View Filing Data

Print Document View Excel Document

Document and Entity Information - USD ($) $ in Billions	12 Months Ended
Document and Entity Information - USD ($) $ in Billions	Dec. 31, 2016	Feb. 24, 2017	Jun. 30, 2016
Document and Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Entity Registrant Name	LIVANOVA PLC
Entity Central Index Key	0001639691
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1.3
Entity Common Stock, Shares Outstanding		48,178,155
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Trading Symbol	LIVN

Consolidated Statements of Income (Loss) - USD ($)	2 Months Ended	3 Months Ended														8 Months Ended		12 Months Ended
Consolidated Statements of Income (Loss) - USD ($)	Dec. 31, 2015	Dec. 31, 2016	Oct. 18, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Jul. 24, 2015	Apr. 24, 2015	Jan. 23, 2015	Oct. 24, 2014	Jul. 25, 2014	Apr. 25, 2014	Jan. 24, 2014	Oct. 25, 2013	Jul. 26, 2013	Dec. 31, 2015	Dec. 26, 2014	Dec. 31, 2016	Apr. 24, 2015	Apr. 25, 2014
Income Statement [Abstract]
Net sales	$ 267,175,000	$ 310,641,000	$ 67,521,000	$ 295,268,000	$ 321,047,000	$ 286,969,000	$ 81,011,000	$ 74,072,000	$ 72,065,000	$ 73,417,000	$ 72,004,000					$ 415,707,000	$ 181,641,000	$ 1,213,925,000	$ 291,558,000	$ 282,014,000
Cost of sales																143,843,000	16,835,000	471,986,000	27,311,000	27,355,000
Product remediation																0		37,534,000	0	0
Gross profit	142,301,000	164,039,000	57,985,000	188,125,000	189,545,000	162,696,000	71,578,000					$ 66,477,000	$ 65,525,000	$ 66,651,000	$ 65,594,000	271,864,000	164,806,000	704,405,000	264,247,000	254,659,000
Operating expenses:
Selling, general and administrative																169,180,000	83,045,000	469,234,000	123,619,000	120,642,000
Research and development																51,420,000	28,125,000	122,454,000	42,245,000	45,220,000
Merger and integration expenses																55,787,000	0	20,537,000	8,692,000	0
Restructuring expenses																11,323,000	0	55,943,000	0	0
Amortization of intangibles																9,734,000		45,511,000	1,039,000	1,342,000
Goodwill impairment																0		18,348,000	0	0
Litigation settlement																0		0	0	7,443,000
Total operating expenses																297,444,000	111,170,000	732,027,000	175,595,000	174,647,000
(Loss) income from operations																(25,580,000)	53,636,000	(27,622,000)	88,652,000	80,012,000
Interest income																392,000	125,000	1,698,000	184,000	182,000
Interest expense																(1,509,000)	(8,000)	(10,616,000)	(21,000)	(20,000)
Impairment of investment																(5,062,000)	0	0	0	0
Foreign exchange and other - gain (loss)																(7,522,000)	109,000	3,491,000	479,000	(295,000)
(Loss) income before income taxes																(39,281,000)	53,861,000	(33,049,000)	89,294,000	79,879,000
Income tax expense (benefit)																(12,976,000)	18,791,000	7,128,000	31,446,000	24,989,000
Losses from equity method investments																(3,308,000)	0	(22,612,000)	0	0
Net (loss) income	$ (16,941,000)	$ (29,799,000)	$ (25,091,000)	$ (1,569,000)	$ 8,957,000	$ (40,378,000)	$ 12,419,000					$ 10,514,000	$ 16,542,000	$ 17,273,000	$ 13,519,000	$ (29,613,000)	$ 35,070,000	$ (62,789,000)	$ 57,848,000	$ 54,890,000
Basic (loss) income per share (in Dollars per Share)																$ (0.90)	$ 1.32	$ (1.29)	$ 2.19	$ 2.02
Diluted (loss) income per share (in Dollars per Share)	$ (0.41)	$ (0.61)	$ (0.96)	$ (0.03)	$ 0.18	$ (0.83)	$ 0.47					$ 0.40	$ 0.62	$ 0.64	$ 0.50	$ (0.90)	$ 1.31	$ (1.29)	$ 2.17	$ 2.00
Shares used in computing basic (loss) income per share (in Shares)																32,741,357	26,551,749	48,860,352	26,391,064	27,142,597
Shares used in computing diluted (loss) income per share (in Shares)																32,741,357	26,774,708	48,860,352	26,625,721	27,466,474

Consolidated Statements of Comprehensive Income (Loss) - USD ($)	8 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2016	Apr. 24, 2015	Apr. 25, 2014
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (29,613,000)	$ (62,789,000)	$ 57,848,000	$ 54,890,000
Other comprehensive (loss) income:
Net change in unrealized gain on derivatives	1,274,000	3,930,000	0	0
Tax effect	(386,000)	(1,199,000)	0	0
Net of tax	888,000	2,731,000	0	0
Foreign currency translation adjustment, net of tax	(51,715,000)	(16,990,000)	(3,856,000)	287,000
Total other comprehensive (loss) income	(50,827,000)	(14,259,000)	(3,856,000)	287,000
Total comprehensive (loss) income	$ (80,440,000)	$ (77,048,000)	$ 53,992,000	$ 55,177,000

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Apr. 24, 2015
Current Assets:
Cash and cash equivalents	$ 39,789	$ 112,613	$ 124,187
Short-term investments	0	6,997	27,020
Accounts receivable, net	275,730	272,352	50,569
Inventories	183,489	212,448	23,963
Prepaid and refundable income taxes	60,615	42,425	2,971
Deferred tax assets, net	0	0	7,199
Prepaid expenses and other current assets	60,450	26,579	4,812
Total Current Assets	620,073	673,414	240,721
Property, plant and equipment, net	223,842	244,587	40,287
Goodwill	691,712	745,356	0
Intangible assets, net	609,197	658,942	10,168
Investments	61,092	77,486	17,127
Deferred tax assets, net	6,017	153,509	6,078
Other assets	130,698	5,445	1,563
Total Assets	2,342,631	2,558,739	315,944
Current Liabilities:
Current debt obligations	47,650	82,513	0
Accounts payable	92,952	109,588	7,251
Accrued liabilities	75,567	63,047	8,334
Income taxes payable	22,340	26,699	2,083
Accrued employee compensation and related benefits liability	78,302	77,274	13,781
Total Current Liabilities	316,811	359,121	31,449
Long-term debt obligations	75,215	91,791	0
Deferred income taxes liability	172,541	235,483	0
Long-term employee compensation and related benefits liability	31,668	31,139	1,311
Other long-term liabilities	39,487	29,743	6,610
Total Liabilities	635,722	747,277	39,370
Commitments and contingencies (Note 18)	0
Stockholders’ Equity:
Common Stock / Ordinary Shares	74,578	75,444	321
Additional paid-in capital	1,719,893	1,742,032	445,362
Treasury stock at cost, 128,277 ordinary shares at December 31, 2016; canceled at October 19, 2015 and 6,058,134 common shares at April 24, 2015	(4,500)	0	(243,535)
Accumulated other comprehensive (loss)	(68,487)	(54,228)	(3,401)
Accumulated (loss) earnings	(14,575)	48,214	77,827
Total Stockholders’ Equity	1,706,909	1,811,462	276,574
Total Liabilities and Stockholders’ Equity	$ 2,342,631	$ 2,558,739	$ 315,944

Consolidated Balance Sheets (Parenthetical)	Dec. 31, 2016 £ / shares shares	Dec. 31, 2015 £ / shares shares	Apr. 24, 2015 $ / shares shares
Statement of Financial Position [Abstract]
Common stock, par value (in Dollars/GBP per Share) \| (per share)	£ 1	£ 1	$ 0.01
Common stock, shares issued (shares)	48,156,690	48,868,305	32,054,236
Common stock, shares outstanding (shares)	48,028,413	48,868,305	25,996,102
Treasury stock (shares)	128,277		6,058,134

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Cyberonics Inc [Member]	Sorin S.p.A. [Member]	Common / Ordinary Stock [Member]	Common / Ordinary Stock [Member] Cyberonics Inc [Member]	Common / Ordinary Stock [Member] Sorin S.p.A. [Member]	Additional Paid-in Capital [Member]	Additional Paid-in Capital [Member] Cyberonics Inc [Member]	Additional Paid-in Capital [Member] Sorin S.p.A. [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Accumulated Earnings (Loss) [Member]
Balance at Apr. 26, 2013	$ 229,568			$ 313			$ 380,159			$ (116,161)	$ 168	$ (34,911)
Balance (shares) at Apr. 26, 2013				31,289,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation plans	19,640			$ 5			19,635
Stock-based compensation plans (shares)				531,000
Tax benefits from stock-based compensation plans	27,073						27,073
Purchase of Common Stock	(72,358)									(72,358)
Net (loss) income	54,890											54,890
Other comprehensive income (loss)	287										287
Balance at Apr. 25, 2014	259,100			$ 318			426,867			(188,519)	455	19,979
Balance (shares) at Apr. 25, 2014				31,820,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation plans	13,967			$ 3			13,964
Stock-based compensation plans (shares)				234,000
Tax benefits from stock-based compensation plans	4,531						4,531
Purchase of Common Stock	(55,016)									(55,016)
Net (loss) income	57,848											57,848
Other comprehensive income (loss)	(3,856)										(3,856)
Balance at Apr. 24, 2015	$ 276,574			$ 321			445,362			(243,535)	(3,401)	77,827
Balance (shares) at Apr. 24, 2015	32,054,236			32,054,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation plans	$ 21,101			$ 1			21,100
Stock-based compensation plans (shares)				86,000
Treasury stock	(7,350)									(7,350)
Cancellation of Cyberonics stock	(215,899)			$ (322)			(466,462)			250,885
Cancellation of Cyberonics stock (shares)				(32,140,000)
Balance at Oct. 19, 2015	74,426			$ 0			0			0	(3,401)	77,827
Balance (shares) at Oct. 19, 2015				0
Balance at Apr. 24, 2015	$ 276,574			$ 321			445,362			(243,535)	(3,401)	77,827
Balance (shares) at Apr. 24, 2015	32,054,236			32,054,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	$ (29,613)
Other comprehensive income (loss)	(50,827)
Balance at Dec. 31, 2015	$ 1,811,462			$ 75,444			1,742,032			0	(54,228)	48,214
Balance (shares) at Dec. 31, 2015	48,868,305			48,868,000
Balance at Oct. 19, 2015	$ 74,426			$ 0			0			0	(3,401)	77,827
Balance (shares) at Oct. 19, 2015				0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation plans	12,494			$ 226			12,268
Stock-based compensation plans (shares)				149,000
Issuance of ordinary shares		$ 215,899	$ 1,589,083		$ 40,213	$ 35,005		$ 175,686	$ 1,554,078
Issuance of ordinary shares (shares)					26,046,000	22,673,000
Net (loss) income	(16,941)											(29,613)
Other comprehensive income (loss)	(50,827)										(50,827)
Balance at Dec. 31, 2015	$ 1,811,462			$ 75,444			1,742,032			0	(54,228)	48,214
Balance (shares) at Dec. 31, 2015	48,868,305			48,868,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation plans	$ 26,982			$ 391			26,591
Stock-based compensation plans (shares)				282,000
Share repurchases	(54,487)			$ (1,257)			(48,730)			(4,500)
Stock repurchases (shares)				(993,000)
Net (loss) income	(62,789)											(62,789)
Other comprehensive income (loss)	(14,259)										(14,259)
Balance at Dec. 31, 2016	$ 1,706,909			$ 74,578			$ 1,719,893			$ (4,500)	$ (68,487)	$ (14,575)
Balance (shares) at Dec. 31, 2016	48,156,690			48,157,000

Consolidated Statements of Cash Flows - USD ($)	8 Months Ended	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Dec. 31, 2015	Dec. 31, 2016	Apr. 24, 2015	Apr. 25, 2014
Cash Flows From Operating Activities:
Net (loss) income	$ (29,613,000)	$ (62,789,000)	$ 57,848,000	$ 54,890,000
Non-cash items included in net (loss) income:
Depreciation	10,766,000	39,852,000	5,768,000	4,289,000
Amortization	9,734,000	45,511,000	1,039,000	1,342,000
Stock-based compensation	31,030,000	19,569,000	11,940,000	11,240,000
Amortization of income taxes payable on intercompany transfers	12,719,000	25,952,000	0	0
Deferred income tax (benefit) expense	(39,766,000)	(26,711,000)	9,400,000	(5,201,000)
Impairment of goodwill	0	18,348,000	0	0
Impairment of property, plant and equipment	0	5,971,000	0	0
Impairment of investments	5,127,000	0	0	0
Loss from equity method investments	3,308,000	22,612,000	0	0
Other	10,492,000	10,217,000	14,000	(1,334,000)
Changes in operating assets and liabilities:
Accounts receivable, net	(15,850,000)	(16,448,000)	(2,654,000)	(10,656,000)
Inventories	36,326,000	26,703,000	(7,113,000)	254,000
Other current and non-current assets	(10,390,000)	(32,686,000)	(2,112,000)	(2,716,000)
Restructuring reserve	(4,720,000)	12,405,000	0	0
Accounts payable and accrued current and non-current liabilities	(28,451,000)	1,645,000	5,546,000	2,088,000
Net cash provided by (used in) operating activities	(9,288,000)	90,151,000	79,676,000	54,196,000
Cash Flow From Investing Activities:
Purchase of short-term investments	(13,990,000)	(7,054,000)	(31,985,000)	(39,985,000)
Maturities of short-term investments	34,013,000	14,051,000	30,089,000	29,990,000
Purchase of property, plant and equipment	(16,057,000)	(36,484,000)	(6,687,000)	(15,222,000)
Intangible assets purchases	(1,229,000)	(1,878,000)	0	(3,839,000)
Proceeds from asset sales	948,000	1,145,000	0	0
Purchases of equity and cost method investments	0	(8,026,000)	(1,182,000)	(5,356,000)
Cash obtained in the Merger	12,497,000	0	0	0
Net cash (used in) provided by investing activities	16,182,000	(38,246,000)	(9,765,000)	(34,412,000)
Cash Flows From Financing Activities:
Short-term (repayments) borrowing, net	11,112,000	(33,708,000)	0	0
Proceeds from long-term debt obligations	0	7,231,000	0	0
Repayment of long-term debt obligations	(31,968,000)	(21,109,000)	0	0
Repayment of trade receivable advances	0	(23,779,000)	0	0
Loans to equity method investees	0	(6,270,000)	0	0
Share repurchases	(7,350,000)	(54,487,000)	(55,015,000)	(72,359,000)
Proceeds from exercise of options for stock	6,480,000	8,332,000	3,184,000	9,737,000
Cash settlement of compensation-based stock units	(708,000)	(2,724,000)	(1,171,000)	(1,323,000)
Realized excess tax benefits - stock-based compensation	3,050,000	2,060,000	4,746,000	26,678,000
Other financial assets and liabilities	1,257,000	145,000	0	0
Net cash used in financing activities	(18,127,000)	(124,309,000)	(48,256,000)	(37,267,000)
Effect of exchange rate changes on cash and cash equivalents	(341,000)	(420,000)	(767,000)	73,000
Net (decrease) increase in cash and cash equivalents	(11,574,000)	(72,824,000)	20,888,000	(17,410,000)
Cash and cash equivalents at beginning of period	124,187,000	112,613,000	103,299,000	120,709,000
Cash and cash equivalents at end of period	112,613,000	39,789,000	124,187,000	103,299,000
Supplementary Disclosures of Cash Flow Information:
Cash paid for interest	815,000	7,371,000	1,000	4,000
Cash paid for income taxes	22,738,000	47,808,000	15,577,000	4,296,000
Supplementary Disclosure of Non-Cash Financing Activity:
Acquisition financed by ordinary shares of LivaNova	$ 1,589,083,000	$ 0	$ 0	$ 0

Nature of Operations	12 Months Ended
Nature of Operations	Dec. 31, 2016
Accounting Policies [Abstract]
Nature of Operations	Nature of Operations Background LivaNova PLC and its subsidiaries (collectively, the “Company”, “LivaNova”, “we”, or “our”), the successor registrant to Cyberonics, Inc., was organized under the laws of England and Wales on February 20, 2015 for the purpose of facilitating the business combination of Cyberonics, Inc., a Delaware corporation (“Cyberonics”) and Sorin S.p.A., a joint stock company organized under the laws of Italy (“Sorin”). As a result of the business combination, LivaNova became the holding company of the combined businesses of Cyberonics and Sorin. This business combination became effective on October 19, 2015, at which time LivaNova’s ordinary shares were listed for trading on the NASDAQ Global Market (“NASDAQ”) and on the London Stock Exchange (the “LSE”) as a standard listing under the trading symbol “LIVN”. On February 23, 2017, we announced our voluntary cancellation of our standard listing of ordinary shares with the London Stock Exchange due to the low volume of our ordinary share trading on the London Stock Exchange. Trading will cease at the close of business on April 4, 2017. LivaNova PLC is headquartered in London, United Kingdom (“U.K.”). Description of the business We are a global medical device company focused on the development and delivery of important therapeutic solutions for the benefit of patients, healthcare professionals, and healthcare systems throughout the world. Working closely with medical professionals throughout the world in the field of Cardiac Surgery, Neuromodulation and Cardiac Rhythm Management, we design, develop, manufacture and sell innovative therapeutic solutions that are consistent with our mission to improve our patients’ quality of life, increase the skills and capabilities of healthcare professionals and minimize healthcare costs. Description of the Mergers On October 19, 2015, pursuant to the terms of a definitive Transaction Agreement entered into by LivaNova, Cyberonics, Sorin and Cypher Merger Sub (the “Merger Sub”), dated March 23, 2015, Sorin merged with and into LivaNova, with LivaNova continuing as the surviving company, immediately followed by the merger of Merger Sub with and into Cyberonics, with Cyberonics continuing as the surviving company and as a wholly owned subsidiary of LivaNova (the “Mergers”). Upon the consummation of the Mergers, the historical financial statements of Cyberonics became the Company’s historical financial statements. Accordingly, the historical financial statements of Cyberonics are included in the comparative prior periods. The issuance of LivaNova ordinary shares in connection with the Mergers was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Registration Statement on Form S-4 (File No. 333-203510), as amended, filed with the United States Securities and Exchange Commission (the “SEC”) by LivaNova and declared effective on August 19, 2015. Further, pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), LivaNova is deemed to be a “successor” issuer to Cyberonics. As such, the ordinary shares of LivaNova are deemed to be registered under Section 12(b) of the Exchange Act, and LivaNova is subject to the informational requirements of the Exchange Act and the rules and regulations promulgated thereunder.

Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies

The Mergers

On October 19, 2015, as further described herein, LivaNova became the holding company of the combined businesses of Cyberonics and Sorin. Based on the structure of the Mergers, management determined that Cyberonics was considered to be the accounting acquirer and predecessor for accounting purposes.

The purchase price allocation recorded and reported in the Transition Report on Form 10-KT for the fiscal period that began April 25, 2015 and ended December 31, 2015, as amended (the “2015 Form 10-KT”), was based on a preliminary acquisition valuation and included the use of estimates based on information that was available to management at the time. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. We finalized our appraisals and estimates which resulted in a change in the valuation of assets acquired, liabilities assumed, goodwill recognized and the related impact on deferred taxes and cumulative translation adjustments as a result of analysis of the facts and circumstances that existed at the time of the acquisition, and we recorded our adjustments during the quarters ended June 30, 2016 and September 30, 2016. Refer to “Note 3. Business Combinations” for further information regarding the adjustments.

Basis of Presentation

The accompanying consolidated financial statements of LivaNova at December 31, 2016 have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.” and such principles, “U.S. GAAP”) and the instructions to Form 10-K and Article 3 and Article 5 of Regulation S-X.

Reporting Periods

In this Report on Form 10-K, LivaNova, as the successor company to Cyberonics, is reporting the results for:


•	LivaNova and its consolidated subsidiaries for the year ended December 31, 2016.

•

A transitional period, April 25, 2015 to December 31, 2015, filed on Form 10-K/T. This transitional report is the result of the change from Cyberonics’ fiscal year ending the last Friday in April before the Mergers to a calendar year ending December 31st after the Mergers. The transitional period included the business activities of Cyberonics and its consolidated subsidiaries for the period April 25, 2015 to October 18, 2015, and the consolidated results of the combined businesses of LivaNova (Cyberonics and Sorin) for the period October 19, 2015 through December 31, 2015.


•	LivaNova is also reporting the historical results of Cyberonics and its consolidated subsidiaries for the fiscal years ended April 24, 2015 and April 25, 2014.

Consolidation

The accompanying consolidated financial statements for LivaNova include LivaNova’s wholly owned subsidiaries and the LivaNova PLC Employee Benefit Trust (“the Trust”). The accompanying consolidated financial statements for Cyberonics include Cyberonics’ wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in such financial statements and accompanying notes. These estimates are based on management’s best knowledge of current events and actions we may undertake in the future. Estimates are used in accounting for, among other items, valuation and amortization of intangible assets, goodwill, measurement of deferred tax assets and liabilities, uncertain income tax positions, stock-based compensation, obsolete and slow-moving inventories, and in general, allocations to provisions and the fair value of assets and liabilities recorded in a business combination. Actual results could differ materially from those estimates.

Merger, Integration and Restructuring Charges

As a result of the Mergers, we incurred merger, integration and restructuring charges and reported them separately as operating expenses in the consolidated statements of income (loss).


•	Merger expenses consisted of expenses directly related to the Mergers, such as professional fees for legal services, accounting services, due diligence, a fairness opinion and the preparation of registration and regulatory filings in the United States and Europe, as well as investment banking fees.


•	Integration expenses consisted of consultancy fees with regard to: our systems integration, organization structure integration, finance, synergy and tax planning, the transition to U.S. GAAP for Sorin, our London Stock Exchange listing and certain re-branding efforts.

•

After the consummation of the Mergers between Cyberonics and Sorin in October 2015, we initiated several restructuring plans (the “Restructuring Plans”) to combine our business operations. We identified costs incurred and liabilities assumed for the Restructuring Plans. The Restructuring Plans are intended to leverage economies of scale, eliminate duplicate corporate expenses, streamline distributions and logistics and office functions in order to reduce overall costs.

Reclassifications

The following reclassifications have been made to conform the prior year consolidated statements of income (loss), consolidated balance sheets and consolidated statements of cash flows with current year presentation:

•

Amortization expense of $9.7 million, $1.0 million and $1.3 million was reclassified from Cost of Sales, SG&A and R&D expense and reported separately in the accompanying consolidated statements of income (loss), for the transitional period April 25, 2015 to December 31, 2015, and the fiscal years ended April 24, 2015 and April 25, 2014, respectively, in order to conform with the year ended December 31, 2016.


•	Prepaid income taxes were reclassified into Prepaid and Refundable Income Taxes from Prepaid Expenses and Other Current Assets in the accompanying consolidated balance sheet for the fiscal year ended April 24, 2015 in the amount of $3.0 million in order to conform with subsequent period presentations.


•	Income taxes payable was reported separately as a current liability, rather than as an Other Current Liability, in the accompanying consolidated balance sheet for the fiscal year ended April 24, 2015 in the amount of $2.1 million in order to conform with subsequent period presentations.

•

Accrued employee compensation and related benefits was reported separately as a current liability, rather than included with Accrued Liabilities, in the accompanying consolidated balance sheets for the transitional period April 25, 2015 to December 31, 2015 in the amount of $77.3 million, and for the fiscal year ended April 24, 2015 in the amount of $13.8 million in order to conform with the year ended December 31, 2016.


•	Long-term employee compensation and related benefits liability was reported separately as a long-term liability, rather than included with Other Long-Term Liabilities, in the accompanying consolidated balance sheets for the fiscal year ended April 24, 2015 in the amounts of $1.3 million in order to conform with subsequent period presentations.


•	Certain previously reported amounts in the accompanying consolidated statements of cash flows for the transitional period April 25, 2015 to December 31, 2015, the fiscal year ended April 24, 2015 and the fiscal year ended April 25, 2014 have been reclassified to conform to the current year presentation.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less, consisting of demand deposit accounts and money market mutual funds, to be cash equivalents and are carried in the balance sheet at cost, which approximated their fair value. We carried $0.0 million, $41.1 million and $28.3 million in money market mutual funds at December 31, 2016, December 31, 2015 and April 24, 2015, respectively.

Accounts Receivable

Our accounts receivable consisted of trade receivables from direct customers and distributors. We maintain an allowance for doubtful accounts for potential credit losses based on our estimates of the ability of customers to make required payments, historical credit experience, existing economic conditions and expected future trends. We write off uncollectible accounts against the allowance when all reasonable collection efforts have been exhausted.

Inventories

We state our inventories at the lower of cost, using the first-in first-out (“FIFO”) method, or market. Our calculation of cost includes the acquisition cost of raw materials and components, direct labor and overhead. We reduce the carrying value of inventories for those items that are potentially excess, obsolete or slow moving based on changes in customer demand, technology developments or other economic factors.

Property, Plant and Equipment (“PP&E”)

Assets held and used

PP&E is carried at cost, less accumulated depreciation. Maintenance and repairs, and minor replacements are charged to expense as incurred, while significant renewals and improvements are capitalized. We compute depreciation using the straight-line method over estimated useful lives. Leasehold improvements are depreciated over the shorter of the following terms: the useful life of the asset or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements are purchased. Capital improvements to the building are added as building components and depreciated over the useful life of the improvement or the building, whichever is less. PP&E is reviewed for impairment annually.

Assets held for sale

We classify long-lived assets as held for sale in the period in which we commit to a plan to sell the asset, the asset is available for immediate sale, the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and the sale of the asset is probable. A long-lived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell and depreciation is discontinued. We recognize a loss for any excess of carrying value over the fair value less cost to sell. See “Note 4. Restructuring Plans” for information regarding our Costa Rica manufacturing facility that was classified as held for sale at December 31, 2016.

Business Combinations and Goodwill

We allocate the amounts we pay for an acquisition to the assets we acquire and liabilities we assume based on their fair values at the date of acquisition, including property, plant and equipment, inventories, accounts receivable, long-term debt, and identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination, including in-process research and development, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. Transaction costs associated with these acquisitions are expensed as incurred and are reported as operating expenses. We assigned goodwill arising from the Mergers to the Cardiac Surgery, Cardiac Rhythm Management and Neuromodulation reporting units. We recognize adjustments to the provisional amounts identified during the measurement period with a corresponding adjustment to goodwill in the reporting period in which the adjustment amounts are determined. 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 will be recorded in the same period’s financial statements, calculated as if the accounting had been completed at the acquisition date.

Intangible Assets, Other than Goodwill

Intangible assets shown on the consolidated balance sheets are finite-lived assets. Developed technology rights consist primarily of existing technology and technical capabilities acquired from Sorin in the Mergers that were recorded at their respective fair values as of the acquisition date which includes patents, related know-how and licensed patent rights that represent assets expected to generate future economic benefits. Trademarks and trade names include Sorin trade name acquired as part of the Mergers. Customer relationships consist of relationships with hospitals and cardiac surgeons in the countries where we operate. Other intangible assets consist of favorable leases acquired from Sorin in the Mergers. We amortize our intangible assets over their useful lives using the straight-line method.

Amortization expense is disclosed separately in the consolidated statement of net income (loss). We evaluate our intangible assets each reporting period to determine whether events and circumstances indicate either a different useful life or impairment. If we change our estimate of the useful life of an asset, we amortize the carrying amount over the revised remaining useful life.

Impairments of Long-Lived Assets, Investments and Goodwill

PP&E, intangible assets and investments

We evaluate the carrying value of our long-lived assets and investments when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Such changes in circumstance may include, among other items, (i) an expectation of a sale or disposal of a long-lived asset or asset group, (ii) adverse changes in market or competitive conditions, (iii) an adverse change in legal factors or business climate in the markets in which we operate and (iv) operating or cash flow losses.

For PP&E and intangible assets used in our operations, recoverability generally is determined by comparing the carrying value of an asset, or group of assets to their expected undiscounted future cash flows. If the carrying value of an asset (asset group) is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset (asset group) and its estimated fair value. The asset grouping as well as the determination of expected undiscounted cash flow amounts requires significant judgments, estimates, and assumptions, including cash flows generated upon disposition. We generally measure fair value by considering sale prices for similar assets. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell.

Goodwill

We conduct impairment testing of our goodwill on October 1st each year. We test goodwill between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Testing is performed at the reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for which financial information is available and is regularly viewed by management. The reporting units we use for goodwill impairment testing are Neuromodulation (“NM”), Cardiac Surgery (“CS”) and Cardiac Rhythm Management (“CRM”).

We assess qualitative factors to determine whether it is more likely than not that the fair value of our reporting units is less than its carrying amount, including goodwill. We assess such qualitative factors as expectation of a sale or disposal of a long-lived asset or asset group, adverse changes in market or competitive conditions, sustained declines in our stock price, an adverse change in legal factors or business climate in the markets in which we operate and operating cash flows. We also consider the results of prior reporting unit fair value calculations, if any, in our considerations. If we elect to perform a quantitative assessment of goodwill, a qualitative assessment is unnecessary.

If we determine that goodwill is more-likely-than-not impaired, or if we elect to perform quantitative testing, we perform the first step of the two-step goodwill impairment test. We first identify potential impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. Fair value refers to the price that would be received if we were to sell the unit as a whole in an orderly transaction. If the carrying amount of our reporting unit is greater than zero and its fair value exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying value of the reporting unit exceeds its fair value, we perform step 2 of the goodwill impairment test and determine if the carrying amount of the reporting unit exceeds the implied fair value of the goodwill. We recognize goodwill impairment for this excess up to and including the carrying amount of the goodwill.

If the aggregate fair value of our reporting units exceeds our market capitalization, we evaluate the reasonableness of the implied control premium which includes a comparison to implied control premiums from recent market transactions within our industry or other relevant benchmark data.

Goodwill impairment evaluations are highly subjective. In most instances, they involve expectations of future cash flows that reflect our judgments and assumptions regarding future industry conditions and operations. The estimates, judgments and assumptions used in the application of our goodwill impairment policies reflect both historical experience and an assessment of current operational, industry, market, economic and political environments. The use of different estimates, judgments, assumptions and expectations regarding future industry and market conditions and operations would likely result in materially different asset carrying values and operating results.

Quantitative factors used to determine the fair value of the reporting units reflect our best estimates, and we believe they are reasonable. Future declines in the reporting unit's operating performance or our anticipated business outlook may reduce the estimated fair value of our reporting unit and result in additional impairments. Factors that could have a negative impact on the fair value of the reporting units include, but are not limited to:

•Decreases in revenue as a result of the inability of our sales force to effectively market and promote our products;

•Increased competition, patent expirations or new technologies or treatments;

•Declines in anticipated growth rates;

•The outcome of litigation, legal proceedings, investigations or other claims resulting in significant cash outflows;

•Increases in the market-participant risk-adjusted Weighted Average Cost of Capital (“WACC”).

Derivatives

U.S. GAAP requires companies to recognize all derivatives as assets and liabilities on the balance sheet and to measure the instruments at fair value through earnings unless the derivative qualifies for hedge accounting. If the derivative qualifies for hedge accounting, depending on the nature of the hedge and hedge effectiveness, changes in the fair value of the derivative will either be recognized immediately in earnings or recorded in other comprehensive income (loss) until the hedged item is recognized in earnings upon settlement/termination. The changes in the fair value of the derivative are intended to offset the change in fair value of the hedged asset, liability or probable commitment. We evaluate hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in earnings. Cash flows from derivative contracts are reported as operating activities in the consolidated statements of cash flows.

We use currency exchange rate derivative contracts and interest rate derivative instruments to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, we enter into derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the forward contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. We do not enter into currency exchange rate derivative contracts for speculative purposes. All derivative instruments that qualify for hedge accounting are recorded at fair value on the consolidated balance sheets, as financial assets or liabilities (current or non-current) depending upon the gain or loss position of the contract and contract maturity date.

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings to offset exchange differences originated by the hedged item or to adjust the value of operating income (expense). We use freestanding derivative forward contracts to offset exposure to the variability of the value associated with assets and liabilities denominated in a foreign currency. These derivatives are not designated as hedges, and therefore changes in the value of these forward contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign currency denominated assets and liabilities.

We use interest rate derivative instruments designated as cash flow hedges to manage the exposure to interest rate movements and to reduce the risk of increased borrowing costs by converting floating-rate debt into fixed-rate debt. Under these agreements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to agreed-upon notional principal amounts. The interest rate swaps are structured to mirror the payment terms of the underlying loan. The fair value of the interest rate swaps is reported in the consolidated balance sheets as financial assets or liabilities (current or non-current) depending upon the gain or loss position of the contract and the maturity of the future cash flows of the fair value of each contract. The effective portion of the gain or loss on these derivatives is reported as a component of accumulated other comprehensive income. The non-effective portion is reported in interest expense in consolidated statements of income (loss).

Fair Value Measurements

We follow the authoritative guidance on fair value measurements and disclosures with respect to assets and liabilities that are measured at fair value on both a recurring and nonrecurring basis. Under this guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability, based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels defined as follows:


•	Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.


•	Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.


•	Level 3 - Inputs are unobservable for the asset or liability.

Financial liabilities that are classified as Level 1 securities include highly liquid portfolio of publically traded mutual funds for which quoted market prices are available.

Financial assets and liabilities that are classified as Level 2 include derivative instruments, primarily forward and option currency contracts and interest rate swaps contracts, which are valued using standard calculations and models that use readily observable market data as their basis.

Level 3 investment securities include convertible preferred stocks and convertible debt securities of private companies for which there are no quoted market prices such that the determination of fair value requires significant judgment or estimation. These securities were valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments by market participants. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value of the securities.

Investments

Short-Term Investments

Our short-term investments consisted of certificates of deposit and commercial paper considered held-to-maturity debt securities and carried at cost, which approximates fair value.

Cost and Equity Method Investments

Our investments in equity instruments, and related loans, are strategic investments in companies that are in varied stages of development and not publicly traded. Our equity investments are reported under Investments, and related loans under Prepaid Expenses and Other Current Assets and Other Assets, on the consolidated balance sheets. We account for our equity investments and related loans under the cost or the equity method, as appropriate, depending on our level of control over the investee. We use the equity method if we exercise significant influence over the investee but do not control the investee, and we use the cost method if we exercise less than significant influence, which is generally under 20% ownership.

Cost Method Investments

We initially record the amount of our cost method investments at cost and regularly review our investments for changes in circumstance or the occurrence of events that suggest our investment may not be recoverable. This evaluation considers all available financial information related to the investee, including valuations based on recent third-party equity investments in the investees. If an impairment is considered to be other-than-temporary, the loss is recognized in the consolidated statements of income in the period the determination is made. Impairments are reported as Impairment of Investments in the consolidated statement of income (loss).

Equity Method Investments

The cost of our investments accounted for under the equity method may give rise to a difference between the cost of the investment and our share of the investee’s net book value, or a basis difference. A basis difference is assigned to assets and liabilities of the investee with remaining unassigned basis assigned to goodwill. We amortize finite lived basis differences over the life of the asset or liability. We adjust our investment carrying value each period for our share of the investee’s income or loss. We report our share of the investee’s losses and the amortization of basis differences in the consolidated statements of income (loss) as Income (Loss) from Equity Method Investments. We regularly review our investments for changes in circumstance or the occurrence of events that suggest our investment may not be recoverable, and if an impairment is considered to be other-than-temporary, the loss is recognized in the consolidated statements of income in the period the determination is made and reported as Losses from Equity Method Investments.

Warranty Obligation

Warranties

We offer a warranty on various products. We estimate the costs that may be incurred under warranties and record a liability in the amount of such costs at the time the product is sold. The amount of the reserve recorded is equal to the net costs to repair or otherwise satisfy the claim. We include the warranty obligation in accrued liabilities on the consolidated balance sheets. Warranty expense is recorded to cost of goods sold in our consolidated statements of income (loss).

Retirement Benefit Plan Assumptions

We sponsor various retirement benefit plans, including defined benefit pension plans (pension benefits), defined contribution savings plans and termination indemnity plans, covering substantially all U.S. employees and employees outside the United States. Pension benefit costs include assumptions for the discount rate, retirement age, compensation rate increases and the expected return on plan assets.

Revenue Recognition

Product Revenue

We sell our products through a direct sales force and independent distributors. We recognize revenue when persuasive evidence of a sales arrangement exists, title to the goods and risk of loss transfers to customers or to independent distributors, the selling price is fixed or determinable and collectability is reasonably assured. We estimate expected sales returns based on historical data and record a reduction of sales with a return reserve. We record state and local sales taxes net; that is, we exclude sales tax from revenue.

Service Revenue

Services largely consist of technical assistance services provided to hospitals for the installation, maintenance and support in the operation of heart-lung machines, and autotransfusion systems. Service related revenue is recognized on the basis of progress of the services, when services are rendered, when collectability is reasonably assured and when the amount is fixed and determinable.

Research and Development (“R&D”)

All R&D costs are expensed as incurred. R&D includes costs of basic research activities as well as engineering and technical effort required to develop a new product or make significant improvement to an existing product or manufacturing process. R&D costs also include regulatory and clinical study expenses, including postmarket clinical studies. Amortization of intangible assets not associated with a marketable product is recorded in R&D.

Leases

We account for leases that transfer substantially all benefits and risks incidental to the ownership of property as an acquisition of an asset and the incurrence of an obligation, and we account for all other leases as operating leases. Certain of our leases provide for tenant improvement allowances that have been recorded as deferred rent and amortized, using the straight-line method, over the life of the lease as a reduction to rent expense. In addition, scheduled rent increases and rent holidays are recognized on a straight-line basis over the term of the lease.

Stock-Based Compensation

Stock-Based Incentive Awards

We may grant stock-based incentive awards to directors, officers, key employees and consultants. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair market value of the award. We recognize equity-based compensation expense ratably over the period that an employee is required to provide service in exchange for the entire award (all vesting periods). We issue new shares upon stock option exercises, otherwise issuance of stock for vesting of restricted stock, restricted stock units or stock appreciation right (“SAR”) are issued from treasury shares. We have the right to elect to pay the cash value of vested restricted stock units in lieu of the issuance of new shares.

Stock Appreciation Rights

A stock appreciation right (“SAR”) confers upon an employee the contractual right to receive an amount of cash, stock, or a combination of both that equals the appreciation in the company’s stock from an award’s grant date to the exercise date. SARs may be exercised at the employee’s discretion during the exercise period and do not give the employee an ownership right in the underlying stock. SARs do not involve payment of an exercise price. We use the Black-Scholes option pricing methodology to calculate the grant date fair market value of SARs. We determine the expected volatility of the awards based on historical volatility. Calculation of compensation for stock awards requires estimation of employee turnover and forfeiture rates.

Restricted Stock and Restricted Stock Units

We may grant restricted stock and restricted stock units at no purchase cost to the grantee. The grantee of unvested restricted stock units have no voting rights nor rights to dividends. Sale or transfer of the stock and stock units are restricted until they are vested. The fair market value of service-based restricted stock and restricted stock units are determined using the market closing price on the grant date, and compensation is expensed ratably over the vesting period. Calculation of compensation for stock awards requires estimation of employee turnover and forfeiture rates.

Income Taxes

We are a U.K. corporation, and we operate through our various subsidiaries in a number of countries throughout the world. Our provision for income taxes is based on the tax laws and rates applicable in the jurisdictions in which we operate and earn income. We use significant judgment and estimates in accounting for our income taxes. We recognize deferred tax assets and liabilities for the anticipated future tax effects of temporary differences between the financial statements basis and the tax basis of our assets and liabilities, which are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Income tax expense compared to pre-tax income yields an effective tax rate.

We file federal and local tax returns in many jurisdictions throughout the world and are subject to income tax examinations for our fiscal year 1992 and subsequent years, with certain exceptions. While we believe that our tax return positions are fully supported, tax authorities may disagree with certain positions we have taken and assess additional taxes. Therefore, we regularly assess the likely outcomes of our tax positions in previously filed tax returns and positions we expect to take in future tax returns that are reflected in measuring our current or deferred income tax assets and liabilities, and we establish reserves when we believe that a tax position is likely to be challenged and that we may or may not prevail. We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. We regularly monitor our tax positions and tax liabilities, and we reevaluate the technical merits of our tax positions. Some of the reasons a reserve for an uncertain tax benefit may be reversed are: (i) completion of a tax audit, (ii) a change in applicable tax law including a tax case or legislative guidance, or (iii) an expiration of the statute of limitations. We recognize interest and penalties associated with unrecognized tax benefits and record interest with interest expense, and penalties in administrative expense, in the consolidated statements of income (loss).

We periodically assess the recoverability of our deferred tax assets by considering whether it is more likely than not that some or all of the actual benefit of those assets will be realized. To the extent that realization does not meet the “more-likely-than-not” criterion, we establish a valuation allowance. We periodically review the adequacy and necessity of the valuation allowance by considering significant positive and negative evidence relative to our ability to recover deferred tax assets and to determine the timing and amount of valuation allowance that should be released. This evidence includes: (i) profitability in the most recent fiscal quarters, (ii) internal forecasts for the current and next two future fiscal years, (iii) size of deferred tax asset relative to estimated profitability, (iv) the potential effects on future profitability from increasing competition, healthcare reforms and overall economic conditions, (v) limitations and potential limitations on the use of our net operating losses due to ownership changes, pursuant to IRC Section 382, and (vi) the implementation of prudent and feasible tax planning strategies, if any.

Vesting or exercise of performance shares, restricted stock units, stock appreciation rights, deferred bonus shares and stock options result in a difference between the income tax deduction and the financial statement stock-based compensation, which creates an excess tax benefit (windfall) or tax deficiency (shortfall). If a windfall benefit can be utilized to reduce income taxes payable as determined using a “with and without” method, the windfall benefit will offset the shortfall deficiency; if not, then the shortfall is recognized as tax expense.

Comprehensive Income and Foreign Currency Translations

In addition to net income, comprehensive income includes changes in foreign currency translation adjustments, unrealized gains and losses on derivative contracts qualifying and designated as cash flow hedges and net changes in retirement obligation funded status. Taxes are not provided on cumulative translation adjustments, as substantially all translation adjustments relate to earnings which are intended to be indefinitely reinvested in the countries where earned.

Income Per Share

Accounting standards require dual presentation of earnings per share (“EPS”): basic EPS and diluted EPS. Basic EPS is computed by dividing net earnings applicable to participating securities by the weighted average number of participating securities outstanding for the period. Diluted EPS includes the effect of potentially dilutive instruments. Refer to “Note 23. Income/Loss per Share” for additional information.

Segments

Prior to the Mergers we had one operating and reportable segment. Upon completion of the Mergers, we reorganized our reporting structure and aligned our segments and the underlying divisions and businesses. We currently function in three operating segments; the historical Cyberonics operations are included in the Neuromodulation segment, and the historical Sorin businesses are included in the Cardiac Surgery and the Cardiac Rhythm Management segments. Refer to “Note 24. Geographic and Segment Information” for additional information.

Contingencies

The Company is subject to product liability claims, government investigations and other legal proceedings in the ordinary course of business. Legal fees and other expenses related to litigation are expensed as incurred and included in Selling, general and administrative expenses in the Consolidated Statements of Income. Contingent accruals are recorded when the Company determines that a loss is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, our assessments involve significant judgment regarding future events.

Business Combinations

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Combinations

On October 19, 2015, and pursuant to the terms of the Merger Agreement, Sorin merged with and into LivaNova, with LivaNova continuing as the surviving company, immediately followed by the merger of Merger Sub with and into Cyberonics, with Cyberonics continuing as the surviving company and as a wholly owned subsidiary of LivaNova. Following the completion of the Mergers, LivaNova became the holding company of the combined businesses of Cyberonics and Sorin, and LivaNova’s ordinary shares were listed, under the ticker symbol “LIVN”, on NASDAQ and admitted for listing on the standard segment of the U.K. Financial Authority’s Official List and to trading on the LSE. As a result of the Mergers, on October 19, 2015, LivaNova issued approximately 48.8 million ordinary shares.

On October 19, 2015, each ordinary share of Sorin was converted into the right to receive 0.0472 ordinary shares of LivaNova, (“Sorin Exchange Ratio”), and each share of common stock of Cyberonics was converted into the right to receive one ordinary share of LivaNova. The fair value of the shares issued as total consideration of the Mergers is based on Cyberonics' closing stock price of $69.95 per share on October 16, 2015, the last business day prior to the close of the Mergers. Based on the number of outstanding shares of Sorin and Cyberonics as of October 19, 2015, former Sorin and Cyberonics shareholders held approximately 46 percent and 54 percent, respectively, of LivaNova's ordinary shares after giving effect to the Mergers.

Based on the relative voting rights of Cyberonics and Sorin shareholders immediately following completion of the Mergers and the premium paid by Cyberonics for Sorin ordinary shares, and after taking into consideration all relevant facts, Cyberonics was considered to be the acquirer for accounting purposes. LivaNova accounted for the acquisition of Sorin as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the tangible and identifiable intangible assets acquired and liabilities assumed are recorded based on their fair values at the acquisition date with the excess over the fair value of consideration recognized as goodwill.

Total fair value of consideration transferred in the Mergers (in thousands except for shares and per share data and the Sorin Exchange Ratio):



Total Sorin shares outstanding as of October 16, 2015	477,824,000
Sorin Exchange Ratio	0.0472
Shares of LivaNova issued	22,553,293
Value per share of Cyberonics as of October 16, 2015	$	69.95
Fair value of ordinary shares transferred to Sorin shareholders	$	1,577,603
Fair value of ordinary shares issued to Sorin share award holders ⁽¹⁾	$	9,231
Fair value of LivaNova stock appreciation rights issued to Sorin stock appreciation rights holders ⁽²⁾	$	2,249
Fair value of ordinary shares transferred to Sorin shareholders	$	1,589,083

(1)

Each Sorin share award (other than a Sorin stock appreciation right) granted prior to the Sorin merger effective time accelerated, vested and was converted into the right to receive LivaNova ordinary shares based on the Sorin Exchange Ratio. The total fair value of the replacement awards is $25.2 million, including $9.2 million attributable to pre-combination services and allocated to consideration transferred to acquire Sorin. Of the remaining $16.0 million, $8.3 million was recognized immediately in the post-combination period and $7.7 million will be recognized over the post-combination service period to February 28, 2017 due to the service period requirements of the awards. Refer to “Note 20. Stock-Based Incentive Plans” for further discussion of treatment of equity awards.

The consideration transferred in the Mergers was measured using the fair-value-based measure of the share awards as of the closing date. For purposes of calculating the consideration transferred, the fair-value-based measure of the Sorin share awards was determined to be the opening market price of LivaNova’s ordinary shares of $69.39 on October 19, 2015.

(2)

As of October 16, 2015 there were 3,815,824 Sorin stock appreciation rights. Each Sorin stock appreciation right granted prior to the Sorin merger effective time accelerated, vested and was converted into the right to receive 0.0472 LivaNova stock appreciation right based on the Sorin Exchange Ratio. The total fair value of the replacement stock appreciation rights is $3.8 million, including $2.2 million attributable to pre-combination services and allocated to consideration transferred to acquire Sorin. The remaining $1.6 million was recognized immediately in the post-combination period. Refer to “Note 20. Stock-Based Incentive Plans” for further discussion of treatment of equity awards.

The following table summarizes the fair value of the assets acquired and liabilities assumed in the Mergers on October 19, 2015, including the measurement period adjustments recognized since the fair values were presented in our report on Form 10-K/T for the transitional period ended December 31, 2015 (in thousands):



	October 19, 2015		Adjustments			October 19, 2015 (as adjusted)
Total fair value of consideration transferred	$	1,589,083	$	—		$	1,589,083
Estimated fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	12,495		—			12,495
Accounts receivable	224,466		—			224,466
Inventories	233,832		—			233,832
Other current assets	60,674		(84		)	60,590
Property, plant and equipment	207,639		(1,121		)	206,518
Intangible assets	688,729		—			688,729
Equity investments	67,059		(72		)	66,987
Other assets	7,483		(1,328		)	6,155
Deferred tax assets	135,370		(121,234		)	14,136
Total assets acquired	1,637,747		(123,839		)	1,513,908

Current portion of debt and other obligations	110,601		—			110,601
Other current liabilities	237,855		830			238,685
Long-term debt	128,458		—			128,458
Deferred tax liabilities	279,328		(148,640		)	130,688
Other long-term liabilities	55,567		—			55,567
Total liabilities assumed	811,809		(147,810		)	663,999
Goodwill	$	763,145	$	(23,971	)	$	739,174

The valuation of the intangible assets acquired in the Mergers and related amortization periods are as follows (in thousands, except years):



	Valuation as of October 19, 2015		Amortization period in years
Customer relationships	$	464,019	16-18
Developed technology	211,091		9-15
Sorin trade-name	13,619		4
	$	688,729

The valuation of Other long-term liabilities acquired in the Mergers included $2.7 million of unfavorable leases with weighted average remaining lives of 5 years.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents growth opportunities and expected cost synergies of the combined company. The Mergers are expected to provide both short-term and long-term revenue enhancements and cost savings and synergy opportunities, increase the diversity of LivaNova’s business mix, and accelerate the entry into three emerging market opportunities in the areas of heart failure, sleep apnea and less invasive mitral valves. The Mergers are also expected to allow LivaNova to utilize and integrate certain Sorin technologies into its existing and future product lines for epilepsy. LivaNova expects all of its reporting units to benefit, directly or indirectly, from the synergies arising from the business combination, and as a result, we assigned the goodwill arising from the Sorin acquisition to all three reporting units. This assignment was made by taking into consideration market participant rates of return for each acquired reporting unit (Cardiac Surgery and Cardiac Rhythm Management) in order to assess the respective fair values. The remaining goodwill, allocated to Neuromodulation, which is the accounting acquirer’s existing business unit, is supported by the synergies deriving from the Mergers. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. Refer to “Note 8. Goodwill and Intangible Assets” for further discussion and details of the balance of goodwill.

Contingent liabilities assumed includes $9.2 million related to uncertain tax positions. Contingent liabilities also included $3.4 million for contingent payments at fair value related to two acquisitions completed by Sorin prior to the closing of the Mergers. The contingent payments for one acquisition are based on achievement of sales targets by the acquiree through June 30, 2018 and the contingent payments for the second acquisition are based on sales of cardiopulmonary disposable products and heart-lung machines through 2019 of the acquiree. Refer to “Note 18. Commitments and Contingencies” for further discussion of contingent liabilities and uncertain tax positions.

The measurement period adjustments shown in the table above were recorded prior to September 30, 2016, and reflect changes in the estimated fair values of certain assets and liabilities, primarily related to deferred income taxes, as a result of new information on facts and circumstances that existed at the time of acquisition. Adjustments were made to deferred income taxes as a result of the allocation of fair value to the legal entities. As a consequence of such push-down, deferred income taxes were presented on a net basis by jurisdiction.

We recorded reductions or (increases) to the following expenses due to the measurement period adjustments (in thousands):



	Year Ended December 31, 2016
Amortization of intangible assets	$	1,844
Depreciation	2,790
Other costs	(40		)
Total before income tax effect	4,594
Income tax	(3,756		)
Net	$	838

LivaNova’s consolidated financial statements for the transitional period April 25, 2015 to December 31, 2015, include Sorin’s results of operations from the acquisition date through December 31, 2015. Net sales and operating loss attributable to Sorin during this period were $200.1 million and $6.0 million, respectively. In relation to the Mergers, we incurred $42.1 million of transaction costs and $13.7 million of integration costs during the transitional period April 25, 2015 to December 31, 2015. The transaction costs primarily related to advisory, legal, and accounting fees are included in the merger and integration expenses line item in the consolidated statement of income (loss). The integration costs are also included in the merger and integration expenses line on the consolidated statement of income (loss).

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 4A
-URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479

+ Details

Restructuring Plans

12 Months Ended

Dec. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring Plans

We initiate restructuring plans to leverage economies of scale, streamline distribution and logistics and strengthen operational and administrative effectiveness in order to reduce overall costs. Costs associated with these Plans were reported as restructuring expenses in the operating results of our consolidated statement of income (loss).

Our 2015 and 2016 Reorganization Plans (the “Plans”) were initiated October 2015 and March 2016, respectively, in conjunction with the completion of the Mergers. The Plans include the closure of our R&D facility in Meylan, France and consolidation of its research and development (“R&D”) capabilities into our Clamart, France facility. In addition, during the year ended December 31, 2016, we initiated a plan to exit the Costa Rica manufacturing operation and transfer its operations to Houston, Texas. We expect to complete the exit of Costa Rica in the first half of 2017 and to complete the 2015 and 2016 Reorganization Plans in the first half of the year ending December 2018.

We estimate that these Plans will result in a net reduction of approximately 317 personnel of which 205 have occurred as of December 31, 2016.

The following table presents the Reorganization Plans’ accruals and inventory obsolescence and other reserves recorded in connection with the Reorganization Plans (in thousands):



	Employee severance and other termination costs			Other			Total
Balance at April 24, 2015	$	—		$	—		$	—
Charges	11,323			—			11,323
Cash payments	(4,404		)	—			(4,404		)
Balance at December 31, 2015	6,919			—			6,919
Charges	46,678			9,265			55,943
Cash payments / write-downs	(32,505		)	(6,209		)	(38,714		)
Balance at December 31, 2016	$	21,092		$	3,056		$	24,148

The following table presents restructuring expense by reportable segment (in thousands):



	Year Ended December 31, 2016		Transitional Period April 25, 2015 to December 31, 2015
Cardiac Surgery	$	11,042	$	1,211
Cardiac Rhythm Management	18,566		829
Neuromodulation ⁽¹⁾	14,769		1,079
Other	11,566		8,204
Total	$	55,943	$	11,323


(1)	Neuromodulation expense for the year ended December 31, 2016 included building and equipment impairment of $5.7 million related to the Costa Rica exit plan.

Accounts Receivable and Allowance for Bad Debt

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Accounts Receivable and Allowance for Bad Debt

Accounts receivable, net consisted of the following (in thousands):



	December 31, 2016			December 31, 2015			April 24, 2015
Trade receivables from third parties	$	285,336		$	274,005		$	51,233
Allowance for bad debt	(9,606		)	(1,653		)	(664		)
	$	275,730		$	272,352		$	50,569

During the year ended December 31, 2016, we increased our allowance for bad debt by $8.3 million primarily due to certain receivables in Greece, Venezuela, the U.S. and Italy whose probability of recoverability became doubtful during the year.

