The Ossur hf. interim Consolidated Financial Statements for the first quarter of 2004 was approved at a meeting of the Board of Directors on 28 April. The quarterly statement, prepared in compliance with the International Financial Reporting Standards (IFRS), has been reviewed and endorsed by the Company auditors.
The principal companies of the Ossur Consolidation are Ossur hf. in Iceland, the Ossur Holdings, Inc., Consolidation in the USA - which now includes Generation II USA, Inc. - the Ossur Holding A.B. Consolidation in Sweden and Ossur Europe B.V. in the Netherlands, in addition to Generation II Orthotics, Inc. in Canada and GII Orthotics Europe NV.
Principal Operating Results for the First Quarter
|
Income Statement for January - March (USD '000) |
Q1 2004 |
% of sales |
Q1 2003 |
% of sales |
Change |
|
|
|
|
|
|
|
|
Net sales |
30,668 |
100% |
21,692 |
100% |
41% |
|
Cost of goods sold |
-12,133 |
-40% |
-9,129 |
-42% |
33% |
|
Gross profit |
18,535 |
60% |
12,563 |
58% |
48% |
|
|
|
|
|
|
|
|
Other income |
25 |
0% |
82 |
0% |
-70% |
|
Sales and marketing expenses |
-6,840 |
-22% |
-4,872 |
-23% |
40% |
|
Research and development expenses |
-2,320 |
-8% |
-2,257 |
-10% |
3% |
|
General & administrative expenses |
-4,854 |
-16% |
-3,546 |
-16% |
37% |
|
|
|
|
|
|
|
|
Profit from operations |
4,546 |
15% |
1,970 |
9% |
131% |
|
|
|
|
|
|
|
|
Interest income / (expenses) |
-278 |
-1% |
-126 |
-1% |
121% |
|
|
|
|
|
|
|
|
Profit before tax |
4,268 |
14% |
1,844 |
9% |
131% |
|
Income tax |
-1,005 |
-3% |
-440 |
-2% |
128% |
|
|
|
|
|
|
|
|
Net income for the period |
3,263 |
11% |
1,404 |
7% |
132% |
|
|
|
|
|
|
|
|
EBITDA |
5,739 |
19% |
2,642 |
12% |
117% |
Balance Sheet as at 31 March
|
Consolidated balance sheets (USD '000) |
31.3.2004 |
31.12.2003 |
Change |
|
|
|
|
|
|
Fixed assets |
66,112 |
65,571 |
1% |
|
Current assets |
39,587 |
36,555 |
8% |
|
Total assets |
105,699 |
102,126 |
3% |
|
|
|
|
|
|
Equity |
46,068 |
44,011 |
5% |
|
Long-term liabilities |
41,590 |
38,347 |
8% |
|
Current liabilities |
18,041 |
19,768 |
-9% |
|
Total equity and liabilities |
105,699 |
102,126 |
3% |
|
|
|
|
|
|
Cash Flow (USD '000) |
|
Q1 2004 |
Q1 2003 |
|
|
|
|
|
|
Working capital from operating activities |
|
5,347 |
2,171 |
|
|
|
|
|
|
Net cash provided by operating activities |
|
2,044 |
686 |
|
Investing activities |
|
-2,317 |
-145 |
|
Financing activities |
|
1,996 |
-301 |
|
Net increase in cash |
|
1,723 |
240 |
|
|
|
|
|
|
|
|
|
|
|
Key Financial ratios |
|
Q1 2004 |
Q1 2003 |
|
|
|
|
|
|
Earnings per share, EPS (US cents) |
|
1,03 |
0,44 |
|
P/E ratio |
|
34,4 |
19,5 |
|
Return on common equity |
|
15 |
29 |
|
Current ratio |
|
2,2 |
2,2 |
|
Equity ratio |
|
44% |
57% |
|
Market value (Million USD) |
|
224,533 |
203,508 |
First Quarter Operations
Ossur's first quarter operations were satisfactory. The integration of the Generation II companies into Ossur's operations was smooth and restructuring and strict cost control returned the desired results. There were no extraordinary expense items during the quarter.
Sales in the first quarter amounted to USD 30.7 million, which represents the greatest single-quarter volume in the history of the Company and an 11% increase from the fourth quarter of 2003. In comparison with the first quarter of last year, sales increased by 41%, but adjusted for currency effects the increase in sales was 34%.
The acquisition of Generation II, whose full impact was felt in the fourth quarter of 2003, was the greatest single factor in the increase. Calculated in local currencies, sales trends in principal market areas between the first quarters of 2003 and 2004 were as follows:
|
|
Increase |
Organic growth |
External growth |
|
|
|
|
|
|
North America |
52% |
2% |
50% |
|
Europe (excl. Scandinavia) |
26% |
13% |
13% |
|
Scandinavia |
-3% |
-3% |
0% |
|
Other markets |
11% |
11% |
0% |
If the increase in sales in local currencies is weighted by proportional market size, the result is that sales increased by just over 4%, net of acquisitions, and 34% if acquisitions are included.
Sales in the North American market showed a substantial growth of 52%. The acquisition of Generation II resulted in a 50% increase in sales. In comparison with the trend in 2003, however, the increase marks a watershed in that there is now a 2% organic growth, as opposed to the previous contraction. In late February, Ossur's North America sales company entered into an agreement with SPS (Southern Prosthetic Supply) on the distribution of the Company's products in North America. New agreement has been made with Hanger Orthopedic Group on the sale of Ossur products in workshops owned by Hanger.
The European market showed excellent first-quarter growth, at 26% calculated in the local currencies. The growth was divided evenly between internal and external growth. The Generation II operating unit in Brussels was relocated and integrated with the operation of Ossur Europe BV in Eindhoven in the course of the first quarter. The relocation was successful, and all operations in Brussels have now been discontinued.
Sales in Scandinavia fell by 3% between years in local currencies. Ossur's market position, in prosthetics in this market is extremely strong, so that growth and growth opportunities are less than in other markets.
Sales in other markets were satisfactory with an increase in sales of 11%.
Total Generation II sales in the first quarter amounted to USD 6.4 million, as compared to USD 5.9 million in the fourth quarter of last year.
More precisely, external sales of the Consolidation in US dollars were as follows, divided by market area:
|
Thousand USD |
Q1 2004 |
% |
Q1 2003 |
% |
|
|
|
|
|
|
|
|
|
North America |
16,592 |
54% |
10,917 |
50% |
52% |
|
Europe (excl. Scandinavia) |
8,214 |
27% |
5,615 |
26% |
46% |
|
Scandinavia |
4,101 |
13% |
3,568 |
16% |
15% |
|
Other markets |
1,761 |
6% |
1,592 |
7% |
11% |
|
|
|
|
|
|
|
|
Total |
30,668 |
100% |
21,692 |
100% |
41% |
The gross profit for the first quarter was 60%, as compared to 58% in the first quarter of 2003. The increase in sales placed great pressure on the product units of the Company and the utilization of fixed production factors was favorable.
The major organizational changes and rapid integration of the Generation II companies in to the operations of Ossur, which inevitably resulted in substantial costs toward the end of last year, are now returning rewards in greater operating efficiency.
Sales and marketing expenses amounted to 22%, an unchanged ratio from the corresponding quarter of 2003. If no measures had been taken, the acquisition of Generation II would have led to an increase in this ratio, as the ratio was higher for Generation II than for Ossur.
R&D expenses amounted to 8%, down from 10% in the preceding year. This is consistent with previous predictions. Investment in research and development has been at record levels in the past two years. Expenses are also falling as a result of the reorganization and integration of R&D departments and because R&D expenses as a ratio of sales lower at Generation II than at Ossur.
General and administrative expenses amounted to 16% of sales in the first quarter, a similar ratio to the first quarter of 2003.
Operating Prospects for the Second Quarter of 2004
Sales prospects are fair. It is still assumed that most of the growth in sales in North America will stem from orthotic products. Similar results are projected for Europe as in the first quarter, except that sales in Scandinavia are expected to improve slightly.
New Products in the First Quarter
The development of the Rheo knee is in its final stages and the knee is scheduled for presentation at the Reha International Prosthetics & Orthotics and Rehabilitation Trade Show in Leipzig in May. The knee will be launched in the market in October. Based on all-new technology, the Rheo project is the largest and most complex development project ever undertaken by the Company.
Ossur has launched a line of cosmetic hands based on the technical expertise of the Swedish company Linea Orthopedic, which Ossur acquired in 2003.
Investor meetings
Tomorrow, 30 April, investors and other interested parties are invited to participate in an open conference with the Company Management, where Jon Sigurdsson, President & CEO, and Hjorleifur Palsson, CFO, will discuss the Company's first quarter results. Hilmar B. Janusson, VP of R&D, will attend the meeting and present the Rheo Knee. The meeting will be held at the Grand Hotel at Sigtun in Reykjavík at 8:15 and will be conducted in Icelandic.
A telephone conference in English will be held at 12:00 noon, local time, 14:00 CET. The telephone conference will be accessible on the Ossur website: www.ossur.com.
Please call the following telephone numbers to participate in the telephone conference.
Telephone number for Europe: +44 (0) 20 7162 0182
Telephone number for the United States: +1 334 3236 203
Queries can also be sent to the English meeting by e-mail to investormeeting@ossur.com.
The 1st Quarter 2004 Report is available on the following link:
The 1st Quarter 2004 Presentation is available on the following link:
***
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