Description December 31, 2016 (Level 1) (Level 2) (Level 3) Interest rate contracts (1) $ 4,991 $ — $ 4,991 $ — Foreign currency contracts, current and long-term (2) $ 354 $ — $ 354 $ — Foreign currency contract liabilities, current and long-term (3) $ (464 ) $ — $ (464 ) $ — (1) The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets (current) and other assets (long-term) in the consolidated balance sheets. (2) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets (current) and other assets (long-term) in the consolidated balance sheets. (3) The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses (current) or other long-term obligations in the consolidated balance sheets. Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue milestones. See Note 5 for further information regarding these acquisitions. The contingent consideration liability is re-measured at the estimated fair value at each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent consideration liability during the three-month periods ended March 31, 2017 and 2016 , consisted of the following (in thousands): Three Months Ended March 31, 2017 2016 Beginning balance $ 683 $ 1,024 Fair value adjustments recorded to income during the period 37 71 Contingent payments made (15 ) (167 ) Ending balance $ 705 $ 928 The recurring Level 3 measurement of our contingent consideration liabilities and contingent receivable includes the following significant unobservable inputs at March 31, 2017 and December 31, 2016 (amounts in thousands): Contingent consideration asset or liability Fair value at March 31, 2017 Valuation technique Unobservable inputs Range Revenue-based payments $ 705 Discounted cash flow Discount rate 9.9% - 15% contingent liability Probability of milestone payment 100% Projected year of payments 2017-2028 Contingent receivable $ 528 Discounted cash flow Discount rate 10% asset Probability of milestone payment 57% Projected year of payments 2017-2019 Contingent consideration asset or liability Fair value at December 31, 2016 Valuation technique Unobservable inputs Range Revenue-based payments $ 683 Discounted cash flow Discount rate 9.9% - 15% contingent liability Probability of milestone payment 100% Projected year of payments 2017-2028 Contingent receivable $ 528 Discounted cash flow Discount rate 10% asset Probability of milestone payment 57% Projected year of payments 2017-2019 The contingent consideration liabilities and contingent receivable are re-measured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement. A decrease in the probability of any milestone payment may result in lower fair value measurements. Our determination of the fair value of the contingent consideration liabilities and contingent receivable could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We record any such change in fair value to operating expenses in our consolidated statements of income. As of March 31, 2017, approximately $609,000 was included in other long-term obligations and $96,000 was included in accrued expenses in our consolidated balance sheet. As of December 31, 2016, approximately $595,000 was included in other long-term obligations and $88,000 was included in accrued expenses in our consolidated balance sheet. The cash paid to settle the contingent consideration liability recognized at fair value as of the acquisition date (including measurement-period adjustments) has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. During the three-month periods ended March 31, 2017 and 2016 , we had losses of approximately $18,000 , and $0 , respectively, related to the measurement of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition. The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. The carrying amount of long-term debt approximates fair value, as determined by borrowing rates estimated to be available to us for debt with similar terms and conditions. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which are Level 1 inputs. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets. The changes in the carrying amount of goodwill for the three-month period ended March 31, 2017 were as follows (in thousands): 2017 Goodwill balance at January 1 $ 211,927 Effect of foreign exchange 372 Additions as the result of acquisitions 7,612 Goodwill balance at March 31 $ 219,911 As of March 31, 2017 , we had recorded $8.3 million of accumulated goodwill impairment charges. All of the goodwill balance as of March 31, 2017 and December 31, 2016 , is related to our cardiovascular segment. Other intangible assets at March 31, 2017 and December 31, 2016 , consisted of the following (in thousands): March 31, 2017 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents $ 14,780 $ (3,288 ) $ 11,492 Distribution agreements 6,626 (3,770 ) 2,856 License agreements 20,745 (3,745 ) 17,000 Trademarks 16,786 (3,658 ) 13,128 Covenants not to compete 1,028 (944 ) 84 Customer lists 23,670 (16,054 ) 7,616 Total $ 83,635 $ (31,459 ) $ 52,176 December 31, 2016 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents $ 14,130 $ (3,165 ) $ 10,965 Distribution agreements 6,626 (3,527 ) 3,099 License agreements 20,695 (3,422 ) 17,273 Trademarks 12,380 (3,330 ) 9,050 Covenants not to compete 1,028 (936 ) 92 Customer lists 22,261 (15,401 ) 6,860 Royalty agreements 267 (267 ) — Total $ 77,387 $ (30,048 ) $ 47,339 Aggregate amortization expense for the three-month periods ended March 31, 2017 and 2016 was approximately $6.2 million and $3.9 million respectively. Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of March 31, 2017 (in thousands): Year Ending December 31 Remaining 2017 $ 18,457 2018 24,063 2019 23,702 2020 22,619 2021 16,172 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies. In the ordinary course of business, we are involved in various claims and litigation matters. These claims and litigation matters may include actions involving product liability, intellectual property, contractual, and employment matters. We do not believe that any such actions are likely to be, individually or in the aggregate, material to our business, financial condition, results of operations or liquidity. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs for these matters such as outside counsel fees and expenses are charged to expense in the period incurred. In October 2016, we received a subpoena from the U.S. Department of Justice seeking information on certain of our marketing and promotional practices. We are in the process of responding to the subpoena, which we anticipate will continue during 2017. We have incurred, and anticipate that we will continue to incur, substantial costs in connection with the matter. We incurred approximately $4.8 million and $1.0 million in expenses in the three-month periods ended March 31, 2017 and December 31, 2016, respectively, responding to the inquiry from the U.S. Department of Justice. We expect that these expenses will be in a similar range in subsequent quarters and may potentially be higher, depending on the progress of the investigation and other factors beyond our control. The investigation is ongoing and at this stage we are unable to predict its scope, duration or outcome. Investigations such as this may result in the imposition of, among other things, significant damages, injunctions, fines or civil or criminal claims or penalties against our company or individuals. In the event of unexpected further developments, it is possible that the ultimate resolution of any of the foregoing matters, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred. |
Issuance of Common Stock
Issuance of Common Stock | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Issuance of Common Stock | Issuance of Common Stock . On March 28, 2017, we closed a public offering of 5,175,000 shares of Common Stock and received proceeds of approximately $136.5 million , which is net of approximately $8.8 million in underwriting discounts and commissions and approximately $833,000 in other direct cost incurred and paid by us in connection with this equity offering. The net proceeds from the offering were used primarily to repay outstanding indebtedness under our Second Amended Credit Agreement (including our term loan and revolving credit loans). |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three-month periods ended March 31, 2017 and 2016 are not audited. Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2017 and December 31, 2016 , and our results of operations and cash flows for the three-month periods ended March 31, 2017 and 2016 . The results of operations for the three-month periods ended March 31, 2017 and 2016 are not necessarily indicative of the results for a full-year period. These interim consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K (the "2016 Form 10-K") for the year ended December 31, 2016 , which was filed with the Securities and Exchange Commission (the "SEC") on March 1, 2017. |
Derivatives | General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of these risks by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative programs are classified as operating activities in the accompanying consolidated statements of cash flows. We formally document, designate and assess the effectiveness of transactions that receive hedge accounting initially and on an ongoing basis. Changes in the fair value of derivatives that qualify for hedge accounting treatment are recorded, net of applicable taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity in the accompanying consolidated balance sheets. For the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative. Interest Rate Risk. A portion of our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Second Amended Credit Agreement that is solely due to changes in the benchmark interest rate. Derivatives Designated as Cash Flow Hedges On December 19, 2012, we entered into a pay-fixed, receive-variable interest rate swap having an initial notional amount of $150 million with Wells Fargo to fix the one-month LIBOR rate at 0.98% . The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). The interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid, on a monthly basis. The notional amount of the interest rate swap is reduced quarterly by 50% of the minimum principal payment due under the terms of our Second Amended Credit Agreement. The interest rate swap is scheduled to expire on December 19, 2017. On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap having an initial notional amount of $42.5 million with Wells Fargo to fix the one-month LIBOR rate at 1.12% . The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The notional amount of the interest rate swap increases quarterly by an amount equal to the decrease of the hedge entered into on December 19, 2012, up to the amount of $175.0 million . The interest rate swap is scheduled to expire on July 6, 2021. At March 31, 2017 and 2016 , our interest rate swaps qualified as cash flow hedges. The fair value of our interest rate swaps at March 31, 2017 was an asset of approximately $5.4 million , which was partially offset by approximately $2.1 million in deferred taxes. The fair value of our interest rate swap at December 31, 2016 was an asset of approximately $5.0 million , which was offset by approximately $1.9 million in deferred taxes. Foreign Currency Risk . We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Euros, British Pounds, Chinese Yuan Renminbi, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Singapore Dollars, Japanese Yen, Korean Won, and Danish Krone. Our consolidated financial statements are denominated in, and our principal currency is, the U.S. Dollar. We do not use derivative financial instruments for trading or speculative purposes. We are not subject to any credit risk contingent features related to our derivative contracts, and counterparty risk is managed by allocating derivative contracts among several major financial institutions. Derivatives Designated as Cash Flow Hedges For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded from the assessment of effectiveness, are recognized in earnings during the current period. We enter into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories at March 31, 2017 and December 31, 2016 consisted of the following (in thousands): March 31, December 31, 2017 2016 Finished goods $ 69,130 $ 63,852 Work-in-process 15,724 11,008 Raw materials 49,456 45,835 Total $ 134,310 $ 120,695 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Stock-based compensation expense before income tax expense for the three-month periods ended March 31, 2017 and 2016 , consisted of the following (in thousands): Three Months Ended March 31, 2017 2016 Cost of goods sold $ 96 $ 123 Research and development 52 42 Selling, general, and administrative 429 459 Stock-based compensation expense before taxes $ 577 $ 624 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | In applying the Black-Scholes methodology to the options granted during the three-month period ended March 31, 2016 , the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below: Three months ended March 31, 2016 Risk-free interest rate 1.4% Expected option life 5.0 years Expected dividend yield —% Expected price volatility 37.06% |
Earnings Per Common Share (EP25
Earnings Per Common Share (EPS) (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the following periods consisted of the following (in thousands, except per share amounts): Net Income Shares Per Share Amount Three-month period ended March 31, 2017: Basic EPS $ 14,803 44,830 $ 0.33 Effect of dilutive stock options and warrants 990 Diluted EPS $ 14,803 45,820 $ 0.32 Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive 96 Three-month period ended March 31, 2016: Basic EPS $ 4,351 44,275 $ 0.10 Effect of dilutive stock options and warrants 304 Diluted EPS $ 4,351 44,579 $ 0.10 Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive 978 |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on estimated fair values, as follows (in thousands): Assets Acquired Trade receivables $ 4,054 Other receivables 6 Inventories 8,585 Prepaid expenses 630 Property and equipment 1,630 Other long-term assets 145 Intangibles Developed technology 67,600 Customer lists 2,400 Trademarks 4,400 Goodwill 24,818 Total assets acquired 114,268 Liabilities Assumed Trade payables (1,790 ) Accrued expenses (5,298 ) Deferred income tax liabilities - current (701 ) Deferred income tax liabilities - noncurrent (10,844 ) Total liabilities assumed (18,633 ) Net assets acquired, net of cash received of $1,327 $ 95,635 The purchase price was preliminarily allocated as follows (in thousands): Assets Acquired Trade receivables $ 952 Inventories 2,244 Prepaid expenses and other current assets 181 Property and equipment 1,472 Intangibles Developed technology 22,900 Customer lists 100 Trademarks 2,900 Goodwill 7,612 Total assets acquired 38,361 Liabilities Assumed Trade payables (338 ) Accrued expenses (23 ) Total liabilities assumed (361 ) Net assets acquired $ 38,000 The purchase price was allocated as follows (in thousands): Assets Acquired Inventories $ 2,455 Property and equipment 290 Intangibles Developed technology 12,100 Trademarks 700 Customers Lists 400 Goodwill 2,555 Total assets acquired $ 18,500 The following table summarizes the preliminary purchase price allocated to the net tangible and intangible assets acquired and liabilities assumed (in thousands): Assets Acquired Cash and cash equivalents $ 1,436 Trade receivables 8,351 Inventories 12,217 Prepaid expenses 1,275 Property and equipment 2,667 Deferred tax assets 184 Intangibles Developed technology 2,600 Customer lists 1,300 Trademarks 1,500 Total assets acquired 31,530 Liabilities Assumed Trade payables (2,306 ) Accrued expenses (5,083 ) Income taxes payable (2 ) Deferred income tax liabilities (999 ) Total liabilities assumed (8,390 ) Total net assets acquired 23,140 Gain on bargain purchase (12,243 ) Total purchase price $ 10,897 |
Business Acquisition, Pro Forma Information | The following table summarizes our consolidated results of operations for the three-month periods ended March 31, 2017 and 2016, as well as unaudited pro forma consolidated results of operations as though the DFINE acquisition had occurred on January 1, 2015 and the acquisition of the Argon critical care business had occurred on January 1, 2016 (in thousands, except per share amounts): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 As Reported Pro Forma As Reported Pro Forma Net Sales $ 171,069 $ 173,829 $ 138,077 $ 156,390 Net Income 14,803 1,725 4,351 12,281 Earnings per common share: Basic $ 0.33 $ 0.04 $ 0.10 $ 0.28 Diluted $ 0.32 $ 0.04 $ 0.10 $ 0.28 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three-month periods ended March 31, 2017 , and 2016 , are as follows (in thousands): Three Months Ended March 31, 2017 2016 Net Sales Cardiovascular $ 164,787 $ 132,544 Endoscopy 6,282 5,533 Total net sales 171,069 138,077 Operating income Cardiovascular 4,004 6,648 Endoscopy 1,605 1,058 Total operating income 5,609 7,706 |
Revolving Credit Facility and28
Revolving Credit Facility and Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | Our outstanding debt obligations as of March 31, 2017 and December 31, 2016 , consisted of the following (in thousands): March 31, 2017 December 31, 2016 2016 Term loan $ 92,500 $ 145,000 2016 Revolving credit loans 138,500 180,000 2017 Debt facility 6,998 — Less debt issuance costs (592 ) (627 ) Total long-term debt 237,406 324,373 Less current portion 16,998 10,000 Long-term portion $ 220,408 $ 314,373 |
Schedule of Long-term Debt Covenants | The Second Amended Credit Agreement requires that we maintain certain financial covenants, as follows: Covenant Requirement Consolidated Total Leverage Ratio (1) Through March 31, 2017 4.5 to 1.0 April 1, 2017 through June 30, 2017 4.0 to 1.0 July 1, 2017 through December 31, 2017 3.75 to 1.0 January 1, 2018 through March 31, 2018 3.5 to 1.0 April 1, 2018 and thereafter 3.25 to 1.0 Consolidated EBITDA (2) 1.25 to 1.0 Consolidated Net Income (3) $0 Facility Capital Expenditures (4) $30 million (1) Maximum Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) as of any fiscal quarter end. (2) Minimum ratio of Consolidated EBITDA (as defined in the Second Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Fixed Charges (as defined in the Second Amended Credit Agreement) for any period of four consecutive fiscal quarters. (3) Minimum level of Consolidated Net Income (as defined in the Second Amended Credit Agreement) for certain periods, and subject to certain adjustments. (4) Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Second Amended Credit Agreement) in any fiscal year. |
Schedule of Maturities of Long-term Debt | Future minimum principal payments on our long-term debt as of March 31, 2017 , are as follows (in thousands): Years Ending Future Minimum December 31 Principal Payments Remaining 2017 7,500 2018 19,498 2019 15,000 2020 17,500 2021 178,500 Total future minimum principal payments $ 237,998 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Notional Amounts of Outstanding Derivative Positions | We enter into approximately 100 cash flow foreign currency hedges every month. As of March 31, 2017, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with the following notional amounts (in thousands and in local currencies): Currency Symbol Forward Notional Amount Euro EUR 9,635 Swiss Franc CHF 1,568 Danish Krone DKK 9,895 British Pound GBP 3,600 Mexican Peso MXN 88,825 Swedish Krona SEK 15,100 We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 20 foreign currency fair value hedges every month. As of March 31, 2017 , we had entered into foreign currency forward contracts related to those balance sheet accounts with the following notional amounts (in thousands and in local currencies): Currency Symbol Forward Notional Amount Euro EUR 23,215 British Pound GBP 824 Chinese Yuan Renminbi CNY 40,300 Mexican Peso MXN 14,374 Brazilian Real BRL 3,700 Australian Dollar AUD 4,742 Hong Kong Dollar HKD 11,000 Swiss Franc CHF 240 Swedish Krona SEK 3,561 Canadian Dollar CAD 1,320 Singapore Dollar SGD 3,900 Japanese Yen JPY 106,000 South Korean Won KRW 1,500,000 |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair value of derivative instruments on a gross basis is as follows (in thousands): As of March 31, 2017 As of December 31, 2016 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives designated as hedging instruments Assets Interest rate swaps Prepaid expenses and other assets (current) $ 334 N/A Interest rate swaps Other assets (long-term) 5,042 Other assets (long-term) $ 4,991 Foreign currency forward contracts Prepaid expenses and other assets (current) 298 Prepaid expenses and other assets 116 Foreign currency forward contracts Other assets (long-term) 88 Other assets (long-term) 18 (Liabilities) Foreign currency forward contracts Accrued Expenses (current) $ (119 ) Accrued Expenses $ (275 ) Foreign currency forward contracts Other long-term obligations (17 ) Other long-term obligations (18 ) Derivatives not designated as hedging instruments Assets Foreign currency forward contracts Prepaid expenses and other assets (current) $ 134 Prepaid expenses and other assets (current) $ 220 (Liabilities) Foreign currency forward contracts Accrued Expenses (current) (340 ) Accrued Expenses (current) (171 ) |
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) | Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income and net earnings in our consolidated statements of earnings, consolidated statements of comprehensive income and consolidated balance sheets (in thousands): Amount of Gain/(Loss) recognized in OCI Amount of Gain/(Loss) reclassified from AOCI Three months ended March 31, Three months ended March 31, 2017 2016 2017 2016 Derivative instrument Location in statements of income Interest rate swaps $ 385 $ (729 ) Interest Expense $ (104 ) $ (245 ) Foreign currency forward contracts 388 — Revenue 1 — Cost of goods sold (65 ) — |
Derivative Instruments, Gain (Loss) | The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands): Three months ended March 31, 2017 2016 Derivative Instrument Location in statements of income Foreign currency forward contracts Other (expense) $ (858 ) $ (343 ) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of March 31, 2017 and December 31, 2016 , consisted of the following (in thousands): Fair Value Measurements Using Total Fair Quoted prices in Significant other Significant Value at active markets observable inputs Unobservable inputs Description March 31, 2017 (Level 1) (Level 2) (Level 3) Interest rate contracts (1) $ 5,376 $ — $ 5,376 $ — Foreign currency contract assets, current and long-term (2) $ 520 $ — $ 520 $ — Foreign currency contract liabilities, current and long-term (3) $ (476 ) $ — $ (476 ) $ — Fair Value Measurements Using Total Fair Quoted prices in Significant other Significant Value at active markets observable inputs Unobservable inputs Description December 31, 2016 (Level 1) (Level 2) (Level 3) Interest rate contracts (1) $ 4,991 $ — $ 4,991 $ — Foreign currency contracts, current and long-term (2) $ 354 $ — $ 354 $ — Foreign currency contract liabilities, current and long-term (3) $ (464 ) $ — $ (464 ) $ — (1) The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets (current) and other assets (long-term) in the consolidated balance sheets. (2) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets (current) and other assets (long-term) in the consolidated balance sheets. (3) The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses (current) or other long-term obligations in the consolidated balance sheets. |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | Changes in the fair value of our contingent consideration liability during the three-month periods ended March 31, 2017 and 2016 , consisted of the following (in thousands): Three Months Ended March 31, 2017 2016 Beginning balance $ 683 $ 1,024 Fair value adjustments recorded to income during the period 37 71 Contingent payments made (15 ) (167 ) Ending balance $ 705 $ 928 |
Fair Value Inputs, Liabilities, Quantitative Information | The recurring Level 3 measurement of our contingent consideration liabilities and contingent receivable includes the following significant unobservable inputs at March 31, 2017 and December 31, 2016 (amounts in thousands): Contingent consideration asset or liability Fair value at March 31, 2017 Valuation technique Unobservable inputs Range Revenue-based payments $ 705 Discounted cash flow Discount rate 9.9% - 15% contingent liability Probability of milestone payment 100% Projected year of payments 2017-2028 Contingent receivable $ 528 Discounted cash flow Discount rate 10% asset Probability of milestone payment 57% Projected year of payments 2017-2019 Contingent consideration asset or liability Fair value at December 31, 2016 Valuation technique Unobservable inputs Range Revenue-based payments $ 683 Discounted cash flow Discount rate 9.9% - 15% contingent liability Probability of milestone payment 100% Projected year of payments 2017-2028 Contingent receivable $ 528 Discounted cash flow Discount rate 10% asset Probability of milestone payment 57% Projected year of payments 2017-2019 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes in carrying amount of goodwill | The changes in the carrying amount of goodwill for the three-month period ended March 31, 2017 were as follows (in thousands): 2017 Goodwill balance at January 1 $ 211,927 Effect of foreign exchange 372 Additions as the result of acquisitions 7,612 Goodwill balance at March 31 $ 219,911 |
Other intangible assets | Other intangible assets at March 31, 2017 and December 31, 2016 , consisted of the following (in thousands): March 31, 2017 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents $ 14,780 $ (3,288 ) $ 11,492 Distribution agreements 6,626 (3,770 ) 2,856 License agreements 20,745 (3,745 ) 17,000 Trademarks 16,786 (3,658 ) 13,128 Covenants not to compete 1,028 (944 ) 84 Customer lists 23,670 (16,054 ) 7,616 Total $ 83,635 $ (31,459 ) $ 52,176 December 31, 2016 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents $ 14,130 $ (3,165 ) $ 10,965 Distribution agreements 6,626 (3,527 ) 3,099 License agreements 20,695 (3,422 ) 17,273 Trademarks 12,380 (3,330 ) 9,050 Covenants not to compete 1,028 (936 ) 92 Customer lists 22,261 (15,401 ) 6,860 Royalty agreements 267 (267 ) — Total $ 77,387 $ (30,048 ) $ 47,339 |
Estimated amortization expense | Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of March 31, 2017 (in thousands): Year Ending December 31 Remaining 2017 $ 18,457 2018 24,063 2019 23,702 2020 22,619 2021 16,172 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 69,130 | $ 63,852 |
Work-in-process | 15,724 | 11,008 |
Raw materials | 49,456 | 45,835 |
Total | $ 134,310 | $ 120,695 |
Stock Based Compensation - Narr
Stock Based Compensation - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Compensation cost not yet recognized | $ 7.2 | |
Compensation cost not yet recognized, period of recognition | 3 years 2 months 9 days | |
Options granted in period (in shares) | 563,500 |
Stock Based Compensation - Allo
Stock Based Compensation - Allocation of Recognized Period Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation | $ 577 | $ 624 |
Cost of goods sold | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation | 96 | 123 |
Research and development | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation | 52 | 42 |
Selling, general, and administrative | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation | $ 429 | $ 459 |
Stock Based Compensation - Fair
Stock Based Compensation - Fair Value Calculation Assumptions (Details) | 3 Months Ended |
Mar. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Risk-free interest rate | 1.40% |
Expected option life | 5 years |
Expected dividend yield | 0.00% |
Expected price volatility | 37.06% |
Earnings Per Common Share (EP36
Earnings Per Common Share (EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Net income, basic | $ 14,803 | $ 4,351 |
Basic (in shares) | 44,830 | 44,275 |
Basic (in dollars per share) | $ 0.33 | $ 0.10 |
Effect of dilutive stock options and warrants (in shares) | 990 | 304 |
Net income, diluted | $ 14,803 | $ 4,351 |
Diluted (in shares) | 45,820 | 44,579 |
Diluted (in dollars per share) | $ 0.32 | $ 0.10 |
Antidilutive securities excluded from EPS (in shares) | 96 | 978 |
Acquisitions - Narrative (Detai
Acquisitions - Narrative (Details) - USD ($) | Jan. 31, 2017 | Jul. 06, 2016 | Feb. 04, 2016 | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2016 |
Business Acquisition [Line Items] | |||||||
Payments to acquire intangible assets | $ 668,000 | $ 482,000 | |||||
Goodwill acquired | 7,612,000 | ||||||
Argon Medical Devices, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Total purchase price | $ 10,897,000 | ||||||
Net sales related to acquisition | 7,200,000 | ||||||
Weighted average useful life | 5 years 11 months 15 days | ||||||
Catheter Connections, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Total purchase price | $ 38,000,000 | ||||||
Net sales related to acquisition | 1,800,000 | ||||||
Weighted average useful life | 11 years 10 months | ||||||
DFINE, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Total purchase price | $ 97,500,000 | ||||||
Net sales related to acquisition | $ 13,500,000 | ||||||
Trade receivables acquired, gross | 4,300,000 | ||||||
Trade receivables, expected to be uncollectible | $ (224,000) | ||||||
Weighted average useful life | 14 years 10 months | ||||||
Consideration paid related to net working capital adjustment | $ 578,000 | ||||||
Reduction of purchase price | $ 1,100,000 | ||||||
Measurement period adjustment, reduction in inventories | 89,000 | ||||||
Measurement period adjustment, reduction in property and equipment | 109,000 | ||||||
Measurement period adjustment, reduction in goodwill | 1,200,000 | ||||||
Measurement period adjustment, reduction in accrued expenses | 407,000 | ||||||
Measurement period adjustment, increase in deferred tax liabilities | (113,000) | ||||||
HeRO®Graft | |||||||
Business Acquisition [Line Items] | |||||||
Total purchase price | $ 18,500,000 | ||||||
Weighted average useful life | 9 years 9 months 25 days | ||||||
Income since acquisition date | 7,100,000 | ||||||
Developed technology | |||||||
Business Acquisition [Line Items] | |||||||
Intangible Assets | 156,414,000 | $ 135,358,000 | 135,358,000 | ||||
Developed technology | Argon Medical Devices, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 7 years | ||||||
Developed technology | Catheter Connections, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 12 years | ||||||
Developed technology | DFINE, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 15 years | ||||||
Developed technology | HeRO®Graft | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 10 years | ||||||
Customer Lists | |||||||
Business Acquisition [Line Items] | |||||||
Intangible Assets | 7,616,000 | 6,860,000 | |||||
Customer Lists | Argon Medical Devices, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 5 years | ||||||
Customer Lists | Catheter Connections, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 8 years | ||||||
Customer Lists | DFINE, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 9 years | ||||||
Customer Lists | HeRO®Graft | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 12 years | ||||||
Trademarks | |||||||
Business Acquisition [Line Items] | |||||||
Intangible Assets | 13,128,000 | $ 9,050,000 | |||||
Trademarks | Argon Medical Devices, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 5 years | ||||||
Trademarks | Catheter Connections, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 10 years | ||||||
Trademarks | DFINE, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 15 years | ||||||
Trademarks | HeRO®Graft | |||||||
Business Acquisition [Line Items] | |||||||
Useful life | 5 years 6 months | ||||||
Cardiovascular Segment | Argon Medical Devices, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Acquisition-related costs | $ 1,100,000 | ||||||
Cardiovascular Segment | DFINE, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Acquisition-related costs | $ 1,600,000 |
Acquisitions - Purchase Price A
Acquisitions - Purchase Price Allocation (Argon Medical Devices, Inc.) (Details) - USD ($) $ in Thousands | Jan. 31, 2017 | Mar. 31, 2017 | Mar. 31, 2016 |
Business Acquisition [Line Items] | |||
Gain on bargain purchase | $ (12,243) | $ 0 | |
Argon Medical Devices, Inc. | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | 1,436 | ||
Trade receivables | 8,351 | ||
Inventories | 12,217 | ||
Prepaid expenses | 1,275 | ||
Property and equipment | 2,667 | ||
Deferred tax assets | 184 | ||
Total assets acquired | 31,530 | ||
Trade payables | (2,306) | ||
Accrued expenses | (5,083) | ||
Income taxes payable | (2) | ||
Deferred income tax liabilities - noncurrent | (999) | ||
Total liabilities assumed | 8,390 | ||
Total net assets acquired | 23,140 | ||
Gain on bargain purchase | (12,243) | ||
Total purchase price | $ 10,897 | ||
Developed technology | Argon Medical Devices, Inc. | |||
Business Acquisition [Line Items] | |||
Intangibles | 2,600 | ||
Customer Lists | Argon Medical Devices, Inc. | |||
Business Acquisition [Line Items] | |||
Intangibles | 1,300 | ||
Trademarks | Argon Medical Devices, Inc. | |||
Business Acquisition [Line Items] | |||
Intangibles | $ 1,500 |
Acquisitions - Purchase Price39
Acquisitions - Purchase Price Allocation (Catheter Connections, Inc.) (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Business Acquisition [Line Items] | ||
Goodwill | $ 219,911 | $ 211,927 |
Catheter Connections, Inc. | ||
Business Acquisition [Line Items] | ||
Trade receivables | 952 | |
Inventories | 2,244 | |
Prepaid expenses | 181 | |
Property and equipment | 1,472 | |
Goodwill | 7,612 | |
Total assets acquired | 38,361 | |
Trade payables | (338) | |
Accrued expenses | (23) | |
Total liabilities assumed | 361 | |
Net assets acquired, net of cash received of $1,327 | 38,000 | |
Developed technology | Catheter Connections, Inc. | ||
Business Acquisition [Line Items] | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 22,900 | |
Customer Lists | Catheter Connections, Inc. | ||
Business Acquisition [Line Items] | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 100 | |
Trademarks | Catheter Connections, Inc. | ||
Business Acquisition [Line Items] | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | $ 2,900 |
Acquisitions - Purchase Price40
Acquisitions - Purchase Price Allocation (DFINE Inc. and HeRO Graft) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Dec. 31, 2016 | Mar. 31, 2017 | Feb. 04, 2016 | |
Assets Acquired | |||
Goodwill | $ 211,927 | $ 219,911 | |
HeRO®Graft | |||
Assets Acquired | |||
Inventories | $ 2,455 | ||
Property and equipment | 290 | ||
Goodwill | 2,555 | ||
Total assets acquired | 18,500 | ||
DFINE, Inc. | |||
Assets Acquired | |||
Trade receivables | 4,054 | ||
Other receivables | 6 | ||
Inventories | 8,585 | ||
Prepaid expenses | 630 | ||
Property and equipment | 1,630 | ||
Other long-term assets | 145 | ||
Goodwill | 24,818 | ||
Total assets acquired | 114,268 | ||
Liabilities Assumed | |||
Trade payables | (1,790) | ||
Accrued expenses | (5,298) | ||
Deferred income tax liabilities - current | (701) | ||
Deferred income tax liabilities - noncurrent | (10,844) | ||
Total liabilities assumed | (18,633) | ||
Net assets acquired, net of cash received of $1,327 | 95,635 | ||
Cash received | 1,327 | ||
Developed technology | HeRO®Graft | |||
Assets Acquired | |||
Intangibles | 12,100 | ||
Developed technology | DFINE, Inc. | |||
Assets Acquired | |||
Intangibles | 67,600 | ||
Customer lists | HeRO®Graft | |||
Assets Acquired | |||
Intangibles | 400 | ||
Customer lists | DFINE, Inc. | |||
Assets Acquired | |||
Intangibles | 2,400 | ||
Trademarks | HeRO®Graft | |||
Assets Acquired | |||
Intangibles | $ 700 | ||
Trademarks | DFINE, Inc. | |||
Assets Acquired | |||
Intangibles | $ 4,400 |
Acquisitions - Summary of Unaud
Acquisitions - Summary of Unaudited Consolidated Results of Operations, Including Proforma Results (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
As Reported | ||
Net Sales | $ 171,069 | $ 138,077 |
Net income | $ 14,803 | $ 4,351 |
Basic (in dollars per share) | $ 0.33 | $ 0.10 |
Diluted (in dollars per share) | $ 0.32 | $ 0.10 |
Pro Forma | ||
Net Sales, Pro Forma | $ 173,829 | $ 156,390 |
Net Income, Pro Forma | $ 1,725 | $ 12,281 |
Basic, Pro Forma (in dollars per share) | $ 0.04 | $ 0.28 |
Diluted, Pro Forma (in dollars per share) | $ 0.04 | $ 0.28 |
Segment Reporting - Operating I
Segment Reporting - Operating Income (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017USD ($)segment | Mar. 31, 2016USD ($) | |
Segment Reporting [Abstract] | ||
Number of Operating Segments | segment | 2 | |
Segment Reporting Information [Line Items] | ||
Net Sales | $ 171,069 | $ 138,077 |
Operating income | 5,609 | 7,706 |
Cardiovascular Segment | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 164,787 | 132,544 |
Operating income | 4,004 | 6,648 |
Endoscopy Segment | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 6,282 | 5,533 |
Operating income | $ 1,605 | $ 1,058 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Overall effective tax rate | 4.50% | 26.30% |
Income tax expense | $ 690 | $ 1,555 |
Revolving Credit Facility and44
Revolving Credit Facility and Long-Term Debt - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2017 | Feb. 23, 2017 | Dec. 31, 2016 | Jul. 06, 2016 | |
Line of Credit Facility [Line Items] | ||||
2017 Debt facility | $ 6,998 | $ 7,000 | $ 0 | |
Variable rate on 2017 debt facility | 2.064% | |||
Outstanding borrowings | (237,998) | |||
Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Outstanding borrowings | $ (231,000) | |||
Maximum facility capital expenditures in the next 12 months | 30,000 | |||
Remaining borrowing capacity on line of credit | 136,500 | |||
Debt subject to fixed interest rate | $ 128,800 | $ 130,000 | ||
Variable Rate 1 | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Variable interest rate percent | 2.98222% | |||
Debt subject to variable interest rate | $ 56,000 | |||
Variable Rate 2 | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Variable interest rate percent | 2.77% | |||
Debt subject to variable interest rate | $ 150,000 | |||
Revolving Credit Facility | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Maximum borrowing capacity | $ 275,000 | |||
Interest rate increase if in event of default | 2.00% | |||
Term Loan | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Debt instrument, face amount | 150,000 | |||
Bridge Loan | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Maximum borrowing capacity | $ 25,000 | |||
Interest Rate Swap 1 | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Fixed interest rate percent | 3.115% | 3.115% | ||
Debt subject to fixed interest rate | $ 46,300 | $ 45,000 | ||
Interest Rate Swap 2 | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Fixed interest rate percent | 2.9825% | 2.9825% | ||
Minimum | Revolving Credit Facility | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Commitment fee percentage | 0.15% | |||
Maximum | Revolving Credit Facility | Credit Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Commitment fee percentage | 0.40% |
Revolving Credit Facility and45
Revolving Credit Facility and Long-Term Debt - Principal Balances under Long-term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Feb. 23, 2017 | Dec. 31, 2016 |
Line of Credit Facility [Line Items] | |||
Total long-term debt | $ 237,406 | $ 324,373 | |
2017 Debt facility | 6,998 | $ 7,000 | 0 |
Less debt issuance costs | (592) | (627) | |
Less current portion | 16,998 | 10,000 | |
Long-term portion | 220,408 | 314,373 | |
Term Loan | |||
Line of Credit Facility [Line Items] | |||
Total long-term debt | 92,500 | 145,000 | |
Revolving Credit Facility | |||
Line of Credit Facility [Line Items] | |||
Total long-term debt | $ 138,500 | $ 180,000 |
Revolving Credit Facility and46
Revolving Credit Facility and Long-Term Debt - Financial Covenants (Details) - Credit Agreement | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Debt Instrument [Line Items] | |
Consolidated EBITDA | $ 0 |
Consolidated Net Income | 0 |
Facility Capital Expenditures | $ 30,000,000 |
Through March 31, 2017 [Member] | |
Debt Instrument [Line Items] | |
Consolidated Total Leverage Ratio | 4.5 |
April 1, 2017 through June 30, 2017 [Member] | |
Debt Instrument [Line Items] | |
Consolidated Total Leverage Ratio | 4 |
July 1, 2017 through December 31, 2017 [Member] | |
Debt Instrument [Line Items] | |
Consolidated Total Leverage Ratio | 3.75 |
January 1, 2018 through March 31, 2018 [Member] | |
Debt Instrument [Line Items] | |
Consolidated Total Leverage Ratio | 3.5 |
April 1, 2018 and thereafter [Member] | |
Debt Instrument [Line Items] | |
Consolidated Total Leverage Ratio | 3.25 |
Revolving Credit Facility and47
Revolving Credit Facility and Long-Term Debt - Future Minimum Payments on Long-term Debt (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Debt Disclosure [Abstract] | |
Remaining 2,017 | $ 7,500 |
2,018 | 19,498 |
2,019 | 15,000 |
2,020 | 17,500 |
2,021 | 178,500 |
Total long-term debt | $ 237,998 |
Derivatives - Narrative (Detail
Derivatives - Narrative (Details) - USD ($) | Dec. 19, 2012 | Mar. 31, 2017 | Dec. 31, 2016 | Aug. 05, 2016 |
Derivative [Line Items] | ||||
Accumulated other comprehensive income (loss), interest rate swap, tax benefit | $ (1,941,000) | |||
Revenue and cost of sales | ||||
Derivative [Line Items] | ||||
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, gross | $ 156,000 | |||
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, net of tax | 95,000 | |||
Interest expense | ||||
Derivative [Line Items] | ||||
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, gross | 334,000 | |||
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, net of tax | 204,000 | |||
Interest rate swap | ||||
Derivative [Line Items] | ||||
Notional amount of derivative | $ 150,000,000 | $ 42,500,000 | ||
Fixed rate | 0.9825% | 1.12% | ||
Quarterly reduction of notional amount | 50.00% | |||
Accumulated other comprehensive income (loss), interest rate swap, tax benefit | $ (2,091,000) | |||
Interest rate swap | Maximum | ||||
Derivative [Line Items] | ||||
Notional amount of derivative | $ 175,000,000 |
Derivatives - Forward Notional
Derivatives - Forward Notional Contracts (Details) - Mar. 31, 2017 - Foreign currency forward contracts € in Thousands, ₩ in Thousands, ¥ in Thousands, ¥ in Thousands, £ in Thousands, SGD in Thousands, SFr in Thousands, SEK in Thousands, MXN in Thousands, HKD in Thousands, DKK in Thousands, CAD in Thousands, BRL in Thousands, AUD in Thousands | CNY (¥) | DKK | MXN | CHF (SFr) | KRW (₩) | GBP (£) | CAD | JPY (¥) | SGD | SEK | EUR (€) | HKD | BRL | AUD |
Not designated as hedging instrument | ||||||||||||||
Derivative [Line Items] | ||||||||||||||
Notional amount of derivative | ¥ 40,300 | MXN 14,374 | SFr 240 | ₩ 1,500,000 | £ 824 | CAD 1,320 | ¥ 106,000 | SGD 3,900 | SEK 3,561 | € 23,215 | HKD 11,000 | BRL 3,700 | AUD 4,742 | |
Derivatives designated as cash flow hedges | Designated as hedging instrument | ||||||||||||||
Derivative [Line Items] | ||||||||||||||
Notional amount of derivative | DKK 9,895 | MXN 88,825 | SFr 1,568 | £ 3,600 | SEK 15,100 | € 9,635 |
Derivatives - Fair Value of Der
Derivatives - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Designated as hedging instrument | Interest rate swap | ||
Derivatives, Fair Value [Line Items] | ||
Total Asset Derivatives | $ 5,376 | |
Designated as hedging instrument | Interest rate swap | Other Assets (current) | ||
Derivatives, Fair Value [Line Items] | ||
Total Asset Derivatives | 334 | |
Designated as hedging instrument | Interest rate swap | Other Assets (long-term) | ||
Derivatives, Fair Value [Line Items] | ||
Total Asset Derivatives | 5,042 | $ 4,991 |
Designated as hedging instrument | Foreign currency forward contracts | Other Assets (long-term) | ||
Derivatives, Fair Value [Line Items] | ||
Total Asset Derivatives | 88 | 18 |
Designated as hedging instrument | Foreign currency forward contracts | Prepaid expenses and other assets | ||
Derivatives, Fair Value [Line Items] | ||
Total Asset Derivatives | 298 | 116 |
Designated as hedging instrument | Foreign currency forward contracts | Accrued Expenses (current) | ||
Derivatives, Fair Value [Line Items] | ||
Total Liability Derivatives | (119) | (275) |
Designated as hedging instrument | Foreign currency forward contracts | Other Long-term Obligations | ||
Derivatives, Fair Value [Line Items] | ||
Total Liability Derivatives | (17) | (18) |
Not designated as hedging instrument | Foreign currency forward contracts | Prepaid expenses and other assets | ||
Derivatives, Fair Value [Line Items] | ||
Total Asset Derivatives | 134 | 220 |
Not designated as hedging instrument | Foreign currency forward contracts | Accrued Expenses (current) | ||
Derivatives, Fair Value [Line Items] | ||
Total Liability Derivatives | $ (340) | $ (171) |
Derivatives - Amount of Gain (L
Derivatives - Amount of Gain (Loss) Recognized in OCI and Income Statement (Details) - Derivatives designated as cash flow hedges - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Interest rate swap | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Amount of Gain/(Loss) recognized in OCI | $ 385 | $ (729) |
Interest rate swap | Interest Expense | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Amount of Gain/(Loss) reclassified from AOCI | (104) | (245) |
Foreign currency forward contracts | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Amount of Gain/(Loss) recognized in OCI | 0 | |
Foreign currency forward contracts | Revenue | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Amount of Gain/(Loss) recognized in OCI | 388 | |
Amount of Gain/(Loss) reclassified from AOCI | 1 | 0 |
Foreign currency forward contracts | Cost of goods sold | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Amount of Gain/(Loss) reclassified from AOCI | $ (65) | $ 0 |
Derivatives - Gain (Loss) in th
Derivatives - Gain (Loss) in the Consolidated Statements of Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Not designated as hedging instrument | Foreign currency forward contracts | Other expense | ||
Derivative [Line Items] | ||
Gain (loss) on derivative | $ (858) | $ (343) |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Assets and (Liabilities) Carried at Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate contracts | $ 0 | $ 0 |
Foreign currency contract liabilities, current and long-term | 0 | |
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value | 0 | |
Foreign currency contract liabilities, current and long-term | 0 | 0 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate contracts | 5,376 | 4,991 |
Foreign currency contract liabilities, current and long-term | (520) | (354) |
Foreign currency contract liabilities, current and long-term | (476) | (464) |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate contracts | 0 | 0 |
Foreign currency contract liabilities, current and long-term | 0 | |
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value | 0 | |
Foreign currency contract liabilities, current and long-term | 0 | 0 |
Estimate of Fair Value, Fair Value Disclosure | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate contracts | 5,376 | 4,991 |
Foreign currency contract liabilities, current and long-term | (520) | (354) |
Foreign currency contract liabilities, current and long-term | $ (476) | $ (464) |
Fair Value Measurements - Liabi
Fair Value Measurements - Liability Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - Contingent Consideration - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | $ 683 | $ 1,024 |
Fair value adjustments recorded to income during the period | 37 | 71 |
Contingent payments made | (15) | (167) |
Ending balance | $ 705 | $ 928 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value Inputs, Liabilities, Quantitative Information (Details) - Contingent Consideration - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Contingent consideration liability | $ 705,000 | $ 683,000 | $ 928,000 | $ 1,024,000 |
Revenue-based Payments | ||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Contingent consideration liability | $ 705,000 | $ 683,000 | ||
Revenue-based Payments | Discounted Cash Flow | Fair Value, Inputs, Level 3 | ||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Probability of milestone payment | 100.00% | 100.00% | ||
Revenue-based Payments | Minimum | Discounted Cash Flow | Fair Value, Inputs, Level 3 | ||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Discount rate | 9.90% | 9.90% | ||
Revenue-based Payments | Maximum | Discounted Cash Flow | Fair Value, Inputs, Level 3 | ||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Discount rate | 15.00% | 15.00% | ||
Other Payments | ||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Contingent consideration asset | $ 528,000 | $ 528,000 | ||
Other Payments | Discounted Cash Flow | Fair Value, Inputs, Level 3 | ||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||
Probability of milestone payment | 57.00% | 57.00% | ||
Discount rate | 10.00% | 10.00% |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impairment of other assets | $ 18 | $ 0 |
Other Long-term Obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | 609 | 595 |
Accrued Expenses (current) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | $ 96 | $ 88 |
Goodwill and Intangible Asset57
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Goodwill [Roll Forward] | |
Goodwill balance at January 1 | $ 211,927 |
Effect of foreign exchange | 372 |
Additions as the result of acquisitions | 7,612 |
Goodwill balance at March 31 | $ 219,911 |
Goodwill and Intangible Asset58
Goodwill and Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 |
Other | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | $ 83,635 | $ 77,387 | |
Accumulated Amortization | (31,459) | $ (30,048) | (30,048) |
Net Carrying Amount | 52,176 | $ 47,339 | 47,339 |
Patents | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 14,780 | 14,130 | |
Accumulated Amortization | (3,288) | (3,165) | |
Net Carrying Amount | 11,492 | 10,965 | |
Distribution agreements | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 6,626 | 6,626 | |
Accumulated Amortization | (3,770) | (3,527) | |
Net Carrying Amount | 2,856 | 3,099 | |
License agreements | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 20,745 | 20,695 | |
Accumulated Amortization | (3,745) | (3,422) | |
Net Carrying Amount | 17,000 | 17,273 | |
Trademarks | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 16,786 | 12,380 | |
Accumulated Amortization | (3,658) | (3,330) | |
Net Carrying Amount | 13,128 | 9,050 | |
Covenants not to compete | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 1,028 | 1,028 | |
Accumulated Amortization | (944) | (936) | |
Net Carrying Amount | 84 | 92 | |
Customer lists | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 23,670 | 22,261 | |
Accumulated Amortization | (16,054) | (15,401) | |
Net Carrying Amount | $ 7,616 | 6,860 | |
Royalty agreements | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 267 | ||
Accumulated Amortization | (267) | ||
Net Carrying Amount | $ 0 |
Goodwill and Intangible Asset59
Goodwill and Intangible Assets - Future Amortization Expense (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remaining 2,017 | $ 18,457 |
2,018 | 24,063 |
2,019 | 23,702 |
2,020 | 22,619 |
2,021 | $ 16,172 |
Goodwill and Intangible Asset60
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||
Aggregate amortization expense | $ 6.2 | $ 3.9 |
Cardiovascular Segment | ||
Finite-Lived Intangible Assets [Line Items] | ||
Accumulated impairment loss | $ 8.3 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Legal Fees In Responding to Department Of Justice Inquiry | $ 4.8 | $ 1 |
Issuance of Common Stock (Detai
Issuance of Common Stock (Details) - USD ($) | Mar. 28, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Equity [Abstract] | ||||
Common stock shares issued (in shares) | 5,175,000 | 49,891,000 | 44,645,000 | |
Proceeds from issuance of common stock | $ 136,500,000 | $ 138,569,000 | $ 557,000 | |
Underwriting discounts and commissions | 8,800,000 | |||
Other direct costs incurred | $ 833,000 | $ 833,000 | $ 0 |