Orthofix Announces Fourth Quarter and Full Year 2005 Results.HUNTERSVILLE There are several places in the United States named Huntersville:
--Fourth quarter and full year sales were $80.3 million and $313.3 million, respectively; full year sales were up 9.3% and within the Company's range of guidance --Fourth quarter and full year sales of spine products increased 31% and 25%, respectively --Fourth quarter and full year earnings per share were $0.44 and $4.51, within the Company's range of guidance --The Company retired $38.0 million of debt in the fourth quarter and $62.0 million for the full year --The Company's 2006 guidance includes sales of $335.0 to $345.0 million for the full year and $79.0 to $81.0 million for the first quarter; earnings per share are expected to be $2.25 to $2.35 for the year and $0.45 to $0.50 for the first quarter, including the impact of expensing stock options totaling approximately $0.20 for the year and $0.05 for the first quarter Orthofix International N.V. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :OFIX) (the Company) today announced results for the fourth quarter and full year ended December December: see month. 31, 2005. Sales for the fourth quarter were $80.3 million, an increase of 9% over the $73.6 million reported during the same period in 2004. The impact of foreign currency on sales for the fourth quarter of 2005 was a negative $0.9 million or 1%. Net income for the fourth quarter was $7.2 million, or $0.44 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $9.5 million, or $0.59 per diluted share, for the same period in 2004. Diluted weighted average shares outstanding were 16,318,619 and 16,044,249 during the three months ended December 31, 2005, and December 31, 2004, respectively. Sales for the year ended December 31, 2005, were $313.3 million, an increase of 9.3% over the $286.6 million reported during the same period in 2004. The impact of foreign currency on sales for the twelve months of 2005 was a positive $1.2 million or 0.4%. Net income for the year ended December 31, 2005, was $73.4 million, or $4.51 per diluted share, compared with $34.1 million, or $2.14 per diluted share, for the same period in 2004. Net income for the twelve months of 2005 included a gain of $37.4 million, or $2.30 per diluted share, net of related costs and taxes, from the settlement of the KCI KCI Kansas City International (airport) KCI Kennel Club of India KCI Key Club International KCI Korea Concrete Institute KCI Kitchener Collegiate Institute KCI Kids Central, Inc. KCI The Kitchen Collection, Inc. KCI Kodak Canada Inc. litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . Diluted weighted average shares outstanding were 16,288,975 and 15,974,945 for the year ended December 31, 2005, and December 31, 2004, respectively. The net gain recorded by the Company from the KCI settlement is subject to adjustment based on the difference between the amount currently accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and the final contractual obligation to share a portion of the KCI settlement proceeds with certain parties including the former owners of Novamedix. The Company's full year effective tax rate reflects the settlement reached by a wholly-owned subsidiary which is incorporated in a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax jurisdiction. The following tables display 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 by business segment, net of inter-company eliminations, and by market sector for the three and twelve months ended December 31, 2005, and 2004. The Company provides net sales by market sector for information purposes only. It maintains its books and records by business segment.
Net sales by business segment for the periods ended December 31,
(In millions)
Three Months Ended Year Ended
December 31, December 31,
-----------------------------------------------------
2005 2004 % Increase 2005 2004 % Increase
-----------------------------------------------------
Americas Orthofix $38.6 $33.0 17% $144.2 $126.0 14%
Americas Breg 18.7 17.7 6% 72.0 68.3 5%
International
Orthofix 23.0 22.9 0% 97.1 92.3 5%
-----------------------------------------------------
Total $80.3 $73.6 9% $313.3 $286.6 9%
=====================================================
Net sales by market sector for the periods ended December 31,
(In millions)
Three Months Ended Year Ended December
December 31, 31 ,
------------------------------------------------
% %
2005 2004 Increase 2005 2004 Increase
-----------------------------------------------
Orthopedic Products
-------------------
Spine $27.8 $21.2 31% $101.6 $ 81.4 25%
Reconstruction 31.1 31.3 -1% 125.4 120.9 4%
Trauma 15.9 15.8 1% 63.5 62.9 1%
------------------------------------------------
Total Orthopedic 74.8 68.3 10% 290.5 265.2 10%
Non-Orthopedic 5.5 5.3 4% 22.8 21.4 7%
------------------------------------------------
Total $80.3 $73.6 9% $313.3 $286.6 9%
================================================
Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by W. Federico Federico may refer to: In business:
1. pertaining to a spine or to the vertebral column. 2. pertaining to the spinal cord's functioning independently from the brain. spi·nal adj. stimulation products in the Americas. Not only did we experience strong market acceptance for our new cervical cervical /cer·vi·cal/ (ser´vi-k'l) 1. pertaining to the neck. 2. pertaining to the neck or cervix of any organ or structure. cer·vi·cal adj. stimulation product, which is the only product of its type approved by the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. for cervical applications, but we also experienced excellent growth in the sales of our lumbar lumbar /lum·bar/ (lum´bar) pertaining to the loins. lum·bar adj. Of, near, or situated in the part of the back and sides between the lowest ribs and the pelvis. spinal stimulation product. The combined result for our spine franchise was an increase in sales of 31% in the fourth quarter and 25% for the full year compared with the same periods in the prior year. While the competitive environment impacted sales of our long-bone stimulation product during 2005, all bone growth stimulation Bone Growth Stimulation Definition Bone growth stimulation is the technique of promoting bone growth in difficult to heal fractures by applying a low electrical current or ultrasound to the fracture. products combined grew 23% in the fourth quarter and 19% for the full year as compared to the prior year. "In our Reconstruction sector, we were also pleased with the growth in sales of our ISKD bone lengthening lengthening (lengkˑ·the·ning), n the use of various massage or muscle energy techniques to relax and stretch muscle and connective tissue. device, which rose 36%, and our OSCAR (Open System for CommunicAtion in Realtime) AOL's internal project name for AOL Instant Messenger (AIM). The core functions of OSCAR, known as the Basic OSCAR Services (BOS), include Login/Logoff, Locate (find out about other AIM users), Instant Message bone cement cement, binding material used in construction and engineering, often called hydraulic cement, typically made by heating a mixture of limestone and clay until it almost fuses and then grinding it to a fine powder. removal product, which increased 12%. However, the overall growth rate in this market sector was constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by lower quarterly and full year sales of our AV Impulse impulse, in mechanics: see momentum. Impulse (mechanics) The integral of a force over an interval of time. For a force F , the impulse J over the interval from t0 to t1 product." Federico went on to say, "The Americas Breg business grew 6% for the fourth quarter and 5% for the year. We were pleased with the market's response to the limited release of the new Fusion(TM) brace brace: see drill. (character) brace - left brace or right brace. , and with the fact that the core bracing bracing, n a resistance to the horizontal components of masticatory force. business grew 10% for the quarter and 11% for the full year. Total Breg sales, including International sales, grew 7% for both the quarter and the year. Additionally, we believe the order fulfillment Order fulfillment (in BE also: order fulfilment) is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes Order fulfillment difficulties we experienced during the Oracle system conversion earlier this year are now behind us." The Company's gross profits and gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. improved in both the fourth quarter and full year over comparative prior year periods due principally to a favorable product mix related to increased sales of higher margin stimulation products. However, in the fourth quarter, these improvements were more than offset by increased market development and new business development expenditures incurred by the Company in connection with ongoing strategic product and new business development initiatives discussed earlier this year. These pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern costs included approximately $1.0 million for market development and approximately $0.8 million for new business development activities involving consultants who have assisted us in analyzing various market opportunities as well as individual target opportunities. Additionally, interest expense increased by approximately $0.6 million on a pretax basis in the fourth quarter compared with the prior year due primarily to the accelerated amortization of debt placement costs totaling approximately $1.8 million, which resulted from the payment of $38.0 million that the Company made on its term loan during the fourth quarter. Total payments on the term loan for 2005 were $62.0 million, reducing the balance on the debt incurred to finance the Breg acquisition from a balance of $76.8 million at Dec. 31, 2004, to $14.8 million at Dec. 31, 2005. These payments were supported by the Company's net cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , which totaled $106.7 million in 2005, including $67.5 million from the KCI settlement. The significant debt reductions made in 2005 will lower the Company's interest expense in 2006. Federico concluded, "We recently announced that Alan Milinazzo will succeed me as President and CEO effective April 1st of this year. I look forward to continuing to work with the Company as a Director and wish to thank our employees and shareholders for the support I have received during my tenure as CEO. "We enter 2006 with a continued focus on our long term growth strategy. The strength of our balance sheet, with a large cash position and low level of debt, will allow us to generate organic growth opportunities as well as fund our business development initiative. We also expect to continue to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. expenditures related to outside business development activities we began in 2005. "After a year of operational investments at our Breg division during 2005, I am excited by the prospect of sales and profitability growth resulting from the planned launches of new bracing and pain therapy products in 2006. We also expect positive results from restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). initiatives designed to strengthen our international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , including the hiring of a new head for our vascular vascular /vas·cu·lar/ (vas´ku-ler) 1. pertaining to vessels, particularly blood vessels. 2. indicative of a copious blood supply. vas·cu·lar adj. business, and an internal reorganization into three distinct business zones intended to enhance the Company's focus on its core markets, and identify opportunities within specific geographies. We believe this will also help us incorporate specific regional customer requirements into the design and distribution of our products and therapies. Additionally, new product launches in our International business are expected to positively impact our sales growth this year." As a result of the positive benefits from actions taken in 2005 and the expected outcomes from initiatives in 2006, the Company expects sales of $335.0 to $345.0 million for the full-year and $79.0 to $81.0 million for the first quarter. Earnings are expected to be $2.25 to $2.35 per share for the full year, and $0.45 to $0.50 in the first quarter, including the approximately $0.20 impact for the year and $0.05 impact in the first quarter from equity compensation expense related to the adoption of FAS 123R. There was no similar expense for FAS 123R recorded in 2004. Orthofix International, N.V., a global diversified diversified (di·verˑ·s orthopedic orthopedic /or·tho·pe·dic/ (-pe´dik) pertaining to the correction of deformities of the musculoskeletal system; pertaining to orthopedics. products company, offers a broad line of minimally invasive invasive /in·va·sive/ (-siv) 1. having the quality of invasiveness. 2. involving puncture of the skin or insertion of an instrument or foreign material into the body; said of diagnostic techniques. surgical, and 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 Adj. 1. widely distributed - growing or occurring in many parts of the world; "a cosmopolitan herb"; "cosmopolitan in distribution" cosmopolitan bionomics, environmental science, ecology - the branch of biology concerned with the relations between organisms 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 Medtronic Cardiology A major manufacturer of pacemakers, defibrillators, and other cardiac devices Sofamor Danek and Kendall Ken·dall , Edward Calvin 1886-1972. American biochemist. He shared a 1950 Nobel Prize for discoveries concerning the hormones of the adrenal cortex. Healthcare. In addition, Orthofix is collaborating in R&D partnerships with leading medical institutions such as the Orthopedic Research and Education Foundation, Rutgers University Rutgers University, main campus at New Brunswick, N.J.; land-grant and state supported; coeducational except for Douglass College; chartered 1766 as Queen's College, opened 1771. Campuses and Facilities Rutgers maintains three campuses. , the Cleveland Clinic Cleveland Clinic (formally known as the Cleveland Clinic Foundation) is a multispecialty academic medical center located in Cleveland, Ohio, USA. Cleveland Clinic was established in 1921 by four physicians for the purpose of providing patient care, research, and medical Foundation, and National Osteoporosis osteoporosis (ŏs'tēō'pərō`sĭs), disorder in which the normal replenishment of old bone tissue is severely disrupted, resulting in weakened bones and increased risk of fracture; osteopenia Institute. For more information about Orthofix, please visit www.orthofix.com. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This communication contains certain forward-looking statements under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc unanticipated expenditures, changing relationship with customers, suppliers and strategic partners, risks relating to the protection of intellectual property, changes to the reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. 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, corporate development activities and other factors described in our annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and other periodic reports filed by the Company with the Securities and Exchange Commission.
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 year
ended December 31, ended December 31,
------------------------ ------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net sales $ 80,264 $ 73,618 $ 313,304 $ 286,638
Cost of sales 21,924 20,351 83,788 79,177
----------- ----------- ----------- -----------
Gross profit 58,340 53,267 229,516 207,461
----------- ----------- ----------- -----------
Operating expenses
Sales and marketing 30,133 26,000 115,744 102,453
General and
administrative 10,355 8,219 36,177 30,621
Research and
development 2,994 2,739 11,317 11,471
Amortization 1,648 1,594 6,572 6,348
----------- ----------- ----------- -----------
45,130 38,552 169,810 150,893
----------- ----------- ----------- -----------
Operating income 13,210 14,715 59,706 56,568
Interest expense, net (1,788) (1,222) (5,468) (5,966)
Other income/(loss), net (278) 943 1,188 1,325
KCI settlement, net
of litigation costs (266) (302) 40,089 (1,568)
----------- ----------- ----------- -----------
Income before
income tax 10,878 14,134 95,515 50,359
Income tax expense (3,680) (4,622) (22,113) (16,210)
----------- ----------- ----------- -----------
Net income $ 7,198 $ 9,512 $ 73,402 $ 34,149
=========== =========== =========== ===========
Net income per
common share -
basic $ 0.45 $ 0.61 $ 4.61 $ 2.22
Net income per
common share -
diluted $ 0.44 $ 0.59 $ 4.51 $ 2.14
Weighted average
number of common
shares outstanding
- basic 16,007,163 15,666,158 15,913,475 15,396,540
Weighted average
number of common
shares outstanding
- diluted 16,318,619 16,044,249 16,288,975 15,974,945
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, U.S. Dollars, in thousands)
As of As of
December 31, December 31,
2005 2004
-------------- ---------------
Assets
Current assets:
Cash and cash equivalents $ 63,786 $ 25,944
Restricted cash 13,762 14,302
Trade accounts receivable 80,745 75,321
Inventory 32,853 32,895
Deferred income taxes 4,511 4,130
Prepaid expenses and other 11,618 10,000
-------------- ---------------
Total current assets 207,275 162,592
Securities and other investments 4,082 4,082
Property, plant and equipment, net 18,987 18,326
Intangible assets, net 230,763 239,956
Other long-term assets 3,194 6,144
-------------- ---------------
Total assets $ 464,301 $ 431,100
============== ===============
Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 79 $ 76
Current portion of long-term debt 10,437 10,057
Trade accounts payable 11,602 9,507
Other current liabilities 51,208 25,745
-------------- ---------------
Total current liabilities 73,326 45,385
Long-term debt 4,771 67,249
Deferred income taxes 16,092 17,555
Deferred income - 2,443
Other long-term liabilities 1,227 1,296
-------------- ---------------
Total liabilities 95,416 133,928
-------------- ---------------
Shareholders' equity
Common shares 1,602 1,572
Additional paid-in capital 106,746 98,388
-------------- ---------------
108,348 99,960
Retained earnings 255,475 182,073
Accumulated other comprehensive
income 5,062 15,139
-------------- ---------------
Total shareholders' equity 368,885 297,172
-------------- ---------------
Total liabilities and
shareholders' equity $ 464,301 $ 431,100
-------------- ---------------
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, U.S. Dollars, in thousands)
For the twelve months
ended December 31,
2005 2004
----------- -----------
Net cash provided by operating activities $ 106,673 $ 27,485
----------- -----------
Cash flows from investing activities:
Investment in subsidiaries and affiliates - (2,556)
Capital expenditure (12,248) (12,243)
Proceeds from sale of investments - 1,300
Proceeds from sale of assets - 1,635
Other - 440
----------- -----------
Net cash used in investing activities (12,248) (11,424)
----------- -----------
Cash flows from financing activities:
Repayment of loans and borrowings (62,085) (33,534)
Proceeds from issuance of common stock 6,471 12,247
Payment of debt issuance costs - (821)
----------- -----------
Net cash used in financing activities (55,614) (22,108)
----------- -----------
Effect of exchange rate changes on cash (969) 635
----------- -----------
Net (decrease) increase in cash and cash
equivalents 37,842 (5,412)
Cash and cash equivalents at the beginning
of the period 25,944 31,356
----------- -----------
Cash and cash equivalents at the end of the
period $ 63,786 $ 25,944
----------- -----------
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