~~Failures in our information technology and storage systems could significantly disrupt our business or force us to expend excessive costs.~~

We utilize complex information technology systems to support our business and process, transmit, and store information, including sensitive personal information and proprietary or confidential information. We cannot be sure that our systems will meet our future business needs or that necessary upgrades will operate as designed, which could result in excessive costs or disruptions in portions of our business. In particular, any disruptions, delays or deficiencies caused by our enterprise resource planning system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our systems, sustained or repeated system failures that interrupt our ability to generate and maintain data, could result in a material disruption in our operations.

Our ability to protect our information systems and electronic transmissions of sensitive data from data corruption, cyber-based attacks, security breaches or privacy violations is critical to the success of our business.

Although we invest in security technology designed to protect our data against risks of data security breaches and cyber-attacks, and we have implemented solutions, processes and procedures to help mitigate these risks at various locations, such as encryption, virus protection, security firewalls and information security and privacy policies, our information technology and

infrastructure are subject to attacks by hackers and may be breached due to inadequacy or ineffectiveness of the protective measures undertaken, employee errors or omissions, malfeasance or other disruptions. A security breach or privacy violation that leads to disclosure of consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state and foreign breach notification laws and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue.

Despite our efforts to protect against cyber-attacks and security breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques, and we may need to expend substantial additional resources to continue to protect against potential security breaches or to address problems caused by such attacks or any breach of our safeguards. In addition, a data security breach could distract management or other key personnel from performing their primary operational duties.

The interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. Among other things, foreign privacy laws impose significant obligations on U.S. companies to protect the personal information of foreign citizens. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices, which could have a material adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

~~Our business could be negatively affected by the loss of or the inability to hire key personnel.~~

Our future success depends in part on our ability to retain our key technical, sales, marketing and executive personnel and our ability to identify and hire additional qualified personnel. Competition for these personnel is intense, both in the industry in which we operate and where our operations are located. Further, we expect to grow our operations, and our needs for additional management and other key personnel are expected to increase. If we are not able to retain existing key personnel, or timely identify and hire replacement or additional qualified personnel to meet expected growth, our business could be adversely impacted. In addition, the loss of any of our key personnel, particularly key research and development personnel, could harm our business and prospects and could impede the achievement of our research and development, operation or strategic objectives.

We face risks relating to our international sales, including inherent economic, political and regulatory risks, that could impact our financial performance, cause interruptions in our current business operations and impede our growth strategy.

Our products are sold internationally, with the majority of our international sales to our customers in Europe and Asia-Pacific. We currently sell and market our products through direct sales, distributor organizations and sales agents. Sales to foreign customers accounted for 18%, 17%, and 14% of our total revenue for the years ended December 31, 2017, 2016 and 2015, respectively. and are expected to increase as a percentage of our total revenue in 2018 and beyond as a result of our acquisition of the Triage and BNP Businesses in the fourth quarter of 2017. Our international operations are subject to inherent economic, political and regulatory risks, which could impact our financial performance, cause interruptions in our current business operations and impede our international growth. These foreign risks include, among others:

compliance with multiple different registration requirements and new and changing registration requirements, our inability to benefit from registration for our products inasmuch as registrations may be controlled by a distributor, and the difficulty in transitioning our product registrations;

compliance with complex foreign and U.S. laws and regulations that apply to our international operations, including U.S. laws such as import/export limitations, the Foreign Corrupt Practices Act, and local laws prohibiting corrupt payments to governmental officials, could expose us or our employees to fines and criminal sanctions and damage our reputation;

~~tariffs or other barriers as we continue to expand into new countries and geographic regions;~~

~~exposure to currency exchange fluctuations against the U.S. dollar;~~

~~longer payment cycles, generally lower average selling prices and greater difficulty in accounts receivable collection and enforcing agreements with foreign entities;~~

~~reduced, or lack of, protection for, and enforcement of, intellectual property rights;~~

~~social, political and economic instability in some of the regions where we currently sell our products or that we may expand into in the future;~~

~~increased financial accounting and reporting burdens and complexities;~~

~~complex and potentially adverse tax consequences; and~~

~~diversion to the U.S. of our products sold into international markets at lower prices.~~

Our international operations are governed by the U.S. Foreign Corrupt Practices Act and similar anti-corruption laws outside the U.S. Global enforcement of anti-corruption laws has increased substantially in recent years, with more enforcement proceedings by U.S. and foreign governmental agencies and the imposition of significant fines and penalties. While we have

implemented policies and procedures to comply with these laws, our international operations, which may involve customer relationships with foreign governments, create the risk that there may be unauthorized payments or offers of payments made by employees, consultants, sales agents or distributors. Any alleged or actual violations of these laws may subject us to government investigations, significant criminal or civil sanctions and other liabilities, and negatively affect our reputation.

Currently, the majority of our international sales are negotiated for and paid in U.S. dollars. Nonetheless, these sales are subject to currency risks, since changes in the values of foreign currencies relative to the value of the U.S. dollar can render our products comparatively more expensive. These exchange rate fluctuations could negatively impact international sales of our products, as could changes in the general economic conditions in those markets. In order to maintain a competitive price for our products internationally, we may have to continue to provide discounts or otherwise effectively reduce our prices, resulting in a lower margin on products sold internationally. Continued change in the values of the Euro, the Chinese Renminbi, the Japanese Yen and other foreign currencies could have a negative impact on our business, financial condition and results of operations.

~~In addition, we have certain supply agreements with foreign vendors whereby we share the foreign currency exchange fluctuation risk. We may, in the future, enter into similar arrangements.~~

Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability.

We are subject to income taxes in the U.S. and in various non-U.S. jurisdictions. In addition, the amount of income taxes we pay is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. Due to the potential for changes to tax laws (or changes to the interpretation thereof) and the ambiguity of tax laws, the subjectivity of factual interpretations, the complexity of our foreign operations and intercompany arrangements and other factors, our estimates of income tax assets or liabilities may differ from actual payments, assessments or receipts. If these audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected. If we determine to repatriate earnings from foreign jurisdictions that have been considered permanently re-invested under existing accounting standards, it could also increase our effective tax rate. In addition, any significant change to the tax system in the United States or in other jurisdictions (including changes in the taxation of international income as further described below) could adversely affect our financial statements.

~~Risks Related to Our Acquisitions~~

~~Our acquisition of Alere’s Triage® and BNP Businesses presents certain risks to our business and operations~~

~~On October 6, 2017, we acquired the Triage and BNP Businesses from Alere. See~~ ~~Note 12~~ in this Annual Report for additional information concerning these acquisitions. The acquisition of these businesses, and the transition and integration process related thereto, present certain risks to our business and operations, including, among other things, risks that:

~~we may be unable to successfully transition and integrate the businesses, and we may experience business interruptions during transition and integration;~~

~~we may not realize the anticipated benefits of the acquisitions, including those anticipated to arise from reducing costs, making product and process improvements and developing new products;~~

~~we may lose management personnel and other key employees and be unable to attract and retain personnel and employees;~~

~~management's attention and our other resources may be focused on integration activities instead of on day-to-day management activities, including pursuing other beneficial opportunities;~~

~~we may incur substantial unexpected integration or transition related costs;~~

the deferred consideration payable to Alere for the BNP Business will be payable even if BNP sales are significantly reduced, or even terminate, whether as a result of the introduction of a competing product, a determination that provisions of the contractual arrangement with Beckman are unenforceable or otherwise, and such payment obligations may significantly exceed the revenues from such business;

~~we may not be able to successfully or efficiently manage our foreign expansion, and the acquired businesses will increase our exposure and risks related to foreign markets;~~

we may be subject to claims, litigation, other legal proceedings and liabilities and damages in connection with the businesses and assets acquired in the acquisitions, some of which may not be covered in full, if at all, by the

~~indemnification provisions provided for in the acquisition agreements, and even if indemnified, may be disruptive to our business;~~

we may not be able to receive required regulatory approvals or clearances relating to the acquired businesses and the acquired products, or may lose previously received regulatory approvals or clearances;

in certain international markets, the marketing authorizations to sell the acquired products will continue to be held by Alere post-closing until the authorizations can be transferred to us through the applicable regulatory process, and such deferred transfers have additional risks, including:


◦	~~we may not timely receive such authorizations, if at all, or may encounter unexpected difficulties and costs in receiving the authorizations;~~


◦	~~we may have less control over the acquired businesses until the deferred transfers occur;~~


◦	completion of the acquisitions may trigger assignment or other provisions in certain commercial contracts to which Alere was a party, such that counterparties may potentially have the right to terminate the contracts; and


◦	~~launching branding or rebranding initiatives may involve substantial costs and may not be favorably received by customers.~~

Alere may fail to perform under various transition agreements that were entered into as part of our acquisition of the Triage and BNP Businesses and we may fail to have necessary systems and services in place when certain of the transition services expire.

In connection with the acquisition of the Triage and BNP Businesses, we entered into a number of agreements with Alere, including transition services agreements and a manufacturing and supply agreement. Certain of these agreements will provide for the performance of services by each company for the benefit of the other for a period of time after the closing of the acquisitions of the Triage and BNP Businesses. If Alere is unable or unwilling to satisfy its payment or performance obligations under these agreements, we could incur operational difficulties or losses which could have a material adverse effect on our profitability and business. In addition, if the costs that we must pay for the services under these agreements significantly increase this could affect our profitability. Moreover, if we do not have our own systems and services in place, or if we do not have agreements in place with other providers of these services when the term of a particular transition service terminates (whether at the end of the term or as a result of an early termination), we may not be able to operate our business effectively, and the cost of such systems and services may be greater than what is provided under the transition services.

As we build our information technology infrastructure and transition the Triage and BNP Businesses to our own systems, we could incur substantial additional costs and experience temporary business interruptions.

We are installing and implementing information technology infrastructure to support critical business functions relating to the Triage and BNP Businesses, including accounting and reporting, customer service, inventory control and distribution, billing and receivables collection, as well as order entry, warehousing and other administrative services. Under the transition services agreements with Alere, Alere is required to provide services both inside and outside the United States, including back office services, for up to two years following the closings of the acquisitions of the Triage and BNP Businesses. The services provided include information technology, billing and receivables collection, as well as order entry, warehousing, and certain other administrative services. These transition services agreements allow us to operate the Triage and BNP Businesses prior to establishing our back office infrastructure and information technology systems to accommodate the Triage and BNP Businesses. Our failure to avoid operational interruptions as we implement the new systems and information technology could disrupt our integration of the Triage and BNP Businesses and have a material adverse effect on our profitability.

~~If goodwill or other intangible assets that we have recorded in connection with our acquisitions of other businesses become impaired, we may be required to take significant charges against earnings.~~

As a result of our acquisitions, we have recorded, and may continue to record, a significant amount of goodwill and other intangible assets. Under current accounting standards, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other intangible assets has been impaired. Any reduction or impairment of the value of goodwill or other intangible assets will result in additional charges against earnings, which could materially reduce our reported results of operations in future periods.

~~If we are not able to manage our growth strategy or if we experience difficulties identifying or integrating companies or technologies we may acquire, our operating results may be adversely affected.~~

Our business strategy contemplates further growth, which we expect to result in expanding the scope of operating and financial systems and the geographical area of our operations, including further expansion outside the U.S., as new products

and technologies are developed and commercialized or new geographical markets are entered. Because we have a relatively small executive staff, acquisitions and other future growth may divert management’s attention from other aspects of our business, and place a strain on existing management and our operational, financial and management information systems. Furthermore, we may expand into markets in which we have less experience or incur higher costs. Some of our growth is expected to come from acquisitions of businesses and technologies. However, we cannot be certain that we will be able to successfully identify and acquire attractive targets. Other risks associated with acquiring other technologies or businesses, include: inability to obtain financing for acquisitions on satisfactory terms or at all; difficulties integrating the operations of companies or technologies that we acquire with our own operations; diversion of the attention of management and key personnel from our core business; adverse effects on our existing business relationships; potential loss of key employees of the acquired businesses; write-downs of goodwill, intangible assets or other assets associated with the acquisitions; and we may not realize our anticipated benefits and cost savings within our expected time frame, or at all, or may experience unexpected costs. We can give no assurance that we will be able to successfully identify, complete and integrate strategic acquisitions. Should we encounter difficulties in managing these tasks and risks, our growth strategy may suffer and our revenue and profitability could be adversely affected.

~~Risk Factors Related to our Indebtedness~~

~~Our substantial debt could materially adversely affect our financial condition and results of operations.~~

On October 6, 2017, we entered into a $270.0 million five-year senior secured credit facility (the “Senior Credit Facility”), consisting of a $245.0 million Term Loan, all of which was borrowed at the closing, and a $25.0 million Revolving Credit Facility, $10.0 million of which was borrowed at the closing. The Senior Credit Facility includes an accordion feature that allows the borrowings under the Senior Credit Facility to be increased by $50 million upon the satisfaction of certain conditions. See ~~Note 3~~ ~~to the Consolidated Financial Statements for a more detailed description of the Credit Agreement. We also have outstanding indebtedness under our Convertible Senior Notes described in~~ ~~Note 3~~ ~~to the Consolidated Financial Statements, and may incur other indebtedness from time to time.~~

~~The degree to which we are leveraged could have important consequences to our business and operating results, including:~~

~~our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes may be impaired;~~

a significant portion of our cash flow from operating activities must be dedicated to the payment of our debt, which reduces the funds available to us for our operations and may limit our ability to engage in acts that may be in our long-term best interests;

~~some of our debt is and will continue to be at variable rates of interest, which may result in higher interest expense in the event of increases in market interest rates;~~

our debt agreements contain, and any agreements to refinance our debt likely will contain, financial and other restrictive covenants, and our failure to comply with them may result in an event of default, which, if not cured or waived, could have a material adverse effect on us;

~~our level of indebtedness will increase our vulnerability to, and reduce our flexibility to respond to, general economic downturns and adverse industry and business conditions;~~

~~as our long-term debt ages, we may need to renegotiate or repay such debt or seek additional financing;~~

~~to the extent the debt we incur requires collateral to secure such indebtedness, our assets could be at risk and our flexibility related to such assets could be limited;~~

~~our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and industry; and~~

~~our level of indebtedness may place us at a competitive disadvantage relative to less leveraged competitors.~~

We may not be able to generate sufficient cash flow to meet our debt service obligations, and any inability to repay our debt when due would have a material adverse effect on our business, financial condition and results of operations.

Our ability to generate sufficient cash flow from operating activities to make scheduled or other required payments on our debt obligations and maintain a desired level of capital expenditures depends on our future performance, which is subject to economic, financial, competitive and other factors, many of which are beyond our control. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to undertake these activities may also be restricted by the terms of our various debt instruments then in effect. In addition, our ability to refinance our indebtedness or

issue additional equity capital will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Any such default on our debt obligations could materially adversely affect our business, financial condition and results of operations.

~~The Senior Credit Facility is secured by substantially all of our assets and those of our subsidiary guarantors.~~

Borrowings under the Senior Credit Facility are guaranteed by certain of our material domestic subsidiaries and are secured by liens on substantially all of our assets and those of the guarantor subsidiaries, other than real property and certain other types of excluded assets. If we default under our secured indebtedness, including our Senior Credit Facility, the holders of such debt could proceed against the collateral securing that indebtedness, which could materially adversely affect our business, financial condition and results of operations.

The Senior Credit Facility contains certain prepayment requirements that will limit our ability to use our cash flow from operations and the proceeds of certain assets sales or other monies for other corporate purposes.

Subject to certain limitations, we are required to prepay loans outstanding under the Senior Credit Facility out of excess cash flow and out of the net cash proceeds of property dispositions and certain other amounts received not in the ordinary course of business, such as certain insurance proceeds and condemnation awards. For example, we were required to use a substantial portion of the proceeds of the Summers Ridge Sale Leaseback to repay amounts under the Senior Credit Facility. These requirements to prepay the Senior Credit Facility with excess monies will limit our flexibility to utilize those monies for other purposes that may be in our best interests.

~~Borrowings under the Senior Credit Facility will be accelerated if certain conditions are not met prior to the maturity of the Convertible Senior Notes.~~

Although the regular maturity date for the Senior Credit Facility is October 6, 2022, the maturity will be accelerated and all borrowings under the Senior Credit Facility will become due and payable on the date that is 91 days prior to the maturity of the Convertible Senior Notes, if any of the Convertible Senior Notes remain outstanding on that date and certain liquidity and refinancing conditions are not satisfied. If the Senior Credit Facility is accelerated under this provision, we may not be able to refinance the facility on acceptable terms, and could be forced to sell assets or issue stock in order to obtain capital to repay the Senior Credit Facility. Any failure to repay the Senior Credit Facility when due could have a material adverse effect on our liquidity and financial position.

~~The agreements relating to our indebtedness contain terms that restrict our ability to operate our business, and as a result, may materially and adversely affect our results of operations.~~

Our Senior Credit Facility contains, and other of our debt agreements may include from time to time, a number of restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries. Such restrictive covenants significantly limit our ability to:

~~incur additional debt, including guarantees;~~

~~allow other liens on our property;~~

~~make certain investments and acquisitions;~~

~~sell or otherwise dispose of assets;~~

~~engage in mergers or consolidations or allow a change in control to occur;~~

~~make distributions to our stockholders;~~

~~engage in restructuring activities;~~

~~enter into transaction with affiliates;~~

~~prepay or amend other indebtedness;~~

~~engage in certain sale and leaseback transactions; and~~

~~issue or repurchase stock or other securities.~~

Such agreements also require us to satisfy other requirements, including maintaining certain financial ratios. Our ability to meet these requirements can be affected by events beyond our control and we may be unable to meet them. To the extent we fail to meet any such requirements and are in default under our debt obligations, our financial condition may be materially adversely affected. These restrictions may also limit our ability to engage in activities that could otherwise benefit us. To the extent that we are unable to engage in activities that support the growth, profitability and competitiveness of our business, our results of operations may be materially adversely affected.

An event of default under any agreement relating to our outstanding indebtedness or other event that could require outstanding debt to be prepaid or purchased by us could cross default other indebtedness, which could have a material adverse effect on our business, financial condition and results of operations.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately, which default or acceleration of debt could cross default other indebtedness. Our Senior Credit Facility could also be cross defaulted as a result of other events that could require us to prepay or purchase outstanding indebtedness. Any cross default with respect to any of our indebtedness would put immediate pressure on our liquidity and financial condition and would amplify the risks described above with regards to being unable to repay our indebtedness when due and payable. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default, and, as described above, any inability to repay our debt when due could have a material adverse effect on our business, financial condition and results of operations.

We may not have the ability to raise the funds necessary to settle conversions of our Convertible Senior Notes, purchase the Convertible Senior Notes as required upon a fundamental change or service or repay the Convertible Notes at maturity, and potential future debt may contain limitations on our ability to pay cash upon conversion or purchase of our Convertible Senior Notes.

Following a fundamental change (as defined in the indenture to our Convertible Senior Notes), the holders of our Convertible Senior Notes will have the right to require us to purchase their notes for cash. In addition, upon conversion of the Convertible Senior Notes, unless we settle our conversion obligation solely in shares of our common stock (other than cash in lieu of any fractional share), we will be required to make cash payments in respect of the Convertible Senior Notes being surrendered for conversion. We may not have sufficient financial resources, or be able to arrange financing, to pay the fundamental change purchase price in cash with respect to any Convertible Senior Notes surrendered by holders for purchase upon a fundamental change or make cash payments upon conversions. Our failure to purchase the Convertible Senior Notes upon a fundamental change or make cash payments upon conversions thereof when required would result in an event of default with respect to the Convertible Senior Notes which could, in turn, constitute a default under the terms of our other then-existing indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the Convertible Senior Notes or make cash payments upon conversions thereof.

~~The conditional conversion feature of our Convertible Senior Notes, if triggered, may adversely affect our financial condition and operating results.~~

In the event the conditional conversion feature of the Convertible Senior Notes is triggered, holders of Convertible Senior Notes will be entitled to convert their Convertible Senior Notes at any time during specified periods at their option. If one or more Convertible Senior Note holders elects to convert their notes, unless we satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. Furthermore, even if Convertible Senior Note holders did not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Senior Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

~~We will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt.~~

~~We and our subsidiaries may be able to incur substantial additional debt in the future. Our indebtedness could be costly or have adverse consequences, such as:~~

~~requiring us to dedicate a substantial portion of our cash flows from operations to payments on our debt;~~

~~limiting our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt obligations and other general corporate requirements;~~

making us more vulnerable to adverse conditions in the general economy or our industry and to fluctuations in our operating results, including affecting our ability to comply with and maintain any financial tests and ratios required under our indebtedness;

~~limiting our flexibility to engage in certain transactions or to plan for, or react to, changes in our business and the diagnostics industry;~~

~~putting us at a disadvantage compared to competitors that have less relative and/or less restrictive debt; and~~

~~subjecting us to additional restrictive financial and other covenants.~~

If we incur substantial additional indebtedness in the future, these higher levels of indebtedness may affect our ability to pay the principal of and interest on existing indebtedness and our creditworthiness generally. In addition, our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service or repay our debt. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing capital expenditures, selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

~~If interest rates increase, our debt service obligations under our variable rate indebtedness could increase significantly, which could have a material adverse effect on our results of operations.~~

Borrowings under certain of our facilities from time to time, including under our Senior Credit Facility, are at variable rates of interest and as a result expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows will correspondingly decrease. To the extent the risk materializes and is not fully mitigated, the resulting increase in interest expense could have a material adverse effect on our results of operations.

~~Risks Related to our Common Stock~~

~~Sales of our common stock in the public market could lower the market price for our common stock and adversely impact the trading price of our securities.~~

We may need to seek additional capital. If this additional financing is obtained through the issuance of equity securities, debt convertible into equity or options or warrants to acquire equity securities, our existing stockholders could experience significant dilution upon the issuance, conversion or exercise of such securities. In addition, a substantial number of shares of our common stock is reserved for issuance upon the conversion of our Convertible Senior Notes, exercise of stock options and vesting of other equity awards.

In addition, we may issue shares of our common stock or securities convertible into our common stock from time to time in connection with a debt refinancing or replacement, acquisition, or other transaction. The issuance of additional shares of our common stock, or issuances of additional securities convertible into or exercisable for shares of our common stock or other equity linked securities, including, convertible debt, preferred stock or warrants, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock.

We also have a number of institutional stockholders that own significant blocks of our common stock. If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of shares of our common stock could be negatively affected.

~~The price of our stock may fluctuate unpredictably in response to factors unrelated to our operating performance.~~

The stock market periodically experiences significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price of our common stock to drop. In particular, the market price of securities of smaller medical device companies, like ours, has been very unpredictable and may vary in response to:

~~announcements by us or our competitors concerning technological innovations;~~

~~introductions of new products;~~

~~FDA and foreign regulatory actions;~~

~~developments or disputes relating to patents or proprietary rights;~~

~~failure to meet the expectations of stock market analysts and investors;~~

~~changes in stock market analyst recommendations regarding our common stock;~~

~~changes in healthcare policy in the U.S. or other countries; and~~

~~general stock market conditions and other factors unrelated to our operating performance.~~

Some provisions of our charter documents and Delaware law ~~and our Convertible Senior Notes~~ may make takeover attempts difficult, which could depress the price of our stock and inhibit our ~~stockholders'~~stockholders’ ability to receive a premium price for their shares.

Provisions of our amended and restated certificate of incorporation could make it more difficult for a third party to acquire control of our business, even if such change in control would be beneficial to our stockholders. Our amended and restated certificate of incorporation allows our ~~board~~Board of ~~directors~~Directors to issue up to five million shares of preferred stock and to fix the rights and preferences of such shares without stockholder approval. Any such issuance could make it more difficult for a third party to acquire our business and may adversely affect the rights of our stockholders. Our amended and restated bylaws include advance notice requirements for stockholder proposals that require stockholders to give written notice of any proposal or director nomination to us within a specified period of time prior to any stockholder meeting and do not permit stockholders to call a special meeting of the stockholders, unless such stockholders hold ~~not less than~~at least 50% of our stock entitled to vote at the meeting.

We are also subject to anti-takeover provisions under Delaware law. ~~Together these~~These provisions may delay, deter or prevent a change in control of us, adversely affecting the market price of our common stock.

In addition, the terms of our Convertible Senior Notes require us to offer to purchase the notes for cash in the event of a fundamental change. A non-stock takeover of our company may trigger the requirement that we purchase the Convertible Senior Notes. This feature may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.

~~We do not anticipate declaring any cash dividends on our common stock.~~

We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and any earnings for use in the operation and expansion of our business.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

At December 31, ~~2017,~~2020, we occupied the indicated square footage in the leased and owned facilities described below:

Location

Status

Lease term

Square
Footage

Primary Use

San Diego, CA (Summers Ridge)

Leased

(1)

2033 - options to extend for two additional 5-year periods

246,000

Administrative offices, sales and marketing, research and development and manufacturing (principal executive offices)

Carlsbad, CA (Rutherford)

Leased

(2)

2036 - options to extend for two additional 5-year periods

128,000

Manufacturing

San Diego, CA (Waples Ct.)

Leased

2031 - options to extend for two additional 5-year periods

106,000

Office, light manufacturing, storage, packaging, assembly and distribution

San Diego, CA (McKellar)

Leased

2030 - options to extend for two additional 5-year periods

78,000

Administrative offices, research and development and manufacturing

San Diego, CA (High Bluff)

Leased

2022 - options to extend for two additional 5-year periods

30,000

This office facility was vacated in 2019 and sublet to a third party in 2020

Athens, OH

Leased

2022 - option to extend for one additional 5-year period

111,000

Administrative offices, sales and marketing, research and development and manufacturing

Beverly, MA

Leased

2023 - option to extend for one additional 3-year period

9,700

Administrative offices, research and development and manufacturing

Shanghai, China

Leased

2024 - option to extend for one additional 2-year period

8,500

Administrative offices, sales and marketing

Galway, Ireland

Leased

2028

3,900

Administrative offices, sales and marketing

Location Status Lease term
Square
Footage
Primary Use
San Diego, CA (McKellar) Leased 2020 - options to extend for three additional 5 year periods 78,000
Administrative offices, research and development and manufacturing
San Diego, CA (High Bluff) Leased 2022 - options to extend for two additional 5 year periods 30,000
Administrative offices, sales and marketing (principal executive offices)
San Diego, CA (Summers Ridge) Owned (1) N/A 320,000
Administrative offices, research and development and manufacturing
Athens, OH Leased 2022 - options to extend for one additional 5 year period 94,000
Administrative offices, sales and marketing, research and development and manufacturing
Beverly, MA Leased 2020 - options to extend for two additional 5 year periods 9,700
Administrative offices, research and development and manufacturing
(1)The Summers Ridge lease is subject to certain must-take provisions related to one additional building, consisting of approximately 71,000 square feet. See Note 8 in the Consolidated Financial Statements included in this Annual Report.

~~(1)~~

As of December 31, 2017, we owned the four buildings at Summers Ridge and leased two buildings of approximately 150,000 square feet to Abbott. On January 5, 2018, we entered into a sale and leaseback transaction pursuant to which we sold the Summers Ridge property and leased back the other two buildings for an initial term of 15 years. The initial term can be extended at our option for two additional five-year terms upon satisfaction of certain conditions.

(2)The Rutherford lease agreement was executed on January 14, 2021.

We believe that our facilities are adequate for our current needs, and we currently do not anticipate any material difficulty in renewing any of our leases as they expire or securing additional or replacement facilities, in each case, on commercially reasonable terms. However, in anticipation of our growth strategy, we may pursue ~~alternative~~additional facilities.

Item 3. Legal Proceedings

The information set forth in ~~"Litigation~~“Litigation and Other Legal ~~Proceedings"~~Proceedings” in Note 8 in the Consolidated Financial Statements included in ~~Part II, Item 8 of~~ this Annual Report is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~COMMON STOCK PRICE RANGE~~

Our common stock is traded on the Nasdaq Global Market under the symbol “QDEL.” ~~The following table sets forth the range of high and low sales prices for our common stock for the periods indicated.~~

Quarter
Ended
Low High
December 29, 2017 $ 43.28
$ 44.49
September 29, 2017 $ 42.84
$ 44.50
June 30, 2017 $ 27.08
$ 27.50
March 31, 2017 $ 22.55
$ 22.76
December 31, 2016 $ 20.88
$ 21.44
September 30, 2016 $ 20.96
$ 22.20
June 30, 2016 $ 17.20
$ 18.00
March 31, 2016 $ 16.98
$ 17.48

As of February ~~21, 2018,~~5, 2021, we had approximately ~~369~~276 common stockholders of ~~record. No cash dividends were declared for our common stock during the fiscal years ended in 2017 or 2016,~~record and we do not anticipate paying any cash dividends in the foreseeable future.

~~Stock Repurchases~~Issuer Purchases of Equity Securities

The ~~Company did not make any~~table below sets forth information regarding repurchases of our common stock ~~repurchases under its share repurchase program~~by us during the ~~year~~three months ended December 31, ~~2017, and there was $35.0 million available under~~2020:


Period	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (2)
September 28, 2020 - October 25, 2020	1,249	$	214.00	—	$	156,313,465
October 26, 2020 - November 22, 2020	1,905	187.28		—	156,313,465
November 23, 2020 - January 3, 2021	173	189.50		—	156,313,465
Total	3,327	$	197.43	—	$	156,313,465

(1) Includes shares surrendered, if any, to the ~~Company's share repurchase program. During~~Company to satisfy the ~~year ended December 31, 2017, 25,079 shares of outstanding common stock with a value of $0.5 million were repurchased in connection with~~ payment of minimum tax withholding obligations ~~for certain employees relating~~and/or option exercise price obligations in connection with stock swap option exercise transactions.

(2) On December 18, 2018, the Company announced a stock repurchase program to ~~the lapse~~repurchase up to $50.0 million of ~~restrictions on certain restricted stock units ("RSUs"). These shares are not considered repurchases under~~ the Company’s ~~repurchase program. During the three months ended December 31, 2017, we repurchased no~~ shares of common stock, ~~from employees in connection with payment of minimum tax withholding obligations related to the lapse of restrictions on certain RSUs.~~

~~On January 25, 2016, we announced that~~which was authorized by the Board of Directors (the “Board”) on December 12, 2018. On August 28, 2020, the Board authorized an ~~amendment~~increase of an additional $150.0 million to the ~~Company's previously announced~~Company’s existing stock repurchase program ~~to (i) replenish~~authorization, which was announced on September 1, 2020. The Board also extended the ~~amount available for~~ repurchase under the program back to the previously authorized repurchase amount of $50.0 million ($35.0 million of which remained available as of December 31, 2017), (ii) approve the addition of repurchases of the Company's Convertible Senior Notes under the program and (iii) extend the expiration date of the program to January 25, 2018. The stock repurchase program expired on January 25, 2018.

authorization through August 28, 2022.

STOCKHOLDER RETURN PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on our common stock with the cumulative total return of the Nasdaq Composite Index, Nasdaq Health Care Index, and Nasdaq US Benchmark Medical Supplies Index for the period beginning December 31, ~~2012~~2015 and ending December 31, ~~2017.~~2020. The graph assumes (i) an initial investment of $100 on December 31, ~~2012~~2015 in our common stock, the Nasdaq Composite Index, the Nasdaq US Benchmark Medical Supplies Index, and the Nasdaq Health Care Index and (ii) reinvestment of dividends. The stock price performance of our common stock depicted in the graph represents past performance only and is not necessarily indicative of future performance.

COMPARISON OF 5 YEAR TOTAL CUMULATIVE RETURN

Among Quidel Corporation, the NASDAQ Composite, NASDAQ US Benchmark Medical Supplies and NASDAQ Health Care Indices


	Base Period
Company/Index	12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020
Quidel Corporation	$	100.00	$	101.04	$	204.48	$	230.28	$	353.92	$	847.41
NASDAQ Composite	$	100.00	$	107.50	$	137.86	$	132.51	$	179.19	$	257.38
NASDAQ US Benchmark Medical Supplies	$	100.00	$	113.04	$	147.56	$	139.80	$	206.56	$	260.84
NASDAQ Health Care	$	100.00	$	83.09	$	100.79	$	96.59	$	121.54	$	158.04

Base Period
Company/Index 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
Quidel Corporation $ 100.00
$ 165.45
$ 154.90
$ 113.55
$ 114.73
$ 232.19
NASDAQ Composite $ 100.00
$ 138.32
$ 156.85
$ 165.84
$ 178.28
$ 228.63
NASDAQ US Benchmark Medical Supplies $ 100.00
$ 120.86
$ 143.48
$ 157.22
$ 177.71
$ 231.99
NASDAQ Health Care $ 100.00
$ 157.04
$ 201.75
$ 215.58
$ 179.12
$ 217.28

Item 6. Selected Financial Data

The following table presents selected consolidated financial data of Quidel Corporation. This historical data should be read in conjunction with the Consolidated Financial Statements and related Notes thereto included in ~~Item 8~~this Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 7 in this Annual Report.

Consolidated Statements of Operations
Year ended December 31,
2017 (1) 2016 (1) 2015 2014 2013 (1)
(in thousands, except per share data)
Total revenues $ 277,743
$ 191,603
$ 196,129
$ 184,158
$ 177,325
Cost of sales (2)
121,601
79,872
78,029
80,463
73,055
Gross profit 156,142
111,731
118,100
103,695
104,270
Research and development 33,644
38,672
35,514
37,913
34,186
Sales and marketing (3)
67,248
50,436
50,401
45,621
37,836
General and administrative (4)
29,192
26,351
27,057
25,811
25,581
Acquisition and integration costs (4)
16,506
711
2,390
—
—
Impairment loss —
—
—
3,558
—
Facility restructuring charge —
—
—
—
1,825
Total operating expenses 146,590
116,170
115,362
112,903
99,428
Operating income (loss) 9,552
(4,439 ) 2,738
(9,208 ) 4,842
Interest expense, net (17,588 ) (11,760 ) (12,035 ) (1,775 ) (1,408 )
(Loss) income before taxes (8,036 ) (16,199 ) (9,297 ) (10,983 ) 3,434
Provision (benefit) for income taxes 129
(2,391 ) (3,218 ) (3,909 ) (3,956 )
Net (loss) income $ (8,165 ) $ (13,808 ) $ (6,079 ) $ (7,074 ) $ 7,390
Basic (loss) earnings per share $ (0.24 ) $ (0.42 ) $ (0.18 ) $ (0.21 ) $ 0.22
Diluted (loss) earnings per share $ (0.24 ) $ (0.42 ) $ (0.18 ) $ (0.21 ) $ 0.21
Shares used in basic per share calculation 33,734
32,708
34,104
34,451
33,836
Shares used in diluted per share calculation 33,734
32,708
34,104
34,451
34,947

Balance Sheet Data
December 31,
2017 2016 2015 2014 2013
(in thousands)
Cash and cash equivalents $ 36,086
$ 169,508
$ 191,471
$ 200,895
$ 8,388
Working capital $ 202,881
$ 191,782
$ 209,834
$ 238,096
$ 54,610
Total assets $ 935,251
$ 388,250
$ 406,505
$ 447,411
$ 271,485
Long-term debt and lease obligation, net of current portions $ 381,110
$ 148,319
$ 147,329
$ 142,575
$ 5,126
Stockholders’ equity $ 227,104
$ 200,630
$ 218,676
$ 245,011
$ 223,779
Common shares outstanding 34,540
32,897
33,323
34,433
34,073


~~(1)~~	Includes the results of operations of the BioHelix, AnDiaTec, Immutopics and Triage and BNP Businesses, from dates of acquisition, May 6, 2013, August 26, 2013, March 18, 2016 and October 6, 2017, respectively.


~~(2)~~	Includes reclassification of $6.5 million, $6.3 million, $6.3 million and $6.1 million from amortization of intangible assets from acquired business and technology to cost of sales for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, respectively.


~~(3)~~	Includes reclassification of $2.6 million, $2.5 million, $2.5 million and $2.1 million from amortization of intangible assets from acquired business and technology to sales and marketing for the years ended December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013, respectively.


~~(4)~~	The Company recorded reclassifications of acquisition and integration costs totaling $0.7 million and $2.4 million for years ended December 31, 2016 and 2015, respectively, from general and administrative expense as previously reported in the Consolidated Statements of Operations to conform to current year presentation.


Consolidated Statements of Operations
	Year ended December 31,
	2020		2019		2018		2017 (1)		2016 (1)
			(in thousands, except per share data)
Total revenues	$	1,661,668	$	534,890	$	522,285	$	277,743	$	191,603
Cost of sales	312,813		214,085		206,572		121,601		79,872
Gross profit	1,348,855		320,805		315,713		156,142		111,731
Research and development	84,292		52,553		51,649		33,644		38,672
Sales and marketing	133,957		111,114		108,987		67,248		50,436
General and administrative	66,586		52,755		44,951		29,192		26,351
Acquisition and integration costs	3,694		11,667		14,197		16,506		711


Total operating expenses	288,529		228,089		219,784		146,590		116,170
Operating income	1,060,326		92,716		95,929		9,552		(4,439)
Other expense, net
Interest expense, net	(9,623)		(14,790)		(24,283)		(17,588)		(12,181)
Loss (gain) on extinguishment of debt	(10,384)		(748)		(8,262)		—		421
Total other expense, net	(20,007)		(15,538)		(32,545)		(17,588)		(11,760)
Income (loss) before income taxes	1,040,319		77,178		63,384		(8,036)		(16,199)
Provision (benefit) for income taxes	230,032		4,257		(10,799)		129		(2,391)
Net income (loss)	$	810,287	$	72,921	$	74,183	$	(8,165)	$	(13,808)
Basic earnings (loss) per share	$	19.24	$	1.78	$	1.95	$	(0.24)	$	(0.42)
Diluted earnings (loss) per share	$	18.60	$	1.73	$	1.86	$	(0.24)	$	(0.42)
Shares used in basic per share calculation	42,124		40,860		37,995		33,734		32,708
Shares used in diluted per share calculation	43,591		43,111		42,554		33,734		32,708


Balance Sheet Data
	December 31,

	2020		2019		2018		2017 (1)		2016 (1)

	(in thousands)
Cash and cash equivalents	$	489,941	$	52,775	$	43,695	$	36,086	$	169,508
Working capital	$	805,441	$	96,336	$	33,662	$	202,881	$	191,782
Total assets	$	1,871,164	$	910,867	$	806,371	$	935,251	$	388,250
Long-term debt and finance lease obligations, net of current portions	$	4,100	$	4,375	$	56,865	$	381,110	$	148,319
Stockholders’ equity	$	1,332,703	$	559,820	$	425,584	$	227,104	$	200,630
Common shares outstanding	42,290		41,868		39,386		34,540		32,897

(1)Includes the results of operations of the Immutopics, Inc., RPS Diagnostics and Triage and BNP Businesses, from dates of acquisition, March 18, 2016, May 16, 2017 and October 6, 2017, respectively.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of the federal securities laws that involve material risks and uncertainties. This discussion should be read in conjunction with “A Warning About Forward-Looking Statements” on page 23 and “Risk Factors” ~~under Item 1A of~~in this Annual Report. In addition, our discussion of the financial condition and results of operations of Quidel Corporation in this Item 7 should be read in conjunction with our Consolidated Financial Statements and the related Notes included elsewhere in this Annual Report. Discussions of year-to-year comparisons between 2019 and 2018 that are not included in this Annual Report can be found in our Annual Report for the year ended December 31, 2019.

Overview and Executive Summary

We have a leadership position in the development, manufacturing and marketing of rapid diagnostic testing solutions. These diagnostic testing solutions ~~are separated~~we separate into our four product ~~categories, comprised of the following:~~categories: rapid immunoassay, ~~cardiac~~Cardiometabolic immunoassay, ~~specialized~~molecular diagnostic solutions and ~~molecular~~specialized diagnostic solutions. We currently sell our products directly to end users and distributors, in each case, for professional use in physician offices, hospitals, clinical laboratories, reference laboratories, urgent care clinics, leading universities, retail clinics, pharmacies and wellness screening centers. We market our products through a network of distributors and through a direct sales force. We operate in one business segment that develops, manufactures and markets our four product categories.

For the year ended December 31, ~~2017,~~2020, total revenue increased ~~45%~~211% to ~~$277.7~~$1,661.7 million as compared to the year ended December 31, ~~2016. Historically,~~2019, and currency exchange rates had a ~~majority~~minimal impact on the growth rate. Our revenues can be highly concentrated over a small number of products. For the year ended December 31, 2020, sales of our COVID-19 products accounted for 70% of total revenues relate to three product families: Influenza, Strep A and pregnancy tests. Going forward, we expect our cardiology family of products acquired with the acquisition of the Triage and BNP Businesses from Alere on October 6, 2017 will also constitute a significant portion of our revenue. ~~See further discussion in Note 12 in the Consolidated Financial Statements in Part II, Item 8 of this Annual Report.~~ For the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015, we derived approximately 58%, 62% and 65%, respectively, of our total revenues from~~2018, sales of our influenza ~~Strep A~~products, as a percentage of total revenue, accounted for 8%, 26%, and ~~pregnancy tests.~~24% respectively. Additionally, a significant portion of our total revenue is from a relatively small number of distributors. Approximately ~~54%~~68%, ~~44%~~51% and ~~48%~~49% of our total revenue for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively, were related to sales through our ~~three~~four largest distributors.

Our primary ~~objective~~mission is to ~~increase shareholder value by building a broader-based diagnostic company capable of delivering revenue growth and consistent operating results.~~ advance diagnostics to improve human health. Our strategy is to ~~identify potential~~target market segments that ~~provide, or are expected to provide,~~represent significant total market opportunities, and in which we can be successful by applying our ~~significant~~ expertise and know-how to develop differentiated technologies and products.

Our diagnostic testing solutions are designed to provide specialized results that serve a broad range of customers, by addressing the market requirements of ease of use, reduced cost, increased test accuracy and reduced time to result. Our current approach ~~to address this diagnostic continuum relative to our strategy~~ is to offer products in the following product categories:

•rapid immunoassay tests for use in physician offices, hospital laboratories and emergency departments, retail clinics, eye health settings, pharmacies, ~~and~~ other urgent care or alternative site ~~settings;~~settings to include over the counter commencing in 2021;

~~cardiac~~•cardiometabolic immunoassay tests for use in physician offices, hospital laboratories and emergency departments, and other urgent care or alternative site settings;

•molecular diagnostic tests for use in hospitals, moderately complex physician offices, laboratories and other settings; and

•specialized diagnostic solutions, including direct DFA and culture-based tests for the clinical virology laboratory and other products serving the bone health, autoimmune and complement research ~~communities; and~~communities.

~~molecular diagnostic tests across a number of hospitals, moderately complex physician offices, laboratories and other segments.~~

~~Our current focus~~In order to ~~accomplish~~achieve our ~~primary objective includes~~mission, our strategy is to do the following:


•	~~leveraging our current infrastructure to develop and launch new Rapid Immunoassays and Cardiac Immunoassays such as additional assays for our Sofia~~^® ~~and Sofia~~^®~~2 Analyzers and Triage~~^® ~~MeterPro~~^® ~~systems and next-generation immunoassay analyzers;~~


•	~~developing a molecular diagnostics franchise that incorporates three distinct testing platforms, Solana~~^®~~, AmpliVue~~^®~~, and Savanna~~^® ~~and that leverages our molecular assay development competencies; and~~

~~strengthening~~•focus on innovative products and markets and leverage our core competency in new product development for our QuickVue®, Sofia® and Triage® immunoassay brands and next-generation products;

•leverage our manufacturing expertise to address increasing demand for our products, including through expanded manufacturing capacity;

•utilize our molecular assay development competencies to further develop our molecular diagnostics franchise that includes distinct testing platforms, such as Lyra®, Solana® and Savanna®; and

•strengthen our position with distribution partners and our end-user customers to gain more emphasis on our ~~products.~~

products and enter new markets.

Our current initiatives to execute this strategy include the following:

~~continue to~~ •provide products that can compete effectively in the healthcare market where cost and quality are important;

~~continue to focus on integrating the Triage and BNP Businesses acquired in late 2017;~~

~~strengthen our international infrastructure to support the integration of the Triage and BNP Businesses and enhance our global footprint to support our international operations and future growth;~~

~~continue to~~ •focus our research and development efforts on three areas:

◦new proprietary product platform development;

◦the creation of new and improved products ~~and new products~~ for ~~existing markets and~~use on our established platforms to address unmet clinical ~~needs;~~needs, and

◦pursuit of collaborations with, or acquisitions of, other companies for new and existing products and markets that advance our ~~strategy~~differentiated strategy;

•leverage our international infrastructure and enhance our global footprint to ~~develop differentiated technologies~~support our international operations and ~~products;~~future growth;

•strengthen our market and brand leadership in current markets by acquiring and/or developing and introducing clinically superior diagnostic solutions;

•strengthen our direct sales force to enhance relationships with integrated delivery networks, laboratories and hospitals, with a goal of driving growth through improved physician and laboratorian satisfaction;

•leverage our wireless connectivity and data management systems, including cloud-based tools;

•support payer evaluation of diagnostic tests and establishment of favorable reimbursement rates;

•provide clinicians with validated studies that encompass the clinical efficacy and economic efficiency of our diagnostic tests for the professional market;

~~continue to~~ •pursue alternative markets for point-of-care diagnostics;

•create strong global alliances to support our efforts to achieve leadership in key markets and expand our presence in emerging markets; ~~and~~

•further refine our manufacturing efficiencies and productivity improvements to increase ~~profit,~~profit; and

•pursue potential acquisitions to support our strategic initiatives.

Impact of COVID-19 Pandemic

Events surrounding the SARS-CoV-2 virus that emerged in late 2019 and the ensuing global pandemic has had a dramatic impact on businesses globally and our business as well. The severity and duration of the pandemic and economic repercussions of the virus and government actions in response to the pandemic remain uncertain and will ultimately depend on many factors, including the speed and effectiveness of the containment efforts throughout the world, the duration and spread of the virus as well as potential seasonality or new outbreaks.

In the United States, federal, state, and local government directives and policies have been put in place to manage public health concerns and address the economic impacts, including sharply reduced business activity, increased unemployment, and overall uncertainty presented by this new healthcare challenge. Similar actions have been taken by governments around the world. While all our sites are currently operational globally, our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates or as a result of the pandemic. To mitigate risks, we continue to evaluate the nature and extent COVID-19 may have to our business and operations and adjust risk mitigation planning and business continuity activities as needed.

New SARS-CoV-2 Diagnostic Products

As a leader in point-of-care diagnostics and with established expertise in respiratory infectious disease products, we are well-positioned to respond to the COVID-19 pandemic. We worked closely with national and local governments, agencies, and industry partners to develop, manufacture and supply critical diagnostic products to support testing initiatives to help curb the spread of the SARS-CoV-2 virus. In particular, we have developed new molecular and antigen products to diagnose the SARS-CoV-2 virus. We have experienced exceptional demand for such products. In response, we have committed and continue to commit significant resources toward the expansion of our production capacity.

We expect demand for our molecular and antigen assays and instruments to continue for the near-term at elevated levels, especially in the United States. At the same time, we also have observed decreased demand for certain of our other diagnostic products in connection with customers closing or decreasing their operations and/or patients deferring treatment. The extent to which COVID-19 will impact demand for our products depends on future developments, which are highly uncertain and very difficult to predict, including new information that may emerge concerning the severity of the coronavirus, impact of new SARS-CoV-2 variants and actions to contain and treat its impacts, including the vaccination programs now being implemented.

Operations and Employee Safety

While many governments have implemented lockdown and shelter-in-place orders, requiring non-essential businesses to shut down operations, our business is deemed “essential” and we have continued ~~focus~~to operate, manufacture and distribute products to customers. We have implemented preparedness plans designed to help protect the safety of our employees and maintain operational continuity with an emphasis on ~~innovative~~manufacturing, product distribution and product development during this crisis. To date, we have been able to maintain our operations without significant interruption and have been able to develop and quickly scale manufacturing capacity for new products related to the COVID-19 pandemic.

To mitigate the pandemic’s impact, we have transitioned many non-essential employees to work remotely, and have implemented preventative protocols intended to help safeguard our on-site employees and maintain business continuity in the event government restrictions or severe outbreaks impact our operations at certain sites. We have also enhanced cleaning and sanitizing procedures, provided additional personal hygiene supplies and protective equipment to personnel, implemented health screening protocols and periodic testing for essential personnel, limited access to facilities to outside persons who are not critical to continuing our operations, trained employees on guidelines for social distancing and face coverings and isolation and quarantine of personnel as we deem appropriate given the facts, circumstances and applicable laws or regulations. These measures have created additional burdens on our infrastructure and information technology systems and may result in decreased productivity and increased operating costs. However, the various responses we have put in place have to date resulted in limited disruption to our normal business operations.

Supply Chains

As a result of the COVID-19 pandemic, we have seen delays in receipts for certain raw materials and components for our products. Such delays can result in disruption to our business operations. We are continuously evaluating our supply chain to identify potential gaps and take steps intended to ensure continuity. We have considered potential political, legal or regulatory actions that could be taken as a result of the pandemic in jurisdictions where we manufacture, source or distribute products that could impact our supply of products to our customers or the availability of raw materials and components from our suppliers. We cannot currently predict the frequency, duration or scope of these government actions and any supply disruptions, and the availability of various products is dependent on our suppliers, their location and the extent to which they are impacted by the COVID-19 pandemic, among other factors. We are proactively working with manufacturers, industry partners and government agencies to help meet the needs of our customers during the pandemic.

Our inventory levels continue to fluctuate due to supply chain constraints in conjunction with larger and more frequent customer orders. In response, we have added alternate suppliers for certain critical components and instruments, increased inventory of raw materials needed in our operations, increased manufacturing capacity and continue to explore opportunities for further expansion in our Athens, Ohio and San Diego, California facilities. In January 2021, we significantly expanded our capacity by entering into a long-term lease for an additional manufacturing facility in Carlsbad, California. This facility is expected to begin operations in the second half of 2021.

We are seeking to minimize the impact of delays and secure allocations of vital raw materials to meet extremely high demand for our products. However, dependent on the duration and continued intensity of the current pandemic, we may experience some sort of interruption to our supply chains, and such an interruption could materially affect our ability to timely manufacture and distribute our products and ~~markets~~unfavorably impact our results of operations depending on the nature and ~~our efforts to leverage our core competency in new product development.~~duration of such interruption.

Product development activities are inherently uncertain, and there can be no assurance that we will be able to obtain regulatory body clearance to market any of our products, or if we obtain clearances, that we will successfully commercialize any of our products. In addition, we may terminate our development efforts with respect to one or more of our products under development at any time, including before or during clinical trials.

Outlook

We anticipate continued revenue growth over the next year, ~~and~~including increased sales of testing products related to the COVID-19 pandemic, with a ~~related~~ positive impact on gross margin and ~~earnings, assuming relatively normal respiratory seasons. This growth is expected~~earnings. We expect to ~~be driven primarily by the full year impact of the Triage/BNP acquisition, and increased sales of our Sofia assays and molecular products. In addition, we expect continued and significant investment~~continue to invest heavily in research and development activities ~~as we invest in~~for our next generation immunoassay and molecular ~~platforms.~~platforms as well as additional assays to be launched on our current platforms, with the most recent focus on assays to address the COVID-19 pandemic. Additionally, we are making substantial investments in the expansion of our production capacity in response to the demand driven by the COVID-19 pandemic. We ~~will~~intend to continue our focus on prudently managing our business and delivering ~~solid~~improved financial results, while at the same time striving to ~~continue to~~ introduce new products tointo the market and ~~maintaining~~maintain our emphasis on research and development investments for longer term growth. Finally, we ~~will~~expect to continue to evaluate opportunities to acquire new product lines, technologies and companies.

Results of Operations

Comparison of years ended December 31, ~~2017~~2020 and ~~2016~~2019

Our fiscal year is the 52 or 53 weeks ending the Sunday closest to December 31. Fiscal year 2020 was 53 weeks and fiscal year 2019 was 52 weeks.

Total Revenues

The following table compares total revenues for the years ended December 31, ~~2017~~2020 and ~~2016~~2019 (in thousands, except percentages):


	For the year ended December 31,				Increase (decrease)
	2020		2019		$		%
Rapid Immunoassay	$	1,144,831	$	191,736	$	953,095	497	%
Cardiometabolic Immunoassay	242,933		266,505		(23,572)		(9)	%
Molecular Diagnostic Solutions	222,964		21,716		201,248		927	%
Specialized Diagnostic Solutions	50,940		54,933		(3,993)		(7)	%
Total revenues	$	1,661,668	$	534,890	$	1,126,778	211	%

For the year ended December 31, Increase (decrease)
2017 2016 $ %
Rapid Immunoassay $ 165,099
$ 121,416
$ 43,683
36 %
Cardiac Immunoassay 47,030
—
47,030
100 %
Specialized Diagnostic Solutions 51,978
60,681
(8,703 ) (14 )%
Molecular Diagnostic Solutions 13,636
9,506
4,130
43 %
Total revenues $ 277,743
$ 191,603
$ 86,140
45 %

For the year ended December 31, ~~2017,~~2020, total revenues increased ~~45%~~211% to ~~$277.7~~$1,661.7 million. The ~~increase in total revenues~~Rapid Immunoassay category was the largest contributor to revenue growth, driven by the ~~incremental Cardiac~~Sofia SARS Antigen and Sofia 2 Flu + SARS Antigen Immunoassays. Molecular Diagnostic Solutions sales grew $201.2 million over the prior year, driven by the Lyra SARS-CoV-2 assays. The decrease in Cardiometabolic Immunoassay ~~revenue from~~and Specialized Diagnostic Solutions sales was mainly due to lower demand during the ~~acquisition of~~COVID-19 pandemic. Currency exchange rate impact for the ~~Triage and BNP Businesses~~period was favorable by $0.7 million, which had a minimal impact on the growth rate. See further discussion in ~~October 2017 discussed further in~~ ~~Note 12~~ ~~to the Consolidated Financial Statements in Part II,~~ Item 87A of this Annual ~~Report. In addition, the Company realized increases in Rapid Immunoassay revenues due primarily~~Report for additional information related to ~~growth in Influenza~~our calculation and ~~Strep A products, bolstered by a severe cold~~use of constant currency and flu season. The increase in our Molecular Diagnostic Solutions was driven by continued gains on our Solana platform and higher sales of Strep A due to the cold and flu season. These increases were partially offset by decreased sales within our Specialized Diagnostics solutions category. This new category includes Virology, Bone Health and Complement products and grants and royalty revenues. The year over year decrease was due to the satisfaction of the terms of the Bill and Melinda Gates grant in the third quarter of 2016, leaving no grantconstant currency revenue ~~recognized in 2017.~~growth.

Gross Profit

Gross profit increased ~~by 40% over prior year,~~ to ~~$156.1~~$1,348.9 million, or ~~56.2%~~81% of revenue for the year ended December 31, ~~2017,~~2020, compared to ~~$111.7~~$320.8 million, or ~~58.3%~~60% of revenue for the year ended December 31, ~~2016.~~ 2019. The increased gross profit was driven by the demand for our SARS-CoV-2 products, which drove improved product mix. In addition, higher production volumes contributed to increased manufacturing overhead absorption, which offset increases in spend required to expedite the production ramp. Gross ~~margins declined slightly during 2017~~margin improved compared to the same period in the prior year due to the ~~amortization of inventory step-up to fair value and intangible assets associated with the acquisition of Triage and BNP Businesses.~~same factors.

Operating Expenses

The following table compares operating expenses for the years ended December 31, ~~2017~~2020 and ~~2016~~2019 (in thousands, except percentages):


	For the year ended December 31,
	2020				2019
	Operating expenses		As a % of total revenues		Operating expenses		As a % of total revenues		Increase (decrease)
									$		%
Research and development	$	84,292	5	%	$	52,553	10	%	$	31,739	60	%
Sales and marketing	$	133,957	8	%	$	111,114	21	%	$	22,843	21	%
General and administrative	$	66,586	4	%	$	52,755	10	%	$	13,831	26	%
Acquisition and integration costs	$	3,694	0	%	$	11,667	2	%	$	(7,973)	(68)	%

For the year ended December 31,
2017 2016

Operating
expenses

As a % of
total
revenues

Operating
expenses

As a % of
total
revenues
Increase (decrease)
$ %
Research and development $ 33,644
12 % $ 38,672
20 % $ (5,028 ) (13 )%
Sales and marketing $ 67,248
24 % $ 50,436
26 % $ 16,812
33 %
General and administrative $ 29,192
11 % $ 26,351
14 % $ 2,841
11 %
Acquisition and integration costs $ 16,506
6 % $ 711
— % $ 15,795
2,222 %

Research and Development Expense

Research and development expense for the year ended December 31, ~~2017 decreased~~2020 increased from ~~$38.7~~$52.6 million to ~~$33.6~~$84.3 million due primarily ~~due~~ to ~~a decrease in~~increased spending on Savanna, Sofia and next-generation instrument development ~~spending for the Savanna MDx platform~~projects. We also incurred higher labor, material and ~~lower~~clinical trials spend ~~on clinical trial activities. These decreases are partially offset by additional expenses~~ associated with ~~the Triage and BNP Businesses.~~

COVID-19 product development.

Research and development expenses include direct external costs such as fees paid to ~~third-party contractors and~~ consultants, and internal direct and indirect costs such as compensation and other expenses for research and development personnel, supplies and materials, clinical trials and studies, facility costs and depreciation.

Due to the risks inherent in the product development process and given the early-stage of development of certain projects, we are unable to estimate with meaningful certainty the costs we will incur in the continued development of our product candidates for commercialization. We expect our research and development costs to be substantial as we move other product candidates into preclinical and clinical trials and advance our existing product candidates into later stages of development.

Sales and Marketing Expense

Sales and marketing expense for the year ended December 31, ~~2017~~2020 increased from ~~$50.4~~$111.1 million to ~~$67.2~~$134.0 million primarily ~~driven~~due to higher employee-related costs, freight and bad debt expense, partially offset by ~~expenses associated with the newly acquired Triage~~reduced travel, meeting and ~~BNP Businesses in October 2017 and the InflammaDry and AdenoPlus diagnostic business from RPS Diagnostics in May 2017 as discussed in the Notes~~trade show costs due to the ~~Consolidated Financial Statements in Part II, Item 8 of this Annual Report.~~COVID-19 travel restrictions.

General and Administrative Expense

General and administrative expense for the year ended December 31, ~~2017~~2020 increased from ~~$26.4~~$52.8 million to ~~$29.2~~$66.6 million ~~primarily~~ due to higher ~~incentive~~ compensation ~~and additional~~ costs ~~associated with~~from increased headcount to support the ~~Triage and BNP Businesses. General and administrative expense primarily includes personnel costs, information technology, facilities and professional service fees.~~growth experienced in 2020 as well as improved performance in the period.

Acquisition and Integration Costs

Acquisition and integration costs of $3.7 million for the year ended December 31, ~~2017 increased from $0.7 million last year~~2020 primarily related to ~~$16.5 million this year primarily attributable to due diligence~~the evaluation of new business development opportunities. Acquisition and integration costs of $11.7 million for the year ended December 31, 2019 consisted primarily of global operation integration costs.

Other Expense, Net

The following table compares Other expense, net, for the years ended December 31, 2020 and 2019 (in thousands, except percentages):


	For the year ended December 31,				Increase (decrease)
	2020		2019		$		%
Interest and other expense, net	$	9,623	$	14,790	$	(5,167)	(35)	%
Loss on extinguishment of debt	10,384		748		9,636		1,288	%
Total other expense, net	$	20,007	$	15,538	$	4,469	29	%

Interest and other expense, net decreased from $14.8 million to $9.6 million. Interest and other expense, net primarily relates to accretion of interest on the deferred consideration, coupon and accretion of interest related to our Convertible Senior Notes and interest and amortization of deferred financing costs associated with any debt outstanding under our Credit Agreement. The decrease in interest and other expense, net over the ~~acquisition~~prior year was primarily due to lower debt balances under the Company’s Revolving Credit Facility and Convertible Senior Notes and lower deferred consideration liability outstanding. Such decrease was partially offset by a $1.1 million change in fair value of derivative liabilities associated with our Convertible Senior Notes conversion recorded in the second quarter of 2020.

Loss on extinguishment of debt of $10.4 million for the twelve months ended December 31, 2020 relates to the extinguishment of $5.9 million in aggregate principal of the ~~Triage~~Convertible Senior Notes converted and ~~BNP Businesses~~settled in cash during the period. Loss on ~~October 6, 2017. The Company recorded reclassifications~~extinguishment of ~~acquisition and integration costs totaling~~debt of $0.7 million for the year ended December 31, ~~2016, from general and administrative expense as previously reported in the Consolidated Statements of Operations to conform to current year presentation.~~

~~Interest Expense, Net~~

~~Interest expense~~2019 relates to ~~accrued interest for~~ the ~~coupon and accretion~~extinguishment of $45.4 million in aggregate principal of the ~~discount on our $172.5 million 3.25%~~ Convertible Senior Notes ~~due 2020 ("Convertible Senior Notes") issued~~ in December 2014, accrued interest and amortization of deferred loan costs associated with the Term Loan and the Revolving Credit Facility together (the "Senior Credit Facility"), and interest paid on our lease obligation associated with our San Diego McKellar facility. The increase in interest expense of $5.8 millionexchange for the ~~year ended December 31, 2017 was primarily due to~~Company’s common stock during the ~~interest incurred under the Senior Credit Facility entered into in connection with the acquisition of the Triage and BNP Businesses.~~period.

~~Income Taxes~~

On December 22, 2017, the U.S. government enacted comprehensive tax legislation referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which should not extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with SAB 118, we must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC Topic 740 is complete.

~~For further information, see~~ ~~Note 4~~ ~~to Consolidated Financial Statements in this Annual Report.~~

We recognized an income tax expense of $0.1 million and a benefit of $2.4 million for the years ended December 31, 2017 and 2016, respectively. The primary factors contributing to our tax expense in 2017 is the recognition of $0.4 million of deferred tax expenses from indefinite-lived assets, namely goodwill that is being amortized for tax, and current tax expense of $0.3 million related to state income taxes. These expenses are offset by an income tax benefit of $0.6 million for alternative minimum tax (AMT) credits which are now refundable based on the law changes in the Tax Act.

~~Comparison of years ended December 31, 2016 and 2015~~

~~Total Revenues~~

~~The following table compares total revenues for the years ended December 31, 2016 and 2015 (in thousands, except percentages):~~

For the year ended December 31, Increase (decrease)
2016 2015 $ %
Rapid Immunoassay $ 121,416
$ 130,348
$ (8,932 ) (7 )%
Specialized Diagnostic Solutions 60,681
60,358
323
1 %
Molecular Diagnostic Solutions 9,506
5,423
4,083
75 %
Total revenues $ 191,603
$ 196,129
$ (4,526 ) (2 )%

For the year ended December 31, 2016, total revenue decreased 2% to $191.6 million. The decrease in total revenues was primarily driven by lower Rapid Immunoassay revenues due to a weaker Influenza season in the first quarter of 2016 compared to the previous year. This decrease was partially offset by growth in our Molecular Diagnostic Solutions. The acquisition of Immutopics, Inc. ("Immutopics") contributed to the growth in our Specialized Diagnostic Solutions category.

~~Gross Profit~~

Gross profit for the year ended December 31, 2016 decreased by 5% as compared to the prior year, to $111.7 million, or 58% of revenue, as compared to $118.1 million, or 60% of revenue, for the year ended December 31, 2015. Gross margins decreased in 2016 due to unfavorable product mix, with lower influenza product sales in the same period as compared to the prior year.

~~Operating Expenses~~

~~The following table compares operating expenses for the years ended December 31, 2016 and 2015 (in thousands, except percentages):~~

For the year ended December 31,
2016 2015
Operating
As a %
of total
Operating
As a %
of total
Increase (decrease)
expenses revenues expenses revenues $ %
Research and development $ 38,672
20 % $ 35,514
18 % $ 3,158
9 %
Sales and marketing $ 50,436
26 % $ 50,401
26 % $ 35
— %
General and administrative $ 26,351
14 % $ 27,057
14 % $ (706 ) (3 )%
Acquisition and integration costs $ 711
— % $ 2,390
1 % $ (1,679 ) (70 )%

~~Research and Development Expense~~

Research and development expense for the year ended December 31, 2016 increased from $35.5 million to $38.7 million primarily due to an increase in development spending for the Savanna MDx platform and our next generation Sofia instrument, and an increase in clinical trials spending for our Solana and Sofia products. These increases were partially offset by lower spending on development of our Lyra products.

Research and development expenses include direct external costs such as fees paid to third-party contractors and consultants, and internal direct and indirect costs such as compensation and other expenses for research and development personnel, supplies and materials, clinical trials and studies, facility costs and depreciation.

~~Sales and Marketing Expense~~

Sales and marketing expense for the year ended December 31, 2016 remained relatively flat over prior year. At December 31, 2015, we employed more than 100 U.S. sales representatives. We utilized this sales force to work closely with our key distributors to drive market penetration of our products in the U.S. POC market, with a particular focus on addressing acute care and integrated delivery network customers.

~~General and Administrative Expense~~

General and administrative expense for the year ended December 31, 2016 decreased from $27.1 million to $26.4 million. The decline was due primarily to business development expenditures in the prior year period that did not repeat during 2016, as well as the suspension of the medical device excise tax for 2016. These decreases were partially offset by increased integration costs associated with the acquisition of Immutopics.

~~Acquisition and Integration Costs~~

Acquisition and integration costs for the year ended for the year ended December 31, 2016 decreased from $2.4 million to $0.7 million and is primarily attributable to one-time fees for professional services and internal costs related to business development activities occurring in 2015. This decrease was partially offset by increased integration costs associated with the acquisition of Immutopics in 2016. The Company recorded reclassifications of acquisition and integration costs totaling $0.7 million and $2.4 million for years ended December 31, 2016 and 2015, respectively, from general and administrative expense as previously reported in the Consolidated Statements of Operations to conform to current year presentation.

~~Interest Expense, Net~~

Interest expense in 2016 and 2015 related to accrued interest for the coupon and accretion of the discount on our $172.5 million 3.25% Convertible Senior Notes due 2020 ("Convertible Senior Notes") issued in December 2014 and interest paid on our lease obligation associated with our San Diego McKellar facility. The decrease in interest expense of $0.3 million for the year ended December 31, 2016 was primarily due to a gain on extinguishment of debt related to the repurchase of $5.2 million in principal of our Convertible Senior Notes during the first quarter of 2016.

Income Taxes

We recognized an income tax ~~benefit~~provision of ~~$2.4~~$230.0 million, ~~and $3.2 million~~resulting in an effective tax rate of 22.1% for the ~~years~~year ended December 31, ~~2016 and 2015, respectively.~~2020. The ~~decrease~~primary drivers of the increased income tax expense in the ~~income tax benefit in 2016 was primarily driven~~year ended December 31, 2020 are the increased pre-tax profits offset by the ~~increase in~~lower proportional impact from excess tax benefits from stock-based compensation. In the ~~valuation allowance for our federal deferred~~year ended December 31, 2019, the excess tax ~~assets.~~benefits from stock-based compensation offset a greater portion of the tax expense from earnings.

Liquidity and Capital Resources

As of December 31, ~~2017~~2020 and ~~2016,~~2019, our principal sources of liquidity consisted of the following (in thousands):


						December 31,
	December 31,					2020		2019
	2017		2016
Cash and cash equivalents	$	36,086	$	169,508

Cash, cash equivalents, and restricted cash					Cash, cash equivalents, and restricted cash	$	489,941	$	52,775
Amount available to borrow under the Revolving Credit Facility					Amount available to borrow under the Revolving Credit Facility	$	175,000	$	175,000
Working capital including cash, cash equivalents, and restricted cash	$	202,881	$	191,782	Working capital including cash, cash equivalents, and restricted cash	$	805,441	$	96,336
Amount available to borrow under the Revolving Credit Facility	$	15,000	N/A

As of December 31, ~~2017,~~2020, we had ~~$36.1~~$489.9 million in cash and cash equivalents, a ~~$133.4~~$437.2 million ~~decrease~~increase from the prior year. During the year ended December 31, 2017, the Company used $399.8 million in cash to acquire the Triage and BNP Businesses and $13.7 million to acquire the InflammaDry and AdenoPlus diagnostic business from RPS Diagnostics. Our cash requirements fluctuate as a result of numerous factors, such as ~~the extent to which we generate~~ cash generated from operations, progress in research and development or capital expansion projects and integration ~~activities, competition and technological developments and the time and expenditures required to obtain governmental approval of our products. In addition, we~~activities. We also intend to continue to evaluate candidates for new product lines, company or technology acquisitions or technology ~~licensing.~~licensing and other strategic acquisitions and investments. If we decide to proceed with any such transactions, we may need to incur additional debt or issue additional equity to successfully complete the transactions.

Our primary source of liquidity, other than our holdings of cash and cash equivalents, has been cash flows from operations and financing. Cash generated from operations provides us with the financial flexibility we need to meet normal operating, investing and financing needs. We do not currently expect the impacts of the COVID-19 pandemic to adversely affect our liquidity and capital resources or our ability to meet financial commitments. We anticipate that our current cash and cash equivalents, together with cash provided by operating activities will be sufficient to fund our ~~near term~~near-term capital and operating needs for at least the next 12 months.

Normal operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our primary short-term needs for capital, which are subject to change, include expenditures related to:

•acquisitions of equipment and other fixed assets in support of our manufacturing facility expansion;

•the continued advancement of research and development efforts;

•support of commercialization efforts related to our current and future products, including support of our direct sales force and field support ~~resources both in the United States and abroad;~~resources;

•interest on and repayments of our ~~Convertible Senior Notes, Senior Credit Facility,~~ deferred consideration, contingent consideration and lease obligations; and

~~the continued advancement of research and development efforts;~~

~~acquisitions of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;~~

~~the integration of our recent strategic acquisitions and investments; and~~

•potential strategic acquisitions and investments.

~~In December 2014, we issued~~Our Convertible Senior Notes ~~in the aggregate principle amount of $172.5 million. The Convertible Senior Notes have a coupon rate of 3.25% and are due in~~matured on December 15, 2020. The ~~Convertible Senior Notes were not convertible~~Amended and Restated Credit Agreement provides us with a Revolving Credit Facility of $175.0 million and there was no balance outstanding as of December 31, ~~2017. For detailed information of the terms of the Convertible Senior Notes, see~~ ~~Note 3~~ ~~to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report under the heading “3.25% Convertible Senior Notes due 2020,” which is incorporated by reference herein.~~2020. The Revolving Credit Facility matures on August 31, 2023.

As of December 31, ~~2017,~~2020, we have ~~$24.3~~$11.9 million in fair value of contingent ~~considerations~~consideration and ~~$223.2~~$116.0 million of deferred consideration associated with acquisitions to be settled in future periods.

~~In January 2016,~~On December 12, 2018, our ~~board~~Board of ~~directors~~Directors authorized a stock repurchase program to purchase up to $50.0 million of the Company’s shares of common stock. On August 28, 2020, we announced an amendment to ~~replenish~~ the ~~amount available under our share~~stock repurchase program up to purchase an ~~aggregate~~additional $150.0 million of ~~$50.0 million in~~our shares of common stock ~~or Convertible Senior Notes. During 2016, we used $19.6 million to repurchase our~~through August 28, 2022. For the twelve months ended December 31, 2020, 257,329 shares of outstanding common stock were repurchased under our stock repurchase program for approximately $43.7 million and as of December 31, 2020, we had approximately $156.3 million available under the ~~share~~ repurchase ~~program and $4.5 million to repurchase $5.2 million in principal amount of our outstanding Convertible Senior Notes.~~program.

On October 6, 2017, the Company entered into the Credit Agreement, which provided the Company with a $245.0 million Term Loan and a $25.0 million Revolving Credit Facility. The Term Loan and the Revolving Credit Facility will mature on October 6, 2022, provided that if any of Convertible Senior Notes remain outstanding on the date that is 91 days prior to the maturity date of the Convertible Senior Notes and the Company has not satisfied certain Refinancing Conditions, then the maturity date for the Term Loan and the Revolving Credit Facility will be the date that is 91 days prior to the maturity date of the Convertible Senior Notes. On the closing date of the Credit Agreement, the Company borrowed the entire amount of the Term Loan and $10.0 million under the Revolving Credit Facility. The Company used the proceeds of the Term Loan along with its cash on hand, to pay (i) the consideration for the Triage Business and (ii) the fees and expenses incurred in connection with the acquisition of the Triage and BNP Businesses.

~~We expect our revenue and operating expenses will significantly impact our cash management decisions.~~

Our future capital requirements and the adequacy of our available funds to service ~~our~~any long-term debt outstanding and to fund working capital expenditures and business development efforts will depend on many factors, including:

•our ability to ~~successfully integrate our recently acquired businesses and~~ realize revenue growth from our new technologies and create innovative products in our markets;

~~our~~ •outstanding debt and covenant restrictions;

~~leveraging~~•our ability to leverage our operating expenses to realize operating profits as we grow revenue;

•competing technological and market developments; and

~~the need to enter~~•our entry into strategic collaborations with other companies or ~~acquire~~acquisitions of other companies or technologies to enhance or complement our product and service ~~offerings.~~offerings

Cash Flow Summary


											Year ended December 31,
	Year ended December 31,
	2017			2016			2015
(in thousands)										(in thousands)	2020		2019
Net cash provided by operating activities	$	27,709		$	11,815		$	36,880		Net cash provided by operating activities	$	629,763	$	134,485
Net cash used for investing activities	(431,759		)	(16,970		)	(17,032		)	Net cash used for investing activities	(63,322)		(27,229)
Net cash provided by (used for) financing activities	270,608			(16,799		)	(29,255		)
Net cash used for financing activities										Net cash used for financing activities	(130,277)		(98,282)
Effect of exchange rate changes on cash	20			(9		)	(17		)	Effect of exchange rate changes on cash	1,002		106
Net decrease in cash and cash equivalents	$	(133,422	)	$	(21,963	)	$	(9,424	)
Net increase in cash and cash equivalents										Net increase in cash and cash equivalents	$	437,166	$	9,080

Cash provided by operating activities ~~was $27.7~~of $629.8 million during the ~~year~~twelve months ended December 31, ~~2017. The Company had a~~2020 reflects net ~~loss~~income of ~~$8.2~~$810.3 million ~~for the year ended December 31, 2017, including non-cash charges~~and adjustments of ~~$59.4~~$70.5 million ofprimarily associated with depreciation, amortization, ~~of intangible assets, amortization of the inventory step-up to fair value related to the Triage and BNP Businesses acquired in 2017,~~ stock-based compensation, deferred taxes, loss on extinguishment of debt and accretion of interest on deferred ~~consideration related to the acquired BNP Business.~~consideration. Partially offsetting ~~this~~these inflows was a net working capital use of cash of ~~$30.7 million.~~$265.3 million primarily driven by increases in accounts receivable and product inventory, both associated with the increased demand due to the COVID-19 pandemic, partially offset by an increase in income taxes payable and accounts payable.

Cash provided by operating activities ~~was $11.8~~of $134.5 million during the year ended December 31, ~~2016. The major contributors to the~~2019 reflects net ~~cash provided by operating activities is the $36.7~~income of $72.9 million inand non-cash ~~add backs to the $13.8~~adjustments of $76.8 million, ~~loss,~~primarily associated with depreciation, amortization, stock-based compensation and ~~stock-based compensation. Partially offsetting this was net~~accretion of interest on deferred consideration. In addition, we used cash to fund our working capital ~~use~~requirements of ~~cash of $5.6 million.~~$21.2 million, primarily driven by an increase in accounts receivable.

~~Cash provided by operating~~Our investing activities ~~was $36.9~~used $63.3 million during the twelve months ended December 31, 2020 primarily related to investments in manufacturing equipment, Sofia, Solana and Triage instruments available for lease, building improvements and scientific equipment. Our investing activities used $27.2 million during the year ended December 31, ~~2015. The Company had a net loss of $6.1 million, including non-cash charges of $36.5 million of depreciation~~2019 primarily related to payments for computer software, building improvements, Sofia, Solana and amortization of intangible assets and property and equipment, stock-based compensation and amortization of debt discount and deferred issuance costs. The most significant change in operating assets and liabilities included a decrease in accounts receivable of $16.1 million due to increased collection efforts and a $3.1 million decrease in restricted cash as grant terms were met under the Bill and Melinda Gates Foundation grant agreement. This was offset by a decrease of $3.1 million in payables as a result of decreased production in the fourth quarter of 2015 compared to 2014.

~~Our investing activities used $431.8 million during the year ended December 31, 2017 primarily for the acquisition of the~~ Triage ~~and BNP Businesses as more fully described in~~ ~~Note 12~~ in the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Additionally, we used $13.7 million for the acquisition of the InflammaDry and AdenoPlus diagnostic business from RPS Diagnostics and $17.5 million primarily for the acquisition of production equipment, Sofia and Solana instruments available for ~~sale or~~ lease and building improvements. Our investing activities used $17.0 million during the year ended December 31, 2016; $5.1 million for the acquisition of Immutopics, and $11.9 million primarily for the acquisition of production equipment, Sofia and Solana instruments available for sale or lease and building improvements. Our investing activities used $17.0 million during the year ended December 31, 2015, primarily related to the acquisition of production equipment, building improvements and Sofia instruments available for sale or lease.manufacturing equipment.

We are currently planning approximately ~~$26.0~~$300 million in capital expenditures over the next 12 ~~months.~~months, of which approximately $33 million is expected to be funded through a contract with the National Institute of Health (“NIH”), entered into during the third quarter of 2020. See Note 1 in the Consolidated Financial Statements included in this Annual Report for further discussion of the NIH contract. We plan to fund the remainder of the capital expenditures with the cash on our balance sheet. The primary purpose for our capital expenditures is to invest in manufacturing capacity expansion, including implementation of our new manufacturing facility in Carlsbad, California, to acquire ~~manufacturing~~Sofia, Solana and Triage instruments,to acquire scientific equipment, to purchase or develop information technology and to implement facility improvements. We ~~plan to fund these capital expenditures with the cash on our balance sheet. We~~ have ~~$5.9~~$32.1 million in firm purchase commitments with respect to planned inventory ~~and capital expenditures~~purchases as of December 31, ~~2017.~~2020.

Cash ~~provided~~used by financing activities was ~~$270.6~~$130.3 million during the twelve months ended December 31, 2020 primarily related to repurchases of common stock of $47.9 million, payment on Convertible Senior Notes and derivative liability of $43.4 million, payments on deferred consideration of $42.0 million, and acquisition contingent consideration of $6.0 million, partially offset by proceeds from issuance of stock of $9.6 million. Cash used by financing activities was $98.3 million during the year ended December 31, ~~2017, and was~~2019 primarily related to ~~proceeds from the issuance~~payments on deferred consideration of ~~the Term Loan and initial advances under~~$44.0 million, payments on the Revolving Credit Facility ~~as more fully described in~~ ~~Note 3~~ ~~in the Consolidated Financial Statements in Part II, Item 8~~ of ~~this Annual Report. Additional cash was provided by the issuance~~$53.2 million, acquisition contingent consideration of $4.0 million and repurchases of common stock of ~~$25.4~~$10.7 million, partially offset by payment on debt issuance costs of $8.7 million. Cash used by financing activities was $16.8 million during the year ended December 31, 2016, of which $20.2 million was used for repurchases of common stock primarily related to our share repurchase program, and $4.5 million was used for the repurchase of some of the Convertible Senior Notes. These amounts were partially offset by proceeds from ~~the~~ issuance of ~~common~~ stock of ~~$8.6 million. Cash used by financing activities was $28.7~~$14.8 million ~~during the year ended December 31, 2015 and was driven primarily by $30.4 million of repurchases of common~~from stock under our share repurchase program and $0.5 million of repurchases in connection with payment of minimum tax withholding obligations for certain employees relating to the lapse of restrictions on certain restricted stock units.

option exercises.

Off-Balance Sheet Arrangements

At December 31, ~~2017~~2020 and ~~2016,~~2019, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Contractual Obligations

As of December 31, ~~2017,~~2020, our future contractual obligations were as follows (in thousands):

Payment due by period
Total
Less than
1 year

1-3
Years

3-5
Years

More than
5 years
Senior Convertible Notes (1)
$ 183,627
$ 5,438
$ 178,189
—
$ —
Term Loan (2)
245,000
12,250
42,875
189,875
—
Revolving Credit Facility (3)
10,000
10,000
—
—
—
Deferred consideration (4)
256,000
46,000
86,000
124,000

Lease obligation (5)
2,869
946
956
967
—
Operating lease obligations (6)
123,943
8,638
18,284
16,462
80,559
Non-cancelable purchase commitment (7)
5,924
2,679
1,697
434
1,114
Total contractual obligations $ 827,363
$ 85,951
$ 328,001
$ 331,738
$ 81,673


	Payment due by period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 years
Deferred consideration (1)	$	124,000	$	42,000	$	82,000	$	—	$	—
Finance lease obligation (2)	18,287		1,215		2,535		2,117		12,420
Operating lease obligations (3)	137,166		12,043		22,677		22,553		79,893
Non-cancelable purchase commitment (4)	32,086		30,687		373		330		696
Total contractual obligations	$	311,539	$	85,945	$	107,585	$	25,000	$	93,009


~~(1)~~	~~Includes the principal amount of our Convertible Senior Notes due in December 2020, as well as interest payments to be made semi-annually.~~


~~(2)~~	~~Reflects the $245.0 million Term Loan that will mature on October 6, 2022.~~


~~(3)~~	Reflects the $10.0 million of the $25.0 million Revolving Credit Facility that was borrowed at the closing of the acquisition of the Triage and BNP Businesses, which drawn amount was paid off in January 2018.


~~(4)~~	~~Reflects the deferred consideration payments related to the acquisition of the BNP Business.~~


~~(5)~~	Reflects our lease obligation on the approximately 78,000 square-foot McKellar San Diego facility in place as of December 31, 2017. The facility is subject to a financing arrangement with payments through December 2020. Our future obligation under this financing arrangement is included in the table above.

~~(6)~~

Reflects future minimum lease obligations on facilities and equipment under operating leases in place as of December 31, 2017. In October of 2013, we entered into a lease for approximately 30,000 square feet of office space in San Diego. The lease expires in 2022 with options to extend the lease for two additional five-year periods. In the fourth quarter of 2016, we exercised our renewal option for the Athens, Ohio location. The amended lease expires in 2022 with the option to extend the lease for one additional five-year period through 2027. On January 5, 2018, we entered into a lease for the Summers Ridge facility, which has been included in the table above.


~~(7)~~	~~Reflects our $5.9 million of non-cancelable commitments for planned inventory and capital expenditures under contractual arrangements.~~

(1)Reflects the deferred consideration payments related to the acquisition of the BNP Business.

(2)Reflects our finance lease obligation primarily on the approximately 78,000 square-foot McKellar San Diego facility. The lease expires in December 2030 with options to extend for two additional 5-year periods. Finance lease obligations include payments through December 2025.

(3)Reflects future minimum lease obligations on facilities and equipment under operating leases in place as of December 31, 2020. The lease for the Summers Ridge facility is subject to certain must-take provisions related to one additional building that is not included in the operating lease obligations. The lease for the Rutherford facility with minimum lease payments of approximately $70.5 million is not included in the operating lease obligations as the lease was executed in 2021.

(4)Reflects our $32.1 million of non-cancelable commitments for planned inventory purchases under contractual arrangements.

We have entered into various licensing agreements, which largely require payments based on ~~specified~~ product sales as well as the achievement of specific milestones. Royalty and license expenses under these various royalty and licensing agreements collectively totaled ~~$0.6~~$2.4 million, ~~$0.8~~$1.1 million and ~~$1.1~~$0.4 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

We exclude liabilities pertaining to uncertain tax positions from our table of contractual obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities, nor the amount of the final cash settlement. As of December 31, ~~2017,~~2020, we had approximately ~~$1.4~~$16.6 million of liabilities associated with uncertain tax positions. See Note 4 in the Consolidated Financial Statements included in this Annual Report for further discussion of uncertain tax positions. The table also excludes ~~$24.3~~$11.9 million in potential contingent consideration payments primarily related to the acquisition of the BNP Business and achievement of certain revenue targets under other acquisition agreements. We have not included amounts in the table because we cannot make a reasonably reliable estimate regarding the probability of the annual payments for the BNP ~~Business or whether the milestones required for the other acquisition payments will be achieved.~~Business. See Note 10 in the Consolidated Financial Statements included in this Annual Report for further discussion of our contingent consideration.

~~Recent Accounting Standards~~

~~For summary of recent accounting pronouncements applicable to our consolidated financial statements see “Company Operations and Summary of Significant Accounting Policies” in~~ ~~Note 1~~ ~~to our Consolidated Financial Statements in Part II, Item 8, which is incorporated herein by reference.~~

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to ~~revenue recognition, stock-based compensation,~~reserve for contractual rebates, goodwill and ~~intangibles, business combinations,~~intangible assets and income ~~taxes and convertible debt.~~taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Reserve for Contractual Rebates ~~and Discounts~~

The Company records revenues primarily from product sales. These revenues are recorded net of rebates ~~and other discounts~~ that are estimated at the time of sale, and are largely driven by various customer program offerings, including special pricing agreements ~~promotions~~ and ~~other volume-based incentives.~~promotions. Rebates are calculated based upon historical experience and ~~discounts are~~estimated distributor inventory balances and recorded as a reduction of sales ~~and~~with offsets to trade accounts ~~receivable, based upon historical experience and estimated revenue levels.~~

~~Stock-Based Compensation~~

~~Compensation expense~~receivable. As of December 31, 2020, the reserve related to stock options granted is recognized ratably over the service vesting period for the entire option. The total number of stock options expected to vest is adjusted by estimated forfeiture rates. We determine the estimated fair value of each stock option on the date of grant using the Black-Scholes option valuation model. The computation of the expected option life is based on a weighted-average calculation combining the average life of options that have already been exercised and post-vest cancellations with the estimated life of the remaining vested and unexercised options. The expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S Treasury yield curve over the expected term of the option. Historically, we have not paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. The estimated forfeiture rate is based on our historical experience and future expectations.

Compensation expense for time-based restricted stock units are measured at the grant date and recognized ratably over the vesting period. We determine the fair value of time-based and performance-based restricted stock units based on the closing market price of our common stock on the grant date. The recognition of compensation expense associated with performance-based restricted stock units requires judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing achievement of the performance-related goals. For purposes of measuring compensation expense, the amount of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The grant date of the performance-based restricted stock units takes place when the grant is authorized and the specific achievement goals are communicated. The communication date of the performance goals can impact the valuation and associated expense of the restricted stock units.contract rebates was $100.8 million.

Goodwill and Intangible Assets

The ~~effective life and related amortization~~useful lives of intangible assets with definite ~~lives will be based on the higher of the percentage of usage or the straight-line method. Useful~~ lives are based on the expected number of years the asset will generate revenue or otherwise be used by ~~us.~~us and the related amortization is based on the straight-line method. Goodwill, ~~and in-process research and development that have~~which has an indefinite ~~lives are~~life, is not amortized but instead ~~are~~is tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include:

•the asset’s ability to continue to generate income from operations and positive cash flow in future periods;

•any volatility or significant decline in our stock price and market capitalization compared to our net book value;

•loss of legal ownership or title to an asset;

•significant changes in our strategic business objectives and utilization of our assets; and

•the impact of significant negative industry or economic trends.

If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

For goodwill, ~~and in-process research and development, a two-step~~the entity has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The quantitative impairment test ~~is used to identify the potential impairment and to measure the amount of impairment, if any. The first step is to compare~~compares the fair value of a reporting unit with the carrying amount, including ~~goodwill and in-process research and development.~~goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill ~~and in-process research and development are~~is considered not impaired; otherwise, goodwill ~~and in-process research and development are~~is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit with the carrying amount of goodwill and in-process research and development. We are required to perform periodic evaluations for impairment of goodwill balances.recorded. We completed our annual evaluation for impairment of goodwill ~~and in-process research and development~~ as of December 31, ~~2017~~2020 and determined that no impairment existed.

~~Business Combinations~~

The cost of an acquired business is assigned to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of the estimated fair values at the date of acquisition. We assess fair value, which is 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, using a variety of methods including, but not limited to, an income approach and a market approach such as the estimation of future cash flows of acquired business and current selling prices of similar assets. Fair value of the assets acquired and liabilities assumed, including intangible assets, in-process research and development (IPR&D), and contingent payments, are measured based on the assumptions and estimations with regards to the variable factors such as the amount and timing of future cash flows for the asset or liability being measured, appropriate risk-adjusted discount rates, nonperformance risk, or other factors that market participants would consider. Upon acquisition, we determine the estimated economic lives of the acquired intangible assets for amortization purposes, which are based on the underlying expected cash flows of such assets. When applicable, adjustments to inventory and property, plant and equipment are based on the fair market value of inventory and amortized into income based on the period in which the underlying inventory is sold. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that is not individually identified and separately recognized. Actual results may vary from projected results and assumptions used in the fair value assessments.

Income Taxes

Significant judgment is required in determining our provision for income taxes, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning opportunities. In 2016 and 2017, we evaluated our gross deferred tax assets, including an assessment of cumulative income or loss over the prior three-year period and future periods, to determine if a valuation allowance was required. A significant piece of objective negative evidence evaluated was the cumulative before-tax loss incurred over the three-year periods ended December 31, 2017 and 2016. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future profitability. On the basis of this evaluation, asAs of December 31, ~~2017, we recorded~~2020, the Company has a valuation allowance of ~~$15.2 million. This valuation allowance~~$2.3 million which represents the portion of the Company’s deferred tax ~~asset~~assets that management ~~could no longer conclude was~~believes is not more likely than not to be realized. We will continue to assess the need for a valuation allowance on our deferred tax assets by evaluating both positive and negative evidence that may exist.

We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained during an audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe that we have appropriate support for the positions taken on our tax returns, we regularly assess the potential outcome of examinations by tax authorities in determining the adequacy of our provision for income taxes. See Note 4 in the Consolidated Financial Statements included in this Annual Report for more information on income taxes.

~~Convertible Debt~~

We account for convertible debt instruments that may be settled in cash upon conversion (including combination settlement of cash equal to the “principal portion” and delivery of the “share amount” in excess of the conversion value over

the principal portion in shares of common stock and/or cash) by separating the liability and equity components of the instruments in a manner that reflects our nonconvertible debt borrowing rate. We determine the carrying amount of the liability component by measuring the fair value of similar debt instruments that do not have the conversion feature. If no similar debt instrument exists, we estimate fair value by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatilities. Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions are judgmental in nature and could have a significant impact on the determination of the debt component, and the associated non-cash interest expense.

In December 2014, we issued $172.5 million aggregate principal amount of 3.25% Convertible Senior Notes due 2020. We assigned a value to the debt component of our Convertible Senior Notes equal to the estimated fair value of similar debt instruments without the conversion feature, which resulted in us recording the debt at a discount. We are amortizing the debt discount over the life of the Convertible Senior Notes as additional non-cash interest expense utilizing the effective interest method. For additional information, see ~~Note 3~~ ~~in the Consolidated Financial Statements included in this Annual Report.~~

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

~~We are not subject to interest rate risk on our Convertible Senior Notes as the Notes have a fixed rate of 3.25%.~~ For fixed rate debt, changes in interest rates will generally affect the fair value of the debt instrument, but not our earnings or cash flows. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to changes in interest rates.

The fair market value of our Senior Credit Facility interest rate debt is subject to interest rate risk. Generally, the fair market value of the Senior Credit Facility interest rate debt will vary as interest rates increase or decrease. We had $255.0 million outstanding under our Senior Credit Facility at December 31, 2017. The weighted average interest rate on these borrowings is 5.19% as of December 31, 2017. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would increase our annual interest expense by approximately $1.5 million. Based on our market risk sensitive instruments outstanding at December 31, 2017, we have determined that there was no material market risk exposure from such instruments to our consolidated financial position, results of operations or cash flows as of such dates.

Our current investment policy with respect to our cash and cash equivalents focuses on maintaining acceptable levels of interest rate risk and liquidity. Although we continually evaluate our placement of investments, our cash equivalents as of December 31, ~~2017,~~2020 consisted primarily of prime money market funds. The funds provide daily liquidity and may be subject to interest rate risk and fall in value if market interest rates increase. We do not expect our operating results or cash ~~and cash equivalents were placed~~flows to be affected to any significant degree by a sudden change in ~~the Company's highly liquid operating accounts.~~market interest rates.

Foreign Currency Exchange Risk

~~The majority~~We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, transaction gains and losses associated with intercompany loans with foreign subsidiaries and transactions denominated in currencies other than a location’s functional currency.

For the year ended December 31, 2020, total revenues were $1,661.7 million, of which approximately $119.8 million in revenue was denominated in currencies other than the U.S. dollar. We believe constant currency and constant currency growth rate enhance the comparison of our ~~international sales are negotiated~~financial performance from period-to-period, and to that of our competitors. Constant currency revenue excludes the impact from foreign currency fluctuations, which was favorable $0.7 million for the year ended December 31, 2020, and ~~paid in U.S. dollars. Nonetheless, these sales are subject to currency risks, since changes~~is calculated by translating current period revenues using prior period exchange rates, net of any hedging effect recognized in the ~~values~~current period. Constant currency revenue growth (expressed as a percentage) is calculated by determining the change in current period constant currency revenues over prior period revenues.

The major currencies to which our revenues are exposed are the Euro and the Chinese Yuan. A 100-basis point move in the average exchange rates (assuming a simultaneous and immediate 100 basis point change for the relevant period) would have resulted in an increase or decrease in our reported revenue for the year ended December 31, 2020 as follows (in thousands):


Currency	Year ended December 31, 2020
Chinese Renminbi	$	1,892
Euro	$	2,740

Our foreign currency management policy permits the use of ~~foreign currencies relative~~derivative instruments, such as forward contracts, to ~~the value~~reduce volatility in our results of ~~the U.S. dollar can render our products comparatively more expensive. These~~operations resulting from foreign exchange rate fluctuations could negatively impact international sales of our products, as could changes in the general economic conditions in those markets. Continued change in the values of the Euro, the Chinese Renminbi, the Japanese Yen and other foreign currencies could have an impact on our business, financial condition and results of operations.fluctuations. We do not ~~currently hedge against exchange rate fluctuations, which means that we are fully exposed to exchange rate changes. In addition, we have certain agreements whereby we share the~~enter into foreign currency ~~exchange fluctuation risk. We may,~~derivative instruments for trading purposes or to engage in speculative activity. See further discussion in Note 12 to the ~~future, enter into similar~~Notes to the Consolidated Financial Statements included in this Annual Report for additional information related to such ~~arrangements.~~

forward contracts.

Item 8. Financial Statements and Supplementary Data

Index of Consolidated Financial Statements and Schedule



Report of Independent Registered Public Accounting Firm			4946
Consolidated Balance Sheets as of December 31, ~~2017~~2020 and ~~2016~~2019			5048
Consolidated Statements of ~~Operations~~Income for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5149
Consolidated Statements of Comprehensive ~~Loss~~Income for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5250
Consolidated Statements of Stockholders’ Equity for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5351
Consolidated Statements of Cash Flows for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5452
Notes to Consolidated Financial Statements			5654
Schedule II Consolidated Valuation and Qualifying Accounts			7972

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~Shareholders~~Stockholders and the Board of Directors of Quidel Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Quidel Corporation (the ~~“Company“)~~Company) as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of ~~operations,~~income, comprehensive ~~loss, stockholders‘~~income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, ~~2017~~2020, and the related notes and schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company ~~as of~~at December 31, ~~2017~~2020 and ~~2016,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~Company's~~Company’s internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February ~~27, 2018~~18, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the ~~Company‘s~~Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the USU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures ~~include~~included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.



~~/s/ Ernst & Young LLP~~		Reserve for contractual rebates
Description of the Matter		As described in Note 1 to the consolidated financial statements, the Company records revenues from product sales net of contractual rebates that are estimated at the time of sale. As of December 31, 2020, the Company recognized an allowance on accounts receivable of $100.8 million in rebates.
		Auditing the Company’s allowance for contractual rebates is especially challenging because the calculation involves estimating adjustments to revenue based upon a high volume of data including inputs from third-party sources, such as distributor inventory levels and historical distributor sales to end users. In addition, the determination of such adjustments includes estimating rebate percentages which are dependent on estimated end-user sales mix and customer contractual terms, which vary across customers.
How We ~~have served~~Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of key controls over the Company’s process to calculate the reserves for contractual rebates, including their evaluation of third-party data inputs utilized in the reserve and accrual calculations, as well as the ~~Company‘s auditor since 2002.~~

~~San Diego, California~~
~~February 27, 2018~~	accuracy of the Company’s data inputs such as contractual pricing and estimated end user sales. Our audit procedures also included the evaluation of significant inputs through the evaluation of the Company's retrospective analysis of rebates claimed compared to actual payments issued, evaluation of estimates based on historical experience, and performance of analytical procedures and sensitivity analyses over the Company’s significant inputs. We also tested the underlying data used in management’s calculations for accuracy and completeness, which included inspection of source data supporting the inventory levels and rebate claims paid subsequent to period end.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

San Diego, California

February 18, 2021

QUIDEL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)


	December 31,							December 31,
	2017			2016				2020		2019
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	36,086		$	169,508		Cash and cash equivalents	$	489,941	$	52,775
Accounts receivable, net	67,046			24,990			Accounts receivable, net	497,688		94,496
Inventories	67,078			26,045			Inventories	113,798		58,086
Assets held for sale	146,644			—

Prepaid expenses and other current assets	14,375			4,851			Prepaid expenses and other current assets	40,975		16,870
Total current assets	331,229			225,394			Total current assets	1,142,402		222,227
Property, plant and equipment, net	61,585			50,858			Property, plant and equipment, net	110,481		79,762
Right-of-use assets							Right-of-use assets	100,544		92,119
Goodwill	337,028			83,834			Goodwill	337,032		337,018
Intangible assets, net	203,827			27,639			Intangible assets, net	122,431		148,112
Deferred tax asset							Deferred tax asset	44,762		24,502
Other non-current assets	1,582			525			Other non-current assets	13,512		7,127
Total assets	$	935,251		$	388,250		Total assets	$	1,871,164	$	910,867
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	27,279		$	16,047		Accounts payable	$	86,316	$	26,701
Accrued payroll and related expenses	15,926			9,642			Accrued payroll and related expenses	34,781		17,286
Current portion of contingent consideration	6,293			2,826
Current portion of deferred consideration	46,000			—
Current portion of Revolving Credit Facility	10,000			—
Current portion of long-term debt	10,184			—
Income tax payable							Income tax payable	127,788		0
Operating lease liabilities							Operating lease liabilities	7,799		6,412
Contingent consideration							Contingent consideration	5,987		5,969
Deferred consideration							Deferred consideration	42,000		42,000

Convertible Senior Notes							Convertible Senior Notes	0		12,661

Other current liabilities	12,666			5,097			Other current liabilities	32,290		14,862
Total current liabilities	128,348			33,612			Total current liabilities	336,961		125,891
Convertible Senior Notes	149,868			144,340
Term Loan	227,394			—

Operating lease liabilities - non-current							Operating lease liabilities - non-current	100,706		93,227

Deferred consideration - non-current	177,158			—			Deferred consideration - non-current	73,951		109,382
Contingent consideration - non-current	18,008			2,349			Contingent consideration - non-current	5,909		10,566
Deferred tax liability - non-current	430			58

Other non-current liabilities	6,941			7,261			Other non-current liabilities	20,934		11,981
Commitments and contingencies (Note 8)							Commitments and contingencies (Note 8)	0		0
Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $.001 par value per share; 5,000 shares authorized; none issued or outstanding at December 31, 2017 and 2016	—			—
Common stock, $.001 par value per share; 97,500 shares authorized; 34,540 and 32,897 shares issued and outstanding at December 31, 2017 and 2016, respectively	35			33
Preferred stock, $.001 par value per share; 5,000 shares authorized; none issued or outstanding at December 31, 2020 and 2019							Preferred stock, $.001 par value per share; 5,000 shares authorized; none issued or outstanding at December 31, 2020 and 2019	0		0
Common stock, $.001 par value per share; 97,500 shares authorized; 42,290 and 41,868 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively							Common stock, $.001 par value per share; 97,500 shares authorized; 42,290 and 41,868 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively	42		42
Additional paid-in capital	239,489			204,905			Additional paid-in capital	388,121		425,557
Accumulated other comprehensive loss	—			(53		)	Accumulated other comprehensive loss	(431)		(463)
Accumulated deficit	(12,420		)	(4,255		)
Retained earnings							Retained earnings	944,971		134,684
Total stockholders’ equity	227,104			200,630			Total stockholders’ equity	1,332,703		559,820
Total liabilities and stockholders’ equity	$	935,251		$	388,250		Total liabilities and stockholders’ equity	$	1,871,164	$	910,867

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

(in thousands, except per share data)


	Year ended December 31,										Year ended December 31,
	2017			2016			2015				2020		2019		2018
Total revenues	$	277,743		$	191,603		$	196,129		Total revenues	$	1,661,668	$	534,890	$	522,285
Cost of sales	121,601			79,872			78,029			Cost of sales	312,813		214,085		206,572
Gross profit	156,142			111,731			118,100			Gross profit	1,348,855		320,805		315,713
Research and development	33,644			38,672			35,514			Research and development	84,292		52,553		51,649
Sales and marketing	67,248			50,436			50,401			Sales and marketing	133,957		111,114		108,987
General and administrative	29,192			26,351			27,057			General and administrative	66,586		52,755		44,951
Acquisition and integration costs	16,506			711			2,390			Acquisition and integration costs	3,694		11,667		14,197
Total operating expenses	146,590			116,170			115,362			Total operating expenses	288,529		228,089		219,784
Operating income (loss)	9,552			(4,439		)	2,738
Interest expense, net	(17,588		)	(11,760		)	(12,035		)
Loss before taxes	(8,036		)	(16,199		)	(9,297		)
Operating income										Operating income	1,060,326		92,716		95,929
Other expense, net										Other expense, net
Interest and other expense, net										Interest and other expense, net	(9,623)		(14,790)		(24,283)
Loss on extinguishment of debt										Loss on extinguishment of debt	(10,384)		(748)		(8,262)
Total other expense, net										Total other expense, net	(20,007)		(15,538)		(32,545)
Income before income taxes										Income before income taxes	1,040,319		77,178		63,384
Provision (benefit) for income taxes	129			(2,391		)	(3,218		)	Provision (benefit) for income taxes	230,032		4,257		(10,799)
Net loss	$	(8,165	)	$	(13,808	)	$	(6,079	)
Basic and diluted loss per share	$	(0.24	)	$	(0.42	)	$	(0.18	)
Shares used in basic and diluted per share calculation	33,734			32,708			34,104
Net income										Net income	$	810,287	$	72,921	$	74,183
Basic earnings per share										Basic earnings per share	$	19.24	$	1.78	$	1.95
Diluted earnings per share										Diluted earnings per share	$	18.60	$	1.73	$	1.86
Shares used in basic per share calculation										Shares used in basic per share calculation	42,124		40,860		37,995
Shares used in diluted per share calculation										Shares used in diluted per share calculation	43,591		43,111		42,554

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME

(in thousands)

Year ended December 31,
2017 2016 2015
Net loss $ (8,165 ) $ (13,808 ) $ (6,079 )
Other comprehensive income, net of tax

Changes in cumulative translation adjustment 53
(22 ) (2 )
Comprehensive loss $ (8,112 ) $ (13,830 ) $ (6,081 )


	Year ended December 31,
	2020		2019		2018
Net income	$	810,287	$	72,921	$	74,183
Other comprehensive income (loss)
Changes in cumulative translation adjustment, net of tax	2,554		(322)		(139)
Changes in unrealized (losses) gains from cash flow hedges:
Net unrealized (losses) gains on derivative instruments	(2,993)		716		0
Reclassification of net realized losses (gains) on derivative instruments included in net income	471		(718)		0
Total change in unrealized (losses) gains from cash flow hedges, net of tax	(2,522)		(2)		0
Comprehensive income	$	810,319	$	72,597	$	74,044

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)


																			Common Stock
	Common Stock																		Shares	Par		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings (accumulated deficit)		Total stockholders’ equity
	Shares		Par			Additional paid-in capital			Accumulated other comprehensive loss			Retained earnings (accumulated deficit)			Total stockholders’ equity
Balance at January 1, 2015	34,433		$	34		$	229,374		$	(29	)	$	15,632		$	245,011

Balance at December 31, 2017																		Balance at December 31, 2017	34,540	$	35	$	239,489	$	0	$	(12,420)	$	227,104
Issuance of common stock under equity compensation plans	308		—			3,318			—			—			3,318			Issuance of common stock under equity compensation plans	1,237	0		17,047		—		—		17,047
Excess tax benefit from share-based compensation	—		—			571			—			—			571
Stock-based compensation expense	—		—			6,791			—			—			6,791			Stock-based compensation expense	—	—		10,078		—		—		10,078
Issuance of shares in exchange for Convertible Senior Notes																		Issuance of shares in exchange for Convertible Senior Notes	3,699	4		200,215		—		—��		200,219
Tax impact from the conversion of Convertible Senior Notes																		Tax impact from the conversion of Convertible Senior Notes	—	—		2,162		—		—		2,162
Reduction for equity component of Convertible Senior Notes exchanged																		Reduction for equity component of Convertible Senior Notes exchanged	—	—		(100,726)		—		—		(100,726)
Repurchases of common stock	(1,418	)	(1		)	(30,933		)	—			—			(30,934		)	Repurchases of common stock	(90)	0		(4,344)		—		—		(4,344)
Changes in cumulative translation adjustment, net of tax	—		—			—			(2		)	—			(2		)	Changes in cumulative translation adjustment, net of tax	—	—		—		(139)		—		(139)
Net loss	—		—			—			—			(6,079		)	(6,079		)
Balance at December 31, 2015	33,323		33			209,121			(31		)	9,553			218,676
Net income																		Net income	—	—		—		—		74,183		74,183
Balance at December 31, 2018																		Balance at December 31, 2018	39,386	39		363,921		(139)		61,763		425,584
Issuance of common stock under equity compensation plans	755		—			9,365			—			—			9,365			Issuance of common stock under equity compensation plans	1,152	2		16,797		—		—		16,799
Stock-based compensation expense	—		—			7,134			—			—			7,134			Stock-based compensation expense	—	—		12,088		—		—		12,088
Repurchase of Convertible Senior Notes	—		—			(547		)	—			—			(547		)
Issuance of shares in exchange for Convertible Senior Notes																		Issuance of shares in exchange for Convertible Senior Notes	1,497	1		86,427		—		—		86,428
Tax impact from the conversion of Convertible Senior Notes																		Tax impact from the conversion of Convertible Senior Notes	—	—		568		—		—		568
Reduction for equity component of Convertible Senior Notes exchanged																		Reduction for equity component of Convertible Senior Notes exchanged	—	—		(43,516)		—		—		(43,516)
Repurchases of common stock	(1,181	)	—			(20,168		)	—			—			(20,168		)	Repurchases of common stock	(167)	0		(10,728)		—		—		(10,728)
Changes in cumulative translation adjustment, net of tax	—		—			—			(22		)	—			(22		)
Net loss	—		—			—			—			(13,808		)	(13,808		)
Balance at December 31, 2016	32,897		33			204,905			(53		)	(4,255		)	200,630
Other comprehensive loss, net of tax																		Other comprehensive loss, net of tax	—	—		—		(324)		—		(324)
Net income																		Net income	—	—		—		—		72,921		72,921
Balance at December 31, 2019																		Balance at December 31, 2019	41,868	42		425,557		(463)		134,684		559,820
Issuance of common stock under equity compensation plans	1,669		2			26,077			—			—			26,079			Issuance of common stock under equity compensation plans	490	0		10,380		—		—		10,380
Stock-based compensation expense	—		—			9,048			—			—			9,048			Stock-based compensation expense	—	—		18,969		—		—		18,969
Issuance of shares in exchange for Convertible Senior Notes																		Issuance of shares in exchange for Convertible Senior Notes	226	0		7,230		—		—		7,230
Tax impact from the conversion of Convertible Senior Notes																		Tax impact from the conversion of Convertible Senior Notes	—	—		54		—		—		54

Derivative liabilities - Convertible Senior Notes elected to settle in cash																		Derivative liabilities - Convertible Senior Notes elected to settle in cash	—	—		(26,180)		—		—		(26,180)
Repurchases of common stock	(26	)	—			(541		)	—			—			(541		)	Repurchases of common stock	(294)	0		(47,889)		—		—		(47,889)
Changes in cumulative translation adjustment, net of tax	—		—			—			53			—			53
Net loss	—		—			—			—			(8,165		)	(8,165		)
Balance at December 31, 2017	34,540		$	35		$	239,489		$	—		$	(12,420	)	$	227,104
Other comprehensive income, net of tax																		Other comprehensive income, net of tax	—	—		—		32		—		32
Net income																		Net income	—	—		—		—		810,287		810,287
Balance at December 31, 2020																		Balance at December 31, 2020	42,290	$	42	$	388,121	$	(431)	$	944,971	$	1,332,703

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year ended December 31,
	2020		2019		2018
OPERATING ACTIVITIES
Net income	$	810,287	$	72,921	$	74,183
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other	49,089		47,827		46,266
Stock-based compensation expense	21,019		13,252		11,709
Impairment loss	0		1,481		0
Amortization of debt discount and deferred issuance costs	771		1,582		3,952
Change in fair value of acquisition contingencies	1,405		1,467		1,114
Accretion of interest on deferred consideration	6,569		8,224		10,000
Amortization of inventory step-up to fair value	0		0		3,650
Net change in operating lease right-of-use assets and liabilities	434		3,964		0
Change in deferred tax assets and liabilities	(20,211)		(1,742)		(20,458)
Change in fair value of derivative liabilities - Convertible Senior Notes	1,084		0		0
Loss on extinguishment of debt	10,384		748		8,262

Changes in assets and liabilities:
Accounts receivable	(402,094)		(36,059)		8,236
Inventories	(54,903)		9,143		(3,974)

Prepaid expenses and other current and non-current assets	(14,264)		4,314		(12,681)

Accounts payable	52,226		2,434		(331)
Accrued payroll and related expenses	16,024		(1,037)		1,674
Income taxes payable	137,708		4,175		2,082

Other current and non-current liabilities	14,235		1,791		2,661
Net cash provided by operating activities	629,763		134,485		136,345
INVESTING ACTIVITIES
Acquisitions of property, equipment and intangibles	(64,927)		(27,229)		(31,689)


Proceeds from government assistance allocated to fixed assets	1,605		0		0
Proceeds from sale of Summers Ridge Property	0		0		146,644
Net cash (used for) provided by investing activities	(63,322)		(27,229)		114,955
FINANCING ACTIVITIES


Proceeds from issuance of common stock	9,613		14,782		17,047
Payments of debt issuance costs	0		0		(513)
Payments on finance lease obligation	(511)		(371)		(130)
Payments on Revolving Credit Facility	0		(53,188)		(40,000)
Repurchases of common stock	(47,889)		(10,728)		(4,344)

Payments on acquisition contingent consideration	(6,044)		(4,044)		(6,303)
Payments of deferred consideration	(42,000)		(44,000)		(46,000)
Payment on Convertible Senior Note and Derivative Liability	(43,446)		0		0
Payments of Term Loan	0		0		(161,813)
Transaction costs related to debt exchange	0		(733)		(2,002)
Net cash used for financing activities	(130,277)		(98,282)		(244,058)
Effect of exchange rate changes on cash	1,002		106		367
Net increase in cash and cash equivalents	437,166		9,080		7,609
Cash and cash equivalents, beginning of period	52,775		43,695		36,086
Cash and cash equivalents, at end of period	$	489,941	$	52,775	$	43,695

Year ended December 31,
2017 2016 2015
OPERATING ACTIVITIES
Net loss $ (8,165 ) $ (13,808 ) $ (6,079 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and other 30,762
22,796
23,386
Stock-based compensation expense 9,061
7,986
7,419
Amortization of debt discount and deferred issuance costs 6,022
5,891
5,664
Change in fair value of acquisition contingencies (81 ) (485 ) (88 )
Accretion of interest on deferred consideration
2,608
—
—
Amortization of inventory step-up to fair value
10,950
—
—
Change in deferred tax assets and liabilities 365
(2,603 ) (4,027 )
Gain on extinguishment of Convertible Senior Notes —
(421 ) —
Changes in assets and liabilities:
Accounts receivable (42,052 ) (6,265 ) 16,060
Inventories 362
859
(1,637 )
Prepaid expenses and other current and non-current assets (9,113 ) (552 ) (1,039 )
Restricted cash —
63
3,064
Accounts payable 12,956
4,323
(3,082 )
Accrued payroll and related expenses 7,130
(375 ) 1,061
Deferred grant revenue —
(3,658 ) (2,672 )
Other current and non-current liabilities 6,904
(1,936 ) (1,150 )
Net cash provided by operating activities 27,709
11,815
36,880
INVESTING ACTIVITIES
Acquisitions of property, equipment and intangibles (17,510 ) (11,909 ) (17,032 )
Acquisition of other businesses, net of cash acquired (14,451 ) (5,061 ) —
Acquisition of Triage and BNP Businesses (399,798 ) —
—
Net cash used for investing activities (431,759 ) (16,970 ) (17,032 )
FINANCING ACTIVITIES
Proceeds from issuance of Term Loan 245,000
—
—
Proceeds from issuance of Revolving Credit Facility 10,000
—
—
Proceeds from issuance of common stock 25,426
8,575
2,911
Payments of debt issuance costs (8,682 ) —
(365 )
Payments on lease obligation (98 ) (540 ) (509 )
Repurchases of common stock (541 ) (20,168 ) (30,934 )
Repurchases of Convertible Senior Notes —
(4,459 ) —
Payments on acquisition contingencies (497 ) (207 ) (129 )
Payment for acquisition holdback —
—
(229 )
Net cash provided by (used for) financing activities 270,608
(16,799 ) (29,255 )
Effect of exchange rate changes on cash 20
(9 ) (17 )
Net decrease in cash and cash equivalents (133,422 ) (21,963 ) (9,424 )
Cash and cash equivalents, beginning of period 169,508
191,471
200,895
Cash and cash equivalents, at end of period $ 36,086
$ 169,508
$ 191,471


	Year ended December 31,
	2020		2019		2018
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	480	$	2,295	$	7,929
Cash paid during the period for income taxes	$	109,912	$	2,189	$	6,923

Purchase of property, equipment and intangibles by incurring current liabilities	$	7,160	$	1,040	$	1,785
Accrued receivable for capital expenditures to be reimbursed under a government contract	$	15,854	$	—	$	—



Reduction of other current liabilities upon issuance of restricted share units	$	767	$	2,018	$	0

Extinguishment of Convertible Senior Notes through issuance of stock	$	7,230	$	86,428	$	200,219
Principal amount of Term Loan exchanged for Revolving Credit Facility	$	0	$	0	$	83,187

See accompanying notes.

Year ended December 31,
2017 2016 2015
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 9,137
$ 6,488
$ 6,998
Cash paid during the period for income taxes $ 1,274
$ 490
$ 1,922
NON-CASH INVESTING ACTIVITIES
Purchase of property, equipment and intangibles by incurring current liabilities $ 1,446
$ 3,280
$ 239
NON-CASH FINANCING ACTIVITIES
Decrease of accrued payroll and related expenses upon issuance of common stock $ 903
$ 539
$ 408
Receivable for stock option exercises $ —
$ 251
$ —
Deferred consideration for acquisition of BNP Business
$ 220,550
$ —
$ —

~~See accompanying notes.~~

QUIDEL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Company Operations and Summary of Significant Accounting Policies

Quidel Corporation (the “Company”) commenced operations in 1979. The Company operates in ~~one~~1 business segment, which develops, manufactures and markets ~~rapid~~ diagnostic testing solutions. These diagnostic tests can be categorized in the following product categories: Rapid Immunoassay, ~~Cardiac~~Cardiometabolic Immunoassay, Specialized Diagnostic Solutions and Molecular Diagnostic Solutions. The Company sells its products directly to end users and distributors, in each case, for professional use in physician offices, hospitals, clinical laboratories, reference laboratories, leading universities, retail clinics and wellness screening centers. The Company markets its products through a network of distributors and a direct sales ~~force and temporary transition service arrangements entered into with Abbott Laboratories in connection with the acquisition of the Triage and BNP Businesses.~~force.

The accompanying consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the U.S.

Consolidation—The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents—The Company considers cash equivalents to be highly liquid investments with a maturity at the date of purchase of three months or less. The Company invests its cash equivalents primarily in money market funds ~~and commercial paper. Cash equivalents are maintained~~ with high quality institutions.

Accounts Receivable—The Company sells its products directly to hospitals and reference laboratories as well as to distributors in the U.S. and ~~sells directly to hospitals and labs and through distribution~~ internationally (see Note 9)9). The Company periodically assesses the financial strength of these customers and establishes reserves for anticipated losses when necessary, which historically have not been material. The ~~Company’s reserves primarily consist of amounts related to cash discounts and contract rebates. The~~ balance of accounts receivable is net of reserves of ~~$12.3~~$103.4 million and ~~$7.2~~$16.0 million at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively, of which the reserve related to contract rebates was $100.8 million and $15.7 million, respectively.

Concentration of Credit Risk—Financial instruments that potentially subject the Company to significant concentrations of credit risk consists principally of trade accounts ~~receivable.~~receivable and cash equivalents.

The Company performs credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary, but generally requires no collateral. Credit quality is monitored regularly by reviewing credit history. The Company believes that the concentration of credit risk in its trade accounts receivables is moderated by its credit evaluation process, relatively short collection terms, the high level of credit worthiness of its customers, and letters of credit issued on the Company’s behalf. Potential credit losses are limited to the gross value of accounts receivable.

Inventories—Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. The Company reviews the components of its inventory ~~on a quarterly basis~~periodically for excess, obsolete and impaired inventory and ~~makes appropriate dispositions as obsolete stock is~~records a reduction to the carrying value when identified.

~~Assets Held for Sale—Assets to be disposed that meet the held for sale criteria are reported at the lower of their carrying amount and fair value, less costs to sell, and are no longer depreciated.~~

Property, Plant and Equipment—Property, plant and equipment is recorded at cost and depreciated over the estimated useful lives of the assets ~~(three~~(three to 15fifteen years) using the straight-line method. Amortization of leasehold improvements is computed on the straight-line method over the shorter of the lease term or the estimated useful lives of the related assets.

Goodwill and Intangible Assets—Intangible assets are recorded at cost and amortized on a straight-line basis over their estimated useful lives, except for indefinite-lived intangibles such as goodwill. Software development costs associated with software to be leased or otherwise marketed are expensed as incurred until technological feasibility has been established. After technological feasibility is established, software development costs are ~~capitalized. The~~ capitalized ~~cost is~~and amortized on a straight-line basis over the estimated product ~~life or on the ratio of current revenues to total projected product revenues, whichever is greater.~~life.

Convertible Debt—The Company accounts for convertible debt instruments that may be settled in cash upon conversion (including combination settlement of cash equal to the “principal portion” and delivery of the “share amount” in excess of the conversion value over the principal portion in shares of common stock and/or cash) by separating the liability and equity components of the instruments in a manner that reflects our nonconvertible debt borrowing rate. The Company determines the carrying amount of the liability component by measuring the fair value of similar debt instruments that do not have the conversion feature. If no similar debt instrument exists, the Company estimates fair value by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatilities.

Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions are judgmental in nature and could have a significant impact on the determination of the debt component, and the associated non-cash interest expense. See Note 3 for additional discussion of the Convertible Senior Notes issued in December 2014.

Revenue Recognition—The Company records revenues primarily from product sales. These revenues are recorded net of rebates and other discounts. These rebates and discounts are estimated at the time of sale, and are largely driven by various customer program offerings, including special pricing agreements, promotions and other volume-based incentives. ~~Revenues from product~~Rebates and discounts are calculated based upon historical experience, estimated discounting levels and estimated distributor inventory balances and recorded as a reduction of sales ~~are recorded upon passage~~with offsets to accounts receivable and other current liabilities, respectively.

Revenue is recognized when control of ~~title and risk of loss~~the products is transferred to the ~~customer. Passage of title~~customers in an amount that reflects the consideration the Company expects to receive from the customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract and the contract price, allocating the contract price to the ~~product~~distinct performance obligations in the contract and ~~recognition of~~recognizing revenue ~~occurs upon delivery~~when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer ~~when sales terms~~either on its own or together with other resources that are ~~free on board (“FOB”) destination~~readily available to the customer and atis separately identified in the ~~time~~contract. A performance obligation is considered to be satisfied once the control of ~~shipment when~~a product is transferred to the ~~sales terms are FOB shipping point~~customer or the service is provided to the customer, meaning the customer has the ability to use and ~~there is no right~~obtain the benefit of ~~return.~~the goods or service.

A portion of product sales includes revenues for diagnostic kits, which are utilized on leased instrument systems under the Company’s “reagent rental” program. The reagent rental program provides customers the right to use the instruments at no separate cost to the customer in consideration for a multi-year agreement to purchase annual minimum amounts of consumables (“reagents” or “diagnostic kits”). When an instrument is placed with a customer under a reagent rental agreement, the Company retains title to the equipment and it remains capitalized on the Company’s Consolidated Balance Sheets as property, plant and ~~equipment.~~equipment, net. The instrument is depreciated on a straight-line basis over the lesser of the lease term or life of the instrument. Depreciation expense is recorded in cost of sales included in the Consolidated Statements of ~~Operations. The~~Income. Instrument and consumables under the reagent rental agreements ~~represent one unit of accounting as~~are deemed two distinct performance obligations. Though the instrument and consumables ~~(reagents)~~do not have any use to customers without one another, they are not highly interdependent ~~in producing a diagnostic result~~because they do not significantly affect each other. The Company would be able to fulfill its promise to transfer the instrument even if its customers did not purchase any consumables and ~~neither has a stand-alone value with respect~~the Company would be able to fulfill its promise to provide the consumables even if customers acquired instruments separately. The contract price is allocated between these ~~agreements. No~~two performance obligations based on the relative standalone selling prices. The instrument is considered an operating lease and revenue ~~is recognized at the time of instrument placement. All revenue is recognized when the title and risk of loss for the diagnostic kits have passed~~allocated to the ~~customer.~~instrument will be separately disclosed, if material.

~~Royalty income from~~Government Assistance— During the ~~grant of license rights is recognized during the period in which the revenue is earned and the amount is determinable from the licensee.~~

~~From time to time, the Company earns income from grants for research and commercialization activities. For the years~~year ended December 31, ~~2016 and 2015,~~2020, the Company ~~recognized $6.5~~entered into a contract with the National Institute of Health (“NIH”), through its newly launched Rapid Acceleration of Diagnostics - Advanced Technology Platforms initiative, to support the Company’s expansion of its manufacturing capacity for its diagnostic assays that test for the SARS-CoV-2 antigen. The contract provides for consideration to the Company of up to $65.0 million and ~~$5.1 million~~has a performance period of one year, which began in July 2020. The contract includes key deliverables and milestones that will directly support the upgrade and addition of new manufacturing lines as ~~grant revenue, respectively, related~~well as the outfitting of a new distribution center. The Company will also provide instruments and assays to NIH. There are no refund provisions under the contract.

Consideration from the contract is allocated to each deliverable identified within the contract using a relative fair value allocation method and recognized when there is reasonable assurance the Company will meet the milestones and receive the consideration. Consideration allocated to the ~~Bill~~delivery of instruments and ~~Melinda Gates Foundation~~assays are recognized in accordance with the Company’s existing revenue recognition policy described above. Consideration that relates to ~~develop, manufacture~~capital expenditures is recorded as a reduction to the carrying value of such assets and ~~validate a quantitative, low-cost, nucleic acid assay for HIV drug treatment monitoring on~~amortized over the integrated Savanna MDx platform for use in limited resource settings. Cash payments received were restricted as to use until expenditures contemplated in the grant were incurred or committed. As of December 31, 2016, all payment related milestones have been achieved and alluseful life of the ~~grant revenue~~assets. Consideration allocated to the remainder of ~~$20.9 million was fully recognized. As such,~~ the ~~Company recognized no grant revenue during~~contract is recorded as reductions to the ~~twelve months~~related expense. During the year ended December 31, ~~2017.~~2020, the Company incurred $15.9 million in capital expenditures, which will be reimbursed under this contract as future milestones are met. Therefore, the Company accrued such unbilled receivables in prepaid expenses and other current assets as of December 31, 2020.

Research and Development Costs—Research and development costs are charged to operations as incurred. In conjunction with certain ~~third party~~third-party service agreements, the Company is required to make periodic payments based on achievement of certain milestones. The costs related to these research and development services are also charged to operations as incurred.

Product Shipment Costs—Product shipment costs are included in sales and marketing expense in the accompanying Consolidated Statements of ~~Operations.~~Income. Shipping and handling costs were ~~$3.7~~$14.2 million,~~, $3.8~~ $9.5 million and ~~$3.9~~$8.3 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

Advertising Costs—Advertising costs are expensed as incurred. Advertising costs were ~~$0.5~~$1.1 million,~~, $0.3~~ $1.3 million and ~~$0.7~~$0.9 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

~~Deferred Rent—~~The Company enters into lease arrangements for office space under non-cancelable operating leases. Certain of the operating lease agreements contain rent escalation provisions, which are considered in determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception. The difference between rent expense and amounts paid under the Company's lease agreements are recorded as deferred rent.

Income Taxes—Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company’s policy is to recognize the interest expense and penalties related to income tax matters as a component of the income tax ~~expense.~~provision.

Fair Value of Financial Instruments— The Company uses the fair value hierarchy established in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, whichrequires that the valuation of assets and liabilities subject to fair value measurements be classified and disclosed by the Company in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities approximate their fair values due to their short-term nature.

~~Reclassifications~~— The Company recorded reclassifications of acquisition and integration costs totaling $0.7 million and $2.4 million for years ended December 31, 2016 and 2015, respectively, from general and administrative expense as previously reported in the Consolidated Statements of Operations to conform to current year presentation. The Company believes these reclassifications provide greater clarity and insight into the consolidated financial statements for the periods presented.

The Company also recorded reclassifications of $6.5 million and $6.3 million for the years ended December 31, 2016 and 2015, respectively, from amortization of intangible assets from acquired business and technology to cost of sales expense as previously reported in the Consolidated Statements of Operations. In addition, the Company recorded reclassifications of $2.6 million and $2.5 million for the years ended December 31, 2016 and 2015, respectively, from amortization of intangible assets from acquired business and technology to sales and marketing expense to conform to current year presentation. These reclassifications did not impact the net loss as previously reported or any prior amounts reported on the Consolidated Balance Sheets, Statements of Cash Flows or Statements of Comprehensive Loss.

~~Product Warranty~~—The Company generally sells products with a limited product warranty and certain limited indemnifications. Due to product testing, the short time between product shipment and the detection and correction of product failures and a low historical rate of payments on indemnification claims, the historical activity and the related expense were not significant for the fiscal years presented.

Stock-Based Compensation—Compensation expense related to stock options granted is recognized ratably over the service vesting period for the entire option. For stock options with graded vesting, the Company ensures that the cumulative amount of compensation expense recognized at the end of any reporting period at least equals the portion of the stock option that has vested at that date. The total number of stock options expected to vest is adjusted by estimated forfeiture rates. The Company determined the estimated fair value of each stock option on the date of grant using the Black-Scholes option valuation model. The fair value of restricted stock units is determined based on the closing market price of the Company’s common stock on the grant date. Compensation expense for time-based restricted stock units (“RSUs”) is measured at the grant date and recognized ratably over the vesting period. A portion of the restricted stock granted are performance-based and vesting is tied to achievement of specific Company goals over a three-year time period, subject to early vesting upon achievement of the performance goals. For purposes of measuring compensation expense for performance-based restricted stock units (“PSUs”), the ~~amount~~number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The ~~recognition~~grant date of ~~compensation expense associated with~~ the ~~performance-based restricted stock units requires judgment in assessing~~PSUs takes place when the ~~probability of meeting~~grant is authorized and the ~~performance goals. This may result in significant expense recognition in the period in which the performance~~specific achievement goals are ~~met or when~~communicated.

~~achievement of the goals is deemed probable or may result in the reversal of previously recognized stock-based compensation expense if the performance criteria are deemed not probable of being met.~~

~~Computation of (Loss) Earnings Per Share~~—For the years ended December 31, 2017, 2016 and 2015, basic loss per share was computed by dividing net loss by the weighted-average number of common shares outstanding, including restricted stock units vested during the period. Diluted earnings per share (“EPS”) reflects the potential dilution that could occur if the earnings were divided by the weighted-average number of common shares and potentially dilutive common shares from outstanding stock options, unvested restricted stock units and the 3.25% Convertible Senior Notes due 2020 (“Convertible Senior Notes”). Potentially dilutive common shares from outstanding stock options and unvested restricted stock units are determined using the average share price for each period under the treasury stock method.

Comprehensive ~~Loss~~Income—Comprehensive ~~loss~~income includes unrealized gains and losses which are related to the cumulative translation adjustments and derivative instruments excluded from the Company’s Consolidated Statements of ~~Operations.~~Income.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounting Periods—Each of the Company’s fiscal quarters end on the Sunday closest to the end of the calendar quarter. The Company’s fiscal year ~~ends are December 31, 2017, January 1, 2017 and~~ended January 3, ~~2016.~~2021 was 53 weeks and the Company’s fiscal years ended December 29, 2019 and December 30, 2018 were 52 weeks. For ease of reference, the calendar ~~quarter~~year end dates are used herein.

~~Recent Accounting Pronouncements—In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in Accounting Standards Update (“ASU”) 2014-09,~~ ~~Revenue from Contracts with Customers, which amends the guidance in former~~ ~~ASC 605, Revenue Recognition~~ ("ASC 605"). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current authoritative guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The FASB has issued several amendments to the new standard, which include clarification of accounting guidance related to identification of performance obligations, intellectual property licenses, and principal vs. agent considerations. ASU 2014-09 and all subsequent amendments (collectively, the “ASC 606”) will be effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods therein.

The Company will adopt ASC 606 on January 1, 2018, using the modified retrospective transition method applied to those contracts which were not completed as of that date. Our evaluation of our contracts subject to this standard is substantially complete and based on procedures completed to date, we do not expect the application of the new standard to these contracts to have a material impact to our Consolidated Statements of Operations or Balance Sheets at initial implementation. We are also evaluating the new disclosures required by the standard to determine what additional information will need to be disclosed.

~~In February 2016, the FASB issued guidance codified in ASU 2016-02 (Topic 842),~~ ~~Leases. The guidance requires a lessee to recognize a lease liability for~~Leases—Lease liabilities represent the obligation to make lease payments and ~~a right-to-use asset representing~~right-of-use (“ROU”) assets represent the right to use the underlying asset ~~for~~during the lease term. Lease liabilities and ROU assets are recognized at the commencement date of the lease based on the present value of lease payments over the lease term at the commencement date. When the implicit rate is unknown, an incremental borrowing rate based on the ~~balance sheet. The guidance~~information available at the commencement date is ~~effective for fiscal years beginning after December 15, 2018 including interim periods within those years. The Company is currently evaluating~~used in

determining the ~~impact~~present value of ~~this guidance and expects~~the lease payments. Options to ~~adopt~~extend or terminate the ~~standard~~lease are included in the ~~first quarter~~determination of ~~2019.~~the lease term when it is reasonably certain that the Company will exercise such options.

~~In January 2017,~~For certain classes of assets, the ~~FASB issued guidance codified~~Company accounts for lease and non-lease components as a single lease component. Variable lease payments, including those related to changes in ~~ASU 2017-04,~~ ~~Intangibles-Goodwill~~the consumer price index, are recognized in the period in which the obligation for those payments are incurred and ~~Other (Topic 350) Simplifying~~are not included in the ~~Test for Goodwill Impairment~~ ~~(“ASU 2017-04”). Under this new guidance, an entity will no longer determine goodwill impairment by calculating~~measurement of the ~~implied fair value~~ROU assets or lease liabilities. Short-term leases are excluded from the calculation of ~~goodwill by assigning~~ the ~~fair value of a reporting unit to all of its~~ROU assets and lease liabilities.

Operating leases are included in right-of-use assets, operating lease liabilities ~~as if that reporting unit had been acquired in a business combination. Instead, an entity will compare the fair value of a reporting unit with its carrying amount~~ and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The guidance is effective for fiscal years beginning after December 15, 2019 including interim periods therein. The Company is currently evaluating the impact of this guidance and expects to adopt the standardoperating lease liabilities non-current in the ~~first quarter of 2020.~~Consolidated Balance Sheet. Finance leases are included in property, plant and equipment, net, other current liabilities and other non-current liabilities.

~~In March 2016, the FASB issued guidance codified in ASU 2016-09 (Topic 718),~~ ~~Improvements to Employee Share-Based Payment Accounting~~ ~~(“ASU 2016-09”)~~. ~~This guidance includes provisions to simplify several aspects of accounting for share-~~

based payment transactions, including income tax consequences, accounting for forfeitures, classification of awards as either equity or liability and classification on the statement of cash flows. ASU 2016-09 includes a requirement that the tax effect related to the settlement of share-based awards be recorded within income tax expense or benefit in the income statement. The simplification of income tax accounting for share-based payment transactions also impacts the computation of weighted-average diluted shares outstanding under the treasury stock method. The Company adopted ASU 2016-09 in the first quarter of 2017 and the impact of the adoption resulted in the following:

Upon adoption, the balance of the unrecognized excess tax benefits of $1.8 million was recorded as an increase to deferred tax assets and a corresponding increase to the valuation allowance, resulting in no impact to retained earnings.

Excess tax benefits from share-based arrangements are to be classified within cash flow from operating activities, rather than as cash flow from financing activities. The Company applied this provision on a retrospective basis and the prior period statement of cash flows was adjusted. This adoption did not have a material impact on the Company’s cash flows.

The Company elected to continue to estimate the number of awards expected to be forfeited and adjust the estimate when appropriate, as is currently required. This adoption did not have a material impact on the Company’s consolidated results of operations, financial condition or cash flows.

~~There was no material impact on the computation of weighted-average diluted shares outstanding.~~

Note 2. Balance Sheet Account Details

~~Inventories~~Prepaid expenses and other current assets

~~Inventories consisted~~The following is a summary of ~~the following, net of immaterial excess~~prepaid expenses and ~~obsolete reserves, at December 31, 2017 and 2016~~other current assets (in thousands):

December 31,
2017 2016
Raw materials $ 22,252
$ 9,297
Work-in-process (materials, labor and overhead) 22,813
7,990
Finished goods (materials, labor and overhead) 22,013
8,758
Total inventories $ 67,078
$ 26,045


	December 31,
	2020		2019
Unbilled receivables	$	16,041	$	0
Other receivables	15,442		7,857
Prepaid expenses	7,335		4,568
Other	2,157		4,445
Total prepaid expenses and other current assets	$	40,975	$	16,870

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. The following is a summary of inventories (in thousands):


	December 31,
	2020		2019
Raw materials	$	58,264	$	23,294
Work-in-process (materials, labor and overhead)	31,359		20,514
Finished goods (materials, labor and overhead)	24,175		14,278
Total inventories	$	113,798	$	58,086

Property, Plant and Equipment, net

The following is a summary of property, plant and equipment (in thousands):


	December 31,
	2020		2019
Equipment, furniture and fixtures	$	91,838	$	80,599
Building and improvements	49,014		46,878
Leased instruments	60,722		47,656
Land	1,080		1,080
Construction in Progress	32,595		15,748
Total property, plant and equipment, gross	235,249		191,961
Less: accumulated depreciation and amortization	(124,768)		(112,199)
Total property, plant and equipment, net	$	110,481	$	79,762

December 31,
2017 2016
Equipment, furniture and fixtures $ 75,728
$ 61,972
Building and improvements 34,994
34,243
Leased instruments 32,458
24,014
Land 1,080
1,080
Total property, plant and equipment, gross 144,260
121,309
Less: accumulated depreciation and amortization (82,675 ) (70,451 )
Total property, plant and equipment, net $ 61,585
$ 50,858

~~The equipment, furniture and fixtures category above includes construction~~Construction in progress ~~and~~includes instruments that have not been placed at a customer under a lease ~~agreement. These items~~agreement that will be reclassified ~~when the assets are~~to leased instruments once placed ~~in service.~~at a customer site. The total ~~expense~~expense for depreciation of fixed assets and

amortization of leasehold improvements was ~~$14.6~~$20.8 million, ~~$13.4~~$19.4 million and ~~$12.7~~$17.7 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively. Maintenance and minor repairs are charged to operations as incurred.

Goodwill and Intangible Assets

The Company had goodwill of $337.0 million as of December 31, ~~2017,~~2020, which ~~increased by $253.2 million as compared to $83.8 million as of~~remains consistent with December 31, 2016 due to the Company's acquisition of the cardiovascular and toxicology Triage® MeterPro business (“Triage Business”) and the Triage® BNP Test for the Beckman Coulter Access Family of Immunoassay

~~Systems business (the “BNP Business”). The Triage Business and the BNP Business are collectively referred to as the “Triage and BNP Businesses.”~~

On October 6, 2017, the Company acquired the Triage and BNP Businesses from Alere Inc. ("Alere"). As part of this acquisition, the Company identified and recorded $115.0 million in customer relationships, $52.4 million in purchased technology and $17.5 million in trademarks. Refer to ~~Note 12~~ ~~for additional details regarding the acquisition and the purchase price allocation.~~

~~On May 16, 2017, the Company acquired the InflammaDry® and AdenoPlus® diagnostic businesses from RPS~~

~~Diagnostics, a developer and manufacturer of rapid, point-of-care (“POC”) diagnostic tests for the eye health and~~

~~primary care markets, for approximately $13.7 million in cash. The purchase price has been allocated as follows:~~

~~$6.1 million to purchased technology and $7.6 million to goodwill. The acquisition has been accounted for in conformity with~~

~~ASC Topic 805,~~ ~~Business Combinations. The InflammaDry and AdenoPlus products are rapid, lateral-flow based, POC~~

~~products for the detection of infectious and inflammatory diseases and conditions of the eye. Revenues for these products are~~

~~reflected in the Company’s Rapid Immunoassay revenue category.~~

~~Amortizable~~2019. Finite-lived intangible assets consisted of the following (dollar amounts in thousands):


		December 31, 2017							December 31, 2016									December 31, 2020						December 31, 2019
Description	Weighted-average useful life (years)	Gross assets		Accumulated amortization			Net		Gross assets		Accumulated amortization			Net		Description	Weighted-average useful life (years)	Gross assets		Accumulated amortization		Net		Gross assets		Accumulated amortization		Net
Purchased technology	9.1	112,100		(49,614		)	62,486		53,600		(41,369		)	12,231		Purchased technology	9.1	$	112,100	$	(71,426)	$	40,674	$	112,100	$	(64,632)	$	47,468
Customer relationships	7.0	122,404		(10,960		)	111,444		7,157		(5,928		)	1,229		Customer relationships	7.0	122,584		(60,688)		61,896		122,178		(44,045)		78,133
License agreements	9.9	6,515		(3,980		)	2,535		6,009		(3,222		)	2,787		License agreements	9.9	6,518		(5,312)		1,206		6,509		(4,931)		1,578
Patent and trademark costs	10.8	28,740		(4,917		)	23,823		11,240		(3,522		)	7,718		Patent and trademark costs	10.8	28,740		(13,038)		15,702		28,740		(10,331)		18,409
Software development costs	5	6,630		(3,091		)	3,539		6,000		(2,326		)	3,674		Software development costs	5.0	8,743		(5,790)		2,953		7,432		(4,908)		2,524
Total amortizable intangible assets		$	276,389	$	(72,562	)	$	203,827	$	84,006	$	(56,367	)	$	27,639
Total finite-lived intangible assets																Total finite-lived intangible assets		$	278,685	$	(156,254)	$	122,431	$	276,959	$	(128,847)	$	148,112

Amortization expense related to the capitalized software costs was $0.9 million, $0.8 million ~~$0.5 million~~ and ~~$0.6~~$1.0 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively. Amortization expense (including capitalized software costs) was ~~$16.1~~$27.3 million, ~~$9.5~~$27.5 million and ~~$10.2~~$28.8 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

The expected future annual amortization expense of the Company’s finite-lived intangible assets held as of December 31, 2020 is as follows (in thousands):

For the years ending December 31, Amortization expense
2018 $ 28,799
2019 27,542
2020 27,144
2021 26,996
2022 26,472
Thereafter 66,874
Total $ 203,827


For the years ending December 31,	Amortization expense
2021	$	27,452
2022	26,922
2023	26,211
2024	21,634
2025	7,979
Thereafter	12,233
Total	$	122,431

Other current liabilities

The following is a summary of other current liabilities (in thousands):


	December 31,
	2020		2019
Customer incentives	$	11,934	$	7,369
Deferred revenue	3,733		336
Derivative liabilities	3,061		433
Other	13,562		6,724
Total other current liabilities	$	32,290	$	14,862

December 31,
2017 2016
Customer incentives $ 7,165
$ 3,766
Accrued interest 442
227
Other 5,059
1,104
Total other current liabilities $ 12,666
$ 5,097

Note 3. Debt

~~3.25%~~ Convertible Senior Notes ~~due 2020~~

In December 2014, the Company issued $172.5 million aggregate principal amount of 3.25% Convertible Senior Notes due 2020. Debt issuance costs of approximately $5.1 million were primarily comprised of underwriters fees, legal, accounting, and other professional fees of which $4.2 million were capitalized and are recorded as a reduction to long-term debt and are being amortized using the effective interest method to interest expense over the six-year term of the Convertible Senior Notes. The remaining $0.9 million of debt issuance costs were allocated as a component of equity in additional paid-in capital. Deferred issuance costs related to the Convertible Senior Notes were $2.1 million and $2.8 million as of December 31, 2017 and 2016, respectively.

The holders of the Convertible Senior Notes may surrender their notes for conversion, subject to specified circumstances, into cash, shares of common stock, or a combination of cash and shares of common stock, at the election of the Company, based on an initial conversion rate, subject to adjustment, of 31.1891 shares per $1,000 principal amount of the Convertible Senior Notes (which represents an initial conversion price of approximately $32.06 per share) up until the business day immediately preceding September 15, 2020. This conversion may, in the discretion of the holder, occur in the following circumstances and to the following extent: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2015, if the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the notes in effect on each applicable trading day; (2) during the five consecutive business day period following any five consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Senior Note for each such trading day was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such day; or (3) upon the occurrence of specified events described in the indenture for the Convertible Senior Notes. On or after September 15, 2020 until the close of business on the second scheduled trading day immediately preceding the stated maturity date, holders may surrender their notes for conversion at any time, regardless of the foregoing circumstances.

In general, for each $1,000 in principal, the “principal portion” of cash upon settlement is defined as the lesser of $1,000, or the conversion value during the 25-day observation period as described in the indenture for the Convertible Senior Notes. The conversion value is the sum of the daily conversion value, which is the product of the effective conversion rate divided by 25 days and the daily volume weighted-average price (“VWAP”) of the Company’s common stock. The “share amount” is the cumulative “daily share amount” during the observation period, which is calculated by dividing the daily VWAP into the difference between the daily conversion value (i.e., conversion rate x daily VWAP) and $1,000.

The Company pays 3.25% interest per annum on the principal amount of the Convertible Senior Notes semi-annually in arrears in cash on June 15 and December 15 of each year. The effective interest rate during fiscal year 2017 was 6.6%. The Convertible Senior Notes mature on December 15, 2020. During the year ended December 31, 2017, the Company recorded total interest expense of $11.0 million related to the Convertible Senior Notes of which $5.5 million related to the amortization of the debt discount and issuance costs and $5.4 million related to the coupon due semi-annually. During the year ended December 31, 2016, the Company recorded total interest expense of $10.9 million related to the Convertible Senior Notes of which $5.4 million related to the amortization of the debt discount and issuance costs and $5.5 million related to the coupon due semi-annually. During the year ended December 31, 2015, the Company recorded total interest expense of $10.9 million related to the Convertible Senior Notes of which $5.3 million related to the amortization of the debt discount and issuance costs and $5.6 million related to the coupon due semi-annually.

If a fundamental change, as defined in the indenture for the Convertible Senior Notes, such as certain acquisitions, mergers, or a liquidation of the Company, occurs prior to the maturity date, subject to certain limitations, holders of the Convertible Senior Notes may require the Company to repurchase all or a portion of their Convertible Senior Notes for cash at a repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date.

~~The Company accounts~~accounted separately for the liability and equity components of the Convertible Senior Notes in

accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance ~~requires~~required the carrying amount of the liability component to be estimated by measuring the fair value of a similar liability that does not have an associated conversion feature. Because the Company had no outstanding non-convertible public debt, the Company determined that senior, unsecured corporate bonds traded on the market represent a similar liability to the Convertible Senior Notes without the conversion option. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry with similar credit ratings and with similar maturity, the Company estimated the implied interest rate of its Convertible Senior Notes to be 6.9%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, which were defined as Level 2 observable inputs. The estimated implied interest rate was applied to the Convertible Senior Notes, which resulted in a fair value of the liability component of $141.9 million upon issuance, calculated as the present value of implied future payments based on the $172.5 million aggregate principal amount. The $30.7 million difference between the cash proceeds of $172.5 million and the estimated fair value of the liability component was recorded in additional paid-in capital, net of tax and issuance costs, as the Convertible Senior Notes were not considered redeemable.

InDuring 2020 the ~~first quarter of 2016, the Company repurchased and retired $5.2 million in~~remaining aggregate principal amount of the outstanding Convertible Senior Notes. The aggregate cash used for the transaction was $4.5 million. The repurchase resulted in a reduction in debt of $4.4 million and a reduction in additional paid-in capital of $0.5 million with a gain on extinguishment of Convertible Senior Notes were settled or matured on December 15, 2020 and at December 31, 2020 no amounts were outstanding.

The following table summarizes the amount of ~~$0.4 million included in~~ interest expense ~~net in~~for the ~~Consolidated Statements of Operations.~~following periods (in thousands):


	Year ended December 31,
	2020		2019		2018
Amortization of debt discount and deferred issuance costs	$	368	$	1,179	$	3,094
Coupon interest	195		1,103		2,992
Total Interest Expense	$	563	$	2,282	$	6,086

The following table summarizes information about the ~~equity and liability components~~settlement of the Convertible Senior Notes ~~(dollars in thousands). The fair values of the respective notes outstanding were measured based on quoted market prices:~~

December 31,
2017 2016
Principal amount of Convertible Senior Notes outstanding $ 167,314
$ 167,314
Unamortized discount of liability component (15,356 ) (20,221 )
Unamortized deferred issuance costs (2,090 ) (2,753 )
Net carrying amount of liability component 149,868
144,340
Less: current portion —
—
Long-term debt $ 149,868
$ 144,340
Carrying value of equity component, net of issuance costs $ 29,211
$ 29,211
Fair value of outstanding Convertible Senior Notes $ 257,245
$ 165,223
Remaining amortization period of discount on the liability component 3 years
4 years

Historically, the Company disclosed its intent, ability and policy to settle conversions of its Senior Convertible Notes through combination settlement, which essentially involves repayment of an amount of cash equal to the “principal portion” and delivery of the “share amount” in excess of the principal portion in shares of common stock or cash. This would have resulted in the “share amount” impacting diluted EPS. Based upon the use of funds to acquire the Triage and BNP Businesses, the Company has determined that it currently does not have the available funds to settle the principal in cash and as a result, may choose to settle both the principal and share amount using equity. As a result, both the “principal portion” and “share portion” will impact diluted EPS. This change in assessment had no impact on diluted EPS because the Company incurred a net loss forduring the year ended December 31, ~~2017. As of December 31, 2017, the if-converted value exceeded the principal amount of the Convertible Senior Notes by $1.5 million.~~2020 (dollars in thousands):

As of December 31, 2016 and 2015, the Convertible Senior Notes were not convertible and the if-converted value did not exceed the principal amount of the Convertible Senior Notes, therefore, there was no dilutive impact for the years ended December 31, 2016 and 2015.


	Year ended December 31, 2020
Principal amount settled	$	13,131
Number of shares of common stock issued	225,955
Payment on Convertible Senior Note and Derivative Liability	$	43,446

~~Senior~~Revolving Credit ~~Agreement~~Facility

On ~~October 6, 2017,~~August 31, 2018, the Company entered into aan Amended and Restated Credit Agreement (the “Credit Agreement”), which ~~provided~~provides the Company with a ~~$245.0~~$175.0 million senior secured term loan facility (the “Term Loan”) and a $25.0 million Revolving Credit Facility ("Revolving Credit Facility") together (the “Senior Credit Facility”). The Term Loan and the Revolving Credit Facility will mature on October 6, 2022. On the closing date of the Credit Agreement, the Company borrowed the entire amount of the Term Loan and $10.0 million under the Revolving Credit Facility. The Company ~~used~~repaid the ~~proceeds~~remaining principal during the year ended December 31, 2019 and no balance remained outstanding as of the Term Loan along with its cash on hand, to pay (i) the consideration for the Triage Business and (ii) the fees and expenses incurred in connection with the acquisition of the Triage and BNP Businesses.

December 31, 2020. The Credit Agreement ~~includes an accordion feature that allows the facility to be increased by $50.0 million upon the satisfaction~~has a term of ~~certain conditions. The Financing is guaranteed by certain material domestic subsidiaries of the Company (the “Guarantors”)~~five years and ~~is secured by liens~~matures on ~~substantially all of the assets of the Company and the Guarantors, excluding real property and certain other types of excluded assets.~~August 31, 2023.

Loans ~~under the Credit Agreement~~will bear interest at a rate equal to (i) the London Interbank Offered Rate (“LIBOR”) plus the “applicable rate” or (ii) the “base rate” (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus one-half of one percent and (c) LIBOR plus one percent) plus the “applicable rate.” The ~~initial~~ applicable rate is ~~2.50% per annum for base rate loans and 3.50% per annum for LIBOR rate loans, and thereafter will be~~ determined in accordance with a pricing grid based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) ranging from ~~2.50%~~1.75% to ~~3.50%~~2.50% per annum for LIBOR rate loans and from ~~1.50%~~0.75% to ~~2.50%~~1.50% per annum for base rate loans. In addition, the Company ~~will pay~~pays a commitment fee on the unused portion of the Credit Agreement based on the Company’s Consolidated Leverage Ratio ranging from ~~0.10%~~0.15% to ~~0.50%~~0.30% per annum.

The ~~Term Loan~~Revolving Credit Facility is ~~subject to quarterly amortization of the principal amount on the last business day of each fiscal quarter~~guaranteed by certain material domestic subsidiaries of the Company ~~(commencing~~(the “Guarantors”) and is secured by liens on ~~March 30, 2018) in such amounts as are set forth in~~substantially all of the ~~Credit Agreement. The Term Loan~~assets of the Company and the Revolving Credit Facility will mature on October 6, 2022, provided that if any of Convertible Senior Notes remain outstanding on the date that is 91 days prior to the maturity date of the Convertible Senior NotesGuarantors, excluding real property and the Company has not satisfied certain Refinancing Conditions, then the maturity date for the Term Loan and the Revolving Credit Facility will be the date that is 91 days prior to the maturity date of the Convertible Senior Notes.

The Company must prepay loans outstanding under the Credit Agreement in an amount equal to 50% of Excess Cash Flow (as defined in the Credit Agreement) for each fiscal year (commencing with fiscal 2018) less any amount voluntarily prepaid during such fiscal year, but only if the Consolidated Senior Secured Leverage Ratio (as defined in the Credit Agreement) as of the last day of such fiscal year is greater than or equal to 1.25 to 1.00. The Company must also prepay loans outstanding under the Credit Agreement in an amount equal to 100% of the Net Cash Proceeds (as defined in the Credit Agreement) from (i) certain property dispositions and (ii) the receipt of certain other ~~amounts not in the ordinary course~~types of ~~business, in each case, if not reinvested within a specified time period as contemplated in the Credit Agreement,~~excluded assets, and with a carve out of up to 30% of the Net Cash Proceeds of the contemplated sale leaseback transaction relating to the Company’s Summers Ridge property to the extent the excluded amounts are used for specified purposes.

~~The Credit Agreement~~ contains affirmative and negative covenants that are customary for credit agreements of this nature. The negative covenants include, among other things, limitations on asset sales, mergers, indebtedness, liens, dividends and other distributions, investments and transactions with affiliates. The Credit Agreement contains ~~two~~2 financial covenants: (i) a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of each fiscal quarter ~~for the most recently completed four fiscal quarters~~ of ~~(a) 5.00 to 1.00 for the fiscal quarter ending December 31, 2017, (b) 4.25 to 1.00 for the fiscal quarters ending March 31, 2018 through December 31, 2018 and (c)~~ 3.50 to 1.00, ~~for the fiscal quarter ending March 31, 2019 and each fiscal quarter thereafter;~~which ratio may be increased to 4.50 to 1.00 in case of certain qualifying acquisitions; and (ii) a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25 to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters. The Company was in compliance with all financial covenants as of December 31, ~~2017.~~

2020.

~~The Term Loan consists of the following (dollars in thousands):~~

December 31, 2017
Principal balance $ 245,000
Unamortized deferred issuance costs (7,422 )
Term Loan, net 237,578
Less: current portion (10,184 )
Term Loan, non-current $ 227,394

~~As of December 31, 2017, the aggregate contractual maturities of long-term borrowings for the Term Loan are as follows (dollars in thousands):~~

Fiscal year:
2018 $ 12,250
2019 18,375
2020 24,500
2021 24,500
2022 165,375
Total $ 245,000

Interest expense recognized on the ~~Term Loan~~Credit Agreement including amortization of deferred issuance cost was $0.7 million, $1.7 million, and $6.5 million, respectively, for the ~~year~~years ended December 31, ~~2017 totaled $3.0 million for the stated interest. Amortization of debt issuance costs associated with the Term Loan was $0.5 million~~ ~~for the year endedDecember 31, 2017~~,2020, 2019 and ~~was recorded to interest expense in the Company's Consolidated Statement of Operations.~~2018.

~~Interest expense recognized on the Revolving Credit Facility for the year ended December 31, 2017 totaled $0.1 million~~ ~~for the stated~~ ~~interest and unused commitment fee. Amortization~~ ~~of debt issuance costs associated with the Revolving Credit~~ ~~Facility was $40,000 for the year ended December 31, 2017, and was recorded to interest expense in the Company's Consolidated Statement of Operations.~~

Note 4. Income Taxes

Significant components of the provision (benefit) for income taxes are as follows (in thousands):

December 31,
2017 2016 2015
Current:
Federal $ (615 ) $ (117 ) $ 948
State 314
246
399
Foreign 57
84
41
Total current (benefit) provision (244 ) 213
1,388
Deferred:
Federal 131
(2,545 ) (4,624 )
State 238
(63 ) —
Foreign 4
4
18
Total deferred benefit 373
(2,604 ) (4,606 )
Provision (benefit) for income taxes $ 129
$ (2,391 ) $ (3,218 )


	December 31,
	2020		2019		2018
Current:
Federal	$	198,498	$	1,559	$	0
State	34,608		746		755
Foreign	1,136		2,007		6,575
Total current provision	234,242		4,312		7,330
Deferred:
Federal	(2,855)		1,234		(9,970)
State	(1,104)		(1,186)		(7,944)
Foreign	(251)		(103)		(215)
Total deferred (benefit) provision	(4,210)		(55)		(18,129)
Provision (benefit) for income taxes	$	230,032	$	4,257	$	(10,799)

The Company’s ~~(loss)~~income before ~~provision (benefit) for~~ income taxes was subject to taxes in the following jurisdictions for the following periods (in thousands):


	December 31,										December 31,
	2017			2016			2015				2020		2019		2018
United States	$	(8,198	)	$	(16,426	)	$	(9,480	)	United States	$	1,035,752	$	70,606	$	46,592
Foreign	162			227			183			Foreign	4,567		6,572		16,792
Loss before benefit for income taxes	$	(8,036	)	$	(16,199	)	$	(9,297	)
Income before income taxes										Income before income taxes	$	1,040,319	$	77,178	$	63,384

Significant components of the Company’s deferred tax assets and deferred tax liabilities as of December 31, ~~2017~~2020 and ~~2016~~2019 are shown below (in thousands):


	December 31,
	2020		2019
Deferred tax assets:
Lease liability	$	24,790	$	22,009

Intangible assets	2,747		3,951
Allowance for returns and discounts	27,277		5,266
Stock-based compensation	8,367		5,197
Tax credit carryforwards	11,770		13,846
Other, net	10,426		6,610
Total deferred tax assets	85,377		56,879
Valuation allowance for deferred tax assets	(2,281)		(2,353)
Total deferred tax assets, net of valuation allowance	83,096		54,526
Deferred tax liabilities:
Right-of-use assets	(22,969)		(20,334)
Intangible assets	(1,133)		(1,633)
Property, plant and equipment	(14,232)		(8,057)
Total deferred tax liabilities	(38,334)		(30,024)
Net deferred tax assets	$	44,762	$	24,502

December 31,
2017 2016
Deferred tax assets:
Net operating loss carryforwards $ 3,924
$ 3,255
Intangible assets 2,935
2,351
Sale-leaseback, net 628
888
Allowance for returns and discounts 5,358
4,043
Stock-based compensation 5,933
10,963
Tax credit carryforwards 5,247
3,430
Other, net 4,580
4,066
Total deferred tax assets 28,605
28,996
Valuation allowance for deferred tax assets (15,204 ) (7,774 )
Total deferred tax assets, net of valuation allowance 13,401
21,222
Deferred tax liabilities:
Convertible Senior Notes (3,633 ) (7,592 )
Intangible assets (2,935 ) (7,557 )
Property, plant and equipment (7,263 ) (6,131 )
Total deferred tax liabilities (13,831 ) (21,280 )
Net deferred tax liabilities $ (430 ) $ (58 )

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. ~~A significant piece of objective negative evidence evaluated was~~For the ~~cumulative before-tax loss incurred over the three-year periods~~three years ended December 31, ~~2017 and 2016.~~2020, the Company has demonstrated positive cumulative pre-tax book income. Such objective positive evidence ~~limits~~allowed the ~~ability~~Company to consider other subjective evidence, such as the ~~Company's~~Company’s projections for future ~~profitability.~~profitability, to determine the realizability of its deferred tax assets. On the basis of this evaluation, during the year ended December 31, 2020, the Company decreased the valuation allowance by $0.1 million related to the U.S. Foreign Tax Credit.

The valuation allowance of $2.3 million as of December 31, ~~2017, the Company had recorded a valuation allowance of $15.2 million, which~~2020 represents the portion of the deferred tax asset that management could ~~no longer~~not conclude was more likely than not to be realized. The amount of the deferred tax assets considered realizable ~~however,~~ could be adjusted in the future based on changes in available ~~evidence~~positive and ~~additional weight may be given to subjective evidence such as the Company's projections for profitability. During the year ended December 31, 2017, the allowance increased by $7.4 million.~~negative evidence.

As of December 31, ~~2017,~~2020, the Company had 0 federal net operating loss ~~("NOL"~~(“NOL”) ~~carryforwards~~carryforwards. The Company had state NOLs of approximately ~~$13.0~~$5.9 million which will begin to expire in ~~2018, unless previously utilized. The Company also had state NOLs of approximately $23.3 million which will begin to expire in 2026,~~2030 unless previously utilized. The Company has 0 federal research credits. The Company has federal foreign tax credits of ~~$4.3~~$2.3 million which will begin to expire on December 31, ~~2031,~~2028 unless previously utilized. ~~Additionally, the Company has federal alternative minimum tax credits of $0.6 million which have been reclassified to a tax receivable based on the new federal tax legislation.~~ The Company has state research credits of ~~$9.8~~$12.3 million, of which ~~$9.5 million do not~~none expire. ~~The remaining $0.3 million begin to expire in 2028, unless previously utilized.~~

Pursuant to Internal Revenue Code Sections 382 and 383, the Company’s use of its NOL and ~~research~~tax credit carryforwards may be limited as a result of cumulative changes in ownership of more than 50% over a ~~three-year~~three-year period. As of December 31, 2020, the Company does not believe any historical ownership change has limited the use of its NOLs or tax credit carryforwards.

The reconciliation of income tax computed at the federal statutory rate to the provision (benefit) for income taxes ~~reconciles to the amount computed by applying the federal statutory rate to loss before taxes~~from continuing operations is as follows (in thousands):

Year ended December 31,
2017 2016 2015
Tax benefit at statutory tax rate $ (2,812 ) $ (5,775 ) $ (3,254 )
State tax benefits, net of federal tax benefit (239 ) (390 ) (235 )
Permanent differences 327
129
157
Federal and state research credits—current year (484 ) (979 ) (722 )
Accrual of uncertain tax positions 142
43
101
Stock-based compensation (5,851 ) —
—
Impact of change in federal and state tax rate on revaluing deferred tax assets 3,357
(4 ) 56
Change in valuation allowance 5,799
4,687
756
Other (110 ) (102 ) (77 )
Provision (benefit) for income taxes $ 129
$ (2,391 ) $ (3,218 )

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into legislation, which includes a broad range of provisions affecting businesses. The Tax Act significantly revises how companies compute their U.S corporate tax liability by, among other provisions, reducing the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S. owned undistributed foreign earnings and profits known as the transition tax.

~~Pursuant to the SEC Staff Accounting Bulletin No. 118,~~ ~~Income Tax Accounting Implications of the Tax Cuts and Jobs Act~~ ("SAB 118"), a company may select between one of three scenarios to determine a reasonable estimate arising from the Tax Act. Those scenarios are (i) a final estimate which effectively closes the measurement window; (ii) a reasonable estimate leaving the measurement window open for future revisions; and (iii) no estimate, as the law is still being analyzed. The Company was able to provide a reasonable estimate for the revaluation of deferred taxes and the effects of the transition tax on undistributed foreign earnings and profits. As such, the Company has recorded a reduction in deferred tax assets for the revaluation of deferred taxes and a reduction of the net operating losses for the impacts of the transition tax, with both reductions offset by a decrease in the Company's full valuation allowance.

As of December 31, 2017, the Company had $1.0 million of undistributed foreign earnings and profits. Pursuant to the Tax Act, the Company’s undistributed foreign earnings and profits were deemed repatriated as of December 31, 2017. As a result, the Company utilized net operating losses and generated foreign tax credits, each offset by the Company’s change in valuation allowance. Upon the distribution of foreign earnings and profits, certain foreign countries impose withholding taxes. The Company did not provide for foreign withholding taxes on the undistributed earnings and profits from certain non-U.S. subsidiaries that will be permanently reinvested outside the United States. If the foreign earnings and profits were distributed, the Company would need to accrue an additional income tax liability, potentially generating foreign tax credits for use against the Company’s U.S. tax liability, subject to certain limitations.


	Year ended December 31,
	2020		2019		2018
Tax expense at statutory tax rate	$	218,467	$	16,207	$	13,311
State tax expense, net of federal tax	30,289		1,061		1,526
Permanent differences	3,843		611		635
Federal and state research credits—current year	(5,037)		(4,269)		(3,628)

Stock-based compensation	(13,867)		(10,408)		(9,286)

Change in valuation allowance	(72)		523		(13,374)
Foreign Derived Intangible Income Deduction (FDII)	(8,589)		(159)		(786)
Other	4,998		691		803
Provision (benefit) for income taxes	$	230,032	$	4,257	$	(10,799)

The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):


	Year ended December 31,
	2020		2019		2018
Beginning balance	$	17,236	$	15,245	$	9,565
(Decreases) increases related to prior year tax positions	(2,351)		287		(558)
Increases related to current year tax positions	7,726		2,209		6,238
Expiration of the statute of limitations for the assessment of taxes	(54)		(505)		0
Ending balance	$	22,557	$	17,236	$	15,245

Year ended December 31,
2017 2016 2015
Beginning balance $ 8,604
$ 7,684
$ 7,065
Increases (decreases) related to prior year tax positions 10
(10 ) (12 )
Increases related to current year tax positions 951
773
631
Other $ —
$ 157
$ —
Ending balance $ 9,565
$ 8,604
$ 7,684

As of December 31, ~~2017~~2020, 2019 and ~~2016,~~2018, the Company had unrecognized tax benefits of ~~$9.6~~$22.6 million, $17.2 million, and ~~$8.6~~$15.2 million respectively, of which ~~$8.1~~$15.0 million and ~~$6.4~~$11.1 million and $9.3 million, respectively, would reduce the Company’s annual effective tax rate, ~~subject to~~if recognized. It is reasonably possible that the ~~valuation allowance. The Company does not anticipate any significant decreases in its~~amount of unrecognized tax benefits ~~over~~in various jurisdictions may decrease in the next 12 ~~months.~~months due to settlements with tax authorities. However, due to the uncertainty surrounding the timing of these events, an estimate in the change within the next 12 months cannot be made at this time. The ~~Company's~~Company’s policy is to recognize the interest expense and penalties related to income tax matters as a component of the income tax expense. The Company ~~has~~had accrued ~~approximately $0.3 million and $0.2 million of~~ interest and penalties associated with uncertain tax positions ~~for each~~ of ~~the years ended~~$0.5 million as of December 31, ~~2017~~2020, $0.4 million as of December 31, 2019 and ~~2016 respectively. There was no interest expense, net~~$0.3 million as of ~~accrued interest (reversed) in 2016.~~December 31, 2018. Interest expense, net of accrued interest (reversed), was approximately $0.1 million for ~~both~~ the years ended December 31, ~~2017~~2020, 2019 and ~~2015, respectively.~~2018.

The Company is subject to periodic audits by domestic and foreign tax ~~authorities; however there~~authorities.

As of December 31, 2020, the Company no longer has any federal net operating loss or credit carryforwards. However, because of utilization of tax attributes generated in tax years 2012 and later on its tax returns still open by statute, the Company’s federal tax years from 2012 and forward are ~~no known audits at this time.~~

still subject to examination by tax authorities. Due to the carryforward of unutilized California net operating ~~loss~~losses and ~~credit carryovers,~~credits, the ~~Company's federal~~Company’s California tax ~~years from 2009 and forward and state tax~~returns for years 2001 and forward are subject to examination by tax authorities.

The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. The CARES Act provides for, among other things, refundable payroll tax credits, deferment of employer side social security payments and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. The Company is benefiting only from the technical amendments regarding retroactive accelerated income tax depreciation on certain of our leasehold improvement assets.

Note 5. Stockholders’ Equity

Preferred Stock. The Company’s certificate of incorporation, as amended, authorizes the issuance of up to ~~five~~5 million preferred shares. The Board of Directors is authorized to fix the number of shares of any series of preferred stock and to determine the designation of such shares. However, the amended certificate of incorporation specifies the initial series and the rights of that series. NoNaN shares of preferred stock were outstanding as of December 31, ~~2017, 2016~~2020, 2019 or ~~2015.~~2018.

Equity Incentive Plan. The Company grants stock options, ~~time-based restricted stock units ("RSUs")~~ RSUs and ~~performance-based restricted stock units ("PSUs")~~PSUs to employees and non-employee directors under its 2018 Equity Incentive Plan (the “2018 Plan”). The Company previously granted stock options under its 2016 Equity Incentive Plan (the “2016 Plan”)~~. The Company previously granted stock options under the~~, Amended and Restated 2010 Equity Incentive Plan (the ~~"2010 Plan"~~“2010 Plan”) and the Amended and Restated 2001 Equity Incentive Plan (the ~~"2001 Plan"~~“2001 Plan”). The 2016 Plan, 2010 Plan and 2001 Plan were terminated at the time of adoption of the ~~2016~~2018 Plan, but the terminated Plans continue to govern outstanding options granted thereunder. The Company has stock options, RSUs and PSUs outstanding, which were issued under each of these equity incentive plans to certain employees and directors. Stock options granted under these plans have terms ranging up to ten years, have exercise prices ranging from ~~$8.50~~$14.56 to ~~$41.36~~$248.41 per share, and generally vest over four years. As of December 31, ~~2017,~~2020, approximately ~~1.8~~2.2 million shares remained available for grant and 3.8 million shares of common stock were reserved for future issuance under the ~~2016~~2018 Plan.

Restricted Stock Units. The Company grants ~~both RSUs~~both RSUs and PSUs to certain officers, directors and management. Until the restrictions lapse, ownership of the affected restricted stock units granted to the Company’s officers, directors and management is conditional upon continuous employment with the Company.

For the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, the Company granted approximately ~~0.3~~0.2 million, ~~0.2~~0.3 million and 0.2 million shares, respectively, of ~~restricted stock units~~RSUs to Board of Directors, officers and management, which either have a time-based four-year vesting provision or performance-based vesting provisions. For purposes of measuring compensation expense of PSUs, the amount of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The grant date of the PSUs takes place when the grant is authorized and the specific achievement goals are communicated. The recognition of compensation expense associated with the PSUs requires judgment in assessing the probability of meeting the performance goals. This may result in significant expense recognition in the period in

which the performance goals are met or when achievement of the goals is deemed probable or may result in the reversal of previously recognized stock-based compensation expense if the performance criteria are deemed not probable of being met.

During the year ended December 31, 2017, common stock was issued to certain members of the Board of Directors in lieu of cash compensation for these members that elected to participate and agree to hold the stock for the elected deferral period. During the years ended December 31, ~~2016~~2020, 2019 and ~~2015,~~2018, RSUs were granted to certain members of the Board of Directors in lieu of cash compensation as a part of the Company’s non-employee director’s deferred compensation program. The compensation expense associated with these RSU grants were ~~$0.1~~$0.5 million, ~~$0.4~~$0.5 million and ~~$0.5~~$0.4 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

Employee Deferred Bonus Compensation Program. ~~For the year ended December 31, 2017, the deferred bonus compensation program was suspended temporarily by the Board.~~ For the years ended December 31, ~~2016~~2020, 2019 and ~~2015,~~2018, certain employees of the Company were eligible to participate in the Company’s deferred bonus compensation program with respect to any payments received under the Company’s cash incentive plan. Participating employees could elect to receive 50% or 100%

of the cash value of their cash bonus in the form of fully vested ~~restricted stock units~~RSUs plus ~~an additional~~a premium as additional ~~restricted stock units,~~RSUs, issued under the ~~2016~~2018 Plan. The premium ~~restricted stock units~~RSUs are subject to a one-year vesting requirement from the date of issuance. The additional premium will be determined based on the length of time of the deferral period selected by the participating employee as follows: (i) if one year from the date of grant, a premium of 10% on the amount deferred, (ii) if two years from the date of grant, a premium of 20% on the amount deferred, or (iii) if four years from the date of grant, a premium of 30% on the amount deferred.

Employee Stock Purchase Plan. Under the Company’s Amended and Restated 1983 Employee Stock Purchase Plan (the “ESPP”), full-time employees are allowed to purchase common stock through payroll deductions (which cannot exceed 10% of the employee’s compensation) at the lower of 85% of fair market value at the beginning or end of each six-month purchase period. As of December 31, ~~2017, 1,272,274~~2020, 86,571 shares ~~had been sold under the Plan, leaving 227,726 shares~~remained available for future issuance.

Share Repurchase Program. On ~~January 25, 2016,~~December 12, 2018, the ~~Company's~~ Board of Directors authorized ~~an amendment to extend the previously announced~~a stock repurchase ~~program. The Board of Directors has authorized the Company~~program pursuant to ~~repurchase~~which up to ~~an aggregate of~~ $50.0 million ~~in shares~~ of ~~our common stock under our stock repurchase program. Any~~the Company’s shares of common stock ~~repurchased under this program will no longer~~may be ~~deemed outstanding upon repurchase and will be returned~~purchased through December 12, 2020. On August 28, 2020, the Board authorized an increase of additional $150.0 million to the ~~pool of authorized shares.~~Company’s existing stock repurchase program and also extended the repurchase authorization through August 28, 2022. During the year ended December 31, ~~2016, 1,152,386~~2020, 257,329 shares of outstanding common stock were repurchased under the ~~Company's previously announced~~revised share repurchase program for approximately $19.6 million. During the year ended December 31, 2015, 1,397,000 shares of outstanding common stock were repurchased under the Company's previously announced share repurchase program for approximately $30.4 million.program. There were no repurchases during ~~2017 and at~~2019. At December 31, ~~2017, $35.0~~2020, $156.3 million remained available under ~~this~~the new repurchase program. ~~The repurchase program expired on January 25, 2018.~~

~~Shares Reserved for Future Issuance.~~ ~~At December 31, 2017, approximately 5.3 million shares of common stock were reserved under the Company’s equity incentive plan and 227,726 shares were reserved for purchases under the ESPP.~~

Note 6. Stock-Based Compensation

Stock-based compensation expense was as follows (in thousands):


	Year ended December 31,
	2020		2019		2018
Cost of sales	$	2,012	$	1,162	$	763
Research and development	3,372		2,332		2,266
Sales and marketing	6,009		3,497		2,843
General and administrative	9,626		6,261		5,837
Total stock-based compensation expense	$	21,019	$	13,252	$	11,709

For the years ended December 31, ~~2017, 2016~~2020, 2019 and 2015 stock-based compensation expense was $9.1 million, $8.0 million and $7.4 million, respectively, of which $4.1 million, $4.7 million and $4.7 million, respectively, related to stock options and $4.9 million, $2.4 million and $2.0 million, respectively, related to restricted stock units. For the years ended December 31, 2017, 2016 and 2015,2018, the Company recorded ~~$0.1~~$2.2 million, ~~$0.9~~$1.4 million and ~~$0.7~~$1.6 million in stock-based compensation expense, respectively, associated with the deferred bonus compensation program, described in Note 5.5. During the years ended December 31, ~~2016~~2020, 2019 and ~~2015, $0.9~~2018, $2.1 million, $0.8 million and ~~$0.6~~$1.6 million, respectively, was initially recorded as a component of accrued payroll and related ~~expenses. Since~~expenses associated with the ~~employee Deferred Bonus Compensation Program was suspended in 2017, there was no component of stock-based~~deferred bonus compensation ~~recorded to accrued payroll related expenses as of December 31, 2017.~~

~~Stock-based compensation expense related to stock options and restricted stock units was as follows (in thousands):~~

Year ended December 31,
2017 2016 2015
Cost of sales $ 579
$ 617
$ 581
Research and development 1,886
1,551
734
Sales and marketing 2,129
1,189
1,554
General and administrative 4,467
4,629
4,550
Total stock-based compensation expense $ 9,061
$ 7,986
$ 7,419

~~Stock-based compensation expense capitalized to inventory and compensation expense related to the Company’s ESPP were not material for the years ended December 31, 2017, 2016 and 2015.~~program.

Stock Options

Compensation expense related to stock options granted is recognized ratably over the service vesting period for the entire option award. For stock options with graded vesting, the Company ensures that the cumulative amount of compensation expense recognized at the end of any reporting period at least equals the portion of the stock option that has vested at that date. The total number of stock options expected to vest is adjusted by estimated forfeiture rates. The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average ~~assumptions for the option grants:~~assumptions:


	Year ended December 31,							Year ended December 31,
	2017		2016		2015			2020		2019		2018
Risk-free interest rate	2.30	%	1.47	%	1.50	%	Risk-free interest rate	1.18	%	2.51	%	2.49	%
Expected option life (in years)	6.63		6.59		6.24		Expected option life (in years)	5.12		5.68		6.29
Volatility rate	36	%	36	%	40	%	Volatility rate	41	%	39	%	36	%
Dividend rate	—	%	—	%	—	%	Dividend rate	0	%	0	%	0	%



~~DELAWARE~~Delaware			94-2573850
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
~~12544 High Bluff Drive, Suite 200, San Diego, California~~			~~92130~~
~~(Address of principal executive offices)~~			~~(Zip Code)~~



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	QDEL	The Nasdaq ~~Global~~Stock Market


				Page
			~~Page~~
	A Warning About Forward-Looking Statements		3
		Part I
Item 1.		Business		4
Item 1A.		Risk Factors		1618
Item 1B.		Unresolved Staff Comments		3130
Item 2.		Properties		31
Item 3.		Legal Proceedings		3231
Item 4.		Mine Safety Disclosures		3231
		Part II
Item 5.		Market for ~~Registrant's~~Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		3332
Item 6.		Selected Financial Data		3533
Item 7.		~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations		3635
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		4744
Item 8.		Financial Statements and Supplementary Data		4845
Item 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		8073
Item 9A.		Controls and Procedures		8073
Item 9B.		Other Information		8275
		Part III
Item 10.		Directors, Executive Officers and Corporate Governance		8376
Item 11.		Executive Compensation		8376
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		8376
Item 13.		Certain Relationships and Related Transactions, and Director Independence		8376
Item 14.		Principal Accountant Fees and Services		8376
		Part IV
Item 15.		Exhibits and Financial Statement Schedules		8477
Item 16.		Form 10-K Summary		8681
		Signatures		8982



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



QUIDEL CORPORATION (Exact name of registrant as specified in its charter)



Quarter Ended	Low		High
December 29, 2017	$	43.28	$	44.49
September 29, 2017	$	42.84	$	44.50
June 30, 2017	$	27.08	$	27.50
March 31, 2017	$	22.55	$	22.76
December 31, 2016	$	20.88	$	21.44
September 30, 2016	$	20.96	$	22.20
June 30, 2016	$	17.20	$	18.00
March 31, 2016	$	16.98	$	17.48



	Base Period
Company/Index	12/31/2012		12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017
Quidel Corporation	$	100.00	$	165.45	$	154.90	$	113.55	$	114.73	$	232.19
NASDAQ Composite	$	100.00	$	138.32	$	156.85	$	165.84	$	178.28	$	228.63
NASDAQ US Benchmark Medical Supplies	$	100.00	$	120.86	$	143.48	$	157.22	$	177.71	$	231.99
NASDAQ Health Care	$	100.00	$	157.04	$	201.75	$	215.58	$	179.12	$	217.28



	December 31, 2017
Principal balance	$	245,000
Unamortized deferred issuance costs	(7,422		)
Term Loan, net	237,578
Less: current portion	(10,184		)
Term Loan, non-current	$	227,394



Fiscal year:
2018	$	12,250
2019	18,375
2020	24,500
2021	24,500
2022	165,375
Total	$	245,000



	Number of Shares		Weighted- average exercise price per share		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value
Outstanding at January 1, 2015	3,607		$	16.37
Granted	659		23.15
Exercised	(168	)	12.30
Cancelled	(131	)	23.41
Outstanding at December 31, 2015	3,967		17.44
Granted	677		15.48
Exercised	(553	)	13.76
Cancelled	(150	)	20.86
Outstanding at December 31, 2016	3,941		17.49
Granted	263		22.21
Exercised	(1,527	)	16.38
Cancelled	(18	)	24.91
Outstanding at December 31, 2017	2,659		$	18.54	5.69	$	65,969
Vested and expected to vest at December 31, 2017	2,574		$	18.51	5.61	$	63,914
Exercisable at December 31, 2017	1,463		$	17.71	3.99	$	37,503
Available for future grant at December 31, 2017	1,848


						Shares	Weighted-average grant date fair value
	Shares		Weighted-average grant date fair value
Non-vested at January 1, 2015	402		$	14.84

Non-vested at December 31, 2017					Non-vested at December 31, 2017	746	$	20.88
Granted	171		22.79		Granted	242	49.97
Vested	(96	)	18.01		Vested	(296)	21.70
Forfeited	(18	)	22.87		Forfeited	(16)	28.40
Non-vested at December 31, 2015	459		21.61
Non-vested at December 31, 2018					Non-vested at December 31, 2018	676	30.75
Granted	185		16.14		Granted	279	59.75
Vested	(120	)	18.50		Vested	(148)	24.26
Forfeited	(23	)	20.80		Forfeited	(21)	43.90
Non-vested at December 31, 2016	501		20.37
Non-vested at December 31, 2019					Non-vested at December 31, 2019	786	41.88
Granted	349		22.34		Granted	235	101.20
Vested	(100	)	23.49		Vested	(123)	26.58
Forfeited	(4	)	18.69		Forfeited	(20)	58.32
Non-vested at December 31, 2017	746		$	20.88
Non-vested at December 31, 2020					Non-vested at December 31, 2020	878	$	59.60



	Twelve months ended December 31,
	2017	2016	2015
Shares used in basic loss per share (weighted-average common shares outstanding)	33,734	32,708	34,104
Effect of potentially dilutive shares issuable from stock options, RSUs and Convertible Senior Notes	—	—	—
Shares used in diluted loss per share calculation	33,734	32,708	34,104
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	37	2,770	1,902



☒			~~FORM 10-K~~


Years ending December 31,	Operating			Finance
2021	$	12,043		$	1,215
2022	11,396			1,258
2023	11,281			1,277
2024	11,226			1,098
2025	11,327			1,019
Thereafter	79,893			12,420
Total lease payments	137,166			18,287
Less: imputed interest	(28,661)			(13,949)
Total	108,505			4,338
Less: current portion	(7,799)			(238)
Non-current portion	$	100,706		$	4,100

Weighted average remaining lease term	14.3 years			12.6 years
Weighted average discount rate	4		%	27		%



Years ending December 31,	Operating Leases		Lease obligation
2018	$	8,638	$	946
2019	9,072		956
2020	9,212		967
2021	9,050		—
2022	7,412		—
Thereafter	80,559		—
Total minimum lease payments	$	123,943	$	2,869


	Long-lived assets as of December 31,				Total revenue for the years ended December 31,							Long-lived assets as of December 31,				Total revenue for the years ended December 31,
	2017		2016		2017		2016		2015			2020		2019		2020		2019		2018
Domestic	$	59,833	$	50,774	$	227,611	$	158,244	$	168,809	Domestic	$	108,375	$	78,254	$	1,452,329	$	358,381	$	354,895
Foreign	1,752		84		50,132		33,359		27,320		Foreign	2,106		1,508		209,339		176,509		167,390
Total	$	61,585	$	50,858	$	277,743	$	191,603	$	196,129	Total	$	110,481	$	79,762	$	1,661,668	$	534,890	$	522,285


	Contingent consideration liability (Level 3 measurement)
Balance at December 31, 2017	$	24,301
Cash payments	(6,303)
Change in estimated fair value, recorded in general and administrative expenses	1,114
Balance at December 31, 2018	19,112
Cash payments	(4,044)
Change in estimated fair value, recorded in general and administrative expenses	1,467
Balance at December 31, 2019	16,535
Cash payments	(6,044)
Change in estimated fair value, recorded in general and administrative expenses	1,405
Balance at December 31, 2020	$	11,896



	Contingent consideration liability (Level 3 measurement)
Balance at December 31, 2016	$	5,175
Cash payments	(498		)
Net gain recorded for fair value adjustments	(80		)
Additional liability recorded for the BNP Business	19,700
Unrealized loss on foreign currency translation	4
Balance at December 31, 2017	$	24,301


	December 31, 2020				December 31, 2019
	Notional Amount		Fair Value, Net		Notional Amount		Fair Value, Net
Designated cash flow hedges:
Prepaid expenses and other current assets	$	0	$	0	$	27,944	$	321
Other current liabilities	$	38,435	$	2,819	$	6,219	$	433

Non-designated forward contracts:
Prepaid expenses and other current assets	$	18,160	$	24	$	0	$	0
Other current liabilities	$	23,120	$	242	$	0	$	0



Cash consideration—Triage Business	$	399,798
Deferred consideration—BNP Business	220,550
Contingent consideration—BNP Business	19,700
Inventory related adjustment	205
Net consideration	$	640,253



Prepaid expenses and other current assets	$	796
Assets held for sale	146,540
Inventories	52,205
Property, plant and equipment	10,608
Intangible assets	184,900
Goodwill	245,531
Other non-current assets	182
Total assets acquired	$	640,762
Other current liabilities	(509		)
Total net assets and liabilities acquired	$	640,253



Intangible Asset	Amortization period	Fair value of assets acquired
Purchased technology	10 years	$	52,400
Customer relationships	7 years	115,000
Trademarks	10 years	17,500
Total intangible assets		$	184,900


~~(1)~~	Includes the reversal of non-recurring transaction costs totaling $11.7 million directly attributable to the acquisition incurred during the year ended December 31, 2017. Pro forma net income also includes the reversal of the amortization of the fair value step-up of inventory of $11.0 million because it does not have a continuing impact.


~~(2)~~	Net loss of $4.8 million includes amortization of the fair value write-up of inventory of $11.0 million, amortization of acquired intangible assets of $5.9 million, cash and non-cash interest expense on the Term Loan of $3.5 million and accretion of interest on the deferred consideration of $2.6 million.


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share data)
2020
Total revenues	$	174,653	$	201,754	$	476,058	$	809,203

Gross profit	$	114,991	$	148,751	$	383,619	$	701,494
Operating income	$	51,628	$	83,663	$	307,959	$	617,076
Net income	$	40,237	$	67,652	$	232,268	$	470,130
Basic income per share	$	0.96	$	1.61	$	5.52	$	11.14
Diluted income per share	$	0.93	$	1.55	$	5.33	$	10.78
2019
Total revenues	$	147,968	$	108,252	$	126,492	$	152,178

Gross profit	$	90,927	$	59,179	$	75,859	$	94,840
Operating income	$	31,153	$	5,818	$	20,682	$	35,063
Net income	$	24,844	$	1,270	$	16,181	$	30,626
Basic earnings per share	$	0.63	$	0.03	$	0.39	$	0.73
Diluted earnings per share	$	0.60	$	0.03	$	0.38	$	0.71


~~(3)~~	Basic and diluted EPS amounts in each quarter are computed using the weighted-average number of shares outstanding during that quarter, while basic and diluted EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ basic or diluted EPS may not equal the full year basic or diluted EPS.


Description	Balance at beginning of period		Additions charged to expense or as reductions to revenue (1)		Deductions (2)			Balance at end of period		Description	Balance at beginning of period		Additions charged to expense or as reductions to revenue (1)		Deductions (2)		Balance at end of period
	(in thousands)
Year ended December 31, 2017
											(in thousands)
Year ended December 31, 2020:										Year ended December 31, 2020:
Accounts receivable allowance	$	7,165	$	36,449	$	(31,305	)	$	12,309	Accounts receivable allowance	$	15,960	$	276,988	$	(189,513)	$	103,435
Year ended December 31, 2016:

Year ended December 31, 2019:										Year ended December 31, 2019:
Accounts receivable allowance	$	7,488	$	28,329	$	(28,652	)	$	7,165	Accounts receivable allowance	$	11,979	$	65,649	$	(61,668)	$	15,960
Year ended December 31, 2015:
Year ended December 31, 2018:										Year ended December 31, 2018:
Accounts receivable allowance	$	8,221	$	31,532	$	(32,265	)	$	7,488	Accounts receivable allowance	$	12,309	$	65,142	$	(65,472)	$	11,979


~~(1)~~	Represents charges associated primarily to accruals for early payment discounts, volume discounts and contract rebates recorded as reductions to revenue. Additions to allowance for doubtful accounts are recorded to sales and marketing expenses.


~~(2)~~	~~The deductions represent actual charges against the accrual described above.~~


~~(c)~~	~~Financial Statements required by Regulation S-X which are excluded from this Annual Report on Form 10-K by Rule 14(a)-3(b).~~



Exhibit Number			Description

~~Exhibit~~ ~~Number~~3.1		~~Description~~

~~3.1~~	Restated Certificate of Incorporation of Quidel Corporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form ~~8-K filed on February 27, 2015.~~10-Q for the quarter ended September 30, 2010.)

3.2			Certificate of Amendment to the Restated Certificate of Incorporation of Quidel Corporation, effective as of May 5, 2015. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on May 6, 2015.)

3.3			Amended and Restated Bylaws of Quidel ~~Corporation.~~Corporation, as of November 9, 2020. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on ~~February 27, 2015.~~November 13 , 2020.)

4.1			Certificate of Designations of Series C Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.)

4.2			Specimen stock certification. (Incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-3 filed on August 31, 2010.)

~~4.3~~4.3			~~Indenture, dated as~~Description of ~~December 1, 2014, between~~Quidel Corporation’s Securities Registered Pursuant to Section 12 of the ~~Registrant and The Bank~~Exchange Act of ~~New York Mellon Trust Company, N.A. (Incorporated by reference to Exhibit 4.8 to the Registrant’s Registration Statement on Form S-3 filed on December 1, 2014.)~~1934

~~4.4~~	~~First Supplemental Indenture, dated as of December 8, 2014, by and between the Registrant and The Bank of New York Mellon Trust Company, N.A. (including the form of Notes)~~. (Incorporated by reference to Exhibit ~~4.1~~4 .5 to the ~~Registrant’s~~Regist ra nt ’s Annual Report on Form ~~8-K filed on~~10-K for the year ended December ~~8, 2014.~~, 31 2019.)

10.1(1)			Registrant’s Amended and Restated 1983 Employee Stock Purchase Plan. (Incorporated by reference to Appendix B to the Registrant’s Proxy Statement filed on April 14, 2016.)

10.2(1)			~~Registrant's~~Registrant’s Amended and Restated ~~2010~~2018 Equity Incentive Plan. (Incorporated by reference to Appendix A to the Registrant’s Proxy Statement filed on April ~~1, 2014.~~12, 2018.)

10.3(1)			Form of Notice of Grant of Award and Award Agreement for ~~Registrant's~~Registrant’s 2010 Equity Incentive Plan. (Incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-8 filed on May 14, 2010.)

10.4(1)			Form of Restricted Stock Award Agreement for ~~Registrant's~~Registrant’s 2010 Equity Incentive Plan. (Incorporated by reference to Exhibit 4.7 to the Registrant’s Registration Statement on Form S-8 filed on May 14, 2010.)

10.5(1)			Registrant's 2016 Equity Incentive Plan. (Incorporated by reference to Appendix A to the Registrant’s Proxy Statement filed on April 14, 2016.)

10.6(1)			Form of Notice of Grant of Stock Options and Option Award Agreement for ~~Registrant's~~Registrant’s 2016 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016.)

10.7(1)			Form of Restricted Stock Unit Award Grant Notice for Registrant's 2016 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016.)

10.8(1)			Form of Restricted Stock Unit Award Grant Notice (Deferred Compensation) for ~~Registrant's~~Registrant’s 2016 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016.)

10.9(1)			Form of Restricted Stock Unit Award Terms and Conditions for Registrant’s 2016 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016.)

10.10			Form of Single Tenant Absolute Net Lease. (Incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K filed on January 4, 2000.)

10.11			Second Amendment to Single Tenant Absolute Net Lease. (Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on December 29, 2009.)

10.12			Third Amendment to Single Tenant Absolute Net Lease. (Incorporated by reference to Exhibit 10.10 to Registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2015.)




10.13(1)						Form of Indemnification ~~Agreement—~~Agreement – Corporate Officer and/or ~~Director.~~Director (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on ~~August 23, 2005.~~November 1 3 , 2020.)


10.14(1)			Employment Agreement, dated as of January 16, 2009, between the Registrant and Douglas C. Bryant. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on January 20, 2009.)

10.15(1)			Agreement Re: Change in Control, dated as of January 16, 2009, between the Registrant and Douglas C. Bryant. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on January 20, 2009.)

10.16(1)			Employment Offer Letter, entered into on June 5, 2008, between the Registrant and Robert J. Bujarski. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 6, 2008.)

10.17(1)			Agreement Re: Change in Control, entered into on June 5, 2008, between the Registrant and Robert J. Bujarski. (Incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed on June 6, 2008.)

10.18(1)			Randall Steward Employment Offer Letter, dated as of September 12, 2011. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 21, 2011.)

10.19(1)			Agreement Re: Change in Control, dated as of September 19, 2011, between the Registrant and Randall Steward. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 21, 2011.)

10.20(1)			Employment Offer Letter, dated April 24, 2014, between the Registrant and Werner Kroll. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)

10.21(1)			Agreement Re: Change in Control, entered into on May 9, 2014, between the Registrant and Werner Kroll. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)

~~10.22(1)~~10.2 2 (1)		~~2017 Cash Incentive Compensation Plan for the Registrant. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on February 21, 2017.)~~

~~10.23(1)~~	~~2017 Annual Equity Incentive Plan Grants to the Registrant’s executive officers. (Incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed on February 21, 2017.)~~

~~10.24(1)~~	~~2017 Annual Base Salaries for the Registrant’s executive officers. (Incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed on February 21, 2017.)~~

~~10.25(1)~~	Employment Offer Letter, dated December 19, 2014, between the Registrant and Michael D. Abney, Jr. (Incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.)

~~10.26(1)~~	Agreement Re: Change in Control, entered into on January 19, 2015, between the Registrant and Michael D. Abney, Jr. (Incorporated by reference to Exhibit 10.7 to the Registrant’s Form 10-Q for the quarter ended March 31, 2015.)

~~10.27(1)~~	Employment Offer Letter, dated October 4, 2015, between the Registrant and Edward K. Russell.~~(Incorporated~~ (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.)

~~10.28(1)~~10.2 3 (1)			Agreement Re: Change in Control, entered into on October 12, 2015, between the Registrant and Edward ~~Russel.~~Russell. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.)

10.29*10.2 4		Credit Agreement, by and among the Company, as Borrower, Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, JPMorgan Chase Bank, N.A. as Syndication Agent, Bank of the West, Citibank, N.A., Compass Bank, Fifth Third Bank, MUFG Union Bank, Silicon Valley Bank, Wells Fargo Bank, National Association and ZB, N.A., DBA California Bank & Trust, as Co-Documentation Agents, Bank of America Merrill Lynch and JP Morgan Chase Bank, N.A. as Joint Lead Arrangers and Joint Lead Bookrunners, dated as of October 6, 2017.

~~10.30~~	Amended and Restated Triage Purchase Agreement, dated September 15, ~~2017~~2017. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 6, 2017.)

~~10.31~~10.2 5			Amended and Restated BNP Purchase Agreement, dated September 15, ~~2017~~2017. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on October 6, 2017.)

~~10.32~~10.2 6			Summers Ridge ~~Lease~~Lease. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on January 9, 2018.)