Nature of Business and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions were eliminated.

Reclassification

The Company made certain reclassifications to the prior years' financial statements to conform them to the presentation as of and for the year ended December 31, 2018. These reclassifications had no effect on consolidated financial position, net earnings, shareholders' equity, or net cash flows for any of the periods presented.

Foreign currency translation

The assets and liabilities of the Company’s subsidiaries outside the United States are translated into United States dollars at current exchange rates in effect at the balance sheet date. Revenues and expenses are translated at monthly average exchange rates. Resulting translation adjustments are reflected in accumulated other comprehensive earnings (loss) within shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in currencies other than the functional currency are reflected as other (income) expense, net, in the Consolidated Statements of Income as incurred.

The cumulative translation adjustment included in accumulated other comprehensive earnings (loss) is a loss of $148.4 million and $113.0 million at December 31, 2018 and 2017, respectively. Transaction gains and losses included in other (income) expense, net, are net losses of $1.3 million, $0.2 million, and $2.2 million for the years ended December 31, 2018, 2017 and 2016,

Revenue recognition

The Company designs, markets and sells products primarily as commercial, off-the-shelf products. Certain customers request different system configurations, based on standard options or accessories that the Company offers. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company regularly enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. In such situations, contract values are allocated to each performance obligation based on its relative estimated standalone selling price. The vast majority of the Company's revenues are recognized at a point in time when goods are transferred to a customer. However, for certain contracts that include highly customized components, if performance does not create an asset with an alternative use and termination for convenience clauses provide an enforceable right to payment for performance completed to date, revenue is recognized over time as the performance obligation is satisfied.

Revenue includes certain shipping and handling costs and is stated net of third party agency fees. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold. Revenue is recognized net of allowances for returns and net of taxes collected from customers which are subsequently remitted to governmental authorities.

The Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance of the Company’s products over a specified period of time, generally twelve to twenty-four months, at no cost to its customers. Warranty liabilities are established at the time that revenue is recognized at levels that represent the Company’s estimate of the costs that will be incurred to fulfill those warranty requirements.

Provisions for estimated losses on sales or related receivables are recorded when identified. Revenue includes certain shipping and handling costs and is stated net of representative commissions and sales taxes. Service revenue is deferred and recognized over the contract period, as is the case for extended warranty contracts, or recognized as services are provided.

See Note 18. "Operating Segments and Related Information - Revenue and Long-Lived Assets by Geographic Area" for information related to the Company’s revenues disaggregated by significant geographical region and operating segment.

Cost of goods sold

Cost of goods sold includes materials, labor and overhead costs incurred in the manufacturing of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation, occupancy costs, and purchasing, receiving and inspection costs.

Research and development

Expenditures for research and development activities are expensed as incurred.

Cash equivalents

Cash equivalents and restricted cash

The Company considers short-term investments that are highly liquid, readily convertible into cash and have maturities of less than three months when purchased to be cash equivalents. Cash equivalents at December 31, 2018 and 2017 were $200.0 million and $140.7 million, respectively, which were primarily investments in money market funds and overnight deposits. Restricted cash includes cash that is subject to a legal or contractual restriction by a third party and restricted as to withdrawal or use, including restrictions that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used. The Company did not have any restricted cash balances at December 31, 2018 and 2017, respectively.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are stated at the amounts the Company expects to collect. Credit limits are established through a process of reviewing the financial history and stability of each customer. The Company regularly evaluates the collectability of its trade receivables balances based on a combination of factors. If it is determined that a customer will be unable to fully meet its financial obligation, the Company records a specific allowance to reduce the related receivable to the amount expected to be recovered. In addition, the Company also records an allowance for all other customers based on certain other factors including the length of time the receivables are past due and historical collection experience with individual customers.

Inventories

Inventories are stated at the lower of cost or market and include materials, labor, and manufacturing overhead. Cost is determined based on a currently adjusted standard cost basis that approximates actual manufacturing cost on a first-in, first-out basis.

