Document


 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________________________

FORM 6-K
 
__________________________________

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
Commission File Number 0-28564
 
__________________________________
QIAGEN N.V.
__________________________________
Hulsterweg 82
5912 PL Venlo
The Netherlands
__________________________________

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F x           Form 40-F  o
Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  o
Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  o
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes  o            No  x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            .

 


Table of Contents

QIAGEN N.V.
Form 6-K
TABLE OF CONTENTS
 
Item
 
Page 
 
 
 
 

2
Table of Contents

OTHER INFORMATION
For the three- and nine-month periods ended September 30, 2016, QIAGEN N.V. prepared its quarterly report under United States generally accepted accounting principles (U.S. GAAP). This quarterly report is furnished herewith as Exhibit 99.1 and incorporated by reference herein.
 

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
QIAGEN N.V.
 
 
 
BY:
/s/ Roland Sackers      
 
Roland Sackers
 
Chief Financial Officer
 
 
Date:
November 3, 2016
 

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EXHIBIT INDEX
 
Exhibit
No. 
 
Exhibit
 
 
 
 
99.1
 
U.S. GAAP Quarterly Report for the Period Ended September 30, 2016


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Exhibit 99.1
QIAGEN N.V. AND SUBSIDIARIES
U.S. GAAP QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2016
TABLE OF CONTENTS
 
Financial Information
 
 
 
Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1
Table of Contents


QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
Note 
 
September 30,
2016
 
December 31,
2015
 
 
 
(unaudited)
 
 
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
 
 
$
354,646

 
$
290,011

Short-term investments
 
 
109,693

 
130,817

Accounts receivable, net of allowance for doubtful accounts of $7,309 and $7,255 in 2016 and 2015, respectively
 
 
260,039

 
273,853

Income taxes receivable
 
 
26,443

 
26,940

Inventories, net
(11)
 
144,710

 
136,586

Prepaid expenses and other current assets
 
 
67,529

 
70,121

Deferred income taxes
 
 
—

 
33,068

Total current assets
 
 
963,060

 
961,396

Long-term assets:
 
 
 
 
 
Property, plant and equipment, net of accumulated depreciation of $456,290 and $409,634 in 2016 and 2015, respectively
 
 
460,509

 
442,944

Goodwill
(6)
 
1,962,514

 
1,875,698

Intangible assets, net of accumulated amortization of $932,096 and $827,084 in 2016 and 2015, respectively
(6)
 
623,272

 
636,421

Deferred income taxes
 
 
7,671

 
2,036

Other long-term assets (of which $9,306 and $7,472 in 2016 and 2015 due from related parties, respectively)
(5, 7, 16)
 
311,118

 
260,622

Total long-term assets
 
 
3,365,084

 
3,217,721

Total assets
 
 
$
4,328,144

 
$
4,179,117


The accompanying notes are an integral part of these condensed consolidated financial statements.

2
Table of Contents

QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
 
 
Note 
 
September 30,
2016
 
December 31,
2015
 
 
 
(unaudited)
 
 
Liabilities and equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
 
 
$
40,874

 
$
52,306

Accrued and other current liabilities
 
 
196,963

 
192,069

Income taxes payable
 
 
12,284

 
21,515

Deferred income taxes
 
 
—

 
2,463

Total current liabilities
 
 
250,121

 
268,353

Long-term liabilities:
 
 
 
 
 
Long-term debt
(9)
 
1,069,440

 
1,049,026

Deferred income taxes
 
 
40,357

 
75,726

Other long-term liabilities
(7)
 
302,526

 
224,058

Total long-term liabilities
 
 
1,412,323

 
1,348,810

Commitments and contingencies
(14)
 
 
 
 
Equity:
 
 
 
 
 
Preference shares, 0.01 EUR par value, authorized—450,000 shares, no shares issued and outstanding
 
 
—

 
—

Financing preference shares, 0.01 EUR par value, authorized—40,000 shares, no shares issued and outstanding
 
 
—

 
—

Common Shares, 0.01 EUR par value, authorized—410,000 shares, issued—239,707 shares in 2016 and in 2015
 
 
2,812

 
2,812

Additional paid-in capital
 
 
1,764,653

 
1,741,167

Retained earnings
 
 
1,273,605

 
1,227,509

Accumulated other comprehensive loss
(12)
 
(249,070
)
 
(259,156
)
Less treasury shares at cost— 5,460 and 6,702 shares in 2016 and in 2015, respectively
(12)
 
(126,300
)
 
(152,412
)
Equity attributable to the owners of QIAGEN N.V.
 
 
2,665,700

 
2,559,920

Noncontrolling interest
 
 
—

 
2,034

Total equity
 
 
2,665,700

 
2,561,954

Total liabilities and equity
 
 
$
4,328,144

 
$
4,179,117


The accompanying notes are an integral part of these condensed consolidated financial statements.
 

3
Table of Contents

QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data)
 
 
Three months ended
 
September 30,
 
2016
 
2015
 
(unaudited)
Net sales
$
338,685

 
$
314,561

Cost of sales
117,879

 
109,915

Gross profit
220,806

 
204,646

Operating expenses:
 
 
 
Research and development
36,202

 
35,568

Sales and marketing
94,442

 
88,759

General and administrative, integration and other
33,339

 
24,562

Acquisition-related intangible amortization
9,851

 
9,586

Total operating expenses
173,834

 
158,475

Income from operations
46,972

 
46,171

Other income (expense):
 
 
 
Interest income
1,658

 
1,283

Interest expense
(9,626
)
 
(9,206
)
Other expense, net
(2,374
)
 
(684
)
Total other expense, net
(10,342
)
 
(8,607
)
Income before income taxes
36,630

 
37,564

Income taxes
2,922

 
3,550

Net income
33,708

 
34,014

Net (loss) income attributable to noncontrolling interest
(53
)
 
84

Net income attributable to the owners of QIAGEN N.V.
$
33,761

 
$
33,930

Basic earnings per common share attributable to the owners of QIAGEN N.V.
$
0.14

 
$
0.15

Diluted earnings per common share attributable to the owners of QIAGEN N.V.
$
0.14

 
$
0.14

 
 
 
 
Weighted-average shares outstanding
 
 
 
Basic
235,157

 
233,607

Diluted
238,343

 
237,105


The accompanying notes are an integral part of these condensed consolidated financial statements.
 

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QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data)
 
 
Nine months ended
 
September 30,
 
2016
 
2015
 
(unaudited)
Net sales
$
971,476

 
$
932,446

Cost of sales
355,025

 
329,388

Gross profit
616,451

 
603,058

Operating expenses:
 
 
 
Research and development
118,082

 
107,471

Sales and marketing
287,185

 
267,200

General and administrative, integration and other
89,943

 
78,210

Acquisition-related intangible amortization
29,387

 
28,888

Total operating expenses
524,597

 
481,769

Income from operations
91,854

 
121,289

Other income (expense):
 
 
 
Interest income
4,676

 
3,028

Interest expense
(28,370
)
 
(27,746
)
Other expense, net
(41
)
 
(10,585
)
Total other expense, net
(23,735
)
 
(35,303
)
Income before income taxes
68,119

 
85,986

Income taxes
(1,426
)
 
7,502

Net income
69,545

 
78,484

Net loss attributable to noncontrolling interest
(101
)
 
(46
)
Net income attributable to the owners of QIAGEN N.V.
$
69,646

 
$
78,530

Basic earnings per common share attributable to the owners of QIAGEN N.V.
$
0.30

 
$
0.34

Diluted earnings per common share attributable to the owners of QIAGEN N.V.
$
0.29

 
$
0.33

 
 
 
 
Weighted-average shares outstanding
 
 
 
Basic
234,668

 
233,407

Diluted
237,453

 
237,172


The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 
 
 
Three Months Ended
 
 
 
September 30,
 
 
 
2016
 
2015
 
 
 
(unaudited)
Net income
 
 
$
33,708

 
$
34,014

Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
 
 
 
 
 
(Losses) gains on cash flow hedges, before tax
(7)
 
(6,937
)
 
1,488

Reclassification adjustments on cash flow hedges, before tax
(7)
 
1,062

 
415

Cash flow hedges, before tax
 
 
(5,875
)
 
1,903

Losses on marketable securities, before tax
 
 
(63
)
 
—

Foreign currency translation adjustments, before tax
 
 
4,276

 
(51,687
)
Other comprehensive loss, before tax
 
 
(1,662
)
 
(49,784
)
Income tax relating to components of other comprehensive loss
 
 
1,559

 
229

Total other comprehensive loss, after tax
 
 
(103
)
 
(49,555
)
Comprehensive income (loss)
 
 
33,605

 
(15,541
)
Comprehensive income attributable to the noncontrolling interest
 
 
42

 
205

Comprehensive income (loss) attributable to the owners of QIAGEN N.V.
 
 
$
33,563

 
$
(15,746
)

 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
September 30,
 
 
 
2016
 
2015
 
 
 
(unaudited)
Net income
 
 
$
69,545

 
$
78,484

Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
 
 
 
 
 
(Losses) gains on cash flow hedges, before tax
(7)
 
(11,762
)
 
1,488

Reclassification adjustments on cash flow hedges, before tax
(7)
 
4,932

 
415

Cash flow hedges, before tax
 
 
(6,830
)
 
1,903

Losses on marketable securities, before tax
 
 
(1,252
)
 
—

Foreign currency translation adjustments, before tax
 
 
17,182

 
(112,093
)
Other comprehensive income (loss), before tax
 
 
9,100

 
(110,190
)
Income tax relating to components of other comprehensive income (loss)
 
 
1,632

 
(137
)
Total other comprehensive income (loss), after tax
 
 
10,732

 
(110,327
)
Comprehensive income (loss)
 
 
80,277

 
(31,843
)
Comprehensive income attributable to the noncontrolling interest
 
 
545

 
410

Comprehensive income (loss) attributable to the owners of QIAGEN N.V.
 
 
$
79,732

 
$
(32,253
)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
 
 
 
 
Common Shares
 
Additional Paid-In Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Shares
 
Equity Attributable to the Owners of QIAGEN N.V.
 
Non-controlling Interest
 
Total
Equity
(unaudited)
Note 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
 
 
BALANCE AT DECEMBER 31, 2015
 
 
239,707

 
$
2,812

 
$
1,741,167

 
$
1,227,509

 
$
(259,156
)
 
(6,702
)
 
$
(152,412
)
 
$
2,559,920

 
$
2,034

 
$
2,561,954

Acquisition of QIAGEN Marseille S.A. shares from non-controlling interests
(3)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,624
)
 
(2,624
)
Acquisition of Exiqon A/S
(3)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
5,519

 
5,519

Acquisition of Exiqon A/S shares from non-controlling interests
(3)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(5,474
)
 
(5,474
)
Net income (loss)
 
 
—

 
—

 
—

 
69,646

 
—

 
—

 
—

 
69,646

 
(101
)
 
69,545

Unrealized loss, net on hedging contracts
(7)
 
—

 
—

 
—

 
—

 
(8,821
)
 
—

 
—

 
(8,821
)
 
—

 
(8,821
)
Realized loss, net on hedging contracts
(7)
 
—

 
—

 
—

 
—

 
3,699

 
—

 
—

 
3,699

 
—

 
3,699

Unrealized loss, net on marketable securities
(5)
 
—

 
—

 
—

 
—

 
(1,252
)
 
—

 
—

 
(1,252
)
 
—

 
(1,252
)
Translation adjustment, net
(12)
 
—

 
—

 
—

 
—

 
16,460

 
—

 
—

 
16,460

 
646

 
17,106

Issuance of common shares in connection with stock plan
 
 
—

 
—

 
—

 
(23,550
)
 
—

 
1,242

 
26,112

 
2,562

 
—

 
2,562

Share-based compensation
(15)
 
—

 
—

 
23,038

 
—

 
—

 
—

 
—

 
23,038

 
—

 
23,038

Tax benefit of employee stock plans
 
 
—

 
—

 
448

 
—

 
—

 
—

 
—

 
448

 
—

 
448

BALANCE AT
SEPTEMBER 30, 2016
 
 
239,707

 
$
2,812

 
$
1,764,653

 
$
1,273,605

 
$
(249,070
)
 
(5,460
)
 
$
(126,300
)
 
$
2,665,700

 
$
—

 
$
2,665,700

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE AT DECEMBER 31, 2014
 
 
239,707

 
$
2,812

 
$
1,823,171

 
$
1,125,686

 
$
(134,735
)
 
(7,684
)
 
$
(167,190
)
 
$
2,649,744

 
$
8,255

 
$
2,657,999

Acquisition of QIAGEN Marseille S.A. shares from non-controlling interests
 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(6,367
)
 
(6,367
)
Net income (loss)
 
 
—

 
—

 
—

 
78,530

 
—

 
—

 
—

 
78,530

 
(46
)
 
78,484

Proceeds from subscription receivables
 
 
—

 
—

 
97

 
—

 
—

 
—

 
—

 
97

 
—

 
97

Redemption of subscription receivables
 
 
—

 
—

 
(112,995
)
 
—

 
—

 
—

 
—

 
(112,995
)
 
—

 
(112,995
)
Unrealized gain, net on hedging contracts
 
 
—

 
—

 
—

 
—

 
1,116

 
—

 
—

 
1,116

 
—

 
1,116

Realized loss, net on hedging contracts
 
 
—

 
—

 
—

 
—

 
311

 
—

 
—

 
311

 
—

 
311

Translation adjustment, net
 
 
—

 
—

 
—

 
—

 
(112,210
)
 
—

 
—

 
(112,210
)
 
456

 
(111,754
)
Purchase of treasury shares
 
 
—

 
—

 
—

 
—

 
—

 
(842
)
 
(20,818
)
 
(20,818
)
 
—

 
(20,818
)
Issuance of common shares in connection with stock plan
 
 
—

 
—

 
—

 
(23,080
)
 
—

 
1,646

 
32,198

 
9,118

 
—

 
9,118

Share-based compensation
 
 
—

 
—

 
22,575

 
—

 
—

 
—

 
—

 
22,575

 
—

 
22,575

Excess tax benefit of employee stock plans
 
 
—

 
—

 
2,513

 
—

 
—

 
—

 
—

 
2,513

 
—

 
2,513

BALANCE AT
SEPTEMBER 30, 2015
 
 
239,707

 
$
2,812

 
$
1,735,361

 
$
1,181,136

 
$
(245,518
)
 
(6,880
)
 
$
(155,810
)
 
$
2,517,981

 
$
2,298

 
$
2,520,279


The accompanying notes are an integral part of these condensed consolidated financial statements.
 

7
Table of Contents

QIAGEN N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 
Nine months ended
 
 
 
September 30,
 
Note 
 
2016
 
2015
Cash flows from operating activities:
 
 
(unaudited)
Net income
 
 
$
69,545

 
$
78,484

Adjustments to reconcile net income to net cash provided by operating activities, net of effects of businesses acquired:
 
 
 
 
 
Depreciation and amortization
 
 
156,695

 
139,666

Non-cash impairments
(5)
 
—

 
2,189

Amortization of debt discount and issuance costs
 
 
15,288

 
14,908

Share-based compensation expense
(15)
 
23,038

 
22,575

Excess tax benefits from share-based compensation
 
 
(448
)
 
(2,513
)
Deferred income taxes
 
 
(11,695
)
 
(7,899
)
Loss on early redemption of debt
(9)
 
717

 
7,564

(Gain) loss on marketable securities
 
 
(1,360
)
 
1,948

Changes in fair value of contingent consideration
(8)
 
(5,501
)
 
(2,466
)
Other items, net including fair value changes in derivatives
 
 
3,621

 
8,774

Net changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
 
 
19,050

 
5,221

Inventories
 
 
(13,602
)
 
(24,992
)
Prepaid expenses and other
 
 
7,856

 
35,106

Other long-term assets
 
 
4,607

 
4,225

Accounts payable
 
 
(14,876
)
 
(3,411
)
Accrued and other current liabilities
 
 
(6,270
)
 
(20,440
)
Income taxes
 
 
(1,121
)
 
(19,301
)
Other long-term liabilities
 
 
(3,965
)
 
(8,903
)
Net cash provided by operating activities
 
 
241,579

 
230,735

Cash flows from investing activities:
 
 
 
 
 
Purchases of property, plant and equipment
 
 
(54,846
)
 
(67,683
)
Proceeds from sale of equipment
 
 
22

 
103

Purchases of intangible assets
 
 
(12,694
)
 
(14,432
)
Purchases of investments
 
 
(21,375
)
 
(5,596
)
Cash paid for acquisitions, net of cash acquired
 
 
(90,490
)
 
(7,097
)
Purchases of short-term investments
 
 
(436,249
)
 
(190,508
)
Proceeds from sales of short-term investments
 
 
458,883

 
274,125

Other investing activities
 
 
(6,505
)
 
(6,055
)
Net cash used in investing activities
 
 
(163,254
)
 
(17,143
)
Cash flows from financing activities:
 
 
 
 
 
Net proceeds from issuance of cash convertible notes and cash paid for issuance costs
(9)
 
—

 
(86
)
Repayment of long-term debt
(9)
 
(6,738
)
 
(251,398
)
Principal payments on capital leases
 
 
(949
)
 
(809
)
Proceeds from subscription receivables
 
 
—

 
97

Excess tax benefits from share-based compensation
 
 
448

 
2,513

Proceeds from issuance of common shares
 
 
2,562

 
9,117

Purchase of treasury shares
(12)
 
—

 
(20,818
)
Other financing activities
(3)
 
(11,156
)
 
(836
)
Net cash used in financing activities
 
 
(15,833
)
 
(262,220
)
Effect of exchange rate changes on cash and cash equivalents
 
 
2,143

 
(13,088
)
Net increase (decrease) in cash and cash equivalents
 
 
64,635

 
(61,716
)
Cash and cash equivalents, beginning of period
 
 
290,011

 
392,667

Cash and cash equivalents, end of period
 
 
$
354,646

 
$
330,951


The accompanying notes are an integral part of these condensed consolidated financial statements.  

8
Table of Contents

QIAGEN N.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
Corporate Information
QIAGEN N.V. is a public limited liability company ('naamloze vennootschap') under Dutch law with a registered office at Hulsterweg 82, 5912 PL Venlo, The Netherlands. QIAGEN N.V., a Netherlands holding company, and subsidiaries (we, our or the Company) is the leading global provider of Sample to Insight solutions to transform biological materials into valuable molecular insights. Our sample technologies isolate and process DNA, RNA and proteins from blood, tissue and other materials. Assay technologies make these biomolecules visible and ready for analysis. Bioinformatics software and knowledge bases interpret data to report relevant, actionable insights. Automation solutions tie these together in seamless and cost-effective molecular testing workflows. We provide these workflows to four major customer classes: Molecular Diagnostics (human healthcare), Applied Testing (forensics, veterinary testing and food safety), Pharma (pharmaceutical and biotechnology companies) and Academia (life sciences research). We market our products in more than 130 countries.

2.
Basis of Presentation and Accounting Policies     
Basis of Presentation
The condensed consolidated financial statements include the accounts of QIAGEN N.V., its wholly-owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All significant intercompany accounts and transactions have been eliminated in consolidation. All amounts are presented in U.S. dollars, unless otherwise indicated. Investments in companies where we exercise significant influence over the operations but do not have control, and where we are not the primary beneficiary, are accounted for using the equity method. All other investments are accounted for under the cost method. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the Company, we record the fair value of the noncontrolling interests at the acquisition date and classify the amounts attributable to noncontrolling interests separately in equity in the condensed consolidated financial statements. Any subsequent changes in the Company's ownership interest while the Company retains its controlling financial interest in its subsidiary are accounted for as equity transactions.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and generally in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission (SEC) rules and regulations. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation have been included.
On June 28, 2016, we acquired Exiqon A/S, located in Vedbaek, Denmark and on November 20, 2015, we acquired MO BIO Laboratories, Inc., located in Carlsbad, California. Accordingly, at the acquisition date, all of the assets acquired and liabilities assumed were recorded at their respective fair values and our consolidated results of operations include the operating results from the acquired companies from the acquisition date.
Certain reclassifications of prior year amounts have been made to conform to the current year presentation in the condensed consolidated statement of cash flows. For the nine-month period ended September 30, 2016, the amounts related to the amortization of debt discount and issuance costs and loss on marketable securities have been reclassified from other items, net and are now stated separately in the consolidated statements of cash flows. These reclassifications had no effect on cash provided by operating activities or total cash flows.
We operate as one operating segment in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 280, Segment Reporting. We have a common basis of organization and our products and services are offered globally. Our chief operating decision maker (CODM) makes decisions based on the Company as a whole. Accordingly, we operate and make decisions as one reporting unit.
The results of operations for an interim period are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 20-F for the year ended December 31, 2015.
Summary of Significant Accounting Policies
The interim condensed consolidated financial statements were prepared based on the same accounting policies as those applied and described in the consolidated financial statements as of December 31, 2015 including the adoption of new standards and interpretations as of January 1, 2016.
Adoption of New Accounting Standards

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In November 2015, the FASB issued Accounting Standard Update No. 2015-17 (ASU 2015-17), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. We elected to adopt the amendments in the first quarter of 2016 prospectively in advance of the timeline in which we were required to adopt the amendments and accordingly the prior period has not been retrospectively adjusted. The adoption did not have a material impact on our condensed consolidated financial statements.
In September 2015, the FASB issued Accounting Standards Update No. 2015-16 (ASU 2015-16), Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement to retrospectively account for those adjustments. The amendments require that an acquirer recognizes adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer records, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments became effective for our financial statements beginning in the first quarter of 2016.
In April 2015, the FASB issued Accounting Standards Update No. 2015-05 (ASU 2015-05), Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This amendment provides guidance to help entities determine whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software or as a service contract. ASU 2015-05 became effective for our financial statements beginning in the first quarter of 2016 and has been applied on a prospective basis.
In April 2015, the FASB issued Accounting Standards Update No. 2015-03 (ASU 2015-03) Interest: Imputation of Interest (Subtopic 835-30) requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. The FASB issued Accounting Standards Update No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff indicated that it would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 became effective for us beginning in the first quarter of 2016 and was applied on a retrospective basis wherein the balance sheet of each period presented is adjusted to reflect the period-specific effects of applying the new guidance. As of December 31, 2015, the effect of the change in balance sheet presentation was a reduction in prepaid expenses and other current assets of $0.2 million and a reduction in other long-term assets of $10.3 million. These amounts are then presented net against the long-term debt liability.
In February 2015, the FASB issued Accounting Standards Update No. 2015-02 (ASU 2015-02) Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new standard modifies current guidance on consolidation under the variable interest model and the voting model. ASU 2015-02 became effective for us in the first quarter of 2016. The adoption did not have an impact on our condensed consolidated financial statements.
New Accounting Standards Not Yet Adopted
In August 2016, the FASB issued Accounting Standards Update No. 2016-15 (ASU No. 2016-15), Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force), which addresses eight classification issues related to the statement of cash flows:
•
debt prepayment or debt extinguishment costs;
•
settlement of zero-coupon bonds;
•
contingent consideration payments made after a business combination;
•
proceeds from the settlement of insurance claims;
•
proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies;
•
distributions received from equity method investees;
•
beneficial interests in securitization transactions; and
•
separately identifiable cash flows and application of the predominance principle.

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ASU 2016-15 will become effective for us for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. We will be required to apply this ASU using a retrospective transition method to each period presented other than for issues where application would be impracticable in which case we will be permitted to apply the amendments for those issues prospectively as of the earliest date practicable. The new guidance will become effective for us on January 1, 2018. We are currently evaluating the potential impact of ASU 2016-15 on our consolidated financial statements.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13), Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance will become effective for us beginning on January 1, 2020. We are currently evaluating the potential impact ASU 2016-13 may have on our consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (ASU 2016-09), Compensation--Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance will become effective for us beginning January 1, 2017. We are currently evaluating the potential impact ASU 2016-09 may have on our consolidated financial statements.
In March 2016, the FASB also issued Accounting Standards Update No. 2016-07 (ASU 2016-07), Investments--Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. The amendments in ASU 2016-17 eliminate the requirement to retroactively adopt the equity method of accounting. The new guidance will become effective for us beginning on January 1, 2017.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). The objective of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 will become effective for us beginning in the first quarter of 2019. We are currently evaluating the potential impact ASU 2016-02 may have on our consolidated financial statements.
In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (ASU 2016-01), Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by:
•
requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;
•
requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
•
requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements;
•
eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities;
•
eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and
•
requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
The amendments will become effective for our financial statements beginning in the first quarter of 2018. We are currently evaluating the impact ASU 2016-01 may have on our consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11 (ASU 2015-11), Inventory: (Topic 330): Simplifying the Measurement of Inventory requiring in scope inventory, including inventory measured using first-in, first out (FIFO) or average cost, to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for us beginning in the first quarter of 2017. We are currently evaluating the potential impact ASU 2015-11 may have on our consolidated financial statements.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers: (Topic 606) which affects any entity that either enters into contracts with customers to transfer goods or services or enters into

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contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). In August 2015, the FASB issued Accounting Standards Update No. 2015-14 (ASU 2015-14), Revenue from Contracts with Customers: (Topic 606): Deferral of the Effective Date which defers the effective date of ASU 2014-09 to interim and annual reporting periods beginning after December 15, 2017. The FASB has continued to issue accounting standards updates to clarify and provide implementation guidance related to Revenue from Contracts with Customers, including ASU 2016-08 Revenue from Contract with Customers: Principal versus Agent Considerations, ASU 2016-10 Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, and ASU 2016-12 Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients. An entity should apply the amendments either retrospectively to each prior reporting period presented and the entity may elect certain practical expedients; or, retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. Early adoption is permitted only as of interim and annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact its adoption would have on our financial position, results of operations or cash flows and plan to adopt these amendments in the first quarter of 2018.

3.
Acquisitions
Acquisitions have been accounted for as business combinations, and the acquired companies’ results have been included in the accompanying condensed consolidated statements of income from their respective dates of acquisition. Our acquisitions have historically been made at prices above the fair value of the acquired net assets, resulting in goodwill, due to expectations of synergies of combining the businesses. These synergies include use of our existing infrastructure, such as sales force, shared service centers, distribution channels and customer relations, to expand sales of an acquired business' products; use of the infrastructure of the acquired businesses to cost-effectively expand sales of our products; and elimination of duplicative facilities, functions and staffing.
2016 Acquisition
During the second quarter of 2016, we acquired a majority shareholding in Exiqon A/S (Exiqon), a publicly traded Danish company headquartered in Vedbaek, Denmark, which is a leading provider of RNA analysis solutions with a proprietary Locked Nucleic Acid (LNA) technology. The acquisition will expand our leadership position in Sample to Insight solutions for RNA analysis. On June 28, 2016, we paid DKK 627.4 million ($95.2 million) for approximately 94.52% of the outstanding Exiqon common shares. On the acquisition date, the fair value of the remaining shares was $5.5 million. The fair value of this noncontrolling share was based on reference to quoted market values of Exiqon stock. Since the acquisition date, we have acquired the remaining Exiqon shares for $5.5 million in cash, which is included in other financing activities in the accompanying condensed consolidated statements of cash flows, and as of September 30, 2016 we held 100% of Exiqon's shares. For the three and nine-month periods ended September 30, 2016, acquisition-related costs of $1.1 million and $4.7 million are included in general, administrative, integration and other in the accompanying condensed consolidated statements of income, respectively.
The allocation of the purchase price is preliminary and is not yet finalized. The preliminary allocation of the purchase price is based upon preliminary estimates which used information that was available to management at the time the financial statements were prepared and these estimates and assumptions are subject to change within the measurement period, up to one year from the acquisition date. Accordingly, the allocation may change. We continue to gather information about the fair value of intangible assets acquired, the related deferred taxes and the deferred tax asset on tax loss carry forwards.
The preliminary purchase price allocation as of September 30, 2016 did not differ from the preliminary purchase price allocation as of June 30, 2016 other than a $9.4 million increase in developed technology, a $9.1 million increase in deferred tax asset on tax loss carry forwards, a $2.8 million decrease in customer relationships, a $1.2 million increase of long-term deferred tax liability and an additional $0.3 increase of other opening balance sheet liabilities. The corresponding impact for these adjustments was a decrease to goodwill of $14.2 million. These changes were not material to the condensed consolidated financial statements.

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(in thousands)
 
Exiqon acquisition
 
 
 
Purchase Price:
 
 
Cash consideration
 
$
95,163

Fair value of remaining shares
 
5,519

 
 
$
100,682

 
 
 
Preliminary Allocation:
 
 
Cash and cash equivalents
 
$
4,824

Accounts receivable
 
3,581

Inventory
 
1,553

Prepaid expenses and other current assets
 
1,499

Accounts payable
 
(1,289
)
Accruals and other current liabilities
 
(11,587
)
Debt assumed
 
(6,068
)
Other long term liabilities
 
(197
)
Deferred tax asset on tax loss carry forwards
 
9,860

Fixed and other long term assets
 
2,869

Developed technology
 
18,500

Customer relationships
 
3,800

Tradenames
 
1,400

Goodwill
 
77,318

Deferred tax liability on fair value of identifiable intangible assets acquired
 
(5,381
)
 
 
$
100,682

The weighted average amortization period for the intangible assets is 11.1 years. The goodwill acquired is not deductible for tax purposes.
Revenue and earnings in the reporting periods since the acquisition date have not been significant. No pro forma financial information has been provided herein as the acquisition of Exiqon did not have a material impact to net sales, net income or earnings per share on a pro forma basis.
Other Acquisitions
During 2011, we acquired a majority shareholding in QIAGEN Marseille S.A., formerly Ipsogen S.A. (QIAGEN Marseille), a publicly listed company founded and based in Marseille, France. In 2015, QIAGEN Marseille, a fully consolidated entity, sold all of its assets and liabilities, with the exception of its intellectual property portfolio. During 2015, we acquired additional QIAGEN Marseille shares through a tender offer for a total of $8.0 million and held 97.22% of the QIAGEN Marseille shares as of December 31, 2015. Per the terms of the tender offer, $2.5 million was set aside as of December 31, 2015 in restricted cash for the remaining shares which were acquired in the first quarter of 2016 and as of September 30, 2016 we held 100% of the QIAGEN Marseille shares.

4.
Restructuring
Late in 2014, we implemented restructuring efforts to further streamline operations as part of a commitment to continuous improvement and related to our strategic focus on our growth drivers. No additional costs were incurred in 2015 or 2016 and we do not expect to record additional restructuring charges related to this program.
The following table summarizes the components of the 2014 restructuring costs. At December 31, 2015, a restructuring accrual of $4.1 million was recorded in accrued and other current liabilities in the accompanying condensed consolidated balance sheets. At

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September 30, 2016, no further amounts were payable under the restructuring program.
(in thousands)
Personnel Related
Facility Related
Contract and Other Costs
Total
Balance at December 31, 2015
$
469

$
3,428

$
214

$
4,111

Payments
(143
)
(3,428
)
(214
)
(3,785
)
Release of excess accrual
(325
)
—

—

(325
)
Foreign currency translation adjustment
(1
)
—

—

(1
)
Balance at September 30, 2016
$
—

$
—

$
—

$
—


5.
Investments
We have made strategic investments in certain companies that are accounted for using the equity- or cost-method of accounting. The method of accounting for an investment depends on the level of influence. We monitor changes in circumstances that may require a reassessment of the level of influence. We periodically review the carrying value of these investments for impairment, considering factors such as the most recent stock transactions and book values from the recent financial statements. The fair value of cost and equity-method investments is estimated when there are identified events or changes in circumstances that may have an impact on the fair value of the investment.
As of September 30, 2016 and December 31, 2015, we had a total of cost-method investments in non-publicly traded companies with carrying amounts of $38.2 million and $17.2 million, respectively, which are included in other long-term assets in the accompanying condensed consolidated balance sheets. In April 2016, we entered into a new $20.0 million cost-method investment. In August 2016, we converted a $0.6 million short-term loan into additional ownership interest of one of our cost-method investments. The fair-values of these cost-method investments are not estimated unless there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. For the nine-month period ended September 30, 2015, we recorded impairments of cost method investments totaling $2.2 million in other expense, net in the accompanying condensed consolidated statement of income.
As of September 30, 2016 and December 31, 2015, we had a total of equity-method investments in non-publicly traded companies of $17.3 million and $16.7 million, respectively, which are included in other long-term assets in the accompanying condensed consolidated balance sheets.
During 2015, our former cost-method investment in Curetis AG was reclassified as a long-term marketable security upon the completed initial public offering of the shares of its Dutch holding company, Curetis N.V. As a result we hold 320,712 shares, with a cost basis of $2.3 million. As of September 30, 2016 and December 31, 2015, the fair market value of these shares was $2.2 million and $3.5 million, respectively, included in other long-term assets in the accompanying condensed consolidated balance sheets.

6.
Intangible Assets
The following table sets forth the intangible assets by major asset class as of September 30, 2016 and December 31, 2015:
 
 
September 30, 2016
 
December 31, 2015
(in thousands) 
 
Gross
Carrying
Amount
 
Accumulated
Amortization 
 
Gross
Carrying
Amount 
 
Accumulated
Amortization 
Amortized Intangible Assets:
 
 
 
 
 
 
 
 
Patent and license rights
 
$
402,189

 
$
(231,024
)
 
$
338,175

 
$
(205,880
)
Developed technology
 
720,785

 
(460,316
)
 
693,294

 
(409,374
)
Customer base, non-compete agreements and trademarks
 
432,394

 
(240,756
)
 
432,036

 
(211,830
)
 
 
$
1,555,368

 
$
(932,096
)
 
$
1,463,505

 
$
(827,084
)
Unamortized Intangible Assets:
 
 
 
 
 
 
 
 
Goodwill
 
$
1,962,514

 
 
 
$
1,875,698

 
 
The changes in intangibles assets in 2016 are summarized as follows:

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(in thousands)
 
Intangibles
 
Goodwill
Balance at December 31, 2015
 
$
636,421

 
$
1,875,698

Additions
 
65,094

 
—

Purchase adjustments
 
(321
)
 
329

Acquisitions
 
23,700

 
77,318

Amortization
 
(102,438
)
 
—

Foreign currency translation adjustments
 
816

 
9,169

Balance at September 30, 2016
 
$
623,272

 
$
1,962,514

Cash paid for purchases of intangibles assets during the nine-month period ended September 30, 2016 totaled $12.7 million, of which $2.9 million is related to prepayments recorded in other long term assets in the accompanying condensed consolidated balance sheet as of September 30, 2016. Intangible asset additions of $65.1 million includes $9.8 million of cash paid during the nine-month period ended September 30, 2016, together with $4.9 million of additions which were previously recorded as prepayments and $50.4 million of additions which were accrued as of September 30, 2016. Of the accrued additions, $48.9 million relate to licenses for which fixed payments are expected to occur through the end of the license term in 2024.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2016 resulted primarily from the acquisition of Exiqon as further discussed in Note 3, "Acquisitions" and changes in foreign currency translation.
For the three- and nine-month periods ended September 30, 2016 and 2015, amortization expense on intangible assets totaled approximately $34.6 million and $102.4 million, and $33.5 million and $98.0 million, respectively. Amortization of intangibles for the next five years is expected to be approximately:
Year 
 
Annual
Amortization
(in millions)
2017
 
$
131.0

2018
 
$
108.5

2019
 
$
87.7

2020
 
$
61.1

2021
 
$
53.5


7.
Derivatives and Hedging
In the ordinary course of business, we use derivative instruments, including swaps, forwards and/or options, to manage potential losses from foreign currency exposures and interest bearing assets or liabilities. The principal objective of such derivative instruments is to minimize the risks and/or costs associated with our global financial and operating activities. We do not utilize derivative or other financial instruments for trading or other speculative purposes. We recognize all derivatives as either assets or liabilities on the balance sheet on a gross basis, measure those instruments at fair value and recognize the change in fair value in earnings in the period of change, unless the derivative qualifies as an effective hedge that offsets certain exposures. In 2015, we agreed with almost all of our counterparties with whom we had entered into cross-currency swaps, interest rate swaps or foreign exchange contracts, to enter into bilateral collateralization contracts under which will receive or provide cash collateral, as the case may be, for the net position with each of these counterparties. As of September 30, 2016, we had a liability of $5.3 million recorded in accrued and other current liabilities and had an asset of $2.7 million from posted collateral recorded in prepaid and other assets in the accompanying condensed consolidated balance sheet. As of December 31, 2015, we had a liability position of $7.8 million recorded in accrued and other current liabilities in the accompanying condensed consolidated balance sheet.
As of September 30, 2016 and December 31, 2015, we held derivative instruments that are designated and qualify as cash flow hedges where the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. In the first nine months of 2016 and in 2015, we did not record any hedge ineffectiveness related to any cash-flow hedges in earnings. Based on their valuation as of September 30, 2016, we expect that no significant amount of derivative gains included in accumulated other comprehensive income will be reclassified into income during the next 12 months. These cash flows derived from derivatives are classified in the condensed consolidated statements of cash flows in the same category as the condensed consolidated balance sheet account of the underlying item.

