UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
Or
Commission file number:
GLAUKOS CORPORATION
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
(Address of registrant’s principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company’’ and “emerging growth company” in Rule 12b-2 of the Exchange Act:
☒ | ☐ Accelerated filer | ☐ Non-accelerated filer |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 2, 2022, there were
GLAUKOS CORPORATION
Form 10-Q
For the Quarterly Period Ended March 31, 2022
Table of Contents
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Condensed Consolidated Statements of Comprehensive Income (Loss) | 5 | ||
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8 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 | ||
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46 |
We use Glaukos, our logo, iStent, iStent inject, iStent infinite, iPrism, iDose, iPRIME, iAccess, Avedro, Photrexa, iLink, KXL, Epioxa, iLution, Retina XR and other marks as trademarks. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
References throughout this document to “we,” “us,” “our,” the “Company,” or “Glaukos” refer to Glaukos Corporation and its consolidated subsidiaries.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLAUKOS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
March 31, | December 31, | ||||||
2022 | 2021 | ||||||
| (unaudited) |
|
| ||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Short-term investments | | | |||||
Accounts receivable, net | | | |||||
Inventory | | | |||||
Prepaid expenses and other current assets | | | |||||
Total current assets | | | |||||
Restricted cash | | | |||||
Property and equipment, net | | | |||||
Operating lease right-of-use assets | | | |||||
Finance lease right-of-use asset | | | |||||
Intangible assets, net | | | |||||
Goodwill | | | |||||
Deposits and other assets | | | |||||
Total assets | $ | | $ | | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | | $ | | |||
Accrued liabilities | | | |||||
Total current liabilities | | | |||||
Convertible senior notes | | | |||||
Operating lease liability | | | |||||
Finance lease liability | | | |||||
Deferred tax liability, net | | | |||||
Other liabilities | | | |||||
Total liabilities | | | |||||
Commitments and contingencies (Note 12) | |||||||
Stockholders' equity: | |||||||
Preferred stock, $ | |||||||
Common stock, $ | | | |||||
Additional paid-in capital | | | |||||
Accumulated other comprehensive (loss) income | ( | | |||||
Accumulated deficit | ( | ( | |||||
Less treasury stock ( | ( | ( | |||||
Total stockholders' equity | | | |||||
Total liabilities and stockholders' equity | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
3
GLAUKOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
Three Months Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
Net sales | $ | | $ | | |||
Cost of sales | | | |||||
Gross profit | | | |||||
Operating expenses: | |||||||
Selling, general and administrative | | | |||||
Research and development | | | |||||
Litigation-related settlement | ( | - | |||||
Total operating expenses | | | |||||
Income (loss) from operations | | ( | |||||
Non-operating expense: | |||||||
Interest income | | | |||||
Interest expense | ( | ( | |||||
Other expense, net | ( | ( | |||||
Total non-operating expense | ( | ( | |||||
Income (loss) before taxes | | ( | |||||
Income tax provision | | | |||||
Net income (loss) | $ | | $ | ( | |||
Basic net income (loss) per share | $ | | $ | ( | |||
Diluted net income (loss) per share | $ | | $ | ( | |||
Weighted average shares used to compute basic net income (loss) per share | | | |||||
Weighted average shares used to compute diluted net income (loss) per share | | |
See accompanying notes to condensed consolidated financial statements.
4
GLAUKOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
Three Months Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
Net income (loss) | $ | | $ | ( | |||
Other comprehensive (loss) income: | |||||||
Foreign currency translation gain | | | |||||
Unrealized loss on short-term investments | ( | ( | |||||
Other comprehensive (loss) income | ( | | |||||
Total comprehensive income (loss) | $ | | $ | ( |
See accompanying notes to condensed consolidated financial statements.
5
GLAUKOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)
Accumulated | ||||||||||||||||||||||
Additional | other | |||||||||||||||||||||
Common stock | paid-in | comprehensive | Accumulated | Treasury stock | Total | |||||||||||||||||
| Shares |
| Amount |
| capital |
| income (loss) |
| deficit |
| Shares |
| Amount |
| equity | |||||||
Balance at December 31, 2021 | | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | |||||||
Common stock issued under stock plans | | — | | — | — | — | — | | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Other comprehensive loss | — | — | — | ( | — | — | — | ( | ||||||||||||||
Net income | — | — | — | — | | — | — | | ||||||||||||||
Balance at March 31, 2022 | | $ | | $ | | $ | ( | $ | ( |
| ( | $ | ( | $ | |
Accumulated | ||||||||||||||||||||||
Additional | other | |||||||||||||||||||||
Common stock | paid-in | comprehensive | Accumulated | Treasury stock | Total | |||||||||||||||||
| Shares |
| Amount |
| capital |
| income |
| deficit |
| Shares |
| Amount |
| equity | |||||||
Balance at December 31, 2020 | | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | |||||||
Effect of adoption of ASU 2020-06 | — | — | ( | ( | ( | |||||||||||||||||
Common stock issued under stock plans | | | | — | — | — | — | | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Other comprehensive income | — | — | — | | — | — | — | | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance at March 31, 2021 | | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
See accompanying notes to condensed consolidated financial statements.
6
GLAUKOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended March 31, | |||||||
| 2022 |
| 2021 |
| |||
Operating Activities | |||||||
Net income (loss) | $ | | $ | ( | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation | | | |||||
Amortization of intangible assets | | | |||||
Amortization of lease right-of-use assets | | | |||||
Amortization of debt issuance costs | | | |||||
Deferred income tax benefit | ( | ( | |||||
Gain on disposal of fixed assets | ( | - | |||||
Stock-based compensation | | | |||||
Unrealized foreign currency (gains) losses | ( | | |||||
Amortization of premium on short-term investments | | | |||||
Other liabilities | ( | | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | ( | ( | |||||
Inventory | ( | | |||||
Prepaid expenses and other current assets | ( | ( | |||||
Accounts payable and accrued liabilities | ( | | |||||
Other assets | ( | | |||||
Net cash provided by operating activities | | | |||||
Investing activities | |||||||
Purchases of short-term investments | ( | ( | |||||
Proceeds from sales and maturities of short-term investments | | | |||||
Purchases of property and equipment | ( | ( | |||||
Proceeds from disposal of property and equipment | | - | |||||
Investment in company-owned life insurance | | ( | |||||
Net cash used in investing activities | ( | ( | |||||
Financing activities | |||||||
Proceeds from exercise of stock options | | | |||||
Proceeds from share purchases under Employee Stock Purchase Plan | | | |||||
Payment of employee taxes related to vested restricted stock units | ( | ( | |||||
Principal paid on finance lease | ( | ( | |||||
Proceeds from tenant improvement allowance | - | | |||||
Net cash provided by financing activities | | | |||||
Effect of exchange rate changes on cash and cash equivalents | | ( | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | | ( | |||||
Cash, cash equivalents and restricted cash at beginning of period | | | |||||
Cash, cash equivalents and restricted cash at end of period | $ | | $ | | |||
Supplemental disclosures of cash flow information | |||||||
Taxes paid (refunded) | $ | | $ | ( | |||
Other interest paid | $ | | $ | | |||
Supplemental schedule of noncash investing and financing activities | |||||||
Purchases of property and equipment included in accounts payable and accrued liabilities | $ | | $ | | |||
See accompanying notes to condensed consolidated financial statements.
7
GLAUKOS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization and Basis of Presentation
Organization and business
Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal disease. The Company developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm and launched its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a corneal disorder, keratoconus, that was approved by the U.S. Food and Drug Administration (FDA) in 2016 and is developing a pipeline of sustained pharmaceutical therapies, surgical devices, and implantable biosensors intended to treat glaucoma progression, corneal disorders such as keratoconus, dry eye and refractive vision correction, and retinal diseases such as neovascular age-related macular degeneration, diabetic macular edema and retinal vein occlusion.
The accompanying condensed consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. All significant intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (GAAP) in the United States of America (U.S.) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.
The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. As permitted under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted. In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2021 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements. These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2021, which are contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on February 28, 2022. The Company’s results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period.
Recent Developments
Settlement of Patent Litigation
On September 14, 2021, the Company entered into a settlement agreement (Settlement Agreement) with Ivantis, Inc. (Ivantis), pursuant to which the Company and Ivantis agreed to terminate the patent infringement lawsuit the Company had filed against Ivantis on April 14, 2018 in the U.S. District Court for the Central District of California, Southern Division (the Lawsuit). In the Lawsuit, the Company alleged that Ivantis’ Hydrus® Microstent device infringes the Company’s U.S. Patent Nos. 6,626,858 and 9,827,143. Pursuant to the terms of the Settlement Agreement, Ivantis was required to pay the Company a cash payment of $
8
Additionally, Ivantis will make quarterly royalty payments to the Company in the amount of
Note 2. Summary of Significant Accounting Policies
There have been no significant changes in the Company’s significant accounting policies during the three months ended March 31, 2022, as compared with those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions. Management considers many factors in selecting appropriate financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, this process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements.
The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2022 reflect the Company’s estimates of the impact of the ongoing COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are uncertain, including the duration and severity of the COVID-19 outbreak, the severity and transmission rates of new and more contagious and/or vaccine-resistant variants of COVID-19, and the actions taken to contain it or treat COVID-19, including the availability, distribution, rate of public acceptance and efficacy of vaccines for COVID-19, as well as the economic impact on local, regional, national and international customers and markets. As a result, there may be changes to the Company’s estimates regarding the impact of COVID-19 in future periods.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statement of cash flows as of the beginning and end of the three months ended March 31, 2022 (in thousands):
March 31, | December 31, | ||||||
2022 | 2021 | ||||||
Cash and cash equivalents | $ | | $ | | |||
Restricted cash | | | |||||
Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows | $ | | $ | |
Recently Adopted Accounting Pronouncements
The Company has not adopted any recent accounting pronouncements that had a material impact on its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.
9
Note 3. Balance Sheet Details
Short-term Investments
Short-term investments consisted of the following (in thousands):
At March 31, 2022 |
| ||||||||||||||
Maturity | Amortized cost | Unrealized | Unrealized | Estimated |
| ||||||||||
| (in years) |
| or cost |
| gains |
| losses |
| fair value |
| |||||
U.S. government bonds | less than | $ | | $ | - | $ | ( | $ | | ||||||
U.S. government agency bonds | less than | | | ( | | ||||||||||
Bank certificates of deposit | less than | | | ( | | ||||||||||
Commercial paper | less than |
| |
| — |
| ( |
| | ||||||
Corporate notes | less than |
| |
| |
| ( |
| | ||||||
Asset-backed securities | less than |
| |
| |
| ( |
| | ||||||
Municipal bonds | less than | | — | ( | | ||||||||||
Total | $ | | $ | | $ | ( | $ | | |||||||
At December 31, 2021 |
| ||||||||||||||
Maturity | Amortized cost | Unrealized | Unrealized | Estimated |
| ||||||||||
| (in years) |
| or cost |
| gains |
| losses |
| fair value |
| |||||
U.S. government agency bonds | less than | | | ( | | ||||||||||
U.S. government bonds | less than | $ | | $ | — | $ | ( | $ | | ||||||
Bank certificates of deposit | less than | | | ( | | ||||||||||
Commercial paper | less than |
| |
| - |
| ( |
| | ||||||
Corporate notes | less than |
| |
| |
| ( |
| | ||||||
Asset-backed securities | less than |
| |
| |
| ( |
| | ||||||
Municipal bonds | less than | | - | ( | | ||||||||||
Total | $ | | $ | | $ | ( | $ | |
Accounts Receivable, Net
Accounts receivable consisted of the following (in thousands):
March 31, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
Accounts receivable | $ | | $ | | |||
Allowance for credit losses | ( | ( | |||||
$ | | $ | |
The Company’s allowance for credit losses represents management’s estimate of current expected credit losses and there were immaterial bad-debt write offs charged during the three months ended March 31, 2022.
Additionally, no customers accounted for more than 10% of net accounts receivable as of March 31, 2022 or December 31, 2021.
Inventory
Inventory consisted of the following (in thousands):
March 31, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
Finished goods | $ | | $ | | |||
Work in process | | | |||||
Raw material | | | |||||
$ | | $ | |
10
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Accrued bonuses | $ | | $ | | ||
Accrued vacation benefits | | | ||||
Other accrued liabilities | | | ||||
$ | | $ | |
Note 4. Fair Value Measurements
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.
The valuation of assets and liabilities is subject to fair value measurements using a three-tiered approach and fair value measurements are classified and disclosed by the Company in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):
At March 31, 2022 | ||||||||||||
Quoted prices | Significant | |||||||||||
in active | other | Significant | ||||||||||
markets for | observable | unobservable | ||||||||||
March 31, | identical assets | inputs | inputs | |||||||||
| 2022 |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets | ||||||||||||
Cash equivalents: | ||||||||||||
Money market funds (i) | $ | | $ | | $ | - | $ | - | ||||
Available for sale securities: | ||||||||||||
U.S. government agency bonds (ii) | $ | | $ | - | $ | | $ | - | ||||
U.S. government bonds (ii) | | - | | - | ||||||||
Bank certificates of deposit (ii) | | - | | - | ||||||||
Commercial paper (ii)(iii) | | - | | - | ||||||||
Corporate notes (ii) | | - | | - | ||||||||
Asset-backed securities (ii) | | - | | - | ||||||||
Municipal bonds (ii) | | - | | - | ||||||||
Investments held for deferred compensation plans | | - | | - | ||||||||
Total Assets | $ | | $ | | $ | | $ | - | ||||
Liabilities | ||||||||||||
Deferred compensation plans | $ | | $ | - | $ | | $ | - | ||||
Total Liabilities | $ | | $ | - | $ | | $ | - |
(i) | Included in cash and cash equivalents with a maturity of three months or less from date of purchase on the condensed consolidated balance sheets. |
(ii) | Included in short-term investments on the condensed consolidated balance sheets. |
11
(iii) | As of March 31, 2022, a commercial paper investment totaling $ |
At December 31, 2021 | ||||||||||||
Quoted prices | Significant | |||||||||||
in active | other | Significant | ||||||||||
markets for | observable | unobservable | ||||||||||
December 31, | identical assets | inputs | inputs | |||||||||
| 2021 |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets | ||||||||||||
Cash equivalents: | ||||||||||||
Money market funds (i) | $ | | $ | | $ | - | $ | - | ||||
Available for sale securities: | ||||||||||||
U.S. government agency bonds (ii) | $ | | $ | - | $ | | $ | - | ||||
U.S. government bonds (ii) | | - | | - | ||||||||
Bank certificates of deposit (ii) | | - | | - | ||||||||
Commercial paper (ii) | | - | | - | ||||||||
Corporate notes (ii) | | - | | - | ||||||||
Asset-backed securities (ii) | | - | | - | ||||||||
Municipal bonds (ii) | | - | | - | ||||||||
Investments held for deferred compensation plans | | | - | |||||||||
Total Assets | $ | | $ | | $ | | $ | - | ||||
Liabilities | ||||||||||||
Deferred compensation plans | $ | | $ | - | $ | | $ | - | ||||
Total Liabilities | $ | | $ | - | $ | | $ | - |
(i) | Included in cash and cash equivalents with a maturity of three months or less from date of purchase on the condensed consolidated balance sheets. |
(ii) | Included in short-term investments on the condensed consolidated balance sheets. |
Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.
U.S. government agency bonds, U.S. government bonds, bank certificates of deposit, commercial paper, municipal bonds, corporate notes and asset-backed securities are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), the Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust and Deferred Compensation Plan liability consist of company-owned life insurance policies (COLIs) and the pricing on these investments can be independently evaluated. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from third party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.
There were
The Company did
Convertible Senior Notes
As of March 31, 2022 and December 31, 2021, the fair value of the Company’s
12
basis of the market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. See Note 9, Convertible Senior Notes for additional information.
Note 5. Leases
The Company has operating and finance leases for facilities and certain equipment. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term.
The Company’s leases have remaining non-cancelable lease terms of approximately
The Company’s office building lease in Aliso Viejo, California (Aliso Facility) is