BOSTON, Oct 27, 2010 (BUSINESS WIRE) -- Orthofix International N.V. (NASDAQ:OFIX) (the Company) today announced
its results for the third quarter ended September 30, 2010. Total
revenue was $138.9 million, an increase of 3% over the third quarter of
last year. Third quarter revenue growth on a constant currency basis was
4% excluding the $1.5 million unfavorable impact of foreign currency on
third quarter sales. Excluding the impact of the Company exiting its
non-core vascular and anesthesia businesses adjusted revenue totaled
$136.2 million which was an increase of 7% compared with adjusted
revenue in the prior year.
Reported third quarter net income totaled $8.5 million, or $0.48 per
diluted share. This represented an increase of 33% compared with
reported net income of $0.36 per diluted share in the third quarter of
the prior year. Excluding a foreign exchange loss during the quarter,
adjusted net income was $0.50 per diluted share, which was an increase
of 14% over adjusted net income of $0.44 in the prior year.
The Company's reported third quarter operating income was $19.0 million,
or 13.7% of total revenue. This was a 7% increase over reported
operating income of $17.6 million, or 13.1% of revenue, in the prior
year. Operating income in the third quarter of 2010 included the impact
of $3.7 million in legal expenses associated with the DOJ investigation
of the bone growth stimulation industry and the Company's internal
investigation into its compliance with the Foreign Corrupt Practices Act
in its subsidiary in Mexico.
"We were very pleased with our third quarter results, which included
strong revenue growth in both our spinal implants and biologics and
spine stimulation divisions," said President and CEO Alan Milinazzo.
"Additionally, with the improved operating leverage we have achieved as
a result of our recent reorganization, we were able to generate solid
earnings growth despite the need to absorb higher costs associated with
certain ongoing legal matters."
Guidance
The Company expects to report total fourth quarter revenue of $144
million to $148 million, which would result in total full-year revenue
of between $564.5 million and $568.5 million. The Company also expects
to report fourth quarter earnings of $0.59 to $0.62 per share, which
would result in full-year earnings of between $2.62 and $2.65 per share.
Non-GAAP Performance Measures
The tables below present reconciliations of third quarter revenue and
net income calculated in accordance with generally accepted accounting
principles (GAAP) to non-GAAP performance measures, referred to as
"Adjusted Revenue" and "Adjusted Net Income" that exclude the items
specified in the tables. The Regulation G Supplemental Information
Schedule attached to this release includes additional reconciliations
between GAAP measures and non-GAAP measures referred to as "Consolidated
EBITDA" and "Adjusted Sports Medicine Revenue". 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 tables below that are excluded from GAAP
revenue and 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.
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Reconciliation of Non-GAAP Performance Measure
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Third Quarter Adjusted Revenue
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Q310
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Q309
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Difference
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($000's)
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($000's)
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Reported GAAP revenue
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$
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138.9
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$
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135.1
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2.8
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%
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Specified Items:
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Sold vascular business
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($1.9
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)
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($3.9
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)
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Impact of change in Breg distributor recognition
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---
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($0.4
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)
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Exited anesthesia business
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($0.8
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)
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($3.0
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)
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Adjusted net income
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$
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136.2
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$
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127.8
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6.6
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%
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NOTE: Some calculations may be impacted by rounding
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Reconciliation of Non-GAAP Performance Measure
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Third Quarter Adjusted Net Income
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Q310
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Q309
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($000's)
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EPS
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($000's)
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EPS
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Reported GAAP net income
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$
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8,520
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$
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0.48
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$
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6,188
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$
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0.36
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Specified Items:
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Loss on interest rate swap
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---
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---
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$
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137
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$
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0.01
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Foreign exchange loss
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$
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411
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$
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0.02
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$
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501
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$
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0.03
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Strategic investments
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---
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---
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$
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450
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$
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0.02
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Reorganization/consolidation costs
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---
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---
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$
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376
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$
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0.02
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Adjusted net income
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$
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8,931
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$
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0.50
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$
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7,652
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$
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0.44
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NOTE: Some calculations may be impacted by rounding
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Revenue
Total third quarter sales in the Company's spine sector were up 14%
year-over-year, to $77.4 million. Spine stimulation revenue increased
9%, to $43.2 million, driven by the continued success of the Company's
devices, which include the only FDA-approved stimulator for the cervical
spine. Spinal implants and biologics revenue was $34.2 million, which
was 20% higher than the third quarter of 2009. The year-over-year growth
in spinal implants and biologics revenue was primarily due to an
increase in U.S. sales of the Firebird(TM) pedicle screw system, Pillar(TM) SA
interbody device, and the Trinity(R) Evolution(TM)
allograft.
Third quarter revenue in Orthofix's orthopedic business was $34.0
million, which was an increase of 2%, and represented growth of 6% on a
constant currency basis, compared with the prior year. The constant
currency revenue growth was driven primarily by international sales of
the Company's internal and external fixation devices and U.S. sales of
Trinity Evolution.
Sports medicine revenue in the third quarter decreased 4% as reported,
compared with 2009, to $23.7 million. The decrease in total sales
included the impact of a revenue recognition change for one distributor,
which resulted in the commission expense related to the distributor now
being recorded as a reduction of that distributor's gross sales
Excluding the impact of this change, sports medicine revenue in the
third quarter was approximately 2% lower year-over-year.
Other revenue decreased 58% to approximately $3.8 million in the third
quarter as a result of the Company's strategy to eliminate non-core
revenue while focusing on increasing its strategic revenue. The decrease
was due to the previously announced sale of the Company's vascular
business, as well as the expiration of two laryngeal mask distribution
agreements in Italy and the United Kingdom.
Gross Margin
The gross profit margin in the third quarter of 2010 was 76.8%, which
was 50 basis points higher than the third quarter of 2009. The
year-over-year improvement is primarily due to increased sales of the
Company's higher gross margin products.
Operating Expenses
Third quarter sales and marketing (S&M) expenses were 41.2% of total
revenue, which was 50 basis points higher than the third quarter in the
prior year. The increase was due primarily to the Company exiting its
non-core vascular and anesthesia businesses, which carried lower S&M
expenses as a percent of revenue generated.
General and administrative (G&A) expenses in the third quarter of 2010
increased by 10 basis points year-over-year, to 15.5% of total sales.
This included the impact of approximately $3.7 million ($2.2 million net
of tax, or $0.12 per share) in legal expenses associated with the DOJ's
investigation of the bone growth stimulation industry, as well as costs
incurred in connection with the Company's internal investigation into
compliance with the Foreign Corrupt Practices Act at its Promeca
subsidiary in Mexico. The G&A ratio in the third quarter of 2009
included $627,000 ($376,200 net of tax, or $0.02 per share) in costs
associated with the reorganization and consolidation plan at the
Company's Spinal Implants and Biologics division.
Research and development (R&D) expenses as a percent of revenue were
5.3% in the third quarter of 2010, compared with 5.8% in the prior year.
The R&D ratio in the third quarter of the prior year included the impact
of a $750,000 ($450,000 net of tax, or $0.02 per share) milestone
payment associated with the Company's strategic agreement with
Intelligent Implant Systems.
Other Income and Expenses
Third quarter net interest expense was $3.5 million, compared with net
interest expense of $6.4 million in the third quarter of the prior year.
The year-over-year decrease reflects a lower outstanding debt balance as
well as a lower interest rate resulting from the previously announced
payoff of an interest rate swap and the refinancing of the Company's
outstanding long term debt. Additionally, in connection with the
refinancing of its debt during the third quarter of this year the
Company incurred expenses of approximately $550,000 related to the
write-off of remaining capitalized debt placement costs associated with
its previous credit agreement.
The Company also incurred a foreign exchange loss of approximately
$689,000 ($411,000 net of tax, or $0.02 per share) in the third quarter
primarily due to 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 third quarter of 2010 was approximately 40
percent. The year-to-date tax rate was approximately 37%, which is
comparable to the year-to-date tax in the prior year.
Cash and Liquidity
Orthofix's third quarter Consolidated EBITDA as calculated in accordance
with the Company's new credit facility was $26.0 million, which was
comparable with Consolidated EBITDA in the third quarter of the prior
year. Consolidated EBITDA in the third quarter of 2010 included the
impact of $3.7 million in legal expenses associated with the DOJ
investigation of the bone growth stimulation industry and the Company's
internal investigation into compliance with the Foreign Corrupt
Practices Act at its Promeca subsidiary in Mexico. At the end of the
third quarter the Company's leverage ratio, as defined in its new credit
facility, was 2.0, which was below the 3.25 maximum leverage ratio
allowed.
