What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-28 · 238 added, 208 removed, 1046 unchanged (30% of the section changed)

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Inventories are valued at the lower of cost, at approximate costs determined on a first-in, first-out method, or net realizable value.

The Company reviews inventories on hand and records provisions based on estimated excess, slow moving and obsolete inventories.

The Company reviews inventories on hand and records provisions based on estimated excess, slow moving and

obsolete inventories.

The valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration.

We identified the provision for estimated excess, slow moving and obsolete inventories as a critical audit matter because of management’s significant judgment and estimates in determining the provision for estimated excess, slow moving and obsolete inventories primarily around forecasted product demand derived from historical experience of product sale and production raw material usage.

This required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of the valuation of excess, slow moving and obsolete inventories included the following, among others:

Our audit procedures related to management’s estimate of the valuation of excess, slow moving and obsolete inventories included the following, among others:

● We tested the effectiveness of controls over the provision for estimated excess, slow moving and obsolete inventories.

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● We tested the calculation of the estimated excess, slow moving and obsolete inventories, on a sample basis, including the completeness and accuracy of the data used in the calculation, such as future product demand based on historical sales and raw material usage and product expiration.

● We assessed the reasonableness of the assumptions used in the calculations of the provision for estimated excess, slow moving and obsolete inventories by developing an independent expectation and comparing our independent expectation to the results of the Company’s calculations.

● We tested the mathematical accuracy of the Company’s calculations of excess, slow moving and obsolete inventories.

Intangible Assets – Bluegrass and AngioDynamics Developed Technology – Refer to Note 3 to the financial statements

● We tested the mathematical accuracy of the Company’s calculation of excess, slow moving and obsolete inventories.

Intangible Assets – EGS and Cook Developed Technology – Refer to Note 3 to the financial statements

Critical Audit Matter Description

On May 4, 2023, the Company entered into an asset purchase agreement to acquire specific assets related to catheter products from Bluegrass Vascular Technologies, Inc.

(“Bluegrass”).

On July 1, 2024, the Company entered into an asset purchase agreement with Endogastric Solutions, Inc.

(“EGS”) to acquire the assets associated with the EsophyX® Z+ device.

The Company accounted for this acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the tangible and intangibles assets acquired based on their respective fair values, including developed technology intangible assets of $72.8 million.

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

(“AngioDynamics”) to acquire the assets associated with a portfolio of catheter products.

On November 1, 2024, the Company entered into an asset purchase agreement with Cook Medical Holdings, LLC (“Cook”) to acquire the assets associated with its lead management business.

The Company accounted for this acquisition under the acquisition method of accounting for business combinations.

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The determination of the fair value of the developed technology intangible assets required management to make significant estimates and assumptions related to future cash flows and the discount rate.

We identified the valuation of the acquired developed technology intangible assets from Bluegrass and AngioDynamics as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets.

We identified the valuation of the acquired developed technology intangible assets from EGS and Cook as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the acquired developed technology.

This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows and the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimates of future cash flows and discount rate for the acquired Bluegrass and AngioDynamics developed technology intangible assets included the following, among others:

Our audit procedures related to the estimates of future cash flows and discount rate for the acquired EGS and Cook developed technology intangible assets included the following, among others:

● We tested the effectiveness of internal controls over the valuation of the developed technology intangible assets, including those over estimates of future cash flows and the selection of the discount rate.

● We assessed the reasonableness of management’s estimated cash flows by inquiring of management regarding its processes for developing estimated financial information and comparing the estimates to historical results achieved by the acquired assets, historical results of the Company and other acquisitions completed in recent years, and comparable peer companies.

● We assessed the reasonableness of management’s estimated cash flows by inquiring of management regarding its processes for developing estimated cash flows and comparing the estimates to historical results achieved by the predecessor, historical results of the Company and other acquisitions completed in recent years, and comparable peer companies.

● We performed sensitivity analyses of the significant assumptions used in the developed technology valuation models to evaluate the change in fair value resulting from changes in the significant assumptions.

● With the assistance of our fair value specialists, we (1) evaluated the reasonableness of the valuation methodology;

(2) evaluated the reasonableness of the discount rate through comparing the data underlying the determination of the discount rate to independent sources and developing a range of independent estimates and comparing those to the discount rates selected by management;

and (3) tested the mathematical accuracy of the discounted cash flow calculation.

● We evaluated whether the estimated revenue growth rates and cash flows were consistent with evidence obtained in other areas of the audit, including a retrospective review of actual post-acquisition financial results.

(2) evaluated the reasonableness of the discount rate through comparing the data underlying the determination of the discount rate to independent sources and developed a range of independent estimates and compared those to the discount rates selected by management;

and (3) tested the mathematical accuracy of the discounted cash flow calculations.

● We evaluated whether the estimated revenue growth rates and cash flows were consistent with evidence obtained as part of a retrospective review of actual post-acquisition financial results.

/s/ DELOITTE & TOUCHE LLP

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Accrued expenses

Current portion of long-term debt

Short-term operating lease liabilities

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Stockholders' equity:

Preferred stock — 5,000 shares authorized as of December 31, 2023 and December 31, 2022;

no shares issued

Common stock, no par value;

100,000 shares authorized;

Preferred stock — 5,000 shares authorized;

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

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

issued and outstanding as of December 31, 2024 - 58,743 and December 31, 2023 - 57,858

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Research and development

Legal settlement

Impairment charges

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(In thousands)

Other comprehensive income:

Other comprehensive income (loss):

Cash flow hedges

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BALANCE — December 31, 2022

Other comprehensive loss

Other comprehensive income

Stock-based compensation expense

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Shares issued from time-vested restricted stock units

Purchase of capped call option

Shares surrendered in exchange for payment of payroll tax liabilities

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BALANCE — December 31, 2023

Other comprehensive income

Other comprehensive loss

Stock-based compensation expense

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Shares issued from time-vested restricted stock units

Purchase of capped call option

Shares surrendered in exchange for payment of payroll tax liabilities

Shares surrendered in exchange for exercise of stock options

BALANCE — December 31, 2024

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Proceeds (payments) from disposition of business

Cash received for settlement of note receivable

Issuance of note receivable

Cash paid for notes receivable and other investments

Cash paid in acquisitions, net of cash acquired

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Payment of taxes related to an exchange of common stock

Net cash, cash equivalents, and restricted cash provided by (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

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We manufacture our products in plants located in the U.S., Mexico, The Netherlands, Ireland, France, Brazil and Singapore.

We export sales to dealers and have direct or modified direct sales forces in the U.S., Canada, Western Europe, Australia, Brazil, Japan, China, Malaysia, South Korea, UAE, India, New Zealand and South Africa (see Note 13).

Principles of Consolidation and Basis of Presentation .

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

The following is a summary of the more significant of such policies.

The consolidated financial statements include our wholly owned subsidiaries.

Intercompany balances and transactions have been eliminated.

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

During the year ended December 31, 2024, we elected to change the presentation of investments in privately held companies within the statements of cash flows to be included within Cash paid for notes receivable and other investments .

Previously, amounts paid to acquire such investments were presented within Cash paid in acquisitions, net of cash acquired .

The change in presentation had no material impact on previously reported financial information and comparative periods have been adjusted to reflect this change in presentation.

Use of Estimates in Preparing Financial Statements .

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Actual results could differ from those estimates.

Principles of Consolidation .

The consolidated financial statements include our wholly owned subsidiaries.

Intercompany balances and transactions have been eliminated.

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

Cash and Cash Equivalents .

We consider interest-bearing deposits with an original maturity date of three months or less to be cash equivalents.

We consider interest-bearing deposits and money market funds with an original maturity date of three months or less to be cash equivalents.

As of December 31, 2024 and 2023, we had restricted cash for the payment of certain import and other taxes for our subsidiary in China of $ 2.1 million and $ 2.1 million, respectively, which was reported within prepaid expenses and other assets on our consolidated balance sheets.

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We review inventories on hand and record provisions based on estimated excess, slow moving and obsolete inventories, as well as inventories with a carrying value in excess of net realizable value.

The regular and systematic review of the valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration.

The regular and systematic review

of the valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration.

Goodwill and Intangible Assets .

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An impairment charge would be recognized to the extent the carrying amount of the in-process technology exceeded its fair value.

D uring the years ended December 31, 2024 and 2023, we recorded no impairment charges related to our intangible assets.

During the year ended December 31, 2022 , we recorded total impairment charges related to our intangible assets of $ 1.7 million for our divestiture on April 30, 2022 of the STD Pharmaceutical Products Limited (“STD Pharmaceutical”) business acquired in our August 2019 acquisition of Fibrovein Holdings Limited, which pertained to our cardiovascular segment.

The primary indicators of impairment were restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies.

Long-Lived Assets .

We periodically review the carrying amount of our depreciable long-lived assets for impairment.

An asset is considered impaired when undiscounted estimated future cash flows are less than the carrying amount of the asset.

We periodically review the carrying amount of our long-lived assets, including property and equipment, intangible assets, and right-of-use operating lease assets, for impairment.

An asset is considered impaired when undiscounted estimated future cash flows are less than the carrying amount of the asset based on the criteria for accounting for the impairment or disposal of long-lived assets under ASC 360, Property, Plant and Equipment .

In the event the carrying amount of such asset is not considered recoverable, the asset is adjusted to its fair value.

Fair value is generally determined based on discounted future cash flow.

The Company recorded write downs of property and equipment in each of the years ended December 31, 2024, 2023 and 2022.

Property and Equipment .

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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.

We paid $ 3.8 million, $ 4.0 million, and $ 1.4 million in the acquisition of additional equity investments and have no cumulative impairments or other fair value adjustments associated with our existing investments.

Refer to Note 15, Fair Value Measurements , for details of impairments of securities previously classified as equity investments.

Other Long-term Obligations.

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In connection with a business combination, any contingent consideration is recorded at fair value on the acquisition date based upon the consideration expected to be transferred in the future.

We re-measure the estimated liability each quarter based upon changes in revenue estimates, changes in the probability of achieving relevant milestones and changes in the discount rate or expected period of payment.

We re-measure the estimated liability each quarter based upon changes in revenue estimates, changes in the probability of achieving relevant milestones and changes in the

discount rate or expected period of payment.

Changes in the estimated fair value are recorded through operating expense in our consolidated statements of income.

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Research and development costs, including new product development, clinical trials, and regulatory compliance, are expensed as incurred.

Restructuring.

Restructuring charges consist primarily of termination benefits for employees effected by certain site consolidation and production line optimization transfers related to the company’s transformation initiatives.

We account for involuntary employee termination benefits that represent a one-time benefit in accordance with ASC 420, Exit or Disposal Cost Obligations .

Severance costs accounted for under ASC 420 are recognized when management with the proper level of authority commits to a restructuring plan and communicates these actions to employees and other applicable criteria.

We record such costs into expense over the employee’s future service period, if any.

Other exit costs are accounted for under ASC 420 and are either deferred or expensed as incurred based on the nature of the expense.

We recorded restructuring charges of $ 3.1 million, $ 2.7 million and $ 7.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

These expenses are reflected within selling, general and administrative expenses within our consolidated statements of income.

The restructuring reserve balance as of December 31, 2024 and 2023 was $ 1.1 million and $ 4.1 million, respectively.

Income Taxes .

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Cash-settled share-based awards, or liability awards, are remeasured at fair value each reporting period until the awards are settled.

Total stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021 was $ 21.3 million, $ 18.0 million, and $ 16.1 million, respectively (see Note 12).

Total stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022 was $ 28.5 million, $ 21.3 million, and $ 18.0 million, respectively (see Note 12, Employee Stock Purchase Plan, Stock Options and Warrants ).

Concentration of Credit Risk .

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Derivatives .

We use forward contracts to mitigate our exposure to volatility in foreign exchange rates, and we use an interest rate swap to hedge changes in the benchmark interest rate related to our Fourth Amended Credit Agreement described in Note 8.

We use forward contracts to mitigate our exposure to volatility in foreign exchange rates, and we used an interest rate swap to hedge changes in the benchmark interest rate related to our Amended Fourth A&R Credit Agreement described in Note 8, Debt .

All derivatives are recognized in the consolidated balance sheets at fair value.

Classification of each hedging instrument is based upon whether the maturity of the instrument is less than or greater than 12 months.

We do not purchase or hold derivative financial instruments for speculative or trading purposes (see Note 9).

R ecently Adopted Financial Accounting Standards.

We do not purchase or hold derivative financial instruments for speculative or trading purposes (see Note 9, Derivatives ).

Recently Adopted Financial Accounting Standards.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

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In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 , which defers the sunset date of the guidance in ASC 848 to December 31, 2024.

During 2023, we transitioned our interest rate swap agreement to reference the Secured Overnight Financing Rate (“SOFR”) in connection with reference rate reform and adopted certain optional expedients provided in ASU 2020-04 in relation to contract modifications and hedge accounting that allowed us

to continue hedge accounting for our interest rate swap cash flow hedge (see Note 9).

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The provisions of this update must be applied retrospectively to all periods presented in the financial statements.

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

We adopted this ASU on January 1, 2024, and applied the amendments retrospectively to all prior periods presented in our consolidated financial statements (see Note 13, Segment Reporting and Foreign Operations ).

The adoption of this guidance did not have an impact on the company’s consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which amends Income Taxes (Topic 740) .

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We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires a public entity to disclose certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization on an annual and interim basis.

ASU 2024-03 is effective

for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The provisions within the update may be applied retrospectively for all periods presented in the financial statements.

While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

We currently believe there are no other issued and not yet effective accounting standards that are materially relevant to our financial statements.

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2024 Acquisitions

On November 1, 2024, pursuant to the terms of the Asset Purchase Agreement (the “Cook Purchase Agreement”) dated September 18, 2024 between Merit and Cook Medical Holdings LLC, (“Cook”), we acquired Cook’s lead management business, which is composed of a comprehensive end-to-end portfolio of medical devices and accessories used in lead management procedures for patients who need a pacemaker or an implantable cardioverter-defibrillator lead removed or replaced.

We acquired the portfolio for a purchase price of $ 210 million, plus the assumption of certain liabilities.

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 $ 5.5 million for the year ended December 31, 2024.

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 transaction, which were included in selling, general and administrative expenses in the consolidated statements of income were approximately $ 5.4 million.

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

Assets Acquired

Intangible assets

Developed technology

Customer List

Total assets acquired

Liabilities Assumed

Accrued expenses

Total liabilities assumed

Total net assets acquired

We are amortizing Cook developed technology intangible assets over ten years , the trademark intangible assets over 12 years , and the customer list intangible asset on an accelerated basis over 12 years .

We have estimated the weighted average life of the intangible assets acquired from Cook to be 10.3 years.

The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes.

The pro forma effects on our consolidated results of operations of the Cook acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information to determine earnings associated with the acquired product lines which represent only a small portion of the product lines of a large, consolidated company without standalone financial information .

On July 1, 2024, we entered into an Asset Purchase Agreement (the “EGS Purchase Agreement”) with EndoGastric Solutions, Inc.

(“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.

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 $ 14.4 million for the year ended December 31, 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 $ 3.4 million.

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

(“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 .

2023 Acquisitions

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

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We accounted for this transaction under the acquisition method of accounting as a business combination.

The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were approximately $ 14.4 million for the year ended December 31, 2023.

The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were approximately $ 26.9 million and $ 14.4 million for the years ended December 31, 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 existing operations, sales distribution networks and management structure of our cardiovascular business segment.

Acquisition-related costs associated with the AngioDynamics acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, were approximately $ 4.9 million for the year ended December 31, 2023.

Acquisition-related costs associated with the AngioDynamics acquisition, which are included in selling,

general and administrative expenses in the accompanying consolidated statements of income, were approximately $ 4.9 million for the year ended December 31, 2023.

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

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The pro forma effects on our consolidated results of operations of the AngioDynamics acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information due to the unavailability of the information provided to the Company, management’s inability to reasonably estimate the amounts from the carve out of assets and differing fiscal year-end of the acquired business.

On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass, for a purchase price of approximately $ 32.7 million.

On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass Vascular Technologies, Inc.

(“Bluegrass”), for a purchase price of approximately $ 32.7 million.

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

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

The fair value of this previously held equity investment of approximately $ 0.2 million is included in the purchase price allocation.

We accounted for this transaction under the acquisition method of accounting as a business combination.

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On May 1, 2023, we entered into an asset purchase agreement to acquire certain assets from ART, related to intellectual property rights for soft tissue markers.

The total purchase price of the ART assets included an up-front payment of $ 750,000 , a deferred payment of $ 750,000 payable upon the first to occur of (1) shipment and installation of two commercial production winders used to manufacture the product or (2) 30 days after delivery of the winders to Merit, and, a deferred payment of $ 500,000 payable upon regulatory approval from the U.S.

The total purchase price of the ART assets included an up-front payment of $ 0.8 million, a deferred payment of $ 0.8 million payable upon the first to occur of (1) shipment and installation of two commercial production winders used to manufacture the product or (2) 30 days after delivery of the winders to Merit, and, a deferred payment of $ 0.5 million payable upon regulatory approval from the U.S.

Food and Drug Administration for Merit to commence commercialization, marketing and sale of the product in the United States.

We have accounted for this transaction as an asset purchase and recorded $ 1.5 million of acquired in-process research and development expense associated with the upfront payment and completion of the milestone related to the installation of the commercial production winders.

We have accounted for this

transaction as an asset purchase and recorded $ 1.5 million of acquired in-process research and development expense associated with the upfront payment and completion of the milestone related to the installation of the commercial production winders.

The final payment will be capitalized as a developed technology intangible asset when paid upon completion of the regulatory approval milestone under the terms of the asset purchase agreement.

The payments are reported within operating expenses because the technological feasibility of the underlying research and development project has not yet been reached and such technology has no identified future alternative use as of the date of acquisition.

We entered into a stock purchase agreement on January 11, 2023, and an exclusive distribution agreement on April 5, 2023, with Solo Pace Inc.

("Solo Pace”), owner and developer of a temporary external pulse generator and grounding pad with associated remote control module.

Pursuant to these agreements, we paid $ 4.0 million to acquire (a) shares of Series Seed-1 Preferred Stock of Solo Pace, (b) an option to purchase the outstanding equity of Solo Pace within the earlier of five years after product commercialization or within 120 days after the twelve-month period wherein sales of the Solo Pace product exceed $ 6.0 million, and (c) exclusive rights to distribute the Solo Pace product upon commercialization.

The shares of Solo Pace stock have been reflected within other assets in the accompanying consolidated balance sheets.

Our investment in Solo Pace represents an ownership of approximately 19 % of its outstanding capital stock and has been recorded as an equity investment accounted for at cost because the equity interest does not have a readily determinable fair value and because we are not able to exercise significant influence over the operations of Solo Pace.

2022 Acquisitions

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We recorded the amount paid upon closing as a developed technology intangible asset, which we are amortizing over 10 years .

On April 30, 2022, we acquired the Restore Endosystems Bifurcated Stent System pursuant to the terms of a unit purchase agreement we executed with all of the members of Restore Endosystems.

On April 30, 2022, we acquired the Restore Endosystems Bifurcated Stent System pursuant to the terms of a unit purchase agreement we executed with all of the members of Restore Endosystems LLC.

Subject to the terms and conditions of the unit purchase agreement, we paid $ 3 million in cash at closing.

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We have accounted for this transaction as an asset purchase and recorded $ 6.5 million of acquired in-process research and development expense because the technological feasibility of the underlying research and development project has not yet been reached and such technology has no identified future alternative use as of the date of acquisition.

During April 2022, we paid $ 1.4 million to acquire shares of Series A Preferred Stock of Fluidx Medical Technology, Inc.

("Fluidx"), owner of certain technology proposed to be used in the development of embolic and adhesive agents for use in arterial, venous, vascular graft and cardiovascular applications inside and outside the heart and related appendages.

We had previously purchased, and continue to hold, $ 4.7 million of participating preferred shares of Fluidx.

Our investments have been recorded as equity investments accounted for at cost and reflected within Other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Fluidx.

Our total current investment in Fluidx represents an ownership of approximately 17 % of its outstanding capital stock at the date of this investment.

2021 Acquisitions

During September 2021, we paid $ 2.7 million to acquire Series A preferred shares of Fluidx.

We had previously purchased $ 2 million of participating preferred shares during 2019.

Our investment has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Fluidx.

Our total current investment in Fluidx represents an ownership of approximately 15.0 % of the outstanding stock at the date of this investment.

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

December 31, 2024

December 31, 2023

Finished goods

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The changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023, are as follows (in thousands):

Cardiovascular

Goodwill balance at January 1

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We did no t have any goodwill impairments for the years ended December 31, 2024, 2023 and 2022.

The total goodwill balance as of December 31, 2023 and 2022 is related to our cardiovascular segment.

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

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

Year ending December 31,

Estimated Amortization Expense

We evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

D uring the year ended December 31, 2023, we recorded no impairment charges related to our intangible assets.

During the year ended December 31, 2021 , we recorded total impairment charges related to our intangible assets of $ 1.6 million for the remaining carrying value of ArraVasc license agreements, which pertained to our cardiovascular segment.

The primary indicators of impairment were restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law.

We currently do not anticipate the recently enacted law, including the corporate alternative minimum tax, one percent excise tax on stock repurchases, or tax incentives to promote clean energy, to have a material impact on our consolidated financial statements.

The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024.

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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.

Based on the 2024 financial results, we anticipate to meet the safe harbor rules in all jurisdictions and do not anticipate the Pillar 2 laws to have a material impact on our effective tax rate.

For the years ended December 31, 2024, 2023 and 2022, income before income taxes is broken out between U.S.

and foreign-sourced operations consisted of the following (in thousands):

and foreign-sourced operations and consisted of the following (in thousands):

The components of the provision for income taxes for the years ended December 31, 2024, 2023 and 2022, consisted of the following (in thousands):

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Computed federal income tax expense at applicable statutory rate of 21 %

State income tax expense (benefit)

State income tax expense

Tax effect of international items

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Operating lease assets

Federal R&D tax credit

State R&D tax credits

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Valuation allowance

Net deferred income tax assets (liabilities)

Net deferred income tax liabilities

Deferred income tax assets

Deferred income tax liabilities

Net deferred income tax assets (liabilities)

Net deferred income tax liabilities

Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions.

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The valuation allowance is primarily related to state credit carryforwards, non-US net operating loss carryforwards, and capital loss carryforwards for which we believe it is more likely than not that the deferred tax assets will not be realized.

The valuation allowance increased by $ 213,000 during the year ended December 31, 2023, increased by $ 2.7 million during the year ended December 31, 2022, and increased by $ 573,000 during the year ended December 31, 2021.

As of December 31, 2023, we had U.S federal net operating loss carryforwards of $ 24.7 million, which were generated by Cianna Medical, Vascular Access Technologies, Inc., DFINE Inc., and Biosphere Medical, Inc., prior to our acquisition of these companies.

The valuation allowance increased by $ 0.4 million during the year ended December 31, 2024, increased by $ 0.2 million during the year ended December 31, 2023, and increased by $ 2.7 million during the year ended December 31, 2022.

As of December 31, 2024, we had U.S federal net operating loss carryforwards of $ 19.8 million, which were generated by Cianna Medical, DFINE Inc., and Biosphere Medical, Inc., prior to our acquisition of these companies.

These net operating loss carryforwards are subject to annual limitations under Internal Revenue Code Section 382.

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We do not consider our foreign earnings to be permanently reinvested.

Consequently, we have recorded tax expense of $ 434,000 , $ 320,000 and $ 288,000 for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2023, 2022 and 2021, respectively.

Additionally, for the year ended December 31, 2022, a tax benefit of $ 4.3 million was recorded with respect to the restructuring of our foreign entities and the associated change in foreign withholding taxes on the unremitted foreign earnings.

Consequently, we have recorded tax expense of $ 0.7 million, $ 0.4 million and $ 0.3 million for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2024, 2023 and 2022, respectively.

Additionally, for the year ended December 31, 2022, a tax benefit

of $ 4.3 million was recorded with respect to the restructuring of our foreign entities and the associated change in foreign withholding taxes on the unremitted foreign earnings.

We are subject to income taxes in the U.S.

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The total liability for unrecognized tax benefits at December 31, 2023, including interest and penalties, was $ 1.9 million, of which $ 1.9 million would favorably impact our effective tax rate if recognized.

At December 31, 2023 and 2022, none of the total liability was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet.

As of December 31, 2023 and 2022, we had accrued $ 290,000 and $ 336,000 respectively, in total interest and penalties related to unrecognized tax benefits.

As of December 31, 2024 and 2023, we had accrued $ 0.2 million and $ 0.3 million respectively, in total interest and penalties related to unrecognized tax benefits.

We account for interest and penalties for unrecognized tax benefits as part of our income tax provision.

During the years ended December 31, 2024, 2023 and 2022, our liability for unrecognized tax benefit was increased (decreased) for interest and penalties by $( 52,000 ), $( 46,000 ), and $ 14,000 , respectively.

We estimate it is reasonably possible that within the next 12 months the total liability for unrecognized tax benefits may increase, including expirations related to statutes of limitation, up to $ 7,000 .

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax benefits for the years ended December 31, 2024, 2023 and 2022, consisted of the following (in thousands):

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Accrued rebates payable

Accrued legal settlement

Accrued interest

Other accrued expenses

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

Revolving credit loans

Convertible notes

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Fourth Amended and Restated Credit Agreement

On June 6, 2023, we entered into a Fourth Amended and Restated Credit Agreement (the "Fourth Amended Credit Agreement").

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

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

The Fourth Amended Credit Agreement provides for a term loan of $ 150 million and a revolving credit commitment of up to an aggregate amount of $ 700 million, inclusive of sub-facilities for multicurrency borrowings, standby letters of credit and swingline loans.

On June 6, 2028, all principal, interest and other amounts outstanding under the Fourth Amended Credit Agreement are payable in full.

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 A&R 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.

On December 5, 2023, we executed an amendment to the Fourth A&R 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 used in determining the interest rates and amended the financial covenants, all as described below.

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

Revolving credit loans bear interest, at our election, at either (a) the Base Rate plus the Applicable Margin, (b) Adjusted Term SOFR plus the Applicable Margin, (c) Adjusted Eurocurrency Rate plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement, as amended), or (d) Adjusted Daily Simple SONIA plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement, as amended).

Term loans made under the Amended Fourth A&R Credit Agreement, as amended 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.

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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

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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 and adjusted for certain expenditures) to Consolidated Interest Expense (as defined in the Fourth Amended Credit Agreement, as amended) for any period of four consecutive fiscal quarters.

As of December 31, 2023, we believe we were in compliance with all covenants set forth in the Fourth Amended Credit Agreement, as amended.

As of December 31, 2023, we had outstanding borrowings of $ 99.1 million and issued letter of credit guarantees of $ 2.7 million under the Fourth Amended Credit Agreement, as amended, with additional available borrowings of approximately $ 626 million, based on the leverage ratio required pursuant to the Fourth Amended Credit Agreement, as amended.

Our interest rate as of December 31, 2023 was a fixed rate of 3.39 % with respect to $ 75 million of the principal amount, as a result of an interest rate swap (see Note 9) and a variable floating rate of 7.21 % on $ 24.1 million.

Our interest rate as of December 31, 2022 was a fixed rate of 2.71 % on $ 75 million as a result of an interest rate swap and a variable floating rate of 5.38 % on $ 123.2 million.

The foregoing fixed rates are exclusive of potential future changes in the applicable margin.

(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.

As of December 31, 2024, we were in compliance with all covenants set forth in the Amended Fourth A&R Credit Agreement.

As of December 31, 2024, we had no outstanding borrowings and issued letter of credit guarantees of $ 2.9 million under the Amended Fourth A&R Credit Agreement, with available borrowings of approximately $ 697 million, based on the leverage ratio required pursuant to the Amended Fourth A&R Credit Agreement.

As of December 31, 2023, we had outstanding borrowings of $ 99.1 million with a fixed rate of 3.39 % with respect to $ 75 million of the principal amount, as a result of an interest rate swap (see Note 9, Derivatives ) and a variable floating rate of 7.21 % on $ 24.1 million, in addition, we had issued letter of credit guarantees of $ 2.7 million under the Amended Fourth A&R Credit Agreement.

Convertible Notes

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(3) Upon the occurrence of a Fundamental Change, as set forth in the indenture governing the Convertible Notes;

(4) During any calendar quarter (and only during such calendar quarter) beginning after March 31, 2024, if, the last reported sale price per share of the Company’s common stock exceeds 130 % of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading day period ending on, and including, the last trading day of the immediately preceding calendar quarter;

(4) During any

calendar quarter (and only during such calendar quarter) beginning after March 31, 2024, if, the last reported sale price per share of the Company’s common stock exceeds 130 % of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading day period ending on, and including, the last trading day of the immediately preceding calendar quarter;

or (5) Prior to the related redemption date if the Company calls any Convertible Notes for redemption.

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Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative.

Interest Rate Risk .

Our debt under the Fourth Amended Credit Agreement bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense.

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

Derivatives Designated as Cash Flow Hedges

On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a current notional amount of $ 175 million with Wells Fargo Bank to fix the one-month LIBOR rate at 1.12 %.

The variable portion of the interest rate swap was tied to the one-month LIBOR rate (the benchmark interest rate).

The interest rate swap expired on July 6, 2021.

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

In June 2023, certain terms under the agreement were amended to reflect the transition from LIBOR to SOFR, an alternative reference rate.

Under the interest rate swap agreement we fixed the one-month SOFR rate on that portion of our borrowings under the Fourth Amended Credit Agreement at 1.64 % for the period from June 1, 2023 to July 31, 2024.

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.

At December 31, 2023 and 2022, our interest rate swaps qualified as cash flow hedges.

At December 31, 2024, we held no interest rate swap qualifying as cash flow hedges.

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

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

The fair value of our interest rate swaps at December 31, 2022 was an asset of $ 3.4 million, partially offset by $ 0.8 million in deferred taxes.

Foreign Currency Risk .

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Prepaid expenses and other assets

Interest rate swap

Other assets (long-term)

Foreign currency forward contracts

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Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income ("OCI") in our consolidated statements of comprehensive income and consolidated balance sheets (in thousands):

Amount of Gain/(Loss)

Amount of Gain

Recognized in OCI

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Derivative instrument

Interest rate swaps

Interest rate swap

Foreign currency forward contracts

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As of December 31, 2024, $ 2.7 million or $ 2.1 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months.

As of December 31, 2023, $ 1.5 million, or $ 1.1 million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months.

Derivatives Not Designated as Hedging Instruments

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Other income (expense) — net

See Note 15 for additional information about our derivatives.

See Note 15, Fair Value Measurements for additional information about our derivatives.

COMMITMENTS AND CONTINGENCIES

We are obligated under non-terminable operating leases for manufacturing facilities, finished good distribution centers, office space, equipment, vehicles, and land.

See Note 17 for disclosures regarding these operating leases.

See Note 17, Leases for disclosures regarding these operating leases.

As of December 31, 2024, we had entered into a number of agreements to license or acquire rights to certain intellectual property which require us to make royalty payments during the term of the agreements generally based on a percentage of sales.

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Minimum contractual commitments under royalty agreements to be paid within twelve months of December 31, 2024 were not significant.

See Note 15 for discussion of future royalty commitments related to acquisitions.

See Note 15, Fair Value Measurements for discussion of future royalty commitments related to acquisitions.

In the ordinary course of business, we are involved in various claims and litigation matters.

T hese proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental inquiries or other matters, including those more fully described below.

The outcomes of these matters will generally not be known for prolonged periods of time.

These matters generally involve inherent uncertainties and often require prolonged periods of time to resolve.

In certain proceedings, the claimants may seek damages as well as other compensatory and equitable relief that could result in the payment of significant claims and settlements and/or the imposition of injunctions or other equitable relief.

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The ultimate cost to us with respect to actions and claims could be materially different than the amount of the current estimates and accruals and could have a material adverse effect on our financial position, results of operations and cash flows.

Shareholder Derivative Action

On June 3, 2021, Steffen Maute filed a complaint, derivatively on behalf of Merit, against Merit (as a nominal defendant), our Chief Executive Officer, our Chief Financial Officer, our former President of EMEA and certain of our directors in the United States District Court for the District of Utah (Case No.

2:21-cv-00346-DBP).

The derivative complaint alleged that the individual defendants violated their fiduciary duties owed to Merit and were unjustly enriched at the expense of and to the detriment of Merit between February 2019 and October 2019, and sought unspecified damages, costs, and professional fees.

Following mediation, the parties negotiated an agreement to settle the dispute, which, among other provisions, provides for the release of all claims against Merit and the other defendants in exchange for Merit’s undertaking to implement certain corporate governance revisions and pay attorneys fees and expenses in the amount of $ 1.0 million.

On February 16, 2023, the court held a hearing and announced approval of the settlement, which has the effect of resolving all claims arising from the litigation.

The expense associated with the settlement has been reflected in our financial results reported for the year ended December 31, 2022.

We have received requests from the Division of Enforcement of the U.S.

Securities and Exchange Commission (“SEC”) seeking the voluntary production of information relating to the business activities of Merit’s subsidiary in China, including interactions with hospitals and health care officials in China.

We are cooperating with the requests and investigating the matter and, at this time, are unable to predict the scope, timing, significance or outcome of this matter.

It is possible that the ultimate resolution of the foregoing matter, or similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.

Unless included in our legal accrual, we are unable to estimate a reasonably possible loss or range of loss associated with any individual material legal proceeding.

Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred.

Commencing in January 2022, we have received requests from the Division of Enforcement of the U.S.

We are cooperating with the requests, investigating the matter and are in discussions with the SEC Staff regarding a potential resolution to the matter.

Currently, we are unable to predict the scope, timing, significance or outcome of the SEC Inquiry or estimate a reasonably possible loss or range of loss associated with the matter.

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.

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)

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Effect of dilutive stock awards

Effect of dilutive convertible notes

Total potential shares outstanding

Equity awards excluded as the impact was anti-dilutive (1)

_______________________________________________

(1) Does not reflect the impact of incremental repurchases under the treasury stock method.

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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 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 prices of our common stock for the year ended December 31, 2024 were used as the basis for determining the dilutive effect on EPS.

The average closing prices for our common stock did not exceed the conversion price of $ 86.83 , and therefore all associated shares were anti-dilutive.

EMPLOYEE STOCK PURCHASE PLAN, STOCK OPTIONS AND WARRANTS

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The 2018 Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, stock units (including restricted stock units) and performance awards (including performance stock units).

may be granted to directors, officers, outside consultants and key employees and may be granted upon such terms and such conditions as the Compensation Committee of our Board of Directors determines.

Options typically vest on an annual basis over a three to five-year life with a contractual life of seven years .

As of December 31, 2023, a total of 1,709,391 shares remained available to be issued under the 2018 Incentive Plan.

Options may be granted to directors, officers, outside consultants and key employees and may be granted upon such terms and such conditions as the Compensation Committee of our Board of Directors determines.

Options typically vest on an annual

basis over a three to five-year life with a contractual life of seven years .

As of December 31, 2024, approximately 3,026,000 shares remained available to be issued under the 2018 Incentive Plan.

2006 Long-Term Incentive Plan .

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We have a non-qualified Employee Stock Purchase Plan (“ESPP”), which has an expiration date of June 30, 2026.

As of December 31, 2023, the total number of shares of common stock that remained available to be issued under our non-qualified plan was 87,673 shares.

As of December 31, 2024, the total number of shares of common stock that remained available to be issued under our non-qualified plan was approximately 74,000 shares.

ESPP participants purchase shares on a quarterly basis at a price equal to 95 % of the market price of the common stock at the end of the applicable offering period.

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Restricted stock units

Cash-settled performance-based share-based awards ("Liability Awards")

Cash-settled performance-based awards

Total selling, general and administrative

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1.4 % - 4.3 %

0.5 % - 1.1 %

Expected option term

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46.2 % - 47.5 %

46.1 % - 46.7 %

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

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We recognize compensation expense for options on a straight-line basis over the service period, which corresponds to the vesting period.

During the years ended December 31, 2023, 2022 and 2021, approximately 444,000 , 251,000 and 716,000 nonqualified stock option grants were made, respectively, for a total fair value of $ 13.1 million, $ 6.3 million and $ 17.5 million.

During the years ended December 31, 2023 and 2022, approximately 444,000 and 251,000 nonqualified stock option grants were made, respectively, for a total fair value of $ 13.1 million and $ 6.3 million.

The Company did no t grant any options during the year ended December 31, 2024.

The table below presents information related to stock option activity for the years ended December 31, 2024, 2023 and 2022 (in thousands):

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Stock-Settled Performance-Based Restricted Stock Units (“PSUs”) and Time-Vested Restricted Stock Units (“RSUs”)

Since 2020, we have granted PSUs which vest at the end of one , two and three-year performance periods, or one year after the agreement date, whichever is later.

We have outstanding PSUs which vest at the end of three-year performance periods.

T he number of shares delivered upon vesting at the end of the performance periods are based upon performance against specified financial performance metrics and relative total shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements.

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

We have granted RSUs to our non-employee directors, which are subject to continued service through the vesting date, which is one year from the date of grant.

We have granted RSUs to our employees and non-employee directors, which are subject to continued service through the vesting date, which is between one to four years from the date of grant.

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

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Beginning nonvested balance

rTSR adjustment

Nonvested balance at December 31

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The actual number of shares which vest is determined based on the satisfaction of performance conditions and the application of an rTSR multiplier between 75 % and 125 % .

(2) Represents the application of an rTSR multiplier of 125 % to certain awards vested in 2023 based on the performance of our common stock and the terms of the awards.

The following table summarizes PSUs and RSUs granted during the years ended December 31, 2024, 2023 and 2022 (units and shares in thousands):

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1.6 % - 2.7 %

0.1 % - 0.3 %

Performance period

2.6 - 2.8 years

1.8 - 2.8 years

Expected dividend yield

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38.5 % - 46.2 %

43.7 % - 49.3 %

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

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The potential maximum payout of these liability awards is 250 % of the target cash incentive, resulting in a total potential maximum payout of $ 4.7 million, $ 4.3 million and $ 2.5 million for liability awards granted during the years ended December 31, 2024, 2023 and 2022, respectively.

Settlement generally occurs at the end of one , two and three-year performance periods based upon the same performance metrics and vesting period as our performance stock units.

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.

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

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As of December 31, 2024, our recorded liabilities associated with these awards was $ 5.1 million, and we had remaining unrecognized compensation cost related to cash-settled performance-based share-based awards of $ 3.6 million, which is expected to be recognized over a weighted average period of 1.7 years.

During 2023, 2022 and 2021, we paid $ 1.7 million, $ 833,000 and $ 417,000 , respectively, in connection with liability awards, and no awards were forfeited.

During 2024, 2023 and 2022, we paid $ 1.3 million, $ 1.7 million and $ 0.8 million, respectively, in connection with liability awards, and no awards were forfeited.

SEGMENT REPORTING AND FOREIGN OPERATIONS

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Our chief operating decision maker is our Chief Executive Officer.

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

See Note 2 to our consolidated financial statements set forth in Item 8 of this report for a detailed breakout of our sales by operating segment and product category, disaggregated between domestic and international sales.

Our CODM uses segment profit or loss to assess performance and allocate resources to each segment, primarily through periodic budgeting and segment performance reviews.

See Note 2, Revenues to our consolidated financial statements set forth in Item 8 of this report for a detailed breakout of our sales by operating segment and product category, disaggregated between domestic and international sales.

Total assets by segment are not used by the CODM to assess performance or allocate resources to the Company’s segments;

therefore, total assets by segment are not disclosed.

During the years ended December 31, 2024, 2023 and 2022, we had international sales of $ 555.7 million, $ 530.4 million and $ 500.4 million, respectively, or 41.0 %, 42.2 % and 43.5 %, respectively, of net sales.

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Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the years ended December 31, 2024, 2023 and 2022, are as follows (in thousands):

December 31, 2024

December 31, 2023

December 31, 2022

Cardiovascular

Total net sales

Income from operations

Cardiovascular

Total income from operations

Cardiovascular

Cost of sales standard (1)

Cost of sales other (2)

Selling, general and administrative expenses

Research and development expenses

Other operating expenses (3)

Income from operations

Total other expense — net

Income tax expense

Total assets by operating segment at December 31, 2023, 2022 and 2021, consisted of the following (in thousands):

Income before income taxes

(1) Cost of sales standard represents costs of goods sold measured at the internal standard cost for production of inventory.

Inventory standard costs include material, labor and manufacturing overhead.

(2) Cost of sales other for all segments include amortization expense associated with our developed technology and license agreement intangible assets, freight and handling associated with shipments to customers, provisions based on estimated excess, slow moving and obsolete inventories, manufacturing and price variances, and royalties.

(3) Other operating expenses include impairment charges, contingent consideration (benefit expense) related to the changes in fair value of contingent payments associated with acquisitions, acquired in-process research and development expense, and certain legal settlements.

Cardiovascular

Total depreciation and amortization by operating segment for the years ended December 31, 2024, 2023 and 2022, consisted of the following (in thousands):

Cardiovascular

Total capital expenditures for property and equipment by operating segment for the years ended December 31, 2023, 2022 and 2021, consisted of the following (in thousands):

Cardiovascular

EMPLOYEE BENEFIT PLANS

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Our contributions to these plans are discretionary in certain countries, including the U.S.

In September 2019, we ceased discretionary contributions to certain of our defined contribution plans and subsequently reinstated those contributions in May 2021.

Total expense for contributions made to these plans for the years ended December 31, 2024, 2023 and 2022 was $ 9.6 million, $ 8.8 million and $ 7.7 million, respectively.

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December 31, 2024

Money market funds (1)

Marketable securities (2)

Interest rate contract asset, current (2)

Foreign currency contract assets, current and long-term (4)

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Marketable securities (2)

Interest rate contract asset, long-term (2)

Interest rate contract asset, current (3)

Foreign currency contract assets, current and long-term (4)

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Contingent consideration liabilities

(1) Our money market fund represents a bank-managed money market fund which permits daily redemptions.

The fund is recorded as cash equivalents in the consolidated balance sheets.

(2) Our marketable securities, which consist entirely of available-for-sale equity securities, are valued using market prices in active markets.

Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

(2) The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as prepaid and other current assets or other long-term assets in the consolidated balance sheets.

(3) The fair value of the interest rate contract is determined using Level 2 fair value inputs and is recorded as prepaid and other current assets or other long-term assets in the consolidated balance sheets.

(4) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid and other assets or other long-term assets in the consolidated balance sheets.

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Contingent consideration liabilities are re-measured to fair value at each reporting period, with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income.

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

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

measurements.

Changes in the fair value of our contingent consideration liabilities during the years ended December 31, 2024 and 2023, consisted of the following (in thousands):

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Contingent payments made

Effect of foreign exchange

Ending balance

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Fair value at

Contingent consideration liability

Contingent consideration

Unobservable inputs

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Fair value at

Contingent consideration liability

Contingent consideration

Unobservable inputs

2 unchanged sentences

Discount rate

12.0 % - 16.0 %

Projected year of payments

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Discount rate

5.1 % - 14.0 %

Projected year of payments

17 unchanged sentences

During 2023, we made the final contingent payment to Cianna Medical Shareholders, including $ 0.9 million paid to the former Merit director who is a former Cianna Medical shareholder.

During the year ended December 31, 2022, we made contingent payments of approximately $ 1.6 million to the former director, and no such payments during 2021 .

During the year ended December 31, 2022, we made contingent payments of approximately $ 1.6 million to the former director .

Fair Value of Other Financial Instruments

The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments.

Our long-term debt under our Fourth Amended Credit Agreement re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value.

We believe the fair value our long-term debt under our convertible notes approximates carrying value as the notes were issued in December 2023.

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.

The fair value our long-term debt under our convertible notes was $ 945.6 million as of December 31, 2024 and was determined based on quoted prices in markets that are not active, which is considered a Level 2 valuation input.

The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which are Level 1 inputs.

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Intangible Assets.

During the years ended December 31, 2023, 2022 and 2021, we had losses of $ 0.0 million, $ 1.7 million and $ 1.6 million, respectively, related to certain acquired intangible assets (see Note 5).

Right of Use Operating Lease Assets.

W e identified changes in events and circumstances relating to certain right-of-use (“ROU”) operating lease assets.

We compared the anticipated undiscounted cash flows generated by a sublease to the carrying value of the ROU operating lease and related long-lived assets and determined that the carrying values were not recoverable.

Consequently, we recorded an impairment loss during the year ended December 31, 2021 of $ 1.4 million, which is equal to the excess of the carrying value of the assets over their estimated fair value.

The impairment loss was driven primarily by site consolidation decisions and changes in our projected cash flows for the ROU operating lease asset and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic.

These changes included an increase in the anticipated time to identify a lessee, an increase in anticipated lease concessions, and a decrease in the expected lease rates for the property.

The ROU operating lease asset impairment losses pertained to our cardiovascular segment.

We had no such losses during the years ended December 31, 2023 and 2022.

Property and Equipment.

D uring the year ended December 31, 2021 , we had losses of $ 1.3 million related to the measurement of property and equipment at fair value based on the planned discontinuance of the Advocate™ Peripheral Angioplasty Balloon product line, sold under our license agreements with ArraVasc, which pertained to our cardiovascular segment.

We had no such losses during the years ended December 31, 2023 and 2022.

During the years ended December 31, 2024, 2023 and 2022, we had losses of $ 0.0 million, $ 0.0 million and $ 1.7 million, respectively, related to certain acquired intangible assets (see Note 1 Organization and Summary of Significant Accounting Policies ).

Equity Investments, Purchase Options and Notes Receivable.

During the year ended December 31, 2023, we recorded impairment charges of $ 0.3 million associated with our previously held equity investment in Bluegrass in connection with the Bluegrass asset acquisition completed on May 4, 2023 (see Note 3).

During the year ended December 31, 2022, we recognized $ 0.5 million of impairment expense related to our equity method investment in XableCath, as business ceased operations.

We had no such losses during the years ended December 31, 2021.

We had no such losses during the year ended December 31, 2024.

Our equity investments in privately held companies were $ 22.8 million and $ 19.1 million at December 31, 2024 and 2023, respectively, which are included within other long-term assets in our consolidated balance sheets.

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Our outstanding long-term notes receivable, including accrued interest and our allowance for current expected credit losses, were $ 9.4 million and $ 3.2 million, as of December 31, 2024 and 2023, respectively.

As of December 31, 2023 and 2022, we had an allowance for current expected credit losses of $ 568,000 and $ 281,000 , respectively, associated with these notes receivable.

As of December 31, 2024 and 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.

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BALANCE — January 1, 2022

Other comprehensive loss

Other comprehensive income (loss)

Reclassifications to:

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BALANCE — December 31, 2022

Other comprehensive income (loss)

Other comprehensive income

Reclassifications to:

3 unchanged sentences

BALANCE — December 31, 2023

Other comprehensive income

Other comprehensive income (loss)

Reclassifications to:

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As of December 31, 2024, maturities of operating lease liabilities were as follows, in thousands:

Year ended December 31,

Year ending December 31,

Amounts due under operating leases

1 unchanged sentence

Imputed interest

As of December 31, 2023, we had entered into an agreement related to an operating lease in Mexico for manufacturing space that had not yet commenced.

The lease will commence in March 2024 with average annual maturities of approximately $ 700,000 expected for a period of approximately 11 years .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data