ICU Medical, Inc. (Nasdaq:ICUI), a leader in the development,
manufacture and sale of innovative medical devices used in infusion
therapy and critical care applications, today announced financial
results for the quarter and fiscal year ended December 31, 2017.
Fourth Quarter 2017 Results
Fourth quarter 2017 revenue was $370.1 million, compared to
$95.7 million in the same period last year. GAAP gross profit for
the fourth quarter of 2017 was $137.5 million, as compared to $50.8
million in the same period last year. GAAP gross margin for
the fourth quarter of 2017 was 37%, as compared to 53% in the same
period last year. GAAP net income for the fourth quarter of
2017 was $49.7 million, or $2.33 per diluted share, as compared to
GAAP net income of $9.5 million, or $0.54 per diluted share, for
the fourth quarter of 2016. Adjusted diluted earnings per
share for the fourth quarter of 2017 were $2.98 as compared to
$1.20 for the fourth quarter of 2016. Also, adjusted EBITDA
was $70.1 million for the fourth quarter of 2017 as compared to
$34.3 million for the fourth quarter of 2016.
Full Fiscal Year 2017 Results
Fiscal year 2017 revenue was $1.3 billion, compared to $379.4
million in the same period last year. GAAP net income for fiscal
year 2017 was $68.6 million, or $3.29 per diluted share, as
compared to GAAP net income of $63.1 million, or $3.66 per diluted
share, for fiscal year 2016. Adjusted diluted earnings per share
for fiscal year 2017 were $6.45 as compared to $4.88 for fiscal
year 2016. Also, adjusted EBITDA was $222.5 million for fiscal year
2017 as compared to $134.1 million for fiscal year 2016.
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 revenues, adjusted EBITDA and adjusted diluted earnings per
share were slightly above our expectations.”
Form 10-K Filing
The Annual Report on Form 10-K for the year ended December 31,
2017 (the "Form 10-K"), will be the Company's first annual filing
since the completion of the Hospira Infusion Systems business (the
"HIS Acquisition"). The complexity of matters related
thereto, including the scale of the HIS Acquisition, have required
substantial management attention and the Company has experienced
unforeseen delays in collecting and compiling certain financial and
other related data that would be included in the Form 10-K in
connection with the HIS Acquisition. Accordingly, the Company
requires additional time to complete certain disclosures and
analyses to be included in the Form 10-K and is therefore unable to
file its Form 10-K within the prescribed time period without
unreasonable effort or expense. The Company does not expect
any material changes to the financial results from the press
release to be reflected in the Form 10-K when filed. The
Company intends to file the Form 10-K within the fifteen day
extension period provided by Rule 12b-25.
Revenues by market segment for the three and twelve
months ended December 31, 2017 and 2016 were as follows (in
millions):
|
|
Three months endedDecember
31, |
|
|
|
|
|
Year endedDecember
31, |
|
|
Market Segment |
|
2017 |
|
2016 |
|
$Change |
|
%Change |
|
2017 |
|
2016 |
|
$Change |
|
%Change |
Infusion
Consumables |
|
$ |
119.7 |
|
|
$ |
82.1 |
|
|
$ |
37.6 |
|
|
45.8 |
% |
|
$ |
365.6 |
|
|
$ |
324.9 |
|
|
$ |
40.7 |
|
|
12.5 |
% |
IV Solutions** |
|
146.5 |
|
|
— |
|
|
146.5 |
|
|
* |
|
522.0 |
|
|
— |
|
|
522.0 |
|
|
* |
Infusion Systems |
|
87.6 |
|
|
— |
|
|
87.6 |
|
|
* |
|
290.2 |
|
|
— |
|
|
290.2 |
|
|
* |
Critical Care |
|
12.8 |
|
|
13.4 |
|
|
(0.6 |
) |
|
(4.5 |
)% |
|
50.0 |
|
|
53.6 |
|
|
(3.6 |
) |
|
(6.7 |
)% |
Other |
|
3.6 |
|
|
0.2 |
|
|
3.4 |
|
|
1,700.0 |
% |
|
64.8 |
|
|
0.9 |
|
|
63.9 |
|
|
7,100.0 |
% |
|
|
$ |
370.2 |
|
|
$ |
95.7 |
|
|
$ |
274.5 |
|
|
286.8 |
% |
|
$ |
1,292.6 |
|
|
$ |
379.4 |
|
|
$ |
913.2 |
|
|
240.7 |
% |
* Not Applicable**IV Solutions includes $17.0 million and $68.9
million of contract manufacturing to Pfizer for the three and
twelve months ended December 31, 2017, respectively.
