ALARIS Medical Systems Announced Increased Quarterly Revenues, Adjusted EBITDA; New COO, CFO to Focus on Enhancing Growth Strategy.

SAN DIEGO--(BUSINESS WIRE)--April 29, 1999--

Key Factors:
--   North American and International Businesses Report Sales Growth
--   Instromedix Sales and Costs Contribute to Results
--   Growing Demand for Clinician and Patient Safety Becoming More
     Important to Results

ALARIS Medical Inc. (Nasdaq:ALRS) Thursday reported increased revenues, higher gross margins and higher Adjusted EBITDA for the quarter ended March 31, future growth.

"To more quickly capture this broad opportunity, I have asked our new chief operating officer, David L. Schlotterbeck, and new chief financial officer, William C. Bopp, to join me in refocusing our growth strategy toannual sales, and we want to be sure we convert this leadership into well-recognized shareholder value," he said.

Results

For the quarter ended March 31, 1999, the company reported a 7 percent growth in revenues to $93,436,000 compared with $86,971,000 in the same periomedix, sales increased approximately 3 percent. North American sales increased 2 percent during the quarter as compared with the same quarter last year. This growth was ministration sets.

Gross Profit

duct costs resulting from 1998 cost reduction efforts.

Additionally, gross margin increased to 51.2 percent for the quarter, as compared with 48.4 percent for the same quarter last year, due to the mix of higher margin disposable adof relocation and integration costs. Total relocation and integration expenses are estimated to be approximately $5,000,000 for 1999.

Included in the first quarter 1999 operating expenses is an increase in research and development costs of $1,707,000 or 39 percent due to the inclusion of Instromedix and increased spending on products nearing commercial introduction.

Interest Expense

Total interest expense increased $2,497,000 due primarily to the company's placement of its 11-1/8 Percent Senior Discount Notes in July 1998 related to the acquisition of Instromedix. This was partially offset by a decrease in interest expense on other long-term debt due to a decrease in the amount outstanding.

The accretion on the 11-1/8 Percent Senior Discount Notes is added to the outstanding principal until August 2003. Accretion of $3,171,000 during the quarter increased the amount outstanding under these notes to $118,264,000 at March 31, 1999.

Financial Position

ALARIS Medical reported long-term debt (including current portion) of $543,504,000 at March 31, 1999, compared with $546,290,000 at Dec. 31, 1998. Operating cash flow increased during the quarter as short-term accounts receivable decreased $15,745,000. This resulted in a total cash balance of $39,512,000 at March 31, 1999, as compared with $29,500,000 at Dec. 31, 1998.

Growing the Company

"In recent months, as promised, management actively examined a wide range of possible scenarios for maximizing shareholder value. That activity is now behind us. It is very clear that growing our business is the most reliable and powerful way to increase shareholder value. Our job is to grow the company," Mercer said.

"To help us pursue that strategy, we have attracted two highly regarded senior executives as chief operating officer and chief financial officer," he added.

New COO and CFO

Schlotterbeck joined ALARIS Medical in mid-April as president and COO. Since 1991, Schlotterbeck has held positions as president and COO of Pacific Scientific, an international manufacturer of motion control, process measurement and safety products; president and CEO of Vitalcom Inc., a medical network manufacturer; and executive vice president and COO for Nellcor Inc., a medical device manufacturer recently acquired by Mallinckrodt Inc. During Schlotterbeck's tenure, Nellcor was recognized by Forbes as one of the best-managed U.S. companies under $350 million.

Bopp joined the company in March as vice president and CFO. Since 1980 Bopp has held positions of increasing responsibility with C.R. Bard Inc., a $1.2 billion developer, manufacturer and marketer of health-care products. In addition to his most recent position of executive vice president and CFO, from 1995 until this year, he also served as a member of the board of directors of Bard.

Investing for the Future

Mercer said: "The most important gains in the quarter appear on the expense side of the income statement as they reflect our much more intensive research and development activities and the costs associated with assimilating Instromedix into our product mix and technology base.

"Within the next 12 months, as a result of these and other investments, we will be launching products that will bring in a new century of acute care and that we believe will further advance ALARIS Medical as a global provider of progressively more integrated care systems around the patient."

Mercer also pointed to the continued ramp-up in sales and marketing expenses relative to much slower increases in general and administrative expenses as another sign of ALARIS Medical's investment in growth.

Safety Trend

In today's increasingly complex health-care environment, ALARIS Medical continues to focus on safety as a key source of differentiation. The company's goal is to reduce medication errors, increase caregiver safety and decrease intravenous site complications. Spending and innovation on improving health-care safety has been focused recently on the safety of the caregiver in addition to the patient.

For example, the overall market for needle-free systems grew to more than $300 million in 1998, reflecting the increasing demand for needle-free solutions that protect the caregiver. The company expects its needle-free disposable products to continue to increase as a percent of total North American disposables sales, as health-care providers and clinicians seek to implement greater use of needle-free systems.

New Product Pipeline -0-

North America Sales

--   In mid-March, the company introduced the Signature Edition(R)
     GOLD platform, a new large volume single- and dual-channel
     infusion system intended for broad clinical applications. Among
     the pump's unique clinical and safety features are advanced
     infusion management (AIM), a comprehensive intravenous infusion
     monitoring and management system, and precision flow, designed to
     provide consistent flow continuity and resolution over time.

--   Going forward, ALARIS Medical expects new concepts such as
     connectivity, modularity, telemedicine and medication management
     to become a reality. The company is working toward the initial
     beta launch in the second half of this year of its integrated
     next-generation patient-care system.

Instromedix Division

--   In late February, the Instromedix Division launched the King of
     Hearts Express(R) II device, a new multi-lead cardiac event
     recorder that provides increased memory for automatic, as well as
     patient-activated, electrocardiogram event recording. The
     recording is subsequently transmitted over a standard telephone
     line for analysis and interpretation. "The Instromedix product
     lines complement the company's existing product base and bring
     strong brands, advanced communications technology and access to
     the rapidly growing alternate site segment of the market to the
     company," Mercer noted.

International Sales

--   First sales of ADVANTIS(TM) to hospitals in emerging markets --
     Primary market segments to be targeted include international
     emerging markets, international general-care hospital markets,
     and global home-care markets. The company completed CE marking of
     the ADVANTIS DL infusion system in late March, which enables the
     system to be launched in Western European markets. This
     introduction follows the November 1998 launch of the ADVANTIS DL
     infusion system into Asia, Latin America, Eastern/Central Europe
     and the Middle East. The ADVANTIS DL instrument is not being
     offered for sale in the United States at this time.

--   ReadyMED(R) CE mark -- Designed for the alternate site, ideally
     home-care setting, the ReadyMED Elastomeric Ambulatory pump is a
     single-use, fixed-rate, positive-pressure system for the delivery
     of antibiotics and antivirals. The product complements the full
     range of home-care products now available in Europe.

--   Strong performance of TIVA anesthesia syringe pump -- In Europe,
     the company is working with pharmaceutical firms to provide an
     increased level of patient safety in the application of
     particular anesthetic drugs by using the company's Target
     Controlled Infusion (TCI) and Total Intravenous Anesthesia (TIVA)
     syringe pumps.

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 Instromedix(R) cardiac event recorders and pacemaker follow-up systems.

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 to 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.; Hillsboro, Ore.; Basingstoke, Hampshire, United Kingdom; and Tijuana, Mexico. Additional information on ALARIS Medical can be found at www.alarismed.com.

Forward-Looking Statements

This news release contains forward-looking statements that are based largely upon the company's expectations for demand and acceptance of new and existing products, technologies and opportunities, regulatory approvals and market and industry segment growth. Actual results could vary materially from these expected results due to a variety of factors, including, without limitation, changes in the market, competition, government regulation and foreign operations. Such risk factors are detailed in the Securities and Exchange Commission filings of ALARIS Medical Inc. including Form 10-K for the year ended Dec. 31, 1998. -0-

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

                          ASSETS

                                    March 31,     Dec. 31,
                                      1999          1998
                                  (Unaudited)
Current assets:
 Cash                              $ 39,512       $ 29,500
 Receivables, net                    86,550        102,295
 Inventories                         81,500         79,485
 Prepaid expenses
  and other current assets           26,230         25,246

   Total current assets             233,792        236,526

Net investment in sales-type
 leases, less current portion        16,758         19,111
Property, plant and
 equipment, net                      65,947         61,990
Other non-current assets             21,840         22,388
Intangible assets, net              306,775        311,018

                                   $645,112       $651,033

          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Current portion of
  long-term debt                   $ 12,979       $ 15,423
 Accounts payable                    19,116         22,103
 Accrued expenses and
  other current liabilities          58,109         52,340

  Total current liabilities          90,204         89,866

Long-term debt                      530,525        530,867
Other non-current liabilities        17,626         21,931

  Total non-current liabilities     548,151        552,798

Contingent liabilities
 and commitments

Stockholders' equity:
 Common stock, authorized 75,000
 shares at $.01 par value; issued
 and outstanding -- 59,233 shares
 and 59,221 shares at March 31,
 1999, and Dec. 31, 1998,
 respectively                           592            592
 Capital in excess of par value     148,793        148,762
 Accumulated deficit               (136,494)      (135,769)
 Treasury stock                      (2,027)        (2,027)
 Accumulated other
   comprehensive loss                (4,107)        (3,189)

  Total stockholders' equity          6,757          8,369

                                  $ 645,112      $ 651,033


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

                                 Three Months Ended March 31,
                                       1999        1998

Sales                               $ 93,436    $ 86,971
Cost of sales                         45,634      44,854

Gross profit                          47,802      42,117

Selling and marketing expenses        19,917      17,129
General and administrative expenses   11,235       9,902
Research and development expenses      6,047       4,340
Integration and other non-recurring
 charges                               2,099          --

  Total operating expenses            39,298      31,371

Lease interest income                  1,061       1,162

  Income from operations               9,565      11,908

Other income (expenses):
  Interest income                        322          62
  Interest expense                   (13,653)    (11,156)
  Other, net                            (459)       (357)

Total other expense                  (13,790)    (11,451)

(Loss) income before income taxes     (4,225)        457
(Benefit from) provision for income
 taxes                                (3,500)        250

Net (loss) income                   $   (725)   $    207

  Net income (loss) per common
   share assuming no dilution       $   (.01)   $     --

  Net income (loss) per common
   share assuming dilution          $   (.01)   $     --

Weighted average common shares
 outstanding assuming no dilution     58,777      58,658

Weighted average common shares
 outstanding assuming dilution        58,777      60,196

Income from operations                 9,565      11,908
Depreciation and amortization          9,194       8,284
Integration and other non-recurring
 charges                               2,099          --

  Adjusted EBITDA                   $ 20,858    $ 20,192

Adjusted EBITDA represents income from operations before non-recurring non-cash purchase accounting charges, restructuring charges, integration 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. Restructuring 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 similarly titled measures of other companies.