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Fair Value Measures and Disclosures (Notes) | 9 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Disclosures | Fair Value Measurements Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair value: •Level 1: quoted prices in active markets for identical assets or liabilities; •Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or •Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities. Contingent Earn-out Liabilities In 2022, we acquired Smiths Medical with a combination of cash consideration and share consideration issued at closing. Total consideration for the acquisition included a potential earn-out payment of $100.0 million in cash contingent on our common stock achieving a certain volume-weighted average price (the "Price Targets") from the closing date to either the third or fourth anniversary of closing and provided Smiths beneficially owns at least 50.0% of the shares of common stock issued at closing at the time the Price Target is achieved. The initial estimated fair value of the earn-out was determined to be $53.5 million. The initial fair value of the earn-out was determined using a Monte Carlo simulation model. The model utilized several assumptions including volatility and the risk-free interest rate. The assumed volatility is based on the average of the historical volatility of our common stock price and the implied volatility of certain at-the-money traded options. The risk-free interest rate is equal to the yield on U.S. Treasury securities at constant maturity for the period commensurate with the term of the earn-out. At each reporting date subsequent to the acquisition, we remeasured the earn-out liability and recognized any changes in its fair value in the Company's consolidated statements of operations. If the probability of achieving the Price Targets during their respective measurement periods was significantly greater than initially anticipated, the realization of an additional liability and related expense would have had a significant impact on the Company's consolidated financial statements in the period recognized. As of December 31, 2023, the estimated fair value of the contingent earn-out was $4.0 million. During July 2024, Smiths sold 1.2 million common shares of ICU Medical, Inc. The sale of shares when combined with other sales in prior periods renders Smiths unable to achieve the contingent consideration based on certain price targets during the third and fourth anniversary of closing as Smiths no longer meets the required minimum beneficial ownership percentage. Accordingly, the valuation of the contingent earn-out liability as of September 30, 2024 has been reduced to zero. In November 2021, we acquired a small foreign infusion systems supplier. Total consideration for the acquisition included a potential earn-out payment of up to $2.5 million, consisting of (i) a cash payment of $1.0 million contingent on the achievement of certain revenue targets for the annual period ended December 31, 2022 and, separately, (ii) a cash payment of $1.5 million contingent upon obtaining certain product-related regulatory certifications. As of December 31, 2022, the measurement period related to the contingent earn-out based on certain revenue targets ended and based on the actual revenue achieved during the measurement period the fair value of the contingent earn-out was determined to be zero as the minimum threshold for earning the earn-out was not met. As of September 30, 2024, the estimated fair value of the contingent consideration related to certain product-related regulatory certifications was estimated to be $1.5 million. In August 2021, we entered into an agreement with one of our international distributors whereby that distributor would not compete with us in a specific territory for a three-year period that ended September 2024. The terms of the agreement included a contingent earn-out payment. The contingent earn-out payment could not exceed $6.0 million and was to be earned based on certain revenue targets over a twelve-month measurement period determined by the highest four consecutive quarters commencing over a two-year period starting on the closing date of the agreement and provided that the distributor is in compliance with its obligations under the agreement. As of December 31, 2023, the fair value of the contingent earn-out was determined to be $3.4 million and was paid out during the three months ended March 31, 2024. Our contingent earn-out liabilities are separately stated on our condensed consolidated balance sheets. The following tables provide a reconciliation of the Level 3 earn-out liabilities measured at estimated fair value (in thousands):
|  | Earn-out Liability
Accrued balance, January 1, 2024 |  | $ | 5,491 |
Change in fair value of earn-out (included in income from operations as a separate line item)(1) |  | 295 |
Accrued balance, March 31, 2024 |  | 5,786 |
Change in fair value of earn-out (included in income from operations as a separate line item)(1) |  | (339) |
Accrued balance, June 30, 2024 |  | 5,447 |
Change in fair value of earn-out (included in income from operations as a separate line item)(1) |  | (3,947) |
Accrued balance, September 30, 2024 |  | $ | 1,500 |
|  | Earn-out Liability
Accrued balance, January 1, 2023 |  | $ | 25,572 |
Change in fair value of earn-out (included in income from operations as a separate line item)(1) |  | (700) |
Currency translation |  | 33 |
Accrued balance, March 31, 2023 |  | 24,905 |
Change in fair value of earn-out (included in income from operations as a separate line item)(2) |  | 4,016 |
Other |  | 11 |
Currency translation |  | 1 |
Accrued balance, June 30, 2023 |  | 28,933 |
Change in fair value of earn-out (included in income from operations as a separate line item)(1) |  | (15,572) |
Other |  | 58 |
Currency translation |  | (58) |
Accrued balance, September 30, 2023 |  | $ | 13,361 |
_______________________________ (1) Re lates to the change in fair value of our Smiths Medical earn-out. (2) Re lates to the change in fair value of our Smiths Medical earn-out and the earn-out with one of our international distributors. The following tables provide quantitative information about Level 3 inputs for fair value measurement of our earn-out liabilities related to Smiths Medical: Smiths Medical Earn-out Liability
Simulation Input |  |  |  |  |  | As of December 31, 2023
Volatility |  |  |  |  |  | 47.00 | %
Risk-Free Rate |  |  |  |  |  | 4.18 | %
Investments, Foreign Exchange Contracts and Interest Rate Contracts As of September 30, 2024, we do not have any investment securities. Our investments historically consisted of corporate, government bonds and U.S. treasury securities. The fair value of our corporate and government bonds were estimated using observable market-based inputs such as quoted prices, interest rates and yield curves or Level 2 inputs. The fair value of our U.S. treasury securities were based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The fair value of our Level 2 foreign exchange contracts is estimated using observable market inputs such as known notional value amounts, spot and forward exchange rates. These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative. The fair value of our Level 2 interest rate swaps is estimated using a pricing model that reflects the terms of the contracts, including the period to maturity, and relies on observable market inputs such as known notional value amounts and USD interest rate curves. Our assets and liabilities measured at fair value on a recurring basis consisted of the following Level 1, 2 and 3 inputs as defined above (in thousands):
| Fair value measurements as of September 30, 2024
| Total carrying value |  | Quoted prices in active markets for identical assets (level 1) |  | Significant other observable inputs (level 2) |  | Significant unobservable inputs (level 3)
Assets: |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Prepaid expenses and other current assets | $ | 5,356 |  |  | $ | — |  |  | $ | 5,356 |  |  | $ | — |
Other assets | 177 |  |  | — |  |  | 177 |  |  | — |
Interest rate contracts: |  |  |  |  |  |  |
Prepaid expenses and other current assets | 10,940 |  |  | — |  |  | 10,940 |  |  | — |
Other assets | — |  |  | — |  |  | — |  |  | — |
Total Assets | $ | 16,473 |  |  | $ | — |  |  | $ | 16,473 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Contingent earn-out liability - ST | $ | 1,500 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,500 |
Foreign exchange contracts: |  |  |  |  |  |  |
Accrued liabilities | 9,878 |  |  | — |  |  | 9,878 |  |  | — |
Other long-term liabilities | 226 |  |  | — |  |  | $ | 226 |  |  | — |
Interest rate swaps: |  |  |  |  |  |  |
Other long-term liabilities | 1,399 |  |  | — |  |  | 1,399 |  |  | — |
Total Liabilities | $ | 13,003 |  |  | $ | — |  |  | $ | 11,503 |  |  | $ | 1,500 |
| Fair value measurements as of December 31, 2023
| Total carrying value |  | Quoted prices in active markets for identical assets (level 1) |  | Significant other observable inputs (level 2) |  | Significant unobservable inputs (level 3)
Assets: |  |  |  |  |  |  |
Available-for-sale debt securities: |  |  |  |  |  |  |
Short-term corporate bonds | $ | 501 |  |  | $ | — |  |  | $ | 501 |  |  | $ | — |
Foreign exchange forwards: |  |  |  |  |  |  |
Prepaid expenses and other current assets | 6,785 |  |  | — |  |  | 6,785 |  |  | — |
Other assets | 673 |  |  | — |  |  | 673 |  |  | — |
Interest rate contracts: |  |  |  |  |  |  |
Prepaid expenses and other current assets | 23,065 |  |  | — |  |  | 23,065 |  |  | — |
Other assets | 4,876 |  |  | — |  |  | 4,876 |  |  | — |
Total Assets | $ | 35,900 |  |  | $ | — |  |  | $ | 35,900 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Contingent earn-out liability - ST | $ | 4,879 |  |  | $ | — |  |  | $ | 3,379 |  |  | $ | 1,500 |
Contingent earn-out liability - LT | 3,991 |  |  | — |  |  | — |  |  | 3,991 |
Foreign exchange contracts: |  |  |  |  |  |  |
Accrued liabilities | 2,590 |  |  | — |  |  | 2,590 |  | — |
Other long-term liabilities | 240 |  |  | — |  |  | 240 |  | — |
Total Liabilities | $ | 11,700 |  |  | $ | — |  |  | $ | 6,209 |  |  | $ | 5,491 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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