Notes to Consolidated Financial Statements
(Unaudited)
Note 1
. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Quidel Corporation and its subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included.
The information at
June 30, 2019
, and for the
three and six
months ended
June 30, 2019
and
2018
, is unaudited. For further information, refer to the Company’s consolidated financial statements and notes thereto for the year ended
December 31, 2018
included in the Company’s
2018
Annual Report on Form 10-K. Operating results for any quarter are historically seasonal in nature and are not necessarily indicative of the results expected for the full year.
For
2019
and
2018
, the Company’s fiscal year will end or has ended on December 29,
2019
and December 30,
2018
, respectively. For
2019
and
2018
, the Company’s
second
quarter ended on June 30,
2019
and July 1,
2018
, respectively. For ease of reference, the calendar quarter end dates are used herein. The
three and six
-month periods ended
June 30, 2019
and
2018
each included 13 and 26 weeks, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Accounting Standards Update (“ASU”) 2016-02 and ASU 2018-11 (collectively, “ASC 842”) require a lessee to recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset representing the right to use the underlying asset for the lease term on the balance sheet. Deferred rent, previously recorded in other current liabilities and other non-current liabilities, is derecognized. The Company adopted ASC 842 as of January 1, 2019 using the alternative transition method to apply the guidance. The Company elected the package of practical expedients which, among other things, allows the Company to carry forward its historical lease classifications.
The following table presents the effect of the change in accounting principle on the Company’s Consolidated Balance Sheets as of January 1, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet (in thousands)
|
January 1,
2019
|
|
Effect of Change in Accounting Principle
|
|
After change in Accounting Principle
|
ASSETS
|
|
|
|
|
|
Operating lease right-of-use asset
|
$
|
—
|
|
|
$
|
87,086
|
|
|
$
|
87,086
|
|
Total assets
|
$
|
806,371
|
|
|
$
|
87,086
|
|
|
$
|
893,457
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Current portion of operating lease liability
|
$
|
—
|
|
|
$
|
5,290
|
|
|
$
|
5,290
|
|
Other current liabilities
|
12,992
|
|
|
(448
|
)
|
|
12,544
|
|
Total current liabilities
|
159,735
|
|
|
4,842
|
|
|
164,577
|
|
Operating lease liability
|
—
|
|
|
84,866
|
|
|
84,866
|
|
Other non-current liabilities
|
9,577
|
|
|
(2,622
|
)
|
|
6,955
|
|
Total liabilities and stockholders’ equity
|
$
|
806,371
|
|
|
$
|
87,086
|
|
|
$
|
893,457
|
|
In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance codified in ASU 2017-04,
Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment
. Under this new guidance, an entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity will compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted the guidance during the first quarter of 2019 with no impact to the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The standard is effective for the Company beginning in the first quarter of 2020, with early adoption permitted. We are currently evaluating the expected impact of ASU 2016-13 on our consolidated financial statements.
Significant Accounting Policies
During the
six months ended June 30, 2019
, there have been no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2018
except as described below and in Note 10. Derivatives and Hedging.
Leases
- Lease liabilities represent the obligation to make lease payments and ROU assets represent the right to use the underlying asset during the lease term. Lease liabilities and ROU assets are recognized at the commencement date of the lease based on the present value of lease payments over the lease term at the commencement date. When the implicit rate is unknown, an incremental borrowing rate based on the information available at the commencement date is used in determining the present value of the lease payments. Options to extend or terminate the lease are included in the determination of the lease term when it is reasonably certain that the Company will exercise such options.
For certain classes of assets, the Company accounts for lease and non-lease components as a single lease component. Variable lease payments, including those related to changes in the consumer price index, are recognized in the period in which the obligation for those payments are incurred and are not included in the measurement of the ROU assets or lease liabilities. Short-term leases are excluded from the calculation of the ROU assets and lease liabilities.
Operating leases are included in right-of-use assets, current portion of operating lease liabilities and operating lease liabilities in the Consolidated Balance Sheet. Finance leases are included in property and equipment, net, other current liabilities and other non-current liabilities.
Note 2
. Computation of Earnings (Loss) Per Share
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted-average number of common shares outstanding, including restricted stock units (“RSUs”) vested during the period. Diluted EPS is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested RSUs and the
3.25%
Convertible Senior Notes due 2020 (“Convertible Senior Notes”). Potentially dilutive common shares from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method. Potentially dilutive shares from the Convertible Senior Notes are determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Senior Notes are assumed to be converted and included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Senior Notes is added back to net income.
The Convertible Senior Notes have a dilutive impact when the average market price of the Company’s common stock exceeds the applicable conversion price of the notes. The Senior Convertible Notes became convertible on March 31, 2018 and remained convertible through
June 30, 2019
.
The following table reconciles net income (loss) and the weighted-average shares used in computing basic and diluted earnings (loss) per share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
|
|
Net income (loss) used for basic earnings per share
|
$
|
1,270
|
|
|
$
|
(3,076
|
)
|
|
$
|
26,114
|
|
|
$
|
30,882
|
|
Interest expense on Convertible Senior Notes, net of tax (1)
|
—
|
|
|
—
|
|
|
1,489
|
|
|
3,361
|
|
Net income (loss) used for diluted earnings per share, if-converted method (1)
|
$
|
1,270
|
|
|
$
|
(3,076
|
)
|
|
$
|
27,603
|
|
|
$
|
34,243
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares outstanding
|
40,209
|
|
|
37,925
|
|
|
39,957
|
|
|
36,586
|
|
Potentially dilutive shares issuable from Convertible Senior Notes (1)
|
6
|
|
|
—
|
|
|
1,062
|
|
|
3,881
|
|
Potentially dilutive shares issuable from stock options and unvested RSUs
|
1,214
|
|
|
—
|
|
|
1,296
|
|
|
1,788
|
|
Diluted weighted-average common shares outstanding, if-converted (1)
|
41,429
|
|
|
37,925
|
|
|
42,315
|
|
|
42,255
|
|
Potentially dilutive shares excluded from calculation due to anti-dilutive effect (2)
|
227
|
|
|
167
|
|
|
183
|
|
|
183
|
|
(1) The if-converted method was not applicable for the
three months ended June 30, 2019 and 2018
due to its anti-dilutive impact. For the
three months ended June 30, 2019
, the number of potentially dilutive shares issuable from Convertible Senior Notes under the if-converted method was
1.6 million
shares. For the
three months ended June 30, 2018
, the number of potentially dilutive shares issuable from Convertible Senior Notes under the if-converted method and stock options and unvested RSUs were
2.8 million
shares and
1.8 million
shares, respectively.
(2) Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.
Note 3
. Balance Sheet Account Details
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
Raw materials
|
$
|
23,725
|
|
|
$
|
24,292
|
|
Work-in-process (materials, labor and overhead)
|
20,413
|
|
|
21,280
|
|
Finished goods (materials, labor and overhead)
|
20,484
|
|
|
21,807
|
|
Total inventories
|
$
|
64,622
|
|
|
$
|
67,379
|
|
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
Receivables under transition service agreements
|
$
|
9,735
|
|
|
$
|
15,507
|
|
Income taxes receivable
|
2,698
|
|
|
2,703
|
|
Prepaid expenses
|
4,850
|
|
|
4,508
|
|
Other
|
2,410
|
|
|
928
|
|
Total prepaid expenses and other current assets
|
$
|
19,693
|
|
|
$
|
23,646
|
|
Other Current Liabilities
Other current liabilities consist of the following (in thousands)
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
Customer incentives
|
$
|
1,988
|
|
|
$
|
7,516
|
|
Income and other taxes payable
|
1,284
|
|
|
1,962
|
|
Customer deposits
|
1,787
|
|
|
—
|
|
Accrued interest
|
26
|
|
|
347
|
|
Other
|
2,609
|
|
|
3,167
|
|
Total other current liabilities
|
$
|
7,694
|
|
|
$
|
12,992
|
|
Note 4
. Income Taxes
The Company calculates its interim income tax provision in accordance with Accounting Standards Codification (“ASC”) 270,
Interim Reporting
, and ASC 740,
Accounting for Income Taxes
(together, “ASC 740”). At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into legislation, which includes a broad range of provisions affecting businesses. The Tax Act significantly revised how companies compute their U.S. corporate tax liability by, among other provisions, reducing the corporate tax rate from
35%
to
21%
for tax years beginning after December 31, 2017, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S.-owned undistributed foreign earnings and profits known as the transition tax.
The Company recognized income tax benefit of
$0.7 million
and
$5.8 million
for the three months ended
June 30, 2019
and
2018
, respectively, which represents an effective tax rate of
(125)%
and
65%
, respectively. The Company’s
(125)%
effective tax rate for the three months ended June 30, 2019 differed from the federal statutory rate of 21% primarily due to the discrete impact of excess tax deductions from stock-based compensation, the benefit from research and development (“R&D”) credits and corporate deductions attributable to Foreign Derived Intangible Income (“FDII”). The Company recognized income tax expense of
$1.0 million
and income tax benefit of
$1.0 million
for the six months ended
June 30, 2019
and
2018
, respectively, which represents an effective tax rate of
4%
and
(3)%
, respectively. The Company’s 4% effective tax rate for the six months ended June 30, 2019 differed from the federal statutory rate of 21% primarily due to the tax benefit recorded for excess tax benefits of stock-based compensation, the benefit from R&D credits and corporate deductions attributable to FDII.
The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized credit carryovers, the Company’s federal tax years from 2009 and forward are subject to examination by the U.S. authorities. The Company’s state and foreign tax years for 2001 and forward are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter.
Note 5
. Debt
Convertible Senior Notes
In December 2014, the Company issued
$172.5 million
aggregate principal amount of its
3.25%
Convertible Senior Notes. Debt issuance costs of approximately
$5.1 million
were primarily comprised of underwriters fees, legal, accounting and other professional fees, of which
$4.2 million
were recorded as a reduction to long-term debt and are being amortized using the effective interest method to interest expense over the
six
-year term of the Convertible Senior Notes. The remaining
$0.9 million
of debt issuance costs were allocated as a component of equity in additional paid-in capital. The implied interest rate of the Convertible Senior Notes was
6.9%
, assuming no conversion option. The Convertible Senior Notes mature on December 15, 2020.
The Convertible Senior Notes are convertible into cash, shares of common stock, or a combination of cash and shares of common stock based on an initial conversion rate, subject to adjustment, of
31.1891
shares per $1,000 principal amount of the Convertible Senior Notes (which represents an initial conversion price of approximately
32.06
per share) in the following circumstances and to the following extent: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2015, if the last reported sales price of the Company’s common stock, for at least
20
trading days (whether or not consecutive) in the period of
30
consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than
130%
of the conversion price of the notes in effect on each applicable trading day; (2) during the
5
consecutive business day period following any
5
consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Senior Notes for each such trading day was less than
98%
of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such day; or (3) upon the occurrence of specified events described in the indenture for the Convertible Senior Notes. On or after September 15, 2020 until the close of business on the second scheduled trading day immediately preceding the stated maturity date, holders may surrender their notes for conversion at any time, regardless of the foregoing circumstances. If a fundamental change, as defined in the indenture for the Convertible Senior Notes, such as an acquisition, merger or liquidation of the Company, occurs prior to the maturity date, subject to certain limitations, holders of the Convertible Senior Notes may require the Company to repurchase all or a portion of their Convertible Senior Notes for cash at a repurchase price equal to
100%
of the principal amount of the Convertible Senior Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date.
During the second quarter of
2019
, the last reported sales price of the Company’s common stock was greater than
130%
of the Convertible Senior Notes conversion price for
20
or more of the
30
consecutive trading days preceding the quarter-end. Consequently, the Convertible Senior Notes were convertible as of
June 30, 2019
. If the Convertible Senior Notes were converted as of
June 30, 2019
, the if-converted amount would exceed the principal by
$0.4 million
. The Convertible Senior Notes may be settled at the Company’s option in cash or a combination of cash and shares of common stock. Because the settlement could be in cash, the Convertible Senior Notes have been classified as short-term debt as of
June 30, 2019
.
During the three months ended
June 30, 2019
, the Company entered into separate, privately negotiated exchange agreements with certain holders of the Convertible Senior Notes. To measure the resulting loss as of the settlement dates, the applicable interest rates were estimated using Level 2 observable inputs and applied to the Convertible Senior Notes using the same methodology as in the issuance date valuation. The following table summarizes information about the settlement of the Convertible Senior notes (in thousands).
|
|
|
|
|
|
June 30,
2019
|
Principal amount settled
|
$
|
45,372
|
|
Number of shares of common stock issued
|
1,497
|
|
Loss on extinguishment of debt
|
$
|
748
|
|
The Company pays
3.25%
interest per annum on the principal amount of the Convertible Senior Notes semi-annually in arrears in cash on June 15 and December 15 of each year. During the
six months ended June 30, 2019
, the Company recorded total interest expense of
$1.8 million
related to the Convertible Senior Notes, of which
$0.9 million
related to the amortization of the debt discount and issuance costs and
$0.9 million
related to the coupon due semi-annually. During the
six months ended June 30, 2018
, the Company recorded total interest expense of
$4.2 million
related to the Convertible Senior Notes of which
$2.2 million
related to the amortization of the debt discount and issuance costs and
$2.0 million
related to the coupon due semi-annually.
The following table summarizes information about the equity and liability components of the Convertible Senior Notes (dollars in thousands). The fair values of the respective notes outstanding were measured based on quoted market price and is a Level 2 measurement.
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
Principal amount outstanding
|
$
|
13,131
|
|
|
$
|
58,503
|
|
Unamortized discount of liability component
|
(617
|
)
|
|
(3,637
|
)
|
Unamortized debt issuance costs
|
(83
|
)
|
|
(487
|
)
|
Net carrying amount of liability component
|
$
|
12,431
|
|
|
$
|
54,379
|
|
Carrying value of equity component, net of issuance costs
|
$
|
2,265
|
|
|
$
|
10,092
|
|
Fair value of outstanding Convertible Senior Notes
|
$
|
25,356
|
|
|
$
|
85,999
|
|
Remaining amortization period of discount on the liability component
|
1.5 years
|
|
|
2.0 years
|
|
Credit Agreement
On August 31, 2018, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) which provides the Company with a
$175.0 million
Revolving Credit Facility. The balance outstanding under the Revolving Credit Facility as of
June 30, 2019
was
$18.2 million
and is due upon maturity on August 31, 2023.
The Credit Agreement matures on August 31, 2023. Loans will bear interest at a rate equal to (i) the London Interbank Offered Rate (“LIBOR”) plus the “applicable rate” or (ii) the “base rate” (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus one-half of one percent and (c) LIBOR plus
one
percent) plus the “applicable rate.” The initial applicable rate was
1.00%
per annum for base rate loans and
2.00%
per annum for LIBOR rate loans, and thereafter will be determined in accordance with a pricing grid based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) ranging from
1.75%
to
2.50%
per annum for LIBOR rate loans and from
0.75%
to
1.50%
per annum for base rate loans. In addition, the Company pays a commitment fee on the unused portion of the Credit Agreement based on the Company’s Consolidated Leverage Ratio ranging from
0.15%
to
0.30%
per annum.
The Credit Agreement is guaranteed by certain material domestic subsidiaries of the Company (the “Guarantors”) and is secured by liens on substantially all of the assets of the Company and the Guarantors, excluding real property and certain other types of excluded assets, and contains affirmative and negative covenants that are customary for credit agreements of this nature. The negative covenants include, among other things, limitations on asset sales, mergers, indebtedness, liens, dividends and other distributions, investments and transactions with affiliates. The Credit Agreement contains
two
financial covenants: (i) maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of each fiscal quarter of
3.50
to 1.00, which ratio may be increased to
4.50
to 1.00 in case of certain qualifying acquisitions; and (ii) a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of
1.25
to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters. The Company was in compliance with all financial covenants as of
June 30, 2019
.
Interest expense recognized under the Credit Agreement including amortization of deferred issuance cost was
$0.5 million
and
$1.1 million
, respectively, for the three and
six months ended June 30, 2019
and
$1.8 million
and
$4.2 million
, respectively, for the three and
six months ended June 30, 2018
.
Note 6
. Stockholders’ Equity
Issuances of Common Stock
A summary of the status of stock option activity for the
six months ended June 30, 2019
is as follows (in thousands, except price data):
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-average
exercise price
per share
|
Outstanding at December 31, 2018
|
1,877
|
|
|
$
|
21.53
|
|
Granted
|
169
|
|
|
59.18
|
|
Exercised
|
(427
|
)
|
|
17.54
|
|
Cancelled
|
(3
|
)
|
|
42.29
|
|
Outstanding at June 30, 2019
|
1,616
|
|
|
$
|
26.50
|
|
A summary of the status of restricted stock unit activity for the
six months ended June 30, 2019
is as follows (in thousands, except price data):
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-average
grant date fair value
|
Non-vested at December 31, 2018
|
676
|
|
|
$
|
30.75
|
|
Granted
|
253
|
|
|
59.19
|
|
Vested
|
(118
|
)
|
|
25.28
|
|
Forfeited
|
(4
|
)
|
|
47.80
|
|
Non-vested at June 30, 2019
|
807
|
|
|
$
|
40.37
|
|
During the
six months ended June 30, 2019
, the Company issued
21,600
shares of common stock in connection with the Company’s employee stock purchase plan (the “ESPP”).
Stock-Based Compensation
The expense related to the Company’s stock-based compensation plans included in the accompanying Consolidated Statements of Income was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Cost of sales
|
$
|
262
|
|
|
$
|
265
|
|
|
$
|
542
|
|
|
$
|
496
|
|
|
Research and development
|
544
|
|
|
601
|
|
|
1,109
|
|
|
1,193
|
|
|
Sales and marketing
|
904
|
|
|
717
|
|
|
2,023
|
|
|
1,513
|
|
|
General and administrative
|
1,662
|
|
|
1,897
|
|
|
3,286
|
|
|
3,213
|
|
|
Total stock-based compensation expense
|
$
|
3,372
|
|
|
$
|
3,480
|
|
|
$
|
6,960
|
|
|
$
|
6,415
|
|
As of
June 30, 2019
, total unrecognized compensation expense was
$28.8 million
, which is expected to be recognized over a weighted-average period of approximately
2.2
years.
The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for the option grants.
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
Risk-free interest rate
|
2.51
|
%
|
|
2.49
|
%
|
Expected option life (in years)
|
5.7
|
|
|
6.3
|
|
Volatility rate
|
39
|
%
|
|
36
|
%
|
Dividend rate
|
0
|
%
|
|
0
|
%
|
Weighted-average grant date fair value
|
$
|
23.67
|
|
|
$
|
18.76
|
|
The fair value of RSUs is determined based on the closing market price of the Company’s common stock on the grant date. The weighted-average fair value of RSUs granted during the
six
months ended
June 30, 2019
and
2018
was
$59.19
and
$48.45
, respectively.
Compensation expense capitalized to inventory and compensation expense related to the Company’s ESPP were not material for the
three and six
months ended
June 30, 2019
or
2018
.
Note 7
. Industry and Geographic Information
The Company operates in
one
reportable segment. Sales to customers outside the U.S. represented
$87.7 million
(
34%
) and
$84.6 million
(
31%
) of total revenue for the
six
months ended
June 30, 2019
and
2018
, respectively. As of
June 30, 2019
and
December 31, 2018
, accounts receivable due from foreign customers were
$19.7 million
and
$23.4 million
, respectively.
The Company had sales to individual customers in excess of
10%
of total revenues, as follows:
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
Customer:
|
|
|
|
A
|
16
|
%
|
|
18
|
%
|
B
|
14
|
%
|
|
13
|
%
|
C
|
13
|
%
|
|
13
|
%
|
Total:
|
43
|
%
|
|
44
|
%
|
As of
June 30, 2019
and
December 31, 2018
, accounts receivable from customers with balances due in excess of
10%
of total accounts receivable totaled
$17.2 million
and
$33.3 million
, respectively.
Consolidated net revenues by product category for the three and
six
months ended
June 30, 2019
and
2018
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Rapid Immunoassay
|
$
|
21,772
|
|
|
$
|
16,689
|
|
|
$
|
84,266
|
|
|
$
|
97,374
|
|
Cardiac Immunoassay
|
67,982
|
|
|
69,850
|
|
|
133,854
|
|
|
138,294
|
|
Specialized Diagnostic Solutions
|
14,286
|
|
|
12,694
|
|
|
28,140
|
|
|
27,565
|
|
Molecular Diagnostic Solutions
|
4,212
|
|
|
3,922
|
|
|
9,960
|
|
|
9,065
|
|
Total revenues
|
$
|
108,252
|
|
|
$
|
103,155
|
|
|
$
|
256,220
|
|
|
$
|
272,298
|
|
Note 8
. Commitments and Contingencies
Leases
We lease administrative, research and development, sales and marketing and manufacturing facilities and certain equipment under various non-cancelable lease agreements. Facility leases generally provide for periodic rent increases, and may contain clauses for rent escalation, renewal options or early termination.
The components of lease expense and supplemental cash flow information related to leases were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2019
|
|
June 30, 2019
|
Finance lease ROU asset amortization
|
$
|
84
|
|
|
$
|
147
|
|
Finance lease interest expense
|
211
|
|
|
420
|
|
Total finance lease costs
|
295
|
|
|
567
|
|
Operating lease costs
|
2,502
|
|
|
5,007
|
|
Total lease costs
|
$
|
2,797
|
|
|
$
|
5,574
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities:
|
|
|
|
Operating cash flows from operating leases
|
$
|
2,304
|
|
|
$
|
4,584
|
|
Operating cash flows from finance leases
|
$
|
211
|
|
|
$
|
420
|
|
Right-of-use assets obtained in exchange for new lease liabilities:
|
|
|
|
Operating leases
|
$
|
—
|
|
|
$
|
328
|
|
Finance leases
|
$
|
43
|
|
|
$
|
1,369
|
|
Commitments for minimum rentals under non-cancelable leases as of
June 30, 2019
are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Years ending December 31,
|
|
Operating
|
|
Finance
|
2019
|
|
$
|
4,610
|
|
|
$
|
628
|
|
2020
|
|
9,333
|
|
|
1,264
|
|
2021
|
|
9,570
|
|
|
1,272
|
|
2022
|
|
8,562
|
|
|
1,283
|
|
2023
|
|
8,182
|
|
|
1,293
|
|
Thereafter
|
|
76,566
|
|
|
3,203
|
|
Total lease payments
|
|
116,823
|
|
|
8,943
|
|
Less: imputed interest
|
|
(28,963
|
)
|
|
(3,879
|
)
|
Total
|
|
87,860
|
|
|
5,064
|
|
Less: current portion
|
|
(5,474
|
)
|
|
(443
|
)
|
Non-current portion
|
|
$
|
82,386
|
|
|
$
|
4,621
|
|
|
|
|
|
|
Weighted average remaining lease term
|
|
12.5 years
|
|
|
6.1 years
|
|
Weighted average discount rate
|
|
4
|
%
|
|
18
|
%
|
Summers Ridge Lease
—
The Company leases
two
of the
four
buildings that are located on the Summers Ridge Property in San Diego, California with an initial term of
15
years beginning as of January 2018. Such lease includes options to extend the lease for
two
additional
five
-year terms upon satisfaction of certain conditions, which have not been included in the determination of the lease term. The lease is subject to certain must-take provisions related to the remaining
two
additional buildings that may create significant rights and obligations. The lease for one such building is expected to commence in the fourth quarter of 2019 and has minimum lease payments of
$18.3 million
during its lease term. The lease for the remaining building is subject to the expiration of the lease with the current tenant of such building, for which the date is not yet known.
McKellar Court Lease
— In 1999, the Company completed a sale and leaseback transaction of its San Diego facility at McKellar Court to a partnership for which the Company is a
25%
limited partner. The partnership is deemed to be a variable interest entity (VIE). The Company is not, however, the primary beneficiary of the VIE as it does not absorb the majority of the partnership’s expected losses or receive a majority of the partnership’s residual returns. The McKellar Court lease ends in December 2020 and contains options to extend the lease for
three
additional
five
-year periods, of which
one
five
-year period is included in the determination of the lease term.