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ICU MEDICAL INC

ICU MEDICAL INCICUIEarnings & Financial Report

Nasdaq · Health Care · Surgical & Medical Instruments & Apparatus

ICU Medical, Inc. is a medical technology company based in San Clemente, California. ICU Medical products are designed to prevent bloodstream infections and protect healthcare workers from exposure to infectious diseases or hazardous drugs. ICU Medical product line includes intravenous therapy (IV) products, pumps, needle-free vascular access devices, custom infusion sets, closed system hazardous drug handling devices and systems, sensor catheters, needle-free closed blood sampling systems, a...

What changed in ICU MEDICAL INC's 10-K — 2022 vs 2023

Top changes in ICU MEDICAL INC's 2023 10-K

412 paragraphs added · 404 removed · 295 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

70 edited+16 added−24 removed119 unchanged
In the United States ("U.S.") our competitors include BD, Baxter, Moog Medical, Fresenius and B. Braun. Outside of the U.S., our primary competitors are BD, B. Braun, Fresenius Kabi, a division of Fresenius Group, and a large number of local market pump manufacturers. These competitors benefit from greater financial, research and development and marketing resources than we have.
In the United States ("U.S.") our competitors include BD, Baxter, B. Braun, Moog Medical, and Fresenius Kabi, a division of Fresenius Group. Outside of the U.S., our primary competitors are BD, B. Braun, Fresenius, and a large number of local market pump manufacturers. These competitors benefit from greater financial, research and development and marketing resources than we have.
The FDA may approve a PMA with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported PMA approval or requirements to conduct additional clinical studies post-approval.
The FDA may approve a PMA with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported PMA approval or requirements to conduct additional clinical 6 studies post-approval.
The Federal Trade Commission ("FTC") also regulates the advertising of our products. Further, we are subject to laws directed at preventing fraud and abuse, which subject our sales and marketing, training and other practices to government scrutiny. Medical Device Regulation in the U.S. The majority of our products are regulated by the FDA as medical devices in the U.S.
The Federal Trade Commission ("FTC") also regulates the advertising of our products. Further, we are subject to laws directed at preventing fraud and abuse, which subject our sales and marketing, training and other practices to government scrutiny. 5 Medical Device Regulation in the U.S. The majority of our products are regulated by the FDA as medical devices in the U.S.
Alternatively, if a UK notified body conducts such assessment, a 'UKNI' mark is applied and the device may only be placed on the market in Northern Ireland and not the EU. Manufacturing Regulation We must also comply with FDA and International Organization for Standardization ("ISO") governing medical device manufacturing practices.
Alternatively, if a UK notified body conducts such assessment, a 'UKNI' mark is applied and the device may only be placed on the market in Northern Ireland and not the EU. 11 Manufacturing Regulation We must also comply with FDA and International Organization for Standardization ("ISO") governing medical device manufacturing practices.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any 8 claims made about the performance and safety of the device are supported by suitable evidence.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.
Such legislation and regulation of healthcare costs may, however, result in decreased lower reimbursements by 12 governmental and private payors to our customers, which may adversely affect our business, financial condition and results of operations. EU Healthcare Reform Additional healthcare reform measures in the EU may be adopted in the future as well.
Such legislation and regulation of healthcare costs may, however, result in decreased lower reimbursements by governmental and private payors to our customers, which may adversely affect our business, financial condition and results of operations. EU Healthcare Reform Additional healthcare reform measures in the EU may be adopted in the future as well.
The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.
The FDA and other agencies actively enforce the 8 laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.
Certain countries also mandate implementation of commercial compliance programs. In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users.
Certain countries also mandate implementation of commercial compliance programs. 10 In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users.
The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k), de novo classification request or a PMA in the first instance, but the FDA can 5 review any such decision and disagree with a manufacturer’s determination.
The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k), de novo classification request or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination.
Infusion Consumables We believe that our ability to effectively compete in the Infusion Consumables market depends upon our ability to differentiate our products based on continued innovation, safety, quality, convenience, reliability, patent protection, ease of use and the pricing of our products, in addition to access to distribution channels.
Consumables We believe that our ability to effectively compete in the Consumables market depends upon our ability to differentiate our products based on continued innovation, safety, quality, convenience, reliability, patent protection, ease of use and the pricing of our products, in addition the access to distribution channels.
Drug manufacturers and their subcontractors are required 7 to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers.
Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers.
The advertising and promotion of medical devices is subject to some general principles set forth in EU legislation. According to the EU Medical Devices Regulation, only devices that are CE marked may be marketed and advertised in the EU in accordance with their intended purpose.
The advertising and promotion of medical devices are subject to some general principles set forth in EU legislation. According to the EU Medical Devices Regulation, only devices that are CE marked may be marketed and advertised in the EU in accordance with their intended purpose.
Unlike the EU Medical Devices Directive, the EU Medical Devices Regulation is directly applicable in EU member states without the need for member states to implement into national law. This aims to increase harmonization across the EU. The EU Medical Devices Regulation became effective on May 26, 2021.
Unlike the EU Medical Devices 9 Directive, the EU Medical Devices Regulation is directly applicable in EU member states without the need for member states to implement into national law. This aims to increase harmonization across the EU. The EU Medical Devices Regulation became effective on May 26, 2021.
Data Privacy and Security Medical device companies may be subject to U.S. federal and state and foreign data privacy, security and data breach notification laws governing the collection, use, disclosure and protection of health-related and other personal information.
Data Privacy and Security 13 Medical device companies may be subject to U.S. federal and state and foreign data privacy, security and data breach notification laws governing the collection, use, disclosure and protection of health-related and other personal information.
The process required by the FDA before a drug may be marketed in the U.S. generally involves the following: 6 • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA's Good Laboratory Practice requirements; • submission to the FDA of an investigational new drug application ("IND"), which must become effective before clinical trials may begin; • approval by an institutional review board ("IRB") or ethics committee at each clinical site before the trial is commenced; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its intended purpose; • preparation of and submission to the FDA of a New Drug Application ("NDA") or abbreviated new drug application ("ANDA") after completion of all required clinical trials; • satisfactory completion of an FDA Advisory Committee review, if applicable; • a determination by the FDA within 60 days of its receipt of an NDA to file the application for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMPs and to assure that the facilities, methods and controls are adequate to preserve the product's continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices ("GCPs"); and • FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the U.S.
The process required by the FDA before a drug may be marketed in the U.S. generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA's Good Laboratory Practice requirements; • submission to the FDA of an investigational new drug application ("IND"), which must become effective before clinical trials may begin; • approval by an institutional review board or ethics committee at each clinical site before the trial is commenced; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its intended purpose; • preparation of and submission to the FDA of a New Drug Application ("NDA") or abbreviated new drug application ("ANDA") after completion of all required clinical trials; • satisfactory completion of an FDA Advisory Committee review, if applicable; • a determination by the FDA within 60 days of its receipt of an NDA to file the application for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMPs and to assure that the facilities, methods and controls 7 are adequate to preserve the product's continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices; and • FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the U.S.
ICU's product portfolio includes ambulatory, syringe, and large volume IV pumps and safety software; dedicated and non-dedicated IV sets, needlefree IV connectors, peripheral IV catheters, and sterile IV solutions; closed system transfer devices and pharmacy compounding systems; as well as a range of respiratory, anesthesia, patient monitoring, and temperature management products.
ICU's product portfolio includes ambulatory, syringe, and large volume IV pumps and safety software; dedicated and non-dedicated IV sets, needlefree IV connectors, IV catheters, sharps safety products, and sterile IV solutions; closed system transfer devices and pharmacy compounding systems; as well as a range of respiratory, anesthesia, patient monitoring, and temperature management products.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-assess the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.
A notified body would typically audit and examine a product's technical dossiers and the manufacturers' quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements).
A notified body would typically audit and examine a product's technical dossiers and the manufacturer's quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements).
In 2021 and 2020, we did not have sales over 10% to any single customer. Distribution 4 Our products are marketed and distributed in the U.S. and internationally to medical product manufacturers, independent distributors and directly to end users.
In 2021, we did not have sales over 10% to any single customer. Distribution Our products are marketed and distributed in the U.S. and internationally to medical product manufacturers, independent distributors and directly to end users.
Raw Materials We purchase many of the components and raw materials used in manufacturing our products from numerous suppliers in various countries. Certain components and raw materials are available only from a single supplier.We currently attempt to manage the risk associated with such suppliers by means of inventory management, relationship management and evaluation of alternative sources when feasible.See Item 1A.
Raw Materials We purchase many of the components and raw materials used in manufacturing our products from numerous suppliers in various countries. Certain components and raw materials are available only from a single supplier. We currently attempt to manage the risk associated with such suppliers by means of inventory management, relationship management and evaluation of alternative sources when feasible.
The FDA may require one or more post-market studies and surveillance to further assess and monitor the drug’s safety and effectiveness after commercialization, and may limit further marketing of the drug based on the results of these post-marketing studies.
The FDA may also require one or more post-market studies and additional surveillance to further assess and monitor the drug’s safety and effectiveness after commercialization, and may limit further marketing of the drug based on the results of these post-marketing studies.
Risk Factors - We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect on our business and financial condition.
See Item 1A. Risk Factors - We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect on our business and financial condition.
On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers, which went into effect on April 1, 2013, and will stay in effect through 2031, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 unless additional Congressional action is taken.
On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers, which went into effect on April 1, 2013, and will stay in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 unless additional Congressional action is taken.
ChemoLock is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminates the risk of needlestick injury; and • ChemoClave TM , an ISO Connection standard and universally compatible CSTD used for the preparation and administration of hazardous drugs.
ChemoLock is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminates the risk of needlestick injury; • ChemoClaveTM, an ISO Connection standard and universally compatible CSTD used for the preparation and administration of hazardous drugs.
The majority of our sales is denominated in United States ("U.S.") dollars and we have sales denominated in Euros, Canadian dollars, Japanese Yen, British Pound and Australian dollars as well as other currencies. In 2022, we had worldwide net sales to Medline of 15% of consolidated net sales.
The majority of our sales is denominated in United States ("U.S.") dollars and we have sales denominated in Euros, Canadian dollars, Japanese Yen, British Pound and Australian dollars as well as other currencies. In 2023 and 2022, we had worldwide net sales to Medline of 16% and 15% of consolidated net sales, respectively.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; • the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare & Medicaid Services ("CMS") information related to 11 payments or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician health care professionals (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives), and teaching hospitals and ownership and investment interests held by the physicians described above and their immediate family members; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical and device companies to comply with the industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to track and report information related to payments and other "transfers of value" to physicians and other healthcare providers or pricing, marketing expenditures and information.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; • the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare & Medicaid Services ("CMS") information related to payments or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician health care professionals (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives), and teaching hospitals and ownership and investment interests held by the physicians described above and their immediate family members; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical and device companies to comply with the industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to track and report information related to payments and other "transfers of value" to physicians and other healthcare providers or pricing, marketing expenditures and information. 12 Violations of any of the laws described above include civil and criminal penalties, damages, fines, the curtailment or restructuring of an entity’s operations, the debarment, suspension or exclusion from federal and state healthcare programs and/or imprisonment.
Closed System Transfer Devices (“CSTD”) and hazardous drug compounding systems are used to prepare and deliver hazardous IV medications such as those used in chemotherapy, which, if released, can have harmful effects to the healthcare worker and environment.
Oncology Closed System Transfer Devices ("CSTD") and hazardous drug compounding systems are used to prepare and deliver hazardous IV medications such as those used in chemotherapy, which, if released, can have harmful effects on the healthcare worker and environment.
While we have obtained certain patents and applied for additional U.S. and foreign patents covering certain of our products, there is no assurance that the scope of any patent protection will prevent competitors from introducing similar or competing devices or that any of our patents will be held valid if subsequently challenged. We can also lose patent protection through expiration.
While we have obtained certain patents and applied for additional U.S. and foreign patents covering certain of our products, there is no assurance that the scope of any patent 14 protection will prevent competitors from introducing similar or competing devices or that any of our patents will be held valid if subsequently challenged.
We have obtained U.S. and foreign patents relating to certain of the technologies found in our products, and are pursuing additional patent applications. There is however, no single patent or group of patents that we own that we believe is material in relation to our business as a whole.
Patents Many of our product lines rely on patent protection. We have obtained U.S. and foreign patents relating to certain of the technologies found in our products, and are pursuing additional patent applications. There is however, no single patent or group of patents that we own that we believe is material in relation to our business as a whole.
The inability to obtain effective patent protection or the loss of patent protection on a specific product line could adversely affect our ability to exclude other company from producing effective competitive products. The loss of a significant portion of our patent portfolio could have an adverse impact on our financial results.
We can also lose patent protection through expiration. The inability to obtain effective patent protection or the loss of patent protection on a specific product line could adversely affect our ability to exclude other company from producing effective competitive products. The loss of a significant portion of our patent portfolio could have an adverse impact on our financial results.
IV Medication Safety Software: • ICU Medical MedNet ™: ICU Medical MedNet is an enterprise-class medication management platform for any sized healthcare system that can help reduce medication errors, improve quality of care, streamline workflows and maximize revenue capture.
IV Medication Safety Software: • ICU Medical MedNet™ software is an enterprise-class medication management platform that can help reduce medication errors, improve quality of care, streamline workflows and maximize revenue capture.
Available Information Our website address is http://www.icumed.com. We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other filings and amendments thereto those reports, free of charge on our website as soon as reasonably practicable after filing or furnishing them with the Securities and Exchange Commission ("SEC").
We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other filings and amendments thereto those reports, free of charge on our website as soon as reasonably practicable after filing or furnishing them with the Securities and Exchange Commission ("SEC").
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation when our current certificates expire.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation.
The regulation foresees a three-year transitional period and will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
Regulations implementing the new regime were originally scheduled to come into force in July 2023, but have recently been postponed to July 2024. Devices bearing CE marks issued by EU notified bodies under the MDR or MDD are now subject to transitional arrangements.
Regulations implementing the new regime were originally scheduled to come into force in July 2023, but have recently been postponed to July 2025. Devices bearing CE marks issued by EU notified bodies under the EU Medical Devices Regulation or EU Medical Devices Directive are now subject to transitional arrangements.
ChemoClave utilizes standard ISO luer locking connections, making it 1 compatible with all brands of needlefree connectors and pump delivery systems. ChemoClave also is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminate the risk of needlestick injury.
ChemoClave utilizes standard ISO luer locking connections, making it compatible with all brands of needlefree connectors and pump delivery systems. ChemoClave also is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminate the risk of needlestick injury; and • Deltec® GRIPPER® non-coring needles for portal access.
We believe our ability to effectively compete will be determined by our ability to build our brand strength using the development of technological advancements aimed at increasing the quality, reliability, safety and security of our pumps while at the same time focusing on manufacturing efficiency and cost-effectiveness, which are operationally challenging with evolving product lines. 13 IV Solutions We participate in the IV solutions market only in the U.S. and Canada.
We believe our ability to effectively compete will be determined by our ability to build our brand strength using the development of technological advancements aimed at increasing the quality, reliability, safety and security of our pumps while at the same time focusing on manufacturing efficiency and cost-effectiveness, which are operationally challenging with evolving product lines.
We encounter significant competition in this market both from global, large, established medical device manufacturers and from smaller companies. We compete with products and systems marketed by Becton Dickinson ("BD"), Baxter International ("Baxter"), and B. Braun Medical, Inc. ("B. Braun").
We encounter significant competition in this market both from global, large, established medical device manufacturers and from smaller companies. We compete with products and systems marketed by Becton Dickinson ("BD"), Baxter International ("Baxter"), B. Braun Medical, Inc. ("B. Braun"), Angiodynamics and Teleflex. Infusion Systems We face strong global competitors in the Infusion Systems market.
We operate regional device service centers, in a number of locations, including Salt Lake City, Utah, U.S., Sligo, Ireland; San Laurent, Quebec, Canada; Taipei, Taiwan and Rydalmere, Australia. See Part I, Item 2 of this Annual Report on Form 10-K.
We no longer purchase products from Pfizer under the MSA. We operate regional device service centers, in a number of locations, including Salt Lake City, Utah, U.S., Grasbrunn, Germany; Sligo, Ireland; San Laurent, Quebec, Canada; Taipei, Taiwan and Rydalmere, Australia. See Part I, Item 2 of this Annual Report on Form 10-K.
Our primary IV Solutions products are: IV Therapy and Diluents: • Including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated Ringer’s, Ringer’s, Mannitol, Sodium Chloride/Dextrose and Sterile Water. Irrigation: • Including Sodium Chloride Irrigation, Sterile Water Irrigation, Physiologic Solutions, Ringer’s Irrigation, Acetic Acid Irrigation, Glycine Irrigation, Sorbitol-Mannitol Irrigation, Flexible Containers and Pour Bottle Options.
IV Solutions Our IV Solutions products include a broad portfolio of injection, irrigation, nutrition and specialty IV solutions including: • IV Therapy and Diluents, including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated Ringer's, Ringer's, Mannitol, Sodium Chloride/Dextrose and Sterile Water. • Irrigation, including Sodium Chloride Irrigation, Sterile Water Irrigation, Physiologic Solutions, Ringer's Irrigation, Acetic Acid Irrigation, Glycine Irrigation, Sorbitol-Mannitol Irrigation, Flexible Containers and Pour Bottle Options.
Our ability to compete in this market will depend on our ability to continue to make technological advances to our products, thereby increasing customer efficiency, and provide product support aimed at improving clinical decision-making that ultimately enhances patient safety. Patents Many of our product lines rely on patent protection.
Our ability to compete in this market will depend on our ability to continue to make technological advances to our products, thereby increasing customer efficiency, and our ability to provide product support and successful customer training aimed at improving clinical decision-making that ultimately enhances patient safety and focuses on demonstrable patient outcomes.
FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.
An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.
Our primary Critical Care products are: 2 • Cogent™ 2-in-1 hemodynamic monitoring system; • CardioFlo™ hemodynamic monitoring system; • TDQ™ and OptiQ™ cardiac output monitoring catheters; • TriOx TM venous oximetry catheters; • Transpac™ blood pressure transducers; and • SafeSet™ closed blood sampling and conservation system.
Our Hemodynamic Monitoring products include: • Cogent™ 2-in-1 hemodynamic monitoring system; • CardioFlo™ hemodynamic monitoring system; • TDQ™ and OptiQ™ cardiac output monitoring catheters; • TriOxTM venous oximetry catheters; • Transpac™ blood pressure transducers; • SafeSet™ closed blood sampling and conservation system; and • MEDEX® LogiCal® Pressure Monitoring System and components.
The primary Infusion Systems-Smiths Medical products are: Ambulatory Infusion Hardware: • CADD ® ambulatory infusion pumps and disposables, including administration sets and medication cassette reservoirs, support a variety of IV pain management therapies across clinical care areas from hospital to outpatient treatment.
Ambulatory Infusion Hardware: • CADD™ ambulatory infusion pumps and disposables, including administration sets and medication cassette reservoirs, serve as a single pain management platform across all types of IV pain management therapies and all clinical care areas from the hospital to outpatient treatment.
Our silicone tracheostomy tubes are customizable to accommodate unique patient requirements. Financial information relating to our reporting segment and primary product lines is set forth in Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K, and is incorporated herein by reference.
Financial information relating to our reporting segment and primary product lines is set forth in Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K, and is incorporated herein by reference. Manufacturing Facilities Our manufacturing facilities are concentrated in the United States, Costa Rica, Mexico, and Czech Republic.
Our main R&D facilities are located in the U.S and India. Our R&D costs primarily include personnel costs and expenses related to the development of new products. Research and development costs were $93.0 million in 2022, $47.5 million in 2021 and $42.9 million in 2020.
Our main R&D facilities are located in the U.S and India. Our R&D costs primarily relate to headcount and employment expense in support of the ongoing development of new products. Research and development costs were $85.3 million in 2023, $93.0 million in 2022 and $47.5 million in 2021.
A serious incident is defined as any malfunction or deterioration in the characteristics or performance of a device made available on the market, including use-error due to ergonomic features, as well as any inadequacy in the information supplied by the manufacturer and any undesirable side-effect, which, directly or indirectly, might have led or might lead to the death of a patient or user or of other persons or to a temporary or permanent serious deterioration of a patient's, user's or other person's state of health or a serious public health threat.
A serious incident is any malfunction or deterioration in the characteristics or performance of a device on the market (e.g., inadequacy in the information supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious deterioration of the health of a patient, user, or other persons, or to a serious public health threat.
Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled. In particular, the certificate in question must still be valid.
In accordance with its recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.
Infusion Consumables Infusion therapy sets, used in hospitals and ambulatory clinics, consist of a tube running from a bottle or plastic bag containing a solution to a catheter inserted in a patient’s vein, that may or may not be used with an IV pump.
Infusion sets used in hospitals and ambulatory clinics consist of flexible sterile tubing running from an IV bag or bottle containing a drug product or solution to a catheter inserted in a patient’s vein that may or may not be used with an infusion pump. Disinfection caps are used to actively disinfect access points into the infusion sets and catheters.
This regulation which entered into force in January 2022 intends to boost cooperation among EU member states in assessing health technologies, including certain high-risk medical devices, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas.
Once applicable, it will have a phased implementation depending on the concerned products. The Regulation intends to boost cooperation among EU member states in assessing health technologies, including certain high-risk medical devices, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas.
Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain.
The rules for placing medical devices on the market in Northern Ireland, which is part of the UK, differ from those in the rest of the UK. Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain.
At December 31, 2022, we had approximately 14,500 employees located in over 35 countries. Geographic Data Information regarding financial data by geography is set forth in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K in Notes 4 and 13 to the Consolidated Financial Statements, and is incorporated herein by reference.
Geographic Data Information regarding financial data by geography is set forth in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K in Notes 4 and 13 to the Consolidated Financial Statements, and is incorporated herein by reference. Available Information Our website address is http://www.icumed.com.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical 9 reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device.
Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive continue to apply. Manufacturers are required to take FSCAs, which are defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.
Professional Services: • In addition to the products above, our teams of clinical, information technology, and professional services experts work with customers to develop and deliver safe and efficient infusion systems, providing customized and personalized configuration, implementation, and data analytics services to complement our infusion hardware and software.
Professional Services: • In addition to the products above, our teams of clinical and technical experts work with customers to develop safe and efficient infusion systems, providing customized and personalized configuration, implementation, and data analytics services to optimize our infusion hardware and software. 3 Vital Care Our Vital Care business unit includes IV Solutions, Hemodynamic Monitoring, General Anesthesia and Respiratory, Temperature Management Solutions and Regional Anesthesia/Pain Management products.
We also rely on certain outside manufacturers for certain product lines in Infusion Systems and we leverage a long-term supply agreement with Pfizer (described below) to provide additional IV Solution products to us.
See Part I, Item 2 of this Annual Report on Form 10-K. We also rely on certain outside manufacturers for certain product lines in Infusion Systems and have in the past leveraged a long-term manufacturing and supply agreement ("MSA") with Pfizer to provide additional IV Solution products to us when requested.
Critical Care Our Critical Care products help clinicians get accurate real-time access to patients’ hemodynamic and cardiac status with an extensive portfolio of monitoring systems and advanced sensors & catheters. Measurements provided by our systems help clinicians determine how well the heart is pumping blood and how efficiently oxygen from the blood is being used by the tissues.
Hemodynamic Monitoring Our Hemodynamic Monitoring products are designed to help clinicians get accurate real-time access to patients’ hemodynamic and cardiac status with an extensive portfolio of monitoring systems and advanced sensors & catheters.
Our primary products include: • Clave™ needlefree products, including the MicroClave, MicroClave Clear, and NanoClave™ brand of connectors, accessories, extension and administration sets used for the administration of IV fluids and medications and the Neutron catheter patency device, used to help maintain patency of central venous catheters; • ChemoLock TM CSTD, which utilizes a proprietary needlefree connection method, is used for the preparation and administration of hazardous drugs.
Our primary Infusion Therapy products are: • Clave™ needlefree products, including the MicroClave, MicroClave Clear, and NanoClave™ brand of connectors, accessories, extension and administration sets used for the administration of IV fluids and medications; • Neutron™ catheter patency device, used to help maintain patency of central venous catheters; 1 • Tego™ needlefree connector utilized to access catheters for hemodialysis and apheresis applications; and • ClearGuard™, SwabCap™ and SwabTip™ disinfection caps.
This is principal for us in attracting, developing, retaining and rewarding talent on a global scale. Finally, we believe that our leadership team, with its broad, and deep category knowledge and averaging approximately 22 years of experience in IV therapy has the necessary experience to effectively lead the execution of our strategy.
Finally, we believe that our leadership team, with its broad, and deep category knowledge and averaging approximately 12 years of experience in IV therapy has the necessary experience to effectively lead the execution of our strategy. 15 At December 31, 2023, we had approximately 14,000 employees located in over 35 countries.
We can, however, experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which has been and may continue to be driven more by the COVID-19 pandemic surges and its impact on hospital admissions and procedure volumes along with production scheduling and customer inventory levels, as well as fluctuations due to supply constraints as a result of other macroeconomic 14 and global geopolitical events, such as the conflict in the Ukraine.
We can, however, experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which can be driven by global health crisis or pandemics, as well as fluctuations due to supply constraints as a result of other macroeconomic and global geopolitical events, such as the conflicts in Eastern Europe and the Middle East.
We also have our code of ethics posted on our website (http://www.icumed.com). The information on our website is not incorporated into this Annual Report on Form 10-K. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on its website (http://www.sec.gov). 15
We also have our code of ethics posted on our website (http://www.icumed.com). The information on our website is not incorporated into this Annual Report on Form 10-K. We use our Investor Relations website as a means of disclosing material information.
Our primary Vascular Access products are: • Jelco ® safety and conventional peripheral IV catheters, sharps safety devices for hypodermic injection, and venipuncture blood collection and peripheral IV catheters designed to help prevent needlestick injury and to reduce the risks associated with blood exposure and contamination while reducing patients’ risk of infection; • DELTEC ® implantable ports and GRIPPER® non-coring needles for portal access; • Portex ® arterial blood sampling syringes, anesthesia trays and kits for pain management; • Powerwand ® midline catheters; and • MEDEX ® LogiCal ® Pressure Monitoring System and components.
Our primary Vascular Access products are: • Jelco® safety and conventional peripheral IV catheters and sharps safety devices for hypodermic injection, designed to help prevent accidental needlestick injury; • Safe-T Wing® venipuncture and blood collection devices; • Port-A-Cath® implantable ports; • Portex® arterial blood sampling syringes; • PowerWand® midline catheters; and • Cleo® subcutaneous infusion catheters and sets.
Vital Care-Smiths Medical We offer a range of devices and systems to maintain patients’ airways and body temperature before, during and after surgery.
General Anesthesia & Respiratory We offer a broad range of anesthesia systems and devices and breathing circuits, ventilation, respiratory and specialty airway products that maintain patients’ airways before, during and after surgery.
For instance, in December 2021, Regulation (EU) No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU, was adopted.
For instance, in December 2021, Regulation (EU) No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim.
Our primary Vital Care products are: • Level 1 ® temperature management systems used in perioperative and critical care settings to help monitor and regulate patient temperature through rapid infusion, routine blood and fluid warming, irrigation warming and convective warming. 3 • Portex ® acapella ® bronchial hygiene products used to mobilize pulmonary secretions to facilitate the opening of airways in patients with chronic respiratory diseases such as chronic obstructive pulmonary disease ("COPD"), asthma and cystic fibrosis. • Portex ® Bivona ® tracheostomy tubes in PVC and silicone construction that provide a secure airway for both surgical and percutaneous procedures.
Our primary Anesthesia & Respiratory products are: • Portex® acapella® bronchial hygiene products used to mobilize pulmonary secretions to facilitate the opening of airways in patients with chronic respiratory diseases such as chronic obstructive pulmonary disease, or COPD, asthma and cystic fibrosis.
Plum 360 was named the 2018, 2019, 2020 and 2022 Best in KLAS winner as top-performing IV smart pump and was the first medical device to be awarded UL Cybersecurity Assurance Program Certification. Also, in 2021, 2022 and 2023, the Plum 360 won the award as the top-performing Smart Pump EMR-Integrated.
Plum 360 has been named Best in KLAS for seven years in a row (2018, 2019, 2020, 2023 – Best in KLAS Smart Pump Traditional; 2021, 2022, 2023, 2024 Best in KLAS Smart Pump EMR Integrated) and was the first medical device to be awarded UL Cybersecurity Assurance Program Certification. • Plum Duo™ infusion pumps with LifeShield™ safety software are dual channel devices capable of delivering up to four compatible medications at independent rates with a single pump.
Manufacturers may choose to use the UKCA mark on a voluntary 10 basis until June 30, 2023. However, UKCA marking will not be recognized in the EU. The rules for placing medical devices on the market in Northern Ireland, which is part of the UK, differ from those in the rest of the UK.
Following these transitional periods, it is expected that all medical devices will require a UK Conformity Assessed ("UKCA") mark. Manufacturers may choose to use the UKCA mark on a voluntary basis prior to the mandatory deadlines. However, UKCA marking will not be recognized in the EU.
ICU Medical MedNet connects our industry-leading smart pumps to a hospital’s EHR, asset tracking systems, and alarm notification platforms with the largest array of integration partners.
ICU Medical MedNet connects our industry-leading Plum 360 smart pumps to a hospital’s EHR, asset tracking systems, and alarm notification platforms to further enhance infusion safety and efficiency. • LifeShield™ infusion safety software for Plum Duo infusion pumps is an enterprise-wide platform designed with the input of pharmacists, nurses and administrators to empower health systems to raise the bar in IV performance.
Infusion Software: • PharmGuard ® Medication Safety Software for MedfusionTM 4000 syringe and CADD™ Solis pumps allows for customized drug libraries to support the standardization of protocols for medication administration throughout the facility. Vascular Access-Smiths Medical Our Vascular Access-Smiths Medical products allow clinicians to safely access the patients’ bloodstream to deliver fluids and medication or to obtain blood samples.
The system’s hybrid architecture provides cloud-based functionality to allowing access anywhere with on-premise management providing security and control. • PharmGuard™ medication safety software for Medfusion 4000 syringe and CADD-Solis™ pumps allows for customized drug libraries to support the standardization of protocols for medication administration throughout the facility.
Components of the ChemoClave and ChemoLock product lines are used both in pharmacies and on the nursing floors for the preparation and administration of hazardous drugs. Infusion Systems We offer a wide range of infusion pumps, dedicated IV sets, software and professional services.
Components of the ChemoClave and ChemoLock product lines are used both in pharmacies and on the nursing floors for the preparation and administration of hazardous drugs. Vascular Access Our Vascular Access products are used by clinicians to access the patients' bloodstream to deliver fluids and medication or to obtain blood samples.
Syringe Infusion Hardware: • Medfusion TM syringe infusion pumps are designed for the administration of fluids and medication requiring precisely controlled infusion rates from a variety of syringe sizes in acute care settings.
Syringe Infusion Hardware: • Medfusion™ syringe infusion pumps are designed for the administration of fluids and medication to address the needs of the most vulnerable patients requiring precisely controlled infusion rates. Focused on delivery accuracy, the Medfusion 4000 can deliver from a comprehensive portfolio of syringes to meet syringe pump guidance to deliver medication from the smallest syringe size possible.
Removed
Products As of December 31, 2022, our primary product offerings are listed below. Our product offerings related to our Smiths Medical acquisition are listed separately as we integrate that business.
Added
Our team is focused on providing quality, innovation and value to our clinical customers worldwide.
Removed
Our primary Infusion System products are dedicated IV sets and the following: Infusion Pump Hardware: • Plum 360™ : The Plum 360™ infusion pump is an ICU Medical MedNet™ ready large volume infusion pump with an extensive drug library and wireless capability.
Added
Products As part of the integration of our acquisition of Smiths Medical, we have renamed our business units and reorganized the products thereunder and, as of January 1, 2023, our business unit structure is composed of Consumables, Infusion Systems and Vital Care. The product offerings under these business units are described below.
Removed
IV Solutions We provide a broad portfolio of IV solutions to meet our customers’ clinical needs, providing a consistent supply of IV solutions, irrigation, and nutritionals to help provide safe and effective patient care.
Added
Consumables Our Consumables business unit includes Infusion Therapy, Oncology, Vascular Access and Tracheostomy products. Infusion Therapy Our Infusion Therapy products include non-dedicated infusion sets, extension sets, needle-free connectors, and disinfection caps.
Removed
Infusion Systems-Smiths Medical We offer a wide range of infusion pumps, disposables and safety software for use in both hospital and home settings. These products participate in adjacent categories to the legacy ICU Medical Infusion Systems product line.
Added
Our primary Oncology products are: • ChemoLockTM CSTD, which utilizes a proprietary needlefree connection method, is used for the preparation and administration of hazardous drugs.
Removed
Vascular Access products are often used in conjunction with Consumables and Infusion Systems devices.
Added
Tracheostomy Our tracheostomy products are used in the placement of a secure airway using both surgical and percutaneous insertion techniques.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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For example, on October 1, 2021, Smiths Medical received a Warning Letter from the FDA following an inspection of Smiths Medical’s Minneapolis, Minnesota Facility on March 30, 2021. The Warning Letter cited, among other things, failures to comply with FDA's medical device reporting requirements and failures to comply with applicable portions of the QSR.
For example, on October 1, 2021, Smiths Medical received a Warning Letter from the FDA following an inspection of 30 Smiths Medical’s Minneapolis, Minnesota Facility on March 30, 2021. The Warning Letter cited, among other things, failures to comply with FDA's medical device reporting requirements and failures to comply with applicable portions of the QSR.
We face exposure to adverse movements in foreign currency exchange rates due to our operations in foreign markets through our foreign subsidiaries and other international distributors. Our primary foreign currency exchange rate exposures are currently with the Euro, Mexican Peso, Czech Koruna, Japanese Yen, Chinese Renminbi, Australian Dollar, and the Canadian Dollar against the U.S. dollar.
We face exposure to adverse movements in foreign currency exchange rates due to our operations in foreign markets through our foreign subsidiaries and other international distributors. Our primary foreign currency exchange rate exposures are currently with the Euro, Mexican Peso, Canadian Dollar, Czech Koruna, Japanese Yen, Chinese Renminbi, and the Australian Dollar against the U.S. dollar.
We have incurred and will continue to incur significant expenditures and the allocation of management time to assimilate the Smiths Medical employees in a manner that preserves the key aspects of our corporate culture, including a focus on strong customer satisfaction, but there can be no assurance that we will be successful in our efforts.
We have incurred and continue to incur significant expenditures and the allocation of management time to assimilate the Smiths Medical employees in a manner that preserves the key aspects of our corporate culture, including a focus on strong customer satisfaction, but there can be no assurance that we will be successful in our efforts.
Department of Health and Human Services' CMS information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists 25 and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives, and teaching hospitals), and applicable manufacturers and GPOs, to report annually ownership and investment interests held by physicians and their immediate family members; • HIPAA, which created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters.
Department of Health and Human Services' CMS information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives, and teaching hospitals), and applicable manufacturers and GPOs, to report annually ownership and investment interests held by physicians and their immediate family members; • HIPAA, which created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters.
It is also possible that enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.
It is also possible that enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil 31 and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.
In addition, acquisitions may involve a number of special risks in addition to the difficulty of integrating cultures and operations and the diversion of management’s attention, including adverse short-term effects on our reported operating results, dependence on retention, hiring and training of key personnel, risks associated with unanticipated problems or legal liabilities, and amortization of acquired intangible assets, some or all of which could materially and adversely affect our operations and financial performance.
In addition, acquisitions may involve a number of special risks in 36 addition to the difficulty of integrating cultures and operations and the diversion of management’s attention, including adverse short-term effects on our reported operating results, dependence on retention, hiring and training of key personnel, risks associated with unanticipated problems or legal liabilities, and amortization of acquired intangible assets, some or all of which could materially and adversely affect our operations and financial performance.
If the FDA or foreign regulatory authorities disagree with our determinations, it could require us to report those actions as recalls and we may be subject to 32 enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.
If the FDA or foreign regulatory authorities disagree with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.
There are numerous U.S. federal and state, as well as foreign, laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims and transparency laws regarding payments and other transfers of value made to physicians and other licensed healthcare professionals. Our business practices and relationships with providers are subject to scrutiny under these laws.
There are numerous U.S. federal and state, as well as foreign, laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims and transparency laws regarding payments and other transfers of value made to physicians and other 25 licensed healthcare professionals. Our business practices and relationships with providers are subject to scrutiny under these laws.
This evolution may create uncertainty in our business, affect our or our collaborators', service providers' and contractors' ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.
This 23 evolution may create uncertainty in our business, affect our or our collaborators', service providers' and contractors' ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.
Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval or certification may not be available or adequate, 20 which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.
Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval or certification may not be available or adequate, which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.
See “Business and Operating Risks - The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our business, finance future operations or pursue our business strategies . ” 36 We have and may continue to acquire businesses, form strategic alliances or make investments in businesses or technologies.
See “Business and Operating Risks - The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our business, finance future operations or pursue our business strategies . ” We have and may continue to acquire businesses, form strategic alliances or make investments in businesses or technologies.
Our hedging activities, however, may not sufficiently offset the adverse financial impact caused by unfavorable movement in foreign currency exchange rates applicable to our business, and such exchange rate impacts could materially adversely affect our financial condition or results of operations. See “Item 7A.
Our hedging activities, however, may not sufficiently offset the adverse financial impact caused by unfavorable movement in foreign currency exchange rates 33 applicable to our business, and such exchange rate impacts could materially adversely affect our financial condition or results of operations. See “Item 7A.
Additionally, distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results. Failure to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, any of which could have a material adverse effect on our results of operations.
Additionally, distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results. Failure to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, any of which could have a material adverse effect on our business and results of operations.
Any such compromise could also result in damage to our reputation and a loss of confidence in our security and privacy or data protection measures. In addition, a cybersecurity attack could result in other negative consequences, including disruption of our internal operations, increased cyber security protection costs, lost revenue, regulatory actions or litigations.
Any such compromise could also result in damage to our reputation and a loss of confidence in our security and privacy or data protection measures. In addition, a cybersecurity attack could result in other negative consequences, including disruption of our internal operations, increased cybersecurity protection costs, lost revenue, regulatory actions or litigations.
Product development requires substantial investment that may be difficult for us to fund and may be challenging to recover through commercial product sales. 19 Innovations generally require a substantial investment in product development before we can determine their commercial viability, and we may not have the financial resources necessary to fund these innovations.
Product development requires substantial investment that may be difficult for us to fund and may be challenging to recover through commercial product sales. Innovations generally require a substantial investment in product development before we can determine their commercial viability, and we may not have the financial resources necessary to fund these innovations.
In the past, we have rarely raised prices and it is uncertain that we would be able to raise them to recover higher prices from our suppliers. Our inability to raise prices in those circumstances, or to otherwise recover these costs, could have an adverse effect on our profitability.
In the past, we have rarely raised 17 prices and it is uncertain that we would be able to raise them to recover higher prices from our suppliers. Our inability to raise prices in those circumstances, or to otherwise recover these costs, could have an adverse effect on our profitability.
Business and Operating Risks We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect on our business and financial condition.
We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect on our business and financial condition.
Although we believe our manufacturing facilities and those of our critical component suppliers are in compliance with the QSR requirements, and with applicable cGMPs for our products, we cannot provide assurance that any future inspection will not result in adverse findings.
Although we believe our manufacturing facilities and those of our critical component suppliers are in compliance with the QSR requirements, and with other applicable cGMPs for our products, we cannot provide assurance that any future inspection will not result in adverse findings.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable 32 risk to health.
Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations. The FDA, state and foreign regulatory authorities have broad enforcement powers.
Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA 28 regulations and applicable foreign laws and regulations. The FDA, state and foreign regulatory authorities have broad enforcement powers.
If the demand for these products changes significantly, which could happen with the loss of a customer or a change in product mix, it may be necessary for us to recognize an impairment charge for the value of the production tooling because its cost may not be recovered through production of saleable product, which could adversely affect our financial condition.
If the demand for these products changes significantly, which could happen with the loss of customers or a change in product mix, it may be necessary for us to recognize an impairment charge for the value of the production tooling because its cost may not be recovered through production of saleable product, which could adversely affect our financial condition.
We may expand our product offerings through acquisitions of companies or product lines. We can provide no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other challenges.
We may expand our product offerings through acquisitions of companies or product lines from time to time. We can provide no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other challenges.
Damage to any of our facilities or interruptions at our facilities due to work stoppages or labor shortages could render us unable to manufacture our products or require us to reduce the output of products at our facilities. Several of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.
Damage to, or interruptions at, any of our facilities or our suppliers' facilities due to work stoppages or labor shortages could render us unable to manufacture our products or require us to reduce the output of products at such facilities. Several of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.
Although our management believes that we continue to have sufficient access to cash to meet our business objectives and capital needs, we do have a decreased availability of cash, cash equivalents and investment securities and we expect to have such decreased availability of cash for the foreseeable future which could constrain our ability to grow our business.
Although our management believes that we continue to have sufficient access to cash to meet our business objectives and capital needs, we currently have a decreased availability of cash, cash equivalents and investment securities and expect to continue to have such decreased availability of cash for the foreseeable future which could constrain our ability to grow our business.
If the cost of key components or raw materials increases and we are unable to fully recover those increased costs through price increases or offset these increases through other cost reductions, we could experience an adverse effect on our financial condition.
If the cost of key components or raw materials increases and we are unable to fully recover those increased costs through price increases or offset these increases through other cost reductions, we could experience an adverse effect on our results of operations and financial condition.
Any such events could result in the loss of customers, revenue, or both, and could require us to incur significant expense to remediate, including legal claims or proceedings. Further, as cyber security related incidents continue to evolve, and regulatory focus on these issues continues to expand, additional investment in protective measures, and vulnerability remediation, may be required.
Any such events could result in the loss of customers, revenue, or both, and could require us to incur significant expense to remediate, including legal claims or proceedings. Further, as cybersecurity related incidents continue to evolve, and regulatory focus on these issues continues to expand, additional investment in protective measures, and vulnerability remediation, may be required.
If our facilities are inoperable, for even a short period of time, it could adversely affect our ability to manufacture and distribute our products in a timely or cost-effective 16 manner, and our ability to make product sales.
If our facilities or our suppliers' facilities are inoperable, for even a short period of time, it could adversely affect our ability to manufacture and distribute our products in a timely or cost-effective manner, and our ability to make product sales.
Prolonged inflation may also reduce or delay orders for our products and for certain products we may be unable to satisfy demand, both of which could have a material adverse impact on our sales and results of operations.
Heightened inflation may also reduce or delay orders for our products and for certain products we may be unable to satisfy demand, both of which could have a material adverse impact on our sales and results of operations.
For example, the privacy, security and breach notification rules promulgated under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, establish a set of national privacy and security standards for the protection of protected health information ("PHI") by health plans, health care clearinghouses and certain health care providers, called covered entities, and the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining or transmitting PHI, as well as their covered subcontractors.
For example, the privacy, security and breach notification rules promulgated under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder (collectively ("HIPAA") establish a set of national privacy and security standards for the protection of protected health information ("PHI") by health plans, health care clearinghouses and certain health care providers, called covered entities, and the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining or transmitting PHI, as well as their covered subcontractors.
Our prices to our international distributors, outside of Europe, for product shipped to the customers from the U.S., Costa Rica or Mexico are generally denominated in U.S. dollars, but their resale prices are set in their local currency.
Our prices to our international distributors, outside of Europe, for products shipped to the customers from the U.S., Costa Rica or Mexico are generally denominated in U.S. dollars, but their resale prices are set in their local currency.
The Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage.
Foreign Corrupt Practices Act and other worldwide anti-bribery laws. 34 The Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage.
We recently acquired the Smiths Medical business, which includes syringe and ambulatory infusion devices, vascular access, and vital care products, but we have to make significant integration efforts to achieve the anticipated benefits. See “ The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and significant growth to our business.
In 2022, we acquired the Smiths Medical business, which includes syringe and ambulatory infusion devices, vascular access, and vital care products, but we have made and continue to make significant integration efforts to achieve the anticipated benefits. See “ The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and significant growth to our business.
We have been and will be ordering production molds and equipment for our new products. We expect to order semi-automated or fully automated assembly machines for certain products in 2023.
We have been and will be ordering production molds and equipment for our new products. We expect to order semi-automated or fully automated assembly machines for certain products in 2024.
See the risk factor titled “ Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates ” under the “Geographic Risks” subsection for a discussion of risks related to foreign currency exchange rates. Additionally, the majority of our sales are conducted pursuant to long-term contracts.
See the risk factor titled “Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates” under the “Geographic Risks” subsection for a discussion of risks related to foreign currency exchange rates. Additionally, the majority of our sales are conducted pursuant to long-term contracts.
Our cost structure is often higher than 33 that of our competitors because of the relatively high cost of transporting product to some local markets as well as our competitors’ lower local labor costs in some markets. Our international sales are subject to higher credit risks than sales in the U.S.
Our cost structure is often higher than that of our competitors because of the relatively high cost of transporting products to some local markets as well as our competitors’ lower local labor costs in some markets. Our international sales are subject to higher credit risks than sales in the U.S.
As a result of the Smiths Medical acquisition, we have used a significant portion of our cash on hand and incurred a substantial amount of debt to finance the cash consideration portion and certain other amounts paid in connection with the Smiths Medical acquisition, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness.
For the Smiths Medical acquisition, we used a significant portion of our cash on hand and incurred a substantial amount of debt to finance the cash consideration portion and certain other amounts paid in connection with the Smiths Medical acquisition, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness.
The ability of our customers to obtain appropriate coverage and reimbursement for healthcare services and products from third-party payors is critical because it affects which products customers purchase and the prices they are willing to pay.
The ability of our customers to obtain appropriate coverage and reimbursement for healthcare 18 services and products from third-party payors is critical because it affects the kinds of products customers purchase and the prices they are willing to pay.
Furthermore, our operating results are reported in U.S. dollars, using the exchange rate in effect at the balance sheet date, or, for revenues and expenses, using the average monthly exchange rates during the year. Accordingly, our operating results are subject to volatility due to fluctuations in foreign currency exchange rates.
Furthermore, our operating results are reported in U.S. dollars, using the exchange rate in effect at the balance sheet date, or, for revenues and expenses, using the average monthly exchange rates during the year. Accordingly, our operating results have been and continue to be subject to volatility due to fluctuations in foreign currency exchange rates.
Most of our common stock is held by, or included in accounts managed by, institutional investors or managers. Several of those institutions own or manage a significant percentage of our outstanding shares, with the ten largest interests accounting for approximately 65% of our outstanding shares at the end of 2022.
Most of our common stock is held by, or included in accounts managed by, institutional investors or managers. Several of those institutions own or manage a significant percentage of our outstanding shares, with the ten largest interests accounting for approximately 63% of our outstanding shares at the end of 2023.
International sales pose additional risks related to competition with larger international companies and established local companies and our possibly higher cost structure. We have undertaken an initiative to increase our international sales, and have distribution arrangements in all the principal countries in Western Europe, the Pacific Rim, Middle East, Latin America, Canada and South Africa.
International sales pose additional risks related to competition with larger international companies and established local companies and higher credit risk. We have undertaken an initiative to increase our international sales, and have distribution arrangements in all the principal countries in Western Europe, the Pacific Rim, Middle East, Latin America, Canada and South Africa.
The FDA's cGMPs apply to the manufacture of medical device components and finished medical devices. The FDA audits compliance with these regulatory requirements through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct inspections or audits at any time, and we and some of our component suppliers are subject to such inspections.
The QSR applies to the manufacture of medical device components and finished medical devices. The FDA audits compliance with these regulatory requirements through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct inspections or audits at any time, and we and some of our component suppliers are subject to such inspections.
In addition, the costs associated with conducting and closing this recall, including any liabilities we may incur, could have a material adverse effect on our business, financial condition and results of operations.
In addition, the costs associated with conducting and closing this recall or any other product recalls, including any liabilities we may incur, could have a material adverse effect on our business, financial condition and results of operations.
We and some of our component manufacturers are required to comply with regulatory requirements known as the FDA's Quality System Regulation, or QSR, a complex regulatory scheme which covers the procedures and documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping, management review, labeling, packaging, sterilization, storage and shipping of our device products.
In the United States, we and some of our component manufacturers are required to comply with regulatory requirements known as the FDA's QSR, a complex regulatory scheme which covers the procedures and documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping, management review, labeling, packaging, sterilization, storage and shipping of our device products.
The Smiths Medical acquisition has resulted in significant growth in our personnel and operations, adding approximately 6,700 employees to our headcount at the time of acquisition. Our total headcount as of December 31, 2022 is approximately 14,500 employees.
The Smiths Medical acquisition has resulted in significant growth in our personnel and operations, adding approximately 6,700 employees to our headcount at the time of acquisition. Our total headcount as of December 31, 2023 is approximately 14,000 employees.
Sales to customers outside of the U.S. made up approximately 36% of our revenues in 2022 and as our operations and sales located in Europe and other areas outside the U.S. increase, we may face new challenges and uncertainties, although we can give no assurance that such operations and sales will increase.
Sales to customers outside of the U.S. composed approximately 36% of our revenues in 2023 and as our operations and sales located in Europe and other areas outside the U.S. increase, we may face new challenges and uncertainties, although we can give no assurance that such operations and sales will increase.
From time to time we become aware of newly issued patents on medical devices, which we review to evaluate any infringement risk. We are aware of a number of patents for infusion connection systems that have been issued to others.
From time to time we become aware of newly issued patents on medical devices, which we review to evaluate any infringement risk. We are aware of a number of patents that have been issued to others.
We, therefore, believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments that covered the whole company.
We, therefore, believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments that covered the company on a consolidated basis.
Government Regulation - Regulation of Medical Devices in the European Union - Brexit.” If we or our component manufacturers fail to comply with the FDA's Quality System Regulation or Good Manufacturing Practice regulations or other requirements, our manufacturing operations could be interrupted, and our product sales and operating results could suffer.
See “Part 1, Item 1. Government Regulation - Regulation of Medical Devices in the European Union - Brexit.” If we or our comp onent manufacturers fail to comply with the FDA's Quality System Regulation or Good Manufacturing Practice regulations or other requirements, our manufacturing operations could be interrupted, and our product sales and operating results could suffer.
At December 31, 2022, we had $213.5 million of cash, cash equivalents and investment securities on hand, which was significantly less than the approximately $571.9 million of cash, cash equivalents and investment securities we had as of December 31, 2021, primarily as a result of the use of existing cash to partially fund the Smiths Medical acquisition.
At December 31, 2023 and 2022, we had $254.7 million and $213.5 million of cash, cash equivalents and investment securities on hand, respectively, which was significantly less in each case than the approximately $571.9 million of cash, cash equivalents and investment securities we had as of December 31, 2021, primarily as a result of the use of existing cash to partially fund the Smiths Medical acquisition.
We have experienced and may continue to experience these inflationary increases in our manufacturing costs and operating expenses, including higher materials and labor costs, as well as negative impacts on our operating results from the strengthening of the U.S. dollar relative to foreign currencies weakening exchange rates.
Although these costs were less volatile in 2023, we may continue to experience these inflationary increases in our manufacturing costs and operating expenses, including higher materials and labor costs, as well as negative impacts on our operating results from the strengthening of the U.S. dollar relative to foreign currencies weakening exchange rates.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. One such shut down was as a result of COVID-19, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.
If our operations are found to be in violation of any of the healthcare laws or regulations described above or any other healthcare regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, contractual damages, reputational harm, disgorgement and the curtailment or restructuring of our operations.
If our operations are found to be in violation of any of the healthcare laws or regulations described above or any other healthcare regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, contractual damages, reputational harm, disgorgement and the curtailment or restructuring of our operations. 26 Healthcare regulation and reform measures could adversely affect our revenue and financial condition.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our future products under development.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our future products under development or otherwise increase the costs associated with compliance.
If one or more of the institutions or if our other large stockholders should decide to reduce or eliminate their position in our common stock, it could cause a significant decrease in the price of our common stock.
If one or more of the institutions or if our other large stockholders should decide to reduce or eliminate their position in our common stock, it could cause a significant decrease in the price of our common stock. Climate-related events and other events could harm our business .
There is no assurance that we will continue to meet the requirements for distribution of our products in Europe.
There is no assurance that we will continue to meet the requirements for distribution of our products in the EU and the EEA.
The risks associated with our operations outside the U.S. also include: • economic and political uncertainty; • changes in non-U.S. government programs; • multiple non-U.S. regulatory requirements that are subject to change and that could restrict our ability to manufacture and sell our products; • different local medical practices, product preferences and product requirements; • possible failure to comply with trade protection and restriction measures and import or export licensing requirements; • difficulty in establishing, staffing and managing non-U.S. operations; 34 • different labor regulations or work stoppages or strikes; • political instability and actual or anticipated military or political conflicts (such as the conflict in Ukraine); • economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of our customers in foreign countries; • uncertainties regarding judicial systems and procedures; • minimal or diminished protection of intellectual property in some countries; • natural disasters or outbreak of diseases (including COVID-19); • fluctuations in foreign currency exchange rates; • disputes between countries, trade relationships and conflicts ); and • imposition of government controls.
The risks associated with our operations outside the U.S. include, without limitation: • economic and political uncertainty; • changes in non-U.S. government programs; • multiple non-U.S. regulatory requirements that are subject to change and that could restrict our ability to manufacture and sell our products; • different local medical practices, product preferences and product requirements; • possible failure to comply with trade protection and restriction measures and import or export licensing requirements; • difficulty in establishing, staffing and managing non-U.S. operations; • different labor regulations or work stoppages or strikes; • changing geopolitical conditions arising from political instability and any actual or anticipated military or political conflicts (such as the conflict in Ukraine and in the Middle East); • economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of our customers in foreign countries, such as the devaluation of the Argentine Peso; • uncertainties regarding judicial systems and procedures; • minimal or diminished protection of intellectual property in some countries; • natural disasters or outbreak of diseases or pandemics; • fluctuations in foreign currency exchange rates; • changes to international trade agreements and trade relationships and conflicts between countries; and • imposition of government controls, such as economic sanctions and export controls.
Risks Related to our Strategic Transactions The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and significant growth to our business.
Risks Related to our Strategic Transactions The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and an increase in size to our business.
As a result of entering into the Senior Secured Credit Facilities, we incurred additional borrowing costs. Our more leveraged financial position following the Smiths Medical transaction could make us more vulnerable to general economic downturns and industry conditions, and place us at a competitive disadvantage relative to our competitors.
As a result of entering into the Senior Secured Credit Facilities, we incurred additional borrowing costs. At December 31, 2023, our long-term debt outstanding was $1.6 billion. Our more leveraged financial position following the Smiths Medical transaction could make us more vulnerable to general economic downturns and industry conditions, and place us at a competitive disadvantage relative to our competitors.
Such concerns may require us to conduct more operations from the U.S. rather than Mexico, which may negatively impact our operations and result in higher costs and inefficiencies. We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws.
Such concerns may require us to conduct more operations from the U.S. rather than Mexico, which may negatively impact our operations and result in higher costs and inefficiencies. We could be adversely affected by violations of the U.S.
We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction, and we are doing the same with the Smiths Medical integration.
We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction, and we have been and continue to do the same with the Smiths Medical integration.
Our IV Solutions are manufactured at our manufacturing facility in Austin, Texas and by a third party manufacturer, Pfizer, in Rocky Mount, North Carolina or our suppliers’ facilities. We have also added various other manufacturing facilities with the acquisition of Smiths Medical in the U.S., Mexico, Italy and Czech Republic.
Our IV Solutions are manufactured at our manufacturing facility in Austin, Texas and in past years also by a third party manufacturer, Pfizer, in Rocky Mount, North Carolina or our suppliers’ facilities. We also operate various other manufacturing facilities in the U.S., Mexico, Italy and Czech Republic.
Similar laws have passed in Virginia, Connecticut, Utah and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.
Similar laws have passed in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the U.S. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.
In 2022, we continued to experience these supply chain disruptions, as well as an increase in raw material costs and shipping costs, as prices on several commodities, including oil and gas, increased as a result of the conflict in the Ukraine and it's impact on the global economy.
In 2022, we experienced these supply chain disruptions, increased raw material costs and shipping costs, as prices on several commodities, including oil and gas, increased as a result of the conflict in the Ukraine and its impact on the global economy.
Because of the significance of the Smiths Medical business acquisition to us, our failure to successfully integrate the Smiths Medical business with that of our own could have a material adverse impact on our business, financial condition and results of operations. 35 The actual impact of the Smiths Medical acquisition on our financial results may be worse than the assumptions we have used.
Because of the significance of the Smiths Medical business acquisition to us, our failure to successfully integrate the Smiths Medical business with that of our own could have a material adverse impact on our business, financial condition and results of operations.
Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. We and certain of our service providers are from time to time subject to cyberattacks and security incidents.
Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.
Further, the California Privacy Rights Act ("CPRA") recently passed in California. The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
Further, the California Privacy Rights Act ("CPRA") generally went into effect on January 1, 2023, and imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
We believe that our ability to compete depends upon numerous factors including, among other things, continued product innovation, the quality, convenience and reliability of our products, access to distribution channels, patent protection and pricing.
We believe that our ability to compete depends upon numerous factors including, among other things, continued product innovation, the quality, convenience and reliability of our products, including demand for more environmentally friendly products and focus on using materials of concern, access to distribution channels, patent protection and pricing.
Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.
Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow. Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our prices.
Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our prices. If we cannot reduce manufacturing costs of existing and new products to counteract such pricing pressures, our sales may not grow and our profitability may decline.
If we cannot reduce manufacturing costs of existing and new products to counteract such pricing pressures, our sales may not grow and our profitability may decline.
In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. 22 Disruptions at the FDA, foreign regulatory authorities and notified bodies to review and approve or certify new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a government agency's ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government's ability to perform routine functions.
The ability of the FDA, foreign regulatory authorities and notified bodies to review and approve or certify new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a government agency's ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government's ability to perform routine functions.
A decline in the value of the local currency in relation to the U.S. dollar may adversely affect their ability to profitably sell in their market the products they buy from us, and may adversely affect their ability to make payment to us for the products they purchase. Legal recourse for non-payment of indebtedness may be uncertain.
A decline in the value of the local currency in relation to the U.S. dollar has in prior years adversely affected and may in future years adversely affect their ability to profitably sell in their market the products they buy from us, and has in prior years adversely affected and may in future years adversely affect their ability to make payment to us for the products they purchase.
We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general economic trends (including macroeconomic challenges related to the COVID-19 pandemic and the conflict in the Ukraine) and substantial product orders could contribute to the volatility in the price of our common stock.
We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general macroeconomic trends (including as a result of pandemics or other health outbreaks, geopolitical tensions and uncertainties including as a result of the current conflicts in Eastern Europe and the Middle East) and substantial product orders could contribute to the volatility in the price of our common stock.
A successful claim against us in excess of insurance coverage could materially and adversely affect us, and result in substantial liabilities and reputational harm including product recalls or withdrawals from the market, withdrawal of clinical trial participants or clinical studies, the inability to commercialize our existing or new products, distraction of management’s attention from our primary business or decreased demand for our products or, if cleared or approved, products in development. 31 While we may attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products may delay the supply of those products to our customers and may impact our reputation.
A successful claim against us in excess of insurance coverage could materially and adversely affect us, and result in substantial liabilities and reputational harm including product recalls or withdrawals from the market, withdrawal of clinical trial participants or clinical studies, the inability to commercialize our existing or new products, distraction of management’s attention from our primary business or decreased demand for our products or, if cleared or approved, products in development.
If we do not effectively integrate, train and manage our combined employee base and maintain strong customer relationships, our corporate culture could be undermined, the quality of our products and customer service could suffer, and our reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations.
If we do not effectively integrate, train and manage our combined employee base and maintain strong customer relationships, our corporate culture could be undermined, the quality of our products and customer service could suffer, and our reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations. 35 The Smiths Medical acquisition was a significant acquisition for us and the product offerings within Smiths Medical are not product offerings that we previously offered.
Also, crude oil and natural gas prices have been volatile in recent years. Our suppliers have historically passed some of their cost increases on to us, and if such prices are sustained or increase further, our suppliers may pass further cost increases on to us.
Our suppliers have historically passed some of their cost increases on to us, and if such prices are sustained or increase further, our suppliers may pass further cost increases on to us.
Despite the implementation of security measures, our information technology systems, and those of third parties on which we rely, are vulnerable to attack and damage from, among others, computer viruses, malware (e.g. ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization or similar disruptive problems.
Despite the implementation of security measures, our information technology systems, and those of third parties on which we rely, are vulnerable to attack, interruption and damage from, among others, computer viruses, malware (e.g. ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyber-attacks or cyber-intrusions over the Internet, phishing and other social engineering schemes, human error, theft or misuse by persons inside our organization, or persons with access to systems inside our organization, fraud, denial or degradation of service attacks and sophisticated nation-state and nation-state-supported actors or similar disruptive problems.
A severe weather event, other natural or man-made disaster, or any other significant disruption, such as outbreak of disease (including the COVID-19 pandemic), the impact of war or political instability (such as the conflict in the Ukraine), work stoppages, labor shortages and similar interruptions affecting our manufacturing facilities or our suppliers and logistics partners could materially and adversely impact our business, financial condition and results of operations.
A severe weather event, including climate change-related severe weather or disasters, other natural or man-made disaster, or any other significant disruption, such as global epidemics/pandemics, the impact of war or political instability (such as the conflicts in Eastern Europe and the Middle East), work stoppages, labor shortages and similar interruptions affecting our manufacturing facilities or our suppliers and logistics partners could materially and adversely impact our business, financial condition and results of operations.
Prolonged periods of inflation, rising interest rates and the impact of foreign currency exchange rates as a result of the current global macroeconomic and geopolitical conditions have had and could in the future have a material adverse effect on our results of operations.
Heightened inflation, higher interest rates and foreign currency rate fluctuations as a result of global macroeconomic and geopolitical conditions have had and could in the future have a material adverse effect on our operations.
Market and Other External Risks If we are unable to compete successfully with our competitors, we may be unable to maintain market share, in which case our sales may not grow and our profitability may be adversely affected.
Any of the following risks could materially and adversely affect our results of operations or financial condition. Market and Other External Risks If we are unable to compete successfully with our competitors, we may be unable to maintain market share, in which case our sales may not grow and our profitability may be adversely affected.
It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.
It also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. Additional compliance investment and potential business process changes may be required.

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Item 2. Properties

Properties — owned and leased real estate

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PROPERTIES Our material properties used by us in connection with our corporate administrative operations, manufacturing, distribution, research and development and service centers as of December 31, 2022, are as follows: 37 Location Approximate Square Footage Primary Use Owned/Leased San Clemente, California, U.S. 39,000 Corporate Headquarters and R&D Owned San Clemente, California, U.S. 28,108 Corporate Headquarters Leased San Diego, California, U.S. 44,779 Corporate Offices and R&D Leased Lake Forest, Illinois, U.S. 137,498 Corporate Offices Leased Dublin, Ohio, U.S. 13,021 Corporate Offices Leased Houten, Netherlands 7,341 Corporate Offices Leased Montreal, Canada 16,414 Corporate Offices/Device service center Leased Rydalmere, NSW Australia 14,735 Corporate Offices/Device service center Leased Chennai, India 36,879 R&D Leased Plymouth, Minnesota, U.S. 99,977 Corporate Offices Leased Kent, United Kingdom 35,759 Corporate Offices Leased Ontario, Canada 25,020 Corporate Offices Leased Austin, Texas, U.S. 594,602 Manufacturing Owned Ensenada, Baja California, Mexico 265,021 Manufacturing Owned La Aurora, Costa Rica 626,869 Manufacturing Owned Salt Lake City, Utah, U.S. 450,000 Manufacturing/Device Service Center Owned Dublin, Ohio, U.S. 117,212 Manufacturing Owned Gary, Indiana, U.S. 40,316 Manufacturing Owned Southington, Connecticut, U.S. 132,000 Manufacturing Owned Tijuana, Mexico (multiple locations) 243,935 Manufacturing Leased Hranice, Czech Republic 106,735 Manufacturing Leased Latina, Italy 62,400 Manufacturing Leased Keene, New Hampshire, U.S. 141,195 Warehouse/Manufacturing Owned Oakdale, Minnesota, U.S. 93,648 Warehouse/Manufacturing/Device Service Center Leased Round Rock, Texas, U.S. 71,960 Warehouse/Manufacturing Owned Dallas, Texas, U.S. 610,806 Distribution Warehouse Leased King of Prussia, Pennsylvania, U.S. 105,571 Distribution Warehouse Owned Santa Fe Springs, California, U.S. 76,794 Distribution Warehouse Owned Wijchen, Netherlands 149,565 Distribution Warehouse Leased Olive Branch, Mississippi, U.S. 239,863 Distribution Warehouse Leased Sligo, Ireland 26,000 Device service center Leased In addition to the above, we own and lease additional office and building space, research and development, and sales and support offices primarily in North America, Europe, South America, and Asia.
PROPERTIES Our material properties used by us in connection with our corporate administrative operations, manufacturing, distribution, research and development and service centers as of December 31, 2023, are as follows: 39 Location Approximate Square Footage Primary Use Owned/Leased San Clemente, California, U.S. 39,000 Corporate Headquarters and R&D Owned San Clemente, California, U.S. 19,958 Corporate Headquarters Leased San Diego, California, U.S. 44,779 Corporate Offices and R&D Leased Lake Forest, Illinois, U.S. 137,498 Corporate Offices Leased Dublin, Ohio, U.S. 13,021 Corporate Offices Leased Houten, Netherlands 7,341 Corporate Offices Leased Montreal, Canada 31,890 Corporate Offices/Device Service Center Leased Rydalmere, NSW Australia 14,735 Corporate Offices/Device Service Center Leased Chennai, India 36,879 R&D Leased Plymouth, Minnesota, U.S. 182,250 Corporate Offices Leased Kent, United Kingdom 24,172 Corporate Offices Leased Ontario, Canada 25,020 Corporate Offices Leased Grasbrunn, Germany 38,155 Corporate Offices/Device Service Center Leased Austin, Texas, U.S. 594,602 Manufacturing Owned Ensenada, Baja California, Mexico 265,021 Manufacturing Owned La Aurora, Costa Rica 626,869 Manufacturing Owned Salt Lake City, Utah, U.S. 450,000 Manufacturing/Device Service Center Owned Dublin, Ohio, U.S. 117,212 Manufacturing Owned Gary, Indiana, U.S. 40,316 Manufacturing Owned Southington, Connecticut, U.S. 132,000 Manufacturing Owned Tijuana, Mexico (multiple locations) 243,935 Manufacturing Leased Hranice, Czech Republic 129,953 Manufacturing Leased Latina, Italy 62,400 Manufacturing Leased Keene, New Hampshire, U.S. 141,195 Warehouse/Manufacturing Owned Oakdale, Minnesota, U.S. 93,648 Warehouse/Manufacturing/Device Service Center Leased Round Rock, Texas, U.S. 71,960 Warehouse/Manufacturing Owned Dallas, Texas, U.S. 610,806 Distribution Warehouse Leased King of Prussia, Pennsylvania, U.S. 105,571 Distribution Warehouse Owned Santa Fe Springs, California, U.S. 76,794 Distribution Warehouse Owned Wijchen, Netherlands 149,565 Distribution Warehouse Leased Olive Branch, Mississippi, U.S. 239,863 Distribution Warehouse Leased Sligo, Ireland 26,000 Device service center Leased In addition to the above, we own and lease additional office and building space, research and development, and sales and support offices primarily in North America, Europe, South America, and Asia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS Certain legal proceedings in which we are involved are discussed in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K in Note 15. Commitments and Contingencies to the Consolidated Financial Statements, and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS The information required with respect to this Item 3. is discussed in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K in Note 15. Commitments and Contingencies to the Consolidated Financial Statements, and is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Issuer Repurchase of Equity Securities The following is a summary of our stock repurchasing activity during the fourth quarter of 2022: Period Shares purchased Average price paid per share Shares purchased as part of a publicly announced program Approximate dollar value that may yet be purchased under the program (1) 10/01/2022 - 10/31/2022 — $ — — $ 100,000,000 11/01/2022 - 11/30/2022 — $ — — $ 100,000,000 12/01/2022 - 12/31/2022 — $ — — $ 100,000,000 Fourth quarter 2022 total — $ — — $ 100,000,000 ____________________________ (1) Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was authorized by our Board of Directors and publicly announced in August 2019.
Issuer Purchases of Equity Securities The following is a summary of our stock repurchasing activity during the fourth quarter of 2023: Period Shares purchased Average price paid per share Shares purchased as part of a publicly announced program Approximate dollar value that may yet be purchased under the program (1) 10/01/2023 - 10/31/2023 — $ — — $ 100,000,000 11/01/2023 - 11/30/2023 — $ — — $ 100,000,000 12/01/2023 - 12/31/2023 — $ — — $ 100,000,000 Fourth quarter 2023 total — $ — — $ 100,000,000 ____________________________ (1) Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was authorized by our Board of Directors and publicly announced in August 2019.
Any future determination as to payment of dividends or purchase of our shares will depend upon our financial condition, results of operations and such other factors as the Board of Directors deems relevant. Stockholders As of January 31, 2023, we had 45 stockholders of record.
Any future determination as to payment of dividends or purchase of our shares will depend upon our financial condition, results of operations and such other factors as the Board of Directors deems relevant. Stockholders As of January 31, 2024, we had 44 stockholders of record.
Purchases made under our stock purchase program can be discontinued at any time we determine additional purchases are not warranted. 39 COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 31, 2017 TO DECEMBER 31, 2022 OF ICU MEDICAL, INC., NASDAQ AND NASDAQ MEDICAL SUPPLIES INDEX The following graph shows the total stockholder return on our common stock based on the market price of the common stock from December 31, 2017 to December 31, 2022 and the total returns of the NASDAQ U.S.
Purchases made under our stock purchase program can be discontinued at any time we determine additional purchases are not warranted. 41 COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 31, 2018 TO DECEMBER 31, 2023 OF ICU MEDICAL, INC., NASDAQ AND NASDAQ MEDICAL SUPPLIES INDEX The following graph shows the total stockholder return on our common stock based on the market price of the common stock from December 31, 2018 to December 31, 2023 and the total returns of the NASDAQ U.S.
Index and NASDAQ Medical Supplies Index for the same period. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 ICU Medical, Inc. 100.00 106.31 86.63 99.30 109.88 72.91 Nasdaq U.S. Index 100.00 94.56 124.03 150.41 189.36 152.00 Nasdaq Medical Supplies Index 100.00 107.34 141.51 179.59 215.55 141.34 Assumes $100 invested on December 31, 2017 in ICU Medical Inc.’s common stock, the NASDAQ U.S.
Index and NASDAQ Medical Supplies Index for the same period. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 ICU Medical, Inc. 100.00 81.49 93.41 103.36 68.58 43.44 Nasdaq U.S. Index 100.00 131.17 159.07 200.26 160.75 203.23 Nasdaq Medical Supplies Index 100.00 131.83 167.31 200.81 131.67 139.30 Assumes $100 invested on December 31, 2018 in ICU Medical Inc.’s common stock, the NASDAQ U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+50 added−52 removed42 unchanged
The principal repayment obligations and estimated interest payments on the term loans and estimated commitment fee payments on the revolver are estimated in the below table.
The principal repayment obligations and estimated interest payments on the term loans and estimated commitment fee payments on the revolver are estimated in the table below.
Our expenses often do not fluctuate in the same manner as net sales, which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue. Non-GAAP Measures In addition to comparing changes in revenue on a U.S. GAAP basis, we also compare the changes in revenue from one period to another using constant currency.
Our expenses often do not fluctuate in the same manner as net sales, which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue. Non-GAAP Financial Measures In addition to comparing changes in revenue on a U.S. GAAP basis, we also compare the changes in revenue from one period to another using constant currency.
The presentation of revenues on a constant currency basis is a non-GAAP financial 42 measure that excludes the impact of fluctuations in foreign currency exchange rates that occurred between the comparative periods. We provide constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates.
The presentation of revenues on a constant currency basis is a non-GAAP financial measure that excludes the impact of fluctuations in foreign currency exchange rates that occurred between the comparative periods. We provide constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates.
At the date of issuance of this report, our issuer and Term Loan B credit ratings assigned and outlook were as follows: Issuer/Term Loan B Credit Ratings Outlook Moody's Ba3/Ba3 Stable Fitch BB/BBB- Negative Standard & Poor's BB-/BB- Stable The Credit Agreement contains financial covenants that pertain to the Term Loan A and the Revolving Credit Facility.
At the date of issuance of this report, our issuer and Term Loan B credit ratings assigned and outlook were as follows: Issuer/Term Loan B Credit Ratings Outlook Moody's Ba3/Ba3 Stable Fitch BB/BB+ Stable Standard & Poor's BB-/BB- Negative The Credit Agreement contains financial covenants that pertain to the Term Loan A and the Revolving Credit Facility.
The effective tax rate in 2022 differs from the federal statutory rate of 21% principally because of the effect of the mix of U.S. and foreign incomes, state income taxes, section 162(m) excess compensation, foreign-derived intangible income ("FDII"), global intangible low-taxed income ("GILTI") and tax credits.
The effective tax rate in 2022 differs from the federal statutory rate of 21% principally because of the effect of the mix of U.S. and foreign incomes, state income taxes, section 162(m) excess compensation, FDII, global intangible low-taxed income ("GILTI") and tax credits.
New Accounting Pronouncements See Note 1: Basis of Presentation and Summary of Significant Accounting Policies to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements.
New Accounting Pronouncements See Note 1: Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements.
Other critical estimates used to estimate the fair value are derived from royalty rates, customer retention rates and/or estimated useful lives. • Earn-out Liability - The fair value of the earn-out liabilities were valued using a Monte Carlo simulation and a probability-weighted cash flow model, as appropriate (see Note 8: Fair Value Measurements to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for details).
Other critical estimates used to estimate the fair value are derived from royalty rates, customer retention rates and/or estimated useful lives. 55 • Contingent Earn-out Liability - The fair value of the earn-out liabilities were valued using a Monte Carlo simulation and a probability-weighted cash flow model, as appropriate (see Note 8: Fair Value Measurements to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for details).
The effective tax rate in 2021 included a tax benefit of $4.9 million related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.
The effective tax rate in 2021 included a tax 48 benefit of $4.9 million related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.
We base our estimates, assumptions and judgments on historical experience and 52 other factors that we believe are reasonable. We evaluate our estimates, assumptions and judgments on a regular basis and apply our accounting policies on a consistent basis.
We base our estimates, assumptions and judgments on historical experience and other factors that we believe are reasonable. We evaluate our estimates, assumptions and judgments on a regular basis and apply our accounting policies on a consistent basis.
Specifically, we are required to maintain a Senior Secured Leverage Ratio of no more than 4.50 to 1.00 until June 30, 2024, with step-downs to 4.00 to 1.00 thereafter, and an Interest Coverage Ratio of no less than 3.00 to 1.00 (defined and discussed in greater detail in Note 11: Long-Term Debt to our accompanying consolidated financial statements).
Specifically, we are required to maintain a Senior Secured Leverage Ratio of no more than 4.50 to 1.00 until June 30, 2024, with step-downs to 4.00 to 1.00 thereafter, and an Interest Coverage Ratio of no less than 3.00 to 1.00 (defined and discussed in greater detail in Note 11: Long-Term Obligations to our accompanying consolidated financial statements).
This plan has no expiration date. As of December 31, 2022, all of the $100.0 million available for purchase was remaining under the plan. We are limited on share purchases in accordance with the terms and conditions of our Credit Agreement (see Note 11: Long-Term Obligations in our accompanying consolidated financial statements).
This plan has no expiration date. As of December 31, 2023, all of the $100.0 million available for purchase was remaining under the plan. We are limited on share purchases in accordance with the terms and conditions of our Credit Agreement (see Note 11: Long-Term Obligations in our accompanying consolidated financial statements).
The applicable margin rate and commitment fee rate will change from time to time in accordance with a preset pricing grid based on the leverage ratio (see Note 11: Long-Term Debt in our accompanying consolidated financial statements for pricing grids related to the Senior Secured Credit Facilities).
The applicable margin rate and commitment fee rate will change from time to time in accordance with a preset pricing grid based on the leverage ratio (see Note 11: Long-Term Obligations in our accompanying consolidated financial statements for pricing grids related to the Senior Secured Credit Facilities).
The proceeds of future borrowings under the Revolving Credit Facility, which expires in January 2027, may be used as a source of liquidity to support our ongoing working capital requirements and other general corporate purposes. There are no outstanding borrowings under the Revolving Credit Facility as of December 31, 2022.
The proceeds of future borrowings under the Revolving Credit Facility, which expires in January 2027, may be used as a source of liquidity to support our ongoing working capital requirements and other general corporate purposes. There are no outstanding borrowings under the Revolving Credit Facility as of December 31, 2023.
Business Overview and Highlights We develop, manufacture, and sell infusion systems, infusion consumables and high-value critical care products used in hospital, alternate site and home care settings. Our team is focused on providing quality, innovation and value to our clinical customers worldwide.
Business Overview and Highlights We develop, manufacture, and sell innovative medical products used in infusion systems, infusion consumables and high-value critical care products used in hospital, alternate site and home care settings. Our team is focused on providing quality, innovation and value to our clinical customers worldwide.
See Note 2: Acquisitions and Note 11: Long-Term Debt in our accompanying consolidated financial statements for additional information. Contractual Obligations Our principal commitments at December 31, 2022 include both short and long-term future obligations. Operating Leases We have non-cancelable operating lease agreements where we are contractually obligated for certain lease payment amounts.
See Note 2: Acquisitions and Note 11: Long-Term Obligations in our accompanying consolidated financial statements for additional information. Contractual Obligations Our principal commitments at December 31, 2023 include both short and long-term future obligations. Operating Leases We have non-cancelable operating lease agreements where we are contractually obligated for certain lease payment amounts.
The effective tax rate in 2020 differs from the federal statutory rate of 21% principally because of the effect of the mix of U.S. and foreign incomes, state income taxes, GILTI, FDII and tax credits.
The effective tax rate in 2021 differs from the federal statutory rate of 21% principally because of the effect of the mix of U.S. and foreign incomes, state income taxes, GILTI, FDII and tax credits.
Consolidated Results of Operations We present our consolidated statements of operations for each of the three years ended December 31, 2022, 2021 and 2020 in Item 8. Financial Statements and Supplementary Data.
Consolidated Results of Operations We present our consolidated statements of operations for each of the three years ended December 31, 2023, 2022 and 2021 in Item 8. Financial Statements and Supplementary Data.
The following table shows, for each of the three most recent years, the respective percentages of items in our statements of operations in relation to total revenues: 41 Percentage of Revenues 2022 2021 2020 Total revenues 100 % 100 % 100 % Gross profit 31 % 37 % 36 % Selling, general and administrative expenses 27 % 23 % 22 % Research and development expenses 4 % 4 % 3 % Restructuring, strategic transaction and integration expenses 3 % 1 % 2 % Change in fair value of contingent earn-out (1) % — % 1 % Contract settlement — % — % — % Total operating expenses 33 % 28 % 28 % Income from operations (2) % 9 % 8 % Interest expense (3) % — % — % Other income, net — % — % — % (Loss) income before income taxes (5) % 9 % 8 % (Benefit) provision for income taxes (2) % 1 % 1 % Net (loss) income (3) % 8 % 7 % Total revenues were $2.3 billion, $1.3 billion and $1.3 billion for 2022, 2021 and 2020, respectively.
The following table shows, for each of the three most recent years, the respective percentages of items in our statements of operations in relation to total revenues: Percentage of Revenues 2023 2022 2021 Total revenues 100 % 100 % 100 % Gross profit 33 % 31 % 37 % Selling, general and administrative expenses 27 % 27 % 23 % Research and development expenses 4 % 4 % 4 % Restructuring, strategic transaction and integration expenses 2 % 3 % 1 % Change in fair value of contingent earn-out (1) % (1) % — % Contract settlement — % — % — % Total operating expenses 32 % 33 % 28 % Income from operations 1 % (2) % 9 % Interest expense (4) % (3) % — % Other income, net — % — % — % (Loss) income before income taxes (3) % (5) % 9 % (Benefit) provision for income taxes (2) % (2) % 1 % Net (loss) income (1) % (3) % 8 % Total revenues were $2.3 billion, $2.3 billion and $1.3 billion for 2023, 2022 and 2021, respectively.
Liquidity and Capital Resources We regularly evaluate our liquidity and capital resources, including our access to external capital, to ensure we can adequately meet our principal cash requirements, which include working capital requirements, planned capital investments in our business, commitments, acquisition restructuring and integration expenses, investments in quality systems and quality compliance objectives, payment of interest expense, repayment of outstanding borrowings, income tax obligations and acquisition opportunities in accordance with our growth strategy.
Liquidity and Capital Resources We regularly evaluate our liquidity and capital resources, including our access to external capital, to assess our ability to meet our principal cash requirements, which include working capital requirements, planned capital investments in our business, commitments, acquisition restructuring and integration expenses, investments in quality systems and quality compliance objectives, payment of interest expense, repayment of outstanding borrowings, income tax obligations and acquisition opportunities in accordance with our growth strategy.
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results. 54
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results. 56
The outstanding aggregate principal amount of the term loans is $1.7 billion as of December 31, 2022, which includes the Term Loan A that will mature in January 2027 and the Term Loan B that will mature in January 2029.
The outstanding aggregate principal amount of the term loans is $1.6 billion as of December 31, 2023, which includes the Term Loan A that will mature in January 2027 and the Term Loan B that will mature in January 2029.
Of the $26.3 million, the amount recorded as the acquisition date fair value, which is considered financing cash flows, was $17.3 million (see Note 8: Fair Value Measurements). (6) In 2022, our employees surrendered 47,664 shares of our common stock from vested restricted stock awards as consideration for approximately $10.9 million in minimum statutory withholding obligations paid on their behalf.
Of the $26.3 million, the amount recorded as the acquisition date fair value, which is considered financing cash flows, was $17.3 million (see Note 8: Fair Value Measurements). (6) In 2023, our employees surrendered 59,377 shares of our common stock from vested restricted stock awards as consideration for approximately $9.4 million in minimum statutory withholding obligations paid on their behalf.
Income taxes Income taxes were accrued at an estimated annual effective tax rate of 35%, 16% and 11% in 2022, 2021 and 2020, respectively.
Income taxes Income taxes were accrued at an estimated annual effective tax rate of 62%, 35% and 16% in 2023, 2022 and 2021, respectively.
In 2020, our employees surrendered 67,041 shares of our common stock from vested restricted stock awards as consideration for approximately $12.9 million in minimum statutory withholding obligations paid on their behalf. Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was approved by our Board of Directors in August 2019.
In 2021, our employees surrendered 40,350 shares of our common stock from vested restricted stock awards as consideration for approximately $8.3 million in minimum statutory withholding obligations paid on their behalf. Our common stock purchase plan, which authorized the repurchase of up to $100.0 million of our common stock, was approved by our Board of Directors in August 2019.
These charges were primarily related to severance and costs related to office and other facility closures. Strategic Transaction and Integration Expenses In 2022, we incurred $61.7 million in strategic transaction and integration expenses primarily related to our acquisition of Smiths Medical, which included legal expenses, bank fees and employee costs, and a United Kingdom stamp tax.
In 2022, we incurred $61.7 million in strategic transaction and integration expenses primarily related to our acquisition of Smiths Medical, which included legal expenses, bank fees and employee costs, and a United Kingdom stamp tax.
In 2022, interest expense primarily includes the contractual interest incurred on borrowings under the Credit Agreement, the per annum commitment fee charged on the available amount of the revolving credit facility contained in the Credit Agreement and the amortization of debt issuance costs incurred in connection with entering into the Credit Agreement (see Note 11 Long-Term Debt in our accompanying consolidated financial statements for additional information).
In 2023 and 2022, interest expense primarily includes the contractual interest incurred on borrowings under the Credit Agreement, the per annum commitment fee charged on the available amount of the revolving credit facility contained in the Credit Agreement, the amortization of debt issuance costs incurred in connection with entering into the Credit Agreement (see Note 11: Long-Term Obligations in our accompanying consolidated financial statements) offset by the impact of the interest rate swaps (see Note 7: Derivatives and Hedging in our accompanying consolidated financial statements).
Cash Flows from Financing Activities The following table summarizes the changes in our financing cash flows (in thousands): 51 For the Years Ended December 31, Variance 2022 2021 2020 2022 2021 Financing Cash Flows: Proceeds from issuance of long-term debt, net of lender debt issuance costs $ 1,664,362 — — 1,664,362 — (1) Principal payments on long-term debt (22,375) — — (22,375) — (2) Payment of third-party debt issuance costs (2,177) — — (2,177) — (2) Proceeds from short-term debt — — 150,000 — (150,000) (3) Repayment of short-term debt — — (150,000) — 150,000 (3) Proceeds from exercise of stock options 8,785 9,372 13,193 (587) (3,821) (4) Payments on finance leases (680) (607) (357) (73) (250) Payment of contingent earn-out — (17,300) — 17,300 (17,300) (5) Tax withholding payments related to net share settlement of equity awards (10,883) (8,335) (12,876) (2,548) 4,541 (6) Net cash used in financing activities $ 1,637,032 $ (16,870) $ (40) $ 1,653,902 $ (16,830) __________________________ (1) During 2022, we borrowed an aggregate of $1.7 billion under the Senior Secured Credit Facilities contained in the Credit Agreement to partially finance our acquisition of Smiths Medical (see Note 11: Long-Term Debt to our accompanying consolidated financial statements for additional information).
Cash Flows from Financing Activities The following table summarizes the changes in our financing cash flows (in thousands): 52 For the Years Ended December 31, Variance 2023 2022 2021 2023 2022 Financing Cash Flows: Proceeds from issuance of long-term debt, net of lender debt issuance costs $ — 1,664,362 — (1,664,362) 1,664,362 (1) Principal payments on long-term debt (29,688) (22,375) — (7,313) (22,375) (2) Payment of third-party debt issuance costs — (2,177) — 2,177 (2,177) (3) Proceeds from exercise of stock options 4,022 8,785 9,372 (4,763) (587) (4) Payments on finance leases (963) (680) (607) (283) (73) Payment of contingent earn-out — — (17,300) — 17,300 (5) Tax withholding payments related to net share settlement of equity awards (9,350) (10,883) (8,335) 1,533 (2,548) (6) Net cash (used in) provided by financing activities $ (35,979) $ 1,637,032 $ (16,870) $ (1,673,011) $ 1,653,902 __________________________ (1) During 2022, we borrowed an aggregate of $1.7 billion under the Senior Secured Credit Facilities contained in the Credit Agreement to partially finance our acquisition of Smiths Medical (see Note 11: Long-Term Obligations to our accompanying consolidated financial statements for additional information).
While we can provide no assurances, we estimate that our capital expenditures in 2023 will be in the range of $100 million to $120 million.
While we can provide no assurances, we estimate that our capital expenditures in 2024 will be in the range of $90 million to $110 million.
We believe that our existing cash and cash equivalents along with cash flows expected to be generated from future operations, cash received from our uncommitted trade accounts receivable purchase facility (see Note 17: Subsequent Events in our accompanying consolidated financial statements for additional information) and the funds received and accessible under the 48 Senior Secured Credit Facilities will provide us with sufficient liquidity to finance our cash requirements for the next twelve months.
We believe that our existing cash and cash equivalents along with cash flows expected to be generated from future operations, cash received from our uncommitted trade accounts receivable purchase facility and the funds received and 49 accessible under the Senior Secured Credit Facilities will provide us with sufficient liquidity to finance our cash requirements for the next twelve months.
Cash Flows from Investing Activities The following table summarizes the changes in our investing cash flows (in thousands): For the Years Ended December 31, Variance 2022 2021 2020 2022 2021 Investing Cash Flows: Purchases of property, plant and equipment $ (90,311) $ (68,542) $ (92,005) $ (21,769) $ 23,463 (1) Proceeds from sale of assets 989 218 6,176 771 (5,958) (2) Intangible asset additions (9,018) (12,627) (8,385) 3,609 (4,242) (3) Business acquisitions, net of cash acquired (1,844,164) (14,452) — (1,829,712) (14,452) (4) Investments in non-marketable equity securities — (3,250) — 3,250 (3,250) (5) Purchases of investment securities (3,397) (10,034) (32,825) 6,637 22,791 (6) Proceeds from sale of investment securities 36,433 18,000 28,900 18,433 (10,900) (7) Net cash used in investing activities $ (1,909,468) $ (90,687) $ (98,139) $ (1,818,781) $ 7,452 __________________________ (1) Our purchases of property, plant and equipment will vary from period to period based on additional investments needed to support new and existing products and expansion of our manufacturing facilities.
Cash Flows from Investing Activities The following table summarizes the changes in our investing cash flows (in thousands): For the Years Ended December 31, Variance 2023 2022 2021 2023 2022 Investing Cash Flows: Purchases of property, plant and equipment $ (83,893) $ (90,311) $ (68,542) $ 6,418 $ (21,769) (1) Proceeds from sale of assets 1,501 989 218 512 771 Intangible asset additions (9,777) (9,018) (12,627) (759) 3,609 (2) Business acquisitions, net of cash acquired — (1,844,164) (14,452) 1,844,164 (1,829,712) (3) Investments in non-marketable equity securities — — (3,250) — 3,250 (4) Purchases of investment securities — (3,397) (10,034) 3,397 6,637 (5) Proceeds from sale of investment securities 4,222 36,433 18,000 (32,211) 18,433 (6) Net cash used in investing activities $ (87,947) $ (1,909,468) $ (90,687) $ 1,821,521 $ (1,818,781) __________________________ (1) Our purchases of property, plant and equipment will vary from period to period based on additional investments needed to support new and existing products and expansion of our manufacturing facilities.
Smiths Medical gross margins are lower than historical ICU margins for the current year primarily due to spending on quality systems and product-related remediation, the cost recognition of the purchase accounting write-up of inventory and freight costs.
Smiths Medical gross margins were lower than historical ICU margins primarily due to spending on quality systems and product-related remediation, the cost recognition of the purchase accounting write-up of inventory and lower manufacturing volumes.
Gross Margins Gross margins were 30.6%, 37.3% and 36.3% for 2022, 2021 and 2020, respectively. The decrease in gross margin in 2022, as compared to 2021 was primarily driven by the acquisition of Smiths Medical, inflationary cost increases in our supply chain, and lower manufacturing absorption due to supply chain disruptions.
The decrease in gross margin in 2022, as compared to 2021, was primarily driven by the acquisition of Smiths Medical, inflationary cost increases in our supply chain, and lower manufacturing absorption due to supply chain disruptions.
In 2022, proceeds from sale of investment securities includes $19.0 million received from a promissory note related to an acquired investment as part of the Smiths Medical acquisition.
(6) Proceeds from the sale of our investment securities will vary based on the maturity dates of the investments. In 2022, proceeds from sale of investment securities includes $19.0 million received from a promissory note related to an acquired investment as part of the Smiths Medical acquisition.
The following table sets forth, for the periods indicated, total revenue by product line as a percentage of total revenue: Year Ended December 31, Product line 2022 2021 2020 Infusion Consumables 25 % 42 % 37 % Infusion Systems 15 % 27 % 28 % IV Solutions 16 % 27 % 31 % Critical Care 2 % 4 % 4 % Infusion Systems-Smiths Medical 15 % — — Vascular Access-Smiths Medical 14 % — — Vital Care-Smiths Medical 13 % — — 100 % 100 % 100 % We manage our product distribution through a network of owned and leased distribution facilities in combination with independent distributors and third-party fulfillment and logistics providers.
The following table sets forth, for the periods indicated, total revenue by product line as a percentage of total revenue: 43 Year Ended December 31, Product line 2023 2022 2021 Consumables 43 % 43 % 42 % Infusion Systems 28 % 27 % 27 % Vital Care 29 % 30 % 31 % 100 % 100 % 100 % We manage our product distribution through a network of owned and leased distribution facilities in combination with independent distributors and third-party fulfillment and logistics providers.
Restructuring Charges In 2022, we incurred restructuring charges of $9.7 million primarily related to severance costs. In 2021, we adjusted certain facility restructuring liabilities by $2.0 million to reflect actual amounts owed resulting in annual net restructuring credits of $(1.8) million. In 2020, restructuring charges were $7.9 million.
We reversed approximately $1.0 million in accrued restructuring balances related to severance and facility closure costs that will not be utilized. In 2022, we incurred restructuring charges of $9.7 million primarily related to severance costs. In 2021, we adjusted certain facility restructuring liabilities by $2.0 million to reflect actual amounts owed resulting in annual net restructuring credits of $(1.8) million.
In 2021, interest expense primarily includes the per annum commitment fee charged on the unused portion of the revolver under our then five-year revolving credit facility and the amortization of financing costs that were incurred in 2017 in connection with entering into the then existing credit facility.
The interest expense increased in 2023, as compared to 2022, primarily due to increases in the applicable SOFR reference rate. 47 In 2021, interest income, net primarily includes the per annum commitment fee charged on the unused portion of the revolver under our then five-year revolving credit facility and the amortization of financing costs that were incurred in 2017 in connection with entering into the then existing credit facility.
In 2021, our employees surrendered 40,350 shares of our common stock from vested restricted stock awards as consideration for approximately $8.3 million in minimum statutory withholding obligations paid on their behalf.
In 2022, our employees surrendered 47,664 shares of our common stock from vested restricted stock awards as consideration for approximately $10.9 million in minimum statutory withholding obligations paid on their behalf.
We can experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by COVID-19 pandemic surges and its impact on hospital admissions and procedure volumes along with production scheduling and customer inventory levels, and less by seasonality.
We can experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by production scheduling and customer inventory levels, and less by seasonality.
We believe that the estimates, assumptions and judgments involved in the accounting for revenue recognition, accounts receivable and business combinations have the most potential impact on our consolidated financial statements. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results.
We believe that the estimates, assumptions and judgments involved in the accounting for revenue recognition, accounts receivable, and business combinations have the most potential impact on our consolidated financial statements.
Our short-term investment portfolio consists of investment-grade corporate and government bonds and U.S treasury securities and is primarily intended to facilitate capital preservation. 2022 Credit Facilities and Access to Capital We entered into the Credit Agreement with various lenders on January 6, 2022 in connection with the closing of the Smiths Medical acquisition.
Our short-term investment portfolio currently consists of investment-grade corporate bonds and is primarily intended to facilitate capital preservation. 2022 Credit Facilities and Access to Capital As discussed in Note 11: Long-Term Obligations to our accompanying consolidated financial statements, we entered into the Credit Agreement with various lenders on January 6, 2022 in connection with the closing of the Smiths Medical acquisition.
Research and Development ("R&D") Expenses The following table summarizes our total R&D expenses (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2022 2021 2020 2022 over 2021 2021 over 2020 R&D $ 93.0 $ 47.5 $ 42.9 $ 45.5 95.8 % $ 4.6 10.7 % R&D expenses increased in 2022, as compared to 2021, due to the acquisition of Smiths Medical.
Research and Development ("R&D") Expenses The following table summarizes our total R&D expenses (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2023 2022 2021 2023 over 2022 2022 over 2021 R&D $ 85.3 $ 93.0 $ 47.5 $ (7.7) (8.3) % $ 45.5 95.8 % R&D expenses decreased in 2023, as compared to 2022, due to organizational synergies and project reprioritization as a result as a result of the Smiths Medical acquisition.
These events have resulted in global economic challenges, and impacts to us and our business, such as rising inflation, especially with respect to freight costs driven by the higher fuel prices, increased cost of raw materials as well as shortages, and supply chain disruptions which have negatively impacted our gross profit margin during 2022.
These impacts, which negatively impacted our gross profit margin during 2022 and 2023, include rising inflation, especially with respect to freight costs driven by higher fuel prices, increased cost and shortages of raw materials, and supply chain disruptions.
The proceeds are net of $37.8 million in payments of lender debt issuance costs. (2) Payment of $22.4 million of principal payments on the Senior Secured Credit Facilities and $2.2 million in third-party debt issuance costs.
The proceeds are net of $37.8 million in payments of lender debt issuance costs. (2) Relates to scheduled principal payments on the Senior Secured Credit Facilities. (3) Relates to third-party debt issuance costs in connection with entering into the Senior Secured Credit Facilities.
The effective tax rate in 2021 differs from the federal statutory rate of 21% principally because of the effect of the mix of U.S. and foreign incomes, state income taxes, global intangible low-taxed income (“GILTI”),FDII and tax credits.
The effective tax rate in 2023 differs from the federal statutory rate of 21% principally because of the effect of the mix of U.S. and foreign income, state income taxes, section 162(m) excess compensation, foreign-derived intangible income (“FDII”), and tax credits.
The rising interest rates and foreign currency impact due to the strengthening of the U.S. dollar have also impacted our results of operations during 2022. While we continually monitor the ongoing and evolving impact of the above events on our operations the overall impact remains uncertain and may not be fully reflected until future periods.
While we continually monitor the ongoing and evolving impact of the above events on our operations the overall impact remains uncertain and may not be fully reflected in our results of operations until future periods.
If cash is not needed for known future transactions our investment strategy takes advantage of the long-term securities with higher yields. Typically, our longer term securities have maturities up to three years. (7) Proceeds from the sale of our investment securities will vary based on the maturity dates of the investments.
Our investment policy allows for the purchase of securities with final maturities in excess of one year. If cash is not needed for known future transactions our investment strategy takes advantage of the long-term securities with higher yields. Typically, our longer term securities have maturities up to three years.
Selling, General and Administrative ("SG&A") Expenses The following table summarizes our SG&A expenses (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2022 2021 2020 2022 over 2021 2021 over 2020 SG&A $ 608.3 $ 302.6 $ 284.0 $ 305.7 101.0 % $ 18.6 6.5 % Consolidated SG&A expenses increased in 2022, as compared to 2021.
Selling, General and Administrative ("SG&A") Expenses The following table summarizes our SG&A expenses (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2023 2022 2021 2023 over 2022 2022 over 2021 SG&A $ 606.7 $ 608.3 $ 302.6 $ (1.6) (0.3) % $ 305.7 101.0 % Consolidated SG&A expenses decreased slightly in 2023, as compared to 2022, primarily due to decreases of $7.5 million in depreciation and amortization, $4.8 million in dealer fees, $3.9 million of office expenses, and $2.6 million of IT expenses.
The increase in other assets was due to the purchase of spare parts. The net changes in income taxes was a result of the timing of payments. The increase in prepaid expenses and other current assets was primarily due to an increase in deferred costs. The decrease in accounts receivable is primarily due to collection efforts.
The increase in other assets was primarily 51 due to the purchase of spare parts. The net increase in prepaid expenses and other current assets was primarily due to an increase in deferred costs.
We also warrant products against defects and have a policy permitting the return of defective products, for which we accrue and expense at the time of sale using information available and our historical experience. Our revenues are recorded at the net sales price, which includes an estimate for variable consideration related to rebates, chargebacks and product returns.
We also warrant products against defects and have a policy permitting the return of defective products, for which we accrue and expense at the time of sale using information available and our historical experience. Accounts receivable Accounts receivable are stated at net realizable value.
Rebates are offered on both a fixed and tiered/variable basis. In both cases, we use information available at the time and our historical experience with each customer to estimate the most likely rebate amount. We also provide chargebacks to distributors that sell to end customers at prices determined under a contract between us and the end customer.
Rebates are offered on both a fixed and tiered/variable basis. In both cases, 54 we use information available at the time, including current contractual requirements, our historical experience with each customer and forecasted customer purchasing patterns, to estimate the most likely rebate amount.
Business Combinations The application of the acquisition method of accounting for business combinations requires the use of significant estimates, assumptions and judgments in the determination of the estimated fair value of assets acquired and liabilities assumed in order to properly allocate the purchase price at the acquisition date. 53 Although we believe the estimates, assumptions and judgments we have made are reasonable, they are based in part on historical experience, industry data, information obtained from the management of the acquired companies and assistance from independent third-party appraisal/valuation firms, and are inherently uncertain.
Although we believe the estimates, assumptions and judgments we have made are reasonable, they are based in part on historical experience, industry data, information obtained from the management of the acquired companies and assistance from independent third-party appraisal/valuation firms, and are inherently uncertain.
The inflationary cost increases during 2022 caused by COVID-19 and the war in the Ukraine notably impacted our freight rates as well as, labor and materials costs. Partially offsetting the decrease to gross margin in the current period was the impact from increased sales of higher margin consumables products.
The inflationary cost increases during 2022 caused by COVID-19 and the war in the Ukraine notably impacted our freight rates, as well as, labor and materials costs.
The effective tax rate in 2020 included a tax benefit of $5.3 million related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period.
The effective tax rate for 2023 also included a tax benefit of $0.8 million related to the excess tax benefits recognized on stock option exercises and the vesting of restricted stock units during the period. Additionally, the effective tax rate for 2023 included a tax benefit of $6.5 million related to U.S. federal return-to-provision adjustments net of related tax reserves.
We expect to fund these obligations with our cash and cash equivalents and cash generated from our operations. Historical Cash Flows Cash Flows from Operating Activities Our cash used in operations was $(62.1) million in 2022. Net income plus adjustments for non-cash net expenses contributed $241.6 million to cash provided by operations.
We expect to fund these obligations with our cash and cash equivalents and cash generated from our operations. Historical Cash Flows Cash Flows from Operating Activities Our cash provided by operations was $166.2 million in 2023.
Our software license renewals are considered to be transferred to a customer at a point in time at the start of each renewal period, therefore revenue is recognized at that time. Arrangements with Multiple Deliverables In certain circumstances, we enter into arrangements in which we provide multiple deliverables to our customers.
Our software license renewals are considered to be transferred to a customer at a point in time at the start of each renewal period, therefore revenue is recognized at that time. Payment is typically due in full within 30 days of delivery or the start of the contract term.
During 2022, our cash and cash equivalents and short-term investment securities decreased by $354.2 million from $567.2 million at December 31, 2021 to $213.0 million at December 31, 2022.
During 2023, our cash and cash equivalents and short-term investment securities increased by $41.7 million from $213.0 million at December 31, 2022 to $254.7 million at December 31, 2023. This increase was primarily due to cash generated from operations.
(2) In 2020, we sold our Farmers Branch, Texas, U.S. distribution facility for $6.0 million. (3) In 2021, we recorded a $6.6 million intangible asset related to a three-year non-compete agreement with one of our international distributors, of which $2.6 million was non-cash offset with a contingent earn-out.
(2) In 2021, we recorded a $6.6 million intangible asset related to a three-year non-compete agreement with one of our international distributors, of which $2.6 million was non-cash offset with a contingent earn-out. (3) Our business acquisitions will vary from period to period based upon our current growth strategy and our ability to execute on desirable target companies.
The changes in operating assets and liabilities included a $46.4 million decrease in accounts payable, a $29.4 million decrease in accrued liabilities, $18.0 million in net changes in income taxes, including excess tax benefits and deferred income taxes, a $16.1 million increase in other assets, and a $4.3 million increase in prepaid expenses and other current assets.
Offsetting these amounts was a $6.1 million increase in inventories, a $68.3 million decrease in accounts payable, a $24.7 million increase in other assets, a $14.5 million decrease in accrued liabilities, and $82.4 million in net changes in income taxes, including excess tax benefits and deferred income taxes .
(4) Our business acquisitions will vary from period to period based upon our current growth strategy and our ability to execute on desirable target companies. In 2022, we acquired Smiths Medical. The cash consideration for the transaction was $1.9 billion, which was financed with existing cash balances and borrowings under the Credit Agreement. Acquired cash was $78.8 million.
In 2022, we acquired Smiths Medical. The cash consideration for the transaction was $1.9 billion, which was financed with existing cash balances and borrowings under the Credit Agreement. Acquired cash was $78.8 million. In 2021, we acquired a small foreign infusion systems supplier for approximately $15.4 million.
In January 2022, we entered into senior secured credit facilities that refinanced our Prior Credit Facility in full, see "Liquidity and Capital Resources" in the remainder of this item for additional information and the estimated impact to future interest expense.
Interest (expense) income, net The following table presents interest expense, net (in thousands): Year ended December 31, 2023 2022 2021 Interest expense $ (102,727) $ (70,805) $ (858) Interest income $ 7,508 $ 4,430 $ 2,840 Interest (expense) income, net $ (95,219) $ (66,375) $ 1,982 In January 2022, to partially fund our acquisition of Smiths Medical, we entered into senior secured credit facilities that refinanced our Prior Credit Facility in full, see "Liquidity and Capital Resources" in the remainder of this item for additional information and the estimated impact to future interest expense.
The remainder of the increase in SG&A was attributable mostly due to higher selling expense due to revenue growth and the impact of inflation. Consolidated SG&A expenses increased in 2021, as compared to 2020. Compensation expense increased $7.9 million, dealer fees increased $5.7 million, stock compensation increased $2.9 million, legal expenses increased $2.3 million and computer expenses increased $1.5 million.
The remainder of the increase in SG&A was attributable mostly due to higher selling expense due to revenue growth and the impact of inflation.
The increase in accounts payable was due to the timing of payments. Our cash provided by operations was $267.5 million in 2021. Net income plus adjustments for non-cash net expenses contributed $252.5 million to cash provided by operations. Net cash used in operations as a result of changes in operating assets and liabilities was $15.0 million.
The increase in accounts payable was due to the timing of payments. Our cash provided by operations was $267.5 million in 2021.
Infusion Systems The following table summarizes our total Infusion Systems revenue (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2022 2021 2020 2022 over 2021 2021 over 2020 Infusion Systems $ 351.1 $ 352.3 $ 359.7 $ (1.2) (0.3)% $ (7.4) (2.1)% Infusion Systems revenue decreased in 2022, as compared to 2021, due to the impact of foreign currency.
Infusion Systems The following table summarizes our total Infusion Systems revenue (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2023 2022 2021 2023 over 2022 2022 over 2021 Infusion Systems (GAAP) $ 629.0 $ 617.4 $ 352.3 $ 11.6 1.9% $ 265.1 75.2% Impact of foreign exchange rate changes 10.5 Infusion Systems on a constant currency basis (non-GAAP) $ 639.5 $ Change in constant currency $ 22.1 % Change in constant currency 3.6 % Infusion Systems revenue increased in 2023, as compared to 2022, primarily due to higher sales of our syringe pumps and large volume pump ("LVP") dedicated sets.
The overall impact to our results of operations will depend on factors such as the duration and extent of the impact from the COVID-19 pandemic, the conflict in the Ukraine and the related global economic challenges, none of which can be fully predicted at this time. See “Part I. Item 1A. Risk Factors” for a discussion of risks and uncertainties.
The overall impact to our results of operations will depend on a number of factors, many of which are out of our control, such as the duration and extent of the current global economic challenges, including any impact from conflicts in Eastern Europe and the Middle East more generally, and the resurgence of the pandemic or the emergence of a new public health crisis, none of which can be fully predicted at this time.
R&D expenses generally include compensation and benefit expenses, consulting fees, production supplies, samples, travel costs, utilities and other miscellaneous administrative costs incurred on our ongoing R&D projects. Restructuring, Strategic Transaction and Integration Expenses Restructuring, strategic transaction and integration expenses were $71.4 million, $18.0 million and $28.4 million in 2022, 2021 and 2020, respectively.
R&D expenses are primarily related to headcount and employment expenses in support of ongoing R&D projects. R&D expenses generally include compensation and benefit expenses, consulting fees, production supplies, samples, travel costs, utilities and other miscellaneous administrative costs incurred in our ongoing R&D projects. R&D expenses increased in 2022, as compared to 2021, due to the acquisition of Smiths Medical.
(6) Our purchases of investment securities will vary from period to period based on current cash needs, planning for known future transactions and changes in our investment strategy. Our investment policy allows for the purchase of securities with final maturities in excess of one year.
(4) In 2021, we paid $3.3 million to acquire approximately a 20% non-marketable equity interest in a non-public company. (5) Our purchases of investment securities will vary from period to period based on current cash needs, planning for known future transactions and changes in our investment strategy.
This decrease was primarily related to the fair value revaluation of our Smiths Medical contingent earn-out liability. At the end of the second quarter of 2021, the measurement period related to the Pursuit earn-out liability ended and in October 2021 the $26.3 million earn-out was finalized and paid to Pursuit's former shareholders.
Change in fair value of contingent earn-out In 2023, the fair value revaluation of our contingent earn-outs resulted in a decrease in value of $16.2 million. This decrease was primarily related to the fair value revaluation of our Smiths Medical contingent earn-out liability.
In 2020, we incurred $20.5 million in strategic transaction and integration expenses primarily related to the integration of HIS, which included the migration of IT systems at our Austin facility. Change in fair value of contingent earn-out In 2022, the fair value revaluation of our contingent earn-outs resulted in a decrease in value of $32.1 million.
The change in fair value of the Smiths Medical contingent earn-out was driven by a decrease in our stock price. In 2022, the fair value revaluation of our contingent earn-outs resulted in a decrease in value of $32.1 million. This decrease was primarily related to the fair value revaluation of our Smiths Medical contingent earn-out liability.
Other Future Capital Investments In connection with the January 2022 acquisition of Smiths Medical we estimate the investment needed in 2023 for restructuring and integration expenses along with spending to support quality systems and quality compliance objectives to be in the range of $75 million to $125 million, which includes acquired accrued field action liabilities.
We expect to fund these obligations with our existing cash and cash equivalents and cash generated from our future operations. 50 (in millions) 2024 2025 2026 2027 2028 Thereafter Term Loan A Principal Payments $ 42.5 $ 42.5 $ 63.8 $ 664.1 $ — $ — Term Loan A Interest Payments 56.1 42.2 37.2 — — — Term Loan B Principal Payments 8.5 8.5 8.5 8.5 8.5 792.6 Term Loan B Interest Payments 62.8 50.2 47.2 47.9 47.6 — Revolver Commitment Fee 1.5 1.5 1.5 — — — $ 171.4 $ 144.9 $ 158.2 $ 720.5 $ 56.1 $ 792.6 Other Future Capital Investments In connection with the January 2022 acquisition of Smiths Medical, we estimate the investment needed in 2024 for restructuring and integration expenses along with spending to support quality systems and quality compliance objectives to be in the range of $90 million to $110 million, which includes acquired accrued field action liabilities.
There were no changes in the fair value of our earn-outs during 2021. In 2020, the fair value revaluation of our Pursuit contingent earn-out liability resulted in an increase in value of $9.0 million. Contract Settlement In 2022, we did not incur any contract settlement charges. In 2021, we recorded $0.1 million in contract settlement expense.
Contract Settlement In 2023 and 2022, we did not incur any contract settlement charges. In 2021, we recorded $0.1 million in contract settlement expense.
Net cash used in operations as a result of changes in operating assets and liabilities was $303.7 million.
The net changes in income taxes was a result of recording the current deferred provision and the timing of payments. Our cash used in operations was $(62.1) million in 2022.
Infusion Consumables The following table summarizes our total Infusion Consumables revenue (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2022 2021 2020 2022 over 2021 2021 over 2020 Infusion Consumables $ 566.6 $ 555.2 $ 473.7 $ 11.4 2.1 % $ 81.5 17.2 % Infusion Consumables revenue increased in 2022, as compared to 2021, due to increased customer demand in our global core infusion, global oncology and renal products.
Consumables The following table summarizes our total Consumables revenue (in millions, except percentages): Year Ended December 31, $ change % change $ change % change 2023 2022 2021 2023 over 2022 2022 over 2021 Consumables revenue (GAAP) $ 969.1 $ 975.0 $ 555.2 $ (5.9) (0.6) % $ 419.8 75.6 % Impact of foreign exchange rate changes 4.0 Consumables revenue on a constant currency basis (non-GAAP) $ 973.1 $ Change in constant currency $ (1.9) % Change in constant currency (0.2) % 44 Consumables revenue decreased in 2023, as compared to 2022, primarily due to a decrease in our vascular access revenues as a result of lost customers and backorder recovery in the prior year.
The vast majority of our sales of Infusion Consumables, Infusion Systems, IV Solutions, Critical Care, Infusion Systems-Smiths Medical, Vascular Access-Smiths Medical and Vital Care-Smiths Medical products are sold on a standalone basis and revenue is recognized upon the transfer of control which we deem to be at point of shipment.
Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. 53 Revenue recognition We recognize revenues when we transfer control of promised goods to our customers, which for the majority of our sales of products sold on a standalone basis to our distributors and end customers for direct sales, is deemed to be at point of shipment.
COVID-19 Pandemic and other Global Geopolitical Events Our business operations have been, and we expect will continue to be, impacted by the novel coronavirus and its variants ("COVID-19"), which has caused lower hospital admissions and medical procedure volumes and by the continuing conflict between Russia and Ukraine.
Supply Constraints, Global Geopolitical Events We have experienced significant impacts to our business as a result of global economic challenges, resulting from, among other events, the COVID-19 pandemic and the continuing conflict between Russia and Ukraine.
Removed
Our product portfolio includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and nondedicated IV sets and needlefree connectors designed to help meet clinical, safety and workflow goals.
Added
Our product portfolio includes ambulatory, syringe, and large volume IV pumps and safety software; dedicated and non-dedicated IV sets, needlefree IV connectors, peripheral IV 42 catheters, and sterile IV solutions; closed system transfer devices and pharmacy compounding systems; as well as a range of respiratory, anesthesia, patient monitoring, and temperature management products.
Removed
In addition, we manufacture automated pharmacy IV compounding systems with workflow technology, closed system 40 transfer devices for preparing and administering hazardous IV drugs and cardiac monitoring systems for critically ill patients.
Added
As part of the integration of our acquisition of Smiths Medical, we have renamed our business units and reorganized the products thereunder and, as of January 1, 2023, our business unit structure is composed of Consumables, Infusion Systems and Vital Care. All prior periods herein have been retrospectively conformed to the current presentation.
Removed
With the recent acquisition of Smiths Medical, our product portfolio expanded to include, among other products, syringe and ambulatory pumps, peripheral IV catheters, fluid warming and respiratory devices and silicone and PVC tracheotomy tubes.
Added
We expect the pressure on the supply chain to continue and freight costs to remain subject to volatility in the market for the foreseeable future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We use foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated revenues and expenses (principally Mexican Pesos, Euros, Czech Koruna, Japanese Yen, U.S. Dollar, Canadian Dollar, Australian Dollar and Chinese Renminbi) that differ from the functional currency of the operating unit.
We use foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated revenues and expenses (principally Mexican Pesos, Euros, Japanese Yen, U.S. Dollar, Chinese Renminbi, Canadian Dollar, and Australian Dollar) that differ from the functional currency of the operating unit.
The term loan B swap has an initial notional amount of $750.0 million, reducing to $46.9 million evenly on a quarterly basis excluding its final maturity on March 30, 2026 and we will pay a fixed rate of 1.17% and will receive the greater of 3-month USD SOFR or 0.35%.
The term loan B swap has an initial notional amount of $750.0 million, reducing to $46.9 million evenly on a quarterly basis through its final maturity on March 30, 2026 and we pay a fixed rate of 1.17% and receive the greater of 3-month USD SOFR or 0.35%.
The term loan A swap has an initial notional amount of $300.0 million, reducing to $150.0 million evenly on a quarterly basis excluding its final maturity on March 30, 2027 and we will pay a fixed rate of 1.32% and will receive the greater of 3-month USD SOFR or (0.15)%.
The term loan A swap has an initial notional amount of $300.0 million, reducing to $150.0 million evenly on a quarterly basis through its final maturity on March 30, 2027 and we pay a fixed rate of 1.32% and receive the greater of 3-month USD SOFR or (0.15)%.
The sensitivity analysis recalculates the fair value of the exchange contracts outstanding at December 31, 2022 using the actual forward rates at December 31, 2022, which are then adjusted to be 10% weaker for each respective currency. 55
The sensitivity analysis recalculates the fair value of the exchange contracts outstanding at December 31, 2023 using the actual forward rates at December 31, 2023, which are then adjusted to be 10% weaker for each respective currency. 57
We are exposed to changes in interest rates on all of these variable-rate debt instruments. The term loan A facility currently bears interest based on Adjusted Term SOFR plus an applicable margin currently 2.00% per year.
We are exposed to changes in interest rates on all of these variable-rate debt instruments. The term loan A facility currently bears interest based on Adjusted Term SOFR plus an applicable margin of 2.00% per year. The term loan B facility currently bears interest based on Adjusted Term SOFR subject to a 0.50% floor plus an applicable margin of 2.5%.
At December 31, 2022, the effect of a hypothetical 10% weakening in the actual foreign exchange rates used for the applicable currencies would result in an estimated decrease in the fair value of these outstanding derivatives contracts by approximately $2.5 million.
At December 31, 2023, the effect of a hypothetical 10% weakening in the actual foreign exchange rates used for the applicable currencies would result in an estimated decrease in the fair value of these outstanding derivatives contracts by approximately $4.6 million.
Our hedging policy attempts to manage these risks to an acceptable level. We manage our foreign currency exposures on a consolidated basis to take advantage of net exposures and natural offsets, which are then further reduced by the gains and losses of our hedging instruments.
We manage our foreign currency exposures on a consolidated basis to take advantage of net exposures and natural offsets, which are then further reduced by the gains and losses of our hedging instruments.
If the SOFR rate increases or decreases 1% from December 31, 2022, the additional annual interest expense or savings related to the term loans would be approximately $16.8 million.
We used a sensitivity analysis to measure our interest rate risk exposure. If the SOFR rate increases or decreases 1% from December 31, 2023, the additional annual interest expense or savings related to the term loans would be approximately $16.5 million.
Our international revenues and expenses and working capital positions denominated in these foreign currencies expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. As the receiver of foreign currencies we are adversely affected by the strengthening of the U.S. dollar and other currencies relative to the operating unit functional currency.
Foreign Exchange Risk We transact business globally in multiple currencies, some of which are considered volatile. Our international revenues and expenses and working capital positions denominated in these foreign currencies expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar.
(see Note 7: Derivatives and Hedging Activities to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K). Foreign Exchange Risk We transact business globally in multiple currencies, some of which are considered volatile.
(see Note 7: Derivatives and Hedging Activities to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K). Accounts Receivable Purchase Program Additionally, our accounts receivable purchase program with Bank of the West, which was subsequently acquired by BMO in February 2023, bears discount rates tied to SOFR.
Removed
The term loan B facility currently bears interest based on Adjusted Term SOFR subject to a 0.50% floor plus an initial applicable margin of 2.5%. We used a sensitivity analyses to measure our interest rate risk exposure.
Added
In June 2023, we entered into an additional swap with a notional amount of $300 million with a maturity date of June 30, 2028 and we pay a fixed rate of 3.8765% starting on June 30, 2023 and receive 3-month USD SOFR.
Added
These variable discount rates would affect the amount of factoring costs we incur, and the amount of cash we receive upon the sales of accounts receivable under this program.
Added
A 1% change in SOFR rates on the accounts receivable sales would not have a material impact on our results of operations, (see Note 17: Accounts Receivable Purchase Program to the Consolidated Financial Statements in Part II, Item 8. Of this Annual Report on Form 10-K).
Added
As the receiver of foreign currencies we are adversely affected by the strengthening of the U.S. dollar and other currencies relative to the operating unit functional currency. Our hedging policy attempts to manage these risks to an acceptable level.

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