ICU Medical(ICUI) - 2025 Q2 - Quarterly Report

Forward-Looking Statements This section outlines forward-looking statements, covered by safe harbor provisions, and identifies various risks and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are covered by safe harbor provisions and are subject to known and unknown risks and uncertainties[8][9] - Key risks include competition, declining demand, inability to fund product development, macroeconomic factors (inflation, interest rates, foreign exchange), changes in trade/tax policies (tariffs on Mexico/Costa Rica), healthcare cost pressures, FDA disruptions, cybersecurity, supply chain issues, dependence on third-party suppliers, and challenges from the Smiths Medical acquisition[11][12] - A 2025 FDA Warning Letter regarding MedFusion™ Model 4000 Syringe Infusion Pump and CADD™ Solis VIP Ambulatory Infusion Pump modifications could impact continued commercial activity[12] PART I. Financial Information This section provides the company's unaudited condensed consolidated financial information and management's analysis Item 1. Financial Statements (Unaudited) This section presents ICU Medical's unaudited condensed consolidated financial statements and detailed explanatory notes Condensed Consolidated Balance Sheets This section presents the company's unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Assets: | | | | | Cash and cash equivalents | $300,025 | $308,566 | $(8,541) | | Accounts receivable, net | $179,495 | $182,828 | $(3,333) | | Inventories | $616,474 | $584,676 | $31,798 | | Assets held for sale | — | $284,382 | $(284,382) | | TOTAL CURRENT ASSETS | $1,180,115 | $1,441,983 | $(261,868) | | TOTAL ASSETS | $4,107,389 | $4,203,931 | $(96,542) | | Liabilities & Equity: | | | | | TOTAL CURRENT LIABILITIES | $482,777 | $556,182 | $(73,405) | | LONG-TERM DEBT | $1,337,731 | $1,531,858 | $(194,127) | | TOTAL STOCKHOLDERS' EQUITY | $2,115,776 | $1,965,235 | $150,541 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $4,107,389 | $4,203,931 | $(96,542) | Condensed Consolidated Statements of Operations This section presents the company's unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share) | Metric (in thousands, except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | TOTAL REVENUES | $548,866 | $596,455 | $1,153,568 | $1,163,110 | | GROSS PROFIT | $208,064 | $207,428 | $418,173 | $392,672 | | INCOME (LOSS) FROM OPERATIONS | $10,587 | $7,692 | $23,475 | $(2,963) | | NET INCOME (LOSS) | $35,338 | $(21,406) | $19,862 | $(60,877) | | Basic EPS | $1.43 | $(0.88) | $0.81 | $(2.51) | | Diluted EPS | $1.43 | $(0.88) | $0.80 | $(2.51) | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's unaudited condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET INCOME (LOSS) | $35,338 | $(21,406) | $19,862 | $(60,877) | | Other comprehensive income (loss), net of tax | $72,753 | $(22,247) | $106,759 | $(38,704) | | COMPREHENSIVE INCOME (LOSS) | $108,091 | $(43,653) | $126,621 | $(99,581) | Condensed Consolidated Statements of Stockholders' Equity This section presents the company's unaudited condensed consolidated statements of stockholders' equity for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balance, January 1, 2025 | Balance, June 30, 2025 | Balance, January 1, 2024 | Balance, June 30, 2024 | | :-------------------- | :----------------------- | :--------------------- | :----------------------- | :--------------------- | | Common Stock (Amount) | $2,452 | $2,469 | $2,414 | $2,443 | | Additional Paid-in Capital | $1,412,118 | $1,435,935 | $1,366,493 | $1,380,703 | | Treasury Stock | $(92) | $(6) | $(262) | $(518) | | Retained Earnings | $690,158 | $710,020 | $807,846 | $746,969 | | Accumulated Other Comprehensive Loss | $(139,401) | $(32,642) | $(53,081) | $(91,785) | | Total Stockholders' Equity | $1,965,235 | $2,115,776 | $2,123,410 | $2,037,812 | Condensed Consolidated Statements of Cash Flows This section presents the company's unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $62,538 | $127,744 | | Net cash provided by (used in) investing activities | $170,648 | $(39,554) | | Net cash used in financing activities | $(251,351) | $(37,229) | | NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | $(8,541) | $48,426 | | CASH AND CASH EQUIVALENTS, end of period | $300,025 | $302,648 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, new pronouncements, and specific financial line items Note 1: Basis of Presentation The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, reflecting normal recurring adjustments - Financial statements are unaudited and prepared under U.S. GAAP and SEC rules, including normal recurring adjustments[31] - ICU Medical develops, manufactures, and sells innovative medical products for infusion therapy, vascular access, and vital care, including IV pumps, sets, connectors, catheters, and respiratory/anesthesia products[32] - Certain prior-year financial statement reclassifications were made for presentation consistency, with no impact on reported results[33] Note 2: New Accounting Pronouncements This note details recently issued accounting standards not yet adopted by the company, with effective dates ranging from 2025 to 2027 - The company is assessing the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Taxes), and ASU 2024-03 (Disaggregation of Income Statement Expenses)[34][35][36][37] - ASU 2023-09 (Income Taxes) will be effective for annual periods beginning after December 15, 2024, and ASU 2024-03 (Disaggregation of Income Statement Expenses) will be effective for annual periods beginning after December 15, 2026[35][36] Note 3: Restructuring, Strategic Transaction and Integration Restructuring, strategic transaction, and integration expenses slightly decreased for the three and six months ended June 30, 2025, compared to 2024 Restructuring, Strategic Transaction and Integration Expenses (in millions) | Expense Category (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Restructuring, Strategic Transaction and Integration Expenses | $16.2 | $17.1 | $32.9 | $33.2 | | Restructuring Charges | $8.2 | $7.7 | $15.0 | $13.0 | | Strategic Transaction and Integration Expenses | $8.0 | $9.4 | $17.9 | $20.2 | - Restructuring charges for 2025 were primarily related to facility closure costs and severance costs[39] - Strategic transaction and integration expenses in 2025 were primarily related to ongoing consulting and employee costs for Smiths Medical integration, and transaction costs for the sale of a 60% ownership in the IV Solutions business[41] Note 4: Assets Held For Sale and Disposal of Business ICU Medical divested a controlling interest in its IV Solutions business to OPF, recognizing a total gain of $41.8 million and retaining a 40% equity method investment - On November 12, 2024, ICU Medical entered an agreement to divest a controlling interest in its IV Solutions business to Otsuka Pharmaceutical Factory America, Inc. (OPF)[42] - On May 1, 2025, ICU Medical sold a 60% ownership interest in the Otsuka ICU Medical LLC joint venture for preliminary cash proceeds of $209.5 million[45][46] - The transaction resulted in a total gain of $41.8 million, comprising a $45.6 million gain from the disposal, a $16.4 million gain from the retained 40% interest, and a $20.2 million unfavorable contract liability[50] - ICU Medical retains a 40% ownership interest in the joint venture, accounted for as an equity method investment, and provides commercial, logistics, manufacturing, and administrative services for up to five years[45][46][52] Note 5: Revenue Revenue is primarily recognized upon product shipment for consumables, infusion systems, and vital care products, and at the start of the license term for software - Revenue is generally recognized upon transfer of control at shipment for products and at the start of the license term for software[56] - Variable consideration, primarily distributor chargebacks and rebates, is estimated using historical data and inventory levels, and recorded as a reduction of accounts receivable[57][58][59][60][61][63][64] Revenue by Product Line (in thousands) | Product Line (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Consumables | $273,133 | $261,816 | $539,359 | $505,855 | | Infusion Systems | $167,696 | $163,638 | $333,996 | $320,976 | | Vital Care | $108,037 | $171,001 | $280,213 | $336,279 | | Total Revenues | $548,866 | $596,455 | $1,153,568 | $1,163,110 | Revenue by Geography (in thousands) | Geography (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $335,432 | $383,140 | $723,676 | $749,295 | | Europe, the Middle East and Africa | $99,059 | $95,310 | $194,747 | $193,699 | | APAC | $58,404 | $61,224 | $117,816 | $113,077 | | Other Foreign | $55,971 | $56,781 | $117,329 | $107,039 | | Total Revenues | $548,866 | $596,455 | $1,153,568 | $1,163,110 | Note 6: Segment Data The company operates as a single operating and reportable segment, as discrete financial information is not provided to the chief operating decision maker at the product-line level - The company has a single operating and reportable segment because discrete financial information (beyond revenue and standard cost) is not allocated to individual product lines for the CODM[71][73] - The chief executive officer, as CODM, uses consolidated net profit (loss) to manage business activities and allocate capital resources[75] - A single distributor accounted for 19% of consolidated worldwide net sales for the three months ended June 30, 2025, and 18% for the six months ended June 30, 2025[77] Geographic Long-Lived Assets (in thousands) | Geographic Long-Lived Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------------- | :------------ | :---------------- | | Costa Rica | $160,676 | $156,149 | | Mexico | $117,835 | $111,043 | | Other LATAM | $64,060 | $55,451 | | Total Foreign | $454,101 | $425,096 | | United States | $628,671 | $610,547 | | Worldwide Total | $1,082,772 | $1,035,643 | Note 7: Leases The company recognizes operating lease ROU assets and liabilities based on the present value of future minimum lease payments, using its incremental borrowing rate - Lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments, using the incremental borrowing rate[81] - Lease terms range from one to fifteen years, with options to extend for up to five additional years, though these are not included in current lease terms unless reasonably certain[82] Lease Cost (in thousands) | Lease Cost (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $5,103 | $5,638 | $10,129 | $11,452 | | Finance lease cost — interest | $107 | $47 | $161 | $80 | | Finance lease cost — reduction of ROU asset | $623 | $301 | $812 | $555 | | Short-term lease cost | $5 | — | $7 | — | | Total lease cost | $5,838 | $5,986 | $11,109 | $12,087 | Lease Liabilities (in thousands) | Lease Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Total operating lease liabilities | $62,632 | $56,472 | | Total finance lease liabilities | $4,588 | $3,398 | Note 8: Net Income (Loss) Per Share Basic EPS is calculated by dividing net income (loss) by weighted-average common shares outstanding, with diluted EPS including dilutive securities unless anti-dilutive - Basic EPS is calculated by dividing net income (loss) by weighted-average common shares outstanding[88] - Diluted EPS includes dilutive securities (common stock options and unvested restricted stock units) using the treasury stock method, unless a net loss makes them anti-dilutive[88] EPS (per share data) | EPS (per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $35,338 | $(21,406) | $19,862 | $(60,877) | | Basic EPS | $1.43 | $(0.88) | $0.81 | $(2.51) | | Diluted EPS | $1.43 | $(0.88) | $0.80 | $(2.51) | Note 9: Derivatives and Hedging Activities ICU Medical uses cash flow hedging programs to manage foreign currency exchange rate risk and floating interest rate risk on variable-rate term loans - The company uses cash flow hedging programs to manage foreign currency exchange rate risk and floating interest rate risk on variable-rate term loans[91] - Foreign exchange forward contracts, with a total notional amount of $137.6 million as of June 30, 2025, hedge exposures in various currencies with an average term of nine months[93] - Interest rate swaps are used to convert floating-rate term loans to fixed rates, with notional amounts of approximately $197.4 million (Term Loan A swap), $140.6 million (Term Loan B swap), and an additional $300.0 million swap hedging both term loans[95][96][97] Derivative Fair Values (in thousands) | Derivative Fair Values (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total Assets (Derivatives) | $3,434 | $23,478 | | Total Liabilities (Derivatives) | $5,055 | $7,391 | Note 10: Fair Value Measurements Fair value measurements are categorized into Level 1, 2, or 3 inputs, with recurring measurements including contingent earn-out liabilities and derivative financial instruments - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[101] - The contingent earn-out liability for the Smiths Medical acquisition was reduced to zero in 2024 because Smiths no longer met the required minimum beneficial ownership percentage[100] - Foreign exchange contracts and interest rate swaps are classified as Level 2 fair value measurements, relying on observable market inputs[104][105] - A nonrecurring Level 3 fair value measurement was made for the retained equity method investment in Otsuka ICU Medical LLC following the partial sale of the IV Solutions business[107] Note 11: Investment Securities ICU Medical holds equity method investments in unconsolidated affiliates, including a 40% ownership interest in Otsuka ICU Medical LLC - ICU Medical applies the equity method for investments in unconsolidated affiliates where it has significant influence but not a controlling interest[108] - On April 24, 2025, the company formed Otsuka ICU Medical LLC (joint venture) and retained a 40% ownership interest, with an initial investment of $125.8 million[109] - Equity in earnings of unconsolidated affiliates was $2.8 million for both the three and six months ended June 30, 2025, with no such balances in 2024[111] Investment Securities (in thousands) | Investment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Otsuka ICU Medical LLC | $128,662 | — | | Other equity method investment | $2,963 | $3,038 | | Total | $131,625 | $3,038 | Note 12: Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets totaled $84.1 million as of June 30, 2025, an increase from $81.5 million at December 31, 2024 Prepaid Expenses and Other Current Assets (in thousands) | Prepaid Expenses and Other Current Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------------------- | :------------ | :---------------- | | Other prepaid expenses and receivables | $29,645 | $17,312 | | Prepaid insurance and property taxes | $6,358 | $10,284 | | VAT/GST receivable | $10,031 | $4,445 | | Interest rate contracts | — | $11,038 | | Prepaid income taxes | $14,810 | $11,244 | | Other | $23,277 | $27,208 | | Total | $84,121 | $81,531 | Note 13: Inventories Inventories are valued at the lower of cost or net realizable value using the FIFO method, and increased to $616.5 million at June 30, 2025 - Inventories are stated at the lower of cost or net realizable value, with cost determined using the FIFO method, including material, labor, and overhead[113] Inventories (in thousands) | Inventories (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Raw materials | $283,874 | $265,275 | | Work in process | $48,317 | $37,528 | | Finished goods | $284,283 | $281,873 | | Total inventories | $616,474 | $584,676 | Note 14: Property, Plant and Equipment Net property, plant and equipment increased to $452.4 million at June 30, 2025, with depreciation expense decreasing due to asset disposals Property, Plant and Equipment (in thousands) | Property, Plant and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :---------------- | | Machinery and equipment | $421,294 | $400,861 | | Land, building and building improvements | $178,951 | $177,089 | | Instruments placed with customers | $142,010 | $124,290 | | Total property, plant and equipment, net | $452,442 | $442,746 | - Depreciation expense for the three months ended June 30, 2025, was $16.9 million (down from $22.3 million in 2024), and for the six months was $33.8 million (down from $44.7 million in 2024)[117] - The decrease in depreciation expense was partly due to the disposal of certain assets related to the sale of a 60% interest of the IV Solutions business[117][218][219] Note 15: Goodwill and Intangible Assets, Net Goodwill increased to $1,501.9 million due to currency translation, while net intangible assets decreased to $698.0 million Goodwill (in thousands) | Goodwill (in thousands) | Amount | | :---------------------- | :----- | | Balance as of January 1, 2025 | $1,432,772 | | Currency translation | $69,148 | | Balance as of June 30, 2025 | $1,501,920 | Intangible Assets, Net (in thousands) | Intangible Assets, Net (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Developed technology | $365,588 | $391,671 | | Non-contractual customer relationships | $290,660 | $310,137 | | Total intangible assets | $698,009 | $740,789 | - Intangible asset amortization expense was $32.7 million for the three months ended June 30, 2025 (vs. $33.1 million in 2024) and $65.3 million for the six months ended June 30, 2025 (vs. $66.2 million in 2024)[120] Note 16: Accrued Liabilities Accrued liabilities increased to $313.8 million at June 30, 2025, with the field service corrective action accrual related to the 2021 FDA Warning Letter Accrued Liabilities (in thousands) | Accrued Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Salaries and benefits | $83,464 | $60,815 | | Incentive compensation | $42,796 | $59,445 | | Deferred revenue | $21,919 | $30,358 | | Italy medical device payback provision | $29,287 | $23,937 | | Field service corrective action | $25,488 | $32,844 | | Other | $110,844 | $99,524 | | Total | $313,798 | $306,923 | - The field service corrective action accrual is primarily associated with the 2021 FDA Warning Letter received by Smiths Medical[123] Note 17: Income Taxes The effective tax rate for the three and six months ended June 30, 2025, was 3% and 25% respectively, influenced by the IV Solutions business sale and valuation allowances Effective Tax Rate | Effective Tax Rate | Three months ended June 30, 2025 | Six months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2024 | | :----------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Effective Tax Rate | 3% | 25% | (10)% | (8)% | - The 2025 effective tax rate includes a $6.1 million tax expense from the IV Solutions business sale and a $5.0 million release of unrecognized tax benefits due to statute of limitations expiration[125] - The company recorded a $2.7 million tax benefit and $3.7 million tax expense from changes to the valuation allowance against U.S. federal and state deferred tax assets in the three and six months ended June 30, 2025, respectively, due to recent U.S. cumulative losses[128] - The U.S. enacted the "One Big Beautiful Bill Act" (OBBBA) on July 4, 2025, and the company is currently assessing its impact on consolidated financial statements[130] Note 18: Long-Term Debt ICU Medical's $2.2 billion Credit Agreement includes Term Loan A and B, with $1.3 billion outstanding as of June 30, 2025, and significant prepayments made - The 2022 Credit Agreement includes a $850.0 million Term Loan A (maturing Jan 2027), a $850.0 million Term Loan B (maturing Jan 2029), and a $500.0 million Revolving Credit Facility[133][137][241] - As of June 30, 2025, the outstanding aggregate principal amount of the term loans is $1.3 billion[242] - Total principal payments on Term Loans for the six months ended June 30, 2025, were $247.8 million, including a $200 million prepayment on Term Loan A (from IV Solutions sale proceeds) and a $35 million prepayment on Term Loan B[148][240][249] - The company was in compliance with all financial covenants (Senior Secured Leverage Ratio and Interest Coverage Ratio) as of June 30, 2025[155][242] Long-Term Debt (in thousands) | Long-Term Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Term Loan A — principal | $559,688 | $770,000 | | Term Loan B — principal | $789,500 | $820,000 | | Total carrying value of long-term debt | $1,337,731 | $1,531,858 | Note 19: Stockholders' Equity The Board approved a $100.0 million share purchase plan, with no shares purchased in Q2 2025, and AOCI significantly improved due to foreign currency translation adjustments - A $100.0 million share purchase plan was approved in August 2019, with no purchases made in Q2 2025 or Q2 2024, and the full amount remains available, subject to Credit Agreement limitations[160][259] - For the six months ended June 30, 2025, 61,066 shares were withheld for $8.7 million in tax withholding payments related to employee vested restricted stock units[161][263] Accumulated Other Comprehensive (Loss) Income (in thousands) | Accumulated Other Comprehensive (Loss) Income (in thousands) | January 1, 2025 | June 30, 2025 | | :--------------------------------------------------------- | :-------------- | :------------ | | Foreign Currency Translation Adjustments | $(146,942) | $(25,483) | | Unrealized Losses on Cash Flow Hedges | $5,722 | $(8,978) | | Other Adjustments | $1,819 | $1,819 | | Total AOCI | $(139,401) | $(32,642) | Note 20: Commitments and Contingencies The company is involved in routine legal proceedings and faces contingencies including FDA Warning Letters and the Italy Medical Device Payback legislation - The company is involved in routine legal proceedings, but management does not believe they will have a material adverse impact[164] - As of June 30, 2025, approximately $25.8 million of the $32.6 million accrued for field service corrective actions is related to the 2021 FDA Warning Letter for Smiths Medical's Oakdale facility[167] - A 2025 FDA Warning Letter cited changes to MedFusion™ Model 4000 Syringe Infusion Pump and CADD™ Solis VIP Ambulatory Infusion Pump requiring new 510(k) clearance; no loss contingency is recorded due to uncertain outcome[169] - The company has accrued $29.3 million for potential payments related to the Italy Medical Device Payback (IMDP) legislation, but potential amendments could lead to settlement for less than the original assessed value[168][252] Note 21: Collaborative and Other Arrangements ICU Medical's Manufacturing and Supply Agreement with Pfizer was amended to extend terms through 2027, with Solutions product rights assigned to the joint venture - The Manufacturing and Supply Agreement (MSA) with Pfizer was amended on December 31, 2024, extending terms through 2027 for certain Solutions and Abboject products[172] - ICU's rights and obligations related to Solutions products under the MSA were assigned to the joint venture as of January 24, 2025[172] Note 22: Accounts Receivable Purchase Program ICU Medical has a revolving $150 million uncommitted receivables purchase agreement with BMO Bank, selling $10.0 million in trade receivables for the six months ended June 30, 2025 - The company has a revolving $150 million uncommitted receivables purchase agreement with BMO Bank, N.A., entered in January 2023, to accelerate capital access[173] - The transfer of receivables is intended as a true sale, isolating them from the company and its creditors[173] Accounts Receivable Purchase Program (in thousands) | Accounts Receivable Purchase Program (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Trade receivables sold | $10,009 | $172,755 | $10,009 | $348,447 | | Cash received in exchange for trade receivables sold | $9,978 | $171,682 | $9,978 | $346,282 | | Loss on sale of receivables | $32 | $1,073 | $32 | $2,165 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses ICU Medical's financial condition and results of operations, covering business overview, product offerings, global economic challenges, the IV Solutions business disposition, consolidated results, and liquidity and capital resources Business Overview and Highlights ICU Medical develops and sells innovative medical products across infusion systems, consumables, and critical care, facing global economic challenges and recently divesting its IV Solutions business - Product offerings include Consumables (Infusion Therapy, Oncology, Vascular Access, Tracheostomy), Infusion Systems (LVP, Ambulatory, Syringe pumps, IV Medication Safety Software, Professional Services), and Vital Care (IV Solutions, Hemodynamic Monitoring, General Anesthesia & Respiratory, Temperature Management, Regional Anesthesia/Pain Management)[180][181][182][184][185][186][187][188][189][190][191][192][193][194][196][197][198][199][200] - The company experiences significant impacts from global economic challenges, including fluctuating inflation, increased raw material costs, supply chain disruptions, higher interest rates, and foreign currency volatility[202][206] - On July 31, 2025, the U.S. announced a tariff increase to 15% for certain countries, including Costa Rica, which could materially impact the business, though tariffs did not significantly impact Q2 2025 results[203][204] - On May 1, 2025, the company sold a 60% interest in its IV Solutions business for $209.5 million, using $200.0 million of the proceeds to pay down Term Loan A long-term debt[208] Consolidated Results of Operations Total revenues decreased due to the IV Solutions divestiture, while gross margins improved significantly, and net income improved substantially from a prior-year loss Consolidated Results of Operations (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $548,866 | $596,455 | $1,153,568 | $1,163,110 | | Gross Profit | $208,064 | $207,428 | $418,173 | $392,672 | | Gross Margin | 37.9% | 34.8% | 36.3% | 33.8% | | Income (Loss) from Operations | $10,587 | $7,692 | $23,475 | $(2,963) | | Net Income (Loss) | $35,338 | $(21,406) | $19,862 | $(60,877) | | Gain on Sale of Business | $41,823 | — | $41,823 | — | - Consumables revenue increased by 4.3% (3 months) and 6.6% (6 months) YoY, driven by new customer installations and increased demand[214] - Infusion Systems revenue increased by 2.4% (3 months) and 4.0% (6 months) YoY, primarily due to increased sales of LVP pump hardware and dedicated sets[215] - Vital Care revenue decreased significantly by 36.8% (3 months) and 16.7% (6 months) YoY, primarily due to lower IV Solutions sales following the divestiture of a controlling ownership interest[216] - Gross margins increased primarily due to the impact of the IV Solutions business sale (a lower-margin business), price increases, higher production levels, foreign exchange impact, lower supply chain costs, and integration synergies, partially offset by increased tariff costs[217] - SG&A expenses slightly decreased due to lower depreciation/amortization, compensation costs (offset by service fee income from joint venture), and dealer fees, partially offset by increased stock-based compensation and legal fees[218][219] - Interest expense, net, decreased due to lower SOFR rates and reduced long-term debt principal balances following prepayments[227] - Other income (expense), net, improved significantly, primarily due to foreign exchange gains from the weakening U.S. dollar[228] - The effective tax rate for the six months ended June 30, 2025, was 25%, compared to (8)% in 2024, influenced by the IV Solutions business sale tax expense and valuation allowance changes[230][231][232] - Equity in earnings of unconsolidated affiliates was $2.8 million for the three and six months ended June 30, 2025, related to the 40% share of the joint venture's earnings[237] Liquidity and Capital Resources ICU Medical's liquidity sources include cash, operating cash flows, and borrowing arrangements, with cash decreasing due to debt prepayments and planned capital expenditures reduced - Primary liquidity sources include cash and cash equivalents, cash flows from operations, and access to borrowing arrangements (Senior Secured Credit Facilities and accounts receivable purchase program)[239] - Cash and cash equivalents decreased by $8.5 million from $308.6 million (Dec 31, 2024) to $300.0 million (June 30, 2025), primarily due to $247.8 million in debt prepayments[240][258] - The Senior Secured Credit Facilities include $1.3 billion in outstanding term loans as of June 30, 2025, and a $500.0 million Revolving Credit Facility with no outstanding borrowings[242] - Estimated 2025 planned capital expenditures are $75 million to $95 million, reduced from $90 million to $110 million due to the IV Solutions business disposal[245] - Net cash provided by operating activities for the six months ended June 30, 2025, was $62.5 million, a decrease from $127.7 million in 2024, influenced by changes in accounts receivable, inventories, and accrued liabilities[255][256] - Net cash provided by investing activities for the six months ended June 30, 2025, was $170.6 million, a significant increase from $(39.6) million in 2024, primarily due to $209.5 million in proceeds from the sale of the IV Solutions business[257] Item 3. Quantitative and Qualitative Disclosures About Market Risk ICU Medical is exposed to interest rate risk from variable-rate term loans, partially mitigated by interest rate swaps, and foreign currency exchange rate risk on international revenues and expenses - The company is exposed to interest rate risk from its variable-rate Term Loan A and Term Loan B facilities[262][264] - A hypothetical 1% increase or decrease in the SOFR rate would result in approximately $13.5 million in additional annual interest expense or savings related to the term loans[264] - Interest rate swaps are used to mitigate interest rate risk, effectively converting portions of floating-rate term loans to fixed rates[265] - Foreign currency exchange rate risk arises from international revenues and expenses denominated in multiple currencies, managed through foreign exchange forward contracts, though not all exposure is hedged[267][268] - A hypothetical 10% weakening in foreign currency exchange rates would result in an estimated $2.5 million increase in the fair value of outstanding foreign exchange derivative contracts[268] Item 4. Controls and Procedures Management evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of June 30, 2025[271] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[272] - Management acknowledges that controls and procedures provide only reasonable assurance due to inherent limitations and resource constraints[269] PART II. Other Information This section provides other information, including legal proceedings, updated risk factors, unregistered sales of equity securities, and exhibit listings Item 1. Legal Proceedings This section refers to the discussion of legal proceedings in Note 20, which states that routine legal proceedings are not expected to have a material adverse impact - Legal proceedings are discussed in Note 20: Commitments and Contingencies[273] - Management does not believe that the resolution of unsettled legal proceedings will have a material adverse impact on financial position or results of operations[164] Item 1A. Risk Factors This section updates risk factors from the 2024 Annual Report, highlighting risks related to non-U.S. sales and manufacturing, particularly concerning tariffs on imports from Costa Rica and Mexico - No material changes to risk factors from the 2024 Annual Report on Form 10-K, except as updated in this report[274] - Significant portion of revenues derived from non-U.S. sales and products manufactured at non-U.S. facilities (Costa Rica, Mexico) and imported into the U.S., exposing the company to tariff risks[275][277] - On July 31, 2025, the U.S. announced an increase to a 15% baseline reciprocal tariff for certain countries, including Costa Rica, which is likely to have a material impact on costs[278] - Elimination of USMCA exemptions for products manufactured in Mexico would substantially increase tariff expenses[278] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a $100.0 million common stock purchase plan, with no shares purchased in Q2 2025, and the full amount remains available subject to Credit Agreement limitations - A $100.0 million common stock purchase plan was approved in August 2019, with no expiration date[280] - No shares were purchased under the plan during the second quarter of 2025, and the full $100.0 million remains available[280] - Share purchases are limited by the terms and conditions of the Credit Agreement[280] Item 5. Other Information This section confirms no other information to report under sub-items (a) and (b), and no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers - No other information to report under sub-items (a) and (b)[281] - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[281] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements, corporate documents, stock incentive plan amendments, and certifications - The exhibits include various agreements such as the Share Sale and Purchase Agreement, Put Option Deed, and Purchase Agreement related to the IV Solutions business[285] - Corporate governance documents like the Certificate of Incorporation and Bylaws, along with amendments to the stock incentive plan, are filed as exhibits[285] - Certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) and XBRL documents are also included[285] Signature This section contains the signature of Brian M. Bonnell, Chief Financial Officer of ICU Medical, Inc., certifying the filing of the report on August 7, 2025 - The report is signed by Brian M. Bonnell, Chief Financial Officer, on behalf of ICU Medical, Inc.[289] - The filing date of the report is August 7, 2025[289]