“Our adjusted operating performance continued to improve during the quarter as we grew our core business, further leveraged our operating infrastructure, and began to optimize our R&D investment,” commented Michael Dinkins, Senior Vice President & CFO. “During the quarter, we also continued to aggressively address the operational issues we are experiencing at our Swiss Orthopaedic facilities. We continue to move forward with our consolidation plans as diligently as possible in order to resolve these issues in a timely and effective manner. As a result of the progress we have made, we now expect that our adjustments to non-GAAP operating income for 2012 will be $40 million to $45 million compared to the $20 million to $30 million estimate provided last quarter. It is important to note that, while we are increasing the 2012 estimate for these costs, the overall estimate to complete our consolidation initiatives remains unchanged and the impact to our operating cash flows will be significantly less than the charges taken. Even though these charges reduce our GAAP operating results in the near term, these initiatives will increase operating leverage and profitability as we move forward.”
Third Quarter Results
Third quarter 2012 sales increased 22% over the prior year period to $161.3 million. This increase was driven by the results from our acquisitions, which added $21.6 million to sales, as well as growth of 13% in CRM/Neuromodulation and 20% in Vascular Access revenue. On an organic constant currency basis, sales for the third quarter increased 8% versus the prior year as the benefits described above were partially offset by operational issues experienced within our Orthopaedics product line. Third quarter results also included the impact of foreign currency exchange rate fluctuations, which lowered Orthopaedic sales by approximately $2 million in comparison to the prior year.Gross profit increased $9.0 million to $51.0 million in the third quarter of 2012, compared to $41.9 million for the comparable 2011 period. This increase in gross profit primarily resulted from the higher sales volumes discussed above. Gross profit as a percentage of sales for the current quarter of 31.6% remained consistent with the prior year, as the benefit of higher production volumes was offset by production inefficiencies at our Swiss Orthopaedic facilities.