|Edgar Online, Inc.|
We design, manufacture and market a comprehensive range of both surgical and non-surgical products used primarily by orthopedic surgeons and other musculoskeletal medical specialists. Our corporate headquarters are located in
Warsaw, Indianaand we have manufacturing and/or office facilities in more than 50 locations worldwide and distribute products in approximately 90 countries.
Our net sales increased 9% for the three months ended
November 30, 2012to $790.1 million, compared to $725.1 millionfor the three months ended November 30, 2011, driven primarily by our acquisition of DePuy's worldwide trauma business (the "Trauma Acquisition") as described below. The effect of foreign currency fluctuations negatively impacted reported net sales for the three months ended November 30, 2012by $11.8 million, with Europereported net sales negatively impacted by $10.3 million, or 6%, and International reported net sales negatively impacted by $1.4 million, or 1%. The following represents key sales growth statistics for the three months ended November 30, 2012compared to the three months ended November 30, 2011: • Large Joint Reconstructive product sales increased 1% worldwide and increased 2% in the U.S.
• Sports, Extremities and Trauma ("
worldwide and 65% in the U.S. Excluding the Trauma Acquisition,
sales increased 14% worldwide and 15% in the U.S. Trauma Acquisition sales
• Spine & Bone Healing product sales decreased 1% worldwide and were flat in
• Dental product sales decreased 9% worldwide and increased 4% in the U.S.
• Other product sales increased 6% worldwide and increased 2% in the U.S.
May 24, 2012, DePuy Orthopaedics, Inc.accepted our binding offer to purchase certain assets representing substantially all of DePuy's worldwide trauma business, which involves researching, developing, manufacturing, marketing, distributing and selling products to treat certain bone fractures or deformities in the human body. On June 15, 2012, the Company announced the initial closing of the transaction. During the first and second quarters of fiscal year 2013 subsequent closings in various foreign countries occurred on a staggered basis, with the final closing occurring on December 7, 2012. We have been active in the capital markets during the first and second quarters of fiscal year 2013. Our objectives included reducing market risk by extending the maturity on the majority of our term loans from March 2015to July 2017, reducing the cost of our capital structure and retaining access to liquidity through the refinancing of our cash flow and asset-based revolvers.
Opportunities and Challenges
Our results of operations could be substantially affected not only by global economic conditions, but also by local operating and economic conditions, which can vary substantially by market. Unfavorable conditions can depress sales in a given market and may result in actions that adversely affect our margins, constrain our operating flexibility or result in charges which are unusual or non-recurring. Certain macroeconomic events, such as the current adverse conditions in the global economy, could have a more wide-ranging and prolonged impact on the general business environment, which could also adversely affect us. In
the United States, healthcare providers that purchase our products (e.g., hospitals, physicians, dentists and other health care providers) generally rely on payments from third-party payors (principally federal Medicare, state Medicaidand private health insurance plans) to cover all or a portion of the cost of our musculoskeletal products. In March 2010, comprehensive health care reform legislation was enacted through the Patient Protection and Affordable Health Care Act (H.R. 3590) and the Health Care and Education Reconciliation Act (H.R. 4872). Among other initiatives, these bills impose a 2.3% excise tax on domestic sales of medical devices following December 31, 2012, which is estimated to contribute approximately $20 billionto healthcare reform. Various healthcare reform proposals have also emerged at the state level. Except for the excise tax, which will impact results of operations following December 31, 2012, we cannot predict with certainty what healthcare initiatives, if any, will be implemented at the state level, or what the ultimate effect of federal health care reform or any future legislation or regulation will have on us. However, an expansion in government's role in the U.S. healthcare industry may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business and results of operations, possibly materially. Outside the United States, reimbursement systems vary significantly from country to country. If adequate levels of reimbursement from third-party payors outside the United Statesare not obtained, international sales of our products may decline. Many foreign markets, including Canadaand some European and Asian countries, have decreased reimbursement rates. Our ability to continue to sell certain products profitably in these markets may diminish if the government-managed healthcare systems continue to reduce reimbursement rates, which can decrease pricing and procedural volume. 33