ALARIS Medical Reports Full Year 2000 Financial Results.

Business Editors & Health/Medical Writers

SAN DIEGO--(BW HealthWire)--April 17, 2001

ALARIS Medical Inc. (AMEX:AMI) today reported sales of $378.9 million for the year ended December 31, 2000, a decrease of $11.0 million, or 3%, when compared with 1999.

For the year, the Company reported a net loss of $11.6 million or $0.20 per share, versus a net loss of $28.4 million or $0.48 per share in the prior year. EBITDA, adjusted for non-recurring charges, decreased $6.8 million, or 8%, to $80.4 million in 2000 compared with $87.2 million in 1999.

Fourth quarter sales decreased 8% to $102.1 million compared with $111.6 million for the fourth quarter of 1999. For the quarter, the Company reported net income of $0.8 million or $0.01 per share compared with a net loss of $17.9 million or $0.30 per share for the fourth quarter of 1999. Adjusted EBITDA decreased to $23.5 million for the quarter compared with $25.1 million for the same quarter a year ago.

The fourth quarter 2000 sales, net income and Adjusted EBITDA amounts were in line with the outlook indicated in the Company's press release of January 10, 2001.

Bank Credit Agreement Amendment

On April 13, 2001, the Company obtained an amendment to the terms of its bank credit agreement. The amendment included the following: (i) a provision providing for changes to certain financial performance covenants for each applicable period from March 31, 2001 through December 31, 2003; (ii) a provision providing for increases to the interest rates on each of the debt tranches; (iii) a provision providing for a decrease in the line of credit from $60 million to $20 million; and (iv) a provision allowing ALARIS Medical Systems to borrow (as part of the credit agreement or otherwise) up to an additional $15 million from a lender it must first locate and to use the funds so borrowed to repurchase the ALARIS Medical Inc. 7 1/4% convertible debentures that mature in January 2002. The $15 million is the maximum that can be borrowed and used for this purpose by ALARIS Medical Systems under the terms of its other debt agreements. The changes to the financial performance covenants were developed based on the Company's strategic plans and were designed to allow the Company access to the $20 million credit line.

Additional information in this regard is detailed in the Company's Form 10-K filing for the year ended December 31, 2000.

2000 Results of Operations

Sales

Sales decreased $11.0 million, or 3%, during 2000 compared with 1999. North America sales decreased $5.8 million, or 2.2% and International sales decreased $5.2 million or 4.2%. The decrease in North America sales in 2000 is primarily due to a decrease in drug infusion disposable administration set revenue of $3.0 million and patient monitoring instruments and disposable revenue of $3.1 million, partially offset by an increase in drug infusion instrument revenue of $1.1 million. Disposable set revenue was lower than a year ago in major markets worldwide. The Company estimates that about $3 million of its dedicated disposable sets were purchased in 1999 as safety stock in anticipation of possible Y2K problems at year-end. The Company believes that most of this customer inventory was worked-off in the first quarter of 2000, resulting in 1999 shipments and revenues that otherwise would have been shipped and recorded in 2000. The majority of the Company's international sales are denominated in foreign currency. Due to a stronger U.S. dollar in 2000 compared with the actual foreign currency exchange rates in effect during 1999, translation of 2000 international sales were adversely impacted by $10.0 million. Using constant exchange rates, International sales increased 4% due primarily to unit growth in syringe pumps and large volume pumps.

Gross Margin

Gross margin decreased $14.0 million or 7% during 2000 compared with 1999. The gross margin percentage decreased from 48.7% in 1999 to 46.4% in 2000 due to changes in product mix and unfavorable manufacturing variances. Contributing to the margin decrease in 2000 was the overall worldwide mix of increased instrument sales and lower disposables sales, lower international sales which typically carry higher margins than U.S. sales and a stronger U.S. dollar.

Selling and Marketing Expense

Selling and marketing expenses decreased $3.4 million, or 5%, during 2000 compared with 1999 due to lower sales and the favorable effect on international expenses of a strong U.S. dollar. Additionally, the 1999 results included costs of approximately $2.1 million that were not repeated in 2000 for management consulting fees associated with developing and validating product strategies. As a percentage of sales, selling and marketing expenses decreased from 19.4% in 1999 to 19.1% in 2000.

