ICU Medical, Inc. Announces Third Quarter 2019 Results

Monday, 11. November 2019 22:05

SAN CLEMENTE, Calif., Nov. 11, 2019 (GLOBE NEWSWIRE) -- ICU Medical, Inc. (Nasdaq:ICUI), a leader in the development, manufacture and sale of innovative medical products used in infusion therapy and critical care applications, today announced financial results for the quarter ended September 30, 2019.

Third Quarter 2019 Results

Third quarter 2019 revenue was $307.5 million, compared to $327.2 million in the same period last year. GAAP gross profit for the third quarter of 2019 was $118.6 million, as compared to $134.6 million in the same period last year.  GAAP gross margin for the third quarter of 2019 was 39%, as compared to 41% in the same period last year.  GAAP net income for the third quarter of 2019 was $26.6 million, or $1.24 per diluted share, as compared to GAAP net income of $0.2 million, or $0.01 per diluted share, for the third quarter of 2018.  Adjusted diluted earnings per share for the third quarter of 2019 were $1.65 as compared to $1.88 for the third quarter of 2018.  Also, adjusted EBITDA was $62.6 million for the third quarter of 2019 as compared to $68.4 million for the third quarter of 2018.

Adjusted EBITDA and adjusted diluted earnings per share are measures calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to the Use of Non-GAAP Financial Information following the financial statements herein for further discussion and reconciliations of these measures to GAAP measures.

Vivek Jain, ICU Medical’s Chief Executive Officer, said, “Third quarter revenue, adjusted EBITDA and adjusted diluted earnings per share were generally in line with our expectations.”

Revenues by market segment for the three and nine months ended September 30, 2019 and 2018 were as follows (in millions):

  Three months ended     Nine months ended  
           
  September 30,     September 30,  
      $ %     $ %
Market Segment 2019 2018 Change Change 2019
 2018 Change Change
Infusion Consumables $119.8  $117.8  $2.0  1.7% $358.0  $361.5  $(3.5) (1.0)%
IV Solutions* 98.2  114.4   (16.2) (14.2)%  314.0   394.2   (80.2) (20.3)%
Infusion Systems 78.9  81.5   (2.6) (3.2)%  244.5   263.3   (18.8) (7.1)%
Critical Care 10.6  13.5   (2.9) (21.5)%  34.2   40.7   (6.5) (16.0)%
  $307.5  $327.2  $(19.7) (6.0)% $950.7  $1,059.7  $(109.0) (10.3)%

*IV Solutions includes $16.8 million and $61.3 million of contract manufacturing to Pfizer for the three and nine months ended September 30, 2019, respectively, as compared to $21.7 million and $59.3 million for the same periods in the prior year.

Conference Call

The Company will host a conference call to discuss third quarter 2019 financial results today at 4:30 p.m. EDT (1:30 p.m. PDT).   The call can be accessed at (800) 936-9761, international (408) 774-4587, conference ID 8184417.  The conference call will be simultaneously available by webcast, which can be accessed by going to the Company's website at icumed.com, clicking on the Investors tab, clicking on Event Calendar and clicking on the Webcast icon and following the prompts.  The webcast will also be available by replay.

About ICU Medical, Inc.

ICU Medical, Inc. (Nasdaq:ICUI) develops, manufactures and sells innovative medical products used in infusion therapy, and critical care applications. ICU Medical's product portfolio includes IV smart pumps, sets, connectors, closed system transfer devices for hazardous drugs, sterile IV solutions, cardiac monitoring systems, along with pain management and safety software technology designed to help meet clinical, safety and workflow goals. ICU Medical is headquartered in San Clemente, California. More information about ICU Medical, Inc. can be found at www.icumed.com

Forward Looking Statements

This press release contains 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. Such statements contain words such as ''will,'' ''expect,'' ''believe,'' ''could,'' ''would,'' ''estimate,'' ''continue,'' ''build,'' ''expand'' or the negative thereof or comparable terminology, and may include (without limitation) information regarding the Company's expectations, goals or intentions regarding the future. These forward-looking statements are based on management's current expectations, estimates, forecasts and projections about the Company and assumptions management believes are reasonable, all of which are subject to risks and uncertainties that could cause actual results and events to differ materially from those stated in the forward-looking statements. These risks and uncertainties include, but are not limited to, decreased demand for the Company's products, decreased free cash flow, the inability to recapture conversion delays or part/resource shortages on anticipated timing, or at all, changes in product mix, increased competition from competitors, lack of growth or improving efficiencies, and unexpected changes in the Company's arrangements with its largest customers. Future results are subject to risks and uncertainties, including the risk factors, and other risks and uncertainties, described in the Company's filings with the Securities and Exchange Commission, which include those in the Annual Report on Form 10-K for the year ended December 31, 2018 and our subsequent filings. Forward-looking statements contained in this press release are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

 
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 September 30, December 31,
 2019 2018
 (Unaudited) (1)
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$315,949  $344,781 
Short-term investment securities20,845  37,329 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES336,794  382,110 
Accounts receivable, net of allowance for doubtful accounts210,449  176,298 
Inventories343,715  311,163 
Prepaid income taxes19,724  11,348 
Prepaid expenses and other current assets33,807  46,117 
TOTAL CURRENT ASSETS944,489  927,036 
PROPERTY AND EQUIPMENT, net444,087  432,641 
OPERATING LEASE RIGHT-OF-USE ASSETS35,787   
LONG-TERM INVESTMENT SECURITIES  2,025 
GOODWILL11,019  11,195 
INTANGIBLE ASSETS, net131,644  133,421 
DEFERRED INCOME TAXES23,242  38,654 
OTHER ASSETS47,516  40,419 
TOTAL ASSETS$1,637,784  $1,585,391 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
Accounts payable$125,355  $120,469 
Accrued liabilities130,056  128,820 
TOTAL CURRENT LIABILITIES255,411  249,289 
CONTINGENT EARN-OUT LIABILITY  47,400 
OTHER LONG-TERM LIABILITIES37,614  20,592 
DEFERRED INCOME TAXES690  721 
INCOME TAX LIABILITY3,734  3,734 
COMMITMENTS AND CONTINGENCIES   
STOCKHOLDERS’ EQUITY:   
Convertible preferred stock, $1.00 par value Authorized—500 shares; Issued and outstanding— none   
Common stock, $0.10 par value — Authorized, 80,000 shares; Issued and outstanding 20,671 shares at September 30, 2019, Issued 20,492 shares at December 31, 2018 and outstanding 20,491 shares at December 31, 20182,067  2,049 
Additional paid-in capital659,709  657,899 
Treasury stock, at cost  (95)
Retained earnings701,141  620,747 
Accumulated other comprehensive loss(22,582) (16,945)
TOTAL STOCKHOLDERS' EQUITY1,340,335  1,263,655 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,637,784  $1,585,391 

______________________________________________________
(1) December 31, 2018 balances were derived from audited consolidated financial statements.

 
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
    
 Three months ended Nine months ended
 September 30, September 30,
 2019 2018 2019 2018
TOTAL REVENUES$307,471  $327,169  $950,685  $1,059,662 
COST OF GOODS SOLD188,919  192,582  592,961  624,274 
GROSS PROFIT118,552  134,587  357,724  435,388 
OPERATING EXPENSES:       
Selling, general and administrative65,876  76,640  206,333  243,471 
Research and development12,002  13,181  36,024  39,342 
Restructuring, strategic transaction and integration7,975  24,012  69,408  64,271 
Contract settlement    3,822  28,917 
Change in fair value of contingent earn-out(200) 18,500  (47,400) 20,500 
TOTAL OPERATING EXPENSES85,653  132,333  268,187  396,501 
INCOME FROM OPERATIONS32,899  2,254  89,537  38,887 
INTEREST EXPENSE(139) (283) (411) (548)
OTHER (EXPENSE) INCOME, net(10) (534) 4,660  (3,482)
INCOME BEFORE INCOME TAXES32,750  1,437  93,786  34,857 
(PROVISION) BENEFIT FOR INCOME TAXES(6,187) (1,218) (13,392) 1,291 
NET INCOME$26,563  $219  $80,394  $36,148 
NET INCOME PER SHARE       
Basic$1.29  $0.01  $3.90  $1.78 
Diluted$1.24  $0.01  $3.73  $1.67 
WEIGHTED AVERAGE NUMBER OF SHARES       
Basic20,666  20,474  20,607  20,362 
Diluted21,487  21,633  21,556  21,588 
            

Use of Non-GAAP Financial Information

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP").  The non-GAAP financial measures should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  There are material limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled non-GAAP financial measures used by other companies, including peer companies.  Our management believes that the non-GAAP data provides useful supplemental information to management and investors regarding our performance and facilitates a more meaningful comparison of results of operations between current and prior periods.  We use non-GAAP financial measures in addition to and in conjunction with GAAP financial measures to analyze and assess the overall performance of our business, in making financial, operating and planning decisions, and in determining executive incentive compensation.  The non-GAAP financial measures included in this press release are adjusted EBITDA and adjusted diluted earnings per share ("Adjusted Diluted EPS").

Adjusted EBITDA excludes the following items from net income:

Interest, net:  We exclude interest in deriving adjusted EBITDA as interest can vary significantly among companies depending on a company's level of income generating instruments and/or level of debt.

Stock compensation expense:  Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years.  The value of stock options is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control.  The value of our restricted stock awards is determined using the grant date stock price, which may not be indicative of our operational performance over the expense period.  Additionally, in order to establish the fair value of performance-based stock awards, which are currently an element of our ongoing stock-based compensation, we are required to apply judgment to estimate the probability of the extent to which performance objectives will be achieved.  Based on the above factors, we believe it is useful to exclude stock-based compensation in order to better understand our operating performance.

Intangible asset amortization expense:  We do not acquire businesses or capitalize certain patent costs on a predictable cycle.  The amount of purchase price allocated to intangible assets and the term of amortization can vary significantly and are unique to each acquisition.  Capitalized patent costs can vary significantly based on our current level of development activities.  We believe that excluding amortization of intangible assets provides the users of our financial statements with a consistent basis for comparison across accounting periods.

Depreciation expense:  We exclude depreciation expense in deriving adjusted EBITDA because companies utilize productive assets of different ages and the depreciable lives can vary significantly resulting in considerable variability in depreciation expense among companies.

Restructuring, strategic transaction and integration:  We incur restructuring and strategic transaction charges that result from events, which arise from unforeseen circumstances and/or often occur outside of the ordinary course of our ongoing business.  Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our ongoing operations with prior and future periods.

Change in fair value of contingent earn-out:  We exclude the impact of certain amounts recorded in connection with business combinations.  We exclude items that are either non-cash or not normal, recurring operating expenses due to their nature, variability of amounts, and lack of predictability as to occurrence and/or timing.

Contract settlementOccasionally, we are involved in contract renegotiations that may result in one-time settlements. We exclude these settlements as they have no direct correlation to the operation of our ongoing business.

Taxes:  We exclude taxes in deriving adjusted EBITDA as taxes are deemed to be non-core to the business and may limit the comparability of our ongoing operations with prior and future periods and distort the evaluation of our normal operating performance.

 Adjusted Diluted EPS excludes from diluted EPS, net of tax, intangible asset amortization expense, stock compensation expense, restructuring, strategic transaction and integration, change in fair value of contingent earn-out and contract settlement.  The tax effect on the above adjustments is calculated using the specific tax rate applied to each adjustment based on the nature of the item/or the tax jurisdiction in which the item has been recorded.

From time to time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful information to investors and management.

The following tables reconcile our GAAP and non-GAAP financial measures:

 
ICU MEDICAL, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
(In thousands)
  
  Adjusted EBITDA
 Three months Ended
 September 30,
 2019 2018
GAAP net income$26,563  $219 
    
Non-GAAP adjustments:   
Interest, net(1,601) (947)
Stock compensation expense3,723  6,232 
Depreciation and amortization expense19,187  19,161 
Restructuring, strategic transaction and integration7,975  24,012 
Change in fair value of contingent earn-out(200) 18,500 
Contract settlement794   
Provision (Benefit) for income taxes6,187  1,218 
Total non-GAAP adjustments36,065  68,176 
    
 Adjusted EBITDA$62,628  $68,395 


  Adjusted diluted earnings per share
 Three months ended
 September 30,
 2019 2018 (1)
GAAP diluted earnings per share$1.24  $0.01 
    
Non-GAAP adjustments:   
Stock compensation expense$0.17  $0.29 
Amortization expense$0.20  $0.19 
Restructuring, strategic transaction and integration$0.37  $1.11 
Change in fair value of contingent earn-out$(0.01) $0.86 
Contract settlement$0.04  $ 
Estimated income tax impact from adjustments$(0.36) $(0.58)
Adjusted diluted earnings per share$1.65  $1.88 

_______________________________________________
(1)  During 2019, we changed our methodology when computing adjusted diluted earnings per share to remove interest, net from the calculation, accordingly we conformed the prior year adjusted diluted earnings per share to the current year presentation.

CONTACT:
ICU Medical, Inc.
Scott Lamb, Chief Financial Officer
(949) 366-2183

ICR, Inc.
John Mills, Partner
(646) 277-1254

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