ICU Medical, Inc. (Nasdaq:ICUI), a leader in the development, manufacture and sale of innovative medical devices used in infusion therapy, oncology and critical care applications, today announced financial results for the second quarter ended June 30, 2016.

Second Quarter 2016 Results

Second quarter 2016 revenue was $96.7 million, compared to $83.8 million in the same period last year. GAAP net income for the second quarter of 2016 was $16.6 million, or $0.98 per diluted share, as compared to GAAP net income of $13.6 million, or $0.83 per diluted share, for the second quarter of 2015.  Adjusted diluted earnings per share for the second quarter of 2016 were $1.15 as compared to $0.97 for the second quarter of 2015. Also, adjusted EBITDA was $33.1 million for the second quarter of 2016 as compared to $28.1 million for the second quarter of 2015.  Vivek Jain, ICU Medical's Chief Executive Officer, said, "We are pleased with our revenue, adjusted EBITDA and net income results in the second quarter as we achieved growth in both our direct and OEM channels."

Revenues by market segment for the three months ended June 30, 2016 and 2015 were as follows:

    (dollars in millions)
    Three months ended June 30, 2016   Three months ended June 30, 2015    
Market Segment   Direct   OEM   Total   Direct   OEM   Total   Total Change
Infusion Therapy   $   38.5     $   32.1     $   70.6     $   31.5     $   26.7     $   58.2     $   12.4  
Oncology       8.9         3.8         12.7         6.0         4.2         10.2         2.5  
Critical Care       13.2         -          13.2         14.9         0.2         15.1         (1.9 )
Other       0.2         -          0.2         0.2         0.1         0.3         (0.1 )
    $   60.8     $   35.9     $   96.7     $   52.6     $   31.2     $   83.8     $   12.9  
                                                         

The Company ended the second quarter of 2016 with a strong balance sheet. As of June 30, 2016, cash, cash equivalents and investment securities totaled $400.6 million and working capital was $494.8 million. Additionally, the Company generated operating cash flow of $24 million for the second quarter of 2016.

Fiscal Year 2016 Guidance Update

For the year, the Company expects revenue to be in the range of $360 million to $370 million, adjusted diluted earnings per share to be in the range of $4.45 to $4.60, and adjusted EBITDA to be in the range of $127 million to $131 million.

Recently Adopted Accounting Standard

During the second quarter of 2016, the Company adopted the Financial Accounting Standards Board's Accounting Standard Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting, effective January 1, 2016.  The net impact of adopting ASU 2016-09 on net income per share is $0.03 and $0.14 for the three and six months ended June 30, 2016, respectively.

Conference Call

The Company will host a conference call to discuss second quarter 2016 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 47410642. 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.

About ICU Medical, Inc.

About 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 our full year 2016 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 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, 2015. 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 SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)
 
  June 30, 2016(unaudited)   December 31, 2015(1)
   
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $   372,895     $   336,164  
Investment securities     27,720         41,233  
Cash, cash equivalents and investment securities     400,615         377,397  
Accounts receivable, net     60,487         57,847  
Inventories     49,919         43,632  
Prepaid income taxes     12,072         14,366  
Prepaid expenses and other current assets     8,092         7,631  
Assets held for sale     4,209         4,134  
TOTAL CURRENT ASSETS     535,394         505,007  
       
PROPERTY AND EQUIPMENT, net     79,704         74,320  
GOODWILL     6,245         6,463  
INTANGIBLE ASSETS, net     23,183         23,936  
DEFERRED INCOME TAXES     18,853         17,099  
TOTAL ASSETS $   663,379     $   626,825  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
CURRENT LIABILITIES:      
Accounts payable $   18,853     $   13,670  
Accrued liabilities     21,759         28,948  
TOTAL CURRENT LIABILITIES     40,612         42,618  
       
LONG-TERM LIABILITIES     1,288         1,476  
DEFERRED INCOME TAXES     3,764         1,372  
INCOME TAX LIABILITY     1,488         1,488  
COMMITMENTS AND CONTINGENCIES     -          -   
STOCKHOLDERS’ EQUITY:      
Convertible preferred stock     -          -   
Common stock     1,618         1,608  
Additional paid-in capital     149,344         145,125  
Treasury stock     (4,471 )       -   
Retained earnings     488,662         453,896  
Accumulated other comprehensive loss     (18,926 )       (20,758 )
TOTAL STOCKHOLDERS' EQUITY     616,227         579,871  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   663,379     $   626,825  
 
(1) December 31, 2015 balances were derived from audited consolidated financial statements.
ICU MEDICAL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)(In thousands, except per share data)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    2016       2015       2016       2015  
REVENUES:              
Net sales $   96,712     $   83,662     $   186,561     $   164,985  
Other     9         119         15         280  
TOTAL REVENUE     96,721         83,781         186,576         165,265  
COST OF GOODS SOLD     46,589         40,020         87,211         78,990  
GROSS PROFIT     50,132         43,761         99,365         86,275  
OPERATING EXPENSES:              
Selling, general and administrative     22,491         20,318         44,466         40,492  
Research and development     3,338         3,122         6,651         7,430  
Restructuring and strategic transaction     1,533         -          1,533         -   
Legal settlement     -          -          -          7,059  
TOTAL OPERATING EXPENSES     27,362         23,440         52,650         54,981  
INCOME FROM OPERATIONS     22,770         20,321         46,715         31,294  
BARGAIN PURCHASE GAIN     1,110         -          1,110         -   
OTHER INCOME, net     77         240         224         766  
INCOME BEFORE INCOME TAXES     23,957         20,561         48,049         32,060  
PROVISION FOR INCOME TAXES (1)     (7,351 )       (6,991 )       (13,283 )       (8,804 )
NET INCOME (1) $   16,606     $   13,570     $   34,766     $   23,256  
NET INCOME PER SHARE              
Basic $   1.03     $   0.86     $   2.16     $   1.48  
Diluted (3) $   0.98     $   0.83     $   2.05     $   1.43  
WEIGHTED AVERAGE NUMBER OF SHARES              
Basic     16,091       15,781         16,070       15,738  
Diluted (2)     17,000       16,352         16,964       16,302  
 
(1)  As a result of the adoption of ASU 2016-09, the Company recorded $0.8 million and $3.1 million in excess tax benefits as a component of income taxes for the three and six months ended June 30, 2016, respectively.
(2)  As a result of the adoption of ASU 2016-09, the Company recorded a 345,000 share and a 340,000 share adjustment to the weighted average diluted shares outstanding for the three and six months ended June 30, 2016, respectively.
(3)  The net impact of adopting ASU 2016-09 on net income per share is $0.03 and $0.14 for the three and six months ended June 30, 2016, respectively.

 

ICU MEDICAL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(In thousands)
 
  Six months ended June 30,
    2016       2015  
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $   34,766     $   23,256  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization     9,648         9,026  
Provision for doubtful accounts     -          53  
Provision for warranty and returns     (125 )       38  
Stock compensation     7,674         5,947  
Loss (gain) on disposal of property and equipment     31         (33 )
Bargain purchase gain     (1,110 )       -   
Bond premium amortization     121         1,223  
Changes in operating assets and liabilities:      
Accounts receivable     (2,527 )       (5,529 )
Inventories     (5,479 )       (2,267 )
Prepaid expenses and other assets     (3,784 )       (1,375 )
Accounts payable     3,752         1,894  
Accrued liabilities     (5,985 )       (1,027 )
Income taxes, including excess tax benefits and deferred income taxes     4,793         (2,031 )
Net cash provided by operating activities     41,775         29,175  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment     (9,112 )       (5,005 )
Proceeds from sale of assets     1         34  
Business acquisitions, net of acquired cash     (2,606 )       -   
Intangible asset additions     (513 )       (440 )
Purchases of investment securities     (18,106 )       (17,092 )
Proceeds from sale of investment securities     31,765         49,555  
Net cash provided by investing activities     1,429         27,052  
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from exercise of stock options     7,796         5,797  
Proceeds from employee stock purchase plan     1,197         1,041  
Purchase of treasury stock     (16,911 )       (1,435 )
Net cash (used in) provided by financing activities     (7,918 )       5,403  
Effect of exchange rate changes on cash     1,445         (6,350 )
NET INCREASE IN CASH AND CASH EQUIVALENTS     36,731         55,280  
CASH AND CASH EQUIVALENTS, beginning of period     336,164         275,812  
CASH AND CASH EQUIVALENTS, end of period $   372,895     $   331,092  
               

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:

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.

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.

Restructuring and strategic transaction:  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.

Legal settlement:  We may incur charges or benefits as well as legal costs related to litigation and other contingencies.  We exclude these charges or benefits, when significant as well as the legal costs associated with significant legal matters, because we do not believe they are an indication of our operating performance.

Bargain purchase gain:  We may incur a bargain purchase gain on certain acquisitions if the fair market value of the identifiable assets acquired and liabilities assumed, net of deferred taxes exceeds the total consideration paid.  We exclude such gains as they are related to acquisitions and have no direct correlation to the operation of our ongoing business.  

 Adjusted Diluted EPS excludes, net of tax, intangible asset amortization expense, stock compensation expense, restructuring and strategic transaction, legal settlement and bargain purchase gain, which was tax free.  We apply our GAAP consolidated effective tax rate to our non-GAAP financial measures, other than when the underlying item has a materially different tax treatment.

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 SUBSIDIARIESReconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)(In thousands, except per share data)
 
   Adjusted EBITDA
  Three months ended June 30,   Six months ended June 30,
    2016       2015       2016       2015  
GAAP net income $   16,606     $   13,570     $   34,766     $   23,256  
               
Non-GAAP adjustments:              
Stock compensation expense     3,866         3,134         7,674         5,947  
Depreciation and amortization expense     4,847         4,397         9,648         9,026  
Restructuring and strategic transaction     1,533         -          1,533         -   
Legal settlement     -          -          -          7,059  
Bargain purchase gain     (1,110 )       -          (1,110 )       -   
Provision for income taxes     7,351         6,991         13,283         8,804  
Total non-GAAP adjustments     16,487         14,522         31,028         30,836  
               
Adjusted EBITDA $   33,093     $   28,092     $   65,794     $   54,092  
               
    Adjusted diluted earnings per share 
  Three months ended June 30,   Six months ended June 30,
    2016       2015       2016       2015  
GAAP diluted earnings per share $   0.98     $   0.83     $   2.05     $   1.43  
               
Non-GAAP adjustments:              
Stock compensation expense $   0.23     $   0.19     $   0.45     $   0.36  
Amortization expense $   0.04     $   0.03     $   0.08     $   0.07  
Restructuring and strategic transaction $   0.09     $   -      $   0.09     $   -   
Legal settlement $   -      $   -      $   -      $   0.43  
Bargain purchase gain $   (0.07 )   $   -      $   (0.07 )   $   -   
Estimated income tax impact from adjustments $   (0.12 )   $   (0.08 )   $   (0.21 )   $   (0.29 )
Adjusted diluted earnings per share $   1.15     $   0.97     $   2.39     $   2.00  

 

ICU MEDICAL, INC. AND SUBSIDIARIESReconciliation of GAAP to Non-GAAP Financial Measures - Fiscal Year 2016 Outlook (Unaudited)(In millions, except per share data)  
   
GAAP net income $   64     $   67  
       
Non-GAAP adjustments:      
Stock compensation expense     15         15  
Depreciation and amortization expense     19         19  
Restructuring and strategic transaction     2         2  
Bargain purchase gain     (1 )       (1 )
Provision for income taxes     28         29  
Total non-GAAP adjustments     63         64  
       
Adjusted EBITDA $   127     $   131  
       
       
GAAP diluted earnings per share $   3.72     $   3.87  
       
Non-GAAP adjustments:      
Stock compensation expense $   0.87     $   0.87  
Amortization expense $   0.16     $   0.16  
Restructuring and strategic transaction $   0.12     $   0.12  
Bargain purchase gain $   (0.06 )   $   (0.06 )
Estimated income tax impact from adjustments $   (0.36 )   $   (0.36 )
Adjusted diluted earnings per share $   4.45     $   4.60  
       
CONTACT:
ICU Medical, Inc.
Scott Lamb, Chief Financial Officer
(949) 366-2183

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