What changed in this filing

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Item 2. Management’s Discussion and Analysis

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Business Overview

We are one of the world's leading pure-play infusion therapy companies with global operations and a wide-ranging product portfolio that includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and non-dedicated IV sets and needlefree connectors designed to help meet clinical, safety and workflow goals.

Recent Developments

On January 6, 2022 we completed the acquisition of Smiths Medical 2020 Limited ("Smiths Medical"), the holding company of Smiths Group plc's global medical device business.

See "Acquisitions" in the remainder of this item for additional detail regarding the acquisition transaction.

Smiths Medical is engaged in the development, manufacture and sale of syringe and ambulatory infusion devices, vascular access, and vital care products used in hospital, emergency, home and alternative care settings.

Our acquisition of Smiths Medical was strategic and increases our focus and scale in infusion therapy globally which we believe will enhance our competitive position as a leader within the industry.

The combination of ICU and Smiths Medical brings together two highly complementary product portfolios to create a comprehensive range of offerings utilized in the infusion therapy care continuum.

Our existing product portfolio includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and non-dedicated IV sets and needlefree connectors designed to help meet clinical, safety and workflow goals.

In addition, we manufacture automated pharmacy IV compounding systems with workflow technology, closed systems transfer devices for preparing and administering hazardous IV drugs, and cardiac monitoring systems for critically ill patients.

The acquisition of Smiths Medical broadened our product portfolio to include syringe and ambulatory pumps, peripheral IV catheters, fluid warming and respiratory devices, silicone and PVC tracheotomy tubes, among other products.

Following the Smiths Medical acquisition, we are initially presenting the following product lines in addition to our legacy product lines:

Infusion Systems-Smiths Medical, Vascular Access-Smiths Medical and Vital Care-Smiths Medical.

See "Products" in the remainder of this item for a list of our primary products included in each line.

Our primary customers are acute care hospitals, wholesalers, ambulatory clinics and alternate site facilities, such as clinics, home health care providers and long-term care facilities.

We sell our products in more than 90 countries throughout the world.

We categorize our products into four main product lines:

Infusion Consumables, Infusion Systems, IV Solutions and Critical Care.

We have presented our financial results in accordance with these product lines, with our primary products in each line listed below.

Definitive Agreement to Purchase Smiths Medical 2020 Limited

In September 2021, we entered into a Share Sale and Purchase Agreement (the "Purchase Agreement") with Smiths Medical 2020 Limited ("Smiths"), the holding company of Smiths Group plc's global medical device business.

We will purchase the entire issued share capital of Smiths Medical 2020 Limited for approximately $1.9 billion in cash, a potential contingent earn-out of $100.0 million and the issuance of 2.5 million fully paid and non-assessable shares of our common stock, par value $0.10 per share.

In connection with entering into the Purchase Agreement, in September 2021, we entered into a debt commitment letter with Wells Fargo Bank, National Association, Wells Fargo Securities, LLC and Barclays Bank PLC (the “Committed Parties”), pursuant to which, among other things, the Committed Parties will provide to us, at or near closing of the transaction, with senior secured credit facilities of up to $2.0 billion consisting of a term loan A facility of $850.0 million, a term loan B facility of $850.0 million and a revolving credit facility of $300.0 million.

In October 2021, the debt commitment related to the term loan A and revolving credit facility was syndicated to a broader group of Committed Parties.

As part of the syndication process, the size of the revolving credit facility was increased from $300.0 million to $500.0 million.

Operations Overview

The novel coronavirus and its variants (“COVID-19”) continues to have an impact on our business operations.

Our manufacturing, distribution and pump service facilities continue to operate under our business continuity plan and our precautionary safety measures implemented to maximize the safety of our employees and mitigate disruption of our business are still in effect.

For greater detail on the above mentioned safety measures and a discussion of how future results may potentially be impacted by COVID-19 see Part II, Item 7, of our 2020 Annual Report on Form 10-K.

While we continually monitor the ongoing and evolving impact of the effect of the COVID-19 pandemic on our operations the overall impact will not be fully reflected in our results of operations until future periods.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be fully predicted at this time, as such, the impact of the pandemic on our overall financial performance remain uncertain and cannot as yet be quantified.

With the addition of Smiths Medical we sell our products in more than 90 countries throughout the world.

The following information is additional to and not a substitute for the Business section under Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2021 and should be read in conjunction with that filing:

Manufacturing Changes

With the acquisition of the Smiths Medical business, we now operate additional manufacturing facilities including five facilities in the United States ("U.S."), two facilities in Mexico and two in the UK, and one facility in the Czech Republic, Italy and China.

Service Centers

With the acquisition of the Smiths Medical business, we now operate additional service and repair facilities in the U.S., Canada, two locations in Europe and four locations in Asia.

Distribution Changes

Following the Smiths Medical acquisition, we operate two additional main distribution centers, one in the U.S.

supporting the Americas and International and one in the Netherlands mainly supporting EMEA.

We have a further eleven smaller distribution centers globally three of which are in the U.S., two centers in EMEA and China, and one center in Canada, the U.K., Japan and India.

Competition Changes

The Infusion Systems product line of Smiths Medical competes with many of the same competitors as those referenced in Part I, Item 1.

"Business" of our 2021 Annual Report on Form 10-K as well as additional competitors such as Moog Medical and QCOR.

The Vascular Access product line of Smith Medicals competes with many of the same competitors as those referenced in Part I, Item 1.

"Business" of our 2021 Annual Report on Form 10-K as well as additional competitors such Angio Dynamics, Greiner Bio-One, and Teleflex Incorporated.

Our ability to remain competitive in this market will depend on our ability to focus on demonstrable patient outcomes by differentiating our products by improving device functionality and by providing successful customer training programs on the use and maintenance of our products.

The Vital Care product line of Smith Medical competes with numerous competitors due its wide range of business.

Those include multinational competitors such as Medtronic and Philips Healthcare as well as smaller more focused competitors such as Belmont and Intersurgical plc.

Our ability to compete in this market will depend on our ability to continue to make technological advances to our products, thereby increasing customer efficiency and by providing product support that improves clinical decision-making that ultimately enhances patient safety.

As of March 31, 2022, our primary product offerings by product line are listed below.

We have presented our financial results in accordance with these product lines:

Infusion Consumables

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• Clave™ needlefree products , including the MicroClave, MicroClave Clear, and NanoClave™ brand of connectors, accessories, extension and administration sets used for the administration of IV fluids and medications and the Neutron catheter patency device, used to help maintain patency of central venous catheters;

• SwabCap disinfecting cap, used to protect and disinfect any needlefree connector, including competitive brands of connectors;

• SwabCap and SwabTip disinfecting caps, used to protect and disinfect any needlefree connector, including competitive brands of connectors, and male luers;

• ClearGuard HD antimicrobial barrier caps for hemodialysis catheters;

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Infusion Systems

We offer a wide range of infusion pumps, dedicated IV sets and software.

We offer a wide range of infusion pumps, dedicated IV sets, software and professional services.

Our primary Infusion System products are dedicated IV sets and the following:

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The Plum 360™ infusion pump is an ICU Medical MedNet™ ready large volume infusion pump with an extensive drug library and wireless capability.

Plum 360 was named the 2018, 2019 and 2020 Best in KLAS winner as top-performing IV smart pump and is the first medical device to be awarded UL Cybersecurity Assurance Program Certification.

Also, in 2021, the Plum 360 won the first ever award as the top-performing Smart Pump EMR-Integrated;

Plum 360 was named the 2018, 2019 and 2020 Best in KLAS winner as top-performing IV smart pump and was the first medical device to be awarded UL Cybersecurity Assurance Program Certification.

Also, in 2021 and 2022, the Plum 360 won the award as the top-performing Smart Pump EMR-Integrated;

• LifeCare PCA™ :

The LifeCare PCA infusion pump is an ICU Medical MedNet™ ready patient-controlled analgesia pump ("PCA"), providing complete IV-EHR interoperability since 2016.

IV Mediation Safety Software:

The LifeCare PCA infusion pump is an ICU Medical MedNet™ ready patient-controlled analgesia pump ("PCA"), providing complete IV Electronic Health Record ("IV-EHR") interoperability since 2016.

IV Medication Safety Software:

• ICU Medical MedNet ™:

ICU Medical MedNet is an enterprise-class medication management platform for any sized healthcare system that can help reduce medication errors, improve quality of care, streamline workflows and maximize revenue capture.

ICU Medical MedNet connects our industry-leading smart pumps to a hospital’s Electronic Health Records ("EHR"), asset tracking systems, and alarm notification platforms with the largest array of integration partners.

ICU Medical MedNet connects our industry-leading smart pumps to a hospital’s EHR, asset tracking systems, and alarm notification platforms with the largest array of integration partners.

Professional Services:

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• SafeSet™ closed blood sampling and conservation system.

The following table summarizes our total worldwide revenue by domestic and international markets by amount and as a percentage of total revenue (in millions, except percentages):

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September 30,

2021 2020 2021 2020

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

Domestic $ 245.3 73 % $ 237.4 75 % $ 697.3 71 % $ 675.8 71 %

International 90.8 27 % 81.2 25 % 278.5 29 % 274.8 29 %

Total Revenue $ 336.1 100 % $ 318.6 100 % $ 975.8 100 % $ 950.6 100 %

The following table sets forth, for the periods indicated, total revenue by product line as a percentage of total revenue:

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Product line 2021 2020 2021 2020

Infusion Consumables 43 % 36 % 42 % 37 %

Infusion Systems 27 % 28 % 27 % 28 %

IV Solutions 27 % 32 % 28 % 31 %

Critical Care 3 % 4 % 3 % 4 %

100 % 100 % 100 % 100 %

We manage our product distribution in the U.S.

through a network of two owned and one leased distribution facilities in combination with independent distributors and third-party fulfillment and logistics providers.

Our end customers, which include healthcare providers and original equipment manufacturer suppliers, may order and receive our products directly from us or through an independent full-line distributor.

Internationally, we manage distribution utilizing international regional hubs and through independent distributors.

Infusion Systems-Smiths Medical

We offer a wide range of infusion pumps, disposables and safety software for use in both hospital and home settings.

These products participate in adjacent categories to the legacy ICU Medical Infusion Systems segment.

The primary Infusion Systems-Smith Medical products are:

Ambulatory Infusion Hardware:

• CADD ® ambulatory infusion pumps and disposables, including administration sets and medication cassette reservoirs, support a variety of IV pain management therapies across clinical care areas from hospital to outpatient treatment.

Syringe Infusion Hardware:

• Medfusion TM syringe infusion pumps are designed for the administration of fluids and medication requiring precisely controlled infusion rates from a variety of syringe sizes in acute care settings.

Infusion Software:

• PharmGuard ® Medication Safety Software for Medfusion TM 4000 syringe and CADD™ Solis pumps allows for customized drug libraries to support the standardization of protocols for medication administration throughout the facility.

Vascular Access-Smiths Medical

Our Vascular Access-Smiths Medical products allow clinicians to safely access the patients' bloodstream to deliver fluids and medication or to obtain blood samples.

Vascular Access products are often used in conjunction with Consumables and Infusion Systems devices.

Our primary Vascular Access products are:

• Jelco ® safety and conventional peripheral IV catheters, sharps safety devices for hypodermic injection, and venipuncture blood collection and peripheral IV catheters designed to help prevent needlestick injury and to reduce the risks associated with blood exposure and contamination while reducing patients' risk of infection;

• DELTEC ® implantable ports and GRIPPER ® non-coring needles for portal access;

• Portex ® arterial blood sampling syringes, anesthesia trays and kits for pain management;

• Powerwand ® midline catheters;

• MEDEX ® LogiCal ® Pressure Monitoring System and components.

Vital Care-Smiths Medical

We offer a range of devices and systems to maintain patients' airways and maintain body temperature before, during and after surgery.

Our primary Vital Care products are:

• Level 1 ® temperature management systems used in perioperative and critical care settings to help monitor and regulate patient temperature through rapid infusion, routine blood and fluid warming, irrigation warming and convective warming.

• Portex ® acapella ® bronchial hygiene products used to mobilize pulmonary secretions to facilitate the opening of airways in patients with chronic respiratory diseases such as chronic obstructive pulmonary disease, or COPD, asthma and cystic fibrosis.

• Portex ® Bivona ® tracheostomy tubes in PVC and silicone construction that provide a secure airway for both surgical and percutaneous procedures.

Our silicone tracheostomy tubes are customizable to accommodate unique patient requirements.

a substantial amount of our products are sold to group purchasing organization member hospitals.

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There are no significant seasonal aspects to our business.

We may experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by production scheduling and their inventory levels, rather than by seasonality.

We can experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by the novel coronavirus and its variants (“COVID-19”) pandemic surges and its impact on hospital admissions and procedure volumes along with production scheduling and customer inventory levels, and less by seasonality.

Our expenses often do not fluctuate in the same manner as net sales, which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue.

On January 6, 2022, we acquired 100% of the equity interests in Smiths Medical from Smiths Group International Holdings Limited (“Smiths”) for cash consideration of $1.9 billion and the issuance of 2.5 million shares of our common stock valued at $576.0 million.

We funded the cash portion of the consideration paid with a combination of proceeds from a Credit Agreement dated January 6, 2022 (the "Credit Agreement") and our cash and cash equivalents.

The fair value of the common shares issued to Smiths was determined based on the closing market price of our common stock on the acquisition date.

Smiths may be entitled to a potential contingent earn-out payment of $100.0 million based on our common stock achieving certain price targets on or prior to the third or fourth anniversary of closing.

See Note 3, Acquisitions in our accompanying condensed consolidated financial statements for further details on the acquisition.

See "Liquidity and Capital Resources" in the remainder of this item and Note 17 in our accompanying condensed consolidated financial statements for additional information regarding the Credit Agreement.

COVID-19 continues to have an impact on our business operations.

For discussion of the risks and uncertainties we face associated with the COVID-19 pandemic, see Part I, Item 1A.

"Risk Factors" of our 2021 Annual Report on Form 10-K.

Consolidated Results of Operations

We present income statement data in Part I, Item 1 - Financial Statements.

The following table shows, for the three and nine months ended September 30, 2021 and 2020, the percentages of each income statement caption in relation to total revenue:

We present income statement data in Part I, Item 1.

"Financial Statements." The following table shows, for the three months ended March 31, 2022 and 2021, the percentages of each income statement caption in relation to total revenue:

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2021 2020 2021 2020

Total revenue 100 % 100 % 100 % 100 %

Gross margin 38 % 36 % 37 % 36 %

Total revenues 100 % 100 %

Gross profit 31 % 35 %

Selling, general and administrative expenses 28 % 23 %

Research and development expenses 4 % 3 %

Restructuring and strategic transaction 1 % 1 % 1 % 2 %

Change in fair value of contingent earn-out — % 1 % — % 1 %

Restructuring, strategic transaction and integration expenses 6 % 1 %

Contract settlement — % — %

Total operating expenses 38 % 27 %

Income from operations 11 % 9 % 9 % 8 %

(Loss) income from operations (7) % 8 %

Interest expense (3) % — %

Other income (expense), net — % — % — % — %

Income before income taxes 11 % 9 % 9 % 8 %

Provision for income taxes (2) % — % (2) % (1) %

Net income 9 % 9 % 7 % 7 %

Other income, net — % — %

(Loss) income before income taxes (10) % 8 %

Benefit (provision) for income taxes 3 % (1) %

Net (loss) income (7) % 7 %

In addition to comparing changes in revenue on a U.S.

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2021 2020 $ Change % Change 2021 2020 $ Change % Change

2022 2021 $ Change % Change

Infusion Consumables $ 140.5 $ 126.4 $ 14.1 11.2 %

Infusion Consumables revenue increased for the three and nine months ended September 30, 2021, as compared to the same periods in the prior year due to lower hospital census in 2020 driven by the onset of the COVID-19 pandemic, growth in our global oncology, U.S.

core infusion and renal products and the impact from foreign exchange.

For the three and nine months ended September 30, 2021, on a constant currency basis, Infusion Consumables revenue would have been $143.5 million and $398.0 million, respectively, an increase of $27.4 million or 23.6% and $47.4 million or 13.5%, respectively, as compared to the same periods in the prior year.

Infusion Consumables revenue increased for the three months ended March 31, 2022, as compared to the same period in the prior year, due to growth in our global core infusion, global oncology, renal and specialty products.

On a constant currency basis, Infusion Consumables revenue would have been $142.5 million for the three months ended March 31, 2022, an increase of $16.1 million or 12.7%, as compared to the same period in the prior year.

Infusion Systems

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2021 2020 $ Change % Change 2021 2020 $ Change % Change

2022 2021 $ Change % Change

Infusion Systems $ 87.0 $ 84.3 $ 2.7 3.2 %

Infusion Systems revenue increased for the three months ended September 30, 2021, as compared to the same period in the prior year due to higher dedicated set sales as hospital census recovered from a low level in the third quarter of 2020 driven by the onset of the COVID-19 pandemic, partially offset by lower large volume pump sales during the third quarter of 2021 and a decline in our non-large volume pump business.

Infusion Systems revenue decreased for the nine months ended September 30, 2021, as compared to the same period in the prior year due to large volume pump sales driven by higher COVID-19-related purchases during the second and third quarters of 2020 and a decline in our non-large volume pump business, which has been partially offset by higher dedicated set sales in 2021 as a result of higher hospital census.

For the three months ended September 30, 2021, on a constant currency basis Infusion Systems revenue would have been $91.0 million, an increase of $2.6 million or 2.9% as compared to the same period in the prior year and for the nine months ended September 30, 2021 on a constant currency basis Infusion Systems revenue would have been $257.5 million, a decrease of $10.4 million or 3.9% as compared to the same period in the prior year.

Infusion Systems revenue increased for the three months ended March 31, 2022, as compared to the same period in the prior year, due to higher large volume pump ("LVP") dedicated set sales driven by larger install base of LVPs, offset partially by lower sales related to our non-LVP products.

On a constant currency basis, Infusion Systems revenue would have been $88.7 million for the three months ended March 31, 2022, an increase of $4.4 million or 5.2%, as compared to the same period in the prior year.

The following table summarizes our total IV Solutions revenue (in millions):

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2021 2020 $ Change % Change 2021 2020 $ Change % Change

2022 2021 $ Change % Change

IV Solutions $ 88.5 $ 94.2 $ (5.7) (6.1) %

IV Solutions revenue decreased for the three and nine months ended September 30, 2021, as compared to the same periods in the prior year primarily due to lower contract manufacturing sales to Pfizer.

IV Solutions revenue decreased for the three months ended March 31, 2022, as compared to the same period in the prior year, primarily due to lower contract manufacturing sales to Pfizer.

Critical Care

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2022 2021 $ Change % Change

Critical Care $ 12.2 $ 13.1 $ (0.9) (6.9) %

Critical Care revenue slightly decreased for the three months ended September 30, 2021, as compared to the same period in the prior year and was essentially flat for the nine months ended September 30, 2021, as compared to the same period in the prior year.

Critical Care revenue slightly decreased for the three months ended March 31, 2022, as compared to the same period in the prior year.

Infusion Systems-Smiths Medical

The following table summarizes our total Infusion Systems-Smiths Medical revenue (in millions):

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2022 2021 $ Change % Change

Infusion Systems-Smiths Medical $ 66.3 $ — $ 66.3 nm

The Infusion Systems-Smiths Medical revenue is a result of the acquisition of Smiths Medical.

The amount in the table above represents approximately three months of revenue from the closing date of the transaction to the end of the quarter.

Vascular Access-Smiths Medical

The following table summarizes our total Vascular Access revenue (in millions):

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2022 2021 $ Change % Change

Vascular Access-Smiths Medical $ 79.0 $ — $ 79.0 nm

The Vascular Access-Smiths Medical revenue is a result of the acquisition of Smiths Medical.

The amount in the table above represents approximately three months of revenue from the closing date of the transaction to the end of the quarter.

Vital Care-Smiths Medical

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2022 2021 $ Change % Change

Vital Care-Smiths Medical $ 69.6 $ — $ 69.6 nm

The Vital Care-Smiths Medical revenue is a result of the acquisition of Smiths Medical.

The amount in the table above represents approximately three months of revenue from the closing date of the transaction to the end of the quarter.

Gross Margins

For the three and nine months ended September 30, 2021, gross margins were 38.0% and 37.3%, respectively, as compared to 35.8% and 35.9%, respectively, for the three and nine months ended September 30, 2020.

The increase in gross margin for the three months ended September 30, 2021, as compared to the same period in the prior year was primarily due to product mix and increased plant volumes, offset by increased costs for raw materials, direct labor and freight.

The increase in gross margin for the nine months ended September 30, 2021, as compared to the same period in the prior year was primarily due to product mix and increased plant volumes, offset by capitalized manufacturing variances from the shutdown of our Austin plant in the fourth quarter of 2020, additional weather-related costs at our Austin plant during the first quarter of 2021 and increased costs for raw materials, direct labor and freight.

For the three months ended March 31, 2022 and 2021, gross margins were 31.1% and 35.4%, respectively.

The decrease in gross margins for the three months ended March 31, 2022, as compared to the same period in the prior year, was primarily due to the acquisition of Smiths Medical.

Smiths Medical gross margins are lower than historical ICU margins for the quarter due to:

$13.2 million spending on quality systems and product-related remediation costs;

lower manufacturing absorption due to supply chain disruptions;

and the impact of inflation and higher freight expediting costs.

Legacy ICU gross margins for the quarter were generally consistent with prior year and reflected improvement due to increased sales of higher margin consumables, offset by lower absorption in our Austin manufacturing plant from lower volumes and inflation.

Selling, General and Administrative (“SG&A”) Expenses

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2021 2020 $ Change % Change 2021 2020 $ Change % Change

2022 2021 $ Change % Change

SG&A $ 153.2 $ 72.4 $ 80.8 111.6 %

SG&A expenses increased for the three and nine months ended September 30, 2021, as compared to the same periods in the prior year.

For the three months ended September 30, 2021 as compared to the same period in the prior year, the increases were primarily due to compensation expense which increased $3.4 million and commissions which increased $1.4 million.

Offsetting these increases was a decrease of $2.6 million in bad debt expense.

Compensation expense increased primarily due to increased headcount and annual compensation merit increases.

Commissions increased due to an increase in revenue.

Bad debt expense is adjusted quarterly, if deemed necessary, based on an assessment of our accounts receivables and our expectations regarding the collectability of those accounts.

For the nine months ended September 30, 2021, as compared to the same period in the prior year, the increases were primarily due to compensation expense which increased $6.3 million, dealer fees which increased $2.9 million, and legal expenses which increased $2.0 million.

Offsetting these increases was a $2.3 million decrease in bad debt expense.

Compensation expense increased primarily due to increased headcount and annual compensation merit increases.

Dealer fees increased due to an increase in revenue from U.S.

distributors in the current year.

Legal fees increased due to additional services performed in the current year related to various legal matters.

Bad debt expense is adjusted quarterly, if deemed necessary, based on an assessment of our accounts receivables and our expectations regarding the collectability of those accounts.

SG&A expenses increased for the three months ended March 31, 2022, as compared to the same period in the prior year, primarily due to a $72.7 million impact from the acquisition of Smiths Medical, which consisted primarily of $28.0 million of salaries and benefits, $25.1 million of depreciation and amortization expense.

Expenses that increased aside from the Smiths Medical acquisition included $5.9 million in stock based compensation.

Stock based compensation increased due to a change in the probability of shares expected to be earned.

Research and Development (“R&D”) Expenses

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2021 2020 $ Change % Change 2021 2020 $ Change % Change

2022 2021 $ Change % Change

R&D $ 23.9 $ 10.7 $ 13.2 123.4 %

R&D expenses increased for the three and nine months ended September 30, 2021, as compared to the same periods in the prior year, due to timing and nature of various R&D projects.

R&D expenses during both periods primarily relates to compensation and related benefit expenses on current R&D projects.

Restructuring and Strategic Transaction and Integration Expenses

Restructuring and strategic transaction and integration expenses were $2.4 million and $9.0 million for the three and nine months ended September 30, 2021, respectively, as compared to $4.1 million and $22.9 million for the three and nine months ended September 30, 2020, respectively.

R&D expenses increased for the three months ended March 31, 2022, as compared to the same period in the prior year primarily due to the acquisition of Smiths Medical.

The increase included $11.8 million related to Smiths Medical R&D expenses.

R&D expenses during both periods primarily relate to compensation and related benefit expenses on current R&D projects.

Restructuring, Strategic Transaction and Integration Expenses

Restructuring, strategic transaction and integration expenses were $33.9 million and $2.9 million for the three months ended March 31, 2022 and 2021, respectively.

Restructuring charges

During the third quarter we adjusted certain facility restructuring liabilities by $2.0 million to reflect actual amounts owed resulting in net restructuring credits of $(2.0) million and $(1.8) million for the three and nine months ended September 30, 2021, respectively.

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

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

Restructuring charges were $3.2 million for the three months ended March 31, 2022 related to severance costs.

We expect to pay unpaid restructuring charges as of March 31, 2022 by the end of 2022.

There were no restructuring charges for the three months ended March 31, 2021.

Strategic transaction and integration expenses

Strategic transaction and integration expenses were $4.3 million and $10.8 million for the three and nine months ended September 30, 2021, respectively, as compared to $4.1 million and $14.8 million for the three and nine months ended September 30, 2020, respectively.

The strategic transaction and integration expenses during the three months ended September 30, 2021 were primarily related to transaction expenses incurred related to entering into a definitive agreement to acquire Smiths.

The strategic transaction and integration expenses for the nine months ended September 30, 2021 were primarily related to integration costs associated with acquisitions, the Hospira Infusion Systems ("HIS") earn-out dispute with Pfizer, one-

time costs incurred to comply with regulatory initiatives and the transaction costs related to the Smiths transaction.

The strategic transaction and integration expenses during the three and nine months ended September 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.

Change in Fair Value of Contingent Earn-out

For the three and nine months ended September 30, 2021 there was no change in fair value of the Pursuit earn-out liability for each period.

As of June 30, 2021, the Pursuit earn-out measurement period had ended and in October 2021 the $26.3 million earn-out was finalized and paid to Pursuit's former shareholders.

For the three and nine months ended September 30, 2020, the fair value revaluation of our Pursuit earn-out liability resulted in an increase in value of $4.3 million and $7.0 million, respectively.

Strategic transaction and integration expenses were $30.7 million and $2.9 million for the three months ended March 31, 2022 and 2021, respectively.

The strategic transaction and integration expenses during the three months ended March 31, 2022 were primarily related to our acquisition of Smiths Medical which primarily included legal expenses, bank fees, a United Kingdom stamp tax and employee costs.

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

Contract Settlement

For the nine months ended September 30, 2021, we recorded $0.1 million in contract settlement expense.

We did not incur contract settlement expense for the three months ended March 31, 2022.

For the three months ended March 31, 2021, we recorded $0.1 million in contract settlement expense.

Interest Expense

Interest expense was $0.2 million and $0.5 million for the three and nine months ended September 30, 2021, respectively, as compared to $0.6 million and $1.6 million for the three and nine months ended September 30, 2020, respectively.

The three and nine months ended September 30, 2021 primarily includes interest expense related to the per annum commitment fee charged on the unused portion of the revolver under our Credit Facility and the amortization of financing costs that were incurred in 2017 in connection with entering into the Credit Facility.

During March 2020, we borrowed $150.0 million under our Credit Facility and, accordingly the interest expense for the three and nine months ended September 30, 2020 also includes interest incurred on borrowings under the Credit Facility (see Note 16:

Long-Term Obligations in our accompanying condensed consolidated financial statements for additional information).

Other (Expense) Income, net

Other (expense) income netted to ($0.3) million and $0.9 million for the three and nine months ended September 30, 2021, respectively, as compared to $1.3 million and ($2.2) million for the three and nine months ended September 30, 2020, respectively.

For the three months ended September 30, 2021, the other expense, net was related to $0.9 million in foreign exchange losses and $0.3 million of loss from disposed assets offset by $0.7 million of interest income and $0.2 million of miscellaneous income.

For the nine months ended September 30, 2021, the other income, net was related to $2.1 million of interest income and $0.5 million of miscellaneous income partially offset by $1.1 million of loss from disposed assets and $0.6 million in foreign exchange losses.

For the three months ended September 30, 2020, the other income, net was related to $2.5 million in miscellaneous income and $0.8 million of interest income, partially offset by $1.4 million in foreign exchange losses and $0.6 million of loss from disposed assets.

For the nine months ended September 30, 2020, the other expense, net was primarily related to $6.0 million in foreign exchange losses and $1.7 million of loss from disposed assets, partially offset by $2.5 million in miscellaneous income and $3.0 million in interest income.

For the three and nine months ended September 30, 2021, income taxes were accrued at an estimated effective tax rate of 18% and 17%, respectively, as compared to 5% and 10%, for the three and nine months ended September 30, 2020, respectively.

The effective tax rate for the three and nine months ended September 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 and nine months ended September 30, 2021 included the following:

• Excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the three and nine months ended September 30, 2021 of $1.1 million and $3.3 million, respectively.

federal return-to-provision adjustments for the year ended December 31, 2020 primarily due to changes in estimates for GILTI, FDII, subpart F and related foreign tax credits along with other prior period adjustments resulted in a tax provision of $1.1 million.

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.

Interest expense was $13.6 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.

Interest expense for the three months ended March 31, 2022 includes the contractual interest incurred on borrowings under the Credit Agreement, the per annum commitment fee charged on the available amount of the revolving credit facility contained in the Credit Agreement and the amortization of debt issuance costs incurred in connection with entering into the Credit Agreement (see Note 17:

Long-Term Debt in our accompanying condensed consolidated financial statements for additional information).

Interest expense for the three months ended March 31, 2021 includes the per annum commitment fee charged on the unused portion of the revolver under our 2017 Credit Facility (the "Prior Credit Facility") and the amortization of financing costs that were incurred in 2017 in connection with entering into the Prior Credit Facility.

The Prior Credit Facility was terminated in connection with entering into the Credit Agreement.

Other Income, net

Other income netted to $1.0 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022, other income, net was related to $0.6 million of interest income, $0.5 million of miscellaneous income and $0.2 million in foreign exchange gains, partially offset by $0.3 million of loss from disposed assets.

For the three months ended March 31, 2021, other income, net was related to $0.7 million of interest income, $0.5 million in foreign exchange gains and $0.2 million of miscellaneous income, partially offset by $0.7 million of loss from disposed assets.

For the three months ended March 31, 2022 and 2021, income taxes were accrued at an estimated effective tax rate of 31% and 12%, respectively.

The effective tax rate for the three months ended March 31, 2022 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, section 162(m) excess compensation, foreign-derived intangible income ("FDII") and tax credits.

The effective tax rate during the three months ended March 31, 2022 included the following:

• Excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period of $2.6 million.

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.

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

The effective tax rate during the three and nine months ended September 30, 2020 included a tax benefit of $0.1 million and $3.6 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 nine months ended September 30, 2020 also included U.S.

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

The effective tax rate during the three months ended March 31, 2021 included a tax benefit of $1.8 million related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.

Liquidity and Capital Resources

During the first nine months of 2021, our cash, cash equivalents and short and long-term investments increased by $120.9 million from $423.8 million at December 31, 2020 to $544.7 million at September 30, 2021.

We regularly evaluate our liquidity and capital resources, including our access to external capital, to ensure we can adequately meet our principal cash requirements, which include working capital requirements, planned capital investments in our business, commitments, acquisition restructuring and integration expenses, investments in quality systems and quality compliance objectives, payment of interest expense, repayment of outstanding borrowings, income tax obligations and acquisition opportunities in accordance with our growth strategy.

Sources of Liquidity

Our primary sources of liquidity are cash and cash equivalents, our short-term investment portfolio, cash flows from our operations and access to borrowing arrangements.

Funds generated from operations are held in cash and cash equivalents and investment securities.

During the three months ended March 31, 2022, our cash and cash equivalents and short-term investment securities decreased by $223.0 million from $567.2 million at December 31, 2021 to $344.3 million at March 31, 2022, which was primarily due to our use of existing cash balances to partially fund the Smiths Medical acquisition in January 2022.

Our short-term investment portfolio consists of investment-grade corporate bonds and is primarily intended to facilitate capital preservation.

2022 Credit Agreement and Access to Capital

We entered into the Credit Agreement with various lenders on January 6, 2022 in connection with the closing of the Smiths Medical acquisition.

The Credit Agreement provides for a five-year term loan A facility of $850.0 million (the "Term Loan A"), a seven-year term loan B facility of $850.0 million (the "Term Loan B") and a five-year revolving credit facility of $500.0 million (the "Revolving Credit Facility") (collectively, the "Senior Secured Credit Facilities").

The proceeds from the term loans were used to finance a portion of the cash consideration for the Smiths Medical acquisition.

The outstanding aggregate principal amount of the term loans is $1.7 billion as of March 31, 2022, which includes the Term Loan A that will mature in January 2027 and the Term Loan B that will mature in January 2029.

The proceeds of future borrowings under the Revolving Credit Facility, which expires in January 2027, may be used as a source of liquidity to support our ongoing working capital requirements and other general corporate purposes.

There are no outstanding borrowings under the Revolving Credit Facility as of March 31, 2022.

As part of entering into the Senior Secured Credit Facilities, we were assigned issuer and Term Loan B credit ratings.

At the date of issuance of this report, our issuer and Term Loan B credit ratings assigned and outlook were as follows:

Issuer/Term Loan B

Credit Ratings Outlook

Moody's Ba3 Stable

Fitch BB/BBB- Stable

Standard & Poor's BB/BB Stable

The Credit Agreement contains financial covenants that pertain to the Term Loan A and the Revolving Credit Facility.

Specifically, we are required to maintain a Senior Secured Leverage Ratio of no more than 4.50 to 1.00 until June 30, 2024, with stepdowns to 4.00 to 1.00 thereafter, and an Interest Coverage Ratio of no less than 3.00 to 1.00 (defined and discussed in greater detail in Note 17:

Long-Term Debt to our accompanying condensed consolidated financial statements).

We were in compliance with these financial covenants as of March 31, 2022.

2017 Credit Facility

On November 8, 2017, we entered into a five-year revolving credit facility with various lenders for $150.0 million (the "Prior Credit Facility").

The Prior Credit Facility, which was set to expire in November 2022, was terminated upon entering into the new Senior Secured Credit Facilities.

There were no outstanding borrowings under the Prior Credit Facility at the time of its termination.

We believe that our existing cash and cash equivalents along with cash flows expected to be generated from future operations and the funds received and accessible under the Senior Secured Credit Facilities will provide us with sufficient liquidity to finance our cash requirements for the next twelve months.

In the event that we experience downturns, cyclical fluctuations in our business that are more severe or longer than anticipated, fail to achieve anticipated revenue and expense levels, or have significant unplanned cash expenditures, we may need to obtain or seek alternative sources of capital or financing, and we can provide no assurances that the terms of such capital or financing will be available to us on favorable terms, if at all.

Our ability to generate cash flows from operations, issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers, deterioration in our key financial ratios or credit ratings or other significantly unfavorable changes in conditions.

"Risk Factors” in our 2021 Annual Report on Form 10-K for discussion of the risks and uncertainties associated with our debt financing.

Uses of Liquidity

Capital Expenditures

At March 31, 2022, there have been no material changes to our estimate for 2022 planned capital expenditures, as previously disclosed in our 2021 Annual Report on Form 10-K.

Contractual Obligations

Our principal commitments at March 31, 2022 include both short and long-term future obligations.

Operating Leases

We have non-cancelable operating lease agreements where we are contractually obligated for certain lease payment amounts.

We assumed additional operating leases as a result of our acquisition of Smiths Medical.

For more information regarding our operating lease obligations, (see Note 6:

Leases to our accompanying condensed consolidated financial statements).

Long-term Debt

As discussed above, in January 2022, we incurred borrowings under Senior Secured Credit Facilities.

The principal repayment obligations and estimated interest payments on the term loans and estimated commitment fee payments on the revolver are estimated in the table below.

Interest payments on the term loans were estimated using an Adjusted Term SOFR rate and an initial applicable margin of 1.75% for Term Loan A and 2.50% for Term Loan B and the revolver commitment fees were estimated using the initial rate of 0.25%.

The applicable margin rate and commitment fee rate will change from time to time in accordance with a preset pricing grid based on the leverage ratio (see Note 17:

Long-Term Debt to our accompanying condensed consolidated financial statements for pricing grids related to the Senior Secured Credit Facilities).

We expect to fund these obligations with our existing cash and cash equivalents and cash generated from our future operations.

(in millions)

Remainder of 2022 2023 2024 2025 2026 2027 Thereafter

Term Loan A Principal Payments $ — $ 21.2 $ 42.5 $ 42.5 $ 63.8 $ 664.0 $ —

Term Loan A Interest Payments 25.3 39.0 34.6 29.8 26.7 0.3 —

Term Loan B Principal Payments 6.4 8.5 8.5 8.5 8.5 8.5 801.1

Term Loan B Interest Payments 32.5 44.9 43.4 40.8 39.0 38.4 41.1

Revolver Commitment Fee 0.9 1.2 1.0 0.8 0.8 0.2 —

$ 65.1 $ 114.8 $ 130.0 $ 122.4 $ 138.8 $ 711.4 $ 842.2

Minimum Purchase Obligations

On February 1, 2022, effective as of January 1, 2022, upon our request, Pfizer executed a Product Addendum (the "Product Addendum") to our Manufacturing and Supply Agreements to supply us with additional product subject to certain time and pricing terms and conditions (see Note 20:

Collaborative and Other Arrangements to our accompanying condensed consolidated financial statements for additional information).

As of March 31, 2022, we had satisfied the minimum purchase obligations under the Product Addendum.

The Product Addendum expires on November 30, 2022.

Other Future Capital Investments

At March 31, 2022, there have been no material changes to our estimate for restructuring and integration expenses along with spending to support quality systems and quality compliance objectives, as previously disclosed in our 2021 Annual Report on Form 10-K.

Indemnifications

In the normal course of business, we have agreed to indemnify our officers and directors to the maximum extent permitted under Delaware law and to indemnify customers as to certain intellectual property matters related to sales of our products.

There is no maximum limit on the indemnification that may be required under these agreements.

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

Historical Cash Flows

Cash Flows from Operating Activities

Our net cash provided by operations for the nine months ended September 30, 2021 was $184.9 million.

Our net cash used in operations for the three months ended March 31, 2022 was $1.3 million.

Net income plus adjustments for non-cash net expenses contributed $49.9 million.

Net cash used in operations as a result of changes in operating assets and liabilities was $51.3 million.

The changes in operating assets and liabilities included a $13.6 million increase in other assets, a $10.4 million decrease in accounts payable, a $8.3 million decrease in accrued liabilities and $1.9 million in net changes in income taxes, including excess tax benefits and deferred income taxes.

Offsetting these amounts was a $16.5 million decrease in inventories, a $3.8 million decrease in accounts receivables and a $3.6 million decrease in prepaid expenses and other assets.

The increase in other assets was due to the purchase of spare parts.

The decrease in accounts payable was due to the timing of payments.

The decrease in accrued liabilities was primarily due to the payment of operating lease liabilities and annual bonuses.

The changes in operating assets and liabilities included a $36.2 million increase in inventories, a $14.4 million increase in other assets, a $19.2 million decrease in accrued liabilities and $26.1 million in net changes in income taxes, including excess tax benefits and deferred income taxes.

Offsetting these amounts was a $22.5 million decrease in accounts receivable, a $2.6 million decrease in prepaid expenses and other current assets and a $19.5 million increase in accounts payable.

The increase in inventory was primarily due to the increase in safety stock.

The increase in other assets was due to the purchase of spare parts and the capitalization of debt issuance costs allocated to the revolving credit facility.

The decrease in accrued liabilities was primarily due to the payout of annual bonuses.

The net changes in income taxes was a result of the timing of payments.

The decrease in inventory was primarily due to the timing of production and customer purchases combined with the reduction in capitalized manufacturing variances.

The decrease in accounts receivable is primarily due to collection efforts.

The net decrease in prepaid expenses and other current assets was primarily due to a decrease in prepaid insurance and property taxes, decreased sales tax receivables and a decrease in deferred costs, offset partially by an increase in annual software and service contract renewals.

Our net cash provided by operations for the nine months ended September 30, 2020 was $144.2 million.

The decrease in accounts receivable is primarily due to collection efforts and the timing of revenue.

The net decrease in prepaid expenses and other current assets was primarily due to a decrease in deferred costs mostly offset by capitalized debt issuance costs allocated to the revolving credit facility.

The increase in accounts payable was due to the timing of payments.

Our net cash provided by operations for the three months ended March 31, 2021 was $51.3 million.

Net income plus adjustments for non-cash net expenses contributed $56.9 million.

Net cash used in operations as a result of changes in operating assets and liabilities was $5.6 million.

The changes in operating assets and liabilities included a $38.0 million decrease in accounts payable, a $20.4 million decrease in accrued liabilities, a $12.1 million increase in other assets, a $6.5 million increase in prepaid expenses, and $0.7 million in net changes in income taxes, including excess tax benefits and deferred income taxes.

Offsetting these amounts was a $38.9 million decrease in accounts receivables and a $8.9 million decrease in inventories.

The decrease in accounts payable was due to the timing of payments.

The decrease in accrued liabilities was due to the payment of accrued supply chain reorganization costs.

The changes in operating assets and liabilities included a $20.0 million decrease in accrued liabilities, a $3.5 million increase in other assets and a $0.7 million increase in prepaid expenses and other assets.

Offsetting these amounts was a $13.2 million decrease in inventories, a $2.4 million increase in accounts payable, a $1.5

million decrease in accounts receivable and $1.4 million in net changes in income taxes, including excess tax benefits and deferred income taxes.

The decrease in accrued liabilities was primarily due to the payment of annual bonuses.

The net increase in prepaid expenses and other current assets was primarily due to the payment of annual software renewals, offset by the amortization of prepaid insurance and property taxes.

The increase in other assets was due to the purchase of spare parts.

The increase in prepaid expenses and other current assets was primarily due to an increase in deferred costs.

The net changes in income taxes was a result of the timing of payments.

The decrease in inventory was primarily due to improved inventory management.

decrease in inventory was primarily due to the timing of production and customer purchases combined with the reduction in capitalized manufacturing variances.

The increase in accounts payable was due to the timing of payments.

The decrease in accounts receivable is primarily due to collection efforts.

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The following table summarizes the changes in our investing cash flows (in thousands):

Nine months ended

September 30,

Three months ended

2022 2021 Change

Investing Cash Flows:

Purchases of property and equipment $ (46,464) $ (62,362) $ 15,898 (1)

Purchases of property, plant and equipment $ (23,606) $ (14,028) $ (9,578) (1)

Proceeds from sale of assets 900 55 845

Business acquisitions, net of cash acquired (1,844,164) — (1,844,164) (2)

Intangible asset additions (2,387) (1,874) (513)

Investments in non-marketable equity securities (3,250) — (3,250) (3)

Purchases of investment securities (1,993) (10,034) 8,041 (3)

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_______________________________

(1) Our purchases of property and equipment will vary from period to period based on additional investments needed to support new and existing products and expansion of our manufacturing facilities.

(2) In September 2021, we recorded a $7.1 million intangible asset related to a three-year non-compete agreement, of which $3.1 million was non-cash offset with a contingent earn-out (see Note 8:

Fair Value Measurements).

(3) In September 2021, we paid $3.3 million to acquire approximately a 20% non-marketable equity interest in a non public company.

(4) Our purchases of investment securities will vary from period to period based on current cash needs, planning for known future transactions and due to changes in our investment strategy.

(5) Proceeds from the sale or maturity of our investment securities will vary from period to period based on the maturity dates of the investments we currently hold.

While we can provide no assurances, we estimate that our capital expenditures in 2021 will be approximately $70.0 million to $75.0 million.

We anticipate making additional investments in machinery and equipment in our manufacturing operations in the U.S., Costa Rica, and Mexico to support new and existing products and in infusion pumps that are placed with customers outside the U.S.

We expect to use our cash and cash equivalents to fund our capital purchases.

Amounts of spending are estimates and actual spending may substantially differ from those amounts.

(1) Our purchases of property, plant and equipment increased during the quarter due to the acquisition of Smiths Medical and will also vary from period to period based on additional investments needed to support new and existing products and expansion of our manufacturing facilities.

(2) Our business acquisitions will vary from period to period based upon our current growth strategy and our ability to execute on desirable target companies.

On January 6, 2022, we completed the acquisition of Smiths Medical.

The cash consideration for the transaction was $1.9 billion, which was financed with existing cash balances and borrowings under the Credit Agreement.

Acquired cash was $78.8 million.

(3) Our purchases of investment securities will vary from period to period based on current cash needs, planning for known future transactions and changes in our investment strategy.

(4) Proceeds from the sale of our investment securities will vary from period to period based on the maturity dates of the investments.

Cash Flows from Financing Activities

The following table summarizes the changes in our financing cash flows (in thousands):

Nine months ended

September 30,

Three months ended

2022 2021 Change

Financing Cash Flows:

Proceeds from short-term debt $ — $ 150,000 $ (150,000) (1)

Repayment of short-term debt — (150,000) 150,000 (1)

Proceeds from issuance of long-term debt, net of lender debt issuance costs $ 1,672,698 $ — $ 1,672,698 (1)

Principal payments on long-term debt (16,000) — (16,000) (2)

Payment of third-party debt issuance costs (1,852) — (1,852) (2)

Proceeds from exercise of stock options 2,974 4,864 (1,890) (3)

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Tax withholding payments related to net share settlement of equity awards (8,743) (7,723) (1,020) (4)

Net cash used in financing activities $ (1,591) $ (4,466) $ 2,875

Net cash provided by (used in) financing activities $ 1,648,917 $ (3,000) $ 1,651,917

_______________________________

(1) During March 2020, as a result of market uncertainty caused by COVID-19, we borrowed $150.0 million under our revolving Credit Facility.

We fully repaid the amounts borrowed under our revolving Credit Facility in September 2020.

(1) In January 2022, we borrowed an aggregate of $1.7 billion under Senior Secured Credit Facilities contained in the Credit Agreement to partially finance our acquisition of Smiths Medical (see Note 17:

Long-Term Debt to our accompanying condensed consolidated financial statements for additional information).

The proceeds are net of $27.3 million in payments of lender debt issuance costs.

(2) Payment of $16.0 million of principal payments on the Senior Secured Credit Facilities and $1.9 million in third-party debt issuance costs.

(3) Proceeds from the exercise of stock options will vary from period to period based on the volume of options exercised and the exercise price of the specific options exercised.

(3) During the nine months ended September 30, 2021, our employees surrendered 39,371 shares of our common stock from vested restricted stock awards as consideration for approximately $8.1 million in minimum statutory withholding

obligations paid on their behalf.

During the nine months ended September 30, 2020, our employees surrendered 66,749 shares of our common stock from vested restricted stock awards as consideration for approximately $12.8 million in minimum statutory withholding obligations paid on their behalf.

In August 2019, our Board of Directors approved a share purchase plan to purchase up to $100.0 million of our common stock.

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

As of September 30, 2021, all of the $100 million available for purchase was remaining under the plan.

We have a substantial cash and investment security position generated from operations.

We maintain this position to address any operational challenges related to COVID-19, fund our growth, meet increasing working capital requirements, fund capital expenditures and to take advantage of acquisition opportunities that may arise.

Our primary investment goal is capital preservation.

Definitive Agreement to Purchase Smiths Medical 2020 Limited

As mentioned above, we entered into a definitive agreement to acquire Smiths Medical 2020 Limited.

The purchase price includes the payment of $1.9 billion in cash, a potential contingent earn-out of $100.0 million and the issuance of 2.5 million fully paid and non-assessable shares of our common stock.

During September 2021, we entered into a debt commitment letter pursuant to which we will be provided with senior secured credit facilities of up to $2.0 billion consisting of a term loan A facility of $850.0 million, a term loan B facility of $850.0 million and a revolving credit facility of $300.0 million.

In October 2021, the debt commitment related to the term loan A and revolving credit facility was syndicated to a broader group of Committed Parties.

As part of the syndication process, the size of the revolving credit facility was increased from $300.0 million to $500.0 million.

The proceeds from the new credit facilities will be used to partially finance the Smiths acquisition.

We expect the new credit facilities to be available near or on the closing date of the Smiths acquisition.

Access to Capital

We believe that our existing cash and cash equivalents along with funds expected to be generated from future operations and the funds received under the Credit Facilities in connection with financing the Smiths acquisition will provide us with sufficient funds to finance our current operations for the next twelve months.

Credit Facility

We have a five-year Credit Facility with various lenders for $150.0 million, with Wells Fargo Bank, N.A.

as the administrative agent (see Note 16:

Long-Term Obligations).

The Credit Facility has an accordion feature that would enable us to increase the borrowing capacity of the Credit Facility by the greater of (i) $100.0 million and (ii) 2.00x Total Leverage.

Under the terms of the Credit Facility, we will be subject to certain financial covenants pertaining to leverage and fixed charge coverage ratios.

Borrowings under the Credit Facility will bear interest at LIBOR plus an applicable margin tied to the leverage ratio in effect.

Any unused portion of the Credit Facility will be subject to a per annum commitment fee which is also calculated using the leverage ratio in effect.

The Credit Facility matures in November 2022.

During March 2020, as a precautionary measure in response to market uncertainty driven by the COVID-19 pandemic, we preemptively increased our liquidity by borrowing $150.0 million under our Credit Facility.

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

Our current Credit Facility will be refinanced in full with the consummation of the Smiths acquisition.

We expect to enter into a new credit facility at or near the closing of the Smiths acquisition which we anticipate will include a new revolving credit facility of $500.0 million (see Note 20, Acquisitions).

Financial Covenants

The Credit Facility contains certain negative financial covenants, including, Consolidated Total Leverage and Consolidated Fixed Charge Coverage Ratios.

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.

The maximum Consolidated Leverage Ratio is not more than 3.00 to 1.00.

The Consolidated Fixed Charge Coverage Ratio is defined as the ratio of:

(a) Consolidated Adjusted EBITDA less the sum of (i) capital expenditures, (ii) federal, state, local and foreign income taxes paid in cash and (iii) cash restricted payments made after the closing date, to (b) Consolidated Fixed Charges for the most recently completed four fiscal quarters, calculated on a pro forma basis.

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

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

Off-Balance Sheet Arrangements

There is no maximum limit on the indemnification that may be required under these agreements.

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

Contractual Obligations

There have been no material changes to our contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 ("Annual Report"), except with respect to our purchase obligations in connection with the Smiths transaction.

Pursuant to the Purchase Agreement, we expect to purchase the entire share capital of Smiths for $1.9 billion in cash, the issuance of 2.5 million fully paid and non-assessable shares of our common stock, par value $0.10 per share and a potential contingent earn-out of $100.0 million in cash, which is to be based upon our common stock achieving a certain volume.

We expect to finance this acquisition with senior secured credit facilities of up to $2.2 billion consisting of a term loan A facility of $850.0 million, a term loan B facility of $850 million and a revolving credit facility of $500.0 million.

(4) During the three months ended March 31, 2022, our employees surrendered 37,279 shares of our common stock from vested restricted stock awards as consideration for approximately $8.7 million in minimum statutory withholding obligations paid on their behalf.

During the three months ended March 31, 2021, our employees surrendered 37,423 shares of our common stock from vested restricted stock awards as consideration for approximately $7.7 million in minimum statutory withholding obligations paid on their behalf.

Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was approved by our Board of Directors in August 2019.

This plan has no expiration date.

As of March 31, 2022, all of the $100.0 million available for purchase was remaining under the plan.

Critical Accounting Policies

In our Annual Report, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements, there have been no material changes to our critical accounting policies from those previously disclosed in our Annual Report.

In our 2021 Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements.

There have been no material changes to our critical accounting policies from those previously disclosed in our 2021 Annual Report on Form 10-K.

New Accounting Pronouncements

See Note 2 to Part I, Item 1.

New Accounting Pronouncements in Part I, Item 1.

"Financial Statements."

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increases in systems capabilities;

introduction, development and sales of new products, acquisition and integration of businesses and product lines (including the Smiths business);

introduction, development and sales of new products, acquisition and integration of businesses and product lines (including Smiths Medical);

benefits of our products over competing systems;

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loss of larger distributors and the ability to locate other distributors;

impact of our pending acquisition of the Smiths business;

growth of our Clave products in future years;

design features of Clave products;

impact of our recently completed acquisition of the Smiths Medical business;

the outcome of our strategic initiatives;

regulatory approvals and compliance;

including the work necessary to achieve regulatory clearance with respect to the Smiths Medical Warning Letter;

outcome of litigation;

21 unchanged sentences

Those factors are uncertain, and if one or more of them turn out differently than we currently expect, our operating results may differ materially from our current expectations.

Second, investors should read the forward looking statements in conjunction with the Risk Factors discussed in Part I, Item 1A of our Annual Report on Form 10-K with the SEC for the year ended December 31, 2020, Part II, Item 1A of this Quarterly Report on Form 10-Q and our other reports filed with the SEC.

Second, investors should read the forward-looking statements in conjunction with the Risk Factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, Part II, Item 1A of this Quarterly Report on Form 10-Q and our other reports filed with the Securities and Exchange Commission ("SEC").

Also, actual future operating results are subject to other important factors and risks that we cannot predict or control, including without limitation, the following:

• the impacts of the COVID-19 pandemic on us, our business and on domestic and global economies generally;

• the integration of Smiths Medical being more difficult, time-consuming or costly than expected;

• general economic and business conditions, both in the U.S.

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• fluctuations in foreign exchange rates and other risks of doing business internationally;

• increases in labor costs or competition for skilled workers;

• increases in costs or availability of the raw materials need to manufacture our products;

• increased competition for skilled workers;

• decreases in availability of the raw materials needed to manufacture our products;

• the effect of price and safety considerations on the healthcare industry;

6 unchanged sentences

• unanticipated production problems;

• acquisition and integration expenses (including as it relates to the Smiths acquisition);

• acquisition and integration expenses (including as it relates to the Smiths Medical acquisition);

• the availability of patent protection and the cost of enforcing and of defending patent claims;

• natural disasters and outbreak of disease or illness;

The forward-looking statements in this report are subject to additional risks and uncertainties, including those detailed from time to time in our other filings with the Securities and Exchange Commission.

• supply chain constraints or disruptions;

• impact of inflation on raw materials, freight charges and labor, especially in the U.S.;

• interest rate increases.

The forward-looking statements in this report are subject to additional risks and uncertainties, including those detailed from time to time in our other filings with the SEC.

These forward-looking statements are made only as of the date hereof and, except as required by law, we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

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 2. Management’s Discussion and Analysis