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Revenue (Notes) | 9 Months Ended
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Sep. 30, 2018
Revenue from Contract with Customer [Abstract] |
Revenue from Contract with Customer [Text Block] | Revenue Adoption of ASC Topic 606, “Revenue from Contracts with Customers” We adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606), effective January 1, 2018 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting beginning after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and will continue to be reported in accordance with our historic accounting under ASC Topic 605, Revenue Recognition. Due to the cumulative impact, net of tax, of adopting ASC Topic 606, we recorded a net increase of $6.3 million to opening retained earnings as of January 1, 2018. The impact is primarily related to our bundled arrangements where we sell software licenses and implementation services, in addition to equipment, consumables and solutions. Under ASC Topic 605, revenue for the equipment was recognized upon delivery and software licenses and implementation services were typically recognized over the contract term. Under ASC Topic 606, revenue for the bundled equipment, software and software implementation services are recognized upon implementation. This results in an acceleration of software related revenue, offset by a delay in the recognition of related revenue of the equipment. Under ASC Topic 605, consumables and solutions revenues were typically recognized upon delivery. Under ASC 606, consumables and solutions revenues are recognized as the customer obtains control of the asset, which is at shipping point. This results in an acceleration in the recognition of consumables and solutions revenue. Additionally, the timing of revenue recognition for software license renewals changed under ASC Topic 606. Under ASC Topic 605, revenue related to software renewals was recognized on a ratable basis over the license period. Under ASC Topic 606, the license, which is considered functional IP, is considered to be transferred to the customer at a point in time, specifically, at the start of each annual renewal period. As a result, under ASC Topic 606, revenue related to our annual software license renewals is accelerated when compared to ASC Topic 605. Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The following tables represent the amounts by which each financial statement line item is affected in the current year as a result of applying ASC Topic 606 (in thousands):
| For the three months ended September 30, 2018 |  | For the nine months ended September 30, 2018
| As Reported |  | Without Adoption of ASC 606 |  | Effect of Adoption |  | As Reported |  | Without Adoption of ASC 606 |  | Effect of Adoption
Revenue | $ | 327,169 |  |  | $ | 340,671 |  |  | $ | (13,502 | ) |  | $ | 1,059,662 |  |  | $ | 1,062,980 |  |  | $ | (3,318 | )
Cost of goods sold | $ | 192,582 |  |  | $ | 196,159 |  |  | $ | (3,577 | ) |  | $ | 624,274 |  |  | $ | 626,810 |  |  | $ | (2,536 | )
Gross Profit | $ | 134,587 |  |  | $ | 144,512 |  |  | $ | (9,925 | ) |  | $ | 435,388 |  |  | $ | 436,170 |  |  | $ | (782 | )
|  | As of September 30, 2018
|  | As Reported |  | Without Adoption of ASC Topic 606 |  | Effect of Adoption
Prepaid expenses and other current assets |  | 26,306 |  |  | $ | 26,872 |  |  | $ | (566 | )
Accrued liabilities |  | 131,954 |  |  | $ | 140,107 |  |  | $ | (8,153 | )
Deferred income taxes |  | 20,341 |  |  | $ | 22,340 |  |  | $ | (1,999 | )
Revenue Recognition The following table represents our revenues disaggregated by geography (in thousands):
| For the three months ended September 30, |  | For the nine months ended September 30,
Geography | 2018 |  | 2017 (1) |  | 2018 |  | 2017 (1)
EMEA | $ | 30,759 |  |  | $ | 31,034 |  |  | $ | 104,150 |  |  | $ | 87,892 |
APAC | 17,779 |  |  | 16,982 |  |  | 54,813 |  |  | 44,071 |
LATAM | 16,051 |  |  | 16,349 |  |  | 44,701 |  |  | 42,034 |
North America | 17,739 |  |  | 21,939 |  |  | 54,684 |  |  | 50,037 |
Other | — |  |  | 120 |  |  | 80 |  |  | 120 |
Total Foreign | 82,328 |  |  | 86,424 |  |  | 258,428 |  |  | 224,154 |
United States | 244,841 |  |  | 256,812 |  |  | 801,234 |  |  | 698,335 |
Total Revenues | $ | 327,169 |  |  | $ | 343,236 |  |  | $ | 1,059,662 |  |  | $ | 922,489 |
The following table represents our revenues disaggregated by product (in thousands):
| For the three months ended September 30, |  | For the nine months ended September 30,
Product line | 2018 |  | 2017 (1) |  | 2018 |  | 2017 (1)
Infusion Consumables | $ | 117,797 |  |  | $ | 92,612 |  |  | $ | 361,490 |  |  | $ | 245,885 |
IV Solutions | 114,433 |  |  | 143,710 |  |  | 394,198 |  |  | 375,494 |
Infusion Systems (2) | 81,456 |  |  | 82,798 |  |  | 263,271 |  |  | 202,590 |
Critical Care | 13,483 |  |  | 12,950 |  |  | 40,703 |  |  | 37,221 |
Other | — |  |  | 11,166 |  |  | — |  |  | 61,299 |
Total Revenues | $ | 327,169 |  |  | $ | 343,236 |  |  | $ | 1,059,662 |  |  | $ | 922,489 |
_______________________________ (1) As noted above, prior period amounts have not been adjusted under the modified retrospective method. (2) For the three and nine months ended September 30, 2018, Infusion Systems revenue includes $4.2 million and $10.2 million, respectively, in revenue recognized over time. The remainder of our revenue is recognized at a point in time. See below for details related to arrangements with multiple performance obligations. Our primary product lines are Infusion Consumables, IV Solutions, Infusion Systems and Critical Care. The vast majority of our sales of these products are made on a stand-alone basis to hospitals, group purchasing organization member hospitals and distributors. Our product sales are typically free on board shipping point and ownership of the product transfers to the customer on shipment. As a result, revenue is typically recognized upon transfer of control of the products, which we deem to be at point of shipment. Payment is typically due in full within 30 days of delivery or the start of the contract term. Revenue is recorded in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We offer certain volume-based rebates to our distribution customers, which we record as variable consideration when calculating the transaction price. Rebates are offered on both a fixed and tiered/variable basis. In both cases, we use information available at the time and our historical experience with each customer to estimate the most likely rebate amount. We also warrant products against defects and have a policy permitting the return of defective products, for which we accrue and expense at the time of sale using information available and our historical experience. We also provide for extended service-type warranties, which we consider to be separate performance obligations. We allocate a portion of the transaction price to the extended service-type warranty based on its estimated relative selling price, and recognize revenue over the period the warranty service is provided. Arrangements with Multiple Performance Obligations We also enter into arrangements which include multiple performance obligations. These arrangements typically consist of the sale of infusion systems equipment, along with annual software licenses and related software implementation services, as well as infusion consumables, IV solutions and extended warranties. For such arrangements, we allocate the transaction price to each performance obligation based on its relative standalone selling price. Equipment, software licenses and software implementation services are typically combined into a single performance obligation and recognized upon implementation. As annual software licenses are renewed, we recognize revenue for the license at a point in time, at the start of each annual renewal period. Consumables and solutions are separate performance obligations, recognized at a point in time. The most significant judgments related to these arrangements include:
• | Identifying the various performance obligations of these arrangements.
• | Estimating the relative standalone selling price of each performance obligation, typically using directly observable method or calculated on a cost plus margin basis method.
Contract balances The following table presents our changes in the contract balances for the nine months ended September 30, 2018 (in thousands):
| Contract Liabilities
Beginning balance, January 1, 2018 | $ | (7,066 | )
Equipment revenue recognized | 3,136 |
Equipment revenue deferred due to implementation | (4,086 | )
Software revenue recognized | 5,649 |
Software revenue deferred due to implementation | (5,507 | )
Ending balance, September 30, 2018 | $ | (7,874 | )
As of September 30, 2018, revenue from remaining performance obligations related to implementation of software and equipment is $6.4 million. We expect to recognize substantially all of this revenue within the next three months. Revenue from remaining performance obligations related to annual software licenses is $1.5 million. We expect to recognize substantially all of this revenue over the next twelve months. Costs to Obtain a Contract with a Customer As part of the cost to obtain a contract, we may pay incremental commissions to sales employees upon entering into a sales contract. Under ASC Topic 606, we have elected to expense these costs as incurred as the period of benefit is less than one year. Practical expedients and exemptions In addition to the practical expedient applied to sales commissions, under ASC Topic 606, we elected to apply the practical expedient for shipping and handling costs incurred after the customer has obtained control of a good. We will continue to treat these costs as a fulfillment cost rather than as an additional promised service.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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