BOSTON, Feb 17, 2010 (BUSINESS WIRE) -- Orthofix International N.V. (NASDAQ:OFIX) (the Company) today announced
its results for the fourth quarter and full year ended December 31,
2009. Total revenue was a record $144 million, which was an increase of
9% over the fourth quarter of 2008. Excluding the favorable $2.5 million
impact of foreign currency on fourth quarter sales, revenue increased 7%
on a constant currency basis.
Reported fourth quarter net income totaled $9.5 million, or $0.55 per
diluted share. This compared with a reported loss of $717,000, or
($0.04) per share, in the fourth quarter of the prior year. Excluding
certain items summarized in the table below, adjusted net income in the
fourth quarter of 2009 was $9.2 million, or $0.53 per share. This was an
increase of 33% compared with adjusted net income of $0.40 per share in
the fourth quarter of the prior year.
The Company's fourth quarter operating income was $22.0 million, or
15.3% of total revenue, compared with operating income of $9.4 million,
or 7.1% of total revenue, in the prior year. Excluding certain items in
2008 as summarized in the table in the Regulation G Supplemental
Information Schedule attached to this release, adjusted operating income
in the fourth quarter of 2009 increased 21.8%. .
"Orthofix's strong fourth quarter capped off a year in which operational
improvements at our spinal implants business, and the strong performance
of our other core business segments, drove higher consolidated profit
margins and operating cash flows. This solid performance allowed us to
deleverage our balance sheet and reinvest in the Company's future, as
demonstrated by the successful launch of several important new
products," said President and CEO Alan Milinazzo.
Guidance
In 2010 Orthofix expects to generate between $580 and $588 million in
total revenue, including $28-$30 million of revenue from Trinity(R)
Evolution(TM). The Company expects reported earnings to be
between $2.00 and $2.04 per diluted share This earnings estimate
includes $1 million in R&D expenses .representing a pretax milestone
payment associated with a strategic initiative with Intelligent Implant
Systems. These expectations, as well as the additional guidance below,
assume the Company makes no material acquisitions or divestitures.
The Company also provided the following additional full-year 2010
guidance:
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gross profit margin of 74%-76%,
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operating profit margin of 13%-14%,
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depreciation/amortization expense of $22-$24 million, including
approximately $9 million of depreciation recorded in cost of sales,
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capital expenditures of $28-$30 million,
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research and development as a percent of revenue totaling 5.5%-6.5%,
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consolidated EBITDA of $110-$115 million, as defined in the Company's
amended credit facility previously filed with SEC,
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interest expense of $23-$25 million,
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stock compensation expense of $10-$11 million,
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a tax rate of 37%-38%, and
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average fully diluted shares outstanding of approximately 17.7 million.
Non-GAAP Performance Measures
The first table below presents a reconciliation of fourth 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. The Regulation G Supplemental Information Schedule
attached to this release includes additional reconciliations between
GAAP measures and non-GAAP measures referred to as "Adjusted Net
Income", "Consolidated EBITDA", "Adjusted Sports Medicine Revenue",
"Adjusted Gross Margin" and "Adjusted Operating Margin". 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.
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Reconciliation of Non-GAAP Performance Measure
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Fourth Quarter Adjusted Net Income
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Q409
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Q408
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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/(loss)
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$9,461
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$0.55
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($717
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($0.04
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Specified Items:
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Foreign exchange loss
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$171
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$0.01
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$1,103
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$0.06
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Unrealized, non-cash (gain)/loss on interest rate swap
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($476
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($0.03
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)
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$5,184
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$0.30
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Strategic investments
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---
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---
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$3,640
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$0.21
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Reorganization/consolidation costs
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---
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---
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$913
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$0.05
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Tax benefits
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---
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---
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($3,358
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($0.20
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Adjusted net income
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$9,156
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$0.53
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$6,765
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$0.40
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NOTE: Some calculations may be impacted by rounding
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Revenue
Total fourth quarter sales in the Company's spine sector were up 13%
year-over-year, to $74.4 million. Spine stimulation revenue increased
12%, to $41.9 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 biologic revenue was $32.5 million, which was
15% higher than the fourth quarter of 2008. The year-over-year growth in
spinal implants and biologic revenue was primarily due to a 31% increase
in U.S. sales of lumbar and cervical spine implant devices, driven
mainly by the Company's recent introductions of the Firebird(TM)
pedicle screw system and Pillar(TM) SA interbody device. The
Company's biologic revenue from the spinal implants division decreased
25% compared with the prior year as a result of the transition to
recording a marketing fee for Trinity(R) Evolution(TM)
versus previously recording full end user sales for the Company's prior
stem cell-based allograft. During the fourth quarter, marketing fees
from Trinity(R) Evolution(TM) in the spine division
totaled approximately $4.4 million, which was a sequential increase of
27% from the third quarter of 2009. Because the Company does not
purchase inventory of Trinity(R) Evolution(TM) it does
not incur any associated costs of sales. As such, the gross profit
margin for the new allograft is 100% of the recorded revenue, which
compares favorably to the gross profit margin of approximately 50% of
sales for the prior allograft.
