DJ Orthopedics Reiterates 4th-quarter Revenue Outlook
BY JOHN MCCORMICK, DECEMBER 6, 2004
Last week, dj Orthopedics Inc. (NYSE:DJO) management team held an analyst's day where they reiterated their guidance on their 4Q:04 forecast for revenue in the range of $65 million to $67 million. According to Reuters, the analysts consensus revenue estimate for 4Q:04 is on the low end of that range - $65.3 million. The Company also said it expects sales in its core rehabilitation segments to be in line with historical trends.
In September, DJO's stock hit an air pocket when management cut its 3Q:04 financial outlook, citing lower-than-expected sales of its Regentek SpinaLogic spine stimulation product line. The Company is currently trying to shore up the SpinaLogic sales effort, particularly in its underperforming markets. Sales, management expects, should begin to reflect the results of these efforts in 2005 - but not in this final quarter of 2004, however. The Regentek sales force expansion and integration effort is now over 80 percent complete, according to management. Management also announced that it intends to increase the number of dedicated OL1000 specialists from a current 75 to 90 specialists by the end of this year.
On other fronts with the Regentek integration, the Company has completed the move of the business unit operations from Tempe, AZ to Vista, CA with the exception of the manufacturing move, which is awaiting FDA inspection. The Company will continue to manufacture Regentek products in Tempe until FDA approval is received. Management expects approximately $3M of pretax savings from the move and the elimination of redundant positions.
Importantly, the Company noted that since first announcing its share repurchase program at the end of 3Q:04, it has purchased and retired an aggregate of approximately 837,000 shares (4% of shares outstanding at the end of 3Q:04) for a total cost of approximately $14.8 million (an average share price of $17.68). We note that the Company's share repurchase program is near its limit of $20 million in only two months.
On a call with investors, management emphasized its focus on the non-operative orthopedic space, it's attention to the use of patents in its product development, an openness to exploring acquisitions and a continued interest in the spine area.
