2024 Annual
Report to Shareholders
and Form 10-K
IV Systems
An integrated portfolio of
IV pump technologies,
informatics, and services
Consumables
A complete line of infusion,
vascular access, and
specialty consumables
Vital Care
Hemodynamic monitoring,
temperature and airway
management, and pain kits
Clinician-founded. Clinically focused.
From our beginnings in 1984 as an innovative clinician-founded company to today—as a global leader in
IV therapy—ICU Medical remains committed to bringing our customers clinically-relevant products and
technologies that help safely and efficiently meet patient care challenges.
April 3, 2025
Dear ICU Medical Shareholder,
As we move into 2025, ICU Medical is in its strongest operational position since acquiring Smiths Medical, and we continue to
build trusted relationships with customers worldwide. In 2024, we grew revenues at an attractive rate and took steps to reduce
debt, but we acknowledge that earnings have remained flat over the past three years. Addressing this is a top priority, and we
are extremely focused on delivering meaningful earnings improvements in 2025. As noted in our last two letters, the Smiths
Medical acquisition and integration has taken time and presented its own challenges, but we are now seeing solid progress and
a clear contribution to financial performance and shareholder value.
The significant inflationary effects that impacted us in prior years eased in 2024, and we began to recoup the impact in our
renewals of long-term customer contracts and effort around global price increases. At the time of writing, the key macroeconomic
factor that could impact our financial results is the potential of US government tariffs and the downstream effects they may have
on currency markets and interest rates.
In 2024, we saw solid revenue growth across our core businesses. In Consumables, the legacy ICU product families of IV Therapy
and Oncology once again reached record sales, and the Vascular Access lines achieved the best growth in years. In the IV
Systems business, the acquired product line of CADD™ ambulatory infusion pumps performed exceptionally well, with strong
sales and growing demand. Our Vital Care business overperformed due to the national IV solutions shortage and is expected to
return to a more normal level this year.
Looking ahead, we believe we are at the pinnacle of IV Systems device innovation, reflecting years of focused investment and
expertise in this critical part of our business. Following approval of the Plum Duo™ infusion pump, we are now in the final stages
of the FDA 510(k) review process for our Plum Solo™ single-channel pump and associated LifeShield™ safety software, and we
are preparing 510(k) submissions for CADD and next-generation Medfusion™ pumps. These updated devices, combined with our
large-volume pump portfolio and connection to LifeShield safety software, will give us the most advanced and integrated fleet of
infusion devices in the market.
From an operational perspective, we made progress on a number of key initiatives in 2024 that will help improve mid- and longer-
term gross margins. We successfully completed the cutover of our order-to-cash IT systems for North America, enabling us to
optimize logistics and customer service infrastructure. We also continued work on multiple factory consolidations to bring
additional productivity to a smaller manufacturing network and refined our real estate footprint to support post-pandemic needs.
Each of these activities has a clear payback and will contribute to improved gross margins.
Finally, one of the most significant updates of 2024 was the announcement of our joint venture for IV solutions with Otsuka
Pharmaceutical Factory—a partnership our teams are working diligently behind the scenes to bring to life. Otsuka’s expertise
and commitment make them an ideal partner, and we believe this collaboration will strengthen supply chain resiliency and drive
much needed innovation in the North American IV solutions market.
In 2025, we remain focused on disciplined execution and driving earnings growth, with the goal of delivering more predictable
results and creating long-term value for our shareholders. As we strengthen our financial position and improve leverage, we look
forward to returning capital in a thoughtful, balanced way that supports both shareholder returns and continued investment in
innovation.
Sincerely,
Vivek Jain
Chairman and CEO
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024 or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-34634
ICU MEDICAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
33-0022692
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
951 Calle Amanecer
San Clemente , California
92673
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (949) 366-2183
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, par value $0.10 per share
ICUI
The Nasdaq Stock Market LLC
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes ý No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and "emerging growth company," in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant
to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ý No
The aggregate market value of the voting stock held by non-affiliates of registrant as of June 30, 2024, the last business day of
registrant’s most recently completed second fiscal quarter, was $2,671,423,750.
The number of shares outstanding of registrant’s common stock, $.10 par value, as of January 31, 2025 was 24,519,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for registrant’s 2025 Annual Meeting of Stockholders filed or to be filed pursuant to Regulation 14A
within 120 days following registrant’s fiscal year ended December 31, 2024, are incorporated by reference into Part III of this Report.
ICU Medical, Inc.
Form 10-K
For the Year Ended December 31, 2024
TABLE OF CONTENTS
Page
Forward-Looking Statements
Risk Factors Summary
PART I
Item 1
Business
1
Item 1A
Risk Factors
16
Item 1B
Unresolved Staff Comments
38
Item 1C
Cybersecurity
38
Item 2
Properties
39
Item 3
Legal Proceedings
40
Item 4
Mine Safety Disclosures
41
PART II
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
41
Item 6
Reserved
42
Item 7
Management's Discussion and Analysis of Financial Condition and Results of Operations
42
Item 7A
Quantitative and Qualitative Disclosures about Market Risk
57
Item 8
Financial Statements and Supplementary Data
58
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
113
Item 9A
Controls and Procedures
113
Item 9B
Other Information
114
Item 9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
114
PART III
Item 10
Directors, Executive Officers and Corporate Governance
114
Item 11
Executive Compensation
116
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
117
Item 13
Certain Relationships and Related Transactions, and Director Independence
117
Item 14
Principal Accountant Fees and Services
117
PART IV
Item 15
Exhibits and Financial Statement Schedules
118
Item 16
Form 10-K Summary
122
Signatures
122
Forward Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of
present and historical fact, contained in this Annual Report on Form 10-K, including, without limitation, statements regarding:
our future results of operations and financial position, business strategy and approach; the projected timeline as well as the
anticipated benefits and costs associated with our purchase agreement with OPF (as defined below); expected capital
expenditures; anticipated consumer demand; supply chain constraints; the expected impact of macroeconomic developments,
such as foreign exchange, inflation and interest rates, and new accounting and tax regulations; tariffs; as well as plans and
objectives of management for future operations, are forward-looking statements. Without limiting the foregoing, in some cases,
you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “exploring,” “plan,”
“anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seeks,” or
“continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these
words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid
placing undue reliance on such statements.
The forward looking statements in this Annual Report on Form 10-K are only predictions and are based largely on our
current expectations and projections about future events and financial trends that we believe may affect our business, financial
condition and results of operations. These forward-looking statements speak only as of the date of this Annual Report on Form
10-K and are subject to a number of known and unknown risks, uncertainties and assumptions, including without limitation, the
following:
•
our failure to compete successfully with our competitors and maintain market share;
•
significant decline in demand for our products;
•
our inability to fund substantial investment in product development and recover such investment through commercial
product sales;
•
prolonged periods of inflation, rising interest rates and the impact of foreign currency exchange rates as a result of the
current global macroeconomic and geopolitical conditions, for example, armed conflicts between Ukraine and Russia
and in Israel;
•
significant changes in U.S. trade, tax or other policies that restrict imports or increase import tariffs for certain
countries, particularly Mexico, will escalate trade wars and will have a material adverse effect on our results of
operations.
•
continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement;
•
disruptions at the FDA, other government agencies or notified bodies caused by funding shortages, global health
concerns, or turnover of personnel;
•
failure to protect our information technology systems against security breaches, service interruptions, or
misappropriation of data;
•
our exposure to risks related to foreign currency exchange rates;
•
damage to any of our manufacturing facilities or disruption to our supply chain network;
•
our dependence on single and limited source third-party suppliers, which subjects our business and results of
operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers;
•
our failure to achieve expected operating efficiencies or expense reductions associated with cost reduction and
restructuring efforts;
•
significant sales through our distributors;
•
additional risks from international sales, related to competition with larger international companies and established
local companies and our possibly higher cost structure;
•
actual or perceived failures to comply with foreign, federal, and state data privacy and security laws, regulations and
standards, or certain fraud and abuse and transparency laws;
•
our failure to defend and enforce our patents or other proprietary rights and the cost of enforcing and of defending
patent claims or claims of other proprietary rights; and expiration of our patents;
•
our failure to effectively complete the integration of our business resulting from the Smiths Medical acquisition or
manage our growth and changes to our business resulting from any other future acquisitions; and
•
our use of a significant portion of our cash on hand and incurrence of a substantial amount of debt to finance the
Smiths Medical acquisition, which could adversely affect our business, including by restricting our ability to engage in
additional transactions or incur additional indebtedness.
The forward looking statements in this report on Form 10-K are only predictions and are based largely on our current
expectations and projections about future events and financial trends that we believe may affect our business, financial
condition and results of operations. These forward-looking statements speak only as of the date of this Annual Report on Form
10-K and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under
the sections in this Annual Report on Form 10-K entitled “Summary Risk Factors,” “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as
predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or
occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in
an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for
management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update
or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed
circumstances or otherwise.
Risk Factors Summary
Our business is subject to a number of risks and uncertainties, including those described in Part I, Item 1A. "Risk
Factors" in this Annual Report on Form 10-K. You should carefully consider these risks and uncertainties when investing in our
securities. Principal risks and uncertainties include:
•
If we are unable to compete successfully with our competitors, we may be unable to maintain market share, in which
case our sales may not grow and our profitability may be adversely affected.
•
If demand for our products were to decline significantly, we might not be able to recover the cost of our expensive
automated molding and assembly equipment and tooling, which could have an adverse effect on our financial
condition and results of operations.
•
Product development requires substantial investment that may be difficult for us to fund and may be challenging to
recover through commercial product sales.
•
Heightened inflation, higher interest rates and foreign currency rate fluctuations as a result of global macroeconomic
and geopolitical conditions have had and could in the future have a material adverse effect on our operations.
•
Significant changes in U.S. trade, tax or other policies that restrict imports or increase import tariffs for certain
countries, particularly Mexico, can escalate trade wars and could have a meaningful adverse effect on our results of
operations.
•
Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our
prices. If we cannot reduce manufacturing costs of existing and new products to counteract such pricing pressures, our
sales may not grow and our profitability may decline.
•
Our ability to market, distribute and sell our products in the U.S. and other countries may be adversely affected if our
products fail to comply with the existing laws and regulations, and applicable requirements of the FDA, governmental
agencies in other countries, and notified bodies.
•
If we or our component manufacturers fail to comply with the FDA's Quality System Regulation or Good
Manufacturing Practice regulations or other requirements, our manufacturing operations could be interrupted, and our
product sales and operating results could suffer. In particular, if we are unable to resolve or close-out the Warning
Letter dated October 1, 2021, received by Smiths Medical ASD, Inc. from the Minneapolis, Minnesota Facility
following a February to March 2021 inspection, we could suffer significant sanctions which may impact our ability to
sell products globally.
•
Disruptions at the FDA, other government agencies or notified bodies caused by funding shortages, global health
concerns, or personnel turnover could hinder their ability to hire, retain, or deploy key leadership and other personnel,
or otherwise prevent new or modified products from being developed, cleared, approved, certified, or commercialized
in a timely manner, or at all, which could negatively impact our business.
•
Failure to protect our information technology systems against security breaches, service interruptions, or
misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly
causing our business and reputation to suffer.
•
Damage to, or interruptions at, any of our manufacturing facilities or our suppliers' facilities could impair our ability to
produce our products.
•
We are dependent on single and limited source third-party suppliers, which subjects our business and results of
operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could
have an adverse effect on our business and financial condition.
•
We may not be successful in achieving expected operating efficiencies or expense reductions associated with cost
reduction and restructuring efforts and may experience a decline in our profitability, business disruptions or other
adverse consequences to our business as a result.
•
Significant sales through distributors expose us to risks that could have a material effect on our results of operations.
•
Actual or perceived failures to comply with foreign, federal, and state data privacy and security laws, regulations and
standards may adversely affect our business, operations and financial performance.
•
We are subject to certain fraud and abuse and transparency laws, which, if violated, could subject us to substantial
penalties. Additionally, any challenge to or investigation into our practices under these laws could cause adverse
publicity and be costly to respond to, and thus could harm our business.
•
Our business could be materially and adversely affected if we fail to defend and enforce our patents or other
proprietary rights, if our products are found to infringe patents or other proprietary rights owned by others or if the cost
to protect our patents or other proprietary rights becomes excessive or as our patents expire.
•
Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates.
•
International sales pose additional risks related to competition with larger international companies and established
local companies and higher credit risk.
•
The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and an increase in
size to our business. If we fail to effectively complete the integration of our business in a manner that preserves our
reputation with customers and the key aspects of our corporate culture, our business, financial condition and results of
operations could be harmed.
•
For the Smiths Medical acquisition, we used a significant portion of our cash on hand and incurred a substantial
amount of debt to finance the cash consideration portion and certain other amounts paid in connection with the Smiths
Medical acquisition, which could adversely affect our business, including by restricting our ability to engage in
additional transactions or incur additional indebtedness.
See Part I, Item 1A of this Annual Report on Form 10-K for the detailed discussion of the above risk factors.
PART I
ITEM 1. BUSINESS
First person pronouns used in this Annual Report on Form 10-K, such as “we,” “us,” and “our,” refer to ICU Medical,
Inc. (“ICU”) and its subsidiaries unless context requires otherwise.
Company Background and Overview of Business
ICU develops, manufactures and sells innovative medical products used in infusion therapy, vascular access, and vital
care applications. Our team is focused on providing quality, innovation and value to our clinical customers worldwide. ICU's
product portfolio includes ambulatory, syringe, and large volume IV pumps and safety software; dedicated and non-dedicated
IV sets, needlefree IV connectors, peripheral IV catheters, sharps safety products, and sterile IV solutions; closed system
transfer devices and pharmacy compounding systems; as well as a range of respiratory, anesthesia, patient monitoring, and
temperature management products.
Headquartered in San Clemente, California, ICU was founded in 1984. Our primary customers are acute care hospitals,
wholesalers, ambulatory clinics and alternate site facilities, such as outpatient clinics, home health care providers, and long-
term care facilities. Since our inception we have grown organically and through acquisitions.
In February 2017, we acquired Pfizer Inc.’s (“Pfizer”) Hospira Infusion Systems (“HIS”) business. The HIS
acquisition complemented our legacy non-dedicated infusion sets and oncology business by expanding our product portfolio to
include a complete intravenous infusion therapy product-line from IV solutions to IV pumps to non-dedicated infusion sets.
In November 2019, we acquired Pursuit Vascular, Inc. (“Pursuit”). Pursuit was a privately-held medical device
company with a primary focus on innovative catheter disinfecting products and technologies to reduce costly bloodstream
infections and lower healthcare costs. Pursuit’s primary product is the ClearGuard® HD cap, which is used for the maintenance
of hemodialysis catheters.
In January 2022, we acquired Smiths Medical 2020 Limited (“Smiths Medical”), the holding company of Smiths
Group plc’s ("Smiths") global medical device business. The Smiths Medical acquisition complemented and broadened our
preexisting product portfolio by adding syringe and ambulatory infusion devices, vascular access, and vital care products, and
we believe has significantly strengthened and expanded our global market reach.
In November 2024, we entered into a purchase agreement with Otsuka Pharmaceutical Factory America, Inc.
(“Otsuka”), a global IV solutions manufacturing subsidiary of Otsuka Holdings Co., Ltd. Under the agreement, a joint venture
will be formed among the Company and ICU Medical Sales, Inc., a wholly owned subsidiary of the Company (collectively, the
“ICU Medical Entities”), and Otsuka, to provide additional supply chain resiliency and innovation to our North American IV
solutions market under commercial agreements, a services agreement and a license agreement. The transaction is expected to be
completed during the second quarter of 2025.
Products
Our primary product offerings are described below.
Consumables
Our Consumables business unit includes Infusion Therapy, Oncology, Vascular Access and Tracheostomy products.
Infusion Therapy
Our Infusion Therapy products include non-dedicated infusion sets, extension sets, needle-free connectors, and
disinfection caps. Infusion sets used in hospitals and ambulatory clinics consist of flexible sterile tubing running from an IV bag
or bottle containing a drug product or solution to a catheter inserted in a patient’s vein that may or may not be used with an
infusion pump. Disinfection caps are used to actively disinfect access points into the infusion sets and catheters. Our primary
Infusion Therapy products are:
1
•
Clave™ needlefree products, including the MicroClave, MicroClave Clear, and NanoClave™ brand of
connectors, accessories, extension and administration sets used for the administration of IV fluids and
medications;
•
Neutron™ catheter patency device, used to help maintain patency of central venous catheters;
•
Tego™ needlefree connector utilized to access catheters for hemodialysis and apheresis applications; and
•
ClearGuard™, SwabCap™ and SwabTip™ disinfection caps.
Oncology
Closed System Transfer Devices ("CSTD") and hazardous drug compounding systems are used to prepare and deliver
hazardous IV medications such as those used in chemotherapy, which, if released, can have harmful effects on the healthcare
worker and environment. Our primary Oncology products are:
•
ChemoLockTM CSTD (“ChemoLock”), which utilizes a proprietary needlefree connection method, is used
for the preparation and administration of hazardous drugs. ChemoLock is used to limit the escape of
hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system,
and eliminates the risk of needlestick injury;
•
ChemoClaveTM (“ChemoClave”), an ISO Connection standard and universally compatible CSTD used for
the preparation and administration of hazardous drugs. ChemoClave utilizes standard ISO luer locking
connections, making it compatible with all brands of needlefree connectors and pump delivery systems.
ChemoClave also is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of
environmental contaminants into the system, and eliminate the risk of needlestick injury; and
•
Deltec® GRIPPER® non-coring needles for portal access.
The preparation of hazardous drugs typically takes place in a pharmacy where drugs are removed from vials and
prepared for delivery to a patient. Those prepared drugs are then transferred to a nursing unit where the chemotherapy is
administered via an infusion pump set to a patient. Components of the ChemoClave and ChemoLock product lines are used
both in pharmacies and on the nursing floors for the preparation and administration of hazardous drugs.
Vascular Access
Our Vascular Access products are used by clinicians to access the patients' bloodstream to deliver fluids and
medication or to obtain blood samples. Our primary Vascular Access products are:
•
Jelco® safety and conventional peripheral IV catheters and sharps safety devices for hypodermic injection,
designed to help prevent accidental needlestick injury;
•
Safe-T Wing® venipuncture and blood collection devices;
•
Port-A-Cath® implantable ports;
•
Portex® arterial blood sampling syringes;
•
PowerWand® midline catheters; and
•
Cleo® subcutaneous infusion catheters and sets.
Tracheostomy
Our tracheostomy products are used in the placement of a secure airway using both surgical and percutaneous insertion
techniques. Our primary Tracheostomy products are:
•
Portex BLUselect® PVC tracheostomy tubes, which feature an inner cannula as well as a Suctionaid option
for above the cuff suctioning and vocalization capability;
2
•
Portex Bivona® silicone tracheostomy tubes, which offer the added benefits of comfort and mobility and
come in a variety of configurations suited to meet the clinical needs of neonatal through adult patients; and
•
Portex BLUperc® percutaneous insertion kits, which allow for safe placement of the tracheostomy tube at the
bedside.
Infusion Systems
We offer a comprehensive portfolio of infusion pumps, dedicated IV sets, software and professional services to meet
the wide range of infusion needs. Our primary Infusion System products are:
Large Volume Pump ("LVP") Hardware:
•
Plum 360™ infusion pumps feature a unique delivery system that helps to enhance patient safety and
workflow efficiency. The pumps work with PlumSet™ dedicated IV sets that include an air trap to help
minimize interruptions and a direct connection to the secondary line that eliminates the risk of setup errors
and enables concurrent delivery of two compatible medications through a single line. Plum 360 has been
named Best in KLAS for eight years in a row (2018, 2019, 2020, 2023 – Best in KLAS Smart Pump
Traditional; 2021, 2022, 2023, 2024, 2025 Best in KLAS Smart Pump EMR Integrated) and was the first
medical device to be awarded UL Cybersecurity Assurance Program Certification.
•
Plum Duo™ infusion pumps with LifeShield™ safety software are dual channel devices capable of delivering
up to four compatible medications at independent rates with a single pump. The Plum Duo combines the
award-winning legacy of Plum 360 with modern innovation, including a large touch screen and highly
intuitive user interface to help guide users through programming, while streamlining complex tasks.
Ambulatory Infusion Hardware:
•
CADD™ ambulatory infusion pumps and disposables, including administration sets and medication cassette
reservoirs, serve as a single pain management platform across all types of IV pain management therapies and
all clinical care areas from the hospital to outpatient treatment.
Syringe Infusion Hardware:
•
Medfusion™ syringe infusion pumps are designed for the administration of fluids and medication to address
the needs of the most vulnerable patients requiring precisely controlled infusion rates. Focused on delivery
accuracy, the Medfusion 4000 can deliver from a comprehensive portfolio of syringes to meet syringe pump
guidance to deliver medication from the smallest syringe size possible.
IV Medication Safety Software:
•
ICU Medical MedNet™ software is an enterprise-class medication management platform that can help reduce
medication errors, improve quality of care, streamline workflows and maximize revenue capture. ICU
Medical MedNet connects our industry-leading Plum 360 smart pumps to a hospital’s electronic health record
("EHR"), asset tracking systems, and alarm notification platforms to further enhance infusion safety and
efficiency.
•
LifeShield™ infusion safety software for Plum Duo infusion pumps is an enterprise-wide platform designed
with the input of pharmacists, nurses and administrators to empower health systems to raise the bar in IV
performance. The system’s hybrid architecture provides cloud-based functionality to allowing access
anywhere with on-premise management providing security and control.
•
PharmGuard™ medication safety software for Medfusion 4000 syringe and CADD-Solis™ pumps allows for
customized drug libraries to support the standardization of protocols for medication administration throughout
the facility.
Professional Services:
3
•
In addition to the products above, our teams of clinical and technical experts work with customers to develop
safe and efficient infusion systems, providing customized and personalized configuration, implementation,
and data analytics services to optimize our infusion hardware and software.
Vital Care
Our Vital Care business unit includes IV Solutions, Hemodynamic Monitoring, General Anesthesia and Respiratory,
Temperature Management Solutions and Regional Anesthesia/Pain Management products.
IV Solutions
Our IV Solutions products include a broad portfolio of injection, irrigation, nutrition and specialty IV solutions
including:
•
IV Therapy and Diluents, including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated
Ringer's, Ringer's, Mannitol, Sodium Chloride/Dextrose and Sterile Water.
•
Irrigation, including Sodium Chloride Irrigation, Sterile Water Irrigation, Physiologic Solutions, Ringer's
Irrigation, Acetic Acid Irrigation, Glycine Irrigation, Sorbitol-Mannitol Irrigation, Flexible Containers and Pour Bottle
Options.
Hemodynamic Monitoring
Our Hemodynamic Monitoring products are designed to help clinicians get accurate real-time access to patients’
hemodynamic and cardiac status with an extensive portfolio of monitoring systems and advanced sensors & catheters.
Measurements provided by our systems help clinicians determine how well the heart is pumping blood and how efficiently
oxygen from the blood is being used by the tissues. Our Hemodynamic Monitoring products include:
•
Cogent™ 2-in-1 hemodynamic monitoring system;
•
CardioFlo™ hemodynamic monitoring system;
•
TDQ™ and OptiQ™ cardiac output monitoring catheters;
•
TriOx™ venous oximetry catheters;
•
Transpac™ blood pressure transducers;
•
SafeSet™ closed blood sampling and conservation system; and
•
MEDEX® LogiCal® Pressure Monitoring System and components.
General Anesthesia & Respiratory
We offer a broad range of anesthesia systems and devices and breathing circuits, ventilation, respiratory and specialty
airway products that maintain patients’ airways before, during and after surgery. Our primary Anesthesia & Respiratory
products are:
•
Portex® acapella® bronchial hygiene products used to mobilize pulmonary secretions to facilitate the
opening of airways in patients with chronic respiratory diseases such as chronic obstructive pulmonary
disease, or COPD, asthma and cystic fibrosis.
Temperature Management Solutions
Temperature Management solutions systems are used in perioperative and critical care settings to help monitor and
regulate patient temperature. Our primary Temperature Management products include:
•
Level 1® rapid infusion, fluid warming, routine blood and fluid warming, irrigation fluid warming,
convective patient warming and temperature probes.
Regional Anesthesia/Pain Management Trays
We offer a comprehensive range of Portex® regional anesthesia/pain management trays and components. Our primary
products include:
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•
Epidural Trays;
•
Spinal Trays;
•
Combined (CSE) Trays;
•
Peripheral Nerve Block Trays; and
•
Specialty Trays (Lumbar Puncture, Amniocentesis, Myelogram).
Financial information relating to our reporting segment and primary product lines is set forth in Part II, Item 7.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-
K, and is incorporated herein by reference.
Manufacturing
Facilities
Our manufacturing facilities are concentrated in the United States, Costa Rica, Mexico, and Czech Republic. See Part
I, Item 2 of this Annual Report on Form 10-K. Additionally, we have historically relied on certain outside manufacturers for
certain product lines in Infusion Systems.
We operate regional device service centers, in a number of locations, including Salt Lake City, Utah, U.S., Grasbrunn,
Germany; Sligo, Ireland; San Laurent; Quebec, Canada; Taipei, Taiwan and Rydalmere, Australia. See Part I, Item 2 of this
Annual Report on Form 10-K.
Raw Materials
We purchase many of the components and raw materials used in manufacturing our products from numerous suppliers
in various countries. Certain components and raw materials are available only from a single supplier. We currently attempt to
manage the risk associated with such suppliers by means of inventory management, relationship management and evaluation of
alternative sources when feasible. See Item 1A. Risk Factors - We are dependent on single and limited source third-party
suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or
degradation in performance in our suppliers could have an adverse effect on our business and financial condition.
Sales, Marketing and Administration
We sell globally through our own direct sales force and through independent distributors. We currently serve
customers in over 100 countries throughout the world. The majority of our sales is denominated in U.S. dollars and we have
sales denominated in Euros, Canadian dollars, Japanese Yen, British Pound and Australian dollars as well as other currencies.
In 2024, 2023, and 2022, we had worldwide net sales to a single distributor of 18%, 16%, and 15% of consolidated net sales,
respectively.
Distribution
Our products are marketed and distributed in the U.S. and internationally to medical product manufacturers,
independent distributors and directly to end users.
The distribution of our products in the U.S. is supported by a network of owned and leased distribution centers, which
include King of Prussia, Pennsylvania; Los Angeles, California; Dallas, Texas and Olive Branch, Mississippi. We also utilize a
number of public warehouses as part of our supply chain.
Internationally, we manage distribution by utilizing international regional hubs and through independent distributors.
Government Regulation
Our products and operations are subject to extensive and rigorous regulation by the Food and Drug Administration
("FDA") and other federal, state and local authorities, as well as foreign regulatory authorities. The FDA regulates, among other
things, the research, development, testing, manufacturing, approval, labeling, storage, recordkeeping, advertising, promotion
and marketing, distribution, post-approval monitoring and reporting and import and export of drug products, medical devices
and combination drug/device products in the U.S. to assure the safety and effectiveness of such medical products for their
intended uses and otherwise meet the applicable requirements of the Federal Food, Drug and Cosmetic Act (“FDC Act”). The
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Federal Trade Commission ("FTC") also regulates the advertising of our products. Further, we are subject to laws directed at
preventing fraud and abuse, which subject our sales and marketing, training and other practices to government scrutiny.
Medical Device Regulation in the U.S.
The majority of our products are regulated by the FDA as medical devices in the U.S. Unless an exemption applies,
each new or significantly modified medical device we seek to commercially distribute in the U.S. will require either a pre-
market notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDC Act, also
referred to as a 510(k) clearance, or approval from the FDA of a pre-market approval ("PMA") application. Under the FDC Act,
medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk
associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and
effectiveness. Class I devices are those that pose the lowest risk to the patient and are those for which safety and effectiveness
can be assured by adherence to the FDA's General Controls for medical devices, which include compliance with the applicable
portions of current good manufacturing practices ("cGMPs") for medical devices currently known as the Quality System
Regulation ("QSR"), facility registration and product listing, reporting of adverse medical events, and truthful and non-
misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA's General Controls, and
special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. Devices deemed by the
FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new
intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed into
Class III.
Manufacturers of most Class II devices are required to obtain from the FDA a 510(k) clearance for permission to
commercially distribute the device. Class III devices require approval of a PMA application evidencing safety and effectiveness
of the device.
Under the 510(k) process, applicants must demonstrate to the FDA that the device is as safe and effective as, or
substantially equivalent to, a legally marketed device, the "predicate" device. A predicate device is a legally marketed device
that is not subject to pre-market approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments
device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that
was found substantially equivalent through the 510(k) process. Applicants must submit performance data to establish
substantial equivalence. In some instances, data from human clinical trials must also be submitted in support of a 510(k) pre-
market notification. If so, these data must be collected in a manner that conforms to the applicable Investigational Device
Exemption ("IDE") regulations. If the FDA agrees that the device is substantially equivalent to a lawfully marketed predicate
device, it will grant 510(k) clearance to authorize the device for commercialization. If the FDA determines that the device is
"not substantially equivalent," the device is automatically designated as a Class III device. The device sponsor must then fulfill
more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the
de novo classification process, which is a route to market for novel medical devices that are low to moderate risk and are not
substantially equivalent to a predicate device.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or
that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on
the modification, PMA approval or de novo classification. The FDA requires each manufacturer to determine whether the
proposed change requires submission of a 510(k), de novo classification request or a PMA in the first instance, but the FDA can
review any such decision and disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s
determination not to seek a new 510(k) or other form of marketing authorization for the modification to the 510(k)-cleared
product, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k)
clearance or PMA approval is obtained or a de novo classification is granted.
In the PMA application process, the applicant must demonstrate to the satisfaction of the FDA that the device is safe
and effective for its intended use. This approval process applies to most Class III devices, and generally requires clinical data to
support the safety and effectiveness of the device, obtained in adherence with IDE requirements. Following receipt of a PMA
application, the FDA determines whether the application is sufficiently complete to permit a substantive review. If FDA accepts
the application for review, it has 180 days under the FDC Act to complete its review of a PMA, although in practice, the FDA's
review often takes significantly longer, and can take up to several years. An advisory panel of experts from outside the FDA
may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the
device. The FDA may or may not accept the panel's recommendation. In addition, the FDA will generally conduct a pre-
approval inspection of the applicant or its third-party manufacturers' or suppliers' facilities to ensure compliance with the QSR,
which will be replaced by the QMSR, as defined below, beginning in February of 2026. The FDA will approve the new device
for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and
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that there is reasonable assurance that the device is safe and effective for its intended use(s). The FDA may approve a PMA
with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things,
restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical
study that supported PMA approval or requirements to conduct additional clinical studies post-approval. Certain changes to an
approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design
performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement, or
in some cases a new PMA.
After a device is cleared or approved or otherwise authorized for marketing, numerous pervasive regulatory
requirements continue to apply unless explicitly exempt. These include:
•
establishment registration and device listing with the FDA;
•
QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design,
testing, control, documentation and other quality assurance procedures during all aspects of the design and
manufacturing process;
•
clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or
effectiveness or that would constitute a major change in intended use of cleared devices;
•
medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may
have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it
markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;
•
correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field
corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a
violation of the FDC Act that may present a risk to health;
•
complying with requirements governing Unique Device Identifiers on devices and also requiring the submission of
certain information about each device to the FDA's Global Unique Device Identification Database;
•
the FDA's recall authority, whereby the agency can order device manufacturers to recall from the market a product that
is in violation of governing laws and regulations; and
•
post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect
public health or to provide additional safety and effectiveness data for the device.
Drug Regulation in the U.S.
Certain of our IV solutions products are regulated by the FDA as drugs. In the U.S., the FDA regulates drugs under the
FDC Act and its implementing regulations. The process required by the FDA before a drug may be marketed in the U.S.
generally involves the following:
•
completion of preclinical laboratory tests and animal studies performed in accordance with the FDA's Good
Laboratory Practice requirements;
•
submission to the FDA of an investigational new drug application ("IND"), which must become effective before
clinical trials may begin;
•
approval by an institutional review board or ethics committee at each clinical site before the trial is commenced;
•
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed
product candidate for its intended purpose;
•
preparation of and submission to the FDA of a New Drug Application ("NDA") or Abbreviated New Drug Application
("ANDA") after completion of all required clinical trials;
•
satisfactory completion of an FDA Advisory Committee review, if applicable;
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•
a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;
•
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the
proposed product is produced to assess compliance with cGMPs and to assure that the facilities, methods and controls
are adequate to preserve the product's continued safety, purity and potency, and of potential inspection of selected
clinical investigation sites to assess compliance with Good Clinical Practices; and
•
FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use
in the U.S.
Prior to beginning clinical trials of a drug product in the U.S., an IND must be submitted to the FDA. An IND is a
request for authorization from the FDA to administer an investigational new drug product to humans. An IND must become
effective before human clinical trials may begin. Assuming successful completion of all required testing in accordance with all
applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to
the FDA as part of an NDA requesting approval to market the product for one or more indications. The NDA must include all
relevant data available from preclinical and clinical studies, including negative or ambiguous results as well as positive
findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling,
among other things. The submission of an NDA requires payment of a substantial application user fee to the FDA, unless a
waiver or exemption applies.
After the FDA evaluates an NDA and conducts inspections of manufacturing facilities where the investigational
product and/or its drug substance will be produced and of select clinical trial sites, the FDA may issue an approval letter or a
Complete Response Letter ("CRL"). An approval letter authorizes commercial marketing of the product with specific
prescribing information for specific indications. A CRL will generally describe all of the deficiencies that the FDA has
identified in the NDA. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the NDA in
condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of
an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing
testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a drug is granted, such approval will be granted for particular indications and may include
limitations on the indicated uses for which such drug may be marketed. The FDA also may condition approval on, among other
things, changes to proposed labeling or the development of adequate controls and specifications. The FDA may also require one
or more post-market studies and additional surveillance to further assess and monitor the drug’s safety and effectiveness after
commercialization, and may limit further marketing of the drug based on the results of these post-marketing studies.
Any drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation
by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic
reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the
approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There
also are continuing, annual program fees for any marketed products. Drug manufacturers and their subcontractors are required
to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by
the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation
requirements upon us and our third-party manufacturers. FDA regulations also require investigation and correction of any
deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to
use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control
to maintain compliance with cGMP and other aspects of regulatory compliance.
Post-Market Enforcement in the U.S.
The FDA may withdraw marketing authorizations for drugs or medical devices if compliance with regulatory
requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of
previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to
add new safety information, imposition of post-market studies or clinical studies to assess new safety risks, or imposition of
distribution restrictions or other restrictions. Other potential consequences include, among other things: complete withdrawal of
the product from the market, product recalls, fines, warning letters, untitled letters, clinical holds on clinical studies, refusal of
the FDA to approve pending applications or supplements to approved applications, product seizures or detention, refusal to
permit the import or export of products, consent decrees, corporate integrity agreements, debarment or exclusion from federal
healthcare programs, the issuance of corrective information, injunctions, or the imposition of civil or criminal penalties.
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In addition, the FDA closely regulates the marketing, labeling, advertising and promotion of drugs and medical
devices. A company can make only those claims relating to safety and efficacy, purity and potency that are cleared or approved
by the FDA and in accordance with the provisions of the authorized label. The FDA and other agencies actively enforce the
laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among
other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.
Regulation of Medical Devices in the European Union
The European Union ("EU") has adopted specific directives and regulations regulating the design, manufacture,
clinical investigation, conformity assessment, labeling and adverse event reporting for medical devices.
Until May 25, 2021, medical devices were regulated by Council Directive 93/42/EEC (the "EU Medical Devices
Directive") which has been repealed and replaced by Regulation (EU) No 2017/745 (the "EU Medical Devices Regulation").
Our current certificates have been granted under the EU Medical Devices Directive. In accordance with the EU Medical
Devices Regulation’s recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the
EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26,
2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made
available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled as may be
assessed by the notified body. However, even in this case, manufacturers must comply with a number of new or reinforced
requirements set forth in the EU Medical Devices Regulation with regard to registration of economic operators and of devices,
post-market surveillance and vigilance requirements. Pursuing marketing of medical devices in the EU will notably require that
our devices be certified under the new regime set forth in the EU Medical Devices Regulation and comply with the
requirements of notified bodies.
In the EU, there is currently no premarket government review of medical devices. However, the EU requires that all
medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in
Annex I to the EU Medical Devices Regulation including the requirement that a medical device must be designed and
manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must
be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and
– where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks
when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking
into account the generally acknowledged state of the art. The European Commission has adopted various standards applicable
to medical devices. These include standards governing common requirements, such as sterilization and safety of medical
electrical equipment and product standards for certain types of medical devices. There are also harmonized standards relating to
design and manufacture. While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the
general safety and performance requirements as a practical matter as it creates a rebuttable presumption that the device satisfies
that general safety and performance requirements.
Compliance with the general safety and performance requirements of the EU Medical Devices Regulation is a
prerequisite for European Conformity marking (“CE mark”) without which medical devices cannot be marketed or sold in the
EU. To demonstrate compliance with the general safety and performance requirements, medical device manufacturers must
undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the general safety and
performance requirements must be based, among other things, on the evaluation of clinical data supporting the safety and
performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device
achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse
events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made
about the performance and safety of the device are supported by suitable evidence. Except for low-risk medical devices (Class
I), where the manufacturer can issue an EC declaration of conformity based on a self-assessment of the conformity of its
products with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse
aspects), a conformity assessment procedure requires the intervention of a notified body. Notified bodies are independent
organizations designated by EU member states to assess the conformity of devices before being placed on the market. A
notified body would typically audit and examine a product’s technical dossiers and the manufacturers’ quality system (notified
body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for
Medical Devices Quality Management Systems – conform to these requirements). If satisfied that the relevant product conforms
to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the
manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device,
which allows the device to be placed on the market throughout the EU.
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Throughout the process of the product authorization in accordance with the EU Medical Devices Directive, the
manufacturer will be subject to, by the notified body, periodic surveillance audits and other certifications to verify continued
compliance with the applicable requirements of the EU Medical Devices Directive. Among other activities, in particular, there
will be a new audit by the notified body before it will renew the relevant certificate(s).
The EU Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the
market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by
submitting identification information to the electronic system ("Eudamed"), unless they have already registered. The
information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact
details of the person or persons responsible for regulatory compliance. The new Regulation also requires that before placing a
device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and
provide it along with other core data to the unique device identifier ("UDI") database. These new requirements aim at ensuring
better identification and traceability of the devices. Each device – and as applicable, each package – will have a UDI composed
of two parts: a device identifier ("UDI-DI") specific to a device, and a production identifier ("UDI-PI") to identify the unit
producing the device. Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes
the UDI database, and for keeping it up to date. The obligations for registration in Eudamed will become applicable at a later
date (as Eudamed is not yet fully functional). Until Eudamed is fully functional, the corresponding provisions of the EU
Medical Devices Directive continue to apply for the purpose of meeting the obligations laid down in the provisions regarding
exchange of information, including, and in particular, information regarding registration of devices and economic operators.
All manufacturers placing medical devices on the market in the EU must comply with the EU medical device vigilance
system which has been reinforced by the EU Medical Devices Regulation. Under this system, serious incidents and Field Safety
Corrective Actions ("FSCAs") must be reported to the relevant authorities of the EU member states. These reports will have to
be submitted through Eudamed – once functional – and aim to ensure that, in addition to reporting to the relevant authorities of
the EU member states, other actors such as the economic operators in the supply chain will also be informed. Until Eudamed is
fully functional, the corresponding provisions of the EU Medical Devices Directive continue to apply. Manufacturers are
required to take FSCAs, which are defined as any corrective action for technical or medical reasons to prevent or reduce a risk
of a serious incident associated with the use of a medical device that is made available on the market. A serious incident is any
malfunction or deterioration in the characteristics or performance of a device on the market (e.g., inadequacy in the information
supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious
deterioration of the health of a patient, user, or other persons, or to a serious public health threat. An FSCA may include the
recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or
its legal representative to its customers and/or to the end users of the device through Field Safety Notices. For similar serious
incidents that occur with the same device or device type and for which the root cause has been identified or a FSCA
implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports
instead of individual serious incident reports.
The advertising and promotion of medical devices are subject to some general principles set forth in EU legislation.
According to the EU Medical Devices Regulation, only devices that are CE marked may be marketed and advertised in the EU
in accordance with their intended purpose. Directive 2006/114/EC concerning misleading and comparative advertising and
Directive 2005/29/EC on unfair commercial practices, while not specific to the advertising of medical devices, also apply to the
advertising thereof and contain general rules, for example, requiring that advertisements are evidenced, balanced and not
misleading. Specific requirements are defined at a national level. EU member states' laws related to the advertising and
promotion of medical devices, which vary between jurisdictions, may limit or restrict the advertising and promotion of products
to the general public and may impose limitations on promotional activities with healthcare professionals.
Many EU member states have adopted specific anti-gift statutes that further limit commercial practices for medical
devices, in particular vis-à-vis healthcare professionals and organizations. Additionally, there has been a recent trend of
increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member
states have adopted national "Sunshine Acts" which impose reporting and transparency requirements (often on an annual basis),
similar to the requirements in the U.S., on medical device manufacturers. Certain countries also mandate implementation of
commercial compliance programs.
In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of
companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users. Failure to
comply with regulatory requirements (as applicable) could require time and resources to respond to the regulatory authorities’
observations and to implement corrective and preventive actions, as appropriate. Regulatory authorities have broad compliance
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and enforcement powers and, if such issues cannot be resolved to their satisfaction, can take a variety of actions, including
untitled or warning letters, fines, consent decrees, injunctions, or civil or criminal penalties.
The aforementioned EU rules are generally applicable in the European Economic Area ("EEA") which consists of the
27 EU member states plus Norway, Liechtenstein and Iceland.
Brexit and the UK Regulatory Framework
Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency ("MHRA") has become the
sovereign regulatory authority responsible for Great Britain (i.e. England, Wales and Scotland) medical device market
according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to
give effect to the three pre-existing EU directives governing active implantable medical devices, general medical devices and in
vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern
Ireland Protocol. Following the end of the United Kingdom's ("UK's") withdrawal from the EU ("Brexit") transitional period on
January 1, 2021, new regulations require all medical devices to be registered with the MHRA before being placed on the Great
Britain market. The MHRA only registers devices where the manufacturer or their UK responsible person has a registered place
of business in the UK. Beginning January 1, 2022, manufacturers based outside the UK need to appoint a UK responsible
person that has a registered place of business in the UK to register devices with the MHRA.
On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory
framework for medical devices and diagnostics. MHRA seeks to amend the UK Medical Devices Regulations 2002 (which are
based on EU legislation, primarily the EU Medical Devices Directive and the EU In Vitro Diagnostic Medical Devices
Directive 98/79/EC), in particular to create a new access pathway to support innovation, create an innovative framework for
regulating software and artificial intelligence as medical devices, reform in vitro diagnostic regulation and foster sustainability
through the reuse and remanufacture of medical devices. Regulations implementing the new regime were originally scheduled
to come into force in July 2023, but the MHRA confirmed that the core elements of the new framework are now expected to be
in place in 2025, while draft legislation for priority measures to enhance post-market surveillance were laid before parliament in
October 2024. In addition, on November 14, 2024, the MHRA launched a new consultation on proposals to update the
regulatory framework for medical devices in Great Britain, covering four topics, namely (1) a new international reliance scheme
to enable swifter market access for certain devices that have already been approved in a comparable regulator country; (2) the
new UK Conformity Assessed (“UKCA”) mark and, in particular, proposals to remove the requirement to place such UKCA
marking on devices; (3) conformity assessment procedures for in vitro diagnostic devices; and (4) maintaining in UK law
certain pieces of “assimilated” EU law which are due to sunset in 2025. The MHRA consultation was opened until January 5,
2025 and it is expected that secondary legislation implementing the proposals would be introduced in 2025.
In addition, the trade deal between the UK and the EU generally provides for cooperation and exchange of information
between the parties in the areas of product safety and compliance, including market surveillance, enforcement activities and
measures, standardization-related activities, exchanges of officials, and coordinated product recalls. As such, processes for
compliance and reporting should reflect requirements from regulatory authorities.
Under the terms of the Northern Ireland Protocol, Northern Ireland follows EU rules on medical devices and devices
marketed in Northern Ireland require assessment according to the EU regulatory regime. Such assessment may be conducted by
an EU notified body, in which case a CE mark is required before placing the device on the market in the EU or Northern
Ireland. Alternatively, if a UK notified body conducts such assessment, a UK Northern Ireland (“UKNI”) mark is applied and
the device may only be placed on the market in Northern Ireland and not the EU.
Manufacturing Regulation
We must also comply with FDA and International Organization for Standardization ("ISO") governing medical device
manufacturing practices. The FDA, state, foreign agencies and ISO require manufacturers to register and subject manufacturers
to periodic FDA, state, foreign agencies and notified bodies and ISO inspections and audits of their manufacturing facilities.
We are a FDA and ISO registered medical device manufacturer, and must demonstrate that we and our contract manufacturers
comply with the FDA's QSR, cGMPs and similar foreign requirements. The FDA, other regulatory agencies and notified bodies
outside the U.S. monitor compliance with these requirements through inspections and audits of manufacturing facilities. If an
inspector observes conditions that might be violative, the manufacturer must correct those conditions or explain them
satisfactorily, or face potential regulatory action that might include physical removal of the product from the marketplace.
Other Healthcare Laws
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We are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the
states and foreign jurisdictions in which we conduct our business. These laws include:
•
the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully
soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the
referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may
be made under federal healthcare programs, such as the Medicare and Medicaid programs. A person or entity does not
need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a
violation;
•
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or
causing to be presented, claims for payment from Medicare, Medicaid or other federal third-party payors that are false
or fraudulent. In addition, the government may assert that a claim including items or services resulting from a violation
of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
•
the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration
to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision
to order or receive items or services reimbursable by the government from a particular provider or supplier;
•
federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making
false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not
need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
•
the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare
transactions and protects the security and privacy of protected health information;
•
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical
supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with
certain exceptions) to report annually to the Centers for Medicare & Medicaid Services ("CMS") information related to
payments or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors), certain non-physician health care professionals (physician assistants, nurse practitioners,
clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants
and certified nurse midwives), and teaching hospitals and ownership and investment interests held by the physicians
described above and their immediate family members; and
•
analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims
laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state
laws that require pharmaceutical and device companies to comply with the industry's voluntary compliance guidelines
and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that
may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers
to track and report information related to payments and other "transfers of value" to physicians and other healthcare
providers or pricing, marketing expenditures and information.
Violations of any of the laws described above include civil and criminal penalties, damages, fines, the curtailment or
restructuring of an entity’s operations, the debarment, suspension or exclusion from federal and state healthcare programs and/
or imprisonment.
Coverage and Reimbursement
Our profitability and operations are subject to changes in legislative, regulatory and reimbursement policies and
decisions as well as changes in private payer reimbursement coverage and payment decisions and policies. Our products are
purchased by hospitals, physicians and other healthcare providers that typically bill various third-party payors, such as
governmental programs, private insurance plans and managed care plans, for the healthcare services and products provided to
their patients. The ability of our customers to obtain appropriate coverage and reimbursement for healthcare services and
products from third-party payors is critical because it affects which products customers purchase and the prices they are willing
to pay since our products are not separately reimbursed by any third-party payor. Third-party payors are increasingly reducing
coverage and reimbursement for certain healthcare services and products and challenging prices charged for healthcare services
and products.
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Health Care Reform in the U.S.
In the U.S., there have been, and we expect that there will continue to be, a number of federal and state proposals to
limit payments by governmental payors for medical devices, and the procedures in which medical devices are used. For
example, in March 2010, comprehensive healthcare reform legislation was enacted through the passage of the Patient Protection
and Affordable Care Act, as amended by the Health Care and Education and Reconciliation Act (the "ACA"), which, among
other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and
implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals,
physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through
bundled payment models.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.
On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states
without specifically ruling on the constitutionality of the ACA.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. On
August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to
Medicare payments to providers, which went into effect on April 1, 2013, and will stay in effect through 2032, with the
exception of a temporary suspension from May 1, 2020 through March 31, 2022 unless additional Congressional action is
taken. On January 2, 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further
reduced Medicare payments to several providers, including hospitals. We cannot predict whether future healthcare initiatives
will be implemented at the federal or state level or internationally, or the effect any future legislation or regulation will have on
us. Such legislation and regulation of healthcare costs may, however, result in decreased lower reimbursements by
governmental and private payors to our customers, which may adversely affect our business, financial condition and results of
operations.
EU Healthcare Reform
Additional healthcare reform measures in the EU may be adopted in the future as well. For instance, in December
2021, Regulation (EU) No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU, was
adopted. While the Regulation entered into force in January 2022, it only began to apply from January 2025 onwards, with
preparatory and implementation-related steps that took place in the interim. The Regulation intends to boost cooperation among
EU member states in assessing health technologies, including certain high-risk medical devices, and provide the basis for
cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA
tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of
the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby
developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising
technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be
responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on
pricing and reimbursement.
Data Privacy and Security
Medical device companies may be subject to U.S. federal and state and foreign data privacy, security and data breach
notification laws governing the collection, use, disclosure and protection of health-related and other personal information. In the
U.S., numerous federal and state laws and regulations, including data breach notification laws, health information privacy and
security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-
related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data,
including health-related data. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict
with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant
civil and/or criminal penalties and restrictions on data processing.
Competition
Our industry is highly competitive. We believe our ability to effectively compete in this industry is determined by our
ability to provide a wide breadth of cost-effective, high quality products. We believe the added breadth of our acquired product
portfolios have increased our competitiveness as we can now provide a one-stop shop for customers and offer more flexible
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competitive pricing. We also believe our infusion pump product offering will enable us to achieve sales of a larger volume of
higher margin infusion consumables, and we believe we have a wider customer reach through our unified distribution channels.
Consumables
We believe that our ability to effectively compete in the Consumables market depends upon our ability to differentiate
our products based on continued innovation, safety, quality, convenience, reliability, patent protection, ease of use and the
pricing of our products, in addition to the access to distribution channels. We encounter significant competition in this market
both from global, large, established medical device manufacturers and from smaller companies. We compete with products and
systems marketed by Becton Dickinson ("BD"), Baxter International ("Baxter"), B. Braun Medical, Inc. ("B. Braun"),
Angiodynamics, Teleflex, EquaShield and Medtronic.
Infusion Systems
We face strong global competitors in the Infusion Systems market. In the U.S. our competitors include BD, Baxter, B.
Braun, Moog Medical, and Fresenius Kabi, a division of Fresenius Group. Outside of the U.S., our primary competitors are BD,
B. Braun, Fresenius, and a large number of local market pump manufacturers. These competitors benefit from greater financial,
research and development and marketing resources than we have. The smart pump market in recent years has been troubled
with security concerns and product recalls. We believe our ability to effectively compete will be determined by our ability to
build our brand strength using the development of technological advancements aimed at increasing the quality, reliability,
safety and security of our pumps while at the same time focusing on manufacturing efficiency and cost-effectiveness, which are
operationally challenging with evolving product lines.
Vital Care
Our IV Solutions products are sold in the U.S. and Canada and compete in the U.S. with Baxter and B. Braun.
Our other Vital Care products compete with numerous competitors due to our broad product portfolio. Our primary
competitors include Edwards Lifesciences, Belmont and Intersurgical plc.
Our ability to compete in this market will depend on our ability to continue to make technological advances to our
products, thereby increasing customer efficiency, and our ability to provide product support and successful customer training
aimed at improving clinical decision-making that ultimately enhances patient safety and focuses on demonstrable patient
outcomes.
Patents
Many of our product lines rely on patent protection. We have obtained U.S. and foreign patents relating to certain of
the technologies found in our products, and are pursuing additional patent applications. There is however, no single patent or
group of patents that we own that we believe is material in relation to our business as a whole.
Our success will depend in part on our ability to obtain, maintain and enforce patent protection for our products and to
operate without infringing on the proprietary rights of third parties. While we have obtained certain patents and applied for
additional U.S. and foreign patents covering certain of our products, there is no assurance that the scope of any patent
protection will prevent competitors from introducing similar or competing devices or that any of our patents will be held valid if
subsequently challenged. We can also lose patent protection through expiration. The inability to obtain effective patent
protection or the loss of patent protection on a specific product line could adversely affect our ability to exclude other
companies from producing effective competitive products. The loss of a significant portion of our patent portfolio could have
an adverse impact on our financial results.
The fact that a patent is issued to us does not eliminate the possibility that patents owned by others may contain claims
that are infringed by our products.
There has been substantial litigation regarding patent and other intellectual property rights in the medical device
industry. Litigation, which would result in substantial cost to us and diversion of our resources, may be necessary to defend us
against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of
others. Adverse determinations in such litigation could subject us to significant liabilities to third parties or could require us to
seek licenses from third parties and could prevent us from manufacturing, selling or using our products, any of which could
have a material adverse effect on our business. In addition, we have initiated litigation, and may continue to initiate litigation in
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the future, to enforce our intellectual property rights against those we believe to be infringing on our patents. Such litigation
could result in substantial cost and diversion of resources.
Seasonality/Quarterly Results
Our business is not significantly impacted by seasonal aspects. We can, however, experience fluctuations in net sales
as a result of variations in the ordering patterns of our largest customers, which can be driven by global health crisis or
pandemics, as well as fluctuations due to supply constraints as a result of other macroeconomic and global geopolitical
events. Our expenses do not typically fluctuate in the same manner as net sales, which may cause fluctuations in operating
income that are disproportionate to fluctuations in our revenue.
Research and Development
We continue to invest in certain research and development ("R&D") projects to drive future growth and to remain
competitive in our product lines. Our main R&D facilities are located in the U.S and India. Our R&D costs primarily relate to
headcount and employment expense in support of the ongoing development of new products. Research and development costs
were $88.6 million in 2024, $85.3 million in 2023 and $93.0 million in 2022.
Human Capital Management
We believe our employees are the foundation of our business and are key to executing our strategy globally. The
knowledge, skills and abilities of our workforce is paramount in upholding our mission of connecting patients and caregivers
through safe, life-saving, life enhancing IV therapy products, systems, and services.
We believe the health and well-being of our employees are cornerstones for our successful operations. Whether you
are a machine operator in one of our manufacturing locations, a material handler in a distribution center, a service technician
supporting our products in the field, or a clinician training customers on the use of our products in a hospital, we strive to
prioritize the safety of our team members. This includes designing our work environments intended to prioritize safety first,
providing personal protective equipment and safety training beginning day one.
Our ability to attract and retain talented individuals globally begins with our commitment to offer a career that gives
people a unique opportunity to work in an exhilarating, fast-paced, inspiring, and collaborative environment where what they do
makes a difference. We believe we offer competitive salaries and benefit packages to our employees as well as select
participation in incentive plans based on individual and company performance.
We believe the development of our workforce is critical for personal growth and the success of our company as well.
We reinforce this with challenging, yet rewarding assignments, continued learning and training programs through our global
iLearning platform, and support continued education globally through tuition reimbursement programs. Our team believes in
collaboration and removing barriers to communication—all with the goal of creating an environment where innovation and
creativity can flourish. This is principal for us in attracting, developing, retaining and rewarding talent on a global scale.
Finally, we believe that our leadership team, with its broad, and deep category knowledge and averaging
approximately 22 years of experience in IV therapy has the necessary experience to effectively lead the execution of our
strategy.
At December 31, 2024, we had approximately 15,000 employees located in over 35 countries.
Geographic Data
Information regarding financial data by geography is set forth in Part II, Item 8. "Financial Statements and
Supplementary Data" of this Annual Report on Form 10-K in Notes 5 and 6 to the Consolidated Financial Statements, and is
incorporated herein by reference.
Available Information
Our website address is http://www.icumed.com. We make available our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and other filings and amendments thereto those reports, free of charge
on our website as soon as reasonably practicable after filing or furnishing them with the Securities and Exchange Commission
("SEC"). We also have our code of ethics posted on our website (http://www.icumed.com). The information on our website is
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not incorporated into this Annual Report on Form 10-K. We use our Investor Relations website as a means of disclosing
material information. Accordingly, investors should monitor our Investor Relations website, in addition to following our press
releases, SEC filings, and public conference calls and webcasts.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC on its website (http://www.sec.gov).
ITEM 1A. RISK FACTORS
In evaluating an investment in our common stock, investors should consider carefully, among other things, the
following risk factors, as well as the other information contained in this Annual Report on Form 10-K and our other reports and
registration statements filed with the SEC. Any of the following risks could materially and adversely affect our results of
operations or financial condition.
Market and Other External Risks
If we are unable to compete successfully with our competitors, we may be unable to maintain market share, in which case our
sales may not grow and our profitability may be adversely affected.
The consumable medical device segment of the health care industry and in particular the infusion products market is
intensely competitive and continues to experience both horizontal and vertical consolidation. We believe that our ability to
compete depends upon numerous factors including, among other things, continued product innovation, the quality, convenience
and reliability of our products, including demand for more environmentally friendly products and focus on using materials of
concern, access to distribution channels, patent protection and pricing. The ability to compete effectively depends on our ability
to differentiate our products based on these factors, as well as our ability to perceive and respond to changing customer needs.
We encounter significant competition in our markets both from large established medical device manufacturers and from
smaller companies. Many of these companies have introduced competitive products with features not provided by the
conventional products and methods they are intended to replace. Most of our current and prospective competitors have
economic and other resources substantially greater than ours and are well established in the healthcare industry. Several large,
established competitors offer broad product lines and have been successful in obtaining full-line contracts with a significant
number of hospitals and group purchasing organizations to supply all of their infusion product requirements. Due to the highly
competitive nature of the group purchasing organizations ("GPOs") or integrated delivery networks ("IDNs") contracting
processes, we may not be able to obtain or maintain contract positions with major GPOs and IDNs across our products
portfolio. Furthermore, the increasing leverage of organized buying groups may reduce market prices for our products thereby
affecting our profitability. While having a contract with a GPO or IDN can facilitate sales to members of that GPO or IDN, it is
no assurance that the sales volume of those products will be maintained. The members of such groups may choose to purchase
from our competitors due to the price or quality offered by such competitors, which could result in a decline in our sales and
profitability. In addition, distributors of our products may begin to negotiate terms of sale more aggressively in an effort to
increase their profitability. Failure to negotiate distribution arrangements having advantageous pricing or other terms of sale
could adversely affect our results of operations and financial condition. In addition, if we fail to implement distribution
arrangements successfully, it could cause us to lose market share to our competitors. Moreover, there is no assurance that our
competitors will not substantially increase resources devoted to the development, manufacture and marketing of products
competitive with our products. The successful implementation of such a strategy by one or more of our competitors could
materially and adversely affect us.
If demand for our products were to decline significantly, we might not be able to recover the cost of our expensive automated
molding and assembly equipment and tooling, which could have an adverse effect on our financial condition and results of
operations.
Our production tooling is relatively expensive, with each "module," which consists of an automated assembly machine
and the molds and molding machines that mold the components, costing several million dollars. The modules are utilized for
certain products. If the demand for these products changes significantly, which could happen with the loss of customers or a
change in product mix, it may be necessary for us to recognize an impairment charge for the value of the production tooling
because its cost may not be recovered through production of saleable product, which could adversely affect our financial
condition.
We have been and will be ordering production molds and equipment for our new products. We expect to order semi-
automated or fully automated assembly machines for certain products in 2025. If we do not achieve significant sales of these
new/transitioned products, it might be necessary for us to recognize an impairment charge for the value of the production
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tooling because its costs may not be recovered through production of saleable product, which could adversely affect our
financial condition.
Product development requires substantial investment that may be difficult for us to fund and may be challenging to recover
through commercial product sales.
Innovations generally require a substantial investment in product development before we can determine their
commercial viability, and we may not have the financial resources necessary to fund these innovations. Even if we succeed in
creating new product candidates from these innovations, we may still fail to successfully commercialize such products. The
success of new medical device products depends on several factors, including our ability to anticipate and meet customers' or
patients' needs, obtain timely regulatory approvals, clearances or certifications, and manufacture quality products in an
economic and timely manner. Even if we are able to develop successful new products or enhancements, we may not produce
sales exceeding the costs of development, and we may not avoid infringing the proprietary rights of third parties. Moreover,
innovations may not be successful due to difficulties encountered in achieving positive clinical outcomes, meeting safety,
efficacy or other regulatory requirements of government agencies or notified bodies, or obtaining favorable pricing on those
products. Finally, innovations may not be accepted in the marketplace quickly or at all because of, among other things,
entrenched patterns of clinical practice and uncertainty over third-party reimbursement.
If we do not successfully develop and commercialize enhanced or new products that remain competitive with new products or
alternative technologies developed by others, we could lose revenue opportunities and customers, and our ability to grow our
business would be impaired.
The medical device industry is characterized by rapid product development and technological advances, which places
our products at risk of obsolescence. Our long-term success and profit margins depend upon the development and successful
commercialization of new products, new or improved technologies and additional applications of our technology. The research
and development process is time-consuming and costly, and may not result in products or applications that we can successfully
commercialize. We can give no assurance that we will be able to successfully develop and commercialize enhanced or new
products or that they will be accepted in the marketplace. Even if we successfully develop and commercialize enhanced or new
products, they may be quickly rendered obsolete by competitors’ innovations, changing customer preferences, or changing
industry or regulatory standards.
Cost volatility or loss of supply of our raw materials could have an adverse effect on our profitability.
Most of the materials used in our products are resins, plastics and other material that depend upon oil or natural gas as
their raw material. Crude oil and natural gas prices have been volatile in recent years. Crude oil markets have historically been
affected by political uncertainty in the Middle East and more recently, by the conflict in Ukraine. As the current conflict in the
Middle East and Ukraine continues and geopolitical tensions rise in the region or globally, there is no assurance that crude oil
supplies will not be interrupted or crude oil prices will not rise in the future. New laws or regulations adopted in response to
climate change could also increase energy costs as well as the costs of certain raw materials and components. Any such
regulations or interruptions could have an adverse effect on our ability to produce, or the cost to produce, our products. Our
suppliers have historically passed some of their cost increases on to us, and if such prices are sustained or increase further, our
suppliers may pass further cost increases on to us. In addition to the effect on resin prices, transportation costs have increased
because of the effect of higher crude oil prices, and we believe most of these costs have been passed on to us. Our ability to
recover these increased costs may depend upon our ability to raise prices on our products. In certain cases, we may be unable to
pass along increased costs to our customers if they are under long-term fixed price contracts. In the past, we have rarely raised
prices and it is uncertain that we would be able to raise them to recover higher prices from our suppliers. Our inability to raise
prices in those circumstances, or to otherwise recover these costs, could have an adverse effect on our profitability.
If we cannot obtain additional custom tooling and equipment on a timely basis to enable us to meet demand for our products,
we might be unable to increase our sales or might lose customers, in which case our sales could decline.
We expanded our manufacturing capacity substantially in recent years, and we expect that continued expansion may be
necessary. Molds and automated assembly machines generally have a long lead-time with vendors, often nine months or longer.
Inability to secure such tooling in a timely manner, or unexpected increases in production demands, could cause us to be unable
to meet customer orders. Such inability could cause customers to seek alternatives to our products, which would adversely
affect our sales.
Heightened inflation, higher interest rates and foreign currency rate fluctuations as a result of global macroeconomic and
geopolitical conditions have had and could in the future have a material adverse effect on our operations.
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Global macroeconomic conditions and geopolitical tensions and resulting impacts therefrom, for example, heightened
inflation, higher interest rates and capital costs, and currency rate fluctuations have resulted in, and may continue to result in,
increased raw material costs, higher shipping costs, higher labor costs, and global supply chain disruptions. In 2022, we
experienced these supply chain disruptions, increased raw material costs and shipping costs, as prices on several commodities,
including oil and gas, increased as a result of the conflict in Ukraine and its impact on the global economy. Although these costs
were less volatile in 2023 and 2024, we may continue to experience these inflationary increases in our manufacturing costs and
operating expenses, including higher materials and labor costs, as well as negative impacts on our operating results from the
strengthening of the U.S. dollar relative to foreign currencies weakening exchange rates. See the risk factor titled “Our
operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates” under the
“Geographic Risks” subsection for a discussion of risks related to foreign currency exchange rates.
Additionally, the majority of our sales are conducted pursuant to long-term contracts. Our efforts to minimize the
impact of inflation on our business through contractual protections may not prove effective, and the presence of longer pricing
periods within our contracts along with sustained or higher than anticipated inflation increases the likelihood that the contract
protections do not adequately mitigate the financial impact of inflation. If our contractual protections do not adequately protect
us in the context of substantial cost increases and inflationary pressures, it could have a material adverse effect on our results of
operations. Heightened inflation may also reduce or delay orders for our products and for certain products we may be unable to
satisfy demand, both of which could have a material adverse impact on our sales and results of operations.
Our operating results may be adversely affected by unfavorable economic conditions that affect our customers’ ability to buy
our products and our suppliers' demand for payment terms.
Disruptions in financial markets worldwide and other worldwide macro-economic challenges have caused and may in
the future cause our customers and suppliers to experience cash flow concerns. If job losses and the resulting loss of health
insurance and personal savings cause individuals to forego or postpone treatment, the resulting decreased hospital use could
affect the demand for our products. As a result, customers may modify, delay or cancel plans to purchase our products and
suppliers may increase their prices, reduce their output or change terms of sales. Additionally, if customers’ or suppliers’
operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers
may not be able to pay, or may delay payment of, accounts receivable owed to us and suppliers may impose different payment
terms that are less favorable to us. Any inability of current and/or potential customers to pay us for our products or any
demands by suppliers for different payment terms may adversely affect our earnings and cash flow.
Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our prices.
If we cannot reduce manufacturing costs of existing and new products to counteract such pricing pressures, our sales may not
grow and our profitability may decline.
Increasing awareness of healthcare costs, public interest in healthcare reform and continuing pressure from Medicare,
Medicaid, GPOs and other payors, both domestic and international, to reduce costs in the healthcare industry, as well as
increasing competition from other protective products, could make it more difficult for us to sell our products at current prices.
Our products are purchased by hospitals, physicians and other healthcare providers that typically bill various third-party payors,
such as governmental programs, private insurance plans and managed care plans, for the healthcare services and products
provided to their patients. The ability of our customers to obtain appropriate coverage and reimbursement for healthcare
services and products from third-party payors is critical because it affects the kinds of products customers purchase and the
prices they are willing to pay. Because there is often no separate reimbursement for supplies used in surgical procedures, the
additional cost associated with the use of our products can affect the profit margin of the hospital or surgery center where the
procedure is performed. Some of our target customers may be unwilling to adopt our products in light of the additional
associated cost. Further, any decline in the amount payors are willing to reimburse our customers could make it difficult for
existing customers to continue using or to adopt our products and could create additional pricing pressure for us. If we are
forced to lower the price we charge for our products or if the costs to manufacture our products exceeds the price at which we
are able to sell our products, our gross margins will decrease, which could have a material adverse effect on our business,
financial condition and results of operations and impair our ability to grow our business.
Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. In addition, no
uniform policy of coverage and reimbursement for procedures using our products exists among third-party payors. Therefore,
coverage and reimbursement for procedures using our products can differ significantly from payor to payor. Payors continually
review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for new or
existing products and procedures. There can be no assurance that third-party payor policies will provide coverage for
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procedures in which our products are used. If we are not successful in reversing existing non-coverage policies, or if third-party
payors that currently cover or reimburse our products and related procedures reverse or limit their coverage in the future, or if
other third-party payors issue similar policies, this could have a material adverse effect on our business.
Further, we believe that future coverage and reimbursement may be subject to increased restrictions, such as additional
prior authorization requirements. Third-party coverage and reimbursement for procedures using our products or any of our
products in development for which we may receive regulatory approval or certification may not be available or adequate, which
could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our
business.
Implementation of further legislative or administrative reforms in the reimbursement system in the U.S. and abroad or
adverse decisions relating to coverage or reimbursement could have an impact on acceptance of and demand for our products
and the prices that our customers are willing to pay for them. In the event that the market will not accept current prices for our
products, our sales and profits could be adversely affected. We believe that our ability to increase our market share and operate
profitably in the long term may depend in part on our ability to reduce manufacturing costs on a per unit basis through high
volume production using highly automated molding and assembly systems. If we are unable to reduce unit manufacturing costs,
we may be unable to increase our market share for our products or may lose market share to alternative products, including
competitors’ products. Similarly, if we cannot reduce unit manufacturing costs of new products as production volumes increase,
we may not be able to sell new products profitably or gain any meaningful market share. Any of these results would adversely
affect our future results of operations.
Disruptions at the FDA, other government agencies or notified bodies caused by funding shortages, global health concerns, or
personnel turnover could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent
new or modified products from being developed, cleared, approved, certified, or commercialized in a timely manner, or at all,
which could negatively impact our business.
The ability of the FDA, foreign regulatory authorities and notified bodies to review and approve or certify new
products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and
policy changes, a government agency's ability to hire and retain key leadership and other personnel and accept the payment of
user fees, and other events that may otherwise affect the government's ability to perform routine functions. Average review
times at the FDA, other government agencies, foreign regulatory authorities and notified bodies have fluctuated in recent years
as a result. In addition, government funding of other government agencies that fund research and development activities is
subject to the political process, which is inherently fluid and unpredictable. For example, in recent years, the U.S. government
has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees
and stop critical activities.
One such shut down was as a result of COVID-19, the FDA postponed most inspections of domestic and foreign
manufacturing facilities at various points. If a prolonged government shutdown occurs, or if a global health concern prevents
the FDA, other regulatory authorities or notified bodies from conducting their regular inspections, audits, reviews, or other
regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities or notified bodies to
timely review and process our regulatory submissions, which could have a material adverse effect on our business.
For instance, in the European Union ("EU"), notified bodies must be officially designated to certify products and
services in accordance with the EU Medical Devices Regulation. Their designation process, which is significantly stricter under
the new Regulation, has experienced considerable delays. Despite a recent increase in designations, the current number of
notified bodies designated under the new Regulation remains significantly lower than the number of notified bodies designated
under the previous regime. The current designated notified bodies are therefore facing a backlog of requests as a consequence
of which review times have lengthened. This situation may impact the way we are conducting our business in the EU and the
European Economic Area ("EEA") and the ability of our notified body to timely review and process our regulatory submissions
and perform its audits.
Failure to protect our information technology systems against security breaches, service interruptions, or misappropriation of
data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing our business and
reputation to suffer.
We collect and maintain information in digital form that is necessary to conduct our business, and we depend heavily
on information technology infrastructure and systems to achieve our business objectives. In the ordinary course of our business,
we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business
information, preclinical and clinical trial data, and personal information (collectively, “Confidential Information”) of customers
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and our employees and contractors. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of
such Confidential Information. Any incident that impairs or compromises this infrastructure, including security breaches,
malicious attacks or more general service interruptions, could impede our ability to process orders, manufacture and ship
product in a timely manner, protect sensitive data and otherwise carry on business in the normal course. Any such events could
result in the loss of customers, revenue, or both, and could require us to incur significant expense to remediate, including legal
claims or proceedings. Further, as cybersecurity related incidents continue to evolve, and regulatory focus on these issues
continues to expand, additional investment in protective measures, and vulnerability remediation, may be required.
Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our
information technology systems and those of our third-party service providers, strategic partners and other contractors or
consultants, which support our operations. Despite the implementation of security measures, our information technology
systems, and those of third parties on which we rely, are vulnerable to attack, interruption and damage from, among others,
computer viruses, malware (e.g. ransomware), misconfigurations, “bugs” or other vulnerabilities, malicious code, natural
disasters, terrorism, war, telecommunication and electrical failures, hacking, cyber-attacks or cyber-intrusions over the Internet,
phishing and other social engineering schemes, human error, theft or misuse by persons inside our organization, or persons with
access to systems inside our organization, fraud, denial or degradation of service attacks and sophisticated nation-state and
nation-state-supported actors or similar disruptive problems. We have also outsourced elements of our information technology
infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information. The
risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers,
foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted
attacks and intrusions from around the world have increased. Because the techniques used to obtain unauthorized access,
disable or degrade service, or sabotage systems change frequently and often are not foreseeable or recognized until launched
against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. We may also
experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to
adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are
designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. There can also be no
assurance that our and our third-party service providers’, strategic partners’, contractors’, consultants’, CROs’ and
collaborators’ cybersecurity risk management program and processes, including policies, controls or procedures, will be fully
implemented, complied with or effective in protecting our systems, networks and Confidential Information.
We and certain of our service providers have been in the past and may from time to time in the future be subject to
cyberattacks and security incidents. Data security breaches and other cybersecurity incidents may result from, for example, non-
technical means (e.g., actions by employees or contractors), system failure, accident or unauthorized access. Any such security
breach may compromise information stored on our networks or those of third parties on which we rely and may result in
significant data losses or theft of personally identifiable information. Any compromise of our security could result in a violation
of applicable security, privacy or data protection, consumer and other laws, legal claims and proceedings (such as class actions),
regulatory or other governmental investigations, enforcement actions, disruption of our internal operations, and financial
exposure, including potential contractual liability, fines and penalties, negative reputational impacts that cause us to lose
existing or future customers, and/or significant incident response, system restoration or remediation and future compliance
costs. A number of proposed and enacted federal, state and international laws and regulations obligate companies to notify
individuals of security breaches involving particular personally identifiable information, which could result from breaches
experienced by us or by third parties, including collaborators, vendors, contractors or other organizations with which we expect
to form strategic relationships. Any such compromise could also result in damage to our reputation and a loss of confidence in
our security and privacy or data protection measures. Any of these effects could materially and adversely affect our business,
financial condition and results of operations. Our cyber liability insurance may not be sufficient to cover the financial, legal,
business or reputational losses that may result from such an interruption or breach. Furthermore, there can be no assurance that
our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully
implemented, complied with or effective in protecting our systems and information.
Our business could suffer if we lose the services of key personnel.
We are dependent upon the management and leadership of our executive team, as well as other members of our senior
management team. If one or more of these individuals were unable or unwilling to continue in his or her present position, our
business would be disrupted and we might not be able to find replacements on a timely basis or with the same level of skill and
experience, which could have an adverse effect on our business. We do not have "key person" life insurance policies on any of
our employees.
The price of our common stock has been and may continue to be highly volatile due to many factors.
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The public equity market can be highly volatile, and we have experienced significant volatility in the price of our
common stock in the past. We believe that factors such as quarter-to-quarter fluctuations in financial results, differences
between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our
competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement
policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general
macroeconomic trends (including as a result of pandemics or other health outbreaks, geopolitical tensions and uncertainties) and
substantial product orders could contribute to the volatility in the price of our common stock.
Most of our common stock is held by, or included in accounts managed by, institutional investors or managers. Several
of those institutions own or manage a significant percentage of our outstanding shares, with the ten largest interests accounting
for approximately 59% of our outstanding shares at the end of 2024. If one or more of the institutions or if our other large
stockholders should decide to reduce or eliminate their position in our common stock, it could cause a significant decrease in
the price of our common stock.
Climate-related events and other events could harm our business.
Natural disasters, disease outbreaks and pandemics, power shortages, terrorism, political unrest, telecommunications
failure, vandalism, geopolitical instability, war, climate-related events, and other events beyond our control could negatively
impact our operations or otherwise harm our business. Such events may result in damage or loss of service to assets that our
operations rely on or cause delays in product manufacturing or distribution, any of which may adversely impact our operations.
In addition, the impacts of climate-related events on the global economy and our industry are rapidly evolving.
Physical impacts of climate-related events (including but not limited to floods, droughts, more frequent and/or intense storms
and wildfires), or chronic changes (such as droughts, heat waves or sea level changes) in climate patterns can adversely impact
our operations, as well as the operations of our suppliers and customers.
If a catastrophic event occurs at or near any of our manufacturing facilities or our suppliers’ facilities, or utility
providers or public health officials take certain actions (e.g., shut off power to our or our suppliers’ facilities), our operations
may be interrupted, which could adversely impact our business and results of operations. Transition impacts of climate-related
events may subject us to increased regulations, reporting requirements, standards or expectations regarding the environmental
impacts of our business. Any of such adverse impacts from these or other climate-related events may also adversely affect our
reputation, business, or financial performance.
The increasing focus on sustainability and environmental, social and governance ("ESG") initiatives could increase our costs,
harm our reputation and adversely impact our financial results.
There has been increasing public focus by investors, patients, the media, governmental and nongovernmental
organizations and other stakeholders on a variety of sustainability and ESG matters. We may experience pressure to make
commitments relating to sustainability matters that affect us, including the design and implementation of risk mitigation
strategies related to sustainability. Expectations regarding the management of ESG initiatives also continue to evolve rapidly.
While we may from time to time engage in various initiatives (including but not limited to voluntary disclosures, policies or
goals) to improve our ESG profile or respond to stakeholder expectations, we cannot guarantee that these initiatives will have
the desired effect. If we are not effective in addressing the sustainability and ESG matters affecting our business, or setting and
meeting relevant goals, our reputation and financial results may suffer. In addition, even if we are effective at addressing such
matters, we may experience increased costs as a result of executing upon our sustainability and ESG goals that may not be
offset by any benefit to our reputation, which could have an adverse impact on our business, operations and financial condition.
In addition, we operate in various jurisdictions that have adopted or proposed laws and regulations related to
sustainability and ESG reporting. For example, we and our subsidiaries may be subject to the European Union’s Corporate
Sustainability Reporting Directive, which requires in scope entities to provide detailed reporting on various climate change and
sustainability topics. California’s Climate Corporate Data Accountability Act, Climate-Related Financial Risk Act, both of
which are being challenged in federal courts, and Voluntary Carbon Market Disclosures Act would require third-party
assurance of greenhouse gas emissions information for certain entities, climate-related financial risk reporting and disclosures
regarding carbon reduction claims. The SEC’s climate disclosure rule, if it is enforced by the current administration and
survives its current federal court challenge, would require new climate-related disclosures in SEC filings and audited financial
statements. We may also be subject to the International Sustainability Standards Board’s sustainability and climate disclosure
standards, to the extent adopted by jurisdictions in which we operate, among other regulations or requirements. Operating in
more than one jurisdiction is likely to make our compliance with sustainability and ESG rules more complex and expensive,
and potentially expose us to greater levels of legal risks associated with our compliance. Our failure to comply with any
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applicable rules or regulations could lead to penalties and adversely impact our reputation, customer attraction and retention,
access to capital and employee retention. Such sustainability and ESG matters may also impact our suppliers and customers,
which may augment or cause additional impacts on our business, financial condition, or results of operations.
Business and Operating Risks
Damage to, or interruptions at, any of our manufacturing facilities or our suppliers' facilities could impair our ability to
produce our products.
A severe weather event, including climate change-related severe weather or disasters, other natural or man-made
disasters, or any other significant disruption, such as global epidemics/pandemics, the impact of war or political instability,
work stoppages, labor shortages and similar interruptions affecting our manufacturing facilities or our suppliers and logistics
partners could materially and adversely impact our business, financial condition and results of operations. For example, the
impact of COVID-19 caused us to temporarily shut down some of our facilities in 2021.
We have a single manufacturing facility for our Clave products located in Salt Lake City, Utah. Our Salt Lake City
facility also produces other components on which our manufacturing operations in Ensenada, Mexico and Costa Rica rely. Our
IV Solutions are manufactured at our manufacturing facility in Austin, Texas or our suppliers’ facilities. We also operate
various other manufacturing facilities in the U.S., Mexico, Italy and Czech Republic. If our facilities or our suppliers' facilities
are inoperable, for even a short period of time, it could adversely affect our ability to manufacture and distribute our products in
a timely or cost-effective manner, and our ability to make product sales. Furthermore, our facilities and the equipment we use to
perform our manufacturing processes could be unavailable or costly and time-consuming to repair or replace.
Damage to, or interruptions at, any of our facilities or our suppliers' facilities due to work stoppages or labor shortages
could render us unable to manufacture our products or require us to reduce the output of products at such facilities. Several of
our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes. We
carry insurance for damage to our property and disruption of our business, but this insurance may not be adequate to cover all
of the risks associated with damage or disruption to our facilities and business, may not provide coverage in amounts sufficient
to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.
We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to
risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect
on our business and financial condition.
We currently rely on a single source supplier for the supply of certain materials (such as resins) that are critical to our
ability to manufacture our products. Our risk mitigation plans employed with such key supplier, or that we may use with other
key suppliers, may not suffice to ensure that we are able to receive requisite materials as and when needed and in sufficient
quantity. We cannot be certain that our current suppliers will continue to provide us with the quantities of materials that we
require or satisfy our anticipated specifications and quality requirements on a timely basis or at all. Any supply interruption in
limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of
supply, if any, could be identified and qualified. Upon identification, the qualification process of new suppliers and component
materials can take a considerable amount of time. We may be unable to find a sufficient alternative supply channel in a
reasonable time or on commercially reasonable terms. Additionally, we are subject to FDA and foreign regulations, which
could further delay our ability to obtain a qualified alternative supplier. The price and supply of these materials may be
impacted or disrupted for reasons beyond our control including supplier shutdowns, transportation delays, inflationary pricing
pressures, work stoppages, labor shortages, extreme weather events, geopolitical developments, global economic uncertainty or
downturns, sanctions and trade restrictions, and other governmental regulatory actions. Furthermore, our contract manufacturers
could require us to move to another one of their production facilities. We have experienced, and may continue to experience,
significant challenges to our global transportation channels and other aspects of the global supply chain network, including the
cost and availability of raw materials and components due to shortages and resulting cost inflation. If we encounter delays or
difficulties in securing these components, materials or services and, if we cannot then obtain an acceptable substitute on a
timely basis, our commercial operations could be interrupted, and we could experience an adverse effect on our results of
operations and financial condition.
Additionally, any performance failure on the part of our suppliers could delay the development and manufacture of our
products, which could have a material adverse effect on our business. Due to the highly competitive nature of the healthcare
industry and the cost controls of our customers and third-party payors, as well as entering into long-term fixed price contracts,
we may be unable to pass along cost increases for any key components or raw materials through higher prices to our customers.
If the cost of key components or raw materials increases and we are unable to fully recover those increased costs through price
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increases or offset these increases through other cost reductions, we could experience an adverse effect on our results of
operations and financial condition.
We may not be successful in achieving expected operating efficiencies or expense reductions associated with cost reduction and
restructuring efforts and may experience a decline in our profitability, business disruptions or other adverse consequences to
our business as a result.
We have engaged in restructuring activities in the past and may engage in other restructuring activities in the future.
For example, since the Smiths Medical acquisition, we have taken realignment and cost reduction initiatives to achieve
operating efficiencies for the combined company. These types of cost reduction and restructuring activities are complex. If we
do not successfully manage our current restructuring activities, or any other restructuring activities that we may take in the
future, any expected efficiencies and benefits might be delayed or not fully realized, and our operations and business could be
disrupted. In addition, the costs associated with implementing restructuring activities might exceed expectations, which could
result in additional future charges.
The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our
business, finance future operations or pursue our business strategies.
The credit agreement governing our Senior Secured Credit Facilities contains, among other things, certain customary
restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or
consummate certain changes of control, acquire other companies, make certain investments, pay dividends, enter into certain
transactions with affiliates, and transfer or dispose of assets as well as financial covenants. While we have not previously
breached and are not currently in breach of these or any other covenants contained in our credit agreement, our ability to
comply with these covenants may be affected by events beyond our control, including health crises and global pandemics, other
geopolitical events, supply chain interruptions or general economic environment, including high inflation and interest rates.
These covenants could also limit our ability to seek capital through the incurrence of new indebtedness or, if we are unable to
meet our obligations, require us to repay any outstanding amounts with sources of capital we may otherwise use to fund our
business. As such, these restrictive covenants contained in our Senior Secured Credit Facility may restrict our ability to pursue
our business strategies.
Significant sales through distributors expose us to risks that could have a material effect on our results of operations.
For the years ended December 31, 2024 and 2023, business from a single distributor accounted for approximately 18%
and 16% of our consolidated revenues, respectively. We may rely on one or more key distributors for a product, and the loss of
these distributors could reduce our revenue. Additionally, distributors may face financial difficulties, including bankruptcy,
which could harm our collection of accounts receivable and financial results. Failure to manage risks related to our use of
distributors may reduce sales, increase expenses, and weaken our competitive position, any of which could have a material
adverse effect on our business and results of operations.
Legal, Compliance, and Regulatory Risks
Our ability to market, distribute and sell our products in the U.S. and other countries may be adversely affected if our products
fail to comply with the existing laws and regulations, and applicable requirements of the FDA, governmental agencies in other
countries, and notified bodies.
We and our products are subject to extensive regulation in the U.S. and elsewhere, including by the FDA and its
foreign counterparts. The FDA and foreign regulatory agencies and notified bodies regulate, among other things, with respect to
medical devices: design, development and manufacturing; testing, labeling, content and language of instructions for use and
storage; clinical trials; product safety; establishment registration and device listing; marketing, sales and distribution; pre-
market clearance, approval and certification; record keeping procedures; advertising and promotion; recalls and field safety
corrective actions; post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were
to recur, could lead to death or serious injury; post-market approval studies; and product import and export.
In the U.S., our medical device products are subject to clearance or approval by the U.S. FDA under the FDC Act.
Before we can market a new medical device, or a new use of, new claim for, or significant modification to, an existing product,
we must first receive either clearance under Section 510(k) of the FDC Act or approval of PMA application from the FDA,
unless an exemption applies. Under the 510(k) process, the manufacturer must submit to the FDA a pre-market notification,
demonstrating that the device is "substantially equivalent," as defined in the FDC Act, to a legally marketed predicate device.
To be "substantially equivalent," the proposed device must have the same intended use as the predicate device, and either have
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the same technological characteristics as the predicate device or have different technological characteristics and not raise
different questions of safety or effectiveness than the predicate device. If the manufacturer is unable to demonstrate substantial
equivalence to FDA's satisfaction, or if there is no available predicate device, then the manufacturer may be required to seek
approval through the PMA application process, which is generally more costly and time consuming than the 510(k) process.
Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of
the safety and effectiveness of the device for its intended use to the FDA's satisfaction. Accordingly, a PMA application
typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical
and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in
device studies.
We currently market certain products that have received 510(k) clearance, and we may pursue 510(k) clearance for
future products. However, certain of our new products may require a longer time for clearance than we have experienced in the
past and there can be no assurance that a PMA application will not be required. For example, in 2022, we acquired Smiths
Medical, which has marketed its PORT-A-CATH implantable access systems pursuant to PMA approval, and there is no
assurance that other new products developed by us or any manufacturers that we might acquire will be eligible for 510(k)
clearance rather than undergoing a more time consuming pre-market approval procedure, such as the PMA approval process, or
that, in any case, they will receive clearance or approval from the FDA. FDA regulatory processes are time consuming and
expensive. Uncertainties as to the time required to obtain FDA clearances or approvals could adversely affect the timing and
expense of new product introductions.
The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory
changes could result in restrictions on our ability to continue or expand our operations, higher than anticipated costs, or lower
than anticipated sales. The FDA enforces these regulatory requirements through periodic unannounced inspections. Even after
we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA
regulations and applicable foreign laws and regulations. The FDA, state and foreign regulatory authorities have broad
enforcement powers.
In addition, new and changing laws, regulations, executive orders and other governmental actions, particularly from
the new presidential administration, may also create uncertainty about how laws and regulations will be interpreted and applied.
Regulatory changes and other actions that materially affect our business may be announced with little or no advance notice, and
we may be unable to effectively mitigate all adverse impacts from such measures. Differing interpretations of such legal
obligations can expose us to significant fines, government investigations, litigation and reputational harm. If we are found to
have violated laws, regulations, or executive orders, it could materially adversely affect our business, reputation, results of
operations and financial condition.
We do not know whether we will pass or be found compliant in any future inspections by FDA or other regulatory
authorities. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state
or foreign regulatory authorities which may include any of the following sanctions:
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untitled letters or warning letters;
•
fines, injunctions, consent decrees and civil penalties;
•
recalls, termination of distribution, administrative detention, or seizure of our products;
•
customer notifications or repair, replacement or refunds;
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operating restrictions or partial suspension or total shutdown of production;
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delays in or refusal to grant our requests for future 510(k) clearances, PMA approvals or foreign regulatory approvals
of new products, new intended uses, or modifications to existing products;
•
withdrawals or suspensions of current 510(k) clearances or PMAs or foreign regulatory approvals, resulting in
prohibitions on sales of our products;
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FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and
•
criminal prosecution.
The FDA's and other regulatory authorities' policies may change and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval or certification of our product candidates. We cannot predict the
likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in
the U.S. or abroad.
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In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing
regulations, or take other actions which may prevent or delay approval or clearance of our future products under development
or otherwise increase the costs associated with compliance.
For example, in September 2019, the FDA issued revised final guidance describing an optional "safety and
performance based" pre-market review pathway for manufacturers of "certain, well-understood device types" to demonstrate
substantial equivalence under the 510(k) clearance pathway by demonstrating that such device meets objective safety and
performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and
performance of their medical devices to specific predicate devices in the clearance process. The FDA maintains a list of device
types appropriate for the "safety and performance based pathway" and continues to develop product-specific guidance
documents that identify the performance criteria for each such device type, as well as recommended testing methods, where
feasible. The FDA may establish performance criteria for classes of devices for which we or our competitors seek or currently
have received clearance, and it is unclear the extent to which such performance standards, if established, could impact our
ability to obtain new 510(k) clearances or otherwise create competition that may negatively affect our business.
In addition, FDA and foreign regulations and guidance are often revised or reinterpreted by the FDA and foreign
counterparts in ways that may significantly affect our business and our products. Any new statutes, regulations or revisions or
reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it
more difficult to obtain clearance, approval, or certification to manufacture, market or distribute our products. We cannot
determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or
adopted may have on our business in the future. Such changes could, among other things, require: additional testing prior to
obtaining clearance, approval, or certification; changes to manufacturing methods; recall, replacement or discontinuance of our
products; or additional record keeping. For example, in February 2024, the FDA issued a final rule to amend and replace the
QSR, which sets forth the FDA’s current good manufacturing practice requirements for medical devices, to align more closely
with the International Organization for Standardization standards. Specifically, this final rule, which the FDA expects to go into
effect on February 2, 2026, establishes the “Quality Management System Regulation,” (“QMSR”), which among other things,
incorporates by reference the quality management system requirements of ISO 13485:2016. Although the FDA has stated that
the standards contained in ISO 13485:2016 are substantially similar to those set forth in the QSR, and although our quality
system is currently designed to comply with ISO standards in connection with our device certifications outside the United
States, it is unclear the extent to which this final rule, once effective, could impose additional or different regulatory
requirements on us that could increase the costs of compliance or otherwise negatively affect our business. If we are unable to
comply with QMSR, once effective, or with any other changes in the laws or regulations enforced by FDA or comparable
regulatory authorities, we may be subject to enforcement action, which could have an adverse effect on our business, financial
condition and results of operations.
In addition, the EU landscape concerning medical devices recently evolved. On May 26, 2021, the EU Medical
Devices Regulation became applicable and repealed and replaced the EU Medical Devices Directive. Unlike directives, which
must be implemented into the national laws of the EU member states, regulations are directly applicable (i.e., without the need
for adoption of EU member state laws implementing them) in all EU member states and are intended to eliminate current
differences in the regulation of medical devices among EU member states. In accordance with its recently extended transitional
provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021
and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices
Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that
the requirements of the transitional provisions are fulfilled as may be assessed by the notified body. However, even in this case,
manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation
with regard to registration of economic operators and of devices, post-market surveillance, market surveillance and vigilance
requirements and comply with the requirements of the notified body.
Subject to the transitional provisions and in order to sell our products in EU member states, our products must comply
with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces the
EU Medical Devices Directive. All medical devices placed on the market in the EU must meet the general safety and
performance requirements laid down in Annex I to the EU Medical Devices Regulation including the requirement that a
medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its
intended purpose. Medical devices must be safe and effective and must not compromise the clinical condition or safety of
patients, or the safety and health of users and – where applicable – other persons, provided that any risks which may be
associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a
high level of protection of health and safety, taking into account the generally acknowledged state of the art. Compliance with
these requirements is a prerequisite to be able to affix the European Conformity ("CE") mark to our products, without which
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they cannot be sold or marketed in the EU. See – Government Regulation. To demonstrate compliance with the general safety
and performance requirements, we must undergo a conformity assessment procedure, which varies according to the type of
medical device and its (risk) classification. Except for low-risk medical devices (Class I), where the manufacturer can self-
assess the conformity of its products with the general safety and performance requirements (except for any parts which relate to
sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of a notified body. The
notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final
inspection of our devices. If satisfied that the relevant product conforms to the relevant general safety and performance
requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration
of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market
throughout the EU. If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our
products, which would prevent us from selling them within the EU.
The aforementioned EU rules are generally applicable in the EEA. Non-compliance with the above requirements
including as determined by a notified body would also prevent us from selling our products in these geographies.
The rules applicable in Great Britain differ from the EEA as a result of Brexit. On June 26, 2022, the Medicines and
Healthcare Products Regulatory Agency (“MHRA”) published its response to a 10-week consultation on the future regulation of
medical devices in the United Kingdom (“UK”). The MHRA proposes amendments to the UK Medical Devices Regulations
2002 (which are based on EU legislation, primarily the EU Medical Devices Directive), in particular to create new access
pathways to support innovation, create an innovative framework for regulating software and artificial intelligence as medical
devices, reform in vitro diagnostic regulation, and foster sustainability through the reuse and remanufacture of medical devices.
The MHRA has stated that it continues its intention to implement the proposals from such consultation through secondary
legislation. In addition, on November 14, 2024, the MHRA launched a new consultation on proposals to update the regulatory
framework for medical devices in Great Britain, covering four topics, namely (1) a new international reliance scheme to enable
swifter market access for certain devices that have already been approved in a comparable regulator country; (2) the new UK
Conformity Assessed (“UKCA”) mark and, in particular, proposals to remove the requirement to place such UKCA marking on
devices; (3) conformity assessment procedures for in vitro diagnostic devices; and (4) maintaining in UK law certain pieces of
“assimilated” EU law which are due to sunset in 2025. The MHRA consultation was opened until January 5, 2025, and it is
expected that secondary legislation implementing the proposals would be introduced in 2025. The divergence of the new UK
rules from EU law could adversely affect or delay our ability to obtain approval for our products in the UK, which could
adversely affect our ability to grow our business. See “Part 1, Item 1. Government Regulation - Regulation of Medical Devices
in the European Union – Brexit and the UK Regulatory Framework.”
If we or our component manufacturers fail to comply with the FDA's Quality System Regulation or Good Manufacturing
Practice regulations or other requirements, our manufacturing operations could be interrupted, and our product sales and
operating results could suffer. In particular, if we are unable to resolve or close-out the Warning Letter dated October 1, 2021,
received by Smiths Medical ASD, Inc. from the Minneapolis, Minnesota Facility following a February to March 2021
inspection, we could suffer significant sanctions which may impact our ability to sell products globally.
In the United States, we and some of our component manufacturers are required to comply with regulatory
requirements known as the FDA's QSR, a complex regulatory scheme which currently covers the procedures and
documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping,
management review, labeling, packaging, sterilization, storage and shipping of our device products. The QSR applies to the
manufacture of medical device components and finished medical devices. The FDA audits compliance with these regulatory
requirements through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may
conduct inspections or audits at any time, and we and some of our component suppliers are subject to such inspections.
Although we believe our manufacturing facilities and those of our critical component suppliers are in compliance with the QSR
requirements, and with other applicable cGMPs for our products, we cannot provide assurance that any future inspection will
not result in adverse findings. For example, on October 1, 2021, Smiths Medical received a Warning Letter from the FDA
following an inspection of Smiths Medical’s Minneapolis, Minnesota Facility during February to March 30, 2021. The
Warning Letter cited, among other things, failures to comply with FDA's medical device reporting requirements and failures to
comply with applicable portions of the QSR. There is no guarantee that we will be able to successfully resolve the issues
identified in the Warning Letter or do so in a timely manner or that similar compliance issues will not be identified in a future
FDA inspection. If we are unable to resolve the Warning Letter, we may be subject to the sanctions listed below.
If our manufacturing facilities or those of any of our component suppliers are found to be in violation of applicable
laws and regulations, or we or our suppliers have significant noncompliance issues or fail to timely and adequately respond to
any adverse inspectional observations or product safety issues, or if any corrective action plan that we or our suppliers propose
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in response to observed deficiencies is not sufficient, the FDA or foreign regulatory authorities could take enforcement action,
including any of the following sanctions:
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untitled letters or warning letters;
•
fines, injunctions, consent decrees and civil penalties;
•
customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;
•
operating restrictions or partial suspension or total shutdown of production;
•
refusing or delaying our requests for clearance or approval or certifications of new products or modified products;
•
withdrawing clearances, approvals, or certifications that have already been granted;
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refusal to grant export approval for our products; or
•
criminal prosecution.
Any of these sanctions could adversely affect our business, financial condition and operating results.
To market our products in the EU, we must conform to additional requirements and demonstrate conformance to
harmonized quality standards. A notified body would typically audit and examine a product's technical dossiers and the
manufacturers' quality system (the notified body must presume that quality systems which implement the relevant harmonized
standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements).
Subject to the transitional provisions, manufacturers of medical devices must also comply with the EU Medical Devices
Regulation. Compliance with these requirements assure that medical devices are both safe and effective and do not compromise
the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons and meet all
applicable established standards prior to being marketed in the EU. There is no assurance that we will continue to meet the
requirements for distribution of our products in the EU and the EEA.
As a result of these new requirements, we may be subject to risks associated with additional testing, modification,
certification, or amendment of our existing certifications, or we may be required to modify products already installed at our
customers' facilities to comply with the official interpretations of the EU Medical Devices Regulation.
Distribution of our products in other countries may be subject to regulation in those countries, and there is no
assurance that we will obtain necessary approvals or certifications in countries in which we want to introduce our products.
Actual or perceived failures to comply with foreign, federal, and state data privacy and security laws, regulations and
standards may adversely affect our business, operations and financial performance.
We are subject to various federal, state and foreign laws that govern the collection, use, disclosure, retention and
security of personal information, including patient health information and information that we may collect in connection with
clinical trials. The global data protection landscape is rapidly evolving, and implementation standards and enforcement
practices are likely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, affect
our or our collaborators', service providers' and contractors' ability to operate in certain jurisdictions or to collect, store, transfer,
use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or
impose additional costs on us. In the U.S., numerous federal and state laws and regulations could apply to our operations or the
operations of our partners, including state data breach notification laws, federal and state health information privacy laws, and
federal and state consumer protection laws and regulations (e.g. Section 5 of the Federal Trade Commission Act (the "FTC
Act")). For example, the privacy, security and breach notification rules promulgated under the Health Insurance Portability and
Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009,
and regulations implemented thereunder (collectively ("HIPAA") establish a set of national privacy and security standards for
the protection of protected health information ("PHI") by health plans, health care clearinghouses and certain health care
providers, called covered entities, and the business associates with whom such covered entities contract for services that involve
creating, receiving, maintaining or transmitting PHI, as well as their covered subcontractors. HIPAA also requires covered
entities to provide individuals with certain rights with respect to their PHI, and requires covered entities to enter into a written
business associate contract or other arrangement with the business associate that establishes specifically what the business
associate has been engaged to do and requires the business associate to comply with the requirements of HIPAA.
HIPAA requires the notification of patients, and other compliance actions, in the event of a breach of unsecured PHI.
If notification to patients of a breach is required, such notification must be provided without unreasonable delay and in no event
later than 60 calendar days after discovery of the breach. In addition, if the PHI of 500 or more individuals is improperly used
or disclosed, we would be required to report the improper use or disclosure to the U.S. Department of Health and Human
Services ("HHS") which would post the violation on its website, and to the media.
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Penalties for failure to comply with a requirement of HIPAA vary significantly depending on the nature of violation
and could include civil monetary or criminal penalties. HIPAA authorizes state attorneys general to file suit on behalf of their
residents for violations. Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such
cases. While HIPAA does not create a private right of action allowing individuals to file suit against us in civil court for
violations of HIPAA, its standards have been used as the basis for duty of care cases in state civil suits such as those for
negligence or recklessness in the misuse or breach of PHI.
Certain states have also adopted privacy and security laws and regulations, which govern the privacy, processing and
protection of health-related and other personal information. Such laws and regulations will be subject to interpretation by
various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future
customers and strategic partners. For example, California enacted the California Consumer Privacy Act of 2018 (the "CCPA"),
as amended by the California Privacy Rights Act (collectively, the CCPA) requires covered businesses that process the personal
information of California residents to, among other things: (i) provide certain disclosures to California residents regarding the
business’s collection, use, and disclosure of their personal information; (ii) receive and respond to requests from California
residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal
information;, and (iii) enter into specific contractual provisions with service providers that process California resident personal
information on the business’s behalf. Additional compliance investment and potential business process changes may be
required. Similar laws have passed in other states, and are continuing to be proposed at the state and federal level, reflecting a
trend toward more stringent privacy legislation in the U.S. The enactment of such laws could have potentially conflicting
requirements that would make compliance challenging. If we fail to comply with applicable laws and regulations we could be
subject to penalties or sanctions, including criminal penalties if we knowingly obtain or disclose individually identifiable health
information from a covered entity in a manner that is not authorized or permitted by HIPAA or applicable state laws.
Furthermore, the FTC and many state attorneys general continue to enforce federal and state consumer protection laws
against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive. For
example, according to the FTC, failing to take appropriate steps to keep consumers' personal information secure can constitute
unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. The FTC expects a company's data
security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the
size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Additionally,
federal and state consumer protection laws are increasingly being applied by FTC and states’ attorneys general to regulate the
collection, use, storage, and disclosure of personal or personally identifiable information, through websites or otherwise, and to
regulate the presentation of website content.
Foreign data protection laws, including the General Data Protection Regulation (the "GDPR"), which became effective
in May 2018, and EU and EEA member state data protection legislation, may also apply to health-related and other personal
data obtained outside of the U.S. The GDPR imposes strict requirements for processing the personal data of individuals within
the EEA or in the context of our activities within the EEA. The GDPR has and will continue to increase compliance burdens on
us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to
control how we collect, use, disclose, retain and process data about them. Fines for non-compliance with the GDPR are
significant - the greater of €20 million or 4% of global turnover. In addition to fines, a breach of the GDPR may result in
regulatory investigations, reputational damage, orders to cease/ change our data processing activities, enforcement notices,
assessment notices (for a compulsory audit) and/ or civil claims (including class actions). The GDPR provides that EU and EEA
member states may impose further obligations relating to the processing of genetic, biometric or health data, which could limit
our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse
impact on our business. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third
countries that have not been found to provide adequate protection to such personal data, including the United States, and the
efficacy and longevity of current transfer mechanisms between the European Economic Area, or the EEA, and the United States
remains uncertain. Case law from the Court of Justice of the European Union (“CJEU”) states that reliance on the standard
contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data transfer
mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must now be assessed on a case-by-
case basis. On July 10, 2023, the European Commission adopted its Adequacy Decision in relation to the new EU-US Data
Privacy Framework (“DPF”), rendering the DPF effective as a GDPR transfer mechanism to U.S. entities self-certified under
the DPF. We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue as
supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs
cannot be used, and/or start taking enforcement action. In particular, we expect the DPF Adequacy Decision to be challenged
and international transfers to the United States and to other jurisdictions more generally to continue to be subject to enhanced
scrutiny by regulators. We could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are
otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the
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manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and
could adversely affect our financial results.
Further, from January 1, 2021, companies have to comply with the GDPR and also the UK GDPR, which, together
with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under
the GDPR, e.g. fines up to the greater of €20 million (£17.5 million) or 4% of global turnover. On October 12, 2023, the UK
Extension to the DPF came into effect (as approved by the UK Government), as a data transfer mechanism from the UK to U.S.
entities self-certified under the DPF. As we continue to expand into other foreign countries and jurisdictions, we may be subject
to additional laws and regulations that may affect how we conduct business.
We are subject to certain fraud and abuse and transparency laws, which, if violated, could subject us to substantial penalties.
Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly
to respond to, and thus could harm our business.
There are numerous U.S. federal and state, as well as foreign, laws pertaining to healthcare fraud and abuse, including
anti-kickback, false claims and transparency laws regarding payments and other transfers of value made to physicians and other
licensed healthcare professionals. Our business practices and relationships with providers are subject to scrutiny under these
laws. The healthcare laws and regulations that may affect our ability to operate include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and
willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce
either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in
whole or in part, under federal healthcare programs, such as Medicare and Medicaid. A person or entity does not need
to have actual knowledge of the statute or specific intent to violate it to have committed a violation. The U.S.
government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers;
•
the federal civil and criminal false claims laws, including the federal civil False Claims Act, which prohibit, among
other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from
Medicare, Medicaid or other federal healthcare programs that are false or fraudulent. Private individuals can bring
False Claims Act "qui tam" actions, on behalf of the government and such individuals, commonly known as
"whistleblowers," may share in amounts paid by the entity to the government in fines or settlement. Moreover, the
government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act;
•
the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration
to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision
to order or receive items or services reimbursable by the government from a particular provider or supplier;
•
the federal Physician Sunshine Act, which require certain applicable manufacturers of drugs, devices, biologics and
medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance
Program ("CHIP") to report annually to the U.S. Department of Health and Human Services' CMS information related
to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse
specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified
nurse midwives, and teaching hospitals), and applicable manufacturers and GPOs, to report annually ownership and
investment interests held by physicians and their immediate family members;
•
HIPAA, which created additional federal criminal statutes that prohibit, among other things, executing a scheme to
defraud any healthcare benefit program and making false statements relating to healthcare matters. Similar to the
federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific
intent to violate it to have committed a violation; and
•
analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims
laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or
patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and
the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be
made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures; consumer protection and unfair competition laws, which broadly regulate marketplace activities and
activities that potentially harm customers; and state laws related to insurance fraud in the case of claims involving
private insurers.
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These laws and regulations, among other things, constrain our business, marketing and other promotional activities by
limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other
potential purchasers of our products. Due to the breadth of these laws, the narrowness of statutory exceptions and regulatory
safe harbors available, and the range of interpretations to which they are subject, it is possible that some of our current or future
practices might be challenged under one or more of these laws.
To enforce compliance with the healthcare regulatory laws, certain enforcement bodies have recently increased their
scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations,
prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-
consuming and can divert management's attention from the business. Additionally, as a result of these investigations, healthcare
providers and entities may have to agree to additional compliance and reporting requirements as part of a consent decree or
corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect
on our business. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly
to respond to. If our operations are found to be in violation of any of the healthcare laws or regulations described above or any
other healthcare regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal
penalties, damages, fines, exclusion from participation in government healthcare programs, such as Medicare and Medicaid,
imprisonment, contractual damages, reputational harm, disgorgement and the curtailment or restructuring of our operations.
Healthcare regulation and reform measures could adversely affect our revenue and financial condition.
Our profitability and operations are subject to risks relating to changes in government and private reimbursement
programs and policies and changes in legal requirements in the U.S. and in the world. There have been, and we expect there
will continue to be, a number of legislative and regulatory changes to the healthcare system that could affect our future revenues
and profitability in the U.S. and abroad. Federal and state lawmakers regularly propose and, at times, enact legislation that
results in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical
products and services. For example, in 2010, the ACA was signed into law introducing comprehensive health insurance and
healthcare reforms in the U.S. The ACA, among other things, provided incentives to programs that increase the federal
government's comparative effectiveness research, and implemented payment system reforms including a national pilot program
on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency
of certain healthcare services through bundled payment models. Additionally, the ACA has expanded eligibility criteria for
Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and
conduct comparative clinical effectiveness research, along with funding for such research.
We anticipate there will continue to be proposals by legislators at both the federal state and foreign levels, regulators
and commercial payors to reduce costs while expanding individual healthcare benefits. The ultimate implementation of any
healthcare reform legislation and any new laws and regulations, and its impact on us, is impossible to predict, particularly in
light of the new presidential administration. Any significant reforms made to the healthcare system in the U.S., or in other
jurisdictions, may have an adverse effect on our financial condition and results of operations.
On December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive
2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it only began to apply from January 2025
onwards, with preparatory and implementation-related steps that took place in the interim. Once applicable, it will have a
phased implementation depending on the concerned products. The Regulation intends to boost cooperation among EU member
states in assessing health technologies, including certain high-risk medical devices, and provide the basis for cooperation at the
EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools,
methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the
innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers
can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early,
and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing
non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.
Our business could be materially and adversely affected if we fail to defend and enforce our patents or other proprietary rights,
if our products are found to infringe patents or other proprietary rights owned by others or if the cost to protect our patents or
other proprietary rights becomes excessive or as our patents expire.
We rely on a combination of patents, trademarks, copyrights, trade secrets, business methods, software and
nondisclosure agreements to protect our proprietary intellectual property. Our efforts to protect our intellectual and proprietary
rights may not be sufficient. Further, there is no assurance that patents pending will issue or that the protection from patents
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which have issued or may issue in the future will be broad enough to prevent competitors from introducing similar devices, that
such patents, if challenged, will be upheld by the courts or that we will be able to prove infringement and damages in litigation.
We generally have multiple patents covering various features of a product, and as each patent expires, the protection
afforded by that patent is no longer available to us, even though protection of features that are covered by other unexpired
patents may continue to be available to us. The loss of patent protection on certain features of our products may make it
possible for others to manufacture and sell products with features identical or similar to ours, which could adversely affect our
business.
If we fail to develop and successfully launch new products prior to the expiration of patents for our existing products,
our sales and profits with respect to those products could decline significantly. We may not be able to develop and successfully
launch more advanced replacement products before these and other patents expire.
In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries
outside of the U.S., which could make it easier for competitors to obtain market position in such countries by utilizing
technologies that are similar to those developed by us.
If others choose to manufacture and sell products similar to or substantially the same as our products, it could have a
material adverse effect on our business through loss of unit volume or price erosion, or both, and could adversely affect our
ability to secure new business.
There has been substantial litigation regarding patent and other intellectual property rights in the medical device
industry. We have in the past faced and may in the future face patent infringement claims. Patent infringement litigation, which
may be necessary to enforce patents issued to us or to defend ourselves against claimed infringement of the rights of others, can
be expensive and may involve a substantial commitment of our resources which may divert resources from other uses. Adverse
determinations in litigation or settlements could subject us to significant liabilities to third parties, could require us to seek
licenses from third parties, could prevent us from manufacturing and selling our products or could fail to prevent competitors
from manufacturing products similar to ours. Any of these results could materially and adversely affect our business.
From time to time we become aware of newly issued patents on medical devices, which we review to evaluate any
infringement risk. We are aware of a number of patents that have been issued to others. While we believe these patents will not
affect our ability to market our products, there is no assurance that these or other issued or pending patents might not interfere
with our right or ability to manufacture and sell our products.
The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product
liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the
promotion of these uses, any of which could be costly to our business.
Our products have been cleared, approved or certified by the FDA, foreign regulatory authorities and notified bodies
for specific indications of use. We train our marketing personnel and direct sales force to not promote our products for uses
outside of the FDA-cleared or approved indications for use, known as "off-label uses." We cannot, however, prevent a
physician from using our products off-label, when in the physician's independent professional medical judgment he or she
deems it appropriate. There may be increased risk of injury to patients if physicians attempt to use our products off-label.
Furthermore, the use of our products for indications other than those cleared or approved by the FDA or approved by any
foreign body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians
and patients.
If the FDA or any foreign regulatory authorities determine that our promotional materials or training constitute
promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory
or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not
necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that enforcement authorities
might take action under other regulatory authority, such as false claims laws, if they consider our business activities to
constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil
and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs
and the curtailment of our operations.
In addition, physicians may misuse our products or use improper techniques if they are not adequately trained,
potentially leading to injury and an increased risk of product liability. If our products are misused or used with improper
technique, we may become subject to costly litigation by our customers or their patients.
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Litigation, product liability claims or product recalls could be costly and could expose us to loss.
The use of our products exposes us to an inherent risk of product liability. Further, the medical device industry has
historically been subject to extensive litigation and we cannot offer any assurance that we will not face product liability or other
lawsuits in the future. Patients, healthcare workers, healthcare providers or others who claim that our products have resulted in
injury could initiate product liability litigation seeking large damage awards against us. Costs of the defense of such litigation,
even if successful, could be substantial. We maintain insurance against product liability and defense costs in the amount of $50
million per occurrence. However, legal proceedings are inherently unpredictable, and the outcome can result in judgments that
affect how we operate our business, or we may enter into settlements of claims for monetary damages that exceed our insurance
coverage, if any is available. A successful claim against us in excess of insurance coverage could materially and adversely
affect us, and result in substantial liabilities and reputational harm including product recalls or withdrawals from the market,
withdrawal of clinical trial participants or clinical studies, the inability to commercialize our existing or new products,
distraction of management’s attention from our primary business or decreased demand for our products or, if cleared or
approved, products in development.
Any attempts we take to manage our product liability exposure, for example, by proactively recalling or withdrawing
from the market any defective products, and any required recall or market withdrawal of our products may delay the supply of
those products to our customers and may impact our reputation. We can provide no assurance that we will be successful in
initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have
the intended effect of preventing product malfunctions and the accompanying product liability that may result. Such recalls and
withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk
when considering the use of our products, either of which could have a material adverse effect on our business, financial
condition and results of operations.
Additionally, we generally offer a limited warranty for product returns which are due to defects in quality and
workmanship. We attempt to estimate our potential liability for future product returns and establish reserves on our financial
statements in amounts that we believe will be sufficient to address our warranty obligations; however, our actual liability for
product returns may significantly exceed the amount of our reserves. If we underestimate our potential liability for future
product returns, or if unanticipated events result in returns that exceed our historical experience, our financial condition and
operating results could be materially and adversely affected.
Our products may cause or contribute to adverse medical events or be subject to failures or malfunctions that we are required
to report to the FDA and foreign regulatory authorities, and if we fail to do so, we would be subject to sanctions that could
harm our reputation, business, financial condition and results of operations. The discovery of serious safety issues with our
products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could
have a negative impact on us.
We are subject to the FDA's medical device reporting regulations and similar foreign regulations, which require us to
report to the FDA and foreign regulatory authorities when we receive or become aware of information that reasonably suggests
that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if
the malfunction were to recur, it could cause or contribute to a death or serious injury. The timing of our obligation to report is
triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse
events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware
of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is
unexpected or removed in time from the use of the product. If we fail to comply with our reporting obligations, the FDA or
foreign regulatory authorities could take action, including warning letters, untitled letters, administrative actions, criminal
prosecution, imposition of civil monetary penalties, revocation of our device clearances, approvals or certifications, seizure of
our products or delay in clearance, approval, or certification of future products.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event
of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable
risk to health. The FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the
device could cause serious injury or death. We may also choose to voluntarily recall a product if any material deficiency is
found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component
failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures
to comply with applicable regulations. Product defects or other errors may occur in the future. For example, in June 2024,
Smiths Medical ASD initiated Class 1 recalls with respect to certain tracheostomy tube kits, and, in May 2024, Smiths Medical
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ASD initiated Class 1 recalls for certain paraPAC plus ventilators. We can provide no assurance that our efforts to work with
the FDA to complete, and ultimately close, these product recalls, and any recalls that may occur in the future, will be
accomplished in a timely manner, or at all. In addition, the costs associated with conducting and closing these or any other
product recalls, including any liabilities we may incur, could have a material adverse effect on our business, financial condition
and results of operations.
Depending on the corrective action we take to redress a product's deficiencies or defects, the FDA or foreign
regulatory agencies may require, or we may decide, that we will need to obtain new clearances, approvals or certifications for
the device before we may market or distribute the corrected device. Seeking such clearances, approvals or certifications may
delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems
associated with our devices, we may face additional regulatory enforcement action, including FDA or foreign regulatory
authorities warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.
Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the
FDA or foreign regulatory authorities. We may initiate voluntary withdrawals or corrections for our products in the future that
we determine do not require notification of the FDA or foreign regulatory authorities. If the FDA or foreign regulatory
authorities disagree with our determinations, it could require us to report those actions as recalls and we may be subject to
enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to product
liability claims against us and negatively affect our sales. Any corrective action, whether voluntary or involuntary, as well as
defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our
business and may harm our reputation and financial results.
Geographic Risks
Significant changes in U.S. trade, tax or other policies that restrict imports or increase import tariffs for certain countries,
particularly Mexico, can escalate trade wars and could have a meaningful adverse effect on our results of operations.
A significant amount of our products are manufactured outside of the U.S. In certain years, the U.S. government has
initiated substantial changes in U.S. trade policy and U.S. trade agreements, including the initiation of tariffs on certain foreign
goods. In response to these tariffs, certain foreign governments, including Canada, China and Mexico, have retaliated imposing
tariffs on certain U.S. goods. In January 2025, the current administration issued executive orders imposing additional tariffs on
imported goods from Canada, Mexico, and China and in response Canada immediately announced similar tariffs on U.S.
imports. Imposed tariffs and retaliatory responses to these and further trade measures could prevent or make it difficult and will
be more costly for us to import goods. They could also potentially disrupt our existing supply chains and impose additional
costs on our business, including, without limitation, costs with respect to raw materials upon which our business depends. The
most significant potential impact to us is the additional tariffs on Mexican imports, which could result in a meaningful impact to
our results of operations due to our manufacturing facilities in Mexico. Increased tariffs could require us to increase our prices,
which likely could decrease demand for our products, and in certain cases we may be unable to pass along increased costs to
our customers if they are under long-term fixed price contracts. Additionally, we are subject to income taxes in the U.S. and
numerous foreign jurisdictions. Any significant changes in current tax policies could have a material adverse effect on our
results of operations.
Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates.
We face exposure to adverse movements in foreign currency exchange rates due to our operations in foreign markets
through our foreign subsidiaries and other international distributors. Our primary foreign currency exchange rate exposures are
currently with the Euro, Mexican Peso, Canadian Dollar, Czech Koruna, Japanese Yen, Chinese Renminbi, and the Australian
Dollar against the U.S. dollar. Our income and expenses are based on a mix of currencies, and a decline in one currency relative
to the other currencies could adversely affect our operating results. Furthermore, our operating results are reported in U.S.
dollars, using the exchange rate in effect at the balance sheet date, or, for revenues and expenses, using the average monthly
exchange rates during the year. Accordingly, our operating results have been and continue to be subject to volatility due to
fluctuations in foreign currency exchange rates. Generally, when the U.S. dollar weakens against these currencies, the dollar
value of foreign-currency denominated revenue and expense increases, and when the U.S. dollar strengthens against these
currencies, the dollar value of foreign-currency denominated revenue and expense decreases. We are also exposed to foreign
currency risk on outstanding foreign currency denominated receivables and payables. Currency exchange rates have been
especially volatile in the recent past. Accordingly, changes in foreign currency exchange rates have adversely affected and may
continue to adversely affect our results of operations. During 2024, we recorded $9.8 million in foreign exchange losses due to
the volatility of foreign exchange rates later in the year such as the strengthening of the US dollar relative to most of our selling
currencies in foreign jurisdictions which impacted margins and the devaluation of the Argentine Peso. See Item 7.
33
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of the
financial impact of exchange rate fluctuations on our results of operations. Fluctuations in currency exchange rates are caused
by a number of factors that are beyond our control, including a country’s political and economic policies, inflationary
conditions, disruptions in the financial markets, and global economic and geopolitical conditions.
We currently only partially hedge against our foreign currency exchange rate risks, related to certain forecasted foreign
currency-denominated revenues and expenses. We, therefore, believe our exposure to these risks may be higher than if we
entered into hedging transactions, including forward exchange contracts or similar instruments that covered the company on a
consolidated basis. If we decide in the future to enter into additional forward foreign exchange contracts to attempt to reduce the
risk related to foreign currency exchange rates, these contracts may not mitigate the potential adverse impact on our financial
results due to the limitations and difficulty forecasting future activity. In addition, these types of contracts may themselves
cause financial harm to us and have inherent levels of counter-party risk over which we would have no control. We attempt to
mitigate a portion of foreign currency exchange rate risks through foreign currency hedging. Our hedging activities, however,
may not sufficiently offset the adverse financial impact caused by unfavorable movement in foreign currency exchange rates
applicable to our business, and such exchange rate impacts could materially adversely affect our financial condition or results of
operations. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”
International sales pose additional risks related to competition with larger international companies and established local
companies and higher credit risk.
We have undertaken an initiative to increase our international sales, and have distribution arrangements in all the
principal countries in Western Europe, the Pacific Rim, Middle East, Latin America, Canada and South Africa. We plan to sell
in most other areas of the world. We export most of our products sold internationally primarily from the U.S. and Mexico and
to a lesser extent Costa Rica. Our principal competitors in international markets consist of much larger companies as well as
smaller companies already established in the countries into which we sell our products. Our cost structure is often higher than
that of our competitors because of the relatively high cost of transporting products to some local markets as well as our
competitors’ lower local labor costs in some markets.
Our international sales are subject to higher credit risks than sales in the U.S. Many of our distributors are small and
may not be well capitalized. Payment terms are relatively long. The European hospitals tend to be significantly slower in
payment which has resulted in and may continue to result in an increase to our days sales outstanding from previous years. Our
prices to our international distributors, outside of Europe, for products shipped to the customers from the U.S., Costa Rica or
Mexico are generally denominated in U.S. dollars, but their resale prices are set in their local currency. A decline in the value of
the local currency in relation to the U.S. dollar has in prior years adversely affected and may in future years adversely affect
their ability to profitably sell in their market the products they buy from us, and has in prior years adversely affected and may in
future years adversely affect their ability to make payment to us for the products they purchase. Legal recourse for non-payment
of indebtedness may be uncertain. These factors all contribute to a potential for credit losses.
We are dependent on manufacturing in Mexico, and could be adversely affected by that region's increased labor costs and any
economic, social or political disruptions.
Most of the material we use in manufacturing is imported into Mexico, and substantially all of the products we
manufacture in Mexico are exported. Business activity in the Ensenada area has expanded significantly, providing increased
employment opportunities. This has had and may continue to have an adverse effect on our ability to hire or retain necessary
personnel and has resulted in and may continue to result in higher labor costs. In addition, minimum wages in regions within
which we operate have increased labor costs significantly. We continue to take steps to compete for labor through attractive
employment conditions and benefits, but there is no assurance that these steps will continue to be successful or that we will not
continue to face increasing labor costs in the future.
Any political or economic disruption in Mexico or a change in its local economies could have an adverse effect on our
operations. We depend on our ability to move goods across borders quickly, and any disruption in the free flow of goods across
national borders could have an adverse effect on our business. Additionally, political and social instability resulting from
violence in certain areas of Mexico has raised concerns about the safety of our personnel. These concerns may hinder our ability
to send domestic personnel abroad and to hire and retain local personnel. Such concerns may require us to conduct more
operations from the U.S. rather than Mexico, which may negatively impact our operations and result in higher costs and
inefficiencies.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws.
34
The Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions generally prohibit companies and their
intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial
advantage. Our policies mandate compliance with these anti-bribery laws, which often carry substantial penalties, including
criminal and civil fines, potential loss of export licenses, possible suspension of the ability to do business with the federal
government, denial of government reimbursement for products and exclusion from participation in government healthcare
programs. We operate in jurisdictions that have experienced governmental and private sector corruption to some degree, and, in
certain circumstances, strict compliance with anti-bribery laws may conflict with certain local customs and practices. We
cannot assure that our internal control policies and procedures always will protect us from reckless or other inappropriate acts
committed by our affiliates, employees, distributors or other agents. Violations of these laws, or allegations of such violations,
could have a material adverse effect on our business, financial position and results of operations.
We are subject to risks associated with doing business outside of the U.S.
We operate in a global market and global operations are subject to a number of risks. Sales to customers outside of the
U.S. composed approximately 36% of our revenues in 2024 and as our operations and sales located in Europe and other areas
outside the U.S. increase, we may face new challenges and uncertainties, although we can give no assurance that such
operations and sales will increase.
The risks associated with our operations outside the U.S. include, without limitation:
•
economic and political uncertainty;
•
changes in non-U.S. government programs;
•
multiple non-U.S. regulatory requirements that are subject to change and that could restrict our ability to manufacture
and sell our products;
•
different local medical practices, product preferences and product requirements;
•
possible failure to comply with trade protection and restriction measures and import or export licensing requirements;
•
difficulty in establishing, staffing and managing non-U.S. operations;
•
different labor regulations or work stoppages or strikes;
•
changing geopolitical conditions arising from political instability and any actual or anticipated military or political
conflicts;
•
economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of
our customers in foreign countries, such as the devaluation of the Argentine Peso;
•
tariffs on products imported to the U.S.;
•
uncertainties regarding judicial systems and procedures;
•
minimal or diminished protection of intellectual property in some countries;
•
natural disasters or outbreak of diseases or pandemics;
•
fluctuations in foreign currency exchange rates;
•
changes to international trade agreements and trade relationships and conflicts between countries; and
•
imposition of government controls, such as economic sanctions and export controls.
These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial
condition. The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value,
financial condition, and results of operations.
Risks Related to our Strategic Transactions
The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and an increase in size to
our business. If we fail to effectively complete the integration of our business in a manner that preserves our reputation with
customers and the key aspects of our corporate culture, our business, financial condition and results of operations could be
harmed.
The Smiths Medical acquisition has resulted in significant growth in our personnel and operations, adding
approximately 6,700 employees to our headcount at the time of acquisition. Our total headcount as of December 31, 2024 was
approximately 15,000 employees. We have incurred and continue to incur significant expenditures and the allocation of
management time to assimilate the Smiths Medical employees in a manner that preserves the key aspects of our corporate
culture, including a focus on strong customer satisfaction, but there can be no assurance that we will be successful in our
efforts. If we do not effectively integrate, train and manage our combined employee base and maintain strong customer
35
relationships, our corporate culture could be undermined, the quality of our products and customer service could suffer, and our
reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations.
The Smiths Medical acquisition was a significant acquisition for us and the product offerings within Smiths Medical
are not product offerings that we previously offered. The success of our business will depend, in part, on our ability to realize
our anticipated benefits, opportunities and synergies from combining our legacy businesses and Smiths Medical. We can
provide no assurance that the anticipated benefits of the Smiths Medical acquisition will be fully realized in the time frame
anticipated or at all. Integrating the operations of Smiths Medical with that of our legacy business has been and continues to be
a complex, costly and time-consuming process. The integration process may disrupt the businesses and, if implemented
ineffectively, would restrict the realization of the full expected benefits. The failure to meet the challenges involved in
integrating the two businesses could cause an interruption of, or a loss of momentum in, the activities of the combined
businesses and could adversely affect the results of operations of the combined businesses. Potential difficulties that may be
encountered in the integration process include the following:
•
challenges in preserving important strategic customer and other third-party relationships of both businesses;
•
the diversion of management’s attention to integration matters;
•
challenges in maintaining employee morale and retaining or attracting key employees;
•
potential incompatibility of corporate cultures;
•
costs, delays and other difficulties consolidating corporate and administrative infrastructures and information systems
and implementing common systems and procedures including, in particular, our internal controls over financial
reporting; and
•
coordinating and integrating a geographically dispersed organization, including operations in jurisdictions we did not
operate in prior to the Smiths Medical transaction.
Any one or all of these factors may increase operating costs or lower anticipated financial performance. Achieving the
anticipated benefits and the potential benefits underlying our reasons for the Smiths Medical business acquisition will depend
on successful integration of the businesses. Because of the significance of the Smiths Medical business acquisition to us, our
failure to successfully complete the integration of the Smiths Medical business with that of our own could have a material
adverse impact on our business, financial condition and results of operations.
If we are unable to effectively manage our internal growth or growth through acquisitions of companies, assets or products,
our financial performance may be adversely affected.
We may expand our product offerings through acquisitions of companies or product lines from time to time. We can
provide no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations
or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other
challenges. In 2022, we acquired the Smiths Medical business, which includes syringe and ambulatory infusion devices,
vascular access, and vital care products, but we have made and continue to make significant integration efforts to achieve the
anticipated benefits. See “The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes
and significant growth to our business. If we fail to effectively manage this growth and change to our business in a manner that
preserves our reputation with customers and the key aspects of our corporate culture, our business, financial condition and
results of operations could be harmed.”
We have additional production facilities outside the U.S. to reduce labor costs. We intend to continue to expand our
marketing and distribution capability, which may include external expansion through acquisitions both in the U.S. and foreign
markets. The expansion of our marketing, distribution and product offerings both internally and through acquisitions or by
contract may place substantial burdens on our management resources and financial controls. Decentralization of assembly and
manufacturing could place further burdens on management to manage those operations and maintain efficiencies and quality
control.
The increasing burdens on our management resources and financial controls resulting from internal growth and
acquisitions could adversely affect our operating results. In addition, acquisitions may involve a number of special risks in
addition to the difficulty of integrating cultures and operations and the diversion of management’s attention, including adverse
short-term effects on our reported operating results, dependence on retention, hiring and training of key personnel, risks
associated with unanticipated problems or legal liabilities, and amortization of acquired intangible assets, some or all of which
could materially and adversely affect our operations and financial performance.
For the Smiths Medical acquisition, we used a significant portion of our cash on hand and incurred a substantial amount of
debt to finance the cash consideration portion and certain other amounts paid in connection with the Smiths Medical
36
acquisition, which could adversely affect our business, including by restricting our ability to engage in additional transactions
or incur additional indebtedness.
At December 31, 2024 and 2023, we had $308.6 million and $254.7 million of cash, cash equivalents and investment
securities on hand, respectively, which was significantly less in each case than the balances maintained prior to the Smiths
Medical acquisition. Although our management believes that we continue to have sufficient access to cash to meet our business
objectives and capital needs, we currently have a decreased availability of cash, cash equivalents and investment securities and
expect to continue to have such decreased availability of cash for the foreseeable future which could constrain our ability to
grow our business. Furthermore, in connection with the Smiths Medical transaction and the payment of the cash consideration,
we entered into Senior Secured Credit Facilities (the "Senior Secured Credit Facilities") of $2.2 billion consisting of a term loan
A facility of $850.0 million, a term loan B facility of $850.0 million and a revolving credit facility of $500.0 million. As a
result of entering into the Senior Secured Credit Facilities, we incurred additional borrowing costs. At December 31, 2024, our
long-term debt outstanding was $1.6 billion. Our more leveraged financial position following the Smiths Medical transaction
could make us more vulnerable to general economic downturns and industry conditions, and place us at a competitive
disadvantage relative to our competitors. In the event that we do not have adequate capital to maintain or develop our business
and need to seek additional financing, additional capital may not be available to us on a timely basis, on favorable terms, or at
all. Moreover, our Senior Secured Credit Facilities have certain restrictions that may limit how we operate our business,
including our ability to engage in certain transactions and incur additional indebtedness, and our business may be materially and
adversely affected if these restrictions prevent us from implementing our business plan. See “Business and Operating Risks -
The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our
business, finance future operations or pursue our business strategies.”
We have and may continue to acquire businesses, form strategic alliances, enter into joint ventures or make investments in
businesses or technologies. Such transactions or investments could result in unforeseen operating difficulties or expenditures
and require significant management resources, charges or write-downs that could adversely impact our business and operating
results.
We have and may continue to seek to supplement our internal growth through acquisitions of complementary
businesses, technologies, services, or products, as well as investments, joint ventures and strategic alliances. We compete for
those opportunities with others including our competitors, some of which have greater financial or operational resources than
we do. We may not be able to identify suitable acquisition candidates or strategic partners, we may have inadequate access to
information or insufficient time to complete due diligence, and we may not be able to complete such transactions on favorable
terms, if at all. Such transactions are inherently risky, and the integration of any newly-acquired business requires significant
effort and management attention that otherwise would be available for ongoing development of our other businesses.
The success of any acquisition, investment, joint venture or alliance may be affected by a number of factors, including
our ability to properly assess and value the potential business opportunity or to successfully integrate any business we may
acquire into our existing business. Integration of an acquired business also may disrupt our ongoing operations and require
management resources that we would otherwise focus on developing our existing business. For example, we acquired the HIS
business in February 2017, which includes IV pumps, solutions, and devices in order to create a leading pure-play infusion
therapy company, and we acquired Smiths Medical in January 2022, which includes syringe and ambulatory infusion devices,
vascular access, and vital care products. We invested significant time and resources into the HIS integration in order to achieve
the anticipated benefits of the transaction, and we have been and continue to do the same with the Smiths Medical integration.
More recently, in November 2024, we entered into a purchase agreement (the “Agreement”) with Otsuka to form a
joint venture (the “Joint Venture”) for our IV Solutions product line. With Otsuka expected to have a 60% equity interest, we
will be a minority holder with a 40% equity interest. The failure to complete this transaction or, if completed, for the Joint
Venture to meet our performance and financial expectations could adversely impact our ability to meet internal forecasts and
expectations. Additionally, pursuant to the terms of the Agreement, we will not have sole decision-making authority with
matters related to the Joint Venture, or have the ability exert control over the actions of Otsuka, which could result in impasses
on decisions or decisions made by our partners, which we may be unable to resolve in a manner that will be favorable to us.
Further, Otsuka may have economic or business interests that are, or may become, inconsistent with our interests.
Acquisitions, investments, joint ventures and alliances involve numerous risks and uncertainties, including, without
limitation, the failure to identify suitable acquisition candidates and partners, the ability to complete the transaction on
acceptable terms and conditions, the incurrence of liabilities greater than anticipated or operating results that are less than
anticipated, the inability to realize the projected value, and the inability to realize projected synergies, the incurrence of debt,
contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on
our financial condition, results of operations and cash flows. We may also experience losses related to investments in other
37
companies, which could have an adverse effect on our results of operations and financial condition. As such, there can be no
assurance that any past or future transactions or investments will be successful.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality,
integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a
cybersecurity incident response plan.
We leverage guidance from the National Institute of Standards and Technology Cybersecurity Framework (“NIST
CSF”), which provides an outline of enterprise security processes and controls, to inform the design and assessment of our
cybersecurity risk management program. This does not imply that we meet any particular technical standards, specifications, or
requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to
our business.
Our cybersecurity risk management program is overseen by a cross-functional team comprised of our business-
functional and IT employees. Our cybersecurity risk management program is integrated into our overall enterprise risk
management program, and shares common methodologies, reporting channels and governance processes that apply across the
enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes:
•
risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products,
services, and our broader enterprise IT environment;
•
evaluations of our readiness to assess, respond and, as applicable, recover from potential cybersecurity incidents;
•
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security
controls;
•
cybersecurity training to educate our employees (including senior management and incident response personnel),
consultants, and other users about their individual responsibilities regarding protecting our IT systems and data;
•
a third-party risk management process for service providers, suppliers and vendors who have access to our critical
systems and information.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity
incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business
strategy, results of operations, or financial condition. For more information, see the section titled “Risk Factor—Market and
Other External Risks—Failure to protect our information technology systems against security breaches, service interruptions,
or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing
our business and reputation to suffer.”
Cybersecurity Governance
Our cybersecurity risk management program is led by our Chief Information Officer (“CIO”) through our Information
Security Committee (“ISC”), which includes a cross-functional group of senior leaders who are responsible for the
dissemination and promotion of our cybersecurity strategy, implementation of cybersecurity objectives and top-down
communication and monitoring of the risk management program as described above. Our ISC is responsible for the regular
oversight of cybersecurity risk, information security and technology risk and assessing and managing our material risks from
cybersecurity threats and supervises both our internal cybersecurity personnel and our retained external cybersecurity
consultants.
38
Our ISC facilitates communications between executive, business/process level and the implementation/operations level
to coordinate the implementation of our cybersecurity risk program. The ISC team meets on a regular basis, at least quarterly
and more frequently as needed, to discuss significant initiatives, critical metrics and address certain risk responses.
Our ISC members includes our Chief Information Security Officer ("CISO") and our Director of IT Security, Risk and
Compliance who have a combined 20 years of risk management experience encompassing cybersecurity and technology
security, such as threat assessments, risk management, cybersecurity insurance, incident response, end user awareness and
vulnerability management.
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee
oversight of cybersecurity and other information technology risks. Our Audit Committee oversees management’s
implementation of our cybersecurity risk management program. On a quarterly basis, our Audit Committee receives updates
from our CISO with respect to the status of our cybersecurity initiatives to strengthen our cybersecurity risk management. In
addition, our CISO updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any
incidents with lesser impact potential. Our Audit Committee discusses the potential impact of cybersecurity risks on our
financial condition, results of operations or our reputation. Our Audit Committee periodically reports to the Board regarding its
activities, including those related to cybersecurity. The Board also periodically receives briefings from management on our
cyber risk management program. Board members receive periodic presentations on cybersecurity topics from our CISO,
internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies.
ITEM 2. PROPERTIES
Our material properties used by us in connection with our corporate administrative operations, manufacturing,
distribution, research and development and service centers as of December 31, 2024, are as follows:
39
Location
Approximate Square Footage
Primary Use
Owned/Leased
San Clemente, California, U.S.
39,000
Corporate Headquarters and R&D
Owned
San Clemente, California, U.S.
9,779
Corporate Headquarters
Leased
San Diego, California, U.S.
13,237
Corporate Offices and R&D
Leased
Lake Forest, Illinois, U.S.
54,298
Corporate Offices
Leased
Dublin, Ohio, U.S.
13,021
Corporate Offices
Leased
Houten, Netherlands
7,341
Corporate Offices
Leased
Montreal, Canada
31,890
Corporate Offices/Device Service
Center
Leased
Rydalmere, NSW Australia
14,735
Corporate Offices/Device Service
Center
Leased
Chennai, India
36,879
R&D
Leased
Plymouth, Minnesota, U.S.
182,250
Corporate Offices
Leased
Kent, United Kingdom
24,172
Corporate Offices
Leased
Ontario, Canada
25,020
Corporate Offices
Leased
Grasbrunn, Germany
38,155
Corporate Offices/Device Service
Center
Leased
Austin, Texas, U.S.
594,602
Manufacturing
Owned
Ensenada, Baja California, Mexico
265,021
Manufacturing
Owned
Monterrey, Mexico
100,000
Manufacturing
Owned
La Aurora, Costa Rica
626,869
Manufacturing
Owned
Salt Lake City, Utah, U.S.
440,104
Manufacturing/Device Service Center
Owned
Dublin, Ohio, U.S.
153,121
Manufacturing
Owned
Gary, Indiana, U.S.
45,416
Manufacturing
Owned
Gary, Indiana, U.S.
14,040
Manufacturing/Corporate Offices
Leased
Southington, Connecticut, U.S.
132,000
Manufacturing
Owned
Tijuana, Mexico (multiple locations)
243,935
Manufacturing
Leased
Hranice, Czech Republic
129,953
Manufacturing
Leased
Latina, Italy
62,441
Manufacturing
Owned
Keene, New Hampshire, U.S.
153,427
Warehouse/Manufacturing
Owned
Oakdale, Minnesota, U.S.
93,648
Warehouse/Device Service Center
Leased
Round Rock, Texas, U.S.
80,929
Warehouse/Manufacturing
Owned
Dallas, Texas, U.S.
610,806
Distribution Warehouse
Leased
King of Prussia, Pennsylvania, U.S.
105,611
Distribution Warehouse
Owned
Santa Fe Springs, California, U.S.
76,794
Distribution Warehouse
Owned
Wijchen, Netherlands
149,565
Distribution Warehouse
Leased
Olive Branch, Mississippi, U.S.
239,863
Distribution Warehouse
Leased
Sligo, Ireland
26,000
Device service center
Leased
In addition to the above, we own and lease additional office and building space, research and development, and sales
and support offices primarily in North America, Europe, South America, and Asia. We believe our existing facilities, both
owned and leased, are in good condition and suitable for the conduct of our business.
ITEM 3. LEGAL PROCEEDINGS
The information required with respect to this Item 3. is discussed in Part II, Item 8. "Financial Statements and
Supplementary Data" of this Annual Report on Form 10-K in Note 16. Commitments and Contingencies to the Consolidated
Financial Statements, and is incorporated herein by reference.
40
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Common Stock
Our common stock trades on the Nasdaq Global Select Market under the symbol “ICUI.”
Stockholders
As of January 31, 2025, we had 40 stockholders of record. This does not include persons whose shares are held in
nominee or “street name” accounts through brokers.
Securities authorized for issuance under equity compensation plans are discussed in Part III, Item 12 of this Annual
Report on Form 10-K.
Dividends
We have never paid dividends and do not anticipate paying dividends in the foreseeable future as the Board of
Directors intends to retain future earnings for use in our business to pay down our long-term debt or to purchase our
shares. Any future determination as to payment of dividends or purchase of our shares will depend upon our financial condition,
results of operations and such other factors as the Board of Directors deems relevant.
Issuer Purchases of Equity Securities
The following is a summary of our stock repurchasing activity during the fourth quarter of 2024:
Period
Shares
purchased
Average
price paid
per share
Shares
purchased
as part of a
publicly
announced
program
Approximate
dollar value that
may yet be
purchased
under the
program(1)
10/01/2024 - 10/31/2024
— $
—
— $ 100,000,000
11/01/2024 - 11/30/2024
— $
—
— $ 100,000,000
12/01/2024 - 12/31/2024
— $
—
— $ 100,000,000
Fourth quarter 2024 total
— $
—
— $ 100,000,000
____________________________
(1)
Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was authorized by our
Board of Directors and publicly announced in August 2019. This plan has no expiration date. We are not obligated to make any
purchases under our stock purchase program. Subject to applicable state and federal corporate and securities laws, purchases under a
stock purchase program may be made at such times and in such amounts as we deem appropriate, depending on a variety of factors,
including our financial position, earnings, share price, capital requirements, other investment opportunities (including mergers and
acquisitions and related financings), market conditions and other factors. Purchases made under our stock purchase program can be
discontinued at any time we determine additional purchases are not warranted.
41
COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 31, 2019 TO DECEMBER 31, 2024 OF ICU MEDICAL,
INC., NASDAQ AND NASDAQ MEDICAL SUPPLIES INDEX
The following graph shows the total stockholder return on our common stock based on the market price of the common stock from
December 31, 2019 to December 31, 2024 and the total returns of the NASDAQ U.S. Index and NASDAQ Medical Supplies Index for the
same period.
NASDAQ U.S. Index
NASDAQ Medical Supplies Index
ICU Medical, Inc.
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
0.00
50.00
100.00
150.00
200.00
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
ICU Medical, Inc.
100.00
114.63
126.84
84.16
53.30
82.93
Nasdaq U.S. Index
100.00
121.27
152.67
122.55
154.93
192.86
Nasdaq Medical Supplies Index
100.00
126.91
152.33
99.88
105.67
96.08
Assumes $100 invested on December 31, 2019 in ICU Medical Inc.’s common stock, the NASDAQ U.S. Index and
the NASDAQ Medical Supplies Index and that all dividends, if any, were reinvested.
ITEM 6. RESERVED
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together
with our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under Part I, Item 1A. “Risk Factors” or in other sections of this Annual Report on
Form 10-K as may be further updated from time to time in our other filings with the SEC.
Business Overview and Highlights
We develop, manufacture, and sell innovative medical products used in infusion systems, infusion consumables and
high-value critical care products used in hospital, alternate site and home care settings. Our team is focused on providing
quality, innovation and value to our clinical customers worldwide. Our product portfolio includes ambulatory, syringe, and
large volume IV pumps and safety software; dedicated and non-dedicated IV sets, needlefree IV connectors, peripheral IV
42
catheters, and sterile IV solutions; closed system transfer devices and pharmacy compounding systems; as well as a range of
respiratory, anesthesia, patient monitoring, and temperature management products.
Global Economic Challenges
We have experienced and may continue to experience significant impacts to our business as a result of global
economic challenges, resulting from, among other events, health pandemics and geopolitical conflicts. These impacts, which
negatively impacted our gross profit margin during 2023 and 2022, include the impact of rising inflation, especially with
respect to freight costs driven by higher fuel prices, increased cost and shortages of raw materials, and supply chain disruptions.
While we expect the pressure on the supply chain to lessen and inflation to continue to subside, freight costs are expected to
remain subject to volatility in the market.
We also continue to expect higher interest rates and volatility in foreign currency rates due to the strengthening of the
U.S. dollar against most global currencies. Our 2024, 2023 and 2022 financial results were negatively impacted by foreign
exchange losses and our results of operations may continue to be impacted in the future.
More recently, in January 2025, the current administration issued executive orders imposing tariffs on imported goods
from Canada, Mexico, and China. In response, Canada announced similar tariffs on U.S. imports. A meaningful portion of our
global revenues are from products manufactured in our Mexico manufacturing facilities and imported into the U.S. In addition,
Canada is our second largest country in terms of revenue and the vast majority of products sold in Canada are imported from
the U.S. The 25% tariff levied on all goods shipped from Mexico to the U.S., combined with the 25% tariff on products shipped
from the U.S. to Canada could potentially have a meaningful impact to our costs and any further trade war escalation could
increase that impact.
While we continually monitor the ongoing and evolving impact of the above events on our operations the overall
impact remains uncertain and may not be fully reflected in our results of operations until future periods. The overall impact to
our results of operations will depend on a number of factors, many of which are out of our control, none of which can be fully
predicted at this time. See "Part I. Item 1A. Risk Factors" for a discussion of risks and uncertainties.
Consolidated Results of Operations
We present our consolidated statements of operations for each of the three years ended December 31, 2024, 2023 and
2022 in Item 8. Financial Statements and Supplementary Data. The following table shows, for each of the three most recent
years, the respective percentages of items in our statements of operations in relation to total revenues:
Percentage of Revenues
2024
2023
2022
Total revenues
100 %
100 %
100 %
Gross profit
35 %
33 %
31 %
Selling, general and administrative expenses
27 %
27 %
27 %
Research and development expenses
4 %
4 %
4 %
Restructuring, strategic transaction and integration expenses
3 %
2 %
3 %
Change in fair value of contingent earn-out
— %
(1) %
(1) %
Total operating expenses
34 %
32 %
33 %
Income from operations
1 %
1 %
(2) %
Interest expense, net
(4) %
(4) %
(3) %
Other expense, net
(1) %
— %
— %
Loss before income taxes
(4) %
(3) %
(5) %
Provision (benefit) for income taxes
2 %
(2) %
(2) %
Net loss
(6) %
(1) %
(3) %
Total revenues were $2.4 billion, $2.3 billion and $2.3 billion for 2024, 2023 and 2022, respectively.
The following table sets forth, for the periods indicated, total revenue by product line as a percentage of total revenue:
43
Year Ended December 31,
Product line
2024
2023
2022
Consumables
44 %
43 %
43 %
Infusion Systems
27 %
28 %
27 %
Vital Care
29 %
29 %
30 %
100 %
100 %
100 %
We manage our product distribution through a network of owned and leased distribution facilities in combination with
independent distributors and third-party fulfillment and logistics providers. Our end customers, which include healthcare
providers and original equipment manufacturer suppliers, may order and receive our products directly from us or through an
independent full-line distributor.
In the U.S. a substantial amount of our products are sold to group purchasing organization ("GPO") member hospitals.
We believe that as healthcare providers continue to either consolidate or join major buying organizations, the success of our
products will depend, in part, on our ability, either independently or through strategic relationships to secure long-term
contracts with large healthcare providers and major buying organizations.
Seasonality/Quarterly Results
There are no significant seasonal aspects to our business. We can experience fluctuations in net sales as a result of
variations in the ordering patterns of our largest customers, which may be driven more by production scheduling and customer
inventory levels, and less by seasonality. Our expenses often do not fluctuate in the same manner as net sales, which may cause
fluctuations in operating income that are disproportionate to fluctuations in our revenue.
Non-GAAP Financial Measures
In addition to comparing changes in revenue on a U.S. GAAP basis, we also compare the changes in revenue from one
period to another using constant currency. The presentation of revenues on a constant currency basis is a non-GAAP financial
measure that excludes the impact of fluctuations in foreign currency exchange rates that occurred between the comparative
periods. We provide constant currency information to enhance the visibility of underlying business trends, excluding the effects
of changes in foreign currency translation rates. We believe this information is useful to investors to facilitate comparisons and
better identify trends in our business. Our constant currency revenues reflect current year local currency revenues at prior year's
average exchange rates. We consistently apply this approach to revenues for all currencies where the functional currency is not
the U.S. dollar. These results should be considered in addition to, not as a substitute for, results reported in accordance with
GAAP. Revenues on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by
other companies and are not measures of performance presented in accordance with GAAP.
Consumables
The following table summarizes our total Consumables revenue (in millions, except percentages):
Year Ended December 31,
$ change
% change
$ change
% change
2024
2023
2022
2024 over 2023
2023 over 2022
Consumables revenue (GAAP) $ 1,038.9
$ 969.1
$
975.0 $
69.8
7.2 % $
(5.9)
(0.6) %
Impact of foreign exchange rate
changes
2.8
$
4.0
Consumables revenue on a
constant currency basis (non-
GAAP)
$ 1,041.7
$ 973.1
$ Change in constant currency
$
72.6
$
(1.9)
% Change in constant currency
7.5 %
(0.2) %
44
Consumables revenue increased in 2024, as compared to 2023, primarily due to new customer installations and
increased demand for our Infusion Consumables, Vascular Access and Oncology product lines.
Consumables revenue decreased in 2023, as compared to 2022, primarily due to a decrease in our vascular access
revenues as a result of lost customers and backorder recovery in 2022. The revenue decrease was partially offset by an increase
in Infusion Therapy and Oncology revenues.
Infusion Systems
The following table summarizes our total Infusion Systems revenue (in millions, except percentages):
Year Ended December 31,
$ change
% change
$ change
% change
2024
2023
2022
2024 over 2023
2023 over 2022
Infusion Systems (GAAP)
$ 652.4
$ 629.0
$
617.4 $
23.4
3.7 % $
11.6
1.9 %
Impact of foreign exchange rate
changes
20.3
$
10.5
Infusion Systems on a constant
currency basis (non-GAAP)
$ 672.7
$ 639.5
$ Change in constant currency
$
43.7
$
22.1
% Change in constant currency
6.9 %
3.6 %
Infusion Systems revenue increased in 2024, as compared to 2023, primarily due to higher sales of our large volume
pump ("LVP") dedicated sets on a larger installed base, as well as growth in our ambulatory hardware and dedicated sets.
Infusion Systems revenue increased in 2023, as compared to 2022, primarily due to higher sales of our syringe pumps
and LVP dedicated sets.
Vital Care
The following table summarizes our total Vital Care revenue (in millions, except percentages):
Year Ended December 31,
$ change
% change
$ change
% change
2024
2023
2022
2024 over 2023
2023 over 2022
Vital Care (GAAP)
$ 690.7
$ 661.0
$
687.6 $
29.7
4.5 % $
(26.6)
(3.9) %
Impact of foreign exchange rate
changes
2.9
$
4.5
Vital Care on a constant currency
basis (non-GAAP)
$ 693.6
$ 665.5
$ Change in constant currency
$
32.6
$ (22.1)
% Change in constant currency
4.9 %
(3.2) %
Vital Care revenue increased in 2024, as compared to 2023, due to higher sales volume of IV Solutions primarily
driven by a market shortage of these products in the U.S. during the fourth quarter of 2024, as explained below.
During the third quarter of 2024, a competitor’s U.S. IV solutions manufacturing facility was damaged as a result of
Hurricane Helene causing a national shortage of IV solutions. In response, we actively increased production of our IV Solutions
product lines in anticipation of increased demand due to the temporary market shortage. We experienced increased demand for
our IV Solutions product lines in the fourth quarter of 2024 and may continue to see elevated demand in the near term given the
sustained market shortage until conditions normalize.
Vital Care revenue decreased in 2023, as compared to 2022, primarily due to lower sales volume of IV Solutions
which was impacted by supply disruptions related to finished good products purchased from third-party manufacturers and
lower sales volume for products acquired from Smiths Group plc ("Smiths") due to backorder recovery in 2022.
Gross Margins
Gross margins were 34.6%, 32.8% and 30.6% for 2024, 2023 and 2022, respectively.
45
The increase in gross margin in 2024, as compared to 2023, was primarily driven by lower supply chain costs due to
synergies and freight rates, price increases, reduced spend on quality remediation activities and the impact of foreign exchange
rate changes which was partially offset by lower manufacturing absorption and higher inventory write-offs.
The increase in gross margin in 2023, as compared to 2022, was primarily driven by lower freight costs, lower spend
on quality remediation and the cost recognition of a purchase accounting write-up of inventory in 2022, offset by continued
inflationary impacts on costs and stronger Mexican peso.
Selling, General and Administrative ("SG&A") Expenses
The following table summarizes our SG&A expenses (in millions, except percentages):
Year Ended December 31,
$ change
% change
$ change
% change
2024
2023
2022
2024 over 2023
2023 over 2022
SG&A
$
638.8 $
606.7 $
608.3 $
32.1
5.3 % $
(1.6)
(0.3) %
Consolidated SG&A expenses increased in 2024, as compared to 2023, primarily due to increases of $11.3 million in
compensation costs, $9.4 million in commissions, $5.6 million in stock based compensation and $5.2 million in dealer fees. The
increases were partially offset by decreases of $8.8 million in depreciation and amortization. Compensation costs increased
primarily due to an increase in cash incentive compensation and employee benefits. Commissions increased primarily due to
increased sales performance in the current period measured against preset sales targets as compared to sales performance
achieved against targets in the comparable prior year period. Stock based compensation primarily increased due to a change in
the probability of meeting a certain earning potential related to a performance based equity award. Dealer fees increased due to
an increase in revenues to distributors. Depreciation and amortization decreased in 2024 due to certain assets reaching the end
of their useful lives and certain assets classified as held for sale during the fourth quarter.
Consolidated SG&A expenses decreased slightly in 2023, as compared to 2022, primarily due to decreases of $7.5
million in depreciation and amortization, $4.8 million in dealer fees, $3.9 million of office expenses, and $2.6 million of IT
expenses. The overall decreases were mostly offset by increases of $7.8 million in compensation costs, $5.2 million in
commissions, $3.5 million in stock based compensation, and $1.3 million in sales and marketing expenses. Depreciation and
amortization decreased in 2023 as the trademark intangible recognized as part of the January 2022 Smiths Medical acquisition
had a useful life of six months and was fully amortized in 2022. Dealer fees decreased due to a decrease in revenues to
distributors. Office and IT expenses decreased based on current operating needs. Compensation costs increased primarily due to
an increase in cash incentive compensation and employee benefits. Commissions increased primarily due to sales performance
in 2023 measured against preset sales targets as compared to sales performance achieved against targets in the comparable 2022
period. Stock based compensation increased due to an increase in the fair value of amounts awarded in 2023 over the fair value
of the awards in 2022. Sales and marketing expenses increased due to an increase in trade show, conference, and related
expenses.
Research and Development ("R&D") Expenses
The following table summarizes our total R&D expenses (in millions, except percentages):
Year Ended December 31,
$ change
% change
$ change
% change
2024
2023
2022
2024 over 2023
2023 over 2022
R&D
$
88.6 $
85.3 $
93.0 $
3.3
3.9 % $
(7.7)
(8.3) %
R&D expenses increased in 2024, as compared to 2023, primarily due to higher headcount and employment expense in
support of ongoing R&D projects. R&D expenses generally include compensation and benefit expenses, consulting fees,
production supplies, samples, travel costs, utilities and other miscellaneous administrative costs incurred in our ongoing R&D
projects.
R&D expenses decreased in 2023, as compared to 2022, due to organizational synergies and project reprioritization as
a result as a result of the Smiths Medical acquisition. R&D expenses are primarily related to headcount and employment
expenses in support of ongoing R&D projects. R&D expenses generally include compensation and benefit expenses, consulting
46
fees, production supplies, samples, travel costs, utilities and other miscellaneous administrative costs incurred in our ongoing
R&D projects.
Restructuring, Strategic Transaction and Integration Expenses
Restructuring, strategic transaction and integration expenses were $59.8 million, $41.3 million and $71.4 million in
2024, 2023 and 2022, respectively.
Restructuring Charges
In 2024, we incurred restructuring charges of $19.6 million primarily related to severance costs.
In 2023, we incurred restructuring charges net of reversed accruals of $5.7 million primarily related to severance costs.
We reversed approximately $1.0 million in accrued restructuring balances related to severance and facility closure costs that
will not be utilized.
In 2022, we incurred restructuring charges of $9.7 million primarily related to severance costs.
Strategic Transaction and Integration Expenses
In 2024, we incurred $40.2 million in strategic transaction and integration expenses primarily related to consulting
expenses and employee costs incurred to integrate our Smiths Medical business acquired in 2022.
In 2023, we incurred $35.6 million in strategic transaction and integration expenses primarily related to consulting
expenses and employee costs incurred to integrate our Smiths Medical business acquired in 2022.
In 2022, we incurred $61.7 million in strategic transaction and integration expenses primarily related to our acquisition
of Smiths Medical, which included legal expenses, bank fees and employee costs, and a United Kingdom stamp tax.
Change in fair value of contingent earn-out
In 2024, the fair value revaluation of our contingent earn-outs resulted in a decrease in value of $5.4 million. This
decrease was related to the fair value revaluation of our Smiths Medical contingent earn-out liability and the fair value
revaluation of a contingent earn-out recognized in 2021 upon the acquisition of a small foreign infusion systems supplier. The
Smiths Medical contingent earn-out was adjusted to zero during 2024. As of December 31, 2024, Smiths had sold all of its
ownership interest in ICU Medical shares. Smiths no longer holds the shares necessary to meet the minimum beneficial
ownership percentage required to earn the contingent earn-out.
In 2023, the fair value revaluation of our contingent earn-outs resulted in a decrease in value of $16.2 million. This
decrease was primarily related to the fair value revaluation of our Smiths Medical contingent earn-out liability. The change in
fair value of the Smiths Medical contingent earn-out was driven by a decrease in our stock price.
Interest expense, net
The following table presents interest expense, net (in thousands):
Year ended December 31,
2024
2023
2022
Interest expense
$
(106,541) $
(102,727) $
(70,805)
Interest income
$
10,788 $
7,508 $
4,430
Interest expense, net
$
(95,753) $
(95,219) $
(66,375)
In 2024, 2023 and 2022, interest expense primarily includes the contractual interest incurred on borrowings under the
Credit Agreement, the per annum commitment fee charged on the available amount of the revolving credit facility contained in
the Credit Agreement, the amortization of debt issuance costs incurred in connection with entering into the Credit Agreement
(see Note 13: Long-Term Obligations in our accompanying consolidated financial statements) offset by the impact of the
interest rate swaps (see Note 9: Derivatives and Hedging in our accompanying consolidated financial statements). The interest
47
expense increased in 2024, as compared to 2023, primarily due to amortization of certain swaps. The interest expense increased
in 2023, as compared to 2022, primarily due to increases in the applicable SOFR reference rate.
Interest income in all years was related to interest earned on interest-bearing securities and cash holdings.
Other expense, net
The following table presents other expense, net (in thousands):
Year ended December 31,
2024
2023
2022
Foreign exchange losses, net
$
(9,792) $
(5,918) $
(5,780)
Loss on disposition of assets
(1,608)
(153)
(2,554)
Other miscellaneous (expense) income, net
(1,823)
166
3,198
Other expense, net
$
(13,223) $
(5,905) $
(5,136)
The foreign exchange losses in 2024 were primarily related to the strengthening of the U.S. dollar relative to certain
foreign currencies, including the Mexican peso and Argentine peso. The foreign exchange losses in 2023 were primarily related
to the devaluation of the Argentine peso during the fourth quarter of 2023.
In 2024, other miscellaneous (expense) income, net primarily includes $2.6 million in fees associated with our
accounts receivable purchase program with BMO Bank N.A. ("BMO") (see Note: 18 Accounts Receivable Purchase Program).
In 2023, other miscellaneous (expense) income, net primarily includes $3.7 million in fees related to our accounts receivable
purchase program (see Note 18: Accounts Receivable Purchase Program) mostly offset by a business interruption gain
recognized upon receipt of insurance proceeds. We received total insurance recoveries for property damage and business
interruption of $3.1 million, $2.6 million of which was related to insurance proceeds for business interruption included within
other miscellaneous (expense) income, net.
Income taxes
Income taxes were accrued at an estimated annual effective tax rate of (78)%, 62% and 35% in 2024, 2023 and 2022,
respectively.
The effective tax rate in 2024 differs from the federal statutory rate of 21% principally because of the effect of the mix
of U.S. and foreign income, foreign-derived intangible income (“FDII”), federal and state valuation allowance, tax reserve
releases, and tax credits. The effective tax rate in 2024 included a tax benefit of $10.1 million primarily related to unrecognized
tax benefits released as a result of the expiration of the statute of limitations offset by a tax expense of $81.7 million related to a
valuation allowance against certain U.S. federal and state deferred tax assets.
The Company regularly assesses the realizability of deferred tax assets and records a valuation allowance to reduce the
deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax
assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings,
scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the
weight of objectively verifiable negative evidence, the Company recorded a valuation allowance of $81.7 million tax expense
and $3.9 million foreign currency translation and derivative instrument adjustments against certain U.S. federal and state
deferred tax assets for the tax years ending December 31, 2024. The significant piece of objectively verifiable negative
evidence evaluated was the recent U.S. cumulative losses. Our ability to use our deferred tax assets depends on the amount of
taxable income in future periods.
In December 2022, the European Union (EU) agreed to implement Pillar Two, the OECD’s global minimum tax rate
of 15% for multinationals that meet a global revenue threshold. All of the EU countries and some of the non-EU countries in
which we operate have enacted or have announced plans to enact legislation to adopt Pillar Two. The Pillar Two legislation is
effective for our fiscal year beginning January 1, 2024 and for fiscal year 2024, Pillar 2 did not have a material impact to our
tax provision or effective tax rate. However, the Pillar Two rules continue to evolve and their application may alter our tax
obligations in certain countries in which we operate for fiscal periods beyond 2024 as we continue to assess the impact of tax
legislation in these jurisdictions.
48
The effective tax rate in 2023 differs from the federal statutory rate of 21% principally because of the effect of the mix
of U.S. and foreign income, state income taxes, section 162(m) excess compensation, foreign-derived intangible income
(“FDII”), and tax credits. The effective tax rate in 2023 included a tax benefit of $9.6 million primarily related to unrecognized
tax benefits released as a result of the expiration of the statute of limitations. The effective tax rate for 2023 also included a tax
benefit of $0.8 million related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock
units during the period. Additionally, the effective tax rate for 2023 included a tax benefit of $6.5 million related to U.S. federal
and state return-to-provision adjustments net of related tax reserves. The adjustments related to primarily to changes in
estimates for the research and development credit and foreign tax credits. Additionally, the effective tax rate 2023 included the
tax impact of the revaluation of contingent consideration of $16.2 million.
The effective tax rate in 2022 differs from the federal statutory rate of 21% principally because of the effect of the mix
of U.S. and foreign incomes, state income taxes, section 162(m) excess compensation, FDII, global intangible low-taxed
income ("GILTI") and tax credits. The effective tax rate during 2022 included a tax benefit of $4.2 million related to the excess
tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period. The effective tax
rate during 2022 also included a $0.0 million tax impact of the revaluation of contingent consideration of $6.8 million.
Liquidity and Capital Resources
We regularly evaluate our liquidity and capital resources, including our access to external capital, to assess our ability
to meet our principal cash requirements, which include working capital requirements, planned capital investments in our
business, commitments, acquisition restructuring and integration expenses, investments in quality systems and quality
compliance objectives, payment of interest expense, repayment of outstanding borrowings, income tax obligations and
acquisition opportunities in accordance with our growth strategy.
Sources of Liquidity
Our current primary sources of liquidity are cash and cash equivalents and cash flows from our operations including
access to borrowing arrangements.
Funds generated from operations are held in cash and cash equivalents and investment securities. During 2024, our
cash and cash equivalents and short-term investment securities increased by $53.8 million from $254.7 million at December 31,
2023 to $308.6 million at December 31, 2024. This increase was primarily due to cash generated from operations.
2022 Credit Facilities and Access to Capital
As discussed in Note 13: Long-Term Obligations to our accompanying consolidated financial statements, we entered
into the Credit Agreement with various lenders on January 6, 2022 in connection with the closing of the Smiths Medical
acquisition. The Credit Agreement provides for a five-year term loan A facility of $850.0 million (the "Term Loan A"), a seven-
year term loan B facility of $850.0 million (the "Term Loan B") and a five-year revolving credit facility of $500.0 million (the
"Revolving Credit Facility") (collectively, the "Senior Secured Credit Facilities"). The proceeds from the term loans were used
to finance a portion of the cash consideration for the Smiths Medical acquisition. The outstanding aggregate principal amount
of the term loans is $1.6 billion as of December 31, 2024, which includes the Term Loan A that will mature in January 2027
and the Term Loan B that will mature in January 2029. The proceeds of future borrowings under the Revolving Credit Facility,
which expires in January 2027, may be used as a source of liquidity to support our ongoing working capital requirements and
other general corporate purposes. There are no outstanding borrowings under the Revolving Credit Facility as of December 31,
2024. As part of entering into the Senior Secured Credit Facilities, we were assigned issuer and Term Loan B credit ratings. At
the date of issuance of this report, our issuer and Term Loan B credit ratings assigned and outlook were as follows:
Issuer/Term Loan B
Credit Ratings
Outlook
Moody's
B1/B1
Stable
Fitch
BB/BB+
Negative
Standard & Poor's
BB-/BB-
Negative
The Credit Agreement contains financial covenants that pertain to the Term Loan A and the Revolving Credit Facility.
Specifically, we were required to maintain a Senior Secured Leverage Ratio of no more than 4.50 to 1.00 until June 30, 2024,
with a stepdown to 4.00 to 1.00 thereafter, and an Interest Coverage Ratio of no less than 3.00 to 1.00 (defined and discussed in
49
greater detail in Note 13: Long-Term Obligations to our accompanying consolidated financial statements). We were in
compliance with these financial covenants as of December 31, 2024.
In January 2023, we entered into a receivables purchase agreement with Bank of the West, which was subsequently
acquired by BMO in February 2023. This agreement provides for an additional source of capital; however as of December 31,
2024, we are not currently utilizing this program (see Note 18: Accounts Receivable Purchase Program).
We believe that our existing cash and cash equivalents along with cash flows expected to be generated from future
operations and the funds received and accessible under the Senior Secured Credit Facilities will provide us with sufficient
liquidity to finance our cash requirements for the next twelve months and the foreseeable future. In the event that we experience
downturns, cyclical fluctuations in our business that are more severe or longer than anticipated, fail to achieve anticipated
revenue and expense levels, or have significant unplanned cash expenditures, we may need to obtain or seek alternative sources
of capital or financing, and we can provide no assurances that the terms of such capital or financing will be available to us on
favorable terms, if at all. Our ability to generate cash flows from operations, issue debt or enter into other financing
arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in
the solvency of our customers or suppliers, deterioration in our key financial ratios or credit ratings or other significantly
unfavorable changes in economic conditions. See Part I. Item 1A. Risk Factors for discussion of the risks and uncertainties
associated with our debt financing.
Uses of Liquidity
Capital Expenditures
Our capital expenditures relate to the expansion and maintenance of our business. While we can provide no assurances,
we estimate that our capital expenditures in 2025 will be in the range of $90 million to $110 million. We anticipate making
additional investments in machinery and equipment in our manufacturing operations in Costa Rica, Europe, Mexico and the
U.S. to support new and existing products and in infusion pumps that get placed with customers outside the U.S. We expect to
use our cash and cash equivalents to fund our capital expenditures. Amounts of spending are estimates and actual spending may
substantially differ from those amounts.
2022 Acquisitions
On January 6, 2022, we acquired Smiths Medical. We financed the $1.9 billion cash portion of the purchase price at
closing with a combination of proceeds from the Senior Secured Credit Facilities and our cash and cash equivalents. See Note
2: Acquisitions and Note 13: Long-Term Obligations in our accompanying consolidated financial statements for additional
information.
Contractual Obligations
Our principal commitments at December 31, 2024 include both short and long-term future obligations.
Operating Leases
We have non-cancelable operating lease agreements where we are contractually obligated for certain lease payment
amounts. For more information regarding our operating lease obligations, see Note 7: Leases in our accompanying consolidated
financial statements.
Long-term Debt Obligations
As discussed above, in January 2022, we incurred borrowings under Senior Secured Credit Facilities. The principal
repayment obligations and estimated interest payments on the term loans and estimated commitment fee payments on the
revolver are estimated in the table below. Interest payments on the term loans were estimated using an Adjusted Term SOFR
rate and an applicable margin on of 2.00% for term loan A and 2.50% for term loan B and the revolver commitment fees were
estimated using a rate of 0.30%. The applicable margin rate and commitment fee rate will change from time to time in
accordance with a preset pricing grid based on the leverage ratio (see Note 13: Long-Term Obligations in our accompanying
consolidated financial statements for pricing grids related to the Senior Secured Credit Facilities).
We expect to fund these obligations with our existing cash and cash equivalents and cash generated from our future
operations.
50
(in millions)
2025
2026
2027
2028
2029
Thereafter
Term Loan A Principal
Payments
$
42.5 $
63.8 $
664.1 $
— $
— $
—
Term Loan A Interest Payments
47.9
41.9
0.6
—
—
—
Term Loan B Principal Payments
8.5
8.5
8.5
8.5
792.6
—
Term Loan B Interest Payments
56.4
54.2
52.4
51.5
0.8
—
Revolver Commitment Fee
1.5
1.3
—
—
—
—
$
156.8 $
169.7 $
725.6 $
60.0 $
793.4 $
—
Other Future Capital Investments
In connection with the January 2022 acquisition of Smiths Medical, we estimate the investment needed in 2025 for
restructuring and integration expenses along with spending to support quality systems and quality compliance objectives to be
in the range of $90 million to $110 million, which includes acquired accrued field action liabilities. We expect to fund these
obligations with our cash and cash equivalents and cash generated from our operations.
Contingent Payments
In 2015, the Italy Medical Device Payback ("IMDP") was enacted in Italy,which requires medical device companies to
make payments to the Italian government if Italy's medical device expenditures for certain years exceeded annual regional
expenditure ceilings. Since its enactment, the legislation has been subject to appeals in the Italian court system. In the third
quarter of 2024, Italy's Constitutional Court issued two judgments, one of which confirmed the legitimacy of the IMDP.
However, litigation proceedings are still pending and the ultimate resolution remains unknown. As of December 31, 2024, we
have accrued $23.9 million for potential payments related to the IMDP, which is classified within our accrued liabilities. Given
the uncertainty regarding this legislation and its enforcement, the timing and amount of payments could ultimately differ from
our current expectations.
