BOSTON, Jul 30, 2009 (BUSINESS WIRE) -- Orthofix International N.V. (NASDAQ:OFIX) (the Company) today announced
its results for the second quarter ended June 30, 2009. Total quarterly
revenue was a record $137.5 million, which was an increase of 6% over
the second quarter of 2008. Excluding the unfavorable $5.5 million
impact of foreign currency on second quarter sales, revenue increased
10% on a constant currency basis.
Reported second quarter net income totaled $5.9 million, or $0.35 per
share. This compared with $5.8 million, or $0.34 per share in the second
quarter of the prior year. Excluding certain items summarized in the
table below, second quarter adjusted net income was $7.2 million, or
$0.42 per share, which was 17% higher than adjusted net income of $6.3
million, or $0.36, in the prior year.
"I'm very pleased to report a strong quarter, which is reflected in our
consolidated revenue and earnings results. These favorable results were
consistent across all of our core business segments. This included our
spinal implant business, which continued to gain momentum in the second
quarter as sales grew 12% led by the recent launches of our Firebird(TM)
pedicle screw system, Pillar(TM) SA interbody device and Trinity(R)
Evolution(TM) stem cell-based allograft," said President and CEO
Alan Milinazzo. "Additionally, our improved cash flow has allowed us to
make a total of $20 million in debt payments ahead of their scheduled
maturities so far this year, including a $5 million payment this month.
Based on our results for the first half of 2009 we are reaffirming our
full-year guidance."
Non-GAAP Performance Measures
The table below presents a reconciliation of second quarter net income
calculated in accordance with generally accepted accounting principles
(GAAP) to a non-GAAP performance measure, referred to as "adjusted net
income", that excludes from net income the items specified in the table.
Additionally a reconciliation between second quarter net income
calculated in accordance with GAAP and the non-GAAP measure referred to
as "Consolidated EBITDA" is included in the Regulation G Supplemental
Information Schedule attached to this release. Management believes it is
important to provide investors with the same non-GAAP metrics it uses to
supplement information regarding the performance and underlying trends
of Orthofix's business operations in order to facilitate comparisons to
its historical operating results and internally evaluate the
effectiveness of the Company's operating strategies. A more detailed
explanation of the items in the table below that are excluded from GAAP
net income, as well as why management believes the non-GAAP measures are
useful to them, is included in the Regulation G Supplemental Information
schedule attached to this press release.
Reconciliation of Non-GAAP Performance Measure | | | | | |
| | | | | |
Second Quarter | Q209 | | Q208 |
| ($000's) | EPS | | ($000's) | EPS |
| | | | | |
| | | | | |
Reported GAAP net income | $ | 5,944 | | $ | 0.35 | | | $ | 5,808 | | $ | 0.34 | |
| | | | | |
Specified Items: | | | | | |
|
| | | | |
Strategic investments | $ | 1,365 | | $ | 0.08 | | | $ | 516 | | $ | 0.03 | |
Reorganization/consolidation costs | $ | 1,075 | | $ | 0.06 | | | $ | 371 | | $ | 0.02 | |
Foreign exchange (gain)/loss | | ($509 | ) | | ($0.03 |
) | | | ($431 | ) | | ($0.03 | ) |
Unrealized, non-cash gain on interest rate swap | | ($674 | ) | | ($0.04 | ) | | | --- | | | --- | |
| | | | | |
Adjusted net income | $ | 7,201 | | $ | 0.42 | | | $ | 6,264 | | $ | 0.36 | |
| | | | | |
NOTE: Some calculations may be impacted by rounding
| | | | | |
Revenue
Total second quarter sales in the Company's spine sector were up 13%
year-over-year, to a record $70.7 million. Spine stimulation revenue
increased 13%, to $40.1 million due to the continued success of the
Company's devices, including the only FDA-approved stimulator for the
cervical spine. Spinal implant and biologic revenue was $30.6 million,
which was 12% higher than the second quarter of 2008. The year-over-year
growth in implant and biologic revenue was primarily due to an 11%
increase in U.S. sales of thoracolumbar and cervical spine implant
devices, and 12% growth in biologic revenue. The growth in sales of
thoracolumbar and cervical spine implant devices was driven primarily by
the Company's recent introductions of its new Firebird(TM)
pedicle screw system and Pillar(TM) SA interbody device. The
increase in biologic revenue from our spinal implants division included
$743,000 in sales from the limited market release of the Company's new
Trinity(R) Evolution(TM) stem cell-based allograft.
After initiating the limited market release of Trinity(R)
Evolution(TM) on May 1st, Orthofix began the full
market release of its new allograft, which was developed in
collaboration with the Musculoskeletal Transplant Foundation (MTF), on
July 1st.
Reported second quarter revenue in the Company's orthopedic business was
$32.6 million, which was a decrease of 2%, but represented growth of 9%
on a constant currency basis, compared with the prior year. The constant
currency revenue growth was driven primarily by increases in
international sales of external and internal fixation devices of 13% and
6%, respectively, as well as 14% global growth in the sales of
Physio-Stim(TM) bone growth stimulation devices. Additionally,
sales of our biologics products in the Orthopedic Division almost
doubled to approximately $1.7 million, which included $1.4 million in
sales of Trinity and $164,000 in sales of Trinity Evolution.
Sports medicine revenue in the second quarter grew 5% compared with
2008, to a record $24.5 million. This growth was driven primarily by an
11% increase in U.S. revenue from the Company's core bracing products,
which was a reflection of the recent expansion of certain product lines,
including soft goods and spine bracing, as well as those for the upper
extremities and the ankles and feet.
Gross Margin
The gross profit margin in the second quarter of 2009 was 73.2%, which
was 20 basis points higher than the second quarter of 2008. The gross
margin in the second quarter of 2009 included the impact of a $1.8
million increase in Orthofix's inventory reserve, which related
primarily to the supply of Trinity(R) allograft remaining on
hand at the expiration of the Company's distribution agreement on June
30th. The year-over-year improvement is primarily due to an increased
mix of revenue from the Company's higher margin spine stimulation and
spinal implants businesses.
Operating Expenses
Second quarter sales and marketing (S&M) expenses as a percent of
revenue decreased 70 basis points year-over-year, to 40.2%. The lower
S&M ratio was due primarily to a reduction in costs associated with the
sales force and sales administration at the Company's spinal implants
division.
General and administrative (G&A) expenses in the second quarter of 2009
increased by 100 basis points year-over-year, to 15.4% of sales. This
included the impact of approximately $1.7 million ($1.1 million net of
tax, or $0.06 per share) in costs associated with the ongoing
reorganization and consolidation plan at the Company's spinal implants
business.
Research and development (R&D) expenses as a percent of revenue were
6.5% in the second quarter of 2009, compared with 5.1% in the prior
year. R&D expenses in the second quarter of 2009 included the final $2.1
million ($1.4 million net of tax, or $0.08 per share) in costs
associated with the Company's previously announced $10 million strategic
investment in the collaboration with the Musculoskeletal Transplant
Foundation (MTF) on the development and commercialization of Trinity
Evolution.
Other Income and Expenses
Second quarter net interest expense was $5.8 million, compared with net
interest expense of approximately $4.1 million in the second quarter of
the prior year. The increase reflects a higher rate of interest
partially offset by a lower outstanding debt balance compared with the
prior year.
During the second quarter, the Company also incurred an unrealized,
non-cash gain of approximately $1 million ($674,000 net of tax, or $0.04
per share) which resulted from changes in the fair value of the
Company's interest rate swap.
Mark-to-market adjustments related to this swap are required to be
reported in quarterly earnings through the expiration of the swap in
June 2011.
The Company also incurred a foreign exchange gain of approximately
$800,000 ($509,000 net of tax, or $0.03 per share) in the second quarter
primarily due to unrealized, non-cash foreign currency adjustments
resulting from a strengthening of the U.S. dollar against various
foreign currencies. A number of Orthofix's foreign subsidiaries have
intercompany and trade accounts payable that are denominated in
currencies, most notably the U.S. Dollar, other than their local
currency, and movements in the relative values of those currencies have
and are expected to continue to result in foreign exchange gains and
losses.
Taxes
The reported tax rate in the second quarter of 2009 was 36%. This was
higher than the tax rate of 28% in the second quarter of 2008, which
included the impact of lower projected taxable earnings from
U.S.-sourced income which carries a higher tax rate than foreign-sourced
income. The year-to-date tax rate is 35%.
Cash and Liquidity
Orthofix's Consolidated EBITDA, as calculated in accordance with the
Company's amended credit facility, was $23.5 million in the second
quarter. At the end of the second quarter the Company's leverage ratio,
as defined in its amended credit facility, was 3.6, which was below the
4.0 maximum leverage ratio allowed in the amended credit facility. Cash
flow from operations in the second quarter of 2009 was approximately
$5.9 million, which was greater than cash flow of approximately $1.4
million in the prior year. The increase in cash flow was due primarily
to improved working capital management. Orthofix continues to have a $45
million unused revolving credit facility, and at the end of the second
quarter the Company was in compliance with the financial covenants
contained in its amended credit agreement.
The total cash balance of $21.5 million at June 30, 2009 compared with
$25.6 million at December 31, 2008. The change in cash balance includes
the impact of two previously announced first quarter repayments and one
second quarter repayment of debt ahead of their scheduled maturities
totaling $15 million.
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to
discuss the Company's financial results for the second quarter.
Interested parties may access the conference call by dialing (866)
626-7622 in the U.S., and (706) 758-3283 outside the U.S., and providing
the conference ID 20357652. A replay of the call will be available for
one week by dialing (800) 642-1687 in the U.S., and (706) 645-9291
outside the U.S., and entering the conference ID 20357652.
About Orthofix
Orthofix International, N.V. is a global medical device company offering
a broad line of minimally invasive surgical, and non-surgical, products
for the spine, orthopedic, and sports medicine market sectors that
address the lifelong bone-and-joint health needs of patients of all
ages-helping them achieve a more active and mobile lifestyle. Orthofix's
products are widely distributed around the world to orthopedic surgeons
and patients via Orthofix's sales representatives and its subsidiaries,
including BREG, Inc. and Blackstone Medical, Inc., and via partnerships
with other leading orthopedic product companies. In addition, Orthofix
is collaborating in R&D partnerships with leading medical institutions
such as the Musculoskeletal Transplant Foundation, the Orthopedic
Research and Education Foundation, Rutgers University and the National
Osteoporosis Institute. For more information about Orthofix, please
visit www.orthofix.com.
FORWARD-LOOKING STATEMENTS
This communication contains certain forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements, which may include, but are not limited to, statements
concerning the projections, financial condition, results of operations
and businesses of Orthofix and its subsidiaries and are based on
management's current expectations and estimates and involve risks and
uncertainties that could cause actual results or outcomes to differ
materially from those contemplated by the forward-looking statements.
Factors that could cause or contribute to such differences may include,
but are not limited to, risks relating to the expected sales of its
products, including recently launched products, unanticipated
expenditures, changing relationships with customers, suppliers,
strategic partners and lenders, risks relating to the protection of
intellectual property, changes to the reimbursement policies of third
parties, changes to and interpretation of governmental regulation of
medical devices, the impact of competitive products, changes to the
competitive environment, the acceptance of new products in the market,
conditions of the orthopedic industry, credit markets and the economy,
corporate development and market development activities, including
acquisitions or divestitures, unexpected costs or operating unit
performance related to recent acquisitions, unexpected difficulties
meeting covenants contained in our secured bank credit facility and
other factors described in our annual report on Form 10-K and other
periodic reports filed by the Company with the Securities and Exchange
Commission (SEC).
- Financial tables follow -
| | | | | | | | |
| | | | | | | | |
ORTHOFIX INTERNATIONAL N.V. | | | | | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | | | | | | |
(Unaudited, U.S. Dollars, in thousands, except per share and
share data) | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | | 2009 | | | | 2008 | | | | 2009 | | | |
2008 | |
| | | | | | | | | |
Net sales
| |
$
|
137,546
| | |
$
|
130,039
| | |
$
|
266,520
| | |
$
|
258,071
| |
Cost of sales
| | |
36,909
| | | |
35,048
| | | |
69,715
| | | |
69,286
| |
|
Gross profit
| | |
100,637
| | | |
94,991
| | | |
196,805
| | | |
188,785
| |
| | | | | | | | | |
Operating expenses
| | | | | | | | |
|
Sales and marketing
| | |
55,272
| | | |
53,246
| | | |
107,536
| | | |
103,442
| |
|
General and administrative
| | |
21,191
| | | |
18,779
| | | |
43,875
| | | |
40,959
| |
|
Research and development
| | |
8,886
| | | |
6,599
| | | |
17,973
| | | |
12,953
| |
|
Amortization of intangible assets
| | |
1,643
| | | |
4,830
| | | |
3,276
| | | |
9,873
| |
|
Gain on sale of Pain Care(R) Operations
| | |
0
| | | |
0
| | | |
0
| | | |
(1,570
|
)
|
| | | |
86,992
| | | |
83,454
| | | |
172,660
| | | |
165,657
| |
| | | | | | | | | |
|
Operating income
| | |
13,645
| | | |
11,537
| | | |
24,145
| | | |
23,128
| |
| | | | | | | | | |
Other income (expense), net
| | | | | | | | |
|
Interest expense, net
| | |
(5,832
|
)
| | |
(4,069
|
)
| | |
(11,948
|
)
| | |
(9,459
|
)
|
|
Other income, net
| | |
425
| | | |
591
| | | |
102
| | | |
1,085
| |
|
Unrealized non-cash gain on interest rate swap
| | |
1,037
| | | |
0
| | | |
1,275
| | | |
0
| |
Other income (expense), net
| | |
(4,370
|
)
| | |
(3,478
|
)
| | |
(10,571
|
)
| | |
(8,374
|
)
|
|
Income before minority interests and income taxes
| | |
9,275
| | | |
8,059
| | | |
13,574
| | | |
14,754
| |
Income tax expense
| | |
(3,331
|
)
| | |
(2,251
|
)
| | |
(4,751
|
)
| | |
(5,340
|
)
|
|
Net income
| |
$
|
5,944
| | |
$
|
5,808
| | |
$
|
8,823
| | |
$
|
9,414
| |
| | | | | | | | | |
Net income per common share - basic
| |
$
|
0.35
| | |
$
|
0.34
| | |
$
|
0.52
| | |
$
|
0.55
| |
| | | | | | | | | |
Net income per common share - diluted
| |
$
|
0.35
| | |
$
|
0.34
| | |
$
|
0.51
| | |
$
|
0.55
| |
| | | | | | | | | |
Weighted average number of common shares outstanding - basic
| | |
17,107,084
| | | |
17,090,217
| | | |
17,105,323
| | | |
17,088,735
| |
| | | | | | | | | |
Weighted average number of common shares outstanding - diluted
| | |
17,172,557
| | | |
17,116,015
| | | |
17,139,789
| | | |
17,240,004
| |
| | | | |
| | | | |
ORTHOFIX INTERNATIONAL N.V. | | | | |
CONDENSED CONSOLIDATED BALANCE SHEETS | | | | |
(U.S. Dollars, in thousands) | | | | |
| | | | | |
| | | Unaudited | | |
| | | June 30, | | December 31, |
| | | 2009 | | 2008 |
| | | | | |
Assets | | | | |
Current assets:
| | | | |
|
Cash and cash equivalents
| |
$
|
5,918
| |
$
|
14,594
|
|
Restricted cash
| | |
15,617
| | |
10,998
|
|
Trade accounts receivable, net
| | |
119,714
| | |
110,720
|
|
Inventories, net
| | |
94,172
| | |
91,185
|
|
Deferred income taxes
| | |
19,571
| | |
17,543
|
|
Prepaid expenses and other current assets
| | |
32,075
| | |
29,610
|
Total current assets
| | |
287,067
| | |
274,650
|
| | | | | |
Investments
| | |
2,095
| | |
2,095
|
Property, plant and equipment, net
| | |
34,226
| | |
32,660
|
Patents and other intangible assets, net
| | |
50,893
| | |
53,546
|
Goodwill
| | |
185,270
| | |
182,581
|
Deferred taxes and other long-term assets
| | |
12,235
| | |
15,683
|
| | | | | |
|
Total assets
| |
$
|
571,786
| |
$
|
561,215
|
| | | | | |
| | | | | |
Liabilities and shareholders' equity | | | | |
Current liabilities:
| | | | |
|
