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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 1 to the financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update No.
−Removed: 2016-02, Leases (Topic 842) , using the modified retrospective approach.
Basis for Opinion
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We believe that our audits provide a reasonable basis for our opinion.
−Removed: Critical Audit Matters
−Removed: 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.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter 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 separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Intangible Assets – Impairment Charges – Refer to Notes 1 and 5 to the financial statements
−Removed: Critical Audit Matter Description
−Removed: The Company has recorded finite-lived intangible assets with carrying values of $367.9 million at December 31, 2020.
−Removed: The Company evaluates amortizing intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable and compares the carrying value of the amortizing intangible assets to the undiscounted cash flows expected to result from the asset group and determines whether the carrying amount is recoverable.
−Removed: If the carrying amount is not recoverable, an impairment charge is recorded based on the difference between the carrying amount and the fair value.
−Removed: The Company estimates the fair value of intangible assets using a discounted cash flow model which includes estimates of future projections of revenues and cash flows.
−Removed: During the year ended December 31, 2020, the Company recorded total impairment charges related to intangible assets of approximately $28.7 million.
−Removed: We identified the intangible asset impairment charges as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of intangible assets to record the impairment charge.
−Removed: This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates of future projections of revenues and cash flows.
−Removed: How the Critical Audit Matter Was Addressed in the Audit
−Removed: Our audit procedures related to management’s estimates of future projections of revenues and cash flows used for the intangible asset impairment tests included the following, among others:
−Removed: ● We tested the effectiveness of controls over the impairment tests of intangible assets, including management’s controls over estimates of future projections of revenues and cash flows.
−Removed: ● We assessed the reasonableness of management’s estimates of future projections of revenues and cash flows through comparison to historical results and the Company’s strategic plans and initiatives.
−Removed: ● We evaluated whether the estimates of future projections of revenues and cash flows were consistent with evidence obtained in other areas of the audit.
Other Long-term Obligations - Contingent Consideration Liability – Refer to Notes 1, 7, and 15 to the financial statements
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Contingent consideration liabilities are re-measured at the estimated fair value at each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income (loss).
−Removed: During the year ended December 31, 2020, the Company recorded a benefit of $8.0 million for the estimated change in fair value of contingent consideration liabilities.
+Added: During the year ended December 31, 2021, the Company recorded an expense of $3.2 million for the estimated change in fair value of contingent consideration liabilities.
Included within contingent consideration liabilities is a liability for the estimated earn-out payment based on a revenue growth multiplier specified in the agreement from the November 2018 acquisition of Cianna Medical, Inc.
2 unchanged sentences
revenue milestone contingent consideration liability as a critical audit matter because of management’s estimates of revenue projections and the complex valuation methodology and discount rate used to determine the fair value of the contingent consideration liability.
−Removed: This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to
−Removed: evaluate the reasonableness of management’s estimates of revenue projections and to evaluate the appropriateness of the valuation methodology and discount rate.
+Added: This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates of revenue projections and to evaluate the appropriateness of the valuation methodology and discount rate.
How the Critical Audit Matter Was Addressed in the Audit
15 unchanged sentences
CONSOLIDATED BALANCE SHEETS
−Removed: DECEMBER 31, 2020 AND 2019
(In thousands)
56 unchanged sentences
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
−Removed: YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(In thousands, except per share amounts)
5 unchanged sentences
Impairment charges
−Removed: Contingent consideration (benefit)
+Added: Contingent consideration expense (benefit)
Acquired in-process research and development
4 unchanged sentences
Interest expense
−Removed: Other income (expense) - net
+Added: Other expense — net
Total other expense — net
Income (loss) before income taxes
−Removed: INCOME TAX (BENEFIT) EXPENSE
+Added: Income tax expense (benefit)
Net income (loss)
5 unchanged sentences
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
−Removed: YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(In thousands)
11 unchanged sentences
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
−Removed: YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(In thousands)
2 unchanged sentences
BALANCE — January 1, 2019
+Added: Reclassify deferred gain on sale-leaseback upon adoption of ASC 842
+Added: Reclassify stranded tax effects upon adoption of ASU 2018-02
Other comprehensive loss
2 unchanged sentences
Issuance of common stock under Employee Stock Purchase Plans
−Removed: Issuance of common stock, net of offering costs
−Removed: Shares surrendered in exchange for payment of payroll tax liabilities
Shares surrendered in exchange for exercise of stock options
BALANCE — December 31, 2019
−Removed: Reclassify deferred gain on sale-leaseback upon adoption of ASC 842
−Removed: Reclassify stranded tax effects upon adoption of ASU 2018-02
+Added: Cumulative effect adjustment upon adoption of ASU 2016-13, Credit Losses
Other comprehensive loss
2 unchanged sentences
Issuance of common stock under Employee Stock Purchase Plans
+Added: Shares surrendered in exchange for payment of payroll tax liabilities
Shares surrendered in exchange for exercise of stock options
BALANCE — December 31, 2020
−Removed: Cumulative effect adjustment upon adoption of ASU 2016-13, Credit Losses
Other comprehensive loss
2 unchanged sentences
Issuance of common stock under Employee Stock Purchase Plans
+Added: Shares issued from time-vested restricted stock units
Shares surrendered in exchange for payment of payroll tax liabilities
5 unchanged sentences
CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(In thousands)
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Proceeds from sale of business
−Removed: Cash received for settlement of current note receivable
+Added: Cash received for settlement of note receivable
Issuance of note receivable
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Proceeds from issuance of common stock
−Removed: Offering costs
Proceeds from issuance of long-term debt
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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The following is a summary of the more significant of such policies.
−Removed: Reclassifications.
−Removed: Certain reclassifications have been made to the 2019 and 2018 periods to conform to the 2020 presentation.
−Removed: In the consolidated statements of cash flows for the year ended December 31, 2020, the fair value adjustment to contingent consideration is presented as a reconciling item between net income (loss) and cash flows from operating activities.
−Removed: A corresponding reclassification for the years ended December 31, 2019 and 2018 of approximately $ 0.2 million and $ 0.7 million, respectively, has been made for comparability, along with corresponding reclassifications to the change in certain operating assets and liabilities.
Use of Estimates in Preparing Financial Statements .
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Intercompany balances and transactions have been eliminated.
+Added: Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts.
Cash and Cash Equivalents .
−Removed: For purposes of the statements of cash flows, we consider interest bearing deposits with an original maturity date of three months or less to be cash equivalents.
+Added: We consider interest-bearing deposits with an original maturity date of three months or less to be cash equivalents.
+Added: As of December 31, 2021, approximately $ 1.9 million of our cash and cash equivalents represents restricted cash for the payment of certain import and other taxes for our subsidiary in China.
+Added: There was no restricted cash for the year ended December 31, 2020.
Receivables .
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We review inventories on hand at least quarterly and record provisions for estimated excess, slow moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value.
−Removed: The regular and systematic
−Removed: inventory valuation reviews include a current assessment of future product demand, historical experience and product expiration.
+Added: The regular and systematic inventory valuation reviews include a current assessment of future product demand, historical experience and product expiration.
Goodwill and Intangible Assets .
We test goodwill balances for impairment on an annual basis as of July 1 or whenever impairment indicators arise.
−Removed: When impairment indicators are identified, we may elect to perform an optional qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units has fallen below their carrying value.
+Added: When impairment indicators are identified, we may elect to perform an optional qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units has fallen below their
+Added: carrying value.
During our annual impairment test, we utilize four reporting units in evaluating goodwill for impairment using a quantitative assessment, which uses a combination of a guideline public company market-based approach and a discounted cash flow income-based approach.
The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value.
−Removed: Finite-lived intangible assets including developed technology, customer lists, distribution agreements, license agreements, trademarks, covenants not to compete and patents are subject to amortization.
+Added: Finite-lived intangible assets including developed technology, customer lists, distribution agreements, license agreements, trademarks and patents are subject to amortization.
Intangible assets are amortized over their estimated useful life on a straight-line basis, except for customer lists, which are generally amortized on an accelerated basis.
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We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
−Removed: We compare the carrying value of the amortizing intangible assets acquired to the undiscounted cash flows expected to result from the asset group and determine whether the carrying amount is recoverable.
−Removed: We determine the fair value of our amortizing assets based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities.
+Added: We compare the carrying value of the asset group to the undiscounted cash flows expected to result from the asset group and determine whether the carrying amount is recoverable.
+Added: We determine the fair value of each asset group based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities.
In-process technology intangible assets, which are not subject to amortization until projects reach commercialization, are assessed for impairment at least annually and more frequently if events occur that would indicate a potential reduction in the fair value of the assets below their carrying value.
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Leasehold improvements
−Removed: Depreciation expense related to property and equipment for the years ended December 31, 2020, 2019 and 2018 was approximately $ 35.4 million, $ 31.4 million, and $ 28.3 million, respectively.
+Added: Depreciation expense related to property and equipment for the years ended December 31, 2021, 2020 and 2019 was $ 34.5 million, $ 35.4 million, and $ 31.4 million, respectively.
Deferred Compensation .
1 unchanged sentence
We established a Rabbi trust to finance obligations under the plan with corporate-owned variable life insurance contracts.
−Removed: The cash surrender value totaled approximately $ 17.1 million and $ 15.1 million at December 31, 2020 and 2019, respectively, which is included in other assets in our consolidated balance sheets.
−Removed: have recorded a deferred compensation payable of approximately $ 16.8 million and $ 14.9 million at December 31, 2020 and 2019, respectively, to reflect the liability to our employees under this plan.
+Added: The cash surrender value totaled $ 19.1 million and $ 17.1 million at December 31, 2021 and 2020, respectively, which is included in other assets in our consolidated balance sheets.
+Added: We have recorded a deferred compensation payable of $ 18.1 million and $ 16.8 million at December 31, 2021 and 2020, respectively, to reflect the liability to our employees under this plan.
Other Assets .
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Our contracts do not typically contain a financing component.
−Removed: Revenue is recorded
−Removed: at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments.
−Removed: The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms.
+Added: Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments.
+Added: The estimates of variable consideration are based on historical payment experience, historical and
+Added: projected sales data, and current contract terms.
Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
47 unchanged sentences
Cash-settled share-based awards, or liability awards, are remeasured at fair value each reporting period until the awards are settled.
−Removed: Stock-based compensation expense for the years ended December 31, 2020, 2019 and 2018 was approximately $ 14.3 million, $ 9.4 million and $ 6.1 million, respectively (see Note 12).
+Added: Stock-based compensation expense for the years ended December 31, 2021, 2020 and 2019 was $ 16.1 million, $ 14.3 million and $ 9.4 million, respectively (see Note 12).
Concentration of Credit Risk .
16 unchanged sentences
New Financial Accounting Standards .
−Removed: Recently Adopted
−Removed: In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):
−Removed: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).
−Removed: ASU 2018-15 became effective for us on January 1, 2020.
−Removed: The adoption of this standard did not have a material impact on our consolidated financial statements.
−Removed: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) , which removes, modifies and adds various disclosure requirements related to fair value disclosures.
−Removed: ASU 2018-13 became effective for us beginning on January 1, 2020.
−Removed: We have modified our disclosures to conform with this guidance (see Note 16).
−Removed: In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):
−Removed: Measurement of Credit Losses on Financial Instruments , which replaced the incurred loss impairment methodology for financial assets with a methodology that reflects expected credit losses.
−Removed: The new credit loss model must be applied to loans, accounts receivable, and other financial assets.
−Removed: ASU 2016-13 became effective for us beginning on January 1, 2020.
−Removed: We adopted this standard using a modified retrospective approach with a cumulative-effect adjustment to retained earnings of $ 575,000 as of the beginning of 2020.
−Removed: See Note 16 for additional disclosures related to our allowance for current expected credit losses.
−Removed: The adoption of this guidance did not have a material impact on our statements of income (loss) or cash flows.
−Removed: Not Yet Adopted
−Removed: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):
+Added: In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):
Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions in accounting for modifications of contracts that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform.
1 unchanged sentence
Scope , which amends the scope of ASU 2020-04.
−Removed: ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 and may be applied prospectively to transactions through December 31, 2022.
+Added: ASU 2020-04 and ASU 2021-01 were effective as of March 12, 2020, and the provisions of these updates may be applied prospectively to transactions through December 31, 2022, when reference rate reform activity is expected to be completed.
+Added: As of December 31, 2021, we had not modified any contracts as a result of reference rate reform.
We are currently assessing the anticipated impact of these standards on our consolidated financial statements.
−Removed: We currently believe that all other issued and not yet effective accounting standards are not relevant to our financial statements.
+Added: We currently believe that all other issued and not yet effective accounting standards are not materially relevant to our financial statements.
Disaggregation of Revenue.
Our revenue is disaggregated based on reporting segment, product category and geographical region.
−Removed: Beginning in the first quarter of 2020, we revised our product categories to more clearly reflect how we sell our products to our customers.
−Removed: We presented historical information under the new revised product categories in a Current Report on Form 8-K, filed with the SEC on April 3, 2020.
We design, develop, manufacture and market medical products for interventional and diagnostic procedures.
22 unchanged sentences
2021 Acquisitions
+Added: During September 2021, we paid $ 2.7 million to acquire series A preferred shares of Fluidx Medical Technology, Inc.
+Added: ("Fluidx"), owner of certain technology proposed to be used in the development of embolic and adhesive agents for use in arterial, venous, vascular graft and cardiovascular applications inside and outside the heart and related appendages.
+Added: We had previously purchased $ 2 million of participating preferred shares during 2019.
+Added: Our investment has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Fluidx.
+Added: Our total current investment in Fluidx represents an ownership of 15.0 % of the outstanding stock.
+Added: 2020 Acquisitions
On November 6, 2020, we entered into a unit purchase agreement to acquire KA Medical, LLC (“KA Medical”).
−Removed: Subject to the terms and conditions of the unit purchase agreement, we paid $ 10.4 million in cash at closing, net of cash acquired, subject to adjustments for working capital and other matters, with an additional $ 4 million payable no later than 12 months following the agreement.
+Added: Subject to the terms and conditions of the unit purchase agreement, we paid $ 14.6 million in cash, net of cash acquired, including adjustments for working capital and deferred payments of $ 4 million.
KA Medical developed the Micro Plug Set, a self-expanding nitinol vascular occlusion device, which is FDA-cleared and CE marked.
We accounted for this acquisition as a business combination.
−Removed: The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material.
−Removed: Acquisition-related costs associated with the KA Medical acquisition, which were included in selling,
−Removed: general and administrative expenses, were not material.
−Removed: The purchase price was preliminarily allocated as follows (in thousands):
+Added: The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material for the years ended December 31, 2021 and 2020.
+Added: Acquisition-related costs associated with the KA Medical acquisition, which were included in selling, general and administrative expenses, were not material.
+Added: During the fourth quarter of 2021, certain immaterial measurement period adjustments were recorded to our purchase price allocation.
+Added: The purchase price was allocated as follows (in thousands):
Assets Acquired
13 unchanged sentences
The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes.
+Added: We do not deem the pro forma effects to our consolidated results of operations of the KA Medical acquisition to be material.
2019 Acquisitions
On October 11, 2019, we entered into a subscription and shareholders’ agreement to acquire 3,900 ordinary shares and 1,365 C ordinary shares of Selio Medical Limited ("Selio"), an option to purchase all ordinary shares in Selio throughout a 45-day period commencing from the date Selio receives FDA Section 510(k) approval of a medical device it is currently developing, and an option to purchase all remaining shares on the third anniversary date of the agreement if we elect to purchase all ordinary shares.
−Removed: The shares of stock we acquired, which represent an ownership interest of approximately 19.5 %, have been recorded as an equity investment accounted for at cost because we are not able to exercise significant influence over the operations of Selio.
−Removed: The investment and purchase option of approximately $ 2.6 million are reflected within other assets in the accompanying consolidated balance sheets.
−Removed: In addition, we have a loan to Selio of $ 250,000 , reflected within other assets, and have committed to provide a loan up to an additional € 2 million at the discretion of the borrower.
−Removed: Amounts outstanding under the loan accrue interest at a rate of 5 % per annum.
−Removed: All amounts outstanding under the loan agreement become due and payable at the first anniversary of the expiration of our option to purchase all ordinary shares.
+Added: The shares of stock we acquired, which represent an ownership interest of 19.5 %, have been recorded as an equity investment accounted for at cost because we are not able to exercise significant influence over the operations of Selio.
+Added: The investment and purchase option of $ 2.6 million are reflected within other assets in the accompanying consolidated balance sheets.
+Added: In addition, we have loans to Selio of $ 2.5 million, reflected within other assets, including funding of an additional loan commitment of € 2 million during the year ended December 31, 2021.
+Added: Amounts outstanding under the loans accrue interest at a rate of 5 % per annum.
+Added: All amounts outstanding under the loans become due and payable at the first anniversary of the expiration of our option to purchase all ordinary shares.
On August 1, 2019, we entered into a share purchase agreement to acquire Fibrovein Holdings Limited, which is the owner of 100 % of the capital stock of STD Pharmaceutical Products Limited, a UK private company engaged in the manufacture, distribution and sale of pharmaceutical sclerotherapy products (“STD Pharmaceutical”).
−Removed: The purchase consideration consisted of an upfront payment of approximately $ 13.7 million, net of cash acquired.
−Removed: We also recorded a contingent consideration liability of $ 934,000 related to royalties potentially payable pursuant to the terms of the share purchase agreement.
+Added: The purchase consideration consisted of an upfront payment of $ 13.7 million, net of cash acquired.
+Added: We also recorded a contingent consideration
+Added: liability of $ 934,000 related to royalties potentially payable pursuant to the terms of the share purchase agreement.
We accounted for this acquisition as a business combination.
5 unchanged sentences
We accounted for this acquisition as a business combination.
−Removed: On March 28, 2019, we paid $ 2 million to acquire convertible participating preferred shares of Fluidx Medical Technology, LLC ("Fluidx"), owner of certain technology proposed to be used in the development of embolic and adhesive agents for use in arterial, venous, vascular graft and cardiovascular applications inside and outside the heart and related appendages.
−Removed: Our investment in Fluidx has been recorded as an equity investment accounted for at cost and reflected within other assets in our accompanying consolidated balance sheet because we are not able to exercise significant influence over the operations of Fluidx.
−Removed: Our total current investment in Fluidx represents an ownership of approximately 11.6 % of the outstanding equity interests of Fluidx.
The following table summarizes the purchase price allocation and other disclosures for acquisitions accounted for as business combinations during the year ended December 31, 2019 (in thousands).
21 unchanged sentences
Weighted Average
−Removed: The sales and results of operations related to the STD Pharmaceutical and Brightwater acquisitions have been included in our cardiovascular segment and were not material.
+Added: The sales and results of operations related to the STD Pharmaceutical and Brightwater acquisitions have been included in our cardiovascular segment and were not material for the years ended December 31, 2021, 2020 and 2019.
It is not practical to separately report earnings related to these acquisitions, as we cannot split out sales costs related solely to the products acquired, principally because our sales representatives sell multiple products within our cardiovascular business segment.
Acquisition costs related to the STD Pharmaceutical and Brightwater acquisitions, which were included in selling, general and administrative expenses, were not material.
−Removed: Goodwill related to these acquisitions arises principally from synergies and economies of scale anticipated upon consolidation of operations and is not expected to be deductible for income tax purposes.
−Removed: 2018 Acquisitions
−Removed: On December 14, 2018, we consummated an acquisition transaction contemplated by an asset purchase agreement with Vascular Insights, LLC and VI Management, Inc.
−Removed: (combined "Vascular Insights") and acquired Vascular Insights’ intellectual property rights, inventory and certain other assets, including, the ClariVein® IC system and the ClariVein OC system.
−Removed: The ClariVein systems are specialty infusion and occlusion catheter systems with rotating wire tips designed for the controlled 360-degree dispersion of physician-specified agents to a targeted treatment area.
−Removed: We accounted for this acquisition as a business combination.
−Removed: The purchase consideration included an upfront payment of $ 40 million and an immaterial working capital adjustment.
−Removed: We are also obligated to pay up to an additional $ 20 million based on achieving certain revenue milestones specified in the asset purchase agreement.
−Removed: On November 13, 2018, we consummated an acquisition transaction contemplated by a merger agreement to acquire Cianna Medical, Inc.
−Removed: ("Cianna Medical").
−Removed: The purchase consideration consisted of an upfront payment of $ 135 million plus a final working capital adjustment of approximately $ 1.2 million in cash, with earn-out payments of $ 15 million for achievement of supply chain and scalability metrics paid in the third quarter of 2019 and potential payments up to an additional $ 50 million for the achievement of sales milestones specified in the merger agreement.
−Removed: Cianna Medical developed the first non-radioactive, wire-free breast cancer localization system.
−Removed: Its SCOUT® and SAVI® Brachy technologies are FDA-cleared and address unmet needs in the delivery of radiation therapy, tumor localization and surgical guidance.
−Removed: We accounted for this acquisition as a business combination.
−Removed: During July 2018, we purchased 1,786,000 preferred limited liability company units of Cagent Vascular, LLC, a medical device company ("Cagent"), for approximately $ 2.2 million.
−Removed: We had previously purchased 3,000,000 preferred limited liability company units of Cagent for approximately $ 3.0 million during 2016 and 2017.
−Removed: Our investment has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Cagent.
−Removed: Our total current investment in Cagent represents an ownership of approximately 19.5 % of the outstanding stock.
−Removed: On May 23, 2018, we entered into an asset purchase agreement with DirectACCESS Medical, LLC (“DirectACCESS”) to acquire its assets, including, certain product distribution agreements for the FirstChoice™ Ultra High-Pressure PTA Balloon Catheter.
−Removed: We accounted for this acquisition as a business combination.
−Removed: The purchase price for the assets was approximately $ 7.3 million.
−Removed: On May 18, 2018, we paid $ 750,000 for a distribution agreement with QXMédical, LLC ("QXMédical") for the Q50® PLUS Stent Graft Balloon Catheter.
−Removed: We accounted for this acquisition as an asset purchase.
−Removed: We are amortizing the distribution agreement intangible asset over a period of ten years .
−Removed: On April 6, 2018, we entered into long-term agreements with NinePoint, pursuant to which we (a) became the exclusive worldwide distributor for the NvisionVLE® Imaging System with Real-time Targeting™ using Optical Coherence Tomography (OCT) and (b) acquired an option to purchase up to 100 % of the outstanding equity in NinePoint throughout a three-month period commencing 18 months subsequent to the agreement date, both in exchange for total consideration of $ 10 million.
−Removed: In addition, we made a loan to NinePoint for $ 10.5 million with a maturity date of April 6, 2023, at which time the loan, together with accrued interest thereon, will be due and payable.
−Removed: The loan bears interest at a rate of 9.0 % and is collateralized by NinePoint’s rights, interest and title to the NvisionVLE® Imaging System and any other product owned or licensed by NinePoint utilizing OCT.
−Removed: This loan has been recorded as a note receivable within other long-term assets in our consolidated balance sheets.
−Removed: We utilized the consolidation of variable interest entities guidance to determine whether or not NinePoint was a variable interest entity ("VIE"), and if so, whether we are the primary beneficiary of NinePoint.
−Removed: As of December 31, 2018, we concluded that NinePoint is a VIE based on the fact that the equity investment at risk in NinePoint is not sufficient to finance its activities.
−Removed: We have also determined that Merit is not the primary beneficiary of NinePoint as we do not have the power to direct NinePoint’s most significant activities.
−Removed: The results of operations related to NinePoint have been included in our endoscopy segment since the acquisition date.
−Removed: During the years ended December 31, 2019 and 2018 our net sales of NinePoint products were approximately $ 2.9 million and $ 3.0 million, respectively.
−Removed: Our exposure to loss related to our transaction with NinePoint was the carrying value of the amounts paid to and due from NinePoint.
−Removed: In 2019, we determined our investments in NinePoint were impaired, and we recorded impairment charges of $ 20.5 million for the NinePoint note receivable and purchase option and $ 1.6 million related to interest accrued on the note receivable.
−Removed: In January 2020, our option to purchase the outstanding equity of NinePoint expired.
−Removed: On February 14, 2018, we acquired certain divested assets from Becton, Dickinson and Company ("BD"), for an aggregate purchase price of $ 100.3 million.
−Removed: We also recorded a contingent consideration liability of $ 1.6 million related to milestone payments payable pursuant to the terms of the acquired contract with Sontina Medical LLC.
−Removed: The assets acquired include the soft tissue core needle biopsy products sold under the tradenames of Achieve® Programmable Automatic Biopsy System, Temno® Biopsy System and TruCut® Biopsy Needles as well as the Aspira® Pleural Effusion Drainage Kits, and the Aspira® Peritoneal Drainage System.
−Removed: We accounted for this acquisition as a business combination.
−Removed: The following table summarizes the purchase price allocation and other required disclosures for acquisitions accounted for as business combinations during the year ended December 31, 2018 (in thousands).
−Removed: Vascular Insights
−Removed: Cianna Medical
−Removed: Assets Acquired
−Removed: Trade receivables
−Removed: Prepaid expenses and other current assets
−Removed: Property and equipment
−Removed: Other long-term assets
−Removed: Developed technology
−Removed: Customer list
−Removed: In-process technology
−Removed: Total assets acquired
−Removed: Liabilities Assumed
−Removed: Trade payables
−Removed: Accrued expenses
−Removed: Other long-term liabilities
−Removed: Deferred income tax liabilities
−Removed: Total liabilities assumed
−Removed: Total net assets acquired
−Removed: Amortization Period of Intangible Assets
−Removed: Developed technology
−Removed: Customer lists (on an accelerated basis)
−Removed: Weighted Average
−Removed: Sales for the years ended
−Removed: December 31, 2020
−Removed: $ 5.5 million
−Removed: $ 45.3 million
−Removed: $ 42.6 million
−Removed: December 31, 2019
−Removed: $ 7.5 million
−Removed: $ 49.5 million
−Removed: $ 46.8 million
−Removed: December 31, 2018
−Removed: $ 6.3 million
−Removed: $ 42.1 million
−Removed: The sales and results of operations related to these acquisitions have been included in our cardiovascular segment.
−Removed: It is not practical to separately report earnings related to these acquisitions, as we cannot split out sales costs related solely to the products acquired, principally because our sales representatives sell multiple products within our cardiovascular business segment.
−Removed: Acquisition costs related to these acquisitions were included in selling, general and administrative expenses.
−Removed: Acquisition costs related to the Vascular Insights and DirectAccess acquisitions were not material, and acquisition costs related to the Cianna Medical and BD acquisitions were $ 3.5 million and $ 1.8 million, respectively.
−Removed: Goodwill related to these acquisitions arises principally from synergies and economies of scale anticipated upon consolidation of operations.
−Removed: Goodwill related to the Cianna Medical acquisition is not expected to be deductible for income tax purposes, while
−Removed: goodwill related to the Vascular Insights, DirectAccess, and BD acquisitions is expected to be deductible for income tax purposes.
−Removed: The following table summarizes our consolidated results of operations for the year ended December 31, 2018, as well as unaudited pro forma consolidated results of operations as though the 2018 acquisitions of Cianna Medical and Vascular Insights had occurred on January 1, 2017 (in thousands, except per common share amounts):
−Removed: Earnings per common share:
−Removed: The pro forma results for the years ended December 31, 2020 and 2019 are not included in the table above because the operating results of the Cianna Medical, and Vascular Insights acquisitions were included in our consolidated statements of income (loss) for these periods.
−Removed: The unaudited pro forma information set forth above is for informational purposes only and includes adjustments related to the step-up of acquired inventories, amortization expense of acquired intangible assets, stock-based compensation for cancelled or forfeited options, and interest expense on long-term debt.
−Removed: The pro forma information should not be considered indicative of actual results that would have been achieved if the acquisition of Cianna Medical and Vascular Insights had occurred on January 1, 2017, or results that may be obtained in any future period.
−Removed: The pro forma consolidated results of operations do not include the 2018 acquisition of assets from BD because it was deemed impracticable to obtain information to determine net income associated with the acquired product lines which represent a small product line of a large, consolidated company without standalone financial information.
−Removed: We do not deem the pro forma effects to our consolidated results of operations of the KA Medical, STD Pharmaceutical, Brightwater and DirectACCESS acquisitions to be material.
+Added: Goodwill related to these acquisitions arises principally from synergies and economies of scale anticipated upon consolidation of operations and is not expected to be deductible for income tax
+Added: We do not deem the pro forma effects to our consolidated results of operations of the STD Pharmaceutical and Brightwater acquisitions to be material.
Inventories at December 31, 2021 and 2020, consisted of the following (in thousands):
22 unchanged sentences
License agreements
−Removed: Covenants not to compete
Customer lists
−Removed: In-process technology
−Removed: Aggregate amortization expense for the years ended December 31, 2020, 2019 and 2018 was approximately $ 58.6 million, $ 60.7 million and $ 41.2 million, respectively.
+Added: Aggregate amortization expense for the years ended December 31, 2021, 2020 and 2019 was $ 49.6 million, $ 58.6 million and $ 60.7 million, respectively.
Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of December 31, 2021 (in thousands):
1 unchanged sentence
Estimated Amortization Expense
−Removed: During the years ended December 31, 2020, 2019, and 2018, we identified indicators of impairment associated with certain acquired intangible assets based on our qualitative assessment, which required us to then complete a quantitative impairment assessment.
−Removed: The primary indicators of impairment were slower-than-anticipated sales growth in the acquired products, planned closure and restructuring activities, uncertainty about future product development and commercialization associated with certain acquired technologies, and in 2020 economic uncertainties associated with the COVID-19 pandemic.
−Removed: During the year ended December 31, 2020, we recorded total impairment charges related to our intangible assets of approximately $ 28.7 million which included a partial impairment charge of $ 8.2 million of intangible assets from our acquisition of STD Pharmaceutical, a partial impairment charge of $ 8.0 million of intangible assets from our acquisition of certain assets from Laurane Medical S.A.S, a partial impairment charge of $ 4.8 million related to our license agreements with ArraVasc Limited, and other intangible asset impairments charges of $ 7.7 million related to intangible assets from our acquisition of certain assets from DirectACCESS Medical, LLC, in-process technology intangible assets of Sontina Medical LLC acquired in connection with our acquisition of certain divested assets from Becton, Dickinson and Company,
−Removed: and a customer list intangible asset from our acquisition of ITL Healthcare Pty Ltd (“ITL”).
−Removed: During the year ended December 31, 2019, we recorded impairment charges related to our amortizing intangible assets from our acquisitions of certain assets from Distal Access, LLC, Lazarus Medical Technologies, LLC, and Pleuratech ApS for a total of approximately $ 3.3 million.
−Removed: During the year ended December 31, 2018, we recorded impairment charges of $ 657,000 related to our acquisition of certain assets from Quellent, LLC.
+Added: During the years ended December 31, 2021, 2020 and 2019, we identified indicators of impairment associated with certain acquired intangible assets based on our qualitative assessment that carrying amounts may not be recoverable, which required us to then complete a quantitative impairment assessment.
+Added: The primary indicators of impairment were planned closure and restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies, due in part to the economic impacts of the COVID-19 pandemic in 2021 and 2020.
+Added: During the year ended December 31, 2021, we recorded total impairment charges related to our intangible assets of $ 1.6 million for the remaining carrying value of ArraVasc license agreements.
+Added: During the year ended December 31, 2020, we recorded total impairment charges related to our intangible assets of $ 28.7 million which included a partial impairment charge of $ 8.2 million of intangible assets from our acquisition of STD Pharmaceutical, a partial impairment charge of $ 8.0 million of intangible assets from our acquisition of certain assets from Laurane Medical S.A.S, a partial impairment charge of $ 4.8 million related to our license agreements with ArraVasc Limited, and other intangible asset impairments charges of $ 7.7 million related to intangible assets from our acquisition of certain assets from DirectACCESS Medical, LLC, in-process technology intangible assets of Sontina Medical LLC acquired in connection with our acquisition of certain divested assets from Becton, Dickinson and Company, and a customer list intangible asset from our acquisition of ITL Healthcare Pty Ltd (“ITL”).
+Added: During the year ended December 31, 2019, we recorded impairment charges related to our amortizing intangible assets from our acquisitions of certain assets from Distal Access, LLC, Lazarus Medical Technologies, LLC, and Pleuratech ApS for a total of $ 3.3 million.
The impairment charges recorded in 2021, 2020, and 2019 all pertained to our cardiovascular segment and are reflected within impairment charges in our consolidated statements of income (loss).
2 unchanged sentences
We evaluated the tax changes to determine what provisions would apply to us.
−Removed: As permitted by the CARES Act we have deferred payment of the employer’s portion of social security payroll tax payments.
+Added: As permitted by the CARES Act, we have deferred payment of the employer’s portion of social security payroll tax payments and made a payment equal to one half of the deferred amount during the year ended December 31, 2021.
For the years ended December 31, 2021, 2020 and 2019, income (loss) before income taxes is broken out between U.S.
8 unchanged sentences
Computed federal income tax expense (benefit) at applicable statutory rate of 21 %
−Removed: State income tax expense (benefit)
−Removed: Foreign tax rate differential
+Added: State income tax benefit
+Added: Tax effect of international items
Uncertain tax positions
Deferred compensation insurance assets
−Removed: Transaction-related expenses
−Removed: transition tax
−Removed: TCJA remeasurement of deferred taxes
−Removed: Stock-based payments
−Removed: Foreign withholding tax
−Removed: Foreign permanent differences (1)
+Added: Stock-based compensation
Valuation allowance
1 unchanged sentence
Remeasurement of state deferred taxes
+Added: Non-deductible expenses
+Added: Remeasurement of contingent consideration liabilities
Other — including the effect of graduated rates
7 unchanged sentences
Net operating loss carryforwards
−Removed: Deferred revenue
Stock-based compensation expense
1 unchanged sentence
Federal R&D tax credit
+Added: UT R&D Credit
Total deferred income tax assets
11 unchanged sentences
Net deferred income tax liabilities
−Removed: The deferred income tax balances are not netted as they represent deferred amounts applicable to different taxing jurisdictions.
+Added: (1) Amounts for the year ended December 31, 2020 in the table above have been updated for presentation and comparative purposes
+Added: Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions.
Deferred income tax balances reflect the temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.
The valuation allowance is primarily related to state credit carryforwards, non-US net operating loss carryforwards, and capital loss carryforwards for which we believe it is more likely than not that the deferred tax assets will not be realized.
−Removed: The valuation allowance increased by approximately $ 5.6 million during the year ended December 31, 2020, decreased by approximately $ 345,000 during the year ended December 31, 2019, and increased by approximately $ 567,000 during the year ended December 31, 2018.
−Removed: As of December 31, 2020, we had U.S federal net operating loss carryforwards of approximately $ 66.9 million, which were generated by Cianna Medical, Vascular Access Technologies, Inc., DFINE Inc., Biosphere Medical, Inc., and Brightwater prior to our acquisition of these companies.
+Added: The valuation allowance increased by $ 573,000 during the year ended December 31, 2021, increased by $ 5.6 million during the year ended December 31, 2020, and decreased by $ 345,000 during the year ended December 31, 2019.
+Added: As of December 31, 2021, we had U.S federal net operating loss carryforwards of $ 45.6 million, which were generated by Cianna Medical, Vascular Access Technologies, Inc., DFINE Inc., Biosphere Medical, Inc., and Brightwater prior to our acquisition of these companies.
These net operating loss carryforwards are subject to annual limitations under Internal Revenue Code Section 382.
If unused $ 34.5 million of the NOLs will expire between 2025 and 2037.
−Removed: Approximately $ 25.2 million of the NOLs incurred after December 31, 2017 can be carried forward indefinitely.
+Added: Of the NOLs incurred post-2017, $ 11.1 million can be carried forward indefinitely.
We anticipate that we will utilize all current net operating loss carryforwards prior to their expiration dates over the next 14 years .
−Removed: We utilized a total of approximately $ 23.7 million in U.S.
+Added: We utilized a total of $ 21.3 million in U.S.
federal net operating loss carryforwards during the year ended December 31, 2021.
−Removed: As of December 31, 2020, we had approximately $ 27 million of non-U.S.
−Removed: net operating loss carryforwards, of which approximately $ 25.8 million have no expiration date and approximately $ 1.2 million expire at various dates through 2030.
+Added: As of December 31, 2021, we had $ 22.8 million of non-U.S.
+Added: net operating loss carryforwards, of which $ 21.9 million have no expiration date and $ 879,000 expire at various dates through 2030.
net operating loss carryforwards utilized during the year ended December 31, 2021 were not material.
We do not consider our foreign earnings to be permanently reinvested.
−Removed: Consequently, we have recorded tax expense of approximately $ 228,000 , $ 638,000 and $ 5.6 million for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2020, 2019 and 2018, respectively.
+Added: Consequently, we have recorded tax expense of $ 288,000 , $ 228,000 and $ 638,000 for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2021, 2020 and 2019, respectively.
We are subject to income taxes in the U.S.
8 unchanged sentences
Such differences could have a material effect on our income tax provision and operating results in the period in which we make such determination.
−Removed: The total liability for unrecognized tax benefits at December 31, 2020, including interest and penalties, was approximately $ 2 million, of which approximately $ 1.6 million would favorably impact our effective tax rate if recognized.
−Removed: Approximately $ 627,000 of the total liability at December 31, 2020 was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet.
−Removed: The total liability for unrecognized tax benefits at December 31, 2019, including interest and penalties, was approximately $ 2.5 million, of which approximately $ 2.2 million would favorably impact our effective tax rate if recognized.
−Removed: Approximately $ 230,000 of the total liability at December 31, 2019 was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet.
−Removed: As of December 31, 2020 and 2019, the total liability for uncertain tax benefits, as presented on our consolidated balance sheets, has been reduced by approximately $ 307,000 related to certain liabilities for unrecognized tax benefits, which, if realized, would reduce the transition tax under the TCJA by approximately $ 307,000 .
−Removed: As of December 31, 2020 and 2019, we had accrued approximately $ 276,000 and $ 366,000 respectively, in total interest and penalties related to unrecognized tax benefits.
+Added: The total liability for unrecognized tax benefits at December 31, 2021, including interest and penalties, was $ 2.0 million, of which $ 2.0 million would favorably impact our effective tax rate if recognized.
+Added: At December 31, 2021, $ 1.0 million of the total liability was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet.
+Added: The total liability for unrecognized tax benefits at December 31, 2020, including interest and penalties, was $ 2.0 million, of which $ 1.6 million would favorably impact our effective tax rate if recognized.
+Added: At December 31,2020, $ 627,000 of the total liability was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet.
+Added: As of December 31, 2021 and 2020, we had accrued $ 322,000 and $ 276,000 respectively, in total interest and penalties related to unrecognized tax benefits.
We account for interest and penalties for unrecognized tax benefits as part of our income tax provision.
−Removed: During the years ended December 31, 2020, 2019 and 2018, our liability for unrecognized tax benefit was increased (decreased) for interest and penalties by approximately ($ 90,000 ), ($ 7,000 ) and $ 69,000 , respectively.
+Added: During the years ended December 31, 2021, 2020 and 2019, our liability for unrecognized tax benefit was increased (decreased) for interest and penalties by $ 46,000 , ($ 90,000 ), and ($ 7,000 ), respectively.
It is reasonably possible that within the next 12 months the total liability for unrecognized tax benefits may change, net of potential decreases due to the expiration of statutes of limitation, up to $ 86,000 .
12 unchanged sentences
Accrued rebates payable
+Added: Accrued legal settlement
Other accrued expenses
30 unchanged sentences
As of December 31, 2021, we believe we were in compliance with all covenants set forth in the Third Amended Credit Agreement.
−Removed: As of December 31, 2020, we had outstanding borrowings of approximately $ 351.6 million under the Third Amended Credit Agreement, with additional available borrowings of approximately $ 389 million, based on the leverage ratio required pursuant to the Third Amended Credit Agreement.
−Removed: Our interest rate as of December 31, 2020 was a fixed rate of 2.37 % on $ 175 million as a result of an interest rate swap (see Note 9) and a variable floating rate of 1.40 % on approximately $ 176.6 million.
+Added: As of December 31, 2021, we had outstanding borrowings of $ 243.1 million and issued letter of credit guarantees of $ 3.5 million under the Third Amended Credit Agreement, with additional available borrowings of approximately $ 490 million, based on the leverage ratio required pursuant to the Third Amended Credit Agreement.
+Added: Our interest rate as of December 31, 2021 was a fixed rate of 2.71 % on $ 75 million as a result of an interest rate swap (see Note 9) and a variable floating rate of 1.10 % on $ 168.1 million.
Our interest rate as of December 31, 2020 was a fixed rate of 2.37 % on $ 175 million as a result of an interest rate swap and a variable floating rate of 1.40 % on $ 176.6 million.
−Removed: The foregoing fixed rates are exclusive of changes in the notional amount and fixed rate associated with our interest rate swaps beginning July 6, 2021 as described in Note 9 and potential future changes in the applicable margin.
+Added: The foregoing fixed rates are exclusive of potential future changes in the applicable margin.
+Added: Certain of the interest rates applicable to our Third Amended Credit Agreement, and applicable to hedging instruments we have purchased to offset interest rate risk under our Third Amended Credit Agreement, are LIBOR-based.
+Added: We anticipate replacement rates will be identified, as provided for in our Third Amended Credit Agreement, as LIBOR-based rates become unavailable.
Future Payments
9 unchanged sentences
We formally document, designate and assess the effectiveness of transactions that receive hedge accounting initially and on an ongoing basis.
−Removed: For qualifying hedges, the change in fair value is deferred in accumulated other comprehensive income (loss) (“AOCI”), a component of stockholders’ equity in the accompanying consolidated balance sheets, and
−Removed: recognized in earnings at the same time the hedged item affects earnings.
+Added: For qualifying hedges, the change in fair value is deferred in accumulated other comprehensive income (loss) (“AOCI”), a component of stockholders’ equity in the accompanying consolidated balance sheets, and recognized in earnings at the same time the hedged item affects earnings.
Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative.
4 unchanged sentences
On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a current notional amount of $ 175 million with Wells Fargo Bank to fix the one-month LIBOR rate at 1.12 %.
−Removed: The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate).
−Removed: On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid.
−Removed: The interest rate swap is scheduled to expire on July 6, 2021.
+Added: The variable portion of the interest rate swap was tied to the one-month LIBOR rate (the benchmark interest rate).
+Added: The interest rate swap expired on July 6, 2021.
On December 23, 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $ 75 million with Wells Fargo Bank to fix the one-month LIBOR rate at 1.71 % for the period from July 6, 2021 to July 31, 2024.
The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate).
−Removed: On a monthly basis, the interest rates under both the interest rate swap and the underlying debt will reset, the swap will be settled with the counterparty, and interest will be paid.
+Added: On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid.
At December 31, 2021 and 2020, our interest rate swaps qualified as cash flow hedges.
−Removed: The fair value of our interest rate swaps at December 31, 2020 was a liability of ($ 4.4 ) million, partially offset by approximately ($ 1.1 ) million in deferred taxes.
−Removed: The fair value of our interest rate swap at December 31, 2019 was an asset of approximately $ 1.2 million (partially offset by approximately $ 307,000 in deferred taxes) and a liability of ($ 290,000 ), partially offset by approximately ($ 75,000 ) in deferred taxes.
+Added: The fair value of our interest rate swap at December 31, 2021 was a liability of $ 1.4 million, partially offset by $ 0.4 million in deferred taxes.
+Added: The fair value of our interest rate swaps at December 31, 2020 was a liability of $ 4.4 million, partially offset by $ 1.1 million in deferred taxes.
Foreign Currency Risk .
2 unchanged sentences
Our policy is to enter into foreign currency derivative contracts with maturities of up to two years .
−Removed: We are primarily exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Chinese Renminbi, Euros, British Pounds, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Danish Krone, Japanese Yen, and South Korean Won, among others.
+Added: We are exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Chinese Renminbi, Euros, British Pounds, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Danish Krone, Japanese Yen, and South Korean Won, among others.
We do not use derivative financial instruments for trading or speculative purposes.
3 unchanged sentences
We entered into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets.
−Removed: The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies.
+Added: The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of foreign currencies.
We enter into approximately 100 cash flow foreign currency hedges every month.
−Removed: As of December 31, 2020 and 2019, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of approximately $ 168.2 million and $ 212.5 million, respectively.
+Added: As of December 31, 2021 and 2020, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 123.0 million and $ 168.2 million, respectively.
Derivatives Not Designated as Cash Flow Hedges
1 unchanged sentence
We enter into approximately 50 foreign currency fair value hedges every month.
−Removed: As of December 31, 2020 and 2019, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of approximately $ 74.8 million and $ 65.0 million, respectively.
+Added: As of December 31, 2021 and 2020, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 86.0 million and $ 74.8 million, respectively.
Balance Sheet Presentation of Derivatives.
6 unchanged sentences
December 31, 2020
−Removed: Interest rate swaps
−Removed: Other assets (long-term)
Foreign currency forward contracts
40 unchanged sentences
All other amounts included in earnings related to designated cash flow hedges are immaterial.
−Removed: As of December 31, 2020, approximately ($ 4.3 ) million or ($ 3.2 ) million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months.
−Removed: As of December 31, 2020, approximately $( 1.5 ) million, or $( 1.1 ) million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months.
+Added: As of December 31, 2021, ($ 1.4 ) million or ($ 1.0 ) million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months.
+Added: As of December 31, 2021, ($ 1.0 ) million, or ($ 0.7 ) million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months.
Derivatives Not Designated as Hedging Instruments
5 unchanged sentences
Other income (expense)
−Removed: See Note 16 for more information about our derivatives.
+Added: See Note 15 for additional information about our derivatives.
COMMITMENTS AND CONTINGENCIES
1 unchanged sentence
See Note 17 for disclosures regarding these operating leases.
−Removed: Loan Commitment.
−Removed: We have committed to provide loans of up to an additional € 2 million at the discretion of Selio at a rate of 5 % per annum until one year and 45 days have passed from the date Selio receives FDA Section 510(k) approval of a medical device it is currently developing.
−Removed: The current note receivable balance from Selio is $ 250,000 .
−Removed: If exercised, these loans would be securitized by all the present and future assets and property of the borrower.
As of December 31, 2021, we had entered into a number of agreements to license or acquire rights to certain intellectual property which require us to make royalty payments during the term of the agreements generally based on a percentage of sales.
3 unchanged sentences
In the ordinary course of business, we are involved in various claims and litigation matters.
−Removed: These claims and litigation matters may include actions involving product liability, intellectual property, contract disputes, and employment or other matters that are significant to our business.
−Removed: For example, in December 2019 our company, our Chief Executive Officer and our Chief Financial Officer were named in a complaint filed in the Central District of California, which alleges violations of certain federal securities laws.
−Removed: Based upon our review of currently available information, we do not believe that any such actions are likely to be, individually or in the aggregate, materially adverse to our business, financial condition, results of operations or liquidity.
−Removed: We have filed a Motion to Dismiss and are awaiting the Court’s ruling on the motion.
−Removed: In addition to the foregoing matters, on October 13, 2020, we entered into a Settlement Agreement with the United States Department of Justice (“DOJ”) to fully resolve the DOJ’s investigation into past marketing and promotional transactions practices of the Company.
+Added: T hese proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental inquiries or other matters, including those more fully described below.
+Added: The outcomes of these matters will generally not be known for prolonged periods of time.
+Added: In certain proceedings, the claimants may seek damages as well as other compensatory and equitable relief that could result in the payment of significant claims and settlements and/or the imposition of injunctions or other equitable relief.
+Added: For legal matters for which our management had sufficient information to reasonably estimate our future obligations, a liability representing management’s best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within the range is not known, is recorded.
+Added: The estimates are based on consultation with legal counsel, previous settlement experience and settlement strategies.
+Added: If actual outcomes are less favorable than those estimated by management, additional expense may be incurred, which could unfavorably affect our financial position, results of operations and cash flows.
+Added: The ultimate cost to us with respect to actions and claims
+Added: could be materially different than the amount of the current estimates and accruals and could have a material adverse effect on our financial position, results of operations and cash flows.
+Added: Securities Litigation
+Added: On December 5, 2019, the Bucks County Employees Retirement Fund filed a complaint against Merit, our Chief Executive Officer and our Chief Financial Officer in the United States District Court for the Central District of California (the “California Central District Court”), individually and on behalf of all purchasers of our common stock between February 26, 2019 and October 30, 2019.
+Added: On February 24, 2020, the court appointed the City of Atlanta Police Pension Fund, the Atlanta Firefighters’ Pension Fund, and the Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge as Lead Plaintiffs.
+Added: This action is now captioned In re Merit Medical Systems, Inc.
+Added: Securities Litigation (Master File No.
+Added: 8:19-cv-02326-DOC-ADS).
+Added: On June 30, 2020, Lead Plaintiffs filed a consolidated class action complaint for violations of federal securities laws against Merit, our Chief Executive Officer and our Chief Financial Officer in the California Central District Court, individually and on behalf of all purchasers of our common stock between February 26, 2019 and October 30, 2019.
+Added: The consolidated class action complaint alleges that defendants violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and seeks unspecified damages, costs and attorneys’ fees, and equitable relief.
+Added: In November 2021 we entered into an agreement in principle to settle the consolidated securities class action lawsuit.
+Added: The proposed settlement calls for a payment of $ 18.25 million in resolution of all claims asserted against Merit and all other defendants.
+Added: Approximately $ 8.2 million of the settlement payment is expected to be satisfied with proceeds of available insurance.
+Added: The terms of the proposed settlement provide for a full release of all claims against all defendants, including Merit and its officers, and contain no admission of liability, wrongdoing or responsibility by any of the defendants.
+Added: On January 3, 2022, the California Central District Court entered an Order Preliminarily Approving Settlement and Providing for Notice of the Settlement.
+Added: The California Central District Court has scheduled a further settlement hearing for April 13, 2022, for the purpose of addressing objections raised to the settlement, if any.
+Added: The settlement remains subject to final approval by the California Central District Court and is subject to the satisfaction of customary conditions.
+Added: There can be no assurance that the final settlement agreement will be approved by the California Central District Court.
+Added: A final, non-appealable closure of the litigation could take several months.
+Added: It is possible that the ultimate resolution of the foregoing matter, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.
+Added: Shareholder Derivative Action
+Added: On June 3, 2021, Steffen Maute filed a complaint, derivatively on behalf of Merit, against Merit (as a nominal defendant), our Chief Executive Officer, our Chief Financial Officer, our former President of Europe, Middle East and Africa (“EMEA,”) and certain of our directors in the United States District Court for the District of Utah (Case No.
+Added: 2:21-cv-00346-DBP).
+Added: The derivative complaint alleges that the individual defendants violated their fiduciary duties owed to Merit and were unjustly enriched at the expense of and to the detriment of Merit between February 2019 and October 2019, and seeks unspecified damages, costs, and professional fees.
+Added: We intend to vigorously defend against the lawsuit.
+Added: The proceeding was stayed until February 19, 2022, subject to the right of either party to seek to lift or extend the stay.
+Added: We have not received an indication of plaintiff’s intentions subsequent to the expiration of the stay, although the parties have engaged in mediation in an attempt to resolve the dispute.
+Added: We have not recorded an expense related to this matter because any potential loss is not reasonably estimable.
+Added: Additionally, we cannot presently estimate the range of loss, if any, that may result from the matter.
+Added: It is possible that the ultimate resolution of the foregoing matter, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.
+Added: DOJ Settlement
+Added: In addition to the foregoing matters, on October 13, 2020, we entered into a Settlement Agreement with the United States Department of Justice (“DOJ”) to resolve the DOJ’s investigation into past marketing and promotional practices of the Company.
Under the Settlement Agreement, we agreed to pay settlement payments in the aggregate of $ 18 million plus interest and enter into a Corporate Integrity Agreement with the U.S.
Office of Inspector General.
−Removed: In total, we paid approximately $ 18.7 million in settlement payments, interest and additional expenses associated with the Settlement Agreement, including fees paid to settle claims of the relator’s counsel.
+Added: In total, we paid $ 18.7
+Added: million in settlement payments, interest and additional expenses associated with the Settlement Agreement, including fees paid to settle claims of the relator’s counsel.
Our failure to comply with the obligations of the Settlement Agreement or Corporate Integrity Agreement could result in monetary penalties and our exclusion from federal health care programs.
6 unchanged sentences
Average common shares outstanding
−Removed: Effect of dilutive stock options
+Added: Effect of dilutive stock awards
Total potential shares outstanding
9 unchanged sentences
Options may be granted to directors, officers, outside consultants and key employees and may be granted upon such terms and such conditions as the Compensation Committee of our Board of Directors determines.
−Removed: Options will typically vest on an annual basis over a three to five-year life with a contractual life of seven years .
+Added: Options typically vest on an annual basis over a three to five-year life with a contractual life of seven years .
+Added: At our annual meeting, held June 17, 2021, our shareholders approved the addition of 3,000,000 shares to the 2018 Incentive Plan.
As of December 31, 2021, a total of 3,205,529 shares remained available to be issued under the 2018 Incentive Plan.
1 unchanged sentence
In May 2006, our Board of Directors adopted, and our shareholders approved, the 2006 Incentive Plan.
−Removed: As of December 31, 2020, the 2006 Incentive Plan was no longer being used for the granting of equity awards.
+Added: As of December 31, 2021, the 2006 Incentive Plan was no longer being used for new equity award grants.
However, as of December 31, 2021, options granted under this plan were still outstanding, vesting, and being exercised and will continue to be outstanding until the vesting periods end and the terms of the equity awards expire.
1 unchanged sentence
We have a non-qualified Employee Stock Purchase Plan (“ESPP”), which has an expiration date of June 30, 2026.
−Removed: As of December 31, 2020, the total number of shares of common stock that remained available to be issued under our non-qualified plan was 40,073 shares.
+Added: At our annual meeting, held June 17, 2021, our shareholders approved the addition of 100,000 shares to our ESPP.
+Added: As of December 31, 2021, the total number of shares of common stock that remained available
+Added: to be issued under our non-qualified plan was 121,959 shares.
ESPP participants purchase shares on a quarterly basis at a price equal to 95 % of the market price of the common stock at the end of the applicable offering period.
9 unchanged sentences
Restricted stock units
−Removed: Cash-settled share-based awards
+Added: Cash-settled performance-based share-based awards ("Liability Awards")
Total selling, general and administrative
Stock-based compensation expense before taxes
−Removed: Nonqualified Stock Options
We recognize stock-based compensation expense (net of a forfeiture rate) for those awards which are expected to vest on a straight-line basis over the requisite service period.
We estimate the forfeiture rate based on our historical experience and expectations about future forfeitures.
−Removed: As of December 31, 2020, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $ 25.4 million and is expected to be recognized over a weighted average period of 2.5 years.
+Added: Nonqualified Stock Options
+Added: As of December 31, 2021, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was $ 26.5 million and is expected to be recognized over a weighted average period of 2.5 years.
In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted were estimated using the following assumptions for the years ended December 31, 2021, 2020 and 2019:
14 unchanged sentences
We determine the expected term of the stock options using the historical exercise behavior of employees.
−Removed: The expected price volatility was determined based upon historical volatility for our stock and other factors.
−Removed: For options with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.
−Removed: During the years ended December 31, 2020, 2019 and 2018, approximately 329,000 , 1.2 million and 692,000 nonqualified stock option grants were made, respectively, for a total fair value of approximately $ 4.5 million, $ 20.9 million and $ 11.1 million, net of estimated forfeitures, respectively.
+Added: The expected price volatility was determined based upon the historical volatility for our stock.
+Added: We recognize compensation expense for options on a straight-line basis over the service period, which corresponds to the vesting period.
+Added: During the years ended December 31, 2021, 2020 and 2019, approximately 716,000 , 329,000 and 1.2 million nonqualified stock option grants were made, respectively, for a total fair value of $ 17.5 million, $ 4.5 million and $ 20.9 million.
The table below presents information related to stock option activity for the years ended December 31, 2021, 2020 and 2019 (in thousands):
13 unchanged sentences
Stock-Settled Performance-Based Restricted Stock Units (“PSUs”) and Time-Vested Restricted Stock Units (“RSUs”)
−Removed: We grant PSUs to certain of our executive officers.
+Added: Since 2020 we have granted PSUs to certain of our executive officers.
Conversion of PSUs occurs at the end of one , two and three-year performance periods, or one year after the agreement date, whichever is later.
The conversion ratio is based upon attaining targeted levels of free cash flow (“FCF”) and relative shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements.
−Removed: After reviewing the anticipated impact of the COVID-19 pandemic on our ongoing and forecasted operations and financial performance, during the three-month period ended June 30, 2020, our Board of Directors amended the PSUs with a one-year performance period in an effort to more closely align our executive management compensation with the interests of our shareholders.
−Removed: This amendment reduced the targeted levels of FCF and reduced the maximum FCF multiplier to 100 % for the one-year awards, which lowered the potential shares of our common stock to be granted pursuant to the one-year awards by 25,415 shares.
−Removed: We have accounted for this amendment in accordance with ASC 718 as a “Type I” modification.
−Removed: The two and three-year PSUs were not amended.
−Removed: The payout for each PSU is equal to one share of common stock multiplied by a FCF multiplier (between 0 % and 100 % in the case of the one-year awards, as amended, or 0 % and 200 % in the case of the two and three-year awards ) and a rTSR multiplier (between 75 % and 125 %).
+Added: In 2020, our Board of Directors amended PSUs granted in 2020 with a one-year performance period to adjust the performance targets and reduce the maximum FCF multiplier to 100 % for the one-year awards, which lowered the potential shares of our common stock to be granted pursuant to the one-year awards by 25,415 shares.
+Added: We accounted for this amendment in accordance with ASC 718 as a “Type I” modification.
+Added: The payout for each PSU is equal to one share of common stock multiplied by a FCF multiplier (between 0 % and 100 % in the case of the 2020 one-year awards, as amended, or 0 % and 200 % in the case of all other PSU awards) and a rTSR multiplier (between 75 % and 125 %).
PSUs convey no shareholder rights unless and until shares are issued in settlement of the award.
11 unchanged sentences
Beginning nonvested balance
−Removed: Impact of amendments
+Added: rTSR adjustment
Nonvested balance at December 31
−Removed: Expected to vest at December 31, 2020
−Removed: (1) Based on the maximum target payout of 100 % for one-year awards, as amended, and 200 % for two and three-year awards.
−Removed: Each unit will convert to between .75 and 1.25 shares of common stock based upon the rTSR performance of our common stock.
−Removed: The weighted average grant-date fair value of PSUs and RSUs for the year December 31, 2020 was $ 43.60 and $ 42.98 , respectively.
−Removed: There were no PSUs or RSUs granted for the years ended December 31, 2019 and 2018, and there were no PSUs or RSUs that vested in the years ended December 31, 2020, 2019 and 2018.
−Removed: The fair value of each PSU was estimated as of the grant date using the following assumptions for awards granted in the year ended December 31, 2020:
+Added: (1) Based on the maximum payout, excluding the impact of the rTSR multiplier.
+Added: The actual number of shares which vest is determined based on the satisfaction of performance conditions and the application of an rTSR multiplier between 75 % and 125 % .
+Added: (2) Represents the application of an rTSR multiplier of 125 % to awards vested in 2021 based on the performance of our common stock and the terms of the awards.
+Added: The following table summarizes PSUs and RSUs granted during the years ended December 31, 2021, 2020 and 2019 (units and shares in thousands):
+Added: Target units granted
+Added: Maximum units granted (1)
+Added: Maximum potential shares (1)(2)
+Added: Weighted average grant date fair value
+Added: Units granted
+Added: Weighted average grant date fair value
+Added: (1) Based on the maximum payout, excluding the impact of the rTSR multiplier.
+Added: (2) Includes the impact of the maximum potential rTSR multiplier of 125 % .
+Added: (3) Includes the impact of the 2020 amendment which reduced the maximum FCF multiplier for one-year awards from 200 % to 100 % .
+Added: During the year ended December 31, 2021, there were approximately 26,000 shares that vested under PSUs, prior to the reduction of shares withheld to satisfy tax withholding obligations.
+Added: Vested shares were calculated based upon achievement of the maximum performance multiplier, as amended, of 100 % and an rTSR multiplier of 125 %.
+Added: There were no shares that vested under PSUs during the years ended December 31, 2020 and 2019.
+Added: During the year ended December 31, 2021 there were approximately 34,000 shares that vested under RSUs.
+Added: There were no shares that vested under RSUs during the years ended December 31, 2020 and 2019.
+Added: The fair value of each PSU was estimated as of the grant date using the following assumptions for awards granted in the years ended December 31, 2021 and 2020:
Risk-free interest rate
0.1 % - 0.3 %
+Added: 1.1 % - 1.3 %
Performance period
1.8 - 2.8 years
+Added: 0.8 - 2.8 years
Expected dividend yield
1 unchanged sentence
43.7 % - 49.3 %
+Added: 40.2 % - 56.1 %
The risk-free interest rate of return was determined using the U.S.
Treasury rate at the time of grant with a remaining term equal to the expected term of the award.
−Removed: The expected volatility was based on a weighted average volatility of our stock price and the average volatility of our compensation peer group's volatilities.
+Added: The expected volatility was based on a weighted average volatility of our stock
+Added: price and the average volatility of our compensation peer group's volatilities.
The expected dividend yield was assumed to be zero because, at the time of the grant, we had no plans to declare a dividend.
−Removed: As of December 31, 2020, the total remaining unrecognized compensation cost related to stock-settled performance stock units and restricted stock units was approximately $ 2.5 million and $ 0.7 million, respectively, which is expected to be recognized over a weighted average period of 1.4 years and 0.5 years, respectively.
+Added: As of December 31, 2021, the total remaining unrecognized compensation cost related to stock-settled performance stock units and restricted stock units, net of expected forfeitures, was $ 4.4 million and $ 0.7 million, respectively, which is expected to be recognized over a weighted average period of 1.5 years and 0.5 years, respectively.
Cash-Settled Performance-Based Share-Based Awards (“Liability Awards”)
−Removed: During the year ended December 31, 2020, we granted liability awards to our Chief Executive Officer.
−Removed: These awards entitle him to a cash payment equal to a total target cash incentive of $ 1.0 million multiplied by rTSR and FCF multipliers, as defined in the award agreements.
−Removed: During the three-month period ended June 30, 2020, after reviewing the anticipated impact of the COVID-19 pandemic on our ongoing and forecasted operations and financial performance, our Board of Directors amended the liability awards with a one-year performance period in an effort to more closely align our Chief Executive Officer’s compensation with the interests of our shareholders.
−Removed: The two and three-year liability awards were not amended.
−Removed: As amended, the potential maximum payout of these awards is 125 % of the target cash incentive for one-year awards, and 250 % of the target cash incentive for two and three-year awards, for a total maximum potential payment of approximately $2.1 million.
+Added: During the years ended December 31, 2021 and 2020, we granted liability awards to our Chief Executive Officer.
+Added: These awards entitle him to cash payments equal to a total target cash incentive of $ 1.0 million and $ 1.0 million, respectively, multiplied by rTSR and FCF multipliers, as defined in the award agreements.
+Added: In 2020, our Board of Directors amended the liability awards with a one-year performance period.
+Added: The potential maximum payout of these liability awards is 125 % of the target cash incentive for the 2020 one-year award, as amended, and 250 % of the target cash incentive for all other liability awards, resulting in a total potential maximum payout of $ 2.5 million and $ 2.1 million for liability awards granted during the years ended December 31, 2021 and 2020, respectively.
Settlement generally occurs at the end of one , two and three-year performance periods based upon the same performance metrics and vesting period as our performance stock units.
1 unchanged sentence
The fair value of these awards is remeasured at each reporting period until the awards are settled.
−Removed: As of December 31, 2020, the total remaining unrecognized compensation cost related to cash-settled performance-based share-based awards was
−Removed: approximately $ 1.0 million, which is expected to be recognized over a weighted average period of 1.5 years.
−Removed: There were no liability awards vested or forfeited in the years ended December 31, 2020, 2019 and 2018.
+Added: As of December 31, 2021, our recorded liabilities associated with these awards was $ 2.0 million, and we had remaining unrecognized compensation cost related to cash-settled performance-based share-based awards of $ 1.7 million, which is expected to be recognized over a weighted average period of 1.6 years.
+Added: During 2021, we paid $ 417,000 in connection with liability awards, and no awards were forfeited.
+Added: There were no liability awards vested or forfeited in the years ended December 31, 2020 or 2019.
SEGMENT REPORTING AND FOREIGN OPERATIONS
7 unchanged sentences
See Note 2 for a detailed breakout of our sales by operating segment and product category, disaggregated between domestic and international sales.
−Removed: During the years ended December 31, 2020, 2019 and 2018, we had international sales of approximately $ 413.8 million, $ 419.1 million and $ 386.3 million, respectively, or approximately 43 %, 42 % and 44 %, respectively, of net sales, primarily in China, Japan, Germany, France, the United Kingdom, Australia, and Russia.
−Removed: China represents our most significant international sales market with sales of approximately $ 113.2 million, $ 113.3 million, and $ 92.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.
+Added: During the years ended December 31, 2021, 2020 and 2019, we had international sales of $ 465.9 million, $ 413.8 million and $ 419.1 million, respectively, or 43 %, 43 % and 42 %, respectively, of net sales.
+Added: Our largest international markets include China, Japan, Germany, France and the United Kingdom, with China representing our most significant international sales market with sales of $ 138.2 million, $ 113.2 million, and $ 113.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.
International sales are attributed based on location of the customer receiving the product.
9 unchanged sentences
Total other expense - net
−Removed: Income tax (benefit) expense
+Added: Income tax expense (benefit)
Net income (loss)
9 unchanged sentences
Our contributions to these plans are discretionary in certain countries, including the U.S.
−Removed: Beginning in September 2019, we ceased discretionary contributions to certain of our defined contribution plans.
−Removed: Total expense for contributions made to these plans for the years ended December 31, 2020, 2019 and 2018 was approximately $ 3.9 million, $ 6.6 million and $ 6.5 million, respectively.
−Removed: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
−Removed: Quarterly data for the years ended December 31, 2020 and 2019 consisted of the following (in thousands, except per share amounts):
−Removed: Quarter Ended
−Removed: Income (loss) from operations
−Removed: Income tax expense (benefit)
−Removed: Net income (loss)
−Removed: Earnings (loss) per common share - basic
−Removed: Earnings (loss) per common share - diluted
−Removed: Income (loss) from operations
−Removed: Income tax expense (benefit)
−Removed: Net income (loss)
−Removed: Earnings (loss) per common share - basic
−Removed: Earnings (loss) per common share - diluted
−Removed: During the three months ended December 31, 2020, we recorded a partial impairment charge of $ 8.2 million of intangible assets from our August 2019 acquisition of STD Pharmaceutical (see Note 5).
−Removed: During the three months ended December 31, 2019, we recorded impairment charges of $ 20.5 million due to our write-off of our NinePoint note receivable and purchase option, along with a write-off of $ 1.6 million of accrued interest (see Note 16).
−Removed: Basic and diluted earnings (loss) per share are computed independently for each of the quarters presented.
−Removed: Therefore, the sum of the quarterly amounts may not equal the total computed for the year.
+Added: In September 2019, we ceased discretionary contributions to certain of our defined contribution plans and subsequently reinstated those contributions in May 2021.
+Added: Total expense for contributions made to these plans for the years ended December 31, 2021, 2020 and 2019 was $ 6.5 million, $ 3.9 million and $ 6.6 million, respectively.
FAIR VALUE MEASUREMENTS
8 unchanged sentences
December 31, 2021
−Removed: Interest rate contract liabilities, current and long-term (1)
+Added: Interest rate contract liabilities, long-term (1)
Foreign currency contract assets, current and long-term (2)
8 unchanged sentences
December 31, 2020
−Removed: Interest rate contract asset, long-term (1)
−Removed: Interest rate contract liability, long-term (1)
+Added: Interest rate contract liabilities, current and long-term (1)
Foreign currency contract assets, current and long-term (2)
1 unchanged sentence
Contingent consideration liabilities
−Removed: (1) The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as other long-term assets, accrued expenses or other long-term obligations in the consolidated balance sheets.
+Added: (1) The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.
(2) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid and other assets or other long-term assets in the consolidated balance sheets.
1 unchanged sentence
Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue or other milestones.
−Removed: See Note 3 for further information regarding these acquisitions.
Contingent consideration liabilities are re-measured to fair value at each reporting period, with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income (loss).
−Removed: We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements.
−Removed: Changes in the fair value of our
−Removed: contingent consideration liabilities during the years ended December 31, 2020 and 2019, consisted of the following (in thousands):
+Added: We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value
+Added: measurements.
+Added: Changes in the fair value of our contingent consideration liabilities during the years ended December 31, 2021 and 2020, consisted of the following (in thousands):
Beginning balance
−Removed: Contingent consideration liability recorded as the result of acquisitions
−Removed: Contingent consideration (benefit)
+Added: Contingent consideration expense (benefit)
Contingent payments made
1 unchanged sentence
Ending balance
−Removed: As of December 31, 2020, approximately $ 36.9 million was included in other long-term obligations and approximately $ 18.8 million was included in accrued expenses in our consolidated balance sheet related to contingent liabilities.
−Removed: As of December 31, 2019, approximately $ 48.1 million was included in other long-term obligations and $ 28.6 was included in accrued expenses in our consolidated balance sheet related to contingent liabilities.
−Removed: Cash paid to settle contingent consideration liabilities recognized at fair value as of the acquisition date (including measurement-period adjustments) has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.
−Removed: During the year ended December 31, 2016, we sold an equity investment for cash and for the right to receive additional payments based on various contingent milestones.
−Removed: During the year ended December 31, 2019, we collected payments of approximately $ 535,000 to settle the receivable in full.
+Added: As of December 31, 2021, $ 13.5 million was included in other long-term obligations and approximately $ 34.7 million was included in accrued expenses in our consolidated balance sheet related to contingent liabilities.
+Added: As of December 31, 2020, $ 36.9 million was included in other long-term obligations and $ 18.8 was included in accrued expenses in our consolidated balance sheet related to contingent liabilities.
+Added: Cash paid to settle contingent consideration liabilities recognized at fair value as of the acquisition date has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.
The recurring Level 3 measurement of our contingent consideration liabilities includes the following significant unobservable inputs at December 31, 2021 and 2020 (amounts in thousands):
9 unchanged sentences
Discount rate
+Added: 7.5 % - 12.5 %
Projected year of payments
22 unchanged sentences
Projected year of payment
+Added: (1) Unobservable inputs were weighted by the relative fair value of the instruments.
+Added: No weighted average is reported for contingent consideration liabilities without a range of unobservable inputs.
The contingent consideration liabilities are re-measured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates.
2 unchanged sentences
An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement.
−Removed: A decrease in the probability of any milestone payment may result in lower fair value measurements.
+Added: A decrease (increase) in the probability of any milestone payment may result in lower (higher) fair value measurements.
Our determination of the fair value of contingent consideration liabilities could change in future periods based upon our ongoing evaluation of these significant unobservable inputs.
2 unchanged sentences
During the years ended December 31, 2020 and 2019, we made contingent payments of approximately $ 800,000 and $ 1.0 million to a current director of Merit and former shareholder of Cianna Medical which we acquired in 2018.
+Added: We made no such payments in 2021.
+Added: In 2022, the Company expects to make additional payments consistent with prior years.
The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a director of Merit.
8 unchanged sentences
Intangible Assets.
−Removed: During the years ended December 31, 2020, 2019 and 2018, we had losses of approximately $ 28.7 million, $ 3.3 million and $ 657,000 , respectively, related to certain acquired intangible assets (see Note 5).
+Added: During the years ended December 31, 2021, 2020 and 2019, we had losses of $ 1.6 million, $ 28.7 million and $ 3.3 million, respectively, related to certain acquired intangible assets (see Note 5).
Right of Use Operating Lease Assets.
−Removed: During the year ended December 31, 2020, we identified changes in events and circumstances relating to a certain right-of-use (“ROU”) operating lease asset.
−Removed: We compared the anticipated undiscounted cash flows generated by a sublease to the carrying value of the ROU operating lease and related long-lived assets and determined that the carrying value was not recoverable.
−Removed: Consequently, we recorded an impairment loss of approximately
−Removed: $ 1.5 million, which is equal to the excess of the carrying value of the assets over their estimated fair value.
−Removed: The impairment loss was driven by site consolidation decisions and changes in our projected cash flows for the ROU operating lease asset and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic.
+Added: During the years ended December 31, 2021 and 2020, we identified changes in events and circumstances relating to certain right-of-use (“ROU”) operating lease assets.
+Added: We compared the anticipated undiscounted cash flows generated by a sublease to the carrying value of the ROU operating lease and related long-lived assets and determined that the carrying values were not recoverable.
+Added: Consequently, we recorded impairment losses during the years ended December 31, 2021 and 2020 of $ 1.4 million and $ 1.5 million, respectively, which is equal to the excess of the carrying value of the assets over their estimated fair value.
+Added: The impairment losses in both periods were driven primarily by site consolidation decisions and changes in our projected cash flows for the ROU operating lease asset and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic.
These changes include an increase in the anticipated time to identify a lessee, an increase in anticipated lease concessions, and a decrease in the expected lease rates for the property.
+Added: The ROU operating lease asset impairment losses in both 2021 and 2020 pertained to our cardiovascular segment.
Property and Equipment.
−Removed: During the year ended December 31, 2020, we had losses of approximately $ 359,000 related to the measurement of certain property and equipment measured at fair value based on restructuring activities associated with the suspension of our distribution agreement with NinePoint.
+Added: D uring the year ended December 31, 2021, we had losses of $ 1.3 million related to the measurement of property and equipment at fair value based on the planned discontinuance of the Advocate™ Peripheral Angioplasty Balloon product line, sold under our license agreements with ArraVasc, which pertained to our cardiovascular segment.
+Added: During the year ended December 31, 2020, we had losses of $ 359,000 related to the measurement of certain property and equipment measured at fair value based on restructuring activities associated with the suspension of our distribution agreement with NinePoint, which pertained to our endoscopy segment.
Equity Investments, Purchase Options and Notes Receivable.
8 unchanged sentences
We also wrote off $ 1.6 million of accrued interest related to the note receivable reported in interest income in the consolidated statements of income (loss) for the year ended December 31, 2019.
−Removed: These valuations used significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy.
−Removed: Current Expected Credit Loss
−Removed: Our outstanding long-term notes receivable, including accrued interest and our allowance for current expected credit losses, were approximately $ 2.2 million and $ 2.7 million, as of December 31, 2020 and 2019, respectively.
−Removed: As of December 31, 2020, we had an allowance for current expected credit losses of $ 730,000 associated with these notes receivable and our contractual obligation to extend credit to Selio.
+Added: We recorded interest income of $ 0.4 million and $ 0.3 million during the years ended December 31, 2021 and 2020, respectively, for partial recoveries of this interest.
+Added: Current Expected Credit Losses
+Added: Our outstanding long-term notes receivable, including accrued interest and our allowance for current expected credit losses, were $ 2.3 million and $ 2.2 million, as of December 31, 2021 and 2020, respectively.
+Added: As of December 31, 2021 and 2020, we had an allowance for current expected credit losses of $ 199,000 and $ 730,000 , respectively, associated with these notes receivable and in 2020 our contractual obligation to extend credit to Selio, which they exercised during the year ended December 31, 2021.
We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities.
−Removed: During the year ended December 31, 2020, we adjusted the probability of default for all notes receivable for certain periods during the loan term due to changes in macroeconomic conditions and our expectations of collectability as a result of the COVID-19 pandemic.
−Removed: The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the year ended December 31, 2020 (in thousands):
+Added: During the year ended December 31, 2021, we collected $ 2.8 million from Bluegrass Vascular which represents the entire principal balance and all accrued interest.
+Added: The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the years ended December 31, 2021 and 2020 (in thousands):
Beginning balance
Cumulative effect adjustment upon adoption of ASU 2016-13, Credit Losses
−Removed: Provision for credit loss expense
+Added: Provision for credit loss - expense (benefit)
Ending balance
−Removed: COMMON STOCK AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
−Removed: On July 30, 2018, we closed a public offering of 4,025,000 shares of common stock and received proceeds of approximately $ 205.0 million, which is net of approximately $ 12.0 million in underwriting discounts and commissions and approximately $ 366,000 in other direct cost incurred in connection with this equity offering.
−Removed: The net proceeds from the offering were used primarily to repay outstanding borrowings (principally revolving credit loans) under our Second Amended Credit Agreement.
+Added: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in each component of Accumulated Other Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):
1 unchanged sentence
Foreign Currency Translation
−Removed: December 31, 2017
+Added: January 1, 2019
Other comprehensive income (loss)
3 unchanged sentences
Net other comprehensive income (loss)
+Added: Reclassification of stranded tax effects 1
December 31, 2019
4 unchanged sentences
Net other comprehensive income (loss)
−Removed: Reclassification of stranded tax effects 1
December 31, 2020
7 unchanged sentences
We have operating leases for facilities used for manufacturing, research and development, sales and distribution, and office space, as well as leases for manufacturing and office equipment, vehicles, and land.
−Removed: Our leases have remaining terms of less than one year to approximately 29 years .
+Added: Our leases have remaining terms ranging from less than one year to approximately 28 years .
A number of our lease agreements contain options to renew at our discretion for periods of up to 15 years and options to terminate the leases within one year .
13 unchanged sentences
Total operating lease liabilities
−Removed: During the year ended December 31, 2015, we entered into sale and leaseback transactions to finance certain production equipment for approximately $ 2.0 million.
−Removed: At that time, we deferred the gain from the sale and leaseback transaction, of which approximately $ 93,000 remained as of December 31, 2018.
+Added: During the year ended December 31, 2015, we entered into sale and leaseback transactions to finance certain production equipment for $ 2.0 million.
+Added: At that time, we deferred the gain from the sale and leaseback transaction, of which $ 93,000 remained as of December 31, 2018.
As part of the adoption of ASC 842, we wrote-off the deferred gain as an adjustment to equity through retained earnings as of January 1, 2019.
We recognize lease expense for operating leases on a straight-line basis over the term of the lease.
−Removed: Net lease cost for the years ended December 31, 2020, 2019 and 2018 was approximately $ 16.7 million, $ 16.5 million, and $ 14.5 million, respectively.
+Added: Net lease cost for the years ended December 31, 2021, 2020 and 2019 was $ 15.9 million, $ 16.7 million, and $ 16.5 million, respectively.
The components of lease costs for the years ended December 31, 2021, 2020 and 2019 were as follows, in thousands:
12 unchanged sentences
Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of lease term and the risks of the economic environment in which the leased asset operates.
−Removed: As of December 31, 2020 and 2019, the following disclosures for remaining lease term and discount rates were applicable:
+Added: As of December 31, 2021, 2020 and 2019, our lease agreements had the following remaining lease term and discount rates:
Weighted average remaining lease term
7 unchanged sentences
These leases will commence during 2022 and are not deemed material.
−Removed: Supplementary Financial Data
−Removed: The supplementary financial information required by Item 302 of Regulation S-K is contained in Note 15 to our consolidated financial statements set forth above.
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.