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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, 2003
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, 2003
----- -----------------------------
Common 13,789,511
ICU MEDICAL, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- ------- --------------------------------
Condensed Consolidated Balance Sheets, March 31, 2003 and
December 31, 2002 3
Condensed Consolidated Statements of Income for the three
months ended March 31, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2003 and 2002 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2.
- -------
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
ITEM 3.
- -------
Quantitative and Qualitative Disclosures About Market Risk 19
ITEM 4.
Controls and Procedures 19
PART II - OTHER INFORMATION 20
- ---------------------------
SIGNATURES 21
CERTIFICATIONS 22
2
ICU MEDICAL, INC.
Condensed Consolidated Balance Sheets
March 31, 2003 and December 31, 2002
(all dollar amounts in thousands except share data)
(unaudited)
ASSETS
3/31/03 12/31/02
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents $ 4,129 $ 4,165
Liquid investments 74,725 84,300
---------------- ----------------
Cash, cash equivalents and liquid investments 78,854 88,465
---------------- ----------------
Accounts receivable, net of allowance for doubtful accounts of $662
and $665 as of March 31, 2003 and December 31, 2002, respectively 27,042 16,633
Inventories 4,378 5,749
Prepaid expenses and other current assets 342 1,652
Deferred income taxes - current portion 1,924 1,710
---------------- ----------------
Total current assets 112,540 114,209
---------------- ----------------
PROPERTY AND EQUIPMENT, at cost: 61,576 58,958
Less--Accumulated depreciation (25,508) (24,350)
---------------- ----------------
36,068 34,608
---------------- ----------------
DEFERRED INCOME TAXES 4,313 4,313
INTANGIBLE ASSETS - net 3,267 3,352
OTHER ASSETS 559 550
---------------- ----------------
$ 156,747 $ 157,032
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,074 $ 5,046
Accrued liabilities 8,580 6,599
---------------- ----------------
Total current liabilities 12,654 11,645
---------------- ----------------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $1.00 par value
Authorized -- 500,000 shares, issued and outstanding -- none -- --
Common stock, $0.10 par value-
Authorized -- 80,000,000 shares, issued -- 14,098,134 and 14,087,026
shares at March 31, 2003 and December 31, 2002, respectively 1,410 1,409
Additional paid-in capital 63,568 63,284
Treasury stock, at cost -- 318,300 shares at March 31, 2003 (8,649) -
Retained earnings 87,764 80,694
---------------- ----------------
Total stockholders' equity 144,093 145,387
---------------- ----------------
$ 156,747 $ 157,032
================ ================
The accompanying notes are an integral part of these consolidated financial statements.
3
ICU MEDICAL, INC.
Condensed Consolidated Statements of Income
For the Three Months Ended
March 31, 2003 and March 31, 2002 (all dollar amounts in
thousands except per share data)
(unaudited)
For the Three Months Ended
---------------------------
3/31/03 3/31/02
------------ ------------
REVENUES
Net Sales $ 28,736 $ 20,905
Other 2,040 --
------------ ------------
TOTAL REVENUE 30,776 20,905
COST OF GOODS SOLD 13,024 8,556
------------ ------------
Gross profit 17,752 12,349
------------ ------------
OPERATING EXPENSES:
Selling, general and administrative 6,087 5,239
Research and development 471 303
------------ ------------
Total operating expenses 6,558 5,542
------------ ------------
Income from operations 11,194 6,807
INVESTMENT INCOME 296 376
------------ ------------
Income before income taxes 11,490 7,183
PROVISION FOR INCOME TAXES 4,420 2,660
------------ ------------
NET INCOME $ 7,070 $ 4,523
============ ============
NET INCOME PER SHARE
Basic $ 0.50 $ 0.34
Diluted $ 0.46 $ 0.30
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
Basic 14,007,731 13,379,119
Diluted 15,337,366 15,064,856
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
4
ICU MEDICAL, INC.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 2003 and March 31, 2002
(all dollar amounts in thousands)
(unaudited)
For the Three Months Ended
---------------------------
3/31/03 3/31/02
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 7,070 $ 4,523
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 1,633 1,070
Net change in current assets and current liabilities, and other (5,711) (4,278)
------------ ------------
2,992 1,315
Tax benefits from exercise of stock options 3 6,300
------------ ------------
Net cash provided by operating activities 2,995 7,615
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,017) (1,445)
Net change in liquid investments 9,575 (8,400)
Payment of Bio-Plexus, Inc. pre-acquisition liabilities (1,221) --
Increase in due from securities brokers -- (2,891)
------------ ------------
Net cash provided by (used in) investing activities 5,337 (12,736)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 10 5,786
Proceeds from employee stock purchase program 271
Purchase of treasury stock (8,649)
------------ ------------
Net cash provided by (used in) financing activities (8,368) 5,786
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (36) 665
CASH AND CASH EQUIVALENTS, beginning of the period 4,165 3,901
------------ ------------
CASH AND CASH EQUIVALENTS, end of the period $ 4,129 $ 4,566
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
5
ICU MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(All dollar amounts in tables in thousands)
(unaudited)
NOTE 1: The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments, which consist of only normal recurring adjustments, which are, in
the opinion of Management, necessary to a fair statement of the consolidated
results for the interim periods presented. Results for the interim period are
not necessarily indicative of results for the full year. 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 condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in our 2002 Annual
Report to Stockholders.
NOTE 2: Inventories consisted of the following:
3/31/03 12/31/02
------------ ------------
Raw material $ 3,249 $ 3,302
Work in process 548 534
Finished goods 581 1,913
------------ ------------
Total $ 4,378 $ 5,749
============ ============
NOTE 3: Property and equipment, at cost, consisted of the following:
3/31/03 12/31/02
------------ ------------
Land, building and building
improvements $ 16,205 $ 15,197
Machinery and equipment 20,180 19,142
Furniture and fixtures 5,419 5,343
Molds 10,097 9,534
Construction in process 9,675 9,742
------------ ------------
Total $ 61,576 $ 58,958
============ ============
NOTE 4: 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. Our 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 1,329,635 and 1,685,737 for the three months ended March
31, 2003 and 2002, respectively. Options that are antidilutive because their
average exercise price exceeded the average market price of our common stock for
the period approximated 420,000 and none for the three months ended March 31,
2003 and 2002, respectively.
6
We account for our stock options granted to employees and directors
under Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock
Issued to Employees" and related interpretations as permitted by SFAS No. 123
"Accounting for Stock-Based Compensation," and do not recognize compensation
expense because the exercise price of the options equals the fair market value
of the underlying shares at the date of grant. Under SFAS No. 123, the Company
is required to present certain pro forma earnings information determined as if
employee stock options were accounted for under the fair value method of that
Statement. The fair value for options granted in 2003 and 2002 was estimated as
of the date of grant using a Black-Scholes option pricing model. The
Black-Scholes option valuation model was developed for use in estimating fair
value of fully transferable traded options with no vesting restrictions, and,
similar to other option valuation models, requires use of highly subjective
assumptions, including expected stock price volatility. The characteristics of
our stock options differ substantially from those of traded stock options, and
changes in the subjective assumptions can materially affect estimated fair
values; therefore, in Management's opinion, existing option valuation models do
not necessarily provide a reliable single measure of the fair value of our stock
options. The following information is provided pursuant to SFAS No. 123, as
amended. The pro forma adjustment reflects stock-based compensation cost
calculated under the fair value method, net of related tax effects, calculated
pursuant to SFAS No. 123.
Quarter ended March 31,
2003 2002
------------ ------------
Net Income, as reported.......... $ 7,070,000 $ 4,523,000
Pro forma adjustment............. 1,342,000 1,129,000
------------ ------------
Net Income, pro forma............ $ 5,728,000 $ 3,394,000
============ ==-=========
Net Income per share.............
Basic, as reported $0.50 $0.34
Diluted, as reported $0.46 $0.30
Basic, pro forma $0.42 $0.26
Diluted, pro forma $0.38 $0.23
NOTE 5: The effective tax rate differs from that computed at the federal
statutory rate of 35% principally because of the effect of state income taxes
partially offset by the effect of tax-exempt investment income.
7
NOTE 6: Net sales to Abbott Laboratories were 68% and 67% of net revenues in the
first quarters of 2003 and 2002, respectively. No other customer accounted for
more than ten percent of revenues.
NOTE 7: We are from time to time involved in various legal proceedings, either
as a defendant or plaintiff, most of which are routine litigation in the normal
course of business. We believe that the resolution of the legal proceedings in
which we are involved will not have a material effect on our financial position
or results of operations.
In the normal course of business, the Company has made certain
indemnities, including indemnities to officers and directors of the Company to
the maximum extent permitted under Delaware law and intellectual property
indemnities to customers in connection with sales of its products.
These indemnities do not provide a maximum amount. The Company has not recorded
any liability for these and does not expect to incur any.
NOTE 8: In the fourth quarter of 2002, we acquired Bio-Plexus. Inc. for
approximately $8.8 million, net of cash acquired, and Bio-Plexus has been
included in our consolidated financial statements since October 31, 2002.
Bio-Plexus's principal products are blood collection needles, under the
Punctur-Guard name, that are designed to eliminate exposure to sharp,
contaminated needles. Bio-Plexus's revenues in the first quarter of 2003 were
$1.8 million, and its effect on net income was immaterial. Unaudited pro forma
combined revenues of the Company and Bio-Plexus for the first quarter of 2002,
assuming the acquisition occurred on January 1, 2002, were $22,813,000; the pro
forma effect on net income was immaterial.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
We develop, manufacture, sell and distribute disposable medical
connection products. Our principal products are proprietary safe medical
connection devices for use in intravenous ("I.V.") therapy applications. We also
produce custom I.V. systems that incorporate our proprietary products, and since
October 31, 2002, blood collection needles.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
Our significant accounting policies are summarized in Note 1 to the
Consolidated Financial Statements included in our 2002 Annual Report to
Shareholders. In preparing our financial statements, we make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities. We apply our accounting
policies on a consistent basis. As circumstances change, they are considered in
our estimates and judgments, and future changes in circumstances could result in
changes in amounts at which assets and liabilities are recorded.
Investment securities are all marketable and considered "available for
sale". See "Quantitative and Qualitative Disclosures about Market Risk" below.
Under our current investment policies, the securities in which we invest have no
significant difference between cost and fair value. If our investment policies
were to change, and there were differences between cost and fair value, that
difference, net of tax effect, would be reflected as a separate component of
stockholders' equity.
