Synthes, Inc. (SYST:VX) Reported Sales and Net Earnings for FY2004
BY HUYEN NGUYEN, MARCH 28, 2005
As an addendum to the January 2005 financial sales release, on March 16/2005, Synthes provided the investment community with the group's sales and earnings financial reports for fiscal year 2004. Synthes reported on both a consolidated and pro forma basis.
On a consolidated basis, in FY'04, Synthes reported total sales of $1.78 billion, a 44.8% increase from $1.23 billion in FY'03. Net earnings for the year were $323.7 million, a 331.4% increase from $75.1 million. Consolidated sales results include sales from Mathys acquisition from February 2004 to December 2004. All one-time charges were included in net profit.
On a pro forma basis, total sales for FY'04 were $1.80 billion, a 20.7% increase from $1.49 billion in FY'03. Net profit grew by 18% to $362.4 million, compared to $307.1 million in 2003. Foreign exchange had a favorable impact on sales by 3.4% and net profit by 2.2%. In 2004, there were several one-time charges that were excluded from net profit (1) $53.4 million was excluded for Mathys acquisition in 2004, and (2) $215 million was excluded for the Spine Solutions, Inc. acquisition in 2003. Pro forma consolidated results include sales from the acquired division of Mathys' Osteosynthesis, excluding Mathys' German subsidiary, which the company did not acquire. All sales are reported as if the acquisition took place on January 1, 2003.
Excluding the Spine Solution acquisition expenses in 2003, Synthes' operating income increased by 18% to $527 million in 2004. Selling, promotion, general and administrative expenses increased by 54% due to significant investments by increasing its sales staff by approximately 25% (on a pro forma basis). Synthes also incurred an additional capital investment of $68.5 million for instrumentation and equipment. Research and development expenses increased by 70% for the year. R&D expenses were related to significant investments the company made in supporting the regulatory process for the ProDisc which is expected to receive FDA approval by 4Q:05.
On December 31, 2004 cash and cash equivalents were reported at $263.6 million which is less than the $425.6 million cash balance reported on December 31, 2003.
Fiscal Year 2004 Highlights by Geography:
All sales are reported on a pro forma basis
Growth rates are compared to FY'03
- North America
- Total product sales grew by 20.7% to $1.14 billion
- Trauma and cranio-maxillofacial sales achieved approximately 50% of the total U.S. market share.
- Now # 3 in spine in the U.S. market behind Medtronic Sofanor Danek and DePuy Spine
- Have more than 900 sales consultants representing Synthes in trauma, spine and cranio-maxillofacial surgery
- Expected to launch the lumbar artificial disc in 2006
- Completed a new 120,000 square foot corporate headquarters building in West Chester, Pennsylvania which will operate on a global basis
- Latin America
- Contributed less than 3% of the total $1.79 billion in sales
- Trauma and cranio-maxillofacial grew more than 20%
- Spine grew by 30%
- AO is very active - 2,600 surgeons and members of the OR-staff participated in AO courses
- Europe
- Total product sales grew by 20.6% to $400.3 million
- The Locking Compression Plate (LCP) exceeded 80% market penetration in the German trauma market
- Due to the Mathys' acquisition, more territories are covered in Europe with the recently acquired countries: France, Italy, Austria, Netherlands and Belgium
- Established a new headquarter for European regions based in Solothurn, Switzerland
- Asia Pacific
- Total product sales grew by 26.5% to $167.2 million
- Contributed less than 10% of the total $1.79 billion in sales
- The Japanese orthopedic market is estimated about $2 billion, in which Synthes accounted for 35% of the market in the areas of trauma, spine, and cranio-maxillofacial
- Established a new regional headquarters for the Asia Pacific region based in Sydney, Australia
