Exhibit 99.1
Company Investor/Media Contact: |
dj Orthopedics, Inc. |
Mark Francois, Director of Investor Relations |
(760) 734-4766 |
mark.francois@djortho.com |
FOR IMMEDIATE RELEASE
DJ ORTHOPEDICS ANNOUNCES FINANCIAL RESULTS FOR FIRST QUARTER 2004
SAN DIEGO, CA April 28, 2004 – dj Orthopedics, Inc., (NYSE: DJO), a global medical device company specializing in rehabilitation and regeneration products for the non-operative orthopedic and spine markets, today announced financial results for the first quarter ended March 27, 2004.
Net revenues for the first quarter of 2004 totaled $62.2 million and included $12.2 million from the Company’s new RegentekÔ division, which was acquired in November 2003, and $0.7 million related to favorable foreign exchange rate changes. Total net revenues increased 32.3 percent compared with net revenues of $47.1 million reported in the first quarter of 2003 and 8.3 percent compared to pro forma net revenues, including Regentek, of $57.5 million for the first quarter of 2003. The first quarter of 2004 included 61 shipping days while the comparable 2003 period included 62 days. On an average sales per day basis, net revenues in the first quarter of 2004 increased 10.1 percent compared to pro forma net revenues for the first quarter of 2003.
Net income for the first quarter of 2004 was $4.0 million, or $0.19 per share, an increase of 139.9 percent compared with net income of $1.7 million, or $0.09 per share, as reported in the first quarter of 2003, and an increase of 116.9 percent compared to pro forma net income of $1.8 million, or $0.10 per share, for the first quarter of 2003. Net income in the current period and pro forma net income for the 2003 period were reduced by approximately $0.02 per share and $0.03 per share, respectively, due to the impact of short-term Regentek purchase accounting adjustments, which increased costs of goods sold as a result of a step up in the value of acquired inventories and increased operating expenses as a result of the amortization of the value assigned to acquired customer order backlog.
The Company sold 3.16 million common shares in a stock offering completed in February 2004, receiving net proceeds of approximately $56.5 million. The impact of the shares issued in the offering and an increase in the dilutive net effect of outstanding stock options increased the weighted average shares outstanding used to calculate diluted earnings per share to 20.7 million for the first quarter of 2004, compared to 17.9 million shares in the first quarter of 2003.
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“We are pleased to report our first quarter reflecting the full benefit of Regentek’s revenue and earnings contribution,” said Les Cross, president and CEO of dj Orthopedics. “On an average daily sales basis, pro forma growth of 19.1 percent within our Regentek division once again outpaced the market, suggesting that Regentek continues to gain market share. Excluding Regentek’s contributions, our first quarter results were also strong, with year over year growth of 8.1 percent on average daily sales within our historical business segments. Cash flow from operations remained strong at $9.5 million in the first quarter of 2004. I would like to express my appreciation to the entire team at dj Orthopedics, as well as to our distribution partners, for making the quarter a success.
“With a solid start in 2004, we are on track to achieve our revenue forecast of approximately $260 million for the year. For the second quarter of 2004, with 64 shipping days, we anticipate revenue will be between $62 million and $64 million. The second quarter is seasonally our lowest for average daily revenues due to a decrease during this period in the sporting activities that drive portions of our business. The second quarter provides us with an important opportunity to strengthen our future earnings by redeeming all $75 million of our outstanding senior subordinated notes on June 15, 2004. We expect to use the net proceeds from our recently completed follow-on offering, combined with available cash, to redeem the notes, which will reduce our annual interest expense by approximately $10 million, beginning in the third quarter. In connection with the redemption, we expect to record a one-time charge in the second quarter of approximately $7.7 million (pretax) to write-off the redemption premium and remaining unamortized debt issuance costs and discounts.”
First Quarter Business Highlights:
• The Company launched new rehabilitation products in pain management, rigid knee bracing and lower extremity fracture boots in the first quarter of 2004, including the DonJoyÒ Pain Control Device, an ambulatory infusion pump for the management of post-operative pain, the DonJoy DefianceÒ III custom knee brace, a more comfortable brace for professional and collegiate athletes and two new rigid knee braces for treating patients with moderate to severe osteoarthritis of the knee. The Company also launched a new line of lower extremity fracture boots under the MaxTraxÔ brand name, which feature improved shock absorption, stability and natural gait.
• The Company remains on schedule and has initiated construction on its new 200,000 square foot built-to-suit manufacturing facility in Tijuana, Mexico. This facility will consolidate multiple buildings into a single site and will increase dj Orthopedics production capacity. The Company anticipates occupancy late in the third quarter of 2004.
Conference Call Information
dj Orthopedics has scheduled an investor conference call to discuss this announcement beginning at 5:00 PM, Eastern Time today, April 28, 2004. Individuals interested in listening to the conference call may do so by dialing (706) 634-0177, using the reservation code 6612058. A telephone replay will be available for 48 hours following the conclusion of the call by dialing (706) 645-9291 and using the above reservation code. The live conference call also will be available via the Internet at www.djortho.com, and a recording of the call will be available on the Company’s website.
About dj Orthopedics, Inc.
dj Orthopedics is a global medical device company specializing in rehabilitation and regeneration products for the non-operative orthopedic and spine markets. The Company’s broad range of over 600 rehabilitation products, including rigid knee braces, soft goods and pain management products, are used in the prevention of injury, in the treatment of chronic conditions and for recovery after surgery or injury. The Company’s regeneration products consist of bone growth stimulation devices that are used to treat nonunion fractures and as an adjunct therapy after spinal fusion surgery.
The Company sells its products in the United States and in more than 30 other countries through networks of agents, distributors and its direct sales force that market its products to orthopedic and podiatric surgeons, spine surgeons, orthopedic and prosthetic centers, third-party distributors, hospitals, surgery centers, physical therapists, athletic trainers and other healthcare professionals. For additional information on the Company, please visit www.djortho.com
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other things, the Company’s future growth and profitability, growth strategy, the Company’s anticipated financial results for 2004, and the Company’s anticipated redemption of its outstanding senior subordinated notes. The words “believe,” “should,” “expect,” “intend,” “estimate” and “anticipate,” variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not a forward-looking statement. These forward-looking statements are based on the Company’s current expectations and are subject to a number of risks, uncertainties and assumptions. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ significantly from those expressed or implied by such forward-looking statements are risks relating to: implementing our business strategy relative to the acquisition of the bone growth stimulation device business; the continued growth of the bone growth stimulation market; outsourcing certain administrative functions relating to our OfficeCare sales channel; our ability to successfully develop, license or acquire, and timely introduce and
market new products or product enhancements; our dependence on orthopedic professionals, agents and distributors for marketing our products; our transition to direct distribution of our products in select foreign countries; our international operations; our high level of indebtedness; the restrictions imposed by the terms of our indebtedness; our ability to generate cash to service our indebtedness; government regulations; developing and protecting our intellectual property; and the effects of healthcare reform, managed care and buying groups on prices of our products. Other risk factors are detailed in our Annual Report on Form 10-K for the 2003 calendar year, filed on March 12, 2004 with the Securities and Exchange Commission.
Tables to follow
dj Orthopedics, Inc.
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data and number of operating days)
|
| Three Months Ended |
| |||||||
|
| March 27, 2004 |
| March 29, 2003 |
| Pro Forma(1) |
| |||
|
|
|
|
|
|
|
| |||
Net revenues |
| $ | 62,241 |
| $ | 47,054 |
| $ | 57,470 |
|
Costs of goods sold |
| 23,359 |
| 21,261 |
| 23,291 |
| |||
Gross profit |
| 38,882 |
| 25,793 |
| 34,179 |
| |||
Operating expenses: |
|
|
|
|
|
|
| |||
Sales and marketing |
| 19,194 |
| 12,452 |
| 17,517 |
| |||
General and administrative |
| 6,744 |
| 6,633 |
| 7,702 |
| |||
Research and development |
| 1,378 |
| 934 |
| 1,147 |
| |||
Amortization of acquired intangibles |
| 1,272 |
| — |
| 1,332 |
| |||
Total operating expenses |
| 28,588 |
| 20,019 |
| 27,698 |
| |||
Income from operations |
| 10,294 |
| 5,774 |
| 6,481 |
| |||
Interest expense and other, net |
| (3,659 | ) | (3,010 | ) | (3,422 | ) | |||
Income before income taxes |
| 6,635 |
| 2,764 |
| 3,059 |
| |||
Provision for income taxes |
| (2,655 | ) | (1,105 | ) | (1,224 | ) | |||
Net income |
| $ | 3,980 |
| $ | 1,659 |
| $ | 1,835 |
|
|
|
|
|
|
|
|
| |||
Net income per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.20 |
| $ | 0.09 |
| $ | 0.10 |
|
Diluted |
| $ | 0.19 |
| $ | 0.09 |
| $ | 0.10 |
|
Weighted average shares outstanding used to calculate per share information: |
|
|
|
|
|
|
| |||
Basic |
| 19,610 |
| 17,902 |
| 17,902 |
| |||
Diluted |
| 20,748 |
| 17,941 |
| 17,941 |
| |||
|
|
|
|
|
|
|
| |||
Number of operating days |
| 61 |
| 62 |
| 62 |
| |||
(1) On November 26, 2003, the Company acquired the operations of Regentek. The results of Regentek’s operations are included in the consolidated results of operations for the entire quarter ended March 27, 2004; however, for comparative purposes the Company has included pro forma financial information for the quarter ended March 29, 2003 as if Regentek was acquired as of January 1, 2003. The Company uses the pro forma information presented to evaluate and manage the Company’s operations. The Company is providing this information to allow for additional financial analysis of the Company’s results of operations.
dj Orthopedics, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
| March 27, |
| December 31, |
| ||
|
| (Unaudited) |
|
|
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 65,849 |
| $ | 19,146 |
|
Short-term investments |
| 18,509 |
| — |
| ||
Accounts receivable, net |
| 50,421 |
| 43,876 |
| ||
Inventories, net |
| 13,694 |
| 15,534 |
| ||
Deferred tax asset, current portion |
| 11,283 |
| 11,283 |
| ||
Other current assets |
| 5,058 |
| 6,342 |
| ||
Total current assets |
| 164,814 |
| 96,181 |
| ||
Property, plant and equipment, net |
| 15,255 |
| 15,556 |
| ||
Goodwill, intangible assets and other assets |
| 158,883 |
| 161,258 |
| ||
Deferred tax asset |
| 45,199 |
| 47,509 |
| ||
Total assets |
| $ | 384,151 |
| $ | 320,504 |
|
|
|
|
|
|
| ||
Liabilities and stockholders’ equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable and other accrued liabilities |
| $ | 30,688 |
| $ | 29,015 |
|
Long-term debt, current portion |
| 5,000 |
| 5,000 |
| ||
Total current liabilities |
| 35,688 |
| 34,015 |
| ||
Long-term debt, less current portion |
| 169,194 |
| 169,156 |
| ||
Total stockholders’ equity |
| 179,269 |
| 117,333 |
| ||
Total liabilities and stockholders’ equity |
| $ | 384,151 |
| $ | 320,504 |
|
dj Orthopedics, Inc.
Unaudited Segment Information
(Dollar amounts in thousands)
|
| Three Months Ended |
| Revenues per Day |
| |||||||||||
|
| March 27, |
| March 29, |
| Pro Forma(1) |
| March 27, |
| Pro Forma(1) |
| |||||
Net revenues: |
|
|
|
|
|
|
|
|
|
|
| |||||
DonJoy |
| $ | 24,668 |
| $ | 22,854 |
| $ | 22,854 |
| $ | 404 |
| $ | 368 |
|
ProCare |
| 11,339 |
| 11,267 |
| 11,267 |
| 186 |
| 182 |
| |||||
Regentek(1) |
| 12,206 |
| — |
| 10,416 |
| 200 |
| 168 |
| |||||
OfficeCare |
| 6,403 |
| 5,822 |
| 5,822 |
| 105 |
| 94 |
| |||||
International |
| 7,625 |
| 7,111 |
| 7,111 |
| 125 |
| 115 |
| |||||
Consolidated net revenues |
| 62,241 |
| 47,054 |
| 57,470 |
| $ | 1,020 |
| $ | 927 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
| |||||
DonJoy |
| 14,495 |
| 12,579 |
| 12,579 |
|
|
|
|
| |||||
ProCare |
| 4,213 |
| 4,460 |
| 4,460 |
|
|
|
|
| |||||
Regentek(1) |
| 10,030 |
| — |
| 8,386 |
|
|
|
|
| |||||
OfficeCare |
| 5,180 |
| 4,410 |
| 4,410 |
|
|
|
|
| |||||
International |
| 4,964 |
| 4,344 |
| 4,344 |
|
|
|
|
| |||||
Consolidated gross profit |
| 38,882 |
| 25,793 |
| 34,179 |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income from operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
DonJoy |
| 5,518 |
| 5,008 |
| 5,008 |
|
|
|
|
| |||||
ProCare |
| 1,795 |
| 2,253 |
| 2,253 |
|
|
|
|
| |||||
Regentek(1) |
| 1,902 |
| — |
| 707 |
|
|
|
|
| |||||
OfficeCare |
| 1,028 |
| 132 |
| 132 |
|
|
|
|
| |||||
International |
| 2,341 |
| 2,092 |
| 2,092 |
|
|
|
|
| |||||
Income from reportable segments |
| 12,584 |
| 9,485 |
| 10,192 |
|
|
|
|
| |||||
Expenses not allocated to segments |
| (2,290 | ) | (3,711 | ) | (3,711 | ) |
|
|
|
| |||||
Consolidated income from operations |
| $ | 10,294 |
| $ | 5,774 |
| $ | 6,481 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Number of operating days |
| 61 |
| 62 |
| 62 |
|
|
|
|
| |||||
(1) On November 26, 2003, the Company acquired the operations of Regentek. The results of Regentek’s operations are included in the consolidated results of operations for the entire quarter ended March 27, 2004; however, for comparative purposes the Company has included pro forma financial information for the quarter ended March 29, 2003 as if Regentek was acquired as of January 1, 2003. The Company uses the pro forma information presented to evaluate and manage the Company’s operations. The Company is providing this information to allow for additional financial analysis of the Company’s results of operations. For the three months ended March 27, 2004, Regentek income from operations has been reduced by amortization of acquired intangible assets amounting to $1.3 million.
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