Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 2.54 0.14%
NASDAQ 4,095.52 9.29 0.23%
Ticker Volume Price Price Delta
STOXX 50 3,155.81 16.55 0.53%
FTSE 100 6,625.25 41.08 0.62%
DAX 9,409.71 91.89 0.99%
Ticker Volume Price Price Delta
NIKKEI 14,516.27 98.74 0.68%
TOPIX 1,173.37 6.78 0.58%
HANG SENG 22,760.24 64.23 0.28%

DJO Global Announces Financial Results for Fourth Quarter and Fiscal Year End 2012



  DJO Global Announces Financial Results for Fourth Quarter and Fiscal Year
  End 2012

   Reports record revenue results and significant improvements in operating
                income and cash flow from operating activities

Business Wire

SAN DIEGO -- February 13, 2013

DJO Global, Inc. (“DJO” or the “Company”), a leading global provider of
medical device solutions for musculoskeletal health, vascular health and pain
management, today announced financial results for its public reporting
subsidiary, DJO Finance LLC (“DJOFL”), for the fourth quarter and fiscal year
ended December 31, 2012.

Fourth Quarter Results

DJOFL achieved record net sales for the fourth quarter of 2012 of $290.5
million, reflecting growth of 2.2 percent compared to net sales of $284.2
million for the fourth quarter of 2011. Net sales for the fourth quarter of
2012 were unfavorably impacted by $1.5 million related to changes in foreign
currency exchange rates compared to the rates in effect in the fourth quarter
of 2011. Excluding the impact of changes in foreign currency exchange rates
from rates in effect in the prior year period (“constant currency”), net sales
for the fourth quarter of 2012 increased 2.8 percent compared to net sales for
the fourth quarter of 2011.

For the fourth quarter of 2012, DJOFL reported a net loss attributable to
DJOFL of $47.0 million, compared to a net loss of $148.2 million for the
fourth quarter of 2011. As detailed in the attached financial tables, the
results for the current and prior year fourth quarter periods were impacted by
significant non-cash items, non-recurring items and other adjustments,
although such adjustments were significantly lower in the current year period
than in the prior year period.

The Company defines Adjusted EBITDA as net (loss) income attributable to DJOFL
plus interest expense, net, 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 amended senior secured credit facility and the
indentures governing its 8.75% second priority senior secured notes, its
9.875% and 7.75% senior notes and its 9.75% senior subordinated notes.
Reconciliation between net loss and Adjusted EBITDA is included in the
attached financial tables.

Adjusted EBITDA for the fourth quarter of 2012 was $71.6 million, or 24.7
percent of net sales, reflecting a decrease of 3.9 percent compared with
Adjusted EBITDA of $74.5 million, or 26.2 percent of net sales, for the fourth
quarter of 2011. Adjusted EBITDA for the fourth quarter of 2012 was
unfavorably impacted by $0.4  million related to changes in foreign currency
exchange rates compared to the rates in effect in the fourth quarter of 2011.
Adjusted EBITDA for the fourth quarter of 2011 included a $4.2 million benefit
related to an adjustment to reduce deferred gross profit from intercompany
sales of inventory. In constant currency and excluding the $4.2 million
adjustment recorded in the fourth quarter of 2011, Adjusted EBITDA for the
current quarter was $72.0 million, reflecting an increase of 2.4 percent
compared with Adjusted EBITDA of $70.3 million for the fourth quarter of 2011.

Year-to-Date Results

DJOFL achieved record net sales of $1,129.4 million for the year ended
December 31, 2012, reflecting growth of 5.1% compared to net sales of $1,074.8
million for the year ended December 31, 2011. Net sales for 2012 were
unfavorably impacted by changes in foreign currency exchange rates aggregating
$15.3 million compared to the rates in effect in 2011. In constant currency,
net sales for 2012 increased by 6.5% compared to net sales for 2011.

DJOFL’s net sales for 2012 included net sales from businesses acquired in
2011. On a pro forma basis, as if the acquisitions of Circle City Medical,
acquired in February 2011, and Dr. Comfort, acquired in April 2011, had both
closed on January 1, 2011, net sales would have reflected growth of 4.5% on
the basis of constant currency over pro forma net sales of $1,095.4 million
for 2011.

For the year ended December 31, 2012, DJOFL reported a net loss attributable
to DJOFL of $119.2 million, compared to a net loss attributable to DJOFL of
$214.5 million for the year ended December 31, 2011. As detailed in the
attached financial tables, the results for the years ended December 31, 2012
and 2011 were impacted by significant non-cash items, non-recurring items and
other adjustments. For the year ended December 31, 2012, DJOFL achieved
operating income of $92.9 million, reflecting significant improvement compared
to an operating loss of $92.3 million for the year ended December 31, 2011.

Adjusted EBITDA for the year ended December 31, 2012 was $271.0 million, or
24.0% of net sales, reflecting an increase of 2.5% compared with Adjusted
EBITDA of $264.3 million, or 24.6% of net sales, for the year ended December
31, 2011. Adjusted EBITDA for 2012 was unfavorably impacted by $3.2  million
related to changes in foreign currency exchange rates compared to the rates in
effect in 2011. In constant currency and pro forma for the acquisitions
discussed above and excluding the $4.2 million adjustment recorded in the
fourth quarter of 2011, Adjusted EBITDA for the year ended December 31, 2012
was $274.2 million, reflecting growth of 2.4% compared with pro forma Adjusted
EBITDA of $267.9 million for the year ended December 31, 2011.

Including $1.6 million of preacquisition Adjusted EBITDA and $1.4 million of
anticipated future cost savings related to recently acquired businesses,
Adjusted EBITDA was $274.0 million, or 24.3 percent of net sales for the year
ended December 31, 2012.

“We are pleased to end 2012 with full year constant currency growth in net
sales of 4.5% compared to pro forma net sales for 2011. Our successful new
product launches and improving commercial execution continue to drive strong
momentum across most of our businesses and provide a solid foundation for
incremental growth in 2013,” said Mike Mogul, DJO’s president and chief
executive officer. “I want to especially congratulate our Bracing and
Vascular, Surgical Implant and International teams, for delivering strong
organic growth of 8.2%, 12.4% and 5.7%, respectively, in 2012. Although we
continue to face market challenges in our Recovery Sciences business unit,
with sales declining 2.3% in 2012 compared to 2011, the strength of the sales
results from our other businesses compensated for those headwinds in 2012. As
expected, our fourth quarter growth rates were impacted by the anniversary of
the October 2011 launch of Exos and the first full quarter impact of the
recent non-coverage decision by Medicare for TENS used to treat chronic low
back pain (“CLBP”). We were very pleased to see average daily sales in the
fourth quarter accelerate from average daily sales in the third quarter for
all business segments, including Recovery Sciences.

“We were very excited to complete the acquisition of Exos right at year end
and we welcome the Exos team to the DJO Global family. Because we were already
the exclusive distribution partner for Exos, the merger will not impact our
reported net sales, but is expected to increase our operating margins and
operating income from the sale of Exos products, and importantly, permit us to
participate more comprehensively in planning and executing many exciting new
product development opportunities incorporating the Exos technology.

“We are also pleased to report strong constant currency Adjusted EBITDA
results in the fourth quarter at 24.7% of net sales, the highest quarterly
margin in 2012, in spite of our continuing investments in new product
development and launch activities and to expand and strengthen our commercial
organization.

“Having just finished a highly successful global sales meeting, we continue to
be very optimistic about incremental opportunities to add value to our
customers and to further accelerate DJO’s revenue growth. While it’s great
that we are achieving our short-term revenue growth targets of mid-single
digits, we remain very keenly focused on continuing to enhance our customers’
experience by developing and launching innovative new products and by striving
for continuous improvement in our commercial execution.

“We have a very exciting slate of new products for 2013 that we will begin to
launch late in the first quarter. We expect these new products and other
ongoing commercial initiatives to drive incremental top line growth beginning
in the second quarter of 2013, and we are targeting total company full year
revenue growth rates of at least 5% for the full 2013 year. As it relates
specifically to the first quarter of 2013, we expect total company revenue
growth rates to continue to be somewhat muted by the impact of the Medicare
CLBP decision and the anniversary dates of certain new products launched in
2012.

“For the full 2013 year, we expect to absorb the impact of both the Medicare
CLBP decision and the new Medical Device Excise Tax (“MDET”) and still deliver
growth in Adjusted EBITDA that is at least as high as our revenue growth. For
the first quarter, however, we expect Adjusted EBITDA and Adjusted EBITDA
margins to contract modestly from the prior year amounts, due to the impact of
the MDET and the Medicare CLBP decision, along with increased operating
expense investments related to upcoming product launches planned for the
meeting of the American Academy of Orthopedic Surgeons in March.”

Sales by Business Segment

Net sales for DJO’s Bracing and Vascular segment were $112.2 million in the
fourth quarter of 2012, reflecting growth of 5.6%, compared to the fourth
quarter of 2011, driven by strong contribution from the sales of new products
and improving sales execution. For the full year of 2012, net sales for the
Bracing and Vascular segment increased 8.2% on a pro forma basis over the full
year of 2011.

Net sales for the Recovery Sciences segment contracted by 5.2% compared to the
fourth quarter of 2011 to $84.7 million, primarily reflecting the effects of
the Medicare CLBP decision on the EMPI business unit and slow market
conditions for capital equipment sold by our Chattanooga business. For the
full year of 2012, net sales for the Recovery Sciences segment contracted 2.3%
from net sales for the full year of 2011.

Fourth quarter net sales within the International segment were $73.9 million,
reflecting an increase of 2.8% from the prior year period including the impact
of $1.5 million of unfavorable changes in foreign currency exchange rates from
rates in effect in the fourth quarter of 2011. In constant currency, growth in
net sales from the prior year fourth quarter was 4.9% for the International
segment. For the full year of 2012, net sales for the International segment
increased 5.7% on a constant currency basis over pro forma sales for the full
year of 2011.

Net sales for the Surgical Implant segment were $19.8 million in the fourth
quarter, reflecting an increase of 18.1% over net sales in the fourth quarter
of 2011, driven by strong sales of the Company’s shoulder products and other
new products and strong sales execution. For the full year of 2012, net sales
for the Surgical Implant segment increased 12.4% over 2011.

As of December 31, 2012, the Company had cash balances of $31.2 million and
available liquidity of $97.0 million under its revolving line of credit. As
previously announced, during the third quarter of 2012, the Company commenced
a comprehensive refinancing which closed early in the fourth quarter. The
refinancing included the issuance of $100.0 million tack-on 8.75% second
priority senior secured notes due 2018, as well as $440.0 million of new
9.875% senior unsecured notes due 2018. The proceeds of the new issues were
used: (1) to repay all amounts outstanding on DJOFL’s revolving line of credit
at the closing date, (2) to repay a portion of DJOFL’s $465 million of 10.875%
senior unsecured notes which were tendered to DJOFL prior to the closing date
and (3) to pay premiums and expenses incurred in connection with the
refinancing. DJOFL redeemed all remaining outstanding 10.875% senior unsecured
notes on November 15, 2012. On December 28, 2012, DJOFL increased the term
loans outstanding under its amended Senior Secured Credit Facility by $25
million. The Company used the proceeds of this incremental term loan and cash
on hand to finance the completion, on December 28, 2012, of the Exos
acquisition previously announced.

For the year ended December 31, 2012, DJOFL generated cash flow from operating
activities of $44.6 million, after cash interest payments of $162.6 million.
For the year ended December 31, 2011, DJOFL generated cash flow from operating
activities of $23.6 million, after cash interest payments of $151.2 million.
Cash flow from operations before cash interest of $207.2 million for 2012
reflected an increase of 18.5% over cash flow from operations before cash
interest of $174.8 million for 2012.

Conference Call Information

DJO has scheduled a conference call to discuss this announcement beginning at
1:00 pm, Eastern Time today, February 13, 2013. Individuals interested in
listening to the conference call may do so by dialing (866) 394-8509
(International callers please use (706) 643-6833), using the reservation code
22322226. A telephone replay will be available for 48 hours following the
conclusion of the call by dialing (855) 859-2056 and using the above
reservation code. The live conference call and replay will be available via
the Internet at www.DJOglobal.com.

About DJO Global

DJO Global is a leading global developer, manufacturer and distributor of
high-quality medical devices that provide solutions for musculoskeletal
health, vascular health and pain management. The Company’s products address
the continuum of patient care from injury prevention to rehabilitation after
surgery, injury or from degenerative disease, enabling people to regain or
maintain their natural motion. Its products are used by orthopedic
specialists, spine surgeons, primary care physicians, pain management
specialists, physical therapists, podiatrists, chiropractors, athletic
trainers and other healthcare professionals. In addition, many of the
Company’s medical devices and related accessories are used by athletes and
patients for injury prevention and at-home physical therapy treatment. The
Company’s product lines include rigid and soft orthopedic bracing, hot and
cold therapy, bone growth stimulators, vascular therapy systems and
compression garments, therapeutic shoes and inserts, electrical stimulators
used for pain management and physical therapy products. The Company’s surgical
division offers a comprehensive suite of reconstructive joint products for the
hip, knee and shoulder. DJO Global’s products are marketed under a portfolio
of brands including Aircast®, Chattanooga, CMF™, Compex®, DonJoy®, Empi®,
ProCare®, DJO® Surgical, Dr. Comfort® and Exos^TM, For additional information
on the Company, please visit www.DJOglobal.com.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements relate to, among
other things, the Company’s expectations for its growth in revenue and
Adjusted EBITDA and its opportunities to improve commercial execution and to
develop new products and services. The words “believe,” “will,” “should,”
“expect,” “intend,” “estimate” and “anticipate,” variations of such words and
similar expressions identify forward-looking statements, but their absence
does not mean that a statement is not a forward-looking statement. These
forward-looking statements are based on the Company’s current expectations and
are subject to a number of risks, uncertainties and assumptions, many of which
are beyond the Company’s ability to control or predict. The Company undertakes
no obligation to update any forward-looking statements, whether as a result of
new information, future events or otherwise. The important factors that could
cause actual operating results to differ significantly from those expressed or
implied by such forward-looking statements include, but are not limited to:
the successful execution of the Company’s business strategies relative to its
Bracing and Vascular, Recovery Sciences, International and Surgical Implant
segments; the continued growth of the markets the Company addresses and any
impact on these markets from changes in global economic conditions; the
successful execution of the Company’s sales and acquisition strategies; the
impact of potential reductions in reimbursement levels and coverage by
Medicare and other governmental and commercial payors; the Company’s highly
leveraged financial position; the impact on the Company and its customers from
changes in global credit markets; the Company’s ability to successfully
develop, license or acquire, and timely introduce and market new products or
product enhancements; risks relating to the Company’s international
operations; resources needed and risks involved in complying with government
regulations and in developing and protecting intellectual property; the
availability and sufficiency of insurance coverage for pending and future
product liability claims, including multiple lawsuits related to the Company’s
cold therapy products and its discontinued pain pump business; and the effects
of healthcare reform, Medicare competitive bidding, managed care and buying
groups on the prices of the Company’s products. These and other risk factors
related to DJO are detailed in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2011, filed with the Securities and Exchange
Commission (“SEC”) on February 21, 2012, and its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2012, filed with the SEC on May 1, 2012. Many
of the factors that will determine the outcome of the subject matter of this
press release are beyond the Company’s ability to control or predict.

 
DJO Finance LLC
Unaudited Condensed Consolidated Statements of Operations
(In thousands)
                                                                              
                      Three Months Ended                   Twelve Months Ended
                      December 31,                         December 31,
                      2012              2011               2012                2011
                                                                                            
Net sales             $ 290,510         $ 284,155          $ 1,129,420         $ 1,074,770
Cost of sales
(exclusive of         115,586           106,429            443,920             418,138
amortization,
see note 1)
Gross profit          174,924           177,726            685,500             656,632
                                                                                            
Operating
expenses:
Selling,
general and           117,448           125,323            460,065             487,084
administrative
Research and          6,182             7,129              27,877              26,850
development
Amortization of
intangible            23,738            24,584             97,243              93,957
assets
Impairment of
goodwill and          7,397             141,006            7,397               141,006
intangible
assets
                      154,765           298,042            592,582             748,897
Operating             20,159            (120,316   )       92,918              (92,265     )
income (loss)
                                                                                            
Other income
(expense):
Interest              (48,156   )       (43,012    )       (183,055    )       (169,332    )
expense
Interest income       50                105                201                 345
Loss on
modification
and                   (27,491   )       —                  (36,889     )       (2,065      )
extinguishment
of debt
Other income          622               (1,263     )       3,553               (2,814      )
(expense), net
                      (74,975   )       (44,170    )       (216,190    )       (173,866    )
Loss before           (54,816   )       (164,486   )       (123,272    )       (266,131    )
income taxes
Income tax            7,948             16,489             4,904               52,544
benefit
Net loss              (46,868   )       (147,997   )       (118,368    )       (213,587    )
Net income
attributable to       (168      )       (214       )       (782        )       (882        )
non-controlling
interests
Net loss
attributable to       $ (47,036 )       $ (148,211 )       $ (119,150  )       $ (214,469  )
DJO Finance LLC
 
Note 1 — Cost of sales is exclusive of amortization of intangible assets of $8,842 and
$38,355 for the
three and twelve months ended December 31, 2012, and $9,837 and $38,668 for the three and
twelve
months ended December 31, 2011, respectively.

 
DJO Finance LLC
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
 
                                             December 31,
                                             2012                2011
Assets
Current assets:
Cash and cash equivalents                    $ 31,223            $ 38,169
Accounts receivable, net                     166,742             158,982
Inventories, net                             156,315             128,699
Deferred tax assets, net                     33,283              43,458
Prepaid expenses and other current           18,073              18,791
assets
Total current assets                         405,636             388,099
Property and equipment, net                  107,035             107,108
Goodwill                                     1,249,305           1,228,778
Intangible assets, net                       1,055,531           1,132,694
Other assets                                 45,216              38,181
Total assets                                 $ 2,862,723         $ 2,894,860
                                                                              
Liabilities and Equity
Current liabilities:
Accounts payable                             $ 54,294            $ 57,926
Accrued interest                             31,653              20,928
Current portion of debt and capital          8,858               8,820
lease obligations
Other current liabilities                    93,640              81,771
Total current liabilities                    188,445             169,445
Long-term debt and capital lease             2,223,816           2,159,091
obligations
Deferred tax liabilities, net                241,202             252,194
Other long-term liabilities                  24,850              16,174
Total liabilities                            2,678,313           2,596,904
                                                                              
Commitments and contingencies
                                                                              
Equity:
DJO Finance LLC membership equity:
Member capital                               839,234             834,871
Accumulated deficit                          (658,426    )       (539,276    )
Accumulated other comprehensive income       1,284               218
Total membership equity                      182,092             295,813
Noncontrolling interests                     2,318               2,143
Total equity                                 184,410             297,956
Total liabilities and equity                 $ 2,862,723         $ 2,894,860
                                                                              

 
DJO Finance LLC
Unaudited Segment Information
(In thousands)
 
 
                    Three Months Ended                   Twelve Months Ended
                    December 31,                         December 31,
                    2012              2011               2012                2011
Net sales:
Bracing and         $ 112,162         $ 106,241          $ 441,256           $ 387,928
Vascular
Recovery              84,652            89,264             334,649             342,599
Sciences
International       73,886            71,876             280,535             279,299
Surgical            19,810            16,774             72,980              64,944
Implant
                    $ 290,510         $ 284,155          $ 1,129,420         $ 1,074,770
Gross Profit:
Bracing and         $ 56,768          $ 53,624           $ 225,916           $ 203,217
Vascular
Recovery            64,173            67,084             253,340             258,920
Sciences
International       40,569            42,766             155,265             161,142
Surgical            14,800            12,621             54,658              46,860
Implant
Expenses not
allocated to        (1,386    )       1,631              (3,679      )       (13,507     )
segments and
eliminations
                    $ 174,924         $ 177,726          $ 685,500           $ 656,632
Operating
Income:
Bracing and         $ 21,192          $ 20,756           $ 85,743            $ 75,095
Vascular
Recovery            25,426            24,502             92,346              93,394
Sciences
International       14,725            16,711             54,227              57,501
Surgical            3,270             2,093              8,016               4,323
Implant
Expenses not
allocated to        (44,454   )       (184,378   )       (147,414    )       (322,578    )
segments and
eliminations
                    $ 20,159          $ (120,316 )       $ 92,918            $ (92,265   )
                                                                                          

                               DJO Finance LLC
                               Adjusted EBITDA
For the Three and Twelve Months Ended December 31, 2012 and December 31, 2011
                                 (unaudited)

Our Amended Senior Secured Credit Facility, consisting of a $476.5 million
term loan, a $385.5 million term loan and a $100.0 million revolving credit
facility, under which $3.0 million was outstanding as of December 31, 2012,
and the Indentures governing our $330.0 million of 8.75% second priority
senior secured notes, $440.0 million of 9.875% senior notes, $300.0 million of
7.75% senior notes, and $300.0 million of 9.75% senior subordinated notes
represent significant components of our capital structure. Under our Amended
Senior Secured Credit Facility, we are required to maintain specified first
lien net leverage ratios, which become more restrictive over time, and which
are determined based on our Adjusted EBITDA. If we fail to comply with the
first lien net leverage ratio under our Amended Senior Secured Credit
Facility, we would be in default. Upon the occurrence of an event of default
under the Amended Senior Secured Credit Facility, the lenders could elect to
declare all amounts outstanding under the Amended Senior Secured Credit
Facility to be immediately due and payable and terminate all commitments to
extend further credit. If we were unable to repay those amounts, the lenders
under the Amended Senior Secured Credit Facility could proceed against the
collateral granted to them to secure that indebtedness. We have pledged a
significant portion of our assets as collateral under the Amended Senior
Secured Credit Facility. Any acceleration under the Amended Senior Secured
Credit Facility would also result in a default under the Indentures governing
the notes, which could lead to the note holders electing to declare the
principal, premium, if any, and interest on the then outstanding notes
immediately due and payable. In addition, under the Indentures governing the
notes, our ability to engage in activities such as incurring additional
indebtedness, making investments, refinancing subordinated indebtedness,
paying dividends and entering into certain merger transactions is governed, in
part, by our ability to satisfy tests based on Adjusted EBITDA. Our ability to
meet the covenants specified above will depend on future events, many of which
are beyond our control, and we cannot assure you that we will meet those
covenants.

Adjusted EBITDA is defined as net income (loss) attributable to DJO Finance
LLC plus interest expense, net, 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 and other ratios under our Amended Senior Secured Credit
Facility and the Indentures governing our 8.75% second priority senior secured
notes, 9.875% senior notes, 7.75% senior notes and our 9.75% senior
subordinated notes. We believe that the presentation of Adjusted EBITDA is
appropriate to provide additional information to investors about the
calculation of, and compliance with, certain financial covenants and other
ratios in our Amended Senior Secured Credit Facility and the Indentures.
Adjusted EBITDA is a material component of these calculations.

Adjusted EBITDA should not be considered as an alternative to net income
(loss) or other performance measures presented in accordance with accounting
principles generally accepted in the United States of America (“GAAP”), or as
an alternative to cash flow from operations as a measure of our liquidity.
Adjusted EBITDA does not represent net income (loss) or cash flow from
operations as those terms are defined by GAAP and does not necessarily
indicate whether cash flows will be sufficient to fund cash needs. In
particular, the definition of Adjusted EBITDA under our Amended Senior Secured
Credit Facility and the Indentures allows us to add back certain non-cash,
extraordinary, unusual or non-recurring charges that are deducted in
calculating net income (loss). However, these are expenses that may recur,
vary greatly and are difficult to predict. While Adjusted EBITDA and similar
measures are frequently used as measures of operations and the ability to meet
debt service requirements, Adjusted EBITDA is not necessarily comparable to
other similarly titled captions of other companies due to the potential
inconsistencies in the method of calculation.

The following table provides reconciliation between net loss and Adjusted
EBITDA:

                       
                        Three Months Ended                   Twelve Months Ended
                        December 31,                         December 31,
(In thousands)          2012              2011               2012               2011
Net loss
attributable to         $ (47,036 )       $ (148,211 )       $ (119,150 )       $ (214,469 )
DJO Finance LLC
Interest                48,106            42,907             182,854            168,987
expense, net
Income tax              (7,948    )       (16,489    )       (4,904     )       (52,544    )
benefit
Depreciation
and                     31,282            30,573             127,459            121,251
amortization
Non-cash                6,787             151,473            10,742             163,918
charges (a)
Non-recurring
and integration         11,597            10,815             32,584             63,717
charges (b)
Other
adjustment
items, before
adjustments             28,831            3,423              41,400             13,393
applicable for
the twelve
month periods
only (c)
Adjusted EBITDA
before other
adjustment
items                                                        270,985            264,253
applicable for
the twelve
month periods
only
                                                                                            
Other
adjustment
items
applicable for
the twelve
month periods
only (d):
Pre-acquisition                                              1,590              7,873
Adjusted EBITDA
Future cost
savings related                                              1,396              5,905
to recent
acquisitions
Adjusted EBITDA         $ 71,619          $ 74,491           $ 273,971          $ 278,031

(a) Non-cash charges are comprised of the following:

                     Three Months Ended                 Twelve Months Ended
                     December 31,                       December 31,
(In                  2012             2011              2012             2011
thousands)
Stock
compensation         $ (1,224 )       $ 1,001           $ 2,339          $ 2,701
expense
(credit)
Impairment
of goodwill
and                  7,397            141,006           7,397            141,006
intangible
assets
Impairment
of fixed
assets and           595              7,116             975              7,466
assets held
for sale
Loss on
disposal of          19               (14       )       31               409
assets, net
Purchase
accounting           —                2,364             —                12,336
adjustments
Total
non-cash             $ 6,787          $ 151,473         $ 10,742         $ 163,918
charges

(b) Non-recurring and integration charges are comprised of the following:

                       Three Months Ended                Twelve Months Ended
                       December 31,                      December 31,
(In thousands)         2012             2011             2012             2011
Integration
charges:
Commercial and
global
business unit          $ 1,602          $ 3,064          $ 7,025          $ 12,228
reorganization
and
integration
Acquisition
related
expenses and           1,532            502              3,020            8,661
integration
(1)
CEO transition         —                83               183              4,270
Litigation and
regulatory
costs and              7,837            2,451            12,582           6,971
settlements,
net (2)
Other
non-recurring          343              20               4,129            3,342
items
ERP
implementation
and other              283              4,695            5,645            28,245
automation
projects
Total
non-recurring
and                    $ 11,597         $ 10,815         $ 32,584         $ 63,717
integration
charges

                            Consists of direct acquisition costs and
                            integration expenses related to the Exos, Dr.
                  (1)       Comfort, Elastic Therapy, Inc. (ETI) and Circle
                            City acquisitions and costs related to potential
                            acquisitions.
                             
                             
                            For the three months ended December 31, 2012,
                            litigation and regulatory costs and settlements
                            includes $2.8 million of estimated costs to
                            complete a post-market surveillance study required
                            by the FDA related to our discontinued
                  (2)       metal-on-metal hip implant products, $1.6 million
                            related to ongoing product liability issues
                            related to our discontinued pain pump products, a
                            $1.3 million judgement related to a French
                            litigation matter we intend to appeal and $2.1
                            million related to other litigation and regulatory
                            costs and settlements.

(c) Other adjustment items are comprised of the following:

                        Three Months Ended               Twelve Months Ended
                        December 31,                     December 31,
(In thousands)          2012             2011            2012             2011
Blackstone              $ 1,750          $ 1,750         $ 7,000          $ 7,000
monitoring fees
Non-controlling         168              214             781              882
interests
Loss on
modification
and                     27,491           —               36,889           2,065
extinguishment
of debt (1)
Other (2)               (578     )       1,459           (3,270   )       3,446
Total other
adjustment              $ 28,831         $ 3,423         $ 41,400         $ 13,393
items

                              Loss on modification and extinguishment of debt
                              for the three months ending December 31, 2012
                              consists of $17.2 million in premiums related to
                              the repurchase or redemption of our 10.875%
                              Notes, $12.7 million related to the non-cash
                              write off of unamortized debt issuance costs
                              related to the 10.875% Notes and $0.1 million in
                              legal and other fees, net of $2.5 million
                              related to the non-cash write off of unamortized
                              original issue premium associated with the
                              10.875% Notes. Loss on modification and
                              extinguishment of debt for the twelve months
                    (1)       ending December 31, 2012 consists of the
                              preceding amounts and $8.6 million of
                              arrangement and amendment fees and other fees
                              and expenses incurred in connection with the
                              March 2012 amendment of our Senior Secured
                              Credit Facility and $0.8 million related to the
                              non-cash write off of unamortized debt issuance
                              costs and original issue discount associated
                              with a portion of our term loans which were
                              extinguished. Loss on modification of debt for
                              the twelve months ended December 31, 2011 is
                              comprised of arrangement and lender consent fees
                              associated with the February 2011 amendment of
                              our Senior Secured Credit Facility.
                               
                              Other adjustments consist primarily of net
                    (2)       realized and unrealized foreign currency
                              transaction gains and losses.

(d) Other adjustment items applicable for the twelve month period only include
future cost savings and pre-acquisition EBITDA related to the acquisitions of
Exos, Dr. Comfort, ETI, and Circle City for the year ended December 31, 2012
and Dr. Comfort, ETI, and Circle City for the year ended December 31, 2011.

Contact:

DJO Investor/Media Contact:
DJO Global, Inc.
Matt Simons
SVP Business Development and Investor Relations
760-734-5548
matt.simons@DJOglobal.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement