[GRAPHIC OMITTED][Orthofix Logo][GRAPHIC OMITTED]
Contacts:
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 Record First-Quarter Revenues
of $70.7 Million, an Increase of 47%
HUNTERSVILLE, N.C., April 30, 2004 - Orthofix International N.V. (NASDAQ:OFIX)
today announced results for the first quarter ended March 31, 2004.
Sales for the first quarter ended March 31, 2004, were $70.7 million, an
increase of 47% compared with $48.2 million reported during the same period in
2003. First-quarter 2004 sales included the incremental impact of Breg, Inc.,
which was acquired on December 30, 2003. The impact of foreign currency on sales
for the first quarter of 2004 was a positive $2.4 million.
Net income for the first quarter ended March 31, 2004, was $8.3 million, or
$0.53 per diluted share, an increase of 40% compared with $5.95 million, or
$0.41 per diluted share, reported during the same period in 2003. In the first
quarter ended March 31, 2004, the Company incurred $0.4 million in litigation
cost related to the KCI patent infringement case, compared with $0.9 million for
the same period in 2003. Diluted weighted average shares outstanding were
15,745,473 and 14,499,614 during the three months ended March 31, 2004, and
March 31, 2003, respectively.
Net sales by geographic destination for the period ended March 31,
(In millions)
Three Months Ended March 31,
---------------------------------------
2004 2003 % Increase
---------- ---------- ---------------
Americas $ 51.3 $ 31.2 64%
International $ 19.4 $ 17.0 14%
---------- ---------- ---------------
Total $ 70.7 $ 48.2 47%
========== ========== ===============
Following the Breg acquisition, the Company stated that it would classify net
sales by the market sectors of "Spine", "Reconstruction" and "Trauma" rather
than by product groups. Breg sales are all reported in the "Reconstruction"
sector.
Net sales by market sector for the periods ended March 31,
(In millions)
Three Months Ended March 31,
---------------------------------------
2004 2003 % Increase
---------- ---------- ---------------
Orthopedic Products
Spine $ 19.6 $ 18.3 7%
Reconstruction 29.7 12.4 140%
Trauma 15.7 12.6 25%
---------- ---------- ---------------
Total Orthopedic 65.0 43.3 50%
Non-Orthopedic 5.7 4.9 16%
---------- ---------- ---------------
Total $ 70.7 $ 48.2 47%
========== ========== ===============
Purchase accounting adjustments from the Breg acquisition resulted in a
non-recurring, first-quarter charge to cost of sales of $0.5 million for step-up
in the value of acquired inventories. Other recurring purchase accounting items,
principally amortization of intangibles and depreciation of step-up in the value
of fixed assets acquired, increased operating expenses for the first quarter of
2004. Additional first quarter 2004 interest expense reflects principally the
cost of financing for the Breg acquisition.
In March, in order to focus its resources on the Breg acquisition, the Company
reduced its ownership participation in OrthoRx to approximately 21% and recorded
a gain by selling a portion of its shares in the joint venture to its partner,
Ferrer Freedman and Co., and by not participating in a further round of
financing. Additionally, as part of a plan to consolidate its U.K. facilities,
the Company sold its interest in a facility for a gain. These gains were
partially offset by exchange losses and the Company's share of losses from
OrthoRx operations, which taken together comprise other income for the first
quarter of 2004. The first quarter 2004 effective tax rate was 30%, which was
due in part to the favorable effect of the sale of OrthoRx shares and reduced
spending on KCI litigation.
Charles W. Federico, President and Chief Executive Officer, stated, "Through the
first quarter, our acquisition of Breg is right on course, and we are pleased
with their 14% year-over-year revenue growth and contribution to our overall
business. Our market sectors of Spine, Reconstruction, and Trauma also performed
well for the quarter. We were particularly pleased with strong growth in the
Trauma sector, where both external fixation and the Physio-Stim for long bone
non-unions demonstrated excellent year-over-year growth, together with good
early success for our PC.C.P. system. We remain positive about our progress
toward FDA clearance of the new cervical bone growth stimulator. Further, we
were pleased to announce a multi-year contract extension to our twelve-year
relationship with Kendall Healthcare for the AV Impulse system."
Orthofix International, N.V., a diversified orthopedic products company, offers
a broad line of minimally invasive surgical, as well as non-surgical, products
for the spine, reconstruction, and trauma market sectors that address the
lifelong bone-and-joint health needs of patients of all ages--helping them
achieve a more active and mobile lifestyle. Orthofix's products are widely
distributed around the world to orthopedic surgeons and patients--via Orthofix's
sales representatives, and via partnerships with other leading orthopedic
product companies, such as Medtronic Sofamor Danek, Stryker Howmedica, and
Kendall Healthcare. In addition, Orthofix is collaborating in R&D partnerships
with leading medical institutions such as the Wake Forest University School of
Medicine, the Orthopedic Research and Education Foundation, the Cleveland Clinic
Foundation, Innovative Spinal Technologies and National Osteoporosis Institute.
For more information about Orthofix, please visit www.orthofix.com.
FORWARD-LOOKING STATEMENTS
This news release contains certain "forward-looking" statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements, which may include, but are not limited to, statements concerning the
projections, financial condition, results of operations and businesses of
Orthofix, are based on management's current expectations and estimates and
involve risks and uncertainties that could cause actual results or outcomes to
differ materially from those contemplated by the forward-looking statements.
Factors that could cause or contribute to such differences may include, but are
not limited to, risks relating to the integration of the businesses of Orthofix
and Breg, unanticipated expenditures, the final purchase price allocation,
changing relationship with customers, suppliers and strategic partners, risks
relating to the protection of intellectual property, changes to the
reimbursement policies of third parties, changes to governmental regulation of
medical devices, the FDA's approval of new products, the impact of competitive
products, changes to the competitive environment, the acceptance of new products
in the market, conditions of the orthopedic industry and the economy and other
factors described in the most recent report on Form 10-K and other periodic
reports filed by Orthofix with the Securities and Exchange Commission.
- 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
----------------------
ended March 31,
----------------------
2004 2003
---------- ----------
Net sales $ 70,739 $ 48,181
Cost of sales 19,546 12,585
---------- ----------
Gross profit 51,193 35,596
---------- ----------
Operating expenses
Sales and marketing 26,136 17,600
General and administrative 7,247 4,982
Research and development 3,316 2,131
Amortization 1,333 278
Litigation and settlement costs 372 862
---------- ----------
38,404 25,853
---------- ----------
Operating income 12,789 9,743
Interest income/(expense) (1,529) 57
Other income/(expense) 595 (383)
---------- ----------
Income before income tax 11,855 9,417
Income tax expense (3,511) (3,464)
---------- ----------
Net income $ 8,344 $ 5,953
Net income per common share - basic $ 0.55 $ 0.43
Net income per common share - diluted $ 0.53 $ 0.41
Weighted average number of common 15,039,870 13,704,052
shares outstanding - basic
Weighted average number of common 15,745,473 14,499,614
shares outstanding - diluted
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, U.S. Dollars, in thousands)
As of As of
------------ -------------
March 31, December 31,
------------ -------------
2004 2003
------------ -------------
Assets
Current assets:
Cash and cash equivalents $ 40,067 $ 33,559
Trade accounts receivable 72,360 70,690
Inventory 32,054 30,713
Deferred income taxes 3,978 3,978
Prepaid expenses and other 11,505 8,928
--------- ---------
Total current assets 159,964 147,868
Securities and other investments 4,881 5,775
Property, plant and equipment, net 18,181 19,169
Intangible assets, net 230,525 234,123
Other long-term assets 5,441 6,244
--------- ---------
Total assets $ 418,992 $ 413,179
========= =========
Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 1,547 $ 72
Current portion of long-term debt 11,073 11,063
Trade accounts payable 10,793 11,569
Other current liabilities 26,233 30,236
--------- ---------
Total current liabilities 49,646 52,940
Long-term debt 96,362 99,072
Deferred income taxes 16,160 16,642
Deferred income 2,500 2,500
Other long-term liabilities 166 186
Deferred compensation 1,044 1,063
--------- ---------
Total liabilities 165,878 172,403
--------- ---------
Shareholders' equity
Common shares 1,518 1,498
Additional paid-in capital 86,031 81,960
Less: Treasury shares, at cost -- --
--------- ---------
87,549 83,458
Retained earnings 156,267 147,924
Accumulated other comprehensive income 9,298 9,394
--------- ---------
Total shareholders' equity 253,114 240,776
--------- ---------
Total liabilities and shareholders' equity $ 418,992 $ 413,179
========= =========
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, U.S. Dollars, in thousands)
For the three months ended March 31,
-------------------------------------
2004 2003
--------- ---------
Net cash provided by operating activities $ 6,953 $ 11,309
--------- ---------
Cash flows from investing activities:
Investment in subsidiaries and affiliates (1,105) (22,071)
Capital expenditure (1,933) (974)
Other 1,300 (300)
--------- ---------
Net cash used in investing activities (1,738) (23,345)
--------- ---------
Cash flows from financing activities:
Net (repayment) proceeds of loans and borrowings (1,280) (1,881)
Proceeds from issuance of common stock 3,034 8,385
Acquisition of treasury shares -- (1,880)
Payment of debt issuance costs (460) --
--------- ---------
Net cash used in financing activities 1,294 4,624
--------- ---------
Effect of exchange rate changes on cash (1) 151
--------- ---------
Net (decrease) increase in cash and cash equivalents 6,508 (7,261)
Cash and cash equivalents at the beginning of the period 33,559 48,813
--------- ---------
Cash and cash equivalents at the end of the period $ 40,067 $ 41,552
--------- ---------