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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 March 31, 2024

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                .

Commission File Number   0-18592

Graphic

MERIT MEDICAL SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Utah

    

87-0447695

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

1600 West Merit Parkway, South Jordan, Utah 84095

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (801) 253-1600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, no par value

MMSI

NASDAQ Global Select 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 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 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 Filer 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Title or class

Shares outstanding as of April 26, 2024

Common Stock, no par value

    

58,105,654

TABLE OF CONTENTS

PART I.

   

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

Consolidated Balance Sheets

3

Consolidated Statements of Income

5

Consolidated Statements of Comprehensive Income

6

Consolidated Statements of Stockholders’ Equity

7

Consolidated Statements of Cash Flows

8

Condensed Notes to Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 5.

Other information

36

Item 6.

Exhibits

37

SIGNATURES

38

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

    

March 31, 

    

December 31, 

ASSETS

    

2024

    

2023

(unaudited)

Current assets:

 

  

 

  

Cash and cash equivalents

$

581,921

$

587,036

Trade receivables — net of allowance for credit losses — 2024 — $9,327 and 2023 — $9,023

 

180,663

 

177,885

Other receivables

 

10,980

 

10,517

Inventories

 

302,733

 

303,871

Prepaid expenses and other current assets

 

24,437

 

24,286

Prepaid income taxes

 

4,088

 

4,016

Income tax refund receivables

 

453

 

859

Total current assets

 

1,105,275

 

1,108,470

Property and equipment:

 

  

 

  

Land and land improvements

 

25,982

 

26,017

Buildings

 

191,218

 

191,491

Manufacturing equipment

 

327,628

 

316,930

Furniture and fixtures

 

63,790

 

63,044

Leasehold improvements

 

53,772

 

53,638

Construction-in-progress

 

58,296

 

61,439

Total property and equipment

 

720,686

 

712,559

Less accumulated depreciation

 

(337,025)

 

(329,036)

Property and equipment — net

 

383,661

383,523

Other assets:

 

  

 

  

Intangible assets:

 

  

 

  

Developed technology — net of accumulated amortization — 2024 — $333,920 and 2023 — $321,488

 

277,085

 

283,999

Other — net of accumulated amortization — 2024 — $78,771 and 2023 — $76,887

 

40,399

 

41,884

Goodwill

 

381,539

 

382,240

Deferred income tax assets

 

7,072

 

7,288

Right-of-use operating lease assets

72,639

63,047

Other assets

 

58,682

 

54,793

Total other assets

 

837,416

 

833,251

Total assets

$

2,326,352

$

2,325,244

See condensed notes to consolidated financial statements.

(continued)

3

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

    

March 31, 

    

December 31, 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

2024

    

2023

(unaudited)

Current liabilities:

 

  

  

Trade payables

$

48,377

$

65,944

Accrued expenses

 

113,220

 

120,447

Short-term operating lease liabilities

12,472

12,087

Income taxes payable

 

9,275

 

5,086

Total current liabilities

 

183,344

 

203,564

Long-term debt

 

800,136

 

823,013

Deferred income tax liabilities

 

5,519

 

5,547

Long-term income taxes payable

 

347

 

347

Liabilities related to unrecognized tax benefits

 

1,912

 

1,912

Deferred compensation payable

 

18,228

 

17,167

Deferred credits

 

1,579

 

1,605

Long-term operating lease liabilities

60,141

 

56,259

Other long-term obligations

 

14,956

 

13,830

Total liabilities

 

1,086,162

 

1,123,244

Commitments and contingencies

 

  

 

  

Stockholders' equity:

 

  

 

  

Preferred stock — 5,000 shares authorized; no shares issued as of March 31, 2024 and December 31, 2023

 

 

Common stock, no par value — 100,000 shares authorized; issued and outstanding as of March 31, 2024 - 58,102 and December 31, 2023 - 57,858

 

649,222

 

638,150

Retained earnings

 

603,424

 

575,184

Accumulated other comprehensive loss

 

(12,456)

 

(11,334)

Total stockholders’ equity

 

1,240,190

 

1,202,000

Total liabilities and stockholders’ equity

$

2,326,352

$

2,325,244

See condensed notes to consolidated financial statements.

(concluded)

4

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts - unaudited)

    

Three Months Ended

March 31, 

    

2024

    

2023

Net sales

$

323,508

$

297,565

Cost of sales

 

171,793

 

159,203

Gross profit

 

151,715

 

138,362

Operating expenses:

 

  

 

  

Selling, general and administrative

 

94,428

 

90,144

Research and development

 

21,482

 

21,314

Contingent consideration (benefit) expense

 

(117)

 

521

Total operating expenses

 

115,793

 

111,979

Income from operations

 

35,922

 

26,383

Other income (expense):

 

  

 

  

Interest income

 

7,276

 

131

Interest expense

 

(8,046)

 

(2,011)

Other income (expense) — net

 

(804)

 

997

Total other expense — net

 

(1,574)

 

(883)

Income before income taxes

 

34,348

 

25,500

Income tax expense

 

6,108

 

4,797

Net income

$

28,240

$

20,703

Earnings per common share

 

  

 

  

Basic

$

0.49

$

0.36

Diluted

$

0.48

$

0.36

Weighted average shares outstanding

 

  

 

  

Basic

 

57,958

 

57,352

Diluted

 

58,567

 

58,183

See condensed notes to consolidated financial statements.

5

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands - unaudited)

    

Three Months Ended

March 31, 

    

2024

    

2023

Net income

$

28,240

$

20,703

Other comprehensive income (loss):

 

  

 

  

Cash flow hedges

 

2,972

 

(1,691)

Income tax benefit (expense)

 

(702)

 

406

Foreign currency translation adjustment

 

(3,404)

 

1,925

Income tax benefit (expense)

 

12

 

(19)

Total other comprehensive income (loss)

 

(1,122)

 

621

Total comprehensive income

$

27,118

$

21,324

See condensed notes to consolidated financial statements.

6

MERIT MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands - unaudited)

Common Stock

Retained

Accumulated Other

    

Shares

    

Amount

    

Earnings

    

Comprehensive Loss

    

Total

Balance — January 1, 2024

 

57,858

$

638,150

$

575,184

$

(11,334)

$

1,202,000

Net income

 

  

 

  

 

28,240

 

  

 

28,240

Other comprehensive loss

 

  

 

  

 

  

 

(1,122)

 

(1,122)

Stock-based compensation expense

 

  

 

4,934

 

  

 

  

 

4,934

Options exercised

 

213

 

7,394

 

  

 

  

 

7,394

Issuance of common stock under Employee Stock Purchase Plan

 

5

 

336

 

  

 

  

 

336

Shares issued from time-vested restricted stock units

47

Shares surrendered in exchange for payment of payroll tax liabilities

 

(21)

 

(1,592)

(1,592)

Balance — March 31, 2024

 

58,102

$

649,222

$

603,424

$

(12,456)

$

1,240,190

Common Stock

Retained

Accumulated Other

    

Shares

    

Amount

    

Earnings

    

Comprehensive Loss

    

Total

Balance — January 1, 2023

 

57,306

$

675,174

$

480,773

$

(11,550)

$

1,144,397

Net income

 

  

 

  

 

20,703

 

  

 

20,703

Other comprehensive income

 

 

 

 

621

 

621

Stock-based compensation expense

 

 

3,498

 

 

 

3,498

Options exercised

 

123

 

3,726

 

 

 

3,726

Issuance of common stock under Employee Stock Purchase Plan

 

4

 

302

 

 

 

302

Shares issued from time-vested restricted stock units

61

Shares surrendered in exchange for payment of payroll tax liabilities

 

(22)

 

(1,592)

(1,592)

Balance — March 31, 2023

 

57,472

$

681,108

$

501,476

$

(10,929)

$

1,171,655

See condensed notes to consolidated financial statements.

7

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands - unaudited)

Three Months Ended

March 31, 

    

2024

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES:

 

Net income

$

28,240

$

20,703

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Depreciation and amortization

 

23,599

 

20,537

Loss on sale or abandonment of property and equipment

 

35

 

207

Write-off of certain intangible assets and other long-term assets

 

202

 

Amortization of right-of-use operating lease assets

3,122

2,662

Adjustments related to contingent consideration liabilities

(117)

521

Amortization of deferred credits

 

(26)

 

(26)

Amortization of long-term debt issuance costs

 

1,477

 

151

Stock-based compensation expense

 

5,234

 

3,969

Changes in operating assets and liabilities, net of acquisitions and divestitures:

 

 

Trade receivables

 

(4,182)

 

(4,880)

Other receivables

 

(705)

 

(1,465)

Inventories

 

(382)

 

(22,974)

Prepaid expenses and other current assets

 

765

 

1,386

Income tax refund receivables

 

305

 

(270)

Other assets

 

(2,947)

 

(79)

Trade payables

 

(14,148)

 

(2,963)

Accrued expenses

 

(8,891)

 

(3,571)

Income taxes payable

 

3,651

 

2,658

Deferred compensation payable

 

1,061

 

605

Operating lease liabilities

(2,931)

(2,237)

Other long-term obligations

 

2,854

 

(389)

Total adjustments

 

7,976

 

(6,158)

Net cash, cash equivalents, and restricted cash provided by operating activities

 

36,216

 

14,545

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Capital expenditures for:

 

  

 

  

Property and equipment

 

(11,682)

 

(12,785)

Intangible assets

 

(861)

 

(271)

Proceeds from the sale of property and equipment

 

 

200

Issuance of note receivables

 

(6,162)

 

Cash paid in acquisitions, net of cash acquired

 

(3,346)

 

(2,000)

Net cash, cash equivalents, and restricted cash used in investing activities

$

(22,051)

$

(14,856)

See condensed notes to consolidated financial statements.

(continued)

8

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands - unaudited)

    

Three Months Ended

March 31, 

2024

2023

CASH FLOWS FROM FINANCING ACTIVITIES:

 

Proceeds from issuance of common stock

$

7,730

$

4,028

Proceeds from issuance of long-term debt

 

 

49,687

Payments on long-term debt

(24,063)

(50,052)

Contingent payments related to acquisitions

 

(78)

 

(2,568)

Payment of taxes related to an exchange of common stock

 

(1,592)

 

(1,592)

Net cash, cash equivalents, and restricted cash used in financing activities

 

(18,003)

 

(497)

Effect of exchange rates on cash, cash equivalents, and restricted cash

 

(1,319)

 

376

Net decrease in cash, cash equivalents and restricted cash

 

(5,157)

 

(432)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

 

  

 

  

Beginning of period

589,144

60,558

End of period

$

583,987

$

60,126

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:

Cash and cash equivalents

581,921

57,945

Restricted cash reported in prepaid expenses and other current assets

2,066

2,181

Total cash, cash equivalents and restricted cash

$

583,987

$

60,126

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

  

 

  

Cash paid during the period for:

 

  

 

  

Interest (net of capitalized interest of $207 and $311, respectively)

$

2,393

$

2,002

Income taxes

2,066

2,467

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

  

 

  

Property and equipment purchases in accounts payable

$

5,163

$

3,587

Acquisition purchases in accrued expenses and other long-term obligations

6,417

3,596

Right-of-use operating lease assets obtained in exchange for operating lease liabilities

7,759

87

See condensed notes to consolidated financial statements.

(concluded)

9

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.   Basis of Presentation and Other Items. The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three-month periods ended March 31, 2024 and 2023 are not audited. Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2024 and December 31, 2023, and our results of operations and cash flows for the three-month periods ended March 31, 2024 and 2023. The results of operations for the three-month periods ended March 31, 2024 and 2023 are not necessarily indicative of the results for a full-year period. Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts. These interim consolidated financial statements should be read in conjunction with the financial statements and risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

2.   Recently Issued Accounting Standards. In November 2023, the Financial Accounting Standards Board (“FASB’) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The provisions of this update must be applied retrospectively to all periods presented in the financial statements. We are currently assessing the anticipated impact of this standard on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve annual basis income tax disclosures related to (1) rate reconciliation, (2) income taxes paid, and (3) other disclosures related to pretax income (or loss) and income tax expense (or benefit) from continuing operations. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied on a prospective basis. Retrospective application is permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

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

3.   Revenue from Contracts with Customers. We recognize revenue when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration we expect to receive in exchange for these goods. Our revenue recognition policies have not changed from those disclosed in Note 1 to our consolidated financial statements in Item 8 of the 2023 Annual Report on Form 10-K.

Disaggregation of Revenue

Our revenue is disaggregated based on reporting segment, product category and geographical region. We design, develop, manufacture and market medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and OEM. Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors.

10

The following table presents revenue from contracts with customers by reporting segment, product category and geographical region for the three-month periods ended March 31, 2024 and 2023 (in thousands):

Three Months Ended

Three Months Ended

March 31, 2024

March 31, 2023

    

United States

    

International

    

Total

    

United States

    

International

    

Total

Cardiovascular

 

  

 

 

  

 

  

 

  

 

  

Peripheral Intervention

$

79,259

$

55,367

$

134,626

$

68,667

$

45,116

$

113,783

Cardiac Intervention

 

35,343

55,345

 

90,688

 

34,305

51,023

 

85,328

Custom Procedural Solutions

 

29,294

19,500

 

48,794

 

26,799

20,902

 

47,701

OEM

 

32,649

6,617

 

39,266

 

32,564

8,600

 

41,164

Total

 

176,545

136,829

 

313,374

 

162,335

 

125,641

 

287,976

 

Endoscopy

Endoscopy Devices

 

9,549

 

585

 

10,134

 

9,025

 

564

 

9,589

Total

$

186,094

$

137,414

$

323,508

$

171,360

$

126,205

$

297,565

4.   Acquisitions. On March 8, 2024, we entered into an asset purchase agreement with Scholten Surgical Instruments, Inc. (“SSI”) to acquire the assets associated with the Biptomoe, Novatome, and Sensatome devices. The total purchase price of the SSI assets included an up-front payment of $3 million, and three deferred payments, including (1) $1 million payable upon the earlier of (a) the first anniversary of the closing date or (b) the date on which Merit can independently manufacture the purchased devices (“Deferred Payment Date”), (2) $1 million payable upon the first anniversary of the Deferred Payment Date, and (3) $1 million payable upon the second anniversary of the Deferred Payment Date. We have accounted for this transaction as an asset purchase, and recorded the amount paid and deferred payments as a developed technology intangible asset, which we are amortizing over eight years.

During March 2024, we paid $0.3 million to acquire additional Series A Preferred Stock of Fluidx Medical Technology, Inc. ("Fluidx"), owner of certain technology proposed to be used in the development of embolic and adhesive agents for use in arterial, venous, vascular graft and cardiovascular applications inside and outside the heart and related appendages. We had previously purchased and continue to hold $4.7 million of participating preferred shares of Fluidx. Our investment has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Fluidx. Our total current investment in Fluidx represents an ownership of approximately 19.9% of the outstanding capital stock at the date of this investment.

11

On June 8, 2023, we entered into an asset purchase agreement with AngioDynamics, Inc. (“AngioDynamics”) to acquire the assets associated with a portfolio of dialysis catheter products and the BioSentry® Biopsy Tract Sealant System for a purchase price of $100 million. We accounted for this transaction under the acquisition method of accounting as a business combination. The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were $6.7 million for the three-month period ended March 31, 2024. It is not practical to separately report earnings related to the acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our cardiovascular business segment. Acquisition-related costs associated with the AngioDynamics acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income, in the 2023 Annual Report on Form 10-K, were approximately $4.9 million. The purchase price was allocated as follows (in thousands):  

Assets Acquired

    

  

Prepaid expenses

$

2,000

Inventories

 

5,254

Property and equipment

108

Intangible assets

 

Developed technology

65,200

Trademarks

4,000

Customer list

5,800

Goodwill

17,638

Total net assets acquired

$

100,000

We are amortizing the AngioDynamics developed technology intangible assets over ten years, the trademark intangible assets over 11 years, and the customer list intangible asset on an accelerated basis over ten years. We have estimated the weighted average life of the intangible assets acquired from AngioDynamics to be 10.5 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects to our consolidated results of operations of the AngioDynamics acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information to determine earnings associated with the acquired product lines which represent only a small portion of the product lines of a large, consolidated company without standalone financial information.

On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass Vascular Technologies, Inc. (“Bluegrass”), for a purchase price of $32.7 million. Prior to the acquisition, we held an equity investment of 1,251,878 Bluegrass common shares representing approximately 19.5% ownership in Bluegrass. The fair value of this previously-held equity investment of approximately $245,000 is included in the purchase price allocation. We accounted for this transaction under the acquisition method of accounting as a business combination. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material. Acquisition-related costs associated with the Bluegrass acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income included in the 2023 Annual Report on Form 10-K, were not material. The purchase price was allocated as follows (in thousands):    

Assets Acquired

    

  

Inventories

$

175

Intangible assets

 

Developed technology

28,000

Trademarks

900

Goodwill

3,898

Total net assets acquired

$

32,973

12

We are amortizing the Bluegrass developed technology intangible asset over 15 years and the related trademarks over 13 years. We have estimated the weighted average life of the intangible assets acquired from Bluegrass to be 14.9 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects to our consolidated results of operations of the Bluegrass acquisition are not material.

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

    

March 31, 2024

    

December 31, 2023

Finished goods

$

152,881

$

158,893

Work-in-process

 

36,278

 

25,420

Raw materials

 

113,574

 

119,558

Total inventories

$

302,733

$

303,871

6.   Goodwill and Intangible Assets. The change in the carrying amount of goodwill for the three-month period ended March 31, 2024 is detailed as follows (in thousands):

    

2024

Goodwill balance at January 1

$

382,240

Effect of foreign exchange

 

(701)

Goodwill balance at March 31

$

381,539

Total accumulated goodwill impairment losses aggregated $8.3 million as of March 31, 2024 and December 31, 2023, respectively. We did not have any goodwill impairments for the three-month periods ended March 31, 2024 or 2023. The total goodwill balances as of March 31, 2024 and December 31, 2023 were related to our cardiovascular segment.

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

March 31, 2024

Gross Carrying

Accumulated

Net Carrying

    

Amount

    

Amortization

    

Amount

Patents

$

29,379

$

(11,400)

$

17,979

Distribution agreements

 

3,250

 

(2,938)

 

312

License agreements

 

11,130

 

(8,555)

 

2,575

Trademarks

 

35,126

 

(21,581)

 

13,545

Customer lists

 

40,285

 

(34,297)

 

5,988

Total

$

119,170

$

(78,771)

$

40,399

December 31, 2023

Gross Carrying

Accumulated

Net Carrying

    

Amount

    

Amortization

    

Amount

Patents

$

28,877

$

(10,916)

$

17,961

Distribution agreements

 

3,250

 

(2,919)

 

331

License agreements

 

11,142

 

(8,327)

 

2,815

Trademarks

 

35,135

 

(20,804)

 

14,331

Customer lists

 

40,367

 

(33,921)

 

6,446

Total

$

118,771

$

(76,887)

$

41,884

Aggregate amortization expense for the three-month periods ended March 31, 2024 and 2023 was $14.6 million and $12.3 million, respectively.

13

We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows is largely independent of the cash flows of other assets and liabilities. We determine the fair value of our amortizing assets based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities. We did not identify indicators of impairment for our intangible assets based on our qualitative assessment for the three-month periods ended March 31, 2024 and 2023, respectively.

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

    

Estimated Amortization Expense

Remaining 2024

$

47,036

2025

 

60,894

2026

 

49,648

2027

46,373

2028

 

45,111

7.   Income Taxes. Our provision for income taxes for the three-month periods ended March 31, 2024 and 2023 was a tax expense of $6.1 million and $4.8 million, respectively, which resulted in an effective tax rate of 17.8% and 18.8%, respectively. The decrease in the effective income tax rate for the three-month period ended March 31, 2024, when compared to the prior-year period, was primarily due to increased benefit from discrete items such as share-based compensation and payroll tax credits, and the increase in the income tax expense when compared to the prior-year period was primarily due to increased pre-tax book income. Our effective tax rate differs from the U.S. statutory rate primarily due to the impact of global intangible low-taxed income (“GILTI”) inclusions, state income taxes, foreign taxes, other nondeductible permanent items and discrete items (such as share-based compensation).

The Organization for Economic Cooperation and Development (“OECD”) Pillar Two global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Under a transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax in the jurisdiction of a company's ultimate parent entity will be zero for each fiscal year of the transition period if that jurisdiction has a corporate tax rate of at least 20%. The safe harbor transition period will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026. While we expect our effective income tax rate and cash income tax payments could increase in future years as a result of the global minimum tax, we do not anticipate a material impact to our fiscal 2024 consolidated results of operations. Our assessment could be affected by legislative guidance and future enactment of additional provisions within the Pillar Two framework. We are closely monitoring developments and evaluating the impact these new rules are anticipated to have on our tax rate, including eligibility to qualify for these safe harbor rules.

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

    

March 31, 2024

    

December 31, 2023

Term loans

$

75,000

$

99,063

Convertible notes