What changed in this filing

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Item 1. Financial Statements

2024-08-01 compared with 2024-04-30 · 222 added, 131 removed, 601 unchanged (37% of the section changed)

52 unchanged sentences

Preferred stock — 5,000 shares authorized;

no shares issued as of March 31, 2024 and December 31, 2023

no shares issued as of June 30, 2024 and December 31, 2023

Common stock, no par value — 100,000 shares authorized;

issued and outstanding as of March 31, 2024 - 58,102 and December 31, 2023 - 57,858

issued and outstanding as of June 30, 2024 - 58,192 and December 31, 2023 - 57,858

Retained earnings

8 unchanged sentences

Three Months Ended

Six Months Ended

Cost of sales

2 unchanged sentences

Research and development

Contingent consideration (benefit) expense

Impairment charges

Contingent consideration expense

Acquired in-process research and development

Total operating expenses

15 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income (loss):

19 unchanged sentences

Balance — March 31, 2024

Other comprehensive loss

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Shares issued from time-vested restricted stock units

Balance — June 30, 2024

See condensed notes to consolidated financial statements.

MERIT MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands - unaudited)

Accumulated Other

8 unchanged sentences

Balance — March 31, 2023

Other comprehensive income

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Shares issued from time-vested restricted stock units

Balance — June 30, 2023

See condensed notes to consolidated financial statements.

3 unchanged sentences

(In thousands - unaudited)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Write-off of certain intangible assets and other long-term assets

Acquired in-process research and development

Amortization of right-of-use operating lease assets

Adjustments related to contingent consideration liabilities

Fair value adjustments related to contingent consideration liabilities

Amortization of deferred credits

20 unchanged sentences

Issuance of note receivables

Cash paid in acquisitions, net of cash acquired

Cash paid in acquisitions and investments, net of cash acquired

Net cash, cash equivalents, and restricted cash used in investing activities

4 unchanged sentences

(In thousands - unaudited)

Three Months Ended

Six Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES:

2 unchanged sentences

Payments on long-term debt

Long-term debt issuance costs

Contingent payments related to acquisitions

Payment of taxes related to an exchange of common stock

Net cash, cash equivalents, and restricted cash used in financing activities

Net cash, cash equivalents, and restricted cash (used in) provided by financing activities

Effect of exchange rates on cash, cash equivalents, and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

18 unchanged sentences

The interim consolidated financial statements of Merit Medical Systems, Inc.

("Merit," "we" or "us") for the three-month periods ended March 31, 2024 and 2023 are not audited.

("Merit," "we" or "us") for the three and six-month periods ended June 30, 2024 and 2023 are not audited.

Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America.

In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2024 and December 31, 2023, and our results of operations and cash flows for the three-month periods ended March 31, 2024 and 2023.

The results of operations for the three-month periods ended March 31, 2024 and 2023 are not necessarily indicative of the results for a full-year period.

In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of June 30, 2024 and December 31, 2023, and our results of operations and cash flows for the three and six-month periods ended June 30, 2024 and 2023.

The results of operations for the three and six-month periods ended June 30, 2024 and 2023 are not necessarily indicative of the results for a full-year period.

Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts.

19 unchanged sentences

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.

Our revenue is disaggregated based on reporting segment, product category and geographic region.

We design, develop, manufacture and market medical products for interventional, diagnostic and therapeutic procedures.

For financial reporting purposes, we report our operations in two operating segments:

1 unchanged sentence

Our cardiovascular segment consists of four product categories:

peripheral intervention, cardiac intervention, custom procedural solutions, and OEM.

peripheral intervention, cardiac intervention, custom procedural solutions, and original equipment manufacturer (“OEM”).

Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices.

Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors.

The following table presents revenue from contracts with customers by reporting segment, product category and geographical region for the three-month periods ended March 31, 2024 and 2023 (in thousands):

Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures.

The following table presents revenue from contracts with customers by reporting segment, product category and geographic region for the three and six-month periods ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

United States

7 unchanged sentences

Endoscopy Devices

Acquisitions.

Six Months Ended

June 30, 2024

June 30, 2023

United States

International

United States

International

Cardiovascular

Peripheral Intervention

Cardiac Intervention

Custom Procedural Solutions

Endoscopy Devices

Acquisitions and Investments.

On May 17, 2024, Merit Medical Ireland Limited (“MM Ireland”), our indirect wholly-owned subsidiary, entered into a Subscription and Shareholder Agreement (the “CrannMed Agreement”) with CrannMed Limited, a company organized under the laws of Ireland (“CrannMed”).

Pursuant to the terms of the CrannMed Agreement, MM Ireland paid € 3.0 million to purchase preferred shares of CrannMed.

At CrannMed’s election at any time after August 16, 2024, MM Ireland is obligated to pay an additional € 3.0 million to acquire additional preferred shares of CrannMed, subject to certain conditions (the “Second Tranche Investment”).

Additionally, upon the request of CrannMed and subject to the completion of the Second Tranche Investment and other conditions, MM Ireland may pay to CrannMed up to an additional € 2.0 million in the form of equity, debt or other investment for the purpose of funding clinical trial activities of CrannMed.

MM Ireland’s investment in CrannMed has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because MM Ireland is not able to exercise significant influence over the operations of CrannMed.

MM Ireland’s total current investment in CrannMed represented an ownership interest of approximately 10.8 % of the outstanding capital stock of CrannMed at the date of the initial purchase.

On March 8, 2024, we entered into an asset purchase agreement with Scholten Surgical Instruments, Inc.

(“SSI”) to acquire the assets associated with the Biptomoe, Novatome, and Sensatome devices.

The total purchase price of the SSI assets included an up-front payment of $ 3 million, and three deferred payments, including (1) $ 1 million payable upon the earlier of (a) the first anniversary of the closing date or (b) the date on which Merit can independently manufacture the purchased devices (“Deferred Payment Date”), (2) $ 1 million payable upon the first anniversary of the Deferred Payment Date, and (3) $ 1 million payable upon the second anniversary of the Deferred Payment Date.

(“SSI”) to acquire the assets associated with the Bioptome, Novatome, and Sensatome devices.

The total purchase price of the SSI assets included an up-front payment of $ 3 million, and three deferred payments, including (i) $ 1 million payable upon the earlier of (a) the first anniversary of the closing date or (b) the date on which Merit can independently manufacture the purchased devices (“Deferred Payment Date”), (ii) $ 1 million payable upon the first anniversary of the Deferred Payment Date, and (iii) $ 1 million payable upon the second anniversary of the Deferred Payment Date.

We have accounted for this transaction as an asset purchase, and recorded the amount paid and deferred payments as a developed technology intangible asset, which we are amortizing over eight years .

3 unchanged sentences

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 19.9 % of the outstanding capital stock at the date of this investment.

Our total current investment in Fluidx represented an ownership interest of approximately 19.9 % of the outstanding capital stock of Fluidx at the date of this investment.

On June 8, 2023, we entered into an asset purchase agreement with AngioDynamics, Inc.

1 unchanged sentence

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 $ 6.7 million for the three-month period ended March 31, 2024.

The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were $ 11.6 million and $ 0.9 million for the six-month periods ended June 30, 2024 and 2023, respectively.

It is not practical to separately report earnings related to the acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our cardiovascular business segment.

Acquisition-related costs associated with the AngioDynamics acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income, in the 2023 Annual Report on Form 10-K, were approximately $ 4.9 million.

Acquisition-related costs associated with the AngioDynamics acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income included in the 2023 Annual Report on Form 10-K, were approximately $ 4.9 million.

The purchase price was allocated as follows (in thousands) :

12 unchanged sentences

(“Bluegrass”), for a purchase price of $ 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.

Prior to the acquisition, we held an equity investment of 1,251,878 Bluegrass common shares, representing an approximately 19.5 % ownership interest in Bluegrass.

The fair value of this previously-held equity investment of approximately $ 245,000 is included in the purchase price allocation.

11 unchanged sentences

The pro forma effects to our consolidated results of operations of the Bluegrass acquisition are not material.

Inventories at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024

Inventories at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024

December 31, 2023

4 unchanged sentences

Goodwill and Intangible Assets.

The change in the carrying amount of goodwill for the three-month period ended March 31, 2024 is detailed as follows (in thousands):

The change in the carrying amount of goodwill for the six-month period ended June 30, 2024 is detailed as follows (in thousands):

Goodwill balance at January 1

Effect of foreign exchange

Goodwill balance at March 31

Total accumulated goodwill impairment losses aggregated $ 8.3 million as of March 31, 2024 and December 31, 2023, respectively.

We did no t have any goodwill impairments for the three-month periods ended March 31, 2024 or 2023.

The total goodwill balances as of March 31, 2024 and December 31, 2023 were related to our cardiovascular segment.

Other intangible assets at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024

Goodwill balance at June 30

Total accumulated goodwill impairment losses aggregated to $ 8.3 million as of June 30, 2024 and December 31, 2023, respectively.

We did no t have any goodwill impairments for the six-month periods ended June 30, 2024 or 2023.

The total goodwill balances as of June 30, 2024 and December 31, 2023 were related to our cardiovascular segment.

Other intangible assets at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024

Gross Carrying

7 unchanged sentences

Customer lists

Aggregate amortization expense for the three-month periods ended March 31, 2024 and 2023 was $ 14.6 million and $ 12.3 million, respectively.

Aggregate amortization expense for the three and six-month periods ended June 30, 2024 was $ 14.8 million and $ 29.4 million, respectively.

Aggregate amortization expense for the three and six-month periods ended June 30, 2023 was $ 13.4 million and $ 25.7 million, respectively.

We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

1 unchanged sentence

We determine the fair value of our amortizing assets based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities.

We did no t identify indicators of impairment for our intangible assets based on our qualitative assessment for the three-month periods ended March 31, 2024 and 2023, respectively.

Estimated amortization expense for developed technology and other intangible assets for the next five years consisted of the following as of March 31, 2024 (in thousands):

We did no t identify indicators of impairment for our intangible assets based on our consideration of triggering events for the six-month periods ended June 30, 2024 and 2023, respectively.

Estimated amortization expense for developed technology and other intangible assets for the next five years consisted of the following as of June 30, 2024 (in thousands):

Estimated Amortization Expense

1 unchanged sentence

Income Taxes.

Our provision for income taxes for the three-month periods ended March 31, 2024 and 2023 was a tax expense of $ 6.1 million and $ 4.8 million, respectively, which resulted in an effective tax rate of 17.8 % and 18.8 %, respectively.

The decrease in the effective income tax rate for the three-month period ended March 31, 2024, when compared to the prior-year period, was primarily due to increased benefit from discrete items such as share-based compensation and payroll tax credits, and the increase in the income tax expense when compared to the prior-year period was primarily due to increased pre-tax book income.

Our provision for income taxes for the three-month periods ended June 30, 2024 and 2023 was a tax expense of $ 10.1 million and $ 4.7 million, respectively, which resulted in an effective tax rate of 22.1 % and 18.7 %, respectively.

Our provision for income taxes for the six-month periods ended June 30, 2024 and 2023 was a tax expense of $ 16.2 million and $ 9.5 million, respectively, which resulted in an effective tax rate of 20.2 % and 18.8 %, respectively.

The increase in the effective income tax rate for the three and six-month periods ended June 30, 2024, when compared to the prior-year periods, was primarily due to decreased benefit from discrete items such as share-based compensation and deferred compensation and decreased foreign tax credit utilization.

The increase in the income tax expense for the six-month period ended June 30, 2024, when compared to the prior-year period, was primarily due to increased pre-tax book income.

Our effective tax rate differs from the U.S.

7 unchanged sentences

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.

Principal balances outstanding under our long-term debt obligations as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024

Principal balances outstanding under our long-term debt obligations as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024

December 31, 2023

4 unchanged sentences

Long-term portion

Future minimum principal payments on our long-term debt, as of March 31, 2024, were as follows (in thousands):

Future minimum principal payments on our long-term debt, as of June 30, 2024, were as follows (in thousands):

Future Minimum

3 unchanged sentences

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, 2023, we entered into a Fourth Amended and Restated Credit Agreement (the "Fourth A&R Credit Agreement").

The Fourth A&R Credit Agreement is a syndicated loan agreement with Wells Fargo Bank, National Association and other parties.

The Fourth A&R Credit Agreement amended and restated in its entirety our previously outstanding Third Amended and Restated Credit Agreement and all amendments thereto.

The Fourth A&R 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, as amended) 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).

On December 5, 2023, we executed an amendment to the Fourth Amended Credit Agreement (as amended, the "Amended Fourth A&R Credit Agreement") to facilitate the issuance of our Convertible Notes described below.

Among other things, the amendment also updated the definition of the “Applicable Margin” as used in the Amended Fourth A&R Credit Agreement to determine the interest rates and amended the financial covenants, all as described below.

Term loans made under the Amended Fourth A&R Credit Agreement bear interest, at our election, at either (i) the Base Rate plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement) or, (ii) Adjusted Term SOFR plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement).

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 Amended Fourth A&R Credit Agreement), or (d) Adjusted Daily Simple SONIA plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement).

Swingline loans bear interest at the Base Rate plus the Applicable Margin.

1 unchanged sentence

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:

The Amended Fourth A&R Credit Agreement is collateralized by substantially all of our assets.

The Amended Fourth A&R 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 Amended Fourth A&R Credit Agreement requires that we maintain certain financial covenants, as follows:

Covenant Requirement

2 unchanged sentences

Consolidated Interest Coverage Ratio (3)

(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, as amended 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.

We believe we were in compliance with all covenants set forth in the Fourth Amended Credit Agreement as of March 31, 2024.

As of March 31, 2024, we had outstanding borrowings of $ 75.0 million and issued letter of credit guarantees of $ 2.7 million under the Fourth Amended Credit Agreement, with additional available borrowings of approximately $ 657 million, based on the maximum net leverage ratio and the aggregate revolving credit commitment pursuant to the Fourth Amended Credit Agreement.

Our interest rate as of March 31, 2024 was a fixed rate of 3.39 % with respect to the principal amount, as a result of an interest rate swap (see Note 9).

(1) Maximum Consolidated Total Net Leverage Ratio (as defined in the Amended Fourth A&R Credit Agreement) as of any fiscal quarter end.

(2) Maximum Consolidated Senior Secured Net Leverage Ratio (as defined in the Amended Fourth A&R Credit Agreement) as of any fiscal quarter end.

(3) Minimum ratio of Consolidated EBITDA (as defined in the Amended Fourth A&R Credit Agreement and adjusted for certain expenditures) to Consolidated Interest Expense (as defined in the Amended Fourth A&R Credit Agreement) for any period of four consecutive fiscal quarters.

We believe we were in compliance with all covenants set forth in the Amended Fourth A&R Credit Agreement as of June 30, 2024.

As of June 30, 2024, we had outstanding borrowings of $ 75.0 million and issued letter of credit guarantees of $ 2.4 million under the Amended Fourth A&R Credit Agreement, with additional available borrowings of approximately $ 680 million, based on the maximum net leverage ratio and the aggregate revolving credit commitment pursuant to the Amended Fourth A&R Credit Agreement.

Our interest rate as of June 30, 2024 was a fixed rate of 3.39 % with respect to the outstanding principal amount as a result of an interest rate swap (see Note 9).

Our interest rate as of December 31, 2023 was a fixed rate of 3.39 % on $ 75 million as a result of an interest rate swap and a variable floating rate of 7.21 % on $ 24.1 million.

1 unchanged sentence

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 indenture governing the Convertible Notes (the “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.

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”).

The Convertible Notes are senior unsecured obligations (as defined in the indenture governing the Convertible Notes (the “Indenture”)) of Merit and will mature on February 1, 2029, unless 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 Transactions, as described below.

The initial conversion rate of the notes will be 11.5171 shares of our common stock (the “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) in cash at a fundamental change repurchase price of 100 % of their principal amount plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

The initial conversion rate of the notes will be 11.5171 shares of our common stock (the “Common Stock”) per $ 1,000 principal amount of notes, which equates 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 Merit to repurchase all or a part of their notes upon the occurrence of a “fundamental change” (as defined in the Indenture) in cash at a fundamental change repurchase price of 100 % of their principal amount plus accrued and unpaid interest up 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.

1 unchanged sentence

(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 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;

(2) Merit 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 Merit’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;

(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 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 March 31, 2024, 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.

(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 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 Merit calls any Convertible Notes for redemption.

As of June 30, 2024, none of the conditions permitting the Holders to convert their Convertible Notes early had been met.

Therefore, the Convertible Notes are classified as long-term debt obligations.

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 Common Stock, or a combination of cash and shares of 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.

Upon conversion, Merit 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 Common Stock, or a combination of cash and shares of Common Stock, at Merit’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.

Capped Call Transactions

6 unchanged sentences

The derivative instruments we use are interest rate swaps and foreign currency forward contracts.

We recognize derivative instruments as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied.

We recognize derivative instruments as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether 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.

6 unchanged sentences

Therefore, we are subject to variability in the cash payable for interest expense.

In order to mitigate a portion of the risk attributable to such variability, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Fourth Amended Credit Agreement that varies in accordance with changes in the benchmark interest rate.

In order to mitigate a portion of the risk attributable to such variability, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Amended Fourth A&R Credit Agreement that varies in accordance with changes in the benchmark interest rate.

Derivatives Designated as Cash Flow Hedges

On December 23, 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $ 75 million with Wells Fargo.

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.

In June 2023, certain terms under the swap 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 Amended Fourth A&R 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.

On March 31, 2024 and December 31, 2023, our interest rate swap qualified as a cash flow hedge.

The fair value of our interest rate swap as of March 31, 2024 was an asset of $ 1.1 million, which was partially offset by $ 0.3 million in deferred taxes.

On June 30, 2024 and December 31, 2023, our interest rate swap qualified as a cash flow hedge.

The fair value of our interest rate swap as of June 30, 2024 was an asset of $ 0.3 million, which was partially offset by $ 0.1 million in deferred taxes.

The fair value of our interest rate swap as of December 31, 2023 was an asset of $ 1.5 million, partially offset by $ 0.4 million in deferred taxes.

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We entered into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets.

The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the foreign currencies.

As of March 31, 2024 and December 31, 2023, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 139.2 million and $ 141.1 million, respectively.

The objective of the forward contracts is to reduce the variability of cash flows associated with the forecasted purchase or sale of the foreign currencies.

As of June 30, 2024 and December 31, 2023, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 134.0 million and $ 141.1 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 March 31, 2024 and December 31, 2023, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 92.7 million and $ 108.4 million, respectively.

As of June 30, 2024 and December 31, 2023, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 110.8 million and $ 108.4 million, respectively.

Balance Sheet Presentation of Derivative Instruments.

As of March 31, 2024 and December 31, 2023, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets.

We are not subject to any master netting agreements.

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Balance Sheet Location

March 31, 2024

June 30, 2024

December 31, 2023

Interest rate swaps

Interest rate swap

Prepaid expenses and other assets

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Balance Sheet Location

March 31, 2024

June 30, 2024

December 31, 2023

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Reclassified from AOCI

Three Months Ended March 31,

Three Months Ended June 30,

Derivative instrument

Location in statements of income

Interest rate swaps

Interest rate swap

Interest expense

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Cost of sales

As of March 31, 2024, $ 3.4 million, or $ 2.6 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 March 31, 2024, $ 1.1 million, or $ 0.9 million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months.

Amount of Gain/(Loss)

Consolidated Statements

Amount of Gain/(Loss)

Recognized in OCI

Reclassified from AOCI

Six Months Ended June 30,

Derivative instrument

Location in statements of income

Interest rate swap

Interest expense

Foreign currency forward contracts

Cost of sales

As of June 30, 2024, $ 2.9 million, or $ 2.2 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months.

As of June 30, 2024, $ 0.3 million, or $ 0.2 million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months.

Derivative Instruments Not Designated as Hedging Instruments

The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Derivative Instrument

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It is possible that the ultimate resolution of the SEC Inquiry, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial position, results of operations or liquidity.

In management's opinion, based on its examination of these matters, its experience to date and discussion with counsel, other than the SEC Inquiry, we are not currently involved in any legal proceedings which, individually or in the aggregate, could have a material adverse effect on our financial position, results of operations or cash flows.

In management's opinion, based on its examination of these matters, its experience to date and discussions with counsel, other than the SEC Inquiry, we are not currently involved in any legal proceedings which, individually or in the aggregate, could have a material adverse effect on our financial position, results of operations or cash flows.

Our management regularly assesses the risks of legal proceedings in which we are involved, and management’s view of these matters may change in the future.

Earnings Per Common Share (EPS).

The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three-month periods ended March 31, 2024 and 2023 consisted of the following (in thousands, except per share amounts):

The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three and six-month periods ended June 30, 2024 and 2023 consisted of the following (in thousands, except per share amounts):

Three Months Ended

Six Months Ended

Average common shares outstanding

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Convertible Notes

For our Convertible Notes issued in December 2023, the dilutive effect is calculated using the if-converted method.

For our Convertible Notes, 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 Common Stock or a combination of cash and shares of 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 price of the Common Stock for the period ended March 31, 2024 was used as the basis for determining the dilutive effect on EPS.

The average closing price for the Common Stock on March 31, 2024 did not exceed the conversion price of $ 86.83 , and therefore all associated shares were deemed anti-dilutive.

The average closing price of the Common Stock for the period ended June 30, 2024 was used as the basis for determining the dilutive effect on EPS.

The average closing price for the Common Stock on June 30, 2024 did not exceed the conversion price of $ 86.83 , and therefore all associated shares were deemed anti-dilutive.

Stock-Based Compensation Expense.

Stock-based compensation expense before income tax expense for the three-month periods ended March 31, 2024 and 2023 consisted of the following (in thousands):

Stock-based compensation expense before income tax expense for the three and six-month periods ended June 30, 2024 and 2023 consisted of the following (in thousands):

Three Months Ended

Six Months Ended

Cost of sales

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Nonqualified Stock Options

During the three-month period ended March 31, 2023, we granted stock options representing 293,294 shares of our Common Stock.

We did not grant any stock options during the three-month period ended March 31, 2024.

During the six-month period ended June 30, 2023, we granted stock options representing 327,294 shares of our Common Stock.

We did no t grant any stock options during the six-month period ended June 30, 2024.

We use the Black-Scholes methodology to value the stock-based compensation expense for options.

In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below:

Three Months Ended

Six Months Ended

Risk-free interest rate

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Expected price volatility

46.7 % - 47.1 %

The average risk-free interest rate is determined using the U.S.

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For awards with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.

As of March 31, 2024, the total remaining unrecognized compensation cost related to non-vested stock options was $ 17.6 million, which was expected to be recognized over a weighted average period of 2.3 years.

As of June 30, 2024, the total remaining unrecognized compensation cost related to non-vested stock options was $ 15.4 million, which was expected to be recognized over a weighted average period of 2.0 years.

Stock-Settled Performance-Based Restricted Stock Units (“Performance Stock Units”)

During the three-month periods ended March 31, 2024 and 2023, we granted performance stock units which represent up to 364,810 and 301,230 shares of Common Stock, respectively.

During the six-month periods ended June 30, 2024 and 2023, we granted performance stock units which represented up to 364,810 and 286,863 shares of Common Stock, respectively.

Conversion of the performance stock units occurs at the end of the relevant performance periods, or one year after the agreement date, whichever is later.

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The fair value of each performance stock unit was estimated as of the grant date using the following assumptions for awards granted in the periods indicated below:

Three Months Ended

Six Months Ended

Risk-free interest rate

3.9 % - 4.6 %

Performance period

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Expected price volatility

31.4 % - 32.6 %

The risk-free interest rate of return was determined using the U.S.

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At the end of the performance period, cumulative expense is calculated based on the actual performance metrics achieved.

As of March 31, 2024, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 21.5 million, which is expected to be recognized over a weighted average period of 2.3 years.

As of June 30, 2024, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 20.3 million, which is expected to be recognized over a weighted average period of 2.1 years.

Cash-Settled Performance-Based Awards

During the three-month periods ended March 31, 2024 and 2023, we granted performance stock units to our Chief Executive Officer that provide for settlement in cash upon achievement of specific metrics (“Liability Awards”), with total target cash incentives in the amount of $ 1.6 million and $ 1.3 million, respectively.

During the six-month periods ended June 30, 2024 and 2023, we granted performance stock units to our Chief Executive Officer that provide for settlement in cash upon achievement of specific metrics (“Liability Awards”), with total target cash incentives in the amount of $ 1.6 million and $ 1.3 million, respectively.

The Liability Awards entitle him to a target cash payment based upon our level of rTSR performance and achievement of other performance metrics, as defined in the award agreements.

During the three-month periods ended March 31, 2024 and 2023, we granted additional performance stock units to certain employees that provide for settlement in cash upon our achievement of specified financial metrics.

During the six-month periods ended June 30, 2024 and 2023, 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 likely to be 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 and $ 4.3 million for Liability Awards granted during the three-month periods ended March 31, 2024 and 2023, respectively.

The potential maximum payout of these Liability Awards is 250 % of the target cash incentive, resulting in a total potential maximum payout of $ 4.4 million and $ 4.4 million for Liability Awards granted during the six-month periods ended June 30, 2024 and 2023, respectively.

The settlement generally occurs at the end of three-year performance periods based upon the same performance metrics and vesting period as our performance stock units.

The fair value of these Liability Awards is measured at each reporting period until the awards are settled.

These Liability Awards are classified as liabilities and reported in accrued expenses and other long-term obligations within our consolidated balance sheets.

As of March 31, 2024, the total remaining unrecognized compensation cost related to Liability Awards was $ 5.1 million, which is expected to be recognized over a weighted average period of 2.2 years.

As of June 30, 2024 and December 31, 2023, the recorded balance associated with these Liability Awards is $ 3.4 million and $ 3.4 million, respectively, which are classified as liabilities and reported in accrued expenses and other long-term obligations within our consolidated balance sheets.

As of June 30, 2024, the total remaining unrecognized compensation cost related to Liability Awards was $ 4.4 million, which is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock Units

During the three-month period ended March 31, 2024 we granted restricted stock units to certain employees representing 134,553 shares of Common Stock.

During the six-month periods ended June 30, 2024 and 2023, we granted restricted stock units to certain employees and and non-employee directors representing 158,719 and 20,358 shares of Common Stock, respectively.

The expense recognized for restricted stock units is equal to the closing stock price on the date of grant, which is recognized over the vesting period.

Restricted stock units granted to each employee are subject to such employee’s continued employment through the vesting date, which is four years from the date of grant.

As of March 31, 2024, the total remaining unrecognized compensation cost related to restricted stock units was $ 9.3 million, which will be recognized over a weighted average period of 3.8 years.

Restricted stock units granted to each non-employee director are subject to such director’s continued service through the vesting date, which is one year from the grant date.

As of June 30, 2024, the total remaining unrecognized compensation cost related to restricted stock units was $ 10.2 million, which will be recognized over a weighted average period of 3.3 years.

Segment Reporting.

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Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures.

Our chief operating decision maker is our Chief Executive Officer.

We evaluate the performance of our operating segments based on net sales and income from operations.

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three-month periods ended March 31, 2024 and 2023, were as follows (in thousands):

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and six-month periods ended June 30, 2024 and 2023, were as follows (in thousands):

Three Months Ended

Six Months Ended

Cardiovascular

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Assets (Liabilities) Measured at Fair Value on a Recurring Basis

Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

Fair Value Measurements Using

4 unchanged sentences

unobservable inputs

March 31, 2024

June 30, 2024

Marketable securities (1)

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Marketable securities (1)

Interest rate contract asset, long-term (2)

Interest rate contract asset, current (2)

Foreign currency contract assets, current and long-term (3)

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We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements.

Changes in the fair value of our contingent consideration liabilities during the three-month periods ended March 31, 2024 and 2023 consisted of the following (in thousands):

Changes in the fair value of our contingent consideration liabilities during the three and six-month periods ended June 30, 2024 and 2023 consisted of the following (in thousands):

Three Months Ended

Six Months Ended

Beginning balance

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Ending balance

As of March 31, 2024, $ 2.8 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.

As of June 30, 2024, $ 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.

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.

Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 78,000 and $ 2.6 million for the three-month periods ended March 31, 2024 and 2023, respectively, have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $ 27,000 and $ 26,000 for the three-month period ended March 31, 2024 and 2023, respectively, are reflected as operating cash flows.

The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at March 31, 2024 and December 31, 2023 (amounts in thousands):

Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 0.1 million and $ 3.4 million for the six-month periods ended June 30, 2024 and 2023, respectively, have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $ 0.1 million and $ 12.7 million for the six-month periods ended June 30, 2024 and 2023, respectively, are reflected as operating cash flows.

The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at June 30, 2024 and December 31, 2023 (amounts in thousands):

Fair value at

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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.

Our long-term debt under our Amended Fourth A&R 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.

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All our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy.

During the three-month periods ending March 31, 2024 and 2023, respectively, we recorded no impairment charges.

Our equity investments in privately held companies were $ 19.4 million and $ 19.1 million at March 31, 2024 and December 31, 2023, respectively, which are included within other long-term assets in our consolidated balance sheets.

Our equity investments in privately-held companies were $ 22.6 million and $ 19.1 million at June 30, 2024 and December 31, 2023, 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 .

During the six-month period ended June 30, 2023, we recorded impairment charges of $ 0.3 million associated with our previously-held equity investment in Bluegrass in connection with the asset acquisition completed on May 4, 2023 (see Note 4).

During the six-month period ended June 30, 2024, we recorded no impairment charges related to our equity investments.

Current Expected Credit Losses

Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 8.5 million and $ 3.2 million as of March 31, 2024 and December 31, 2023, respectively.

Long-term notes receivable issued were $ 6.2 million for the three-month period ended March 31, 2024 and were related to loans issued to Selio Medical Limited (“Selio”) of $ 1.7 million, Solo Pace Inc.

Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 8.7 million and $ 3.2 million as of June 30, 2024 and December 31, 2023, respectively.

Long-term notes receivable issued were $ 6.2 million for the six-month period ended June 30, 2024 and were related to loans issued to Selio Medical Limited (“Selio”) of $ 1.7 million, Solo Pace Inc.

(“Solo Pace”) of $ 1.5 million and Fluidx of $ 3.0 million.

As of March 31, 2024 and December 31, 2023, we had an allowance for current expected credit losses of $ 1.4 million and $ 0.6 million, respectively, associated with these notes receivable.

As of June 30, 2024 and December 31, 2023, we had an allowance for current expected credit losses of $ 1.4 million and $ 0.6 million, respectively, associated with these notes receivable.

We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities, and other security specific factors.

The table below presents a roll-forward of the allowance for current expected credit losses on our notes receivable for the three-month periods ended March 31, 2024 and 2023 (in thousands):

The table below presents a roll-forward of the allowance for current expected credit losses on our notes receivable for the three and six-month periods ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

Six Months Ended

Beginning balance

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Accumulated Other Comprehensive Income (Loss).

The changes in each component of accumulated other comprehensive income (loss) for the three-month periods ended March 31, 2024 and 2023 were as follows:

The changes in each component of accumulated other comprehensive income (loss) for the three and six-month periods ended June 30, 2024 and 2023 were as follows:

Cash Flow Hedges

Foreign Currency Translation

Balance as of January 1, 2024

Balance as of April 1, 2024

Other comprehensive loss

Reclassifications to:

Cost of sales

Interest expense

Net other comprehensive loss

Balance as of June 30, 2024

Cash Flow Hedges

Foreign Currency Translation

Balance as of April 1, 2023

Other comprehensive income (loss)

3 unchanged sentences

Net other comprehensive income (loss)

Balance as of March 31, 2024

Balance as of June 30, 2023

Cash Flow Hedges

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Net other comprehensive income (loss)

Balance as of March 31, 2023

Balance as of June 30, 2024

Cash Flow Hedges

Foreign Currency Translation

Balance as of January 1, 2023

Other comprehensive income

Reclassifications to:

Cost of sales

Interest expense

Net other comprehensive income

Balance as of June 30, 2023

Subsequent Events.

On July 1, 2024, we entered into an Asset Purchase Agreement (the “EGS Purchase Agreement”) with EndoGastric Solutions, Inc., a Delaware corporation (“EGS”), pursuant to which we acquired the EsophyX® Z+ device and various assets related thereto (collectively, the “EGS Acquisition”), which are designed to deliver a durable, minimally invasive non-pharmacological treatment option for patients suffering from gastroesophageal reflux disease.

We acquired the purchased assets identified under the EGS Purchase Agreement for a purchase price of $ 105 million, which amount we financed at closing through current borrowings under our long-term debt obligations, plus the assumption or reimbursement of certain liabilities of EGS.

We are currently evaluating the accounting treatment of the EGS Acquisition, as well as performing the valuation of the assets acquired and the related purchase price allocation.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements