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SEC Filings

10-Q
HEARTWARE INTERNATIONAL, INC. filed this Form 10-Q on 11/02/2015
Entire Document
 


Table of Contents

The following tables represent the fair value of our financial assets and financial liabilities measured at fair value on a recurring basis and which level was used in the fair value hierarchy at the respective dates.

 

                  Fair Value Measurements at the Reporting Date Using  
     Carrying
Value
    Fair
Value
     Level 1      Level 2      Level 3  
                  (in thousands)                

As of September 30, 2015

  

Assets

  

Short-term investments

   $ 63,391      $ 63,391       $ —         $ 63,391       $ —     

Long-term investments

     1,225        1,225         —           1,225         —     

Liabilities

             

3.5% convertible notes

     35,808  (1)      46,081         —           46,081         —     

1.75% convertible notes

     152,981  (1)      179,853         —           179,853         —     

Contingent consideration

     50,440        50,440         —           —           50,440   

Royalties

     896        896         —           —           896   

Lease exit costs

     1,152        1,152         —           —           1,152   
                  Fair Value Measurements at the Reporting Date Using  
     Carrying
Value
    Fair
Value
     Level 1      Level 2      Level 3  
                  (in thousands)                

As of December 31, 2014

  

Assets

  

Short-term investments

   $ 75,535      $ 75,535       $ —         $ 75,535       $ —     

Long-term investments

     1,225        1,225         —           1,225         —     

Liabilities

             

3.5% convertible notes

     114,803  (1)      153,978         —           153,978         —     

Contingent consideration

     43,740        43,740         —           —           43,740   

Royalties

     962        962         —           —           962   

Lease exit costs

     1,207        1,207         —           —           1,207   

 

(1) The carrying amount of our convertible notes is net of unamortized discount. See Note 7 (Debt) for more information.

Our Level 2 financial assets and liabilities include available-for-sale investments and our convertible notes. The fair value of our available-for-sale investments and our convertible notes was determined using quoted prices (including trade data) for the instruments in markets that are not active. The fair value of our convertible notes is presented for disclosure purposes only.

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Our Level 3 financial liabilities include the following:

 

    Contingent consideration – Determining the fair value of the contingent consideration related to our acquisition of CircuLite in December 2013 requires significant management judgment or estimation. The estimated fair value is calculated using the income approach, with significant inputs that include various development timelines, revenue assumptions, discount rates and applying a probability to each outcome. Material changes in any of these inputs could result in a significantly higher or lower fair value measurement. The fair value of the contingent consideration is remeasured at the estimated fair value at each reporting period. Actual amounts paid may differ from the obligations recorded.

 

   

Royalties – Royalties represent future royalty payments to be made over the next 14 years pursuant to agreements related to intellectual property licensed or acquired by World Heart Corporation, which we acquired in August

 

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