Össur hf. 3Q Results
Net sales hit a new high, with increases in sales corresponding to 18% organic growth over the third quarter.
Profit from operations in the first nine months of the year increased by 24% from the preceding year, to USD 9.2 million.
Profit in the first three quarters came to slightly less than USD 7.3 million, increasing by 24% from the preceding year.
EPS increased by 31% from the previous year, reaching 3.06 US Cents per share.
The Össur hf. interim Consolidated Financial Statements for the third quarter of 2002 was approved at meeting of the Board of Directors on 28 October. The statements have been reviewed and endorsed by the auditors of the Company.
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.
Principal Third-Quarter Results
Consolidated Income Statements
3Q 2002 and 3Q 2001 (USD 000) 3Q
2002 % of
Sales 3Q
2001 % of
Sales Change
Net sales 21,391 100.0% 18,108 100.0% +18.1%
Cost of goods sold -8,305 -38.8% -5,666 -31.3% +46.6%
Gross profit 13,086 61.2% 12,442 68.7% +5.2%
Other income 165 0.8% 24 0.1% +587.5%
Sales and marketing expenses -3,748 -17.6% -2,729 -15.0% +37.3%
Research & development expenses -1,676 -7.8% -1,159 -6.4% +44.6%
General & administrative expenses -3,137 -14.7% -4,783 -26.4% -34.4%
Profit from operations 4,690 21.9% 3,795 21.0% +23.6%
Interest income/(expenses) -151 -0.7% 10 0.0% -1,500%
Income from associates 2 -0.0% 16 0.1% -87.5%
Profit before tax 4,541 21.2% 3,821 21.1% +18.8%
Income tax -892 -4.2% -1,321 -7.3% -32.4%
Net profit for the period 3,649 17.0% 2,500 13.8% +46.0%
EBITDA 5,370 25.1% 4,291 23.7% +25.1%
The principal results for January - September are as follows:
Consolidated Income Statements
Jan-Sept 2002 and Jan-Sept 2001 (USD 000) Jan-Sept 2002 % of
Sales Jan-Sept 2001 % of
Sales Change
Net sales 61,206 100.0% 51,256 100.0% +19.4%
Cost of goods sold -24,394 -39.9% -19,103 -37.3% +27.7%
Gross profit 36,812 60.1% 32,153 62.7% +14.5%
Other income 495 0.8% 635 1.2% -22.0%
Sales and marketing expenses -12,837 -21.0% -9,208 -17.9% +39.4%
Research & development expenses -5,251 -8.6% -3,917 -7.6% +34.1%
General & administrative expenses -9,997 -16.3% -12,230 -23.9% -18.3%
Profit from operations 9,222 15.0% 7,433 14.5% +24.1%
Interest income/(expenses) -136 -0.2% -138 -0.2% -1.4%
Income from associates 40 0.1% 48 0.0% -16.7%
Profit before tax 9,126 14.9% 7,343 14.3% +24.3%
Income tax -1,857 -3.0% -1,481 -2.9% +25.4%
Net profit for the period 7,269 11.9% 5,862 11.4% +24.0%
EBITDA 11,127 18.2% 8,986 17.5% +23.8%
Consolidated Balance Sheets (USD 000) 30.
Sept 30. June 31.
Dec. Change from 31.
2002 2002 2001 Dec.
Fixed assets 31,938 32,644 30,948 +3.2%
Current assets 37,703 34,555 27,253 +38.3%
Total assets 69,641 67,199 58,201 +19.7%
Equity 36,966 33,559 30,547 +21.0%
Long-term liabilities 15,969 16,338 12,931 +23.5%
Current liabilities 16,706 17,302 14,723 +13.5%
Total equity and liabilities 69,641 67,199 58,201 +19.7%
Consolidated Statement of Cash Flows
January to September 2002 (USD 000) 1 Jan-?30 Sept
2002 1 Jan-?30 Sept
2001
Working capital from operating activities 10,623 8,119
Net cash provided by operating activities 5,092 7,908
Investing activities -2,654 -2,589
Financing activities 813 -5,500
Net increase/(decrease) in cash 3,251 -181
Key Financial ratios 1 Jan-?30 Sept
2002 1 Jan-?30 Sept
2001
Earnings per share, EPS (US cents) 3.06 2.34
P/E ratio 19.4 17.5
Return on common equity 31.0% 30.5%
Current ratio 2.3 1.7
Equity ratio 53.1% 48.4%
Market cap (Million USD) 195 135
Comparison with Operating Budget
Consolidated Income Statements
3Q 2002 vs 3Q budget (USD 000) 3Q
2002 % of
Sales 3Q
Budget % of
Sales Variance
Net sales 21,391 100.0% 21,187 100.0% +204
Cost of goods sold -8,305 -38.8% -7,598 -35.9% -707
Gross profit 13,086 61.2% 13,589 64.1% -503
Other income 165 0.8% 43 0.2% +122
Sales and marketing expenses -3,748 -17.6% -4,072 -19.2% +324
Research & development expenses -1,676 -7.8% -1,578 -7.4% -98
General & administrative expenses -3,137 -14,7% -3,148 -14.9% +11
Profit from operations 4,690 21.9% 4,834 22.8% -144
Interest income/(expenses) -151 -0.7% -249 -1.2% +98
Income from associates 2 -0.0% 14 0.1% -12
Profit before tax 4,541 21.2% 4,599 21.7% -58
Income tax -892 -4.2% -713 -3.4% -179
Net profit for the period 3,649 17.0% 3,886 18.3% -237
EBITDA 5,370 25.1% 5,449 25.7% -79
Third Quarter Operations
The first three quarters of the year were characterised by excellent organic growth. The third quarter is the best in terms of sales for the Company since its founding, with sales increasing by 18% from the corresponding quarter last year. This is the third consecutive quarter of record sales for the Company. In all, income from sales grew by over 19% over the first nine months of the year in comparison with the first nine months of 2001. The entire increase is a result of organic growth.
All in all, third-quarter sales, and sales in the first nine months of the year, were in line with the median values of the operating budget, with deviation at less than 1%. The Company did not quite meet the goals of the operating budget regarding sales in North America, the Companys largest market, with sales at approximately 1% below budget. Sales through Össur Europe B.V., however, exceeded budget projections by just over 7% and third-quarter sales of Össur Nordic A.B. were 17% above budget projections. Sales in other international markets fell 21% short of budget projections, which is still considerably closer to established goals than in the first and second quarter. More precisely, the external sales of the Consolidation are divided as follows according to market areas:
Thousand USD 3d Quarter 2002 % Budget Variance
North America 12,182 57% 12,346 -164
Europe 4,384 21% 4,089 +295
Scandinavia 2,594 12% 2,221 +373
Other international markets 1,792 8% 2,279 -487
Domestic sales 439 2% 252 187
Total 21,391 100% 21,187 +204
The cost of goods sold, as a ratio of sales, was somewhat higher in the third quarter than projected in the operating budget, with the deviation at 2.9%. In comparison, the corresponding variance in the second quarter was unfavourable by 3.6%. There have always been some fluctuations in this ratio in the Companys operation, but fluctuations in 2002 were less than in 2001. Apart from normal deviations resulting from changes in the product composition of the Companys sales, the deviation is largely a result of the relocation and reorganisation of production units.
Sales and marketing costs were slightly less than 8% below projected costs in the third quarter. For the first nine months of the year, this cost is just over 6% below projections. In comparison with the preceding year, the ratio of sales and marketing costs as a proportion of sales has increased by just over 2% in the first nine months of the year.
Research and development costs amounted to 7.8% of sales in the third quarter, which is just over 6% above projections. In the second quarter, this cost was well below projections, but above projections in the first quarter owing to speeding up of projects. On the whole, the ratio of R&D costs to sales was 8.6% in the first three quarters, which is in line with the Companys overall strategy.
General and administrative costs were according to budget in the third quarter, but 2% over budget for the combined first three quarters. The ratio of general and administrative expenses as a proportion of sales, was in the first nine months of the year slightly over 16%, down from 24% in the preceding year.
Interest items continued to be slightly more favourable for the Company than budget projections.
Any comparison of operations in January to September between 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 733 thousand based on the accounting principles used in 2002.
The manufacture of carbon-fibre artificial feet, which was started in a new production line in Iceland on 1 July, has been successful and according to plan.
As previously announced, the Company acquired the assets of the Swedish technology company Cabod Systems AB in Sweden last September. The transfer of technology and development of operations in the field of CAD/CAM solutions is proceeding as planned. The impact of the acquisition on the Companys operations in 2002 is insignificant.
The updating of the Companys product line was concluded in the third quarter with the introduction of the new Stabilo and Transfemoral II liners in the United States. With these new products, the Companys entire range of liners has been updated on the basis of new materials technology with greater adaptation and differentiation based on user needs than ever before.
A new range of adaptors was introduced in the third quarter. With the new adaptors, the Company has succeeded in eliminating the head start previously enjoyed by its competitors in this section of the market.
Prospects for the remainder of the year
Despite growing competition in North America, the Companys principal market area, at this point in time, Össur management team believes that the result of operations over the year will be within the range projected in the operating budget.
Publication of Annual Financial Statement
The Company will publish its annual financial statement on 12 February 2003, one week from the originally scheduled date. The date of the Annual General Meeting remains 14 February, as announced earlier.
Open Conference with the Management
Tomorrow morning investors and other interested parties are invited to join an open conference with the Companys Management. At the conference, Mr. Jon Sigurdsson, President & CEO, will review the results of the quarter and discuss the results with investors together with Mr. Hjorleifur Palsson, CFO. Hilmar B. Janusson, VP of the Technical division will attend the conference and discuss in brief patent issues.
The conference will be held tomorrow, Thursday 31 October, at 9:00 a.m. at the office of Össur hf. at Grjothals 5, Reykjavik.