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SEC
10-Q
BIOTELEMETRY, INC. filed this Form 10-Q on 10/31/2018
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BIOTELEMETRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


Inventory, which includes purchased parts, materials, direct labor and applied manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method. The increase in our inventory balance is due primarily to the accumulation of newer generation devices in our Technology operating segment to support our growing Healthcare business.

5. Fair Value Measurements
We have determined that our long-term debt, classified as Level 2, has a fair value consistent with its carrying value, exclusive of debt discount and deferred charges, of $198.8 million and $199.4 million as of September 30, 2018 and December 31, 2017, respectively.
Contingent consideration represents our contingent milestone payment obligations related to our acquisitions and is measured at fair value, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions we believe would be made by a market participant. We assess these estimates on an ongoing basis as additional data impacting the assumptions is obtained. The balances of the fair value of contingent consideration were recognized within accrued liabilities and other long-term liabilities on our consolidated balance sheets. Adjustments to contingent consideration are recorded in other charges in the consolidated statements of operations.
The following table provides a reconciliation of the beginning and ending balances of contingent consideration associated with our Telcare and ePatch acquisitions that occurred during the year ended December 31, 2016:
 
Three Months Ended
 
Nine Months Ended
(in thousands)
September 30,
2018
 
September 30,
2017
 
September 30,
2018
 
September 30,
2017
Beginning balance
$

 
$
2,700

 
$
700

 
$
3,305

Changes in fair value of contingent consideration

 
(1,400
)
 
(700
)
 
(2,005
)
Ending balance
$

 
$
1,300

 
$

 
$
1,300

During the nine months ended September 30, 2018 and 2017, the fair values of the contingent consideration decreased $0.7 million and $2.0 million, respectively, as it was no longer probable that certain of the contingencies related to the Telcare or ePatch acquisitions, respectively, would be met.


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