EX-99.1 2 q32014earningsrelease.htm Q3 2014 EARNINGS RELEASE Q3 2014 Earnings Release



Exhibit 99.1
ICU Medical, Inc. Announces Third Quarter 2014 Results
SAN CLEMENTE, Calif., Nov. 10, 2014 (GLOBE NEWSWIRE) -- ICU Medical, Inc., (Nasdaq:ICUI) (“ICU Medical”), a leader in innovative medical devices used in vascular therapy, oncology and critical care applications, today announced financial results for the third quarter and nine months ended September 30, 2014.
Third Quarter 2014 Results
Third quarter 2014 revenue was $77.5 million, compared to $82.8 million in the same period last year. GAAP net income for the third quarter of 2014 was $6.4 million, or $0.42 per diluted share, as compared to GAAP net income of $11.0 million, or $0.72 per diluted share, for the third quarter of 2013. Adjusted diluted earnings per share for the third quarter of 2014 was $0.66 as compared to $0.84 for the third quarter of 2013. Also, adjusted EBITDA was $18.9 million for the third quarter of 2014 as compared to $22.6 million for the third quarter of 2013.
Vivek Jain, ICU Medical's Chief Executive Officer, said, "Third quarter results were slightly above our expectations and showed similar trends to the first half of the year. The increase in our direct oncology sales and our international sales was primarily offset by an expected decline in our OEM business. As we had previously outlined, the year over year change was as expected due to the third quarter of 2013 being the peak of the company’s transition period. We have had two quarters in a row of consistent sales and we expect the fourth quarter of 2014 to look in-line with the third quarter. Based on our results to date and expectations for the remainder of the year, we are adjusting slightly upwards our full year 2014 adjusted EBITDA, adjusted EPS and GAAP EPS guidance ranges."
Revenues by market segment for the three and nine months ended September 30, 2014 and 2013 were as follows:
(dollars in millions)
 
Nine months ended September 30,
Three months ended September 30,
Market Segment
2014
2013
Change
2014
2013
Change
Infusion Therapy
$ 159.3
$ 166.4
$ (7.1)
$ 54.9
$ 58.5
$ (3.6)
Critical Care
41.3
41.1
0.2
12.8
14.2
(1.4)
Oncology
27.7
27.4
0.3
9.4
9.9
(0.5)
Other
1.1
0.9
0.2
0.4
0.2
0.2
 
$ 229.4
$ 235.8
$ (6.4)
$ 77.5
$ 82.8
$ (5.3)
The Company ended the third quarter with a strong balance sheet. As of September 30, 2014, cash, cash equivalents and investment securities totaled $329.7 million and working capital was $395.3 million. Additionally, the Company generated operating cash flow of $19.1 million for the third quarter of 2014.
Updated Fiscal Year 2014 Guidance
For the year, the Company now expects revenue to be in the range of $304 million to $307 million, compared to the previous range of $285 million to $300 million. GAAP diluted earnings per share increased to a range of $1.62 to $1.70 compared to the previous range of $1.30 to $1.45. Adjusted diluted earnings per share increased to a range of $2.25 to $2.33 compared to the previous range of $1.95 to $2.15, and adjusted EBITDA is increased to a range of $69 million to $71 million compared to the previous range $63 million to $68 million.

Conference Call
The Company will be conducting a conference call concerning these announcements at 4:30 p.m. EDT (1:30 p.m. PDT), today, Monday, November 10, 2014. The call can be accessed at 800-936-9761, international 408-774-4587, conference ID 27351191. 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 EBITDA 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 devices used in vascular therapy, oncology and critical care applications. ICU Medical’s products improve patient outcomes by helping prevent bloodstream infections and protecting healthcare workers from exposure to infectious diseases or hazardous drugs. The company’s complete product line includes custom IV systems, closed delivery systems for hazardous drugs, needlefree IV connectors, catheters and cardiac monitoring systems. 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 the fourth quarter and fiscal year 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.





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

 
September 30,
 2014
 
December 31,
 2013
 
(unaudited)
 
(1)
ASSETS
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
Cash and cash equivalents
$
252,241

 
 
$
226,022

 
Investment securities
77,503
 
 
 
70,869
 
 
Cash, cash equivalents and investment securities
329,744
 
 
 
296,891
 
 
Accounts receivable, net of allowance for doubtful accounts of $1,141 at September 30, 2014 and $1,208 at December 31, 2013
35,354
 
 
 
45,318
 
 
Inventories
38,248
 
 
 
34,451
 
 
Prepaid income taxes
9,381
 
 
 
5,966
 
 
Prepaid expenses and other current assets
5,372
 
 
 
7,319
 
 
Deferred income taxes
6,404
 
 
 
4,351
 
 
Total current assets
424,503
 
 
 
394,296
 
 
 
 
 
 
 
 
PROPERTY AND EQUIPMENT, net
88,532
 
 
 
87,861
 
 
GOODWILL
1,478
 
 
 
1,478
 
 
INTANGIBLE ASSETS, net
7,394
 
 
 
8,490
 
 
DEFERRED INCOME TAXES
5,809
 
 
 
7,518
 
 
 
$
527,716

 
 
$
499,643

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
Accounts payable
$
11,932

 
 
$
11,335

 
Accrued liabilities
17,318
 
 
 
15,551
 
 
Total current liabilities
29,250
 
 
 
26,886
 
 
 
 
 
 
 
 
DEFERRED INCOME TAXES
4,325
 
 
 
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, 15,360 shares at September 30, 2014 and 15,103 shares at December 31, 2013; Outstanding, 15,360 shares September 30, 2014 and 15,102 shares at December 31, 2013
1,536
 
 
 
1,510
 
 
Additional paid-in capital
93,900
 
 
 
78,495
 
 
Treasury stock, at cost - 0 shares at September 30, 2014 and 1 shares at December 31, 2013
(1
)
 
 
(49
)
 
Retained earnings
401,539
 
 
 
382,576
 
 
Accumulated other comprehensive income
(5,546
)
 
 
2,193
 
 
Total stockholders’ equity
491,428
 
 
 
464,725
 
 
 
$
527,716

 
 
$
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 September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
77,329

 
 
$
82,709

 
 
$
228,997

 
 
$
235,419

 
Other
128
 
 
 
106
 
 
 
367
 
 
 
356
 
 
TOTAL REVENUE
77,457
 
 
 
82,815
 
 
 
229,364
 
 
 
235,775
 
 
COST OF GOODS SOLD
39,310
 
 
 
41,860
 
 
 
117,648
 
 
 
119,988
 
 
Gross profit
38,147
 
 
 
40,955
 
 
 
111,716
 
 
 
115,787
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
—
 
 
Selling, general and administrative
21,843
 
 
 
22,399
 
 
 
68,640
 
 
 
68,447
 
 
Research and development
5,055
 
 
 
3,140
 
 
 
13,252
 
 
 
8,949
 
 
Restructuring charges
2,840
 
 
 
—
 
 
 
2,840
 
 
 
—
 
 
Total operating expenses
29,738
 
 
 
25,539
 
 
 
84,732
 
 
 
77,396
 
 
Income from operations
8,409
 
 
 
15,416
 
 
 
26,984
 
 
 
38,391
 
 
OTHER INCOME
155
 
 
 
190
 
 
 
572
 
 
 
570
 
 
Income before income taxes
8,564
 
 
 
15,606
 
 
 
27,556
 
 
 
38,961
 
 
PROVISION FOR INCOME TAXES
(2,136
)
 
 
(4,572
)
 
 
(8,593
)
 
 
(11,875
)
 
NET INCOME
$
6,428

 
 
$
11,034

 
 
$
18,963

 
 
$
27,086

 
NET INCOME PER SHARE
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.42

 
 
$
0.75

 
 
$
1.25

 
 
$
1.85

 
Diluted
$
0.42

 
 
$
0.72

 
 
$
1.22

 
 
$
1.79

 
WEIGHTED AVERAGE NUMBER OF SHARES
 
 
 
 
 
 
 
 
 
 
 
Basic
15,319
 
 
 
14,684
 
 
 
15,220
 
 
 
14,603
 
 
Diluted
15,488
 
 
 
15,324
 
 
 
15,497
 
 
 
15,139
 
 
 






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

 
Nine months ended September 30,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net income
$
18,963

 
 
$
27,086

 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
14,642
 
 
 
14,451
 
 
Provision for doubtful accounts
3
 
 
 
40
 
 
Provision for warranty and returns
(488
)
 
 
124
 
 
Stock compensation
6,990
 
 
 
4,133
 
 
Loss (gain) on disposal of property and equipment
8
 
 
 
(20
)
 
Bond premium amortization
1,599
 
 
 
2,045
 
 
Cash provided (used) by changes in operating assets and liabilities
 
 
 
 
 
Accounts receivable
9,433
 
 
 
(2,538
)
 
Inventories
(4,655
)
 
 
2,471
 
 
Prepaid expenses and other assets
2,146
 
 
 
1,572
 
 
Accounts payable
681
 
 
 
(790
)
 
Accrued liabilities
2,123
 
 
 
(1,236
)
 
Income taxes, including excess tax benefits and deferred income taxes
(3,098
)
 
 
(5,094
)
 
Net cash provided by operating activities
48,347
 
 
 
42,244
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Purchases of property and equipment
(14,924
)
 
 
(15,223
)
 
Proceeds from sale of asset
5
 
 
 
21
 
 
Intangible asset additions
(709
)
 
 
(839
)
 
Purchases of investment securities
(78,993
)
 
 
(71,919
)
 
Proceeds from sale of investment securities
69,470
 
 
 
76,681
 
 
Net cash used by investing activities
(25,151
)
 
 
(11,279
)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Proceeds from exercise of stock options
9,105
 
 
 
5,016
 
 
Proceeds from employee stock purchase plan
2,485
 
 
 
2,457
 
 
Tax benefits from exercise of stock options
2,734
 
 
 
4,567
 
 
Purchase of treasury stock
(5,836
)
 
 
(3,033
)
 
Net cash provided by financing activities
8,488
 
 
 
9,007
 
 
Effect of exchange rate changes on cash
(5,465
)
 
 
1,158
 
 
NET INCREASE IN CASH AND CASH EQUIVALENTS
26,219
 
 
 
41,130
 
 
CASH AND CASH EQUIVALENTS, beginning of period
226,022
 
 
 
146,900
 
 
CASH AND CASH EQUIVALENTS, end of period
$
252,241

 
 
$
188,030

 
 
 
 
 
 
 
NON-CASH INVESTING ACTIVITIES
 
 
 
 
 
  Accrued liabilities for property and equipment
$
100

 
 
$
273

 
 





 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
 
 
 Q3
 
 YTD September 30,
 
 
 2014
 
 2013
 
 2014
 
 2013
 
 GAAP net income
$
6,428

 
$
11,034

 
$
18,963

 
$
27,086

 
 
 
 
 
 
 
 
 
 
 Non-GAAP adjustments:
 
 
 
 
 
 
 
 
   Stock compensation expense (a)
2,531

 
1,311

 
6,990

 
4,133

 
   Depreciation and amortization expense (b)
4,976

 
4,862

 
14,642

 
14,451

 
   Restructuring and strategic transaction expense (c)
2,840

 
781

 
2,840

 
1,341

 
   Provision for income taxes (d)
2,136

 
4,572

 
8,593

 
11,875

 
     Total non-GAAP adjustments
12,483

 
11,526

 
33,065

 
31,800

 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
$
18,911

 
$
22,560

 
$
52,028

 
$
58,886

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted diluted earnings per share
 
 Adjusted diluted earnings per share
 
 
 Q3
 
 YTD September 30,
 
 
 2014
 
 2013
 
 2014
 
 2013
 
 GAAP diluted earnings per share
$
0.42

 
$
0.72

 
$
1.22

 
$
1.79

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

 
$
0.09

 
$
0.45

 
$
0.27

 
   Amortization expense (e)
$
0.04

 
$
0.04

 
$
0.12

 
$
0.13

 
   Restructuring and strategic transaction expense (c)
$
0.18

 
$
0.05

 
$
0.18

 
$
0.09

 
   Estimated income tax impact from adjustments (f)
$
(0.14
)
 
$
(0.06
)
 
$
(0.26
)
 
$
(0.17
)
 
 Adjusted diluted earnings per share
$
0.66

 
$
0.84

 
$
1.71

 
$
2.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (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.




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
$
25,094

 
$
26,363

 
 
 
 
 Non-GAAP adjustments:
 
 
 
   Stock compensation expense (a)
9,584

 
9,584

   Depreciation and amortization expense (b)
19,640

 
19,640

   Restructuring and strategic transaction expense (c)
2,840

 
2,840

   Provision for income taxes (d)
11,894

 
12,577

     Total non-GAAP adjustments
43,958

 
44,641

 
 
 
 
 Adjusted EBITDA
$
69,052

 
$
71,004

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 GAAP diluted earnings per share
$
1.62

 
$
1.70

 
 
 
 
 Non-GAAP adjustments:
 
 
 
   Stock compensation expense (a)
$
0.62

 
$
0.62

   Amortization expense (e)
$
0.16

 
$
0.16

   Restructuring and strategic transaction expense (c)
$
0.18

 
$
0.18

   Estimated income tax impact from adjustments (f)
$
(0.33
)
 
$
(0.33
)
 
 
 
 
 Adjusted diluted earnings per share
$
2.25

 
$
2.33

 
 
 
 
 
 
 
 
 (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.