DJO intends to save costs, generate greater cash flow from operations

By Devika Patel

Knoxville, Tenn., March 8 – DJO Global, Inc. needs to improve its liquidity and cash generated from operations, executives said.

The company is seeking to transform the company’s balance sheet and believes it can deliver 7% to 10% cost savings and more than $50 million of cash by the end of 2018.

“We are not where we should be at this point in our journey,” chief operating officer and chief financial officer Mike Eklund said on the company’s fourth quarter earnings conference call on Wednesday.

“The reality is, customer experience, productivity and liquidity are not where we need them to be and it’s putting pressure on our business results,” the executive said.

Cash flow from operations was $166.3 million before interest and taxes for 2016, down $68.1 million from the prior year.

At the end of Q4, DJO Global had cash balances of $35.2 million plus additional liquidity of $61.8 million under its revolver.

“The reality has made it imperative that we act more quickly and more aggressively to address the inefficiencies in our cost structure,” Eklund said.

Eklund noted that this process has already begun, and the company expects its efforts in cost reduction to bring 7% to 10% cost savings across the entire organizational cost base and greater than $50 million of incremental cash by the end of 2018.

“We’ve taken the bold step to launch a business transformation that will improve our near-term results and should increase confidence that we will deliver sustainable, top-tier financial performance over the long term.

“As part of the transformation, we are stepping up and accelerating our cost reduction efforts to deliver best-in-class cost, both in our supply chain and in our overhead structures.

“We expect the actions we are taking to deliver 7% to 10% cost savings across the entire organizational cost base and greater than $50 million of incremental cash by the end of 2018,” Eklund said.

“We must improve our liquidity profile and that means greatly increasing the amount of cash we generate from operations,” president, chief executive officer and director Brady R. Shirley said on the call.

“This is going to require a lot of work, but it’s all within our control,” Shirley said.

The company’s net first-lien leverage ratio was 1.44 times last 12 months adjusted EBITDA, well within its 5.35 times covenant.

Fourth quarter adjusted EBITDA was $59.5 million; full year adjusted EBITDA was $235.3 million.

San Diego-based DJO Global is a developer, manufacturer and distributor of medical devices that provide solutions for musculoskeletal health, vascular health and pain management.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.