What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-27 · 433 added, 362 removed, 1351 unchanged (37% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Report s of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 202 3 and 202 2

23 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Chargeback Reserve — Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue for product sales net of a reserve for estimated chargebacks.

The Company recognizes revenue and the related accounts receivable for product sales, net of a reserve for estimated chargebacks.

Chargebacks are the difference between prices the Company charges distribution customers and contracted prices the Company has with the end-customer which are processed as credits to the distribution customers.

Chargebacks are accounted for as variable consideration when determining the transaction price for purposes of recognizing revenue.

The Company estimates and reserves for chargebacks as a reduction of revenue at the time of sale to its distribution customers using information available at that time, including historical experience.

Accounts receivable as of December 31, 2022 of $222 million and total revenues for the year ended December 31, 2022 of $2,280 million are recorded net of estimated chargebacks.

Given the subjectivity and complexity of evaluating management’s assumptions used in the determination of the chargeback reserve, including the chargeback amount related to monthly sales to distribution customers and the time to settle chargeback obligations, auditing the chargeback reserve requires a high degree of auditor judgment and an increased extent of effort.

Variable consideration is included in net sales only to the extent that a significant reversal in revenue is not probable when the uncertainty is resolved.

The Company estimates and reserves for chargebacks as a reduction of revenue and the related accounts receivable at the time of sale to its distribution customers using information available at that time, including historical experience.

Given the subjectivity and complexity of evaluating management’s assumptions used in the determination of the chargeback reserve, including the estimated chargeback amount for sales to distribution customers and the time to settle chargeback obligations, auditing the chargeback reserve requires a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

7 unchanged sentences

– Performing retrospective reviews comparing management's estimates of expected chargeback reserves to actual amounts incurred subsequent to the dates of estimation, to assess management's ability to reasonably estimate these obligations and to identify potential bias in management's assessment of the reserve.

Business Combination— Refer to Note 2 of the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Smiths Medical for $2.552 billion on January 6, 2022.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identifiable intangible assets totaling $945 million.

Of the identifiable intangible assets acquired, the most significant included Customer Relationships of $510 million and Developed Technology of $400 million.

The estimated fair value of identifiable intangible assets were developed using the income approach and are based on critical estimates, judgments and assumptions derived from:

analysis of market conditions;

discount rate;

discounted cash flows;

royalty rates;

and/or estimated useful lives.

We identified the purchase price accounting allocation as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of the identifiable intangible assets acquired.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our internal fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows and the selection of the discount rates for the identifiable intangible assets.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the business combination included the following, among others:

• We tested the effectiveness of controls over the valuation of the identifiable intangible assets, including management’s controls over forecasts of future cash flows and selection of the discount rates.

• We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and growth rates observed for similar businesses and/or peer companies, and evidence obtained in other areas of the audit.

• With the assistance of our fair value specialists, we also performed the following:

– We evaluated the reasonableness of the valuation methodologies selected.

– We tested the source information underlying the determination of the discount rates and tested the mathematical accuracy of the calculations.

/s/ DELOITTE & TOUCHE LLP

9 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 27, 2024, expressed an unqualified opinion on those financial statements.

As described in ‘Management’s Annual Report on Internal Control over Financial Reporting’, management excluded from its assessment the internal control over financial reporting at Smiths Medical, which was acquired on January 6, 2022, and whose financial statements constitute 40% of total assets and 42% of total revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2022.

Accordingly, our audit did not include the internal control over financial reporting at Smiths Medical.

Basis for Opinion

45 unchanged sentences

Income tax payable 7,714 6,200

Contingent earn-out liability 4,879 —

TOTAL CURRENT LIABILITIES 481,838 494,559

36 unchanged sentences

TOTAL OPERATING EXPENSES 717,048 740,659 368,245

(LOSS) INCOME FROM OPERATIONS ( 42,898 ) 123,245 98,162

INCOME (LOSS) FROM OPERATIONS 22,825 ( 42,898 ) 123,245

INTEREST (EXPENSE) INCOME, NET ( 95,219 ) ( 66,375 ) 1,982

24 unchanged sentences

603 1,203 ( 62 )

Other comprehensive (loss) income, net of tax ( 61,709 ) ( 17,747 ) 13,880

Other comprehensive income (loss), net of tax 27,897 ( 61,709 ) ( 17,747 )

COMPREHENSIVE (LOSS) INCOME $ ( 1,758 ) $ ( 135,995 ) $ 85,388

10 unchanged sentences

Stock compensation — — 27,341 — — — 27,341

Other comprehensive income, net of tax — — — — — 13,880 13,880

Other comprehensive loss, net of tax — — — — — ( 17,747 ) ( 17,747 )

Net income — — — — 103,135 — 103,135

2 unchanged sentences

Tax withholding payments related to net share settlement of equity awards ( 48 ) — — ( 10,883 ) — — ( 10,883 )

Issuance of common stock for acquisitions 2,500 250 575,725 — — 575,975

Stock compensation — — 36,025 — — — 36,025

Other comprehensive loss, net of tax — — ( 10 ) — — ( 61,709 ) ( 61,719 )

Net income — — — — 103,135 — 103,135

Net loss — — — — ( 74,286 ) — ( 74,286 )

Balance, December 31, 2022 23,995 2,399 1,331,249 ( 243 ) 837,501 ( 80,978 ) 2,089,928

1 unchanged sentence

Tax withholding payments related to net share settlement of equity awards ( 59 ) — — ( 9,350 ) — — ( 9,350 )

Issuance of common stock for acquisitions 2,500 250 575,725 — — — 575,975

Stock compensation — — 40,563 — — — 40,563

Other comprehensive loss, net of tax — — ( 10 ) — — ( 61,709 ) ( 61,719 )

Other comprehensive income, net of tax — — 5 — — 27,897 27,902

Net loss — — — — ( 29,655 ) — ( 29,655 )

16 unchanged sentences

Stock compensation 40,563 36,025 27,341

Loss (gain) on disposal or write-off of property, plant and equipment 2,010 1,652 ( 1,789 )

Gain on disposition of assets ( 374 ) — —

Loss on disposal or write-off of property, plant and equipment 2,109 2,010 1,652

Bond premium amortization 17 264 655

12 unchanged sentences

Income taxes, including excess tax benefits and deferred income taxes ( 82,356 ) ( 66,734 ) 874

Net cash (used in) provided by operating activities ( 62,129 ) 267,538 222,752

Net cash provided by (used in) operating activities 166,201 ( 62,129 ) 267,538

CASH FLOWS FROM INVESTING ACTIVITIES:

11 unchanged sentences

Payment of third-party debt issuance costs — ( 2,177 ) —

Proceeds from short-term debt — — 150,000

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

Proceeds from exercise of stock options 4,022 8,785 9,372

2 unchanged sentences

Tax withholding payments related to net share settlement of equity awards ( 9,350 ) ( 10,883 ) ( 8,335 )

Net cash provided by (used in) financing activities 1,637,032 ( 16,870 ) ( 40 )

Net cash (used in) provided by financing activities ( 35,979 ) 1,637,032 ( 16,870 )

Effect of exchange rate changes on cash 3,163 ( 9,478 ) ( 3,251 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 344,043 ) 156,730 127,427

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 45,438 ( 344,043 ) 156,730

CASH AND CASH EQUIVALENTS, beginning of period 208,784 552,827 396,097

27 unchanged sentences

ICU Medical, Inc.

("ICU" or "we"), a Delaware corporation, develops, manufactures and sells infusion systems, infusion consumables and high-value critical care products used in hospital, alternate site and home care settings.

Our wide-ranging 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.

We also 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.

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

ICU's business activities are interrelated and leverage shared manufacturing, supply chain, IT and other supporting infrastructure.

("ICU" or "we"), a Delaware corporation, develops, manufactures and sells innovative medical products used in infusion therapy, vascular access, and vital care applications.

ICU's product portfolio includes ambulatory, syringe, and large volume IV pumps and safety software;

dedicated and non-dedicated IV sets, needlefree IV connectors, peripheral IV catheters, and sterile IV solutions;

closed system transfer devices and pharmacy compounding systems;

as well as a range of respiratory, anesthesia, patient monitoring, and temperature management products.

All significant operating decisions are based on analysis of ICU as a single global business, accordingly, we operate in one business segment.

We sell the majority of our products globally through our direct sales force and through independent distributors.

Additionally, we sell our products on an original equipment manufacturer basis to other medical device manufacturers.

We sell the majority of our products globally through our direct sales force and through independent distributors throughout the U.S.

and internationally.

We also sell certain products on an original equipment manufacturer basis to other medical device manufacturers.

Basis of Presentation

4 unchanged sentences

These consolidated financial statements were prepared in accordance with accounting principles generally accepted in the U.S.

Certain reclassifications have been made to the prior year financial statements and footnotes to conform to the presentation used in the current year.

In the statements of operations we reclassified interest income to interest (expense) income, net from other income (expense), net and in Note 4:

Revenues, certain reclassifications were made to revenues disaggregated by geography.

These reclassifications had no impact on net (loss) income, shareholder's equity or cash flows as previously reported.

On January 6, 2022, we acquired Smiths Medical 2020 Limited ("Smiths Medical"), see Note 2:

Acquisitions.

Our consolidated statement of operations includes the results of operations for Smiths Medical from January 7, 2022 through December 31, 2022.

Certain reclassifications have been made to the prior year footnotes to conform to the presentation used in the current year.

In the statements of operations, we reclassified interest income to interest expense, net from other expense, net and in Note 4:

Revenues, certain reclassifications were made to revenues disaggregated by product line and by geography.

These reclassifications had no impact on total revenues, net loss, shareholder's equity or cash flows as previously reported.

Use of Estimates

4 unchanged sentences

Accounts Receivable

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts receivable are stated at net realizable value.

6 unchanged sentences

Inventories consist of the following (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31,

30 unchanged sentences

maintenance and repairs are expensed as incurred.

The costs and related accumulated depreciation applicable to property, plant and equipment sold or retired are

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

removed from the accounts and any gain or loss is reflected in the statements of operations at the time of disposal.

The costs and related accumulated depreciation applicable to property, plant and equipment sold or retired are removed from the accounts and any gain or loss is reflected in the statements of operations at the time of disposal.

Depreciation expense was $ 96.7 million, $ 95.8 million and $ 65.9 million in 2023, 2022 and 2021, respectively.

4 unchanged sentences

The market approach compares our reporting unit to similar companies with the assumption that companies operating in the same industry will share similar characteristics and that company values will correlate to those characteristics.

If the carrying amount of the reporting unit exceeds the reporting unit’s fair value, we recognize an impairment loss equal to the difference between the carrying amount and the estimated fair value of the reporting unit.

If the carrying amount of the reporting unit

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

exceeds the reporting unit’s fair value, we recognize an impairment loss equal to the difference between the carrying amount and the estimated fair value of the reporting unit.

We concluded that there was no impairment of goodwill during fiscal 2023, 2022, or 2021.

1 unchanged sentence

Balance as of January 1, 2021 $ 33,001

Balance as of December 31, 2020 $ 33,001

Goodwill acquired (1)

4 unchanged sentences

Balance as of December 31, 2022 1,449,258

Currency translation 23,188

Balance as of December 31, 2023 $ 1,472,446

_______________________________

(1) In 2020, "Other" primarily relates to a $ 1.3 million measurement period adjustment to deferred taxes related to the 2019 acquisition of Pursuit Vascular, Inc.

and foreign currency translation.

(1) In 2021, we acquired a small foreign infusion systems supplier, which resulted in $ 10.6 million of goodwill.

5 unchanged sentences

Intangible assets, carried at cost less accumulated amortization and amortized on a straight-lined basis , were as follows (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Weighted-Average Amortization Life

14 unchanged sentences

* Internally developed software will be amortized when the projects are complete and the assets are ready for their intended use.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Weighted-Average Amortization Life

16 unchanged sentences

As of December 31, 2023, estimated annual amortization for our intangible assets for each of the next five years is approximately (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2024 $ 132,623

11 unchanged sentences

Investment Securities

Short-term investments, exclusive of cash equivalents, are marketable securities intended to be sold within one year and may include trading securities, available-for-sale securities, and held-to-maturity securities (if maturing within one year at the time of acquisition).

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the time of acquisition).

Long-term investments are marketable securities intended to be sold after one year and may include trading securities, available-for-sale securities, and held-to-maturity securities.

Investments in Available-for-sale Securities

Our investment securities are considered available-for-sale and currently consist of short and long-term corporate bonds, short-term U.S.

treasury securities and long-term government bonds.

Our investment securities are considered available-for-sale and consist of corporate bonds, U.S.

treasury securities, and government bonds.

These securities are considered “investment grade” and are carried at fair value.

9 unchanged sentences

There have been no realized gains or losses on the disposal of these investments.

The scheduled maturities of the debt securities are between 2023 and 2024.

The scheduled maturities of our current debt securities are in 2024.

All short-term investment securities are callable within one year.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our short-term and long-term investments in available-for-sale securities consist of the following (in thousands):

11 unchanged sentences

Short-term corporate bonds $ 2,314 $ — $ 2,314

Short-term U.S.

treasury securities 1,412 — 1,412

Short-term government bonds 498 — 498

Total short-term investment securities 4,224 — 4,224

Long-term corporate bonds 516 — 516

2 unchanged sentences

During the third quarter of 2021, we acquired approximately a 20.0 % non-marketable equity interest in a nonpublic company and entered into a three-year distribution agreement where we have the exclusive rights to market, sell and distribute the company's products in exchange for a cash payment of $ 3.3 million.

In addition, we were granted an exclusive license for all of the seller's intellectual property.

In addition, we were granted an exclusive license for

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

all of the seller's intellectual property.

At the expiration of the distribution agreement we have the right but not the obligation to acquire the remaining interest in the business.

3 unchanged sentences

We eliminate any intra-entity profits to the extent of our beneficial interest.

We record our share of the investee's income or (loss) on a one quarter lag.

We report our proportionate share of the investee's income or (loss) resulting from this investment in other expense, net in our consolidated statements of operations.

2 unchanged sentences

During 2023 and 2022, there were no indications that our non-marketable equity method investment was impaired.

Our recorded share of the investee's loss was not material for the year ended December 31, 2022 and 2021.

Our recorded share of the investee's loss was not material for the years ended December 31, 2023 and 2022.

We did not receive any dividend distributions from this investment during 2023 and 2022.

3 unchanged sentences

Investments in non-marketable debt securities

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

In 2022, we received $19.0 million in proceeds from a promissory note related to an acquired investment as part of the Smiths Medical acquisition.

Deferred taxes are determined based on the differences between the financial statements and the tax bases using rates as enacted in the laws.

3 unchanged sentences

Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

We have not recorded any material interest or penalties during any of the years presented.

We have accrued for interest and penalties of $ 2.9 million and $ 2.0 million, respectively, as of December 31, 2023 and $ 2.2 million and $ 2.3 million, respectively, as of December 31, 2022.

Foreign Currency

5 unchanged sentences

Translation adjustments are recorded as a component of accumulated other comprehensive loss, a separate component of stockholders' equity on our consolidated balance sheets and the effect of exchange rate changes on cash and cash equivalents are reflected on our consolidated statements of cash flows.

Gains and losses for transactions denominated in a currency other than the functional currency of the entity are included in our consolidated statements of operations in other expense, net, see below other expense, net table.

Foreign currency transaction losses (gains), net were $ 5.9 million, $ 5.8 million and $ 1.0 million in 2023, 2022 and 2021, respectively.

Revenue Recognition

We recognize revenues when we transfer control of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods.

We offer certain volume-based rebates to our distribution customers, which we consider variable consideration when calculating the transaction price.

Rebates are offered on both a fixed and tiered/variable basis.

In both cases, we use information available at the time and our historical experience with each customer to estimate the most likely rebate amount.

We also provide chargebacks to distributors that sell to end customers at prices determined under a contract between us and the end customer.

Chargebacks are the difference between prices we charge our distribution customers and contracted prices we have with the end customer which are processed as credits to our distribution customers.

In estimating the expected value of chargeback amounts for use in determining the transaction price, we use information available at the time, including our historical experience.

We also warrant products against defects and have a policy permitting the return of defective products, for which we accrue and expense at the time of sale using information available and our historical experience.

Our revenues are recorded at the net sales price, which includes an estimate for variable consideration related to rebates, chargebacks and product returns.

The vast majority of our sales of Infusion Consumables, Infusion Systems, IV Solutions, Critical Care, Vascular Access and Vital Care products are sold on a standalone basis and control of these products transfers to the customer upon shipment.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We recognize revenues when we transfer control of promised goods to our customers, which for the majority of our sales of products sold on a standalone basis to our distributors and end customers for direct sales, is deemed to be at point of shipment.

Our software license renewals are considered to be transferred to a customer at a point in time at the start of each renewal period, therefore revenue is recognized at that time.

Arrangements with Multiple Deliverables

In certain circumstances, we enter into arrangements in which we provide multiple deliverables to our customers.

These bundled arrangements typically consist of the sale of infusion systems equipment, along with annual software licenses

Payment is typically due in full within 30 days of delivery or the start of the contract term.

Revenue is recorded in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We include variable consideration in net sales only to the extent that a significant reversal in revenue is not probable when the uncertainty is resolved.

Our variable consideration includes distributor chargebacks, product returns and end customer rebates, with distributor chargebacks representing the majority and subject to the greatest judgment.

Chargebacks are the difference between the prices we charge our distribution customers at the time they purchase our products and the contracted prices we have with the end customer, most often in the U.S.

When a distributor sells our products to one of our contracted end customers, the distributor typically will claim a refund from us for the chargeback amount which we process as a credit to the distributor.

In estimating the transaction price to present as net revenue for sales to distributors, we must estimate the expected chargeback amount that we will refund to the distributor after they sell our product to a contracted end customer.

Determining the appropriate chargeback reserve requires judgment around the following assumptions:

(i) The estimated chargeback amount (the difference between the price we invoice the distributor and the contractually agreed price with specified end customers);

(ii) The estimated period of time between the sale to the distributor and the receipt of a chargeback claim.

For purposes of estimating the expected chargeback amount, we utilize actual recent historical chargebacks paid to the specific distributor for similar products as determined at either a product or product-family level.

While individual chargeback rates can vary significantly depending on the product and contracted prices with distributors and end customers, our chargeback reserve estimate is not overly sensitive to those individual price changes due to the long-term nature of our distributor and end customer contracts as well as consistency in purchasing patterns.

Additionally, the use of the actual chargeback history to calculate an average chargeback rate has historically resulted in a reasonable estimation of overall current contract rates.

For purposes of estimating the period of time between the sale to the distributor and the receipt of a chargeback claim, we utilize several sources of information including actual inventory quantities of our products on hand at distributors.

This inventory on hand information is received from the distributors or, when specific quantities are not provided, estimated by using the targeted days of inventory on hand for distributors.

Historical experience of actual chargebacks paid has indicated that use of this information has reasonable predictive value of outstanding chargebacks and accounts for the variability of purchasing

patterns and expected timing and volume of sales to end customers.

The value of the chargeback reserve generally represents approximately two months of obligation due to the timing difference between the initial sale to a distributor and the processing of a chargeback claim after the product is sold to the end customer.

The chargeback reserve estimates change from period-to-period primarily based on changes in revenue from/and the inventory levels of distributors.

Our judgments regarding the information used to calculate the chargeback reserve are consistent from period to period;

however, on a regular basis, we evaluate the adequacy of the chargeback reserve to reassess and ensure that the variable consideration is appropriately constrained, and the likelihood of future revenue reversal is not probable.

We use metrics including chargeback provision as a percentage of gross revenue, movements in inventory on hand at distributors, trends in accrued versus paid chargebacks and impacts from price changes and similar metrics.

The chargeback reserve reflects a reasonable estimate of the amount of consideration using the expected value method and is recorded as a reduction of accounts receivable, net on the consolidated balance sheets.

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and related software implementation services, as well as infusion consumables, IV solutions and extended warranties.

We also offer certain volume-based rebates to both our distribution and end customers, which we record as variable consideration when calculating the transaction price.

Rebates are offered on both a fixed and tiered/variable basis.

In both cases, we use information available at the time, including current contractual requirements, our historical experience with each customer and forecasted customer purchasing patterns, to estimate the most likely rebate amount.

We also provide for extended service-type warranties, which we consider to be separate performance obligations.

We allocate a portion of the transaction price to the extended service-type warranty based on its estimated relative selling price, and recognize revenue over the period the warranty service is provided.

Arrangements with Multiple Deliverables

In certain circumstances, we enter into arrangements in which we provide multiple deliverables to our customers.

These bundled arrangements typically consist of the sale of infusion systems equipment, along with annual software licenses and related software implementation services, software maintenance services and extended warranties.

Our most significant judgments related to these arrangements are (i) identifying the various performance obligations and (ii) estimating the relative standalone selling price of each performance obligation, typically using a directly observable method or calculated on a cost plus margin basis method.

22 unchanged sentences

Other expense, net

The following table presents other income (expense), net (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents other expense, net (in thousands):

As of December 31,

1 unchanged sentence

Foreign exchange losses, net $ ( 5,918 ) $ ( 5,780 ) $ ( 1,017 )

(Loss) gain on disposition of assets ( 2,554 ) ( 1,651 ) 1,773

Loss on disposition of assets ( 153 ) ( 2,554 ) ( 1,651 )

Other miscellaneous income, net 166 3,198 627

Other expense, net $ ( 5,905 ) $ ( 5,136 ) $ ( 2,041 )

The foreign exchange losses in 2023 were primarily related to the devaluation of the Argentine peso.

In 2023, other miscellaneous income, net primarily includes $ 3.7 million in fees related to our accounts receivable purchase program (see Note 17:

Accounts Receivable Purchase Program) mostly offset by a business interruption gain.

We received total insurance recoveries for property damage and business interruption of $ 3.1 million, $ 2.6 million of which was related to insurance proceeds for business interruption included within other miscellaneous income, net.

In 2022, other miscellaneous income, net primarily relates to sale of certain other assets.

Net (Loss) Income Per Share

1 unchanged sentence

Diluted net (loss) income per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding plus any dilutive potential securities.

Dilutive potential securities

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

include outstanding common stock options and unvested restricted stock units, less the number of shares that could have been purchased with the proceeds from the exercise of the options, using the treasury stock method.

Dilutive potential securities include outstanding common stock options and unvested restricted stock units, less the number of shares that could have been purchased with the proceeds from the exercise of the options, using the treasury stock method.

Options that are anti-dilutive, where their exercise price exceeds the average market price of the common stock, are not included in the treasury stock method calculation.

Restricted stock units that are anti-dilutive are not included in the treasury stock method.

Due to the net loss for the year ended December 31, 2022 the inclusion of any potential securities is antidilutive, accordingly, basic and diluted net loss per share is the same for this period.

There were 12,354 and 12,083 anti-dilutive shares in 2021 and 2020, respectively.

Due to the net loss for the years ended December 31, 2023 and 2022 the inclusion of any potential securities is antidilutive, accordingly, basic and diluted net loss per share is the same for this period.

