Ossur Second Quarter Report for 2005

 

 

The Ossur hf. interim Consolidated Financial Statements for the second quarter of 2005 were approved at a meeting of the Company's Board of Directors on 27 July. The quarterly statement, prepared in compliance with International Financial Reporting Standards (IFRS), has been reviewed and endorsed by the Company auditors.

 

 

Excellent sales are the most prominent feature of Ossur's operations in the second quarter. The sales figures represent the highest single-quarter sales in the Company's history, with the corresponding quarter of last year taking second place.  Sales from continuing operations increased by 13% as measured in USD, and 11% as measured in local currencies. Including sold operating units, sales increased by 11% in US dollars, and by 10% as measured in local currencies. The favourable results can be attributed to successful operation in all market regions, but the excellent growth in US prosthetics sales is a significant factor. The division in sales between prosthetic and orthotic products was as follows:

 

 

The ratio of operating expenses to sales showed no significant change. Marketing and sales expenses were comparatively low, but administrative expenses rose slightly. Profit from operations amounted to 18% of sales, while earnings before interest, tax and depreciation amounted to 22%.  Net profit was 13% of sales.

 

 

Income statement for the second quarter of 2005 (USD '000)	Q2 2005	% of sales	Q2 2004	% of sales	Change
Net sales	35,422	100%	31,775	100%	11%
Cost of goods sold	-13,863	-39%	-12,595	-40%	10%
Gross profit	21,559	61%	19,180	60%	12%
Other income	510	1%	307	1%	66%
Sales and marketing expenses	-7,002	-20%	-6,856	-22%	2%
Research & development expenses	-2,767	-8%	-2,156	-7%	28%
General & administrative expenses	-5,800	-16%	-4,853	-15%	20%
Profit from operations	6,500	18%	5,622	18%	16%
Interest income / (expenses)	-271	-1%	-696	-2%	-61%
Profit before tax	6,229	18%	4,926	16%	26%
Income tax	-1,614	-5%	-1,066	-3%	51%
Net profit for the period	4,615	13%	3,860	12%	20%
Earnings per outstanding shares (US cents)	1,47		1,22		20%
EBITDA	7,758	22%	6,738	21%	15%

The operating units of the consolidation are comparable between years, with the exception that the subsidiary Mauch Inc. in Dayton, Ohio, was sold at year-end 2004, and Ossur's Icelandic retail operations were sold in early June. Sales of discontinued operating units amounted to USD 230 thousand in the second quarter, as compared to USD 624 thousand in the corresponding quarter of last year. 

 

 

 

 

 

Total assets at end of June amounted to USD 108 million, with the Company's total assets remaining unchanged from the turn of the year. Equity increased by 11%, putting the end-June equity ratio at 56%, up by 50% from the year-end level.

 

 

 

Cash from operating activities, net of interest, amounted to USD 7.7 million, as compared to USD 6.0 million in 2004. The increase amounted to 28%.

 

 

 

 

 

 

 

The favourable results can be attributed to successful operation in all market regions, but the excellent growth in US prosthetics sales, amounting to 16% between years, proved a significant factor. Sales of orthotic products was also more successful in the US market than previously, remaining stable as opposed to previous slides. On the whole, sales in the North American market increased by 10% as measured in local currency. The European markets showed good progress, with sales increasing by 10% in local currencies. Temporary problems which slowed growth in the first quarter as reported earlier, are now resolved. Nordic operations continued to do well, with the increase in sales at 11%, as measured in local currencies. Sales in other international markets were excellent, increasing by 16% between years.

 

Gross profit was satisfactory in the second quarter at 61%, as compared to 60% in the corresponding quarter last year. The average rate of the dollar was 12% lower as measured in Icelandic kronur in the second quarter of 2005 than the second quarter of 2004. The same applied in the first quarter, when the average rate was 12% lower than in the preceding year. This has the effect of undermining the gross profit of the Company, as described in earlier reports. However, the strength of the euro against the US dollar contributes to the gross profit of the Company. The euro was on the average approximately 5% higher than the dollar in both these quarters as compared to comparable periods in the preceding year. Some boost is provided to gross profit by the fact that growth in Europe was strong in countries where average prices are higher, which had the results that gross profit exceeded anticipations by a small margin. Approximately 0.7% gross profit margin can be attributed to lowering of a reserve for write-down of obsolete products.

 

The ratio of operating expenses to sales was similar to previous figures. Marketing and sales expenses were comparatively low, while administrative expenses rose slightly. As before, all research and development costs are expensed in the income statement. Profit from operations amounted to 18% of sales, while earnings before interest, tax and depreciation were 22%. Net profit was 13% of sales.

 

 

 

 

 

 

Ossur has acquired the Australian company Advanced Prosthetic Components, one of the Company's distributing agents.  Ossur Asia-Pacific will concentrate on Ossur's current markets in Australia, China and Japan, in addition to working on further development of markets in Korea, Taiwan and other Asian markets.  Ossur Asia-Pacific has five employees, with Harvey Blackney, former owner of the company, as CEO.  The acquisition price was USD 1.2 million, in addition to inventory.

 

 

 

In early June, pharmaceutical retailer Lyf og heilsa took over Ossur hf.'s retail operation in Reykjavik, together with all the services offered by the outlet, including gait analysis.  The sale of the retail operation means that Ossur hf. has divested itself of all operations in the domestic market which are not linked to the Company's core activities.  The total proceeds from the sale of the operation and inventory fell just short of USD 900 thousand; the turnover of the operation in 2004 amounted to just over USD 700 thousand.  Gains on the sale, amounting to approximately USD 450 thousand, are recognised under other income in the income statement.

 

 

In the course of the year, strong emphasis has been placed on research and design involving a new bionic product line.  For this reason, new products in Ossur's current product line have not been prominent. Some smaller products have been introduced and older products improved.  The new bionic product line is scheduled for launching in the third quarter.

 

 

Prospects for third quarter are fair. One time integration and restructuring expenses will be expensed in third quarter as explained in a separate news release.

 

 

On Wednesday, 3 August, Ossur hf. will host a presentation meeting for investors. 

 

At 8.30 a.m., local time, an open meeting will be held with the Company's management in Hvammur conference room at the Grand Hotel in Reykjavík. At the meeting, Jon Sigurdsson, CEO, and Hjorleifur Palsson, CFO, will discuss the Company's operation over the quarter.

 

A telephone conference in English will be held at 12:00 noon, local time, 14:00 CET. The meeting can be heard on the Ossur website: www.ossur.com.

 

Please call the following telephone numbers to participate in the conference:

Telephone number for Europe: +44 (0) 20 7162 0191

Telephone number for the United States: +1 334 323 6203