NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed consolidated financial statements of IDEXX Laboratories, Inc. and its subsidiaries have been prepared in accordance with U.S. GAAP for interim financial information and with the requirements of Regulation S-X, Rule 10-01 for financial statements required to be filed as a part of this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “IDEXX,” the “Company,” “we,” “our,” or “us” refer to IDEXX Laboratories, Inc. and its subsidiaries.
The accompanying unaudited condensed consolidated financial statements include the accounts of IDEXX Laboratories, Inc. and our wholly-owned and majority-owned subsidiaries. We do not have any variable interest entities for which we are the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of our management, all adjustments necessary for a fair statement of our financial position and results of operations. All such adjustments are of a recurring nature. The consolidated balance sheet data at December 31, 2019, was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended June 30, 2020, are not necessarily indicative of the results to be expected for the full year or any future period, particularly in light of the COVID-19 pandemic and its effects on the domestic and global economies as described below. These unaudited condensed consolidated financial statements should be read in conjunction with this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, and our Annual Report on Form 10-K for the year ended December 31, 2019, (the “2019 Annual Report”) filed with the SEC.
Beginning in the first quarter of 2020, to limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home policies and social distancing procedures and guidelines, causing some businesses, including those that we serve, to adjust, reduce, or suspend business and operating activities. The primary impacts of the COVID-19 pandemic have been seen in our CAG and Water businesses. Veterinary care is widely recognized as an “essential” service for pet owners, and veterinarians continued to deliver essential medical care for sick and injured pets. The stay-at-home policies deployed during 2020 to combat the spread of COVID-19 resulted in a decrease in companion animal clinical visits, including delay of elective procedures and wellness visits. Our reference laboratories and manufacturing facilities are operating and have been designated as essential businesses although disruptions or reductions to operations may occur as the impacts from the COVID-19 pandemic and related responses continue to develop. In order to maintain the quality of drinking and surface water, Water compliance testing is also recognized as an "essential" service; however, our business has been impacted due to lower non-compliance testing, as well as some disruption in compliance testing due to social distancing policies, including beach and pool closures. During the second quarter of 2020, local, state, and federal governments began to ease the stay-at-home policies and allowed more businesses and facilities to re-open, leading to a recovery in companion animal clinical visits and associated demand for our diagnostic services. The extent to which the continuation, or a possible second-wave outbreak of COVID-19, or an outbreak of other health epidemics could impact our business, results of operations and financial condition, including the potential for write-offs or impairments of assets and suspension of capital investments, will depend on future developments. We are unable to predict with certainty the effects of the COVID-19 pandemic on our customers, suppliers, and vendors, as well as the actions of governments, and when and to what extent normal economic and operating conditions can resume; these effects may differ from those assumed in our projected estimates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic impact that has occurred or may occur in the future.
The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments, and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenues and expenses. We have made estimates of the impact of the COVID-19 pandemic within our financial statements, and our actual results may differ from these estimates and there may be changes to those estimates in future periods.
We have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q in the “Glossary of Terms and Selected Abbreviations.”
NOTE 2. ACCOUNTING POLICIES
Significant Accounting Policies
The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three and six months ended June 30, 2020, are consistent with those discussed in Note 2. Summary of Significant Accounting Policies to the consolidated financial statements in our 2019 Annual Report, except as noted below.
New Accounting Pronouncements Adopted
We adopted ASU 2018-13, Fair Value Measurement (Topic 820), as of January 1, 2020, which modifies the disclosure requirements on fair value measurements under ASC Topic No. 820, Fair Value Measurement, as amended (“ASC 820”). ASU 2018-13 removes (a) the prior requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy contained in ASC 820, (b) the policy for timing of transfers between levels, and (c) the valuation processes used for Level 3 fair value measurements. ASU 2018-13 also adds, among other things, a requirement to disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The adoption did not have a material impact on our consolidated financial statements.
Effective January 1, 2020, we adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” using the modified retrospective transition method. This ASU amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables and leased equipment. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. We recorded a non-cash cumulative effect adjustment to retained earnings of $1.8 million, net of $0.6 million of income taxes, on our opening consolidated balance sheet as of January 1, 2020. This adjustment, before the impact of income taxes, was comprised of $2.3 million related to our contract assets and sales-type leases, and $0.2 million related to accounts receivable. See Note 6. Credit Losses, for more information on our presentation of credit losses.
New Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The new guidance is intended to simplify the accounting for income taxes by removing certain exceptions and by updating accounting requirements around goodwill recognized for tax purposes and the allocation of current and deferred tax expense among legal entities, among other minor changes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of ASU 2019-12 to have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting". ASU 2020-04 is intended to provide optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The relief offered by this guidance, if adopted, is available to companies for the period March 12, 2020 through December 31, 2022. We do not expect the discontinuation of LIBOR to have a material impact on our consolidated financial statements.
NOTE 3. REVENUE RECOGNITION
Our revenue is recognized when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to a customer. We exclude sales, use, value-added, and other taxes we collect on behalf of third parties from revenue. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To accurately present the consideration received in exchange for promised products or services, we apply the five-step model outlined below:
1.Identification of a contract or agreement with a customer
2.Identification of our performance obligations in the contract or agreement
3.Determination of the transaction price
4.Allocation of the transaction price to the performance obligations
5.Recognition of revenue when, or as, we satisfy a performance obligation
We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The timing of revenue recognition, billings, and cash collections results in accounts receivable, contract assets and lease receivables as a result of revenue recognized in advance of billings (included within other assets), and contract liabilities or deferred revenue as a result of receiving consideration in advance of revenue recognition within our unaudited condensed consolidated balance sheet. Our general payment terms range from 30 to 60 days, with exceptions in certain geographies. Below is a listing of our major categories of revenue for our products and services:
Diagnostic Products and Accessories. Diagnostic products and accessories revenues, including IDEXX VetLab® consumables and accessories, rapid assay, LPD, Water, and OPTI testing products, are predominantly recognized and invoiced at the time of shipment, which is when the customer obtains control of the product based on legal title transfer and we have the right to payment. Shipping costs reimbursed by the customer are included in revenue and cost of sales. As a practical expedient, we do not account for shipping activities as a separate performance obligation.
Reference Laboratory Diagnostic and Consulting Services. Reference laboratory revenues are recognized and invoiced when the laboratory diagnostic service is performed.
Instruments, Software and Systems. CAG Diagnostics capital instruments, veterinary software and diagnostic imaging systems revenues are recognized and invoiced when the customer obtains control of the products based on legal title transfer and we have the right to payment, which generally occurs at the time of installation and customer acceptance. Our instruments, software, and systems are often included in one of our significant customer programs, as further described below. For veterinary software systems that include multiple performance obligations, such as perpetual software licenses and computer hardware, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.
Lease Revenue. Revenues from instrument rental agreements and reagent rental programs are recognized either as operating leases on a ratable basis over the term of the agreement or as sales-type leases at the time of installation and customer acceptance. Customers typically pay for the right to use instruments under rental agreements in equal monthly amounts over the term of the rental agreement. Our reagent rental programs provide our customers the right to use our instruments upon entering into agreements to purchase specified amounts of consumables, which are considered embedded leases. For some agreements, the customers are provided with the right to purchase the instrument at the end of the lease term. Lease revenues from these agreements are presented in product revenue on our unaudited condensed consolidated income statement. Lease revenue was approximately $3.5 million and $7.7 million for the three and six months ended June 30, 2020, respectively, as compared
to $4.6 million and $9.2 million for the three and six months ended June 30, 2019, respectively, including both operating leases and sales-type leases under ASC 842, Leases, for leases entered into after January 1, 2019, and ASC 840, Leases, for leases entered into prior to 2019. See below for revenue recognition under our reagent rental programs.
Extended Warranties and Post-Contract Support. CAG Diagnostics capital instruments and diagnostic imaging systems extended warranties typically provide customers with continued coverage for a period of one to five years beyond the first-year standard warranty. Customers can either pay in full for the extended warranty at the time of instrument or system purchase or can be billed on a quarterly basis over the term of the contract. We recognize revenue associated with extended warranties over time on a ratable basis using a time elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.
Veterinary software post-contract support provides customers with access to technical support when and as needed through access to call centers and online customer assistance. Post-contract support contracts typically have a term of 12 months and customers are billed for post-contract support in equal quarterly amounts over the term. We recognize revenue for post-contract support services over time on a ratable basis using a time elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.
On December 31, 2019, our deferred revenue related to extended warranties and post-contract support was $38.0 million, of which approximately $3.0 million and $16.7 million were recognized during the three and six months ended June 30, 2020. Furthermore, as a result of new agreements, our deferred revenue related to extended warranties and post-contract support was $35.8 million at June 30, 2020. We do not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less and do not adjust for the effect of the financing components when the period between customer payment and revenue recognition is one year or less. Deferred revenue related to extended warranties and post-contract support with an original duration of more than one year was $22.1 million at June 30, 2020, of which approximately 22%, 36%, 25%, 12%, and 5% are expected to be recognized during the remainder of 2020, the
full years 2021, 2022, 2023, and thereafter, respectively. Additionally, we have determined these agreements do not include a significant financing component.
SaaS Subscriptions. We offer a variety of veterinary software and diagnostic imaging SaaS subscriptions including IDEXX Neo®, Animana®, Pet Health Network® Pro, Petly® Plans, Web PACS, rVetLink®, and Smart Flow™. We recognize revenue for our SaaS subscriptions over time on a ratable basis over the contract term, beginning on the date our service is made available to the customer. Our subscription contracts vary in term from monthly to two years. Customers typically pay for our subscription contracts in equal monthly amounts over the term of the agreement. Deferred revenue related to our SaaS subscriptions is not material.
Contracts with Multiple Performance Obligations. We enter into contracts where customers purchase a combination of IDEXX products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment. We determine the transaction price for a contract based on the consideration we expect to receive in exchange for the transferred goods or services. To the extent the transaction price includes variable consideration, such as volume rebates or expected price adjustments, we apply judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. We evaluate constraints based on our historical and projected experience with similar customer contracts.
We allocate revenue to each performance obligation in proportion to the relative standalone selling prices and recognize revenue when transfer of the related goods or services has occurred for each obligation. We utilize the observable standalone selling price when available, which represents the price charged for the performance obligation when sold separately. When standalone selling prices for our products or services are not directly observable, we determine the standalone selling prices using relevant information available and apply suitable estimation methods including, but not limited to, the cost plus a margin approach. We recognize revenue as each performance obligation is satisfied, either at a point in time or over time, as described in the revenue categories above. We do not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less.
The following customer programs represent our most significant customer contracts which contain multiple performance obligations:
Customer Commitment Programs. We offer customer incentives upon entering into multi-year agreements to purchase annual minimum amounts of products and services.
Up-Front Customer Loyalty Programs. Our up-front loyalty programs provide customers with incentives in the form of cash payments or IDEXX Points upon entering into multi-year agreements to purchase annual minimum amounts of future products or services. If a customer breaches its agreement, they are required to refund all or a portion of the up-front cash or IDEXX Points, or make other repayments, remedial actions, or both. Up-front incentives to customers in the form of cash or IDEXX Points are not made in exchange for distinct goods or services and are capitalized as customer acquisition costs within other current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of the customer agreement. If these up-front incentives are subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance. To the extent invoiced instrument revenue exceeds recognized instrument revenue, we record deferred revenue as a contract liability, which is subsequently recognized upon the purchase of future products and services. We have determined these agreements do not include a significant financing component. Differences between estimated and actual customer purchases may impact the amount and timing of revenue recognition.
On December 31, 2019, our capitalized customer acquisition costs were $137.4 million, of which approximately $10.0 million and $20.2 million were recognized as a reduction of revenue during the three and six months ended June 30, 2020. Furthermore, as a result of new up-front customer loyalty payments, net of subsequent recognition, our capitalized customer acquisition costs were $146.0 million at June 30, 2020. We monitor customer purchases over the term of their agreement to assess the realizability of our capitalized customer acquisition costs and review estimates of variable consideration. Impairments, revenue adjustments that relate to performance obligations satisfied in prior periods, and contract modifications during the three and six months ended June 30, 2020, were not material.
Volume Commitment Programs. Our volume commitment programs, such as our IDEXX 360 program, provide customers with a free or discounted instrument or system upon entering into multi-year agreements to purchase annual minimum amounts of products and services. We allocate total consideration, including future committed purchases and expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance in advance of billing the customer, which is also when the customer obtains control of the instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract asset within other current and long-term assets. The contract asset is transferred to accounts receivable when customers are billed for future products and services over the term of the contract. We have determined these agreements do not include a significant financing component. Differences between estimated and actual customer purchases may impact the amount and timing of revenue recognition.
On December 31, 2019, our volume commitment contract assets were $83.9 million, of which approximately $4.7 million and $9.6 million were reclassified to accounts receivable when customers were billed for related products and services during the three and six months ended June 30, 2020. Furthermore, as a result of new placements under volume commitment programs, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses upon adoption of ASU 2016-13, our contract assets were $91.6 million at June 30, 2020. We monitor customer purchases over the term of their agreement to assess the realizability of our contract assets and review estimates of variable consideration. Impairments, revenue adjustments that relate to performance obligations satisfied in prior periods, and contract modifications during the three and six months ended June 30, 2020, were not material.
For our up-front customer loyalty and volume commitment programs, we estimate future revenues related to multi-year agreements to be approximately $2.0 billion, of which approximately 13%, 25%, 22%, 19%, and 21% are expected to be recognized during the remainder of 2020, the full years 2021, 2022, 2023, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied, for which customers have committed to purchase goods and services, net of the expected revenue reductions from customer acquisition costs and expected price adjustments, and as a result, are lower than stated contractual commitments by our customers.
Instrument Rebate Programs. Our instrument rebate programs, previously referred to as IDEXX Instrument Marketing Programs, require an instrument purchase and provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the program. We account for the customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the term of the program. Total consideration allocated to identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does not include estimates of future purchases that are optional. We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and recognized upon the purchase of future products and services, offsetting future rebates as they are earned.
On December 31, 2019, our deferred revenue related to instrument rebate programs was $49.1 million, of which approximately $4.2 million and $8.5 million were recognized when customers purchased eligible products and services and earned rebates during the three and six months ended June 30, 2020. Furthermore, as a result of new instrument purchases under rebate programs, net of subsequent recognition, our deferred revenue was $43.3 million at June 30, 2020, of which approximately 18%, 31%, 23%, 15%, and 13% are expected to be recognized during the remainder of 2020, the full years 2021, 2022, 2023, and thereafter, respectively.
Reagent Rental Programs. Our reagent rental programs provide our customers the right to use our instruments upon entering into multi-year agreements to purchase annual minimum amounts of consumables. These types of agreements include an embedded lease for the right to use our instrument, and we determine the amount of lease revenue allocated to the instrument based on relative standalone selling prices. We evaluate the terms of these embedded leases to determine classification as either a sales-type lease or an operating lease.
Sales-type Reagent Rental Programs. Our reagent rental programs that effectively transfer control of instruments to our customers are classified as sales-type leases, and we recognize instrument revenue and cost in advance of billing the customer, at the time of installation and customer acceptance. Our right to future consideration related to instrument revenue is recorded as a lease receivable within other current and long-term assets, and is transferred to accounts receivable when customers are billed for future products and services over the term of the contract. On December 31, 2019, our lease receivable assets were $7.2 million,
of which approximately $0.3 million and $0.7 million were reclassified to accounts receivable when customers were billed for related products and services during the three and six months ended June 30, 2020, respectively. Furthermore, as a result of new placements under sales-type reagent rental programs, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses upon adoption of ASU 2016-13, our lease receivable assets were $7.9 million at June 30, 2020. The impacts of discounting and unearned income at June 30, 2020, were not material. Profit and loss recognized at the commencement date and interest income during the three and six months ended June 30, 2020, were not material. We monitor customer purchases over the term of their agreement to assess the realizability of our lease receivable assets. Impairments during the three and six months ended June 30, 2020, were not material.
Operating-type Reagent Rental Programs. Our reagent rental programs that do not effectively transfer control of instruments to our customers are classified as operating leases, and we recognize instrument revenue and costs ratably over the term of the agreement. The cost of the instrument is capitalized within property and equipment. During the three and six months ended June 30, 2020, we transferred instruments of$1.7 million and $4.1 million, respectively, as compared to $3.0 million and $5.0 million for the three and six months ended June 30, 2019, respectively, from inventory to property and equipment.
We estimate future revenue to be recognized related to our reagent rental programs of approximately $26.6 million, of which approximately 21%, 35%, 22%, 11%, and 11% are expected to be recognized during the remainder of 2020, the full years 2021, 2022, 2023, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied for which customers have committed to future purchases, net of any expected price adjustments, and as a result, may be lower than stated contractual commitments by our customers.
Other Customer Incentive Programs. Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified purchase threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method for incentives that are offered to individual customers and the expected-value method for programs that are offered to a broad group of customers. Revenue adjustments that relate to performance obligations satisfied in prior periods during the three and six months ended June 30, 2020, were not material. Refund obligations related to customer incentive programs are recorded in accrued liabilities for the actual issuance of incentives, incentives earned but not yet issued and estimates of incentives to be earned in the future.
Program Combinations. At times, we combine elements of our significant customer programs within a single customer contract. We separate each significant program element and include the contract assets, customer acquisition costs, deferred revenues and estimated future revenues within the most relevant program disclosures above. Each customer contract is presented as a net contract asset or net contract liability on our unaudited condensed consolidated balance sheet.
IDEXX Points. IDEXX Points may be applied to trade receivables due to us, converted to cash, or applied against the purchase price of IDEXX products and services. We consider IDEXX Points equivalent to cash. IDEXX Points that have not yet been used by customers are included in accrued liabilities until utilized or expired. Breakage is not material because customers can apply IDEXX Points to trade receivables at any time.
Accounts Receivable. We recognize revenue when it is probable that we will collect substantially all of the consideration to which we will be entitled, based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. We have no significant customers that accounted for greater than 10% of our consolidated revenues, and we have no concentration of credit risk as of June 30, 2020.
Disaggregated Revenues. We present disaggregated revenue for our CAG segment based on major product and service categories. Our Water segment is comprised of a single major product category. Although our LPD segment does not meet the quantitative thresholds to be reported as a separate segment, we believe it is important to disaggregate these revenues as a major product and service category within our Other reportable segment given its distinct markets, and therefore we have elected to report LPD as a reportable segment.
The following table presents disaggregated revenue by major product and service categories:
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(in thousands)
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For the Three Months Ended
June 30,
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For the Six Months Ended
June 30,
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2020
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2019
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2020
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2019
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CAG segment revenue:
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CAG Diagnostics recurring revenue:
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$
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510,254
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$
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477,431
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$
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998,179
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$
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921,222
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IDEXX VetLab consumables
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196,061
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175,159
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384,774
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342,370
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Rapid assay products
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64,658
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68,605
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122,088
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123,036
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Reference laboratory diagnostic and consulting services
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228,816
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213,892
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449,077
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416,550
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CAG Diagnostics services and accessories
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20,719
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19,775
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42,240
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39,266
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CAG Diagnostics capital - instruments
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18,871
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31,526
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42,704
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60,275
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Veterinary software, services and diagnostic imaging systems
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36,975
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38,392
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77,213
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74,770
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CAG segment revenue
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566,100
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547,349
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1,118,096
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1,056,267
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Water segment revenue
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28,116
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34,764
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62,265
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65,074
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LPD segment revenue
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32,244
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33,104
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66,398
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64,610
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Other segment revenue
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11,132
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4,886
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17,169
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10,208
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Total revenue
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$
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637,592
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$
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620,103
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$
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1,263,928
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$
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1,196,159
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Revenue by principal geographic area, based on customers’ domiciles, was as follows:
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(in thousands)
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For the Three Months Ended
June 30,
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For the Six Months Ended
June 30,
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2020
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2019
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2020
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2019
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United States
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$
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405,998
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$
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388,875
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$
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802,781
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$
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747,163
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Europe, the Middle East and Africa
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123,969
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124,840
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253,735
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246,586
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Asia Pacific Region
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71,750
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64,033
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135,262
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124,108
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Canada
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25,357
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27,654
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49,604
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50,878
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Latin America
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10,518
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14,701
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22,546
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27,424
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Total
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$
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637,592
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$
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620,103
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$
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1,263,928
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$
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1,196,159
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Costs to Obtain a Contract. We capitalize sales commissions and the related fringe benefits earned by our sales force when considered incremental and recoverable costs of obtaining a contract. Our contracts include performance obligations related to various goods and services, some of which are satisfied at a point in time and others over time. Commission costs related to performance obligations satisfied at a point in time are expensed at the time of sale, which is when revenue is recognized. Commission costs related to long-term service contracts and performance obligations satisfied over time, including extended warranties and SaaS subscriptions, are deferred and recognized on a systematic basis that is consistent with the transfer of the goods or services to which the asset relates. We apply judgment in estimating the amortization period, which ranges from 3 to 7 years, by taking into consideration our customer contract terms, history of renewals, expected length of customer relationship, as well as the useful life of the underlying technology and products. Amortization expense is included in sales and marketing expenses in the accompanying unaudited condensed consolidated statements of income. Deferred commission costs are periodically reviewed for impairment.
On December 31, 2019, our deferred commission costs, included within other assets, were $15.6 million, of which approximately $1.3 million and $2.7 million of commission expense was recognized during the three and six months ended June 30, 2020, respectively. Furthermore, as a result of commissions related to new extended warranties and SaaS subscriptions, net of subsequent recognition, our deferred commission costs were $15.7 million at June 30, 2020. Impairments of deferred commission costs during the three and six months ended June 30, 2020, were not material.
NOTE 4. ACQUISITIONS
We believe that our acquisitions of businesses and other assets enhance our existing businesses by either expanding our geographic range and customer base or expanding our existing product lines. From time to time we may acquire the assets of small reference labs that we account for as an asset purchase.
During the fourth quarter of 2019, we acquired the assets of a multi-site reference laboratory in the Midwest of the U.S. for $50.0 million in cash. This acquisition expands our national reference laboratory presence in the U.S. and was accounted for as a business combination. We finalized the valuation of the assets acquired during the first quarter of 2020. The fair value of the assets acquired consists of $26.9 million in intangible assets, primarily for customer relationships, with a weighted average life of 13.8 years, $0.2 million of tangible assets, and $22.9 million of goodwill, representing synergies within our reference laboratory portfolio. The goodwill is expected to be deductible for income tax purposes.
NOTE 5. SHARE-BASED COMPENSATION
The fair value of options, restricted stock units, deferred stock units, and employee stock purchase rights awarded during the three and six months ended June 30, 2020, totaled $2.3 million and $38.6 million as compared to $1.9 million and $36.3 million for the three and six months ended June 30, 2019. The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation awards outstanding at June 30, 2020, was $70.5 million, which will be recognized over a weighted average period of approximately 1.9 years. During the three and six months ended June 30, 2020, we recognized expenses of $7.8 million and $15.1 million as compared to $6.9 million and $13.2 million for the three and six months ended June 30, 2019, related to share-based compensation.
We determine the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at each grant date. As such, we may use different assumptions for options granted throughout the year. Option awards are granted with an exercise price equal to the closing market price of our common stock at the date of grant. We have never paid any cash dividends on our common stock, and we have no intention to pay such a dividend at this time; therefore, we assume that no dividends will be paid over the expected terms of option awards.
The weighted averages of the valuation assumptions used to determine the fair value of each option award on the date of grant and the weighted average estimated fair values were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
Share price at grant
|
$
|
288.49
|
|
|
$
|
208.25
|
|
|
Expected stock price volatility
|
27
|
%
|
|
26
|
%
|
|
Expected term, in years
|
6.0
|
|
6.0
|
|
Risk-free interest rate
|
1.4
|
%
|
|
2.5
|
%
|
|
Weighted average fair value of options granted
|
$
|
84.09
|
|
|
$
|
63.93
|
|
NOTE 6. CREDIT LOSSES
We are exposed to credit losses primarily through our sales of products and services to our customers. We maintain allowances for credit losses for potentially uncollectible receivables. We base our estimates on a detailed analysis of specific customer situations and a percentage of our accounts receivable by aging category. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current economic conditions. See Note 2. Accounting Policies, for more information on our adoption of ASU 2016-13 on January 1, 2020, using the modified retrospective transition method.
Additional allowances may be required if either the financial condition of our customers was to deteriorate, or a strengthening U.S. dollar impacts the ability of foreign customers to make payments to us on their U.S. dollar-denominated purchases. We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and
due dates. Our activities include timely account reconciliations, dispute resolution and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.
Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. We may require collateralized asset support or a prepayment to mitigate credit risk. We do not have any off-balance sheet credit exposure related to our customers.
Accounts Receivable
The allowance for credit losses associated with accounts receivable was $7.6 million and $3.6 million at June 30, 2020 and December 31, 2019, respectively. Accounts receivable reflected on the balance sheet is net of this reserve. Based on an aging analysis, at June 30, 2020, approximately 88% of our accounts receivable had not yet reached the invoice due date and approximately 12% was considered past due, of which approximately 2.1% was greater than 60 days past due. At December 31, 2019, approximately 84% of our accounts receivable had not yet reached the invoice due date and approximately 16% was considered past due, of which approximately 1.5% was greater than 60 days past due.
Contract assets and lease receivables
The allowance for credit losses associated with the contract assets and lease receivables was $3.0 million, at June 30, 2020. The assets reflected on the balance sheet are net of these reserves. Historically, we have experienced low credit loss rates on our customer commitment programs and lease receivables. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
NOTE 7. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The components of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
Raw materials
|
$
|
49,129
|
|
|
$
|
41,202
|
|
|
Work-in-process
|
20,314
|
|
|
20,077
|
|
|
Finished goods
|
159,934
|
|
|
133,740
|
|
|
Inventories
|
$
|
229,377
|
|
|
$
|
195,019
|
|
NOTE 8. LEASES
The majority of our facilities are occupied under operating lease arrangements with various expiration dates through 2067, some of which include options to extend the life of the lease, and some of which include options to terminate the lease within one year. In certain instances, we are responsible for the real estate taxes and operating expenses related to these facilities. Additionally, we enter into operating leases for certain vehicles and office equipment in the normal course of business. We determine the expected term of any executed agreements using the non-cancelable lease term plus any renewal options by which the failure to renew imposes a penalty in such amount that renewal is reasonably assured. The derived expected term is then used in the determination of a financing or operating lease and in the calculation of straight-line rent expense. Rent escalations are considered in the calculation of minimum lease payments in our capital lease tests and in determining straight-line rent expense for operating leases. Minimum lease payments include the fixed lease component of the agreement, as well as fixed rate increases that are initially measured at the lease commencement date. Variable lease payments based on an index, payments associated with non-lease components and short-term rentals (leases with terms less than 12 months) are expensed as incurred. Consideration is allocated to the lease and non-lease components based on the estimated standalone prices.
We determine if an arrangement is a lease at its inception. Operating leases are included in operating lease right-of-use assets, accrued liabilities, and long-term operating lease liabilities in our consolidated balance sheets. Our financing leases are not material to our financial statements.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an explicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Rent expense for lease payments is recognized on a straight-line basis over the lease term. The operating lease right-of-use assets also includes any rent prepayments, lease incentives upon receipt and straight-line rent expense impacts, which represent the difference between our operating lease liabilities and right-of-use assets.
Maturities of operating lease liabilities were as follows:
|
|
|
|
|
|
|
|
(in thousands, except lease term and discount rate)
|
June 30, 2020
|
|
|
|
|
2020 (remainder of year)
|
$
|
9,263
|
|
|
2021
|
19,956
|
|
|
2022
|
16,841
|
|
|
2023
|
11,714
|
|
|
2024
|
7,833
|
|
|
Thereafter
|
35,739
|
|
|
Total lease payments
|
101,346
|
|
|
Less imputed interest
|
(16,276)
|
|
|
Total
|
$
|
85,070
|
|
|
|
|
|
Current operating lease liabilities, included in accrued liabilities
|
$
|
16,473
|
|
|
Long-term operating lease liabilities
|
$
|
68,597
|
|
|
|
|
|
Weighted average remaining lease term - operating leases
|
9.9 years
|
|
|
|
|
Weighted average discount rate - operating leases
|
3.5
|
%
|
Total minimum future lease payments of approximately $1.3 million for leases that have not commenced as of June 30, 2020, are not included in the condensed consolidated financial statements, as we do not yet control the underlying assets. These leases are expected to commence between 2020 and 2021 with lease terms of approximately 5 years to 10 years.
Rent expense charged to operations under operating leases was approximately $5.2 million and $10.6 million during the three and six months ended June 30, 2020, respectively, and $5.1 million and $10.3 million during the three and six months ended June 30, 2019, respectively. Variable rent and short-term lease expenses were not material.
Supplemental cash flow information for leases was as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
For the Six Months Ended
June 30, 2020
|
|
|
|
|
Cash paid for amounts included in the measurement of operating leases liabilities
|
$
|
9,346
|
|
|
Right-of-use assets obtained in exchange for operating lease obligations, net of early lease terminations
|
$
|
10,738
|
|
NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS
Other current assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
Customer acquisition costs
|
$
|
41,569
|
|
|
$
|
39,329
|
|
|
Prepaid expenses
|
31,795
|
|
|
31,992
|
|
|
Contract assets, net
|
18,860
|
|
|
17,659
|
|
|
Taxes receivable
|
15,769
|
|
|
20,516
|
|
|
Deferred sales commissions
|
5,321
|
|
|
5,202
|
|
|
Other assets
|
11,308
|
|
|
10,284
|
|
|
Other current assets
|
$
|
124,622
|
|
|
$
|
124,982
|
|
Other long-term assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
|
Customer acquisition costs
|
$
|
104,406
|
|
|
$
|
98,117
|
|
|
Contract assets, net
|
72,721
|
|
|
66,226
|
|
|
Investment in long-term product supply arrangements
|
13,388
|
|
|
13,657
|
|
|
Deferred sales commissions
|
10,409
|
|
|
10,442
|
|
|
Deferred income taxes
|
7,575
|
|
|
8,100
|
|
|
Taxes receivable
|
11,543
|
|
|
14,960
|
|
|
Other assets
|
36,712
|
|
|
28,690
|
|
|
Other long-term assets
|
$
|
256,754
|
|
|
$
|
240,192
|
|
NOTE 10. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
Accrued employee compensation and related expenses
|
$
|
106,191
|
|
|
$
|
127,174
|
|
|
Accrued expenses
|
67,265
|
|
|
86,296
|
|
|
Accrued customer incentives and refund obligations
|
63,149
|
|
|
63,079
|
|
|
Accrued taxes
|
55,690
|
|
|
31,108
|
|
|
Current lease liabilities
|
16,473
|
|
|
15,281
|
|
|
Accrued liabilities
|
$
|
308,768
|
|
|
$
|
322,938
|
|
Other long-term liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
Accrued taxes
|
$
|
66,100
|
|
|
$
|
67,463
|
|
|
Other accrued long-term expenses
|
18,107
|
|
|
13,701
|
|
|
Other long-term liabilities
|
$
|
84,207
|
|
|
$
|
81,164
|
|
NOTE 11. DEBT
Senior Notes
The following describes all of our currently outstanding unsecured senior notes issued and sold in private placements (collectively, the “Senior Notes”) as of June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Principal Amount in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue Date
|
|
Due Date
|
|
Series
|
|
Principal Amount
|
|
Coupon Rate
|
|
Senior Note Agreement (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/11/2013
|
|
12/11/2023
|
|
2023 Series A Notes
|
|
$
|
75,000
|
|
|
3.94
|
%
|
|
NY Life 2013 Note Agreement
|
|
12/11/2013
|
|
12/11/2025
|
|
2025 Series B Notes
|
|
$
|
75,000
|
|
|
4.04
|
%
|
|
NY Life 2013 Note Agreement
|
|
09/04/2014
|
|
09/04/2026
|
|
2026 Senior Notes
|
|
$
|
75,000
|
|
|
3.72
|
%
|
|
NY Life 2014 Note Agreement
|
|
07/21/2014
|
|
07/21/2021
|
|
2021 Series A Notes
|
|
$
|
50,000
|
|
|
3.32
|
%
|
|
Prudential 2015 Amended Agreement
|
|
07/21/2014
|
|
07/21/2024
|
|
2024 Series B Notes
|
|
$
|
75,000
|
|
|
3.76
|
%
|
|
Prudential 2015 Amended Agreement
|
|
06/18/2015
|
|
06/18/2025
|
|
2025 Series C Notes
|
|
€
|
88,857
|
|
|
1.785
|
%
|
|
Prudential 2015 Amended Agreement
|
|
02/12/2015
|
|
02/12/2022
|
|
2022 Series A Notes
|
|
$
|
75,000
|
|
|
3.25
|
%
|
|
MetLife 2014 Note Agreement
|
|
02/12/2015
|
|
02/12/2027
|
|
2027 Series B Notes
|
|
$
|
75,000
|
|
|
3.72
|
%
|
|
MetLife 2014 Note Agreement
|
|
03/14/2019
|
|
03/14/2029
|
|
2029 Series C Notes
|
|
$
|
100,000
|
|
|
4.19
|
%
|
|
MetLife 2014 Note Agreement
|
|
04/02/2020
|
|
04/02/2030
|
|
MetLife 2030 Series D Notes
|
|
$
|
125,000
|
|
|
2.50
|
%
|
|
MetLife 2014 Note Agreement
|
|
04/14/2020
|
|
04/14/2030
|
|
Prudential 2030 Series D Notes
|
|
$
|
75,000
|
|
|
2.50
|
%
|
|
Prudential 2015 Amended Agreement
|
(1) In each case, as amended.
MetLife 2014 Note Agreement
On March 23, 2020, we entered into the Second Amendment to the MetLife 2014 Note Agreement (the “MetLife Second Amendment”), in order to (i) increase the facility size from $150 million to $300 million, (ii) extend the facility issuance period to December 20, 2022, (iii) make various implementing and administrative changes in order to facilitate a $125 million notes issuance on April 2, 2020 and (iv) allow the amount available to be issued under the facility to equal $300 million, less the amounts outstanding on 2029 Series C Notes and MetLife 2030 Series D Notes.
On April 2, 2020, we issued and sold to MetLife and other purchasers $125 million of our unsecured senior notes (the “MetLife 2030 Series D Notes”) pursuant to the MetLife Second Amendment. The entire outstanding principal balance of the MetLife 2030 Series D Notes is due and payable on April 2, 2030, and the MetLife 2030 Series D Notes bear interest at the rate of 2.50% per annum. We used the proceeds received from the MetLife 2030 Series D Notes for general corporate purposes.
Prudential 2015 Amended Agreement
On April 10, 2020, we entered into the Second Amendment to the Prudential 2015 Amended Agreement (the “Prudential Second Amendment”), in order to (i) increase the facility size to $425 million, (ii) extend the facility issuance period to April 10, 2023, (iii) make various implementing and administrative changes in order to facilitate a $75 million notes issuance on April 14, 2020, (iv) allow the amount available to be issued under the facility to equal $425 million less the amount of notes outstanding from time to time during the issuance period and (v) modify several defined terms, schedules and covenant baskets in the Prudential 2015 Amended Agreement to create additional operating flexibility, and in particular to align such provisions with similar modifications we made substantially concurrently in our other debt facilities.
On April 14, 2020, we issued and sold to Prudential and other purchasers $75 million of our unsecured senior notes (the “Prudential 2030 Series D Notes”) pursuant to the Prudential Second Amendment. The entire outstanding balance of the Prudential 2030 Series D Notes is due and payable on April 14, 2030, and the Prudential 2030 Series D Notes bear interest at the rate of 2.50% per annum. We used the proceeds received from the Prudential 2030 Series D Notes for general corporate purposes.
NY Life 2013 and 2014 Note Agreements
On April 10, 2020, we amended the NY Life 2013 Note Agreement and the NY Life 2014 Note Agreement by entering into two Amendments to Note Purchase Agreement with New York Life Insurance Company and the other parties thereto, which modified several defined terms, schedules and covenant baskets in the NY Life 2013 Agreement and the NY Life 2014 Note Agreement to create additional operating flexibility, and in particular to align such provisions with similar modifications we made substantially concurrently in our other debt facilities.
Senior Note Agreements
The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, fundamental changes, investments, transactions with affiliates, certain restrictive agreements, and violations of laws and regulations. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, acquisition-related expense, and share-based compensation, as defined in the Senior Note Agreements, not to exceed 3.5-to-1. At June 30, 2020, we were in compliance with the covenants of the Senior Note Agreements.
Should we elect to prepay the Senior Notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the Company or upon the disposition of certain assets of the Company the proceeds of which are not reinvested (as defined in the Senior Note Agreements), we may be required to prepay all or a portion of the Senior Notes. The obligations under the Senior Notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreement, each of which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974, the failure to pay specified indebtedness and cross-acceleration to specified indebtedness.
Credit Facility
On April 14, 2020, we, along with IDEXX Distribution, Inc., IDEXX Operations, Inc., OPTI Medical Systems, Inc., IDEXX Laboratories Canada Corporation, IDEXX Europe B.V., and IDEXX Holding B.V., our wholly-owned subsidiaries (whether directly or indirectly held) (collectively, the “Borrowers”), entered into a third amended and restated credit agreement (the “Credit Agreement”) relating to a three-year unsecured revolving credit facility in the principal amount of $1 billion, among the Borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Toronto agent, and the other parties thereto.
The Credit Agreement amends and restates that certain second amended and restated credit agreement, dated as of December 4, 2015, (which provided for a $850 million five-year unsecured revolving credit facility) to extend the maturity to April 14, 2023 and to increase the aggregate commitments available for borrowing by the Borrowers to $1 billion with the option to increase the aggregate commitments by $250 million, for an aggregate maximum of up to $1.25 billion, subject to the Borrowers obtaining commitments from existing or new lenders and satisfying other conditions specified in the Credit Agreement.
Although the Credit Facility does not mature until April 14, 2023, all individual borrowings under the terms of the Credit Facility with an interest rate based on a LIBOR, EURIBOR, or Canadian Dollar rate (as selected by the borrower) have a stated term between 30 and 180 days. At the end of each term, the obligation is either repaid or rolled over into a new borrowing, or replaced by a borrowing based on a published prime rate (where interest is then paid quarterly). The Credit Facility contains a subjective material adverse event notification clause, which allows the debt holders to call the loans under the Credit Facility if we fail to provide prompt written notice to the syndicate of such an event. Based on the stated term and the existence of the subjective material adverse event clause, this Credit Facility is reflected in the current liabilities section of our consolidated balance sheets.
NOTE 12. REPURCHASES OF COMMON STOCK
We primarily acquire shares by repurchases in the open market. However, we also acquire shares that are surrendered by employees in payment for the minimum required statutory withholding taxes due on the vesting of restricted stock units and the settlement of deferred stock units, otherwise referred to herein as employee surrenders. We issue shares of treasury stock upon the vesting of certain restricted stock units and upon the exercise of certain stock options. The number of shares of treasury stock issued during the three and six months ended June 30, 2020 and 2019, was not material.
The following is a summary of our open market common stock repurchases, reported on a trade date basis, and shares acquired through employee surrender:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
For the Three Months Ended
June 30,
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Shares repurchased in the open market
|
—
|
|
|
86
|
|
|
721
|
|
|
353
|
|
|
Shares acquired through employee surrender for statutory tax withholding
|
—
|
|
|
1
|
|
|
30
|
|
|
37
|
|
|
Total shares repurchased
|
—
|
|
|
87
|
|
|
751
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
Cost of shares repurchased in the open market
|
$
|
—
|
|
|
$
|
20,285
|
|
|
$
|
179,623
|
|
|
$
|
74,147
|
|
|
Cost of shares for employee surrenders
|
65
|
|
|
169
|
|
|
8,669
|
|
|
7,572
|
|
|
Total cost of shares
|
$
|
65
|
|
|
$
|
20,454
|
|
|
$
|
188,292
|
|
|
$
|
81,719
|
|
|
|
|
|
|
|
|
|
|
|
Average cost per share - open market repurchases
|
$
|
—
|
|
|
$
|
235.94
|
|
|
$
|
249.20
|
|
|
$
|
209.81
|
|
|
Average cost per share - employee surrenders
|
$
|
312.19
|
|
|
$
|
249.77
|
|
|
$
|
288.94
|
|
|
$
|
207.16
|
|
|
Average cost per share - total
|
$
|
312.19
|
|
|
$
|
236.04
|
|
|
$
|
250.79
|
|
|
$
|
209.56
|
|
NOTE 13. INCOME TAXES
Our effective income tax rate was 18.9% for the three months ended June 30, 2020, as compared to 19.5% for the three months ended June 30, 2019, and 18.6% for the six months ended June 30, 2020, as compared to 18.7% for the six months ended June 30, 2019. The decrease in our effective tax rate for the three and six months ended June 30, 2020, as compared to the same period in the prior year, was primarily driven by regional earnings mix, with relatively higher statutory earnings subject to lower international tax rates than domestic tax rates.
The effective tax rate for the three and six months ended June 30, 2020, differed from the U.S. statutory tax rate of 21% primarily due tax benefits from share-based compensation.
NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME
The changes in AOCI, net of tax, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (Loss) Gain on Cash Flow Hedges, Net of Tax
|
|
Unrealized (Loss) Gain on
Net Investment Hedges, Net of Tax
|
|
|
|
|
|
|
|
(in thousands)
|
|
Unrealized Gain (Loss) on Investments,
Net of Tax
|
|
Foreign Currency Exchange Contracts
|
|
Euro-Denominated Notes
|
|
Cross Currency Swaps
|
|
Cumulative Translation
Adjustment
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
$
|
110
|
|
|
$
|
(736)
|
|
|
$
|
1,396
|
|
|
$
|
3,467
|
|
|
$
|
(50,419)
|
|
|
$
|
(46,182)
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
(574)
|
|
|
5,538
|
|
|
(642)
|
|
|
2,602
|
|
|
(15,200)
|
|
|
(8,276)
|
|
|
Gain reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(2,574)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,574)
|
|
|
Balance as of June 30, 2020
|
|
$
|
(464)
|
|
|
$
|
2,228
|
|
|
$
|
754
|
|
|
$
|
6,069
|
|
|
$
|
(65,619)
|
|
|
$
|
(57,032)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gain (Loss) on Cash Flow Hedges,
Net of Tax
|
|
Unrealized (Loss) Gain on Net Investment Hedges, Net of Tax
|
|
|
|
|
|
|
|
(in thousands)
|
|
Unrealized (Loss) Gain on Investments,
Net of Tax
|
|
Foreign Currency Exchange Contracts
|
|
Euro-Denominated Notes
|
|
Cross Currency Swaps
|
|
Cumulative Translation
Adjustment
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
|
$
|
(157)
|
|
|
$
|
6,229
|
|
|
$
|
(394)
|
|
|
$
|
1,360
|
|
|
$
|
(48,829)
|
|
|
$
|
(41,791)
|
|
|
Other comprehensive income before reclassifications
|
|
362
|
|
|
1,110
|
|
|
500
|
|
|
868
|
|
|
1,681
|
|
|
4,521
|
|
|
Gain reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(3,313)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,313)
|
|
|
Balance as of June 30, 2019
|
|
$
|
205
|
|
|
$
|
4,026
|
|
|
$
|
106
|
|
|
$
|
2,228
|
|
|
$
|
(47,148)
|
|
|
$
|
(40,583)
|
|
The following tables present components and amounts reclassified out of AOCI to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Affected Line Item in the Statements of Income
|
|
Amounts Reclassified from AOCI For the Three Months Ended June 30,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Gain on derivative instruments classified as cash flow hedges included in net income:
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
Cost of revenue
|
|
$
|
1,812
|
|
|
$
|
2,509
|
|
|
|
|
Tax expense
|
|
339
|
|
|
358
|
|
|
|
|
Gain, net of tax
|
|
$
|
1,473
|
|
|
$
|
2,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Affected Line Item in the Statements of Income
|
|
Amounts Reclassified from AOCI For the Six Months Ended June 30,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Gain on derivative instruments classified as cash flow hedges included in net income:
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
Cost of revenue
|
|
$
|
3,153
|
|
|
$
|
3,920
|
|
|
|
|
Tax expense
|
|
579
|
|
|
607
|
|
|
|
|
Gain, net of tax
|
|
$
|
2,574
|
|
|
$
|
3,313
|
|
NOTE 15. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income attributable to our stockholders by the weighted average number of shares of common stock and vested deferred stock units outstanding during the year. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and assumed issuance of unvested restricted stock units and unvested deferred stock units using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the total unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase our common stock at the average market price during the period. Vested deferred stock units outstanding are included in shares outstanding for basic and diluted earnings per share because the associated shares of our common stock are issuable for no cash consideration, the number of shares of our common stock to be issued is fixed and issuance is not contingent. See Note 5 to the consolidated financial statements in our 2019 Annual Report for additional information regarding deferred stock units.
The following is a reconciliation of weighted average shares outstanding for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
For the Three Months Ended
June 30,
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding for basic earnings per share
|
85,134
|
|
|
86,215
|
|
|
85,282
|
|
|
86,210
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding for diluted earnings per share:
|
|
|
|
|
|
|
|
|
Shares outstanding for basic earnings per share
|
85,134
|
|
|
86,215
|
|
|
85,282
|
|
|
86,210
|
|
|
Dilutive effect of share-based payment awards
|
1,268
|
|
|
1,400
|
|
|
1,286
|
|
|
1,384
|
|
|
|
86,402
|
|
|
87,615
|
|
|
86,568
|
|
|
87,594
|
|
Certain awards and options to acquire shares have been excluded from the calculation of shares outstanding for diluted earnings per share because they were anti-dilutive. The following table presents information concerning those anti-dilutive awards and options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
For the Three Months Ended
June 30,
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares underlying anti-dilutive awards
|
—
|
|
—
|
|
1
|
|
|
—
|
|
Weighted average number of shares underlying anti-dilutive options
|
270
|
|
|
286
|
|
|
218
|
|
|
235
|
|
NOTE 16. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
See “Note 8. Leases”, for more information regarding our lease commitments.
Contingencies and Guarantees
We are subject to claims that may arise in the ordinary course of business, including with respect to actual and threatened litigation and other matters. We accrue for loss contingencies when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. However, the results of legal actions cannot be predicted with certainty, and therefore our actual losses with respect to these contingencies could exceed our accruals. At June 30, 2020, our accruals with respect to actual and threatened litigation were not material.
From time to time, we have received notices alleging that our products infringe third-party proprietary rights, although we are not aware of any pending litigation with respect to such claims. Patent litigation frequently is complex and expensive, and the outcome of patent litigation can be difficult to predict. There can be no assurance that we will prevail in any infringement proceedings that may be commenced against us. If we lose any such litigation, we may be stopped from selling certain products and/or we may be required to pay damages as a result of the litigation.
We are a defendant in an ongoing litigation matter involving an alleged breach of contract for underpayment of royalty payments made from 2004 through 2017 under an expired patent license agreement. The plaintiff has asserted a claim of approximately $50 million, inclusive of interest, alleging that the incorrect royalty provision was applied to certain licensed products and services throughout the agreement term and that royalties were also due on non-licensed diagnostic services that were provided concurrently with licensed services. While it is possible that we may have a loss related to this claim, we do not believe a loss is probable at this time. We are vigorously defending ourselves against the plaintiff’s allegations. While we believe the claim is without merit, litigation is inherently unpredictable and there can be no assurance that we will prevail in this matter.
Excluding the litigation described above, we have had no significant changes to our contingencies and guarantees discussed in Note 15 to the consolidated financial statements in our 2019 Annual Report.
NOTE 17. SEGMENT REPORTING
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. Our reportable segments include diagnostic and information technology-based products and services for the veterinary market, which we refer to as the Companion Animal Group (“CAG”), water quality products (“Water”) and diagnostic products and services for livestock and poultry health and to ensure the quality and safety of milk and improve dairy efficiency, which we refer to as Livestock, Poultry and Dairy (“LPD”). Our Other operating segment combines and presents products for the human medical diagnostics (“OPTI Medical”) market with our out-licensing arrangements. Assets are not allocated to segments for internal reporting purposes.
Effective January 1, 2020, we modified our management reporting to the Chief Operating Decision Maker to provide a more comprehensive view of the performance of our operating segments by including costs that previously were not allocated to our segments. Prior to January 1, 2020, certain costs were not allocated to our operating segments and were instead reported under the caption “Unallocated Amounts”. These costs primarily consist of our R&D function, regional or country expenses and unusual items. Corporate support function costs (such as information technology, facilities, human resources, finance and legal), health benefits and incentive compensation were charged to our business segments at pre-determined budgeted amounts or rates. Beginning January 1, 2020, the segments reflect these actual costs allocated to the segment based on various allocation methods, including revenue and headcount. Foreign exchange losses on settlements of foreign currency denominated transactions are not allocated to our operating segments and are instead reported within our Other reporting segment.
The following table reflects adjustments to previously reported costs in our Unallocated segment, that are now allocated to our CAG, Water, LPD and Other segments for the three and six months ended June 30, 2019, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
CAG
|
|
Water
|
|
LPD
|
|
Other
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
344
|
|
|
$
|
15
|
|
|
$
|
19
|
|
|
$
|
8
|
|
|
$
|
(386)
|
|
|
Gross profit
|
|
(344)
|
|
|
(15)
|
|
|
(19)
|
|
|
(8)
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
$
|
(18)
|
|
|
$
|
(1)
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
General and administrative
|
|
(893)
|
|
|
(179)
|
|
|
(206)
|
|
|
949
|
|
|
329
|
|
|
Research and development
|
|
3,960
|
|
|
10
|
|
|
13
|
|
|
—
|
|
|
(3,983)
|
|
|
Total operating expenses
|
|
3,049
|
|
|
(170)
|
|
|
(194)
|
|
|
949
|
|
|
(3,634)
|
|
|
Income from operations
|
|
$
|
(3,393)
|
|
|
$
|
155
|
|
|
$
|
175
|
|
|
$
|
(957)
|
|
|
$
|
4,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
CAG
|
|
Water
|
|
LPD
|
|
Other
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
162
|
|
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
4
|
|
|
$
|
(182)
|
|
|
Gross profit
|
|
(162)
|
|
|
(7)
|
|
|
(9)
|
|
|
(4)
|
|
|
182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
$
|
111
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
(122)
|
|
|
General and administrative
|
|
(1,095)
|
|
|
(219)
|
|
|
(253)
|
|
|
1,164
|
|
|
403
|
|
|
Research and development
|
|
7,518
|
|
|
19
|
|
|
24
|
|
|
—
|
|
|
(7,561)
|
|
|
Total operating expenses
|
|
6,534
|
|
|
(195)
|
|
|
(223)
|
|
|
1,164
|
|
|
(7,280)
|
|
|
Income from operations
|
|
$
|
(6,696)
|
|
|
$
|
188
|
|
|
$
|
214
|
|
|
$
|
(1,168)
|
|
|
$
|
7,462
|
|
The following is a summary of segment performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
CAG
|
|
Water
|
|
LPD
|
|
Other
|
|
Consolidated Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
566,100
|
|
|
$
|
28,116
|
|
|
$
|
32,244
|
|
|
$
|
11,132
|
|
|
$
|
637,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
167,969
|
|
|
$
|
12,258
|
|
|
$
|
8,249
|
|
|
$
|
4,772
|
|
|
$
|
193,248
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
(9,426)
|
|
|
Income before provision for income taxes
|
|
|
|
|
|
|
|
|
|
183,822
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
34,826
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
148,996
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
56
|
|
|
Net income attributable to IDEXX Laboratories, Inc. stockholders
|
|
|
|
|
|
|
|
|
|
$
|
148,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
547,349
|
|
|
$
|
34,764
|
|
|
$
|
33,104
|
|
|
$
|
4,886
|
|
|
$
|
620,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
141,190
|
|
|
$
|
16,722
|
|
|
$
|
6,568
|
|
|
$
|
(205)
|
|
|
$
|
164,275
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
(8,153)
|
|
|
Income before provision for income taxes
|
|
|
|
|
|
|
|
|
|
156,122
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
30,421
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
125,701
|
|
|
Less: Net loss attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
Net income attributable to IDEXX Laboratories, Inc. stockholders
|
|
|
|
|
|
|
|
|
|
$
|
125,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
CAG
|
|
Water
|
|
LPD
|
|
Other
|
|
Consolidated Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,118,096
|
|
|
$
|
62,265
|
|
|
$
|
66,398
|
|
|
$
|
17,169
|
|
|
$
|
1,263,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
$
|
286,628
|
|
|
$
|
28,140
|
|
|
$
|
17,912
|
|
|
$
|
4,893
|
|
|
$
|
337,573
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
(16,978)
|
|
|
Income before provision for income taxes
|
|
|
|
|
|
|
|
|
|
320,595
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
59,743
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
260,852
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
85
|
|
|
Net income attributable to IDEXX Laboratories, Inc. stockholders
|
|
|
|
|
|
|
|
|
|
$
|
260,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,056,267
|
|
|
$
|
65,074
|
|
|
$
|
64,610
|
|
|
$
|
10,208
|
|
|
$
|
1,196,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
$
|
252,909
|
|
|
$
|
30,537
|
|
|
$
|
12,857
|
|
|
$
|
1,110
|
|
|
$
|
297,413
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
(16,499)
|
|
|
Income before provision for income taxes
|
|
|
|
|
|
|
|
|
|
280,914
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
52,504
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
228,410
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
23
|
|
|
Net income attributable to IDEXX Laboratories, Inc. stockholders
|
|
|
|
|
|
|
|
|
|
$
|
228,387
|
|
See “Note 3. Revenue Recognition” for a summary of disaggregated revenue by reportable segment and by major product and service category for the three and six months ended June 30, 2020 and 2019.
NOTE 18. FAIR VALUE MEASUREMENTS
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a non-recurring basis and certain financial assets and liabilities that are not measured at fair value in our unaudited condensed consolidated balance sheets but for which we disclose the fair value. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
|
|
Level 2
|
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
Level 3
|
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We did not have any transfers between Level 1 and Level 2 or transfers in or out of Level 3 of the fair value hierarchy during the three and six months ended June 30, 2020.
Our cross currency swap contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets. We measure the fair value of our cross currency swap contracts classified as derivative instruments using prevailing market conditions as of the close of business on each balance sheet date. The product of this calculation is then adjusted for counterparty risk.
Our foreign currency exchange contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets. We measure the fair value of our foreign currency exchange contracts classified as derivative instruments using an income approach, based on prevailing market forward rates less the contract rate multiplied by the notional amount. The product of this calculation is then adjusted for counterparty risk.
The amounts outstanding under our unsecured revolving credit facility (“Credit Facility” or “line of credit”) and senior notes (“long-term debt”) are measured at carrying value in our unaudited condensed consolidated balance sheets though we disclose the fair value of these financial instruments. We determine the fair value of the amount outstanding under our Credit Facility and long-term debt using an income approach, utilizing a discounted cash flow analysis based on current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk. Our Credit Facility and long-term debt are valued using Level 2 inputs. The estimated fair value of our Credit Facility approximates its carrying value. The estimated fair value and carrying value of our long-term debt were $996.9 million and $900.3 million, respectively, as of June 30, 2020, and $753.6 million and $699.4 million, respectively, as of December 31, 2019.
The following tables set forth our assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance at June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Money market funds(1)
|
|
$
|
76
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
76
|
|
|
Equity mutual funds(2)
|
|
$
|
1,244
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,244
|
|
|
Cross currency swaps(3)
|
|
$
|
—
|
|
|
$
|
7,980
|
|
|
$
|
—
|
|
|
$
|
7,980
|
|
|
Foreign currency exchange contracts(3)
|
|
$
|
—
|
|
|
$
|
3,889
|
|
|
$
|
—
|
|
|
$
|
3,889
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts(3)
|
|
$
|
—
|
|
|
$
|
1,374
|
|
|
$
|
—
|
|
|
$
|
1,374
|
|
|
Deferred compensation(4)
|
|
$
|
1,244
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance at December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Money market funds(1)
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
Equity mutual funds(2)
|
|
$
|
1,676
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,676
|
|
|
Cross currency swaps(3)
|
|
$
|
—
|
|
|
$
|
4,559
|
|
|
$
|
—
|
|
|
$
|
4,559
|
|
|
Foreign currency exchange contracts(3)
|
|
$
|
—
|
|
|
$
|
1,791
|
|
|
$
|
—
|
|
|
$
|
1,791
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts(3)
|
|
$
|
—
|
|
|
$
|
2,886
|
|
|
$
|
—
|
|
|
$
|
2,886
|
|
|
Deferred compensation(4)
|
|
$
|
1,676
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,676
|
|