XML 34 R22.htm IDEA: XBRL DOCUMENT
v3.20.2

Fair Value Measurements | 6 Months Ended
--- | ---
Jun. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 14. Fair Value Measurements. Assets (Liabilities) Measured at Fair Value on a Recurring Basis Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of June 30, 2020 and December 31, 2019 consisted of the following (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ | ​ | Total Fair | ​ | Quoted prices in | ​ | Significant other | ​ | Significant
​ | ​ | Value at | ​ | active markets | ​ | observable inputs | ​ | unobservable inputs
​ |  | June 30, 2020 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Interest rate contracts (1) | ​ | $ | (5,310) | ​ | $ | — | ​ | $ | (5,310) | ​ | $ | —
Foreign currency contract assets, current and long-term (2) | ​ | $ | 1,986 | ​ | $ | — | ​ | $ | 1,986 | ​ | $ | —
Foreign currency contract liabilities, current and long-term (3) | ​ | $ | (3,913) | ​ | $ | — | ​ | $ | (3,913) | ​ | $ | —
Contingent consideration liabilities | ​ | $ | (69,100) | ​ | $ | — | ​ | $ | — | ​ | $ | (69,100)
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ | ​ | Total Fair | ​ | Quoted prices in | ​ | Significant other | ​ | Significant
​ | ​ | Value at | ​ | active markets | ​ | observable inputs | ​ | unobservable inputs
​ |  | December 31, 2019 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Interest rate contract (1) | ​ | $ | 1,192 | ​ | $ | — | ​ | $ | 1,192 | ​ | $ | —
Interest rate contract (1) | ​ | $ | (290) | ​ | $ | — | ​ | $ | (290) | ​ | $ | —
Foreign currency contract assets, current and long-term (2) | ​ | $ | 2,447 | ​ | $ | — | ​ | $ | 2,447 | ​ | $ | —
Foreign currency contract liabilities, current and long-term (3) | ​ | $ | (4,255) | ​ | $ | — | ​ | $ | (4,255) | ​ | $ | —
Contingent consideration liabilities | ​ | $ | (76,709) | ​ | $ | — | ​ | $ | — | ​ | $ | (76,709)
(1) | The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as other long-term assets or other long-term obligations in the consolidated balance sheets.
(2) | The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other current assets or other long-term assets in the consolidated balance sheets.
(3) | The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.
Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue or other milestones. The contingent consideration liability is re-measured at the estimated fair value at the end of each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income (loss) for such period. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent consideration liabilities during the three and six-month periods ended June 30, 2020 and 2019 consisted of the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended |  | Six Months Ended
​ |  | June 30, |  | June 30,
​ |  | 2020 |  | 2019 |  | 2020 |  | 2019
Beginning balance | ​ | $ | 68,869 | ​ | $ | 82,457 | ​ | $ | 76,709 | ​ | $ | 82,236
Contingent consideration liability recorded as the result of acquisitions | ​ |  | — | ​ |  | 8,400 | ​ |  | — | ​ |  | 8,380
Contingent consideration expense | ​ |  | 343 | ​ |  | 2,404 | ​ |  | 5,240 | ​ |  | 3,199
Contingent payments made | ​ |  | (107) | ​ |  | (57) | ​ |  | (12,861) | ​ |  | (611)
Effect of foreign exchange | ​ | ​ | (5) | ​ | ​ | — | ​ | ​ | 12 | ​ | ​ | —
Ending balance | ​ | $ | 69,100 | ​ | $ | 93,204 | ​ | $ | 69,100 | ​ | $ | 93,204
​
​ As of June 30, 2020, approximately $59.0 million in contingent consideration liability was included in other long-term obligations and approximately $10.1 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. As of December 31, 2019, approximately $48.1 million in contingent consideration liability was included in other long-term obligations and approximately $28.6 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. Cash paid to settle the contingent consideration liability recognized at fair value as of the applicable acquisition date (including measurement-period adjustments) has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. During the year ended December 31, 2016, we sold an equity investment for cash and for the right to receive additional payments based on various contingent milestones. We determined the fair value of the contingent payments using Level 3 inputs defined under authoritative guidance for fair value measurements, and we recorded a contingent receivable asset. During the three and six-month periods ended June 30, 2019, we recorded a gain (loss) on the contingent receivable of approximately $(2,000) and $18,000, respectively. As of December 31, 2019, the contingent receivable was settled in full and there was no balance remaining to collect. The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at June 30, 2020 and December 31, 2019 (amounts in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair value at | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | Valuation | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration liability |  | 2020 |  | technique |  | Unobservable inputs |  | Range |  | Weighted Average(1)
Revenue-based royalty payments contingent liability | ​ | $ | 7,930 |  | Discounted cash flow |  | Discount rate | ​ | 12% - 24% |  | 16.0%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2020-2034 |  | 2026
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue milestones contingent liability | ​ | $ | 58,170 |  | Monte Carlo simulation |  | Discount rate | ​ | 11% - 15% |  | 12.6%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2020-2023 |  | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Regulatory approval contingent liability | ​ | $ | 3,000 | ​ | Scenario-based method | ​ | Discount rate | ​ | 2.7% | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Probability of milestone payment | ​ | 65% | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Projected year of payment | ​ | 2022 | ​ | ​
(1) Unobservable inputs were weighted by the relative fair value of the instruments. No weighted average is reported for unobservable inputs related to a single financial asset or liability.
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair value at | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, | ​ | Valuation | ​ | ​ | ​ | ​
Contingent consideration liability |  | 2019 |  | technique |  | Unobservable inputs |  | Range
Revenue-based royalty payments contingent liability | ​ | $ | 7,710 |  | Discounted cash flow |  | Discount rate | ​ | 13% - 24%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2020-2034
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue milestones contingent liability | ​ | $ | 66,114 |  | Monte Carlo simulation |  | Discount rate | ​ | 9% - 13.5%
​ | ​ |  |  |  | ​ |  | Projected year of payments | ​ | 2020-2023
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Regulatory approval contingent liability | ​ | $ | 2,885 | ​ | Scenario-based method | ​ | Discount rate | ​ | 2.4%
​ | ​ | ​ | ​ | ​ | ​ | ​ | Probability of milestone payment | ​ | 65%
​ | ​ | ​ | ​ | ​ | ​ | ​ | Projected year of payment | ​ | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ The contingent consideration liability is re-measured to fair value each reporting period. Significant increases or decreases in projected revenues, based on our most recent internal operational budgets and long-range strategic plans, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement. Our determination of the fair value of the contingent consideration liability could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income (loss). Contingent Payments to Related Parties During the six-month period ended June 30, 2020, we made contingent payments of approximately $800,000 to a current director of Merit and former shareholder of Cianna Medical, Inc. (“Cianna Medical”), which was acquired by Merit in 2018. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a director of Merit. As a former shareholder of Cianna Medical, the Merit director may be eligible for additional payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical. Fair Value of Other Financial Instruments The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which use Level 1 inputs. Impairment and Other Charges We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property and equipment, right-of-use operating lease assets, intangible assets and goodwill in connection with impairment evaluations. All our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the three-month periods ended June 30, 2020 and 2019, we recorded impairment charges of approximately $2.4 million and $548,000, respectively, related to certain acquired intangible assets (see Note 6). During the three and six-month periods ended June 30, 2020, we had losses of approximately $88,000 and $529,000, compared to losses of approximately $46,000 and $257,000, respectively, for the three and six-month periods ended June 30, 2019, related to the measurement of other non-financial assets, property and equipment and patents, at fair value on a nonrecurring basis subsequent to their initial recognition. During the three-month period ended June 30, 2020, we identified changes in events and circumstances relating to a certain right-of-use (“ROU”) operating lease asset. We compared the anticipated undiscounted cash flows generated by a sublease to the carrying value of the ROU operating lease and related long-lived assets and determined that the carrying value was not recoverable. Consequently, we recorded an impairment loss of approximately $1.5 million, which is equal to the excess of the carrying value of the assets over their estimated fair value. The impairment loss was driven by site consolidation decisions and changes in our projected cash flows for the ROU operating lease asset and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic. These changes include an increase in the anticipated time to identify a lessee, an increase in anticipated lease concessions, and a decrease in the expected lease rates for the property. During the six-month period ended June 30, 2020 we recorded a charge of $3.5 million due to our write-off of our purchase option to acquire Bluegrass Vascular Technologies, Inc. (“Bluegrass Vascular”) due to our decision not to exercise our option to purchase the company. Equity Investments Our equity investments in privately held companies, including options to acquire these companies, were $14.5 million and $17.1 million as of June 30, 2020 and December 31, 2019, respectively. We analyze our investments in privately held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the investment. Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments. Notes Receivable Our outstanding long-term notes receivable, including accrued interest, were approximately $2.8 million and $2.7 million as of June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020, we had an allowance for current expected credit losses of $757,000 associated with these notes receivable and our contractual obligation to extend credit to Selio. We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities. During the three and six-month periods ended June 30, 2020, we adjusted the probability of default for all securities for a period of one year due to changes in current macroeconomic conditions and our expectations of collectability as a result of the COVID-19 pandemic. The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the three and six-month periods ended June 30, 2020 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Six Months Ended
​ | ​ | June 30, 2020 |  | June 30, 2020
Beginning balance | ​ | $ | 670 | ​ | $ | —
Cumulative effect adjustment upon adoption of ASU 2016-13, Credit Losses | ​ | ​ | — | ​ | ​ | 575
Provision for credit loss expense | ​ | ​ | 87 | ​ | ​ | 182
Ending balance | ​ | $ | 757 | ​ | $ | 757
​

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration