What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-07 · 150 added, 97 removed, 635 unchanged (28% of the section changed)

10 unchanged sentences

TOTAL CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES 476,698 410,784

Accounts receivable, net of allowance for doubtful accounts of $ 21,782 at March 31, 2021 and $ 21,490 at December 31, 2020

Accounts receivable, net of allowance for doubtful accounts of $ 14,590 at June 30, 2021 and $ 21,490 at December 31, 2020

120,782 124,093

26 unchanged sentences

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

Issued — 21,219 shares at March 31, 2021 and 21,058 shares at December 31, 2020 and outstanding — 21,192 shares at March 31, 2021 and 21,058 shares at December 31, 2020

Issued — 21,219 shares at June 30, 2021 and 21,058 shares at December 31, 2020 and outstanding — 21,208 shares at June 30, 2021 and 21,058 shares at December 31, 2020

Additional paid-in capital 705,582 693,068

13 unchanged sentences

Three months ended

June 30, Six months ended

2021 2020 2021 2020

TOTAL REVENUES $ 321,677 $ 303,379 $ 639,723 $ 631,986

26 unchanged sentences

Three months ended

June 30, Six months ended

2021 2020 2021 2020

NET INCOME $ 28,398 $ 18,908 $ 52,129 $ 35,742

Other comprehensive income (loss), net of tax:

Cash flow hedge adjustments, net of taxes of $ 298 and $ 932 for the three months ended March 31, 2021 and 2020, respectively

Cash flow hedge adjustments, net of taxes of $( 111 ) and $ 356 for the three months ended June 30, 2021 and 2020, respectively, and $( 409 ) and $( 577 ) for the six months ended June 30, 2021 and 2020, respectively

( 352 ) 1,126 ( 1,296 ) ( 1,826 )

2 unchanged sentences

Other adjustments, net of taxes of $ — for all periods

Other comprehensive loss, net of taxes ( 8,391 ) ( 13,510 )

12 4 23 ( 78 )

Other comprehensive income (loss), net of taxes 962 5,734 ( 7,429 ) ( 7,776 )

TOTAL COMPREHENSIVE INCOME $ 29,360 $ 24,642 $ 44,700 $ 27,966

4 unchanged sentences

(Amounts in thousands)

Common Stock Accumulated

Additional Other

Shares Amount Paid-In

Shares Amount Additional

Capital Treasury

Stock Retained

Earnings Comprehensive

Earnings Accumulated

Comprehensive

Balance, January 1, 2021 21,058 $ 2,106 $ 693,068 $ ( 39 ) $ 808,652 $ ( 1,522 ) $ 1,502,265

5 unchanged sentences

Balance, March 31, 2021 21,219 $ 2,122 $ 701,586 $ ( 5,410 ) $ 832,383 $ ( 9,913 ) $ 1,520,768

Common Stock Accumulated

Additional Other

Shares Amount Paid-In

Issuance of restricted stock and exercise of stock options — — ( 2,685 ) 3,237 — — 552

Tax withholding payments related to net share settlement of equity awards — — — ( 96 ) — — ( 96 )

Stock compensation — — 6,681 — — — 6,681

Other comprehensive income, net of tax — — — — — 962 962

Net income — — — — 28,398 — 28,398

Balance, June 30, 2021 21,219 $ 2,122 $ 705,582 $ ( 2,269 ) $ 860,781 $ ( 8,951 ) $ 1,557,265

Shares Amount Additional

Capital Treasury

Stock Retained

Earnings Comprehensive

Earnings Accumulated

Comprehensive

Balance, January 1, 2020 20,742 $ 2,074 $ 668,947 $ ( 157 ) $ 721,782 $ ( 15,402 ) $ 1,377,244

5 unchanged sentences

Balance, March 31, 2020 20,833 $ 2,083 $ 665,679 $ ( 1,573 ) $ 738,616 $ ( 28,912 ) $ 1,375,893

Issuance of restricted stock and exercise of stock options 106 11 4,408 1,820 — — 6,239

Tax withholding payments related to net share settlement of equity awards ( 2 ) — — ( 387 ) — — ( 387 )

Stock compensation — — 5,410 — — — 5,410

Other comprehensive income, net of tax — — — — — 5,734 5,734

Net income — — — — 18,908 — 18,908

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

ICU MEDICAL, INC.

2 unchanged sentences

(In thousands)

Three months ended

Six months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

9 unchanged sentences

Debt issuance costs amortization 144 144

Change in fair value of contingent earn-out — 2,700

Product-related charges — 2,626

32 unchanged sentences

(In thousands)

Three months ended

Six months ended

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:

29 unchanged sentences

Restructuring, Strategic Transaction and Integration

Restructuring, strategic transaction and integration expenses were $ 2.9 million and $ 12.3 million for the three months ended March 31, 2021, and 2020 respectively.

Restructuring, strategic transaction and integration expenses were $ 3.8 million and $ 6.6 million for the three and six months ended June 30, 2021 respectively, as compared to $ 6.5 million and $ 18.8 million for the three and six months ended June 30, 2020 respectively.

Restructuring

During the three months ended March 31, 2021 and 2020, restructuring charges were $ 0.0 million and $ 7.2 million, respectively.

Restructuring charges for the three months ended March 31, 2020 were primarily related to severance and costs related to office and other facility closures.

During the three and six months ended June 30, 2021 restructuring charges were $ 0.1 million and $ 0.1 million, respectively.

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

Restructuring charges for the three and six months ended June 30, 2021 were primarily related to severance charges.

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

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

The following table summarizes the details of changes in our restructuring-related accrual for the period ended March 31, 2021 (in thousands):

The following table summarizes the details of changes in our restructuring-related accrual for the period ended June 30, 2021 (in thousands):

ICU MEDICAL, INC.

4 unchanged sentences

Translation Accrued Balance

March 31, 2021

June 30, 2021

Severance pay and benefits $ 1,858 $ 143 $ ( 695 ) $ 28 $ 1,334

2 unchanged sentences

Strategic transaction and integration expenses

We incurred and expensed $ 2.9 million and $ 5.1 million in strategic transaction and integration expenses during the three months ended March 31, 2021 and 2020, respectively, which are included in restructuring, strategic transaction and integration expenses in our condensed consolidated statement of operations.

The strategic transaction and integration expenses during the three months ended March 31, 2021 were primarily related to integration costs associated with acquisitions, the Hospira Infusion Systems ("HIS") earn-out dispute with Pfizer and one-time costs incurred to comply with regulatory initiatives.

The strategic transaction and integration expenses during the three months ended March 31, 2020 were primarily related to the integration of the HIS business acquired in 2017 from Pfizer, which included the migration of IT systems at our Austin facility.

We incurred and expensed $ 3.7 million and $ 6.5 million in strategic transaction and integration expenses during the three and six months ended June 30, 2021, as compared to $ 5.6 million and $ 10.7 million during the three and six months ended June 30, 2020, respectively, which are included in restructuring, strategic transaction and integration expenses in our condensed consolidated statement of operations.

The strategic transaction and integration expenses during the three and six months ended June 30, 2021 were primarily related to integration costs associated with acquisitions, the Hospira Infusion Systems ("HIS") earn-out dispute with Pfizer and one-time costs incurred to comply with regulatory initiatives.

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

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

18 unchanged sentences

For the three months

ended March 31,

ended June 30, For the six months

ended June 30,

Geography 2021 2020 2021 2020

9 unchanged sentences

For the three months

ended March 31,

ended June 30, For the six months

ended June 30,

Product line 2021 2020 2021 2020

5 unchanged sentences

Contract balances

The following table presents our changes in the contract balances for the three months ended March 31, 2021 and 2020 (in thousands):

The following table presents our changes in the contract balances for the six months ended June 30, 2021 and 2020 (in thousands):

Contract Liabilities

4 unchanged sentences

Software revenue deferred due to implementation ( 2,212 )

Ending balance, March 31, 2021 $ ( 8,888 )

Ending balance, June 30, 2021 $ ( 4,968 )

Beginning balance, January 1, 2020 $ ( 4,855 )

3 unchanged sentences

Software revenue deferred due to implementation ( 3,643 )

Ending balance, March 31, 2020 $ ( 8,472 )

As of March 31, 2021, revenue from remaining performance obligations related to implementation of software and equipment is $ 7.3 million.

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

As of June 30, 2021, revenue from remaining performance obligations related to implementation of software and equipment is $ 3.7 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 and its variants ("COVID-19").

20 unchanged sentences

For the three months

ended March 31

ended June 30 For the six months

ended June 30

2021 2020 2021 2020

Operating lease cost $ 2,822 $ 2,776 $ 5,657 $ 5,567

6 unchanged sentences

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

For the three months ended March 31,

For the six months ended

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

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

March 31, 2021 As of

June 30, 2021 As of

December 31, 2020

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):

March 31, 2021 As of

June 30, 2021 As of

December 31, 2020

8 unchanged sentences

Financing leases 4.28 % 4.27 %

As of March 31, 2021, the maturities of our operating and financing lease liabilities for each of the next five years is approximately (in thousands):

As of June 30, 2021, 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 12,080 and 15,333 anti-dilutive securities for the three months ended March 31, 2021 and 2020, respectively.

There were 12,107 and 57,091 anti-dilutive securities for the three months ended June 30, 2021 and 2020, respectively.

There were 12,080 and 15,045 anti-dilutive securities for the six months ended June 30, 2021 and 2020, 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

2021 2020 2021 2020

Net income $ 28,398 $ 18,908 $ 52,129 $ 35,742

13 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 March 31, 2021 was approximately 327.6 million MXN.

The total notional amount of this outstanding derivative as of June 30, 2021 was approximately 218.4 million MXN.

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

3 unchanged sentences

The derivative instrument matured 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 March 31, 2021 and December 31, 2020 (in thousands):

The following table presents the fair values of our derivative instruments included within the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (in thousands):

ICU MEDICAL, INC.

2 unchanged sentences

Condensed Consolidated Balance Sheet

Location March 31, 2021 December 31, 2020

Location June 30, 2021 December 31, 2020

Derivatives designated as cash flow hedging instruments

2 unchanged sentences

Total derivatives designated as cash flow hedging instruments $ 1,849 $ 3,555

The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (in thousands):

The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

Line Item in the

Condensed Consolidated Statements of Operations Three months ended

June 30, Six months ended

2021 2020 2021 2020

Derivatives designated as cash flow hedging instruments

Foreign exchange forward contracts Cost of goods sold $ 903 $ ( 219 ) $ 1,744 $ 473

We recognized the following (losses) gains on our foreign exchange contracts designated as a cash flow hedge (in thousands):

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

We recognized the following gains (losses) on our foreign exchange contracts designated as a cash flow hedge (in thousands):

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

Three months ended

March 31, Three months ended

June 30, Three months ended

2021 2020 Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income 2021 2020

Derivatives designated as cash flow hedges:

Foreign exchange forward contract $ 441 $ 1,262 Cost of goods sold $ 903 $ ( 219 )

Total derivatives designated as cash flow hedging instruments $ 441 $ 1,262 $ 903 $ ( 219 )

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amount of Gain (Loss) 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

2021 2020 Location of Gain Reclassified From Accumulated Other Comprehensive Income into Income 2021 2020

2 unchanged sentences

Total derivatives designated as cash flow hedging instruments $ 39 $ ( 1,930 ) $ 1,744 $ 473

As of March 31, 2021, we expect approximately $ 2.3 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.

As of June 30, 2021, we expect approximately $ 1.8 million of the deferred gains on the outstanding derivatives in accumulated other comprehensive income to be reclassified to net income during the next six months concurrent with the underlying hedged transactions also being reported in net income.

Fair Value Measurement

3 unchanged sentences

inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

9 unchanged sentences

As of December 31, 2019, we determined that we 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.

The dispute is being resolved by binding arbitration that will likely be concluded during the third quarter of 2021.

Pfizer disputed our determination that the performance targets requiring payout of the HIS earn-out liability were not met, therefore the dispute is being resolved by binding arbitration.

As of this filing, we expect the arbitrator to render a decision on this matter in August 2021.

Given the uncertainty of any arbitration, it may be possible that we will incur a loss with regards to this matter.

2 unchanged sentences

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.

The Monte Carlo simulation model utilizes multiple input variables to determine the value of the earn-out liability including historical volatility, a risk free interest rate, counter party credit risk and projected future gross profit, see below simulation input table related to Pursuit.

The historical volatility was based on the median of ICU and a certain peer group.

The earn-out is 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.

During the earn-out period, we used a Monte Carlo simulation model to determine the fair value of the earn-out liability.

The Monte Carlo

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

simulation model utilizes multiple input variables to determine the value of the earn-out liability including historical volatility, a risk free interest rate, counter party credit risk and projected future gross profit (see the simulation input table below related to Pursuit).

The historical volatility is based on the median of ICU and a certain peer group.

The risk-free interest rate is equal to the yield, as of the valuation date, of the zero-coupon U.S.

1 unchanged sentence

The counter party credit risk is based on a synthetic credit rating of B1.

If the probabilities in the model significantly change from what we initially and subsequently anticipate, the change could have a significant impact on our financial statements in the period recognized.

As of June 30, 2021, the earn-out measurement period had ended.

Based on the actual sales and gross profit achieved during the measurement period, we calculated the actual earn-out amount to be $ 26.3 million.

Pursuit's former equity holders are entitled to an earn-out review period during which they may dispute the final earn-out amount.

Assuming Pursuit's former equity holders accept out calculation, we expect to pay the $ 26.3 million earn-out during the third quarter of 2021.

Our contingent earn-out liability is separately stated in our condensed consolidated balance sheets.

4 unchanged sentences

Accrued balance, March 31, 2021 $ 26,300

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

Accrued balance, June 30, 2021 $ 26,300

Earn-out Liability

2 unchanged sentences

Accrued balance, March 31, 2020 $ 17,300

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

Change in fair value of earn-out (included in income from operations as a separate line item) 2,700

Accrued balance, June 30, 2020 $ 20,000

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

Pursuit Earn-out

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Simulation Input As of

March 31, 2021 As of

December 31, 2020 As of

March 31, 2020

June 30, 2020

Revenue/Gross Profit Volatility 25.00 % 30.00 %

6 unchanged sentences

These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative.

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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):

Fair value measurements at March 31, 2021

Fair value measurements at June 30, 2021

Total carrying

25 unchanged sentences

Total Liabilities $ 26,300 $ — $ — $ 26,300

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investment Securities

11 unchanged sentences

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

As of March 31, 2021

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2021

Amortized Cost Unrealized Holding Gains (Losses) Fair Value

9 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Other prepaid expenses and receivables $ 17,705 $ 14,964

10 unchanged sentences

Inventories consisted of the following (in thousands):

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Raw materials $ 119,424 $ 126,499

2 unchanged sentences

Total inventories $ 299,610 $ 314,928

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Machinery and equipment $ 301,573 $ 291,331

11 unchanged sentences

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

Depreciation expense was $ 16.3 million and $15.2 million for the three months ended March 31, 2021 and 2020, respectively.

Depreciation expense was $ 16.3 million and $ 32.7 million for the three and six months ended June 30, 2021, respectively, as compared to $ 15.8 million and $ 31.0 million for the three and six months ended June 30, 2020, respectively.

Goodwill and Intangible Assets, Net

2 unchanged sentences

Currency translation ( 74 )

Balance as of March 31, 2021 $ 32,952

Balance as of June 30, 2021 $ 32,927

Intangible Assets, Net

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Average March 31, 2021

Average June 30, 2021

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 months ended March 31, 2021 and 2020, respectively, intangible asset amortization expense was $ 5.8 million and $ 5.8 million, respectively.

As of March 31, 2021 estimated annual amortization for our intangible assets for each of the next five years is approximately (in thousands):

During the three and six months ended June 30, 2021, respectively, intangible asset amortization expense was $ 5.8 million and $ 11.6 million, respectively, as compared to $ 5.8 million and $ 11.6 million for the three and six months ended June 30, 2020, respectively.

As of June 30, 2021 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):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Salaries and benefits $ 27,708 $ 25,786

13 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Operating lease liability-LT $ 37,636 $ 41,019

3 unchanged sentences

Financing lease liability-LT 2,284 2,388

Deferred revenue 693 864

Other 214 1,446

$ 42,951 $ 47,835

Income taxes were accrued at an estimated effective tax rate of 12 % and 17 % for the three months ended March 31, 2021 and 2020, respectively.

The effective tax rate for the three months ended March 31, 2021 differs from the federal statutory rate of 21 % principally because of the effect of the mix of U.S.

Income taxes were accrued at an estimated effective tax rate of 18 % and 16 % for the three and six months ended June 30, 2021, respectively, as compared to 9 % and 13 % for the three and six months ended June 30, 2020, respectively.

The effective tax rate for the three and six months ended June 30, 2021 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 months ended

The effective tax rate during the three and six months ended June 30, 2021 included a discrete tax benefit of $ 0.4 million and $ 2.2 million, respectively, related to excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

March 31, 2021 included a discrete tax benefit of $ 1.8 million related to 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 months ended March 31, 2020 differs from the federal statutory rate of 21 % principally because of the effect of the mix of U.S.

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, GILTI, 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 excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.

Long-Term Obligations

4 unchanged sentences

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

As of March 31, 2021, we had no borrowings and $ 150.0 million of availability under the Credit Facility.

As of June 30, 2021, 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.

9 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 March 31, 2021.

We were in compliance with all financial covenants as of June 30, 2021.

Stockholders' Equity

2 unchanged sentences

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

During the three months ended March 31, 2021, we did not purchase any shares of our common stock under our stock purchase plans.

As of March 31, 2021, all of the $ 100.0 million available for purchase was remaining under the plan.

During the six months ended June 30, 2021, we did not purchase any shares of our common stock under our stock purchase plans.

As of June 30, 2021, 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 three months ended March 31, 2021, we withheld 37,423 shares of our common stock from employee vested restricted stock units in consideration for $ 7.7 million in payments made on the employee's behalf for their minimum statutory income tax withholding obligations.

For the three months ended March 31, 2020, we withheld 63,511 shares of our common stock from employee vested restricted stock units in consideration for $ 12.2 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.

For the six months ended June 30, 2021, we withheld 37,882 shares of our common stock from employee vested restricted stock units in consideration for $ 7.8 million in payments made on the employee's behalf for their minimum statutory income tax withholding 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

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Accumulated Other Comprehensive (Loss) Income

7 unchanged sentences

Balance as of March 31, 2021 $ ( 11,839 ) $ 1,839 $ 87 $ ( 9,913 )

Other comprehensive income before reclassifications 1,302 335 12 1,649

Amounts reclassified from AOCI — ( 687 ) — ( 687 )

Other comprehensive income 1,302 ( 352 ) 12 962

Balance as of June 30, 2021 $ ( 10,537 ) $ 1,487 $ 99 $ ( 8,951 )

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

4 unchanged sentences

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

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

Amounts reclassified from AOCI — 166 — 166

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

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

Commitments and Contingencies

6 unchanged sentences

Although we can provide no assurances, we have never incurred, nor do we expect to incur, any material liability for indemnification.

ICU MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingencies

During November 2019, we acquired Pursuit.

Total consideration for the acquisition includes a potential contractual earn-out of up to $ 50.0 million, to be paid to former Pursuit equity holders, calculated based upon the achievement of certain performance targets during the earn-out period (see Note 8:

As of June 30, 2021, the earn-out measurement period has ended and based on the actual sales and gross profit achieved during the measurement period we calculated the actual earn-out to be $26.3 million.

Pursuit's former equity holders are entitled to an earn-out review period, during which they may dispute the final earn-out amount (see Note 8:

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.

The dispute is being resolved by binding arbitration that will likely be concluded during the third quarter of 2021.

Pfizer disputed our determination that the performance targets requiring payout of the HIS earn-out liability were not me, therefore the dispute is being resolved by binding arbitration.

As of this filing, we expect the arbitrator to render a decision on this matter in August 2021.

Given the uncertainty of any arbitration, it may be possible that we will incur a loss with regards to this matter.

If we are unsuccessful in arbitration such that it is determined that we met the necessary performance targets for any of the HIS earn-

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

out liability, we will have to pay between $191.3 million and $225.0 million in additional cash consideration (see Note 8, Fair Value Measurements).

If we are unsuccessful in arbitration such that it is determined that we met the necessary performance targets for any of the HIS earn-out liability, we will have to pay between $191.3 million and $225.0 million in additional cash consideration (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:

7 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements