MERIT MEDICAL SYSTEMS INC 10-K

Item 8. Financial Statements and Supplementary Data. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Merit Medical Systems, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Merit Medical Systems, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 51 Table of Contents Inventories - Provision for estimated excess, slow moving and obsolete inventories – Refer to Note 1 to the financial statements Critical Audit Matter Description Inventories are valued at the lower of cost, at approximate costs determined on a first-in, first-out method, or net realizable value. The Company reviews inventories on hand and records provisions based on estimated excess, slow moving and obsolete inventories. The inventories valuation reviews include an assessment of future product demand based on historical sales and raw material usage and product expiration. As of December 31, 2022, the Company’s inventories were $266.0 million. During the year ended December 31, 2022, the Company recorded obsolescence expense of approximately $9.8 million. ​ We identified the provision for estimated excess, slow moving and obsolete inventories as a critical audit matter because of management’s significant judgment and estimates in determining the provision for estimated excess, slow moving and obsolete inventories primarily around future product demand based on historical sales. This required a high degree of auditor judgment and an increased extent of effort . How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s estimates of the valuation of excess and obsolete inventories included the following, among others: ● We tested the effectiveness of controls over the provision for estimated excess, slow moving and obsolete inventories. ● We evaluated management’s ability to accurately estimate the provision for estimated excess, slow moving and obsolete inventories by comparing actual write-downs of inventories to management’s historical estimates. ● We evaluated the reasonableness of the Company's provision for estimated excess, slow moving and obsolete inventories, considering future product demand based on historical sales and raw material usage and product expiration and the underlying assumptions. ● We tested the accuracy and completeness of the underlying data used in the Company’s calculations of the valuation of excess and obsolete inventories, including historical usage, quantities on hand, expiration dates, and pricing. ● We assessed the reasonableness of the assumptions used in the calculations of the provision for estimated excess, slow moving and obsolete inventories by developing an independent expectation and comparing our independent expectation to the results of the Company’s calculations. ● We tested the mathematical accuracy of the Company’s calculations of excess, slow moving and obsolete inventories. ​ /s/ DELOITTE & TOUCHE LLP ​ ​ ​ Salt Lake City, Utah ​ February 24, 2023 ​ We have served as the Company’s auditor since 1988. ​ ​ ​ 52 Table of Contents ​ MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ASSETS 2022 2021 ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 58,408 ​ $ 67,750 Trade receivables — net of allowance for credit losses — 2022 — $ 8,423 and 2021 — $ 6,767 ​ 164,677 ​ 152,301 Other receivables ​ 12,992 ​ 17,763 Inventories ​ 265,991 ​ 221,922 Prepaid expenses and other current assets ​ 22,324 ​ 16,149 Prepaid income taxes ​ 3,913 ​ 3,550 Income tax refund receivables ​ 779 ​ 2,777 Total current assets ​ 529,084 ​ 482,212 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ Land and land improvements ​ 25,940 ​ 25,287 Buildings ​ 189,148 ​ 190,044 Manufacturing equipment ​ 299,089 ​ 277,976 Furniture and fixtures ​ 61,128 ​ 61,446 Leasehold improvements ​ 49,673 ​ 46,341 Construction-in-progress ​ 61,269 ​ 51,182 Total property and equipment ​ 686,247 ​ 652,276 Less accumulated depreciation ​ ( 303,271 ) ​ ( 280,618 ) Property and equipment — net ​ 382,976 ​ ​ 371,658 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ Intangible assets: ​ ​ Developed technology — net of accumulated amortization — 2022 — $ 274,570 and 2021 — $ 234,016 ​ 237,522 ​ 276,833 Other — net of accumulated amortization — 2022 — $ 69,780 and 2021 — $ 65,053 ​ 38,350 ​ 42,436 Goodwill ​ 359,821 ​ 361,741 Deferred income tax assets ​ 6,599 ​ 6,080 Right-of-use operating lease assets ​ ​ 65,262 ​ ​ 65,913 Other assets ​ 44,352 ​ 41,421 Total other assets ​ 751,906 ​ 794,424 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,663,966 ​ $ 1,648,294 ​ See notes to consolidated financial statements. (continued) ​ ​ 53 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, LIABILITIES AND STOCKHOLDERS’ EQUITY 2022 2021 ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ Trade payables ​ $ 68,504 ​ $ 55,624 Accrued expenses ​ 123,189 ​ 159,014 Current portion of long-term debt ​ 11,250 ​ 8,438 Short-term operating lease liabilities ​ ​ 11,005 ​ ​ 10,668 Income taxes payable ​ 6,697 ​ 2,536 Total current liabilities ​ 220,645 ​ 236,280 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 186,759 ​ 234,397 Deferred income tax liabilities ​ 18,462 ​ 31,503 Long-term income taxes payable ​ 347 ​ 347 Liabilities related to unrecognized tax benefits ​ 1,912 ​ 932 Deferred compensation payable ​ 15,264 ​ 18,111 Deferred credits ​ 1,708 ​ 1,815 Long-term operating lease liabilities ​ ​ 59,736 ​ 61,526 Other long-term obligations ​ 14,736 ​ 23,584 Total liabilities ​ 519,569 ​ 608,495 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Preferred stock — 5,000 shares authorized as of December 31, 2022 and December 31, 2021; no shares issued ​ — ​ — Common stock, no par value; 100,000 shares authorized; issued and outstanding as of December 31, 2022 - 57,306 and December 31, 2021 - 56,570 ​ 675,174 ​ 641,533 Retained earnings ​ 480,773 ​ 406,257 Accumulated other comprehensive loss ​ ( 11,550 ) ​ ( 7,991 ) Total stockholders’ equity ​ 1,144,397 ​ 1,039,799 ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 1,663,966 ​ $ 1,648,294 ​ ​ ​ See notes to consolidated financial statements. (concluded) ​ ​ ​ 54 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Net sales ​ $ 1,150,981 ​ $ 1,074,751 ​ $ 963,875 Cost of sales ​ 631,882 ​ 589,418 ​ 562,698 Gross profit ​ 519,099 ​ 485,333 ​ 401,177 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ Selling, general and administrative ​ 342,525 ​ 335,690 ​ 297,724 Research and development ​ 75,510 ​ 71,247 ​ 57,537 Legal settlement ​ ​ — ​ ​ 10,036 ​ ​ 18,684 Impairment charges ​ 2,219 ​ 4,283 ​ 36,504 Contingent consideration expense (benefit) ​ 4,611 ​ 3,161 ​ ( 7,960 ) Acquired in-process research and development ​ 6,671 ​ — ​ 250 Total operating expenses ​ 431,536 ​ 424,417 ​ 402,739 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ 87,563 ​ 60,916 ​ ( 1,562 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ Interest income ​ 439 ​ 769 ​ 604 Interest expense ​ ( 6,339 ) ​ ( 5,261 ) ​ ( 9,994 ) Other income (expense) — net ​ 966 ​ ( 2,507 ) ​ ( 2,279 ) Total other expense — net ​ ( 4,934 ) ​ ( 6,999 ) ​ ( 11,669 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) before income taxes ​ 82,629 ​ 53,917 ​ ( 13,231 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense (benefit) ​ 8,113 ​ 5,463 ​ ( 3,388 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 74,516 ​ $ 48,454 ​ $ ( 9,843 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per common share ​ ​ ​ Basic ​ $ 1.31 ​ $ 0.86 ​ $ ( 0.18 ) Diluted ​ $ 1.29 ​ $ 0.84 ​ $ ( 0.18 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ ​ Basic ​ 56,806 ​ 56,145 ​ 55,434 Diluted ​ 57,671 ​ 57,359 ​ 55,434 ​ See notes to consolidated financial statements. ​ ​ 55 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Net income (loss) ​ $ 74,516 ​ $ 48,454 ​ $ ( 9,843 ) Other comprehensive income (loss): ​ ​ ​ Cash flow hedges ​ 9,007 ​ 5,965 ​ ( 9,523 ) Income tax benefit (expense) ​ ( 2,177 ) ​ ( 1,489 ) ​ 2,365 Foreign currency translation adjustment ​ ( 10,491 ) ​ ( 7,704 ) ​ 7,786 Income tax benefit (expense) ​ 102 ​ 689 ​ ( 786 ) Total other comprehensive loss ​ ( 3,559 ) ​ ( 2,539 ) ​ ( 158 ) Total comprehensive income (loss) ​ $ 70,957 ​ $ 45,915 ​ $ ( 10,001 ) ​ See notes to consolidated financial statements. ​ ​ 56 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Accumulated Other ​ ​ ​ ​ Shares Amount Earnings Comprehensive Income (Loss) Total BALANCE — January 1, 2020 55,213 ​ $ 587,017 ​ $ 368,221 ​ $ ( 5,294 ) ​ $ 949,944 Net loss ​ ​ ( 9,843 ) ​ ​ ( 9,843 ) Cumulative effect adjustment upon adoption of ASU 2016-13, Credit Losses ​ ​ ​ ​ ​ ​ ​ ( 575 ) ​ ​ ​ ​ ​ ( 575 ) Other comprehensive loss ​ ​ ​ ( 158 ) ​ ( 158 ) Stock-based compensation expense ​ 13,433 ​ ​ ​ 13,433 Options exercised 442 ​ 6,948 ​ ​ ​ 6,948 Issuance of common stock under Employee Stock Purchase Plans 30 ​ 1,159 ​ ​ ​ 1,159 Shares surrendered in exchange for payment of payroll tax liabilities ​ ( 23 ) ​ ​ ( 866 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 866 ) Shares surrendered in exchange for exercise of stock options ​ ( 39 ) ​ ​ ( 1,467 ) ​ ​ ​ ( 1,467 ) BALANCE — December 31, 2020 55,623 ​ 606,224 ​ 357,803 ​ ( 5,452 ) ​ 958,575 Net income ​ ​ 48,454 ​ ​ 48,454 Other comprehensive loss ​ ​ ​ ( 2,539 ) ​ ( 2,539 ) Stock-based compensation expense ​ 14,579 ​ ​ ​ 14,579 Options exercised 883 ​ 20,374 ​ ​ ​ 20,374 Issuance of common stock under Employee Stock Purchase Plans 18 ​ 1,112 ​ ​ ​ 1,112 Shares issued from time-vested restricted stock units ​ 59 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Shares surrendered in exchange for payment of payroll tax liabilities ( 10 ) ​ ( 576 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 576 ) Shares surrendered in exchange for exercise of stock options ( 3 ) ​ ( 180 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 180 ) BALANCE — December 31, 2021 56,570 ​ 641,533 ​ 406,257 ​ ( 7,991 ) ​ 1,039,799 Net income ​ ​ ​ ​ ​ ​ ​ 74,516 ​ ​ ​ ​ 74,516 Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 3,559 ) ​ ( 3,559 ) Stock-based compensation expense ​ ​ ​ ​ 16,045 ​ ​ ​ ​ ​ ​ ​ 16,045 Options exercised ​ 703 ​ ​ 20,092 ​ ​ ​ ​ ​ ​ ​ 20,092 Issuance of common stock under Employee Stock Purchase Plans ​ 19 ​ ​ 1,118 ​ ​ ​ ​ ​ ​ ​ 1,118 Shares issued from time-vested restricted stock units ​ 70 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Shares surrendered in exchange for payment of payroll tax liabilities ​ ( 38 ) ​ ​ ( 2,474 ) ​ ​ ​ ​ ​ ​ ​ ( 2,474 ) Shares surrendered in exchange for exercise of stock options ​ ( 18 ) ​ ​ ( 1,140 ) ​ ​ ​ ​ ​ ​ ​ ( 1,140 ) BALANCE — December 31, 2022 57,306 ​ $ 675,174 ​ $ 480,773 ​ $ ( 11,550 ) ​ $ 1,144,397 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See notes to consolidated financial statements. ​ 57 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ 2020 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ Net income (loss) ​ $ 74,516 ​ $ 48,454 ​ $ ( 9,843 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: ​ ​ ​ Depreciation and amortization ​ 81,804 ​ 84,066 ​ 94,070 Loss (gain) on disposition of business ​ 1,417 ​ — ​ ( 517 ) Loss on sale or abandonment of property and equipment ​ 380 ​ 1,303 ​ 2,159 Write-off of certain intangible assets and other long-term assets ​ 2,281 ​ 4,412 ​ 36,609 Acquired in-process research and development ​ 6,671 ​ — ​ 250 Amortization of right-of-use operating lease assets ​ ​ 10,394 ​ ​ 11,718 ​ ​ 12,746 Adjustments related to contingent consideration liabilities ​ ​ 4,611 ​ ​ 3,161 ​ ​ ( 7,960 ) Amortization of deferred credits ​ ( 107 ) ​ ( 108 ) ​ ( 130 ) Amortization of long-term debt issuance costs ​ 604 ​ 604 ​ 604 Deferred income taxes ​ ( 14,924 ) ​ ( 4,631 ) ​ ( 11,295 ) Stock-based compensation expense ​ 18,042 ​ 16,090 ​ 14,339 Changes in operating assets and liabilities, net of acquisitions and divestitures: ​ ​ ​ ​ ​ Trade receivables ​ ( 15,116 ) ​ ( 8,618 ) ​ 10,425 Other receivables ​ 4,154 ​ ( 10,418 ) ​ 1,668 Inventories ​ ( 47,929 ) ​ ( 25,183 ) ​ 29,429 Prepaid expenses and other current assets ​ ( 1,798 ) ​ ( 3,555 ) ​ ( 446 ) Prepaid income taxes ​ ( 379 ) ​ 125 ​ ( 162 ) Income tax refund receivables ​ 1,952 ​ 739 ​ ( 339 ) Other assets ​ 657 ​ ( 1,670 ) ​ ( 3,511 ) Trade payables ​ 12,661 ​ 6,050 ​ 333 Accrued expenses ​ ( 16,379 ) ​ 36,462 ​ 4,603 Income taxes payable ​ 4,521 ​ ( 119 ) ​ ( 86 ) Liabilities related to unrecognized tax benefits ​ ( 45 ) ​ 314 ​ ( 576 ) Deferred compensation payable ​ ( 2,848 ) ​ 1,303 ​ 1,953 Operating lease liabilities ​ ​ ( 11,127 ) ​ ​ ( 12,410 ) ​ ​ ( 12,659 ) Other long-term obligations ​ 278 ​ ( 858 ) ​ 3,606 Total adjustments ​ 39,775 ​ 98,777 ​ 175,113 Net cash, cash equivalents, and restricted cash provided by operating activities ​ 114,291 ​ 147,231 ​ 165,270 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Capital expenditures for: ​ ​ ​ Property and equipment ​ ( 45,029 ) ​ ( 27,939 ) ​ ( 45,988 ) Intangible assets ​ ( 3,175 ) ​ ( 2,834 ) ​ ( 3,288 ) Proceeds from the sale of property and equipment ​ 65 ​ 1,037 ​ 42 Proceeds (payments) from disposition of business ​ ​ ( 971 ) ​ ​ — ​ ​ 1,285 Cash received for settlement of note receivable ​ ​ — ​ ​ 2,000 ​ ​ 250 Issuance of note receivable ​ — ​ ( 2,254 ) ​ — Cash paid in acquisitions, net of cash acquired ​ ( 8,287 ) ​ ( 7,171 ) ​ ( 10,953 ) Net cash, cash equivalents, and restricted cash used in investing activities ​ $ ( 57,397 ) ​ $ ( 37,161 ) ​ $ ( 58,652 ) ​ ​ ​ See notes to consolidated financial statements. (continued) ​ ​ 58 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ Proceeds from issuance of common stock ​ $ 20,070 ​ $ 21,306 ​ $ 6,635 Proceeds from issuance of long-term debt ​ 215,205 ​ 98,421 ​ 68,625 Payments on long-term debt ​ ​ ( 260,143 ) ​ ​ ( 206,921 ) ​ ​ ( 157,000 ) Contingent payments related to acquisitions ​ ( 32,918 ) ​ ( 10,665 ) ​ ( 13,100 ) Payment of taxes related to an exchange of common stock ​ ( 2,474 ) ​ ( 576 ) ​ ( 866 ) Net cash, cash equivalents, and restricted cash used in financing activities ​ ( 60,260 ) ​ ( 98,435 ) ​ ( 95,706 ) Effect of exchange rates on cash, cash equivalents, and restricted cash ​ ( 3,826 ) ​ ( 801 ) ​ 1,684 Net increase (decrease) in cash, cash equivalents and restricted cash ​ ( 7,192 ) ​ 10,834 ​ 12,596 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH, CASH EQUIVALENTS AND RESTRICTED CASH: ​ ​ ​ Beginning of period ​ ​ 67,750 ​ ​ 56,916 ​ ​ 44,320 End of period ​ $ 60,558 ​ $ 67,750 ​ $ 56,916 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ 58,408 ​ ​ 67,750 ​ ​ 56,916 Restricted cash reported in prepaid expenses and other current assets ​ ​ 2,150 ​ ​ — ​ ​ — Total cash, cash equivalents and restricted cash ​ $ 60,558 ​ $ 67,750 ​ $ 56,916 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ​ ​ ​ Cash paid during the period for: ​ ​ ​ Interest (net of capitalized interest of $ 858 , $ 480 and $ 813 , respectively) ​ $ 6,258 ​ $ 5,261 ​ $ 10,077 Income taxes ​ ​ 17,092 ​ ​ 8,828 ​ ​ 8,918 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES ​ ​ ​ Property and equipment purchases in accounts payable ​ $ 3,702 ​ $ 2,558 ​ $ 2,180 Current note receivable converted to equity investment ​ ​ — ​ ​ — ​ ​ 899 Proceeds from sale of business in other receivables ​ ​ — ​ ​ — ​ ​ 321 Acquisition purchases in accrued expenses and other long-term obligations ​ ​ 3,526 ​ ​ — ​ ​ 4,358 Merit common stock surrendered ( 18 , 3 , and 39 shares, respectively) in exchange for exercise of stock options ​ ​ 1,140 ​ ​ 180 ​ ​ 1,467 Right-of-use operating lease assets obtained in exchange for operating lease liabilities ​ ​ 11,130 ​ ​ 1,524 ​ ​ 10,938 ​ See notes to consolidated financial statements. (concluded) ​ ​ ​ ​ ​ 59 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization . Merit Medical Systems, Inc. (“Merit,” “we,” or “us”) designs, develops, manufactures and markets single-use 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 cardiology and radiology medical device products which assist in diagnosing and treating coronary artery disease, peripheral vascular disease and other non-vascular diseases and includes embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, 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. Within those two operating segments, we offer products focused in five product categories: peripheral intervention, cardiac intervention, custom procedural solutions, original equipment manufacturer (“ OEM”) and endoscopy. We manufacture our products in plants located in the U.S., Mexico, The Netherlands, Ireland, France, Brazil and Singapore. We export sales to dealers and have direct or modified direct sales forces in the U.S., Canada, Western Europe, Australia, Brazil, Japan, China, Malaysia, South Korea, UAE, India, New Zealand and South Africa (see Note 13). Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The following is a summary of the more significant of such policies. Use of Estimates in Preparing Financial Statements . The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation . The consolidated financial statements include our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated. Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts. Cash and Cash Equivalents . We consider interest-bearing deposits with an original maturity date of three months or less to be cash equivalents. As of December 31, 2021 , approximately $ 1.9 million, respectively, of our cash and cash equivalents represents restricted cash for the payment of certain import and other taxes for our subsidiary in China. Receivables . Trade accounts receivable are recorded at the net invoice value and are not interest-bearing. An allowance for credit losses on trade receivables is recorded based on our expectation of credit losses and is based upon our historical bad debt experience, current economic conditions, expectations of future economic conditions and management’s evaluation of our ability to collect individual outstanding balances. Once collection efforts have been exhausted and a receivable is deemed to be uncollectible, such balance is charged against the allowance for credit losses. Inventories . We value our inventories at the lower of cost, at approximate costs determined on a first-in, first-out method, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory costs include material, labor and manufacturing overhead. We review inventories on hand and record provisions based on estimated excess, slow moving and obsolete inventory, as well as inventories with a carrying value in excess of net realizable value. The regular and systematic review of the valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration. Goodwill and Intangible Assets . We test goodwill balances for impairment on an annual basis as of July 1 or whenever impairment indicators arise. When impairment indicators are identified, we may elect to perform an optional qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units has fallen below their carrying value. During our annual impairment test, we utilize four reporting units in evaluating goodwill for impairment 60 Table of Contents using a quantitative assessment, which uses a combination of a guideline public company market-based approach and a discounted cash flow income-based approach. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value. Finite-lived intangible assets including developed technology, customer lists, distribution agreements, license agreements, trademarks and patents are subject to amortization. Intangible assets are amortized over their estimated useful life on a straight-line basis, except for customer lists, which are generally amortized on an accelerated basis. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. 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 are largely independent of the cash flows of other assets and liabilities. We compare the carrying value of the asset group to the undiscounted cash flows expected to result from the asset group and determine whether the carrying amount is recoverable. We determine the fair value of each asset group based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities. In-process technology intangible assets, which are not subject to amortization until projects reach commercialization, are assessed for impairment at least annually and more frequently if events occur that would indicate a potential reduction in the fair value of the assets below their carrying value. An impairment charge would be recognized to the extent the carrying amount of the in-process technology exceeded its fair value. Long-Lived Assets . We periodically review the carrying amount of our depreciable long-lived assets for impairment. An asset is considered impaired when undiscounted estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not considered recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow. Property and Equipment . Property and equipment is stated at the historical cost of construction or purchase. Construction costs include interest costs capitalized during construction. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements. Construction-in-process consists of new buildings and various production equipment being constructed internally and externally. Assets in construction-in-process will commence depreciating once the asset has been placed in service. Depreciation is computed using the straight-line method over estimated useful lives as follows: ​ ​ ​ ​ Buildings 40 years Manufacturing equipment ​ 4 - 20 years Furniture and fixtures ​ 3 - 20 years Land improvements ​ 10 - 20 years Leasehold improvements ​ 4 - 25 years ​ Depreciation expense related to property and equipment for the years ended December 31, 2022, 2021 and 2020 was $ 33.4 million, $ 34.5 million, and $ 35.4 million, respectively. Deferred Compensation . We have a deferred compensation plan that permits certain management employees to defer a portion of their salary until the future. We established a Rabbi trust to finance obligations under the plan with corporate-owned variable life insurance contracts. The cash surrender value totaled $ 15.8 million and $ 19.1 million at December 31, 2022 and 2021, respectively, which is included in other assets in our consolidated balance sheets. We have recorded a deferred compensation payable of $ 15.3 million and $ 18.1 million at December 31, 2022 and 2021, respectively, to reflect the liability to our employees under this plan. 61 Table of Contents Other Assets . Other assets as of December 31, 2022 and 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Investments in privately held companies ​ $ 15,576 ​ $ 14,711 Deferred compensation plan assets ​ ​ 15,767 ​ ​ 19,126 Long-term notes receivable, net ​ ​ 2,397 ​ ​ 2,345 Other ​ 10,612 ​ 5,239 Total ​ $ 44,352 ​ $ 41,421 ​ 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 investment. Our share of earnings associated with equity method investments is reported within other income (expense) in our consolidated statements of income (loss). 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. Other Long-term Obligations. Other long-term obligations as of December 31, 2022 and 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Contingent consideration liabilities ​ $ 2,260 ​ $ 13,500 Other long-term obligations ​ ​ 12,476 ​ ​ 10,084 Total ​ $ 14,736 ​ $ 23,584 ​ In connection with a business combination, any contingent consideration is recorded at fair value on the acquisition date based upon the consideration expected to be transferred in the future. We re-measure the estimated liability each quarter based upon changes in revenue estimates, changes in the probability of achieving relevant milestones and changes in the discount rate or expected period of payment. Changes in the estimated fair value are recorded through operating expense in our consolidated statements of income (loss). ​ Revenue Recognition . We sell our medical products through a direct sales force in the U.S. and through OEM relationships, custom procedure tray manufacturers and a combination of direct sales force and independent distributors in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps: ​ Identify the contract with the customer . A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred if the amortization period would have been one year or less. Identify the performance obligations in the contract . Generally, our contracts with customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations generally relate to delivering single-use medical products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans, except in limited cases which are not material. Determine the transaction price . Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. Our contracts do not typically contain a financing component. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and 62 Table of Contents projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. Allocate the transaction price to performance obligations in the contract . We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing. Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue. Contract assets are recognized for the future right to invoice customers, and contract liabilities are recognized for unearned revenue if payment is received prior to our fulfillment of performance obligations. We do not have material contract assets or contract liabilities. Reserves are recorded as a reduction in net sales and are not considered material to our consolidated statements of income (loss) for the years ended December 31, 2022, 2021 and 2020. In addition, we invoice our customers for taxes assessed by governmental authorities, such as sales tax and value-added taxes. We present these taxes on a net basis. Shipping and Handling . When billed to our customers, shipping and handling charges are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales. Cost of Sales . We include product costs (i.e. material, direct labor and overhead costs), shipping and handling expense, product royalty expense, developed technology amortization expense, production-related depreciation expense and product license agreement expense in cost of sales. Research and Development . Research and development costs, including new product development, clinical trials, and regulatory compliance, are expensed as incurred. Income Taxes . Under our accounting policies, we initially recognize a tax position in our financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. Although we believe our provisions for unrecognized tax positions are reasonable, we can make no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our income tax provisions and accruals. Such differences could have a material impact on our income tax provisions and operating results in the periods in which we make such determination. Earnings per Common Share . Net income (loss) per common share is computed by both the basic method, which uses the weighted average number of our common shares outstanding, and the diluted method, which includes the dilutive common shares from stock options and restricted stock units as calculated using the treasury stock method. Performance stock units are considered contingently issuable awards and are excluded from the weighted average basic share calculation. These awards are included in the weighted average dilutive share calculation, to the extent they are dilutive, based on the number of shares, if any, that would be issuable as of the end of the reporting period assuming the end of the reporting period is also the end of the performance period. Fair Value Measurements . The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information 63 Table of Contents used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. Stock-Based Compensation . We recognize the fair value compensation cost relating to stock-based payment transactions in accordance with Accounting Standards Codification (“ASC”) 718, Compensation — Stock Compensation . Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the employee’s requisite service period, which is generally the vesting period. The fair value of our stock options is estimated using a Black-Scholes option valuation model. The fair value of our performance stock units linked to total shareholder return is estimated using Monte-Carlo simulations. Compensation expense is adjusted each period based on the grant-date fair value and the number of shares that are probable of being awarded based on the performance conditions of the awards. Restricted stock units are valued based on the closing stock price on the date of grant. Cash-settled share-based awards, or liability awards, are remeasured at fair value each reporting period until the awards are settled. Total stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020 was $ 18.0 million, $ 16.1 million, and $ 14.3 million, respectively (see Note 12). Concentration of Credit Risk . Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We provide credit, in the normal course of business, primarily to hospitals and independent third-party custom procedure tray manufacturers and distributors. We perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses. Due to the diversified nature and number of our customers, concentrations of credit risk with respect to accounts receivable are limited. Foreign Currency . The financial statements of our foreign subsidiaries are measured using local currencies as the functional currency, with the exception of our manufacturing subsidiaries in Ireland and Mexico, which each use the U.S. Dollar as its functional currency. Assets and liabilities are translated into U.S. Dollars at year-end rates of exchange and results of operations are translated at average rates for the year. Gains and losses resulting from these translations are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. Transactional exchange gains or losses are included in other income (expense) in determining net income (loss) for the period. Derivatives . We use forward contracts to mitigate our exposure to volatility in foreign exchange rates, and we use interest rate swaps to hedge changes in the benchmark interest rate related to our Third Amended Credit Agreement described in Note 8. All derivatives are recognized in the consolidated balance sheets at fair value. Classification of each hedging instrument is based upon whether the maturity of the instrument is less than or greater than 12 months. We do not purchase or hold derivative financial instruments for speculative or trading purposes (see Note 9). New Financial Accounting Standards. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions in accounting for modifications of contracts that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope , which amends the scope of ASU 2020-04. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 , which defers the sunset date of the guidance in ASC 848 to December 31, 2024. ASU 2020-04 and ASU 2021-01 were effective as of March 12, 2020; ASU 2022-06 was effective upon its issuance in December 2022. The provisions of these updates may be applied prospectively to transactions through December 31, 2024, when reference rate reform activity is expected to be completed. As of December 31, 2022, we had not modified any contracts as a result of reference rate reform. We are currently assessing the anticipated impact of these standards on our consolidated financial statements. ​ We currently believe that all other issued and not yet effective accounting standards are not materially relevant to our financial statements. 64 Table of Contents ​ ​ ​ 2. REVENUES 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 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. The following table presents sales by operating segment disaggregated based on product category and geographic region for the years ended December 31, 2022, 2021 and 2020 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ Year Ended ​ ​ December 31, 2022 ​ December 31, 2021 ​ December 31, 2020 ​ United States International Total United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 263,602 ​ $ 176,208 ​ $ 439,810 ​ $ 244,459 ​ $ 160,657 ​ $ 405,116 ​ $ 211,999 ​ $ 129,569 ​ $ 341,568 Cardiac Intervention ​ 128,711 ​ ​ 214,475 ​ 343,186 ​ 122,452 ​ 198,189 ​ 320,641 ​ 108,109 ​ 171,562 ​ 279,671 Custom Procedural Solutions ​ 108,778 ​ ​ 81,416 ​ 190,194 ​ 108,068 ​ 85,874 ​ 193,942 ​ 110,269 ​ 92,927 ​ 203,196 OEM ​ 118,869 ​ ​ 26,165 ​ 145,034 ​ 104,436 ​ 19,092 ​ 123,528 ​ 91,826 ​ 17,941 ​ 109,767 Total ​ 619,960 ​ ​ 498,264 ​ 1,118,224 ​ 579,415 ​ 463,812 ​ 1,043,227 ​ 522,203 ​ 411,999 ​ 934,202 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy Devices ​ 30,599 ​ 2,158 ​ 32,757 ​ 29,463 ​ 2,061 ​ 31,524 ​ 27,858 ​ 1,815 ​ 29,673 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 650,559 ​ $ 500,422 ​ $ 1,150,981 ​ $ 608,878 ​ $ 465,873 ​ $ 1,074,751 ​ $ 550,061 ​ $ 413,814 ​ $ 963,875 ​ ​ 65 Table of Contents 3. ACQUISITIONS AND OTHER STRATEGIC TRANSACTIONS 2022 Acquisitions On October 3, 2022, we entered into an asset purchase agreement with BioTrace Medical, Inc., developer of the Tempo® Temporary Pacing Lead device, for a purchase price of $ 2.5 million. W e are also required to pay a total of six annual royalty payments between 5 % and 10 % of net sales, dependent on net sales goal achievement, u pon achievement of the first device sold in the United States . We accounted for this transaction as an asset purchase. We recorded the amount paid upon closing as a developed technology intangible asset, which we are amortizing over 10 years . On April 30, 2022, we acquired the Restore Endosystems Bifurcated Stent System pursuant to the terms of a unit purchase agreement we executed with all of the members of Restore Endosystems. Subject 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 will 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 has 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. ​ 2021 Acquisitions During September 2021, we paid $ 2.7 million to acquire series A preferred shares of Fluidx. We had previously purchased $ 2 million of participating preferred shares during 2019. Our investment has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Fluidx. Our total current investment in Fluidx represents an ownership of 15.0 % of the outstanding stock. ​ 2020 Acquisitions On November 6, 2020, we entered into a unit purchase agreement to acquire KA Medical, LLC (“KA Medical”). Subject to the terms and conditions of the unit purchase agreement, we paid $ 14.6 million in cash, net of cash acquired, including adjustments for working capital and deferred payments of $ 4 million. KA Medical developed the Micro Plug Set, a self-expanding nitinol vascular occlusion device, which is FDA-cleared and CE marked. We accounted for this acquisition as a business combination. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material for the years ended December 31, 2022, 2021 and 2020. Acquisition-related costs associated with the KA Medical acquisition, which were included in selling, general and 66 Table of Contents administrative expenses, were not material. During the fourth quarter of 2021, certain immaterial measurement period adjustments were recorded to our purchase price allocation. The purchase price was allocated as follows (in thousands): ​ ​ ​ ​ ​ Assets Acquired ​ Trade receivables ​ $ 24 Other receivables ​ ​ 13 Inventories ​ 211 Property and equipment ​ ​ 298 Other long-term assets ​ ​ 10 Intangible assets ​ ​ Developed technology ​ ​ 6,000 Goodwill ​ ​ 8,570 Total assets acquired ​ 15,126 ​ ​ ​ ​ Liabilities Assumed ​ Trade payables ​ ( 31 ) Accrued expenses ​ ( 507 ) Total liabilities assumed ​ ( 538 ) ​ ​ ​ ​ Total net assets acquired ​ $ 14,588 ​ We are amortizing the developed technology intangible asset acquired from KA Medical over 17 years . The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. We do not deem the pro forma effects to our consolidated results of operations of the KA Medical acquisition to be material. ​ 4. INVENTORIES Inventories at December 31, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Finished goods ​ $ 147,051 ​ $ 132,403 Work-in-process ​ 29,534 ​ 22,160 Raw materials ​ 89,406 ​ 67,359 Total inventories ​ $ 265,991 ​ $ 221,922 ​ ​ 5. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Goodwill balance at January 1 ​ $ 361,741 ​ $ 363,533 Effect of foreign exchange ​ ( 1,920 ) ​ ( 2,078 ) Additions and adjustments as the result of acquisitions ​ — ​ 286 Goodwill balance at December 31 ​ $ 359,821 ​ $ 361,741 ​ Total accumulated goodwill impairment losses aggregated to $ 8.3 million as of December 31, 2022 and 2021. We did no t have any goodwill impairments for the years ended December 31, 2022, 2021 and 2020. The total goodwill balance as of December 31, 2022 and 2021 is related to our cardiovascular segment. 67 Table of Contents Other intangible assets at December 31, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 29,445 ​ $ ( 10,203 ) ​ $ 19,242 Distribution agreements ​ 3,250 ​ ( 2,715 ) ​ 535 License agreements ​ 11,109 ​ ( 7,250 ) ​ 3,859 Trademarks ​ 30,221 ​ ( 17,863 ) ​ 12,358 Customer lists ​ 34,105 ​ ( 31,749 ) ​ 2,356 Total ​ $ 108,130 ​ $ ( 69,780 ) ​ $ 38,350 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 years ended December 31, 2022, 2021 and 2020 was $ 48.4 million, $ 49.6 million, and $ 58.6 million, respectively. Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of December 31, 2022 (in thousands): ​ ​ ​ ​ Year Ending December 31, Estimated Amortization Expense 2023 ​ $ 47,496 2024 ​ 44,434 2025 ​ 42,610 2026 ​ ​ 32,040 2027 ​ 28,966 ​ During the years ended December 31, 2022, 2021 and 2020, we identified indicators of impairment associated with certain acquired intangible assets based on our qualitative assessment that carrying amounts may not be recoverable, which required us to then complete a quantitative impairment assessment. The primary indicators of impairment were planned closure and restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies, due in part to the economic impacts of the COVID-19 pandemic in 2021 and 2020. During the year ended December 31, 2022 , we recorded total impairment charges related to our intangible assets of $ 1.7 million for 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. During the year ended December 31, 2021 , we recorded total impairment charges related to our intangible assets of $ 1.6 million for the remaining carrying value of ArraVasc license agreements. During the year ended December 31, 2020 , we recorded total impairment charges related to our intangible assets of $ 28.7 million which included a partial impairment charge of $ 8.2 million of intangible assets from our acquisition of STD Pharmaceutical , a partial impairment charge of $ 8.0 million of intangible assets from our acquisition of certain assets from Laurane Medical S.A.S , a partial impairment charge of $ 4.8 million related to our license agreements with ArraVasc Limited , and other intangible asset impairments charges of $ 7.7 million related to intangible assets from our acquisition of certain assets from DirectACCESS Medical, LLC, in-process technology intangible assets of Sontina Medical LLC 68 Table of Contents acquired in connection with our acquisition of certain divested assets from Becton, Dickinson and Company, and a customer list intangible asset from our acquisition of ITL Healthcare Pty Ltd (“ITL”). ​ 6. INCOME TAXES On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The $2.2 trillion economic stimulus bill contains numerous tax law changes. We evaluated the tax changes to determine what provisions would apply to us. As permitted by the CARES Act, we have deferred payment of the employer’s portion of social security payroll tax payments and made a payment equal to one half of the deferred amount during the year ended December 31, 2021. The remaining half was paid during the year ended December 31, 2022. 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. For the years ended December 31, 2022, 2021 and 2020, income (loss) before income taxes is broken out between U.S. and foreign-sourced operations and consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Domestic ​ $ 77,562 ​ $ 21,328 ​ $ ( 32,216 ) Foreign ​ 5,067 ​ 32,589 ​ 18,985 Total ​ $ 82,629 ​ $ 53,917 ​ $ ( 13,231 ) ​ The components of the provision for income taxes for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Current expense (benefit): ​ ​ ​ Federal ​ $ 9,584 ​ $ 808 ​ $ ( 937 ) State ​ 3,162 ​ 806 ​ 437 Foreign ​ 10,291 ​ 8,480 ​ 8,407 Total current expense ​ 23,037 ​ 10,094 ​ 7,907 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred expense (benefit): ​ ​ ​ Federal ​ ( 10,438 ) ​ ( 468 ) ​ ( 2,688 ) State ​ ( 3,615 ) ​ ( 1,845 ) ​ ( 4,524 ) Foreign ​ ( 871 ) ​ ( 2,318 ) ​ ( 4,083 ) Total deferred benefit ​ ( 14,924 ) ​ ( 4,631 ) ​ ( 11,295 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total income tax expense (benefit) ​ $ 8,113 ​ $ 5,463 ​ $ ( 3,388 ) ​ 69 Table of Contents The difference between the income tax expense (benefit) reported and amounts computed by applying the statutory federal rate of 21.0 % to pretax income (loss) for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Computed federal income tax expense (benefit) at applicable statutory rate of 21 % ​ $ 17,352 ​ $ 11,323 ​ $ ( 2,778 ) State income tax benefit ​ 35 ​ ( 283 ) ​ ( 1,448 ) Tax credits ​ ( 1,978 ) ​ ( 2,507 ) ​ ( 2,391 ) Tax effect of international items ​ ( 10,698 ) ​ ( 281 ) ​ 4,705 Uncertain tax positions ​ ( 47 ) ​ 401 ​ ( 455 ) Deferred compensation insurance assets ​ 706 ​ ( 413 ) ​ ( 290 ) Stock-based compensation ​ ( 3,423 ) ​ ( 5,571 ) ​ ( 1,822 ) Valuation allowance ​ ​ 3,523 ​ ​ — ​ ​ 1,257 DOJ settlement ​ ​ — ​ ​ — ​ ​ 1,890 Remeasurement of state deferred taxes ​ ​ ( 375 ) ​ ​ ( 526 ) ​ ​ ( 1,765 ) Non-deductible expenses ​ ​ 2,027 ​ ​ 2,455 ​ ​ 1,077 Remeasurement of contingent consideration liabilities ​ ​ 1,061 ​ ​ 733 ​ ​ ( 1,185 ) Other — including the effect of graduated rates ​ ( 70 ) ​ 132 ​ ( 183 ) Total income tax expense (benefit) ​ $ 8,113 ​ $ 5,463 ​ $ ( 3,388 ) ​ Deferred income tax assets and liabilities at December 31, 2022 and 2021, consisted of the following temporary differences and carry-forward items (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Deferred income tax assets: ​ ​ Allowance for credit losses on trade receivables ​ $ 1,925 ​ $ 1,494 Accrued compensation expense ​ 9,968 ​ 11,063 Inventory differences ​ 5,712 ​ 4,887 Net operating loss carryforwards ​ 11,117 ​ 14,833 Stock-based compensation expense ​ 7,167 ​ 6,388 Operating lease assets ​ ​ 12,801 ​ ​ 13,431 Federal R&D tax credit ​ ​ 634 ​ ​ 5,003 UT R&D Credit ​ ​ 4,679 ​ ​ 4,126 IRC section 174 capitalized R&D ​ ​ 15,012 ​ ​ — Other ​ 8,827 ​ 9,939 Total deferred income tax assets ​ 77,842 ​ 71,164 ​ ​ ​ ​ ​ ​ ​ Deferred income tax liabilities: ​ ​ Prepaid expenses ​ ( 1,568 ) ​ ( 1,047 ) Property and equipment ​ ( 20,925 ) ​ ( 20,797 ) Intangible assets ​ ( 38,547 ) ​ ( 42,888 ) Foreign withholding tax ​ ( 1,571 ) ​ ( 5,575 ) Operating lease liabilities ​ ​ ( 11,527 ) ​ ​ ( 11,938 ) Other ​ ( 2,040 ) ​ ( 3,556 ) Total deferred income tax liabilities ​ ( 76,178 ) ​ ( 85,801 ) Valuation allowance ​ ( 13,527 ) ​ ( 10,786 ) Net deferred income tax liabilities ​ $ ( 11,863 ) ​ $ ( 25,423 ) ​ ​ ​ ​ ​ ​ ​ Reported as: ​ ​ Deferred income tax assets ​ $ 6,599 ​ $ 6,080 Deferred income tax liabilities ​ ( 18,462 ) ​ ( 31,503 ) Net deferred income tax liabilities ​ $ ( 11,863 ) ​ $ ( 25,423 ) ​ 70 Table of Contents Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. Deferred income tax balances reflect the temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The valuation allowance is primarily related to state credit carryforwards, non-US net operating loss carryforwards, and capital loss carryforwards for which we believe it is more likely than not that the deferred tax assets will not be realized. The valuation allowance increased by $ 2.7 million during the year ended December 31, 2022, increased by $ 573,000 during the year ended December 31, 2021, and increased by $ 5.6 million during the year ended December 31, 2020. As of December 31, 2022, we had U.S federal net operating loss carryforwards of $ 29.7 million, which were generated by Cianna Medical, Vascular Access Technologies, Inc., DFINE Inc., and Biosphere Medical, Inc., prior to our acquisition of these companies. These net operating loss carryforwards are subject to annual limitations under Internal Revenue Code Section 382. If unused $ 29.6 million of the NOLs will expire between 2025 and 2037. Of the NOLs incurred post-2017, $ 97,000 can be carried forward indefinitely. We anticipate that we will utilize all current net operating loss carryforwards prior to their expiration dates over the next 13 years . We utilized a total of $ 15.9 million in U.S. federal net operating loss carryforwards during the year ended December 31, 2022. As of December 31, 2022, we had $ 22.2 million of non-U.S. net operating loss carryforwards, of which $ 21.1 million have no expiration date and $ 1.1 million expire at various dates through 2034. Non-U.S. net operating loss carryforwards utilized during the year ended December 31, 2022 were not material. We do not consider our foreign earnings to be permanently reinvested. Consequently, we have recorded tax expense of $ 320,000 , $ 288,000 and $ 228,000 for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2022, 2021 and 2020, respectively. Additionally, for the year ended December 31, 2022, a tax benefit of $ 4.3 million was recorded with respect to the restructuring of our foreign entities and the associated change in foreign withholding taxes on the unremitted foreign earnings. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. We are no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2019. In foreign jurisdictions, we are no longer subject to income tax examinations for years before 2016. Although we believe our estimates are reasonable, the final outcomes of these matters may be different from those which we have reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and operating results in the period in which we make such determination. The total liability for unrecognized tax benefits at December 31, 2022, including interest and penalties, was $ 1.9 million, of which $ 1.9 million would favorably impact our effective tax rate if recognized. At December 31, 2022, none of the total liability was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet. The total liability for unrecognized tax benefits at December 31, 2021, including interest and penalties, was $ 2.0 million, of which $ 2.0 million would favorably impact our effective tax rate if recognized. At December 31, 2021, $ 1.0 million of the total liability was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet. As of December 31, 2022 and 2021, we had accrued $ 336,000 and $ 322,000 respectively, in total interest and penalties related to unrecognized tax benefits. We account for interest and penalties for unrecognized tax benefits as part of our income tax provision. During the years ended December 31, 2022, 2021 and 2020, our liability for unrecognized tax benefit was increased (decreased) for interest and penalties by $ 14,000 , $ 46,000 , and $( 90,000 ), respectively. We estimate it is reasonably possible that within the next 12 months the total liability for unrecognized tax benefits may decrease, including expirations related to statutes of limitation, up to $ 109,000 . 71 Table of Contents A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax benefits for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Unrecognized tax benefits, opening balance ​ $ 1,635 ​ $ 1,674 ​ $ 2,161 Gross increases (decreases) in tax positions taken in a prior year ​ ( 10 ) ​ 82 ​ 115 Gross increases in tax positions taken in the current year ​ 294 ​ 316 ​ 283 Lapse of applicable statute of limitations ​ ( 343 ) ​ ( 437 ) ​ ( 885 ) Unrecognized tax benefits, ending balance ​ $ 1,576 ​ $ 1,635 ​ $ 1,674 ​ The tabular roll-forward ending balance does not include interest and penalties related to unrecognized tax benefits. ​ 7. ACCRUED EXPENSES Accrued expenses at December 31, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Payroll and related liabilities ​ $ 58,620 ​ $ 59,435 Current portion of contingent liabilities ​ 15,813 ​ 34,735 Advances from employees ​ 165 ​ 201 Accrued rebates payable ​ ​ 10,925 ​ ​ 11,271 Accrued legal settlement ​ ​ 1,000 ​ ​ 18,250 Other accrued expenses ​ 36,666 ​ 35,122 ​ ​ ​ ​ ​ ​ ​ Total ​ $ 123,189 ​ $ 159,014 ​ ​ ​ 8. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT Principal balances outstanding under our long-term debt obligations as of December 31, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Term loans ​ $ 124,688 ​ $ 133,125 Revolving credit loans ​ 73,500 ​ 110,000 Less unamortized debt issuance costs ​ ( 179 ) ​ ( 290 ) Total long-term debt ​ 198,009 ​ 242,835 Less current portion ​ 11,250 ​ 8,438 Long-term portion ​ $ 186,759 ​ $ 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). 72 Table of Contents ​ 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 loan featuring the Base Rate is due and payable on the last business day of each calendar quarter; interest on each loan featuring the Eurocurrency Rate 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 of 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. ​ As of December 31, 2022, we believe we were in compliance with all covenants set forth in the Third Amended Credit Agreement. As of December 31, 2022, we had outstanding borrowings of $ 198.2 million and issued letter of credit guarantees of $ 3.2 million under the Third Amended Credit Agreement, with additional available borrowings of approximately $ 523 million, based on the leverage ratio required pursuant to the Third Amended Credit Agreement. Our interest rate as of December 31, 2022 was a fixed rate of 2.71 % on $ 75 million as a result of an interest rate swap (see Note 9) and a variable floating rate of 5.38 % on $ 123.2 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 are exclusive of potential future changes in the applicable margin. Certain of the interest rates applicable to our Third Amended Credit Agreement, and applicable to hedging instruments we have purchased to offset interest rate risk under our Third Amended Credit Agreement, are LIBOR-based. We anticipate replacement rates will be identified, as provided for in our Third Amended Credit Agreement, as LIBOR-based rates become unavailable. Future Payments Future minimum principal payments on our long-term debt as of December 31, 2022, are as follows (in thousands): ​ ​ ​ ​ Years Ending ​ Future Minimum December 31, Principal Payments 2023 $ 11,250 2024 ​ ​ 186,938 Total future minimum principal payments ​ $ 198,188 ​ 73 Table of Contents ​ ​ ​ 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 these risks by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives 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 programs 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 initially and on an ongoing basis. For qualifying hedges, the change in fair value is deferred in accumulated other comprehensive income (loss) (“AOCI”), a component of stockholders’ equity in the accompanying consolidated balance sheets, and recognized in earnings at the same time the hedged item affects earnings. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative. Interest Rate Risk . Our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, 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 is solely due to changes in the benchmark interest rate. Derivatives Designated as Cash Flow Hedges On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a current notional amount of $ 175 million with Wells Fargo Bank to fix the one-month LIBOR rate at 1.12 %. The variable portion of the interest rate swap was tied to the one-month LIBOR rate (the benchmark interest rate). The interest rate swap expired on July 6, 2021. On December 23, 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $ 75 million with Wells Fargo Bank to fix the one-month LIBOR rate at 1.71 % for the period from July 6, 2021 to July 31, 2024. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. At December 31, 2022 and 2021, our interest rate swaps qualified as cash flow hedges. The fair value of our interest rate swap at December 31, 2022 was an asset of $ 3.4 million, partially offset by $ 0.8 million in deferred taxes. The fair value of our interest rate swaps at 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 are not subject to any credit risk contingent features related to our derivative contracts, and counterparty risk is managed by allocating derivative contracts among several major financial institutions. 74 Table of Contents Derivatives 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 foreign currencies. We enter into approximately 100 cash flow foreign currency hedges every month. As of December 31, 2022 and 2021, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 87.8 million and $ 123.0 million, respectively. Derivatives 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 December 31, 2022 and 2021, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 92.4 million and $ 86.0 million, respectively. Balance Sheet Presentation of Derivatives. As of December 31, 2022 and 2021, all derivatives, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded gross at fair value on our consolidated balance sheets. We are not subject to any master netting agreements. The fair value of derivative instruments on a gross basis is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Designated as Hedging Instruments Balance Sheet Location December 31, 2022 December 31, 2021 Assets ​ ​ Interest rate swaps Other assets (long-term) ​ $ 3,444 ​ $ — Foreign currency forward contracts Prepaid expenses and other assets ​ ​ 3,215 ​ ​ 1,326 Foreign currency forward contracts Other assets (long-term) ​ ​ 56 ​ 179 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Interest rate swaps ​ Other long-term obligations ​ ​ — ​ ​ ( 1,447 ) Foreign currency forward contracts Accrued expenses ​ ( 1,509 ) ​ ( 2,288 ) Foreign currency forward contracts Other long-term obligations ​ ( 531 ) ​ ( 502 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Not Designated as Hedging Instruments Balance Sheet Location December 31, 2022 December 31, 2021 Assets ​ ​ Foreign currency forward contracts Prepaid expenses and other assets ​ $ 1,512 ​ $ 736 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 1,946 ) ​ ( 856 ) ​ 75 Table of Contents Income Statement Presentation of Derivatives Derivatives Designated as Cash Flow Hedges Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income ("OCI") in our consolidated statements of comprehensive income (loss) and consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of Gain/(Loss) ​ ​ Recognized in OCI ​ ​ Year Ended December 31, Derivative instrument 2022 2021 2020 Interest rate swaps ​ $ 4,879 ​ $ 1,402 ​ $ ( 6,131 ) Foreign currency forward contracts ​ 6,263 ​ ( 1,521 ) ​ ( 5,516 ) ​ Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on AOCI and net earnings in our consolidated statements of income (loss), consolidated statements of comprehensive income (loss) and consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Statements ​ Amount of Gain/(Loss) ​ ​ of Income ​ reclassified from AOCI ​ ​ Year Ended December 31, ​ Year ended December 31, Location in statements of income 2022 ​ 2021 ​ 2020 2022 2021 2020 Interest expense ​ $ ( 6,339 ) ​ $ ( 5,261 ) ​ $ ( 9,994 ) ​ $ ( 12 ) $ ( 1,509 ) $ ( 872 ) Revenue ​ 1,150,981 ​ 1,074,751 ​ 963,875 ​ 3,583 ​ ( 5,592 ) ​ 36 Cost of sales ​ ( 631,882 ) ​ ( 589,418 ) ​ ( 562,698 ) ​ ( 1,436 ) ​ 1,017 ​ ( 1,288 ) ​ As of December 31, 2022, $ 2.7 million or $ 2.1 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 December 31, 2022, $ 2.3 million, or $ 1.8 million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months. Derivatives Not Designated as Hedging Instruments The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income (loss) for the years presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Derivative Instrument Location in statements of income 2022 2021 2020 Foreign currency forward contracts Other income (expense) — net ​ $ 1,420 ​ $ ( 1,598 ) ​ $ ( 2,190 ) ​ See Note 15 for additional information about our derivatives. ​ 10. COMMITMENTS AND CONTINGENCIES We are obligated under non-terminable operating leases for manufacturing facilities, finished good distribution centers, office space, equipment, vehicles, and land. See Note 17 for disclosures regarding these operating leases. Royalties . As of December 31, 2022, we had entered into a number of agreements to license or acquire rights to certain intellectual property which require us to make royalty payments during the term of the agreements generally based on a percentage of sales. During the years ended December 31, 2022, 2021 and 2020, total royalty expense approximated $ 7.3 million, $ 7.6 million and $ 7.1 million, respectively, and is recorded in cost of sales on the consolidated statement of income (loss). Minimum contractual commitments under royalty agreements to be paid within twelve months of December 31, 2022 were not significant. See Note 15 for discussion of future royalty commitments related to acquisitions. Litigation . In the ordinary course of business, we are involved in various claims and litigation matters. T hese proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental 76 Table of Contents 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 and settlement strategies. 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 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 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 alleged 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 sought unspecified damages, costs, and professional fees. Following mediation, the parties negotiated an agreement to settle the dispute, which, among other provisions, provides for the release of all claims against Merit and the other defendants in exchange for Merit’s undertaking to implement certain corporate governance revisions and pay attorneys fees and expenses in the amount of $ 1.0 million. On February 16, 2023, the court held a hearing and announced approval of the settlement, which has the effect of resolving all claims arising from the litigation. The expense associated with the settlement has been reflected in our financial results reported for the year ended December 31, 2022. ​ SEC Inquiry ​ We have received requests 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 the requests and investigating the matter and, at this time, are unable to predict the scope, timing, significance or outcome of this matter. ​ It is possible that the ultimate resolution of the foregoing matter, or similar 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 these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred. ​ 77 Table of Contents 11. EARNINGS PER COMMON SHARE (EPS) The computation of weighted average shares outstanding and the basic and diluted earnings (loss) per common share for the following periods consisted of the following (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 Net income (loss) ​ $ 74,516 ​ $ 48,454 ​ $ ( 9,843 ) Average common shares outstanding ​ 56,806 ​ 56,145 ​ 55,434 Basic EPS ​ $ 1.31 ​ $ 0.86 ​ $ ( 0.18 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average common shares outstanding ​ ​ 56,806 ​ ​ 56,145 ​ ​ 55,434 Effect of dilutive stock awards ​ ​ 865 ​ ​ 1,214 ​ ​ — Total potential shares outstanding ​ ​ 57,671 ​ ​ 57,359 ​ ​ 55,434 Diluted EPS ​ $ 1.29 ​ $ 0.84 ​ $ ( 0.18 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity awards excluded as the impact was anti-dilutive (1) ​ ​ 1,438 ​ ​ 799 ​ ​ 4,216 (1) Does not reflect the impact of incremental repurchases under the treasury stock method. ​ ​ 12. EMPLOYEE STOCK PURCHASE PLAN, STOCK OPTIONS AND WARRANTS Our stock-based compensation primarily consists of the following plans: 2018 Long-Term Incentive Plan . In June 2018, our Board of Directors adopted and our shareholders approved, the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan, which was subsequently amended effective December 14, 2018 (the “2018 Incentive Plan”) to supplement the Merit Medical Systems, Inc. 2006 Long-Term Incentive plan (the "2006 Incentive Plan"). The 2018 Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, stock units (including restricted stock units) and performance awards (including performance stock units). Options may be granted to directors, officers, outside consultants and key employees and may be granted upon such terms and such conditions as the Compensation Committee of our Board of Directors determines. Options typically vest on an annual basis over a three to five-year life with a contractual life of seven years . As of December 31, 2022, a total of 2,817,861 shares remained available to be issued under the 2018 Incentive Plan. 2006 Long-Term Incentive Plan . In May 2006, our Board of Directors adopted, and our shareholders approved, the 2006 Incentive Plan. As of December 31, 2022, the 2006 Incentive Plan was no longer being used for new equity award grants. However, as of December 31, 2022, options granted under this plan were still outstanding, vesting, and being exercised and will continue to be outstanding until the vesting periods end and the terms of the equity awards expire. Employee Stock Purchase Plan . We have a non-qualified Employee Stock Purchase Plan (“ESPP”), which has an expiration date of June 30, 2026. As of December 31, 2022, the total number of shares of common stock that remained available to be issued under our non-qualified plan was 102,739 shares. ESPP participants purchase shares on a quarterly basis at a price equal to 95 % of the market price of the common stock at the end of the applicable offering period. 78 Table of Contents Stock-Based Compensation Expense . The stock-based compensation expense before income tax expense for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Cost of sales ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ $ 1,606 ​ $ 1,476 ​ $ 1,357 Research and development ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 1,789 ​ ​ 1,343 ​ ​ 1,157 Selling, general and administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 7,305 ​ ​ 6,678 ​ ​ 7,332 Performance-based restricted stock units ​ ​ 3,509 ​ ​ 3,525 ​ ​ 2,829 Restricted stock units ​ ​ 1,836 ​ ​ 1,557 ​ ​ 758 Cash-settled performance-based share-based awards ("Liability Awards") ​ ​ 1,997 ​ ​ 1,511 ​ ​ 906 Total selling, general and administrative ​ ​ 14,647 ​ ​ 13,271 ​ ​ 11,825 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense before taxes ​ $ 18,042 ​ $ 16,090 ​ $ 14,339 ​ 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 As of December 31, 2022, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was $ 20.4 million and is expected to be recognized over a weighted average period of 2.1 years. 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 years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Risk-free interest rate 1.4 % - 4.3 % ​ 0.5 % - 1.1 % ​ 0.3 % - 1.7 % Expected option term 4.0 years ​ 4.0 years ​ 4.0 - 5.0 years Expected dividend yield — ​ — ​ — Expected price volatility 46.2 % - 47.5 % ​ 46.1 % - 46.7 % ​ 38.7 % - 45.1 % ​ 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 option. We determine the expected term of the stock options using the historical exercise behavior of employees. The expected price volatility was determined based upon the historical volatility for our stock. We recognize compensation expense for options on a straight-line basis over the service period, which corresponds to the vesting period. During the years ended December 31, 2022, 2021 and 2020, approximately 251,000 , 716,000 and 329,000 nonqualified stock option grants were made, respectively, for a total fair value of $ 6.3 million, $ 17.5 million and $ 4.5 million. The table below presents information related to stock option activity for the years ended December 31, 2022, 2021 and 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Total intrinsic value of stock options exercised ​ $ 27,110 ​ $ 36,086 ​ $ 11,733 Cash received from stock option exercises ​ 18,952 ​ 20,194 ​ 5,481 Excess tax benefit from the exercise of stock options ​ 3,423 ​ 5,571 ​ 1,815 ​ 79 Table of Contents Changes in stock options for the year ended December 31, 2022, consisted of the following (shares and intrinsic value in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ Weighted Average ​ Remaining Contractual ​ Intrinsic ​ of Shares Exercise Price Term (in years) Value Beginning balance 3,640 ​ $ 44.70 ​ Granted 251 ​ 63.69 ​ Exercised ( 703 ) ​ 28.58 ​ Forfeited/expired ( 111 ) ​ 53.16 ​ Outstanding at December 31 3,077 ​ 49.62 3.51 ​ $ 64,634 Exercisable 1,792 ​ 43.50 2.61 ​ 48,595 Ending vested and expected to vest 3,013 ​ 49.37 3.47 ​ 64,026 ​ The weighted average grant-date fair value of options granted during the years ended December 31, 2022, 2021 and 2020 was $ 24.98 , $ 24.38 and $ 13.70 , respectively. Stock-Settled Performance-Based Restricted Stock Units (“PSUs”) and Time-Vested Restricted Stock Units (“RSUs”) ​ Since 2020, we have granted PSUs to certain of our executive officers. Conversion of PSUs occurs at the end of one , two and three-year performance periods, or one year after the agreement date, whichever is later. The conversion ratio is based upon attaining targeted levels of free cash flow (“FCF”) and relative shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements. In 2020, our Board of Directors amended PSUs granted in 2020 with a one-year performance period to adjust the performance targets and reduce the maximum FCF multiplier to 100 % for the one-year awards, which lowered the potential shares of our common stock to be granted pursuant to the one-year awards by 25,415 shares. We accounted for this amendment in accordance with ASC 718 as a “Type I” modification. ​ The payout for each PSU is equal to one share of common stock multiplied by a FCF multiplier (between 50 % and 100 % in the case of the 2020 one-year awards, as amended, or 50 % and 200 % in the case of all other PSU awards) and a rTSR multiplier (between 75 % and 125 %). PSUs convey no shareholder rights unless and until shares are issued in settlement of the award. We use Monte-Carlo simulations to estimate the grant-date fair value of the PSUs linked to total shareholder return. 