LAKE FOREST, Calif.--(BUSINESS WIRE)--Feb. 24, 2004--

I-Flow Corporation (Nasdaq:IFLO) announced today that revenue for the fourth quarter ended December 31, 2003, rose 46% to a record $13,703,000 from $9,395,000 for the fourth quarter of fiscal 2002. The Company's Regional Anesthesia business led the advance with a 125% increase in revenue to $5,226,000 from $2,327,000 for last year's fourth quarter.

Net income for this year's fourth quarter, which includes net income from discontinued operations of $68,000 from Spinal Specialties, Inc. and a $2,283,000 gain on the sale of Spinal Specialties, was $804,000, or $0.04 per diluted share. This compares to net income of $90,000, or $0.01 per diluted share, for last year's fourth quarter, which includes net income of $8,000 from Spinal Specialties. The net loss from continuing operations for this year's fourth quarter was $1,547,000, or $0.09 per diluted share, versus net income from continuing operations of $82,000, or $0.01 per diluted share, for the same period last year. The loss from continuing operations for this year's fourth quarter included a write-down of $672,000 for tooling, patents and inventory related to IV Infusion Therapy's declining electronic pump manufacturing business. The write-down resulted in additional cost of sales of $582,000 and additional research and development expenses of $90,000.

"Record fourth quarter revenue capped eight consecutive quarters of record top-line growth as we made great strides in building our post-surgical pain relief business. We continued to build our sales force, which now totals over 110 professionals, to extend I-Flow's reach into the large, under-penetrated market for the ON-Q(R) Post-Operative Pain Relief System. A growing pool of clinical data confirming the therapeutic and economic advantages of ON-Q provided invaluable support for our marketing and sales effort. We are optimistic about the opportunity for ON-Q in 2004 and will continue to implement programs to expand I-Flow's share of the post-surgical pain relief market," said Chairman, President and Chief Executive Officer Donald M. Earhart.

For the twelve-month period ended December 31, 2003, revenue from continuing operations rose 36% to a record $47,043,000 from $34,663,000 in fiscal 2002. Net income for 2003, which includes net income from discontinued operations of $328,000 from Spinal Specialties and a gain of $2,283,000 on the sale of Spinal Specialties, was $457,000, or $0.03 per diluted share. This compares to a net loss of $3,035,000, or $0.19 per diluted share, for fiscal 2002, which includes net income of $24,000 from Spinal Specialties and a loss of $3,474,000 from the cumulative effect of a change in accounting principle. The net loss from continuing operations for fiscal 2003 was $2,154,000, or $0.13 per diluted share, versus net income from continuing operations of $415,000, or $0.03 per diluted share, for fiscal 2002.

In a transaction effective November 1, 2003, I-Flow sold Spinal Specialties, Inc. to Integra LifeSciences Holdings Corporation (Nasdaq:IART) for approximately $6,000,000.

Regional Anesthesia

Sales for I-Flow's Regional Anesthesia market segment, which includes ON-Q Classic, ON-Q C-bloc(TM), ON-Q Elite, Soaker(TM) Catheter and the award-winning PainBuster(R) Pain Management System, increased 125% to $5,226,000 for this year's fourth quarter versus $2,327,000 for the same period in 2002. For the twelve months ended December 31, 2003, Regional Anesthesia sales grew 88% to $16,112,000, compared to $8,582,000 for fiscal 2002. U.S. sales of ON-Q excluding PainBuster increased 112% for the quarter and 81% for the year, as compared to the same period amounts in the prior year.

I-Flow is utilizing the resources and expertise of its InfuSystem subsidiary to drive sales in the Regional Anesthesia market segment. In January 2004, I-Flow initiated its new ON-Q Third Party Billing Program enabling Ambulatory Surgery Centers (ASCs) to provide patients with this emerging standard in post-surgical pain relief and I-Flow with reimbursement for the cost of the device. Piloted in 2003, the program facilitates the adoption of ON-Q by physicians and minimizes paperwork for participating ASCs. I-Flow's InfuSystem subsidiary, which has built relationships and secured contracts with insurance companies for more than 18 years, will process claims submitted by the centers and directly bill a patient's insurance company. "Our objective is to make the use of ON-Q seamless for ambulatory surgery centers and surgeons," Earhart said. In addition to the ON-Q Third Party Billing, I-Flow introduced a program to educate surgeons on how to submit for payment for the procedure to insert the ON-Q catheter following surgery.

"Clinical data supporting the adoption of ON-Q for pain relief after surgery is an essential component of I-Flow's blueprint for growth. We have completed and presented 29 research studies. Additionally, we have ongoing clinical trials at numerous leading U.S. universities and medical centers to demonstrate the clinical and economic advantages of ON-Q for a variety of surgical procedures. Typically, these studies have reported reductions in hospital stays by one to three days, reductions in narcotics use by 40% to 70% and reductions in treatment costs by 8% to 30%. Additional results from this research include increased patient satisfaction and substantial reduction in pain scores," Earhart said.

A study of patients requiring median sternotomy for open heart surgery published in The Journal of Thoracic and Cardiovascular Surgery found that their intake of narcotics following surgery was reduced by 41% and they experienced decreased pain levels when using ON-Q. It also found that hospital stays for ON-Q patients were reduced by an average of three days from the average of eight days typically needed for recovery, and patient charges were reduced by an average of 18%.

In a corroborating study, research on the safety and efficacy of using ON-Q following coronary artery bypass graft surgery published in The Journal of American Society of Anesthesiologists found that ON-Q patients had significantly lower pain scores, as well as a 63% average reduction in the use of narcotics, and they left the hospital 1.5 days earlier on average.

The Journal of Surgical Research reported that the use of ON-Q following surgery for the removal of axillary lymph nodes in patients with breast cancer resulted in statistically significant decreased pain and narcotics use by patients, enabling a quicker return to their normal lives. This research also showed that after 90 days there is evidence that when ON-Q was used, there was a reduction in some of the chronic morbidities normally seen after breast cancer surgery.

A study on the efficacy of ON-Q pain relief treatment following foot and ankle surgery published in Anesthesia & Analgesia found that ON-Q patients had a 70% average decrease in narcotics use, 67% average reduction in pain after surgery and 65% average reduction in length of hospital stay.

Two studies presented at the American College of Surgeons 89th Annual Clinical Congress demonstrated that patients treated with a local anesthetic infused directly into the incision site with ON-Q returned to their normal lives faster after open inguinal hernia repair and thoracotomy procedures.

The results of these studies have sparked media interest about the benefits of ON-Q and have resulted in stories like the one that appeared in the December 2003 Reader's Digest, which has a circulation of more than 11 million. These ON-Q mentions in mainstream magazines and newspapers have subsequently led to an increasing awareness by surgeons and patients alike.

Oncology Infusion Services

Revenues for I-Flow's InfuSystem subsidiary in the fourth quarter ended December 31, 2003, increased 27% to $3,403,000 from $2,683,000 for last year's fourth quarter. Revenues for the twelve months ended December 31, 2003, were $13,022,000, a 27% increase over the $10,293,000 in revenues for the same period last year.

"InfuSystem's co-marketing activities with two major pharmaceutical companies to provide physicians with pumps to administer the new drugs Camptosar and Eloxatin to treat colorectal cancer are having a significant impact on the clinical use of ambulatory infusion pump protocols for chemotherapy. Acceptance of these two drugs is growing rapidly, and we believe that will continue in the future," Earhart said.

IV Infusion Therapy

Worldwide sales for IV Infusion Therapy, which include the Company's intravenous elastomeric pumps, mechanical infusion devices and electronic infusion pumps and disposables, increased 16% to $5,074,000 for the fourth quarter ended December 31, 2003, from $4,385,000 for the same period last year. Sales for this year's twelve-month period increased 13% to $17,909,000 from $15,788,000 for fiscal 2002. The Company's loss from continuing operations for this year's fourth quarter and this year included a write-down of $672,000 for tooling, patents and inventory related to the declining electronic IV pump business. Revenues from sales of these products into the IV Infusion Therapy market were approximately $530,000 during 2003.

Balance Sheet

At December 31, 2003, I-Flow reported working capital of $31.5 million, no long-term debt and shareholders' equity of $44.8 million. Cash and cash equivalents totaled $15.2 million.

Conference Call

I-Flow has scheduled a conference call today at 11:00 a.m. ET. A simultaneous webcast may be accessed from the Investors link or the Investors' Event Calendar link at www.IFLO.com. A replay will be available after 1:00 p.m. ET at these same Internet addresses. For a telephone replay, dial 800-633-8284, reservation #21185598 after 1:00 p.m. ET.

About I-Flow

I-Flow Corporation (www.IFLO.com) designs, develops and markets technically advanced, low-cost ambulatory infusion systems that are redefining the standard of care by providing life-enhancing, cost-effective solutions for pain relief. Certain disclosures made by the Company in this press release and in other reports and statements released by the Company are and will be forward-looking in nature, such as comments that express the Company's opinions about trends and factors that may impact future operating results. Disclosures that use words such as the Company "believes," "anticipates," or "expects" or use similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ from those expected, and readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to republish revised forward-looking statements to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company in this release which seek to advise interested parties of the risks and other factors that affect the Company's business, as well as in the Company's periodic reports on Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission. The risks affecting the Company's business include reliance on the success of the home health care industry, the Company's success in pursuing its direct sales strategy, the reimbursement system currently in place and future changes to that system, competition in the industry, economic and political conditions in foreign countries, currency exchange rates, inadequacy of booked reserves, technological changes and product availability. Any such forward-looking statements, whether made in this release or elsewhere, should be considered in context with the various disclosures made by the Company about its business.

                          I-FLOW CORPORATION
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
              ($ in thousands, except for per share data)

                                      Three Months     Twelve Months
                                          Ended            Ended
                                       December 31,     December 31,
                                       2003    2002     2003     2002

Net Revenues                        $13,703  $9,395  $47,043  $34,663
Cost of sales                         5,411   2,862   17,210   11,986
  Gross Profit                        8,292   6,533   29,833   22,677

Costs and expenses:
  Selling, general & administrative   9,837   5,900   30,753   19,859
  Research & development                750     471    2,361    2,104
    Total expenses                   10,587   6,371   33,114   21,963

Operating Income (loss)              (2,295)    162   (3,281)     714

Interest expense (income), net            8      (1)      46       (6)

Income (loss) before taxes           (2,303)    163   (3,327)     720

Provision (benefit) for income taxes   (756)     81   (1,173)     305

Net income (loss) from continuing
 operations                          (1,547)     82   (2,154)     415

Net income from discontinued
 operations, net of tax                  68       8      328       24
Gain on sale of discontinued
 operations, net of tax               2,283      --    2,283       --
Cumulative effect of a change in
 accounting principle for goodwill
 impairment                              --      --       --   (3,474)

Net Income (Loss)                      $804     $90     $457  $(3,035)

Net income (loss) per share from
 Continuing Operations:
  Basic                               (0.09)   0.01    (0.13)    0.03
  Diluted                             (0.09)   0.01    (0.13)    0.03

Net income (loss) per share from
 discontinued operations and
 cumulative effect of a change in
 accounting principle
  Basic                                0.13      --     0.16    (0.23)
  Diluted                              0.13      --     0.16    (0.22)

Net income (loss) per share
  Basic                                0.04    0.01     0.03    (0.20)
  Diluted                             $0.04   $0.01    $0.03   $(0.19)

Weighted average shares outstanding
  Basic                              18,037  15,389   16,384   15,368
  Diluted                            18,037  15,573   16,384   15,879


                CONDENSED CONSOLIDATED BALANCE SHEETS
                     ($ in thousands)(Unaudited)

                                            Dec. 31,          Dec. 31,
ASSETS                                        2003              2002

Current Assets                              $38,590           $22,247
Property, Plant & Equipment, Net              6,744             5,626
Other Assets                                  6,562             5,188

Total                                       $51,896           $33,061

LIABILITIES AND EQUITY

Current Liabilities                          $7,123            $5,590
Long-term liabilities                            --                 1
Shareholders' Equity                         44,773            27,470

Total                                       $51,896           $33,061
      

    CONTACT: I-Flow Corporation
             James R. Talevich, 949-206-2700
             www.IFLO.com
             or
             Investor Contact:
             Berkman Associates
             John Hicks, 310-277-5162
             info@BerkmanAssociates.com

    SOURCE: I-Flow Corporation