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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 $77.7 Million
for the First Quarter 2005
Net Income Increases 29% to $10.8 million, or $0.67 per Diluted Share
HUNTERSVILLE, N.C., April 28, 2005 - Orthofix International N.V. (NASDAQ:OFIX)
today announced results for the first quarter ended March 31, 2005.
Sales for the first quarter ended March 31, 2005, were $77.7 million, an
increase of 10% over the $70.7 million reported during the same period in 2004.
The incremental impact of foreign currency on sales for the first quarter of
2005 was a positive $1.1 million, or 1.4%.
Net income for the first quarter ended March 31, 2005, was $10.8 million, or
$0.67 per diluted share, an increase of 29%, compared with $8.3 million, or
$0.53 per diluted share, for the same period in 2004. Diluted weighted average
shares outstanding were 16,157,395 and 15,745,473 during the three months ended
March 31, 2005, and March 31, 2004, respectively.
The following tables display net sales by business segment, net of inter-company
eliminations and by market sector for the three months ended March 31, 2005, and
2004. Orthofix provides net sales by market sector for information purposes
only. The Company maintains its books and records by business segment.
Net sales by business segment for the quarters ended March 31.
(In millions)
Three Months Ended March, 31,
----------------------------
2005 2004 % Increase
---- ---- ----------
Americas Orthofix $33.8 $29.8 13%
Americas Breg 18.0 16.8 7%
International Orthofix 25.9 24.1 7%
----- ------ -----
Total $77.7 $70.7 10%
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Net sales by market sector for the quarters ended March 31,
(In millions)
Three Months Ended March, 31,
----------------------------
2005 2004 % Increase
---- ---- ----------
Orthopedic Products
- -------------------
Spine $ 23.2 $ 19.6 18%
Reconstruction 32.6 30.1 8%
Trauma 16.0 15.3 5%
------ ------ -----
Total Orthopedic 71.8 65.0 10%
Non-Orthopedic 5.9 5.7 4%
------ ------ -----
Total $ 77.7 $ 70.7 10%
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Charles W. Federico, President and CEO of Orthofix, reiterated comments made on
April 11 in the Company's release announcing that first-quarter sales would
exceed its guidance range . "We are delighted with the 18% year-over-year sales
growth in our Spine market sector, most notably as a result of sales of
Cervical-Stim(R), which was approved by the FDA in December 2004 and has begun
selling in the first quarter 2005. The growth of sales for spinal stimulation
products also provided the momentum for the 13% year-over-year growth of the
Americas. Sales of Breg bracing products grew 10% in the first quarter. However,
delay in the introduction of new pain and cold therapy products, which had a
combined growth rate of 3% for the quarter, slowed the overall Breg growth rate
to 7% for the quarter. Sales growth of International Reconstruction and Trauma
products at 7% was good when taking into consideration the still negative
year-over-year comparison in sales of AV Impulse products," said Federico.
Federico stated further, "We were pleased to see operating income grow 22% on
10% sales growth resulting in an operating income ratio of 20% for the first
quarter. This leverage was the result of a growth in gross profit margin to
73.1% for the quarter, principally from favorable mix, combined with a reduction
in the ratio of operating expenses to sales. 'Other income' reflects the
one-time recording of $2.4 million (approximately $1.5 million after tax, or
$0.09 per share) of royalties that resulted from the previously announced
conclusion of the Bone Source agreement."
Federico concluded, "We are pleased with our excellent first quarter start to
2005."
During the first quarter, the Company made further scheduled and voluntary
prepayments of $8.0 million on outstanding term loan borrowings. Strong free
cash flow enabled the Company to continue to reduce its term loan used to
finance the Breg acquisition from an initial balance of $110.0 million to $68.8
million at March 31, 2005, and still report an ending cash balance of $37.0
million.
Orthofix International, N.V., a global 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 its subsidiaries, including Breg, Inc.,
and via partnerships with other leading orthopedic product companies, such as
Medtronic Sofamor Danek, 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, risks relating to the integration of the businesses of Orthofix
and Breg, 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
(Unaudited, U.S. Dollars, in thousands, except per share and share data)
For the three months
----------------------------
ended March 31,
----------------------------
2005 2004
--------- ----------
Net sales $ 77,688 $ 70,739
Cost of sales 20,896 19,546
--------- ----------
Gross profit 56,792 51,193
--------- ----------
Operating expenses
Sales and marketing 27,598 26,136
General and administrative 8,676 7,247
Research and development 2,938 3,316
Amortization 1,627 1,333
Litigation and settlement costs 342 372
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41,181 38,404
--------- ----------
Operating income 15,611 12,789
Interest income/(expense) (1,319) (1,529)
Other income/(loss) 2,053 189
Gain/(loss) in joint venture - 406
--------- ----------
Income before income tax 16,345 11,855
Income tax expense (5,566) (3,511)
--------- ----------
Net income $ 10,779 $ 8,344
Net income per common share - basic $ 0.68 $ 0.55
Net income per common share - diluted $ 0.67 $ 0.53
Weighted average number of common
shares outstanding - basic 15,784,245 15,039,870
Weighted average number of common
shares outstanding - diluted 16,157,395 15,745,473
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, U.S. Dollars, in thousands)
As of As of
----------- ------------
March 31, December 31,
2005 2004
----------- ------------
Assets
Current assets:
Cash and cash equivalents $ 26,021 $ 25,944
Restricted cash 10,940 14,302
Trade accounts receivable 79,101 75,321
Inventory 32,291 32,895
Deferred income taxes 3,948 4,130
Prepaid expenses and other 13,018 10,000
----------- ------------
Total current assets 165,319 162,592
Securities and other investments 4,082 4,082
Property, plant and equipment, net 18,385 18,326
Intangible assets, net 237,476 239,956
Other long-term assets 5,234 6,144
----------- ------------
Total assets $ 430,496 $ 431,100
=========== ============
Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 74 $ 76
Current portion of long-term debt 10,230 10,057
Trade accounts payable 9,214 9,507
Other current liabilities 26,946 25,745
----------- ------------
Total current liabilities 46,464 45,385
Long-term debt 59,058 67,249
Deferred income taxes 17,323 17,555
Deferred income - 2,443
Other long-term liabilities 54 57
Deferred compensation 1,259 1,239
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Total liabilities 124,158 133,928
----------- ------------
Shareholders' equity
Common shares 1,580 1,572
Additional paid-in capital 100,052 98,388
----------- ------------
101,632 99,960
Retained earnings 192,852 182,073
Accumulated other comprehensive income 11,854 15,139
----------- ------------
Total shareholders' equity 306,338 297,172
----------- ------------
Total liabilities and
shareholders' equity $ 430,496 $431,100
=========== ============
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, U.S. Dollars, in thousands)
For the three months
ended March 31,
------------------------
2005 2004
----------- --------
Net cash provided by (used in) operating activities $ 9,581 $ (8,059)
----------- ---------
Cash flows from investing activities:
Investment in subsidiaries and affiliates - (1,105)
Capital expenditure (2,624) (1,933)
Proceeds from sale of investments - 1,300
----------- ---------
Net cash used in investing activities (2,624) (1,738)
----------- ---------
Cash flows from financing activities:
Net repayment of loans and borrowings (8,020) (1,280)
Proceeds from issuance of common stock 1,500 3,034
Payment of debt issuance costs (460)
----------- ---------
Net cash (used in) provided by financing activities (6,520) 1,294
----------- ---------
Effect of exchange rate changes on cash (286) (1)
----------- ---------
Net increase (decrease) in cash and cash equivalents 77 (8,504)
Cash and cash equivalents at the beginning of the period 25,944 33,559
----------- ---------
Cash and cash equivalents at the end of the period $ 26,021 $ 25,055
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