[GRAPHIC OMITTED][GRAPHIC OMITTED]
For Further Information:
Charles W. Federico Thomas Hein
Group President & CEO CFO
Orthofix International N.V. Orthofix International N.V.
704.948.2600 704.948.2600
Orthofix Reports Third Quarter Sales of
$51.3 Million; An Increase of 15%
HUNTERSVILLE, N.C., October 28, 2003 - Orthofix International N.V. (NASDAQ:OFIX)
today announced results for the third quarter ended September 30, 2003.
For the three months ended September 30, 2003, sales were $51.3 million, an
increase of 15% over the $44.5 million reported during the same period in 2002.
The impact of foreign currency on sales for the quarter was a positive $1.1
million. Net income for the third quarter ended September 30, 2003, was $5.4
million, or $0.37 per diluted share, compared with $6.0 million, or $0.41 per
diluted share, for the same period in 2002. Net income for the third quarter
ended September 30, 2003, included $0.9 million in litigation costs related to
the KCI patent infringement case and $1.1 million in after-tax settlement costs
associated with the Office of Inspector General investigation. Excluding these
litigation and settlement costs, net income for the third quarter ended
September 30, 2003 would have been $7.4 million, or $0.50 per diluted share, an
increase of 23% over the same period in 2002. Diluted weighted average shares
outstanding were 14,882,747 and 14,717,983 during the three months ended
September 30, 2003, and September 30, 2002, respectively.
For the nine months ended September 30, 2003, sales were $151.0 million, an
increase of 15% over the $131.7 million reported during the same period in 2002.
The impact of foreign currency on sales for the nine month period was a positive
$5.3 million. Net income for the nine months ended September 30, 2003, was $17.9
million, or $1.22 per diluted share, compared with $19.3 million, or $1.30 per
diluted share, for the same period in 2002. Net income for the nine months ended
September 30, 2003, included $2.9 million in litigation costs related to the KCI
patent infringement case and $1.1 million in after-tax settlement costs
associated with the Office of Inspector General investigation. Excluding these
litigation and settlement costs, net income for the nine months ended September
30, 2003, would have been $21.9 million, or $1.49 per diluted share, an increase
of 13% over the same period in 2002. Diluted weighted average shares outstanding
were 14,720,139 and 14,915,615 for the nine months ended September 30, 2003, and
September 30, 2002, respectively.
Net sales by geographic destination for the periods ended September 30,
(In millions)
Three Months Ended September 30 Nine Months Ended September 30,
------------------------------------- ---------------------------------------
2003 2002 % Increase 2003 2002 % Increase
---------- ---------- ------------- ------------ ---------- -------------
Americas $ 35.7 $ 31.2 14% $ 101.4 $ 91.6 11%
International 15.6 13.3 17% 49.6 40.1 24%
---------- ---------- ------------- ------------ ---------- -------------
Total $ 51.3 $ 44.5 15% $ 151.0 $ 131.7 15%
========== ========== ============= ============ ========== =============
Net sales by product group for the periods ended September 30,
(In millions)
Three Months Ended September 30 Nine Months Ended September 30,
------------------------------------- ---------------------------------------
2003 2002 % Increase 2003 2002 % Increase
---------- ---------- ------------- ------------ ---------- -------------
Orthopedic
Devices $ 14.9 $ 13.3 12% $ 46.4 $ 40.6 14%
Stimulation 24.0 20.1 19% 68.9 59.2 16%
Vascular (DVT) 6.6 6.0 10% 18.3 16.5 11%
---------- ---------- ------------- ------------ ---------- -------------
Total Orthopedic 45.5 39.4 15% 133.6 116.3 15%
17.4 15.4 13%
Non-Orthopedic 5.8 5.1 14%
---------- ---------- ------------- ------------ ---------- -------------
Total $ 51.3 $ 44.5 15% $ 151.0 $ 131.7 15%
========== ========== ============= ============ ========== =============
Charlie Federico, President and Chief Executive Officer, stated, "We continued
to experience strong growth in our core businesses of orthopedic devices and
stimulation, which grew 12% and 19%, respectively, in the third quarter over the
same period of the prior year and which, year-to-date, have grown 14% and 16%,
respectively, compared with the same period of the prior year."
"Our vascular business continued to maintain its double digit year-to-date
growth rate over the same period of the prior year. Our Americas business
continued its healthy growth, with sales totaling $35.7 million, or 70% of total
sales, for the third quarter, an increase of 14% over the same period of the
prior year. International sales, including the positive effect of foreign
currency, increased 17% for the third quarter and 24% year-to-date over the same
periods in 2002," said Federico.
"Gross profit margin for the third quarter increased to 76%, compared with 75%
for the same period of the prior year. This increase was attributable to a
favorable mix of higher margin stimulation sales during the quarter, partially
offset by a negative foreign currency impact that, in effect, increased the
production costs of external fixation and vascular products. Year-to-date, the
gross profit margin remained constant at 75% compared with the same period of
the prior year," Federico added.
"Operating income as a percentage of sales was 17% and 19% for the third quarter
and year-to-date, respectively, and included $2.6 million and $4.7 million,
respectively, of litigation and settlement costs. With regard to our ongoing
patent litigation against Kinetic Concepts Inc, as predicted in the second
quarter, costs incurred are now running at a lower level, and most of the
pre-trial activity should be concluded by mid-November. Further, in order to
avoid protracted litigation, we settled the two-year investigation by the Office
of Inspector General regarding coverage issues by federal payers with an
after-tax payment to CHAMPUS/TriCare of $1.1 million, thus eliminating the need
for legal costs associated with litigation, and placing this government inquiry
into our billings to federal programs firmly in the past. In settling this
matter, Orthofix admitted no wrongdoing and affirmatively asserted that the
Company and its counsel believed the government's interpretation of the TriCare
regulation to be incorrect. We remain confident that the course of action we
have taken is in the best interests of our shareholders," said Federico.
"Our balance sheet remains healthy, with cash balances as of September 30, 2003,
totaling $45.7 million, and working capital items of days sales in receivables
(DSO) and inventory turns having improved modestly since the end of 2002,"
Federico said.
Orthofix International N.V. is an international corporation that develops,
produces and markets innovative products in the medical device sector. Its
products include Spinal-Stim(R) Lite for the enhanced healing of spinal fusions,
the Orthotrac Pneumatic Vest(R) for chronic low back pain, the EZBrace LSO(R)
for spine stabilization, the Physio-Stim(R) Lite for the healing of un-united
fractures, the OSCAR(R) ultrasonic bone cement removal system for hip-revision
procedures, the A-V Impulse System(R) for enhancing venous circulation, the
Orthofix(R) external fixation range for fractures and limb reconstruction, and
the Orthofix ISKD(R) internal lengthener.
For more information, please visit our corporate website at
http://www.orthofix.com.
Certain of the matters discussed in this news release are forward-looking
statements that involve risks and uncertainties, including, without limitation,
the acceptance of new products in the market and the impact of competitive
products and other risks and uncertainties. These are detailed from time to time
in the Company's SEC filings (including its Annual Report on Form 10-K for the
year ended December 31, 2002 and Quarterly Reports on Form 10-Q) and the
Company's quarterly press releases.
This news release, together with any information that would be required under
Regulation G, will be available in the "Press Release" section of the Company's
website specified above.
- - - Financial tables follow -
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, U.S. Dollars, in thousands, except per share and share data)
For the three months For the nine months
---------------------------- ------------------------------
ended September 30, ended September 30,
---------------------------- ------------------------------
2003 2002 2003 2002
----------- ------------ ----------- -------------
Net sales $ 51,253 $ 44,542 $ 150,999 $ 131,718
Cost of sales 12,482 10,977 38,077 32,728
----------- ------------ ----------- -------------
Gross profit 38,771 33,565 112,922 98,990
----------- ------------ ----------- -------------
Operating expenses
Sales and marketing 20,321 16,582 57,428 47,334
General and administrative 5,039 4,551 15,139 13,337
Research and development 1,721 1,749 5,979 5,851
Amortization 259 178 656 490
Litigation and settlement costs 2,605 -- 4,731 --
----------- ------------ ----------- -------------
29,945 23,060 83,933 67,012
----------- ------------ ----------- -------------
Operating income 8,826 10,505 28,989 31,978
Other income/(loss) (470) (871) (772) (1,807)
----------- ------------ ----------- -------------
Income before income tax 8,356 9,634 28,217 30,171
and minority interests
Income tax expense (2,914) (3,260) (10,328) (9,571)
----------- ------------ ----------- -------------
Net income before minority interests 5,442 6,374 17,889 20,600
Minority interests -- (400) -- (1,261)
----------- ------------ ----------- -------------
Net income $ 5,442 $ 5,974 $ 17,889 $ 19,339
----------- ------------ ----------- -------------
Net income per common share - diluted $ 0.37 $ 0.41 1.22 $ 1.30
Weighted average number of common
shares outstanding-diluted 14,882,747 14,717,983 14,720,139 14,915,615
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, U.S. Dollars, in thousands)
As of As of
----------------- -----------------
September 30, December 31,
----------------- -----------------
2003 2002
----------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 45,729 $ 48,813
Trade accounts receivable 58,702 54,654
Inventory 23,908 23,471
Deferred income taxes 3,271 3,271
Prepaid expenses and other 4,517 6,789
----------------- -----------------
Total current assets 136,127 136,998
Securities and other investments 6,316 4,753
Property, plant and equipment, net 13,170 13,841
Intangible assets, net 78,157 62,995
Other long-term assets 1,462 2,187
----------------- -----------------
Total assets $ 235,232 $ 220,774
================= =================
Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 3,373 $ 6,977
Current portion of long-term debt 119 399
Trade accounts payable 8,447 9,637
Other current liabilities 18,695 20,113
----------------- -----------------
Total current liabilities 30,634 37,126
Long-term debt 104 44
Deferred income taxes 1,817 2,202
Deferred income 2,500 2,500
Other long-term liabilities 45 58
Deferred compensation 1,020 893
----------------- -----------------
Total liabilities 36,120 42,823
----------------- -----------------
Minority interests - 9,867
Shareholders' equity
Common shares 1,424 1,384
Additional paid-in capital 52,442 50,884
Less: Treasury shares, at cost - (5,281)
----------------- -----------------
53,866 46,987
Retained earnings 141,083 123,194
Accumulated other comprehensive income 4,163 (2,097)
----------------- -----------------
Total shareholders' equity 199,112 168,084
----------------- -----------------
Total liabilities, minority interests and shareholders' equity $ 235,232 $ 220,774
================= =================
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, U.S. Dollars, in thousands)
For the nine months ended September 30,
------------------------------------
2003 2002
----------------- -----------------
Net cash provided by operating activities $ 20,897 $ 19,314
----------------- -----------------
Cash flows from investing activities
Investment in subsidiaries and affiliates (23,678) (7,254)
Capital expenditure (3,608) (5,680)
Other 354 -
----------------- -----------------
Net cash used in investing activities (26,932) (12,934)
----------------- -----------------
Cash flows from financing activities:
Net (repayment) proceeds of loans and borrowings (4,303) 611
Proceeds from issuance of common stock 10,863 14,333
Acquisition of treasury shares (4,372) (16,600)
----------------- -----------------
Net cash provided (used) in financing activities 2,188 (1,656)
----------------- -----------------
Effect of exchange rate changes on cash and cash equivalents 763 1,456
----------------- -----------------
Net (decrease) increase in cash and cash equivalents (3,084) 6,180
Cash and cash equivalents at the beginning of the period 48,813 34,273
----------------- -----------------
Cash and cash equivalents at the end of the period $ 45,729 $ 40,453
----------------- -----------------