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Washington, D.C. 20549

For the quarterly period ended March 31, 2020
For the transition period from                      to                     
Commission file number: 000-33001
(Exact name of registrant as specified in its charter)
Delaware 77-0154833
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
6701 Koll Center Parkway, Suite 120, Pleasanton, CA 94566
(Address of principal executive offices) (Zip Code)
(925) 223-6700
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareNTUSThe Nasdaq Stock Market LLC
(The Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” or an “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large Accelerated Filer   Accelerated Filer 
Non-accelerated Filer 
  Smaller reporting company 
  Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of issued and outstanding shares of the registrant’s Common Stock, $0.001 par value, as of April 29, 2020 was 33,802,042.

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Item 1.    Financial Statements
(in thousands, except share and per share amounts)
March 31, 2020December 31, 2019
Current assets:
Cash and cash equivalents$107,016  $63,297  
Accounts receivable, net of allowance for doubtful accounts of $7,291 in 2020 and $7,384 in 2019101,219  115,889  
Inventories74,808  71,368  
Prepaid expenses and other current assets19,671  19,195  
Total current assets302,714  269,749  
Property and equipment, net26,267  24,702  
Operating lease right-of-use assets14,198  15,046  
Intangible assets, net108,346  114,799  
Goodwill145,028  146,367  
Deferred income tax30,176  30,355  
Other assets20,741  21,509  
Total assets$647,470  $622,527  
Current liabilities:
Accounts payable$33,284  $27,253  
Current portion of long-term debt35,000  35,000  
Accrued liabilities45,255  54,451  
Deferred revenue22,823  20,246  
Current portion of operating lease liabilities5,727  5,871  
Total current liabilities142,089  142,821  
Long-term liabilities:
Other liabilities17,268  17,616  
Operating lease liabilities11,212  12,051  
Long-term debt, net of current portion64,713  19,665  
Deferred income tax14,035  14,251  
Total liabilities249,317  206,404  
Stockholders’ equity:
Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding 33,802,133 in 2020 and 34,148,700 in 2019334,296  344,476  
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding in 2020 and 2019    
Retained earnings84,325  87,922  
Accumulated other comprehensive loss(20,468) (16,275) 
Total stockholders’ equity398,153  416,123  
Total liabilities and stockholders’ equity$647,470  $622,527  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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(in thousands, except per share amounts)
 Three Months Ended   March 31,
Revenue$109,383  $114,757  
Cost of revenue44,933  46,509  
Intangibles amortization1,668  1,756  
Gross profit62,782  66,492  
Operating expenses:
Marketing and selling30,730  33,729  
Research and development17,569  13,394  
General and administrative13,182  16,306  
Intangibles amortization3,661  3,786  
Restructuring871  37,372  
Total operating expenses66,013  104,587  
Loss from operations(3,231) (38,095) 
Other expense, net(1,494) (2,112) 
Loss before provision for income tax benefit(4,725) (40,207) 
Benefit from income taxes(1,128) (9,809) 
Net loss(3,597) $(30,398) 
Net loss per share:
Basic$(0.11) $(0.90) 
Diluted$(0.11) $(0.90) 
Weighted average shares used in the calculation of net loss per share:
Basic33,800  33,590  
Diluted33,800  33,590  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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(in thousands, except per share amounts)
 Three Months Ended   March 31,
Net loss$(3,597) $(30,398) 
Other comprehensive loss, net of tax:
Foreign currency translation adjustment(4,018) (1,797) 
Interest rate swap designated as a cash flow hedge(175) (78) 
Reclassification of stranded tax effects upon adoption of ASU 2018-02  (1,332) 
Other comprehensive loss, net of tax(4,193) (3,207) 
Comprehensive loss(7,790) (33,605) 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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(in thousands, except per share amounts)

