What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-09 · 113 added, 89 removed, 431 unchanged (32% of the section changed)

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The following information should be read in conjunction with the condensed consolidated financial statements and accompanying notes in this Form 10-Q, as well as the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2021 included in our Annual Report on Form 10-K.

When used in this report, the terms “we,” “us,” and “our” refer to ICU Medical, Inc ("ICU") and its subsidiaries included in our condensed consolidated financial statements unless context requires otherwise.

When used in this report, the terms “we,” “us,” and “our” refer to ICU Medical, Inc.

("ICU") and its subsidiaries included in our condensed consolidated financial statements unless context requires otherwise.

Business Overview

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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.

See "Acquisitions" below 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.

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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 as Moog Medical and Fresenius.

The Vascular Access 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 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.

The Vital Care product line of Smiths Medical competes with numerous competitors due to 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.

As of June 30, 2022, our primary product offerings by product line are listed below.

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

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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.

The fair value of the common shares issued to Smiths was determined based on the opening 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.

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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:

"Financial Statements." The following table shows, for the three and six months ended June 30, 2022 and 2021, the percentages of each income statement caption in relation to total revenue:

Three months ended

June 30, Six months ended

2022 2021 2022 2021

Total revenues 100 % 100 % 100 % 100 %

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Restructuring, strategic transaction and integration expenses 2 % 1 % 4 % 1 %

Change in fair value of contingent earn-out (5) % — % (2) % — %

Contract settlement — % — % — % — %

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Three months ended

2022 2021 $ Change % Change

June 30, Six months ended

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Infusion Consumables $ 144.5 $ 136.2 $ 8.3 6.1 % $ 285.0 $ 262.6 $ 22.4 8.5 %

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 Consumables revenue increased for the three and six months ended June 30, 2022, as compared to the same periods in the prior year, due to increased customer demand in our global core infusion, global oncology and renal products.

On a constant currency basis, Infusion Consumables revenue would have been $148.6 million, an increase of $12.4 million or 9.1% and $291.1 million, an increase of $28.5 million or 10.9%, for the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year.

Infusion Systems

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2022 2021 $ Change % Change

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2022 2021 $ Change % Change 2022 2021 $ Change % Change

Infusion Systems $ 87.3 $ 84.7 $ 2.6 3.1 % $ 174.3 $ 169.0 $ 5.3 3.1 %

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.

Infusion Systems revenue increased for the three and six months ended June 30, 2022, as compared to the same periods 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 $90.0 million, an increase of $5.3 million or 6.3%, and $178.7 million, an increase of $9.7 million or 5.7%, for the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year.

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

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2022 2021 $ Change % Change 2022 2021 $ Change % Change

IV Solutions $ 94.1 $ 88.4 $ 5.7 6.4 % $ 182.6 $ 182.6 $ — — %

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.

IV Solutions revenue increased for the three months ended June 30, 2022, as compared to the same period in the prior year, primarily due to an increase in contract manufacturing sales to Pfizer.

For the six months ended June 30, 2022, IV Solutions revenue was flat as compared to the same period in the prior year.

Critical Care

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2022 2021 $ Change % Change

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2022 2021 $ Change % Change 2022 2021 $ Change % Change

Critical Care $ 12.3 $ 12.4 $ (0.1) (0.8) % $ 24.5 $ 25.5 $ (1.0) (3.9) %

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

Critical Care revenue decreased slightly for the three and six months ended June 30, 2022, as compared to the same periods in the prior year.

Infusion Systems-Smiths Medical

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2022 2021 $ Change % Change

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

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2022 2021 $ Change % Change 2022 2021 $ Change % Change

Infusion Systems-Smiths Medical $ 77.8 $ — $ 77.8 nm $ 144.1 $ — $ 144.1 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.

The year-to-date amount in the table above represents approximately six months of revenue from the closing date of the transaction to the end of the current quarter ended June 30, 2022.

Revenues in the current periods are lower than historical results due to operational challenges caused by supply chain and fulfillment constraints.

Vascular Access-Smiths Medical

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2022 2021 $ Change % Change

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

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2022 2021 $ Change % Change 2022 2021 $ Change % Change

Vascular Access-Smiths Medical $ 77.1 $ — $ 77.1 nm $ 156.1 $ — $ 156.1 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.

The year-to-date amount in the table above represents approximately six months of revenue from the closing date of the transaction to the end of the current quarter.

Revenues in the current periods are lower than historical results due to operational challenges caused by supply chain and fulfillment constraints.

Vital Care-Smiths Medical

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

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2022 2021 $ Change % Change 2022 2021 $ Change % Change

Vital Care-Smiths Medical $ 68.0 $ — $ 68.0 nm $ 137.6 $ — $ 137.6 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.

The year-to-date amount in the table above represents approximately six months of revenue from the closing date of the transaction to the end of the current quarter.

Revenues in the current periods are lower than historical results due to operational challenges caused by supply chain and fulfillment constraints.

Gross Margins

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.

For the three months ended June 30, 2022 and 2021, gross margins were 29.9% and 38.4%, respectively.

For the six months ended June 30, 2022 and 2021, gross margins were 30.5% and 36.9%, respectively.

The decrease in gross margins for the three and six months ended June 30, 2022, as compared to the same period in the prior year, was driven by the acquisition of Smiths Medical, inflationary cost increases in our supply chain, and lower manufacturing absorption due to supply chain disruptions.

Smiths Medical gross margins are lower than historical ICU margins for the current quarter and year-to-date period due primarily to spending on quality systems and product-related remediation, the cost recognition of the purchase accounting write-up of inventory and freight costs.

The inflationary cost increases during 2022 notably impacted our freight rates as well as, labor and materials costs.

Partially offsetting the decreases to gross margins in the current periods was the impact from increased sales of higher margin consumables.

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

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SG&A $ 158.7 $ 73.9 $ 84.8 114.7 % $ 312.0 $ 146.3 $ 165.7 113.3 %

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.

SG&A expenses increased for the three and six months ended June 30, 2022, as compared to the same periods in the prior year.

For the three and six months ended June 30, 2022, increases of $83.5 million and $156.3 million, respectively, was due to the impact of the Smiths Medical acquisition.

Expense increases related to Smiths Medical included, $28.1 million of salaries and benefits and $33.6 million of depreciation and amortization expense for the three months ended June 30, 2022 and

$56.2 million of salaries and benefits and $58.8 million of depreciation and amortization expense for the six months ended June 30, 2022.

Research and Development (“R&D”) Expenses

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R&D $ 22.6 $ 11.4 $ 11.2 98.2 % $ 46.4 $ 22.1 $ 24.3 110.0 %

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 increased for the three and six months ended June 30, 2022, as compared to the same periods in the prior year primarily due to the acquisition of Smiths Medical.

For the three and six months ended June 30, 2022, the increase included $9.3 million and $21.1 million, respectively, 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, strategic transaction and integration expenses were $13.5 million and $47.4 million for the three and six months ended June 30, 2022, respectively, as compared to $3.8 million and $6.6 million for the three and six months ended June 30, 2021, respectively.

Restructuring charges

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.

Restructuring charges were $1.7 million and $4.9 million for the three and six months ended June 30 2022, respectively, and were related to severance costs.

We expect to pay unpaid restructuring charges as of June 30, 2022 by the end of 2022.

Restructuring charges were $0.1 million for both the three and six months ended June 30, 2021.

Strategic transaction and integration expenses

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.

Strategic transaction and integration expenses were $11.8 million and $42.5 million for the three and six months ended June 30, 2022, respectively, as compared to $3.7 million and $6.5 million for the three and six months ended June 30, 2021, respectively.

The strategic transaction and integration expenses during the three and six months ended June 30, 2022 were primarily related to our acquisition of Smiths Medical which primarily included legal expenses, bank fees and employee costs.The strategic transaction and integration expenses during the six months ended June 30, 2022 also included a United Kingdom stamp tax.

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.

Contract Settlement

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.

We did not incur contract settlement expense for the three and six months ended June 30, 2022.

For the three and six months ended June 30, 2021, we recorded $0.1 million in contract settlement expense.

Interest Expense

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:

Interest expense was $16.3 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively.

Interest expense was $29.9 million and $0.3 million for the six months ended June 30, 2022 and 2021, respectively.

Interest expense for the three and six months ended June 30, 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.

Interest expense for the three and six months ended June 30, 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.

Other (expense) income netted to $(0.5) million and $0.5 million for the three and six months ended June 30, 2022, respectively, as compared to $0.5 million and $1.2 million for the three and six months ended June 30, 2021, respectively.

For the three months ended June 30, 2022, other expense, net was related to $2.7 million in foreign exchange losses and $0.6 million of loss from disposed assets, mostly offset by $2.0 million of miscellaneous income and $0.8 million of interest income.

For the six months ended June 30, 2022, other income, net was related to $2.6 million of miscellaneous income and $1.4 million of interest income, partially offset by $2.5 million in foreign exchange losses and $1.0 million of loss from disposed assets.

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

For the six months ended June 30, 2021, the other income, net was related to $1.4 million of interest income, $0.4 million of miscellaneous income and $0.3 million in foreign exchange gains, partially offset by $0.8 million of loss from disposed assets.

For the three months ended June 30, 2020, the other income, net was primarily related to $1.5 million in foreign exchange gains.

For the three months ended June 30, 2022 and 2021, income taxes were accrued at an estimated effective tax rate of 56% and 18%, respectively.

For the six months ended June 30, 2022 and 2021, income taxes were accrued at an estimated effective tax rate of 36% and 16%, respectively.

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

The effective tax rate during the three and six months ended June 30, 2022 included a tax benefit of $0.0 million and $2.6 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 six months ended June 30, 2022 also included a nil tax impact of the revaluation of contingent consideration.

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, GILTI, FDII and 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.

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

Liquidity and Capital Resources

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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.

During the six months ended June 30, 2022, our cash and cash equivalents and short-term investment securities decreased by $298.4 million from $567.2 million at December 31, 2021 to $268.9 million at June 30, 2022, which was primarily due to our use of existing

cash balances to partially fund the Smiths Medical acquisition in January 2022 and due to building inventory safety stock levels to respond to supply chain constraints.

Our short-term investment portfolio consists of investment-grade corporate bonds and U.S.

treasury securities and is primarily intended to facilitate capital preservation.

2022 Credit Agreement and Access to Capital

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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 outstanding aggregate principal amount of the term loans is $1.7 billion as of June 30, 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.

There are no outstanding borrowings under the Revolving Credit Facility as of June 30, 2022.

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

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

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

We were in compliance with these financial covenants as of June 30, 2022.

2017 Credit Facility

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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.

At June 30, 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.

Our principal commitments at June 30, 2022 include both short and long-term future obligations.

Operating Leases

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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.

As of June 30, 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.

At June 30, 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

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Cash Flows from Operating Activities

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

Our net cash used in operations for the six months ended June 30, 2022 was $62.7 million.

Net income plus adjustments for non-cash net expenses contributed $108.2 million.

Net cash used in operations as a result of changes in operating assets and liabilities was $170.9 million.

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 changes in operating assets and liabilities included a $100.0 million increase in inventories, a $17.3 million increase in other assets, a $33.5 million decrease in accrued liabilities and $45.8 million in net changes in income taxes, including excess tax benefits and deferred income taxes and a $1.1 million increase in accounts receivable.

Offsetting these amounts was a $4.7 million decrease in prepaid expenses and other current assets and a $22.1 million increase in accounts payable.

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

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

The net changes in income taxes was a result of recording the current deferred provision and the timing of payments.

The increase 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.

Our net cash provided by operations for the six months ended June 30, 2021 was $106.1 million.

Net income plus adjustments for non-cash net expenses contributed $122.2 million.

Net cash used in operations as a result of changes in operating assets and liabilities was $16.1 million.

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 changes in operating assets and liabilities included a $17.1 million decrease in accrued liabilities, a $7.6 million increase in other assets, $6.0 million in net changes in income taxes, including excess tax benefits and deferred income taxes and a $1.6 million decrease in accounts payable.

Offsetting these amounts was a $13.4 million decrease in inventories, a $2.1 million decrease in accounts receivables, and a $0.8 million decrease in prepaid expenses and other assets.

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

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

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 payable was due to 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 changes in income taxes was a result of the timing of payments.

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

Cash Flows from Investing Activities

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

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

Includes $19.0 million in proceeds received during the second quarter of 2022 from a promissory note related to an acquired investment as part of the Smiths Medical acquisition.

Cash Flows from Financing Activities

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

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(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.

(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.

(4) During the six months ended June 30, 2022, our employees surrendered 44,759 shares of our common stock from vested restricted stock awards as consideration for approximately $10.4 million in minimum statutory withholding obligations paid on their behalf.

During the six months ended June 30, 2021, our employees surrendered 37,882 shares of our common stock from vested restricted stock awards as consideration for approximately $7.8 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.

As of June 30, 2022, all of the $100.0 million available for purchase was remaining under the plan.

Critical Accounting Policies

119 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis