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ICU Medical, Inc. Announces Third Quarter 2020 Results and Updates Fiscal Year 2020 Guidance

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SAN CLEMENTE, Calif., Nov. 05, 2020 (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, 2020.

Third Quarter 2020 Results

Third quarter 2020 revenue was $318.6 million, compared to $307.5 million in the same period last year. GAAP gross profit for the third quarter of 2020 was $113.9 million, as compared to $118.6 million in the same period last year. GAAP gross margin for the third quarter of 2020 was 36%, as compared to 39% in the same period last year. GAAP net income for the third quarter of 2020 was $25.0 million, or $1.16 per diluted share, as compared to GAAP net income of $26.6 million, or $1.24 per diluted share, for the third quarter of 2019. Adjusted diluted earnings per share for the third quarter of 2020 were $1.90 as compared to $1.65 for the third quarter of 2019. Also, adjusted EBITDA was $62.2 million for the second quarter of 2020 as compared to $62.6 million for the third quarter of 2019.

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 results were generally in line with our expectations and reflected improved demand for our products in the U.S.”

Revenues by product line for the three and nine months ended September 30, 2020 and 2019 were as follows (in millions):

Three months ended
September 30,

Nine months ended
September 30,

Product Line

2020

2019

$ Change

2020

2019

$ Change

Infusion Consumables

$

116.1

$

119.8

$

(3.7

)

$

350.6

$

358.0

$

(7.4

)

Infusion Systems

88.4

78.9

9.5

267.9

244.5

23.4

IV Solutions*

101.9

98.2

3.7

295.4

314.0

(18.6

)

Critical Care

12.2

10.6

1.6

36.7

34.2

2.5

$

318.6

$

307.5

$

11.1

$

950.6

$

950.7

$

(0.1

)

*IV Solutions includes $15.8 million and $44.8 million of contract manufacturing to Pfizer for the three and nine months ended September 30, 2020, respectively, as compared to $16.8 million and $61.3 million for the same periods in the prior year.

Fiscal Year 2020 Guidance Update

The Company is narrowing its 2020 outlook for adjusted EBITDA from a range of $230 million to $250 million to a range of $235 million to $245 million and updating adjusted earnings per share from a range of $5.95 to $6.65 to a range of $6.65 to $7.00.

Conference Call

The Company will host a conference call to discuss third quarter 2020 financial results on the Company, 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 9959519. 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, unexpected changes in the Company's arrangements with its largest customers and the impact of the ongoing COVID-19 pandemic on the Company and our financial results. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

September 30,
2020

December 31,
2019

(Unaudited)

(1)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

350,993

$

268,670

Short-term investment securities

12,544

23,967

TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES

363,537

292,637

Accounts receivable, net of allowance for doubtful accounts

164,538

202,219

Inventories

321,961

337,640

Prepaid income taxes

8,032

15,720

Prepaid expenses and other current assets

42,071

33,981

TOTAL CURRENT ASSETS

900,139

882,197

PROPERTY AND EQUIPMENT, net

456,348

456,085

OPERATING LEASE RIGHT-OF-USE ASSETS

47,802

34,465

GOODWILL

32,651

31,245

INTANGIBLE ASSETS, net

200,428

211,408

DEFERRED INCOME TAXES

36,373

27,998

OTHER ASSETS

55,795

48,984

TOTAL ASSETS

$

1,729,536

$

1,692,382

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

81,027

$

128,629

Accrued liabilities

103,397

117,776

Income tax payable

935

2,063

TOTAL CURRENT LIABILITIES

185,359

248,468

CONTINGENT EARN-OUT LIABILITY

24,300

17,300

OTHER LONG-TERM LIABILITIES

48,750

32,820

DEFERRED INCOME TAXES

2,091

2,091

INCOME TAX PAYABLE

16,816

14,459

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 — 20,969 shares at September 30, 2020 and 20,743 shares at December 31, 2019 and outstanding — 20,968 shares at September 30, 2020 and 20,742 shares at December 31, 2019

2,097

2,074

Additional paid-in capital

683,326

668,947

Treasury stock, at cost

(180

)

(157

)

Retained earnings

782,510

721,782

Accumulated other comprehensive loss

(15,533

)

(15,402

)

TOTAL STOCKHOLDERS' EQUITY

1,452,220

1,377,244

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,729,536

$

1,692,382

______________________________________________________
(1) December 31, 2019 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
September 30,

Nine months ended
September 30,

2020

2019

2020

2019

TOTAL REVENUES

$

318,567

$

307,471

$

950,553

$

950,685

COST OF GOODS SOLD

204,643

188,919

608,930

592,961

GROSS PROFIT

113,924

118,552

341,623

357,724

OPERATING EXPENSES:

Selling, general and administrative

70,854

65,876

210,401

206,333

Research and development

10,126

12,002

31,151

36,024

Restructuring, strategic transaction and integration

4,114

7,975

22,903

69,408

Change in fair value of contingent earn-out

4,300

(200

)

7,000

(47,400

)

Contract settlement

(1,000

)

(975

)

3,822

TOTAL OPERATING EXPENSES

88,394

85,653

270,480

268,187

INCOME FROM OPERATIONS

25,530

32,899

71,143

89,537

INTEREST EXPENSE

(616

)

(139

)

(1,583

)

(411

)

OTHER INCOME (EXPENSE), net

1,252

(10

)

(2,175

)

4,660

INCOME BEFORE INCOME TAXES

26,166

32,750

67,385

93,786

PROVISION FOR INCOME TAXES

(1,180

)

(6,187

)

(6,657

)

(13,392

)

NET INCOME

$

24,986

$

26,563

$

60,728

$

80,394

NET INCOME PER SHARE

Basic

$

1.19

$

1.29

$

2.91

$

3.90

Diluted

$

1.16

$

1.24

$

2.82

$

3.73

WEIGHTED AVERAGE NUMBER OF SHARES

Basic

20,948

20,666

20,870

20,607

Diluted

21,556

21,487

21,561

21,556

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.

Product-related charges: We exclude non-cash product-related charges 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.

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.

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,

2020

2019

GAAP net income

$

24,986

$

26,563

Non-GAAP adjustments:

Interest, net

(142

)

(1,601

)

Stock compensation expense

6,265

3,723

Depreciation and amortization expense

21,462

19,187

Restructuring, strategic transaction and integration

4,114

7,975

Change in fair value of contingent earn-out

4,300

(200

)

Contract settlement

794

Provision for income taxes

1,180

6,187

Total non-GAAP adjustments

37,179

36,065

Adjusted EBITDA

$

62,165

$

62,628


Adjusted diluted earnings per share

Three months ended
September 30,

2020

2019

GAAP diluted earnings per share

$

1.16

$

1.24

Non-GAAP adjustments:

Stock compensation expense

$

0.29

$

0.17

Amortization expense

$

0.27

$

0.20

Restructuring, strategic transaction and integration

$

0.19

$

0.37

Change in fair value of contingent earn-out

$

0.20

$

(0.01

)

Contract settlement

$

$

0.04

Estimated income tax impact from adjustments

$

(0.21

)

$

(0.36

)

Adjusted diluted earnings per share

$

1.90

$

1.65

ICU Medical, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures - Fiscal Year 2020 Outlook (Unaudited)
(In millions, except per share data)

Low End of Guidance

High End of Guidance

GAAP net income

$

73

$

81

Non-GAAP adjustments:

Interest, net

(1

)

(1

)

Stock compensation expense

24

24

Depreciation and amortization expense

86

86

Restructuring, strategic transaction and integration

30

30

Change in fair value of contingent earn-out

7

7

Contract settlement and product-related charges

5

5

Provision for income taxes

11

13

Total non-GAAP adjustments

$

162

$

164

Adjusted EBITDA

$

235

$

245

GAAP diluted earnings per share

$

3.41

$

3.76

Non-GAAP adjustments:

Stock compensation expense

$

1.11

$

1.11

Amortization expense

$

1.07

$

1.07

Restructuring, strategic transaction and integration

$

1.39

$

1.39

Change in fair value of contingent earn-out

$

0.32

$

0.32

Contract settlement and product-related charges

$

0.21

$

0.21

Estimated income tax impact from adjustments

$

(0.86

)

$

(0.86

)

Adjusted diluted earnings per share

$

6.65

$

7.00

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

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