Ossur hf. (Ossur) has reported net sales of $350 million for the full year of 2008, up 4%, compared with the net sales of $335.6 million in the previous year-end. It has also reported net profit of $28.5 million, or $6.73 per diluted share, for the full year of 2008, compared with the net profit of $7.5 million, or $1.94 per diluted share, in the previous year-end.
Jon Sigurdsson, president & chief executive officer, comments: “The year was characterized by internal focus. One of our main tasks has been to increase profitability and although the sales were slower than anticipated the profits increased considerably. In 2008 we introduced thirteen new products and twenty products were discontinued. In 2009 some new and exciting products will be launched and we will focus on traditional products that fit into the current reimbursement channels. The financial crises we have seen around the world have had limited effects on the underlying business of the company as well as the healthcare sector in general. Overall, we are confident that we have managed to build a strong company with a solid foundation for future success.”
Business overview for 2008
The year was characterized by internal focus. In 2008 focus on processes and profitability was one of the main tasks. Twenty products were discontinued and profits increased handsomely. The total sales amounted to $350.0 million representing a 4% growth. No acquisitions were made in 2008. Earnings before interest, tax, depreciation and amortization (EBITDA) amounted to $79.4 million or 23% of sales and increased by 15.0 million or 23% from 2007.
Sales growth in prosthetics continues and was 9%, confirming Ossur’s strong position in this market segment and the company’s technical leadership. Sales growth in bracing and supports was 1% and sales growth of compression therapy products 5%. In March Ossur divested its Advanced Wound Care product line to BSN medical GmbH. In August Ossur delivered the production line and inventory in accordance with the contract and received additional milestone payments. All intellectual property litigation related to the product line has been settled. The divestment affects Ossur‘s income statements in 2008 by $8.4 million, which is included in other income.
In the past year internal processes have been strengthened, building a strong platform for the future. To increase sales, numerous initiatives have been set, focusing on fuelling sales growth in 2009.
The net financial expenses in 2008 amounted to $17.7 million compared to $31.7 million in 2007, decreasing by $13.9 million or 44%. In October 2007 the share capital was increased through a private placement of new shares. The proceeds from the offering were used to pay down a bridge loan facility, decreasing the leverage of the company. Exchange rate developments of the EUR against the $also contribute to the decrease. Net unfavourable exchange rate difference decreased from $16.5 million in 2007 to $0.3 million in 2008. A gain from forward currency contracts amounted to $0.6 million in 2008 compared to $8.7 million in 2007.
For the long term debt Ossur has an interest rate swap agreements, fixing the interest rates for part of its long term debt at a weighted average of 5.99% per annum. Following the collapse of Kaupthing Bank in October 2008, the treatment of Ossur’s interest rate swap agreement is subject to uncertainty. Furthermore, the recent drop in interest rates has resulted in a plunge in the market value of the agreement to minus $9.5 million. Changes in the market value of the swap agreement net of tax are realized through equity in the company‘s financial statements. Income tax was $9.7 million, corresponding to a 25% effective tax rate, compared to 6% in 2007. The income tax in 2007 was unusually low due to significant deductions relating to a net loss in the Americas as well as deductions relating to the internal financing structure of the company. Contributing to the increased expensed tax in 2008 is decreased tax rate in Iceland and in Germany which causes a write-down of accumulated tax benefits. The effective tax rate should remain at a similar percentage range for the next year.
EBITDA was $79.4 million, 23% of sales, against $64.4 million and 19% of sales in 2007. EBITDA adjusted for one-time income and expenses amounted to $72.6 million and 21%, against $58.4 million and 17% in 2007
Sales growth in bracing and supports was 1%. Sales measured in local currency declined by 1%. Sales of bracing and supports in the Americas throughout 2008 has been below target, affecting the overall growth of the segment. Reorganization of the sales channel in the US has not returned expected results and in 2009 the structure will be simplified and made more transparent. Sales of bracing and supports in EMEA excluding Gibaud were in line with market growth.
In 2008 six new bracing and supports products and upgrades were introduced to the market including the Exoform Dorsal Night Splint and Gameday. These products have been well received by the market.
Sales growth in prosthetics was 9%. Sales growth measured in local currency was 6%. Sales of prosthetic products continue to grow handsomely. Seven new products were launched in 2008, including the Iceross Seal-In X5 and Flex-Foot Assure. Flex-Foot Assure is a solution for the diabetic and vascular amputee population. Flex-Foot Assure incorporates basic Flex-Foot technology that allows a soft and stable gait with the benefits of dynamic response.