Those exchange rates combined with a deteriorating global economy (which by itself was ferocious enough to cut a destructive swath through most major manufacturing industries) and a short quarter (two and a half fewer shipping days) to trigger a 6 percent decrease in sales and a 2.6 percent drop in gross profit.
A slow start in January drove sales down to $225.4 million and trimmed gross profit to $140.9 million in the first quarter, ended March 28. DJO President and CEO Les Cross claimed sales were reduced by about $8.6 million due to changes in foreign exchange rates compared with the first quarter of 2008.
DJO’s Chattanooga division sustained the most damage from the quarter’s financial tempest. Cross said the division, which manufactures clinical rehabilitation equipment and supplies for treating muscular, skeletal, neurological and soft tissue disorders, suffered throughout the first quarter from declining capital equipment expenditures by hospitals and clinics.
Some areas of DJO, however, escaped unscathed from the first quarter’s fiscal squall. Operating income jumped 69.7 percent to $13.9 million, and the firm’s net loss fell to $14.3 million, a 40.9 percent decrease compared with the $24.2 million the company posted in the first three months of 2008. In addition, DJO reported sales increases in its Domestic Rehabilitation, International and Surgical Implants segments.
Domestic Rehabilitation sales grew 2.2 percent to $154.4 million, Inter-national sales climbed 1.1 percent to $55.6 million, and Surgical Implants sales swelled 1.6 percent to $15.3 million, according to the company’s first-quarter earnings release.
Medtronic’s Spinal Unit Posts Double-Digit Growth
Recessions have developed such bad reputations over the years.
Typically feared and reviled by most capitalist societies, they are usually conquered and forgotten about before they get the chance to foster true change.
The recession that began 20 months ago, however, is different. Besides its unusually long life span, the economic downturn that began in December 2007 has forced Americans to change their spending habits and companies to innovate in order to maintain steady growth.
Medtronic Inc. has maintained steady growth throughout most of the last 12 months despite the ongoing deterioration of the real estate market and the meltdown of Wall Street last fall. For fiscal 2009, the Minneapolis, Minn.-based firm posted respectable increases in revenue and net earnings; its Spinal and Biologics division (which operates under the name Sofamor Danek USA Inc.) reported a 14 percent spike in revenue.
Revenue growth in the fourth quarter was 5 percent after adjusting for a negative $211 million impact of foreign exchange rates. Full-year revenue jumped 8 percent to $14.59 billion, and net earnings totaled $2.29 billion, or $2.04 per diluted share.
Medtronic’s Sofamor Danek unit reported $881 million in worldwide sales in the fourth quarter of fiscal 2009, a 1.4 percent increase compared with the $869 million the segment posted in the comparable period of 2008. Domestic sales climbed 1.17 percent, going from $683 million in 2008 to $691 million in the last quarter of 2009.
Medtronic’s Core Spinal business grew 3 percent in the fourth quarter, reaching $512 million. For the full fiscal year (ended April 24), the company posted a 4.4 percent increase in Core Spinal revenue, going from $1.86 billion in fiscal 2008 to $1.95 billion in 2009.
The firm’s Kyphon business, which develops and markets minimally invasive spinal products, experienced modest growth both domestically and worldwide in the fourth quarter of 2009.
Domestic sales totaled $118 million, a 5.3 percent increase compared with the $112 million the segment reported in the last quarter of fiscal 2008. Worldwide sales of Kyphon products grew 2.6 percent, reaching $154 million in the fourth quarter.
Kyphon product revenue more than doubled in fiscal 2009, reaching $609 million from $298 million in fiscal 2008, ended April 25 that year. Most of that revenue was generated within the United States—the company reported $451 million in Ky-phon product sales in fiscal 2009, according to unaudited earnings figures from Medtronic.