Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 01, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NATUS MEDICAL INC | |
Entity Central Index Key | 878,526 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 33,440,032 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 54,908 | $ 88,950 |
Accounts receivable, net of allowance for doubtful accounts of $6,575 in 2018 and $8,978 in 2017 | 122,971 | 126,809 |
Inventories | 76,630 | 71,529 |
Prepaid expenses and other current assets | 32,224 | 18,340 |
Total current assets | 286,733 | 305,628 |
Property and equipment, net | 21,645 | 22,071 |
Intangible assets, net | 162,559 | 172,582 |
Goodwill | 163,550 | 172,998 |
Deferred income tax | 10,296 | 10,709 |
Other assets | 18,855 | 25,931 |
Total assets | 663,638 | 709,919 |
Current liabilities: | ||
Accounts payable | 24,053 | 25,242 |
Accrued liabilities | 54,874 | 51,738 |
Deferred revenue | 16,892 | 15,157 |
Total current liabilities | 95,819 | 92,137 |
Long-term liabilities: | ||
Other liabilities | 21,970 | 21,995 |
Long-term debt, net | 119,379 | 154,283 |
Deferred income tax | 18,936 | 19,407 |
Total liabilities | 256,104 | 287,822 |
Stockholders’ equity: | ||
Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding 33,590,337 in 2018 and 33,134,101 in 2017 | 321,295 | 316,577 |
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding in 2018 and 2017 | 0 | 0 |
Retained earnings | 119,470 | 129,115 |
Accumulated other comprehensive loss | (33,231) | (23,595) |
Total stockholders’ equity | 407,534 | 422,097 |
Total liabilities and stockholders’ equity | $ 663,638 | $ 709,919 |
Consolidated Balance Sheets (un
Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 6,575 | $ 8,978 |
Common Stock, par value (dollars per share) | $ 0.001 | $ 0.001 |
Common Stock, shares authorized (in shares) | 120,000,000 | 120,000,000 |
Common Stock, shares issued (in shares) | 33,590,337 | 33,134,101 |
Common Stock, shares outstanding (in shares) | 33,590,337 | 33,134,101 |
Preferred Stock, par value (dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Preferred Stock, shares outstanding (in shares) | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income and Comprehensive Income (unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 130,653 | $ 122,227 | $ 259,261 | $ 246,887 |
Cost of revenue | 52,897 | 54,589 | 108,266 | 111,502 |
Intangibles amortization | 2,717 | 1,500 | 4,305 | 2,500 |
Gross profit | 75,039 | 66,138 | 146,690 | 132,885 |
Operating expenses: | ||||
Marketing and selling | 33,401 | 30,354 | 69,273 | 62,569 |
Research and development | 15,616 | 13,713 | 31,059 | 26,466 |
General and administrative | 23,721 | 24,156 | 41,169 | 40,172 |
Intangibles amortization | 4,151 | 3,885 | 8,957 | 7,959 |
Restructuring | 1,938 | 307 | 2,750 | 593 |
Total operating expenses | 78,827 | 72,415 | 153,208 | 137,759 |
Loss from operations | (3,788) | (6,277) | (6,518) | (4,874) |
Other expense, net | (2,398) | (378) | (4,218) | (1,418) |
Loss before provision for income tax | (6,186) | (6,655) | (10,736) | (6,292) |
Provision for income tax | (3,609) | (1,621) | (5,009) | (1,606) |
Net loss | $ (2,577) | $ (5,034) | $ (5,727) | $ (4,686) |
Loss per share: | ||||
Basic (dollars per share) | $ (0.08) | $ (0.15) | $ (0.17) | $ (0.14) |
Diluted (dollars per share) | $ (0.08) | $ (0.15) | $ (0.17) | $ (0.14) |
Weighted average shares used in the calculation of loss per share: | ||||
Basic (in shares) | 32,859 | 32,529 | 32,809 | 32,507 |
Diluted (in shares) | 32,859 | 32,529 | 32,809 | 32,507 |
Other comprehensive income (loss): | ||||
Unrealized loss on available-for-sale investments | $ 0 | $ 12 | $ 0 | $ (45) |
Foreign currency translation adjustment | (13,253) | 8,558 | (9,636) | 12,205 |
Total other comprehensive income (loss) | (13,253) | 8,570 | (9,636) | 12,160 |
Comprehensive income (loss) | $ (15,830) | $ 3,536 | $ (15,363) | $ 7,474 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Operating activities: | ||
Net loss | $ (5,727) | $ (4,686) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Provision for losses on accounts receivable | 4,089 | 7,072 |
Depreciation and amortization | 16,694 | 13,819 |
Loss (gain) on disposal of property and equipment | 160 | (6) |
Warranty reserve | 975 | 5,708 |
Share-based compensation | 5,632 | 4,975 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,064 | (8,898) |
Inventories | (2,483) | 6,092 |
Prepaid expenses and other assets | (15,141) | 677 |
Accounts payable | (364) | (796) |
Accrued liabilities | 3,414 | (10,504) |
Deferred revenue | 1,687 | (8,888) |
Deferred income tax | 326 | 5,749 |
Net cash provided by operating activities | 11,326 | 10,314 |
Investing activities: | ||
Acquisition of businesses, net of cash acquired | 151 | (147,436) |
Purchase of property and equipment | (3,387) | (1,464) |
Purchase of intangible assets | (298) | 0 |
Sale of short-term investments | 0 | 34,019 |
Net cash used in investing activities | (3,534) | (114,881) |
Financing activities: | ||
Proceeds from stock option exercises and Employee Stock Purchase Program purchases | 5,092 | 2,073 |
Repurchase of common stock | (5,630) | (2,268) |
Taxes paid related to net share settlement of equity awards | (326) | (3,136) |
Contingent consideration | (147) | (2,500) |
Proceeds from borrowings | 0 | 10,000 |
Deferred debt issuance costs | 0 | (38) |
Payments on borrowings | (35,000) | (40,000) |
Net cash used in financing activities | (36,011) | (35,869) |
Exchange rate changes effect on cash and cash equivalents | (5,823) | 7,188 |
Net decrease in cash and cash equivalents | (34,042) | (133,248) |
Cash and cash equivalents, beginning of period | 88,950 | 213,551 |
Cash and cash equivalents, end of period | 54,908 | 80,303 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 2,966 | 2,102 |
Cash paid for income taxes | 7,234 | 3,056 |
Non-cash investing activities: | ||
Property and equipment included in accounts payable | 93 | 297 |
Inventory transferred to property and equipment | $ 293 | $ 773 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation and Significant Accounting Policies The accompanying interim condensed consolidated financial statements of Natus Medical Incorporated (“Natus,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Except where noted below within Note 1, the accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Interim financial reports are prepared in accordance with the rules and regulations of the Securities and Exchange Commission; accordingly, the reports do not include all of the information and notes required by GAAP for annual financial statements. The interim financial information is unaudited, and reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods presented. The consolidated balance sheet as of December 31, 2017 was derived from audited financial statements, but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 . The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Recent Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance. The standard's core principle is that an entity should recognize revenue when it transfers promised 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 standard creates a five-step model to achieve its core principle: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction's price to the separate performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. In addition, entities must disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative disclosures are required about: (i) the entity's contracts with customers; (ii) the significant judgments, and changes in judgments, made in applying the guidance to those contracts; and (iii) any assets recognized from the costs to obtain or fulfill a contract with a customer. The Company adopted the new revenue standard on January 1, 2018, without any material impact to its accounting policies or its reported results. The Company utilized the modified retrospective method of transition and applied a practical expedient permitting the Company to not disclose the consideration allocated to the remaining performance obligations or an explanation of when the Company expects to recognize revenue for all reporting periods presented before January 1, 2018, the date of initial application. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740). This update is to remove the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. Under the ASU, the selling entity is required to recognize any current tax expense or benefit upon transfer of the asset. Similarly, the purchasing entity is required to recognize a deferred tax asset or deferred tax liability, as well as the related deferred tax benefit or expense, upon receipt of the asset. The Company adopted this guidance on a modified retrospective basis on January 1, 2018, recognizing a charge to retained earnings of approximately $3.9 million which reflects the unamortized portion of the deferred tax asset for both the consideration as well as the reserve. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). This update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. The definition of a business affected many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The adoption of this guidance prospectively on January 1, 2018 had no impact to the Company. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The adoption of this guidance prospectively on January 1, 2018 had no impact to the Company. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This update amends and simplifies existing hedge accounting guidance and allows for more hedging strategies to be eligible for hedge accounting. In addition, the ASU amends disclosure requirements and how hedge effectiveness is assessed. Effective January 1, 2018, the Company elected to early adopt ASU 2017-12. The adoption of this standard did not have an impact on the Company's consolidated financial statements. Recent Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires a lessee to recognize the lease assets and lease liabilities arising from operating leases in the statement of financial position. Qualitative along with specific quantitative disclosures are required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU 2016-02, Leases (Topic 842), and have the same effective and transition requirements as ASU 2016-02. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU 2017-04 is effective for the Company's annual and any interim goodwill impairment tests performed on or after January 1, 2020. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). This update permits a company to reclassify its disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings (termed “stranded tax effects”). Only the stranded tax effects resulting from the 2017 Act are eligible for reclassification. The ASU also requires certain new disclosures, some of which are applicable for all companies. The ASU is effective for the Company on January 1, 2019. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards. Entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to ASC 718 upon vesting. This eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This update makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standard Codification. The majority of the amendments in ASU 2018-09 will be effective for us in annual periods beginning after December 15, 2018. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. Significant Accounting Policies Revenue Recognition Revenue is recognized when obligations under the terms of a contract with a customer are satisfied; generally this occurs with the transfer of control of devices, supplies, or services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. For the majority of devices and supplies, the Company transfers control and recognizes revenue when products ship from the warehouse to the customer. The Company generally does not provide rights of return on devices and supplies. Freight charges billed to customers are included in revenue and freight-related expenses are charged to cost of revenue. Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation (e.g. installation). Judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. The Company uses a single amount to estimate SSP for items that are not sold separately. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the SSP is determined using information that may include market conditions and other observable inputs. The Company sells separately-priced service contracts that extend maintenance coverages for both medical devices and data management systems beyond the base agreements to customers. The separately priced service contracts range from 12 months to 36 months. The Company receives payment at the inception of the contract and recognizes revenue ratably over the service period. For products containing embedded software, the Company determined the hardware and software components function together to deliver the products' essential functionality and are considered a combined performance obligation. Revenue recognition policies for sales of these products are substantially the same as for other tangible products. The following information summarizes the Company's contract assets and liabilities (in thousands): June 30, 2018 December 31, 2017 Contract Assets $ 2,942 $ 2,884 Deferred Revenue $ 20,847 $ 18,901 Contract assets for the periods presented primarily represent the difference between revenue recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented was primarily related to extended service contracts, installation, and training, for which the service fees are billed up-front. The associated deferred revenue is generally recognized ratably over the extended service period or when installation and training are complete. The following table summarized the changes in the contract assets and contract liability balances for the six months ended June 30, 2018 : Unbilled AR, December 31, 2017 $ 2,884 Additions 387 Transferred to Trade Receivable (329 ) Unbilled AR, June 30, 2018 $ 2,942 Deferred Revenue, December 31, 2017 $ 18,901 Additions 11,724 Revenue Recognized (9,778 ) Deferred Revenue, June 30, 2018 $ 20,847 At June 30, 2018 , the short-term portion of the contract liability of $16.9 million and the long-term portion of $3.9 million were included in deferred revenue and other long term liabilities respectively, in the consolidated balance sheet. As of June 30, 2018 , the Company is expected to recognize revenue associated with deferred revenue of approximately $10.9 million for the remainder of 2018, $7.2 million in 2019, $1.5 million in 2020, $0.7 million in 2021, and $0.5 million thereafter. Financial Instruments and Derivatives As part of a risk management strategy, the Company may enter into derivative contracts with various counterparts. All derivatives are recognized on the balance sheet at their estimated fair value. On the date a derivative contract is entered into, it is designated as a fair value hedge, a cash flow hedge, a foreign currency fair value or cash flow hedge, a hedge of net investment in a foreign operation, or a trading or non-hedging instrument. Changes in the estimated fair value of a derivative which is highly effective and that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are initially recorded in other comprehensive income. Subsequently when the variability of cash flows of the hedged transaction affects earnings, it is reclassified into earnings as a component of interest expense. Any hedge ineffectiveness, which represents the amount by which the changes in the estimated fair value of the derivative differ from the variability in the cash flows of the forecasted transaction, is recognized in current-period earnings as a component of interest expense. When an interest rate swap designated as a cash flow hedge no longer qualifies for hedge accounting, changes in estimated fair value of the hedge previously deferred to accumulated other comprehensive income, along with any changes in estimated fair value occurring thereafter, are recognized in earnings. Cash flows from interest rate swap agreements are classified as net cash provided from operating activities on the consolidated statements of cash flows. The Company's accounting policy is to present the cash flows from the hedging instruments in the same category in the consolidated statements of cash flows as the category for the cash flows the hedged items. |
Business Combinations
Business Combinations | 6 Months Ended |
Jun. 30, 2018 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations Integra On October 6, 2017, the Company acquired certain neurosurgery business assets from Integra LifeSciences (“Integra” or “Neurosurgery”) for $46.2 million in cash. As part of the acquisition, the Company acquired a global product line, including the manufacturing facility, it leases from a third party and the U.S. rights related to four other product lines. The total purchase price has been preliminarily allocated to $14.0 million of tangible assets, $25.6 million of intangible assets with an associated weighted average life of 9 years being amortized on the straight line method, and $7.9 million of goodwill, offset by $1.3 million of net liabilities. The purchase price allocation is considered preliminary at this time although no material adjustments are anticipated. Besides pro forma revenue, pro forma financial information for the Integra acquisition is not presented as certain Integra expense data necessary to present pro forma net income and pro forma earnings per share is not available. Pro forma revenue assuming the acquisition had occurred on January 1, 2017 is $135.0 million and $271.5 million for the three and six months ended June 30, 2017 . |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The components of basic and diluted EPS are as follows (in thousands, except per share amounts): Three Months Ended Six Months Ended 2018 2017 2018 2017 Net loss $ (2,577 ) $ (5,034 ) $ (5,727 ) $ (4,686 ) Weighted average common shares 32,859 32,529 32,809 32,507 Dilutive effect of stock based awards — — — — Diluted Shares 32,859 32,529 32,809 32,507 Basic loss per share $ (0.08 ) $ (0.15 ) $ (0.17 ) $ (0.14 ) Diluted loss per share $ (0.08 ) $ (0.15 ) $ (0.17 ) $ (0.14 ) Shares excluded from calculation of diluted EPS 382 505 387 553 |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following (in thousands): June 30, 2018 December 31, 2017 Raw materials and subassemblies $ 30,759 $ 44,699 Work in process 3,328 3,788 Finished goods 60,055 43,488 Total inventories 94,142 91,975 Less: Non-current inventories (17,512 ) (20,446 ) Inventories, current $ 76,630 $ 71,529 As of June 30, 2018 and December 31, 2017 , the Company has classified $17.5 million and $20.4 million , respectively, of inventories as other assets. This inventory consists primarily of service components used to repair products held by customers pursuant to warranty obligations and extended service contracts, including service components for products the Company no longer sells, inventory purchased for lifetime buys, and inventory impacted by ship holds. The Company believes these inventories will be utilized for their intended purpose. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets The following table summarizes the components of gross and net intangible asset balances (in thousands): June 30, 2018 December 31, 2017 Gross Accumulated Accumulated Net Book Gross Accumulated Accumulated Net Book Intangible assets with definite lives: Technology $ 112,126 $ (1,046 ) $ (46,064 ) $ 65,016 $ 101,045 $ (1,058 ) $ (42,048 ) $ 57,939 Customer related 100,534 (50 ) (33,708 ) 66,776 108,074 (50 ) (28,972 ) 79,052 Trade names 47,506 (3,873 ) (16,230 ) 27,403 49,313 (3,916 ) (13,273 ) 32,124 Internally developed software 15,902 — (13,346 ) 2,556 15,610 — (12,293 ) 3,317 Patents 2,743 (132 ) (2,507 ) 104 2,778 (133 ) (2,495 ) 150 Service Agreements 1,190 — (486 ) 704 — — — — Definite-lived intangible assets $ 280,001 $ (5,101 ) $ (112,341 ) $ 162,559 $ 276,820 $ (5,157 ) $ (99,081 ) $ 172,582 Finite-lived intangible assets are amortized over their weighted average lives, which are 14 years for technology, 10 years for customer related intangibles, 10 years for trade names, 6 years for internally developed software, 13 years for patents, 2 years for service agreements and 11 years in total. Internally developed software consists of $13.7 million relating to costs incurred for development of internal use computer software and $2.2 million for development of software to be sold. Amortization expense related to intangible assets with definite lives was as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Technology $ 2,558 $ 1,791 $ 4,378 $ 3,117 Customer related 2,302 2,155 5,183 4,363 Trade names 1,456 1,318 3,082 2,905 Internally developed software 528 503 1,058 1,007 Patents 22 28 43 55 Service Agreements $ 486 $ — $ 486 $ — Total amortization $ 7,352 $ 5,795 $ 14,230 $ 11,447 Expected amortization expense related to amortizable intangible assets is as follows (in thousands): Six months ending December 31, 2018 $ 13,629 2019 26,060 2020 23,581 2021 22,171 2022 18,532 2023 17,509 Thereafter 41,077 Total expected amortization expense $ 162,559 |
Goodwill
Goodwill | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill The carrying amount of goodwill and the changes in the balance are as follows (in thousands): December 31, 2017 $ 172,998 Purchase accounting adjustments (7,565 ) Foreign currency translation (1,883 ) June 30, 2018 $ 163,550 |
Property and Equipment, net
Property and Equipment, net | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | Property and Equipment, net Property and equipment, net consist of the following (in thousands): June 30, 2018 December 31, 2017 Land $ 1,828 $ 2,815 Buildings 4,913 5,096 Leasehold improvements 3,920 3,295 Equipment and furniture 25,549 25,612 Computer software and hardware 11,015 9,760 Demonstration and loaned equipment 12,142 11,932 59,367 58,510 Accumulated depreciation (37,722 ) (36,439 ) Total $ 21,645 $ 22,071 Depreciation expense of property and equipment was approximately $1.4 million and $2.4 million for the three and six months ended June 30, 2018 and approximately $1.2 million and $2.3 million for the three and six months ended June 30, 2017 . |
Reserve for Product Warranties
Reserve for Product Warranties | 6 Months Ended |
Jun. 30, 2018 | |
Product Warranties Disclosures [Abstract] | |
Reserve for Product Warranties | Reserve for Product Warranties The Company provides a warranty for products that is generally one year in length, but in some cases regulations may require them to provide repair or remediation beyond the typical warranty period. If any of the products contain defects, the Company may incur additional repair and remediation costs. Service for domestic customers is provided by Company-owned service centers that perform all service, repair, and calibration services. Service for international customers is provided by a combination of Company-owned facilities, vendors on a contract basis, and distributors. A warranty reserve is included in accrued liabilities for the expected future costs of servicing products. Additions to the reserve are based on management’s best estimate of probable liability. The Company considers a combination of factors including material and labor costs, regulatory requirements, and other judgments in determining the amount of the reserve. The reserve is reduced as costs are incurred to honor existing warranty and regulatory obligations. As of June 30, 2018 , the Company had accrued $5.6 million of estimated costs to bring certain products into U.S. regulatory compliance. The Company's estimate of these costs associated with bringing the products into compliance is primarily based upon the number of units outstanding that may require repair, costs associated with shipping, and the assumption the FDA will approve the Company's plan for compliance. The details of activity in the warranty reserve are as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Balance, beginning of period $ 9,068 $ 12,721 $ 10,995 $ 10,670 Assumed through acquisitions — — — 1,166 Additions (decreases) charged to expense 2,100 2,902 975 5,708 Reductions (255 ) (1,484 ) (1,057 ) (3,405 ) Balance, end of period $ 10,913 $ 14,139 $ 10,913 $ 14,139 The estimates the Company uses in projecting future product warranty costs may prove to be incorrect. Any future determination that product warranty reserves are understated could result in increases to cost of sales and reductions in operating profits and results of operations. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation As of June 30, 2018 , the Company has two active share-based compensation plans, the 2011 Stock Awards Plan and the 2011 Employee Stock Purchase Plan. The terms of awards granted during the six months ended June 30, 2018 and the methods for determining grant-date fair value of the awards are consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 . Details of share-based compensation expense are as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Cost of revenue $ 71 $ 40 $ 139 $ 121 Marketing and selling 199 117 396 186 Research and development 272 311 549 778 General and administrative 2,728 1,751 4,548 3,890 Total $ 3,270 $ 2,219 $ 5,632 $ 4,975 As of June 30, 2018 , unrecognized compensation expense related to the unvested portion of stock options and other stock awards was approximately $17.6 million , which is expected to be recognized over a weighted average period of 2.3 years . |
Other Income (Expense), net
Other Income (Expense), net | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other Income (Expense), net | Other Income (Expense), net Other income (expense), net consists of (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Interest income $ (5 ) $ 96 $ 5 $ 428 Interest expense (1,641 ) (1,284 ) (3,601 ) (2,264 ) Foreign currency gain (loss) (838 ) 897 (234 ) 469 Other income 86 (87 ) (388 ) (51 ) Total other income (expense), net $ (2,398 ) $ (378 ) $ (4,218 ) $ (1,418 ) |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recorded a benefit from income tax of $3.6 million and $5.0 million for the three and six months ended June 30, 2018 , respectively. The effective tax rate was 58.3% and 46.7% for the three and six months ended June 30, 2018 , respectively. The Company recorded a benefit from income tax of $1.6 million and $1.6 million for the three and six months ended June 30, 2017 , respectively. The effective tax rate was 24.4% and 25.5% for the three and six months ended June 30, 2017 , respectively. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“2017 Act”) was signed into law making significant changes to the Internal Revenue Code. These changes include a federal statutory rate reduction from 35% to 21% , the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The increase in the effective tax rate for the three and six months ended June 30, 2018 compared with the three and six months ended June 30, 2017 is primarily attributable to the changes enacted by the 2017 Act and certain discrete items. The Company's effective tax rate for the three and six months ended June 30, 2018 differed from the federal statutory tax rate of 21% primarily due to the recognition of excess tax benefits of stock-based compensation and Federal and California research and development credits, non-deductible expenses, and the international provisions from the 2017 Act. The changes attributable to the 2017 Act which impacted the effective tax rate directly increased the amount of non-deductible executive compensation and introduced a new type of deemed inclusion related to global intangible low taxed income (“GILTI”). The tax rate for the three and six months ended June 30, 2018 was significantly greater than the tax rate for the three and six months ended June 30, 2017 , largely due to the changes from the 2017 Act. The tax rate was also impacted to a lesser degree by shifts in geographical mix and discrete items. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Act. In the fourth quarter of 2017, the Company recorded a provisional amount of $16.6 million related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings, net of foreign tax credits. The transition tax will be paid in installments over an eight-year period, which started in 2018, and will not accrue interest. For the three and six months ended June 30, 2018 , there were no significant adjustments to this amount although it remains provisional. Additional work is still necessary for a more detailed analysis of the Company's deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. The future issuance of U.S. Treasury Regulations, administrative interpretations or court decisions interpreting the 2017 Act may require further adjustments and changes in the Company's estimate. The final determination of the transition tax and remeasurement of the Company's deferred assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the 2017 Act. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete. On August 1, 2018, The Department of Treasury and the IRS released proposed regulations under Section 965 ("the proposed 965 regulations"). The proposed 965 regulations provide guidance relating to the one-time transition tax on the mandatory deemed repatriation of foreign earnings from the enactment of the 2017 Act on December 22, 2017. The Company is reviewing the proposed 965 regulations to determine the impact, if any, on the one-time transition tax liability. Due to the timing of the release of the proposed regulations, as well as the complexity, detail and length of the regulations, the Company is not able to provide guidance on impact at this time but expects to do so in the next quarterly filing. For the three and six months ended June 30, 2018 , the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing. The Company has made a policy election to treat the GILTI as a period cost and does not recognize deferred taxes when basis differences exist that are expected to affect the amount of the GILTI inclusion upon reversal. On July 24, 2018, the Ninth Circuit Court of Appeals issued an opinion in Altera Corp. v. Commissioner requiring related parties in an intercompany cost-sharing arrangement to share expenses related to share-based compensation. This opinion reversed the prior decision of the United States Tax Court. On August 7, 2018, the Altera opinion was withdrawn to permit time for a reconstituted panel to consider the appeal. The Company will continue to monitor ongoing developments and potential impacts to the consolidated financial statements. The Company recorded $12.0 thousand of net tax benefit related to unrecognized tax benefits for the six months ended June 30, 2018 , primarily due to the lapse of the applicable statute of limitations. Within the next twelve months, it is possible that uncertain tax benefit may change with a range of approximately zero to $0.9 million . The Company's tax returns remain open to examination as follows: U.S Federal, 2014 through 2017, U.S. States, 2013 through 2017, and significant foreign jurisdictions, 2013 through 2017. |
Debt and Credit Arrangements
Debt and Credit Arrangements | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt and Credit Arrangements | Debt and Credit Arrangements The Company has a Credit Agreement with JP Morgan Chase Bank ("JP Morgan") and Citibank, NA (“Citibank”). The Credit Agreement provides for an aggregate $225.0 million of secured revolving credit facility. The Credit Agreement contains covenants, including covenants relating to maintenance of books and records, financial reporting and notification, compliance with laws, maintenance of properties and insurance, and limitations on guaranties, investments, issuance of debt, lease obligations and capital expenditures, and is secured by virtually all of the Company's assets. The Credit Agreement provides for events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, bankruptcy or insolvency events and the occurrence of a material adverse effect. The Company has no other significant credit facilities. In addition to the customary restrictive covenants listed above, the Credit Agreement also contains financial covenants that require the Company to maintain a certain leverage ratio and fixed charge coverage ratio, each as defined in the Credit Agreement: • Leverage Ratio, as defined, to be no higher than 2.75 to 1.00 . • Interest Coverage Ratio, as defined, to be at least 1.75 to 1.00 at all times. At June 30, 2018 , the Company was in compliance with the Leverage Ratio at 2.01 to 1.00 and the Interest Coverage Ratio at 5.98 to 1.00 . At June 30, 2018 , the Company had $120.0 million outstanding under the Credit Agreement. Pursuant to the terms of the Credit Agreement, the outstanding principal balance will bear interest at either (a) a fluctuating rate per annum equal to the Applicable Rate, as defined in the Credit Agreement, depending on our leverage ratio plus the higher of (i) the federal funds rate plus one-half of one percent per annum; (ii) the prime rate in effect on such a day; and (iii) the LIBOR rate plus one percent, or (b) a fluctuating rate per annum of LIBOR Rate plus the Applicable Rate, which ranges between 1.75 % to 2.75 %. The effective interest rate during the six months ended June 30, 2018 was 4.27% . The Credit Agreement matures on September 23, 2021, at which time all principal amounts outstanding under the Credit Agreement will be due and payable. Long-term debt consists of (in thousands): June 30, 2018 December 31, 2017 Revolving credit facility $ 120,000 $ 155,000 Debt issuance costs (621 ) (717 ) Less: current portion of long-term debt — — Total long-term debt $ 119,379 $ 154,283 As of June 30, 2018 , the carrying value of total debt approximated fair market value. |
Financial Instruments and Deriv
Financial Instruments and Derivatives | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial Instruments and Derivatives | Financial Instruments and Derivatives The Company uses interest rate swap derivative instruments to manage earnings and cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of the Company's expected LIBOR-indexed floating-rate borrowings. The Company held the following interest rate swaps as of June 30, 2018 (in thousands): Hedged Item Current Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Floating Rate Estimated Fair Value 1-month USD LIBOR Loan $ 40,000 May 31, 2018 June 1, 2018 September 23, 2021 2.611% 1-month USD LIBOR $ (1 ) Total interest rate derivatives designated as cash flow hedge $ 40,000 $ (1 ) The Company designated these derivative instruments as cash flow hedges. The Company assesses the effectiveness of these derivative instruments and records the change in the fair value of a derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive income (“AOCI”), net of tax. Once the hedged item affects earnings, the effective portion of any gain or loss will be reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time. As of June 30, 2018 , the Company expects that approximately $72,000 of losses associated with the cash flow hedge, net of tax, could be reclassified from AOCI into earnings within the next twelve months. |
Segment, Customer and Geographi
Segment, Customer and Geographic Information | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment, Customer and Geographic Information | Segment, Customer and Geographic Information The Company operates in one reportable segment in which the Company provides healthcare products and services used for the screening, detection, treatment, monitoring and tracking of common medical ailments. End-user customer base includes hospitals, clinics, laboratories, physicians, audiologists, and governmental agencies. Most of the Company's international sales are to distributors who resell products to end users or sub-distributors. Revenue and long-lived asset information are as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Consolidated Revenue: United States $ 75,467 $ 67,100 $ 144,154 $ 131,808 International 55,186 55,127 115,107 115,079 Totals $ 130,653 $ 122,227 $ 259,261 $ 246,887 Three Months Ended Six Months Ended 2018 2017 2018 2017 Revenue by End Market: Neurology Products Devices and Systems $ 50,308 $ 41,584 $ 96,361 $ 79,773 Supplies 16,535 15,182 33,707 30,069 Services 3,565 2,551 6,303 5,743 Total Neurology Revenue 70,408 59,317 136,371 115,585 Newborn Care Products Devices and Systems 13,985 17,464 29,951 41,602 Supplies 9,625 11,299 19,147 22,745 Services 5,477 5,345 10,880 10,395 Total Newborn Care Revenue 29,087 34,108 59,978 74,742 Otometrics Products Devices and Systems 30,572 22,522 57,340 43,900 Supplies 586 6,280 5,572 12,660 Total Otometrics Revenue 31,158 28,802 62,912 56,560 Total Revenue $ 130,653 $ 122,227 $ 259,261 $ 246,887 June 30, 2018 December 31, 2017 Property and equipment, net: United States $ 11,149 $ 10,128 Canada 4,137 5,068 Argentina 1,035 1,591 Ireland 3,413 3,178 Denmark 1,072 1,158 Other countries 839 948 Totals $ 21,645 $ 22,071 During the three and six months ended June 30, 2018 and 2017 , no single customer or country outside the United States contributed to more than 10% of consolidated revenue. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value: Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The derivative financial instruments described in Note 13 are measured at fair value on a recurring basis and are presented on the consolidated balance sheets at fair value. The table below presents the fair value of the derivative financial instruments as well as the classification on the consolidated balance sheet (in thousands): December 31, 2017 Additions Payments Adjustments June 30, 2018 Liabilities: Interest Rate Swap $ — $ 1 $ — $ — $ 1 Total $ — $ 1 $ — $ — $ 1 The Company estimates the fair value of the interest rate swaps by calculating the present value of the expected future cash flows of each swap. The calculation incorporated the contractual terms of the derivatives, observable market interest rates which are considered to be Level 2 inputs, and credit risk adjustments, if any, to reflect the counterpart's as well as the Company's nonperformance risk. As of June 30, 2018 , there have been no events of default under the interest rate swap agreement. The following financial instruments are not measured at fair value on the Company’s consolidated balance sheet as of June 30, 2018 and December 31, 2017 , but require disclosure of their fair values: cash and cash equivalents, accounts receivable, and accounts payable. The carrying value of these financial instruments approximates fair values because of their relatively short maturity. In the third quarter of 2014, the Company listed its facility in Mundelein, Illinois for sale. This asset was measured at fair value less cost to sell as of September 30, 2014 based on market price and is classified as a Level 2 asset. The book value of this asset on June 30, 2014 was $3.6 million . The Company expensed $2.2 million during the third quarter of 2014 for this impairment and an additional $0.2 million in the second quarter of 2018. As of June 30, 2018 , the Company is carrying the asset as held for sale in other current assets on the accompanying condensed consolidated balance sheet at a value of $1.2 million . In the second quarter of 2018, the Company listed a portion of vacant land located in Canada for sale. The Company plans to sell 1.5 acres of the vacant land. This asset was measured at fair value less cost to sell as of June 30, 2018 based on market price and is classified as a Level 2 asset. The book value of this asset on June 30, 2018 was $0.9 million , which is the amount in other current assets on the accompanying condensed consolidated balance sheet. The Company also has contingent consideration associated with earn-outs from acquisitions. Contingent consideration liabilities are classified as Level 3 liabilities, as the Company uses unobservable inputs to value them, which is a probability-based income approach. Contingent consideration is classified as accrued liabilities on the condensed consolidated balance sheet. Subsequent changes in the fair value of contingent consideration liabilities are recorded within the Company's income statement as an operating expense. Contingent considerations are as follows (in thousands): December 31, 2017 Additions Payments Adjustments June 30, 2018 Liabilities: Contingent consideration $ 147 $ — $ (147 ) $ — $ — Total $ 147 $ — $ (147 ) $ — $ — The significant unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions are annualized revenue forecasts developed by the Company’s management and the probability of achievement of those revenue forecasts. Significant changes in these unobservable inputs may result in a significant impact to the fair value measurement. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Impact of Foreign Currency Translation - Argentina Effective July 1, 2018, Argentina's economy is considered to be highly inflationary under U.S. GAAP since it has experienced a rate of general inflation in excess of 100% over the latest three-year period, based upon the cumulative inflation rates published by Center for Audit Quality (CAQ) SEC Regulations Committee and its International Practices Task Force (IPTF). As a result, beginning July 1, 2018, the U.S. dollar will be the functional currency for the Company's subsidiary in Argentina, Medix I.C.S.A. (“Medix”). Accordingly, all gains and losses resulting from the translation of the Company's Argentinian operations are required to be recorded directly in the statement of operations. Through June 30, 2018, prior to being designated as highly inflationary, currency translation adjustments of Medix's balance sheet are reflected in shareholders' equity as part of Other Comprehensive Income; however subsequent to July 1, 2018, such adjustments will be reflected in earnings. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying interim condensed consolidated financial statements of Natus Medical Incorporated (“Natus,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Except where noted below within Note 1, the accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Interim financial reports are prepared in accordance with the rules and regulations of the Securities and Exchange Commission; accordingly, the reports do not include all of the information and notes required by GAAP for annual financial statements. The interim financial information is unaudited, and reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods presented. The consolidated balance sheet as of December 31, 2017 was derived from audited financial statements, but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 . The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. |
Recent Accounting Pronouncements | Recent Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance. The standard's core principle is that an entity should recognize revenue when it transfers promised 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 standard creates a five-step model to achieve its core principle: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction's price to the separate performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. In addition, entities must disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative disclosures are required about: (i) the entity's contracts with customers; (ii) the significant judgments, and changes in judgments, made in applying the guidance to those contracts; and (iii) any assets recognized from the costs to obtain or fulfill a contract with a customer. The Company adopted the new revenue standard on January 1, 2018, without any material impact to its accounting policies or its reported results. The Company utilized the modified retrospective method of transition and applied a practical expedient permitting the Company to not disclose the consideration allocated to the remaining performance obligations or an explanation of when the Company expects to recognize revenue for all reporting periods presented before January 1, 2018, the date of initial application. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740). This update is to remove the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. Under the ASU, the selling entity is required to recognize any current tax expense or benefit upon transfer of the asset. Similarly, the purchasing entity is required to recognize a deferred tax asset or deferred tax liability, as well as the related deferred tax benefit or expense, upon receipt of the asset. The Company adopted this guidance on a modified retrospective basis on January 1, 2018, recognizing a charge to retained earnings of approximately $3.9 million which reflects the unamortized portion of the deferred tax asset for both the consideration as well as the reserve. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). This update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. The definition of a business affected many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The adoption of this guidance prospectively on January 1, 2018 had no impact to the Company. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The adoption of this guidance prospectively on January 1, 2018 had no impact to the Company. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This update amends and simplifies existing hedge accounting guidance and allows for more hedging strategies to be eligible for hedge accounting. In addition, the ASU amends disclosure requirements and how hedge effectiveness is assessed. Effective January 1, 2018, the Company elected to early adopt ASU 2017-12. The adoption of this standard did not have an impact on the Company's consolidated financial statements. Recent Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires a lessee to recognize the lease assets and lease liabilities arising from operating leases in the statement of financial position. Qualitative along with specific quantitative disclosures are required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU 2016-02, Leases (Topic 842), and have the same effective and transition requirements as ASU 2016-02. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU 2017-04 is effective for the Company's annual and any interim goodwill impairment tests performed on or after January 1, 2020. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). This update permits a company to reclassify its disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings (termed “stranded tax effects”). Only the stranded tax effects resulting from the 2017 Act are eligible for reclassification. The ASU also requires certain new disclosures, some of which are applicable for all companies. The ASU is effective for the Company on January 1, 2019. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards. Entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to ASC 718 upon vesting. This eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This update makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standard Codification. The majority of the amendments in ASU 2018-09 will be effective for us in annual periods beginning after December 15, 2018. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. |
Revenue Recognition | Contract assets for the periods presented primarily represent the difference between revenue recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented was primarily related to extended service contracts, installation, and training, for which the service fees are billed up-front. The associated deferred revenue is generally recognized ratably over the extended service period or when installation and training are complete. Revenue Recognition Revenue is recognized when obligations under the terms of a contract with a customer are satisfied; generally this occurs with the transfer of control of devices, supplies, or services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. For the majority of devices and supplies, the Company transfers control and recognizes revenue when products ship from the warehouse to the customer. The Company generally does not provide rights of return on devices and supplies. Freight charges billed to customers are included in revenue and freight-related expenses are charged to cost of revenue. Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation (e.g. installation). Judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. The Company uses a single amount to estimate SSP for items that are not sold separately. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the SSP is determined using information that may include market conditions and other observable inputs. The Company sells separately-priced service contracts that extend maintenance coverages for both medical devices and data management systems beyond the base agreements to customers. The separately priced service contracts range from 12 months to 36 months. The Company receives payment at the inception of the contract and recognizes revenue ratably over the service period. For products containing embedded software, the Company determined the hardware and software components function together to deliver the products' essential functionality and are considered a combined performance obligation. Revenue recognition policies for sales of these products are substantially the same as for other tangible products. |
Financial Instruments and Derivatives | Financial Instruments and Derivatives As part of a risk management strategy, the Company may enter into derivative contracts with various counterparts. All derivatives are recognized on the balance sheet at their estimated fair value. On the date a derivative contract is entered into, it is designated as a fair value hedge, a cash flow hedge, a foreign currency fair value or cash flow hedge, a hedge of net investment in a foreign operation, or a trading or non-hedging instrument. Changes in the estimated fair value of a derivative which is highly effective and that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are initially recorded in other comprehensive income. Subsequently when the variability of cash flows of the hedged transaction affects earnings, it is reclassified into earnings as a component of interest expense. Any hedge ineffectiveness, which represents the amount by which the changes in the estimated fair value of the derivative differ from the variability in the cash flows of the forecasted transaction, is recognized in current-period earnings as a component of interest expense. When an interest rate swap designated as a cash flow hedge no longer qualifies for hedge accounting, changes in estimated fair value of the hedge previously deferred to accumulated other comprehensive income, along with any changes in estimated fair value occurring thereafter, are recognized in earnings. Cash flows from interest rate swap agreements are classified as net cash provided from operating activities on the consolidated statements of cash flows. The Company's accounting policy is to present the cash flows from the hedging instruments in the same category in the consolidated statements of cash flows as the category for the cash flows the hedged items. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of contract assets and liabilities | The following table summarized the changes in the contract assets and contract liability balances for the six months ended June 30, 2018 : Unbilled AR, December 31, 2017 $ 2,884 Additions 387 Transferred to Trade Receivable (329 ) Unbilled AR, June 30, 2018 $ 2,942 Deferred Revenue, December 31, 2017 $ 18,901 Additions 11,724 Revenue Recognized (9,778 ) Deferred Revenue, June 30, 2018 $ 20,847 The following information summarizes the Company's contract assets and liabilities (in thousands): June 30, 2018 December 31, 2017 Contract Assets $ 2,942 $ 2,884 Deferred Revenue $ 20,847 $ 18,901 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | The components of basic and diluted EPS are as follows (in thousands, except per share amounts): Three Months Ended Six Months Ended 2018 2017 2018 2017 Net loss $ (2,577 ) $ (5,034 ) $ (5,727 ) $ (4,686 ) Weighted average common shares 32,859 32,529 32,809 32,507 Dilutive effect of stock based awards — — — — Diluted Shares 32,859 32,529 32,809 32,507 Basic loss per share $ (0.08 ) $ (0.15 ) $ (0.17 ) $ (0.14 ) Diluted loss per share $ (0.08 ) $ (0.15 ) $ (0.17 ) $ (0.14 ) Shares excluded from calculation of diluted EPS 382 505 387 553 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories | Inventories consist of the following (in thousands): June 30, 2018 December 31, 2017 Raw materials and subassemblies $ 30,759 $ 44,699 Work in process 3,328 3,788 Finished goods 60,055 43,488 Total inventories 94,142 91,975 Less: Non-current inventories (17,512 ) (20,446 ) Inventories, current $ 76,630 $ 71,529 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Amortization expense related to intangible assets with definite lives | The following table summarizes the components of gross and net intangible asset balances (in thousands): June 30, 2018 December 31, 2017 Gross Accumulated Accumulated Net Book Gross Accumulated Accumulated Net Book Intangible assets with definite lives: Technology $ 112,126 $ (1,046 ) $ (46,064 ) $ 65,016 $ 101,045 $ (1,058 ) $ (42,048 ) $ 57,939 Customer related 100,534 (50 ) (33,708 ) 66,776 108,074 (50 ) (28,972 ) 79,052 Trade names 47,506 (3,873 ) (16,230 ) 27,403 49,313 (3,916 ) (13,273 ) 32,124 Internally developed software 15,902 — (13,346 ) 2,556 15,610 — (12,293 ) 3,317 Patents 2,743 (132 ) (2,507 ) 104 2,778 (133 ) (2,495 ) 150 Service Agreements 1,190 — (486 ) 704 — — — — Definite-lived intangible assets $ 280,001 $ (5,101 ) $ (112,341 ) $ 162,559 $ 276,820 $ (5,157 ) $ (99,081 ) $ 172,582 |
Amortization expense | Amortization expense related to intangible assets with definite lives was as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Technology $ 2,558 $ 1,791 $ 4,378 $ 3,117 Customer related 2,302 2,155 5,183 4,363 Trade names 1,456 1,318 3,082 2,905 Internally developed software 528 503 1,058 1,007 Patents 22 28 43 55 Service Agreements $ 486 $ — $ 486 $ — Total amortization $ 7,352 $ 5,795 $ 14,230 $ 11,447 |
Expected amortization expense related to amortizable intangible assets | Expected amortization expense related to amortizable intangible assets is as follows (in thousands): Six months ending December 31, 2018 $ 13,629 2019 26,060 2020 23,581 2021 22,171 2022 18,532 2023 17,509 Thereafter 41,077 Total expected amortization expense $ 162,559 |
Goodwill (Tables)
Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Carrying amount of Goodwill | The carrying amount of goodwill and the changes in the balance are as follows (in thousands): December 31, 2017 $ 172,998 Purchase accounting adjustments (7,565 ) Foreign currency translation (1,883 ) June 30, 2018 $ 163,550 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment net | Property and equipment, net consist of the following (in thousands): June 30, 2018 December 31, 2017 Land $ 1,828 $ 2,815 Buildings 4,913 5,096 Leasehold improvements 3,920 3,295 Equipment and furniture 25,549 25,612 Computer software and hardware 11,015 9,760 Demonstration and loaned equipment 12,142 11,932 59,367 58,510 Accumulated depreciation (37,722 ) (36,439 ) Total $ 21,645 $ 22,071 |
Reserve for Product Warranties
Reserve for Product Warranties (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Product Warranties Disclosures [Abstract] | |
Reserve for Product Warranties | The details of activity in the warranty reserve are as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Balance, beginning of period $ 9,068 $ 12,721 $ 10,995 $ 10,670 Assumed through acquisitions — — — 1,166 Additions (decreases) charged to expense 2,100 2,902 975 5,708 Reductions (255 ) (1,484 ) (1,057 ) (3,405 ) Balance, end of period $ 10,913 $ 14,139 $ 10,913 $ 14,139 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation Expense | Details of share-based compensation expense are as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Cost of revenue $ 71 $ 40 $ 139 $ 121 Marketing and selling 199 117 396 186 Research and development 272 311 549 778 General and administrative 2,728 1,751 4,548 3,890 Total $ 3,270 $ 2,219 $ 5,632 $ 4,975 |
Other Income (Expense), net (Ta
Other Income (Expense), net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other Income (Expense), net | Other income (expense), net consists of (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Interest income $ (5 ) $ 96 $ 5 $ 428 Interest expense (1,641 ) (1,284 ) (3,601 ) (2,264 ) Foreign currency gain (loss) (838 ) 897 (234 ) 469 Other income 86 (87 ) (388 ) (51 ) Total other income (expense), net $ (2,398 ) $ (378 ) $ (4,218 ) $ (1,418 ) |
Debt and Credit Arrangements (T
Debt and Credit Arrangements (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term debt | Long-term debt consists of (in thousands): June 30, 2018 December 31, 2017 Revolving credit facility $ 120,000 $ 155,000 Debt issuance costs (621 ) (717 ) Less: current portion of long-term debt — — Total long-term debt $ 119,379 $ 154,283 |
Financial Instruments and Der33
Financial Instruments and Derivatives (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of interest rate swaps | The Company held the following interest rate swaps as of June 30, 2018 (in thousands): Hedged Item Current Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Floating Rate Estimated Fair Value 1-month USD LIBOR Loan $ 40,000 May 31, 2018 June 1, 2018 September 23, 2021 2.611% 1-month USD LIBOR $ (1 ) Total interest rate derivatives designated as cash flow hedge $ 40,000 $ (1 ) |
Segment, Customer and Geograp34
Segment, Customer and Geographic Information (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Revenue and Long-lived Asset Information by Geographic Region | Revenue and long-lived asset information are as follows (in thousands): Three Months Ended Six Months Ended 2018 2017 2018 2017 Consolidated Revenue: United States $ 75,467 $ 67,100 $ 144,154 $ 131,808 International 55,186 55,127 115,107 115,079 Totals $ 130,653 $ 122,227 $ 259,261 $ 246,887 Three Months Ended Six Months Ended 2018 2017 2018 2017 Revenue by End Market: Neurology Products Devices and Systems $ 50,308 $ 41,584 $ 96,361 $ 79,773 Supplies 16,535 15,182 33,707 30,069 Services 3,565 2,551 6,303 5,743 Total Neurology Revenue 70,408 59,317 136,371 115,585 Newborn Care Products Devices and Systems 13,985 17,464 29,951 41,602 Supplies 9,625 11,299 19,147 22,745 Services 5,477 5,345 10,880 10,395 Total Newborn Care Revenue 29,087 34,108 59,978 74,742 Otometrics Products Devices and Systems 30,572 22,522 57,340 43,900 Supplies 586 6,280 5,572 12,660 Total Otometrics Revenue 31,158 28,802 62,912 56,560 Total Revenue $ 130,653 $ 122,227 $ 259,261 $ 246,887 June 30, 2018 December 31, 2017 Property and equipment, net: United States $ 11,149 $ 10,128 Canada 4,137 5,068 Argentina 1,035 1,591 Ireland 3,413 3,178 Denmark 1,072 1,158 Other countries 839 948 Totals $ 21,645 $ 22,071 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair value of the derivative financial instrument | The table below presents the fair value of the derivative financial instruments as well as the classification on the consolidated balance sheet (in thousands): December 31, 2017 Additions Payments Adjustments June 30, 2018 Liabilities: Interest Rate Swap $ — $ 1 $ — $ — $ 1 Total $ — $ 1 $ — $ — $ 1 |
Changes in fair value of contingent consideration | Contingent considerations are as follows (in thousands): December 31, 2017 Additions Payments Adjustments June 30, 2018 Liabilities: Contingent consideration $ 147 $ — $ (147 ) $ — $ — Total $ 147 $ — $ (147 ) $ — $ — |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Jun. 30, 2018 |
ASU 2016-16 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Tax effect of intra-entity transfer assets recorded to retained earnings | $ 3.9 | |
Minimum | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Service period for separately-priced contracts | 12 months | |
Maximum | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Service period for separately-priced contracts | 36 months |
Basis of Presentation - Schedul
Basis of Presentation - Schedule of Contract Assets and Liabilities (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Contract with Customer, Asset and Liability [Abstract] | |
Deferred Revenue | $ 18,901 |
Change In Contract With Customer, Liability [Roll Forward] | |
Deferred Revenue, December 31, 2017 | 18,901 |
Additions | 11,724 |
Revenue Recognized | (9,778) |
Deferred Revenue, June 30, 2018 | 20,847 |
Unbilled AR | |
Contract with Customer, Asset and Liability [Abstract] | |
Contract Assets | 2,884 |
Change In Contract With Customer, Asset [Roll Forward] | |
Unbilled AR, December 31, 2017 | 2,884 |
Additions | 387 |
Transferred to Trade Receivable | (329) |
Unbilled AR, June 30, 2018 | $ 2,942 |
Basis of Presentation - Narrati
Basis of Presentation - Narrative for Revenue Recognition (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Short-term contract liability | $ 16.9 |
Long-term contract liability | 3.9 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 10.9 |
Expected timing of satisfaction for remaining performance obligation | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 7.2 |
Expected timing of satisfaction for remaining performance obligation | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 1.5 |
Expected timing of satisfaction for remaining performance obligation | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 0.7 |
Expected timing of satisfaction for remaining performance obligation | 3 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 0.5 |
Expected timing of satisfaction for remaining performance obligation |
Business Combinations - Narrati
Business Combinations - Narrative (Details) - USD ($) $ in Thousands | Oct. 06, 2017 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | |||||
Goodwill | $ 163,550 | $ 172,998 | |||
Integra | |||||
Business Acquisition [Line Items] | |||||
Purchase price paid in cash to acquire entity | $ 46,200 | ||||
Tangible assets | 14,000 | ||||
Intangible assets | $ 25,600 | ||||
Weighted average life of intangible assets | 9 years | ||||
Goodwill | $ 7,900 | ||||
Net liabilities | $ 1,300 | ||||
Pro forma revenue | $ 135,000 | $ 271,500 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Net loss | $ (2,577) | $ (5,034) | $ (5,727) | $ (4,686) |
Weighted average common shares (in shares) | 32,859 | 32,529 | 32,809 | 32,507 |
Dilutive effect of stock based awards (in shares) | 0 | 0 | 0 | 0 |
Diluted Shares (in shares) | 32,859 | 32,529 | 32,809 | 32,507 |
Basic earnings per share (dollars per share) | $ (0.08) | $ (0.15) | $ (0.17) | $ (0.14) |
Diluted earnings per share (dollars per share) | $ (0.08) | $ (0.15) | $ (0.17) | $ (0.14) |
Diluted earnings per share (in shares) | 382 | 505 | 387 | 553 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Summary of Inventories | ||
Raw materials and subassemblies | $ 30,759 | $ 44,699 |
Work in process | 3,328 | 3,788 |
Finished goods | 60,055 | 43,488 |
Total inventories | 94,142 | 91,975 |
Less: Non-current inventories | (17,512) | (20,446) |
Inventories, current | $ 76,630 | $ 71,529 |
Intangible Assets - Components
Intangible Assets - Components of Gross and Net Intangible Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 280,001 | $ 276,820 |
Accumulated Impairment | (5,101) | (5,157) |
Accumulated Amortization | (112,341) | (99,081) |
Net Book Value | 162,559 | 172,582 |
Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 112,126 | 101,045 |
Accumulated Impairment | (1,046) | (1,058) |
Accumulated Amortization | (46,064) | (42,048) |
Net Book Value | 65,016 | 57,939 |
Customer related | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 100,534 | 108,074 |
Accumulated Impairment | (50) | (50) |
Accumulated Amortization | (33,708) | (28,972) |
Net Book Value | 66,776 | 79,052 |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 47,506 | 49,313 |
Accumulated Impairment | (3,873) | (3,916) |
Accumulated Amortization | (16,230) | (13,273) |
Net Book Value | 27,403 | 32,124 |
Internally developed software | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 15,902 | 15,610 |
Accumulated Impairment | 0 | 0 |
Accumulated Amortization | (13,346) | (12,293) |
Net Book Value | 2,556 | 3,317 |
Patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 2,743 | 2,778 |
Accumulated Impairment | (132) | (133) |
Accumulated Amortization | (2,507) | (2,495) |
Net Book Value | 104 | 150 |
Service Agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,190 | 0 |
Accumulated Impairment | 0 | 0 |
Accumulated Amortization | (486) | 0 |
Net Book Value | $ 704 | $ 0 |
Intangible Assets - Narrative (
Intangible Assets - Narrative (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 11 years |
Technology | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 14 years |
Customer related | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 10 years |
Trade names | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 10 years |
Internally developed software | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 6 years |
Costs incurred for development of internal use computer software | $ 13.7 |
Costs incurred for development of software to be sold | $ 2.2 |
Patents | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 13 years |
Service Agreements | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 2 years |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | $ 7,352 | $ 5,795 | $ 14,230 | $ 11,447 |
Technology | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | 2,558 | 1,791 | 4,378 | 3,117 |
Customer related | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | 2,302 | 2,155 | 5,183 | 4,363 |
Trade names | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | 1,456 | 1,318 | 3,082 | 2,905 |
Internally developed software | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | 528 | 503 | 1,058 | 1,007 |
Patents | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | 22 | 28 | 43 | 55 |
Service Agreements | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization | $ 486 | $ 0 | $ 486 | $ 0 |
Intangible Assets - Schedule 45
Intangible Assets - Schedule of Expected Amortization Expense (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Expected annual amortization expense related to amortizable intangible assets | ||
Six months ending December 31, 2018 | $ 13,629 | |
2,019 | 26,060 | |
2,020 | 23,581 | |
2,021 | 22,171 | |
2,022 | 18,532 | |
2,023 | 17,509 | |
Thereafter | 41,077 | |
Net Book Value | $ 162,559 | $ 172,582 |
Goodwill (Details)
Goodwill (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Carrying amount of goodwill | |
December 31, 2017 | $ 172,998 |
Purchase accounting adjustments | (7,565) |
Foreign currency translation | (1,883) |
June 30, 2018 | $ 163,550 |
Property and Equipment, net (De
Property and Equipment, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 59,367 | $ 59,367 | $ 58,510 | ||
Accumulated depreciation | (37,722) | (37,722) | (36,439) | ||
Total | 21,645 | 21,645 | 22,071 | ||
Depreciation | 1,400 | $ 1,200 | 2,400 | $ 2,300 | |
Land | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 1,828 | 1,828 | 2,815 | ||
Buildings | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 4,913 | 4,913 | 5,096 | ||
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 3,920 | 3,920 | 3,295 | ||
Equipment and furniture | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 25,549 | 25,549 | 25,612 | ||
Computer software and hardware | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 11,015 | 11,015 | 9,760 | ||
Demonstration and loaned equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 12,142 | $ 12,142 | $ 11,932 |
Reserve for Product Warrantie48
Reserve for Product Warranties - Narrative (Details) - USD ($) $ in Thousands | 6 Months Ended | |||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | |
Product Warranties Disclosures [Abstract] | ||||||
Product warranty period (in years) | 1 year | |||||
Product Liability Contingency [Line Items] | ||||||
Accrual of estimated costs | $ 10,913 | $ 9,068 | $ 10,995 | $ 14,139 | $ 12,721 | $ 10,670 |
Certain products | ||||||
Product Liability Contingency [Line Items] | ||||||
Accrual of estimated costs | $ 5,600 |
Reserve for Product Warrantie49
Reserve for Product Warranties - Schedule of Warranty Reserve (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Reserve for Product Warranties | ||||
Balance, beginning of period | $ 9,068 | $ 12,721 | $ 10,995 | $ 10,670 |
Assumed through acquisitions | 0 | 0 | 0 | 1,166 |
Additions (decreases) charged to expense | 2,100 | 2,902 | 975 | 5,708 |
Reductions | (255) | (1,484) | (1,057) | (3,405) |
Balance, end of period | $ 10,913 | $ 14,139 | $ 10,913 | $ 14,139 |
Share-Based Compensation - Narr
Share-Based Compensation - Narrative (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($)plan | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Number of active share based compensation plans | plan | 2 |
Unrecognized compensation expense related to unvested portion of stock options | $ | $ 17.6 |
Weighted average period of recognition of unrecognized compensation expense | 2 years 4 months |
Share-Based Compensation - Sche
Share-Based Compensation - Schedule of Share-based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | $ 3,270 | $ 2,219 | $ 5,632 | $ 4,975 |
Cost of revenue | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 71 | 40 | 139 | 121 |
Marketing and selling | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 199 | 117 | 396 | 186 |
Research and development | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 272 | 311 | 549 | 778 |
General and administrative | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | $ 2,728 | $ 1,751 | $ 4,548 | $ 3,890 |
Other Income (Expense), net (De
Other Income (Expense), net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Other expense, net | ||||
Interest income | $ (5) | $ 96 | $ 5 | $ 428 |
Interest expense | (1,641) | (1,284) | (3,601) | (2,264) |
Foreign currency gain (loss) | (838) | 897 | (234) | 469 |
Other income | 86 | (87) | (388) | (51) |
Total other income (expense), net | $ (2,398) | $ (378) | $ (4,218) | $ (1,418) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items] | |||||
Provision for income tax benefit | $ 3,609,000 | $ 1,621,000 | $ 5,009,000 | $ 1,606,000 | |
Effective income tax rate | 58.30% | 24.40% | 46.70% | 25.50% | |
Statutory tax rate | 21.00% | 35.00% | |||
Income tax provision related to one-time transition tax on mandatory deemed repatriation of foreign earnings | $ 16,600,000 | ||||
tax benefit related to unrecognized tax benefits due to the lapse of applicable statute of limitations | $ 12,000 | ||||
Minimum | |||||
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items] | |||||
Possible of uncertain tax benefit within the next twelve months | $ 0 | 0 | |||
Maximum | |||||
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items] | |||||
Possible of uncertain tax benefit within the next twelve months | $ 900,000 | $ 900,000 |
Debt and Credit Arrangements -
Debt and Credit Arrangements - Narrative (Details) | 6 Months Ended | ||
Jun. 30, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | |
Line of Credit Facility [Line Items] | |||
Revolving credit facility | $ 119,379,000 | $ 154,283,000 | |
Revolving credit facility | Line of Credit | |||
Line of Credit Facility [Line Items] | |||
Revolving credit facility | $ 120,000,000 | $ 155,000,000 | |
Credit Agreement | Citibank, National Association | |||
Line of Credit Facility [Line Items] | |||
Aggregate secured revolving credit facility | $ 225,000,000 | ||
Leverage Ratio | 2.01 | ||
Interest Coverage Ratio | 5.98 | ||
All-in rate | 4.27% | ||
Credit Agreement | Citibank, National Association | Federal Funds Rate | |||
Line of Credit Facility [Line Items] | |||
Interest rate | 0.50% | ||
Credit Agreement | Citibank, National Association | LIBOR rate | |||
Line of Credit Facility [Line Items] | |||
Interest rate | 1.00% | ||
Credit Agreement | Citibank, National Association | Maximum | |||
Line of Credit Facility [Line Items] | |||
Leverage Ratio | 2.75 | ||
Credit Agreement | Citibank, National Association | Maximum | LIBOR rate | |||
Line of Credit Facility [Line Items] | |||
Interest rate | 275.00% | ||
Credit Agreement | Citibank, National Association | Minimum | |||
Line of Credit Facility [Line Items] | |||
Interest Coverage Ratio | 1.75 | ||
Credit Agreement | Citibank, National Association | Minimum | LIBOR rate | |||
Line of Credit Facility [Line Items] | |||
Interest rate | 175.00% |
Debt and Credit Arrangements 55
Debt and Credit Arrangements - Schedule of Long-term debt (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Revolving credit facility | $ 119,379 | $ 154,283 |
Debt issuance costs | (621) | (717) |
Less: current portion of long-term debt | 0 | 0 |
Total long-term debt | 119,379 | 154,283 |
Revolving credit facility | Line of Credit | ||
Debt Instrument [Line Items] | ||
Revolving credit facility | $ 120,000 | $ 155,000 |
Financial Instruments and Der56
Financial Instruments and Derivatives (Details) | Jun. 30, 2018USD ($) |
Derivative [Line Items] | |
Losses associated with cash flow hedge expected to be reclassified within the next 12 months | $ 72,000 |
Designated as Hedging Instrument | Cash Flow Hedging | Interest Rate Swap | |
Derivative [Line Items] | |
Current Notional Amount | $ 40,000,000 |
Fixed Interest Rate | 2.611% |
Estimated Fair Value | $ (1,000) |
Segment, Customer and Geograp57
Segment, Customer and Geographic Information - Narrative (Details) | 6 Months Ended |
Jun. 30, 2018segment | |
Segment Reporting [Abstract] | |
Number of reportable segments (segments) | 1 |
Segment, Customer and Geograp58
Segment, Customer and Geographic Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Consolidated Revenue: | |||||
Revenue | $ 130,653 | $ 122,227 | $ 259,261 | $ 246,887 | |
Revenue by End Market: | |||||
Total Revenue | 130,653 | 122,227 | 259,261 | 246,887 | |
Property and equipment, net: | |||||
Property and equipment, net | 21,645 | 21,645 | $ 22,071 | ||
Neurology Products | |||||
Revenue by End Market: | |||||
Total Revenue | 70,408 | 59,317 | 136,371 | 115,585 | |
Neurology Products | Devices and Systems | |||||
Revenue by End Market: | |||||
Total Revenue | 50,308 | 41,584 | 96,361 | 79,773 | |
Neurology Products | Supplies | |||||
Revenue by End Market: | |||||
Total Revenue | 16,535 | 15,182 | 33,707 | 30,069 | |
Neurology Products | Services | |||||
Revenue by End Market: | |||||
Total Revenue | 3,565 | 2,551 | 6,303 | 5,743 | |
Newborn Care Products | |||||
Revenue by End Market: | |||||
Total Revenue | 29,087 | 34,108 | 59,978 | 74,742 | |
Newborn Care Products | Devices and Systems | |||||
Revenue by End Market: | |||||
Total Revenue | 13,985 | 17,464 | 29,951 | 41,602 | |
Newborn Care Products | Supplies | |||||
Revenue by End Market: | |||||
Total Revenue | 9,625 | 11,299 | 19,147 | 22,745 | |
Newborn Care Products | Services | |||||
Revenue by End Market: | |||||
Total Revenue | 5,477 | 5,345 | 10,880 | 10,395 | |
Otometrics Products | |||||
Revenue by End Market: | |||||
Total Revenue | 31,158 | 28,802 | 62,912 | 56,560 | |
Otometrics Products | Devices and Systems | |||||
Revenue by End Market: | |||||
Total Revenue | 30,572 | 22,522 | 57,340 | 43,900 | |
Otometrics Products | Supplies | |||||
Revenue by End Market: | |||||
Total Revenue | 586 | 6,280 | 5,572 | 12,660 | |
United States | |||||
Consolidated Revenue: | |||||
Revenue | 75,467 | 67,100 | 144,154 | 131,808 | |
Property and equipment, net: | |||||
Property and equipment, net | 11,149 | 11,149 | 10,128 | ||
International | |||||
Consolidated Revenue: | |||||
Revenue | 55,186 | $ 55,127 | 115,107 | $ 115,079 | |
Property and equipment, net: | |||||
Property and equipment, net | 839 | 839 | 948 | ||
Canada | |||||
Property and equipment, net: | |||||
Property and equipment, net | 4,137 | 4,137 | 5,068 | ||
Argentina | |||||
Property and equipment, net: | |||||
Property and equipment, net | 1,035 | 1,035 | 1,591 | ||
Ireland | |||||
Property and equipment, net: | |||||
Property and equipment, net | 3,413 | 3,413 | 3,178 | ||
Denmark | |||||
Property and equipment, net: | |||||
Property and equipment, net | $ 1,072 | $ 1,072 | $ 1,158 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($)a | Sep. 30, 2014USD ($) | Jun. 30, 2018USD ($)a | Jun. 30, 2017USD ($) | Jun. 30, 2014USD ($) | |
Long Lived Assets Held-for-sale [Line Items] | |||||
Loss on disposal of property and equipment | $ 160 | $ (6) | |||
Mundelein Facility | Level II | |||||
Long Lived Assets Held-for-sale [Line Items] | |||||
Asset held-for-sale book value | $ 3,600 | ||||
Loss on disposal of property and equipment | $ 200 | $ 2,200 | |||
Asset held-for-sale at fair value | $ 1,200 | $ 1,200 | |||
Land | Level II | |||||
Long Lived Assets Held-for-sale [Line Items] | |||||
Area of land held for sale | a | 1.5 | 1.5 | |||
Asset held-for-sale at fair value | $ 900 | $ 900 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Derivative Financial Instruments at Fair Value (Details) - Level II - Recurring $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Derivative Liability [Roll Forward] | |
December 31, 2017 | $ 0 |
Additions | 1 |
Payments | 0 |
Adjustments | 0 |
June 30, 2018 | $ 1 |
Fair Value Measurements - Sch61
Fair Value Measurements - Schedule of Contingent Consideration Liabilities (Details) - Level III $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Contingent consideration, beginning balance | $ 147 |
Additions | 0 |
Payments | (147) |
Adjustments | 0 |
Contingent consideration, ending balance | 0 |
Contingent consideration | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Contingent consideration, beginning balance | 147 |
Additions | 0 |
Payments | (147) |
Adjustments | 0 |
Contingent consideration, ending balance | $ 0 |