DJO Global Announces Financial Results For Second Quarter 2017
Published: Aug 11, 2017
SAN DIEGO--(BUSINESS WIRE)--DJO Global, Inc. (“DJO” or the “Company”), a leading global provider of medical technologies designed to get and keep people moving, today announced financial results for its public reporting subsidiary, DJO Finance LLC (“DJOFL”), for the second quarter ended July 1, 2017.
Second Quarter Financial Highlights
- Net sales grew 0.6% to $294.7 million, or 2.3% on a sales-per-day, constant currency basis.
- Net loss attributable to DJOFL was $34.4 million compared to $23.3 million in the prior year period.
- Adjusted EBITDA was $63.5 million.
Business Transformation Progress
- Significant investments were made, as planned, in the Company’s transformation which remains on track to deliver 7% to 10% annual cost reduction by the end of 2018.
- Transformation actions taken to date expected to contribute $15 million in annual savings over the next four quarters.
“Our results for the second quarter, and for the first half, of the year are ahead of our annual operating plan and reflect the hard work our team has contributed to growing the business while transforming our operations,” said Brady Shirley, DJO’s President and Chief Executive Officer. “Over the first half of 2017, we continued to grow our global business and we grew Adjusted EBITDA faster than revenue. We also continued to execute on our business transformation, making investments and taking actions that support our priorities of improved profitability, liquidity, growth and customer experience. Looking forward, we remain confident in both our transformation and the team that we have in place to deliver long-term value to our customers, employees and investors.”
DJOFL achieved net sales for the second quarter of 2017 of $294.7 million, reflecting growth of 0.6%, compared with net sales of $292.9 million for the second quarter of 2016. The second quarter of 2017 included 61 shipping days for our international business compared to 63 for the same period in 2016, while domestic shipping days remained constant at 64 for both the second quarter of 2017 and 2016. Sales in the second quarter of 2017 grew 2.3% on a sales-per-day, constant currency basis over sales in the second quarter of 2016. For the six months ending July 1, 2017, sales grew 2.0% to $583.1 million over the same period in 2016, or 2.7% on a constant currency basis.
Net sales for the Surgical Implant segment grew 17.4% in the second quarter of 2017 to $50.0 million. Sales across all three implant subcategories (knee, hip and shoulder) again grew at double digit rates compared to the prior year. For the six months ending July 1, 2017, Surgical Implant sales grew 16.3%, over the comparable period in 2016, to $99.6 million.
Net sales for DJO’s International segment were $79.6 million in the second quarter of 2017, a decline of 0.6% compared to the second quarter of 2016. On the basis of constant currency and taking into account 61 shipping days for our international business compared to 63 in the prior year, International sales grew 5.3% driven by stronger sales in the Company’s direct markets, primarily Australia, France and Spain, as well as continued growth in the Company’s export markets. For the six months ending July 1, 2017, International sales grew 1.7% to $157.8 million, or 4.3% on a constant currency basis over the comparable period in 2016.
Net sales for DJO’s Recovery Sciences segment were $38.8 million in the second quarter of 2017, reflecting growth of 0.8% compared to the second quarter of 2016. Growth in both of the segment’s major product lines, Chattanooga rehabilitation equipment and Regeneration CMF, was relatively flat in the quarter compared to the prior year period. For the six months ending July 1, 2017, Recovery Sciences sales grew 3.0% to $77.3 million.
Net sales for DJO’s Bracing and Vascular segment were $126.4 million in the second quarter of 2017, a decline of 4.1%, compared to the second quarter of 2016, reflecting general softness across the Company’s bracing and support products, as well as continued pressure in the Company’s Dr. Comfort product line. For the six months ending July 1, 2017, Bracing and Vascular sales declined 2.9% to $248.5 million.
For the second quarter of 2017, DJOFL reported a net loss of $34.4 million compared to a net loss of $23.3 million for the second quarter of 2016. As detailed in the attached financial tables, the results for the current and prior year second quarter periods and the current and prior year twelve-month periods were impacted by significant non-cash items, non-recurring items and other adjustments.
Adjusted EBITDA for the second quarter of 2017 was $63.5 million compared with Adjusted EBITDA of $63.6 million in the second quarter of 2016. Adjusted EBITDA for the first six months of 2017 was $120.8 million compared with Adjusted EBITDA of $112.5 million in the first six months of 2016. Including projected future savings from cost savings programs currently underway of $15.0 million as permitted under our credit agreement and the indentures governing our outstanding notes, Adjusted EBITDA for the twelve months ended July 1, 2017 was $258.6 million.
The Company defines Adjusted EBITDA as net (loss) income attributable to DJOFL plus net interest expense, income tax provision (benefit), and depreciation and amortization, further adjusted for certain non-cash items, non-recurring items and other adjustment items as permitted in calculating covenant compliance under the Company’s secured term loan and revolving credit facilities (“Senior Secured Credit Facilities”) and the indentures governing its 8.125% second lien notes and its 10.75% third lien notes. A reconciliation between net loss attributable to DJOFL and Adjusted EBITDA is included in the attached financial tables.
Net cash provided by continuing operating activities for the six months ending July 1, 2017 was $38.1 million compared to a net use of cash of $10.6 million for the same period of 2016. The improvement in cash flow was primarily attributable to working capital initiatives executed as part of the Company’s overall business transformation.