Synthes, Inc. (Synthes), a developer of instruments for the surgical fixation, has reported consolidated net sales of $3.19 billion for the full year of 2008, up 17.2%, compared with the consolidated net sales of $2.75 billion in the previous year-end. It has reported net income of $735 million, or $6.19 per share, for the full year of 2008, compared with net income of $612.6 million, or $5.16 per diluted share, in the previous year-end.
Fourth Quarter 2008
Global sales were US$ 811.3 million, +9.9% vs. prior year (PY) (14.4% in local currencies)
Double-digit local currency sales growth was once again achieved across all geographical regions and product groups
Continued accelerated sales growth and market share gains in Spine globally
Full Year 2008
Double-digit sales growth in all geographical regions and product groups driven by increased penetration of new products, sales force expansion, and increased educational efforts
Strong gross margin of 82.7%
Income tax rate decreased by 3.7 pps vs. PY to 30.3%
Strong cash generation resulted in a record cash balance of US$ 871.5 million, 60% growth vs. PY
Other achievements include the settlement of the TFN (Trochanteric Fixation Nail) case, and the launch of over 90 new products, including ProDisc®-C in the U.S.
Michel Orsinger, president and chief executive officer of Synthes, comments on the performance:
“Our solid performance was achieved thanks to the entire organization’s focus on new product launches, sales force expansion, and education. In today’s challenging economic environment, our conscious management of resources allowed Synthes to deliver yet another record year with strong double-digit earnings growth and end the year with a strong debt-free balance sheet. We are excited about the opportunity to continue growing and strengthening Synthes’ market position in 2009, while improving patient care worldwide.”
Financial Performance (Second Half 2008)
Second half 2008 represents an improvement vs. first half 2008: Local currency sales growth improved to 14.2% (vs. 12.6%), whereas operating expenses (as a percentage of sales) declined to 48.1% (vs. 49.5%). Earnings growth of 14.8% slightly exceeded sales growth (in local currencies) despite FX losses (vs. FX gains in H2 2007) and the one-time payment received in H2 2007 from the Globus Medical litigation settlement.
financial performance (full year 2008)
Full year 2008 gross profit margin of 82.7% (as a percentage of sales) improved vs. full year 2007 of 81.0% due to manufacturing productivity initiatives, lower inventory obsolescence provisions and FX rate changes.
Operating expenses in local currencies (as a percentage of sales) were flat vs. prior year. Productivity improvements offset increased investments in the business supporting sales force expansion and increased education. Higher royalty expenses (primarily paid in Swiss francs) as a percentage of sales resulted from the strengthening Swiss franc vs. the U.S. dollar.
Other Income (Expense) was negatively impacted by foreign exchange losses (vs. gains in the prior year), primarily a result of the strengthening Swiss Franc. Furthermore, the comparison to prior year was negatively impacted by the one-time payment received in H2 2007 from the Globus Medical litigation settlement.
Improvements in the income tax rate to 30.3% (vs. 34.0%) were achieved due to tax planning efforts, changes in tax legislation and settlement of tax contingencies.
Strong net earnings growth exceeded sales growth despite the impact of unfavorable “other income (expense)” items.
Capital expenditures of $ 261.1 million reflect Synthes’ investments in its future growth. Sales force equipment investments of US$ 173.4 million (implant and instrument sets) represent an increase of 25% vs. prior year. Sales force investments are related to Synthes’ continued commitment to sales force expansion and new product launches.
Synthes’ net cash flow of US$ 326.7 million increased 28.2% vs. prior year, resulting in a cash balance of $871.5 million.
In 2008, Synthes increased its staffing by almost 900 employees. Over 80% of the increase included sales force and manufacturing personnel. On December 31, 2008 Synthes employed 9,947 employees worldwide.