DJO Global reports first quarter results for 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 first quarter ended March 30, 2013.

“We were pleased to see all of our business segments except for Recovery Sciences, which has been hampered by market and reimbursement hurdles, perform quite well in the first quarter”

First Quarter Results

DJOFL achieved net sales for the first quarter of 2013 of $279.1 million, roughly flat with net sales of $278.9 million for the first quarter of 2012. Net sales for the first quarter of 2013 were not materially affected by changes in foreign currency exchange rates compared to the rates in effect in the first quarter of 2012, but were impacted by fewer shipping days compared to 2012. Average daily sales for the first quarter of 2013 increased 1.9 percent compared to average daily sales for the first quarter of 2012. The first quarter of 2013 included 63 shipping days in the United States and 62 days in most international markets, while the comparable 2012 period included 64 days.

For the first quarter of 2013, DJOFL reported a net loss attributable to DJOFL of $32.4 million, compared to a net loss of $29.4 million for the first quarter of 2012. As detailed in the attached financial tables, the results for the current and prior year first quarter periods were impacted by significant non-cash items, non-recurring items and other adjustments.

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 first quarter of 2013 was $59.8 million, or 21.4 percent of net sales, reflecting a decrease of 8.0 percent compared with Adjusted EBITDA of $65.0 million, or 23.3 percent of net sales, for the first quarter of 2012. Adjusted EBITDA for the first quarter of 2013 was not materially affected by changes in foreign currency exchange rates compared to the rates in effect in the first quarter of 2012.

For the twelve months ended March 30, 2013 (LTM), Adjusted EBITDA was $266.9 million, or 23.6 percent of LTM net sales of $1,129.6 million, including pre-acquisition Adjusted EBITDA and expected future cost savings aggregating $1.1 million related to the Company's recent acquisition of Exos Corporation.

"We were pleased to see all of our business segments except for Recovery Sciences, which has been hampered by market and reimbursement hurdles, perform quite well in the first quarter," said Mike Mogul, DJO's president and chief executive officer. "I want to especially congratulate our Bracing and Supports, Surgical Implant and International teams, for delivering strong organic growth in the first quarter of 2013. Our Recovery Sciences business has been impacted in recent quarters by Medicare's 2012 non-coverage decision related to Transcutaneous Electrical Nerve Stimulation ('TENS') for chronic low back pain ('CLBP') and slower than expected market conditions for capital equipment purchasing, which is impacting our Chattanooga business.

"For the first quarter, as expected, Adjusted EBITDA contracted modestly from the prior year amounts, due partly to the impact of the medical device excise tax, which became effective January 1, 2013, partly to the recent Medicare CLBP non-coverage decision and partly to increased operating expense investments related to upcoming product launches and other revenue growth initiatives.

"We have a very exciting slate of new products for 2013 that we began launching late in the first quarter. These new products were highlighted at the American Academy of Orthopedic Surgeons meeting in March and were extremely well received. 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 continue to target total company full year revenue growth rates of at least 5%. We continue to expect to absorb the impact of both the Medicare CLBP decision and the new medical device excise tax and still deliver full year growth in Adjusted EBITDA that is at least as high as our revenue growth."

Sales by Business Segment

In the first quarter of 2013, DJOFL reassigned certain product lines between its Bracing and Vascular and Recovery Sciences segments and revised the way it allocates costs among its segments. Segment information for all periods presented has been restated to reflect these changes.

Net sales for DJO's Bracing and Vascular segment were $108.1 million in the first quarter of 2013, reflecting growth in average sales per day of 3.7%, compared to the first quarter of 2012, driven by strong contribution from the sales of new products and improving sales execution.

Net sales for DJO's Recovery Sciences segment were $75.5 million in the first quarter of 2013, reflecting a contraction in average sales per day of 8.4%, compared to the first quarter of 2012, reflecting the effects of the Medicare CLBP decision on the EMPI business unit, slow market conditions for capital equipment sold by the Chattanooga business and the impact of certain distribution changes on the CMF bone growth stimulation business unit.

First quarter net sales within the International segment were $73.9 million, reflecting an increase in average sales per day of 6.3% from the prior year period, excluding the impact of $0.1 million of favorable changes in foreign currency exchange rates from rates in effect in the first quarter of 2012 ("constant currency"). The strong international growth is being driven by increased penetration in certain geographies and the impact of sales of new products.

Net sales for the Surgical Implant segment were $21.5 million for the first quarter of 2013, reflecting an increase in average sales per day of 22.1% over net sales in the first quarter of 2012, driven by strong sales of each of the Company's shoulder, knee and hip product lines.

As of March 30, 2013, the Company had cash balances of $36.2 million and available liquidity of $82 million under its revolving line of credit. During the first quarter of 2013, the Company amended its senior secured credit facility to, among other things, reduce the interest rate applicable on the term loans outstanding under the senior secured credit facility to LIBOR plus 3.75%, subject to a minimum LIBOR rate of 1.00%.

Conference Call Information

DJO has scheduled a conference call to discuss this announcement beginning at 1:00 p.m. Eastern Time today, April 26, 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.