MERIT MEDICAL SYSTEMS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ASSETS 2022 2021 ​ ​ ​ (unaudited) ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 53,875 ​ $ 67,750 Trade receivables — net of allowance for credit losses — 2022 — $ 7,568 and 2021 — $ 6,767 ​ 155,859 ​ 152,301 Other receivables ​ 11,748 ​ 17,763 Inventories ​ 231,451 ​ 221,922 Prepaid expenses and other current assets ​ 19,809 ​ 16,149 Prepaid income taxes ​ 3,547 ​ 3,550 Income tax refund receivables ​ 1,803 ​ 2,777 Total current assets ​ 478,092 ​ 482,212 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ Land and land improvements ​ 25,380 ​ 25,287 Buildings ​ 189,773 ​ 190,044 Manufacturing equipment ​ 283,802 ​ 277,976 Furniture and fixtures ​ 61,877 ​ 61,446 Leasehold improvements ​ 48,060 ​ 46,341 Construction-in-progress ​ 50,870 ​ 51,182 Total property and equipment ​ 659,762 ​ 652,276 Less accumulated depreciation ​ ( 287,853 ) ​ ( 280,618 ) Property and equipment — net ​ 371,909 ​ ​ 371,658 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ Intangible assets: ​ ​ Developed technology — net of accumulated amortization — 2022 — $ 244,017 and 2021 — $ 234,016 ​ 264,839 ​ 276,833 Other — net of accumulated amortization — 2022 — $ 66,924 and 2021 — $ 65,053 ​ 40,899 ​ 42,436 Goodwill ​ 361,456 ​ 361,741 Deferred income tax assets ​ 6,179 ​ 6,080 Right-of-use operating lease assets ​ ​ 64,659 ​ ​ 65,913 Other assets ​ 41,707 ​ 41,421 Total other assets ​ 779,739 ​ 794,424 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,629,740 ​ $ 1,648,294 ​ ​ ​ See condensed notes to consolidated financial statements. (continued) ​ ​ ​ 3 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, LIABILITIES AND STOCKHOLDERS’ EQUITY 2022 2021 ​ ​ ​ (unaudited) ​ ​ ​ Current liabilities: ​ ​ ​ Trade payables ​ $ 58,099 ​ $ 55,624 Accrued expenses ​ 122,394 ​ 159,014 Current portion of long-term debt ​ 9,375 ​ 8,438 Short-term operating lease liabilities ​ ​ 10,304 ​ ​ 10,668 Income taxes payable ​ 3,659 ​ 2,536 Total current liabilities ​ 203,831 ​ 236,280 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 243,112 ​ 234,397 Deferred income tax liabilities ​ 31,491 ​ 31,503 Long-term income taxes payable ​ 347 ​ 347 Liabilities related to unrecognized tax benefits ​ 932 ​ 932 Deferred compensation payable ​ 16,804 ​ 18,111 Deferred credits ​ 1,788 ​ 1,815 Long-term operating lease liabilities ​ ​ 60,366 ​ 61,526 Other long-term obligations ​ 14,550 ​ 23,584 Total liabilities ​ 573,221 ​ 608,495 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Preferred stock — 5,000 shares authorized as of March 31, 2022 and December 31, 2021; no shares issued ​ — ​ — Common stock, no par value; shares authorized — 2022 and 2021 - 100,000 ; issued and outstanding as of March 31, 2022 - 56,655 and December 31, 2021 - 56,570 ​ 646,370 ​ 641,533 Retained earnings ​ 416,802 ​ 406,257 Accumulated other comprehensive loss ​ ( 6,653 ) ​ ( 7,991 ) Total stockholders’ equity ​ 1,056,519 ​ 1,039,799 ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 1,629,740 ​ $ 1,648,294 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ 4 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Net sales ​ $ 275,415 ​ $ 248,913 Cost of sales ​ 154,508 ​ 137,019 Gross profit ​ 120,907 ​ 111,894 ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ Selling, general and administrative ​ 84,015 ​ 81,024 Research and development ​ 17,387 ​ 16,274 Impairment charges ​ 1,672 ​ — Contingent consideration expense ​ 2,600 ​ 402 Total operating expenses ​ 105,674 ​ 97,700 ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 15,233 ​ 14,194 ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ Interest income ​ 104 ​ 472 Interest expense ​ ( 1,002 ) ​ ( 1,537 ) Other expense — net ​ ( 164 ) ​ ( 435 ) Total other expense — net ​ ( 1,062 ) ​ ( 1,500 ) ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 14,171 ​ 12,694 ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 3,626 ​ 1,736 ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 10,545 ​ $ 10,958 ​ ​ ​ ​ ​ ​ ​ Earnings per common share ​ ​ Basic ​ $ 0.19 ​ $ 0.20 Diluted ​ $ 0.18 ​ $ 0.19 ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ Basic ​ 56,593 ​ 55,717 Diluted ​ 57,531 ​ 56,978 ​ See condensed notes to consolidated financial statements. ​ ​ 5 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Net income ​ $ 10,545 ​ $ 10,958 Other comprehensive income (loss): ​ ​ Cash flow hedges ​ 2,907 ​ 2,921 Income tax benefit (expense) ​ ( 712 ) ​ ( 724 ) Foreign currency translation adjustment ​ ( 793 ) ​ ( 4,462 ) Income tax benefit (expense) ​ ( 64 ) ​ 535 Total other comprehensive income (loss) ​ 1,338 ​ ( 1,730 ) Total comprehensive income ​ $ 11,883 ​ $ 9,228 ​ See condensed notes to consolidated financial statements. ​ ​ 6 Table of Contents MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Accumulated Other ​ ​ ​ ​ Shares Amount Earnings Comprehensive Income (Loss) Total Balance — January 1, 2022 56,570 ​ $ 641,533 ​ $ 406,257 ​ $ ( 7,991 ) ​ $ 1,039,799 Net income ​ ​ 10,545 ​ ​ 10,545 Other comprehensive income ​ ​ ​ 1,338 ​ 1,338 Stock-based compensation expense ​ 4,212 ​ ​ ​ 4,212 Options exercised 52 ​ 1,320 ​ ​ ​ 1,320 Issuance of common stock under Employee Stock Purchase Plan 5 ​ 320 ​ ​ ​ 320 Shares issued from time-vested restricted stock units ​ 44 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Shares surrendered in exchange for payment of payroll tax liabilities ( 16 ) ​ ( 1,015 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 1,015 ) Balance — March 31, 2022 56,655 ​ $ 646,370 ​ $ 416,802 ​ $ ( 6,653 ) ​ $ 1,056,519 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Accumulated Other ​ ​ ​ ​ Shares Amount Earnings Comprehensive Income (Loss) Total Balance — January 1, 2021 55,623 ​ $ 606,224 ​ $ 357,803 ​ $ ( 5,452 ) ​ $ 958,575 Net income ​ ​ 10,958 ​ ​ 10,958 Other comprehensive loss ​ ​ ​ ​ ​ ​ ( 1,730 ) ​ ( 1,730 ) Stock-based compensation expense ​ ​ 3,310 ​ ​ ​ ​ ​ 3,310 Options exercised 291 ​ 5,897 ​ ​ ​ ​ ​ 5,897 Issuance of common stock under Employee Stock Purchase Plan 5 ​ 263 ​ ​ ​ ​ ​ 263 Shares issued from time-vested restricted stock units ​ 25 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Shares surrendered in exchange for payment of payroll tax liabilities ( 9 ) ​ ( 488 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 488 ) Shares surrendered in exchange for exercise of stock options ( 2 ) ​ ( 93 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 93 ) Balance — March 31, 2021 55,933 ​ $ 615,113 ​ $ 368,761 ​ $ ( 7,182 ) ​ $ 976,692 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ ​ ​ ​ 7 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 10,545 ​ $ 10,958 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Depreciation and amortization ​ 20,466 ​ 21,400 Loss (gain) on sales and/or abandonment of property and equipment ​ 94 ​ ( 28 ) Write-off of certain intangible assets and other long-term assets ​ 1,672 ​ — Amortization of right-of-use operating lease assets ​ ​ 2,584 ​ ​ 3,070 Fair value adjustments to contingent consideration ​ ​ 2,600 ​ ​ 402 Amortization of deferred credits ​ ( 27 ) ​ ( 27 ) Amortization of long-term debt issuance costs ​ 151 ​ 151 Stock-based compensation expense ​ 4,642 ​ 3,595 Changes in operating assets and liabilities, net of acquisitions and divestitures: ​ ​ ​ ​ Trade receivables ​ ( 3,851 ) ​ ( 5,284 ) Other receivables ​ 5,854 ​ ( 597 ) Inventories ​ ( 9,177 ) ​ ( 3,396 ) Prepaid expenses and other current assets ​ ( 1,307 ) ​ ( 1,071 ) Income tax refund receivables ​ 196 ​ 199 Other assets ​ 833 ​ 80 Trade payables ​ 2,670 ​ 4,237 Accrued expenses ​ ( 23,508 ) ​ 5,393 Income taxes payable ​ 1,147 ​ ( 174 ) Deferred compensation payable ​ ( 1,307 ) ​ ( 581 ) Operating lease liabilities ​ ​ ( 2,841 ) ​ ​ ( 3,151 ) Other long-term obligations ​ 574 ​ 56 Total adjustments ​ 1,465 ​ 24,274 Net cash, cash equivalents, and restricted cash provided by operating activities ​ 12,010 ​ 35,232 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Capital expenditures for: ​ ​ Property and equipment ​ ( 9,526 ) ​ ( 6,171 ) Intangible assets ​ ( 342 ) ​ ( 692 ) Proceeds from the sale of property and equipment ​ — ​ 873 Cash paid in acquisitions, net of cash acquired ​ — ​ ( 358 ) Net cash, cash equivalents, and restricted cash used in investing activities ​ $ ( 9,868 ) ​ $ ( 6,348 ) ​ ​ ​ See condensed notes to consolidated financial statements. (continued) ​ 8 Table of Contents ​ MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2022 ​ 2021 CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from issuance of common stock ​ $ 1,641 ​ $ 5,520 Proceeds from issuance of long-term debt ​ 80,524 ​ 9,694 Payments on long-term debt ​ ​ ( 70,899 ) ​ ​ ( 40,569 ) Contingent payments related to acquisitions ​ ( 24,491 ) ​ ( 403 ) Payment of taxes related to an exchange of common stock ​ ( 1,015 ) ​ ( 488 ) Net cash, cash equivalents, and restricted cash used in financing activities ​ ( 14,240 ) ​ ( 26,246 ) Effect of exchange rates on cash, cash equivalents, and restricted cash ​ 111 ​ ( 1,035 ) Net increase (decrease) in cash, cash equivalents and restricted cash ​ ( 11,987 ) ​ 1,603 ​ ​ ​ ​ ​ ​ ​ CASH, CASH EQUIVALENTS AND RESTRICTED CASH: ​ ​ Beginning of period ​ 67,750 ​ 56,916 End of period ​ $ 55,763 ​ $ 58,519 ​ ​ ​ ​ ​ ​ ​ RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ 53,875 ​ ​ 58,519 Restricted cash reported in prepaid expenses and other current assets ​ ​ 1,888 ​ ​ — Total cash, cash equivalents and restricted cash ​ $ 55,763 ​ $ 58,519 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ​ ​ Cash paid during the period for: ​ ​ Interest (net of capitalized interest of $ 126 and $ 120 , respectively) ​ $ 993 ​ $ 1,539 Income taxes ​ ​ 2,411 ​ ​ 1,660 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES ​ ​ Property and equipment purchases in accounts payable ​ $ 2,442 ​ $ 1,688 Merit common stock surrendered ( 0 and 2 shares, respectively) in exchange for exercise of stock options ​ ​ — ​ ​ 93 Right-of-use operating lease assets obtained in exchange for operating lease liabilities ​ ​ 1,404 ​ ​ 131 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ 9 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation and Other Items. The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three-month periods ended March 31, 2022 and 2021 are not audited. Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2022 and December 31, 2021, and our results of operations and cash flows for the three-month periods ended March 31, 2022 and 2021. The results of operations for the three-month periods ended March 31, 2022 and 2021 are not necessarily indicative of the results for a full-year period. Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts. These interim consolidated financial statements should be read in conjunction with the financial statements and risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report on Form 10-K”). ​ ​ 2. Recently Issued Financial Accounting Standards. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards 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. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope , which amends the scope of ASU 2020-04. ASU 2020-04 and ASU 2021-01 were effective as of March 12, 2020, and t he provisions of these updates may be applied prospectively to transactions through December 31, 2022, when reference rate reform activity is expected to be completed. As of March 31, 2022, we had not modified any contracts as a result of reference rate reform. W e are currently assessing the anticipated impact of these standards on our consolidated financial statements. We currently believe that all other issued and not yet effective accounting standards are not materially relevant to our financial statements. 3. Revenue from Contracts with Customers. We recognize revenue when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration we expect to receive in exchange for these goods. Our revenue recognition policies have not changed from those disclosed in Note 1 to our consolidated financial statements in Item 8 of the 2021 Annual Report on Form 10-K. Disaggregation of Revenue Our revenue is disaggregated based on reporting segment, product category and geographical region. We design, develop, manufacture and market medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and original equipment manufacturer (“OEM”). Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors. 10 Table of Contents The following tables present revenue from contracts with customers by reporting segment, product category and geographical region for the three-month periods ended March 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ ​ March 31, 2022 ​ March 31, 2021 ​ United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 62,100 ​ $ 43,673 ​ $ 105,773 ​ $ 56,866 ​ $ 36,048 ​ $ 92,914 Cardiac Intervention ​ 28,549 ​ ​ 52,938 ​ 81,487 ​ 29,251 ​ 45,486 ​ 74,737 Custom Procedural Solutions ​ 26,555 ​ ​ 19,707 ​ 46,262 ​ 24,892 ​ 20,529 ​ 45,421 OEM ​ 27,796 ​ ​ 5,618 ​ 33,414 ​ 22,890 ​ 5,044 ​ 27,934 Total ​ 145,000 ​ ​ 121,936 ​ 266,936 ​ 133,899 ​ 107,107 ​ 241,006 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy devices ​ 7,992 ​ 487 ​ 8,479 ​ 7,473 ​ 434 ​ 7,907 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 152,992 ​ $ 122,423 ​ $ 275,415 ​ $ 141,372 ​ $ 107,541 ​ $ 248,913 ​ ​ ​ 4. Inventories. Inventories at March 31, 2022 and December 31, 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 Finished goods ​ $ 130,500 ​ $ 132,403 Work-in-process ​ 32,512 ​ 22,160 Raw materials ​ 68,439 ​ 67,359 Total inventories ​ $ 231,451 ​ $ 221,922 ​ ​ 5. Goodwill and Intangible Assets. The change in the carrying amount of goodwill for the three-month period ended March 31, 2022 is detailed as follows (in thousands): ​ ​ ​ ​ ​ ​ 2022 Goodwill balance at January 1 ​ $ 361,741 Effect of foreign exchange ​ ( 285 ) Goodwill balance at March 31 ​ $ 361,456 ​ Total accumulated goodwill impairment losses aggregated to $ 8.3 million as of March 31, 2022 and December 31, 2021. We did no t have any goodwill impairments for the three-month periods ended March 31, 2022 and 2021. The total goodwill balance as of March 31, 2022 and December 31, 2021 was related to our cardiovascular segment. ​ Other intangible assets at March 31, 2022 and December 31, 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 26,691 ​ $ ( 8,788 ) ​ $ 17,903 Distribution agreements ​ 3,250 ​ ( 2,569 ) ​ 681 License agreements ​ 12,725 ​ ( 8,098 ) ​ 4,627 Trademarks ​ 30,238 ​ ( 15,920 ) ​ 14,318 Customer lists ​ 34,919 ​ ( 31,549 ) ​ 3,370 Total ​ $ 107,823 ​ $ ( 66,924 ) ​ $ 40,899 ​ 11 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 26,349 ​ $ ( 8,315 ) ​ $ 18,034 Distribution agreements ​ 3,250 ​ ( 2,519 ) ​ 731 License agreements ​ 12,663 ​ ( 7,768 ) ​ 4,895 Trademarks ​ 30,242 ​ ( 15,256 ) ​ 14,986 Customer lists ​ 34,985 ​ ( 31,195 ) ​ 3,790 Total ​ $ 107,489 ​ $ ( 65,053 ) ​ $ 42,436 ​ Aggregate amortization expense for the three-month periods ended March 31, 2022 and 2021 was $ 12.2 million and $ 12.5 million, respectively. ​ We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows is largely independent of the cash flows of other assets and liabilities. 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. During the three-month period ended March 31, 2022, we identified indicators of impairment associated with certain acquired intangible assets based on our qualitative assessment, which led us to complete an interim quantitative impairment assessment. The primary indicator of impairment was our planned divestiture of the STD Pharmaceutical Products Limited (“STD Pharmaceutical”) business acquired in our August 2019 acquisition of Fibrovein Holdings Limited. On April 30, 2022, we completed the divestiture of Fibrovein Holdings Limited, in exchange for the termination of our obligations arising from the acquisition transaction in August 2019 and the purchaser’s agreement to make potential future payments upon a qualifying disposition of the STD Pharmaceutical business. We recorded an impairment charge for the carrying value of $ 1.7 million of intangible assets during the three months ended March 31, 2022, all of which pertained to our cardiovascular segment. ​ We did no t identify indicators of impairment in any intangible assets based on our qualitative assessment for the three-month period ended March 31, 2021. ​ Estimated amortization expense for the developed technology and other intangible assets for the next five years consisted of the following as of March 31, 2022 (in thousands): ​ ​ ​ ​ ​ Year Ending December 31, Estimated Amortization Expense Remaining 2022 ​ $ 35,932 2023 ​ 46,894 2024 ​ 43,959 2025 ​ ​ 42,185 2026 ​ 31,634 ​ ​ 6. Income Taxes. Our provision for income taxes for the three-month periods ended March 31, 2022 and 2021 was a tax expense of $ 3.6 million and $ 1.7 million, respectively, which resulted in an effective tax rate of 25.6 % and 13.7 %, respectively. The increase in the income tax expense and the corresponding change in the effective income tax rate for the three-month period ended March 31, 2022, when compared to the prior-year period, was primarily due to decreased benefit from discrete items such as share-based compensation. Our effective tax rate differs from the U.S. statutory rate primarily due to the impact of global intangible low-taxed income (“GILTI”) inclusions, state income taxes, foreign taxes, other non-deductible permanent items and discrete items (such as share-based compensation). ​ 7. Revolving Credit Facility and Long-Term Debt. Principal balances outstanding under our long-term debt obligations as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands): ​ 12 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 Term loans ​ $ 131,250 ​ $ 133,125 Revolving credit loans ​ 121,500 ​ 110,000 Less unamortized debt issuance costs ​ ( 263 ) ​ ( 290 ) Total long-term debt ​ 252,487 ​ 242,835 Less current portion ​ 9,375 ​ 8,438 Long-term portion ​ $ 243,112 ​ $ 234,397 ​ Third Amended and Restated Credit Agreement ​ On July 31, 2019, we entered into a Third Amended and Restated Credit Agreement (the "Third Amended Credit Agreement"). The Third Amended Credit Agreement is a syndicated loan agreement with Wells Fargo Bank, National Association and other parties. The Third Amended Credit Agreement amends and restates in its entirety our previously outstanding Second Amended and Restated Credit Agreement and all amendments thereto. The Third Amended Credit Agreement provides for a term loan of $ 150 million and a revolving credit commitment up to an aggregate amount of $ 600 million, inclusive of sub-facilities for multicurrency borrowings, standby letters of credit and swingline loans. On July 31, 2024, all principal, interest and other amounts outstanding under the Third Amended Credit Agreement are payable in full. At any time prior to the maturity date, we may repay any amounts owing under all term loans and revolving credit loans in whole or in part, without premium or penalty, other than breakage fees (as defined in the Third Amended Credit Agreement). ​ Revolving credit loans denominated in dollars and term loans made under the Third Amended Credit Agreement bear interest, at our election, at either the Base Rate or the Eurocurrency Rate (as such terms are defined in the Third Amended Credit Agreement) plus the Applicable Margin (as defined in the Third Amended Credit Agreement). Revolving credit loans denominated in an Alternative Currency (as defined in the Third Amended Credit Agreement) bear interest at the Eurocurrency Rate plus the Applicable Margin. Swingline loans bear interest at the Base Rate plus the Applicable Margin (as defined in the Third Amended Credit Agreement). Interest on each Base Rate loan is due and payable on the last business day of each calendar quarter; interest on each Eurocurrency Rate loan is due and payable on the last day of each interest period applicable thereto, and if such interest period extends over three months, at the end of each three-month interval during such interest period. ​ The Third Amended Credit Agreement is collateralized by substantially all our assets. The Third Amended Credit Agreement contains affirmative and negative covenants, representations and warranties, events of default and other terms customary for loans of this nature. In particular, the Third Amended Credit Agreement requires that we maintain certain financial covenants, as follows: ​ ​ ​ ​ ​ ​ ​ Covenant Requirement ​ Consolidated Total Leverage Ratio (1) ​ 4.0 to 1.0 ​ Consolidated Interest Coverage Ratio (2) ​ 3.0 to 1.0 ​ Facility Capital Expenditures (3) ​ ​ $ 50 million ​ (1) Maximum Consolidated Total Net Leverage Ratio (as defined in the Third Amended Credit Agreement) as of any fiscal quarter end. (2) Minimum ratio of Consolidated EBITDA (as defined in the Third Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Interest Expense (as defined in the Third Amended Credit Agreement) for any period of four consecutive fiscal quarters. (3) Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Third Amended Credit Agreement) in any fiscal year. ​ We believe we were in compliance with all covenants set forth in the Third Amended Credit Agreement as of March 31, 2022. As of March 31, 2022, we had outstanding borrowings of $ 253 million and issued letter of credit guarantees of $ 3.4 million under the Third Amended Credit Agreement, with additional available borrowings of approximately $ 475 million, based 13 Table of Contents on the maximum net leverage ratio and the aggregate revolving credit commitment pursuant to the Third Amended Credit Agreement. Our interest rate as of March 31, 2022 was a fixed rate of 2.71 % on $ 75 million as a result of an interest rate swap (see Note 8) and a variable floating rate of 1.46 % on $ 177.8 million. 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 and a variable floating rate of 1.10 % on $ 168.1 million. The foregoing fixed rates do not reflect potential future changes in the applicable margin. Future minimum principal payments on our long-term debt, as of March 31, 2022, were as follows (in thousands): ​ ​ ​ ​ Years Ending ​ Future Minimum December 31, Principal Payments Remaining 2022 $ 6,562 2023 ​ ​ 11,250 2024 ​ ​ 234,938 Total future minimum principal payments ​ $ 252,750 ​ ​ 8. Derivatives. General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of the risks attributable to those fluctuations by entering into derivative contracts. The derivative instruments we use are interest rate swaps and foreign currency forward contracts. We recognize derivative instruments as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative contracts are classified as operating activities in the accompanying consolidated statements of cash flows. ​ We formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment initially and on an ongoing basis. For qualifying hedges, the change in fair value is deferred in accumulated other comprehensive income, 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 derivative instruments not designated as hedging instruments are recorded in earnings throughout the term of the derivative. ​ Interest Rate Risk. Our debt bears interest at variable interest rates. Therefore, we are subject to variability in the cash payable for interest expense. In order to mitigate a portion of the risk attributable to such variability, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Third Amended Credit Agreement that varies in accordance with changes in the benchmark interest rate. Derivative Instruments Designated as Cash Flow Hedges ​ 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 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). 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. On March 31, 2022 and December 31, 2021, our interest rate swap qualified as a cash flow hedge. The fair value of our interest rate swap on March 31, 2022 was an asset of $ 1.2 million, which was partially offset by $ 0.3 million in deferred taxes. The fair value of our interest rate swap on December 31, 2021 was a liability of ($ 1.4 ) million, partially offset by ($ 0.4 ) million in deferred taxes. 14 Table of Contents Foreign Currency Risk. We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years . We are exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in various currencies, with our most significant exposure related to transactions and balances denominated in Chinese Renminbi and Euros, among others. We do not use derivative financial instruments for trading or speculative purposes. We do not believe we are subject to any credit risk contingent features related to our derivative contracts, and we seek to manage counterparty risk by allocating derivative contracts among several major financial institutions. Derivative Instruments Designated as Cash Flow Hedges ​ For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is temporarily reported as a component of other comprehensive income (loss) and then reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. 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. 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. We enter into approximately 100 cash flow foreign currency hedges every month. As of March 31, 2022 and December 31, 2021, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 141.0 million and $ 123.0 million, respectively. Derivative Instruments Not Designated as Cash Flow Hedges ​ We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 50 foreign currency fair value hedges every month. As of March 31, 2022 and December 31, 2021, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 87.9 million and $ 86.0 million, respectively. Balance Sheet Presentation of Derivative Instruments. As of March 31, 2022 and December 31, 2021, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets. We are not subject to any master netting agreements. 15 Table of Contents The fair value of derivative instruments on a gross basis was as follows on the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Designated as Hedging Instruments Balance Sheet Location March 31, 2022 December 31, 2021 Assets ​ ​ Interest rate swaps Other assets (long-term) ​ $ 1,161 ​ $ — Foreign currency forward contracts Prepaid expenses and other assets ​ ​ 1,778 ​ ​ 1,326 Foreign currency forward contracts Other assets (long-term) ​ 293 ​ 179 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Interest rate swaps ​ Other long-term obligations ​ ​ — ​ ​ ( 1,447 ) Foreign currency forward contracts Accrued expenses ​ ( 2,569 ) ​ ( 2,288 ) Foreign currency forward contracts Other long-term obligations ​ ( 644 ) ​ ( 502 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Not Designated as Hedging Instruments Balance Sheet Location March 31, 2022 December 31, 2021 Assets ​ ​ Foreign currency forward contracts Prepaid expenses and other assets ​ $ 1,327 ​ $ 736 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 1,505 ) ​ ( 856 ) ​ Income Statement Presentation of Derivative Instruments. ​ Derivative Instruments Designated as Cash Flow Hedges ​ Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income (“OCI”), accumulated other comprehensive income (“AOCI”), and net earnings in our consolidated statements of income, consolidated statements of comprehensive income and consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of Gain/(Loss) ​ ​ Consolidated Statements ​ Amount of Gain/(Loss) ​ ​ Recognized in OCI ​ ​ of Income ​ Reclassified from AOCI ​ ​ Three Months Ended March 31, ​ ​ Three Months Ended March 31, ​ Three Months Ended March 31, Derivative instrument 2022 2021 Location in statements of income 2022 ​ 2021 2022 2021 Interest rate swaps ​ $ 2,314 ​ $ 721 ​ Interest expense ​ $ ( 1,002 ) ​ $ ( 1,537 ) ​ $ ( 294 ) ​ $ ( 432 ) Foreign currency forward contracts ​ ( 270 ) ​ 516 ​ Revenue ​ 275,415 ​ 248,913 ​ ( 386 ) ​ ( 1,602 ) ​ ​ ​ ​ Cost of sales ​ ( 154,508 ) ​ ( 137,019 ) ​ ( 183 ) ​ 350 ​ As of March 31, 2022, ($ 1.0 ) million, or ($ 0.8 ) million after taxes, was expected to be reclassified from accumulated other comprehensive income (loss) to earnings in revenue and cost of sales over the succeeding twelve months. As of March 31, 2022, $ 34,000 , or $ 26,000 after taxes, was expected to be reclassified from accumulated other comprehensive income (loss) to earnings in interest expense over the succeeding twelve months. Derivative Instruments Not Designated as Hedging Instruments ​ The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income (loss) for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, Derivative Instrument Location in statements of income 2022 2021 Foreign currency forward contracts Other income (expense) ​ $ ( 1,112 ) ​ $ 229 ​ ​ 16 Table of Contents 9. Commitments and Contingencies. Litigation. In the ordinary course of business, we are involved in various proceedings, legal actions and claims. These proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental inquiries or other matters, including those more fully described below. The outcomes of these matters will generally not be known for prolonged periods of time. 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. 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. The estimates are based on consultation with legal counsel, previous settlement experience, settlement strategies and the potential availability of insurance coverage. 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. The ultimate cost to us with respect to such proceedings, actions and claims 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. ​ Securities Litigation ​ 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. 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. This action is captioned In re Merit Medical Systems, Inc. Securities Litigation (Master File No. 8:19-cv-02326-DOC-ADS). 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. The consolidated class action complaint alleged that defendants violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and sought unspecified damages, costs and attorneys’ fees, and equitable relief. ​ As of December 31, 2021, we had accrued approximately $ 10 million of net expense in connection with an agreement in principle to settle the consolidated class action complaint. The parties executed a settlement agreement, settling all claims asserted in the class action complaint, and the settlement agreement was approved by the Central California District Court on April 13, 2022. ​ Shareholder Derivative Action ​ 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. 2:21-cv-00346-DBP). 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. We intend to vigorously defend against the lawsuit. The proceeding was stayed until February 19, 2022, subject to the right of either party to seek to lift or extend the stay. The stay has expired, however the parties have been engaged in mediation in an attempt to resolve the dispute. We have not recorded an expense related to this matter because any potential loss is not reasonably estimable. Additionally, we cannot presently estimate the range of loss, if any, that may result from the matter. It is possible that the ultimate resolution of the foregoing matter, or other matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity. ​ Legal costs for proceedings, legal actions and claims discussed, such as outside counsel fees and expenses, are charged to expense in the period(s) incurred. 17 Table of Contents ​ ​ 10. Earnings Per Common Share (EPS). The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three-month periods ended March 31, 2022 and 2021 consisted of the following (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2022 ​ 2021 Net income ​ $ 10,545 ​ $ 10,958 Average common shares outstanding ​ 56,593 ​ 55,717 Basic EPS ​ $ 0.19 ​ $ 0.20 ​ ​ ​ ​ ​ ​ ​ Average common shares outstanding ​ ​ 56,593 ​ ​ 55,717 Effect of dilutive stock awards ​ ​ 938 ​ ​ 1,261 Total potential shares outstanding ​ ​ 57,531 ​ ​ 56,978 Diluted EPS ​ $ 0.18 ​ $ 0.19 ​ ​ ​ ​ ​ ​ ​ Equity awards excluded as the impact was anti-dilutive (1) ​ ​ 1,553 ​ ​ 1,042 (1) Does not reflect the impact of incremental repurchases under the treasury stock method. ​ ​ 11. Stock-Based Compensation Expense. Stock-based compensation expense before income tax expense (benefit) for the three-month periods ended March 31, 2022 and 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Cost of sales ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ $ 588 ​ $ 318 Research and development ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 486 ​ 279 Selling, general and administrative ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 1,924 ​ 1,627 Performance-based restricted stock units ​ ​ 815 ​ ​ 731 Restricted stock units ​ ​ 399 ​ ​ 355 Cash-settled performance-based share-based awards ("Liability Awards") ​ ​ 430 ​ ​ 285 Total selling, general and administrative ​ ​ 3,568 ​ ​ 2,998 ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense before taxes ​ $ 4,642 ​ $ 3,595 ​ 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. ​ Nonqualified Stock Options During the three-month periods ended March 31, 2022 and 2021, we granted stock options representing 123,606 and 125,850 shares of our common stock, respectively. We use the Black-Scholes methodology to value the stock-based 18 Table of Contents compensation expense for options. In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ ​ 2022 ​ 2021 Risk-free interest rate 1.4 % - 1.8 % 0.6 % ​ Expected option term 4 years 4 years ​ Expected dividend yield — — ​ Expected price volatility 46.2 % - 46.6 % 46.7 % ​ ​ The average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock award. We determine the expected term of stock options using the historical exercise behavior of employees. The expected price volatility was determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option term and implied volatility based on recent trends of the daily historical volatility. For awards with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period. ​ As of March 31, 2022, the total remaining unrecognized compensation cost related to non-vested stock options was $ 25.9 million, which was expected to be recognized over a weighted average period of 2.4 years. ​ Stock-Settled Performance-Based Restricted Stock Units (“Performance Stock Units”) ​ During the three-month periods ended March 31, 2022 and 2021, we granted performance stock units to certain of our executive officers which represent up to 109,178 and 128,883 shares of our common stock, respectively. Conversion of the performance stock units occurs at the end of the relevant 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. ​ We use Monte-Carlo simulations to estimate the grant-date fair value of the performance stock units linked to total shareholder return. The fair value of each performance stock unit was estimated as of the grant date using the following assumptions for awards granted in the periods indicated below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ ​ 2022 ​ 2021 Risk-free interest rate 1.6 % 0.1 % - 0.3 % ​ Performance period 2.8 years 1.8 - 2.8 years ​ Expected dividend yield — — ​ Expected price volatility 42.6 % 43.7 % - 49.3 % ​ ​ The risk-free interest rate of return was determined using the U.S. Treasury rate at the time of grant with a term equal to the expected term of the award. 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. The expected dividend yield was assumed to be zero because, at the time of the grant, we had no plans to declare a dividend. Compensation expense is recognized using the grant-date fair value for the number of shares that are probable of being awarded based on the performance conditions. Each reporting period, this probability assessment is updated, and cumulative adjustments are recorded based on the level of FCF that is expected to be achieved. At the end of the performance period, cumulative expense is calculated based on the actual level of FCF achieved. As of March 31, 2022, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 9.3 million, which is expected to be recognized over a weighted average period of 2.2 years. 19 Table of Contents Liability Awards During the three-month periods ended March 31, 2022 and 2021, we granted liability awards to our Chief Executive Officer with total target cash incentives, each in the amount of $ 1.0 million. These awards entitle him to a target cash payment based upon attaining targeted levels of FCF and rTSR, as defined in the award agreements. Settlement generally occurs based upon the same performance metrics, vesting period, and performance period as our performance stock units. The fair value of these awards is remeasured at each reporting period until the awards are settled. These awards are classified as liabilities and reported in accrued expenses and other long-term obligations within our consolidated balance sheet. As of March 31, 2022, the total remaining unrecognized compensation cost related to cash-settled performance-based share-based awards was $ 3.7 million, which is expected to be recognized over a weighted average period of 2.2 years. Restricted Stock Units On June 17, 2021, we granted restricted stock units to our non-employee directors representing 26,226 shares of our common stock. The expense recognized for restricted stock units is equal to the closing stock price on the date of grant, which is recognized over the vesting period. Restricted stock units granted to each director are subject to such director’s continued service through the vesting date, which is one year from the date of grant. As of March 31, 2022, the total remaining unrecognized compensation cost related to restricted stock units was $ 0.3 million, which will be recognized over the remaining vesting period. ​ ​ 12. Segment Reporting. We report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and OEM. Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors. We evaluate the performance of our operating segments based on net sales and operating income. Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three-month periods ended March 31, 2022 and 2021, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ March 31, ​ 2022 2021 Net Sales ​ ​ Cardiovascular ​ $ 266,936 ​ $ 241,006 Endoscopy ​ 8,479 ​ 7,907 Total net sales ​ 275,415 ​ 248,913 ​ ​ ​ ​ ​ ​ ​ Operating Income ​ ​ Cardiovascular ​ 13,126 ​ 12,201 Endoscopy ​ 2,107 ​ 1,993 Total operating income ​ 15,233 ​ 14,194 ​ ​ ​ ​ ​ ​ ​ Total other expense - net ​ ( 1,062 ) ​ ( 1,500 ) Income tax expense ​ 3,626 ​ 1,736 ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 10,545 ​ $ 10,958 ​ ​ 20 Table of Contents 13. Fair Value Measurements. Assets (Liabilities) Measured at Fair Value on a Recurring Basis Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Total Fair ​ Quoted prices in ​ Significant other ​ Significant ​ ​ Value at ​ active markets ​ observable inputs ​ unobservable inputs ​ March 31, 2022 (Level 1) (Level 2) (Level 3) Interest rate contract asset, long-term (1) ​ $ 1,161 ​ $ — ​ $ 1,161 ​ $ — Foreign currency contract assets, current and long-term (2) ​ $ 3,398 ​ $ — ​ $ 3,398 ​ $ — Foreign currency contract liabilities, current and long-term (3) ​ $ ( 4,718 ) ​ $ — ​ $ ( 4,718 ) ​ $ — Contingent consideration liabilities ​ $ ( 26,333 ) ​ $ — ​ $ — ​ $ ( 26,333 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Total Fair ​ Quoted prices in ​ Significant other ​ Significant ​ ​ Value at ​ active markets ​ observable inputs ​ unobservable inputs ​ December 31, 2021 (Level 1) (Level 2) (Level 3) Interest rate contract liability, long-term (1) ​ $ ( 1,447 ) ​ $ — ​ $ ( 1,447 ) ​ $ — Foreign currency contract assets, current and long-term (2) ​ $ 2,241 ​ $ — ​ $ 2,241 ​ $ — Foreign currency contract liabilities, current and long-term (3) ​ $ ( 3,646 ) ​ $ — ​ $ ( 3,646 ) ​ $ — Contingent consideration liabilities ​ $ ( 48,234 ) ​ $ — ​ $ — ​ $ ( 48,234 ) (1) The fair value of the interest rate contract is determined using Level 2 fair value inputs and is reported with other long-term assets 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 expenses and other current assets or other long-term assets in the consolidated balance sheets. (3) The fair value of the foreign currency contract liabilities (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 accrued expenses or other long-term obligations in the consolidated balance sheets. 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. The contingent consideration liability is re-measured at the estimated fair value at the end of each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income for such period. 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. Changes in the fair value of our contingent consideration liabilities during the three-month periods ended March 31, 2022 and 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ March 31, ​ 2022 2021 Beginning balance ​ $ 48,234 ​ $ 55,750 Contingent consideration expense ​ 2,600 ​ 402 Contingent payments made ​ ( 24,491 ) ​ ( 403 ) Effect of foreign exchange ​ ​ ( 10 ) ​ ​ 5 Ending balance ​ $ 26,333 ​ $ 55,754 ​ 21 Table of Contents As of March 31, 2022, $ 5.8 million in contingent consideration liability was included in other long-term obligations and $ 20.5 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. As of December 31, 2021, $ 13.5 million in contingent consideration liability was included in other long-term obligations and $ 34.7 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. Cash paid to settle the contingent consideration liability recognized at fair value as of the applicable 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 included the following significant unobservable inputs at March 31, 2022 and December 31, 2021 (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2022 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 2,405 Discounted cash flow Discount rate ​ 13 % - 16 % ​ 15.5 % ​ ​ ​ Projected year of payments ​ 2022-2034 ​ 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 20,269 Monte Carlo simulation Discount rate ​ 0 % - 13 % ​ 3.8 % ​ ​ ​ Projected year of payments ​ 2022-2031 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 3,659 ​ Scenario-based method ​ Discount rate ​ 3.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 80 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2024-2025 ​ 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2021 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 2,870 Discounted cash flow Discount rate ​ 13 % - 16 % ​ 14.7 % ​ ​ ​ Projected year of payments ​ 2022-2034 ​ 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 41,671 Monte Carlo simulation Discount rate ​ 7.5 % - 12.5 % ​ 8.2 % ​ ​ ​ Projected year of payments ​ 2022-2031 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 3,693 ​ Scenario-based method ​ Discount rate ​ 2.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 80 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2024-2025 ​ 2025 (1) Unobservable inputs were weighted by the relative fair value of the instruments. No weighted average is reported for contingent consideration liabilities without a range of unobservable inputs. ​ The contingent consideration liability is re-measured to fair value each reporting period. Significant increases or decreases in projected revenues, based on our most recent internal operational budgets and long-range strategic plans, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement. Our determination of the fair value of the contingent consideration liability could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income. 22 Table of Contents Contingent Payments to Related Parties During the three-month period ended March 31, 2022, we made contingent payments of $ 1.6 million to a current director of Merit and former shareholder of Cianna Medical, Inc. (“Cianna Medical”), which we acquired in 2018. We made no such payments during the three-month period ended March 31, 2021. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a Merit director. As a former shareholder of Cianna Medical, the Merit director may be eligible for additional payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical. Fair Value of Other Assets (Liabilities) The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which use Level 1 inputs. We analyze our investments in privately-held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the company in which we have invested. Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments. Impairment Charges We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property and equipment, right-of-use operating lease assets, equity investments, intangible assets and goodwill in connection with impairment evaluations. Such assets are reported at carrying value and are not subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Fair value is generally determined based on discounted future cash flow. All our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the three-month period ended March 31, 2022, we recorded an impairment charge of $ 1.7 million related to the acquired intangible assets from our August 2019 acquisition of STD Pharmaceutical. As of March 31, 2022, the net assets associated with the STD Pharmaceutical business were not material. On April 30, 2022, we divested our ownership of the STD Pharmaceutical business. We do not anticipate the recognition of a material loss upon the divestiture of this business. During the three-month period ended March 31, 2021, we had no losses related to acquired intangible assets (see Note 5). Notes Receivable Our outstanding long-term notes receivable, including accrued interest and our allowance for current expected credit losses, were $ 2.4 million and $ 2.3 million as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, we had an allowance for current expected credit losses of $ 0.2 million and $ 0.2 million, respectively, associated with these notes receivable. 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, and other security specific factors. The table 23 Table of Contents below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the three-month periods ended March 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2022 2021 Beginning balance ​ $ 199 ​ $ 730 Provision for credit loss expense ​ ​ — ​ ​ 202 Ending balance ​ $ 199 ​ $ 932 ​ ​ 14. Accumulated Other Comprehensive Income (Loss). The changes in each component of accumulated other comprehensive income (loss) for the three-month periods ended March 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of January 1, 2022 $ ( 2,464 ) ​ $ ( 5,527 ) ​ $ ( 7,991 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 2,044 ​ ​ ( 793 ) ​ ​ 1,251 Income taxes ( 712 ) ​ ​ ( 64 ) ​ ​ ( 776 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ 386 ​ ​ ​ ​ ​ 386 Cost of sales ​ 183 ​ ​ ​ ​ ​ 183 Interest expense ​ 294 ​ ​ ​ ​ ​ 294 Net other comprehensive income (loss) ​ 2,195 ​ ​ ( 857 ) ​ ​ 1,338 ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of March 31, 2022 $ ( 269 ) ​ $ ( 6,384 ) ​ $ ( 6,653 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of January 1, 2021 $ ( 6,940 ) ​ $ 1,488 ​ $ ( 5,452 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 1,237 ​ ​ ( 4,462 ) ​ ​ ( 3,225 ) Income taxes ( 724 ) ​ ​ 535 ​ ​ ( 189 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ 1,602 ​ ​ ​ ​ ​ 1,602 Cost of sales ​ ( 350 ) ​ ​ ​ ​ ​ ( 350 ) Interest expense ​ 432 ​ ​ ​ ​ ​ 432 Net other comprehensive income (loss) ​ 2,197 ​ ​ ( 3,927 ) ​ ​ ( 1,730 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of March 31, 2021 $ ( 4,743 ) ​ $ ( 2,439 ) ​ $ ( 7,182 ) ​ ​ 24 Table of Contents ​ 15. Subsequent Events. On April 30, 2022, we entered into a unit purchase agreement to acquire Restore Endosystems, LLC (“Restore Endosystems”), developer of the Restore Endosystems Bifurcated Stent System. Subject to the terms and conditions of the unit purchase agreement, we paid $ 3 million in cash at closing, with additional payments totaling $ 4 million payable in separate $ 2 million payments no later than two and four years following the closing of the acquisition, respectively, or earlier upon the achievement of specified milestones. We intend to account for this transaction as an asset purchase and include the purchase price in our consolidated statements of income as acquired in-process research and development expense, because the technological feasibility of the underlying research and development project has not yet been reached and such technology had no identified future alternative use as of the date of acquisition. ​ ​