Cash flow from operations in the third quarter of 2010 was approximately
$7.6 million, compared with cash flow from operations of $11.2 million
in the prior year. The year-over-year decrease is primarily attributable
to an $8.2 million increase in restricted cash on the cash flow
statement. Restricted cash is available for operational and debt
repayment purposes for all of the Company's subsidiaries which are
parties to the Company's credit facility.
The total cash balance of $37.2 million at September 30, 2010 compared
with $25.0 million at December 31, 2009. The cash balance at September 30th
reflected the impact of a $4.8 million payment to pay off the interest
rate swap in the second quarter, as well as approximately $30 million in
debt repayments, including a repayment of $4.3 million in the third
quarter. Additionally, the Company made a $5 million debt repayment
subsequent to the end of the third quarter.
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to
discuss the Company's financial results for the third quarter of 2010.
Interested parties may access the conference call by dialing (888)
267-2845 in the U.S., and (973) 413-6102 outside the U.S., and providing
the conference ID 87421. A replay of the call will be available for one
week by dialing (800) 332-6854 in the U.S., and (973) 528-0005 outside
the U.S., and entering the conference ID 87421.
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 via collaborations with other leading
orthopedic product companies. In addition, Orthofix is collaborating on
R&D activities with leading medical institutions such as the
Musculoskeletal Transplant Foundation, the Orthopedic Research and
Education Foundation, The University of Medicine and Dentistry of New
Jersey 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, changes to and the interpretation of
governmental regulations, ongoing litigation matters and governmental
investigations of our businesses which could result in civil or criminal
liability or findings of violations of law (as further described in the
"Legal Proceedings" sections of our annual report on Form 10-K and
quarterly reports on Form 10-Q), risks relating to the protection of
intellectual property, changes to the reimbursement policies of third
parties, 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, 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 -
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2010
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2009
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2010
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2009
|
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Net sales
|
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$
|
138,906
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$
|
135,098
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|
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$
|
420,573
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|
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$
|
401,618
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Cost of sales
|
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|
32,266
|
|
|
|
31,985
|
|
|
|
|
|
99,046
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|
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|
101,700
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Gross profit
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106,640
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|
|
103,113
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321,527
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|
|
299,918
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Operating expenses
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Sales and marketing
|
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57,281
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|
55,012
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|
|
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170,756
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162,547
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General and administrative
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21,568
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|
20,819
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63,410
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64,694
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Research and development
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7,375
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|
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|
7,863
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23,272
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|
25,837
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Amortization of intangible assets
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1,402
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|
1,668
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4,259
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4,944
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Net gain on sale of vascular operations
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20
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0
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(12,319
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)
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0
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87,646
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|
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|
85,362
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249,378
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258,022
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Operating income
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18,994
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17,751
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72,149
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41,896
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Other income (expense), net
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Interest expense, net
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(3,481
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)
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(6,437
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)
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(14,772
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)
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(18,385
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)
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Other expense, net
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(674
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)
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|
|
(688
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)
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(904
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)
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(586
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)
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Loss on refinancing of credit facility
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(550
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)
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0
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(550
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)
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0
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Gain (loss) on interest rate swap
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|
0
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|
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|
(229
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)
|
|
|
|
|
1,254
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|
|
|
1,046
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Other income (expense), net
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|
|
(4,705
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)
|
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|
(7,354
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)
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|
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(14,972
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)
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|
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(17,925
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)
|
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Income before income taxes
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|
|
|
14,289
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|
|
|
10,397
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|
|
|
|
|
57,177
|
|
|
|
23,971
|
|
Income tax expense
|
|
|
|
(5,769
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)
|
|
|
(4,209
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)
|
|
|
|
|
(20,933
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)
|
|
|
(8,960
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)
|
|
Net income
|
|
|
$
|
8,520
|
|
|
$
|
6,188
|
|
|
|
|
$
|
36,244
|
|
|
$
|
15,011
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|
|
|
|
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|
|
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|
Net income per common share - basic
|
|
|
$
|
0.48
|
|
|
$
|
0.36
|
|
|
|
|
$
|
2.06
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - diluted
|
|
|
$
|
0.48
|
|
|
$
|
0.36
|
|
|
|
|
$
|
2.03
|
|
|
$
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic
|
|
|
|
17,626,319
|
|
|
|
17,130,247
|
|
|
|
|
|
17,565,414
|
|
|
|
17,113,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding -
diluted
|
|
|
|
17,836,537
|
|
|
|
17,215,567
|
|
|
|
|
|
17,824,273
|
|
|
|
17,174,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
15,248
|
|
$
|
13,328
|
|
Restricted cash
|
|
|
|
21,987
|
|
|
11,630
|
|
Trade accounts receivable, net
|
|
|
|
132,750
|
|
|
129,777
|
|
Inventories, net
|
|
|
|
85,484
|
|
|
94,624
|
|
Deferred income taxes
|
|
|
|
23,289
|
|
|
20,286
|
|
Prepaid expenses and other current assets
|
|
|
|
34,614
|
|
|
29,849
|
Total current assets
|
|
|
|
313,372
|
|
|
299,494
|
|
|
|
|
|
|
|
Investments, at cost
|
|
|
|
345
|
|
|
345
|
Property, plant and equipment, net
|
|
|
|
42,362
|
|
|
38,694
|
Patents and other intangible assets, net
|
|
|
|
42,794
|
|
|
47,628
|
Goodwill
|
|
|
|
176,889
|
|
|
185,175
|
Deferred taxes and other long-term assets
|
|
|
|
21,771
|
|
|
19,137
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$
|
597,533
|
|
$
|
590,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Bank borrowings
|
|
|
$
|
2,676
|
|
$
|
2,209
|
|
Current portion of long-term debt
|
|
|
|
5,000
|
|
|
3,332
|
|
Trade accounts payable
|
|
|
|
17,739
|
|
|
23,302
|
|
Other current liabilities
|
|
|
|
54,041
|
|
|
59,210
|
Total current liabilities
|
|
|
|
79,456
|
|
|
88,053
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
217,445
|
