John F. Mills – Investor Relations Vivek Jain – Chief Executive Officer and Chairman Scott E. Lamb – Chief Financial Officer, Treasurer and Secretary.

Thomas J. Gunderson – Piper Jaffray & Co. Jayson Bedford – Raymond James & Associates Chris Lewis – Roth Capital Partners Lawrence Solow – CJS Securities, Inc. Mitra Ramgopal –Sidoi & Company, LLC.

Good day ladies and gentlemen and welcome to your ICU Medical Incorporated Q3 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would like to now introduce your host for today’s conference Mr. John Mills, of ICR. Sir, you may begin..

Good afternoon everyone. Thank you for joining us today to review ICU Medical's financial results for the third quarter ended September 30, 2014. On the call today representing ICU Medical is Vivek Jain, Chief Executive Officer and Chairman; and Scott Lamb, Chief Financial Officer.

Vivek will start the call with a brief overview of our third quarter results and then Scott will discuss third quarter financial performance in more detail, and provide financial guidance for the fourth quarter and full-year of 2014. Finally, the company will open the call for your questions.

Before we start, I want to touch upon any forward-looking statements made during the call, including management's belief and expectations about the company's future results. Please be aware they are based on the best available information to management and assumptions that management believes are reasonable.

Such statements are not intended to be a representation of future results, and are subject to risks and uncertainties. Future results may differ materially from management's current expectations.

We refer all of you to the company's SEC filings for more detailed information on the risks and uncertainties that have a direct bearing on operating results and performance and financial conditions. Please note that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis.

We believe these adjusted financial measures can facilitate a more complete analysis, and greater transparency into ICU’s ongoing results of operations, particularly in comparing underlying results from period-to-period.

We have included reconciliations of these non-GAAP measures with today's release, and have provided as much detail as possible on any adjustments that are added back. With that said, I'll now turn the call over to Vivek Jain. Please go ahead, Vivek..

Thanks John. Good afternoon everybody. Now, I recognize the last two quarterly calls have been a bit late on the calendar after the quarter closed. We’ve been working to provide you with more transparency into our business, hence the additional preparation time, so we appreciate your patience.

Our third quarter results were slightly above our expectations. We generated strong cash flow and adjusted EBITDA and we expect Q4 to look very similar to Q3. As a result, we expect full year revenues and adjusted EBITDA to be approximately $305 million and $70 million respectively, both a little ahead of the previous guidance.

Scott will go through it in more detail including the EPS and the barriers ranges. Our third quarter and even what has been going on through today in Q4 showed essentially the same trend as the first half of the year.

We had consistent performance in our direct operations in particular our direct oncology sales and our international direct infusion sales and those were offset by a decline in our OEM results.

Running out the full year 2014 at the ranges we just mentioned, we expect our direct operations to have full year growth in the range of 4% to 6% and our OEM business to be down 12%.

As we had mentioned on previous calls, the third quarter of last year was the peak of the company’s transition period and we expected the year-over-year comps to look as they did. That will reverse in the Q4 quarter and we will see more normal trends as the correction happened between Q3 and Q4 of 2013.

What I’ve been focused on are those same three value drivers I’d mentioned on previous calls.

One our manufacturing scale in the category, which reflected sales in our gross margins and their trends; two, the sticky nature of our products, which shows in the sequential quarters of our direct business, which is what we control, which has been plus or minus $1 million for the few quarters as the company has been going through this transition period.

And three, our cash generating ability, which can improve if we execute on our margin improvement activities. I will talk momentarily on how we see 2015 unfolding, but before that I will update you on the different growth and margin improvement actions that we have had going on at the company.

As a reminder, on previous calls, we’ve tried to book in two basic scenarios both of which we believe will generate improved value creation relative to where we today.

Those scenarios were framed as in the best case, we'll have better execution to improve our top line performance, responsibly deploy capital, drive operational improvements and explore returning capital to shareholders to the extent it makes sense.

In the worst case, we continue to find headwinds on the top line, but we can still drive operational improvements and more actively explore returning capital to shareholders.

So I wanted to start with the two items we control the most directly; improvement in our direct to commercial operations and driving operational improvements leading to margin expansion. Improvement in our direct to commercial operation is about two things, improving our sales and marketing execution and the development of new products.

Continuing from the last call, we have been focused on getting the right people in the right seats with clear authority and discipline around customer targeting. A lot of those things were not done here historically as the OEM business drove much of the growth.

We’ve pulled the resources from less value creating markets or products whose channels could be managed more centrally. We’ve reallocated those resources to filling international rules, internally trying to upgrade the level of talent across the company.

Those activities take time, but we have made significant progress in the last three months towards a stronger commercial organization. The second piece of improving direct commercial execution is new products. We will likely start talking about those some point next year.

Improvement in driving our operations from margin expansion has been moving along quickly. I would characterize these actions as fully identified and deployed and should be realized in 2015.

As I said previously, this is not the long-term answer for ICU but it is really important what has been going on from an OEM perspective to position us for better margin improvement in the future.

In addition to the cost actions on the selling teams, new actions have ranged from cleaning up our various distribution channels domestically, slowing unnecessary outside spend, really just questioning a lot of that which is the necessary, but sometimes its not.

It has been helpful to put all of our assets and people and infrastructure into very separate measurable teams for infusion therapy, critical care international, where performance and returns can be tracked closely.

I continue to believe ICU is a company that is big enough to be big and small enough to be small, where income statement can be influenced quickly. Just some basic common sense choices can make a meaningful improvement in our P&L. We continue to be keenly focused on timing to deliver improved performance for fiscal 2015.

Okay, so it’s good that all of these activities have been going on, but they’ve really only matter in the context of the whole picture which includes what has been going on with our OEM business.

I think it’s helpful to layout where we expect to get to on at least an adjusted EBITDA forecast for the business in 2015 and how we are thinking about setting up the future. Right now, we believe we can manage the business to deliver approximately $85 million in adjusted EBITDA for 2015 with a couple of assumptions.

We are currently thinking our OEM partner will be down potentially at least another 5% to possibly 10% next year. We see them finishing this year at around $108 million, down an additional 10% next year will put them where our OEM business at roughly $98 million in 2015.

We believe we will have direct revenue growth in an amount to deliver aggregate positive top line growth and we will give more color on that on the next call..

So from a value perspective 2015 versus 2014, I think we’re saying we can deliver some positive revenue growth, substantially improve adjusted EBITDA and adjusted EPS while facing those headwinds. And in my mind that sets up a future in 2016 that could have tailwinds from our new products making their way into the market with the U.S.

sales force with more time under their belt, our regular international growth around infusion, the continued push around oncology with impending policy changes, and perhaps a return to enormously for our OEM business and that’s without the opportunity to deploy capital.

I recognize we’re forecasting our OEM results perhaps out of line we publish estimates or even recent trends in their business. We are delighted to see our OEM partner delivered strong results and makes so much progress on many different fronts.

We benefit from their success, but for now I think we must be cautious here and make sure our infrastructure is priced with caution.

I think we’ll also see a reduction in our CapEx needs, which will run below DNA and I think we could have north of $50 million of free cash flow generation next year, which would make our cash balance near $400 million at the end of next year.

Hopefully that gives some transparency to how we’re thinking about the future and the puts and takes on the P&L.

I do think we have a real value creating scenario, but it does make the strategic issue of having a single customer exposure of our size, even though our OEM partner will be at a 10 year low in terms of percentage of the overall business, an important issue to address eventually as one looks at the absolute matter.

We do need to begin thinking about adjacencies that are logical and leverage our competency to help mitigate that issue. I say adjacencies because growth with our own direct operations could never offset the size of our OEM partner in a time period that mattered.

Things are moving fast, we’re trying to improve the company with urgency but I wanted to remind everyone as I’ve said on previous calls, there are still core areas we need to solidify with investments and one time costs into quality, certain technical competencies and a little bit of infrastructure to be able to deploy capital.

We need to keep working in those areas and they’re not all to my satisfaction yet. I think people inside the company are starting to see the range of plans that are coming together. We are trying to take responsible action and break some of the inertia that many companies in our position face.

We may hit some bumps as we take on some of these cleanup actions and we will overcome them and emerge stronger. On our next call, we will continue to provide you with more transparency and color on the additional parts of the plan and how they will improve our overall returns. With that, I’ll turn it over to Scott..

Thanks, Vivek. Before I begin, let me remind all of you that the sales numbers we’re covering as well as our financial statements and the reconciliation from our GAAP to adjusted EBITDA and EPS are available on the Investor portion of our website for your review.

As we mentioned on our last call, we will continue to report adjusted earnings per share and adjusted EBITDA in order to provide a better and more consistent view of our earnings. We will continue to provide as much detail as possible on any adjustments.

Those key adjustments we’re talking about include items such as stock compensation expense, restructuring and transactional related cost. So now on to reporting our Q3 results.

Our third quarter results exceeded our guidance and were driven primarily by consistent performance in our international direct infusion therapy and global direct oncology sales. Total revenues were $77 million in the third quarter compared to $83 million in the third quarter of 2013.

Third quarter adjusted EBITDA was $19 million compared to $23 million last year. This decline was primarily due to lower sales and increased R&D expenditures. Adjusted diluted earnings per share for the third quarter were $0.66 compared to $0.84 last year.

GAAP net income for the third quarter was $6 million or $0.42 per diluted share, as compared to GAAP net income of $11 million or $0.72 per diluted share last year. The decrease was primarily due to lower revenue, higher non-cash based stock compensation expense and increased R&D is slightly offset by lower tax rate.

Now let me discuss our third quarter revenue performance by market segment and you can also view our detailed market segmentation in our earnings press release. For the third quarter, sales in infusion therapy decreased 6% to $55 million and represented 71% of our total sales.

International direct infusion therapy sales increased 8% but were more than offset by 12% decrease in OEM sales and a 6% decrease in U.S. direct sales. Sales in oncology decreased 5% to $9 million and represented 12% of revenue. An increase in our global direct oncology sales of 10% was offset by 28% decrease in our OEM oncology sales.

What matter to us as we think about the stickiness of our business are the rolling sequential trend which at this moment is perhaps an equally important comparison due to the volatility in 2013. For the last three quarters, direct sales of our infusion and oncology product lines have been $34 million, $36 million, and $36 million respectively.

Our sales in critical care decreased 10% to $13 million and represented 17% of our sales. We do see critical care being roughly flat for the full-fiscal year for the first time in three years. Our third quarter sales for domestic and international were as follows.

Domestic sales were down 9% to $55 million for the third quarter compared to $60 million for the same period last year. The primary reason for this decline was lower OEM sales. International sales were up 1% to $23 million as an increase in international direct infusion sales was mostly offset by weaker OEM infusion and oncology sales.

Our gross margin for the third quarter was 49.3% compared to 49.5% last year, the change is primarily due to product mix. SG&A expenses decreased 2.5% primarily due to lower sales and marketing cost, partially offset by higher stock compensation costs.

During this quarter, we began to see reduction in our sales and marketing cost due to the restructuring we implemented in August. We also incurred approximately $3 million in related restructuring cost in the third quarter.

Our Research and Development expenses increased 61% year-over-year to $5 million, as we continue to invest in organic growth opportunities in all of our primary market segments, and in particular, critical care. Now moving to our balance sheet and cash flow. As of the end of September, our balance sheet remained very strong with no debt.

We generated $19 million of operating cash flow and increased our cash, cash equivalents and investment securities to $330 million. This equate to approximately $21 per outstanding share. As Vivek already mentioned, we expect the fourth quarter revenue, adjusted EBITDA, and adjusted EPS to primarily look like the third quarter results.

So based on third quarter results and expected fourth quarter results, we are adjusting our previously announced annual expectations for revenue, adjusted EBITDA, EPS and GAAP EPS as follows. For the year, we expect revenue to be in the range of $304 million to $307 million compared to the previous range of $285 million to $300 million.

We expect our adjusted diluted earnings per share for 2014 to be in the range of $2.25 to $2.33 compared to the previous range of $1.95 to $2.15. We are raising our adjusted EBITDA for the full year to now be in the range of $69 million to $71 million compared to the previous range of $63 million to $68 million.

We expect GAAP diluted earnings to be in the range of $1.62 to $1.70 compared to the previous range of $1.30 to $1.50. And to remind you, you can find a reconciliation of these metrics in our press release and on our website.

We expect our full year gross margins to be approximately 49%, and we expect SG&A to be approximately 30% of revenue excluding any restructuring charges. We also expect research and development spend to be approximately 6% of revenue and for modeling purposes, we expect our tax rate to be approximately 32%, this includes the discrete tax items.

