<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: MARCH 31, 1998
OR
[_] 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)
(949) 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 April 30, 1998
----- -----------------------------
Common 7,914,624
<PAGE>
ICU MEDICAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page Number
- ------------------------------ -----------
<S> <C>
Item 1. Financial Statements
- -----------------------------
Consolidated Balance Sheets, March 31, 1998 and
December 31, 1997 3
Consolidated Statements of Income for the three months
ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2.
- -------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 3.
- -------
Quantitative and Qualitative Disclosures About Market
Risk Not Applicable
PART II - OTHER INFORMATION 13
- ---------------------------
SIGNATURES 14
</TABLE>
2
<PAGE>
ICU Medical, Inc.
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
(All dollar amounts in thousands except share data)
<TABLE>
<CAPTION>
3/31/98 12/31/97
--------------------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,263 $ 2,962
Liquid investments 32,950 32,150
Accounts receivable, net of allowance for doubtful accounts of $364
and $324 as of March 31, 1998 and December 31, 1997, respectively. 4,689 3,357
Inventories 1,988 1,763
Prepaid expenses and other and other 264 201
Deferred income taxes 717 717
-------------------------
Total current assets 43,871 41,150
PROPERTY AND EQUIPMENT, at cost
Machinery and equipment 7,220 7,078
Furniture and fixtures 1,579 1,522
Molds 2,975 2,873
Land, building and building improvements 5,429 5,001
Construction in process 1,106 183
-------------------------
18,309 16,657
Less - Accumulated depreciation (7,617) (7,060)
-------------------------
10,692 9,597
Other assets 446 439
-------------------------
$ 55,009 $ 51,186
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,406 $ 1,403
Accrued liabilities 2,400 1,754
-------------------------
Total current liabilities 3,806 3,157
Deferred income taxes 82 82
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, 8,867,162 shares. 887 887
Additional capital 39,790 39,455
Treasury stock - 957,776 and 1,100,776 shares at
March 31, 1998 and December 31, 1997, respectively. (8,087) (9,320)
Retained earnings 18,531 16,925
-------------------------
Total stockholders' equity 51,121 47,947
-------------------------
$ 55,009 $ 51,186
=========================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ICU Medical, Inc.
Consolidated Statements of Income
For the Three Months Ended
March 31, 1998 and March 31, 1997
(All dollar amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
3/31/98 3/31/97
----------------------------------------
<S> <C> <C>
Net sales $ 9,982 $ 6,824
Cost of goods sold 4,167 2,913
----------------------------------------
Gross profit 5,815 3,911
Selling, general and administrative expenses 3,171 1,729
Research and development expenses 298 316
----------------------------------------
Income from operations 2,346 1,866
Investment income 334 272
----------------------------------------
Income before income taxes 2,680 2,138
Provision for income taxes 1,020 800
----------------------------------------
Net income $ 1,660 $ 1,338
========================================
Net income per share:
Basic $0.21 $0.16
Diluted $0.20 $0.16
========================================
Weighted average number of shares:
Basic 7,823,030 8,246,517
Diluted 8,281,360 8,290,629
========================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ICU MEDICAL, INC.
Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 1998 and March 31, 1997
(All dollar amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
3/31/98 3/31/97
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,660 $ 1,338
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 610 568
Net change in current asset and current liabilities, and other (956) (45)
------- -------
Net cash provided by operating activities 1,314 1,861
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and other (1,727) (131)
Net change in liquid investments (800) (441)
------- -------
Net cash used in investing activities (2,527) (572)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised and related tax benefits 1,514 58
Purchase of treasury stock - (1,273)
------- -------
Net cash provided by (used in) financing activities 1,514 (1,215)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 301 74
Cash and cash equivalents, beginning of the period 2,962 2,060
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 3,263 $ 2,134
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ICU MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(All dollar amounts in thousands)
(unaudited)
NOTE 1: The accompanying unaudited interim consolidated 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 consolidated results for the
interim periods presented, which adjustments consist of only normal recurring
adjustments. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The consolidated statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1997 Annual Report to Stockholders. Certain reclassifications have been made to
the 1997 consolidated financial statements to conform with the current
presentation.
NOTE 2: Inventories consisted of the following:
<TABLE>
<CAPTION>
3/31/98 12/31/97
-------- ---------
<S> <C> <C>
Raw material $ 1,159 $ 1,060
Work in process 484 460
Finished goods 345 243
-------- ---------
Total $ 1,988 $ 1,763
======== =========
</TABLE>
NOTE 3: Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted net income per
share is computed by dividing net income by the weighted average number of
common shares outstanding plus dilutive securities. The Company's dilutive
securities are outstanding common stock options (excluding stock options with an
exercise price in excess of market value), less the number of shares that could
have been purchased with the proceeds from the exercise of the options, using
the treasury stock method, and were 458,330 and 44,112 for the three months
ended March 31, 1998 and 1997, respectively.
NOTE 4: The effective tax rate differs from that computed at the federal
statutory rate of 34% principally because of the effect of tax-exempt
investment income offset by the effect of state income taxes.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
- -------
The following table sets forth the net sales by product as a percentage of
total net sales for the periods indicated:
<TABLE>
<CAPTION>
=====================================================================================================================
PRODUCT LINE 1994 1995 1996 1997 Q1-97 Q1-98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLAVE 45% 61% 68% 65% 65% 67%
- ---------------------------------------------------------------------------------------------------------------------
Click Lock and Piggy Lock 41% 20% 12% 7% 9% 6%
- ---------------------------------------------------------------------------------------------------------------------
McGaw Protected Needle 9% 13% 8% 5% 7% 5%
- ---------------------------------------------------------------------------------------------------------------------
Lopez Valve and other 5% 4% 4% 4% 4% 4%
- ---------------------------------------------------------------------------------------------------------------------
RF100-RF150 ("Rhino") - 2% 3% 7% 5% 7%
- ---------------------------------------------------------------------------------------------------------------------
Budget Medical Products - - 2% 6% 5% 6%
- ---------------------------------------------------------------------------------------------------------------------
McGaw SafeLine Revenue Sharing - - 3% 6% 5% 5%
- ---------------------------------------------------------------------------------------------------------------------
Total 100% 100% 100% 100% 100% 100%
=====================================================================================================================
</TABLE>
The Company sells its products to independent distributors and through
strategic supply and distribution agreements with B.Braun Medical, Inc.
("B.Braun/McGaw" or "McGaw") and Abbott Laboratories ("Abbott") (the "McGaw
Agreement" and the "Abbott Agreement," respectively). Most independent
distributors handle the full line of the Company's products. B.Braun/McGaw and
Abbott both purchase CLAVE(R) products, principally bulk, non-sterile
connectors. B.Braun/McGaw also purchases the McGaw Protected Needle and pays
the Company revenue sharing payments on its sales of its SafeLine products.
Abbott also purchases the Rhino, a low-priced connector specifically designed
for Abbott. Through 1997, both agreements established minimum transfer prices
which were lower than historical average selling prices, which the Company
negotiated in anticipation of significant sales, and a revenue sharing formula
under which the Company could receive more than the minimum transfer prices
based on selling prices of products incorporating the Company's products. The
McGaw Agreement provided for such revenue sharing based on McGaw's selling
prices of CLAVE products and the Abbott Agreement provides for such revenue
sharing based on Abbott's selling prices of both CLAVE products and Rhinos.
Effective August 1, 1997, and January 1, 1998, respectively, the Abbott
Agreement was amended to establish fixed selling prices for Rhinos and CLAVE
Products and eliminate revenue sharing. The Company expects to establish fixed
selling prices on CLAVE Products and eliminate revenue sharing under the McGaw
Agreement effective January 1, 1998.
On June 25, 1997, B.Braun Melsungen AG (B.Braun) acquired McGaw from IVAX
Corporation. B.Braun's U.S. operation markets an I.V. connection system that
competes with I.V. connection systems of the Company and others. The McGaw
Agreement extends to July 2000. The Company and B.Braun/McGaw have signed a
letter of intent to modify the McGaw Agreement to extend it to 2002 and modify
product pricing. Average monthly sales to B.Braun/McGaw in the second half of
1997 were somewhat lower than the first half of 1997, although significantly
above those for comparable periods of the prior year. Sales to B.Braun/McGaw in
the first quarter of 1998
7
<PAGE>
were significantly above those of both the first quarter of 1997 and the fourth
quarter of 1997. There is no assurance as to future sales patterns with
B.Braun/McGaw, and, while the Company expects to conclude a definitive agreement
with B.Braun/McGaw, there is no assurance that it will. If it does not, the
current agreement will remain in effect. Prices included in the first quarter
1998 results of operations are those in the letter of intent, which are somewhat
lower than those in the current agreement.
Management believes that as the healthcare provider market continues to
consolidate, the Company's success in marketing and distributing CLAVE products
will depend, in part, on the Company's ability, either independently or through
strategic supply and distribution arrangements, to secure long-term CLAVE
contracts with major buying organizations. Further, the Company's marketing and
distribution strategy may result in a significant share of the Company's
revenues being concentrated among a small number of customers. The loss of a
strategic supply and distribution agreement with a customer or the loss of a
large contract by such a customer, could have a material adverse effect on
operating results.
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 a number of such products. In response to competitive pressure the
Company has been reducing prices to its independent distribution, as well as to
original equipment manufacturers, to protect and expand its market. The price
reductions to date have more than been offset by increased volume, although this
has not occurred to date for independent distributors in the aggregate. There
is no assurance that such increased volume will be achieved by the independent
distributors, and there is no assurance that the Company's current or future
products will be able to successfully compete with products developed by others.
Quarter Ended March 31, 1998 Compared to the Same Quarter Last Year
- -------------------------------------------------------------------
Net sales increased $3,158,000, or approximately 46%, to $9,982,000 in the
first quarter of 1998 compared to $6,824,000 during the same period last year.
The increase was primarily attributable to a 53% increase in sales of CLAVE
products. All other product categories, except protected needles, also had
increased net sales.
Net sales to McGaw, including revenue sharing, amounted to $3,322,000 in
the first quarter of 1998, as compared with $2,788,000 in the first quarter of
1997. CLAVE net sales increased $307,000 and estimated revenue sharing payments
due on B.Braun/McGaw sales of its SafeLine products increased $157,000. Sales of
McGaw Protected Needle were up slightly from last year. Based on B.Braun/McGaw's
forecasts, Management expects increases in unit shipments of CLAVE Products to
B.Braun/McGaw to continue during the remainder of 1998, although there is no
assurance that B.Braun/McGaw's forecasts will be realized. Management expects
that SafeLine revenue sharing payments will continue, although it is unable to
accurately forecast such amounts.
Net sales to Abbott in the first quarter of 1998 were $2,705,000, as
compared with net sales of $622,000 in the first quarter of 1997. Commencing in
the second quarter of 1997, there has been a substantial increase in marketing
of CLAVE products to Abbott and to Abbott customers, and
8
<PAGE>
Management expects continued increases in sales volume with Abbott throughout
1998, although there is no assurance that such increases will be realized.
Total net sales of CLAVE Products increased from $4,412,000 in the first
quarter of 1997 to $6,737,000 in the first quarter of 1998, or 53%. The
increase in unit shipments was approximately 101%, substantially all of which
was accounted for by Abbott and B.Braun/McGaw. Unit shipments to independent
distributors were virtually unchanged. Average net selling prices decreased in
response to market pressures and because a greater proportion of sales were the
lower priced bulk non-sterile CLAVEs sold to Abbott and B.Braun/McGaw.
Management expects unit shipments of CLAVE Products to independent
distributors in 1998 to be at or somewhat below those for 1997. Net sales are
expected to decrease as average selling prices continue to decline.
Net sales of Click Lock and Piggy Lock decreased approximately 2% in the
first quarter of 1998 compared to the same period last year. The decline is
because of the safe-connector market's continued shift to needleless technology.
Management expects the trend to continue.
Net sales of Lopez Valve increased 56% in the first quarter compared to the
same period last year due to an increase in unit shipments. Management expects
that net sales of the Lopez Valve will continue to increase for the rest of
1998, although at a lower rate than the increase in the first quarter.
Net sales of Budget Medical Products increased to $562,000 in the first
quarter of 1998, as compared with $355,000 in the first quarter of 1997,
principally because of increased unit shipments of custom I.V. sets
incorporating the CLAVE. The Company is currently taking steps aimed at
expanding BMP by increasing systems capabilities, improving manufacturing
efficiency, reducing labor cost and enhancing distribution. As part of these
steps, the Company will transfer BMP's manufacturing to a low-labor-cost area in
Mexico, and is evaluating a significant broadening of its market. There can be
no assurance that these steps will achieve the desired results. However, even
if they are successful, Management expects that gross profit margins in BMP will
continue to be lower than the average historical gross profit margins recorded
by the Company because production of its products is relatively labor intensive.
Total sales to foreign distributors were $432,000 in the first quarter of
1998, as compared with $239,000 in the first quarter of 1997. The increase was
due to higher unit shipments. Management expects that the Company's sales to
foreign distributors will increase over the balance of the year. In April 1998,
BOC OHMEDA AB ("Ohmeda"), the Company's principal distributor in Europe sold its
European distribution operations to a competitor of the Company and the
distribution agreement with Ohmeda is expected to terminate in August 1998. The
Company is currently seeking to arrange alternative distribution in areas
serviced by Ohmeda and is currently evaluating the potential impact of the
change in distribution in Europe. There is no assurance that satisfactory
alternative distribution arrangements will be made or whether the termination of
the distribution agreement with Ohmeda will have an adverse effect on the
Company's sales in Europe.
9
<PAGE>
In November 1997, the Company commenced marketing the CLC 2000, a one
piece, swabable connector, engineered to prevent the back-flow of blood into the
catheter. Net sales to date have not been significant, as the Company
experienced delays in production validation. That process is complete, and
shipments commenced in the second quarter.
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 net sales:
<TABLE>
<CAPTION>
=======================================================================================================
NET SALES (000'S) Q1 Q2 Q3 Q4 Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 $6,008 $6,147 $5,972 $6,472 $24,599
- -------------------------------------------------------------------------------------------------------
1997 $6,824 $7,190 $7,700 $8,690 $30,404
- -------------------------------------------------------------------------------------------------------
1998 $9,982
=======================================================================================================
</TABLE>
The second and third quarters have tended to be weaker than the first and
fourth, although the rate of growth in net sales has caused exceptions to that
tendency in recent years. In the second quarter of 1995, McGaw was building
significant inventory of CLAVE. In the second quarter of 1996, McGaw commenced
payment of SafeLine Revenue Sharing. In the second quarter of 1997, sales
increases occurred in most of the Company's product lines; and the third quarter
of 1997, sales increases occurred principally because of increased net sales of
CLAVE products to Abbott and independent distributors, offset by lower net sales
of CLAVE products to B.Braun/McGaw.
Gross margin was 58% during the first quarter of 1998 compared to 57% during
the same period last year. Although average selling prices have continued to
decrease, increases in production volume resulted in greater absorption of
overhead and a decrease in unit manufacturing costs. Management believes that
the gross margin percentage will stay at or slightly lower than that achieved in
the first quarter of 1998 as average unit sales prices decrease.
Selling, general and administrative expenses ("SG&A"), excluding research
and development expenses, increased $1,442,000 to $3,171,000, an increase as a
percentage of net sales to 32% during the first quarter of 1998 compared to 25%
during the same period last year. The principal components of the increase were
the cost of patent litigation in which the Company is the plaintiff, other
litigation, investment in the BMP custom I.V. set business, and increased sales
and marketing expenses related to introduction of new products and expansion of
the business.
The cost of patent litigation in which the Company is the plaintiff
increased from $67,000, or 1% of net sales, in the first quarter of 1997 to
$425,000, or 4% of net sales, in the first quarter of 1998. Those costs in the
second quarter of 1998 are expected to be at or above the levels incurred in the
first quarter of 1998 as the matter is scheduled for trial June 1, 1998. The
cost of other litigation for the balance of 1998 is expected to be at or below
levels incurred the first quarter of 1998, when the action entitled Allen Petty,
dba Carmel Development International v. ICU Medical, Inc. was tried. See Part
II, Item 1. Legal Proceedings.
10
<PAGE>
The amount of costs related to litigation will depend on the progress of the
legal proceedings, and no assurances can be given in this regard. There can be
no assurance that the costs will not vary materially from Management's
estimates. Costs related to BMP custom I.V. set business and sales and
marketing are expected to continue through the balance of the year at
approximately the same level as in the first quarter of 1998.
Research and development expenses ("R&D") were at approximately the same
amount in the first quarters of 1997 and 1998, and decreased as a percentage of
net sales from 5% to 3%. Management expects R&D expenses to increase later in
the year for clinical evaluations of the new CLC 2000. However, no assurance
can be given that such costs will not differ materially from those estimates or
that the R&D will be completed as expected.
Investment income increased in the first quarter of 1998 from the first
quarter of 1997 because of increased amounts available for investment.
Income from operations increased 26%, as the increase in operating expenses
partially offset the 49% increase in gross profit.
Net income increased 24% to $1,660,000 in the first quarter of 1998 as
compared with $1,338,000 in the comparable period last year. Net income per
share - diluted increased $0.04 or 25%, in the first quarter of 1998 over the
first quarter of 1997.
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1998, the Company's cash and cash
equivalents and investment securities position increased $1,101,000 to
$36,213,000. Cash provided by operating activities and the exercise of stock
options was partially offset by the cost additions to working capital and
property and equipment.
Management expects that sales of the Company's products will continue to
grow in 1998. If sales continue to increase, accounts receivable and inventories
are expected to increase as well. As a result of these and other factors,
including increased capital expenditures, the Company's working capital
requirements may increase in the foreseeable future.
Management expects to increase capital expenditures significantly in 1998
from levels in the past three years to meet increased sales volumes and automate
production of new products, and to acquire and build a facility for BMP in a
low-labor-cost area of Mexico.
The Company believes that its existing working capital, supplemented by
income from operations, will be sufficient for the foreseeable future.
The Company has not purchased treasury stock since August 1997, but may
purchase additional shares in the future. However, future acquisitions, if any,
will depend on market conditions and other factors.
11
<PAGE>
Forward Looking Statements
- --------------------------
In this Management's Discussion and Analysis, Management has made numerous
statements about perceived trends and its expectations and beliefs about various
matters, which reflect the best information currently available to Management
and assumptions which Management believes to be reasonable. They include
without limitation statements about: sales and unit volumes of product generally
and of individual product categories; sales and unit volumes of sales to
B.Braun/McGaw and Abbott and revenue sharing from B.Braun/McGaw; the
relationship with and future contractual arrangements with B.Braun/McGaw; the
pattern of sales to B.Braun/McGaw; contracts with buying organizations;
concentration of revenues among a small number of customers; the development by
others of competing products; reduction in average selling prices and the
possibility of increased unit volumes offsetting such decline; decreases in
sales of Click Lock and Piggy Lock; SafeLine revenue sharing; sales and unit
volumes of sales to independent distributors; Lopez Valve sales; BMP systems
capabilities, manufacturing efficiency, labor costs, distribution, transfer of
manufacturing, broadening of market, costs of increasing systems capabilities
and future gross profit margins; foreign sales; status of agreements with BOC
OHMEDA AB; unit production costs, production volumes and their effect on gross
margin; SG&A costs; sales, marketing and promotional costs; new product
introduction; costs related to the custom I.V. set business; patent litigation
and other litigation costs, R&D costs and clinical evaluation costs; capital
expenditures; repurchases of the Company's common stock; and, working capital
requirements. These statements and similar statements are forward looking
statements that involve a number of risks and uncertainties, including the
possible failure of the factors described in such statements to materialize, the
materialization of other factors and the caveats which accompany the statements.
The Company further 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, such as product innovation, new technologies, marketing and
distribution strength and price erosion; unanticipated market shifts and trends;
the impact of legislation effecting government reimbursement of healthcare
costs; any changes in corporate strategies and practices of B.Braun/McGaw,
Abbott and the Company's independent distributors that might effect the
resources and efforts that they devote to marketing the Company's products; the
possible impact of the acquisition of the Company's customers; production
problems; changes in product mix; changes in marketing strategy; the
availability of patent protection and the cost of enforcing and of defending
patent claims; and other risks described from time to time in the Company's
registration statements and reports filed with the Securities and Exchange
Commission, including those described under "Risk Factors" in 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.
12
<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 infringement of two of the Company's
patents by defendant's protected needle connector and Y-style extension sets.
The Company is seeking a permanent injunction, and monetary damages in an amount
to be determined. On February 27, 1998 and March 26, 1998, the Court issued
rulings on a number of motions filed by the parties that were generally
favorable to the Company. Trial date is presently set for June 1, 1998.
On April 7, 1998, in an action entitled Allen Petty, dba Carmel Development
-----------------------------------
International v. ICU Medical, Inc., an Orange County, California, Superior Court
- ----------------------------------
jury rendered a verdict in favor of the Plaintiff and against the Company in the
sum of $795,448 in an action brought by the Plaintiff for commissions allegedly
owed him. The Company believes the verdict is against the facts in the case and
is contrary to well established law, and intends to seek to have the verdict
overturned. Management, after consultation with counsel, believes it will
ultimately prevail on this matter, and accordingly has not accrued the verdict
as a charge to earnings.
The Company is from time to time involved in various other legal
proceedings, either as a defendant or plaintiff, most of which are routine
litigation in the normal course of business. The Company believes that the
resolution of the legal proceedings in which it is involved will not have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
Inapplicable
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- ---------------------------------------
Inapplicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- --------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
13
<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: May 13, 1998
- ----------------------
Francis J. O'Brien
Chief Financial Officer
(Principal Financial Officer and)
Chief Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,263
<SECURITIES> 32,950
<RECEIVABLES> 5,053
<ALLOWANCES> (364)
<INVENTORY> 1,988
<CURRENT-ASSETS> 43,871
<PP&E> 18,309
<DEPRECIATION> (7,617)
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0
0
<COMMON> 887
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</TABLE>
