Sorin Group Announces Final Financial Results for 2014

At a meeting held today and chaired by Rosario Bifulco, the Sorin S.p.A. (MIL:SRN) Board of Directors approved the Draft of the 2014 Financial Statements, which will be submitted to the next Shareholders’ meeting convened for April 30, 2015.

"2014 final results are substantially in line with the preliminary figures published on February 11, 2015. The top-line performance in 2014 was driven by strong results of the cardiopulmonary products and by continuous improvement in the CRM business. Net earnings were also in line with our expectations taking into account the negative impact of FX and our continued investments in growth initiatives. During 2014, the Company continued the roll-out of important new products, made significant progress on the development of its New Ventures programs and also closed several strategic deals including the joint venture with MicroPort in CRM and the acquisition of Oscor’s leads business,” said André-Michel Ballester, Sorin Group's Chief Executive Officer. "Recently Sorin Group also announced the transformational merger plan with Cyberonics Inc. to create a new global leader in medical technologies. We expect this deal to further accelerate our growth strategy and build significant shareholder value,” he added.

CONSOLIDATED RESULTS FOR 2014

In 2014, Sorin Group reported revenues of €746.9 million, a 3.4%¹ increase compared to 2013.

Gross profit in 2014 was €438.9 million, or 58.8% of revenues, compared to 59.1% of revenues in 2013. The decrease in Gross margin is mainly due to an unfavourable country mix, to pricing erosion in CRM globally and to the effect of foreign exchange rates, partially compensated by continuous progress in manufacturing efficiencies.

Selling, general and administrative (SG&A) expenses were €285.2 million compared to €280.3 million in 2013. At constant foreign exchange rates, SG&A were substantially flat over the same period of 2013.

Research and development (R&D) expenses were €80.3 million (10.8% of revenues) compared to €73.7 million (10.0% of revenues) in 2013.

EBITDA was €121.0 million, or 16.2% of revenues, compared to €131.1 million, or 17.8% of revenues in 2013. EBITDA included a €7.2 million impact from New Ventures and reflected a €14.0 million unfavorable foreign exchange effect.

EBIT was €73.7 million compared to €68.6 million in 2013. EBIT before special items was €73.4 million in 2014 compared to €82.8 million in 2013. Special items, positive for €0.4 million in 2014, primarily included restructuring charges for €1.5 million and €7.9 million related to the impact from the sales return reserve, balanced by a €15.5 million income related to the insurance indemnification for the earthquakes in Emilia of 2012. The remaining non-recurring charges mainly refer to business development activities and litigation costs.

Net financial charges were €7.8 million compared to €5.7 million in 2013, reflecting FX charges. On a run-rate basis, the financial charges in 2014 increased by €0.2 million compared to 2013.

Net profit was €52.0 million compared to €48.9 million in 2013. The net profit for 2014 includes €15.5 million, considered the minimum insurance payment due to the Company in relation to the damage caused by the 2012 earthquakes. Negotiations for the definitive settlement are expected to be finalized in the short-term.

Adjusted net profit³ was €55.1 million, compared to €60.8 million in 2013. Adjusted net profit included a €5.3 million impact from New Ventures and reflected a €10.0 million unfavorable foreign exchange effect.

Net financial debt as of December 31, 2014 was €124.4 million, compared to €68.7 million as of December 31, 2013 (€113.2 million as of September 30, 2014). Special items for the period were negative for €60.7 million, including €38.5 million for business development initiatives (see details in the attached table).

In 2014, the Company's free cash flow⁴ amounted to €5.0 million, reflecting one-off investments related to the reconstruction of the Mirandola site and a temporary absorption in working capital.

Significant events occurring after December 31, 2014

On February 26, 2015, Sorin and Cyberonics Inc. announced their merger plan to create a new global leader in medical technologies⁵. This merger is expected to drive significant value for shareholders by leveraging combined strengths, capturing new opportunities and creating new solutions to benefit patients and healthcare professionals alike.

The transaction is currently expected to be completed by the end of the third calendar quarter of 2015 and is subject to approval by both Sorin and Cyberonics’ shareholders, the receipt of required antitrust and regulatory clearances, and other customary closing conditions.

Guidance for the current fiscal year and for the first quarter of 2015

For 2015, the Company expects revenues to grow by 4-6%⁶ over 2014 and Adjusted net profit⁷ of approximately €55 million, equivalent to Adjusted EPS (Earnings per share) of 11.5 euro cents, substantially in line with 2014. Sorin expects the temporary dilutive effect of the New Ventures to be in the region of €10 million (of which approximately €3 million incremental compared to 2014) at EBITDA level. FX impact for 2015 is expected neutral at current FX rates.

For the first quarter of 2015, Sorin Group expects revenues to grow 2-3%⁶ over the same period of 2014.

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Results of the parent company, Sorin S.p.A.

The Board of Directors approved the financial statements of the parent company, Sorin S.p.A., which recorded a net profit of €46.5 million (€28.5 million in 2013), and proposed to allocate the profit to the legal reserve (€2.3 million) and retained earnings (€44.2 million).

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Call of the Shareholders' meeting

The draft of the 2014 consolidated financial statements approved by the Sorin S.p.A. Board of Directors will be submitted to the next Shareholders’ meeting convened for April 30, 2015 (single call).

The Shareholders' meeting will also be called upon to pass a resolution in relation to the appointment of members of the Board of Directors and the report on the Management compensation according to art. 123-ter of TUF.

The documentation required by prevailing laws and regulations in relation to the aforementioned matters and in relation to the proposals to be submitted to the Shareholders' meeting will be filed in the period required by law with the registered office of the Company and will also be available on the Internet site: www.sorin.com, Investor Relations section.

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The corporate officer responsible for the company’s financial reports, Demetrio Mauro, declares, pursuant to Paragraph 2 of Article 154-bis of the Consolidated Law on Finance that the accounting information contained in this press release corresponds to the documented results and the accounting books and records.

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In addition to the conventional indicators recommended by the IFRS, this press release provides alternative performance indicators. These indicators should not be considered as replacements for the conventional indicators recommended by the IFRS, but rather as an additional source of information, representative of the income statement, balance sheet and financial position parameters used internally in the decision-making process. An explanation of the meaning and structure of these alternative performance indicators is provided in the Interim Report on Operations at June 30, 2014.

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This press release contains forward-looking statements. These statements are based on the Group’s current expectations and projections about future events and, by their nature, are subject to inherent risks and uncertainties. They relate to events and depend on circumstances that may or may not occur or exist in the future, and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in such statements as a result of a variety of factors, including: continued volatility and further deterioration of capital and financial markets, changes in commodity prices, changes in general economic conditions, economic growth and other changes in business conditions, changes in laws and regulations (both in Italy and abroad), and many other factors, most of which are outside of the Company’s control.

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The amounts indicated in the reclassified layouts of the attached tables are not included in the audit by the Independent Auditors. In addition, notice that the issue of the December 31^st, 2014 auditor’s report of Sorin Group Financial Statements is still in progress.

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About Sorin Group

Sorin Group (Reuters Code: SORN.MI), is a global medical device company and a leader in the treatment of cardiovascular diseases. The Company develops, manufactures and markets medical technologies for cardiac surgery and for the treatment of cardiac rhythm disorders. With 3,900 employees worldwide, the Company focuses on two major therapeutic areas: Cardiac Surgery (cardiopulmonary products for open heart surgery and heart valve repair or replacement products) and Cardiac Rhythm Management (pacemakers, defibrillators, cardiac resynchronization devices). Every year, over one million patients are treated with Sorin Group devices in more than 80 countries.

For more information, please refer to www.sorin.com

¹ At comparable exchange rates and perimeter
² Adjusted net profit: net profit before after-tax non-recurring income and expenses (special items)
³ Adjusted net profit: net profit before after-tax non-recurring income and expenses (special items)
⁴ Free cash flow: net profit + depreciation, amortization and writedowns ± ? working capital – investments. This account is net of the impact of special items
⁵ See press release dated February 26, 2015
⁶ At comparable exchange rates and perimeter
⁷ Adjusted net profit: net profit before after-tax non-recurring income and expenses (special items)