dj Orthopedics Enjoys Record Year in 2005

Dj Orthopedics Inc. (NYSE:DJO) has announced record financial results for the fourth quarter and fiscal year ended December 31, 2005.

Fourth Quarter

Net revenues for the fourth quarter of 2005 were $75.0 million, reflecting an increase of 10.1 percent, compared with net revenues of $68.1 million in the fourth quarter of 2004. The fourth quarter of 2005 included 61 shipping days while the comparable 2004 period included 65 shipping days. On the basis of average daily sales, net revenues per day in the fourth quarter of 2005 increased 17.3 percent compared to net revenues per day for the fourth quarter of 2004.

Net income for the fourth quarter of 2005 was $8.1 million, or $0.35 per share, reflecting an increase of 53.5 percent, compared with net income of $5.3 million, or $0.24 per share, for the fourth quarter of 2004. Reported net income for the fourth quarter of 2004 included charges of $2.6 million ($1.6 million after tax) for restructuring activities related primarily to integrating the company's Regeneration business.

Excluding these charges, net income in the fourth quarter of 2005 grew 17.5 percent over the fourth quarter of 2004.

Full Year 2005

For the full year 2005, net revenues totaled $286.2 million, reflecting an increase of 11.8 percent, compared with net revenues of $256.0 million reported for 2004. Net income for the full year 2005 was $29.2 million, or $1.29 per share, compared with net income of $14.0 million, or $0.63 per share, reported for 2004. Reported net income for the full year 2004 was reduced by total charges of approximately $12.5 million ($7.6 million after tax) associated with the early

redemption of the company's Senior Subordinated Notes ($4.7 million after tax) and restructuring charges ($2.9 million after tax). Excluding these charges, net income for the full year 2005 increased 35.2 percent, compared to 2004.

"We are very pleased to report outstanding financial results for the fourth quarter and full year," said Les Cross, president and CEO. "At the outset of 2005, we established specific strategies to accelerate growth within our Domestic Rehabilitation, Regeneration, and International business segments, and our results clearly demonstrate that we executed well against those initiatives. We attribute our success in 2005 to a focused combination of new product introductions, new sales and marketing initiatives, complementary acquisitions and outstanding execution from our global workforce.

"For the full year, revenue growth in our Domestic Rehabilitation segment, which includes our DonJoy(R), ProCare(R) and OfficeCare(R) channels, was very strong at approximately 11-percent year over year. During the year, we introduced approximately 30 new rehabilitation products, including one of our most successful new products ever, the Velocity Ankle brace. We also added over 200 net new OfficeCare accounts, including approximately 45 accounts added with our first quarter acquisition of Superior Medical Equipment. Our third quarter acquisition of the Encore orthopedic soft goods business added strength to our ProCare channel. All of these important initiatives contributed to building momentum in this segment and with over 16 percent growth in average daily sales in the fourth quarter, our Domestic Rehabilitation segment reported one of its strongest quarters ever.

"We are also very pleased with the traction gained in our Regeneration business in the second half of 2005, leading to full year revenue growth of approximately 12 percent. For the fourth quarter, our Regeneration business was exceptionally strong, with growth in average daily sales at 19 percent year over year and with sequential growth in average daily sales of approximately 12 percent from the third quarter of 2005. Reduced turnover within our OL1000 sales force and the increasing productivity of our sales representatives helped drive growth in average daily sales of almost 17 percent for this product line in the fourth quarter. Sales of our SpinaLogic® bone growth stimulator were also strong in the fourth quarter, with growth in average daily sales of 22 percent. Our recent SpinaLogic results have benefited from our modified selling arrangement with DePuy Spine for 2005, which allowed us to convert a number of underperforming sales territories to non-exclusive. In 2006, our entire agreement with DePuy has become non-exclusive, permitting us to deploy additional selling resources in all other territories where growth is not meeting our expectations. We look forward to momentum continuing within our Regeneration business in 2006.

"Full year net revenues from our International business grew almost 16 percent, the result of a broader product offering that includes an expanding line of retail soft goods, cold therapy products, and our Regeneration devices. Acquisitions remain an important component of our international strategy and our January 2006 acquisition of Axmed (Newmed SAS) significantly strengthens our footing in the important French and Spanish sports medicine markets, and should be a catalyst for continued strong international sales growth in 2006.

"Improving profitability was a positive theme throughout 2005 and our fourth quarter was a fitting highlight to a record year. While our gross profit margins in the second half of the year reflected an increased mix of lower-margin distribution sales due to our third quarter acquisition of the Encore orthopedic soft goods business, strong operating margins in all of our business segments drove record net income and earnings per share. Cash flow from operations was also strong in the quarter at approximately $14.6 million, permitting us to reduce our debt balances to $47.5 million at year-end.

"Our 2006 growth initiatives will again focus on accelerating our lead in non-operative orthopedics through new product introductions, enhanced sales force productivity and accretive acquisitions. For fiscal 2006, before the benefit of any new acquisitions we may identify, but including the benefit of our acquisition of Axmed, we expect to achieve total revenues of approximately $325 million, reflecting top line growth of nearly 14 percent. We expect that this level of sales will deliver earnings per share growth of approximately 20 percent to approximately $1.55 per share, before the impact of equity based compensation expense. We expect the first quarter of 2006, which contains 64 shipping days, to generate revenues of between $78 million and $79 million. Due to the impact of purchase accounting adjustments related to the Axmed acquisition, increased spending related to first quarter trade shows and sales meetings and an increased investment in sales and marketing resources within our Regeneration segment, we expect operating margins in the first quarter to be between 18 percent and 19 percent, before the impact of equity based compensation expense. We will begin expensing stock options and other equity based compensation in the first quarter of 2006. We currently estimate that the related expense for 2006 will be approximately $6.5 million, net of tax, which will reduce our reported earnings per share by approximately $0.28. This estimate assumes that we grant approximately the same number of stock options in 2006 as we did in 2005 and is subject to change based on, among other variables, the actual number of new stock options granted in 2006, the date of those grants and the price of our shares on the date of any future grants.

To reduce the 2006 impact of implementing this new accounting standard, we postponed the company's annual stock option grants from December 2005 to an estimated future grant date of April 2006,and we added a three year vesting schedule to annual options granted to members of our board of directors. We are continuing to evaluate whether any other changes should be made to our historical equity compensation practices."

Fourth Quarter Business Highlights

The company announced the following highlights during the fourth quarter:

dj Orthopedics acquired Axmed (Newmed SAS), a French orthopedic bracing business. The acquisition adds significant revenue to the company's base of business in France. Frost & Sullivan estimates the orthopedic braces and supports market in France to be the second largest orthopedics market in Europe at approximately $120 million. The acquisition closed on January 2, 2006. The company introduced five new products in the fourth quarter, bringing the total in 2005 to 30 new products. Fourth- quarter products included a new Quick-Fit Wrist to treat carpal tunnel syndrome and a line of new rehabilitation therapy kits for use after ankle, knee, and shoulder surgery. The company also completed the integration of approximately 50 new soft goods products for patient safety and pressure care that were acquired from Encore Medical in 2005. dj Orthopedics renewed its soft goods supply contract with HealthTrust Purchasing Group for an additional three-year term. The company signed a new three-year supply agreement with Novation for cold therapy products.

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