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8K 2014 Q2 ER 8.11.14


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 11, 2014
ICU MEDICAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
 
0-19974
 
33-0022692
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
951 Calle Amanecer, San Clemente, California
 
92673
(Address of principal executive offices)
 
(Zip Code)
(949) 366-2183
Registrant's telephone number, including area code
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02. Results of Operations and Financial Condition
ICU Medical, Inc. announced its earnings for the second quarter of 2014.
Item 9.01. Financial Statements and Exhibits.
(c)
 
Exhibits
 
 
99.1
Press release, dated August 11, 2014 announcing ICU Medical, Inc.'s second quarter 2014 earnings.


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ICU Medical, Inc.
Date: August 11, 2014
 
/s/ SCOTT E. LAMB
Scott E. Lamb
Secretary, Treasurer and Chief Financial Officer


Q2 2014 Earnings Release


Exhibit 99.1
ICU Medical, Inc. Announces Second Quarter 2014 Results

SAN CLEMENTE, Calif.-August 11, 2014-ICU Medical, Inc., (Nasdaq: ICUI), a leader in innovative medical devices used in infusion therapy, oncology and critical care applications, today announced financial results for the second quarter and six months ended June 30, 2014.

Second Quarter 2014 Results

Revenues were $78.7 million in the second quarter of 2014 and 2013. GAAP net income for the second quarter of 2014 was $5.9 million, or $0.38 per diluted share, as compared to GAAP net income of $7.4 million, or $0.48 per diluted share, for the second quarter of 2013. Adjusted diluted earnings per share for the second quarter of 2014 was $0.51 as compared to $0.58 for the second quarter of 2013. Also, adjusted EBITDA was $16.3 million for the second quarter of 2014 as compared to $17.7 million for the second quarter of 2013.

Vivek Jain, ICU Medical's Chief Executive Officer, said, “Second quarter revenue and profitability were slightly above our expectations. International sales were up 12%, primarily due to increased sales in infusion therapy and critical care. Domestic sales were down 4%, primarily due to lower infusion therapy sales. Based on our results to date and expectations for the remainder of the year, we are moderately raising our full year 2014 adjusted EBITDA, adjusted EPS, and GAAP EPS guidance ranges.”

Revenues by market segment for the three and six months ended June 30, 2014 and 2013 were as follows:
(dollars in millions)
 
 
Six months ended June 30,
 
Three months ended June 30,
Market Segment
 
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Infusion Therapy
 
$
106.1

 
$
109.4

 
$
(3.3
)
 
$
55.3

 
$
56.2

 
$
(0.9
)
Critical Care
 
26.8

 
25.4

 
1.4

 
13.7

 
12.7

 
1.0

Oncology
 
18.3

 
17.5

 
0.8

 
9.3

 
9.4

 
(0.1
)
Other
 
0.7

 
0.7

 
—

 
0.4

 
0.4

 
—

 
 
$
151.9

 
$
153.0

 
$
(1.1
)
 
$
78.7

 
$
78.7

 
$
—



The Company ended the second quarter with a strong balance sheet. As of June 30, 2014, cash, cash equivalents and investment securities totaled $315.8 million and working capital was $385.5 million. Additionally, the Company generated operating cash flow of $16.6 million for the second quarter of 2014.
Updated Fiscal Year 2014 Guidance
GAAP diluted earnings per share is increased to a range of $1.30 to $1.50 compared to the previous range of $1.15 to $1.45. Adjusted diluted earnings per share is in the range of $1.95 to $2.15, and adjusted EBITDA range is increased to $63 million to $68 million compared to the previous range $58 million to $65 million.




Conference Call
The Company will be conducting a conference call concerning these results at 4:30 p.m. EDT (1:30 p.m. PDT), today, Monday, August 11, 2014. The call can be accessed at 800-936-9761, international 408-774-4587, conference ID 77489598. 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.


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”). 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. The non-GAAP financial measures included in this press release are adjusted EBITDA and adjusted diluted earnings per share (“Adjusted Diluted EPS”). Adjusted EBIDTA excludes intangible asset amortization expense, depreciation expense, stock compensation expense, strategic transaction expense, restructuring expense and income tax expense. Adjusted Diluted EPS excludes, net of tax, intangible asset amortization expense, stock compensation expense, strategic transaction expense and restructuring expense.

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 limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies.

Reconciliations of our GAAP to non-GAAP financial are included in the financial tables in this press release.

About ICU Medical, Inc.
ICU Medical, Inc. (Nasdaq: ICUI) develops, manufactures and sells innovative medical technologies used in infusion therapy, oncology, and critical care applications. ICU Medical's products improve patient outcomes by helping prevent bloodstream infections, protecting healthcare workers from exposure to infectious diseases or hazardous drugs. The Company's complete product line includes needlefree infusion connectors, custom infusion systems, hemodynamic monitoring systems and Closed System Transfer Devices and systems for handling hazardous drugs. 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, including, but not limited to, statements regarding guidance for fiscal year of 2014. 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 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, 2013. 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.
Contact:

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

ICR, Inc.
John Mills, Partner
(626) 277-1254





ICU Medical, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share data)
 

 
June 30,
 2014
 
December 31,
 2013
 
(unaudited)
 
(1)
ASSETS
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
Cash and cash equivalents
$
235,951

 
 
$
226,022

 
Investment securities
79,896
 
 
 
70,869
 
 
Cash, cash equivalents and investment securities
315,847
 
 
 
296,891
 
 
Accounts receivable, net of allowance for doubtful accounts of $1,201 at June 30, 2014 and $1,208 at December 31, 2013
41,022
 
 
 
45,318
 
 
Inventories
37,819
 
 
 
34,451
 
 
Prepaid income taxes
6,651
 
 
 
5,966
 
 
Prepaid expenses and other current assets
6,729
 
 
 
7,319
 
 
Deferred income taxes
4,577
 
 
 
4,351
 
 
Total current assets
412,645
 
 
 
394,296
 
 
 
 
 
 
 
 
PROPERTY AND EQUIPMENT, net
91,899
 
 
 
87,861
 
 
GOODWILL
1,478
 
 
 
1,478
 
 
INTANGIBLE ASSETS, net
7,668
 
 
 
8,490
 
 
DEFERRED INCOME TAXES
5,827
 
 
 
7,518
 
 
 
$
519,517

 
 
$
499,643

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
Accounts payable
$
11,328

 
 
$
11,335

 
Accrued liabilities
15,798
 
 
 
15,551
 
 
Total current liabilities
27,126
 
 
 
26,886
 
 
 
 
 
 
 
 
DEFERRED INCOME TAXES
4,211
 
 
 
3,630
 
 
INCOME TAX LIABILITY
2,713
 
 
 
4,402
 
 
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, 15,287 shares at June 30, 2014 and 15,103 shares at December 31, 2013; Outstanding, 15,268 shares June 30, 2014 and 15,102 shares at December 31, 2013
1,529
 
 
 
1,510
 
 
Additional paid-in capital
88,625
 
 
 
78,495
 
 
Treasury stock, at cost - 19 shares at June 30, 2014 and 1 shares at December 31, 2013
(1,188
)
 
 
(49
)
 
Retained earnings
395,111
 
 
 
382,576
 
 
Accumulated other comprehensive income
1,390
 
 
 
2,193
 
 
Total stockholders’ equity
485,467
 
 
 
464,725
 
 
 
$
519,517

 
 
$
499,643

 
______________________________________________________
(1) December 31, 2013 balances were derived from audited consolidated financial statements.






ICU Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
(unaudited)
 

 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
78,555

 
 
$
78,537

 
 
$
151,668

 
 
$
152,710

 
Other
122
 
 
 
124
 
 
 
239
 
 
 
250
 
 
TOTAL REVENUE
78,677
 
 
 
78,661
 
 
 
151,907
 
 
 
152,960
 
 
COST OF GOODS SOLD
41,135
 
 
 
40,623
 
 
 
78,338
 
 
 
78,128
 
 
Gross profit
37,542
 
 
 
38,038
 
 
 
73,569
 
 
 
74,832
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
—
 
 
Selling, general and administrative
24,278
 
 
 
23,182
 
 
 
46,797
 
 
 
46,048
 
 
Research and development
4,566
 
 
 
3,906
 
 
 
8,197
 
 
 
5,809
 
 
Total operating expenses
28,844
 
 
 
27,088
 
 
 
54,994
 
 
 
51,857
 
 
Income from operations
8,698
 
 
 
10,950
 
 
 
18,575
 
 
 
22,975
 
 
OTHER INCOME
207
 
 
 
212
 
 
 
417
 
 
 
380
 
 
Income before income taxes
8,905
 
 
 
11,162
 
 
 
18,992
 
 
 
23,355
 
 
PROVISION FOR INCOME TAXES
(3,027
)
 
 
(3,795
)
 
 
(6,457
)
 
 
(7,303
)
 
NET INCOME
$
5,878

 
 
$
7,367

 
 
$
12,535

 
 
$
16,052

 
NET INCOME PER SHARE
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.39

 
 
$
0.5

 
 
$
0.83

 
 
$
1.1

 
Diluted
$
0.38

 
 
$
0.48

 
 
$
0.81

 
 
$
1.06

 
WEIGHTED AVERAGE NUMBER OF SHARES
 
 
 
 
 
 
 
 
 
 
 
Basic
15,242
 
 
 
14,617
 
 
 
15,170
 
 
 
14,562
 
 
Diluted
15,362
 
 
 
15,216
 
 
 
15,439
 
 
 
15,147
 
 
 






ICU Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(unaudited)
 

 
Six months ended June 30,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net income
$
12,535

 
 
$
16,052

 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
9,666
 
 
 
9,589
 
 
Provision for doubtful accounts
3
 
 
 
40
 
 
Provision for warranty and returns
(597
)
 
 
16
 
 
Stock compensation
4,459
 
 
 
2,822
 
 
Loss (gain) on disposal of property and equipment
2
 
 
 
(20
)
 
Bond premium amortization
1,060
 
 
 
1,338
 
 
Cash provided (used) by changes in operating assets and liabilities
 
 
 
 
 
Accounts receivable
4,786
 
 
 
(623
)
 
Inventories
(3,456
)
 
 
(186
)
 
Prepaid expenses and other assets
548
 
 
 
649
 
 
Accounts payable
(134
)
 
 
208
 
 
Accrued liabilities
498
 
 
 
(1,035
)
 
Income taxes, including excess tax benefits and deferred income taxes
(95
)
 
 
(2,894
)
 
Net cash provided by operating activities
29,275
 
 
 
25,956
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Purchases of property and equipment
(12,729
)
 
 
(11,781
)
 
Proceeds from sale of asset
5
 
 
 
20
 
 
Intangible asset additions
(377
)
 
 
(633
)
 
Purchases of investment securities
(60,090
)
 
 
(45,368
)
 
Proceeds from sale of investment securities
49,863
 
 
 
49,650
 
 
Net cash used by investing activities
(23,328
)
 
 
(8,112
)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Proceeds from exercise of stock options
7,016
 
 
 
3,921
 
 
Proceeds from employee stock purchase plan
1,384
 
 
 
1,267
 
 
Tax benefits from exercise of stock options
1,985
 
 
 
3,084
 
 
Purchase of treasury stock
(5,835
)
 
 
(1,792
)
 
Net cash provided by financing activities
4,550
 
 
 
6,480
 
 
Effect of exchange rate changes on cash
(568
)
 
 
(636
)
 
NET INCREASE IN CASH AND CASH EQUIVALENTS
9,929
 
 
 
23,688
 
 
CASH AND CASH EQUIVALENTS, beginning of period
226,022
 
 
 
146,900
 
 
CASH AND CASH EQUIVALENTS, end of period
$
235,951

 
 
$
170,588

 
 
 
 
 
 
 
NON-CASH INVESTING ACTIVITIES
 
 
 
 
 
  Accrued liabilities for property and equipment
$
140

 
 
$
228

 
 





 ICU Medical, Inc. and Subsidiaries
 Reconciliation of GAAP to Non-GAAP Financial Measures
 (Amounts in thousands, except per share data)
 (unaudited)
 
 Adjusted EBITDA
 
 Adjusted EBITDA
 
 Three months ended June 30,
 
 Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
 GAAP net income
$
5,878

 
$
7,367

 
$
12,535

 
$
16,052

 
 
 
 
 
 
 
 
 Non-GAAP adjustments:
 
 
 
 
 
 
 
   Stock compensation expense (a)
2,486

 
1,432

 
4,459

 
2,822

   Depreciation and amortization expense (b)
4,901

 
4,877

 
9,666

 
9,589

   Strategic transaction expense (c)
—

 
238

 
—

 
560

   Provision for income taxes (d)
3,027

 
3,795

 
6,457

 
7,303

     Total non-GAAP adjustments
10,414

 
10,342

 
20,582

 
20,274

 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
16,292

 
$
17,709

 
$
33,117

 
$
36,326

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted diluted earnings per share
 
 Adjusted diluted earnings per share
 
 Three months ended June 30,
 
 Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
 GAAP diluted earnings per share
$
0.38

 
$
0.48

 
$
0.81

 
$
1.06

 
 
 
 
 
 
 
 
 Non-GAAP adjustments:
 
 
 
 
 
 
 
   Stock compensation expense (a)
$
0.16

 
$
0.09

 
$
0.29

 
$
0.19

   Amortization expense (e)
$
0.04

 
$
0.04

 
$
0.08

 
$
0.09

   Strategic transaction expense (c)
$
—

 
$
0.02

 
$
—

 
$
0.04

   Estimated income tax impact from adjustments (f)
$
(0.07
)
 
$
(0.05
)
 
$
(0.12
)
 
$
(0.11
)
 
 
 
 
 
 
 
 
 Adjusted diluted earnings per share
$
0.51

 
$
0.58

 
$
1.06

 
$
1.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (a) Stock-based compensation expense in accordance with ASC 718.
 (b) Depreciation of fixed assets and amortization of intangible assets.
 (c) Expenses associated with strategic business transaction.
 (d) Income tax expense recognized during the period.
 (e) Amortization of intangible assets.
 (f) Estimated income tax effect on adjustments for stock compensation expense, amortization expense and strategic transaction expense.






ICU Medical, Inc. and Subsidiaries
 Reconciliation of GAAP to Non-GAAP Financial Measures - Fiscal Year 2014 Outlook
 (Amounts in thousands, except per share data)
 (unaudited)
 
 
 
 
 
 
 
 
 GAAP net income
$
20,148

 
$
23,183

 
 
 
 
 Non-GAAP adjustments:
 
 
 
   Stock compensation expense (a)
9,339

 
9,339

   Depreciation and amortization expense (b)
19,998

 
19,998

   Restructuring and strategic transaction expense (c)
3,565

 
3,565

   Provision for income taxes (d)
10,378

 
11,941

     Total non-GAAP adjustments
43,280

 
44,843

 
 
 
 
 Adjusted EBITDA
$
63,428

 
$
68,026

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 GAAP diluted earnings per share
$
1.30

 
$
1.50

 
 
 
 
 Non-GAAP adjustments:
 
 
 
   Stock compensation expense (a)
$
0.60

 
$
0.60

   Amortization expense (e)
$
0.16

 
$
0.16

   Restructuring and strategic transaction expense (c)
$
0.23

 
$
0.23

   Estimated income tax impact from adjustments (f)
$
(0.34
)
 
$
(0.34
)
 
 
 
 
 Adjusted diluted earnings per share
$
1.95

 
$
2.15

 
 
 
 
 
 
 
 
 (a) Stock-based compensation expense in accordance with ASC 718.
 (b) Depreciation of fixed assets and amortization of intangible assets.
 (c) Restructuring and strategic transaction expense.
 (d) Income tax expense recognized during the period.
 (e) Amortization expense
 (f) Estimated income tax effect on adjustments for stock compensation expense, amortization expense and restructuring and strategic transaction expense.