Ossur First Quarter Report 2008

Transcription

1 Ossur First Quarter Report Press release from Ossur hf. Reykjavik, 29 April First Quarter Highlights Sales USD 89.8 million Organic growth 12% EBITDA USD 23 million, up by 124% from EBITDA adjusted USD 17.4 million, up by 51% from Net profit USD 6.7 million, compared to a net loss of USD 2.7 million in Cash EPS diluted 2.98 US cents, up by 231% from EPS diluted 1.58 US cents, compared to in Jon Sigurdsson, President & CEO, comments: We are pleased with the results of the first quarter of the year. Traditional Europe and Asia are showing excellent growth both in prosthetics and bracing and supports. Prosthetics continue to exceed market growth, confirming Ossur s strength in this market segment. Sales of bracing and support products in the US are still challenging. However, the Company s management is confident that a turnaround is on the horizon. Some of the main focus areas in are profitability and exploiting cross selling opportunities as well as product rationalization. Important projects supporting this have already been initiated.

2 Investor meeting live broadcast at 12:00 GMT / 14:00 CET/ 8:00 EST Today, Tuesday 29 April Jon Sigurdsson, President and CEO, and Hjorleifur Palsson, CFO, will host a meeting presenting and discussing the results of the first quarter for investors, analysts and shareholders. The meeting will be at Grand Hotel Reykjavik and will be conducted in English. There will be a live broadcast from the meeting on the Ossur website: To call in and participate in the meeting please call the following telephone numbers: Telephone number for Europe: +44 (0) Telephone number for the United States: Local Icelandic number: Presentation material will be available on the Company s website and the News System of the Iceland Stock Exchange/ Nasdaq OMX: and on Divestment of the Advanced Wound Care product line In March Ossur s Advanced Wound Care product line was sold to BSN medical GmbH. The wound care product line was developed in-house using the Company s silicone technology expertise. The divestment strengthens Ossur s focus on the vast opportunities in the Company s core business segments. The transaction is valued at USD 11 million. Subject to certain conditions, the transaction value could further increase by up to USD 6 million. As previously communicated, Ossur is involved in an intellectual property litigation related to the Advanced Wound Care product line and the Company will retain responsibility for these. Part of the transaction value is reserved for covering future litigation expense exposure. Operating results for the first quarter of The operating results for the first quarter of are presented below. Somas, acquired in, is included in the consolidated accounts from 1 February. Income Statements (USD '000) Change Net 89, % 80, % 11.7% Cost of goods sold (36,577) -40.8% (36,004) -44.8% 1.6% Gross profit 53, % 44, % 19.8% Other income 5, % % % Sales & marketing expenses (23,499) -26.2% (22,233) -27.7% 5.7% Research & development expenses (5,424) -6.0% (5,052) -6.3% 7.4% General & administrative expenses (12,952) -14.4% (13,353) -16.6% -3.0% Profit from operations 17, % 4, % 319.9% Financial income /(expenses) (9,043) -10.1% (7,852) -9.8% 15.2% Profit/(loss) before tax 7, % (3,794) -4.7% n/a Income tax (1,314) -1.5% 1, % n/a Net profit for the period 6, % (2,706) -3.4% n/a EBITDA 22, % 10, % 124.1% EBITDA adjusted* 17, % 11, % 51.4% *Adjusted for one-time restructuring expenses and inventory step-up related to acquisitions in and one-time income in. Income Statements for the first quarter The total for the first quarter amounted to 89.8 million, representing a 12% growth compared to the first quarter of. Exchange rate trends had a positive impact on and growth measured in local currency was 5%, all organic as no material acquisitions were made in. Gibaud has been fully aligned to IFRS and Ossur s accounting methods resulting in expenses recorded as G&A in are now classified as cost of goods sold and and marketing expenses. Comparison numbers have been adjusted accordingly.

3 Gross profit increased by 20%. The gross profit margin was 59.2% compared to 55.2% in the first quarter of. Affecting the gross profit in the first quarter of was an inventory step-up related to the acquisition of Gibaud, decreasing the gross profit by USD 1.3 million, or by 1.6% percentage points. Exchange rate trends have a positive impact on the gross profit in the first quarter of. Other income amounted to USD 5.7 million. One-time other income includes a USD 5.5 million gain realized through the divestment of the wound care product line. General and administrative expenses were 14.4 compared to 16.6% in the first quarter of. In the first quarter of G&A was unusually high due to severance payments relating to the restructuring of channels in the Americas, wound care litigation costs and Somas integration expenses which amounted to USD 1.8 million in total, or 2.2. Profit from operations increased by USD 13 million or by 320% and represented 19 compared to 5% in the first quarter of. The increase is partly due to exchange rate differences as well as the effect of one-time income in and one-time expenses in the first quarter of. Amortization of intangible assets relating to acquisitions amounted to USD 3.6 million, compared to USD 3.8 million in the first quarter of. The amortization following acquisitions in the past is in accordance with accounting standards, affecting the P/L statement although the underlying intangible assets are not decreasing in value. The amortization of intangible assets will continue at the same level for the next three years and then drop to a lower level for another six years. Further acquisitions will affect the amortization level. Net interest expenses in the first quarter amounted to USD 4.8 million and decreased by 15% from the first quarter of as a result of decreased leverage. Ossur has entered into interest rate swap agreements fixing the rates of the Company s long term debt at a weighted average of 5.99% per annum interest rate. Approximately 61 Ossur s long term bank loans are in US dollars and 39% in Euros. The significant strengthening of the Euro against the US dollar during the period resulted in a USD 4.2 million negative exchange rate loss, mostly related to the Company s long term debt in Euros. This could be reversed by future market changes. Income tax was USD 1.3 million, corresponding to a 16% effective tax rate, compared to a positive income tax of USD 1.1 million in the first quarter of. The positive tax in the first quarter of was due to deductions relating to a net loss in the Americas as well as deductions relating to the internal financing structure of the Company. Net profit amounted to USD 6.7 million compared to a net loss of USD 2.7 million in the first quarter of. EDITDA amounted to USD 23 million, up by 124% from the first quarter of and corresponds to 25.6 compared to USD 10.2 million and 12.7 in the same period in. EBITDA adjusted for one-time income amounted to USD 17.4 million, corresponding to 19.5, compared to USD 11.5 million and 14.3 in the first quarter of when adjusted for one-time expenses. One-time income includes USD 5.5 million in the first quarter of due to the gain realized through the divestment of the wound care product line. One-time expenses in the first quarter of include severance payments relating to the restructuring of channels in the Americas, wound care litigation costs and Somas integration expenses amounting to USD 1.8 million in total. Product groups The division of between main product groups in the first quarter of was as follows: USD 000 USD Gibaud has been fully aligned to IFRS and Ossur s accounting methods resulting in expenses recorded as G&A in are now classified as cost of goods sold and and marketing expenses. Comparison numbers have been adjusted accordingly. LCY Bracing & supports 47,692 53% 9% 3% Prosthetics 34,527 40% 14% 9% Compression therapy 5,881 6% 1% -12% Other 1,654 1% 174% 162% Total 89, % 12% 5% In the first quarter of six new products and product upgrades were introduced. Bracing and Supports Sales growth in bracing and supports was 9%. Sales of bracing and support products in traditional Europe (Europe excluding Gibaud ) are growing healthily while of bracing and support products in the US are still challenging. Ossur has just signed an exclusive distribution agreement with Team Makena, previously a distributor for DJO Inc. Team Makena will distribute Ossur bracing and support products in Southern California and Southern Nevada. Ossur previously had 3 representatives in the area. The agreement is expected to have a positive effect on bracing and supports in Americas. In the first quarter two new products and product upgrades were introduced to the market. A number of new products and product upgrades will be introduced throughout the year. Success of new key products such as Unloader One and CTi knee braces continues. Important rationalization in the bracing and support product lines is in progress and is expected to have positive effect on the operating results in medium to long term.

4 Prosthetics Sales growth in prosthetics continues to exceed the market growth and was 14%. This confirms Ossur s strength in this market segment as well as technical leadership. In the first quarter of four new products and product upgrades were introduced. Amongst products introduced was a new version of the Seal-In liner. The new Iceross Seal-In incorporates a series of five seals that conform to the shape of the residual limb providing an airtight seal. Compression Therapy Sales of compression therapy products in the first quarter declined by 12% compared to the first quarter of. Compression therapy products are currently only sold in France. Sales of compression therapy products in the first quarter of were unusually high due to extreme focus on this segment at that time, thus skewing the comparison between years. Sales focus at Gibaud shifted between segments in resulting in uneven performance. Focus on segments within Gibaud is now more balanced resulting in less fluctuations. Geographical markets The distribution of according to market regions in the first quarter of was as follows: USD 000 USD LCY Americas 40,104 45% 4% 3% EMEA 46,958 52% 18% 6% Asia 2,693 3% 27% 24% Total 89, % 12% 5% Americas in Ossur Americas was 3% and 4% measured in local currency. The strong growth in prosthetics is offset by flat in the bracing and support segment. Sales of bracing and support products are still challenging. The distribution agreement with Team Makena is an important addition to America s current channel. Team Makena will distribute Ossur bracing and support products in Southern California and Southern Nevada.. Sales in the Americas accounted for 45, compared to 48% in the first quarter last year. EMEA in EMEA was 18% and 6% measured in local currency. in traditional Europe was excellent, both in prosthetics and braces and supports. Gibaud has been challenging and overall growth of EMEA is offset by Gibaud s lower growth. As reported when Gibaud was acquired, Gibaud will be operated more as a stand-alone unit for months and limited synergies are therefore expected to be realized during this period. Sales in EMEA accounted for 52 total, compared to 49% in the same period last year. Asia in Asia measured in USD was 27% and 24% measured in local currency. Sales of both prosthetics and bracing and support products have been growing well, especially in Australia. Sales in Asia accounted for 3, same as in the first quarter of. Balance Sheets Consolidated Balance Sheets (USD 000) 31 March Change Fixed assets 508, ,564 1% Current assets 142, ,257 8% Total assets 651, ,821 2% Stockholders equity 259, ,282 4% Long-term liabilities 251, ,361 5% Current liabilities 140, ,178-4% Total equity and liabilities 651, ,821 2% Net Debt / EBITDA LTM Net Debt / EBITDA LTM adj.* Equity ratio 40% 39% Gibaud has been fully aligned to IFRS and Ossur s accounting methods resulting in expenses recorded as G&A in are now classified as cost of goods sold and and marketing expenses. Comparison numbers have been adjusted accordingly.

5 * Adjusted for one-time restructuring expenses and inventory step-up related to acquisitions in and one-time income in Total assets have increased by USD 15.5 million from the end of, partly due to exchange rate difference. The equity ratio at the end of first quarter was 40%, compared to 39% at the end of. Net interest bearing debt over last twelve month EBITDA was 3.6x at the end of the quarter (4.4x EBITDA adjusted). Cash Flow Cash Flow (USD 000) Sales Working capital provided by operating activities 19,505 22% 5,504 7% Net cash provided by operating activities 14,278 16% 2,111 3% Sales of the wound care product line contribute to the significant increase in cash flow. Capital investments amounted to USD 1.7 million or 1.9, compared to USD 1.9 million or 2.4 in the first quarter of. Earnings per share Earnings per share Change EPS diluted (US cents) n/a Cash EPS diluted (US cents) % Five year comparison Five Quarter Comparison Q4 Q3 Q2 Net 89,754 84,870 82,322 88,037 80,380 Gross profit 53,177 46,227 47,355 50,869 44,376 Profit from operations 17,041 16,157 8,125 11,376 4,058 Financial income / (expenses) (9,043) (8,445) (5,840) (9,526) (7,852) Profit (loss) before tax 7,998 7,712 2,285 1,850 (3,794) Net profit 6,684 6,648 2,155 1,483 (2,706) EBITDA 22,950 22,732 14,068 17,353 10,240 EBITDA adj.* 17,449 13,474 14,068 17,353 11,528 Gross profit margin 59% 54% 58% 58% 55% EBITDA margin 26% 27% 17% 20% 13% EBITDA adj.* margin 19% 16% 17% 20% 14% Stockholders equity 259, , , , ,148 Total assets 651, , , , ,091 Current ratio Equity ratio 40% 39% 27% 26% 25% Net debt / EBITDA LTM Net debt / EBITDA LTM adj.* Working capital from operating activities 19,505 31,180-2,205 9,512 5,504 Net cash provided by operating activities 14,278 19,982 12,324 11,284 2,111 Earnings per share (US cents) Cash earnings per share (US cents) Price per share at period end (ISK) Market value at period end (USD million) * Adjusted for one-time restructuring expenses and inventory step-up related to acquisitions and one-time income Gibaud has been fully aligned to IFRS and Ossur s accounting methods resulting in expenses recorded as G&A in are now classified as cost of goods sold and and marketing expenses. Comparison numbers have been adjusted accordingly.

6 Operating prospects Ossur operates within niche segments of the USD 25 billion orthopaedic industry, focusing on three segments of the non-invasive orthopaedic market: prosthetics, bracing and supports and compression therapy. Strong underlying market growth drivers in these markets include demographic aspects such as an aging population, increase in lifestyle diseases and more active and wealthy seniors. The health care sector has historically had limited sensitivity to economic fluctuations and the recent negative developments in the global financial markets are not expected to have significant impact on the Company s underlying business. The Company s main focus areas in include profitability, innovation and cost leadership. The emphasis will be on further exploring cross selling opportunities and increased product rationalization in the bracing and support line of the business. Various new products and product upgrades are in the pipeline for prosthetics and bracing and supports and Ossur will continue to pursue its strategy of leveraging on existing technical platforms. Ossur s in are estimated to be around USD million and EBITDA is expected to be USD million, excluding the gain realized from the divestment of the wound care product line. Approval of Financial Statements The Ossur hf. Consolidated Financial Statements for the first quarter of were approved at a meeting of the Board of Directors on 28 April. The statements are prepared in compliance with International Financial Reporting Standards (IFRS). The estimated dates of publication of financial reports in are as follows: Second quarter results 29 July Third quarter results 28 October Fourth quarter and annual results 5 February 2009 Annual General Meeting 20 February 2009 Further information Jon Sigurdsson, President & CEO Tel: Hjorleifur Palsson, CFO Tel: Sigurborg Arnarsdottir, IR Manager Tel: Ossur press releases by If you wish to receive Ossur press releases by please register at the following web-site: About Ossur Ossur (OMX: OSSR) is a global leader in non-invasive orthopaedics that help people live a life without limitations. Its business is focused on improving people s mobility through the delivery of innovative technologies within the fields of braces, supports, prosthetic limbs and compression therapies. A recognized Technology Pioneer," Ossur invests significantly in research and product development; its award-winning designs ensuring a consistently strong position in the market. Successful patient and clinical outcomes are further empowered via Ossur s educational programs and business solutions. Headquartered in Iceland, Ossur has major operations in the Americas, Europe and Asia, with additional distributors worldwide. Forward-Looking Statements This press release includes "forward-looking statements" which involve risks and uncertainties that could cause actual results to differ materially from results expressed or implied by these statements. Ossur hf. undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forwardlooking statements are qualified in their entirety by this cautionary statement. Gibaud has been fully aligned to IFRS and Ossur s accounting methods resulting in expenses recorded as G&A in are now classified as cost of goods sold and and marketing expenses. Comparison numbers have been adjusted accordingly.