10-Q 1 qdel-20210930.htm 10-Q qdel-20210930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________________________________________________
FORM 10-Q
  ____________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 0-10961
 ____________________________________________________________________________ 
QUIDEL CORPORATION
(Exact name of registrant as specified in its charter)
  ____________________________________________________________________________
Delaware 94-2573850
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
9975 Summers Ridge Road, San Diego, California 92121
(Address of principal executive offices, including zip code)
(858552-1100
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par ValueQDELThe NASDAQ Stock Market
____________________________________________________________________________ 
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.    Yes      No  
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).    Yes      No  
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.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
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     No  
As of October 29, 2021, 41,674,651 shares of the registrant’s common stock were outstanding.




INDEX
 

2


PART I    FINANCIAL INFORMATION
 
ITEM 1.    Financial Statements
QUIDEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value; unaudited)
September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$578,447 $489,941 
Accounts receivable, net335,560 497,688 
Inventories196,976 113,798 
Prepaid expenses and other current assets38,082 40,975 
Total current assets1,149,065 1,142,402 
Property, plant and equipment, net319,949 110,481 
Right-of-use assets132,227 100,544 
Goodwill337,023 337,032 
Intangible assets, net105,696 122,431 
Deferred tax asset43,994 44,762 
Other non-current assets18,428 13,512 
Total assets$2,106,382 $1,871,164 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$82,698 $86,316 
Accrued payroll and related expenses30,149 34,781 
Income taxes payable71,993 127,788 
Operating lease liabilities9,618 7,799 
Contingent consideration5,835 5,987 
Deferred consideration41,922 42,000 
Other current liabilities54,873 32,290 
Total current liabilities297,088 336,961 
Operating lease liabilities - non-current133,212 100,706 
Deferred consideration - non-current35,545 73,951 
Other non-current liabilities6,470 26,843 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000 shares authorized; none issued or outstanding at September 30, 2021 and December 31, 2020
  
Common stock, $0.001 par value per share; 97,500 shares authorized; 41,672 and 42,290 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
42 42 
Additional paid-in capital275,325 388,121 
Accumulated other comprehensive income (loss)820 (431)
Retained earnings1,357,880 944,971 
Total stockholders’ equity1,634,067 1,332,703 
Total liabilities and stockholders’ equity$2,106,382 $1,871,164 
See accompanying notes.
3


QUIDEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
 September 30,
 2021202020212020
Total revenues$509,736 $476,058 $1,061,684 $852,465 
Cost of sales136,328 92,439 280,131 205,104 
Gross profit373,408 383,619 781,553 647,361 
Research and development23,676 21,448 69,594 58,797 
Sales and marketing46,778 37,413 119,111 95,718 
General and administrative21,113 16,410 61,758 46,421 
Acquisition and integration costs 389 1,754 3,175 
Total operating expenses91,567 75,660 252,217 204,111 
Operating income281,841 307,959 529,336 443,250 
Other expense, net
Interest and other expense, net(347)(1,797)(4,352)(8,071)
Loss on extinguishment of debt (10,384) (10,384)
Total other expense, net(347)(12,181)(4,352)(18,455)
Income before income taxes281,494 295,778 524,984 424,795 
Provision for income taxes65,742 63,510 112,075 84,638 
Net income$215,752 $232,268 $412,909 $340,157 
Basic earnings per share$5.17 $5.52 $9.91 $8.08 
Diluted earnings per share$5.08 $5.33 $9.72 $7.82 
Shares used in basic per share calculation41,728 42,105 41,657 42,093 
Shares used in diluted per share calculation42,463 43,596 42,471 43,582 
See accompanying notes.

4


QUIDEL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands; unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Net income$215,752 $232,268 $412,909 $340,157 
Other comprehensive income (loss)
Changes in cumulative translation adjustment, net of tax(651)837 (1,160)1,037 
Changes in unrealized (losses) gains from cash flow hedges:
Net unrealized (losses) gains on derivative instruments(14)(1,468)93 (1,200)
Reclassification of net realized losses (gains) on derivative instruments included in net income466 71 2,319 (265)
Total change in unrealized gains (losses) from cash flow hedges, net of tax452 (1,397)2,412 (1,465)
Comprehensive income$215,553 $231,708 $414,161 $339,729 
See accompanying notes.

5


QUIDEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands; unaudited)
 Common Stock   
SharesParAdditional
paid-in
capital
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
stockholders’
equity
Balance at December 31, 202042,290 $42 $388,121 $(431)$944,971 $1,332,703 
Issuance of common stock under equity compensation plans409 1 6,373 — — 6,374 
Stock-based compensation expense— — 5,889 — — 5,889 
Tax withholdings related to vesting of stock-based awards(156)— (33,929)— — (33,929)
Other comprehensive gain, net of tax— — — 593 — 593 
Net income— — — — 178,084 178,084 
Balance at March 31, 202142,543 43 366,454 162 1,123,055 1,489,714 
Issuance of common stock under equity compensation plans59  494 — — 494 
Stock-based compensation expense— — 5,846 — — 5,846 
Tax withholdings related to vesting of stock-based awards(12)— (1,467)— — (1,467)
Repurchases of common stock(957)(1)(103,437)— — (103,438)
Other comprehensive gain, net of tax— — — 857 — 857 
Net income— — — — 19,073 19,073 
Balance at June 30, 202141,633 42 267,890 1,019 1,142,128 1,411,079 
Issuance of common stock under equity compensation and benefit plans44 — 2,444 — — 2,444 
Stock-based compensation expense— — 5,605 — — 5,605 
Tax withholdings related to vesting of stock-based awards(5)— (614)— — (614)
Other comprehensive loss, net of tax— — — (199)— (199)
Net income— — — — 215,752 215,752 
Balance at September 30, 202141,672 $42 $275,325 $820 $1,357,880 $1,634,067 

6


 Common Stock   
SharesParAdditional
paid-in
capital
Accumulated
other
comprehensive loss
Retained
earnings
Total
stockholders’
equity
Balance at December 31, 201941,868 $42 $425,557 $(463)$134,684 $559,820 
Issuance of common stock under equity compensation plans153  3,571 — — 3,571 
Stock-based compensation expense— — 3,325 — — 3,325 
Tax withholdings related to vesting of stock-based awards(25)— (1,954)— — (1,954)
Other comprehensive gain, net of tax— — — 200 — 200 
Net income— — — — 40,237 40,237 
Balance at March 31, 202041,996 42 430,499 (263)174,921 605,199 
Issuance of common stock under equity compensation plans203 — 3,287 — — 3,287 
Stock-based compensation expense— — 4,665 — — 4,665 
Issuance of shares in exchange for Convertible Senior Notes2  48 — — 48 
Derivative liabilities - Convertible Senior Notes elected to settle in cash— — (26,180)— — (26,180)
Tax withholdings related to vesting of stock-based awards(5)— (716)— — (716)
Repurchases of common stock(247)— (42,178)— — (42,178)
Other comprehensive loss, net of tax— — — (68)— (68)
Net income— — — — 67,652 67,652 
Balance at June 30, 202041,949 42 369,425 (331)242,573 611,709 
Issuance of common stock under equity compensation and benefit plans88  2,733 — — 2,733 
Stock-based compensation expense— — 5,021 — — 5,021 
Issuance of shares in exchange for Convertible Senior Notes14 — 460 — — 460 
Tax withholdings related to vesting of stock-based awards(4)— (871)— — (871)
Repurchases of common stock(10)— (1,513)— — (1,513)
Other comprehensive gain, net of tax— — — (560)— (560)
Net income— — — — 232,268 232,268 
Balance at September 30, 202042,037 $42 $375,255 $(891)$474,841 $849,247 
7


QUIDEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
 Nine Months Ended
 September 30,
 20212020
OPERATING ACTIVITIES:
Net income$412,909 $340,157 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other39,983 36,614 
Stock-based compensation expense18,679 14,561 
Amortization of debt discount and deferred issuance costs303 615 
Change in fair value of acquisition contingencies101 848 
Accretion of interest on deferred consideration3,515 5,026 
Net change in operating lease right-of-use assets and liabilities2,642 167 
Change in deferred tax assets and liabilities768 (441)
Change in fair value of derivative liabilities - Convertible Senior Notes 1,084 
Payment of accreted interest on contingent and deferred consideration(8,157) 
Loss on extinguishment of debt 10,384 
Changes in assets and liabilities:
Accounts receivable161,535 (258,216)
Inventories(83,333)(36,949)
Prepaid expenses and other current and non-current assets(15,228)(5,080)
Accounts payable(3,461)19,561 
Accrued payroll and related expenses(3,903)10,078 
Income taxes payable(67,703)51,814 
Other current and non-current liabilities25,842 409 
Net cash provided by operating activities:484,492 190,632 
INVESTING ACTIVITIES:
Acquisitions of property, equipment, investments and intangibles(260,399)(36,112)
Proceeds from government assistance allocated to fixed assets36,881  
Net cash used for investing activities:(223,518)(36,112)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock7,310 8,824 
Payments on finance lease obligation(193)(353)
Payments of tax withholdings related to vesting of stock-based awards(36,010)(3,541)
Repurchases of common stock(103,438)(43,691)
Principal payments of acquisition contingent consideration(4,740)(6,043)
Principal payments of deferred consideration(35,142)(42,000)
Payment on Convertible Senior Note and Derivative Liability (43,416)
Net cash used for financing activities:(172,213)(130,220)
Effect of exchange rates on cash(255)472 
Net increase in cash and cash equivalents88,506 24,772 
Cash and cash equivalents, beginning of period489,941 52,775 
Cash and cash equivalents, end of period$578,447 $77,547 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Purchase of property, equipment and intangibles by incurring current liabilities$7,681 $3,536 
Reduction of other current liabilities upon issuance of restricted share units$2,001 $767 
Extinguishment of Convertible Senior Notes through issuance of stock$ $508 
See accompanying notes.
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Quidel Corporation
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Quidel Corporation and its subsidiaries (the “Company” or “Quidel”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included.
The information at September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020, is unaudited. For further information, refer to the Company’s Consolidated Financial Statements and notes thereto for the year ended December 31, 2020 included in the Company’s 2020 Annual Report on Form 10-K. Operating results for any quarter are historically seasonal in nature and are not necessarily indicative of the results expected for the full year.
For 2021 and 2020, the Company’s fiscal year will end or has ended on January 2, 2022 and January 3, 2021, respectively. For 2021 and 2020, the Company’s third quarter ended on October 3, 2021 and September 27, 2020, respectively. For ease of reference, the calendar quarter end dates are used herein. The three and nine-month periods ended September 30, 2021 and 2020 each included 13 and 39 weeks, respectively.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant Accounting Policies
During the nine months ended September 30, 2021, there have been no changes to our significant accounting policies as described in our 2020 Annual Report on Form 10-K.
Note 2. Computation of Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted EPS is computed based on the sum of the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested restricted stock units (“RSUs”) and, for the 2020 periods, the 3.25% Convertible Senior Notes (“Convertible Notes”). Potentially dilutive common shares from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method.
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The following table reconciles net income and the weighted-average shares used in computing basic and diluted EPS (in thousands):
Three Months Ended
September 30,
Nine Months Ended
 September 30,
2021202020212020
Numerator:
Net income used for basic earnings per share$215,752 $232,268 $412,909 $340,157 
Interest expense on Convertible Senior Notes, net of tax 107  457 
Net income used for diluted earnings per share$215,752 $232,375 $412,909 $340,614 
Basic weighted-average common shares outstanding41,728 42,105 41,657 42,093 
Dilutive potential shares issuable from Convertible Senior Notes 218  340 
Dilutive potential shares issuable from stock options and unvested RSUs735 1,273 814 1,149 
Diluted weighted-average common shares outstanding42,463 43,596 42,471 43,582 
Potentially dilutive shares excluded from calculation due to anti-dilutive effect177 7 147 4 
Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.
For the 2020 periods, potentially dilutive shares from the Convertible Notes were determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Notes were assumed to be converted and the resulting common shares were included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Notes was added back to net income. The Convertible Notes had a dilutive impact when the average market price of the Company’s common stock exceeded the applicable conversion price of the notes. The Convertible Notes became convertible on March 31, 2018 and matured on December 15, 2020.
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Note 3. Balance Sheet Account Details    
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventories consisted of the following (in thousands):
September 30,
2021
December 31,
2020
Raw materials$109,015 $58,264 
Work-in-process (materials, labor and overhead)43,169 31,359 
Finished goods (materials, labor and overhead)44,792 24,175 
Total inventories$196,976 $113,798 
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
September 30,
2021
December 31,
2020
Other receivables$15,033 $15,442 
Unbilled receivables 16,041 
Prepaid expenses19,003 7,335 
Other4,046 2,157 
Total prepaid expenses and other current assets$38,082 $40,975 
Unbilled receivables as of December 31, 2020 primarily consisted of receivables arising from unbilled milestone achievements for capital expenditures to be reimbursed under the National Institute of Health (“NIH”) contract. Amounts billed but not collected as of December 31, 2020 were included in other receivables. As of September 30, 2021, the Company had achieved and collected payments for all milestones under the NIH contract.
Other Current Liabilities
Other current liabilities consist of the following (in thousands):
September 30,
2021
December 31,
2020
Customer incentives and rebates$11,483 $15,663 
Deferred revenue18,728 3,733 
Accrued other taxes payable4,403 2,157 
Derivative liabilities442 3,061 
Payables under transition services agreements5,455  
Other14,362 7,676 
Total other current liabilities$54,873 $32,290 
Note 4. Income Taxes
The Company calculates its interim income tax provision in accordance with Accounting Standards Codification (“ASC”) 270, Interim Reporting, and ASC 740, Accounting for Income Taxes (together, “ASC 740”). At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.

For the three months ended September 30, 2021 and 2020, the Company recognized income tax provisions of $65.7 million in relation to income before taxes of $281.5 million and $63.5 million in relation to income before taxes of $295.8 million, respectively, resulting in effective tax rates of 23% and 21%, respectively. For the nine months ended September 30, 2021 and 2020, the Company recognized income tax provisions of $112.1 million in relation to income before taxes of $525.0
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million and $84.6 million in relation to income before taxes of $424.8 million, respectively, resulting in effective tax rates of 21% and 20%, respectively. As compared to the federal statutory rate of 21%, all periods were primarily impacted by income taxes owed in U.S. states, partially offset by benefits from the discrete impact of excess tax deductions from stock-based compensation.

The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized credits, the Company’s federal tax years from 2012 and forward are subject to examination by the U.S. authorities. The Company’s state and foreign tax years for 2001 and forward are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter.
Note 5. Revolving Credit Facility
The Company has a $175.0 million Revolving Credit Facility under a Credit Agreement expiring on August 31, 2023 of which no amounts were outstanding as of September 30, 2021. Loans will bear interest at a rate equal to (i) the London Interbank Offered Rate (“LIBOR”) plus the “applicable rate” or (ii) the “base rate” (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus one-half of one percent, (c) LIBOR plus one percent, and (d) one percent) plus the “applicable rate.” The applicable rate is determined in accordance with a pricing grid based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) ranging from 1.75% to 2.50% per annum for LIBOR rate loans and from 0.75% to 1.50% per annum for base rate loans. In addition, the Company pays a commitment fee on the unused portion of the Credit Agreement based on the Company’s Consolidated Leverage Ratio ranging from 0.15% to 0.30% per annum in accordance with the pricing grid.
The Revolving Credit Facility is guaranteed by certain material domestic subsidiaries of the Company (the “Guarantors”) and is secured by liens on substantially all of the assets of the Company and the Guarantors, excluding real property and certain other types of excluded assets, and contains affirmative and negative covenants that are customary for credit agreements of this nature. The negative covenants include, among other things, limitations on asset sales, mergers, indebtedness, liens, dividends and other distributions, investments and transactions with affiliates. The Credit Agreement contains two financial covenants: (i) maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of each fiscal quarter of 3.50 to 1.00, which ratio may be increased to 4.50 to 1.00 in case of certain qualifying acquisitions; and (ii) a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25 to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters. The Company was in compliance with all financial covenants as of September 30, 2021.
Interest expense recognized, including amortization of deferred issuance cost, was $0.3 million and $0.6 million for the three and nine months ended September 30, 2021 and $0.2 million and $0.6 million for the three and nine months ended September 30, 2020.
Note 6. Stockholders’ Equity
Issuances of Common Stock
A summary of the status of stock option activity for the nine months ended September 30, 2021 is as follows (in thousands, except price data):
SharesWeighted-average
exercise price
per share
Outstanding at December 31, 2020760 $46.95 
Granted58 232.75 
Exercised(83)38.92 
Outstanding at September 30, 2021735 $62.58 
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A summary of the status of RSU activity for the nine months ended September 30, 2021 is as follows (in thousands, except price data):
SharesWeighted-average
grant date fair value
Non-vested December 31, 2020878 $59.60 
Granted113 200.05 
Vested(399)48.41 
Forfeited(5)122.58 
Non-vested at September 30, 2021587 $93.70 
During the nine months ended September 30, 2021, the Company issued 29,948 shares of common stock in connection with the Company’s employee stock purchase plan (the “ESPP”).
Stock-Based Compensation
The expense related to the Company’s stock-based compensation plans included in the accompanying Consolidated Statements of Income was as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
 September 30,
2021202020212020
Cost of sales$909 $539 $2,068 $1,232 
Research and development1,369 1,032 3,296 2,540 
Sales and marketing1,736 1,580 4,696 4,218 
General and administrative2,991 2,402 8,619 6,571 
Total stock-based compensation expense$7,005 $5,553 $18,679 $14,561 
As of September 30, 2021, total unrecognized compensation expense was $42.5 million, which is expected to be recognized over a weighted-average period of approximately 1.8 years.
The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for the option grants.
Nine Months Ended
 September 30,
20212020
Risk-free interest rate0.48 %1.20 %
Expected option life (in years)4.995.13
Volatility rate54 %40 %
Dividend rate0 %0 %
Weighted-average grant date fair value$106.55$35.28
The fair value of RSUs is determined based on the closing market price of the Company’s common stock on the grant date. The weighted-average fair value of RSUs granted during the nine months ended September 30, 2021 and 2020 was $200.05 and $97.33, respectively.
Compensation expense capitalized to inventory and compensation expense related to the ESPP were not material for the three and nine months ended September 30, 2021 or 2020.
Note 7. Industry and Geographic Information
The Company operates in one reportable segment. Sales to customers outside of the United States represented $196.0 million (18%) and $140.5 million (16%) of total revenues for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021 and December 31, 2020, net accounts receivable due from foreign customers were $32.6 million and $18.6 million, respectively.
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The Company had sales to individual customers in excess of 10% of total revenues, as follows:
Nine Months Ended
 September 30,
20212020
Customer:
A27 %25 %
B11 %18 %
C10 %11 %
Total:48 %54 %
As of September 30, 2021 and December 31, 2020, net accounts receivable from customers with balances due in excess of 10% of total accounts receivable totaled $205.6 million and $411.7 million, respectively.
Consolidated total revenues by product category for the nine months ended September 30, 2021 and 2020 were as follows (in thousands):
 Three Months Ended
September 30,
Nine Months Ended
 September 30,
 2021202020212020
Rapid Immunoassay$378,721 $337,042 $676,461 $513,578 
Cardiometabolic Immunoassay64,790 64,810 203,008 172,902 
Molecular Diagnostic Solutions54,834 62,993 149,553 126,533 
Specialized Diagnostic Solutions11,391 11,213 32,662 39,452 
Total revenues$509,736 $476,058 $1,061,684 $852,465 

Note 8. Commitments and Contingencies
Leases
We lease administrative, research and development, sales and marketing and manufacturing facilities and certain equipment under various non-cancelable lease agreements. Facility leases generally provide for periodic rent increases, and may contain clauses for rent escalation, renewal options or early termination.
Summers Ridge Lease The Company leases three of the four buildings that are located on the Summers Ridge property in San Diego, California with an initial term through January 2033 with options to extend the lease for two additional five-year terms upon satisfaction of certain conditions, which have not been included in the determination of the lease term. The lease is subject to must-take provisions related to one additional building, which will have the same lease term as the three buildings originally leased. The remaining building is subject to the expiration of the lease with its current tenant in October 2022, subject to an option to renew for a two-year period.
McKellar Court Lease — During 1999, the Company completed a sale and leaseback transaction of its San Diego facility at McKellar Court to 10165 McKellar Court, L.P. (“McKellar LP” or the “partnership”) for which the Company was the limited partner. McKellar LP owned the real property and improvements located at 10165 McKellar Court (the “McKellar Property”). The partnership was deemed to be a variable interest entity (“VIE”). The Company was not, however, the primary beneficiary of the VIE as it did not have the power to direct the activities of the partnership and did not have the obligation to absorb losses or receive benefits of the partnership that could potentially be significant to the partnership. The Company’s primary use of the McKellar Property is for manufacturing and administrative offices.
On August 17, 2021, a wholly owned subsidiary of the Company purchased the general partner’s interest (the “GP interest”) in McKellar LP for a net purchase price of $28.9 million, which was acquired using cash on hand. As a result of the purchase of the GP interest, the partnership is now a wholly owned subsidiary of the Company. The partnership continues to be a VIE for which the Company is now the primary beneficiary. The Company accounted for the GP interest as an asset acquisition and recorded building and land with a total value of $28.9 million. Prior to the purchase date, the Company was leasing the McKellar Property through 2030, with options to extend for two additional five‐year periods. As a result of the
14


Company’s purchase of the GP interest in McKellar LP, the Company no longer makes lease payments for the McKellar Property. Prior to the acquisition, the Company made lease payments to the partnership of approximately $0.6 million during the nine months ended September 30, 2021.
Rutherford Lease — During January 2021, the Company entered into a lease agreement for a manufacturing facility in Carlsbad, California and recorded a right-of-use asset and a corresponding lease liability of $39.4 million. The initial lease term is 15 years with options to extend the lease for two additional five-year periods.
Litigation and Other Legal Proceedings
In Beckman Coulter, Inc. v. Quidel Corporation, which was filed in the Superior Court for the County of San Diego, California, on November 27, 2017, Beckman Coulter, Inc. (“Beckman Coulter”) alleged that a provision of an agreement between Quidel and Beckman Coulter violated state antitrust laws. Our acquisition of the B-type Naturietic Peptide assay business (“BNP Business”) in October 2017 consisted of assets and liabilities relating to a contractual arrangement with Beckman Coulter (the “BNP Supply Agreement”) for the supply of antibodies and other inputs related to, and distribution of, the Triage® B-type Naturietic Peptide Test (“BNP Test”) for the Beckman Coulter Access Family of Immunoassay Systems. In the lawsuit, Beckman Coulter asserted that an exclusivity provision violated certain state antitrust laws and was unenforceable. From the inception of the lawsuit, the lawsuit was subject to numerous motions, rulings, appellate reviews and opinions. The matter was scheduled for trial starting April 15, 2022.
On July 24, 2021, the Company and Beckman Coulter entered into a Master Agreement (the “Master Agreement”) pursuant to which, among other matters, Quidel’s business of selling and distributing the BNP Test for the BNP Business will be transitioned to Beckman Coulter. Concurrent with entering into the Master Agreement, Quidel and Beckman Coulter entered into a Settlement Agreement to resolve all disputes relating to the existing BNP Supply Agreement, among other matters. On August 3, 2021, the lawsuit was dismissed with prejudice.
As consideration for the arrangements during each of calendar years 2022 through and including 2029, Quidel will receive a minimum payment of $70.0 million and a maximum payment of $75.0 million. Such maximum payments will be pro-rated for 2021, based on the period commencing on the date of the initial commercial transition to Beckman Coulter, through December 31, 2021. In addition, the parties entered into other related agreements under the Master Agreement, including a Transition Services Agreement, pursuant to which the parties will provide various transitional services, a Supply Agreement for the supply by Quidel of the Quidel antibody and other components used in the manufacture of the BNP Test, and a Distribution Agreement, granting Beckman Coulter the right to sell and distribute the BNP Test as described above.
From time to time, the Company is involved in other litigation and proceedings, including matters related to product liability claims, commercial disputes and intellectual property claims, as well as regulatory, employment, and other claims related to our business. The Company accrues for legal claims when, and to the extent that, amounts associated with the claims become probable and are reasonably estimable. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. For those matters as to which we are not able to estimate a possible loss or range of loss, we are not able to determine whether the loss will have a material adverse effect on our business, financial condition or results of operations or liquidity. No accrual has been recorded as of September 30, 2021 and December 31, 2020 related to such matters as they are not probable and/or reasonably estimable. 
Management believes that all such current legal actions, in the aggregate, will not have a material adverse effect on the Company. However, the resolution of, or increase in any accruals for, one or more matters may have a material adverse effect on the Company’s results of operations and cash flows. The Company also maintains insurance, including coverage for product liability claims, in amounts that management believes are appropriate given the nature of its business.
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Note 9. Fair Value Measurements
The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the following periods (in thousands):
 September 30, 2021December 31, 2020
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Cash equivalents (money market funds)$200,002 $ $ $200,002 $200,003 $ $ $200,003 
Derivative assets 167  167  24  24 
Total assets measured at fair value$200,002 $167 $ $200,169 $200,003 $24 $ $200,027 
Liabilities:
Derivative liabilities$ $442 $ $442 $ $3,061 $ $3,061 
Contingent consideration  5,957 5,957   11,896 11,896 
Deferred consideration 77,467  77,467  115,951  115,951 
Total liabilities measured at fair value$ $77,909 $5,957 $83,866 $ $119,012 $11,896 $130,908 
There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 categories of the fair value hierarchy during the three and nine-month periods ended September 30, 2021 and the year ended December 31, 2020.
Cash equivalents consist of funds held in money market accounts that are valued using quoted prices in active markets for identical instruments. Derivative financial instruments are measured based on observable inputs that are corroborated by market data. Observable inputs include broker quotes, daily market foreign currency rates and forward pricing curves.
In connection with the acquisition of the BNP Business, the Company has an annual installment payment payable in 2022 of up to $48.0 million and an annual installment payment of $40.0 million payable in 2023 remaining as of September 30, 2021. The fair value of the payments treated as deferred consideration is calculated based on the net present value of cash payments using an estimated borrowing rate based on a quoted price for a similar liability. The fair value of the payments treated as contingent consideration is calculated using a discounted probability weighted valuation model. Discount rates used in such calculation are a significant assumption that are not observed in the market and, therefore, the resulting fair value represents a Level 3 measurement. The discount rate of 2.9% used as of September 30, 2021 was based on an estimated borrowing rate for a similar liability.
Changes in estimated fair value of contingent consideration liabilities from December 31, 2020 through September 30, 2021 were as follows (in thousands):
Contingent consideration liabilities
(Level 3 measurement)
Balance at December 31, 2020$11,896 
Cash payments(6,040)
Change in estimated fair value, recorded in general and administrative expenses101 
Balance at September 30, 2021$5,957 

Note 10. Foreign Currency Hedges
In the normal course of business, the Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates. As part of its strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses designated cash flow hedges in the form of foreign currency forward contracts to mitigate the impact of foreign currency translation on transactions that are denominated primarily in the Euro and the Chinese Yuan. The Company also uses non-designated forward contracts to hedge non-functional currency denominated balance sheet assets. Hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and
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strategies for undertaking the hedge transactions are formally documented. The Company does not use any derivative financial instruments for trading or other speculative purposes.
Such forward foreign currency contracts are carried at fair value in prepaid expenses and other current assets or other current liabilities depending on the unrealized gain or loss position of the hedged contract as of the balance sheet date. Changes in the value of the derivatives are recorded to other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the derivative no longer qualifies as a highly effective hedge. The cash flows from derivatives treated as hedges are classified in the Consolidated Statements of Cash Flows in the same category as the item being hedged.
The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current currency exchange rates at each respective date. We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their net fair values. We did not have any derivative instruments with credit-risk related contingent features that would require us to post collateral.
The following table summarizes the fair value and notional amounts of designated and non-designated foreign currency forward contracts as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Notional Amount