There were 12,354 anti-dilutive shares in 2021.

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

13 unchanged sentences

Due to concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate ("LIBOR"), regulators around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation.

The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform.

The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

rate expected to be discontinued as a result of reference rate reform.

Optional expedients may be applied to contracts that are modified as a result of the reference rate reform.

9 unchanged sentences

The impact of these ASU's on our contracts has not been and is not expected to be material.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative.

The amendments in this update modify the disclosure or presentation requirements of a variety of Topics in the Accounting Standards Codification ("ASC") in response to the SEC’s Release No.

33-10532, Disclosure Update and Simplification Initiative, and align the ASC’s requirements with the SEC’s regulations.

For entities within the scope, the guidance will be applied prospectively with the effective date for each amendment to be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

If the SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the Codification and will not become effective.

We are currently assessing what impact this guidance will have on the Company's consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

The amendments in this update expand disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s significant expenses, interim segment profit or loss, and a description of how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.

The amendments clarify that a single reportable segment entity must apply ASC 280 in its entirety.

The update will be effective for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

This ASU is applicable to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods, with early application permitted.

We are currently assessing the effect of this update on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

The amendments in this update expand disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid information.

The update will be effective for annual periods beginning after December 15, 2024 and is applicable to our Annual Report on Form 10-K for the fiscal year December 31, 2025, with early application permitted.

We are currently assessing the effect of this update on our consolidated financial statements and related disclosures.

2022 Acquisitions

On January 6, 2022, we acquired 100 % of the equity interests in Smiths Medical, the holding company of Smiths Group plc's global medical device business, from Smiths Group International Holdings Limited (“Smiths”).

The acquisition of

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Smiths Medical aligns with our strategic growth plans, enabling us to broaden our product offerings to include syringe and ambulatory infusion devices, vascular access, and vital care products and to strengthen and expand our global market reach.

The acquisition of Smiths Medical aligns with our strategic growth plans, enabling us to broaden our product offerings to include syringe and ambulatory infusion devices, vascular access, and vital care products and to strengthen and expand our global market reach.

Total cash consideration for the acquisition was $ 1.9 billion, which was financed with existing cash balances and proceeds from the credit agreement entered into on January 6, 2022 (see Note 11:

Long-Term Debt).

Long-Term Obligations).

We also issued share consideration to Smiths of 2.5 million shares of our common stock.

1 unchanged sentence

Smiths may be entitled to an additional $ 100.0 million in cash consideration contingent on our common stock achieving certain price targets for certain periods after closing in accordance with the terms of the Share Sale and Purchase Agreement (the "Purchase Agreement").

In the event that (a) on or prior to the third anniversary of closing the 30-day volume-weighted average price for our common stock, as defined in the Purchase Agreement, equals or exceeds $ 300.00 per share or (b) on or prior to the fourth anniversary of closing the 45-day volume-weighted average price for our common stock, as defined in the Purchase Agreement, equals or exceeds $ 300.00 per share (each a "Price Target"), and provided Smiths beneficially owns at least 50.0 % of the shares of common stock issued at closing at the time the Price Target is achieved, then Smiths will be entitled to receive the additional $ 100.0 million in cash consideration.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the event that (a) on or prior to the third anniversary of closing the 30-day volume-weighted average price for our common stock, as defined in the Purchase Agreement, equals or exceeds $ 300.00 per share or (b) on or prior to the fourth anniversary of closing the 45-day volume-weighted average price for our common stock, as defined in the Purchase Agreement, equals or exceeds $ 300.00 per share (each a "Price Target"), and provided Smiths beneficially owns at least 50.0 % of the shares of common stock issued at closing at the time the Price Target is achieved, then Smiths will be entitled to receive the additional $ 100.0 million in cash consideration.

The fair value of the contingent consideration was determined using an option pricing model, specifically the Monte Carlo Simulation.

1 unchanged sentence

The fair value of the contingent consideration is then calculated as the average present value across all simulated paths.

As of December 31, 2023, the estimated fair value of the contingent earn-out was $ 4.0 million.

Smiths became a related party to us when we issued 2.5 million shares of our common stock as partial consideration for the acquisition of Smiths Medical.

1 unchanged sentence

The TSA includes certain information technology, human resource and tax support services for an initial term of twelve months with the option to extend up to 24 months.

During 2022, we expensed $ 37.6 million for services provided under the TSA.

As of December 31, 2022, we have $ 5.1 million in open payables related to the services received under the TSA.

In 2023, we expensed $ 8.3 million for services provided under the TSA and we had no related open payables as of December 31, 2023.

In 2022, we expensed $ 37.6 million for services provided under the TSA and we had $ 5.1 million in related open payables as of December 31, 2022.

Final Price Allocation

The following table summarizes the final purchase price and the final allocation of the purchase price related to the assets acquired and liabilities assumed (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash consideration for acquired assets $ 1,922,955

23 unchanged sentences

Purchase Consideration $ 2,552,450

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

_______________________________________________

16 unchanged sentences

The prepaid expenses and other current assets and assumed liabilities were recorded at their carrying values as of the date of the acquisition, as their carrying values approximated their fair values due to their short-term nature.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited Pro Forma Information

15 unchanged sentences

During November 2021, we acquired a small foreign infusion systems supplier and paid an initial gross cash payment of approximately $ 15.4 million.

In addition to the initial cash consideration, total consideration for the acquisition includes an additional holdback of $ 0.5 million, to be paid two years from the completion date of the acquisition, and also a potential earn-out payment of up to $ 2.5 million, consisting of (i) a cash payment of $ 1.0 million contingent on the achievement of certain revenue targets for the annual period ending December 31, 2022 and, separately, (ii) a cash payment of $ 1.5 million contingent on certain product-related regulatory certifications obtained by May 26, 2024.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

revenue targets for the annual period ending December 31, 2022 and, separately, (ii) a cash payment of $ 1.5 million contingent on certain product-related regulatory certifications obtained by May 26, 2024.

The contingent earn-out based on the achievement of certain revenue targets obtained for the annual period ending December 31, 2022 was forfeited at December 31, 2022 as the minimum threshold for earning the earn-out was not met.

As of December 31, 2023, the estimated fair value for the contingent earn-out related to certain product-related regulatory certifications was $ 1.5 million.

RESTRUCTURING, STRATEGIC TRANSACTION AND INTEGRATION

1 unchanged sentence

Restructuring

Restructuring charges were $ 9.7 million, $( 1.8 ) million and $ 7.9 million in 2022, 2021 and 2020, respectively, and are included in the above restructuring, strategic transaction and integration expenses in our consolidated statement of operations.

Restructuring charges net of any reversed accruals were $ 5.7 million, $ 9.7 million and $( 1.8 ) million in 2023, 2022 and 2021, respectively, and are included in the above restructuring, strategic transaction and integration expenses in our consolidated statement of operations.

In 2023, we incurred restructuring charges primarily related to severance expenses.

We adjusted certain facility and severance restructuring accrued balances, shown in the table below under "Other adjustments", to reverse certain accrued balances that will not be utilized.

In 2022, we incurred restructuring charges primarily related to severance in connection with the January 6, 2022 acquisition of Smiths Medical, see Note 2:

1 unchanged sentence

In 2021, we adjusted certain facility restructuring liabilities by $ 2.0 million, shown in the table below under "Other adjustments," to reflect actual amounts owed which resulted in net restructuring credits of $( 1.8 ) million.

In 2020, restructuring charges were primarily related to severance and costs related to office and other facility closures.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the activity in our restructuring-related accrual by major type of cost (in thousands):

1 unchanged sentence

Accrued balance, January 1, 2022 $ 499 $ 165 $ 664

Acquired restructuring charges 5,796 1,740 7,536

Charges incurred 9,667 58 9,725

2 unchanged sentences

Other adjustments ( 38 ) — ( 38 )

( 528 ) ( 1,429 ) ( 1,957 )

Accrued balance, December 31, 2022 $ 4,416 $ 1,507 $ 5,923

Acquired restructuring charges 5,796 1,740 7,536

Charges incurred 5,521 1,189 6,710

Payments ( 6,694 ) ( 1,192 ) ( 7,886 )

Currency translation ( 425 ) ( 188 ) ( 613 )

Other adjustments (1)

( 234 ) ( 785 ) ( 1,019 )

Currency translation ( 198 ) 38 ( 160 )

Accrued balance, December 31, 2023 $ 2,811 $ 757 $ 3,568

_______________________________________________

(1) The estimated liabilities related to a prior year's facility closure restructuring were adjusted to actual amounts owed.

(1) Relates to accrued restructuring charges for estimated facility closure costs and severance costs that will not be utilized and were reversed during the year.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Strategic Transaction and Integration Expenses

We incurred $ 35.6 million, $ 61.7 million and $ 19.8 million in strategic transaction and integration expenses in 2023, 2022 and 2021, respectively, which are included in restructuring, strategic transaction and integration expenses in our consolidated statement of operations.

The strategic transaction and integration expenses during 2023 were primarily related to consulting expenses and employee costs incurred to integrate our Smiths Medical business acquired in 2022.

The strategic transaction and integration expenses during 2022 were primarily related to transaction and integration expenses associated with our acquisition of Smiths Medical on January 6, 2022 (see Note 2:

1 unchanged sentence

The strategic transaction and integration expenses during 2021 were 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 transaction expenses incurred in connection with entering into a definitive agreement to acquire Smiths Medical.

The integration expenses during 2020 were related to the integration of HIS and included expenses for the migration of IT systems at our Austin facility.

Revenue Recognition

Following the acquisition of Smiths Medical our primary product lines are Infusion Consumables, Infusion Systems, IV Solutions, Critical Care, Infusion Systems-Smiths Medical, Vascular Access-Smiths Medical and Vital Care-Smiths Medical.

The vast majority of our sales of these products are made on a stand-alone basis to hospitals and distributors.

As part of the integration of our acquisition of Smiths Medical, we have renamed our business units and reorganized the products thereunder and, as of January 1, 2023, our business unit structure is composed of Consumables, Infusion Systems and Vital Care.

All prior periods herein have been retrospectively conformed to the current presentation.

The vast majority of our sales of these products within these business units are made on a stand-alone basis to hospitals and distributors.

Revenue is typically recognized upon transfer of control of the products, which we deem to be at point of shipment.

However, for purposes of revenue recognition for our software licenses and renewals, we consider the control of these products to be transferred to a customer at a certain point in time;

For purposes of revenue recognition for our software licenses and renewals, we consider the control of these products to be transferred to a customer at a certain point in time;

therefore, we recognize revenue at the start of the applicable license term.

1 unchanged sentence

Revenue is recorded in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We offer certain volume-based rebates to both our distribution and end customers, which we record as variable consideration when calculating the transaction price.

We include variable consideration in net sales only to the extent that a significant reversal in revenue is not probable when the uncertainty is resolved.

Our variable consideration includes distributor chargebacks, product returns and end customer rebates with distributor chargebacks representing the majority and subject to the greatest judgment, (see Note 1:

Basis of Presentation and Significant Accounting Policies).

We also offer certain volume-based rebates to both our distribution and end customers, which is recorded as variable consideration when calculating the transaction price.

Rebates are offered on both a fixed and tiered/variable basis.

In both cases, we use information available at the time and our historical experience with each customer to estimate the most likely rebate amount.

We also provide chargebacks to distributors that sell to end customers at prices determined under a contract between us and the end customer.

Chargebacks are the difference between the prices we charge our distribution customers and the contracted prices we have with the end customer which are processed as credits to our distribution customers.

In estimating the expected value of chargeback

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

amounts in order to determine the transaction price, we use information available at the time, including our historical experience.

We also warrant products against defects and have a policy permitting the return of defective products.

We also provide for extended service-type warranties, which we consider to be separate performance obligations.

Our revenues are recorded at the net sales price, which includes an estimate for variable consideration related to rebates, chargebacks and product returns.

Basis of Presentation and Significant Accounting Policies for further discussion.

Arrangements with Multiple Performance Obligations

6 unchanged sentences

The following table represents our revenues disaggregated by product line (in thousands) and our disaggregated product line revenue as a percentage of total revenue:

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31,

1 unchanged sentence

Product line Revenue % of Revenue Revenue % of Revenue Revenue % of Revenue

Infusion Consumables $ 566,617 25 % $ 555,189 42 % $ 473,740 37 %

Consumables $ 969,129 43 % $ 974,993 43 % $ 555,189 42 %

Infusion Systems 629,043 28 % 617,435 27 % 352,321 27 %

IV Solutions 363,472 16 % 359,477 27 % 388,971 31 %

Critical Care 47,330 2 % 49,321 4 % 48,602 4 %

Infusion Systems-Smiths Medical 340,124 15 % — nm — nm

Vascular Access-Smiths Medical 326,765 14 % — nm — nm

Vital Care-Smiths Medical 284,609 13 % — nm — nm

Vital Care 660,954 29 % 687,569 30 % 408,798 31 %

Total Revenues $ 2,259,126 100 % $ 2,279,997 100 % $ 1,316,308 100 %

1 unchanged sentence

The following table represents our revenues disaggregated by geography (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31,

2 unchanged sentences

Europe, the Middle East and Africa 373,571 367,411 147,488

APAC 257,208 85,692 79,610

Asia-Pacific 241,699 257,208 85,692

Other Foreign 203,839 195,309 141,319

6 unchanged sentences

The following table presents the changes in our contract balances for the years ended December 31, 2023 and 2022, (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract Liabilities

Beginning balance, January 1, 2022 $ ( 7,461 )

Fair value of acquired deferred revenue ( 51,245 )

Equipment revenue recognized 32,252

2 unchanged sentences

Software revenue deferred due to implementation ( 17,557 )

Government grant deferred revenue ( 3,729 )

Government grant recognized 1,514

Other deferred revenue ( 1,500 )

Other deferred revenue recognized 5,915

Ending balance, December 31, 2022 ( 45,866 )

Fair value of acquired deferred revenue ( 51,245 )

Equipment revenue recognized 34,121

8 unchanged sentences

During 2023, we recognized $ 29.8 million in revenue that was included in the opening contract balances as of December 31, 2022

As of December 31, 2022, revenue from remaining performance obligations is as follows:

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2023, revenue from remaining performance obligations is as follows (in thousands):

Recognition Timing

(in thousands) <12 Months > 12 Months

<12 Months > 12 Months

Equipment revenue $ ( 17,749 ) $ ( 24 )

1 unchanged sentence

Government grant revenue (1)

( 2,064 ) ( 9,415 )

Other deferred revenue (2)

( 1,717 ) ( 383 )

Total $ ( 31,592 ) $ ( 10,585 )

____________________________

(1) The government grant deferred income is amortized over the life of the related depreciable asset as a reduction to depreciation expense.

(2) Other deferred revenue includes pump development programs, purchased training and extended warranty.

3 unchanged sentences

Practical expedients and exemptions

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In addition to the practical expedient applied to sales commissions, under ASC Topic 606, we elected to apply the practical expedient for shipping and handling costs incurred after the customer has obtained control of a good.

9 unchanged sentences

All of our leases have stated lease payments, which may include fixed rental increases.

Our leases are for corporate, research and development and sales and support offices, distribution facilities, device service centers and certain equipment.

Our leases are for corporate, research and development and sales and support offices, manufacturing and distribution facilities, device service centers and certain equipment.

Our leases have original lease terms of one year to fifteen years , some of which include options to extend the leases for up to an additional five years .

8 unchanged sentences

Total lease cost $ 25,213 $ 22,869 $ 12,035

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest expense on our finance leases is included in interest expense, net in our consolidated statements of operations.

The reduction of the operating and finance ROU assets is included as noncash lease expense in selling, general and administrative expenses in our consolidated statements of operations.

The reduction of the operating and finance ROU assets is included as noncash lease expense in costs of goods sold and selling, general and administrative expenses in our consolidated statements of operations.

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

9 unchanged sentences

_____________________________

(1) We acquired $ 55.2 million of operating right-of-use assets as part of the Smiths Medical acquisition, see Note 2:

(1) In January 2022, we acquired $ 55.2 million of operating right-of-use assets as part of the Smiths Medical acquisition, see Note 2:

Acquisitions.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

10 unchanged sentences

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

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31,

9 unchanged sentences

As of December 31, 2023, the maturities of our operating and finance lease liabilities for each of the next five years are approximately (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Operating Leases Finance Leases

9 unchanged sentences

SHARE-BASED AWARDS

We have a stock incentive plan for employees and directors and an employee stock purchase plan.

We have a stock incentive plan for employees and directors and an employee stock purchase plan, however, the employee stock purchase plan was suspended in 2017.

Shares to be issued under these plans will be issued either from authorized but unissued shares or from treasury shares.

We incur stock compensation expense for stock options, restricted stock units ("RSU"), performance restricted stock units ("PRSU") and in years prior to 2018 stock purchased under our employee stock purchase plan ("ESPP"), which was suspended in 2017.

We incur stock compensation expense for stock options, restricted stock units ("RSU") and performance restricted stock units ("PRSU").

We receive a tax benefit on stock compensation expense and direct tax benefits from the exercise of stock options and vesting of restricted stock units.

1 unchanged sentence

The table below summarizes compensation costs and related tax benefits (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31,

(In thousands) 2022 2021 2020

2023 2022 2021

Stock compensation expense $ 40,563 $ 36,025 $ 27,341

5 unchanged sentences

Our 2011 Plan initially had 650,000 shares available for issuance, plus the remaining available shares for grant from the 2003 Plan and any shares that were forfeited, terminated or expired that would have otherwise returned to the 2003 Plan.

In 2012, 2014 and 2017, our stockholders approved amendments to the 2011 plan that increased the shares available for issuance by 3,275,000 , bringing the initial shares available for issuance to 3,925,000 , plus the remaining 248,700 shares that remained available for grant from the 2003 Plan.

In years 2012, 2014, 2017 and 2023, our stockholders approved amendments to the 2011 plan that increased the shares available for issuance by a total of 5,461,000 , bringing the initial shares available for issuance to 6,111,000 , plus the remaining 248,700 shares that remained available for grant from the 2003 Plan.

As of December 31, 2023, the 2011 Plan has 6,374,300 shares of common stock reserved for issuance to employees, which includes 263,300 shares that transferred from the 2003 Plan.

3 unchanged sentences

Options granted under the 2011 Plan may be "non-statutory stock options" which expire no more than ten years from date of grant or "incentive stock options" as defined in Section 422 of the Internal Revenue Code of 1986, as amended.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Time-based Stock Options

7 unchanged sentences

We estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock, based on the average expected exercise term.

The table below summarizes the total time-based stock options granted, total valuation and the weighted-average assumptions (dollars in thousands, except per option amounts):

The table below summarizes the total time-based stock options granted, total valuation and the weighted-average assumptions (dollars and shares in thousands, except per option amounts):

Year ended December 31,

2022 2021 2020

Number of time-based options granted 7,620 7,910

Grant-date fair value of options granted (in thousands) $ 540 $ 528 $ 425

Grant-date fair value of options granted $ 540 $ 528

Weighted-average assumptions for stock option valuation:

5 unchanged sentences

Weighted-average grant-date fair value per option $ 70.86 $ 66.78

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There were no stock options granted during the year ended December 31, 2023.

A summary of our stock option activity as of and for the year ended December 31, 2023 is as follows:

8 unchanged sentences

The intrinsic values for options exercisable, outstanding and vested or expected to vest at December 31, 2023 are based on our closing stock price of $ 99.74 at December 31, 2023 and are before applicable taxes.

The following table presents information regarding stock option activity:

The following table presents information regarding stock option activity (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31,

(In thousands) 2022 2021 2020

2023 2022 2021

Intrinsic value of options exercised $ 8,441 $ 17,340 $ 27,534

1 unchanged sentence

Tax benefit from stock option exercises $ 1,733 $ 3,637 $ 5,092

In 2023, we granted PRSUs to our executive officers.

For the executive officers other than the Chief Executive Officer ("CEO"), Chief Operations Officer ("COO"), the Chief Financial Officer ("CFO") and the Corporate Vice President, General Counsel ("CVP, GC"), the PRSUs will vest as to one-third of the total number of PRSUs underlying the award on the first, second and third anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers have met their individual performance goals for the applicable year and continued service through such vesting date.

For the CEO, COO, the CFO, and the CVP, GC, the PRSUs will cliff-vest on March 15, 2026, subject to continued service through such vesting date and the achievement of minimum three-year adjusted revenue and Adjusted EBITDA compound annual growth rates, commencing on January 1, 2023 and ending on December 31, 2025, which when reviewed against a predetermined vesting matrix could result in the vesting of 0% to 250% of the awarded PRSUs.

In 2022, we granted our annual PRSUs to our executive officers and certain other non-executive employees.

These PRSUs will cliff-vest on March 7, 2024 subject to the achievement of net synergy savings targets related to the Smiths Medical acquisition achieved during the performance period commencing on January 1, 2022 and ending on December 31, 2023, which when reviewed against predetermined targets could result in 0% to 200% of the awarded units that could vest.

We also granted certain other one-off PRSU awards to non-executive employees with various performance requirements, whereby the performance shares will be earned if the minimum requirements are met within a specified time period.

These PRSUs will cliff-vest on March 7, 2024, subject to continued service through such vesting date and the achievement of net synergy savings targets related to the Smiths Medical acquisition achieved during the performance period commencing on January 1, 2022 and ending on December 31, 2023, which when reviewed against predetermined targets could result in the vesting of 0% to 200% of the awarded PRSUs.

We also granted certain other one-off PRSU awards to non-executive employees with various performance requirements, whereby the PRSUs will be earned if the minimum requirements are met within a specified time period.

The performance period related to the annual 2022 PRSUs ended on December 31, 2023 and is subject to the Compensation Committee review and determination that between 0% and 200% of the PRSUs awarded were earned based on the actual net synergy savings related to the Smiths Medical acquisition achieved during the performance period.

In 2021, we granted PRSUs to our executive officers.

For the executive officers other than the Chief Executive Officer ("CEO"), Chief Operations Officer ("COO") and the Chief Financial Officer ("CFO"), the PRSUs will vest subject to a three-year time vesting and further subject to a determination by the Compensation Committee that the officers have met their individual performance goals for the applicable years.

For the CEO, COO and the CFO, the performance shares will cliff-vest ending on March 6, 2024 and further be subject to the achievement of minimum three-year cumulative revenue and EPS targets, commencing on January 1, 2021 and ending on December 31, 2023, which when reviewed against a predetermined vesting matrix could result in 0% to 250% of the awarded units that could vest.

For the executive officers other than the CEO, COO and the CFO, the PRSUs will vest as to one-third of the total number of PRSUs underlying the award on the first, second and third anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers have met their individual performance goals for the applicable years and continued service through such vesting date.

For the CEO, COO and the CFO, the PRSUs will cliff-vest on March 8, 2024, subject to continued service through such vesting date and the achievement of minimum three-year cumulative adjusted revenue dollar target frowth rate and adjusted EPS dollar target growth rate targets, commencing on January 1, 2021 and ending on December 31, 2023, which when reviewed against a predetermined vesting matrix could result in the vesting of 0% to 250% of the awarded PRSUs.

In February 2022, the Compensation Committee made the determination that the executive officers other than the CEO, CFO and COO met their individual performance goals for 2021, therefore one-third of their 2021 PRSUs awarded vested during 2022.

In February 2023, the Compensation Committee made the determination that the executive officers other than the CEO, CFO and COO met their individual performance goals for 2022, therefore one-third of their 2021 PRSUs awarded vested during 2023.

The performance period related to the final third of the PRSUs awarded to the executive officers other than the CEO, CFO and COO ended on December 31, 2023 and is subject to the Compensation Committee review and determination that the PRSUs will be earned at 100% of the awarded PRSUs based on whether the officers met their individual performance goals for 2023.

The performance period related to the 2021 CEO, COO and CFO PRSUs ended on December 31, 2023 and is subject to the Compensation Committee review and determination that between 0% and 250% of the awarded PRSUs will be earned based on the actual cumulative adjusted revenue dollar target growth rate and adjusted EPS dollar target growth rate achieved during the performance period.

In 2020, we granted PRSUs to our executive officers.

For the executive officers other than the CEO, COO and the CFO, the PRSUs will vest subject to a three-year time vesting and further subject to a determination by the Compensation Committee that the officers have met their individual performance goals for the applicable years.

For the CEO, COO and the CFO, the performance shares will cliff-vest ending on March 6, 2023 and further be subject to the achievement of minimum three-year cumulative revenue and EPS targets, which when reviewed against a predetermined vesting matrix could result in 0% to 250% of the awarded units that could vest.

On February 15, 2021, the Compensation Committee made the determination that the executive officers other than the CEO, COO and CFO met their individual performance goals for 2021, therefore one-third of their 2020 PRSU shares awarded vested during 2021.

Additionally, during February 2021, the Compensation Committee, modified the potential vesting percentages related to the 2020 PRSU awards for the CEO, COO and CFO, as the original potential percentages were established immediately before the onset of the COVID-19 pandemic.

The Compensation Committee determined to adjust the CEO, COO and CFO's potential to earn from between 0% and 250% of the award granted,

For the executive officers other than the CEO, COO and the CFO, the PRSUs vested as to one-third of the total number of PRSUs underlying the award on the first, second and third anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers had met their individual performance goals for the applicable years and continued service through such vesting date.

For the CEO, COO and the CFO, the PRSUs cliff-vested on March 6, 2023 and were further subjected to continued service through such vesting date and the achievement of minimum three-year cumulative adjusted revenue dollar target growth rate and

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to an increased potential to earn between 50% and 300% of the award granted, subject to the same minimum threshold revenue and EPS targets to be achieved by the Company.

adjusted EPS dollar target growth rate targets, which when reviewed against a predetermined vesting matrix could have resulted in the vesting 0% to 250% of the awarded PRSUs.

In February 2021, the Compensation Committee made the determination that the executive officers other than the CEO, COO and CFO met their individual performance goals for 2020;

therefore one-third of their 2020 PRSUs awarded vested during 2021.

The Compensation Committee determined to adjust the CEO, COO and CFO's potential to earn from between 0% and 250% of the awarded PRSUs, to an increased potential to earn between 50% and 300% of the award granted, subject to the same minimum threshold revenue and EPS targets set forth above to be achieved by the Company.

The additional compensation expense as a result of modifying the 2020 PRSUs granted to our CEO, COO and CFO totaled $ 2.1 million recognized over the remaining amortization period from the date of modification.

In February 2023, the Compensation Committee made the determination that the executive officers other than the CEO, CFO and COO met their individual performance goals for 2022, therefore a third of their 2020 PRSU shares awarded vested during 2023.

The performance period related to the 2020 CEO and COO PRSUs ended on December 31, 2022 and is subject to the Compensation Committee review and determination of shares earned based on the Cumulative revenue and EPS results achieved during the performance period.

In February 2023, the Compensation Committee made the determination that the executive officers other than the CEO, CFO and COO met their individual performance goals for 2022, therefore the final third of their 2020 PRSUs awarded vested during 2023.

The performance period related to the 2020 CEO, COO and CFO PRSUs ended on December 31, 2022 and in February 2023 the Compensation Committee determined that 188% of the awarded PRSUs were earned based on the actual cumulative adjusted revenue dollar growth rate and adjusted EPS dollar target growth rate achieved during the performance period.

In 2019, we granted PRSUs to our executive officers.

For the executive officers other than the CEO and the COO, the PRSUs vested subject to a three-year time vesting and further subject to a determination by the Compensation Committee that the officers had met their individual performance goals for the applicable years.

For the CEO and the COO, the performance shares were to cliff-vest on March 6, 2022, subject to the achievement of a minimum Cumulative Adjusted EBITDA and continuous service through that date.

If for the three year period ending on December 31, 2021 the Cumulative Adjusted EBITDA had a growth of at least 6% to 8%, 50% of the awarded units would have vested.

If on the vesting date the Cumulative Adjusted EBITDA had a growth of between 8% to 10%, 100% of the awarded units would have vested.

If on the vesting date the Cumulative Adjusted EBITDA has a growth of over 10%, 200% of the awarded units would have vested.

For the executive officers other than the CEO and the COO, the PRSUs vested as to one-third of the total number of PRSUs underlying the award on the first, second and third anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers had met their individual performance goals for the applicable years and continued service through such vesting date.

For the CEO and the COO, the PRSUs were to cliff-vest on March 6, 2022, subject to continued service through such vesting date and the achievement of a minimum Cumulative Adjusted EBITDA growth target over the performance period.

If, for the three-year period ending on December 31, 2021, the Cumulative Adjusted EBITDA had a growth of at least 6% to 8%, 50% of the awarded PRSUs would have vested.

If, on the vesting date, the Cumulative Adjusted EBITDA had a growth of between 8% to 10%, 100% of the awarded PRSUs would have vested.

If, on the vesting date, the Cumulative Adjusted EBITDA had a growth of over 10%, 200% of the awarded PRSUs would have vested.

In 2019, we also granted PRSUs to one of our non-executive employees.

These PRSUs vested at the end of a three-year period ending on March 31, 2022, based on meeting certain minimum performance goals.

In February 2022, the Compensation Committee made the determination that the executive officers other than the CEO and COO met their individual performance goals for 2022, therefore, the final third of their 2019 PRSU shares awarded vested during 2022.

The performance period related to the 2019 CEO and COO PRSUs ended on December 31, 2021 and in February 2022 the Compensation Committee determined that zero PRSUs were earned based on the actual Cumulative Adjusted EBITDA achieved during the performance period.

In 2018, we granted PRSUs to our executive officers.

For the executive officers other than the CEO and the COO, the PRSUs were vested subject to a three-year time vesting and further subject to a determination by the Compensation Committee that the officers have met their individual performance goals for the applicable year.

For the CEO and the COO, the performance shares were to cliff-vest ending on February 15, 2021 subject to the achievement of a minimum Cumulative Adjusted EBITDA.

If for the three year period ending on December 31, 2020 the Cumulative Adjusted EBITDA had a growth of at least 6% to 8%, 50% of the awarded units would vest.

If on the vesting date the Cumulative Adjusted EBITDA had a growth of between 8% to 10%, 100% of the awarded units would vest.

If on the vesting date the Cumulative Adjusted EBITDA had a growth of over 10%, 200% of the awarded units would vest.

On February 15, 2021, the Compensation Committee made the determination that the executive officers other than the CEO and COO met their individual performance goals for 2021, therefore, one-third of their 2018 PRSU shares awarded vested during 2021.

Also on February 15, 2021, the Compensation Committee determined that based on the actual Cumulative Adjusted EBITDA achieved during the performance period the CEO and COO's 2018 PRSUs were earned at 100% of the awards granted.

In February 2020, the Compensation Committee made the determination that the executive officers other than the CEO and COO met their individual performance goals for 2019, therefore, one-third of their 2019 PRSUs awarded vested during 2020.

In February 2021, the Compensation Committee made the determination that the executive officers other than the CEO and COO met their individual performance goals for 2020, therefore, one-third of their 2019 PRSUs awarded vested during 2021.

In February 2022, the Compensation Committee made the determination that the executive officers other than the CEO and COO met their individual performance goals for 2021, therefore, the final third of their 2019 PRSUs awarded vested during 2022.

In 2018, we granted PRSUs to our executive officers.

The PRSUs were scheduled to vest, if at all, upon the achievement of a minimum Cumulative Adjusted EBITDA, subject to a three-year cliff vesting ending on December 31, 2019.

If at that date, our Cumulative Adjusted EBITDA was at least $600 million but less than $650 million, 100% of the awarded units would vest.

If our Cumulative Adjusted EBITDA was at least $650 million but less than $700 million, 200% of the awarded units would vest.

If our Cumulative Adjusted EBITDA is at least $700 million, 300% of the awarded units would vest.

On January 17, 2020, the Compensation Committee determined that based on the actual Cumulative Adjusted EBITDA achieved during the performance period that the 2017 PRSU shares were earned by our executive officers at the 300% achievement level.

For the executive officers other than the CEO and the COO, the PRSUs were vested as to one-third of the total number of PRSUs underlying the award on the first, second and third anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers have met their individual performance goals for the applicable year and continued service through such vesting date.

For the CEO and the COO, the PRSUs cliff-vested ending on February 15, 2021, subject to continued service through such vesting date and the achievement of a minimum Cumulative Adjusted EBITDA growth target over the performance period.

If, for the three -year period ending on December 31, 2020, the Cumulative Adjusted EBITDA had a growth of at least 6% to 8%, 50% of the awarded PRSUs would vest.

If, on the vesting date, the Cumulative Adjusted EBITDA had a growth of between 8% to 10%, 100% of the awarded PRSUs would vest.

If, on the vesting date, the Cumulative Adjusted EBITDA had a growth of over 10%, 200% of the awarded PRSUs would vest.

In February 2019, the Compensation Committee made the determination that six of the eight executive officers other than the CEO and COO who received a 2018 PRSU award met their individual performance goals for 2018, therefore, one-third of the 2018 PRSUs awarded for those executives vested during 2019.

The two executive officers who did not earn one-third of the PRSUs awarded during the 2018 performance period additionally earned those shares in 2019.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2021, the Compensation Committee made the determination that the executive officers other than the CEO and COO met their individual performance goals for 2020, therefore, the final third of their 2018 PRSUs awarded vested during 2021.

Also in February 2021, the Compensation Committee determined that based on the actual Cumulative Adjusted EBITDA growth achieved during the performance period, the CEO and COO's 2018 PRSUs were earned at 100% of the PRSUs granted.

Restricted stock units are granted annually to our non-employee directors and vest on the first anniversary of the grant date, or the date of our annual meeting, whichever occurs first.

3 unchanged sentences

The table below summarizes our restricted stock award activity (dollars in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended December 31,

(In thousands, except shares and per share amounts) 2022 2021 2020

2023 2022 2021

Shares granted 78,213 60,383 53,246

Shares earned (a)

Shares earned (1)

49,314 46,317 32,013

7 unchanged sentences

_______________________________

(a) PRSU shares earned in 2020 were related to performance awards granted to executives in 2017, 2018 and 2019.

(1) PRSU shares earned in 2023 were related to performance awards granted to executives in 2020 and 2021 and performance awards granted to a non-executive employees in 2022.

PRSU shares earned in 2022 were related to performance awards granted to executives in 2019, 2020 and 2021 and performance award granted to a non-executive employee in 2019, 2020, and 2021.

PRSU shares earned in 2021 were related to performance awards granted to executives in 2018, 2019 and 2020.

PRSU shares earned in 2022 were related to performance awards granted to executives in 2019, 2020 and 2021 and performance awards granted to a non-executive employee in 2019, 2020 and 2021.

The table below provides a summary of our PRSU and RSU activity as of and for the year ended December 31, 2023:

1 unchanged sentence

Non-vested at December 31, 2022 354,004 $ 213.95

Change in units due to performance expectations (a)

Change in units due to performance expectations (1)

5,554 $ 188.11

4 unchanged sentences

_______________________________

(a) Relates to net adjustments to 2019, 2020, 2021 and 2022 PRSUs granted to executives and certain non-executive employees.

PRSUs granted assumes attainment of an increased payout rate based on performance expectations.

(1) Relates to adjustments to 2020 PRSUs granted to executives that vested during 2023.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We have an ESPP under which U.S.

2 unchanged sentences

To date, there have been no increases.

As of December 31, 2022, there were no shares available for future issuance, all shares unissued under the plan expired during 2022.

The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code.

We suspended our ESPP in 2017.

All shares unissued under the plan expired during 2022.

DERIVATIVES AND HEDGING ACTIVITIES

Hedge Accounting and Hedging Program

The purposes of our cash flow hedging programs are to manage the foreign currency exchange rate risk on forecasted expenses denominated in currencies other than the functional currency of the operating unit, and to manage floating interest rate

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

risk associated with future interest payments on variable-rate term loans issued in January 2022.

We do not issue derivatives for trading or speculative purposes.

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions.

The par forward contract and forward-starting interest rate swaps are designated and qualify as cash flow hedges.

The derivative instruments we utilize, including various foreign exchange contracts and interest rate swaps, are designated and qualify as cash flow hedges.

Our derivative instruments are recorded at fair value on the consolidated balance sheets and are classified based on the instrument's maturity date.

4 unchanged sentences

These contracts are agreements to buy or sell a quantity of a currency at a predetermined future date and at a predetermined exchange rate.

Our foreign exchange forward contracts hedge exposures principally denominated in Mexican Pesos ("MXN"), Euros, Czech Koruna ("CZK"), Japanese Yen ("JPY"), U.S.

Dollar ("USD"), Chinese Renminbi ("CNH"), Canadian Dollar ("CAD") and Australian Dollar ("AUD") and have varying maturities with an average term of approximately twelve months.

The total notional amount of these outstanding derivative contracts as of December 31, 2022 was $ 206.0 million, which included the notional equivalent of $ 61.3 million in MXN, $ 31.7 million in Euros, $ 13.9 million in CZK, $ 15.3 million in JPY, $ 11.5 million in CNH, $ 43.2 million in USD, $ 11.6 million in CAD, $ 11.9 million in AUD and $ 5.6 million in other foreign currencies, with terms currently through February 2024.

Certain contracts were acquired as part of the Smiths Medical acquisition.

We did not have such derivative contracts as of December 31, 2021.

Our current foreign exchange forward contracts hedge exposures principally denominated in Mexican Pesos ("MXN"), Euros, Japanese Yen ("JPY"), Chinese Renminbi ("CNH"), Canadian Dollar ("CAD"), U.S.

Dollar ("USD") and Australian Dollar ("AUD") and have varying maturities with an average term of approximately twelve months.

The total notional amount of these outstanding derivative contracts as of December 31, 2023 was $ 172.6 million, which included the notional equivalent of $ 27.1 million in MXN, $ 35.6 million in Euros, $ 17.4 million in JPY, $ 8.1 million in CNH, $ 18.4 million in CAD, $ 14.2 million in AUD, $ 42.6 million in USD and $ 9.2 million in other foreign currencies, with terms currently through November 2025.

Cross-currency Par Forward Contracts

1 unchanged sentence

These contracts are agreements to exchange cash flows from one currency to another at specified intervals over the contract term with all exchanges occurring at the same predetermined rate.

In November 2018, we hedged a portion of our Mexico forecasted expenses denominated in Pesos ("MXN") by entering into a one-year cross-currency par forward contract.

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

The derivative instrument matured in equal monthly amounts at a fixed forward rate of 22.11 MXN/USD.

In March 2020, we entered into a one-year cross-currency par forward contract.

4 unchanged sentences

The total notional amount of this outstanding derivative as of December 31, 2021 was approximately 413.1 million MXN.

The term of this one-year contract is December 1, 2021 to December 1, 2022.

The term of this one-year contract was December 1, 2021 to December 1, 2022.

The derivative instrument matured in equal monthly amounts at a fixed forward rate of 21.60 MXN/USD.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Floating Interest Rate Risk

In November 2021, in anticipation of entering into the new senior secured credit facilities in January 2022, which included a variable-rate term loan A and a variable-rate term loan B (see Note 11:

Long-term Debt), we entered into two forward-starting interest rate swaps.

Long-Term Obligations), we entered into two forward-starting interest rate swaps.

In February 2022, certain terms under the agreements were amended to reflect the transition from LIBOR to the Secured Overnight Financing Rate ("SOFR"), an alternative reference rate.

Under the interest rate swap agreements we exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount.

The term loan A swap, as amended, has an initial notional amount of

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 300.0 million, reducing to $ 150.0 million evenly on a quarterly basis through its final maturity on March 30, 2027.

We will pay a fixed rate of 1.32 % and will receive the greater of 3-month USD SOFR or ( 0.15 )%.

The term loan B swap, as amended, has an initial notional amount of $ 750.0 million, reducing to $ 46.9 million evenly on a quarterly basis excluding its final maturity on March 30, 2026.

We will pay a fixed rate of 1.17 % and will receive the greater of 3-month USD SOFR or 0.35 %.

These forward-starting swaps will effectively convert the relevant portion of the floating-rate term loans to fixed rates.

The term loan A swap, as amended, has an initial notional amount of $ 300.0 million, reducing to $ 150.0 million evenly on a quarterly basis through its final maturity on March 30, 2027.

We pay a fixed rate of 1.32 % and will receive the greater of 3-month USD SOFR or ( 0.15 )%.

The total notional amount of this outstanding derivative as of December 31, 2023 was approximately $ 244.7 million.

The term loan B swap, as amended, has an initial notional amount of $ 750.0 million, reducing to $ 46.9 million evenly on a quarterly basis through its final maturity on March 30, 2026.

We pay a fixed rate of 1.17 % and receive the greater of 3-month USD SOFR or 0.35 %.

The total notional amount of this outstanding derivative as of December 31, 2023 was approximately $ 421.9 million.

In June 2023, we entered into an additional interest rate swap that hedges both term loan A and term loan B interest payments.

The total notional amount of the swap is $ 300.0 million.

The hedge matures on June 30, 2028.

We pay a fixed rate of 3.88 % and receive 3-months USD SOFR.

These forward-starting swaps effectively convert the relevant portion of the floating-rate term loans to fixed rates.

The following table presents the fair values of our derivative instruments included within the consolidated balance sheets (in thousands):

1 unchanged sentence

Consolidated Balance Sheet Location Foreign Exchange Forward Contracts Interest Rate Swaps Gross Derivatives

(In thousands)

As of December 31, 2023

14 unchanged sentences

The following table presents the effects of our derivative instruments designated as cash flow hedges on the Consolidated Statements of Operations (in thousands):

Gain Reclassified From Accumulated Other Comprehensive (Loss) Income into Net (Loss) Income

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gain Reclassified From Accumulated Other Comprehensive (Loss) Income into Income

Location of Gain in the Consolidated Statements of Operations Year Ended December 31,

3 unchanged sentences

Foreign exchange forward contracts Cost of goods sold 7,852 7,751 3,444

Foreign exchange forward contracts Other expense, net (1)

Foreign exchange forward contracts Interest expense (2)

2 unchanged sentences

_______________________________

(1) Represents location of gain reclassified from accumulated other comprehensive (loss) income to net (loss) income as a result of a forecasted transaction being no longer probable of occurring.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We recognized the following gains (losses) on our derivative instruments designated as cash flow hedges in other comprehensive (loss) income before reclassifications to net (loss) income (in thousands):

Amount of Gain (Loss) Recognized in Other Comprehensive (Loss) Income

(1) Represents location of gain reclassified from accumulated other comprehensive income (loss) into other expense, net as a result of ineffectiveness.

(2) Represents location of gain reclassified from accumulated other comprehensive income (loss) into interest expense as a result of a forecasted transaction being no longer probable of occurring.

We recognized the following gains (losses) on our derivative instruments designated as cash flow hedges in other comprehensive income (loss) before reclassifications to income (in thousands):

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)

Year Ended December 31,

4 unchanged sentences

Total derivatives designated as cash flow hedging instruments $ 15,988 $ 72,374 $ ( 530 )

As of December 31, 2022, we expect an estimated $ 3.0 million in deferred gains on the outstanding foreign exchange forward contract and an estimated $ 29.3 million in deferred gains on the forward-starting interest rate swaps will be reclassified from accumulated other comprehensive loss to net income during the next 12 months concurrent with the underlying hedged transactions also being reported in net income.

As of December 31, 2023, we expect an estimated $ 4.2 million in deferred gains on the outstanding foreign exchange forward contract and an estimated $ 23.9 million in deferred gains on the forward-starting interest rate swaps will be reclassified from accumulated other comprehensive loss to net income during the next 12 months concurrent with the underlying hedged transactions also being reported in net (loss) income.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FAIR VALUE MEASUREMENTS

24 unchanged sentences

The contingent earn-out payment shall not exceed $ 6.0 million, which will be earned based on certain revenue targets over a twelve-month measurement period determined by the highest four consecutive quarters commencing over a two-year period starting on the closing date of the agreement and provided that the distributor is in compliance with its obligations under the agreement.

As of December 31, 2022, the fair value of the contingent earn-out was estimated at $ 2.6 million.

The estimated fair value of the contingent earn-out is calculated using a probability-weighted cash flow model based on historical revenue streams and the likelihood that the revenue targets will be met.

As of December 31, 2023, the fair value of the contingent earn-out was determined to be $ 3.4 million and was paid out in the first quarter of 2024.The estimated fair value of the contingent earn-out is calculated using a probability-weighted cash flow model based on historical revenue streams and the likelihood that the revenue targets will be met.

During November 2021, we acquired a small foreign infusion systems supplier.

15 unchanged sentences

The following table provides a reconciliation of our Level 3 earn-out liabilities measured at estimated fair value based on an initial valuation and updated quarterly for the years ended December 31, 2023, 2022 and 2021 (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earn-out Liability

Contingent earn-out liability, January 1, 2021 $ 26,300

Change in fair value of contingent earn-out (included in income from operations as a separate line item) (1)

Contingent earn-out liability, December 31, 2020 26,300

Contingent earn-out con-compete arrangement 2,589

Contingent earn-out non-compete arrangement 2,589

Transfer of Pursuit earn-out liability into Level 2 (1)

4 unchanged sentences

Contingent earn-out liability, December 31, 2022 25,572

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Transfer of Mediverse earn-out liability into Level 2 (6)

Currency translation 41

Contingent earn-out liability, December 31, 2023 $ 5,491

_______________________________

(1) The fair value of the Pursuit earn-out increased during 2020 primarily due to changes in the probabilities within the valuation model.

(1) The Pursuit earn-out was transferred out of Level 3 and into Level 2 in the third quarter of 2021 when the amount of the actual payment was known, and subsequently settled during the fourth quarter of 2021.

1 unchanged sentence

Acquisitions).

(4) Includes an adjustment to reduce to zero a contingent earn-out issued as part of the 2021 acquisition of a small foreign infusion systems supplier.

(3) Primarily relates to the change in fair value of our Smiths Medical earn-out and an adjustment to reduce to zero a contingent earn-out issued as part of the 2021 acquisition of a small foreign infusion systems supplier.

The contingent earn-out was not earned based on our determination that the threshold target was not met.

The following tables provide quantitative information about Level 3 inputs for fair value measurement of our earn-out liabilities related to Smiths Medical and Pursuit:

(4) Primarily relates to the change in fair value of our Smiths Medical earn-out and the earn-out with one of our international distributors.

(5) Primarily relates to the reclassification to accrued liabilities of a holdback liability not subject to unobservable inputs when determining the fair market value.

(6) The Mediverse earn-out was transferred out of Level 3 and into Level 2 in the fourth quarter of 2023 when the amount of the actual payment was known, and subsequently settled during first quarter of 2024.

The following table provides quantitative information about Level 3 inputs for fair value measurement of our earn-out liabilities related to Smiths Medical:

Smiths Medical Earn-out

December 31, 2022 At Acquisition

January 6, 2022

December 31, 2023 As of

December 31, 2022

Simulation Input

1 unchanged sentence

Risk-Free Rate 4.18 % 4.17 %

Pursuit Earn-out

December 31, 2020 At Acquisition

November 2, 2019

Simulation Input

Revenue/Gross Profit Volatility 25.00 % 20.00 %

Discount Rate 12.50 % 15.00 %

Risk-free rate 0.09 % 1.55 %

Counter Party Risk 3.10 % 6.00 %

Investments, Foreign Currency Contracts and Interest Rate Contracts

Our investments consist of corporate and government bonds and U.S treasury securities.

Our investments historically consist of corporate, government bonds and U.S.

treasury securities.

The fair value of our corporate and government bonds are estimated using observable market-based inputs such as quoted prices, interest rates and yield curves or Level 2 inputs.

3 unchanged sentences

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

The fair value of our Level 2 interest rate swaps is estimated using a pricing model that reflects the terms of the contracts, including the period to maturity, and relies on observable market inputs such as known notional value amounts and USD interest rate curves.

Other than the Pursuit earn-out liability described above, there were no transfers between levels in 2022 or 2021.

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

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other than the Mediverse earn-out liability described above, there were no transfers between levels in 2023 or 2022.

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

Fair value measurements as of December 31, 2023

6 unchanged sentences

Short-term corporate bonds $ 501 $ — $ 501 $ —

Short-term U.S.

treasury securities 1,412 1,412 — —

Short-term government bonds 498 — 498 —

Long-term corporate bonds 516 — 516 —

Foreign exchange forwards:

5 unchanged sentences

Total Assets $ 35,900 $ — $ 35,900 $ —

Contingent earn-out liability-ST $ 4,879 $ — $ 3,379 $ 1,500

Contingent earn-out liability - LT 3,991 — — 3,991

13 unchanged sentences

Available-for-sale debt securities:

Short-term $ 14,420 $ — $ 14,420 $ —

Long-term 4,620 — 4,620 —

Short-term corporate bonds $ 2,314 $ — $ 2,314 $ —

Short-term U.S.

treasury securities 1,412 1,412 — —

Short-term government bonds 498 — 498 —

Long-term corporate bonds 516 — 516 —

Foreign exchange forwards:

Prepaid expenses and other current assets (1)

4,860 — 4,860 —

Other assets (1)

Interest rate contracts:

Prepaid expenses and other current assets (1)

28,431 — 28,431 —

Other assets (1)

26,753 — 26,753 —

Total Assets $ 64,878 $ 1,412 $ 63,466 $ —

Contingent earn-out liability - LT $ 25,572 $ — $ — $ 25,572

Forward-starting interest rate swaps

Foreign exchange contracts:

Accrued liabilities (1)

1,847 — 1,847 —

Other long-term liabilities (1)

Total Liabilities $ 27,586 $ — $ 2,014 $ 25,572

_______________________________

(1) Subsequent to the issuance of the financial statements as of and for the year ended December 31, 2022, the Company determined that the tabular disclosure of the level for these amounts were incorrectly presented within level 3, and accordingly the Company has corrected these disclosures to present them as level 2 within this table.

The Company determined the impact of the adjustments to the table to be immaterial, individually and in the aggregate, based on consideration of quantitative and qualitative factors.

PREPAID EXPENSES AND OTHER CURRENT ASSETS AND OTHER ASSETS

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

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31,

11 unchanged sentences

Other assets consist of the following (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31,

9 unchanged sentences

Accrued liabilities consist of the following (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31,

4 unchanged sentences

Field service corrective action (1)

30,281 24,517

Italy medical device payback provision (2)

Legal accrual 1,874 3,137

14 unchanged sentences

_____________________________

(1) Includes field corrective actions associated with certain products in connection with a 2021 Warning Letter received by Smiths Medical from the FDA following an inspection of Smiths Medical's Oakdale, Minnesota Facility, see Note 15:

(1) Primarily includes field corrective actions associated with certain products in connection with a 2021 Warning Letter received by Smiths Medical from the FDA following an inspection of Smiths Medical's Oakdale, Minnesota Facility, see Note 15:

Commitments and Contingencies for further detail.

(2) As of December 31, 2022, there was an additional $ 12.1 million in payback provision recorded as a reduction to accounts receivable, net.

Whereas we recorded the amount for the payback provision to accrued liabilities from accounts receivable in Q3 2023, the payback provision was not reclassified as of December 31, 2022 to conform to the current year presentation.

ICU MEDICAL, INC.

6 unchanged sentences

Deferred revenue 10,585 16,239

Forward-starting interest rate swaps — 1,480

Benefits 4,207 5,314

Field service corrective action (1)

26,056 25,294

Accrued rent 841 997

2 unchanged sentences

_______________________________

(1) Related to field corrective actions associated with certain products in connection with a 2021 Warning Letter received by Smiths Medical from the FDA following an inspection of Smiths Medical's Oakdale, Minnesota Facility, see Note 15:

Commitments and Contingencies for further detail.

15 unchanged sentences

Pursuant to the terms and conditions of the Credit Agreement, the maturity dates of the Term Loans and the Revolving Credit Facility may be extended upon our request, subject to the consent of the Lenders.

Interest Rate Terms

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest Rate Terms

In general, the Term Loans and borrowings under the Revolving Credit Facility denominated in U.S.

7 unchanged sentences

The Revolving Credit Facility has a per annum commitment fee at an initial rate of 0.25 % which is applied to the available amount of the Revolving Credit Facility.

Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended June 30, 2022, the commitment fee will be determined by reference to the leverage ratio in effect from time to time as set forth in the table below.

Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended June 30, 2022, the commitment fee is determined by reference to the leverage ratio in effect from time to time as set forth in the table below.

Applicable Interest Margins

The Term Loan A and borrowings under the Revolving Credit Facility have an initial applicable margin of 0.75 % per annum for Base Rate Loans and 1.75 % per annum for Term SOFR Loans.

Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended June 30, 2022, the applicable margin for the Term Loan A and borrowings under the Revolving Credit Facility will be determined by reference to the leverage ratio in effect from time to time as set forth in the following table:

Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended June 30, 2022, the applicable margin for the Term Loan A and borrowings under the Revolving Credit Facility is determined by reference to the leverage ratio in effect from time to time as set forth in the following table:

Leverage Ratio Applicable Margin for Term SOFR Loans Applicable Margin for Base Rate Loans Commitment Fee Rate

5 unchanged sentences

The Term Loan B has an initial applicable margin of 1.5 % per annum for Base Rate Loans and 2.5 % per annum for Term SOFR Loans.

Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended June 30, 2022, the applicable margin for the Term Loan B will be determined by reference to the leverage ratio in effect from time to time as set forth in the following table:

Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended June 30, 2022, the applicable margin for the Term Loan B is determined by reference to the leverage ratio in effect from time to time as set forth in the following table:

ICU MEDICAL, INC.

6 unchanged sentences

Principal payments on the Term Loans are due on the last day of each calendar quarter commencing on June 30, 2022.

The Term Loan A will amortize in nineteen consecutive quarterly installments in an amount equal to 2.50 % of the original principal amount in each of the first two years, 5.00 % in each of the third and fourth years and 7.50 % in the fifth year, with a final payment of the remaining outstanding principal balance due on the maturity date.

The Term Loan A amortizes in nineteen consecutive quarterly installments in an amount equal to 2.50 % of the original principal amount in each of the first two years, 5.00 % in each of the third and fourth years and 7.50 % in the fifth year, with a final payment of the remaining outstanding principal balance due on the maturity date.

The Term Loan B matures in twenty-seven consecutive quarterly installments in an amount equal to 0.25 % of the original principal amount, with a final payment of the remaining outstanding principal balance due on the maturity date.

We may borrow, prepay and re-borrow amounts under the Revolving Credit Facility, in accordance with the terms and conditions of the Credit Agreement, with all outstanding amounts due at maturity.

During March 2022, we prepaid $ 16.0 million in principal payments on the Term Loan A principal balance.

For the year ended December 31, 2022, including the prepayment, we paid a total of $ 22.4 million in principal payments on both Term Loans.

During March 2022, we prepaid $ 16.0 million in principal payments on the Term Loan A principal balance, total principal paid on both Term Loans for the year ended December 31, 2022 was $ 22.4 million.

For the twelve months ended December 31, 2023, total principal payments on both Term Loans was $ 29.7 million.

Interest Payments

Interest payments on Base Rate Loans are payable quarterly in arrears on the last business day of each calendar quarter and the applicable maturity date.

Interest periods on Term SOFR Loans will be determined, at our option, as either one, three or six months and will be payable on the last day of each interest period and the applicable maturity date.

In the case of any interest periods of more than three months' duration, the interest payment will be payable on each day prior to the last day of such interest period that occurs at three-month intervals.

Interest periods on Term SOFR Loans are determined, at our option, as either one, three or six months and will be payable on the last day of each interest period and the applicable maturity date.

In the case of any interest periods of more than three months' duration, the interest payment are payable on each day prior to the last day of such interest period that occurs at three-month intervals.

The commitment fee on the Revolving Credit Facility is payable quarterly in arrears on the third business day following the last day of each calendar quarter and at the maturity date.

96 unchanged sentences

Section 162(m) 3,268 ( 4.2 ) % 3,942 ( 3.4 ) % 1,812 1.5 %

Tax reserve releases ( 6,884 ) 8.8 % ( 1,834 ) 1.6 % — — %

Other ( 545 ) 0.7 % 1,642 ( 1.4 ) % 2,245 1.8 %

11 unchanged sentences

Warranty reserve 13,788 13,241

Section 163(j) 9,166 —

Section 163(j) - interest expense limitation 25,467 9,166

Chargebacks, discounts, customer concessions 39,077 39,508

Capitalized research and development 43,313 16,587

Valuation allowance ( 8,452 ) ( 11,166 )

4 unchanged sentences

Section 481(a) adjustment - change in accounting method — —

Foreign currency translation adjustments 9,581 —

Foreign currency translation and derivative instrument adjustments 3,630 9,581

$ 220,524 $ 237,671

2 unchanged sentences

Net operating loss ("NOL") carryforwards consist of:

(a) federal NOL carryforwards of $ 1.9 million which will expire at various dates from 2023 to indefinite carryforward periods, (b) state NOL carryforwards of $ 4.3 million which will expire at various dates from 2026 to indefinite carryforward periods and (c) foreign NOL carryforwards of $ 46.3 million which will expire at various dates from 2023 to indefinite carryforward periods.

We believe that it is more likely than not that the benefit

(a) federal NOL carryforwards of $ 1.4 million which will expire at various dates from 2031 to indefinite carryforward periods, (b) state NOL carryforwards of $ 4.1 million which will expire at

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

from certain foreign NOL carryforwards will not be realized.

In recognition of this risk, we have provided a valuation allowance of $ 11.5 million on the $ 12.7 million DTAs related to these foreign NOL carryforwards.

various dates from 2026 to indefinite carryforward periods and (c) foreign NOL carryforwards of $ 32.6 million which will expire at various dates from 2024 to indefinite carryforward periods.

We believe that it is more likely than not that the benefit from certain foreign NOL carryforwards will not be realized.

In recognition of this risk, we have provided a valuation allowance of $ 9.0 million on the $ 9.5 million deferred tax assets related to these foreign NOL carryforwards.

Under Section 382 of the Internal Revenue Code, certain ownership changes limit the utilization of the NOL carryforwards, and the amount of federal NOL carryforwards recorded is the net federal benefit available.

3 unchanged sentences

The net impact of these tax holiday and tax incentives was an increase to our net earnings by $ 8.0 million or $ 0.33 per diluted share in 2023 and by $ 8.1 million or $ 0.34 per diluted share in 2022.

Foreign currency translation adjustments, and related tax effects, are an element of “other comprehensive income” and are not included in net income other than the revaluation of the associated deferred tax asset due to the Tax Act.

Foreign currency translation and derivative instrument adjustments, and related tax effects, are an element of “other comprehensive income” and are not included in net income other than the revaluation of the associated deferred tax asset due to the Tax Act.

As of December 31, 2023, we have estimated $ 246.8 million of undistributed foreign earnings and profits.

12 unchanged sentences

As of December 31, 2023, it is reasonably possible that the expiration of the U.S.

federal statute of limitations will cause the gross amount of unrecognized tax benefits to decrease by $7.8 million.

federal statute of limitations will cause the gross amount of unrecognized tax benefits to decrease by $ 6.7 million within the next twelve months.

It is not possible to estimate any other amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months.

We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.

We have accrued for penalties and interest of $ 2.3 million and $ 2.2 million, respectively as of December 31, 2022.

We recognized $ 1.4 million of interest expense and $ 0.2 million of penalties in income tax benefit during 2023 and released $ 0.7 million of interest expense and $ 0.6 million of penalties in 2023.

In total, we have accrued for interest and penalties of $ 2.9 million and $ 2.0 million, respectively as of December 31, 2023, and $ 2.2 million and $ 2.3 million, respectively, as of December 31, 2022.

The following table summarizes our cumulative gross unrecognized tax benefits (in thousands):

9 unchanged sentences

Ending balance $ 78,558 $ 54,053 $ 21,537

GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS

Significant Customers

ICU MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In December 2022, the European Union agreed to implement Pillar Two, the OECD’s global minimum tax rate of 15% for multinationals that meet a global revenue threshold.

A number of countries have enacted or have announced plans to enact legislation to adopt Pillar Two.

The Pillar Two legislation is effective for our fiscal year beginning January 1, 2024 and for fiscal year 2024 we do not anticipate that it will have a material impact to our tax provision or effective tax rate.

However, the Pillar Two rules continue to evolve and their application may alter our tax obligations in certain countries in which we operate for fiscal periods beyond 2024 as we continue to assess the impact of tax legislation in these jurisdictions.

GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS

Significant Customers

We sell products worldwide, on credit terms on an unsecured basis, as an OEM supplier, to independent medical supply distributors and directly to the end customer.

The manufacturers and distributors, in turn, sell our products to healthcare providers.

In 2022, we had worldwide net sales to Medline of 15 % of consolidated net sales.

In 2023, we had net sales to Medline of 16 % of consolidated worldwide net sales.

Geographic Information

25 unchanged sentences

We had 1,633 shares remaining in treasury at December 31, 2021.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2021, we withheld 40,350 shares of our common stock from employee vested restricted stock units in consideration for $ 8.3 million in payments for the employees' share award income tax withholding obligations.

3 unchanged sentences

The components of AOCI, net of tax, were as follows (in thousands):

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Balance as of January 1, 2021 $ ( 4,381 ) $ 2,784 $ 75 $ ( 1,522 )

Other comprehensive income before reclassifications 12,929 1,505 47 14,481

Amounts reclassified from AOCI — ( 601 ) — ( 601 )

Other comprehensive income 12,929 904 47 13,880

Balance as of December 31, 2020 $ ( 4,381 ) $ 2,784 $ 75 $ ( 1,522 )

Other comprehensive loss before reclassifications ( 14,664 ) ( 403 ) ( 62 ) ( 15,129 )

2 unchanged sentences

Balance as of December 31, 2021 $ ( 19,045 ) $ ( 237 ) $ 13 $ ( 19,269 )

Other comprehensive loss before reclassifications ( 103,928 ) 54,962 1,203 ( 47,763 )

Other comprehensive loss (income) before reclassifications ( 103,928 ) 54,962 1,203 ( 47,763 )

Amounts reclassified from AOCI — ( 13,946 ) — ( 13,946 )

Other comprehensive loss ( 103,928 ) 41,016 1,203 ( 61,709 )

Other comprehensive (loss) income ( 103,928 ) 41,016 1,203 ( 61,709 )

Balance as of December 31, 2022 $ ( 122,973 ) $ 40,779 $ 1,216 $ ( 80,978 )

Other comprehensive income before reclassifications 46,189 12,096 603 58,888

Amounts reclassified from AOCI — ( 30,991 ) — ( 30,991 )

Other comprehensive income (loss) 46,189 ( 18,895 ) 603 27,897

Balance as of December 31, 2023 $ ( 76,784 ) $ 21,884 $ 1,819 $ ( 53,081 )

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

Contingencies

During November 2019, we acquired Pursuit (see Note 2:

Acquisitions).

During November 2019, we acquired Pursuit.

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

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

As of June 30, 2021, the earn-out measurement period had ended and based on

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In October 2021, the $ 26.3 million earn-out was finalized and paid to the former Pursuit equity holders (see Note 8:

3 unchanged sentences

The contingent earn-out shall not exceed $ 6.0 million, which will be earned based on certain revenue targets over a twelve-month measurement period determined by the highest four consecutive quarters commencing over a two-year period starting on the closing date of the agreement and provided that the distributor is in compliance with its obligations under the agreement.

As of December 31, 2022, the fair value of the contingent earn-out was estimated at $ 2.6 million (see Note 8:

As of December 31, 2023, the fair value of the contingent earn-out was determined to be $ 3.4 million and was paid out in the first quarter of 2024 (see Note 8:

Fair Value Measurements).

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During November 2021, we acquired a small foreign infusion systems supplier.

8 unchanged sentences

The Warning Letter cited, among other things, failures to comply with FDA's medical device reporting requirements and failures to comply with applicable portions of the Quality System Regulation.

A provision for the estimated costs related to the field service corrective action was recorded on the opening acquired balance sheet of Smiths Medical.

The initial estimate recorded was based on a probability-weighted estimate of the costs required to settle the obligation.

The actual costs to be incurred are dependent upon the scope of the work necessary to achieve regulatory clearance and could differ from the original estimate.

The estimated field service corrective action recorded at December 31, 2022 is $ 49.8 million.

A provision for the estimated costs related to the field service corrective actions identified as of the closing date of the acquisition was recorded on the opening acquired balance sheet of Smiths Medical.

The initial estimate recorded was based on a probability-weighted estimate of the costs required to settle the obligation related to known field corrective actions.

The actual costs to be incurred are dependent upon the scope of the work necessary to achieve regulatory clearance, including potential additional field corrective actions, and could differ from the original estimate.

For the years ended December 31, 2023 and 2022, we recorded additional expense of $ 20.3 million and $ 5.3 million, respectively, primarily related to additional field corrective actions identified and initiated during those periods.

As of December 31, 2023, approximately $ 53.6 million of the $ 56.3 million of accrued field service corrective action was related to Smiths Medical.

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

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COLLABORATIVE AND OTHER ARRANGEMENTS

On February 3, 2017, we entered into two Manufacturing and Supply Agreements ("MSAs") whereby (i) Pfizer will manufacture and supply us with certain agreed upon products for an initial five-year term with a one-time two-year option to extend and (ii) we will manufacture and supply Pfizer certain agreed upon products for a term of five or ten years depending on the product, also with a one-time two-year option to extend.

The MSAs provide each party with mutually beneficial interests and both of the MSAs are to be jointly managed by both Pfizer and ICU.

We no longer purchase products from Pfizer under the MSA as described in (i) above.

The MSA described in (ii) above provides each party with mutually beneficial interests and is jointly managed by both Pfizer and ICU.

The initial supply price, which will be annually updated, is in full consideration for all costs associated with the manufacture, documentation, packaging and certification of the products.

7 unchanged sentences

The Product Addendum expired on November 30, 2022.

ICU MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUBSEQUENT EVENTS

On January 19, 2023, we entered into a revolving $ 150 million uncommitted receivables purchase agreement with Bank of The West ("BOW") which provides for a less expensive form of capital.

ACCOUNTS RECEIVABLE PURCHASE PROGRAM

On January 19, 2023, we entered into a revolving $ 150 million uncommitted receivables purchase agreement with Bank of The West ("BOW"), which was subsequently acquired by BMO in February 2023.

This agreement provided for a less expensive form of capital.

The discount rate applied to the sold receivables equals a rate per annum equal to the sum of (i) an applicable margin of 1.75%, plus (ii) Term SOFR for a period equal to the discount period which is calculated with respect to the payment terms of the specific receivable.

The accounts receivable to be sold have payment terms ranging between 30 and 60 days, and are related to customer accounts with good credit history.

The accounts receivable sold have payment terms ranging between 30 and 60 days, and are related to customer accounts with good credit history.

The transfer of the purchased accounts receivable under the agreement is intended to be an absolute and irrevocable transfer constituting a true sale as the transferred receivables have been isolated beyond the reach of the Company and our creditors, even in bankruptcy or other receivership.

We will not retain effective control over the sold receivables and BOW will have the right upon purchase to pledge and/or exchange the transferred assets without restrictions.

The Company will act as collection agent for BOW, collection services will be undertaken by our accounts receivable personnel in their normal course of business and collected funds will be remitted to BOW.

The discount rate has been negotiated net of consideration for the collection services, the cost of collection is expected to be immaterial to the Company.

We do not retain effective control over the sold receivables and BOW has the right upon purchase to pledge and/or exchange the transferred assets without restrictions.

The Company acts as collection agent for BOW and collection services are undertaken by our accounts receivable personnel in their normal course of business and collected funds are remitted to BOW.

We do not have any continuing involvement with the sold receivables other than the collection services which does not provide us with more than a trivial benefit.

The discount rate has been negotiated net of consideration for the collection services, the cost of collection is immaterial to the Company;

therefore, we did not separately record any related servicing assets or liabilities related to the sold receivables.

For the year ended December 31, 2023, the carrying value of trade receivables sold to BOW in connection with the purchase program was $ 629.1 million.

In exchange for the sale of trade receivables, we received cash of $ 625.3 million.

For the year ended December 31, 2023, the sale of the receivables resulted in a loss of $ 3.7 million, recorded in other expense, net in our consolidated statement of operations.

For the year ended December 31, 2023, we have collected and remitted $ 553.2 million in cash to BOW.

As of December 31, 2023, cash remaining to be collected on behalf of BOW was $ 75.9 million, which has been removed from our consolidated balance sheet as of December 31, 2023 and is reflected as cash provided by operating activities in the consolidated statement of cash flows.

There were no such balances at December 31, 2022.

The carrying value of the sold receivables approximated the fair value at December 31, 2023.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data