[GRAPHIC OMITTED][ORTHOFIX LOGO] [GRAPHIC OMITTED]
For Further Information:
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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 Sales of $71.5 Million for
the Third Quarter, an Increase of 39%
HUNTERSVILLE, N.C., October 28, 2004 - Orthofix International N.V. (NASDAQ:OFIX)
today announced results for the third quarter and nine months ended September
30, 2004.
Sales for the third quarter ended September 30, 2004, were $71.5 million, an
increase of 39% over the $51.3 million reported during the same period in 2003.
Third-quarter sales included the incremental impact of Breg, Inc., which was
acquired on December 30, 2003. The incremental impact of foreign currency on
sales for the third quarter of 2004 was a positive $1.3 million.
Net income for the third quarter ended September 30, 2004, was $8.4 million, or
$0.53 per diluted share, an increase of 55% compared to $5.4 million, or $0.37
per diluted share, for the same period in 2003, which included $1.1 million in
after-tax costs related to settlement of a legal proceeding. Diluted weighted
average shares outstanding were 15,953,268 and 14,882,747 during the three
months ended September 30, 2004, and September 30, 2003, respectively.
For the nine months ended September 30, 2004, sales were $213.0 million, an
increase of 41% over the $151.0 million reported during the same period in 2003.
Sales for the nine months ended September 30, 2004, included the incremental
impact of Breg, Inc., which was acquired on December 30, 2003. The positive
impact of foreign currency on sales for the nine month period was $5.1 million.
Net income for the nine months ended September 30, 2004, was $24.6 million, or
$1.55 per diluted share, compared with $17.9 million, or $1.22 per diluted
share, for the same period in 2003. Diluted weighted average shares outstanding
were 15,939,801 and 14,720,139 for the nine months ended September 30, 2004, and
September 30, 2003, respectively.
The following tables display net sales by geographic destination and by business
segment, net of inter-company eliminations, and by the Company's market sectors
for the three and nine months ended September 30, 2004, and 2003. Orthofix
provides net sales by geographic destination and market sector for information
purposes only. The Company maintains its books and records by business segment.
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Net sales by geographic destination for the periods ended September 30,
(In millions)
Three Months Ended September 30, Nine Months Ended September 30, (1)
-------------------------------- ----------------------------------
2004 2003 % Increase 2004 2003 % Increase
---------- ---------- ---------- ---------- ----------- -----------
Americas $ 53.4 $ 35.7 50% $ 156.2 $ 101.4 54%
International 18.1 15.6 16% 56.8 49.6 15%
---------- ---------- ---------- ---------- ----------- -----------
Total $ 71.5 $ 51.3 39% $ 213.0 $ 151.0 41%
========== ========== ========== ========== =========== ===========
(1) Nine month table contains a reclass of $0.2 and $0.3 for the first and
second quarter, respectively, from International to Americas.
Net sales by business segment for the periods ended September 30,
(In millions)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- ----------------------------------
2004 2003 % Increase 2004 2003 % Increase
---------- ---------- ---------- ---------- ----------- -----------
Americas Orthofix $ 32.1 $ 29.8 8% $ 93.0 $ 86.1 8%
Americas Breg 17.3 - - 50.6 - -
International Orthofix 22.1 21.5 3% 69.4 64.9 7%
---------- ---------- ---------- ---------- ----------- -----------
Total $ 71.5 $ 51.3 39% $ 213.0 $ 151.0 41%
========== ========== ========== ========== =========== ===========
Net sales by market sector for the periods ended September 30,
(In millions)
Three Months Ended September 30, Nine Months Ended September 30, (2)
-------------------------------- ----------------------------------
2004 2003 % Increase 2004 2003 % Increase
---------- ---------- ---------- ---------- ----------- -----------
Orthopedic Products
- -------------------
Spine $ 20.5 $ 20.2 1% $ 60.3 $ 58.9 2%
Reconstuction 30.3 13.1 131% 89.6 37.8 137%
Trauma 15.7 13.3 18% 47.1 40.1 17%
---------- ---------- ---------- ---------- ----------- -----------
Total Orthopedic 66.5 46.6 43% 197.0 136.8 44%
Non-Orthopedic 5.0 4.7 6% 16.0 14.2 13%
---------- ---------- ---------- ---------- ----------- -----------
Total $ 71.5 $ 51.3 39% $ 213.0 $ 151.0 41%
========== ========== ========== ========== =========== ===========
(2) Nine month table contains a first quarter reclass from trauma to
reconstruction of $0.4 million.
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Charles W. Federico, President and CEO of Orthofix, commented, "We are pleased
to announce a 39 percent increase in revenue and a 55 percent increase in net
income for the third quarter of 2004, compared to the same quarter of the prior
year. Sales of trauma products were strong, up 18 percent over the prior year in
the third quarter, led by 18 percent growth of the Physio-Stim, the Company's
bone growth stimulator for long-bone non-unions, and 16 percent growth in
external fixation. Reconstruction products also performed well, with strength
from Breg products and external fixation products for reconstruction leading the
way. Sales of the AV Impulse recovered in the third quarter from second quarter
levels; however, as noted last quarter, the combination of lower contract prices
and a more competitive environment will result in lower quarterly AV Impulse
sales when compared to prior year periods. In the Spine sector, sales of spinal
stimulation products were up 2 percent over the same period of the prior year
and are up 4 percent year-to-date, while Orthotrac and EZ Brace sales were both
down due to reimbursement issues."
Federico went on to state, "Breg continues to perform to our expectations with
revenues up 13 percent for the third quarter and 12 percent for the
year-to-date.
"Gross profit margins expanded from 72.2 percent in the second quarter to 72.6
percent in the third quarter. Further, we continued to reduce our SG&A and
Operating Expense ratios for the quarter, despite higher spending for the KCI
litigation. This enabled us to increase operating income back above 20 percent,
to 20.4 percent, for the third quarter."
Federico concluded, "We continue to remain positive about our overall 2004
results. Our long-term fundamentals are solid and we continue to build more
revenue diversity and worldwide distribution power for the future."
As previously disclosed, effective September 30, 2004, the Company has
successfully negotiated an amendment to its Credit Agreement that reduced the
interest rate on the outstanding term loan to LIBOR plus 2.25% from the original
rate of LIBOR plus 2.75%. At the same time, the Company made a voluntary
prepayment of approximately $10.4 million on outstanding term loan borrowings.
The prepayment is expected to enable the Company to further reduce the
outstanding term loan interest rate to LIBOR plus 2.0% effective upon delivery
of the Company's third quarter compliance report to the lender's administrative
agent. The total interest rate reduction from LIBOR plus 2.75% to LIBOR plus
2.0% is expected to reduce annual interest expense by approximately $0.6 million
over the next year.
Finally, as previously announced during the third quarter, the Company made the
final payment to American Medical Electronics' shareholders under the 1995
Merger Agreement. The payment of approximately $5.6 million was fully reserved.
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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 communication 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 and 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 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 For the nine months
------------------------------ ------------------------------
ended September 30, ended September 30,
------------------------------ ------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
Net sales $ 71,488 $ 51,253 $ 213,019 $ 150,999
Cost of sales 19,582 12,482 58,825 38,077
-------------- -------------- -------------- --------------
Gross profit 51,906 38,771 154,194 112,922
-------------- -------------- -------------- --------------
Operating expenses
Sales and marketing 24,678 20,321 76,452 57,428
General and administrative 7,737 5,039 22,402 15,139
Research and development 2,722 1,721 8,732 5,979
Amortization 1,609 259 4,754 656
Litigation and settlement costs 562 2,605 1,266 4,731
-------------- -------------- -------------- --------------
37,308 29,945 113,606 83,933
-------------- -------------- -------------- --------------
Operating income 14,598 8,826 40,588 28,989
Interest income/(expense) (1,697) (24) (4,596) 54
Other income 324 126 341 349
Loss in joint venture (334) (572) (109) (1,175)
-------------- -------------- -------------- --------------
Income before income tax 12,891 8,356 36,224 28,217
Income tax expense (4,474) (2,914) (11,588) (10,328)
-------------- -------------- -------------- --------------
Net income $ 8,417 $ 5,442 $ 24,636 $ 17,889
============== ============== ============== ==============
Net income per common share-basic $ 0.54 $ 0.38 $ 1.61 $ 1.28
Net income per common share-diluted $ 0.53 $ 0.37 $ 1.55 $ 1.22
Weighted average number of common 15,570,313 14,181,847 15,296,717 14,001,981
shares outstanding-basic
Weighted average number of common
shares outstanding-diluted 15,953,268 14,882,747 15,939,801 14,720,139
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, U.S. Dollars, in thousands)
As of As of
-------------- --------------
September 30, December 31,
-------------- --------------
2004 2003
-------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 38,532 $ 33,559
Trade accounts received 80,801 70,690
Inventory 31,912 30,713
Deferred income taxes 3,978 3,978
Prepaid expenses and other 8,477 8,928
-------------- --------------
Total current assets 163,700 147,868
Securities and other investments 4,366 5,775
Property, plant and equipment, net 17,623 19,169
Intangible assets, net 238,216 234,123
Other long-term assets 5,656 6,244
-------------- --------------
Total assets $ 429,561 $ 413,179
============== ==============
Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 1,434 $ 72
Current portion of long-term debt 9,852 11,063
Trade accounts payable 8,407 11,569
Other current liabilities 25,532 30,236
-------------- --------------
Total current liabilities 45,225 52,940
Long-term debt 82,524 99,072
Deferred income taxes 17,402 16,642
Deferred income 2,500 2,500
Other long-term liabilities 133 186
Deferred compensation 1,129 1,063
-------------- --------------
Total liabilities 148,913 172,403
-------------- --------------
Shareholders' equity
Common shares 1,564 1,498
Additional paid-in capital 97,034 81,960
Less: Treasury shares, at cost -- --
-------------- --------------
98,598 83,458
Retained earnings 172,560 147,924
Accumulated other comprehensive income 9,490 9,394
-------------- --------------
Total shareholders' equity 280,648 240,776
-------------- --------------
Total liabilities and shareholders' equity $ 429,561 $ 413,179
============== ==============
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, U.S. Dollars, in thousands)
For the nine months ended September 30,
---------------------------------------
2004 2003
-------------- --------------
Net cash provided by operating activities $ 19,838 $ 20,897
-------------- --------------
Cash flows from investing activities:
Investment in subsidiaries and affiliates (2,081) (23,678)
Capital expenditure (9,825) (3,608)
Proceeds from sale of joint venture 1,300 -
Proceeds from sale of assets and marketable securities 1,789 354
Proceeds from settlement of distributor agreement 400 -
-------------- --------------
Net cash used in investing activities (8,377) (26,932)
-------------- --------------
Cash flows from financing activities:
Net repayment of loan and borrowings (17,100) (4,303)
Proceeds from issuance of common stock 11,151 10,863
Acquisition of treasury shares - (4,372)
Payment of debt issuance costs (532) -
-------------- --------------
Net cash (used in) provided by financing activities (6,481) 2,188
-------------- --------------
Effect of exchange rate changes on cash (7) 763
-------------- --------------
Net (decrease) increase in cash and cash equivalents 4,973 (3,084)
Cash and cash equivalents at the beginning of the period 33,559 48,813
-------------- --------------
Cash and cash equivalents at the end of the period $ 38,532 $ 45,729
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