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 catchups 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. ​ We grant RSUs to our non-employee directors, which are subject to continued service through the vesting date, which is one year from the date of grant. The expense recognized for RSUs is equal to the closing stock price on the date of grant, which is recognized over the vesting period. ​ 80 Table of Contents Changes in PSUs and RSUs for the year ended December 31, 2022, consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PSUs ​ RSUs ​ ​ ​ ​ Weighted Average ​ ​ ​ Weighted Average ​ ​ Stock Units ​ Grant Date ​ Stock Units ​ Grant Date ​ (In Thousands) (1) Fair Value (In Thousands) Fair Value Beginning nonvested balance 163 ​ $ 53.71 26 ​ $ 61.77 Granted 97 ​ 64.54 31 59.02 rTSR adjustment ​ 8 (2) ​ 65.03 ​ — ​ ​ — Vested ( 44 ) ​ 65.03 ( 26 ) 61.77 Forfeited ( 45 ) ​ 60.81 — — Nonvested balance at December 31 179 ​ 65.20 31 ​ 59.02 (1) Based on the maximum payout, excluding the impact of the rTSR multiplier. The actual number of shares which vest is determined based on the satisfaction of performance conditions and the application of an rTSR multiplier between 75 % and 125 % . (2) Represents the application of an rTSR multiplier of 125 % to awards vested in 2022 based on the performance of our common stock and the terms of the awards. ​ The following table summarizes PSUs and RSUs granted during the years ended December 31, 2022, 2021, and 2020 (units and shares in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 PSUs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Target units granted ​ ​ 48 ​ ​ 52 ​ ​ 61 ​ Maximum units granted (1) ​ ​ 97 ​ ​ 103 ​ ​ 102 (3) Maximum potential shares (1)(2) ​ ​ 121 ​ ​ 129 ​ ​ 127 (3) Weighted average grant date fair value ​ $ 64.54 ​ $ 61.39 ​ $ 43.63 ​ RSUs ​ ​ ​ ​ ​ ​ ​ ​ ​ Units granted ​ ​ 31 ​ ​ 26 ​ ​ 34 ​ Weighted average grant date fair value ​ $ 59.02 ​ $ 61.77 ​ $ 42.98 ​ (1) Based on the maximum payout, excluding the impact of the rTSR multiplier. (2) Includes the impact of the maximum potential rTSR multiplier of 125 % . (3) Includes the impact of the 2020 amendment which reduced the maximum FCF multiplier for one-year awards from 200 % to 100 % . ​ ​ During the years ended December 31, 2022 and 2021, there were approximately 44,000 and 26,000 shares, respectively, that vested under PSUs, prior to the reduction of shares withheld to satisfy tax withholding obligations. Vested shares were calculated based upon achievement of the maximum performance multiplier, as amended, of 200 % and 100 % for 2022 and 2021, respectively, and an rTSR multiplier of 125 %. There were no shares that vested under PSUs during the year ended December 31, 2020. During the years ended December 31, 2022 and 2021, there were approximately 26,000 and 34,000 shares, respectively, that vested under RSUs. There were no shares that vested under RSUs during the year ended December 31, 2020. ​ The fair value of each PSU was estimated as of the grant date using the following assumptions for awards granted in the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ 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 % - 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 remaining term equal to the expected term of the award. The expected volatility was based on a weighted average volatility of our stock 81 Table of Contents 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. As of December 31, 2022, the total remaining unrecognized compensation cost related to stock-settled performance stock units and restricted stock units, net of expected forfeitures, was $ 4.7 million and $ 0.7 million, respectively, which is expected to be recognized over a weighted average period of 1.6 years and 0.4 years, respectively. Cash-Settled Performance-Based Share-Based Awards (“Liability Awards”) ​ During the years ended December 31, 2022, 2021 and 2020, we granted liability awards to certain executive officers. These awards entitle them to cash payments equal to a total target cash incentive of $ 1.0 million, $ 1.0 million, and $ 1.0 million, respectively, multiplied by rTSR and FCF multipliers, as defined in the award agreements. In 2020, our Board of Directors amended the liability awards with a one-year performance period. The potential maximum payout of these liability awards is 125 % of the target cash incentive for the 2020 one-year award, as amended, and 250 % of the target cash incentive for all other liability awards, resulting in a total potential maximum payout of $ 2.5 million and $ 2.5 million for liability awards granted during the years ended December 31, 2022 and 2021, respectively. Settlement generally occurs at the end of one , two and three-year performance periods based upon the same performance metrics and vesting period as our performance stock units. ​ These awards are classified as liabilities and reported in accrued expenses and other long-term liabilities within our consolidated balance sheet. The fair value of these awards is remeasured at each reporting period until the awards are settled. As of December 31, 2022, our recorded liabilities associated with these awards was $ 3.2 million, and we had remaining unrecognized compensation cost related to cash-settled performance-based share-based awards of $ 1.9 million, which is expected to be recognized over a weighted average period of 1.7 years. During 2022 and 2021, we paid $ 833,000 and $ 417,000 , respectively, in connection with liability awards, and no awards were forfeited. There were no liability awards vested or forfeited in the year ended December 31, 2020. ​ ​ ​ 13. SEGMENT REPORTING AND FOREIGN OPERATIONS 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 (loss). See Note 2 to our consolidated financial statements set forth in Item 8 of this report for a detailed breakout of our sales by operating segment and product category, disaggregated between domestic and international sales. ​ During the years ended December 31, 2022, 2021 and 2020, we had international sales of $ 500.4 million, $ 465.9 million and $ 413.8 million, respectively, or 43 %, 43 % and 43 %, respectively, of net sales. Our largest international markets include China, Japan, Germany, France and the United Kingdom, with China representing our most significant international sales market with sales of $ 149.3 million, $ 138.2 million, and $ 113.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. International sales are attributed based on location of the customer receiving the product. ​ 82 Table of Contents Our long-lived assets (which are comprised of our net property and equipment) by geographic area at December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 United States ​ $ 281,290 ​ $ 275,311 ​ $ 277,643 Ireland ​ 40,749 ​ 39,863 ​ 42,951 Other foreign countries ​ 60,937 ​ 56,484 ​ 62,134 Total ​ $ 382,976 ​ $ 371,658 ​ $ 382,728 ​ Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the years ended December 31, 2022, 2021 and 2020, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Net sales ​ ​ ​ ​ Cardiovascular ​ $ 1,118,224 ​ $ 1,043,227 ​ $ 934,202 Endoscopy ​ 32,757 ​ 31,524 ​ 29,673 Total net sales ​ 1,150,981 ​ 1,074,751 ​ 963,875 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ ​ Cardiovascular ​ 80,946 ​ 53,415 ​ ( 7,042 ) Endoscopy ​ 6,617 ​ 7,501 ​ 5,480 Total income (loss) from operations ​ 87,563 ​ 60,916 ​ ( 1,562 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other expense — net ​ ( 4,934 ) ​ ( 6,999 ) ​ ( 11,669 ) Income tax expense (benefit) ​ 8,113 ​ 5,463 ​ ( 3,388 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 74,516 ​ $ 48,454 ​ $ ( 9,843 ) ​ Total assets by operating segment at December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Cardiovascular ​ $ 1,652,145 ​ $ 1,635,676 ​ $ 1,654,866 Endoscopy ​ 11,821 ​ 12,618 ​ 9,530 Total ​ $ 1,663,966 ​ $ 1,648,294 ​ $ 1,664,396 ​ Total depreciation and amortization by operating segment for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Cardiovascular ​ $ 80,777 ​ $ 83,000 ​ $ 93,160 Endoscopy ​ 1,027 ​ 1,066 ​ 910 Total ​ $ 81,804 ​ $ 84,066 ​ $ 94,070 ​ Total capital expenditures for property and equipment by operating segment for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Cardiovascular ​ $ 44,925 ​ $ 27,557 ​ $ 45,803 Endoscopy ​ 104 ​ 382 ​ 185 Total ​ $ 45,029 ​ $ 27,939 ​ $ 45,988 ​ ​ ​ ​ 83 Table of Contents 14. EMPLOYEE BENEFIT PLANS We have defined contribution plans covering all U.S. full-time adult employees and certain of our foreign employees. Our contributions to these plans are discretionary in certain countries, including the U.S. In September 2019, we ceased discretionary contributions to certain of our defined contribution plans and subsequently reinstated those contributions in May 2021. Total expense for contributions made to these plans for the years ended December 31, 2022, 2021 and 2020 was $ 7.7 million, $ 6.5 million and $ 3.9 million, respectively. ​ ​ ​ 15. FAIR VALUE MEASUREMENTS Assets (Liabilities) Measured at Fair Value on a Recurring Basis Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of December 31, 2022 and 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 ​ December 31, 2022 (Level 1) (Level 2) (Level 3) Marketable securities (1) ​ $ 138 ​ $ 138 ​ $ — ​ $ — Interest rate contract asset, long-term (2) ​ $ 3,444 ​ $ — ​ $ 3,444 ​ $ — Foreign currency contract assets, current and long-term (3) ​ $ 4,783 ​ $ — ​ $ 4,783 ​ $ — Foreign currency contract liabilities, current and long-term (4) ​ $ ( 3,986 ) ​ $ — ​ $ ( 3,986 ) ​ $ — Contingent consideration liabilities ​ $ ( 18,073 ) ​ $ — ​ $ — ​ $ ( 18,073 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 (2) ​ $ ( 1,447 ) ​ $ — ​ $ ( 1,447 ) ​ $ — Foreign currency contract assets, current and long-term (3) ​ $ 2,241 ​ $ — ​ $ 2,241 ​ $ — Foreign currency contract liabilities, current and long-term (4) ​ $ ( 3,646 ) ​ $ — ​ $ ( 3,646 ) ​ $ — Contingent consideration liabilities ​ $ ( 48,234 ) ​ $ — ​ $ — ​ $ ( 48,234 ) (1) Our marketable securities, which consist entirely of available-for-sale equity securities, are valued using market prices in active markets. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. (2) The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets. (3) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid and other assets or other long-term assets in the consolidated balance sheets. (4) 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. Contingent consideration liabilities are re-measured to fair value at each reporting period, with the change in fair value recognized 84 Table of Contents within operating expenses in the accompanying consolidated statements of income (loss). 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 years ended December 31, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Beginning balance ​ $ 48,234 ​ $ 55,750 Contingent consideration expense ​ 4,610 ​ 3,161 Contingent payments made ​ ( 34,762 ) ​ ( 10,665 ) Effect of foreign exchange ​ ​ ( 9 ) ​ ​ ( 12 ) Ending balance ​ $ 18,073 ​ $ 48,234 ​ As of December 31, 2022, $ 2.3 million in contingent consideration liability was included in other long-term obligations and $ 15.8 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet related to contingent liabilities. As of December 31, 2021, $ 13.5 million in contingent consideration liability was included in other long-term obligations and $ 34.7 in contingent consideration liability was included in accrued expenses in our consolidated balance sheet related to contingent liabilities. Cash payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date 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 year ended December 31, 2022 are reflected as operating cash flows. The recurring Level 3 measurement of our contingent consideration liabilities includes the following significant unobservable inputs at December 31, 2022 and 2021 (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2022 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 2,097 Discounted cash flow Discount rate ​ 14 % - 17 % ​ 15.7 % ​ ​ ​ Projected year of payments ​ 2023-2034 ​ 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 13,064 Monte Carlo simulation Discount rate ​ 5.1 % - 14.0 % ​ 5.2 % ​ ​ ​ Projected year of payments ​ 2023-2033 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 2,912 ​ Scenario-based method ​ Discount rate ​ 5.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 90 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2023-2030 ​ 2024 (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. 85 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. ​ The contingent consideration liabilities are re-measured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement. A decrease (increase) in the probability of any milestone payment may result in lower (higher) fair value measurements. Our determination of the fair value of contingent consideration liabilities could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income (loss). Contingent Payments to Related Parties. During the years ended December 31, 2022 and 2020, we made contingent payments of approximately $ 1.6 million and $ 800,000 to a former director of Merit and former shareholder of Cianna Medical which we acquired in 2018. We made no such payments in 2021. In 2023, the Company expects to make additional payments consistent with prior years. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a director of Merit. 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 Financial Instruments 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 are Level 1 inputs. Impairment Charges We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property and equipment, intangible assets and goodwill in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. Intangible Assets. During the years ended December 31, 2022, 2021 and 2020, we had losses of $ 1.7 million, $ 1.6 million and $ 28.7 million, respectively, related to certain acquired intangible assets (see Note 5). 86 Table of Contents Right of Use Operating Lease Assets. W e identified changes in events and circumstances relating to certain right-of-use (“ROU”) operating lease assets. We compared the anticipated undiscounted cash flows generated by a sublease to the carrying value of the ROU operating lease and related long-lived assets and determined that the carrying values were not recoverable. Consequently, we recorded impairment losses during the years ended December 31, 2021 and 2020 of $ 1.4 million and $ 1.5 million, respectively, which is equal to the excess of the carrying value of the assets over their estimated fair value. The impairment losses were driven primarily by site consolidation decisions and changes in our projected cash flows for the ROU operating lease asset and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic. These changes include an increase in the anticipated time to identify a lessee, an increase in anticipated lease concessions, and a decrease in the expected lease rates for the property. The ROU operating lease asset impairment losses pertained to our cardiovascular segment. We had no such losses during the year ended December 31, 2022. Property and Equipment. D uring the year ended December 31, 2021 , we had losses of $ 1.3 million related to the measurement of property and equipment at fair value based on the planned discontinuance of the Advocate™ Peripheral Angioplasty Balloon product line, sold under our license agreements with ArraVasc, which pertained to our cardiovascular segment. During the year ended December 31, 2020 , we had losses of $ 359,000 related to the measurement of certain property and equipment measured at fair value based on restructuring activities associated with the suspension of our distribution agreement with NinePoint, which pertained to our endoscopy segment. We had no such losses during the year ended December 31, 2022. Equity Investments, Purchase Options and Notes Receivable. During the year ended December 31, 2022, we recognized $ 0.5 million of impairment expense related to our equity method investment in XableCath, as business ceased operations. During the year ended December 31, 2020, we recognized $ 2.5 million of impairment expense related to our equity method investment in the 19.5 percent ownership in preferred shares of Fusion Medical, Inc. (“Fusion”) due to uncertainty about future product development and commercialization associated with the technologies and a charge of $ 3.5 million related to Bluegrass Vascular due to our decision not to exercise our option to purchase the company. We had no such losses during the year ended December 31, 2021. Our equity investments in privately held companies were $ 15.6 million and $ 14.7 million at December 21, 2022 and 2021, respectively, which are included within other long-term assets in our consolidated balance sheets. 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 investment. 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. Current Expected Credit Losses 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 December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, we had an allowance for current expected credit losses of $ 281,000 and $ 199,000 , 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. During the year ended December 31, 2021, we collected $ 2.8 million from Bluegrass Vascular Technologies, Inc. pursuant to the terms of a note receivable, which represents the entire principal balance and all accrued interest payable pursuant to that note. The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the years ended December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 Beginning balance ​ $ 199 ​ $ 730 Provision for credit loss expense ​ ​ 82 ​ ​ ( 531 ) Ending balance ​ $ 281 ​ $ 199 ​ ​ 87 Table of Contents 16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The changes in each component of Accumulated Other Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total January 1, 2020 $ 218 ​ ​ ( 5,512 ) ​ ​ ( 5,294 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) ( 11,647 ) ​ ​ 7,786 ​ ​ ( 3,861 ) Income taxes 2,365 ​ ​ ( 786 ) ​ ​ 1,579 Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 36 ) ​ ​ ​ ​ ​ ( 36 ) Cost of sales ​ 1,288 ​ ​ ​ ​ ​ 1,288 Interest expense ​ 872 ​ ​ ​ ​ ​ 872 Net other comprehensive income (loss) ​ ( 7,158 ) ​ ​ 7,000 ​ ​ ( 158 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ( 6,940 ) ​ ​ 1,488 ​ ​ ( 5,452 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) ( 119 ) ​ ​ ( 7,704 ) ​ ​ ( 7,823 ) Income taxes ( 1,489 ) ​ ​ 689 ​ ​ ( 800 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ 5,592 ​ ​ ​ ​ ​ 5,592 Cost of sales ​ ( 1,017 ) ​ ​ ​ ​ ​ ( 1,017 ) Interest expense ​ 1,509 ​ ​ ​ ​ ​ 1,509 Net other comprehensive income (loss) ​ 4,476 ​ ​ ( 7,015 ) ​ ​ ( 2,539 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ( 2,464 ) ​ ​ ( 5,527 ) ​ ​ ( 7,991 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 11,142 ​ ​ ( 10,491 ) ​ ​ 651 Income taxes ( 2,177 ) ​ ​ 102 ​ ​ ( 2,075 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 3,583 ) ​ ​ ​ ​ ​ ( 3,583 ) Cost of sales ​ 1,436 ​ ​ ​ ​ ​ 1,436 Interest expense ​ 12 ​ ​ ​ ​ ​ 12 Net other comprehensive income (loss) ​ 6,830 ​ ​ ( 10,389 ) ​ ​ ( 3,559 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 $ 4,366 ​ $ ( 15,916 ) ​ $ ( 11,550 ) ​ ​ ​ ​ 88 Table of Contents 17. LEASES We have operating leases for facilities used for manufacturing, research and development, sales and distribution, and office space, as well as leases for manufacturing and office equipment, vehicles, and land. Our leases have remaining terms ranging from less than one year to approximately 27 years . A number of our lease agreements contain options to renew at our discretion for periods of up to 15 years and options to terminate the leases within one year . The lease term used to calculate ROU assets and lease liabilities includes renewal and termination options that are deemed reasonably certain to be exercised. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. We do not have any bargain purchase options in our leases. For leases with an initial term of one year or less, we do not record a ROU asset or lease liability on our consolidated balance sheet. Substantially all of the ROU assets and lease liabilities as of December 31, 2022 recorded on our consolidated balance sheet are related to our cardiovascular segment. From time to time, we enter into agreements to sublease a portion of our facilities to third parties. Such sublease income is not material. We also lease certain hardware consoles to customers and record rental revenue as a component of net sales. Rental revenue under such console leasing arrangements for the years ended December 31, 2022, 2021 and 2020 was not significant. The following was included in our consolidated balance sheet as of December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Assets ​ ​ ROU operating lease assets ​ $ 65,262 ​ $ 65,913 ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ Short-term operating lease liabilities ​ $ 11,005 ​ $ 10,668 Long-term operating lease liabilities ​ 59,736 ​ 61,526 Total operating lease liabilities ​ $ 70,741 ​ $ 72,194 ​ We recognize lease expense for operating leases on a straight-line basis over the term of the lease. Net lease cost for the years ended December 31, 2022, 2021 and 2020 was $ 13.8 million, $ 15.9 million, and $ 16.7 million, respectively. The components of lease costs for the years ended December 31, 2022, 2021 and 2020 were as follows, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease Cost ​ Classification ​ 2022 ​ 2021 ​ 2020 Operating lease cost (a) Selling, general and administrative expenses ​ $ 14,219 ​ $ 16,013 ​ $ 16,735 Sublease (income) (b) Selling, general and administrative expenses ​ ( 409 ) ​ ( 75 ) ​ ( 15 ) Net lease cost ​ $ 13,810 ​ $ 15,938 ​ $ 16,720 (a) Includes expense related to short-term leases and variable payments, which were not significant. (b) Does not include rental revenue from leases of hardware consoles to customers, which was not significant. ​ Supplemental cash flow information for the years ended December 31, 2022, 2021 and 2020 was as follows, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 Cash paid for amounts included in the measurement of lease liabilities ​ $ 13,710 ​ $ 14,970 ​ $ 15,059 Right-of-use assets obtained in exchange for lease obligations ​ $ 11,130 ​ $ 1,524 ​ $ 10,938 ​ Generally, our lease agreements do not specify an implicit rate. Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length 89 Table of Contents of lease term and the risks of the economic environment in which the leased asset operates. As of December 31, 2022, 2021 and 2020, our lease agreements had the following remaining lease term and discount rates: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 2021 ​ ​ 2020 Weighted average remaining lease term ​ 10.4 years ​ ​ 11.4 years ​ ​ 11.5 years Weighted average discount rate ​ 3.4 % ​ ​ 3.4 % ​ ​ 3.3 % ​ As of December 31, 2022, maturities of operating lease liabilities were as follows, in thousands: ​ ​ ​ ​ Year ended December 31, Amounts due under operating leases 2023 ​ $ 12,638 2024 ​ 11,554 2025 ​ 8,941 2026 ​ 7,523 2027 ​ 5,944 Thereafter ​ 37,983 Total lease payments ​ 84,583 Less: Imputed interest ​ ( 13,842 ) Total ​ $ 70,741 ​ As of December 31, 2022, we had additional operating leases for office space that had not yet commenced. These leases will commence during 2023 and are not deemed material. ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. ​