Fiscal 2018 Guidance
The Company is modifying its full year 2018 adjusted earnings
per share from a range of $6.05 to $6.65 to a range of $6.60 to
$7.30.
Conference Call
The Company will host a conference call to discuss fourth
quarter and fiscal year 2017 financial results today at 4:30 p.m.
EST (1:30 p.m. PST). The call can be accessed at (800)
936-9761, international (408) 774-4587, conference ID
5885838. 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.
ICU Medical, Inc. (Nasdaq:ICUI) develops, manufactures and sells
innovative medical devices used in vascular therapy, and critical
care applications. ICU Medical's product portfolio includes IV
smart pumps, sets, connectors, closed transfer devices for
hazardous drugs, 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 full year 2018
guidance and that the Company does not expect any material changes
to the financial results and that the Form 10-K will be timely
filed. 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,
unexpected changes in the Company's arrangements with its largest
customers and the Company’s ability to meet expectations regarding
the integration of the Hospira infusion systems business. 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, 2016 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
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)(In thousands, except per share data) |
|
|
|
Year endedDecember
31, |
|
2017 |
|
2016 |
|
2015 |
REVENUES: |
|
|
|
|
|
Net
sales |
$ |
1,292,166 |
|
|
$ |
379,339 |
|
|
$ |
341,254 |
|
Other |
447 |
|
|
33 |
|
|
414 |
|
TOTAL REVENUE |
1,292,613 |
|
|
379,372 |
|
|
341,668 |
|
COST OF GOODS SOLD |
866,518 |
|
|
177,974 |
|
|
160,871 |
|
GROSS
PROFIT |
426,095 |
|
|
201,398 |
|
|
180,797 |
|
OPERATING
EXPENSES: |
|
|
|
|
|
Selling,
general and administrative |
303,953 |
|
|
89,426 |
|
|
83,216 |
|
Research
and development |
51,253 |
|
|
12,955 |
|
|
15,714 |
|
Restructuring, strategic transaction and integration |
77,967 |
|
|
15,348 |
|
|
8,451 |
|
Change in
fair value of contingent earn-out |
8,000 |
|
|
— |
|
|
— |
|
Gain on
sale of building |
— |
|
|
— |
|
|
(1,086 |
) |
Legal
settlements |
— |
|
|
— |
|
|
1,798 |
|
Impairment of assets held for sale |
— |
|
|
728 |
|
|
4,139 |
|
TOTAL OPERATING
EXPENSES |
441,173 |
|
|
118,457 |
|
|
112,232 |
|
(LOSS) INCOME FROM
OPERATIONS |
(15,078 |
) |
|
82,941 |
|
|
68,565 |
|
BARGAIN PURCHASE
GAIN* |
70,890 |
|
|
1,456 |
|
|
— |
|
INTEREST EXPENSE |
(2,047 |
) |
|
(118 |
) |
|
(39 |
) |
OTHER (EXPENSE) INCOME,
net |
(2,482 |
) |
|
885 |
|
|
1,173 |
|
INCOME BEFORE INCOME
TAXES |
51,283 |
|
|
85,164 |
|
|
69,699 |
|
BENEFIT (PROVISION) FOR
INCOME TAXES* |
17,361 |
|
|
(22,080 |
) |
|
(24,714 |
) |
NET INCOME |
$ |
68,644 |
|
|
$ |
63,084 |
|
|
$ |
44,985 |
|
NET INCOME PER
SHARE* |
|
|
|
|
|
Basic |
$ |
3.50 |
|
|
$ |
3.90 |
|
|
$ |
2.84 |
|
Diluted |
$ |
3.29 |
|
|
$ |
3.66 |
|
|
$ |
2.73 |
|
WEIGHTED AVERAGE NUMBER
OF SHARES |
|
|
|
|
|
Basic |
19,614 |
|
|
16,168 |
|
|
15,848 |
|
Diluted |
20,858 |
|
|
17,254 |
|
|
16,496 |
|
________________________________________
* Unaudited balances are subject to change based on final
purchase accounting adjustments. A bargain purchase gain
adjustment of approximately $10 million would impact income tax up
to $1.4 million and net income per diluted share up to $0.48.
ICU MEDICAL, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)(In thousands, except per share data) |
|
|
|
Three months endedDecember
31, |
|
2017 |
|
2016 |
REVENUES: |
|
|
|
Net
sales |
$ |
370,622 |
|
|
$ |
95,680 |
|
Other |
(498 |
) |
|
8 |
|
TOTAL REVENUE |
370,124 |
|
|
95,688 |
|
COST OF GOODS SOLD |
232,634 |
|
|
44,928 |
|
GROSS
PROFIT |
137,490 |
|
|
50,760 |
|
OPERATING
EXPENSES: |
|
|
|
Selling,
general and administrative |
77,141 |
|
|
22,598 |
|
Research
and development |
13,876 |
|
|
2,654 |
|
Restructuring, strategic transaction and integration |
9,934 |
|
|
11,009 |
|
Change in
fair value of contingent earn-out |
(5,000 |
) |
|
— |
|
Impairment of assets held for sale |
— |
|
|
728 |
|
TOTAL OPERATING
EXPENSES |
95,951 |
|
|
36,989 |
|
INCOME FROM
OPERATIONS |
41,539 |
|
|
13,771 |
|
BARGAIN PURCHASE
GAIN* |
(881 |
) |
|
— |
|
INTEREST EXPENSE |
(304 |
) |
|
17 |
|
OTHER (EXPENSE) INCOME,
net |
(452 |
) |
|
301 |
|
INCOME BEFORE INCOME
TAXES |
39,902 |
|
|
14,089 |
|
BENEFIT (PROVISION) FOR
INCOME TAXES* |
9,803 |
|
|
(4,577 |
) |
NET INCOME |
$ |
49,705 |
|
|
$ |
9,512 |
|
NET INCOME PER
SHARE* |
|
|
|
Basic |
$ |
2.47 |
|
|
$ |
0.58 |
|
Diluted |
$ |
2.33 |
|
|
$ |
0.54 |
|
WEIGHTED AVERAGE NUMBER
OF SHARES |
|
|
|
Basic |
20,152 |
|
|
16,330 |
|
Diluted |
21,342 |
|
|
17,551 |
|
________________________________________
* Unaudited balances are subject to change based on final
purchase accounting adjustments. A bargain purchase gain
adjustment of approximately $10 million would impact income tax up
to $1.4 million and net income per diluted share up to $0.48.
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 net sales,
adjusted gross profit, adjusted gross profit margin, 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.
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.
Legal settlement: Occasionally, we are involved in legal
proceedings that may result in one-time settlements. We exclude
these settlements as they have no direct correlation to the
operation of our ongoing business.
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.
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.
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.
Impairment of assets held for sale: We have excluded the effect
of the impairment on assets held for sale in calculating our
non-GAAP adjusted EBITDA and non-GAAP adjusted earnings per share.
Impairments on assets no longer used in operations are not
reflective of our ongoing business and operating results.
Adjusted Diluted EPS excludes from diluted EPS, net of tax,
interest, net, intangible asset amortization expense, stock
compensation expense, restructuring, strategic transaction and
integration, adjustment to reverse the cost recognition related to
the purchase accounting write-up of inventory to fair market value,
legal settlement, disposition of certain assets, change in fair
value of earn-out, impairment of assets held for sale, bargain
purchase gain, which was tax free and the impact of tax reform.
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) |
|
|
|
Adjusted EBITDA |
|
Three months EndedDecember
31, |
|
Year EndedDecember
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
GAAP net income |
$ |
49,705 |
|
|
$ |
9,512 |
|
|
$ |
68,644 |
|
|
$ |
63,084 |
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
Interest,
net |
(638 |
) |
|
— |
|
|
221 |
|
|
— |
|
Stock
compensation expense |
5,965 |
|
|
3,778 |
|
|
19,352 |
|
|
15,242 |
|
Depreciation and amortization expense |
19,057 |
|
|
4,699 |
|
|
66,569 |
|
|
19,050 |
|
Restructuring, strategic transaction and integration |
9,934 |
|
|
11,009 |
|
|
77,967 |
|
|
15,348 |
|
Adjustment to reverse the cost recognition related to the purchase
accounting write-up of inventory to fair market value |
— |
|
|
— |
|
|
66,313 |
|
|
— |
|
Legal
settlement |
— |
|
|
— |
|
|
809 |
|
|
— |
|
Bargain
purchase gain |
881 |
|
|
— |
|
|
(70,890 |
) |
|
(1,456 |
) |
Change in
fair value of contingent earn-out |
(5,000 |
) |
|
— |
|
|
8,000 |
|
|
— |
|
Disposition of certain assets |
— |
|
|
— |
|
|
2,880 |
|
|
— |
|
Impairment of assets held for sale |
— |
|
|
728 |
|
|
— |
|
|
728 |
|
Benefit
(Provision) for income taxes |
(9,803 |
) |
|
4,577 |
|
|
(17,361 |
) |
|
22,080 |
|
Total non-GAAP
adjustments |
20,396 |
|
|
24,791 |
|
|
153,860 |
|
|
70,992 |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
70,101 |
|
|
$ |
34,303 |
|
|
$ |
222,504 |
|
|
$ |
134,076 |
|
|
Adjusted diluted earnings per
share |
|
Three months endedDecember
31, |
|
Year endedDecember
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
GAAP diluted
earnings per share |
$ |
2.33 |
|
|
$ |
0.54 |
|
|
$ |
3.29 |
|
|
$ |
3.66 |
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
Interest,
net |
$ |
(0.03 |
) |
|
$ |
— |
|
|
$ |
0.01 |
|
|
$ |
— |
|
Stock
compensation expense |
$ |
0.28 |
|
|
$ |
0.22 |
|
|
$ |
0.93 |
|
|
$ |
0.88 |
|
Amortization expense |
$ |
0.19 |
|
|
$ |
0.04 |
|
|
$ |
0.72 |
|
|
$ |
0.16 |
|
Restructuring, strategic transaction and integration |
$ |
0.47 |
|
|
$ |
0.63 |
|
|
$ |
3.74 |
|
|
$ |
0.89 |
|
Adjustment to reverse the cost recognition related to the purchase
accounting write-up of inventory to fair market value |
$ |
— |
|
|
$ |
— |
|
|
$ |
3.18 |
|
|
$ |
— |
|
Legal
settlement |
$ |
— |
|
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
— |
|
Bargain
purchase gain |
$ |
0.04 |
|
|
$ |
— |
|
|
$ |
(3.4 |
) |
|
$ |
(0.08 |
) |
Change in
fair value of contingent earn-out |
$ |
(0.23 |
) |
|
$ |
— |
|
|
$ |
0.38 |
|
|
$ |
— |
|
Disposition of certain assets |
$ |
— |
|
|
$ |
— |
|
|
$ |
0.14 |
|
|
$ |
— |
|
Impairment of assets held for sale |
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
$ |
0.04 |
|
Estimated
income tax impact from adjustments and impact from tax reform
(1) |
$ |
(0.07 |
) |
|
$ |
(0.27 |
) |
|
$ |
(2.58 |
) |
|
$ |
(0.67 |
) |
Adjusted diluted
earnings per share |
$ |
2.98 |
|
|
$ |
1.20 |
|
|
$ |
6.45 |
|
|
$ |
4.88 |
|
_______________________________________________
(1) Includes additional tax expense of $3.1 million for
both the three months and year ended December 31, 2017 relating to
new U.S. tax legislation. The additional tax expense includes
an estimated one-time transition tax payable of $2.0 million,
payable over an eight year period with 8% due in each of the first
five years and a tax expense of $1.1 million related to the
remeasurement of deferred tax balances due to the lower corporate
tax rate at which they are expected to reverse in the future.
ICU Medical, Inc. and
SubsidiariesReconciliation of GAAP to Non-GAAP
Financial Measures - Fiscal Year 2018 Outlook
(Unaudited)(In millions, except per share data) |
|
|
Low End of Guidance |
|
High End of Guidance |
GAAP diluted
earnings per share |
$ |
2.94 |
|
|
$ |
3.64 |
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
Stock
compensation expense |
$ |
1.09 |
|
|
$ |
1.09 |
|
Amortization
expense |
$ |
0.75 |
|
|
$ |
0.75 |
|
Restructuring, strategic transaction and integration |
$ |
2.79 |
|
|
$ |
2.79 |
|
Estimated income
tax impact from adjustments |
$ |
(0.97 |
) |
|
$ |
(0.97 |
) |
Adjusted diluted
earnings per share |
$ |
6.60 |
|
|
$ |
7.30 |
|
|
|
|
|
|
|
|
|
CONTACT:ICU Medical, Inc.Scott Lamb, Chief Financial
Officer(949) 366-2183
ICR, Inc.John Mills, Partner(646) 277-1254
ICU Medical (NASDAQ:ICUI)
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