 Common StockRetained
Balances, December 31, 201934,148,700  $344,476  $87,922  $(16,275) $416,123  
Vesting of restricted stock units14,033  —  —  —  —  
Net issuance of restricted stock awards162,212  —  —  —  —  
Stock-based compensation expense—  2,198  —  —  2,198  
Repurchase of company stock(465,117) (10,495) —  —  (10,495) 
Taxes paid related to net share settlement of equity awards(57,695) (1,883) —  —  (1,883) 
Other comprehensive loss—  —  —  (4,193) (4,193) 
Net loss—  —  (3,597) —  (3,597) 
Balances, March 31, 202033,802,133  $334,296  $84,325  $(20,468) $398,153  

 Common StockRetained
Balances, December 31, 201833,804,379  $334,215  $102,261  $(38,032) $398,444  
Reclassification of stranded tax effects for ASU 2018-02—  —  1,332  (1,332)   
Vesting of restricted stock units42,130  —  —  —  —  
Net issuance of restricted stock awards139,718  —  —  —  —  
Stock-based compensation expense—  2,432  —  —  2,432  
Repurchase of company stock    —  —    
Taxes paid related to net share settlement of equity awards(47,767) (1,567) —  —  (1,567) 
Exercise of stock options16,617  268  —  —  268  
Other comprehensive income—  —  —  (1,875) (1,875) 
Net loss—  —  (30,398) —  (30,398) 
Balances, March 31, 201933,955,077  $335,348  $73,195  $(41,239) $367,304  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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(in thousands)
 Three Months Ended   March 31,
Operating activities:
Net loss$(3,597) $(30,398) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for losses on accounts receivable1,564  1,797  
Loss on commencement of sales-type leases295    
Depreciation and amortization6,994  7,711  
Loss on disposal of property and equipment42  179  
Warranty reserve704  354  
Share-based compensation2,291  2,554  
Impairment charge for sale of entity  24,571  
Changes in operating assets and liabilities:
Accounts receivable14,570  14,358  
Inventories(3,443) (4,476) 
Prepaid expenses and other assets(1,060) (7,367) 
Accounts payable6,038  (3,436) 
Accrued liabilities(9,329) (1,319) 
Deferred revenue2,190  1,982  
Deferred income tax103  (17) 
Net cash provided by operating activities17,362  6,493  
Investing activities:
Purchase of property and equipment(3,575) (2,461) 
Net cash used in investing activities(3,575) (2,461) 
Financing activities:
Proceeds from stock option exercises and Employee Stock Purchase Program purchases  268  
Repurchase of common stock(10,495)   
Taxes paid related to net share settlement of equity awards(1,883) (1,567) 
Principal payments of financing lease liability(133) (165) 
Proceeds from borrowings60,000    
Payments on borrowings(15,000) (5,000) 
Net cash provided by (used in) financing activities32,489  (6,464) 
Exchange rate changes effect on cash and cash equivalents(2,557) (518) 
Net increase (decrease) in cash and cash equivalents43,719  (2,950) 
Cash and cash equivalents, beginning of period63,297  56,373  
Cash and cash equivalents, end of period$107,016  $53,423  
Supplemental disclosure of cash flow information:
Cash paid for interest$637  $1,347  
Cash paid for income taxes$3,492  $1,224  
Non-cash investing activities:
Property and equipment included in accounts payable$131  $141  
Inventory transferred to property and equipment$196  $143  
Transfer of leased assets to sales-type leases$663  $  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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1 - Basis of Presentation and Significant Accounting Policies
        The accompanying interim condensed consolidated financial statements of Natus Medical Incorporated (“we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Except where noted below within Note 1, the accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
        Interim financial reports are prepared in accordance with the rules and regulations of the Securities and Exchange Commission; accordingly, the reports do not include all of the information and notes required by GAAP for annual financial statements. The interim financial information is unaudited, and reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods presented. We have made certain reclassifications to the prior period to conform to current period presentation. The consolidated balance sheet as of December 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
        Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The accompanying condensed consolidated financial statements include our accounts and our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Impact of COVID-19 on Our Financial Statements
The global spread and unprecedented impact of COVID-19 is complex and rapidly-evolving. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended extensive containment and mitigation measures worldwide. The outbreak has reached all of the regions in which we do business, and governmental authorities around the world have implemented numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, shutdowns, limitations or closures of non-essential businesses, school closures, and social distancing requirements. The global spread of COVID-19 and actions taken in response to the virus have negatively affected workforces, customers, consumer confidence, financial markets, employment rates, consumer spending, credit markets and housing demand, caused significant economic and business disruption, volatility and financial uncertainty, and led to a significant economic downturn, including in the markets where we operate.
We have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context of the unknown future impacts of COVID-19 using information that is reasonably available to us at this time. The accounting estimates and other matters we assessed include, but were not limited to, our allowance for doubtful accounts, inventory and warranty reserves, stock-based compensation, goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition. While based on our current assessment of these estimates there was not a material impact to our consolidated financial statements as of and for the quarter ended March 31, 2020, as additional information becomes available to us, our future assessment of these estimates, including our expectations at the time regarding the duration, scope and severity of the pandemic, as well as other factors, could materially and adversely impact our consolidated financial statements in future reporting periods. For further information, refer to Part II - Item 1A - "Risk Factors" of this 10-Q.

Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Credit Losses (Topic 326). This update requires financial assets measured at amortized cost, such as trade receivables and contract assets, to be presented net of expected credit

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losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial assets. The new guidance requires enhanced disclosures related to trade receivables and associated credit losses. In May 2019, the FASB issued ASU 2019-05 which provides targeted transition relief guidance intended to increase comparability of financial statement information. The guidance for both of these was effective beginning January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This update amends Topic 820 to add, remove, and clarify disclosure requirements related to fair value measurement disclosure. For calendar year-end entities, the update is effective for annual periods beginning January 1, 2020, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period. The adoption of ASU 2018-13 did not have an impact on our consolidated financial statements. 

2 - Revenue
        Unbilled accounts receivable (“AR”) for the periods presented primarily represent the difference between revenue recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented primarily relates to extended service contracts, installation, and training, for which the service fees are billed in advance. The associated deferred revenue is generally recognized ratably over the extended service period or when installation and training are complete.
The following table summarizes the changes in the unbilled AR and deferred revenue balances for the three months ended March 31, 2020 (in thousands):

Unbilled AR, December 31, 2019$2,667  
Transferred to trade receivable(153) 
Unbilled AR, March 31, 2020$2,620  

Deferred Revenue, December 31, 2019$24,808  
Revenue recognized(8,362) 
Deferred Revenue, March 31, 2020$27,021  

        At March 31, 2020, the short-term portion of deferred revenue of $22.8 million and the long-term portion of $4.2 million were included in deferred revenue and other long-term liabilities respectively, in the consolidated balance sheet. As of March 31, 2020, we expect to recognize revenue associated with deferred revenue of approximately $19.3 million in 2020, $5.3 million in 2021, $1.3 million in 2022, $0.8 million in 2023, and $0.3 million thereafter.

3 - Earnings Per Share
The components of basic and diluted EPS, and shares excluded from the calculation of diluted loss per share because the effect would have been anti-dilutive, are as follows (in thousands, except per share amounts):

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Three Months Ended   March 31,
Net loss$(3,597) $(30,398) 
Weighted average common shares33,800  33,590  
Dilutive effect of stock based awards    
Diluted Shares33,800  33,590  
Basic loss per share$(0.11) $(0.90) 
Diluted loss per share$(0.11) $(0.90) 
Shares excluded from calculation of diluted EPS85  119  

4 - Allowance for Doubtful Accounts

We estimate the lifetime allowance for doubtful, potentially uncollectible, accounts receivable upon their inception based on historical collection experience within the markets in which we operate, customer-specific information such as bankruptcy filings or customer liquidity problems, current conditions, and reasonable and supportable forecasts about the future.
Our allowance for doubtful accounts is presented as a reduction to accounts receivable on our consolidated balance sheet. When all internal efforts have been exhausted to collect the receivable, it is written off and relieved from the reserve.
The details of activity in allowance for doubtful accounts are as follows for the three months ended March 31, 2020 (in thousands):
Three Months Ended   March 31,
Balance, beginning of period$7,384  $6,960  
Additions charged to expense1,564  1,797  
Write-offs charged against allowance(557) (726) 
Recoveries of amounts previously written off(1,100) (580) 
Balance, end of period$7,291  $7,451  

