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, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). 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, 2023, 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 28, 2024, 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 Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. ​ 49 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 valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration. 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 forecasted product demand derived from historical experience of product sale and production raw material usage. 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, slow moving 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 tested the calculation of the estimated excess, slow moving and obsolete inventories, on a sample basis, including the completeness and accuracy of the data used in the calculation, such as future product demand based on historical sales and raw material usage and product expiration. ● 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. Intangible Assets – Bluegrass and AngioDynamics Developed Technology – Refer to Note 3 to the financial statements Critical Audit Matter Description On May 4, 2023, the Company entered into an asset purchase agreement to acquire specific assets related to catheter products from Bluegrass Vascular Technologies, Inc. (“Bluegrass”). The Company accounted for this acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the tangible and intangibles assets acquired based on their respective fair values, including developed technology intangible assets of $28 million. On June 8, 2023, the Company entered into an asset purchase agreement with AngioDynamics, Inc. (“AngioDynamics”) to acquire the assets associated with a portfolio of catheter products. The Company accounted for this acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the tangible and intangible assets acquired based on their respective fair values, including developed technology intangible assets of $65.2 million. The determination of the fair value of the developed technology intangible assets required management to make significant estimates and assumptions related to future cash flows and the discount rate. 50 Table of Contents We identified the valuation of the acquired developed technology intangible assets from Bluegrass and AngioDynamics as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets. This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows and the discount rate. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the estimates of future cash flows and discount rate for the acquired Bluegrass and AngioDynamics developed technology intangible assets included the following, among others: ● We tested the effectiveness of internal controls over the valuation of the developed technology intangible assets, including those over estimates of future cash flows and the selection of the discount rate. ● We assessed the reasonableness of management’s estimated cash flows by inquiring of management regarding its processes for developing estimated financial information and comparing the estimates to historical results achieved by the acquired assets, historical results of the Company and other acquisitions completed in recent years, and comparable peer companies. ● We performed sensitivity analyses of the significant assumptions used in the developed technology valuation models to evaluate the change in fair value resulting from changes in the significant assumptions. ● With the assistance of our fair value specialists, we (1) evaluated the reasonableness of the valuation methodology; (2) evaluated the reasonableness of the discount rate through comparing the data underlying the determination of the discount rate to independent sources and developing a range of independent estimates and comparing those to the discount rates selected by management; and (3) tested the mathematical accuracy of the discounted cash flow calculation. ● We evaluated whether the estimated revenue growth rates and cash flows were consistent with evidence obtained in other areas of the audit, including a retrospective review of actual post-acquisition financial results. ​ /s/ DELOITTE & TOUCHE LLP ​ ​ ​ Salt Lake City, Utah ​ February 28, 2024 ​ We have served as the Company’s auditor since 1988. ​ ​ ​ 51 Table of Contents ​ MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ASSETS 2023 2022 ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 587,036 ​ $ 58,408 Trade receivables — net of allowance for credit losses — 2023 — $ 9,023 and 2022 — $ 8,423 ​ 177,885 ​ 164,677 Other receivables ​ 10,517 ​ 12,992 Inventories ​ 303,871 ​ 265,991 Prepaid expenses and other current assets ​ 24,286 ​ 22,324 Prepaid income taxes ​ 4,016 ​ 3,913 Income tax refund receivables ​ 859 ​ 779 Total current assets ​ 1,108,470 ​ 529,084 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ Land and land improvements ​ 26,017 ​ 25,940 Buildings ​ 191,491 ​ 189,148 Manufacturing equipment ​ 316,930 ​ 299,089 Furniture and fixtures ​ 63,044 ​ 61,128 Leasehold improvements ​ 53,638 ​ 49,673 Construction-in-progress ​ 61,439 ​ 61,269 Total property and equipment ​ 712,559 ​ 686,247 Less accumulated depreciation ​ ( 329,036 ) ​ ( 303,271 ) Property and equipment — net ​ 383,523 ​ ​ 382,976 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ Intangible assets: ​ ​ Developed technology — net of accumulated amortization — 2023 — $ 321,488 and 2022 — $ 274,570 ​ 283,999 ​ 237,522 Other — net of accumulated amortization — 2023 — $ 76,887 and 2022 — $ 69,780 ​ 41,884 ​ 38,350 Goodwill ​ 382,240 ​ 359,821 Deferred income tax assets ​ 7,288 ​ 6,599 Right-of-use operating lease assets ​ ​ 63,047 ​ ​ 65,262 Other assets ​ 54,793 ​ 44,352 Total other assets ​ 833,251 ​ 751,906 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 2,325,244 ​ $ 1,663,966 ​ See notes to consolidated financial statements. (continued) ​ ​ 52 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, LIABILITIES AND STOCKHOLDERS’ EQUITY 2023 2022 ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ Trade payables ​ $ 65,944 ​ $ 68,504 Accrued expenses ​ 120,447 ​ 123,189 Current portion of long-term debt ​ — ​ 11,250 Short-term operating lease liabilities ​ ​ 12,087 ​ ​ 11,005 Income taxes payable ​ 5,086 ​ 6,697 Total current liabilities ​ 203,564 ​ 220,645 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 823,013 ​ 186,759 Deferred income tax liabilities ​ 5,547 ​ 18,462 Long-term income taxes payable ​ 347 ​ 347 Liabilities related to unrecognized tax benefits ​ 1,912 ​ 1,912 Deferred compensation payable ​ 17,167 ​ 15,264 Deferred credits ​ 1,605 ​ 1,708 Long-term operating lease liabilities ​ ​ 56,259 ​ 59,736 Other long-term obligations ​ 13,830 ​ 14,736 Total liabilities ​ 1,123,244 ​ 519,569 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Preferred stock — 5,000 shares authorized as of December 31, 2023 and December 31, 2022; no shares issued ​ — ​ — Common stock, no par value; 100,000 shares authorized; issued and outstanding as of December 31, 2023 - 57,858 and December 31, 2022 - 57,306 ​ 638,150 ​ 675,174 Retained earnings ​ 575,184 ​ 480,773 Accumulated other comprehensive loss ​ ( 11,334 ) ​ ( 11,550 ) Total stockholders’ equity ​ 1,202,000 ​ 1,144,397 ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 2,325,244 ​ $ 1,663,966 ​ ​ ​ See notes to consolidated financial statements. (concluded) ​ ​ ​ 53 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Net sales ​ $ 1,257,366 ​ $ 1,150,981 ​ $ 1,074,751 Cost of sales ​ 673,494 ​ 631,882 ​ 589,418 Gross profit ​ 583,872 ​ 519,099 ​ 485,333 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ Selling, general and administrative ​ 373,676 ​ 342,525 ​ 335,690 Research and development ​ 82,728 ​ 75,510 ​ 71,247 Legal settlement ​ ​ — ​ ​ — ​ ​ 10,036 Impairment charges ​ 270 ​ 2,219 ​ 4,283 Contingent consideration expense ​ 1,704 ​ 4,611 ​ 3,161 Acquired in-process research and development ​ 1,550 ​ 6,671 ​ — Total operating expenses ​ 459,928 ​ 431,536 ​ 424,417 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 123,944 ​ 87,563 ​ 60,916 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ Interest income ​ 2,456 ​ 439 ​ 769 Interest expense ​ ( 15,511 ) ​ ( 6,339 ) ​ ( 5,261 ) Other income (expense) — net ​ 1,200 ​ 966 ​ ( 2,507 ) Total other expense — net ​ ( 11,855 ) ​ ( 4,934 ) ​ ( 6,999 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 112,089 ​ 82,629 ​ 53,917 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 17,678 ​ 8,113 ​ 5,463 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 94,411 ​ $ 74,516 ​ $ 48,454 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per common share ​ ​ ​ Basic ​ $ 1.64 ​ $ 1.31 ​ $ 0.86 Diluted ​ $ 1.62 ​ $ 1.29 ​ $ 0.84 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ ​ Basic ​ 57,593 ​ 56,806 ​ 56,145 Diluted ​ 58,356 ​ 57,671 ​ 57,359 ​ See notes to consolidated financial statements. ​ ​ 54 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Net income ​ $ 94,411 ​ $ 74,516 ​ $ 48,454 Other comprehensive income: ​ ​ ​ Cash flow hedges ​ ( 3,570 ) ​ 9,007 ​ 5,965 Income tax benefit (expense) ​ 866 ​ ( 2,177 ) ​ ( 1,489 ) Foreign currency translation adjustment ​ 2,959 ​ ( 10,491 ) ​ ( 7,704 ) Income tax benefit (expense) ​ ( 39 ) ​ 102 ​ 689 Total other comprehensive income (loss) ​ 216 ​ ( 3,559 ) ​ ( 2,539 ) Total comprehensive income ​ $ 94,627 ​ $ 70,957 ​ $ 45,915 ​ See notes to consolidated financial statements. ​ ​ 55 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 Loss Total BALANCE — January 1, 2021 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 Net income ​ ​ ​ ​ ​ ​ ​ 94,411 ​ ​ ​ ​ 94,411 Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 216 ​ 216 Stock-based compensation expense ​ ​ ​ ​ 19,043 ​ ​ ​ ​ ​ ​ ​ 19,043 Options exercised ​ 606 ​ ​ 20,312 ​ ​ ​ ​ ​ ​ ​ 20,312 Issuance of common stock under Employee Stock Purchase Plans ​ 15 ​ ​ 1,081 ​ ​ ​ ​ ​ ​ ​ 1,081 Shares issued from time-vested restricted stock units ​ 92 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Purchase of capped call option ​ — ​ ​ ( 66,528 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 66,528 ) Shares surrendered in exchange for payment of payroll tax liabilities ​ ( 75 ) ​ ​ ( 5,123 ) ​ ​ ​ ​ ​ ​ ​ ( 5,123 ) Shares surrendered in exchange for exercise of stock options ​ ( 86 ) ​ ​ ( 5,809 ) ​ ​ ​ ​ ​ ​ ​ ( 5,809 ) BALANCE — December 31, 2023 57,858 ​ $ 638,150 ​ $ 575,184 ​ $ ( 11,334 ) ​ $ 1,202,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See notes to consolidated financial statements. ​ 56 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ Net income ​ $ 94,411 ​ $ 74,516 ​ $ 48,454 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ Depreciation and amortization ​ 89,985 ​ 81,804 ​ 84,066 (Gain) loss on disposition of business ​ ( 431 ) ​ 1,417 ​ — Loss on sale or abandonment of property and equipment ​ 5,838 ​ 380 ​ ​ 1,303 Write-off of certain intangible assets and other long-term assets ​ 506 ​ 2,281 ​ ​ 4,412 Acquired in-process research and development ​ 1,550 ​ 6,671 ​ ​ — Amortization of right-of-use operating lease assets ​ ​ 11,307 ​ ​ 10,394 ​ ​ 11,718 Fair value adjustments related to contingent consideration liabilities ​ ​ 1,704 ​ ​ 4,611 ​ ​ 3,161 Amortization of deferred credits ​ ( 104 ) ​ ( 107 ) ​ ​ ( 108 ) Amortization and write-off of long-term debt issuance costs ​ 1,717 ​ 604 ​ ​ 604 Deferred income taxes ​ ( 12,643 ) ​ ( 14,924 ) ​ ​ ( 4,631 ) Stock-based compensation expense ​ 21,333 ​ 18,042 ​ ​ 16,090 Changes in operating assets and liabilities, net of acquisitions and divestitures: ​ ​ ​ ​ ​ ​ ​ Trade receivables ​ ( 11,916 ) ​ ( 15,116 ) ​ ​ ( 8,618 ) Other receivables ​ 2,429 ​ 4,154 ​ ​ ( 10,418 ) Inventories ​ ( 32,105 ) ​ ( 47,929 ) ​ ​ ( 25,183 ) Prepaid expenses and other current assets ​ 1,281 ​ ( 1,798 ) ​ ​ ( 3,555 ) Prepaid income taxes ​ ( 92 ) ​ ( 379 ) ​ ​ 125 Income tax refund receivables ​ ( 58 ) ​ 1,952 ​ ​ 739 Other assets ​ ( 5,976 ) ​ 657 ​ ​ ( 1,670 ) Trade payables ​ ( 7,297 ) ​ 12,661 ​ ​ 6,050 Accrued expenses ​ ( 2,484 ) ​ ( 16,379 ) ​ ​ 36,462 Income taxes payable ​ ( 1,685 ) ​ 4,521 ​ ​ ( 119 ) Liabilities related to unrecognized tax benefits ​ — ​ ( 45 ) ​ ​ 314 Deferred compensation payable ​ 1,903 ​ ( 2,848 ) ​ ​ 1,303 Operating lease liabilities ​ ​ ( 11,492 ) ​ ​ ( 11,127 ) ​ ​ ( 12,410 ) Other long-term obligations ​ ( 2,530 ) ​ 278 ​ ​ ( 858 ) Total adjustments ​ 50,740 ​ 39,775 ​ 98,777 Net cash, cash equivalents, and restricted cash provided by operating activities ​ 145,151 ​ 114,291 ​ 147,231 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Capital expenditures for: ​ ​ ​ Property and equipment ​ ( 34,290 ) ​ ( 45,029 ) ​ ​ ( 27,939 ) Intangible assets ​ ( 2,411 ) ​ ( 3,175 ) ​ ​ ( 2,834 ) Proceeds from the sale of property and equipment ​ 201 ​ 65 ​ ​ 1,037 Proceeds (payments) from disposition of business ​ ​ 431 ​ ​ ( 971 ) ​ ​ — Cash received for settlement of note receivable ​ ​ — ​ ​ — ​ ​ 2,000 Issuance of note receivable ​ ( 1,000 ) ​ — ​ ​ ( 2,254 ) Cash paid in acquisitions, net of cash acquired ​ ( 138,278 ) ​ ( 8,287 ) ​ ​ ( 7,171 ) Net cash, cash equivalents, and restricted cash used in investing activities ​ $ ( 175,347 ) ​ $ ( 57,397 ) ​ $ ( 37,161 ) ​ ​ ​ See notes to consolidated financial statements. (continued) ​ ​ 57 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ Proceeds from issuance of common stock ​ $ 15,584 ​ $ 20,070 ​ $ 21,306 Proceeds from issuance of long-term debt ​ 1,199,203 ​ 215,205 ​ 98,421 Payments on long-term debt ​ ​ ( 579,624 ) ​ ​ ( 260,143 ) ​ ​ ( 206,921 ) Purchase of capped call option ​ ​ ( 66,528 ) ​ ​ — ​ ​ — Long-term debt issuance costs ​ ( 677 ) ​ — ​ — Contingent payments related to acquisitions ​ ( 3,569 ) ​ ( 32,918 ) ​ ( 10,665 ) Payment of taxes related to an exchange of common stock ​ ( 5,123 ) ​ ( 2,474 ) ​ ( 576 ) Net cash, cash equivalents, and restricted cash provided by (used in) financing activities ​ 559,266 ​ ( 60,260 ) ​ ( 98,435 ) Effect of exchange rates on cash, cash equivalents, and restricted cash ​ ( 484 ) ​ ( 3,826 ) ​ ( 801 ) Net increase (decrease) in cash, cash equivalents and restricted cash ​ 528,586 ​ ( 7,192 ) ​ 10,834 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH, CASH EQUIVALENTS AND RESTRICTED CASH: ​ ​ ​ Beginning of period ​ ​ 60,558 ​ ​ 67,750 ​ ​ 56,916 End of period ​ $ 589,144 ​ $ 60,558 ​ $ 67,750 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ 587,036 ​ ​ 58,408 ​ ​ 67,750 Restricted cash reported in prepaid expenses and other current assets ​ ​ 2,108 ​ ​ 2,150 ​ ​ — Total cash, cash equivalents and restricted cash ​ $ 589,144 ​ $ 60,558 ​ $ 67,750 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ​ ​ ​ Cash paid during the period for: ​ ​ ​ Interest (net of capitalized interest of $ 1,272 , $ 858 and $ 480 , respectively) ​ $ 14,051 ​ $ 6,258 ​ $ 5,261 Income taxes ​ ​ 31,534 ​ ​ 17,092 ​ ​ 8,828 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES ​ ​ ​ Property and equipment purchases in accounts payable ​ $ 8,267 ​ $ 3,702 ​ $ 2,558 Acquisition purchases in accrued expenses and other long-term obligations ​ ​ 3,713 ​ ​ 3,526 ​ ​ — Merit common stock surrendered ( 86 , 18 and 3 shares, respectively) in exchange for exercise of stock options ​ ​ 5,809 ​ ​ 1,140 ​ ​ 180 Right-of-use operating lease assets obtained in exchange for operating lease liabilities ​ ​ 8,891 ​ ​ 11,130 ​ ​ 1,524 ​ See notes to consolidated financial statements. (concluded) ​ ​ ​ ​ ​ 58 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 (“U.S. GAAP”). 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 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, 2023 and 2022, we had restricted cash for the payment of certain import and other taxes for our subsidiary in China of $ 2.1 million and $ 2.1 million, respectively, which was reported within prepaid expenses and other assets on our consolidated balance sheets. 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 inventories, 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. 59 Table of Contents 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 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, 2023, 2022 and 2021 was $ 34.0 million, $ 33.4 million, and $ 34.5 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 $ 18.3 million and $ 15.8 million at December 31, 2023 and 2022, respectively, which is included in other assets in our consolidated balance sheets. We have recorded a deferred compensation payable of $ 17.2 million and $ 15.3 million at December 31, 2023 and 2022, respectively, to reflect the liability to our employees under this plan. 60 Table of Contents Other Assets . Other assets as of December 31, 2023 and 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Investments in privately held companies ​ $ 19,061 ​ $ 15,576 Deferred compensation plan assets ​ ​ 18,309 ​ ​ 15,767 Long-term notes receivable, net ​ ​ 3,241 ​ ​ 2,397 Other ​ 14,182 ​ 10,612 Total ​ $ 54,793 ​ $ 44,352 ​ 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. 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, 2023 and 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Contingent consideration liabilities ​ $ 3,039 ​ $ 2,260 Other long-term obligations ​ ​ 10,791 ​ ​ 12,476 Total ​ $ 13,830 ​ $ 14,736 ​ 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. ​ 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. 61 Table of Contents 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 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 for the years ended December 31, 2023, 2022 and 2021. 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 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 potentially dilutive common equivalent shares outstanding. 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. For Convertible Notes, the dilutive effect is calculated using the if-converted method. 62 Table of Contents 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 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, 2023, 2022 and 2021 was $ 21.3 million, $ 18.0 million, and $ 16.1 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 loss as a separate component of stockholders’ equity. Transactional exchange gains or losses are included in other income (expense) in determining net income for the period. Derivatives . We use forward contracts to mitigate our exposure to volatility in foreign exchange rates, and we use an interest rate swap to hedge changes in the benchmark interest rate related to our Fourth 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). R ecently Adopted 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. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. 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. During 2023, we transitioned our interest rate swap agreement to reference the Secured Overnight Financing Rate (“SOFR”) in connection with reference rate reform and adopted certain optional expedients provided in ASU 2020-04 in relation to contract modifications and hedge accounting that allowed us 63 Table of Contents to continue hedge accounting for our interest rate swap cash flow hedge (see Note 9). The adoption of this guidance did not have a material impact on our consolidated financial statements. ​ Recently Issued Accounting Standards. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The provisions of this update must be applied retrospectively to all periods presented in the financial statements. We are currently assessing the anticipated impact of this standard on our consolidated financial statements. ​ In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which amends Income Taxes (Topic 740) . The FASB issued this update to improve annual basis income tax disclosures related to (1) rate reconciliation, (2) income taxes paid, and (3) other disclosures related to pretax income (or loss) and income tax expense (or benefit) from continuing operations. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied on a prospective basis. Retrospective application is permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures. ​ We currently believe there are no other issued and not yet effective accounting standards that are materially relevant to our financial statements. ​ ​ 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, 2023, 2022 and 2021 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ Year Ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ December 31, 2021 ​ United States International Total United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 299,313 ​ $ 202,907 ​ $ 502,220 ​ $ 263,602 ​ $ 176,208 ​ $ 439,810 ​ $ 244,459 ​ $ 160,657 ​ $ 405,116 Cardiac Intervention ​ 143,755 ​ ​ 214,696 ​ 358,451 ​ 128,711 ​ ​ 214,475 ​ 343,186 ​ 122,452 ​ ​ 198,189 ​ 320,641 Custom Procedural Solutions ​ 114,010 ​ ​ 81,323 ​ 195,333 ​ 108,778 ​ ​ 81,416 ​ 190,194 ​ 108,068 ​ ​ 85,874 ​ 193,942 OEM ​ 135,525 ​ ​ 29,031 ​ 164,556 ​ 118,869 ​ ​ 26,165 ​ 145,034 ​ 104,436 ​ ​ 19,092 ​ 123,528 Total ​ 692,603 ​ ​ 527,957 ​ 1,220,560 ​ 619,960 ​ 498,264 ​ 1,118,224 ​ 579,415 ​ 463,812 ​ 1,043,227 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy Devices ​ 34,386 ​ 2,420 ​ 36,806 ​ 30,599 ​ ​ 2,158 ​ 32,757 ​ 29,463 ​ ​ 2,061 ​ 31,524 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 726,989 ​ $ 530,377 ​ $ 1,257,366 ​ $ 650,559 ​ $ 500,422 ​ $ 1,150,981 ​ $ 608,878 ​ $ 465,873 ​ $ 1,074,751 ​ ​ 64 Table of Contents 3. ACQUISITIONS AND OTHER STRATEGIC TRANSACTIONS 2023 Acquisitions On June 8, 2023, we entered into an asset purchase agreement with AngioDynamics, Inc. (“AngioDynamics”) to acquire the assets associated with a portfolio of dialysis catheter products and the BioSentry® Biopsy Tract Sealant System for a purchase price of $ 100 million. We accounted for this transaction under the acquisition method of accounting as a business combination. The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were approximately $ 14.4 million for the year ended December 31, 2023. It is not practical to separately report earnings related to the acquisition, as we began to immediately integrate the acquisition into existing operations, sales distribution networks and management structure of our cardiovascular business segment. Acquisition-related costs associated with the AngioDynamics acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, were approximately $ 4.9 million for the year ended December 31, 2023. The purchase price was allocated as follows (in thousands): ​ ​ ​ ​ Assets Acquired ​ Prepaid expenses ​ $ 2,000 Inventories ​ 5,254 Property and equipment ​ ​ 108 Intangible assets ​ ​ Developed technology ​ ​ 65,200 Trademarks ​ ​ 4,000 Customer list ​ ​ 5,800 Goodwill ​ ​ 17,638 Total net assets acquired ​ $ 100,000 ​ We are amortizing the AngioDynamics developed technology intangible assets over ten years , the trademark intangible assets over 11 years , and the customer list intangible asset on an accelerated basis over ten years . We have estimated the weighted average life of the intangible assets acquired from AngioDynamics to be 10.5 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects on our consolidated results of operations of the AngioDynamics acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information due to the unavailability of the information provided to the Company, management’s inability to reasonably estimate the amounts from the carve out of assets and differing fiscal year-end of the acquired business. ​ On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass, for a purchase price of approximately $ 32.7 million. Prior to the acquisition, we held an equity investment of 1,251,878 Bluegrass common shares representing approximately 19.5 % ownership in Bluegrass. The fair value of this previously held equity investment of approximately $ 245,000 is included in the purchase price allocation. We accounted for this transaction under the acquisition method of accounting 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. Acquisition-related costs associated with the Bluegrass acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, are not material. The purchase price was allocated as follows (in thousands): ​ ​ ​ ​ Assets Acquired ​ Inventories ​ $ 175 Intangible assets ​ ​ Developed technology ​ ​ 28,000 Trademarks ​ ​ 900 Goodwill ​ ​ 3,898 Total net assets acquired ​ $ 32,973 ​ 65 Table of Contents We are amortizing the Bluegrass developed technology intangible asset over 15 years and the related trademarks over 13 years . We have estimated the weighted average life of the intangible assets acquired from Bluegrass to be 14.9 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects on our consolidated results of operations of the Bluegrass acquisition are not material. ​ On May 1, 2023, we entered into an asset purchase agreement to acquire certain assets from ART, related to intellectual property rights for soft tissue markers. The total purchase price of the ART assets included an up-front payment of $ 750,000 , a deferred payment of $ 750,000 payable upon the first to occur of (1) shipment and installation of two commercial production winders used to manufacture the product or (2) 30 days after delivery of the winders to Merit, and, a deferred payment of $ 500,000 payable upon regulatory approval from the U.S. Food and Drug Administration for Merit to commence commercialization, marketing and sale of the product in the United States. We have accounted for this transaction as an asset purchase and recorded $ 1.5 million of acquired in-process research and development expense associated with the upfront payment and completion of the milestone related to the installation of the commercial production winders. The final payment will be capitalized as a developed technology intangible asset when paid upon completion of the regulatory approval milestone under the terms of the asset purchase agreement. The payments are reported within operating expenses 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. ​ We entered into a stock purchase agreement on January 11, 2023, and an exclusive distribution agreement on April 5, 2023, with Solo Pace Inc. ("Solo Pace”), owner and developer of a temporary external pulse generator and grounding pad with associated remote control module. Pursuant to these agreements, we paid $ 4.0 million to acquire (a) shares of Series Seed-1 Preferred Stock of Solo Pace, (b) an option to purchase the outstanding equity of Solo Pace within the earlier of five years after product commercialization or within 120 days after the twelve-month period wherein sales of the Solo Pace product exceed $ 6.0 million, and (c) exclusive rights to distribute the Solo Pace product upon commercialization. The shares of Solo Pace stock have been reflected within other assets in the accompanying consolidated balance sheets. Our investment in Solo Pace represents an ownership of approximately 19 % of its outstanding capital stock and has been recorded as an equity investment accounted for at cost because the equity interest does not have a readily determinable fair value and because we are not able to exercise significant influence over the operations of Solo Pace. ​ 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. ​ 66 Table of Contents 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 at the date of this investment. ​ 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 approximately 15.0 % of the outstanding stock at the date of this investment. ​ 4. INVENTORIES Inventories at December 31, 2023 and 2022, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 Finished goods ​ $ 158,893 ​ $ 147,051 Work-in-process ​ 25,420 ​ 29,534 Raw materials ​ 119,558 ​ 89,406 Total inventories ​ $ 303,871 ​ $ 265,991 ​ ​ 5. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Goodwill balance at January 1 ​ $ 359,821 ​ $ 361,741 Effect of foreign exchange ​ 883 ​ ( 1,920 ) Additions and adjustments as the result of acquisitions ​ 21,536 ​ — Goodwill balance at December 31 ​ $ 382,240 ​ $ 359,821 ​ Total accumulated goodwill impairment losses aggregated to $ 8.3 million as of December 31, 2023 and 2022. We did no t have any goodwill impairments for the years ended December 31, 2023, 2022 and 2021. The total goodwill balance as of December 31, 2023 and 2022 is related to our cardiovascular segment. 67 Table of Contents Other intangible assets at December 31, 2023 and 2022, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 28,877 ​ $ ( 10,916 ) ​ $ 17,961 Distribution agreements ​ 3,250 ​ ( 2,919 ) ​ 331 License agreements ​ 11,142 ​ ( 8,327 ) ​ 2,815 Trademarks ​ 35,135 ​ ( 20,804 ) ​ 14,331 Customer lists ​ 40,367 ​ ( 33,921 ) ​ 6,446 Total ​ $ 118,771 ​ $ ( 76,887 ) ​ $ 41,884 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ Aggregate amortization expense for the years ended December 31, 2023, 2022 and 2021 was $ 56.1 million, $ 48.4 million, and $ 49.6 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, 2023 (in thousands): ​ ​ ​ ​ ​ Estimated Amortization Expense 2024 ​ $ 62,244 2025 ​ 60,127 2026 ​ 49,037 2027 ​ ​ 45,619 2028 ​ 44,230 ​ We evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. D uring the year ended December 31, 2023, we recorded no impairment charges related to our intangible assets. 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, which pertained to our cardiovascular segment. 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, which pertained to our cardiovascular segment. The primary indicators of impairment were restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies. ​ 68 Table of Contents 6. INCOME TAXES 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. The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. Under a transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax in the jurisdiction of a company's ultimate parent entity will be zero for each fiscal year of the transition period if that jurisdiction has a corporate tax rate of at least 20%. The safe harbor transition period will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026. We are closely monitoring developments and evaluating the impact these new rules are anticipated to have on our tax rate, including eligibility to qualify for these safe harbor rules. For the years ended December 31, 2023, 2022 and 2021, income before income taxes is broken out between U.S. and foreign-sourced operations consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Domestic ​ $ 60,935 ​ $ 77,562 ​ $ 21,328 Foreign ​ 51,154 ​ 5,067 ​ 32,589 Total ​ $ 112,089 ​ $ 82,629 ​ $ 53,917 ​ The components of the provision for income taxes for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Current expense: ​ ​ ​ Federal ​ $ 15,684 ​ $ 9,584 ​ $ 808 State ​ 3,775 ​ 3,162 ​ 806 Foreign ​ 10,862 ​ 10,291 ​ 8,480 Total current expense ​ 30,321 ​ 23,037 ​ 10,094 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred expense (benefit): ​ ​ ​ Federal ​ ( 11,030 ) ​ ( 10,438 ) ​ ( 468 ) State ​ ( 1,699 ) ​ ( 3,615 ) ​ ( 1,845 ) Foreign ​ 86 ​ ( 871 ) ​ ( 2,318 ) Total deferred benefit ​ ( 12,643 ) ​ ( 14,924 ) ​ ( 4,631 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total income tax expense ​ $ 17,678 ​ $ 8,113 ​ $ 5,463 ​ 69 Table of Contents The difference between the income tax expense reported and amounts computed by applying the statutory federal rate of 21.0 % to pretax income for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Computed federal income tax expense at applicable statutory rate of 21 % ​ $ 23,539 ​ $ 17,352 ​ $ 11,323 State income tax expense (benefit) ​ 1,627 ​ 35 ​ ( 283 ) Tax credits ​ ( 2,412 ) ​ ( 1,978 ) ​ ( 2,507 ) Tax effect of international items ​ ( 3,994 ) ​ ( 10,698 ) ​ ( 281 ) Uncertain tax positions ​ 4 ​ ( 47 ) ​ 401 Deferred compensation insurance assets ​ ( 548 ) ​ 706 ​ ( 413 ) Stock-based compensation ​ ( 3,001 ) ​ ( 3,423 ) ​ ( 5,571 ) Valuation allowance ​ ​ ( 90 ) ​ ​ 3,523 ​ ​ — Remeasurement of state deferred taxes ​ ​ ( 73 ) ​ ​ ( 375 ) ​ ​ ( 526 ) Non-deductible expenses ​ ​ 2,101 ​ ​ 2,027 ​ ​ 2,455 Remeasurement of contingent consideration liabilities ​ ​ 317 ​ ​ 1,061 ​ ​ 733 Other — including the effect of graduated rates ​ 208 ​ ( 70 ) ​ 132 Total income tax expense ​ $ 17,678 ​ $ 8,113 ​ $ 5,463 ​ Deferred income tax assets and liabilities at December 31, 2023 and 2022, consisted of the following temporary differences and carry-forward items (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Deferred income tax assets: ​ ​ Allowance for credit losses on trade receivables ​ $ 2,009 ​ $ 1,925 Accrued compensation expense ​ 10,285 ​ 9,968 Inventory differences ​ 5,477 ​ 5,712 Net operating loss carryforwards ​ 10,007 ​ 11,117 Stock-based compensation expense ​ 7,913 ​ 7,167 Operating lease assets ​ ​ 11,331 ​ ​ 12,801 Federal R&D tax credit ​ ​ — ​ ​ 634 State R&D tax credits ​ ​ 5,237 ​ ​ 4,679 IRC Section 174 capitalized R&D ​ ​ 26,370 ​ ​ 15,012 Other ​ 10,159 ​ 8,827 Total deferred income tax assets ​ 88,788 ​ 77,842 ​ ​ ​ ​ ​ ​ ​ Deferred income tax liabilities: ​ ​ Prepaid expenses ​ ( 1,123 ) ​ ( 1,568 ) Property and equipment ​ ( 23,539 ) ​ ( 20,925 ) Intangible assets ​ ( 34,613 ) ​ ( 38,547 ) Foreign withholding tax ​ ( 2,005 ) ​ ( 1,571 ) Operating lease liabilities ​ ​ ( 10,129 ) ​ ​ ( 11,527 ) Other ​ ( 1,898 ) ​ ( 2,040 ) Total deferred income tax liabilities ​ ( 73,307 ) ​ ( 76,178 ) Valuation allowance ​ ( 13,740 ) ​ ( 13,527 ) Net deferred income tax assets (liabilities) ​ $ 1,741 ​ $ ( 11,863 ) ​ ​ ​ ​ ​ ​ ​ Reported as: ​ ​ Deferred income tax assets ​ $ 7,288 ​ $ 6,599 Deferred income tax liabilities ​ ( 5,547 ) ​ ( 18,462 ) Net deferred income tax assets (liabilities) ​ $ 1,741 ​ $ ( 11,863 ) ​ 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 $ 213,000 during the year ended December 31, 2023, increased by $ 2.7 million during the year ended December 31, 2022, and increased by $ 573,000 during the year ended December 31, 2021. As of December 31, 2023, we had U.S federal net operating loss carryforwards of $ 24.7 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, $ 24.7 million of the net operating losses will expire between 2025 and 2037. We anticipate that we will utilize all current net operating loss carryforwards prior to their expiration dates over the next 12 years . We utilized a total of $ 5 million in U.S. federal net operating loss carryforwards during the year ended December 31, 2023. As of December 31, 2023, we had $ 22.6 million of non-U.S. net operating loss carryforwards, of which $ 20.6 million have no expiration date and $ 2 million expire at various dates through 2035. Non-U.S. net operating loss carryforwards utilized during the year ended December 31, 2023 were not material. We do not consider our foreign earnings to be permanently reinvested. Consequently, we have recorded tax expense of $ 434,000 , $ 320,000 and $ 288,000 for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2023, 2022 and 2021, 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 2020. In foreign jurisdictions, we are no longer subject to income tax examinations for years before 2017. 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, 2023, including interest and penalties, was $ 1.9 million, of which $ 1.9 million would favorably impact our effective tax rate if recognized. 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, 2023 and 2022, none 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, 2023 and 2022, we had accrued $ 290,000 and $ 336,000 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, 2023, 2022 and 2021, our liability for unrecognized tax benefit was increased (decreased) for interest and penalties by $( 46,000 ), $ 14,000 , and $ 46,000 , respectively. We estimate it is reasonably possible that within the next 12 months the total liability for unrecognized tax benefits may increase, including expirations related to statutes of limitation, up to $ 7,000 . 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, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Unrecognized tax benefits, opening balance ​ $ 1,576 ​ $ 1,635 ​ $ 1,674 Gross increases (decreases) in tax positions taken in a prior year ​ 112 ​ ( 10 ) ​ 82 Gross increases in tax positions taken in the current year ​ 442 ​ 294 ​ 316 Lapse of applicable statute of limitations ​ ( 508 ) ​ ( 343 ) ​ ( 437 ) Unrecognized tax benefits, ending balance ​ $ 1,622 ​ $ 1,576 ​ $ 1,635 ​ 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, 2023 and 2022, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Payroll and related liabilities ​ $ 66,929 ​ $ 58,620 Current portion of contingent liabilities ​ 408 ​ 15,813 Advances from employees ​ 285 ​ 165 Accrued rebates payable ​ ​ 11,005 ​ ​ 10,925 Accrued legal settlement ​ ​ — ​ ​ 1,000 Other accrued expenses ​ 41,820 ​ 36,666 Total ​ $ 120,447 ​ $ 123,189 ​ ​ ​ 8. DEBT Principal balances outstanding under our long-term debt obligations as of December 31, 2023 and 2022, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 Term loans ​ $ 99,063 ​ $ 124,688 Revolving credit loans ​ — ​ 73,500 Convertible notes ​ ​ 747,500 ​ ​ — Less unamortized debt issuance costs ​ ( 23,550 ) ​ ( 179 ) Total long-term debt ​ 823,013 ​ 198,009 Less current portion ​ — ​ 11,250 Long-term portion ​ $ 823,013 ​ $ 186,759 ​ Future minimum principal payments on our long-term debt as of December 31, 2023, are as follows (in thousands): ​ ​ ​ ​ Years Ending ​ Future Minimum December 31, Principal Payments 2024 $ — 2025 ​ ​ — 2026 ​ ​ — 2027 ​ ​ — 2028 ​ ​ 99,063 Thereafter ​ ​ 747,500 Total future minimum principal payments ​ $ 846,563 ​ 72 Table of Contents Fourth Amended and Restated Credit Agreement ​ On June 6, 2023, we entered into a Fourth Amended and Restated Credit Agreement (the "Fourth Amended Credit Agreement"). The Fourth Amended Credit Agreement is a syndicated loan agreement with Wells Fargo Bank, National Association and other parties. The Fourth Amended Credit Agreement amended and restated in its entirety our previously outstanding Third Amended and Restated Credit Agreement and all amendments thereto. The Fourth Amended Credit Agreement provides for a term loan of $ 150 million and a revolving credit commitment of up to an aggregate amount of $ 700 million, inclusive of sub-facilities for multicurrency borrowings, standby letters of credit and swingline loans. On June 6, 2028, all principal, interest and other amounts outstanding under the Fourth 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. ​ On December 5, 2023, we executed an amendment to the Fourth Amended Credit Agreement (the "Fourth Amended Credit Agreement, as amended") to facilitate the issuance of our Convertible Notes described below. Among other things, the amendment also updated the definition of the Applicable Margin used in determining the interest rates and amended the financial covenants, all as described below. ​ Term loans made under the Fourth Amended Credit Agreement, as amended bear interest, at our election, at either (i) the Base Rate plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement) or, (ii) Adjusted Term SOFR plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement, as amended). Revolving credit loans bear interest, at our election, at either (a) the Base Rate plus the Applicable Margin, (b) Adjusted Term SOFR plus the Applicable Margin, (c) Adjusted Eurocurrency Rate plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement, as amended), or (d) Adjusted Daily Simple SONIA plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement, as amended). Swingline loans bear interest at the Base Rate plus the Applicable Margin. Interest on each loan featuring the Base Rate and each Daily Simple SONIA Loan is due and payable on the last business day of each calendar month; interest on each loan featuring the Eurocurrency Rate and each Term SOFR Loan is due and payable on the last day of each interest period applicable thereto, and if such interest period extends over three months, at the end of each three-month interval during such interest period. ​ The Fourth Amended Credit Agreement, as amended is collateralized by substantially all of our assets. The Fourth 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 Fourth Amended Credit Agreement requires that we maintain certain financial covenants, as follows: ​ ​ ​ ​ ​ ​ ​ Covenant Requirement ​ Consolidated Total Net Leverage Ratio (1) ​ 5.0 to 1.0 ​ Consolidated Senior Secured Net Leverage Ratio (2) ​ ​ 3.0 to 1.0 ​ Consolidated Interest Coverage Ratio (3) ​ 3.0 to 1.0 ​ ​ (1) Maximum Consolidated Total Net Leverage Ratio (as defined in the Fourth Amended Credit Agreement, as amended) as of any fiscal quarter end. (2) Maximum Consolidated Senior Secured Net Leverage Ratio (as defined in the Fourth Amended Credit Agreement, as amended) as of any fiscal quarter end. (3) Minimum ratio of Consolidated EBITDA (as defined in the Fourth Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Interest Expense (as defined in the Fourth Amended Credit Agreement, as amended) for any period of four consecutive fiscal quarters. ​ As of December 31, 2023, we believe we were in compliance with all covenants set forth in the Fourth Amended Credit Agreement, as amended. 73 Table of Contents As of December 31, 2023, we had outstanding borrowings of $ 99.1 million and issued letter of credit guarantees of $ 2.7 million under the Fourth Amended Credit Agreement, as amended, with additional available borrowings of approximately $ 626 million, based on the leverage ratio required pursuant to the Fourth Amended Credit Agreement, as amended. Our interest rate as of December 31, 2023 was a fixed rate of 3.39 % with respect to $ 75 million of the principal amount, as a result of an interest rate swap (see Note 9) and a variable floating rate of 7.21 % on $ 24.1 million. 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 and a variable floating rate of 5.38 % on $ 123.2 million. The foregoing fixed rates are exclusive of potential future changes in the applicable margin. Convertible Notes In December 2023, we issued Convertible Notes which bear interest at 3.00 % per year, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2024. The Convertible Notes are senior unsecured obligations (as defined in the Note Indenture) of the Company and will mature on February 1, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The net proceeds from the sale of the Convertible Notes were approximately $ 724.8 million after deducting offering and issuance costs and before the costs of the Capped Call transaction, as described below. The initial conversion rate of the notes will be 11.5171 shares of common stock per $ 1,000 principal amount of notes equivalent to an initial conversion price of approximately $ 86.83 per share of common stock, subject to adjustments as provided in the Indenture upon the occurrence of certain specified events. In addition, Holders of the Convertible Notes (“Holders”) will have the right to require the Company to repurchase all or a part of their notes upon the occurrence of a “fundamental change” (as defined in the indenture governing the Convertible Notes) in cash at a fundamental change repurchase price of 100 % of their principal amount plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. ​ Conversion can occur at the option of the Holders at any time on or after October 1, 2028. Prior to October 1, 2028, Holders may only elect to convert the Convertible Notes under the following circumstances: (1) During the five business day period after any ten consecutive trading day period in which, for each day of that period, the trading price per $1,000 principal amount of the Convertible Notes for such trading day was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on such trading day; (2) The Company issues to common stockholders any rights, options, or warrants, entitling them, for a period of not more than 60 days, to purchase shares of common stock at a price per share less than the average closing sale price of 10 consecutive trading days, or the Company’s election to make a distribution to common stockholders exceeding 10 % of the previous day’s closing sale price; (3) Upon the occurrence of a Fundamental Change, as set forth in the indenture governing the Convertible Notes; (4) During any calendar quarter (and only during such calendar quarter) beginning after March 31, 2024, if, the last reported sale price per share of the Company’s common stock exceeds 130 % of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading day period ending on, and including, the last trading day of the immediately preceding calendar quarter; or (5) Prior to the related redemption date if the Company calls any Convertible Notes for redemption. As of December 31, 2023, none of the conditions permitting the holders of the Convertible Notes to convert their notes early had been met, therefore, they are classified as long-term. ​ On or after February 7, 2027, we may redeem for cash all or part of the Convertible Notes, at our option, if the last reported sales price of common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related notice of the redemption. ​ Upon conversion, the Company will (1) pay cash up to the aggregate principal amount of the Convertible Notes to be converted and (2) pay or deliver, as the case may be, cash, shares of its common stock, or a combination of cash and shares of our common stock, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. ​ 74 Table of Contents Capped Call Transaction ​ In December 2023, in connection with the pricing of the Convertible Notes, Merit entered into privately negotiated capped call transactions (“Capped Call Transactions”) with certain of the initial purchasers and/or their respective affiliates and certain other financial institutions. The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the number of shares of Merit’s common stock initially underlying the Convertible Notes and are generally expected to reduce potential dilution to Merit’s common stock upon any conversion of Convertible Notes and/or offset any cash payments Merit is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap, based on a cap price initially equal to approximately $ 114.68 per share of Merit’s common stock, subject to certain adjustments under the terms of the Capped Call Transactions. The cost of the Capped Call Transactions was approximately $ 66.5 million. The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company's stock. The premiums paid for the Capped Call Transactions have been included as a net reduction to common stock within stockholders' equity. ​ ​ ​ ​ 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 under the Fourth Amended Credit Agreement 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 Fourth 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. In June 2023, certain terms under the agreement were amended to reflect the transition from LIBOR to SOFR, an alternative reference rate. Under the interest rate swap agreement we fixed the one-month SOFR rate on that portion of our borrowings under the Fourth Amended Credit Agreement at 1.64 % for the period from June 1, 2023 to July 31, 2024. The variable portion of the interest rate swap is tied to the one-month SOFR 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. 75 Table of Contents At December 31, 2023 and 2022, our interest rate swaps qualified as cash flow hedges. The fair value of our interest rate swap at December 31, 2023 was an asset of $ 1.5 million, partially offset by $ 0.4 million in deferred taxes. The fair value of our interest rate swaps at December 31, 2022 was an asset of $ 3.4 million, partially offset by $ 0.8 million in deferred taxes. Foreign Currency Risk . We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years . We are exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in various currencies, with our most significant exposure related to transactions and balances denominated in Chinese Renminbi and Euros, among others. We do not use derivative financial instruments for trading or speculative purposes. We do not believe we are subject to any credit risk contingent features related to our derivative contracts, and we seek to manage counterparty risk by allocating derivative contracts among several major financial institutions. 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 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. As of December 31, 2023 and 2022, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 141.1 million and $ 87.8 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. As of December 31, 2023 and 2022, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 108.4 million and $ 92.4 million, respectively. Balance Sheet Presentation of Derivatives. As of December 31, 2023 and 2022, 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): ​ 76 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Designated as Hedging Instruments Balance Sheet Location December 31, 2023 December 31, 2022 Assets ​ ​ Interest rate swap Prepaid expenses and other assets ​ $ 1,503 ​ $ — Interest rate swap Other assets (long-term) ​ ​ — ​ ​ 3,444 Foreign currency forward contracts Prepaid expenses and other assets ​ ​ 2,061 ​ ​ 3,215 Foreign currency forward contracts Other assets (long-term) ​ ​ 216 ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 1,898 ) ​ ( 1,509 ) Foreign currency forward contracts Other long-term obligations ​ ( 499 ) ​ ( 531 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Not Designated as Hedging Instruments Balance Sheet Location December 31, 2023 December 31, 2022 Assets ​ ​ Foreign currency forward contracts Prepaid expenses and other assets ​ $ 828 ​ $ 1,512 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 1,463 ) ​ ( 1,946 ) ​ 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 and consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of Gain/(Loss) ​ ​ Recognized in OCI ​ ​ Year Ended December 31, Derivative instrument 2023 2022 2021 Interest rate swaps ​ $ 609 ​ $ 4,879 ​ $ 1,402 Foreign currency forward contracts ​ 3,909 ​ 6,263 ​ ( 1,521 ) ​ 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, consolidated statements of comprehensive income 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 2023 ​ 2022 ​ 2021 2023 2022 2021 Interest expense ​ $ ( 15,511 ) ​ $ ( 6,339 ) ​ $ ( 5,261 ) ​ ​ $ 2,550 $ ( 12 ) $ ( 1,509 ) Revenue ​ 1,257,366 ​ 1,150,981 ​ 1,074,751 ​ ​ 4,081 ​ 3,583 ​ ( 5,592 ) Cost of sales ​ ( 673,494 ) ​ ( 631,882 ) ​ ( 589,418 ) ​ ​ 1,457 ​ ( 1,436 ) ​ 1,017 ​ As of December 31, 2023, $ 0.9 million or $ 0.7 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, 2023, $ 1.5 million, or $ 1.1 million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months. 77 Table of Contents Derivatives Not Designated as Hedging Instruments The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the years presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Derivative Instrument Location in statements of income 2023 2022 2021 Foreign currency forward contracts Other income (expense) — net ​ $ 2,004 ​ $ 1,420 ​ $ ( 1,598 ) ​ 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, 2023, 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, 2023, 2022 and 2021, total royalty expense approximated $ 8.6 million, $ 7.3 million and $ 7.6 million, respectively, and is recorded in cost of sales on the consolidated statements of income. Minimum contractual commitments under royalty agreements to be paid within twelve months of December 31, 2023 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 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. ​ 78 Table of Contents 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. ​ ​ 11. EARNINGS PER COMMON SHARE (EPS) The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 Net income ​ $ 94,411 ​ $ 74,516 ​ $ 48,454 Average common shares outstanding ​ 57,593 ​ 56,806 ​ 56,145 Basic EPS ​ $ 1.64 ​ $ 1.31 ​ $ 0.86 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average common shares outstanding ​ ​ 57,593 ​ ​ 56,806 ​ ​ 56,145 Effect of dilutive stock awards ​ ​ 763 ​ ​ 865 ​ ​ 1,214 Total potential shares outstanding ​ ​ 58,356 ​ ​ 57,671 ​ ​ 57,359 Diluted EPS ​ $ 1.62 ​ $ 1.29 ​ $ 0.84 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity awards excluded as the impact was anti-dilutive (1) ​ ​ 1,143 ​ ​ 1,438 ​ ​ 799 _______________________________________________ (1) Does not reflect the impact of incremental repurchases under the treasury stock method. ​ Convertible Notes ​ For our Convertible Notes issued in December 2023, the dilutive effect is calculated using the if-converted method. Upon surrender of the Convertible Notes for conversion, Merit will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of Merit’s common stock or a combination of cash and shares of Merit’s common stock, at Merit’s election, in respect of the remainder, if any, of Merit’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. Under the if-converted method, we include the number of shares required to satisfy the remaining conversion obligation, assuming all the Convertible Notes were converted. The average closing prices of our common stock for the year ended December 31, 2023 were used as the basis for determining the dilutive effect on EPS. The average closing prices for our common stock did not exceed the conversion price of $ 86.83 , and therefore all associated shares were anti-dilutive. ​ ​ ​ 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 79 Table of Contents 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, 2023, a total of 1,709,391 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, 2023, the 2006 Incentive Plan was no longer being used for new equity award grants. However, as of December 31, 2023, 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, 2023, the total number of shares of common stock that remained available to be issued under our non-qualified plan was 87,673 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. Stock-Based Compensation Expense . The stock-based compensation expense before income tax expense for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Cost of sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ $ 1,647 ​ $ 1,606 ​ $ 1,476 Research and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ ​ 1,739 ​ ​ 1,789 ​ ​ 1,343 Selling, general and administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ ​ 7,542 ​ ​ 7,305 ​ ​ 6,678 Performance-based restricted stock units ​ ​ ​ 6,344 ​ ​ 3,509 ​ ​ 3,525 Restricted stock units ​ ​ ​ 1,771 ​ ​ 1,836 ​ ​ 1,557 Cash-settled performance-based share-based awards ("Liability Awards") ​ ​ ​ 2,290 ​ ​ 1,997 ​ ​ 1,511 Total selling, general and administrative ​ ​ ​ 17,947 ​ ​ 14,647 ​ ​ 13,271 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense before taxes ​ ​ $ 21,333 ​ $ 18,042 ​ $ 16,090 ​ 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, 2023, 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 2.2 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, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Risk-free interest rate ​ 3.6 % - 4.8 % ​ 1.4 % - 4.3 % ​ 0.5 % - 1.1 % Expected option term ​ 4.0 years ​ 4.0 years ​ 4.0 years Expected dividend yield ​ — ​ — ​ — Expected price volatility ​ 39.6 % - 47.1 % ​ 46.2 % - 47.5 % ​ 46.1 % - 46.7 % ​ 80 Table of Contents 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, 2023, 2022 and 2021, approximately 444,000 , 251,000 and 716,000 nonqualified stock option grants were made, respectively, for a total fair value of $ 13.1 million, $ 6.3 million and $ 17.5 million. The table below presents information related to stock option activity for the years ended December 31, 2023, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Total intrinsic value of stock options exercised ​ $ 23,300 ​ $ 27,110 ​ $ 36,086 Cash received from stock option exercises ​ 14,503 ​ 18,952 ​ 20,194 Excess tax benefit from the exercise of stock options ​ 3,001 ​ 3,423 ​ 5,571 ​ Changes in stock options for the year ended December 31, 2023, 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 3,077 ​ $ 49.62 ​ Granted 444 ​ 72.36 ​ Exercised ( 606 ) ​ 33.48 ​ Forfeited/expired ( 47 ) ​ 60.08 ​ Outstanding at December 31 2,868 ​ 56.39 3.44 ​ $ 56,333 Exercisable 1,714 ​ 50.73 2.40 ​ 43,234 Ending vested and expected to vest 2,868 ​ 56.39 3.44 ​ 56,333 ​ The weighted average grant-date fair value of options granted during the years ended December 31, 2023, 2022 and 2021 was $ 29.58 , $ 24.98 and $ 24.38 , respectively. Stock-Settled Performance-Based Restricted Stock Units (“PSUs”) and Time-Vested Restricted Stock Units (“RSUs”) ​ Since 2020, we have granted PSUs which vest at the end of one , two and three-year performance periods, or one year after the agreement date, whichever is later. T he number of shares delivered upon vesting at the end of the performance periods are based upon performance against specified financial performance metrics and relative total shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements. 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 performance metrics that are expected to be achieved. At the end of the performance period, cumulative expense is calculated based on the actual financial performance metrics attained. ​ We have granted 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. ​ 81 Table of Contents Changes in PSUs and RSUs for the year ended December 31, 2023, 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 179 ​ $ 63.90 31 ​ $ 59.02 Granted 229 ​ 72.26 20 83.99 rTSR adjustment ​ 8 (2) ​ 70.58 ​ — ​ ​ — Vested ( 61 ) ​ 70.58 ( 31 ) 59.02 Forfeited — ​ — — — Nonvested balance at December 31 355 ​ 71.15 20 ​ 83.99 ​ (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 certain awards vested in 2023 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, 2023, 2022, and 2021 (units and shares in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 PSUs ​ ​ ​ ​ ​ ​ ​ ​ ​ Target units granted ​ ​ 115 ​ ​ 48 ​ ​ 52 Maximum units granted (1) ​ ​ 229 ​ ​ 97 ​ ​ 103 Maximum potential shares (1)(2) ​ ​ 287 ​ ​ 121 ​ ​ 129 Weighted average grant date fair value ​ $ 72.26 ​ $ 64.54 ​ $ 61.39 RSUs ​ ​ ​ ​ ​ ​ ​ ​ Units granted ​ ​ 20 ​ ​ 31 ​ ​ 26 Weighted average grant date fair value ​ $ 83.99 ​ $ 59.02 ​ $ 61.77 ​ (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 % . ​ During the years ended December 31, 2023, 2022 and 2021, there were approximately 61,000 , 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 financial performance multipliers and market conditions related to the rTSR multiplier. During the years ended December 31, 2023, 2022 and 2021, there were approximately 31,000 , 26,000 and 34,000 shares, respectively, that vested under RSUs. ​ 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, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Risk-free interest rate ​ 3.9 % - 4.6 % ​ 1.6 % - 2.7 % ​ 0.1 % - 0.3 % Performance period ​ 2.8 years ​ 2.6 - 2.8 years ​ 1.8 - 2.8 years Expected dividend yield ​ — ​ — ​ — Expected price volatility ​ 31.4 % - 32.6 % ​ 38.5 % - 46.2 % ​ 43.7 % - 49.3 % ​ The risk-free interest rate of return was determined using the U.S. Treasury rate at the time of grant with a remaining term equal to the expected term of the award. The expected volatility was based on a weighted average volatility of our stock price and the average volatility of our compensation peer group's volatilities. The expected dividend yield was assumed to be zero because, at the time of the grant, we had no plans to declare a dividend. 82 Table of Contents As of December 31, 2023, the total remaining unrecognized compensation cost related to stock-settled performance stock units and restricted stock units, net of expected forfeitures, was $ 10.5 million and $ 0.6 million, respectively, which is expected to be recognized over a weighted average period of 1.8 years and 0.4 years, respectively. Cash-Settled Performance-Based Share-Based Awards (“Liability Awards”) During the years ended December 31, 2023, 2022 and 2021, we granted liability awards to our Chief Executive Officer with total target cash incentives in the amount of $ 1.3 million, $ 1.0 million, and $ 1.0 million, respectively. These awards entitle him to a target cash payment based upon our relative shareholder return as compared to the rTSR and achievement of specified performance metrics, as defined in the award agreements. During the years ended December 31, 2023, 2022 and 2021, we granted additional performance stock units to certain employees that provide for settlement in cash upon our achievement of specified financial metrics. The cash payable upon vesting at the end of the service period is based upon performance against specified financial performance metrics and relative total shareholder return as compared to the rTSR, as defined in the award agreements. Compensation expense is recognized for the cash payment probable of being awarded based on the performance metrics. The potential maximum payout of these liability awards is 250 % of the target cash incentive, resulting in a total potential maximum payout of $ 4.3 million, $ 2.5 million and $ 2.5 million for liability awards granted during the years ended December 31, 2023, 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 sheets. The fair value of these awards is remeasured at each reporting period until the awards are settled. As of December 31, 2023, our recorded liabilities associated with these awards was $ 3.4 million, and we had remaining unrecognized compensation cost related to cash-settled performance-based share-based awards of $ 3.1 million, which is expected to be recognized over a weighted average period of 1.8 years. During 2023, 2022 and 2021, we paid $ 1.7 million, $ 833,000 and $ 417,000 , respectively, in connection with liability awards, and no awards were forfeited. ​ ​ ​ 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. Our chief operating decision maker is our Chief Executive Officer. We evaluate the performance of our operating segments based on net sales and operating income. 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, 2023, 2022 and 2021, we had international sales of $ 530.4 million, $ 500.4 million and $ 465.9 million, respectively, or 42 %, 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 $ 147.3 million, $ 149.3 million, and $ 138.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. International sales are attributed based on location of the customer receiving the product. ​ 83 Table of Contents Our long-lived assets (which are comprised of our net property and equipment) by geographic area at December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 United States ​ $ 273,105 ​ $ 281,290 ​ $ 275,311 Ireland ​ 42,333 ​ 40,749 ​ 39,863 Other foreign countries ​ 68,085 ​ 60,937 ​ 56,484 Total ​ $ 383,523 ​ $ 382,976 ​ $ 371,658 ​ Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the years ended December 31, 2023, 2022 and 2021, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Net sales ​ ​ ​ ​ Cardiovascular ​ $ 1,220,560 ​ $ 1,118,224 ​ $ 1,043,227 Endoscopy ​ 36,806 ​ 32,757 ​ 31,524 Total net sales ​ 1,257,366 ​ 1,150,981 ​ 1,074,751 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ ​ ​ Cardiovascular ​ 114,440 ​ 80,946 ​ 53,415 Endoscopy ​ 9,504 ​ 6,617 ​ 7,501 Total income from operations ​ 123,944 ​ 87,563 ​ 60,916 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other expense — net ​ ( 11,855 ) ​ ( 4,934 ) ​ ( 6,999 ) Income tax expense ​ 17,678 ​ 8,113 ​ 5,463 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 94,411 ​ $ 74,516 ​ $ 48,454 ​ Total assets by operating segment at December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Cardiovascular ​ $ 2,308,217 ​ $ 1,652,145 ​ $ 1,635,676 Endoscopy ​ 17,027 ​ 11,821 ​ 12,618 Total ​ $ 2,325,244 ​ $ 1,663,966 ​ $ 1,648,294 ​ Total depreciation and amortization by operating segment for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Cardiovascular ​ $ 88,960 ​ $ 80,777 ​ $ 83,000 Endoscopy ​ 1,025 ​ 1,027 ​ 1,066 Total ​ $ 89,985 ​ $ 81,804 ​ $ 84,066 ​ Total capital expenditures for property and equipment by operating segment for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Cardiovascular ​ $ 33,985 ​ $ 44,925 ​ $ 27,557 Endoscopy ​ 305 ​ 104 ​ 382 Total ​ $ 34,290 ​ $ 45,029 ​ $ 27,939 ​ ​ ​ ​ 84 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, 2023, 2022 and 2021 was $ 8.8 million, $ 7.7 million and $ 6.5 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, 2023 and 2022, 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, 2023 (Level 1) (Level 2) (Level 3) Marketable securities (1) ​ $ 78 ​ $ 78 ​ $ — ​ $ — Interest rate contract asset, current (2) ​ $ 1,503 ​ $ — ​ $ 1,503 ​ $ — Foreign currency contract assets, current and long-term (3) ​ $ 3,105 ​ $ — ​ $ 3,105 ​ $ — Foreign currency contract liabilities, current and long-term (4) ​ $ ( 3,860 ) ​ $ — ​ $ ( 3,860 ) ​ $ — Contingent consideration liabilities ​ $ ( 3,447 ) ​ $ — ​ $ — ​ $ ( 3,447 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ (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 prepaid and other current assets or other long-term assets 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. 85 Table of Contents 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 within operating expenses in the accompanying consolidated statements of income. 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, 2023 and 2022, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Beginning balance ​ $ 18,073 ​ $ 48,234 Contingent consideration expense ​ 1,704 ​ 4,610 Contingent payments made ​ ( 16,330 ) ​ ( 34,762 ) Effect of foreign exchange ​ ​ — ​ ​ ( 9 ) Ending balance ​ $ 3,447 ​ $ 18,073 ​ As of December 31, 2023, $ 3.0 million in contingent consideration liability was included in other long-term obligations and $ 0.4 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet related to contingent liabilities. 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. Cash payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $ 12.8 million and $ 1.8 million for the years ended December 31, 2023 and 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, 2023 and 2022 (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2023 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 2,945 Discounted cash flow Discount rate ​ 12.0 % - 16.0 % ​ 14.6 % ​ ​ ​ Projected year of payments ​ 2024-2034 ​ 2028 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 93 Monte Carlo simulation Discount rate ​ 13.0 % ​ ​ ​ ​ ​ Projected year of payments ​ 2024-2039 ​ 2039 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 409 ​ Scenario-based method ​ Discount rate ​ 5.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 50.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2024-2030 ​ 2030 (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. 86 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ 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. Contingent Payments to Related Parties. As a former shareholder of Cianna Medical, a former Merit director was eligible for payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical completed in 2018. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a Merit director. During 2023, we made the final contingent payment to Cianna Medical Shareholders, including $ 0.9 million paid to the former Merit director who is a former Cianna Medical shareholder. During the year ended December 31, 2022, we made contingent payments of approximately $ 1.6 million to the former director, and no such payments during 2021 . 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 under our Fourth Amended Credit Agreement 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. We believe the fair value our long-term debt under our convertible notes approximates carrying value as the notes were issued in December 2023. 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, right-of-use operating lease assets, equity investments in privately held companies, 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. 87 Table of Contents Intangible Assets. During the years ended December 31, 2023, 2022 and 2021, we had losses of $ 0.0 million, $ 1.7 million and $ 1.6 million, respectively, related to certain acquired intangible assets (see Note 5). 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 an impairment loss during the year ended December 31, 2021 of $ 1.4 million, which is equal to the excess of the carrying value of the assets over their estimated fair value. The impairment loss was 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 included 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 years ended December 31, 2023 and 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. We had no such losses during the years ended December 31, 2023 and 2022. Equity Investments, Purchase Options and Notes Receivable. During the year ended December 31, 2023, we recorded impairment charges of $ 0.3 million associated with our previously held equity investment in Bluegrass in connection with the Bluegrass asset acquisition completed on May 4, 2023 (see Note 3). 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. We had no such losses during the years ended December 31, 2021. Our equity investments in privately held companies were $ 19.1 million and $ 15.6 million at December 21, 2023 and 2022, 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 $ 3.2 million and $ 2.4 million, as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, we had an allowance for current expected credit losses of $ 568,000 and $ 281,000 , 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. The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 Beginning balance ​ $ 281 ​ $ 199 Provision for credit loss expense ​ ​ 287 ​ ​ 82 Ending balance ​ $ 568 ​ $ 281 ​ ​ 88 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, 2023, 2022 and 2021 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total BALANCE — January 1, 2021 $ ( 6,940 ) ​ $ 1,488 ​ $ ( 5,452 ) Other comprehensive 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE — 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE — December 31, 2022 ​ 4,366 ​ ​ ( 15,916 ) ​ ​ ( 11,550 ) Other comprehensive income 4,518 ​ ​ 2,959 ​ ​ 7,477 Income taxes 866 ​ ​ ( 39 ) ​ ​ 827 Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 4,081 ) ​ ​ ​ ​ ​ ( 4,081 ) Cost of sales ​ ( 1,457 ) ​ ​ ​ ​ ​ ( 1,457 ) Interest expense ​ ( 2,550 ) ​ ​ ​ ​ ​ ( 2,550 ) Net other comprehensive income (loss) ​ ( 2,704 ) ​ ​ 2,920 ​ ​ 216 ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE — December 31, 2023 $ 1,662 ​ $ ( 12,996 ) ​ $ ( 11,334 ) ​ ​ ​ ​ 89 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 26 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, 2023 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, 2023, 2022 and 2021 was not significant. The following was included in our consolidated balance sheet as of December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Assets ​ ​ ROU operating lease assets ​ $ 63,047 ​ $ 65,262 ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ Short-term operating lease liabilities ​ $ 12,087 ​ $ 11,005 Long-term operating lease liabilities ​ 56,259 ​ 59,736 Total operating lease liabilities ​ $ 68,346 ​ $ 70,741 ​ 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, 2023, 2022 and 2021 was $ 14.4 million, $ 13.8 million, and $ 15.9 million, respectively. The components of lease costs for the years ended December 31, 2023, 2022 and 2021 were as follows, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease Cost ​ Classification ​ 2023 ​ 2022 ​ 2021 Operating lease cost (a) Selling, general and administrative expenses ​ $ 14,879 ​ $ 14,219 ​ $ 16,013 Sublease (income) (b) Selling, general and administrative expenses ​ ( 488 ) ​ ( 409 ) ​ ( 75 ) Net lease cost ​ $ 14,391 ​ $ 13,810 ​ $ 15,938 (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, 2023, 2022 and 2021 was as follows, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 Cash paid for amounts included in the measurement of lease liabilities ​ $ 13,804 ​ $ 13,710 ​ $ 14,970 Right-of-use assets obtained in exchange for lease obligations ​ $ 8,891 ​ $ 11,130 ​ $ 1,524 ​ 90 Table of Contents 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 of lease term and the risks of the economic environment in which the leased asset operates. As of December 31, 2023, 2022 and 2021, our lease agreements had the following remaining lease term and discount rates: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ 2022 ​ ​ 2021 Weighted average remaining lease term ​ 9.6 years ​ ​ 10.4 years ​ ​ 11.4 years Weighted average discount rate ​ 3.4 % ​ ​ 3.4 % ​ ​ 3.4 % ​ As of December 31, 2023, maturities of operating lease liabilities were as follows, in thousands: ​ ​ ​ ​ Year ended December 31, Amounts due under operating leases 2024 ​ $ 13,706 2025 ​ 10,718 2026 ​ 8,867 2027 ​ 7,432 2028 ​ 6,089 Thereafter ​ 33,950 Total lease payments ​ 80,762 Less: Imputed interest ​ ( 12,416 ) Total ​ $ 68,346 ​ As of December 31, 2023, we had entered into an agreement related to an operating lease in Mexico for manufacturing space that had not yet commenced. The lease will commence in March 2024 with average annual maturities of approximately $ 700,000 expected for a period of approximately 11 years . ​ ​ ​ 91 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. ​