EX-99.1 2 ex99-1_022806.txt EXHIBIT 99.1 - PRESS RELEASE [ORTHOFIX LOGO] Contact: Dan Yarbrough, Director of Investor Relations, Orthofix International N.V. 704-948-2617 Orthofix Announces Fourth Quarter and Full Year 2005 Results o 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 o Fourth quarter and full year sales of spine products increased 31% and 25%, respectively o Fourth quarter and full year earnings per share were $0.44 and $4.51; within the Company's range of guidance o The Company retired $38.0 million of debt in the fourth quarter and $62.0 million for the full year o 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 HUNTERSVILLE, N.C., February 28, 2006 - Orthofix International N.V., (NASDAQ:OFIX) (the Company) today announced results for the fourth quarter and full year ended December 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 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 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. Page Two The net gain recorded by the Company from the KCI settlement is subject to adjustment based on the difference between the amount currently accrued 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 tax jurisdiction. The following tables display net sales 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 December 31, Year Ended 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 December 31, Year Ended December 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% ===== ===== ===== ===== ===== =====
Page Three Charles W. Federico, President and CEO of Orthofix, stated, "Our fourth quarter and full year sales growth was driven by increased sales of our spinal stimulation products in the Americas. Not only did we experience strong market acceptance for our new cervical stimulation product, which is the only product of its type approved by the FDA for cervical applications, but we also experienced excellent growth in the sales of our lumbar 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 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 device, which rose 36%, and our OSCAR bone cement removal product, which increased 12%. However, the overall growth rate in this market sector was constrained by lower quarterly and full year sales of our AV Impulse 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, and with the fact that the core bracing 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 difficulties we experienced during the Oracle system conversion earlier this year are now behind us." The Company's gross profits and gross profit margins 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 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, 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. Page Four 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 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 initiatives designed to strengthen our international operations, including the hiring of a new head for our vascular 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 orthopedic products company, offers a broad line of minimally invasive 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 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, Rutgers University, the Cleveland Clinic Foundation, and National Osteoporosis Institute. For more information about Orthofix, please visit www.orthofix.com. Page Five 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 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, corporate development activities and other factors described in our annual report on Form 10-K and other periodic reports filed by the Company 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 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 16,007,163 15,666,158 15,913,475 15,396,540 shares outstanding - basic 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 ----------- -----------