Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our principal executive officer and principal financial officer have concluded, based on their evaluation of our disclosure controls and procedures (as defined in Regulations 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Report, that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting.
Management has used the criteria in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of its internal control over financial reporting.
Based on this criteria, management of the Company has concluded that the Company has maintained effective internal control over its financial reporting as of December 31, 2020.
Our independent registered public accounting firm that audited the December 31, 2020 financial statements included in this Annual Report on Form 10-K has independently assessed the effectiveness of our internal control over financial reporting and its report is below.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of ICU Medical, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of ICU Medical, Inc and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 26, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
February 26, 2021
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ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 of Form 10-K is set forth under the captions Executive Officers, Election of Directors , Audit Committee and Compliance with Section 16(a) Beneficial Ownership Reporting Compliance in our definitive
Proxy Statement to be filed in connection with our 2021 Annual Meeting of Stockholders, and such information is incorporated herein by reference.
We have a Code of Business Conduct and Ethics for Directors and Officers. A copy is available on our website, www.icumed.com. We will disclose any future amendments to, or waivers from, the Code of Business Conduct and Ethics for Directors and Officers on our website.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 of Form 10-K is set forth under the caption Executive Officer and Director Compensation , Compensation Committee and Compensation Committee Interlocks and Insider Participation in our definitive Proxy Statement to be filed in connection with our 2021 Annual Meeting of Stockholders, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 of Form 10-K is set forth under the caption Security Ownership of Certain Beneficial Owners and Management and Equity Compensation Plan Information in our definitive Proxy Statement to be filed in connection with our 2021 Annual Meeting of Stockholders, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 of Form 10-K is set forth under the caption Transactions with Related Persons , Policies and Procedures Regarding Transactions with Related Persons and Director Independence in our definitive Proxy Statement to be filed in connection with our 2021 Annual Meeting of Stockholders, and such information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 of Form 10-K is set forth under the caption Ratification of Auditors in our definitive Proxy Statement to be filed in connection with our 2021 Annual Meeting of Stockholders, and such information is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Form 10-K Page No.
The following documents are filed as part of this report:
1. Consolidated Financial Statements. See Index to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. 50
2. Exhibits . The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Form 10-K.
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3. Financial Statement Schedules. The Financial Statement Schedules required to be filed as a part of this Report are:
Schedule II — Valuation and Qualifying Accounts
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EXHIBIT INDEX
Exhibit Number Exhibit Description
2.1
Amended and Restated Stock and Asset Purchase Agreement, dated as of January 5, 2017, by and between Pfizer Inc., a Delaware corporation, and ICU Medical, Inc., a Delaware corporation. Filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed January 5, 2017, and incorporated herein by reference.
3.1
Registrant's Certificate of Incorporation, as amended and restated. Filed as an exhibit to Registrant's Current Report on Form 8-K filed on June 10, 2014, and incorporated herein by reference.
3.2
Registrant's Bylaws, as amended and restated. Filed as an Exhibit to Registrant's Current Report on Form 8-K filed August 3, 2016, and incorporated herein by reference.
4.1
Description of Securities Registered Under Section 12 of the Exchange Act. Filed as an Exhibit to Registrant's Annual Report of Form 10-K for the year ended December 31, 2019, filed March 2, 3020, and incorporated herein by reference.
10.1
Form of Indemnification Agreement with Directors and Executive Officers. Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30, 2010, filed October 22, 2010 (File No. 001-34634), and incorporated herein by reference.
10. 2
Registrant's 2001 Directors' Stock Option Plan.* Filed as an Exhibit to Registrant's definitive Proxy Statement filed pursuant to Regulation 14A on April 3, 2002 (File No. 000-19974), and incorporated herein by reference.
10. 3
Registrant's 2002 Employee Stock Purchase Plan.* Filed as an Exhibit to Registrant's definitive Proxy Statement filed pursuant to Regulation 14A on April 3, 2002 (File No. 000-19974), and incorporated herein by reference.
10. 4
Registrant's 2003 Stock Option Plan.* Filed as an Exhibit to Registrant's definitive Proxy Statement filed pursuant to Regulation 14A on April 25, 2003 (File No. 000-19974), and incorporated herein by reference.
10.5
Executive officer compensation*
10.6
Non-employee director compensation*
10. 7
2008 Performance-Based Incentive Plan, as amended.* Filed as Annex A to Registrant's proxy statement filed April 3, 2013 (File No. 001-34634), and incorporated herein by reference.
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10. 8
Amendment No. 1 to 2001 Directors' Stock Option Plan.* Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009, filed October 22, 2009 (File No. 000-19974), and incorporated herein by reference.
10. 9
Amendment No. 2 to 2001 Directors' Stock Option Plan.* Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009, filed October 22, 2009 (File No. 000-19974), and incorporated herein by reference.
10. 10
Amendment No. 3 to 2001 Directors' Stock Option Plan.* Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009, filed October 22, 2009 (File No. 000-19974), and incorporated herein by reference.
10. 11
Amended and Restated ICU Medical, Inc. 2011 Stock Incentive Plan.* Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2018, and incorporated herein by reference.
10.12
First Amendment to ICU Medical, Inc. Amended and Restated 2011 Stock Incentive Plan. Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 2019, filed March 2, 2020 (File No.001-34634) and incorporated herein by reference.
10. 13
2014 Inducement Stock Incentive Plan.* Filed as an Exhibit to Registrant's Current Report on Form 8-K filed February 26, 2014 (File No. 001-34634) and incorporated herein by reference.
10 .14
Amended and Restated Executive Employment Agreement, dated as of May 8, 2017, by and between ICU Medical, Inc. and Vivek Jain.* Filed as an Exhibit to Registrant's Current Report on Form 8-K filed May 8, 2017, and incorporated herein by reference.
10. 15
Buy-Out Agreement between Registrant and George A. Lopez, M.D. effective September 30, 2015.* Filed as an Exhibit to Registrant's Current Report on Form 8-K filed October 1, 2015, and incorporated herein by reference.
10.16
Letter agreement between the Registrant and Alison Burcar, effective April 1, 2019. Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2019, and incorporated herein by reference.
10.17
Retirement and Separation Agreement, dated as of February 27, 2020, by and between ICU Medical, Inc. and Scott Lamb. Filed as an Exhibit to Registrant’s Current Report on Form 8-K filed February 28, 2020 and incorporated herein by reference.
10. 18
ICU Medical, Inc. Executive Severance Plan.* Filed as an Exhibit to Registrant’s Current Report on Form 8-K filed January 6, 2017, and incorporated herein by reference.
10.1 9
First Amendment to the ICU Medical, Inc. Executive Severance Plan. Filed as an Exhibit to Registrant's Current Report on Form 8-K filed January 6, 2020, and incorporated herein by reference.
10. 20
Revolving Credit Agreement, dated as of November 8, 2017, among ICU Medical, Inc., as borrower, certain lenders party thereto and Wells Fargo Bank, N.A., as administrative agent and swingline lender. Filed as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30, 2017, and incorporated herein by reference.
21
Subsidiaries of Registrant.
23.1
Consent of Deloitte & Touche LLP
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Exhibit 101.INS The instance document does not appear in the interactive data file because its XBRL (Extensible Business Reporting Language) tags are embedded within the Inline XBRL document.
Exhibit 101.SCH XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
__________________________________________
*Executive compensation plan or other arrangement
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SCHEDULE II
ICU MEDICAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
Additions
(Amounts in thousands)
Description Balance at
Beginning of
Period Charged to
Costs and
Expenses Charged to
Other Accounts Write-off/
Disposals Balance
at End
of Period
For the year ended December 31, 2018:
Allowance for doubtful accounts $ 3,311 $ 781 $ 1,676 $ — $ 5,768
Warranty and return reserve - accounts receivable $ 1,726 $ 2,445 $ 2,581 $ — $ 6,752
Warranty and return reserve - inventory $ 503 $ ( 2,908 ) $ ( 133 ) $ — $ ( 2,538 )
Deferred tax asset valuation allowance $ 7,385 $ — $ — $ ( 1,949 ) $ 5,436
For the year ended December 31, 2019:
Allowance for doubtful accounts $ 5,768 $ 14,882 $ ( 431 ) $ — $ 20,219
Warranty and return reserve - accounts receivable $ 6,752 $ 83 $ ( 458 ) $ — $ 6,377
Warranty and return reserve - inventory $ ( 2,538 ) $ ( 217 ) $ ( 722 ) $ — $ ( 3,477 )
Deferred tax asset valuation allowance $ 5,436 $ — $ ( 1,584 ) $ ( 175 ) $ 3,677
For the year ended December 31, 2020:
Allowance for doubtful accounts $ 20,219 $ 7,137 $ ( 5,866 ) $ — $ 21,490
Warranty and return reserve - accounts receivable $ 6,377 $ ( 3,609 ) $ ( 61 ) $ — $ 2,707
Warranty and return reserve - inventory $ ( 3,477 ) $ 2,033 $ ( 169 ) 0 $ ( 1,613 )
Deferred tax asset valuation allowance $ 3,677 $ — $ 214 $ — $ 3,891
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ITEM 16. FORM 10-K SUMMARY
None
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ICU MEDICAL, INC.
By: /s/ Vivek Jain
Vivek Jain
Chairman of the Board and Chief Executive Officer
Dated: February 26, 2021
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Vivek Jain Chairman of the Board and February 26, 2021
Vivek Jain Chief Executive Officer
(Principal Executive Officer)
/s/ Brian M. Bonnell Chief Financial Officer February 26, 2021
Brian M. Bonnell (Principal Financial Officer)
/s/ Kevin J. McGrody Chief Accounting Officer February 26, 2021
Kevin J. McGrody (Principal Accounting Officer)
/s/ George A. Lopez, M.D. Director February 26, 2021
George A. Lopez, M.D.
/s/ Robert S. Swinney, M.D. Director February 26, 2021
Robert S. Swinney, M.D.
/s/ David C. Greenberg Director February 26, 2021
David C. Greenberg
/s/ Elisha W. Finney Director February 26, 2021
Elisha W. Finney
/s/ David F. Hoffmeister Director February 26, 2021
David F. Hoffmeister
/s/ Donald M. Abbey Director February 26, 2021
Donald M. Abbey
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