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ICU Medical, Inc. Announces Fourth Quarter 2019 Results

SAN CLEMENTE, Calif., Feb. 27, 2020 (GLOBE NEWSWIRE) -- ICU Medical, Inc. (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 December 31, 2019.

Fourth Quarter 2019 Results

Fourth quarter 2019 revenue was $315.5 million, compared to $340.4 million in the same period last year. GAAP gross profit for the fourth quarter of 2019 was $114.1 million, as compared to $134.6 million in the same period last year.  GAAP gross margin for the fourth quarter of 2019 was 36%, as compared to 40% in the same period last year.  GAAP net income for the fourth quarter of 2019 was $20.6 million, or $0.96 per diluted share, as compared to GAAP net loss of $7.4 million, or $0.36 loss per diluted share, for the fourth quarter of 2018.  Adjusted diluted earnings per share for the fourth quarter of 2019 were $1.94 as compared to $2.14 for the fourth quarter of 2018.  Also, adjusted EBITDA was $60.7 million for the fourth quarter of 2019 as compared to $69.3 million for the fourth 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, “Fourth quarter revenue and adjusted EBITDA were generally in line with our expectations.”

Revenues by market segment for the three and twelve months ended December 31, 2019 and 2018 were as follows (in millions):

    Three months ended
December 31,
            Year ended
December 31,
       
Market Segment   2019   2018   $
Change
  %
Change
    2019   2018   $
Change
    %
Change
 
Infusion Consumables   $ 119.6     $ 121.5     $ (1.9 )   (1.6 )%   $ 477.6     $ 483.0     $ (5.4 )   (1.1 )%
Infusion Systems   83.8     92.2     (8.4 )   (9.1 )%   328.3     355.5     (27.2 )   (7.7 )%
IV Solutions*   101.0     113.8     (12.8 )   (11.2 )%   415.0     508.0     (93.0 )   (18.3 )%
Critical Care   11.1     12.8     (1.7 )   (13.3 )%   45.3     53.5     (8.2 )   (15.3 )%
    $ 315.5     $ 340.3     $ (24.8 )   (7.3 )%   $ 1,266.2     $ 1,400.0     $ (133.8 )   (9.6 )%

*IV Solutions includes $19.7 million and $81.0 million of contract manufacturing to Pfizer for the three and twelve months ended December 31, 2019, respectively, as compared to $18.9 million and $78.2 million for the same periods in the prior year.

Fiscal Year 2020 Guidance

For the Fiscal Year 2020, the Company expects adjusted EBITDA to be in the range of $240 million to $260 million, and adjusted diluted EPS to be in the range of $6.50 to $7.20.

Conference Call

The Company will host a conference call to discuss fourth 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 9482926.  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. (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, 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 Securities and Exchange Commission, which include those in the Company's most recent Annual Report on Form 10-K 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)

  December 31,
 2019
  December 31,
 2018
  (Unaudited)   (1)
ASSETS      
CURRENT ASSETS:      
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  
Inventories 337,640     311,163  
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  
GOODWILL 31,245     11,195  
INTANGIBLE ASSETS, net 211,408     133,421  
DEFERRED INCOME TAXES 27,998     38,654  
OTHER ASSETS 48,984     40,419  
TOTAL ASSETS $ 1,692,382     $ 1,585,391  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
CURRENT LIABILITIES:      
Accounts payable $ 128,629     $ 120,469  
Accrued liabilities 117,776     128,820  
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      
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 20,743 shares at December 31, 2019 and 20,492 at December 31, 2018 and outstanding 20,742 shares at December 31, 2019 and 20,491 shares at December 31, 2018 2,074     2,049  
Additional paid-in capital 668,947     657,899  
Treasury stock, at cost (157 )   (95 )
Retained earnings 721,782     620,747  
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  

______________________________________________________
(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
December 31,
  Twelve months ended
December 31,
  2019   2018   2019   2018
TOTAL REVENUES $ 315,523     $ 340,378     $ 1,266,208     $ 1,400,040  
COST OF GOODS SOLD 201,383     205,738     794,344     830,012  
GROSS PROFIT 114,140     134,640     471,864     570,028  
OPERATING EXPENSES:              
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  
Contract settlement 1,915     12,696     5,737     41,613  
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  
INTEREST EXPENSE (138 )   (161 )   (549 )   (709 )
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              
Basic $ 1.00     $ (0.36 )   $ 4.90     $ 1.41  
Diluted $ 0.96     $ (0.36 )   $ 4.69     $ 1.33  
WEIGHTED AVERAGE NUMBER OF SHARES              
Basic 20,693     20,490     20,629     20,394  
Diluted 21,393     20,490     21,545     21,601  
                       

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.

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)
(In thousands)

   Adjusted EBITDA
  Three months Ended
December 31,
  2019   2018
GAAP net income (loss) $ 20,641     $ (7,355 )
       
Non-GAAP adjustments:      
Interest, net (1,563 )   (2,008 )
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 )
Contract settlement 3,019     12,810  
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 EBITDA $ 60,703     $ 69,313  


   Adjusted diluted earnings per share
  Three months ended
December 31,
  2019   2018 (1)
 GAAP diluted earnings (loss) per share $ 0.96     $ (0.36 )
       
 Non-GAAP adjustments:      
Stock compensation expense $ 0.27     $ 0.29  
Amortization expense $ 0.24     $ 0.20  
Restructuring, strategic transaction and integration $ 0.52     $ 1.91  
Change in fair value of contingent earn-out $     $  
Contract settlement $ 0.14     $ 0.59  
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.


ICU Medical, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures - Fiscal Year 2020 Outlook
(In millions, except per share data)
(unaudited)

  Low End of Guidance   High End of Guidance
 GAAP net income $ 71     $ 86  
       
 Non-GAAP adjustments:      
Interest, net (3 )   (3 )
Stock compensation expense 22     22  
Depreciation and amortization expense 87     87  
Restructuring, strategic transaction and integration 40     40  
Contract settlement 4     4  
Provision for income taxes 19     24  
  Total non-GAAP adjustments 169     174  
       
 Adjusted EBITDA $ 240     $ 260  
       
       
       
       
 GAAP diluted earnings per share $ 3.29     $ 3.99  
       
 Non-GAAP adjustments:      
  Stock compensation expense $ 1.02     $ 1.02  
  Amortization expense $ 1.07     $ 1.07  
Restructuring, strategic transaction and integration $ 1.86     $ 1.86  
Contract settlement $ 0.17     $ 0.17  
  Estimated income tax impact from adjustments $ (0.91 )   $ (0.91 )
 Adjusted diluted earnings per share $ 6.50     $ 7.20  

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

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