EX-99.2 4 exhibit992proforma.htm EX-99.2 Document

Exhibit 99.2

ICU MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On January 6, 2022 (the “Closing Date”), ICU Medical, Inc. (the “Company”, “ICU Medical”, “we” or “us”) completed the acquisition of Smiths Medical 2020 Limited (“Smiths Medical”), the holding company of Smiths Group plc’s (“Smiths Group”) global medical device business, and its consolidated subsidiaries (the “Acquisition”) pursuant to the terms and conditions of the Share Sale and Purchase Agreement, dated as of September 27, 2021 (the “Purchase Agreement”).

The Acquisition will be accounted for using the acquisition method of accounting for business combinations under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 805, Business Combinations, with ICU Medical representing the accounting acquirer under this guidance. The unaudited pro forma combined financial statements were prepared in accordance with Article 11 of Regulation S-X, as amended by SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses. The unaudited pro forma combined financial information is presented to illustrate the estimated effects of the Acquisition and the issuance of debt used to partially fund the Acquisition.

The unaudited pro forma combined balance sheet assumes that the Acquisition occurred on September 30, 2021 and combines ICU Medical’s historical unaudited consolidated balance sheet as of September 30, 2021 with Smiths Medical’s July 31, 2021 adjusted consolidated balance sheet.

The unaudited pro forma combined statement of operations for the year ended December 31, 2020 combines ICU Medical’s historical audited consolidated statement of operations for the year ended December 31, 2020 with Smiths Medical’s historical unaudited consolidated statement of income for the twelve months ended January 31, 2021, giving effect to the Acquisition as if it had been completed on January 1, 2020.

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2021 combines ICU Medical’s historical unaudited consolidated statement of operations for the nine months ended September 30, 2021 with Smiths Medical’s historical unaudited consolidated statement of income for the nine months ended July 31, 2021, giving effect to the Acquisition as if it had been completed on January 1, 2020.

The estimated purchase price of the Acquisition will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the Closing Date; any excess value of the estimated consideration transferred over the net assets will be recognized as goodwill. The Company has made a preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed using information currently available. The finalization of the Company’s purchase accounting assessment may result in changes to the valuation of assets acquired and liabilities assumed, which could have a material impact on the accompanying unaudited pro forma combined financial information.

The unaudited pro forma combined financial information contains certain reclassification adjustments to conform the historical Smiths Medical’s financial statement presentation to ICU Medical’s financial statement presentation. Additionally, in the accompanying unaudited pro forma combined financial information, Smiths Medical’s financial information has been adjusted from International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) to accounting principles generally accepted in the United States of America (“U.S. GAAP”). Further, the unaudited pro forma combined financial information contains adjustments reflecting the Acquisition and related debt financing.

On January 6, 2022, ICU Medical entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, Barclays Bank PLC and certain other financial institutions (the “Lenders”), pursuant to which, among other things, the Lenders provided ICU Medical with credit facilities in an aggregate amount of $2.2 billion (the “Credit Facilities”) consisting of a Term Loan A Facility of $850 million, a Term Loan B Facility of $850 million, and a Revolving Credit Facility of $500 million. Proceeds of $1.7 billion, net of lender fees and debt issuance costs of $35.7 million, received under the Credit Facilities on the Closing Date were used to partially fund the Acquisition. The Company had no borrowings under the Revolving


Credit Facility as of the Closing Date. The adjustments related to the Credit Facilities are shown in a separate column as “Financing Adjustments”.

Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma combined balance sheet and unaudited pro forma combined statements of operations.

The following unaudited pro forma combined financial information should be read in conjunction with ICU Medical’s consolidated financial statements and related notes and Smiths Medical’s audited financial statements and related notes. ICU Medical’s financial statements and notes are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2021. Smiths Medical’s audited financial statements and related notes for the year ended July 31, 2021 are included elsewhere in this Form 8-K.

The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma combined financial information and related notes are presented for illustrative purposes only, and do not purport to represent what the actual consolidated results of operations or financial condition would have been had the Acquisition occurred on the dates indicated, nor are they necessarily indicative of the combined company's future results of operations or financial position. Additionally, the unaudited pro forma combined financial statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies, or any revenue, tax, or other synergies that may result from the Acquisition.

ICU MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2021
(Amounts in thousands) 

ICU Medical
September 30, 2021
Historical		Smiths Medical
July 31, 2021
(As Adjusted)
(Note 3)		Transaction Adjustments
(Note 6)		Note RefFinancing
Adjustments
(Note 7)		Pro Forma
Combined
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$519,485 $229,477 $(1,922,955)6A$1,664,362 $490,369 
Short-term investment securities18,009 — — — 18,009 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES537,494 229,477 (1,922,955)1,664,362 508,378 
Accounts receivable, net of allowance for doubtful accounts 116,043 156,489 — — 272,532 
Inventories291,601 201,263 34,500 6E— 527,364 
Prepaid income taxes31,381 3,959 — — 35,340 
Prepaid expenses and other current assets34,718 1,544,465 (1,526,297)6B— 52,886 
TOTAL CURRENT ASSETS1,011,237 2,135,653 (3,414,752)1,664,362 1,396,500 
PROPERTY, PLANT AND EQUIPMENT, net458,041 176,485 49,515 6C— $684,041 
OPERATING LEASE RIGHT-OF-USE ASSETS40,979 55,958 5,922 6F— 102,859 
LONG-TERM INVESTMENT SECURITIES7,172 19,000 — — 26,172 
GOODWILL32,760 717,185 573,532 6I— 1,323,477 
INTANGIBLE ASSETS, net192,778 17,710 907,290 6D— 1,117,778 
DEFERRED INCOME TAXES35,585 16,836 — — 52,421 
OTHER ASSETS60,799 2,327 — 8,336 71,462 
TOTAL ASSETS$1,839,351 $3,141,154 $(1,878,493)$1,672,698 $4,774,710 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:  
Accounts payable$62,008 $107,846 $(830)6B$— $169,024 
Current portion of long-term debt— 1,124,187 (1,124,187)6B22,312 22,312 
Accrued liabilities94,133 140,482 31,409 6G— 266,024 
Income tax payable2,636 17,716 — — 20,352 
Contingent earn-out liability26,300 — 53,520 6A— 79,820 
TOTAL CURRENT LIABILITIES185,077 1,390,231 (1,040,088)22,312 557,532 
CONTINGENT EARN-OUT LIABILITY3,100 — — — 3,100 
LONG-TERM DEBT— 24 — 1,650,386 1,650,410 
OTHER LONG-TERM LIABILITIES40,853 119,869 — — 160,722 
DEFERRED INCOME TAXES1,663 (1,248)249,307 6K— 249,722 
INCOME TAX LIABILITY18,686 — — — 18,686 
COMMITMENTS AND CONTINGENCIES— — — — — 
STOCKHOLDERS’ EQUITY:  

ICU MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2021
(Amounts in thousands) 
Convertible preferred stock— — — — — 
Common stock2,124 12,556 (12,306)6A,6H— 2,374 
Additional paid-in capital711,152 172 575,553 6A,6H— 1,286,877 
Treasury stock, at cost (48)— — — (48)
Retained earnings891,862 2,121,883 (2,153,292)6H— 860,453 
Accumulated other comprehensive loss(15,118)(502,333)502,333 6H— (15,118)
TOTAL STOCKHOLDERS' EQUITY1,589,972 1,632,278 (1,087,712)— 2,134,538 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,839,351 $3,141,154 $(1,878,493)$1,672,698 $4,774,710 

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.



ICU MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2020
(Amounts in thousands, except per share data)


 ICU Medical
12 months ended December 31, 2020
Historical		Smiths Medical
12 months ended January 31, 2021
As Adjusted
(Note 3)		Transaction Adjustments
(Note 6)		Note RefFinancing Adjustments
(Note 7)		Pro Forma
Combined
TOTAL REVENUES$1,271,004 $1,199,074 $— $— $2,470,078 
COST OF GOODS SOLD809,507 714,226 35,853 6C, 6E, 6F— 1,559,586 
GROSS PROFIT461,497 484,848 (35,853)— 910,492 
OPERATING EXPENSES:  
Selling, general and administrative283,953 288,430 105,575 6C, 6D, 6F— 677,958 
Research and development42,948 32,993 39 6C, 6F— 75,980 
Restructuring, strategic transaction and integration28,409 — 31,409 6G— 59,818 
Change in fair value of contingent ear-out9,000 9,000 
Contract settlement(975)— — — (975)
TOTAL OPERATING EXPENSES363,335 321,423 137,023 — 821,781 
INCOME FROM OPERATIONS98,162 163,425 (172,876)— 88,711 
INTEREST EXPENSE(1,753)(25,840)22,371 6B(47,525)(52,747)
OTHER INCOME (EXPENSE), NET1,085 36,811 (47,156)6B— (9,260)
INCOME BEFORE INCOME TAXES97,494 174,396 (197,661)(47,525)26,704 
PROVISION FOR INCOME TAXES(10,624)(20,445)46,499 6K11,881 27,311 
NET INCOME$86,870 $153,951 $(151,162)$(35,644)$54,015 
NET INCOME PER SHARE  
Basic$4.16 $2.31 
Diluted$4.02 $2.24 
WEIGHTED AVERAGE NUMBER OF SHARES  
Basic20,907 2,500 23,407 
Diluted21,591 2,500 24,091 
 
The accompanying notes are an integral part of these consolidated financial statements.






ICU MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Amounts in thousands, except per share data)
 ICU Medical, Inc.
9 months ended
September 30, 2021
Historical		Smiths Medical
9 months ended
July 31, 2021
As Adjusted
(Note 3)		Transaction Adjustments
(Note 6)		Note RefFinancing Adjustments
(Note 7)
Pro Forma
Combined
TOTAL REVENUES$975,783 $900,457 $— $— $1,876,240 
COST OF GOODS SOLD611,783 587,416 (5,760)6C, 6F— 1,193,439 
GROSS PROFIT364,000 313,041 5,760 — 682,801 
OPERATING EXPENSES:  
Selling, general and administrative221,127 223,069 72,217 6C, 6D, 6F— 516,413 
Research and development34,332 22,319 (140)6C, 6F— 56,511 
Restructuring, strategic transaction and integration8,994 — — — 8,994 
Change in fair value of contingent earn-out— — — — — 
Contract settlement127 — — — 127 
TOTAL OPERATING EXPENSES264,580 245,388 72,077 — 582,045 
INCOME FROM OPERATIONS99,420 67,653 (66,317)— 100,756 
INTEREST EXPENSE(492)(20,309)19,377 6B(32,244)(33,668)
OTHER INCOME, NET921 76,402 (85,940)6B— (8,617)
INCOME BEFORE INCOME TAXES99,849 123,746 (132,880)(32,244)58,471 
PROVISION FOR INCOME TAXES(16,639)(11,940)33,220 6K8,061 12,702 
NET INCOME$83,210 $111,806 $(99,660)$(24,183)$71,173 
NET INCOME PER SHARE  
Basic$3.93 $3.00 
Diluted$3.83 $2.94 
WEIGHTED AVERAGE NUMBER OF SHARES  
Basic21,189 2,500 23,689 
Diluted21,735 2,500 24,235 
 
The accompanying notes are an integral part of these consolidated financial statements.




ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Note 1: Basis of Pro Forma Presentation

The unaudited pro forma combined financial information is presented to illustrate the pro forma effects of the Acquisition. ICU Medical’s historical financial information is derived from ICU Medical’s unaudited consolidated balance sheet as of September 30, 2021, audited consolidated statement of operations for the fiscal year ended December 31, 2020, and unaudited consolidated statement of operations for the nine months ended September 30, 2021, all of which were prepared in accordance with U.S. GAAP.

Smiths Medical’s historical financial information is derived from Smiths Medical’s audited consolidated balance sheet as of July 31, 2021, unaudited consolidated statement of income for the twelve months ended January 31, 2021, and unaudited consolidated statement of income for the nine months ended July 31, 2021, all of which have been adjusted from IFRS to U.S. GAAP.

Due to ICU Medical’s and Smiths Medical’s different fiscal year ends, the pro forma statement of income for Smiths Medical’s three month period ended January 31, 2021 was included in both the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 and the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2021. The following table reflects the results of Smiths Medical, as adjusted, for the three months ended January 31, 2021 (in thousands):

Smiths Medical
3 months ended
Jan 31, 2021, as
adjusted
TOTAL REVENUES$299,178 
NET INCOME83,868 

The unaudited pro forma combined statements of operations illustrate the effects of the Acquisition as if it had been completed on January 1, 2020, and the unaudited pro forma combined balance sheet reflects effects of the Acquisition as if it had been completed on September 30, 2021. The pro forma adjustments are preliminary and based on estimates of the purchase consideration and estimates of fair value and useful lives of the assets acquired and liabilities assumed. The final purchase price allocations will be based on estimated fair value of the assets acquired and the liabilities assumed as of the Closing Date of the Acquisition and could result in material changes to the unaudited pro forma combined financial information.

For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed in determining the final purchase price allocations, ICU Medical will apply U.S. GAAP for fair value measurements. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date". This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers unrelated to ICU Medical in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. Many of these fair value measurements can be highly subjective and it is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting in accordance with ASC 805, with ICU Medical treated as the accounting acquirer of Smiths. Under ASC 805, acquisition-related transaction costs (such as advisory, legal, valuation, and other professional fees) are not part of the allocation of the consideration transferred but are part of the transaction accounting adjustments for the Acquisition and not a separate material transaction. Adjustments were made for transaction costs to the extent that they were incurred or expected to be incurred and not already recognized in the historical financial statements.
The unaudited pro forma combined information is preliminary, presented solely for informational purposes and does not purport to represent what the combined statements of operations or balance sheet would have been for the periods or dates indicated, nor is it necessarily indicative of the combined future consolidated results of operations or financial position. The actual results reported in periods following the Acquisition may differ significantly from those reflected in these unaudited pro forma combined financial information presented herein for

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma adjustments and actual amounts, cost savings or associated costs to achieve such savings from operating efficiencies, synergies, debt refinancing, or other restructuring that may result from the Acquisition, but for which are not reflected herein. Any non-recurring items related to the Acquisition were reflected in the pro forma combined statement of operations for the year ended December 31, 2020 as they will not recur beyond twelve months after the acquisition.

Note 2: Description of the Acquisition
On September 8, 2021, ICU Medical entered into the Purchase Agreement with Smiths Group International Holdings Limited, a consolidated subsidiary of Smiths Group, (the “Seller”) to acquire all issued ordinary shares of Smiths Medical. On January 6, 2022, pursuant to the Purchase Agreement, ICU Medical consummated the purchase of Smiths Medical, a medical device business, for estimated purchase consideration of $2.6 billion, consisting of:

(i) $798.6 million in cash to Seller, financed through existing cash on hand and net proceeds from the Credit Facilities;

(ii) 2,500,000 newly issued and non-assessable shares of ICU Medical common stock, par value of $0.10 per share, with a fair value of $576.0 million to Seller;

(iii) settlement of a $1.1 billion intra-group loan owed by Smiths Medical ASD, a consolidated subsidiary of Smiths Medical, to Smiths Group for the benefit of Smiths Medical, financed through existing cash on hand and the net proceeds from the Credit Facilities; and

(iv) additional cash consideration with an estimated fair value of $53.5 million, with a potential cash payment of up to $100.0 million (the “Additional Consideration”), payable to Seller. If, on or prior to the third anniversary of the Closing Date, the 30-Day volume weighted average price (“VWAP”) of ICU Medical’s shares equals or exceeds US$300 per share or on or prior to the fourth anniversary of the Closing Date, the 45-Day VWAP of ICU Medical’s shares exceeds US$300 per share (each, a “Price Target”), and Smiths Group at the time the Price Target is achieved, is the beneficial owner of at least 1,250,000 shares of ICU Medical’s common stock, then the Additional Consideration will be paid in cash.

Upon issuance of these unaudited pro forma combined financial statements, the purchase consideration is preliminary. See Note 4 below for further details on the estimated purchase consideration.

In connection with the Acquisition, ICU Medical entered into the Credit Agreement on January 6, 2022 for the issuance of Credit Facilities totaling $2.2 billion. ICU Medical used the proceeds of $1.7 billion, net of lender fees and debt issuance costs of $35.7 million, from the Credit Facilities to partially fund the Acquisition on the Closing Date. Under the Credit Agreement, the final maturity of the Term Loan A Facility and the Revolving Credit Facility will occur on the fifth anniversary of the Closing Date, and the final maturity of the Term Loan B Facility will occur on the seventh anniversary of the Closing Date. The U.S. dollar revolving and term loans under the Credit Facilities may bear interest, at our option, on either (1) the Base Rate (“Base Rate Loan”) (as defined in the Credit Agreement) plus the applicable margin or (2) Adjusted Term secured overnight financing rate ("Term SOFR Loan") (as defined in the Credit Agreement) plus applicable margin. Euro loans (“Eurocurrency Rate Loan”) bear interest based on the applicable Adjusted Eurocurrency Rate (as defined in the Credit Agreement) plus the applicable interest margin. Pounds Sterling loans bear interest based on the Adjusted Daily Simple RFR rate (as defined in the Credit Agreement) plus the applicable interest margin. The applicable interest margins with respect to the Term Loan A Facility and Revolving Credit Facility is initially set at 0.75% for Base Rate Loans and 1.75% for other term and revolving loans. The applicable interest margins for the Term Loan B Facility are initially set at 1.5% for the Base Rate Loans and 2.50% for Eurocurrency Rate Loans. The applicable interest margins will be based on changes in the Leverage Ratio (as defined in the Credit Agreement). The Credit Agreement is included in our Form 8-K filing dated January 7, 2022.

Note 3: Adjustments to Smiths Medical 2020 Limited Financial Statements

Smiths Medical’s historical consolidated balance sheet as of July 31, 2021 and consolidated statements of operations for the nine months ended July 31, 2021 and twelve months ended January 31, 2021 were prepared in

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
accordance with IFRS as issued by the IASB. Certain adjustments are reflected in the financial information below to convert from IFRS to U.S. GAAP and align accounting policies and presentation with that of ICU Medical.

As part of preparing the unaudited pro forma combined financial statements, ICU Medical conducted an initial review of the accounting policies of Smiths Medical to determine if differences in accounting policies or presentation between Smiths Medical and ICU Medical existed that may require recasting or reclassification to conform to ICU Medical’s accounting policies and presentation. Management’s assessment is ongoing and, at the time of preparing the unaudited pro forma combined financial statements, other than the adjustments and reclassifications made herein, management is not aware of any other material differences.

The Company identified certain reclassifications that were necessary to conform Smiths Medical’s financial statement presentation to that of ICU Medical. For purposes of the unaudited pro forma combined financial statements, Smiths Medical’s historical balance sheet and statements of income have been adjusted to reflect these reclassifications.

(A) Balance Sheet

The following table illustrates the impact of aligning financial statement line items to conform to ICU Medical’s financial statement presentation and converting the financial statements to US GAAP (in thousands):

Smiths Medical July 31, 2021
Historical		Alignment to ICU Medical CaptionsReclassification
Adjustments		Note
Ref		IFRS vs. US GAAP AdjustmentsNote
Ref		Smiths Medical July 31, 2021, as adjusted
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$229,477 $— $— $— $229,477 
Short-term investment securities— — — — — 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES229,477 — — — 229,477 
Accounts receivable, net of allowance for doubtful accounts — 156,489 — — 156,489 
Trade and other receivables169,631 (169,631)— — — 
Related party notes receivable1,526,297 (1,526,297)— — — 
Prepaid income taxes— 3,959 — — 3,959 
Current tax receivables3,959 (3,959)— — 
Inventories201,263 — — — 201,263 
Financial derivatives5,026 (5,026)— — — 
Prepaid expenses and other current assets— 1,544,465 — — 1,544,465 
TOTAL CURRENT ASSETS2,135,653 — — — 2,135,653 
PROPERTY, PLANT AND EQUIPMENT, net168,954 — 7,531 Ai— 176,485 
RIGHT OF USE ASSETS, NET55,958 — — (55,958)Bii
OPERATING LEASE RIGHT-OF-USE ASSETS— — — 55,958 Bii55,958 
LONG-TERM INVESTMENT SECURITIES— 19,000 — — 19,000 
GOODWILL— 717,185 — — 717,185 
INTANGIBLE ASSETS, net857,933 (717,185)(7,531)Ai(115,507)Bii17,710 
OTHER FINANCIAL ASSETS19,282 (19,282)— — — 
TRADE AND OTHER RECEIVABLES2,045 (2,045)— — — 
DEFERRED INCOME TAXES16,836 — — — 16,836 
OTHER ASSETS— 2,327 — — 2,327 

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
TOTAL ASSETS$3,256,661 $— $— $(115,507)$3,141,154 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES: 
Accounts payable$— $107,846 $— $— $107,846 
Current portion of long-term debt— 1,124,187 — — 1,124,187 
Accrued liabilities— 140,482 — — 140,482 
Income tax liability17,716 — — — 17,716 
Contingent earn-out liability— — — — — 
Financial liabilities— 
 - borrowings - cash overdrafts
18,157 (18,157)— — — 
 - borrowings - related party
1,124,458 (1,124,458)— — — 
 - lease liabilities
17,035 (17,035)— — — 
 - financial derivatives
2,980 (2,980)— — — 
Trade and other payables198,487 (198,487)— — — 
Related party trade and other payables, net830 (830)— — — 
Provisions for liabilities and charges10,839 (10,839)— — — 
TOTAL CURRENT LIABILITIES1,390,502 (271)— — 1,390,231 
FINANCIAL LIABILITIES
CONTINGENT EARN-OUT LIABILITY— — — — — 
LONG-TERM DEBT— 24 — — 24 
OTHER LONG-TERM LIABILITIES— 119,869 — — 119,869 
INCOME TAX LIABILITY— — — — — 
 - LEASE LIABILITIES
44,845 (44,845)— — — 
 - FINANCIAL DERIVATIVES
56 (56)— — — 
TRADE AND OTHER PAYABLES25,414 (25,414)— — 
PROVISIONS FOR LIABILITIES AND CHARGES42,607 (42,607)— — — 
RETIREMENT BENEFIT OBLIGATIONS6,700 (6,700)— — 
DEFERRED INCOME TAXES27,629 — — (28,877)Bi(1,248)
COMMITMENTS AND CONTINGENCIES— — — — — 
STOCKHOLDERS’ EQUITY: 
Convertible preferred stock— — — — — 
Common stock— 12,556 — 12,556 
Share Capital12,556 (12,556)— — 
Additional paid-in capital— 172 — 172 
Share premium172 (172)— 
Treasury stock, at cost— — — 
Retained earnings2,208,513 — — (86,630)Bi2,121,883 
Accumulated other comprehensive loss— (502,333)— — (502,333)
Group Construction Reserve(371,999)371,999 — — 
Cumulative translation reserve(132,040)132,040 — — 
Hedge reserve1,706 (1,706)— — 
TOTAL STOCKHOLDERS' EQUITY1,718,908 — — (86,630)1,632,278 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$3,256,661 $— $— $(115,507)$3,141,154 

B) Income Statement

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following table illustrates the impact of aligning financial statement line items to conform to ICU Medical’s financial statement presentation and converting the financial statements to US GAAP for the twelve months ended January 31, 2021 (in thousands):
 
Smiths Medical 12 months ended
January 31, 2021
Historical		Alignment to ICU Medical CaptionsReclassification
Adjustments		Note
Ref		IFRS vs. US GAAP AdjustmentsNote
Ref		Smiths Medical 12 months ended
 January 31, 2021
as adjusted
TOTAL REVENUES$1,171,455 $— $27,619 Ai$— $1,199,074 
COST OF GOODS SOLD583,436 — 144,013 Aii, Aiv(13,223)Bi714,226 
GROSS PROFIT588,019 — (116,394)13,223 484,848 
OPERATING EXPENSES: 
Selling, general and administrative444,831 (29,080)(127,321)Ai, Aii, Aiii, Aiv— 288,430 
Other operating expenses3,913 (3,913)— — 
Research and development— 32,993 — — 32,993 
Restructuring, strategic transaction and integration— — — — — 
Change in fair value of contingent earn-out— — — — — 
Contract settlement— — — — — 
TOTAL OPERATING EXPENSES448,744 — (127,321)— 321,423 
INCOME FROM OPERATIONS139,275 — 10,927 13,223 163,425 
INTEREST INCOME7,208 (7,208)— — — 
INTEREST EXPENSE(25,840)— — — (25,840)
OTHER FINANCING INCOME (EXPENSE)40,530 (40,530)— — — 
OTHER INCOME (EXPENSE), NET— 47,738 (10,927)Aiii— 36,811 
INCOME BEFORE INCOME TAXES161,173 — — 13,223 174,396 
PROVISION FOR INCOME TAXES(17,139)— — (3,306)Bi(20,445)
NET INCOME$144,034 $— $9,917 $153,951 


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following table illustrates the impact of aligning financial statement line items to conform to ICU Medical’s financial statement presentation and converting the financial statements to US GAAP for the nine months ended July 31, 2021 (in thousands):
 
Smiths Medical 9 months ended
July 31, 2021
Historical		Alignment to ICU Medical CaptionsReclassification
Adjustments		Note
Ref		IFRS vs. US GAAP AdjustmentsNote
Ref		Smiths Medical 9 months ended
July 31, 2021
as adjusted
TOTAL REVENUES$880,403 $— $20,054 Ai$— $900,457 
COST OF GOODS SOLD476,809 — 120,776 Aii, Aiv(9,620)Bi587,965 
GROSS PROFIT403,594 — (100,722)9,620 312,492 
OPERATING EXPENSES: 
Selling, general and administrative340,304 63,456 (110,648)Ai, Aii, Aiii, Aiv(70,592)Bi222,520 
Other operating expenses85,775 (85,775)— — 
Research and development— 22,319 — — 22,319 
Restructuring, strategic transaction and integration— — — — — 
Change in fair value of contingent earn-out— — — — — 
Contract settlement— — — — — 
TOTAL OPERATING EXPENSES426,079 — (110,648)(70,592)244,839 
INCOME FROM OPERATIONS(22,485)— 9,926 80,212 67,653 
INTEREST INCOME2,794 (2,794)— — — 
INTEREST EXPENSE(20,309)— — — (20,309)
OTHER FINANCING INCOME (EXPENSE)83,534 (83,534)— — — 
OTHER INCOME (EXPENSE), NET— 86,328 (9,926)Aiii— 76,402 
INCOME BEFORE INCOME TAXES43,534 — — 80,212 123,746 
PROVISION FOR INCOME TAXES8,113 — — (20,053)Bi(11,940)
NET INCOME$51,647 $— $— $60,159 $111,806 


Reclassification Adjustments

A    In addition to the alignment of Smiths Medical’s historical financial information to conform to ICU Medical’s financial statement line items, the following summary represents reclassifications to conform Smiths

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Medical’s historical financial information to financial statement line items and presentation of ICU Medical based on ICU Medical’s accounting policies:

Consolidated Balance Sheets Reclassification Adjustments
i.Acquired software of $7.5 million from Intangible assets, net to Property, plant and equipment, net.

December 31, 2020 Consolidated Statements of Operations Reclassification Adjustments
i.Distributor and group purchasing organization (“GPO”) fees of $27.6 million from Total revenues to Selling, general and administrative.
ii.Warranty expense of $4.1 million from Cost of goods sold to Selling, general and administrative.
iii.Nonrecurring transaction costs and other specific items of $10.9 million from Selling, general and administrative to Other income (expense), net.
iv.Specific cost items totaling $148.2 million from Selling, general and administrative to Cost of goods sold.

September 30, 2021 Consolidated Statements of Operations Reclassification Adjustments
i.Distributor and GPO fees of $20.1 million from Total revenues to Selling, general and administrative.
ii.Warranty expense of $4.7 million from Cost of goods sold to Selling, general and administrative.
iii.Nonrecurring transaction costs and other specific items of $9.9 million from Selling, general and administrative to Other income (expense), net.
iv.Specific cost items of $124.9 million from Selling, general and administrative to Cost of goods sold

IFRS to US GAAP Adjustment

B    The following adjustments have been made to align Smiths Medical’s historical financial information prepared under IFRS as issued by the IASB to US GAAP:

i.Capitalized Development Costs. Represents an adjustment to record a reversal of capitalized research and development costs as, under US GAAP, internally generated research and development costs are expensed as incurred unless there is an alternative future use, with certain exceptions for software and advertising that are not applicable to this balance. The balance sheet impact is a decrease in Intangible assets, net, of $115.5 million, offset by a decrease to Deferred income taxes of $28.9 million and a decrease to Retained earnings of $86.6 million. On the statement of operations, for the year ended December 31, 2020, this resulted in a decrease to Cost of goods sold of $13.2 million and increase to Provision for income taxes of $3.3 million. On the statement of operations for and the nine months ended September 30, 2021, this resulted in a decrease to Cost of goods sold of $9.6 million, decrease to Selling, general and administrative of $70.6 million, and increase to Provision for income taxes of $20.1 million.
ii.Right of Use Assets. Adjustment of $56.0 million from Right of use assets, net to Operating lease right-of-use assets reflects Management’s assessment that the acquired leases are operating leases under US GAAP.

Note 4: Estimated Purchase Consideration

The calculation of the estimated purchase consideration is based on the terms of the Purchase Agreement. The estimated preliminary purchase price is as follows (in thousands, except per share data):


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Cash Consideration798,645 
Payment of related party loan payable for the benefit of Smiths Medical 1,124,310 
Consideration Shares: 2,500,000 shares of ICU Medical issued at $230.39 per share575,975 
Additional Consideration: Contingent consideration based on ICU Medical’s common stock performance53,520 
Total purchase price consideration$2,552,450 

The following table illustrates calculation of the closing consideration related to the share issuance (in thousands except for share price):

Number of shares of ICU Medical’s common stock issued at Closing Date2,500 
Share price at Closing Date$230.39 
Fair Value of Share Consideration$575,975 
Common Stock$250 
Additional paid-in capital$575,725 

Note 5: Preliminary Purchase Price Allocation

The table below represents the preliminary purchase price allocation for Smiths Medical based on estimates, assumptions, valuations and other analyses as of the Closing Date, that have not been finalized in order to make a definitive allocation. Accordingly, the pro forma adjustments to allocate the purchase consideration will remain preliminary until ICU Medical's management finalizes the fair values of assets acquired and liabilities assumed. The final amounts allocated to assets acquired and liabilities assumed are dependent upon certain valuation and other studies that have not yet been completed, and as previously stated could differ materially from the amounts presented in the unaudited pro forma combined financial statements.

The total preliminary estimated purchase consideration as shown in the table above is allocated to the tangible and intangible assets and liabilities of Smiths Medical based on their estimated fair values as if the Acquisition had occurred on September 30, 2021, which is the assumed acquisition date for purposes of the pro forma balance sheet (in thousands).


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Assets acquired:
Cash and cash equivalents$229,477 
Accounts receivable156,489 
Inventories235,763 
Prepaid income taxes3,959 
Prepaid expenses and other current assets18,168 
Property, plant and equipment226,000 
Operating lease right-of-use assets61,880 
Long-term investment securities19,000 
Goodwill1,290,717 
Intangible assets925,000 
Deferred income taxes16,836 
Other assets2,327 
Total assets acquired3,185,616 
Liabilities assumed:
Accounts payable107,016 
Accrued liabilities140,482 
Income tax liability17,716 
Long-term debt24 
Other long-term liabilities119,869 
Deferred income taxes248,059 
Total liabilities assumed633,166 
Net assets acquired$2,552,450 

The estimated purchase consideration and purchase price allocation are preliminary and are subject to change as we obtain further information; accordingly, the actual goodwill may be materially different from the estimate included in these unaudited pro forma combined financial statements.

Note 6: Transaction Adjustments

A Closing Consideration:

Adjustments in the unaudited pro forma financial information are represented by the following:

Balance Sheet Impact

This adjustment records the cash purchase consideration of $1.9 billion million comprised of cash paid of $798.6 million, settlement of an intra-group loan of $1.1 billion for the benefit of Smiths Medical, contingent consideration valued at $53.5 million, and share issuance valued at $576.0 million. This adjustment results in a decrease to Cash and cash equivalents of $1.9 billion for the Cash Consideration paid on the Closing Date, an increase to Contingent earn-out liability of $53.5 million for the Additional Consideration, an increase to Common stock of $250.0 thousand for the par value of Share Consideration, and an increase to Additional paid-in capital of $575.7 million for the remaining fair value of Share Consideration.

B Extinguished and Assigned Related Party Balances:

Represents an adjustment to exclude (1) the intra-group receivable balance associated with a loan balance owed to Smiths Medical by Smiths Group that was assigned to the Seller prior to the Closing Date and, thus, was not acquired in the Acquisition and (2) an adjustment to reflect settlement of the intra-group loan payable of $1.1 billion owed by Smiths Medical ASD, a consolidated subsidiary of Smiths Medical, to Smiths Group for the benefit of

ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Smiths Medical that was part of the closing consideration discussed above. This adjustment results in a decrease to Prepaid expenses and other current assets of $1.5 billion, a decrease to Accounts payable of $0.8 million, and a decrease to Current portion of long-term debt of $1.1 billion.

Statement of Operations Impact

Removal of interest income and foreign currency impacts related to the intra-group receivable represents an adjustment to reduce Other income (expense), net by $47.2 million and $85.9 million for the year ended December 30, 2020 and nine months ended September 30, 2021, respectively. Settlement of the intra-group loan payable results in an adjustment to reflect a decrease to Interest expense of $22.4 million and $19.4 million for the year ended December 31, 2020 and nine months ended September 30, 2021, respectively.

C Property, Plant and Equipment, Net:

Balance Sheet Impact

Represents an adjustment to account for acquired property, plant and equipment at fair value under purchase accounting pursuant to US GAAP. This adjustment results in an increase to Property, plant and equipment, net of $49.5 million.

Statement of Operations Impact

Represents a change in depreciation expense related to both the fair value adjustment of the acquired property, plant and equipment, the adoption of ICU’s accounting policies on useful life and reversal of impairments recognized in the historical financial information, resulting in an increase to Cost of goods sold of $1.2 million, increase to Selling, general and administrative of $0.1 million, and increase to Research and development of $31.0 thousand for the year ended December 31, 2020 and a decrease to Cost of goods sold of $5.9 million, decrease to Selling, general and administrative of $3.1 million, and decrease to Research and development of $0.1 million for the nine months ended September 30, 2021.

D Intangible Assets, Net:

Balance Sheet Impact

Adjustment reflects an increase to Intangible assets, net of $907.3 million for the acquired identifiable intangible assets consisting of a trade mark license agreement, developed technology, internally developed software, and customer relationships.

Statement of Operations Impact

Adjustment reflects incremental amortization expense, shown as an increase to Selling, general and administrative of $105.2 million and $75.1 million for the year ended December 31, 2020 and nine months ended September 30, 2021, respectively.

The following table summarizes the estimated fair values of Smiths Medical’s identifiable intangible assets, the fair values as a percentage of purchase price, their estimated useful lives, and amount of amortization recognized on such identified intangible assets under a straight-line method of amortization for the year ended December 31, 2020 and the nine months ended September 30, 2021 (in thousands except percentages and useful lives):


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Fair value% of Purchase ConsiderationUseful lifeAmortization for the 12 months ended December 31, 2020Amortization for the 9 months ended September 30,2021
Trade mark license agreement$5,000 0.2 %0.5 $5,000 $— 
Developed technology390,000 15.3 %10.0 39,000 29,250 
Internally developed software30,000 1.2 %5.0 6,000 4,500 
Customer relationships500,000 19.6 %8.0 62,500 46,875 
Total assets acquired$925,000 36.2 %$112,500 $80,625 

E Inventories:

Balance Sheet Impact

Represents an adjustment to step up Smiths Medical’s inventory to fair value in accordance with US GAAP. This adjustment results in an increase to Inventories of $34.5 million.

Statement of Operations Impact

Inventory is expected to turn over during the first year post-Acquisition. Therefore, adjustment represents an increase to Cost of goods sold of $34.5 million for the year ended December 31, 2020.

F Leases:

Balance Sheet Impact

Represents an adjustment to account for acquired leases as new leases under purchase accounting pursuant to US GAAP. This adjustment results in an increase to the Operating lease right-of-use assets of $5.9 million.

Statement of Operations Impact

Represents an increase in right-of-use asset amortization associated with the step up of operating lease right-of-use assets in accordance with purchase accounting. This adjustment results in an increase to Cost of goods sold of $0.2 million, increase to Selling, general and administrative of $0.3 million, and increase to Research and development of $8.0 thousand for the year ended December 31, 2020, and an increase to Cost of goods sold of $0.2 million, increase to Selling, general and administrative of $0.2 million, and increase to Research and development of $6.1 thousand for the nine months ended September 30, 2021.

G Transaction Costs:

Balance Sheet Impact

Represents an adjustment to reflect the accrual of additional transaction costs incurred by ICU Medical and Smiths Medical not included in the historical financial statements of ICU Medical and Smiths Medical and results in a $31.4 million increase to Accrued liabilities.

Statement of Operations Impact

Reflects an increase of transaction expenses of $31.4 million related to transaction costs incurred by ICU Medical and Smiths Medical that are not included in the historical financial statements of ICU Medical and Smiths Medical, resulting in a $31.4 million increase to Restructuring, strategic transaction and integration expense for the year ended December 31, 2020.

H    Equity: Adjustment eliminates Smiths Medical’s historical shareholders’ equity of $1.6 billion.


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
I Goodwill: Adjustment shows estimated goodwill of $1.3 billion recognized from the Acquisition derived using the fair value estimate of net assets acquired and the purchase price (see Note 5) inclusive of the elimination of historical Smiths Medical Goodwill of $717.2 million. Adjustment is represented as an increase to goodwill of $573.5 million.

J Earnings Per Share: As noted above, a portion of the purchase consideration was paid by delivery of 2,500,000 newly issued and non-assessable ICU Medical common shares to Smiths Group at the Closing Date. For purposes of the unaudited pro forma combined statement of operations, the 2,500,000 shares comprising the Share Consideration are assumed to be outstanding for the entire year ending December 31, 2020 and the entire nine months ended September 30, 2021. There were no share awards issued in connection with the Acquisition and, therefore, the pro forma adjustments to the basic and diluted earnings per share amounts are the same. The following table reflects the pro forma adjustments:

For the 12 months
ending December
31, 2020		For the 9 months
ending September
30, 2021
Pro Forma weighted-average shares outstanding (Basic)
Historical weighted-average shares outstanding20,907 21,189 
Number of shares of ICU Medical’s common stock issued at Closing Date2,500 2,500 
Pro Forma basic weighted-average shares outstanding23,407 23,689 
Pro Forma weighted-average shares outstanding (Basic)
Historical weighted-average shares outstanding21,591 21,735 
Number of shares of ICU Medical’s common stock issued at Closing Date2,500 2,500 
Pro Forma basic weighted-average shares outstanding24,091 24,235 
Pro Forma earnings per share
Pro forma net income54,015 71,173 
Pro forma basic earnings per share$2.31 $3.00 
Pro forma diluted earnings per share$2.24 $2.94 

K Provision for Income Tax:

Balance Sheet Impact

Represents an adjustment to reflect an increase in Deferred income taxes of $249.3 million arising from the transaction accounting adjustments related to the Acquisition.

Statement of Operations Impact

Reflects a decrease to income tax expense as a result of the Acquisition, resulting in a decrease of $46.5 million and $33.2 million for the year ended December 31, 2020 and nine months ended September 30, 2021, respectively, to Provision for income taxes.

Note 7: Financing Adjustments

A    Debt Issuance

Balance Sheet Impact


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
This adjustment reflects ICU Medical’s receipt of $1.7 billion in borrowings from the Credit Facilities, consisting of $850.0 million of a Term Loan A Facility and $850.0 million of a Term Loan B Facility, net of lender fees and debt issuance costs of $35.7 million. This adjustment results in an increase to Cash and cash equivalents of $1.7 billion, increase to Other assets of $8.3 million, increase to Current portion of long-term debt of $22.3 million, and increase to Long-term debt of $1.7 billion.

Statement of Operations Impact

Results in an increase to Interest expense of $47.5 million and $32.2 million for the year ended December 31, 2020 and nine months ended September 30, 2021, respectively, and a decrease to the Provision for income taxes of $11.9 million and $8.1 million for the year ended December 31, 2020 and nine months ended September 30, 2021, respectively, related to interest expense incurred on the debt issued under the Credit Facilities on the Closing Date and amortization of lender fees and debt issuance costs.

The following table reflects the term loan proceeds and fees and expenses related to the Credit Facilities (in thousands):

Cash and cash equivalentsCurrent portion of
long-term debt		Long-term debtOther assets
Term loan proceeds
Term Loan A$850,000 $15,938 $834,063 $— 
Term Loan B850,000 6,374 843,625 — 
Total term loan proceeds1,700,000 22,312 1,677,688 — 
Fees and expenses related to debt
Term Loan A(15,219)— (15,219)— 
Term Loan B(12,083)— (12,083)— 
Revolver(8,336)— — 8,336 
Total fees and expenses related to debt(35,638)— (27,302)(8,336)
Total$1,664,362 $22,312 $1,650,386 $8,336 

Additionally, the following table reflects the interest expense and amortization of lender fees and debt issuance costs related to the debt financing, in addition to providing a sensitivity analysis to reflect a change of 1/8 of one percent in interest (in thousands):


ICU MEDICAL, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
For the 12 months ending December 31, 2020For the 9 months ending September 30, 2021
Interest expense on Credit Facilities (or term loans issued on the Closing Date)
Term Loan A$15,654 $10,072 
Term Loan B25,435 17,344 
Total interest expense on Credit Facilities/term loans41,089 27,416 
Amortization of lender fees and debt issuance costs
Term Loan A3,043 2,283 
Term Loan B1,726 1,295 
Revolver1,667 1,250 
Total amortization of lender fees and debt issuance costs6,436 4,828 
Total interest expense and amortization of lender fees and debt issuance costs$47,525 $32,244 
A change of 1/8 of 1% in the interest rate would change to interest amount by approximately:
Interest expense:8,006 5,356