Historical Cash Flows
Cash Flows from Operating Activities
Our cash provided by operations was $204.0 million in 2024. The changes in operating assets and liabilities included a
$46.8 million increase in accounts receivable, a $23.2 million increase in other assets, and $8.8 million increase in prepaid
expenses and other current assets. Offsetting these amounts was a $20.7 million increase in accrued liabilities, a $16.8 million
decrease in inventories, a $12.5 million increase in accounts payable and $26.2 million in net changes in income taxes,
including excess tax benefits and deferred income taxes. The increase in accounts receivable was primarily due to the amount
and timing of revenues and we sold less receivables under our accounts receivable purchase program with BMO as we did not
utilize the program during the fourth quarter of 2024 (see Note 18: Accounts Receivable Purchase Program). The increase in
other assets was due to the purchase of spare parts. The increase in prepaid expenses and other current assets was primarily
attributable to deferred costs related to infusion pumps sold and insurance and property taxes. The net change in income taxes
was a result of recording the current deferred provision and the timing of payments. The primary drivers for the net increase in
accrued liabilities was primarily due to accrued employee costs, accrued restructuring costs and distributor rebates partially
offset by operating lease payments. The decrease in inventory was primarily due to our focus on reducing inventory levels.
Our cash provided by operations was $166.2 million in 2023. The changes in operating assets and liabilities included a
$48.6 million decrease in accounts receivable and a $11.7 million decrease in prepaid expenses and other current assets.
Offsetting these amounts was a $6.1 million increase in inventories, a $68.3 million decrease in accounts payable, a $24.7
million increase in other assets, a $14.5 million decrease in accrued liabilities, and $82.4 million in net changes in income taxes,
including excess tax benefits and deferred income taxes. The decrease in accounts receivable was primarily due to the sale of
accounts receivable as part of our accounts receivable purchase program with BMO (see Note 18: Accounts Receivable
Purchase Program). The decrease in prepaid expenses and other current assets was primarily attributable to insurance, property
taxes, and prepaid vendor expenses. The increase in inventory was primarily to build inventory safety stock levels. The
decrease in accounts payable was due to the timing of payments. The increase in other assets was due to the purchase of spare
parts. The primary drivers for the net decrease in accrued liabilities was primarily due to payments for field corrective actions,
51
operating lease liabilities and distributor rebates as well as a decrease in deferred revenue offset partially by increases in
accrued employee costs. The net changes in income taxes was a result of recording the current deferred provision and the timing
of payments.
Our cash used by operations was $(62.1) million in 2022. The changes in operating assets and liabilities included a
$201.1 million increase in inventories, a $21.3 million increase in other assets, a $55.8 million decrease in accrued liabilities,
$66.7 million in net changes in income taxes, including excess tax benefits and deferred income taxes, and a $19.2 million
increase in accounts receivable. Offsetting these amounts was a $22.9 million decrease in prepaid expenses and other current
assets and a $37.5 million increase in accounts payable. The increase in inventory was primarily to build inventory safety stock
levels. The increase in other assets was due to the purchase of spare parts. The primary drivers for the net decrease in accrued
liabilities was primarily due to the payout of annual bonuses and decrease in deferred revenue. The net changes in income taxes
was a result of recording the current deferred provision and the timing of payments. The increase in accounts receivable was
primarily due to the net impact of collection efforts and the timing of revenue. The net decrease in prepaid expenses and other
current assets was primarily due to a decrease in deferred costs mostly offset by capitalized debt issuance costs allocated to the
revolving credit facility. The increase in accounts payable was due to the timing of payments.
Cash Flows from Investing Activities
The following table summarizes the changes in our investing cash flows (in thousands):
For the Years Ended December 31,
Variance
2024
2023
2022
2024
2023
Investing Cash Flows:
Purchases of property, plant and equipment
$ (79,373) $
(83,893) $
(90,311) $
4,520 $
6,418 (1)
Proceeds from sale of assets
746
1,501
989
(755)
512
Intangible asset additions
(10,833)
(9,777)
(9,018)
(1,056)
(759)
Business acquisitions, net of cash acquired
—
— (1,844,164)
—
1,844,164 (2)
Purchases of investment securities
—
—
(3,397)
—
3,397 (3)
Proceeds from sale of investment securities
500
4,222
36,433
(3,722)
(32,211) (4)
Net cash used in investing activities
$ (88,960) $
(87,947) $ (1,909,468) $
(1,013) $ 1,821,521
__________________________
(1)
Our purchases of property, plant and equipment will vary from period to period based on additional investments needed to
support new and existing products and expansion of our manufacturing facilities.
(2)
Our business acquisitions will vary from period to period based upon our current growth strategy and our ability to execute
on desirable target companies. In 2022, we acquired Smiths Medical. The cash consideration for the transaction was $1.9
billion, which was financed with existing cash balances and borrowings under the Credit Agreement. Acquired cash was
$78.8 million.
(3)
Our purchases of investment securities will vary from period to period based on current cash needs, planning for known
future transactions and changes in our investment strategy. Our investment policy allows for the purchase of securities with
final maturities in excess of one year. If cash is not needed for known future transactions our investment strategy takes
advantage of the long-term securities with higher yields. Typically, our longer term securities have maturities up to three
years.
(4)
Proceeds from the sale of our investment securities will vary based on the maturity dates of the investments. In 2022,
proceeds from sale of investment securities includes $19.0 million received from a promissory note related to an acquired
investment as part of the Smiths Medical acquisition.
Cash Flows from Financing Activities
The following table summarizes the changes in our financing cash flows (in thousands):
52
For the Years Ended December 31,
Variance
2024
2023
2022
2024
2023
Financing Cash Flows:
Proceeds from issuance of long-term debt, net of
lender debt issuance costs
$
— $
— $ 1,664,362 $
— $ (1,664,362) (1)
Principal payments on long-term debt
(51,000)
(29,688)
(22,375)
(21,312)
(7,313) (2)
Payment of third-party debt issuance costs
—
—
(2,177)
—
2,177 (3)
Proceeds from exercise of stock options
10,939
4,022
8,785
6,917
(4,763) (4)
Payments on finance leases
(1,147)
(963)
(680)
(184)
(283)
Payment of contingent earn-out
(2,600)
—
—
(2,600)
— (5)
Tax withholding payments related to net share
settlement of equity awards
(11,992)
(9,350)
(10,883)
(2,642)
1,533 (6)
Net cash (used in) provided by financing activities
$ (55,800) $ (35,979) $ 1,637,032 $
(19,821) $ (1,673,011)
__________________________
(1)
During 2022, we borrowed an aggregate of $1.7 billion under the Senior Secured Credit Facilities contained in the Credit
Agreement to partially finance our acquisition of Smiths Medical (see Note 13: Long-Term Obligations to our
accompanying consolidated financial statements for additional information). The proceeds are net of $37.8 million in
payments of lender debt issuance costs.
(2)
Relates to scheduled principal payments on the Senior Secured Credit Facilities.
(3)
Relates to third-party debt issuance costs in connection with entering into the Senior Secured Credit Facilities.
(4) Proceeds from the exercise of stock options will vary from period to period based on the volume of options exercised and
the exercise price of the specific options exercised.
(5) During the first quarter of 2024, we paid $3.4 million in cash related to the settlement of the Mediverse contingent earn-out.
Of the $3.4 million, the amount recorded as the acquisition date fair value, which is considered financing cash flows, was
$2.6 million (see Note 10: Fair Value Measurements).
(6)
In 2024, our employees surrendered 114,787 shares of our common stock from vested restricted stock awards as
consideration for approximately $12.0 million in minimum statutory withholding obligations paid on their behalf. In 2023,
our employees surrendered 59,377 shares of our common stock from vested restricted stock awards as consideration for
approximately $9.4 million in minimum statutory withholding obligations paid on their behalf. In 2022, our employees
surrendered 47,664 shares of our common stock from vested restricted stock awards as consideration for approximately
$10.9 million in minimum statutory withholding obligations paid on their behalf.
Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was
approved by our Board of Directors in August 2019. This plan has no expiration date. As of December 31, 2024, all of the
$100.0 million available for purchase was remaining under the plan. We are limited on share purchases in accordance with the
terms and conditions of our Credit Agreement (see Note 13: Long-Term Obligations in our accompanying consolidated
financial statements).
New Accounting Pronouncements
See Note 1: Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements in Part
II, Item 8 of this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements. In preparing
our consolidated financial statements in accordance with GAAP and pursuant to the rules and regulations of the SEC, we make
estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related
disclosures of contingent assets and liabilities. We base our estimates, assumptions and judgments on historical experience and
other factors that we believe are reasonable. We evaluate our estimates, assumptions and judgments on a regular basis and apply
our accounting policies on a consistent basis. We believe that the estimates, assumptions and judgments involved in the
accounting for revenue recognition, accounts receivable, and business combinations have the most potential impact on our
consolidated financial statements. Historically, our estimates, assumptions and judgments relative to our critical accounting
policies have not differed materially from actual results.
53
Revenue recognition
We recognize revenues when we transfer control of promised goods to our customers, which for the majority of our
sales of products sold on a standalone basis to our distributors and end customers for direct sales, is deemed to be at point of
shipment. Our software license renewals are considered to be transferred to a customer at a point in time at the start of each
renewal period; therefore, revenue is recognized at that time.
Payment is typically due in full within 30 days of delivery or the start of the contract term. Revenue is recorded in an
amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We include variable
consideration in net sales only to the extent that a significant reversal in revenue is not probable when the uncertainty is
resolved.
Our variable consideration includes distributor chargebacks, product returns and end customer rebates, with distributor
chargebacks representing the majority and subject to the greatest judgment.
Chargebacks are the difference between the prices we charge our distribution customers at the time they purchase our
products and the contracted prices we have with the end customer, most often in the U.S. and Canada. When a distributor sells
our products to one of our contracted end customers, the distributor typically will claim a refund from us for the chargeback
amount which we process as a credit to the distributor.
In estimating the transaction price to present as net revenue for sales to distributors, we must estimate the expected
chargeback amount that we will refund to the distributor after they sell our product to a contracted end customer. Determining
the appropriate chargeback reserve requires judgment around the following assumptions:
(i) The estimated chargeback amount (the difference between the price we invoice the distributor and the contractually
agreed price with specified end customers); and
(ii) The estimated period of time between the sale to the distributor and the receipt of a chargeback claim.
For purposes of estimating the expected chargeback amount, we utilize actual recent historical chargebacks paid to the
specific distributor for similar products as determined at either a product or product-family level. While individual chargeback
rates can vary significantly depending on the product and contracted prices with distributors and end customers, our chargeback
reserve estimate is not overly sensitive to those individual price changes due to the long-term nature of our distributor and end
customer contracts as well as consistency in purchasing patterns. Additionally, the use of the actual chargeback history to
calculate an average chargeback rate has historically resulted in a reasonable estimation of overall current contract rates.
For purposes of estimating the period of time between the sale to the distributor and the receipt of a chargeback claim,
we utilize several sources of information including actual inventory quantities of our products on hand at distributors. This
inventory on hand information is received from the distributors or, when specific quantities are not provided, estimated by using
the targeted days of inventory on hand for distributors. Historical experience of actual chargebacks paid has indicated that use
of this information has reasonable predictive value of outstanding chargebacks and accounts for the variability of purchasing
patterns and expected timing and volume of sales to end customers. The value of the chargeback reserve generally represents
approximately two months of obligation due to the timing difference between the initial sale to a distributor and the processing
of a chargeback claim after the product is sold to the end customer.
The chargeback reserve estimates change from period-to-period primarily based on changes in revenue from/and the
inventory levels of distributors. Our judgments regarding the information used to calculate the chargeback reserve are consistent
from period to period; however, on a regular basis, we evaluate the adequacy of the chargeback reserve to reassess and ensure
that the variable consideration is appropriately constrained, and the likelihood of future revenue reversal is not probable. We
use metrics including chargeback provision as a percentage of gross revenue, movements in inventory on hand at distributors,
trends in accrued versus paid chargebacks and impacts from price changes and similar metrics.
The chargeback reserve reflects a reasonable estimate of the amount of consideration using the expected value method
and is recorded as a reduction of accounts receivable, net on the consolidated balance sheets.
We also offer certain volume-based rebates to both our distribution and end-customers, which we record as variable
consideration when calculating the transaction price. Rebates are offered on both a fixed and tiered/variable basis. In both cases,
54
we use information available at the time, including current contractual requirements, our historical experience with each
customer and forecasted customer purchasing patterns, to estimate the most likely rebate amount.
We also warrant products against defects and have a policy permitting the return of defective products, for which we
accrue and expense at the time of sale using information available and our historical experience.
Accounts receivable
Accounts receivable are stated at net realizable value. Our accounts receivable are recorded net of reserves including
distributor chargebacks, estimated rebates and allowance for doubtful accounts. See above for significant judgments related to
distributor chargebacks and rebates. An allowance is provided for estimated collection losses based on an analysis of the age of
the receivable, on specific past due accounts for which we consider collection to be doubtful and based on current receivables
where known economic conditions specific to individual significant customers may indicate collection is doubtful. We rely on
prior payment trends, financial status and other factors to estimate the cash which ultimately will be received. Such amounts
cannot be known with certainty at the financial statement date. We regularly review individual past due balances for
collectability. We also have credit exposure with international customers for whom normal payment terms are long in
comparison to those of our other customers and with domestic distributors. If actual collection losses exceed expectations, we
could be required to accrue additional bad debt expense, which could have an adverse effect on our operating results in the
period in which the accrual occurs.
Business Combinations
The application of the acquisition method of accounting for business combinations requires the use of significant
estimates, assumptions and judgments in the determination of the estimated fair value of assets acquired and liabilities assumed
in order to properly allocate the purchase price at the acquisition date.
Although we believe the estimates, assumptions and judgments we have made are reasonable, they are based in part on
historical experience, industry data, information obtained from the management of the acquired companies and assistance from
independent third-party appraisal/valuation firms, and are inherently uncertain.
Examples of critical estimates in valuing certain of the tangible and intangible assets we have acquired, and certain
liabilities assumed include but are not limited to:
•
Inventories - we used the comparative sales method, which estimates the selling price of finished goods and work-in-
progress inventory, reduced by estimated costs expected to be incurred in selling the inventory and a profit on those
costs. The fair value of inventory is recognized in our statements of operations as the inventory is sold. Based on
internal forecasts and estimates of inventory turnover, acquisition date inventory is sold and recognized in cost of
goods sold over an estimated period of six months after the acquisition date.
•
Property, Plant and Equipment - the fair value estimate of acquired property, plant and equipment is determined based
upon the nature of the asset using either the cost approach, the sales comparison approach or the income capitalization
approach. The cost approach measures the value of an asset by estimating the cost to acquire or reproduce comparable
assets. The sales comparison approach measures the value of an asset through an analysis of comparable property
sales. The income approach values the asset based on its earnings potential. The fair value of land was estimated using
a sales comparison approach. Land and building improvements were valued using the cost approach. Personal
property assets, such as, leasehold improvements, tooling, laboratory equipment, furniture and fixtures, and equipment,
computer hardware, computer software, dies and molds were all valued using the cost approach. Transportation
equipment and major manufacturing and equipment were valued using the sales comparison method. Construction-in-
progress assets were valued based on the cost approach less adjustments for the nature of the assets. The fair value of
property, plant and equipment will be recognized in our statements of operations over the expected useful life of the
individual depreciable assets.
•
Identifiable Intangible Assets - The fair value of the significant acquired identifiable intangible assets generally is
determined using varying methods under the income approach. This method starts with a forecast of all of the expected
future net cash flows associated with the asset and then adjusts the forecast to present value by applying an appropriate
discount rate that reflects the risk factors associated with the cash flow streams. Other critical estimates used to
estimate the fair value are derived from royalty rates, customer retention rates and/or estimated useful lives.
55
•
Contingent Earn-out Liability - The fair value of the earn-out liabilities were valued using a Monte Carlo simulation
and a probability-weighted cash flow model, as appropriate (see Note 10: Fair Value Measurements to the consolidated
financial statements in Part II, Item 8 of this Annual Report on Form 10-K for details).
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions,
estimates or actual results.
56
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
In connection with the Smiths Medical acquisition on January 6, 2022 we entered into the Senior Secured Credit
Facilities totaling approximately $2.2 billion consisting of a variable-rate term loan A facility of $850.0 million, a variable-rate
term loan B facility of $850.0 million and a revolving credit facility of $500.0 million. We are exposed to changes in interest
rates on all of these variable-rate debt instruments.
The term loan A facility currently bears interest based on Adjusted Term SOFR plus an applicable margin of 2.00%
per year. The term loan B facility currently bears interest based on Adjusted Term SOFR subject to a 0.50% floor plus an
applicable margin of 2.50%. We used a sensitivity analysis to measure our interest rate risk exposure. If the SOFR rate
increases or decreases 1% from December 31, 2024, the additional annual interest expense or savings related to the term loans
would be approximately $16.0 million.
In order to mitigate and offset a portion of this interest rate risk exposure associated with these debt instruments we
entered into interest rate swaps to achieve a targeted mix of fixed and variable-rate debt. The term loan A swap has an initial
notional amount of $300.0 million, reducing to $150.0 million evenly on a quarterly basis through its final maturity on March
30, 2027 and we pay a fixed rate of 1.32% and receive the greater of 3-month USD SOFR or (0.15)%. The term loan B swap
has an initial notional amount of $750.0 million, reducing to $46.9 million evenly on a quarterly basis through its final maturity
on March 30, 2026 and we pay a fixed rate of 1.17% and receive the greater of 3-month USD SOFR or 0.35%. In June 2023,
we entered into an additional swap with a notional amount of $300.0 million with a maturity date of June 30, 2028 and we pay a
fixed rate of 3.8765% starting on June 30, 2023 and receive 3-month USD SOFR. (see Note 9: Derivatives and Hedging
Activities to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K).
Accounts Receivable Purchase Program
Additionally, our accounts receivable purchase program with BMO bears discount rates tied to SOFR. These variable
discount rates would affect the amount of factoring costs we incur, and the amount of cash we receive upon the sales of
accounts receivable under this program. A 1% change in SOFR rates on the accounts receivable sales would not have a material
impact on our results of operations, (see Note 18: Accounts Receivable Purchase Program to the Consolidated Financial
Statements in Part II, Item 8. Of this Annual Report on Form 10-K).
Foreign Exchange Risk
We transact business globally in multiple currencies, some of which are considered volatile. Our international revenues
and expenses and working capital positions denominated in these foreign currencies expose us to the risk of fluctuations in
foreign currency exchange rates against the U.S. dollar. As the receiver of foreign currencies we are adversely affected by the
strengthening of the U.S. dollar and other currencies relative to the operating unit functional currency. Our hedging policy
attempts to manage these risks to an acceptable level. We manage our foreign currency exposures on a consolidated basis to
take advantage of net exposures and natural offsets, which are then further reduced by the gains and losses of our hedging
instruments. Gains and losses on the hedging instruments offset gains and losses on the hedged forecasted transactions and
reduce the earnings volatility related to foreign exchange, however we do not hedge our entire foreign exchange exposure and
are still subject to potentially significant earnings volatility due to foreign exchange risk.
We use foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated
revenues and expenses (principally Mexican Pesos, Euros, Czech Koruna, Japanese Yen, Swedish Krona, Danish Krone,
Chinese Renminbi, Canadian Dollar, U.S. Dollar, and Australian Dollar) that differ from the functional currency of the
operating unit. These derivative contracts are designated and qualify as cash flow hedges (see Note 9: Derivatives and Hedging
Activities to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). We performed a
sensitivity analysis to estimate changes in the fair value of our foreign exchange derivatives due to potential changes in near-
term foreign exchange rates. At December 31, 2024, the effect of a hypothetical 10% weakening in the actual foreign exchange
rates used for the applicable currencies would result in an estimated decrease in the fair value of these outstanding derivatives
contracts by approximately $5.4 million. The sensitivity analysis recalculates the fair value of the exchange contracts
outstanding at December 31, 2024 using the actual forward rates at December 31, 2024, which are then adjusted to be 10%
weaker for each respective currency.
57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page No.
Reports of Independent Registered Public Accounting Firm
59
Consolidated Balance Sheets as of December 31, 2024 and 2023
62
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023 and 2022
63
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2024, 2023 and
2022
64
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 2023 and
2022
65
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
66
Notes to Consolidated Financial Statements
68
Schedule II-Valuation and Qualifying Accounts
121
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of ICU Medical, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ICU Medical, Inc. and subsidiaries (the "Company") as of
December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and
cash flows, for each of the three years in the period ended December 31, 2024, and the related notes and the schedule listed in
the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting
principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 27, 2025, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Revenue Recognition – Chargeback Reserve — Refer to Notes 1 and 5 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue and the related accounts receivable for product sales, net of a reserve for estimated
chargebacks. Chargebacks are the difference between prices the Company charges distribution customers and contracted prices
the Company has with the end-customer which are processed as credits to the distribution customers.
Chargebacks are accounted for as variable consideration when determining the transaction price for purposes of recognizing
revenue. Variable consideration is included in net sales only to the extent that a significant reversal in revenue is not probable
when the uncertainty is resolved. The Company estimates and reserves for chargebacks as a reduction of revenue and the
related accounts receivable at the time of sale to its distribution customers using information available at that time, including
historical experience.
59
Given the subjectivity and complexity of evaluating management’s assumptions used in the determination of the chargeback
reserve, including the estimated chargeback amount for sales to distribution customers and the time to settle chargeback
obligations, auditing the chargeback reserve requires 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 the chargeback reserve included the following, among others:
•
We tested the effectiveness of certain controls related to management's assessment of assumptions related to estimating
the provision for chargeback reserves, the provisioning, processing, and monitoring of chargeback transactions, and
the reconciliation of chargeback reserves.
•
We tested chargeback estimates for purposes of determining whether revenues recognized at the time of sale were
recorded in the proper period.
•
We evaluated the methods and assumptions used by management to estimate the chargeback reserve by:
–
Analyzing trends in the chargeback provision as a percent of revenues and the chargeback reserve as a percent
of revenues.
–
Testing the underlying data, including historical sales to distribution customers, chargeback settlements with
distribution customers, and inventory days on hand reported from distributors, that are utilized as the basis for
the chargeback reserve, to test whether the inputs to the estimate were reasonable.
–
Developing an expectation of the chargeback reserve based on monthly sales to distribution customers,
historical experience, and the time to settle chargeback obligations, and comparing our expectation to the
amount recorded by management.
–
Performing retrospective reviews comparing management's estimates of expected chargeback reserves to
actual amounts incurred subsequent to the dates of estimation, to assess management's ability to reasonably
estimate these obligations and to identify potential bias in management's assessment of the reserve.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
February 27, 2025
We have served as the Company's auditor since 2008
60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of ICU Medical, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of ICU Medical, Inc. and subsidiaries (the “Company”) as of
December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our
report dated February 27, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
February 27, 2025
61
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value data and treasury shares)
December 31,
2024
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
308,566 $
254,222
Short-term investment securities
—
501
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT
SECURITIES
308,566
254,723
Accounts receivable, net of allowance of $12,977 and $11,064 at December 31, 2024 and
2023, respectively
182,828
161,566
Inventories
584,676
709,360
Prepaid income taxes
11,244
21,983
Prepaid expenses and other current assets
70,287
73,640
Assets held for sale
284,382
—
TOTAL CURRENT ASSETS
1,441,983
1,221,272
PROPERTY, PLANT AND EQUIPMENT, net
442,746
612,909
OPERATING LEASE RIGHT-OF-USE ASSETS
53,295
69,909
GOODWILL
1,432,772
1,472,446
INTANGIBLE ASSETS, net
740,789
870,588
DEFERRED INCOME TAXES
24,211
37,295
OTHER ASSETS
68,135
94,020
TOTAL ASSETS
$
4,203,931 $
4,378,439
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
148,020 $
150,030
Accrued liabilities
306,923
268,215
Current portion of long-term debt
51,000
51,000
Income tax payable
17,328
7,714
Contingent earn-out liability
—
4,879
Liabilities held for sale
32,911
—
TOTAL CURRENT LIABILITIES
556,182
481,838
CONTINGENT EARN-OUT LIABILITY
—
3,991
LONG-TERM DEBT
1,531,858
1,577,770
OTHER LONG-TERM LIABILITIES
66,745
100,497
DEFERRED INCOME TAXES
48,814
55,873
INCOME TAX LIABILITY
35,097
35,060
COMMITMENTS AND CONTINGENCIES (Note 16)
—
—
STOCKHOLDERS’ EQUITY:
Convertible preferred stock, $1.00 par value; Authorized—500 shares; Issued and
outstanding— none
—
—
Common stock, $0.10 par value; Authorized—80,000 shares; Issued—24,518 and 24,144
shares at December 31, 2024 and 2023, respectively, and outstanding—24,517 and 24,141
shares at December 31, 2024 and 2023, respectively
2,452
2,414
Additional paid-in capital
1,412,118
1,366,493
Treasury stock, at cost (571 and 2,428 shares, respectively)
(92)
(262)
Retained earnings
690,158
807,846
Accumulated other comprehensive loss
(139,401)
(53,081)
TOTAL STOCKHOLDERS' EQUITY
1,965,235
2,123,410
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
4,203,931 $
4,378,439
The accompanying notes are an integral part of these consolidated financial statements.
62
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Year ended December 31,
2024
2023
2022
TOTAL REVENUES
$
2,382,046 $
2,259,126 $
2,279,997
COST OF GOODS SOLD
1,557,264
1,519,253
1,582,236
GROSS PROFIT
824,782
739,873
697,761
OPERATING EXPENSES:
Selling, general and administrative
638,762
606,693
608,345
Research and development
88,615
85,344
92,984
Restructuring, strategic transaction and integration
59,840
41,258
71,421
Change in fair value of contingent earn-out
(5,399)
(16,247)
(32,091)
TOTAL OPERATING EXPENSES
781,818
717,048
740,659
INCOME (LOSS) FROM OPERATIONS
42,964
22,825
(42,898)
INTEREST EXPENSE, NET
(95,753)
(95,219)
(66,375)
OTHER EXPENSE, NET
(13,223)
(5,905)
(5,136)
LOSS BEFORE INCOME TAXES
(66,012)
(78,299)
(114,409)
(PROVISION) BENEFIT FOR INCOME TAXES
(51,676)
48,644
40,123
NET LOSS
$
(117,688) $
(29,655) $
(74,286)
NET LOSS PER SHARE
Basic
$
(4.83) $
(1.23) $
(3.11)
Diluted
$
(4.83) $
(1.23) $
(3.11)
WEIGHTED AVERAGE NUMBER OF SHARES
Basic
24,388
24,091
23,868
Diluted
24,388
24,091
23,868
The accompanying notes are an integral part of these consolidated financial statements.
63
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
Year ended December 31,
2024
2023
2022
NET LOSS
$
(117,688) $
(29,655) $
(74,286)
Other comprehensive loss, net of tax:
Cash flow hedge adjustments, net of tax of $0, $(5,951) and $12,941 for the
years ended December 31, 2024, 2023 and 2022, respectively
(16,162)
(18,895)
41,016
Foreign currency translation adjustment, net of tax of $0 for all periods
(70,158)
46,189
(103,928)
Other adjustments, net of tax of $0 for all periods
—
603
1,203
Other comprehensive (loss) income, net of tax
(86,320)
27,897
(61,709)
COMPREHENSIVE LOSS
$
(204,008) $
(1,758) $
(135,995)
The accompanying notes are an integral part of these consolidated financial statements.
64
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
Common Stock
Additional
Paid-In
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Total
Shares
Amount
Balance, January 1, 2022
21,280
$ 2,128
$
721,412
$
(27) $
911,787
$
(19,269) $ 1,616,031
Issuance of restricted stock and exercise of stock options
263
21
(1,903)
10,667
—
—
8,785
Tax withholding payments related to net share settlement of equity awards
(48)
—
—
(10,883)
—
—
(10,883)
Issuance of common stock for acquisitions
2,500
250
575,725
—
—
—
575,975
Stock compensation
—
—
36,025
—
—
—
36,025
Other comprehensive loss, net of tax
—
—
(10)
—
—
(61,709)
(61,719)
Net loss
—
—
—
—
(74,286)
—
(74,286)
Balance, December 31, 2022
23,995
2,399
1,331,249
(243)
837,501
(80,978)
2,089,928
Issuance of restricted stock and exercise of stock options
208
15
(5,324)
9,331
—
—
4,022
Tax withholding payments related to net share settlement of equity awards
(59)
—
—
(9,350)
—
—
(9,350)
Stock compensation
—
—
40,563
—
—
—
40,563
Other comprehensive income, net of tax
—
—
5
—
—
27,897
27,902
Net loss
—
—
—
—
(29,655)
—
(29,655)
Balance, December 31, 2023
24,144
2,414
1,366,493
(262)
807,846
(53,081)
2,123,410
Issuance of restricted stock and exercise of stock options
489
38
(1,261)
12,162
—
—
10,939
Tax withholding payments related to net share settlement of equity awards
(115)
—
—
(11,992)
—
—
(11,992)
Stock compensation
—
—
46,883
—
—
—
46,883
Other comprehensive loss, net of tax
—
—
3
—
—
(86,320)
(86,317)
Net loss
—
—
—
—
(117,688)
—
(117,688)
Balance, December 31, 2024
24,518
$ 2,452
$
1,412,118
$
(92) $
690,158
$
(139,401) $ 1,965,235
The accompanying notes are an integral part of these consolidated financial statements.
65
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year ended December 31,
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss
$
(117,688) $
(29,655) $
(74,286)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
219,512
228,774
235,151
Noncash expense for inventory step-up
—
—
26,519
Noncash lease expense
21,344
21,910
23,651
Provision for doubtful accounts
5,800
838
1,036
Provision for warranty and returns
1,130
21,582
4,902
Stock compensation
46,883
40,563
36,025
Loss on disposal or write-off of property, plant and equipment
2,522
2,109
2,010
Debt issuance cost amortization
6,807
6,814
6,972
Change in fair value of contingent earn-out
(5,399)
(16,247)
(32,091)
Usage of spare parts
18,298
17,050
11,924
Other
7,393
8,066
(213)
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable
(46,844)
48,635
(19,151)
Inventories
16,829
(6,079)
(201,095)
Prepaid expenses and other current assets
(8,829)
11,672
22,903
Other assets
(23,154)
(24,695)
(21,290)
Accounts payable
12,531
(68,301)
37,472
Accrued liabilities
20,668
(14,479)
(55,834)
Income taxes, including excess tax benefits and deferred income taxes
26,230
(82,356)
(66,734)
Net cash provided by (used in) operating activities
204,033
166,201
(62,129)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment
(79,373)
(83,893)
(90,311)
Proceeds from sale of assets
746
1,501
989
Intangible asset additions
(10,833)
(9,777)
(9,018)
Business acquisitions, net of cash acquired
—
—
(1,844,164)
Purchases of investment securities
—
—
(3,397)
Proceeds from sale of investment securities
500
4,222
36,433
Net cash used in investing activities
(88,960)
(87,947)
(1,909,468)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of lender debt issuance costs
—
—
1,664,362
Principal repayments of long-term debt
(51,000)
(29,688)
(22,375)
Payment of third-party debt issuance costs
—
—
(2,177)
Proceeds from exercise of stock options
10,939
4,022
8,785
Payments on finance leases
(1,147)
(963)
(680)
Payment of contingent earn-out
(2,600)
—
—
Tax withholding payments related to net share settlement of equity awards
(11,992)
(9,350)
(10,883)
Net cash (used in) provided by financing activities
(55,800)
(35,979)
1,637,032
Effect of exchange rate changes on cash
(4,929)
3,163
(9,478)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
54,344
45,438
(344,043)
CASH AND CASH EQUIVALENTS, beginning of period
254,222
208,784
552,827
CASH AND CASH EQUIVALENTS, end of period
$
308,566
$
254,222
$
208,784
The accompanying notes are an integral part of these consolidated financial statements.
66
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Amounts in thousands)
Year ended December 31,
2024
2023
2022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for income taxes
$
25,253
$
35,809
$
27,504
Cash paid during the year for interest
$
99,717
$
95,913
$
63,713
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Accounts payable for property, plant and equipment
$
7,443
$
6,570
$
4,854
Detail of assets acquired and liabilities assumed in acquisitions:
Fair value of assets acquired
$
1,606,300
Cash paid for acquisitions, net of cash acquired
(1,844,164)
Issuance of common stock for acquisitions
(575,975)
Contingent consideration
(55,158)
Goodwill, acquired/adjusted during period
1,462,752
Liabilities assumed/Adjustments to liabilities assumed
$
593,755
The accompanying notes are an integral part of these consolidated financial statements.
67
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
ICU Medical, Inc. ("ICU" or "we"), a Delaware corporation, develops, manufactures and sells innovative medical
products used in infusion therapy, vascular access, and vital care applications. ICU's product portfolio includes ambulatory,
syringe, and large volume IV pumps and safety software; dedicated and non-dedicated IV sets, needlefree IV connectors,
peripheral IV catheters, and sterile IV solutions; closed system transfer devices and pharmacy compounding systems; as well as
a range of respiratory, anesthesia, patient monitoring, and temperature management products.
We sell the majority of our products globally through our direct sales force and through independent distributors
throughout the U.S. and internationally. We also sell certain products on an original equipment manufacturer basis to other
medical device manufacturers.
Basis of Presentation
All subsidiaries are wholly owned and are included in the consolidated financial statements. All intercompany
balances and transactions have been eliminated. Results of operations of companies purchased are included from the dates of
acquisition.
The consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for
fair financial statement presentation. These consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the U.S. ("GAAP").
Certain reclassifications have been made to the prior year financial statements and footnotes to conform to the
presentation used in the current year. In the consolidated statements of cash flows, we reclassified bond premium amortization
to other. The reclassification had no impact on cash flows from operating activities as previously reported. In Note 14: Income
Taxes, we reclassified certain provision (benefit) for income taxes and tax asset categories. These reclassifications had no
impact on the consolidated statement of operations and consolidated balance sheets.
Segment Reporting
We operate as a single operating and reportable segment. Our Chief Operating Decision Maker ("CODM"), the Chief
Executive Officer, reviews financial information presented on a consolidated basis for purposes of allocating resources and
assessing performance. See Note 6: Segment Data.
Use of Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and
have original maturities of three months or less from the date of purchase.
Accounts Receivable
Accounts receivable are stated at net realizable value. An allowance is provided for estimated collection losses based
on an assessment of various factors. We consider prior payment trends, the age of the accounts receivable balances, the
financial status of our customers and other factors to estimate the cash which ultimately will be received. Such amounts cannot
be known with certainty at the financial statement date. We regularly review individual past due balances for collectability.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68
Inventories
Inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out
method. Inventory costs include material, labor and overhead related to the manufacturing of our products.
Inventories consist of the following (in thousands):
As of December 31,
2024
2023
Raw materials
$
265,275
$
296,037
Work in process
37,528
58,906
Finished goods
281,873
354,417
Total
$
584,676
$
709,360
_____________________________
As of December 31, 2024, inventory account balances that are part of a disposal group that met the criteria for assets held for
sale during the fourth quarter of 2024 were combined with other disposal group assets and presented as a separate line item
"Assets Held For Sale" in our consolidated balance sheet (See Note 4:Assets Held For Sale).
Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands):
As of December 31,
2024
2023
Machinery and equipment(1)
$
400,861 $
483,382
Land, building and building improvements(1)
177,089
278,251
Molds
96,318
89,573
Computer equipment and software(1)
122,208
122,038
Furniture and fixtures(1)
27,871
30,662
Instruments placed with customers(2)
124,290
115,672
Construction in progress(1)
87,006
117,219
Total property, plant and equipment, cost
1,035,643
1,236,797
Accumulated depreciation(1)
(592,897)
(623,888)
Property, plant and equipment, net (1)
$
442,746 $
612,909
_______________________________
(1) As of December 31, 2024, certain property, plant and equipment category account balances that are part of a disposal group
that met the criteria for assets held for sale during the fourth quarter of 2024 were combined with other disposal group
assets and presented as a separate line item "Assets held For Sale" in our consolidated balance sheet, $99.4 million of
accumulated depreciation was included in the disposal group and reclassified to assets held for sale. See Note 4: Assets
Held For Sale.
(2)
Instruments placed with customers consist of drug-delivery and monitoring systems placed with customers under operating
leases.
All property, plant and equipment are stated at cost. We use the straight-line method for depreciating property, plant
and equipment over their estimated useful lives. Estimated useful lives are:
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
69
Buildings
15 - 30 years
Building improvements
15 - 30 years
Machinery and equipment and molds
2 - 15 years
Furniture, fixtures and office equipment
2 - 5 years
Computer equipment and software
3 - 5 years
Instruments placed with customers
3 - 10 years
We capitalize expenditures that materially increase the life of the related assets; maintenance and repairs are expensed
as incurred. The costs and related accumulated depreciation applicable to property, plant and equipment sold or retired are
removed from the accounts and any gain or loss is reflected in the statements of operations at the time of disposal. Depreciation
expense was $85.2 million, $96.7 million and $95.8 million in 2024, 2023 and 2022, respectively, of which $73.7 million,
$75.4 million, and $74.1 million, respectively, are included in cost of goods sold.
Goodwill
We test goodwill for impairment on an annual basis in the month of November, or more frequently if an event occurs
or circumstances change that would indicate that impairment may exist. Generally, we first perform a qualitative assessment to
determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, based on
an assessment of relevant qualitative factors, we determine that this is not the case, then the quantitative impairment test is not
required to be performed. Conversely, if we determine based on the qualitative assessment that it is more likely than not that the
fair value of the reporting unit is less than its carrying amount, we will perform the quantitative impairment test. For the
quantitative impairment test, we calculate the estimated fair value of the reporting unit. If the estimated fair value of the
reporting unit is less than its carrying amount, the goodwill of the reporting unit is determined to be impaired. An impairment
charge is recorded in an amount equal to the excess of the carrying amount over its estimated fair value, limited to the total
amount of goodwill allocated to the reporting unit. In 2024, we performed a qualitative assessment and concluded that it was
more likely than not that the fair value of our reporting unit exceeded its carrying amount, and therefore, no further impairment
testing was required. We concluded that there was no impairment of goodwill during fiscal 2024, 2023, or 2022.
The following table presents the changes in the carrying amount of our goodwill for 2024, 2023 and 2022 (in
thousands):
Total
Balance as of January 1, 2022
$
43,439
Goodwill(1)
1,469,880
Other(2)
(7,128)
Disposition(3)
(650)
Currency translation
(56,283)
Balance as of December 31, 2022
1,449,258
Currency translation
23,188
Balance as of December 31, 2023
1,472,446
Currency translation
(39,674)
Balance as of December 31, 2024
$
1,432,772
_______________________________
(1) Relates to Smiths Medical acquired on January 6, 2022 (see Note 2: Acquisitions).
(2) Reflects a measurement period adjustment related to the 2021 acquisition of a small foreign infusion systems supplier.
(3)
Relates to the sale of a certain line of infusion products in China.
Intangible Assets
Intangible assets, carried at cost less accumulated amortization and amortized on a straight-lined basis, were as follows
(in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
70
Weighted-
Average
Amortization
Life
in Years
December 31, 2024
Cost
Accumulated
Amortization
Net
Patents
10
$
36,811 $
22,913 $
13,898
Customer contracts
12
9,818
6,994
2,824
Non-contractual customer relationships
8
546,404
236,267
310,137
Trademarks
1
5,425
5,425
—
Trade name
15
18,239
8,357
9,882
Developed technology(1)
10
619,540
227,869
391,671
Non-compete
3
9,100
9,100
—
Total amortized intangible assets
$
1,245,337 $
516,925 $
728,412
Internally developed software(2)
$
12,377
$
12,377
Total intangible assets
$
1,257,714 $
516,925 $
740,789
_______________________________
(1)
Developed technology primarily consists acquired patented technologies and internally developed software. Upon
completion of development, the assets will be amortized over their estimated useful lives.
(2)
Internally developed software will be reclassified to developed technology and amortized when the projects are complete
and the assets are ready for their intended use. During 2024, we reclassified $33.2 million to developed technology.
Weighted-
Average
Amortization
Life
in Years
December 31, 2023
Cost
Accumulated
Amortization
Net
Patents
10
$
33,261 $
20,637 $
12,624
Customer contracts
12
10,018
6,755
3,263
Non-contractual customer relationships
8
554,982
171,279
383,703
Trademarks
1
5,425
5,425
—
Trade name
15
18,251
7,162
11,089
Developed technology
10
587,852
167,913
419,939
Non-compete
3
9,100
7,450
1,650
Total amortized intangible assets
$
1,218,889 $
386,621 $
832,268
Internally developed software*
$
38,320
$
38,320
Total intangible assets
$
1,257,209 $
386,621 $
870,588
_______________________________
* Internally developed software will be amortized when the projects are complete and the assets are ready for their intended use.
Amortization expense was $134.3 million, $132.1 million and $139.4 million in 2024, 2023 and 2022, respectively, of
which $1.7 million, $— million, and $0.3 million, respectively, are included in cost of goods sold.
As of December 31, 2024, estimated annual amortization for our intangible assets for each of the next five years and
thereafter is approximately (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
71
2025
$
129,604
2026
127,612
2027
117,450
2028
116,852
2029
113,775
Thereafter
123,119
Total
$
728,412
Our intangible assets that are not subject to amortization are reviewed annually for impairment or more often if there
are indications of possible impairment. We perform our annual intangible assets impairment test in November of each year. We
did not have any intangible asset impairments in 2024, 2023 or 2022.
Long-Lived Assets
We periodically evaluate the recoverability of long-lived assets whenever events and changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. When indicators of impairment are present, the
carrying values of the assets are evaluated in relation to the operating performance and future undiscounted cash flows of the
underlying business. The net book value of the underlying asset is adjusted to fair value if the sum of the expected discounted
cash flows is less than book value. Fair values are based on estimates of market prices and assumptions concerning the amount
and timing of estimated future cash flows and discount rates, reflecting varying degrees of perceived risk. We did not have any
long-lived asset impairments in 2024, 2023 or 2022.
Assets Held for Sale
We classify a long-lived asset or disposal groups as held for sale in the period in which all of the following criteria are
met: (1) management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; (2) the
asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary
for sales of such assets or disposal groups; (3) an active program to locate a buyer and other actions required to complete the
plan to sell the asset or disposal group have been initiated; (4) the sale of the asset or disposal group is probable, and transfer of
the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or
circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year; (5) the
asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6)
actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan
will be withdrawn. We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its
carrying value or fair value less any costs to sell and immediately recognize any estimated losses. Conversely, gains are not
recognized on the sale of a long-lived asset or disposal group until the date of sale. Each reporting period that a long-lived asset
or disposal group remains as held for sale, the carrying value of the long-lived asset or disposal group is adjusted for subsequent
changes in fair value less cost to sell, losses are recognized for a subsequent write-down to fair value less cost to sell and gains
are recognized for an increase in fair value less cost to sell although limited to the amount of any previous cumulative losses
recognized. We cease depreciation and amortization of a long-lived asset, or assets within a disposal group, upon their
designation as held for sale. See Note 4: Assets Held For Sale.
Investment Securities
Short-term investments, exclusive of cash equivalents, are marketable securities intended to be sold within one year
and may include trading securities, available-for-sale securities, and held-to-maturity securities (if maturing within one year at
the time of acquisition).
Investments in Available-for-sale Securities
Our investment securities were historically considered available-for-sale and consisted of corporate bonds, U.S.
treasury securities, and government bonds. These securities were considered “investment grade” and were carried at fair value.
We assess our investment in available-for-sale debt securities for impairment each reporting period. If an unrealized loss exists,
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
72
we determine whether any portion of the decline in fair value below the carrying value is credit-related by reviewing several
factors, including, but not limited to, the extent of the fair value decline and changes in the financial condition of the issuer. We
record an impairment for credit-related losses through an allowance, limited to the amount of the unrealized loss. If we either
intend to sell or it is more likely than not we will be required to sell the debt security before its anticipated recovery, any
allowance is written off and the amortized cost basis is written down to fair value through a charge against net earnings.
Unrealized gains and non-credit-related unrealized losses are recorded, net of tax, in other comprehensive (loss) income. We
did not have any investments in available-for-sale debt securities in unrealized loss positions as of December 31, 2024 or 2023.
The amortized cost of the debt securities and U.S treasury securities is adjusted for the amortization of premiums
computed under the effective interest method. Such amortization is included in interest expense, net in the consolidated
statements of operations. Realized gains and losses are accounted for on the specific identification method. There have been no
realized gains or losses on the disposal of these investments. All short-term investment securities are callable within one year.
As of December 31, 2024, we did not have any investment securities. As of December 31, 2023, the amortized cost,
unrealized holding gains (losses) and fair value of our available-for-sale investment securities were as follows (in thousands):
As of December 31, 2023
Amortized
Cost
Unrealized
Holding Gains
(Losses)
Fair Value
Short-term corporate bonds
$
501
$
—
$
501
Investments in Non-Marketable Equity Securities
We own approximately a 20.0% non-marketable equity interest in a nonpublic company and entered into a three-year
distribution agreement where we have the exclusive rights to market, sell and distribute the company's products in exchange for
a cash payment of $3.3 million. In addition, we were granted an exclusive license for all of the seller's intellectual property. At
the expiration of the distribution agreement we have the right but not the obligation to acquire the remaining interest in the
business.
We apply the equity method of accounting for investments when we determine we have a significant influence, but not
a controlling interest in the investee. We determine whether we have significant influence by considering key factors such as
ownership interest, representation on the board of directors, participation in policy making decisions, business relationship and
material intra-entity transactions, among other factors. Our equity method investment is reported at cost and adjusted each
period for our share of the investee's income or (loss) and dividend paid, if any. We eliminate any intra-entity profits to the
extent of our beneficial interest. We report our proportionate share of the investee's income or (loss) resulting from this
investment in other expense, net in our consolidated statements of operations. The carrying value of our equity method
investment is reported in other assets on the consolidated balance sheets. We assess our equity method investments for
impairment on an annual basis or whenever events or circumstances indicate that the carrying value of the investment may not
be recoverable. Our recorded share of the investee's loss was not material for the years ended December 31, 2024, 2023 or
2022. We did not receive any dividend distributions from this investment during 2024, 2023 or 2022.
Our non-marketable equity method investment consists of the following (in thousands):
As of December 31,
2024
2023
Equity method investment
$
3,038
$
3,120
Investments in non-marketable debt securities
In 2022, we received $19.0 million in proceeds from a promissory note related to an acquired investment as part of the
Smiths Medical acquisition.
Income Taxes
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
73
Deferred taxes are determined based on the differences between the financial statements and the tax bases using rates
as enacted in the laws. A valuation allowance is established if it is “more likely than not” that all or a portion of the deferred tax
assets will not be realized.
We recognize interest and penalties related to unrecognized tax benefits in the tax provision. We recognize liabilities
for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and
settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of
benefit that is greater than 50% likely of being realized upon ultimate settlement. We have accrued for interest and penalties of
$2.6 million and $1.6 million, respectively, as of December 31, 2024 and $2.9 million and $2.0 million, respectively, as of
December 31, 2023.
Foreign Currency
Generally, the functional currency of our international subsidiaries is the local currency. Generally, we translate the
financial statements of these subsidiaries to U.S. dollars at the exchange rate in effect at the balance sheet date and revenues and
expenses are translated at the average monthly exchange rates during the year. Certain of our international subsidiaries
consolidate first with another subsidiary that utilizes a functional currency other than U.S. dollars. In those cases, we follow a
step by step translation process utilizing the same sequence as the consolidation process. Translation adjustments are recorded
as a component of accumulated other comprehensive loss, a separate component of stockholders' equity on our consolidated
balance sheets and the effect of exchange rate changes on cash and cash equivalents are reflected on our consolidated
statements of cash flows. Gains and losses for transactions denominated in a currency other than the functional currency of the
entity are included in our consolidated statements of operations in other expense, net (see Other expense, net table below).
Foreign currency transaction losses, net were $9.8 million, $5.9 million and $5.8 million in 2024, 2023 and 2022, respectively.
Revenue Recognition
We recognize revenues when we transfer control of promised goods to our customers, which for the majority of our
sales of products sold on a standalone basis to our distributors and end customers for direct sales, is deemed to be at point of
shipment. Our software license renewals are considered to be transferred to a customer at a point in time at the start of each
renewal period, therefore revenue is recognized at that time.
Payment is typically due in full within 30 days of delivery or the start of the contract term. Revenue is recorded in an
amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We include variable
consideration in net sales only to the extent that a significant reversal in revenue is not probable when the uncertainty is
resolved.
Our variable consideration includes distributor chargebacks, product returns and end customer rebates, with distributor
chargebacks representing the majority and subject to the greatest judgment.
Chargebacks are the difference between the prices we charge our distribution customers at the time they purchase our
products and the contracted prices we have with the end customer, most often in the U.S. and Canada. When a distributor sells
our products to one of our contracted end customers, the distributor typically will claim a refund from us for the chargeback
amount which we process as a credit to the distributor.
In estimating the transaction price to present as net revenue for sales to distributors, we must estimate the expected
chargeback amount that we will refund to the distributor after they sell our product to a contracted end customer. Determining
the appropriate chargeback reserve requires judgment around the following assumptions:
(i) The estimated chargeback amount (the difference between the price we invoice the distributor and the contractually
agreed price with specified end customers); and
(ii) The estimated period of time between the sale to the distributor and the receipt of a chargeback claim.
For purposes of estimating the expected chargeback amount, we utilize actual recent historical chargebacks paid to the
specific distributor for similar products as determined at either a product or product-family level. While individual chargeback
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
74
rates can vary significantly depending on the product and contracted prices with distributors and end customers, our chargeback
reserve estimate is not overly sensitive to those individual price changes due to the long-term nature of our distributor and end
customer contracts as well as consistency in purchasing patterns. Additionally, the use of the actual chargeback history to
calculate an average chargeback rate has historically resulted in a reasonable estimation of overall current contract rates.
For purposes of estimating the period of time between the sale to the distributor and the receipt of a chargeback claim,
we utilize several sources of information including actual inventory quantities of our products on hand at distributors. This
inventory on hand information is received from the distributors or, when specific quantities are not provided, estimated by using
the targeted days of inventory on hand for distributors. Historical experience of actual chargebacks paid has indicated that use
of this information has reasonable predictive value of outstanding chargebacks and accounts for the variability of purchasing
patterns and expected timing and volume of sales to end customers. The value of the chargeback reserve generally represents
approximately two months of obligation due to the timing difference between the initial sale to a distributor and the processing
of a chargeback claim after the product is sold to the end customer.
The chargeback reserve estimates change from period-to-period primarily based on changes in revenue from/and the
inventory levels of distributors. Our judgments regarding the information used to calculate the chargeback reserve are consistent
from period to period; however, on a regular basis, we evaluate the adequacy of the chargeback reserve to reassess and ensure
that the variable consideration is appropriately constrained, and the likelihood of future revenue reversal is not probable. We
use metrics including chargeback provision as a percentage of gross revenue, movements in inventory on hand at distributors,
trends in accrued versus paid chargebacks and impacts from price changes and similar metrics.
The chargeback reserve reflects a reasonable estimate of the amount of consideration using the expected value method
and is recorded as a reduction of accounts receivable, net on the consolidated balance sheets.
We also offer certain volume-based rebates to both our distribution and end customers, which we record as variable
consideration when calculating the transaction price. Rebates are offered on both a fixed and tiered/variable basis. In both cases,
we use information available at the time, including current contractual requirements, our historical experience with each
customer and forecasted customer purchasing patterns, to estimate the most likely rebate amount.
We also warrant products against defects and have a policy permitting the return of defective products, for which we
accrue and expense at the time of sale using information available at that time and our historical experience. We also provide
for extended service-type warranties, which we consider to be separate performance obligations. We allocate a portion of the
transaction price to the extended service-type warranty based on its estimated relative selling price, and recognize revenue over
the period the warranty service is provided.
Arrangements with Multiple Deliverables
In certain circumstances, we enter into arrangements in which we provide multiple deliverables to our customers.
These bundled arrangements typically consist of the sale of infusion systems equipment, along with annual software licenses
and related software implementation services, software maintenance services and extended warranties. Our most significant
judgments related to these arrangements are (i) identifying the various performance obligations and (ii) estimating the relative
standalone selling price of each performance obligation, typically using a directly observable method or calculated on a cost
plus margin basis method. Revenue related to the bundled equipment, software and software implementation services are
typically combined into a single performance obligation and recognized upon implementation. As annual software licenses are
renewed, we recognize revenue for the license at a point in time, at the start of each annual renewal period. The transaction
price allocated to the extended service-type warranty is recognized as revenue over the period the warranty service is provided.
Consumables and solutions are separate performance obligations, recognized at a point in time.
Shipping Costs
Costs to ship finished goods to our customers are included in cost of goods sold on the consolidated statements of
operations.
Post-retirement and Post-employment Benefits
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
75
We sponsor a Section 401(k) retirement plan ("plan") for employees. Our contributions to our 401(k) plan were
approximately $19.1 million, $19.2 million and $14.6 million in 2024, 2023 and 2022, respectively. We also have post-
retirement and post-employment obligations related to employees located in certain international countries. These obligations
are immaterial to our financial statements taken as a whole.
Research and Development
The majority of our research and development costs are expensed as incurred. In certain circumstances when an asset
will have an alternative future use we capitalize the costs related to those assets. Research and development costs include
salaries and related benefits, consulting fees, production supplies, samples, travel costs, utilities and other miscellaneous
administrative costs.
Interest expense, net
The following table presents interest (expense) income, net (in thousands):
As of December 31,
2024
2023
2022
Interest expense
$
(106,541) $
(102,727) $
(70,805)
Interest income
10,788
7,508
4,430
Interest expense, net
$
(95,753) $
(95,219) $
(66,375)
Other expense, net
The following table presents other expense, net (in thousands):
As of December 31,
2024
2023
2022
Foreign exchange losses, net
$
(9,792) $
(5,918) $
(5,780)
Loss on disposition of assets
(1,608)
(153)
(2,554)
Other miscellaneous (expense) income, net
(1,823)
166
3,198
Other expense, net
$
(13,223) $
(5,905) $
(5,136)
The foreign exchange losses in 2024 were primarily related to the strengthening of the U.S. dollar relative to certain
foreign currencies, including the Mexican peso and Argentine peso.
In 2024, other miscellaneous (expense) income, net primarily includes $2.6 million in fees related to our accounts
receivable purchase program. In 2023, other miscellaneous (expense) income, net primarily includes $3.7 million in fees related
to our accounts receivable purchase program (see Note 18: Accounts Receivable Purchase Program) mostly offset by a business
interruption gain. We received total insurance recoveries for property damage and business interruption of $3.1 million,
$2.6 million of which was related to insurance proceeds for business interruption included within other miscellaneous (expense)
income, net.
Net Loss Per Share
Due to the net loss for the years ended December 31, 2024, 2023 and 2022, both basic and diluted net loss per share
are computed by dividing net loss by the weighted-average number of common shares outstanding for the period. With net
losses the inclusion of any potential securities is antidilutive, accordingly, basic and diluted net loss per share are the same in
periods with losses.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
76
The following table presents the calculation of net earnings per common share (“EPS”) — basic and diluted (in
thousands, except per share data):
Year ended December 31,
2024
2023
2022
Net loss
$
(117,688) $
(29,655) $
(74,286)
Weighted-average number of common shares outstanding (basic)
24,388
24,091
23,868
Dilutive securities
—
—
—
Weighted-average common and common equivalent shares
outstanding (diluted)
24,388
24,091
23,868
EPS — basic
$
(4.83) $
(1.23) $
(3.11)
EPS — diluted
$
(4.83) $
(1.23) $
(3.11)
Total anti-dilutive stock options and restricted stock awards (shares in
thousands)
42
129
141
New Accounting Pronouncements
Recently Issued Accounting Standards Not Yet Adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response
to the SEC's Disclosure Update and Simplification Initiative. The amendments in this update modify the disclosure or
presentation requirements of a variety of Topics in the Accounting Standards Codification ("ASC") in response to the SEC’s
Release No. 33-10532, Disclosure Update and Simplification Initiative, and align the ASC’s requirements with the SEC’s
regulations. For entities within the scope, the guidance will be applied prospectively with the effective date for each amendment
to be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective,
with early adoption prohibited. If the SEC has not removed the related disclosure from its regulations by June 30, 2027, the
amendments will be removed from the Codification and will not become effective. We are currently assessing what impact this
guidance will have on the Company's consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax
Disclosures. The amendments in this update expand disclosures in an entity’s income tax rate reconciliation table and regarding
cash taxes paid information. The update will be effective for annual periods beginning after December 15, 2024 and is
applicable to our Annual Report on Form 10-K for the fiscal year December 31, 2025, with early application permitted. We are
currently assessing the effect of this update on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The guidance
requires disclosure of disaggregated income statement expense information about specific categories (including purchases of
inventory, employee compensation, depreciation, and intangible asset amortization) in the notes to financial statements. In
January 2025, FASB released ASU 2025-01 to clarify the guidance will be effective for annual periods beginning after
December 15, 2026. This update will be applicable to our Annual Report on Form 10-K for the fiscal year December 31, 2027,
with early application permitted. We are currently assessing the effect of this update on our consolidated financial statements
and related disclosures.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07 "Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures," which requires the Company to expand the breadth and frequency of
segment disclosures to include additional information about significant segment expenses, the chief operating decision maker
(CODM) and other items, and also require the annual disclosures on an interim basis. This guidance was effective for annual
periods beginning with the Company's fiscal year 2024, and in interim periods within the Company's fiscal year 2025. The
Company adopted the requirements of this ASU in Note 6, Segment Data of this Annual Report.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
77
NOTE 2. ACQUISITIONS
2022 Acquisitions
On January 6, 2022, we acquired 100% of the equity interests in Smiths Medical, the holding company of Smiths
Group plc's global medical device business, from Smiths Group International Holdings Limited (“Smiths”). The acquisition of
Smiths Medical aligns with our strategic growth plans, enabling us to broaden our product offerings to include syringe and
ambulatory infusion devices, vascular access, and vital care products and to strengthen and expand our global market reach.
Total cash consideration for the acquisition was $1.9 billion, which was financed with existing cash balances and
proceeds from the credit agreement entered into on January 6, 2022 (see Note 13: Long-Term Obligations). We also issued
share consideration to Smiths of 2.5 million shares of our common stock. The fair value of the shares of common stock issued
to Smiths was determined based on the opening market price of our common stock on the acquisition date. Smiths may be
entitled to an additional $100.0 million in cash consideration contingent on our common stock achieving certain price targets
for certain periods after closing in accordance with the terms of the Share Sale and Purchase Agreement (the "Purchase
Agreement"). In the event that (a) on or prior to the third anniversary of closing the 30-day volume-weighted average price for
our common stock, as defined in the Purchase Agreement, equals or exceeds $300.00 per share or (b) on or prior to the fourth
anniversary of closing the 45-day volume-weighted average price for our common stock, as defined in the Purchase Agreement,
equals or exceeds $300.00 per share (each a "Price Target"), and provided Smiths beneficially owns at least 50.0% of the shares
of common stock issued at closing at the time the Price Target is achieved, then Smiths will be entitled to receive the additional
$100.0 million in cash consideration. The fair value of the contingent consideration was determined using an option pricing
model, specifically the Monte Carlo Simulation. In the analysis, the determinants of payout are simulated in a risk neutral
framework over a large number of simulation paths. The fair value of the contingent consideration is then calculated as the
average present value across all simulated paths. During July 2024, Smiths sold 1.2 million shares of common stock of ICU
Medical, Inc. which were issued as partial consideration for the 2022 acquisition of Smiths Medical. The sale of shares when
combined with other sales in prior periods rendered Smiths unable to achieve the contingent consideration based on certain
price targets during the third and fourth anniversary of closing as Smiths no longer meets the required minimum beneficial
ownership percentage. Accordingly, the valuation of the contingent earn-out liability as of December 31, 2024 has been reduced
to zero.
Smiths became a related party to us when we issued 2.5 million shares of our common stock as partial consideration
for the acquisition of Smiths Medical. Additionally, we entered in to a transition services agreement ("TSA") with certain
members of Smiths Group, plc. The TSA includes certain information technology, human resource and tax support services for
an initial term of twelve months with the option to extend up to 24 months. In 2023, we expensed $8.3 million for services
provided by Smiths under the TSA. Since December 31, 2023, there were no services being provided under the TSA and we
had no remaining related-party open payables as of December 31, 2023.
Final Price Allocation
The following table summarizes the final purchase price and the final allocation of the purchase price related to the
assets acquired and liabilities assumed (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
78
Cash consideration for acquired assets
$
1,922,955
Fair value of contingent consideration payable to Smiths
53,520
Issuance of ICU Medical, Inc. common shares:
Number of shares issued to Smiths
2,500
Price per share (ICU's opening market price on the acquisition date)
$
230.39
Fair value of ICU shares issued to Smiths
$
575,975
Total Consideration
$
2,552,450
Purchase Price Allocation
Cash and cash equivalents
$
78,791
Accounts receivables
106,132
Inventories
228,919
Prepaid expenses and other current assets
53,554
Property, plant and equipment
206,333
Operating lease right-of-use assets
55,161
Intangible assets(1)
945,000
Other assets
379
Accounts payable
(105,291)
Accrued liabilities(2)
(173,151)
Income tax payable
(40,312)
Other long-term liabilities
(85,490)
Deferred income taxes
(187,455)
Total identifiable net assets acquired
$
1,082,570
Goodwill - not tax deductible
1,469,880
Purchase Consideration
$
2,552,450
_______________________________________________
(1)
Identifiable intangible assets included $510.0 million of customer relationships, $400.0 million of developed technology,
$30.0 million of internally developed software, and $5.0 million of trade mark. The estimated weighted-average
amortization period for the total identifiable intangible assets is approximately nine years, and, for each identifiable
intangible asset is estimated as follows: eight years for customer relationships, ten years for developed technology, five
years for internally developed software, and six months for the trademark.
(2)
Accrued liabilities includes, among other things, accrued warranty reserves, accrued restructuring initiatives, accrued
salaries and related benefits, deferred revenue and accrued sales and use taxes.
The identifiable intangible assets and other long-lived assets acquired have been valued utilizing Level 3 inputs as
defined in Note 10: Fair Value Measurements. The fair value of identifiable intangible assets were generally developed using
the income approach and are based on critical estimates, judgments and assumptions derived from: analysis of market
conditions; discount rate; discounted cash flows; royalty rates; customer retention rates; and/or estimated useful lives. Certain
other intangible assets were valued using a cost to replace method, estimating the labor and non-labor costs required to replace
the asset under the premise that it was not part of the transaction. Property, plant and equipment was valued with the
consideration of remaining economic lives. The raw materials inventory was valued at historical cost and adjusted for any
obsolescence which we estimate to approximate replacement cost, the work in process inventory was valued at estimated sales
proceeds less costs to complete and costs to sell, and finished goods inventory was valued at estimated sales proceeds less costs
to sell. The prepaid expenses and other current assets and assumed liabilities were recorded at their carrying values as of the
date of the acquisition, as their carrying values approximated their fair values due to their short-term nature.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
79
Unaudited Pro Forma Information
Smiths Medical is included in our consolidated results beginning on January 7, 2022. Total revenues and net loss
attributable to Smiths Medical for the period from January 7, 2022 to December 31, 2022 were $950.7 million and
$(74.3) million, respectively. The net loss figure is an estimate as the results by company are less identifiable due to integration.
The following unaudited pro forma financial information presents the combined results of operations of ICU and Smiths
Medical as if the acquisition had occurred on January 1, 2021. The pro forma financial information is presented for
informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition
had taken place on the date indicated or of results that may occur in the future.
Twelve months
ended December 31,
(In thousands)
2022
Revenues
$
2,300,371
Net (Loss) Income
$
(70,286)
The unaudited pro forma results presented above include the impact of the following adjustments: incremental
amortization expense on intangible assets acquired of $1.9 million for the twelve months ended December 31, 2022, and
incremental interest expense, including amortization of debt discount and debt issuance costs, on the Credit Facilities of
$1.2 million for the twelve months ended December 31, 2022. The unaudited pro forma results include IFRS to U.S. GAAP
adjustments for Smiths Medical historical results and adjustments for accounting policy alignment, which were materially
similar to the Company. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company
in the unaudited pro forma results presented.
NOTE 3. RESTRUCTURING, STRATEGIC TRANSACTION AND INTEGRATION
Restructuring, strategic transaction and integration expenses were $59.8 million, $41.3 million and $71.4 million in
2024, 2023 and 2022, respectively.
Restructuring
Restructuring charges net of any reversed accruals were $19.6 million, $5.7 million and $9.7 million in 2024, 2023 and
2022, respectively, and are included in the above restructuring, strategic transaction and integration expenses in our
consolidated statement of operations.
In 2024, we incurred restructuring charges primarily related to severance expenses. We adjusted certain severance
restructuring accrued balances, shown in the table below under "Other adjustments", as a result of merging Smiths Medical
entities during 2024.
In 2023, we incurred restructuring charges primarily related to severance expenses. We adjusted certain facility and
severance restructuring accrued balances, shown in the table below under "Other adjustments", to reverse certain accrued
balances that will not be utilized.
In 2022, we incurred restructuring charges primarily related to severance in connection with the January 6, 2022
acquisition of Smiths Medical, see Note 2: Acquisitions.
The following table summarizes the activity in our restructuring-related accrual by major type of cost (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
80
Severance Pay
and Benefits
Retention and
Facility
Closure Costs
Total
Accrued balance, January 1, 2023
$
4,416 $
1,507 $
5,923
Charges incurred
5,521
1,189
6,710
Payments
(6,694)
(1,192)
(7,886)
Other adjustments(1)
(234)
(785)
(1,019)
Currency translation
(198)
38
(160)
Accrued balance, December 31, 2023
$
2,811 $
757 $
3,568
Charges incurred
18,299
1,272
19,571
Payments
(11,687)
(1,632)
(13,319)
Other adjustments(2)
327
—
327
Currency translation
(212)
10
(202)
Accrued balance, December 31, 2024
$
9,538 $
407 $
9,945
_______________________________________________
(1)
Relates to accrued restructuring charges for estimated facility closure costs and severance costs that will not be utilized and
were reversed during the year.
(2) Relates to adjustments to accrued restructuring charges as a result of merging Smiths Medical entities during 2024.
Strategic Transaction and Integration Expenses
We incurred $40.2 million, $35.6 million and $61.7 million in strategic transaction and integration expenses in 2024,
2023 and 2022, respectively, which are included in restructuring, strategic transaction and integration expenses in our
consolidated statement of operations. The strategic transaction and integration expenses during 2024 and 2023 were primarily
related to consulting expenses and employee costs incurred to integrate our Smiths Medical business acquired in 2022. The
strategic transaction and integration expenses during 2022 were primarily related to transaction and integration expenses
associated with our acquisition of Smiths Medical on January 6, 2022 (see Note 2: Acquisitions) which primarily included legal
expenses, bank fees, employee costs and a United Kingdom stamp tax.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
81
NOTE 4: ASSETS HELD FOR SALE
On November 12, 2024, the Company and ICU Medical Sales, Inc., a Delaware corporation (collectively, the "ICU
Medical Entities") entered into a purchase agreement (the "Agreement") with Otsuka Pharmaceutical Factory America, Inc., a
Delaware corporation ("OPF"). Pursuant to the Agreement, prior to the closing, the ICU Medical Entities will form a Delaware
limited liability company (the "LLC") and the ICU Medical Entities, and the LLC shall enter into a contribution agreement
under which the ICU Medical Entities shall transfer the assets, liabilities and operations that comprise the IV Solutions product
line to the LLC. At the closing, OPF will acquire a 60% equity interest in the LLC from the ICU Medical Entities. Pursuant to
the Agreement, the consideration receivable by the ICU Medical Entities is comprised of (a) estimated cash consideration of
approximately $200 million at closing and (b) a milestone payment paid by OPF to the Company for any incremental revenue
and incremental gross profit recognized by the LLC, as calculated under the terms of the Agreement upon the final
determination of the LLC's audited financial statements for the year-ending and as of December 31, 2026. Additionally, at
closing, the LLC, ICU Medical Entities and OPF shall enter into an operating agreement, and the LLC and the Company shall
enter into one or more commercial agreements, a services agreement and a license agreement, which will provide for, among
other things, certain administrative, marketing, distribution, sales support and logistic services to the LLC for a specified period
of time. The transaction is expected to be completed during the second quarter of 2025. Based upon initial estimates, no
impairment in the assets held for sale was identified and the expected gain from the sale will be recognized upon close of the
transaction.
As of December 31, 2024, certain presentation criteria were met (see Note:1 Basis of Presentation and Significant
Accounting Policies-Assets Held For Sale), accordingly we presented certain IV Solutions assets and liabilities as held for sale.
The following table summarizes the carrying values of the assets and liabilities presented as held for sale in our
consolidated balances sheet as of December 31, 2024 (in thousands):
Assets:
2024
Accounts receivable, net of allowance of $465 at December 31, 2024
$
13,331
Inventories
88,656
Prepaid expenses and other current assets
4,140
Property, plant and equipment, net
155,426
Other assets
22,829
Total assets held for sale
$
284,382
Liabilities:
Accounts payable
$
13,533
Accrued liabilities
19,378
Total liabilities held for sale
$
32,911
Net assets held for sale
$
251,471
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
82
NOTE 5: REVENUE
Revenue Recognition
Our business units are Consumables, Infusion Systems and Vital Care. The vast majority of our sales of these products
within these business units are made on a stand-alone basis to hospitals and distributors. Revenue is typically recognized upon
transfer of control of the products, which we deem to be at point of shipment. For purposes of revenue recognition for our
software licenses and renewals, we consider the control of these products to be transferred to a customer at a certain point in
time; therefore, we recognize revenue at the start of the applicable license term.
Payment is typically due in full within 30 days of delivery or the start of the contract term. Revenue is recorded in an
amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We include variable
consideration in net sales only to the extent that a significant reversal in revenue is not probable when the uncertainty is
resolved. Our variable consideration includes distributor chargebacks, product returns and end customer rebates with distributor
chargebacks representing the majority and subject to the greatest judgment, (see Note 1: Basis of Presentation and Significant
Accounting Policies).
We also offer certain volume-based rebates to both our distribution and end customers, which is recorded as variable
consideration when calculating the transaction price. Rebates are offered on both a fixed and tiered/variable basis. In both cases,
we use information available at the time, including current contractual requirements, our historical experience with each
customer and forecasted customer purchasing patterns, to estimate the most likely rebate amount. We also warrant products
against defects and have a policy permitting the return of defective products. We also provide for extended service-type
warranties, which we consider to be separate performance obligations. We allocate a portion of the transaction price to the
extended service-type warranty based on its estimated relative selling price, and recognize revenue over the period the warranty
service is provided. See Note 1. Basis of Presentation and Significant Accounting Policies for further discussion.
Arrangements with Multiple Performance Obligations
We also enter into arrangements which include multiple performance obligations, (see Note 1: Basis of Presentation
and Summary of Significant Accounting Policies). The most significant judgments related to these arrangements include:
•
Identifying the various performance obligations of these arrangements.
•
Estimating the relative standalone selling price of each performance obligation, typically using a directly observable
method or calculated on a cost plus margin basis method.
Revenue disaggregated
The following table represents our revenues disaggregated by product line (in thousands) and our disaggregated
product line revenue as a percentage of total revenue:
Year ended December 31,
2024
2023
2022
Product line
Revenue
% of Revenue
Revenue
% of Revenue
Revenue
% of Revenue
Consumables
$ 1,038,869
44 % $
969,129
43 % $
974,993
43 %
Infusion Systems
652,410
27 %
629,043
28 %
617,435
27 %
Vital Care
690,767
29 %
660,954
29 %
687,569
30 %
Total Revenues
$ 2,382,046
100 % $ 2,259,126
100 % $ 2,279,997
100 %
We report revenue on a "where sold" basis, which reflects the revenue within the country or region in which the
ultimate sale is made to our external customer.
The following table represents our revenues disaggregated by geography (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
83
Year ended December 31,
Geography
2024
2023
2022
United States
$
1,532,104 $
1,440,017 $
1,460,069
Europe, the Middle East and Africa
393,530
373,571
367,411
Asia-Pacific
232,820
241,699
257,208
Other Foreign
223,592
203,839
195,309
Total Revenues
$
2,382,046 $
2,259,126 $
2,279,997
Domestic sales accounted for 64%, 64% and 64% of total revenue in 2024, 2023 and 2022, respectively. International
sales accounted for 36%, 36% and 36% of total revenue in 2024, 2023 and 2022, respectively.
Contract balances
Our contract balances (deferred revenue) are recorded in accrued liabilities and other long-term liabilities in our
consolidated balance sheet (see Note 12: Accrued Liabilities and Other Long-term Liabilities). The following table presents the
changes in our contract balances for the years ended December 31, 2024 and 2023, (in thousands):
Contract Liabilities
Beginning balance, January 1, 2023
$
45,866
Equipment revenue recognized
(34,121)
Equipment revenue deferred due to implementation
35,868
Software revenue recognized
(18,526)
Software revenue deferred due to implementation
19,947
Government grant income recognized(1)
(3,684)
Government grant income deferred
944
Other deferred revenue recognized
(6,041)
Other deferred revenue
1,924
Ending balance, December 31, 2023
42,177
Equipment revenue recognized
(56,182)
Equipment revenue deferred due to implementation
55,932
Software revenue recognized
(28,292)
Software revenue deferred due to implementation
29,913
Government grant income recognized(1)
(2,072)
Government grant income deferred
—
Other deferred revenue recognized
(2,576)
Other deferred revenue
503
Ending balance, December 31, 2024
$
39,403
____________________________
(1) The government grant income deferred is amortized over the life of the related depreciable asset as a reduction to
depreciation expense.
During 2024, we recognized $26.0 million in revenue that was included in the opening contract balances as of
December 31, 2023.
As of December 31, 2024, revenue from remaining performance obligations is as follows (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
84
Recognition Timing
<12 Months
> 12 Months
Equipment revenue
$
17,050 $
1,231
Software revenue
11,214
471
Government grant deferred income(1)
2,064
7,343
Other deferred revenue(2)
30
—
Total
$
30,358 $
9,045
____________________________
(1)
The government grant deferred income is amortized over the life of the related depreciable asset as a reduction to
depreciation expense.
(2)
Other deferred revenue includes pump development programs, purchased training and extended warranty.
Costs to Obtain a Contract with a Customer
As part of the cost to obtain a contract, we may pay incremental commissions to sales employees upon entering into a
sales contract. Under ASC Topic 606, we have elected to expense these costs as incurred as the period of benefit is less than
one year.
Practical expedients and exemptions
In addition to the practical expedient applied to sales commissions, under ASC Topic 606, we elected to apply the
practical expedient for shipping and handling costs incurred after the customer has obtained control of a good. We will continue
to treat these costs as a fulfillment cost rather than as an additional promised service.
NOTE 6. SEGMENT DATA
The Company has a single operating and reportable segment. The segment is organized by and derives revenues from
the manufacture and sale of our medical products which are used in infusion therapy, vascular access, and vital care
applications. Our product portfolio includes ambulatory, syringe, and large volume IV pumps and safety software; dedicated
and non-dedicated IV sets, needlefree IV connectors, IV catheters, sharps safety products, and sterile IV solutions; closed
system transfer devices and pharmacy compounding systems; as well as a range of respiratory, anesthesia, patient monitoring,
and temperature management products. Our product lines, as disclosed in Note 5: Revenue, were determined to be a single
operating segment as discrete financial information by product-line is limited to revenue and standard cost. Other cost of sale
expenses, which include above-site manufacturing costs, manufacturing variances and supply chain costs including freight and
warehousing are not allocated to individual product lines. Similarly, quality, regulatory and other operating expenses are only
provided to our chief operating decision maker ("CODM") at the consolidated level.
The accounting policies of our single reportable segment are the same as those described in Note 1: Basis of
Presentation and Significant Accounting Policies.
For information on disaggregation of revenues by product-line and geography, see Note 5: Revenue.
Our chief executive officer is our CODM. Our CODM uses net profit (loss) to manage our business activities on a
consolidated basis and to evaluate and assess the performance of the Company when determining how to allocate capital
resources. Our segment performance is monitored and resource allocation is determined during the annual budget/forecast
processes. The measure of segment assets is reported on the consolidated balance sheets as total assets. In 2024, 2023 and 2022,
expenditures for additions to long-lived assets were $90.2 million, $93.7 million, and $99.3 million, respectively.
The following table presents information about our segment revenue, segment profit or loss, and significant segment
expenses (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
85
Year ended December 31,
2024
2023
2022
REVENUES
$
2,382,046 $
2,259,126 $
2,279,997
Less:
Standard COGS(1)
1,193,994
1,114,294
1,052,455
Quality remediation/recall(2)
19,126
58,243
70,036
Other COGS(3)
344,144
346,716
459,745
Selling, general and administrative
638,762
606,693
608,345
Research and development
88,615
85,344
92,984
Restructuring and integration
59,840
41,258
71,421
Other segment items(4)
(2,964)
(17,850)
(31,385)
Interest expense
106,541
102,727
70,805
Income tax provision (benefit)
51,676
(48,644)
(40,123)
Consolidated net loss
$
(117,688) $
(29,655) $
(74,286)
_______________
(1) Represents the average annual budgeted cost of producing each good sold in the period.
(2) Represents significant labor and material costs to replace or repair a product outside the scope of standard warranty and
compliance costs related to quality systems and manufacturing operations.
(3) Includes costs related to capitalized manufacturing variances to standard COGS, supply chain and logistics costs including
freight, inventory management and reserves, hardware service, quality and regulatory, and operations and supply chain
management costs.
(4) Includes changes in fair value of contingent earn-out, interest income, gain/loss on disposition of assets, gain/loss on foreign
exchange, other miscellaneous income/expense and equity in the income of equity method investees.
For information on depreciation and amortization expense, see Note 1: Basis of Presentation and Significant
Accounting Policies.
Significant Customers
We sell products worldwide, on credit terms on an unsecured basis, as an OEM supplier, to independent medical
supply distributors and directly to end customers. The manufacturers and distributors, in turn, sell our products to healthcare
providers. In 2024, 2023 and 2022, we had net sales to a single distributor of 18%, 16% and 15%, respectively of consolidated
worldwide net sales.
Geographic Information
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
86
The table below presents our gross long-lived assets, consisting of property, plant and equipment, by country or region
(in thousands):
As of December 31,
2024
2023
Costa Rica
$
156,149 $
143,380
Mexico
111,043
110,124
Other LATAM
55,451
47,564
Canada
5,284
5,694
Italy
29,124
28,201
Spain
17,141
21,921
Czech Republic
11,909
12,256
Other Europe
11,445
11,440
APAC
27,550
22,966
Total Foreign
$
425,096 $
403,546
United States*
610,547
833,251
Worldwide Total
$
1,035,643 $
1,236,797
________________________________
*During the fourth quarter of 2024, we presented within the assets held for sale line item in our consolidated balance sheet, the
gross long-lived assets that were part of a disposal group that met the criteria as held for sale during the fourth quarter (See
Note 4: Assets Held For Sale).
NOTE 7. LEASES
We determine if an arrangement is a lease at inception. Our operating lease assets are separately stated in operating
lease right-of-use ("ROU") assets and our financing lease assets are included in other assets on our consolidated balance sheets.
Our lease liabilities are included in accrued liabilities and other long-term liabilities on our consolidated balance sheets. We
have elected not to recognize an ROU asset and lease liability for leases with terms of twelve months or less.
Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease
payments over the lease term at commencement date. Most of our leases do not provide an implicit rate, therefore we use our
incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term based on the
information available at commencement date. Our lease ROU assets exclude lease incentives and initial direct costs incurred.
Our lease terms include options to extend when it is reasonably certain that we will exercise that option. All of our leases have
stated lease payments, which may include fixed rental increases.
Our leases are for corporate, research and development and sales and support offices, manufacturing and distribution
facilities, device service centers and certain equipment. Our leases have original lease terms of one year to fifteen years, some
of which include options to extend the leases for up to an additional five years. For all of our leases, we do not include optional
periods of extension in our current lease terms because we determined the exercise of options to extend is not reasonably
certain.
The following table presents the components of our lease cost (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
87
Year ended December 31,
2024
2023
2022
Operating lease cost
$
22,037 $
24,024 $
22,038
Finance lease cost — interest
182
125
112
Finance lease cost — reduction of ROU asset
1,158
1,035
712
Short-term lease cost
9
29
7
Total lease cost
$
23,386 $
25,213 $
22,869
Interest expense on our finance leases is included in interest expense, net in our consolidated statements of operations.
The reduction of the operating and finance ROU assets is included as noncash lease expense in costs of goods sold and selling,
general and administrative expenses in our consolidated statements of operations.
The following table presents the supplemental cash flow information related to our leases (in thousands):
Year ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
24,251 $
24,604 $
25,225
Operating cash flows from finance leases
$
182 $
125 $
112
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
12,580 $
15,873 $
5,994
Finance leases
$
1,809 $
1,028 $
715
The following table presents the supplemental balance sheet information related to our operating leases (in thousands,
except lease term and discount rate):
As of December 31,
2024
2023
Operating leases
Operating lease right-of-use assets
$
53,295
$
69,909
Accrued liabilities
$
15,695
$
20,161
Other long-term liabilities
40,777
52,972
Total operating lease liabilities
$
56,472
$
73,133
Weighted-Average Remaining Lease Term
Operating leases
5.8 years
5.6 years
Weighted-Average Discount Rate
Operating leases
4.90 %
4.31 %
The following table presents the supplemental balance sheet information related to our finance leases (in thousands,
except lease term and discount rate):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
88
As of December 31,
2024
2023
Finance leases
Other assets
$
3,259
$
2,707
Accrued liabilities
$
1,066
$
860
Other long-term liabilities
2,332
1,954
Total finance lease liabilities
$
3,398
$
2,814
Weighted-Average Remaining Lease Term
Finance leases
3.5 years
4.1 years
Weighted-Average Discount Rate
Finance leases
5.63 %
4.93 %
As of December 31, 2024, the maturities of our operating and finance lease liabilities for each of the next five years are
approximately (in thousands):
Operating
Leases
Finance
Leases
2025
$
17,996 $
1,215
2026
13,506
1,104
2027
9,093
759
2028
6,612
420
2029
5,280
197
Thereafter
11,620
47
Total Lease Payments
64,107
3,742
Less imputed interest
(7,635)
(344)
Total
$
56,472 $
3,398
NOTE 8. SHARE-BASED AWARDS
We have a stock incentive plan for employees and directors and an employee stock purchase plan; however, the
employee stock purchase plan was suspended in 2017. Shares to be issued under these plans will be issued either from
authorized but unissued shares or from treasury shares.
We incur stock compensation expense for stock options, restricted stock units ("RSU") and performance restricted
stock units ("PRSU"). We receive a tax benefit on stock compensation expense and direct tax benefits from the exercise of
stock options and vesting of restricted stock units. We also have had indirect tax benefits upon exercise of stock options and
vesting of restricted stock units related to research and development tax credits which are recorded as a reduction of income tax
expense.
The table below summarizes compensation costs and related tax benefits (in thousands):
Year ended December 31,
2024
2023
2022
Stock compensation expense
$
46,883 $
40,563 $
36,025
Tax benefit from stock-based compensation cost
$
5,524 $
5,379 $
4,636
Indirect tax benefit
$
— $
— $
749
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
89
As of December 31, 2024, we had $55.3 million of unamortized stock compensation cost which we will recognize as
an expense over a weighted-average period of approximately 0.7 years.
Stock Option Plans
Our 2011 Stock Incentive Plan ("2011 Plan") replaced our 2003 Stock Option Plan ("2003 Plan"). Our 2011 Plan
initially had 650,000 shares available for issuance, plus the remaining available shares for grant from the 2003 Plan and any
shares that were forfeited, terminated or expired that would have otherwise returned to the 2003 Plan. In years 2012, 2014, 2017
and 2023, our stockholders approved amendments to the 2011 plan that increased the shares available for issuance by a total of
5,461,000, bringing the initial shares available for issuance to 6,111,000, plus the remaining 248,700 shares that remained
available for grant from the 2003 Plan. As of December 31, 2024, the 2011 Plan has 6,374,300 shares of common stock
reserved for issuance to employees, which includes 263,300 shares that transferred from the 2003 Plan. Shares issued as options
or stock appreciation rights ("SARs") are charged against the 2011 Plan's share reserve as one share for one share issued.
Shares subject to awards other than options and SARs are charged against the 2011 Plan's share reserve as 2.09 shares for 1
share issued. Options may be granted with exercise prices at no less than fair market value at date of grant. Options granted
under the 2011 Plan may be "non-statutory stock options" which expire no more than ten years from date of grant or "incentive
stock options" as defined in Section 422 of the Internal Revenue Code of 1986, as amended.
Time-based Stock Options
To date, all options granted under 2011 Plan and 2003 Plan have been non-statutory stock options. The majority of the
time-based outstanding employee option grants vested 25% after one year from the grant date and the balance vested ratably on
a monthly basis over 36 months. The outstanding employee option grants are all fully vested. The majority of the outstanding
options granted to non-employee directors vest one year from the grant date. The options generally expire 10 years from the
grant date.
The fair value of time-based option grants is calculated using the Black-Scholes option valuation model. The expected
term for the option grants was based on historical experience and expected future employee behavior. We estimate the volatility
of our common stock at the date of grant based on the historical volatility of our common stock, based on the average expected
exercise term.
The table below summarizes the total time-based stock options granted, total valuation and the weighted-average
assumptions (dollars and shares in thousands, except per option amounts):
Year ended December 31,
2022
Number of time-based options granted
7,620
Grant-date fair value of options granted
$
540
Weighted-average assumptions for stock option valuation:
Expected term (years)
5.5
Expected stock price volatility
36.0 %
Risk-free interest rate
3.0 %
Expected dividend yield
— %
Weighted-average grant-price per option
$
185.79
Weighted-average grant-date fair value per option
$
70.86
There were no stock options granted during the years ended December 31, 2024 and 2023.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
90
A summary of our stock option activity as of and for the year ended December 31, 2024 is as follows:
Shares
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Contractual
Life (Years)
Aggregate
Intrinsic
Value (in
thousands)
Outstanding at December 31, 2023
459,828 $
82.95
Granted
— $
—
Exercised
(351,688) $
66.61
Forfeited or expired
— $
—
Outstanding at December 31, 2024
108,140 $
136.12
2.21
$
3,963
Exercisable at December 31, 2024
108,140 $
136.12
2.21
$
3,963
Vested and expected to vest, December 31, 2024
108,140 $
136.12
2.21
$
3,963
The intrinsic values for options exercisable, outstanding and vested or expected to vest at December 31, 2024 are
based on our closing stock price of $155.17 at December 31, 2024 and are before applicable taxes.
The following table presents information regarding stock option activity (in thousands):
Year ended December 31,
2024
2023
2022
Intrinsic value of options exercised
$
18,651 $
8,441 $
17,340
Cash received from exercise of stock options
$
10,939 $
4,022 $
8,785
Tax benefit from stock option exercises
$
1,034 $
1,733 $
3,637
Stock Awards
In 2024, we granted PRSUs to our executive officers and certain other non-executive employees. The PRSUs will
cliff-vest on March 8, 2026, subject to continued service through such vesting date and the achievement of minimum two-year
cumulative adjusted EBITDA, commencing on January 1, 2024 and ending on December 31, 2025, which when reviewed
against a predetermined vesting matrix could result in the vesting of 0% to 250% of the awarded PRSUs. We also granted
certain other one-off PRSU awards to non-executive employees with various performance requirements, whereby the PRSUs
will be earned if the minimum requirements are met.
In 2023, we granted PRSUs to our executive officers. For the executive officers other than the CEO, COO, CFO and
the CVP, GC, the PRSUs will vest as to one-third of the total number of PRSUs underlying the award on the first, second and
third anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the
officers have met their individual performance goals for the applicable year and continued service through such vesting date.
For the CEO, COO, the CFO, and the CVP, GC, the PRSUs will cliff-vest on March 15, 2026, subject to continued service
through such vesting date and the achievement of minimum three-year adjusted revenue and adjusted EBITDA compound
annual growth rates, commencing on January 1, 2023 and ending on December 31, 2025, which when reviewed against a
predetermined vesting matrix could result in the vesting of 0% to 250% of the awarded PRSUs. In February 2024, the
Compensation Committee made the determination that the executive officers other than the CEO, CFO, COO and CVP, GC
met their individual performance goals for 2023 with respect to the PRSUs subject to annual vesting, as outlined above, and
therefore one-third of their 2023 PRSUs vested during 2024.
In 2022, we granted our annual PRSUs to our executive officers and certain other non-executive employees. These
PRSUs cliff-vested on March 7, 2024, subject to continued service through such vesting date and the achievement of net
synergy savings targets related to the Smiths Medical acquisition achieved during the performance period commencing on
January 1, 2022 and ending on December 31, 2023, which when reviewed against predetermined targets could have resulted in
the vesting of 0% to 200% of the awarded PRSUs. We also granted certain other one-off PRSU awards to non-executive
employees with various performance requirements, whereby the PRSUs will be earned if the minimum requirements are met
within a specified time period. The performance period related to the annual 2022 PRSUs ended on December 31, 2023 and in
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
91
February 2024 the Compensation Committee determined that 200% of the PRSUs awarded were earned based on the actual net
synergy savings related to the Smiths Medical acquisition achieved during the performance period.
In 2021, we granted PRSUs to our executive officers. For the executive officers other than the CEO, COO and the
CFO, the PRSUs vested as to one-third of the total number of PRSUs underlying the award on the first, second and third
anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers
had met their individual performance goals for the applicable years and continued service through such vesting date. In
February 2022, 2023 and 2024, the Compensation Committee made the determination that the executive officers other than the
CEO, CFO and COO met their individual performance goals for 2021, 2022 and 2023, respectively, and therefore one-third of
their 2021 PRSUs vested during each of 2022, 2023 and 2024. For the CEO, COO and the CFO, the PRSUs cliff-vested on
March 8, 2024, subject to continued service through such vesting date and the achievement of minimum three-year cumulative
adjusted revenue dollar target growth rate and adjusted EPS dollar target growth rate targets, commencing on January 1, 2021
and ending on December 31, 2023, which when reviewed against a predetermined vesting matrix could have resulted in the
vesting of 0% to 250% of the awarded PRSUs. The performance period related to the 2021 CEO, COO and CFO PRSUs ended
on December 31, 2023 and in February 2024 the Compensation Committee determined that 110% of the awarded PRSUs were
earned based on the actual cumulative adjusted revenue dollar target growth rate and adjusted EPS dollar target growth rate
achieved during the performance period.
In 2020, we granted PRSUs to our executive officers. For the executive officers other than the CEO, COO and the
CFO, the PRSUs vested as to one-third of the total number of PRSUs underlying the award on the first, second and third
anniversaries of the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers
had met their individual performance goals for the applicable years and continued service through such vesting date. In
February 2021, 2022, and 2023, the Compensation Committee made the determination that the executive officers other than the
CEO, CFO and COO met their individual performance goals for 2021, 2022 and 2023, respectively, and therefore one-third of
their 2020 PRSUs awarded vested during 2021, 2022 and 2023. For the CEO, COO and the CFO, the PRSUs cliff-vested on
March 6, 2023, subject to continued service through such vesting date and the achievement of minimum three-year cumulative
adjusted revenue dollar target growth rate and adjusted EPS dollar target growth rate targets, which when reviewed against a
predetermined vesting matrix such PRSUs originally had the potential to vest from 0% to 250% of the awarded PRSUs. During
February 2021, the Compensation Committee, modified the potential vesting percentages related to the 2020 PRSU awards for
the CEO, COO and CFO, as the original potential percentages were established immediately before the onset of the COVID-19
pandemic. The Compensation Committee determined to adjust the CEO, COO and CFO's potential to earn from between 0%
and 250% of the awarded PRSUs, to an increased potential to earn between 50% and 300% of the award granted, subject to the
same minimum threshold revenue and EPS targets set forth above to be achieved by the Company. The additional
compensation expense as a result of modifying the 2020 PRSUs granted to our CEO, COO and CFO totaled $2.1 million
recognized over the remaining amortization period from the date of modification. The performance period related to the 2020
CEO, COO and CFO PRSUs ended on December 31, 2022 and in February 2023 the Compensation Committee determined that
188% of the awarded PRSUs were earned based on the actual cumulative adjusted revenue dollar growth rate and adjusted EPS
dollar target growth rate achieved during the performance period.
In 2019, we granted PRSUs to our executive officers. For the executive officers other than the CEO and the COO, the
PRSUs vested as to one-third of the total number of PRSUs underlying the award on the first, second and third anniversaries of
the applicable grant date, subject to a determination by the CEO and Compensation Committee that the officers had met their
individual performance goals for the applicable years and continued service through such vesting date. In February 2020, 2021
and 2022, the Compensation Committee made the determination that the executive officers other than the CEO and COO met
their individual performance goals for 2019, 2020 and 2021, respectively, and therefore one-third of their 2019 PRSUs awarded
vested during 2020, 2021 and 2022. For the CEO and the COO, the PRSUs were to cliff-vest on March 6, 2022, subject to
continued service through such vesting date and the achievement of a minimum Cumulative Adjusted EBITDA growth target
over the performance period. If, for the three-year period ending on December 31, 2021, the Cumulative Adjusted EBITDA had
a growth of at least 6% to 8%, 50% of the awarded PRSUs would have vested. If, on the vesting date, the Cumulative Adjusted
EBITDA had a growth of between 8% to 10%, 100% of the awarded PRSUs would have vested. If, on the vesting date, the
Cumulative Adjusted EBITDA had a growth of over 10%, 200% of the awarded PRSUs would have vested. The performance
period related to the 2019 CEO and COO PRSUs ended on December 31, 2021 and in February 2022 the Compensation
Committee determined that zero PRSUs were earned based on the actual Cumulative Adjusted EBITDA growth achieved
during the performance period. In 2019, we also granted PRSUs to one of our non-executive employees. These PRSUs vested at
the end of a three-year period ending on March 31, 2022, based on meeting certain minimum performance goals.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
92
Restricted stock units are granted annually to our non-employee directors and vest on the first anniversary of the grant
date, or the date of our annual meeting, whichever occurs first.
In 2024, 2023 and 2022, we granted RSUs to certain employees that typically vest ratably on the anniversary of the
grant over three years. We recognize forfeitures as they occur.
The grant-date fair market value of our PRSUs and RSUs is determined by our stock price on the grant date.
The table below summarizes our restricted stock award activity (dollars in thousands):
Year ended December 31,
2024
2023
2022
PRSU
Shares granted
150,218
78,213
60,383
Shares earned (1)
142,735
49,314
46,317
Grant-date fair value per share
$
104.52 $
190.02 $
230.31
Grant-date fair value
$
15,701 $
14,862 $
13,907
Intrinsic value vested
$
15,145 $
8,024 $
10,487
RSU
Shares granted
223,899
156,111
116,870
Grant-date fair value per share
$
105.94 $
173.10 $
221.65
Grant-date fair value
$
23,721 $
27,024 $
25,905
Intrinsic value vested
$
11,963 $
14,179 $
16,438
_______________________________
(1)
PRSU shares earned in 2024 were related to performance awards granted to executives and certain other employees in 2021, 2022 and
2023. PRSU shares earned in 2023 were related to performance awards granted to executives in 2020 and 2021 and performance awards
granted to a non-executive employees in 2022. PRSU shares earned in 2022 were related to performance awards granted to executives in
2019, 2020 and 2021 and performance award granted to a non-executive employee in 2019, 2020, and 2021.
The table below provides a summary of our PRSU and RSU activity as of and for the year ended December 31, 2024:
Number of
Units
Grant-Date
Fair Value Per
Share
Weighted-
Average
Contractual
Life (Years)
Aggregate
Intrinsic
Value (in
thousands)
Non-vested at December 31, 2023
448,601 $
199.68
Change in units due to performance expectations (1)
2,081 $
198.05
Granted
374,117 $
105.37
Vested
(258,756) $
207.72
Forfeited
(15,032) $
140.87
Non-vested and expected to vest at December 31, 2024
551,011 $
133.47
1.0
$
85,500
_______________________________
(1)
Relates to adjustments to 2021 PRSUs granted to executives that vested during 2024.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
93
ESPP
We have an ESPP under which U.S. employees may purchase up to $25,000 annually of common stock at 85% of its
fair market value at the beginning or the end of a six-month offering period, whichever is lower. There were 750,000 shares of
common stock reserved for issuance under the ESPP, which is subject to an annual increase of the least of 300,000 shares, two
percent of the shares outstanding or such a number as determined by the Board. To date, there have been no increases. The
ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue
Code. We suspended our ESPP in 2017. All shares unissued under the plan expired during 2022.
NOTE 9. DERIVATIVES AND HEDGING ACTIVITIES
Hedge Accounting and Hedging Program
The purposes of our cash flow hedging programs are to manage the foreign currency exchange rate risk on forecasted
revenues and expenses denominated in currencies other than the functional currency of the operating unit, and to manage
floating interest rate risk associated with future interest payments on variable-rate term loans issued in 2022. We do not issue
derivatives for trading or speculative purposes.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the
hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. The derivative
instruments we utilize, including various foreign exchange contracts and interest rate swaps, are designated and qualify as cash
flow hedges. Our derivative instruments are recorded at fair value on the consolidated balance sheets and are classified based on
the instrument's maturity date. We record changes in the fair value of the effective portion of the gain or loss on the derivative
instrument as a component of other comprehensive (loss) income and we reclassify that gain or loss into earnings in the same
line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings.
Foreign Currency Exchange Rate Risk
Foreign Exchange Forward Contracts
We enter into foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated
revenues and expenses to minimize the effect of foreign exchange rate movements on the related cash flows. These contracts
are agreements to buy or sell a quantity of a currency at a predetermined future date and at a predetermined exchange rate. Our
current foreign exchange forward contracts hedge exposures principally denominated in Mexican Pesos ("MXN"), Euros,
Japanese Yen ("JPY"), Chinese Renminbi ("CNH"), Canadian Dollar ("CAD"), U.S. Dollar ("USD") and Australian Dollar
("AUD") and have varying maturities with an average term of approximately eleven months. The total notional amount of these
outstanding derivative contracts as of December 31, 2024 was $112.5 million, which included the notional equivalent of
$53.4 million in MXN, $6.9 million in Euros, $6.5 million in CAD, $6.4 million in AUD, $30.6 million in USD and
$8.7 million in other foreign currencies, with terms currently through December 2025.
Cross-currency Par Forward Contracts
We entered into cross-currency par forward contracts to hedge a portion of our Mexico forecasted expenses
denominated in MXN. These contracts are agreements to exchange cash flows from one currency to another at specified
intervals over the contract term with all exchanges occurring at the same predetermined rate.
In November 2021, we entered into a one-year cross-currency par forward contract. The total notional amount of this
outstanding derivative as of December 31, 2021 was approximately 413.1 million MXN. The term of this one-year contract was
December 1, 2021 to December 1, 2022. The derivative instrument matured in equal monthly amounts at a fixed forward rate of
21.60 MXN/USD.
Floating Interest Rate Risk
In 2022, we entered into interest rate swaps to reduce the interest rate volatility on our variable-rate term loan A and
variable-rate term loan B (see Note 13: Long-Term Obligations). We exchange, at specified intervals, the difference between
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
94
fixed and floating interest amounts calculated by reference to an agreed-upon notional amount. Effective March 30, 2022, the
term loan A swap, as amended, has an initial notional amount of $300.0 million, reducing to $150.0 million evenly on a
quarterly basis through its final maturity on March 30, 2027. We pay a fixed rate of 1.32% and will receive the greater of 3-
month USD SOFR or (0.15)%. The total notional amount of this outstanding derivative as of December 31, 2024 was
approximately $213.2 million. Effective March 30, 2022, the term loan B swap, as amended, has an initial notional amount of
$750.0 million, reducing to $46.9 million evenly on a quarterly basis through its final maturity on March 30, 2026. We pay a
fixed rate of 1.17% and receive the greater of 3-month USD SOFR or 0.35%. The total notional amount of this outstanding
derivative as of December 31, 2024 was approximately $234.4 million. In June 2023, we entered into an additional interest rate
swap that hedges both term loan A and term loan B interest payments. The total notional amount of the swap is $300.0 million.
The hedge matures on June 30, 2028. We pay a fixed rate of 3.88% and receive 3-months USD SOFR. These forward-starting
swaps effectively convert the relevant portion of the floating-rate term loans to fixed rates.
The following table presents the fair values of our derivative instruments included within the consolidated balance
sheets (in thousands):
Derivatives Designated as Cash Flow
Hedging Instruments
Consolidated Balance Sheet Location
Foreign Exchange
Forward Contracts
Interest Rate Swaps
Gross Derivatives
As of December 31, 2024
Prepaid expenses and other current assets
$
6,716
$
11,038
$
17,754
Other assets
—
5,724
5,724
Total assets
$
6,716
$
16,762
$
23,478
Accrued liabilities
$
7,391
$
—
$
7,391
Total liabilities
$
7,391
$
—
$
7,391
Derivatives Designated as Cash Flow
Hedging Instruments
As of December 31, 2023
Foreign Exchange
Forward Contracts
Forward-Starting
Interest Rate Swaps
Gross Derivatives
Prepaid expenses and other current assets
$
6,785
$
23,065
$
29,850
Other assets
673
4,876
5,549
Total assets
$
7,458
$
27,941
$
35,399
Accrued liabilities
$
2,590
$
—
$
2,590
Other long-term liabilities
240
—
240
Total liabilities
$
2,830
$
—
$
2,830
The following table presents the effects of our derivative instruments designated as cash flow hedges on the
Consolidated Statements of Operations (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
95
Gain Reclassified From Accumulated Other Comprehensive (Loss) Income into
Income
Location of Gain in the
Consolidated Statements of
Operations
Year Ended December 31,
2024
2023
2022
Derivatives designated as cash flow hedging
instruments:
Foreign exchange forward contracts
Total revenues
$
2,981
$
296
$
3,829
Foreign exchange forward contracts
Cost of goods sold
91
7,852
7,751
Foreign exchange forward contracts
Other expense, net(1)
—
229
—
Foreign exchange forward contracts
Interest expense(2)
—
13
717
Interest rate swaps
Interest expense
27,132
32,444
6,122
Total derivatives designated as cash flow
hedging instruments
$
30,204
$
40,834
$
18,419
_______________________________
(1) Represents location of gain reclassified from accumulated other comprehensive (loss) income into other expense, net as a
result of ineffectiveness.
(2) Represents location of gain reclassified from accumulated other comprehensive (loss) income into interest expense as a
result of a forecasted transaction being no longer probable of occurring.
We recognized the following (losses) gains on our derivative instruments designated as cash flow hedges in other
comprehensive loss before reclassifications to income (in thousands):
Amount of Gain Recognized in Other
Comprehensive Loss
Year Ended December 31,
2024
2023
2022
Derivatives designated as cash flow hedging instruments:
Foreign exchange forward contracts
$
(1,912) $
10,788
$
9,588
Interest rate swaps
15,954
5,200
62,786
Total derivatives designated as cash flow hedging instruments
$
14,042
$
15,988
$
72,374
As of December 31, 2024, we expect an estimated $0.7 million in deferred losses on the outstanding foreign exchange
forward contract and an estimated $11.4 million in deferred gains on the forward-starting interest rate swaps will be reclassified
from accumulated other comprehensive loss to net income during the next 12 months concurrent with the underlying hedged
transactions also being reported in net (loss) income.
NOTE 10. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy,
which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon
the lowest level of input that is available and significant to the fair value measurement:
•
Level 1: quoted prices in active markets for identical assets or liabilities;
•
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active
markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not
active, or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities; or
•
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values
of the assets or liabilities.
Contingent earn-out liabilities
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
96
In August 2021, we entered into an agreement with one of our international distributors whereby that distributor would
not compete with us in a specific territory for a three-year period that ended September 2024. The terms of the agreement
included a contingent earn-out payment. The contingent earn-out payment could not exceed $6.0 million and was to be earned
based on certain revenue targets over a twelve-month measurement period determined by the highest four consecutive quarters
commencing over a two-year period starting on the closing date of the agreement and provided that the distributor is in
compliance with its obligations under the agreement. The estimated fair value of the contingent earn-out was calculated using a
probability-weighted cash flow model based on historical revenue streams and the likelihood that the revenue targets will be
met. As of December 31, 2023, the earn-out measurement period ended. The fair value of the contingent earn-out was
determined to be $3.4 million and was paid out in the first quarter of 2024.
In November 2021, we acquired a small foreign infusion systems supplier. Total consideration for the acquisition
includes a potential earn-out payment of up to $2.5 million, consisting of (i) a cash payment of $1.0 million contingent on the
achievement of certain revenue targets for the annual period ending December 31, 2022 and, separately, (ii) a cash payment of
$1.5 million contingent on obtaining certain product-related regulatory certifications by May 26, 2024. As of December 31,
2022, the measurement period related to the contingent earn-out based on certain revenue targets ended and based on the actual
revenue achieved during the measurement period, the fair value of the contingent earn-out was determined to be zero as the
minimum threshold for earning the earn-out was not met. As of December 31, 2024, the earn-out measurement period related to
certain product-related regulatory certifications had ended and the product-related regulatory certification had not been
achieved, accordingly, the estimated fair value for the contingent consideration was reduced to zero.
In 2022, we acquired Smiths Medical with a combination of cash consideration and share consideration issued at
closing. Total consideration for the acquisition included a potential earn-out payment of $100.0 million in cash contingent on
our common stock achieving a certain volume-weighted average price (the "Price Targets") from the closing date to either the
third or fourth anniversary of closing and provided Smiths beneficially owns at least 50.0% of the shares of common stock
issued at closing at the time the Price Target is achieved. The initial estimated fair value of the earn-out was determined to be
$53.5 million using a Monte Carlo simulation model. The model utilized several assumptions including volatility and the risk-
free interest rate. The assumed volatility is based on the average of the historical volatility of our common stock price and the
implied volatility of certain at-the-money traded options. The risk-free interest rate is equal to the yield on U.S. Treasury
securities at constant maturity for the period commensurate with the term of the earn-out. At each reporting date subsequent to
the acquisition, we remeasured the earn-out liability and recognized any changes in its fair value in our consolidated statements
of operations. If the probability of achieving the Price Targets during their respective measurement periods was significantly
greater than initially anticipated, the realization of an additional liability and related expense would have had a significant
impact on our consolidated financial statements in the period recognized. As of December 31, 2023, the estimated fair value of
the contingent earn-out was $4.0 million. During 2024, Smiths sold all of their remaining shares of common stock of ICU
Medical, Inc. The sale of these shares rendered Smiths unable to achieve the contingent consideration based on certain price
targets during the third and fourth anniversary of closing as Smiths no longer met the required minimum beneficial ownership
percentage. Accordingly, the valuation of the contingent earn-out liability as of December 31, 2024 was zero.
Our contingent earn-out liabilities are separately stated on our consolidated balance sheets.
The following table provides a reconciliation of our Level 3 earn-out liabilities measured at estimated fair value based
on an initial valuation and updated quarterly for the years ended December 31, 2024, 2023 and 2022 (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
97
Earn-out Liability
Contingent earn-out liability, January 1, 2022
$
2,589
Acquisition date fair value estimate of earn-out(1)
55,158
Change in fair value of contingent earn-out (included in income from operations as a separate line item)(2)
(32,091)
Currency translation
(84)
Contingent earn-out liability, December 31, 2022
25,572
Change in fair value of contingent earn-out (included in income from operations as a separate line item)(3
(16,247)
Other(4)
(496)
Transfer of Mediverse earn-out liability into Level 2(5)
(3,379)
Currency translation
41
Contingent earn-out liability, December 31, 2023
5,491
Change in fair value of contingent earn-out (included in income from operations as a separate line item)(6)
(5,399)
Currency translation
(92)
Contingent earn-out liability, December 31, 2024
$
—
_______________________________
(1)
$53.5 million relates to our acquisition of Smiths Medical and $1.6 million relates to our acquisition of a small foreign
infusions systems supplier in the fourth quarter of 2021 (see Note 2: Acquisitions).
(2) Primarily relates to the change in fair value of our Smiths Medical earn-out and an adjustment to reduce to zero a
contingent earn-out issued as part of the 2021 acquisition of a small foreign infusion systems supplier. The contingent earn-
out was not earned based on our determination that the threshold target was not met.
(3) Primarily relates to the change in fair value of our Smiths Medical earn-out.
(4)
Primarily relates to the reclassification to accrued liabilities of a holdback liability not subject to unobservable inputs when
determining the fair market value.
(5)
The Mediverse earn-out was transferred out of Level 3 and into Level 2 in the fourth quarter of 2023 when the amount of
the actual payment was known, and subsequently settled during first quarter of 2024.
(6) Relates to the change in fair value of our Smiths Medical earn-out and the earn-out with one of our small foreign infusion
systems suppliers, both of which were written down to zero as of December 31, 2024.
The following table provides quantitative information about Level 3 inputs for fair value measurement of our earn-out
liabilities related to Smiths Medical:
Smiths Medical Earn-out
As of
December 31, 2023
Simulation Input
Volatility
47.00 %
Risk-Free Rate
4.18 %
Investments, Foreign Currency Contracts and Interest Rate Contracts
Our investments historically consist of corporate, government bonds and U.S. treasury securities. The fair value of our
corporate and government bonds are estimated using observable market-based inputs such as quoted prices, interest rates and
yield curves or Level 2 inputs. The fair value of our U.S. treasury securities are based on quoted market prices in active markets
and are included in the Level 1 fair value hierarchy.
The fair value of our Level 2 forward currency contracts is estimated using observable market inputs such as known
notional value amounts, spot and forward exchange rates. These inputs relate to liquid, heavily traded currencies with active
markets which are available for the full term of the derivative.
The fair value of our Level 2 interest rate swaps is estimated using a pricing model that reflects the terms of the
contracts, including the period to maturity, and relies on observable market inputs such as known notional value amounts and
USD interest rate curves.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
98
Other than the Mediverse earn-out liability described above, there were no transfers between levels in 2024 or 2023.
Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1, 2 and 3 inputs
as defined above) (in thousands):
Fair value measurements as of December 31, 2024
Total carrying
value
Quoted prices
in active
markets for
identical
assets (level 1)
Significant
other
observable
inputs (level 2)
Significant
unobservable
inputs (level 3)
Assets:
Foreign exchange forwards:
Prepaid expenses and other current assets $
6,716 $
— $
6,716 $
—
Interest rate contracts:
Prepaid expenses and other current assets
11,038
—
11,038
—
Other assets
5,724
—
5,724
—
Total Assets
$
23,478 $
— $
23,478 $
—
Liabilities:
Foreign exchange contracts:
Accrued liabilities
$
7,391 $
— $
7,391 $
—
Total Liabilities
$
7,391 $
— $
7,391 $
—
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
99
Fair value measurements as of December 31, 2023
Total carrying
value
Quoted prices
in active
markets for
identical
assets (level 1)
Significant
other
observable
inputs (level 2)
Significant
unobservable
inputs (level 3)
Assets:
Available-for-sale debt securities:
Short-term corporate bonds
$
501 $
— $
501 $
—
Foreign exchange forwards:
Prepaid expenses and other current assets
6,785
—
6,785
—
Other assets
673
—
673
—
Interest rate contracts:
Prepaid expenses and other current assets
23,065
—
23,065
—
Other assets
4,876
—
4,876
—
Total Assets
$
35,900 $
— $
35,900 $
—
Liabilities:
Contingent earn-out liability-ST
$
4,879
$
3,379 $
1,500
Contingent earn-out liability - LT
3,991 $
—
— $
3,991
Foreign exchange contracts:
Accrued liabilities
2,590
—
2,590
—
Other long-term liabilities
240
—
240
—
Total Liabilities
$
11,700 $
— $
6,209 $
5,491
NOTE 11. PREPAID EXPENSES AND OTHER CURRENT ASSETS AND OTHER ASSETS
Prepaid expenses and other current assets consist of the following (in thousands):
As of December 31,
2024
2023
Other prepaid expenses and receivables*
$
15,423 $
17,833
Prepaid vendor expenses
1,889
1,309
Deferred costs
9,060
1,668
Prepaid insurance and property taxes*
10,284
9,547
VAT/GST receivable
4,445
2,748
Deferred tax charge
5,511
5,822
Foreign exchange forward contract
6,716
6,785
Interest rate contracts
11,038
23,065
Deposits*
1,207
1,196
Other
4,714
3,667
$
70,287 $
73,640
____________________________
*As of December 31, 2024, certain prepaid expense account balances that are part of a disposal group that met the criteria for
assets held for sale during the fourth quarter of 2024 were combined with other disposal group assets and presented as a
separate line item "Assets Held For Sale" in our consolidated balance sheet (See Note 4:Assets Held For Sale).
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
100
Other assets consist of the following (in thousands):
As of December 31,
2024
2023
Pump lease receivables
$
23,631 $
30,627
Spare parts*
28,632
46,496
Equity method investments
3,038
3,120
Interest rate contracts
5,724
4,876
Deferred debt issuance costs
1,719
3,439
Finance lease right-of-use assets
3,259
2,707
Other
2,132
2,755
$
68,135 $
94,020
____________________________
*As of December 31, 2024, spare parts account balances that are part of a disposal group that met the criteria for assets held for
sale during the fourth quarter of 2024 were combined with other disposal group assets and presented as a separate line item
"Assets Held For Sale" in our consolidated balance sheet (See Note 4:Assets Held For Sale).
NOTE 12. ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES
Accrued liabilities consist of the following (in thousands):
As of December 31,
2024
2023
Salaries and benefits
$
60,815 $
52,250
Incentive compensation
59,445
37,992
Operating lease liability-ST
15,695
20,161
Accrued professional fees
3,167
2,803
Field service corrective action(1)
32,844
30,281
Italy medical device payback provision(2)
23,937
23,176
Legal accrual
3,425
1,874
Accrued sales taxes
4,449
6,748
Warranties and returns
4,094
3,682
Deferred revenue
30,358
31,640
Accrued other taxes
4,564
3,024
Distribution fees
16,548
13,049
Accrued freight
13,206
17,215
Restructuring accrual
9,945
3,568
Foreign exchange contracts
7,391
2,590
Accrued audit fees
4,395
5,492
Defined benefit plan
3,111
2,575
Accrued interest
667
1,431
Other
8,867
8,664
$
306,923 $
268,215
_____________________________
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
101
(1) Primarily includes field corrective actions associated with certain products in connection with a 2021 Warning Letter (as defined below)
received by Smiths Medical from the FDA following an inspection of Smiths Medical's Oakdale, Minnesota Facility (see Note 16:
Commitments and Contingencies for further details).
(2) Related to potential payments associated with the IMDP (as defined below) as a result of 2015 legislation enacted requiring medical device
companies to make payments to the Italian government based on regional expenditure ceilings (see Note 16: Commitments and Contingencies
for further details).
As of December 31, 2024, certain accrued liability account balances that are part of a disposal group that met the
criteria for assets held for sale during the fourth quarter of 2024 were presented as a separate line item "Liabilities held for sale"
in our consolidated balance sheet (See Note 4:Assets Held For Sale).
Other long-term liabilities consist of the following (in thousands):
As of December 31,
2024
2023
Operating lease liability-LT
$
40,777 $
52,972
Finance lease liability-LT
2,332
1,954
Deferred revenue
9,045
10,585
Benefits
3,830
4,207
Field service corrective action(1)
6,401
26,056
Accrued rent
618
841
Other
3,742
3,882
$
66,745 $
100,497
_______________________________
(1) Primarily related to field corrective actions associated with certain products in connection with a 2021 Warning Letter (as
defined below) received by Smiths Medical from the FDA following an inspection of Smiths Medical's Oakdale,
Minnesota Facility (see Note 16: Commitments and Contingencies for further details).
NOTE 13. LONG-TERM OBLIGATIONS
2022 Credit Agreement
In 2022, in connection with the acquisition of Smiths Medical, we entered into a Credit Agreement (the "Credit
Agreement") with Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, Barclays Bank PLC and certain other
financial institutions (the “Lenders”) for $2.2 billion of senior secured credit facilities. The senior secured credit facilities
include (i) a five-year Tranche A term loan of $850.0 million (the "Term Loan A"), (ii) a seven-year Tranche B term loan of
$850.0 million (the "Term Loan B") and (iii) a five-year revolving credit facility of $500.0 million (the "Revolving Credit
Facility"), with separate sub-limits of $50.0 million for letters of credit and swingline loans (collectively, the "Senior Secured
Credit Facilities"). We used the proceeds from borrowings under the Term Loan A and the Term Loan B (collectively, the
"Term Loans") to fund a portion of the cash consideration for the purchase of Smiths Medical and the related fees and expenses
incurred in connection with the acquisition. We did not incur borrowings under the Revolving Credit Facility on the closing
date of the acquisition. The proceeds from any future borrowings under the Revolving Credit Facility may be used for working
capital and other general corporate purposes.
In connection with entering into the Credit Agreement, in 2022, we incurred $37.8 million in debt discount and
issuance costs, which were allocated to the Term Loan A, the Term Loan B and the Revolving Credit Facility based on lender
commitment amounts relative to each type of fees paid. The lender and third-party discount and issuance costs allocated to the
Term Loan A and the Term Loan B were $15.8 million and $13.4 million, respectively, the current unamortized balances are
reflected as a direct deduction from the face amount of the corresponding term loans on the consolidated balance sheet. These
costs are being amortized to interest expense over the respective terms of the loans using the effective interest method. The
issuance costs allocated to the Revolving Credit Facility were $8.6 million, which are capitalized and included in prepaid
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102
expenses and other current assets and other assets on our consolidated balance sheets. These costs are being amortized to
interest expense over the term of the Revolving Credit Facility using the straight-line method.
The net funds received from the Term Loan A and the Term Loan B, after deducting debt issuance costs, were
$834.2 million and $836.6 million, respectively.
Maturity Dates
The maturity date for the Term Loan A and the Revolving Credit Facility is January 6, 2027 and the maturity date for
the Term Loan B is January 6, 2029. Pursuant to the terms and conditions of the Credit Agreement, the maturity dates of the
Term Loans and the Revolving Credit Facility may be extended upon our request, subject to the consent of the Lenders.
Interest Rate Terms
In general, the Term Loans and borrowings under the Revolving Credit Facility denominated in U.S. dollars bear
interest, at our option, on either: (1) the Base Rate, as defined below, plus the applicable margin, as indicated below ("Base Rate
Loans") or (2) the Adjusted Term Secured Overnight Financing Rate ("Adjusted Term SOFR"), as defined below, plus the
applicable margin, as indicated below ("Term SOFR Loans").
The Base Rate is defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) Adjusted
Term SOFR (as defined below) for a one-month period plus, in each case, 1.00%.
Adjusted Term SOFR is the rate per annum equal to (a) the Term SOFR plus (b) the Term SOFR Adjustment. Term
SOFR is the forward-looking term rate based on SOFR and is calculated separately for Term SOFR Loans and Base Rate
Loans, as specified in the Credit Agreement. The Term SOFR Adjustment is a percentage per annum of 0.10% for Base Rate
Loans and between 0.10% to 0.25% for Term SOFR Loans based on the applicable interest period.
Revolving Credit Facility Commitment Fee
The Revolving Credit Facility has a per annum commitment fee at an initial rate of 0.25% which is applied to the
available amount of the Revolving Credit Facility. Effective on the first Adjustment Date, as defined in the Credit Agreement,
occurring subsequent to our quarter ended June 30, 2022, the commitment fee is determined by reference to the leverage ratio in
effect from time to time as set forth in the table below.
Applicable Interest Margins
The Term Loan A and borrowings under the Revolving Credit Facility have an initial applicable margin of 0.75% per
annum for Base Rate Loans and 1.75% per annum for Term SOFR Loans.
Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended
June 30, 2022, the applicable margin for the Term Loan A and borrowings under the Revolving Credit Facility is determined by
reference to the leverage ratio in effect from time to time as set forth in the following table:
Leverage Ratio
Applicable Margin
for Term SOFR
Loans
Applicable Margin
for Base Rate Loans
Commitment Fee
Rate
Greater than 4.00 to 1.0
2.25%
1.25%
0.35%
Less than or equal to 4.00 to 1.0 but greater than
3.00 to 1.0
2.00%
1.00%
0.30%
Less than or equal to 3.00 to 1.0 but greater than
2.50 to 1.0
1.75%
0.75%
0.25%
Less than or equal to 2.50 to 1.0 but greater than
2.00 to 1.0
1.50%
0.50%
0.20%
Less than or equal to 2.00 to 1.0
1.25%
0.25%
0.15%
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
103
The Term Loan B has an initial applicable margin of 1.5% per annum for Base Rate Loans and 2.5% per annum for
Term SOFR Loans.
Effective on the first Adjustment Date, as defined in the Credit Agreement, occurring subsequent to our quarter ended
June 30, 2022, the applicable margin for the Term Loan B is determined by reference to the leverage ratio in effect from time to
time as set forth in the following table:
Leverage Ratio
Applicable Margin
for Term SOFR
Loans
Applicable Margin
for Base Rate Loans
Greater than 2.75 to 1.0
2.50%
1.50%
Less than 2.75 to 1.0
2.25%
1.25%
Principal Payments
Principal payments on the Term Loans are due on the last day of each calendar quarter commencing on June 30, 2022.
The Term Loan A amortizes in nineteen consecutive quarterly installments in an amount equal to 2.50% of the original
principal amount in each of the first two years, 5.00% in each of the third and fourth years and 7.50% in the fifth year, with a
final payment of the remaining outstanding principal balance due on the maturity date.
The Term Loan B matures in twenty-seven consecutive quarterly installments in an amount equal to 0.25% of the
original principal amount, with a final payment of the remaining outstanding principal balance due on the maturity date.
We may borrow, prepay and re-borrow amounts under the Revolving Credit Facility, in accordance with the terms and
conditions of the Credit Agreement, with all outstanding amounts due at maturity.
During March 2022, we prepaid $16.0 million in principal payments on the Term Loan A principal balance. For the
years ended December 31, 2024, 2023 and 2022, total principal payments on both Term Loans was $51.0 million, $29.7 million
and $22.4 million, respectively.
Interest Payments
Interest payments on Base Rate Loans are payable quarterly in arrears on the last business day of each calendar quarter
and the applicable maturity date. Interest periods on Term SOFR Loans are determined, at our option, as either one, three or six
months and will be payable on the last day of each interest period and the applicable maturity date. In the case of any interest
periods of more than three months' duration, the interest payment are payable on each day prior to the last day of such interest
period that occurs at three-month intervals.
The commitment fee on the Revolving Credit Facility is payable quarterly in arrears on the third business day
following the last day of each calendar quarter and at the maturity date. The commitment fee is included in interest expense in
our consolidated statements of operations.
Guarantors and Collateral
Our obligations under the Credit Agreement are unconditionally guaranteed, on a joint and several basis, by ICU
Medical, Inc. and certain of our existing subsidiaries.
Debt Covenants
The Credit Agreement contains affirmative and negative covenants, including certain financial covenants. The
negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger and acquisition
transactions, asset sales and other dispositions, other investments, dividends, share purchases and payments affecting
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
104
subsidiaries, changes in nature of business, fiscal year or organizational documents, prepayments and redemptions of
subordinated and other junior debt, transactions with affiliates, and other matters.
The financial covenants include the Senior Secured Leverage Ratio and the Interest Coverage Ratio, both defined
below, and pertain to the Term Loan A and the Revolving Credit Facility.
The Senior Secured Leverage Ratio is defined, at any measurement date, as the ratio of: (a) all Funded Debt, as defined
in the Credit Agreement, that is secured by a lien on any asset or property minus the lesser of (i) all unrestricted cash and cash
equivalents and (ii) $500.0 million, to (b) Consolidated EBITDA, as defined in the Credit Agreement, for the most recently
completed four fiscal quarters, calculated on a pro forma basis. The maximum Senior Secured Leverage Ratio was 4.50 to 1.00
until June 30, 2024. Thereafter, the maximum Senior Secured Leverage Ratio is 4.00 to 1.00, with limited permitted exception.
The Interest Coverage ratio is defined, at any measurement date, as the ratio of Consolidated EBITDA, as defined in
the Credit Agreement, to Consolidated Interest Expense, as defined in the Credit Agreement, paid or payable in cash, for the
most recently completed four fiscal quarters. The minimum Interest Coverage ratio is 3.00 to 1.00.
We were in compliance with all financial covenants as of December 31, 2024.
The Credit Agreement contains customary events of default, including, among others: non-payments of principal and
interest; breach of representations and warranties; covenant defaults; cross-defaults and cross-acceleration to certain other
material indebtedness; the existence of bankruptcy or insolvency proceedings; certain events under ERISA; material judgments;
and a change of control. If an event of default occurs and is not cured within any applicable grace period or is not waived, the
administrative agent and the Lenders are entitled to take various actions, including, without limitation, the acceleration of all
amounts due and the termination of commitments under the Senior Secured Credit Facilities.
The carrying values of our long-term debt consist of the following (in thousands):
2024 Effective
Interest Rate
As of December 31,
2023 Effective
Interest Rate
2024
2023
Senior Secured Credit Facilities:
Term Loan A — principal
8.03 % $
770,313 $
812,813
7.67 %
Term Loan B — principal
8.38 %
826,625
835,125
8.00 %
Revolving Credit Facility — principal
— %
—
—
— %
Less unamortized debt issuance costs(1)
(14,080)
(19,168)
Total carrying value of long-term debt
1,582,858
1,628,770
Less current portion of long-term debt
51,000
51,000
Long-term debt, net
$
1,531,858 $
1,577,770
_______________________________
(1)
In 2024, comprised of $6.1 million and $8.0 million relating to the Term Loan A and the Term Loan B, respectively. In
2023, comprised of $9.3 million and $9.9 million relating to the Term Loan A and the Term Loan B, respectively.
As of December 31 2024, the aggregate amount of principal repayments of our long-term debt (including any current
portion) for each of the next five years is approximately (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
105
2025
$
51,000
2026
72,250
2027
672,563
2028
8,500
2029
792,625
Thereafter
—
Total
$
1,596,938
The following table presents the total interest expense related to our long-term debt (in thousands):
Year Ended December 31,
2024
2023
2022
Contractual interest
$
125,012 $
125,550 $
66,770
Amortization of debt issuance costs
6,807
6,814
6,972
Commitment fee — Revolving Credit Facility
1,524
1,518
1,290
Total long-term debt-related interest expense
$
133,343 $
133,882 $
75,032
NOTE 14. INCOME TAXES
Income from continuing operations before taxes consisted of the following (in thousands):
Year Ended December 31,
2024
2023
2022
United States
$
(116,024) $
(136,980) $
(135,646)
Foreign
50,012
58,681
21,237
$
(66,012) $
(78,299) $
(114,409)
The provision (benefit) for income taxes consisted of the following (in thousands):
Year Ended December 31,
2024
2023
2022
Current:
Federal
$
16,589 $
(8,235) $
4,128
State
4,256
5,035
3,799
Foreign
25,164
24,500
12,924
$
46,009 $
21,300 $
20,851
Deferred:
Federal
$
1,294 $
(43,042) $
(42,012)
State
14,850
(14,657)
(11,239)
Foreign
(10,477)
(12,245)
(7,723)
5,667
(69,944)
(60,974)
$
51,676 $
(48,644) $
(40,123)
We have accrued for tax contingencies for potential tax assessments, and in 2024 we recognized a $5.7 million net
decrease, most of which related to federal, state, and foreign tax reserves net of the release of various federal and foreign tax
reserves.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106
A reconciliation of the provision for income taxes at the statutory rate to our effective tax rate is as follows (dollars in
thousands):
Year Ended December 31,
2024
2023
2022
Amount
Percent
Amount
Percent
Amount
Percent
Federal tax at the expected statutory rate
$
(13,862)
21.0 % $
(16,443)
21.0 % $
(24,026)
21.0 %
State income tax, net of federal effect
701
(1.1) %
(6,057)
7.7 %
(5,050)
4.4 %
Tax credits
(10,985)
16.6 %
(9,824)
12.5 %
(3,636)
3.2 %
Global intangible low-taxed income
2,977
(4.5) %
(2,658)
3.4 %
2,303
(2.0) %
Foreign income tax differential
(4,231)
6.4 %
(2,506)
3.2 %
(2,943)
2.5 %
Stock-based compensation
2,824
(4.3) %
(289)
0.4 %
(3,721)
3.2 %
Foreign-derived intangible income
(3,756)
5.7 %
(3,299)
4.2 %
(2,269)
2.0 %
Transaction cost
—
— %
—
— %
2,299
(2.0) %
Contingent consideration
(838)
1.3 %
(3,407)
4.4 %
(6,830)
6.0 %
Section 162(m)
1,880
(2.8) %
3,268
(4.2) %
3,942
(3.4) %
Tax reserve releases
(2,216)
3.3 %
(6,884)
8.8 %
(1,834)
1.6 %
Legal Settlement
(2,100)
3.2 %
—
— %
—
— %
Valuation allowance
81,713 (123.8) %
—
— %
—
— %
Other
(431)
0.7 %
(545)
0.7 %
1,642
(1.4) %
$
51,676
(78.3) % $
(48,644)
62.1 % $
(40,123)
35.1 %
Tax credits in 2024, 2023 and 2022 consist principally of research and developmental tax credits.
The components of our deferred income tax assets (liabilities) are as follows (in thousands):
As of December 31,
2024
2023
Deferred tax asset:
Accruals/other
$
40,849 $
30,190
Acquired future tax deductions
7,869
10,877
Stock-based compensation
3,940
6,987
Tax credits
17,068
15,095
Inventory reserves
25,015
25,592
Warranty reserve
1,098
13,788
Section 163(j) - interest expense limitation
27,078
25,467
Chargebacks, discounts, customer concessions
52,709
39,077
Capitalized research and development
56,975
43,313
Valuation allowance
(90,950)
(8,452)
$
141,651 $
201,934
Deferred tax liability:
State income taxes
$
5,886 $
4,465
Depreciation and amortization
160,368
212,429
Foreign currency translation and derivative instrument adjustments
—
3,630
$
166,254 $
220,524
Deferred tax (liability) asset, net
$
(24,603) $
(18,590)
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
107
The Company regularly assesses the realizability of deferred tax assets and records a valuation allowance to reduce the
deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax
assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings,
scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the
weight of objectively verifiable negative evidence, the Company recorded a valuation allowance of $81.7 million tax expense
and $3.9 million foreign currency translation and derivative instrument adjustments against certain U.S. federal and state
deferred tax assets for the tax years ending December 31, 2024. The significant piece of objectively verifiable negative
evidence evaluated was the recent U.S. cumulative losses. Our ability to use our deferred tax assets depends on the amount of
taxable income in future periods.
Tax Holidays and Carryforwards
Net operating loss ("NOL") carryforwards consist of: (a) federal NOL carryforwards of $1.3 million which will expire
at various dates from 2031 to indefinite carryforward periods, (b) state NOL carryforwards of $2.6 million which has indefinite
carryforward periods and (c) foreign NOL carryforwards of $114.3 million which will expire at various dates from 2025 to
indefinite carryforward periods. We have recorded a net deferred tax asset of $6.8 million, $29.5 million gross deferred tax
asset net of tax reserves of $22.7 million, related to our foreign NOL carryforwards. The deferred tax assets recognized for
these foreign NOLs are presented net of tax reserves. We believe that it is more likely than not that the benefit from certain
foreign NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of
$5.9 million on the $6.8 million net deferred tax assets related to these foreign NOL carryforwards. Under Section 382 of the
Internal Revenue Code, certain ownership changes limit the utilization of the NOL carryforwards, and the amount of federal
NOL carryforwards recorded is the net federal benefit available.
Other carryforwards include state research and development (“R&D”) tax credit carryforwards of $23.9 million, the
majority of which have an indefinite carryforward period.
A substantial portion of our manufacturing operations in Costa Rica operate under various tax holiday and tax
incentive programs due to expire in whole or in part in 2029. Certain of the holidays may be extended if specific conditions are
met. The net impact of these tax holiday and tax incentives was an increase to our net earnings by $11.1 million or $0.45 per
diluted share in 2024 and by $8.0 million or $0.33 per diluted share in 2023.
Foreign currency translation and derivative instrument adjustments, and related tax effects, are an element of “other
comprehensive income” and are not included in net income.
As of December 31, 2024, we have estimated $322 million of undistributed foreign earnings and profits. Such earnings
were previously subject to U.S. tax as a result of the Tax Act and much of any future remittances would generally be subject to
no U.S. tax as a result of dividends received deductions and/or foreign tax credit relief. We intend to invest substantially all of
our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those
jurisdictions in which we incur significant additional costs upon repatriation of such amounts.
We are subject to taxation in the U.S. and various states and foreign jurisdictions. Our U.S. federal income tax returns
for tax years 2021 and forward are subject to examination by the Internal Revenue Service. Our principal state income tax
returns for tax years 2012 and forward are subject to examination by the state tax authorities. The total gross amount of
unrecognized tax benefits as of December 31, 2024 was $72.8 million which, if recognized, would impact the effective tax
rate. We believe that adequate provision has been made for any adjustments that may result from tax examinations. However,
the outcome of tax examinations cannot be predicted with certainty. As of December 31, 2024, it is reasonably possible that the
expiration of the U.S. federal statute of limitations will cause the gross amount of unrecognized tax benefits to decrease by
$5.2 million within the next twelve months. It is not possible to estimate any other amount of change, if any, in the
unrecognized tax benefits that is reasonably possible within the next twelve months. We recognize accrued interest and
penalties related to unrecognized tax benefits as a component of income tax expense. We recognized $0.8 million of interest
expense and $0.1 million of penalties in income tax benefit during 2024 and released $1.1 million of interest expense and
$0.5 million of penalties in 2024. In total, we have accrued for interest and penalties of $2.6 million and $1.6 million,
respectively as of December 31, 2024, and $2.9 million and $2.0 million, respectively, as of December 31, 2023.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
108
The following table summarizes our cumulative gross unrecognized tax benefits (in thousands):
Year Ended December 31,
2024
2023
2022
Beginning balance
$
78,558 $
54,053 $
21,537
Increases to prior year tax positions
1,945
2,347
148
Increases due to acquisitions
—
29,606
Increases to current year tax positions
4,441
34,607
4,706
Decreases to prior year tax positions
(406)
(2,455)
(222)
Decrease related to lapse of statute of limitations
(10,062)
(9,591)
(1,722)
Decrease related to settlements with tax authorities
(1,133)
(403)
—
Decrease related to exchange rate fluctuations
(524)
—
—
Ending balance
$
72,819 $
78,558 $
54,053
In December 2022, the European Union (EU) agreed to implement Pillar Two, the OECD’s global minimum tax rate
of 15% for multinationals that meet a global revenue threshold. All of the EU countries and some of the non-EU countries in
which we operate have enacted or have announced plans to enact legislation to adopt Pillar Two. The Pillar Two legislation is
effective for our fiscal year beginning January 1, 2024 and for fiscal year 2024, Pillar 2 did not have a material impact to our
tax provision or effective tax rate. However, the Pillar Two rules continue to evolve and their application may alter our tax
obligations in certain countries in which we operate for fiscal periods beyond 2024 as we continue to assess the impact of tax
legislation in these jurisdictions.
NOTE 15. STOCKHOLDERS' EQUITY
Treasury Stock
In August 2019, our Board of Directors approved a common stock purchase plan to purchase up to $100.0 million of
our common stock. This plan has no expiration date. We have $100.0 million remaining on this purchase plan. We did not
purchase any of our common stock under our common stock purchase plan in 2024, 2023 or 2022. We are limited on share
purchases in accordance with the terms and conditions of our Senior Secured Credit Facilities (see Note 13: Long-Term
Obligations).
In 2024, we withheld 114,787 shares of our common stock from employee vested restricted stock units in
consideration for $12.0 million in payments for the employees' share award income tax withholding obligations. We had 571
shares remaining in treasury at December 31, 2024.
In 2023, we withheld 59,377 shares of our common stock from employee vested restricted stock units in consideration
for $9.4 million in payments for the employees' share award income tax withholding obligations. We had 2,428 shares
remaining in treasury at December 31, 2023.
In 2022, we withheld 47,664 shares of our common stock from employee vested restricted stock units in consideration
for $10.9 million in payments for the employees' share award income tax withholding obligations. We had 1,633 shares
remaining in treasury at December 31, 2022.
We use treasury stock to issue shares for stock option exercises and restricted stock grants.
Accumulated Other Comprehensive (Loss) Income ("AOCI")
The components of AOCI, net of tax, were as follows (in thousands):
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
109
Foreign
Currency
Translation
Adjustments
Unrealized Gains
(Losses) on Cash
Flow Hedges
Other
Adjustments
Total
Balance as of January 1, 2022
$
(19,045) $
(237) $
13 $
(19,269)
Other comprehensive (loss) income before
reclassifications
(103,928)
54,962
1,203
(47,763)
Amounts reclassified from AOCI
—
(13,946)
—
(13,946)
Other comprehensive (loss) income
(103,928)
41,016
1,203
(61,709)
Balance as of December 31, 2022
$
(122,973) $
40,779 $
1,216 $
(80,978)
Other comprehensive income before
reclassifications
46,189
12,096
603
58,888
Amounts reclassified from AOCI
—
(30,991)
—
(30,991)
Other comprehensive income (loss)
46,189
(18,895)
603
27,897
Balance as of December 31, 2023
$
(76,784) $
21,884 $
1,819 $
(53,081)
Other comprehensive loss before reclassifications
(70,158)
14,042
—
(56,116)
Amounts reclassified from AOCI
—
(30,204)
—
(30,204)
Other comprehensive loss
(70,158)
(16,162)
—
(86,320)
Balance as of December 31, 2024
$
(146,942) $
5,722 $
1,819 $
(139,401)
NOTE 16. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, we are involved in various legal proceedings, most of which are routine litigation, in the normal
course of business. Our management does not believe that the resolution of the unsettled legal proceedings that we are involved
with will have a material adverse impact on our financial position or results of operations.
Off Balance Sheet Arrangements
In the normal course of business, we have agreed to indemnify our officers and directors to the maximum extent
permitted under Delaware law and to indemnify customers as to certain intellectual property matters related to sales of our
products. There is no maximum limit on the indemnification that may be required under these agreements. We have never
incurred, nor do we expect to incur, any liability for indemnification.
Contingencies
In August 2021, we entered into an agreement with one of our international distributors whereby that distributor would
not compete with us in a specific territory for a three-year period that ended September 2024. The terms of the agreement
included a contingent earn-out payment. The contingent earn-out payment could not exceed $6.0 million and was to be earned
based on certain revenue targets over a twelve-month measurement period determined by the highest four consecutive quarters
commencing over a two-year period starting on the closing date of the agreement and provided that the distributor is in
compliance with its obligations under the agreement. The estimated fair value of the contingent earn-out was calculated using a
probability-weighted cash flow model based on historical revenue streams and the likelihood that the revenue targets will be
met. As of December 31, 2023, the earn-out measurement period ended. The fair value of the contingent earn-out was
determined to be $3.4 million and was paid out in the first quarter of 2024 (see Note 10: Fair Value Measurements).
During November 2021, we acquired a small foreign infusion systems supplier. Total consideration for the acquisition
includes a potential earn-out payment of up to $2.5 million, consisting of (i) a cash payment of $1.0 million contingent on the
achievement of certain revenue targets for the annual period ending December 31, 2022 and, separately, (ii) a cash payment of
$1.5 million contingent on obtaining certain product-related regulatory certifications by May 26, 2024. As of December 31,
2022, the measurement period related to the contingent earn-out based on certain revenue targets ended and based on the actual
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
110
revenue achieved during the measurement period, the fair value of the contingent earn-out was determined to be zero as the
minimum threshold for earning the earn-out was not met. As of December 31, 2024, the earn-out measurement period related to
certain product-related regulatory certifications had ended and the product-related regulatory certification had not been
achieved, and accordingly, the estimated fair value for the contingent consideration was reduced to zero (see Note 10: Fair
Value Measurements).
In January 2022, we acquired Smiths Medical. Total consideration for the acquisition included a potential earn-out
payment of $100.0 million in cash contingent on our common stock achieving the Price Targets from the closing date to either
the third or fourth anniversary of closing and provided Smiths beneficially owned at least 50.0% of the shares of common stock
issued at closing at the time the Price Target is achieved. During 2024, Smiths sold all of their remaining shares of common
stock of ICU Medical, Inc. The sale of these shares renders Smiths unable to achieve the contingent consideration based on
certain price targets during the third and fourth anniversary of closing as Smiths no longer met the required minimum beneficial
ownership percentage. Accordingly, the valuation of the contingent earn-out liability as of December 31, 2024 was zero (see
Note 10: Fair Value Measurements).
Prior to being acquired, during 2021, Smiths Medical received a Warning Letter from the FDA following an inspection
of Smiths Medical’s Oakdale, Minnesota Facility (the "2021 Warning Letter"). The 2021Warning Letter cited, among other
things, failures to comply with FDA's medical device reporting requirements and failures to comply with applicable portions of
the Quality System Regulation. A provision for the estimated costs related to the field service corrective actions identified as of
the closing date of the acquisition was recorded on the opening acquired balance sheet of Smiths Medical. The initial estimate
recorded was based on a probability-weighted estimate of the costs required to settle the obligation related to known field
corrective actions. The actual costs to be incurred are dependent upon the scope of the work necessary to achieve regulatory
clearance, including potential additional field corrective actions, and could differ from the original estimate. For the years ended
December 31, 2024 and 2023, we recorded a net reversal to the provision of $5.2 million and a provision of $20.3 million,
respectively, to adjust the estimated cost to complete the field corrective actions to the amounts expected to be incurred based
on historical experience. As of December 31, 2024, approximately $31.7 million of the $39.2 million of accrued field service
corrective action recorded was related to the 2021 Warning Letter.
In 2015, legislation was enacted in Italy which requires medical device companies to make payments to the Italian
government if Italy's medical device expenditures for certain years exceeded annual regional expenditure ceilings. Since its
enactment, the legislation has been subject to appeals in the Italy court system. In the third quarter of 2024, Italy's
Constitutional Court issued two judgments, one of which confirmed the legitimacy of the legislation on the Italy Medical
Device Payback ("IMDP"). However, litigation proceedings are still pending and the ultimate resolution remains unknown. The
timing and amount of payments could ultimately differ from our current expectations (see Note 12: Accrued Liabilities and
Other Long-Term Liabilities for details on amounts accrued for potential payments related to the IMDP).
Commitments
We have non-cancelable operating lease agreements where we are contractually obligated to pay certain lease payment
amounts (see Note 7: Leases).
NOTE 17. COLLABORATIVE AND OTHER ARRANGEMENTS
On February 3, 2017, we entered into two Manufacturing and Supply Agreements ("MSAs") whereby (i) Pfizer would
manufacture and supply us with certain agreed upon products for an initial five-year term with a one-time two-year option to
extend and (ii) we will manufacture and supply Pfizer certain agreed upon products for a term of five or ten years depending on
the product, also with a one-time two-year option to extend. We no longer purchase products from Pfizer under the MSA as
described in (i) above.
The MSA described in (ii) above provides each party with mutually beneficial interests and is jointly managed by both
Pfizer and ICU. On January 1, 2021, we amended our MSA with Pfizer, whereby we manufacture and supply certain agreed
upon products to Pfizer. The amendments included a change to the term of the agreement to end on December 31, 2024. The
MSA was amended on January 24, 2025 to extend the term through 2027 for certain Solutions products. Changes to the terms
of the MSA include (i) amendments to our level of supply of products to Pfizer and (ii) updates to our supply price for 2025.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
NOTE 18: ACCOUNTS RECEIVABLE PURCHASE PROGRAM
On January 19, 2023, we entered into a revolving $150 million uncommitted receivables purchase agreement with
Bank of The West ("BOW"), which was subsequently acquired by BMO in February 2023. This agreement provided for a less
expensive form of capital. The discount rate applied to sold receivables equals a rate per annum equal to the sum of (i) an
applicable margin, plus (ii) Term SOFR for a period equal to the discount period which is calculated with respect to the
payment terms of the specific receivable. The accounts receivable sold have payment terms ranging between 30 and 60 days,
and are related to customer accounts with good credit history. The transfer of the purchased accounts receivable under the
agreement is intended to be an absolute and irrevocable transfer constituting a true sale as the transferred receivables have been
isolated beyond the reach of the Company and our creditors, even in bankruptcy or other receivership. We do not retain
effective control over the sold receivables and BMO has the right upon purchase to pledge and/or exchange the transferred
assets without restrictions. The Company acts as collection agent for BMO and collection services are undertaken by our
accounts receivable personnel in their normal course of business and collected funds are remitted to BMO. We do not have any
continuing involvement with the sold receivables other than the collection services which does not provide us with more than a
trivial benefit. The discount rate has been negotiated net of consideration for the collection services, the cost of collection is
immaterial to the Company; therefore, we did not separately record any related servicing assets or liabilities related to the sold
receivables.
The following table presents information in connection with the purchase program (in thousands):
Year Ended December 31,
2024
2023
Trade receivables sold(1)
$
435,438 $
629,065
Cash received in exchange for trade receivables sold(2)
432,803
625,341
Loss on sale of receivables(3)
2,635
3,724
_______________________________
(1)
Represents carrying value of trade receivables sold to BMO.
(2)
Cash proceeds received from BMO.
(3)
Reflected in other expense, net in our condensed consolidated statement of operations.
As of December 31, 2024, we are not actively utilizing the program and there are no outstanding balances to be
collected on behalf of BMO. At December 31, 2023, cash remaining to be collected on behalf of BMO was $75.9 million which
has been removed from our consolidated balance sheet as of December 31, 2023, and is reflected as cash provided by operating
activities in the consolidated statement of cash flows in the same period. There were no such balances at December 31, 2022.
The carrying value of the sold receivables approximated the fair value at December 31, 2023.
ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints,
and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to
their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated
the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under
the Securities Exchange Act of 1934) as of the end of the period covered by this Report. Disclosure controls and procedures are
designed to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities
Exchange Commission, and that such information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based upon that evaluation, our principal executive officer and our principal financial officer concluded that, as of December
31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter
that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting.
Management has used the criteria in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of its internal control over financial
reporting.
Based on this criteria, management of the Company has concluded that the Company has maintained effective internal
control over its financial reporting as of December 31, 2024.
Our independent registered public accounting firm that audited the December 31, 2024 financial statements included in
this Annual Report on Form 10-K has independently assessed the effectiveness of our internal control over financial reporting
and its report can be found in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-
K.
113
ITEM 9B. OTHER INFORMATION
(a) None
(b) During the three months ended December 31, 2024, none of the Company's directors or "officers" (as defined in Rule
16a-1(f) of the Exchange Act) adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" intended to satisfy
the affirmative defense of Rule 10b5-1(c) or a “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408(a) of
Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table lists the names, ages, certain positions and offices held by our executive officers and directors as
of January 31, 2025:
Name
Age
Office Held
Vivek Jain
52
Chief Executive Officer ("CEO") and Chairman of the Board
Brian Bonnell
51
Chief Financial Officer ("CFO") and Treasurer
Christian Voigtlander
56
Chief Operating Officer ("COO")
Daniel Woolson
48
President
Virginia Sanzone
50
Corporate Vice President, General Counsel ("CVP, GC")
David C. Greenberg
58
Director
Elisha Finney
63
Director
David Hoffmeister
70
Director
Donald Abbey
58
Director
Laurie Hernandez
67
Director
Kolleen T. Kennedy
65
Director
Mr. Vivek Jain joined the Company in February 2014 as Chairman of the Board and Chief Executive Officer. Mr. Jain
served as CareFusion Corporation's ("CareFusion") President of Procedural Solutions from 2011 to February 2014. Mr. Jain
served as President, Medical Technologies and Services of CareFusion from 2009 until 2011. Mr. Jain served as the Executive
Vice-President-Strategy and Corporate Development of Cardinal Health from 2007 until 2009. Mr. Jain served as Senior Vice
President, Business Development and M&A for the Philips Medical Systems business of Koninklijke Philips Electronics N.V.,
an electronics company from 2006 to August 2007. Mr. Jain served as an investment banker at J.P. Morgan Securities, Inc., an
investment banking firm, from 1994 to 2006. Mr. Jain's last position with J.P. Morgan was as Co-Head of Global Healthcare
Investment Banking from 2002 to 2006.
Mr. Christian Voigtlander has served as our Chief Operating Officer since January 2018. From February 2017 to
January 2018, Mr. Voigtlander served as the Company’s Corporate Vice President, Business Development and General
Manager, Infusion Solutions. From June 2015 to February 2017, Mr. Voigtlander served as the Company’s Vice President,
Business Development. Prior to May 2015, Mr. Voigtlander held various roles at CareFusion and last served as Senior Vice
President, Business Development and Strategy.
Mr. Brian Bonnell has served as our Chief Financial Officer and Treasurer since March 3, 2020. From May 2018 until
March 2020, Mr. Bonnell served as the Company’s Corporate Vice President, Finance. Prior to joining the Company, Mr.
Bonnell served as Treasurer and Head of Financial Planning and Analysis at Alere Inc. from May 2015 until December 2017.
Prior to May 2015, Mr. Bonnell held various roles at CareFusion Corporation in Finance and last served as Senior Vice
President, Tax and Treasurer.
Mr. Daniel Woolson has served as our President since October 2024. Prior to becoming President, Mr. Woolson served
as our Corporate Vice President, General Manager - Infusion Systems from January 2017 to October 2024. Mr. Woolson served
114
as President, Respiratory Solutions for Becton Dickinson from March 2015 to November 2016. Prior to March 2015, Mr.
Woolson held various roles at CareFusion and last served as Vice President/General Manager, Specialty Disposables.
Ms. Virginia Sanzone has served as our Corporate Vice President, General Counsel and Secretary since January 2018.
Ms. Sanzone also serves as our Compliance Officer. Ms. Sanzone served as the Company’s Vice President, General Counsel
from August of 2015 to January 2018. Prior to August of 2015, Ms. Sanzone held various roles at CareFusion and last served as
Senior Vice President, Associate General Counsel - Business Segments & Americas.
Mr. David C. Greenberg has been a director since 2015, serves as Lead Independent Director and Chair of the
Compensation Committee and is a member of the Audit Committee. Mr. Greenberg is currently serving as Chief Executive
Officer of HomeThrive, Inc. Mr. Greenberg joined HomeThrive, Inc. in October 2018. Mr. Greenberg was Executive Vice
President, Strategy of Medline Industries, Inc. (“Medline”) from June 2008 to October 2018. Medline is a privately held
manufacturer and distributor of medical supplies uniquely positioned to provide products, education and support across the
continuum of care. In that capacity, Mr. Greenberg was a member of Medline’s Executive Board and advised top leadership/
ownership on all aspects of the business. Mr. Greenberg was responsible for Strategy, Business Development and M&A.
Additionally, Mr. Greenberg was a Group President and had responsibility for Medline’s distribution business and several
manufacturing and marketing divisions. Mr. Greenberg has served on the board of directors for Amendia, Inc., a spinal implant
company. Previously, Mr. Greenberg spent thirteen years in a variety of leadership positions within Aon Corporation, including
Chief Financial Officer of its Aon Global subsidiary. Mr. Greenberg previously served as a director at Potrero Medical, Inc., the
latest spinout of medical device incubator Theranova, LLC. Currently Mr. Greenberg serves on the board of directors of
HomeThrive, Inc. since October 2018, Canadian Hospital Specialties, a privately held medical device manufacturer and
specialty distributor, since April 2021 and Access & Integrated Practice Holdings, LLC a comprehensive variable access
medical services platform since 2023. The Board believes Mr. Greenberg should serve as a director due to his extensive
knowledge and experience in the medical industry, demonstrated executive leadership in business and insight into financial
matters.
Ms. Elisha W. Finney has been a director since January 2016, and serves as Chair of the Nominating and Governance
Committee and is a member of the Audit Committee. Ms. Finney, now retired, was named Vice President, Finance and CFO of
Varian Medical Systems in April 1999. In January 2005, she was promoted to Senior Vice President and given additional
management responsibility for the Corporate Information Systems group. She was named Executive Vice President in February
2012. Varian Medical Systems is a leading manufacturer of medical devices and software for treating cancer and other medical
conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy. Ms. Finney managed a worldwide staff of 400.
Her management responsibilities included corporate accounting; corporate communications and investor relations; internal
financial and compliance audit; risk management; tax and treasury, and corporate information systems. Ms. Finney joined
Varian as risk manager in 1988 and has assumed a wide variety of finance functions over her last 29 years with the company.
Prior to joining Varian, Ms. Finney was with the Fox Group in Foster City, CA, and Beatrice Foods, a major food processing
company, in Chicago, IL. Ms. Finney has served on the boards of: Mettler Toledo, a multinational manufacturer of scales and
analytical instruments, since November 2017; and Viatris, a global pharmaceutical and healthcare corporation, since December
2022. Ms. Finney previously served on the boards of directors of: Nanostring Technologies from May 2017 to June 2024;
Laserscope from August 2005 until July 2006 when Laserscope was sold to American Medical Systems; Thoratec, a developer,
manufacturer and marketer of proprietary medical devices for mechanical circulatory support from July 2007 to May 2013;
Altera Corporation, a manufacturer of programmable logic devices from September 2011 until December 2015, when Altera
was sold to Intel; Cutera, Inc. a global provider of laser and other energy-based aesthetic systems, from November 2017 to May
2019; and iRobot Corporation, a robotics technology company, from January 2017 to November 2021. The Board believes Ms.
Finney should serve as a director due to her extensive knowledge and experience in the medical industry and her financial
knowledge and experience, particularly with respect to her service on the Audit Committee.
Mr. David F. Hoffmeister has been director since January 2018 and serves as Chair of the Audit Committee and a
member of the Compensation Committee. Mr. Hoffmeister served as Senior Vice President and Chief Financial Officer of Life
Technologies Corp. from 2004 to 2014. Prior to joining Life Technologies, Mr. Hoffmeister was a senior partner with
McKinsey & Co., focusing on health care, private equity and chemicals industries. Before joining McKinsey, Mr. Hoffmeister
held financial positions at GTE Corp. and W.R. Grace and Co. Mr. Hoffmeister currently serves on the boards of Kaiser
Foundation Health Plan, Inc. and Kaiser Foundation Hospitals and has since November of 2014. Mr. Hoffmeister currently
serves on the Board of Directors of Glaukos Corp. and has since 2014; Celanese Corp., since 2005; and Stepstone Group, Inc.
since 2020. Mr. Hoffmeister received a bachelor’s of science degree from University of Minnesota and a M.B.A. from
University of Chicago. The Board believes Mr. Hoffmeister should serve as a director due to his strong finance background and
extensive experience as a chief financial officer of a global biotechnology company.
115
Mr. Donald M. Abbey has been a director since January 2018 and is a member of the Nominating Governance
Committee and the Compensation Committee. Mr. Abbey is currently serving as Executive Vice President, Global Business
Services, IT, Quality and Regulatory Affairs at Dexcom, Inc. (“Dexcom”). Mr. Abbey joined Dexcom in May of 2016. Prior to
joining Dexcom, Mr. Abbey was with Becton Dickinson (who acquired CareFusion Corporation in 2015 and which was spun
out of Cardinal Health in 2009 (collectively, “BD”) from 2007. Mr. Abbey served in many roles over his years at BD including
most recently as the Senior Vice President, Quality and Regulatory. Prior to his time at BD, Mr. Abbey held senior quality and
regulatory affairs and general management positions with Respironics, Welch Allyn and Philips Healthcare. Mr. Abbey began
his career at Varian Medical and Boston Scientific holding positions with increasing responsibility in research and development
and quality. Mr. Abbey received a B.S.E.E from Washington State University and a M.B.A from University of Washington.
The Board believes Mr. Abbey should serve as a director due to his extensive knowledge and experience in the medical
industry and particularly, his knowledge of compliance and regulatory requirements.
Ms. Laurie Hernandez has been a director since July 2021 and is a member of the Nominating and Governance
Committee. Ms. Hernandez is a retired healthcare executive with over 25 years of strategic healthcare experience. Ms.
Hernandez joined Baxter Healthcare Corporation (“Baxter”) in November of 2007 and has assumed a wide variety of strategic
positions over her 10 years with that company. Prior to joining Baxter, Ms. Hernandez was with Hospira Inc. in Lake Forest,
Illinois. Ms. Hernandez previously served on the boards of Sinai Health System in Chicago, Illinois and Lambs Farm in
Libertyville, Illinois. The Board believes Ms. Hernandez should serve as a director due to her extensive experience in the
medical industry.
Ms. Kolleen T. Kennedy has been a director since December 2021 and recently retired as President, Proton Solutions &
Chief Growth Officer at Varian Medical Systems (“Varian”) in December 2021. Ms. Kennedy joined Varian in 1997 as
Marketing Manager for radiation therapy delivery systems, and assumed other strategic roles over 24 years including Executive
Vice President of Varian Oncology Systems, the market leading radiation therapy business division with nearly 7,000
employees worldwide. Prior to joining Varian, Ms. Kennedy was with Siemens Medical Systems and Radiation Oncology
Computer Systems in oncology product sales and marketing. Ms. Kennedy received BS degrees in Radiation Oncology and
Psychology from Wayne State University as well as an MS degree in Medical Physics from the University of Colorado. Ms.
Kennedy currently serves on the boards of IPG Photonics since 2023 and Wayne State University Foundation since 2018,
served on the board of the City Cancer Challenge Foundation from 2018 to 2022, and served on the board of the Radiation
Oncology Institute from 2018 to 2021. The Board believes Ms. Kennedy should serve as a director due to her relevant
knowledge and history in the medical industry.
Corporate Governance
We have a Code of Business Conduct and Ethics applicable to all our directors, officers, and other employees,
including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions. A copy is available on our website, www.icumed.com in the "Investors" section. We intend to
satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any future amendments to, or waiver from, a
provision of our Code of Business Conduct and Ethics, as well as Nasdaq's requirement to disclose waivers with respect to
directors and executive officers, by posting such information on our website at the address and location specified above.
Additional information as required by this Item 10 of Form 10-K will be set forth under the captions Executive
Officers, Election of Directors, Audit Committee and Compliance with Section 16(a) Beneficial Ownership Reporting
Compliance in our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders, and
such information is incorporated herein by reference.
We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities that
applies to all personnel of ICU Medical, Inc. and its subsidiaries, including directors, officers and employees. We also follow
procedures for the repurchase of our securities. We believe that our insider trading policy and repurchase procedures are
reasonably designed to promote compliance with insider trading laws, rules and regulations, as well as applicable listing
standards. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 of Form 10-K will be set forth under the caption Executive Officer and
Director Compensation, Compensation Committee and Compensation Committee Interlocks and Insider Participation in our
definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders, and such information is
incorporated herein by reference.
116
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item 12 of Form 10-K will be set forth under the caption Security Ownership of
Certain Beneficial Owners and Management and Equity Compensation Plan Information in our definitive Proxy Statement to
be filed in connection with our 2025 Annual Meeting of Stockholders, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 of Form 10-K will be set forth under the caption Transactions with Related
Persons, Policies and Procedures Regarding Transactions with Related Persons and Corporate Governance-Director
Independence in our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders, and
such information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information about aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP (PCAOB No.
34) as required by this Item 14 of Form 10-K will be set forth under the caption Ratification of Auditors in our definitive Proxy
Statement to be filed in connection with our 2025 Annual Meeting of Stockholders, and such information is incorporated herein
by reference.
117
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Form 10-K Page
No.
The following documents are filed as part of this report:
1.
Consolidated Financial Statements. See Index to Consolidated Financial Statements in Part II, Item
8 of this Form 10-K.
58
2.
Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by
reference as part of this Form 10-K.
118
3.
Financial Statement Schedules. The Financial Statement Schedules required to be filed as a part of
this Report are:
Schedule II — Valuation and Qualifying Accounts
121
EXHIBIT INDEX
Exhibit
Number
Exhibit Description
Filed/
Furnished
Herewith
2.1
Share Sale and Purchase Agreement, dated September 8, 2021, by and between Smiths
Group International Holdings Limited, a private limited company incorporated in England
and Wales, and ICU Medical, Inc., a Delaware corporation. Filed as an Exhibit to
Registrant's Current Report on Form 8-K filed on September 8, 2021 (File No. 001-34634).
2.2
Put Option Deed from ICU Medical, Inc., a Delaware corporation to Smiths Group
International Holdings Limited, a private limited company incorporated in England and
Wales. Filed as an Exhibit to Registrant's Current Report on Form 8-K filed on September
8, 2021 (File No. 001-34634).
2.3
Purchase Agreement, dated November 12, 2024, by and between ICU Medical, Inc., a
Delaware corporation, ICU Medical Sales, Inc., a Delaware corporation and Otsuka
Pharmaceutical Factory America, Inc., a Delaware corporation. Filed as an Exhibit to
Registrant's Current Report on Form 10-Q filed on November 12, 2024 (File No.
001-34634)
3.1
Registrant's Certificate of Incorporation, as amended and restated. Filed as an Exhibit to
Registrant's Current Report on Form 8-K filed on June 10, 2014 (File No. 001-34634).
3.2
Registrant's Bylaws, as amended and restated. Filed as an Exhibit to Registrant's Current
Report on Form 8-K filed on November 3, 2023 (File No. 001-34634).
4.1
Description of Securities Registered Under Section 12 of the Exchange Act. Filed as an
Exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 2019,
filed on March 2, 3020 (File No. 001-34634).
10.1
Form of Indemnification Agreement with Directors and Executive Officers. Filed as an
Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30,
2010, filed on October 22, 2010 (File No. 001-34634).
10.2
Registrant's 2002 Employee Stock Purchase Plan.* Filed as an Exhibit to Registrant's
definitive Proxy Statement filed pursuant to Regulation 14A on April 3, 2002 (File No.
000-19974).
10.3
Executive officer compensation
*
10.4
Non-employee director compensation
*
118
10.5
2008 Performance-Based Incentive Plan, as amended.* Filed as Annex A to Registrant's
proxy statement filed April 3, 2013 (File No. 001-34634).
10.6
Amended and Restated ICU Medical, Inc. 2011 Stock Incentive Plan.* Filed as an Exhibit
to Registrant's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2018 (File
No. 001-34634).
10.7
First Amendment to ICU Medical, Inc. Amended and Restated 2011 Stock Incentive Plan.
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the year ended
December 31, 2019, filed on March 2, 2020 (File No.001-34634).
10.8
,
Plan. Filed as an Exhibit to Registrant's Current Report on Form 8-K filed on May 22, 2023
(File No. 001-34634).
10.9
Amended and Restated Executive Employment Agreement, dated as of April 15, 2022, by
and between ICU Medical, Inc. and Vivek Jain.* Filed as an Exhibit to Registrant's Current
Report on Form 8-K filed on April 20, 2022 (File No. 001-34634).
10.10
Letter agreement between the Registrant and Alison Burcar, effective April 1, 2019.* Filed
as an Exhibit to Registrant's Quarterly Report on Form 10-Q for the Quarter ended March
31, 2019 (File No. 001-34634).
10.11
ICU Medical, Inc. Executive Severance Plan.* Filed as an Exhibit to Registrant’s Current
Report on Form 8-K filed on January 6, 2017 (File No. 001-34634).
10.12
First Amendment to the ICU Medical, Inc. Executive Severance Plan. *Filed as an Exhibit
to Registrant's Current Report on Form 8-K filed on January 6, 2020 (File No. 001-34634).
10.13
,
Exhibit to Registrant's Current Report on Form 8-K filed on January 3, 2023 (File No.
001-34634).
10.14
Credit Agreement, dated as of January 6, 2022, by and among ICU Medical, Inc. as
Borrower, certain subsidiaries as guarantors, Wells Fargo Bank, National Association, as
Administrative Agent, Wells Fargo Securities, LLC and Barclays Bank PLC as joint
bookrunners and joint lead arrangers and the other joint bookrunners and joint lead
arrangers listed therein.# Filed as an Exhibit to Registrant's Current Report on Form 8-K
filed January 7, 2022 (File No. 001-34634).
10.15
Shareholders Agreement, dated as of January 6, 2022, by and between ICU Medical, Inc.
and Smiths Group International Holdings Limited. Filed as an Exhibit to Registrant's
Current Report on Form 8-K filed on January 7, 2022 (File No. 001-34634).
19.1
ICU Medical, Inc. Insider Trading Policy
*
21
Subsidiaries of Registrant.
*
23.1
Consent of Deloitte & Touche LLP
*
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
*
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
*
32
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
**
97.1
Policy Relating to Recovery of Erroneously Awarded Compensation. Filed as an Exhibit to
Registrant's Annual Report on Form 10-K for the Year ended December 31, 2023 filed on
February 27, 2024 (File No. 001-34634).
119
Exhibit 101.INS
The instance document does not appear in the interactive data file because its XBRL (Extensible
Business Reporting Language) tags are embedded within the Inline XBRL document.
Exhibit 101.SCH
XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
__________________________________________
* Filed herewith.
** Furnished herewith.
# Annexes, schedules and exhibits have been omitted pursuant to Item 601(a)(5)(b)(2) of Regulation S-K. The Registrant
hereby agrees to furnish supplementally a copy of any omitted annex, schedule or exhibit to the SEC upon request.
120
SCHEDULE II
ICU MEDICAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
Additions (Reductions)
(Amounts in thousands)
Description
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other Accounts
Write-off/
Disposals
Balance
at End
of Period
For the year ended December 31, 2022:
Allowance for doubtful accounts
$
7,038 $
1,036 $
456 $
— $
8,530
Warranty and return reserve - accounts receivable(1)
$
2,485 $
(364) $
3,742 $
— $
5,863
Warranty and return reserve - inventory/accrued(2)
$
(1,883) $
5,266 $
47,436 $
— $
50,819
Deferred tax asset valuation allowance
$
2,934 $
— $
8,232 $
— $
11,166
For the year ended December 31, 2023:
Allowance for doubtful accounts
$
8,530 $
838 $
1,696 $
— $
11,064
Warranty and return reserve - accounts receivable
$
5,863 $
1,627 $
15 $
— $
7,505
Warranty and return reserve - inventory/accrued(3)
$
50,819 $
20,290 $
(13,313) $
— $
57,796
Deferred tax asset valuation allowance
$
11,166 $
— $
(2,714) $
— $
8,452
For the year ended December 31, 2024:
Allowance for doubtful accounts(4)
$
11,064 $
5,800 $
(5,394) $
— $
11,470
Warranty and return reserve - accounts receivable
$
7,505 $
(1,441) $
806 $
— $
6,870
Warranty and return reserve - inventory/accrued(5)
$
57,796 $
2,571 $
(18,146) $
— $
42,221
Deferred tax asset valuation allowance(6)
$
8,452 $
78,592 $
3,906 $
— $
90,950
______________________________________________
(1) Includes an acquired balance of $3.8 million related to the Smiths Medical acquisition.
(2) Includes an acquired balance of $55.2 million in short-term and long-term accrued warranty reserve related to the Smiths
Medical acquisition.
(3Additional charges to expense were primarily related to additional field corrective actions identified and initiated during the
period related to the Smiths Medical business FDA warning letter (See Note: 16 Commitments and Contingencies in our
accompanying consolidated financial statements).
(4) The charged to other accounts includes a $2.0 million reclassification to assets held for sale related to the IV Solutions
business (See Note 4: Assets held For Sale in our accompanying consolidated financial statements).
(5) Primarily includes payments for expenses related to our field corrective actions.
(6) Primarily relates to valuation allowance against certain U.S. federal and state deferred tax assets (See Note 14: Income Taxes
in our accompanying consolidated financial statements).
121
ITEM 16. FORM 10-K SUMMARY
None
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ICU MEDICAL, INC.
By:
/s/ Vivek Jain
Vivek Jain
Chairman of the Board and Chief Executive Officer
Dated:
February 27, 2025
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Vivek Jain
Chairman of the Board and
February 27, 2025
Vivek Jain
Chief Executive Officer
(Principal Executive Officer)
/s/ Brian M. Bonnell
Chief Financial Officer
February 27, 2025
Brian M. Bonnell
(Principal Financial Officer and Principal
Accounting Officer)
/s/ David C. Greenberg
Director
February 27, 2025
David C. Greenberg
/s/ Elisha W. Finney
Director
February 27, 2025
Elisha W. Finney
/s/ David F. Hoffmeister
Director
February 27, 2025
David F. Hoffmeister
/s/ Donald M. Abbey
Director
February 27, 2025
Donald M. Abbey
/s/ Laurie Hernandez
Director
February 27, 2025
Laurie Hernandez
/s/ Kolleen T. Kennedy
Director
February 27, 2025
Kolleen T. Kennedy
122
We Connect Patients and Caregivers
through safe, life-saving, life-enhancing medical devices.
Board of Directors
Donald M. Abbey
Elisha W. Finney
David C. Greenberg
Laurie Hernandez
David F. Hoffmeister
Vivek Jain
Kolleen T. Kennedy
Executive Management
Vivek Jain*
Chairman of the Board and
Chief Executive Officer
Brian Bonnell*
Chief Financial Officer
Christian Voigtlander*
Chief Operating Officer
Virginia Sanzone*
Corporate Vice President,
General Counsel
Ben Sousa*
Chief Information Officer
Olivia Barrall
Vice President,
Human Resources
Krishna Uppugonduri
Corporate Vice President,
Quality, Medical, and Regulatory Affairs
Dan Woolson*
President
Jim Paloyan
Corporate Vice President
and General Manager, Consumables
Dante Tisci
Corporate Vice President,
IV Solutions, Pain Management, Distribution
Management, Alternate Site Sales
Chad Jansen
Corporate Vice President,
Infusion Systems
Henrik Schwerdt
Vice President,
Respiratory & Anesthesia
*“Executive Officer” under the Securities Exchange Act of 1934
Corporate Headquarters:
951 Calle Amanecer, San Clemente, California 92673
T: 800.824.7890 | F: 949.366.8368
www.icumed.com
Auditors
Deloitte & Touche LLP
695 Town Center Drive Suite 1000
Costa Mesa, CA 92626-7188
Transfer Agent and Registrar
Equiniti Trust Company, LLC.
48 Wall Street, Floor 23
New York, NY 10005
Phone: 800.937.5449
Local/International: 718.921.8124
Email: HelpAST@equiniti.com
Overnight Delivery:
55 Challenger Road, Floor 2
Ridgefield Park, NJ 07660
General Communications:
EQ
PO BOX 500
Newark, NJ 07101
Common Stock
Symbol: ICUI
The Nasdaq Global Select Market
© 2025 ICU Medical, Inc.