Reported fourth quarter revenue in the Company's orthopedic business was
$35.9 million, which was an increase of 11%, and represented growth of
4% on a constant currency basis, compared with the prior year. The
constant currency revenue growth was driven primarily by increases in
global sales of internal fixation and external fixation devices of
approximately 23% and 6%, respectively.. Additionally, the Company
reported approximately $900,000 in revenue from Trinity(R)
Evolution(TM) in its orthopedic business.
Sports medicine revenue in the fourth quarter decreased 5% compared with
2008, to $23.0 million. The decrease was the result of a change in the
revenue recognition 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. The full-year impact to
revenue of approximately $1.5 million was all recognized in the fourth
quarter, and had no impact to operating results. Excluding the impact of
this change, sports medicine revenue in the fourth quarter would have
increased 1% year-over-year. U.S. revenue from the Company's core
bracing and cold therapy products increased 3% in the fourth quarter,
which reflected the recent expansion of certain product lines, including
soft goods and spine bracing, as well as bracing for the upper
extremities and the ankles and feet.
Gross Margin
The gross profit margin in the fourth quarter of 2009 was 74.5%, which
was 80 basis points higher than the fourth quarter of 2008. The
year-over-year improvement is primarily due to a higher mix of revenue
from the Company's higher margin spine stimulation and spinal implants
businesses.
Operating Expenses
Fourth quarter sales and marketing (S&M) expenses as a percent of
revenue decreased 320 basis points year-over-year, to 37.1%. The lower
S&M ratio was due primarily to an increase in sales tax expense in the
fourth quarter of 2008, as well as an increase in revenue in the fourth
quarter of 2009 from the Company's international spinal implants
markets, which generally operate in more of a fixed overhead environment.
General and administrative (G&A) expenses in the fourth quarter of 2009
increased by 50 basis points year-over-year, to 16.8% of sales. The
increase is due primarily to an accrual recorded for potential royalties
payable in connection with litigation in the Company's vascular business.
Research and development (R&D) expenses as a percent of revenue were
3.9% in the fourth quarter of 2009, compared with 8.6% in the prior
year. R&D expenses in the fourth quarter of 2008 included $5.6 million
($3.6 million net of tax, or $0.21 per share) in costs associated with
the development of Trinity(R) Evolution(TM).
Other Income and Expenses
Fourth quarter net interest expense was $6.2 million, compared with net
interest expense of approximately $6.0 million in the fourth quarter of
the prior year. The year-over-year increase reflects a higher rate of
interest partially offset by a lower outstanding debt balance.
During the fourth quarter the Company incurred an unrealized, non-cash
gain of approximately $806,000 ($476,000 net of tax, or $0.03 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 loss of approximately
$290,000 ($171,000 net of tax, or $0.01 per share) in the fourth 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 fourth quarter of 2009 was approximately
41%.
Cash and Liquidity
Orthofix's Consolidated EBITDA, as calculated in accordance with the
Company's amended credit facility, was $31.1 million in the fourth
quarter. At the end of the fourth quarter the Company's leverage ratio,
as defined in its amended credit facility, was 2.6, which was below the
3.25 maximum leverage ratio allowed in the amended credit facility. A
reconciliation of reported net income to Consolidated EBITDA is included
in the Regulation G Supplemental Information Schedule attached to this
release.
Cash flow from operations in the fourth quarter of 2009 was
approximately $21.7 million, compared with $24.3 million in the prior
year. Orthofix continues to have a $45 million unused revolving credit
facility, and at the end of the fourth quarter the Company was in
compliance with the financial covenants contained in its amended credit
agreement.