Inventory write-downs are recorded when conditions exist to indicate that inventories are likely to be in excess of anticipated demand or are obsolete based upon the Company’s assumptions about future demand for its products and market conditions. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including the following: historical usage rates, forecasted sales or usage, product end of life dates, estimated current and future market values and new product introductions. When recorded, write-downs reduce the carrying value of the Company’s inventories to their net realizable value and create a new cost-basis in the inventories. Write-downs are reflected in cost of goods sold in the Consolidated Statements of Income.

Demonstration Units

Demonstration units

The Company’s products which are being used as demonstration units are stated at the lower of cost or market and are included in prepaid expenses and other current assets in the Consolidated Balance Sheets. Demonstration units are available for sale and the Company periodically evaluates them as to marketability and realizable values. The carrying value of demonstration units was $35.2 million and $37.6 million at December 31, 2018 and 2017, respectively.

Property and equipment

Property and equipment are stated at cost and are depreciated using a straight-line methodology over their estimated useful lives. Repairs and maintenance are charged to expense as incurred.

Goodwill

Goodwill is reviewed during the third quarter of each year, or more frequently if warranted, for impairment to determine if events or changes in business conditions indicate that the carrying value may not be recoverable. The Company did not recognize any impairment charges on goodwill during the years ended December 31, 2018, 2017 and 2016. See Note 8, "Goodwill," for additional information.

Intangible assets

Intangible assets are amortized using a straight-line methodology over their estimated useful lives. Intangible assets with indefinite useful lives are evaluated annually for impairment, or more frequently if required. The Company did not recognize any impairment charges on intangible assets with indefinite lives during the years ended December 31, 2018, 2017 and 2016.

Impairment of long-lived assets

Long-lived asset groups are reviewed for impairment when circumstances indicate that the carrying amounts may not be recoverable. Impairment exists when the carrying value is greater than the expected undiscounted future cash flows expected to be provided by the asset group. If impairment exists, the asset group is written down to its fair value. The Company did not recognize any impairment charges on long-lived assets during the years ended December 31, 2018, 2017 and 2016.

Advertising costs

Advertising costs, which are included in selling, general and administrative expenses, are expensed as incurred. Advertising costs for the years ended December 31, 2018, 2017 and 2016 were $12.5 million, $19.2 million and $19.3 million, respectively.

Contingencies

The Company is subject to the possibility of loss contingencies arising in the normal course of business. An estimated loss is accrued when the Company determines that it is probable that an asset has been impaired or a liability has been incurred and the amount can be reasonably estimated. The Company regularly evaluates current available information to determine whether such accruals and disclosures should be adjusted.

Earnings per share

Basic earnings per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted shares outstanding are increased to include additional shares from the assumed exercise of stock options, if dilutive, and the assumed issuance of shares upon vesting of restricted stock awards.

The following table sets forth the reconciliation of the numerator and denominator utilized in the computation of basic and diluted earnings per share (in thousands):



	Year Ended December 31,
	2018		2017		2016
Numerator for earnings per share:
Net earnings for basic and diluted earnings per share	$	282,425	$	107,223	$	166,626
Denominator for earnings per share:
Weighted average number of common shares outstanding	137,815		137,456		137,138
Assumed exercise of stock options and vesting of restricted stock awards, net of shares assumed reacquired under the treasury stock method	2,394		2,190		1,359
Diluted shares outstanding	140,209		139,646		138,497

The effect of stock-based compensation awards for the years ended December 31, 2018, 2017 and 2016 that aggregated 10,000, 39,000 and 233,000 shares, respectively, have been excluded for purposes of diluted earnings per share since the effect of their inclusion would have been anti-dilutive.


Note 1.	Nature of Business and Significant Accounting Policies - (Continued)

Supplemental cash flow disclosure (in thousands)



	Year Ended December 31,
	2018		2017		2016
Cash paid for:
Interest	$	14,183	$	15,394	$	15,815
Taxes	$	83,259	$	72,340	$	32,465

Stock-based compensation

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards and shares expected to be issued under the Company's employee stock purchase plan. Nonvested stock awards (referred to as restricted stock unit awards) are valued based on the fair market value of the Company's stock, discounted for expected dividends, on the date of grant. Restricted stock units containing performance-based vesting criteria are valued on the date of grant based on the fair value of the Company's stock, discounted for expected dividends and an estimate for illiquidity. The fair value of market-based restricted stock units is determined on the date of grant using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation and a discount for illiquidity. The estimated discount for illiquidity is relevant for share based awards that require the plan participant to hold the shares for a specified period of time after the award vests and is estimated using the protective put method. The Company recognizes the compensation expense for all stock-based compensation awards on a straight-line basis over the requisite service period of each award.

The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016 (in thousands):



	Year Ended December 31,
	2018		2017		2016
Cost of goods sold	$	3,157	$	2,665	$	3,103
Research and development	6,697		5,068		4,815
Selling, general and administrative	24,316		23,285		19,879
Stock-based compensation expense before income taxes	$	34,170	$	31,018	$	27,797

Stock-based compensation expense capitalized in the Consolidated Balance Sheets as of December 31, 2018, 2017 and 2016 is as follows (in thousands):



	December 31,
	2018		2017		2016
Capitalized in inventory	$	1,080	$	1,062	$	567

As of December 31, 2018, the Company had approximately $48.1 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of approximately two years.


Note 1.	Nature of Business and Significant Accounting Policies - (Continued)

Stock-based compensation - (Continued)

The fair value of the stock-based awards granted in the years ended December 31, 2018, 2017 and 2016 was estimated with the following weighted-average assumptions:



	2018		2017		2016
Stock option awards:
Risk-free interest rate	—		1.8	%	0.9	%
Expected dividend yield	—		1.6	%	1.6	%
Expected term	—		6.0 years		4.3 years
Expected volatility	—		26.6	%	25.6	%
Performance-based restricted stock awards:
Expected dividend yield	1.2	%	1.6	%	1.6	%
Discount for illiquidity	—		—		9.9	%
Market-based restricted stock awards:
Risk-free interest rate	—		—		0.9	%
Expected dividend yield	—		—		1.6	%
Expected term	—		—		4.0 years
Expected volatility	—		—		25.8	%
Expected volatility of S&P 500	—		—		25.0	%
Discount for illiquidity	—		—		9.9	%
Employee stock purchase plan:
Risk-free interest rate	2.3	%	1.0	%	0.5	%
Expected dividend yield	1.3	%	1.6	%	1.5	%
Expected term	6 months		6 months		6 months
Expected volatility	26.4	%	20.9	%	27.0	%
Discount for illiquidity	10.5	%	10.5	%	10.5	%

The Company uses the United States Treasury (constant maturity) interest rate on the date of grant as the risk-free interest rate and uses historical volatility as the expected volatility. The Company’s determination of expected term is based on an analysis of historical and expected exercise patterns. In 2017 and 2016, all stock options granted were time-based options. The Company uses an estimated forfeiture rate of 5 percent of the stock-compensation expense of non-executive employees based on an analysis of historical and expected forfeitures.

During the years ended December 31, 2018, 2017 and 2016, the Company granted approximately 594,000, 773,000 and 865,000 time-vested restricted stock units, respectively. The fair value of time-vested restricted stock units is fixed and determined on the date of grant based upon the Company's stock price on the date of grant. The weighted average fair values of the time-vested restricted stock units granted during the years ended December 31, 2018, 2017 and 2016 were $52.93, $36.20 and $29.48 per share, respectively.

During the year ended December 31, 2016, the Company granted approximately 64,000 market-based restricted stock units. These units may be earned based upon the Company's total shareholder return compared to the total shareholder return over a three year period of the component company at the 60th percentile level in the S&P 500 Index. Shares vested under the market-based restricted stock unit awards must be held by the participant for a period of one year from the vest date. The fair value of the market-based restricted stock units granted during the year ended December 31, 2016 was $22.89 per share, respectively.

During the years ended December 31, 2018, 2017 and 2016, the Company granted approximately 177,000, 283,000 and 62,000 performance-based restricted stock units, respectively. These units are earned based upon the Company's return on invested capital over a three year period. The fair value of the performance-based restricted units granted during the years ended December 31, 2018, 2017 and 2016 was $52.32, $35.08 and $26.41 per share, respectively.


Note 1.	Nature of Business and Significant Accounting Policies - (Continued)

Stock-based compensation - (Continued)

The total fair value of the restricted stock unit awards granted during the year ended December 31, 2018 in the table below of $40.7 million includes $9.2 million of grant date fair value associated with the performance-based restricted stock units. The total fair value of the restricted stock unit awards granted during the year ended December 31, 2017 in the table below of $37.9 million includes $9.9 million of grant date fair value associated with the performance-based restricted stock units. The total fair value of the restricted stock unit awards granted during the year ended December 31, 2016 in the table below of $28.6 million includes $1.5 million of grant date fair value associated with the market-based restricted stock units and $1.6 million of grant date fair value associated with the performance-based restricted stock units.

The weighted-average fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts):



	Years Ended December 31,
	2018		2017		2016
Stock option awards:
Weighted average grant date fair value per share	—		$	8.55	$	5.68
Total fair value of awards granted	—		$	2,824	$	4,716
Total fair value of awards vested	$	2,529	$	4,203	$	4,407
Total intrinsic value of options exercised	$	24,652	$	20,631	$	6,170
Restricted stock unit awards:
Weighted average grant date fair value per share	$	52.79	$	35.90	$	28.86
Total fair value of awards granted	$	40,675	$	37,906	$	28,603
Total fair value of awards vested	$	48,705	$	27,489	$	21,130
Employee stock purchase plan:
Weighted average grant date fair value per share	$	10.01	$	7.66	$	6.33
Total fair value of shares estimated to be issued	$	1,330	$	1,087	$	923

The total amount of cash received from the exercise of stock options in the years ended December 31, 2018, 2017 and 2016 was $23.7 million, $53.5 million and $7.7 million, respectively, and the related tax benefits realized from the exercise of the stock options in the years ended December 31, 2018, 2017 and 2016 was $8.7 million, $3.0 million and $1.3 million, respectively.

Concentration of risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable. Concentration of credit risk with respect to accounts receivable is limited because a relatively large number of geographically diverse customers make up the Company’s customer base, thus diversifying the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs credit evaluations for all new customers and requires letters of credit, bank guarantees and advanced payments, if deemed necessary.

A substantial portion of the Company’s revenue is derived from sales to United States and foreign government agencies (see Note 18, "Operating Segments and Related Information"). The Company also purchases certain key components from sole or limited source suppliers.

The Company maintains cash deposits with major banks that from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and instruments in which it invests and adjusts its investment balances to mitigate the risk of principal loss.

Use of estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and judgments made by management of the Company include matters such as collectability of accounts receivable, realizability of inventories, recoverability of deferred tax assets, impairment tests of goodwill, intangible assets and other long-lived assets, recognition and measurement of loss contingencies and adequacy of warranty accruals. Actual results could differ from those estimates. The Company believes that the estimates used are reasonable.

Accumulated other comprehensive earnings

Accumulated other comprehensive earnings (loss)

Accumulated other comprehensive earnings (loss) includes cumulative translation adjustments, fair value adjustments on interest rate swap contracts, unrealized gains and losses on available-for-sale securities and changes in minimum liability for pension plans. Foreign currency translation adjustments included in comprehensive income were not tax affected as investments in international affiliates are deemed to be indefinite in duration.

The following table sets forth the changes in the balances of each component of accumulated other comprehensive earnings (loss) for the year ended December 31, 2018:



	Pension Plans Items			Available-For-Sale Items			Foreign Currency Items			Total
Balance, December 31, 2017	$	(344	)	$	(4	)	$	(113,012	)	$	(113,360	)
Other comprehensive income (loss) before reclassifications, net of tax	(338		)	—			(35,394		)	(35,732		)
Amounts reclassified from accumulated other comprehensive earnings (loss), net of tax	—			—			—			—
Net current period other comprehensive income (loss), net of tax	(338		)	—			(35,394		)	(35,732		)
Balance, December 31, 2018	$	(682	)	$	(4	)	$	(148,406	)	$	(149,092	)

Product warranties

The Company generally provides a twelve to twenty-four month warranty on its products. A provision for the estimated future costs of warranty, based upon historical cost and product performance experience, is recorded when revenue is recognized.

Segment reporting

The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, evaluates each of its segment’s performance and allocates resources based on revenue and segment operating income. Intersegment revenues are recorded at cost and are eliminated in consolidation. The Company and each of its segments employ consistent accounting policies.

The following tables present revenue, operating income, and assets for the three segments. Operating income as reviewed by the CODM is revenue less cost of goods sold and operating expense, excluding general corporate expenses, acquisition related costs, executive transition costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, costs associated with the SkyWatch product remediation, restructuring charges, and the loss on sale of business. Accounts receivable and inventories for operating segments are regularly reviewed by management and are reported below as segment assets. All remaining assets, liabilities, capital expenditures and depreciation for all periods presented below were managed on a Company-wide basis.

Recent accounting pronouncements

Recently Adopted Accounting Pronouncements

Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). Effective January 1, 2018, the Company adopted ASU 2016-18 on a retrospective basis. This update clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. The amendment requires restricted cash be included in an entity's cash and cash-equivalent balances in the statement of cash flows and also requires an entity to disclose information about the nature of the restrictions. Further, a reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. The Company's adoption of ASU 2016-18 did not have a material impact on the consolidated financial statements.

FASB ASU No. 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). Effective January 1, 2018, the Company adopted ASU 2016-01. The update requires changes to the accounting for financial instruments that primarily affect equity securities, financial liabilities measured using the fair value option, and the presentation and disclosure requirements for such instruments. The Company's adoption of ASU 2016-01 did not have an impact on the consolidated financial statements. The most significant impact is the Company's non-marketable equity securities formerly classified as cost method investments are now measured and recorded using the measurement alternative. In addition, the existing impairment model has been replaced with a new one-step qualitative impairment model. No initial adoption adjustment was recorded for these instruments since the standard was required to be applied prospectively for securities measured using the measurement alternative.


Note 1.	Nature of Business and Significant Accounting Policies - (Continued)

Recently Adopted Accounting Pronouncements - (Continued)

FASB ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"). Effective January 1, 2018, the Company adopted ASU 2017-01. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company's adoption of ASU 2017-01 did not have a material impact on the consolidated financial statements.

FASB ASU No. 2014-09, "Revenue - Revenue from Contracts with Customers". Effective January 1, 2018, the Company adopted ASU 2014-09 and all the related amendments ("new revenue standard" or "ASC 606") using the modified retrospective method to those contracts not yet completed as of January 1, 2018. As a result, the Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings in the amount of approximately $1.0 million as of January 1, 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company expects the impact of the adoption of the new standard to be immaterial to net income on an ongoing basis.

FASB ASU No. 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory" ("ASU 2016-16"). Effective January 1, 2018, the Company adopted ASU 2016-16, which eliminates the exception of recognizing, at the time of transfer, current and deferred income taxes for intra-entity asset transfers other than inventory. This new standard has been applied on a modified retrospective transition basis with an adjustment to the opening balance of retained earnings in the amount of approximately $79.3 million as of January 1, 2018.

The cumulative effect of the changes made to the Company's consolidated January 1, 2018 balance sheet for the adoption of ASC 606, "Revenue - Revenue from Contracts with Customers" and ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory" were as follows (in thousands):



	Balance at December 31, 2017		Adjustments Due to ASC 606			Adjustments Due to ASU 2016-16			Balance at January 1, 2018
Assets
Accounts receivable, net	$	346,687	$	981		$	—		$	347,668
Inventories	372,183		(524		)	—			371,659
Deferred income taxes, net	21,001		—			74,367			95,368
Other assets	59,869		—			(1,005		)	58,864

Liabilities
Deferred revenue	25,614		(788		)	—			24,826
Deferred income taxes	12,496		290			2,067			14,853
Pension and other long-term liabilities	59,872		—			(8,030		)	51,842

Shareholders' Equity
Retained earnings	1,856,756		955			79,325			1,937,036

Note 1. Basis of Presentation - (Continued)

Recently Adopted Accounting Pronouncements - (Continued)

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated income statement and balance sheet was as follows (in thousands):



	Year Ended December 31, 2018
	As Reported		Balances Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Income Statement
Revenue	$	1,775,686	$	1,773,938	$	1,748
Cost of goods sold	875,368		874,993		375
Income tax provision	24,678		24,389		289
Net earnings	282,425		281,341		1,084



	December 31, 2018
	As Reported		Balances Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Balance Sheet
Assets
Accounts receivable, net	$	323,746	$	321,017	$	2,729
Inventories	352,107		352,482		(375		)

Liabilities
Deferred revenue	32,703		32,703		—
Deferred income taxes	22,927		22,348		579

Equity
Retained earnings	2,024,523		2,022,748		1,775

See Note 2, "Revenue" for additional disclosures required by the new revenue standard.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") established Topic 842, Leases, by issuing Accounting Standards Update ("ASU") No. 2016-02 (“ASU 2016-02”). Among other things, ASU 2016-02 requires recognition of a right-of-use asset and liability for future lease payments for contracts that meet the definition of a lease and requires disclosure of certain information about leasing arrangements. ASU 2016-02 is effective January 1, 2019. On July 30, 2018, the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which, among other things, allows companies to elect an optional transition method to apply the new lease standard through a cumulative-effect adjustment in the period of adoption. The Company adopted the new standard on January 1, 2019 and used this effective date as the date of initial application pursuant to the optional transition method. The company has made substantial progress in executing its implementation plan. The Company has revised its controls and processes to address the lease standard and is currently finalizing the implementation and validation of data input into its lease accounting software tool. The Company will elect the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the Company to carry forward the historical lease classification. The Company will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. Adoption of the standard is expected to have an impact of approximately $40 million on our consolidated balance sheets for the addition of lease assets and liabilities related to operating leases. ASU 2016-02 also requires expanded disclosure regarding the amounts, timing and uncertainties of cash flows related to a company’s lease portfolio. The Company is evaluating these disclosure requirements and incorporating the collection of relevant data into its processes in preparation for disclosure in 2019. The Company does not expect ASU 2016-02 to have a material impact on its Consolidated Statements of Income or it Consolidated Statements of Cash Flows.


Note 1.	Nature of Business and Significant Accounting Policies - (Continued)

Recently Issued Accounting Pronouncements - (Continued)

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The amendments in this update simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in ASU 2017-04 are to be applied on a prospective basis. The Company adopted the standard as of January 1, 2019 and the adoption is not expected to have a material impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"). The standard will permit entities to reclassify tax effects stranded in accumulated other comprehensive income ("AOCI") as a result of U.S. tax reform to retained earnings. The standard is effective January 1, 2019. The Company adopted the standard as of January 1, 2019 and the adoption is not expected to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, "Improvements to Nonemployee Share-Based Payment Accounting" ("ASU 2018-07"). The standard more closely aligns the accounting for employee and nonemployee share-based payments. The standard is effective January 1, 2019. The Company adopted the standard as of January 1, 2019 and the adoption is not expected to have a material impact on its consolidated financial statements or disclosures.

In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract” (“ASU 2018-15”). The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted the standard as of January 1, 2019 and the adoption is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2018, the FASB issued ASU No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606" ("ASU 2018-18"). The standard clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC 606, when one participant is a customer, and specifies that a distinct good or service is the unit of account for evaluating whether the transaction is with a customer. The standard also provides some guidance on presentation of transactions not in the scope of ASC 606. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted as long as a company has already adopted the guidance in ASC 606. The Company plans to adopt the standard as of January 1, 2020 and is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

Investment, Policy [Policy Text Block]

Minority interest equity investments

The Company holds certain investments in equity instruments of non-publicly traded companies. Equity investments in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. The Company's proportionate share of income or loss is recorded in interest income and other, net in the Consolidated Statement of Income. All other non-marketable equity investments are measured at cost less impairment, if any, adjusted for changes resulting from qualifying observable price changes. Prior to 2018, all other non-marketable equity investments were accounted for using the cost method. The Company periodically reviews its equity investments for impairment. During the years ended December 31, 2018, 2017, and 2016 the Company did not recognize any impairments on its minority interest equity investments. The carrying values of the minority interest equity investments were $17.1 million and $3.1 million at December 31, 2018 and 2017, respectively, and are included in other assets in the Consolidated Balance Sheets.