DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 24, 2018 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | iart | |
Entity Registrant Name | INTEGRA LIFESCIENCES HOLDINGS CORP | |
Entity Central Index Key | 917,520 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 78,948,346 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Total revenue, net | $ 357,082 | $ 258,636 |
Costs and expenses: | ||
Cost of goods sold | 144,222 | 86,585 |
Research and development | 18,325 | 15,494 |
Selling, general and administrative | 163,566 | 142,497 |
Intangible asset amortization | 5,390 | 4,101 |
Total costs and expenses | 331,503 | 248,677 |
Operating income | 25,579 | 9,959 |
Interest income | 76 | 7 |
Interest expense | (18,768) | (5,131) |
Other income (expense), net | 2,245 | (90) |
Income before income taxes | 9,132 | 4,745 |
Income tax benefit | (1,860) | (1,649) |
Net income | $ 10,992 | $ 6,394 |
Net income per share | ||
Basic (in dollars per share) | $ 0.14 | $ 0.09 |
Diluted (in dollars per share) | $ 0.14 | $ 0.08 |
Weighted average common shares outstanding (See Note 12): | ||
Basic (in shares) | 78,552 | 74,765 |
Diluted (in shares) | 79,834 | 78,394 |
Comprehensive income (See Note 13) | $ 32,604 | $ 12,095 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 189,396 | $ 174,935 |
Trade accounts receivable, net of allowances of $4,596 and $8,882 | 272,260 | 251,799 |
Inventories, net | 290,474 | 296,332 |
Prepaid expenses and other current assets | 96,520 | 99,080 |
Total current assets | 848,650 | 822,146 |
Property, plant and equipment, net | 274,029 | 269,251 |
Intangible assets, net | 1,147,954 | 1,159,627 |
Goodwill | 944,495 | 937,905 |
Deferred tax assets, net | 6,464 | 6,250 |
Other assets | 26,101 | 16,078 |
Total assets | 3,247,693 | 3,211,257 |
Current liabilities: | ||
Short-term portion of borrowings under senior credit facility | 60,000 | 60,000 |
Accounts payable, trade | 86,995 | 93,967 |
Accrued compensation | 56,991 | 73,392 |
Short-term portion of contingent consideration | 24,215 | 22,793 |
Accrued expenses and other current liabilities | 107,819 | 98,759 |
Total current liabilities | 336,020 | 348,911 |
Long-term borrowings under senior credit facility | 1,772,027 | 1,781,142 |
Deferred tax liabilities | 72,879 | 65,130 |
Other liabilities | 68,327 | 53,768 |
Total liabilities | 2,249,253 | 2,248,951 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Preferred stock; no par value; 15,000 authorized shares; none outstanding | 0 | 0 |
Common stock; $0.01 par value; 240,000 authorized shares; 81,711 and 81,306 issued at March 31, 2018 and December 31, 2017, respectively | 817 | 813 |
Additional paid-in capital | 822,520 | 821,758 |
Treasury stock, at cost; 2,890 shares and 2,912 shares at March 31, 2018 and December 31, 2017, respectively | (120,734) | (121,644) |
Accumulated other comprehensive loss | (1,663) | (23,807) |
Retained earnings | 297,500 | 285,186 |
Total stockholders’ equity | 998,440 | 962,306 |
Total liabilities and stockholders’ equity | $ 3,247,693 | $ 3,211,257 |
CONDENSED CONSOLIDATED BALANCE4
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Trade accounts receivable, allowance | $ 4,596 | $ 8,882 |
Preferred stock, authorized shares (in shares) | 15,000,000 | 15,000,000 |
Preferred stock, outstanding shares (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares (in shares) | 240,000,000 | 240,000,000 |
Common stock, issued shares (in shares) | 81,711,000 | 81,306,000 |
Treasury stock, shares (in shares) | 2,890,000 | 2,912,000 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING ACTIVITIES: | ||
Net income | $ 10,992 | $ 6,394 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 27,096 | 19,717 |
Deferred income tax | (1,636) | 7 |
Amortization of debt issuance costs | 1,519 | 393 |
Loss on disposal of property and equipment | 146 | 348 |
Change in fair value of contingent consideration and other | 379 | 261 |
Share-based compensation | 4,731 | 5,363 |
Changes in assets and liabilities, net of business acquisitions: | ||
Accounts receivable | (18,400) | (589) |
Inventories | 1,297 | (5,207) |
Prepaid expenses and other current assets | 12,163 | (1,988) |
Other non-current assets | 339 | (321) |
Accounts payable, accrued expenses and other current liabilities | 2,974 | 10,189 |
Other non-current liabilities | (69) | (5,685) |
Net cash provided by operating activities | 41,531 | 28,882 |
INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (15,387) | (9,191) |
Proceeds from sale of short-term investments | 0 | 9,976 |
Proceeds from note receivable | 221 | 0 |
Proceeds from sale of property and equipment | 148 | 0 |
Cash provided by (used in) business acquisition | 5,720 | (193,928) |
Net cash used in investing activities | (9,298) | (193,143) |
FINANCING ACTIVITIES: | ||
Borrowings under senior credit facility | 25,000 | 210,000 |
Repayments under senior credit facility | (35,000) | (20,000) |
Net cash paid for financing liability from business acquisition | (7,772) | 0 |
Proceeds from exercised stock options | 3,662 | 1,167 |
Cash taxes paid in net equity settlement | (6,776) | (6,128) |
Net cash (used in) provided by financing activities | (20,886) | 185,039 |
Effect of exchange rate changes on cash and cash equivalents | 3,114 | 1,280 |
Net increase in cash and cash equivalents | 14,461 | 22,058 |
Cash and cash equivalents at beginning of period | 174,935 | 102,055 |
Cash and cash equivalents at end of period | $ 189,396 | $ 124,113 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION General The terms “we,” “our,” “us,” “Company” and “Integra” refer to Integra LifeSciences Holdings Corporation, a Delaware corporation, and its subsidiaries unless the context suggests otherwise. In the opinion of management, the March 31, 2018 unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K. The December 31, 2017 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. Operating results for the three-month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the entire year. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Significant estimates affecting amounts reported or disclosed in the consolidated financial statements include allowances for doubtful accounts receivable and sales returns and allowances, net realizable value of inventories, valuation of intangible assets including amortization periods for acquired intangible assets, discount rates and estimated projected cash flows used to value and test impairments of long-lived assets and goodwill, estimates of projected cash flows and depreciation and amortization periods for long-lived assets, computation of taxes, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation, valuation of derivative instruments, valuation of pension assets and liabilities, valuation of contingent liabilities, the fair value of debt instruments and loss contingencies. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the current circumstances. Actual results could differ from these estimates. Recently Issued Accounting Standards In May 2014, the FASB issued Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of 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. To achieve that core principle, an entity should 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. This update became effective for all annual periods and interim reporting periods beginning after December 15, 2017. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective method. See Note 3, Revenues , for further details. In February 2016, the FASB issued Update No. 2016-02, Leases (Topic 842) . Under current accounting guidance, an entity is not required to report operating leases on the balance sheet. The amendment requires that lessees recognize virtually all of their leases on the balance sheet by recording a right-of-use asset and lease liability (other than leases that meet the definition of a "short-term lease"). This update will become effective for all annual periods and interim reporting periods beginning after December 15, 2018. The new standard must be adopted using a modified retrospective transition. Early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In August 2016, the FASB issued Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . The guidance addresses the classification of cash flows related to debt repayment or extinguishment costs, settlement of zero-coupon debt instruments or debt instruments with coupon rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after business combinations, proceeds from the settlement of insurance claims and corporate-owned life insurance, distribution received from equity method investees and beneficial interest in securitization transaction. This update became effective for all annual periods and interim reporting periods beginning after December 15, 2017. The Company adopted ASU 2016-15 effective January 1, 2018 on a retrospective basis. The adoption of this guidance had no significant impact on its consolidated financial statements. In October 2016, the FASB issued Update No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The guidance requires the income tax consequences of intra-entity transfers of assets other than inventory to be recognized as current-period income tax expense or benefit and removes the requirement to defer and amortize the consolidated tax consequences of intra-entity transfers. The new standard became effective for all annual periods beginning after December 15, 2017. The Company adopted ASU 2016-16 effective January 1, 2018, and this guidance had no significant impact on its consolidated financial statements. In March 2017, the FASB issued Update No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . The guidance requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. In addition, the amendments also allow only the service cost component to be eligible for capitalization when applicable. The new standard became effective for annual periods beginning after December 15, 2017. The Company adopted ASU 2017-07 effective January 1, 2018. The Company recognized the components of net periodic benefit cost other than the service cost component in other (expense) income, net in the consolidated statements of operations. The adoption of this guidance had no significant impact on its prior-year consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Stock Compensation (Topic 718): Scope of Modification Accounting . The update provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The new standard became effective for all annual periods beginning after December 15, 2017. The Company adopted ASU 2017-09 effective January 1, 2018, and there was no significant impact of this guidance on its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities . This update amends the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. This update will become effective for all annual periods and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company elected to early adopt ASU 2017-12 effective January 1, 2017 using modified retrospective method. The implementation of the amended guidance did not have any significant impact on the Company's consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income. This amendment allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Act (as defined in Note 11, Income Taxes ). This guidance is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company elected to early adopt the ASU 2018-02 effective January 1, 2018, which resulted in the reclassification of $0.5 million from accumulated other comprehensive loss to retained earnings related to net unrealized loss on cash flow hedges. There are no other recently issued accounting pronouncements that are expected to have any significant effect on the Company's financial position, results of operations or cash flows. |
BUSINESS ACQUISITIONS AND DIVES
BUSINESS ACQUISITIONS AND DIVESTITURE | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
BUSINESS ACQUISITIONS AND DIVESTITURE | BUSINESS ACQUISITIONS AND DIVESTITURE Johnson & Johnson's Codman Neurosurgery Business On October 2, 2017, upon the terms and subject to the conditions set forth in the asset purchase agreement entered into by the Company with DePuy Synthes, Inc., a Delaware corporation (“DePuy Synthes”), a wholly-owned subsidiary of Johnson & Johnson (the "Purchase Agreement"), the Company completed the acquisition of certain assets, and assumed certain liabilities of Johnson & Johnson’s Codman neurosurgery business (the "Codman Acquisition"). Under the terms of the Purchase Agreement, the Company paid an aggregate purchase price of $1.014 billion , subject to adjustments set forth in the Purchase Agreement relating to the book value of inventory transferred to the Company at the closing of the Codman Acquisition, the book value of certain inventory retained by DePuy Synthes will be transferred to the Company in the future along with certain prepaid taxes. To facilitate the completion of the Codman Acquisition, the Company drew $700.0 million from the Term Loan A-1 component of the Senior Credit Facility (as defined in Note 6, Debt ) and used cash available as of October 2, 2017. The Codman Acquisition was accounted for using the acquisition method of business combination under ASC 805, Business Combinations. The Company recorded revenue for Codman Neurosurgery of approximately $77.9 million , in the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2018 . The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations. The following summarizes the preliminary allocation of the purchase price based on the fair value of the assets acquired and liabilities assumed: Preliminary Purchase Price Weighted Average Life (Dollars in thousands) Inventory $ 74,962 Assets held for sale 30,813 Other current assets 7,777 Property, plant and equipment 35,949 Intangible assets: Codman corporate trade name 162,900 Indefinite Completed technology 379,900 22 years Goodwill 343,437 Total assets acquired 1,035,738 Accrued expenses 1,730 Pension liabilities 19,917 Net assets acquired $ 1,014,091 In the first quarter of 2018, the Company adjusted its preliminary purchase price allocation of goodwill by $2.8 million due to working capital adjustments of $5.7 million that were offset by inventory adjustments of $2.9 million because of additional information obtained about the acquired assets. During the first quarter of 2018, the Company received cash of $5.7 million from Depuy Synthes related to working capital adjustments, which was recorded within investing activities on the consolidated statements of cash flows. On April 4, 2018, the Company received an additional $21.0 million related to working capital adjustments. During the first quarter of 2018, the Company paid $7.8 million for inventory that was included in the initial purchase price allocation. The payment was included within financing activities on the consolidated statements of cash flows. As of March 31, 2018 , certain amounts relating to the valuation of property, plant and equipment have not been finalized. The finalization of these matters may result in changes to goodwill. Goodwill related to Codman Acquisition was allocated to the Codman Special Surgical segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is generally deductible for income tax purposes. In fourth quarter of 2017, the Company wrote-off construction in progress of $6.3 million related to a project acquired from Codman Neurosurgery that the Company decided to discontinue after the Codman Acquisition. Divestiture to Natus On September 8, 2017, to facilitate the acquisition of the Codman Neurosurgery Business and to comply with legal requirements, the Company and certain of its subsidiaries entered into an asset purchase agreement (the “Divestiture Agreement”) with Natus Medical Incorporated (“Natus”), pursuant to which the Company agreed to divest its global Camino® Intracranial Pressure monitoring product lines and the U.S. rights to its fixed pressure shunts business within its Codman Specialty Surgical segment together with certain neurosurgery assets acquired as part of the Codman Acquisition, which includes Codman U.S. dural graft implant, external ventricular drainage catheter and cerebrospinal fluid collection systems businesses (the “Divestiture”). The Divestiture Agreement was entered into in connection with the review of the Codman Acquisition by the Federal Trade Commission and the antitrust authority of Spain. On October 6, 2017, upon the terms and subject to the conditions of the Divestiture Agreement, the Divestiture was completed and Natus paid an aggregate purchase price of $46.4 million . Assets and liabilities divested consisted of the following as of October 6, 2017 (amounts in thousands): Inventories $ 8,348 Prepaid expenses and other current assets 36 Assets held for sale 30,813 Property, plant and equipment, net 1,122 Goodwill 2,861 Total assets divested $ 43,180 Deferred revenue $ 1,082 Accrued compensation 209 Total liabilities divested $ 1,291 Assets held for sale includes assets and liabilities related to U.S. dural graft implant, external ventricular drainage catheters and cerebrospinal fluid collection systems businesses acquired as part of the Codman Acquisition. The transitional supply agreement with Natus requires the Company to provide to Natus certain assets defined in the transitional supply agreement upon termination. The Company recognized a liability of $1.3 million , included in other liabilities in consolidated balance sheet, related to estimated cost of assets to be provided to Natus upon termination of the transitional supply agreement. The Divestiture does not represent a strategic shift that will have a major effect on the Company's operations and financial statements. Goodwill was allocated to the assets and liabilities divested using the relative fair value method. The Company recognized a pretax gain on sale of business of $2.6 million included in other income, net in its consolidated statement of operations for the year ended December 31, 2017 . Derma Sciences On February 24, 2017, the Company executed the Agreement and Plan of Merger (the "Merger Agreement") under which the Company acquired all of the outstanding shares of Derma Sciences, Inc., a Delaware corporation ("Derma Sciences") for an aggregate purchase price of approximately $210.8 million , including payment of certain of Derma Sciences' closing expenses and settlement of stock-based compensation plans of $4.8 million and $4.3 million , respectively. The purchase price consisted of a cash payment to the former shareholders of Derma Sciences of approximately $201.7 million upon the closing of the transaction. Derma Sciences is a tissue regeneration company focused on advanced wound and burn care that offers products to help manage chronic and hard-to-heal wounds, especially those resulting from diabetes and poor vascular functioning. The Company recorded revenue for Derma Sciences of approximately $24.7 million and $10.4 million in the condensed consolidated statements of operations and comprehensive income for three months ended March 31, 2018 and 2017 , respectively. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it has been integrated into the Company's operations. The following summarizes the allocation of the purchase price based on the fair value of the assets acquired and liabilities assumed: Purchase Price Allocation (Dollars in thousands) Cash and cash equivalents $ 16,512 Short-term investments 19,238 Accounts receivable 8,949 Inventory 17,977 Prepaid expenses and other current assets 4,369 Property, plant and equipment 4,311 Intangible assets: Wtd. Avg. Life: Customer relationship 78,300 14 years Trademarks/brand names 13,500 15 years Completed technology 11,600 14 years Non-compete agreement 280 1 year Goodwill 73,765 Deferred tax assets 14,524 Other assets 101 Total assets acquired 263,426 Accounts payable 4,560 Accrued expenses and other current liabilities 7,409 Contingent liability 37,174 Other liabilities 3,805 Net assets acquired $ 210,478 Goodwill related to Derma Sciences acquisition was allocated to the Orthopedics and Tissue Technologies segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes. Short-term Investments Short-term investments recognized at the acquisition date of Derma Sciences are investments in equity and debt securities including certificates of deposit purchased with an original maturity greater than three months which are deposited in various U.S. financial institutions and are fully insured by the Federal Deposit Insurance Corporation. The Company considers securities with original maturities of greater than 90 days to be available for sale securities. Securities under this classification are recorded at fair value and unrealized gains and losses are recorded within accumulated other comprehensive income. The estimated fair value of the available for sale securities is determined based on quoted market prices. The Company evaluates securities with unrealized losses to determine whether such losses, if any, are other than temporary. Short-term investments are classified as Level 1 in fair value hierarchy. Fair values of short-term investments are determined using the unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the balance sheet date. In the second quarter of 2017 , the Company sold the acquired short-term investments and recognized a realized loss of $2.3 million included in other expense, net in the consolidated statement of operations. Deferred Taxes The acquired deferred taxes of $14.5 million include a deferred tax asset of $39.7 million related to a federal net operating loss which the Company expects to utilize against income in future periods and a deferred tax asset of $16.4 million related to intangibles acquired by Derma Sciences in previous periods, offset by a deferred tax liability of $41.1 million for new intangibles for which the Company will not receive a tax benefit and a deferred tax liability of $0.5 million related to various deferred items. In the second quarter of 2017, the Company decreased the preliminary estimated value of this deferred tax liability by $1.5 million to reflect the adjustments to preliminary estimated fair values of assets and liabilities acquired. In the fourth quarter of 2017, the Company decreased the preliminary value of the deferred tax asset by $3.3 million to reflect returns filed for periods prior to the acquisition date and adjustments for expected effective state tax rates. United States Food and Drug Administration ("FDA") Untitled Letter On June 22, 2015, the FDA issued an Untitled Letter (the "Untitled Letter") alleging that BioD morselized amniotic membrane based products do not meet the criteria for regulation as human cellular tissue-based products (“HCT/Ps”) solely under Section 361 of the Public Health Service Act and that, as a result, BioD would need a biologics license to lawfully market those morselized products. Since the issuance of the Untitled Letter, BioD and more recently, the Company, have been in discussions with the FDA to communicate their disagreement with the FDA’s assertion that certain products do not fall within the HCT/Ps. The FDA has not changed its position that certain of the BioD acquired products are not eligible for marketing solely under Section 361. In November 2017, the FDA issued its final guidance document related to human tissue titled, “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use” (the “HCT/P Final Guidance”). The HCT/P Final Guidance maintains the FDA’s position that products such as the Company’s morselized amniotic membrane tissue based products do not meet the criteria for regulation solely as HCT/Ps. In addition, the FDA articulated a risk-based approach to enforcement and, while some uses for amniotic membrane tissue-based products would enjoy as much as thirty-six months of enforcement discretion, other high risk uses could be subject to immediate enforcement action. The Company does not believe the uses for its amniotic membrane tissue based products fall into the high risk category. Nonetheless, the Company can make no assurances that the FDA will continue to exercise its enforcement discretion with respect to the Company’s amniotic membrane tissue based products, and any potential action of the FDA could have a financial impact regarding the sales of such products. Although the Company continues to disagree with the FDA's position, the Company has been considering and continues to consider regulatory approval pathways for its amniotic membrane tissue based products. Revenues from BioD morselized amniotic material based products for the three months ended March 31, 2018 and 2017 were less than 1.0% of consolidated revenues. Contingent Consideration The Company assumed contingent consideration incurred by Derma Sciences related to its acquisitions of BioD and the intellectual property related to the Medihoney product. The Company accounted for the contingent liabilities by recording their fair value on the date of the acquisition based on a discounted cash-flow model. The contingent liabilities recognized as part of the Derma Sciences acquisition relate to the following: i. contractual incentive payments that could be made to former equity owners of BioD if net sales of BioD products exceed a certain amount for the twelve-month periods ending June 30, 2017 and 2018 ("BioD Earnout Payments"); ii. a contractual incentive payment that could be made to the former equity owners if there has been no specific enforcement action or notice by the FDA against the specific BioD products as a result of the Untitled Letter for a certain period after closing as defined by the agreement ("Product Payment"); and iii. contractual incentive payments that could be made to the former owner of the intellectual property relating to the Medihoney product line, if net sales of Medihoney products exceed certain amounts defined in the agreement between Derma Sciences and the former owner of the intellectual property of Medihoney for any twelve-month period ("Medihoney Earnout Payments"). At the date of the acquisition, net sales used in estimating the BioD Earnout Payments is based on the weighted average of different possible scenarios using a revenue volatility of 13.5% . The BioD Earnout Payments were valued using a discount rate of 3.0% . The maximum payout related to the BioD Earnout Payments is $26.5 million . The estimated fair value as of February 24, 2017 was $9.1 million . In August 2017, the Company paid $4.8 million for the twelve-month period ending June 30, 2017 component of the BioD Earnout Payments. As of March 31, 2018 and December 31, 2017 , the estimated fair value of the remaining portion of the BioD Earnout Payments was $0.3 million . At the date of acquisition, the Company estimated that the probability of the Product Payment was 98.0% and valued it at a discount rate of 2.5% . The maximum payout related to the Product Payment is $29.7 million . The estimated fair value as of February 24, 2017 was $26.8 million . In the second quarter of 2017, the Company adjusted the preliminary estimated fair value to increase the Product Payment by $0.9 million related to additional products that should have been included in the preliminary estimate based on the Merger Agreement. On May 25, 2017, the Company made full payment for the Product Payment of $26.6 million . The payment was included in cash used in business acquisition, net of cash acquired within investing activities in the condensed consolidated statements of cash flows since the payment was made shortly after the acquisition. At the date of the acquisition, the net sales used in estimating the Medihoney Earnout Payments were based on the weighted average of different possible scenarios using revenue volatility of 27.5% . The Medihoney Earnout Payments were valued using a discount rate of 4.5% . The maximum payout related to the Medihoney Earnout Payments is $5.0 million . The estimated fair value as of February 24, 2017, December 31, 2017 and March 31, 2018 was $1.4 million . These fair value measurements were based on significant inputs not observed in the market and thus represented a Level 3 measurement. The contingent considerations are re-measured to fair value at each reporting date until the contingency is resolved, and those changes in fair value are recognized in earnings. Depending on the expected timing of the estimated payments, the acquisition date fair values and subsequent remeasurement could be different. Pro Forma Results The following unaudited pro forma financial information summarizes the results of operations for the three months ended March 31, 2017 as if the acquisitions of Codman Neurosurgery, Derma Sciences and TGX Medical Systems LLC and Divestiture to Natus, which were completed by the Company during 2017 had been completed as of the beginning of 2016. The pro forma results are based upon certain assumptions and estimates, and they give effect to actual operating results prior to the acquisitions and adjustments to reflect (i) the change in interest expense, depreciation expenses, intangible asset amortization and inventory step-up, (ii) timing of recognition for certain expenses that will not be recurring in a post-acquisition period, which includes $2.9 million incurred by Derma Sciences prior to the acquisition and $9.0 million incurred by Integra, and (iii) income taxes at a rate consistent with the Company’s statutory rate at the date of the acquisitions. No effect has been given to other cost reductions or operating synergies. As a result, these pro forma results do not necessarily represent results that would have occurred if the acquisition had taken place on the basis assumed above, nor are they indicative of the results of future combined operations. Three Months Ended March 31, 2017 (pro forma) (In thousands, except per share amounts) Total revenue $ 346,655 Net income $ 8,619 Basic income per share $ 0.12 |
REVENUES FROM CONTRACT WITH CUS
REVENUES FROM CONTRACT WITH CUSTOMERS | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
REVENUES FROM CONTRACT WITH CUSTOMERS | REVENUES FROM CONTRACT WITH CUSTOMERS Summary of Accounting Policies on Revenue Recognition Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Total revenue, net, includes product sales, product royalties and other revenues, such as fees received from services. For products shipped with FOB shipping point terms, the control of the product passes to the customer at the time of shipment. For shipments in which the control of the product is transferred when the customer receives the product, the Company recognizes revenue upon receipt by the customer. Certain products that the Company produces for private label customers have no alternative use and the Company has a right of payment for performance to date. Revenues from those products are recognized over the period that the Company manufactures these products, which is typically one to three months. The Company uses the input method to measure the manufacturing activities completed to date, which depicts the progress of the Company's performance obligation of transferring control of goods being manufactured for private label customers. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and distributors, and also from inventory physically held by field sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. Revenues from sale of products and services are evidenced by either a contract with the customer or a valid purchase order and an invoice which includes all relevant terms of sale. For product sales, invoices are generally issued upon the transfer of control (or upon the completion of the manufacturing in the case of the private label transactions recognized over time) and are typically payable 30 days after the invoice date. The Company performs a review of each specific customer's credit worthiness and ability to pay prior to acceptance as a customer. Further, the Company performs periodic reviews of its customers' creditworthiness prospectively. Performance Obligations The Company's performance obligations consist mainly of transferring control of goods and services identified in the contracts, purchase orders or invoices. The Company has no significant multi-element contracts with customers. Significant Judgments Usage-based royalties and licenses are estimated based on the provisions of contracts with customers and recognized in the same period that the royalty-based products are sold by the Company's strategic partners. The Company estimates and recognizes royalty revenue based upon communication with licensees, historical information and expected sales trends. Differences between actual reported licensee sales and those that were estimated are adjusted in the period in which they become known, which is typically the following quarter. Historically, such adjustments have not been significant. The Company estimates returns, price concessions and discounts allowances using the expected value method based on historical trends and other known factors. Rebate allowances are estimated using the most likely method based on each customer contract. The Company's return policy, as set forth in its product catalogs and sales invoices, requires the Company to review and authorize the return of product in advance. Upon the authorization, a credit will be issued for the goods returned within a set amount of days from the shipment, which is generally ninety days. The Company disregards the effects of a financing component if the Company expects, at contract inception, that the period between the transfer and customer payment for the good or services will be one year or less. The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers. Contract Asset and Liability Revenues recognized from the Company's private label business that are not invoiced to the customers as a result of recognizing revenue over time are recorded as a contract asset included in the prepaid expenses and other current assets account in the consolidated balance sheet. Other operating revenues may include fees received under service agreements. Non-refundable fees received under multiple-period service agreements are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability. The following table summarized the changes in the contract asset and liability balances for the three months ended March 31, 2018 : Contract Asset Contract asset, January 1, 2018 $ 3,552 Transferred to trade receivable of contract asset included in beginning of the year contract asset (3,552 ) Contract asset, net of transferred to trade receivables on contracts during the period 4,856 Contract asset, March 31, 2018 $ 4,856 Contract Liability Contract liability, January 1, 2018 $ 11,059 Recognition of revenue included in beginning of year contract liability (1,750 ) Contract liability, net of revenue recognized on contracts during the period 931 Foreign currency translation 28 Contract liability, March 31, 2018 $ 10,268 At March 31, 2018 , the short-term portion of the contract liability of $3.6 million and the long-term portion of $6.7 million were included in accrued expenses and other current liabilities and other liabilities in the consolidated balance sheet. As of March 31, 2018 , the Company is expected to recognize revenue of approximately $2.7 million for the remainder of 2018, $3.4 million in 2019, $0.6 million in 2020, $0.6 million in 2021, $0.6 million in 2022 and $2.4 million thereafter. Shipping and Handling Fees The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold. Product Warranties Certain of the Company's medical devices, including monitoring systems and neurosurgical systems, are reusable and are designed to operate over long periods of time. These products are sold with warranties which may extend for up to two years from the date of the purchase. Warranties are not considered as a separate performance obligation. The Company estimates the product warranties using the expected value method based on historical trends and other known factors, and includes them in accrued expenses and other current liabilities in the consolidated balance sheet. Taxes Collected from Customers The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer. Disaggregated Revenue The following table presents revenues disaggregated by the major sources of revenues for the three months ended March 31, 2018 (amounts in thousands): Neurosurgery $ 166,898 Precision Tools and Instruments 69,217 Total Codman Specialty Surgical 236,115 Wound Reconstruction and Care 70,112 Extremity Orthopedics 24,810 Private Label 26,045 Total Orthopedics and Tissue Technologies 120,967 Total revenue $ 357,082 See Note 14, Segment and Geographical Information , for details of revenues based on the location of the customer. Effect of Adoption of ASC Topic 606 On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method applied to all contracts which were not completed as of January 1, 2018. Result of operations for the reporting periods after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition . The adoption of Topic 606 resulted in an increase to the opening retained earnings of $1.9 million as of January 1, 2018 to reflect the change in timing of the recognition of revenue related to the Company's private label business from point in time to over time during the manufacturing process and goods in transit for which control was transferred to customers at the time of shipment, net of tax effect. The total assets and the total liabilities increased by $7.1 million and $5.2 million , respectively, as of January 1, 2018. The impact of adoption of Topic 606 to the Company's consolidated statement of operations for the three months ended March 31, 2018 was as follows: As Reported Excluding Impact of Topic 606 (Amounts in thousands) Statement of Operations Total revenue, net $ 357,082 $ 356,622 Cost of goods sold 144,222 144,019 Income tax benefit (1,860 ) (1,924 ) Net income 10,992 10,799 The adoption of Topic 606 had no significant impact on the Company's consolidated balance sheet as of March 31, 2018 . |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2018 | |
Inventory, Net [Abstract] | |
INVENTORIES | INVENTORIES Inventories, net consisted of the following: March 31, 2018 December 31, 2017 (In thousands) Finished goods $ 185,203 $ 190,100 Work in process 59,924 58,637 Raw materials 45,347 47,595 $ 290,474 $ 296,332 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the three -month period ended March 31, 2018 were as follows: Codman Specialty Surgical Orthopedics and Tissue Technologies Total (In thousands) Goodwill at December 31, 2017 $ 634,767 $ 303,138 $ 937,905 Codman acquisition purchase price allocation adjustments (2,783 ) — (2,783 ) Foreign currency translation 6,335 3,038 9,373 Balance, March 31, 2018 $ 638,319 $ 306,176 $ 944,495 The components of the Company’s identifiable intangible assets were as follows: March 31, 2018 Weighted Average Life Cost Accumulated Amortization Net (Dollars in thousands) Completed technology 19 years $ 873,943 $ (135,897 ) $ 738,046 Customer relationships 13 years 233,922 (95,942 ) 137,980 Trademarks/brand names 28 years 105,187 (23,258 ) 81,929 Codman trade name Indefinite 162,900 — 162,900 Supplier relationships 27 years 34,721 (15,449 ) 19,272 All other (1) 4 years 11,347 (3,520 ) 7,827 $ 1,422,020 $ (274,066 ) $ 1,147,954 December 31, 2017 Weighted Average Life Cost Accumulated Amortization Net (Dollars in thousands) Completed technology 19 years $ 869,174 $ (124,096 ) $ 745,078 Customer relationships 13 years 233,430 (91,961 ) 141,469 Trademarks/brand names 28 years 104,879 (22,293 ) 82,586 Codman trade name Indefinite 162,900 — 162,900 Supplier relationships 27 years 34,721 (15,092 ) 19,629 All other (1) 4 years 11,511 (3,546 ) 7,965 $ 1,416,615 $ (256,988 ) $ 1,159,627 (1) At March 31, 2018 and December 31, 2017 , all other included in-process research and development ("IPR&D") costs of $1.0 million in both periods, which was indefinite-lived. During the third quarter of 2017, the Company recorded an impairment charge of $3.3 million in cost of goods sold related to completed technology assets acquired from Tarsus Medical, Inc. ("Tarsus Technology"), since the underlying product will no longer be sold. Tarsus Technology was included in the Orthopedic and Tissue Technology segment. Based on quarter-end exchange rates, annual amortization expense (including amounts reported in cost of product revenues, but excluding any possible future amortization associated with acquired IPR&D) is expected to be approximately $67.5 million in 2018 , $67.4 million in 2019 , $67.2 million in 2020 , $66.2 million in 2021 , $62.7 million in 2022 , $61.8 million in 2023 and $603.9 million thereafter. Identifiable intangible assets are initially recorded at fair market value at the time of acquisition using an income or cost approach. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Amended and Restated Senior Credit Agreement On March 31, 2017 , the Company entered into an amendment ("March 2017 Amendment") to its fourth amended and restated Senior Credit Facility (the "Senior Credit Facility") with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. The March 2017 Amendment increased the aggregate principal amount from $1.5 billion to $2.2 billion available to the Company through the following facilities: i. a $500.0 million Term Loan A facility; ii. a $700.0 million Term Loan A-1, which was used in a single drawing on a delayed basis at the time of closing of the Codman Acquisition; and iii. a $1.0 billion revolving credit facility, which includes a $60.0 million sublimit for the issuance of standby letters of credit and a $60.0 million sublimit for swingline loans. In connection with the March 2017 Amendment, the Company’s maximum consolidated total leverage ratio in the financial covenants as defined in the Senior Credit Facility was increased to the following: Fiscal Quarter Maximum Consolidated Total Leverage Ratio December 31, 2016 through before the first fiscal quarter after the delayed draw date of Term Loan A-1 4.50 : 1.00 First fiscal quarter ended after the delayed draw date of Term Loan A-1 through September 30, 2018 5.50 : 1.00 October 1, 2018 through September 30, 2019 5.00 : 1.00 October 1, 2019 through September 30, 2020 4.50 : 1.00 October 1, 2020 and thereafter 4.00 : 1.00 There was no change in the maturity date, which remains at December 7, 2021. Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at a rate equal to the following: i. the Eurodollar Rate (as defined in the Senior Credit Facility) in effect from time to time plus the applicable rate (ranging from 1.00% to 2.00% ), or ii. the highest of: 1. the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50% , 2. the prime lending rate of Bank of America, N.A., and 3. the one-month Eurodollar Rate plus 1.00% . The applicable rates are based on the Company’s consolidated total leverage ratio (defined as the ratio of (a) consolidated funded indebtedness less cash in excess of $40.0 million that is not subject to any restriction on the use or investment thereof to (b) consolidated EBITDA at the time of the applicable borrowing. The Company will pay an annual commitment fee ranging from 0.15% to 0.35% , based on the Company's consolidated total leverage ratio, on the amount available for borrowing under the revolving credit facility. The Senior Credit Facility is collateralized by substantially all of the assets of the Company’s U.S. subsidiaries, excluding intangible assets. The Senior Credit Facility is subject to various financial and negative covenants and at March 31, 2018 , the Company was in compliance with all such covenants. The Company capitalized $0.5 million of incremental financing costs in 2017 in connection with the modifications to the Senior Credit Facility. There were no financing costs capitalized in the first quarter of 2018. No previously capitalized financing costs were written-off in the first quarter of 2018 and the fiscal year 2017. In October 2017, the Company capitalized $19.1 million of incremental financing costs related to the drawing of Term A-1 component of the Senior Credit Facility. At March 31, 2018 and December 31, 2017 , there were $660.0 million and $655.0 million outstanding, respectively, under the revolving credit component of the Senior Credit Facility at a weighted average interest rate of 3.7% . At March 31, 2018 and December 31, 2017 , there were $493.8 million and $500.0 million outstanding, respectively, under the Term Loan A component of the Senior Credit Facility at a weighted average interest rate of 3.8% and 3.6% , respectively. At March 31, 2018 and December 31, 2017 , there were $691.3 million and $700.0 million outstanding, respectively, under the Term Loan A-1 component of Senior Credit Facility at a weighted average interest rate of 3.6% . At March 31, 2018 , there was approximately $340.0 million available for borrowing under the Senior Credit Facility. The fair value of outstanding borrowings of the Senior Credit Facility's revolving credit facility, Term Loan A and Term A-1 components at March 31, 2018 was approximately $660.0 million , $492.3 million and $689.2 million , respectively. These fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair value hierarchy. Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly and are other than active market observable inputs that reflect unadjusted quoted prices for identical assets or liabilities. Letters of credit outstanding as of March 31, 2018 and December 31, 2017 totaled $0.6 million . There were no amounts drawn as of March 31, 2018 . Contractual repayments of the Term Loan A and Term A-1 components of Senior Credit Facility are due as follows: Year Ended December 31, Principal Repayment (In thousands) Remainder of 2018 45,000 2019 60,000 2020 90,000 2021 990,000 $ 1,185,000 The outstanding balance of the revolving credit component of the Senior Credit Facility is due on December 7, 2021. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Interest Rate Hedging The Company’s interest rate risk relates to U.S. dollar denominated variable interest rate borrowings. 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 our expected LIBOR-indexed floating-rate borrowings. The Company held the following interest rate swaps as of March 31, 2018 (amounts in thousands): Hedged Item Current Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Floating Rate Estimated Fair Value Assets (Liabilities) 3-month USD LIBOR Loan $ 50,000 June 22, 2016 December 31, 2016 June 30, 2019 1.062 % 3-month USD LIBOR $ 822 3-month USD LIBOR Loan 50,000 June 22, 2016 December 31, 2016 June 30, 2019 1.062 % 3-month USD LIBOR 835 1-month USD LIBOR Loan 50,000 July 12, 2016 December 31, 2016 June 30, 2019 0.825 % 1-month USD LIBOR 850 3-month USD LIBOR Loan 50,000 February 6, 2017 June 30, 2017 June 30, 2020 1.834 % 3-month USD LIBOR 791 1-month USD LIBOR Loan 100,000 February 6, 2017 June 30, 2017 June 30, 2020 1.652 % 1-month USD LIBOR 1,621 1-month USD LIBOR Loan 100,000 March 27, 2017 December 31, 2017 June 30, 2021 1.971 % 1-month USD LIBOR 1,529 1-month USD LIBOR Loan 150,000 December 13, 2017 January 1, 2018 December 31, 2022 2.201 % 1-month USD LIBOR 2,343 1-month USD LIBOR Loan 150,000 December 13, 2017 January 1, 2018 December 21, 2022 2.201 % 1-month USD LIBOR 2,284 1-month USD LIBOR Loan 100,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % 1-month USD LIBOR 1,034 1-month USD LIBOR Loan 50,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % 1-month USD LIBOR 642 1-month USD LIBOR Loan 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % 1-month USD LIBOR 3,437 Total interested rate derivatives designated as cash flow hedge $ 1,050,000 $ 16,188 The Company has designated these derivative instruments as cash flow hedges. The Company records the effectiveness of these derivative instruments and has recorded the changes in the fair value of the derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive income (“AOCI”), net of tax, until the hedged item affected earnings, at which point any gain or loss was 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 remaining amount of any gain or loss on the related cash flow hedge recorded in AOCI to interest expense at that time. Foreign Currency Hedging From time to time the Company enters into foreign currency hedge contracts intended to protect the U.S. dollar value of certain forecasted foreign currency denominated transactions. The Company assesses the effectiveness of the contracts that are designated as hedging instruments. The changes in fair value of foreign currency cash flow hedges are recorded in AOCI, net of tax, until the hedged item affects earnings. Once the related hedged item affects earnings, the Company reclassifies amounts recorded in AOCI to earnings. If the hedged forecasted transaction 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 earnings at that time. For contracts not designated as hedging instruments, the changes in fair value of the contracts are recognized in other income (expense), net in the consolidated statements of operation, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities. The success of the Company’s hedging program depends, in part, on forecasts of certain activity denominated in foreign currency. The Company may experience unanticipated currency exchange gains or losses to the extent that there are differences between forecasted and actual activities during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may affect earnings and cash flows. On November 28, 2017, the Company entered into a foreign currency forward contract, with a notional amount of $8.9 million to mitigate the foreign currency exchange risk related to a certain intercompany loan denominated in Swiss Francs ("CHF"). The contract is not designated as a hedging instrument. For the three months ended March 31, 2018 , the Company recognized $0.2 million loss from the change in fair value of the contract, which was included in other income (expense), net in the consolidated statement of operations. The fair value of the foreign currency forward contact was a liability of $0.1 million as of March 31, 2018 , that is included in accrued expenses and other current liabilities in the consolidated balance sheet. Cross-Currency Rate Swap On October 2, 2017, the Company entered into cross currency swap agreements to convert a notional amount of $300.0 million equivalent to 291.2 million of CHF denominated intercompany loans into U.S. dollars. The CHF-denominated intercompany loans were the result of the purchase of intellectual property by a subsidiary in Switzerland as part of the Codman Acquisition. The objective of these cross-currency swaps is to reduce volatility of earnings and cash flows associated with changes in the foreign currency exchange rate. Under the terms of these contracts, which have been designated as cash flow hedges, the Company will make interest payments in Swiss Francs and receive interest in U.S. dollars. Upon the maturity of these contracts, the Company will pay the principal amount of the loans in Swiss Francs and receive U.S. dollars from the counterparties. The Company held the following cross-currency rate swaps as of March 31, 2018 (dollar amounts in thousands): Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value Liability Pay CHF October 2, 2017 October 2, 2020 1.75% CHF 97,065 $ (3,694 ) Receive U.S.$ 4.38% $ 100,000 Pay CHF October 2, 2017 October 2, 2021 1.85% CHF 48,533 (2,123 ) Receive U.S.$ 4.46% $ 50,000 Pay CHF October 2, 2017 October 2, 2022 1.95% CHF 145,598 (7,091 ) Receive U.S.$ 4.52% $ 150,000 Total $ (12,908 ) The cross-currency swaps were carried on the consolidated balance sheet at fair value, and changes in the fair values were recorded as unrealized gains or losses in AOCI. For the three months ended March 31, 2018 , the Company recorded a loss of $6.4 million in other income (expense), net related to change in fair value related to the foreign currency rate translation to offset the gains or losses recognized on the intercompany loans. For the three months ended March 31, 2018 , the Company recorded a loss of $7.0 million in AOCI related to the change in fair value of the cross-currency swap and a gain of $1.9 million in other income, net included in the consolidated statements of operations related to the interest rate differential of the cross-currency swap. As of March 31, 2018 , an estimated gain of $7.7 million is expected to be reclassified within the next twelve months to other income, net from AOCI. As of March 31, 2018 , the Company does not expect any gains or losses will be reclassified into earnings as a result of the discontinuance of these cash flow hedges because the original forecasted transaction will not occur. Counterparty Credit Risk The Company manages its concentration of counterparty credit risk on its derivative instruments by limiting acceptable counterparties to a group of major financial institutions with investment grade credit ratings, and by actively monitoring their credit ratings and outstanding positions on an ongoing basis. Therefore, the Company considers the credit risk of the counterparties to be low. Furthermore, none of the Company’s derivative transactions is subject to collateral or other security arrangements, and none contain provisions that depend upon the Company’s credit ratings from any credit rating agency. Fair Value of Derivative Instruments The Company has classified all of its derivative instruments within Level 2 of the fair value hierarchy because observable inputs are available for substantially the full terms of the derivative instruments. The fair value of the foreign currency forward exchange contracts related to inventory purchases is determined by comparing the forward rate as of the end of the period and the settlement rate specified in each contract. The fair value of the interest rate swaps was developed using a market approach based on publicly available market yield curves and the terms of the related swap. The Company performs ongoing assessments of counterparty credit risk. The following table summarizes the fair value and presentation for derivatives designated as hedging instruments in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 : Fair Value as of Location on Balance Sheet (1) : March 31, 2018 December 31, 2017 (In thousands) Derivatives designated as hedges — Assets: Prepaid expenses and other current assets Interest rate swap (2) $ 2,992 $ 1,521 Cross-currency swap 7,652 7,757 Other assets Interest rate swap (2) 13,647 2,491 Cross-currency swap — — Total derivatives designated as hedges — Assets $ 24,291 $ 11,769 Derivatives designated as hedges — Liabilities: Accrued expenses and other current liabilities Interest rate swap (2) $ 451 $ 1,845 Cross-currency swap — — Other liabilities Interest rate swap (2) — 1,575 Cross-currency swap 20,560 11,714 Total derivatives designated as hedges — Liabilities $ 21,011 $ 15,134 (1) The Company classifies derivative assets and liabilities as non-current based on the cash flows expected to be incurred within the following 12 months. (2) At March 31, 2018 and December 31, 2017 , the notional amount related to the Company’s interest rate swaps was $1.05 billion . There is no expected reduction in this notional amount in the next twelve months. The following presents the effect of derivative instruments designated as cash flow hedges on the accompanying condensed consolidated statement of operations during the three months ended March 31, 2018 and 2017 : Balance in AOCI Beginning of Quarter Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Earnings Balance in AOCI End of Quarter Location in Statements of Operations (In thousands) Three Months Ended March 31, 2018 Interest rate swap $ 592 $ 14,940 $ (656 ) $ 16,188 Interest (expense) Cross-currency swap (5,104 ) (7,027 ) (4,454 ) (7,677 ) Other income (expense) $ (4,512 ) $ 7,913 $ (5,110 ) $ 8,511 Three Months Ended March 31, 2017 Interest rate swap $ 1,871 $ 586 $ (22 ) $ 2,479 Interest (expense) $ 1,871 $ 586 $ (22 ) $ 2,479 At March 31, 2018 , the Company expects $10.2 million of pre-tax income recorded in AOCI related to cash flow hedges to be reclassified to earnings in the next twelve months. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION As of March 31, 2018 , the Company had stock options, restricted stock awards, performance stock units, contract stock awards and restricted stock unit awards outstanding under two plans, the 2001 Equity Incentive Plan (the “2001 Plan”) and the 2003 Equity Incentive Plan (the “2003 Plan,” and collectively, the “Plans”). Stock options issued under the Plans become exercisable over specified periods, generally within three to four years from the date of grant for officers and employees, and within a year from date of grant for directors and generally expire eight years from the grant date for employees, and from eight to ten years for directors and certain executive officers. Restricted stock issued under the Plans vests over specified periods, generally three years after the date of grant. The vesting of performance stock issued under the Plans is subject to service and performance conditions. Stock Options As of March 31, 2018 , there were approximately $6.3 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately three years . There were 139,938 stock options granted during the three months ended March 31, 2018 . Awards of Restricted Stock and Performance Stock Performance stock and restricted stock awards generally have requisite service periods of three years. Performance stock units are subject to graded vesting conditions, and the Company expenses their fair value over the requisite service period. The Company expenses the fair value of restricted stock awards on a straight-line basis over the requisite service period. As of March 31, 2018 , there were approximately $33.3 million of total unrecognized compensation costs related to these unvested awards. The Company expects to recognize these costs over a weighted-average period of approximately two years . The Company granted 223,571 restricted stock awards and 119,459 performance stock during the three months ended March 31, 2018 . The Company has no formal policy related to the repurchase of stock for the purpose of satisfying stock-based compensation obligations. The Company also maintains an Employee Stock Purchase Plan (the “ESPP”), which provides eligible employees with the opportunity to acquire shares of common stock at periodic intervals by means of accumulated payroll deductions. The ESPP is a non-compensatory plan based on its terms. |
DEFINED BENEFIT PLANS
DEFINED BENEFIT PLANS | 3 Months Ended |
Mar. 31, 2018 | |
Retirement Benefits [Abstract] | |
DEFINED BENEFIT PLANS | DEFINED BENEFIT PLANS The Company maintains defined benefit pension plans that cover certain employees in Austria, France, Japan, Germany and Switzerland. Net periodic benefit costs for the Company’s defined benefit pension plans for the three months ended March 31, 2018 were $0.6 million . The components of the net periodic benefit costs other than the service cost component of $0.7 million are included in other income (expense), net in consolidated statements of operation. The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2017 that it expected to contribute $1.8 million to its defined benefit pension plans in 2018 . For the three months ended March 31, 2018 , the Company contributed $0.5 million to the defined benefit plans. As of March 31, 2018 , the Company anticipates contributing an additional $1.4 million to defined benefit plans in 2018 , for a total of $1.9 million . The estimated fair values of plan assets were $29.3 million and $26.9 million as of March 31, 2018 and December 31, 2017 , respectively. The net plan assets of the pension plans are invested in common trusts as of March 31, 2018 and December 31, 2017 . Common trusts are classified as Level 2 in the fair value hierarchy. The fair value of common trusts is valued at the net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. The investment strategy of the Company's defined benefit plans is both to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within an appropriate risk profile. |
TREASURY STOCK
TREASURY STOCK | 3 Months Ended |
Mar. 31, 2018 | |
Treasury Stock Transactions, Excluding Value of Shares Reissued [Abstract] | |
TREASURY STOCK | TREASURY STOCK On October 25, 2016, the Board of Directors terminated its October 2014 authorization for the repurchase of its outstanding common stock and authorized management to repurchase up to $150.0 million of its outstanding common stock through December 31, 2018. Shares may be repurchased either in the open market or in privately negotiated transactions. As of March 31, 2018 , there remained $150.0 million available for repurchase under this authorization. As of March 31, 2018 and December 31, 2017 , there were 2.9 million shares of treasury stock outstanding with a cost of $120.7 million and $121.6 million , respectively, at a weighted average of $41.77 per share. There were no cash treasury stock repurchases during the three months ended March 31, 2018 or 2017 . |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The following table provides a summary of the Company's effective tax rate: Three Months Ended March 31, 2018 2017 Reported tax rate (20.4 )% (34.8 )% The Company’s effective income tax rates for the three months ended March 31, 2018 and 2017 were (20.4)% and (34.8)% , respectively. For the three months ended March 31, 2018, the primary drivers of the change in rate are higher income before income taxes compared to the same period in 2017 and the inclusion of the new GILTI (as defined below) provisions of $0.7 million and other tax reform-related changes offset by the reduction in the federal statutory rate from 35% to 21%. The tax benefit recorded this quarter is primarily driven by excess tax benefits from share-based compensation for the three months ended March 31, 2018 and 2017 , which were $2.8 million and $2.7 million , respectively. These excess tax benefits from share-based compensation reduced the effective tax rate by 30.9% and 57.7% for the three months ended March 31, 2018 and 2017, respectively. The Tax Cuts and Jobs Act (the "2017 Tax Act"), enacted in December 2017, made significant changes to the previous tax laws. Included among the numerous changes are a reduction of the federal statutory rate from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the elimination of certain domestic tax deductions such as the domestic production activities deduction. Additionally, the 2017 Tax Act provides for a one-time repatriation tax on accumulated foreign subsidiaries’ untaxed foreign earnings (the “Toll Tax”). The 2017 Tax Act implements a territorial tax system and includes base erosion provisions on non-U.S. earnings, which subjects certain foreign earnings to additional taxation as global intangible low-taxed income (“GILTI”). These provisions became effective on January 1, 2018. As of March 31, 2018, the Company included GILTI related to current-year operations in its estimated annual effective tax rate but has not yet included additional GILTI on deferred tax items. The 2017 Tax Act eliminated the deferral of U.S. income tax on unrepatriated earnings from foreign subsidiaries through the imposition of the Toll Tax, a one-time tax in 2017 on deemed repatriated foreign earnings, which is paid over an eight-year period. The tax is assessed on the foreign subsidiary accumulated foreign earnings that were not previously taxed. Foreign earnings in cash and cash equivalents are taxed at 15.5% and all other earnings are taxed at 8.0%. The calculation of the Toll Tax allows for the ability to offset positive foreign earnings with existing foreign deficits and use of foreign tax credits. The Company prepared a reasonable estimate of this tax and expects to continue to refine the estimate as it finalizes its 2017 tax returns. As of December 31, 2017 , we recorded an estimated income tax expense of $5.5 million related to the Toll Tax, of which, $0.4 million is expected to be paid within one year. The Company continued to analyze its foreign earnings and profits (“E&P”) during the three months ended March 31, 2018 and has not made any adjustments to the provisional amounts recognized during 2017. The Company will continue to refine its E&P analysis, which may affect the measurement of the Toll Tax liability. As a result of the 2017 Tax Act’s reduction of the federal statutory rate from 35% to 21%, the Company remeasured deferred tax assets and liability and recorded a tax benefit of $43.4 million as of December 31, 2017. The Company did not record any adjustments to this provisional amount during the three months ended March 31, 2018 and will continue to analyze and refine its calculations related to the remeasurement as the impact of the 2017 Tax Act is finalized. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 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 Tax Act. The Company made reasonable estimates of the impact of the 2017 Tax Act on its consolidated financial statements as of December 31, 2017 and recognized the provisional tax impacts related to the deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the twelve months ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the 2017 Tax Act. |
NET INCOME PER SHARE
NET INCOME PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | NET INCOME PER SHARE Basic and diluted net income per share was as follows: Three Months Ended March 31, 2018 2017 (In thousands, except per share amounts) Basic net income per share: Net income $ 10,992 $ 6,394 Weighted average common shares outstanding 78,552 74,765 Basic net income per common share $ 0.14 $ 0.09 Diluted net income per share: Net income $ 10,992 $ 6,394 Weighted average common shares outstanding — Basic 78,552 74,765 Effect of dilutive securities: Warrants — 2,139 Stock options and restricted stock 1,282 1,490 Weighted average common shares for diluted earnings per share 79,834 78,394 Diluted net income per common share $ 0.14 $ 0.08 Shares of common stock of approximately 0.2 million and 0.2 million at March 31, 2018 and 2017 , respectively, that are issuable through the exercise of dilutive securities were not included in the computation of diluted net income per share because their effect would have been antidilutive. In connection with the issuance of the 1.625% Convertible Senior Notes due in 2016, which the Company extinguished on December 15, 2016, the Company entered into call transactions and warrant transactions with the affiliates of the initial purchasers of such notes. The warrants expired on a series of expiration dates from March 2017 to August 2017. For the year ended December 31, 2017, the hedge participants exercised 8,707,202 warrants. As a result, the Company issued 2,839,743 shares of common stock for the year ended December 31, 2017. The company has no outstanding warrants as of March 31, 2018. For the three months ended March 31, 2017 , the potential excess conversion value on warrants was included in the Company's dilutive share calculation because the average stock price for the three months ended March 31, 2017 exceeded the conversion price. Restricted and performance units that entitle the holders to approximately 0.5 million shares of common stock are included in the basic and diluted weighted average shares outstanding calculation because no further consideration is due related to the issuance of the underlying common shares. |
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
COMPREHENSIVE INCOME | COMPREHENSIVE INCOME Comprehensive income was as follows: Three Months Ended March 31, 2018 2017 (In thousands) Net income $ 10,992 $ 6,394 Foreign currency translation adjustment 13,780 4,064 Change in unrealized gain on derivatives, net of tax 7,838 347 Unrealized gain on short-term investments — 1,292 Pension liability adjustment, net of tax (6 ) (2 ) Comprehensive income, net $ 32,604 $ 12,095 Changes in Accumulated Other Comprehensive Income by component between December 31, 2017 and March 31, 2018 are presented in the table below, net of tax: Cash Flow Hedges Defined Benefit Pension Items Foreign Currency Items Total (In thousands) Balance at December 31, 2017 $ (2,979 ) $ (93 ) $ (20,735 ) $ (23,807 ) Reclassification of stranded tax effect 532 — — 532 Balance at January 1, 2018 (2,447 ) (93 ) (20,735 ) (23,275 ) Other comprehensive income (loss) 3,957 (6 ) 13,780 17,731 Amounts reclassified from accumulated other comprehensive income (3,881 ) — — (3,881 ) Net current-period other comprehensive income (loss) 7,838 (6 ) 13,780 21,612 Balance at March 31, 2018 $ 5,391 $ (99 ) $ (6,955 ) $ (1,663 ) For the three months ended March 31, 2018 , the Company reclassified $0.5 million and $3.4 million of loss from AOCI to interest expense and other income (expenses), net, respectively. For the three months ended March 31, 2018 , income tax benefit related to comprehensive losses from cash flow hedges was $1.2 million . |
SEGMENT AND GEOGRAPHIC INFORMAT
SEGMENT AND GEOGRAPHIC INFORMATION | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT AND GEOGRAPHIC INFORMATION | SEGMENT AND GEOGRAPHIC INFORMATION In October 2017, as part of our branding strategy, the Company leveraged the globally recognized Codman name by rebranding the Specialty Surgical Solutions segment as Codman Specialty Surgical. The Company internally manages two global reportable segments and reports the results of its businesses to its chief operating decision maker. The two reportable segments and their activities are described below. • The Codman Specialty Surgical segment includes (i) the Neurosurgery business, which sells a full line of products for neurosurgery and neuro critical care such as tissue ablation equipment, dural repair products, cerebral spinal fluid management devices, intracranial monitoring equipment, and cranial stabilization equipment and (ii) the precision tools and instruments business, which sells more than 60,000 instrument patterns and surgical and lighting products to hospitals, surgery centers, and dental, podiatry, and veterinary offices. • The Orthopedics and Tissue Technologies segment includes such offerings as skin and wound repair, bone and joint fixation implants in the upper and lower extremities, bone grafts and nerve and tendon repair. The Corporate and other category includes (i) various executive, finance, human resource, information systems and legal functions, (ii) brand management, and (iii) share-based compensation costs. The operating results of the various reportable segments as presented are not comparable to one another because (i) certain operating segments are more dependent than others on corporate functions for unallocated general and administrative and/or operational manufacturing functions, and (ii) the Company does not allocate certain manufacturing costs and general and administrative costs to the operating segment results. Net sales and profit by reportable segment for the three months ended March 31, 2018 and 2017 are as follows: Three Months Ended March 31, 2018 2017 (In thousands) Segment Net Sales Codman Specialty Surgical $ 236,115 $ 156,290 Orthopedics and Tissue Technologies 120,967 102,346 Total revenues $ 357,082 $ 258,636 Segment Profit Codman Specialty Surgical $ 89,491 $ 62,703 Orthopedics and Tissue Technologies 32,438 27,079 Segment profit 121,929 89,782 Amortization (5,390 ) (4,101) Corporate and other (90,960 ) (75,722 ) Operating income $ 25,579 $ 9,959 The Company does not allocate any assets to the reportable segments. No asset information is reported to the chief operating decision maker and disclosed in the financial information for each segment. The Company attributes revenues to geographic areas based on the location of the customer. Total revenue by major geographic area consisted of the following: Three Months Ended March 31, 2018 2017 (In thousands) United States $ 248,928 $ 201,096 Europe 51,773 28,816 Asia Pacific 35,785 16,088 Rest of World 20,596 12,636 Total Revenues $ 357,082 $ 258,636 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES In consideration for certain technology, manufacturing, distribution, and selling rights and licenses granted to the Company, the Company has agreed to pay royalties on sales of certain products that it sells. The royalty payments that the Company made under these agreements were not significant for any of the periods presented. The Company is subject to various claims, lawsuits and proceedings in the ordinary course of the Company's business, including claims by current or former employees, distributors and competitors and with respect to its products and product liability claims, lawsuits and proceedings, some of which have been settled by the Company. In the opinion of management, such claims are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material, adverse effect on the Company's financial condition. However, it is possible that the Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies. TEI, acquired by Integra on July 17, 2015, manufactures a bovine-derived surgical mesh product for Boston Scientific Corporation ("BSC") and has been named as a defendant in lawsuits under a broad range of products liability theories, many of which have not been served on TEI. As of March 31, 2018 , only ten active cases remained against TEI. Pursuant to an indemnification agreement with BSC (i) BSC is managing the litigation; and (ii) TEI has in place a product liability insurance policy, of which it must exhaust $3.0 million before BSC’s indemnity begins to cover relevant claims (and of which only a small portion has been utilized to date and against which the insurer has reserved the entire $3.0 million ). Because the thrust of products liability litigation focuses on synthetic surgical mesh products, counsel is filing motions to dismiss on behalf of TEI in many cases. In addition, Integra has certain protections in the merger agreements with TEI which would indemnify it for approximately $30.0 million for the first fifteen months after closing and between $20.0 and $30.0 million for the remainder of the three -year period after closing for losses relating to a variety of matters, including half of certain products liability claims (including those related to the product it manufactures for BSC) not covered by insurance. As of April 26, 2018 , no indemnification payments were received nor owed in relation to the lawsuits. The Company accrues for loss contingencies when it is deemed probable that a loss has been incurred and that loss is estimable. The amounts accrued are based on the full amount of the estimated loss before considering insurance proceeds and do not include an estimate for legal fees expected to be incurred in connection with the loss contingency. The Company consistently accrues legal fees expected to be incurred in connection with loss contingencies as those fees are incurred by outside counsel as a period cost. Contingent Consideration The Company determined the fair value of contingent consideration during the three -month period ended March 31, 2018 and 2017 to reflect the change in estimate, additions, payments, transfers and the time value of money during the period. A reconciliation of the opening balances to the closing balances of these Level 3 measurements for the three months ended March 31, 2018 and 2017 is as follows (in thousands): Three Months Ended March 31, 2018 Contingent Considerations Liabilities Related to Acquisition of Derma Sciences ( See Note 2 ) Contingent Consideration Liability Related to Acquisition of Confluent Surgical, Inc. Location in Financial Statements Short-term Long-term Short-term Balance as of January 1, 2018 $ 315 $ 1,387 $ 22,478 Loss from change in fair value of contingent consideration liabilities — 32 1,422 Selling, general and administrative Balance as of March 31, 2018 $ 315 $ 1,419 $ 23,900 Three Months Ended March 31, 2017 Contingent Considerations Liabilities Related to Acquisition of Derma Sciences (See Note 2 ) Contingent Consideration Liability Related to Acquisition of Confluent Surgical, Inc. Location in Financial Statements Short-term Long-term Short-term Long-term Balance as of January 1, 2017 $ — $ — $ — $ 22,036 Additions from acquisition of Derma Sciences 32,848 3,467 — — Transfers from long-term to current portion — — 4,198 (4,198 ) Loss from change in fair value of contingent consideration liabilities — 82 — 120 Selling, general and administrative Balance as of March 31, 2017 $ 32,848 $ 3,549 $ 4,198 $ 17,958 On January 15, 2014, the Company acquired all outstanding shares of Confluent Surgical, Inc., ("Confluent Surgical"). The purchase price includes contingent consideration. The potential maximum undiscounted contingent consideration of $30.0 million consists of $25.0 million upon obtaining certain U.S. governmental approvals (the "U.S. Contingent Consideration") and $5.0 million upon obtaining certain European governmental approvals, both related to the completion of the transition of the Confluent Surgical business. The U.S. Contingent Consideration is subject to adjustment to reduce the amount of maximum payment based on the timing of obtaining the U.S. governmental approval up to the minimum of $19.0 million . The fair values of contingent consideration related to the acquisition of Confluent Surgical were estimated using a discounted cash flow model using discount rate of 2.2% . In March 2018, the Company received the U.S. governmental approvals and adjusted the related contingent consideration liability to $19.0 million which the Company paid in April 2018. The Company expects to receive the European governmental approvals and pay the related contingent consideration liability within the next twelve months. The Company assesses these assumptions on an ongoing basis as additional information affecting the assumptions is obtained. The contingent consideration balance was included in accrued expenses and other current liabilities and other liabilities at March 31, 2018 and December 31, 2017 . Supply Agreement Liability and Above Market Supply Agreement Liability On January 15, 2014, the Company entered into a transitional supply agreement with Covidien Group S.a.r.l ("Covidien"). This agreement contains financial incentives to Covidien for the timely supply of products each fiscal quarter through the third anniversary of the agreement. The prices paid under the supply agreement were essentially flat through the third anniversary of the agreement, and then increase significantly in each of the following three years. The Company determined the fair value of its supply agreement liability and above market supply agreement liability with Covidien during the three -month periods ended March 31, 2018 and 2017 to reflect the payments, change in estimate and the time value of money during the period. A reconciliation of the opening balances to the closing balances of these Level 3 measurements is as follows (amounts in thousands): Three Months Ended March 31, 2018 Above Market Supply Agreement Liability - Short-term Location in Financial Statements Balance as of January 1, 2018 $ 2,641 Payments (214 ) Gain from change in fair value (980 ) Selling, general and administrative Transfer to accounts payable (571 ) Balance as of March 31, 2018 $ 876 Three Months Ended March 31, 2017 Supply Agreement Liability - Short-term Above Market Supply Agreement Liability - Short- Term Above Market Supply Agreement Liability - Long-term Location in Financial Statements Balance as of January 1, 2017 $ 166 $ — $ 2,648 Payments (166 ) — (155 ) Transfer from long-term to current portion — 1,752 (1,752 ) Loss from increase in fair value — — 59 Selling, general and administrative Balance as of March 31, 2017 $ — $ 1,752 $ 800 The fair values of supply agreement liability and above market supply agreement liability were estimated using a discounted cash flow model using a discount rate of 12.0% . The Company assesses these assumptions on an ongoing basis as additional information impacting the assumptions is obtained. The above market supply agreement liability - short-term was included in accrued expenses and other current liabilities at March 31, 2018 and December 31, 2017 . There are no transfers between level 1, 2 or 3 during the three months ended March 31, 2018 and 2017 . If the Company's estimate regarding the fair value of its contingent consideration liabilities, supply agreement liability and above market supply agreement liability are inaccurate, a future adjustment to these estimated fair values may be required which could change significantly. BioD On April 7, 2017, the Company's indirect wholly-owned subsidiary, BioD filed an action in the Superior Court of New Jersey, Chancery Division, Middlesex County seeking a declaration that the resignation of Russell Olsen, the former CEO of BioD, was “for Good Reason” (as defined in Olsen’s employment agreement); a finding that Olsen breached the implied covenant of good faith and fair dealing, committed legal fraud, equitable fraud and negligent misrepresentation; and an award of damages for such actions, including a return of severance fees paid to Olsen. BioD was acquired in August 2016 by Derma Sciences, which Integra subsequently acquired in February 2017. After receiving a job offer from Integra that Olsen believed materially diminished his title and authority, on February 24, 2017 Olsen indicated his intention to terminate his position with BioD for Good Reason, as otherwise permitted by his employment agreement with BioD. Shortly thereafter, Cynthia Weatherly (as representative of the former equity owners of BioD) claimed in a letter to Derma Sciences that Olsen’s resignation was a “termination Without Cause” (as also defined in Olsen’s employment agreement), which would arguably trigger an acceleration of the earn out under a merger agreement between Derma Sciences, BioD and other parties (the "BioD Merger Agreement"), which was entered into in July 2016, and require as a result of the acceleration the payment of $26.5 million by BioD. As previously disclosed and described in Note 2 - Business Acquisitions and Divestiture , to the Company's consolidated financial statements for the three months ended March 31, 2018, Integra assumed this contingent liability in connection with its acquisition of Derma Sciences. The action for a declaratory judgment was filed to clarify that Olsen’s termination was for Good Reason and not Without Cause. If the employment agreement was terminated for Good Reason, then the Company believes that the earn out provision under the BioD Merger Agreement should not be accelerated and the likelihood of loss is remote. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the FASB issued Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of 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. To achieve that core principle, an entity should 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. This update became effective for all annual periods and interim reporting periods beginning after December 15, 2017. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective method. See Note 3, Revenues , for further details. In February 2016, the FASB issued Update No. 2016-02, Leases (Topic 842) . Under current accounting guidance, an entity is not required to report operating leases on the balance sheet. The amendment requires that lessees recognize virtually all of their leases on the balance sheet by recording a right-of-use asset and lease liability (other than leases that meet the definition of a "short-term lease"). This update will become effective for all annual periods and interim reporting periods beginning after December 15, 2018. The new standard must be adopted using a modified retrospective transition. Early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. In August 2016, the FASB issued Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . The guidance addresses the classification of cash flows related to debt repayment or extinguishment costs, settlement of zero-coupon debt instruments or debt instruments with coupon rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after business combinations, proceeds from the settlement of insurance claims and corporate-owned life insurance, distribution received from equity method investees and beneficial interest in securitization transaction. This update became effective for all annual periods and interim reporting periods beginning after December 15, 2017. The Company adopted ASU 2016-15 effective January 1, 2018 on a retrospective basis. The adoption of this guidance had no significant impact on its consolidated financial statements. In October 2016, the FASB issued Update No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The guidance requires the income tax consequences of intra-entity transfers of assets other than inventory to be recognized as current-period income tax expense or benefit and removes the requirement to defer and amortize the consolidated tax consequences of intra-entity transfers. The new standard became effective for all annual periods beginning after December 15, 2017. The Company adopted ASU 2016-16 effective January 1, 2018, and this guidance had no significant impact on its consolidated financial statements. In March 2017, the FASB issued Update No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . The guidance requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. In addition, the amendments also allow only the service cost component to be eligible for capitalization when applicable. The new standard became effective for annual periods beginning after December 15, 2017. The Company adopted ASU 2017-07 effective January 1, 2018. The Company recognized the components of net periodic benefit cost other than the service cost component in other (expense) income, net in the consolidated statements of operations. The adoption of this guidance had no significant impact on its prior-year consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Stock Compensation (Topic 718): Scope of Modification Accounting . The update provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The new standard became effective for all annual periods beginning after December 15, 2017. The Company adopted ASU 2017-09 effective January 1, 2018, and there was no significant impact of this guidance on its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities . This update amends the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. This update will become effective for all annual periods and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company elected to early adopt ASU 2017-12 effective January 1, 2017 using modified retrospective method. The implementation of the amended guidance did not have any significant impact on the Company's consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income. This amendment allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Act (as defined in Note 11, Income Taxes ). This guidance is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company elected to early adopt the ASU 2018-02 effective January 1, 2018, which resulted in the reclassification of $0.5 million from accumulated other comprehensive loss to retained earnings related to net unrealized loss on cash flow hedges. There are no other recently issued accounting pronouncements that are expected to have any significant effect on the Company's financial position, results of operations or cash flows. |
Summary of Accounting Policies on Revenue Recognition | Summary of Accounting Policies on Revenue Recognition Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Total revenue, net, includes product sales, product royalties and other revenues, such as fees received from services. For products shipped with FOB shipping point terms, the control of the product passes to the customer at the time of shipment. For shipments in which the control of the product is transferred when the customer receives the product, the Company recognizes revenue upon receipt by the customer. Certain products that the Company produces for private label customers have no alternative use and the Company has a right of payment for performance to date. Revenues from those products are recognized over the period that the Company manufactures these products, which is typically one to three months. The Company uses the input method to measure the manufacturing activities completed to date, which depicts the progress of the Company's performance obligation of transferring control of goods being manufactured for private label customers. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and distributors, and also from inventory physically held by field sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. Revenues from sale of products and services are evidenced by either a contract with the customer or a valid purchase order and an invoice which includes all relevant terms of sale. For product sales, invoices are generally issued upon the transfer of control (or upon the completion of the manufacturing in the case of the private label transactions recognized over time) and are typically payable 30 days after the invoice date. The Company performs a review of each specific customer's credit worthiness and ability to pay prior to acceptance as a customer. Further, the Company performs periodic reviews of its customers' creditworthiness prospectively. Performance Obligations The Company's performance obligations consist mainly of transferring control of goods and services identified in the contracts, purchase orders or invoices. The Company has no significant multi-element contracts with customers. Significant Judgments Usage-based royalties and licenses are estimated based on the provisions of contracts with customers and recognized in the same period that the royalty-based products are sold by the Company's strategic partners. The Company estimates and recognizes royalty revenue based upon communication with licensees, historical information and expected sales trends. Differences between actual reported licensee sales and those that were estimated are adjusted in the period in which they become known, which is typically the following quarter. Historically, such adjustments have not been significant. The Company estimates returns, price concessions and discounts allowances using the expected value method based on historical trends and other known factors. Rebate allowances are estimated using the most likely method based on each customer contract. The Company's return policy, as set forth in its product catalogs and sales invoices, requires the Company to review and authorize the return of product in advance. Upon the authorization, a credit will be issued for the goods returned within a set amount of days from the shipment, which is generally ninety days. The Company disregards the effects of a financing component if the Company expects, at contract inception, that the period between the transfer and customer payment for the good or services will be one year or less. The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers. Contract Asset and Liability Revenues recognized from the Company's private label business that are not invoiced to the customers as a result of recognizing revenue over time are recorded as a contract asset included in the prepaid expenses and other current assets account in the consolidated balance sheet. Other operating revenues may include fees received under service agreements. Non-refundable fees received under multiple-period service agreements are recognized as revenue as the Company satisfies the performance obligations to the other party. |
Shipping and Handling Fees | Shipping and Handling Fees The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold. |
Product Warranties | Product Warranties Certain of the Company's medical devices, including monitoring systems and neurosurgical systems, are reusable and are designed to operate over long periods of time. These products are sold with warranties which may extend for up to two years from the date of the purchase. Warranties are not considered as a separate performance obligation. The Company estimates the product warranties using the expected value method based on historical trends and other known factors, and includes them in accrued expenses and other current liabilities in the consolidated balance sheet. |
Taxes Collected from Customers | Taxes Collected from Customers The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer. |
BUSINESS ACQUISITIONS AND DIV22
BUSINESS ACQUISITIONS AND DIVESTITURE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following summarizes the allocation of the purchase price based on the fair value of the assets acquired and liabilities assumed: Purchase Price Allocation (Dollars in thousands) Cash and cash equivalents $ 16,512 Short-term investments 19,238 Accounts receivable 8,949 Inventory 17,977 Prepaid expenses and other current assets 4,369 Property, plant and equipment 4,311 Intangible assets: Wtd. Avg. Life: Customer relationship 78,300 14 years Trademarks/brand names 13,500 15 years Completed technology 11,600 14 years Non-compete agreement 280 1 year Goodwill 73,765 Deferred tax assets 14,524 Other assets 101 Total assets acquired 263,426 Accounts payable 4,560 Accrued expenses and other current liabilities 7,409 Contingent liability 37,174 Other liabilities 3,805 Net assets acquired $ 210,478 The following summarizes the preliminary allocation of the purchase price based on the fair value of the assets acquired and liabilities assumed: Preliminary Purchase Price Weighted Average Life (Dollars in thousands) Inventory $ 74,962 Assets held for sale 30,813 Other current assets 7,777 Property, plant and equipment 35,949 Intangible assets: Codman corporate trade name 162,900 Indefinite Completed technology 379,900 22 years Goodwill 343,437 Total assets acquired 1,035,738 Accrued expenses 1,730 Pension liabilities 19,917 Net assets acquired $ 1,014,091 |
Schedule of Assets and Liabilities Divested | Assets and liabilities divested consisted of the following as of October 6, 2017 (amounts in thousands): Inventories $ 8,348 Prepaid expenses and other current assets 36 Assets held for sale 30,813 Property, plant and equipment, net 1,122 Goodwill 2,861 Total assets divested $ 43,180 Deferred revenue $ 1,082 Accrued compensation 209 Total liabilities divested $ 1,291 |
Schedule of Pro Forma Information | As a result, these pro forma results do not necessarily represent results that would have occurred if the acquisition had taken place on the basis assumed above, nor are they indicative of the results of future combined operations. Three Months Ended March 31, 2017 (pro forma) (In thousands, except per share amounts) Total revenue $ 346,655 Net income $ 8,619 Basic income per share $ 0.12 |
REVENUES FROM CONTRACT WITH C23
REVENUES FROM CONTRACT WITH CUSTOMERS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Changes in Contract Assets and Contract Liabilities | The following table summarized the changes in the contract asset and liability balances for the three months ended March 31, 2018 : Contract Asset Contract asset, January 1, 2018 $ 3,552 Transferred to trade receivable of contract asset included in beginning of the year contract asset (3,552 ) Contract asset, net of transferred to trade receivables on contracts during the period 4,856 Contract asset, March 31, 2018 $ 4,856 Contract Liability Contract liability, January 1, 2018 $ 11,059 Recognition of revenue included in beginning of year contract liability (1,750 ) Contract liability, net of revenue recognized on contracts during the period 931 Foreign currency translation 28 Contract liability, March 31, 2018 $ 10,268 |
Schedule of Disaggregation of Revenue | Disaggregated Revenue The following table presents revenues disaggregated by the major sources of revenues for the three months ended March 31, 2018 (amounts in thousands): Neurosurgery $ 166,898 Precision Tools and Instruments 69,217 Total Codman Specialty Surgical 236,115 Wound Reconstruction and Care 70,112 Extremity Orthopedics 24,810 Private Label 26,045 Total Orthopedics and Tissue Technologies 120,967 Total revenue $ 357,082 |
Schedule of Impact on Statement of Operations | The impact of adoption of Topic 606 to the Company's consolidated statement of operations for the three months ended March 31, 2018 was as follows: As Reported Excluding Impact of Topic 606 (Amounts in thousands) Statement of Operations Total revenue, net $ 357,082 $ 356,622 Cost of goods sold 144,222 144,019 Income tax benefit (1,860 ) (1,924 ) Net income 10,992 10,799 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventory, Net [Abstract] | |
Schedule of Inventory, Net | Inventories, net consisted of the following: March 31, 2018 December 31, 2017 (In thousands) Finished goods $ 185,203 $ 190,100 Work in process 59,924 58,637 Raw materials 45,347 47,595 $ 290,474 $ 296,332 |
GOODWILL AND OTHER INTANGIBLE25
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Changes in Carrying Amount of Goodwill | Changes in the carrying amount of goodwill for the three -month period ended March 31, 2018 were as follows: Codman Specialty Surgical Orthopedics and Tissue Technologies Total (In thousands) Goodwill at December 31, 2017 $ 634,767 $ 303,138 $ 937,905 Codman acquisition purchase price allocation adjustments (2,783 ) — (2,783 ) Foreign currency translation 6,335 3,038 9,373 Balance, March 31, 2018 $ 638,319 $ 306,176 $ 944,495 |
Components of Company's Identifiable Intangible Assets | The components of the Company’s identifiable intangible assets were as follows: March 31, 2018 Weighted Average Life Cost Accumulated Amortization Net (Dollars in thousands) Completed technology 19 years $ 873,943 $ (135,897 ) $ 738,046 Customer relationships 13 years 233,922 (95,942 ) 137,980 Trademarks/brand names 28 years 105,187 (23,258 ) 81,929 Codman trade name Indefinite 162,900 — 162,900 Supplier relationships 27 years 34,721 (15,449 ) 19,272 All other (1) 4 years 11,347 (3,520 ) 7,827 $ 1,422,020 $ (274,066 ) $ 1,147,954 December 31, 2017 Weighted Average Life Cost Accumulated Amortization Net (Dollars in thousands) Completed technology 19 years $ 869,174 $ (124,096 ) $ 745,078 Customer relationships 13 years 233,430 (91,961 ) 141,469 Trademarks/brand names 28 years 104,879 (22,293 ) 82,586 Codman trade name Indefinite 162,900 — 162,900 Supplier relationships 27 years 34,721 (15,092 ) 19,629 All other (1) 4 years 11,511 (3,546 ) 7,965 $ 1,416,615 $ (256,988 ) $ 1,159,627 (1) At March 31, 2018 and December 31, 2017 , all other included in-process research and development ("IPR&D") costs of $1.0 million in both periods, which was indefinite-lived. |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Maximum Leverage Ratios | In connection with the March 2017 Amendment, the Company’s maximum consolidated total leverage ratio in the financial covenants as defined in the Senior Credit Facility was increased to the following: Fiscal Quarter Maximum Consolidated Total Leverage Ratio December 31, 2016 through before the first fiscal quarter after the delayed draw date of Term Loan A-1 4.50 : 1.00 First fiscal quarter ended after the delayed draw date of Term Loan A-1 through September 30, 2018 5.50 : 1.00 October 1, 2018 through September 30, 2019 5.00 : 1.00 October 1, 2019 through September 30, 2020 4.50 : 1.00 October 1, 2020 and thereafter 4.00 : 1.00 |
Schedule of Maturities of Long-term Debt | Contractual repayments of the Term Loan A and Term A-1 components of Senior Credit Facility are due as follows: Year Ended December 31, Principal Repayment (In thousands) Remainder of 2018 45,000 2019 60,000 2020 90,000 2021 990,000 $ 1,185,000 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments | The Company held the following cross-currency rate swaps as of March 31, 2018 (dollar amounts in thousands): Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value Liability Pay CHF October 2, 2017 October 2, 2020 1.75% CHF 97,065 $ (3,694 ) Receive U.S.$ 4.38% $ 100,000 Pay CHF October 2, 2017 October 2, 2021 1.85% CHF 48,533 (2,123 ) Receive U.S.$ 4.46% $ 50,000 Pay CHF October 2, 2017 October 2, 2022 1.95% CHF 145,598 (7,091 ) Receive U.S.$ 4.52% $ 150,000 Total $ (12,908 ) The Company held the following interest rate swaps as of March 31, 2018 (amounts in thousands): Hedged Item Current Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Floating Rate Estimated Fair Value Assets (Liabilities) 3-month USD LIBOR Loan $ 50,000 June 22, 2016 December 31, 2016 June 30, 2019 1.062 % 3-month USD LIBOR $ 822 3-month USD LIBOR Loan 50,000 June 22, 2016 December 31, 2016 June 30, 2019 1.062 % 3-month USD LIBOR 835 1-month USD LIBOR Loan 50,000 July 12, 2016 December 31, 2016 June 30, 2019 0.825 % 1-month USD LIBOR 850 3-month USD LIBOR Loan 50,000 February 6, 2017 June 30, 2017 June 30, 2020 1.834 % 3-month USD LIBOR 791 1-month USD LIBOR Loan 100,000 February 6, 2017 June 30, 2017 June 30, 2020 1.652 % 1-month USD LIBOR 1,621 1-month USD LIBOR Loan 100,000 March 27, 2017 December 31, 2017 June 30, 2021 1.971 % 1-month USD LIBOR 1,529 1-month USD LIBOR Loan 150,000 December 13, 2017 January 1, 2018 December 31, 2022 2.201 % 1-month USD LIBOR 2,343 1-month USD LIBOR Loan 150,000 December 13, 2017 January 1, 2018 December 21, 2022 2.201 % 1-month USD LIBOR 2,284 1-month USD LIBOR Loan 100,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % 1-month USD LIBOR 1,034 1-month USD LIBOR Loan 50,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % 1-month USD LIBOR 642 1-month USD LIBOR Loan 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % 1-month USD LIBOR 3,437 Total interested rate derivatives designated as cash flow hedge $ 1,050,000 $ 16,188 |
Schedule of Fair Value and Presentation of Derivatives | The following table summarizes the fair value and presentation for derivatives designated as hedging instruments in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 : Fair Value as of Location on Balance Sheet (1) : March 31, 2018 December 31, 2017 (In thousands) Derivatives designated as hedges — Assets: Prepaid expenses and other current assets Interest rate swap (2) $ 2,992 $ 1,521 Cross-currency swap 7,652 7,757 Other assets Interest rate swap (2) 13,647 2,491 Cross-currency swap — — Total derivatives designated as hedges — Assets $ 24,291 $ 11,769 Derivatives designated as hedges — Liabilities: Accrued expenses and other current liabilities Interest rate swap (2) $ 451 $ 1,845 Cross-currency swap — — Other liabilities Interest rate swap (2) — 1,575 Cross-currency swap 20,560 11,714 Total derivatives designated as hedges — Liabilities $ 21,011 $ 15,134 (1) The Company classifies derivative assets and liabilities as non-current based on the cash flows expected to be incurred within the following 12 months. (2) At March 31, 2018 and December 31, 2017 , the notional amount related to the Company’s interest rate swaps was $1.05 billion . There is no expected reduction in this notional amount in the next twelve months. |
Effect of Derivative Instruments Designated as Cash Flow Hedges on Statements of Operations | The following presents the effect of derivative instruments designated as cash flow hedges on the accompanying condensed consolidated statement of operations during the three months ended March 31, 2018 and 2017 : Balance in AOCI Beginning of Quarter Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Earnings Balance in AOCI End of Quarter Location in Statements of Operations (In thousands) Three Months Ended March 31, 2018 Interest rate swap $ 592 $ 14,940 $ (656 ) $ 16,188 Interest (expense) Cross-currency swap (5,104 ) (7,027 ) (4,454 ) (7,677 ) Other income (expense) $ (4,512 ) $ 7,913 $ (5,110 ) $ 8,511 Three Months Ended March 31, 2017 Interest rate swap $ 1,871 $ 586 $ (22 ) $ 2,479 Interest (expense) $ 1,871 $ 586 $ (22 ) $ 2,479 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | The following table provides a summary of the Company's effective tax rate: Three Months Ended March 31, 2018 2017 Reported tax rate (20.4 )% (34.8 )% |
NET INCOME PER SHARE (Tables)
NET INCOME PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income Per Share | Basic and diluted net income per share was as follows: Three Months Ended March 31, 2018 2017 (In thousands, except per share amounts) Basic net income per share: Net income $ 10,992 $ 6,394 Weighted average common shares outstanding 78,552 74,765 Basic net income per common share $ 0.14 $ 0.09 Diluted net income per share: Net income $ 10,992 $ 6,394 Weighted average common shares outstanding — Basic 78,552 74,765 Effect of dilutive securities: Warrants — 2,139 Stock options and restricted stock 1,282 1,490 Weighted average common shares for diluted earnings per share 79,834 78,394 Diluted net income per common share $ 0.14 $ 0.08 |
COMPREHENSIVE INCOME (Tables)
COMPREHENSIVE INCOME (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of Comprehensive Income | Comprehensive income was as follows: Three Months Ended March 31, 2018 2017 (In thousands) Net income $ 10,992 $ 6,394 Foreign currency translation adjustment 13,780 4,064 Change in unrealized gain on derivatives, net of tax 7,838 347 Unrealized gain on short-term investments — 1,292 Pension liability adjustment, net of tax (6 ) (2 ) Comprehensive income, net $ 32,604 $ 12,095 |
Schedule of Changes in Accumulated Other Comprehensive Income by Component | Changes in Accumulated Other Comprehensive Income by component between December 31, 2017 and March 31, 2018 are presented in the table below, net of tax: Cash Flow Hedges Defined Benefit Pension Items Foreign Currency Items Total (In thousands) Balance at December 31, 2017 $ (2,979 ) $ (93 ) $ (20,735 ) $ (23,807 ) Reclassification of stranded tax effect 532 — — 532 Balance at January 1, 2018 (2,447 ) (93 ) (20,735 ) (23,275 ) Other comprehensive income (loss) 3,957 (6 ) 13,780 17,731 Amounts reclassified from accumulated other comprehensive income (3,881 ) — — (3,881 ) Net current-period other comprehensive income (loss) 7,838 (6 ) 13,780 21,612 Balance at March 31, 2018 $ 5,391 $ (99 ) $ (6,955 ) $ (1,663 ) |
SEGMENT AND GEOGRAPHIC INFORM31
SEGMENT AND GEOGRAPHIC INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Total Revenue By Major Geographic Area | Net sales and profit by reportable segment for the three months ended March 31, 2018 and 2017 are as follows: Three Months Ended March 31, 2018 2017 (In thousands) Segment Net Sales Codman Specialty Surgical $ 236,115 $ 156,290 Orthopedics and Tissue Technologies 120,967 102,346 Total revenues $ 357,082 $ 258,636 Segment Profit Codman Specialty Surgical $ 89,491 $ 62,703 Orthopedics and Tissue Technologies 32,438 27,079 Segment profit 121,929 89,782 Amortization (5,390 ) (4,101) Corporate and other (90,960 ) (75,722 ) Operating income $ 25,579 $ 9,959 The Company does not allocate any assets to the reportable segments. No asset information is reported to the chief operating decision maker and disclosed in the financial information for each segment. The Company attributes revenues to geographic areas based on the location of the customer. Total revenue by major geographic area consisted of the following: Three Months Ended March 31, 2018 2017 (In thousands) United States $ 248,928 $ 201,096 Europe 51,773 28,816 Asia Pacific 35,785 16,088 Rest of World 20,596 12,636 Total Revenues $ 357,082 $ 258,636 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Contingent Consideration | A reconciliation of the opening balances to the closing balances of these Level 3 measurements is as follows (amounts in thousands): Three Months Ended March 31, 2018 Above Market Supply Agreement Liability - Short-term Location in Financial Statements Balance as of January 1, 2018 $ 2,641 Payments (214 ) Gain from change in fair value (980 ) Selling, general and administrative Transfer to accounts payable (571 ) Balance as of March 31, 2018 $ 876 Three Months Ended March 31, 2017 Supply Agreement Liability - Short-term Above Market Supply Agreement Liability - Short- Term Above Market Supply Agreement Liability - Long-term Location in Financial Statements Balance as of January 1, 2017 $ 166 $ — $ 2,648 Payments (166 ) — (155 ) Transfer from long-term to current portion — 1,752 (1,752 ) Loss from increase in fair value — — 59 Selling, general and administrative Balance as of March 31, 2017 $ — $ 1,752 $ 800 A reconciliation of the opening balances to the closing balances of these Level 3 measurements for the three months ended March 31, 2018 and 2017 is as follows (in thousands): Three Months Ended March 31, 2018 Contingent Considerations Liabilities Related to Acquisition of Derma Sciences ( See Note 2 ) Contingent Consideration Liability Related to Acquisition of Confluent Surgical, Inc. Location in Financial Statements Short-term Long-term Short-term Balance as of January 1, 2018 $ 315 $ 1,387 $ 22,478 Loss from change in fair value of contingent consideration liabilities — 32 1,422 Selling, general and administrative Balance as of March 31, 2018 $ 315 $ 1,419 $ 23,900 Three Months Ended March 31, 2017 Contingent Considerations Liabilities Related to Acquisition of Derma Sciences (See Note 2 ) Contingent Consideration Liability Related to Acquisition of Confluent Surgical, Inc. Location in Financial Statements Short-term Long-term Short-term Long-term Balance as of January 1, 2017 $ — $ — $ — $ 22,036 Additions from acquisition of Derma Sciences 32,848 3,467 — — Transfers from long-term to current portion — — 4,198 (4,198 ) Loss from change in fair value of contingent consideration liabilities — 82 — 120 Selling, general and administrative Balance as of March 31, 2017 $ 32,848 $ 3,549 $ 4,198 $ 17,958 |
BASIS OF PRESENTATION - Narrati
BASIS OF PRESENTATION - Narrative (Details) $ in Thousands | Jan. 01, 2018USD ($) |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Reclassification of stranded tax effect | $ 532 |
Accounting Standards Update 2018-02 | New Accounting Pronouncement, Early Adoption, Effect | |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Reclassification of stranded tax effect | $ 500 |
BUSINESS ACQUISITIONS AND DIV34
BUSINESS ACQUISITIONS AND DIVESTITURE - Narrative (Details) - USD ($) | Apr. 04, 2018 | Oct. 02, 2017 | May 25, 2017 | Feb. 24, 2017 | Aug. 31, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2017 | Oct. 06, 2017 |
Business Acquisition [Line Items] | |||||||||||
Amount drawn from loan | $ 25,000,000 | $ 210,000,000 | |||||||||
Cash received from working capital adjustment related to business acquisition | 5,700,000 | ||||||||||
Payment for contingent consideration | 7,800,000 | ||||||||||
Realized loss on sale of short-term investment | $ 2,300,000 | ||||||||||
Change in fair value of contingent consideration | 379,000 | 261,000 | |||||||||
Net income | 10,992,000 | $ 6,394,000 | |||||||||
Interest Expense, Intangible Asset Amortization, and External Expenses Related to Acquisition | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Net income | $ 9,000,000 | ||||||||||
Product Concentration Risk | BioD Morselized Amniotic Membrane Based Products | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Percentage of revenue to product (less than) | 1.00% | 1.00% | |||||||||
Derma Sciences | Interest Expense, Intangible Asset Amortization, and External Expenses Related to Acquisition | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Net income | $ 2,900,000 | ||||||||||
Codman Specialty Surgical | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Aggregate purchase price received | $ 46,400,000 | ||||||||||
Assets provided upon termination of transitional supply agreement liability | $ 1,300,000 | $ 1,300,000 | |||||||||
Disposal Group, Held-for-sale, Not Discontinued Operations | Codman Specialty Surgical | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Pretax gain on sale of business, included in other income, net | 2,600,000 | ||||||||||
Subsequent Event | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Cash received from working capital adjustment related to business acquisition | $ 21,000,000 | ||||||||||
Codman | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Consideration for acquisition | $ 1,014,000,000 | ||||||||||
Revenue of acquired company | 77,900,000 | ||||||||||
Purchase price adjustments | 2,783,000 | ||||||||||
Purchase price, working capital adjustments | 5,700,000 | ||||||||||
Purchase price, inventory adjustments | 2,900,000 | ||||||||||
Write off of construction in progress | 6,300,000 | ||||||||||
Codman | Secured Debt | Term Loan A-1 | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Amount drawn from loan | $ 700,000,000 | ||||||||||
Derma Sciences | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Consideration for acquisition | $ 210,800,000 | ||||||||||
Revenue of acquired company | 24,700,000 | $ 10,400,000 | |||||||||
Payment of closing expenses | 4,800,000 | ||||||||||
Settlement of stock compensation plan | 4,300,000 | ||||||||||
Cash payment to former shareholders | 201,700,000 | ||||||||||
Acquired deferred taxes | $ 14,524,000 | 14,500,000 | |||||||||
Deferred tax asset, federal net operating loss | 39,700,000 | ||||||||||
Deferred tax asset, intangibles | 16,400,000 | ||||||||||
Deferred tax liabilities, intangibles | 41,100,000 | ||||||||||
Deferred tax asset, various | 500,000 | ||||||||||
Deferred tax liabilities, adjustment to estimated fair value | 1,500,000 | ||||||||||
Deferred tax assets, adjustment to estimated fair value | 3,300,000 | 3,300,000 | |||||||||
Derma Sciences | BioD Earnout Payments | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Payment for contingent consideration | $ 4,800,000 | ||||||||||
Revenue volatility percentage | 13.50% | ||||||||||
Fair value inputs, discount rate | 3.00% | ||||||||||
Contingent consideration maximum payout | $ 26,500,000 | ||||||||||
Estimated fair value of the remaining portion of the contingent consideration, liability | $ 9,100,000 | 300,000 | 300,000 | 300,000 | |||||||
Derma Sciences | Product Payment Contingent Consideration | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Fair value inputs, discount rate | 2.50% | ||||||||||
Contingent consideration maximum payout | $ 29,700,000 | ||||||||||
Estimated fair value of the remaining portion of the contingent consideration, liability | $ 26,800,000 | ||||||||||
Product payment rate | 98.00% | ||||||||||
Change in fair value of contingent consideration | $ 900,000 | ||||||||||
Payment for the product payment | $ 26,600,000 | ||||||||||
Derma Sciences | Medihoney Earnout Payments | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Revenue volatility percentage | 27.50% | ||||||||||
Fair value inputs, discount rate | 4.50% | ||||||||||
Contingent consideration maximum payout | $ 5,000,000 | ||||||||||
Estimated fair value of the remaining portion of the contingent consideration, liability | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 |
BUSINESS ACQUISITIONS AND DIV35
BUSINESS ACQUISITIONS AND DIVESTITURE - Schedule of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Oct. 02, 2017 | Feb. 24, 2017 | Mar. 31, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | ||||
Other current assets | $ 7,777 | |||
Intangible assets: | ||||
Goodwill | $ 944,495 | $ 937,905 | ||
Codman | ||||
Business Acquisition [Line Items] | ||||
Inventory | 74,962 | |||
Assets held for sale | 30,813 | |||
Property, plant and equipment | 35,949 | |||
Intangible assets: | ||||
Goodwill | 343,437 | |||
Total assets acquired | 1,035,738 | |||
Accrued expenses | 1,730 | |||
Pension liabilities | 19,917 | |||
Net assets acquired | 1,014,091 | |||
Codman | Completed technology | ||||
Intangible assets: | ||||
Intangible assets, definite-lived | $ 379,900 | |||
Weighted Average Life | 22 years | |||
Codman | Trade Names | ||||
Intangible assets: | ||||
Intangible assets, indefinite-lived | $ 162,900 | |||
Derma Sciences | ||||
Business Acquisition [Line Items] | ||||
Cash and cash equivalents | $ 16,512 | |||
Short-term investments | 19,238 | |||
Accounts receivable | 8,949 | |||
Inventory | 17,977 | |||
Prepaid expenses and other current assets | 4,369 | |||
Property, plant and equipment | 4,311 | |||
Intangible assets: | ||||
Goodwill | 73,765 | |||
Deferred tax assets | 14,524 | $ 14,500 | ||
Other assets | 101 | |||
Total assets acquired | 263,426 | |||
Accounts payable | 4,560 | |||
Accrued expenses and other current liabilities | 7,409 | |||
Contingent liability | 37,174 | |||
Other liabilities | 3,805 | |||
Net assets acquired | 210,478 | |||
Derma Sciences | Customer relationship | ||||
Intangible assets: | ||||
Intangible assets, definite-lived | $ 78,300 | |||
Weighted Average Life | 14 years | |||
Derma Sciences | Trademarks/brand names | ||||
Intangible assets: | ||||
Intangible assets, definite-lived | $ 13,500 | |||
Weighted Average Life | 15 years | |||
Derma Sciences | Completed technology | ||||
Intangible assets: | ||||
Intangible assets, definite-lived | $ 11,600 | |||
Weighted Average Life | 14 years | |||
Derma Sciences | Non-compete agreement | ||||
Intangible assets: | ||||
Intangible assets, definite-lived | $ 280 | |||
Weighted Average Life | 1 year |
BUSINESS ACQUISITIONS AND DIV36
BUSINESS ACQUISITIONS AND DIVESTITURE - Schedule of Assets and Liabilities Divested (Details) - Codman Specialty Surgical - Disposal Group, Held-for-sale, Not Discontinued Operations $ in Thousands | Oct. 06, 2017USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Inventories | $ 8,348 |
Prepaid expenses and other current assets | 36 |
Assets held for sale | 30,813 |
Property, plant and equipment, net | 1,122 |
Goodwill | 2,861 |
Total assets divested | 43,180 |
Deferred revenue | 1,082 |
Accrued compensation | 209 |
Total liabilities divested | $ 1,291 |
BUSINESS ACQUISITIONS AND DIV37
BUSINESS ACQUISITIONS AND DIVESTITURE - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Business Combinations [Abstract] | ||
Total revenue, as reported | $ 357,082 | $ 258,636 |
Total revenue, pro forma | 346,655 | |
Net income, as reported | $ 10,992 | 6,394 |
Net income, pro forma | $ 8,619 | |
Basic income per share, as reported (in dollars per share) | $ 0.14 | $ 0.09 |
Basic income per share, pro forma (in dollars per share) | $ 0.12 |
REVENUES FROM CONTRACT WITH C38
REVENUES FROM CONTRACT WITH CUSTOMERS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Number of days from shipment to issue a credit | 90 days | ||
Short-term portion of contract liability | $ 3,600 | ||
Long-term portion of contract liability | 6,700 | ||
Increase to opening retained earnings | 297,500 | $ 285,186 | |
Increase to total assets | 3,247,693 | 3,211,257 | |
Increase to total liabilities | $ 2,249,253 | $ 2,248,951 | |
Accounting Standards Update 2014-09 | Adjustment Resulting from Adoption of Topic 606 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Increase to total assets | $ 7,100 | ||
Increase to total liabilities | 5,200 | ||
Accounting Standards Update 2014-09 | Adjustment Resulting from Adoption of Topic 606 | Transferred over Time | Private Label | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Increase to opening retained earnings | $ 1,900 | ||
Minimum | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Manufacturing period for products shipped with no alternative use and right of payment for performance | 1 month | ||
Maximum | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Manufacturing period for products shipped with no alternative use and right of payment for performance | 3 months |
REVENUES FROM CONTRACT WITH C39
REVENUES FROM CONTRACT WITH CUSTOMERS - Narrative, Revenue Remaining Performance Obligation (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied | $ 2.7 |
Performance obligations expected to be satisfied, expected timing | 9 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] | |
Performance obligations expected to be satisfied | $ 3.4 |
Performance obligations expected to be satisfied, expected timing | 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] | |
Performance obligations expected to be satisfied | $ 0.6 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied | $ 0.6 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied | $ 0.6 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied | $ 2.4 |
Performance obligations expected to be satisfied, expected timing |
REVENUES FROM CONTRACT WITH C40
REVENUES FROM CONTRACT WITH CUSTOMERS - Schedule of Changes in Contract Assets and Liabilities (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Contract Asset | |
Contract asset, beginning of period | $ 3,552 |
Transferred to trade receivable of contract asset included in beginning of the year contract asset | (3,552) |
Contract asset, net of transferred to trade receivables on contracts during the period | 4,856 |
Contract asset, End of Period | 4,856 |
Contract Liability | |
Contract liability, Beginning of Period | 11,059 |
Recognition of revenue included in beginning of year contract liability | (1,750) |
Contract liability, net of revenue recognized on contracts during the period | 931 |
Foreign currency translation | 28 |
Contract liability, End of Period | $ 10,268 |
REVENUES FROM CONTRACT WITH C41
REVENUES FROM CONTRACT WITH CUSTOMERS - Schedule of Revenues Disaggregated by Major Source (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | $ 357,082 |
Codman Specialty Surgical | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | 236,115 |
Codman Specialty Surgical | Neurosurgery | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | 166,898 |
Codman Specialty Surgical | Precision Tools and Instruments | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | 69,217 |
Orthopedics and Tissue Technologies | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | 120,967 |
Orthopedics and Tissue Technologies | Wound Reconstruction and Care | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | 70,112 |
Orthopedics and Tissue Technologies | Extremity Orthopedics | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | 24,810 |
Orthopedics and Tissue Technologies | Private Label | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |
Total revenue | $ 26,045 |
REVENUES FROM CONTRACT WITH C42
REVENUES FROM CONTRACT WITH CUSTOMERS - Impact of Adoption on Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Operations | ||
Total revenue, net | $ 357,082 | $ 258,636 |
Cost of goods sold | 144,222 | 86,585 |
Income tax benefit | (1,860) | (1,649) |
Net income | 10,992 | $ 6,394 |
Excluding Impact of Topic 606 | ||
Statement of Operations | ||
Total revenue, net | 356,622 | |
Cost of goods sold | 144,019 | |
Income tax benefit | (1,924) | |
Net income | $ 10,799 |
INVENTORIES - Schedule of Net I
INVENTORIES - Schedule of Net Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory, Net [Abstract] | ||
Finished goods | $ 185,203 | $ 190,100 |
Work in process | 59,924 | 58,637 |
Raw materials | 45,347 | 47,595 |
Inventories, net | $ 290,474 | $ 296,332 |
GOODWILL AND OTHER INTANGIBLE44
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Goodwill [Roll Forward] | |
Goodwill at December 31, 2017 | $ 937,905 |
Foreign currency translation | 9,373 |
Balance, March 31, 2018 | 944,495 |
Codman | |
Goodwill [Roll Forward] | |
Codman acquisition purchase price allocation adjustments | (2,783) |
Codman Specialty Surgical | |
Goodwill [Roll Forward] | |
Goodwill at December 31, 2017 | 634,767 |
Foreign currency translation | 6,335 |
Balance, March 31, 2018 | 638,319 |
Codman Specialty Surgical | Codman | |
Goodwill [Roll Forward] | |
Codman acquisition purchase price allocation adjustments | (2,783) |
Orthopedics and Tissue Technologies | |
Goodwill [Roll Forward] | |
Goodwill at December 31, 2017 | 303,138 |
Foreign currency translation | 3,038 |
Balance, March 31, 2018 | 306,176 |
Orthopedics and Tissue Technologies | Codman | |
Goodwill [Roll Forward] | |
Codman acquisition purchase price allocation adjustments | $ 0 |
GOODWILL AND OTHER INTANGIBLE45
GOODWILL AND OTHER INTANGIBLE ASSETS - Components of Company's Identifiable Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2017 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Cost | $ 1,422,020 | $ 1,416,615 | |
Accumulated Amortization | (274,066) | (256,988) | |
Net | 1,147,954 | 1,159,627 | |
Trade Names | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Cost | 162,900 | 162,900 | |
Net | 162,900 | 162,900 | |
In Process Research and Development | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Other indefinite-lived intangible assets | $ 1,000 | 1,000 | |
Completed technology | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Life | 19 years | 19 years | |
Cost | $ 873,943 | 869,174 | |
Accumulated Amortization | (135,897) | (124,096) | |
Net | $ 738,046 | 745,078 | |
Customer relationships | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Life | 13 years | 13 years | |
Cost | $ 233,922 | 233,430 | |
Accumulated Amortization | (95,942) | (91,961) | |
Net | $ 137,980 | 141,469 | |
Trademarks/brand names | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Life | 28 years | 28 years | |
Cost | $ 105,187 | 104,879 | |
Accumulated Amortization | (23,258) | (22,293) | |
Net | $ 81,929 | 82,586 | |
Supplier relationships | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Life | 27 years | 27 years | |
Cost | $ 34,721 | 34,721 | |
Accumulated Amortization | (15,449) | (15,092) | |
Net | $ 19,272 | 19,629 | |
All other | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Life | 4 years | 4 years | |
Cost | $ 11,347 | 11,511 | |
Accumulated Amortization | (3,520) | (3,546) | |
Net | $ 7,827 | $ 7,965 |
GOODWILL AND OTHER INTANGIBLE46
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Sep. 30, 2017 | Mar. 31, 2018 | |
Goodwill [Line Items] | ||
Expected annual amortization expense, 2018 | $ 67.5 | |
Expected annual amortization expense, 2019 | 67.4 | |
Expected annual amortization expense, 2020 | 67.2 | |
Expected annual amortization expense, 2021 | 66.2 | |
Expected annual amortization expense, 2022 | 62.7 | |
Expected annual amortization expense, 2023 | 61.8 | |
Expected annual amortization expense, thereafter | $ 603.9 | |
Tarsus | Orthopedics and Tissue Technologies | ||
Goodwill [Line Items] | ||
Impairment charge | $ 3.3 |
DEBT - Narrative (Details)
DEBT - Narrative (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2018 | Dec. 31, 2017 | Oct. 31, 2017 | Mar. 31, 2017 | Mar. 30, 2017 | |
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 2,200,000,000 | $ 1,500,000,000 | |||
Previously capitalized financing costs, written-off | $ 0 | $ 0 | |||
Designated as Hedging Instrument | Cash Flow Hedging | |||||
Debt Instrument [Line Items] | |||||
Notional amount | 1,050,000,000 | 1,100,000,000 | |||
Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 1,000,000,000 | ||||
Line of credit facility outstanding | $ 660,000,000 | $ 655,000,000 | |||
Weighted average interest rate on debt | 3.70% | 3.70% | |||
Revolving Credit Facility | Fair Value, Inputs, Level 2 | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility, fair value of amount outstanding | $ 660,000,000 | ||||
Standby Letters of Credit | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 60,000,000 | ||||
Swingline Loan | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 60,000,000 | ||||
Term Loan A | Secured Debt | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 500,000,000 | ||||
Line of credit facility outstanding | $ 493,800,000 | $ 500,000,000 | |||
Weighted average interest rate on debt | 3.80% | 3.60% | |||
Term Loan A | Secured Debt | Fair Value, Inputs, Level 2 | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility, fair value of amount outstanding | $ 492,300,000 | ||||
Term Loan A-1 | Secured Debt | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 700,000,000 | ||||
Incremental financing costs capitalized | $ 19,100,000 | ||||
Line of credit facility outstanding | $ 691,300,000 | $ 700,000,000 | |||
Weighted average interest rate on debt | 3.60% | 3.60% | |||
Term Loan A-1 | Secured Debt | Fair Value, Inputs, Level 2 | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility, fair value of amount outstanding | $ 689,200,000 | ||||
Senior Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Cash balance threshold above which excess amount is not subject to any restriction of use or investment | 40,000,000 | ||||
Incremental financing costs capitalized | 0 | $ 500,000 | |||
Available borrowings under senior secured revolving credit facility | $ 340,000,000 | ||||
Senior Credit Facility | Minimum | |||||
Debt Instrument [Line Items] | |||||
Line of credit, commitment fee percentage | 0.15% | ||||
Senior Credit Facility | Maximum | |||||
Debt Instrument [Line Items] | |||||
Line of credit, commitment fee percentage | 0.35% | ||||
Senior Credit Facility | Eurodollar | Minimum | |||||
Debt Instrument [Line Items] | |||||
Interest rates available to the Company at its option | 1.00% | ||||
Senior Credit Facility | Eurodollar | Maximum | |||||
Debt Instrument [Line Items] | |||||
Interest rates available to the Company at its option | 2.00% | ||||
Senior Credit Facility | Federal Funds | |||||
Debt Instrument [Line Items] | |||||
Interest rates available to the Company at its option | 0.50% | ||||
Senior Credit Facility | One Month Eurodollar Rate | |||||
Debt Instrument [Line Items] | |||||
Interest rates available to the Company at its option | 1.00% | ||||
Senior Credit Facility | Standby Letters of Credit | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility outstanding | $ 0 | ||||
Letters of credit outstanding | $ 600,000 | $ 600,000 |
DEBT - Maximum Total Leverage R
DEBT - Maximum Total Leverage Ratio Table (Details) - Senior Credit Facility | Mar. 31, 2018 |
December 31, 2016 through before the first fiscal quarter after the delayed draw date of Term Loan A-1 | |
Debt Instrument [Line Items] | |
Maximum Consolidated Total Leverage Ratio | 4.50 |
First fiscal quarter ended after the delayed draw date of Term Loan A-1 through September 30, 2018 | |
Debt Instrument [Line Items] | |
Maximum Consolidated Total Leverage Ratio | 5.50 |
October 1, 2018 through September 30, 2019 | |
Debt Instrument [Line Items] | |
Maximum Consolidated Total Leverage Ratio | 5 |
October 1, 2019 through September 30, 2020 | |
Debt Instrument [Line Items] | |
Maximum Consolidated Total Leverage Ratio | 4.50 |
October 1, 2020 and thereafter | |
Debt Instrument [Line Items] | |
Maximum Consolidated Total Leverage Ratio | 4 |
DEBT - Contractual Maturity Tab
DEBT - Contractual Maturity Table (Details) $ in Thousands | Mar. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
Remainder of 2018 | $ 45,000 |
2,019 | 60,000 |
2,020 | 90,000 |
2,021 | 990,000 |
Total Principal Repayment | $ 1,185,000 |
DERIVATIVE INSTRUMENTS - Schedu
DERIVATIVE INSTRUMENTS - Schedule of Derivatives (Details) - Cash Flow Hedging - Designated as Hedging Instrument - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Derivative [Line Items] | ||
Current Notional Amount | $ 1,050,000,000 | $ 1,100,000,000 |
Estimated Fair Value, Assets (Liabilities) | 16,188,000 | |
3-month BBA LIBOR | Interest Rate Swap Designated June 22, 2016 Tranche 1 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 50,000,000 | |
Fixed Interest Rate | 1.062% | |
Estimated Fair Value, Assets (Liabilities) | $ 822,000 | |
3-month BBA LIBOR | Interest Rate Swap Designated June 22, 2016 Tranche 2 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 50,000,000 | |
Fixed Interest Rate | 1.062% | |
Estimated Fair Value, Assets (Liabilities) | $ 835,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated July 12, 2016 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 50,000,000 | |
Fixed Interest Rate | 0.825% | |
Estimated Fair Value, Assets (Liabilities) | $ 850,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated February 6, 2017 Tranche 2 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 100,000,000 | |
Fixed Interest Rate | 1.652% | |
Estimated Fair Value, Assets (Liabilities) | $ 1,621,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated March 27, 2017 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 100,000,000 | |
Fixed Interest Rate | 1.971% | |
Estimated Fair Value, Assets (Liabilities) | $ 1,529,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated December 13, 2017 Tranche 1 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 150,000,000 | |
Fixed Interest Rate | 2.201% | |
Estimated Fair Value, Assets (Liabilities) | $ 2,343,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated December 13, 2017 Tranche 2 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 150,000,000 | |
Fixed Interest Rate | 2.201% | |
Estimated Fair Value, Assets (Liabilities) | $ 2,284,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated December 13, 2017 Tranche 3 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 100,000,000 | |
Fixed Interest Rate | 2.423% | |
Estimated Fair Value, Assets (Liabilities) | $ 1,034,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated December 13, 2017 Tranche 4 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 50,000,000 | |
Fixed Interest Rate | 2.423% | |
Estimated Fair Value, Assets (Liabilities) | $ 642,000 | |
1-Month USD LIBOR | Interest Rate Swap Designated December 13, 2017 Tranche 5 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 200,000,000 | |
Fixed Interest Rate | 2.313% | |
Estimated Fair Value, Assets (Liabilities) | $ 3,437,000 | |
3-Month USD LIBOR | Interest Rate Swap Designated February 6, 2017 Tranche 1 | ||
Derivative [Line Items] | ||
Current Notional Amount | $ 50,000,000 | |
Fixed Interest Rate | 1.834% | |
Estimated Fair Value, Assets (Liabilities) | $ 791,000 |
DERIVATIVE INSTRUMENTS - Narrat
DERIVATIVE INSTRUMENTS - Narrative (Details) SFr in Millions | 3 Months Ended | ||||
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Nov. 28, 2017USD ($) | Oct. 02, 2017CHF (SFr) | Oct. 02, 2017USD ($) | |
Derivative [Line Items] | |||||
Loss recorded to AOCI | $ (7,913,000) | $ (586,000) | |||
Pre-tax income recorded in AOCI related to cash flow hedges to be reclassified to earnings in the next twelve months | 10,200,000 | ||||
Cross-currency swap | Codman | |||||
Derivative [Line Items] | |||||
Loss, reclassification from AOCI, foreign currency rate translation, intercompany loan | 6,400,000 | ||||
Gain reclassified into income | 1,900,000 | ||||
Pre-tax income recorded in AOCI related to cash flow hedges to be reclassified to earnings in the next twelve months | 7,700,000 | ||||
Cross-currency swap | Short | Codman | |||||
Derivative [Line Items] | |||||
Notional amount | $ 300,000,000 | ||||
Cross-currency swap | Long | Codman | |||||
Derivative [Line Items] | |||||
Notional amount | SFr | SFr 291.2 | ||||
Not Designated as Hedging Instrument | Foreign Exchange Forward | |||||
Derivative [Line Items] | |||||
Notional amount | $ 8,900,000 | ||||
Loss from the change in fair value | 200,000 | ||||
Derivative liability, fair value | 100,000 | ||||
Other income (expense) | Cross-currency swap | |||||
Derivative [Line Items] | |||||
Loss recorded to AOCI | 7,027,000 | ||||
Other income (expense) | Cross-currency swap | Codman | |||||
Derivative [Line Items] | |||||
Loss recorded to AOCI | $ 7,000,000 |
DERIVATIVE INSTRUMENTS - Sche52
DERIVATIVE INSTRUMENTS - Schedule of Cross Currency Swap Derivatives (Details) | Mar. 31, 2018CHF (SFr) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Oct. 02, 2017CHF (SFr) | Oct. 02, 2017USD ($) |
Codman | Cross-currency swap | Long | |||||
Derivative [Line Items] | |||||
Aggregate Notional Amount | SFr | SFr 291,200,000 | ||||
Codman | Cross-currency swap | Short | |||||
Derivative [Line Items] | |||||
Aggregate Notional Amount | $ 300,000,000 | ||||
Cash Flow Hedging | Designated as Hedging Instrument | |||||
Derivative [Line Items] | |||||
Aggregate Notional Amount | $ 1,050,000,000 | $ 1,100,000,000 | |||
Cash Flow Hedging | Designated as Hedging Instrument | Codman | Cross-currency swap | |||||
Derivative [Line Items] | |||||
Fair Value Liability | (12,908,000) | ||||
Cash Flow Hedging | Swap One | Designated as Hedging Instrument | Codman | Cross-currency swap | |||||
Derivative [Line Items] | |||||
Fair Value Liability | $ (3,694,000) | ||||
Cash Flow Hedging | Swap One | Designated as Hedging Instrument | Codman | Cross-currency swap | Long | |||||
Derivative [Line Items] | |||||
Fixed Rate | 1.75% | 1.75% | |||
Aggregate Notional Amount | SFr | SFr 97,065,000 | ||||
Cash Flow Hedging | Swap One | Designated as Hedging Instrument | Codman | Cross-currency swap | Short | |||||
Derivative [Line Items] | |||||
Fixed Rate | 4.38% | 4.38% | |||
Aggregate Notional Amount | $ 100,000,000 | ||||
Cash Flow Hedging | Swap Two | Designated as Hedging Instrument | Codman | Cross-currency swap | |||||
Derivative [Line Items] | |||||
Fair Value Liability | $ (2,123,000) | ||||
Cash Flow Hedging | Swap Two | Designated as Hedging Instrument | Codman | Cross-currency swap | Long | |||||
Derivative [Line Items] | |||||
Fixed Rate | 1.85% | 1.85% | |||
Aggregate Notional Amount | SFr | SFr 48,533,000 | ||||
Cash Flow Hedging | Swap Two | Designated as Hedging Instrument | Codman | Cross-currency swap | Short | |||||
Derivative [Line Items] | |||||
Fixed Rate | 4.46% | 4.46% | |||
Aggregate Notional Amount | $ 50,000,000 | ||||
Cash Flow Hedging | Swap Three | Designated as Hedging Instrument | Codman | Cross-currency swap | |||||
Derivative [Line Items] | |||||
Fair Value Liability | $ (7,091,000) | ||||
Cash Flow Hedging | Swap Three | Designated as Hedging Instrument | Codman | Cross-currency swap | Long | |||||
Derivative [Line Items] | |||||
Fixed Rate | 1.95% | 1.95% | |||
Aggregate Notional Amount | SFr | SFr 145,598,000 | ||||
Cash Flow Hedging | Swap Three | Designated as Hedging Instrument | Codman | Cross-currency swap | Short | |||||
Derivative [Line Items] | |||||
Fixed Rate | 4.52% | 4.52% | |||
Aggregate Notional Amount | $ 150,000,000 |
DERIVATIVE INSTRUMENTS - Fair V
DERIVATIVE INSTRUMENTS - Fair Value of Derivative Instruments By Balance Sheet Location (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Derivatives, Fair Value [Line Items] | ||
Reduction In notional amount of interest rate derivatives In next twelve months | $ 0 | |
Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Assets | 24,291,000 | $ 11,769,000 |
Derivatives designated as hedges — Liabilities | 21,011,000 | 15,134,000 |
Interest Rate Swap | ||
Derivatives, Fair Value [Line Items] | ||
Notional amount | 1,050,000,000 | 1,050,000,000 |
Interest Rate Swap | Designated as Hedging Instrument | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Assets | 2,992,000 | 1,521,000 |
Interest Rate Swap | Designated as Hedging Instrument | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Assets | 13,647,000 | 2,491,000 |
Interest Rate Swap | Designated as Hedging Instrument | Accrued expenses and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Liabilities | 451,000 | 1,845,000 |
Interest Rate Swap | Designated as Hedging Instrument | Other liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Liabilities | 0 | 1,575,000 |
Cross-currency swap | Designated as Hedging Instrument | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Assets | 7,652,000 | 7,757,000 |
Cross-currency swap | Designated as Hedging Instrument | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Assets | 0 | 0 |
Cross-currency swap | Designated as Hedging Instrument | Accrued expenses and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Liabilities | 0 | 0 |
Cross-currency swap | Designated as Hedging Instrument | Other liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedges — Liabilities | $ 20,560,000 | $ 11,714,000 |
DERIVATIVE INSTRUMENTS - Effect
DERIVATIVE INSTRUMENTS - Effect of Derivative Instruments Designated Cash Flow Hedges on Statements of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derivative Instruments, Gain (Loss) [Roll Forward] | ||
Balance in AOCI Beginning of Quarter | $ (4,512) | $ 1,871 |
Amount of Gain (Loss) Recognized in AOCI | 7,913 | 586 |
Amount of Gain (Loss) Reclassified from AOCI into Earnings | (5,110) | (22) |
Balance in AOCI End of Quarter | 8,511 | 2,479 |
Interest rate swap | Interest (expense) | ||
Derivative Instruments, Gain (Loss) [Roll Forward] | ||
Balance in AOCI Beginning of Quarter | 592 | 1,871 |
Amount of Gain (Loss) Recognized in AOCI | 14,940 | 586 |
Amount of Gain (Loss) Reclassified from AOCI into Earnings | (656) | (22) |
Balance in AOCI End of Quarter | 16,188 | $ 2,479 |
Cross-currency swap | Other income (expense) | ||
Derivative Instruments, Gain (Loss) [Roll Forward] | ||
Balance in AOCI Beginning of Quarter | (5,104) | |
Amount of Gain (Loss) Recognized in AOCI | (7,027) | |
Amount of Gain (Loss) Reclassified from AOCI into Earnings | (4,454) | |
Balance in AOCI End of Quarter | $ (7,677) |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($)planshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation arrangement by share-based payment award, number of plans | plan | 2 |
Grants in period, net of forfeitures (in shares) | 139,938 |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total unrecognized compensation costs | $ | $ 6.3 |
Weighted-average period for cost recognition | 3 years |
Stock options | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock options exercisable, vesting period | 3 years |
Stock options | Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock options exercisable, vesting period | 4 years |
Stock options | Director | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock options exercisable, vesting period | 1 year |
Stock options | Employee | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expiration period | 8 years |
Stock options | Directors and certain executive officers | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expiration period | 8 years |
Stock options | Directors and certain executive officers | Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expiration period | 10 years |
Performance stock and Restricted stock awards | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Requisite service periods of awards | 3 years |
Restricted stock awards/stock units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock options exercisable, vesting period | 3 years |
Total unrecognized compensation costs | $ | $ 33.3 |
Weighted-average period for cost recognition | 2 years |
Awards granted during the period (in shares) | 223,571 |
Performance shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards granted during the period (in shares) | 119,459 |
DEFINED BENEFIT PLANS - Narrati
DEFINED BENEFIT PLANS - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | ||
Net periodic benefit costs | $ 0.6 | |
Service cost component | 0.7 | |
Expected future employer contributions, next fiscal year | $ 1.8 | |
Employer contributions | 0.5 | |
Expected additional employer contributions | 1.4 | |
Expected employer contributions, this fiscal year | 1.9 | |
Estimated fair value of plan assets | $ 29.3 | $ 26.9 |
TREASURY STOCK - Narrative (Det
TREASURY STOCK - Narrative (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Oct. 25, 2016 | |
Treasury Stock Transactions, Excluding Value of Shares Reissued [Abstract] | ||||
Stock repurchase program, authorized amount (up to) | $ 150,000,000 | |||
Amount available for share repurchase under this latest authorization | $ 150,000,000 | |||
Treasury stock (in shares) | 2,900,000 | 2,900,000 | ||
Treasury stock | $ 120,700,000 | $ 121,600,000 | ||
Treasury stock, average cost per share (in dollars per share) | $ 41.77 | $ 41.77 | ||
Stock repurchased during period (in shares) | 0 | 0 |
INCOME TAXES - Summary of Effec
INCOME TAXES - Summary of Effective Tax Rate (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Reported tax rate | (20.40%) | (34.80%) |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Effective income tax rate | (20.40%) | (34.80%) | |
Provisional income tax expense, Tax Cuts and Jobs Act of 2017 | $ 0.7 | $ 5.5 | |
Excess tax benefit from share-based compensation | $ 2.8 | $ 2.7 | |
Effective income tax rate reduction, excess tax benefits share-based compensation | (30.90%) | (57.70%) | |
Income tax expense, to be paid within one year, Tax Cuts and Jobs Act of 2017 | $ 0.4 | ||
Tax benefit, re-measurement of net deferred tax liabilities, Tax Cuts and Jobs Act of 2017 | $ 43.4 |
NET INCOME PER SHARE - Basic an
NET INCOME PER SHARE - Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Basic net income per share: | ||
Net income | $ 10,992 | $ 6,394 |
Weighted average common shares outstanding - Basic (in shares) | 78,552 | 74,765 |
Basic net income per common share (in dollars per share) | $ 0.14 | $ 0.09 |
Diluted net income per share: | ||
Net income | $ 10,992 | $ 6,394 |
Weighted average common shares outstanding - Basic (in shares) | 78,552 | 74,765 |
Effect of dilutive securities: | ||
Warrants (in shares) | 0 | 2,139 |
Stock options and restricted stock (in shares) | 1,282 | 1,490 |
Weighted average common shares for diluted earnings per share (in shares) | 79,834 | 78,394 |
Diluted net income per common share (in dollars per share) | $ 0.14 | $ 0.08 |
NET INCOME PER SHARE - Narrativ
NET INCOME PER SHARE - Narrative (Details) - shares | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 15, 2016 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Shares excluded from computation as their effect would be anti-dilutive (in shares) | 200,000 | 200,000 | ||
Restricted Units and Performance Units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Weighted average number of shares outstanding, basic and diluted (in shares) | 500,000 | |||
Convertible Debt | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Warrants exercised (in shares) | 8,707,202 | |||
Common stock from the exercise of warrants (in shares) | 2,839,743 | |||
Warrants outstanding (in shares) | 0 | |||
2016 Senior Convertible Notes | Convertible Debt | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Interest rate on debt | 1.625% |
COMPREHENSIVE INCOME - Schedule
COMPREHENSIVE INCOME - Schedule of Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Equity [Abstract] | ||
Net income | $ 10,992 | $ 6,394 |
Foreign currency translation adjustment | 13,780 | 4,064 |
Change in unrealized gain on derivatives, net of tax | 7,838 | 347 |
Unrealized gain on short-term investments | 0 | 1,292 |
Pension liability adjustment, net of tax | (6) | (2) |
Comprehensive income, net | $ 32,604 | $ 12,095 |
COMPREHENSIVE INCOME - Schedu63
COMPREHENSIVE INCOME - Schedule of Changes in Accumulated Other Comprehensive Income by Component (Details) - USD ($) $ in Thousands | Jan. 01, 2018 | Mar. 31, 2018 |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Balance at December 31, 2017 | $ 962,306 | $ 962,306 |
Reclassification of stranded tax effect | 532 | |
Other comprehensive income (loss) | 17,731 | |
Amounts reclassified from accumulated other comprehensive income | (3,881) | |
Net current-period other comprehensive income (loss) | 21,612 | |
Balance at March 31, 2018 | 998,440 | |
Cash Flow Hedges | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Balance at December 31, 2017 | (2,979) | (2,979) |
Reclassification of stranded tax effect | 532 | |
Other comprehensive income (loss) | 3,957 | |
Amounts reclassified from accumulated other comprehensive income | (3,881) | |
Net current-period other comprehensive income (loss) | 7,838 | |
Balance at March 31, 2018 | (2,447) | 5,391 |
Defined Benefit Pension Items | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Balance at December 31, 2017 | (93) | (93) |
Reclassification of stranded tax effect | 0 | |
Other comprehensive income (loss) | (6) | |
Amounts reclassified from accumulated other comprehensive income | 0 | |
Net current-period other comprehensive income (loss) | (6) | |
Balance at March 31, 2018 | (93) | (99) |
Foreign Currency Items | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Balance at December 31, 2017 | (20,735) | (20,735) |
Reclassification of stranded tax effect | 0 | |
Other comprehensive income (loss) | 13,780 | |
Amounts reclassified from accumulated other comprehensive income | 0 | |
Net current-period other comprehensive income (loss) | 13,780 | |
Balance at March 31, 2018 | (20,735) | (6,955) |
Total | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Balance at December 31, 2017 | (23,807) | (23,807) |
Balance at March 31, 2018 | $ (23,275) | $ (1,663) |
COMPREHENSIVE INCOME - Narrativ
COMPREHENSIVE INCOME - Narrative (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Reclassification from accumulated other comprehensive income | $ 3,881 |
Income tax benefit | 1,200 |
Interest Expense | Accumulated Net Investment Gain (Loss) Attributable to Parent | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Reclassification from accumulated other comprehensive income | 500 |
Other Expense | Accumulated Net Investment Gain (Loss) Attributable to Parent | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Reclassification from accumulated other comprehensive income | $ 3,400 |
SEGMENT AND GEOGRAPHIC INFORM65
SEGMENT AND GEOGRAPHIC INFORMATION - Narrative (Details) | 3 Months Ended |
Mar. 31, 2018productSegment | |
Segment Reporting Information [Line Items] | |
Number of reportable segments | Segment | 2 |
Codman Specialty Surgical | |
Segment Reporting Information [Line Items] | |
Number of products offered (more than) | product | 60,000 |
SEGMENT AND GEOGRAPHIC INFORM66
SEGMENT AND GEOGRAPHIC INFORMATION - Net Sales and Profit by Reportable Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Net Sales | ||
Total Revenues | $ 357,082 | $ 258,636 |
Segment Profit | ||
Operating income | 25,579 | 9,959 |
Amortization | (5,390) | (4,101) |
Codman Specialty Surgical | ||
Segment Net Sales | ||
Total Revenues | 236,115 | 156,290 |
Orthopedics and Tissue Technologies | ||
Segment Net Sales | ||
Total Revenues | 120,967 | 102,346 |
Operating Segments | ||
Segment Profit | ||
Operating income | 121,929 | 89,782 |
Operating Segments | Codman Specialty Surgical | ||
Segment Profit | ||
Operating income | 89,491 | 62,703 |
Operating Segments | Orthopedics and Tissue Technologies | ||
Segment Profit | ||
Operating income | 32,438 | 27,079 |
Segment Reconciling Items | ||
Segment Profit | ||
Amortization | (5,390) | (4,101) |
Corporate and other | ||
Segment Profit | ||
Operating income | $ (90,960) | $ (75,722) |
SEGMENT AND GEOGRAPHIC INFORM67
SEGMENT AND GEOGRAPHIC INFORMATION - Total Revenue by Major Geographic Area (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Total Revenues | $ 357,082 | $ 258,636 |
United States | ||
Segment Reporting Information [Line Items] | ||
Total Revenues | 248,928 | 201,096 |
Europe | ||
Segment Reporting Information [Line Items] | ||
Total Revenues | 51,773 | 28,816 |
Asia Pacific | ||
Segment Reporting Information [Line Items] | ||
Total Revenues | 35,785 | 16,088 |
Rest of World | ||
Segment Reporting Information [Line Items] | ||
Total Revenues | $ 20,596 | $ 12,636 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narrative (Details) | Feb. 24, 2017USD ($) | Jul. 17, 2015USD ($) | Mar. 31, 2018USD ($)case | Apr. 26, 2018USD ($) | Dec. 31, 2017USD ($) | Jan. 15, 2014USD ($) |
Supply Commitment, Current, Long-Term, and Above Market | ||||||
Loss Contingencies [Line Items] | ||||||
Fair value, discount rate | 12.00% | |||||
TEI | ||||||
Loss Contingencies [Line Items] | ||||||
Number of active cases | case | 10 | |||||
Indemnification policy in place | $ 3,000,000 | |||||
TEI | Indemnification period - up to fifteen months after close | ||||||
Loss Contingencies [Line Items] | ||||||
Maximum indemnification from acquisition | $ 30,000,000 | |||||
Period of indemnification | 15 months | |||||
TEI | Indemnification period - up to fifteen months after close | Subsequent Event | ||||||
Loss Contingencies [Line Items] | ||||||
Indemnification payments received | $ 0 | |||||
Indemnification payments owed | $ 0 | |||||
TEI | Indemnification period - up to 3 years after close | ||||||
Loss Contingencies [Line Items] | ||||||
Maximum indemnification from acquisition | $ 30,000,000 | |||||
Period of indemnification | 3 years | |||||
Minimum indemnification from acquisition | $ 20,000,000 | |||||
TEI | Third Party Insurer | ||||||
Loss Contingencies [Line Items] | ||||||
Indemnification policy in place | $ 3,000,000 | |||||
Confluent Surgical, Inc. | ||||||
Loss Contingencies [Line Items] | ||||||
Maximum contingent consideration | $ 30,000,000 | |||||
Minimum contingent consideration (up to) | 19,000,000 | |||||
Contingent consideration, liability | $ 19,000,000 | |||||
Confluent Surgical, Inc. | Contingent Consideration Liability | ||||||
Loss Contingencies [Line Items] | ||||||
Fair value, discount rate | 2.20% | |||||
Confluent Surgical, Inc. | Cash Consideration One | ||||||
Loss Contingencies [Line Items] | ||||||
Maximum contingent consideration | 25,000,000 | |||||
Confluent Surgical, Inc. | Cash Consideration Two | ||||||
Loss Contingencies [Line Items] | ||||||
Maximum contingent consideration | $ 5,000,000 | |||||
Derma Sciences | BioD Earnout Payments | ||||||
Loss Contingencies [Line Items] | ||||||
Maximum contingent consideration | $ 26,500,000 | |||||
Fair value, discount rate | 3.00% | |||||
Contingent consideration, liability | $ 9,100,000 | $ 300,000 | $ 300,000 |
COMMITMENTS AND CONTINGENCIES69
COMMITMENTS AND CONTINGENCIES - Fair Value Contingent Consideration (Details) - Contingent Consideration Liability - Fair Value, Inputs, Level 3 - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derma Sciences | Accrued expenses and other short-term liabilities | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | $ 315 | $ 0 |
Additions from acquisition of Derma Sciences | 32,848 | |
Transfers from long-term to current portion | 0 | |
Balance, End of Period | 315 | 32,848 |
Derma Sciences | Accrued expenses and other short-term liabilities | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss from change in fair value of contingent consideration liabilities | 0 | 0 |
Derma Sciences | Other Long-term Liabilities | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | 1,387 | 0 |
Additions from acquisition of Derma Sciences | 3,467 | |
Transfers from long-term to current portion | 0 | |
Balance, End of Period | 1,419 | 3,549 |
Derma Sciences | Other Long-term Liabilities | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss from change in fair value of contingent consideration liabilities | 32 | 82 |
Confluent Surgical, Inc. | Accrued expenses and other short-term liabilities | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | 22,478 | 0 |
Additions from acquisition of Derma Sciences | 0 | |
Transfers from long-term to current portion | 4,198 | |
Balance, End of Period | 23,900 | 4,198 |
Confluent Surgical, Inc. | Accrued expenses and other short-term liabilities | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss from change in fair value of contingent consideration liabilities | $ 1,422 | 0 |
Confluent Surgical, Inc. | Other Long-term Liabilities | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | 22,036 | |
Additions from acquisition of Derma Sciences | 0 | |
Transfers from long-term to current portion | (4,198) | |
Balance, End of Period | 17,958 | |
Confluent Surgical, Inc. | Other Long-term Liabilities | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss from change in fair value of contingent consideration liabilities | $ 120 |
COMMITTMENTS AND CONTINGENCIES
COMMITTMENTS AND CONTINGENCIES - Fair Value Supply Agreement (Details) - Supply Commitments - Fair Value, Inputs, Level 3 - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Accrued expenses and other short-term liabilities | Supply Agreement Liability - Short-term | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | $ 166 | |
Payments | (166) | |
Transfer from long-term to current portion | 0 | |
Balance, End of Period | 0 | |
Accrued expenses and other short-term liabilities | Supply Agreement Liability - Short-term | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Gain (Loss) from change in fair value | 0 | |
Accrued expenses and other short-term liabilities | Above Market Supply Agreement Liability - Short- Term | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | $ 2,641 | 0 |
Payments | (214) | 0 |
Transfer from long-term to current portion | 1,752 | |
Transfer to accounts payable | (571) | |
Balance, End of Period | 876 | 1,752 |
Accrued expenses and other short-term liabilities | Above Market Supply Agreement Liability - Short- Term | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Gain (Loss) from change in fair value | $ (980) | 0 |
Other Long-term Liabilities | Above Market Supply Agreement Liability - Long-term | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, Beginning of Period | 2,648 | |
Payments | (155) | |
Transfer from long-term to current portion | (1,752) | |
Balance, End of Period | 800 | |
Other Long-term Liabilities | Above Market Supply Agreement Liability - Long-term | Selling, general and administrative | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Gain (Loss) from change in fair value | $ 59 |