What changed in this filing

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Item 1. Financial Statements

2024-10-30 compared with 2024-08-01 · 182 added, 119 removed, 704 unchanged (30% of the section changed)

4 unchanged sentences

(In thousands)

September 30,

Current assets:

27 unchanged sentences

(In thousands)

September 30,

LIABILITIES AND STOCKHOLDERS’ EQUITY

17 unchanged sentences

Preferred stock — 5,000 shares authorized;

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

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

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

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

issued and outstanding as of September 30, 2024 - 58,274 and December 31, 2023 - 57,858

Retained earnings

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of sales

22 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other comprehensive income (loss):

25 unchanged sentences

Balance — June 30, 2024

Other comprehensive income

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Balance — September 30, 2024

See condensed notes to consolidated financial statements.

18 unchanged sentences

Balance — June 30, 2023

Other comprehensive loss

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Shares surrendered in exchange for payment of payroll tax liabilities

Shares surrendered in exchange for exercise of stock options

Balance — September 30, 2023

See condensed notes to consolidated financial statements.

3 unchanged sentences

(In thousands - unaudited)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

13 unchanged sentences

Prepaid expenses and other current assets

Prepaid income taxes

Income tax refund receivables

20 unchanged sentences

(In thousands - unaudited)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM FINANCING ACTIVITIES:

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

Net increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

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Acquisition purchases in accrued expenses and other long-term obligations

Merit common stock surrendered ( 0 and 86 shares, respectively) in exchange for exercise of stock options

Right-of-use operating lease assets obtained in exchange for operating lease liabilities

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

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

("Merit," "we" or "us") for the three and nine-month periods ended September 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 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.

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

The results of operations for the three and nine-month periods ended September 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.

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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.

We are currently assessing the anticipated impact of this standard on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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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.

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):

The following tables present revenue from contracts with customers by reporting segment, product category and geographic region for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):

Three Months Ended

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

United States

7 unchanged sentences

Endoscopy Devices

Six Months Ended

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

United States

8 unchanged sentences

Acquisitions and Investments.

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 accounted for the EGS Acquisition under the acquisition method of accounting as a business combination.

The sales related to the EGS Acquisition have been included in our endoscopy segment since the acquisition date and were $ 6.8 million for the three and nine-month periods ended September 30, 2024.

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

Acquisition-related costs associated with the EGS Acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income were approximately $ 1.8 million.

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

Assets Acquired

Trade receivables

Prepaid expenses and other current assets

Property and equipment

Intangible assets

Developed technology

Customer list

Total assets acquired

Liabilities Assumed

Trade payables

Accrued expenses

Total liabilities assumed

Total net assets acquired

We are amortizing the EGS 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 11 years .

We have estimated the weighted average life of the intangible assets acquired from EGS to be 10.1 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 to our consolidated results of operations of the EGS Acquisition are not material in relation to reported sales .

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”).

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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”);

no additional amount has been distributed to CrannMed as of September 30, 2024.

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.

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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 $ 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.

(“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 (collectively, the “AngioDynamics Acquisition”) .

We accounted for the AngioDynamics Acquisition under the acquisition method of accounting as a business combination.

The sales related to the AngioDynamics Acquisition have been included in our cardiovascular segment since the acquisition date and were $ 21.0 million and $ 8.3 million for the nine-month periods ended September 30, 2024 and 2023, respectively.

It is not practical to separately report earnings related to the AngioDynamics 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 included in the 2023 Annual Report on Form 10-K, were approximately $ 4.9 million.

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

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

June 30, 2024

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

September 30, 2024

December 31, 2023

4 unchanged sentences

Goodwill and Intangible Assets.

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

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

Cardiovascular

Goodwill balance at January 1

Effect of foreign exchange

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

Additions and adjustments as the result of acquisitions

Goodwill balance at September 30

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

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

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

September 30, 2024

Gross Carrying

7 unchanged sentences

Customer lists

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.

Aggregate amortization expense for the three and nine-month periods ended September 30, 2024 was $ 16.9 million and $ 46.4 million, respectively.

Aggregate amortization expense for the three and nine-month periods ended September 30, 2023 was $ 15.4 million and $ 41.1 million, respectively.

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

We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows is largely independent of the cash flows of other assets and liabilities.

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

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):

If a triggering event is identified, 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 consideration of triggering events for the nine-month periods ended September 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 September 30, 2024 (in thousands):

Estimated Amortization Expense

1 unchanged sentence

Income Taxes.

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 provision for income taxes for the three-month periods ended September 30, 2024 and 2023 was a tax expense of $ 8.2 million and $ 4.4 million, respectively, which resulted in an effective tax rate of 22.4 % and 14.5 %, respectively.

Our provision for income taxes for the nine-month periods ended September 30, 2024 and 2023 was a tax expense of $ 24.4 million and $ 13.8 million, respectively, which resulted in an effective tax rate of 20.9 % and 17.2 %, respectively.

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

The increase in the income tax expense for the nine-month period ended September 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.

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

June 30, 2024

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

September 30, 2024

December 31, 2023

Revolving credit loans

Convertible notes

3 unchanged sentences

Long-term portion

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

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

Future Minimum

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(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).

We were in compliance with these financial covenants set forth in the Amended Fourth A&R Credit Agreement as of September 30, 2024.

As of September 30, 2024, we had outstanding borrowings of $ 23.0 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 $ 697 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 September 30, 2024 was a variable rate of 6.70 % with respect to the outstanding principal amount.

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.

The foregoing fixed rates do not reflect potential future changes in the Applicable Margin.

The foregoing interest rates do not reflect potential future changes in the Applicable Margin.

Convertible Notes

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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.

As of September 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.

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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 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.

As of September 30, 2024, the term of our interest rate swap has expired.

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

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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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.

As of September 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 $ 155.4 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 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.

As of September 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 $ 115.6 million and $ 108.4 million, respectively.

Balance Sheet Presentation of Derivative Instruments.

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.

As of September 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.

2 unchanged sentences

Balance Sheet Location

June 30, 2024

September 30, 2024

December 31, 2023

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Balance Sheet Location

June 30, 2024

September 30, 2024

December 31, 2023

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Reclassified from AOCI

Three Months Ended June 30,

Three Months Ended September 30,

Derivative instrument

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Reclassified from AOCI

Six Months Ended June 30,

Nine Months Ended September 30,

Derivative instrument

4 unchanged sentences

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.

As of September 30, 2024, $ 2.0 million, or $ 1.5 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Derivative Instrument

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Earnings Per Common Share (EPS).

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Average common shares outstanding

1 unchanged sentence

Effect of dilutive stock awards

Effect of dilutive convertible notes

Total potential shares outstanding

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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 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.

The convertible notes only have an impact on diluted earnings per share when the average share price of our common stock exceeds the conversion price of $ 86.83 .

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

Stock-Based Compensation Expense.

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):

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of sales

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Nonqualified Stock Options

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.

During the nine-month period ended September 30, 2023, we granted stock options representing 401,535 shares of our Common Stock.

We did no t grant any stock options during the nine-month period ended September 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:

Six Months Ended

Nine Months Ended

September 30,

Risk-free interest rate

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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 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.

As of September 30, 2024, the total remaining unrecognized compensation cost related to non-vested stock options was $ 13.2 million, which was expected to be recognized over a weighted average period of 1.9 years.

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

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.

During the nine-month periods ended September 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.

2 unchanged sentences

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:

Six Months Ended

Nine Months Ended

September 30,

Risk-free interest rate

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

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.

As of September 30, 2024, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 17.5 million, which is expected to be recognized over a weighted average period of 1.9 years.

Cash-Settled Performance-Based Awards

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.

During the nine-month periods ended September 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 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.

During the nine-month periods ended September 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 $ 4.4 million and $ 4.4 million for Liability Awards granted during the six-month periods ended June 30, 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 $ 4.6 million for Liability Awards granted during the nine-month periods ended September 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.

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.

As of September 30, 2024 and December 31, 2023, the recorded balance associated with these Liability Awards is $ 4.1 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 September 30, 2024, the total remaining unrecognized compensation cost related to Liability Awards was $ 3.8 million, which is expected to be recognized over a weighted average period of 1.8 years.

Restricted Stock Units

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.

During the nine-month periods ended September 30, 2024 and 2023, we granted restricted stock units to certain employees 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.

1 unchanged sentence

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.

As of September 30, 2024, the total remaining unrecognized compensation cost related to restricted stock units was $ 9.1 million, which will be recognized over a weighted average period of 3.1 years.

Segment Reporting.

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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 and six-month periods ended June 30, 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 nine-month periods ended September 30, 2024 and 2023, were as follows (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

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

Fair Value Measurements Using

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unobservable inputs

June 30, 2024

September 30, 2024

Marketable securities (1)

Interest rate contract asset, current (2)

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

21 unchanged sentences

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

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Beginning balance

2 unchanged sentences

Ending balance

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 September 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 $ 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):

Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 0.2 million and $ 3.5 million for the nine-month periods ended September 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 nine-month periods ended September 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 September 30, 2024 and December 31, 2023 (amounts in thousands):

Fair value at

September 30,

Contingent consideration liability

46 unchanged sentences

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

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.

Our equity investments in privately-held companies were $ 22.6 million and $ 19.1 million at September 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.

During the nine-month period ended September 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 nine-month period ended September 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 $ 8.7 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.

Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 9.3 million and $ 3.2 million as of September 30, 2024 and December 31, 2023, respectively.

Long-term notes receivable issued were $ 6.7 million for the nine-month period ended September 30, 2024 and were related to loans issued to Selio Medical Limited (“Selio”) of $ 1.7 million, Solo Pace Inc.

(“Solo Pace”) of $ 2.0 million and Fluidx of $ 3.0 million.

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.

As of September 30, 2024 and December 31, 2023, we had an allowance for current expected credit losses of $ 1.6 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 and six-month periods ended June 30, 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 nine-month periods ended September 30, 2024 and 2023 (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Beginning balance

2 unchanged sentences

Accumulated Other Comprehensive Income (Loss).

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:

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

Cash Flow Hedges

Foreign Currency Translation

Balance as of April 1, 2024

Other comprehensive loss

Balance as of July 1, 2024

Other comprehensive income (loss)

Reclassifications to:

1 unchanged sentence

Interest expense

Net other comprehensive loss

Balance as of June 30, 2024

Net other comprehensive income (loss)

Balance as of September 30, 2024

Cash Flow Hedges

Foreign Currency Translation

Balance as of April 1, 2023

Balance as of July 1, 2023

Other comprehensive income (loss)

2 unchanged sentences

Interest expense

Net other comprehensive income (loss)

Balance as of June 30, 2023

Net other comprehensive loss

Balance as of September 30, 2023

Cash Flow Hedges

6 unchanged sentences

Net other comprehensive income (loss)

Balance as of June 30, 2024

Balance as of September 30, 2024

Cash Flow Hedges

1 unchanged sentence

Balance as of January 1, 2023

Other comprehensive income

Other comprehensive income (loss)

Reclassifications to:

1 unchanged sentence

Interest expense

Net other comprehensive income

Balance as of June 30, 2023

Net other comprehensive income (loss)

Balance as of September 30, 2023

Subsequent Events.

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.

On September 16, 2024, we entered into an Asset Purchase Agreement (the “Cook Purchase Agreement”) with Cook Medical Holdings LLC, an Indiana limited liability company (“Cook Medical”), to purchase Cook Medical’s lead management portfolio of medical devices and certain related assets for total cash consideration of approximately $ 210 million (collectively, the “Cook Acquisition”).

The closing of the proposed Cook Acquisition is expected to occur during the fourth quarter of 2024, subject to the receipt or waiver (in accordance with the provisions of the Cook Purchase Agreement) of certain closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and other customary closing conditions.

We expect to fund the Cook Acquisition through a combination of cash on hand and borrowings under our long-term credit facility.

In connection with the projected closing of the Cook Acquisition, we propose to enter into a transition services agreement with Cook Medical, pursuant to which Cook Medical would provide manufacturing and other services to us during a two-year transition period.

We are currently evaluating the accounting treatment of the Cook 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