10-Q 1 podd-20210930.htm 10-Q podd-20210930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________
Form 10-Q
 _____________________________________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33462
___________________________________________________________
INSULET CORPORATION
(Exact name of Registrant as specified in its charter)
__________________________________________________________________________________________________
Delaware 04-3523891
(State or Other Jurisdiction of
Incorporation or Organization)		 (I.R.S. Employer
Identification No.)
100 Nagog ParkActonMassachusetts 01720
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (978) 600-7000
________________________________________________________________________________________________________
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, or a smaller reporting 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  ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par Value Per SharePODDThe NASDAQ Stock Market, LLC

As of October 28, 2021, the registrant had 68,967,286 shares of common stock outstanding.



TABLE OF CONTENTS
 
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2021 and December 31, 2020
Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2021 and 2020
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and nine months ended September 30, 2021 and 2020
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2021 and 2020
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2021 and 2020 (Restated)

PART I - FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
INSULET CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except share and per share data)September 30, 2021December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents$856.6 $907.2 
Short-term investments0.5 40.4 
Accounts receivable trade, less allowance for credit losses of $3.0 and $2.9 (Note 16)
114.3 83.8 
Inventories259.0 154.3 
Prepaid expenses and other current assets76.5 63.0 
Total current assets1,306.9 1,248.7 
Property, plant and equipment, net515.4 478.7 
Other intangible assets, net37.2 28.7 
Goodwill39.8 39.8 
Other assets99.6 77.0 
Total assets$1,998.9 $1,872.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable$58.0 $54.1 
Accrued expenses and other current liabilities (Note 16)
141.7 138.1 
Current portion of long-term debt28.9 15.6 
Total current liabilities228.6 207.8 
Long-term debt, net1,257.0 1,043.7 
Other liabilities15.4 17.8 
Total liabilities1,501.0 1,269.3 
Commitments and contingencies (Note 10)
Stockholders’ Equity
Preferred stock, $.001 par value, 5,000,000 authorized; none issued and outstanding
— — 
Common stock, $.001 par value, 100,000,000 authorized; 68,921,847 and 66,017,444 issued and outstanding
0.1 0.1 
Additional paid-in capital1,179.9 1,264.3 
Accumulated deficit(678.7)(666.3)
Accumulated other comprehensive (loss) income(3.4)5.5 
Total stockholders’ equity497.9 603.6 
Total liabilities and stockholders’ equity$1,998.9 $1,872.9 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
INSULET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except share and per share data)2021202020212020
Revenue (Related Party Transactions Note 16)
$275.6 $234.0 $791.1 $658.3 
Cost of revenue86.9 82.2 252.2 237.1 
Gross profit188.7 151.8 538.9 421.2 
Research and development expenses37.5 38.8 118.3 108.5 
Selling, general and administrative expenses117.5 89.2 344.3 253.9 
Operating income33.7 23.8 76.3 58.8 
Interest expense, net(16.3)(11.4)(46.1)(32.6)
Loss on extinguishment of debt(1.5)— (41.6)— 
Other (expense) income, net(0.7)1.0 (1.5)2.0 
Income (loss) before income taxes15.2 13.4 (12.9)28.2 
Income tax (expense) benefit(2.6)(1.8)0.5 (4.3)
Net income (loss)$12.6 $11.6 $(12.4)$23.9 
Net income (loss) per share:
Basic$0.18 $0.18 $(0.18)$0.37 
Diluted$0.18 $0.17 $(0.18)$0.36 
Weighted-average number of common shares outstanding
(in thousands):
Basic68,869 65,718 67,236 64,329 
Diluted69,619 66,828 67,236 65,598 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
INSULET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Net income (loss)$12.6 $11.6 $(12.4)$23.9 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment(4.4)3.3 (8.3)0.5 
Unrealized gain (loss) on cash flow hedges0.3 — (0.3)— 
Unrealized (loss) gain on available-for-sale debt securities, net of tax— (0.3)(0.3)0.1 
Total other comprehensive (loss) income, net of tax(4.1)3.0 (8.9)0.6 
Comprehensive income (loss)$8.5 $14.6 $(21.3)$24.5 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
INSULET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)

Three Months Ended September 30, 2021
 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated Other Comprehensive IncomeTotal
Shareholders’
Equity
(dollars in millions)Shares
(in thousands)		Amount
Balance at June 30, 202168,610 $0.1 $1,149.6 $(691.3)$0.7 $459.1 
Exercise of options to purchase common stock95 — 4.3 — — 4.3 
Stock-based compensation expense— — 8.2 — — 8.2 
Restricted stock units vested, net of shares withheld for taxes2 — (0.2)— — (0.2)
Extinguishment of conversion feature on 1.375% Notes, net of issuance costs
— — (41.7)— — (41.7)
Issuance of shares for debt extinguishment215 — 59.7 — — 59.7 
Net income— — — 12.6 — 12.6 
Other comprehensive loss— — — — (4.1)(4.1)
Balance at September 30, 202168,922 $0.1 $1,179.9 $(678.7)$(3.4)$497.9 

Three Months Ended September 30, 2020
 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
(dollars in millions)Shares
(in thousands)		Amount
Balance at June 30, 202065,604 $0.1 $1,227.6 $(660.8)$(3.6)$563.3 
Exercise of options to purchase common stock265 — 10.6 — — 10.6 
Stock-based compensation expense— — 6.6 — — 6.6 
Restricted stock units vested, net of shares withheld for taxes3 — (0.1)— — (0.1)
Net income— — — 11.6 — 11.6 
Other comprehensive income— — — — 3.0 3.0 
Balance at September 30, 202065,872 $0.1 $1,244.7 $(649.2)$(0.6)$595.0 
















The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Nine Months Ended September 30, 2021
 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated Other Comprehensive IncomeTotal
Shareholders’
Equity
(dollars in millions)Shares
(in thousands)		Amount
Balance at December 31, 202066,017 $0.1 $1,264.3 $(666.3)$5.5 $603.6 
Exercise of options to purchase common stock259 — 10.5 — — 10.5 
Issuance of shares for employee stock purchase plan17 — 3.9 — — 3.9 
Stock-based compensation expense— — 25.8 — — 25.8 
Restricted stock units vested, net of shares withheld for taxes172 — (27.6)— — (27.6)
Extinguishment of conversion feature on 1.375% Notes, net of issuance costs
— — (779.4)— — (779.4)
Issuance of shares for debt extinguishment2,457 — 682.4 — — 682.4 
Net loss— — — (12.4)— (12.4)
Other comprehensive loss— — — — (8.9)(8.9)
Balance at September 30, 202168,922 $0.1 $1,179.9 $(678.7)$(3.4)$497.9 

Nine Months Ended September 30, 2020
 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
(dollars in millions)Shares
(in thousands)		Amount
Balance at December 31, 201962,685 $0.1 $749.0 $(672.0)$(1.2)$75.9 
Adoption of ASU 2016-13 (1)
— — — (1.1)— (1.1)
Issuance of common stock2,370 — 477.5 — — 477.5 
Exercise of options to purchase common stock569 — 21.9 — — 21.9 
Issuance of shares for employee stock purchase plan19 — 2.9 — — 2.9 
Stock-based compensation expense— — 20.3 — — 20.3 
Restricted stock units vested, net of shares withheld for taxes229 — (26.9)— — (26.9)
Net income— — — 23.9 — 23.9 
Other comprehensive income— — — — 0.6 0.6 
Balance at September 30, 202065,872 $0.1 $1,244.7 $(649.2)$(0.6)$595.0 
(1) The Company recorded a cumulative effect adjustment to retained earnings to reflect the adoption of Accounting Standards Update 2016-13, Credit Losses (Topic 326). Refer to Note 2 of Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

INSULET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
(in millions)20212020
(Restated)
Cash flows from operating activities
Net (loss) income$(12.4)$23.9 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization42.5 29.7 
Non-cash interest expense31.9 33.6 
Stock-based compensation expense25.8 20.3 
Loss on extinguishment of debt41.6 — 
Provision for credit losses2.8 3.1 
Other0.2 0.3 
Changes in operating assets and liabilities:
Accounts receivable(35.5)(19.9)
Inventories(108.1)(22.9)
Prepaid expenses and other assets(32.7)(12.7)
Accounts payable6.0 1.8 
Accrued expenses and other liabilities(4.7)9.8 
Net cash (used in) provided by operating activities(42.6)67.0 
Cash flows from investing activities
Capital expenditures(80.1)(78.2)
Acquisition of intangible assets(5.7)(0.6)
Purchases of investments— (37.9)
Receipts from the maturity or sale of investments39.5 200.0 
Net cash (used in) provided by investing activities(46.3)83.3 
Cash flows from financing activities
Proceeds from issuance of debt, net489.5 — 
Proceeds from equipment financing, net43.1 — 
Payment of debt issuance costs(4.0)— 
Repayment of convertible debt(460.8)— 
Repayment of equipment financings(9.6)— 
Repayment of mortgage(1.5)— 
Repayment of debt(1.3)— 
Proceeds from issuance of common stock, net of issuance costs— 477.5 
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan14.4 24.8 
Payment of withholding taxes in connection with vesting of restricted stock units(27.6)(26.9)
Net cash provided by financing activities42.2 475.4 
Effect of exchange rate changes on cash(3.9)(1.3)
Net (decrease) increase in cash, cash equivalents and restricted cash(50.6)624.4 
Cash, cash equivalents and restricted cash at beginning of period (Note 3)
922.0 213.7 
Cash, cash equivalents and restricted cash at end of period (Note 3)
$871.4 $838.1 
Supplemental noncash information:
Purchases of property and equipment included in accounts payable and accrued expenses$3.2 $14.6 
Purchases of intangible assets included in accounts payable and accrued expenses$7.3 $— 
Lease liabilities arising from obtaining right-of-use assets$0.5 $2.1 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
INSULET CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements reflect the consolidated operations of Insulet Corporation and its subsidiaries (“Insulet” or the “Company”). The unaudited consolidated financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from those estimates. In management’s opinion, the unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the interim results reported. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021, or for any other subsequent interim period.
The year-end balance sheet data was derived from audited consolidated financial statements. These unaudited consolidated financial statements do not include all of the annual disclosures required by GAAP; accordingly, they should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Restatement of Condensed Consolidated Cash Flow Statement
In February 2021, the Company identified an error in the presentation of certain cash flow activity that impacted several line items within the previously issued Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020. While these items affected cash flows from operating and investing activities, they had no impact on the net increase (decrease) in cash and cash equivalents or net income. The Company assessed the materiality of the misstatement in accordance with ASC 250-10, Accounting Changes and Error Corrections, and concluded that this misstatement was not material to the previously issued consolidated financial statements. The Company has restated the accompanying Condensed Consolidated Statement of Cash Flow from amounts previously reported to correct this matter. The following table presents a summary of the impact of the restatement on the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020.
(in millions)Previously ReportedRestatement Adjustment
Reclassification (1)
Restated
Prepaid and other assets$(16.8)$4.1 $— $(12.7)
Accounts payable, accrued expenses and other current liabilities$36.1 $(22.1)$(14.0)$— 
Other long-term liabilities$(2.4)$— $2.4 $— 
Accounts payable$— $— $1.8 $1.8 
Accrued expenses and other liabilities$— $— $9.8 $9.8 
Net cash provided by operating activities$85.0 $(18.0)$— $67.0 
Capital expenditures$(88.5)$10.3 $— $(78.2)
Acquisition of intangible assets$(8.3)$7.7 $— $(0.6)
Net cash provided by investing activities$65.3 $18.0 $— $83.3 
(1) Certain prior period amounts have been reclassified to conform to the current period cash flow statement presentation.
Cloud Computing Arrangements
As of September 30, 2021 and December 31, 2020, the Company had net capitalized implementation costs of $55.5 million and $24.2 million, respectively. Amortization expense recorded for the three months ended September 30, 2021 and 2020 was $0.8 million and $0.2 million, respectively, and $2.1 million and $0.7 million for the nine months ended September 30, 2021 and 2020, respectively.
Shipping and Handling Costs
Shipping and handling costs are included in selling, general and administrative expenses and were $2.8 million and $3.2 million for the three months ended September 30, 2021 and 2020, respectively, and were $7.5 million and $7.0 million for the nine months ended September 30, 2021 and 2020, respectively.
9
Derivative Instruments
The Company is exposed to certain risks relating to its business operations. Risks that relate to interest rate exposure are managed by using interest rate swaps. The Company recognizes derivative instruments as either assets or liabilities at fair value on the consolidated balance sheet. Changes in a derivative financial instrument’s fair value are recognized in earnings unless specific hedge criteria are met, in which case changes in fair value are recognized as adjustments to other comprehensive income. The Company has designated its interest rate swap contracts as cash flow hedges.
Fair Value Measurements
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. To measure fair value of assets and liabilities, the Company uses the following fair value hierarchy based on three levels of inputs:
Level 1—observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2—significant other observable inputs that are observable either directly or indirectly; and
Level 3—significant unobservable inputs for which there are little or no market data, which require the Company to develop its own assumptions.
Certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of their short-term maturity. See Notes 3 and 8 for financial assets and liabilities held at carrying amount on the consolidated balance sheet and Note 4 for investments measured at fair value on a recurring basis.
Advertising Costs
The Company expenses advertising costs as they are incurred. Advertising expenses were $13.6 million and $10.0 million for the three months ended September 30, 2021 and 2020, respectively, and were $35.0 million and $15.6 million for the nine months ended September 30, 2021 and 2020, respectively.
Recently Adopted Accounting Standards
Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions in the current guidance regarding the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.
Note 2. Revenue and Contract Acquisition Costs
The following table summarizes the Company’s disaggregated revenue:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
U.S. Omnipod$167.2 $132.3 $461.0 $377.7 
International Omnipod93.1 79.8 274.6 226.1 
Total Omnipod260.3 212.1 735.6 603.8 
Drug Delivery15.3 21.9 55.5 54.5 
Total revenue$275.6 $234.0 $791.1 $658.3 
During the three and nine months ended September 30, 2021, the Company had one customer that represented 14% and two customers that in aggregate represented 25% of total revenue, respectively. During the three and nine months ended September 30, 2020, the Company had one customer that represented 11% and two customers that in aggregate that represented 21% of total revenue.
At September 30, 2021, the Company had two customers that in aggregate accounted for 27% of consolidated net accounts receivable, compared with one customer that accounted for 15% of consolidated net accounts receivable at December 31, 2020.
10
Deferred revenue related to unsatisfied performance obligations was included in the following consolidated balance sheet accounts in the amounts shown:
(in millions)
September 30, 2021December 31, 2020
Accrued expenses and other current liabilities$3.5 $5.4 
Other liabilities1.5 1.0 
Total deferred revenue$5.0 $6.4 
During the nine months ended September 30, 2021 and 2020, the Company recognized $4.0 million and $1.7 million of revenue, respectively, that was included in deferred revenue at the beginning of each period. During both the three months ended September 30, 2021 and 2020, the amount of revenue the Company recognized that was included in deferred revenue at the beginning of each period was insignificant.
Contract acquisition costs, representing capitalized commission costs related to new customers, net of amortization, were included in the following consolidated balance sheet captions in the amounts shown:
(in millions)September 30, 2021December 31, 2020
Prepaid expenses and other current assets$12.6 $11.0 
Other assets24.3 21.9 
Total capitalized contract acquisition costs, net$36.9 $32.9 
The Company recognized $3.2 million and $2.7 million of amortization of capitalized contract acquisition costs during the three months ended September 30, 2021 and 2020, respectively. The Company recognized $9.1 million and $7.8 million of amortization of capitalized contract acquisition costs during the nine months ended September 30, 2021 and 2020, respectively.
The Company had unbilled receivables of $16.1 million and $11.6 million at September 30, 2021 and December 31, 2020, respectively.
Note 3. Cash and Cash Equivalents
The following table provides a summary of cash and cash equivalents:
(in millions)September 30, 2021December 31, 2020
Cash$223.6 $164.6 
Money market mutual funds630.1 739.8 
Restricted cash2.9 2.8 
Total cash and cash equivalents856.6 907.2 
Restricted cash included in other assets14.8 14.8 
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$871.4 $922.0 
The restricted cash included in other assets on the consolidated balance sheet is held as a compensating balance against long-term borrowings.
All cash and cash equivalents are Level 1 in the fair value hierarchy.
11
Note 4. Investments
The Company’s investments in debt securities had maturity dates that range from one month to three months at September 30, 2021. Realized gains or losses for both the three and nine months ended September 30, 2021 and 2020 were insignificant. The following table provides amortized costs, gross unrealized gains and losses, fair values and the level in the fair value hierarchy for the Company’s investments:
(in millions)Amortized CostGross Unrealized GainsFair ValueLevel 1
Level 2 (1)
September 30, 2021
Certificates of deposit0.5 — 0.5 — 0.5 
Total short-term investments$0.5 $— $0.5 $— $0.5 
December 31, 2020
U.S. government and agency bonds$35.1 $0.2 $35.3 $35.3 $— 
Corporate bonds2.8 0.1 2.9 — 2.9 
Certificates of deposit2.2 — 2.2 — 2.2 
Total short-term investments$40.1 $0.3 $40.4 $35.3 $5.1 
(1) Fair value was determined using market prices obtained from third-party pricing sources.
Note 5. Inventories
At the end of each period, inventories were comprised of the following:
(in millions)September 30, 2021December 31, 2020
Raw materials$59.5 $30.7 
Work-in-process98.7 59.6 
Finished goods100.8 64.0 
    Total inventories$259.0 $154.3 
Note 6. Goodwill and Other Intangible Assets, Net
The carrying amount of goodwill was $39.8 million at both September 30, 2021 and December 31, 2020.
The gross carrying amount, accumulated amortization and net book value of intangible assets at the end of each period were as follows:
September 30, 2021December 31, 2020
(in millions)
Gross
Carrying Amount		Accumulated AmortizationNet
Book Value		Gross
Carrying Amount		Accumulated AmortizationNet
Book Value
Customer relationships$43.3 $(22.1)$21.2 $43.3 $(18.3)$25.0 
Internal-use software24.5 (9.8)14.7 11.4 (8.6)2.8 
Intellectual property1.6 (0.3)1.3 1.1 (0.2)0.9 
Total intangible assets$69.4 $(32.2)$37.2 $55.8 $(27.1)$28.7 
Amortization expense for intangible assets was $1.6 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively. Amortization expense for intangible assets was $5.1 million and $2.2 million for the nine months ended September 30, 2021 and 2020, respectively.
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Note 7. Accrued Expenses and Other Current Liabilities
The components of accrued expenses and other current liabilities were as follows:
(in millions)September 30, 2021December 31, 2020
Employee compensation and related costs$52.4 $53.1 
Accrued rebates25.1 13.1 
Professional and consulting services18.5 19.1 
Supplier purchases3.6 7.1 
Value added taxes payable3.6 5.0 
Income taxes payable0.8 5.0 
Accrued interest0.8 1.8 
Other36.9 33.9 
Accrued expenses and other current liabilities$141.7 $138.1 
Product Warranty Costs
The Company provides a four-year warranty on Personal Diabetes Managers (“PDMs”) sold in the United States and Europe and a five-year warranty on PDMs sold in Canada and may replace Pods that do not function in accordance with product specifications. The Company estimates its warranty obligation at the time the product is shipped based on historical experience and the estimated cost to service the claims. Since the Company continues to introduce new products and versions, the anticipated performance of the product over the warranty period is also considered in estimating warranty reserves. Warranty expense is recorded in cost of revenue in the consolidated statements of operations. Cost to service the claims reflects the current product cost. Reconciliations of the changes in the Company’s product warranty liability were as follows: 
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Product warranty liability at beginning of period$6.5 $8.1 $6.7 $8.5 
Warranty expense3.0 3.1 7.9 8.3 
Warranty claims settled(2.8)(4.2)(7.9)(9.8)
Product warranty liability at the end of period$6.7 $7.0 $6.7 $7.0 
Note 8. Debt
The components of debt consisted of the following:
(in millions)
September 30, 2021December 31, 2020
1.375% Convertible Senior Notes due November 2024
$12.1 $402.5 
0.375% Convertible Senior Notes due September 2026
800.0 800.0 
Term loan due May 2028498.8 — 
Equipment financing due May 202417.6 22.2 
Equipment financing due November 202531.4 36.4 
Equipment financing due July 202843.1 — 
5.15% Mortgage due November 2025
68.2 69.7 
Unamortized debt discount(169.2)(252.5)
Debt issuance costs(16.1)(19.0)
Total debt1,285.9 1,059.3 
Less: current portion28.9 15.6 
Total long-term debt$1,257.0 $1,043.7 
1.375% Convertible Senior Notes
In June 2021, the Company repurchased $370.4 million in principal ($305.7 million net of discount and issuance costs) of its 1.375% Convertible Senior Notes due November 2024 (“1.375% Notes”) for $460.8 million in cash and the issuance of 2.2 million shares with a fair value of $622.7 million. The debt repurchase resulted in a $40.1 million loss on extinguishment, including cash paid to the note holders as an inducement to convert and transaction costs.
13
During the three months ended September 30, 2021, $20.0 million in principal of the 1.375% Notes were converted into approximately 215,000 shares with a fair value of $59.7 million. The conversion resulted in a $1.5 million loss on extinguishment of debt.
4.25% Equipment Financing
In July 2021, the Company entered into a $43.1 million equipment financing transaction secured by machinery and equipment associated with one of its highly automated manufacturing lines located in Acton, Massachusetts. The equipment financing has a term of seven years and an effective interest rate of approximately 4.27%.
Senior Secured Credit Agreement
In May 2021, the Company entered into a senior secured credit agreement (the “Credit Agreement”), which includes a $500 million seven year senior secured term loan B (the “Term Loan”) for net proceeds of $489.5 million, which was used to fund the cash portion of the repurchase of the 1.375% Notes discussed above. The Term Loan bears interest at a rate of LIBOR plus 3.25%, with a 0.50% LIBOR floor, and contains leverage and fixed charge coverage ratio covenants, both of which are measured upon the occurrence of future debt.
Under the same agreement, the Company obtained a $60 million three year senior secured revolving credit facility (the “Revolving Credit Facility”), which bears interest at a rate of LIBOR plus an applicable margin of 2.75% to 3.25% based on the Company’s net leverage ratio. The Revolving Credit Facility contains a covenant to maintain a certain leverage ratio when there are amounts outstanding. No amount was outstanding under the Revolving Credit Facility at September 30, 2021.
Borrowings under the Credit Agreement are guaranteed by the Company’s wholly owned domestic subsidiaries, and are secured by substantially all assets of the Company and of each subsidiary guarantor, subject to certain exceptions. Additionally, borrowings under the Credit Agreement are senior to all of the Company’s unsecured indebtedness, including the convertible notes.
Fair Value of Debt
The carrying amount and the estimated fair value of the Company’s debt were as follows:
September 30, 2021December 31, 2020
(in millions)
Carrying
Value		Estimated
Fair Value		Carrying
Value
Estimated
Fair Value (1)
1.375% Convertible Senior Notes due November 2024 (1)
$10.2 $36.9 $323.9 $1,104.2 
0.375% Convertible Senior Notes due September 2026 (1)
631.2 1,002.9 609.2 902.0 
Term loan due May 2028 (2)
486.0 500.0 — — 
  Total$1,127.4 $1,539.8 $933.1 $2,006.2 
(1) Convertible debt is classified as Level 2 in the fair value hierarchy. Fair value was determined using the Company’s quoted stock price and the contractual conversion rate.
(2) Term debt is classified as Level 1 in the fair value hierarchy. Fair value was determined using quoted market prices.
The fair values of the mortgage and equipment financings approximate their carrying values.
Note 9. Derivative Instruments
The Company manages interest rate exposure through the use of interest rate swap transactions with financial institutions acting as principal counterparties. In May 2021, the Company entered into two interest rate swap agreements that expire on April 30, 2025. Under the interest rate swap agreements, the Company receives variable rate interest payments and pays fixed interest rates on a total notional value of $480 million of its Term Loan. As a result of the interest rate swaps 96% of the Term Loan exposed to interest rate risk from changes in LIBOR is fixed at a rate of 4.20%. The Company has designated the interest rate swaps as cash flow hedges.
The fair value of interest rate swaps, which are classified as Level 2 in the fair value hierarchy, represent the estimated amounts the Company would receive or pay to terminate the contracts and is determined using industry standard valuation models and market-based observable inputs, including credit risk and interest rate yield curves. At September 30, 2021, the fair value of the interest rate swaps was a liability of $0.3 million.
Note 10. Commitments and Contingencies
Legal Proceedings
Between May 5, 2015 and June 16, 2015, three class action lawsuits were filed by shareholders in the U.S. District Court, for the District of Massachusetts, against the Company and certain then current and former executives of the Company. Two suits subsequently were voluntarily dismissed. Arkansas Teacher Retirement System v. Insulet, et al., 1:15-cv-12345, alleged that the Company (and certain then current and former executives) committed violations of Sections 10(b) and 20(a) and Rule 10b-5 of the
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Securities Exchange Act of 1934 by making allegedly false and misleading statements about the Company’s business, operations and prospects. On February 8, 2018, the parties executed a binding stipulation of settlement, under which all claims were released, and a payment was made into an escrow account for the plaintiffs and the class they purport to represent. On August 6, 2018, the Court issued an order approving the settlement. On June 25, 2021, the Court issued an order on the plaintiffs’ motion for fees and expenses, a final judgment approving the settlement, and an order of dismissal with prejudice. The Company had previously accrued fees and expenses in connection with this matter for the amount of the final settlement liability that was not covered by insurance, the amount of which was not material to the Company’s consolidated financial statements.
In addition, on April 26, 2017, a derivative action (Walker v. DeSisto, et al., 1:17-cv-10738) was filed, and on October 13, 2017, a second derivative action (Carnazza v. DeSisto, et al., 1:17-cv-11977) was filed, both on behalf of the Company, each by a shareholder in the U.S. District Court for the District of Massachusetts against the Company (as a nominal defendant) and certain individual then current and former officers and directors of the Company. The allegations in the actions are substantially similar to those alleged in the securities class action. The actions seek, among other things, damages, disgorgement of certain types of compensation or profits, and attorneys’ fees and costs. On July 11, 2018, the parties executed a binding stipulation of settlement, under which all claims were released, and a payment of attorneys’ fees and reimbursement of expenses will be paid to plaintiffs’ counsel, subject to the Court’s approval. On July 13, 2018, the plaintiffs filed a motion for preliminary approval of the settlement. On June 28, 2021, the Court issued an order preliminarily approving the proposed settlement. On September 9, 2021, the Court held a hearing to decide whether the proposed settlement should be finally approved, and issued an order and final judgment the same day approving the settlement and the payment of attorneys’ fees and reimbursement of expenses to plaintiffs’ counsel, and dismissing the case with prejudice. Such fees and expenses paid to plaintiffs' counsel were covered by the Company’s insurance.
In June 2020, Roche Diabetes Care, Inc. (“Roche”) filed a patent infringement lawsuit against the Company in the United States District Court for the District of Delaware alleging that the Company’s manufacture and sale of its Omnipod Insulin Management System, including OmniPods, Personal Diabetes Managers, and other components of the system, and kits in the United States infringed Roche’s now-expired U.S. Patent 7,931,613. Roche is seeking unspecified monetary damages and attorneys’ fees and costs. Since the patent expired in 2019, Roche is not seeking injunctive relief and the lawsuit will have no impact on ongoing sales of the Company’s products. The Company believes that it has meritorious defenses to Roche’s claims and intends to vigorously defend against them. The court has set a trial date of July 25, 2022. By Order of the Court, on October 29, 2021, representatives of Roche and the Company participated in a mediation conference, the results of which were unsuccessful. At this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or range of estimates, of potential losses, which could be material.
In July 2020, the Company filed a patent infringement claim against Roche Diabetes Care Limited (“Roche Ltd.”) in the United Kingdom alleging that Roche Ltd.’s manufacture and sale of the Accu-Chek® Solo insulin pump and its consumable components infringes European Patent No. 1 335 764 in the United Kingdom. The Company was seeking an injunction to last until expiry of the patent and monetary damages. A trial was held in May 2021 and the judge ultimately sided with Roche Ltd. on non-infringement and invalidity of the patent, which was slated to expire in August 2021. Accordingly, no injunction was issued and no monetary damages were awarded.
The Company is, from time to time, involved in the normal course of business in various legal proceedings, including intellectual property, contract, employment and product liability suits. Other than as described above, the Company does not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on its results of operati