0001193125-17-164160.txt : 20170509 0001193125-17-164160.hdr.sgml : 20170509 20170509160550 ACCESSION NUMBER: 0001193125-17-164160 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170509 DATE AS OF CHANGE: 20170509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORASURE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001116463 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 364370966 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16537 FILM NUMBER: 17826380 BUSINESS ADDRESS: STREET 1: 150 WEBSTER ST CITY: BETHLEHEM STATE: PA ZIP: 18015 BUSINESS PHONE: 5036416115 MAIL ADDRESS: STREET 1: 150 WEBSTER ST CITY: BETHLEHEM STATE: PA ZIP: 18015 10-Q 1 d377587d10q.htm FORM 10-Q Form 10-Q

 

 

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 March 31, 2017.

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 001-16537

 

 

ORASURE TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   36-4370966

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

 

220 East First Street, Bethlehem, Pennsylvania   18015
(Address of Principal Executive Offices)   (Zip code)

(610) 882-1820

(Registrant’s Telephone Number, Including Area Code)

 

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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

      
Non-accelerated filer   ☐ (Do not check if a smaller reporting company)   

Smaller reporting company

 
Accelerated filer      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 checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Number of shares of Common Stock, par value $.000001 per share, outstanding as of May 4, 2017: 57,762,761 shares.

 

 

 


PART I. FINANCIAL INFORMATION

 

     Page No.  

Item 1.    Financial Statements (unaudited)

  

Consolidated Balance Sheets at March 31, 2017 and December  31, 2016

     3  

Consolidated Statements of Income for the three months ended March  31, 2017 and 2016

     4  

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016

     5  

Consolidated Statements of Cash Flows for the three months ended March  31, 2017 and 2016

     6  

Notes to the Consolidated Financial Statements

     7  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     19  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     28  

Item 4. Controls and Procedures

     28  
PART II. OTHER INFORMATION   

Item 1. Legal Proceedings

     29  

Item 1A. Risk Factors

     30  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     31  

Item 3. Defaults Upon Senior Securities

     31  

Item 4. Mine Safety Disclosures

     31  

Item 5. Other Information

     31  

Item 6. Exhibits

     31  

Signatures

     32  

 

- 2-


Item 1. FINANCIAL STATEMENTS

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except per share amounts)

 

     March 31, 2017     December 31, 2016  

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 120,851     $ 107,959  

Restricted cash

     1,831       1,831  

Short-term investments

     18,776       11,160  

Accounts receivable, net of allowance for doubtful accounts of $588 and $484

     24,005       19,827  

Inventories

     12,707       11,799  

Prepaid expenses

     1,732       1,722  

Other current assets

     633       2,143  
  

 

 

   

 

 

 

Total current assets

     180,535       156,441  

PROPERTY AND EQUIPMENT, net

     20,134       20,033  

INTANGIBLE ASSETS, net

     9,779       10,337  

GOODWILL

     18,971       18,793  

OTHER ASSETS

     3,173       2,331  
  

 

 

   

 

 

 
   $ 232,592     $ 207,935  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable

   $ 7,286     $ 4,633  

Deferred revenue

     1,306       1,388  

Accrued expenses

     9,685       11,314  
  

 

 

   

 

 

 

Total current liabilities

     18,277       17,335  
  

 

 

   

 

 

 

OTHER LIABILITIES

     3,160       2,304  
  

 

 

   

 

 

 

DEFERRED INCOME TAXES

     2,330       2,446  
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 7)

    

STOCKHOLDERS’ EQUITY

    

Preferred stock, par value $.000001, 25,000 shares authorized, none issued

     —         —    

Common stock, par value $.000001, 120,000 shares authorized, 57,664 and 56,001 shares issued and outstanding

     —         —    

Additional paid-in capital

     360,612       350,528  

Accumulated other comprehensive loss

     (13,770     (14,220

Accumulated deficit

     (138,017     (150,458
  

 

 

   

 

 

 

Total stockholders’ equity

     208,825       185,850  
  

 

 

   

 

 

 
   $ 232,592     $ 207,935  
  

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

- 3-


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended March 31,  
     2017     2016  

NET REVENUES:

    

Product

   $ 31,482     $ 25,245  

Other

     1,064       3,844  
  

 

 

   

 

 

 
     32,546       29,089  

COST OF PRODUCTS SOLD

     12,236       8,776  
  

 

 

   

 

 

 

Gross profit

     20,310       20,313  
  

 

 

   

 

 

 

OPERATING EXPENSES:

    

Research and development

     2,970       2,366  

Sales and marketing

     6,877       8,706  

General and administrative

     7,092       6,542  

Gain on litigation settlement

     (12,500     —    
  

 

 

   

 

 

 
     4,439       17,614  
  

 

 

   

 

 

 

Operating income

     15,871       2,699  

OTHER INCOME (EXPENSE)

     467       (192
  

 

 

   

 

 

 

Income before income taxes

     16,338       2,507  

INCOME TAX EXPENSE

     3,897       61  
  

 

 

   

 

 

 

NET INCOME

   $ 12,441     $ 2,446  
  

 

 

   

 

 

 

EARNINGS PER SHARE:

    

BASIC

   $ 0.22     $ 0.04  
  

 

 

   

 

 

 

DILUTED

   $ 0.21     $ 0.04  
  

 

 

   

 

 

 

SHARES USED IN COMPUTING EARNINGS PER SHARE:

 

 

BASIC

     56,929       55,451  
  

 

 

   

 

 

 

DILUTED

     58,772       56,079  
  

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

- 4-


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

     Three Months Ended March 31,  
     2017      2016  

NET INCOME

   $ 12,441      $ 2,446  

OTHER COMPREHENSIVE INCOME

 

  

Currency translation adjustments

     450        2,867  
  

 

 

    

 

 

 

COMPREHENSIVE INCOME

   $ 12,891      $ 5,313  
  

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

- 5-


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES    

CONSOLIDATED STATEMENTS OF CASH FLOWS    

(Unaudited)    

(in thousands)    

 

     Three Months Ended March 31,  
     2017     2016  

OPERATING ACTIVITIES:

    

Net income

   $ 12,441     $ 2,446  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Stock-based compensation

     1,518       1,452  

Depreciation and amortization

     1,408       1,354  

Amortization of lease incentives

     (20     (19

Amortization of debt issue costs

     31       —    

Unrealized foreign currency (gain) loss

     (1     141  

Deferred income taxes

     (139     (18

Changes in assets and liabilities

    

Accounts receivable

     (4,143     2,489  

Inventories

     (893     990  

Prepaid expenses and other assets

     1,505       26  

Accounts payable

     2,619       758  

Deferred revenue

     (84     (2,504

Accrued expenses and other liabilities

     (1,623     (2,371
  

 

 

   

 

 

 

Net cash provided by operating activities

     12,619       4,744  
  

 

 

   

 

 

 

INVESTING ACTIVITIES:

    

Purchases of short-term investments

     (7,514     (7,689

Proceeds from maturities of short-term investments

     —         7,689  

Purchases of property and equipment

     (878     (1,593
  

 

 

   

 

 

 

Net cash used in investing activities

     (8,392     (1,593
  

 

 

   

 

 

 

FINANCING ACTIVITIES:

    

Proceeds from exercise of stock options

     9,417       —    

Repurchase of common stock

     (851     (3,187
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     8,566       (3,187
  

 

 

   

 

 

 

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH

     99       500  

NET INCREASE IN CASH AND CASH EQUIVALENTS

     12,892       464  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     107,959       94,094  
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 120,851     $ 94,558  
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

Cash paid for income taxes

   $ 1,949     $ 84  
  

 

 

   

 

 

 

Noncash investing activities (accrued property and equipment purchases)

   $ 297     $ 444  
  

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

- 6-


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(in thousands, except per share amounts, unless otherwise indicated)

 

1. The Company

We develop, manufacture, market and sell diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products, including immunoassays and other in vitro diagnostic tests that are used on other specimen types. Our diagnostic products include tests that are performed on a rapid basis at the point-of-care, tests that are processed in a laboratory, and include a rapid point-of-care HIV in-home test approved for use in the domestic consumer retail or over-the-counter (“OTC”) market and a rapid point-of-care HIV self-test used in certain international markets. We also manufacture and sell devices used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomic, personalized medicine, microbiome and animal genetic markets. Lastly, we manufacture and sell medical devices used for the removal of benign skin lesions by cryosurgery, or freezing. Our products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, research and academic institutions, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet.

 

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation. The consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiary, DNA Genotek, Inc. (“DNAG”). All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiary, unless otherwise indicated.

The accompanying consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations expected for the full year.    

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable and inventories and assumptions utilized in impairment testing for intangible assets and goodwill, as well as calculations related to contingencies, accruals, and performance- based compensation expense, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis, using historical experience and other factors, which management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity and foreign currency markets, reductions in government funding, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the financial statements in those future periods.

Short-Term Investments. We consider all short-term investments to be available-for-sale securities. These securities are comprised of guaranteed investment certificates with purchased maturities greater than ninety days. Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.

 

- 7-


Our available-for-sale securities as of March 31, 2017 and December 31, 2016 consisted of guaranteed investment certificates with amortized cost and fair value of $18,776 and $11,160, respectively.

Fair Value of Financial Instruments. As of March 31, 2017 and December 31, 2016, the carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values based on their short-term nature.

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed 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 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).

Included in cash and cash equivalents at March 31, 2017 and December 31, 2016, was $82,142 and $83,704 invested in government money market funds. These funds have investments in government securities and are Level 1 instruments.

We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and Company stock. The fair value of the plan assets as of March 31, 2017 and December 31, 2016 was $2,828 and $1,980, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in other assets with the same amount included in other liabilities in the accompanying consolidated balance sheets.

All of our available-for-sale securities are measured as Level 1 instruments as of March 31, 2017 and December 31, 2016.

In 2017, we purchased certificates of deposit (“CD”) from a commercial bank. The CDs bear interest at an annual rate ranging from 0.28% to 0.44% and mature monthly through February 28, 2018. The carrying values of the CDs approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 7 – Commitments and Contingencies.

Inventories. Inventories are stated at the lower of cost and net realizable value determined on a first-in, first-out basis and are comprised of the following:

 

     March 31, 2017      December 31, 2016  

Raw materials

   $ 5,024      $ 5,399  

Work in process

     1,035        1,034  

Finished goods

     6,648        5,366  
  

 

 

    

 

 

 
   $ 12,707      $ 11,799  
  

 

 

    

 

 

 

Property and Equipment. Property and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to

 

- 8-


forty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of income. Accumulated depreciation of property and equipment as of March 31, 2017 and December 31, 2016 was $36,856 and $36,067, respectively.

Intangible Assets. Intangible assets consist of a customer list, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of seven to fifteen years. Accumulated amortization of intangible assets as of March 31, 2017 and December 31, 2016 was $15,944 and $15,197, respectively. The change in intangibles from $10,337 as of December 31, 2016 to $9,779 as of March 31, 2017 is a result of $637 in amortization expense and $79 in foreign currency translation gains.

Goodwill. Goodwill represents the excess of the purchase price we paid over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current U.S. generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then we would not be required to perform the two-step quantitative impairment test. Otherwise, performing the two-step impairment test is necessary. The first step of the two-step quantitative impairment test involves comparing the fair values of the applicable reporting unit with its aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the test to determine the amount of the impairment loss, if any. The second step involves measuring any impairment by comparing the implied fair values of the affected reporting unit’s goodwill and intangible assets with the respective carrying values.

We performed our last annual impairment assessment as of July 31, 2016 utilizing a qualitative evaluation and concluded that it was more likely than not that the fair value of our DNAG reporting unit is greater than its carrying value. We believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting unit. If actual future results are not consistent with management’s estimates and assumptions, we may have to take an impairment charge in the future related to our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of March 31, 2017, we believe no indicators of impairment exist.

The change in goodwill from $18,793 as of December 31, 2016 to $18,971 as of March 31, 2017 is a result of foreign currency translation.

Revenue Recognition. We recognize product revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenues are recorded net of allowances for any discounts or rebates. Other than for sales of our OraQuick® In-Home HIV test to the retail trade, we do not grant price protection or product return rights to our customers except for warranty returns. Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.

Our net revenues recorded on sales of the OraQuick® In-Home HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.

We record shipping and handling charges billed to our customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.

In June 2014, we entered into a Master Program Services and Co-Promotion Agreement with AbbVie Bahamas Ltd., a wholly-owned subsidiary of AbbVie Inc. (“AbbVie”), to co-promote our OraQuick® HCV test in the United

 

- 9-


States. On June 30, 2016, we mutually agreed to terminate our agreement with AbbVie effective December 31, 2016. Following the termination of the agreement, AbbVie was relieved of its co-promotion obligations, including its obligation to detail the OraQuick® HCV Rapid Test into physician offices, and has no further financial obligations to us. We are no longer obligated to compensate AbbVie for product detailing activities and are free to pursue arrangements with other pharmaceutical companies to market and promote our OraQuick® HCV Rapid Antibody Test in the U.S. Accordingly, during the first quarter of 2017 we did not record any revenue from this co-promotion agreement. During the first quarter of 2016, $3,362 in exclusivity revenue was recognized and was recorded as other revenue in our consolidated statements of income.

On June 12, 2015, we were awarded a grant for up to $10,400 in total funding from the U.S. Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) related to our OraQuick® Ebola Rapid Antigen test. The three-year, multi-phased grant includes an initial commitment of $1,800 and options for up to an additional $8,600 to fund certain clinical and regulatory activities. In September 2015, BARDA exercised an option to provide $7,200 in additional funding for the development of our OraQuick® Ebola Rapid Antigen test. Amounts related to this grant are recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarters of 2017 and 2016, $420 and $482, respectively, was recognized in connection with this grant.

In August 2016, we were awarded a contract for up to $16,600 in total funding from BARDA related to our rapid Zika test. The six-year, multi-phased contract includes an initial commitment of $7,000 and options for up to an additional $9,600 to fund the evaluation of additional product enhancements, and clinical and regulatory activities. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarter of 2017, $644 was recognized in connection with this grant.

Customer Sales Returns and Allowances. We do not grant return rights to our customers for any product, except for our OraQuick® In-Home HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick® In-Home HIV product revenues in our consolidated statements of income. This estimate reflects our historical sales experience to retailers and consumers, as well as other retail factors, and is reviewed regularly to ensure that it reflects potential product returns. As of March 31, 2017 and December 31, 2016, the reserve for sales returns and allowances was $235 and $217, respectively. If actual product returns differ materially from our reserve amount, or if a determination is made that this product’s distribution would be discontinued in whole or in part by certain retailers, then we would need to adjust our reserve. Should the actual level of product returns vary significantly from our estimates, our operating and financial results could be materially affected.

Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2017 and December 31, 2016 includes customer prepayments of $1,306 and $1,388, respectively.

Customer and Vendor Concentrations. One of our customers accounted for 22% of our accounts receivable as of March 31, 2017. Another customer accounted for 15% of our accounts receivable as of December 31, 2016. We had no significant concentrations in net consolidated revenues for the three months ended March 31, 2017. One of our customers accounted for approximately 12% of our net consolidated revenues for the three months ended March 31, 2016.

We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our products to our customers. Also, our subsidiary, DNAG, uses two third-party suppliers to manufacture its products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.

Earnings Per Share. Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in a manner similar to basic earnings per share except that the weighted average number of shares outstanding is increased to

 

- 10-


include shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock, and performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period.

The computations of basic and diluted earnings per share are as follows:

 

     Three Months
Ended March 31,
 
     2017      2016  

Net income

   $ 12,441      $ 2,446  
  

 

 

    

 

 

 

Weighted average shares of common stock outstanding:

     

Basic

     56,929        55,451  

Dilutive effect of stock options and restricted stock

     1,843        628  
  

 

 

    

 

 

 

Diluted

     58,772        56,079  
  

 

 

    

 

 

 

Earnings per share:

     

Basic

   $ 0.22      $ 0.04  
  

 

 

    

 

 

 

Diluted

   $ 0.21      $ 0.04  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2017 and 2016, outstanding common stock options, unvested restricted stock, and unvested performance units representing 666 and 4,843 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.    

Foreign Currency Translation. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders’ equity.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange losses resulting from foreign currency transactions that are included in other income (expense) in our consolidated statements of income were $(200) and $(346) for the three months ended March 31, 2017 and 2016, respectively.

Accumulated Other Comprehensive Income (Loss). We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive income (loss) separately from accumulated deficit and additional paid-in capital in the stockholders’ equity section of our consolidated balance sheet.

We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and as such, the results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. The $450 and $2,867 currency translation adjustments recorded in the first three months of 2017 and 2016, respectively, are largely the result of the translation of our Canadian operation’s balance sheets into U.S. dollars.

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued converged guidance on recognizing revenue in contracts with customers, ASU 2014-09, Revenue from Contracts with Customers. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, at which point we plan to adopt the standard.

 

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The FASB allows two adoption methods under ASU 2014-09. We plan to adopt the standard using the “modified retrospective method.” Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effective of the change and providing additional disclosures comparing results to previous accounting standards.

Upon initial evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations related to our device and lab services for drug testing. This revenue stream amounts to less than 1% of total consolidated revenues. We will continue to evaluate the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and related disclosures, but do not anticipate the adoption to have a material impact on our financial results.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires an entity that uses the first-in, first-out method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016.    We adopted ASU 2015-11 on January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires entities to begin recording assets and liabilities from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU 2016-02 may have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued authoritative guidance under ASU 2016-09, Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017. Since we have a full valuation allowance against our net deferred tax assets, the adoption of this standard for recognition of tax effects of deductions for employee share awards in excess of compensation costs (‘windfall”) did not have a material impact on our consolidated financial statements and related disclosures. See Note 6 – Income Taxes, for additional information. Should the full valuation allowance be reversed in future periods the adoption of this new guidance will introduce more volatility to our effective tax rate depending on the Company’s share price at exercise or vesting of share-based awards compared to grant date. The other provisions of ASU 2016-09 did not have a material impact on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December 15, 2017, subject to early adoption. The majority of the guidance in ASU 2016-15 is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This update will be effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the future adoption of this standard on our consolidated financial statements and related disclosures.

 

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3. Accrued Expenses

 

     March 31, 2017      December 31, 2016  

Payroll and related benefits

   $ 3,905      $ 7,685  

Income taxes payable

     2,045        (39

Royalties

     688        982  

Professional fees

     686        715  

Other

     2,361        1,971  
  

 

 

    

 

 

 
   $ 9,685      $ 11,314  
  

 

 

    

 

 

 

 

4. Credit Facility

On September 30, 2016, we entered into a credit agreement (the “Credit Agreement”) with a commercial bank. The Credit Agreement provides for revolving extensions of credit in an initial aggregate amount of up to $10,000 (inclusive of a letter of credit subfacility of $2,500), with an option to request, prior to the second anniversary of the closing date, that the lender, at its election, provide up to $5,000 of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding under the Credit Agreement at March 31, 2017 and December 31, 2016.

Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three or six-month loans, as selected by the Company, plus 2.50% per year. The Credit Agreement is subject to an unused line fee of 0.375% per year on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.

In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of March 31, 2017 and December 31, 2016, we were in compliance with all applicable covenants in the Credit Agreement.

 

5. Stockholders’ Equity

Stock-Based Awards

We grant stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the “Stock Plan”). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. We recognize compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust compensation expense related to these awards, as appropriate. To satisfy the exercise of options or to issue restricted stock, or redeem performance-based restricted stock units, we issue new shares rather than purchase shares on the open market.

Total compensation cost related to stock options for the three months ended March 31, 2017 and 2016 was $502 and $733, respectively. Net cash proceeds from the exercise of stock options were $9,417 and $0 for the three months ended March 31, 2017 and 2016, respectively. As a result of the Company’s net operating loss carryforward position, no actual income tax benefit was realized from stock option exercises during these periods.

 

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The following table summarizes the stock option activity for the first three months ended March, 31, 2017:

 

     Options  

Outstanding on January 1, 2017

     5,456  

Granted

     191  

Exercised

     (1,462

Expired

     (27

Forfeited

     (19
  

 

 

 

Outstanding on March 31, 2017

     4,139  
  

 

 

 

Compensation cost of $655 and $719 related to restricted shares was recognized during the three months ended March 31, 2017 and 2016, respectively. In connection with the vesting of restricted shares and exercise of stock options during the three months ended March 31, 2017 and 2016, we purchased and immediately retired 96 and 98 shares with aggregate values of $851 and $527, respectively, in satisfaction of minimum tax withholding and exercise obligations.

The following table summarizes restricted stock award activity for the three months ended March 31, 2017:

 

     Shares  

Issued and unvested, January 1, 2017

     750  

Granted

     288  

Vested

     (297

Forfeited

     (4
  

 

 

 

Issued and unvested, March 31, 2017

     737  
  

 

 

 

Commencing in 2016, we granted to certain executives performance-based restricted stock units (“PSUs”). Vesting of these PSUs is dependent upon achievement of performance-based metrics during a one-year or three-year period, from the date of grant. Assuming achievement of each performance-based metric, the executive must also remain in our service for three years from the grant date. Performance during the one-year period will be based on a one-year earnings per share target. If the one-year target is achieved, the PSUs will then vest three years from grant date. Performance during the three-year period will be based on achievement of a three-year compound annual growth rate for consolidated product revenues. If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date. PSUs are converted into shares of our common stock once vested. Upon grant of the PSUs, we recognize compensation expense related to these awards based on assumptions as to what percentage of each target will be achieved. The Company evaluates these assumptions on a quarterly basis and adjusts compensation expense related to these awards, as appropriate.

Compensation cost of $361 related to PSUs was recognized during the three months ended March 31, 2017. No compensation cost related to the PSUs was recognized during the three months ended March, 31, 2016.

The following table summarizes PSU activity for the three months ended March 31, 2017:

 

     Units  

Issued and unvested, January 1, 2017

     456  

Granted

     229  

Vested

     —    

Forfeited

     —    
  

 

 

 

Issued and unvested, March 31, 2017

     685  
  

 

 

 

 

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Stock Repurchase Program

On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. No shares were purchased and retired during the three months ended March 31, 2017. During the three months ended March 31, 2016, we purchased and retired 423 shares of common stock at an average price of $6.29 per share for a total cost of $2,660, respectively.

 

6. Income Taxes

During the three months ended March 31, 2017 and 2016, we recorded tax expense of $3,897 and $61, respectively.

Tax expense reflects taxes due to state and Canadian taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of our total deferred tax liability as of March 31, 2017 relate to the tax effects of the basis difference between the intangible assets acquired in the DNAG acquisition for financial reporting and tax purposes. Tax expense in the first quarter of 2017 reflects the additional Canadian taxes due as a result of the $12,500 gain from the settlement of the Ancestry litigation.

In 2008, we established a full valuation allowance against our U.S. deferred tax asset. Management believes the full valuation allowance is still appropriate as of both March 31, 2017 and December 31, 2016 since the facts and circumstances necessitating the allowance have not changed. As a result, no U.S. federal or state deferred income tax expense or benefit was recorded for the three-month periods ended March 31, 2017 and 2016.

The new accounting guidance under ASU 2016-09 allows for the recognition of excess tax benefits regardless of whether the deduction reduces taxes payable. On January 1, 2017, we recorded a cumulative-effect adjustment to retained earnings of $3,391 to recognize the increase in our net operating loss carryforwards from the cumulative excess tax benefits not recognized in periods prior to January 1, 2017. A corresponding $3,391 increase to our valuation allowance associated with this tax benefit was also recorded to retained earnings thereby recording a net impact to retained earnings of $0.

 

7. Commitments and Contingencies

Standby Letters of Credit

In 2016, we established four standby letters of credit in the aggregate amount of $1,831, naming international customers as the beneficiaries. These letters of credit were required as a performance guarantee of our obligations under our product supply contracts with those customers and are collateralized by certificates of deposit maintained at a commercial bank.

Litigation

From time to time, we are involved in certain legal actions arising in the ordinary course of business. In management’s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on our future financial position or results of operations.

In May 2015, our subsidiary DNAG filed a complaint in the United States District Court for the District of Delaware against Ancestry.com DNA LLC (“Ancestry”) relating to the manufacture and sale by Ancestry of its oral fluid DNA collection device (the “Ancestry Device”). Ancestry previously purchased DNAG’s patented oral fluid DNA collection devices. The complaint alleged that the manufacture and sale by Ancestry of the Ancestry Device infringes U.S. Patent No. 8,221,381 B2, which is owned by DNAG. In addition, the complaint alleged that Ancestry has breached the terms of agreements under which Ancestry previously purchased DNAG products. The complaint also included an action to quiet title to the Ancestry Device and related patent applications. DNAG requested the court to grant injunctive relief and damages.

On October 20, 2015, Ancestry filed with the United States Patent and Trademark Office (“USPTO”) a Petition for Inter Partes Review (“IPR”) of some, but not all, claims of U.S. Patent No. 8,221,381 B2. On April 8, 2016, the USPTO instituted an IPR of some, but not all, of the claims raised in Ancestry’s petition. On June 3, 2016, Ancestry filed a second Petition for IPR of some, but not all, of the claims of U.S. Patent No. 8,221,381 B2.

 

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In July 2015, DNAG filed a complaint in the United States District Court for the District of Delaware against Spectrum DNA, Spectrum Solutions L.L.C. and Spectrum Packaging L.L.C. (collectively “Spectrum”) relating to the manufacture and sale by Spectrum of an oral fluid DNA collection device (the “Spectrum Device”). The Spectrum Device is the same as the Ancestry device mentioned above and Spectrum is the manufacturer of the Ancestry Device for Ancestry. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. patent number 8,221,381 B-2, which is owned by DNAG. DNAG requested the court to grant injunctive relief and damages. Spectrum filed a motion to dismiss this lawsuit on the grounds that the Delaware District Court lacked jurisdiction over Spectrum. The Court granted Spectrum’s motion to dismiss for lack of personal jurisdiction.

On June 20, 2016, DNAG filed a complaint in the United States District Court for the Southern District of California against Spectrum relating to the manufacture and sale of the Spectrum Device. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. Patent No. 9,207,164, which is owned by DNAG. DNAG requested the court to grant injunctive relief and damages. On June 21, 2016, DNAG filed a motion for preliminary injunction. On July 21, 2016, Spectrum filed a motion to stay the case pending resolution by the PTO of a Petition for IPR of U.S. Patent No. 9,207,164, which was filed by Ancestry in July 2016. On October 6, 2016, the Court issued an order denying DNAG’s motion for preliminary injunction and on October 7, 2016, the Court issued an order staying the case pending resolution of the IPR of U.S. Patent No. 9,207,164.

Effective February 6, 2017, DNAG settled the foregoing litigation with Ancestry and Spectrum. Under a Settlement and License Agreement executed by the parties, Ancestry agreed to pay DNAG a settlement fee of $12,500. This settlement amount has been recorded as a separate line item and a reduction of our operating expenses in our consolidated statements of income. In addition, DNAG granted Ancestry a royalty-bearing, non-exclusive, worldwide license to certain patents and patent applications related to the collection of DNA in human saliva. The license granted to Ancestry is limited to saliva DNA collection kits sold or used as part of Ancestry’s genetic testing service offerings and does not cover the sale or use of collection kits outside of Ancestry’s business. The Settlement and License Agreement also provides DNAG with a royalty-free, non-exclusive license to patents related to Ancestry’s existing saliva DNA collection kit and certain modifications thereto.

The parties have each agreed to a mutual release of claims and other provisions typical for settlement agreements of this type. Pursuant to the terms of the Settlement and License Agreement, the pending federal lawsuits in the District of Delaware and the Southern District of California have been dismissed and the IPR proceedings before the USPTO involving the DNAG patents asserted in the litigation have been terminated.

 

8. Business Segment Information

We operate our business within two reportable segments: our “OSUR” business, which consists of the development, manufacture and sale of diagnostic products, specimen collection devices and medical devices; and our molecular collection systems or “DNAG” business, which primarily consists of the manufacture, development and sale of oral fluid collection devices that are used to collect, stabilize and store samples of genetic material for molecular testing. OSUR revenues are derived primarily from products sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet. OSUR also derives other revenues, including exclusivity payments for co-promotion rights and other licensing and product development activities. DNAG revenues result primarily from products sold into the commercial market which consists of customers engaged in consumer genetics, clinical genetic testing, pharmacogenomics, personalized medicine, microbiome, and animal genetic testing. DNAG products are also sold into the academic research market, which consists of research laboratories, universities and hospitals.

We organized our operating segments according to the nature of the products included in those segments. The accounting policies of the segments are the same as those described in the summary of significant accounting

 

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policies (see Note 2). We evaluate performance of our operating segments based on revenue and operating income (loss). We do not allocate interest income, interest expense, other income, other expenses or income taxes to our operating segments. Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.

The following table summarizes operating segment information for the three months ended March 31, 2017 and 2016, and asset information as of March 31, 2017 and December 31, 2016:

 

     Three Months Ended March 31,  
     2017      2016  

Net revenues:

     

OSUR

   $ 21,840      $ 22,199  

DNAG

     10,706        6,890  
  

 

 

    

 

 

 

Total

   $ 32,546      $ 29,089  
  

 

 

    

 

 

 

Operating income (loss):

     

OSUR

   $ (219    $ 1,608  

DNAG

     16,090        1,091  
  

 

 

    

 

 

 

Total

   $ 15,871      $ 2,699  
  

 

 

    

 

 

 

Depreciation and amortization:

     

OSUR

   $ 625      $ 639  

DNAG

     783        715  
  

 

 

    

 

 

 

Total

   $ 1,408      $ 1,354  
  

 

 

    

 

 

 

Capital expenditures:

     

OSUR

   $ 784      $ 447  

DNAG

     94        1,146  
  

 

 

    

 

 

 

Total

   $ 878      $ 1,593  
  

 

 

    

 

 

 
     March 31, 2017      December 31, 2016  

Total assets:

     

OSUR

   $ 161,730      $ 151,719  

DNAG

     70,862        56,216  
  

 

 

    

 

 

 

Total

   $ 232,592      $ 207,935  
  

 

 

    

 

 

 

Our products are sold principally in the United States and Europe.

The following table represents total net revenues by geographic area, based on the location of the customer:

 

     Three Months Ended March 31,  
     2017      2016  

United States

   $ 20,854      $ 22,170  

Europe

     3,125        3,879  

Other regions

     8,567        3,040  
  

 

 

    

 

 

 
   $ 32,546      $ 29,089  
  

 

 

    

 

 

 

 

- 17-


The following table represents total long-lived assets by geographic area:

 

     March 31, 2017      December 31, 2016  

United States

   $ 15,886      $ 15,737  

Canada

     4,238        4,286  

Other regions

     10        10  
  

 

 

    

 

 

 
   $ 20,134      $ 20,033  
  

 

 

    

 

 

 

 

- 18-


Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements below regarding future events or performance are “forward-looking statements” within the meaning of the Federal securities laws. These may include statements about our expected revenues, earnings/loss per share, net income (loss), expenses, cash flow or other financial performance or developments, clinical trial or development activities, expected regulatory filings and approvals, planned business transactions, views of future industry, competitive or market conditions, and other factors that could affect our future operations, results of operations or financial position. These statements often include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “will,” “should,” “could,” or similar expressions. Forward-looking statements are not guarantees of future performance or results. Known and unknown factors that could cause actual performance or results to be materially different from those expressed or implied in these statements include, but are not limited to: ability to market and sell products, whether through our internal, direct sales force or third parties; ability to manufacture products in accordance with applicable specifications, performance standards and quality requirements; ability to obtain, and timing and cost of obtaining, necessary regulatory approvals for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements; ability to effectively resolve warning letters, audit observations and other findings or comments from the FDA or other regulators; changes in relationships, including disputes or disagreements, with strategic partners or other parties and reliance on strategic partners for the performance of critical activities under collaborative arrangements; impact of increased reliance on U.S. government contracts; failure of distributors or other customers to meet purchase forecasts, historic purchase levels or minimum purchase requirements for our products; impact of replacing distributors; inventory levels at distributors and other customers; ability of the Company to achieve its financial and strategic objectives and continue to increase its revenues, including the ability to expand international sales; ability to identify, complete, integrate and realize the full benefits of future acquisitions; impact of competitors, competing products and technology changes; impact of negative economic conditions, high unemployment levels and poor credit conditions; reduction or deferral of public funding available to customers; competition from new or better technology or lower cost products; ability to develop, commercialize and market new products; market acceptance of oral fluid testing or other products; changes in market acceptance of products based on product performance or other factors, including changes in testing guidelines, algorithms or other recommendations by the Centers for Disease Control and Prevention (“CDC”) or other agencies; ability to fund research and development and other products and operations; ability to obtain and maintain new or existing product distribution channels; reliance on sole supply sources for critical products and components; availability of related products produced by third parties or products required for use of our products; history of losses and ability to achieve sustained profitability; ability to utilize net operating loss carry forwards or other deferred tax assets; volatility of the Company’s stock price; uncertainty relating to patent protection and potential patent infringement claims; uncertainty and costs of litigation relating to patents and other intellectual property; availability of licenses to patents or other technology; ability to enter into international manufacturing agreements; obstacles to international marketing and manufacturing of products; ability to sell products internationally, including the impact of changes in international funding sources and testing algorithms; adverse movements in foreign currency exchange rates; loss or impairment of sources of capital; ability to meet financial covenants in credit agreements; ability to attract and retain qualified personnel; exposure to product liability and other types of litigation; changes in international, federal or state laws and regulations; customer consolidations and inventory practices; equipment failures and ability to obtain needed raw materials and components; the impact of terrorist attacks and civil unrest; and general political, business and economic conditions. These and other factors are discussed more fully in our Securities and Exchange Commission (“SEC”) filings, including our registration statements, Annual Report on Form 10-K for the year ended December 31, 2016, Quarterly Reports on Form 10-Q, and other filings with the SEC. Although forward-looking statements help to provide information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. The forward-looking statements are made as of the date of this Report, and we undertake no duty to update these statements.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of OraSure.

 

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The following discussion should be read in conjunction with our consolidated financial statements contained herein and the notes thereto, along with the Section entitled “Critical Accounting Policies and Estimates,” set forth below.

Overview

We develop, manufacture, market and sell diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products, including immunoassays and other in vitro diagnostic tests that are used on other specimen types. Our diagnostic products include tests that are performed on a rapid basis at the point-of-care, tests that are processed in a laboratory, a rapid point-of-care HIV test approved for use in the domestic consumer retail or over-the-counter (“OTC”) market and a rapid point-of-care HIV self-test used in certain interational markets. We also manufacture and sell collection devices used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomic, personalized medicine, microbiome and animal genetic markets. Lastly, we manufacture and sell medical devices used for the removal of benign skin lesions by cryosurgery, or freezing. Our products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, research and academic institutions, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet.

Recent Developments

Litigation Settlement

Effective February 6, 2017, we settled our patent infringement and breach of contract litigation against Ancestry.com DNA LLC (“Ancestry”) and its contract manufacturer. Under a Settlement and License Agreement executed by the parties, Ancestry agreed to pay a settlement fee of $12.5 million which we received in the first quarter of 2017 and recorded as a gain on litigation settlement in our consolidated statements of income. In addition, we granted Ancestry a royalty-bearing, non-exclusive, worldwide license to certain patents and patent applications related to the collection of DNA in human saliva. The license granted to Ancestry is limited to saliva DNA collection kits sold or used as part of Ancestry’s genetic testing service offerings and does not cover the sale or use of collection kits outside of Ancestry’s business. The Settlement and License Agreement also provides us with a royalty-free, non-exclusive license to patents related to Ancestry’s existing saliva DNA collection kit and certain modifications thereto.

New Genomics Contract

We recently entered into a contract to supply over $20 million of our DNA saliva collection kits over a period greater than 12 months with one of our genomics customers. This is the largest product supply contract in the history of our molecular business.

Current Consolidated Financial Results

During the three months ended March 31, 2017, our consolidated net revenues were $32.5 million, compared to $29.1 million for the three months ended March 31, 2016. Net product revenues during the three months ended March 31, 2017 increased 25% when compared to the first three months of 2016, primarily due to higher sales of our molecular products and higher international sales of our professional OraQuick® HIV self-test and OraQuick® HCV product, partially offset by lower domestic sales of our OraQuick® HIV and HCV products and our cryosurgical products. Other revenues for the first three months of 2017 were $1.1 million compared to $3.8 million in the same period of 2016. Other revenues in the first quarter of 2017 represent revenue recognized in connection with funding received from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) for our Ebola and Zika products. Other revenues in the first quarter of 2016 included $482,000 of BARDA funding and $3.4 million of exclusivity revenues recognized under our HCV co-promotion agreement with AbbVie, which terminated effective December 31, 2016.

 

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Our consolidated net income for the three months ended March 31, 2017 was $12.4 million, or $0.21 per share on a fully-diluted basis, compared to consolidated net income of $2.4 million, or $0.04 per share on a fully-diluted basis, for the three months ended March 31, 2016. Results for the current quarter include a pre-tax gain of $12.5 million associated with the Ancestry settlement, as described above.

Cash provided by operating activities for the three months ended March 31, 2017 was $12.6 million and included the $12.5 million litigation settlement noted above.    Cash provided by operating activities during the three months ended March 31, 2016 was $4.7 million. As of March 31, 2017, we had $141.5 million in cash (including restricted cash), cash equivalents, and short-term investments compared to $120.9 million at December 31, 2016.    

Business Segments

We operate our business within two reportable segments: our “OSUR” business, which consists of the development, manufacture and sale of diagnostic products, specimen collection devices, and medical devices, and our “DNAG” or molecular collection systems business, which consists primarily of the development, manufacture and sale of oral fluid collection devices that are used to collect, stabilize, transport, and store samples of genetic material for molecular testing. OSUR revenues are derived primarily from products sold into the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies, mass merchandisers and consumers over the internet. DNAG revenues result from products sold into the commercial market, which consists of customers engaged in consumer genetics, clinical genetic testing, pharmacogenomics, personalized medicine, microbiome and animal genetic testing, as well as products sold into the academic research market which consists of research laboratories, universities and hospitals.

Results of Operations

Three months ended March 31, 2017 compared to March 31, 2016

CONSOLIDATED NET REVENUES

The table below shows a breakdown of total consolidated net revenues (dollars in thousands) generated by each of our business segments for the three months ended March 31, 2017 and 2016.

 

     Three Months Ended March 31,  
     Dollars            Percentage of Total
Net Revenues
 
     2017      2016      %
Change
    2017     2016  

OSUR

   $ 20,776      $ 18,355        13     64     63

DNAG

     10,706        6,890        55       33       24  
  

 

 

    

 

 

      

 

 

   

 

 

 

Net product revenues

     31,482        25,245        25       97       87  

Other

     1,064        3,844        (72     3       13  
  

 

 

    

 

 

      

 

 

   

 

 

 

Net revenues

   $ 32,546      $ 29,089        12     100     100
  

 

 

    

 

 

      

 

 

   

 

 

 

Consolidated net product revenues increased 25% to $31.5 million in the first quarter of 2017 from $25.2 million in the comparable period of 2016. Higher sales of our molecular products and increased international sales of our OraQuick® HIV self-test and OraQuick® HCV product, were partially offset by lower domestic sales of our OraQuick® HIV and HCV products and lower sales of our cryosurgical products. In the first quarter of 2017, we recognized $1.1 million as other revenues in connection with funding from BARDA related to our Ebola and Zika products. Other revenues in the first quarter of 2016 were $3.8 million and included $3.4 million in exclusivity payments received under our HCV co-promotion agreement with AbbVie and $482,000 recognized in connection with funding from BARDA. Our co-promotion agreement with AbbVie was terminated effective as of December 31, 2016 and no further revenues under this agreement will be recognized.

 

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Consolidated net revenues derived from products sold to customers outside of the United States were $11.7 million and $6.9 million, or 36% and 24% of total net revenues, in the first quarters of 2017 and 2016, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

Net Revenues by Segment

OSUR Segment

The table below shows a breakdown of total net revenues (dollars in thousands) generated by our OSUR segment.

 

     Three Months Ended March 31,  
     Dollars            Percentage of Total
Net Revenues
 

Market

   2017      2016      %
Change
    2017     2016  

Infectious disease testing

   $ 14,583      $ 11,368        28     67     51

Risk assessment testing

     3,130        3,105        1       14       14  

Cryosurgical

     3,063        3,882        (21     14       18  
  

 

 

    

 

 

      

 

 

   

 

 

 

Net product revenues

     20,776        18,355        13       95       83  

Other

     1,064        3,844        (72     5       17  
  

 

 

    

 

 

      

 

 

   

 

 

 

Net revenues

   $ 21,840      $ 22,199        (2 )%      100     100
  

 

 

    

 

 

      

 

 

   

 

 

 

Infectious Disease Testing Market

Sales to the infectious disease testing market increased 28% to $14.6 million in the first quarter of 2017 from $11.4 million in the first quarter of 2016. This increase resulted from higher international sales of our OraQuick® HIV self-test and OraQuick® HCV product, partially offset by a decline in domestic sales of our OraQuick® HIV and HCV products.

The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during the first quarters of 2017 and 2016.

 

     Three Months Ended March 31,  

Market

   2017      2016      % Change  

Domestic HIV

   $ 3,812      $ 5,703        (33 )% 

International HIV

     2,644        854        210  

Domestic OTC HIV

     1,542        1,523        1  
  

 

 

    

 

 

    

Net HIV revenues

     7,998        8,080        (1
  

 

 

    

 

 

    

Domestic HCV

     1,709        1,900        (10

International HCV

     4,402        1,001        340  
  

 

 

    

 

 

    

Net HCV revenues

     6,111        2,901        111  
  

 

 

    

 

 

    

Net OraQuick® HIV and HCV product revenues

   $ 14,109      $ 10,981        28
  

 

 

    

 

 

    

Domestic OraQuick® HIV sales decreased 33% to $3.8 million for the three months ended March 31, 2017 from $5.7 million for the three months ended March 31, 2016. This decrease was primarily the result of customer ordering patterns and continued price and product competition. We anticipate that future domestic sales of our professional HIV product will continue to be negatively affected as a result of Centers for Disease Control and Prevention (“CDC”) testing guidelines recommending the use of competing fourth generation automated HIV immunoassays performed in a laboratory, changes in government funding and continued product and price

 

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competition. International sales of our OraQuick® HIV test during the first quarter of 2017 rose 210% to $2.6 million from $854,000 in the first quarter of 2016. This increase was largely due to the continued shipment of product in support of a HIV self-testing program in Africa, higher sales into the Middle East, and customer ordering patterns.

Sales of our OraQuick® In-Home HIV test remained consistent at $1.5 million during the first quarters of 2017 and 2016.

Domestic OraQuick® HCV sales decreased 10% to $1.7 million in the first quarter of 2017 from $1.9 million in the first quarter of 2016 primarily due to customer ordering patterns. International OraQuick® HCV sales increased 340% to $4.4 million in the first quarter of 2017 from $1.0 million in the first quarter of 2016, largely due to continued shipments of product to a foreign government to support a nationwide HCV testing and treatment program that began in November 2016, and increased sales in Africa.

International orders for both our HIV and HCV products can be sporadic in nature and are often predicated upon the availability of governmental funding, the impact of competition and other factors. As such, there is no assurance that such sales will continue at the same levels in future periods.

Risk Assessment Market

Sales to the risk assessment market remained consistent at $3.1 million in the first quarters of 2017 and 2016.

Cryosurgical Market

Sales of our cryosurgical products (which includes sales in both the physicians’ office and OTC markets) decreased 21% to $3.1 million in the first quarter of 2017 from $3.9 million in the first quarter of 2016.

The table below shows a breakdown of our total net cryosurgical revenues (dollars in thousands) generated in each market during the first quarters of 2017 and 2016.

 

     Three Months Ended March 31,  

Market

   2017      2016      % Change  

Domestic professional

   $ 1,496      $ 1,554        (4 )% 

International professional

     130        235        (45

Domestic OTC

     285        378        (25

International OTC

     1,152        1,715        (33
  

 

 

    

 

 

    

Net cryosurgical revenues

   $ 3,063      $ 3,882        (21 )% 
  

 

 

    

 

 

    

Sales of our Histofreezer® product to physicians’ offices in the United States decreased 4% to $1.5 million in the first quarter of 2017 from $1.6 million in the first quarter of 2016, primarily due to distributor ordering patterns. International sales of Histofreezer® decreased to $130,000 in the first quarter of 2017 from $235,000 in the same period of the prior year largely due to lower sales into Asia and Europe.

Sales of our private-label wart removal product in the U.S. retail market decreased to $285,000 in the first quarter of 2017 from $378,000 in the first quarter of 2016. Sales volume in the first quarter of 2016 was at a higher level as a result of inventory stocking at a new large pharmacy chain in that period. Sales levels in the first quarter of 2017 are more reflective of typical quarterly sales of the product in the U.S. retail market.

Sales of our international OTC cryosurgical products during the first quarter of 2017 decreased 33% to $1.2 million compared to $1.7 million in the first quarter of 2016, largely due to lower sales into Europe and Latin America.    

 

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Other revenues

Other revenues in the first quarter of 2017 decreased 72% to $1.1 million from $3.8 million in the first quarter of 2016.

Other revenues in the first quarter of 2016 included AbbVie exclusivity revenues of $3.4 million. There are no similar revenues in the first quarter of 2017 due to the termination of our co-promotion agreement with AbbVie on December 31, 2016. Funding from BARDA increased to $1.1 million in the first quarter of 2017 compared to $482,000 in the first quarter of 2016.

DNAG Segment

Molecular Market

Net molecular revenues increased 55% to $10.7 million in the first quarter of 2017 from $6.9 million in the first quarter of 2016. Sales of our Oragene® product in the commercial market rose 119% in the first quarter of 2017 compared to the first quarter of 2016, primarily as a result of higher customer demand and increased sales from new customer accounts won in the second half of 2016. Sales of our Oragene® product in the academic market decreased 20% in the first quarter of 2017 compared to the first quarter of 2016, largely due to ordering patterns of existing customers and the absence of a one-time order which occurred in the first quarter of 2016 and did not repeat in 2017. The higher revenues in the first quarter of 2017 also included $767,000 in sales of our microbiome product compared to $162,000 in the same period of 2016. We believe interest in our microbiome product offering continues to grow with both new and existing customers.

CONSOLIDATED OPERATING RESULTS

Consolidated gross margin was 62% for the first quarter of 2017 compared to 70% for the first quarter of 2016. Gross margin in the first quarter of 2017 was negatively impacted by the absence of exclusivity revenues under our HCV co-promotion agreement with AbbVie, increased scrap and spoilage costs, and an increase in lower margin product sales in the first quarter of 2017 compared to the first quarter of 2016.

Consolidated operating income for the first quarter of 2017 was $15.9 million, a $13.2 million improvement from $2.7 million of operating income reported in the first quarter of 2016. The operating income for the first quarter of 2017 benefited from the Ancestry litigation settlement gain and lower sales and marketing costs, partially offset by higher research and development and general and administrative expenses.

OPERATING INCOME (LOSS) BY SEGMENT

OSUR Segment

OSUR’s gross margin was 60% in the first quarter of 2017 compared to 69% in the first quarter of 2016. OSUR’s gross margin in the first quarter of 2017 was negatively impacted by the absence of exclusivity revenues under our HCV co-promotion agreement with AbbVie ($3.4 million was recorded in the first quarter of 2016 and none in 2017), increased scrap and spoilage costs, and an increase in lower margin product sales in the first quarter of 2017 compared to the first quarter of 2016.

Research and development expenses increased 36% to $2.4 million in the first quarter of 2017 from $1.7 million in the first quarter of 2016, largely due to higher supply costs associated with the development of our Ebola and Zika products and increased staffing expenses. Sales and marketing expenses decreased 28% to $4.7 million in the first quarter of 2017 from $6.5 million in the first quarter of 2016. This decrease was primarily the result of the termination of our OraQuick® HCV co-promotion agreement with AbbVie on December 31, 2016 and lower staffing costs. General and administrative expenses increased 14% to $6.3 million in the first quarter of 2017 from $5.5 million in the first quarter of 2016 due to increased staffing costs.

 

- 24-


All of the above contributed to OSUR’s first quarter 2017 operating loss of $219,000, which included non-cash charges of $625,000 for depreciation and amortization and $1.4 million for stock-based compensation.

DNAG Segment

DNAG’s gross margin was 67% in the first quarter of 2017 compared to 73% in the first quarter of 2016. This decline was attributable to an increase in lower margin sales in the first quarter of 2017 compared to the first quarter of 2016.

Research and development expenses decreased 4% to $603,000 in the first quarter of 2017 from $627,000 in the first quarter of 2016, largely due to lower supply costs. Sales and marketing expenses remained consistent at $2.2 million in the first quarters of each of 2017 and 2016. General and administrative expenses decreased 22% to $831,000 in the first quarter of 2017 compared to $1.1 million in the first quarter of 2016 primarily due to lower legal costs. Operating expenses in the first quarter of 2017 were offset by the $12.5 million pre-tax gain associated with the settlement of our Ancestry litigation.

All of the above contributed to DNAG’s first quarter 2017 operating income of $16.1 million, which included non-cash charges of $783,000 for depreciation and amortization and $97,000 for stock-based compensation.

CONSOLIDATED INCOME TAXES

We continue to believe the full valuation allowance established in 2008 against OSUR’s total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended March 31, 2017, state income tax expense of $31,000 was recorded compared to $0 in the three months ended March 31, 2016. Canadian income tax expense of $3.9 million and $61,000 was recorded in the first quarters of 2017 and 2016, respectively. Taxes in the first quarter of 2017 included the additional taxes due as a result of the $12.5 million Ancestry litigation settlement payment.    

Liquidity and Capital Resources

 

     March 31,      December 31,  
     2017      2016  
     (In thousands)  

Cash and cash equivalents

   $ 122,682      $ 109,790  

Short-term investments

     18,776        11,160  

Working capital

     162,258        139,106  

Our cash, cash equivalents, and short-term investment balances increased to $141.5 million at March 31, 2017 from $120.9 million at December 31, 2016. Our working capital increased to $162.2 million at March 31, 2017 from $139.1 million at December 31, 2016.

During the first three months of 2017, we generated $12.6 million in cash from operating activities. Our net income of $12.4 million benefitted from non-cash stock-based compensation expense of $1.5 million and depreciation and amortization expense of $1.4 million, partially offset by a net reduction of other non-cash charges of $129,000.    Additional sources of cash included an increase in accounts payable of $2.6 million largely due to consulting services and inventory purchases that were invoiced at the end of the quarter, and a decrease in prepaid and other assets of $1.5 million largely due to the receipt of $1.4 million as payment of a claim from one of our raw material suppliers. This settlement was recorded as a receivable at December 31, 2016. Uses of cash in operating activities during the period include an increase in accounts receivable of $4.1 million largely resulting from longer collection periods associated with our international contracts, a decrease in accrued expenses and other liabilities of $1.6 million associated with payment of our 2016 management incentive bonuses partially offset by an increase in our Canadian income taxes payable, an increase in inventory balances of $893,000 required to meet expected demand, and a decrease in deferred revenue of $84,000.

 

- 25-


Net cash used in investing activities was $8.4 million for the three months ended March 31, 2017, which reflects $7.5 million used to purchase short-term investments and $878,000 to acquire property and equipment.

Net cash provided by financing activities was $8.6 million for the three months ended March 31, 2017, which resulted from $9.4 million in proceeds received from the exercise of stock options partially offset by $851,000 used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares.

On September 30, 2016, we entered into a credit agreement (the “Credit Agreement”) with a commercial bank. The Credit Agreement provides for revolving extensions of credit in an initial aggregate amount of up to $10,000,000 (inclusive of a letter of credit subfacility of $2,500,000), with an option to request, prior to the second anniversary of the closing date, that lenders, at their election, provide up to $5,000,000 of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding at March 31, 2017 or December 31, 2016.

Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three or six-month loans, as selected by the Company, plus 2.50% per annum. The Credit Agreement will be subject to an unused line fee of 0.375% per annum on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.

In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of March 31, 2017 and December 31, 2016, we were in compliance with all applicable covenants under the Credit Agreement.

Our current cash and cash equivalents balance and available borrowing capacity are expected to be sufficient to fund our current operating and capital needs for the foreseeable future. Our cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the scope and timing of future strategic acquisitions, the progress of our research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors.

Summary of Contractual Obligations

A summary of our obligations to make future payments under contracts existing at December 31, 2016 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2016. As of March 31, 2017, there were no significant changes to this information, including the absence of any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our judgments and estimates, including those related to the valuation of accounts receivable, inventories and intangible assets, as well as calculations related to contingencies and accruals. We base our judgments and estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

- 26-


A more detailed review of our critical accounting policies is contained in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC. During the first three months of 2017, there were no material changes in our critical accounting policies.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any amounts of derivative financial instruments or derivative commodity instruments and, accordingly, we have no material derivative risk to report under this Item.

As of March 31, 2017, we did not have any foreign currency exchange contracts or purchase currency options to hedge local currency cash flows. Sales denominated in foreign currencies comprised 5.2% of our total revenues for the three months ended March 31, 2017. We do have foreign currency exchange risk related to our operating subsidiary in Canada. While the majority of this subsidiary’s revenues are recorded in U.S. dollars, almost all of this subsidiary’s operating expenses are denominated in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar could affect year-to-year comparability of operating results and cash flows. Our Canadian subsidiary had net assets, subject to translation, of $78.4 million CDN ($58.9 million USD), which are included in the Company’s consolidated balance sheet as of March 31, 2017. A 10% unfavorable change in the Canadian-to-U.S. dollar exchange rate would have decreased our comprehensive income by $5.9 million in the three months ended March 31, 2017.

 

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of March 31, 2017. Based on that evaluation, the Company’s management, including such officers, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2017 to provide reasonable assurance that material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 was accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and was recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b) Changes in Internal Control Over Financial Reporting. There was no change in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS

From time to time, we are involved in certain legal actions arising in the ordinary course of business. In management’s opinion, based upon the advice of counsel, the outcomes of such actions are not expected, individually or in the aggregate, to have a material adverse effect on our future financial position or results of operations.

In May 2015, our subsidiary DNAG filed a complaint in the United States District Court for the District of Delaware against Ancestry.com DNA LLC (“Ancestry”) relating to the manufacture and sale by Ancestry of its oral fluid DNA collection device (the “Ancestry Device”). Ancestry previously purchased DNAG’s patented oral fluid DNA collection devices. The complaint alleged that the manufacture and sale by Ancestry of the Ancestry Device infringes U.S. Patent No. 8,221,381 B2, which is owned by DNAG. In addition, the complaint alleged that Ancestry has breached the terms of agreements under which Ancestry previously purchased DNAG products. The complaint also included an action to quiet title to the Ancestry Device and related patent applications. DNAG requested the court to grant injunctive relief and damages.

On October 20, 2015, Ancestry filed with the United States Patent and Trademark Office (“USPTO”) a Petition for Inter Partes Review (“IPR”) of some, but not all, claims of U.S. Patent No. 8,221,381 B2. On April 8, 2016, the USPTO instituted an IPR of some, but not all, of the claims raised in Ancestry’s petition. On June 3, 2016, Ancestry filed a second Petition for IPR of some, but not all, of the claims of U.S. Patent No. 8,221,381 B2.

In July 2015, DNAG filed a complaint in the United States District Court for the District of Delaware against Spectrum DNA, Spectrum Solutions L.L.C. and Spectrum Packaging L.L.C. (collectively “Spectrum”) relating to the manufacture and sale by Spectrum of an oral fluid DNA collection device (the “Spectrum Device”). The Spectrum Device is the same as the Ancestry device mentioned above and Spectrum is the manufacturer of the Ancestry Device for Ancestry. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. patent number 8,221,381 B-2, which is owned by DNAG. DNAG is requesting the court to grant injunctive relief and damages. Spectrum filed a motion to dismiss this lawsuit on the grounds that the Delaware District Court lacked jurisdiction over Spectrum. The Court granted Spectrum’s motion to dismiss for lack of personal jurisdiction.

On June 20, 2016, DNAG filed a complaint in the United States District Court for the Southern District of California against Spectrum relating to the manufacture and sale of the Spectrum Device. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. Patent No. 9,207,164, which is owned by DNAG. DNAG requested the court to grant injunctive relief and damages. On June 21, 2016, DNAG filed a motion for preliminary injunction. On July 21, 2016, Spectrum filed a motion to stay the case pending resolution by the PTO of a Petition for IPR of U.S. Patent No. 9,207,164, which was filed by Ancestry in July 2016. On October 6, 2016, the Court issued an order denying DNAG’s motion for preliminary injunction and on October 7, 2016, the Court issued an order staying the case pending resolution of the IPR of U.S. Patent No. 9,207,164.

Effective February 6, 2017, DNAG settled the foregoing litigation with Ancestry and Spectrum. Under a Settlement and License Agreement executed by the parties, Ancestry agreed to pay DNAG a settlement fee of $12.5 million. This settlement amount has been recorded as a separate line item and a reduction of our operating expenses in our statements of income in 2017. In addition, DNAG granted Ancestry a royalty-bearing, non-exclusive, worldwide license to certain patents and patent applications related to the collection of DNA in human saliva. The license granted to Ancestry is limited to saliva DNA collection kits sold or used as part of Ancestry’s genetic testing service offerings and does not cover the sale or use of collection kits outside of Ancestry’s business. The Settlement and License Agreement also provides DNAG with a royalty-free, non-exclusive license to patents related to Ancestry’s existing saliva DNA collection kit and certain modifications thereto.

The parties have each agreed to a mutual release of claims and other provisions typical for settlement agreements of this type. Pursuant to the terms of the Settlement and License Agreement, the pending federal lawsuits in the District of Delaware and the Southern District of California have been dismissed and the IPR proceedings before the USPTO involving the DNAG patents asserted in the litigation have been terminated

 

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Item 1A. RISK FACTORS

There have been no material changes to the factors disclosed in Item 1A., entitled “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2016.

 

- 29-


Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Period

   Total number
of shares
purchased
    Average price
paid per
Share
     Total number of
shares purchased
as part of publicly
announced plans
or programs
     Maximum number (or
approximate dollar
value) of shares that
may yet be repurchased
under the plans or
programs (2, 3)
 

January 1, 2017 - January 31, 2017

     —         —          —          11,984,720  

February 1, 2017 - February 28, 2017

     —         —          —          11,984,720  

March 1, 2017 - March 31, 2017

     96,105  (1)    $ 8.85        N/A        11,984,720  
  

 

 

      

 

 

    
     96,105          —       
  

 

 

      

 

 

    

 

(1)  Pursuant to the OraSure Technologies, Inc. Stock Award Plan, and in connection with the vesting of restricted shares, these shares were retired to satisfy minimum tax withholdings.
(2)  On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25.0 million of outstanding shares. This share repurchase program may be discontinued at any time.
(3)  This column represents the amount that remains available under the $25.0 million repurchase plan, as of the period indicated. We have made no commitment to purchase any shares under this plan.

 

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

 

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

 

ITEM 5. OTHER INFORMATION

None

 

Item 6. EXHIBITS

Exhibits are listed on the Exhibit Index following the signature page of this Report.

 

- 30-


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    ORASURE TECHNOLOGIES, INC.
   

/s/ Ronald H. Spair

Date: May 9, 2017     Ronald H. Spair
    Chief Operating Officer and
    Chief Financial Officer
    (Principal Financial Officer)
   

/s/Mark L. Kuna

Date: May 9, 2017     Mark L. Kuna
    Senior Vice President, Finance and Controller
    (Principal Accounting Officer)

 

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EXHIBIT INDEX

 

Exhibit

Number

  

Exhibit

  10.1    Description of the OraSure Technologies, Inc. 2017 Management Incentive Plan is incorporated by reference to Item 5.02 to the Company’s Current Report on Form 8-K filed February 24, 2017.*
  10.2    Description of Long-Term Incentive Policy, as amended, is incorporated by reference to Item 5.02 to the Company’s Current Report on Form 8-K filed February 24, 2017.*
  10.3    Description of Non-Employee Director Compensation Policy, as amended, is incorporated by reference to Item 5.02 to the Company’s Current Report on Form 8-K filed February 24, 2017. *
  31.1    Certification of Douglas A. Michels required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
  31.2    Certification of Ronald H. Spair required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
  32.1    Certification of Douglas A. Michels required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Ronald H. Spair required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB    XBRL Taxonomy Extension Labels Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Management contract or compensatory plan or arrangement.

 

- 32-

EX-31.1 2 d377587dex311.htm EX-31.1 EX-31.1

Exhibit 31.1

Certification

I, Douglas A. Michels, certify that:

 

1. I have reviewed this report on Form 10-Q of OraSure Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d –15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within the entity, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2017

 

/s/ Douglas A. Michels

Douglas A. Michels
President and Chief Executive Officer
(Principal Executive Officer)

 

- 33-

EX-31.2 3 d377587dex312.htm EX-31.2 EX-31.2

Exhibit 31.2

Certification

I, Ronald H. Spair, certify that:

 

1. I have reviewed this report on Form 10-Q of OraSure Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d –15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within the entity, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2017

 

/s/ Ronald H. Spair

Ronald H. Spair
Chief Operating Officer and
Chief Financial Officer
(Principal Financial Officer)

 

- 34-

EX-32.1 4 d377587dex321.htm EX-32.1 EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OraSure Technologies, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas A. Michels, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Douglas A. Michels
Douglas A. Michels
President and Chief Executive Officer
May 9, 2017

 

- 35-

EX-32.2 5 d377587dex322.htm EX-32.2 EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OraSure Technologies, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald H. Spair, Chief Operating Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Ronald H. Spair
Ronald H. Spair
Chief Operating Officer and Chief Financial Officer
May 9, 2017

 

- 36-

EX-101.INS 6 osur-20170331.xml XBRL INSTANCE DOCUMENT 25000000 57762761 94558000 2867000 6.29 3905000 0.000001 36856000 57664000 57664000 232592000 180535000 688000 120000000 360612000 588000 120851000 24005000 0 7286000 2828000 1306000 686000 450000 -13770000 2330000 9685000 5024000 0.000001 25000000 15944000 633000 9779000 12707000 232592000 9779000 18971000 1035000 3160000 18277000 1732000 2361000 10000000 6648000 3173000 0 20134000 18776000 208825000 2045000 -138017000 0 1831000 4139000 82142000 18776000 11160000 1.10 2500000 1831000 4 737000 685000 1306000 5000000 2 161730000 70862000 4238000 15886000 10000 94094000 7685000 0.000001 36067000 56001000 56001000 207935000 156441000 982000 120000000 350528000 484000 107959000 19827000 0 4633000 1980000 1388000 715000 -14220000 2446000 11314000 5399000 0.000001 25000000 15197000 2143000 10337000 11799000 207935000 10337000 18793000 1034000 2304000 17335000 1722000 1971000 5366000 2331000 0 20033000 11160000 185850000 -39000 -150458000 0 1831000 5456000 83704000 18776000 11160000 750000 456000 1388000 151719000 56216000 4286000 15737000 10000 3391000 12500000 P3Y 8600000 1800000 10400000 0.15 0 3391000 7200000 P6Y 9600000 7000000 16600000 217000 31000 ORASURE TECHNOLOGIES INC 10-Q 0001116463 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="break-inside: avoid"> <td valign="top" width="4%" align="left"><b>4.</b></td> <td valign="top" align="left"><b>Credit Facility</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> On September&#xA0;30, 2016, we entered into a credit agreement (the &#x201C;Credit Agreement&#x201D;) with a commercial bank. The Credit Agreement provides for revolving extensions of credit in an initial aggregate amount of up to $10,000 (inclusive of a letter of credit subfacility of $2,500), with an option to request, prior to the second anniversary of the closing date, that the lender, at its election, provide up to $5,000 of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding under the Credit Agreement at March&#xA0;31, 2017 and December&#xA0;31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three or&#xA0;<font style="WHITE-SPACE: nowrap">six-month</font>&#xA0;loans, as selected by the Company, plus 2.50% per year. The Credit Agreement is subject to an unused line fee of 0.375% per year on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September&#xA0;30, 2019.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of March&#xA0;31, 2017 and December&#xA0;31, 2016, we were in compliance with all applicable covenants in the Credit Agreement.</p> </div> 2017-03-31 12892000 99000 2017 false --12-31 7092000 0 0.22 1408000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Earnings Per Share</u></i><i>.</i> Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in a manner similar to basic earnings per share except that the weighted average number of shares outstanding is increased to include shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock, and performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The computations of basic and diluted earnings per share are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="79%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Three&#xA0;Months</b><br /> <b>Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net income</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,441</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,446</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares of common stock outstanding:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,929</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">55,451</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Dilutive effect of stock options and restricted stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,843</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">628</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58,772</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,079</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Earnings per share:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.22</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.21</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> For the three-month periods ended March&#xA0;31, 2017 and 2016, outstanding common stock options, unvested restricted stock, and unvested performance units representing 666 and 4,843 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.</p> </div> Q1 0.21 12891000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Accumulated Other Comprehensive Income (Loss)</u></i><i>.</i> We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive income (loss) separately from accumulated deficit and additional <font style="WHITE-SPACE: nowrap">paid-in</font> capital in the stockholders&#x2019; equity section of our consolidated balance sheet.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and as such, the results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. The $450 and $2,867 currency translation adjustments recorded in the first three months of 2017 and 2016, respectively, are largely the result of the translation of our Canadian operation&#x2019;s balance sheets into U.S. dollars.</p> </div> Accelerated Filer 637000 12236000 0 -200000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i><u>Principles of Consolidation and Basis of Presentation</u></i><i>.</i> The consolidated financial statements include the accounts of OraSure Technologies, Inc. (&#x201C;OraSure&#x201D;) and its wholly-owned subsidiary, DNA Genotek, Inc. (&#x201C;DNAG&#x201D;). All intercompany transactions and balances have been eliminated. References herein to &#x201C;we,&#x201D; &#x201C;us,&#x201D; &#x201C;our,&#x201D; or the &#x201C;Company&#x201D; mean OraSure and its consolidated subsidiary, unless otherwise indicated.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The accompanying consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form <font style="WHITE-SPACE: nowrap">10-K</font> for the fiscal year ended December&#xA0;31, 2016. Results of operations for the three months ended March&#xA0;31, 2017 are not necessarily indicative of the results of operations expected for the full year.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Foreign Currency Translation</u></i>. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders&#x2019; equity.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange losses resulting from foreign currency transactions that are included in other income (expense) in our consolidated statements of income were $(200) and $(346) for the three months ended March&#xA0;31, 2017 and 2016, respectively.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left"><b>7.</b></td> <td valign="top" align="left"><b>Commitments and Contingencies</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>Standby Letters of Credit</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In 2016, we established four standby letters of credit in the aggregate amount of $1,831, naming international customers as the beneficiaries. These letters of credit were required as a performance guarantee of our obligations under our product supply contracts with those customers and are collateralized by certificates of deposit maintained at a commercial bank.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Litigation</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> From time to time, we are involved in certain legal actions arising in the ordinary course of business. In management&#x2019;s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on our future financial position or results of operations.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In May 2015, our subsidiary DNAG filed a complaint in the United States District Court for the District of Delaware against Ancestry.com DNA LLC (&#x201C;Ancestry&#x201D;) relating to the manufacture and sale by Ancestry of its oral fluid DNA collection device (the &#x201C;Ancestry Device&#x201D;).&#xA0;Ancestry previously purchased DNAG&#x2019;s patented oral fluid DNA collection devices.&#xA0;The complaint alleged that the manufacture and sale by Ancestry of the Ancestry Device infringes U.S. Patent No.&#xA0;8,221,381 B2, which is owned by DNAG.&#xA0;In addition, the complaint alleged that Ancestry has breached the terms of agreements under which Ancestry previously purchased DNAG products.&#xA0;The complaint also included an action to quiet title to the Ancestry Device and related patent applications.&#xA0;DNAG requested the court to grant injunctive relief and damages.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> On October&#xA0;20, 2015, Ancestry filed with the United States Patent and Trademark Office (&#x201C;USPTO&#x201D;) a Petition for <i>Inter Partes</i> Review (&#x201C;IPR&#x201D;) of some, but not all, claims of U.S. Patent No.&#xA0;8,221,381 B2. On April&#xA0;8, 2016, the USPTO instituted an IPR of some, but not all, of the claims raised in Ancestry&#x2019;s petition. On June&#xA0;3, 2016, Ancestry filed a second Petition for IPR of some, but not all, of the claims of U.S. Patent No.&#xA0;8,221,381 B2.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> In July 2015, DNAG filed a complaint in the United States District Court for the District of Delaware against Spectrum DNA, Spectrum Solutions L.L.C. and Spectrum Packaging L.L.C. (collectively &#x201C;Spectrum&#x201D;) relating to the manufacture and sale by Spectrum of an oral fluid DNA collection device (the &#x201C;Spectrum Device&#x201D;). The Spectrum Device is the same as the Ancestry device mentioned above and Spectrum is the manufacturer of the Ancestry Device for Ancestry. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. patent number 8,221,381 <font style="WHITE-SPACE: nowrap">B-2,</font> which is owned by DNAG. DNAG requested the court to grant injunctive relief and damages. Spectrum filed a motion to dismiss this lawsuit on the grounds that the Delaware District Court lacked jurisdiction over Spectrum.&#xA0;The Court granted Spectrum&#x2019;s motion to dismiss for lack of personal jurisdiction.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> On June&#xA0;20, 2016, DNAG filed a complaint in the United States District Court for the Southern District of California against Spectrum relating to the manufacture and sale of the Spectrum Device.&#xA0;The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. Patent No.&#xA0;9,207,164, which is owned by DNAG.&#xA0;DNAG requested the court to grant injunctive relief and damages.&#xA0;On June&#xA0;21, 2016, DNAG filed a motion for preliminary injunction.&#xA0;On July&#xA0;21, 2016, Spectrum filed a motion to stay the case pending resolution by the PTO of a Petition for IPR of U.S. Patent No.&#xA0;9,207,164, which was filed by Ancestry in July 2016.&#xA0;On October&#xA0;6, 2016, the Court issued an order denying DNAG&#x2019;s motion for preliminary injunction and on October&#xA0;7, 2016, the Court issued an order staying the case pending resolution of the IPR of U.S. Patent No.&#xA0;9,207,164.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Effective February&#xA0;6, 2017, DNAG settled the foregoing litigation with Ancestry and Spectrum. Under a Settlement and License Agreement executed by the parties, Ancestry agreed to pay DNAG a settlement fee of $12,500. This settlement amount has been recorded as a separate line item and a reduction of our operating expenses in our consolidated statements of income. In addition, DNAG granted Ancestry a royalty-bearing, <font style="WHITE-SPACE: nowrap">non-exclusive,</font> worldwide license to certain patents and patent applications related to the collection of DNA in human saliva. The license granted to Ancestry is limited to saliva DNA collection kits sold or used as part of Ancestry&#x2019;s genetic testing service offerings and does not cover the sale or use of collection kits outside of Ancestry&#x2019;s business. The Settlement and License Agreement also provides DNAG with a royalty-free, <font style="WHITE-SPACE: nowrap">non-exclusive</font> license to patents related to Ancestry&#x2019;s existing saliva DNA collection kit and certain modifications thereto.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The parties have each agreed to a mutual release of claims and other provisions typical for settlement agreements of this type. Pursuant to the terms of the Settlement and License Agreement, the pending federal lawsuits in the District of Delaware and the Southern District of California have been dismissed and the IPR proceedings before the USPTO involving the DNAG patents asserted in the litigation have been terminated.</p> </div> 1000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Goodwill</u></i><i>.</i> Goodwill represents the excess of the purchase price we paid over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current U.S. generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then we would not be required to perform the <font style="WHITE-SPACE: nowrap">two-step</font> quantitative impairment test. Otherwise, performing the <font style="WHITE-SPACE: nowrap">two-step</font> impairment test is necessary. The first step of the <font style="WHITE-SPACE: nowrap">two-step</font> quantitative impairment test involves comparing the fair values of the applicable reporting unit with its aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit&#x2019;s fair value, we perform the second step of the test to determine the amount of the impairment loss, if any. The second step involves measuring any impairment by comparing the implied fair values of the affected reporting unit&#x2019;s goodwill and intangible assets with the respective carrying values.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We performed our last annual impairment assessment as of July&#xA0;31, 2016 utilizing a qualitative evaluation and concluded that it was more likely than not that the fair value of our DNAG reporting unit is greater than its carrying value. We believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting unit. If actual future results are not consistent with management&#x2019;s estimates and assumptions, we may have to take an impairment charge in the future related to our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of March&#xA0;31, 2017, we believe no indicators of impairment exist.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The change in goodwill from $18,793 as of December&#xA0;31, 2016 to $18,971 as of March&#xA0;31, 2017 is a result of foreign currency translation.</p> </div> 0 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="break-inside: avoid"> <td valign="top" width="4%" align="left"><b>3.</b></td> <td valign="top" align="left"><b>Accrued Expenses</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="67%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Payroll and related benefits</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,905</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,685</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Income taxes payable</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,045</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(39</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Royalties</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">688</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">982</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Professional fees</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">686</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">715</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,361</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,971</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,685</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,314</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> </div> -139000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Fair Value of Financial Instruments</u></i><i>.</i> As of March&#xA0;31, 2017 and December&#xA0;31, 2016, the carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values based on their short-term nature.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Level&#xA0;1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Level&#xA0;2: 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</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Level&#xA0;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).</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Included in cash and cash equivalents at March&#xA0;31, 2017 and December&#xA0;31, 2016, was $82,142 and $83,704 invested in government money market funds. These funds have investments in government securities and are Level&#xA0;1 instruments.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and Company stock. The fair value of the plan assets as of March&#xA0;31, 2017 and December&#xA0;31, 2016 was $2,828 and $1,980, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level&#xA0;1 instruments. The fair value of plan assets is included in other assets with the same amount included in other liabilities in the accompanying consolidated balance sheets.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> All of our <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">available-for-sale</font></font> securities are measured as Level&#xA0;1 instruments as of March&#xA0;31, 2017 and December&#xA0;31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In 2017, we purchased certificates of deposit (&#x201C;CD&#x201D;) from a commercial bank. The CDs bear interest at an annual rate ranging from 0.28% to 0.44% and mature monthly through February&#xA0;28, 2018. The carrying values of the CDs approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 7 &#x2013; Commitments and Contingencies.</p> </div> 32546000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Short-Term Investments</u></i><i>.</i> We consider all short-term investments to be <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">available-for-sale</font></font> securities. These securities are comprised of guaranteed investment certificates with purchased maturities greater than ninety days. <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">Available-for-sale</font></font> securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders&#x2019; equity as a component of accumulated other comprehensive loss.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Our <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">available-for-sale</font></font> securities as of March&#xA0;31, 2017 and December&#xA0;31, 2016 consisted of guaranteed investment certificates with amortized cost and fair value of $18,776 and $11,160, respectively.</p> </div> 467000 -1623000 20310000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="break-inside: avoid"> <td valign="top" width="4%" align="left"><b>6.</b></td> <td valign="top" align="left"><b>Income Taxes</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> During the three months ended March&#xA0;31, 2017 and 2016, we recorded tax expense of $3,897 and $61, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Tax expense reflects taxes due to state and Canadian taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of our total deferred tax liability as of March&#xA0;31, 2017 relate to the tax effects of the basis difference between the intangible assets acquired in the DNAG acquisition for financial reporting and tax purposes. Tax expense in the first quarter of 2017 reflects the additional Canadian taxes due as a result of the $12,500 gain from the settlement of the Ancestry litigation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In 2008, we established a full valuation allowance against our U.S. deferred tax asset. Management believes the full valuation allowance is still appropriate as of both March&#xA0;31, 2017 and December&#xA0;31, 2016 since the facts and circumstances necessitating the allowance have not changed. As a result, no U.S. federal or state deferred income tax expense or benefit was recorded for the three-month periods ended March&#xA0;31, 2017 and 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The new accounting guidance under ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-09</font>&#xA0;allows for the recognition of excess tax benefits regardless of whether the deduction reduces taxes payable. On January&#xA0;1, 2017, we recorded a cumulative-effect adjustment to retained earnings of $3,391 to recognize the increase in our net operating loss carryforwards from the cumulative excess tax benefits not recognized in periods prior to January&#xA0;1, 2017. A corresponding $3,391 increase to our valuation allowance associated with this tax benefit was also recorded to retained earnings thereby recording a net impact to retained earnings of $0.</p> </div> 1949000 4439000 12441000 16338000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Inventories</u></i><i>.&#xA0;</i>Inventories are stated at the lower of cost and net realizable value determined on a&#xA0;<font style="WHITE-SPACE: nowrap">first-in,</font>&#xA0;<font style="WHITE-SPACE: nowrap">first-out</font>&#xA0;basis and are comprised of the following:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Raw materials</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,024</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,399</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Work in process</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,035</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,034</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Finished goods</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,648</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,366</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,707</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,799</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <br class="Apple-interchange-newline" /> </div> -8392000 0.00375 450000 79000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <u>Intangible Assets</u>. Intangible assets consist of a customer list, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of seven to fifteen years. Accumulated amortization of intangible assets as of March&#xA0;31, 2017 and December&#xA0;31, 2016 was $15,944 and $15,197, respectively. The change in intangibles from $10,337 as of December&#xA0;31, 2016 to $9,779 as of March&#xA0;31, 2017 is a result of $637 in amortization expense and $79 in foreign currency translation gains.</p> </div> 4143000 Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. 2019-09-30 12500000 851000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Customer and Vendor Concentrations</u></i><i>.</i> One of our customers accounted for 22% of our accounts receivable as of March&#xA0;31, 2017. Another customer accounted for 15% of our accounts receivable as of December&#xA0;31, 2016. We had no significant concentrations in net consolidated revenues for the three months ended March&#xA0;31, 2017. One of our customers accounted for approximately 12% of our net consolidated revenues for the three months ended March&#xA0;31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our products to our customers. Also, our subsidiary, DNAG, uses two third-party suppliers to manufacture its products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.</p> </div> 2619000 -1505000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Recent Accounting Pronouncements</u></i><i>.</i> In May 2014, the Financial Accounting Standards Board (&#x201C;FASB&#x201D;) issued converged guidance on recognizing revenue in contracts with customers, ASU <font style="WHITE-SPACE: nowrap">2014-09,</font> <i>Revenue from Contracts with Customers</i>. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The standard will be effective for the first interim period within annual reporting periods beginning after December&#xA0;15, 2017, at which point we plan to adopt the standard.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The FASB allows two adoption methods under ASU <font style="WHITE-SPACE: nowrap">2014-09.</font> We plan to adopt the standard using the &#x201C;modified retrospective method.&#x201D; Under that method, we will apply the rules to all contracts existing as of January&#xA0;1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effective of the change and providing additional disclosures comparing results to previous accounting standards.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Upon initial evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations related to our device and lab services for drug testing. This revenue stream amounts to less than 1% of total consolidated revenues. We will continue to evaluate the impact that the adoption of ASU <font style="WHITE-SPACE: nowrap">2014-09</font> will have on our consolidated financial statements and related disclosures, but do not anticipate the adoption to have a material impact on our financial results.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In July 2015, the FASB issued ASU <font style="WHITE-SPACE: nowrap">2015-11,</font> <i>Simplifying the Measurement of Inventory</i>, which requires an entity that uses the <font style="WHITE-SPACE: nowrap">first-in,</font> <font style="WHITE-SPACE: nowrap">first-out</font> method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December&#xA0;15, 2016.&#xA0;&#xA0;&#xA0;&#xA0;We adopted ASU <font style="WHITE-SPACE: nowrap">2015-11</font> on January&#xA0;1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In February 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">2016-02,</font> <i>Leases</i>, which requires entities to begin recording assets and liabilities from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard will be effective for the first interim period within annual reporting periods beginning after December&#xA0;15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU <font style="WHITE-SPACE: nowrap">2016-02</font> may have on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In March 2016, the FASB issued authoritative guidance under ASU <font style="WHITE-SPACE: nowrap">2016-09,</font> <i>Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting</i>. ASU <font style="WHITE-SPACE: nowrap">2016-09</font> provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU <font style="WHITE-SPACE: nowrap">2016-09</font> on January&#xA0;1, 2017. Since we have a full valuation allowance against our net deferred tax assets, the adoption of this standard for recognition of tax effects of deductions for employee share awards in excess of compensation costs (&#x2018;windfall&#x201D;) did not have a material impact on our consolidated financial statements and related disclosures. See Note 6 &#x2013; Income Taxes, for additional information. Should the full valuation allowance be reversed in future periods the adoption of this new guidance will introduce more volatility to our effective tax rate depending on the Company&#x2019;s share price at exercise or vesting of share-based awards compared to grant date. The other provisions of ASU <font style="WHITE-SPACE: nowrap">2016-09</font> did not have a material impact on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In August 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">2016-15,</font> <i>Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments</i>, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December&#xA0;15, 2017, subject to early adoption. The majority of the guidance in ASU <font style="WHITE-SPACE: nowrap">2016-15</font> is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In January 2017, the FASB issued ASU <font style="WHITE-SPACE: nowrap">2017-04,</font> <i>Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment</i>, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This update will be effective for annual and interim periods in fiscal years beginning after December&#xA0;15, 2019. Early adoption is permitted. We are currently assessing the impact of the future adoption of this standard on our consolidated financial statements and related disclosures.</p> </div> 893000 1843000 15871000 8566000 7514000 -84000 1064000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left"><b>1.</b></td> <td valign="top" align="left"><b>The Company</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We develop, manufacture, market and sell diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products, including immunoassays and other <i>in vitro</i> diagnostic tests that are used on other specimen types. Our diagnostic products include tests that are performed on a rapid basis at the <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">point-of-care,</font></font> tests that are processed in a laboratory, and include a rapid <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">point-of-care</font></font> HIV <font style="WHITE-SPACE: nowrap">in-home</font> test approved for use in the domestic consumer retail or <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">over-the-counter</font></font> (&#x201C;OTC&#x201D;) market and a rapid <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">point-of-care</font></font> HIV self-test used in certain international markets. We also manufacture and sell devices used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomic, personalized medicine, microbiome and animal genetic markets. Lastly, we manufacture and sell medical devices used for the removal of benign skin lesions by cryosurgery, or freezing. Our products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, research and academic institutions, distributors, government agencies, physicians&#x2019; offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet.</p> </div> 3897000 12619000 2 878000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="break-inside: avoid"> <td valign="top" width="4%" align="left"><b>5.</b></td> <td valign="top" align="left"><b>Stockholders&#x2019; Equity</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i>Stock-Based Awards</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> We grant stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the &#x201C;Stock Plan&#x201D;). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. We recognize compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust compensation expense related to these awards, as appropriate. To satisfy the exercise of options or to issue restricted stock, or redeem performance-based restricted stock units, we issue new shares rather than purchase shares on the open market.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Total compensation cost related to stock options for the three months ended March&#xA0;31, 2017 and 2016 was $502 and $733, respectively. Net cash proceeds from the exercise of stock options were $9,417 and $0 for the three months ended March&#xA0;31, 2017 and 2016, respectively. As a result of the Company&#x2019;s net operating loss carryforward position, no actual income tax benefit was realized from stock option exercises during these periods.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The following table summarizes the stock option activity for the first three months ended March, 31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="89%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Options</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding on January&#xA0;1, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,456</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">191</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Exercised</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,462</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expired</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(27</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(19</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding on March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,139</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Compensation cost of $655 and $719 related to restricted shares was recognized during the three months ended March&#xA0;31, 2017 and 2016, respectively.<b>&#xA0;</b>In connection with the vesting of restricted shares and exercise of stock options during the three months ended March&#xA0;31, 2017 and 2016, we purchased and immediately retired 96 and 98 shares with aggregate values of $851 and $527, respectively, in satisfaction of minimum tax withholding and exercise obligations.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The following table summarizes restricted stock award activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="90%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Shares</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, January&#xA0;1, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">750</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">288</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(297</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(4</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">737</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Commencing in 2016, we granted to certain executives performance-based restricted stock units (&#x201C;PSUs&#x201D;). Vesting of these PSUs is dependent upon achievement of performance-based metrics during a&#xA0;<font style="WHITE-SPACE: nowrap">one-year</font>&#xA0;or three-year period, from the date of grant. Assuming achievement of each performance-based metric, the executive must also remain in our service for three years from the grant date. Performance during the&#xA0;<font style="WHITE-SPACE: nowrap">one-year</font>&#xA0;period will be based on a&#xA0;<font style="WHITE-SPACE: nowrap">one-year</font>&#xA0;earnings per share target. If the&#xA0;<font style="WHITE-SPACE: nowrap">one-year</font>&#xA0;target is achieved, the PSUs will then vest three years from grant date. Performance during the three-year period will be based on achievement of a three-year compound annual growth rate for consolidated product revenues. If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date. PSUs are converted into shares of our common stock once vested. Upon grant of the PSUs, we recognize compensation expense related to these awards based on assumptions as to what percentage of each target will be achieved. The Company evaluates these assumptions on a quarterly basis and adjusts compensation expense related to these awards, as appropriate.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Compensation cost of $361 related to PSUs was recognized during the three months ended March&#xA0;31, 2017. No compensation cost related to the PSUs was recognized during the three months ended March, 31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The following table summarizes PSU activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Units</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, January&#xA0;1, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">456</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">229</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">685</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i>Stock Repurchase Program</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> On August&#xA0;5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. No shares were purchased and retired during the three months ended March&#xA0;31, 2017. During the three months ended March&#xA0;31, 2016, we purchased and retired 423 shares of common stock at an average price of $6.29 per share for a total cost of $2,660, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> </div> 1462000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Use of Estimates</u></i><i>.</i> The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable and inventories and assumptions utilized in impairment testing for intangible assets and goodwill, as well as calculations related to contingencies, accruals, and performance- based compensation expense, among others. These estimates and assumptions are based on management&#x2019;s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis, using historical experience and other factors, which management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity and foreign currency markets, reductions in government funding, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the financial statements in those future periods.</p> </div> 31482000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table represents total net revenues by geographic area, based on the location of the customer:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> United States</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,854</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">22,170</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Europe</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,125</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,879</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other regions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,567</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,040</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,546</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">29,089</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The following table represents total long-lived assets by geographic area:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> United States</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,886</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,737</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Canada</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,238</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,286</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other regions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,134</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,033</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 58772000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Property and Equipment</u></i><i>.</i> Property and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to forty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of income. Accumulated depreciation of property and equipment as of March&#xA0;31, 2017 and December&#xA0;31, 2016 was $36,856 and $36,067, respectively.</p> </div> 235000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table summarizes restricted stock award activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="90%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Shares</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, January&#xA0;1, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">750</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">288</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(297</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(4</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">737</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The computations of basic and diluted earnings per share are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="79%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Three&#xA0;Months</b><br /> <b>Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net income</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,441</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,446</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares of common stock outstanding:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,929</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">55,451</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Dilutive effect of stock options and restricted stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,843</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">628</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58,772</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,079</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Earnings per share:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.22</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.21</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Inventories are stated at the lower of cost and net realizable value determined on a&#xA0;<font style="WHITE-SPACE: nowrap">first-in,</font>&#xA0;<font style="WHITE-SPACE: nowrap">first-out</font>&#xA0;basis and are comprised of the following:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Raw materials</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,024</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,399</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Work in process</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,035</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,034</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Finished goods</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,648</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,366</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,707</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,799</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <br class="Apple-interchange-newline" /></div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table summarizes PSU activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Units</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, January&#xA0;1, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">456</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">229</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Issued and unvested, March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">685</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Customer Sales Returns and Allowances</u></i><i>.</i> We do not grant return rights to our customers for any product, except for our OraQuick<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> <font style="WHITE-SPACE: nowrap">In-Home</font> HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> <font style="WHITE-SPACE: nowrap">In-Home</font> HIV product revenues in our consolidated statements of income. This estimate reflects our historical sales experience to retailers and consumers, as well as other retail factors, and is reviewed regularly to ensure that it reflects potential product returns. As of March&#xA0;31, 2017 and December&#xA0;31, 2016, the reserve for sales returns and allowances was $235 and $217, respectively. If actual product returns differ materially from our reserve amount, or if a determination is made that this product&#x2019;s distribution would be discontinued in whole or in part by certain retailers, then we would need to adjust our reserve. Should the actual level of product returns vary significantly from our estimates, our operating and financial results could be materially affected.</p> </div> 56929000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="break-inside: avoid"> <td valign="top" width="4%" align="left"><b>2.</b></td> <td valign="top" align="left"><b>Summary of Significant Accounting Policies</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Principles of Consolidation and Basis of Presentation</u></i><i>.</i>&#xA0;The consolidated financial statements include the accounts of OraSure Technologies, Inc. (&#x201C;OraSure&#x201D;) and its wholly-owned subsidiary, DNA Genotek, Inc. (&#x201C;DNAG&#x201D;). All intercompany transactions and balances have been eliminated. References herein to &#x201C;we,&#x201D; &#x201C;us,&#x201D; &#x201C;our,&#x201D; or the &#x201C;Company&#x201D; mean OraSure and its consolidated subsidiary, unless otherwise indicated.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The accompanying consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form&#xA0;<font style="WHITE-SPACE: nowrap">10-K</font>&#xA0;for the fiscal year ended December&#xA0;31, 2016. Results of operations for the three months ended March&#xA0;31, 2017 are not necessarily indicative of the results of operations expected for the full year.&#xA0;&#xA0;&#xA0;&#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Use of Estimates</u></i><i>.&#xA0;</i>The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable and inventories and assumptions utilized in impairment testing for intangible assets and goodwill, as well as calculations related to contingencies, accruals, and performance- based compensation expense, among others. These estimates and assumptions are based on management&#x2019;s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis, using historical experience and other factors, which management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity and foreign currency markets, reductions in government funding, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the financial statements in those future periods.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Short-Term Investments</u></i><i>.&#xA0;</i>We consider all short-term investments to be&#xA0;<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">available-for-sale</font></font>&#xA0;securities. These securities are comprised of guaranteed investment certificates with purchased maturities greater than ninety days.&#xA0;<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">Available-for-sale</font></font>&#xA0;securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders&#x2019; equity as a component of accumulated other comprehensive loss.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Our&#xA0;<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">available-for-sale</font></font>&#xA0;securities as of March&#xA0;31, 2017 and December&#xA0;31, 2016 consisted of guaranteed investment certificates with amortized cost and fair value of $18,776 and $11,160, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Fair Value of Financial Instruments</u></i><i>.&#xA0;</i>As of March&#xA0;31, 2017 and December&#xA0;31, 2016, the carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values based on their short-term nature.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; MARGIN-LEFT: 62px; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Level&#xA0;1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; MARGIN-LEFT: 62px; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Level&#xA0;2: 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</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; MARGIN-LEFT: 62px; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Level&#xA0;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).</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Included in cash and cash equivalents at March&#xA0;31, 2017 and December&#xA0;31, 2016, was $82,142 and $83,704 invested in government money market funds. These funds have investments in government securities and are Level&#xA0;1 instruments.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and Company stock. The fair value of the plan assets as of March&#xA0;31, 2017 and December&#xA0;31, 2016 was $2,828 and $1,980, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level&#xA0;1 instruments. The fair value of plan assets is included in other assets with the same amount included in other liabilities in the accompanying consolidated balance sheets.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> All of our&#xA0;<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">available-for-sale</font></font>&#xA0;securities are measured as Level&#xA0;1 instruments as of March&#xA0;31, 2017 and December&#xA0;31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In 2017, we purchased certificates of deposit (&#x201C;CD&#x201D;) from a commercial bank. The CDs bear interest at an annual rate ranging from 0.28% to 0.44% and mature monthly through February&#xA0;28, 2018. The carrying values of the CDs approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 7 &#x2013; Commitments and Contingencies.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Inventories</u></i><i>.&#xA0;</i>Inventories are stated at the lower of cost and net realizable value determined on a&#xA0;<font style="WHITE-SPACE: nowrap">first-in,</font>&#xA0;<font style="WHITE-SPACE: nowrap">first-out</font>&#xA0;basis and are comprised of the following:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Raw materials</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,024</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,399</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Work in process</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,035</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,034</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Finished goods</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,648</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,366</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,707</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,799</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Property and Equipment</u></i><i>.</i>&#xA0;Property and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to forty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of income. Accumulated depreciation of property and equipment as of March&#xA0;31, 2017 and December&#xA0;31, 2016 was $36,856 and $36,067, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <u>Intangible Assets</u>. Intangible assets consist of a customer list, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of seven to fifteen years. Accumulated amortization of intangible assets as of March&#xA0;31, 2017 and December&#xA0;31, 2016 was $15,944 and $15,197, respectively. The change in intangibles from $10,337 as of December&#xA0;31, 2016 to $9,779 as of March&#xA0;31, 2017 is a result of $637 in amortization expense and $79 in foreign currency translation gains.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Goodwill</u></i><i>.</i><i>&#xA0;</i>Goodwill represents the excess of the purchase price we paid over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current U.S. generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then we would not be required to perform the&#xA0;<font style="WHITE-SPACE: nowrap">two-step</font>&#xA0;quantitative impairment test. Otherwise, performing the&#xA0;<font style="WHITE-SPACE: nowrap">two-step</font>&#xA0;impairment test is necessary. The first step of the&#xA0;<font style="WHITE-SPACE: nowrap">two-step</font>&#xA0;quantitative impairment test involves comparing the fair values of the applicable reporting unit with its aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit&#x2019;s fair value, we perform the second step of the test to determine the amount of the impairment loss, if any. The second step involves measuring any impairment by comparing the implied fair values of the affected reporting unit&#x2019;s goodwill and intangible assets with the respective carrying values.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> We performed our last annual impairment assessment as of July&#xA0;31, 2016 utilizing a qualitative evaluation and concluded that it was more likely than not that the fair value of our DNAG reporting unit is greater than its carrying value. We believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting unit. If actual future results are not consistent with management&#x2019;s estimates and assumptions, we may have to take an impairment charge in the future related to our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of March&#xA0;31, 2017, we believe no indicators of impairment exist.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The change in goodwill from $18,793 as of December&#xA0;31, 2016 to $18,971 as of March&#xA0;31, 2017 is a result of foreign currency translation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Revenue Recognition</u></i><i>.</i>&#xA0;We recognize product revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenues are recorded net of allowances for any discounts or rebates. Other than for sales of our OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;<font style="WHITE-SPACE: nowrap">In-Home</font>&#xA0;HIV test to the retail trade, we do not grant price protection or product return rights to our customers except for warranty returns. Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Our net revenues recorded on sales of the OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;<font style="WHITE-SPACE: nowrap">In-Home</font>&#xA0;HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> We record shipping and handling charges billed to our customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In June 2014, we entered into a Master Program Services and&#xA0;<font style="WHITE-SPACE: nowrap">Co-Promotion</font>&#xA0;Agreement with AbbVie Bahamas Ltd., a wholly-owned subsidiary of AbbVie Inc. (&#x201C;AbbVie&#x201D;), to&#xA0;<font style="WHITE-SPACE: nowrap">co-promote</font>&#xA0;our OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;HCV test in the United States. On June&#xA0;30, 2016, we mutually agreed to terminate our agreement with AbbVie effective December&#xA0;31, 2016. Following the termination of the agreement, AbbVie was relieved of its&#xA0;<font style="WHITE-SPACE: nowrap">co-promotion</font>&#xA0;obligations, including its obligation to detail the OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;HCV Rapid Test into physician offices, and has no further financial obligations to us. We are no longer obligated to compensate AbbVie for product detailing activities and are free to pursue arrangements with other pharmaceutical companies to market and promote our OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;HCV Rapid Antibody Test in the U.S. Accordingly, during the first quarter of 2017 we did not record any revenue from this&#xA0;<font style="WHITE-SPACE: nowrap">co-promotion</font>&#xA0;agreement. During the first quarter of 2016, $3,362 in exclusivity revenue was recognized and was recorded as other revenue in our consolidated statements of income.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> On June&#xA0;12, 2015, we were awarded a grant for up to $10,400 in total funding from the U.S. Department of Health and Human Services (&#x201C;HHS&#x201D;) Office of the Assistant Secretary for Preparedness and Response&#x2019;s Biomedical Advanced Research and Development Authority (&#x201C;BARDA&#x201D;) related to our OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Ebola Rapid Antigen test. The three-year, multi-phased grant includes an initial commitment of $1,800 and options for up to an additional $8,600 to fund certain clinical and regulatory activities. In September 2015, BARDA exercised an option to provide $7,200 in additional funding for the development of our OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Ebola Rapid Antigen test. Amounts related to this grant are recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarters of 2017 and 2016, $420 and $482, respectively, was recognized in connection with this grant.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In August 2016, we were awarded a contract for up to $16,600 in total funding from BARDA related to our rapid Zika test. The&#xA0;<font style="WHITE-SPACE: nowrap">six-year,</font>&#xA0;multi-phased contract includes an initial commitment of $7,000 and options for up to an additional $9,600 to fund the evaluation of additional product enhancements, and clinical and regulatory activities. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarter of 2017, $644 was recognized in connection with this grant.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Customer Sales Returns and Allowances</u></i><i>.</i>&#xA0;We do not grant return rights to our customers for any product, except for our OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;<font style="WHITE-SPACE: nowrap">In-Home</font>&#xA0;HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;<font style="WHITE-SPACE: nowrap">In-Home</font>&#xA0;HIV product revenues in our consolidated statements of income. This estimate reflects our historical sales experience to retailers and consumers, as well as other retail factors, and is reviewed regularly to ensure that it reflects potential product returns. As of March&#xA0;31, 2017 and December&#xA0;31, 2016, the reserve for sales returns and allowances was $235 and $217, respectively. If actual product returns differ materially from our reserve amount, or if a determination is made that this product&#x2019;s distribution would be discontinued in whole or in part by certain retailers, then we would need to adjust our reserve. Should the actual level of product returns vary significantly from our estimates, our operating and financial results could be materially affected.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Deferred Revenue</u></i><i>.</i>&#xA0;We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March&#xA0;31, 2017 and December&#xA0;31, 2016 includes customer prepayments of $1,306 and $1,388, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Customer and Vendor Concentrations</u></i><i>.</i>&#xA0;One of our customers accounted for 22% of our accounts receivable as of March&#xA0;31, 2017. Another customer accounted for 15% of our accounts receivable as of December&#xA0;31, 2016. We had no significant concentrations in net consolidated revenues for the three months ended March&#xA0;31, 2017. One of our customers accounted for approximately 12% of our net consolidated revenues for the three months ended March&#xA0;31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our products to our customers. Also, our subsidiary, DNAG, uses two third-party suppliers to manufacture its products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Earnings Per Share</u></i><i>.&#xA0;</i>Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in a manner similar to basic earnings per share except that the weighted average number of shares outstanding is increased to include shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock, and performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The computations of basic and diluted earnings per share are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="79%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"><b>Three&#xA0;Months</b><br /> <b>Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net income</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,441</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,446</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares of common stock outstanding:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,929</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">55,451</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Dilutive effect of stock options and restricted stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,843</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">628</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58,772</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,079</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Earnings per share:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.22</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.21</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> For the three-month periods ended March&#xA0;31, 2017 and 2016, outstanding common stock options, unvested restricted stock, and unvested performance units representing 666 and 4,843 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.&#xA0;&#xA0;&#xA0;&#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Foreign Currency Translation</u></i>. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders&#x2019; equity.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange losses resulting from foreign currency transactions that are included in other income (expense) in our consolidated statements of income were $(200) and $(346) for the three months ended March&#xA0;31, 2017 and 2016, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Accumulated Other Comprehensive Income (Loss)</u></i><i>.</i>&#xA0;We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive income (loss) separately from accumulated deficit and additional&#xA0;<font style="WHITE-SPACE: nowrap">paid-in</font>&#xA0;capital in the stockholders&#x2019; equity section of our consolidated balance sheet.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and as such, the results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. The $450 and $2,867 currency translation adjustments recorded in the first three months of 2017 and 2016, respectively, are largely the result of the translation of our Canadian operation&#x2019;s balance sheets into U.S. dollars.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> <i><u>Recent Accounting Pronouncements</u></i><i>.&#xA0;</i>In May 2014, the Financial Accounting Standards Board (&#x201C;FASB&#x201D;) issued converged guidance on recognizing revenue in contracts with customers, ASU&#xA0;<font style="WHITE-SPACE: nowrap">2014-09,</font>&#xA0;<i>Revenue from Contracts with Customers</i>. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The standard will be effective for the first interim period within annual reporting periods beginning after December&#xA0;15, 2017, at which point we plan to adopt the standard.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> The FASB allows two adoption methods under ASU&#xA0;<font style="WHITE-SPACE: nowrap">2014-09.</font>&#xA0;We plan to adopt the standard using the &#x201C;modified retrospective method.&#x201D; Under that method, we will apply the rules to all contracts existing as of January&#xA0;1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effective of the change and providing additional disclosures comparing results to previous accounting standards.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> Upon initial evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations related to our device and lab services for drug testing. This revenue stream amounts to less than 1% of total consolidated revenues. We will continue to evaluate the impact that the adoption of ASU&#xA0;<font style="WHITE-SPACE: nowrap">2014-09</font>&#xA0;will have on our consolidated financial statements and related disclosures, but do not anticipate the adoption to have a material impact on our financial results.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In July 2015, the FASB issued ASU&#xA0;<font style="WHITE-SPACE: nowrap">2015-11,</font>&#xA0;<i>Simplifying the Measurement of Inventory</i>, which requires an entity that uses the&#xA0;<font style="WHITE-SPACE: nowrap">first-in,</font>&#xA0;<font style="WHITE-SPACE: nowrap">first-out</font>&#xA0;method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December&#xA0;15, 2016.&#xA0;&#xA0;&#xA0;&#xA0;We adopted ASU&#xA0;<font style="WHITE-SPACE: nowrap">2015-11</font>&#xA0;on January&#xA0;1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In February 2016, the FASB issued ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-02,</font>&#xA0;<i>Leases</i>, which requires entities to begin recording assets and liabilities from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard will be effective for the first interim period within annual reporting periods beginning after December&#xA0;15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-02</font>&#xA0;may have on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In March 2016, the FASB issued authoritative guidance under ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-09,</font>&#xA0;<i>Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting</i>. ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-09</font>&#xA0;provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-09</font>&#xA0;on January&#xA0;1, 2017. Since we have a full valuation allowance against our net deferred tax assets, the adoption of this standard for recognition of tax effects of deductions for employee share awards in excess of compensation costs (&#x2018;windfall&#x201D;) did not have a material impact on our consolidated financial statements and related disclosures. See Note 6 &#x2013; Income Taxes, for additional information. Should the full valuation allowance be reversed in future periods the adoption of this new guidance will introduce more volatility to our effective tax rate depending on the Company&#x2019;s share price at exercise or vesting of share-based awards compared to grant date. The other provisions of ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-09</font>&#xA0;did not have a material impact on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In August 2016, the FASB issued ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-15,</font>&#xA0;<i>Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments</i>, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December&#xA0;15, 2017, subject to early adoption. The majority of the guidance in ASU&#xA0;<font style="WHITE-SPACE: nowrap">2016-15</font>&#xA0;is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> In January 2017, the FASB issued ASU&#xA0;<font style="WHITE-SPACE: nowrap">2017-04,</font>&#xA0;<i>Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment</i>, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This update will be effective for annual and interim periods in fiscal years beginning after December&#xA0;15, 2019. Early adoption is permitted. We are currently assessing the impact of the future adoption of this standard on our consolidated financial statements and related disclosures.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px; font-variant-ligatures: normal; font-variant-caps: normal"> &#xA0;</p> </div> OSUR 2970000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i><u>Deferred Revenue</u></i><i>.</i> We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March&#xA0;31, 2017 and December&#xA0;31, 2016 includes customer prepayments of $1,306 and $1,388, respectively.</p> </div> 9417000 <div><br class="Apple-interchange-newline" /> <table style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="67%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Payroll and related benefits</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,905</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,685</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Income taxes payable</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,045</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(39</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Royalties</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">688</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">982</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Professional fees</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">686</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">715</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,361</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,971</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; break-inside: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,685</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,314</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left"><b>8.</b></td> <td valign="top" align="left"><b>Business Segment Information</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We operate our business within two reportable segments: our &#x201C;OSUR&#x201D; business, which consists of the development, manufacture and sale of diagnostic products, specimen collection devices and medical devices; and our molecular collection systems or &#x201C;DNAG&#x201D; business, which primarily consists of the manufacture, development and sale of oral fluid collection devices that are used to collect, stabilize and store samples of genetic material for molecular testing. OSUR revenues are derived primarily from products sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, distributors, government agencies, physicians&#x2019; offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet. OSUR also derives other revenues, including exclusivity payments for <font style="WHITE-SPACE: nowrap">co-promotion</font> rights and other licensing and product development activities. DNAG revenues result primarily from products sold into the commercial market which consists of customers engaged in consumer genetics, clinical genetic testing, pharmacogenomics, personalized medicine, microbiome, and animal genetic testing. DNAG products are also sold into the academic research market, which consists of research laboratories, universities and hospitals.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We organized our operating segments according to the nature of the products included in those segments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). We evaluate performance of our operating segments based on revenue and operating income (loss). We do not allocate interest income, interest expense, other income, other expenses or income taxes to our operating segments. Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table summarizes operating segment information for the three months ended March&#xA0;31, 2017 and 2016, and asset information as of March&#xA0;31, 2017 and December&#xA0;31, 2016:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net revenues:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">21,840</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">22,199</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">10,706</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,890</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,546</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">29,089</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Operating income (loss):</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(219</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,608</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,090</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,091</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,871</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,699</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Depreciation and amortization:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">625</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">639</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">783</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">715</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,408</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,354</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Capital expenditures:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">784</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">447</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">94</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,146</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">878</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,593</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="16"></td> <td height="16" colspan="4"></td> <td height="16" colspan="4"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total assets:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">161,730</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">151,719</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">70,862</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">232,592</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">207,935</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Our products are sold principally in the United States and Europe.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table represents total net revenues by geographic area, based on the location of the customer:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> United States</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,854</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">22,170</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Europe</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,125</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,879</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other regions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,567</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,040</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,546</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">29,089</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The following table represents total long-lived assets by geographic area:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> United States</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,886</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,737</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Canada</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,238</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,286</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other regions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,134</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,033</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table summarizes operating segment information for the three months ended March&#xA0;31, 2017 and 2016, and asset information as of March&#xA0;31, 2017 and December&#xA0;31, 2016:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net revenues:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">21,840</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">22,199</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">10,706</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,890</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,546</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">29,089</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Operating income (loss):</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(219</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,608</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,090</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,091</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,871</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,699</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Depreciation and amortization:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">625</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">639</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">783</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">715</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,408</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,354</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Capital expenditures:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">784</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">447</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">94</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,146</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">878</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,593</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="16"></td> <td height="16" colspan="4"></td> <td height="16" colspan="4"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,&#xA0;2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total assets:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> OSUR</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">161,730</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">151,719</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> DNAG</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">70,862</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">56,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; 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Product revenues are recorded net of allowances for any discounts or rebates. Other than for sales of our OraQuick<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> <font style="WHITE-SPACE: nowrap">In-Home</font> HIV test to the retail trade, we do not grant price protection or product return rights to our customers except for warranty returns. Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Our net revenues recorded on sales of the OraQuick<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> <font style="WHITE-SPACE: nowrap">In-Home</font> HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We record shipping and handling charges billed to our customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In June 2014, we entered into a Master Program Services and <font style="WHITE-SPACE: nowrap">Co-Promotion</font> Agreement with AbbVie Bahamas Ltd., a wholly-owned subsidiary of AbbVie Inc. (&#x201C;AbbVie&#x201D;), to <font style="WHITE-SPACE: nowrap">co-promote</font> our OraQuick<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> HCV test in the United States. On June&#xA0;30, 2016, we mutually agreed to terminate our agreement with AbbVie effective December&#xA0;31, 2016. 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During the first quarter of 2016, $3,362 in exclusivity revenue was recognized and was recorded as other revenue in our consolidated statements of income.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> On June&#xA0;12, 2015, we were awarded a grant for up to $10,400 in total funding from the U.S. Department of Health and Human Services (&#x201C;HHS&#x201D;) Office of the Assistant Secretary for Preparedness and Response&#x2019;s Biomedical Advanced Research and Development Authority (&#x201C;BARDA&#x201D;) related to our OraQuick<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> Ebola Rapid Antigen test. The three-year, multi-phased grant includes an initial commitment of $1,800 and options for up to an additional $8,600 to fund certain clinical and regulatory activities. 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Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2017
May 04, 2017
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q1  
Trading Symbol OSUR  
Entity Registrant Name ORASURE TECHNOLOGIES INC  
Entity Central Index Key 0001116463  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   57,762,761
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
CURRENT ASSETS:    
Cash and cash equivalents $ 120,851 $ 107,959
Restricted cash 1,831 1,831
Short-term investments 18,776 11,160
Accounts receivable, net of allowance for doubtful accounts of $588 and $484 24,005 19,827
Inventories 12,707 11,799
Prepaid expenses 1,732 1,722
Other current assets 633 2,143
Total current assets 180,535 156,441
PROPERTY AND EQUIPMENT, net 20,134 20,033
INTANGIBLE ASSETS, net 9,779 10,337
GOODWILL 18,971 18,793
OTHER ASSETS 3,173 2,331
TOTAL ASSETS 232,592 207,935
CURRENT LIABILITIES:    
Accounts payable 7,286 4,633
Deferred revenue 1,306 1,388
Accrued expenses 9,685 11,314
Total current liabilities 18,277 17,335
OTHER LIABILITIES 3,160 2,304
DEFERRED INCOME TAXES 2,330 2,446
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY    
Preferred stock, par value $.000001, 25,000 shares authorized, none issued
Common stock, par value $.000001, 120,000 shares authorized, 57,664 and 56,001 shares issued and outstanding 0 0
Additional paid-in capital 360,612 350,528
Accumulated other comprehensive loss (13,770) (14,220)
Accumulated deficit (138,017) (150,458)
Total stockholders' equity 208,825 185,850
Total liabilities and stockholders' equity $ 232,592 $ 207,935
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 588 $ 484
Preferred stock, par value $ 0.000001 $ 0.000001
Preferred stock, shares authorized 25,000,000 25,000,000
Preferred stock, shares issued 0 0
Common stock, par value $ 0.000001 $ 0.000001
Common stock, shares authorized 120,000,000 120,000,000
Common stock, shares issued 57,664,000 56,001,000
Common stock, shares outstanding 57,664,000 56,001,000
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
NET REVENUES:    
Product $ 31,482 $ 25,245
Other 1,064 3,844
Total revenue 32,546 29,089
COST OF PRODUCTS SOLD 12,236 8,776
Gross profit 20,310 20,313
OPERATING EXPENSES:    
Research and development 2,970 2,366
Sales and marketing 6,877 8,706
General and administrative 7,092 6,542
Gain on litigation settlement (12,500)  
Total operating expenses 4,439 17,614
Operating income 15,871 2,699
OTHER INCOME (EXPENSE) 467 (192)
Income before income taxes 16,338 2,507
INCOME TAX EXPENSE 3,897 61
NET INCOME $ 12,441 $ 2,446
EARNINGS PER SHARE:    
BASIC $ 0.22 $ 0.04
DILUTED $ 0.21 $ 0.04
SHARES USED IN COMPUTING EARNINGS PER SHARE:    
BASIC 56,929 55,451
DILUTED 58,772 56,079
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement of Comprehensive Income [Abstract]    
NET INCOME $ 12,441 $ 2,446
OTHER COMPREHENSIVE INCOME    
Currency translation adjustments 450 2,867
COMPREHENSIVE INCOME $ 12,891 $ 5,313
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
OPERATING ACTIVITIES:    
NET INCOME $ 12,441 $ 2,446
Adjustments to reconcile net income to net cash provided by operating activities:    
Stock-based compensation 1,518 1,452
Depreciation and amortization 1,408 1,354
Amortization of lease incentives (20) (19)
Amortization of debt issue costs 31  
Unrealized foreign currency (gain) loss (1) 141
Deferred income taxes (139) (18)
Changes in assets and liabilities    
Accounts receivable (4,143) 2,489
Inventories (893) 990
Prepaid expenses and other assets 1,505 26
Accounts payable 2,619 758
Deferred revenue (84) (2,504)
Accrued expenses and other liabilities (1,623) (2,371)
Net cash provided by operating activities 12,619 4,744
INVESTING ACTIVITIES:    
Purchases of short-term investments (7,514) (7,689)
Proceeds from maturities of short-term investments   7,689
Purchases of property and equipment (878) (1,593)
Net cash used in investing activities (8,392) (1,593)
FINANCING ACTIVITIES:    
Proceeds from exercise of stock options 9,417  
Repurchase of common stock (851) (3,187)
Net cash provided by (used in) financing activities 8,566 (3,187)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 99 500
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,892 464
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 107,959 94,094
CASH AND CASH EQUIVALENTS, END OF PERIOD 120,851 94,558
Cash paid for income taxes 1,949 84
Noncash investing activities (accrued property and equipment purchases) $ 297 $ 444
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
The Company
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company
1. The Company

We develop, manufacture, market and sell diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products, including immunoassays and other in vitro diagnostic tests that are used on other specimen types. Our diagnostic products include tests that are performed on a rapid basis at the point-of-care, tests that are processed in a laboratory, and include a rapid point-of-care HIV in-home test approved for use in the domestic consumer retail or over-the-counter (“OTC”) market and a rapid point-of-care HIV self-test used in certain international markets. We also manufacture and sell devices used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomic, personalized medicine, microbiome and animal genetic markets. Lastly, we manufacture and sell medical devices used for the removal of benign skin lesions by cryosurgery, or freezing. Our products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, research and academic institutions, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation. The consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiary, DNA Genotek, Inc. (“DNAG”). All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiary, unless otherwise indicated.

The accompanying consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations expected for the full year.    

Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable and inventories and assumptions utilized in impairment testing for intangible assets and goodwill, as well as calculations related to contingencies, accruals, and performance- based compensation expense, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis, using historical experience and other factors, which management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity and foreign currency markets, reductions in government funding, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the financial statements in those future periods.

Short-Term InvestmentsWe consider all short-term investments to be available-for-sale securities. These securities are comprised of guaranteed investment certificates with purchased maturities greater than ninety days. Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.

 

Our available-for-sale securities as of March 31, 2017 and December 31, 2016 consisted of guaranteed investment certificates with amortized cost and fair value of $18,776 and $11,160, respectively.

Fair Value of Financial InstrumentsAs of March 31, 2017 and December 31, 2016, the carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values based on their short-term nature.

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed 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 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).

Included in cash and cash equivalents at March 31, 2017 and December 31, 2016, was $82,142 and $83,704 invested in government money market funds. These funds have investments in government securities and are Level 1 instruments.

We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and Company stock. The fair value of the plan assets as of March 31, 2017 and December 31, 2016 was $2,828 and $1,980, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in other assets with the same amount included in other liabilities in the accompanying consolidated balance sheets.

All of our available-for-sale securities are measured as Level 1 instruments as of March 31, 2017 and December 31, 2016.

In 2017, we purchased certificates of deposit (“CD”) from a commercial bank. The CDs bear interest at an annual rate ranging from 0.28% to 0.44% and mature monthly through February 28, 2018. The carrying values of the CDs approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 7 – Commitments and Contingencies.

InventoriesInventories are stated at the lower of cost and net realizable value determined on a first-in, first-out basis and are comprised of the following:

 

     March 31, 2017      December 31, 2016  

Raw materials

   $ 5,024      $ 5,399  

Work in process

     1,035        1,034  

Finished goods

     6,648        5,366  
  

 

 

    

 

 

 
   $ 12,707      $ 11,799  
  

 

 

    

 

 

 

Property and Equipment. Property and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to forty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of income. Accumulated depreciation of property and equipment as of March 31, 2017 and December 31, 2016 was $36,856 and $36,067, respectively.

Intangible Assets. Intangible assets consist of a customer list, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of seven to fifteen years. Accumulated amortization of intangible assets as of March 31, 2017 and December 31, 2016 was $15,944 and $15,197, respectively. The change in intangibles from $10,337 as of December 31, 2016 to $9,779 as of March 31, 2017 is a result of $637 in amortization expense and $79 in foreign currency translation gains.

Goodwill. Goodwill represents the excess of the purchase price we paid over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current U.S. generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then we would not be required to perform the two-step quantitative impairment test. Otherwise, performing the two-step impairment test is necessary. The first step of the two-step quantitative impairment test involves comparing the fair values of the applicable reporting unit with its aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the test to determine the amount of the impairment loss, if any. The second step involves measuring any impairment by comparing the implied fair values of the affected reporting unit’s goodwill and intangible assets with the respective carrying values.

We performed our last annual impairment assessment as of July 31, 2016 utilizing a qualitative evaluation and concluded that it was more likely than not that the fair value of our DNAG reporting unit is greater than its carrying value. We believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting unit. If actual future results are not consistent with management’s estimates and assumptions, we may have to take an impairment charge in the future related to our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of March 31, 2017, we believe no indicators of impairment exist.

The change in goodwill from $18,793 as of December 31, 2016 to $18,971 as of March 31, 2017 is a result of foreign currency translation.

Revenue Recognition. We recognize product revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenues are recorded net of allowances for any discounts or rebates. Other than for sales of our OraQuick® In-Home HIV test to the retail trade, we do not grant price protection or product return rights to our customers except for warranty returns. Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.

Our net revenues recorded on sales of the OraQuick® In-Home HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.

We record shipping and handling charges billed to our customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.

In June 2014, we entered into a Master Program Services and Co-Promotion Agreement with AbbVie Bahamas Ltd., a wholly-owned subsidiary of AbbVie Inc. (“AbbVie”), to co-promote our OraQuick® HCV test in the United States. On June 30, 2016, we mutually agreed to terminate our agreement with AbbVie effective December 31, 2016. Following the termination of the agreement, AbbVie was relieved of its co-promotion obligations, including its obligation to detail the OraQuick® HCV Rapid Test into physician offices, and has no further financial obligations to us. We are no longer obligated to compensate AbbVie for product detailing activities and are free to pursue arrangements with other pharmaceutical companies to market and promote our OraQuick® HCV Rapid Antibody Test in the U.S. Accordingly, during the first quarter of 2017 we did not record any revenue from this co-promotion agreement. During the first quarter of 2016, $3,362 in exclusivity revenue was recognized and was recorded as other revenue in our consolidated statements of income.

On June 12, 2015, we were awarded a grant for up to $10,400 in total funding from the U.S. Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) related to our OraQuick® Ebola Rapid Antigen test. The three-year, multi-phased grant includes an initial commitment of $1,800 and options for up to an additional $8,600 to fund certain clinical and regulatory activities. In September 2015, BARDA exercised an option to provide $7,200 in additional funding for the development of our OraQuick® Ebola Rapid Antigen test. Amounts related to this grant are recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarters of 2017 and 2016, $420 and $482, respectively, was recognized in connection with this grant.

In August 2016, we were awarded a contract for up to $16,600 in total funding from BARDA related to our rapid Zika test. The six-year, multi-phased contract includes an initial commitment of $7,000 and options for up to an additional $9,600 to fund the evaluation of additional product enhancements, and clinical and regulatory activities. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarter of 2017, $644 was recognized in connection with this grant.

Customer Sales Returns and Allowances. We do not grant return rights to our customers for any product, except for our OraQuick® In-Home HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick® In-Home HIV product revenues in our consolidated statements of income. This estimate reflects our historical sales experience to retailers and consumers, as well as other retail factors, and is reviewed regularly to ensure that it reflects potential product returns. As of March 31, 2017 and December 31, 2016, the reserve for sales returns and allowances was $235 and $217, respectively. If actual product returns differ materially from our reserve amount, or if a determination is made that this product’s distribution would be discontinued in whole or in part by certain retailers, then we would need to adjust our reserve. Should the actual level of product returns vary significantly from our estimates, our operating and financial results could be materially affected.

Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2017 and December 31, 2016 includes customer prepayments of $1,306 and $1,388, respectively.

Customer and Vendor Concentrations. One of our customers accounted for 22% of our accounts receivable as of March 31, 2017. Another customer accounted for 15% of our accounts receivable as of December 31, 2016. We had no significant concentrations in net consolidated revenues for the three months ended March 31, 2017. One of our customers accounted for approximately 12% of our net consolidated revenues for the three months ended March 31, 2016.

We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our products to our customers. Also, our subsidiary, DNAG, uses two third-party suppliers to manufacture its products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.

Earnings Per ShareBasic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in a manner similar to basic earnings per share except that the weighted average number of shares outstanding is increased to include shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock, and performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period.

The computations of basic and diluted earnings per share are as follows:

 

     Three Months
Ended March 31,
 
     2017      2016  

Net income

   $ 12,441      $ 2,446  
  

 

 

    

 

 

 

Weighted average shares of common stock outstanding:

     

Basic

     56,929        55,451  

Dilutive effect of stock options and restricted stock

     1,843        628  
  

 

 

    

 

 

 

Diluted

     58,772        56,079  
  

 

 

    

 

 

 

Earnings per share:

     

Basic

   $ 0.22      $ 0.04  
  

 

 

    

 

 

 

Diluted

   $ 0.21      $ 0.04  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2017 and 2016, outstanding common stock options, unvested restricted stock, and unvested performance units representing 666 and 4,843 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.    

Foreign Currency Translation. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders’ equity.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange losses resulting from foreign currency transactions that are included in other income (expense) in our consolidated statements of income were $(200) and $(346) for the three months ended March 31, 2017 and 2016, respectively.

Accumulated Other Comprehensive Income (Loss). We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive income (loss) separately from accumulated deficit and additional paid-in capital in the stockholders’ equity section of our consolidated balance sheet.

We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and as such, the results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. The $450 and $2,867 currency translation adjustments recorded in the first three months of 2017 and 2016, respectively, are largely the result of the translation of our Canadian operation’s balance sheets into U.S. dollars.

Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued converged guidance on recognizing revenue in contracts with customers, ASU 2014-09, Revenue from Contracts with Customers. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, at which point we plan to adopt the standard.

 

The FASB allows two adoption methods under ASU 2014-09. We plan to adopt the standard using the “modified retrospective method.” Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effective of the change and providing additional disclosures comparing results to previous accounting standards.

Upon initial evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations related to our device and lab services for drug testing. This revenue stream amounts to less than 1% of total consolidated revenues. We will continue to evaluate the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and related disclosures, but do not anticipate the adoption to have a material impact on our financial results.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires an entity that uses the first-in, first-out method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016.    We adopted ASU 2015-11 on January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires entities to begin recording assets and liabilities from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU 2016-02 may have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued authoritative guidance under ASU 2016-09, Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017. Since we have a full valuation allowance against our net deferred tax assets, the adoption of this standard for recognition of tax effects of deductions for employee share awards in excess of compensation costs (‘windfall”) did not have a material impact on our consolidated financial statements and related disclosures. See Note 6 – Income Taxes, for additional information. Should the full valuation allowance be reversed in future periods the adoption of this new guidance will introduce more volatility to our effective tax rate depending on the Company’s share price at exercise or vesting of share-based awards compared to grant date. The other provisions of ASU 2016-09 did not have a material impact on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December 15, 2017, subject to early adoption. The majority of the guidance in ASU 2016-15 is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This update will be effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the future adoption of this standard on our consolidated financial statements and related disclosures.

 

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accrued Expenses
3 Months Ended
Mar. 31, 2017
Payables and Accruals [Abstract]  
Accrued Expenses
3. Accrued Expenses

 

     March 31, 2017      December 31, 2016  

Payroll and related benefits

   $ 3,905      $ 7,685  

Income taxes payable

     2,045        (39

Royalties

     688        982  

Professional fees

     686        715  

Other

     2,361        1,971  
  

 

 

    

 

 

 
   $ 9,685      $ 11,314  
  

 

 

    

 

 

 

 

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
Credit Facility
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Credit Facility
4. Credit Facility

On September 30, 2016, we entered into a credit agreement (the “Credit Agreement”) with a commercial bank. The Credit Agreement provides for revolving extensions of credit in an initial aggregate amount of up to $10,000 (inclusive of a letter of credit subfacility of $2,500), with an option to request, prior to the second anniversary of the closing date, that the lender, at its election, provide up to $5,000 of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding under the Credit Agreement at March 31, 2017 and December 31, 2016.

Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three or six-month loans, as selected by the Company, plus 2.50% per year. The Credit Agreement is subject to an unused line fee of 0.375% per year on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.

In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of March 31, 2017 and December 31, 2016, we were in compliance with all applicable covenants in the Credit Agreement.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Stockholders' Equity
5. Stockholders’ Equity

Stock-Based Awards

We grant stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the “Stock Plan”). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. We recognize compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust compensation expense related to these awards, as appropriate. To satisfy the exercise of options or to issue restricted stock, or redeem performance-based restricted stock units, we issue new shares rather than purchase shares on the open market.

Total compensation cost related to stock options for the three months ended March 31, 2017 and 2016 was $502 and $733, respectively. Net cash proceeds from the exercise of stock options were $9,417 and $0 for the three months ended March 31, 2017 and 2016, respectively. As a result of the Company’s net operating loss carryforward position, no actual income tax benefit was realized from stock option exercises during these periods.

 

The following table summarizes the stock option activity for the first three months ended March, 31, 2017:

 

     Options  

Outstanding on January 1, 2017

     5,456  

Granted

     191  

Exercised

     (1,462

Expired

     (27

Forfeited

     (19
  

 

 

 

Outstanding on March 31, 2017

     4,139  
  

 

 

 

Compensation cost of $655 and $719 related to restricted shares was recognized during the three months ended March 31, 2017 and 2016, respectively. In connection with the vesting of restricted shares and exercise of stock options during the three months ended March 31, 2017 and 2016, we purchased and immediately retired 96 and 98 shares with aggregate values of $851 and $527, respectively, in satisfaction of minimum tax withholding and exercise obligations.

The following table summarizes restricted stock award activity for the three months ended March 31, 2017:

 

     Shares  

Issued and unvested, January 1, 2017

     750  

Granted

     288  

Vested

     (297

Forfeited

     (4
  

 

 

 

Issued and unvested, March 31, 2017

     737  
  

 

 

 

Commencing in 2016, we granted to certain executives performance-based restricted stock units (“PSUs”). Vesting of these PSUs is dependent upon achievement of performance-based metrics during a one-year or three-year period, from the date of grant. Assuming achievement of each performance-based metric, the executive must also remain in our service for three years from the grant date. Performance during the one-year period will be based on a one-year earnings per share target. If the one-year target is achieved, the PSUs will then vest three years from grant date. Performance during the three-year period will be based on achievement of a three-year compound annual growth rate for consolidated product revenues. If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date. PSUs are converted into shares of our common stock once vested. Upon grant of the PSUs, we recognize compensation expense related to these awards based on assumptions as to what percentage of each target will be achieved. The Company evaluates these assumptions on a quarterly basis and adjusts compensation expense related to these awards, as appropriate.

Compensation cost of $361 related to PSUs was recognized during the three months ended March 31, 2017. No compensation cost related to the PSUs was recognized during the three months ended March, 31, 2016.

The following table summarizes PSU activity for the three months ended March 31, 2017:

 

     Units  

Issued and unvested, January 1, 2017

     456  

Granted

     229  

Vested

     —    

Forfeited

     —    
  

 

 

 

Issued and unvested, March 31, 2017

     685  
  

 

 

 

 

Stock Repurchase Program

On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. No shares were purchased and retired during the three months ended March 31, 2017. During the three months ended March 31, 2016, we purchased and retired 423 shares of common stock at an average price of $6.29 per share for a total cost of $2,660, respectively.

 

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes
3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
6. Income Taxes

During the three months ended March 31, 2017 and 2016, we recorded tax expense of $3,897 and $61, respectively.

Tax expense reflects taxes due to state and Canadian taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of our total deferred tax liability as of March 31, 2017 relate to the tax effects of the basis difference between the intangible assets acquired in the DNAG acquisition for financial reporting and tax purposes. Tax expense in the first quarter of 2017 reflects the additional Canadian taxes due as a result of the $12,500 gain from the settlement of the Ancestry litigation.

In 2008, we established a full valuation allowance against our U.S. deferred tax asset. Management believes the full valuation allowance is still appropriate as of both March 31, 2017 and December 31, 2016 since the facts and circumstances necessitating the allowance have not changed. As a result, no U.S. federal or state deferred income tax expense or benefit was recorded for the three-month periods ended March 31, 2017 and 2016.

The new accounting guidance under ASU 2016-09 allows for the recognition of excess tax benefits regardless of whether the deduction reduces taxes payable. On January 1, 2017, we recorded a cumulative-effect adjustment to retained earnings of $3,391 to recognize the increase in our net operating loss carryforwards from the cumulative excess tax benefits not recognized in periods prior to January 1, 2017. A corresponding $3,391 increase to our valuation allowance associated with this tax benefit was also recorded to retained earnings thereby recording a net impact to retained earnings of $0.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
7. Commitments and Contingencies

Standby Letters of Credit

In 2016, we established four standby letters of credit in the aggregate amount of $1,831, naming international customers as the beneficiaries. These letters of credit were required as a performance guarantee of our obligations under our product supply contracts with those customers and are collateralized by certificates of deposit maintained at a commercial bank.

Litigation

From time to time, we are involved in certain legal actions arising in the ordinary course of business. In management’s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on our future financial position or results of operations.

In May 2015, our subsidiary DNAG filed a complaint in the United States District Court for the District of Delaware against Ancestry.com DNA LLC (“Ancestry”) relating to the manufacture and sale by Ancestry of its oral fluid DNA collection device (the “Ancestry Device”). Ancestry previously purchased DNAG’s patented oral fluid DNA collection devices. The complaint alleged that the manufacture and sale by Ancestry of the Ancestry Device infringes U.S. Patent No. 8,221,381 B2, which is owned by DNAG. In addition, the complaint alleged that Ancestry has breached the terms of agreements under which Ancestry previously purchased DNAG products. The complaint also included an action to quiet title to the Ancestry Device and related patent applications. DNAG requested the court to grant injunctive relief and damages.

On October 20, 2015, Ancestry filed with the United States Patent and Trademark Office (“USPTO”) a Petition for Inter Partes Review (“IPR”) of some, but not all, claims of U.S. Patent No. 8,221,381 B2. On April 8, 2016, the USPTO instituted an IPR of some, but not all, of the claims raised in Ancestry’s petition. On June 3, 2016, Ancestry filed a second Petition for IPR of some, but not all, of the claims of U.S. Patent No. 8,221,381 B2.

 

In July 2015, DNAG filed a complaint in the United States District Court for the District of Delaware against Spectrum DNA, Spectrum Solutions L.L.C. and Spectrum Packaging L.L.C. (collectively “Spectrum”) relating to the manufacture and sale by Spectrum of an oral fluid DNA collection device (the “Spectrum Device”). The Spectrum Device is the same as the Ancestry device mentioned above and Spectrum is the manufacturer of the Ancestry Device for Ancestry. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. patent number 8,221,381 B-2, which is owned by DNAG. DNAG requested the court to grant injunctive relief and damages. Spectrum filed a motion to dismiss this lawsuit on the grounds that the Delaware District Court lacked jurisdiction over Spectrum. The Court granted Spectrum’s motion to dismiss for lack of personal jurisdiction.

On June 20, 2016, DNAG filed a complaint in the United States District Court for the Southern District of California against Spectrum relating to the manufacture and sale of the Spectrum Device. The complaint alleged that the manufacture and sale by Spectrum of the Spectrum Device infringes U.S. Patent No. 9,207,164, which is owned by DNAG. DNAG requested the court to grant injunctive relief and damages. On June 21, 2016, DNAG filed a motion for preliminary injunction. On July 21, 2016, Spectrum filed a motion to stay the case pending resolution by the PTO of a Petition for IPR of U.S. Patent No. 9,207,164, which was filed by Ancestry in July 2016. On October 6, 2016, the Court issued an order denying DNAG’s motion for preliminary injunction and on October 7, 2016, the Court issued an order staying the case pending resolution of the IPR of U.S. Patent No. 9,207,164.

Effective February 6, 2017, DNAG settled the foregoing litigation with Ancestry and Spectrum. Under a Settlement and License Agreement executed by the parties, Ancestry agreed to pay DNAG a settlement fee of $12,500. This settlement amount has been recorded as a separate line item and a reduction of our operating expenses in our consolidated statements of income. In addition, DNAG granted Ancestry a royalty-bearing, non-exclusive, worldwide license to certain patents and patent applications related to the collection of DNA in human saliva. The license granted to Ancestry is limited to saliva DNA collection kits sold or used as part of Ancestry’s genetic testing service offerings and does not cover the sale or use of collection kits outside of Ancestry’s business. The Settlement and License Agreement also provides DNAG with a royalty-free, non-exclusive license to patents related to Ancestry’s existing saliva DNA collection kit and certain modifications thereto.

The parties have each agreed to a mutual release of claims and other provisions typical for settlement agreements of this type. Pursuant to the terms of the Settlement and License Agreement, the pending federal lawsuits in the District of Delaware and the Southern District of California have been dismissed and the IPR proceedings before the USPTO involving the DNAG patents asserted in the litigation have been terminated.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information
3 Months Ended
Mar. 31, 2017
Segment Reporting [Abstract]  
Business Segment Information
8. Business Segment Information

We operate our business within two reportable segments: our “OSUR” business, which consists of the development, manufacture and sale of diagnostic products, specimen collection devices and medical devices; and our molecular collection systems or “DNAG” business, which primarily consists of the manufacture, development and sale of oral fluid collection devices that are used to collect, stabilize and store samples of genetic material for molecular testing. OSUR revenues are derived primarily from products sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet. OSUR also derives other revenues, including exclusivity payments for co-promotion rights and other licensing and product development activities. DNAG revenues result primarily from products sold into the commercial market which consists of customers engaged in consumer genetics, clinical genetic testing, pharmacogenomics, personalized medicine, microbiome, and animal genetic testing. DNAG products are also sold into the academic research market, which consists of research laboratories, universities and hospitals.

We organized our operating segments according to the nature of the products included in those segments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). We evaluate performance of our operating segments based on revenue and operating income (loss). We do not allocate interest income, interest expense, other income, other expenses or income taxes to our operating segments. Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.

The following table summarizes operating segment information for the three months ended March 31, 2017 and 2016, and asset information as of March 31, 2017 and December 31, 2016:

 

     Three Months Ended March 31,  
     2017      2016  

Net revenues:

     

OSUR

   $ 21,840      $ 22,199  

DNAG

     10,706        6,890  
  

 

 

    

 

 

 

Total

   $ 32,546      $ 29,089  
  

 

 

    

 

 

 

Operating income (loss):

     

OSUR

   $ (219    $ 1,608  

DNAG

     16,090        1,091  
  

 

 

    

 

 

 

Total

   $ 15,871      $ 2,699  
  

 

 

    

 

 

 

Depreciation and amortization:

     

OSUR

   $ 625      $ 639  

DNAG

     783        715  
  

 

 

    

 

 

 

Total

   $ 1,408      $ 1,354  
  

 

 

    

 

 

 

Capital expenditures:

     

OSUR

   $ 784      $ 447  

DNAG

     94        1,146  
  

 

 

    

 

 

 

Total

   $ 878      $ 1,593  
  

 

 

    

 

 

 
     March 31, 2017      December 31, 2016  

Total assets:

     

OSUR

   $ 161,730      $ 151,719  

DNAG

     70,862        56,216  
  

 

 

    

 

 

 

Total

   $ 232,592      $ 207,935  
  

 

 

    

 

 

 

Our products are sold principally in the United States and Europe.

The following table represents total net revenues by geographic area, based on the location of the customer:

 

     Three Months Ended March 31,  
     2017      2016  

United States

   $ 20,854      $ 22,170  

Europe

     3,125        3,879  

Other regions

     8,567        3,040  
  

 

 

    

 

 

 
   $ 32,546      $ 29,089  
  

 

 

    

 

 

 

 

The following table represents total long-lived assets by geographic area:

 

     March 31, 2017      December 31, 2016  

United States

   $ 15,886      $ 15,737  

Canada

     4,238        4,286  

Other regions

     10        10  
  

 

 

    

 

 

 
   $ 20,134      $ 20,033  
  

 

 

    

 

 

 
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation. The consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiary, DNA Genotek, Inc. (“DNAG”). All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiary, unless otherwise indicated.

The accompanying consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations expected for the full year.

Use of Estimates

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable and inventories and assumptions utilized in impairment testing for intangible assets and goodwill, as well as calculations related to contingencies, accruals, and performance- based compensation expense, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis, using historical experience and other factors, which management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity and foreign currency markets, reductions in government funding, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the financial statements in those future periods.

Short-Term Investments

Short-Term Investments. We consider all short-term investments to be available-for-sale securities. These securities are comprised of guaranteed investment certificates with purchased maturities greater than ninety days. Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.

 

Our available-for-sale securities as of March 31, 2017 and December 31, 2016 consisted of guaranteed investment certificates with amortized cost and fair value of $18,776 and $11,160, respectively.

Fair Value of Financial Instruments

Fair Value of Financial Instruments. As of March 31, 2017 and December 31, 2016, the carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values based on their short-term nature.

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed 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 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).

Included in cash and cash equivalents at March 31, 2017 and December 31, 2016, was $82,142 and $83,704 invested in government money market funds. These funds have investments in government securities and are Level 1 instruments.

We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and Company stock. The fair value of the plan assets as of March 31, 2017 and December 31, 2016 was $2,828 and $1,980, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in other assets with the same amount included in other liabilities in the accompanying consolidated balance sheets.

All of our available-for-sale securities are measured as Level 1 instruments as of March 31, 2017 and December 31, 2016.

In 2017, we purchased certificates of deposit (“CD”) from a commercial bank. The CDs bear interest at an annual rate ranging from 0.28% to 0.44% and mature monthly through February 28, 2018. The carrying values of the CDs approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 7 – Commitments and Contingencies.

Inventories

InventoriesInventories are stated at the lower of cost and net realizable value determined on a first-in, first-out basis and are comprised of the following:

 

     March 31, 2017      December 31, 2016  

Raw materials

   $ 5,024      $ 5,399  

Work in process

     1,035        1,034  

Finished goods

     6,648        5,366  
  

 

 

    

 

 

 
   $ 12,707      $ 11,799  
  

 

 

    

 

 

 

Property and Equipment

Property and Equipment. Property and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to forty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of income. Accumulated depreciation of property and equipment as of March 31, 2017 and December 31, 2016 was $36,856 and $36,067, respectively.

Intangible Assets

Intangible Assets. Intangible assets consist of a customer list, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of seven to fifteen years. Accumulated amortization of intangible assets as of March 31, 2017 and December 31, 2016 was $15,944 and $15,197, respectively. The change in intangibles from $10,337 as of December 31, 2016 to $9,779 as of March 31, 2017 is a result of $637 in amortization expense and $79 in foreign currency translation gains.

Goodwill

Goodwill. Goodwill represents the excess of the purchase price we paid over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current U.S. generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then we would not be required to perform the two-step quantitative impairment test. Otherwise, performing the two-step impairment test is necessary. The first step of the two-step quantitative impairment test involves comparing the fair values of the applicable reporting unit with its aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the test to determine the amount of the impairment loss, if any. The second step involves measuring any impairment by comparing the implied fair values of the affected reporting unit’s goodwill and intangible assets with the respective carrying values.

We performed our last annual impairment assessment as of July 31, 2016 utilizing a qualitative evaluation and concluded that it was more likely than not that the fair value of our DNAG reporting unit is greater than its carrying value. We believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting unit. If actual future results are not consistent with management’s estimates and assumptions, we may have to take an impairment charge in the future related to our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of March 31, 2017, we believe no indicators of impairment exist.

The change in goodwill from $18,793 as of December 31, 2016 to $18,971 as of March 31, 2017 is a result of foreign currency translation.

Revenue Recognition

Revenue Recognition. We recognize product revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenues are recorded net of allowances for any discounts or rebates. Other than for sales of our OraQuick® In-Home HIV test to the retail trade, we do not grant price protection or product return rights to our customers except for warranty returns. Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.

Our net revenues recorded on sales of the OraQuick® In-Home HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.

We record shipping and handling charges billed to our customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.

In June 2014, we entered into a Master Program Services and Co-Promotion Agreement with AbbVie Bahamas Ltd., a wholly-owned subsidiary of AbbVie Inc. (“AbbVie”), to co-promote our OraQuick® HCV test in the United States. On June 30, 2016, we mutually agreed to terminate our agreement with AbbVie effective December 31, 2016. Following the termination of the agreement, AbbVie was relieved of its co-promotion obligations, including its obligation to detail the OraQuick® HCV Rapid Test into physician offices, and has no further financial obligations to us. We are no longer obligated to compensate AbbVie for product detailing activities and are free to pursue arrangements with other pharmaceutical companies to market and promote our OraQuick® HCV Rapid Antibody Test in the U.S. Accordingly, during the first quarter of 2017 we did not record any revenue from this co-promotion agreement. During the first quarter of 2016, $3,362 in exclusivity revenue was recognized and was recorded as other revenue in our consolidated statements of income.

On June 12, 2015, we were awarded a grant for up to $10,400 in total funding from the U.S. Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) related to our OraQuick® Ebola Rapid Antigen test. The three-year, multi-phased grant includes an initial commitment of $1,800 and options for up to an additional $8,600 to fund certain clinical and regulatory activities. In September 2015, BARDA exercised an option to provide $7,200 in additional funding for the development of our OraQuick® Ebola Rapid Antigen test. Amounts related to this grant are recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarters of 2017 and 2016, $420 and $482, respectively, was recognized in connection with this grant.

In August 2016, we were awarded a contract for up to $16,600 in total funding from BARDA related to our rapid Zika test. The six-year, multi-phased contract includes an initial commitment of $7,000 and options for up to an additional $9,600 to fund the evaluation of additional product enhancements, and clinical and regulatory activities. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During the first quarter of 2017, $644 was recognized in connection with this grant.

Customer Sales Returns and Allowances

Customer Sales Returns and Allowances. We do not grant return rights to our customers for any product, except for our OraQuick® In-Home HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick® In-Home HIV product revenues in our consolidated statements of income. This estimate reflects our historical sales experience to retailers and consumers, as well as other retail factors, and is reviewed regularly to ensure that it reflects potential product returns. As of March 31, 2017 and December 31, 2016, the reserve for sales returns and allowances was $235 and $217, respectively. If actual product returns differ materially from our reserve amount, or if a determination is made that this product’s distribution would be discontinued in whole or in part by certain retailers, then we would need to adjust our reserve. Should the actual level of product returns vary significantly from our estimates, our operating and financial results could be materially affected.

Deferred Revenue

Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2017 and December 31, 2016 includes customer prepayments of $1,306 and $1,388, respectively.

Customer and Vendor Concentrations

Customer and Vendor Concentrations. One of our customers accounted for 22% of our accounts receivable as of March 31, 2017. Another customer accounted for 15% of our accounts receivable as of December 31, 2016. We had no significant concentrations in net consolidated revenues for the three months ended March 31, 2017. One of our customers accounted for approximately 12% of our net consolidated revenues for the three months ended March 31, 2016.

We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our products to our customers. Also, our subsidiary, DNAG, uses two third-party suppliers to manufacture its products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.

Earnings Per Share

Earnings Per Share. Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in a manner similar to basic earnings per share except that the weighted average number of shares outstanding is increased to include shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock, and performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period.

The computations of basic and diluted earnings per share are as follows:

 

     Three Months
Ended March 31,
 
     2017      2016  

Net income

   $ 12,441      $ 2,446  
  

 

 

    

 

 

 

Weighted average shares of common stock outstanding:

     

Basic

     56,929        55,451  

Dilutive effect of stock options and restricted stock

     1,843        628  
  

 

 

    

 

 

 

Diluted

     58,772        56,079  
  

 

 

    

 

 

 

Earnings per share:

     

Basic

   $ 0.22      $ 0.04  
  

 

 

    

 

 

 

Diluted

   $ 0.21      $ 0.04  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2017 and 2016, outstanding common stock options, unvested restricted stock, and unvested performance units representing 666 and 4,843 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.

Foreign Currency Translation

Foreign Currency Translation. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders’ equity.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange losses resulting from foreign currency transactions that are included in other income (expense) in our consolidated statements of income were $(200) and $(346) for the three months ended March 31, 2017 and 2016, respectively.

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss). We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive income (loss) separately from accumulated deficit and additional paid-in capital in the stockholders’ equity section of our consolidated balance sheet.

We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and as such, the results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. The $450 and $2,867 currency translation adjustments recorded in the first three months of 2017 and 2016, respectively, are largely the result of the translation of our Canadian operation’s balance sheets into U.S. dollars.

Recent Accounting Pronouncements

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued converged guidance on recognizing revenue in contracts with customers, ASU 2014-09, Revenue from Contracts with Customers. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, at which point we plan to adopt the standard.

 

The FASB allows two adoption methods under ASU 2014-09. We plan to adopt the standard using the “modified retrospective method.” Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effective of the change and providing additional disclosures comparing results to previous accounting standards.

Upon initial evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations related to our device and lab services for drug testing. This revenue stream amounts to less than 1% of total consolidated revenues. We will continue to evaluate the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and related disclosures, but do not anticipate the adoption to have a material impact on our financial results.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires an entity that uses the first-in, first-out method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016.    We adopted ASU 2015-11 on January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires entities to begin recording assets and liabilities from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU 2016-02 may have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued authoritative guidance under ASU 2016-09, Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017. Since we have a full valuation allowance against our net deferred tax assets, the adoption of this standard for recognition of tax effects of deductions for employee share awards in excess of compensation costs (‘windfall”) did not have a material impact on our consolidated financial statements and related disclosures. See Note 6 – Income Taxes, for additional information. Should the full valuation allowance be reversed in future periods the adoption of this new guidance will introduce more volatility to our effective tax rate depending on the Company’s share price at exercise or vesting of share-based awards compared to grant date. The other provisions of ASU 2016-09 did not have a material impact on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December 15, 2017, subject to early adoption. The majority of the guidance in ASU 2016-15 is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This update will be effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the future adoption of this standard on our consolidated financial statements and related disclosures.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Schedule of Inventories

Inventories are stated at the lower of cost and net realizable value determined on a first-in, first-out basis and are comprised of the following:

 

     March 31, 2017      December 31, 2016  

Raw materials

   $ 5,024      $ 5,399  

Work in process

     1,035        1,034  

Finished goods

     6,648        5,366  
  

 

 

    

 

 

 
   $ 12,707      $ 11,799  
  

 

 

    

 

 

 

Computations of Basic and Diluted Earnings Per Share

The computations of basic and diluted earnings per share are as follows:

 

     Three Months
Ended March 31,
 
     2017      2016  

Net income

   $ 12,441      $ 2,446  
  

 

 

    

 

 

 

Weighted average shares of common stock outstanding:

     

Basic

     56,929        55,451  

Dilutive effect of stock options and restricted stock

     1,843        628  
  

 

 

    

 

 

 

Diluted

     58,772        56,079  
  

 

 

    

 

 

 

Earnings per share:

     

Basic

   $ 0.22      $ 0.04  
  

 

 

    

 

 

 

Diluted

   $ 0.21      $ 0.04  
  

 

 

    

 

 

 
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accrued Expenses (Tables)
3 Months Ended
Mar. 31, 2017
Payables and Accruals [Abstract]  
Schedule of Accrued Expenses

     March 31, 2017      December 31, 2016  

Payroll and related benefits

   $ 3,905      $ 7,685  

Income taxes payable

     2,045        (39

Royalties

     688        982  

Professional fees

     686        715  

Other

     2,361        1,971  
  

 

 

    

 

 

 
   $ 9,685      $ 11,314  
  

 

 

    

 

 

 
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity (Tables)
3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Summary of Company's Stock Option Activity

The following table summarizes the stock option activity for the first three months ended March, 31, 2017:

 

     Options  

Outstanding on January 1, 2017

     5,456  

Granted

     191  

Exercised

     (1,462

Expired

     (27

Forfeited

     (19
  

 

 

 

Outstanding on March 31, 2017

     4,139  
  

 

 

 
Summary of Restricted Stock Award Activity

The following table summarizes restricted stock award activity for the three months ended March 31, 2017:

 

     Shares  

Issued and unvested, January 1, 2017

     750  

Granted

     288  

Vested

     (297

Forfeited

     (4
  

 

 

 

Issued and unvested, March 31, 2017

     737  
  

 

 

 
Summary of PSU Activity

The following table summarizes PSU activity for the three months ended March 31, 2017:

 

     Units  

Issued and unvested, January 1, 2017

     456  

Granted

     229  

Vested

     —    

Forfeited

     —    
  

 

 

 

Issued and unvested, March 31, 2017

     685  
  

 

 

 
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information (Tables)
3 Months Ended
Mar. 31, 2017
Segment Reporting [Abstract]  
Summary of Operating Segment and Asset Information

The following table summarizes operating segment information for the three months ended March 31, 2017 and 2016, and asset information as of March 31, 2017 and December 31, 2016:

 

     Three Months Ended March 31,  
     2017      2016  

Net revenues:

     

OSUR

   $ 21,840      $ 22,199  

DNAG

     10,706        6,890  
  

 

 

    

 

 

 

Total

   $ 32,546      $ 29,089  
  

 

 

    

 

 

 

Operating income (loss):

     

OSUR

   $ (219    $ 1,608  

DNAG

     16,090        1,091  
  

 

 

    

 

 

 

Total

   $ 15,871      $ 2,699  
  

 

 

    

 

 

 

Depreciation and amortization:

     

OSUR

   $ 625      $ 639  

DNAG

     783        715  
  

 

 

    

 

 

 

Total

   $ 1,408      $ 1,354  
  

 

 

    

 

 

 

Capital expenditures:

     

OSUR

   $ 784      $ 447  

DNAG

     94        1,146  
  

 

 

    

 

 

 

Total

   $ 878      $ 1,593  
  

 

 

    

 

 

 
     March 31, 2017      December 31, 2016  

Total assets:

     

OSUR

   $ 161,730      $ 151,719  

DNAG

     70,862        56,216  
  

 

 

    

 

 

 

Total

   $ 232,592      $ 207,935  
  

 

 

    

 

 

 
Presentation of Total Net Revenues and Long-Lived Assets by Geographic Area

The following table represents total net revenues by geographic area, based on the location of the customer:

 

     Three Months Ended March 31,  
     2017      2016  

United States

   $ 20,854      $ 22,170  

Europe

     3,125        3,879  

Other regions

     8,567        3,040  
  

 

 

    

 

 

 
   $ 32,546      $ 29,089  
  

 

 

    

 

 

 

 

The following table represents total long-lived assets by geographic area:

 

     March 31, 2017      December 31, 2016  

United States

   $ 15,886      $ 15,737  

Canada

     4,238        4,286  

Other regions

     10        10  
  

 

 

    

 

 

 
   $ 20,134      $ 20,033  
  

 

 

    

 

 

 
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Additional Information (Detail)
shares in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Dec. 31, 2016
USD ($)
Jun. 12, 2015
USD ($)
Aug. 31, 2016
USD ($)
Sep. 30, 2015
USD ($)
Mar. 31, 2017
USD ($)
Supplier
shares
Mar. 31, 2016
USD ($)
shares
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Available-for-sale securities, fair values $ 11,160,000       $ 18,776,000   $ 11,160,000  
Cash and cash equivalents 107,959,000       120,851,000 $ 94,558,000 107,959,000 $ 94,094,000
Fair value of plan assets 1,980,000       2,828,000   1,980,000  
Accumulated depreciation of property and equipment 36,067,000       36,856,000   36,067,000  
Intangible Assets, Net 10,337,000       9,779,000   10,337,000  
Intangible Assets, Accumulated Amortization         637,000      
Intangible Assets, Foreign currency translation gains         79,000      
Accumulated amortization of intangible assets 15,197,000       15,944,000   15,197,000  
Amount of goodwill at period end 18,793,000       18,971,000   18,793,000  
Revenue recognized         0 3,362,000    
Maximum value of grant revenue from clinical and regulatory activities   $ 10,400,000 $ 16,600,000          
Initial grant revenue from clinical and regulatory activities   1,800,000 7,000,000          
Remaining grant revenue from clinical and regulatory activities   $ 8,600,000 $ 9,600,000          
Period of grant   3 years 6 years          
Additional contract revenue from clinical and regulatory activities       $ 7,200,000        
Contract revenues from clinical and regulatory activities         644,000      
Reserve for sales return and allowances         235,000   217,000  
Deferred revenue 1,388,000       1,306,000   1,388,000  
Net foreign exchange losses         (200,000) (346,000)    
Accumulated foreign currency adjustments included in other comprehensive loss amounted         450,000 $ 2,867,000    
Money Market Fund [Member] | Level I Instruments [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Cash and cash equivalents $ 83,704,000       $ 82,142,000   83,704,000  
Common Stock Options Unvested Restricted Stock and Unvested Performance Units [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Number of anti-dilutive securities excluded from EPS computation | shares         666 4,843    
Accounts Receivable [Member] | Customer Concentration Risk [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Percentage of concentration risk 15.00%              
Net Consolidated Revenue [Member] | Customer Concentration Risk [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Percentage of concentration risk         0.00%      
Up Front Payment Arrangement [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Deferred revenue $ 1,388,000       $ 1,306,000   1,388,000  
AbbVie [Member] | Collaborative Arrangement Co-promotion [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Expiration date of rights agreement         Dec. 31, 2016      
Customer One [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Percentage of concentration risk         22.00%      
Customer One [Member] | Net Consolidated Revenue [Member] | Customer Concentration Risk [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Percentage of concentration risk           12.00%    
Guaranteed Investment Certificates [Member] | Level I Instruments [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Available-for-sale securities, amortized cost 18,776,000       $ 18,776,000   18,776,000  
Available-for-sale securities, fair values $ 11,160,000       11,160,000   $ 11,160,000  
Other [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Contract revenues from clinical and regulatory activities         $ 420,000 $ 482,000    
Certificates of Deposit [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Certificates of deposit maturity date         Feb. 28, 2018      
Maximum [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Useful life of Intangible assets         15 years      
Maximum [Member] | Net Consolidated Revenue [Member] | Revenue from Rights Concentration Risk [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Percentage of concentration risk         1.00%      
Maximum [Member] | Buildings [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         40 years      
Maximum [Member] | Computer Equipment [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         10 years      
Maximum [Member] | Machinery and Equipment [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         10 years      
Maximum [Member] | Furniture and Fixtures [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         10 years      
Maximum [Member] | Certificates of Deposit [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Interest rate on certificates of deposit         0.44%      
Minimum [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Useful life of Intangible assets         7 years      
Minimum [Member] | Buildings [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         20 years      
Minimum [Member] | Computer Equipment [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         2 years      
Minimum [Member] | Machinery and Equipment [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         2 years      
Minimum [Member] | Furniture and Fixtures [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Estimated useful lives of assets         2 years      
Minimum [Member] | Certificates of Deposit [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Interest rate on certificates of deposit         0.28%      
DNA Genotek [Member]                
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                
Number of third-party suppliers to manufacture DNAG's products | Supplier         2      
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Inventories (Detail) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Inventory, Net [Abstract]    
Raw materials $ 5,024 $ 5,399
Work in process 1,035 1,034
Finished goods 6,648 5,366
Inventories $ 12,707 $ 11,799
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Computations of Basic and Diluted Earnings Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Earnings Per Share [Abstract]    
NET INCOME $ 12,441 $ 2,446
Weighted average shares of common stock outstanding:    
BASIC 56,929 55,451
Dilutive effect of stock options and restricted stock 1,843 628
Diluted 58,772 56,079
BASIC $ 0.22 $ 0.04
DILUTED $ 0.21 $ 0.04
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accrued Expenses - Schedule of Accrued Expenses (Detail) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Accrued Liabilities, Current [Abstract]    
Payroll and related benefits $ 3,905 $ 7,685
Income taxes payable 2,045 (39)
Royalties 688 982
Professional fees 686 715
Other 2,361 1,971
Accrued Expenses, Total $ 9,685 $ 11,314
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Credit Facility - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Line of Credit Facility [Line Items]    
Current borrowing capacity $ 10,000,000  
Line of credit facility, collateral Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets.  
Borrowings $ 0 $ 0
Unused capacity commitment fee 0.375%  
Maturity date of credit facility Sep. 30, 2019  
Maximum [Member]    
Line of Credit Facility [Line Items]    
Additional revolving commitments $ 5,000,000  
Line of Credit [Member]    
Line of Credit Facility [Line Items]    
Minimum fixed charge coverage ratio 110.00%  
Line of Credit [Member] | London Interbank Offered Rate (LIBOR) [Member]    
Line of Credit Facility [Line Items]    
Line of credit, interest rate 2.50%  
Letter of Credit [Member]    
Line of Credit Facility [Line Items]    
Current borrowing capacity $ 2,500,000  
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Aug. 05, 2008
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Proceeds from exercise of stock options $ 9,417,000    
Income tax benefit realized from stock option exercises during period 0 $ 0  
Total compensation cost $ 1,518,000 $ 1,452,000  
Amount share repurchase program of common shares     $ 25,000,000
Share Repurchase Program [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Number of shares purchased and retired 0 423  
Average price of common stock   $ 6.29  
Total cost of common stock purchased and retired   $ 2,660,000  
Stock Options [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Proceeds from exercise of stock options $ 9,417,000 0  
Total compensation cost 502,000 733,000  
Restricted Stock [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Total compensation cost $ 655,000 $ 719,000  
Vesting of restricted shares and exercise of stock options, withholding and exercise obligations 96,000 98,000  
Restricted shares of common stock and stock options, aggregate values $ 851,000 $ 527,000  
Performance Based Restricted Stock [Member] | Share-based Compensation Award, Tranche One [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Vesting period 1 year    
Performance Based Restricted Stock [Member] | Share-based Compensation Award, Tranche Two [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Vesting period 3 years    
Performance Based Restricted Stock Unit [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Total compensation cost $ 361,000 $ 0  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Summary of Company's Stock Option Activity (Detail)
shares in Thousands
3 Months Ended
Mar. 31, 2017
shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]  
Options, Outstanding, Beginning Balance 5,456
Options, Granted 191
Options, Exercised (1,462)
Options, Expired (27)
Options, Forfeited (19)
Options, Outstanding, Ending Balance 4,139
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Summary of Restricted Stock Award Activity (Detail) - Restricted Stock [Member]
shares in Thousands
3 Months Ended
Mar. 31, 2017
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares, Issued and unvested, Beginning Balance 750
Shares, Granted 288
Shares, Vested (297)
Shares, Forfeited (4)
Shares, Issued and unvested, Ending Balance 737
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Summary of PSU Activity (Detail) - Performance Based Restricted Stock [Member]
shares in Thousands
3 Months Ended
Mar. 31, 2017
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares, Issued and unvested, Beginning Balance 456
Shares, Granted 229
Shares, Vested 0
Shares, Forfeited 0
Shares, Issued and unvested, Ending Balance 685
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes - Additional Information (Detail) - USD ($)
3 Months Ended
Jan. 01, 2017
Mar. 31, 2017
Mar. 31, 2016
Income Taxes [Line Items]      
INCOME TAX EXPENSE   $ 3,897,000 $ 61,000
Gain from settlement of Ancestry litigation   12,500,000  
U.S. federal or state deferred income tax expense or benefits   $ 0 $ 0
Accounting Standards Update Two Thousand Sixteen Zero Nine [Member]      
Income Taxes [Line Items]      
Cumulative-effect adjustment to retained earnings $ 3,391,000    
Net impact of cumulative-effect adjustment to retained earnings 0    
Accounting Standards Update Two Thousand Sixteen Zero Nine [Member] | Valuation Allowance, Operating Loss Carryforwards [Member]      
Income Taxes [Line Items]      
Cumulative-effect adjustment to retained earnings $ 3,391,000    
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies - Additional Information (Detail)
$ in Thousands
Feb. 06, 2017
USD ($)
Mar. 31, 2017
USD ($)
Debt_Instruments
DNA Genotek [Member]    
Contractual Obligation Fiscal Year Maturity [Line Items]    
Settlement fee $ 12,500  
Standby Letters of Credit [Member]    
Contractual Obligation Fiscal Year Maturity [Line Items]    
Standby letters of credit   $ 1,831
Debt instrument, number of letters of credit | Debt_Instruments   4
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Additional Information (Detail)
3 Months Ended
Mar. 31, 2017
Segment
Segment Reporting [Abstract]  
Number of reportable segments of company 2
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Summary of Operating Segment and Asset Information (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Segment Reporting Information [Line Items]      
Net revenues $ 32,546 $ 29,089  
Operating income (loss) 15,871 2,699  
Depreciation and amortization 1,408 1,354  
Capital expenditures 878 1,593  
Total assets 232,592   $ 207,935
OSUR [Member]      
Segment Reporting Information [Line Items]      
Net revenues 21,840 22,199  
Operating income (loss) (219) 1,608  
Depreciation and amortization 625 639  
Capital expenditures 784 447  
Total assets 161,730   151,719
DNAG [Member]      
Segment Reporting Information [Line Items]      
Net revenues 10,706 6,890  
Operating income (loss) 16,090 1,091  
Depreciation and amortization 783 715  
Capital expenditures 94 $ 1,146  
Total assets $ 70,862   $ 56,216
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Presentation of Total Net Revenues and Long-Lived Assets by Geographic Area (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Segment Reporting, Revenue Reconciling Item [Line Items]      
Revenues $ 32,546 $ 29,089  
Long-lived assets 20,134   $ 20,033
United States [Member]      
Segment Reporting, Revenue Reconciling Item [Line Items]      
Revenues 20,854 22,170  
Long-lived assets 15,886   15,737
Europe [Member]      
Segment Reporting, Revenue Reconciling Item [Line Items]      
Revenues 3,125 3,879  
Other Regions [Member]      
Segment Reporting, Revenue Reconciling Item [Line Items]      
Revenues 8,567 $ 3,040  
Long-lived assets 10   10
Canada [Member]      
Segment Reporting, Revenue Reconciling Item [Line Items]      
Long-lived assets $ 4,238   $ 4,286
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