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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: September 30, 2022
 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 (I.R.S. Employer
incorporation or organization) Identification No.)
951 Calle Amanecer,San Clemente,California92673
(Address of principal executive offices)(Zip Code)
 (949) 366-2183
(Registrant’s telephone number including area code)
 
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.  Yes x  No o
 
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 x  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 filerx Accelerated filer
Non-accelerated filer 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes  No x

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.10 per shareICUIThe Nasdaq Stock Market LLC
(Global Select Market)

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
Class Outstanding at October 31, 2022
Common 23,981,588




ICU MEDICAL, INC. AND SUBSIDIARIES
Form 10-Q
September 30, 2022

Table of Contents
 Page Number
PART I.  
Item 1.  
 
 
   
 
   
 
 
   
 
   
Item 2. 
   
Item 3. 
   
Item 4. 
   
PART II.  
Item 1. 
   
Item1A. 
   
Item 2. 
   
Item 6. 
   
 
2


PART I - FINANCIAL INFORMATION
Item1.Financial Statements (Unaudited)

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data and treasury shares) 
 September 30,
2022
December 31,
2021
 (Unaudited)(1)
ASSETS  
CURRENT ASSETS:  
Cash and cash equivalents$243,879 $552,827 
Short-term investment securities2,919 14,420 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES246,798 567,247 
Accounts receivable, net of allowance for doubtful accounts of $8,006 at September 30, 2022 and $7,038 at December 31, 2021
212,845 105,894 
Inventories625,268 290,235 
Prepaid income taxes20,170 19,586 
Prepaid expenses and other current assets94,283 46,847 
TOTAL CURRENT ASSETS1,199,364 1,029,809 
PROPERTY, PLANT AND EQUIPMENT, net656,383 468,365 
OPERATING LEASE RIGHT-OF-USE ASSETS76,438 39,847 
LONG-TERM INVESTMENT SECURITIES1,831 4,620 
GOODWILL1,369,717 43,439 
INTANGIBLE ASSETS, net1,020,658 188,311 
DEFERRED INCOME TAXES15,482 42,604 
OTHER ASSETS110,604 63,743 
TOTAL ASSETS$4,450,477 $1,880,738 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:  
Accounts payable$205,042 $81,128 
Accrued liabilities244,303 118,195 
Current portion of long-term debt24,375  
Income tax payable15,014 1,454 
Contingent earn-out liability300  
TOTAL CURRENT LIABILITIES489,034 200,777 
CONTINGENT EARN-OUT LIABILITY25,942 2,589 
LONG-TERM DEBT1,629,849  
OTHER LONG-TERM LIABILITIES119,251 41,830 
DEFERRED INCOME TAXES153,599 1,490 
INCOME TAX LIABILITY19,997 18,021 
COMMITMENTS AND CONTINGENCIES (Note 19)  
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 — 23,980 shares at September 30, 2022 and 21,280 shares at December 31, 2021; and outstanding — 23,979 shares at September 30, 2022 and 21,280 shares at December 31, 2021
2,398 2,128 
Additional paid-in capital1,323,178 721,412 
Treasury stock, at cost (712 and 119 shares, respectively)
(126)(27)
Retained earnings853,037 911,787 
Accumulated other comprehensive loss(165,682)(19,269)
TOTAL STOCKHOLDERS' EQUITY2,012,805 1,616,031 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$4,450,477 $1,880,738 
______________________________________________________
(1) December 31, 2021 balances were derived from audited consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
 
 Three months ended
September 30,
Nine months ended
September 30,
 2022202120222021
TOTAL REVENUES$597,857 $336,060 $1,701,983 $975,783 
COST OF GOODS SOLD411,461 208,269 1,179,167 611,783 
GROSS PROFIT186,396 127,791 522,816 364,000 
OPERATING EXPENSES:  
Selling, general and administrative153,452 74,815 465,412 221,127 
Research and development23,105 12,238 69,538 34,332 
Restructuring, strategic transaction and integration14,365 2,358 61,795 8,994 
Change in fair value of contingent earn-out(4,059) (31,253) 
Contract settlement   127 
TOTAL OPERATING EXPENSES186,863 89,411 565,492 264,580 
(LOSS) INCOME FROM OPERATIONS(467)38,380 (42,676)99,420 
INTEREST EXPENSE(21,151)(168)(51,068)(492)
OTHER INCOME (EXPENSE), net311 (287)782 921 
(LOSS) INCOME BEFORE INCOME TAXES(21,307)37,925 (92,962)99,849 
BENEFIT (PROVISION) FOR INCOME TAXES8,099 (6,844)34,212 (16,639)
NET (LOSS) INCOME$(13,208)$31,081 $(58,750)$83,210 
NET (LOSS) INCOME PER SHARE  
Basic$(0.55)$1.47 $(2.47)$3.93 
Diluted$(0.55)$1.43 $(2.47)$3.83 
WEIGHTED AVERAGE NUMBER OF SHARES  
Basic23,908 21,214 23,828 21,189 
Diluted23,908 21,730 23,828 21,735 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
(In thousands)
 
 Three months ended
September 30,
Nine months ended
September 30,
 2022202120222021
NET (LOSS) INCOME$(13,208)$31,081 $(58,750)$83,210 
Other comprehensive income (loss), net of tax:
Cash flow hedge adjustments, net of tax of $(3,676) and $259 for the three months ended September 30, 2022 and 2021, respectively, and $(15,357) and $668 for the nine months ended September 30, 2022 and 2021, respectively.
16,915 (819)48,631 (2,116)
Foreign currency translation adjustment, net of tax of $0 for all periods
(90,549)(5,360)(195,300)(11,516)
Other adjustments, net of tax of $0 for all periods
227 12 256 36 
Other comprehensive loss, net of tax(73,407)(6,167)(146,413)(13,596)
COMPREHENSIVE (LOSS) INCOME$(86,615)$24,914 $(205,163)$69,614 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
(Amounts in thousands)


Common StockAdditional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
SharesAmountTotal
Balance, January 1, 202221,280 $2,128 $721,412 $(27)$911,787 $(19,269)$1,616,031 
Issuance of restricted stock and exercise of stock options154 12 (2,965)5,927 — — 2,974 
Tax withholding payments related to net share settlement of equity awards(37)— — (8,743)— — (8,743)
Issuance of common stock for acquisitions2,500 250 575,725 — — — 575,975 
Stock compensation— — 12,092 — — — 12,092 
Other comprehensive income, net of tax— — — — — 18,641 18,641 
Net loss— — — — (38,068)— (38,068)
Balance, March 31, 202223,897 $2,390 $1,306,264 $(2,843)$873,719 $(628)$2,178,902 
Issuance of restricted stock and exercise of stock options10  (4,428)4,446 — — 18 
Tax withholding payments related to net share settlement of equity awards(8)— — (1,695)— — (1,695)
Stock compensation— — 7,762 — — — 7,762 
Other comprehensive loss, net of tax— — — — — (91,647)(91,647)
Net loss— — — — (7,474)— (7,474)
Balance, June 30, 202223,899 $2,390 $1,309,598 $(92)$866,245 $(92,275)$2,085,866 
Issuance of restricted stock and exercise of stock options82 8 4,837 69 — — 4,914 
Tax withholding payments related to net share settlement of equity awards(2)— — (103)— — (103)
Stock compensation— — 8,743 — — — 8,743 
Other comprehensive loss, net of tax— — — — — (73,407)(73,407)
Net loss— — — — (13,208)— (13,208)
Balance, September 30, 202223,979 $2,398 $1,323,178 $(126)$853,037 $(165,682)$2,012,805 


6

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)(continued)
(Amounts in thousands)
 Common StockAdditional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
SharesAmountTotal
Balance, January 1, 202121,058 $2,106 $693,068 $(39)$808,652 $(1,522)$1,502,265 
Issuance of restricted stock and exercise of stock options198 16 2,496 2,352 — — 4,864 
Tax withholding payments related to net share settlement of equity awards(37)— — (7,723)— — (7,723)
Stock compensation— — 6,022 — — — 6,022 
Other comprehensive loss, net of tax— — — — — (8,391)(8,391)
Net income— — — — 23,731 — 23,731 
Balance, March 31, 202121,219 $2,122 $701,586 $(5,410)$832,383 $(9,913)$1,520,768 
Issuance of restricted stock and exercise of stock options  (2,685)3,237 — — 552 
Tax withholding payments related to net share settlement of equity awards — — (96)— — (96)
Stock compensation— — 6,681 — — — 6,681 
Other comprehensive income, net of tax— — — — — 962 962 
Net income— — — — 28,398 — 28,398 
Balance, June 30, 202121,219 $2,122 $705,582 $(2,269)$860,781 $(8,951)$1,557,265 
Issuance of restricted stock and exercise of stock options20 2 (963)2,511 — — 1,550 
Tax withholding payments related to net share settlement of equity awards(1)— — (290)— — (290)
Stock compensation— — 6,533 — — — 6,533 
Other comprehensive loss, net of tax— — — — — (6,167)(6,167)
Net income— — — — 31,081 — 31,081 
Balance, September 30, 202121,238 $2,124 $711,152 $(48)$891,862 $(15,118)$1,589,972 
7

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands) 

 Nine months ended
September 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net (loss) income$(58,750)$83,210 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: 
Depreciation and amortization178,338 66,564 
Amortization of inventory step-up22,676  
Noncash lease expense17,382 7,165 
Provision for doubtful accounts214 342 
Provision for warranty and returns3,439 752 
Stock compensation28,597 19,236 
Loss on disposal of property, plant and equipment and other assets2,391 1,083 
Bond premium amortization254 514 
Debt issuance costs amortization5,254 216 
Change in fair value of contingent earn-out(31,253) 
Product-related charges 3,380 
Usage of spare parts7,915 9,831 
Other(2,855)2,908 
Changes in operating assets and liabilities, net of amounts acquired: 
Accounts receivable(8,956)3,807 
Inventories(151,840)16,510 
Prepaid expenses and other current assets20,074 3,557 
Other assets(22,594)(13,593)
Accounts payable30,413 (10,374)
Accrued liabilities(38,070)(8,317)
Income taxes, including excess tax benefits and deferred income taxes(63,047)(1,874)
Net cash (used in) provided by operating activities(60,418)184,917 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property, plant and equipment(68,715)(46,464)
Proceeds from sale of assets933 218 
Business acquisitions, net of cash acquired(1,844,164) 
Intangible asset additions(6,560)(10,216)
Investments in non-marketable equity investments (3,250)
Purchases of investment securities(3,397)(10,034)
Proceeds from sale and maturities of investment securities36,433 12,000 
Net cash used in investing activities(1,885,470)(57,746)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from issuance of long-term debt, net of lender debt issuance costs1,672,631  
Principal repayments of long-term debt(20,250) 
Payment of third-party debt issuance costs(1,852) 
Proceeds from exercise of stock options7,906 6,966 
Payments on finance leases(477)(448)
Tax withholding payments related to net share settlement of equity awards(10,541)(8,109)
Net cash provided by (used in) financing activities1,647,417 (1,591)
Effect of exchange rate changes on cash(10,477)(2,192)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(308,948)123,388 
CASH AND CASH EQUIVALENTS, beginning of period552,827 396,097 
CASH AND CASH EQUIVALENTS, end of period$243,879 $519,485 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8



ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - CONTINUED
(In thousands)

Nine months ended
September 30,
20222021
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
  Accounts payable for property, plant and equipment$2,757 $2,897 
  Non-compete agreement with associated contingent earn-out liability$ $3,100 
Detail of assets acquired and liabilities assumed in acquisitions*:
Fair value of assets acquired$1,658,937 
Cash paid for acquisitions, net of cash acquired(1,844,164)
Share consideration(575,975)
Contingent consideration(55,158)
Goodwill, acquired during period1,442,849 
Liabilities assumed/Adjustments to liabilities assumed$(626,489)
*Includes amounts related to the acquisition of Smiths Medical 2020 Limited and measurement period adjustments related to a 2021 acquisition of a small foreign infusion systems supplier.

The accompanying notes are an integral part of these condensed consolidated financial statements.
9

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Note 1:Basis of Presentation
 
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.") and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of only normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the consolidated results for the interim periods presented. Results for the interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of ICU Medical, Inc., ("ICU"), a Delaware corporation, filed with the SEC for the year ended December 31, 2021. Certain reclassifications have been made to the prior year footnote information for revenue disaggregated by geography in Note 5: Revenues to conform to classifications used in the current year. These reclassifications had no impact on net loss, shareholder's equity or cash flows as previously reported.
 
We are engaged in the development, manufacturing and sale of innovative medical products used in infusion therapy and critical care applications. We sell the majority of our products 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. All subsidiaries are wholly owned and are included in the condensed consolidated financial statements. All intercompany balances and transactions have been eliminated.

On January 6, 2022, we acquired Smiths Medical 2020 Limited ("Smiths Medical"), see Note 3: Acquisitions. Our condensed consolidated statement of operations includes the results of operations for Smiths Medical from January 7, 2022 through September 30, 2022. During the third quarter ended September 30, 2022, Smiths Medical changed their reporting period to align with ICU's calendar quarter from their historic 4-4-5 reporting period, this change did not have a material impact on our consolidated financial statements for the three and nine months ended September 30, 2022. Our condensed consolidated statement of operations includes the results of operations for Smiths Medical from June 26, 2022 through September 30, 2022 and January 7, 2022 through September 30, 2022 for the three and nine months ended September 30, 2022, respectively.

Note 2:    New Accounting Pronouncements

Recently Issued Accounting Standards

    In March 2020, the Financial Accounting Standards Board issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden for reference rate reform on financial reporting. Due to concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate ("LIBOR"), regulators around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. Optional expedients may be applied to contracts that are modified as a result of the reference rate reform. Modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate. Modifications of contracts within the scope of ASC 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate (incremental borrowing rate). Exceptions to Topic 815, Derivatives and Hedging, results in not having a dedesignation of a hedging relationship if certain criteria are met. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. In November 2021, we entered into two forward-starting swaps whereby the variable leg of the swap referenced LIBOR. These swaps were amended in early 2022 to transition to an alternative reference rate (see Note 8: Derivatives and Hedging Activities). The amendments in this ASU allow for certain expedients that will allow us to assume that our hedged interest payments are probable of occurring regardless of any expected modification in their terms related to reference rate reform and will allow us to continue hedge accounting for a cash flow hedge for which the hedged interest rate risk changes if the hedge is highly effective under ASC 815, Derivatives and Hedging, or the optional expedient under this ASU is elected. The impact of this ASU on our contracts has not been and is not expected to be material.
        
10

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3:    Acquisitions

2022 Acquisition

On January 6, 2022, we acquired 100.0% 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 17: Long-Term Debt). We also issued share consideration to Smiths of 2.5 million shares of our common stock. The fair value of the common shares 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.

Preliminary Purchase Price Allocation

The following table summarizes the estimated purchase price and the preliminary allocation of the purchase price related to the assets acquired and liabilities assumed (in thousands):
11

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Estimated cash consideration for acquired assets$1,922,955 
Preliminary fair value of contingent consideration payable to Smiths53,520 
Issuance of ICU Medical, Inc. common shares:
Number of shares issued to Smiths2,500 
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 estimated consideration to be paid$2,552,450 
Preliminary Purchase Price Allocation:
Cash and cash equivalents$78,791 
Accounts receivable118,522 
Inventories226,196 
Prepaid expenses and other current assets53,554 
Property, plant and equipment210,000 
Operating lease right-of-use assets55,161 
Intangible assets(1)
975,000 
Deferred income taxes9,303 
Other assets379 
Accounts payable(105,291)
Accrued liabilities(2)
(173,901)
Income tax payable(24,332)
Other long-term liabilities(85,739)
Deferred income taxes(235,170)
Total identifiable net assets acquired$1,102,473 
Goodwill - not tax deductible1,449,977 
Estimated Purchase Consideration$2,552,450 
_______________________________
(1)    Estimated identifiable intangible assets include $540.0 million of customer relationships, $400.0 million of developed technology, $30.0 million of internally developed software, and $5.0 million of trademark. 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 trade mark.
(2)    Estimated 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 above purchase price and purchase price allocation are preliminary and subject to future revision as the acquired assets and liabilities assumed are dependent upon the finalization of the related valuations.

The identifiable intangible assets and other long-lived assets acquired have been valued as Level 3 assets at fair value. The estimated fair value of identifiable intangible assets were 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 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.
12

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 September 30, 2022 were estimated to be $699.1 million and $79.0 million, respectively, and for the three months ended September 30, 2022 were estimated to be $261.4 million and $13.6 million. 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.

Three months ended September 30,Nine months ended September 30,
(In thousands)2022202120222021
Revenues$597,857 $641,115 $1,722,357 $1,862,237 
Net Loss$(13,208)$(8,874)$(54,840)$22,026 

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 and $1.9 million for the nine months ended September 30, 2022 and 2021, respectively, incremental interest expense, including amortization of debt discount and debt issuance costs, on the Senior Secured Credit Facilities (as defined in Note 17: Long-Term Debt) of $1.4 million and $47.1 million for the nine months ended September 30, 2022 and 2021, respectively; and a $27.4 million expense adjustment related to the increase in fair value of inventory to remove the expense for the nine months ended September 30, 2022 and to add the expense for the nine months ended September 30, 2021. In addition, there was a non-recurring adjustment directly attributable to the business combination for acquisition-related costs of $11.6 million for the nine months ended September 30, 2021. 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.

2021 Acquisition

During November 2021, we acquired a small foreign infusion systems supplier and paid an initial gross cash payment of approximately $15.4 million. In addition to the initial cash consideration, total consideration for the acquisition includes an additional holdback of $0.5 million, to be paid two years from the completion date of the acquisition, and also 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 certain product-related regulatory certifications obtained by May 26, 2024. As of September 30, 2022, the total consideration which includes the acquisition date fair value of the contingent consideration was $17.1 million.

13

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4: Restructuring, Strategic Transaction and Integration

    Restructuring, strategic transaction and integration expenses were $14.4 million and $2.4 million for the three months ended September 30, 2022 and 2021, respectively, and $61.8 million and $9.0 million for nine months ended September 30, 2022 and 2021, respectively.

Restructuring

    During the three and nine months ended September 30, 2022, restructuring charges were $2.4 million and $7.3 million, respectively, and were related to severance costs. During the third quarter 2021 we adjusted certain facility restructuring liabilities by $2.0 million to reflect actual amounts owed which resulted in net restructuring credits of $(1.9) million and $(1.8) million for the three and nine months ended September 30, 2021, respectively.    
    
The following table summarizes the activity in our restructuring-related accrual by major type of cost for the period ended September 30, 2022 (in thousands):
Severance Pay and BenefitsRetention and Facility Closure CostsTotal
Accrued balance, January 1, 2022$499 $165 $664 
Acquired restructuring liabilities5,796 1,740 7,536 
Charges incurred3,222  3,222 
Payments(2,030) (2,030)
Currency translation(147)(40)(187)
Accrued balance, March 31, 2022$7,340 $1,865 $9,205 
Charges incurred1,710  1,710 
Payments(3,352)(212)(3,564)
Currency translation(256)(94)(350)
Other adjustments(38) (38)
Accrued balance, June 30, 2022$5,404 $1,559