Össur hf. - Financial Statements for the Second Quarter of 2002
Net sales hit a new high, with increases in sales corresponding to 26% organic growth over the second quarter.
Profit from operations in the second quarter increased by 53% from the corresponding quarter of the preceding year.
EPS increased by 31% from previous year and was 2.7 US Cent a share.
Net sales in the second quarter amounted to USD 21.2 million, which is in line with the operating budget.
Profit from operations came to slightly less than USD 3 million, which is USD 460 thousand short of the lower limits of the operating budget.
Second quarter profit was just under USD 2.6 million, which is slightly above the lower limits of the budget.
The Össur hf. interim Consolidated Financial Statements for the second quarter of 2002 was approved at a meeting of the Board of Directors on 24 July. The statements have been reviewed and endorsed by the company auditors.
The principal companies of the Össur Consolidation are Össur hf. in Iceland, the Össur Holdings Inc. Consolidation in the USA, the Össur Holding A.B. Consolidation in Sweden and Össur Europe B.V. in the Netherlands
The principal results for the second quarter are as follows:
Consolidated Income Statements
2Q 2002 and 2Q 2001 (USD 000) 2Q
2002 % of
Sales 2Q
2001 % of
Sales Change
Net sales 21,223 100.0% 16,822 100.0% +26.2%
Cost of goods sold -8,595 40.5% -7,149 42.5% +20.2%
Gross profit 12,628 59.5% 9,673 57.5% +30.5%
Other income 107 0.5% 462 2.7% -76.8%
Sales and marketing expenses -4,891 -23.0% -3,144 -18.7% +55.6%
Research & development expenses -1,557 -7.3% -1,600 -9.5% -2.7%
General & administrative expenses -3,298 -15.5% -3,442 -20.4% -4.2%
Profit from operations 2,989 14.1% 1,949 11.6% +53.4%
Interest income/(expenses) 339 1.6% 213 1.3% +59.2%
Income from associates -18 -0.1% 23 0.1% -178.3%
Profit before tax 3,310 15.6% 2,185 13.0% +51.5%
Income tax -720 -3.4% 522 3.1% +237.9%
Net profit for the period 2,590 12.2% 2,707 16.1% -4.3%
EBITDA 3,604 17.0% 2,478 14.7% +45.4%
Consolidated Income Statements
Jan-June 2002 and Jan-June 2001 (USD 000) Jan-June
2002 % of
Sales Jan-June 2001 % of
Sales Change
Net sales 39,816 100.0% 33,147 100.0% +20.1%
Cost of goods sold -16,089 40.4% -13,436 40.5% +19.7%
Gross profit 23,727 59.6% 19,711 59.5% +20.4%
Other income 329 0.8% 611 1.8% -46.2%
Sales and marketing expenses -9,089 -22.8% -6,479 -19.5% +40.3%
Research & development expenses -3,575 -9.0% -2,759 -8.3% +29.6%
General & administrative expenses -6,860 -17.2% -7,447 -22.5% -7.9%
Profit from operations 4,532 11.4% 3,637 11.0% +24.6%
Interest income/(expenses) 15 0.0% -148 -0.4% +110,1%
Income from associates 38 0.0% 33 0.0% +1.2%
Profit before tax 4,585 11.5% 3,522 10.6% +30.2%
Income tax -965 -2.4% -161 -0.5% +499.4%
Net profit for the period 3,620 9.1% 3,361 10.1% +7.7%
EBITDA 5,732 14.4% 4,695 14.2% +22.1%
Consolidated Balance Sheets (USD 000) 30 June 31 Dec. Change
2002 2001
Fixed assets 32,644 30,948 +5.5%
Current assets 34,555 27,253 +26.8%
Total assets 67,199 58,201 +15.5%
Equity 33,559 30,547 +9.9%
Long-term liabilities 16,338 12,931 +26.3%
Current liabilities 17,302 14,723 +17.5%
Total equity and liabilities 67,199 58,201 +15.5%
Consolidated Statement of Cash Flows
January to June 2002 (USD 000) 1 Jan-?30 Jun
2002 1 Jan-?30 Jun
2001
Working capital from operating activities 5,547 4,386
Net cash provided by operating activities 997 4,095
Investing activities -2,187 -2,390
Financing activities 1,363 -3,098
Net increase/(decrease) in cash 173 -1,393
Financial ratios 1 Jan-?30 Jun
2002 1 Jan-?30 Jun
2001
Earnings per share, EPS (US cents) 2.71 2.07
P/E ratio 23.7 21.7
Return on common equity 29.0% 25.8%
Current ratio 2.0 1.7
Equity ratio 49.9% 50.1%
Market cap (Million USD) 211 148
Comparison with Operating Budget
Consolidated Income Statements
2Q 2002 and 2Q 2001 (USD 000) 2Q
2002 % of
Sales 2Q
Budget % of
Sales Variance
Net sales 21,223 100.0% 21,359 100.0% -136
Cost of goods sold -8,595 40.5% -7,886 36.9% -709
Gross profit 12,628 59.5% 13,473 63.1% -845
Other income 107 0.5% 43 0.2% 64
Sales and marketing expenses -4,891 -23.0% -4,828 -22.6% -63
Research & development expenses -1,557 -7.3% -1,874 -8.8% 317
General & administrative expenses -3,298 -15.5% -3,181 -14.9% -117
Profit from operations 2,989 14.1% 3,633 17.0% -644
Interest income/(expenses) 339 1.6% -245 -1.1% 584
Income from associates -18 -0.1% 14 0.0% -32
Profit before tax 3,310 15.6% 3,402 15.9% -92
Income tax -720 -3.4% -637 -3.0% -83
Net profit for the period 2,590 12.2% 2,765 12.9% -175
EBITDA 3,604 17.0% 4,233 19.8% -629
Second Quarter Operations
The most prominent feature characterizing the second quarter operation is the substantial organic growth. The quarter is the best in terms of net sales for the company since its founding, with sales increasing by 26% from the corresponding quarter last year. The best previous quarter in terms of sales was the first quarter of this year. In all, income from sales grew by over 20% over the first six months of the year in comparison with the first six months of 2001. The entire increase is the result of organic growth, as there were no acquisitions during the period.
Sales in North America, the Companys largest market, have continued to exceed projections. Sales through Össur Europe B.V. are according to budget, as in the first quarter. Sales by Össur Nordic A.B. exceeded projections by 16% in the second quarter, but fell short by 5% in the first quarter. Sales in other markets have remained sluggish, at 32% below projections for the second quarter. All in all, second-quarter sales and sales in the first half of the year were in line with the median values of the operating budget, with deviation at less than 1%. More precisely, the external sales of the Consolidation are divided as follows according to market areas:
Thousand USD 2Q 2002 % Budget Variance
Össur North America, Inc. 12,326 58% 12,078 +248
Össur Europe, B.V. 4,237 20% 4,150 +87
Össur Nordic, A.B. 2,715 13% 2,336 +379
Other markets 1,945 9% 2,795 -850
Total 21,223 100% 21,359 -136
The cost of goods sold, as a ratio of sales, was considerably higher in the second quarter than projected in the operating budget, with the deviation at 3.6%. Nevertheless, the ratio represents an improvement of 2% over the second quarter of the preceding year. This ratio has always been subject to fluctuation in the Companys operation, and the relocation of the US production unit from Dayton, Ohio, to Albion, Michigan, together with restructuring measures, had the effect of increasing the fluctuation this year.
Sales and marketing costs are according to budget for the second quarter, but were substantially below projections in the first quarter. In comparison with the preceding year, the ratio of sales and marketing costs as a proportion of sales has been increased by just over 3% in the first six months of the year compared to the preceding year; this is in line with the Companys strategy.
Research and development costs amounted to 7.3% of sales in the second quarter, which is well below projections. As revealed earlier, several projects were brought forward to the first quarter, which accounts for the high ratio of research and development costs in that quarter. The total ratio of research and development costs to sales amounts to slightly less than 9% for the first half of the year. The research and development cost is is just over 3% below the budgeted figure for the first six months of the year.
General and administrative expenses were slightly above budget in the second quarter, and in total these expenses were 3% over budget in the first half of the year. The ratio of general and administrative expenses in the first half of the year was slightly over 17%, down from 22% in the preceding year.
Financial items were more favorable for the Company than projected in the budget owing to exchange rate gains resulting from the strengthening of the euro against the US dollar.
Comparison of the first six months of the years 2002 and 2001 must take account of the fact that inflation adjustments in the financial statements were discontinued as of the year 2002. Profit for 2001 would have been lower by USD 600 thousand based on the accounting principles used in 2002.
The development in Iceland of a new production line for the manufacture of carbon-fiber artificial feet was successful, with production starting on 1 July. All scheduled deadlines were met, and total investment in the production line was below budget.
An international workplace analysis was conducted in all Össur workplaces. IMG Gallup conducted the study. The results were very positive, confirming the companys success in uniting the employees of different companies under the Össur banner. The study confirms that the Companys human resource strengths are substantially above those of the benchmark companies.
At the same time, a 360° performance appraisal was also conducted of the Companys executive management team. The conclusion of the evaluation was that the strengths of the top management are considerably in excess of the benchmark group, i.e. UK company managers.
New product marketing proceeded according to plan in the second quarter. In early May, the Company participated in the Orthopädie Reha Technik trade fair in Leipzig, Germany, the largest prosthetics trade fair in Europe. Össur presented six new products at the fair, including a new knee, the Mauch XG, which is specially designed for heavy wear and highly active users, including athletes. The design of the Mauch XG is a good example of the success in combining the expertise available in the individual companies now forming Össur. In the new version of the Mauch XG, the frame of the knee is manufactured from the same kind of carbon fiber as the Flex-Foot ankles instead of aluminum, which makes the knee both lighter and stronger.
Open Conference with the Management:
Tomorrow, investors and other interested parties are invited to join an open conference with the Companys Management. At the conference, Mr. Jon Sigurdsson, President and CEO, will review the results of the quarter and discuss the results with investors together with Mr. Hjorleifur Palsson, CFO.
The conference will be held tomorrow, Friday 26 July, at 9:00 a.m. at the office of Össur hf. at Grjothals 5, Reykjavik.