Our customers consist of hospitals, other healthcare institutions, distributors, organized purchase groups and government and private entities. Actual collection periods for trade receivables vary significantly as a function of the nature of the customer (e.g., government or private) and its geographic location. We acquired carrying value of $224.5 million of trade receivables from Sorin in the Mergers. As part of the acquisition accounting, accounts receivables were recorded at fair value, which was measured considering any allowance for bad debt previously recognized by Sorin.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details

Inventories

12 Months Ended

Dec. 31, 2016

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of the following (in thousands):



	December 31, 2016		December 31, 2015		April 24, 2015
Raw materials	$	47,704	$	52,482	$	11,118
Work-in-process	32,316		44,369		5,653
Finished goods	103,469		115,597		7,192
	$	183,489	$	212,448	$	23,963

We included $35.2 million of amortization of the step-up in inventory basis that resulted from the Mergers in Cost of Sales in the consolidated statement of net income (loss) for the year ended December 31, 2016, whereas, in the transitional period ended December 31, 2015, the amortization of the step-up in inventory was $21.0 million. Inventories are reported net of the provision for obsolescence, which totaled $9.8 million, $3.6 million, and $2.3 million at December 31, 2016, December 31, 2015, and April 24, 2015, respectively.

The provision for obsolescence at December 31, 2016 reflects normal obsolescence and includes components that are phased out or expired. The provision for obsolescence at December 31, 2015 reflects the fact that inventories were fair valued (and the obsolescence provision was set to zero) at the Mergers, in October 2015.

Property, Plant and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, Plant and Equipment (“PP&E)

PP&E detail (in thousands):



	December 31, 2016			December 31, 2015			April 24, 2015			Lives in years
Land	$	15,181		$	15,662		$	1,644
Building and building improvements	96,304			82,014			28,048			3 to 50
Equipment, software, furniture and fixtures	176,610			140,364			39,325			3 to 20
Other	1,317			8,634			—			3 to 10
Capital investment in process	17,012			42,210			6,695
Total	306,424			288,884			75,712
Accumulated depreciation	(82,582		)	(44,297		)	(35,425		)
Net	$	223,842		$	244,587		$	40,287

Depreciation expense for LivaNova was $39.9 million, $10.8 million and $5.8 million for the year ended December 31, 2016, the transitional period April 25, 2015 to December 31, 2015 and the fiscal year ended April 24, 2015. Depreciation expense increased due to the inclusion of Sorin activity for the full year in 2016.

As part of the Mergers, we acquired Sorin’s PP&E with a carrying value of $206.5 million equal to their fair values. During the year ended December 31, 2016, our investments were primarily for costs associated with manufacturing and office facilities, R&D equipment, in addition to general infrastructure and information technology system improvements.

During the year ended December 31, 2016, we initiated a plan to exit the Costa Rica manufacturing operation and transfer those activities to Houston, Texas. Movable machinery and equipment was transferred to various locations, primarily to Europe. As a result of our exit from Costa Rica, we recorded impairments for the building and equipment of $5.7 million which is included in Restructuring expenses in the consolidated statement of net income (loss). We wrote-down obsolete inventory of $0.3 million and accrued $0.3 million for employee termination expenses as of December 31, 2016. In addition, the carrying value of $4.5 million of the land and building after impairment were classified as Assets Held for Sale and included in Prepaid expenses and other current assets in the consolidated balance sheet as of December 31, 2016.

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Detail of finite-lived and indefinite-lived intangible assets (in thousands):



	December 31, 2016			December 31, 2015			April 24, 2015
Finite-lived intangible assets:
Developed technology	$	206,048		$	213,873		$	13,204
Customer relationships	441,088			444,472			—
Trademarks and trade names	12,649			13,030			—
Other intangible assets	2,106			11			1,023
Total	661,891			671,386			14,227
Accumulated amortization	(52,694		)	(12,444		)	(4,059		)
Net	$	609,197		$	658,942		$	10,168
Indefinite-lived intangible assets:
Goodwill	$	691,712		$	745,356		$	—

During the year ended December 31, 2016, we purchased $1.9 million of developed technology.

In connection with the Mergers and based upon the preliminary acquisition valuation, we acquired certain finite-lived intangible assets: $464.0 million of customer relationships, $211.1 million of developed technology and $13.6 million of trade names.

The amortization periods for our finite-lived intangible assets as of December 31, 2016:



	Minimum Life in years	Maximum Life in years
Developed technology	9	15
Customer relationships	16	18
Trademarks and trade names	4	4
Other intangible assets	5	5

The estimated future amortization expense based on our finite-lived intangible assets at December 31, 2016 (in thousands):



2017	$	45,408
2018	45,407
2019	45,407
2020	45,407
2021	45,397
Thereafter	382,171

Goodwill and Goodwill Impairment

Our business consists of three operating Segments (which are our reporting units for goodwill testing): our historical Cyberonics segment, Neuromodulation (“NM”) and the two historical Sorin segments, Cardiac Surgery (“CS”) and Cardiac Rhythm Management (“CRM”).

The carrying amount of goodwill by Segment (in thousands):



	Neuromodulation		Cardiac Surgery			Cardiac Rhythm Management			Total
April 24, 2015
Goodwill from acquisition	$	315,943	$	429,627		$	17,575		$	763,145
Currency adjustments	—		(17,086		)	(703		)	(17,789		)
December 31, 2015	315,943		412,541			16,872			745,356
Measurement period adjustments, net	—		(25,728		)	1,757			(23,971		)
Impairments	—		—			(18,348		)	(18,348		)
Currency adjustments	—		(11,044		)	(281		)	(11,325		)
December 31, 2016	$	315,943	$	375,769		$	—		$	691,712

As a result of the Mergers, the newly formed LivaNova entity recognized $763.1 million of goodwill on its balance sheet as the excess of the fair value of consideration over the fair value of the net assets acquired and liabilities assumed from Sorin. We finalized the measurement of assets and liabilities recognized in the Mergers in the nine months ended September 30, 2016, and as a result we recorded a net decrease in goodwill of $24.0 million.

We test goodwill for impairment on an annual basis or when events or changes in circumstances indicate that a potential impairment exists. As part of our annual goodwill impairment test as of October 1, 2016, we considered that certain sales targets were not achieved during the third quarter of 2016 and the reduction to our fourth quarter 2016 sales projections.

Our stock price also declined significantly during the fourth quarter, reaching a low following the Mergers of $40.84 on November 15, 2016. Our stock price traded between $40.84 and $60.99 during the fourth quarter of 2016 and averaged $49.31 during this period.

Management considered the reduction in third quarter sales and fourth quarter sales projections, in addition to a decline in our stock price, and based on a qualitative assessment concluded that the goodwill of the CRM and CS reporting units may be impaired. As a result, we performed the first step of the impairment test process by estimating the fair value of the reporting units using an income approach.

Based on the valuation performed as of October 1, 2016, the CRM reporting unit estimated fair value was less than its carrying value; therefore, we concluded that the CRM goodwill balance was impaired. For the second step of the impairment test, we compared the estimated fair value of the reporting unit to the fair value of all assets and liabilities of the reporting unit to calculate the implied fair value of goodwill. As a result, we recorded a non-cash loss on impairment totaling $18.3 million which was included in Goodwill Impairment in our consolidated statement of net loss for the year ended December 31, 2016.

Based on the valuation performed as of October 1, 2016, the CS reporting unit estimated fair value exceeded the carrying value by approximately 6%, therefore we concluded that the goodwill balance was not impaired.

The income approach was based on a discounted cash flow model, which utilized present values of cash flows to estimate fair value. The future cash flows were projected based on our estimates of future sales, operating costs, capital requirements, growth rates and terminal values. Forecasted sales and growth rates take into account current market conditions and our anticipated business outlook, both of which have been impacted by the reduction in sales projections during 2016.

Operating costs were forecasted using a combination of our historical average operating costs and expected future costs, adjusted for an estimated inflation factor. Capital requirements in the discounted cash flow model were based on management's estimates of future capital costs, taking into consideration our historical trends. The estimated capital requirements included cash outflows to maintain manufacturing and R&D facilities.

A terminal period was used to reflect our estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 3% for both reporting units, which includes an estimated inflation factor. The future cash flows were discounted using a market participant risk-adjusted weighted average cost of capital ("WACC") for CRM and CS of 9.5% and 8.5%, respectively.

These assumptions were derived from unobservable inputs and reflect management's judgments and assumptions. A decline in the CS reporting unit cash flow projections or adverse changes in other key assumptions such as a 50 basis point increase in the WACC or a 0.5% reduction in the terminal growth rate could result in a goodwill impairment charge in the future. However, management does not believe that an impairment charge is likely.

We evaluated the estimated fair value of our reporting units as compared to our market capitalization as of October 1, 2016. The aggregate fair values of our reporting units exceeded our market capitalization, and we believe the resulting implied control premium was reasonable based on recent market transactions within our industry or other relevant benchmark data.

We performed a qualitative assessment for our NM reporting unit as of October 1, 2016. Despite the reduction to sales projections for CRM and CS, we concluded that the fair value of NM remains substantially in excess of the carrying value of the reporting unit, as evidenced by the estimated fair value of the NM reporting unit calculated for the purpose of reconciling the fair value of our reporting units to our market capitalization. Therefore, we concluded that it remains more-likely than not that the NM reporting unit goodwill was not impaired.

The estimates used to determine the fair value of the CS reporting unit reflect management's best estimates of inputs and assumptions that a market participant would use. We believe our estimates are reasonable given the Company’s advantageous position in the global market for oxygenators, heart-lung machines, and auto-transfusion systems, despite the issues experienced in the 3T Heater Cooler market. Future declines in the CS reporting unit's operating performance or our anticipated business outlook may reduce the estimated fair value of our CS reporting unit and result in an impairment of goodwill. As indicated in the Risk Factors, various factors that could impact the reporting unit’s operating performance include, but are not limited to, the timing of regulatory approvals, market acceptance of products, non-coverage determinations for reimbursement by third-party payors, temporary manufacturing disruptions, or product recalls or safety alerts.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Other Assets - Long Term (Notes)

12 Months Ended

Dec. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets - Long Term

Detail of other long-term assets (in thousands):



	December 31, 2016		December 31, 2015		April 24, 2015
Taxes payable on inter-company transfers of property	$	124,600	$	—	$	—
Investments ⁽¹⁾	2,537		1,777		1,231
Loans and notes receivable	2,029		2,205		—
Guaranteed deposits	940		785		—
Other	592		678		332
	$	130,698	$	5,445	$	1,563


(1)	Primarily cash surrender value of company owned life insurance policies.

Accrued Liabilities

12 Months Ended

Dec. 31, 2016

Accrued Liabilities [Abstract]

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):



	December 31, 2016		December 31, 2015		April 24, 2015
Product Remediation⁽¹⁾	$	23,464	$	—	$	—
Restructuring related liabilities	16,859		6,919		—
Provisions for agents, returns and other	7,271		7,199		—
Product warranty obligations	2,736		2,119		—
Royalty costs	2,503		1,316		—
Deferred income	1,708		992		—
Derivatives	942		1,815		—
Clinical study costs	839		2,004		974
Insurance	118		2,566		—
Advances received on customer receivables	—		24,494		—
Merger related expense accruals	—		—		4,101
Other	19,127		13,623		3,259
	$	75,567	$	63,047	$	8,334


(1)	Refer to “Note 11. Product Remediation Liability.”

Product Remediation Liability (Notes)	12 Months Ended
Product Remediation Liability (Notes)	Dec. 31, 2016
Environmental Remediation Obligations [Abstract]
Product Remediation Liability	Product Remediation Liability In December 2015, we received an FDA Warning Letter (the “Warning Letter”) alleging certain violations of FDA regulations applicable to medical device manufacturing at our Munich, Germany and Arvada, Colorado facilities. On October 13, 2016 the Centers for Disease Control and Prevention (“CDC”) and FDA separately released safety notifications regarding the 3T Heater Cooler devices in response to which the Company issued a Field Safety Notice Update for U.S. users of 3T Heater Cooler devices to proactively and voluntarily contact facilities to facilitate implementation of the CDC and FDA recommendations. At December 31, 2016, the Company recognized a liability for a product remediation plan related to its 3T Heater Cooler device. The remediation plan developed by the Company consists primarily of a modification of the 3T design to include internal sealing and addition of a vacuum system to new and existing devices. These changes are intended to address regulatory actions and further reduce the risk of possible dispersion of aerosols from the 3T Heater Cooler devices in the operating room. The deployment of this solution for commercially distributed devices will occur upon final validation and verification of the design changes and approval or clearance by regulatory authorities worldwide, including FDA clearance in the U.S. and CE Mark in Europe. Based on the device classification and magnitude of the design change, we estimate that we can self-certify the effectiveness of the change in order to apply the CE Mark in Europe. As part of this plan, we also intend to perform a no-charge deep disinfection service for 3T users who have reported confirmed M. chimaera mycobacterium contamination. Although the deep disinfection service is not yet available in the U.S., it is currently offered in many countries around the world and will be expanded to additional geographies as regulatory approvals are received. Finally, in the fourth quarter of 2016 we initiated a program to provide existing 3T users with a new loaner 3T device at no charge pending regulatory approval and implementation of the vacuum system addition and deep disinfection service worldwide. This loaner program began in the U.S. and is being progressively made available on a global basis, prioritizing and allocating devices to 3T users based on pre-established criteria. It is estimated that by the end of 2018, a majority of the 3T devices in use globally will be upgraded and returned to operation. In addition to $4.0 million of costs incurred during the year ended December 31, 2016, we also recognized a $33.5 million liability at December 31, 2016 to provide for the remaining execution of the plan including finalization and implementation of the design change, deep disinfection services and the provision of loaner 3T Heater Cooler devices. We concluded that it was probable that a liability had been incurred upon management’s approval of the plan and the commitments made by management to various regulatory authorities globally in November and December 2016, and furthermore, the cost associated with the plan was reasonably estimable. This liability is included in Accrued Liabilities and Other Long-Term Liabilities on the consolidated balance sheet. It is reasonably possible that our estimate of the remediation liability could materially change in future periods due to the various significant assumptions involved such as customer behavior, market reaction and the timing of approvals or clearance by regulatory authorities worldwide. For further information, please refer to “Note 18. Commitments and Contingencies.” At this stage, no liability has been recognized with respect to any lawsuits involving the Company related to the 3T Heater Cooler and the related legal costs will be expensed as incurred.

Warranties

12 Months Ended

Dec. 31, 2016

Product Warranties Disclosures [Abstract]

Warranties

We include warranty obligations with current accrued liabilities in the consolidated balance sheets. Changes in the carrying amount of our warranty obligation consisted of the following (in thousands):



Balance at December 31, 2015	$	2,119
Product warranty accrual	1,359
Settlements	(762		)
Effect of changes in currency exchange rates	20
Balance at December 31, 2016	$	2,736

Other Long-Term Liabilities

12 Months Ended

Dec. 31, 2016

Other Liabilities, Noncurrent [Abstract]

Other Long-Term Liabilities

Other long-term liabilities consisted of the following (in thousands):



	December 31, 2016		December 31, 2015		April 24, 2015
Uncertain tax positions	$	16,857	$	13,048	$	5,782
Product Remediation⁽¹⁾	10,023		—		—
Government grant deferred revenue	3,803		3,918		—
Earnout for contingent payments ⁽²⁾	3,890		3,457		—
Unfavorable operating leases ⁽³⁾	1,672		2,513		—
Financial derivatives	1,392		1,793		—
Other	1,850		5,014		828
	$	39,487	$	29,743	$	6,610


(1)	Refer to “Note 11. Product Remediation Liability.”

(2)

The earnout for contingent payments represents contingent payments we assumed during the Mergers for two acquisitions completed by Sorin prior to the Mergers. The first acquisition, in September 2015, was of Cellplex PTY Ltd. in Australia; the second acquisition was of the commercial activities of a local distributor in Colombia. The contingent payments for the Cellplex acquisition are based on achievement of sales targets by the acquiree through June 30, 2018 and the contingent payments for the second acquisition are based on sales of cardiopulmonary disposable products and heart-lung machines of the acquiree through December 2019. Refer to “Note 15. Fair Value Measurements.”


(3)	The unfavorable operating leases liability represents the adjustment to recognize Sorin’s future lease obligations at their estimated fair value in conjunction with the Mergers, with an average life of 5 years.

Investments

12 Months Ended

Dec. 31, 2016

Investments [Abstract]

Investments

Short-Term Investments

Our short-term investments as of December 31, 2015 and April 24, 2015 consisted of investments in Commercial paper and Commercial paper and Certificates of deposit, respectively.

Cost Method Investments

Our cost-method investments are included in Investments in the consolidated balance sheets and consist of our equity positions in the following privately-held companies (in thousands):



	December 31, 2016		December 31, 2015		April 24, 2015
ImThera Medical, Inc. - convertible preferred shares and warrants ⁽¹⁾	$	12,000	$	12,000	$	12,000
Cerbomed GmbH - convertible preferred shares ⁽²⁾	—		—		5,127
Rainbow Medical Ltd.⁽³⁾	3,733		3,847		—
Respicardia ⁽⁴⁾	17,518		—		—
MD Start II	526		—		—
Carrying amount - cost method investments	$	33,777	$	15,847	$	17,127


(1)	ImThera Medical, Inc. is a private U.S. company developing a neurostimulation device system for the treatment of obstructive sleep apnea.

(2)

Cerbomed GmbH is a European company developing a transcutaneous vagus nerve stimulation device for the treatment of epilepsy. During the transitional period April 25, 2015 to December 31, 2015, we recorded an other-than-temporary impairment of $5.1 million against our investment in Cerbomed. We recorded the charge in Impairment of Investments in the consolidated statement of income (loss). Refer to “Note 15. Fair Value Measurements.”


(3)	Rainbow Medical Ltd. is a private Israeli venture capital company that seeds and grows companies developing medical devices in a diverse range of medical fields.


(4)	Respicardia is a privately funded U.S. company developing an implantable device designed to restore a more natural breathing pattern during sleep in patients with central sleep apnea ("CSA") by transvenously stimulating the phrenic nerve. As of November 30, 2016, we reclassified Respicardia to a cost method investment from an equity method investment, refer to the Respicardia details below.

Equity Method Investments

Our equity-method investments are included in Investments in the consolidated balance sheets and consist of our equity position in the following entities (in thousands, except for percent ownership):



	% Ownership ⁽¹⁾		December 31, 2016		December 31, 2015		April 24, 2015
Caisson Interventional LLC ⁽²⁾	49	%	$	16,423	$	13,712	$	—
Highlife S.A.S. ⁽²⁾	38	%	6,009		8,363		—
MicroPort Sorin CRM (Shanghai) Co. Ltd.	49	%	4,867		8,959		—
Respicardia, Inc. ⁽³⁾	19.7	%	—