MERIT MEDICAL SYSTEMS INC MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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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. Our future financial condition and results of operations, as well
as any forward-looking statements, are subject to inherent risks and
uncertainties that may adversely impact our operations and financial results.
These risks and uncertainties are discussed in Part I, Item 1A "Risk Factors" in
the 2021 Annual Report on Form 10-K and in Part II, Item 1A "Risk Factors"
in
this report.

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, market and sell 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 four product categories: peripheral
intervention, cardiac intervention, custom procedural solutions, and OEM. Within
these product categories, we sell a variety of products, including cardiology
and radiology devices (which assist in diagnosing and treating coronary arterial
disease, peripheral vascular disease and other non-vascular diseases), as well
as embolotherapeutic, cardiac rhythm management, electrophysiology, critical
care, breast cancer localization and guidance, biopsy, and interventional
oncology and spine devices. Our endoscopy segment consists of gastroenterology
and pulmonology devices which assist in the palliative treatment of expanding
esophageal, tracheobronchial and biliary strictures caused by malignant tumors.

For the three-month period ended September 30, 2022, we reported sales of $287.2
million, an increase of $20.2 million or 7.5%, compared to sales for the
three-month period ended September 30, 2021 of $267.0 million. For the
nine-month period ended September 30, 2022, we reported sales of $857.6 million,
an increase of $61.3 million or 7.7% compared to sales for the nine-month period
ended September 30, 2021 of $796.3 million. For the three and nine-month periods
ended September 30, 2022, foreign currency fluctuations (net of hedging)
decreased our net sales by $8.0 million and $15.8 million, respectively,
assuming applicable foreign exchange rates in effect during the comparable
prior-year periods.

Gross margin as a percentage of sales was 44.8% for the three-month period ended
September 30, 2022compared to 45.1% for the three-month period ended
September 30, 2021. Gross margin as a percentage of sales was 44.8% for the nine months ended September 30, 2022 and 2021.

Net income for the three-month period ended September 30, 2022 was $15.3
million, or $0.27 per share, compared to net income of $12.0 million, or $0.21
per share, for the three-month period ended September 30, 2021. Net income for
the nine-month period ended September 30, 2022 was $41.1 million, or $0.71 per
share, compared to net income of $27.8 million, or $0.49 per share, for the
nine-month period ended September 30, 2021.

Recent developments and trends

In addition to the trends identified in the 2021 Annual Report on Form 10-K
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Overview," our business in 2022 has been impacted,
and we believe will continue to be impacted, by the following recent
developments and trends:

Our revenues during the three-month period ended September 30, 2022 were

? driven mainly by stronger than expected demand in the WE and more

a trend in international sales that was more favorable than anticipated, particularly in EMEA

   and Asia Pacific ("APAC") regions.


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During the third quarter of 2022, we launched four new products, including a

? new version of our Elation pulmonary balloon dilator, our SafeGuard Focus Cool™

Compression device, our Prelude Roadster™ Guide Sheath and our TEMNO Elite™

Soft tissue biopsy system.

Our dedication to the Foundations for Growth program has helped offset

? inflationary pressures on the costs of certain raw materials, shipping and freight

expenses.

Of the September 30, 2022we had cash, cash equivalents and restricted cash of

? $53.6 million and a net available borrowing capacity of approximately $509

   million.


RESULTS OF OPERATIONS

The following table sets forth certain operational data as a percentage of sales
for the periods indicated:

                                                  Three Months Ended           Nine Months Ended
                                                    September 30,               September 30,
                                                   2022         2021           2022         2021
Net sales                                             100 %        100 %          100 %        100 %
Gross profit                                         44.8         45.1           44.8         44.8
Selling, general and administrative expenses         31.3         32.4           30.2         32.5
Research and development expenses                     6.7          6.4            6.4          6.4
Impairment charges                                      -            -            0.2          0.5
Contingent consideration expense                      0.3          0.4            0.5          0.4
Acquired in-process research and development
expense                                                 -            -            0.8            -
Income from operations                                6.5          6.0            6.7          4.9
Other expense - net                                 (0.4)        (0.7)          (0.5)        (0.7)
Income before income taxes                            6.1          5.3            6.1          4.2
Net income                                            5.3          4.5            4.8          3.5


Sales

Sales for the three-month period ended September 30, 2022 increased by 7.5%, or
$20.2 million, compared to the corresponding period in 2021. Sales for the
nine-month period ended September 30, 2022 increased by 7.7%, or $61.3 million,
compared to the corresponding period in 2021. Listed below are the sales by
product category within each of our financial reporting segments for the three
and nine-month periods ended September 30, 2022 and 2021 (in thousands, other
than percentage changes):

                                               Three Months Ended                      Nine Months Ended
                                                 September 30,                           September 30,
                               % Change        2022         2021       % Change        2022         2021
Cardiovascular
Peripheral Intervention             9.5 %    $ 110,698    $ 101,059         9.3 %    $ 327,426    $ 299,573
Cardiac Intervention                8.8 %       86,848       79,813         7.4 %      257,909      240,203
Custom Procedural Solutions       (7.6) %       45,692       49,435       (1.7) %      141,047      143,492
OEM                                21.5 %       35,711       29,397        18.3 %      106,173       89,734
Total                               7.4 %      278,949      259,704         7.7 %      832,555      773,002

Endoscopy

Endoscopy Devices                  12.4 %        8,226        7,317        
7.5 %       25,011       23,257

Total                               7.5 %    $ 287,175    $ 267,021         7.7 %    $ 857,566    $ 796,259


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Cardiovascular Sales. Our cardiovascular sales for the three-month period ended
September 30, 2022 were $278.9 million, up 7.4% when compared to the
corresponding period of 2021 of $259.7 million. Sales for the three-month period
ended September 30, 2022 were favorably affected by increased sales of:

Peripheral intervention products, which increased by $9.6 millioni.e. 9.5%,

(a) compared to the corresponding period of 2021. This increase is mainly explained by

the sale of our access, drainage, embolotherapy and radar localization products,

partially offset by lower sales of our intervention products.

Cardiac intervention products, which increased by $7.0 millioni.e. 8.8%, of

the corresponding period of 2021. This increase is mainly due to sales

(b) our cardiac rhythm/electrophysiology intervention and management

(“CRM/EP”), partially offset by lower sales of our fluids

management products (including our Medallion® syringes, which have seen an increase

     demand in the prior period due to COVID-19 vaccination efforts).

OEM products, which increased by $6.3 millioni.e. 21.5%, of the

(c) corresponding period of 2021. This increase is mainly due to the sales of

our fluid access and management products and kits.

The foregoing increase in sales for the three-month period ended September 30,
2022 was partially offset by decreased sales of custom procedural solutions
products, which decreased by ($3.7) million, or (7.6)%, from the corresponding
period of 2021. This decrease was driven primarily by decreased sales of our
critical care products and kits, offset partially by increased sales of our
trays.

Our cardiovascular sales for the nine-month period ended September 30, 2022 were
$832.6 million, up 7.7% when compared to the corresponding period of 2021 of
$773.0 million. Sales for the nine-month period ended September 30, 2022 were
favorably affected by increased sales of:

Peripheral intervention products, which increased by $27.9 millioni.e. 9.3%,

compared to the corresponding period of 2021. This increase is mainly explained by

(a) sales of our locating, drainage, angiography, access and

     embolotherapy products, partially offset by decreased sales of our
     intervention products.

Cardiac intervention products, which increased by $17.7 millioni.e. 7.4%,

compared to the corresponding period of 2021. This increase is mainly explained by

(b) sales of our interventional, angiography and CRM/EP products, partially offset

by lower sales of our fluid management products (including our Medallion®

Syringes, which saw increased demand in the previous period due to COVID-19

     vaccination efforts).


     OEM products, which increased by $16.4 million, or 18.3%, from the

corresponding period of 2021. This increase is mainly attributable to the sales of

(c) our access, fluid management, intervention, angiography and coating

products, as well as kits, partially offset by lower sales of our CRM/EP

some products.


The foregoing increase in sales for the nine-month period ended September 30,
2022 was partially offset by decreased sales of custom procedural solutions
products, which decreased by ($2.4) million, or (1.7)%, from the corresponding
period of 2021. This decrease was driven primarily by sales of our critical care
products, offset partially by increased sales of our trays.

Endoscopy Sales. Our endoscopy sales for the three-month period ended
September 30, 2022 were $8.2 million, up 12.4%, when compared to sales in the
corresponding period of 2021 of $7.3 million. Our endoscopy sales for the
nine-month period ended September 30, 2022 were $25.0 million, up 7.5%, when
compared to sales in the corresponding period of 2021 of $23.3 million. Sales
for the three and nine-month periods ended September 30, 2022 compared to the
corresponding periods in 2021 were favorably affected by increased sales of our
Elation Pulmonary Balloon Dilator and EndoMAXX® fully covered esophageal stent
products, offset partially by decreased sales of our other stents.

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Geographic Sales

Below are sales by geography for the three and nine month periods ended
September 30, 2022 and 2021 (in thousands, other than percentage changes):

                                Three Months Ended                     Nine Months Ended
                                  September 30,                          September 30,
                 % Change       2022         2021       % Change       2022         2021
United States         8.6 %   $ 164,571    $ 151,505         6.8 %   $ 482,237    $ 451,648
International         6.1 %     122,604      115,516         8.9 %     375,329      344,611
Total                 7.5 %   $ 287,175    $ 267,021         7.7 %   $ 857,566    $ 796,259

United States sales. WE sales for the three-month period ended
September 30, 2022 were $164.6 millioni.e. 57.3% of net sales, up 8.6% compared to the corresponding period of 2021. WE sales for the nine-month period ended September 30, 2022 were $482.2 millionrepresenting 56.2% of net sales, up 6.8% compared to the corresponding period of 2021. The increase in our domestic sales is mainly attributable to our peripheral interventions and our OEM products.

International Sales. International sales for the three-month period ended
September 30, 2022 were $122.6 million, or 42.7% of net sales, up 6.1% when
compared to the corresponding period of 2021 of $115.5 million. The increase in
our international sales for the three-month period ended September 30, 2022,
compared to the three-month period ended September 30, 2021, included increased
sales in our APAC operations of $3.2 million or 5.7%, in our ROW operations of
$1.5 million or 17.4%, and in our EMEA operations of $2.3 million or 4.7%.

International sales for the nine-month period ended September 30, 2022 were
$375.3 million, or 43.8% of net sales, up 8.9% when compared to the
corresponding period of 2021 of $344.6 million. The increase in our
international sales for the nine-month period ended September 30, 2022, compared
to the nine-month period ended September 30, 2021, included increased sales in
our APAC operations of $13.0 million or 7.7%, in our ROW operations of $9.0
million or 39.3%, and in our EMEA operations of $8.7 million or 5.7%.

Gross profit

Our gross profit as a percentage of sales decreased to 44.8% for the three-month
period ended September 30, 2022, compared to 45.1% for the three-month period
ended September 30, 2021. The decrease in gross profit percentage was primarily
due to unfavorable variances primarily from the impact of inflationary pressures
on material costs, and higher freight costs, offset partially by favorable
changes in product mix, lower standard costs from efficiencies gained in our
Foundations for Growth program, and lower obsolescence expense as a percentage
of sales.

Our gross profit as a percentage of sales was 44.8% for the nine-month periods
ended September 30, 2022 and September 30, 2021. Gross profit percentage
increased primarily due to changes in product mix, lower standard costs from
efficiencies gained in our Foundations for Growth program and lower intangible
amortization expense as a percentage of sales, which was offset by unfavorable
variances primarily from the impact of inflationary pressures on material costs
and higher freight costs.

Operating Expenses

Selling, General and Administrative Expense. Selling, general and administrative
("SG&A") expenses increased $3.3 million, or 3.8%, for the three-month period
ended September 30, 2022 compared to the corresponding period of 2021. As
a percentage of sales, SG&A expenses were 31.3% for the three-month period ended
September 30, 2022, compared to 32.4% for the corresponding period of 2021. For
the three-month period ended September 30, 2022, SG&A expenses increased
compared to the corresponding period of 2021 primarily due to increased labor
related costs associated with headcount, increased commissions associated with
sales, and increased travel related costs as restrictions continue to lift post
pandemic, offset partially by lower due diligence costs associated with
acquisitions.