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As of September 30, 2016 and December 31, 2015, we held derivative instruments that qualify for hedge accounting as fair value hedges. For derivative instruments that are designated and qualify as a fair value hedge, the effective portion of the gain or loss on the derivative is reflected in earnings. This earnings effect is offset by the change in the fair value of the hedged item attributable to the risk being hedged that is also recorded in earnings. In the first nine months of 2016 and in 2015, we concluded there was no ineffectiveness. The cash flows derived from derivatives are classified in the condensed consolidated statements of cash flows in the same category as the condensed consolidated balance sheet account of the underlying item.
Interest Rate Derivatives
We use interest rate derivative contracts to align our portfolio of interest bearing assets and liabilities with our risk management objectives. During 2015, we entered into five cross currency interest rate swaps through 2025 for a total notional amount of €180.0 million which qualify for hedge accounting as cash flow hedges. We determined that no ineffectiveness exists related to these swaps. As of September 30, 2016, the €180.0 million notional swap amount had a fair value of $6.4 million recorded within other long-term liabilities and accrued and unpaid interest of $0.5 million which is recorded in other long-term assets in the accompanying condensed consolidated balance sheet. As of December 31, 2015, this swap had a fair value of $5.3 million and accrued and unpaid interest of $1.6 million which are both recorded in other long-term assets in the accompanying condensed consolidated balance sheet.
During 2014, we entered into interest rate swaps, which effectively fixed the fair value of $200.0 million of our fixed rate private placement debt and qualify for hedge accounting as fair value hedges. We determined that no ineffectiveness exists related to these swaps. As of September 30, 2016, the $200.0 million notional swap amount had a fair value of $10.5 million and accrued and unpaid interest of $1.8 million which are both recorded in other long-term assets in the accompanying condensed consolidated balance sheet. At December 31, 2015, this swap had a fair value of $5.0 million and accrued and unpaid interest of $0.8 million which are both recorded in other long-term assets in the accompanying condensed consolidated balance sheet.
Call Options
We entered into Call Options during 2014 which, along with the sale of the Warrants, represent the Call Spread Overlay entered into in connection with the Cash Convertible Notes and which are more fully described in Note 9, “Debt.” We used $105.2 million of the proceeds from the issuance of the Cash Convertible Notes to pay the premium for the Call Options, and simultaneously received $68.9 million, (net of issuance costs) from the sale of the Warrants, for a net cash outlay of $36.3 million for the Call Spread Overlay. The Call Options are intended to offset cash payments in excess of the principal amount due upon any conversion of the Cash Convertible Notes.
Aside from the initial payment of a premium of $105.2 million for the Call Options, we will not be required to make any cash payments under the Call Options. We will however be entitled to receive under the terms of the Call Options an amount of cash generally equal to the amount by which the market price per share of our common stock exceeds the exercise price of the Call Options during the relevant valuation period. The exercise price under the Call Options is equal to the conversion price of the Cash Convertible Notes.
The Call Options, for which our common stock are the underlying security, are a derivative asset that requires mark-to-market accounting treatment due to the cash settlement features until the Call Options settle or expire. The Call Options are measured and reported at fair value on a recurring basis, within Level 2 of the fair value hierarchy. For further discussion of the inputs used to determine the fair value of the Call Options, refer to Note 8, “Fair Value Measurements.” The fair value of the Call Options at September 30, 2016 and December 31, 2015 was approximately $203.4 million and $169.0 million, respectively, which is recorded in other long-term assets in the accompanying condensed consolidated balance sheet.
The Call Options do not qualify for hedge accounting treatment. Therefore, the change in fair value of these instruments is recognized immediately in our condensed consolidated statements of income in other income (expense), net. For the nine months ended September 30, 2016 and September 30, 2015, the change in the fair value of the Call Options resulted in gains of $34.3 million and $1.1 million, respectively. Because the terms of the Call Options are substantially similar to those of the Cash Convertible Notes' embedded cash conversion option, discussed below, we expect the effect on earnings from those two derivative instruments to mostly offset each other.
Cash Convertible Notes Embedded Cash Conversion Option
The embedded cash conversion option within the Cash Convertible Notes is required to be separated from the Cash Convertible Notes and accounted for separately as a derivative liability, with changes in fair value reported in our condensed consolidated statements of income in other income (expense), net until the cash conversion option settles or expires. For further discussion of the Cash Convertible Notes, refer to Note 9, “Debt.” The initial fair value liability of the embedded cash conversion option was $105.2 million, which simultaneously reduced the carrying value of the Cash Convertible Notes (effectively an original issuance discount). The embedded cash conversion option is measured and reported at fair value on a recurring basis, within Level 2 of the fair value hierarchy. For further discussion of the inputs used to determine the fair value of the embedded cash conversion option, refer to Note 8, “Fair Value Measurements.” The fair value of the embedded cash conversion option at September 30, 2016 and December 31, 2015 was approximately $205.9 million and $171.0 million, respectively, and is included in other long-term liabilities in the accompanying condensed consolidated balance sheet. For the nine months ended September 30, 2016 and September 30, 2015, the change in the fair

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value of the embedded cash conversion option resulted in losses of $34.9 million and $1.5 million, respectively, recognized in our condensed consolidated statements of income in other income (expense), net.
Foreign Currency Derivatives
As a globally active enterprise, we are subject to risks associated with fluctuations in foreign currencies in our ordinary operations. This includes foreign currency-denominated receivables, payables, debt, and other balance sheet positions including intercompany items. We manage balance sheet exposure on a group-wide basis using foreign exchange forward contracts, foreign exchange options and cross-currency swaps.
Undesignated Derivative Instruments
We are party to various foreign exchange forward, option and swap arrangements which had, at September 30, 2016, an aggregate notional value of $303.8 million and fair value of $2.4 million included in prepaid and other assets and $2.9 million included in accrued and other current liabilities, which expire at various dates through December 2017. We were party to various foreign exchange forward and swap arrangements which had, at December 31, 2015, an aggregate notional value of $264.2 million and fair values of $1.4 million and $0.5 million included in prepaid and other assets and accrued and other current liabilities, respectively, which expired at various dates through March 2016. The transactions have been entered into to offset the effects from balance sheet exposure to foreign currency exchange risk. Changes in the fair value of these arrangements have been recognized in other income (expense), net.
Fair Values of Derivative Instruments
The following table summarizes the fair value amounts of derivative instruments reported in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015:
 
 
Derivatives in Asset Positions Fair value
 
Derivatives in Liability Positions Fair value 
(in thousands)
 
9/30/2016
 
12/31/2015
 
9/30/2016
 
12/31/2015
Derivative instruments designated as hedges
 
 
 
 
 
 
 
 
Interest rate contracts(1)
 
$
12,717

 
$
12,687

 
$
(6,425
)
 
$
—

Total derivative instruments designated as hedges
 
$
12,717

 
$
12,687

 
$
(6,425
)
 
$
—

Undesignated derivative instruments
 
 
 
 
 
 
 
 
Call spread overlay
 
$
203,357

 
$
169,037

 
$
(205,855
)
 
$
(170,951
)
Foreign exchange contracts
 
2,444

 
1,393

 
(2,930
)
 
(525
)
Total undesignated derivative instruments
 
$
205,801

 
$
170,430

 
$
(208,785
)
 
$
(171,476
)
_________________
(1) The fair value amounts for the interest rate contracts include accrued interest.

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Gains and Losses on Derivative Instruments
The following tables summarize the locations and gains and losses on derivative instruments for the three and nine months ended September 30, 2016 and 2015:
Three months ended September 30, 2016 (in thousands) 
 
Gain/(loss)
recognized in AOCI
 
Location of
gain / loss in
income statement
 
(Gain) loss
reclassified
from AOCI into
income
 
Gain (loss) recognized in income
Cash flow hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
(6,937
)
 
Other (expense) income, net
 
$
1,062

 
n/a

 
 
 
 
 
 
 
 
 
Fair value hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
—

 
Other (expense) income, net
 
$
—

 
$
(2,264
)
 
 
 
 
 
 
 
 
 
Undesignated derivative instruments
 
 
 
 
 
 
 
 
Call spread overlay
 
n/a

 
Other (expense) income, net
 
n/a

 
$
(1,478
)
Foreign exchange contracts
 
n/a

 
Other (expense) income, net
 
n/a

 
1,472

 
 
 
 
 
 
 
 
$
(6
)
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2015 (in thousands) 
 
Gain/(loss)
recognized in AOCI
 
Location of
gain / loss in
income statement
 
(Gain) loss
reclassified
from AOCI into
income
 
Gain (loss) recognized in income
Cash flow hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
1,488

 
Other (expense) income, net
 
$
415

 
n/a

 
 
 
 
 
 
 
 
 
Fair value hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
—

 
Other (expense) income, net
 
$
—

 
$
5,194

 
 
 
 
 
 
 
 
 
Undesignated derivative instruments
 
 
 
 
 
 
 
 
Call spread overlay
 
n/a

 
Other (expense) income, net
 
n/a

 
$
(498
)
Foreign exchange contracts
 
n/a

 
Other (expense) income, net
 
n/a

 
(1,206
)
 
 
 
 
 
 
 
 
$
(1,704
)

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Nine months ended September 30, 2016 (in thousands) 
 
Gain/(loss)
recognized in AOCI
 
Location of
(gain) loss in
income statement
 
(Gain) loss
reclassified
from AOCI into
income
 
Gain (loss) recognized in income
Cash flow hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
(11,762
)
 
Other (expense) income, net
 
$
4,932

 
n/a

 
 
 
 
 
 
 
 
 
Fair value hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
—

 
Other (expense) income, net
 
$
—

 
$
5,475

 
 
 
 
 
 
 
 
 
Undesignated derivative instruments
 
 
 
 
 
 
 
 
Call spread overlay
 
n/a

 
Other (expense) income, net
 
n/a

 
$
(584
)
Foreign exchange contracts
 
n/a

 
Other (expense) income, net
 
n/a

 
(1,653
)
 
 
 
 
 
 
 
 
$
(2,237
)
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015 (in thousands) 
 
Gain/(loss)
recognized in AOCI
 
Location of
(gain) loss in
income statement
 
(Gain) loss
reclassified
from AOCI into
income
 
Gain (loss) recognized in income
Cash flow hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
1,488

 
Other (expense) income, net
 
$
415

 
n/a

 
 
 
 
 
 
 
 
 
Fair value hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
—

 
Other (expense) income, net
 
$
—

 
$
4,806

 
 
 
 
 
 
 
 
 
Undesignated derivative instruments
 
 
 
 
 
 
 
 
Call spread overlay
 
n/a

 
Other (expense) income, net
 
n/a

 
$
(375
)
Foreign exchange contracts
 
n/a

 
Other (expense) income, net
 
n/a

 
15,444

 
 
 
 
 
 
 
 
$
15,069

The amounts noted in the table above for accumulated other comprehensive income (AOCI) do not include any adjustment for the impact of deferred income taxes.

8.
Fair Value Measurements
Assets and liabilities are measured at fair value according to a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs, such as quoted prices in active markets;
Level 2. Inputs, other than the quoted price in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Our assets and liabilities measured at fair value on a recurring basis consist of marketable securities as discussed in Note 5 and short-term investments, which are classified in Level 1 and Level 2 of the fair value hierarchy, derivative contracts used to hedge currency and interest rate risk, derivative financial instruments entered into in connection with the Cash Convertible Notes discussed in Note 9, which are classified in Level 2 of the fair value hierarchy, and contingent consideration accruals which are classified in Level 3 of the fair value hierarchy and are shown in the tables below.
In determining fair value for Level 2 instruments, we apply a market approach, using quoted active market prices relevant to the particular instrument under valuation, giving consideration to the credit risk of both the respective counterparty to the contract and the Company. To determine our credit risk, we estimated our credit rating by benchmarking the price of outstanding debt to publicly-available comparable data from rated companies. Using the estimated rating, our credit risk was quantified by reference to publicly-

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traded debt with a corresponding rating. The Level 2 derivative financial instruments include the Call Options asset and the embedded conversion option liability. See Note 9, "Debt", and Note 7, "Derivatives and Hedging," for further information. The derivatives are not actively traded and are valued based on an option pricing model that uses observable market data for inputs. Significant market data inputs used to determine fair values as of September 30, 2016 included our common stock price, the risk-free interest rate, and the implied volatility of our common stock. The Call Options asset and the embedded cash conversion option liability were designed with the intent that changes in their fair values would substantially offset, with limited net impact to our earnings. Therefore, the sensitivity of changes in the unobservable inputs to the option pricing model for such instruments is substantially mitigated.
Our Level 3 instruments include contingent consideration liabilities. We value contingent consideration liabilities using unobservable inputs, applying the income approach, such as the discounted cash flow technique, or the probability-weighted scenario method. Contingent consideration arrangements obligate us to pay the sellers of an acquired entity if specified future events occur or conditions are met such as the achievement of technological or revenue milestones. We use various key assumptions, such as the probability of achievement of the milestones (0% to 100%) and the discount rate (between 0.7% and 2.2%), to represent the non-performing risk factors and time value when applying the income approach. We regularly review the fair value of the contingent consideration, and reflect any change in the accrual in the condensed consolidated statements of income in the line items commensurate with the underlying nature of milestone arrangements.
The following table presents our hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015:
 
 
As of September 30, 2016
 
As of December 31, 2015
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Total 
 
Level 1
 
Level 2
 
Level 3
 
Total 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
 
$
3,917

 
$
105,776

 
$
—

 
$
109,693

 
$
3,674

 
$
127,143

 
$
—

 
$
130,817

Marketable securities
 
2,234

 
—

 
—

 
2,234

 
3,485

 
—

 
—

 
3,485

Call option
 
—

 
203,357

 
—

 
203,357

 
—

 
169,037

 
—

 
169,037

Foreign exchange contracts
 
—

 
2,444

 
—

 
2,444

 
—

 
1,393

 
—

 
1,393

Interest rate contracts
 
—

 
12,717

 
—

 
12,717

 
—

 
12,687

 
—

 
12,687

 
 
$
6,151

 
$
324,294

 
$
—

 
$
330,445

 
$
7,159

 
$
310,260

 
$
—

 
$
317,419

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
—

 
$
(2,930
)
 
$
—

 
$
(2,930
)
 
$
—

 
$
(525
)
 
$
—

 
$
(525
)
Interest rate contracts
 
—

 
(6,425
)
 
—

 
(6,425
)
 
—

 
—

 
—

 
—

Cash conversion option
 
—

 
(205,855
)
 
—

 
(205,855
)
 
—

 
(170,951
)
 
—

 
(170,951
)
Contingent consideration
 
—

 
—

 
(9,598
)
 
(9,598
)
 
—

 
—

 
(17,678
)
 
(17,678
)
 
 
$
—

 
$
(215,210
)
 
$
(9,598
)
 
$
(224,808
)
 
$
—

 
$
(171,476
)
 
$
(17,678
)
 
$
(189,154
)
For liabilities with Level 3 inputs, the following table summarizes the activity for the nine months ended September 30, 2016:
(in thousands)
 
Contingent Consideration
Beginning Balance at December 31, 2015
 
$
(17,678
)
Additions
 
(536
)
Payments
 
3,120

Gain included in earnings
 
5,501

Foreign currency translation adjustments
 
(5
)
Ending balance at September 30, 2016
 
$
(9,598
)
As of September 30, 2016, of the total $9.6 million accrued for contingent consideration, $6.7 million is included in other long-term liabilities and $2.9 million is included in accrued and other current liabilities in the accompanying condensed consolidated balance sheet. During 2016, a $5.5 million gain for the reduction in the fair value of contingent consideration related to unmet milestones was recognized in general and administrative, integration and other in the accompanying condensed consolidated statement of income.
The carrying values of financial instruments, including cash and equivalents, accounts receivable, accounts payable and other accrued liabilities, approximate their fair values due to their short-term maturities. The estimated fair value of long-term debt as disclosed in Note 9 was based on current interest rates for similar types of borrowings. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. There were no

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adjustments in the nine-month periods ended September 30, 2016 and 2015 for nonfinancial assets or liabilities required to be measured at fair value on a nonrecurring basis.

9.
Debt
Our credit facilities available and undrawn at September 30, 2016 total €436.6 million (approximately $487.3 million). This includes a €400.0 million syndicated multi-currency revolving credit facility expiring December 2020 of which no amounts were utilized at September 30, 2016 or at December 31, 2015, and four other lines of credit amounting to €36.6 million with no expiration date, none of which were utilized as of September 30, 2016 or as of December 31, 2015. The €400.0 million facility can be utilized in euro, U.K. pound or U.S. dollar and bears interest of 0.4% to 1.2% above three months EURIBOR, or LIBOR in relation to any loan not in euro, and is offered with interest periods of one, two, three, six or twelve months. The commitment fee is calculated based on 35% of the applicable margin. The revolving facility agreement contains certain financial and non-financial covenants, including but not limited to, restrictions on the encumbrance of assets and the maintenance of certain financial ratios. We were in compliance with these covenants at September 30, 2016. The credit facilities are for general corporate purposes.
At September 30, 2016 and December 31, 2015, long-term debt, net of debt issuance costs of $8.7 million and $10.6 million, respectively, consists of the following:
(in thousands)
 
2016
 
2015
3.19% Series A Senior Notes due October 2019
 
$
74,679

 
$
73,790

3.75% Series B Senior Notes due October 2022
 
307,683

 
302,943

3.90% Series C Senior Notes due October 2024
 
26,907

 
26,898

0.375% Senior Unsecured Cash Convertible Notes due 2019
 
399,850

 
391,111

0.875% Senior Unsecured Cash Convertible Notes due 2021
 
260,321

 
254,284

Total long-term debt
 
$
1,069,440

 
$
1,049,026

Cash Convertible Notes due 2019 and 2021
On March 19, 2014, we issued $730.0 million aggregate principal amount of Cash Convertible Senior Notes of which $430.0 million is due in 2019 (2019 Notes) and $300.0 million is due in 2021 (2021 Notes). We refer to the 2019 Notes and 2021 Notes, collectively as the “Cash Convertible Notes.” The aggregate net proceeds of the Cash Convertible Notes were $680.7 million, after payment of the net cost of the Call Spread Overlay described below and transaction costs. Additionally, we used $372.5 million of the net proceeds to repay the 2006 Notes and related subscription right.
Interest on the Cash Convertible Notes is payable semi-annually in arrears on March 19 and September 19 of each year, at rates of 0.375% and 0.875% per annum for the 2019 Notes and 2021 Notes, respectively, commencing on September 19, 2014. The 2019 Notes will mature on March 19, 2019 and the 2021 Notes will mature on March 19, 2021, unless repurchased or converted in accordance with their terms prior to such date.
The Cash Convertible Notes are convertible into cash in whole, but not in part, at the option of noteholders in the following circumstances: (a) from April 29, 2014 through September 18, 2018 for the 2019 Notes, and through September 18, 2020 for the 2021 Notes (Contingent Conversion Period), under any of the Contingent Conversion Conditions and (b) at any time following the Contingent Conversion Period through the fifth business day immediately preceding the applicable maturity date. Upon conversion, noteholders will receive an amount in cash equal to the Cash Settlement Amount, calculated as described below. The Cash Convertible Notes are not convertible into shares of our common stock or any other securities.
Noteholders may convert their Cash Convertible Notes into cash at their option at any time during the Contingent Conversion Period only under the following circumstances (Contingent Conversion Conditions):
•
during any calendar quarter commencing after the calendar quarter ending on March 31, 2014 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•
if we undergo certain fundamental changes;
•
during the five business day period immediately after any ten consecutive trading day period in which the quoted price for the 2019 Notes or the 2021 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;
•
if we elect to distribute assets or property to all or substantially all of the holders of our common stock and those assets or other property have a value of more than 25% of the average daily volume-weighted average trading price of our common stock for the prior 20 consecutive trading days;
•
if we elect to redeem the Cash Convertible Notes; or

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•
if we experience certain customary events of default, including defaults under certain other indebtedness.
The initial conversion rate is 7,056.7273 shares of our common stock per $200,000 principal amount of Cash Convertible Notes (reflecting an initial conversion price of approximately $28.34 per share of common stock). Upon conversion, holders are entitled to a cash payment (Cash Settlement Amount) equal to the average of the conversion rate multiplied by the daily volume-weighted average trading price for our common stock over a 50-day period. The conversion rate is subject to adjustment in certain instances but will not be adjusted for any accrued and unpaid interest. In addition, following the occurrence of certain corporate events that may occur prior to the applicable maturity date, we may be required to pay a cash make-whole premium by increasing the conversion rate for any holder who elects to convert Cash Convertible Notes in connection with the occurrence of such a corporate event.
We may redeem the 2019 Notes or 2021 Notes in their entirety at a price equal to 100% of the principal amount of the applicable Cash Convertible Notes plus accrued interest at any time 20% or less of the aggregate principal amount of the applicable Cash Convertible Notes originally issued remain outstanding.
The Cash Convertible Notes are senior unsecured obligations, and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Cash Convertible Notes; equal in right of payment to any of our unsecured indebtedness that is unsubordinated; junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such ind