What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-06 compared with 2020-08-10 · 160 added, 122 removed, 739 unchanged (28% of the section changed)

4 unchanged sentences

(In thousands, except par value data)

September 30,

2020 December 31,

4 unchanged sentences

TOTAL CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES 363,537 292,637

Accounts receivable, net of allowance for doubtful accounts of $ 19,648 at June 30, 2020 and $ 20,219 at December 31, 2019

Accounts receivable, net of allowance for doubtful accounts of $ 22,299 at September 30, 2020 and $ 20,219 at December 31, 2019

164,538 202,219

14 unchanged sentences

Accrued liabilities 103,397 117,776

Short-term debt 150,000 —

Income tax liability 935 2,063

9 unchanged sentences

Common stock, $ 0.10 par value — Authorized, 80,000 shares;

Issued — 20,937 shares at June 30, 2020 and 20,743 shares at December 31, 2019 and outstanding — 20,936 shares at June 30, 2020 and 20,742 shares at December 31, 2019

Issued — 20,969 shares at September 30, 2020 and 20,743 shares at December 31, 2019 and outstanding — 20,968 shares at September 30, 2020 and 20,742 shares at December 31, 2019

Additional paid-in capital 683,326 668,947

12 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

27 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Cash flow hedge adjustments, net of taxes of $356 and $116 for the three months ended June 30, 2020 and 2019, respectively, and ($577) and $322 for the six months ended June 30, 2020 and 2019, respectively 1,126 369 ( 1,826 ) 1,019

Cash flow hedge adjustments, net of taxes of ($321) and $118 for the three months ended September 30, 2020 and 2019, respectively, and $256 and ($204) for the nine months ended September 30, 2020 and 2019, respectively 1,016 ( 375 ) ( 810 ) 644

Foreign currency translation adjustment, net of taxes of $0 for all periods 6,626 ( 7,533 ) 754 ( 6,287 )

26 unchanged sentences

Balance, June 30, 2020 20,937 $ 2,094 $ 675,497 $ ( 140 ) $ 757,524 $ ( 23,178 ) $ 1,411,797

Issuance of restricted stock and exercise of stock options 33 3 1,564 220 — — 1,787

Tax withholding payments related to net share settlement of equity awards ( 1 ) — — ( 260 ) — — ( 260 )

Stock compensation — — 6,265 — — — 6,265

Other comprehensive income, net of tax — — — — — 7,645 7,645

Net income — — — — 24,986 — 24,986

Balance, September 30, 2020 20,969 $ 2,097 $ 683,326 $ ( 180 ) $ 782,510 $ ( 15,533 ) $ 1,452,220

ICU MEDICAL, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) - CONTINUED

(Amounts in thousands)

Common Stock Accumulated

17 unchanged sentences

Balance, June 30, 2019 20,668 $ 2,067 $ 657,543 $ ( 1,650 ) $ 674,578 $ ( 14,674 ) $ 1,317,864

Issuance of restricted stock and exercise of stock options 4 — ( 1,556 ) 1,863 — — 307

Tax withholding payments related to net share settlement of equity awards ( 1 ) — — ( 213 ) — — ( 213 )

Stock compensation — — 3,722 — — — 3,722

Other comprehensive loss, net of tax — — — — — ( 7,908 ) ( 7,908 )

Net income — — — — 26,563 — 26,563

Balance, September 30, 2019 20,671 $ 2,067 $ 659,709 $ — $ 701,141 $ ( 22,582 ) $ 1,340,335

ICU MEDICAL, INC.

