ICU Medical, Inc. Announces First Quarter 2018 Results


May 9, 2018

SAN CLEMENTE, Calif., May 09, 2018 (GLOBE NEWSWIRE) -- ICU Medical, Inc. (Nasdaq:ICUI), a leader in the development, manufacture and sale of innovative medical devices used in infusion therapy and critical care applications, today announced financial results for the quarter ended March 31, 2018.

First Quarter 2018 Results

First quarter 2018 revenue was $372.0 million, compared to $247.7 million in the same period last year. GAAP gross profit for the first quarter of 2018 was $149.0 million, as compared to $88.9 million in the same period last year.  GAAP gross margin for the first quarter of 2018 was 40%, as compared to 36% in the same period last year.  GAAP net income for the first quarter of 2018 was $4.9 million, or $0.23 per diluted share, as compared to GAAP net income of $55.9 million, or $2.86 per diluted share, for the first quarter of 2017.  Adjusted diluted earnings per share for the first quarter of 2018 were $2.26 as compared to $1.68 for the first quarter of 2017.  Also, adjusted EBITDA was $73.4 million for the first quarter of 2018 as compared to $50.1 million for the first quarter of 2017. 

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, "First quarter revenues, adjusted EBITDA and adjusted diluted earnings per share were slightly above our expectations.”

 
Revenues by product line for the three months ended March 31, 2018 and 2017 were as follows (in millions):
 
    Three months ended        
    March 31,        
                %
Product Line   2018   2017   $ Change   Change
Infusion Consumables   $ 119.9     $ 75.7     $ 44.2     58.4 %
IV Solutions*   144.4     97.4     47.0     48.3 %
Infusion Systems   93.4     46.7     46.7     100.0 %
Critical Care   14.3     12.4     1.9     15.3 %
Other       15.5     (15.5 )   (100.0 )%
    $ 372.0     $ 247.7     $ 124.3     50.2 %
 
*IV Solutions includes $18.1 million and $14.7 million of contract manufacturing to Pfizer for the three months ended March 31, 2018 and 2017, respectively.
 

Conference Call

The Company will host a conference call to discuss first quarter 2018 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 3029969.  The conference call will be simultaneously available by webcast, which can be accessed by going to the Company's website at www.icumed.com, clicking on the Investors tab, 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 continued growth or improving efficiencies, unexpected changes in the Company's arrangements with its largest customers and the Company’s ability to meet expectations regarding the integration of the Hospira infusion systems business. 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, 2017 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data)
 
    March 31,         December 31,
    2018         2017
    (Unaudited)         (1)
ASSETS              
CURRENT ASSETS:              
Cash and cash equivalents   $ 254,536           $ 290,072  
Short-term investment securities   14,180           10,061  
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES   268,716           300,133  
Accounts receivable, net of allowance for doubtful accounts of $3,839 at March 31, 2018 and $3,311 at December 31, 2017   123,477           112,696  
Inventories   295,548           288,657  
Prepaid income taxes   16,111           10,594  
Prepaid expenses and other current assets   32,406           41,286  
Related-party receivable   132,272           98,807  
Assets held-for-sale             12,489  
TOTAL CURRENT ASSETS   868,530           864,662  
PROPERTY AND EQUIPMENT, net   407,582           398,684  
LONG-TERM INVESTMENT SECURITIES   9,896           14,579  
GOODWILL   12,314           12,357  
INTANGIBLE ASSETS, net   136,645           143,753  
DEFERRED INCOME TAXES   20,073           24,775  
OTHER ASSETS   37,702           38,141  
TOTAL ASSETS   $ 1,492,742           $ 1,496,951  
LIABILITIES AND STOCKHOLDERS’ EQUITY              
CURRENT LIABILITIES:              
Accounts payable   $ 82,195           $ 78,228  
Accrued liabilities   116,448           132,064  
TOTAL CURRENT LIABILITIES   198,643           210,292  
CONTINGENT EARN-OUT LIABILITY   23,000           27,000  
OTHER LONG-TERM LIABILITIES   35,074           55,326  
DEFERRED INCOME TAXES   1,482           1,487  
INCOME TAX LIABILITY   4,592           4,592  
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 20,317 shares at March 31, 2018 and 20,210 shares at December 31, 2017; Outstanding, 20,304 shares at March 31, 2018 and 20,210 shares at December 31, 2017   2,032           2,021  
Additional paid-in capital   632,012           625,568  
Treasury stock, at cost   (3,176 )          
Retained earnings   596,829           585,624  
Accumulated other comprehensive loss   2,254           (14,959 )
TOTAL STOCKHOLDERS' EQUITY   1,229,951           1,198,254  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 1,492,742           $ 1,496,951  
 
(1) December 31, 2017 balances were derived from audited consolidated financial statements.

 

 
ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
 
  Three months ended
  March 31,
  2018   2017
REVENUE:      
Net sales $ 372,033     $ 231,788  
Other     15,951  
TOTAL REVENUE 372,033     247,739  
COST OF GOODS SOLD 223,032     158,794  
GROSS PROFIT 149,001     88,945  
OPERATING EXPENSES:      
Selling, general and administrative 86,997     64,886  
Research and development 12,586     11,641  
Restructuring, strategic transaction and integration 21,569     29,401  
Change in fair value of contingent earn-out (4,000 )    
Contract settlement 28,917      
TOTAL OPERATING EXPENSES 146,069     105,928  
INCOME (LOSS) FROM OPERATIONS 2,932     (16,983 )
BARGAIN PURCHASE GAIN     63,237  
INTEREST EXPENSE (135 )   (513 )
OTHER INCOME 1,026     107  
INCOME BEFORE INCOME TAXES 3,823     45,848  
BENEFIT FOR INCOME TAXES 1,052     10,015  
NET INCOME $ 4,875     $ 55,863  
NET INCOME PER SHARE      
Basic $ 0.24     $ 3.03  
Diluted $ 0.23     $ 2.86  
WEIGHTED AVERAGE NUMBER OF SHARES      
Basic 20,255     18,439  
Diluted 21,400     19,549  


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.

Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value: The inventory step-up represents the expense recognition of fair value adjustments in excess of the historical cost basis of inventory obtained through acquisition, these charges are outside of our normal operations and are excluded.

Bargain purchase gain:  We may incur a bargain purchase gain on certain acquisitions if the fair market value of the identifiable assets acquired and liabilities assumed, net of deferred taxes exceeds the total consideration paid.  We exclude such gains as they are related to acquisitions and have no direct correlation to the operation of our ongoing business.

Contract settlement:  Occasionally, 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.

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.

Impairment of assets held for sale: We have excluded the effect of the impairment on assets held for sale in calculating our non-GAAP adjusted EBITDA and non-GAAP adjusted earnings per share. Impairments on assets no longer used in operations are not reflective of our ongoing business and operating results.

Adjusted Diluted EPS excludes from diluted EPS, net of tax, interest, net, intangible asset amortization expense, stock compensation expense, restructuring, strategic transaction and integration, adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value, contract settlement, change in fair value of contingent earn-out, impairment of assets held for sale, bargain purchase gain, which was tax free and the impact of tax reform.  We apply our GAAP consolidated effective tax rate to our non-GAAP financial measures, other than when the underlying item has a materially different tax treatment.

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
  March 31,
  2018         2017
GAAP net income $ 4,875           $ 55,863  
             
Non-GAAP adjustments:            
Interest, net (942 )         409  
Stock compensation expense 5,462           4,006  
Depreciation and amortization expense 18,304           11,594  
Restructuring, strategic transaction and integration 21,569           29,401  
Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value           22,053  
Bargain purchase gain           (63,237 )
Contract settlement 28,917            
Change in fair value of contingent earn-out (4,000 )          
Impairment of assets held for sale 269            
Benefit for income taxes (1,052 )         (10,015 )
Total non-GAAP adjustments 68,527           (5,789 )
             
 Adjusted EBITDA $ 73,402           $ 50,074  


 
   Adjusted diluted earnings per
share
  Three months ended
  March 31,
  2018       2017
GAAP diluted earnings per share $ 0.23         $ 2.86  
           
Non-GAAP adjustments:          
Interest, net $ (0.04 )       $ 0.02  
Stock compensation expense $ 0.26         $ 0.20  
Amortization expense $ 0.19         $ 0.17  
Restructuring, strategic transaction and integration $ 1.01         $ 1.50  
Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value $         $ 1.13  
Bargain purchase gain $         $ (3.23 )
Contract settlement $ 1.35         $  
Change in fair value of contingent earn-out $ (0.19 )       $  
Impairment of assets held for sale $ 0.01         $  
Estimated income tax impact from adjustments $ (0.56 )       $ (0.97 )
Adjusted diluted earnings per share $ 2.26         $ 1.68  
 

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

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

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Source: ICU Medical, Inc.