In addition, we expect our CapEx spend to be $16 million to $19 million this year and to start declining in 2015. Lastly, I believe it’s an important to note that the initiatives that we began implementing (indiscernible) beginning to take shape.

And while there are still more to do, it’s exciting to be part of the beginning of driving the company through greater earnings and growth opportunities. And with that I’d like to turn the call over to your questions..

Thank you. (Operator Instructions) Our first question comes from the line of Tom Gunderson with Piper Jaffray. Your line is now open..

Hi, good afternoon everybody. So maybe you could talk a little bit about – as you gave us some indication of how 2015 might look, a little bit more about how you would expand if at all geographically you’re doing well on the direct side, on the international. And obviously one way to keep growth going higher is to place bets on your winners.

Can you talk a little bit about that Vivek?.

Sure, hi Tom. I think it’s really important, I mean that’s the one place that has been working for many quarters in a row now. And I think ICU was very early in bringing valves to the global market, bringing oncology to the global market.

And I think both of those things have been really well received both on the direct basis and with our distribution customers. There’s kind of three different ways to grow that business and that’s why I’ve been spending a lot of time. The first is in the countries that we’re direct; we need to get the right people and to add more resources.

We’ve been doing that. We’ve added probably four or five people; we need a little bit more over time.

Second thing is that’s where we should be signing up new distribution partners on a very local by local basis, so it’s not making any sort of big bang kind of stuff, but really figuring out who is the market share winner and who is the right horse to ride on a country by country basis, and try to make the right partnerships with them.

And then the third issue is on the M&A front. I mean, we’ve said on previous calls, finding something that U.S. is probably low likelihood. It’s going to have to be thing that outside of the U.S. and hopefully that dovetails when something that can broaden our distribution channel.

So it’s hard for small companies to do all of that globally, particularly with the competitors who are up against organically. So we’re going to have to supplement a little bit at some point..

Got it, thanks. And then my second question would be on R&D Scott talked about how it went up. It crossed over the $5 million for quarter level.

I see how that fits with the broad strategies that you’ve been talking about the last couple of quarters, but I’m wondering if you could give us a little bit more color as R&D going up as the number of people go up, the number of projects go up, the number of projects go up.

You’re trying to accelerate time to approval, give us a sense of where those extra dollars were going?.

It’s Vivek. I’ll start and then Scott can jump in. Look I think our R&D here is that a record historical high, right. I’m not a huge as I said in the last call. I think I’m not a huge believer and there is some magic percentage of sales that you should spend our R&D at small companies.

And I can make the argument that the OEM business shouldn’t be in part of that calculation right, it’s really 200 to 300 net of sales you’re looking at. And so, I feel like our spend is a very large number right now. It was trickling up because some of the things going on in the critical care business and we’re going on when I walked in here.

As I think we’ve said on previous calls, historical levels of R&D were $9 million and $10 million. We’re not going to get all the way back there, but we are going to get somewhere between where we are today and a more right size looking number.

So that’s part of the way that we’re going to fill that gap of where we want to get to on an earnings perspective. And I don’t feel that’s like taking out permanent innovation cost from the company.

I think there’s been very specific project on the critical care side of the ledger that are drawing much more to a close either now or in the next 90 or 120 days. And I think that’s going to have to come down just candidly..

Okay, thanks. That’s it for me guys..

Thank you. Our next question comes from the line of Jayson Bedford with Raymond James. Your line is now open..

Good afternoon. Thanks for taking the questions. I guess the first question is you repositioned the U.S. sales team to focus a little bit more on kind of your hospital customers and oncology.

Two parts, did you see any disruption from that in the third quarter? And two I guess the flip side is are you starting to see a benefit from this initiative maybe what you’re seeing so far in the fourth quarter?.

Hi, Jason. I think its right down the middle right now, no negative, no positive. I mean the oncology growth in the U.S. in Q3 was really strong, which is good, but I don’t believe that’s because in August we made a changes in sales force and got better in the last six weeks. I mean I think there is just a lot of tailwind there.

Just like I don’t think the infusion year-over-year down draft of a couple of points is because we made a change. I think we’re already saying on the previous call what happen last year was going to be the bigger influence of that. So right now, I’m happy with no negatives and I think we see no negatives. We had a lot of open seeds. We’re being careful.

We’re getting the right people in each team even if it takes time. I think that’s kind of all I would say, but we should not get ahead of ourselves at all and believe that it’s making a big impact, we had to take time for those things to work through..

Okay. And just maybe piggybacking on your comments on oncology, we’ve always view that as a pretty attractive market. I think you did what 10% growth direct. I'm guessing the business in an oncology can grow faster than that.

Can we assume or think about a faster growth rate at least on a direct basis when we think about 2015?.

I think if you went back to the beginning of this year when I got here and we put out this 13% to 17% or the prime numbers of oncology, I think our direct business actually very close to being in that range. I think what – we didn’t handicap well was a little bit of disconnect on the OEM side there.

So I sort of know that we know the absolute bottom of it in aggregate. I feel like the 10% that we’ve been running around the last quarter or so, or two quarters on direct feels like a good place to be, that’s kind of what our view of market growth is. I'm not sure we are smart enough right now to say 10 versus 15 or something like that..

Okay. And just lastly from me and then I’ll get back into queue. On your OEM relationship, I appreciate the color on 2015, but just trying to reconcile their results versus your view, to be clear there has been no change in the contract or the relationship at all.

It seems like this is more of a function if you taking perhaps more of a conservative view..

There has been absolutely no change in the contract. I don’t really think it’s our place to comment on where they are in their status and things, but it affects us.

And I’ve been around infusion a little bit and things move slowly and I feel like ICU felt the discomfort when on there a number of months after it started, because it’s a lag time to feel that affect both in the tough way. But also I suspect that it’s going to be a lag time to feel in the positive way and there is just no advantage.

We have to be over, over exuberant if it the right word it’s about that. So I think if we can price our infrastructure because let’s say we can feel create value, even if that goes on and if we get back to normal grey. I don’t think we are the beneficiaries of it. I don’t think it was the kind of a more complex view of the world in that. .

Okay, fair enough, thank you..

Thank you. Our next question comes from the line of Chris Lewis with Roth Capital Partners. Your line is now open..

Hey guys, good afternoon. Thanks for taking the questions..

Hi, Chris..

I guess first Vivek you’ve mentioned you still need – you still see a need for investment in some core areas within the business, maybe can you elaborate on what specifically those kind of main focus core areas are and when do you expect you’ll be able to fully address this?.

I think this ICU get an amazing job on a lot of different fronts on manufacturing, on innovation, on things building an industry and a class of trade that nobody focused on. But I think like many small companies, it didn’t necessarily put the right pieces in place everywhere across the board.

And so, I learned an infusion making sure that you’re rock solid on qualities is a huge value driver. And I think ICU is in a great place on quality. But you can always be better and so I want to make sure we can afford investment, let’s get the best thinking we can around on some of those topics. I feel that way around business development activities.

I feel that way around some finance activities. I feel that way around IT.

I think there is a number of things and just kind of running the business that if you want to grow globally you need to have a bit more infrastructure around, thinking through every one of those topics that I’ve mentioned country-by-country is a different skill set that we may have had on our own.

And so, when I say a little bit of infrastructure that’s what I mean..

I understood. In terms of the 2015 kind of revenue outlook you’ve provided today.

Can you elaborate on what gives you confidence such that OEM decline marginally improves from 2014 to 2015?.

Yeah, just to be clear I don’t think we put out revenue guidance per se, right….

Right now, I guess this initial outlook – kind of ballpark outlook..

I think what we were trying to say is like no matter – we have to play the cards that were dealt. And right now, our OEM partner will be down in our estimate 12% this year. And we try to put forward a math model that says if they were down 10% next year the math still works for us.

I think if we look at the trend rates and we separate out in regular old infusion in valves versus oncology, we basically straight-lined the range that’s been going on over that period. That’s the same analysis you could yourself.

You just don’t necessarily have the visibility into – well maybe now you do actually how much is oncology versus everything else that was essentially the analysis and then trying to triangulate that off of the public comments and the data that we see around the potential there..

Okay, great. And then just one more, returning capital to shareholders, can you talk about where the company is in terms of the stages of those discussions and perhaps when the company maybe announcing a more aggressive strategy around returning capital to shareholders? Thanks..

Look I think we’re on the clock, right. We said that on previous calls, I don’t think it’s a huge drag. If we have $400 million on our balance sheet at the end of next year that is half of the enterprise value of the company, right. That’s a little silly to all of us. So I don’t think it’s realistic to say. We’re going to able to hold onto that forever.

But when I think about buyback, I do think we have to be really mindful of the concentration that we currently have in our business. And even though it’s a lower percentage, it’s still a very large absolute number dollars even if it’s back to 2007, 2008 or 2009 levels or whatever.

I don’t know that it’s wise and there is a bit of a black and white statement. I don’t know if it’s wise to say buyback makes sense, well when it concentrates everybody’s exposure to that issue even more than maybe exploring a little bit of diversification first and then unlocking the capital return power of this company.

So I don’t think we have any definitive decisions today, but we’re looking at it in the context of also what’s going on from an OEM perspective and trying to see the whole picture before we make a definitive decision, but I think we also recognize that you can’t over the long-term have half of the enterprise value of cash on your balance sheet..

Okay, thanks for the time..

Thank you. (Operator Instructions) Our next question comes from the line of Larry Solow of CJS Securities. Your line is now open..

Lawrence Solow – CJS Securities, Inc.:.

:.

Sure, I think we said in the last call that we made a number of changes equating to about $10 million annually and that we would realize roughly $3 million or so of that this year..

Okay..

And the balance would lap into next year. It’s probably maybe a tad more than $3 million is going to be realized this year and maybe a little less than $7 million will be realized next year then there is a couple of other items that we’ve been working on and then there is the decrease in R&D, right..

Right..

So if you kind of annualized where our EBITDA, if we are saying Q3 and Q4 right now is going to be in the same place and you roll the additional cost savings have been identified rolled a little bit of decrease in R&D and added some growth on an organic basis even if it was in the 4% to 6% range that we….

Right..

At this year, that’s how we are saying that’s why we are – we felt like there is enough information to give an approximation of what next year could be even in the phase of some down graph on the OEM situation. So still be able to grow value through that. So that’s how we were thinking about that..

And ballpark the $85 million target outlook are really not guidance, does that assume I mean could you reach that number even with the OEM partner declining, OEM sales declining 10% or would have to do more or like the 5% number..

I think we were saying we believe that would be our approximate level even if they….

Okay..

decrease 10%, I think the way we thought about is it if it was 5%, we could handle it with the cost stuff we have going on, if it was 10%, it would add into the margin that’s generated from our own direct sales increases..

Gotcha. And then the slight improvement or the whatever you take the midpoints 5 percentage points absolute slowdown in contraction next year. Is it fair to say that the without – getting into specifics, the 12% or whatever – there have been a lot of double digit double-digit decline to the large OEM partner.

Is there end market demand declining that much as well or is there some inventory draw downs?.

I think we don’t control that right. Right, we don’t have perfect transparency into what’s in the system versus end customers. So I think that’s exactly what we are trying to do is put our best view of out there and let me make their own decisions..

Right..

It’s a lot more people looking at that thing and there are ICU. So,.

Gotcha..

Okay everybody can do that work there..

And just lastly, our critical care realized some probably a little bit lower in terms of strategic importance going out over the next several years, but obviously still a pretty significant PCA business,.

Yes..

Insight into sort of sales have flattened is the market growing faster and you’re able to having sort of stop losing share and imagine that lot some of the newer products that are coming out are going to be in critical care and maybe more in the non-invasive part of the ICU is that fair to say..

Yes. I think that’s fair to say on the new products when they eventually come. I think critical care has really lacked focus here. I mean there is not a nice way to say that. And it’s taken a lot of resources, the integration of it from the acquisition than it stay forward.

I mean ICU took over a business and then watched it decline a third over that period while allocating more R&D, allocating more quality, allocating more regulatory, et cetera to it has been a difficult slot. As we said on the other calls, I don’t think we’ve done anything dramatic.

The thing that we have done over the last three months is there’s now a dedicated general manager of that business.

We’ve hired one or two people out of that industry who know something about this base and all the basics that one would do – I mean I would say we survived a lot in critical care and we self-inflict the market there is a nice market structure industry.

We self-inflicted a lot of wounds because we didn’t understand the business and so basics around pricing or how you go to market et cetera. And so, now we have people coming through those types of things, so that just make some good judgment based on facts about what happens in the market.

I think right now, two things, one we’ve got some people making the right decision in that way and the other thing is the install base where it’s gotten actually quite small out there. We are coming close to I think the bottom of that core group of loyalists.

I think the competitors have taken a lot of share and most of people that they could take and I’m sure they’re going to keep trying, but I feel like we’re just – at a small number now, we’re bumping along that a little bit..

Got you. Great, thanks. I appreciate it..

Thank you. Our final question comes from the line of Mitra Ramgopal with Sidoti. Your line is now open..

Yes, just a couple of questions. I know on the last call, you had mentioned, you’d identified some low hanging fruit in terms of helping to boost efficiencies with the third quarter behind, you’re now half way through the fourth.

Would you say you have realized most of that and – should see it appearing more next year or as it start showing up in the third quarter?.

I think – as we talked a little bit of the cost savings were in the third quarter. They will be more into the balance of next year. I think we felt like on that issue we were on the clock too because of what was going on with the OEM situation that we had to take action quickly.

And so all of those things have been identified and the programs are in place. We really want them to start and be fully implemented for next year. So whether it happens in October, November or December, it candidly hasn’t concerned me that much. I think they’re really next year’s activity. I don’t think there is anything new to find there.

And I think from a value perspective at a small company, it’s not the answer, its buying time for people to see another card frankly. And what I feel proud about with the company is we can get back to a level of profitability that was at historic highs even with $35 million of standardized revenue coming out of the system.

I think that’s really, really good. But that’s not a game you can play for ever and I hope what it’s setting up is this we get more time under our belt on direct sales, new products comp.

May be OEM gets a little bit better, the earnings power that you’re see through the ability of whole gross margins there could be good or at least we live to fight it another day, on that issue and that’s been kind of a – we’ve done almost no investor outreach which I appreciate the people that they share with us, but in the limited interactions that we’ve had, that issue around the OEM is one we spend a lot of time getting asked about.

So we’re just trying to frame it up with total transparency how we look at it today..

Okay. Thanks for the color. And then I don’t if you could give us some may be your thoughts on the pending acquisition of CareFusion, if you had the significant change in the comparative landscape or providing some opportunities for you. I don’t know if you have anything to share with us..

Look I think they are each on their own to unbelievably successful companies and great companies. At a high level we competed against each one of them for many years. I see you competed against each one of them for many years and held its own. I think ICU’s business, direct business in the U.S.

may be talk a little more specifically, ICU’s direct business in the U.S. is only $70 million or so and a lot of that’s what is really, really clinical preference, not sort of full line business. And so yes there is risk there, but the customers made a choice on specific reasons and having that business has been sticky for a long, long time.

I think on emerging markets our distributors were early into the market and helped build the markets and lot of that. And ultimately even though there might be a new competitive entrance there, the technology still being adopted in lot of those places in the world. So that’s a good thing.

I think where I have kind of probably the most concerned about it is where the distribution channel is got a lot stronger and certainly in a relative basis that ICU has and what I would call the international developed markets.

So we just don’t have a lot of – that much scale there in places where direct and now I suspect they’ll have more distribution there. So that’s where we’ve been – we were investing there anyway it’s up to our intensity and focus around that, but I think, again we’re a small company.

We don’t need big bites to live off, it promise it can feed us pretty well..

Great. Thanks for taking the questions..

Thank you. I’m showing no more questions in the queue at this time. I’d like to hand the call over to Vivek Jain for any closing remarks..

Okay. Thanks everybody. Again apologies the call was a little bit late in the quarter, we’re trying to give as much transparency as to what’s going on both on an OEM basis and a direct basis.

I think it’s important that we recognize it’s in still working progress, there are still going to be bombs, we are trying to quickly, we don’t want to get ahead ourselves, we don’t want to anybody else to ahead what we’re doing out there, either and I think it’s a – it jut trying to play a lot of logic in fact base decision making too.

What’s going on here and I think there is a – the thing I would like to talking about next year that I feel everyone of these calls is very much around kind of cash flow and cost et cetera and that’s really important to make it through this period.

But I mentioned we need to talk what made ICU great, which is kind of new products and bringing value to customers in the market. I’d like to thank everybody, both on our company and the advisors have been helping us get up a speed on lot of these tops and thanks for the support.

Everybody, after on the call and the interest in ICU, we look forward to updating you more early more next year..

Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may now disconnect..