<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM: _______ TO _________
COMMISSION FILE NO.: 0-19974
ICU MEDICAL, INC.
(Exact name of Registrant as provided in charter)
Delaware 33-0022692
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
951 Calle Amanecer, San Clemente, California 92673
(Address of Principal Executive Offices) Zip Code
(714) 366-2183
(Registrant's Telephone No. Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days:
Yes XXX No
--- ----
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at November 8, 1996
----- -------------------------------
Common 8,682,230
<PAGE>
ICU MEDICAL, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
Balance Sheets, September 30, 1996 and 3
December 31, 1995
Statements of Income for the three months 4
ended September 30, 1996 and 1995
Statements of Income for the nine months 5
ended September 30, 1996 and 1995
Statements of Cash Flows for the nine 6
months ended September 30, 1996
Notes to Financial Statements 7
ITEM 2.
- -------
Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II - OTHER INFORMATION 14
- ---------------------------
SIGNATURES 15
2
<PAGE>
ICU MEDICAL, INC.
Balance Sheets
September 30, 1996 and December 31, 1995
(all dollar amounts in thousands except share data)
ASSETS
<TABLE>
<CAPTION>
9/30/96 12/31/95
------------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,399 $ 837
Cash equivalents 33,750 28,827
Investment securities held-to-maturity - 508
Accounts receivable, net of allowance for doubtful
accounts of $254 and $255 as of September 30, 1996
and December 31, 1995, respectively. 2,884 2,733
Inventories 1,888 1,504
Prepaids and other 1,162 889
Deferred income taxes 451 451
------------------------
Total current assets 41,534 35,749
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 6,519 6,223
Furniture and fixtures 1,118 900
Molds 3,402 3,129
Lands and buildings 4,991 4,988
Construction in process 437 502
------------------------
16,467 15,742
Less - Accumulated depreciation (5,573) (4,093)
------------------------
10,894 11,649
Other assets 501 452
------------------------
TOTAL ASSETS $ 52,929 $ 47,850
========================
LIABILITIES AND STOCKHODERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,321 $ 1,048
Accrued liabilities 523 938
------------------------
Total current liabilities 1,844 1,986
Deferred income taxes 206 206
STOCKHOLDERS' EQUITY
Convertible preferred stock, $1.00 par value,
Authorized 500,000 shares, issued and outstanding
- none
Common stock, $0.10 par value, Authorized,
20,000,000 shares, issued and outstanding -
8,867,162 and 8,662,837 at September 30, 1996 and
December 31, 1995, respectively. 887 866
Additional capital 39,395 38,017
Retained earnings 10,597 6,775
------------------------
Total stockholders' equity 50,879 45,658
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 52,929 47,850
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ICU MEDICAL, INC.
Statements of Income
For the Three Months Ended
September 30, 1996 and September 30, 1995
(all dollar amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
% of % of
9/30/96 Sales 9/30/95 Sales
---------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 5,972 100% $ 4,617 100%
Cost of sales 2,884 48% 2,307 50%
--------------------------------------------
Gross profit 3,088 52% 2,310 50%
Selling, general and administrative expenses 1,888 32% 1,149 25%
--------------------------------------------
Income from operations 1,200 20% 1,161 25%
Interest and other income 330 6% 260 6%
--------------------------------------------
Income before tax 1,530 26% 1,421 31%
Provision for income taxes 566 9% 530 11%
--------------------------------------------
Net income $ 964 16% $ 891 19%
============================================
Net income per share $ 0.11 $ 0.10
==================================
Weighted average common
and common equivalent shares outstanding 8,907,056 8,890,485
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ICU MEDICAL, INC.
Statements of Income
For the Nine Months Ended
September 30, 1996 and September 30, 1995
(all dollar amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
% of % of
9/30/96 Sales 9/30/95 Sales
---------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 18,127 100% $ 16,010 100%
Cost of sales 8,043 44% 8,170 51%
---------------------------------------------
Gross profit 10,084 56% 7,840 49%
Selling, general and administrative expenses 5,021 28% 4,198 26%
---------------------------------------------
Income from operations 5,063 28% 3,642 23%
Interest and other income 1,003 6% 411 3%
---------------------------------------------
Income before tax 6,066 33% 4,053 25%
Provision for income taxes 2,244 12% 1,540 10%
---------------------------------------------
Net income $ 3,822 21% $ 2,513 16%
=============================================
Net income per share $0.43 $ 0.32
==================================
Weighted average common
and common equivalent shares outstanding 8,992,433 7,968,161
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ICU Medical, Inc.
Statements of Cash Flows
For the Nine Months Ended
September 30, 1996 and September 30, 1995
(all dollar amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
9/30/96 9/30/95
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,822 $ 2,513
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,524 1,368
(Increase) Decrease in accounts receivable (151) 54
(Increase) Decrease in inventories (384) 1,152
(Increase) Decrease in prepaids and other assets (273) 362
Increase (Decrease) in accounts payable 273 177
Increase (Decrease) in accrued liabilities (415) (164)
Increase in accrued incentive compensation - 208
----------------------
Net cash provided by operating activities 4,396 5,670
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and other (818) (1,433)
Sales of investment securities 508 3,070
----------------------
Net cash used in investing activities (310) 1,637
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised and related
tax benefits 1,399 777
Proceeds from sale of common stock 15,866
----------------------
Net cash provided by financing activities 1,399 16,643
----------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,485 23,950
Cash and cash equivalents at the beginning of the
period 29,664 3,569
----------------------
CASH AND CASH EQUIVALENTS, end of period $35,149 $27,519
======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for income taxes $ 1,085 $ 133
Non-cash item--income tax benefits associated
with exercise of stock options $ 941 $ 730
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
ICU MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(all dollar amounts in thousands)
(unaudited)
NOTE 1 The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for
the interim periods presented, which adjustments consist of only normal
recurring adjustments. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's 1995 Annual Report to Stockholders.
NOTE 2 Inventories consisted of the following at September 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
Description 9/30/96 12/31/95
----------- ------- --------
<S> <C> <C>
Raw material $923 $684
Work in process 350 532
Finished goods 615 288
_______ _______
Total $1,888 $1,504
======= =======
</TABLE>
NOTE 3 Net income per share was computed by dividing net income by the
weighted average number of shares of common stock and common stock
equivalents outstanding during the periods. Common stock equivalents
consist of the shares issuable on exercise of the outstanding dilutive
common stock options less the shares that could have been purchased
with the proceeds from the exercise of the options, using the treasury
stock method.
NOTE 4 The effective tax rate differs from that computed at the federal
statutory rate of 34 percent principally because of the effect of
tax-exempt interest income offset by the effect of state income taxes.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Quarter Ended September 30, 1996 Compared to the Same Quarter Last Year.
Net sales increased $1,355,000, or approximately 29 percent, to
$5,972,000 in the third quarter compared to $4,617,000 during the same period
last year. The increase was primarily attributable to a 40% increase in CLAVE(R)
sales and the recording of an estimated $400,000 of revenue sharing due from
McGaw, Inc. ("McGaw") based on sales of its SafeLine and McGaw CLAVE products.
Shipments of the low-priced Rhino in the current year third quarter accounted
for 14% of the sales increase. Those increases were partially offset by a 27%
decrease in Click Lock and Piggy Lock sales.
Unit shipments of CLAVE products in the 1996 third quarter increased 61%
over the 1995 quarter. That was accompanied by an anticipated continuing
decline in unit shipments of Click Lock, Piggy Lock and McGaw Protected Needle.
An anticipated 25% decrease in unit price to McGaw for bulk, non sterile CLAVEs
pursuant to a revenue sharing agreement and a general change in product mix, as
the Company shipped large unit volumes of the low priced Rhino and as unit
shipments of higher priced Click Lock and Piggy Lock continued to decline,
combined to produce a decrease in average selling prices.
The CLAVE continues to be the Company's dominant product as reflected in
the following comparison of net sales:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PRODUCT LINE 1993 1994 1995 Q395 Q396
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLAVE(R) 20% 45% 61% 62% 67%
-----------------------------------------------
Click Lock and Piggy Lock 75% 41% 20% 21% 11%
-----------------------------------------------
McGaw Protected Needle - 9% 13% 14% 9%
-----------------------------------------------
Lopez Valve - other 5% 5% 4% 3% 4%
-----------------------------------------------
SafeLine Revenue sharing - - - - 5%
-----------------------------------------------
Rhino - - 2% - 4%
-----------------------------------------------
TOTAL 100% 100% 100% 100% 100%
- -------------------------------------------------------------------------------
</TABLE>
The increase in unit sales of the CLAVE in the third quarter of 1996
was accompanied by a decrease in average unit prices related principally to the
decrease in unit prices to McGaw and Abbott for bulk, non sterile CLAVEs.
Under a nonexclusive strategic supply and distribution agreement with McGaw
(the "McGaw Agreement"), the Company will be entitled to share in certain
incremental increases in McGaw's CLAVE selling prices and as a result could
realize higher average selling prices to McGaw in the future. The Company
recorded approximately $100,000 of revenue sharing in its third quarter of 1996,
but at McGaw's current price levels, Management does not expect to receive
significantly greater amounts of revenue sharing on CLAVE products sold to
McGaw, and there is no assurance that McGaw's pricing in the future will result
in any revenue sharing under the formula in the McGaw Agreement. Based on
McGaw's forecasts, Management expects increases in unit shipments to McGaw to
continue during the remainder of 1996, although there is no assurance that
McGaw's forecasts will be realized.
8
<PAGE>
During the first and second quarters of 1996, the Company made initial
shipments of CLAVE to Abbott Laboratories ("Abbott") for test marketing and
product qualification under a strategic supply and distribution agreement (the
"Abbott Agreement"). Abbott has qualified the CLAVE, and the Company began
production-quantity shipments in the third quarter. Like the McGaw Agreement,
the Abbott Agreement establishes minimum prices that Abbott will pay for CLAVE
products which are lower than historical average selling prices and which the
Company negotiated in anticipation of significant sales to Abbott. The Abbott
Agreement also includes a revenue sharing formula under which the Company could
receive more than the minimum prices based on incremental increases in selling
prices of Abbott products incorporating the Company's products. Based on
Abbott's initial order and its current forecasts, Management expects sales to
Abbott to contribute to CLAVE shipments during the remainder of 1996. The
Abbott Agreement, however, neither requires the purchase of minimum quantities
nor prevents Abbott from marketing competing products, and there is no assurance
that Abbott will be successful in promoting and selling CLAVE against its other
safe connector offerings, or against other competitors' current or future
products. Further, there is no assurance that Abbott's selling prices will be
such as to result in any significant revenue sharing with the Company under the
Abbott Agreement.
Management believes the success of CLAVE has, and will continue to
motivate others to develop one piece needleless connectors which may incorporate
many of the same functional and physical characteristics as the CLAVE. The
Company is aware of at least five such products. In response to competitive
pressure felt in the third quarter of 1996, the Company in mid-October announced
to its distributors a new aggressive pricing strategy to protect and expand its
market. Prices to independent distributors will be reduced up to 40%, depending
on the type of customer to which the distributor is reselling the CLAVE product.
Management expects that the average price reduction in the fourth quarter of
1996 will be less than the maximum 40%, although the average price of its CLAVE
products will decline over the next several quarters. Management expects that
the price decline will be more than offset by increased volume. However, there
is no assurance that such increased volume will be achieved, and there is no
assurance that the Company's current or future products will be able to
successfully compete with products developed by others.
Management expects that unit sales of CLAVE to its independent
distributors will increase for the remainder of 1996, although the size of such
increase may be impacted by competition from existing and new competitive
products or acquisition of CLAVE market share by Abbott and McGaw. Management
expects to encounter continued pricing pressure from individual end users, but
believes that its new pricing strategy will improve its competitive position.
Net sales of Click Lock and Piggy Lock continued to decline in the third
quarter as the market continues to shift to needleless technology. Net sales of
Click Lock and Piggy Lock decreased approximately 27% in the third quarter of
1996 compared to the same period last year. Management expects the trend
towards needleless technology to continue.
Net sales of McGaw Protected Needle decreased approximately 17% in the
third quarter this year compared to the same period last year due primarily to
lower unit shipments. Management expects McGaw Protected Needle sales to be
flat or lower for the remainder of 1996 compared to the third quarter this year,
for the same reasons that Click Lock and Piggy Lock sales are decreasing.
9
<PAGE>
Net sales of Lopez Valve and Swiss System increased slightly in the
third quarter compared to the same period last year because of an increase in
unit shipments. Management expects modest growth of Lopez Valve sales for the
remainder of 1996.
Net sales of Rhino to Abbott, which were negligible in the third quarter
of 1995, were approximately $245,000 in the third quarter of 1996. The Rhino
was designed specifically for Abbott. Based on Abbott's orders and forecasts,
Management expects unit shipments of Rhino to increase modestly during the
remainder of 1996. Rhino is sold to Abbott under a revenue sharing agreement
providing that the Company may receive a share of Abbott's Rhino revenue based
on Abbott's selling prices. The Company has not yet recorded any revenue
sharing under the Abbott Rhino agreement, but expects to record revenue sharing
for Abbott Rhino sales in the fourth quarter of 1996; the amount that may be
recorded has not been determined and will be based on sales information
furnished by Abbott.
Based on McGaw's report to the Company of sales of McGaw SafeLine
products, in the third quarter of 1996 the Company recorded estimated revenue
sharing related to sale of SafeLine products of approximately $300,000 under a
revenue sharing agreement with McGaw. Although Management anticipates that such
revenue sharing will continue, the actual amount will depend on the volume and
selling prices of McGaw's SafeLine products which management has no means of
forecasting.
During the second quarter of 1996, the Company entered into a
distribution agreement with BOC OHMEDA AB ("Ohmeda"), a major distributor of
medical products, for distribution of CLAVE in Europe. Test marketing is
completed and approval of a full launch of exclusive distribution is expected
shortly. The agreement provides for initial distribution in the United Kingdom,
France and the Benelux countries, and the addition of most other countries in
Europe in phases. The Company made its first shipments under the contract in the
third quarter if 1996. Management does not expect sales under the distribution
agreement to become significant in 1996. Total sales to foreign distributors
were $278,000 in the third quarter of 1996, and $578,000 for the first three
quarters in total. Management expects that its sales to foreign distributors
will continue to increase in the future.
Historically the Company has experienced lower usage of its products in
the summer months due to lower censuses in healthcare facilities. The table
below illustrates the effect this phenomenon has on the Company's sales:
<TABLE>
<CAPTION>
================================================================================
TOTAL NET SALES (000'S) Q1 Q2 Q3 Q4 TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 $2,451 $2,356 $2,603 $2,743 $10,153
- --------------------------------------------------------------------------------
1993 $2,914 $2,335 $2,495 $3,637 $11,381
- --------------------------------------------------------------------------------
1994 $4,180 $3,842 $3,484 $5,036 $16,542
- --------------------------------------------------------------------------------
1995 $5,427 $5,966 $4,617 $5,272 $21,282
- --------------------------------------------------------------------------------
1996 $5,966 $6,147* $5,972**
================================================================================
</TABLE>
* Includes $229,000 of McGaw SafeLine Revenue Sharing
================================================================================
** Includes $300,000 of McGaw SafeLine Revenue Sharing
================================================================================
As illustrated above, the second and third quarters tend to be weaker
than the first and fourth. The exception is the second quarter of 1995, in
which McGaw was building significant inventory of CLAVE.
10
<PAGE>
Gross margin increased to 52% during the third quarter of 1996 compared
to 50% during the same period last year. The primary reason for the increase
was the McGaw SafeLine revenue sharing recorded in the third quarter this year
as compared to none last year. That was partially offset by the decline in
average sales prices in the third quarter which was only partially offset by a
decrease in unit manufacturing costs.
Sequentially, gross margin decreased from 61% in the first quarter this
year to 55% in the second quarter and 52% in the third quarter. The primary
reasons for the decrease were changes in product mix as higher margin Click
Lock, Piggy Lock and McGaw Protected Needle and packaged sterile CLAVE sites
declined and lower margin Rhino sold to Abbott and bulk CLAVE sites sold to
Abbott and McGaw increased. Further, manufacturing volumes were lower in the
second quarter than in the first, resulting in higher overhead cost per unit.
The same trends in product mix continued in the third quarter, further
decreasing margins. Manufacturing volumes increased in the third quarter, but
the benefit of that increase was offset principally by non-recurring quality
control efforts related to certain automated production equipment. The
decreases in gross margins described above were positively offset by the McGaw
revenue sharing recorded in the second and third quarters as noted above.
Management believes that its new pricing strategy for the CLAVE may
initially adversely affect the gross margin percentage, but that as volume
increases gross margin percentages should not deteriorate, and may improve.
This is because a large portion of the Company's manufacturing costs are fixed
and the Company has adequate existing fixed-asset capacity to handle increased
volumes. In addition, increasing production of CLAVE for McGaw and Abbott,
together with possible revenue sharing from Abbott's Rhino sales, could
positively affect gross margins. Any such improvement could be offset, however,
by a potential shift in sales mix from independent distributors to McGaw and
Abbott at lower average selling prices. As a result, Management does not expect
margins to decrease for the rest of 1996, but believes that any increase for the
rest of 1996 will be relatively small.
Selling, general and administrative expenses increased to 32% of sales
during the third quarter of 1996 compared to 25% during the same period last
year. The increase from the third quarter last year to the same period this
year amounted to $739,000. The principal component of the increase was the
continuing cost of patent litigation, which was $546,000 for the third quarter
this year compared to $45,000 last year; without those costs, SG&A expenses
would have been 23% of sales in 1996. Other SG&A expenses increased at a
somewhat lower rate than sales except for administrative expenses incurred on
behalf of Budget Medical which were not incurred last year and a higher levels
of research and development expenses.
Management expects the patent litigation costs to continue at
approximately the same level as in the third quarter of 1996 until the case goes
to trial, or until it is settled, if sooner. Trial is currently scheduled for
January 1997.
Interest and other income increased $70,000 in line with the higher
balances in the Company's cash equivalents, which are held in short-term tax
exempt and money market investments.
Net income increased $73,0000 over the comparable period last year.
While net sales and gross profit increased 29% and 33%, respectively, the
disproportionate increase in SG&A expenses because of the patent litigation
costs reduced the overall increase in net income to 8%.
11
<PAGE>
Nine Months Ended September 30, 1996 Compared to the Same Period Last Year
- --------------------------------------------------------------------------
Net sales increased approximately 13% for the nine months ended
September 30, 1996 compared to the same period last year. The increase
resulted primarily from increased CLAVE sales, and recording of an estimated
$629,000 of revenue sharing due from McGaw, Inc. and increased Rhino sales to
Abbott, offset in part by declining Click Lock, Piggy Lock and McGaw Protected
Needle sales.
During the period, sales of CLAVE increased approximately 26% due
primarily to higher unit sales while net sales of Click Lock, Piggy Lock and
McGaw Protected Needles decreased approximately 26% due to lower unit sales.
During the period, the Company also began shipping the Rhino as noted above.
For the nine months ended September 30, 1996 net sales of Rhino were
approximately $432,000.
Gross margin for the nine months ended September 30, 1996 increased to
56% compared to 49% during the same period last year. The main reasons for the
improvement were a significant shift in product mix during the first quarter of
1996 toward higher margin packaged sterile CLAVE products, and away from the
Company's other products. As noted above, that shift has partially reversed
itself in the second and third quarters of 1996. Also, the Company recorded
SafeLine revenue sharing from McGaw, as noted above, which accounted for 3% of
the increase in gross margin.
Selling, general and administrative expenses for the nine months ended
September 30, 1996 increased to 28% of sales compared to 26% during the same
period last year. The increase in SG&A expenses was $823,000. The components of
the increase included an increase in patent litigation expense of $829,000 to
$986,000 for 1996 to date, administrative expenses for Budget Medical not
incurred last year and increase in research and development expense. These
increases were offset in part by decreases in certain administrative and sales
and marketing expenses.
Interest and other income increased $592,000 in line with the higher
balances in the Company's cash equivalents, which are held in short-term tax
exempt and money market investments.
Income before tax for the nine months ended September 30, 1996 increased
$2,013,000, or 50%, over the comparable period last year. Almost one-third of
the increase was from higher interest income. While net sales and gross profit
increased 13% and 29%, respectively, SG&A expenses increased only 20%, so
income from operations increased 39%. Were it not for the patent litigation
expense, SG&A expenses would have been virtually unchanged in total and
operating income would have increased 63%.
Net income and net income per share increased 52% and 34%, respectively.
The increase in net income per share was proportionally less than the increase
in net income because of the increase in the number of common shares outstanding
following the Company's sale of common stock on July 5, 1995.
12
<PAGE>
Liquidity and capital resources
- -------------------------------
During the nine months ended September 30, 1996, the Company's cash,
cash equivalents and investment securities position increased $5,485,000 to
$35,149,000. The primary reasons for the increase were cash provided by
operating activities and proceeds from the exercise of stock options and related
tax benefits.
If sales of the Company's products increase, accounts receivable and
inventories are expected to increase as well. As a result of these and other
factors, the Company's working capital requirements may increase in the
foreseeable future.
The Company believes that its existing working capital, supplemented by
income from operations will be sufficient for the foreseeable future.
In October 1996, the Company implemented a program of repurchasing
shares of its common stock. Purchases will be made at market prices when the
price is such that the reduction in the number of shares will result in an
increase in earnings per share. The Company expects to expend approximately
$6,000,0000 to $8,000,000 to repurchase its shares; this amount is subject to
change based on market conditions and other factors, and the ultimate amount
spent may be significantly more or less. Through November 8, 1996, the Company
had purchased 184,932 shares at a cost of $1,601,000.
Forward Looking Statements
- --------------------------
The foregoing statements in this Management's Discussion and Analysis
concerning beliefs or expectations for the future with respect to sales growth,
sales to particular customers, market shifts, trends, individual product sales,
product pricing, seasonal sales fluctuations, factors affecting gross margins,
selling, general and administrative expenses generally and specific expenses,
and other financial factors are forward looking statements that involve a number
or risks and uncertainties. The Registrant cautions that, in addition to the
factors described in such statements, actual future results of operations are
subject to other important factors, including among others the following:
general economic and business conditions; the effect of price and safety
considerations on the healthcare industry; competitive factors such as product
innovation, new technologies, marketing and distribution strength and price
erosion; unanticipated market shifts and trends; production problems; changes
in product mix; changes in marketing strategy; the availability of patent
protection and the cost of enforcing of defending patent claims; and other risks
described from time to time in Registrant's registration statements and reports
filed with the Securities and Exchange Commission, including the Company's
Current Report on Form 8-K dated November 14, 1996. Results of operations
actually achieved in the future may thus differ materially from Management's
current expectations. The Company disclaims any obligation to update the
statements or to announce publicly the result of any revision to any of the
statements contained herein to reflect future events or developments.
13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ---------------------------
In an action entitled ICU Medical, Inc. v. Tri-State Hospital Supply
----------------------------------------------
Corporation, pending in the United States District Court for the Northern
- -----------
District of California, the Company alleges patent infringement by defendant's
protected needle connector. The Company is seeking preliminary and permanent
injunctions, and monetary damages in an amount to be determined. On February 8,
1996, the United States District Court for the Northern District of California
denied Tri-State's motion for summary judgment of non-infringement of the
Company's patent. This case is scheduled to proceed to trial in January 1997,
on the Company's claim of patent infringement.
In an action entitled Allen Petty, dba Carmel Development International
-------------------------------------------------
v. ICU Medical, Inc., pending in the Superior Court in Orange County,
- --------------------
California, Plaintiff alleges breach of contract and seeks at least $500,000 in
commissions allegedly related to sales of the CLAVE to various O.E.M.
manufacturers. The Company believes the claim is without merit and intends to
defend the action vigorously.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
Inapplicable
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- ---------------------------------------
Inapplicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
Inapplicable
ITEM 5. OTHER INFORMATION
- -------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------------------------------------------
27 Financial Data Schedule
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ICU Medical, Inc.
(Registrant)
/s/ Francis J. O'Brien Date: November 14, 1996
- ----------------------
Francis J. O'Brien
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
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