8
Most of our product sales are FOB shipping point and ownership of the
product transfers to the customer when we ship it. Certain other product sales
are FOB destination and ownership of the product transfers to the customer at
destination. We record sales and related costs when ownership of the product
transfers to the customer. Most of our customers are distributors or medical
product manufacturers, although there are some sales to end-users. Our only
post-sale obligations are warranty and certain rebates. Customers, with certain
rare exceptions, do not retain any right of return and there is no price
protection with respect to unsold products. We warrant products against defects
and have a policy permitting the return of defective products. We provide a
reserve for warranty returns as an expense; amounts have been insignificant. We
accrue rebates as a reduction in revenue based on contractual commitments and
historical experience; amounts have not been significant. Adjustments of
estimates of warranty claims, rebates or returns, which have not been, and are
not expected to be material, affect current operating results when they are
made.
Accounts receivable are stated at net realizable value. An allowance is
provided for estimated collection losses based on specific past due accounts for
which we consider collection to be doubtful. Loss exposure is principally with
international distributors for whom normal payment terms are long in comparison
to those of our other customers and, to a lesser extent, domestic distributors.
Many of these distributors are relatively small and we are vulnerable to adverse
developments in their businesses that can hinder our collection of amounts due.
If there are significant doubts as to the collectibility of receivables at the
time of shipment, we defer recognition of the sale in income until the
receivable is collected. If actual collection losses exceed expectations, we
could be required to accrue additional bad debt expense, which could have an
adverse effect on our operating results in the period in which the accrual
occurs.
Inventories are stated at the lower of cost or market. We need to carry
many components to accommodate our rapid product delivery, and if we misestimate
demand or if customer requirements change, we may have components in inventory
that we may not be able to use. Most finished products are made only after we
receive orders, but for those that are not, we need to estimate what may not be
saleable. We regularly review inventory for slow moving items and write off all
items we do not expect to use in manufacturing, or finished products we do not
expect to sell. If actual usage of components or sales of finished goods
inventory is less than our estimates, we would be required to write off
additional inventory, which could have an adverse effect on our operating
results in the period in which the write-off occurs.
Property and equipment is carried at cost and depreciated on the
straight-line method over their estimated useful lives. The estimates of useful
lives are significant judgments in accounting for property and equipment,
particularly for molds and automated assembly machines that are custom made for
us. We may retire them on an accelerated basis if we replace them with larger or
more technologically advanced tooling. The remaining useful lives of all
property and equipment are reviewed regularly and lives are adjusted or assets
written off based on current estimates of future use. As part of that review,
property and equipment is reviewed for other indicators of impairment, but to
date we have not encountered circumstances indicating the carrying amount of an
asset, or group of assets, may not be recoverable. An unexpected shortening of
useful lives of property and equipment that significantly increases depreciation
provisions, or other circumstances causing us to record an impairment loss on
such assets, could have an adverse effect on our operating results in the period
in which the related charges are recorded.
9
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
We have implemented all new accounting pronouncements that are in
effect and that may impact our consolidated financial statements and the effect
of such adoption was not material. We do not believe that there are any other
new accounting pronouncements that have been issued that might have a material
impact on our consolidated financial statements.
GENERAL
- -------
Our principal products are our CLAVE(R)needleless I.V. connection
system and our custom I.V. systems. The following table sets forth, for the
periods indicated, our net revenues by product as a percentage of total net
revenues:
======================================================================================================
PRODUCT LINE 2000 2001 2002 Q1-02 Q1-03
- ------------------------------------------------------------------------------------------------------
CLAVE 71% 74% 67% 77% 63%
- ------------------------------------------------------------------------------------------------------
Custom I.V. Systems 12% 13% 17% 14% 16%
- ------------------------------------------------------------------------------------------------------
Punctur-Guard(R) - - 1% - 6%
- ------------------------------------------------------------------------------------------------------
CLC2000(R) 4% 3% 4% 2% 4%
- ------------------------------------------------------------------------------------------------------
Lopez Valve(R) 3% 2% 2% 2% 2%
- ------------------------------------------------------------------------------------------------------
RF100-RF150 ("Rhino") 5% 3% 2% 2% 1%
- ------------------------------------------------------------------------------------------------------
Protected Needle and Other Products 5% 5% 3% 3% 1%
- ------------------------------------------------------------------------------------------------------
License, royalty and revenue share - - 4% - 7%
- ------------------------------------------------------------------------------------------------------
Total 100% 100% 100% 100% 100%
======================================================================================================
We sell our products to independent distributors and through agreements
with Abbott (the "Abbott Agreements") and certain other medical product
manufacturers. Most independent distributors handle the full line of our
products. Abbott purchases CLAVE products, principally bulk, non-sterile
connectors. Abbott also purchases the Rhino, a low-priced connector specifically
designed for Abbott, the CLC2000, and custom I.V. sets. The Abbott Agreements
extend to December 2009 and have extension provisions beyond that date. We also
sell certain other products to a number of other medical product manufacturers.
We believe that as the healthcare provider market continues to
consolidate, our success in marketing and distributing CLAVE products will
depend, in part, on our ability, either independently or through strategic
supply and distribution arrangements, to secure long-term CLAVE contracts with
major buying organizations. Further, our marketing and distribution strategy may
result in a significant share of our revenues being concentrated among a small
number of distributors and manufacturers. 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 our operating results.
10
We believe the success of the CLAVE has motivated, and will continue to
motivate others to develop one piece, swabbable, needleless connectors that may
incorporate many of the same functional and physical characteristics as the
CLAVE. We are aware of a number of such products. In response to competitive
pressure, we have been reducing prices to protect and expand our market. The
price reductions to date have been more than offset by increased volume. We
expect that the average price of our CLAVE products may continue to decline.
There is no assurance that our current or future products will be able to
successfully compete with products developed by others.
The federal Needlestick Safety and Prevention Act, enacted in November
2000, modified standards promulgated by the Occupational Safety and Health
Administration to require employers to use needleless systems where appropriate
to reduce risk of injury to employees from needlesticks. We believe the effect
of this law has helped to accelerate sales of our needleless systems, although
we are unable to estimate the amount or timing of such sales.
We are taking steps to reduce our dependence on our current proprietary
products. We are seeking to substantially expand our custom I.V. systems
business with products sold to medical product manufacturers and independent
distributors. On February 27, 2001, we signed an agreement with Abbott under
which we manufacture all new custom I.V. sets for sale by Abbott, and we jointly
promote the products under the name SetSource(TM). We expect continuing
significant increases in sales of custom I.V. systems under this agreement. We
also launched efforts to contract with group purchasing organizations and
independent dealer networks for inclusion of our products among those available
to members of those entities. Custom I.V. systems accounted for approximately
$4.9 million of net sales in the first three months of 2003, including net sales
under the Abbott SetSource program of approximately $2.1 million. There is no
assurance that either one of these initiatives will continue to succeed.
In the fourth quarter of 2002 we acquired Bio-Plexus. Inc. for
approximately $8.8 million, net of cash acquired, and Bio-Plexus has been
included in our consolidated financial statements since October 31, 2002.
Bio-Plexus's principal products are blood collection needles, under the
Punctur-Guard name, that are designed to eliminate exposure to sharp,
contaminated needles. Bio-Plexus's revenues in the first quarter of 2003 were
$1.8 million, and its effect on net income was immaterial.
We have an ongoing program to increase systems capabilities, improve
manufacturing efficiency, reduce labor costs, reduce time needed to produce an
order, and minimize investment in inventory. The original focus on
labor-intensive production of custom I.V. systems was expanded to include all
automated manufacturing operations in San Clemente, California and has most
recently been expanded to include the Punctur-Guard manual and automated
manufacturing in Connecticut. Manual assembly, except for that done in
Connecticut, is performed at the facility opened in December 1998 in Ensenada,
Baja California, Mexico. Molding and automated assembly, except for that done in
Connecticut, takes place in our San Clemente, California facility. We continue
to make investments in automated molding and assembly equipment. In the third
quarter of 2002 we commenced use of automated assembly equipment for the 1o2
Valve(R) and commenced use of automated assembly equipment for the CLC2000 in
the fourth quarter of 2002. Throughout 2002, we added molding and automated
assembly capacity for CLAVE production. In the third quarter of 2002 we
commenced a significant expansion of our manual assembly capacity in Mexico that
we expect to complete by June 2003. All these steps have reduced and will
continue to reduce unit production costs. Ongoing steps also include automation
of the production of new products and other products for which volume is
growing, and consideration of establishment of production facilities outside
North America. Because significant innovation is required to achieve these
goals, there is no assurance that these steps will achieve the desired results.
11
We distribute our products through three distribution channels. Net
sales for each distribution channel were as follows:
============================================ ========== =========== ========== =========== ==========
CHANNEL 2000 2001 2002 Q1-02 Q1-03
- -------------------------------------------- ---------- ----------- ---------- ----------- ----------
Medical product manufacturers 74% 72% 73% 75% 75%
- -------------------------------------------- ---------- ----------- ---------- ----------- ----------
Independent domestic distributors 21% 20% 19% 17% 21%
- -------------------------------------------- ---------- ----------- ---------- ----------- ----------
International 5% 8% 8% 8% 4%
- -------------------------------------------- ---------- ----------- ---------- ----------- ----------
Total 100% 100% 100% 100% 100%
============================================ ========== =========== ========== =========== ==========
The healthcare business in the United States is subject to seasonal
fluctuations, and activity tends to diminish somewhat in the summer months of
June, July and August, when illness is less frequent than in winter months and
patients tend to postpone elective procedures. This typically causes seasonal
fluctuations in our business. In addition, we can experience fluctuations as a
result of variations in the ordering patterns of our largest customers, which
may be driven more by production scheduling and their inventory levels, and less
by seasonality.
QUARTER ENDED MARCH 31, 2003 COMPARED TO THE SAME QUARTER LAST YEAR
- -------------------------------------------------------------------
NET REVENUES increased $9,871,000, or approximately 47%, to $30,776,000
in the first quarter of 2003 compared to $20,905,000 during the same period last
year. This amount included approximately $4.0 million of CLAVE product available
for delivery on current orders in the fourth quarter of 2002, but for which
shipment was deferred until early 2003 by agreement with Abbott. (There was no
similar deferral at the end of March 2003.) The increase was primarily
attributable to increased sales of CLAVE products as well as increased sales of
custom I.V. systems, inclusion of sales of Punctur-Guard, which was acquired in
late 2002, and receipt of a license fee.
Net sales to Abbott in the first quarter of 2003 were $20,705,000, as
compared with net sales of $13,969,000 in the first quarter of 2002. (Abbott
sales discussed in this paragraph do not include export sales.) Net sales of
CLAVE products to Abbott, excluding custom CLAVE I.V. systems, in the first
quarter of 2003 increased approximately 41%, to $17,362,000 due to an increase
in unit volume. Sales to Abbott under the SetSource program were $2,080,000, as
compared with approximately $850,000 in the first quarter of 2002. We expect a
substantial increase in CLAVE unit and dollar sales volume with Abbott in 2003,
as well as a significant increase in SetSource unit and sales volume. Net sales
of CLC2000 almost tripled to $419,000 on increased unit volume partially offset
by a modest decrease in pricing. We expect sales of the CLC2000 to Abbott will
increase in the future. Net sales of the Rhino were virtually unchanged at
approximately $500,000; sales of Rhino started to decline in early 2001, and
while they have leveled off recently, we expect them to decline in the future as
the market shifts to one piece, swabbable, needleless technology. There is no
assurance as to the amount of any future sales increases to Abbott.
12
Net revenue from B. Braun Medical Inc. ("B. Braun") was $412,000 in the
first quarter of 2003, as compared with $1,660,000 in the first quarter of 2002.
CLAVE product sales to B. Braun in 2002 were $1,367,000, but less than $100,000
in the first quarter of 2003. There will be no CLAVE product sales to B. Braun
in the future. In 2001, we commenced litigation against B.Braun over contractual
and patent matters. In connection with settlement of the contract litigation in
November 2002, we terminated the agreement under which we sold CLAVE products to
B.Braun, effective December 31, 2002. We continue to vigorously pursue the
patent litigation against B.Braun. See Part II, Item 1. Legal Proceedings. While
the termination of the B.Braun CLAVE agreement could have an adverse effect on
us, we do not believe that it will. We do expect to lose some sales unit volume
to B.Braun products that compete with CLAVE, but we believe many of B.Braun's
customers prefer the CLAVE to B.Braun's products and that many of them will
continue to buy CLAVE products through either Abbott or independent distributors
when they are no longer available from B.Braun. To the extent that customers'
needs are filled through independent distributors, we generate higher revenue
and profit per CLAVE connector, because independent distributors purchase
packaged sterilized products, often complete I.V. sets, from us and these have a
higher price than the bulk nonsterile CLAVE sites which accounted for most of
the CLAVEs that we sold to B. Braun. We have contracts to supply B. Braun a
protected needle product, and B. Braun pays us under the Safeline revenue
sharing agreement. We expect both of these revenue streams to continue to
decrease as the market shifts to one piece, swabbable, needleless technology.
Net sales to independent domestic distributors increased approximately
84% from $3,471,000 in 2002 to $6,378,000 in 2003. This increase in sales to
independent distributors is attributed to a $595,000, or 75%, increase in CLAVE
product sales to $1,393,000 and a $485,000, or 24%, increase in custom I.V.
system sales to approximately $2,545,000, as well as the inclusion of $1,548,000
of Punctur-Guard sales. The increase in CLAVE product sales was because of
higher unit volume, which we believe is because of acquisition by our
independent distributors of market share from B. Braun, and we expect a
continued increase in sales of CLAVE products to independent domestic
distributors. The increase in sales of custom I.V. systems was attributable to
an increase in unit volume, and we expect increased volume of custom I.V.
systems in the future. Net sales of the CLC2000 and the Lopez Valve to
independent domestic distributors also increased by 175% and 49%, respectively,
on higher unit volume. There is no assurance as to the amount of any future
sales increases to the independent domestic distributors.
Total net sales to international distributors (excluding Canada) were
$1,210,000 in the first quarter of 2003, as compared with $1,682,000 in the
first quarter of 2002. The decrease was principally because of a decrease in
CLAVE product sales. We experienced weakness in Latin America because of
continuing economic and political issues and a change in distribution. A decline
in sales to Europe distributors was related mostly to the timing of filling
customers' orders. We now have distribution arrangements in the principal
countries in Western Europe, the Pacific Rim and Latin America and in South
Africa. Furthermore, we have been increasing the number of our international
business development managers. We expect significant increases in sales to
foreign customers in the future, although there is no assurance that those
expectations will be realized.
13
Total net sales of CLAVE products (excluding custom CLAVE I.V. systems)
increased to $19,527,000 in the first quarter of 2003 from $16,041,000 in the
first quarter of 2002, or 22%. Unit shipments of CLAVE products in the first
quarter of 2003 increased approximately 42% over those in the first quarter of
2002. Increases in set sales of CLAVE products of $5,021,000 to Abbott and
$595,000 to independent domestic distributors were partially offset by the
$1,273,000 decrease in CLAVE product sales to B. Braun and the $861,000 decrease
in international CLAVE product sales, from $1,531,000 in 2002 to $670,000 in
2003. The aggregate average net unit selling price of CLAVE products in the
first quarter of 2003 decreased approximately 14%, principally because the mix
of products was more heavily weighted toward bulk non sterile product which has
a lower selling price per unit. We expect continued significant growth in CLAVE
unit and dollar sales volume in 2003, notwithstanding the termination of
distribution to B.Braun, because of the growth that we expect in our other
distribution channels. However, we give no assurance that the expectations will
be realized.
In October 2001, we commenced production of the "MicroCLAVE(R)." It is
smaller than the existing CLAVE but is functionally similar. We are currently
marketing it as an extension of the CLAVE product line for use where its smaller
size is advantageous, such as pediatric care. Sales are included in CLAVE
product sales.
Net sales of custom I.V. systems were $4,894,000 in the first quarter
of 2003 compared to $3,017,000 in the first quarter of 2002, a $1,877,000, or
62%, increase. The SetSource program with Abbott accounted for about 65% of the
increase, with most of the balance in sales to independent domestic
distributors. Unit volume accounted for the majority of the increase.
We acquired the Punctur-Guard product line and technology with the
purchase of Bio-Plexus on October 31, 2002. We now produce the Punctur-Guard
line of products and also license the technology to two medical device
manufacturers for use in catheters. We spent most of the first quarter making
improvements on the Punctur-Guard products. Pending completion of those efforts,
we did not actively promote sales of those products. Improvements were completed
on the Winged Set products and they were re-launched on March 1, 2003.
Improvements on the blood collection needles are ongoing. Sales of Punctur-Guard
products (excluding royalties) were $1,618,000 in the first quarter of 2003. We
expect sales of those products to increase later in 2003, but we give no
assurance that such increases will be achieved.
The 1o2 Valve is the first one-way or two-way drug delivery system in
the marketplace. In the third quarter of 2002, we began using automated assembly
equipment that will enable us to better meet demand for the 1o2 Valve. We are
selling the 1o2 Valve only as a part of our custom I.V. systems, and sales,
which are included in that category were approximately $740,000 in the first
quarter of 2003.
Net sales of the CLC2000 were $1,166,000 in the first quarter of 2003 a
$671,000 or 136% increase over the first quarter of 2002 principally because of
an increase in units sold. Abbott and independent domestic distributors each
accounted for approximately 40% of the increase, and the remainder was accounted
for by foreign distributors. We expect sales of the CLC2000 to increase
moderately in 2003 and later years, but there is no assurance as to the amount
or timing of future CLC2000 sales.
14
Net sales of the Lopez Valve increased 64% in the first quarter
compared to the same period last year principally because of higher unit volume
sold to independent domestic distributors. We believe that the focus of the
sales and marketing efforts of our personnel and those of our distributors on
other products has and may continue to dilute sales of the Lopez Valve and may
contribute to quarterly fluctuations, but we do expect modest sales increases
throughout 2003.
Net sales of protected needle products decreased approximately 48% in
the first quarter of 2003 compared to the same period last year because we
discontinued the Click Lock and Piggy Lock products in the first quarter of
2003. The remaining protected needle product is the McGaw Protected Needle, and
we expect its sales will continue to decline as the market shifts to one piece,
swabbable, needleless technology.
Other revenue consists of license, royalty and revenue share income,
and is being presented separately in our financial statements since the fourth
quarter of 2002. The principal component in the first quarter of 2003 was a
payment for a fully paid up license to use certain of our patents of $1,666,000.
The remainder of the $2,040,000 were ongoing royalties for use of Punctur-Guard
technology and Safeline revenue share payments from B. Braun. We do expect to
receive other license fees or royalties for the use of our technology such as
the one received in the first quarter of 2003 (which was similar to one received
in December 2002), but we can give no assurance as to the amounts or timing of
such payments, or whether any such payments will be received. We did agree to
another license in April 2003 under which we will receive payments of
approximately $1 million in May 2003 and approximately $1 million per year in
quarterly payments from 2004 through 2007.
GROSS MARGIN for the first quarter of 2003, calculated on Net sales
and excluding Other revenue, was 55% as compared with 59% for the first quarter
of 2002. Our "benchmark" gross margin percentage has been 58% over the past five
years. The exclusion of Safeline revenue share payments from net sales (now
included in other revenue) and the inclusion of Bio-Plexus, which has a lower
gross margin than the average of our other products, caused a two percentage
point reduction in the gross margin. The other one percentage point decline was
because of non-recurring production expenses. Average unit selling prices
changed slightly because of a change in product mix, but otherwise were steady
in the first quarter of 2003, and did not contribute significantly to the
decrease in gross margin. We expect gross margins for the entire year 2003 to be
equal to or somewhat lower than the 57% recorded in 2002 but can give no
assurance that such expectation will be realized.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"), excluding
research and development expenses increased by $848,000, or 16%, to $6,087,000,
and were 20% of total revenue (21% of net sales), as compared with 25% in 2002.
The increase was because of the inclusion of Bio-Plexus. Sales and marketing and
administrative costs excluding Bio-Plexus were approximately the same in the
first quarters of 2002 and 2003, except for a small decline in litigation costs
in 2003. We expect to add sales and administrative personnel as 2003 progresses,
and those personnel and related costs will cause a modest increase in total SG&A
costs, which we expect to be 22% to 24% of total revenue for the entire year
2003. However, actual costs may differ from our expectations.
15
RESEARCH AND DEVELOPMENT EXPENSES ("R&D") increased in the first
quarter of 2003 by $168,000 to $471,000, and were approximately 1.5% of total
revenue in both years. The principal increase was on product development for the
Punctur-Guard product line to make improvements that we felt were necessary to
successfully market and sell the products. We estimate that R&D costs will
continue in 2003 at approximately the same percentage of total revenue as in
2002. However R&D costs could differ from those estimates and the R&D may not be
completed as expected.
We plan to launch an infusion device using Punctur-Guard technology in
the second quarter of 2003. These devices will be used for short-term
intravenous administration therapy.
We plan to launch, in limited markets, a new I.V. connector currently
under development. We expect to apply in the second half of 2003 to the FDA
under Section 510(k) of the FDC Act for approval to market this new connector.
There is significant technological difficulty in developing this connector, and
there is no assurance that the FDA will grant marketing clearance, that we will
launch this new product, or that it will achieve sales if and when we commence
marketing it.
INCOME FROM OPERATIONS increased $4,387,000 or 64% and was 36% of total
revenue in the first quarter of 2003, as compared with 33% in the first quarter
of 2002. Gross profit, including license, royalty and revenue share income,
increased 44% over that in 2001, while operating expenses increased only 18%, a
far lower percentage than the increase in gross profit.
INVESTMENT INCOME decreased in the first quarter of 2003 as compared
with the first quarter of 2002, notwithstanding the increase in the investment
portfolio, because of declines in interest rates.
INCOME TAXES were accrued at an effective tax rate of 38.5% in the
first quarter of 2003, as compared with 37% in the first quarter of 2002 and
37.4% for the entire year 2002. The increase is principally because of a one
percentage point increase in the estimated federal tax rate applicable to the
Company and a decline in tax exempt income as a percentage of taxable income. We
expect our effective tax rate will be approximately 38.5% for the entire year
2003.
NET INCOME increased 56% to $7,070,000 in the first quarter of 2003 as
compared with $4,523,000 in the comparable period last year, principally because
of the increase in income from operations. NET INCOME PER SHARE - DILUTED
increased $0.16 or 53%, in the first quarter of 2003 over the first quarter of
2002. This was a lower percentage than the increase in net income principally
because of an increase in shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the first quarter of 2003, our working capital decreased
$2,678,000 to $99,886,000 from $102,564,000. The decrease was principally
because purchases of treasury stock and investments in property and equipment
exceeded working capital generated by operations. During the three months ended
March 31, 2003, our cash and cash equivalents and investment securities position
decreased $9,611,000 to $78,854,000. Cash provided by operating activities of
approximately $3.0 million was more than offset by the $8.6 million spent on
purchasing our stock, as well as $3.0 million of capital expenditures and a $1.2
million payment of Bio-Plexus pre-acquisition liabilities.
16
We expect that sales of our products will continue to grow in 2003. If
sales continue to increase, accounts receivable and inventories are expected to
increase as well. As a result of these and other factors, our working capital
requirements may increase in the foreseeable future.
Accounts receivable increased from $16,633,000 at December 31, 2002 to
$27,042,000 at March 31, 2003. They were 94% of product sales for the first
quarter; the December 31, 2002 balance was 81% of product sales for the fourth
quarter of 2002. The principal reason for the increase was that a
disproportionately high percentage of sales in the first quarter of 2003 were
shipped in March and payment was not due until after March 31, 2003.
Delinquencies were lower as a percentage of receivables at March 31, 2003 than
they were at December 31, 2002.
Inventories decreased from $5,749,000 at December 31, 2002 to
$4,378,000 at March 31, 2003. The decrease was in finished goods, principally
because the December 31, 2002 balances were increased by product shipments that
were deferred in the fourth quarter of 2002. Raw material continues to be high
in relation to historical levels. We have been maintaining components in stock
to avoid a shortage of components needed to meet production schedules until we
can realign our suppliers to meet the demands of our increased volume.
We currently estimate that capital expenditures for 2003 will be
approximately $12 million (excluding any acquisitions). We expect that $4
million will be spent on completion of the $7.2 million expansion in Mexico,
including an electron-beam sterilizer, $6.8 million on molds, molding equipment
and automated assembly equipment, and $1.2 million on computers and software. Of
those amounts, approximately $6 million was committed under contracts at March
31, 2003, and we expect to commit the balance later in 2003. Amounts of spending
are estimates and actual spending may substantially differ from those amounts.
We are currently evaluating the design and capacity of our
manufacturing facilities. We estimate that our current facilities and additions
in progress will be adequate through 2003, but that production after 2003 will
require additional clean room facilities for molding and automated assembly. We
expect to decide later in the year how to meet the need for additional
facilities and the location of additional clean room facilities for molding and
automated assembly.
In 2002 we acquired Bio-Plexus and paid for it from our existing
working capital. We may acquire other businesses or product lines in the future.
In February 2003, we purchased 56,000 shares of our common stock for
$1.7 million, and in March 2003, we purchased an additional 262,300 shares for
$6.9 million. Until those purchases, we had not purchased treasury stock since
October 1999, except for a small amount in March 2000. We may purchase
additional shares in the future. However, future acquisitions, if any, will
depend on market conditions and other factors. As announced on April 15, 2003,
we are considering payment of a dividend, although no decision has been made at
this time.
We have a large cash and liquid investment position generated from
profitable operations and stock sales, principally from the exercise of employee
stock options. We maintain this position to fund our growth, meet increasing
working capital requirements, fund capital expenditures, and potentially to take
advantage of acquisition opportunities that may arise. Our primary investment
goal is capital preservation, as further described in Item 3. Quantitative and
Qualitative Disclosures about Market Risk, our liquid investments have very
little credit risk or market risk.
17
We believe that our existing working capital, supplemented by income
from operations, will be sufficient to fund capital expenditures and increased
working capital requirements for the foreseeable future.
FORWARD LOOKING STATEMENTS
- --------------------------
Various portions of this Report, including this Management's Discussion
and Analysis, describe trends in our business and finances that we perceive and
state some of our expectations and beliefs about our future. These statements
about the future are "forward looking statements," and we identify 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 us and assumptions that we believe are reasonable, but we do not
intend the statements to be representations as to future results. They include,
among other things, statements about:
o future operating results and various elements of operating results,
including sales and unit volumes of products, future license, royalty and
revenue share income, production costs, gross margins, SG&A, and R&D
expense and income taxes;
o factors affecting operating results, such as shipments to specific
customers, product mix, selling prices, warranty claims, rebates, returns,
the market shift to needleless products, future increases or declines in
sales of certain products, impact of safety legislation, achievement of
business expansion goals, development of innovative systems capabilities,
introduction and sales of new products, manufacturing efficiencies, labor
costs, unit production costs, acquisition and use of production equipment
and expansion of facilities and assembly capacity, expansion of markets and
the need for additional facilities, business seasonality and customer
ordering patterns;
o new or extended contracts with manufacturers and buying organizations, and
dependence on a small number of customers, effect of termination of B.Braun
CLAVE agreement;
o regulatory approvals, and outcome of litigation; 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 working capital requirements, changes in
accounts receivable and inventories, capital expenditures, acquisitions of
other businesses or product lines, common stock repurchases and payment of
a dividend.
The kinds of statements described above and similar forward looking
statements about our 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 we currently expect, our operating results may differ materially from our
current expectations.
18
Second, one should read the forward looking statements in conjunction
with the Risk Factors in our Current Report on Form 8-K to the Securities and
Exchange Commission dated February 15, 2002, which is incorporated by reference.
Third, our actual future operating results are subject to other
important factors that we cannot predict or control, including among others the
following:
o general economic and business conditions;
o the effect of price and safety considerations on the healthcare industry;
o competitive factors, such as product innovation, new technologies,
marketing and distribution strength and price erosion;
o unanticipated market shifts and trends;
o the impact of legislation affecting government reimbursement of healthcare
costs;
o changes by our major customers and independent distributors in their
strategies that might affect their efforts to market our products;
o unanticipated production problems; and
o the availability of patent protection and the cost of enforcing and of
defending patent claims.
We disclaim 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------
We have a portfolio of corporate preferred stocks and
federal-tax-exempt state and municipal government debt securities. The
securities are all "investment grade" and we believe that we have virtually no
exposure to credit risk. Dividend and interest rates reset at auction for most
of the securities from between seven and forty-nine day intervals, with some
longer but none beyond twelve months, so we have very little market risk, that
is, risk that the fair value of the security will change because of changes in
market interest rates; they are readily saleable at par at auction dates, and
can normally be sold at par between auction dates.
Our future earnings are subject to potential increase or decrease
because of changes in short-term interest rates. Generally, each one-percentage
point change in the discount rate will cause our overall yield to change by
two-thirds to three-quarters of a percentage point, depending upon the relative
mix of federal-tax-exempt securities and corporate preferred stocks in the
portfolio and market conditions specific to the securities in which we invest.
ITEM 4. CONTROLS AND PROCEDURES
- -------------------------------
Our principal executive officer and principal financial officer have
concluded, based on their evaluation of our disclosure controls and procedures
(as defined in Regulations 13a-14(c) and 15a-14(c) under the Securities Exchange
Act of 1934) within 90 days of filing this Report, that our disclosure controls
and procedures are effective to ensure that the information we are required to
disclose in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure and that such information is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities Exchange Commission. There were no
significant changes in our internal controls or in other factors that could
significantly affect our internal controls subsequent to the date of the
principal executive officer's and principal financial officer's evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
19
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
In an action filed August 21, 2001 entitled ICU Medical, Inc. v. B
Braun Medical, Inc. pending in the United States District Court for the Northern
District of California, we allege that B.Braun Medical, Inc. infringes ICU's
patent by the manufacture and sale of its UltraSite medical connector. We seek
monetary damages and injunctive relief and intend to vigorously pursue this
matter. The outcome of this matter cannot be determined at this time.
We are 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. We believe that the resolution of the legal
proceedings in which we are involved will not have a material adverse effect on
our 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
- -----------------------------------------------------------
Inapplicable
ITEM 5. OTHER INFORMATION
- -------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
Exhibit 99.1 Certifications of Chief Executive Officer and Chief Financial
Officer
(b) Reports on Form 8-K:
The Registrant filed the following Report on Form 8-K/A during the quarter for
which this Report is filed:
20
Item 2 - February 11, 2003
The following financial statements were filed as part of the Report on Form 8K/A
of February 11, 2003:
(a) Financial Statements of Business Acquired
The financial statements of Bio-Plexus, Inc. at December 31, 2001 and
for the three years then ended and the report of independent auditors:
incorporated by reference to Bio-Plexus, Inc.'s Form 10-K filed with
the Securities and Exchange Commission (Commission file number 0-24218)
for the year ended December 31, 2001.
The unaudited condensed financial statements of Bio-Plexus, Inc. at
June 30, 2002 and for the six months then ended: incorporated by
reference to Bio-Plexus, Inc.'s Form 10-Q filed with the Securities and
Exchange Commission for the quarter ended June 30, 2002.
(b) Pro Forma Financial Information
ICU Medical, Inc. and Bio-Plexus, Inc.:
Unaudited Pro Forma Condensed Combined Balance Sheets at June 30, 2002
Unaudited Pro Forma Condensed Combined Consolidated Statements of
Operations for the Year Ended December 31, 2001
Unaudited Pro Forma Condensed Combined Consolidated Statements of
Operations for the Six Months Ended June 30, 2002.
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 9, 2003
- --------------------------------
Francis J. O'Brien
Chief Financial Officer
(Principal Financial Officer and)
Chief Accounting Officer)
21
I, the Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICU Medical,
Inc.:
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's auditors and the audit committee of registrant's board
of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involved
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were any significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 9, 2003
/s/ George A. Lopez, M.D.
-------------------------
Chief Executive Officer
22
I, the Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICU Medical,
Inc.:
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's auditors and the audit committee of registrant's board
of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involved
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were any significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 9, 2003
/s/ Francis J. O'Brien
----------------------
Chief Financial Officer
23