2 unchanged sentences

(In thousands)

Six months ended

Nine months ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

32 unchanged sentences

Proceeds from short-term debt 150,000 —

Repayment of short-term debt ( 150,000 ) —

Proceeds from exercise of stock options 8,586 4,240

1 unchanged sentence

Tax withholding payments related to net share settlement of equity awards ( 12,821 ) ( 18,478 )

Net cash provided by (used in) financing activities 144,122 ( 14,331 )

Net cash used in financing activities ( 4,466 ) ( 14,238 )

Effect of exchange rate changes on cash ( 201 ) ( 1,759 )

7 unchanged sentences

(In thousands)

Six months ended

Nine months ended

September 30,

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:

80 unchanged sentences

Restructuring, Strategic Transaction and Integration

Restructuring, strategic transaction and integration expenses were $ 6.5 million and $ 18.8 million for the three and six months ended June 30, 2020, respectively, as compared to $ 37.0 million and $ 61.4 million for the three and six months ended June 30, 2019, respectively.

Restructuring, strategic transaction and integration expenses were $ 4.1 million and $ 22.9 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 8.0 million and $ 69.4 million for the three and nine months ended September 30, 2019, respectively.

Restructuring

During the three and six months ended June 30, 2020, restructuring charges were $ 0.9 million and $ 8.1 million, respectively.

During the three and six months ended June 30, 2019, restructuring charges were $ 6.9 million and $ 7.7 million, respectively.

Restructuring charges for the three and six months ended June 30, 2020 were primarily related to severance and costs related to office and other facility closures.

Restructuring charges for the three and six months ended June 19, 2019 were primarily related to a one-time charge to move our U.S.

pump service depot to our existing Salt Lake City facility.

During the three and nine months ended September 30, 2020, restructuring charges were $ 0.0 million and $ 8.1 million, respectively.

During the three and nine months ended September 30, 2019, restructuring charges were $ 0.8 million and $ 8.4 million, respectively.

Restructuring charges for the nine months ended September 30, 2020 were primarily related to severance and costs related to office and other facility closures.

Restructuring charges for the three and nine months ended September 30, 2019 were primarily related to a one-time charge to move our U.S.

pump service depot to our existing Salt Lake City facility and other plant restructuring.

Restructuring charges are included in the restructuring, strategic transaction and integration line item in our condensed consolidated statement of operations.

3 unchanged sentences

The buy-out, including payroll taxes, is paid in equal monthly installments until December 2020.

The following table summarizes the details of changes in our restructuring-related accrual for the period ended June 30, 2020 (in thousands):

The following table summarizes the details of changes in our restructuring-related accrual for the period ended September 30, 2020 (in thousands):

ICU MEDICAL, INC.

4 unchanged sentences

Translation Accrued Balance

June 30, 2020

September 30, 2020

Severance pay and benefits $ 3,878 $ 3,706 $ ( 5,215 ) $ ( 43 ) $ 2,326

3 unchanged sentences

Strategic transaction and integration expenses

We incurred and expensed $ 5.6 million and $ 10.7 million in strategic transaction and integration expenses during the three and six months ended June 30, 2020, respectively, as compared to $ 30.1 million and $ 53.7 million during the three and six months ended June 30, 2019, respectively.

The strategic transaction and integration expenses during the three and six months ended June 30, 2020 and 2019, were primarily related to the integration of the Hospira Infusion Systems ("HIS") business acquired in 2017 from Pfizer, which for the six months ended June 30, 2020, included expenses for the migration of IT systems at our Austin facility.

The strategic transaction and integration expenses during the three and six months ended June 30, 2019, included a one-time strategic supply chain restructuring charge of $ 22.1 million, which reduced our contracted commitments to our third party manufacturer.

The six months ended June 30, 2019 also included a $ 12.7 million non-cash write-off of assets related to our final Pfizer separation costs.

We incurred and expensed $ 4.1 million and $ 14.8 million in strategic transaction and integration expenses during the three and nine months ended September 30, 2020, respectively, as compared to $ 7.2 million and $ 61.0 million during the three and nine months ended September 30, 2019, respectively.

The strategic transaction and integration expenses during the three and nine months ended September 30, 2020 and 2019, were primarily related to the integration of the Hospira Infusion Systems ("HIS") business acquired in 2017 from Pfizer, which for the nine months ended September 30, 2020, included expenses for the migration of IT systems at our Austin facility.

The strategic transaction and integration expenses during the nine months ended September 30, 2019, included a one-time strategic supply chain restructuring charge of $ 22.1 million, which reduced our contracted commitments to our third party manufacturer.

The nine months ended September 30, 2019 also included a $ 12.7 million non-cash write-off of assets related to our final Pfizer separation costs.

Our primary product lines are Infusion Consumables, Infusion Systems, IV Solutions and Critical Care.

14 unchanged sentences

For the three months

ended June 30, For the six months

ended June 30,

ended September 30, For the nine months

ended September 30,

Geography 2020 2019 2020 2019

9 unchanged sentences

For the three months ended

June 30, For the six months ended

September 30, For the nine months ended

September 30,

Product line 2020 2019 2020 2019

5 unchanged sentences

Contract balances

The following table presents our changes in the contract balances for the six months ended June 30, 2020 and 2019 (in thousands):

The following table presents our changes in the contract balances for the nine months ended September 30, 2020 and 2019 (in thousands):

Contract Liabilities

4 unchanged sentences

Software revenue deferred due to implementation ( 5,033 )

Ending balance, June 30, 2020 $ ( 12,242 )

Ending balance, September 30, 2020 $ ( 8,932 )

Beginning balance, January 1, 2019 $ ( 4,282 )

3 unchanged sentences

Software revenue deferred due to implementation ( 3,115 )

Ending balance, June 30, 2019 $ ( 5,892 )

As of June 30, 2020, revenue from remaining performance obligations related to implementation of software and equipment is $ 10.7 million.

We expect to recognize substantially all of this revenue within the next three to six months dependent on implementation restrictions due to COVID-19.

Ending balance, September 30, 2019 $ ( 7,692 )

As of September 30, 2020, revenue from remaining performance obligations related to implementation of software and equipment is $ 7.6 million.

We expect to recognize substantially all of this revenue within the next three to six months dependent on implementation restrictions due to the novel coronavirus ("COVID-19").

Revenue from remaining performance obligations related to annual software licenses is $ 1.3 million.

18 unchanged sentences

For the three months

ended June 30, For the six months

ended June 30,

ended September 30, For the nine months

ended September 30,

2020 2019 2020 2019

7 unchanged sentences

The following table presents the supplemental cash flow information related to our leases (in thousands):

For the six months ended June 30,

For the nine months ended September 30,

Cash paid for amounts included in the measurement of lease liabilities:

8 unchanged sentences

The following table presents the supplemental balance sheet information related to our operating leases (in thousands, except lease term and discount rate):

June 30, 2020 As of

September 30, 2020 As of

December 31, 2019

9 unchanged sentences

The following table presents the supplemental balance sheet information related to our finance leases (in thousands, except lease term and discount rate):

June 30, 2020

September 30, 2020

Financing leases

7 unchanged sentences

Financing leases 4.27 %

As of June 30, 2020, the maturities of our operating and financing lease liabilities for each of the next five years is approximately (in thousands):

As of September 30, 2020, the maturities of our operating and financing lease liabilities for each of the next five years is approximately (in thousands):

Operating Leases Finance Leases

17 unchanged sentences

Options and restricted stock units that are anti-dilutive are not included in the treasury stock method calculation.

There were 57,091 and 6,462 anti-dilutive securities for the three months ended June 30, 2020 and 2019, respectively.

There were 15,045 and 5,908 anti-dilutive securities for the six months ended June 30, 2020 and 2019, respectively.

There were 14,017 and 20,116 anti-dilutive securities for the three months ended September 30, 2020 and 2019, respectively.

There were 12,182 and 9,375 anti-dilutive securities for the nine months ended September 30, 2020 and 2019, respectively.

The following table presents the calculation of net earnings per common share (“EPS”) — basic and diluted (in thousands, except per share data):

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

14 unchanged sentences

In March 2020, we entered into a one-year cross-currency par forward contract that extends our current hedge of a portion of our Mexico forecasted expenses denominated in Pesos ("MXN").

The total notional amount of this outstanding derivative as of June 30, 2020 was approximately 473.2 million MXN.

The total notional amount of this outstanding derivative as of September 30, 2020 was approximately 473.2 million MXN.

The term of the one-year contract is November 3, 2020 to December 1, 2021.

1 unchanged sentence

In November 2018, we entered into a one-year cross-currency par forward contract that hedges of a portion of our Mexico forecasted expenses denominated in MXN.

The total notional amount of this outstanding derivative as of June 30, 2020 was approximately 165.8 million MXN.

The total notional amount of this outstanding derivative as of September 30, 2020 was approximately 66.3 million MXN.

The term of the one-year hedge is November 1, 2019 to November 3, 2020.

The derivative instrument matures in equal monthly amounts at a fixed forward rate of 22.109 MXN/USD.

The following table presents the fair values of our derivative instruments included within the Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (in thousands):

The following table presents the fair values of our derivative instruments included within the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (in thousands):

ICU MEDICAL, INC.

2 unchanged sentences

Condensed Consolidated Balance Sheet

Location June 30, 2020 December 31,

Location September 30, 2020 December 31,

Derivatives designated as cash flow hedging instruments

4 unchanged sentences

Total derivatives designated as cash flow hedging instruments $ 1,300 $ 2,366

The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (in thousands):

The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Line Item in the

Condensed Consolidated Statements of Operations Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

4 unchanged sentences

Three months ended

June 30, Three months ended

September 30, Three months ended

September 30,

2020 2019 Location of (Loss) Gain Reclassified From Accumulated Other Comprehensive Income into Income 2020 2019

3 unchanged sentences

Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives Amount of Gain Reclassified From Accumulated Other Comprehensive Income into Income

Six months ended

June 30, Six months ended

Nine months ended

September 30, Nine months ended

September 30,

2020 2019 Location of Gain Reclassified From Accumulated Other Comprehensive Income into Income 2020 2019

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2020, we expect approximately $ 75,000 of the deferred losses on the outstanding derivatives in accumulated other comprehensive income to be reclassified to net income during the next twelve months concurrent with the underlying hedged transactions also being reported in net income.

As of September 30, 2020, we expect approximately $ 1.1 million of the deferred gains on the outstanding derivatives in accumulated other comprehensive income to be reclassified to net income during the next twelve months concurrent with the underlying hedged transactions also being reported in net income.

Fair Value Measurement

15 unchanged sentences

As of the date of this filing, Pfizer has disputed our determination that the performance targets requiring payout of the HIS earn-out liability were not met.

If we do not reach agreement on this issue with Pfizer, the dispute will be resolved by binding arbitration, that will likely be concluded in the second half of this calendar year.

If we do not reach agreement on this issue with Pfizer, the dispute will be resolved by binding arbitration, that will likely be concluded within the next three to six months.

In the fourth quarter of 2019, we recognized an earn-out liability related to the acquisition of Pursuit Vascular, Inc.

Pursuit's former equity holders are potentially entitled up to $ 50.0 million in additional cash consideration contingent upon the achievement of certain sales and gross profit targets for specific customers.

The earn-out paid will be calculated as a percentage of gross profit achieved during the earn-out period against a pre-determined target gross profit, not to exceed $ 50.0 million.

Pursuit's former equity holders are entitled up to $ 50.0 million in additional cash consideration contingent upon the achievement of certain sales and gross profit targets for specific customers.

The earn-out will be calculated as a percentage of gross profit achieved during the earn-out period against a pre-determined target gross profit, not to exceed $ 50.0 million.

We used a Monte Carlo simulation model to determine the fair value of the earn-out liability.

16 unchanged sentences

Accrued balance, June 30, 2020 $ 20,000

Change in fair value of earn-out (included in income from operations as a separate line item) 4,300

Accrued balance, September 30, 2020 $ 24,300

Earn-out Liability

4 unchanged sentences

Accrued balance, June 30, 2019 $ 200

The fair value of the Pursuit earn-out increased at June 30, 2020 from the fair value calculated at December 31, 2019 primarily due to changes in the probabilities within the valuation model.

Change in fair value of earn-out (included in income from operations as a separate line item) ( 200 )

Accrued balance, September 30, 2019 $ —

The fair value of the Pursuit earn-out increased at September 30, 2020 from the fair value calculated at December 31, 2019 primarily due to changes in the probabilities within the valuation model.

The following tables provide quantitative information about Level 3 inputs for fair value measurement of our earn-out liabilities:

1 unchanged sentence

Simulation Input As of

June 30, 2020 At Acquisition November 2, 2019

September 30, 2020 At Acquisition November 2, 2019

Revenue/Gross Profit Volatility 35.00 % 20.00 %

3 unchanged sentences

Simulation Input As of

June 30, 2019 As of

December 31, 2018

Adjusted EBITDA Volatility 30.00 %

WACC 8.25 % 8.25 %

20-year risk free rate 2.87 %

1 unchanged sentence

Cost of debt 5.25 %

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments and Foreign Currency Contracts

3 unchanged sentences

Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1, 2 and 3 inputs as defined above) (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair value measurements at June 30, 2020

Fair value measurements at September 30, 2020

Total carrying

6 unchanged sentences

Foreign exchange forwards:

Prepaid expenses and other current assets 1,090 — 1,090 —

Other assets 216 — 216 —

21 unchanged sentences

Available-for-sale securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income.

Unrealized losses on available-for-sale securities are charged against net earnings when a decline in fair value is determined to be other than temporary.

Unrealized losses on available-for-sale securities are charged against net earnings when a decline in fair value is determined to

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

be other than temporary.

Our management reviews several factors to determine whether a loss is other than temporary, such as the length and extent of the fair value decline, the financial condition and near term prospects of the issuer, and for equity investments, our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

6 unchanged sentences

Our short investment securities consisted of the following (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2020

As of September 30, 2020

Amortized Cost Unrealized Holding Gains (Losses) Fair Value

5 unchanged sentences

Prepaid expenses and other current assets consist of the following (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Other prepaid expenses and receivables 17,384 13,778

9 unchanged sentences

Inventories consisted of the following (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Raw materials $ 126,475 $ 119,709

2 unchanged sentences

Total inventories $ 321,961 $ 337,640

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment

Property and equipment consisted of the following (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Machinery and equipment $ 258,083 $ 219,057

11 unchanged sentences

(1) Instruments placed with customers consist of drug-delivery and monitoring systems placed with customers under operating leases.

Depreciation expense was $ 15.8 million and $ 31.0 million for the three and six months ended June 30, 2020, respectively, as compared to $ 14.7 million and $ 29.8 million for the three and six months ended June 30, 2019, respectively.

Depreciation expense was $ 15.6 million and $ 46.7 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 14.8 million and $ 44.6 million for the three and nine months ended September 30, 2019, respectively.

Goodwill and Intangible Assets, Net

2 unchanged sentences

Currency translation 60

Balance as of June 30, 2020 $ 32,472

Balance as of September 30, 2020 $ 32,651

_______________________________________________

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Average June 30, 2020

Average September 30, 2020

Life in Years Cost Accumulated

28 unchanged sentences

Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives.

During the three and six months ended June 30, 2020, intangible asset amortization expense was $ 5.8 million and $ 11.6 million, respectively, as compared to $ 4.0 million and $ 8.0 million for the three and six months ended June 30, 2019, respectively.

As of June 30, 2020 estimated annual amortization for our intangible assets for each of the next five years is approximately (in thousands):

During the three and nine months ended September 30, 2020, intangible asset amortization expense was $ 5.8 million and $ 17.4 million, respectively, as compared to $ 4.4 million and $ 12.4 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020 estimated annual amortization for our intangible assets for each of the next five years is approximately (in thousands):

ICU MEDICAL, INC.

6 unchanged sentences

Accrued liabilities consist of the following (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Salaries and benefits $ 26,536 $ 21,116

17 unchanged sentences

Other long-term liabilities consist of the following (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Operating lease liability-LT $ 42,512 $ 28,896

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income taxes were accrued at an estimated effective tax rate of 9 % and 13 % for the three and six months ended June 30, 2020, respectively, as compared to 17 % and 12 % for the three and six months ended June 30, 2019, respectively.

The effective tax rate for the three and six months ended June 30, 2020 differs from the federal statutory rate of 21 % principally because of the effect of the mix of U.S.

and foreign incomes, state income taxes, global intangible low-taxed income ("GILTI"), foreign-derived intangible income ("FDII") and tax credits.

The effective tax rate during the three and six months ended June 30, 2020 included a discrete tax benefit of $ 3.0 million and $ 3.5 million, respectively, related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.

The effective tax rate for the three and six months ended June 30, 2019 differs from the federal statutory rate of 21 % principally because of the effect of the mix of U.S.

and foreign incomes, state income taxes, GILTI and tax credits.

The effective tax rate during the three and six months ended June 30, 2019 included a discrete tax benefit of $ 1.8 million and $ 7.4 million, respectively, related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.

In addition, the effective tax rate during the three and six months ended June 30, 2019 included a discrete tax provision of $ 9.5 million and $ 11.3 million as a result of a revaluation of the contingent consideration.

Income taxes were accrued at an estimated effective tax rate of 5 % and 10 % for the three and nine months ended September 30, 2020, respectively, as compared to 19 % and 14 % for the three and nine months ended September 30, 2019, respectively.

The effective tax rate for the three and nine months ended September 30, 2020 differs from the federal statutory rate of 21 % principally because of the effect of the mix of U.S.

and foreign incomes, state income taxes, global intangible low-taxed income ("GILTI"), foreign-derived intangible income ("FDII"), tax credits and the following discrete tax items recognized during the interim periods:

• Excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the three and nine months ended September 30, 2020 of $ 0.1 million and $ 3.6 million, respectively.

• The revaluation of the contingent consideration during the three and nine months ended September 30, 2020, which resulted in a tax benefit of $ 0.7 million and $ 1.1 million, respectively.

federal and state return-to-provision adjustments net of related reserve changes for the year ended December 31, 2019 resulted in a tax benefit of $ 3.8 million primarily due to changes in estimates for GILTI, FDII, and related foreign tax credits.

The effective tax rate for the three and nine months ended September 30, 2019 differs from the federal statutory rate of 21 % principally because of the effect of the mix of U.S.

and foreign incomes, state income taxes, GILTI and tax credits and the following discrete tax items recognized during the interim periods:

• Excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the three and nine months ended September 30, 2019 of $ 0.3 million and $ 7.7 million, respectively.

• The revaluation of the contingent consideration during the nine months ended September 30, 2019 resulted in a tax expense of $ 11.4 million.

• The repatriation of certain intellectual property and assets from one of our foreign subsidiaries to the U.S.

parent resulted in a net tax benefit of $ 3.8 million.

• A return-to-provision adjustment for the year ended December 31, 2018 included a tax expense of $ 2.2 million primarily due to changes in estimates for GILTI.

Long-Term Obligations

2 unchanged sentences

as the administrative agent, swingline lender and issuing lender.

During March 2020, as a result of market uncertainty caused by the novel coronavirus ("COVID-19"), we preemptively borrowed $ 150.0 million on our Credit Facility as a conservative measure to manage any potential short-term liquidity risk.

We plan to hold the proceeds of these borrowings as cash while the COVID-19 situation and market conditions remain uncertain.

As of June 30, 2020, we had $ 150.0 million in borrowings and no availability under the Credit Facility.

During March 2020, as a result of market uncertainty caused by COVID-19, we preemptively borrowed $ 150.0 million on our Credit Facility as a conservative measure to manage any potential short-term liquidity risk.

In September 2020, we fully repaid the borrowings under our Credit Facility.

As of September 30, 2020, we had no borrowings and $ 150.0 million of availability under the Credit Facility.

Principal payments on the revolving Credit Facility are made at our discretion with the unpaid amount due at maturity.

4 unchanged sentences

In addition, the Credit Facility has restrictions pertaining to limitations on debt, liens, negative pledges, loans, advances, acquisitions, other investments, dividends, distributions, redemptions, repurchases of equity interests, fundamental changes and asset sales and other dispositions, prepayments, redemptions and purchases of subordinated debt and other junior debt, transactions with affiliates, dividend and payment restrictions affecting subsidiaries, changes in line of business, fiscal year and accounting practices and amendment of organizational documents and junior debt documents.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Consolidated Leverage Ratio is defined as the ratio of Consolidated Total Funded Indebtedness on such date, to Consolidated Adjusted EBITDA, as defined under the Credit Facility Agreement, for the most recently completed four fiscal quarters.

3 unchanged sentences

The minimum Consolidated Fixed Charge Coverage Ratio is 2.00 to 1.00.

We were in compliance with all financial covenants as of June 30, 2020.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We were in compliance with all financial covenants as of September 30, 2020.

Stockholders' Equity

2 unchanged sentences

This plan replaced our existing plan and has no expiration date.

During the six months ended June 30, 2020, we did not purchase any shares of our common stock under our stock purchase plans.

As of June 30, 2020, all of the $ 100.0 million available for purchase was remaining under the plan.

During the nine months ended September 30, 2020, we did not purchase any shares of our common stock under our stock purchase plans.

As of September 30, 2020, all of the $ 100.0 million available for purchase was remaining under the plan.

We are currently limited on share purchases in accordance with the terms and conditions of our Credit Facility (see Note 16:

Long-Term Obligations).

For the six months ended June 30, 2020, we withheld 65,392 shares of our common stock from employee vested restricted stock units in consideration for $ 12.6 million in payments made on the employee's behalf for their minimum statutory income tax withholding obligations.

For the six months ended June 30, 2019, we withheld 78,108 shares of our common stock from employee vested restricted stock units in consideration for $ 18.3 million in payments made on the employee's behalf for their minimum statutory income tax withholding obligations.

For the nine months ended September 30, 2020, we withheld 66,749 shares of our common stock from employee vested restricted stock units in consideration for $ 12.8 million in payments made on the employee's behalf for their minimum statutory income tax withholding obligations.

For the nine months ended September 30, 2019, we withheld 79,313 shares of our common stock from employee vested restricted stock units in consideration for $ 18.5 million in payments made on the employee's behalf for their minimum statutory income tax withholding obligations.

Treasury stock is used to issue shares for stock option exercises, restricted stock grants and employee stock purchase plan stock purchases.

3 unchanged sentences

Balance as of January 1, 2020 $ ( 17,310 ) $ 1,880 $ 28 $ ( 15,402 )

Other comprehensive loss before reclassifications ( 10,477 ) ( 2,426 ) ( 81 ) ( 12,984 )

Other comprehensive loss before

reclassifications ( 10,477 ) ( 2,426 ) ( 81 ) ( 12,984 )

Amounts reclassified from AOCI — ( 526 ) — ( 526 )

1 unchanged sentence

Balance as of March 31, 2020 $ ( 27,787 ) $ ( 1,072 ) $ ( 53 ) $ ( 28,912 )

Other comprehensive loss before reclassifications 4,604 960 4 5,568

Other comprehensive income before reclassifications 4,604 960 4 5,568

Amounts reclassified from AOCI — 166 — 166

Other comprehensive loss 4,604 1,126 4 5,734

Other comprehensive income 4,604 1,126 4 5,734

Balance as of June 30, 2020 $ ( 23,183 ) $ 54 $ ( 49 ) $ ( 23,178 )

Other comprehensive income before reclassifications 6,626 978 3 7,607

Amounts reclassified from AOCI — 38 — 38

Other comprehensive income 6,626 1,016 3 7,645

Balance as of September 30, 2020 $ ( 16,557 ) $ 1,070 $ ( 46 ) $ ( 15,533 )

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Translation Adjustments Unrealized Gains on Cash Flow Hedges Other Adjustments Total

8 unchanged sentences

Balance as of June 30, 2019 $ ( 16,436 ) $ 1,657 $ 105 $ ( 14,674 )

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other comprehensive income before reclassifications ( 7,533 ) ( 201 ) — ( 7,734 )

Amounts reclassified from AOCI — ( 174 ) — ( 174 )

Other comprehensive income ( 7,533 ) ( 375 ) — ( 7,908 )

Balance as of September 30, 2019 $ ( 23,969 ) $ 1,282 $ 105 $ ( 22,582 )

Commitments and Contingencies

Legal Proceedings

Beginning in November 2016, purported class actions were filed in the U.S.

District Court for the Northern District of Illinois against Pfizer, Inc.

subsidiaries, Hospira, Inc., Hospira Worldwide, Inc.

and certain other defendants relating to the intravenous saline solutions part of the HIS business.

Plaintiffs seek to represent classes consisting of all persons and entities in the U.S.

who directly purchased intravenous saline solution sold by any of the defendants from January 1, 2013 until the time the defendants’ allegedly unlawful conduct ceases.

Plaintiffs allege that U.S.

manufacturer defendants conspired together to restrict output and artificially fix, raise, maintain and/or stabilize the prices of intravenous saline solution sold throughout the U.S.

in violation of federal antitrust laws.

Plaintiffs seek treble damages (for themselves and on behalf of the putative classes) and an injunction against defendants for alleged price overcharges for intravenous saline solution in the U.S.

since January 1, 2013.

On July 5, 2018, the District Court granted defendants’ motion to dismiss the operative complaint for failing to state a

valid antitrust claim, but allowed the plaintiffs to file a second amended complaint.

On September 6, 2018, plaintiffs filed a second amended complaint adding new allegations in support of their conspiracy claims and adding ICU as a defendant.

All defendants filed a motion to dismiss this second amended complaint and on April 3, 2020, the District Court granted Defendants’ motion to dismiss the second amended complaint.

The District Court concluded that it would be futile to permit plaintiffs to amend their complaint again, and dismissed the case with prejudice.

The plaintiffs did not file an appeal.

From time to time, we are involved in various legal proceedings, most of which are routine litigation, in the normal course of business.

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Fair Value Measurement).

We had a contractual obligation in connection with our 2017 acquisition of HIS, which as of December 31, 2019 we determined did not meet the necessary performance targets that would require payout of any of the HIS earn-out liability.

As of the date of this filing, Pfizer has disputed our determination that the performance targets requiring payout of the HIS earn-out liability were not met.

If we do not reach agreement on this issue with Pfizer, the dispute will be resolved by binding arbitration (see Note 8, Fair Value Measurements).

We have non-cancellable operating lease agreements where we are contractually obligated to pay certain lease payment amounts (see Note 5:

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Collaborative and Other Arrangements

6 unchanged sentences

and international markets.

The ultimate disruption caused by the outbreak is uncertain;

however, it may result in a material adverse impact on our financial position, results of operations and cash flows.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

impact may include, but is not limited to:

During the first nine months of 2020, our operations have been impacted globally by lower admission rates and procedural volumes at our hospital customers.

Specifically, since the beginning of the second quarter we have generally seen decreased demand for products within our Infusion Consumables and IV Solutions businesses along with the dedicated infusion sets within Infusion Systems.

This decline has been partially offset by increased demand for infusion pump hardware within Infusion Systems.

We have also incurred increased expenses as a result of COVID-19 for additional compensation paid to our manufacturing and distribution facility workers along with personal protection equipment and other items.

At the same time, we have seen some expense decreases due to reductions in travel and other discretionary spending.

We have also incurred foreign exchange losses related to fluctuations in certain foreign currencies as a result of deteriorating economic conditions.

However, the impacts of COVID-19 and the measures taken to limit its spread may increase in severity and may result in a material adverse impact on our financial position, results of operations and cash flows in the future.

In addition to the effects discussed above, possible impact may include, but is not limited to:

lost revenue or additional costs associated with a disruption to our production or distribution facilities;

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements