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Fair Value Measurements (Tables) | 9 Months Ended
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Sep. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurements on a Recurring Basis | The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|  | Fair Value as of September 30, 2020 |  | Fair Value Measurements Using Inputs Considered as:
|  |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |  |
Derivative assets - designated as cash flow hedges (foreign currency exchange rate “FX”) |  | $ | 1,787 |  |  | $ | — |  |  | $ | 1,787 |  |  | $ | — |
Derivative assets - freestanding instruments (FX) |  | 4,052 |  |  | — |  |  | 4,052 |  |  | — |
Derivative assets - capped call derivatives |  | 38,999 |  |  | — |  |  | — |  |  | 38,999 |
Convertible notes receivable |  | 2,301 |  |  | — |  |  | — |  |  | 2,301 |
|  | $ | 47,139 |  |  | $ | — |  |  | $ | 5,839 |  |  | $ | 41,300 |
Liabilities: |  |  |  |  |  |  |  |
Derivative liabilities - freestanding instruments (interest rate swaps) |  | $ | 139 |  |  | $ | — |  |  | $ | 139 |  |  | $ | — |
Derivative liabilities - freestanding instruments (FX) |  | 85 |  |  | — |  |  | 85 |  |  | — |
Derivative liabilities - embedded exchange feature |  | 59,398 |  |  | — |  |  | — |  |  | 59,398 |
Derivative liabilities - other |  | 1,350 |  |  | — |  |  | — |  |  | 1,350 |
Contingent consideration arrangements |  | 96,174 |  |  | — |  |  | — |  |  | 96,174 |
|  | $ | 157,146 |  |  | $ | — |  |  | $ | 224 |  |  | $ | 156,922 |
|  | Fair Value as of December 31, 2019 |  | Fair Value Measurements Using Inputs Considered as:
|  |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |  |
Derivative assets - designated as cash flow hedges (FX) |  | $ | 535 |  |  | $ | — |  |  | $ | 535 |  |  | $ | — |
Derivative assets - freestanding instruments (FX) |  | 26 |  |  | — |  |  | 26 |  |  | — |
|  | $ | 561 |  |  | $ | — |  |  | $ | 561 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |
Derivative liabilities - designated as cash flow hedges (FX) |  | $ | 169 |  |  | $ | — |  |  | $ | 169 |  |  | $ | — |
Derivative liabilities - designated as cash flow hedges (interest rate swaps) |  | 374 |  |  | — |  |  | 374 |  |  | — |
Derivative liabilities - freestanding instruments (FX) |  | 3,137 |  |  | — |  |  | 3,137 |  |  | — |
Contingent consideration arrangements |  | 137,349 |  |  | — |  |  | — |  |  | 137,349 |
|  | $ | 141,029 |  |  | $ | — |  |  | $ | 3,680 |  |  | $ | 137,349 |
Reconciliation of Beginning and Ending Balances of Contingent Consideration | The following table provides a reconciliation of the beginning and ending balances of our recurring fair value measurements, using significant unobservable inputs (Level 3) (in thousands):
|  | Capped Call Derivative Asset |  | Embedded Exchange Feature Derivative Liability |  | Other Derivative Liabilities |  | Contingent Consideration Liability Arrangements |  | Convertible Notes Receivable
As of December 31, 2019 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 137,349 |  |  | $ | — |
Additions |  | 43,096 |  |  | 74,951 |  |  | — |  |  | — |  |  | 2,267 |
Payments (1) |  | — |  |  | — |  |  | — |  |  | (9,868) |  |  | — |
Changes in fair value (2) (3) (4) |  | (4,097) |  |  | (15,553) |  |  | 1,350 |  |  | (31,176) |  |  | 34 |
Effect of changes in foreign currency exchange rates |  | — |  |  | — |  |  | — |  |  | (131) |  |  | — |
Total at September 30, 2020 |  | 38,999 |  |  | 59,398 |  |  | 1,350 |  |  | 96,174 |  |  | 2,301 |
Less current portion at September 30, 2020 |  | — |  |  | — |  |  | 1,160 |  |  | 16,571 |  |  | 2,044 |
Long-term portion at September 30, 2020 |  | $ | 38,999 |  |  | $ | 59,398 |  |  | $ | 190 |  |  | $ | 79,603 |  |  | $ | 257 |
(1)During the nine months ended September 30, 2020, we paid $8.8 million under the contingent consideration arrangement for the acquisition of CardiacAssist, Inc., doing business as TandemLife (“TandemLife”). Additionally, we made final payments under contingent consideration arrangements resulting from the acquisitions of two distributors. (2)The contingent consideration change in fair value during the nine months ended September 30, 2020 is primarily due to a one-year delay in the projected achievement of a certain regulatory milestone and timing of sales-based earnout payments for ImThera Medical Inc. (“ImThera”), and the impact of an increase in discount rates utilized in the valuation of contingent consideration. Refer to the tables below for further information regarding the fair value measurements of contingent consideration. (3)During the nine months ended September 30, 2020, the contingent consideration change in fair value resulted in a decrease of $19.2 million and $12.0 million recorded to cost of sales - exclusive of amortization and research and development, respectively. (4)Changes in the fair value of the embedded exchange feature derivative and capped call derivatives are recognized in foreign exchange and other gains (losses) in the condensed consolidated statements of income (loss).
Schedule of Business Acquisitions by Acquisition, Contingent Consideration | The following table provides the fair value of our Level 3 contingent consideration arrangements by acquisition (in thousands):
|  | September 30, 2020 |  | December 31, 2019
ImThera |  | $ | 79,603 |  |  | $ | 113,503 |
TandemLife |  | 11,672 |  |  | 17,311 |
Miami Instruments |  | 4,899 |  |  | 5,338 |
Drilltex |  | — |  |  | 294 |
Other |  | — |  |  | 903 |
|  | $ | 96,174 |  |  | $ | 137,349 |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | Both arrangements are Level 3 fair value measurements and include the following significant unobservable inputs as of September 30, 2020:
ImThera Acquisition |  | Valuation Technique |  | Unobservable Input |  | Ranges
Regulatory milestone-based payment |  | Discounted cash flow |  | Discount rate |  | 8.3%
|  |  |  | Probability of payment |  | 85%
|  |  |  | Projected payment year |  | 2024
Sales-based earnout |  | Monte Carlo simulation |  | Risk-adjusted discount rate |  | 12.2 | % | - | 12.5%
|  |  |  | Credit risk discount rate |  | 8.5 | % | - | 9.2%
|  |  |  | Revenue volatility |  | 32.5%
|  |  |  | Probability of payment |  | 85%
|  |  |  | Projected years of earnout |  | 2025 | - | 2028
The TandemLife business combination involved a contingent consideration arrangement composed of potential cash payments upon the achievement of certain regulatory milestones. The arrangement is a Level 3 fair value measurement and includes the following significant unobservable inputs as of September 30, 2020:
TandemLife Acquisition |  | Valuation Technique |  | Unobservable Input |  | Ranges
Regulatory milestone-based payment |  | Discounted cash flow |  | Discount rate |  | 7.6 | % | - | 7.7%
|  |  |  | Probability of payments |  | 70 | % | - | 100%
|  |  |  | Projected payment years |  | 2020 | - | 2021
The Miami Instruments business combination involved a contingent consideration arrangement composed of potential cash payments upon the achievement of certain regulatory milestones. The arrangement is a Level 3 fair value measurement and includes the following significant unobservable inputs as of September 30, 2020:
Miami Instruments |  | Valuation Technique |  | Unobservable Input |  | Ranges
Regulatory milestone-based payments |  | Discounted cash flow |  | Discount rate |  | 7.6 | % | - | 7.7%
|  |  |  | Probability of payments |  | 80 | % | - | 95%
|  |  |  | Projected payment years |  | 2020 | - | 2021

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- Definition Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19279-110258 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2C -URI http://asc.fasb.org/extlink&oid=117815213&loc=SL7498348-110258 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (bb) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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- Definition Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (bbb) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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- Definition Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19279-110258 + Details
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- Definition Tabular disclosure of contingent payment arrangements including the terms that will result in payment and the accounting treatment that will be followed if such contingencies occur, including the potential impact on earnings per share if contingencies are to be settled in common stock of the entity. The description also may include the period over which amounts are expected to be paid, and changes in the amount since the previous reporting period. This also includes contingent options and commitments. + References No definition available. + Details
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