Icu Medical Inc 10-Q for FY2020 Q1

About this 10-Q

Headline figures

Icu Medical Inc (ICUI)

10-Q 2020-05-08 For: 2020-03-31

Added on April 11, 2026

Icu Medical Inc filed this 10-Q on May 8, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

951 Calle Amanecer

San Clemente

California

(Address of principal executive offices)

(Zip Code)

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $328.61M; down 0.7% from $330.93M a year earlier
Net income: $16.83M; down 45.7% from net income of $31M a year earlier
Diluted EPS: $0.78; down 45.8% from $1.44 a year earlier

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Delaware		33-0022692
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)



Large accelerated filer	x	Accelerated filer o

Non-accelerated filer o		Smaller reporting company	☐

		Emerging growth company	☐



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.10 per share	ICUI	The Nasdaq Stock Market LLC
Common stock, par value $0.10 per share	ICUI	(Global Select Market)



Class		Outstanding at April 30, 2020
Common		20,832,404



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ICU MEDICAL, INC. AND SUBSIDIARIES Form 10-Q March 31, 2020 Table of Contents

PART I.	Financial Information	Page Number

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets, at March 31, 2020 and December 31, 2019	3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019	4

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019	5

	Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2020 and 2019	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II.	Other Information
Item 1.	Legal Proceedings	40

Item1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 6.	Exhibits	43

	Signature	44



	March 31, 2020			December 31, 2019
	(Unaudited)			(1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	419,557		$	268,670
Short-term investment securities	20,115			23,967
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES	439,672			292,637
Accounts receivable, net of allowance for doubtful accounts of $19,856 at March 31, 2020 and $20,219 at December 31, 2019	198,158			202,219
Inventories	311,604			337,640
Prepaid income tax	18,140			15,720
Prepaid expenses and other current assets	34,601			33,981
TOTAL CURRENT ASSETS	1,002,175			882,197

PROPERTY AND EQUIPMENT, net	455,624			456,085
OPERATING LEASE RIGHT-OF-USE ASSETS	50,430			34,465
GOODWILL	30,767			31,245
INTANGIBLE ASSETS, net	206,837			211,408
DEFERRED INCOME TAXES	21,904			27,998
OTHER ASSETS	49,242			48,984
TOTAL ASSETS	$	1,816,979		$	1,692,382

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	86,348		$	128,629
Accrued liabilities	120,009			117,776
Short-term debt	150,000			—
Income tax liability	944			2,063
TOTAL CURRENT LIABILITIES	357,301			248,468

CONTINGENT EARN-OUT LIABILITY	17,300			17,300
OTHER LONG-TERM LIABILITIES	50,041			32,820
DEFERRED INCOME TAXES	1,985			2,091
INCOME TAX LIABILITY	14,459			14,459
COMMITMENTS AND CONTINGENCIES (Note 18)	—			—
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 — 20,833 shares at March 31, 2020 and 20,743 shares at December 31, 2019 and outstanding — 20,825 shares at March 31, 2020 and 20,742 shares at December 31, 2019	2,083			2,074
Additional paid-in capital	665,679			668,947
Treasury stock, at cost	(1,573		)	(157		)
Retained earnings	738,616			721,782
Accumulated other comprehensive loss	(28,912		)	(15,402		)
TOTAL STOCKHOLDERS' EQUITY	1,375,893			1,377,244
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,816,979		$	1,692,382



	Three months ended March 31,
	2020			2019
TOTAL REVENUES	$	328,607		$	330,932
COST OF GOODS SOLD	207,192			195,629
GROSS PROFIT	121,415			135,303
OPERATING EXPENSES:
Selling, general and administrative	72,305			72,633
Research and development	10,746			12,823
Restructuring, strategic transaction and integration	12,307			24,392
Change in fair value of contingent earn-out	—			(7,700		)
Contract settlement	—			2,783
TOTAL OPERATING EXPENSES	95,358			104,931
INCOME FROM OPERATIONS	26,057			30,372
INTEREST EXPENSE	(196		)	(133		)
OTHER (EXPENSE) INCOME, net	(5,480		)	3,191
INCOME BEFORE INCOME TAXES	20,381			33,430
PROVISION FOR INCOME TAXES	(3,547		)	(2,432		)
NET INCOME	$	16,834		$	30,998
NET INCOME PER SHARE
Basic	$	0.81		$	1.51
Diluted	$	0.78		$	1.44
WEIGHTED AVERAGE NUMBER OF SHARES
Basic	20,780			20,527
Diluted	21,507			21,551



	Common Stock												Accumulated
					Additional								Other
	Shares		Amount		Paid-In Capital			Treasury Stock			Retained Earnings		Comprehensive Loss			Total
Balance, January 1, 2020	20,742		$	2,074	$	668,947		$	(157	)	$	721,782	$	(15,402	)	$	1,377,244
Issuance of restricted stock and exercise of stock options	155		9		(10,207		)	10,758			—		—			560
Tax withholding payments related to net share settlement of equity awards	(64	)	—		—			(12,174		)	—		—			(12,174		)
Stock compensation	—		—		6,939			—			—		—			6,939
Other comprehensive loss, net of tax	—		—		—			—			—		(13,510		)	(13,510		)
Net income	—		—		—			—			16,834		—			16,834
Balance, March 31, 2020	20,833		$	2,083	$	665,679		$	(1,573	)	$	738,616	$	(28,912	)	$	1,375,893



	Accrued Balance January 1, 2020		Charges Incurred		Payments			Accrued Balance March 31, 2020
Severance pay and benefits	$	3,878	$	3,111	$	(2,620	)	$	4,369
Employment agreement buyout	460		—		(186		)	274
Facility closure expenses	1,211		4,062		(3,501		)	1,772
	$	5,549	$	7,173	$	(6,307	)	$	6,415



	For the three months ended March 31,
Geography	2020		2019
Europe, the Middle East and Africa	$	37,928	$	32,378
Other Foreign	60,521		51,361
Total Foreign	98,449		83,739
United States	230,158		247,193
Total Revenues	$	328,607	$	330,932



	For the three months ended March 31,
Product line	2020		2019
Infusion Consumables	$	123,507	$	120,580
Infusion Systems	88,380		84,282
IV Solutions	104,291		113,182
Critical Care	12,429		12,888
Total Revenues	$	328,607	$	330,932



	Contract Liabilities
Beginning balance, January 1, 2020	$	(4,855	)
Equipment revenue recognized	1,802
Equipment revenue deferred due to implementation	(3,990		)
Software revenue recognized	1,235
Software revenue deferred due to implementation	(2,664		)
Ending balance, March 31, 2020	$	(8,472	)

Beginning balance, January 1, 2019	$	(4,282	)
Equipment revenue recognized	448
Equipment revenue deferred due to implementation	(1,343		)
Software revenue recognized	345
Software revenue deferred due to implementation	(1,593		)
Ending balance, March 31, 2019	$	(6,425	)



	Three months ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,834		$	30,998
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	20,957			19,074
Amortization of right-of-use assets	2,305			—
Provision for doubtful accounts	5			2,096
Provision for warranty and returns	(821		)	2,692
Stock compensation	6,939			6,209
Loss on disposal of property and equipment and other assets	562			12,682
Bond premium amortization	34			28
Debt issuance costs amortization	72			72
Change in fair value of contingent earn-out	—			(7,700		)
Product-related charges	2,626			—
Usage of spare parts	4,900			6,362
Other	876			(1,991		)
Changes in operating assets and liabilities:
Accounts receivable	899			(49,534		)
Inventories	19,372			(11,968		)
Prepaid expenses and other assets	2,634			10,319
Other assets	(6,402		)	(7,542		)
Accounts payable	(35,063		)	3,075
Accrued liabilities	465			(34,814		)
Income taxes, including excess tax benefits and deferred income taxes	2,325			(1,068		)
Net cash provided by (used in) operating activities	39,519			(21,010		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(25,463		)	(28,671		)
Proceeds from sale of asset	131			16
Intangible asset additions	(1,958		)	(1,949		)
Purchases of investment securities	(7,082		)	(4,409		)
Proceeds from sale of investment securities	10,900			24,500
Net cash used in investing activities	(23,472		)	(10,513		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term debt	150,000			—
Proceeds from exercise of stock options	560			925
Tax withholding payments related to net share settlement of equity awards	(12,174		)	(18,157		)
Net cash provided by (used in) financing activities	138,386			(17,232		)


Note 1:	Basis of Presentation



	For the three months ended March 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,457	$	2,219
Operating cash flows from finance leases	$	29	$	—

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	19,094	$	98
Finance leases	$	800	$	—



	As of March 31, 2020			As of December 31, 2019
Operating leases
Operating lease right-of-use assets	$	50,430		$	34,465

Accrued liabilities	$	7,544		$	7,362
Other long-term liabilities	45,166			28,896
Total operating lease liabilities	$	52,710		$	36,258

Weighted Average Remaining Lease Term
Operating leases	7.3 years			6.0 years

Weighted Average Discount Rate
Operating leases	5.06		%	5.57		%



	As of March 31, 2020
Financing leases
Financing lease right-of-use assets	$	789

Accrued liabilities	$	188
Other long-term liabilities	601
Total financing lease liabilities	$	789

Weighted Average Remaining Lease Term
Financing leases	4.0 years

Weighted Average Discount Rate
Financing leases	4.32		%



	Operating Leases			Finance Leases
Remainder of 2020	$	7,195		$	174
2021	10,021			218
2022	9,309			218
2023	8,494			218
2024	8,094			25
2025	4,816			—
Thereafter	14,906			—
Total Lease Payments	62,835			853
Less imputed interest	(10,125		)	(64		)
Total	$	52,710		$	789



	Derivatives
	Condensed Consolidated Balance Sheet Location	March 31, 2020			December 31, 2019
Derivatives designated as cash flow hedging instruments
Foreign exchange forward contract:
	Prepaid expenses and other current assets	$	—		$	2,366
	Accrued liabilities	(1,006		)	—
	Other long-term liabilities	(512		)	—
Total derivatives designated as cash flow hedging instruments		$	(1,518	)	$	2,366



	Line Item in the Condensed Consolidated Statements of Operations	Three months ended March 31,
		2020		2019
Derivatives designated as cash flow hedging instruments
Foreign exchange forward contracts	Cost of goods sold	$	692	$	155



	Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives					Amount of Gain Reclassified From Accumulated Other Comprehensive Income into Income
	Three months ended March 31,						Three months ended March 31,
	Three months ended March 31,						Three months ended March 31,
	2020			2019		Location of Gain Reclassified From Accumulated Other Comprehensive Income into Income	2020		2019
Derivatives designated as cash flow hedges:
Foreign exchange forward contract	$	(3,192	)	$	1,010	Cost of goods sold	$	692	$	155
Total derivatives designated as cash flow hedging instruments	$	(3,192	)	$	1,010		$	692	$	155


•	Level 1: quoted prices in active markets for identical assets or liabilities;


•	Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.



