Securities and exchange commission


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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: SEPTEMBER 30, 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 by check mark whether the registrant is an accelerated filer (as

defined in the Exchange Act).
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 October 31, 2003

----- -------------------------------

Common 13,650,003


ICU MEDICAL, INC.
INDEX




PART I - FINANCIAL INFORMATION PAGE NUMBER

------------------------------ -----------


ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

-----------------------------------------
Condensed Consolidated Balance Sheets, September 30, 2003 and

December 31, 2002 3
Condensed Consolidated Statements of Income for the three months ended

September 30, 2003 and 2002 4
Condensed Consolidated Statements of Income for the nine months ended

September 30, 2003 and 2002 5
Condensed Consolidated Statements of Cash Flows for the nine months ended

September 30, 2003 and 2002 6
Notes to Condensed Consolidated Financial Statements 7


ITEM 2.

-------
Management's Discussion and Analysis of Financial Condition and Results of

Operations 9


ITEM 3.

-------
Quantitative and Qualitative Disclosures About Market Risk 20


ITEM 4.

-------
Controls and Procedures 21



PART II - OTHER INFORMATION 22

---------------------------
SIGNATURES 23
2

ICU MEDICAL, INC.

Condensed Consolidated Balance Sheets

September 30, 2003 and December 31, 2002

(all dollar amounts in thousands except share data)

(unaudited)

ASSETS
9/30/03 12/31/02

---------- ----------
CURRENT ASSETS:

Cash and cash equivalents $ 5,639 $ 4,165

Liquid investments 65,475 84,300

---------- ----------

Cash and liquid investments 71,114 88,465

Accounts receivable, net of allowance for doubtful accounts of $639 and

$665 as of September 30, 2003 and December 31, 2002, respectively 15,828 16,633

Finance loans receivable - current portion 1,533 --

Inventories 4,680 5,749

Prepaid income taxes 3,851 --

Prepaid expenses and other 2,438 1,652

Deferred income taxes - current portion 1,599 1,710

---------- ----------

Total current assets 101,043 114,209

---------- ----------
PROPERTY AND EQUIPMENT, at cost: 70,686 58,958

Less--Accumulated depreciation (28,850) (24,350)

---------- ----------

Property and equipment, net 41,836 34,608

---------- ----------

FINANCE LOANS RECEIVABLE 4,976 --

DEFERRED INCOME TAXES 3,282 4,313

INTANGIBLE ASSETS, net 4,410 3,352

OTHER ASSETS 508 550

---------- ----------

$ 156,055 $ 157,032

========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:

Accounts payable $ 3,301 $ 5,046

Accrued liabilities 5,991 6,599

---------- ----------

Total current liabilities 9,292 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 -- 14,114,759 and 14,087,026

shares at September 30, 2003 and December 31, 2002, respectively 1,411 1,409

Additional paid-in capital 63,750 63,284

Treasury stock, at cost -- 549,218 shares at September 30, 2003 (14,236) --

Retained earnings 95,838 80,694

---------- ----------

Total stockholders' equity 146,763 145,387

---------- ----------

$ 156,055 $ 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

September 30, 2003 and September 30, 2002

(all dollar amounts in thousands except share and per share data)

(unaudited)

For the Three Months Ended

-----------------------------
9/30/03 9/30/02

------------ ------------
REVENUES

Net Sales $ 25,016 $ 20,105

Other 508 --

------------ ------------

TOTAL REVENUE 25,524 20,105

------------ ------------
COST OF GOODS SOLD 13,246 8,541
------------ ------------

Gross profit 12,278 11,564

------------ ------------
OPERATING EXPENSES:

Selling, general and administrative 5,387 4,743

Research and development 419 384
------------ ------------

Total operating expenses 5,806 5,127

------------ ------------
Income from operations 6,472 6,437
INVESTMENT INCOME 313 339

------------ ------------
Income before income taxes 6,785 6,776
PROVISION FOR INCOME TAXES 2,610 2,500

------------ ------------
NET INCOME $ 4,175 $ 4,276

============ ============
NET INCOME PER SHARE

Basic $ 0.31 $ 0.31

Diluted $ 0.28 $ 0.28

============ ============
WEIGHTED AVERAGE NUMBER OF SHARES

Basic 13,603,733 13,895,280

Diluted 14,805,056 15,375,757

============ ============
The accompanying notes are an integral part of these

consolidated financial statements.
4
ICU MEDICAL, INC.

Condensed Consolidated Statements of Income

For the Nine Months Ended

September 30, 2003 and September 30, 2002

(all dollar amounts in thousands except share and per share data)

(unaudited)

For the Nine Months Ended

-----------------------------
9/30/03 9/30/02

------------ ------------
REVENUES

Net Sales $ 73,616 $ 63,678

Other 3,967 --

------------ ------------

TOTAL REVENUE 77,583 63,678

------------ ------------
COST OF GOODS SOLD 35,418 26,429
------------ ------------

Gross profit 42,165 37,249

------------ ------------
OPERATING EXPENSES:

Selling, general and administrative 17,017 15,398

Research and development 1,427 1,033
------------ ------------

Total operating expenses 18,444 16,431

------------ ------------
Income from operations 23,721 20,818
INVESTMENT INCOME 883 1,079

------------ ------------
Income before income taxes 24,604 21,897
PROVISION FOR INCOME TAXES 9,460 8,100

------------ ------------
NET INCOME $ 15,144 $ 13,797

============ ============
NET INCOME PER SHARE

Basic $ 1.10 $ 1.01

Diluted $ 1.00 $ 0.90

============ ============
WEIGHTED AVERAGE NUMBER OF SHARES

Basic 13,790,843 13,710,168

Diluted 15,073,761 15,281,644

============ ============
The accompanying notes are an integral part of these

consolidated financial statements.
5

ICU MEDICAL, INC.

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended

September 30, 2003 and September 30, 2002

(all dollar amounts in thousands)

(unaudited)

For the Nine Months Ended

-------------------------------
9/30/03 9/30/02

------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income $ 15,144 $ 13,797

Adjustments to reconcile net income to net cash

Provided by operating activities --

Depreciation and amortization 5,105 3,748

Net change in current assets and liabilities, and other,

net of acquisitions (2,120) (7,711)

------------- -------------

18,129 9,834
Tax benefits from exercise of stock options 275 8,141
------------- -------------

Net cash provided by operating activities 18,404 17,975

------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment (9,631) (8,446)

Net change in liquid investments 18,825 (15,824)

Cash payments in connection with acquisitions (5,572) --

Advances under finance loans, net (6,509) --
------------- -------------

Net cash used in investing activities (2,887) (24,270)

------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options 719 7,663

Proceeds from employee stock purchase plan 561 --

Purchase of treasury stock (15,323) --
------------- -------------

Net cash provided by (used in) financing activities (14,043) 7,663

------------- -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,474 1,368

CASH AND CASH EQUIVALENTS, beginning of the period 4,165 3,901

------------- -------------
CASH AND CASH EQUIVALENTS, end of the period $ 5,639 $ 5,269

============= =============
The accompanying notes are an integral part of these consolidated financial statements.
6
ICU MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(All dollar amounts 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:
9/30/03 12/31/02

----------- -----------

Raw material $ 3,202 $ 3,302

Work in process 733 534

Finished goods 745 1,913

----------- -----------

Total $ 4,680 $ 5,749

=========== ===========
NOTE 3: Property and equipment, at cost, consisted of the following:
9/30/03 12/31/02

----------- -----------

Land, building and building

improvements $ 21,233 $ 15,197

Machinery and equipment 24,314 19,142

Furniture and fixtures 5,579 5,343

Molds 13,740 9,534

Construction in process 5,820 9,742

----------- -----------

Total $ 70,686 $ 58,958

=========== ===========
NOTE 4: Finance loans receivable are commercial loans by ICU Finance, Inc., a

wholly-owned consolidated subsidiary. We plan to hold the loans to maturity or

payoff. They are carried at their outstanding principal amount, and will be

reduced for an allowance for credit losses and charge offs if any such

reductions are determined to be necessary in the future. Interest is accrued as

earned based on the stated interest rate and amounts outstanding. Loan fees and

costs have not been material. Scheduled maturities are: remainder of 2003

$406,000; 2004 $1,362,000; 2005 $1,336,000; 2006 $1,306,000; 2007 $1,289,000 and

2008 $810,000. Weighted average maturity (principal and interest) at September

30, 2003 is 2.2 years and the weighted average interest rate is 4.7%. In October

2003, we decided to discontinue new lending activities; we will honor existing

lending commitments; unfunded commitments were approximately $6.1 million at

September 30, 2003.
NOTE 5: Basic net income per share is computed by dividing net income by the

weighted average number of common shares outstanding. Diluted net income per
7
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 the average market value during this period), 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 1,201,323 and 1,480,477 for

the three months ended September 30, 2003 and 2002, respectively and 1,282,918

and 1,571,476 for the nine months ended September 30, 2003 and 2002,

respectively. Options that are anti-dilutive because their average exercise

price exceeded the average market price of our common stock for the period

approximated 810,000 and 210,000 for the three months ended September 30, 2003

and 2002, respectively, and approximately 555,000 and 145,000 for the nine

months ended September 30, 2003 and 2002, respectively.
At the 2003 Annual Meeting of Stockholders, the 2003 Stock Option Plan,

under which 1,500,000 common shares were reserved for issuance to employees, was

approved. Shares reserved for issuance under all of our stock plans at September
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