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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: June 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 July 31, 2022
Common 23,899,381




ICU MEDICAL, INC. AND SUBSIDIARIES
Form 10-Q
June 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) 
 June 30,
2022
December 31,
2021
 (Unaudited)(1)
ASSETS  
CURRENT ASSETS:  
Cash and cash equivalents$255,698 $552,827 
Short-term investment securities13,191 14,420 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES268,889 567,247 
Accounts receivable, net of allowance for doubtful accounts of $7,557 at June 30, 2022 and $7,038 at December 31, 2021
216,124 105,894 
Inventories583,050 290,235 
Prepaid income taxes27,111 19,586 
Prepaid expenses and other current assets94,663 46,847 
TOTAL CURRENT ASSETS1,189,837 1,029,809 
PROPERTY, PLANT AND EQUIPMENT, net667,783 468,365 
OPERATING LEASE RIGHT-OF-USE ASSETS83,323 39,847 
LONG-TERM INVESTMENT SECURITIES1,837 4,620 
GOODWILL1,421,216 43,439 
INTANGIBLE ASSETS, net1,080,329 188,311 
DEFERRED INCOME TAXES43,942 42,604 
OTHER ASSETS101,728 63,743 
TOTAL ASSETS$4,589,995 $1,880,738 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:  
Accounts payable$201,874 $81,128 
Accrued liabilities247,656 118,195 
Current portion of long-term debt19,063  
Income tax payable17,102 1,454 
Contingent earn-out liability290  
TOTAL CURRENT LIABILITIES485,985 200,777 
CONTINGENT EARN-OUT LIABILITY30,119 2,589 
LONG-TERM DEBT1,636,029  
OTHER LONG-TERM LIABILITIES128,200 41,830 
DEFERRED INCOME TAXES204,992 1,490 
INCOME TAX LIABILITY18,804 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 — 23,899 shares at June 30, 2022 and 21,280 shares at December 31, 2021; and outstanding — 23,898 shares at June 30, 2022 and 21,280 shares at December 31, 2021
2,390 2,128 
Additional paid-in capital1,309,598 721,412 
Treasury stock, at cost (406 and 119 shares, respectively)
(92)(27)
Retained earnings866,245 911,787 
Accumulated other comprehensive loss(92,275)(19,269)
TOTAL STOCKHOLDERS' EQUITY2,085,866 1,616,031 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$4,589,995 $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
June 30,
Six months ended
June 30,
 2022202120222021
TOTAL REVENUES$561,004 $321,677 $1,104,126 $639,723 
COST OF GOODS SOLD393,411 198,148 767,706 403,514 
GROSS PROFIT167,593 123,529 336,420 236,209 
OPERATING EXPENSES:  
Selling, general and administrative158,748 73,921 311,960 146,312 
Research and development22,562 11,385 46,433 22,094 
Restructuring, strategic transaction and integration13,525 3,753 47,430 6,636 
Change in fair value of contingent earn-out(27,194) (27,194) 
Contract settlement   127 
TOTAL OPERATING EXPENSES167,641 89,059 378,629 175,169 
(LOSS) INCOME FROM OPERATIONS(48)34,470 (42,209)61,040 
INTEREST EXPENSE(16,273)(163)(29,917)(324)
OTHER (EXPENSE) INCOME, net(533)525 471 1,208 
(LOSS) INCOME BEFORE INCOME TAXES(16,854)34,832 (71,655)61,924 
BENEFIT (PROVISION) FOR INCOME TAXES9,380 (6,434)26,113 (9,795)
NET (LOSS) INCOME$(7,474)$28,398 $(45,542)$52,129 
NET (LOSS) INCOME PER SHARE  
Basic$(0.31)$1.34 $(1.91)$2.46 
Diluted$(0.31)$1.31 $(1.91)$2.40 
WEIGHTED AVERAGE NUMBER OF SHARES  
Basic23,897 21,200 23,787 21,176 
Diluted23,897 21,703 23,787 21,718 
 
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
June 30,
Six months ended
June 30,
 2022202120222021
NET (LOSS) INCOME$(7,474)$28,398 $(45,542)$52,129 
Other comprehensive income (loss), net of tax:
Cash flow hedge adjustments, net of tax of $4,370 and $(111) for the three months ended June 30, 2022 and 2021, respectively, and $11,681 and $(409) for the six months ended June 30, 2022 and 2021, respectively.
8,144 (352)31,716 (1,296)
Foreign currency translation adjustment, net of tax of $0 for all periods
(99,805)1,302 (104,751)(6,156)
Other adjustments, net of tax of $0 for all periods
14 12 29 23 
Other comprehensive (loss) income, net of tax(91,647)962 (73,006)(7,429)
COMPREHENSIVE (LOSS) INCOME$(99,121)$29,360 $(118,548)$44,700 
 
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 

 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 
6

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

 Six months ended
June 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net (loss) income$(45,542)$52,129 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: 
Depreciation and amortization119,697 44,319 
Amortization of inventory step-up22,676  
Noncash lease expense10,888 4,780 
Provision for doubtful accounts(99)342 
Provision for warranty and returns1,483 (345)
Stock compensation19,854 12,703 
Loss on disposal of property, plant and equipment and other assets267 829 
Bond premium amortization211 364 
Debt issuance costs amortization3,495 144 
Change in fair value of contingent earn-out(27,194) 
Usage of spare parts5,229 5,356 
Other(2,807)1,574 
Changes in operating assets and liabilities, net of amounts acquired: 
Accounts receivable(1,090)2,078 
Inventories(100,024)13,368 
Prepaid expenses and other current assets4,710 759 
Other assets(17,323)(7,632)
Accounts payable22,149 (1,648)
Accrued liabilities(33,509)(17,068)
Income taxes, including excess tax benefits and deferred income taxes(45,798)(5,970)
Net cash (used in) provided by operating activities(62,727)106,082 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property, plant and equipment(48,039)(29,693)
Proceeds from sale of assets900 203 
Business acquisitions, net of cash acquired(1,844,164) 
Intangible asset additions(4,440)(4,136)
Purchases of investment securities(3,397)(10,034)
Proceeds from sale and maturities of investment securities26,198 7,000 
Net cash used in investing activities(1,872,942)(36,660)
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(18,125) 
Payment of third-party debt issuance costs(1,852) 
Proceeds from exercise of stock options2,992 5,416 
Payments on finance leases(321)(296)
Tax withholding payments related to net share settlement of equity awards(10,438)(7,819)
Net cash provided by (used in) financing activities1,644,887 (2,699)
Effect of exchange rate changes on cash(6,347)(783)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(297,129)65,940 
CASH AND CASH EQUIVALENTS, beginning of period552,827 396,097 
CASH AND CASH EQUIVALENTS, end of period$255,698 $462,037 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


7

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

Six months ended
June 30,
20222021
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
  Accounts payable for property, plant and equipment$5,539 $1,857 
Detail of assets acquired and liabilities assumed in acquisitions*:
Fair value of assets acquired$1,658,692 
Cash paid for acquisitions, net of cash acquired(1,844,164)
Share consideration(575,975)
Contingent consideration(55,158)
Goodwill, acquired during period1,437,811 
Liabilities assumed/Adjustments to liabilities assumed$(621,206)
*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.
8

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.
 
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 June 25, 2022, which is the current end of their 4-4-5 accounting period.

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.
        
9

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):
10

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 receivable118,277 
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)
(175,099)
Income tax payable(24,332)
Other long-term liabilities(85,739)
Deferred income taxes(228,689)
Total identifiable net assets acquired$1,107,511 
Goodwill - not tax deductible1,444,939 
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 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 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.
11

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 June 30, 2022 were $437.8 million and $65.5 million, respectively, and for the three months ended June 30, 2022 were $222.9 million and $26.0 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 June 30,Six months ended June 30,
(In thousands)2022202120222021
Revenues$561,004 $625,942 $1,124,823 $1,227,502 
Net Loss$(7,474)$34,244 $(59,425)$31,447 

The unaudited pro forma results presented above include the impact of the following adjustments: incremental amortization expense on intangible assets acquired of $1.3 million and $55.5 million for the six months ended June 30, 2022 and 2021, respectively, incremental interest expense, including amortization of debt discount and debt issuance costs, on the Credit Facilities of $0.8 million and $25.4 million for the six months ended June 30, 2022 and 2021, respectively; and a $27.4 million expense related to the increase in fair value of inventory for the six months ended June 30, 2021. In addition, there were non-recurring adjustments directly attributable to the business combination, including acquisition-related cost of $13.5 million for the six months ended June 30, 2021 and adjustments related to the extinguishment of related party loans receivable and payable equal to $80.7 million and $45.0 million for the six months ended June 30, 2022 and 2021, respectively. 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 June 30, 2022, the total consideration which includes the acquisition date fair value of the contingent consideration was $17.1 million.

12

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 $13.5 million and $3.8 million for the three months ended June 30, 2022 and 2021, respectively, and $47.4 million and $6.6 million for six months ended June 30, 2022 and 2021, respectively.

Restructuring

    During the three and six months ended June 30, 2022, restructuring charges were $1.7 million and $4.9 million, respectively, and were related to severance costs. Restructuring charges during the three and six months ended June 30, 2021 were not material.    
    
The following table summarizes the activity in our restructuring-related accrual by major type of cost for the period ended June 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 $6,963 

Strategic Transaction and Integration Expenses

    We incurred and expensed $11.8 million and $3.7 million in strategic transaction and integration expenses during the three months ended June 30, 2022 and 2021, respectively, and we incurred and expensed $42.5 million and $6.5 million in strategic transaction and integration expenses during the six months ended June 30, 2022 and 2021, respectively, which are included in restructuring, strategic transaction and integration expenses in our condensed consolidated statements of operations. The strategic transaction and integration expenses during the three and six months ended June 30, 2022 were primarily related to transaction and integration expenses associated with our acquisition of Smiths Medical on January 6, 2022 (see Note 3: Acquisitions) which primarily included legal expenses, bank fees and employee costs. The six months ended June 30, 2022 also included a United Kingdom stamp tax. The strategic transaction and integration expenses for the three and six months ended June 30, 2021 were primarily related to integration costs associated with acquisitions, the Hospira Infusion Systems ("HIS") earn-out dispute with Pfizer and one-time costs incurred to comply with regulatory initiatives.

Note 5: Revenue

Revenue Recognition

    Following our acquisition of Smiths Medical, our primary product lines are Infusion Consumables, Infusion Systems, IV Solutions, Critical Care, Infusion Systems-Smiths Medical, Vascular Access-Smiths Medical and Vital Care-Smiths Medical. The vast majority of our sales of these products 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. However, 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.

13

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    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 offer certain volume-based rebates to our distribution 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 and our historical experience with each customer to estimate the most likely rebate amount. We also provide chargebacks to distributors that sell to end customers at prices determined under a contract between us and the end customer. Chargebacks are the difference between the prices we charge our distribution customers and the contracted prices we have with the end customer which are processed as credits to our distribution customers. In estimating the expected value of chargeback amounts in order to determine the transaction price, we use information available at the time, including our historical experience.

    We also warranty 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. Our revenues are recorded at the net sales price, which includes an estimate for variable consideration related to rebates, chargebacks and product returns.

Revenue disaggregated

The following table represents our revenues disaggregated by product line (in thousands):

Three months ended
June 30,
Six months ended
June 30,
Product line2022202120222021
Infusion Consumables$144,456 $136,200 $284,977 $262,569 
Infusion Systems87,253 84,661 174,265 168,995 
IV Solutions94,113 88,421 182,593 182,597 
Critical Care12,373 12,395 24,530 25,562 
Infusion Systems-Smiths Medical77,812  144,102  
Vascular Access-Smiths Medical77,058  156,066  
Vital Care-Smiths Medical67,939  137,593  
Total Revenues$561,004 $321,677 $1,104,126 $639,723 

Infusion Systems-Smiths Medical, Vascular Access-Smiths Medical and Vital Care-Smiths Medical represent our newly integrated product lines following our acquisition of Smiths Medical on January 6, 2022.

    The following table represents our revenues disaggregated by geography (in thousands):
Three months ended
June 30,
Six months ended
June 30,
Geography2022202120222021
Europe, the Middle East and Africa$87,415 $37,761 $173,619 $72,560 
Other Foreign109,723 59,249 218,850 115,145 
Total Foreign197,138 97,010 392,469 187,705 
United States363,866 224,667 711,657 452,018 
Total Revenues$561,004 $321,677 $1,104,126 $639,723 
    




14

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

    The following table presents the changes in our contract balances for the six months ended June 30, 2022 and 2021 (in thousands):
Contract Liabilities
Beginning balance, January 1, 2022$(7,461)
Fair value of acquired deferred revenue(51,245)
Equipment revenue recognized14,606 
Equipment revenue deferred due to implementation(7,349)
Software revenue recognized8,737 
Software revenue deferred due to implementation(9,067)
Government grant deferred revenue(2,972)
Government grant recognized