	Pursuit
	Earn-out Liability
Accrued balance, January 1, 2020	$	17,300
Change in fair value of earn-out (included in income from operations as a separate line item)	—
Accrued balance, March 31, 2020	$	17,300



	HIS
	Earn-out Liability
Accrued balance, January 1, 2019	$	47,400
Change in fair value of earn-out (included in income from operations as a separate line item)	(7,700		)
Accrued balance, March 31, 2019	$	39,700



Simulation Input	As of March 31, 2020		At Acquisition November 2, 2019
Revenue/Gross Profit Volatility	20.00	%	20.00	%
Discount Rate	15.00	%	15.00	%
Risk Free Rate	1.55	%	1.55	%
Counter Party Risk	6.00	%	6.00	%



Simulation Input	As of March 31, 2019		As of December 31, 2018
Adjusted EBITDA Volatility	30.00	%	30.00	%
WACC	8.25	%	8.25	%
20-year risk free rate	2.63	%	2.87	%
Market price of risk	5.47	%	5.24	%
Cost of debt	4.35	%	5.25	%



	Fair value measurements at March 31, 2020
	Total carrying value		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Assets:
Available for sale securities:
Short-term	$	20,115	$	—	$	20,115	$	—
Total Assets	$	20,115	$	—	$	20,115	$	—

Liabilities:
Earn-out liability	$	17,300	$	—	$	—	$	17,300
Foreign exchange forwards:
Accrued liabilities	1,006		—		1,006		—
Other long-term liabilities	512		—		512		—
Total Liabilities	$	18,818	$	—	$	1,518	$	17,300



	Fair value measurements at December 31, 2019
	Total carrying value		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Assets:
Available for sale securities:
Short-term	$	23,967	$	—	$	23,967	$	—
Foreign exchange forwards:
Prepaid expenses and other current assets	2,366		—		2,366		—
Total Assets	$	26,333	$	—	$	26,333	$	—

Liabilities:
Earn-out liability	$	17,300	$	—	$	—	$	17,300
Total Liabilities	$	17,300	$	—	$	—	$	17,300



	As of March 31, 2020
	Amortized Cost		Unrealized Holding Gains (Losses)		Fair Value
Short-term corporate bonds	$	20,115	$	—	$	20,115

	As of December 31, 2019
	Amortized Cost		Unrealized Holding Gains (Losses)		Fair Value
Short-term corporate bonds	$	23,967	$	—	$	23,967



	March 31, 2020		December 31, 2019
Other prepaid expenses and receivables	15,407		13,778
Deferred costs	6,493		3,332
Prepaid insurance and property taxes	4,548		5,450
VAT/GST receivable	3,913		4,422
Deferred tax charge	1,266		1,266
Deposits	1,316		1,375
Other	1,658		4,358
	$	34,601	$	33,981



	March 31, 2020		December 31, 2019
Raw materials	$	121,674	$	119,709
Work in process	36,291		39,515
Finished goods	153,639		178,416
Total inventories	$	311,604	$	337,640



	March 31, 2020			December 31, 2019
Machinery and equipment	$	241,059		$	219,057
Land, building and building improvements	233,548			230,454
Molds	60,312			60,155
Computer equipment and software	93,475			83,217
Furniture and fixtures	7,416			7,498
Instruments placed with customers⁽¹⁾	74,292			74,434
Construction in progress	77,483			101,425
Total property and equipment, cost	787,585			776,240
Accumulated depreciation	(331,961		)	(320,155		)
Property and equipment, net	$	455,624		$	456,085



	Total
Balance as of January 1, 2020	$	31,245
Currency translation	(478		)
Balance as of March 31, 2020	$	30,767



	Weighted Average	March 31, 2020
	Amortization Life in Years	Cost		Accumulated Amortization		Net
Patents	10	$	22,854	$	13,886	$	8,968
Customer contracts	12	10,093		5,584		4,509
Non-contractual customer relationships	9	56,258		21,102		35,156
Trademarks	4	425		425		—
Trade name	15	18,237		2,555		15,682
Developed technology	13	152,893		27,403		125,490
Non-compete	3	2,500		347		2,153
Total amortized intangible assets		$	263,260	$	71,302	$	191,958

Internally developed software*		$	14,879			$	14,879

Total intangible assets		$	278,139	$	71,302	$	206,837



Remainder of 2020	$	17,424
2021	22,997
2022	22,355
2023	21,512
2024	21,422
2025	15,629
Thereafter	70,619
Total	$	191,958