ICU Medical, Inc. Announces Fourth Quarter 2019 Results
Fourth Quarter 2019 Results
Fourth quarter 2019 revenue was
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.
Revenues by market segment for the three and twelve months ended
|Three months ended
*IV Solutions includes
Fiscal Year 2020 Guidance
For the Fiscal Year 2020, the Company expects adjusted EBITDA to be in the range of
The Company will host a conference call to discuss fourth quarter 2019 financial results today at
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, including our fiscal year 2020 guidance. 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
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|Cash and cash equivalents||$||268,670||$||344,781|
|Short-term investment securities||23,967||37,329|
|TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES||292,637||382,110|
|Accounts receivable, net of allowance for doubtful accounts||202,219||176,298|
|Prepaid income taxes||15,720||11,348|
|Prepaid expenses and other current assets||33,981||46,117|
|TOTAL CURRENT ASSETS||882,197||927,036|
|PROPERTY AND EQUIPMENT, net||456,085||432,641|
|OPERATING LEASE RIGHT-OF-USE ASSETS||34,465||—|
|LONG-TERM INVESTMENT SECURITIES||—||2,025|
|INTANGIBLE ASSETS, net||211,408||133,421|
|DEFERRED INCOME TAXES||27,998||38,654|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Income tax liability||2,063||—|
|TOTAL CURRENT LIABILITIES||248,468||249,289|
|CONTINGENT EARN-OUT LIABILITY||17,300||47,400|
|OTHER LONG-TERM LIABILITIES||32,820||20,592|
|DEFERRED INCOME TAXES||2,091||721|
|INCOME TAX PAYABLE||14,459||3,734|
|COMMITMENTS AND CONTINGENCIES||—||—|
|Convertible preferred stock,
|Additional paid-in capital||668,947||657,899|
|Accumulated other comprehensive loss||(15,402||)||(16,945||)|
|TOTAL STOCKHOLDERS' EQUITY||1,377,244||1,263,655|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||1,692,382||$||1,585,391|
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
|Three months ended
||Twelve months ended
|COST OF GOODS SOLD||201,383||205,738||794,344||830,012|
|Selling, general and administrative||70,649||76,531||276,982||320,002|
|Research and development||12,587||13,525||48,611||52,867|
|Restructuring, strategic transaction and integration||11,166||41,119||80,574||105,390|
|Change in fair value of contingent earn-out||—||(100||)||(47,400||)||20,400|
|TOTAL OPERATING EXPENSES||96,317||143,771||364,504||540,272|
|INCOME (LOSS) FROM OPERATIONS||17,823||(9,131||)||107,360||29,756|
|OTHER INCOME (EXPENSE), net||3,236||(3,191||)||7,896||(6,673||)|
|INCOME (LOSS) BEFORE INCOME TAXES||20,921||(12,483||)||114,707||22,374|
|(PROVISION) BENEFIT FOR INCOME TAXES||(280||)||5,128||(13,672||)||6,419|
|NET INCOME (LOSS)||$||20,641||$||(7,355||)||$||101,035||$||28,793|
|NET INCOME (LOSS) PER SHARE|
|WEIGHTED AVERAGE NUMBER OF SHARES|
Use of Non-GAAP Financial Information
This press release contains financial measures that are not calculated in accordance with
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 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.
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.
Disposition of certain assets: Occasionally, we may dispose of certain assets if no longer needed for current operations. We exclude any gains or losses recognized on the sale of these assets in determining our non-GAAP financial measures as they may limit the comparability of our ongoing operations with prior and future periods and distort the evaluation of our normal operating performance.
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, contract settlement, adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value and disposition of certain assets. 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)
|Three months Ended
|GAAP net income (loss)||$||20,641||$||(7,355||)|
|Stock compensation expense||5,757||6,249|
|Depreciation and amortization expense||19,891||19,667|
|Restructuring, strategic transaction and integration||11,166||41,119|
|Change in fair value of contingent earn-out||—||(100||)|
|Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value||1,512||—|
|Disposition of certain assets||—||4,059|
|Provision (Benefit) for income taxes||280||(5,128||)|
|Total non-GAAP adjustments||40,062||76,668|
|Adjusted diluted earnings per share|
|Three months ended
|GAAP diluted earnings (loss) per share||$||0.96||$||(0.36||)|
|Stock compensation expense||$||0.27||$||0.29|
|Restructuring, strategic transaction and integration||$||0.52||$||1.91|
|Change in fair value of contingent earn-out||$||—||$||—|
|Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value||$||0.07||$||—|
|Disposition of certain assets||$||—||$||0.19|
|Estimated income tax impact from adjustments||$||(0.26||)||$||(0.68||)|
|Adjusted diluted earnings per share||$||1.94||$||2.14|
(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.
Reconciliation of GAAP to Non-GAAP Financial Measures - Fiscal Year 2020 Outlook
(In millions, except per share data)
|Low End of Guidance||High End of Guidance|
|GAAP net income||$||71||$||86|
|Stock compensation expense||22||22|
|Depreciation and amortization expense||87||87|
|Restructuring, strategic transaction and integration||40||40|
|Provision for income taxes||19||24|
|Total non-GAAP adjustments||169||174|
|GAAP diluted earnings per share||$||3.29||$||3.99|
|Stock compensation expense||$||1.02||$||1.02|
|Restructuring, strategic transaction and integration||$||1.86||$||1.86|
|Estimated income tax impact from adjustments||$||(0.91||)||$||(0.91||)|
|Adjusted diluted earnings per share||$||6.50||$||7.20|
Source: ICU Medical, Inc.