<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

    (MARK ONE)

    [X]            Quarterly Report Pursuant to Section 13 or 15(d) of the 
                   Securities Exchange Act of 1934

    For the quarterly period ended MARCH 31, 1999 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 Number:                 33-26398
                        ------------------------------------------

                              ALARIS MEDICAL, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                            13-3492624
-------------------------------                            --------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

                   10221 Wateridge Circle, San Diego, CA 92121
-------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (619) 458-7000
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


-------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports 
required 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   X     No        
                                                   -----      -----

On May 5, 1999, 59,247,881 shares of Registrant's Common Stock were 
outstanding.

<PAGE>

                              ALARIS MEDICAL, INC.
-------------------------------------------------------------------------------

                                      INDEX

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION

    Item 1 - Financial Statements:
                                                                                    PAGE
                                                                                    ----
<S>                                                                                 <C>
        Condensed consolidated balance sheet at
        March 31, 1999 and December 31, 1998.....................................     3

        Condensed consolidated statement of operations for
        the three months ended March 31, 1999 and 1998...........................     4

        Condensed consolidated statement of cash flows for
        the three months ended March 31, 1999 and 1998...........................     5

        Condensed consolidated statement of changes
        in stockholders' equity for the period from
        December 31, 1998 to March 31, 1999 .....................................     6

        Notes to the condensed consolidated financial statements.................     7


    Item 2 - Management's Discussion and Analysis of Financial
        Condition and Results of Operations......................................    13


PART II. OTHER INFORMATION

    Item 1 - Legal Proceedings..................................................     23

    Item 6 - Exhibits and Reports on Form 8-K...................................     24
</TABLE>


                                      -2-
<PAGE>

                                   FORM 10 - Q
                                 PART 1 - ITEM 1
                              FINANCIAL INFORMATION

                              ALARIS MEDICAL, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET

         (DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------

                                     ASSETS

<TABLE>
<CAPTION>
                                                                             MARCH 31,        DECEMBER 31,
                                                                                1999             1998
                                                                            -------------    --------------
                                                                            (UNAUDITED)
<S>                                                                         <C>              <C>
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 (Note 5)

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 December 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
                                                                            ----------        -----------
                                                                            ----------        -----------
</TABLE>

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                     CONSOLIDATED FINANCIAL STATEMENTS.

                                      -3-
<PAGE>

                              ALARIS MEDICAL, INC.

           CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

         (DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED MARCH 31,
                                                                          ----------------------------
                                                                              1999             1998
                                                                          -----------      -----------
<S>                                                                       <C>              <C>
Sales...................................................................  $    93,436      $    86,971
Cost of sales...........................................................       45,634           44,854
                                                                          -----------      -----------

Gross margin............................................................       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 (loss) income per common share assuming no dilution.............  $      (.01)     $         -
                                                                          ------------     -----------
                                                                          ------------     -----------
    Net (loss) income 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
                                                                          ------------     -----------
                                                                          ------------     -----------
</TABLE>

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED 
                        CONSOLIDATED FINANCIAL STATEMENTS

                                      -4-
<PAGE>

                              ALARIS MEDICAL, INC.

           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

                             (DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED MARCH 31,
                                                                        ----------------------------
                                                                           1999             1998
                                                                        ----------       -----------
<S>                                                                     <C>              <C>
Net cash provided by operating activities............................   $   26,025       $    14,238
                                                                        ----------       -----------

Cash flows from investing activities:
    Net capital expenditures.........................................       (8,886)           (5,002)
    Patents, trademarks and other....................................         (297)             (125)
    Payment for product distribution rights..........................         (800)                -
                                                                        ----------       -----------

Net cash used in investing activities................................       (9,983)           (5,127)
                                                                        ----------       -----------

Cash flows from financing activities:
    Principal payments on long-term debt.............................       (5,993)           (6,072)
    Proceeds under revolving credit facility.........................            -            10,300
    Repayments under revolving credit facility.......................            -           (16,500)
    Proceeds from exercise of stock options..........................           26                41
                                                                        ----------       -----------

Net cash used in financing activities................................       (5,967)          (12,231)
                                                                        ----------       -----------

Effect of exchange rate changes on cash..............................          (63)              (25)
                                                                        ----------       -----------

Net increase (decrease) in cash......................................       10,012            (3,145)
Cash at beginning of period..........................................       29,500             6,984
                                                                        ----------       -----------

Cash at end of period................................................   $   39,512       $     3,839
                                                                        ----------       -----------
                                                                        ----------       -----------
</TABLE>

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED 
                        CONSOLIDATED FINANCIAL STATEMENTS

                                      -5-
<PAGE>

                              ALARIS MEDICAL, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
                        STOCKHOLDERS' EQUITY (UNAUDITED)

                     (DOLLAR AND SHARE AMOUNTS IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                ACCUMULATED
                                                                                                   OTHER                  OTHER
                                                     CAPITAL IN                                   COMPRE-                COMPRE-
                                     COMMON STOCK     EXCESS OF  ACCUMULATED  TREASURY STOCK      HENSIVE                HENSIVE
                                    SHARES  AMOUNT    PAR VALUE    DEFICIT    SHARES   AMOUNT      LOSS        TOTAL       LOSS   
                                    ------  ------   ----------    -------    -------  ------   -----------   --------   ---------
<S>                                 <C>     <C>      <C>         <C>          <C>      <C>      <C>           <C>        <C>
Balance at December 31, 1998....... 59,221  $  592   $ 148,762   $ (135,769)     453   $(2,027)   $(3,189)    $ 8,369

Comprehensive loss
   Net loss for the period.........                                    (725)                                     (725)    $  (725)
   Equity adjustment from foreign
    currency translation...........                                                                  (918)       (918)       (918)
                                                                                                                          -------
Comprehensive loss.................                                                                                       $(1,643)
                                                                                                                          -------
                                                                                                                          -------
Exercise of stock options..........     12       -          26                                                     26
Tax benefit from exercise of
   stock options...................                          5                                                      5
                                    ------  ------   ---------   ----------    -----   -------    --------    -------
Balance at March 31, 1999.......... 59,233  $  592   $ 148,793   $ (136,494)     453   $(2,027)   $(4,107)    $ 6,757
                                    ------  ------   ---------   ----------    -----   -------    --------    -------
                                    ------  ------   ---------   ----------    -----   -------    --------    -------
</TABLE>

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED 
                        CONSOLIDATED FINANCIAL STATEMENTS

                                      -6-
<PAGE>

                              ALARIS MEDICAL, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

      (DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------

NOTE 1 -- BUSINESS AND STATEMENT OF ACCOUNTING POLICY

THE COMPANY:

ALARIS Medical, Inc. ("ALARIS Medical"), formerly Advanced Medical, Inc., 
operating through its consolidated subsidiaries, designs, manufactures, 
distributes and services intravenous infusion therapy and patient monitoring 
instruments and related disposables and accessories, as well as 
cardiovascular and pacemaker monitoring products. ALARIS Medical and its 
subsidiaries are collectively referred to as the "Company."

STATEMENT OF ACCOUNTING POLICY:

The accompanying financial statements have been prepared by the Company 
without audit pursuant to the rules and regulations of the Securities and 
Exchange Commission. Certain information and footnote disclosures normally 
included in financial statements prepared in accordance with generally 
accepted accounting principles have been condensed or omitted pursuant to 
those rules and regulations, although the Company believes that the 
disclosures herein are adequate to make the information not misleading.

In the opinion of the Company, the accompanying financial statements contain 
all adjustments, consisting of normal recurring adjustments, necessary for a 
fair statement of the Company's financial position as of March 31, 1999, and 
the results of its operations and its cash flows for the three months ended 
March 31, 1999 and 1998.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities at the date of the 
financial statements and the reported amounts of revenues and expenses during 
the period. Actual results could differ from those estimates.

NET INCOME (LOSS) PER COMMON SHARE:

The Company's net income (loss) per common share assuming no dilution is 
computed using the weighted average number of common shares outstanding. The 
Company's net income (loss) per common share assuming dilution is computed 
using the weighted average number of common shares outstanding plus dilutive 
potential common shares using the treasury stock method at the average market 
price during the reporting period (Note 3).

NOTE 2 -- INVENTORIES

Inventories comprise the following:

<TABLE>
<CAPTION>
                                                  MARCH 31,       DECEMBER 31,
                                                    1999             1998 
                                                 -----------      -----------
<S>                                              <C>              <C>
    Raw materials.............................   $    37,834      $    35,024
    Work-in-process...........................         7,263            5,719
    Finished goods............................        36,403           38,742
                                                 -----------      -----------

                                                 $    81,500      $    79,485
                                                 -----------      -----------
                                                 -----------      -----------
</TABLE>

                                      -7-
<PAGE>

NOTE 3 -- EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED MARCH 31,
                                                          ------------------------------------------------------
                                                                   1999                           1998
                                                          ------------------------      ------------------------
                                                             BASIC       DILUTED           BASIC        DILUTED
                                                          ---------     ----------      ----------     ---------
<S>                                                       <C>           <C>             <C>            <C>
Net (loss) income as reported..........................   $    (725)    $     (725)     $      207     $     207
                                                          ---------     ----------      ----------     ---------
                                                          ---------     ----------      ----------     ---------

Weighted average common shares outstanding.............      58,777         58,777          58,658        58,658

Weighted average common stock options as
   determined by application of the treasury
   stock method........................................           -              -               -         1,538
                                                          ---------     ----------      ----------     ---------

Weighted average common and common
   equivalent shares outstanding.......................      58,777         58,777          58,658        60,196
                                                          ---------     ----------      ----------     ---------
                                                          ---------     ----------      ----------     ---------

Net (loss) income per common share.....................   $    (.01)    $     (.01)     $        -     $       -
                                                          ---------     ----------      ----------     ---------
                                                          ---------     ----------      ----------     ---------
</TABLE>

Net loss per common share assuming no dilution and dilution are the same for 
the three months ended March 31, 1999, as the Company experienced a net loss. 
Options outstanding at March 31, 1999 were excluded due to their antidilutive 
nature. Had such options been included, the weighted average shares would 
have increased by 1,153.

The Company's 7.25% Convertible Debentures (the "Convertible Debentures") 
were not included in the calculation of diluted earnings per share in the 
quarters ended March 31, 1999 and 1998 as they are antidilutive. The $16,152 
of Convertible Debentures, if converted at an exercise price of $18.14 per 
share, would result in an increase of 890 common shares and an increase of 
$176, net of taxes, to net income, due to the reduction in interest expense.

NOTE 4 -- SEGMENT INFORMATION

In 1998, the Company adopted Statement of Financial Accounting Standards No. 
131 ("FAS 131"), "Disclosures about Segments of an Enterprise and Related 
Information." The prior year's segment information has been conformed to 
present the Company's three reportable segments in accordance with the new 
standard -(1) North America, (2) International and (3) Instromedix.

The accounting policies of the segments are the same as those described in 
the "Statement of Accounting Policy" (Note 1). Segment data does not include 
intersegment revenues, or charges allocating corporate-headquarters costs to 
each of its operating segments. The Company evaluates the performance of its 
segments and allocates resources to them based on operating income and 
adjusted earnings before interest, taxes, depreciation, and amortization 
(EBITDA).

The Company is organized primarily based on geographic location with the 
United States and Canada drug infusion and patient monitoring business 
representing the North American Segment. All other international operations 
including Europe, Asia, Australia and Latin America represent the 
International segment. The acquisition of Instromedix in 1998 resulted in a 
third separate operating segment.

                                      -8-
<PAGE>

The table below presents information about reported segments for the three 
months ended March 31:

<TABLE>
<CAPTION>
                                         NORTH                                            SHARED
                                        AMERICA       INTERNATIONAL    INSTROMEDIX       SERVICES          TOTAL 
                                     ------------    --------------   ------------    -------------    ------------
<S>                                  <C>             <C>              <C>             <C>              <C>
1999
    Sales .........................  $    57,336     $    32,062      $     4,038     $         -      $    93,436
    Operating Income...............        9,332           7,520           (2,853)         (4,434)           9,565
    Adjusted EBITDA................       12,648           8,970              343          (1,103)          20,858

1998
    Sales .........................  $    56,070     $    30,901      $         -     $         -      $    86,971
    Operating Income...............        9,690           6,850                -          (4,632)          11,908
    Adjusted EBITDA................       13,474           8,133                -          (1,415)          20,192
</TABLE>

Reconciliation of total segment adjusted EBITDA to consolidated (loss) income 
before taxes:

<TABLE>
<CAPTION>
                                                                          1999             1998 
                                                                       -----------      -----------
<S>                                                                    <C>              <C>
ADJUSTED EBITDA
    Total adjusted EBITDA............................................  $    20,858      $    20,192
    Depreciation and amortization....................................       (9,194)          (8,284)
    Interest (net)...................................................      (13,331)         (11,094)
    Integration and other non-recurring charges......................       (2,099)               -
    Other reconciling items..........................................         (459)            (357)
                                                                       -----------      -----------
       Consolidated (loss) income before income taxes................  $    (4,225)     $       457
                                                                       -----------      -----------
                                                                       -----------      -----------
</TABLE>

NOTE 5 -- CONTINGENCIES AND LITIGATION

GOVERNMENT REGULATION

The United States Food and Drug Administration (the "FDA"), pursuant to the 
Federal Food, Drug, and Cosmetic Act (the "FDC Act"), regulates the 
introduction of medical devices into commerce, as well as testing 
manufacturing procedures, labeling, adverse event reporting and 
record-keeping with respect to such products. The process of obtaining market 
clearances from the FDA for new products can be time-consuming and expensive 
and there can be no assurance that such clearances will be granted or that 
FDA review will not involve delays adversely affecting the marketing and sale 
of products. Enforcement of the FDC Act depends heavily on administrative 
interpretation and there can be no assurance that interpretations made by the 
FDA or other regulatory bodies will not have a material adverse effect on the 
business, financial condition, results of operations or cash flows. The FDA 
and state agencies routinely inspect the Company to determine whether the 
Company is in compliance with various requirements relating to manufacturing 
practices, testing, quality control, complaint handling, medical device 
reporting and product labeling. Such inspections can result in such agencies 
requiring the Company to take certain corrective actions for non-complying 
conditions observed during the inspections. A determination that the Company 
is in violation of the FDC Act could lead to the imposition of civil 
sanctions, including fines, recall orders, orders for repair or refund or 
product seizures and criminal sanctions. Since 1994, the Company has on 
seventeen occasions temporarily removed products from the market or issued 
safety alerts regarding products that were found not to meet performance 
standards. None of such recalls materially interfered with the Company's 
operations and all such product lines, except the Model 599 Series infusion 
pump, were subsequently returned to the market. The Company continues, 
however, to sell administration sets and replacement parts for the Model 599 
Series infusion pump. In addition, the 

                                      -9-
<PAGE>

Company has initiated a voluntary safety alert of its Model 597/598 and Model 
599 Series infusion pumps. Moreover, the Company has initiated a voluntary 
recall of approximately 50,000 of its Gemini PC-1 and PC-2 infusion pumps 
because failure of specific electrical components on the power regulator 
printed circuit board may result in improper regulation of the battery charge 
voltage, which may cause the battery to overheat. The Company recorded a 
charge of $2,500 to cost of sales for the three months ended March 31, 1997 
on account of this voluntary recall. The Company initiated a voluntary recall 
of its Signature Edition infusion pumps to correct a malfunction of an 
electronic line filter component (which malfunction may occur when a user 
fails to follow the Company's written cleaning instructions and can result in 
an electrical short). The Company is not aware of the occurrence of any 
injury incidents relating to a malfunction of this type. Further, in November 
1998, the Company initiated a voluntary safety alert regarding the Signature 
Edition infusion pumps advising to check for the proper installation of a 
spring in the pumping mechanism assembly. In the third quarter of 1998, the 
Company initiated a recall of its Gemini PC-4 infusion pumps to correct 
certain electro-mechanical problems which may cause one or more channels of 
the device to audibly and visibly alarm and temporarily cease operation. The 
Company has initiated a mandatory field upgrade of its P-1000, P-2000, P-3000 
and P-4000 syringe pumps because under certain circumstances a rate change 
can occur. The Company has also initiated a mandatory field upgrade of the 
Gemini PC-2T CE (220V) product, distributed only in certain countries outside 
the U.S., for failure to audibly alarm when a certain type of failure occurs. 
Although there can be no assurance, the Company believes that these voluntary 
recalls, along with adjustments and corrections that may be made to various 
Company products from time to time as an ordinary part of the business of the 
Company, will not have a material adverse effect on the business, financial 
condition, results of operations or cash flows.

LITIGATION

The Company is a defendant in a lawsuit filed in June 1996 by Sherwood 
Medical, Inc. against IVAC Medical Systems, Inc. ("IVAC") which alleges 
infringement of two patents by reason of certain activities including the 
sale by IVAC of disposable probe covers for use with the Company's infrared 
tympanic thermometer. The lawsuit sought injunctive relief, treble damages 
and the recovery of costs and attorney fees. The jury failed to reach a 
verdict in this litigation and the Court has declared a mistrial. Sherwood 
has asked the Court for a retrial, which is tentatively scheduled for August 
1999. The Company believes it has sufficient defenses to all claims, 
including the defenses of noninfringement and invalidity and intends to 
vigorously defend this action. However, there can be no assurance that the 
Company will successfully defend all claims made by Sherwood and the failure 
of the Company to successfully prevail in this lawsuit could have a material 
adverse effect on the business, financial condition, results of operations or 
cash flows.

The Company is a defendant in a lawsuit filed on April 20, 1998 and served on 
October 28, 1998, by Becton Dickinson and Company ("Becton") against ALARIS 
Medical Systems, Inc., which alleges infringement of a patent licensed to 
Becton by reason of certain activities, including the sale of the Company's 
SmartSite needle-free system. Becton has requested a permanent injunction 
enjoining the Company from infringing the patent in suit. No amount of 
monetary damages has been specified by Becton, however, the complaint 
requests damages as appropriate and all gains, profits and advantages derived 
by or from the Company's infringement of the patent, as well as prejudgment 
interest, costs, expenses and reasonable attorney's fees. The Company 
believes it has sufficient defenses to all claims, and intends to vigorously 
defend this action. However, there can be no assurance that the Company will 
successfully defend all claims made by Becton and the failure of the Company 
to successfully prevail in this lawsuit could have a material adverse effect 
on the business, financial condition, results of operations or cash flows. In 
addition, the Company filed a lawsuit on December 4, 1998 against Becton. The 
lawsuit, which is pending in the United States District Court for the 
Southern District of California, alleges infringement of two patents, one 
owned by the Company and one licensed to the Company, by reason of 

                                      -10-
<PAGE>

certain activities, including the sale of Becton's Atrium needle free valve. 
The lawsuit seeks injunctive relief, damages and the recovery of costs and 
attorney fees.

UNITED STATES CUSTOMS SERVICE MATTER

During the years 1988 through 1995, Cal Pacifico acted as the Company's 
United States customs broker and importer of record with respect to the 
importation into the United States of finished products ("Finished Products") 
assembled at the Company's two maquiladora assembly plants in Tijuana, 
Mexico. In May 1995, Cal Pacifico received a pre-penalty notice from the 
United States Customs Service ("Customs") to the effect that Customs intended 
to assess additional duties and substantial penalties against Cal Pacifico 
for its alleged failure, during the years 1988 through 1992, to comply with 
certain documentary requirements regarding the importation of goods on behalf 
of its clients, including the Company. Customs recently assessed additional 
duties with respect to Cal Pacifico's importation of goods on behalf of its 
clients, including the importation of the Company's Finished Products, for 
the years 1993 and 1994, and it is anticipated that Customs will issue a 
pre-penalty notice to Cal Pacifico in respect to these years as well 
(collectively with the amounts referred to in the immediately preceding 
sentence, the "Disputed Amounts"). The Company has been advised by its 
special Customs counsel that, under applicable law, no person, by fraud, 
gross negligence or negligence, may (i) import merchandise into the commerce 
of the United States by means of any material and false document, statement 
or act, or any material omission or (ii) aid or abet any other person to 
import merchandise in such manner. No proceeding has been initiated by 
Customs against the Company in respect of the matters which are the subject 
of the proceeding against Cal Pacifico. Since Cal Pacifico was the Company's 
United States customs broker and importer of record during each of the 
foregoing years, the Company believes that it is unlikely that Customs will 
assess against the Company any portion of the Disputed Amounts.

Cal Pacifico is contesting Customs' assessment of the Disputed Amounts. Cal 
Pacifico's challenge to the assessment of the Disputed Amounts is in its 
preliminary stages. Given the present posture of Cal Pacifico's challenge, 
and the inherent uncertainty of contested matters such as this, it is not 
possible for the Company to express an opinion as to the likelihood that Cal 
Pacifico will prevail on its challenge. Cal Pacifico or Customs has not 
informed the Company as to the specific amount of the Disputed Amounts.

Cal Pacifico has advised the Company that, should Cal Pacifico's challenge to 
the assessment of the Disputed Amounts prove to be unsuccessful, it will seek 
recovery from the Company, through arbitration, for any portion of the 
Disputed Amounts which it is required to pay to Customs. As part of the 
settlement agreement which resolved the Company's contract dispute with Cal 
Pacifico during the second quarter of 1997, the Company paid Cal Pacifico 
$550, which is to be applied toward Cal Pacifico's payment of Disputed 
Amounts. The $550 payment by the Company is to be credited toward any portion 
of the Disputed Amounts which the arbitrator determines the Company owes to 
Cal Pacifico. The actual amount so determined by the arbitrator may be less 
or greater than $550. Although the ultimate outcome of such an arbitration 
proceeding cannot be guaranteed, the Company believes that it has meritorious 
defenses to claims with respect to Disputed Amounts which Cal Pacifico might 
raise against the Company. These defenses would be based, among other 
factors, on the contractual relationship between the Company and Cal Pacifico 
(including a defense with respect to the availability of indemnification 
under the agreements between Cal Pacifico and the Company), the conduct of 
Cal Pacifico with respect to both the Company and Customs, and the compliance 
obligations of Cal Pacifico under applicable customs laws. Inasmuch as Cal 
Pacifico's challenge before Customs is still pending and any claim against 
the Company for indemnification would be based on Cal Pacifico's ultimate 
lack of success in that challenge, and inasmuch as any arbitration proceeding 
by which Cal Pacifico might seek indemnification has not been filed nor has 
Cal Pacifico committed itself to the theories under which it might seek 
indemnification or 

                                      -11-
<PAGE>

the recovery of damages from the Company, it is not possible for the Company 
to express an opinion at this time as to the likelihood of an unfavorable 
outcome in such a proceeding.

OTHER

The Company is also a defendant in various actions, claims, and legal 
proceedings arising from its normal business operations. Management believes 
they have meritorious defenses and intends to vigorously defend against all 
allegations and claims. As the ultimate outcome of these matters is 
uncertain, no contingent liabilities or provisions have been recorded in the 
accompanying financial statements for such matters. However, in management's 
opinion, based on discussions with legal counsel, liabilities arising from 
such matters, if any, will not have a material adverse effect on the 
business, financial condition, results of operations or cash flows.








                                      -12-
<PAGE>

                                 PART I - ITEM 2

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------------------------------------

GENERAL

ALARIS Medical is a holding company for ALARIS Medical Systems, Inc. ("ALARIS 
Medical Systems"). ALARIS Medical also identifies and evaluates potential 
acquisitions and investments, and performs various corporate functions. As a 
holding company, ALARIS Medical currently has no revenues to fund its 
operating and interest expense and relies on cash generated from the 
operations of ALARIS Medical Systems, as well as the existing cash and 
external borrowings of ALARIS Medical Systems to meet its obligations. 
Capitalized terms used but not defined herein have the meaning ascribed to 
them in the Notes to the Condensed Consolidated Financial Statements.

The Company is a leading provider of infusion systems and related 
technologies to the United States hospital market, with the largest installed 
base of pump delivery lines ("channels"). The Company is also a leader in the 
international infusion systems market. Based on installed base of infusion 
pumps, the Company has a number one or two market position in eight Western 
European countries, the number three market position in Germany, the largest 
installed base of infusion pumps in Australia and Canada and a developing 
position in Latin America and Asia. The Company's infusion systems, which are 
used to deliver one or more fluids, primarily pharmaceuticals or 
nutritionals, to patients, consist of single and multi-channel infusion pumps 
and controllers, and proprietary and non-proprietary disposable 
administration sets (i.e., plastic tubing and pump interfaces). In addition, 
the Company is a leading provider of patient monitoring products that measure 
and monitor temperature, pulse, pulse oximetry and blood pressure, with the 
largest installed base of hospital thermometry systems in the United States. 
Through its July 17, 1998 acquisition of Instromedix, Inc. ("Instromedix"), 
the Company also designs, manufactures and sells cardiology products such as 
arrhythmia-event recorders and pacemaker monitors.

The Company sells a full range of products through a worldwide direct sales 
force consisting of approximately 300 sales persons and through more than 150 
distributors to over 5,000 hospitals worldwide. Sales by the Company's 
International business unit represented 34.3% of the Company's total sales 
for the period ended March 31, 1999. For the three months ended March 31, 
1999, the Company had sales of $93.4 million and Adjusted EBITDA of $20.9 
million.

In recent years, the Company's results of operations have been affected by 
the cost containment pressures applicable to health care providers. In 
particular, in order to reduce costs, certain hospitals have adopted a 
protocol increasing the maximum time between disposable administration set 
changes from every 24 hours to as much as every 72 hours. Notwithstanding 
this change in protocol, unit sales volume of the Company's disposable 
administration sets increased in every year since 1993, primarily as a result 
of the growth in its world-wide installed base of infusion pumps. However, 
uncertainty remains with regard to future changes within the healthcare 
industry. The trend towards managed care and economically motivated buyers in 
the U.S. may result in continued pressure on selling prices of products and 
compression on gross margins. The U.S. marketplace is increasingly 
characterized by consolidation among healthcare providers and purchasers of 
medical products. The Company's profitability is affected by the increasing 
use of Group Purchasing Organizations ("GPOs") which are better able to 
negotiate favorable pricing from providers of infusion systems, such as the 
Company, and which police compliance with exclusive buying arrangements for 
their members. These buying arrangements, in certain situations, also may 
result in the GPO requiring removal of the Company's existing infusion pumps. 
The Company expects that such GPOs will become increasingly more common and 
may have an adverse effect on the Company's future profitability. Finally, 
the enactment 

                                      -13-
<PAGE>

of national health care reform or other legislation affecting payment 
mechanisms and health care delivery could affect the Company's future results 
of operations. It is impossible to predict the extent to which the Company 
may be affected by any such change in legislation.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected financial 
information expressed as a percentage of sales:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED MARCH 31,
                                                      -----------------------------
                                                          1999             1998 
                                                      -----------      -----------
<S>                                                   <C>              <C>
Sales...............................................        100.0%           100.0%
Cost of sales.......................................         48.8             51.6
                                                      -----------      -----------
Gross margin........................................         51.2%            48.4%
Selling and marketing expenses......................         21.3             19.7
General and administrative expenses.................         12.0             11.4
Research and development expenses...................          6.5              5.0
Integration and other non-recurring charges.........          2.2              -
Lease interest income...............................          1.1              1.3
                                                      -----------      -----------
Income from operations..............................         10.3             13.6
Interest expense....................................        (14.6)           (12.8)
Other, net..........................................          (.2)             (.3)
                                                      -----------      -----------
(Loss) income before income taxes...................         (4.5)              .5
(Benefit from) provision for income taxes...........         (3.7)              .3
                                                      -----------      -----------
Net (loss) income...................................          (.8)%             .2%
                                                      -----------      -----------
                                                      -----------      -----------
OTHER DATA:
     Adjusted EBITDA................................         22.3%            23.2%

<CAPTION>
                                                       THREE MONTHS ENDED MARCH 31, 
                                                      -----------------------------
                                                          1999             1998 
                                                      -----------      -----------
<S>                                                   <C>              <C>

ADJUSTED EBITDA (1).................................  $    20,858      $   20,192
Integration and other non-recurring charges.........       (2,099)              -
Depreciation and amortization (2)...................       (9,194)         (8,284)
Interest income.....................................          322              62
Interest expense....................................      (13,653)        (11,156)
Other, net..........................................         (459)           (357)
Benefit from (provision for) income taxes...........        3,500            (250)
                                                      -----------      -----------
     Net (loss) income..............................  $      (725)     $      207
                                                      -----------      -----------
                                                      -----------      -----------
</TABLE>

-------------------------
(1)    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. ALARIS Medical has included information concerning Adjusted
       EBITDA herein because it understands that such information is used by
       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 ALARIS 

                                      -14-
<PAGE>

       Medical believes that the inclusion of these items would not be helpful 
       to an investor's understanding of ALARIS Medical's ability to service 
       debt. ALARIS Medical's computation of Adjusted EBITDA may not be 
       comparable to similar titled measures of other companies.

(2)    Depreciation and amortization excludes amortization of debt discount and
       issuance costs included in interest expense.

The following table summarizes sales to customers by each business unit.

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                             MARCH 31,(A) 
                                                      --------------------------
                                                        1999              1998
                                                      ---------         --------
                                                         (DOLLARS IN MILLIONS)
<S>                                                   <C>               <C>

North America sales................................   $    57.3         $   56.1
International sales................................        32.1             30.9
Instromedix sales..................................         4.0                -
                                                      ---------         --------
     Total sales...................................   $    93.4         $   87.0
                                                      ---------         --------
                                                      ---------         --------
</TABLE>

(A)   The Company's sales results are reported consistent with the Company's
      three strategic business units: North America, International, and
      Instromedix. As a result, Canadian sales of drug infusion and patient
      monitoring products are now included in "North America" results.
      Previously, Canadian sales were reported as "international" sales. Prior
      year amounts have been reclassified for comparability with 1999.

For purposes of this discussion and analysis, the three months ended March 
31, 1999 and 1998 are referred to as 1999 and 1998, respectively.

SALES

Sales increased $6.4 million, or 7%, during 1999 as compared with 1998. 
International sales increased $1.2 million, or 4% while North America sales 
increased $1.2 million, or 2%. Sales generated by Instromedix for 1999 were 
$4.0 million. Excluding Instromedix, sales increased approximately 3%. The 
increase in International sales is primarily due to increases in volume of 
drug infusion disposable administration sets. The increase in North America 
sales in 1999 as compared with 1998 is primarily due to increases in drug 
infusion disposable administration set revenue of $3.1 million, partially 
offset by a decrease in drug infusion instrument and patient monitoring 
product revenue of $1.8 million.

GROSS MARGIN

The gross margin increased $5.7 million, or 14%, during 1999 as compared with 
1998. The gross margin percentage increased from 48.4% in 1998 to 51.2% in 
1999 primarily due to increased sales with lower product costs resulting from 
1998 cost reduction efforts and the mix of higher margin disposable 
administration set sales in relation to total sales.

SELLING AND MARKETING EXPENSES

Selling and marketing expenses increased $2.8 million, or 16%, during 1999 as 
compared with 1998. As a percentage of sales, selling and marketing expenses 
increased from 19.7% in 1998 to 21.3% in 1999. This increase is primarily due 
to the addition of Instromedix as well as the addition of International 
personnel and increased distribution cost. Instromedix selling and marketing 
expenses for 1999 were $1.2 million.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $1.3 million, or 14%, during 
1999 as compared with 1998. As a percentage of sales, general and 
administrative expenses increased from 11.4% in 1998 to 

                                      -15-
<PAGE>

12.0% in 1999. This increase is primarily due to the addition of Instromedix 
and an increase in information technology costs for the Company's new 
domestic operating system implemented in late 1998. Instromedix added 
approximately $1.0 million of general and administrative cost in 1999, 
including $0.6 million of intangible asset amortization.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses increased approximately $1.7 million, or 
39%, during 1999 as compared with 1998 primarily due to the addition of 
Instromedix and increased activities associated with the later development 
stages of various domestic and international engineering projects.

INTEGRATION AND OTHER NON-RECURRING CHARGES

In connection with the Instromedix acquisition, management, with the 
assistance of consultants performed a review of the operating activities of 
the acquired company in order to assess how best to integrate and leverage 
the Instromedix operations with ALARIS Medical Systems. As a result of this 
assessment, in February 1999, the Company announced its plans to consolidate 
the operations of Instromedix into its San Diego, California facilities. Such 
consolidation will allow the Company to leverage its existing infrastructure 
and manufacturing capacity in San Diego. In connection with these relocation 
and integration activities, the Company incurred $2.1 million in costs, 
including severance and related termination benefits of $1.1 million, 
retention bonuses of $0.2 million, asset dispositions of $0.4 million, lease 
termination costs of $0.3 million and $0.1 million in other related costs. 
Total integration costs for 1999 are anticipated to be approximately $5.0 
million.

INCOME FROM OPERATIONS

Income from operations decreased $2.3 million during 1999 as compared with 
1998 primarily due to the 1999 Instromedix integration activities discussed 
above.

ADJUSTED EBITDA

Adjusted EBITDA increased $0.7 million during 1999 as compared with 1998. As 
a percentage of sales, Adjusted EBITDA decreased from 23.2%, or $20.2 
million, during 1998 to 22.3%, or $20.9 million, during 1999 due to the 
reasons discussed above. Adjusted EBITDA represents income from operations 
before non-recurring non-cash purchase accounting 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 or to cash flows 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 investors as a 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.

INTEREST EXPENSE

Interest expense increased $2.5 million during 1999 primarily due to 
additional financing obtained to fund the Instromedix acquisition. In 
connection with the Instromedix acquisition, in July 1998 the Company 
completed the sale of $109.9 million 11 1/8% Senior Discount Notes ("Senior 
Discount Notes"), due 2008. The increase from the Senior Discount Notes was 
partially offset by a decrease in interest expense on other long-term debt 
due to a decrease in the amount outstanding as compared with 1998 (see 
Liquidity and Capital Resources).

                                      -16-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Management currently believes that sufficient cash will be available through 
ALARIS Medical Systems, based upon current operations, to satisfy debt 
service and other corporate expenses of ALARIS Medical in the foreseeable 
future. In November 1996, ALARIS Medical Systems entered into a bank credit 
facility consisting of term loans and a revolving credit facility (the 
"Credit Facility"). The Credit Facility permits ALARIS Medical Systems to 
transfer to ALARIS Medical up to $1.5 million annually to fund ALARIS 
Medical's operating expenses and additional amounts sufficient to meet 
interest payment requirements.

The Company expects to continue to meet its short-term and long-term 
liquidity needs, including capital expenditure requirements with cash flow 
from operations, borrowings under the Credit Facility, and the remaining cash 
proceeds from the Senior Discount Notes which were issued, among other 
things, to fund the Instromedix acquisition in July 1998. In addition to 
operating expenses, the Company's primary future use of funds, on a 
short-term and long-term basis, will continue to be fund capital expenditures 
and strategic acquisitions and to pay debt service on outstanding 
indebtedness.

At March 31, 1999, the Company's outstanding indebtedness was $543.5 million, 
which includes $208.5 million of bank term debt under the Credit Facility, 
$200.0 million of 9 3/4% Senior Subordinated Notes due 2006 (the "9 3/4% 
Notes") and $118.3 million (including accretion) of Senior Discount Notes due 
2008 which were issued to fund the Instromedix acquisition in July 1998. The 
bank debt bears interest at floating rates based, at the Company's option, on 
Eurodollar or prime rates. During the second quarter of 1997, the Company 
entered into an interest rate protection agreement covering approximately 50% 
of its term loan borrowings. Such agreement fixed the interest rate charged 
on such borrowings resulting in a weighted average interest rate of 8.9% on 
the Credit Facility borrowings at March 31, 1999. As a result, a one percent 
increase in the rate of interest charged on indebtedness outstanding under 
the Credit Facility at March 31, 1999 would result in additional annual 
interest expense of approximately $1.2 million. Included in total 
consolidated debt, at March 31, 1999, ALARIS Medical had outstanding $16.2 
million of 7 1/4% Convertible Debentures.

In July 1998, in connection with the Instromedix acquisition, the Company 
amended the Credit Facility. The amendment provided for the banks' consent to 
the Instromedix acquisition and increased the revolving credit facility from 
$50.0 million to $60.0 million. The amended Credit Facility also provided the 
Company an additional $30.0 million under the Tranche D term debt. The 
Company used the $30.0 million term debt borrowing, along with approximately 
$2.0 million from the revolving credit line, to fund the initial payments 
required upon closing the Instromedix acquisition. Subsequent to closing the 
Instromedix acquisition, ALARIS Medical completed the sale of $109.9 million 
of Senior Discount Notes, receiving net proceeds of approximately $106.3 
million. Interest accruing on these notes is added to the outstanding 
principal balance through July 31, 2003. Interest accruing subsequent to July 
31, 2003 is payable in cash semi-annually in arrears on February 1 and August 
1, commencing February 1, 2004. Upon receipt of the net proceeds from the 
Senior Discount Notes, ALARIS Medical paid its remaining obligations of 
approximately $22.7 million to the Instromedix shareholders and contributed 
the remaining net proceeds of approximately $81.7 million to ALARIS Medical 
Systems, as required under the amended Credit Facility. ALARIS Medical 
Systems then repaid the amount outstanding under its revolving credit line.

As a result of the Company's significant indebtedness, the Company expects to 
incur significant interest expense in future periods. The Company believes 
that its existing cash and cash provided by operations will be sufficient to 
meet its interest expense obligations.

                                      -17-
<PAGE>

Annual principal amortization of the Company's indebtedness is $9.5 million 
for the remaining nine months of 1999 and $14.1 million and $22.1 million for 
2000 and 2001, respectively.

The Convertible Debentures provide for semi-annual interest payments of 
approximately $0.6 million and mature on January 15, 2002. The 9 3/4% Notes 
and the Credit Facility permit ALARIS Medical Systems to fund interest 
payments on the Convertible Debentures and to make limited distributions to 
ALARIS Medical to fund operating expenses and to pay income taxes; provided 
that, with respect to the Credit Facility, there exists no default or event 
of default under the Credit Facility. The 9 3/4% Notes and the Credit 
Facility, however, restrict distributions to ALARIS Medical to fund the 
repayment of the Convertible Debentures at maturity.

During 1999, the Company made cash payments of approximately $0.1 million 
related to merger and integration costs accrued at December 31, 1998. These 
payments are in addition to approximately $1.0 million of Instromedix 
integration paid in 1998. These integration activities primarily related to 
the assessment and review of Instromedix operating activities and strategy. 
In February 1999, as a result of this assessment, the Company announced it 
plans to consolidate the operations of Instromedix into its San Diego, 
California facilities. Such consolidation will allow the Company to leverage 
its existing infrastructure and manufacturing capacity in San Diego. In 
connection with these relocation and integration activities, the Company 
recorded a charge of $2.1 million during the quarter ended March 31, 1999. 
The Company expects to incur nonrecurring integration and relocation charges 
of approximately $5.0 million before related income tax benefits for full 
year 1999.

The Company made capital expenditures of approximately $9.0 million during 
1999 and anticipates additional capital expenditures of approximately $20.0 
million during the remainder of 1999. First quarter 1999 capital spending was 
higher than historical quarterly levels due to approximately $1.8 million for 
a significant U.S. hospital order of drug infusion instruments accounted for 
as an operating lease, as well as approximately $1.0 million to upgrade sales 
force demonstration and evaluation units for new product introductions.

During the first quarter of 1998, the Company created a corporate development 
function to assess product and company acquisitions, distribution alliances 
and joint ventures which would expand Company technologies into unserved 
markets. While there can be no assurances that the Company will complete any 
acquisitions, depending on the value of potential acquisitions, the Company 
might fund such transactions through a variety of sources, including existing 
or new debt facilities or through the sale of equity securities.

The Company believes that, on both a short-term and long-term basis, based on 
current levels of performance, it will generate cash flow from operations, 
together with its existing cash, sufficient to fund its operations, make 
planned capital expenditures and make principal amortization and interest 
payments under the Credit Facility and interest payments on the 9 3/4% Notes. 
However, on a long-term basis, the Company may not generate sufficient cash 
flow from operations to repay the 9 3/4% Notes at maturity in the amount of 
$200.0 million, to make scheduled payments on the Senior Discount Notes or to 
repay the Senior Discount Notes in the amount of $189.0 million at maturity. 
Accordingly, the Company may have to refinance the 9 3/4% Notes and the 
Senior Discount Notes at or prior to maturity or sell assets or raise equity 
capital to repay such debt. Based on current interest rates and debt 
outstanding as of March 31, 1999, over the next twelve months, the Company is 
required to make principal and interest payments under its Credit Facility in 
the amount of $28.9 million and interest payments on the 9 3/4% Notes and the 
Convertible Debentures in the amount of $19.5 million and $1.2 million, 
respectively. In addition, the Company's ability to fund its operations, to 
make planned capital expenditures and to make scheduled principal and 
interest payments will be dependent on the

                                      -18-
<PAGE>

Company's future operating performance, which is itself dependent on a number 
of factors, many of which the Company cannot control, including conditions 
affecting the Company's foreign operations, prevailing economic conditions, 
availability of other sources of liquidity, and financial, business, 
regulatory and other factors affecting the Company's business and operations.

YEAR 2000 RISK

The Year 2000 problem arises from the use of a two-digit field to identify 
years in computer programs, e.g., 85=1985, and the assumption of a single 
century, the 1900s. Any program so created may read, or attempt to read, "00" 
as the year 1900.

The Company has developed, and is implementing, a comprehensive program to 
address Year 2000 issues pertaining to both information technology (IT) and 
non-IT systems. The program is monitored by a steering committee comprised of 
representatives from key functional areas, which periodically reports to 
senior management and will be reporting to the board of directors throughout 
1999 as to the program's status. The program consists of identification, 
prioritization, remediation and post-implementation phases and considers the 
worldwide effect of the Year 2000 on the Company's operations and internal 
systems (including non-information technology systems), customers, products 
and services, and manufacturing systems, as well as on its third party 
suppliers and other critical business partners. The committee has completed 
its initial assessment and it is not currently aware of any material Year 
2000 issues related to third parties with whom the Company conducts business 
or in its non-information technology systems. The committee's assessment will 
likely be a continuous process through the remainder of 1999. In addition to 
its customers, the Company conducts business with and utilizes the services 
of numerous third parties including, but not limited to, suppliers, 
distributors, telecommunication companies, financial institutions, 
governmental agencies, and utility companies. The Company is working to 
identify and analyze the most reasonably likely worst-case scenarios for 
third-party relationships affected by the Year 2000. The ability of these 
third parties to adequately address their Year 2000 issues is outside the 
Company's control. Failure by some or all of these parties to adequately 
address their Year 2000 issues could have a material adverse effect on the 
Company. Given the number of parties with whom the Company transacts 
business, it is reasonably likely that some of these parties will not be able 
to adequately solve their Year 2000 issues in a timely manner. Due to the 
Company's inability to control third party compliance with Year 2000 issues, 
there can be no assurances that such Year 2000 issues will not have a 
material adverse effect on the financial condition, results of operations or 
cash flows of the Company.

In order to successfully provide product to its customers, the Company is 
dependent upon the timely fulfillment of its supply orders from its chosen 
vendors. The Company has identified potentially critical suppliers and 
attempted to determine if such suppliers have identified and/or addressed 
their own Year 2000 issues by means of questionnaires. The Company is 
dependent on such suppliers to provide timely responses to its questionnaires 
and is not in a position to verify the truth or accuracy of the responses it 
receives to such questionnaires. At this time, the Company has not identified 
or been informed of any significant suppliers that will not be able to 
fulfill the Company's orders. However, many of the Company's key suppliers 
have acknowledged that they must make improvements to their systems to 
properly deal with the Year 2000 orders and issues. As a result, there can be 
no assurances that key suppliers will be able to timely fill the Company's 
future orders. The Company is in the process of evaluating what alternatives 
are available if key suppliers could not provide required materials and 
supplies to the Company when ordered. While a formal contingency plan related 
to this risk has not yet been completed by the Company, alternatives would be 
to increase inventory levels of key suppliers and seek supplies from other 
vendors. The Company estimates that such contingency plans will be completed 
by December 31, 1999. However, there can be no assurance that all significant 
primary and back-up suppliers will be able to fill the Company's orders due 
to their own 

                                      -19-
<PAGE>

Year 2000 issues. Such supplier failures could have a material adverse impact 
on the Company's financial condition, results of operations and cash flows.

In addition to routine capital expenditures, and in connection with prior 
acquisitions, the Company has made significant expenditures for the 
acquisition of enterprise-wide information system software and hardware and 
the related design, testing and implementation. The manufacturer has 
represented that the new system is Year 2000 compliant. The Company 
successfully implemented certain financial applications of the new system and 
began utilizing such applications at the beginning of 1998. The Company 
successfully converted the remainder of its domestic business processes to 
the new system in September 1998. The Company believes the primary 
information system for its International operations is not directly affected 
by the Year 2000. However, due to the increased significance of its 
International operations and the desire to integrate its reporting systems, 
the Company will be converting the International information systems to a 
system common with the domestic operations. The International project is 
scheduled for completion in 1999. The International system is also designed 
to properly process transactions denominated in the euro currency. Euro 
currency is a new monetary unit which certain European countries can begin 
using in 1999.

The Company has launched Year 2000 internet websites for its customers that 
include a complete list of the Company's electronic medical products, 
detailed and updated information regarding the status of the products and 
other information regarding the Company's Year 2000 program. Certain of the 
Company's products contain software in which the record keeping capabilities 
will be affected beyond the Year 2000. Products affected by the Year 2000 
issue have been identified and information regarding user interventions and 
software upgrades has been provided. The Company believes that these issues 
will not interfere with the primary functions of the products involved, nor 
will they affect the safety of patients; however, there can be no assurance 
in regard to the foregoing nor can there be any assurance that the Company 
will not be subject to legal claims for damages arising from products that 
are not Year 2000 compliant.

During the fiscal years 1996, 1997 and 1998 the Company made combined capital 
and operating expenditures of approximately $13.9 million related to the new 
enterprise-wide information system, and expenditures of $0.6 million in the 
period ended March 31, 1999. To complete the identified phases of the 
project, the Company anticipates additional expenditures for 1999 of 
approximately $3.4 million.

Infusion instrument sales are typically higher in the fourth quarter due to 
sales compensation plans which reward the achievement of annual quotas and 
the seasonal characteristics of the industry, including hospital purchasing 
patterns. First quarter sales are traditionally not as strong as the fourth 
quarter. The Company anticipates that this trend will continue but is unable 
to predict the effect, if any, from health care reform, increased competitive 
pressures and Year 2000 issues. Approximately 34% and 33% of the Company's 
sales of drug infusion instruments occurred during the fourth quarters of 
1997 and 1998, respectively. Sales of the Company's medical instrument 
products represent capital expenditures to many of the Company's customers. 
The Company believes it is possible that due to Year 2000 capital 
requirements by its customers during 1999, fourth quarter drug infusion 
instrument purchasing decisions could be deferred until 2000. Additionally, 
the Company believes that customers' Year 2000 concerns and planning 
strategies may result in certain customers increasing historical stock levels 
of the Company's disposable products resulting in increased sales of such 
products during 1999.

Although the Company is dedicating substantial resources towards attaining 
Year 2000 readiness, there is no assurance it will be successful in its 
efforts to identify and address all Year 2000 issues. Even if the Company 
acts in a timely manner to complete all of its assessments; identifies, 
develops and implements remediation plans believed to be adequate; and 
develops contingency plans believed to be adequate some problems may not be 
identified or corrected in time to prevent material adverse consequences to 
the 

                                      -20-
<PAGE>

Company. The discussion above regarding estimated completion dates, costs, 
risks and other forward-looking statements regarding Year 2000 is based on 
the Company's best estimates given information that is currently available 
and is subject to change. As the Company continues to progress with its Year 
2000 initiatives, it may discover that actual results will differ materially 
from these estimates. The information provided above constitutes a "Year 2000 
Readiness Disclosure" for purposes of the Year 2000 Information and Readiness 
Disclosure Act.

BACKLOG

The backlog of orders, believed to be firm, at March 31, 1999 and 1998 was 
$6.9 million and $5.9 million, respectively.

FOREIGN OPERATIONS

The Company has significant foreign operations and, as a result, is subject 
to various risks, including without limitation, foreign currency risks. 
Historically, the Company has not entered into foreign currency contracts to 
hedge such exposure and such risk. Due to changes in foreign currency 
exchange rates during 1999 and 1998, primarily a strengthening of the U.S. 
dollar, the Company's functional currency, against many European currencies, 
the Company recognized a foreign currency transaction loss of approximately 
$0.4 million and $0.2 million during 1999 and 1998, respectively. For the 
three months ended March 31, 1999 and the three months ended March 31, 1998, 
approximately 37% and 40% of the Company's sales and 29% and 33% of the 
Company's operating expenses were denominated in currencies other than the 
Company's functional currency, respectively. These foreign currencies are 
primarily those of Western Europe, Canada and Australia. Additionally, 
substantially all of the receivables and payables of the Company's foreign 
subsidiaries are denominated in currencies other than the Company's 
functional currency, and no formal hedging program exists to manage 
fluctuations in these foreign currencies. The Company continues to evaluate 
hedging programs to limit the exposure to the Company resulting from changes 
in foreign currency exchange rates.

On December 31, 1998, Mexico enacted certain changes to its tax code which 
broaden the definition of when a U.S. company using manufacturing services in 
Mexico will be considered to have a "permanent establishment." These changes, 
which would apply to the Company effective as of January 1, 2000, would 
result in effective taxation of that portion of the Company's income 
attributable to the Mexican subsidiary at a rate of 75% or higher. It is 
uncertain if any such new tax imposed by Mexico will be granted a 
corresponding foreign tax credit under the U.S. Internal Revenue Code. The 
Company is currently evaluating the anticipated effect of such changes, which 
could have a material adverse effect on its financial condition, results of 
operations and cash flows.

HEALTH CARE REFORM

Heightened public awareness and concerns regarding the growth in overall 
health care expenditures in the United States may result in the enactment of 
legislation affecting payment mechanisms and health care delivery. 
Legislation which imposes limits on the number and type of medical procedures 
which may be performed or which has the effect of restricting a provider's 
ability to select specific devices or products for use in administrating 
medical care may adversely impact the demand for the Company's products. In 
addition, legislation which imposes restrictions on the price which may be 
charged for medical products may adversely affect the Company's results of 
operations. It is not possible to predict the extent to which the Company or 
the health care industry in general may be adversely affected by the 
aforementioned in the future.

                                      -21-
<PAGE>

NASDAQ NATIONAL MARKET LISTING

During the first quarter of 1999, The Nasdaq Stock Market, Inc. ("NASDAQ") 
notified the Company that it would delist the Company's common stock ("Common 
Stock") from the NASDAQ National Market System on June 22, 1999 for failure 
to maintain a closing per share bid price of at least $5.00 in accordance 
with NASDAQ Marketplace Rule 4450(b)(4) (the "Pricing Requirement"). 
Notwithstanding the foregoing, if on or before June 18, 1999, the closing per 
share bid price of the Common Stock equals at least $5.00 for a minimum of 
ten consecutive trading days, the Company will be deemed to have satisfied 
the Pricing Requirement. If the Company is unable to achieve compliance with 
the Pricing Requirement, the Company may, prior to June 18, 1999, request a 
hearing for the purpose of seeking a waiver of the Pricing Requirement from 
NASDAQ. If the Company timely requests a hearing, the Common Stock will 
continue to trade on the NASDAQ National Market System until a decision on 
the Company's request for such waiver is rendered by NASDAQ. Although the 
Company expects that, if it is unable to achieve compliance with the Pricing 
Requirement by June 18, 1999, it will request a hearing, there can be no 
assurance that it will be granted a waiver with respect to such requirement. 
In the event that the Company cannot achieve compliance with the Pricing 
Requirement and is not granted a waiver with respect to the Pricing 
Requirement, the Company will seek to have the Common Stock approved for 
trading on either the NASDAQ Small Capitalization Market or the American 
Stock Exchange.

FORWARD-LOOKING STATEMENTS

Forward-Looking Statements in this report are made pursuant to the Safe 
Harbor Provisions of the Private Securities Litigation Reform Act of 1995. 
Persons reading this report are cautioned that such forward-looking 
statements involve risks and uncertainties, including, without limitation, 
the effect of legislative and regulatory changes effecting the health care 
industry; the potential of increased levels of competition; technological 
changes; the dependence of the Company upon the success of new products and 
ongoing research and development efforts; the effect of the Year 2000 risk; 
restrictions contained in the instruments governing the Company's 
indebtedness; the significant leverage to which the Company is subject; and 
other matters referred to in this report.






                                      -22-
<PAGE>

                                     PART II

                                OTHER INFORMATION
-------------------------------------------------------------------------------

ITEM 1.  LEGAL PROCEEDINGS

See Note 5 to the Condensed Consolidated Financial Statements.














                                      -23-
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

27    --    Financial Data Schedule


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


(b)   Reports on Form 8-K

None.








                                      -24-
<PAGE>

                                   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.

                                                            ALARIS MEDICAL, INC.
                                                            --------------------
                                                                    (REGISTRANT)


Date: May 14, 1999                               By:         /s/ WILLIAM C. BOPP
                                                     ---------------------------
                                                                 William C. Bopp
                                      Vice President and Chief Financial Officer




                                      -25-
<PAGE>

                                  EXHIBIT INDEX
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Exhibit                                                                    Page
  No.                                                                       No. 
-------                                                                    ----
<S>      <C>                                                               <C>
27       --   Financial Data Schedule...................................    27
</TABLE>





                                      -26-