Bank borrowings
| |
$
|
3,080
| |
$
|
1,907
|
|
Current portion of long-term debt
| | |
3,333
| | |
3,329
|
|
Trade accounts payable
| | |
23,749
| | |
23,865
|
|
Other current liabilities
| | |
54,442
| | |
45,894
|
Total current liabilities
| | |
84,604
| | |
74,995
|
| | | | | |
Long-term debt
| | |
260,910
| | |
277,533
|
Deferred income taxes
| | |
3,940
| | |
4,509
|
Other long-term liabilities
| | |
4,680
| | |
2,117
|
|
Total liabilities
| | |
354,134
| | |
359,154
|
| | | | | |
Shareholders' equity:
| | | | |
|
Common shares
| | |
1,713
| | |
1,710
|
|
Additional paid-in capital
| | |
171,947
| | |
167,818
|
| | | |
173,660
| | |
169,528
|
|
Retained earnings
| | |
38,470
| | |
29,647
|
|
Accumulated other comprehensive income
| | |
5,522
| | |
2,886
|
Total shareholders' equity
| | |
217,652
| | |
202,061
|
| | | | | |
|
Total liabilities and shareholders' equity
| |
$
|
571,786
| |
$
|
561,215
|
| | | | |
| | | | |
ORTHOFIX INTERNATIONAL N.V. | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | |
(Unaudited, U.S. Dollars, in thousands) | | |
| |
| | | | | |
| | | Six Months Ended June 30, |
| | | 2009 | | | 2008 | |
| | | | | |
Cash flows from operating activities:
| | | | |
|
Net income
| |
$
|
8,823
| | |
$
|
9,414
| |
|
Adjustments to reconcile net income to net cash provided by
operating activities:
| | | | |
|
Depreciation and amortization
| | |
10,614
| | | |
14,777
| |
|
Amortization of debt costs
| | |
99
| | | |
632
| |
|
Provision for doubtful accounts
| | |
3,487
| | | |
3,019
| |
|
Provision for inventory obsolescence
| | |
5,055
| | | |
0
| |
|
Deferred taxes
| | |
(1,505
|
)
| | |
0
| |
|
Share-based compensation
| | |
5,316
| | | |
4,657
| |
|
Minority Interest
| | |
28
| | | |
235
| |
|
Amortization of step up of fair value in inventory
| | |
0
| | | |
242
| |
|
Gain on sale of Pain Care(R) operations
| | |
0
| | | |
(1,570
|
)
|
|
Other
| | |
938
| | | |
515
| |
|
Change in operating assets and liabilities:
| | | | |
|
Restricted cash
| | |
(4,592
|
)
| | |
4,772
| |
|
Accounts receivable
| | |
(10,741
|
)
| | |
(10,630
|
)
|
|
Inventories
| | |
(5,655
|
)
| | |
(16,734
|
)
|
|
Prepaid expenses and other current assets
| | |
(2,261
|
)
| | |
(4,486
|
)
|
|
Accounts payable
| | |
(577
|
)
| | |
3,250
| |
|
Current liabilities
| | |
7,954
| | | |
(5,839
|
)
|
Net cash provided by operating activities
| | |
16,983
| | | |
2,254
| |
| | | | | |
Cash flows from investing activities:
| | | | |
|
Capital expenditures
| | |
(9,153
|
)
| | |
(12,150
|
)
|
|
Proceeds from sale of Pain Care(R) operations
| | |
0
| | | |
5,980
| |
Net cash used in investing activities
| | |
(9,153
|
)
| | |
(6,170
|
)
|
| | | | | |
Cash flows from financing activities:
| | | | |
|
Net proceeds from issuance of common shares
| | |
7
| | | |
1,922
| |
|
Repayments of long-term debt
| | |
(16,618
|
)
| | |
(5,351
|
)
|
|
Proceeds from (repayments of) bank borrowings, net
| | |
1,107
| | | |
(1,131
|
)
|
|
Cash payment for purchase of minority interest in subsidiary
| | |
(1,143
|
)
| | |
0
| |
|
Tax benefit on non-qualified stock options
| | |
2
| | | |
22
| |
Net cash used in financing activities
| | |
(16,645
|
)
| | |
(4,538
|
)
|
| | | | | |
Effect of exchange rate changes on cash
| | |
139
| | | |
235
| |
| | | | | |
Net decrease in cash and cash equivalents
| | |
(8,676
|
)
| | |
(8,219
|
)
|
Cash and cash equivalents at the beginning of the year
| | |
14,594
| | | |
25,064
| |
Cash and cash equivalents at the end of the period
| |
$
|
5,918
| | |
$
|
16,845
| |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
External net sales by market
sector | | | | | | | | | | | | | | | | | | | | | |
(In US$ millions) | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, |
| | | | | | | | | | | | Constant | | | | | | | | | | | | Constant |
| | | | | | | | | Reported | | | Currency |
| | | | | | | | Reported | | | Currency |
| | | | 2009 | | | | 2008 | | | Growth | | | Growth | | | | 2009 | | | | 2008 | | | Growth | | | Growth |
| | | | | | | | | | | | | | | | | | | | | | | | |
Spine | | | | | | | | | | | | | | | | | | | | | | | |
|
Stimulation
| |
$
|
40.2
| | |
$
|
35.4
| | |
13
|
%
| | |
13
|
%
| | |
$
|
77.5
| | |
$
|
68.9
| | |
12
|
%
| | |
13
|
%
|
|
Implants and Biologics
| | |
30.5
| | | |
27.3
| | |
12
|
%
| | |
12
|
%
| | | |
59.4
| | | |
56.3
| | |
5
|
%
| | |
6
|
%
|
Total Spine | | |
70.7
| | | |
62.7
| | |
13
|
%
| | |
13
|
%
| | | |
136.9
| | | |
125.2
| | |
9
|
%
| | |
10
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Orthopedic | | |
32.6
| | | |
33.3
| | |
-2
|
%
| | |
9
|
%
| | | |
62.2
| | | |
63.1
| | |
-1
|
%
| | |
9
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Sports Medicine | | |
24.5
| | | |
23.2
| | |
5
|
%
| | |
6
|
%
| | | |
48.7
| | | |
46.5
| | |
5
|
%
| | |
6
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Vascular | | |
4.3
| | | |
3.7
| | |
14
|
%
| | |
20
|
%
| | | |
8.7
| | | |
9.1
| | |
-5
|
%
| | |
1
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Other Products | | |
5.4
| | | |
7.1
| | |
-24
|
%
| | |
-4
|
%
| | | |
10.0
| | | |
14.2
| | |
-29
|
%
| | |
-10
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | |
$
|
137.5
| | |
$
|
130.0
| | |
6
|
%
| | |
10
|
%
| | |
$
|
266.5
| | |
$
|
258.1
| | |
3
|
%
| | |
7
|
%
|
Regulation G Supplemental Information
Schedule
The information in this schedule is set up in three sections intended to
address different aspects of Regulation G.
Section 1 includes a Reconciliation of a Non-GAAP Performance
Measure for each non-GAAP metric included in the release to which this
supplemental information is attached, except for the reconciliation
pertaining to Adjusted Net Income for the second quarter of 2009, which
is included in the body of the release to which this supplemental
information is attached.
Section 2 contains explanations of each of the specified items
listed in each Reconciliation of a Non-GAAP Performance Measure included
in Section 1 of this Supplemental Information Schedule or in the text of
the press release to which the schedule is attached.
Section 3 provides detailed disclosures indicating the reasons
management believes our non-GAAP measures are useful.
Section 1
| | | |
Consolidated EBITDA | | | |
Orthofix International NV | | | |
| | | | | |
(In thousands) | | | |
|
| | | | |
| | | | | |
| | | Q2 2009 | | TTM 6/30/09 |
Orthofix: | | | |
|
Net Income/(loss)
|
$
|
5,944
| | |
$
|
(229,144
|
)
|
| | | | | |
| |
Depreciation and Amortization
| |
5,397
| | | |
25,309
| |
| |
Interest
| |
5,881
| | | |
22,445
| |
| |
Unrealized non-cash loss (gain) on interest rate swap
| |
(1,037
|
)
| | |
6,699
| |
| |
Allowable loss on refinancing of senior secured term loan
| |
-
| | | |
3,660
| |
| |
Tax Expense
| |
3,331
| | | |
(67,069
|
)
|
| |
123R expense
| |
2,507
| | | |
11,262
| |
| |
Product Commercialization Investments
| |
2,100
| | | |
11,000
| |
| |
Impairment charge
| |
-
| | | |
289,523
| |
| |
Other Non-Cash Charges
| |
(584
|
)
| | |
3,403
| |
| | | | | |
Consolidated EBITDA |
$
|
23,539
| | |
$
|
77,088
| |
NOTE: For the definition of Consolidated EBITDA please refer to a copy
of the credit agreement, dated September 22, 2006, which was filed as
Exhibit 10.1 to Orthofix's current report on Form 8-K filed on September
27, 2006, and a copy of the first amendment to the credit agreement,
dated September 29, 2008, which was filed as Exhibit 10.1 to Orthofix's
current report on Form 8-K filed on September 29, 2008. These documents
can be found at the SEC's website at www.sec.gov.
Section 2
Description of Second Quarter 2009 Specified Items (earnings
reconciliation)
- Unrealized, non-cash gain on interest rate swap- resulted from
changes in the fair value of the Company's interest rate swap.
Mark-to-market adjustments are required to be reported in quarterly
earnings through the expiration of the swap in June 2011.
- Strategic investments- costs related to the Company's strategic
investment in the development and commercialization of a new stem
cell-based allograft with MTF.
- Foreign exchange (gain)/loss- due to unrealized, non-cash
translation adjustments resulting from a strengthening or weakening of
the U.S. dollar against various foreign currencies. A number of
Orthofix's foreign subsidiaries have intercompany and trade accounts
payable that are held in currencies, most notably the U.S. Dollar,
other than their local currency, and movements in the relative values
of those currencies result in foreign exchange gains and losses.
- Reorganization/consolidation costs- costs associated with
reorganization and facility consolidation plans within various areas
of the Company, primarily related to the spinal implants division.
Net Income to Consolidated EBITDA
- Depreciation and Amortization- non-cash depreciation and
amortization expenses
- Interest- interest expense related to outstanding debt.
- Unrealized non-cash loss (gain) on interest rate swap- from
changes in the fair value of the Company's interest rate swap.
Mark-to-market adjustments are required to be reported in quarterly
earnings through the expiration of the swap in June 2011.
- Allowable loss on refinancing of senior secured term loan- costs
associated with the completion of an amended credit facility in the 3rd
quarter of 2008.
- Tax expense- non-cash tax expenses
- 123R expense- non-cashequity compensation expenses
- Product commercialization investments- costs associated with
the Development and Commercialization Agreements with MTF, and the
acquisition and development of IP from IIS.
- Impairment charge- anon-cash impairment charge taken in
Q408 related to the value of certain intangible assets
- Other non-cash charges- certainnon-cash charges
including foreign exchange losses, an inventory step up related to an
acquisition and the amortization of a prepaid royalty.
Section 3
Management use of, and economic substance behind, Non-GAAP
Performance Measures
Management uses non-GAAP measures, referred to as "adjusted net income"
and "Consolidated EBITDA" (earnings before interest, taxes, depreciation
and amortization) to evaluate performance period over period, to analyze
the underlying trends in the Company's business, to assess its
performance relative to its competitors, and to establish operational
goals and forecasts that are used in allocating resources. In addition,
following the Company's acquisition of Blackstone, and the related
increase in Orthofix's debt, management has increased its focus on cash
generation and debt reduction. Management uses these non-GAAP measures
as the basis for assessing the ability of the underlying operations to
generate cash for use in paying down debt. In addition, management uses
these non-GAAP measures to further its understanding of the performance
of the Company's business segments. The items excluded from Orthofix's
non-GAAP measures are also excluded from the profit or loss reported by
the Company's business segments for the purpose of analyzing their
performance.
Material Limitations Associated with the Use of Non-GAAP Measures
The non-GAAP measures used in this release may have limitations as
analytical tools, and should not be considered in isolation or as a
replacement for GAAP performance measures. Some of the limitations
associated with the use of these non-GAAP performance measures are that
they exclude items that reflect an economic cost to the Company and can
have a material effect on cash flows. Similarly, equity compensation
expense does not directly impact cash flows, but is part of total
compensation costs accounted for under GAAP.
Compensation for Limitations Associated with Use of Non-GAAP Measures
Orthofix compensates for the limitations of its non-GAAP performance
measures by relying upon its GAAP results to gain a complete picture of
the Company's performance. The GAAP results provide the ability to
understand the Company's performance based on a defined set of criteria.
The non-GAAP measures reflect the underlying operating results of the
Company's businesses, excluding non-cash items, which management
believes is an important measure of the Company's overall performance.
The Company provides a detailed reconciliation of the non-GAAP
performance measures to their most directly comparable GAAP measures,
and encourages investors to review this reconciliation.
Usefulness of Non-GAAP Measures to Investors
Orthofix believes that providing non-GAAP measures that exclude certain
items provides investors with greater transparency to the information
used by the Company's senior management in its financial and operational
decision-making. Management believes that providing this information
enables investors to better understand the performance of the Company's
ongoing operations and to understand the methodology used by management
to evaluate and measure such performance. Disclosure of these non-GAAP
performance measures also facilitates comparisons of Orthofix's
underlying operating performance with other companies in its industry
that also supplement their GAAP results with non-GAAP performance
measures.
SOURCE: Orthofix International N.V.
Orthofix International N.V.
Dan Yarbrough, 617-912-2903
Vice President of Investor Relations
danyarbrough@orthofix.com
Copyright Business Wire 2009