MERIT MEDICAL SYSTEMS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ASSETS 2022 2021 ​ ​ ​ (unaudited) ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 51,481 ​ $ 67,750 Trade receivables — net of allowance for credit losses — 2022 — $ 8,018 and 2021 — $ 6,767 ​ 155,828 ​ 152,301 Other receivables ​ 10,827 ​ 17,763 Inventories ​ 246,660 ​ 221,922 Prepaid expenses and other current assets ​ 27,388 ​ 16,149 Prepaid income taxes ​ 3,515 ​ 3,550 Income tax refund receivables ​ 4,164 ​ 2,777 Total current assets ​ 499,863 ​ 482,212 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ Land and land improvements ​ 25,699 ​ 25,287 Buildings ​ 186,976 ​ 190,044 Manufacturing equipment ​ 290,306 ​ 277,976 Furniture and fixtures ​ 63,380 ​ 61,446 Leasehold improvements ​ 49,962 ​ 46,341 Construction-in-progress ​ 59,783 ​ 51,182 Total property and equipment ​ 676,106 ​ 652,276 Less accumulated depreciation ​ ( 299,950 ) ​ ( 280,618 ) Property and equipment — net ​ 376,156 ​ ​ 371,658 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ Intangible assets: ​ ​ Developed technology — net of accumulated amortization — 2022 — $ 263,990 and 2021 — $ 234,016 ​ 245,282 ​ 276,833 Other — net of accumulated amortization — 2022 — $ 68,308 and 2021 — $ 65,053 ​ 38,825 ​ 42,436 Goodwill ​ 358,056 ​ 361,741 Deferred income tax assets ​ 5,467 ​ 6,080 Right-of-use operating lease assets ​ ​ 64,700 ​ ​ 65,913 Other assets ​ 44,388 ​ 41,421 Total other assets ​ 756,718 ​ 794,424 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,632,737 ​ $ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, LIABILITIES AND STOCKHOLDERS’ EQUITY 2022 2021 ​ ​ ​ (unaudited) ​ ​ ​ Current liabilities: ​ ​ ​ Trade payables ​ $ 63,206 ​ $ 55,624 Accrued expenses ​ 124,504 ​ 159,014 Current portion of long-term debt ​ 11,250 ​ 8,438 Short-term operating lease liabilities ​ ​ 10,310 ​ ​ 10,668 Income taxes payable ​ 3,765 ​ 2,536 Total current liabilities ​ 213,035 ​ 236,280 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 205,412 ​ 234,397 Deferred income tax liabilities ​ 31,168 ​ 31,503 Long-term income taxes payable ​ 347 ​ 347 Liabilities related to unrecognized tax benefits ​ 932 ​ 932 Deferred compensation payable ​ 14,786 ​ 18,111 Deferred credits ​ 1,735 ​ 1,815 Long-term operating lease liabilities ​ ​ 59,989 ​ 61,526 Other long-term obligations ​ 16,492 ​ 23,584 Total liabilities ​ 543,896 ​ 608,495 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Preferred stock — 5,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued ​ — ​ — Common stock, no par value; 100,000 shares authorized; issued and outstanding as of September 30, 2022 - 56,918 and December 31, 2021 - 56,570 ​ 658,198 ​ 641,533 Retained earnings ​ 447,372 ​ 406,257 Accumulated other comprehensive loss ​ ( 16,729 ) ​ ( 7,991 ) Total stockholders’ equity ​ 1,088,841 ​ 1,039,799 ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 1,632,737 ​ $ 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 Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Net sales ​ $ 287,175 ​ $ 267,021 ​ $ 857,566 ​ $ 796,259 Cost of sales ​ 158,602 ​ 146,527 ​ 473,019 ​ 439,732 Gross profit ​ 128,573 ​ 120,494 ​ 384,547 ​ 356,527 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ Selling, general and administrative ​ 89,780 ​ 86,474 ​ 259,282 ​ 259,061 Research and development ​ 19,221 ​ 16,974 ​ 55,074 ​ 50,841 Impairment charges ​ — ​ — ​ 1,672 ​ 4,283 Contingent consideration expense ​ 915 ​ 1,115 ​ 4,702 ​ 3,322 Acquired in-process research and development ​ — ​ — ​ 6,671 ​ — Total operating expenses ​ 109,916 ​ 104,563 ​ 327,401 ​ 317,507 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 18,657 ​ 15,931 ​ 57,146 ​ 39,020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ ​ Interest income ​ 116 ​ 104 ​ 316 ​ 668 Interest expense ​ ( 1,831 ) ​ ( 1,233 ) ​ ( 4,180 ) ​ ( 4,156 ) Other income (expense) — net ​ 660 ​ ( 625 ) ​ ( 808 ) ​ ( 1,796 ) Total other expense — net ​ ( 1,055 ) ​ ( 1,754 ) ​ ( 4,672 ) ​ ( 5,284 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 17,602 ​ 14,177 ​ 52,474 ​ 33,736 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 2,330 ​ 2,210 ​ 11,359 ​ 5,895 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 15,272 ​ $ 11,967 ​ $ 41,115 ​ $ 27,841 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per common share ​ ​ ​ ​ Basic ​ $ 0.27 ​ $ 0.21 ​ $ 0.73 ​ $ 0.50 Diluted ​ $ 0.27 ​ $ 0.21 ​ $ 0.71 ​ $ 0.49 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ ​ ​ Basic ​ 56,835 ​ 56,302 ​ 56,707 ​ 56,033 Diluted ​ 57,586 ​ 57,549 ​ 57,573 ​ 57,274 ​ 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 Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Net income ​ $ 15,272 ​ $ 11,967 ​ $ 41,115 ​ $ 27,841 Other comprehensive income (loss): ​ ​ ​ ​ Cash flow hedges ​ 3,850 ​ 1,522 ​ 13,182 ​ 5,442 Income tax benefit (expense) ​ ( 942 ) ​ ( 377 ) ​ ( 3,226 ) ​ ( 1,349 ) Foreign currency translation adjustment ​ ( 9,003 ) ​ ( 2,873 ) ​ ( 18,775 ) ​ ( 5,535 ) Income tax benefit (expense) ​ 85 ​ 346 ​ 81 ​ 678 Total other comprehensive income (loss) ​ ( 6,010 ) ​ ( 1,382 ) ​ ( 8,738 ) ​ ( 764 ) Total comprehensive income ​ $ 9,262 ​ $ 10,585 ​ $ 32,377 ​ $ 27,077 ​ 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 Net income ​ ​ 15,298 ​ ​ 15,298 Other comprehensive loss ​ ​ ​ ( 4,066 ) ​ ( 4,066 ) Stock-based compensation expense ​ 3,952 ​ ​ ​ 3,952 Options exercised 58 ​ 1,303 ​ ​ ​ 1,303 Issuance of common stock under Employee Stock Purchase Plan 6 ​ 301 ​ ​ ​ 301 Shares issued from time-vested restricted stock units ​ 26 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Balance — June 30, 2022 56,745 ​ ​ 651,926 ​ ​ 432,100 ​ ​ ( 10,719 ) ​ ​ 1,073,307 Net income ​ ​ 15,272 ​ ​ 15,272 Other comprehensive loss ​ ​ ​ ( 6,010 ) ​ ( 6,010 ) Stock-based compensation expense ​ 3,893 ​ ​ ​ 3,893 Options exercised 201 ​ 4,141 ​ ​ ​ 4,141 Issuance of common stock under Employee Stock Purchase Plan 5 ​ 246 ​ ​ ​ 246 Shares surrendered in exchange for payment of payroll tax liabilities ​ ( 18 ) ​ ​ ( 1,110 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 1,110 ) Shares surrendered in exchange for exercise of stock options ​ ( 15 ) ​ ​ ( 898 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 898 ) Balance — September 30, 2022 56,918 ​ $ 658,198 ​ $ 447,372 ​ $ ( 16,729 ) ​ $ 1,088,841 ​ ​ ​ See condensed notes to consolidated financial statements. (continued) ​ ​ 7 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, 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 Net income ​ ​ 4,916 ​ ​ 4,916 Other comprehensive income ​ ​ ​ 2,348 ​ 2,348 Stock-based compensation expense ​ 2,765 ​ ​ ​ 2,765 Options exercised 253 ​ 5,455 ​ ​ ​ 5,455 Issuance of common stock under Employee Stock Purchase Plan 4 ​ 258 ​ ​ ​ 258 Shares issued from time-vested restricted stock units ​ 34 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Balance — June 30, 2021 ​ 56,224 ​ ​ 623,591 ​ ​ 373,677 ​ ​ ( 4,834 ) ​ ​ 992,434 Net income ​ ​ 11,967 ​ ​ 11,967 Other comprehensive loss ​ ​ ​ ( 1,382 ) ​ ( 1,382 ) Stock-based compensation expense ​ 4,411 ​ ​ ​ 4,411 Options exercised 225 ​ 5,806 ​ ​ ​ ​ 5,806 Issuance of common stock under Employee Stock Purchase Plan 5 ​ 314 ​ ​ ​ 314 Shares surrendered in exchange for payment of payroll tax liabilities ​ ( 1 ) ​ ​ ( 88 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 88 ) Shares surrendered in exchange for exercise of stock options ​ ( 1 ) ​ ​ ( 86 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 86 ) Balance — September 30, 2021 ​ 56,452 ​ $ 633,948 ​ $ 385,644 ​ $ ( 6,216 ) ​ $ 1,013,376 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ ​ ​ ​ 8 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 41,115 ​ $ 27,841 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Depreciation and amortization ​ 61,312 ​ 63,173 Loss on disposition of business ​ 1,389 ​ — Loss on sale or abandonment of property and equipment ​ 196 ​ 630 Write-off of certain intangible assets and other long-term assets ​ 1,733 ​ 4,412 Acquired in-process research and development ​ 6,671 ​ — Amortization of right-of-use operating lease assets ​ ​ 7,819 ​ ​ 8,941 Adjustments and payments related to contingent consideration liability ​ ​ 2,888 ​ ​ 3,322 Amortization of deferred credits ​ ( 81 ) ​ ( 81 ) Amortization of long-term debt issuance costs ​ 453 ​ 453 Stock-based compensation expense ​ 13,691 ​ 11,589 Changes in operating assets and liabilities, net of acquisitions and divestitures: ​ ​ ​ ​ Trade receivables ​ ( 9,063 ) ​ ( 6,180 ) Other receivables ​ 5,669 ​ ( 3,173 ) Inventories ​ ( 30,735 ) ​ ( 11,180 ) Prepaid expenses and other current assets ​ ( 4,186 ) ​ ( 6,251 ) Income tax refund receivables ​ ( 1,713 ) ​ 960 Other assets ​ 1,848 ​ ( 3,638 ) Trade payables ​ 9,752 ​ 1,181 Accrued expenses ​ ( 8,861 ) ​ 19,575 Income taxes payable ​ ( 1,374 ) ​ ( 1,600 ) Deferred compensation payable ​ ( 3,325 ) ​ 606 Operating lease liabilities ​ ​ ( 8,406 ) ​ ​ ( 9,365 ) Other long-term obligations ​ ( 509 ) ​ 201 Total adjustments ​ 45,168 ​ 73,575 Net cash, cash equivalents, and restricted cash provided by operating activities ​ 86,283 ​ 101,416 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Capital expenditures for: ​ ​ Property and equipment ​ ( 32,539 ) ​ ( 19,612 ) Intangible assets ​ ( 1,909 ) ​ ( 2,121 ) Proceeds from the sale of property and equipment ​ 63 ​ 1,037 Payments from disposition of business ​ ​ ( 971 ) ​ ​ — Cash paid in acquisitions, net of cash acquired ​ ( 4,712 ) ​ ( 1,858 ) Net cash, cash equivalents, and restricted cash used in investing activities ​ $ ( 40,068 ) ​ $ ( 22,554 ) ​ ​ ​ See condensed notes to consolidated financial statements. (continued) ​ 9 Table of Contents ​ MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ ​ 2022 ​ 2021 CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from issuance of common stock ​ $ 6,733 ​ $ 17,814 Proceeds from issuance of long-term debt ​ 172,336 ​ 73,251 Payments on long-term debt ​ ​ ( 198,593 ) ​ ​ ( 145,876 ) Contingent payments related to acquisitions ​ ( 32,862 ) ​ ( 10,579 ) Payment of taxes related to an exchange of common stock ​ ( 2,125 ) ​ ( 576 ) Net cash, cash equivalents, and restricted cash used in financing activities ​ ( 54,511 ) ​ ( 65,966 ) Effect of exchange rates on cash, cash equivalents, and restricted cash ​ ( 5,862 ) ​ ( 908 ) Net increase (decrease) in cash, cash equivalents and restricted cash ​ ( 14,158 ) ​ 11,988 ​ ​ ​ ​ ​ ​ ​ CASH, CASH EQUIVALENTS AND RESTRICTED CASH: ​ ​ Beginning of period ​ 67,750 ​ 56,916 End of period ​ $ 53,592 ​ $ 68,904 ​ ​ ​ ​ ​ ​ ​ RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ 51,481 ​ ​ 68,904 Restricted cash reported in prepaid expenses and other current assets ​ ​ 2,111 ​ ​ — Total cash, cash equivalents and restricted cash ​ $ 53,592 ​ $ 68,904 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ​ ​ Cash paid during the period for: ​ ​ Interest (net of capitalized interest of $ 565 and $ 345 , respectively) ​ $ 4,087 ​ $ 4,155 Income taxes ​ ​ 14,013 ​ ​ 6,166 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES ​ ​ Property and equipment purchases in accounts payable ​ $ 1,899 ​ $ 2,842 Acquisition purchases in accrued expenses and other long-term obligations ​ ​ ( 4,526 ) ​ ​ — Merit common stock surrendered ( 15 and 3 shares, respectively) in exchange for exercise of stock options ​ ​ 898 ​ ​ 179 Right-of-use operating lease assets obtained in exchange for operating lease liabilities ​ ​ 8,948 ​ ​ 827 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ 10 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 and nine-month periods ended September 30, 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 September 30, 2022 and December 31, 2021, and our results of operations and cash flows for the three and nine-month periods ended September 30, 2022 and 2021. The results of operations for the three and nine-month periods ended September 30, 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 amended the scope of ASU 2020-04. ASU 2020-04 and ASU 2021-01 became 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 September 30, 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. 11 Table of Contents The following tables present revenue from contracts with customers by reporting segment, product category and geographical region for the three and nine-month periods ended September 30, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ ​ September 30, 2022 ​ September 30, 2021 ​ United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 67,200 ​ $ 43,498 ​ $ 110,698 ​ $ 61,282 ​ $ 39,777 ​ $ 101,059 Cardiac Intervention ​ 33,194 ​ ​ 53,654 ​ 86,848 ​ 30,562 ​ 49,251 ​ 79,813 Custom Procedural Solutions ​ 27,078 ​ ​ 18,614 ​ 45,692 ​ 27,895 ​ 21,540 ​ 49,435 OEM ​ 29,425 ​ ​ 6,286 ​ 35,711 ​ 25,025 ​ 4,372 ​ 29,397 Total ​ 156,897 ​ ​ 122,052 ​ 278,949 ​ 144,764 ​ 114,940 ​ 259,704 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy Devices ​ 7,674 ​ 552 ​ 8,226 ​ 6,741 ​ 576 ​ 7,317 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 164,571 ​ $ 122,604 ​ $ 287,175 ​ $ 151,505 ​ $ 115,516 ​ $ 267,021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Nine Months Ended ​ ​ September 30, 2022 ​ September 30, 2021 ​ United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 195,095 ​ $ 132,331 ​ $ 327,426 ​ $ 181,383 ​ $ 118,190 ​ $ 299,573 Cardiac Intervention ​ 95,652 ​ ​ 162,257 ​ 257,909 ​ 93,030 ​ 147,173 ​ 240,203 Custom Procedural Solutions ​ 80,951 ​ ​ 60,096 ​ 141,047 ​ 80,179 ​ 63,313 ​ 143,492 OEM ​ 87,269 ​ ​ 18,904 ​ 106,173 ​ 75,335 ​ 14,399 ​ 89,734 Total ​ 458,967 ​ ​ 373,588 ​ 832,555 ​ 429,927 ​ 343,075 ​ 773,002 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy Devices ​ 23,270 ​ 1,741 ​ 25,011 ​ 21,721 ​ 1,536 ​ 23,257 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 482,237 ​ $ 375,329 ​ $ 857,566 ​ $ 451,648 ​ $ 344,611 ​ $ 796,259 ​ ​ ​ ​ 12 Table of Contents 4. Acquisitions. On April 30, 2022, we acquired the Restore Endosystems Bifurcated Stent System pursuant to the terms of a unit purchase agreement we executed with the members of Restore Endosystems, LLC (“Restore Endosystems”). Pursuant to the terms and conditions of the unit purchase agreement, we paid $ 3 million in cash at closing. We also accrued $ 3.5 million of other long-term obligations, which represents the fair value of two separate $ 2 million payments which are payable no later than two and four years following the closing of the acquisition, respectively, or earlier upon the achievement of specified milestones. We impute interest on these liabilities with the passage of time. We have accounted for this transaction as an asset purchase and recorded $ 6.5 million of 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. During April 2022, we paid $ 1.4 million to acquire shares of series A preferred stock of Fluidx Medical Technology, Inc. ("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. We had previously purchased, and continue to hold, $ 4.7 million of participating preferred shares of Fluidx. Our investments have been recorded as equity investments 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. Our total current investment in Fluidx represents an ownership of approximately 17 % of its outstanding capital stock. During the three-month period ended September 30, 2022, we met the criteria requiring the final payment pursuant to our asset purchase agreement with QX Medical, LLC executed on December 15, 2011, for the acquisition of the intellectual property rights to certain support guide catheter technology. As of September 30, 2022, we recorded a liability of $ 1.0 million within accrued expenses based upon our obligation to pay the sales milestone payment in accordance with the terms of the asset purchase agreement and capitalized a developed technology intangible asset. ​ 5. Inventories. Inventories at September 30, 2022 and December 31, 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 Finished goods ​ $ 134,686 ​ $ 132,403 Work-in-process ​ 32,470 ​ 22,160 Raw materials ​ 79,504 ​ 67,359 Total inventories ​ $ 246,660 ​ $ 221,922 ​ ​ 6. Goodwill and Intangible Assets. The change in the carrying amount of goodwill for the nine-month period ended September 30, 2022 is detailed as follows (in thousands): ​ ​ ​ ​ ​ ​ 2022 Goodwill balance at January 1 ​ $ 361,741 Effect of foreign exchange ​ ( 3,685 ) Goodwill balance at September 30 ​ $ 358,056 ​ Total accumulated goodwill impairment losses aggregated $ 8.3 million as of September 30, 2022 and December 31, 2021. We did no t have any goodwill impairments for the nine-month periods ended September 30, 2022 and 2021. The total goodwill balances as of September 30, 2022 and December 31, 2021 were related to our cardiovascular segment. ​ 13 Table of Contents Other intangible assets at September 30, 2022 and December 31, 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 28,179 ​ $ ( 9,724 ) ​ $ 18,455 Distribution agreements ​ 3,250 ​ ( 2,664 ) ​ 586 License agreements ​ 11,029 ​ ( 6,967 ) ​ 4,062 Trademarks ​ 30,194 ​ ( 17,189 ) ​ 13,005 Customer lists ​ 34,481 ​ ( 31,764 ) ​ 2,717 Total ​ $ 107,133 ​ $ ( 68,308 ) ​ $ 38,825 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 and nine-month periods ended September 30, 2022 was $ 12.1 million and $ 36.3 million, respectively. Aggregate amortization expense for the three and nine-month periods ended September 30, 2021 was $ 12.4 million and $ 37.3 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 nine-month period ended September 30, 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 divestiture on April 30, 2022 of the STD Pharmaceutical Products Limited (“STD Pharmaceutical”) business acquired in our August 2019 acquisition of Fibrovein Holdings Limited. We recorded an impairment charge for the carrying value of $ 1.7 million of intangible assets during the nine months ended September 30, 2022 , all of which pertained to our cardiovascular segment. ​ During the nine-month period ended September 30, 2021, 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. During the nine-month period ended September 30, 2021, the primary indicator of impairment was our planned discontinuance of the Advocate™ Peripheral Angioplasty Balloon product line, sold under our license agreements with ArraVasc Limited (“ArraVasc”). We recorded an impairment charge for the remaining carrying value of ArraVasc intangible assets of approximately $ 1.6 million during the nine-month period ended September 30, 2021 , all of which pertained to our cardiovascular segment. ​ 14 Table of Contents Estimated amortization expense for developed technology and other intangible assets for the next five years consisted of the following as of September 30, 2022 (in thousands): ​ ​ ​ ​ ​ Year Ending December 31, Estimated Amortization Expense Remaining 2022 ​ $ 12,121 2023 ​ 47,414 2024 ​ 44,330 2025 ​ ​ 42,434 2026 ​ 31,860 ​ ​ 7. Income Taxes. Our provision for income taxes for the three-month periods ended September 30, 2022 and 2021 was a tax expense of $ 2.3 million and $ 2.2 million, respectively, which resulted in an effective tax rate of 13.2 % and 15.6 %, respectively. Our provision for income taxes for the nine-month periods ended September 30, 2022 and 2021 was a tax expense of $ 11.4 million and $ 5.9 million, respectively, which resulted in an effective tax rate of 21.6 % and 17.5 %, respectively. The increase in the income tax expense and the corresponding change in the effective income tax rate for the three and nine-month periods ended September 30, 2022, when compared to the prior-year periods, was primarily due to decreased benefit from discrete items such as share-based compensation and deferred 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). ​ On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. We currently do not anticipate the recently enacted law, including the corporate alternative minimum tax, one percent excise tax on stock repurchases, or tax incentives to promote clean energy, to have a material impact on our consolidated financial statements. ​ ​ 8. Revolving Credit Facility and Long-Term Debt. Principal balances outstanding under our long-term debt obligations as of September 30, 2022 and December 31, 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 Term loans ​ $ 127,500 ​ $ 133,125 Revolving credit loans ​ 89,368 ​ 110,000 Less unamortized debt issuance costs ​ ( 206 ) ​ ( 290 ) Total long-term debt ​ 216,662 ​ 242,835 Less current portion ​ 11,250 ​ 8,438 Long-term portion ​ $ 205,412 ​ $ 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 amended and restated 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 of 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 15 Table of Contents 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 September 30, 2022. As of September 30, 2022, we had outstanding borrowings of $ 216.9 million and issued letter of credit guarantees of $ 1.9 million under the Third Amended Credit Agreement, with additional available borrowings of approximately $ 509 million, based on the maximum net leverage ratio and the aggregate revolving credit commitment pursuant to the Third Amended Credit Agreement. Our interest rate as of September 30, 2022 was a fixed rate of 2.71 % with respect to $ 75 million of the principal amount, as a result of an interest rate swap (see Note 9), and a variable floating rate of 4.12 % with respect to $ 141.9 million of the principal amount. 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 September 30, 2022, were as follows (in thousands): ​ ​ ​ ​ Years Ending ​ Future Minimum December 31, Principal Payments Remaining 2022 $ 2,812 2023 ​ ​ 11,250 2024 ​ ​ 202,806 Total future minimum principal payments ​ $ 216,868 ​ ​ 9. 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. 16 Table of Contents ​ 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 on that portion of our borrowings under the Third Amended Credit Agreement 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 September 30, 2022 and December 31, 2021, our interest rate swap qualified as a cash flow hedge. The fair value of our interest rate swap on September 30, 2022 was an asset of $ 3.4 million, which was partially offset by ($ 0.8 ) 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. 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 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 September 30, 2022 and December 31, 2021, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 72.8 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 17 Table of Contents fair value hedges every month. As of September 30, 2022 and December 31, 2021, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 79.3 million and $ 86.0 million, respectively. Balance Sheet Presentation of Derivative Instruments. As of September 30, 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. 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 September 30, 2022 December 31, 2021 Assets ​ ​ Interest rate swaps Other assets (long-term) ​ $ 3,439 ​ $ — Foreign currency forward contracts Prepaid expenses and other assets ​ ​ 5,969 ​ ​ 1,326 Foreign currency forward contracts Other assets (long-term) ​ ​ 695 ​ 179 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Interest rate swaps ​ Other long-term obligations ​ ​ — ​ ​ ( 1,447 ) Foreign currency forward contracts Accrued expenses ​ ( 1,324 ) ​ ( 2,288 ) Foreign currency forward contracts Other long-term obligations ​ ( 35 ) ​ ( 502 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Not Designated as Hedging Instruments Balance Sheet Location September 30, 2022 December 31, 2021 Assets ​ ​ Foreign currency forward contracts Prepaid expenses and other assets ​ $ 3,206 ​ $ 736 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 1,474 ) ​ ( 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 September 30, ​ Three Months Ended September 30, ​ Three Months Ended September 30, Derivative instrument 2022 2021 Location in statements of income 2022 2021 2022 2021 Interest rate swaps ​ $ 1,504 ​ $ ( 18 ) ​ Interest expense ​ $ ( 1,831 ) ​ $ ( 1,233 ) ​ $ 94 ​ $ ( 319 ) Foreign currency forward contracts ​ 3,491 ​ 33 ​ Revenue ​ 287,175 ​ 267,021 ​ 1,491 ​ ( 1,500 ) ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ( 158,602 ) ​ ( 146,527 ) ​ ( 440 ) ​ 312 ​ ​ 18 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of Gain/(Loss) ​ ​ Consolidated Statements ​ Amount of Gain/(Loss) ​ ​ Recognized in OCI ​ ​ of Income ​ Reclassified from AOCI ​ ​ Nine Months Ended September 30, ​ ​ Nine Months Ended September 30, ​ Nine Months Ended September 30, Derivative instrument 2022 2021 Location in statements of income 2022 ​ 2021 2022 2021 Interest rate swaps ​ $ 4,507 ​ $ 619 ​ Interest expense ​ $ ( 4,180 ) ​ $ ( 4,156 ) ​ $ ( 379 ) ​ $ ( 1,198 ) Foreign currency forward contracts ​ 8,713 ​ ( 83 ) ​ Revenue ​ 857,566 ​ 796,259 ​ 1,303 ​ ( 4,674 ) ​ ​ ​ ​ Cost of sales ​ ( 473,019 ) ​ ( 439,732 ) ​ ( 886 ) ​ 966 ​ As of September 30, 2022, $ 5.5 million, or $ 4.2 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months. As of September 30, 2022, $ 1.9 million, or $ 1.5 million after taxes, was expected to be reclassified from AOCI 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 for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, Nine Months Ended September 30, Derivative Instrument Location in statements of income 2022 2021 2022 2021 Foreign currency forward contracts Other income (expense) — net ​ $ 1,034 ​ $ 39 ​ $ 1,212 ​ $ ( 709 ) ​ ​ 10. 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, audits or proceedings, 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 amounts 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. ​ 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. The parties have negotiated a tentative agreement to settle the dispute; however, that agreement is not final and remains subject to court approval. As currently proposed, the settlement would result in an expense to Merit of $ 1.0 million. The estimated expense associated with the tentative settlement has been reflected in our financial results reported for the nine-month period ended September 30, 2022. On October 18, 2022, the court entered an order preliminarily approving the settlement and providing for notice to the Company’s shareholders, subject to further consideration at a settlement hearing scheduled for February 16, 2023. ​ SEC Inquiry 19 Table of Contents ​ We received a request from the Division of Enforcement of the U.S, Securities and Exchange Commission (“SEC”) seeking the voluntary production of information relating to the business activities of Merit’s subsidiary in China, including interactions with hospitals and health care officials in China. We are cooperating with this request and investigating the matter and, at this time, are unable to predict the scope, timing, significance or outcome of this matter. ​ Legal costs for proceedings, legal actions and claims discussed above, such as outside counsel fees and expenses, are charged to expense in the period(s) incurred. ​ ​ 11. Earnings Per Common Share (EPS). The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three and nine-month periods ended September 30, 2022 and 2021 consisted of the following (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 Net income ​ $ 15,272 ​ $ 11,967 ​ $ 41,115 ​ $ 27,841 Average common shares outstanding ​ 56,835 ​ 56,302 ​ 56,707 ​ 56,033 Basic EPS ​ $ 0.27 ​ $ 0.21 ​ $ 0.73 ​ $ 0.50 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average common shares outstanding ​ ​ 56,835 ​ ​ 56,302 ​ ​ 56,707 ​ ​ 56,033 Effect of dilutive stock awards ​ ​ 751 ​ ​ 1,247 ​ ​ 866 ​ ​ 1,241 Total potential shares outstanding ​ ​ 57,586 ​ ​ 57,549 ​ ​ 57,573 ​ ​ 57,274 Diluted EPS ​ $ 0.27 ​ $ 0.21 ​ $ 0.71 ​ $ 0.49 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity awards excluded as the impact was anti-dilutive (1) ​ ​ 1,641 ​ ​ 419 ​ ​ 1,612 ​ ​ 815 (1) Does not reflect the impact of incremental repurchases under the treasury stock method. ​ ​ 12. Stock-Based Compensation Expense. Stock-based compensation expense before income tax expense for the three and nine-month periods ended September 30, 2022 and 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Cost of sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ $ 150 ​ $ 383 ​ $ 1,247 ​ $ 1,019 Research and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 476 ​ 355 ​ ​ 1,412 ​ 910 Selling, general and administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 2,166 ​ 2,071 ​ ​ 5,297 ​ 4,512 Performance-based restricted stock units ​ ​ 647 ​ ​ 1,193 ​ ​ 2,719 ​ ​ 2,896 Restricted stock units ​ ​ 454 ​ ​ 409 ​ ​ 1,382 ​ ​ 1,149 Cash-settled performance-based share-based awards ("Liability Awards") ​ ​ 705 ​ ​ 446 ​ ​ 1,634 ​ ​ 1,103 Total selling, general and administrative ​ ​ 3,972 ​ ​ 4,119 ​ ​ 11,032 ​ ​ 9,660 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense before taxes ​ $ 4,598 ​ $ 4,857 ​ $ 13,691 ​ $ 11,589 ​ 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. 20 Table of Contents ​ Nonqualified Stock Options During the nine-month periods ended September 30, 2022 and 2021, we granted stock options representing 203,606 and 656,350 shares of our common stock, respectively. We use the Black-Scholes methodology to value the stock-based 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: ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ ​ 2022 ​ 2021 Risk-free interest rate 1.4 % - 3.4 % 0.5 % - 0.7 % Expected option term 4.0 years 4.0 years Expected dividend yield — — Expected price volatility 46.2 % - 47.4 % 46.3 % - 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 September 30, 2022, the total remaining unrecognized compensation cost related to non-vested stock options was $ 22.0 million, which was expected to be recognized over a weighted average period of 2.3 years. ​ Stock-Settled Performance-Based Restricted Stock Units (“Performance Stock Units”) ​ During the nine-month periods ended September 30, 2022 and 2021, we granted performance stock units to certain of our executive officers which represent up to 120,710 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: ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ ​ 2022 ​ 2021 Risk-free interest rate 1.6 % - 2.7 % 0.1 % - 0.3 % Performance period 2.6 - 2.8 years 1.8 - 2.8 years Expected dividend yield — — Expected price volatility 38.5 % - 46.2 % 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 the weighted average volatility of our stock price and the average volatility of our compensation peer group's stock price. 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 21 Table of Contents September 30, 2022, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 6.5 million, which is expected to be recognized over a weighted average period of 1.7 years. Liability Awards During the nine-month periods ended September 30, 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 September 30, 2022, the total remaining unrecognized compensation cost related to cash-settled performance-based share-based awards was $ 2.7 million, which is expected to be recognized over a weighted average period of 1.9 years. Restricted Stock Units During the nine-month periods ended September 30, 2022 and 2021, we granted restricted stock units to our non-employee directors representing 30,500 and 26,226 shares of our common stock, respectively. 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 September 30, 2022, the total remaining unrecognized compensation cost related to restricted stock units was $ 1.2 million, which will be recognized over the remaining vesting period. ​ ​ 13. 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 income from operations. 22 Table of Contents Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and nine-month periods ended September 30, 2022 and 2021, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ September 30, September 30, ​ 2022 2021 2022 2021 Net sales ​ ​ ​ ​ Cardiovascular ​ $ 278,949 ​ $ 259,704 ​ $ 832,555 ​ $ 773,002 Endoscopy ​ 8,226 ​ 7,317 ​ 25,011 ​ 23,257 Total net sales ​ 287,175 ​ 267,021 ​ 857,566 ​ 796,259 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ ​ ​ ​ Cardiovascular ​ 17,435 ​ 14,411 ​ 51,836 ​ 33,389 Endoscopy ​ 1,222 ​ 1,520 ​ 5,310 ​ 5,631 Total income from operations ​ 18,657 ​ 15,931 ​ 57,146 ​ 39,020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other expense — net ​ ( 1,055 ) ​ ( 1,754 ) ​ ( 4,672 ) ​ ( 5,284 ) Income tax expense ​ 2,330 ​ 2,210 ​ 11,359 ​ 5,895 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 15,272 ​ $ 11,967 ​ $ 41,115 ​ $ 27,841 ​ ​ 14. 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 September 30, 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 ​ September 30, 2022 (Level 1) (Level 2) (Level 3) Interest rate contract asset, long-term (1) ​ $ 3,439 ​ $ — ​ $ 3,439 ​ $ — Foreign currency contract assets, current and long-term (2) ​ $ 9,870 ​ $ — ​ $ 9,870 ​ $ — Foreign currency contract liabilities, current and long-term (3) ​ $ ( 2,833 ) ​ $ — ​ $ ( 2,833 ) ​ $ — Contingent consideration liabilities ​ $ ( 18,250 ) ​ $ — ​ $ — ​ $ ( 18,250 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. 23 Table of Contents (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 and nine-month periods ended September 30, 2022 and 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ September 30, September 30, ​ 2022 2021 2022 2021 Beginning balance ​ $ 17,426 ​ $ 57,477 ​ $ 48,234 ​ $ 55,750 Contingent consideration expense ​ 915 ​ 1,115 ​ 4,702 ​ 3,322 Contingent payments made ​ ( 91 ) ​ ( 10,090 ) ​ ( 34,676 ) ​ ( 10,579 ) Effect of foreign exchange ​ ​ — ​ ​ ( 19 ) ​ ​ ( 10 ) ​ ​ ( 10 ) Ending balance ​ $ 18,250 ​ $ 48,483 ​ $ 18,250 ​ $ 48,483 ​ As of September 30, 2022, $ 5.5 million in contingent consideration liability was included in other long-term obligations and $ 12.8 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. Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 32.9 million and $ 10.6 million for the nine-month periods ended September 30, 2022 and 2021, respectively, have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $ 1.8 million for the nine-month period ended September 30, 2022 are reflected as operating cash flows. The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at September 30, 2022 and December 31, 2021 (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2022 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 2,322 Discounted cash flow Discount rate ​ 14 % - 17 % ​ 15.9 % ​ ​ ​ Projected year of payments ​ 2022-2034 ​ 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 12,551 Monte Carlo simulation Discount rate ​ 7.5 % - 14 % ​ 7.6 % ​ ​ ​ Projected year of payments ​ 2022-2032 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 3,377 ​ Scenario-based method ​ Discount rate ​ 5.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 80 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2024-2025 ​ 2025 ​ ​ 24 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ ​ 25 Table of Contents 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. Contingent Payments to Related Parties During the nine-month period ended September 30, 2022, we made contingent payments of $ 1.6 million to a former director of Merit and former shareholder of Cianna Medical, Inc. (“Cianna Medical”), which we acquired in 2018. We made no such payments during the nine-month period ended September 30, 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 former 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. Intangible Assets. On April 30, 2022, we completed the divestiture of Fibrovein Holdings Limited, which was the owner of all of the capital stock of STD Pharmaceutical Products 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. During the nine-month period ended September 30, 2022 , we had impairment losses related to acquired intangible assets of $ 1.7 million (see note 6) in connection with this disposition. In addition to the intangible asset impairment, during the three-month period ended June 30, 2022, we recorded a loss within other income (expense) – net of $ 1.3 million primarily associated with the transfer of net assets of the divested entity including approximately $ 1.0 million of cash and $ 1.2 million of inventory, partially offset by a gain of $ 1.0 million from reclassification of foreign currency translation gains. During the nine-month period ended September 30, 2021 we had losses related to acquired intangible assets of $ 1.6 million (see note 6). Right of Use Operating Lease Assets. During the nine-month period ended September 30, 2021, we identified changes in events and circumstances relating to certain right-of-use (“ROU”) operating lease assets. We compared the anticipated 26 Table of Contents 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. Consequently, we recorded impairment losses in the nine-month period ended September 30, 2021 of approximately $ 1.4 million, which is equal to the excess of the carrying value of the assets over their estimated fair value. The impairment losses were driven primarily by site consolidation decisions and changes in our projected cash flows for the ROU operating lease assets and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic. These changes included an increase in the anticipated time to identify lessees, an increase in anticipated lease concessions, and a decrease in the expected lease rates for the properties. The ROU operating lease asset impairment losses in 2021 pertained to our cardiovascular segment. We had no such losses during the three and nine-month periods ended September 30, 2022. ​ Property and Equipment. During the three and nine-month periods ended September 30, 2021, we had losses of $ 1.3 million related to the measurement of property and equipment at fair value based on the discontinuance of the Advocate™ Peripheral Angioplasty Balloon product line, sold under our license agreements with ArraVasc, which pertained to our cardiovascular segment. Notes Receivable Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 2.4 million and $ 2.3 million as of September 30, 2022, and December 31, 2021, respectively. As of September 30, 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 below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the three and nine-month periods ended September 30, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2022 2021 ​ 2022 2021 Beginning balance ​ $ 192 ​ $ 1,107 ​ $ 199 ​ $ 730 Provision for credit loss expense ​ ​ ( 6 ) ​ ​ 113 ​ ​ ( 13 ) ​ ​ 490 Ending balance ​ $ 186 ​ $ 1,220 ​ $ 186 ​ $ 1,220 ​ ​ 27 Table of Contents 15. Accumulated Other Comprehensive Income (Loss). The changes in each component of accumulated other comprehensive income (loss) for the three and nine-month periods ended September 30, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of June 30, 2022 $ 4,584 ​ $ ( 15,303 ) ​ $ ( 10,719 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 4,995 ​ ​ ( 9,003 ) ​ ​ ( 4,008 ) Income taxes ( 942 ) ​ ​ 85 ​ ​ ( 857 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 1,491 ) ​ ​ ​ ​ ​ ( 1,491 ) Cost of sales ​ 440 ​ ​ ​ ​ ​ 440 Interest expense ​ ( 94 ) ​ ​ ​ ​ ​ ( 94 ) Net other comprehensive income (loss) ​ 2,908 ​ ​ ( 8,918 ) ​ ​ ( 6,010 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2022 $ 7,492 ​ $ ( 24,221 ) ​ $ ( 16,729 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of June 30, 2021 $ ( 3,992 ) ​ $ ( 842 ) ​ $ ( 4,834 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 15 ​ ​ ( 2,873 ) ​ ​ ( 2,858 ) Income taxes ( 377 ) ​ ​ 346 ​ ​ ( 31 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ 1,500 ​ ​ ​ ​ ​ 1,500 Cost of sales ​ ( 312 ) ​ ​ ​ ​ ​ ( 312 ) Interest expense ​ 319 ​ ​ ​ ​ ​ 319 Net other comprehensive income (loss) ​ 1,145 ​ ​ ( 2,527 ) ​ ​ ( 1,382 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2021 $ ( 2,847 ) ​ $ ( 3,369 ) ​ $ ( 6,216 ) ​ ​ 28 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of December 31, 2021 $ ( 2,464 ) ​ $ ( 5,527 ) ​ $ ( 7,991 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 13,220 ​ ​ ( 17,739 ) ​ ​ ( 4,519 ) Income taxes ( 3,226 ) ​ ​ 81 ​ ​ ( 3,145 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 1,303 ) ​ ​ ​ ​ ​ ( 1,303 ) Cost of sales ​ 886 ​ ​ ​ ​ ​ 886 Interest expense ​ 379 ​ ​ ​ ​ ​ 379 Other expense — net ​ ​ ​ ​ ( 1,036 ) ​ ​ ( 1,036 ) Net other comprehensive income (loss) ​ 9,956 ​ ​ ( 18,694 ) ​ ​ ( 8,738 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2022 $ 7,492 ​ $ ( 24,221 ) ​ $ ( 16,729 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of December 31, 2020 $ ( 6,940 ) ​ $ 1,488 ​ $ ( 5,452 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 536 ​ ​ ( 5,535 ) ​ ​ ( 4,999 ) Income taxes ( 1,349 ) ​ ​ 678 ​ ​ ( 671 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ 4,674 ​ ​ ​ ​ ​ 4,674 Cost of sales ​ ( 966 ) ​ ​ ​ ​ ​ ( 966 ) Interest expense ​ 1,198 ​ ​ ​ ​ ​ 1,198 Net other comprehensive income (loss) ​ 4,093 ​ ​ ( 4,857 ) ​ ​ ( 764 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2021 $ ( 2,847 ) ​ $ ( 3,369 ) ​ $ ( 6,216 ) ​ ​ ​ 16. Subsequent Events. On October 3, 2022, we entered into an asset purchase agreement to acquire substantially all the assets of BioTrace Medical, Inc. (“BioTrace”), developer of the Tempo® Temporary Pacing Lead device. Subject to the terms and conditions of the asset purchase agreement, we paid $ 2.5 million in cash at closing. Additionally, upon achievement of the first device sold in the United States, we are obligated to pay a total of six annual royalty payments at an amount of up to 10 % of net sales. We intend to account for this transaction as an asset purchase and will capitalize the acquired assets, including developed technology, in our consolidated balance sheet. ​ ​ ​ 29 Table of Contents