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Fair Value Measurements (Tables)

9 Months Ended

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.

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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.

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