5 - Inventories
Inventories consist of the following (in thousands):
March 31, 2020December 31, 2019
Raw materials and subassemblies$35,516  $37,259  
Work in process2,270  1,780  
Finished goods54,186  50,521  
Total inventories91,972  89,560  
Less: Non-current inventories(17,164) (18,192) 
Inventories, current$74,808  $71,368  

As of March 31, 2020 and December 31, 2019, we have classified $17.2 million and $18.2 million, respectively, of inventories as other assets. This inventory consists primarily of service components used to repair products held by customers pursuant to warranty obligations and extended service contracts, including service components for products we no longer sell, inventory purchased for lifetime buys, and inventory that is turning over at a slow rate. We believe these inventories will be utilized for their intended purpose.

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6 – Intangible Assets
The following table summarizes the components of gross and net intangible asset balances (in thousands):
 March 31, 2020December 31, 2019
Net Book
Net Book
Intangible assets with definite lives:
Technology$107,716  $(6,029) $(56,827) $44,860  $108,400  $(6,035) $(55,408) $46,957  
Customer related89,191  (50) (42,071) 47,070  90,351  (50) (40,527) 49,774  
Trade names45,644  (3,214) (26,722) 15,708  45,874  (3,237) (25,355) 17,282  
Internally developed software13,281    (12,674) 607  13,281    (12,606) 675  
Patents2,675  (133) (2,542)   2,692  (133) (2,559)   
Service agreements1,190    (1,089) 101  1,190    (1,079) 111  
Definite-lived intangible assets$259,697  $(9,426) $(141,925) $108,346  $261,788  $(9,455) $(137,534) $114,799  

Finite-lived intangible assets are amortized over their weighted average lives, which are 14 years for technology, 10 years for customer related intangibles, 7 years for trade names, 6 years for internally developed software, 13 years for patents, 2 years for service agreements and 11 years weighted average in total.
Internally developed software consists of $11.1 million relating to costs incurred for development of internal use computer software and $2.2 million for development of software to be sold.
Amortization expense related to intangible assets with definite lives was as follows (in thousands):
 Three Months Ended   March 31,
Technology$1,712  $1,738  
Customer related2,140  2,183  
Trade names1,466  1,498  
Internally developed software69  504  
Patents  20  
Service agreements$10  $102  
Total amortization$5,397  $6,045  

The amortization expense amounts shown above include internally developed software not held for sale of $24.0 thousand and $459.0 thousand for the three months ended March 31, 2020 and March 31, 2019, respectively which is recorded within our income statement as a general and administrative operating expense.
Expected amortization expense related to definite-lived amortizable intangible assets is as follows (in thousands):

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Nine months ending December 31, 2020$16,062  
Total expected amortization expense$108,346  

7 – Goodwill
The carrying amount of goodwill and the changes in the balance are as follows (in thousands):
December 31, 2019$146,367  
Foreign currency translation(1,339) 
March 31, 2020$145,028  

8 - Property and Equipment, net
Property and equipment, net consist of the following (in thousands):
March 31, 2020December 31, 2019
Land$1,719  $1,719  
Buildings6,878  6,943  
Leasehold improvements8,697  8,664  
Finance lease right-of-use assets2,548  2,377  
Equipment and furniture23,496  22,819  
Computer software and hardware13,750  12,610  
Demonstration and loaned equipment11,871  11,621  
68,959  66,753  
Accumulated depreciation(42,692) (42,051) 
Total$26,267  $24,702  

Depreciation expense of property and equipment was approximately $1.7 million for the three months ended March 31, 2020 and approximately $1.5 million for the three months ended March 31, 2019.

9 - Reserve for Product Warranties
We provide a warranty for products that is generally one year in length. In some cases, regulations may require us to provide repair or remediation beyond the typical warranty period. If any of the products contain defects, we may incur additional repair and remediation costs. Service, repair and calibration services are provided by a combination of our owned facilities and vendors on a contract basis.
We accrue estimated product warranty costs at the time of sale based on historical experience. A warranty reserve is included in accrued liabilities for the expected future costs of servicing products. Additions to the reserve are based on management’s best estimate of probable liability. We consider a combination of factors including material and labor costs, regulatory requirements, and other judgments in determining the amount of the reserve. The reserve is reduced as costs are incurred to honor existing warranty and regulatory obligations.
As of March 31, 2020, we have accrued $5.8 million for product related warranties. Our estimate of these costs is primarily based upon the number of units outstanding that may require repair and costs associated with shipping.

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The details of activity in the warranty reserve are as follows (in thousands):
 Three Months Ended   March 31,
Balance, beginning of period$6,404  $9,391  
Additions charged to expense704  609  
Utilizations(1,271) (1,511) 
Changes in estimate related to product remediation activities  (255) 
Divestiture adjustments  (9) 
Balance, end of period$5,837  $8,225  

Our estimate of future product warranty costs may vary from actual product warranty costs, and any variance from estimates could impact our cost of sales, operating profits and results of operations.

10 - Share-Based Compensation
As of March 31, 2020, we have two active share-based compensation plans, the 2018 Equity Incentive Plan and the 2011 Employee Stock Purchase Plan.
In January 2020, we granted performance stock unit (“PSU”) awards to our CEO and CFO. These PSUs fully vest on December 31, 2022 and have separate performance goals than the previously granted market stock units. We estimate fair value of performance stock unit awards based on the share price and other pertinent factors on the grant date. Compensation expense for performance stock unit awards are recognized on a straight-line basis over the requisite service period of the award based on expected achievement of the performance condition. Provided that the requisite service is rendered, the shares will become vested and payout will occur based on the outcome of the performance condition. Any unrecognized compensation cost shall be recognized when the award becomes vested.
The terms of all other awards granted during the three months ended March 31, 2020 and the methods for determining grant-date fair value of the awards are consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Details of share-based compensation expense are as follows (in thousands):
 Three Months Ended   March 31,
Cost of revenue$75  $67  
Marketing and selling469  245  
Research and development254  230  
General and administrative1,400  1,890  
Total$2,198  $2,432  

As of March 31, 2020, unrecognized compensation expense related to the unvested portion of stock options and other stock awards was approximately $16.4 million, which is expected to be recognized over a weighted average period of 2.4 years.


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11 - Other Income (Expense), net
Other income (expense), net consists of (in thousands):
 Three Months Ended   March 31,
Interest income$24  $20  
Interest expense(717) (1,527) 
Foreign currency loss(801) (598) 
Other expense  (7) 
Total other expense, net$(1,494) $(2,112) 

12 - Income Taxes
Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete events arising in each respective quarter. During each interim period, we update the estimated annual effective tax rate which is subject to significant volatility due to several factors, including our ability to accurately predict the income (loss) before provision for income taxes in multiple jurisdictions, the effects of acquisitions, the integration of those acquisitions, and changes in tax law. In circumstances where we are unable to predict income (loss) in multiple jurisdictions, the actual year to date effective tax rate may be the best estimate of the annual effective tax rate for purposes of determining the interim provision for income tax. For the three months ended March 31, 2020, we have included our best estimate of the impact of the COVID-19 pandemic to the estimated annual effective tax rate. Our estimated annual effective tax rate could be impacted by any changes in facts and circumstances or new information related to the COVID-19 pandemic.
We recorded a benefits from income tax of $1.1 million and $9.8 million for the three months ended March 31, 2020 and March 31, 2019, respectively. The effective tax rate was 23.9% and 24.4% for the three months ended March 31, 2020 and March 31, 2019 respectively. Of the $9.8 million benefit from income tax recorded for the three months ended March 31, 2019, $8.2 million relates to the tax accounting effects of the sale of Medix.
The decrease in the effective tax rate for the three months ended March 31, 2020 compared with the three months ended March 31, 2019 is primarily attributable to changes in distribution of income among jurisdictions with varying tax rates. Other significant factors that impact the effective tax rate are Federal and California research and development credits, non-deductible executive compensation expenses, and inclusions related to global intangible low-taxed income.
We recorded no changes related to unrecognized tax benefits for the three months ended March 31, 2020. Within the next twelve months, it is possible that the uncertain tax benefit may change with a range of approximately zero to $2.4 million. Our tax returns remain open to examination as follows: U.S Federal, 2016 through 2019, U.S. states, 2015 through 2019, and significant foreign jurisdictions, generally 2015 through 2019.

13 - Debt and Credit Arrangements
        We have a Credit Agreement with JP Morgan Chase Bank ("JP Morgan"), Citibank, NA (“Citibank”), and Wells Fargo Bank, National Association (“Wells Fargo”). The Credit Agreement provides for an aggregate $225.0 million of secured revolving credit facility. The Credit Agreement contains covenants, including covenants relating to maintenance of books and records, financial reporting and notification, compliance with laws, maintenance of properties and insurance, and limitations on guaranties, investments, issuance of debt, lease obligations and capital expenditures, and is secured by virtually all of our assets. The Credit Agreement provides for events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, bankruptcy or insolvency events and the occurrence of the event has a material adverse effect. We have no other significant credit facilities.


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        In addition to the customary restrictive covenants listed above, the Credit Agreement also contains financial covenants that require us to maintain a certain leverage ratio and fixed charge coverage ratio, each as defined in the Credit Agreement:
Leverage Ratio, as defined, to be no higher than 2.75 to 1.00.
Interest Coverage Ratio, as defined, to be at least 1.75 to 1.00 at all times.
        At March 31, 2020, we were in compliance with the Leverage Ratio and the Interest Coverage Ratio covenants as defined in the Credit Agreement.
        During the first quarter of 2020 we drew an additional $60.0 million on our credit line as a precaution to ensure we have the necessary capital to continue to reliably serve our customers during an extended period of uncertainty. At March 31, 2020, we had $100.0 million outstanding under the Credit Agreement.
        Pursuant to the terms of the Credit Agreement, the outstanding principal balance will bear interest at either (a) a fluctuating rate per annum equal to the Applicable Rate, as defined in the Credit Agreement, depending on our leverage ratio plus the higher of (i) the federal funds rate plus one-half of one percent per annum; (ii) the prime rate in effect on such a day; and (iii) the LIBOR rate plus one percent, or (b) a fluctuating rate per annum of LIBOR Rate plus the Applicable Rate, which ranges between 1.75% to 2.75%. The effective interest rate during the three months ended March 31, 2020 was 3.64%. The Credit Agreement matures on September 23, 2021, at which time all principal amounts outstanding under the Credit Agreement will be due and payable. As of March 31, 2020, we have classified $35.0 million of the $100.0 million outstanding as short-term on our balance sheet due to our intent to repay this portion over the next twelve months.
        Long-term debt consists of (in thousands):

 March 31, 2020December 31, 2019
Revolving credit facility$100,000  $55,000  
Debt issuance costs(287) (335) 
Less: current portion of long-term debt35,000  35,000  
Total long-term debt$64,713  $19,665  
Maturities of long-term debt as of March 31, 2020 are as follows (in thousands):
 March 31, 2020December 31, 2019
2020$  $  
2021100,000  55,000  
Total$100,000  $55,000  
As of March 31, 2020, the carrying value of total debt approximated fair market value.

14 - Financial Instruments and Derivatives
        We use interest rate swap derivative instruments to reduce earnings volatility and manage cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of our expected LIBOR-indexed floating-rate borrowings. We held the following interest rate swaps as of March 31, 2020 (in thousands):


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