I-Flow Reports 21% Increase in Total Revenues for the Second Quarter of 2008 to $35.3...

I-Flow Reports 21% Increase in Total Revenues for the Second Quarter of 2008 to $35.3 Million Versus $29.1 Million for the Second Quarter of 2007

Regional Anesthesia Sales Increased 13% to $26.1 Million for the
Second Quarter of 2008 from $23.0 Million in Last Year's Second
Quarter
LAKE FOREST, Calif.--(Business Wire)--
I-FLOW CORPORATION (NASDAQ:IFLO) announced today that total
revenue from continuing operations in the second quarter increased 21%
to a record $35.3 million compared to $29.1 million for the same
period of the prior year. Sales of Acute Care products, which include
Regional Anesthesia (RA) sales of the Company's flagship ON-Q(R)
product lines and AcryMed revenues, increased 21% for the second
quarter of 2008 to $27.9 million compared to $23.0 million for the
second quarter of 2007.

The loss from continuing operations before income taxes for this
year's second quarter was $11.5 million. The $11.5 million loss amount
included $12.2 million of certain litigation and insurance charges,
including a $3.5 million expense to purchase retroactive insurance
policies to significantly increase the Company's product liability
insurance coverage and $8.7 million in loss contingency that the
Company accrued in connection with ongoing litigation. Excluding the
litigation and insurance charges, the loss from continuing operations
before income taxes for the second quarter of 2008 would have jumped
to approximately $630,000 in income from continuing operations before
income taxes, as shown in the attached reconciliation table. This
compares to a loss from continuing operations before income taxes of
$2.4 million for the second quarter of 2007.

"Our solid second quarter revenue growth overall and improved
bottom-line performance before the litigation and insurance charges
are especially noteworthy in view of the weak economy and resulting
fall-off in the number of elective and non-life threatening surgical
procedures during the period. We continued to see published reports
and hear anecdotally throughout the quarter that an increasing number
of Americans postponed health care. Many people, including those with
health insurance, delayed or opted against receiving medical care or
elective procedures because of concern about cost and in some cases,
missing days of work. Our sales force saw the effect of the reported
slowdown on scheduled hospital surgeries across the U.S. and had to
respond quickly to mitigate the impact on our ON-Q product line sales.
By focusing on utilization of our ON-Q family of products for relief
of post-surgical pain without narcotics in bariatric, colorectal,
thoracic, heart, trauma and other non-elective and crucial procedures,
our team drove the 13% increase in RA revenues versus last year's
second quarter. Perhaps more notable and a better indication of the
second quarter's performance is the increase of 15% in RA revenues
compared to the first quarter of 2008, with little or no change in
headcount in our sales organization compared to the first quarter. Our
ON-Q C-bloc(R) Continuous Nerve Block System, which is optimized for
anesthesiologists and continuous peripheral nerve blocks primarily
used for orthopedic surgeries, was a stand-out performer once again in
this year's second quarter, just as it has been every quarter since we
launched this line extension several years ago," said Donald M.
Earhart, Chairman and Chief Executive Officer.

"Going forward, we have launched a new marketing campaign for ON-Q
that centers on having physicians make our products an essential part
of all their surgeries. We are doing this by focusing physicians on
the significant narcotic reduction when ON-Q is used, coupled with the
superior pain relief and the possibility of reduced infections. The
latter is particularly relevant in the face of the pending October 1,
2008 Medicare (CMS) changes that eliminate payments for
hospital-acquired conditions and even opens up additional sales call
points, like infection control, in the hospital. We have also
initiated our ON-Q E (epidural) roll-out into the sizable labor and
delivery market," he added.

"AcryMed Incorporated, a developer of innovative infection control
and wound healing products we acquired in February 2008, contributed
revenues of approximately $1.8 million for the second quarter, marking
further progress in I-Flow's continuing evolution into an integrated
Acute Care products company focused on developing and marketing
proprietary disposable medical devices that improve patient outcomes.
We are confident in our two-fold strategy to leverage our dedicated
sales and marketing organization by selling products from the AcryMed
pipeline in the emerging market for acute care products, even as we
continue building our ON-Q franchise in the multi-billion dollar
potential market for post-surgical pain relief, and to out-license
AcryMed products or technologies that are not within our core
competency to partners that can effectively commercialize them,"
Earhart said.

Earhart explained that this year's second quarter results included
special charges of approximately $3.5 million to purchase retroactive
insurance policies to significantly increase the Company's product
liability insurance coverage and $8.7 million in loss contingency
consistent with the guidance in Statement of Financial Accounting
Standards No. 5, Accounting for Contingencies. "I-Flow has been named
as a defendant in lawsuits seeking damages as a result of chondrolysis
in the shoulder joint allegedly due to the continuous infusion of a
local anesthetic into the joint space via an infusion pump following
surgery. While we believe these lawsuits are without merit as to
I-Flow, we have taken prudent and responsible steps to protect the
Company and our shareholders from the potentially high costs of this
litigation by obtaining additional retroactive insurance coverage and
recording a reserve for litigation costs," he said.

"Looking ahead, we continue to expect growth in total revenue of
approximately 20% for 2008. This will be driven by revised growth
expectations of approximately 23% growth for the year in Acute Care
products, including an approximate 17% increase in RA sales for 2008,
with growth being stronger in the second half of the year as we launch
new products. The changes in Acute Care and RA guidance were made
based on current economic and market conditions. Finally, we
anticipate that I-Flow will be profitable for the second half of 2008,
with the possible exception of non-cash purchase accounting
adjustments (see "AcryMed Acquisition" below)," Earhart added.

AcryMed Acquisition

On February 15, 2008, the Company acquired AcryMed Incorporated
for $26.7 million in cash. The Company's first half of 2008 results
include the revenues and expenses of AcryMed from the date of
acquisition and a preliminary purchase allocation. The Company has
retained an external valuation consultant to assist in determining the
fair values on the acquisition date of the tangible and intangible
assets of AcryMed. To the extent, if any, that the purchase price is
allocated to amortizable assets other than goodwill or to in-process
research and development costs, the Company may record a non-cash
charge related to the amortization or write-off of such costs
consistent with the guidance in Statement of Financial Accounting
Standards No. 141, Business Combinations.

Second Quarter Results

For the three months ended June 30, 2008, revenue from continuing
operations increased 21% to $35.3 million from $29.1 million for the
second quarter of 2007.

Sales of I-Flow's Acute Care products, which include RA
(consisting of ON-Q) and AcryMed revenues, increased 21% to $27.9
million compared to $23.0 million for the second quarter of 2007.
Sales in the RA segment, which includes the ON-Q PainBuster
Post-Operative Pain Relief System, the ON-Q C-bloc(R) Continuous Nerve
Block System, the ON-Q Soaker(R) Catheter, the ON-Q SilverSoaker
Catheter, and ON-Q third party billings, increased 13% for the second
quarter of 2008 versus the prior year quarter to $26.1 million from
$23.0 million last year. ON-Q C-bloc sales increased 59% for the
second quarter of 2008 to $6.1 million from $3.8 million for the
second quarter of 2007.

AcryMed revenues were $1.8 million for this year's second quarter.

IV Infusion Therapy revenue increased 22% to $7.4 million for the
second quarter of 2008 from $6.1 million a year earlier.

Gross profit was 73% of total revenues for the second quarter of
2008 versus 72% for the second quarter of 2007.

SG&A expenses from continuing operations increased 9% to $24.9
million for the second quarter of 2008 from $23.0 million for the
second quarter of 2007, which included stock-based compensation
expense of $1.9 million for the second quarter of 2008 versus $1.8
million for the second quarter of 2007. The Company also incurred a
total of $12.2 million in certain litigation and insurance charges to
significantly increase the Company's product liability insurance
coverage and accrue a loss contingency related to the chondrolysis
lawsuits.

The loss before income taxes from continuing operations was $11.5
million for the second quarter of 2008. Excluding the $12.2 million
for litigation and insurance charges, the Company would have reported
a pretax profit of $630,000 for the quarter, as shown in the attached
reconciliation table.

The loss from continuing operations, net of tax, for the second
quarter of 2008 was $11.4 million, or $0.47 per basic and diluted
share. This compares to a loss from continuing operations, net of tax,
for the second quarter of 2007 of $1.6 million, or $0.06 per basic and
diluted share. Income from discontinued operations, related to the
Company's former InfuSystem subsidiary divested on October 25, 2007,
net of tax, for the second quarter of 2007 was $2.2 million, or $0.09
per basic and diluted share.

The net loss for the three months ended June 30, 2008 was $11.4
million, or $0.47 per basic and diluted share. This compares to net
income for the three months ended June 30, 2007, including both
continuing and discontinued operations, of $0.6 million, or $0.03 per
basic and diluted share.

At June 30, 2008, I-Flow reported net working capital of
approximately $69.9 million, including cash and cash equivalents and
short-term investments of $47.8 million, no long-term debt, and
shareholders' equity of $132.9 million.

On February 26, 2008, I-Flow announced that its Board of Directors
has authorized the repurchase of up to one million shares of the
Company's common stock. The shares may be repurchased in open market
or privately negotiated transactions in the discretion of management,
subject to its assessment of market conditions and other factors.
Through June 30, 2008, the Company repurchased approximately 728,000
shares for approximately $9.3 million under this program.

First Half Results

For the six months ended June 30, 2008, revenue from continuing
operations increased 19% to $63.7 million compared to $53.4 million
for the first six months of 2007.

The loss from continuing operations, net of tax, for the first six
months of 2008 was $12.0 million, or $0.49 per basic and diluted
share. This compares to a loss from continuing operations, net of tax,
for the first six months of 2007 of $3.8 million, or $0.16 per basic
and diluted share.

Income from discontinued operations, net of tax, for the first six
months of 2007 was $3.5 million, or $0.15 per basic and diluted share.

The net loss for the six months ended June 30, 2008 was $12.0
million, or $0.49 per basic and diluted share, including stock-based
compensation expense of $3.3 million. This compares to a net loss for
the six months ended June 30, 2007, including both continuing and
discontinued operations, of $0.3 million, or $0.01 per diluted share,
including stock-based compensation expense of $3.1 million.

Conference Call

I-Flow has scheduled a conference call today at 11:00 a.m. EDT. A
simultaneous webcast may be accessed from the Investors link at
www.IFLO.com. A replay will be available after 1:00 p.m. EDT at this
same Internet address. For a telephone replay, dial (800) 633-8284,
reservation #21388279, after 1:00 p.m. EDT.

The financial results included in this release are unaudited. The
Company's complete financial statements for the three months and six
months ended June 30, 2008 and 2007 will be included in I-Flow's
Report on Form 10-Q expected to be filed with the SEC on or before
August 8, 2008.

About I-Flow

I-Flow Corporation (www.IFLO.com) is improving surgical outcomes
by designing, developing and marketing technically advanced, low cost
delivery systems and innovative surgical products for post-surgical
pain relief and surgical site care.

Regulation G

The Company's results reported in this press release have been
prepared in accordance with accounting principles generally accepted
in the United States ("GAAP"). In addition to the GAAP results, the
Company has also provided additional information concerning its
results, which includes a financial measure not prepared in accordance
with GAAP. The non-GAAP financial measure included in this press
release excludes certain litigation and insurance charges recorded in
the three months ended June 30, 2008. The non-GAAP financial measures
should not be considered a substitute for any measure derived in
accordance with GAAP. The non-GAAP financial measures may also be
inconsistent with the manner in which similar measures are derived or
used by other companies. Management believes that the presentation of
such non-GAAP financial measures, when considered in conjunction with
the most directly comparable GAAP financial measures, provides
additional useful information concerning the Company's operating
performance. The Company has provided reconciling information in a
table at the end of this press release.

"Safe Harbor" Statement

Statements 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 and express the Company's current opinions
about trends and factors that may impact future operating results.
Statements that use words such as "may," "will," "should," "believes,"
"predicts," "estimates," "projects," "anticipates" or "expects" or use
similar expressions are intended to identify forward-looking
statements. Forward-looking statements are subject to material risks,
assumptions and uncertainties, which could cause actual results to
differ materially from those currently expected, and readers are
cautioned not to place undue reliance on these forward-looking
statements. Except as required by applicable law, the Company
undertakes no obligation to publish revised forward-looking statements
to reflect the occurrence of unanticipated or subsequent events.
Readers are also urged to carefully review and consider the various
disclosures made by the Company in this press release that seek to
advise interested parties of the risks and other factors that affect
the Company's business. Interested parties should also review the
Company's reports on Forms 10-K, 10-Q and 8-K and other reports that
are periodically filed with or furnished to the Securities and
Exchange Commission. The risks affecting the Company's business
include, among others: physician acceptance of infusion-based
therapeutic regimens; implementation of the Company's direct sales
strategy; successful integration of the Company's recent acquisition
of AcryMed Incorporated and further development and commercialization
of AcryMed's technologies; potential inadequacy of insurance to cover
existing and future product liability claims; dependence on the
Company's suppliers and distributors; the Company's continuing
compliance with applicable laws and regulations, such as the Medicare
Supplier Standards and the Food, Drug and Cosmetic Act, and the
Medicare's and FDA's concurrence with management's subjective judgment
on compliance issues; the reimbursement system currently in place and
future changes to that system; product availability, acceptance and
safety; competition in the industry; technological changes;
intellectual property challenges and claims; economic and political
conditions in foreign countries; currency exchange rates; inadequacy
of booked reserves or future impairment expenses; and reliance on the
success of the home health care industry. All forward-looking
statements, whether made in this press release or elsewhere, should be
considered in context with the various disclosures made by the Company
about its business.

-0-
*T
I-FLOW CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except for per share data)

Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
--------- -------- --------- --------

Net revenues $ 35,316 $29,075 $ 63,731 $53,381
Cost of revenues 9,699 8,054 16,886 14,342
--------- -------- --------- --------
Gross profit 25,617 21,021 46,845 39,039

Operating expenses:
Selling, general &
administrative 24,938 22,950 48,244 44,125
Product development 1,237 682 2,158 1,304
Certain litigation and
insurance charges 12,168 -- 12,168 --
-------------------------------------
Total operating expenses 38,343 23,632 62,570 45,429

Operating loss (12,726) (2,611) (15,725) (6,390)

Interest and other income 1,188 245 2,895 524
--------- -------- --------- --------

Loss from continuing operations
before income taxes (11,538) (2,366) (12,830) (5,866)
Income tax benefit 113 796 868 2,089
--------- -------- --------- --------

Loss from continuing operations (11,425) (1,570) (11,962) (3,777)

Discontinued operations:
Income from discontinued
operations, net of tax -- 2,169 -- 3,455
--------- -------- --------- --------

Net income (loss) $(11,425) $ 599 $(11,962) $ (322)
========= ======== ========= ========

Per share of common stock, basic
and diluted
Loss from continuing operations$ (0.47) $ (0.06) $ (0.49) $ (0.16)
Income from discontinued
operations, net of tax -- 0.09 -- 0.15
--------- -------- --------- --------
Net income (loss) $ (0.47) $ 0.03 $ (0.49) $ (0.01)
========= ======== ========= ========

Weighted average shares, basic
and diluted 24,459 23,694 24,528 23,622
========= ======== ========= ========

*T

-0-
*T
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(in thousands)
----------------------------------------------------------------------

ASSETS Jun. 30, Dec. 31, LIABILITIES Jun. 30, Dec. 31,
2008 2007 AND EQUITY 2008 2007

----------------------------------------------------------------------
Cash, Equivalents & Current
Short-term Liabilities
Investments $ 47,771 $103,483 $ 22,004 $ 26,677
Accounts Receivable,
Net 20,784 22,443
Inventories, Net Long-term
15,752 13,128 Liabilities 6,201 6,402
Other Current Assets 7,575 4,810
Property, Plant &
Equipment, Net 4,055 3,318
Goodwill (1) 23,344 --
Other Assets Shareholders'
41,840 41,473 Equity 132,916 155,576
-------- -------- -------- --------
Total $161,121 $188,655 $161,121 $188,655
======== ======== ======== ========

(1) The purchase price allocation is preliminary.
*T

-0-
*T
I-FLOW CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands) (Unaudited)

Non-GAAP Measures

The Company utilizes certain non-GAAP measures to evaluate its
performance and considers these measures important indicators of its
success. The non-GAAP financial measures should not be considered a
substitute for any measure derived in accordance with GAAP. The non-
GAAP financial measures may also be inconsistent with the manner in
which similar measures are derived or used by other companies.
Management believes that the presentation of such non-GAAP financial
measures, when considered in conjunction with the most directly
comparable GAAP financial measures, provides additional useful
information concerning the Company's operating performance.

The following sets forth a reconciliation of the Company's income from
continuing operations before income taxes and certain litigation and
insurance charges to loss from continuing operations before income
taxes (which is the closest GAAP financial measure):
*T

-0-
*T
Three Months
Ended
June 30, 2008
--------------

Loss from continuing operations before income taxes -
as reported $(11,538)
Certain litigation and insurance charges 12,168
--------------
Income from continuing operations before income taxes
and certain litigation and insurance charges $ 630
==============
*T

I-Flow Corporation
James R. Talevich
Chief Financial Officer
949-206-2700
www.iflo.com
or
Investor Contact:
Neil Berkman
Berkman Associates
310-826-5051
info@BerkmanAssociates.com

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