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ICU Medical, Inc. Announces Fourth Quarter and Fiscal Year 2016 Results

/EIN News/ -- SAN CLEMENTE, Calif., March 01, 2017 (GLOBE NEWSWIRE) -- 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 fourth quarter and fiscal year ended December 31, 2016.

Fourth Quarter 2016 Results
Fourth quarter 2016 revenue was $95.7 million, compared to $90.4 million in the same period last year. GAAP net income for the fourth quarter of 2016 was $9.5 million, or $0.54 per diluted share, as compared to GAAP net income of $5.5 million, or $0.33 per diluted share, for the fourth quarter of 2015. Adjusted diluted earnings per share for the fourth quarter of 2016 were $1.20 as compared to $0.96 for the fourth quarter of 2015. Also, adjusted EBITDA was $34.3 million for the fourth quarter of 2016 as compared to $30.1 million for the fourth quarter of 2015.

Full Fiscal Year 2016 Results
Fiscal year 2016 revenue was $379.4 million, compared to $341.7 million in the same period last year. GAAP net income for fiscal year 2016 was $63.1 million, or $3.66 per diluted share, as compared to GAAP net income of $45.0 million, or $2.73 per diluted share, for fiscal year 2015. Adjusted diluted earnings per share for fiscal year 2016 were $4.88 as compared to $3.96 for fiscal year 2015.  Also, adjusted EBITDA was $134.1 million for fiscal year 2016 as compared to $113.9 million for fiscal year 2015.

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, "We are pleased with our revenue, adjusted EBITDA, and adjusted earnings per share results in the fourth quarter. Our growth was driven by continued strength in our Direct Channels for infusion therapy and oncology market segments."

Revenue for the three and twelve months ended December 31, 2016 and 2015 were as follows:

                                                                       
      (dollars in millions)
      Three months ended December 31, 2016     Three months ended December 31, 2015      
Market Segment     Direct     OEM     Total     Direct     OEM     Total     Total Change
Infusion Therapy     $ 43.5       $ 25.9       $ 69.4       $ 36.7       $ 28.7       $ 65.4       $ 4.0  
Critical Care     13.3       0.1       13.4       13.0             13.0       0.4  
Oncology     9.5       3.2       12.7       7.3       4.3       11.6       1.1  
Other     0.1       0.1       0.2       0.3       0.1       0.4       (0.2 )
      $ 66.4       $ 29.3       $ 95.7       $ 57.3       $ 33.1       $ 90.4       $ 5.3  
                                                                       
       
      (dollars in millions)
      Year ended December 31, 2016     Year ended December 31, 2015      
Market Segment     Direct     OEM     Total     Direct     OEM     Total     Total Change
Infusion Therapy     $ 162.5       $ 110.1       $ 272.6       $ 132.6       $ 112.1       $ 244.7       $ 27.9  
Critical Care     53.5       0.1       53.6       54.3             54.3       (0.7 )
Oncology     37.6       14.7       52.3       26.9       14.6       41.5       10.8  
Other     0.7       0.2       0.9       1.0       0.2       1.2       (0.3 )
      $ 254.3       $ 125.1       $ 379.4       $ 214.8       $ 126.9       $ 341.7       $ 37.7  
                                                                       

The Company ended the fourth quarter with a strong balance sheet. As of December 31, 2016, cash, cash equivalents and investment securities totaled $445.1 million and working capital was $528.6 million. Additionally, the Company generated operating cash flow of $89.9 million for the fiscal year of 2016.

Fiscal Year 2017 Guidance

For the fiscal year of 2017, the Company expects revenue to be in the range of $1.2 billion to $1.25 billion; adjusted diluted earnings per share to be in the range of $3.55 to $3.90, and adjusted EBITDA to be in the range of $165 million to $175 million.

ICU Medical Conference Call

ICU Medical, Inc. invites you to review the presentation here.

The Company will be conducting a conference call  at 4:30 p.m. EST (1:30 p.m. PST), today, Wednesday, March  1, 2017. The call can be accessed at 800-936-9761, international 408-774-4587, conference ID 72955804. 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 for replay.

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 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 2017 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, unexpected changes in the Company's arrangements with its largest customers and the Company’s ability to meet expectations regarding 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 Information contained in this press release is 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
(Amounts in thousands, except per share data)
(unaudited)
       
      December 31,
      2016       2015
ASSETS              
CURRENT ASSETS:              
Cash and cash equivalents     $ 445,082         $ 336,164  
Short-term investment securities             41,233  
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES     445,082         377,397  
Accounts receivable, net     56,161         57,847  
Inventories     49,264         43,632  
Prepaid income taxes     11,235         14,366  
Prepaid expenses and other current assets     7,355         7,631  
Assets held for sale             4,134  
Total current assets     569,097         505,007  
               
PROPERTY AND EQUIPMENT, net     85,696         74,320  
GOODWILL     5,577         6,463  
INTANGIBLE ASSETS, net     22,383         23,936  
DEFERRED INCOME TAXES     21,935         17,099  
TOTAL ASSETS     $ 704,688         $ 626,825  
LIABILITIES AND STOCKHOLDERS’ EQUITY              
CURRENT LIABILITIES:              
Accounts payable     $ 14,641         $ 13,670  
Accrued liabilities     25,896         28,948  
Total current liabilities     40,537         42,618  
               
LONG-TERM LIABILITIES     1,107         1,476  
DEFERRED INCOME TAXES     1,370         1,372  
INCOME TAX LIABILITY     1,519         1,488  
COMMITMENTS AND CONTINGENCIES              
STOCKHOLDERS’ EQUITY:              
Convertible preferred stock              
Common stock     1,633         1,608  
Additional paid-in capital     162,828         145,125  
Treasury stock, at cost     (14 )        
Retained earnings     516,980         453,896  
Accumulated other comprehensive loss     (21,272 )       (20,758 )
Total stockholders’ equity     660,155         579,871  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 704,688         $ 626,825  


     
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(unaudited)
     
    Year ended December 31,
    2016     2015     2014
REVENUES:                
Net sales   $ 379,339       $ 341,254       $ 308,770  
Other   33       414       490  
TOTAL REVENUE   379,372       341,668       309,260  
COST OF GOODS SOLD   177,974       160,871       157,859  
GROSS PROFIT   201,398       180,797       151,401  
OPERATING EXPENSES:                
Selling, general and administrative   89,426       83,216       88,939  
Research and development   12,955       15,714       18,332  
Restructuring and strategic transaction   15,348       8,451       5,093  
Gain on sale of building         (1,086 )      
Legal settlements         1,798        
Impairment of assets held for sale   728       4,139        
TOTAL OPERATING EXPENSES   118,457       112,232       112,364  
INCOME FROM OPERATIONS   82,941       68,565       39,037  
BARGAIN PURCHASE GAIN   1,456              
OTHER INCOME   767       1,134       755  
Income before income taxes   85,164       69,699       39,792  
PROVISION FOR INCOME TAXES   (22,080 )     (24,714 )     (13,457 )
NET INCOME   $ 63,084       $ 44,985       $ 26,335  
NET INCOME PER SHARE                
Basic   $ 3.90       $ 2.84       $ 1.72  
Diluted   $ 3.66       $ 2.73       $ 1.68  
WEIGHTED AVERAGE NUMBER OF SHARES                
Basic   16,168       15,848       15,282  
Diluted   17,254       16,496       15,647  


       
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(unaudited)
       
      Three months ended December 31,
      2016       2015
REVENUES:              
Net sales     $ 95,680         $ 90,378  
Other     8         9  
TOTAL REVENUE     95,688         90,387  
COST OF GOODS SOLD     44,928         42,130  
Gross profit     50,760         48,257  
OPERATING EXPENSES:              
Selling, general and administrative     22,598         22,519  
Research and development     2,654         4,057  
Restructuring and strategic transaction     11,009         5,040  
Impairment of assets held for sale     728         4,139  
Total operating expenses     36,989         35,755  
Income from operations     13,771         12,502  
OTHER INCOME     318         139  
Income before income taxes     14,089         12,641  
PROVISION FOR INCOME TAXES     (4,577 )       (7,178 )
NET INCOME     $ 9,512         $ 5,463  
NET INCOME PER SHARE              
Basic     $ 0.58         $ 0.34  
Diluted     $ 0.54         $ 0.33  
WEIGHTED AVERAGE NUMBER OF SHARES              
Basic     16,331         16,020  
Diluted     17,563         16,697  


       
ICU MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
       
      Year ended December 31,
      2016       2015       2014
CASH FLOWS FROM OPERATING ACTIVITIES:                      
Net income     $ 63,084         $ 44,985         $ 26,335  
Adjustments to reconcile net income to net cash provided by operating activities:                      
Depreciation and amortization     19,050         18,073         19,447  
Provision for doubtful accounts             54         34  
Provision for warranty and returns     559         52         (360 )
Stock compensation     15,242         12,827         9,592  
Loss (gain) on disposal of property and equipment     59         (1,106 )       8  
Bond premium amortization     1,355         1,670         2,188  
Impairment of assets held for sale     728         4,139          
Bargain purchase gain     (1,456 )                
Other     75                  
Changes in operating assets and liabilities:                      
Accounts receivable     744         (20,515 )       4,912  
Inventories     (5,501 )       (8,337 )       (3,836 )
Prepaid expenses and other assets     (3,028 )       (1,832 )       1,970  
Accounts payable     (463 )       3,118         (621 )
Accrued liabilities     (1,221 )       9,454         2,344  
Income taxes, including excess tax benefits and deferred income taxes     714         1,613         4,327  
Net cash provided by operating activities     89,941         64,195         66,340  
CASH FLOWS FROM INVESTING ACTIVITIES:                      
Purchases of property and equipment     (23,361 )       (12,984 )       (16,604 )
Proceeds from sale of assets             3,592         5  
Proceeds from the disposal of assets held for sale, net     3,268                  
Intangible asset additions     (1,192 )       (951 )       (989 )
Business acquisitions, net of cash acquired     (2,584 )       (56,786 )        
Proceeds from sale of business             28,970          
Purchases of investment securities     (118,384 )       (56,137 )       (93,588 )
Proceeds from sale of investment securities     158,534         83,054         89,426  
Net cash provided by (used in) investing activities     16,281         (11,242 )       (21,750 )
CASH FLOWS FROM FINANCING ACTIVITIES:                      
Proceeds from exercise of stock options     17,346         15,042         16,998  
Proceeds from employee stock purchase plan     2,361         2,162         2,485  
Purchase of treasury stock     (17,235 )       (1,523 )       (5,836 )
Net cash provided by financing activities     2,472         15,681         13,647  
Effect of exchange rate changes on cash     224         (8,282 )       (8,447 )
NET INCREASE IN CASH AND CASH EQUIVALENTS     108,918         60,352         49,790  
CASH AND CASH EQUIVALENTS, beginning of period     336,164         275,812         226,022  
CASH AND CASH EQUIVALENTS, end of period     $ 445,082         $ 336,164         $ 275,812  
                                   

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:

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.

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.

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.

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.

Gain on sale of building: Occasionally, we may sell 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.

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.

Impairment of assets held for saleWe 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.

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, gain on sale of building, legal settlement, impairment of assets held for sale 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 Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in thousands, except per share data)
(unaudited)
     
     Adjusted EBITDA
     Q4      Year Ended
    2016     2015     2016     2015
GAAP net income   $ 9,512       $ 5,463       $ 63,084       $ 44,985  
                       
Non-GAAP adjustments:                      
Stock compensation expense   3,778       3,522       15,242       12,827  
Depreciation and amortization expense   4,699       4,807       19,050       18,073  
Restructuring and strategic transaction expense   11,009       5,040       15,348       8,451  
Gain on sale of building                     (1,086 )
Legal settlements                     1,798  
Impairment of assets held for sale   728       4,139       728       4,139  
Bargain purchase gain               (1,456 )      
Provision for income taxes   4,577       7,178       22,080       24,714  
Total non-GAAP adjustments   24,791       24,686       70,992       68,916  
                       
Adjusted EBITDA   $ 34,303       $ 30,149       $ 134,076       $ 113,901  
                       
                       
     Adjusted diluted earnings per share
     Q4      Year Ended
    2016     2015     2016     2015
GAAP diluted earnings per share   $ 0.54       $ 0.33       $ 3.66       $ 2.73  
                       
Non-GAAP adjustments:                      
Stock compensation expense   $ 0.22       $ 0.21       $ 0.88       $ 0.78  
Amortization expense   $ 0.04       $ 0.04       $ 0.16       $ 0.13  
Restructuring and strategic transaction expense   $ 0.63       $ 0.30       $ 0.89       $ 0.51  
Gain on sale of building   $       $       $       $ (0.07 )
Legal settlements   $       $       $       $ 0.11  
Impairment of assets held for sale   $ 0.04       $ 0.25       $ 0.04       $ 0.25  
Bargain purchase gain   $       $       $ (0.08 )     $  
Estimated income tax impact from adjustments   $ (0.27 )     $ (0.17 )     $ (0.67 )     $ (0.48 )
Adjusted diluted earnings per share   $ 1.20       $ 0.96       $ 4.88       $ 3.96  


             
ICU Medical, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures - Fiscal Year 2017 Outlook
(In millions, except per share data)
(unaudited)
             
    Low End of Guidance       High End of Guidance
GAAP net income   $ 59         $ 66  
             
Non-GAAP adjustments:            
Stock compensation expense   18         18  
Depreciation and amortization expense   62         62  
Provision for income taxes   26         29  
Total non-GAAP adjustments   106         109  
             
Adjusted EBITDA   $ 165         $ 175  
             
             
             
             
GAAP diluted earnings per share   $ 2.89         $ 3.24  
             
Non-GAAP adjustments:            
Stock compensation expense   $ 0.86         $ 0.86  
Amortization expense   $ 0.14         $ 0.14  
Estimated income tax impact from adjustments   $ (0.34 )       $ (0.34 )
Adjusted diluted earnings per share   $ 3.55         $ 3.90  


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

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

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