Elekta AB : Interim Report for the Three-Months Ended July 31, 2002.Business Editors & Health/Medical Writers STOCKHOLM, Sweden--(BUSINESS WIRE)--Sept. 30, 2002 Elekta AB - Operating profit improved strongly by SEK 31 M to SEK 64 M (33) and operating margin rose to 10 percent (6). - Order bookings were stable, amounting to SEK 697 M (703). - Net sales rose 22 percent to SEK 662 M (544). - Cash flow after investments was positive, amounting to SEK 27 M (46). - Court ruling in U.S. patent dispute, received in September 2002, is appealed. - New functional organization implemented. The international economy remains weak and difficult to assess. However, demand for Elekta's products and treatment methods for cancer and neurological disorders This is a list of major and frequently observed neurological disorders (e.g. Alzheimer's disease), symptoms (e.g.back pain), signs (e.g. aphasia) and syndromes (e.g. Aicardi syndrome). remains strong. Order bookings and order backlog Order bookings declined 1 percent to SEK SEK In currencies, this is the abbreviation for the Swedish Krona. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 697 M (703). Exchange-rate movements affected order bookings negatively by 5 percent. Neurosurgery neurosurgery /neu·ro·sur·gery/ (noor´o-sur?jer-e) surgery of the nervous system. neu·ro·sur·ger·y n. Surgery on any part of the nervous system. products were down 4 percent to SEK 213 M (223) and oncology products rose 1 percent to SEK 484 M (480). Order bookings for a rolling 12-month period rose 6 percent to SEK 2,921 M. For Tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. Information Please Refer to the Elekta AB Website At www.elekta.com Group order backlog declined, despite higher order bookings than sales, mainly due to the weakening of the US dollar. The order backlog amounted to SEK 2,260 M at July 31, 2002, compared with SEK 2,317 M at April 30, 2002. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight Consolidated net sales rose 22 percent to SEK 662 M (544). Exchange-rate movements had a negative impact on net sales of 6 percent. Net sales declined 7 percent to SEK 172 M (184) for neurosurgery products and rose 36 percent to SEK 490 M (360) for oncology products. Net sales of aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. products and services increased 19 percent to SEK 197 M (165), and represented 30 percent (30) of consolidated net sales. Net sales rose 24 percent to SEK 2,856 M on a rolling 12-month basis. For Tabular Information Please Refer to the Elekta AB Website At www.elekta.com Result Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. improved by SEK 31 M to SEK 64 M (33). The improvement was primarily attributable to increased volumes. The operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved to 10 percent (6). On a rolling 12-month basis, the operating margin was 8 percent. Exchange-rate movements affected operating profit positively by about SEK 2 M. Investments in research and development increased 22 percent to SEK 38 M (30), corresponding to 6 percent (6) of net sales. In accordance with RR15, SEK 10 M was capitalized for some specific projects while the balance was expensed. See accounting principles on page 10. For Tabular Information Please Refer to the Elekta AB Website At www.elekta.com Net financial expense amounted to SEK 3 M (income: 2). This included net interest expense SEK 2 M (5). Earnings from participations in associated companies associated company associate n → Partnerfirma f associated company n → società collegata amounted to SEK 1 M (3), and foreign exchange differences totaled a negative SEK 2 M (positive: 4). Profit after net financial items improved to SEK 61 M (35). Profit after taxes amounted to SEK 43 M (23). Earnings per share amounted to SEK 1.37 (0.80) before dilution and SEK 1.33 (0.82) after dilution. Return on equity amounted to 13 percent (8) and return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). was 21 percent (14). For Tabular Information Please Refer to the Elekta AB Website At www.elekta.com Investments and depreciation Investments in intangible and tangible fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → amounted to SEK 13 M (9). Amortization/depreciation of intangible and tangible fixed assets totaled SEK 15 M (15). Liquidity and financial position Cash flow before investments amounted to SEK 28 M (53). Cash flow after investments and divestments amounted to SEK 27 M (46). Liquid assets Cash, or property immediately convertible to cash, such as Securities, notes, life insurance policies with cash surrender values, U.S. savings bonds, or an account receivable. amounted to SEK 562 M on July 31, 2002, compared with SEK 536 M on April 30, 2002. Of the bank balances held, SEK 66 M was pledged, primarily in the form of guarantees for customer advances received. Interest-bearing liabilities amounted to SEK 32 M (48). The equity/assets ratio was 52 percent. During the first quarter, 115,800 new B shares were subscribed exercising allotted al·lot tr.v. al·lot·ted, al·lot·ting, al·lots 1. To parcel out; distribute or apportion: allotting land to homesteaders; allot blame. 2. warrants within the framework of the established warrants program. At September 25, 2002, the total number of shares amounted to 31,937,867. Market As a result of an increasingly older population and improved diagnostic methods among other things, the number of cancer cases is rising. The development of treatment methods for cancer is focusing increasingly on high-precision radiation treatment. Elekta is currently the largest supplier in Europe and the next largest in the world of methods for radiation treatment of cancer. Elekta is also a leading supplier of precision radiation of cancer using IMRT IMRT Intensity-modulated radiation therapy Radiation oncology A format for delivering high-dose RT to regions–eg, nasopharynx, that are surrounded by radiation-sensitive areas; in IMRT, a broad radiation field is divided into hundreds of small pencil beams, - Intensity Modulated mod·u·late v. mod·u·lat·ed, mod·u·lat·ing, mod·u·lates v.tr. 1. To adjust or adapt to a certain proportion; regulate or temper. 2. Radiation Treatment. IMRT enables the radiation dose to be more precisely adapted to the tumor's three-dimensional shape and specific radiation sensitivity, without healthy tissue being damaged, thereby improving the patient's treatment result and quality of life. The market has rapidly accepted IMRT as a clinically and financially efficient method of improved cancer care. The need for non-invasive radiosurgery radiosurgery /ra·dio·sur·gery/ (-ser´jer-e) surgery in which tissue destruction is performed by means of ionizing radiation rather than by surgical incision. is growing. Today, some 235 people out of every million suffer from the type of brain disorders that are suitable for radiosurgery using Leksell Gamma Knife Gamma Knife A trademark for a radiologic nonsurgical device used in stereotactic radiosurgery. Gamma knife A surgical tool that focuses beams of radiation at the head, which converge in the brain to form a lesion. (R). The areas of illness in which radiosurgery is rising sharply are certain tumors in the brain, and functional disorders functional disorder n. A physical disorder in which the symptoms have no known or detectable organic basis but are believed to be the result of psychological factors such as emotional conflicts or stress. Also called functional disease. . Radiation treatment using Leksell Gamma Knife is characterized by the high quality of care provided and its cost-efficiency, as well as being very gentle on the patient. For Tabular Information Please Refer to the Elekta AB Website At www.elekta.com Stable order bookings in Europe Order bookings in region Europe, including the Middle East and Africa, increased 2 percent to SEK 293 M (288). Substantial investments in the development of cancer care are being made in the Netherlands. In UK further funds have been allocated for investments in radiation therapy. Net sales rose 24 percent to SEK 248 M (200). Positive trend in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. As a result of increased order bookings of linear accelerators linear accelerator: see particle accelerator. linear accelerator or linac Type of particle accelerator that imparts a series of relatively small increases in energy to subatomic particles as they pass through a sequence of for radiation treatment of cancer, order bookings in North and South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. rose 9 percent and amounted to SEK 274 M (252). Order bookings for oncology products increased by 160 percent. Net sales rose 74 percent to SEK 305 M (175). The reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. rates for Leksell Gamma Knife(R) treatment as well as radiotherapy radiotherapy /ra·dio·ther·a·py/ (-ther´ah-pe) treatment of disease by means of ionizing radiation; tissue may be exposed to a beam of radiation, or a radioactive element may be contained in devices (e.g. of cancer with IMRT were recently proposed at the same favorable levels as previously. Leksell Gamma Knife treatment has its own reimbursement code and radiotherapy of cancer with IMRT has a three to four times higher reimbursement rate than conventional radiotherapy. Strong quarter in Japan Strong order bookings in neurosurgery as well as oncology resulted in an increase in order bookings in Japan to SEK 84 M (11). A large installed base of Leksell Gamma Knife represents a substantial potential for profitable aftermarket sales. The Japanese authorities have approved the new Leksell Gamma Knife C unit, which provides increased possibilities for upgrading of older Leksell Gamma Knife units and new sales. Asia develops according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. plan Demand for Elekta's products in Asia remained good. Compared with the very strong first quarter a year earlier, however, order bookings in Asia declined to SEK 46 M (152). The first quarter in the preceding year was very strong due to a large order for oncology products from one market, namely Taiwan. Patent dispute As previously announced on several occasions, most recently in a press release on September 20, 2002, a privately held American company sued certain companies within the Elekta Group for patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. in late 1997. The plaintiff asserted that some of Elekta's software products were infringing on some U.S. patents held by that company. The patents relate to a method of transferring medical images, for example, CT or MRI 1. (application) MRI - Magnetic Resonance Imaging. 2. MRI - Measurement Requirements and Interface. scans into a computer for the purpose of stereotactic stereotactic /ster·eo·tac·tic/ (-tak´tik) 1. characterized by precise positioning in space; said especially of discrete areas of the brain that control specific functions. 2. pertaining to stereotactic surgery. planning and image fusion. In September 2002 the judge entered his judgement in the case based on the previous jury verdict in February 2002. The judgement was in an amount of approximately USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 25 M. The judgement also included an injunction prohibiting further infringement. The injunction does not prevent Elekta from delivering any of its products to the US. Elekta does not consider itself liable for any patent infringement and is of the opinion that the judgement as well as the jury verdict is incorrect on many different grounds. Notice of appeal has been filed to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Court of Appeal for the Federal Circuit, the appellate court A court having jurisdiction to review decisions of a trial-level or other lower court. An unsuccessful party in a lawsuit must file an appeal with an appellate court in order to have the decision reviewed. with nationwide jurisdiction in patent cases. Elekta estimates the appeal process to take between two to three years. Elekta's opinion, supported by legal counsel in the case is that the appeal has a strong basis. During the appeals process Elekta will be required to issue a surety bond surety bond An insurance fee required before a duplicate security is issued to replace one that has been lost. The fee is approximately 4% of the market value of the security to be replaced. . The size of the surety bond is not yet set by the court but Elekta estimates that an amount of USD 25 M will be adequate. Elekta has insurance facilities for various purposes and risks. As part of these measures Elekta has a financial facility (Facility) with a limit up to USD 20 M. During the maturity of this particular Facility, Elekta is pledging funds towards the Facility in accordance with its terms. For this patent dispute the Facility serves as a collateral for the surety bond during the appeals process as well as a vehicle to finance and distribute any damages awarded up to the limit of the Facility. In the event the Court of Appeals were to uphold the judgement of the District Court, Elekta would pay a total amount equal to the limit of the Facility, USD 20 M, over nine years with most of the disbursements to be made over the first five years. Elekta would also pay any damage amount exceeding the limit of the Facility. As of today Elekta has pledged SEK 27 M towards the Facility. As long as the patent dispute continues Elekta will incur costs for among other things legal services legal services n. the work performed by a lawyer for a client. and the cost for the Facility. The total cost for the Facility alone is approximately SEK 20 M. Elekta estimates that the annual costs for this patent dispute will be approx. SEK 10-20 M. Elekta made a provision in the preceding fiscal year of SEK 20 M for estimated costs to be incurred during current fiscal year 2002/03. In the event Elekta would loose its appeal the full amount of a final award would be charged to the income statement at the time in question. In the balance sheet the amount of any damages would be accounted for as an interest-bearing liability to be offset by the amount pledged towards the Facility. During the appeals process the face value of the surety bond will be accounted for as a contingent liability Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. . If the Court of Appeals were to support the appeal and release Elekta from all liability in this patent dispute, Elekta may choose to release amounts pledged towards the Facility. Employees The average number of employees in the Group amounted to 989 (874). The number of employees at the close of the period was 995, compared with 989 on April 30, 2002. New organization Elekta has established a new organization and expands the executive committee with the aim of creating the conditions for long-term sustainable growth and profitability. The new organization is based on a strong market and customer focus and is based on Elekta's regional structure, which is being combined into a global function for sales, marketing and service. This function is being coupled to a common function for technical development and production Parent Company Parent Company operations comprise Group management, joint Group functions and financial management. The Parent Company's loss after net financial items amounted to SEK 6 M (loss: 5). The average number of employees was 15 (13). Future prospects As earlier announced in the report on operations on June 18, 2002, Elekta's goals for the 2002-2004 period have been revised due to the positive trend of operations. The target for operating margin has been raised from 6-8 percent on a rolling 12-month basis to 8-10 percent, before costs for the ongoing patent dispute. The operating margin for individual quarters can deviate from this target. Other financial and growth goals remain unchanged for the 2002-2004 period. The revenue growth is 10-15 percent, the return on capital employed goal is better than 15 percent and the equity/assets ratio is 40 percent. The operating profit for the second quarter fiscal year 2002/03 is expected to be on par with that of the first quarter. Financial information The interim report for the first six months of the fiscal year will be issued on December 11, 2002. Stockholm September 30, 2002 ELEKTA AB (publ) Laurent Leksell President Further information on Elekta is available at: www.elekta.com Accounting principles ---------------------------------------------------------------------- ---------------------------------------------------------------------- Application of RR15, the Swedish Financial Accounting Standards Council's new recommendation regarding intangible assets resulted in a change of accounting principles for Elekta, which has previously expensed all research and development expenditures. Elekta's application of the new rules mean that very high demands are placed before any expenditures for development shall be reported as an asset. For example, the technical functionality of a new product must be proven before expenditures for this development are reported as an asset. The transition rules for this recommendation mean that no retroactive adjustment is made. Otherwise, the accounting principles applied are the same as those used in Elekta's most recent year-end report. This interim report was prepared in accordance with Recommendation RR20 on Interim Reports, issued by the Swedish Financial Accounting Standards Council. ---------------------------------------------------------------------- ---------------------------------------------------------------------- For Tabular Information Please Refer to the Elekta AB Website At www.elekta.com The Company's auditors have not reviewed this interim report. |
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