10-Q

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 JUNE 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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 (Do not check if a smaller reporting company) 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	54,735,486
Title or class	Number of Shares Outstanding at August 6, 2018

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	3
	Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017	5
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017	7
	Condensed Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	47
PART II.	OTHER INFORMATION	48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 6.	Exhibits	51
SIGNATURES		52

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2018 AND DECEMBER 31, 2017 (In thousands)
	June 30,			December 31,
	2018			2017
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	43,512		$	32,336
Trade receivables — net of allowance for uncollectible accounts — 2018 — $1,921 and 2017 — $1,769	131,943			105,536
Other receivables	8,490			9,429
Inventories	169,254			155,288
Prepaid expenses and other assets	12,142			9,096
Prepaid income taxes	3,292			3,225
Income tax refund receivables	2,331			1,211
Total current assets	370,964			316,121
PROPERTY AND EQUIPMENT:
Land and land improvements	26,940			19,877
Buildings	150,726			147,356
Manufacturing equipment	205,911			197,651
Furniture and fixtures	52,649			49,528
Leasehold improvements	33,029			31,161
Construction-in-progress	40,454			32,896
Total property and equipment	509,709			478,469
Less accumulated depreciation	(197,941		)	(185,649		)
Property and equipment — net	311,768			292,820
OTHER ASSETS:
Intangible assets:
Developed technology — net of accumulated amortization — 2018 — $86,023 and 2017 — $72,420	232,880			167,771
Other — net of accumulated amortization — 2018 — $43,246 and 2017 — $38,127	66,188			59,553
Goodwill	248,998			238,147
Deferred income tax assets	2,318			2,359
Other assets	58,075			35,040
Total other assets	608,459			502,870
TOTAL	$	1,291,191		$	1,111,811
See condensed notes to consolidated financial statements.				(continued)

3

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2018 AND DECEMBER 31, 2017 (In thousands)
	June 30,		December 31,
	2018		2017
LIABILITIES AND STOCKHOLDERS’ EQUITY	(unaudited)
CURRENT LIABILITIES:
Trade payables	$	50,823	$	34,931
Accrued expenses	65,838		58,932
Current portion of long-term debt	21,985		19,459
Income taxes payable	948		2,298
Total current liabilities	139,594		115,620
LONG-TERM DEBT	391,582		259,013
DEFERRED INCOME TAX LIABILITIES	23,148		23,289
LONG-TERM INCOME TAXES PAYABLE	4,846		4,846
LIABILITIES RELATED TO UNRECOGNIZED TAX BENEFITS	2,746		2,746
DEFERRED COMPENSATION PAYABLE	11,620		11,181
DEFERRED CREDITS	2,332		2,403
OTHER LONG-TERM OBLIGATIONS	16,069		16,379
Total liabilities	591,937		435,477
COMMITMENTS AND CONTINGENCIES (Notes 5, 10, 11, and 14)
STOCKHOLDERS’ EQUITY:
Preferred stock — 5,000 shares authorized as of June 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 June 30, 2018 - 50,635 and December 31, 2017 - 50,248	359,570		353,392
Retained earnings	337,618		321,408
Accumulated other comprehensive income	2,066		1,534
Total stockholders’ equity	699,254		676,334
TOTAL	$	1,291,191	$	1,111,811
See condensed notes to consolidated financial statements.			(concluded)

4

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (In thousands, except per share amounts - unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
NET SALES	$	224,810		$	186,549		$	427,844		$	357,618
COST OF SALES	124,801			102,408			239,779			197,535
GROSS PROFIT	100,009			84,141			188,065			160,083
OPERATING EXPENSES:
Selling, general and administrative	69,095			57,409			134,007			115,180
Research and development	15,316			13,313			29,638			25,838
Contingent consideration expense (benefit)	178			(18		)	219			19
Acquired in-process research and development	306			75			306			75
Total operating expenses	84,895			70,779			164,170			141,112
INCOME FROM OPERATIONS	15,114			13,362			23,895			18,971
OTHER INCOME (EXPENSE):
Interest income	342			89			487			172
Interest expense	(3,338		)	(1,639		)	(5,736		)	(4,345		)
Gain on bargain purchase	—			(669		)	—			11,574
Other income (expense) - net	(553		)	170			(721		)	434
Other income (expense) — net	(3,549		)	(2,049		)	(5,970		)	7,835
INCOME BEFORE INCOME TAXES	11,565			11,313			17,925			26,806
INCOME TAX EXPENSE	624			1,830			1,715			2,520
NET INCOME	$	10,941		$	9,483		$	16,210		$	24,286
EARNINGS PER COMMON SHARE:
Basic	$	0.22		$	0.19		$	0.32		$	0.51
Diluted	$	0.21		$	0.19		$	0.31		$	0.50
AVERAGE COMMON SHARES:
Basic	50,473			49,957			50,376			47,406
Diluted	52,154			51,188			52,033			48,516
See condensed notes to consolidated financial statements.

5

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(In thousands - unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income	$	10,941		$	9,483		$	16,210		$	24,286
Other comprehensive income (loss):
Cash flow hedges	881			(527		)	2,873			310
Less income tax benefit (expense)	(226		)	205			(738		)	(121		)
Foreign currency translation adjustment	(4,195		)	1,425			(1,603		)	2,205
Less income tax expense	—			—			—			(252		)
Total other comprehensive income (loss)	(3,540		)	1,103			532			2,142
Total comprehensive income	$	7,401		$	10,586		$	16,742		$	26,428
See condensed notes to consolidated financial statements.

6

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (In thousands - unaudited)
	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,210		$	24,286
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,779			25,709
Gain on bargain purchase	—			(11,574		)
Loss on sales and/or abandonment of property and equipment	371			234
Write-off of patents and intangible assets	86			19
Acquired in-process research and development	306			75
Amortization of deferred credits	(71		)	(76		)
Amortization of long-term debt issuance costs	402			343
Deferred income taxes	—			(295		)
Stock-based compensation expense	2,821			1,691
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade receivables	(27,947		)	(13,248		)
Other receivables	966			(114		)
Inventories	(7,189		)	(2,160		)
Prepaid expenses and other current assets	(3,105		)	(1,230		)
Prepaid income taxes	(100		)	(92		)
Income tax refund receivables	(1,146		)	294
Other assets	(751		)	(1,500		)
Trade payables	15,767			3,664
Accrued expenses	7,467			7,421
Income taxes payable	(2,076		)	(301		)
Deferred compensation payable	438			513
Other long-term obligations	(179		)	907
Total adjustments	18,839			10,280
Net cash provided by operating activities	35,049			34,566
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment	(31,559		)	(17,782		)
Intangible assets	(1,755		)	(1,082		)
Proceeds from the sale of property and equipment	4			3
Issuance of note receivable	(10,500		)	—
Cash paid in acquisitions, net of cash acquired	(118,654		)	(54,809		)
Net cash used in investing activities	(162,464		)	(73,670		)
See condensed notes to consolidated financial statements.				(continued)

7

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (In thousands - unaudited)
	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	$	3,251		$	140,989
Offering costs	—			(815		)
Proceeds from issuance of long-term debt	320,827			96,859
Payments on long-term debt	(185,827		)	(179,359		)
Contingent payments related to acquisitions	(130		)	(30		)
Net cash provided by financing activities	138,121			57,644
EFFECT OF EXCHANGE RATES ON CASH	470			(36		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	11,176			18,504
CASH AND CASH EQUIVALENTS:
Beginning of period	32,336			19,171
End of period	$	43,512		$	37,675
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized interest of $314 and $240, respectively)	$	5,714		$	4,386
Income taxes	$	5,141		$	2,678
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment purchases in accounts payable	$	3,943		$	1,560
Acquisition purchases in accrued expenses and other long-term obligations	$	—		$	6,000
Merit common stock surrendered (32 and 0 shares, respectively) in exchange for exercise of stock options	$	1,684		$	—
See condensed notes to consolidated financial statements.				(concluded)

8

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 six-month periods ended June 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 June 30, 2018 and December 31, 2017, and our results of operations and cash flows for the three and six-month periods ended June 30, 2018 and 2017. The results of operations for the three and six-month periods ended June 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 June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30,		December 31,
	2018		2017
Finished goods	$	101,092	$	86,555
Work-in-process	20,962		12,799
Raw materials	47,200		55,934
Total Inventories	$	169,254	$	155,288

3. Stock-Based Compensation Expense. The stock-based compensation expense before income tax expense for the three and six months ended June 30, 2018 and 2017, consisted of the following (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Cost of sales	$	232	$	168	$	416	$	264
Research and development	147		100		271		152
Selling, general and administrative	1,186		846		2,134		1,275
Stock-based compensation expense before taxes	$	1,565	$	1,114	$	2,821	$	1,691

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 June 30, 2018, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $22.4 million and is expected to be recognized over a weighted average period of 3.46 years.

During the three and six-month periods ended June 30, 2018, we granted stock-based awards representing 200,000 and 692,002 shares of our common stock, respectively. During the three and six-month periods ended June 30, 2017, we granted stock-based awards representing approximately 1.28 million shares of our common stock. 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:

9

	Six Months Ended June 30,
	2018	2017
Risk-free interest rate	2.63% - 2.77%	1.77% - 1.79%
Expected option life	5.0 years	5.0 years
Expected dividend yield	—	—
Expected price volatility	34.06% - 34.32%	33.81% - 34.03%

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					Six Months
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount
Period ended June 30, 2018:
Basic EPS	$	10,941	50,473	$	0.22	$	16,210	50,376	$	0.32
Effect of dilutive stock options and warrants			1,681					1,657
Diluted EPS	$	10,941	52,154	$	0.21	$	16,210	52,033	$	0.31
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive			535					359
Period ended June 30, 2017:
Basic EPS	$	9,483	49,957	$	0.19	$	24,286	47,406	$	0.51
Effect of dilutive stock options and warrants			1,231					1,110
Diluted EPS	$	9,483	51,188	$	0.19	$	24,286	48,516	$	0.50
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive			1,007					552

5. Acquisitions. 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 a follows (in thousands):

10

Net Assets Acquired
Inventories	$	971
Intangibles
Developed technology	4,840
Customer list	120
Trademarks	400
Goodwill	938
Total net 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 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 segment since the acquisition date. During the period from April 6, 2018 to June 30, 2018, our net sales of NinePoint products were approximately $1.1 million. We believe the NinePoint products will enhance the product offerings of our Endotek 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, 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 a rate of 9% and is collateralized by NinePoint's rights, interest and title to the NvisionVLE® Imaging System and any other product owned or licensed by 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 six-month periods ended June 30, 2018, our net sales of BD products were approximately $12.2 million and $18.5 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 $41,000 and $1.8 million for the three and six-month periods ended June 30, 2018. The following table summarizes the preliminary purchase price allocated to the assets acquired from BD (in thousands):

11

		Preliminary Allocation		Adjustments (1)			Revised Allocation
	Inventories	$	6,039	$	(235	)	$	5,804
	Property and equipment	581		167			748
	Intangibles
	Developed technology	79,900		(5,900		)	74,000
	Customer list	3,500		700			4,200
	Trademarks	4,700		200			4,900
	Goodwill	5,387		5,226			10,613
	Total net assets acquired	$	100,107	$	158		$	100,265
(1)	Under U.S. GAAP, measurement period adjustments are recognized on a prospective basis in the period of change, instead of restating prior periods. There was no impact to reported earnings in connection with these measurement period adjustments for the periods presented. Amounts represent adjustments to the preliminary purchase price allocation first presented in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 resulting from a final working capital adjustment and our ongoing activities with respect to finalizing asset valuations for this acquisition.

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 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 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 segment since the acquisition date. During the three and six months ended June 30, 2018, our net sales of ITL products were approximately $2.0 million and $4.2 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.

12

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):

Net Assets Acquired
Inventories	$	594
Intangibles
Developed technology	14,920
Customer list	120
Goodwill	6,366
Total net 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 six months ended June 30, 2018, our net sales of Osseon products were approximately $588,000 and $1.1 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 net assets acquired (in thousands):

Net Assets Acquired
Inventories	$	979
Property and equipment	58
Intangibles
Developed technology	5,400
Customer list	200
Goodwill	203
Total net 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 and liabilities assumed (in thousands):

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Net Assets Acquired
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 six months ended June 30, 2018, our net sales of the Argon critical care products were approximately $11.2 million and $23.7 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):

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	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 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 segment since the acquisition date. During the three and six months ended June 30, 2018, our net sales of the products acquired from Catheter Connections were approximately $3.1 million and $6.3 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):

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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		)
Net assets acquired	$	38,000

We are amortizing the Catheter Connections developed technology asset over 12 years, the related trademarks over 10 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.

On July 6, 2016, we acquired all of the issued and outstanding shares of DFINE Inc. ("DFINE"). The DFINE acquisition added a line of vertebral augmentation products for the treatment of vertebral compression fractures, as well as medical devices used to treat metastatic spine tumors. We made an initial payment of $97.5 million to certain DFINE stockholders on July 6, 2016 and paid approximately $578,000 related to a net working capital adjustment subject to review by Merit and the preferred stockholders of DFINE. We accounted for the acquisition as a business combination. Acquisition-related costs during the year ended December 31, 2016, which are included in selling, general, and administrative expenses were approximately $1.6 million. The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the three and six months ended June 30, 2018, our net sales of DFINE products were approximately $7.2 million and $14.5 million, respectively. It is not practical to separately report the earnings related to the DFINE acquisition, as we cannot split out sales costs related to DFINE products, principally because our sales representatives are selling multiple products (including DFINE products) in the cardiovascular business segment. The purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on estimated fair values, as follows (in thousands):

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Assets Acquired
Trade receivables	$	4,054
Other receivables	6
Inventories	8,585
Prepaid expenses and other assets	630
Property and equipment	1,630
Other long-term assets	145
Intangibles
Developed technology	67,600
Customer lists	2,400
Trademarks	4,400
Goodwill	24,818
Total assets acquired	114,268
Liabilities Assumed
Trade payables	(1,790		)
Accrued expenses	(5,298		)
Deferred income tax liabilities - current	(701		)
Deferred income tax liabilities - noncurrent	(10,844		)
Total liabilities assumed	(18,633		)
Net assets acquired, net of cash received of $1,327	$	95,635

The gross amount of trade receivables we acquired in the acquisition was approximately $4.3 million, of which approximately $224,000 was expected to be uncollectible or returned. With respect to the DFINE assets, we are amortizing developed technology over 15 years and customer lists on an accelerated basis over nine years. While U.S. trademarks can be renewed indefinitely, we currently estimate that we will generate cash flow from the acquired trademarks for a period of 15 years from the acquisition date. The total weighted-average amortization period for these acquired intangible assets is 14.8 years.

On February 4, 2016, we purchased the HeRO® Graft device and other related assets from CryoLife, Inc., a developer of medical devices based in Kennesaw, Georgia ("CryoLife"). The HeRO Graft is a fully subcutaneous vascular access system intended for use in maintaining long-term vascular access for chronic hemodialysis patients who have failing fistulas, grafts or are catheter dependent due to a central venous blockage. The purchase price was $18.5 million, which was paid in full during 2016. We accounted for this acquisition as a business combination. The purchase price was allocated as follows (in thousands):

Assets Acquired
Inventories	$	2,455
Property and equipment	290
Intangibles
Developed technology	12,100
Trademarks	700
Customers Lists	400
Goodwill	2,555
Total assets acquired	$	18,500

We are amortizing the developed HeRO Graft technology asset over 10 years, the related trademarks over 5.5 years, and the associated customer lists over 12 years. We have estimated the weighted average life of the intangible HeRO Graft assets acquired to be approximately 9.8 years. Acquisition-related costs related to the HeRO Graft device and other related assets during the year ended December 31, 2016, which are included in selling, general and administrative expenses, 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 six months ended June 30, 2018, our net sales of the products acquired from CryoLife were approximately $2.2 million and $4.2 million, respectively. It is not practical to separately report the earnings related to the products acquired from CryoLife, as

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we cannot split out sales costs related to those products, principally because our sales representatives are selling multiple products (including the HeRO Graft device) in the cardiovascular business segment.

The following table summarizes our consolidated results of operations for the six-month period ended June 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):

	Six Months Ended
	June 30, 2017
	As Reported		Pro Forma
Net sales	$	357,618	$	360,378
Net income	24,286		12,444
Earnings per common share:
Basic	$	0.51	$	0.26
Diluted	$	0.50	$	0.26

* The pro forma results for the three-month periods ended June 30, 2018 and 2017 and the six-month period ended June 30, 2018 are not included in the table above because the operating results for the Argon critical care division acquisition were included in our consolidated statements of income for these periods.

The unaudited pro forma information set forth above is for informational purposes only and includes adjustments related to the step-up of acquired inventories, amortization expense of acquired intangible assets, interest expense on long-term debt and changes in the timing of the recognition of the gain on bargain purchase. The pro forma information should not be considered indicative of actual results that would have been achieved if the acquisition of the Argon critical care division had occurred on January 1, 2016, or results that may be obtained in any future period. The pro forma consolidated results of operations do not include the acquisition of assets from BD because it was deemed impracticable to obtain information to determine net income associated with the acquired product lines which represent a small product line of a large, consolidated company without standalone financial information. The pro forma consolidated results of operations do not include the DirectACCESS, ITL, Laurane, Osseon, VAT or Catheter Connections acquisitions as we do not deem the pro forma effect of these transactions to be material.

The goodwill arising from the acquisitions discussed above consists largely of the synergies and economies of scale we hope to achieve from combining the acquired assets and operations with our historical operations. The goodwill recognized from certain acquisitions is expected to be deductible for income tax purposes.

6. Revenue from Contracts with Customers.

In accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), we recognize revenue when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration we to receive in exchange for these goods. To achieve this core principle, we apply the following five steps:

1. Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred if the amortization period would have been one year or less.

2. Identify the performance obligations in the contract. Generally, our contracts with customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations relate to delivering single-use medical products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans.

3. Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of June 30, 2018 contained a significant financing

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component. Further, our methodology to estimate and recognize variable consideration is consistent with the requirements of ASC 606. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

4. Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we recognize revenue upon delivery of the product to the customer's control at contractually stated pricing.

5. Recognize revenue when or as we satisfy a performance obligation. We satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

Disaggregation of Revenue

The disaggregation of revenue is based on type of product and geographical region. For descriptions of our product offerings and segments, see Note 12 in our 2017 Form 10-K.

The following tables present revenue from contracts with customers for the three and six-month periods ended June 30, 2018 and 2017 (in thousands):

	Three Months Ended June 30, 2018						Three Months Ended June 30, 2017
	United States		International		Total		United States		International		Total
Cardiovascular
Stand-alone devices	$	50,941	$	41,555	$	92,496	$	37,202	$	33,854	$	71,056
Custom kits and procedure trays	23,667		10,325		33,992		24,271		7,526		31,797
Inflation devices	8,160		16,145		24,305		8,042		12,747		20,789
Catheters	16,704		22,670		39,374		16,022		16,407		32,429
Embolization devices	5,094		7,630		12,724		5,593		6,565		12,158
CRM/EP	11,758		1,738		13,496		10,264		1,170		11,434
Total	116,324		100,063		216,387		101,394		78,269		179,663
Endoscopy
Endoscopy devices	8,121		302		8,423		6,712		174		6,886
Total	$	124,445	$	100,365	$	224,810	$	108,106	$	78,443	$	186,549

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	Six Months Ended June 30, 2018						Six Months Ended June 30, 2017
	United States		International		Total		United States		International		Total
Cardiovascular
Stand-alone devices	$	94,953	$	80,789	$	175,742	$	73,366	$	61,343	$	134,709
Custom kits and procedure trays	45,984		21,280		67,264		45,737		14,935		60,672
Inflation devices	15,828		30,896		46,724		16,017		23,279		39,296
Catheters	31,974		41,265		73,239		31,151		31,454		62,605
Embolization devices	10,126		15,184		25,310		11,134		13,551		24,685
CRM/EP	20,596		3,366		23,962		20,011		2,440		22,451
Total	219,461		192,780		412,241		197,416		147,002		344,418
Endoscopy
Endoscopy devices	15,040		563		15,603		12,806		394		13,200
Total	$	234,501	$	193,343	$	427,844	$	210,222	$	147,396	$	357,618

7. Segment Reporting. We report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of cardiology and radiology medical device products which assist in diagnosing and treating coronary artery disease, peripheral vascular disease and other non-vascular diseases and includes embolotherapeutic, cardiac rhythm management ("CRM"), electrophysiology ("EP"), critical care, and interventional oncology and spine devices. Our endoscopy segment focuses on the gastroenterology, pulmonary and thoracic surgery specialties, with a portfolio consisting primarily of stents, dilation balloons, certain inflation devices, guidewires, and other disposable products. We evaluate the performance of our operating segments based on operating income. 

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and six-month periods ended June 30, 2018 and 2017, are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Net Sales (1)
Cardiovascular	$	216,387	$	179,663	$	412,241	$	344,418
Endoscopy	8,423		6,886		15,603		13,200
Total net sales	$	224,810	$	186,549	$	427,844	$	357,618
Operating Income (1)
Cardiovascular	$	12,663	$	11,493	$	19,060	$	15,475
Endoscopy	2,451		1,869		4,835		3,496
Total operating income	$	15,114	$	13,362	$	23,895	$	18,971

⁽¹⁾ Sales and operating income have been adjusted from prior disclosure to reflect changes in product classifications between our operating segments, which were made to be consistent with updates in the management of our product portfolios in 2018.

8. Recently Issued Financial Accounting Standards

Recently Adopted

In October 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 became effective for us as of January 1, 2018. The adoption of ASU 2016-16 did not have a material impact on our consolidated financial statements.

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In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. We adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance regarding the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. We adopted ASU 2016-01 on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on our consolidated financial statements.

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU (and all subsequent ASUs that modified Topic 606) effective January 1, 2018 on a modified retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations or cash flows. As such, prior period amounts are not adjusted and continue to be reported under accounting standards then in effect, and we did not record a cumulative adjustment to the opening equity balance of retained earnings as of January 1, 2018. However, additional disclosures have been added in accordance with the requirements of Topic 606 and are reflected in Note 6.

Not Yet Adopted

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. While we continue to assess the potential impact of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017 (the "2017 Tax Act"). ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the anticipated impact of adopting ASU 2018-02 on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the anticipated impact of adopting ASU 2017-12 on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02.

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We do not believe any other issued and not yet effective accounting standards will be relevant to our consolidated financial statements.

9. Income Taxes. On December 22, 2017, the 2017 Tax Act was signed into law. At December 31, 2017, we recorded a provisional net tax benefit related to the remeasurement of deferred taxes and a one-time tax expense for the transition tax. In accordance with SEC Staff Accounting Bulletin 118 (“SAB 118”), income tax effects of the 2017 Tax Act may be refined upon obtaining, preparing, and/or analyzing additional information during the measurement period and such changes could be material. During the measurement period, provisional amounts may also be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017 by U.S. regulatory and standard-setting bodies. As of June 30, 2018, the amounts recorded for the 2017 Tax Act remain provisional and may be impacted by further analysis and subsequently issued guidance.

For tax years beginning after December 31, 2017, the 2017 Tax Act introduces new provisions of U.S. taxation of certain Global Intangible Low-Taxed Income (“GILTI”). We have not yet determined our policy election with respect to whether to record deferred taxes for temporary basis differences expected to reverse as GILTI in future periods, or account for taxes on GILTI using the period cost method. We have, however, included an estimate of the current GILTI impact in our tax provision for the three and six months ended June 30, 2018.

Our non-U.S. earnings are currently considered as indefinitely reinvested overseas. Previously, any repatriation by way of a dividend may have been subject to both U.S. federal and state income taxes, as adjusted for any non-U.S. tax credits. Under the 2017 Tax Act, such dividends should no longer be subject to U.S. federal tax. We are still analyzing how the 2017 Tax Act impacts our existing accounting position to indefinitely reinvest foreign earnings and have yet to determine whether we plan to change our position. We will record the tax effects of any change to our existing assertion in the period that we complete our analysis. If such earnings were to be distributed, any foreign withholding taxes could be material.

Our provision for income taxes for the three months ended June 30, 2018 and 2017 was a tax expense of approximately $624,000 and $1.8 million, respectively, which resulted in an effective tax rate of 5.4% and 16.2%, respectively. Our provision for income taxes for the six months ended June 30, 2018 and 2017 was a tax expense of approximately $1.7 million and $2.5 million, respectively, which resulted in an effective tax rate of 9.6% and 9.4%, respectively. The decrease in the effective income tax rate for the second quarter of 2018 compared to the second quarter of 2017 was primarily caused by a decrease in the federal statutory tax rate, as well as a discrete tax benefit related to share-based payment awards. Despite the decrease resulting from these items, the effective tax rate for the six months ended June 30, 2018 is relatively unchanged when compared to the corresponding period in 2017 due primarily to the nontaxable gain on the bargain purchase recorded in connection with the 2017 acquisition of the Argon critical care division.

10. Revolving Credit Facility and Long-Term Debt. Principal balances outstanding under our long-term debt obligations as of June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30, 2018			December 31, 2017
2016 Term loan	$	80,000		$	85,000
2016 Revolving credit loans	327,000			187,000
Collateralized debt facility	6,985			6,959
Less unamortized debt issuance costs	(418		)	(487		)
Total long-term debt	413,567			278,472
Less current portion	21,985			19,459
Long-term portion	$	391,582		$	259,013

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2016 Term Loan and Revolving Credit Loans

On July 6, 2016, we entered into a Second Amended and Restated Credit Agreement (as amended to date, the “Second Amended Credit Agreement”), with Wells Fargo Bank, National Association, as administrative agent, swingline lender and a lender, and Wells Fargo Securities, LLC, as sole lead arranger and sole bookrunner. In addition to Wells Fargo Bank, National Association, Bank of America, N.A., U.S. Bank, National Association, and HSBC Bank USA, National Association, are parties to the Second Amended Credit Agreement as lenders. The Second Amended Credit Agreement amends and restates in its entirety our previously outstanding Amended and Restated Credit Agreement and all amendments thereto. The Second Amended Credit Agreement was amended on September 28, 2016 to allow for a new revolving credit loan to our wholly-owned subsidiary, on March 20, 2017 to allow flexibility in how we apply net proceeds received from equity issuances to prepay outstanding indebtedness, on December 13, 2017 to increase the revolving credit commitment by $100 million up to $375 million, and on March 28, 2018 to amend certain debt covenants.

The Second Amended Credit Agreement provides for a term loan of $150 million and a revolving credit commitment up to an aggregate amount of $375 million, which includes a reserve of $25 million to make swingline loans from time to time. The term loan is payable in quarterly installments in the amounts provided in the Second Amended Credit Agreement until the maturity date of July 6, 2021, at which time the term and revolving credit loans, together with accrued interest thereon, will be due and payable. At any time prior to the maturity date, we may repay any amounts owing under all revolving credit loans, term loans, and all swingline loans in whole or in part, subject to certain minimum thresholds, without premium or penalty, other than breakage costs.

Revolving credit loans denominated in dollars and term loans made under the Second Amended Credit Agreement bear interest, at our election, at either a Base Rate or Eurocurrency Base Rate (as such terms are defined in the Second Amended Credit Agreement) plus the applicable margin, which increases as our Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) increases. Revolving credit loans denominated in an Alternative Currency (as defined in the Second Amended Credit Agreement) bear interest at the Eurocurrency rate plus the applicable margin. Swingline loans bear interest at the Base Rate plus the applicable margin. Upon an event of default, the interest rate may be increased by 2.0%. The revolving credit commitment also carries a commitment fee of 0.15% to 0.40% per annum on the unused portion.

The Second Amended Credit Agreement is collateralized by substantially all our assets. The Second Amended Credit Agreement contains covenants, representations and warranties, and other terms customary for loans of this nature. The Second Amended Credit Agreement requires that we maintain certain financial covenants, as follows:

		Covenant Requirement
Consolidated Total Leverage Ratio (1)
	January 1, 2018 and thereafter	3.5 to 1.0
Consolidated EBITDA (2)		1.25 to 1.0
Consolidated Net Income (3)		$0
Facility Capital Expenditures (4)		$30 million
(1)	Maximum Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) as of any fiscal quarter end.
(2)	Minimum ratio of Consolidated EBITDA (as defined in the Second Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Fixed Charges (as defined in the Second Amended Credit Agreement) for any period of four consecutive fiscal quarters.
(3)	Minimum level of Consolidated Net Income (as defined in the Second Amended Credit Agreement) for certain periods, and subject to certain adjustments.
(4)	Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Second Amended Credit Agreement) in any fiscal year.

Additionally, the Second Amended Credit Agreement contains customary events of default and affirmative and negative covenants for transactions of this type. As of June 30, 2018, we believe we were in compliance with all covenants set forth in the Second Amended Credit Agreement.

As of June 30, 2018, we had outstanding borrowings of approximately $407 million under the Second Amended Credit Agreement, with available borrowings of approximately $47.8 million, based on the leverage ratio required pursuant to the Second Amended Credit Agreement. Our interest rate as of June 30, 2018 was a fixed rate of 2.87% on $175 million as a result an interest rate swap

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(see Note 11) and a variable floating rate of 3.84% on $232 million. Our interest rate as of December 31, 2017 was a fixed rate of 2.68% on $175 million as a result of an interest rate swap and a variable floating rate of 2.82% on $97 million.

Collateralized Debt Facility

On March 14, 2018, we renewed our loan agreement with HSBC Bank USA, National Association ("HSBC Bank") whereby HSBC Bank agreed to provide us with a loan in the amount of approximately $7.0 million. The loan matures on July 10, 2018, with an extension available at our option, subject to certain conditions. The loan agreement bears interest at the three-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.0%, which resets quarterly. The loan is secured by assets having a value not less than the currently outstanding loan balance. The loan contains covenants, representations and warranties and other terms customary for loans of this nature. As of June 30, 2018, our interest rate on the loan was a variable rate of 3.26%.

Future Payments

Future minimum principal payments on our long-term debt as of June 30, 2018, are as follows (in thousands):

Years Ending	Future Minimum
December 31	Principal Payments
Remaining 2018	$	14,485
2019	15,000
2020	17,500
2021	367,000
Total future minimum principal payments	$	413,985

11. Derivatives

General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of these risks by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative programs are classified as operating activities in the accompanying consolidated statements of cash flows.

We formally document, designate and assess the effectiveness of transactions that receive hedge accounting initially and on an ongoing basis. Changes in the fair value of derivatives that qualify for hedge accounting treatment are recorded, net of applicable taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity in the accompanying consolidated balance sheets. For the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative.

Interest Rate Risk. A portion of our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Second Amended Credit Agreement that is solely due to changes in the benchmark interest rate.

Derivatives Designated as Cash Flow Hedges

On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a current notional amount of $175.0 million with Wells Fargo to fix the one-month LIBOR rate at 1.12%. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The interest rate swap is scheduled to expire on July 6, 2021.

At June 30, 2018 and December 31, 2017, our interest rate swap qualified as a cash flow hedge. The fair value of our interest rate swap at June 30, 2018 was an asset of approximately $8.0 million, which was partially offset by approximately $2.1 million in

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deferred taxes. The fair value of our interest rate swap at December 31, 2017 was an asset of approximately $5.7 million, which was offset by approximately $1.5 million in deferred taxes.

Foreign Currency Risk. We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Euros, British Pounds, Chinese Renminbi, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Danish Krone, Japanese Yen, Korea Won, and Singapore Dollars. We do not use derivative financial instruments for trading or speculative purposes. We are not subject to any credit risk contingent features related to our derivative contracts, and counterparty risk is managed by allocating derivative contracts among several major financial institutions.

Derivatives Designated as Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded from the assessment of effectiveness, are recognized in earnings during the current period. We enter into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies.

We enter into approximately 100 cash flow foreign currency hedges every month. As of June 30, 2018, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with the following notional amounts (in thousands and in local currencies):

Currency	Symbol	Forward Notional Amount
Canadian Dollar	CAD	2,410
Swiss Franc	CHF	1,158
Chinese Renminbi	CNY	66,000
Danish Krone	DKK	11,650
Euro	EUR	12,870
British Pound	GBP	2,975
Mexican Peso	MXN	94,275
Swedish Krona	SEK	13,830

Derivatives Not Designated as Cash Flow Hedges

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 20 foreign currency fair value hedges every month. As of June 30, 2018, we had entered into foreign currency forward contracts related to those balance sheet accounts, with the following notional amounts (in thousands and in local currencies):

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Currency	Symbol	Forward Notional Amount
Australian Dollar	AUD	8,400
Brazilian Real	BRL	8,500
Canadian Dollar	CAD	3,098
Swiss Franc	CHF	255
Chinese Renminbi	CNY	95,228
Danish Krone	DKK	2,885
Euro	EUR	25,861
British Pound	GBP	1,584
Hong Kong Dollar	HKD	11,000
Japanese Yen	JPY	260,000
Korean Won	KRW	2,700,000
Mexican Peso	MXN	18,700
Swedish Krona	SEK	10,536
Singapore Dollar	SGD	6,900

Balance Sheet Presentation of Derivatives. As of June 30, 2018, and December 31, 2017, all derivatives, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded gross at fair value on our consolidated balance sheets. We are not subject to any master netting agreements.

The fair value of derivative instruments on a gross basis is as follows (in thousands):

		Fair Value
	Balance Sheet Location	June 30, 2018			December 31, 2017
Derivatives designated as hedging instruments
Assets
Interest rate swap	Other assets (long-term)	$	8,047		$	5,749
Foreign currency forward contracts	Prepaid expenses and other assets	700			363
Foreign currency forward contracts	Other assets (long-term)	83			35
Liabilities
Foreign currency forward contracts	Accrued expenses	(231		)	(468		)
Foreign currency forward contracts	Other long-term obligations	(38		)	(82		)
Derivatives not designated as hedging instruments
Assets
Foreign currency forward contracts	Prepaid expenses and other assets	$	1,097		$	223
Liabilities
Foreign currency forward contracts	Accrued expenses	(228		)	(841		)

Income Statement Presentation of Derivatives.

Derivatives Designated as Cash Flow Hedges

Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income and net earnings in our consolidated statements of income, consolidated statements of comprehensive income and consolidated balance sheets (in thousands):

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	Amount of Gain/(Loss) recognized in OCI						Amount of Gain/(Loss) reclassified from AOCI
	Three Months Ended June 30,						Three Months Ended June 30,
	2018		2017				2018			2017
Derivative instrument						Location in statements of income
Interest rate swaps	$	748	$	(893	)	Interest Expense	$	357		$	—
Foreign currency forward contracts	394		353			Revenue	(234		)	(41		)
						Cost of sales	138			28
	Amount of Gain/(Loss) recognized in OCI						Amount of Gain/(Loss) reclassified from AOCI
	Six Months Ended June 30,						Six Months Ended June 30,
	2018		2017				2018			2017
Derivative instrument						Location in statements of income
Interest rate swaps	2,868		(507		)	Interest Expense	570			(104		)
Foreign currency forward contracts	568		741			Revenue	(385		)	(40		)
						Cost of sales	378			(37		)

The net amount recognized in earnings during the three and six months ended June 30, 2018 and 2017 due to ineffectiveness and amounts excluded from the assessment of hedge effectiveness were not significant.

As of June 30, 2018, approximately $464,000, or $345,000 after taxes, was expected to be reclassified from accumulated other comprehensive income to earnings in revenue and cost of sales over the succeeding twelve months. As of June 30, 2018, approximately $2.2 million, or $1.6 million after taxes, was expected to be reclassified from accumulated other comprehensive income to earnings in interest expense over the succeeding twelve months.

Derivatives Not Designated as Hedging Instruments

The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands):

		Three Months Ended June 30,					Six Months Ended June 30,
		2018		2017			2018		2017
Derivative Instrument	Location in statements of income
Foreign currency forward contracts	Other expense	$	3,153	$	(1,834	)	$	2,038	$	(2,692	)

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12. Fair Value Measurements. Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

				Fair Value Measurements Using
	Total Fair			Quoted prices in		Significant other			Significant
	Value at			active markets		observable inputs			unobservable inputs
Description	June 30, 2018			(Level 1)		(Level 2)			(Level 3)
Interest rate contracts (1)	$	8,047		$	—	$	8,047		$	—
Foreign currency contract assets, current and long-term (2)	$	1,880		$	—	$	1,880		$	—
Foreign currency contract liabilities, current and long-term (3)	$	(497	)	$	—	$	(497	)	$	—
				Fair Value Measurements Using
	Total Fair			Quoted prices in		Significant other			Significant
	Value at			active markets		observable inputs			unobservable inputs
Description	December 31, 2017			(Level 1)		(Level 2)			(Level 3)
Interest rate contracts (1)	$	5,749		$	—	$	5,749		$	—
Foreign currency contract assets, current and long-term (2)	$	621		$	—	$	621		$	—
Foreign currency contract liabilities, current and long-term (3)	$	(1,391	)	$	—	$	(1,391	)	$	—

(1)    The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as other assets or other long-term obligations in the consolidated balance sheets.

(2)    The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets or other long-term assets in the consolidated balance sheets.

(3)    The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.

Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue milestones. See Note 5 for further information regarding these acquisitions. The contingent consideration liability is re-measured at the estimated fair value at each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent consideration liability during the three and six-month periods ended June 30, 2018 and 2017, consisted of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Beginning balance	$	10,928		$	705		$	10,956		$	683
Contingent consideration liability recorded as the result of acquisitions (see Note 5)	—			4,900			—			4,900
Fair value adjustments recorded to income during the period	99			(18		)	86			19
Contingent payments made	(115		)	(15		)	(130		)	(30		)
Ending balance	$	10,912		$	5,572		$	10,912		$	5,572

As of June 30, 2018, approximately $10.6 million in contingent consideration liability was included in other long-term obligations and approximately $301,000 was included in accrued expenses in our consolidated balance sheet. As of December 31, 2017, approximately $10.7 million in contingent consideration liability was included in other long-term obligations and $289,000 was included in accrued expenses in our consolidated balance sheet. The cash paid to settle the contingent consideration liability recognized at fair value as of the acquisition date (including measurement-period adjustments) has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

During the year ended December 31, 2016, we sold a cost method investment for cash and for the right to receive additional payments based on various contingent milestones. We determined the fair value of the contingent payments using Level 3 inputs

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defined under authoritative guidance for fair value measurements, and we recorded a contingent receivable asset, which as of June 30, 2018 and December 31, 2017 had a value of approximately $474,000 and $760,000, respectively. We record any changes in fair value to operating expenses as part of our cardiovascular segment in our consolidated statements of income. During the three and six months ended June 30, 2018, we recorded a loss on the contingent receivable of approximately $79,000 and $132,000, respectively and received payments of approximately $0 and $153,000, respectively. As of June 30, 2018, approximately $184,000 was included in other long-term assets and approximately $290,000 was included in other receivables as a current asset in our consolidated balance sheet. As of December 31, 2017, approximately $319,000 was included in other long-term assets and approximately $441,000 was included in other receivables as a current asset in our consolidated balance sheet.

The recurring Level 3 measurement of our contingent consideration liability and contingent receivable includes the following significant unobservable inputs at June 30, 2018 and December 31, 2017 (amounts in thousands):

Contingent consideration asset or liability	Fair value at June 30, 2018		Valuation technique	Unobservable inputs	Range
Revenue-based payments	$	10,912	Discounted cash flow	Discount rate	9.9% - 15%
contingent liability				Projected year of payments	2018-2037
Contingent receivable	$	474	Discounted cash flow	Discount rate	10%
asset				Probability of milestone payment	54%
				Projected year of payments	2018-2019
Contingent consideration asset or liability	Fair value at December 31, 2017		Valuation technique	Unobservable inputs	Range
Revenue-based payments	$	10,956	Discounted cash flow	Discount rate	9.9% - 15%
contingent liability				Probability of milestone payment	100%
				Projected year of payments	2018-2037
Contingent receivable	$	760	Discounted cash flow	Discount rate	10%
asset				Probability of milestone payment	75%
				Projected year of payments	2018-2019

The contingent consideration liability and contingent receivable are re-measured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement. A decrease in the probability of any milestone payment may result in lower fair value measurements. Our determination of the fair value of the contingent consideration liability and contingent receivable could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income.

During the three and six-month periods ended June 30, 2018, we had losses of approximately $29,000 and $86,000, respectively, compared to losses of approximately $1,000 and $19,000 for the three and six-month periods ended June 30, 2017, respectively, related to the measurement of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition.

We believe the carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which are Level 1 inputs.

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13. Goodwill and Intangible Assets. The changes in the carrying amount of goodwill for the six-month period ended June 30, 2018 were as follows (in thousands):

	2018
Goodwill balance at January 1	$	238,147
Effect of foreign exchange	(906		)
Additions as the result of acquisitions	11,757
Goodwill balance at June 30	$	248,998

As of June 30, 2018, we had recorded $8.3 million of accumulated goodwill impairment charges. All of the goodwill balance as of June 30, 2018 and December 31, 2017, is related to our cardiovascular segment.

Other intangible assets at June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents	$	18,196	$	(4,334	)	$	13,862
Distribution agreements	8,192		(5,278		)	2,914
License agreements	23,845		(6,419		)	17,426
Trademarks	21,516		(5,550		)	15,966
Covenants not to compete	1,028		(985		)	43
Customer lists	35,737		(20,680		)	15,057
In-process technology	920		—			920
Total	$	109,434	$	(43,246	)	$	66,188

	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents	$	16,528	$	(3,737	)	$	12,791
Distribution agreements	7,262		(4,686		)	2,576
License agreements	23,783		(5,568		)	18,215
Trademarks	16,224		(4,686		)	11,538
Covenants not to compete	1,028		(968		)	60
Customer lists	31,935		(18,482		)	13,453
In-process technology	920		—			920
Total	$	97,680	$	(38,127	)	$	59,553

Aggregate amortization expense for the three and six-month periods ended June 30, 2018 was approximately $10.4 million and $18.9 million, respectively. Aggregate amortization expense for the three and six-month periods ended June 30, 2017 was approximately $6.2 million and $12.4 million, respectively.

Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of June 30, 2018 (in thousands):

Year Ending December 31
Remaining 2018	$	20,132
2019	39,154
2020	37,881
2021	30,488
2022	28,688

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14. Commitments and Contingencies. In the ordinary course of business, we are involved in various claims and litigation matters. These claims and litigation matters may include actions involving product liability, intellectual property, contract disputes, and employment or other matters that are significant to our business. Based upon our review of currently available information, we do not believe any such actions are likely to be, individually or in the aggregate, materially adverse to our business, financial condition, results of operations or liquidity.

In October 2016, we received a subpoena from the U.S. Department of Justice seeking information on certain of our marketing and promotional practices. We are in the process of responding to the subpoena, which we anticipate will continue during 2018. We have incurred, and anticipate that we will continue to incur, substantial costs in connection with the matter. The investigation is ongoing and at this stage we are unable to predict its scope, duration or outcome. Investigations such as this may result in the imposition of, among other things, significant damages, injunctions, fines or civil or criminal claims or penalties against our company or individuals. Legal expenses we incurred in responding to the U.S. Department of Justice subpoena for the three and six-month periods ended June 30, 2018 were approximately $1.6 million and $3.3 million, respectively.

In the event of unexpected further developments, it is possible that the ultimate resolution of any of the foregoing matters, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred.

15. Issuance of Common Stock. On March 28, 2017, we closed a public offering of 5,175,000 shares of common stock and received proceeds of approximately $136.6 million, which is net of approximately $8.8 million in underwriting discounts and commissions and approximately $816,000 in other direct cost incurred and paid by us in connection with this equity offering. The net proceeds from the offering were used primarily to repay outstanding indebtedness under our Second Amended Credit Agreement (including our term loan and revolving credit loans).

16. Subsequent Events. On July 30, 2018, we closed a public offering of 4,025,000 shares of common stock and received proceeds of approximately $205.4 million, which is net of approximately $10.4 million in underwriting discounts and commissions, and we paid approximately $500,000 in other direct costs incurred in connection with this equity offering. The net proceeds from the offering were used primarily to repay revolving credit loans under our Second Amended Credit Agreement.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this report, other than statements of historical fact, are “forward-looking statements” for purposes of these provisions, including, without limitation, any projections of earnings, revenues or other financial items, any statements of the plans and objectives of our management for future operations, any statements concerning proposed new products or services, any statements regarding the integration, development or commercialization of the business or any assets acquired from other parties, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “seeks,” “believes,” “estimates,” “potential,” “forecasts,” “continue,” or other forms of these words or similar words or expressions, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct. Actual results will likely differ, and could differ materially, from those projected or assumed in the forward-looking statements. Prospective investors are cautioned not to unduly rely on any such forward-looking statements.

Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including the following:

• risks relating to managing growth, particularly if accomplished through acquisitions and the integration of acquired businesses;

• risks relating to protecting our intellectual property;

• claims by third parties that we infringe their intellectual property rights, which could cause us to incur significant legal or licensing expenses and prevent us from selling our products;

• greater scrutiny and regulation by governmental authorities, including risks relating to the subpoena we received in October 2016 from the U.S. Department of Justice seeking information on our marketing and promotional practices;

• risks relating to physicians’ use of our products in unapproved circumstances;

• regulatory clearance processes of the FDA and other governmental authorities and any failure to obtain and maintain required regulatory clearances and approvals;

• disruption of our critical information systems or material breaches in the security of our systems;

• failure to comply with export control laws, customs laws, domestic procurement laws, sanctions laws and other laws governing our operations in the U.S. and other countries, which could subject us to civil or criminal penalties, other remedial measures and legal expenses;

• risks relating to significant adverse changes in, or our failure to comply with, governing regulations;

• restrictions and limitations in our debt agreements and instruments, which could affect our ability to operate our business and our liquidity;

• expending significant resources for research, development, testing and regulatory approval or clearance of our products under development and any failure to develop the products, any failure of the products to be effective or any failure to obtain approvals for commercial use;

• violations of laws targeting fraud and abuse in the healthcare industry;

• risks relating to healthcare reform legislation negatively affecting our financial results, business, operations or financial condition;

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• changes in the regulatory approval process and requirements in foreign countries, which could force us to incur additional expense or experience delays or uncertainties;

• loss of key personnel;

• product liability claims;

• failure to report adverse medical events to the FDA, which may subject us to sanctions that may materially harm our business;

• failure to maintain or establish sales capabilities on our own or through third parties, which may result in our inability to commercialize any of our products in countries where we lack direct sales and marketing capabilities;

• the addressable market for our product groups being smaller than our estimates;

• demands for price concessions resulting from consolidations in the healthcare industry, group purchasing organizations, public procurement policies or other factors beyond our control;

• our inability to compete in markets, particularly if there is a significant change in relevant practices or technology;

• the effect of evolving U.S. and international laws and regulations regarding privacy and data protection;

• fluctuations in foreign currency exchange rates negatively impacting our financial results;

• termination or interruption of, or a failure to monitor, our supply relationships or increases in the price of our component parts, finished products, third-party services or raw materials, particularly petroleum-based products;

• our inability to accurately forecast customer demand for our products or manage our inventory;

• changes in international and national economic and industry conditions;

• inability to generate sufficient cash flow to fund our debt obligations, capital expenditures, and ongoing operations;

• risks relating to our revenues being derived from a few products and medical procedures;

• risks relating to work stoppage, transportation interruptions, severe weather and natural disasters;

• fluctuations in our effective tax rate adversely affecting our business, financial condition or results of operations;

• limits on reimbursement imposed by governmental and other programs;

• failure to comply with applicable environmental laws and regulations;

• volatility of the market price of our common stock;

• dilution as a result of future equity offerings; and

• other factors and risks referenced in our press releases and described or referenced in our reports and other documents filed with the Securities and Exchange Commission.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Our actual results will likely differ, and may differ materially, from anticipated results. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and we assume no obligation to update or disclose revisions to those estimates. If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections. Additional factors that may have a direct bearing on our operating results are discussed in Part I, Item 1A “Risk Factors” in the 2017 Form 10-K.

Disclosure Regarding Trademarks

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This report includes trademarks, tradenames and service marks that are our property or the property of other third parties. Solely for convenience, such trademarks and tradenames sometimes appear without any “™” or “®” symbol. However, failure to include such symbols is not intended to suggest, in any way, that we will not assert our rights or the rights of any applicable licensor, to these trademarks and tradenames.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related condensed notes thereto, which are included in Part I of this Report.

We design, develop, manufacture and market single-use medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of cardiology and radiology devices, which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases and includes embolotherapeutic, cardiac rhythm management, electrophysiology, critical care and interventional oncology and spine devices. Our endoscopy segment focuses on the gastroenterology, pulmonary and thoracic surgery specialties, with a portfolio consisting primarily of stents, dilation balloons, certain inflation devices, guidewires, and other disposable products. Within those two operating segments, we offer products focused in five core product groups: peripheral intervention, cardiac intervention, interventional oncology and spine, cardiovascular and critical care and endoscopy.

For the three-month period ended June 30, 2018, we reported sales of approximately $224.8 million, up approximately $38.3 million or 20.5%, over sales from the three-month period ended June 30, 2017 of approximately $186.5 million. For the six-month period ended June 30, 2018, we reported sales of approximately $427.8 million, up approximately $70.2 million or 19.6%, over sales from the six-month period ended June 30, 2017 of approximately $357.6 million.

Gross profit as a percentage of sales decreased to 44.5% for the three-month period ended June 30, 2018 as compared to 45.1% for the three-month period ended June 30, 2017. Gross profit as a percentage of sales decreased to 44.0% for the six-month period ended June 30, 2018 as compared to 44.8% for the six-month period ended June 30, 2017.

Net income for the three-month period ended June 30, 2018 was approximately $10.9 million, or $0.21 per share, as compared to $9.5 million, or $0.19 per share, for the three-month period ended June 30, 2017. Net income for the six-month period ended June 30, 2018 was approximately $16.2 million, or $0.31 per share, as compared to $24.3 million, or $0.50 per share, for the six-month period ended June 30, 2017.

Recent Developments and Trends

In addition to the trends identified in the 2017 Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview,” we believe that our business in 2018 will be impacted by the following recent events and trends:

• In February 2018, we acquired certain divested assets from BD for an aggregate purchase price of $100.3 million. The acquired assets 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. During the three and six-month periods ended June 30, 2018, our net sales of BD products were approximately $12.2 million and $18.5 million, respectively.

• 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 both in exchange for total consideration of $10.0 million. In addition, we made a loan to NinePoint for $10.5 million. We believe the NinePoint products will enhance the product offerings of our Endotek division (in our endoscopy segment) and will be another step to adding 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. During the period from April 6, 2018 to June 30, 2018, our net sales of NinePoint products were approximately $1.1 million.

• In May 2018, we entered into an agreement for the acquisition of product distribution agreements for the DirectACCESS FirstChoice™ Ultra High Pressure PTA Balloon Catheter and executed a distribution agreement for the QXMédical Q50® PLUS Stent Graft Balloon Catheter.

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• A competitor recently experienced substantial global supply shortages due to internal issues, which has resulted in increased demand for our Merit Laureate® Hydrophilic Guide Wires, our offering of microcatheters (including the Merit Maestro®, SwiftNINJA® and the recently introduced Pursue™ Microcatheter), our Impress® Diagnostic Catheters and our vascular sheaths (including the recently introduced Prelude IDeal™ and PreludeEASE™ product offerings).

Additionally, we expect that (a) our net sales for the remainder of 2018 will be positively impacted by recently-awarded tenders, anticipated releases of new products and commencement of production of the Laurane product line in our Irish facility, and (b) our net income for the remainder of 2018 will be positively impacted by continued manufacturing efficiencies, cost-saving measures, and sales of our biopsy and drainage products, partially offset by several demand-based factors, including changes in our product mix, increases in revenue in certain markets served by distributors, and increases in labor costs and logistical expenses of addressing global supply requirements.

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Results of Operations

The following table sets forth certain operational data as a percentage of sales for the three and six-month periods ended June 30, 2018 and 2017, as indicated:

	Three Months Ended June 30,		Six Months Ended June 30,
	2018	2017	2018	2017
Net sales	100%	100%	100%	100%
Gross profit	44.5	45.1	44.0	44.8
Selling, general and administrative expenses	30.7	30.8	31.3	32.2
Research and development expenses	6.8	7.1	6.9	7.2
Contingent consideration expense (benefit)	0.1	0.0	0.1	0.0
Acquired in-process research and development expenses	0.1	0.0	0.1	0.0
Income from operations	6.7	7.2	5.6	5.3
Other income (expense) - net	(1.6)	(1.1)	(1.4)	2.2
Income before income taxes	5.1	6.1	4.2	7.5
Net income	4.9	5.1	3.8	6.8

Sales

Sales for the three-month period ended June 30, 2018 increased by 20.5%, or approximately $38.3 million, compared to the corresponding period in 2017. Sales for the six-month period ended June 30, 2018 increased by 19.6%, or approximately $70.2 million, compared to the corresponding period in 2017. Listed below are the sales by product category within each of our two financial reporting segments for the three and six-month periods ended June 30, 2018 and 2017 (in thousands, other than percentage changes):

		Three Months Ended June 30,					Six Months Ended June 30,
	% Change	2018		2017		% Change	2018		2017
Cardiovascular
Stand-alone devices	30.2%	$	92,496	$	71,056	30.5%	$	175,742	$	134,709
Custom kits and procedure trays	6.9%	33,992		31,797		10.9%	67,264		60,672
Inflation devices	16.9%	24,305		20,789		18.9%	46,724		39,296
Catheters	21.4%	39,374		32,429		17.0%	73,239		62,605
Embolization devices	4.7%	12,724		12,158		2.5%	25,310		24,685
CRM/EP	18.0%	13,496		11,434		6.7%	23,962		22,451
Total	20.4%	216,387		179,663		19.7%	412,241		344,418
Endoscopy
Endoscopy devices	22.3%	8,423		6,886		18.2%	15,603		13,200
Total	20.5%	$	224,810	$	186,549	19.6%	$	427,844	$	357,618

Note: Certain revenue categories for 2017 have been adjusted from prior disclosure to reflect changes in product classifications to be consistent with updates in Merit's management of its product portfolios during 2018.

Cardiovascular Sales. Our cardiovascular sales for the three-month period ended June 30, 2018 were approximately $216.4 million, up 20.4% when compared to the corresponding period for 2017 of approximately $179.7 million. Sales for the three-month period ended June 30, 2018 were favorably affected by increased sales of (a) our stand-alone devices (particularly our MAP^TM Merit Angioplasty Packs, Merit Laureate® Hydrophilic Guide Wires, EN Snare® Endovascular Snare Systems, and wires, as well as sales from products acquired in connection with our acquisitions including the BD product lines, Catheter Connections, Osseon, and Laurane) of approximately $21.4 million, up 30.2% from the corresponding period for 2017; (b) catheters (particularly our Impress® Diagnostic Catheters, Prelude® and Prelude® Radial Sheath product lines, and our Merit Maestro® Microcatheters) of approximately $6.9 million, up 21.4% from the corresponding period for 2017; (c) our custom kits and procedure trays of approximately $2.2 million (which includes sales from our acquisition of ITL), up 6.9%

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from the corresponding period for 2017; and (d) inflation devices (particularly our basixTOUCH® and BasixCompak® product lines) of approximately $3.5 million, up 16.9% from the corresponding period for 2017.

Our cardiovascular sales for the six-month period ended June 30, 2018 were approximately $412.2 million, up 19.7%, when compared to the corresponding period for 2017 of approximately $344.4 million. Sales for the six-month period ended June 30, 2018 were favorably affected by increased sales of (a) our stand-alone devices (particularly our MAP^TM Merit Angioplasty Packs, Merit Laureate® Hydrophilic Guide Wires, EN Snare® Endovascular Snare Systems, Medallion® Syringes, stopcocks, and wires, as well as sales from products acquired in connection with our acquisitions, including the BD product lines, Argon critical care division, Catheter Connections, Osseon, and Laurane) of approximately $41.0 million, up 30.5% from the corresponding period for 2017; (b) catheters (particularly our ReSolve® Locking Drainage Catheters, Prelude® and Prelude® Radial Sheath product lines, and our Merit Maestro® Microcatheters) of approximately $10.6 million, up 17.0% from the corresponding period for 2017; (c) our custom kits and procedure trays of approximately $6.6 million (which includes sales from our acquisition of ITL), up 10.9% from the corresponding period for 2017; and (d) inflation devices (particularly our BASIXTouch® and BasixCompak® product lines) of approximately $7.4 million, up 18.9% from the corresponding period for 2017.

Endoscopy Sales. Our endoscopy sales for the three-month period ended June 30, 2018 were approximately $8.4 million, up 22.3%, when compared to sales in the corresponding period of 2017 of approximately $6.9 million. Our endoscopy sales for the six-month period ended June 30, 2018 were approximately $15.6 million, up 18.2%, when compared to sales in the corresponding period of 2017 of approximately $13.2 million. In each case, the increase was primarily related to an increase in sales of our Elation® Balloon Dilator, products acquired from BD and products sold pursuant to our distribution agreement with NinePoint.

International Sales. International sales for the three-month period ended June 30, 2018 were approximately $100.4 million, or 44.6% of net sales, up 27.9% when compared to the corresponding period in 2017. The increase in our international sales for the second quarter of 2018 compared to the second quarter of 2017 was primarily related to (a) sales increases in China of approximately $6.7 million, or 35.4% when compared to the corresponding period in 2017, (b) sales increases in Japan of approximately $2.3 million, or 24.8% when compared to the corresponding period in 2017, and (c) sales associated with our acquisition of certain product lines from BD.

International sales for the six-month period ended June 30, 2018 were approximately $193.3 million, or 45.2% of net sales, up 31.2% when compared to the six-month period ended June 30, 2017. The increase in our international sales was primarily related to (a) sales increases in China of approximately $12.6 million, or 34.3% when compared to the corresponding period in 2017, (b) sales increases in Japan of approximately $3.8 million, or 21.7% when compared to the corresponding period in 2017, and (c) sales associated with our acquisition of certain product lines from BD.

Gross Profit

Our gross profit as a percentage of sales decreased to 44.5% for the three-month period ended June 30, 2018, compared to 45.1% for the three-month period ended June 30, 2017. Gross profit as a percentage of sales decreased to 44.0% for the six-month period ended June 30, 2018, compared to 44.8% for the six-month period ended June 30, 2017. These decreases were primarily due to increased amortization as a result of acquisitions, increased inventory obsolescence, and increased freight costs associated with filling our global pipeline.

Operating Expenses

Selling, General and Administrative Expense.Selling, general and administrative ("SG&A") expenses increased approximately $11.7 million, or 20.4%, for the three-month period ended June 30, 2018 compared to the three-month period ended June 30, 2017. As a percentage of sales, SG&A expenses were 30.7% of sales for the three-month period ended June 30, 2018, compared to 30.8% the three-month period ended June 30, 2017. SG&A expenses increased approximately $18.8 million, or 16.3%, for the six-month period ended June 30, 2018 compared to the six-month period ended June 30, 2017. As a percentage of sales, SG&A expenses decreased to 31.3% of sales for the six-month period ended June 30, 2018, compared to 32.2% of sales for the six-month period ended June 30, 2017. The increase in SG&A expense was primarily related to acquisition and integration costs for our acquisition of BD, increased headcount and increased amortization as a result of acquisitions, which was partially offset by a reduction in legal expenses incurred in responding to the pending subpoena from the Department of Justice when compared to SG&A expenses in the corresponding periods of 2017.

Research and Development Expenses. Research and development ("R&D") expenses for the three-month period ended June 30, 2018 were approximately $15.3 million, up 15.0%, when compared to R&D expenses in the corresponding period

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of 2017 of approximately $13.3 million. R&D expenses for the six-month period ended June 30, 2018 were approximately $29.6 million, up 14.7%, when compared to R&D expenses in the corresponding period of 2017 of approximately $25.8 million. This increase in R&D expenses was largely due to hiring additional research and development personnel to support various new core and acquired product developments.

Operating Income

The following table sets forth our operating income by financial reporting segment for the three and six-month periods ended June 30, 2018 and 2017 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Operating Income
Cardiovascular	$	12,663	$	11,493	$	19,060	$	15,475
Endoscopy	2,451		1,869		4,835		3,496
Total operating income	$	15,114	$	13,362	$	23,895	$	18,971

⁽¹⁾ Operating income for the 2017 periods has been adjusted from prior disclosure to reflect changes in product classifications between our operating segments, which were made to be consistent with updates in the management of our product portfolios in 2018.

Cardiovascular Operating Income. Our cardiovascular operating income for the three-month period ended June 30, 2018 was approximately $12.7 million, compared to operating income of approximately $11.5 million for the three-month period ended June 30, 2017. Our cardiovascular operating income for the six-month period ended June 30, 2018 was approximately $19.1 million, compared to operating income of approximately $15.5 million for the six-month period ended June 30, 2017. The increase in cardiovascular operating income was primarily related to increased sales, which was partially offset by a lower gross margin percentage, acquisition and integration-related costs, increased headcount, increased amortization as a result of acquisitions, and foreign market expansion.

Endoscopy Operating Income. Our endoscopy operating income for the three-month period ended June 30, 2018 was approximately $2.5 million, compared to approximately $1.9 million for the three-month period ended June 30, 2017. Our endoscopy operating income for the six-month period ended June 30, 2018 was approximately $4.8 million, compared to approximately $3.5 million for the six-month period ended June 30, 2017. This increase was primarily the result of higher sales (principally related to sales of the NinePoint product of approximately $1.1 million) and lower SG&A expenses as a percentage of sales.

Effective Tax Rate

Our effective income tax rate for the three-month periods ended June 30, 2018 and 2017 was 5.4%, and 16.2%, respectively. Our effective income tax rate for the six-month periods ended June 30, 2018 and 2017 was 9.6% and 9.4%, respectively. The decrease in the effective income tax rate for the second quarter of 2018 compared to the second quarter of 2017 was primarily caused by a decrease in the federal statutory tax rate, as well as a discrete tax benefit related to share-based payment awards. Despite the decrease resulting from these items, the effective tax rate for the six months ended June 30, 2018 is relatively unchanged when compared to the corresponding period in 2017 due to the nontaxable gain on the bargain purchase recorded in connection with the 2017 acquisition of the Argon critical care division.

Other Income (Expense)

Our other income (expense) for the three-month periods ended June 30, 2018 and 2017 was approximately $(3.5) million, and $(2.0) million, respectively. The increase in other expense was primarily a result of increased interest expense due to higher debt balances used to finance the BD and other acquisitions.

Our other income (expense) for the six-month periods ended June 30, 2018 and 2017 was approximately $(6.0) million, and $7.8 million, respectively. The change in other income (expense) for these periods was primarily a result of the bargain purchase gain related to the acquisition of the Argon critical care division the first quarter of 2017, which did not recur in 2018, and increased interest expense in 2018 due to higher debt balances used to finance the BD and other acquisitions.

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Net Income

Our net income for three-month periods ended June 30, 2018 and 2017 was approximately $10.9 million and $9.5 million, respectively. The increase in net income was primarily due to increased sales, which were partially offset by a decrease in gross profit as a percentage of sales. Our net income for six-month periods ended June 30, 2018 and 2017 was approximately $16.2 million and $24.3 million, respectively. The decrease in net income was primarily related to the gain on bargain purchase of $11.6 million reported in 2017, which did not recur in 2018, related to the acquisition of the Argon critical care division, which was partially offset by increased sales in the six months ended June 30, 2018 compared to the same period in 2017.

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LIQUIDITY AND CAPITAL RESOURCES

Capital Commitments, Contractual Obligations and Cash Flows

At June 30, 2018 and December 31, 2017, we had cash and cash equivalents of approximately $43.5 million and $32.3 million respectively, of which approximately $41.9 million and $30.4 million, respectively, were held by foreign subsidiaries. The 2017 Tax Act one-time repatriation tax liability effectively taxes the undistributed earnings previously deferred from U.S. income taxes. We have not provided for foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries because such earnings are currently considered to be indefinitely reinvested. We are still analyzing how the 2017 Tax Act impacts our existing accounting position to indefinitely reinvest foreign earnings and have yet to determine whether we plan to change our position. The cash held by our foreign subsidiaries for indefinite reinvestment is used to fund the operating activities of our foreign subsidiaries and for further investment in foreign operations.

In addition, cash held by our subsidiary in China is subject to local laws and regulations that require government approval for the transfer of such funds to entities located outside of China. As of June 30, 2018 and December 31, 2017, we had cash and cash equivalents of approximately $22.9 million and $13.1 million, respectively, held by our subsidiary in China.

Cash flows provided by operating activities. Cash provided by operating activities during the six-month periods ended June 30, 2018 and 2017 was primarily the result of net income excluding non-cash items, offset by shifts in working capital. Our working capital as of June 30, 2018 and December 31, 2017 was approximately $231.4 million and $200.5 million, respectively. The increase in working capital as of June 30, 2018 compared to December 31, 2017 was primarily the result of increases in trade receivables and inventories which were partially offset by an increase in trade payables and accrued expenses. As of June 30, 2018 and December 31, 2017, we had a current ratio of 2.66 to 1 and 2.73 to 1, respectively.

During the six-month period ended June 30, 2018, our inventory balance increased approximately $14.0 million, from approximately $155.3 million as of December 31, 2017 to approximately $169.3 million as of June 30, 2018. The increase in the inventory balance was due to several factors, including acquisitions and expansion to support increased sales and the opening of new modified direct sales markets. The trailing twelve-month inventory turns as of June 30, 2018 was 2.90, compared to 2.91 for the twelve-month period ended December 31, 2017.

Cash flows provided by financing activities. Cash provided by financing activities for the six-month period ended June 30, 2018 was approximately $138.1 million compared to approximately $57.6 million for the six-month period ended June 30, 2017, an increase of approximately $80.5 million. The increase in net cash provided from financing activities was primarily the result of additional borrowings in 2018 to fund the acquisition of assets from BD, NinePoint and DirectACCESS, partially offset by a decrease in proceeds from the issuance of common stock (as no public equity offering was undertaken in the six-month period ended June 30, 2018).

On March 14, 2018, we renewed our loan agreement with HSBC Bank USA, National Association ("HSBC Bank") whereby HSBC Bank agreed to provide us with a loan in the amount of approximately $7.0 million. The loan matures on July 10, 2018, with an extension available at our option, subject to certain conditions. The loan agreement bears interest at the three-month LIBOR plus 1.0%, which resets quarterly. The loan is secured by assets equal to the currently outstanding loan balance. The loan contains covenants, representations and warranties and other terms customary for loans of this nature. As of June 30, 2018, our interest rate on the loan was a variable rate of 3.26%.

The Second Amended Credit Agreement provides for a term loan of $150 million and a revolving credit commitment up to an aggregate amount of $375 million, which includes a reserve of $25 million to make swingline loans from time to time. The term loan is payable in quarterly installments in the amounts provided in the Second Amended Credit Agreement until the maturity date of July 6, 2021, at which time the term and revolving credit loans, together with accrued interest thereon, will be due and payable. At any time prior to the maturity date, we may repay any amounts owing under all revolving credit loans, term loans, and all swingline loans in whole or in part, subject to certain minimum thresholds, without premium or penalty, other than breakage costs.

Revolving credit loans denominated in dollars and term loans made under the Second Amended Credit Agreement bear interest, at our election, at either a Base Rate or Eurocurrency Base Rate (as such terms are defined in the Second Amended Credit Agreement) plus the applicable margin, which increases as our Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) increases. Revolving credit loans denominated in an Alternative Currency (as defined in the Second Amended Credit Agreement) bear interest at the Eurocurrency rate plus the applicable margin. Swingline loans bear interest at the Base Rate plus the applicable margin. Upon an event of default, the interest rate may be increased by 2.0%. The revolving credit commitment will also carry a commitment fee of 0.15% to 0.40% per annum on the unused portion.

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The Second Amended Credit Agreement is collateralized by substantially all our assets. The Second Amended Credit Agreement contains covenants, representations and warranties and other terms customary for loans of this nature. The Second Amended Credit Agreement requires that we maintain certain financial covenants, as follows:

		Covenant Requirement
Consolidated Total Leverage Ratio (1)
	January 1, 2018 and thereafter	3.5 to 1.0
Consolidated EBITDA (2)		1.25 to 1.0
Consolidated Net Income (3)		$0
Facility Capital Expenditures (4)		$30 million
(1)	Maximum Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) as of any fiscal quarter end.
(2)	Minimum ratio of Consolidated EBITDA (as defined in the Second Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Fixed Charges (as defined in the Second Amended Credit Agreement) for any period of four consecutive fiscal quarters.
(3)	Minimum level of Consolidated Net Income (as defined in the Second Amended Credit Agreement) for certain periods, and subject to certain adjustments.
(4)	Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Second Amended Credit Agreement) in any fiscal year.

Additionally, the Second Amended Credit Agreement contains customary events of default and affirmative and negative covenants for transactions of this type. As of June 30, 2018, we believe we were in compliance with all covenants set forth in the Second Amended Credit Agreement.

As of June 30, 2018, we had outstanding borrowings of approximately $407.0 million under the Second Amended Credit Agreement (an increase in long-term debt of approximately $132.6 million from December 31, 2017, which was principally due to our acquisition of assets from BD, NinePoint and DirectACCESS), with available borrowings of approximately $47.8 million, based on the leverage ratio required pursuant to the Second Amended Credit Agreement. Our interest rate as of June 30, 2018 was a fixed rate of 2.87% on $175.0 million as a result of an interest rate swap (see Note 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report) and a variable floating rate of 3.84% on $232.0 million. Our interest rate as of December 31, 2017 was a fixed rate of 2.68% on $175.0 million as a result of an interest rate swap and a variable floating rate of 2.82% on $97.0 million.

As discussed in Note 16 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, the net proceeds from our offering of common stock, which closed on July 30, 2018, were used primarily to repay outstanding borrowings (primarily revolving credit loans) under the Second Amended Credit Agreement.

Cash flows used in investing activities.Our cash flows used in investing activities for the six-month period ended June 30, 2018 was approximately $162.5 million compared to approximately $73.7 million for the six-month period ended June 30, 2017, an increase of approximately $88.8 million. This increase was primarily a result of an increase of approximately $63.8 million in net cash paid for acquisitions during the six months ended June 30, 2018, compared to the six months ended June 30, 2017 (see Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report), combined with a $13.8 million increase in capital expenditures for property and equipment. Capital expenditures for property and equipment were approximately $31.6 million and $17.8 million for the six-month periods ended June 30, 2018 and 2017, respectively.

We currently believe that our existing cash balances, anticipated future cash flows from operations and borrowings under the Second Amended Credit Agreement will be adequate to fund our current and currently planned future operations for the next twelve months and the foreseeable future. In the event we pursue and complete significant transactions or acquisitions in the future, additional funds will likely be required to meet our strategic needs, which may require us to raise additional funds in the debt or equity markets.

Off-Balance Sheet Arrangements

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses,

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results of operations, liquidity, capital expenditures or capital resources that are material to investors. As of June 30, 2018, we have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The SEC has requested that all registrants address their most critical accounting policies. The SEC has indicated that a “critical accounting policy” is one which is both important to the representation of the registrant’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on past experience and on various other assumptions our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results will differ, and may differ materially, from these estimates under different assumptions or conditions. Additionally, changes in accounting estimates could occur in the future from period to period. Our management has discussed the development and selection of our most critical financial estimates with the audit committee of our Board of Directors. The following paragraphs identify our most critical accounting policies:

Inventory Obsolescence. Our management reviews on a quarterly basis inventory quantities on hand for unmarketable and/or slow-moving products that may expire prior to being sold. This review includes quantities on hand for both raw materials and finished goods. Based on this review, we provide adjustments for any slow-moving finished good products or raw materials that we believe will expire prior to being sold or used to produce a finished good and any products that are unmarketable. This review of inventory quantities for unmarketable and/or slow moving products is based on forecasted product demand prior to expiration lives.

Forecasted unit demand is derived from our historical experience of product sales and production raw material usage. If market conditions become less favorable than those projected by our management, additional inventory write-downs may be required. During the years ended December 31, 2017, 2016 and 2015, we recorded obsolescence expense of approximately $6.1 million, $3.9 million and $2.8 million, respectively, and wrote off approximately $2.9 million, $2.8 million and $2.5 million, respectively. Based on this historical trend, we believe that our inventory balances as of June 30, 2018 have been accurately adjusted for any unmarketable and/or slow moving products that may expire prior to being sold.

Allowance for Doubtful Accounts. A majority of our receivables are with hospitals which, over our history, have demonstrated favorable collection rates. Therefore, we have experienced relatively minimal bad debts from hospital customers. In limited circumstances, we have written off bad debts as the result of the termination of our business relationships with foreign distributors. The most significant write-offs over our history have come from U.S. and international distributors.

We maintain allowances for doubtful accounts relating to estimated losses resulting from the inability of our customers to make required payments. These allowances are based upon historical experience and a review of individual customer balances. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Stock-Based Compensation. We measure stock-based compensation cost at the grant date based on the value of the award and recognize the cost as an expense over the term of the vesting period. Judgment is required in estimating the fair value of share-based awards granted and their expected forfeiture rate. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

Income Taxes. Under our accounting policies, we initially recognize a tax position in our financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. Although we believe that our provisions for unrecognized tax positions are reasonable, we can make no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our income tax provisions and accruals. The tax law is subject to varied interpretations, and we have taken positions related to certain matters where the law is subject to interpretation. Additionally, changes in tax law - such as the 2017 Tax Act - may be subject to evolving interpretation over a period of time following their enactment. Such differences and evolving interpretations could have a material impact on our income tax provisions and operating results in the period(s) in which we make such determination.

Goodwill and Intangible Asset Impairment and Contingent Consideration. We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill. We test our goodwill balances for impairment as of July 1 of each year, or whenever impairment indicators arise. We utilize several reporting units in

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evaluating goodwill for impairment. We assess the estimated fair value of reporting units using a combination of a guideline public company market-based approach and a discounted cash flow income-based approach. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, an impairment charge is recognized in an amount equal to the excess of the carrying amount of the reporting unit goodwill over the implied fair value of that goodwill. This analysis requires significant judgment, including estimation of future cash flows and the length of time they will occur, which is based on internal forecasts, and a determination of a discount rate based on our weighted average cost of capital. During our annual test of goodwill balances in 2017, which was completed during the third quarter of 2017, we determined that the fair value of each reporting unit with goodwill exceeded the carrying amount by a significant amount.

We evaluate the recoverability of intangible assets subject to amortization whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable. This analysis requires similar significant judgments as those discussed above regarding goodwill, except that undiscounted cash flows are compared to the carrying amount of intangible assets to determine if impairment exists. In-process technology intangible assets, which are not subject to amortization until projects reach commercialization, are assessed for impairment at least annually and more frequently if events occur that would indicate a potential reduction in the fair value of the assets below their carrying value. During the fourth quarter of 2017, we compared the carrying value of the amortizing intangible assets acquired in our July 2015 acquisition of certain assets from Distal Access, LLC to the undiscounted cash flows expected to result from the asset group and determined that the carrying amount was not recoverable. We then determined the fair value of the amortizing assets related to the Distal Access acquisition based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities. Some of the factors that influenced our estimated cash flows were slower than anticipated sales growth in the products acquired from our Distal Access acquisition and uncertainty about future sales growth. The excess of the carrying value compared to the fair value was recognized as an intangible asset impairment charge. We recorded an impairment charge for Distal Access of approximately $809,000 during the fourth quarter of 2017.

Contingent consideration is an obligation by the buyer to transfer additional assets or equity interests to the former owner upon reaching certain performance targets. Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue milestones. In connection with a business combination, any contingent consideration is recorded on the acquisition date based upon the consideration expected to be transferred in the future. We utilize a discounted cash flow method, which includes a probability factor for milestone payments, in valuing the contingent consideration liability. We re-measure the estimated liability each quarter and record changes in the estimated fair value through operating expense in our consolidated statements of income. Significant increases or decreases in our estimates could result in changes to the estimated fair value of our contingent consideration liability, as the result of changes in the timing and amount of revenue estimates, as well as changes in the discount rate or periods.

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Item 3.QUANTITATIVE AND QUALITATIVE DICSLOSURES ABOUT MARKET RISK

Currency Risk

Our principal market risk relates to changes in the value of the following currencies relative to the U.S. Dollar (USD):

• Euro (EUR)

• Chinese Yuan Renminbi (CNY), and

• British Pound (GBP).

We also have a limited market risk relating to the following currencies (among others):

• Hong Kong Dollar (HKD),

• Mexican Peso (MXN),

• Australian Dollar (AUD),

• Canadian Dollar (CAD),

• Brazilian Real (BRL),

• Swiss Franc (CHF),

• Swedish Krona (SEK),

• Danish Krone (DKK),

• Singapore Dollars (SGD),

• South Korean Won (KRW), and

• Japanese Yen (JPY).

Our consolidated financial statements are denominated in, and our principal currency is, the U.S. Dollar. For the six-month period ended June 30, 2018, a portion of our net sales (approximately $143.4 million, representing approximately 33.5% of our aggregate net sales), was attributable to sales that were denominated in foreign currencies. All other international sales were denominated in U.S. Dollars.

Our Euro-denominated revenue represents our largest single currency risk. However, our Euro-denominated expenses associated with our European operations (manufacturing sites, a distribution facility and sales representatives) provide a natural hedge. Accordingly, changes in the Euro, and in particular a strengthening of the U.S. Dollar against the Euro, generally have a positive effect on our operating income. As we continue to expand our operations in China, we have been increasingly exposed to currency risk related to our CNY-denominated revenue. In general, a strengthening of the U.S. Dollar against CNY has a negative effect on our operating income. The following table presents the USD impact to reported operating income related to a hypothetical positive and negative 10% exchange rate fluctuation in the value of the U.S. Dollar relative to both the EUR and CNY (annual amounts):

(in thousands)
	USD Relative to Other Currency
	10% Strengthening			10% Weakening
Impact to Operating Income of:
EUR	$	4,300		$	(4,300	)
CNY	$	(5,800	)	$	5,800

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During the three and six months ended June 30, 2018, exchange rate fluctuations of foreign currencies against the U.S. Dollar had the following impact on sales, cost of sales and gross profit (in thousands, except basis points):

	Three Months Ended				Six Months Ended
	June 30, 2018				June 30, 2018
	Currency Impact to Reported Amounts				Currency Impact to Reported Amounts
	Increase/(Decrease)		Percent Increase/(Decrease)		Increase/(Decrease)		Percent Increase/(Decrease)
Net Sales	$	3,645	1.6	%	$	8,798	2.1	%
Cost of Sales	$	2,521	2.1	%	$	4,596	2.0	%
Gross Profit (1)	$	1,124	1.1	%	$	4,202	2.3	%
(1) Represents approximately 22 basis points decrease and 8 basis points increase in gross margin percentage for the three and six months ended June 30, 2018, respectively

The impact to sales for the three and six months ended June 30, 2018 was primarily a result of favorable impacts due to sales denominated in EUR, CNY, and GBP. The impact to cost of sales was primarily a result of unfavorable impacts from EUR fluctuations related to manufacturing costs from our facilities in Europe denominated in EUR and MXN fluctuations on our manufacturing costs from our facility in Tijuana, Mexico denominated in MXN.

We forecast our net exposure related to sales and expenses denominated in foreign currencies. As of June 30, 2018, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with the following notional amounts (in thousands and in local currencies):

Currency	Symbol	Forward Notional Amount
Canadian Dollar	CAD	2,410
Swiss Franc	CHF	1,158
Chinese Renminbi	CNY	66,000
Danish Krone	DKK	11,650
Euro	EUR	12,870
British Pound	GBP	2,975
Mexican Peso	MXN	94,275
Swedish Krona	SEK	13,830

We also forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. As of June 30, 2018, we had entered into the following foreign currency forward contracts (which were not designated as hedging instruments) related to those balance sheet accounts (amounts in thousands and in local currencies):

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Currency	Symbol	Forward Notional Amount
Australian Dollar	AUD	8,400
Brazilian Real	BRL	8,500
Canadian Dollar	CAD	3,098
Swiss Franc	CHF	255
Chinese Renminbi	CNY	95,228
Danish Krone	DKK	2,885
Euro	EUR	25,861
British Pound	GBP	1,584
Hong Kong Dollar	HKD	11,000
Japanese Yen	JPY	260,000
Korean Won	KRW	2,700,000
Mexican Peso	MXN	18,700
Swedish Krona	SEK	10,536
Singapore Dollar	SGD	6,900

See Note 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of our foreign currency forward contracts.

Interest Rate Risk. As discussed in Note 10 to our condensed consolidated financial statements, as of June 30, 2018, we had outstanding borrowings of approximately $407.0 million under the Second Amended Credit Agreement, an increase in long-term debt of approximately $132.6 million from December 31, 2017, which was principally due to our acquisition of assets from BD, NinePoint and DirectACCESS. Accordingly, our earnings and after-tax cash flow are increasingly affected by changes in interest rates. On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with Wells Fargo, which as of June 30, 2018 had a notional amount of $175 million, to fix the one-month LIBOR rate at 1.12%. The interest rate swap is scheduled to expire on July 6, 2021. This instrument is intended to reduce our exposure to interest rate fluctuations and was not entered into for speculative purposes. Excluding the amount that is subject to a fixed rate under the interest rate swap and assuming the current level of borrowings remained the same, it is estimated that our interest expense and income before income taxes would change by approximately $2.3 million annually for each one percentage point change in the average interest rate under these borrowings.

In the event of an adverse change in interest rates, our management would likely take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, additional analysis is not possible at this time. Further, such analysis would not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

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Item 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures for our company. Consequently, our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of June 30, 2018. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, 2018, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 14 “Commitments and Contingencies” set forth in the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

ITEM 1A. RISK FACTORS

In addition to other information set forth in this Report, readers should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" of the 2017 Form 10-K, as well as the amended and updated risk factors included below (which replace equivalent risk factors disclosed in Part I, Item 1A. "Risk Factors" of the 2017 Form 10-K). Such risk factors could materially affect our business, financial condition or future results.

The risks described in our 2017 Form 10-K and in the amended and updated risk factors below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

We may be unable to successfully manage growth, particularly if accomplished through acquisitions, and the integration of acquired businesses may present significant challenges that could harm our operations.

Successful implementation of our business strategy will require that we effectively manage any associated growth. To manage growth effectively, our management will need to continue to implement changes in certain aspects of our business, to improve our information systems, infrastructure and operations to respond to increased demand, to attract and retain qualified personnel, and to develop, train, and manage an increasing number of management-level and other employees. Growth could place an increasing strain on our management, sales and other personnel, and on our financial, product design, marketing, distribution and other resources, and we could experience operating difficulties. Any failure to manage growth effectively could have a material adverse effect on our business, operations or financial condition.

Over the past several years, we have completed a series of significant acquisitions. As we grow through acquisitions and, at any given time, we may be considering a number of potential further acquisitions and strategic transactions, certain of which may also be significant. As we grow through acquisitions, we face the additional challenges of integrating the operations, culture, information management systems and other characteristics of the acquired entity with our own. Efforts to integrate future acquisitions may be hampered by delays, the loss of certain employees, suppliers or customers, proceedings resulting from employment terminations, culture clashes, unbudgeted costs, and other issues, which may occur at levels that are more severe or prolonged than anticipated. Additionally, past and future acquisitions may increase the risks of competition we face by, among other things, extending our operations into industry segments and product lines where we have few existing customers or qualified sales personnel and limited expertise. For example, although we acquired certain tunneled home drainage catheter and soft tissue core needle biopsy products from BD in February 2018, BD retained other products that directly compete with the products we acquired. As BD is a larger company with a more well-established market presence in such product lines, we may be unable to realize expected benefits from the acquisition in the timeframe anticipated or at all.

We have incurred, and will likely continue to incur, significant expenses in connection with negotiating and consummating various acquisition and other strategic transactions, and we may inherit significant liabilities in connection with prospective acquisitions or other strategic transactions, including regulatory, infringement, product liability, discrimination or other legal claims or issues. In addition, we may not realize competitive advantages, synergies or other benefits anticipated in connection with any such acquisition or other transaction. If we do not adequately identify targets for, or manage issues related to, our future acquisitions and similar transactions, such transactions may have an adverse effect on our business, operations or financial condition.

Use of our products in unapproved circumstances could expose us to liabilities.

The marketing clearances and approvals from the FDA and other regulators of certain of our products are, or are expected to be, limited to specific uses. We are prohibited from marketing or promoting any uncleared or unapproved use of our product. However, physicians may use these products in ways or circumstances other than those strictly within the scope of the regulatory approval or clearance. The use of our products for unauthorized purposes could arise from our sales personnel or distributors violating our policies by providing information or recommendations about such unauthorized uses. Consequently, claims may be asserted by the FDA or other enforcement agencies that we are not in compliance with applicable laws or regulations or have improperly

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promoted our products for uncleared or unapproved uses. The FDA or such other agencies could require a recall of products or allege that our promotional activities misbrand or adulterate our products or violate other legal requirements, which could result in investigations, prosecutions, fines or other civil or criminal actions.

The FDA regulatory clearance process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products.

Before we can introduce a new device or a new use of or a claim for a cleared device in the United States, we must generally obtain clearance from the FDA through the 510(k) premarket notification process or approval through a PMA application, unless an exemption from premarket review or an alternative procedure, such as a de novo risk based classification or a humanitarian device exemption, applies. The FDA clearance and approval processes for medical devices are expensive, uncertain and time-consuming.

If human clinical trials of a medical device are required for FDA clearance or approval and the device presents a significant risk, the sponsor of the trial must file an IDE application with the FDA prior to commencing such trials in the U.S. Submission of an IDE application does not ensure that the IDE will become effective. If the IDE application is approved, there can be no assurance that the FDA will determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. For clinical trials involving a device that does not present a significant risk, the sponsor is not required to obtain FDA approval of an IDE, but the sponsor must obtain the review and approval of an institutional review board. Both significant risk and non-significant risk trials are subject to additional FDA regulations, including a requirement to obtain informed consent, reporting and recordkeeping requirements, and other requirements. We, the FDA, or the institutional review board, may suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Changes to 510(k) cleared or PMA approved devices, including manufacturing changes, product enhancements and product line extensions, may require a new 510(k) clearance or approval of a PMA supplement. For devices marketed under an approved PMA, we must submit a PMA supplement to the FDA for review and approval prior to making a change to the device that affects the safety or effectiveness of the device, including changes to the design, manufacturing or labeling of the device. Likewise, for 510(k)-cleared devices, we must obtain new FDA 510(k) clearance when there is a major change or modification in the intended use, or a change or modification of the device that could significantly affect the safety or effectiveness of the device. In some cases, clinical data may be required to support a PMA supplement or 510(k) premarket notification for a device modification.

The FDA requires every manufacturer to make the determination regarding the need for a new 510(k) submission or a PMA supplement in the first instance, but the FDA may review the manufacturer’s decisions not to seek a new 510(k) or PMA supplement. We may make changes to our cleared products without seeking additional clearances or approvals if we determine such clearances or approvals are not necessary and document the basis for that conclusion. However, the FDA may disagree with our determination or may require additional information, including clinical data, to be submitted before a determination is made, in which case we may be required to delay the introduction and marketing of our modified products, redesign our products, conduct clinical trials to support any modifications and pay significant regulatory fines or penalties. In addition, the FDA may not approve or clear our products for the indications that are necessary or desirable for successful commercialization.

There is no assurance that we will be able to obtain the necessary regulatory clearances or approvals for any product on a timely basis or at all. Further, 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 products under development or impact our ability to modify our currently cleared products on a timely basis. Delays in receipt of, or failure to obtain, regulatory clearances for any product enhancements or new products we develop would result in delayed or no realization of revenue from such product enhancements or new products and in substantial additional costs, which could decrease our profitability.

In addition, we are required to continue to comply with applicable FDA and other regulatory requirements once we have obtained clearance or approval for a product. We cannot assure you that we will successfully maintain the clearances or approvals we have received or may receive in the future. The loss of previously received clearances or approvals, or the failure to comply with existing or future regulatory requirements could also have a material adverse effect on our business.

Our products may cause or contribute to adverse medical events that we are required to report to the FDA or other governmental authorities, and if we fail to do so, we may be subject to sanctions that may materially harm our business.

Our products are subject to medical device reporting regulations, which require us to report to the FDA any information that reasonably suggests one of our products may have caused or contributed to a death or serious injury, or one of our products malfunctioned and, if the malfunction were to recur, this device or a similar device that we market would be likely to cause or

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contribute to a death or serious injury. Our obligation to report under the medical device reporting regulations is triggered on the date on which we become aware of information that reasonably suggests a reportable adverse event occurred. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or if the product characteristic that caused the adverse event is removed in time from our products. If we fail to comply with our medical device reporting obligations, the FDA could issue warning letters or untitled letters, take administrative actions, commence criminal prosecution, impose civil monetary penalties, demand or initiate a product recall, seize our products, or delay the clearance of our future products.

We generally offer a limited warranty for the return of product due to defects in quality and workmanship. We attempt to estimate our potential liability for future product returns and establish reserves on our financial statements in amounts that we believe will be sufficient to address our warranty obligations; however, our actual liability for product returns may significantly exceed the amount of our reserves. If we underestimate our potential liability for future product returns, or if unanticipated events result in returns that exceed our historical experience, our financial condition and operating results could be materially harmed.

We may be unable to accurately forecast customer demand for our products and manage our inventory.

To ensure adequate supply, we must forecast our inventory needs and place orders with our suppliers based on estimates of future demand for particular products. Our ability to accurately forecast demand for our products could be negatively affected by many factors, including our failure to accurately manage our expansion strategy and customer acceptance of new products, product introductions by our competitors, an increase or decrease in customer demand for our products or for products of our competitors, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would impact our gross margin. Conversely, if we underestimate customer demand for our products, our manufacturing facilities may not be able to deliver products to meet our order requirements, which could damage our reputation and customer relationships.

Our forecasts of customer demand and related decisions that we make about production levels may take into account potential opportunities created by regulatory issues, supply disruptions or other challenges experienced by our competitors. We generally do not know the extent and cannot predict the duration of these challenges experienced by our competitors. As a result, our estimates about related increased demand for our products are inherently uncertain and subject to change. If our estimates incorrectly forecast the extent or duration of this increased demand, or the product types to which it relates, our revenues, margins and earnings could be adversely affected.

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ITEM 6. EXHIBITS

The following exhibits required by Item 601 of Regulation S-K are filed herewith or have been filed previously with the SEC as indicated below:

Exhibit No.	Description
3.1	Second Amended and Restated Articles of Incorporation (1)
3.2	Third Amended and Restated Bylaws (1)
10.1	Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan (2)
10.2	Indemnification Agreement by and between Merit Medical Systems, Inc. and Raul Parra, dated August 1, 2018
10.3	Employment Agreement by and between Merit Medical Systems, Inc. and Raul Parra, dated August 1, 2018
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from the quarterly report on Form 10-Q of Merit Medical Systems, Inc. for the quarter ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, and (v) Condensed Notes to the Consolidated Financial Statements

(1) Incorporated by reference from our Current Report on Form 8-K filed on May 31, 2018 (as amended).

(2) Incorporated by reference from our Form S-8 filed on June 4, 2018.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MERIT MEDICAL SYSTEMS, INC.

REGISTRANT

Date: August 9, 2018	By:	/s/ FRED P. LAMPROPOULOS
			Fred P. Lampropoulos, President and
			Chief Executive Officer
Date: August 9, 2018	By:	/s/ RAUL PARRA
			Raul Parra
			Chief Financial Officer and Treasurer

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EX-10.2

Exhibit 10.2

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (the “Agreement”) is made as of August 1, 2018 by and between Merit Medical Systems, Inc., a Utah corporation (“Company”), and Raul Parra, an individual (“Indemnitee”).

RECITALS

A.The Company is aware that because of the increased exposure to litigation costs, talented and experienced persons are increasingly reluctant to serve or continue serving as directors and officers of corporations unless they are protected by comprehensive liability insurance and indemnification.

B.The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore often fail to provide such directors and officers with adequate guidance regarding the proper course of action.

C.The Board of Directors of the Company (the “Board”), has concluded that, in order to retain and attract talented and experienced individuals to serve as officers and directors of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, the Company should contractually indemnify its officers and directors, and the officers and directors of its subsidiaries, in connection with claims against such officers and directors relating to their services to the Company and its subsidiaries and has further concluded that the failure to provide such contractual indemnification could be detrimental to the Company, its subsidiaries and shareholders.

D.Indemnitee's willingness to serve as an officer of the Company is predicated, in substantial part, upon the Company's willingness to indemnify Indemnitee in accordance with the principles reflected above, to the fullest extent permitted by the laws of the State of Utah, and upon the other undertakings set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises made in this Agreement, and for other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the Company and Indemnitee, intending to be legally bound hereby, hereby agree as follows:

1. Definitions.

(a)Agent. “Agent” with respect to the Company means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary; or is or was serving at the request of, for the convenience of, or to represent the interests of, the Company or a subsidiary as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including without limitation any employee benefit plan whether or not subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)); or was a director, officer, employee or agent of a predecessor corporation (or other predecessor entity or enterprise) of the Company or a subsidiary, or was a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including without limitation any employee benefit plan whether or not subject to the ERISA) at the request of, for the convenience of, or to represent the interests of such predecessor.

(b)Change in Control. “Change in Control” shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or group acting in concert, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then

1

outstanding voting securities; (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets.

(c)Company. References to the “Company” shall include, in addition to Merit Medical Systems, Inc., any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which Merit Medical Systems, Inc. (or any of its wholly­ owned subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

(d)Expenses. “Expenses” means all direct and indirect costs of any type or nature whatsoever (including, without limitation, all reasonable attorneys' and experts' fees, costs of investigation and related disbursements) reasonably incurred by Indemnitee in connection with the investigation (whether formal or informal), settlement, defense or appeal of a Proceeding covered hereby or the establishment or enforcement of a right to indemnification under this Agreement, including without limitation in the case of an appeal the premium for, and other costs relating to, any costs bond or supercedes bond or other appeal bond or its equivalent.

(e)Independent Legal Counsel. “Independent Legal Counsel” shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(i) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the preceding three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other Indemnitees under similar indemnity agreements).

(f)Other References. References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

(g)Proceeding. “Proceeding” means any threatened, pending, or completed claim, suit, action, proceeding or alternative dispute resolution mechanism, or any hearing or investigation, whether civil, criminal, administrative, investigative or otherwise, including without limitation any situation which Indemnitee believes in good faith might lead to the institution of any such proceeding.

(h)Reviewing Party. “Reviewing Party” shall mean, subject to the provisions of Section 2(g), any person or body appointed by the Board in accordance with applicable law to review the Company’s obligations hereunder and under applicable law, which may include a member or members of the Board, Independent Legal Counsel or any

2

other person or body not a party to the particular Proceeding for which Indemnitee is seeking indemnification, as set forth in Section 2(i).

2. Indemnification.

(a)Third Party Proceedings. The Company shall defend, indemnify and hold harmless Indemnitee to the fullest extent permitted by the Utah Revised Business Corporation Act (the “Act”) if Indemnitee is or was a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was or is claimed to be an Agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an Agent of the Company, against all Expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld)) actually and reasonably incurred by Indemnitee in connection with such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee's conduct was unlawful.

(b)Proceedings By or in the Right of the Company. The Company shall defend, indemnify and hold harmless Indemnitee to the fullest extent permitted by the Act if Indemnitee was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was or is claimed to be an Agent of the Company, all Expenses and liabilities of any type whatsoever (including, but not limited to, legal fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld)), in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudicated by court order or judgment to be liable to the Company in the performance of Indemnitee's duty to the Company and its stockholders unless and only to the extent that the court in which such action or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses, which such court shall deem proper.

(c)Presumptions; Burden of Proof. In making any determination concerning Indemnitee's right to indemnification, there shall be a presumption that Indemnitee has satisfied the applicable standard of conduct, and the Company may overcome such presumption only by its adducing clear and convincing evidence to the contrary. For purposes of this Agreement, the termination of any Proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law. In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement under applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. Any determination concerning Indemnitee's right to indemnification that is adverse to Indemnitee may be challenged by Indemnitee in the courts of the State of Utah. No determination by the Company (including without limitation by its directors or any Independent Legal Counsel) that Indemnitee has not satisfied any applicable standard of conduct shall be a defense to any claim by Indemnitee for indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.

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(d)Reliance as a Safe Harbor. For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee's actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by other Agents of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other person· (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any Agent of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.

(e)Actions Where Indemnitee Is Deceased. If Indemnitee was or is a party, or is threatened to be made a party, to any Proceeding by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, and prior to, during the pendency of, or after completion of, such Proceeding, Indemnitee shall die, then the Company shall defend, indemnify and hold harmless the estate, heirs and legatees of Indemnitee against any and all Expenses and liabilities reasonably incurred by or for such persons or entities in connection with the investigation, defense, settlement or appeal of such Proceeding on the same basis as provided for Indemnitee in Sections 2(a) and 2(b) above.

(f)Extent of Insurance. The Expenses and liabilities covered hereby shall be net of any payments made by D&O Insurance carriers or others.

(g)Review of Indemnification Obligations. Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder under applicable law: (i) the Company shall have no further obligation under Section 2(a) or Section 2(b) to make any payments to Indemnitee not made prior to such determination by such Reviewing Party; and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder under applicable law; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified hereunder under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon.

(h)Indemnitee Rights on Unfavorable Determination; Binding Effect. If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee.

(i)Selection of Reviewing Party; Change in Control. A determination, if required by applicable law, with respect to Indemnitee's entitlement to indemnification shall be made in accordance with the provisions of this paragraph (i). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Board who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company's Articles of Incorporation or Bylaws as now or hereafter

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in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless: (i) the employment of separate counsel by one or more Indemnitees has been previously authorized by the Board in writing; or (ii) an Indemnitee shall have provided to the Company a written statement that such Indemnitee has reasonably concluded that there may be a conflict of interest between such Indemnitee and the other Indemnitees with respect to the matters arising under this Agreement.

3.No Employment Rights. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment. Indemnitee specifically acknowledges that Indemnitee's employment with or services to the Company or any of its subsidiaries is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, the Company's Articles of Incorporation and Bylaws, as applicable.

4.Expenses; Indemnification Procedure.

(a)Advancement of Expenses. The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or Proceeding referred to in Section 2(a) or Section 2(b) hereof (including amounts actually paid in settlement of any such Proceeding if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.

(b)Notice/Cooperation by Indemnitee. Promptly after receipt by Indemnitee of notice of the commencement or threat of any Proceeding covered hereby, Indemnitee shall notify the Company of the commencement or threat thereof, provided that any failure to so notify shall not relieve the Company of any of its obligations hereunder, except to the extent that such failure prejudices the Company's ability to perform its obligations hereunder. Notice to the Company shall be directed to the Chief Executive Officer of the Company and shall be given in accordance with the provisions of Section 13(i) below. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power.

(c)Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuant to Section 4(b) hereof, the Company has D&O Insurance (as defined in Section 7(a) below) in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(d)Indemnitee shall be entitled to retain one or more counsel from time to time selected by Indemnitee in Indemnitee's reasonable discretion to act as its counsel in and for the investigation, defense, settlement or appeal of each Proceeding. The Company shall not waive any privilege or right available to Indemnitee in any such Proceeding.

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(e)The Company shall bear all reasonable fees and Expenses (including invoices for advance retainers) of such counsel, and all reasonable fees and Expenses invoiced by other persons or entities, in connection with the investigation, defense, settlement or appeal of each such Proceeding. Such fees and Expenses are referred to herein as “Covered Expenses.”

(f)Until a determination to the contrary under Section 5 hereof is made, the Company shall advance all Covered Expenses in connection with each Proceeding. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to the fullest extent permitted by law to repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee's ability to repay the expenses and without regard to Indemnitee's ultimate entitlement to indemnification under the other provisions of this Agreement.

(g)Selection of Counsel. In the event the Company shall be obligated hereunder to provide indemnification for or make any advancement of Expenses with respect to the Expenses of any Proceeding, the Company, if appropriate, shall be entitled to assume the defense of such Proceeding with counsel selected by the Company, subject to approval by Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to Indemnitee of written notice of the Company's election to do so. After delivery of such notice and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently retained by or on behalf of Indemnitee with respect to the same Proceeding; provided that: (i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Proceeding at Indemnitee's expense; and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Proceeding, then the fees and expenses of Indemnitee's separate counsel shall be Expenses for which Indemnitee may receive indemnification or advancement of Expenses hereunder.

(h)Each advance to be made hereunder shall be paid by the Company to Indemnitee within ten (10) business days following delivery of a written request therefor by Indemnitee to the Company.

(i)The Company acknowledges the potentially severe damage to Indemnitee should the Company fail timely to make such advances to Indemnitee.

(j)The Company shall not settle any Proceeding if, as a result of such settlement, any fine or obligation is imposed on Indemnitee without Indemnitee's prior written consent.

5.Determination of Right to Indemnification.

(a)To the extent Indemnitee has been successful on the merits or otherwise in defense of any Proceeding, claim, issue or matter covered hereby, Indemnitee need not repay any of the Expenses advanced in connection with the investigation, defense or appeal of such Proceeding.

(b)Indemnitee shall have the right to advancement by the Company prior to the final disposition of any Proceeding of any and all Expenses relating to, arising out of or resulting from any Proceeding paid or incurred by Indemnitee or which Indemnitee determines are reasonably likely to be paid or incurred by Indemnitee.

(c)Subject to the provisions of Section 2(g), notwithstanding a determination by a Reviewing Party or a court that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the courts of the State of Utah for the purpose of enforcing Indemnitee's right to indemnification pursuant to this Agreement.

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(d)Subject to the provisions of Section 2(i), the Company shall indemnify Indemnitee against all Expenses reasonably incurred by Indemnitee in connection with any Proceeding under Sections 5(b) or 5(c) and against all Expenses reasonably incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of Indemnitee in any such Proceeding were frivolous or made in bad faith.

(e)The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by the Act, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Incorporation, the Company's Bylaws or by statute. In the event of any change after the date of this Agreement to the Act or in any applicable law, statute or rule which expands the right of a Utah corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change to the Act or in any applicable law, statute or rule which narrows the right of a Utah corporation to indemnify its Agent, such change, to the extent not otherwise required by the Act or such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder except as set forth in Section 9 hereof.

(f)Nonexclusivity. The indemnification and the payment of Expense advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any other agreement, any vote of shareholders or disinterested directors, the Act, or otherwise. The indemnification and the payment or advancement of Expenses provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity.

(g)No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Proceeding to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's Articles of Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.

(h)Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Proceeding, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

6.Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee.

7.Officer and Director Liability Insurance.

(a)The Company hereby covenants and agrees with Indemnitee that, subject to Section 7(b), the Company shall obtain and maintain in full force and effect directors' and officers' liability insurance (“D&O Insurance”), in reasonable amounts as the Board shall determine from established and reputable insurers with an AM Best rating of A.VI or better, but no less than the amounts in effect upon initial procurement of the D&O Insurance. In all policies of D&O Insurance, Indemnitee shall be named as an insured.

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(b)Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Board determines in good faith that the premium costs for such insurance are (i) disproportionate to the amount of coverage provided after giving effect to exclusions, and (ii) substantially more burdensome to the Company than the premiums charged to the Company for its initial D&O Insurance.

(c)To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary.

8.Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company's inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

9.Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

(a)Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, other than: (i) Proceedings under Sections 5(b) or 5(c); (ii) Proceedings brought to establish or enforce a right to indemnification under this Agreement or the provisions of the Company’s Articles of Incorporation or Bylaws unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such Proceeding were not made in good faith or were frivolous; or (iii) proceedings or claims instituted by Indemnitee with the approval by the Board;

(b)Unauthorized Settlement. To indemnify Indemnitee under this Agreement for any amounts paid in settlement of a Proceeding covered hereby without the prior written consent of the Company to such settlement, which consent will not be unreasonably withheld provided that the Company's consent is not required if the Company is refusing to indemnify or advance Expenses to Indemnitee;

(c)Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such expenses or liabilities have been paid directly to Indemnitee by an insurance carrier under a policy of officers' and directors; liability insurance maintained by the Company; or

(d)Claims Under Section 16(b). To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

10.Witness Expenses. The Company agrees to compensate Indemnitee for the reasonable value of Indemnitee's time spent, and to reimburse Indemnitee for all Expenses (including reasonable attorneys' fees and travel costs) reasonably incurred by Indemnitee, in connection with being a witness, or if Indemnitee is threatened to be made a witness, with respect to any Proceeding, by reason of Indemnitee serving or having served as an Agent of the Company.

11.Attorneys' Fees. In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including

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reasonable attorneys' fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys' fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous.

12.Duration. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is an Agent of the Company and shall continue thereafter (a) so long as Indemnitee may be subject to any possible claim for which Indemnitee may be indemnified hereunder (including any rights of appeal thereto) and (b) throughout the pendency of any Proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret Indemnitee's rights under this Agreement, even if, in either case, Indemnitee may have ceased to serve in such capacity at the time of any such Proceeding.

13.Miscellaneous.

(a)Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Utah, without giving effect to principles of conflict of law.

(b)Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Utah for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the federal and state courts located in the State of Utah in and for Salt Lake County, which shall be the exclusive and only proper forum for adjudicating such a claim.

(c)Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

(d)Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(e)Counterparts. This Agreement may be signed in counterparts. This Agreement constitutes a separate agreement between the Company and Indemnitee and may be supplemented or amended as to Indemnitee only by a written instrument signed by the Company and Indemnitee, with such amendment binding only the Company and Indemnitee. All waivers must be in a written document signed by the party to be charged. No waiver of any of the provisions of this Agreement shall be implied by the conduct of the parties. A waiver of any right hereunder shall not constitute a waiver of any other right hereunder.

(f)Interpretation of Agreement. This Agreement shall be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by the Act.

(g)Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company to effectively bring suit to enforce such rights.

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(h)Continuation of Indemnity; Binding Effect. Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting an Agent of the Company and the benefits hereof shall inure to the benefit of the heirs, executors and administrators of Indemnitee. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

(i)Notices. All notices, demands, consents, requests, approvals and other communications required or permitted hereunder shall be in writing and shall be deemed to have been properly given if hand delivered (effective upon receipt or when refused), or if sent by a courier freight prepaid (effective upon receipt or when refused), in the case of the Company, at the addresses listed below, or to such other addresses as the parties may notify each other in writing.

To Company: Merit Medical Systems, Inc.

Attention: Chief Executive Officer

1600 West Merit Parkway

South Jordan, Utah 84095

To Indemnitee: At Indemnitee's residence address and facsimile number on the records of the Company from time to time.

(j)Evidence of Coverage. Upon request by Indemnitee, the Company shall provide evidence of the liability insurance coverage required by this Agreement. The Company shall promptly notify Indemnitee of any change in the Company's D&O Insurance coverage.

[Remainder of Page Intentionally Left Blank;

Signatures appear on the following page.]

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The parties hereto have agreed and accept this Agreement as of the day and year set forth on the first page of this Agreement.

MERIT MEDICAL SYSTEMS, INC.

/s/ Fred P. Lampropoulos

By:

Name: Fred P. Lampropoulos

Title: Chief Executive Officer

INDEMNITEE:

/s/ Raul Parra            

[Signature Page to Indemnification Agreement]

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EX-10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by and between Merit Medical Systems, Inc., a Utah corporation (the “Company”) and Raul Parra (the “Executive”), as of the August 1, 2018.

RECITALS:

 WHEREAS, the Executive currently serves as an executive employee of the Company; and

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company; and

WHEREAS, the Company and the Executive desire to enter into the Employment Agreement as follows:

AGREEMENT:

 NOW, THEREFORE, the above recitals are incorporated herein and the parties agree as follows:

1.             Certain Definitions.  For purposes of this Agreement, the following terms shall have the following meanings:

(a)           “Affiliated Companies” shall mean any corporation, partnership, limited liability company or other business entity controlled by, controlling or under common control with the Company.  One entity shall be presumed to control another if it owns directly, or indirectly through other Affiliated Companies, a majority of the outstanding voting equity interests of the other entity.

(b)           “Change in Control” shall mean:

(i)            The acquisition during any 12-month period in one or more integrated transactions by any individual, entity or “group” (within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))(a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the combined voting power of the then outstanding common stock and other voting securities of the Company entitled to vote generally in the election of directors of the Company (the “Outstanding Company Voting Securities”);provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company, an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or any corporation or other entity pursuant to a transaction which complies with clauses (A) and (B) of subsection (iii) of this Section 1(b); and (B) any acquisition which does also not constitute a “change in effective control” of the Company within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(1);

(ii)           The replacement during any 12-month period of a majority of the directors serving on the Board by directors whose appointment or election is not endorsed by at least a majority of the Board immediately before the date of any such appointment or election; provided that this subsection (ii) shall only apply to a change in the Board that constitutes a “change in effective control” of the Company within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(2); and

(iii)          The sale or other disposition of all or substantially all of the assets of the Company (an “Asset Sale”), including a disposition by merger or consolidation, in a transaction that also constitutes a “change in ownership of a substantial portion” of the Company’s assets within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii); provided, however, that a transaction will not constitute a Change in

Employment Agreement

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Control under his subsection (iii) if: (A) the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Asset Sale beneficially own, directly or indirectly, 50% or more of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities of the acquiror or resulting corporation in such Asset Sale in substantially the same proportions as their ownership, immediately prior to such Asset Sale of the Outstanding Company Voting Securities; and (B) no Person beneficially owns, directly or indirectly, more than 30% of the combined voting power of the then outstanding voting securities of the acquiror or resulting corporation except to the extent that such ownership existed prior to the Asset Sale. For avoidance of doubt, no transaction or event will constitute a “Change in Control” under this Agreement unless it also constitutes a “change in effective control” of the Company within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi) or a “change in ownership of a substantial portion” of the Company’s assets within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii).

(c)           “Code” means the Internal Revenue Code of 1986, as amended.

(d)           “Company” shall mean Merit Medical Systems, Inc.

(e)           “Employment Period” shall mean the period commencing on the date hereof and continuing through the effective date of termination of Executive’s employment as provided below.

(f)            “Executive” shall mean the executive employee of the Company named in the first introductory paragraph of this Agreement.

(g)           “Separation from Service” means “separation from service” (as defined in Treasury Regulation Section 1.409A-1(h) from the Company.

(h)           “Treasury Regulation” means the regulations promulgated under the Code.  Any reference in this Agreement to a Treasury Regulation shall include such regulation as amended from time to time and shall be deemed to incorporate herein the full text of such regulation.

2.             Employment.  Subject to termination as provided below, the Company hereby agrees to continue the Executive in its employ “at will”, and the Executive hereby agrees to remain in the employ of the Company “at will”, subject to the terms and conditions of this Agreement.  As an “at will” employee, the Company may terminate the Executive’s employment, and the Executive may resign his employment with the Company, at any time and for any or no reason.

3.             Terms of Employment.

(a)           Position and Duties.

(i)            During the Employment Period, the Executive’s position and title shall be Chief Financial Officer.  Notwithstanding the foregoing, upon a Change in Control: (A) the Executive’s position (including offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the effective date of a Change in Control; and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.

(ii)           During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.  During the Employment Period it shall not be a violation of this Agreement for the Executive to: (A) serve on corporate, civic or charitable boards or committees, provided that the

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Executive obtains the Company’s prior, written consent, which will not be unreasonably withheld; (B) deliver lectures, fulfill speaking engagements or teach at educational institutions; and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement.  It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the effective date of a Change in Control, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the effective date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.

(b)           Compensation.

(i)            Base Salary.  During the Employment Period the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid in equal monthly installments, at least equal to the Executive’s then current salary or such other amount as is authorized by the Compensation Committee of the Board; provided, however that following a Change in Control, the Executive’s rate of Annual Base Salary for any fiscal year of the Company following the Change in Control shall not be less than 12 times the highest monthly base salary paid or payable (including any base salary which has been earned but deferred) to the Executive by the Company and its Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Change in Control occurs.  During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase or decrease applicable to the Executive and thereafter at least annually.  Any increase or decrease in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.

(ii)           Annual Bonus.  In addition to Annual Base Salary, for each fiscal year of the Company that ends during the Employment Period (a “Bonus Award Year”) the Executive shall be awarded an annual bonus (the “Annual Bonus”) in cash in such amount as the Board determines in its sole discretion; provided that (A) no Annual Bonus shall be payable for a particular Bonus Award Year unless the Executive is still employed by the Company on the last day of the Bonus Award Year in question (or such earlier dater as the Annual Bonus is paid); and (B) for any Company fiscal year ending on or after the effective date of a Change in Control, the Annual Bonus shall be at least equal to the Executive’s average annual cash bonus for the last three full 12-month fiscal years ending prior to the Change in Control (or such lesser number of full fiscal years as the Executive has completed with the Company, and annualized in the event that the Executive was not employed by the Company for the whole of any such full 12-month Company fiscal year) (the “Average Annual Bonus”).  Each such Annual Bonus shall be paid to the Executive not later than the 15th day of the third month following the calendar year in which the Annual Bonus is earned, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to a non-qualified deferred compensation plan maintained by the Company that complies with the requirements of Code Section 409A.  The Executive shall not be entitled to any Annual Bonus for a Bonus Award Year unless the Executive remains employed by the Company through the earlier of the date the Annual Bonus is paid or the last day of the Bonus Award Year in question.

(iii)       Commissions. In addition to the Annual Base Salary and Annual Bonus, the Executive may, at the Board’s discretion, be awarded monthly or quarterly commissions (the “Commissions”), at least equal to the Executive’s then current commissions or such other amount as is authorized by the Board; provided, however that for any company fiscal year ending on or after the effective date of a Change in Control, the Executive’s Commissions shall not be less than the Executive’s average annual commissions for the last three full 12-month fiscal years ending prior to the Change of Control (or such lesser number of full fiscal years as the Executive has completed with the company, and annualized in the event the Executive was not employed by the Company for the whole of any such full 12-month Company fiscal year (the “Average Annual Commissions”). During the Employment Period, the Commissions shall be reviewed no more than 12 months after the last commission increase or decrease applicable to the Executive and thereafter at least annually. Any increase or decrease in Commissions shall not serve to limit or reduce any other obligation to the Executive under this Agreement.

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(iv)    Stock Incentive and Retirement Plans.  During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its Affiliated Companies.  In no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, materially less favorable, in the aggregate following the effective date of a Change in Control, than the those provided by the Company and its Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change in Control or if more favorable to the Executive, those provided generally at any time after the Change in Control to other peer executives of the Company and its Affiliated Companies.

(v)          Welfare Benefit Plans.  During the Employment Period, the Executive shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its Affiliated Companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs for the Executive, the Executive’s spouse and the Executive’s qualifying dependent children ) to the extent applicable generally to other peer executives of the Company and its Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits following a Change in Control which are materially less favorable, in the aggregate, than the plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Change in Control or, if more favorable to the Executive, those provided generally at any time after the Change in Control to other peer executives of the Company and its Affiliated Companies.

(vi)           Expenses.  During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its Affiliated Companies.  In no event shall such policies, practices and procedures be materially less favorable, in the aggregate, following a Change in Control than the policies, practices and procedures in effect for the Executive at any time during the 120-day period immediately preceding the Change in Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies. All such expense reimbursements shall be paid promptly following submission for the applicable expense reimbursement requests and appropriate substitution but in no event later than the end of the calendar year following the calendar year in which the expense in question is incurred by the Executive. No reimbursement shall be exchanged or liquidated for another benefit and the amount of expenses eligible for reimbursement in a particular calendar year shall not affect the expense eligible for reimbursement in another taxable year.

(vii)          Fringe Benefits.  During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the generally applicable plans, practices and programs of the Company for its executive employees.  In no event shall such policies and programs be materially less favorable following a Change in control than the most favorable plans, practices, programs and policies of the Company and its Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Change in Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies.

(viii)         Office and Support Staff.  During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, generally provided to other executive officers of the Company and its Affiliated Companies.

(ix)        Vacation.  During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the generally applicable plans, practices and programs of the Company for its executive

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employees.  In no event shall such policies and programs be materially less favorable following a Change in Control than the most favorable plans, policies, programs and practices of the Company and its Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Change in Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies.

4.             Termination of Employment.

(a)           Death or Disability.  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

(b)           By the Company for Cause.  The Company may terminate the Executive’s employment at any time during the Employment Period for Cause to be effective on the applicable Date of Terminations et forth in Section 4(g).  For purposes of this Agreement, “Cause” shall mean:

(i)            the willful and continued failure of the Executive to perform substantially all of the Executive’s duties with the Company or one of its Affiliates (other than any such failure results from incapacity due to physical mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties,

(ii)           the Executive willfully engaging in illegal conduct, intentional misconduct or gross negligence which is materially and demonstrably injurious to the Company, or

(iii)         the Executive’s violation of written Company policies prohibiting workplace discrimination, sexual harassment and alcohol or substance abuse.

For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.  Following a Change in Control, the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

(c)           By the Company without Cause.  The Company, acting through the Board, may terminate the Executive’s employment with the Company at any time “at will” without Cause for any or no reason upon

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written notice of termination to the Executive to be effective on the applicable Date of Termination set forth in Section 4(g).

(d)           By the Executive for Good Reason.  The Executive may terminate and resign the Executive’s employment for Good Reason effective on or after the date of a Change in Control upon not less than thirty (30) advance written notice of termination to the Company; provided the Executive delivers such notice of termination to the Company within ninety (90) days after the occurrence of the event constituting Good Reason.  For purposes of this Agreement, “Good Reason” shall mean:

(i)            the Company’s assignment to the Executive upon or within two (2) years after a Change in Control of any duties inconsistent in any respect with the Executive’s position (including offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action by the Company upon or within two (2) years after a Change in Control which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(ii)           the Company’s failure upon or within two (2) years following a Change in Control to comply with any of the provisions of Section 3(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(iii)          upon or within two (2) years following a Change in Control, the Company’s requiring the Executive to be based at any office or location other than as provided in Section 3(a)(i)(B) hereof or the Company’s requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; and

(iv)          any failure by the Company to comply with and satisfy Section 9(c) of this Agreement.

(e)           By Executive without Good Reason.  The Executive may resign and terminate the Executive’s employment with the Company without Good Reason at any time “at will” upon written notice of termination to the Company to be effective on the applicable Date of Termination set forth in Section 4(g).

(f)            Notice of Termination.  Any termination by the Company for Cause, by the Executive for Good Reason, or by either party without Cause or Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 10(b) of this Agreement.  For purposes of this Agreement, a “Notice of Termination” means a written notice which

(i)            indicates the specific termination provision in this Agreement relied upon,

(ii)           to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and

(iii)          if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be as set forth Section 4(g)).  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(g)           Date of Termination.  For purposes of this Agreement the term “Date of Termination” means:

(i)            if the Executive’s employment is terminated by the Company for Cause, or upon or following a Change in Control by the Executive for Good Reason: (A) the date of the receipt of the Notice of Termination in the case of termination by the Company for Cause, or (B) the date set forth in the Notice of Termination in the case of termination by the Executive for Good Reason, which shall be not less than thirty (30) days after the delivery of the Notice of Termination.

(ii)           if the Executive’s employment is terminated by the Company other than for Cause, death or Disability; the Date of Termination shall be the tenth (10th) day after the Company notifies the Executive of such termination, provided that the Notice of Termination may specify a later effective Date of Termination (which date shall not be more than 30 days after the giving of such notice);

(iii)          if the Executive voluntarily resigns his employment (other than for Good Reason upon or following a Change in Control), the Date of Termination shall be the tenth (10th) day after the Executive notifies the Company of such resignation, provided that the Notice of Termination may specify a later Date of Termination (which date shall not be more than 30 days after the giving of such notice); and

(iv)          if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

5.             Obligations of the Company upon Termination of Executive’s Employment.

(a)           General.  Upon termination of the Executive’s employment with the Company the Company shall provide the Executive with the payments and benefits set forth in the applicable subsection of this Section 5.  The amounts payable under this Section 5 are in addition to the Company’s obligations to the Executive under the Company’s various retirement, deferred compensation, stock option and long-term incentive, employee stock purchase and welfare benefit plans.  The Company’s obligations under this Section 5 vary depending upon whether or not the Executive’s termination of employment is in “Connection with a Change in Control.”  For purposes of this Agreement, termination of the Executive’s employment shall be deemed to be in “Connection with a Change in Control” if and only if:

(i)            the Executive’s Date of Termination is on or within two (2) years after the effective date of a Change in Control; or

(ii)           the Company terminates the Executive’s employment without Cause within six (6) months prior to the date on which a Change in Control occurs and the Executive reasonably demonstrates that such termination of employment (A) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control; or (B) otherwise arose in connection with or anticipation of a Change in Control.

(b)           Termination Other Than in Connection with a Change in Control.  If the Executive’s employment shall terminate for any reason, voluntarily or involuntarily with or without Cause, other than in Connection with a Change in Control, the Company shall pay to the Executive (or if deceased to the Executive’s estate) the following amounts:

(i)            a lump sum cash payment equal to the Executive’s Annual Base Salary earned through the Date of Termination to the extent not theretofore paid and any accrued vacation pay through the Date of Termination, which lump sum shall be paid ten (10) days after the Date of Termination;

(ii)           a lump sum cash payment equal to the Executive’s accrued Annual Bonus earned for the last Company fiscal year ending immediately prior to the Date of Termination to the extent not theretofore paid, which lump sum shall be paid within the time period set forth in Section 3(b)(ii);

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(iii)    if applicable to Executive, a lump sum Commissions payment earned through the Date of Termination to the extent not theretofore paid, which lump sum shall be paid ten (10) days after the date the applicable Commissions would have been calculated by the Company had the Executive’s employment not been terminated; and

(iii)          such additional severance benefits, if any, as the Board approves in its sole and absolute discretion without reference to the amount of severance benefits, if any, paid to any other executive officer or employee of the Company; provided, however, that no such discretionary severance benefits shall be paid in a manner or amount that renders such payments non-qualified deferred compensation subject to additional tax or interest under Section 409A(a)(1)(B) of the Code.

(c)           Resignation for Good Reason or Termination without Cause in Connection with a Change in Control.  If the Executive resigns for Good Reason in Connection with a Change in Control (i.e., on or within two (2) years after the date of a Change in Control) or the Company terminates the Executive without Cause in Connection with a Change in Control, the Company shall:

(i)            Pay to the Executive the following amounts:

(A)          a lump sum cash payment equal to the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid and any accrued unpaid vacation pay through the Date of Termination, which lump sum shall be paid ten (10) days after the Date of Termination (on a date within that 10 day period designated by the Company);

(B)           a lump sum cash payment equal to the Executive’s accrued Annual Bonus, if any, for the last Company fiscal year ending immediately prior to the Date of Termination to the extent not theretofore paid, which lump sum shall be paid within the time period set forth in Section 3(b)(ii).  The sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the “Accrued Obligations;” and

(C)    if applicable to Executive, a lump sum Commissions payment earned through the Date of Termination to the extent not theretofore paid, which lump sum shall be paid ten (10) days after the date the applicable Commissions would have been calculated by the Company had the Executive’s employment not been terminated; and

(ii)           Pay to the Executive a cash severance benefit (the “Severance Benefit”) in an amount equal to two (2) times the sum of: (A) the Executive’s Annual Base Salary (computed at the highest rate in effect at any time during the 12-month period immediately preceding the Change in Control); (B) the Executive’s Average Annual Bonus as defined in Section 3(b)(ii); and (C) if applicable to Executive, the Executive’s Average Annual Commissions as defined in Section 3(b)(iii).  The Severance Benefit payable under this Section 5(c)(ii) shall be paid:

(A)          In a cash lump sum within 30 days after the later of the date of the Executive’s Separation from Service with the Company or the date of the Change in Control to the limited extent the amount so paid constitutes “separation pay” due to an “involuntary separation from service” within the meaning and dollar limitations of Treasury Regulation Section 1.409A-1(b)(9)(iii), or is otherwise exempt from Code Section 409A under Treasury Regulation Section 1.409A-1(b); and

(B)           the balance, in a separate cash lump sum on the date that is six months and one day after the date of the Executive’s Separation from Service with the Company.  The balance of the Severance Benefit payable under this clause (B) shall bear interest from the Executive’s Date of Termination at an annual rate equal to the “prime rate” of Wells Fargo Bank, NA in effect on the Date of Termination plus four (4) percentage points, which interest the Company shall pay to the Executive contemporaneously with payment of the Severance Benefit under this clause (B).

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This Section 5(c)(ii) shall be interpreted and applied to permit the payment of the Change in Control Severance Benefit prior to the date that is six months and one day after Executive’s Separation from Service with the Company only to the extent such payments would not thereby constitute a deferral of compensation subject to Code Section 409A.  Neither the Company nor the Executive shall have the right to accelerate or defer such payments except as permitted or required by Code Section 409A.

(iii)          To the extent permitted by law and the Company’s applicable insurance policies, for two (2) after the Executive’s Date of Termination, continue benefits to the Executive and/or the Executive’s eligible spouse and dependent children at least equal to those which would have been provided to them in accordance with the welfare plans, programs, practices and policies described in Section 3 of this Agreement if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility.

(iv)          Provide at the Company’s sole expense for a period not to exceed twelve (12) months the Executive with reasonable outplacement services the scope and provider of which shall be selected by the Executive in his reasonable discretion; and

(v)           To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its Affiliated Companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”) in accordance with the terms of such other plans, programs, policies or practices.

(d)           Death on or after Change in Control.  If the Executive’s employment is terminated by reason of the Executive’s death on or after the date of a Change in Control, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits.  Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in cash in the manner and within the time frames set forth in Section 5(b)(i) and (ii), as applicable.  With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(d) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and Affiliated Companies to the estates and beneficiaries of peer executives of the Company and such Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date of a Change in Control, or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its Affiliated Companies and their beneficiaries.

(e)           Disability on or after Change in Control.  If the Executive’s employment is terminated by reason of the Executive’s Disability on or after the date of a Change in Control, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits.  Accrued Obligations shall be paid to the Executive in cash in the manner and within the time frames set forth in Section 5(b)(i) and (ii), as applicable.  With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(e) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date of a Change in Control, or, if more favorable to the Executive and/or the Executive’s family, as in

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effect at any time thereafter generally with respect to other peer executives of the Company and its Affiliated Companies and their families.

(f)            Termination for Cause or Resignation Other than for Good Reason on or after a Change in Control.  If the Company terminates the Executive’s for Cause on or after the date of a Change in Control, this Agreement shall terminate without further obligations to the Executive hereunder other than the obligation to pay to the Executive (i) his Annual Base Salary, Commissions, if applicable, and accrued vacation through the Date of Termination, and (ii) Other Benefits, in each case to the extent theretofore unpaid.  If the Executive voluntarily terminates employment upon or following a Change in Control (excluding a resignation for Good Reason in Connection with a Change in Control) this Agreement shall terminate without further obligations to the Executive under, other than for Accrued Obligations and timely payment or provision of Other Benefits.  In such case, all Accrued Obligations shall be paid to the Executive in cash in the manner and within the time frames set forth in Section 5(b)(i) and (ii), as applicable.

(g)      [Intentionally Omitted]

(h)           Limits on Timing of Post-employment Payments.  Notwithstanding any provision in this Agreement to the contrary, payments under Sections 5(b) and 5(c) shall be bifurcated into two portions, the first consisting of the portion that does not constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the second consisting of the portion of such payments that does constitute such “nonqualified deferred compensation.”  Such payments shall first be made from the portion that does not constitute “nonqualified deferred compensation” until it is exhausted and then from the portion that constitutes “nonqualified deferred compensation.”  Because Executive is a “specified employee” within the meaning of Code Section 409A, the commencement and delivery of any such payments that constitute “nonqualified deferred compensation” shall be delayed to the date that is six months and one day after the date of Executive’s Separation from Service with the Company.  The determination of whether, and the extent to which, payments under Section 5(b) or Section 5(c) are “nonqualified deferred compensation” shall be made after the application of all applicable exclusions under Treasury Regulation Section 1.409A-1(b).  Similarly, continuation coverage under each employee benefit plan pursuant to Section 5.2(c)(iii) and outplacement assistance under Section 5.2(c)(iv) shall be treated as separate plans from each other and from the cash payments under Section 5.2(c)(i) and (ii).  Each type of employee benefit plan continuation coverage specified in Section 5.2(c)(iii) and the outplacement assistance described in Section 5.2(c)(iv) shall also be bifurcated into two portions, one consisting of the maximum portion of such employee benefit plan continuation coverage or outplacement assistance, as applicable, that does not constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, and the second portion consisting of the element that does constitute “nonqualified deferred compensation” within the meaning of Code Section 409A.” Provision of the portion of any benefit under Section 5(c)(iii) and 5(c)(iv) that constitutes “nonqualified deferred compensation” shall be deferred until six months and one day after the date of Executive’s Separation from Service with the Company.

With respect to items eligible for reimbursement under the terms of this Agreement or any other plan of the Company, (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year, (ii) no such reimbursement may be exchanged or liquidated for another payment or benefit, and (iii) any reimbursements of such expenses shall be made as soon as practicable under the circumstances but in any event no later than the end of the calendar year following the calendar year in which the related expenses were incurred. All payments under Section 5(c) on account of the Executive’s termination for Good Reason shall be treated for purposes of Code Section 409A, to the fullest extent permitted by the Treasury Regulations under Code Section 409A, as payments on account of the Executive’s involuntary termination.

6.             Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its Affiliated Companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its Affiliated

Employment Agreement

Page 10 of 13

Companies.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its Affiliated Companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

7.             Full Settlement.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.

8.             Confidential Information.  Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its Affiliated Companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its Affiliated Companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it, or use such confidential information.  In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

9.             Successors.

(a)           This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b)           This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c)           The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such success had taken place.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumed and agrees to perform this Agreement by operation of law, or otherwise.

10.           Miscellaneous.

(a)           This Agreement shall be governed by and construed in accordance with the laws of the State of Utah, without reference to principles of conflict of laws.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.  No waiver of any party’s rights or benefits under this Agreement shall be effective unless such party signs a written waiver of its rights or benefits.

(b)           All notices and other communications hereunder shall be writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or in the case of notices to the Executive by electronic mail (email) addressed as follows:

If to the Executive:

To the Executive’s most current home address (or email address, as applicable) on file with the Company’s Human Resources Department

Employment Agreement

Page 11 of 13

If to the Company:

                 Merit Medical Systems, Inc.

1600 West Merit Parkway

South Jordan, Utah 84095

Attention:  Chief Legal Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

(c)           The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d)     The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. The Company makes no representation or warranty to the Executive regarding the tax consequences of any payment or benefit under this Agreement, including any representation as to the application of Code Section 409A to such payments. Neither the Company, any Affiliated Companies of the Company, nor any director, officer, employee or agent of the Company or of any of its Affiliated Companies shall have any obligation or liability to gross-up, reimburse or indemnify the Executive for any taxes (including tax-related interest and penalties) imposed on the Executive.

(e)           The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right of this Agreement.

(f)            This Agreement constitutes the entire agreement between the parties with respect to the Executive’s employment by the Company and supersedes and replaces all other agreements, oral or written, between the parties with respect to the subject matter hereof.

(g)           The Company and the Executive irrevocably: (i) agree that any claim, law suit, cause of action or dispute arising under or with respect to this Agreement or the Executive’s employment hereunder (a “Claim”) shall be adjudicated solely in the United States Federal District Court or Utah State Courts situated in Salt Lake City, Utah (collectively the “Utah Courts”); (ii) consent and submit to the personal jurisdiction of the Utah Courts with respect to any Claim; (iii) agree that the Utah Courts shall have exclusive subject matter jurisdiction over any such Claims and that venue with respect to any such Claims is proper and most convenient in the Utah Courts; and (iv) agree and covenant not to assert any objection to personal jurisdiction, subject matter jurisdiction or venue in the Utah Courts with respect to any Claim. TO THE FULLEST EXTENT PERMITTED BY LAW, THE COMPANY AND THE EXECUTIVE IRREVOCABLY WAIVE AND RELEASE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY THE COMPANY.

(h)           If the Executive or the Company retains legal counsel and/or incurs other costs and expenses in connection with the enforcement of any or all of the provisions of this Agreement, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees, costs, and expenses incurred by the prevailing party in connection with the enforcement of this Agreement.  Notwithstanding the foregoing, in the event that following a Change in Control the Executive engages legal counsel to enforce the Executive’s rights or seek a determination under this Agreement, the Company shall pay the expenses of such legal counsel regardless of the outcome of any legal proceeding resulting therefrom; provided that such claim is not determined by a trier of fact to be frivolous or in bad faith.

[Remainder of Page Intentionally Left Blank-Signature Page Follows]

Employment Agreement

Page 12 of 13

IN WITNESS WHEREOF, the Executive and Company have caused this Agreement to be executed as of the date first set forth above.

EXECUTIVE:	/s/ Raul Parra Name: Raul Parra Title: Chief Financial Officer
COMPANY:	MERIT MEDICAL SYSTEMS, INC. /s/ Fred Lampropoulos Name: Fred Lampropoulos Title: Chairman and Chief Executive Officer

Employment Agreement

Page 13 of 13

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Fred P. Lampropoulos, certify that:

1.      I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of Merit Medical Systems, Inc. (the “Registrant”);

2.      Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.      Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4.      The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.      The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 9, 2018

/s/ Fred P. Lampropoulos

Fred P. Lampropoulos

President and Chief Executive Officer

(principal executive officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Raul Parra, certify that:

1.      I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of Merit Medical Systems, Inc. (the “Registrant”);

2.      Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.      Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4.      The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.      The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 9, 2018

/s/ Raul Parra

Raul Parra

Chief Financial Officer

(principal financial officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Merit Medical Systems, Inc. (the “Company”) for the quarter ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Fred P. Lampropoulos, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018	/s/ Fred P. Lampropoulos
	Fred P. Lampropoulos
	President and Chief Executive Officer
	(principal executive officer)

This certification accompanies the foregoing Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Merit Medical Systems, Inc. (the “Company”) for the quarter ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Raul Parra, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018	/s/ Raul Parra
	Raul Parra
	Chief Financial Officer
	(principal financial officer)

This certification accompanies the foregoing Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 06, 2018
Document Information [Abstract]
Entity Registrant Name	MERIT MEDICAL SYSTEMS INC
Entity Central Index Key	0000856982
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		54,735,486

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
CURRENT ASSETS:
Cash and cash equivalents	$ 43,512	$ 32,336
Trade receivables — net of allowance for uncollectible accounts — 2018 — $1,921 and 2017 — $1,769	131,943	105,536
Other receivables	8,490	9,429
Inventories	169,254	155,288
Prepaid expenses and other assets	12,142	9,096
Prepaid income taxes	3,292	3,225
Income tax refund receivables	2,331	1,211
Total current assets	370,964	316,121
PROPERTY AND EQUIPMENT:
Land and land improvements	26,940	19,877
Buildings	150,726	147,356
Manufacturing equipment	205,911	197,651
Furniture and fixtures	52,649	49,528
Leasehold improvements	33,029	31,161
Construction-in-progress	40,454	32,896
Total property and equipment	509,709	478,469
Less accumulated depreciation	(197,941)	(185,649)
Property and equipment — net	311,768	292,820
OTHER ASSETS:
Goodwill	248,998	238,147
Deferred income tax assets	2,318	2,359
Other assets	58,075	35,040
Total other assets	608,459	502,870
TOTAL	1,291,191	1,111,811
CURRENT LIABILITIES:
Trade payables	50,823	34,931
Accrued expenses	65,838	58,932
Current portion of long-term debt	21,985	19,459
Income taxes payable	948	2,298
Total current liabilities	139,594	115,620
LONG-TERM DEBT	391,582	259,013
DEFERRED INCOME TAX LIABILITIES	23,148	23,289
LONG-TERM INCOME TAXES PAYABLE	4,846	4,846
LIABILITIES RELATED TO UNRECOGNIZED TAX BENEFITS	2,746	2,746
DEFERRED COMPENSATION PAYABLE	11,620	11,181
DEFERRED CREDITS	2,332	2,403
OTHER LONG-TERM OBLIGATIONS	16,069	16,379
Total liabilities	591,937	435,477
COMMITMENTS AND CONTINGENCIES (Notes 5, 10, 11, and 14)
STOCKHOLDERS’ EQUITY:
Preferred stock — 5,000 shares authorized as of June 30, 2018 and December 31, 2017; no shares issued	0	0
Common stock, no par value; shares authorized — 2018 and 2017 - 100,000; issued and outstanding as of June 30, 2018 - 50,635 and December 31, 2017 - 50,248	359,570	353,392
Retained earnings	337,618	321,408
Accumulated other comprehensive income	2,066	1,534
Total stockholders’ equity	699,254	676,334
TOTAL	1,291,191	1,111,811
Developed technology — net of accumulated amortization — 2018 — $86,023 and 2017 — $72,420
OTHER ASSETS:
Intangible assets	232,880	167,771
Other — net of accumulated amortization — 2018 — $43,246 and 2017 — $38,127
OTHER ASSETS:
Intangible assets	$ 66,188	$ 59,553

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
CURRENT ASSETS:
Trade receivables, allowances	$ 1,921	$ 1,769
STOCKHOLDERS’ EQUITY:
Preferred stock shares authorized (in shares)	5,000,000	5,000,000
Preferred stock shares issued (in shares)	0	0
Common stock par value (in dollars per share)
Common stock shares authorized (in shares)	100,000,000	100,000,000
Common stock shares issued (in shares)	50,635,000	50,248,000
Common stock shares outstanding (in shares)	50,635,000	50,248,000
Other
OTHER ASSETS:
Intangibles, accumulated amortization	$ 43,246	$ 38,127
Developed technology
OTHER ASSETS:
Intangibles, accumulated amortization	$ 86,023	$ 72,420

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
NET SALES	$ 224,810	$ 186,549	$ 427,844	$ 357,618
COST OF SALES	124,801	102,408	239,779	197,535
GROSS PROFIT	100,009	84,141	188,065	160,083
OPERATING EXPENSES:
Selling, general and administrative	69,095	57,409	134,007	115,180
Research and development	15,316	13,313	29,638	25,838
Contingent consideration expense (benefit)	178	(18)	219	19
Acquired in-process research and development	306	75	306	75
Total operating expenses	84,895	70,779	164,170	141,112
INCOME FROM OPERATIONS	15,114	13,362	23,895	18,971
OTHER INCOME (EXPENSE):
Interest income	342	89	487	172
Interest expense	(3,338)	(1,639)	(5,736)	(4,345)
Gain on bargain purchase	0	(669)	0	11,574
Other income (expense) - net	(553)	170	(721)	434
Other income (expense) — net	(3,549)	(2,049)	(5,970)	7,835
INCOME BEFORE INCOME TAXES	11,565	11,313	17,925	26,806
INCOME TAX EXPENSE	624	1,830	1,715	2,520
NET INCOME	$ 10,941	$ 9,483	$ 16,210	$ 24,286
EARNINGS PER COMMON SHARE:
Basic (in dollars per share)	$ 0.22	$ 0.19	$ 0.32	$ 0.51
Diluted (in dollars per share)	$ 0.21	$ 0.19	$ 0.31	$ 0.50
AVERAGE COMMON SHARES:
Basic (in shares)	50,473	49,957	50,376	47,406
Diluted (in shares)	52,154	51,188	52,033	48,516

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 10,941	$ 9,483	$ 16,210	$ 24,286
Other comprehensive income (loss):
Amount of Gain/(Loss) recognized in OCI	881	(527)	2,873	310
Less income tax benefit (expense)	(226)	205	(738)	(121)
Foreign currency translation adjustment	(4,195)	1,425	(1,603)	2,205
Less income tax expense	0	0	0	(252)
Total other comprehensive income (loss)	(3,540)	1,103	532	2,142
Total comprehensive income	$ 7,401	$ 10,586	$ 16,742	$ 26,428

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 16,210	$ 24,286
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,779	25,709
Gain on bargain purchase	0	(11,574)
Loss on sales and/or abandonment of property and equipment	371	234
Write-off of patents and intangible assets	86	19
Acquired in-process research and development	306	75
Amortization of deferred credits	(71)	(76)
Amortization of long-term debt issuance costs	402	343
Deferred income taxes	0	(295)
Stock-based compensation expense	2,821	1,691
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade receivables	(27,947)	(13,248)
Other receivables	966	(114)
Inventories	(7,189)	(2,160)
Prepaid expenses and other current assets	(3,105)	(1,230)
Prepaid income taxes	(100)	(92)
Income tax refund receivables	(1,146)	294
Other assets	(751)	(1,500)
Trade payables	15,767	3,664
Accrued expenses	7,467	7,421
Income taxes payable	(2,076)	(301)
Deferred compensation payable	438	513
Other long-term obligations	(179)	907
Total adjustments	18,839	10,280
Net cash provided by operating activities	35,049	34,566
Capital expenditures for:
Property and equipment	(31,559)	(17,782)
Intangible assets	(1,755)	(1,082)
Proceeds from the sale of property and equipment	4	3
Issuance of note receivable	(10,500)	0
Cash paid in acquisitions, net of cash acquired	(118,654)	(54,809)
Net cash used in investing activities	(162,464)	(73,670)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	3,251	140,989
Offering costs	0	(815)
Proceeds from issuance of long-term debt	320,827	96,859
Payments on long-term debt	(185,827)	(179,359)
Contingent payments related to acquisitions	(130)	(30)
Net cash provided by financing activities	138,121	57,644
EFFECT OF EXCHANGE RATES ON CASH	470	(36)
NET INCREASE IN CASH AND CASH EQUIVALENTS	11,176	18,504
CASH AND CASH EQUIVALENTS:
Beginning of period	32,336	19,171
End of period	43,512	37,675
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest (net of capitalized interest of $314 and $240, respectively)	5,714	4,386
Income taxes	5,141	2,678
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment purchases in accounts payable	3,943	1,560
Acquisition purchases in accrued expenses and other long-term obligations	0	6,000
Merit common stock surrendered (32 and 0 shares, respectively) in exchange for exercise of stock options	$ 1,684	$ 0

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Statement of Cash Flows [Abstract]
Net capitalized interest	$ 314	$ 240
Merit common stock surrendered in exchange for exercise of stock options (in shares)	32	0

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation. The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three and six-month periods ended June 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 June 30, 2018 and December 31, 2017, and our results of operations and cash flows for the three and six-month periods ended June 30, 2018 and 2017. The results of operations for the three and six-month periods ended June 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.

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Inventories

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Inventories

Inventories. Inventories at June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30,		December 31,
	2018		2017
Finished goods	$	101,092	$	86,555
Work-in-process	20,962		12,799
Raw materials	47,200		55,934
Total Inventories	$	169,254	$	155,288

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Stock-Based Compensation Expense

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Expense

Stock-Based Compensation Expense. The stock-based compensation expense before income tax expense for the three and six months ended June 30, 2018 and 2017, consisted of the following (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Cost of sales	$	232	$	168	$	416	$	264
Research and development	147		100		271		152
Selling, general and administrative	1,186		846		2,134		1,275
Stock-based compensation expense before taxes	$	1,565	$	1,114	$	2,821	$	1,691

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 June 30, 2018, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $22.4 million and is expected to be recognized over a weighted average period of 3.46 years.

During the three and six-month periods ended June 30, 2018, we granted stock-based awards representing 200,000 and 692,002 shares of our common stock, respectively. During the three and six-month periods ended June 30, 2017, we granted stock-based awards representing approximately 1.28 million shares of our common stock. 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:

	Six Months Ended June 30,
	2018	2017
Risk-free interest rate	2.63% - 2.77%	1.77% - 1.79%
Expected option life	5.0 years	5.0 years
Expected dividend yield	—	—
Expected price volatility	34.06% - 34.32%	33.81% - 34.03%

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.

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Earnings Per Common Share (EPS)

6 Months Ended

Jun. 30, 2018

Earnings Per Share, Basic and Diluted [Abstract]

Earnings Per Common Share (EPS)

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					Six Months
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount
Period ended June 30, 2018:
Basic EPS	$	10,941	50,473	$	0.22	$	16,210	50,376	$	0.32
Effect of dilutive stock options and warrants			1,681					1,657
Diluted EPS	$	10,941	52,154	$	0.21	$	16,210	52,033	$	0.31
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive			535					359
Period ended June 30, 2017:
Basic EPS	$	9,483	49,957	$	0.19	$	24,286	47,406	$	0.51
Effect of dilutive stock options and warrants			1,231					1,110
Diluted EPS	$	9,483	51,188	$	0.19	$	24,286	48,516	$	0.50
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive			1,007					552

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Acquisitions

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Acquisitions

Acquisitions. 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 a follows (in thousands):

Net Assets Acquired
Inventories	$	971
Intangibles
Developed technology	4,840
Customer list	120
Trademarks	400
Goodwill	938
Total net 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 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 segment since the acquisition date. During the period from April 6, 2018 to June 30, 2018, our net sales of NinePoint products were approximately $1.1 million. We believe the NinePoint products will enhance the product offerings of our Endotek 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, 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 a rate of 9% and is collateralized by NinePoint's rights, interest and title to the NvisionVLE® Imaging System and any other product owned or licensed by 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 six-month periods ended June 30, 2018, our net sales of BD products were approximately $12.2 million and $18.5 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 $41,000 and $1.8 million for the three and six-month periods ended June 30, 2018. The following table summarizes the preliminary purchase price allocated to the assets acquired from BD (in thousands):

		Preliminary Allocation		Adjustments (1)			Revised Allocation
	Inventories	$	6,039	$	(235	)	$	5,804
	Property and equipment	581		167			748
	Intangibles
	Developed technology	79,900		(5,900		)	74,000
	Customer list	3,500		700			4,200
	Trademarks	4,700		200			4,900
	Goodwill	5,387		5,226			10,613
	Total net assets acquired	$	100,107	$	158		$	100,265
(1)	Under U.S. GAAP, measurement period adjustments are recognized on a prospective basis in the period of change, instead of restating prior periods. There was no impact to reported earnings in connection with these measurement period adjustments for the periods presented. Amounts represent adjustments to the preliminary purchase price allocation first presented in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 resulting from a final working capital adjustment and our ongoing activities with respect to finalizing asset valuations for this acquisition.

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 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 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 segment since the acquisition date. During the three and six months ended June 30, 2018, our net sales of ITL products were approximately $2.0 million and $4.2 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):

Net Assets Acquired
Inventories	$	594
Intangibles
Developed technology	14,920
Customer list	120
Goodwill	6,366
Total net 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 six months ended June 30, 2018, our net sales of Osseon products were approximately $588,000 and $1.1 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 net assets acquired (in thousands):

Net Assets Acquired
Inventories	$	979
Property and equipment	58
Intangibles
Developed technology	5,400
Customer list	200
Goodwill	203
Total net 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 and liabilities assumed (in thousands):

Net Assets Acquired
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 six months ended June 30, 2018, our net sales of the Argon critical care products were approximately $11.2 million and $23.7 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 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 segment since the acquisition date. During the three and six months ended June 30, 2018, our net sales of the products acquired from Catheter Connections were approximately $3.1 million and $6.3 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		)
Net assets acquired	$	38,000

We are amortizing the Catheter Connections developed technology asset over 12 years, the related trademarks over 10 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.

On July 6, 2016, we acquired all of the issued and outstanding shares of DFINE Inc. ("DFINE"). The DFINE acquisition added a line of vertebral augmentation products for the treatment of vertebral compression fractures, as well as medical devices used to treat metastatic spine tumors. We made an initial payment of $97.5 million to certain DFINE stockholders on July 6, 2016 and paid approximately $578,000 related to a net working capital adjustment subject to review by Merit and the preferred stockholders of DFINE. We accounted for the acquisition as a business combination. Acquisition-related costs during the year ended December 31, 2016, which are included in selling, general, and administrative expenses were approximately $1.6 million. The results of operations related to this acquisition have been included in our cardiovascular segment since the acquisition date. During the three and six months ended June 30, 2018, our net sales of DFINE products were approximately $7.2 million and $14.5 million, respectively. It is not practical to separately report the earnings related to the DFINE acquisition, as we cannot split out sales costs related to DFINE products, principally because our sales representatives are selling multiple products (including DFINE products) in the cardiovascular business segment. The purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on estimated fair values, as follows (in thousands):

Assets Acquired
Trade receivables	$	4,054
Other receivables	6
Inventories	8,585
Prepaid expenses and other assets	630
Property and equipment	1,630
Other long-term assets	145
Intangibles
Developed technology	67,600
Customer lists	2,400
Trademarks	4,400
Goodwill	24,818
Total assets acquired	114,268
Liabilities Assumed
Trade payables	(1,790		)
Accrued expenses	(5,298		)
Deferred income tax liabilities - current	(701		)
Deferred income tax liabilities - noncurrent	(10,844		)
Total liabilities assumed	(18,633		)
Net assets acquired, net of cash received of $1,327	$	95,635

The gross amount of trade receivables we acquired in the acquisition was approximately $4.3 million, of which approximately $224,000 was expected to be uncollectible or returned. With respect to the DFINE assets, we are amortizing developed technology over 15 years and customer lists on an accelerated basis over nine years. While U.S. trademarks can be renewed indefinitely, we currently estimate that we will generate cash flow from the acquired trademarks for a period of 15 years from the acquisition date. The total weighted-average amortization period for these acquired intangible assets is 14.8 years.

On February 4, 2016, we purchased the HeRO® Graft device and other related assets from CryoLife, Inc., a developer of medical devices based in Kennesaw, Georgia ("CryoLife"). The HeRO Graft is a fully subcutaneous vascular access system intended for use in maintaining long-term vascular access for chronic hemodialysis patients who have failing fistulas, grafts or are catheter dependent due to a central venous blockage. The purchase price was $18.5 million, which was paid in full during 2016. We accounted for this acquisition as a business combination. The purchase price was allocated as follows (in thousands):

Assets Acquired
Inventories	$	2,455
Property and equipment	290
Intangibles
Developed technology	12,100
Trademarks	700
Customers Lists	400
Goodwill	2,555
Total assets acquired	$	18,500

We are amortizing the developed HeRO Graft technology asset over 10 years, the related trademarks over 5.5 years, and the associated customer lists over 12 years. We have estimated the weighted average life of the intangible HeRO Graft assets acquired to be approximately 9.8 years. Acquisition-related costs related to the HeRO Graft device and other related assets during the year ended December 31, 2016, which are included in selling, general and administrative expenses, 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 six months ended June 30, 2018, our net sales of the products acquired from CryoLife were approximately $2.2 million and $4.2 million, respectively. It is not practical to separately report the earnings related to the products acquired from CryoLife, as we cannot split out sales costs related to those products, principally because our sales representatives are selling multiple products (including the HeRO Graft device) in the cardiovascular business segment.

The following table summarizes our consolidated results of operations for the six-month period ended June 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):

	Six Months Ended
	June 30, 2017
	As Reported		Pro Forma
Net sales	$	357,618	$	360,378
Net income	24,286		12,444
Earnings per common share:
Basic	$	0.51	$	0.26
Diluted	$	0.50	$	0.26

* The pro forma results for the three-month periods ended June 30, 2018 and 2017 and the six-month period ended June 30, 2018 are not included in the table above because the operating results for the Argon critical care division acquisition were included in our consolidated statements of income for these periods.

The unaudited pro forma information set forth above is for informational purposes only and includes adjustments related to the step-up of acquired inventories, amortization expense of acquired intangible assets, interest expense on long-term debt and changes in the timing of the recognition of the gain on bargain purchase. The pro forma information should not be considered indicative of actual results that would have been achieved if the acquisition of the Argon critical care division had occurred on January 1, 2016, or results that may be obtained in any future period. The pro forma consolidated results of operations do not include the acquisition of assets from BD because it was deemed impracticable to obtain information to determine net income associated with the acquired product lines which represent a small product line of a large, consolidated company without standalone financial information. The pro forma consolidated results of operations do not include the DirectACCESS, ITL, Laurane, Osseon, VAT or Catheter Connections acquisitions as we do not deem the pro forma effect of these transactions to be material.

The goodwill arising from the acquisitions discussed above consists largely of the synergies and economies of scale we hope to achieve from combining the acquired assets and operations with our historical operations. The goodwill recognized from certain acquisitions is expected to be deductible for income tax purposes.

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Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customers

Revenue from Contracts with Customers.

In accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), we recognize revenue when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration we to receive in exchange for these goods. To achieve this core principle, we apply the following five steps:

1. Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred if the amortization period would have been one year or less.

2. Identify the performance obligations in the contract. Generally, our contracts with customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations relate to delivering single-use medical products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans.

3. Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of June 30, 2018 contained a significant financing component. Further, our methodology to estimate and recognize variable consideration is consistent with the requirements of ASC 606. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

4. Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we recognize revenue upon delivery of the product to the customer's control at contractually stated pricing.

5. Recognize revenue when or as we satisfy a performance obligation. We satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

Disaggregation of Revenue

The disaggregation of revenue is based on type of product and geographical region. For descriptions of our product offerings and segments, see Note 12 in our 2017 Form 10-K.

The following tables present revenue from contracts with customers for the three and six-month periods ended June 30, 2018 and 2017 (in thousands):

	Three Months Ended June 30, 2018						Three Months Ended June 30, 2017
	United States		International		Total		United States		International		Total
Cardiovascular
Stand-alone devices	$	50,941	$	41,555	$	92,496	$	37,202	$	33,854	$	71,056
Custom kits and procedure trays	23,667		10,325		33,992		24,271		7,526		31,797
Inflation devices	8,160		16,145		24,305		8,042		12,747		20,789
Catheters	16,704		22,670		39,374		16,022		16,407		32,429
Embolization devices	5,094		7,630		12,724		5,593		6,565		12,158
CRM/EP	11,758		1,738		13,496		10,264		1,170		11,434
Total	116,324		100,063		216,387		101,394		78,269		179,663
Endoscopy
Endoscopy devices	8,121		302		8,423		6,712		174		6,886
Total	$	124,445	$	100,365	$	224,810	$	108,106	$	78,443	$	186,549

	Six Months Ended June 30, 2018						Six Months Ended June 30, 2017
	United States		International		Total		United States		International		Total
Cardiovascular
Stand-alone devices	$	94,953	$	80,789	$	175,742	$	73,366	$	61,343	$	134,709
Custom kits and procedure trays	45,984		21,280		67,264		45,737		14,935		60,672
Inflation devices	15,828		30,896		46,724		16,017		23,279		39,296
Catheters	31,974		41,265		73,239		31,151		31,454		62,605
Embolization devices	10,126		15,184		25,310		11,134		13,551		24,685
CRM/EP	20,596		3,366		23,962		20,011		2,440		22,451
Total	219,461		192,780		412,241		197,416		147,002		344,418
Endoscopy
Endoscopy devices	15,040		563		15,603		12,806		394		13,200
Total	$	234,501	$	193,343	$	427,844	$	210,222	$	147,396	$	357,618

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Segment Reporting

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting. We report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of cardiology and radiology medical device products which assist in diagnosing and treating coronary artery disease, peripheral vascular disease and other non-vascular diseases and includes embolotherapeutic, cardiac rhythm management ("CRM"), electrophysiology ("EP"), critical care, and interventional oncology and spine devices. Our endoscopy segment focuses on the gastroenterology, pulmonary and thoracic surgery specialties, with a portfolio consisting primarily of stents, dilation balloons, certain inflation devices, guidewires, and other disposable products. We evaluate the performance of our operating segments based on operating income. 

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and six-month periods ended June 30, 2018 and 2017, are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Net Sales (1)
Cardiovascular	$	216,387	$	179,663	$	412,241	$	344,418
Endoscopy	8,423		6,886		15,603		13,200
Total net sales	$	224,810	$	186,549	$	427,844	$	357,618
Operating Income (1)
Cardiovascular	$	12,663	$	11,493	$	19,060	$	15,475
Endoscopy	2,451		1,869		4,835		3,496
Total operating income	$	15,114	$	13,362	$	23,895	$	18,971

⁽¹⁾ Sales and operating income have been adjusted from prior disclosure to reflect changes in product classifications between our operating segments, which were made to be consistent with updates in the management of our product portfolios in 2018.

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Recently Issued Financial Accounting Standards

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Recently Issued Financial Accounting Standards

Recently Issued Financial Accounting Standards

Recently Adopted

In October 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 became effective for us as of January 1, 2018. The adoption of ASU 2016-16 did not have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. We adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance regarding the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. We adopted ASU 2016-01 on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on our consolidated financial statements.

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU (and all subsequent ASUs that modified Topic 606) effective January 1, 2018 on a modified retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations or cash flows. As such, prior period amounts are not adjusted and continue to be reported under accounting standards then in effect, and we did not record a cumulative adjustment to the opening equity balance of retained earnings as of January 1, 2018. However, additional disclosures have been added in accordance with the requirements of Topic 606 and are reflected in Note 6.

Not Yet Adopted

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. While we continue to assess the potential impact of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017 (the "2017 Tax Act"). ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the anticipated impact of adopting ASU 2018-02 on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the anticipated impact of adopting ASU 2017-12 on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02.

We do not believe any other issued and not yet effective accounting standards will be relevant to our consolidated financial statements.

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes. On December 22, 2017, the 2017 Tax Act was signed into law. At December 31, 2017, we recorded a provisional net tax benefit related to the remeasurement of deferred taxes and a one-time tax expense for the transition tax. In accordance with SEC Staff Accounting Bulletin 118 (“SAB 118”), income tax effects of the 2017 Tax Act may be refined upon obtaining, preparing, and/or analyzing additional information during the measurement period and such changes could be material. During the measurement period, provisional amounts may also be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017 by U.S. regulatory and standard-setting bodies. As of June 30, 2018, the amounts recorded for the 2017 Tax Act remain provisional and may be impacted by further analysis and subsequently issued guidance.

For tax years beginning after December 31, 2017, the 2017 Tax Act introduces new provisions of U.S. taxation of certain Global Intangible Low-Taxed Income (“GILTI”). We have not yet determined our policy election with respect to whether to record deferred taxes for temporary basis differences expected to reverse as GILTI in future periods, or account for taxes on GILTI using the period cost method. We have, however, included an estimate of the current GILTI impact in our tax provision for the three and six months ended June 30, 2018.

Our non-U.S. earnings are currently considered as indefinitely reinvested overseas. Previously, any repatriation by way of a dividend may have been subject to both U.S. federal and state income taxes, as adjusted for any non-U.S. tax credits. Under the 2017 Tax Act, such dividends should no longer be subject to U.S. federal tax. We are still analyzing how the 2017 Tax Act impacts our existing accounting position to indefinitely reinvest foreign earnings and have yet to determine whether we plan to change our position. We will record the tax effects of any change to our existing assertion in the period that we complete our analysis. If such earnings were to be distributed, any foreign withholding taxes could be material.

Our provision for income taxes for the three months ended June 30, 2018 and 2017 was a tax expense of approximately $624,000 and $1.8 million, respectively, which resulted in an effective tax rate of 5.4% and 16.2%, respectively. Our provision for income taxes for the six months ended June 30, 2018 and 2017 was a tax expense of approximately $1.7 million and $2.5 million, respectively, which resulted in an effective tax rate of 9.6% and 9.4%, respectively. The decrease in the effective income tax rate for the second quarter of 2018 compared to the second quarter of 2017 was primarily caused by a decrease in the federal statutory tax rate, as well as a discrete tax benefit related to share-based payment awards. Despite the decrease resulting from these items, the effective tax rate for the six months ended June 30, 2018 is relatively unchanged when compared to the corresponding period in 2017 due primarily to the nontaxable gain on the bargain purchase recorded in connection with the 2017 acquisition of the Argon critical care division.

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Revolving Credit Facility and Long-Term Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Revolving Credit Facility and Long-Term Debt

Revolving Credit Facility and Long-Term Debt. Principal balances outstanding under our long-term debt obligations as of June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30, 2018			December 31, 2017
2016 Term loan	$	80,000		$	85,000
2016 Revolving credit loans	327,000			187,000
Collateralized debt facility	6,985			6,959
Less unamortized debt issuance costs	(418		)	(487		)
Total long-term debt	413,567			278,472
Less current portion	21,985			19,459
Long-term portion	$	391,582		$	259,013

2016 Term Loan and Revolving Credit Loans

On July 6, 2016, we entered into a Second Amended and Restated Credit Agreement (as amended to date, the “Second Amended Credit Agreement”), with Wells Fargo Bank, National Association, as administrative agent, swingline lender and a lender, and Wells Fargo Securities, LLC, as sole lead arranger and sole bookrunner. In addition to Wells Fargo Bank, National Association, Bank of America, N.A., U.S. Bank, National Association, and HSBC Bank USA, National Association, are parties to the Second Amended Credit Agreement as lenders. The Second Amended Credit Agreement amends and restates in its entirety our previously outstanding Amended and Restated Credit Agreement and all amendments thereto. The Second Amended Credit Agreement was amended on September 28, 2016 to allow for a new revolving credit loan to our wholly-owned subsidiary, on March 20, 2017 to allow flexibility in how we apply net proceeds received from equity issuances to prepay outstanding indebtedness, on December 13, 2017 to increase the revolving credit commitment by $100 million up to $375 million, and on March 28, 2018 to amend certain debt covenants.

The Second Amended Credit Agreement provides for a term loan of $150 million and a revolving credit commitment up to an aggregate amount of $375 million, which includes a reserve of $25 million to make swingline loans from time to time. The term loan is payable in quarterly installments in the amounts provided in the Second Amended Credit Agreement until the maturity date of July 6, 2021, at which time the term and revolving credit loans, together with accrued interest thereon, will be due and payable. At any time prior to the maturity date, we may repay any amounts owing under all revolving credit loans, term loans, and all swingline loans in whole or in part, subject to certain minimum thresholds, without premium or penalty, other than breakage costs.

Revolving credit loans denominated in dollars and term loans made under the Second Amended Credit Agreement bear interest, at our election, at either a Base Rate or Eurocurrency Base Rate (as such terms are defined in the Second Amended Credit Agreement) plus the applicable margin, which increases as our Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) increases. Revolving credit loans denominated in an Alternative Currency (as defined in the Second Amended Credit Agreement) bear interest at the Eurocurrency rate plus the applicable margin. Swingline loans bear interest at the Base Rate plus the applicable margin. Upon an event of default, the interest rate may be increased by 2.0%. The revolving credit commitment also carries a commitment fee of 0.15% to 0.40% per annum on the unused portion.

The Second Amended Credit Agreement is collateralized by substantially all our assets. The Second Amended Credit Agreement contains covenants, representations and warranties, and other terms customary for loans of this nature. The Second Amended Credit Agreement requires that we maintain certain financial covenants, as follows:

		Covenant Requirement
Consolidated Total Leverage Ratio (1)
	January 1, 2018 and thereafter	3.5 to 1.0
Consolidated EBITDA (2)		1.25 to 1.0
Consolidated Net Income (3)		$0
Facility Capital Expenditures (4)		$30 million
(1)	Maximum Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) as of any fiscal quarter end.
(2)	Minimum ratio of Consolidated EBITDA (as defined in the Second Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Fixed Charges (as defined in the Second Amended Credit Agreement) for any period of four consecutive fiscal quarters.
(3)	Minimum level of Consolidated Net Income (as defined in the Second Amended Credit Agreement) for certain periods, and subject to certain adjustments.
(4)	Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Second Amended Credit Agreement) in any fiscal year.

Additionally, the Second Amended Credit Agreement contains customary events of default and affirmative and negative covenants for transactions of this type. As of June 30, 2018, we believe we were in compliance with all covenants set forth in the Second Amended Credit Agreement.

As of June 30, 2018, we had outstanding borrowings of approximately $407 million under the Second Amended Credit Agreement, with available borrowings of approximately $47.8 million, based on the leverage ratio required pursuant to the Second Amended Credit Agreement. Our interest rate as of June 30, 2018 was a fixed rate of 2.87% on $175 million as a result an interest rate swap (see Note 11) and a variable floating rate of 3.84% on $232 million. Our interest rate as of December 31, 2017 was a fixed rate of 2.68% on $175 million as a result of an interest rate swap and a variable floating rate of 2.82% on $97 million.

Collateralized Debt Facility

On March 14, 2018, we renewed our loan agreement with HSBC Bank USA, National Association ("HSBC Bank") whereby HSBC Bank agreed to provide us with a loan in the amount of approximately $7.0 million. The loan matures on July 10, 2018, with an extension available at our option, subject to certain conditions. The loan agreement bears interest at the three-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.0%, which resets quarterly. The loan is secured by assets having a value not less than the currently outstanding loan balance. The loan contains covenants, representations and warranties and other terms customary for loans of this nature. As of June 30, 2018, our interest rate on the loan was a variable rate of 3.26%.

Future Payments

Future minimum principal payments on our long-term debt as of June 30, 2018, are as follows (in thousands):

Years Ending	Future Minimum
December 31	Principal Payments
Remaining 2018	$	14,485
2019	15,000
2020	17,500
2021	367,000
Total future minimum principal payments	$	413,985

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Derivatives

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of these risks by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative programs are classified as operating activities in the accompanying consolidated statements of cash flows.

We formally document, designate and assess the effectiveness of transactions that receive hedge accounting initially and on an ongoing basis. Changes in the fair value of derivatives that qualify for hedge accounting treatment are recorded, net of applicable taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity in the accompanying consolidated balance sheets. For the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative.

Interest Rate Risk. A portion of our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Second Amended Credit Agreement that is solely due to changes in the benchmark interest rate.

Derivatives Designated as Cash Flow Hedges

On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a current notional amount of $175.0 million with Wells Fargo to fix the one-month LIBOR rate at 1.12%. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The interest rate swap is scheduled to expire on July 6, 2021.

At June 30, 2018 and December 31, 2017, our interest rate swap qualified as a cash flow hedge. The fair value of our interest rate swap at June 30, 2018 was an asset of approximately $8.0 million, which was partially offset by approximately $2.1 million in deferred taxes. The fair value of our interest rate swap at December 31, 2017 was an asset of approximately $5.7 million, which was offset by approximately $1.5 million in deferred taxes.

Foreign Currency Risk. We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Euros, British Pounds, Chinese Renminbi, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Danish Krone, Japanese Yen, Korea Won, and Singapore Dollars. We do not use derivative financial instruments for trading or speculative purposes. We are not subject to any credit risk contingent features related to our derivative contracts, and counterparty risk is managed by allocating derivative contracts among several major financial institutions.

Derivatives Designated as Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded from the assessment of effectiveness, are recognized in earnings during the current period. We enter into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies.

We enter into approximately 100 cash flow foreign currency hedges every month. As of June 30, 2018, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with the following notional amounts (in thousands and in local currencies):

Currency	Symbol	Forward Notional Amount
Canadian Dollar	CAD	2,410
Swiss Franc	CHF	1,158
Chinese Renminbi	CNY	66,000
Danish Krone	DKK	11,650
Euro	EUR	12,870
British Pound	GBP	2,975
Mexican Peso	MXN	94,275
Swedish Krona	SEK	13,830

Derivatives Not Designated as Cash Flow Hedges

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 20 foreign currency fair value hedges every month. As of June 30, 2018, we had entered into foreign currency forward contracts related to those balance sheet accounts, with the following notional amounts (in thousands and in local currencies):

Currency	Symbol	Forward Notional Amount
Australian Dollar	AUD	8,400
Brazilian Real	BRL	8,500
Canadian Dollar	CAD	3,098
Swiss Franc	CHF	255
Chinese Renminbi	CNY	95,228
Danish Krone	DKK	2,885
Euro	EUR	25,861
British Pound	GBP	1,584
Hong Kong Dollar	HKD	11,000
Japanese Yen	JPY	260,000
Korean Won	KRW	2,700,000
Mexican Peso	MXN	18,700
Swedish Krona	SEK	10,536
Singapore Dollar	SGD	6,900

Balance Sheet Presentation of Derivatives. As of June 30, 2018, and December 31, 2017, all derivatives, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded gross at fair value on our consolidated balance sheets. We are not subject to any master netting agreements.

The fair value of derivative instruments on a gross basis is as follows (in thousands):

		Fair Value
	Balance Sheet Location	June 30, 2018			December 31, 2017
Derivatives designated as hedging instruments
Assets
Interest rate swap	Other assets (long-term)	$	8,047		$	5,749
Foreign currency forward contracts	Prepaid expenses and other assets	700			363
Foreign currency forward contracts	Other assets (long-term)	83			35
Liabilities
Foreign currency forward contracts	Accrued expenses	(231		)	(468		)
Foreign currency forward contracts	Other long-term obligations	(38		)	(82		)
Derivatives not designated as hedging instruments
Assets
Foreign currency forward contracts	Prepaid expenses and other assets	$	1,097		$	223
Liabilities
Foreign currency forward contracts	Accrued expenses	(228		)	(841		)

Income Statement Presentation of Derivatives.

Derivatives Designated as Cash Flow Hedges

Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income and net earnings in our consolidated statements of income, consolidated statements of comprehensive income and consolidated balance sheets (in thousands):

	Amount of Gain/(Loss) recognized in OCI						Amount of Gain/(Loss) reclassified from AOCI
	Three Months Ended June 30,						Three Months Ended June 30,
	2018		2017				2018			2017
Derivative instrument						Location in statements of income
Interest rate swaps	$	748	$	(893	)	Interest Expense	$	357		$	—
Foreign currency forward contracts	394		353			Revenue	(234		)	(41		)
						Cost of sales	138			28
	Amount of Gain/(Loss) recognized in OCI						Amount of Gain/(Loss) reclassified from AOCI
	Six Months Ended June 30,						Six Months Ended June 30,
	2018		2017				2018			2017
Derivative instrument						Location in statements of income
Interest rate swaps	2,868		(507		)	Interest Expense	570			(104		)
Foreign currency forward contracts	568		741			Revenue	(385		)	(40		)
						Cost of sales	378			(37		)

The net amount recognized in earnings during the three and six months ended June 30, 2018 and 2017 due to ineffectiveness and amounts excluded from the assessment of hedge effectiveness were not significant.

As of June 30, 2018, approximately $464,000, or $345,000 after taxes, was expected to be reclassified from accumulated other comprehensive income to earnings in revenue and cost of sales over the succeeding twelve months. As of June 30, 2018, approximately $2.2 million, or $1.6 million after taxes, was expected to be reclassified from accumulated other comprehensive income to earnings in interest expense over the succeeding twelve months.

Derivatives Not Designated as Hedging Instruments

The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands):

		Three Months Ended June 30,					Six Months Ended June 30,
		2018		2017			2018		2017
Derivative Instrument	Location in statements of income
Foreign currency forward contracts	Other expense	$	3,153	$	(1,834	)	$	2,038	$	(2,692	)

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements. Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

				Fair Value Measurements Using
	Total Fair			Quoted prices in		Significant other			Significant
	Value at			active markets		observable inputs			unobservable inputs
Description	June 30, 2018			(Level 1)		(Level 2)			(Level 3)
Interest rate contracts (1)	$	8,047		$	—	$	8,047		$	—
Foreign currency contract assets, current and long-term (2)	$	1,880		$	—	$	1,880		$	—
Foreign currency contract liabilities, current and long-term (3)	$	(497	)	$	—	$	(497	)	$	—
				Fair Value Measurements Using
	Total Fair			Quoted prices in		Significant other			Significant
	Value at			active markets		observable inputs			unobservable inputs
Description	December 31, 2017			(Level 1)		(Level 2)			(Level 3)
Interest rate contracts (1)	$	5,749		$	—	$	5,749		$	—
Foreign currency contract assets, current and long-term (2)	$	621		$	—	$	621		$	—
Foreign currency contract liabilities, current and long-term (3)	$	(1,391	)	$	—	$	(1,391	)	$	—

(1)    The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as other assets or other long-term obligations in the consolidated balance sheets.

(2)    The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets or other long-term assets in the consolidated balance sheets.

(3)    The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.

Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue milestones. See Note 5 for further information regarding these acquisitions. The contingent consideration liability is re-measured at the estimated fair value at each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent consideration liability during the three and six-month periods ended June 30, 2018 and 2017, consisted of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Beginning balance	$	10,928		$	705		$	10,956		$	683
Contingent consideration liability recorded as the result of acquisitions (see Note 5)	—			4,900			—			4,900
Fair value adjustments recorded to income during the period	99			(18		)	86			19
Contingent payments made	(115		)	(15		)	(130		)	(30		)
Ending balance	$	10,912		$	5,572		$	10,912		$	5,572

As of June 30, 2018, approximately $10.6 million in contingent consideration liability was included in other long-term obligations and approximately $301,000 was included in accrued expenses in our consolidated balance sheet. As of December 31, 2017, approximately $10.7 million in contingent consideration liability was included in other long-term obligations and $289,000 was included in accrued expenses in our consolidated balance sheet. The cash paid to settle the contingent consideration liability recognized at fair value as of the acquisition date (including measurement-period adjustments) has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

During the year ended December 31, 2016, we sold a cost method investment for cash and for the right to receive additional payments based on various contingent milestones. We determined the fair value of the contingent payments using Level 3 inputs defined under authoritative guidance for fair value measurements, and we recorded a contingent receivable asset, which as of June 30, 2018 and December 31, 2017 had a value of approximately $474,000 and $760,000, respectively. We record any changes in fair value to operating expenses as part of our cardiovascular segment in our consolidated statements of income. During the three and six months ended June 30, 2018, we recorded a loss on the contingent receivable of approximately $79,000 and $132,000, respectively and received payments of approximately $0 and $153,000, respectively. As of June 30, 2018, approximately $184,000 was included in other long-term assets and approximately $290,000 was included in other receivables as a current asset in our consolidated balance sheet. As of December 31, 2017, approximately $319,000 was included in other long-term assets and approximately $441,000 was included in other receivables as a current asset in our consolidated balance sheet.

The recurring Level 3 measurement of our contingent consideration liability and contingent receivable includes the following significant unobservable inputs at June 30, 2018 and December 31, 2017 (amounts in thousands):

Contingent consideration asset or liability	Fair value at June 30, 2018		Valuation technique	Unobservable inputs	Range
Revenue-based payments	$	10,912	Discounted cash flow	Discount rate	9.9% - 15%
contingent liability				Projected year of payments	2018-2037
Contingent receivable	$	474	Discounted cash flow	Discount rate	10%
asset				Probability of milestone payment	54%
				Projected year of payments	2018-2019
Contingent consideration asset or liability	Fair value at December 31, 2017		Valuation technique	Unobservable inputs	Range
Revenue-based payments	$	10,956	Discounted cash flow	Discount rate	9.9% - 15%
contingent liability				Probability of milestone payment	100%
				Projected year of payments	2018-2037
Contingent receivable	$	760	Discounted cash flow	Discount rate	10%
asset				Probability of milestone payment	75%
				Projected year of payments	2018-2019

The contingent consideration liability and contingent receivable are re-measured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement. A decrease in the probability of any milestone payment may result in lower fair value measurements. Our determination of the fair value of the contingent consideration liability and contingent receivable could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income.

During the three and six-month periods ended June 30, 2018, we had losses of approximately $29,000 and $86,000, respectively, compared to losses of approximately $1,000 and $19,000 for the three and six-month periods ended June 30, 2017, respectively, related to the measurement of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition.

We believe the carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which are Level 1 inputs.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets. The changes in the carrying amount of goodwill for the six-month period ended June 30, 2018 were as follows (in thousands):

	2018
Goodwill balance at January 1	$	238,147
Effect of foreign exchange	(906		)
Additions as the result of acquisitions	11,757
Goodwill balance at June 30	$	248,998

As of June 30, 2018, we had recorded $8.3 million of accumulated goodwill impairment charges. All of the goodwill balance as of June 30, 2018 and December 31, 2017, is related to our cardiovascular segment.

Other intangible assets at June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents	$	18,196	$	(4,334	)	$	13,862
Distribution agreements	8,192		(5,278		)	2,914
License agreements	23,845		(6,419		)	17,426
Trademarks	21,516		(5,550		)	15,966
Covenants not to compete	1,028		(985		)	43
Customer lists	35,737		(20,680		)	15,057
In-process technology	920		—			920
Total	$	109,434	$	(43,246	)	$	66,188

	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents	$	16,528	$	(3,737	)	$	12,791
Distribution agreements	7,262		(4,686		)	2,576
License agreements	23,783		(5,568		)	18,215
Trademarks	16,224		(4,686		)	11,538
Covenants not to compete	1,028		(968		)	60
Customer lists	31,935		(18,482		)	13,453
In-process technology	920		—			920
Total	$	97,680	$	(38,127	)	$	59,553

Aggregate amortization expense for the three and six-month periods ended June 30, 2018 was approximately $10.4 million and $18.9 million, respectively. Aggregate amortization expense for the three and six-month periods ended June 30, 2017 was approximately $6.2 million and $12.4 million, respectively.

Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of June 30, 2018 (in thousands):

Year Ending December 31
Remaining 2018	$	20,132
2019	39,154
2020	37,881
2021	30,488
2022	28,688

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies. In the ordinary course of business, we are involved in various claims and litigation matters. These claims and litigation matters may include actions involving product liability, intellectual property, contract disputes, and employment or other matters that are significant to our business. Based upon our review of currently available information, we do not believe any such actions are likely to be, individually or in the aggregate, materially adverse to our business, financial condition, results of operations or liquidity.

In October 2016, we received a subpoena from the U.S. Department of Justice seeking information on certain of our marketing and promotional practices. We are in the process of responding to the subpoena, which we anticipate will continue during 2018. We have incurred, and anticipate that we will continue to incur, substantial costs in connection with the matter. The investigation is ongoing and at this stage we are unable to predict its scope, duration or outcome. Investigations such as this may result in the imposition of, among other things, significant damages, injunctions, fines or civil or criminal claims or penalties against our company or individuals. Legal expenses we incurred in responding to the U.S. Department of Justice subpoena for the three and six-month periods ended June 30, 2018 were approximately $1.6 million and $3.3 million, respectively.

In the event of unexpected further developments, it is possible that the ultimate resolution of any of the foregoing matters, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred.

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Issuance of Common Stock

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Issuance of Common Stock

Issuance of Common Stock. On March 28, 2017, we closed a public offering of 5,175,000 shares of common stock and received proceeds of approximately $136.6 million, which is net of approximately $8.8 million in underwriting discounts and commissions and approximately $816,000 in other direct cost incurred and paid by us in connection with this equity offering. The net proceeds from the offering were used primarily to repay outstanding indebtedness under our Second Amended Credit Agreement (including our term loan and revolving credit loans).

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events. On July 30, 2018, we closed a public offering of 4,025,000 shares of common stock and received proceeds of approximately $205.4 million, which is net of approximately $10.4 million in underwriting discounts and commissions, and we paid approximately $500,000 in other direct costs incurred in connection with this equity offering. The net proceeds from the offering were used primarily to repay revolving credit loans under our Second Amended Credit Agreement.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three and six-month periods ended June 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 June 30, 2018 and December 31, 2017, and our results of operations and cash flows for the three and six-month periods ended June 30, 2018 and 2017. The results of operations for the three and six-month periods ended June 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.

Revenue from Contracts with Customers

Revenue from Contracts with Customers.

In accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), we recognize revenue when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration we to receive in exchange for these goods. To achieve this core principle, we apply the following five steps:

1. Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred if the amortization period would have been one year or less.

2. Identify the performance obligations in the contract. Generally, our contracts with customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations relate to delivering single-use medical products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans.

3. Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of June 30, 2018 contained a significant financing component. Further, our methodology to estimate and recognize variable consideration is consistent with the requirements of ASC 606. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

4. Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we recognize revenue upon delivery of the product to the customer's control at contractually stated pricing.

5. Recognize revenue when or as we satisfy a performance obligation. We satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

Recently Issued Financial Accounting Standards

Recently Issued Financial Accounting Standards

Recently Adopted

In October 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 became effective for us as of January 1, 2018. The adoption of ASU 2016-16 did not have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. We adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance regarding the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. We adopted ASU 2016-01 on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on our consolidated financial statements.

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU (and all subsequent ASUs that modified Topic 606) effective January 1, 2018 on a modified retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations or cash flows. As such, prior period amounts are not adjusted and continue to be reported under accounting standards then in effect, and we did not record a cumulative adjustment to the opening equity balance of retained earnings as of January 1, 2018. However, additional disclosures have been added in accordance with the requirements of Topic 606 and are reflected in Note 6.

Not Yet Adopted

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. While we continue to assess the potential impact of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017 (the "2017 Tax Act"). ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the anticipated impact of adopting ASU 2018-02 on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the anticipated impact of adopting ASU 2017-12 on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which eliminates the current tests for lease classification under U.S. GAAP and requires lessees to recognize the right-of-use assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. ASU 2016-02 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are assessing the impact that ASU 2016-02 is anticipated to have on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon our adoption of ASU 2016-02.

We do not believe any other issued and not yet effective accounting standards will be relevant to our consolidated financial statements.

Derivatives

Derivatives

General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of these risks by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative programs are classified as operating activities in the accompanying consolidated statements of cash flows.

We formally document, designate and assess the effectiveness of transactions that receive hedge accounting initially and on an ongoing basis. Changes in the fair value of derivatives that qualify for hedge accounting treatment are recorded, net of applicable taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity in the accompanying consolidated balance sheets. For the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative.

Interest Rate Risk. A portion of our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Second Amended Credit Agreement that is solely due to changes in the benchmark interest rate.

Derivatives Designated as Cash Flow Hedges

On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a current notional amount of $175.0 million with Wells Fargo to fix the one-month LIBOR rate at 1.12%. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The interest rate swap is scheduled to expire on July 6, 2021.

At June 30, 2018 and December 31, 2017, our interest rate swap qualified as a cash flow hedge. The fair value of our interest rate swap at June 30, 2018 was an asset of approximately $8.0 million, which was partially offset by approximately $2.1 million in deferred taxes. The fair value of our interest rate swap at December 31, 2017 was an asset of approximately $5.7 million, which was offset by approximately $1.5 million in deferred taxes.

Foreign Currency Risk. We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Euros, British Pounds, Chinese Renminbi, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Danish Krone, Japanese Yen, Korea Won, and Singapore Dollars. We do not use derivative financial instruments for trading or speculative purposes. We are not subject to any credit risk contingent features related to our derivative contracts, and counterparty risk is managed by allocating derivative contracts among several major financial institutions.

Derivatives Designated as Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded from the assessment of effectiveness, are recognized in earnings during the current period. We enter into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies.

Balance Sheet Presentation of Derivatives. As of June 30, 2018, and December 31, 2017, all derivatives, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded gross at fair value on our consolidated balance sheets. We are not subject to any master netting agreements.

Derivatives Not Designated as Cash Flow Hedges

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventories at June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30,		December 31,
	2018		2017
Finished goods	$	101,092	$	86,555
Work-in-process	20,962		12,799
Raw materials	47,200		55,934
Total Inventories	$	169,254	$	155,288

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Stock-Based Compensation Expense (Tables)

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The stock-based compensation expense before income tax expense for the three and six months ended June 30, 2018 and 2017, consisted of the following (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Cost of sales	$	232	$	168	$	416	$	264
Research and development	147		100		271		152
Selling, general and administrative	1,186		846		2,134		1,275
Stock-based compensation expense before taxes	$	1,565	$	1,114	$	2,821	$	1,691

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

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:

	Six Months Ended June 30,
	2018	2017
Risk-free interest rate	2.63% - 2.77%	1.77% - 1.79%
Expected option life	5.0 years	5.0 years
Expected dividend yield	—	—
Expected price volatility	34.06% - 34.32%	33.81% - 34.03%

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Earnings Per Common Share (EPS) (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share, Basic and Diluted [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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					Six Months
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount
Period ended June 30, 2018:
Basic EPS	$	10,941	50,473	$	0.22	$	16,210	50,376	$	0.32
Effect of dilutive stock options and warrants			1,681					1,657
Diluted EPS	$	10,941	52,154	$	0.21	$	16,210	52,033	$	0.31
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive			535					359
Period ended June 30, 2017:
Basic EPS	$	9,483	49,957	$	0.19	$	24,286	47,406	$	0.51
Effect of dilutive stock options and warrants			1,231					1,110
Diluted EPS	$	9,483	51,188	$	0.19	$	24,286	48,516	$	0.50
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive			1,007					552

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The purchase price was allocated as follows (in thousands):

Assets Acquired
Inventories	$	2,455
Property and equipment	290
Intangibles
Developed technology	12,100
Trademarks	700
Customers Lists	400
Goodwill	2,555
Total assets acquired	$	18,500

The following table summarizes the purchase price allocated to the net assets acquired (in thousands):

Net Assets Acquired
Inventories	$	979
Property and equipment	58
Intangibles
Developed technology	5,400
Customer list	200
Goodwill	203
Total net assets acquired	$	6,840

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 tax liabilities	(1,901		)
Total liabilities assumed	(2,864		)
Total net assets acquired	$	11,290

The following table summarizes the aggregate purchase price (including contingent royalty payment liabilities) allocated to the assets acquired from Laurane (in thousands):

Net Assets Acquired
Inventories	$	594
Intangibles
Developed technology	14,920
Customer list	120
Goodwill	6,366
Total net assets acquired	$	22,000

The following table summarizes the purchase price allocated to the net assets acquired and liabilities assumed (in thousands):

Net Assets Acquired
Intangibles
Developed technology	$	7,800
In-process technology	920
Goodwill	4,281
Deferred tax liabilities	(3,101		)
Total net assets acquired	$	9,900

The purchase price was preliminarily allocated a follows (in thousands):

Net Assets Acquired
Inventories	$	971
Intangibles
Developed technology	4,840
Customer list	120
Trademarks	400
Goodwill	938
Total net assets acquired	$	7,269

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.

The purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on estimated fair values, as follows (in thousands):

Assets Acquired
Trade receivables	$	4,054
Other receivables	6
Inventories	8,585
Prepaid expenses and other assets	630
Property and equipment	1,630
Other long-term assets	145
Intangibles
Developed technology	67,600
Customer lists	2,400
Trademarks	4,400
Goodwill	24,818
Total assets acquired	114,268
Liabilities Assumed
Trade payables	(1,790		)
Accrued expenses	(5,298		)
Deferred income tax liabilities - current	(701		)
Deferred income tax liabilities - noncurrent	(10,844		)
Total liabilities assumed	(18,633		)
Net assets acquired, net of cash received of $1,327	$	95,635

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		)
Net assets acquired	$	38,000

The following table summarizes the preliminary purchase price allocated to the assets acquired from BD (in thousands):

		Preliminary Allocation		Adjustments (1)			Revised Allocation
	Inventories	$	6,039	$	(235	)	$	5,804
	Property and equipment	581		167			748
	Intangibles
	Developed technology	79,900		(5,900		)	74,000
	Customer list	3,500		700			4,200
	Trademarks	4,700		200			4,900
	Goodwill	5,387		5,226			10,613
	Total net assets acquired	$	100,107	$	158		$	100,265
(1)	Under U.S. GAAP, measurement period adjustments are recognized on a prospective basis in the period of change, instead of restating prior periods. There was no impact to reported earnings in connection with these measurement period adjustments for the periods presented. Amounts represent adjustments to the preliminary purchase price allocation first presented in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 resulting from a final working capital adjustment and our ongoing activities with respect to finalizing asset valuations for this acquisition.

Business Acquisition, Pro Forma Information

The following table summarizes our consolidated results of operations for the six-month period ended June 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):

	Six Months Ended
	June 30, 2017
	As Reported		Pro Forma
Net sales	$	357,618	$	360,378
Net income	24,286		12,444
Earnings per common share:
Basic	$	0.51	$	0.26
Diluted	$	0.50	$	0.26

* The pro forma results for the three-month periods ended June 30, 2018 and 2017 and the six-month period ended June 30, 2018 are not included in the table above because the operating results for the Argon critical care division acquisition were included in our consolidated statements of income for these periods.

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue

The following tables present revenue from contracts with customers for the three and six-month periods ended June 30, 2018 and 2017 (in thousands):

	Three Months Ended June 30, 2018						Three Months Ended June 30, 2017
	United States		International		Total		United States		International		Total
Cardiovascular
Stand-alone devices	$	50,941	$	41,555	$	92,496	$	37,202	$	33,854	$	71,056
Custom kits and procedure trays	23,667		10,325		33,992		24,271		7,526		31,797
Inflation devices	8,160		16,145		24,305		8,042		12,747		20,789
Catheters	16,704		22,670		39,374		16,022		16,407		32,429
Embolization devices	5,094		7,630		12,724		5,593		6,565		12,158
CRM/EP	11,758		1,738		13,496		10,264		1,170		11,434
Total	116,324		100,063		216,387		101,394		78,269		179,663
Endoscopy
Endoscopy devices	8,121		302		8,423		6,712		174		6,886
Total	$	124,445	$	100,365	$	224,810	$	108,106	$	78,443	$	186,549

	Six Months Ended June 30, 2018						Six Months Ended June 30, 2017
	United States		International		Total		United States		International		Total
Cardiovascular
Stand-alone devices	$	94,953	$	80,789	$	175,742	$	73,366	$	61,343	$	134,709
Custom kits and procedure trays	45,984		21,280		67,264		45,737		14,935		60,672
Inflation devices	15,828		30,896		46,724		16,017		23,279		39,296
Catheters	31,974		41,265		73,239		31,151		31,454		62,605
Embolization devices	10,126		15,184		25,310		11,134		13,551		24,685
CRM/EP	20,596		3,366		23,962		20,011		2,440		22,451
Total	219,461		192,780		412,241		197,416		147,002		344,418
Endoscopy
Endoscopy devices	15,040		563		15,603		12,806		394		13,200
Total	$	234,501	$	193,343	$	427,844	$	210,222	$	147,396	$	357,618

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and six-month periods ended June 30, 2018 and 2017, are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Net Sales (1)
Cardiovascular	$	216,387	$	179,663	$	412,241	$	344,418
Endoscopy	8,423		6,886		15,603		13,200
Total net sales	$	224,810	$	186,549	$	427,844	$	357,618
Operating Income (1)
Cardiovascular	$	12,663	$	11,493	$	19,060	$	15,475
Endoscopy	2,451		1,869		4,835		3,496
Total operating income	$	15,114	$	13,362	$	23,895	$	18,971

⁽¹⁾ Sales and operating income have been adjusted from prior disclosure to reflect changes in product classifications between our operating segments, which were made to be consistent with updates in the management of our product portfolios in 2018.

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Revolving Credit Facility and Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Principal balances outstanding under our long-term debt obligations as of June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30, 2018			December 31, 2017
2016 Term loan	$	80,000		$	85,000
2016 Revolving credit loans	327,000			187,000
Collateralized debt facility	6,985			6,959
Less unamortized debt issuance costs	(418		)	(487		)
Total long-term debt	413,567			278,472
Less current portion	21,985			19,459
Long-term portion	$	391,582		$	259,013

Schedule of Long-term Debt Covenants

The Second Amended Credit Agreement requires that we maintain certain financial covenants, as follows:

		Covenant Requirement
Consolidated Total Leverage Ratio (1)
	January 1, 2018 and thereafter	3.5 to 1.0
Consolidated EBITDA (2)		1.25 to 1.0
Consolidated Net Income (3)		$0
Facility Capital Expenditures (4)		$30 million
(1)	Maximum Consolidated Total Leverage Ratio (as defined in the Second Amended Credit Agreement) as of any fiscal quarter end.
(2)	Minimum ratio of Consolidated EBITDA (as defined in the Second Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Fixed Charges (as defined in the Second Amended Credit Agreement) for any period of four consecutive fiscal quarters.
(3)	Minimum level of Consolidated Net Income (as defined in the Second Amended Credit Agreement) for certain periods, and subject to certain adjustments.
(4)	Maximum level of the aggregate amount of all Facility Capital Expenditures (as defined in the Second Amended Credit Agreement) in any fiscal year.

Schedule of Maturities of Long-term Debt

Future minimum principal payments on our long-term debt as of June 30, 2018, are as follows (in thousands):

Years Ending	Future Minimum
December 31	Principal Payments
Remaining 2018	$	14,485
2019	15,000
2020	17,500
2021	367,000
Total future minimum principal payments	$	413,985

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 20 foreign currency fair value hedges every month. As of June 30, 2018, we had entered into foreign currency forward contracts related to those balance sheet accounts, with the following notional amounts (in thousands and in local currencies):

Currency	Symbol	Forward Notional Amount
Australian Dollar	AUD	8,400
Brazilian Real	BRL	8,500
Canadian Dollar	CAD	3,098
Swiss Franc	CHF	255
Chinese Renminbi	CNY	95,228
Danish Krone	DKK	2,885
Euro	EUR	25,861
British Pound	GBP	1,584
Hong Kong Dollar	HKD	11,000
Japanese Yen	JPY	260,000
Korean Won	KRW	2,700,000
Mexican Peso	MXN	18,700
Swedish Krona	SEK	10,536
Singapore Dollar	SGD	6,900

We enter into approximately 100 cash flow foreign currency hedges every month. As of June 30, 2018, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with the following notional amounts (in thousands and in local currencies):

Currency	Symbol	Forward Notional Amount
Canadian Dollar	CAD	2,410
Swiss Franc	CHF	1,158
Chinese Renminbi	CNY	66,000
Danish Krone	DKK	11,650
Euro	EUR	12,870
British Pound	GBP	2,975
Mexican Peso	MXN	94,275
Swedish Krona	SEK	13,830

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The fair value of derivative instruments on a gross basis is as follows (in thousands):

		Fair Value
	Balance Sheet Location	June 30, 2018			December 31, 2017
Derivatives designated as hedging instruments
Assets
Interest rate swap	Other assets (long-term)	$	8,047		$	5,749
Foreign currency forward contracts	Prepaid expenses and other assets	700			363
Foreign currency forward contracts	Other assets (long-term)	83			35
Liabilities
Foreign currency forward contracts	Accrued expenses	(231		)	(468		)
Foreign currency forward contracts	Other long-term obligations	(38		)	(82		)
Derivatives not designated as hedging instruments
Assets
Foreign currency forward contracts	Prepaid expenses and other assets	$	1,097		$	223
Liabilities
Foreign currency forward contracts	Accrued expenses	(228		)	(841		)

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income and net earnings in our consolidated statements of income, consolidated statements of comprehensive income and consolidated balance sheets (in thousands):

	Amount of Gain/(Loss) recognized in OCI						Amount of Gain/(Loss) reclassified from AOCI
	Three Months Ended June 30,						Three Months Ended June 30,
	2018		2017				2018			2017
Derivative instrument						Location in statements of income
Interest rate swaps	$	748	$	(893	)	Interest Expense	$	357		$	—
Foreign currency forward contracts	394		353			Revenue	(234		)	(41		)
						Cost of sales	138			28
	Amount of Gain/(Loss) recognized in OCI						Amount of Gain/(Loss) reclassified from AOCI
	Six Months Ended June 30,						Six Months Ended June 30,
	2018		2017				2018			2017
Derivative instrument						Location in statements of income
Interest rate swaps	2,868		(507		)	Interest Expense	570			(104		)
Foreign currency forward contracts	568		741			Revenue	(385		)	(40		)
						Cost of sales	378			(37		)

Derivative Instruments, Gain (Loss)

The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands):

		Three Months Ended June 30,					Six Months Ended June 30,
		2018		2017			2018		2017
Derivative Instrument	Location in statements of income
Foreign currency forward contracts	Other expense	$	3,153	$	(1,834	)	$	2,038	$	(2,692	)

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

				Fair Value Measurements Using
	Total Fair			Quoted prices in		Significant other			Significant
	Value at			active markets		observable inputs			unobservable inputs
Description	June 30, 2018			(Level 1)		(Level 2)			(Level 3)
Interest rate contracts (1)	$	8,047		$	—	$	8,047		$	—
Foreign currency contract assets, current and long-term (2)	$	1,880		$	—	$	1,880		$	—
Foreign currency contract liabilities, current and long-term (3)	$	(497	)	$	—	$	(497	)	$	—
				Fair Value Measurements Using
	Total Fair			Quoted prices in		Significant other			Significant
	Value at			active markets		observable inputs			unobservable inputs
Description	December 31, 2017			(Level 1)		(Level 2)			(Level 3)
Interest rate contracts (1)	$	5,749		$	—	$	5,749		$	—
Foreign currency contract assets, current and long-term (2)	$	621		$	—	$	621		$	—
Foreign currency contract liabilities, current and long-term (3)	$	(1,391	)	$	—	$	(1,391	)	$	—

(1)    The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as other assets or other long-term obligations in the consolidated balance sheets.

(2)    The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other assets or other long-term assets in the consolidated balance sheets.

(3)    The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

Changes in the fair value of our contingent consideration liability during the three and six-month periods ended June 30, 2018 and 2017, consisted of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Beginning balance	$	10,928		$	705		$	10,956		$	683
Contingent consideration liability recorded as the result of acquisitions (see Note 5)	—			4,900			—			4,900
Fair value adjustments recorded to income during the period	99			(18		)	86			19
Contingent payments made	(115		)	(15		)	(130		)	(30		)
Ending balance	$	10,912		$	5,572		$	10,912		$	5,572

Fair Value Inputs, Liabilities, Quantitative Information

The recurring Level 3 measurement of our contingent consideration liability and contingent receivable includes the following significant unobservable inputs at June 30, 2018 and December 31, 2017 (amounts in thousands):

Contingent consideration asset or liability	Fair value at June 30, 2018		Valuation technique	Unobservable inputs	Range
Revenue-based payments	$	10,912	Discounted cash flow	Discount rate	9.9% - 15%
contingent liability				Projected year of payments	2018-2037
Contingent receivable	$	474	Discounted cash flow	Discount rate	10%
asset				Probability of milestone payment	54%
				Projected year of payments	2018-2019
Contingent consideration asset or liability	Fair value at December 31, 2017		Valuation technique	Unobservable inputs	Range
Revenue-based payments	$	10,956	Discounted cash flow	Discount rate	9.9% - 15%
contingent liability				Probability of milestone payment	100%
				Projected year of payments	2018-2037
Contingent receivable	$	760	Discounted cash flow	Discount rate	10%
asset				Probability of milestone payment	75%
				Projected year of payments	2018-2019

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in carrying amount of goodwill

The changes in the carrying amount of goodwill for the six-month period ended June 30, 2018 were as follows (in thousands):

	2018
Goodwill balance at January 1	$	238,147
Effect of foreign exchange	(906		)
Additions as the result of acquisitions	11,757
Goodwill balance at June 30	$	248,998

Other intangible assets

Other intangible assets at June 30, 2018 and December 31, 2017, consisted of the following (in thousands):

	June 30, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents	$	18,196	$	(4,334	)	$	13,862
Distribution agreements	8,192		(5,278		)	2,914
License agreements	23,845		(6,419		)	17,426
Trademarks	21,516		(5,550		)	15,966
Covenants not to compete	1,028		(985		)	43
Customer lists	35,737		(20,680		)	15,057
In-process technology	920		—			920
Total	$	109,434	$	(43,246	)	$	66,188

	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents	$	16,528	$	(3,737	)	$	12,791
Distribution agreements	7,262		(4,686		)	2,576
License agreements	23,783		(5,568		)	18,215
Trademarks	16,224		(4,686		)	11,538
Covenants not to compete	1,028		(968		)	60
Customer lists	31,935		(18,482		)	13,453
In-process technology	920		—			920
Total	$	97,680	$	(38,127	)	$	59,553

Estimated amortization expense

Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of June 30, 2018 (in thousands):

Year Ending December 31
Remaining 2018	$	20,132
2019	39,154
2020	37,881
2021	30,488
2022	28,688

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Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Finished goods	$ 101,092	$ 86,555
Work-in-process	20,962	12,799
Raw materials	47,200	55,934
Total Inventories	$ 169,254	$ 155,288

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Stock-Based Compensation Expense - Allocation of Recognized Period Costs (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation	$ 1,565	$ 1,114	$ 2,821	$ 1,691
Cost of sales
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation	232	168	416	264
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation	147	100	271	152
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation	$ 1,186	$ 846	$ 2,134	$ 1,275

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Stock-Based Compensation Expense - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Compensation cost not yet recognized	$ 22.4		$ 22.4
Compensation cost not yet recognized, period of recognition			3 years 5 months 16 days
Options granted in period (in shares)	200,000	1,280,000	692,002	1,280,000

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Stock-Based Compensation Expense - Fair Value Calculation Assumptions (Details)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	5 years	5 years
Expected option life	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	2.63%	1.77%
Expected price volatility	34.06%	33.81%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	2.77%	1.79%
Expected price volatility	34.32%	34.03%

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Earnings Per Common Share (EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Earnings Per Share, Basic and Diluted [Abstract]
Net income, basic EPS	$ 10,941	$ 9,483	$ 16,210	$ 24,286
Basic EPS (in shares)	50,473	49,957	50,376	47,406
Basic EPS (in dollars per share)	$ 0.22	$ 0.19	$ 0.32	$ 0.51
Effect of dilutive stock options and warrants (in shares)	1,681	1,231	1,657	1,110
Net income, diluted EPS	$ 10,941	$ 9,483	$ 16,210	$ 24,286
Diluted EPS (in shares)	52,154	51,188	52,033	48,516
Diluted EPS (in dollars per share)	$ 0.21	$ 0.19	$ 0.31	$ 0.50
Stock options excluded from the calculation of common stock equivalents as the impact was anti-dilutive (in shares)	535	1,007	359	552

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Acquisitions - Narrative (Details) $ in Thousands												3 Months Ended		5 Months Ended	6 Months Ended		12 Months Ended
	May 23, 2018 USD ($)	May 18, 2018 USD ($)	Apr. 06, 2018 USD ($)	Feb. 14, 2018 USD ($)	Oct. 02, 2017 USD ($)	Aug. 04, 2017 USD ($)	Jul. 03, 2017 USD ($)	May 01, 2017 USD ($)	Jan. 31, 2017 USD ($) patents	Jul. 06, 2016 USD ($)	Feb. 04, 2016 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Business Acquisition [Line Items]
Payments to acquire intangible assets															$ 1,755	$ 1,082
Loan for long-term agreement															10,500	0
QX Medical, LLC
Business Acquisition [Line Items]
Payments to acquire intangible assets		$ 750
NinePoint
Business Acquisition [Line Items]
Net sales related to acquisition												$ 1,100
Option to purchase outstanding equity, up to			100.00%
Consideration received, option to purchase remaining equity			$ 10,000
Loan for long-term agreement			$ 10,500
Interest rate on loan			9.00%
Distribution agreements | QX Medical, LLC
Business Acquisition [Line Items]
Useful life		10 years
DirectACCESS Medical, LLC
Business Acquisition [Line Items]
Total purchase price	$ 7,300
Weighted average useful life	9 years 11 months
DirectACCESS Medical, LLC | Developed technology
Business Acquisition [Line Items]
Useful life	10 years
DirectACCESS Medical, LLC | Trademarks
Business Acquisition [Line Items]
Useful life	10 years
DirectACCESS Medical, LLC | Customer Lists
Business Acquisition [Line Items]
Useful life	5 years
Becton, Dickinson and Company
Business Acquisition [Line Items]
Total purchase price				$ 100,300
Net sales related to acquisition													$ 12,200		18,500
Acquisition-related costs													41		1,800
Weighted average useful life				8 years
Working capital adjustment														$ 158
Becton, Dickinson and Company | Developed technology
Business Acquisition [Line Items]
Useful life				8 years
Becton, Dickinson and Company | Trademarks
Business Acquisition [Line Items]
Useful life				9 years
Becton, Dickinson and Company | Customer Lists
Business Acquisition [Line Items]
Useful life				7 years
ITL Healthcare Pty Ltd
Business Acquisition [Line Items]
Total purchase price					$ 11,300
Net sales related to acquisition													2,000		4,200
ITL Healthcare Pty Ltd | Customer Lists
Business Acquisition [Line Items]
Useful life					7 years
Laurane Medical S.A.S.
Business Acquisition [Line Items]
Total purchase price						$ 16,500
Weighted average useful life						11 years 11 months
Contingent liability						$ 5,500
Laurane Medical S.A.S. | Developed technology
Business Acquisition [Line Items]
Useful life						12 years
Laurane Medical S.A.S. | Customer Lists
Business Acquisition [Line Items]
Useful life						1 year
Osseon LLC
Business Acquisition [Line Items]
Total purchase price							$ 6,800
Net sales related to acquisition													588		1,100
Weighted average useful life							8 years 11 months 15 days
Osseon LLC | Developed technology
Business Acquisition [Line Items]
Useful life							9 years
Osseon LLC | Customer Lists
Business Acquisition [Line Items]
Useful life							8 years
Vascular Access Technologies, Inc.
Business Acquisition [Line Items]
Total purchase price								$ 5,000
Contingent liability								$ 4,900
Vascular Access Technologies, Inc. | Developed technology
Business Acquisition [Line Items]
Useful life								15 years
Argon Medical Devices, Inc.
Business Acquisition [Line Items]
Total purchase price									$ 10,900							$ 10,100
Net sales related to acquisition													11,200		23,700
Weighted average useful life									5 years 11 months 15 days
Working capital adjustment									$ (797)
Argon Medical Devices, Inc. | Cardiovascular Segment
Business Acquisition [Line Items]
Acquisition-related costs																	$ 2,600
Argon Medical Devices, Inc. | Developed technology
Business Acquisition [Line Items]
Useful life									7 years
Argon Medical Devices, Inc. | Trademarks
Business Acquisition [Line Items]
Useful life									5 years
Argon Medical Devices, Inc. | Customer Lists
Business Acquisition [Line Items]
Useful life									5 years
Catheter Connections, Inc.
Business Acquisition [Line Items]
Total purchase price									$ 38,000
Net sales related to acquisition													3,100		6,300
Weighted average useful life									11 years 8 months
Number of patents acquired | patents									40
Catheter Connections, Inc. | Cardiovascular Segment
Business Acquisition [Line Items]
Acquisition-related costs																	$ 482
Catheter Connections, Inc. | Developed technology
Business Acquisition [Line Items]
Useful life									12 years
Catheter Connections, Inc. | Trademarks
Business Acquisition [Line Items]
Useful life									10 years
Catheter Connections, Inc. | Customer Lists
Business Acquisition [Line Items]
Useful life									8 years
DFINE, Inc.
Business Acquisition [Line Items]
Total purchase price										$ 97,500
Net sales related to acquisition													7,200		14,500
Weighted average useful life										14 years 10 months
Consideration paid related to net working capital adjustment										$ 578
Trade receivables acquired, gross										4,300
Trade receivables, expected to be uncollectible										$ 224
DFINE, Inc. | Cardiovascular Segment
Business Acquisition [Line Items]
Acquisition-related costs																		$ 1,600
DFINE, Inc. | Developed technology
Business Acquisition [Line Items]
Useful life										15 years
DFINE, Inc. | Trademarks
Business Acquisition [Line Items]
Useful life										15 years
DFINE, Inc. | Customer Lists
Business Acquisition [Line Items]
Useful life										9 years
HeRO®Graft
Business Acquisition [Line Items]
Total purchase price											$ 18,500
Weighted average useful life											9 years 9 months 25 days
Income since acquisition date													$ 2,200		$ 4,200
HeRO®Graft | Developed technology
Business Acquisition [Line Items]
Useful life											10 years
HeRO®Graft | Trademarks
Business Acquisition [Line Items]
Useful life											5 years 6 months
HeRO®Graft | Customer Lists
Business Acquisition [Line Items]
Useful life											12 years

XML

Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Thousands										3 Months Ended			5 Months Ended	6 Months Ended
	May 23, 2018	Feb. 14, 2018	Oct. 02, 2017	Aug. 04, 2017	Jul. 03, 2017	May 01, 2017	Jan. 31, 2017	Jul. 06, 2016	Feb. 04, 2016	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Assets Acquired
Goodwill										$ 248,998			$ 248,998	$ 248,998		$ 238,147
Adjustments
Gain on bargain purchase										0	$ 669			0	$ (11,574)
DirectACCESS Medical, LLC
Assets Acquired
Inventories	$ 971
Goodwill	938
Total assets acquired	7,269
Adjustments
Total purchase price	7,300
DirectACCESS Medical, LLC | Developed technology
Assets Acquired
Intangibles	4,840
DirectACCESS Medical, LLC | Customer lists
Assets Acquired
Intangibles	120
DirectACCESS Medical, LLC | Trademarks
Assets Acquired
Intangibles	$ 400
Becton, Dickinson and Company
Assets Acquired
Inventories		$ 6,039								5,804			5,804	5,804
Property and equipment		581								748			748	748
Goodwill		5,387								10,613			10,613	10,613
Total assets acquired		100,107								100,265			100,265	100,265
Adjustments
Inventories													(235)
Property and equipment													167
Goodwill													5,226
Total net assets acquired													158
Total purchase price		100,300
Becton, Dickinson and Company | Developed technology
Assets Acquired
Intangibles		79,900								74,000			74,000	74,000
Adjustments
Intangibles													(5,900)
Becton, Dickinson and Company | Customer lists
Assets Acquired
Intangibles		3,500								4,200			4,200	4,200
Adjustments
Intangibles													700
Becton, Dickinson and Company | Trademarks
Assets Acquired
Intangibles		$ 4,700								$ 4,900			4,900	$ 4,900
Adjustments
Intangibles													$ 200
ITL Healthcare Pty Ltd
Assets Acquired
Trade receivables			$ 1,287
Other receivables			56
Inventories			1,808
Prepaid expenses and other assets			65
Property and equipment			1,053
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
Adjustments
Total purchase price			11,300
ITL Healthcare Pty Ltd | Customer lists
Assets Acquired
Intangibles			$ 5,940
Laurane Medical S.A.S.
Assets Acquired
Inventories				$ 594
Goodwill				6,366
Total assets acquired				22,000
Adjustments
Total purchase price				16,500
Laurane Medical S.A.S. | Developed technology
Assets Acquired
Intangibles				14,920
Laurane Medical S.A.S. | Customer lists
Assets Acquired
Intangibles				$ 120
Osseon LLC
Assets Acquired
Inventories					$ 979
Property and equipment					58
Goodwill					203
Total assets acquired					6,840
Adjustments
Total purchase price					6,800
Osseon LLC | Developed technology
Assets Acquired
Intangibles					5,400
Osseon LLC | Customer lists
Assets Acquired
Intangibles					$ 200
Vascular Access Technologies, Inc.
Assets Acquired
Goodwill						$ 4,281
Liabilities Assumed
Deferred income tax liabilities						(3,101)
Total net assets acquired						9,900
Adjustments
Total purchase price						5,000
Vascular Access Technologies, Inc. | Developed technology
Assets Acquired
Intangibles						7,800
Vascular Access Technologies, Inc. | In-process technology
Assets Acquired
Intangibles						$ 920
Argon Medical Devices, Inc.
Assets Acquired
Cash and cash equivalents											1,436				1,436
Trade receivables											8,351				8,351
Inventories											11,222				11,222
Prepaid expenses and other assets											1,275				1,275
Income tax refund receivables											165				165
Property and equipment											2,319				2,319
Deferred income tax assets											202				202
Total assets acquired											29,570				29,570
Liabilities Assumed
Trade payables											(2,414)				(2,414)
Accrued expenses											(5,083)				(5,083)
Deferred income tax liabilities											(934)				(934)
Total liabilities assumed											(8,431)				(8,431)
Total net assets acquired											21,139				21,139
Adjustments
Total net assets acquired							$ (797)
Gain on bargain purchase															(11,039)
Total purchase price							10,900								10,100
Negative adjustment (Argon Medical Devices, Inc.)												$ 1,200
Argon Medical Devices, Inc. | Developed technology
Assets Acquired
Intangibles											2,200				2,200
Argon Medical Devices, Inc. | Customer lists
Assets Acquired
Intangibles											1,500				1,500
Argon Medical Devices, Inc. | Trademarks
Assets Acquired
Intangibles											$ 900				$ 900
Catheter Connections, Inc.
Assets Acquired
Trade receivables							958
Inventories							2,157
Prepaid expenses and other assets							85
Property and equipment							1,472
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
Adjustments
Total purchase price							38,000
Catheter Connections, Inc. | Developed technology
Assets Acquired
Intangibles							21,100
Catheter Connections, Inc. | Customer lists
Assets Acquired
Intangibles							700
Catheter Connections, Inc. | Trademarks
Assets Acquired
Intangibles							$ 2,900
DFINE, Inc.
Assets Acquired
Trade receivables								$ 4,054
Other receivables								6
Inventories								8,585
Prepaid expenses and other assets								630
Property and equipment								1,630
Other long-term assets								145
Goodwill								24,818
Total assets acquired								114,268
Liabilities Assumed
Trade payables								(1,790)
Accrued expenses								(5,298)
Deferred income tax liabilities - current								(701)
Deferred income tax liabilities - noncurrent								(10,844)
Total liabilities assumed								(18,633)
Total net assets acquired								95,635
Adjustments
Total purchase price								97,500
Cash received								1,327
DFINE, Inc. | Developed technology
Assets Acquired
Intangibles								67,600
DFINE, Inc. | Customer lists
Assets Acquired
Intangibles								2,400
DFINE, Inc. | Trademarks
Assets Acquired
Intangibles								$ 4,400
HeRO®Graft
Assets Acquired
Inventories									$ 2,455
Property and equipment									290
Goodwill									2,555
Total assets acquired									18,500
Adjustments
Total purchase price									18,500
HeRO®Graft | Developed technology
Assets Acquired
Intangibles									12,100
HeRO®Graft | Customer lists
Assets Acquired
Intangibles									400
HeRO®Graft | Trademarks
Assets Acquired
Intangibles									$ 700

XML

Acquisitions - Summary of Unaudited Consolidated Results of Operations, Including Proforma Results (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
As Reported
Net sales	$ 224,810	$ 186,549	$ 427,844	$ 357,618
Net income	$ 10,941	$ 9,483	$ 16,210	$ 24,286
Basic (in dollars per share)	$ 0.22	$ 0.19	$ 0.32	$ 0.51
Diluted (in dollars per share)	$ 0.21	$ 0.19	$ 0.31	$ 0.50
Pro Forma
Net sales				$ 360,378
Net income				$ 12,444
Basic (in dollars per share)				$ 0.26
Diluted (in dollars per share)				$ 0.26

XML

Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Net sales	$ 224,810	$ 186,549	$ 427,844	$ 357,618
United States
Disaggregation of Revenue [Line Items]
Net sales	124,445	108,106	234,501	210,222
International
Disaggregation of Revenue [Line Items]
Net sales	100,365	78,443	193,343	147,396
Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	216,387	179,663	412,241	344,418
Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	116,324	101,394	219,461	197,416
Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	100,063	78,269	192,780	147,002
Endoscopy
Disaggregation of Revenue [Line Items]
Net sales	8,423	6,886	15,603	13,200
Stand-alone devices | Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	92,496	71,056	175,742	134,709
Stand-alone devices | Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	50,941	37,202	94,953	73,366
Stand-alone devices | Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	41,555	33,854	80,789	61,343
Custom kits and procedure trays | Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	33,992	31,797	67,264	60,672
Custom kits and procedure trays | Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	23,667	24,271	45,984	45,737
Custom kits and procedure trays | Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	10,325	7,526	21,280	14,935
Inflation devices | Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	24,305	20,789	46,724	39,296
Inflation devices | Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	8,160	8,042	15,828	16,017
Inflation devices | Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	16,145	12,747	30,896	23,279
Catheters | Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	39,374	32,429	73,239	62,605
Catheters | Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	16,704	16,022	31,974	31,151
Catheters | Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	22,670	16,407	41,265	31,454
Embolization devices | Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	12,724	12,158	25,310	24,685
Embolization devices | Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	5,094	5,593	10,126	11,134
Embolization devices | Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	7,630	6,565	15,184	13,551
CRM/EP | Cardiovascular
Disaggregation of Revenue [Line Items]
Net sales	13,496	11,434	23,962	22,451
CRM/EP | Cardiovascular | United States
Disaggregation of Revenue [Line Items]
Net sales	11,758	10,264	20,596	20,011
CRM/EP | Cardiovascular | International
Disaggregation of Revenue [Line Items]
Net sales	1,738	1,170	3,366	2,440
Endoscopy devices | Endoscopy
Disaggregation of Revenue [Line Items]
Net sales	8,423	6,886	15,603	13,200
Endoscopy devices | Endoscopy | United States
Disaggregation of Revenue [Line Items]
Net sales	8,121	6,712	15,040	12,806
Endoscopy devices | Endoscopy | International
Disaggregation of Revenue [Line Items]
Net sales	$ 302	$ 174	$ 563	$ 394

XML

Segment Reporting - Narrative (Details)	6 Months Ended
	Jun. 30, 2018 segment
Segment Reporting [Abstract]
Number of operating segments	2

XML

Segment Reporting - Operating Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segment Reporting Information [Line Items]
Net sales	$ 224,810	$ 186,549	$ 427,844	$ 357,618
Operating income	15,114	13,362	23,895	18,971
Cardiovascular
Segment Reporting Information [Line Items]
Net sales	216,387	179,663	412,241	344,418
Operating income	12,663	11,493	19,060	15,475
Endoscopy
Segment Reporting Information [Line Items]
Net sales	8,423	6,886	15,603	13,200
Operating income	$ 2,451	$ 1,869	$ 4,835	$ 3,496

XML

Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Income tax expense	$ 624	$ 1,830	$ 1,715	$ 2,520
Effective tax rate	5.40%	16.20%	9.60%	9.40%

XML

Revolving Credit Facility and Long-Term Debt - Principal Balances under Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 14, 2018	Dec. 31, 2017
Line of Credit Facility [Line Items]
Total long-term debt	$ 413,567		$ 278,472
Collateralized debt facility	6,985	$ 7,000	6,959
Less unamortized debt issuance costs	(418)		(487)
Less current portion	21,985		19,459
Long-term portion	391,582		259,013
Term Loan
Line of Credit Facility [Line Items]
Total long-term debt	80,000		85,000
Revolving Credit Facility
Line of Credit Facility [Line Items]
Total long-term debt	$ 327,000		$ 187,000

XML

Revolving Credit Facility and Long-Term Debt - Narrative (Details) - USD ($)		6 Months Ended
	Mar. 14, 2018	Jun. 30, 2018	Dec. 31, 2017	Dec. 13, 2017	Jul. 06, 2016
Line of Credit Facility [Line Items]
Outstanding borrowings		$ 413,985,000
Collateralized debt facility	$ 7,000,000	$ 6,985,000	$ 6,959,000
Variable rate on loan		3.26%
LIBOR
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate	1.00%
Credit Agreement
Line of Credit Facility [Line Items]
Outstanding borrowings		$ 407,000,000
Remaining borrowing capacity on line of credit		47,800,000
Fixed interest rate percent			2.68%
Debt subject to fixed interest rate		$ 175,000,000	$ 175,000,000
Credit Agreement | Variable Rate 1
Line of Credit Facility [Line Items]
Variable interest rate percent		3.84%	2.82%
Debt subject to variable interest rate		$ 232,000,000	$ 97,000,000
Credit Agreement | Interest Rate Swap 2
Line of Credit Facility [Line Items]
Fixed interest rate percent		2.87%
Credit Agreement | Revolving Credit Facility
Line of Credit Facility [Line Items]
Increase to revolving credit commitment				$ 100,000,000
Maximum borrowing capacity				$ 375,000,000
Interest rate increase if in event of default		2.00%
Credit Agreement | Revolving Credit Facility | Minimum
Line of Credit Facility [Line Items]
Commitment fee percentage		0.15%
Credit Agreement | Revolving Credit Facility | Maximum
Line of Credit Facility [Line Items]
Commitment fee percentage		0.40%
Credit Agreement | Term Loan
Line of Credit Facility [Line Items]
Debt instrument, face amount					$ 150,000,000
Credit Agreement | Bridge Loan
Line of Credit Facility [Line Items]
Maximum borrowing capacity					$ 25,000,000

XML

Revolving Credit Facility and Long-Term Debt - Financial Covenants (Details) - Credit Agreement	6 Months Ended
	Jun. 30, 2018 USD ($)
Debt Instrument [Line Items]
Consolidated EBITDA	1.25
Consolidated Net Income	$ 0
Facility Capital Expenditures	$ 30,000,000
January 1, 2018 and thereafter
Debt Instrument [Line Items]
Consolidated Total Leverage Ratio	3.5

XML

Revolving Credit Facility and Long-Term Debt - Future Minimum Payments on Long-term Debt (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Debt Disclosure [Abstract]
Remaining 2018	$ 14,485
2019	15,000
2020	17,500
2021	367,000
Total future minimum principal payments	$ 413,985

XML

Derivatives - Narrative (Details) € in Thousands, ₩ in Thousands, ¥ in Thousands, ¥ in Thousands, £ in Thousands, kr in Thousands, kr in Thousands, SFr in Thousands, R$ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) derivative_instrument	Jun. 30, 2018 CHF (SFr) derivative_instrument	Jun. 30, 2018 DKK (kr) derivative_instrument	Jun. 30, 2018 MXN ($) derivative_instrument	Jun. 30, 2018 CNY (¥) derivative_instrument	Jun. 30, 2018 KRW (₩) derivative_instrument	Jun. 30, 2018 GBP (£) derivative_instrument	Jun. 30, 2018 CAD ($) derivative_instrument	Jun. 30, 2018 JPY (¥) derivative_instrument	Jun. 30, 2018 SGD ($) derivative_instrument	Jun. 30, 2018 EUR (€) derivative_instrument	Jun. 30, 2018 HKD ($) derivative_instrument	Jun. 30, 2018 SEK (kr) derivative_instrument	Jun. 30, 2018 AUD ($) derivative_instrument	Jun. 30, 2018 BRL (R$) derivative_instrument	Dec. 31, 2017 USD ($)	Aug. 05, 2016 USD ($)
Derivative [Line Items]
Deferred taxes used to offset fair value of interest rate swap																$ (1,500)
Maturity of derivative contract (up to)	2 years
Revenue and cost of sales
Derivative [Line Items]
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, gross	$ 464
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, net of tax	345
Interest expense
Derivative [Line Items]
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, gross	2,200
Amount expected to be reclassified from accumulated other comprehensive income to earnings in next twelve months, net of tax	1,600
Interest rate swap
Derivative [Line Items]
Notional amount of derivative																	$ 175,000
Fixed rate																	1.12%
Deferred taxes used to offset fair value of interest rate swap	$ 2,100
Foreign currency forward contracts | Designated as hedging instrument
Derivative [Line Items]
Average number of contracts entered into per month | derivative_instrument	100	100	100	100	100	100	100	100	100	100	100	100	100	100	100
Foreign currency forward contracts | Not designated as hedging instrument
Derivative [Line Items]
Notional amount of derivative		SFr 255	kr 2,885	$ 18,700	¥ 95,228	₩ 2,700,000	£ 1,584	$ 3,098	¥ 260,000	$ 6,900	€ 25,861	$ 11,000	kr 10,536	$ 8,400	R$ 8,500
Average number of contracts entered into per month | derivative_instrument	20	20	20	20	20	20	20	20	20	20	20	20	20	20	20

XML

Derivatives - Forward Notional Contracts (Details) - Jun. 30, 2018 - Foreign currency forward contracts € in Thousands, ₩ in Thousands, ¥ in Thousands, ¥ in Thousands, £ in Thousands, kr in Thousands, kr in Thousands, SFr in Thousands, R$ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands	CHF (SFr)	DKK (kr)	MXN ($)	CNY (¥)	KRW (₩)	GBP (£)	CAD ($)	JPY (¥)	SGD ($)	EUR (€)	HKD ($)	SEK (kr)	AUD ($)	BRL (R$)
Designated as hedging instrument | Derivatives designated as cash flow hedges
Derivative [Line Items]
Notional amount of derivative	SFr 1,158	kr 11,650	$ 94,275	¥ 66,000		£ 2,975	$ 2,410			€ 12,870		kr 13,830
Not designated as hedging instrument
Derivative [Line Items]
Notional amount of derivative	SFr 255	kr 2,885	$ 18,700	¥ 95,228	₩ 2,700,000	£ 1,584	$ 3,098	¥ 260,000	$ 6,900	€ 25,861	$ 11,000	kr 10,536	$ 8,400	R$ 8,500

XML

Derivatives - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Designated as hedging instrument | Interest rate swap | Other assets (long-term)
Derivatives, Fair Value [Line Items]
Total Asset Derivatives	$ 8,047	$ 5,749
Designated as hedging instrument | Foreign currency forward contracts | Other assets (long-term)
Derivatives, Fair Value [Line Items]
Total Asset Derivatives	83	35
Designated as hedging instrument | Foreign currency forward contracts | Prepaid expenses and other assets
Derivatives, Fair Value [Line Items]
Total Asset Derivatives	700	363
Designated as hedging instrument | Foreign currency forward contracts | Accrued expenses
Derivatives, Fair Value [Line Items]
Total Liability Derivatives	(231)	(468)
Designated as hedging instrument | Foreign currency forward contracts | Other long-term obligations
Derivatives, Fair Value [Line Items]
Total Liability Derivatives	(38)	(82)
Not designated as hedging instrument | Foreign currency forward contracts | Prepaid expenses and other assets
Derivatives, Fair Value [Line Items]
Total Asset Derivatives	1,097	223
Not designated as hedging instrument | Foreign currency forward contracts | Accrued expenses
Derivatives, Fair Value [Line Items]
Total Liability Derivatives	$ (228)	$ (841)

XML

Derivatives - Amount of Gain (Loss) Recognized in OCI and Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) recognized in OCI	$ 881	$ (527)	$ 2,873	$ 310
Derivatives designated as cash flow hedges | Interest rate swap
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) recognized in OCI	748	(893)	2,868	(507)
Derivatives designated as cash flow hedges | Interest rate swap | Interest Expense
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) reclassified from AOCI	357	0	570	(104)
Derivatives designated as cash flow hedges | Foreign currency forward contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) recognized in OCI		353		741
Derivatives designated as cash flow hedges | Foreign currency forward contracts | Revenue
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) recognized in OCI	394		568
Amount of Gain/(Loss) reclassified from AOCI	(234)	(41)	(385)	(40)
Derivatives designated as cash flow hedges | Foreign currency forward contracts | Cost of sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) reclassified from AOCI	$ 138	$ 28	$ 378	$ (37)

XML

Derivatives - Gain (Loss) in the Consolidated Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Not designated as hedging instrument | Foreign currency forward contracts | Other expense
Derivative [Line Items]
Gain (loss) on derivative	$ 3,153	$ (1,834)	$ 2,038	$ (2,692)

XML

Fair Value Measurements - Financial Assets and (Liabilities) Carried at Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate contracts	$ 0	$ 0
Foreign currency contract liabilities, current and long-term	0	0
Foreign currency contract liabilities, current and long-term	0	0
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate contracts	8,047	5,749
Foreign currency contract liabilities, current and long-term	1,880	621
Foreign currency contract liabilities, current and long-term	(497)	(1,391)
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate contracts	0	0
Foreign currency contract liabilities, current and long-term	0	0
Foreign currency contract liabilities, current and long-term	0	0
Estimate of Fair Value, Fair Value Disclosure
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate contracts	8,047	5,749
Foreign currency contract liabilities, current and long-term	1,880	621
Foreign currency contract liabilities, current and long-term	$ (497)	$ (1,391)

XML

Fair Value Measurements - Liability Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - Contingent Consideration - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 10,928	$ 705	$ 10,956	$ 683
Contingent consideration liability recorded as the result of acquisitions (see Note 5)	0	4,900	0	4,900
Fair value adjustments recorded to income during the period	99	(18)	86	19
Contingent payments made	(115)	(15)	(130)	(30)
Ending balance	$ 10,912	$ 5,572	$ 10,912	$ 5,572

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Fair Value Measurements - Fair Value Inputs, Liabilities, Quantitative Information (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Mar. 31, 2018 USD ($)	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Contingent Consideration
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Contingent consideration liability	$ 10,912	$ 10,956	$ 10,928	$ 5,572	$ 705	$ 683
Revenue-based Payments | Contingent Consideration
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Contingent consideration liability	$ 10,912	$ 10,956
Revenue-based Payments | Contingent Consideration | Discounted Cash Flow | Fair Value, Inputs, Level 3
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Probability of milestone payment		100.00%
Measurement Input, Discount Rate | Revenue-based Payments | Contingent Consideration | Minimum | Discounted Cash Flow | Fair Value, Inputs, Level 3
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Discount rate	0.099	0.099
Measurement Input, Discount Rate | Revenue-based Payments | Contingent Consideration | Maximum | Discounted Cash Flow | Fair Value, Inputs, Level 3
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Discount rate	0.15	0.15
Contingent Receivable | Other Payments
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Contingent consideration asset	$ 474	$ 760
Contingent Receivable | Other Payments | Discounted Cash Flow | Fair Value, Inputs, Level 3
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Probability of milestone payment	54.00%	75.00%
Contingent Receivable | Measurement Input, Discount Rate | Other Payments | Discounted Cash Flow | Fair Value, Inputs, Level 3
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Discount rate	0.10	0.10

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Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impairment of other assets	$ 29	$ 1	$ 86	$ 19
Contingent Receivable | Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Gain (loss) on contingent receivable	79		132
Payment received on contingent receivable	0		153
Other long-term obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liability, noncurrent	10,600		10,600		$ 10,700
Accrued expenses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liability, current	301		301		289
Other assets (long-term) | Contingent Receivable | Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Remaining contingent receivable asset	184		184		319
Other current assets | Contingent Receivable | Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Remaining contingent receivable asset	$ 290		$ 290		$ 441

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Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Goodwill [Roll Forward]
Goodwill balance at January 1	$ 238,147
Effect of foreign exchange	(906)
Additions as the result of acquisitions	11,757
Goodwill balance at June 30	$ 248,998

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Goodwill and Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Other
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 109,434	$ 97,680
Accumulated Amortization	(43,246)	(38,127)
Net Carrying Amount	66,188	59,553
Patents
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	18,196	16,528
Accumulated Amortization	(4,334)	(3,737)
Net Carrying Amount	13,862	12,791
Distribution agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	8,192	7,262
Accumulated Amortization	(5,278)	(4,686)
Net Carrying Amount	2,914	2,576
License agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	23,845	23,783
Accumulated Amortization	(6,419)	(5,568)
Net Carrying Amount	17,426	18,215
Trademarks
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	21,516	16,224
Accumulated Amortization	(5,550)	(4,686)
Net Carrying Amount	15,966	11,538
Covenants not to compete
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,028	1,028
Accumulated Amortization	(985)	(968)
Net Carrying Amount	43	60
Customer lists
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	35,737	31,935
Accumulated Amortization	(20,680)	(18,482)
Net Carrying Amount	15,057	13,453
In-process technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	920	920
Accumulated Amortization	0	0
Net Carrying Amount	$ 920	$ 920

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Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Accumulated impairment loss	$ 8.3		$ 8.3
Aggregate amortization expense	$ 10.4	$ 6.2	$ 18.9	$ 12.4

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Goodwill and Intangible Assets - Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Remaining 2018	$ 20,132
2019	39,154
2020	37,881
2021	30,488
2022	$ 28,688

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Commitments and Contingencies (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
U.S. Department of Justice Matter
Loss Contingencies [Line Items]
Legal expenses	$ 1.6	$ 3.3

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Issuance of Common Stock (Details) - USD ($) $ in Thousands		6 Months Ended
	Mar. 28, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Equity [Abstract]
Common stock shares issued (in shares)	5,175,000	50,635,000		50,248,000
Proceeds from issuance of common stock	$ 136,600	$ 3,251	$ 140,989
Underwriting discounts and commissions	8,800
Other direct costs incurred	$ 816	$ 0	$ 815

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Subsequent Events - Narrative (Details) - Subsequent Event $ in Thousands	Jul. 30, 2018 USD ($) shares
Subsequent Event [Line Items]
Common stock issued in transaction (in shares) | shares	4,025,000
Net proceeds from issuance of common stock	$ 205,400
Underwriting discounts and commissions	10,400
Other direct costs incurred	$ 500