<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, 1999
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)
(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, 1999
----- -----------------------------
Common 8,187,993
<PAGE>
ICU Medical, Inc.
Index
Part I - Financial Information Page Number
- ------------------------------ -----------
Item 1. Financial Statements
- -----------------------------
Consolidated Balance Sheets, March 31, 1999 and
December 31, 1998 3
Consolidated Statements of Income for the three months ended
March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 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 15
2
<PAGE>
ICU Medical, Inc.
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
(all dollar amounts in thousands except share data)
ASSETS
<TABLE>
<CAPTION>
3/31/99 12/31/98
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $3,857 $ 2,048
Liquid investments 35,343 36,041
--------- ---------
Cash and liquid investments 39,200 38,089
Accounts receivable, net of allowance for doubtful accounts of $275
and $342 as of March 31, 1999 and December 31, 1998, respectively 6,076 6,492
Inventories 2,409 1,991
Prepaid expenses and other 164 385
Deferred income taxes -- current portion 991 991
--------- ---------
Total current assets 48,840 47,948
--------- ---------
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 8,917 8,225
Furniture and fixtures 2,173 2,044
Molds 3,774 3,710
Land, building and building improvements 5,181 7,191
Construction in process 7,197 1,703
--------- ---------
27,242 22,873
LessAccumulated depreciation (9,618) (9,109)
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17,624 13,764
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DEFERRED INCOME TAXES 92 92
OTHER ASSETS 545 555
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$ 67,101 $ 62,359
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,459 $ 683
Accrued liabilities 3,717 3,448
--------- ---------
Total current liabilities 5,176 4,131
--------- ---------
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 paidin capital 40,717 40,241
Treasury stock 681,169 and 807,847 shares at
March 31, 1999 and December 31, 1998, respectively (5,830) (7,117)
Retained earnings 26,151 24,217
--------- ---------
Total stockholders' equity 61,925 58,228
--------- ---------
$67,101 $ 62,359
========= =========
</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, 1999 and March 31, 1998
(all dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------------
3/31/99 3/31/98
---------------- ----------------
<S> <C> <C>
NET SALES $ 11,442 $ 9,982
COST OF GOODS SOLD 4,733 4,167
---------------- ----------------
Gross profit 6,709 5,815
---------------- ----------------
OPERATING EXPENSES:
Selling, general and administrat 3,370 3,171
Research and development 205 298
---------------- ----------------
Total operating expenses 3,575 3,469
---------------- ----------------
Income from operations 3,134 2,346
INVESTMENT INCOME 350 334
---------------- ----------------
Income before income taxes 3,484 2,680
PROVISION FOR INCOME TAXES 1,300 1,020
---------------- ----------------
NET INCOME $ 2,184 $ 1,660
=============== ===============
NET INCOME PER SHARE
Basic $0.27 $0.21
Diluted $0.25 $0.20
=============== ===============
WEIGHTED AVERAGE NUMBER OF SHARES
Basic 8,116,925 7,823,030
Diluted 8,816,581 8,281,360
=============== ===============
</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, 1999 and March 31, 1998
(all dollar amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------
3/31/99 3/31/98
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,184 $ 1,660
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 617 610
Net change in current assets and current liabilities, and other 1,265 (956)
-------- --------
Net cash provided by operating activities 4,066 1,314
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,468) (1,727)
Net change in liquid investments 698 (800)
-------- --------
Net cash (used in) investing activities (3,770) (2,527)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock
options and related income tax benefits, and other 1,513 1,514
-------- --------
Net cash provided by (used in) financing activities 1,513 1,514
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,809 301
CASH AND CASH EQUIVALENTS, beginning of the period 2,048 2,962
-------- --------
CASH AND CASH EQUIVALENTS, end of the period $ 3,857 $ 3,263
======== ========
</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, 1999
(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 financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1998 Annual Report to Stockholders.
<TABLE>
<CAPTION>
Note 2: Inventories consisted of the following:
3/31/99 12/31/98
------- --------
<S> <C> <C>
Raw material $ 1,553 $ 1,121
Work in process 499 509
Finished goods 357 361
-------- -------
Total $ 2,409 $ 1,991
======== =======
</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 699,656 and 458,330 for the three months
ended March 31, 1999 and 1998, respectively.
Note 4: The effective tax rate differs from that computed at the federal
statutory rate of 34% principally because of the effect of state income taxes
partially offset by the effect of tax-exempt investment income.
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 1996 1997 1998 Q1-98 Q1-99
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
CLAVE 68% 65% 69% 67% 69%
- ------------------------------------------------------------------------------------------------
Click Lock and Piggy Lock 12% 7% 4% 6% 4%
- ------------------------------------------------------------------------------------------------
McGaw Protected Needle 8% 5% 4% 5% 3%
- ------------------------------------------------------------------------------------------------
Lopez Valve and other 4% 4% 5% 4% 3%
- ------------------------------------------------------------------------------------------------
RF100-RF150 ("Rhino") 3% 7% 5% 7% 7%
- ------------------------------------------------------------------------------------------------
Budget Medical Products 2% 6% 8% 6% 10%
- ------------------------------------------------------------------------------------------------
McGaw SafeLine Revenue Sharing 3% 6% 5% 5% 4%
- ------------------------------------------------------------------------------------------------
Total 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") and Abbott Laboratories ("Abbott") (the "B.Braun/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.
The B.Braun/McGaw Agreement extends to December 2002, and has extension
provisions beyond then.
In January 1999, the Company and Abbott agreed to a significant expansion
of their agreement for CLAVE products. The new agreement has assurances of
substantial increases in sales volume, accompanied by price reductions. The new
agreement is extended from April 2002 to December 2009, and designates the
Company as Abbott's preferred supplier for all Abbott's needlefree technology.
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.
7
<PAGE>
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 distributors, as well as to
I.V. product 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.
Management expects that the average price of its CLAVE products will continue to
decline. 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, 1999 Compared to the Same Quarter Last Year
- -------------------------------------------------------------------
Net sales increased $1,460,000, or approximately 15%, to $11,442,000 in the
first quarter of 1999 compared to $9,982,000 during the same period last year.
The increase was primarily attributable to a 17% increase in sales of CLAVE
products. Among the other product categories, Budget Medical Products, Rhino
and Lopez Valve showed increases in net sales and protected needles and SafeLine
revenue share showed decreases.
Net sales to Abbott in the first quarter of 1999 were $5,508,000, as
compared with net sales of $2,705,000 in the first quarter of 1998. Net sales of
CLAVE products increased to $4,780,000 in the first quarter of 1999 from
$2,095,000 in the first quarter of 1998 on a greater than three-fold increase in
unit volume. The balance of the increase in net sales to Abbott was in the low-
priced Rhino. Based on terms of the Abbott agreement as amended in January 1999,
Management expects a substantial increase in CLAVE unit and dollar sales volume
with Abbott in 1999, although there can be no assurance as to the amount or
timing of such an increase.
Net sales to B.Braun/McGaw, including revenue sharing, amounted to
$2,240,000 in the first quarter of 1999, as compared with $3,322,000 in the
first quarter of 1998. Net sales of CLAVE products decreased $825,000, on a
decrease in unit shipments. Net sales of the McGaw Protected Needle decreased
$165,000 and SafeLine revenue share decreased $106,000. The decline in first
quarter 1999 net sales of CLAVE products to B.Braun/McGaw was principally
because of timing of orders. Based on B.Braun/McGaw's forecasts and market
information, Management expects unit shipments and net sales of CLAVE products
to B.Braun/McGaw to increase over 1998 levels through the remainder of 1999,
although increases may be at a lower rate than in the last several years, and
there is no assurance that these expectations will be realized. Management
expects net sales of the McGaw Protected Needle will continue to decline as the
market for safe connectors continues its shift to needleless technology.
Management expects that SafeLine revenue sharing payments will continue,
although it is unable to accurately forecast such amounts.
Total net sales of CLAVE Products increased from $6,737,000 in the first
quarter of 1998 to $7,853,000 in the first quarter of 1999, or 17%. The
increase in unit shipments was approximately 75%, all of which was accounted for
by Abbott. Unit shipments of CLAVE products to B.Braun/McGaw and to independent
distributors were both down from last year's first quarter. 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 1999 to be
8
<PAGE>
somewhat below those for 1998. Net sales of CLAVE products to independent
distributors are expected to show a larger decrease as average selling prices
continue to decline.
Net sales of Click Lock and Piggy Lock decreased approximately 19% in the
first quarter of 1999 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(R) increased 6% 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
remainder of 1999.
Net sales of Budget Medical Products ("BMP") increased to $1,176,000 in the
first quarter of 1999, as compared with $562,000 in the first quarter of 1998,
principally because of increased unit shipments of custom I.V. sets
incorporating the CLAVE. BMP's production, much of which is performed manually,
is relatively labor-intensive, resulting in a generally lower gross profit
margin than for the Company's other products. The Company is currently taking
steps aimed at expanding BMP by increasing systems capabilities, improving
manufacturing efficiency, reducing labor cost and enhancing distribution.
Because significant innovation is required to achieve these goals, there is 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 will continue to be relatively
labor intensive. BMP has moved substantially all of its manual assembly
operations to the facility that the Company opened in December 1998 in Ensenada,
Baja California, Mexico. BMP had an improved gross profit in the first quarter
of 1999 and was profitable.
Total sales to foreign distributors were $253,000 in the first quarter of
1999, as compared with $432,000 in the first quarter of 1998. (Those amounts do
not include distribution in Canada.) The Company had a small operating loss on
international operations in the first quarter of 1999. The decrease in net
sales was due principally to lower unit shipments in Europe. In April 1998, BOC
OHMEDA AB ("Ohmeda"), who was the Company's principal distributor in Europe,
sold its European distribution to a competitor of the Company, and the Company
has terminated substantially all distribution by Ohmeda since August 1998. The
Company believes that the loss of distribution through Ohmeda had an adverse
effect on the amount of European sales. The Company is currently making new
distribution arrangements in Europe. To enhance growth of European distribution
and sales, the Company has hired four additional product specialists in Europe
since mid 1998 bringing to six the total in Europe. Management expects that its
sales to European and other foreign distributors will increase in the future,
although there can be no assurance that it will succeed in arranging new
distribution in Europe or increase sales in Europe or other areas outside the
United States.
In November 1997, the Company commenced marketing the CLC 2000/TM/ a one
piece, swabable connector, engineered to prevent the back-flow of blood into the
catheter. Net sales to date have not been significant, although based on market
indications, the Company expects sales to increase throughout 1999. However,
there can be no assurance as to the amount or timing of future CLC 2000 sales.
9
<PAGE>
In November 1998, the Company introduced the 1o2 Valve/TM/ the first one-
way or two-way drug delivery system. The Company expects to overcome delays in
production validation in the second quarter and then commence shipments to
customers. However, there can be no assurance as to when shipments will actually
commence.
In the first quarter of 1999, the Company continued development work on
SetFinder/TM/, which will distribute directly commodity-type standard I.V. sets.
Orders will be taken over the internet at a special "web-site" named
setfinder.com. Proprietary technology will enable the Company to minimize
working capital requirements. SetFinder products will be assembled at BMP's
facility in Mexico. Management expects to launch setfinder.com later in 1999.
Because significant innovation is required to launch and operate setfinder.com,
there is no assurance that it will be launched successfully or that current
plans for SetFinder will not change materially. Further, even if it is launched,
there can be no assurance that it will achieve sales and the amount of future
operating profits or losses is dependent upon future development of the
SetFinder business, the outcome of which is not known at this time.
Historically, the Company has experienced lower usage of its products in
the summer months due to lower censuses in healthcare facilities. That would
generally cause the Company's sales in the second and third quarters of the year
to be lower than sales in the first and fourth quarters. Since 1995, there have
been significant departures from that pattern because significant increases in
volumes with B.Braun/McGaw and Abbott have often offset the expected seasonal
sales decline. Further, those I.V. product manufacturers order bulk non-sterile
product many months before sale to the healthcare facility to allow for normal
manufacturing times. Thus, Management believes that the large percentage of
sales to I.V. product manufacturers could lead to non-seasonal quarterly
fluctuations in net sales because their ordering patterns may not directly
reflect their current sales volumes.
Gross margin was 59% during the first quarter of 1999 compared to 58%
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 for the full year 1999 will be slightly lower than
that achieved in the first quarter of 1999 as average unit sales prices continue
to decrease.
Selling, general and administrative expenses ("SG&A"), excluding research
and development expenses, increased $199,000 to $3,370,000, and decreased as a
percentage of net sales to 29% during the first quarter of 1999 compared to 32%
during the same period last year. Sales and marketing expenses increased in the
first quarter of 1999 over the levels in the first quarter of 1998 because of
the introduction of new products and expansion of the business. That increase
was largely offset by a reduction in litigation costs.
Research and development expenses ("R&D") decreased in the first quarter of
1999 as compared with the first quarter of 1998. The level of R&D activity is
down from last year as the R&D work on the CLC 2000 and 1o2 Valve is
substantially complete. Resources are currently being devoted to sustaining
engineering. Management expects R&D expense to increase later in 1999 for
clinical evaluations of the new CLC 2000. However, no assurance can be given
that such costs will not differ materially from current estimates or that the
R&D will be completed as expected.
10
<PAGE>
Income from operations increased $788,000 or 34% and was 27% of net sales
in the first quarter of 1999, as compared with 24% in the first quarter of 1998.
Gross profit increased $894,000 while operating expenses increased only
$106,000.
Net income increased 32% to $2,184,000 in the first quarter of 1999 as
compared with $1,660,000 in the comparable period last year, principally because
of the increase in income from operations.. Net income per share - diluted
increased $0.05 or 25%, in the first quarter of 1999 over the first quarter of
1998.
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1999, the Company's cash and cash
equivalents and investment securities position increased $1,111,000 to
$39,200,000. Cash provided by operating activities and the exercise of stock
options was partially offset by the cost of additions to property and equipment.
Management expects that sales of the Company's products will continue to
grow in 1999. 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 currently expects that capital expenditures for property and
equipment will be between approximately $12 million and $16 million in 1999 to
meet the growth in CLAVE and other products. Most of the additions will be in
the Company's San Clemente, California production facilities and will be for
molding machines, molds and automated assembly machines. In addition, the
Company, in April 1999 purchased a 28,000 square foot building near its other
two buildings in San Clemente to accommodate its expansion, and costs will be
incurred to add improvements to that building and one of the Company's existing
buildings.
The Company has not purchased treasury stock since August 1998, but may
purchase additional shares in the future. However, future acquisitions, if any,
will depend on market conditions and other factors.
The Company believes that its existing working capital, supplemented by
income from operations, will be sufficient to fund capital expenditures and
increased working capital requirements for the foreseeable future.
Year 2000 Compliance
- --------------------
Many older computer programs use only the last two digits to refer to a
year. Therefore, they do not properly recognize a year that begins with "20"
rather than "19." This is referred to as the Year 2000, or Y2K problem. The
Y2K problem has been eliminated in many new programs and systems, which are said
to be "Y2K compliant." The Company has substantially completed its initial
assessment of Y2K and believes, based on manufacturers' specifications and
subject to completion of testing in 1999, that substantially all of its
information technology ("IT") systems and applications and related hardware and
its non-IT systems (e.g. manufacturing systems) are Y2K compliant. The Company
will attempt to
11
<PAGE>
assess in the second and third quarters of 1999 whether third parties with whom
it deals, such as customers, vendors and governments have any Y2K problems that
could affect the Company; such problems could result in interruptions in
delivery of services and materials and payments, among other things. The Company
has not developed Y2K non-compliance contingency plans, but will consider the
need for such plans upon completion of the Y2K compliance assessments. Costs to
assure Y2K compliance have so far been and are expected to remain nominal.
While the Company is not currently aware of any Y2K compliance problems in
its own systems, Y2K compliance of those systems cannot be assured until
completion of testing. Further, the Company cannot assure that the information
it receives from third parties about their Y2K compliance will be meaningful or
accurate. Failure to achieve compliance for the Company's systems, or failure of
significant third parties with which the Company deals to achieve Y2K
compliance, could have a material adverse effect on the Company's operations.
Forward Looking Statements
- --------------------------
Various portions of this Report, including this Management's Discussion and
Analysis, describe trends in the Company's business and finances that Management
perceives and state some of its expectations and beliefs about the Company's
future. These statements about the future are "forward looking statements," and
the Company identifies them by using words such as "believes," "expects,"
"estimates," "plans," "will," "continue," "could," and by similar expressions
and statements about aims, goals and plans. The forward looking statements are
based on the best information currently available to Management and assumptions
that Management believes are reasonable, but Management does not intend the
statements to be representations as to future results. They include, among
other things, statements about:
. future operating results and various elements of operating results, including
sales and unit volumes of products, production costs, gross margins, and
research and development expense;
. factors affecting operating results, such as shipments to specific
customers, product mix, selling prices, the market shift to needleless
products, achievement of business expansion goals, development of innovative
systems capabilities, sales of new products, production engineering and
validation, manufacturing efficiencies, production volumes, overhead
absorption, expansion of markets and distribution costs, seasonality and
customers' ordering patterns;
. new contracts with buying organizations and dependence on a small number of
customers;
. competitive and market factors, including continuing development of competing
products by other manufacturers, consolidation of the healthcare provider
market and downward pressure on selling prices and market acceptance of
innovative ordering and distribution systems;
. working capital requirements, capital expenditures and common stock
repurchases; and
. Y2K issues.
The kinds of statements described above and similar forward looking
statements about the Company's future performance are subject to a number of
risks and uncertainties which one should consider in evaluating the statements.
First, one should consider the factors and risks described in the statements
themselves. These factors are uncertain, and if one or more of them turn out
differently than Management currently expects, the Company's operating results
may differ materially from Management's current expectations.
12
<PAGE>
Second, one should read the forward looking statements in conjunction with
the Risk Factors in the Company's Current Report on Form 8-K to the Securities
and Exchange Commission dated November 5, 1998, which is incorporated by
reference.
Third, the Company's actual future operating results are subject to other
important factors that the Company cannot predict or control, 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;
. the impact of legislation affecting government reimbursement of healthcare
costs;
. changes by the Company's major customers and independent distributors in
their strategies that might affect their efforts to market the Company's
products;
. unanticipated production problems; and
. the availability of patent protection and the cost of enforcing and of
defending patent claims.
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.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
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. On June 23, 1998, the Court reduced the judgement to $727,522
($673,142 plus certain expenses), but denied the balance of the Company's motion
to set aside the jury verdict. The Company believes the verdict is against the
facts in the case and is contrary to well established law, and has appealed to
have the balance of the judgement overturned. In view of the Court decision in
June 1998 and the uncertainties of the appeal process, the Company accrued a
provision for this matter in its June 1998 financial statements.
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.
13
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Item 2. Changes in Securities
- ------------------------------
Inapplicable
Item 3. Default Upon Senior Securities
- ---------------------------------------
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The following is a description of matters submitted to a vote or
Registrant's stockholders at its annual Meeting of Stockholders held on April
24, 1998:
A. John J. Connors, Esq. And Michael T. Kovalchik, III, M.D. were
elected as directors to hold office until the 2002 Annual Meeting. Votes cast
for and withheld with respect to the nominee were as follows:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
J. Connors, Esq. 6,951,091 249,802
Michael T. Kovalchik, III, M.D. 6,950,911 249,982
</TABLE>
The terms of the following directors continued after the Annual Meeting:
Jack W. Brown George A. Lopez, M.D.
Richard H. Sherman, M.D. Robert S. Swinney, M.D.
B. A brief description of each other matter voted upon at the meeting and
votes cast for, against and abstentions and broker non-votes as to each such
matter are as follows:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Vote
-- ------- ------ --------
<S> <C> <C> <C> <C>
Proposal to approve an amendment of the 3,578,417 2,023,069 26,823 1,572,584
ICU Medical, Inc. Amended and Restated
1993 Stock Incentive Plan
Proposal to ratify the selection of Arthur 7,184,512 7,672 8,708 0
Andersen LLP as auditors for Registrant
</TABLE>
Item 5. Other Information
None
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
Registrant filed the following Reports on Form 8-K during the quarter for which
this Report is filed:
Item 5 -- February 9, 1999
Item 5 -- February 23, 1999
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 4, 1999
- ----------------------
Francis J. O'Brien
Chief Financial Officer
(Principal Financial Officer and)
Chief Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,857
<SECURITIES> 35,343
<RECEIVABLES> 6,351
<ALLOWANCES> (275)
<INVENTORY> 2,409
<CURRENT-ASSETS> 48,840
<PP&E> 27,242
<DEPRECIATION> (9,618)
<TOTAL-ASSETS> 67,101
<CURRENT-LIABILITIES> 5,176
<BONDS> 0
0
0
<COMMON> 887
<OTHER-SE> 61,038
<TOTAL-LIABILITY-AND-EQUITY> 67,101
<SALES> 11,442
<TOTAL-REVENUES> 11,442
<CGS> 4,733
<TOTAL-COSTS> 8,308
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,484
<INCOME-TAX> 1,300
<INCOME-CONTINUING> 2,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,184
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.25
</TABLE>
