Össur hf. Financial Statements

Reykjavik, ICELAND


 
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 it's 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 Company's 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 Company's operation, but fluctuations in 2002 were less than in 2001. Apart from normal deviations resulting from changes in the product composition of the Company's 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 Company's 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 Company's operations in 2002 is insignificant.
 
The updating of the Company's 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 Company's 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 Company's 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 Company's 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.
     
    ***
     
    Attachments:
     
    Presentation Q3 2002:
     
    Financial Statement: