DJO’s Healthy Revenue Growth Across the Board Tarnished by $107 Million Write Down

Device company DJO Global, Inc. has announced financial results that show Q4 revenue gain of 7.5 percent over Q4 2012 and full year revenue 3.8 percent up on 2012.

Background

DJO Finance LLC is the reporting subsidiary of DJO Global and has reported net sales for Q4 2013 of $313.6 million, which represents 7.5 percent growth over Q4 2012 on a constant currency basis. Despite the healthy top line, the company has reported a net loss of $131.8 million, compared to a net loss of $47.0 million for Q4 2012, this increase due primarily to a year-end write off of goodwill of $106.6 million.

For the twelve months of 2013, the company reported a net attributable loss of $203.5 million, compared to $119.2 million for the twelve months of 2012. The results for the current and prior year twelve month periods were both impacted by significant non-cash items, non-recurring items and other adjustments, although the biggest single item was the aforementioned goodwill write-off. Basically, take out the goodwill write-off and the position has improved from a year ago, suggesting the place is in pretty good shape.

Revenue by Business Segment

Bracing and Vascular

Net sales were $128.0 million in the fourth quarter of 2013, reflecting growth of 13.1 percent, compared to Q4 2012, driven by strong contribution from the sales of new products and improving sales execution, according to the company.

Recovery Sciences

Net sales were $83.4 million reflecting a contraction of 0.2 percent, compared to the fourth quarter of 2012, primarily due to the effects of the Medicare CLBP decision on the EMPI business unit and slow market conditions for capital equipment sold by the Chattanooga business unit. The fourth quarter sales results for the Recovery Sciences segment reflected strong sequential improvement from the third quarter of 2013, which reflected a contraction of 4.4 percent from the prior year third quarter period.

International

Q4 net sales within the International segment were $78.0 million, netting out at an increase in constant currency net sales of 7.8 percent, driven by increased penetration in certain geographies and the positive impact of sales of new products.

Surgical Implants

Sales of $24.2 million for the period reflected an increase of 22.2 percent over net sales in the fourth quarter of 2012, driven by strong sales of each of the Company’s shoulder, knee and hip product lines.

Company comments

“It is terrific to see our team continue to deliver strong accelerating sales growth in the fourth quarter with approximately 7.5% growth on a constant currency basis compared to the fourth quarter of 2012. Our successful new product launches and strong global commercial execution continues to drive momentum across most of our businesses,” said Mike Mogul, DJO’s President and Chief Executive Officer. “I want to especially congratulate our Bracing & Vascular and Surgical Implant teams, for delivering strong constant currency growth in the fourth quarter of 2013 of 13.1% and 22.2%, respectively, as compared to the prior year period. Our Recovery Sciences business continues to be impacted by Medicare’s 2012 non-coverage decision related to Transcutaneous Electrical Nerve Stimulation (‘TENS’) for chronic low back pain (‘CLBP’) and slow market conditions for capital equipment purchasing, which is impacting our Chattanooga business. Excluding Recovery Sciences, aggregate net sales from our other business segments for the fourth quarter of 2013 increased by 11.2% compared to the prior year period.

“We continue to be very pleased with the revenue growth contributed by our continued breadth of new product launches and other commercial initiatives. These successful growth initiatives have enabled our Bracing and Vascular, International and Surgical Implant segments to consistently achieve growth rates that we believe are market leading. We remain diligently focused on improving the sales results of our Recovery Sciences segment. We believe that the impact of recent and upcoming product launches, combined with having reached the anniversary date of Medicare’s noncoverage decision for TENS for CLBP late in the third quarter of 2013, will improve the future sales growth results for this segment. This improvement, combined with continued strong performance from our other segments should permit us to report stronger revenue results and higher total company growth rates in future quarters, which in turn should improve our Adjusted EBITDA results.”

Source: DJO Global, Inc., Business Wire

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