|
|
249,132
|
Deferred income taxes
|
|
|
|
6,447
|
|
|
6,115
|
Other long-term liabilities
|
|
|
|
2,403
|
|
|
6,904
|
|
Total liabilities
|
|
|
|
305,751
|
|
|
350,204
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
Common shares
|
|
|
|
1,766
|
|
|
1,714
|
|
Additional paid-in capital
|
|
|
|
193,208
|
|
|
177,246
|
|
|
|
|
|
194,974
|
|
|
178,960
|
|
Retained earnings
|
|
|
|
90,363
|
|
|
54,119
|
|
Accumulated other comprehensive (loss) income
|
|
|
|
6,445
|
|
|
7,190
|
Total shareholders' equity
|
|
|
|
291,782
|
|
|
240,269
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
|
$
|
597,533
|
|
$
|
590,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2010
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
36,244
|
|
|
|
$
|
15,011
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
15,510
|
|
|
|
|
16,064
|
|
|
Amortization of debt costs
|
|
|
|
215
|
|
|
|
|
199
|
|
|
Provision for doubtful accounts
|
|
|
|
5,901
|
|
|
|
|
5,138
|
|
|
Deferred taxes
|
|
|
|
(2,767
|
)
|
|
|
|
(2,015
|
)
|
|
Share-based compensation
|
|
|
|
7,124
|
|
|
|
|
7,877
|
|
|
Provision for inventory obsolescence
|
|
|
|
5,872
|
|
|
|
|
6,769
|
|
|
Change in fair value of interest rate swap
|
|
|
|
(1,254
|
)
|
|
|
|
(1,046
|
)
|
|
Loss on refinancing of credit facility
|
|
|
|
550
|
|
|
|
|
-
|
|
|
Net gain on sale of vascular operations
|
|
|
|
(12,319
|
)
|
|
|
|
-
|
|
|
Tax benefit on non-qualified stock options
|
|
|
|
(1,859
|
)
|
|
|
|
(2
|
)
|
|
Other
|
|
|
|
507
|
|
|
|
|
(131
|
)
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
|
(10,339
|
)
|
|
|
|
(2,141
|
)
|
|
|
Accounts receivable
|
|
|
|
(10,080
|
)
|
|
|
|
(18,357
|
)
|
|
|
Inventories
|
|
|
|
667
|
|
|
|
|
(12,832
|
)
|
|
|
Prepaid expenses and other current assets
|
|
|
|
(4,810
|
)
|
|
|
|
(4,415
|
)
|
|
|
Accounts payable
|
|
|
|
(5,072
|
)
|
|
|
|
2,314
|
|
|
|
Current liabilities
|
|
|
|
(4,678
|
)
|
|
|
|
15,791
|
|
Net cash provided by operating activities
|
|
|
|
19,412
|
|
|
|
|
28,224
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
(17,160
|
)
|
|
|
|
(16,073
|
)
|
|
Proceeds from sale of investments held at cost
|
|
|
|
-
|
|
|
|
|
1,711
|
|
|
Net proceeds from sale of assets, principally vascular operations
|
|
|
|
24,215
|
|
|
|
|
-
|
|
Net cash provided by (used in) investing activities
|
|
|
|
7,055
|
|
|
|
|
(14,362
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from issuance of common shares
|
|
|
|
7,031
|
|
|
|
|
7
|
|
|
Repayments of long-term debt. net
|
|
|
|
(29,961
|
)
|
|
|
|
(22,477
|
)
|
|
Payment of refinancing fees
|
|
|
|
(3,986
|
)
|
|
|
|
-
|
|
|
Proceeds from bank borrowings, net
|
|
|
|
564
|
|
|
|
|
1,581
|
|
|
Cash payment for purchase of minority interest in subsidiary
|
|
|
|
-
|
|
|
|
|
(1,143
|
)
|
|
Tax benefit on non-qualified stock options
|
|
|
|
1,859
|
|
|
|
|
2
|
|
Net cash used in financing activities
|
|
|
|
(24,493
|
)
|
|
|
|
(22,030
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
(54
|
)
|
|
|
|
374
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
1,920
|
|
|
|
|
(7,794
|
)
|
Cash and cash equivalents at the beginning of the year
|
|
|
|
13,328
|
|
|
|
|
14,594
|
|
Cash and cash equivalents at the end of the period
|
|
|
$
|
15,248
|
|
|
|
$
|
6,800
|
|
|
|
External net sales by market sector
|
(U.S. Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2010
|
|
|
2009
|
|
Reported Growth
|
|
Constant Currency Growth
|
|
|
|
2010
|
|
|
2009
|
|
Reported Growth
|
|
Constant Currency Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stimulation
|
|
|
|
43.2
|
|
|
39.6
|
|
9
|
%
|
|
9
|
%
|
|
|
|
130.0
|
|
|
117.0
|
|
11
|
%
|
|
11
|
%
|
|
Implants and Biologics
|
|
|
|
34.2
|
|
|
28.5
|
|
20
|
%
|
|
20
|
%
|
|
|
|
97.7
|
|
|
88.0
|
|
11
|
%
|
|
11
|
%
|
Total Spine
|
|
|
|
77.4
|
|
|
68.1
|
|
14
|
%
|
|
14
|
%
|
|
|
|
227.7
|
|
|
205.0
|
|
11
|
%
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orthopedic
|
|
|
|
34.0
|
|
|
33.3
|
|
2
|
%
|
|
6
|
%
|
|
|
|
106.9
|
|
|
95.4
|
|
12
|
%
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sports Medicine
|
|
|
|
23.7
|
|
|
24.7
|
|
-4
|
%
|
|
-4
|
%
|
|
|
|
70.4
|
|
|
73.4
|
|
-4
|
%
|
|
-4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Products
|
|
|
|
3.8
|
|
|
9.0
|
|
-58
|
%
|
|
-56
|
%
|
|
|
|
15.6
|
|
|
27.8
|
|
-44
|
%
|
|
-45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
138.9
|
|
$
|
135.1
|
|
3
|
%
|
|
4
|
%
|
|
|
$
|
420.6
|
|
$
|
401.6
|
|
5
|
%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 reconciliations
pertaining to Adjusted Revenue and Adjusted Net Income for the third
quarter of 2010, which are 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q310
|
|
|
TTM 9/30/10
|
|
|
Orthofix:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
8,520
|
|
|
$
|
45,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
5,164
|
|
|
|
21,788
|
|
|
|
|
|
Interest expense
|
|
|
3,493
|
|
|
|
21,245
|
|
|
|
|
|
Loss on refinancing of senior secured term loan
|
|
|
550
|
|
|
|
550
|
|
|
|
|
|
Gain on interest rate swap
|
|
|
-
|
|
|
|
(2,060
|
)
|
|
|
|
|
Tax Expense
|
|
|
5,769
|
|
|
|
27,522
|
|
|
|
|
|
Share-based compensation
|
|
|
1,676
|
|
|
|
9,999
|
|
|
|
|
|
Net gain on sale of vascular operations
|
|
|
20
|
|
|
|
(12,319
|
)
|
|
|
|
|
Other Non-Cash Charges
|
|
|
766
|
|
|
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
25,958
|
|
|
$
|
113,519
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: For the definition of Consolidated EBITDA above, please refer to a
copy of the credit agreement , dated August 30, 2010, which was filed as
Exhibit 10.1 to Orthofix's report on Form 8-K filed on August 31, 2010.
This document can be found at the SEC's website at www.SEC.gov.
|
|
|
|
|
Adjusted 3rd Quarter Sports Medicine Revenue
|
|
|
|
%
|
|
($ millions)
|
|
|
Q310
|
|
|
|
Q309
|
|
|
|
Change
|
Reported Revenue
|
|
|
$
|
23.7
|
|
|
|
$
|
24.7
|
|
|
|
|
-3.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of change in revenue recognition for distributor
|
|
|
|
|
|
|
|
($0.4
|
)
|
|
|
|
|
Adj. Sports Med Rev
|
|
|
$
|
23.7
|
|
|
|
$
|
24.3
|
|
|
|
|
-2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: Some calculations may be impacted by rounding
|
|
Section 2
Description of Third Quarter Specified Items
Adjusted Net Income
-
Loss on interest rate swap- realized change in the fair
market value of the Company's interest rate swap. Mark-to-market
adjustments were required to be reported in quarterly earnings. The
Company paid off the swap approximately one year early in Q210.
-
Strategic investments- costs related to the Company's strategic
investment in the development and commercialization of a new stem
cell-based allograft with MTF, and the agreement with IIS related to
the development of a pedicle screw system.
-
Foreign exchange loss- due to translation 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 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.
Consolidated EBITDA
-
Depreciation and Amortization- non-cash depreciation and
amortization expenses.
-
Interest- interest expense related to outstanding debt.
-
Loss on refinancing of senior secured term loan- the write-off
of the remaining capitalized debt issuance costs associated with the
Company's prior credit facility.
-
Gain on interest rate swap- realized change in the fair
market value of the Company's interest rate swap. Mark-to-market
adjustments are required to be reported in quarterly earnings. The
Company paid off the swap approximately one year early in Q210.
-
Tax expense- income tax expenses incurred by the Company.
-
Share-based compensation- non-cash equity compensation
expenses.
-
Net gain on sale of vascular operations- represents the
Company's sale of its vascular business during the first quarter of
2010.
-
Other non-cash charges- certain non-cash charges
including foreign exchange gains and losses, and the amortization of
debt issuance costs.
Adjusted Sports Medicine Revenue
-
Impact of change in revenue recognition for distributor- the
sales and commission expense in 2009 for one distributor were
previously recorded on separate line items on the income statement,
but are now netted on the revenue line.
Adjusted Revenue
-
Sold vascular business- the Company sold the assets of its
vascular business in Q110. This adjustment excludes revenue from this
business generated in Q309 as well as the revenue generated in Q310
from the transition services agreement in place in connection with the
sale.
-
Exited anesthesia business- the Company exited its anesthesia
business after the expiration of its distribution agreements in the
United Kingdom and Italy during Q210 and Q309, respectively.
-
Impact of change in Breg distributor recognition - the sales
and commission expense in 2009 for one distributor were previously
recorded on separate line items on the income statement, but are now
netted on the revenue line.
Section 3
Management use of, and economic substance behind, Non-GAAP
Performance Measures
Management uses non-GAAP measures 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 Medical,
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 2010