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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Form 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2021
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 number: 001-37599
livn-20210930_g1.jpg
LivaNova PLC
(Exact name of registrant as specified in its charter)
England and Wales ................... 98-1268150
(State or other jurisdiction of .......... (I.R.S. Employer
incorporation or organization) ........ Identification No.)
20 Eastbourne Terrace, London, United Kingdom, W2 6LG
(Address of principal executive offices) ....................... (Zip Code)
Registrant’s telephone number, including area code: (44) (0) 203 325-0660
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares - £1.00 par value per shareLIVNNASDAQ Global Market
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      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     No
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 filerAccelerated filer
Non-accelerated filerSmaller 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes      No 
ClassOutstanding at October 29, 2021
Ordinary Shares - £1.00 par value per share53,225,496



LIVANOVA PLC
TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONPAGE NO.
 PART II. OTHER INFORMATION
In this Quarterly Report on Form 10-Q, “LivaNova,” “the Company,” “we,” “us” and “our” refer to LivaNova PLC and its consolidated subsidiaries.
This report may contain references to our proprietary intellectual property, including among others:
Trademarks for our VNS therapy systems, the VNS Therapy® System, the VITARIA® System and our proprietary pulse generator products: Model 102 (Pulse®), Model 102R (Pulse Duo®), Model 103 (Demipulse®), Model 104 (Demipulse Duo®), Model 106 (AspireSR®), Model 1000 (SenTiva®), Model 1000-D (SenTiva® Duo), Model 7103 (VITARIA® and TitrationAssist) and Model 8103 (Symmetry®).
Trademarks for our Cardiopulmonary product systems: S5® heart-lung machine, S3® heart-lung machine, S5 Pro heart-lung machine, B-Capta®, Inspire®, Heartlink®, XTRA® Autotransfusion System, 3T Heater-Cooler®, Connect™, Revolution® and Essenzheart-lung machine.
Trademarks for our advanced circulatory support systems: TandemLife®, TandemHeart®, TandemLung®, ProtekDuo®, and LifeSPARC®.
Trademarks for our obstructive sleep apnea system: ImThera® and Aura6000®.
These trademarks and trade names are the property of LivaNova or the property of our consolidated subsidiaries and are protected under applicable intellectual property laws. Solely for convenience, our trademarks and tradenames referred to in this Quarterly Report on Form 10-Q may appear without the ® or symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.

________________________________________
2


NOTE ABOUT FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, LivaNova’s plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “should,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” “foresee” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by LivaNova and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q, and include but are not limited to the risks and uncertainties summarized below:
changes in our common stock price;
activist investors causing disruptions to the business;
changes in our profitability;
regulatory activities and announcements, including the failure to obtain regulatory approvals for our new products;
effectiveness of our internal controls over financial reporting;
fluctuations in future quarterly operating results;
failure to comply with, or changes in, laws, regulations or administrative practices affecting government regulation of our products, including, but not limited to, U.S. Food and Drug Administration (“FDA”) laws and regulations;
failure to establish, expand or maintain market acceptance of our products for the treatment of our approved indications;
any legislative or administrative reform to the healthcare system, including the U.S. Medicare or Medicaid systems or international reimbursement systems, that significantly reduces reimbursement for our products or procedures or denies coverage for such products or procedures or enhances coverage for competitive products or procedures, as well as adverse decisions by administrators of such systems on coverage or reimbursement issues relating to our products;
failure to maintain the current regulatory approvals for our products’ approved indications;
failure to obtain or maintain coverage and reimbursement for our products’ approved indications;
unfavorable results from clinical studies;
variations in sales and operating expenses relative to estimates;
our dependence on certain suppliers and manufacturers to provide certain materials, components and contract services necessary for the production of our products;
logistical cost and delays related to the supply of raw materials and the distribution of finished products;
product liability, intellectual property, shareholder-related, environmental-related, income tax and other litigation, disputes, losses and costs;
protection, expiration and validity of our intellectual property;
changes in technology, including the development of superior or alternative technology or devices by competitors;
competition from providers of alternative medical therapies, such as pharmaceutical companies and providers of cannabis;
cyber-attacks or other disruptions to our information technology systems;
failure to comply with applicable U.S. laws and regulations, including federal and state privacy and security laws and regulations;
3


failure to comply with applicable non-U.S. laws and regulations;
non-U.S. operational and economic risks and concerns;
failure to attract or retain key personnel;
failure of new acquisitions to further our strategic objectives or strengthen our existing businesses;
losses or costs from pending or future lawsuits and governmental investigations, including any amount of liability or damages imposed by the Appeals Court or the Supreme Court of Italy with respect to SNIA S.p.A.;
changes in accounting rules that adversely affect the characterization of our consolidated financial position, results of operations or cash flows;
changes in customer spending patterns;
risks relating to the exchangeability of the exchangeable senior notes;
volatility in the global market and worldwide economic conditions, including volatility caused by Brexit, changes to existing trade agreements and relationships between the U.S. and other countries and/or COVID-19;
risks relating to the outbreak and spread of COVID-19 and its variants around the world;
changes in tax laws, including changes related to Brexit, or exposure to additional income tax liabilities;
harsh weather or natural disasters that interrupt our business operations or the business operations of our hospital-customers; and
failure of the market to adopt new therapies or to adopt new therapies quickly.
Other factors that could cause our actual results to differ from our projected results are described in (1) “Part II, Item 1A. Risk Factors” and elsewhere in this and our other Quarterly Reports on Form 10-Q, (2) our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 Form 10-K”), (3) our reports and registration statements filed and furnished from time to time with the Securities and Exchange Commission (“SEC”) and (4) other announcements we make from time to time.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. Operating results for the nine months ended September 30, 2021 are not necessarily indicative of future results, including the full fiscal year. You should also refer to our “Annual Consolidated Financial Statements,” “Notes” thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our 2020 Form 10-K and in our Quarterly Reports on Form 10-Q.
Financial Information and Currency of Financial Statements
All of the financial information included in this quarterly report has been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.” and such principles, “U.S. GAAP”). The reporting currency of our condensed consolidated financial statements is U.S. dollars.

________________________________________

4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net sales$253,215 $240,083 $765,301 $664,686 
Cost of sales83,105 92,448 256,828 234,079 
Gross profit170,110 147,635 508,473 430,607 
Operating expenses:
Selling, general and administrative109,042 104,036 347,471 331,711 
Research and development42,133 47,368 139,315 108,422 
Other operating expenses1,067 3,739 43,103 12,611 
Operating income (loss) from continuing operations17,868 (7,508)(21,416)(22,137)
Interest income178 47 293 482 
Interest expense(11,355)(14,673)(43,806)(25,237)
Loss on debt extinguishment(60,238) (60,238)(1,407)
Foreign exchange and other gains13,436 3,420 7,117 1,914 
Loss from continuing operations before tax(40,111)(18,714)(118,050)(46,385)
Income tax expense (benefit)2,098 (3,990)9,094 17,581 
Losses from equity method investments(28)(48)(109)(221)
Net loss from continuing operations(42,237)(14,772)(127,253)(64,187)
Net loss from discontinued operations, net of tax   (995)
Net loss$(42,237)$(14,772)$(127,253)$(65,182)
Basic loss per share:
Continuing operations$(0.82)$(0.30)$(2.56)$(1.32)
Discontinued operations   (0.02)
$(0.82)$(0.30)$(2.56)$(1.34)
Diluted loss per share:
Continuing operations$(0.82)$(0.30)$(2.56)$(1.32)
Discontinued operations   (0.02)
$(0.82)$(0.30)$(2.56)$(1.34)
Shares used in computing basic loss per share51,582 48,652 49,748 48,582 
Shares used in computing diluted loss per share51,582 48,652 49,748 48,582 
See accompanying notes to the condensed consolidated financial statements
5


LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net loss$(42,237)$(14,772)$(127,253)$(65,182)
Other comprehensive (loss) income:
Net change in unrealized (loss) gain on derivatives(1,197)1,640 (2,782)1,313 
Tax effect287 (393)668 (314)
Net of tax(910)1,247 (2,114)999 
Foreign currency translation adjustment(18,986)23,457 (22,516)8,008 
Total other comprehensive (loss) income(19,896)24,704 (24,630)9,007 
Total comprehensive (loss) income$(62,133)$9,932 $(151,883)$(56,175)

See accompanying notes to the condensed consolidated financial statements
6


LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share amounts)
 September 30, 2021December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents$181,846 $252,832 
Accounts receivable, net of allowance of $11,837 at September 30, 2021 and $10,310 at December 31, 2020
182,008 184,356 
Inventories123,733 126,675 
Prepaid and refundable taxes36,029 60,240 
Assets held for sale 70,539 
Current derivative assets95,928 2,053 
Prepaid expenses and other current assets26,811 22,739 
Total Current Assets646,355 719,434 
Property, plant and equipment, net152,728 163,805 
Goodwill905,154 922,318 
Intangible assets, net408,954 437,636 
Operating lease assets46,215 50,525 
Investments16,580 31,094 
Deferred tax assets2,012 2,990 
Long-term derivative assets 72,302 
Other assets25,411 11,247 
Total Assets$2,203,409 $2,411,351 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt obligations$227,773 $13,343 
Accounts payable60,248 73,668 
Accrued liabilities and other97,504 88,036 
Current derivative liabilities151,388 7,372 
Current litigation provision liability33,526 28,612 
Taxes payable20,514 16,463 
Accrued employee compensation and related benefits67,512 51,879 
Liabilities held for sale 29,679 
Total Current Liabilities658,465 309,052 
Long-term debt obligations10,797 642,298 
Contingent consideration104,080 89,850 
Deferred tax liabilities8,312 8,915 
Long-term operating lease liabilities38,688 42,221 
Long-term employee compensation and related benefits18,173 20,628 
Long-term derivative liabilities 121,940 
Other long-term liabilities52,396 57,618 
Total Liabilities890,911 1,292,522 
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Ordinary Shares, £1.00 par value: unlimited shares authorized; 53,731,820 shares issued and 53,221,234 shares outstanding at September 30, 2021; 49,447,473 shares issued and 48,655,863 shares outstanding at December 31, 2020
82,254 76,300 
Additional paid-in capital2,107,391 1,768,156 
Accumulated other comprehensive income3,179 27,809 
Accumulated deficit(879,655)(752,402)
Treasury stock at cost, 510,586 ordinary shares at September 30, 2021; 791,610 ordinary shares at December 31, 2020
(671)(1,034)
Total Stockholders’ Equity1,312,498 1,118,829 
Total Liabilities and Stockholders’ Equity$2,203,409 $2,411,351 
See accompanying notes to the condensed consolidated financial statements
7


LIVANOVA PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended September 30,
20212020
Operating Activities:
Net loss$(127,253)$(65,182)
Non-cash items included in net loss:
Loss on debt extinguishment60,238 1,407 
Stock-based compensation30,574 26,845 
Amortization20,005 29,346 
Depreciation18,493 22,206 
Remeasurement of contingent consideration to fair value17,755 (31,176)
Amortization of debt issuance costs13,087 5,468 
Amortization of operating lease assets12,133 9,813 
Remeasurement of Respicardia investment and loan(4,642) 
Remeasurement of derivative instruments(2,211)(17,654)
Deferred tax (benefit) expense(342)41,133 
Other1,944 (999)
Changes in operating assets and liabilities:
Accounts receivable, net(7,851)65,401 
Inventories4,656 (12,141)
Other current and non-current assets20,532 (15,360)
Accounts payable and accrued current and non-current liabilities2,999 (50,741)
Taxes payable4,996 (615)
Litigation provision liability3,951 (124,158)
Net cash provided by (used in) operating activities69,064 (116,407)
Investing Activities:
Proceeds from sale of Heart Valves, net of cash disposed40,244  
Proceeds from sale of Respicardia investment and loan23,057  
Purchases of property, plant and equipment(17,893)(28,445)
Purchase of investments(3,520)(3,175)
Loans to investees (2,250)
Other(1,353)533 
Net cash provided by (used in) investing activities40,535 (33,337)
Financing Activities:
Repayment of long-term debt obligations(451,396)(481,360)
Proceeds from issuance of ordinary shares, net324,180  
Payment of make-whole premium on long-term debt obligations(35,594) 
Shares repurchased from employees for minimum tax withholding(12,246)(5,277)
Payment of contingent consideration(5,249)(8,860)
Proceeds from exercise of stock options2,405 219 
Debt issuance costs(1,875)(20,412)
Proceeds from share issuances under ESPP1,750 2,063 
Proceeds from long-term debt obligations 886,899 
Proceeds from short term borrowings (maturities greater than 90 days) 46,717 
Repayments of short term borrowings (maturities greater than 90 days) (44,838)
Purchase of capped call (43,096)
Closing adjustment payment for sale of CRM business (14,891)
Other(158)(1,237)
Net cash (used in) provided by financing activities(178,183)315,927 
Effect of exchange rate changes on cash and cash equivalents(2,402)491 
Net (decrease) increase in cash and cash equivalents(70,986)166,674 
Cash and cash equivalents at beginning of period252,832 61,137 
Cash and cash equivalents at end of period$181,846 $227,811 
See accompanying notes to the condensed consolidated financial statements
8


LIVANOVA PLC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Unaudited Condensed Consolidated Financial Statements
Basis of Presentation
The accompanying condensed consolidated financial statements of LivaNova as of, and for the three and nine months ended September 30, 2021 and 2020, have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated balance sheet of LivaNova at December 31, 2020 has been derived from audited financial statements contained in our 2020 Form 10-K, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the operating results of LivaNova and its subsidiaries, for the three and nine months ended September 30, 2021, and are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The financial information presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto accompanying our 2020 Form 10-K.
Developments Regarding COVID-19
Since early 2020, the COVID-19 pandemic (“COVID-19”) has caused and may continue to cause unpredictable demand for our products. Throughout the pandemic, healthcare customers have diverted medical resources and priorities towards the treatment of COVID-19, and public health bodies have delayed elective procedures, which has negatively impacted the usage of our products. Further, some people have avoided seeking treatment for non-COVID-19 procedures and hospitals and clinics have experienced staffing shortages, which has negatively impacted the demand for our products. While we have seen improvement during 2021, we continue to experience lingering COVID-19 related headwinds and are monitoring the potential for various strains of the virus to cause a resumption of high levels of infection and hospitalization, that in turn, may affect the demand for our products.
Reclassifications
We have reclassified certain prior period amounts on the condensed consolidated statements of income (loss), the condensed consolidated balance sheets and the condensed consolidated statements of cash flows for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows. The prior period reclassifications on the condensed consolidated statements of income (loss) are summarized and presented below (in thousands):
Product remediation has been reclassified to cost of sales
Merger and integration expenses have been reclassified to other operating expenses
Restructuring expenses have been reclassified to other operating expenses
Litigation provision, net has been reclassified to other operating expenses
Amortization of intangibles has been reclassified to cost of sales or selling, general and administrative based on the nature of the underlying intangible asset and
Loss on debt extinguishment has been reclassified from foreign exchange and other gains to loss on debt extinguishment.
9


Three Months Ended September 30,Nine Months Ended September 30,
As Previously ReportedReclassificationsCurrent PresentationAs Previously ReportedReclassificationsCurrent Presentation
Net sales$240,083 $ $240,083 $664,686 $ $664,686 
Cost of sales86,467 5,981 92,448 212,152 21,927 234,079 
Product remediation1,133 (1,133) 6,868 (6,868) 
Gross profit152,483 (4,848)147,635 445,666 (15,059)430,607 
Operating expenses:
Selling, general and administrative99,199 4,837 104,036 317,424 14,287 331,711 
Research and development47,368  47,368 108,422  108,422 
Merger and integration expenses1,094 (1,094) 6,616 (6,616) 
Restructuring expenses(349)349  2,025 (2,025) 
Amortization of intangibles9,685 (9,685) 29,346 (29,346) 
Litigation provision, net2,994 (2,994) 3,970 (3,970) 
Other operating expenses 3,739 3,739  12,611 12,611 
Operating loss from continuing operations(7,508) (7,508)(22,137) (22,137)
Interest income47  47 482  482 
Interest expense(14,673) (14,673)(25,237) (25,237)
Loss on debt extinguishment    (1,407)(1,407)
Foreign exchange and other gains3,420  3,420 507 1,407 1,914 
Loss from continuing operations before tax$(18,714)$ $(18,714)$(46,385)$ $(46,385)
Significant Accounting Policies
Our significant accounting policies are detailed in “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” and “Note 3. Revenue Recognition” of our 2020 Form 10-K.
Note 2. Divestiture of Heart Valve Business
On December 2, 2020, LivaNova entered into a Share and Asset Purchase Agreement (“Purchase Agreement”) with Mitral Holdco S.à r.l. (the “Purchaser”), a company incorporated under the laws of Luxembourg and wholly owned and controlled by funds advised by Gyrus Capital S.A., a Swiss private equity firm. The Purchase Agreement provides for the divestiture of certain of LivaNova’s subsidiaries as well as certain other assets and liabilities relating to the Company’s Heart Valve business and site management operations conducted by the Company’s subsidiary LivaNova Site Management S.r.l. (“LSM”) at the Company’s Saluggia campus for €60.0 million (approximately $69.5 million as of September 30, 2021). On April 9, 2021, LivaNova and the Purchaser entered into an Amended and Restated Share and Asset Purchase Agreement (the “A&R Purchase Agreement”) which amends and restates the original Purchase Agreement to, among other things, defer the closing of the sale and purchase of LSM by up to two years and include or amend certain additional terms relating to such deferral, including certain amendments relating to the potential hazardous substances liabilities of LSM and the related expense reimbursement provisions.
As a result of entering into the Purchase Agreement, during the fourth quarter of 2020 the Company concluded that the assets and liabilities of the Heart Valve business being sold met the criteria to be classified as held for sale. As a result, we recognized an impairment of $180.2 million during the fourth quarter of 2020 to record the Heart Valves disposal group at fair value less estimated cost to sell.
The initial closing of the sale of the Heart Valve business occurred on June 1, 2021 and we received €34.8 million (approximately $42.5 million as of June 1, 2021), subject to customary trade working capital and net indebtedness adjustments, as set forth in the Purchase Agreement. An additional €2.5 million (approximately $2.9 million as of September 30, 2021) is payable to LivaNova during the fourth quarter of 2021 and €10.0 million (approximately $11.6 million as of September 30, 2021) is payable to LivaNova on December 30, 2022. During the three and nine months ended September 30, 2021, we recognized a (loss) gain from the sale of the Heart Valve business of $(0.1) million and $0.7 million, respectively, which is included within other operating expenses on the condensed consolidated statements of income (loss).
10


In conjunction with the sale, we entered into a transition services agreement to provide certain support services generally for up to twelve months from the closing date of the sale. These services include, among others, accounting, information technology, human resources, quality assurance, regulatory affairs, supply chain, clinical affairs and customer support. During the three and nine months ended September 30, 2021, we recognized income of $1.0 million and $1.3 million, respectively, for providing these services. Income recognized related to the transition services agreements is recorded as a reduction to the related expenses in the associated expense line items in the condensed consolidated statements of income (loss).
Note 3. Restructuring
We initiate restructuring plans to leverage economies of scale, streamline distribution and logistics, and strengthen operational and administrative effectiveness in order to reduce overall costs.
During the fourth quarter of 2020, we initiated a reorganization plan (the “2020 Plan”) to reduce our cost structure. We incurred restructuring expenses of $5.3 million during the three months ended December 31, 2020 primarily associated with severance costs for 54 employees, and $0.1 million and $9.8 million during the three and nine months ended September 30, 2021, respectively, primarily associated with severance costs for 27 additional employees during the nine months ended September 30, 2021 under the 2020 Plan and lease abandonment costs.
The following table provides a reconciliation of the beginning and ending balance of the accruals and other reserves recorded in connection with our restructuring plans included within accrued liabilities and other and other long-term liabilities on the condensed consolidated balance sheet (in thousands):
Employee Severance and Other Termination CostsOtherTotal
Balance at December 31, 2020$5,749 $546 $6,295 
Charges7,800 1,981 9,781 
Cash payments and other(10,452)(2,270)(12,722)
Balance at September 30, 2021$3,097 $257 $3,354 
The following table presents restructuring expense by reportable segment (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Cardiovascular $53 $9 $2,882 $1,265 
Neuromodulation (28)43 1,493 851 
Other63 (401)5,406 (91)
Total (1)
$88 $(349)$9,781 $2,025 
(1)Restructuring expense is included within other operating expenses on the condensed consolidated statements of income (loss).
Note 4. Investments
Investments on the condensed consolidated balance sheets represent the carrying value of our investments in equity securities of non-consolidated affiliates without readily determinable fair values for which we do not exert significant influence over the investee. These equity investments are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. At September 30, 2021 and December 31, 2020, the carrying value of our investments was $16.6 million and $31.1 million, respectively.
In April 2021, Zoll Medical Corporation acquired Respicardia Inc. As a result of the acquisition we received proceeds of $23.1 million for our investment and loan receivable with carrying values of $17.7 million and $0.8 million as of December 31, 2020, respectively. The Company recorded a gain of $4.6 million during the first quarter of 2021 to adjust the investment and loans receivable to fair value, which is included in foreign exchange and other gains on the condensed consolidated statements of income (loss) for the nine months ended September 30, 2021.
During the second quarter of 2021 the Company received a cash dividend from its investment in MD Start II of $3.1 million, which is included in foreign exchange and other gains on the condensed consolidated statements of income (loss) for the nine months ended September 30, 2021.
11


Note 5. Fair Value Measurements
We review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no transfers between Level 1, Level 2, or Level 3 during the nine months ended September 30, 2021 and 2020.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis (in thousands):
Fair Value as of September 30, 2021Fair Value Measurements Using Inputs Considered as:
Level 1Level 2Level 3
Assets:
Derivative assets - designated as cash flow hedges (foreign currency exchange rate “FX”)$272 $ $272 $ 
Derivative assets - freestanding instruments (FX)1,137  1,137  
Derivative assets - capped call derivatives94,519   94,519 
Convertible notes receivable2,764   2,764 
$98,692 $ $1,409 $97,283 
Liabilities:
Derivative liabilities - designated as cash flow hedges (FX)$728 $ $728 $ 
Derivative liabilities - freestanding instruments (FX) 9  9  
Derivative liabilities - embedded exchange feature150,651   150,651 
Contingent consideration arrangements115,573   115,573 
$266,961 $ $737 $266,224 

Fair Value as of December 31, 2020Fair Value Measurements Using Inputs Considered as:
Level 1Level 2Level 3
Assets:
Derivative assets - designated as cash flow hedges (FX)$2,893 $ $2,893 $ 
Derivative assets - freestanding instruments (FX)55  55  
Derivative assets - capped call derivatives72,302   72,302 
Convertible notes receivable2,775   2,775 
$78,025 $ $2,948 $75,077 
Liabilities:
Derivative liabilities - designated as cash flow hedges (FX)$14 $ $14 $ 
Derivative liabilities - freestanding instruments (interest rate swaps)74  74  
Derivative liabilities - freestanding instruments (FX) 4,073