General and Administrative Expense

General and administrative expense decreased $3.6 million, or 8%, during 2000 compared with 1999. This decrease is primarily due to lower amortization expense in 2000 resulting from certain intangible assets becoming fully amortized. These decreases were partially offset by increased information technology costs for the Company's new International operating system implemented in late 1999 and higher medical benefits costs than in the prior year. As a percentage of sales, general and administrative expense decreased from 10.8% for 1999 to 10.2% for 2000.

Research and Development Expense

Research and development expense decreased approximately $0.6 million, or 3%, during 2000. As a percentage of sales, research and development spending remained consistent with the prior year.

Restructuring, Integration and Other Non-Recurring Charges

Restructuring, integration and other non-recurring charges increased $4.2 million during 2000 compared with the prior year. The 2000 costs represent restructuring activities the Company initiated which totaled approximately $7.0 million. These actions are intended to save approximately $6 million per year when fully implemented and involve facilities in Creedmoor, N.C., Basingstoke, England and San Diego. The primary focus of this activity is in the Creedmoor manufacturing operation. This plant has been restructured to include disposables engineering, automated manufacturing of selected products and distribution operations. Manual assembly operations has been relocated to the Company's facilities in Tijuana, Mexico, and certain operations will be outsourced. Additionally, the Basingstoke and San Diego operations have been matched to the mix of requirements resulting from current and future product line rationalization efforts. The restructuring and other non-recurring charges of $7.0 million taken during the current period were composed of severance ($5.3 million), fixed asset write-offs ($1.0 million), termination of a product distribution agreement ($0.6 million) and closure of a foreign sales office ($0.1 million).

Integration and other non-recurring charges for 1999 includes a third quarter charge of $2.8 million for two patent license agreements related to patent infringement lawsuits.

Interest Expense

Interest expense increased $3.0 million, or 5%, during 2000 primarily due to increased interest accretion on the Company's 11 1/8% senior discount notes, as well as higher interest rates in 2000 on the Company's other outstanding debt. Additionally, in conjunction with an $18.1 million debt repayment following the sale of Instromedix, the Company recorded a corresponding reduction of debt issuance costs, resulting in a $0.4 million interest expense charge in 2000.

Other Expense

Other expense decreased $1.5 million during 2000 compared with 1999, primarily due to the favorable resolution of two tradename disputes resulting in payments to ALARIS Medical Systems of approximately $2.8 million during 2000. This income was partially offset by increases of $1.4 million in foreign currency transaction losses resulting from the strengthening of the U.S. dollar in 2000 compared with the actual foreign currency exchange rates in effect during 1999.

Discontinued Operations 

During the third quarter of 2000, the Company sold its Instromedix division to Card Guard Technologies Inc., resulting in a gain of $1.8 million, net of applicable taxes. For the year ended December 31, 2000, operating losses of $1.3 million (net of tax) for the Instromedix division are included in discontinued operations. Discontinued operations in 1999 included a pretax charge of $19.2 million resulting from the write-off of goodwill and other intangible assets related to the Instromedix business unit and $4.6 million in integration charges related to the consolidation of Instromedix into the San Diego facility.

Financial Position

ALARIS Medical reported long-term debt (including current portion) of $523.8 million at December 31, 2000 compared with $540.9 million at December 31, 1999. Due to the sale of Instromedix in August 2000, during the year the Company repaid $17.7 million of debt in excess of the scheduled principal amortization of $13.5 million. Additionally, the Company had over $30 million in cash on the balance sheet at the end of 2000.

Recent Key Developments

-- On March 21, 2001, the Company announced that Frederic Denerolle was
appointed vice president and general manager of the International Business Unit
of ALARIS Medical Systems Inc. Over the past 15 years, Denerolle has held
increasingly responsible leadership positions in well-known international
medical device companies. In particular, he has been intimately involved in the
drug infusion device business in France and Germany, the latter being the
world's third largest healthcare consumer market. An experienced general
manager, he was most recently the executive vice president/general manager of
Fresenius' Infusion Technology Division.

-- In the past six months, the Company has completed two significant agreements
to improve its access to the U.S. market. In November 2000, an agreement was
announced with Novation, LLC which runs through May 31, 2005 and names ALARIS
Medical Systems Inc. as one of two companies providing large volume infusion
pumps and compatible accessories, including devices using needle-free
technologies for its VHA members and related organizations. In January 2001,
the Company announced the addition of its SmartSite(R) needle-free system was
added to an existing supply agreement with Premier. ALARIS Medical Systems is
one of two companies providing needle-free infusion delivery devices, large
volume infusion pumps and compatible accessories to Premier member health
systems and hospitals.

-- The Company's user trials of its Medley(TM) Patient Care System continue to
provide extremely positive results in support of the planned shipment of
revenue-producing units later in the second quarter of 2001.

-- The scheduled submission to the FDA later this month of the Company's
certification of regulatory compliance is in preparation. A timely submission
is anticipated.

Outlook

The Company indicated that it plans to report its first quarter 2001 results on May 3. At that time, the Company anticipates reporting strong first quarter 2001 sales, up over 10 percent compared with the prior year's first quarter of $88.6 million. This would be the strongest first quarter sales result in the Company's history. Adjusted EBITDA, which certain investors consider a measure of debt service ability, is anticipated to show an increase from 2000's first quarter of $16.3 million in the 15 to 20 percent range. The strong first quarter performance has increased the Company's cash balance from over $30 million at year-end 2000 to over $45 million at March 31, 2001.

For the full year 2001, ALARIS Medical repeated earlier indications that sales are anticipated to grow at about six percent. Adjusted EBITDA is projected to be between $74 million and $77 million for this period.

For the longer term, the Company noted that the amended bank credit agreement covenants for ALARIS Medical Systems Inc. require a minimum EBITDA of $81.2 million in 2002 and $97.3 million in 2003. These covenants have been developed from the Company's business plan for these years, leaving some operating flexibility. This plan includes revenue growth of approximately 10% per year during 2002 and 2003.

ALARIS Medical Inc., through its operating company, ALARIS Medical Systems Inc., is known for its IMED(R) and IVAC(R) brand names of intravenous infusion therapy systems and patient monitoring products. The company's principal line of business is the design, manufacture and marketing of intravenous infusion therapy products, patient monitoring instruments and related disposables. The Company's products are distributed in more than 120 countries worldwide. In addition to its San Diego world headquarters and manufacturing facility, the company also operates manufacturing facilities in Creedmoor, N.C.; Basingstoke, Hampshire, U.K.; and Tijuana, Mexico. Additional information on ALARIS Medical can be found at www.alarismed.com.

This news release contains forward-looking statements as defined in the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Persons reading this release are cautioned that such forward-looking statements involve risks and uncertainties, including restrictions contained in the instruments governing ALARIS Medical's indebtedness, the significant leverage to which it is subject, the effect of change in foreign currency exchange rates, the dependence of ALARIS Medical upon the success of new products and ongoing research and development efforts including obtaining regulatory approvals, the potential of increased levels of competition and technological changes. Such risk factors are detailed in the Securities and Exchange Commission filings of ALARIS Medical, Inc., including Form 10-K for the year ended December 31, 2000. ALARIS Medical assumes no obligation to update any forward-looking statements as a result of new information or future events or developments.

                          ALARIS MEDICAL INC.
    CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA (Unaudited)
    (Dollar and share amounts in thousands, except per share data)

                         Three Months Ended            Year Ended
                            December 31,              December 31,
                          2000         1999         2000         1999

Sales               $  102,154   $  111,637   $  378,948   $  389,927
Cost of sales           53,841       60,118      202,964      199,923

  Gross profit          48,313       50,519      175,984      190,004

Selling and marketing
 expenses               18,307       19,212       72,340       75,749
General and administrative
 expenses                9,815       10,572       38,740       42,291
Research and development
 expenses                5,671        5,997       21,570       22,134
Restructuring and other
 non-recurring charges     446           --        7,048        2,887

  Total operating
   expenses             34,239       35,781      139,698      143,061

Lease interest income    1,342        1,158        5,095        4,425

  Income from
   operations           15,416       16,896       41,381       51,368

Other income (expenses):
  Interest income          483          253        1,317        1,377
  Interest expense     (14,199)     (13,918)     (57,847)     (54,876)
  Other, net               221         (873)        (140)      (1,668)

Total other expense    (13,495)     (14,538)     (56,670)     (55,167)

Income (loss) before
 income taxes            1,921        2,358      (15,289)      (3,799)
Provision for (benefit from)
 income taxes            1,100        1,600       (3,200)       1,000

Income (loss) from
 continuing operations     821          758      (12,089)      (4,799)

Discontinued operations:
  Loss from operations of
   discontinued business
   (net of tax benefit)     --      (18,631)      (1,308)     (23,627)

Gain on disposal of business
 (net of tax expense)       --           --        1,839           --

Total (loss) income from
 discontinued operations    --      (18,631)         531      (23,627)

Net income (loss) attributable
 to common stock    $      821   $  (17,873)  $  (11,558)  $  (28,426)

  Net income (loss) per
   common share assuming
   no dilution      $      .01   $     (.30)  $     (.20)  $     (.48)

  Net income (loss) per
   common share assuming
   dilution         $      .01   $     (.30)  $     (.20)  $     (.48)

Weighted average common
 shares outstanding
 assuming no dilution   58,845       58,815       58,845       58,815

Weighted average common
 shares outstanding
 assuming dilution      58,859       58,815       58,845       58,815

Income from
 operations         $   15,416   $   16,896   $   41,381   $   51,368
Depreciation and
 amortization            7,593        8,250       31,979       32,920
Restructuring and other
 non-recurring expense     446           --        7,048        2,887

  Adjusted EBITDA   $   23,455   $   25,146   $   80,408   $   87,175


                          ALARIS MEDICAL INC.
                      CONSOLIDATED BALANCE SHEET
    (Dollar and share amounts in thousands, except per share data)

                                ASSETS

                                                  December 31,
                                             2000              1999
Current assets:
  Cash                                 $   30,630        $   23,559
  Receivables, net                         79,790            84,889
  Inventories                              62,324            76,769
  Prepaid expenses and other
   current assets                          33,049            25,086

    Total current assets                  205,793           210,303

Net investment in sales-type leases,
 less current portion                      25,920            24,407
Property, plant and equipment, net         59,988            68,480
Other non-current assets                   28,481            28,157
Intangible assets, net                    249,803           275,443

                                       $  569,985        $  606,790

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt    $   19,871        $   13,769
  Accounts payable                         22,077            25,169
  Accrued expenses and other current
   liabilities                             46,262            44,606

    Total current liabilities              88,210            83,544

Long-term debt                            503,974           527,082
Other non-current liabilities              13,535            17,115

    Total non-current liabilities         517,509           544,197

Contingent liabilities and commitments
Common stock and other stockholders' equity:
  Common stock, authorized 75,000 shares at
   $0.01 par value; issued 59,296 and 59,295
   shares at December 31, 2000 and 1999,
   respectively                               593               593
  Capital in excess of par value          148,992           148,991
  Accumulated deficit                    (175,753)         (164,195)
  Treasury stock                           (2,027)           (2,027)
  Accumulated other comprehensive loss     (7,539)           (4,313)

    Total common stock and other
     stockholders' deficit                (35,734)          (20,951)

                                       $  569,985        $  606,790

Adjusted EBITDA represents income from operations before restructuring, integration and other non-recurring charges, non-cash purchase accounting charges and depreciation and amortization. Adjusted EBITDA does not represent net income or cash flows from operations, as these terms are defined under generally accepted accounting principles, and should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. The Company has included information concerning Adjusted EBITDA herein because it understands that such information is used by certain investors as one measure of an issuer's historical ability to service debt. Integration and other one time non-recurring charges are excluded from Adjusted EBITDA as the Company believes that the inclusion of these items would not be helpful to an investor's understanding of the Company's ability to service debt. The Company's computation of Adjusted EBITDA may not be comparable to similar titled measures of other companies.