Össur hf. Financial Statements for 1st Quarter of 2002

The interim Consolidated Financial Statements for the first quarter of 2002 of Össur was approved at meeting of the Board of Directors on 29 April. The reporting currency of the consolidation has been changed from Icelandic krona to US dollars from January 1st. 2002, the reason being that the US dollar is the functional currency of the Össur consolidation. Comparative figures from prior periods have been converted from Icelandic krona into US dollars. Operating items are converted according to the average exchange rate of the first quarter of 2001, but the balance sheet items at the end of year 2001 have been converted according to the year-end exchange rate. General price level adjustments in the financial reporting of the Icelandic companies pertaining to the Consolidation have also been cancelled from the beginning of 2002. The interim Financial Statements have been reviewed and endorsed by the auditors of the company.

The principal companies of the Össur Consolidation are Össur hf. in Iceland, the Össur Holdings, Inc. Consolidation in USA, the Össur Holding A.B. Consolidation in Sweden and Össur Europe B.V. in Holland.

The principal results for the first quarter are as follows:

Consolidated Income Statement 1Q 2002 (USD '000)	1Q 2002	% of Sales	1Q Budget	% of Sales	Variance

Net sales	18,593	100.0%	18,788	100.0%	-195
Cost of goods sold	-7,495	40.3%	-7,427	39.5%	-68
Gross profit	11,098	59.7%	11,361	60.5%	-263

Other income	222	1.2%	43	0.2%	179
Sales and marketing expenses	-4,197	-22.6%	-4,819	-25.6%	622
Research & development expenses	-2,019	-10.9%	-1,821	-9.7%	-198
General & administrative expenses	-3,562	-19.2%	-3,467	-18.4%	-95

Profit from operations	1,542	8.3%	1,297	6.9	245

Interest income /(expenses)	-323	-1.7%	-240	-1.3%	-83
Income from associates	56	0.3%	14	0.0%	42

Profit before tax	1,275	6.9%	1,071	5.7%	204
Income tax and net worth tax	-244	1.3%	-476	-2.5%	232

Net profit for the period	1,031	5.5%	595	3.2%	436

EBITDA	2,127	11.4%	1,876	10.0%	251


Consolidated Balance sheets (USD '000)			31.3. 2002	31.12. 2001	Change %

Fixed assets			32,732	30,948	+5.8%
Current assets			28,549	27,253	+4.7%
Total assets			61,281	58,201	+5.3%

Equity			31,044	30,547	+1.6%
Long-term liabilities			12,979	12,931	+0.4%
Current liabilities			17,258	14,723	+17.2%
Total equity and liabilities			61,281	58,201	+5.3%


Consolidated Statement of Cash Flows 1Q 2002 (USD '000)				1Q 2002	1Q 2001

Working capital from operating activities				1,989	1,722

Net Cash provided by (used in) operating activities				-444	1,362
Investing activities				-1,366	-1,041
Financing activities				-59	-800
Net decrease in cash				-1,869	-479


Financial ratios				1Q 2002	1Q 2001

Earnings per Share, EPS (US cents)				2.74	N/A*
P/E ratio				17.3	N/A*
Return on common equity				32%	N/A*
Current ratio				1.7	1.2
Equity ratio				51%	46%
Market cap. (Million USD)				156	180

* Calculation based on the last 12 months, N/A for 2001 as an interim Financial Statements were not prepared for the first quarter of the year 2000.

Comparison with the year 2001:

Consolidated Income Statements 1Q 2002 (USD '000)	1Q 2002	% of Sales	1Q 2001	% of Sales	Change %

Net sales	18,593	100.0%	16,325	100.0%	+13.9%
Cost of goods sold	-7,495	40.3%	-6,288	38.5%	+19.2%
Gross profit	11,098	59.7%	10,037	61.5%	+10.6%

Other income	222	1.2%	149	0.9%	+49.0%
Sales and marketing expenses	-4,197	-22.6%	-3,335	-20.4%	+25.8%
Research & development expenses	-2,019	-10.9%	-1,158	-7.1%	+74.4%
General & administrative expenses	-3,562	-19.2%	-4,004	-24.5%	-11.0%

Profit from operations	1,542	8.3%	1,689	10.3%	-8.7%

Interest income /(expenses)	-323	-1.7%	-361	-2.2%	-10.5%
Income from associates	56	0.3%	9	0.0%	+522.2%

Profit before tax	1,275	6.9%	1,337	8.2%	-4.6%
Income tax and net worth tax	-244	1.3%	-682	-4.2%	-64.2%

Net profit for the period	1,031	5.5%	655	4.0%	+57.4%

EBITDA	2,127	11.4%	2,217	13.6%	-4.1%

First Quarter Operations

Operations in the first quarter went according to plan in all principal respects. The comparison with the operating plan is based on median values. The presentation of the Income Statement has been changed according to the provisions of the International Accounting Standard No. 1 (IAS 1). The contribution margin, calculated as the difference between the net sales and the cost of goods sold, is noted separately, and other income are now included with other operating items instead of among the operating revenues.

European sales have proceeded according to plan. When preparing the operating budget the risk of operational deviations was considered to be greatest in Europe because of the radical changes recently made in the operating structure and personnel affairs. Sales in North America exceeded plans by approximately USD 400 thousand and sales in Scandinavia were slightly under expectations. Sales of spinal implants exceeded expectations. Sale targets on other markets, on the other hand, were generally not reached with the deviation amounting to approximately USD 400 thousand in total. The primary reason for this is the difficult economic environment in the markets involved and in some cases currency depreciation. More precisely, the external sales of the Consolidation are divided as follows according to market areas:

Thousand USD	1Q 2002	%	Budget	Variance

Össur North America, Inc.	10,909	59%	10,502	+ 407
Össur Europe, B.V.	3,571	19%	3,627	- 56
Össur Nordic, A.B.	2,307	12%	2,437	-130
Other markets	1,806	10%	2,222	-416

Total	18,593	100%	18,788	-195

There was some deviation in the sales and marketing expenses, i.e. the cost was USD 622 thousand below budget. Research and development costs, however, were approximately USD 200 thousand higher than the median value of the operating plan's projections. The press release regarding the publication of the 2002 operating plan emphasized that projects could easily be transferred between quarters. These deviations are primarily a result of such transfers. There is also some deviation in the projected income tax, but this item is difficult to estimate with accuracy, given the complicated structure of the Consolidation. Examples of items that cause fluctuations in income tax between quarters are tax effects related to eliminations of unrealized inter company profits in inventories and payments of inter company interests in the United States.

The warehouse of Össur North America, Inc. was relocated during the first quarter. It was previously a 30 minute drive from the company's headquarters but are currently on the same site as other operations in Aliso Viejo in California, in the third building taken into use on the site. The warehouse is approximately 1,800 square meters in size.

The start up a production line for the manufacturing of artificial feet from carbon fibers in Iceland has proceeded well and in accordance with plans.

The principal innovations in product development included a new artificial foot, Ceterus(TM), which was introduced in February. It has been well received, and sales in the first quarter have exceeded expectations. The Ceterus(TM) foot combines rotation, shock absorption and dynamic response.

New products planned to be introduced in the second quarter:

Among the products to be introduced during the second quarter are the TKO1500 knee, the lock Icelock(TM) Smooth 651, and two new sockets.

TKO 1500 is a new knee with shock absorption, which means that the user is less likely to have to lift the hip when walking.

ICELOCK(TM)SMOOTH 651 is the fourth lock in Össur's line of locks, Icelock 600. The lock is unique in the way that it provides step-less locking. Össur holds a patent on the locking mechanism used in the lock.

ICEROSS Stabilo(TM) is a new socket designed for moderately active users. The socket is skin friendly, sits well and minimizes chafing.

ICEROSS Transfemoral Conical is a socket designed for above knee amputees. In 2001, Össur hf. introduced Iceross Transfemoral Standard to the market. This socket was the first of its kind (i.e. specifically designed for above knee amputees). Transfemoral Conical is the second socket in this line of products. The bottom section of the socket has a wider circumference than other sockets, which increases the comfort for users.

Open Conference with the Management:

Today, investors and other interested parties are invited to join an open conference with the Company's Management. At the conference, Mr. Jon Sigurdsson, CEO, and Mr. Hjorleifur Palsson, CFO, will review the results of the first quarter.

Eythor Bender, Vice-President of the Prosthetics Division, will discuss the products marketed in 2002 and future products to be launched. Mr. Bender will also discuss the Company's research and developmental work.

The meeting will be held today at 4:30 p.m. in the Golden Room of Hotel Borg, Reykjavik.