DocumentMERIT MEDICAL SYSTEMS INC0000856982Large Accelerated Filer2018Q3falseFALSEFALSE2018-09-30--12-312,0111,76993,68072,42046,08838,1275,0005,000——100,000100,00054,80250,24854,80250,24846837143—3.252.632.771.771.8334.0634.3233.8134.071.23.501.2530two years2.19.9159.915——00008569822018-01-012018-09-30xbrli:shares00008569822018-11-05iso4217:USD00008569822018-09-3000008569822017-12-310000856982us-gaap:DevelopedTechnologyRightsMember2018-09-300000856982us-gaap:DevelopedTechnologyRightsMember2017-12-310000856982us-gaap:OtherIntangibleAssetsMember2018-09-300000856982us-gaap:OtherIntangibleAssetsMember2017-12-31iso4217:USDxbrli:shares00008569822018-07-012018-09-3000008569822017-07-012017-09-3000008569822017-01-012017-09-3000008569822016-12-3100008569822017-09-300000856982us-gaap:CostOfSalesMember2018-07-012018-09-300000856982us-gaap:CostOfSalesMember2017-07-012017-09-300000856982us-gaap:CostOfSalesMember2018-01-012018-09-300000856982us-gaap:CostOfSalesMember2017-01-012017-09-300000856982us-gaap:ResearchAndDevelopmentExpenseMember2018-07-012018-09-300000856982us-gaap:ResearchAndDevelopmentExpenseMember2017-07-012017-09-300000856982us-gaap:ResearchAndDevelopmentExpenseMember2018-01-012018-09-300000856982us-gaap:ResearchAndDevelopmentExpenseMember2017-01-012017-09-300000856982us-gaap:SellingGeneralAndAdministrativeExpensesMember2018-07-012018-09-300000856982us-gaap:SellingGeneralAndAdministrativeExpensesMember2017-07-012017-09-300000856982us-gaap:SellingGeneralAndAdministrativeExpensesMember2018-01-012018-09-300000856982us-gaap:SellingGeneralAndAdministrativeExpensesMember2017-01-012017-09-30xbrli:pure0000856982srt:MinimumMember2018-01-012018-09-300000856982srt:MaximumMember2018-01-012018-09-300000856982srt:MinimumMember2017-01-012017-09-300000856982srt:MaximumMember2017-01-012017-09-300000856982mmsi:CagentVacsularLLCMember2018-07-310000856982mmsi:CagentVacsularLLCMember2018-07-012018-07-310000856982mmsi:DirectACCESSMedicalLLCMember2018-05-232018-05-230000856982mmsi:DirectACCESSMedicalLLCMember2018-01-012018-09-300000856982mmsi:DirectACCESSMedicalLLCMember2018-05-230000856982us-gaap:DevelopedTechnologyRightsMembermmsi:DirectACCESSMedicalLLCMember2018-05-230000856982us-gaap:CustomerListsMembermmsi:DirectACCESSMedicalLLCMember2018-05-230000856982us-gaap:TrademarksMembermmsi:DirectACCESSMedicalLLCMember2018-05-230000856982us-gaap:DevelopedTechnologyRightsMembermmsi:DirectACCESSMedicalLLCMember2018-05-232018-05-230000856982us-gaap:TrademarksMembermmsi:DirectACCESSMedicalLLCMember2018-05-232018-05-230000856982us-gaap:CustomerListsMembermmsi:DirectACCESSMedicalLLCMember2018-05-232018-05-230000856982mmsi:QXMedicalLLCMember2018-05-182018-05-180000856982us-gaap:DistributionRightsMembermmsi:QXMedicalLLCMember2018-05-182018-05-180000856982mmsi:NinePointMedicalInc.Member2018-04-062018-04-060000856982mmsi:NinePointMedicalInc.Member2018-07-012018-09-300000856982mmsi:NinePointMedicalInc.Member2018-01-012018-09-300000856982mmsi:BectonDickinsonandCompanyMember2018-02-142018-02-140000856982mmsi:BectonDickinsonandCompanyMember2018-07-012018-09-300000856982mmsi:BectonDickinsonandCompanyMember2018-01-012018-09-300000856982mmsi:BectonDickinsonAndCompanyMember2018-01-012018-09-300000856982mmsi:BectonDickinsonandCompanyMember2018-09-300000856982us-gaap:DevelopedTechnologyRightsMembermmsi:BectonDickinsonandCompanyMember2018-09-300000856982us-gaap:CustomerListsMembermmsi:BectonDickinsonandCompanyMember2018-09-300000856982us-gaap:TrademarksMembermmsi:BectonDickinsonandCompanyMember2018-09-300000856982us-gaap:DevelopedTechnologyRightsMembermmsi:BectonDickinsonandCompanyMember2018-01-012018-09-300000856982us-gaap:TrademarksMembermmsi:BectonDickinsonandCompanyMember2018-01-012018-09-300000856982us-gaap:CustomerListsMembermmsi:BectonDickinsonandCompanyMember2018-01-012018-09-300000856982mmsi:ITLHealthcarePtyLtdMember2017-10-022017-10-020000856982mmsi:ITLHealthcarePtyLtdMember2018-01-012018-09-300000856982mmsi:ITLHealthcarePtyLtdMember2017-10-020000856982mmsi:ITLHealthcarePtyLtdMemberus-gaap:CustomerListsMember2017-10-020000856982mmsi:ITLHealthcarePtyLtdMemberus-gaap:CustomerListsMember2017-10-022017-10-020000856982mmsi:ITLHealthcarePtyLtdMember2018-07-012018-09-300000856982mmsi:LauraneMedicalS.A.S.Member2017-08-042017-08-040000856982mmsi:LauraneMedicalS.A.S.Member2017-08-040000856982mmsi:LauraneMedicalSASMember2018-01-012018-09-300000856982mmsi:LauraneMedicalS.A.S.Memberus-gaap:DevelopedTechnologyRightsMember2017-08-040000856982mmsi:LauraneMedicalS.A.S.Memberus-gaap:CustomerListsMember2017-08-040000856982mmsi:LauraneMedicalS.A.S.Memberus-gaap:DevelopedTechnologyRightsMember2017-08-042017-08-040000856982mmsi:LauraneMedicalS.A.S.Memberus-gaap:CustomerListsMember2017-08-042017-08-040000856982mmsi:OsseonLLCMember2017-07-032017-07-030000856982mmsi:OsseonLLCMember2018-07-012018-09-300000856982mmsi:OsseonLLCMember2018-01-012018-09-300000856982mmsi:OsseonLLCMember2017-07-030000856982mmsi:OsseonLLCMemberus-gaap:DevelopedTechnologyRightsMember2017-07-030000856982mmsi:OsseonLLCMemberus-gaap:CustomerListsMember2017-07-030000856982mmsi:OsseonLLCMemberus-gaap:DevelopedTechnologyRightsMember2017-07-032017-07-030000856982mmsi:OsseonLLCMemberus-gaap:CustomerListsMember2017-07-032017-07-030000856982mmsi:VascularAccessTechnologiesInc.Member2017-05-012017-05-010000856982mmsi:VascularAccessTechnologiesInc.Member2017-05-010000856982mmsi:VascularAccessTechnologiesIncMember2018-01-012018-09-300000856982mmsi:VascularAccessTechnologiesInc.Memberus-gaap:DevelopedTechnologyRightsMember2017-05-010000856982mmsi:VascularAccessTechnologiesInc.Memberus-gaap:InProcessResearchAndDevelopmentMember2017-05-010000856982mmsi:VascularAccessTechnologiesInc.Memberus-gaap:DevelopedTechnologyRightsMember2017-05-012017-05-010000856982mmsi:ArgonMedicalDevicesInc.Member2017-01-312017-01-310000856982mmsi:ArgonMedicalDevicesInc.Membermmsi:CardiovascularSegmentMember2017-01-012017-12-310000856982mmsi:ArgonMedicalDevicesInc.Member2018-07-012018-09-300000856982mmsi:ArgonMedicalDevicesInc.Member2018-01-012018-09-300000856982mmsi:ArgonMedicalDevicesIncMember2018-01-012018-09-300000856982mmsi:ArgonMedicalDevicesInc.Member2017-01-310000856982mmsi:ArgonMedicalDevicesInc.Memberus-gaap:DevelopedTechnologyRightsMember2017-01-310000856982mmsi:ArgonMedicalDevicesInc.Memberus-gaap:CustomerListsMember2017-01-310000856982us-gaap:TrademarksMembermmsi:ArgonMedicalDevicesInc.Member2017-01-310000856982mmsi:ArgonMedicalDevicesInc.Memberus-gaap:DevelopedTechnologyRightsMember2017-01-312017-01-310000856982mmsi:ArgonMedicalDevicesInc.Memberus-gaap:CustomerListsMember2017-01-312017-01-310000856982us-gaap:TrademarksMembermmsi:ArgonMedicalDevicesInc.Member2017-01-312017-01-31mmsi:patents0000856982mmsi:CatheterConnectionsInc.Member2017-01-312017-01-310000856982mmsi:CardiovascularSegmentMembermmsi:CatheterConnectionsInc.Member2017-01-012017-12-310000856982mmsi:CatheterConnectionsInc.Member2018-07-012018-09-300000856982mmsi:CatheterConnectionsInc.Member2018-01-012018-09-300000856982mmsi:CatheterConnectionsIncMember2018-01-012018-09-300000856982mmsi:CatheterConnectionsInc.Member2017-01-310000856982us-gaap:DevelopedTechnologyRightsMembermmsi:CatheterConnectionsInc.Member2017-01-310000856982us-gaap:CustomerListsMembermmsi:CatheterConnectionsInc.Member2017-01-310000856982us-gaap:TrademarksMembermmsi:CatheterConnectionsInc.Member2017-01-310000856982us-gaap:DevelopedTechnologyRightsMembermmsi:CatheterConnectionsInc.Member2017-01-312017-01-310000856982us-gaap:TrademarksMembermmsi:CatheterConnectionsInc.Member2017-01-312017-01-310000856982us-gaap:CustomerListsMembermmsi:CatheterConnectionsInc.Member2017-01-312017-01-310000856982mmsi:ArgonMedicalDevicesInc.Member2017-01-012017-03-310000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMembercountry:US2018-07-012018-09-300000856982mmsi:StandAloneDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMembercountry:US2017-07-012017-09-300000856982mmsi:StandAloneDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMembercountry:US2018-07-012018-09-300000856982us-gaap:NonUsMembermmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMembercountry:US2017-07-012017-09-300000856982us-gaap:NonUsMembermmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMembercountry:US2018-07-012018-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2018-07-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2018-07-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMembercountry:US2017-07-012017-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2017-07-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2017-07-012017-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMembercountry:US2018-07-012018-09-300000856982us-gaap:NonUsMembermmsi:CathetersMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMembercountry:US2017-07-012017-09-300000856982us-gaap:NonUsMembermmsi:CathetersMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMembercountry:US2018-07-012018-09-300000856982mmsi:EmbolizationDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMembercountry:US2017-07-012017-09-300000856982mmsi:EmbolizationDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMembercountry:US2018-07-012018-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:CRMEPMember2018-07-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMember2018-07-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMembercountry:US2017-07-012017-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:CRMEPMember2017-07-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMember2017-07-012017-09-300000856982mmsi:CardiovascularSegmentMembercountry:US2018-07-012018-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:CardiovascularSegmentMember2018-07-012018-09-300000856982mmsi:CardiovascularSegmentMembercountry:US2017-07-012017-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:CardiovascularSegmentMember2017-07-012017-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMembercountry:US2018-07-012018-09-300000856982us-gaap:NonUsMembermmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2018-07-012018-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2018-07-012018-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMembercountry:US2017-07-012017-09-300000856982us-gaap:NonUsMembermmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2017-07-012017-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2017-07-012017-09-300000856982country:US2018-07-012018-09-300000856982us-gaap:NonUsMember2018-07-012018-09-300000856982country:US2017-07-012017-09-300000856982us-gaap:NonUsMember2017-07-012017-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMembercountry:US2018-01-012018-09-300000856982mmsi:StandAloneDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMembercountry:US2017-01-012017-09-300000856982mmsi:StandAloneDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:StandAloneDevicesMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMembercountry:US2018-01-012018-09-300000856982us-gaap:NonUsMembermmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMembercountry:US2017-01-012017-09-300000856982us-gaap:NonUsMembermmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:CustomKitAndProceduresTraysMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMembercountry:US2018-01-012018-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2018-01-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2018-01-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMembercountry:US2017-01-012017-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2017-01-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:InflationDevicesMember2017-01-012017-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMembercountry:US2018-01-012018-09-300000856982us-gaap:NonUsMembermmsi:CathetersMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMembercountry:US2017-01-012017-09-300000856982us-gaap:NonUsMembermmsi:CathetersMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:CathetersMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMembercountry:US2018-01-012018-09-300000856982mmsi:EmbolizationDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMembercountry:US2017-01-012017-09-300000856982mmsi:EmbolizationDevicesMemberus-gaap:NonUsMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:EmbolizationDevicesMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMembercountry:US2018-01-012018-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:CRMEPMember2018-01-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMember2018-01-012018-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMembercountry:US2017-01-012017-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMembermmsi:CRMEPMember2017-01-012017-09-300000856982mmsi:CardiovascularSegmentMembermmsi:CRMEPMember2017-01-012017-09-300000856982mmsi:CardiovascularSegmentMembercountry:US2018-01-012018-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:CardiovascularSegmentMember2018-01-012018-09-300000856982mmsi:CardiovascularSegmentMembercountry:US2017-01-012017-09-300000856982us-gaap:NonUsMembermmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:CardiovascularSegmentMember2017-01-012017-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMembercountry:US2018-01-012018-09-300000856982us-gaap:NonUsMembermmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2018-01-012018-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2018-01-012018-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMembercountry:US2017-01-012017-09-300000856982us-gaap:NonUsMembermmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2017-01-012017-09-300000856982mmsi:EndoscopyDevicesMembermmsi:EndoscopySegmentMember2017-01-012017-09-300000856982country:US2018-01-012018-09-300000856982us-gaap:NonUsMember2018-01-012018-09-300000856982country:US2017-01-012017-09-300000856982us-gaap:NonUsMember2017-01-012017-09-30mmsi:segment0000856982mmsi:EndoscopySegmentMember2018-07-012018-09-300000856982mmsi:EndoscopySegmentMember2017-07-012017-09-300000856982mmsi:EndoscopySegmentMember2018-01-012018-09-300000856982mmsi:EndoscopySegmentMember2017-01-012017-09-300000856982mmsi:TermLoanMember2018-09-300000856982mmsi:TermLoanMember2017-12-310000856982us-gaap:RevolvingCreditFacilityMember2018-09-300000856982us-gaap:RevolvingCreditFacilityMember2017-12-310000856982us-gaap:RevolvingCreditFacilityMembermmsi:CreditAgreementMember2017-12-130000856982mmsi:CreditAgreementMembermmsi:TermLoanMember2016-07-060000856982us-gaap:BridgeLoanMembermmsi:CreditAgreementMember2016-07-060000856982us-gaap:RevolvingCreditFacilityMembermmsi:CreditAgreementMember2018-01-012018-09-300000856982srt:MinimumMemberus-gaap:RevolvingCreditFacilityMembermmsi:CreditAgreementMember2018-01-012018-09-300000856982us-gaap:RevolvingCreditFacilityMembermmsi:CreditAgreementMembersrt:MaximumMember2018-01-012018-09-300000856982mmsi:CreditAgreementMember2018-01-012018-09-300000856982mmsi:CreditAgreementMember2018-09-300000856982mmsi:InterestRateSwap2Membermmsi:CreditAgreementMember2018-09-300000856982mmsi:VariableRate1Membermmsi:CreditAgreementMember2018-09-300000856982mmsi:CreditAgreementMember2017-12-310000856982mmsi:VariableRate1Membermmsi:CreditAgreementMember2017-12-3100008569822018-09-030000856982us-gaap:LondonInterbankOfferedRateLIBORMember2018-09-032018-09-030000856982mmsi:CreditAgreementMembermmsi:January12018andthereafterMember2018-01-012018-09-300000856982us-gaap:InterestRateSwapMember2016-08-050000856982us-gaap:OtherNoncurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2018-09-300000856982us-gaap:OtherNoncurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2017-12-310000856982us-gaap:DesignatedAsHedgingInstrumentMember2018-01-012018-09-30mmsi:derivative_instrument0000856982us-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-09-30iso4217:CAD0000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-09-30iso4217:CHFiso4217:CNYiso4217:DKKiso4217:EURiso4217:GBPiso4217:JPYiso4217:MXNiso4217:SEK0000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMember2018-09-300000856982us-gaap:NondesignatedMember2018-01-012018-09-30iso4217:AUDiso4217:BRLiso4217:HKDiso4217:KRWiso4217:SGD0000856982us-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2017-12-310000856982us-gaap:ForeignExchangeForwardMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMember2017-12-310000856982us-gaap:ForeignExchangeForwardMemberus-gaap:AccruedLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:AccruedLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMember2017-12-310000856982us-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherNoncurrentLiabilitiesMember2018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherNoncurrentLiabilitiesMember2017-12-310000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2018-09-300000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2017-12-310000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:AccruedLiabilitiesMember2018-09-300000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:AccruedLiabilitiesMember2017-12-310000856982us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2018-07-012018-09-300000856982us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2017-07-012017-09-300000856982us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2018-07-012018-09-300000856982us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2017-07-012017-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:SalesRevenueNetMember2018-07-012018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMember2017-07-012017-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:SalesRevenueNetMember2017-07-012017-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:CostOfGoodsTotalMember2018-07-012018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:CostOfGoodsTotalMember2017-07-012017-09-300000856982us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2018-01-012018-09-300000856982us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2017-01-012017-09-300000856982us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2018-01-012018-09-300000856982us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2017-01-012017-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:SalesRevenueNetMember2018-01-012018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMember2017-01-012017-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:SalesRevenueNetMember2017-01-012017-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:CostOfGoodsTotalMember2018-01-012018-09-300000856982us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMemberus-gaap:CostOfGoodsTotalMember2017-01-012017-09-300000856982mmsi:RevenueandCostofSalesMember2018-01-012018-09-300000856982us-gaap:InterestExpenseMember2018-01-012018-09-300000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:OtherExpenseMember2018-07-012018-09-300000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:OtherExpenseMember2017-07-012017-09-300000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:OtherExpenseMember2018-01-012018-09-300000856982us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMemberus-gaap:OtherExpenseMember2017-01-012017-09-300000856982us-gaap:InterestRateSwapMember2018-09-300000856982us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2018-09-300000856982us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2018-09-300000856982us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2018-09-300000856982us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2018-09-300000856982us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2017-12-310000856982us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2017-12-310000856982us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2017-12-310000856982us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2017-12-310000856982mmsi:ContingentConsiderationMember2018-06-300000856982mmsi:ContingentConsiderationMember2017-06-300000856982mmsi:ContingentConsiderationMember2017-12-310000856982mmsi:ContingentConsiderationMember2016-12-310000856982mmsi:ContingentConsiderationMember2018-07-012018-09-300000856982mmsi:ContingentConsiderationMember2017-07-012017-09-300000856982mmsi:ContingentConsiderationMember2018-01-012018-09-300000856982mmsi:ContingentConsiderationMember2017-01-012017-09-300000856982mmsi:ContingentConsiderationMember2018-09-300000856982mmsi:ContingentConsiderationMember2017-09-300000856982mmsi:OtherLongTermObligationsMember2018-09-300000856982us-gaap:AccruedLiabilitiesMember2018-09-300000856982mmsi:OtherLongTermObligationsMember2017-12-310000856982us-gaap:AccruedLiabilitiesMember2017-12-310000856982mmsi:ContingentReceivableMembermmsi:OtherPaymentsMember2018-09-300000856982mmsi:ContingentReceivableMembermmsi:OtherPaymentsMember2017-12-310000856982mmsi:ContingentReceivableMembermmsi:ContingentConsiderationMember2018-07-012018-09-300000856982mmsi:ContingentReceivableMembermmsi:ContingentConsiderationMember2018-01-012018-09-300000856982mmsi:ContingentReceivableMemberus-gaap:OtherNoncurrentAssetsMembermmsi:ContingentConsiderationMember2017-12-310000856982mmsi:ContingentReceivableMemberus-gaap:OtherCurrentAssetsMembermmsi:ContingentConsiderationMember2017-12-310000856982mmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMember2018-09-300000856982mmsi:ContingentReceivableMembermmsi:OtherPaymentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMemberus-gaap:IncomeApproachValuationTechniqueMember2018-09-300000856982mmsi:ContingentReceivableMembermmsi:OtherPaymentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:IncomeApproachValuationTechniqueMembermmsi:MilestonePaymentProbabilityMember2018-09-300000856982mmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMember2017-12-310000856982us-gaap:FairValueInputsLevel3Membermmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMemberus-gaap:IncomeApproachValuationTechniqueMembermmsi:MilestonePaymentProbabilityMember2017-12-310000856982mmsi:ContingentReceivableMembermmsi:OtherPaymentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMemberus-gaap:IncomeApproachValuationTechniqueMember2017-12-310000856982mmsi:ContingentReceivableMembermmsi:OtherPaymentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:IncomeApproachValuationTechniqueMembermmsi:MilestonePaymentProbabilityMember2017-12-310000856982us-gaap:FairValueInputsLevel3Membersrt:MinimumMembermmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:IncomeApproachValuationTechniqueMember2018-09-300000856982us-gaap:FairValueInputsLevel3Membermmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:IncomeApproachValuationTechniqueMembersrt:MaximumMember2018-09-300000856982us-gaap:FairValueInputsLevel3Membersrt:MinimumMembermmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:IncomeApproachValuationTechniqueMember2017-12-310000856982us-gaap:FairValueInputsLevel3Membermmsi:ContingentConsiderationMembermmsi:RevenueBasedPaymentsMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:IncomeApproachValuationTechniqueMembersrt:MaximumMember2017-12-310000856982us-gaap:PatentsMember2018-09-300000856982us-gaap:DistributionRightsMember2018-09-300000856982us-gaap:LicensingAgreementsMember2018-09-300000856982us-gaap:TrademarksMember2018-09-300000856982us-gaap:NoncompeteAgreementsMember2018-09-300000856982us-gaap:CustomerListsMember2018-09-300000856982mmsi:InProcessTechnologyMember2018-09-300000856982us-gaap:PatentsMember2017-12-310000856982us-gaap:DistributionRightsMember2017-12-310000856982us-gaap:LicensingAgreementsMember2017-12-310000856982us-gaap:TrademarksMember2017-12-310000856982us-gaap:NoncompeteAgreementsMember2017-12-310000856982us-gaap:CustomerListsMember2017-12-310000856982mmsi:InProcessTechnologyMember2017-12-310000856982mmsi:QuellentLLCMember2018-07-012018-09-300000856982mmsi:UnitedStatesDepartmentofJusticeMatterMember2018-07-012018-09-300000856982mmsi:UnitedStatesDepartmentofJusticeMatterMember2018-01-012018-09-3000008569822018-07-302018-07-3000008569822017-03-282017-03-280000856982us-gaap:ScenarioPlanMembermmsi:CiannaMedicalIncMemberus-gaap:SubsequentEventMember2018-10-012018-10-010000856982us-gaap:ScenarioPlanMembermmsi:CiannaMedicalIncMemberus-gaap:SubsequentEventMembermmsi:CertainManufacturingCapacityAndManufacturingCostMilestoneMember2018-10-010000856982us-gaap:ScenarioPlanMembermmsi:CiannaMedicalIncMemberus-gaap:SubsequentEventMembermmsi:AnnualNetSalesMilestoneMember2018-10-01
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018 | |
| |
OR | |
| |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE TRANSITION PERIOD FROM TO . |
| Commission File Number 0-18592 |
MERIT MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Utah | | 87-0447695 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
1600 West Merit Parkway, South Jordan, Utah 84095
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (801) 253-1600
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large Accelerated Filer x | Accelerated Filer o | Non-Accelerated Filer o
| Smaller Reporting Company o | Emerging Growth Company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
Common Stock | | 54,833,602 |
Title or class | | Number of Shares Outstanding at November 5, 2018 |
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| | | | | | | | | | | |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES | | | |
CONSOLIDATED BALANCE SHEETS | | | |
AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017 | | | |
(In thousands) | | | |
| September 30, | | December 31, |
| 2018 | | 2017 |
| (unaudited) | | |
ASSETS | | | |
| | | |
CURRENT ASSETS: | | | |
Cash and cash equivalents | $ | 51,955 | | $ | 32,336 |
Trade receivables — net of allowance for uncollectible accounts — 2018 — $2,011 and 2017 — $1,769 | 129,282 | | 105,536 |
Other receivables | 8,903 | | 9,429 |
Inventories | 181,439 | | 155,288 |
Prepaid expenses and other assets | 11,720 | | 9,096 |
Prepaid income taxes | 3,307 | | 3,225 |
Income tax refund receivables | 1,043 | | 1,211 |
| | | |
Total current assets | 387,649 | | 316,121 |
| | | |
PROPERTY AND EQUIPMENT: | | | |
Land and land improvements | 26,926 | | 19,877 |
Buildings | 150,880 | | 147,356 |
Manufacturing equipment | 211,215 | | 197,651 |
Furniture and fixtures | 53,869 | | 49,528 |
Leasehold improvements | 33,365 | | 31,161 |
Construction-in-progress | 48,166 | | 32,896 |
| | | |
Total property and equipment | 524,421 | | 478,469 |
| | | |
Less accumulated depreciation | (204,496) | | (185,649) |
| | | |
Property and equipment — net | 319,925 | | 292,820 |
| | | |
OTHER ASSETS: | | | |
Intangible assets: | | | |
Developed technology — net of accumulated amortization — 2018 — $93,680 and 2017 — $72,420 | 224,540 | | 167,771 |
Other — net of accumulated amortization — 2018 — $46,088 and 2017 — $38,127 | 64,565 | | 59,553 |
Goodwill | 249,023 | | 238,147 |
Deferred income tax assets | 2,254 | | 2,359 |
Other assets | 61,927 | | 35,040 |
| | | |
Total other assets | 602,309 | | 502,870 |
| | | |
TOTAL | $ | 1,309,883 | | $ | 1,111,811 |
| | | |
See condensed notes to consolidated financial statements. | | | (continued) |
| | | | | | | | | | | |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES | | | |
CONSOLIDATED BALANCE SHEETS | | | |
AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017 | | | |
(In thousands) | | | |
| September 30, | | December 31, |
| 2018 | | 2017 |
| (unaudited) | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| | | |
CURRENT LIABILITIES: | | | |
Trade payables | $ | 50,697 | | $ | 34,931 |
Accrued expenses | 65,530 | | 58,932 |
Current portion of long-term debt | 22,000 | | 19,459 |
Income taxes payable | 1,598 | | 2,298 |
| | | |
Total current liabilities | 139,825 | | 115,620 |
| | | |
LONG-TERM DEBT | 186,867 | | 259,013 |
| | | |
DEFERRED INCOME TAX LIABILITIES | 23,102 | | 23,289 |
| | | |
LONG-TERM INCOME TAXES PAYABLE | 4,846 | | 4,846 |
| | | |
LIABILITIES RELATED TO UNRECOGNIZED TAX BENEFITS | 2,746 | | 2,746 |
| | | |
DEFERRED COMPENSATION PAYABLE | 12,176 | | 11,181 |
| | | |
DEFERRED CREDITS | 2,296 | | 2,403 |
| | | |
OTHER LONG-TERM OBLIGATIONS | 14,814 | | 16,379 |
| | | |
Total liabilities | 386,672 | | 435,477 |
| | | |
COMMITMENTS AND CONTINGENCIES (Notes 5, 10, 11, and 14) | | | |
| | | |
STOCKHOLDERS’ EQUITY: | | | |
Preferred stock — 5,000 shares authorized as of September 30, 2018 and December 31, 2017; no shares issued | — | | — |
Common stock, no par value; shares authorized — 2018 and 2017 - 100,000; issued and outstanding as of September 30, 2018 - 54,802 and December 31, 2017 - 50,248 | 568,051 | | 353,392 |
Retained earnings | 354,236 | | 321,408 |
Accumulated other comprehensive income | 924 | | 1,534 |
| | | |
Total stockholders’ equity | 923,211 | | 676,334 |
| | | |
TOTAL | $ | 1,309,883 | | $ | 1,111,811 |
| | | |
See condensed notes to consolidated financial statements. | | | (concluded) |
| | | | | | | | | | | | | | | | | | | | | | | |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES | | | | | | | |
CONSOLIDATED STATEMENTS OF INCOME | | | | | | | |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 | | | | | | | |
(In thousands, except per share amounts - unaudited) | | | | | | | |
| | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2018 | | 2017 | | 2018 | | 2017 |
NET SALES | $ | 221,659 | | $ | 179,337 | | $ | 649,504 | | $ | 536,955 |
| | | | | | | |
COST OF SALES | 119,620 | | 98,823 | | 359,400 | | 296,358 |
| | | | | | | |
GROSS PROFIT | 102,039 | | 80,514 | | 290,104 | | 240,597 |
| | | | | | | |
OPERATING EXPENSES: | | | | | | | |
Selling, general and administrative | 66,382 | | 54,716 | | 200,389 | | 169,896 |
Research and development | 14,525 | | 12,838 | | 44,163 | | 38,676 |
Intangible asset impairment charge | 657 | | — | | 657 | | — |
Contingent consideration expense (benefit) | (661) | | 20 | | (442) | | 39 |
Acquired in-process research and development | 75 | | 12,061 | | 382 | | 12,136 |
| | | | | | | |
Total operating expenses | 80,978 | | 79,635 | | 245,149 | | 220,747 |
| | | | | | | |
INCOME FROM OPERATIONS | 21,061 | | 879 | | 44,955 | | 19,850 |
| | | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | |
Interest income | 359 | | 94 | | 847 | | 266 |
Interest expense | (2,329) | | (1,590) | | (8,064) | | (5,935) |
Gain on bargain purchase | — | | (778) | | — | | 10,796 |
Other income (expense) - net | 294 | | (810) | | (429) | | (376) |
| | | | | | | |
Other income (expense) — net | (1,676) | | (3,084) | | (7,646) | | 4,751 |
| | | | | | | |
INCOME (LOSS) BEFORE INCOME TAXES | 19,385 | | (2,205) | | 37,309 | | 24,601 |
| | | | | | | |
INCOME TAX EXPENSE | 2,766 | | 1,364 | | 4,481 | | 3,884 |
| | | | | | | |
NET INCOME (LOSS) | $ | 16,619 | | $ | (3,569) | | $ | 32,828 | | $ | 20,717 |
| | | | | | | |
EARNINGS PER COMMON SHARE: | | | | | | | |
Basic | $ | 0.31 | | $ | (0.07) | | $ | 0.64 | | $ | 0.43 |
| | | | | | | |
Diluted | $ | 0.30 | | $ | (0.07) | | $ | 0.62 | | $ | 0.42 |
| | | | | | | |
AVERAGE COMMON SHARES: | | | | | | | |
Basic | 53,431 | | 50,150 | | 51,434 | | 48,332 |
| | | | | | | |
Diluted | 55,103 | | 51,599 | | 53,096 | | 49,555 |
| | | | | | | |
See condensed notes to consolidated financial statements. | | | | | | | |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(In thousands - unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2018 | | 2017 | | 2018 | | 2017 |
Net income | $ | 16,619 | | $ | (3,569) | | $ | 32,828 | | $ | 20,717 |
Other comprehensive income (loss): | | | | | | | |
Cash flow hedges | 667 | | (144) | | 3,541 | | 166 |
Less income tax benefit (expense) | (172) | | 56 | | (910) | | (64) |
Foreign currency translation adjustment | (1,637) | | 721 | | (3,241) | | 2,925 |
Less income tax (expense) | — | | — | | — | | (252) |
Total other comprehensive income (loss) | (1,142) | | 633 | | (610) | | 2,775 |
Total comprehensive income (loss) | $ | 15,477 | | $ | (2,936) | | $ | 32,218 | | $ | 23,492 |
| | | | | | | |
See condensed notes to consolidated financial statements. | | | | | | | |
| | | | | | | | | | | |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 | | | |
(In thousands - unaudited) | | | |
| | | |
| Nine Months Ended September 30, | | |
| 2018 | | 2017 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 32,828 | | $ | 20,717 |
| | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 50,436 | | 39,388 |
Gain on bargain purchase | — | | (10,796) |
Loss on sales and/or abandonment of property and equipment | 425 | | 219 |
Write-off of patents and intangible assets | 744 | | 86 |
Acquired in-process research and development | 382 | | 12,136 |
Amortization of deferred credits | (106) | | (111) |
Amortization of long-term debt issuance costs | 603 | | 514 |
Deferred income taxes | — | | (290) |
Stock-based compensation expense | 4,494 | | 2,883 |
Changes in operating assets and liabilities, net of effects from acquisitions: | | | |
Trade receivables | (25,482) | | (10,963) |
Other receivables | 255 | | (449) |
Inventories | (19,375) | | (9,922) |
Prepaid expenses and other current assets | (2,719) | | (1,587) |
Prepaid income taxes | (120) | | (231) |
Income tax refund receivables | 134 | | 280 |
Other assets | (1,370) | | (2,992) |
Trade payables | 15,936 | | (876) |
Accrued expenses | 7,707 | | 4,470 |
Income taxes payable | (1,528) | | (764) |
| | | |
| | | |
Deferred compensation payable | 994 | | 1,107 |
Other long-term obligations | (1,381) | | 574 |
| | | |
Total adjustments | 30,029 | | 22,676 |
| | | |
Net cash provided by operating activities | 62,857 | | 43,393 |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Capital expenditures for: | | | |
Property and equipment | (47,024) | | (29,522) |
Intangible assets | (2,234) | | (1,927) |
Proceeds from the sale of property and equipment | 7 | | 9 |
Issuance of note receivable | (10,750) | | — |
Cash paid in acquisitions, net of cash acquired | (122,770) | | (103,500) |
| | | |
Net cash used in investing activities | (182,771) | | (134,940) |
| | | |
See condensed notes to consolidated financial statements. | | | (continued) |
| | | | | | | | | | | |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 | | | |
(In thousands - unaudited) | | | |
| Nine Months Ended September 30, | | |
| 2018 | | 2017 |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Proceeds from issuance of common stock | $ | 213,276 | | $ | 143,069 |
Offering costs | (366) | | (816) |
Proceeds from issuance of long-term debt | 380,825 | | 151,462 |
Payments on long-term debt | (450,575) | | (197,962) |
| | | |
Contingent payments related to acquisitions | (184) | | (45) |
Payment of taxes related to an exchange of common stock | (2,616) | | — |
| | | |
Net cash provided by financing activities | 140,360 | | 95,708 |
| | | |
EFFECT OF EXCHANGE RATES ON CASH | (827) | | 30 |
| | | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 19,619 | | 4,191 |
| | | |
CASH AND CASH EQUIVALENTS: | | | |
Beginning of period | 32,336 | | 19,171 |
| | | |
End of period | $ | 51,955 | | $ | 23,362 |
| | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | |
Cash paid during the period for: | | | |
Interest (net of capitalized interest of $468 and $371, respectively) | $ | 8,018 | | $ | 5,953 |
| | | |
Income taxes | $ | 6,069 | | $ | 4,029 |
| | | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | |
Property and equipment purchases in accounts payable | $ | 3,058 | | $ | 1,394 |
| | | |
Acquisition purchases in accrued expenses and other long-term obligations | $ | — | | $ | 12,000 |
| | | |
Merit common stock surrendered (43 and 0 shares, respectively) in exchange for exercise of stock options | $ | 2,262 | | $ | — |
| | | |
See condensed notes to consolidated financial statements. | | | (concluded) |
MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation. The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three and nine-month periods ended September 30, 2018 and 2017 are not audited. Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2018 and December 31, 2017, and our results of operations and cash flows for the three and nine-month periods ended September 30, 2018 and 2017. The results of operations for the three and nine-month periods ended September 30, 2018 and 2017 are not necessarily indicative of the results for a full-year period. These interim consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K (the "2017 Form 10-K") for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission (the "SEC") on March 1, 2018.
2. Inventories. Inventories at September 30, 2018 and December 31, 2017, consisted of the following (in thousands):
| | | | | | | | | | | |
| September 30, | | December 31, |
| 2018 | | 2017 |
Finished goods | $ | 103,258 | | $ | 86,555 |
Work-in-process | 20,546 | | 12,799 |
Raw materials | 57,635 | | 55,934 |
| | | |
Total Inventories | $ | 181,439 | | $ | 155,288 |
3. Stock-Based Compensation Expense. Stock-based compensation expense before income tax expense for the three and nine months ended September 30, 2018 and 2017, consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2018 | | 2017 | | 2018 | | 2017 |
Cost of sales | $ | 241 | | $ | 189 | | $ | 657 | | $ | 453 |
Research and development | 141 | | 110 | | 412 | | 262 |
Selling, general and administrative | 1,291 | | 893 | | 3,425 | | 2,168 |
Stock-based compensation expense before taxes | $ | 1,673 | | $ | 1,192 | | $ | 4,494 | | $ | 2,883 |
We recognize stock-based compensation expense (net of a forfeiture rate) for those awards which are expected to vest on a straight-line basis over the requisite service period. We estimate the forfeiture rate based on our historical experience and expectations about future forfeitures. As of September 30, 2018, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $20.7 million and is expected to be recognized over a weighted average period of 3.25 years.
During the three-month period ended September 30, 2018, we did not grant any new stock-based awards. During the nine-month period ended September 30, 2018, we granted stock-based awards representing 692,002 shares of our common stock. During the three and nine-month periods ended September 30, 2017, we granted stock-based awards representing 20,000 and approximately 1.3 million shares of our common stock, respectively. We use the Black-Scholes methodology to value the stock-based compensation expense for options. In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below:
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2018 | | 2017 |
Risk-free interest rate | 2.63% - 2.77% | | 1.77% - 1.83% |
Expected option life | 5.0 years | | 5.0 years |
Expected dividend yield | — | | — |
Expected price volatility | 34.06% - 34.32% | | 33.81% - 34.07% |
The average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock options. We determine the expected term of the stock options using the historical exercise behavior of employees. The expected price volatility was determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option life and implied volatility based on recent trends of the daily historical volatility. For options with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.
4. Earnings Per Common Share (EPS). The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the following periods consisted of the following (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months | | | | | | Nine Months | | | | |
| Net Income | | Shares | | Per Share Amount | | Net Income | | Shares | | Per Share Amount |
Period ended September 30, 2018: | | | | | | | | | | | |
Basic EPS | $ | 16,619 | | 53,431 | | $ | 0.31 | | $ | 32,828 | | 51,434 | | $ | 0.64 |
Effect of dilutive stock options and warrants | | | 1,672 | | | | | | 1,662 | | |
| | | | | | | | | | | |
Diluted EPS | $ | 16,619 | | 55,103 | | $ | 0.30 | | $ | 32,828 | | 53,096 | | $ | 0.62 |
| | | | | | | | | | | |
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive | | | 667 | | | | | | 462 | | |
| | | | | | | | | | | |
Period ended September 30, 2017: | | | | | | | | | | | |
Basic EPS | $ | (3,569) | | 50,150 | | $ | (0.07) | | $ | 20,717 | | 48,332 | | $ | 0.43 |
Effect of dilutive stock options and warrants | | | 1,449 | | | | | | 1,223 | | |
| | | | | | | | | | | |
Diluted EPS | $ | (3,569) | | 51,599 | | $ | (0.07) | | $ | 20,717 | | 49,555 | | $ | 0.42 |
| | | | | | | | | | | |
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive | | | 200 | | | | | | 434 | | |
5. Acquisitions. During July 2018, we purchased 1,786,000 preferred limited liability company units of Cagent Vascular, LLC, a medical device company ("Cagent"), for approximately $2.2 million. Our investment has been accounted for as an equity investment reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Cagent. Our total investment in Cagent represents an ownership of approximately 19.5% of the outstanding limited liability company units.
On May 23, 2018, we entered into an asset purchase agreement with DirectACCESS Medical, LLC (“DirectACCESS”) to acquire its assets, including, certain product distribution agreements for the FirstChoice™ Ultra High Pressure PTA Balloon Catheter. We accounted for this acquisition as a business combination. The purchase price for the assets was approximately $7.3 million. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material. Acquisition-related costs associated with the DirectACCESS acquisition, which were included in selling, general and administrative expenses in our consolidated statements of income, were not material. The purchase price was preliminarily allocated as follows (in thousands):
| | | | | | | | |
| Inventories | $ | 971 |
| Intangibles | |
| Developed technology | 4,840 |
| Customer list | 120 |
| Trademarks | 400 |
| Goodwill | 938 |
| | |
| Total assets acquired | $ | 7,269 |
We are amortizing the developed technology intangible asset over ten years, the related trademarks over ten years and the customer list on an accelerated basis over five years. The total weighted-average amortization period for these acquired intangible assets is approximately 9.9 years.
On May 18, 2018, we paid $750,000 for a distribution agreement with QXMédical, LLC ("QXMédical") for the Q50® PLUS Stent Graft Balloon Catheter. We accounted for this acquisition as an asset purchase. We are amortizing the distribution agreement as an intangible asset over a period of ten years.
On April 6, 2018, we entered into long-term agreements with NinePoint Medical, Inc. (“NinePoint”), pursuant to which, we (a) became the exclusive worldwide distributor for the NvisionVLE® Imaging System with Real-time Targeting™ using Optical Coherence Tomography (OCT) and (b) acquired an option to purchase up to 100% of the outstanding equity in NinePoint throughout a three-month period commencing 18 months subsequent to the agreement date, both in exchange for total consideration of $10.0 million. We accounted for this transaction as an asset purchase. The results of operations related to the distribution agreement have been included in our endoscopy operating segment since the acquisition date. During the three and nine months ended September 30, 2018, our net sales of NinePoint products were approximately $1.4 million and $2.5 million, respectively. We believe the NinePoint products will enhance the product offerings of our endoscopy operating segment and will be another step in our strategy to add therapy and disease-state products to our portfolio. The NinePoint products have 510(k) clearance in the United States, and NinePoint is preparing a CE mark application. We plan to launch the NinePoint products globally on a measured basis.
In addition, on April 6, 2018, we made a loan to NinePoint for $10.5 million with a maturity date of April 6, 2023, at which time the loan, together with accrued interest thereon, will be due and payable. The loan bears interest at an annual rate of 9% and is collateralized by NinePoint's rights, interest and title to the NvisionVLE® Imaging System and substantially all other assets of NinePoint. This loan has been recorded as a note receivable within other long-term assets in our consolidated balance sheets.
On February 14, 2018, we acquired certain divested assets from Becton, Dickinson and Company ("BD"), for an aggregate purchase price of $100.3 million. The assets acquired include the soft tissue core needle biopsy products sold under the tradenames of Achieve® Programmable Automatic Biopsy System, Temno® Biopsy System, Tru-Cut® Biopsy Needles as well as Aspira® Pleural Effusion Drainage Kits, and the Aspira® Peritoneal Drainage System. We accounted for this acquisition as a business combination.
During the three and nine-month periods ended September 30, 2018, our net sales of BD products were approximately $11.8 million and $30.3 million, respectively. It is not practical to separately report earnings related to the products acquired from BD, as we cannot split out sales costs related solely to the products we acquired from BD, principally because our sales representatives sell multiple products (including the products we acquired from BD) in our cardiovascular business segment. Acquisition-related costs associated with the BD acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, were approximately $1.8 million for the nine-month period ended September 30, 2018. The following table summarizes the purchase price allocated to the assets acquired from BD (in thousands):
| | | | | | | | |
| Inventories | $ | 5,804 |
| Property and equipment | 748 |
| Intangibles | |
| Developed technology | 74,000 |
| Customer list | 4,200 |
| Trademarks | 4,900 |
| Goodwill | 10,613 |
| | |
| Total assets acquired | $ | 100,265 |
We are amortizing the developed technology intangible assets over eight years, the related trademarks over nine years, and the customer lists on an accelerated basis over seven years. The total weighted-average amortization period for these acquired intangible assets is approximately eight years.
On October 2, 2017, we acquired a custom procedure pack business located in Melbourne, Australia from ITL Healthcare Pty Ltd. ("ITL"), for an aggregate purchase price of $11.3 million. We accounted for this acquisition as a business combination. The following table summarizes the aggregate purchase price allocated to the assets acquired from ITL (in thousands):
| | | | | |
Assets Acquired | |
Trade receivables | $ | 1,287 |
Other receivables | 56 |
Inventories | 1,808 |
Prepaid expenses and other assets | 65 |
Property and equipment | 1,053 |
Intangibles | |
Customer lists | 5,940 |
Goodwill | 3,945 |
Total assets acquired | 14,154 |
| |
Liabilities Assumed | |
Trade payables | (216) |
Accrued expenses | (747) |
Deferred income tax liabilities | (1,901) |
Total liabilities assumed | (2,864) |
| |
Total net assets acquired | $ | 11,290 |
We are amortizing the customer list on an accelerated basis over seven years. Acquisition-related costs associated with the ITL acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income in the 2017 Form 10-K, were not material. The results of operations related to this acquisition have been included in our cardiovascular operating segment since the acquisition date. During the three and nine months ended September 30, 2018, our net sales of ITL products were approximately $1.9 million and $6.1 million, respectively. It is not practical to separately report the earnings related to the ITL acquisition, as we cannot split out sales costs related solely to the products we acquired from ITL, principally because our sales representatives sell multiple products (including the products we acquired from ITL) in our cardiovascular business segment.
On August 4, 2017, we acquired from Laurane Medical S.A.S. ("Laurane") and its shareholders inventories and the intellectual property rights associated with certain manual bone biopsy devices, manual bone marrow needles and muscle biopsy kits for an aggregate purchase price of $16.5 million. We also recorded a contingent consideration liability of $5.5 million related to royalties potentially payable to Laurane's shareholders pursuant to the terms of an intellectual property purchase agreement. We accounted for this acquisition as a business combination. The following table summarizes the aggregate purchase price (including contingent royalty payment liabilities) allocated to the assets acquired from Laurane (in thousands):
| | | | | | | | |
| Inventories | $ | 594 |
| Intangibles | |
| Developed technology | 14,920 |
| Customer list | 120 |
| Goodwill | 6,366 |
| | |
| Total assets acquired | $ | 22,000 |
We are amortizing the developed technology intangible asset over 12 years and the customer list on an accelerated basis over one year. The total weighted-average amortization period for these acquired intangible assets is 11.9 years. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material. Acquisition-related costs associated with the Laurane acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income of our 2017 Form 10-K, were not material.
On July 3, 2017, we acquired from Osseon LLC (“Osseon”) substantially all the assets related to Osseon’s vertebral augmentation products. We accounted for this acquisition as a business combination. The purchase price for the assets was approximately $6.8 million. Acquisition-related costs associated with the Osseon acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income of our 2017 Form 10-K, were not material. The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the three and nine months ended September 30, 2018, our net sales of Osseon products were approximately $478,000 and $1.6 million, respectively. It is not practical to separately report the earnings related to the Osseon acquisition, as we cannot split out sales costs related solely to the products we acquired from Osseon, principally because our sales representatives sell multiple products (including the products we acquired from Osseon) in our cardiovascular business segment. The following table summarizes the purchase price allocated to the assets acquired (in thousands):
| | | | | | | | |
| Inventories | $ | 979 |
| Property and equipment | 58 |
| Intangibles | |
| Developed technology | 5,400 |
| Customer list | 200 |
| Goodwill | 203 |
| | |
| Total assets acquired | $ | 6,840 |
We are amortizing the developed technology intangible asset over nine years and customer lists on an accelerated basis over eight years. The total weighted-average amortization period for these acquired intangible assets is approximately 9.0 years.
On May 1, 2017, we entered into an agreement and plan of merger with Vascular Access Technologies, Inc. ("VAT"), pursuant to which we acquired the SAFECVAD™ device. We accounted for this acquisition as a business combination. The purchase price for the acquisition was $5.0 million. We also recorded $4.9 million of contingent consideration related to royalties potentially payable to VAT pursuant to the merger agreement. The following table summarizes the purchase price allocated to the net assets acquired (in thousands):
| | | | | | | | |
| Intangibles | |
| Developed technology | $ | 7,800 |
| In-process technology | 920 |
| Goodwill | 4,281 |
| Deferred tax liabilities | (3,101) |
| | |
| Total net assets acquired | $ | 9,900 |
We are amortizing the developed technology intangible asset over 15 years. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material. Acquisition-related costs associated with the VAT acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income of our 2017 Form 10-K, were not material.
On January 31, 2017, we acquired the critical care division of Argon Medical Devices, Inc. ("Argon"), including a manufacturing facility in Singapore, the related commercial operations in Europe and Japan, and certain inventories and intellectual property rights within the United States. We made an initial payment of approximately $10.9 million and received a subsequent reduction to the purchase price of approximately $797,000 related to a working capital adjustment according to the terms of the purchase agreement. We accounted for the acquisition as a business combination.
Acquisition-related costs associated with the acquisition of the Argon critical care division during the year ended December 31, 2017, which were included in selling, general and administrative expenses in the consolidated statements of income of our 2017 Form 10-K, were approximately $2.6 million. The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the three and nine months ended September 30, 2018, our net sales of the Argon critical care products were approximately $11.0 million and $34.2 million, respectively. It is not practical to separately report the earnings related to the Argon critical care acquisition, as we cannot split out sales costs related solely to the products we acquired from Argon, principally because our sales representatives sell multiple products (including the products we acquired from Argon) in our cardiovascular business segment.
The assets and liabilities in the purchase price allocation for the Argon critical care acquisition are stated at fair value based on estimates of fair value using available information and making assumptions our management believes are reasonable. The following table summarizes the purchase price allocated to the net tangible and intangible assets acquired and liabilities assumed (in thousands):
| | | | | | | | |
| Assets Acquired | |
| Cash and cash equivalents | $ | 1,436 |
| Trade receivables | 8,351 |
| Inventories | 11,222 |
| Prepaid expenses and other assets | 1,275 |
| Income tax refund receivables | 165 |
| Property and equipment | 2,319 |
| Deferred income tax assets | 202 |
| Intangibles | |
| Developed technology | 2,200 |
| Customer lists | 1,500 |
| Trademarks | 900 |
| Total assets acquired | 29,570 |
| | |
| Liabilities Assumed | |
| Trade payables | (2,414) |
| Accrued expenses | (5,083) |
| Deferred income tax liabilities | (934) |
| Total liabilities assumed | (8,431) |
| | |
| Total net assets acquired | 21,139 |
| Gain on bargain purchase (1) | (11,039) |
| Total purchase price | $ | 10,100 |
| | |
(1) | The total fair value of the net assets acquired from Argon exceeded the purchase price, resulting in a gain on bargain purchase which was recorded within other income (expense) in our consolidated statements of income. We believe the reason for the gain on bargain purchase was a result of the divestiture of a non-strategic, slow-growth critical care business for Argon. It is our understanding that the divestiture allows Argon to focus on its higher growth interventional portfolio. A reduction of $1.2 million was recorded since the bargain purchase gain was first presented in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, resulting from our ongoing activities, including reassessment of the assets acquired and liabilities assumed. The purchase price allocation for this acquisition is now final. | |
With respect to the Argon critical care assets, we are amortizing developed technology over seven years and customer lists on an accelerated basis over five years. While U.S. trademarks can be renewed indefinitely, we estimate that we will generate cash flow from the acquired trademarks for a period of five years from the acquisition date. The total weighted-average amortization period for these acquired intangible assets is approximately 6.0 years.
On January 31, 2017, we acquired substantially all the assets, including intellectual property covered by approximately 40 patents and pending applications, and assumed certain liabilities, of Catheter Connections, Inc. (“Catheter Connections”), in exchange for payment of $38.0 million. Catheter Connections, based in Salt Lake City, Utah, developed and marketed the DualCap® System, an innovative family of disinfecting products designed to protect patients from intravenous infections resulting from infusion therapy. We accounted for this acquisition as a business combination.
Acquisition-related costs associated with the Catheter Connections acquisition during the year ended December 31, 2017, which were included in selling, general and administrative expenses were approximately $482,000. The results of operations related to this acquisition have been included in our cardiovascular operating segment since the acquisition date. During the three and nine months ended September 30, 2018, our net sales of the products acquired from Catheter Connections were approximately $3.7 million and $10.1 million, respectively. It is not practical to separately report the earnings related to the products acquired from Catheter Connections, as we cannot split out sales costs related solely to those products, principally because our sales representatives sell multiple products (including the DualCap System) in the cardiovascular business segment. The purchase price was allocated as follows (in thousands):
| | | | | |
Assets Acquired | |
Trade receivables | $ | 958 |
Inventories | 2,157 |
Prepaid expenses and other assets | 85 |
Property and equipment | 1,472 |
Intangibles | |
Developed technology | 21,100 |
Customer lists | 700 |
Trademarks | 2,900 |
Goodwill | 8,989 |
Total assets acquired | 38,361 |
| |
Liabilities Assumed | |
Trade payables | (338) |
Accrued expenses | (23) |
Total liabilities assumed | (361) |
| |
Total net assets acquired | $ | 38,000 |
We are amortizing the Catheter Connections developed technology asset over 12 years, the related trademarks over ten years, and the associated customer list on an accelerated basis over eight years. We have estimated the weighted average life of the intangible Catheter Connections assets acquired to be approximately 11.7 years.
The following table summarizes our consolidated results of operations for the nine-month period ended September 30, 2017, as well as unaudited pro forma consolidated results of operations as though the acquisition of the Argon critical care division had occurred on January 1, 2016 (in thousands, except per common share amounts):