The total cash balance of $25.0 million at December 31, 2009 compared
with $25.6 million at December 31, 2008. The change in cash balance
includes the impact of five previously announced repayments of debt
ahead of their scheduled maturities totaling $25 million.
Full Year 2009 Results
Total revenue for the full year 2009 was $545.6 million, which
represented a 5% increase over 2008, or 7% on a constant currency basis.
Total net income for 2009 was $24.5 million, or $1.42 per diluted share.
Excluding certain items, total adjusted net income for the year 2009 was
$29.4 million, or $1.75 per diluted share. This was an 11.5% increase
compared with total adjusted net income of $27 million, or $1.57 per
share, in 2008. A reconciliation of full year adjusted net income is
included in the Regulation G Supplemental Information Schedule attached
to this release.
Excluding certain items, total adjusted operating income for 2009 was
$73.9 million, or 13.5% of total revenue, compared with adjusted
operating income of $60.3 million, or 11.6%, in 2008. This represented a
22.5% increase in operating income year-over-year. A reconciliation of
full year adjusted operating income is included in the Regulation G
Supplemental Information Schedule attached to this release.
The gross profit margin for the full year 2009 was 74.6%, compared with
70.7% in 2008. Excluding an $11.5 million inventory reserve recorded in
2008, the adjusted gross profit margin in 2008 was 73.0%. The increase
in the consolidated gross profit margin was driven primarily by an
increase in the gross profit margin at the Company's spinal implants and
biologics division, including the impact of Trinity(R) Evolution(TM),
which has a gross profit margin of 100%, which is approximately twice
that of the Company's prior stem cell-based allograft.
Full-year 2009 S&M expenses decreased 20 basis points year-over-year, to
39.6% of total revenue, and full-year 2009 G&A expenses increased 50
basis points year-over-year, to 16.3%. The increase was mainly due to
costs associated with the Company's reorganization and consolidation
plan, which was primarily related to the spinal implants and biologic
division. Full-year 2009 R&D expenses decreased 10 basis points
year-over year, to 5.8% of total revenue.
Full-year 2009 Consolidated EBITDA, as calculated in accordance with the
Company's amended credit facility, was $102.1 million, which was an
increase of 20.2% compared with 2008. The increase is due primarily to
higher gross and operating margins year-over-year. Cash flow from
operations for the full year 2009 was up 87% from the prior year, to
$50.0 million.
Taxes
The reported full year tax rate in 2009 was approximately 39%, which was
in line with the Company's full-year guidance of 37%-39%.
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to
discuss the Company's financial results for the fourth quarter and
full-year 2009. 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 (888) 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 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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ORTHOFIX INTERNATIONAL N.V.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited, U.S. Dollars, in thousands, except per share and
share data)
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Three Months Ended December 31,
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Twelve Months Ended December 31,
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2009
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2008
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2009
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2008
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Net sales
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$
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144,016
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$
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132,303
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$
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545,635
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$
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519,675
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Cost of sales
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36,749
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34,730
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138,450
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152,014
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Gross profit
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107,267
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97,573
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407,185
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367,661
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Operating expenses
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Sales and marketing
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53,396
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53,261
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215,943
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206,913
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General and administrative
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24,171
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21,554
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88,866
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81,806
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Research and development
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5,624
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11,444
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31,460
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30,844
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Amortization of intangible assets
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2,097
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1,874
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7,041
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17,094
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Impairment of goodwill and certain intangible assets
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0
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0
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0
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289,523
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Gain on sale of Pain Care(R) Operations
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0
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0
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0
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(1,570
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85,288
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88,133
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343,310
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624,610
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Operating income/(loss)
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21,979
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9,440
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63,875
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(256,949
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Other income/(expense), net
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Interest expense, net
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(6,242
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(5,966
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)
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(24,627
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)
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(19,674
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Loss on refinancing of senior secured term loan
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0
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0
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0
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(5,735
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Other expense
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(494
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)
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(1,965
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)
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(1,079
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(4,702
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Unrealized non-cash gain/(loss) on interest rate swap
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806
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(7,975
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1,852
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(7,975
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Other income/(expense), net
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(5,930
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)
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(15,906
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)
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(23,854
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)
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(38,086
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)
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Income/(loss) before income taxes
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16,049
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(6,466
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)
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40,021
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(295,035
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)
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Income tax benefit/(expense)
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(6,588
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)
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5,749
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(15,549
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)
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66,481
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Net income/(loss)
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$
|
9,461
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$
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(717
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)
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$
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24,472
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$
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(228,554
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)
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Net income/(loss) per common share - basic
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$
|
0.55
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|
|
-$0.04
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|
|
$
|
1.43
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|
-$13.37
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Net income/(loss) per common share - diluted
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|
$
|
0.55
|
|
|
|
-$0.04
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|
|
$
|
1.42
|
|
|
|
-$13.37
|
|
|
|
|
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|
|
|
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|
Weighted average number of common shares outstanding - basic
|
|
|
17,135,542
|
|
|
|
17,102,141
|
|
|
|
17,119,474
|
|
|
|
17,095,416
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|
|
|
|
|
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Weighted average number of common shares outstanding -
diluted
|
|
|
17,301,659
|
|
|
|
17,102,141
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|
|
|
17,202,943
|
|
|
|
17,095,416
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|
|
|
|
|
|
|
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|
ORTHOFIX INTERNATIONAL N.V.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
|
|
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
13,328
|
|
$
|
14,594
|
Restricted cash
|
|
|
11,630
|
|
|
10,998
|
Trade accounts receivable, net
|
|
|
129,777
|
|
|
110,720
|
Inventory, net
|
|
|
94,624
|
|
|
91,185
|
Deferred income taxes
|
|
|
20,286
|
|
|
17,543
|
Prepaid expenses and other current assets
|
|
|
29,849
|
|
|
29,610
|
Total current assets
|
|
|
299,494
|
|
|
274,650
|
|
|
|
|
|
Investments
|
|
|
345
|
|
|
2,095
|
Property, plant and equipment, net
|
|
|
38,694
|
|
|
32,660
|
Patents and other intangible assets, net
|
|
|
47,628
|
|
|
53,546
|
Goodwill
|
|
|
185,175
|
|
|
182,581
|
Deferred taxes and other long-term assets
|
|
|
19,137
|
|
|
15,683
|
|
|
|
|
|
Total assets
|
|
$
|
590,473
|
|
$
|
561,215
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Bank borrowings
|
|
$
|
2,209
|
|
$
|
1,907
|
Current portion of long-term debt
|
|
|
3,332
|
|
|
3,329
|
Trade accounts payable
|
|
|
23,302
|
|
|
23,865
|
Other current liabilities
|
|
|
59,210
|
|
|
45,894
|
Total current liabilities
|
|
|
88,053
|
|
|
74,995
|
|
|
|
|
|
Long-term debt
|
|
|
249,132
|
|
|
277,533
|
Deferred income taxes
|
|
|
6,115
|
|
|
4,509
|
Other long-term liabilities
|
|
|
6,904
|
|
|
2,117
|
Total liabilities
|
|
|
350,204
|
|
|
359,154
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
Common shares
|
|
|
1,714
|
|
|
1,710
|
Additional paid-in capital
|
|
|
177,246
|
|
|
167,818
|
|
|
|
178,960
|
|
|
169,528
|
Retained earnings
|
|
|
54,119
|
|
|
29,647
|
Accumulated other comprehensive income
|
|
|
7,190
|
|
|
2,886
|
Total shareholders' equity
|
|
|
240,269
|
|
|
202,061
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
590,473
|
|
$
|
561,215
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2009
|
|
|
|
2008
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net income/(loss)
|
|
$
|
24,472
|
|
|
$
|
(228,554
|
)
|
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
22,344
|
|
|
|
31,279
|
|
Amortization of debt costs
|
|
|
248
|
|
|
|
911
|
|
Provision for doubtful accounts
|
|
|
7,335
|
|
|
|
7,261
|
|
Provision for inventory obsolescence
|
|
|
8,760
|
|
|
|
10,913
|
|
Loss on refinancing of senior secured term loan
|
|
|
0
|
|
|
|
3,660
|
|
Impairment of goodwill and certain intangible assets
|
|
|
0
|
|
|
|
289,523
|
|
Impairment of investments held at cost
|
|
|
0
|
|
|
|
1,500
|
|
Change in fair value of interest rate swap
|
|
|
(1,852
|
)
|
|
|
7,975
|
|
Deferred taxes
|
|
|
(4,409
|
)
|
|
|
(79,158
|
)
|
Share-based compensation
|
|
|
10,752
|
|
|
|
10,589
|
|
Minority interest
|
|
|
34
|
|
|
|
0
|
|
Amortization of step up of fair value in inventory
|
|
|
0
|
|
|
|
493
|
|
Gain on sale of Pain Care(R) operations
|
|
|
0
|
|
|
|
(1,570
|
)
|
Other
|
|
|
2,507
|
|
|
|
(743
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
Restricted cash
|
|
|
(612
|
)
|
|
|
5,444
|
|
Accounts receivable
|
|
|
(23,858
|
)
|
|
|
(13,182
|
)
|
Inventories
|
|
|
(8,941
|
)
|
|
|
(13,731
|
)
|
Prepaid expenses and other current assets
|
|
|
(12
|
)
|
|
|
(5,046
|
)
|
Accounts payable
|
|
|
(1,310
|
)
|
|
|
675
|
|
Current liabilities
|
|
|
14,512
|
|
|
|
(1,469
|
)
|
Net cash provided by operating activities
|
|
|
49,970
|
|
|
|
26,770
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Capital expenditures
|
|
|
(21,998
|
)
|
|
|
(20,192
|
)
|
Investment in collaborative arrangements
|
|
|
(2,000
|
)
|
|
|
0
|
|
Proceeds from sale of investments held at cost
|
|
|
1,711
|
|
|
|
769
|
|
Proceeds from sale of Pain Care(R) operations
|
|
|
0
|
|
|
|
5,980
|
|
Net cash used in investing activities
|
|
|
(22,287
|
)
|
|
|
(13,443
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Net proceeds from issuance of common shares
|
|
|
70
|
|
|
|
1,734
|
|
Repayments of long-term debt
|
|
|
(28,323
|
)
|
|
|
(17,069
|
)
|
Proceeds from (repayments of) bank borrowings, net
|
|
|
248
|
|
|
|
(6,721
|
)
|
Payment of refinancing fees
|
|
|
0
|
|
|
|
(283
|
)
|
Cash payment for purchase of minority interest in subsidiary
|
|
|
(1,143
|
)
|
|
|
(500
|
)
|
Repurchase of equity
|
|
|
(220
|
)
|
|
|
0
|
|
Tax benefit on non-qualified stock options
|
|
|
25
|
|
|
|
22
|
|
Net cash used in financing activities
|
|
|
(29,343
|
)
|
|
|
(22,817
|
)
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
394
|
|
|
|
(980
|
)
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(1,266
|
)
|
|
|
(10,470
|
)
|
Cash and cash equivalents at the beginning of the year
|
|
|
14,594
|
|
|
|
25,064
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
13,328
|
|
|
$
|
14,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External net sales by market sector
|
(In US$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Twelve Months Ended December 31,
|
|
2009
|
|
2008
|
|
Reported Growth
|
|
Constant Currency Growth
|
|
2009
|
|
2008
|
|
Reported Growth
|
|
Constant Currency Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stimulation
|
41.9
|
|
37.4
|
|
12%
|
|
12%
|
|
159.0
|
|
141.8
|
|
12%
|
|
12%
|
Implants and Biologics
|
32.5
|
|
28.3
|
|
15%
|
|
15%
|
|
120.4
|
|
110.4
|
|
9%
|
|
9%
|
Total Spine
|
74.4
|
|
65.7
|
|
13%
|
|
13%
|
|
279.4
|
|
252.2
|
|
11%
|
|
11%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orthopedic
|
35.9
|
|
32.3
|
|
11%
|
|
4%
|
|
131.3
|
|
129.2
|
|
2%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sports Medicine
|
23.0
|
|
24.3
|
|
-5%
|
|
-6%
|
|
96.4
|
|
94.5
|
|
2%
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vascular
|
6.1
|
|
4.5
|
|
36%
|
|
35%
|
|
18.7
|
|
17.9
|
|
4%
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Products
|
4.6
|
|
5.5
|
|
-16%
|
|
-19%
|
|
19.8
|
|
25.9
|
|
-24%
|
|
-12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$ 144.0
|
|
$ 132.3
|
|
9%
|
|
7%
|
|
$ 545.6
|
|
$ 519.7
|
|
5%
|
|
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 fourth 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2009
|
|
|
TTM 12/31/09
|
|
|
|
Orthofix:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
$
|
9,461
|
|
|
|
$
|
24,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
|
|
|
6,279
|
|
|
|
|
22,344
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
6,318
|
|
|
|
|
24,820
|
|
|
|
|
|
|
Unrealized non-cash gain on interest rate swap
|
|
|
|
|
|
(806
|
)
|
|
|
|
(1,852
|
)
|
|
|
|
|
|
Tax Expense
|
|
|
|
|
|
6,589
|
|
|
|
|
15,549
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
2,874
|
|
|
|
|
10,752
|
|
|
|
|
|
|
Product Commercialization Investments
|
|
|
|
|
|
-
|
|
|
|
|
4,900
|
|
|
|
|
|
|
Other Non-Cash Charges
|
|
|
|
|
|
407
|
|
|
|
|
1,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
|
|
|
$
|
31,122
|
|
|
|
$
|
102,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
Adjusted 4th Quarter Sports Medicine Revenue
|
|
|
|
|
%
|
|
($ millions)
|
|
|
|
|
|
Q409
|
|
|
|
|
Q408
|
|
|
|
|
Change
|
Reported Revenue
|
|
|
|
|
|
$
|
23.0
|
|
|
|
|
$
|
24.3
|
|
|
|
|
|
-5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of change in revenue recognition for distributor
|
|
|
|
|
|
$
|
1.5
|
|
|
|
|
|
---
|
|
|
|
|
|
|
Pain Therapy revenue
|
|
|
|
|
|
|
|
|
|
|
|
($0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adj. Sports Med Rev
|
|
|
|
|
|
$
|
24.5
|
|
|
|
|
$
|
24.2
|
|
|
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full year 2009 Adjusted Net Income
|
|
|
|
|
|
|
|
|
|
|
|
($000s)
|
|
|
|
2009
|
|
|
|
2008
|
|
|
|
|
|
Net Income
|
|
EPS
|
|
|
Net Income
|
|
EPS
|
Reported net income/(loss)
|
|
|
|
$
|
24,472
|
|
|
$
|
1.42
|
|
|
|
|
($228,554
|
)
|
|
|
($13.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic investments
|
|
|
|
$
|
3,691
|
|
|
$
|
0.21
|
|
|
|
$
|
7,866
|
|
|
$
|
0.46
|
|
Reorganization costs
|
|
|
|
$
|
2,325
|
|
|
$
|
0.14
|
|
|
|
$
|
2,785
|
|
|
$
|
0.16
|
|
FX loss
|
|
|
|
$
|
273
|
|
|
$
|
0.02
|
|
|
|
$
|
1,772
|
|
|
$
|
0.10
|
|
Unrealized, non-cash (gain)/loss on int rate swap
|
|
|
|
|
($1,173
|
)
|
|
|
($0.07
|
)
|
|
|
$
|
5,184
|
|
|
$
|
0.30
|
|
Asset impairment & inventory reserve
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
$
|
237,689
|
|
|
$
|
13.90
|
|
Tax benefits
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
($3,358
|
)
|
|
|
($0.20
|
)
|
Credit agreement amendment costs
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
$
|
3,579
|
|
|
$
|
0.21
|
|
Costs associated with proxy contest
|
|
|
|
$
|
494
|
|
|
$
|
0.03
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
|
|
$
|
30,082
|
|
|
$
|
1.75
|
|
|
|
$
|
26,963
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full year 2009 Adjusted Gross Profit Margin
|
|
|
|
|
|
|
|
|
|
|
|
($000s)
|
|
|
|
2009
|
|
|
|
2008
|
|
|
|
|
Gross Profit
|
|
GPM
|
|
|
Gross Profit
|
|
GPM
|
Reported gross profit margin
|
|
|
|
$
|
407,185
|
|
|
|
74.6
|
%
|
|
|
$
|
367,661
|
|
|
|
70.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory reserve
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
$
|
11,500
|
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross profit margin
|
|
|
|
$
|
407,185
|
|
|
|
74.6
|
%
|
|
|
$
|
379,161
|
|
|
|
73.0
|
%
|
|
|
Full year adjusted operating margin
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Reported Op Margin
|
|
|
|
$
|
63,875
|
|
|
|
|
|
($256,949
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
Strategic investments
|
|
|
|
$
|
5,650
|
|
|
|
|
$
|
11,927
|
|
Reorg/consolidation plan
|
|
|
|
$
|
3,627
|
|
|
|
|
$
|
4,328
|
|
Impairment/reserve
|
|
|
|
|
|
|
|
$
|
301,023
|
|
Proxy contest costs
|
|
|
|
$
|
737
|
|
|
|
|
|
---
|
|
Total adjustments
|
|
|
|
$
|
10,014
|
|
|
|
|
$
|
317,278
|
|
|
|
|
|
|
|
|
|
|
Adjusted Op Margin
|
|
|
|
$
|
73,889
|
|
|
|
|
$
|
60,329
|
|
Adj Operating Profit Margin
|
|
|
|
|
13.5
|
%
|
|
|
|
|
11.6
|
%
|
|
|
Fourth quarter adjusted operating margin
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q409
|
|
|
|
Q408
|
|
|
|
|
|
|
|
|
|
|
Reported Op Margin
|
|
|
|
|
$
|
21,979
|
|
|
|
|
$
|
9,440
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Strategic investments
|
|
|
|
|
|
|
|
|
$
|
5,600
|
|
Reorg/consolidation plan
|
|
|
|
|
|
|
|
|
$
|
1,400
|
|
Sales tax exp adjustment
|
|
|
|
|
|
|
|
|
$
|
1,600
|
|
Proxy contest costs
|
|
|
|
|
|
|
|
|
|
---
|
|
Total adjustments
|
|
|
|
|
$
|
0
|
|
|
|
|
$
|
8,600
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income
|
|
|
|
|
$
|
21,979
|
|
|
|
|
$
|
18,040
|
|
Adj Operating Profit Margin
|
|
|
|
|
|
15.3
|
%
|
|
|
|
|
13.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Section 2
Description of Fourth Quarter and Full Year Specified Items
Adjusted Net Income (4th quarter and full
year 2009)
-
Unrealized, non-cash (gain)/loss 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, and the agreement with IIS related to
the development of a pedicle screw system.
-
Foreign exchange loss- due to unrealized, non-cash 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.
-
Tax benefits- tax benefits resulting from the reversal of a
previously recorded reserve for uncertain tax positions, and a
favorable geographic mix of pretax gains and losses in certain tax
jurisdictions.
-
Asset impairment & inventory reserve- a charges taken by
the Company as a result of an analysis that determined the value of
certain intangible assets on the balance sheet and certain items in
inventory had decreased.
-
Credit agreement amendment costs- expenses associated with the
amendment of the Company's long term credit facility.
-
Costs associated with proxy contest- legal expenses associated
with a proxy contest initiated by one of the Company's shareholders.
Net Income to Consolidated EBITDA
-
Depreciation and Amortization- non-cash depreciation and
amortization expenses.
-
Interest- interest expense related to outstanding debt.
-
Unrealized non-cash 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.
-
Tax expense- income tax expenses incurred by the Company.
-
Share-based compensation- non-cash equity compensation
expenses.
-
Product commercialization investments- costs associated with
the Development and Commercialization Agreements with MTF, and the
acquisition and development of IP from IIS.
-
Other non-cash charges- certain non-cash charges
including foreign exchange losses, an inventory step up related to an
acquisition and the amortization of a prepaid royalty.
Adjusted Sports Medicine Revenue
-
Impact of Change in Revenue Recognition for Distributor- the
sales and commission expense for one distributor were previously
recorded on separate line items on the income statement, but will be
netted against each other on the revenue line going forward.
Full Year Adjusted Gross Profit Margin
-
Inventory reserve- expenses recorded as part of Costs of Good
Sold in connection with an allowance for obsolescence on products held
in inventory.
Fourth Quarter & Full Year Adjusted Operating Margin
-
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.
-
Reorganization/consolidation costs- costs associated with
reorganization and facility consolidation plans within various areas
of the Company, primarily related to the spinal implants division.
-
Impairment/reserve- charges taken by the Company as a result of
an analysis that determined the value of certain intangible assets on
the balance sheet and certain items in inventory had decreased.
-
Costs associated with proxy contest- legal expenses associated
with a proxy contest initiated by one of the Company's shareholders.
-
Sales tax expense adjustment- the result of rulings by certain
US states regarding the taxability of some of Orthofix's products; the
adjustment related to sales over a 43 month period.
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