First-Quarter Sales Up Slightly at DJO Global

Vista, Calif.-based DJO Global Inc. showed incremental gains in the first quarter of 2014, growing net sales 1.3 percent to $282.7 million. The company reported a net loss of $36.5 million during the three-month period (ended March 29), compared with a net loss of $32.4 million for the same quarter 2013.

President/CEO Mike Mogul said all branches of the company, aside from recovery sciences, delivered positive growth in the first quarter. Its recovery sciences business continues to be impacted by a 2012 Medicare policy that limits coverage for the devices in that sector, such as its electrical stimulation “TENS” device for chronic lower back pain.

DJO’s Q1 net sales were favorably impacted by $900,000 related to changes in foreign currency exchange rates compared with the rates in effect in the first quarter of 2013. Excluding the impact of changes in foreign currency exchange rates from rates in effect last year (“constant currency”), net sales for the first quarter of 2014 increased 2.5 percent on a sales per day basis. The first quarter of 2014 included 62 shipping days in the United States and 61 shipping days in most international markets, while the comparable 2013 period included 63 days.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the first quarter of 2014 was $59.6 million, or 21.1 percent of net sales, remaining flat when compared with adjusted EBITDA of $59.8 million, or 21.4 percent of net sales, in Q1 2013.

” We were pleased to see all of our business segments, except for Recovery Sciences, continue to deliver good sales growth in the first quarter with approximately 2.5 percent growth on a constant currency basis compared to the first quarter of 2013, despite effects of severe weather in the U.S. Our strong global commercial execution continues to drive momentum across most of our businesses,” Mogul said. “I want to especially congratulate our Surgical Implant and International teams, for delivering strong constant currency growth in the first quarter of 2014 of 13.2 percent and 8.9 percent, respectively, as compared to the prior year period. Our Recovery Sciences business continues to be impacted by Medicare’s 2012 non-coverage decision related to Transcutaneous Electrical Nerve Stimulation (“TENS”) for chronic low back pain (“CLBP”) and slow market conditions for capital equipment purchasing, which is impacting our Chattanooga business. Excluding Recovery Sciences, aggregate net sales from our other business segments for the first quarter of 2014 increased by 5.1 percent compared to the prior year period.”

Net sales for DJO’s Bracing and Vascular segment were $109.5 million in the first quarter of 2014, reflecting growth of 3 percent on a sales per day basis, compared with the first quarter of 2013, driven by strong contribution from the sales of new products and improving sales execution.

Net sales for DJO’s Recovery Sciences segment were $68.9 million, reflecting a contraction of 7.5 percent on a sales per day basis, primarily due to the effects of the Medicare CLBP decision on the EMPI business unit and continued slow market conditions for capital equipment sold by the Chattanooga (Tenn.) business unit.

First quarter net sales within the International segment were $80.4 million, reflecting an increase in constant currency net sales on a sales per day basis of 8.9 percent from the first quarter of 2013, excluding the impact of $900,000 million of favorable changes in foreign currency exchange rates.

Net sales for the Surgical Implant segment were $23.9 million, reflecting a sales per day increase of 13.2 percent over first-quarter net sales in 2013, driven by strong sales of each of the company’s shoulder, knee and hip product lines.

As of March 29, the company had cash balances of $47 million and available liquidity of $61.5 million under its $100 million revolving line of credit.