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SG&A expenses increased $0.2 million, or 0.1%, for the nine-month period ended
September 30, 2022 compared to the corresponding period of 2021. As a percentage
of sales, SG&A expenses were 30.2% for the nine-month period ended
September 30, 2022, compared to 32.5% for the corresponding period of 2021. For
the nine-month period ended September 30, 2022, SG&A expenses increased compared
to the corresponding period of 2021 primarily due to increased labor related
costs associated with headcount, increased commissions associated with sales,
and increased travel related costs as restrictions continue to lift post
pandemic, offset partially by lower due diligence costs associated with
acquisitions, and $6.1 million of contract termination costs recorded in SG&A
during the prior year 2021 to renegotiate certain terms of an acquisition
agreement.

Research and Development Expenses. Research and development ("R&D") expenses for
the three-month period ended September 30, 2022 were $19.2 million, up 13.2%,
when compared to R&D expenses in the corresponding period of 2021 of $17.0
million. R&D expenses for the nine-month period ended September 30, 2022 were
$55.1 million, up 8.3%, when compared to R&D expenses in the corresponding
period of 2021 of $50.8 million. The increases in R&D expenses for the three and
nine-month periods ended September 30, 2022 compared to the corresponding
periods in 2021 were largely due to higher labor-related costs, increased
clinical expenses for certain R&D projects (including clinical trials for our
Embosphere® Microspheres and WRAPSODYTM Endoprosthesis) and higher expenses
related to implementation of the Medical Device Regulation in the European
Union.

Impairment Charges. For the three-month periods ended September 30, 2022 and
September 30, 2021, we recorded no impairment charges. For the nine-month period
ended September 30, 2022, we recorded impairment charges of $1.7 million of
intangible assets due to the divestiture of the STD Pharmaceutical business,
which we completed on April 30, 2022. For the nine-month period ended
September 30, 2021 we recorded $4.3 million of impairment charges. These
impairments included $1.6 million of intangible assets and $1.3 million of
property and equipment due to the planned discontinuance of the Advocate™
Peripheral Angioplasty Balloon product line, sold under our license agreements
with ArraVasc, and $1.4 million of impairments of certain right-of-use "ROU"
operating lease assets due to site consolidation decisions and changes in our
projected cash flows for the underlying assets.

Contingent Consideration Expense. For the three and nine-month periods ended
September 30, 2022, we recognized contingent consideration expense from changes
in the estimated fair value of our contingent consideration obligations stemming
from our previously disclosed business acquisitions of $0.9 million and $4.7
million, respectively, compared to contingent consideration expense of $1.1
million and $3.3 million for the three and nine-month periods ended
September 30, 2021. Expense in each period related to changes in the probability
and timing of achieving certain revenue and operational milestones, as well as
expense for the passage of time.

Acquired In-process Research and Development. For the three-month period ended
September 30, 2022 we incurred no acquired in-process research and development
costs. For the nine-month period ended September 30, 2022, we recognized $6.7
million in acquired in-process research and development costs primarily
associated with our acquisition of Restore Endosystems. We did not incur
acquired in-process research and development charges during the three and
nine-month periods ended September 30, 2021.

Operating result

The following table sets forth our operating income by financial reporting
segment for the three and nine-month periods ended September 30, 2022 and 2021
(in thousands):

                            Three Months Ended        Nine Months Ended
                              September 30,            September 30,
                             2022         2021        2022         2021
Operating Income
Cardiovascular            $   17,435    $ 14,411    $  51,836    $ 33,389
Endoscopy                      1,222       1,520        5,310       5,631
Total operating income    $   18,657    $ 15,931    $  57,146    $ 39,020


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Cardiovascular Operating Income. Our cardiovascular operating income for the
three-month period ended September 30, 2022 was $17.4 million, compared to
cardiovascular operating income in the corresponding period of 2021 of $14.4
million. The increase in cardiovascular operating income during the three-month
period ended September 30, 2022 compared to the corresponding period of 2021 was
primarily a result of higher sales ($278.9 million compared to $259.7 million),
partially offset by a decreased gross margin and higher SG&A and R&D expenses.

Our cardiovascular operating income for the nine-month period ended
September 30, 2022 was $51.8 million, compared to cardiovascular operating
income in the corresponding period of 2021 of $33.4 million. The increase in
cardiovascular operating income during the nine-month period ended
September 30, 2022 compared to the corresponding period of 2021 was primarily a
result of higher sales ($832.6 million compared to $773.0 million), partially
offset by higher SG&A, contingent consideration expense and $6.7 million of
acquired in-process research and development charges.

Endoscopy Operating Income. Our endoscopy operating income for the three-month
period ended September 30, 2022 was $1.2 million, compared to endoscopy
operating income of $1.5 million for the corresponding period of 2021. Our
endoscopy operating income for the nine-month period ended September 30, 2022
was $5.3 million, compared to endoscopy operating income of $5.6 million for the
corresponding period of 2021. The decrease in endoscopy operating income for the
three and nine-month periods ended September 30, 2022 compared to the
corresponding periods of 2021 was primarily a result of decreased gross margin
and higher SG&A expenses.

Other Expense - Net
Our other expense for the three-month periods ended September 30, 2022 and 2021
was $1.1 million and $1.8 million, respectively. The change in other expense was
primarily related to decreased expense from realized and unrealized foreign
currency losses, partially offset by an increase in interest expense associated
with rising interest rates.

Our other expense for the nine-month periods ended September 30, 2022 and 2021
was $4.7 million and $5.3 million, respectively. The change in other expense was
primarily related to decreased expense from realized and unrealized foreign
currency losses, partially offset by a $1.3 million loss on the divestiture of
the STD Pharmaceutical business.

Effective tax rate

Our provision for income taxes for the three-month periods ended
September 30, 2022 and 2021 was a tax expense of $2.3 million and $2.2 million,
respectively, which resulted in an effective tax rate of 13.2% and 15.6%,
respectively. Our provision for income taxes for the nine-month periods ended
September 30, 2022 and 2021 was a tax expense of $11.4 million and $5.9 million,
respectively, which resulted in an effective tax rate of 21.6% and 17.5%,
respectively. The increase in the income tax expense and the corresponding
change in the effective income tax rate for the three and nine-month periods
ended September 30, 2022, when compared to the prior-year periods, was primarily
due to decreased benefit from discrete items such as share-based compensation
and deferred compensation. Our effective tax rate differs from the U.S.
statutory rate primarily due to the impact of GILTI inclusions, state income
taxes, foreign taxes, other non-deductible permanent items and discrete items
(such as share-based compensation).

Net revenue

Our net income for the three-month periods ended September 30, 2022 and 2021 was
$15.3 million and $12.0 million, respectively. The increase in our net income
for the three-month period ended September 30, 2022 was primarily the result
higher sales, partially offset by lower gross margins as a percentage of sales,
and higher SG&A and R&D expenses.

Our net income for the nine-month periods ended September 30, 2022 and 2021 was
$41.1 million and $27.8 million, respectively. The increase in our net income
for the nine-month period ended September 30, 2022 was primarily the result of
higher sales and lower impairment charges ($1.7 million for the nine-month
period ended September 30, 2022 compared to $4.3 million for the corresponding
period of 2021), partially offset by higher R&D expenses, higher contingent
consideration expense ($4.7 million for the nine-month period ended
September 30, 2022 compared to $3.3 million for the corresponding period of
2021), increased acquired in-process research and development charges, and
higher income tax expense.

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CASH AND CAPITAL RESOURCES

Capital commitments, contractual obligations and cash flows

At September 30, 2022 and December 31, 2021, our current assets exceeded current
liabilities by $286.8 million and $245.9 million, respectively, and we had cash,
cash equivalents and restricted cash of $53.6 million and $67.8 million,
respectively, of which $50.4 million and $55.7 million, respectively, were held
by foreign subsidiaries. We currently believe future repatriation of cash and
other property held by our foreign subsidiaries will generally not be subject to
U.S. federal income tax. As a result, we are not permanently reinvested with
respect to our historic unremitted foreign earnings. 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 September 30, 2022, and December 31, 2021, we had cash, cash
equivalents and restricted cash of $26.3 million and $28.5 million,
respectively, within our subsidiary in China.

Cash flows provided by operating activities. We generated cash from operating
activities of $86.3 million and $101.4 million during the nine-month periods
ended September 30, 2022 and 2021, respectively. Net cash provided by operating
activities decreased $15.1 million for the nine-month period ended
September 30, 2022 compared to the nine-month period ended September 30, 2021.
Significant factors affecting operating cash flows during these periods
included:

? The net profit was around $41.1 million and $27.8 million for nine months

completed periods September 30, 2022 and 2021, respectively.

Cash used for inventory was ($30.7) million and ($11.2) million for the

nine-month periods ended September 30, 2022 and 2021, respectively. The

? the increase in inventory was associated with our proactive investment strategy in

our inventory balances to build the required safety stock and encourage

customer service levels.

Cash provided by (used for) accrued liabilities has been ($8.9) million and $19.6

million for the nine-month periods ended September 30, 2022 and 2021,

respectively, mainly due to the decrease in the current share of

? contingent consideration liabilities, payment of approximately $18.25 million

in trust in the settlement of a securities class action

lawsuit, and premium payment schedule, partially offset by the schedule

and payment of accrued liabilities and other accrued liabilities for each period.

Cash provided by (used for) other claims has been $5.7 million and ($3.2)

million for the nine-month periods ended September 30, 2022 and 2021,

? respectively, mainly due to the collection of approximately $8.2 million of

insurance products in connection with the consolidated securities class action

lawsuit in which we settled April 2022.


Cash flows used in investing activities. We used cash in investing activities of
$40.1 million and $22.6 million for the nine-month periods ended
September 30, 2022 and 2021, respectively. We used cash for capital expenditures
of property and equipment of $32.5 million and $19.6 million in the nine-month
periods ended September 30, 2022 and 2021, respectively. Capital expenditures in
each period were primarily related to investment in property and equipment to
support development and production of our products. Historically, we have
incurred significant expenses in connection with facility construction,
production automation, product development and the introduction of new products.
We anticipate that we will spend approximately $55 to $60 million in 2022 for
property and equipment.

Cash outflows invested in acquisitions for the nine-month period ended
September 30, 2022 were approximately $4.7 million and were primarily related to
our $3.0 million upfront payment in our purchase of Restore Endosystems and our
additional equity investment in Fluidx of $1.4 million. Cash outflows invested
in acquisitions for the nine-month period ended September 30, 2021 were
approximately $1.9 million and were primarily related to our settlement of the
first deferred payment for our acquisition of KA Medical, LLC completed in
November 2020.

Cash flows used in financing activities. Cash used in financing activities for
the nine-month periods ended September 30, 2022 and 2021 was $54.5 million and
$66.0 million, respectively. We decreased our net borrowings by

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approximately $26.3 and $72.6 million for the nine-month periods ended September
30, 2022 and 2021, respectively, by paying down our debt. We completed payment
of contingent consideration of $32.8 million and $10.6 million for the
nine-month periods ended September 31, 2022 and 2021, respectively, principally
related to sales milestone payments connected to our acquisitions of Cianna
Medical and Vascular Insights, LLC.

As of September 30, 2022, we had outstanding borrowings of $216.9 million and
issued letter of credit guarantees of $1.9 million under the Third Amended
Credit Agreement, with additional available borrowings of approximately $509
million, based on the maximum net leverage ratio and the aggregate revolving
credit commitment pursuant to the Third Amended Credit Agreement. Our interest
rate as of September 30, 2022 was a fixed rate of 2.71% with respect to $75
million of the principal amount as a result of an interest rate swap and a
variable floating rate of 4.12% with respect to $141.9 million of the principal
amount. Our interest rate as of December 31, 2021 was a fixed rate of 2.71% on
$75 million as a result of an interest rate swap and a variable floating rate of
1.10% on $168.1 million.

We currently believe that our existing cash balances, anticipated future cash
flows from operations and borrowings under the Third 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial results are influenced by the choice and application of accounting policies and methods. During the nine-month period ended
September 30, 2022 there was no change in the application of critical accounting policies previously disclosed in Part II, Item 7 of the 2021 Annual Report on Form 10-K.

CAUTION 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," "should," "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.

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.

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  Table of Contents

NOTICE REGARDING TRADEMARKS
This report includes trademarks, tradenames and service marks that are our
property or the property of others. 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.

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