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ZEVEX International (ZVXI) Reports Results For Third Quarter And Nine Months Ended September 30, 2004; Reports 2005 Numico Product Roll-Out Plan


10/19/2005 5:11:58 PM

SALT LAKE CITY, Oct. 26 /PRNewswire-FirstCall/ -- ZEVEX International Inc. reported financial results for the three and nine months ended September 30, 2004.

Revenue from the Company's Therapeutics and Applied Technology divisions for the third quarter of 2004 was $5.34 million, compared with $5.29 million, a 1% increase, for the third quarter of 2003, not including revenue from the Physical Evaluation division that was sold in December 2003. Including sales from that division, revenue was $6.1 million in the third quarter of 2003. For the nine-month period ended September 30, 2004 the Company reported revenue of $17.8 million, an increase of 4%, compared with $17.2 million for the same nine-month period of 2003, not including revenue from the division that was sold in December 2003. Including sales from the division that was sold, revenue was $19.6 million in the nine-month period in 2003.

Net loss for the third quarter ended September 30, 2004 was $294,721, or $0.09 per share, compared with a net loss of $407,328, or $0.12 per share, for the third quarter in 2003. The net loss for the quarter was due primarily to a temporary reduction in orders from some larger contract manufacturing customers and higher research and development costs for planned new products. For the nine-month period ended September 30, 2004, net income was $106,952, or $0.03 per share, compared with a net loss of $257,999, or $0.08 per share, for the same period in 2003.

The Company realized a record quarter for sales of its EnteraLite(R) enteral feeding pumps and disposable sets, which grew 16 percent over the third quarter of 2003. Total Therapeutics division sales for the third quarter of 2004, which include stationary pumps and disposable sets, increased 11 percent over the third quarter of 2003. In the third quarter of 2004, stationary pumps sales were below those of the same period in 2003, but higher sequentially compared to the second quarter of 2004.

Sales from the Company's Applied Technology division declined 10 percent in the third quarter of 2004, compared with the third quarter of 2003. The lower sales were due to the temporary reduction in orders by three of the Company's largest customers who purchase surgical handpieces and sensors. These customers have indicated the reason for their reduced orders is to lower inventories. The company expects orders from these customers to resume beginning in the fourth quarter of 2004 and the first half of 2005.

For the third quarter of 2004, operating expenses declined to $2.1 million, compared with $2.5 million for the third quarter of 2003 (including expenses from the division that was sold). Selling, general and administrative expenses were 32% of sales in the third quarter of 2004. This percentage was 33% in the third quarter of 2003 (including selling costs from the division sold). Research and development expenses for the Therapeutics division increased to $389,000 in the third quarter of 2004 from $155,000 in the third quarter of 2003, due to a new product under development that is expected to be introduced in early 2005.

For the nine-month period ended September 30, 2004, operating expenses were $6.4 million, or 36% of sales, compared with $7.6 million, or 39% of sales, in the first nine months of last year (including expenses associated with the division that was sold).

The Company's effective tax rate for both the third quarter and nine months ended September 30, 2004 was 0%. The tax rate through the first nine months of 2004 was due to the recognition of a full valuation allowance of the Company's deferred tax assets.

ZEVEX Chairman and CEO, David J. McNally, said, "Our Applied Technology division, in which we make components and systems for other medical companies, experienced a disappointing quarter in terms of products ordered from customers. Three of our largest customers did not place their customary orders during the quarter, which greatly affected our overall sales. However, the largest of these customers has placed a new order for the fourth quarter of this year, and the others believe they will begin placing orders again in the first half of 2005. Because of the order received from our largest customer, fourth quarter sales will improve, but will still be somewhat affected by the lack of orders from the two other customers.

"We plan to introduce a new product in North America in the first quarter of 2005. Until that product is complete, however, we will continue to incur significant R&D costs during the fourth quarter of this year.

"Separately, we are in the midst of redefining the roll-out process for the products of Royal Numico, our strategic partner in Europe and other countries. The roll-out is now expected in the late first half or early second half of next year. Notably, we still expect annualized revenue of $7 million during each year of this contract, as previously announced. However we estimate the new, mid-year roll-out schedule will result in 2005 revenue from this project of approximately $3.5 million, instead of the $7.0 million that we previously projected," Mr. McNally said.

Mr. McNally continued, "While we are executing on plans to grow revenue, it is encouraging that the Company continues to generate positive cash flows from operations. So far this year we have generated over $1.5 million in cash flows from operations, which has allowed us to achieve a zero balance on our line of credit and reduce long-term debt to approximately $2 million."

ZEVEX INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, 2004 2003* 2004 2003* (unaudited) (unaudited) (unaudited) (unaudited) Revenue: Product Sales $5,187,253 $5,906,271 $17,180,510 $17,946,058 Engineering Services 152,153 219,486 591,597 1,657,676 Total Revenue $5,339,406 $6,125,757 $17,772,107 $19,603,734 Cost of Sales 3,517,818 4,185,993 11,193,487 12,192,402 Gross Profit 1,821,588 1,939,764 6,578,640 7,411,332 Operating Expenses: Selling, General and Administrative: 1,707,321 2,002,886 5,408,745 6,172,538 Research and Development: 427,711 474,430 993,354 1,382,473 Total Operating Expenses 2,135,032 2,477,316 6,402,099 7,555,011 Operating (Loss) Income (313,444) (537,552) 176,541 (143,679) Other Income (Expense): Interest and Other Income 10,120 967 14,976 7,213 Interest Expense (25,254) (54,519) (114,807) (238,289) (Loss) Income Before Income Taxes (328,578) (591,104) 76,710 (374,755) Benefit for Income Taxes 33,857 183,776 30,242 116,756 Net (Loss) Income $(294,721) $(407,328) $106,952 $(257,999) Basic Net (Loss) Income Per Share $(0.09) $(0.12) $0.03 (0.08) Weighted Average Shares Outstanding 3,400,964 3,400,964 3,400,964 3,400,964 Diluted Net (Loss) Income Per Share: $(0.09) $(0.12) $0.03 $(0.08) Diluted Weighted Ave. Shares Outstanding 3,400,964 3,400,964 3,473,602 3,400,964 *Data contains financial results from the Company's Physical Evaluation division sold December 31, 2003. ZEVEX INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEET September 30, December 31, 2004 2003* ASSETS (unaudited) Current Assets Cash and cash equivalents $853,960 $668,089 Designated cash for sinking fund payment on industrial development bond 70,804 95,277 Accounts receivable, net of allowances for doubtful accounts of $155,000 and $185,000 3,301,580 3,830,341 Other receivable 35,500 1,200,000 Inventories 3,896,336 4,114,567 Marketable securities 64,900 88,000 Income taxes receivable -- 442,548 Prepaid expenses and other current assets 24,965 115,457 Total current assets 8,248,045 10,554,279 Property and equipment, net 4,461,970 4,799,120 Patents, trademarks and other intangibles, net 329,573 330,277 Goodwill, net 4,048,264 4,048,264 Other assets -- 145 Total assets $17,087,852 $19,732,085 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $1,346,656 $1,540,700 Other accrued liabilities 557,076 525,071 Deferred revenue 14,043 538,770 Income Taxes Payable 3,615 -- Bank line of credit -- 1,810,970 Current portion of industrial development bond 100,000 100,000 Current portion of other long-term debt 52,528 50,430 Current portion of capital leases -- 122,950 Total current liabilities 2,073,918 4,688,891 Industrial development bond 1,200,000 1,300,000 Other long-term debt 779,946 819,609 Stockholders' Equity Common stock; $.001 par value, 10,000,000 authorized shares, 3,440,197 issued and 3,400,964 outstanding at September 30, 2004 and December 31, 2003 3,440 3,440 Additional paid-in capital 16,290,452 16,290,452 Unrealized gain on marketable securities 6,517 3,067 Treasury stock, 39,233 shares (at cost) at September 30, 2004 and December 31, 2003 (89,422) (89,422) Accumulated deficit (3,176,999) (3,283,951) Total stockholders' equity 13,033,988 12,923,586 Total liabilities and stockholders' equity $17,087,852 $19,732,085 *Data contains financial results from the Company's Physical Evaluation division sold December 31, 2003. CONFERENCE CALL

ZEVEX International Inc. invites all those interested to join the ZEVEX management team for its earnings conference call for the third quarter ended September 30, 2004. The call will be held Tuesday, October 26, 2004, at 2:30 p.m. Mountain Time (4:30 p.m. Eastern, 3:30 p.m. Central, and 1:30 p.m. Pacific). The telephone numbers for the call are as follows:

Domestic: 1-800-240-2134 International: 1-303-262-2190

A live webcast and a rebroadcast of the conference call will be available on the Company's website at http://www.zevex.com/ and http://www.streetevents.com/. To listen to the live broadcast, please enter the site 10-15 minutes prior to the call in order to download any necessary software, and then click on the "Live Webcast" link on the ZEVEX Home Page to access the call. The webcast will be archived on both sites. There is no other replay access to the call.

ABOUT ZEVEX INTERNATIONAL

ZEVEX International, Inc. (http://www.zevex.com/), founded in 1986, transforms life with its patented and proprietary medical device technologies. The Therapeutics division markets award-winning enteral nutrition delivery devices. The Applied Technology division designs and manufactures advanced medical components and systems for the Therapeutics division, as well as for other medical technology companies.

Forward-Looking Statements

Statements made in this press release, including those relating to anticipated growth and other statements regarding future performance, are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Among other things, the Company's efforts to improve its sales and margins in its core businesses may not be effective or such efforts could be more difficult or expensive than the Company currently anticipates. Moreover, the Company could experience further delays in orders for its contract manufacturing products or in the launch of planned new products that could delay the receipt of anticipated revenue. In addition to the foregoing, the economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2003, may cause actual results or events to differ materially from those described in the forward looking statements in this press release.

ZEVEX International Inc.

CONTACT: Nancy E. Schultz, Director, Corporate Communications/InvestorRelations of ZEVEX International Inc., +1-801-264-1001, ext. 203,nschultz@zevex.com


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