Exhibit 99.1
[ORTHOFIX logo]
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 Record Sales for the Fourth
Quarter and for the Year 2004
Full-Year Net Income Increases 38%
Highlights:
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o 4Q sales up 40%, full-year sales up 41%.
o 4Q net income rises by 39%, full-year net income climbs by 38%.
o Spine and long-bone stimulation sales capture additional market share.
o Trauma sector: Revenue up 17% for the full-year, paced by long-bone
stimulation products growing at more than twice the rate of the market;
PC.C.P hip fracture sales triple.
o Reconstruction sector: External fixation products up 32%; AV-Impulse hits
4Q forecast.
o Acquisition integration succeeding: Breg's reconstruction sector growth
rate nearly doubles the market's rate of growth.
o Debt reduced: Strong free cash flow reduces debt 30% while the year ends
with $40.2 million cash balance. EBITDA grows 52% to $70.7 million in 2004.
HUNTERSVILLE, N.C., March 3, 2005 - Orthofix International N.V. (NASDAQ:OFIX)
today announced results for the fourth quarter and the year ended December 31,
2004.
Sales for the fourth quarter ended December 31, 2004, were $73.6 million, an
increase of 40% over the $52.7 million reported during the same period in 2003.
Fourth-quarter sales included the incremental impact of Breg, Inc., which was
acquired on December 30, 2003. The positive impact of foreign currency on sales
for the fourth quarter of 2004 was $1.4 million or 3%.
Net income for the fourth quarter ended December 31, 2004, was $9.5 million, an
increase of 39% compared with $6.8 million for the same period in 2003. Earnings
per diluted share for the fourth quarter ended December 31, 2004, was $0.59, an
increase of 28%, which takes into account additional shares related to the Breg
transaction and stock option exercises in
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2004, compared with $0.46 per diluted share for the same period in 2003. Diluted
weighted average shares outstanding were 16,044,249 and 14,854,946 during the
three months ended December 31, 2004, and December 31, 2003, respectively.
Sales for the year ended December 31, 2004, were $286.6 million, an increase of
41% over the $203.7 million reported during the same period in 2003. Sales for
the year ended December 31, 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 twelve-month period was $6.5 million or 3%.
Net income for the year ended December 31, 2004, was $34.1 million, an increase
of 38% compared with $24.7 million for the same period in 2003. Earnings per
diluted share for the year ended December 31, 2004, was $2.14, an increase of
27%, which takes into account additional shares related to the Breg transaction
and stock option exercises in 2004, compared with $1.68 per diluted share for
the same period in 2003. Diluted weighted average shares outstanding were
15,974,945 and 14,681,883 for the year ended December 31, 2004, and December 31,
2003, respectively.
The following tables display net sales by business segment, net of inter-company
eliminations and by market sector for the three months and year ended December
31, 2004, and 2003. We provide net sales by market sector for information
purposes only.
Net sales by business segment for the periods ended December 31,
(In millions)
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
2004 2003 % Increase 2004 2003 % Increase
------ ------ ---------- ------ ------ ----------
Americas Orthofix $ 33.0 $ 30.7 7% $ 126.0 $ 116.8 8%
Americas Breg $ 17.7 -- -- $ 68.3 -- --
International
Orthofix $ 22.9 $ 22.0 4% $ 92.3 $ 86.9 6%
------- ------ ------ ------- ------- -----
Total $ 73.6 $ 52.7 40% $ 286.6 $ 203.7 41%
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Page Three
Net sales by market sector for the periods ended December 31,
(In millions)
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
2004 2003 % Increase 2004 2003 % Increase
------ ------ ---------- ------ ------ ----------
Orthopedic Products
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Spine $ 21.2 $ 20.6 3% $ 81.4 $ 79.5 2%
Reconstruction 31.3 13.4 134% 120.9 51.2 136%
Trauma 15.8 13.6 16% 62.9 53.7 17%
------- ------- ---- ------- ------- ----
Total Orthopedic 68.3 47.6 43% 265.2 184.4 44%
Non-Orthopedic 5.3 5.1 4% 21.4 19.3 11%
------- ------- ---- ------- ------- ----
Total $ 73.6 $ 52.7 40% $ 286.6 $ 203.7 41%
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Charles W. Federico, President and CEO of Orthofix, reiterated comments made on
February 17, 2005, in the Company's release of preliminary sales results, "We
concluded 2004 with an excellent fourth quarter reflecting 40% sales growth and
39% growth in net income over the prior year periods. For the full year we
reported sales growth of 41% and net income growth of 38%. We are pleased that
we were able to overcome challenges experienced during 2004 resulting from the
slowing in 2004 of the spine stimulation market and contract repricing and
inventory balancing that occurred on the A-V Impulse product. Even with these
difficulties we reported strong sales growth matched by strong earnings growth.
In addition to the Breg acquisition, products serving the trauma and
reconstruction market sectors led sales growth in 2004. External fixation
products grew 32% in reconstruction and 11% in trauma. The Physio-Stim for long
bone nonunions in trauma grew 21% in 2004, and the PC.C.P hip fracture repair
system tripled in sales in 2004. This growth, and approximately $116 million in
sales, testifies to the vitality that our array of diversified surgical products
serving the reconstruction and trauma markets delivers to the Company. In
addition, we successfully integrated Breg, whose reconstruction business grew at
10% in 2004, nearly twice the reported rate of market growth. We remain
convinced that the recent FDA approval for the Cervical-Stim will enable us to
accelerate in 2005 our rate of growth in the important spine market sector."
Federico stated further, "Lower SG&A and operating expense ratios for the fourth
quarter and year compared with the prior year partially offset lower gross
profit margins which resulted from the blending of Breg's lower gross profit
margins into the total."
Page Four
Federico concluded, "Overall, 2004 was a positive year. The accretive effect of
the Breg acquisition coupled with the continued profitability of our core
business generated a robust 38% growth in net income. The positive effect of a
broader base product offering is seen in the overall sales growth of 41%. With
Cervical-Stim having the first and only 'on-label' FDA approval for a bone
growth stimulator for use as an adjunct to cervical (upper) spine fusion in high
risk patients, plus a number of announced new products that are now being
introduced to the market, we expect to have good momentum in 2005, and I expect
continued growth in both sales and earnings.
"In 2004 and early 2005, we welcomed five new independent board members to our
Board of Directors. These new directors, with their exceptional financial and
healthcare backgrounds, bring a level of talent to the board that can assist
Orthofix to become a truly exciting global orthopedic products company. We would
also like to thank our retiring directors for their many years of service, which
have been instrumental in building Orthofix into the international orthopedic
company it is today," said Federico.
During the fourth quarter, the Company made further scheduled and voluntary
prepayments of $15.0 million on outstanding term loan borrowings. Strong free
cash flow enabled the Company to reduce its term loan used to finance the Breg
acquisition by 30%, from an initial balance of $110.0 million to $76.8 million
at December 31, 2004, and still report an ending cash balance of $40.2 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
generated by the Company in 2004 was $70.7 million, compared with $46.4 million
in 2003, a growth of 52% over the prior year.
Supplemental Disclosure Regarding Non-GAAP Financial Measure
EBITDA represents income before net interest expense, income taxes, depreciation
and amortization. The following table reconciles net income, representing the
most comparable measure under accounting principles generally accepted in the
United States, to EBITDA. EDITDA is presented and discussed because management
believes it is a useful adjunct to net income and other measurements under
accounting principles generally accepted in the United States, since it is a
meaningful measure of a company's performance and ability to meet its future
debt service requirements, fund capital expenditures and meet working capital
requirements. The Company believes the presentation of EBITDA is useful for
investors because it makes it easier to compare the Company's results with other
companies that have different financing and capital structures or tax rates. In
addition, the measure is commonly used by investors, analysts and peers in the
Company's industry for purposes of valuation and comparing the operating
performance of the Company to other companies in its industry. EBITDA is not a
measure calculated in accordance with GAAP and should not be considered as an
alternative to (i) net income, or (ii) cash flows from operating, investing or
financing activities as an indicator of cash flows or as a measure of liquidity.
Page Five
Year Ended
December 31,
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2004 2003
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Net Income $ 34,149 $ 24,730
Add:
Interest expense, net 5,966 161
Income taxes 16,210 14,585
Depreciation 7,853 5,707
Amortization 6,543 1,242
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EBITDA $ 70,721 $ 46,425
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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, its distributors 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
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, unanticipated expenditures, 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
(U.S. Dollars, in thousands, except per share and share data)
For the three months For the twelve months
-------------------- ---------------------
ended December 31, ended December 31,
-------------------- --------------------
2004 2003 2004 2003
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Net sales $ 73,618 $ 52,708 $ 286,638 $ 203,707
Cost of sales 20,351 13,013 79,177 51,090
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Gross profit 53,267 39,695 207,461 152,617
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Operating expenses
Sales and marketing 26,000 19,328 102,452 76,756
General and administrative 8,219 5,326 30,621 20,465
Research and development 2,739 2,149 11,471 8,128
Amortization 1,594 339 6,348 995
Litigation and settlement costs 302 958 1,568 5,689
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38,854 28,100 152,460 112,033
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Operating income 14,413 11,595 55,001 40,584
Interest income/(expense) (1,370) (215) (5,966) (161)
Other income/(loss) 1,312 328 1,652 677
Gain/(loss) in joint venture (219) (610) (328) (1,785)
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Income before income tax 14,136 11,098 50,359 39,315
Income tax expense (4,622) (4,257) (16,210) (14,585)
----------- ----------- ----------- -----------
Net income $ 9,514 $ 6,841 $ 34,149 $ 24,730
Net income per common share - basic $ 0.61 $ 0.48 $ 2.22 $ 1.76
Net income per common share - diluted $ 0.59 $ 0.46 $ 2.14 $ 1.68
Weighted average number of common
shares outstanding - basic 15,666,158 14,237,904 15,396,540 14,061,447
Weighted average number of common
shares outstanding - diluted 16,044,249 14,854,946 15,974,945 14,681,883
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars, in thousands)
As of As of
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December 31, December 31,
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2004 2003
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Assets
Current assets:
Cash and cash equivalents $ 40,246 $ 31,356
Trade accounts receivable 75,321 70,690
Inventory 32,895 30,713
Deferred income taxes 4,130 3,978
Prepaid expenses and other 10,000 11,131
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Total current assets 162,592 147,868
Securities and other investment 4,082 5,775
Property, plant and equipment, net 18,326 19,169
Intangible assets, net 240,533 234,123
Other long-term assets 6,201 6,244
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Total assets $ 431,734 $ 413,179
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Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 76 $ 72
Current portion of long-term debt 10,057 11,063
Trade accounts payable 9,507 11,569
Other current liabilities 26,322 30,236
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Total current liabilities 45,962 52,940
Long-term debt 67,249 99,072
Deferred income taxes 17,612 16,642
Deferred income 2,443 2,500
Other long-term liabilities 1,296 1,249
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Total liabilities 134,562 172,403
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Shareholders' equity
Common shares 1,572 1,498
Additional paid-in capital 98,388 81,960
Less: Treasury shares, at cost -- --
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99,960 83,458
Retained earnings 182,073 147,924
Accumulated other comprehensive income 15,139 9,394
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Total shareholders' equity 297,172 240,776
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Total liabilities and
shareholders' equity $ 431,734 $ 413,179
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ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars, in thousands)
For the year ended December 31,
-------------------------------
2004 2003
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Net cash provided by operating activites $ 41,498 $ 31,789
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Cash flows from investing activities:
Investment in subsidiaries and affiliates (2,556) (150,572)
Capital expenditure (12,243) (5,238)
Proceeds from sale of joint venture 1,300 --
Proceeds from sale of assets and marketable
securities 1,635 354
Proceeds from settlement of distributor
agreement 440 --
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Net cash used in investing activities (11,424) (155,456)
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Cash flows from financing activities:
Net (repayment) proceeds of loans
and borrowings (33,534) 102,097
Proceeds from issuance of common stock 12,247 11,705
Acquisition of treasury shares -- (4,395)
Payment of debt issuance costs (532) (2,783)
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Net cash (used in) provided by
financing activities (21,819) 106,624
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Effect of exchange rate changes on cash 635 1,789
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Net (decrease) increase in cash
and cash equivalents 8,890 (15,254)
Cash and cash equivalents at the
beginning of the period 31,356 46,610
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Cash and cash equivalents at the end
of the period $ 40,246 $ 31,356
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