ev3 Inc. Reports Second Quarter Financial Results

Net Sales Grow by 53% Compared to Year-Ago Period



PLYMOUTH, Minn., Aug. 2  /PRNewswire-FirstCall/ -- ev3 Inc. (NASDAQ:EVVV), a global endovascular device company, reported today its financial results for its fiscal second quarter ended July 3, 2005, the company's first full quarterly financial report since its initial public offering.

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ev3's net sales in the second quarter of 2005 were $31.5 million, an increase of 53% versus net sales of $20.6 million in the second quarter of 2004, and an increase of 14% compared to net sales of $27.7 million in the first quarter of 2005.  This growth was generated internally and reflected net sales growth in each of ev3's reportable business segments and geographic markets.  New products and an expansion of the ev3 world-wide sales and distribution organization were the important growth drivers.  Reported net sales for ev3 include the consolidated net sales of the company's majority- owned subsidiary, Micro Therapeutics, Inc. (NASDAQ:MTIX), an endovascular device company focused on neurovascular disease and disorders.

For the six months ended July 3, 2005, ev3's net sales were $59.2 million, an increase of 44% compared to net sales in the first six months of 2004. Sales growth in the first half of 2005 also was generated internally and reflected net sales growth in each of ev3's reportable business segments and geographic markets.

James Corbett, President and CEO of ev3 Inc. and Chairman of the Board of MTI, commented, "We are extremely pleased that ev3's second quarter sales results reflected strength across the company's broad lines of cardio peripheral and neurovascular products globally, while also continuing the acceleration in sales growth that commenced in the fourth quarter of 2004. We welcome our new shareholders who have joined ev3 as a result of our recent initial public offering, and we are confident that our strengthened cash position and balance sheet will support our growth and profitability objectives."

Gross profit for the second quarter of 2005 increased 67% to $18.8 million from $11.2 million for the second quarter of 2004 while the gross margin percent increased to 59.5% from 54.5%. ev3's improved gross margin percent reflects the benefits of recent plant consolidations and improving manufacturing yields for new products.  Gross profit includes net sales less cost of goods sold, exclusive of the amortization of intangible assets.

ev3's net loss attributable to common shareholders for the second quarter of 2005 was $40.9 million or $4.60 per common share, compared to a second quarter 2004 net loss of $32.8 million or $18.29 per common share. ev3's net loss attributable to common shareholders for the first six months of 2005 was $79.7 million or $13.95 per common share, compared to a net loss of $65.4 million or $37.36 per common share for the first six months of 2004. Total weighted average shares outstanding used in the per share calculations were 8,877,898 for the second quarter of 2005 and 1,795,745 for the second quarter of 2004. ev3's operating expenses for the first six months of 2005 included $0.8 million in expenses related to the company's initial public offering, in-process research and development charges of $0.9 million and $1.7 million in stock-based compensation charges.

Corbett continued, "ev3's operating losses continue to be impacted by the company's investment in broad and innovative product lines and our significant world-wide sales and marketing infrastructure. We are committed to leveraging these investments as our revenue continues to increase."

As of July 3, 2005 ev3 had 48,910,654 shares of common stock outstanding, reflecting the company's initial public offering and conversion of outstanding demand notes and preferred membership units on June 21, 2005. In addition, on July 20, 2005, ev3 sold 205,800 shares of common stock pursuant to the over- allotment option granted to the underwriters in connection with its initial public offering, increasing the number of outstanding shares total to 49,116,454.  As a result of the initial public offering and sale of shares pursuant to the over-allotment option, ev3 received net proceeds totaling $155.5 million, of which $36.5 million was used to retire debt.  As of July 3, 2005 ev3 had cash and cash equivalents of $128.4 million and no long-term debt.

Sales Review

By segment, ev3's second quarter net sales of cardio peripheral products were $19.2 million, representing an increase of 58% versus the year-ago quarter, and net sales of neurovascular products were $12.3 million, representing an increase of 47% versus the year-ago quarter.  On a geographic basis, ev3's second quarter United States net sales were $15.9 million, representing an increase of 56% versus the year-ago quarter, and second quarter international net sales were $15.6 million, representing an increase of 51% versus the year-ago quarter.

Outlook

ev3 expects its sales in the third quarter and full year 2005 to be in the range of $32 to $35 million and $130 to $137 million, respectively.  ev3 also expects its quarterly operating losses to be reduced during the second half of 2005 as compared with its operating losses in the first six months of 2005.

Earnings Call Information

ev3 will host a conference call today beginning at 5:00 p.m. EDT to review its results of operations for the second quarter of 2005 and other recent events and to discuss its third quarter and full year 2005 business outlook. Discussions during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company's revenues, margins, operating expenses, distribution arrangements, clinical studies, regulatory status, and financial position, and comments the company may make about its future in response to questions from participants on the conference call.  Any interested party may listen to the conference call through a live audio Internet broadcast at http://www.ev3.net/ .  For those unable to listen to the live broadcast, a playback of the webcast will be available at http://www.ev3.net/ for approximately one year. Those without Internet access may join the call from within the U.S. by dialing 800-642-1687; outside the U.S. dial 706-645-9291, pass code 8233174.  A playback of the conference call will be available from 11:30 p.m. EDT, August 2, 2005 until noon on September 2, 2005.

ev3 and the ev3 logo are trademarks of ev3 Inc., registered in the U.S. and other countries.

Statements contained in this press release that are not historical information are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied.  Such potential risks and uncertainties relate, but are not limited, to, in no particular order: product demand and market acceptance, the impact of competitive products and pricing, and success of clinical testing.  More detailed information on these and additional factors which could affect ev3 Inc.'s operating and financial results are described in the company's filings with the Securities and Exchange Commission, including its Registration Statement on Form S-1.  ev3 Inc. urges all interested parties to read these reports to gain a better understanding of the many business and other risks that the company faces. Additionally, ev3 Inc. undertakes no obligation to publicly release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

                                 ev3 Inc.
              COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
             (Dollars in thousands, except per share amounts)
                               (unaudited)

                                   For the three months   For the six months
                                          ended                 ended
                                   July 3,     July 4,   July 3,     July 4,
                                     2005       2004       2005       2004

  Net sales                        $31,540    $20,569    $59,222    $41,149

  Operating expenses
    Cost of goods sold (a)          12,785      9,368     24,894     18,157
    Sales, general and
     administrative (a)             32,297     23,520     64,157     47,957
    Research and development (a)    11,891     10,589     22,217     19,743
    Amortization of intangible
     assets                          2,548      2,447      5,203      4,978
    (Gain) loss on sale or
     disposal of assets, net           111         (1)       164         19
    Acquired in-process research
     and development                   868          -        868          -
       Total operating expenses     60,500     45,923    117,503     90,854

       Loss from operations        (28,960)   (25,354)   (58,281)   (49,705)

  Other (income) expense:
    Gain on sale of investments, net  (878)    (1,728)    (4,611)    (1,728)
    Interest expense, net            6,078      4,458     11,786     10,613
    Minority interest in loss of
     subsidiary                       (705)    (1,315)      (726)    (5,072)
    Other expense, net               1,828        206      2,920        106
      Loss before income taxes     (35,283)   (26,975)   (67,650)   (53,624)

  Income tax benefit                   (61)         -        (59)         -

      Net loss                     (35,222)   (26,975)   (67,591)   (53,624)

  Accretion of preferred
   membership units to redemption
   value                             5,635      5,869     12,061     11,804

      Net loss attributable to
       common shareholders        $(40,857)  $(32,844)  $(79,652)  $(65,428)

  Net loss per common share
   attributed to common
   shareholders (basic and
   diluted) (b)                     $(4.60)   $(18.29)   $(13.95)   $(37.36)

  Weighted average common shares
   outstanding (b)               8,877,898  1,795,745  5,711,852  1,751,092

  (a) Includes stock based
       compensation charges of:
      Cost of goods sold              $135        $47       $247        $98
      Sales, general and
       administrative                  591        206      1,045      1,373
      Research and development         189        182        434        398
                                      $915       $435     $1,726     $1,869

  (b) Net loss per common share attributable to common shareholders reflects
      the June 21, 2005 1-for-6 reverse stock split for all periods
      presented.

                                 ev3 Inc.
                   COMBINED CONSOLIDATED BALANCE SHEETS
             (Dollars in thousands, except per share amounts)
                               (unaudited)

                                                 July 3,       December 31,
                                                   2005              2004
  Assets
  Current assets
  Cash and cash equivalents                     $128,399           $20,131
  Accounts receivable, less allowance
   of $3,233 and $2,694, respectively             22,128            18,956
  Inventories                                     28,219            22,500
  Prepaid expenses and other assets                6,030             4,576
  Other receivables                                2,549             2,446
    Total current assets                         187,325            68,609

  Restricted cash                                  3,074             2,638
  Property and equipment, net                     13,030             9,130
  Goodwill                                        94,456            94,514
  Other intangible assets, net                    30,844            31,851
  Other assets                                     4,017             5,304
    Total assets                                $332,746          $212,046

  Liabilities and stockholders' equity (deficit)
  Current liabilities
  Accounts payable                               $11,703            $8,931
  Accrued compensation and benefits               11,176             9,523
  Accrued liabilities                             14,300            13,821
  Accrued acquisition consideration                    -             3,750
    Total current liabilities                     37,179            36,025

  Demand notes payable - related parties               -           299,453
  Other long-term liabilities                        561               702
    Total liabilities                             37,740           336,180

  Commitments and contingencies                        -                 -

  Class A preferred membership units:
   stated value $3.56; 24,040,718 units
   authorized; issued and outstanding:
   zero and 24,040,718, respectively                   -            95,105
  Class B preferred membership units:
   stated value $3.56; 41,077,336 units
   authorized; issued and outstanding:
   zero and 41,077,336, respectively                   -           158,923

  Minority interest                               13,754            16,310

  Stockholders' equity (deficit)

  Members' capital                                     -            47,927
  Common stock: $0.01 par value;
   100,000,000 shares authorized;
   issued and outstanding: 48,910,654 and
   zero, respectively                                489                 -
  Additional paid in capital                     801,252                 -
  Accumulated deficit                           (520,208)         (440,705)
  Accumulated other comprehensive loss              (281)           (1,694)
    Total stockholders' equity (deficit)         281,252          (394,472)
    Total liabilities and stockholders'
     equity (deficit)                           $332,746          $212,046


                                 ev3 Inc.
              COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
             (Dollars in thousands, except per share amounts)
                               (unaudited)

                                                 For the six months ended
                                                 July 3,           July 4,
                                                   2005              2004

  Operating activities
  Net loss                                      $(67,591)         $(53,624)
  Adjustments to reconcile net loss to
   net cash used in operating activities
      Depreciation and amortization                7,340             6,990
      Provision for bad debts                        327               278
      Provision for inventory obsolescence         1,156               264
      Acquired in-process research and development   868                 -
      Loss on disposal of assets                     157                19
      Amortization of beneficial
       conversion feature and non-cash
       interest expense                                -             1,857
      Gain on sale of investment                  (4,611)           (1,728)
      Stock compensation expense                   1,726             1,869
      Minority interest in loss of subsidiary       (726)           (5,072)
    Increase (decrease) in cash resulting from
     changes in operating assets and liabilities
        Accounts receivable                       (3,965)           (3,847)
        Inventories                               (6,980)           (4,534)
        Prepaids and other assets                    102              (667)
        Accounts payable                           3,024             3,672
        Accrued expenses and other liabilities     2,509               292
        Accrued interest on notes payable         12,156             8,752
  Net cash used in operating activities          (54,508)          (45,479)

  Investing activities
  Purchase of property and equipment              (6,119)           (1,483)
  Purchase of patents and licenses                  (982)             (571)
  Proceeds from sale of property and equipment         8                 -
  Proceeds from sale of investments                4,611             1,728
  Acquisitions, net of cash acquired              (1,626)           (3,750)
  Restricted cash                                   (221)              (31)
  Other                                              894               -
  Net cash used in investing activities           (3,435)           (4,107)

  Financing activities
  Issuance of demand notes payable                49,100            30,840
  Payments on demand notes payable               (36,475)                -
  Proceeds from issuance of notes
   payable, net of costs                               -            21,008
  Proceeds from exercise of stock options            660                79
  Proceeds from issuance of subsidiary
   stock to minority shareholders                    227               178
  Proceeds from initial public offering, net     152,713                 -
  Other                                                -              (827)
  Net cash provided by financing activities      166,225            51,278

  Effect of exchange rate changes on cash            (14)               (8)

  Net increase in cash and cash equivalents      108,268             1,684
  Cash and cash equivalents, beginning
   of year                                        20,131            23,625
  Cash and cash equivalents, end of year        $128,399           $25,309


                                 ev3 Inc.
                        SELECTED SALES INFORMATION
             (Dollars in thousands, except per share amounts)
                               (unaudited)

                                           For the three     For the six
  SALES BY SEGMENT                         months ended      months ended
                                          July 3, July 4,   July 3,  July 4,
                                           2005     2004     2005     2004

    Cardio Peripheral
      Stents                              $8,781   $4,681  $15,879  $10,005
      Thrombectomy and embolic protection  3,223    1,835    6,461    3,935
      Procedural support and other         7,204    5,647   13,709   11,792
        Total Cardio Peripheral           19,208   12,163   36,049   25,732

    Neurovascular
      Embolic products                     4,219    3,209    8,197    5,487
      Neuro access and delivery products   8,113    5,197   14,976    9,930
        Total Neurovascular               12,332    8,406   23,173   15,417

  Total Company                          $31,540  $20,569  $59,222  $41,149


                                           For the three     For the six
  SALES BY GEOGRAPHY                       months ended      months ended
                                          July 3, July 4,   July 3,  July 4,
                                            2005     2004     2005     2004

    United States                        $15,939  $10,212  $30,060  $20,710
    International                         15,601   10,357   29,162   20,439

  Total net sales                        $31,540  $20,569  $59,222  $41,149


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DATASOURCE: ev3 Inc.



CONTACT:  Patrick D. Spangler, CFO of ev3 Inc., [phone],

 



Web site:  http://www.ev3.net/ 

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