Commitments and Contingencies

Leases

The Company leases its facilities and certain equipment. Commitments for minimum rentals under non-cancelable leases at the end of 2018 are as follows (in thousands):



Years ending December 31,	Operating Leases		Lease obligation
2019	$	9,940	$	956
2020	10,601		967
2021	10,502		—
2022	8,965		—
2023	8,409		—
Thereafter	86,797		—
Total minimum lease payments	$	135,214	$	1,923

Operating Leases—Rent expense under operating leases totaled approximately $10.2 million for the year ended December 31, 2018, $2.1 million for the year ended December 31, 2017 and $2.2 million for the year ended December 31, 2016.

On January 5, 2018, the Company entered into a sale and leaseback transaction for the San Diego property on Summers Ridge Road (the “Summers Ridge Property”) that was acquired as part of the Triage Business from Alere discussed in Note 12. The Summers Ridge Property was included as assets held for sale on the Consolidated Balance Sheet as of December 31, 2017. The Company sold the Summers Ridge Property for a net consideration of $146.6 million. In addition, the Company entered into a lease agreement with the buyer to lease two of the four buildings on the Summers Ridge Property for an initial term of 15 years. The Summers Ridge lease is subject to certain must-take provisions related to two additional buildings, consisting of approximately 125,000 square feet, upon the expiration of certain leases with the tenants of the other portion of the Summers Ridge Property. The initial term can be extended by the Company for two additional 5-year terms upon satisfaction of certain conditions. The future minimum lease payments above excludes one building for which the must-take clause has not been triggered.

McKellar Court Lease Obligation—During 1999, the Company completed a sale and leaseback transaction of its San Diego facility at McKellar Court. The facility was sold for $15.0 million, of which $3.8 million was capital contributed by the Company. The sale was an all-cash transaction, netting the Company approximately $7.0 million. The Company is a 25% limited partner in the partnership that acquired the facility. The transaction was deemed a financing transaction under the guidance in ASC Topic 840-40, Accounting for Sales of Real Estate. The assets sold remain on the books of the Company and will continue to be depreciated over the estimated useful life. In December 2009, the Company amended the terms of its lease agreement for the McKellar Court property, which had no significant impact on the Company’s financial statements. The amended terms included a new ten-year lease term through December 31, 2019, with options to extend the lease for up to three additional five-year periods. In the fourth quarter of 2015, the Company amended the terms of its lease agreement to extend the lease term through December 31, 2020. The options to extend the lease for up to three additional five-year periods commence at the new lease term date of December 31, 2020. The Company is amortizing the lease obligation over the new estimated lease term, including extensions. As the Company accounts for the lease as a financing transaction, the Company adjusted the implied interest rate so that the existing lease obligation is amortized to the end of the estimated lease term, including extensions. The Company has determined that the partnership is a variable interest entity (VIE). The Company is not, however, the primary beneficiary of the VIE as it does not absorb the majority of the partnership’s expected losses or receive a majority of the partnership’s residual returns. The Company made lease payments to the partnership of approximately $0.9 million for each of the years ended December 31, 2018, 2017 and 2016, respectively.

Purchase Commitments

The Company has $9.1 million in firm inventory purchase commitments as of December 31, 2018, the majority of which will be purchased within the next twelve months.

Litigation and Other Legal Proceedings

In Beckman Coulter Inc. v. Quidel Corporation, which was filed in the Superior Court for the County of San Diego, California (the “Trial Court”), on November 27, 2017, Beckman Coulter Inc. (“Beckman”) alleges that a provision of an agreement between Quidel and Beckman violates state antitrust laws. Our acquisition of the BNP Business consisted of assets and liabilities relating to a contractual arrangement with Beckman (the “Beckman Agreement”) for the supply of antibodies and other inputs related to, and distribution of, the Triage® BNP Test for the Beckman Coulter Access Family of Immunoassay Systems. The Beckman Agreement further provides that Beckman, for a specified period, cannot research or develop an assay for use in the diagnosis of cardiac diseases that measures or detects the presence or absence of BNP or NT-pro-BNP (a related biomarker). In the lawsuit, Beckman asserts that this provision violates certain California antitrust laws and is unenforceable. Beckman contends that it has suffered damages due to this provision and seeks a declaration that this provision is void.

On December 7, 2018, the Trial Court granted Beckman’s motion for summary adjudication of its first cause of action for declaratory relief (the “Order”), finding the challenged provision void under California law. On December 18, 2018, the Trial Court stayed the effect of the Order pending our petitioning the Fourth District Court of Appeal (the “Court of Appeal”) for a stay and review of the Order.

On January 18, 2019, we filed a petition for writ of mandate with the Court of Appeal, seeking immediate appellate review of the Order and requesting a stay of the Order pending review. Beckman requested and obtained an extension to file a preliminary opposition to the writ petition, which is due on February 25, 2019. We intend to file a reply to the preliminary opposition, which will be due twenty days after the filing of the opposition.

On February 7, 2019, the Trial Court stayed the remaining litigation on Beckman’s second cause of action pending a decision from the Court of Appeal on whether they will hear the merits of our writ petition. The Trial Court also vacated all deadlines in the case, including the trial date. The parties are to report back to the Trial Court once the Court of Appeal issues its decision on whether to review the merits of our writ petition.

We continue to deny that the contractual provision is unlawful, deny any liability with respect to this matter, and intend to continue to vigorously defend ourselves. There are multiple factors that prevent us from being able to estimate the amount of loss, if any, that may result from this matter including: (1) we are vigorously defending ourselves and believe that we have a number of meritorious legal defenses; (2) there are unresolved questions of law and fact that could be important to the ultimate resolution of this matter; and (3) discovery is in the very early stages. Accordingly, at this time, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition, results of operations or liquidity.

From time to time, the Company is involved in other litigation and proceedings, including matters related to product liability claims, commercial disputes and intellectual property claims, as well as regulatory, employment, and other claims related to our business. The Company accrues for legal claims when, and to the extent that, amounts associated with the claims become probable and are reasonably estimable. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. For those matters as to which we are not able to estimate a possible loss or range of loss, we are not able to determine whether the loss will have a material adverse effect on our business, financial condition or results of operations or liquidity. No accrual has been recorded as of December 31, 2018 and December 31, 2017 related to such matters as they are not probable and/or reasonably estimable.

Management believes that all such current legal actions, in the aggregate, will not have a material adverse effect on the Company. However, the resolution of, or increase in any accruals for, one or more matters may have a material adverse effect on the Company’s results of operations and cash flows.

The Company also maintains insurance, including coverage for product liability claims, in amounts which management believes are appropriate given the nature of its business.

Licensing Arrangements

The Company has entered into various licensing and royalty agreements, which largely require payments by the Company based on specified product sales as well as the achievement of specified milestones. The Company had royalty and license expenses relating to those agreements of approximately $0.4 million, $0.6 million and $0.8 million for the years ended December 31, 2018, 2017 and 2016, respectively.