Third Quarter Highlights
-
Third quarter net sales of $101.2 million; an increase of 4.1% over
prior year on a constant currency basis
-
Adjusted EBITDA of $15.9 million, or 15.7% of net sales
-
Announces $75 million share repurchase plan
LEWISVILLE, Texas--(BUSINESS WIRE)--
Orthofix International N.V. (NASDAQ:OFIX) today reported its financial
results for the third quarter ended September 30, 2015, including net
sales of $101.2 million, diluted loss per share from continuing
operations of ($0.04) and adjusted diluted earnings per share from
continuing operations of $0.30.
"The third quarter was a very good quarter for Orthofix in many
respects, led by the financial results, which are at the high end of our
expectations. Our third quarter net sales continue to confirm that the
plan we are executing will deliver consistent top line growth. With this
growth we also anticipate ongoing improvement in our operating
leverage," said President and Chief Executive Officer, Brad Mason. "I am
also pleased to report that our Board of Directors has approved a $75
million share repurchase plan. I believe our improving financial
performance and significant cash flow generation ability affords us this
opportunity to return capital to shareholders while driving profitable
growth."
Third Quarter Financial Results
The following table provides net sales and constant currency net sales
growth by strategic business unit ("SBU") for the three months
ended September 30, 2015 and 2014:
|
|
|
|
Three Months Ended September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
Reported
Growth
|
|
|
Constant
Currency
Growth
|
|
BioStim
|
|
|
$
|
41,559
|
|
|
$
|
38,285
|
|
|
8.6
|
%
|
|
|
8.6
|
%
|
|
Biologics
|
|
|
|
14,639
|
|
|
|
13,856
|
|
|
5.7
|
%
|
|
|
5.7
|
%
|
|
Extremity Fixation
|
|
|
|
24,694
|
|
|
|
27,636
|
|
|
(10.6
|
)%
|
|
|
3.4
|
%
|
|
Spine Fixation
|
|
|
|
20,259
|
|
|
|
21,217
|
|
|
(4.5
|
)%
|
|
|
(3.9
|
)%
|
|
Total net sales
|
|
|
$
|
101,151
|
|
|
$
|
100,994
|
|
|
0.2
|
%
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales of $101.2 million were relatively flat when compared to the
same prior year period; however, net sales increased by approximately
4.1% on a constant currency basis. Net sales increased in our BioStim
and Biologics SBUs due primarily to continued expansion of our sales
channels and improving execution of our commercial strategies. Net sales
in our Extremity Fixation SBU decreased 10.6% (an increase of 3.4% on a
constant currency basis) compared to the same prior year period. The
increase in constant currency terms was primarily driven by growth in
the U.S. and increased cash collections, partially offset by weakness in
Brazil. Net sales in our Spine Fixation SBU decreased 3.9% in constant
currency year-over-year; however, third quarter sales grew 4.5%
sequentially over the second quarter, marking three consecutive quarters
of sales growth in this segment and highlighting the success of the team
and strategies that were put in place late last year.
Gross profit increased $1.6 million to $77.3 million, compared to $75.7
million in the same prior year period. Gross margin was 76.4% compared
to 75.0% for the same prior year period, primarily due to the increased
sales mix of our BioStim and Biologics regenerative solutions relative
to our other products.
Total net margin (gross profit less sales and marketing expenses)
was $31.2 million, or 30.8% of net sales, a decrease of $3.5 million or
10.3% from $34.7 million, or 34.4% of net sales, in the third quarter of
2014. The decrease in net margin was driven by an increase in sales and
marketing expenses of $5.1 million, partially due to an increase in bad
debt expense of $3.0 million, $2.0 million of which resulted from an
increase in accounts receivable reserves in response to the recent
fiscal and economic difficulties experienced by the Puerto Rico
Commonwealth, including receiving downgrades in credit ratings. Also
contributing to this increase was the planned increase in sales
management and field-based education and training personnel as well as
overachievement of sales commission quotas in certain territories. These
increases in sales and marketing expenses were partially offset by the
increase in gross profit.
Operating expenses increased by $3.9 million to $73.1 million, compared
to $69.2 million in the prior year period. The increase in operating
expenses was primarily a result of the increase in sales and marketing
expense, partially offset by a decrease of $1.2 million in restatements
and related costs from lower professional fees.
Adjusted EBITDA, which excludes share-based compensation, foreign
exchange impact, strategic investments, restatements and related costs,
infrastructure investments, legal judgment, gain on sale of assets, and
the Puerto Rico adjustment, decreased to $15.9 million or 15.7% of net
sales for the quarter, compared to $17.6 million or 17.4% of net sales
in the same prior year period due primarily to increased operating
expenses as described above.
Net loss from continuing operations for the quarter was ($0.8) million,
or ($0.04) per diluted share, compared to net income of $28 thousand, or
$0.00 per diluted share, in the same prior year period.
Adjusted net income from continuing operations for the quarter was $5.7
million, or $0.30 per diluted share, compared to adjusted net income
from continuing operations of $3.3 million, or $0.17 per diluted share,
in the same prior year period.
As of September 30, 2015, cash and cash equivalents were $63.7
million compared to $71.2 million, which includes restricted cash, as
of December 31, 2014. On August 31, 2015, the Company entered into a new
credit agreement that provides for a five year, $125 million secured
revolving credit facility, and replaces the Company's prior 2010 credit
facility. As of September 30, 2015, the Company had no outstanding
indebtedness and borrowing capacity of $125 million.
Class Action Settlement
Subject to court approval, a settlement in principle has been reached in
the shareholder action related to the first restatement. The settlement
is within the Company's insurance coverage limits. Further details of
the settlement are provided in the 2015 third quarter Form 10-Q.
Share Repurchase Plan
The Company's Board of Directors has authorized a share repurchase plan,
authorizing the purchase of up to $75 million of the Company's common
stock through the end of September 2017. The timing of purchases and the
number of shares to be purchased will depend on market conditions and
other factors. Repurchases are expected to consist primarily of open
market transactions at prevailing market prices in accordance with the
guidelines specified under Rule 10b-18 of the Securities Exchange Act of
1934, as amended.
Fiscal 2015 Outlook
Based on the Company's year-to-date results and updated forecast for the
fourth quarter of this year, the Company is narrowing its range of Net
Sales and adjusted EBITDA guidance as shown in the table below. The
guidance assumes constant currency exchange rates from those currently
prevailing.
|
|
|
|
Previous Quarter
2015 Outlook
|
|
|
Current Quarter
2015 Outlook
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
$ 390 million — $ 395 million |
|
|
$ 392 million — $ 395 million1 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$ 57 million — $ 60 million |
|
|
$ 58 million — $ 60 million2 |
|
|
|
|
|
|
|
|
1 Represents a year over year increase of 1.1% to 1.9%
on a constant currency basis and a decrease of 2.6% to 1.8% on a
reported basis.
2 Represents a year over year decrease of 11.5% to
8.4% on a constant currency basis and a decrease of 11.3% to 8.3% on a
reported basis.
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 2015.
Interested parties may access the conference call by dialing (888)
427-9380 in the U.S. and (719) 325-2412 outside the U.S., and
referencing the conference ID 344751. A replay of the call will be
available for two weeks by dialing (888) 203-1112 in the U.S. and (719)
457-0820 outside the U.S., and entering the conference ID 344751. A
webcast of the conference call may be accessed by going to the Company's
website at www.orthofix.com,
by clicking on the Investors link and then the Events and Presentations
page.
About Orthofix
Orthofix International N.V. is a diversified, global medical device
company focused on improving patients' lives by providing superior
reconstructive and regenerative orthopedic and spine solutions to
physicians worldwide. Headquartered in Lewisville, Texas, the Company
has four strategic business units that include BioStim, Biologics,
Extremity Fixation and Spine Fixation. Orthofix products are widely
distributed via the Company's sales representatives, distributors and
its subsidiaries. In addition, Orthofix is collaborating on research and
development activities with leading clinical organizations such as
the Musculoskeletal Transplant Foundation and the Texas Scottish Rite
Hospital for Children. For more information, 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, 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.
The forward-looking statements in this release do not constitute
guarantees or promises of future performance. Factors that could cause
or contribute to such differences may include, but are not limited to,
risks relating to: an investigation by the Division of Enforcement of
the Securities and Exchange Commission (the "SEC") and related
securities class action litigation arising out of our prior accounting
review and restatements of financial statements; our review of
allegations of improper payments involving our Brazil-based subsidiary;
the geographic concentration of certain of our sales and accounts
receivable in countries or territories that are facing severe fiscal
challenges; the expected sales of our products, including recently
launched products; unanticipated expenditures; changing relationships
with customers, suppliers, strategic partners and lenders; changes to
and the interpretation of governmental regulations; the resolution of
pending litigation matters (including our indemnification obligations
with respect to certain product liability claims against our former
sports medicine global business unit); our ongoing compliance
obligations under a corporate integrity agreement with the Office of
Inspector General of the Department of Health and Human Services (and
related terms of probation) and a deferred prosecution agreement with
the U.S. Department of Justice; 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 and spine industry; credit markets and the global
economy; corporate development and market development activities,
including acquisitions or divestitures; unexpected costs or operating
unit performance related to recent acquisitions; and other risks
described in our 2014 Annual Report on Form 10-K, Part I, Item 1A, "Risk
Factors" as well as in other reports that we file in the future.
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands, except share and per
share data)
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
Product sales
|
|
|
$
|
87,761
|
|
|
|
$
|
88,296
|
|
|
|
|
$
|
251,461
|
|
|
|
$
|
265,175
|
|
|
Marketing service fees
|
|
|
|
13,390
|
|
|
|
|
12,698
|
|
|
|
|
|
40,406
|
|
|
|
|
36,818
|
|
|
Net sales
|
|
|
|
101,151
|
|
|
|
|
100,994
|
|
|
|
|
|
291,867
|
|
|
|
|
301,993
|
|
|
Cost of sales
|
|
|
|
23,865
|
|
|
|
|
25,268
|
|
|
|
|
|
65,114
|
|
|
|
|
77,455
|
|
|
Gross profit
|
|
|
|
77,286
|
|
|
|
|
75,726
|
|
|
|
|
|
226,753
|
|
|
|
|
224,538
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
46,129
|
|
|
|
|
40,998
|
|
|
|
|
|
133,360
|
|
|
|
|
124,182
|
|
|
General and administrative
|
|
|
|
19,348
|
|
|
|
|
19,322
|
|
|
|
|
|
63,423
|
|
|
|
|
55,396
|
|
|
Research and development
|
|
|
|
6,523
|
|
|
|
|
6,572
|
|
|
|
|
|
18,819
|
|
|
|
|
18,818
|
|
|
Restatements and related costs
|
|
|
|
1,147
|
|
|
|
|
2,326
|
|
|
|
|
|
9,276
|
|
|
|
|
12,959
|
|
|
|
|
|
|
73,147
|
|
|
|
|
69,218
|
|
|
|
|
|
224,878
|
|
|
|
|
211,355
|
|
|
Operating income
|
|
|
|
4,139
|
|
|
|
|
6,508
|
|
|
|
|
|
1,875
|
|
|
|
|
13,183
|
|
|
Other income and expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
(125
|
)
|
|
|
|
(395
|
)
|
|
|
|
|
(323
|
)
|
|
|
|
(1,355
|
)
|
|
Other expense, net
|
|
|
|
(1,736
|
)
|
|
|
|
(1,322
|
)
|
|
|
|
|
(192
|
)
|
|
|
|
(1,231
|
)
|
|
|
|
|
|
(1,861
|
)
|
|
|
|
(1,717
|
)
|
|
|
|
|
(515
|
)
|
|
|
|
(2,586
|
)
|
|
Income before income taxes
|
|
|
|
2,278
|
|
|
|
|
4,791
|
|
|
|
|
|
1,360
|
|
|
|
|
10,597
|
|
|
Income tax expense
|
|
|
|
(3,066
|
)
|
|
|
|
(4,763
|
)
|
|
|
|
|
(5,808
|
)
|
|
|
|
(9,251
|
)
|
|
Net (loss) income from continuing operations
|
|
|
|
(788
|
)
|
|
|
|
28
|
|
|
|
|
|
(4,448
|
)
|
|
|
|
1,346
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations
|
|
|
|
(804
|
)
|
|
|
|
260
|
|
|
|
|
|
(2,315
|
)
|
|
|
|
(6,363
|
)
|
|
Income tax benefit
|
|
|
|
221
|
|
|
|
|
164
|
|
|
|
|
|
585
|
|
|
|
|
2,278
|
|
|
Net (loss) income from discontinued operations
|
|
|
|
(583
|
)
|
|
|
|
424
|
|
|
|
|
|
(1,730
|
)
|
|
|
|
(4,085
|
)
|
|
Net (loss) income
|
|
|
$
|
(1,371
|
)
|
|
|
$
|
452
|
|
|
|
|
$
|
(6,178
|
)
|
|
|
$
|
(2,739
|
)
|
|
Net (loss) income per common share—basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
$
|
(0.04
|
)
|
|
|
$
|
—
|
|
|
|
|
$
|
(0.24
|
)
|
|
|
$
|
0.07
|
|
|
Net (loss) income from discontinued operations
|
|
|
|
(0.03
|
)
|
|
|
|
0.02
|
|
|
|
|
|
(0.09
|
)
|
|
|
|
(0.22
|
)
|
|
Net (loss) income per common share—basic
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
0.02
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
$
|
(0.15
|
)
|
|
Net (loss) income per common share—diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
$
|
(0.04
|
)
|
|
|
$
|
—
|
|
|
|
|
$
|
(0.24
|
)
|
|
|
$
|
0.07
|
|
|
Net (loss) income from discontinued operations
|
|
|
|
(0.03
|
)
|
|
|
|
0.02
|
|
|
|
|
|
(0.09
|
)
|
|
|
|
(0.22
|
)
|
|
Net (loss) income per common share—diluted
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
0.02
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
$
|
(0.15
|
)
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
18,855,533
|
|
|
|
|
18,557,540
|
|
|
|
|
|
18,785,696
|
|
|
|
|
18,408,238
|
|
|
Diluted
|
|
|
|
18,855,533
|
|
|
|
|
18,773,386
|
|
|
|
|
|
18,785,696
|
|
|
|
|
18,564,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
(U.S. Dollars, in thousands except share and per share data)
|
|
|
2015
|
|
|
2014
|
|
Assets
|
|
|
(unaudited)
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
63,694
|
|
|
|
$
|
36,815
|
|
|
Restricted cash
|
|
|
|
—
|
|
|
|
|
34,424
|
|
|
Trade accounts receivable, less allowance for doubtful accounts of
$9,468 and $7,285 at September 30, 2015 and December 31, 2014,
respectively
|
|
|
|
56,173
|
|
|
|
|
61,358
|
|
|
Inventories
|
|
|
|
57,766
|
|
|
|
|
59,846
|
|
|
Deferred income taxes
|
|
|
|
35,974
|
|
|
|
|
37,413
|
|
|
Prepaid expenses and other current assets
|
|
|
|
31,884
|
|
|
|
|
26,552
|
|
|
Total current assets
|
|
|
|
245,491
|
|
|
|
|
256,408
|
|
|
Property, plant and equipment, net
|
|
|
|
51,467
|
|
|
|
|
48,549
|
|
|
Patents and other intangible assets, net
|
|
|
|
5,368
|
|
|
|
|
7,152
|
|
|
Goodwill |
|
|
|
53,565
|
|
|
|
|
53,565
|
|
|
Deferred income taxes
|
|
|
|
19,101
|
|
|
|
|
18,541
|
|
|
Other long-term assets
|
|
|
|
27,457
|
|
|
|
|
8,970
|
|
|
Total assets
|
|
|
$
|
402,449
|
|
|
|
$
|
393,185
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
$
|
17,009
|
|
|
|
$
|
13,223
|
|
|
Other current liabilities
|
|
|
|
61,570
|
|
|
|
|
53,220
|
|
|
Total current liabilities
|
|
|
|
78,579
|
|
|
|
|
66,443
|
|
|
Deferred income taxes
|
|
|
|
—
|
|
|
|
|
229
|
|
|
Other long-term liabilities
|
|
|
|
26,664
|
|
|
|
|
26,886
|
|
|
Total liabilities
|
|
|
|
105,243
|
|
|
|
|
93,558
|
|
|
Contingencies
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
Common shares $0.10 par value; 50,000,000 shares authorized;
18,882,661 and 18,611,495 issued and outstanding as of September
30, 2015 and December 31, 2014, respectively
|
|
|
|
1,888
|
|
|
|
|
1,861
|
|
|
Additional paid-in capital
|
|
|
|
239,954
|
|
|
|
|
232,788
|
|
|
Retained earnings
|
|
|
|
59,182
|
|
|
|
|
65,360
|
|
|
Accumulated other comprehensive loss
|
|
|
|
(3,818
|
)
|
|
|
|
(382
|
)
|
|
Total shareholders' equity
|
|
|
|
297,206
|
|
|
|
|
299,627
|
|
|
Total liabilities and shareholders' equity
|
|
|
$
|
402,449
|
|
|
|
$
|
393,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
Selected Financial Data
Net Sales by SBU
The following tables provide net sales and constant currency net sales
growth by SBU for the three and nine months ended September 30, 2015 and
2014:
|
|
|
|
Three Months Ended September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
Reported
Growth
|
|
|
Constant
Currency
Growth
|
|
BioStim
|
|
|
$
|
41,559
|
|
|
$
|
38,285
|
|
|
8.6
|
%
|
|
|
8.6
|
%
|
|
Biologics
|
|
|
|
14,639
|
|
|
|
13,856
|
|
|
5.7
|
%
|
|
|
5.7
|
%
|
|
Extremity Fixation
|
|
|
|
24,694
|
|
|
|
27,636
|
|
|
(10.6
|
)%
|
|
|
3.4
|
%
|
|
Spine Fixation
|
|
|
|
20,259
|
|
|
|
21,217
|
|
|
(4.5
|
)%
|
|
|
(3.9
|
)%
|
|
Total net sales
|
|
|
$
|
101,151
|
|
|
$
|
100,994
|
|
|
0.2
|
%
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
Reported
Growth
|
|
|
Constant
Currency
Growth
|
|
BioStim
|
|
|
$
|
119,962
|
|
|
$
|
114,937
|
|
|
4.4
|
%
|
|
|
4.4
|
%
|
|
Biologics
|
|
|
|
43,874
|
|
|
|
40,718
|
|
|
7.8
|
%
|
|
|
7.8
|
%
|
|
Extremity Fixation
|
|
|
|
72,103
|
|
|
|
82,005
|
|
|
(12.1
|
)%
|
|
|
2.1
|
%
|
|
Spine Fixation
|
|
|
|
55,928
|
|
|
|
64,333
|
|
|
(13.1
|
)%
|
|
|
(12.6
|
)%
|
|
Total net sales
|
|
|
$
|
291,867
|
|
|
$
|
301,993
|
|
|
(3.4
|
)%
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Margin by SBU
The following table provides net margin by SBU for the three and nine
months ended September 30, 2015 and 2014:
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
BioStim
|
|
|
$
|
16,834
|
|
|
|
$
|
16,442
|
|
|
|
|
$
|
47,634
|
|
|
|
$
|
49,168
|
|
|
Biologics
|
|
|
|
6,296
|
|
|
|
|
6,504
|
|
|
|
|
|
19,525
|
|
|
|
|
19,500
|
|
|
Extremity Fixation
|
|
|
|
6,442
|
|
|
|
|
8,361
|
|
|
|
|
|
22,607
|
|
|
|
|
21,952
|
|
|
Spine Fixation
|
|
|
|
1,938
|
|
|
|
|
3,958
|
|
|
|
|
|
4,582
|
|
|
|
|
11,147
|
|
|
Corporate
|
|
|
|
(353
|
)
|
|
|
|
(537
|
)
|
|
|
|
|
(955
|
)
|
|
|
|
(1,411
|
)
|
|
Total net margin
|
|
|
$
|
31,157
|
|
|
|
$
|
34,728
|
|
|
|
|
$
|
93,393
|
|
|
|
$
|
100,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a % of net sales
|
|
|
|
30.8
|
%
|
|
|
|
34.4
|
%
|
|
|
|
|
32.0
|
%
|
|
|
|
33.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
The following table reconciles reported net (loss) income from
continuing operations to EBITDA (earnings before net interest expense,
income tax provision, depreciation and amortization) and Adjusted EBITDA
for the three and nine months ended September 30, 2015 and 2014. Please
refer to the Non-GAAP Performance Measures section at the end of this
press release for more information about the specified items below.
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
Net (loss) income from continuing operations
|
|
|
$
|
(788
|
)
|
|
|
$
|
28
|
|
|
|
|
$
|
(4,448
|
)
|
|
|
$
|
1,346
|
|
|
Interest expense, net
|
|
|
|
125
|
|
|
|
|
395
|
|
|
|
|
|
323
|
|
|
|
|
1,355
|
|
|
Income tax expense
|
|
|
|
3,066
|
|
|
|
|
4,763
|
|
|
|
|
|
5,808
|
|
|
|
|
9,251
|
|
|
Depreciation and amortization
|
|
|
|
5,171
|
|
|
|
|
5,578
|
|
|
|
|
|
15,746
|
|
|
|
|
17,094
|
|
|
EBITDA
|
|
|
$
|
7,574
|
|
|
|
$
|
10,764
|
|
|
|
|
$
|
17,429
|
|
|
|
$
|
29,046
|
|
|
Share-based compensation
|
|
|
|
1,948
|
|
|
|
|
1,730
|
|
|
|
|
|
5,524
|
|
|
|
|
4,103
|
|
|
Foreign exchange impact
|
|
|
|
1,696
|
|
|
|
|
1,349
|
|
|
|
|
|
3,374
|
|
|
|
|
1,029
|
|
|
Strategic investments
|
|
|
|
199
|
|
|
|
|
—
|
|
|
|
|
|
1,100
|
|
|
|
|
—
|
|
|
Restatements and related costs
|
|
|
|
1,147
|
|
|
|
|
2,326
|
|
|
|
|
|
9,276
|
|
|
|
|
12,959
|
|
|
Infrastructure investments
|
|
|
|
1,270
|
|
|
|
|
1,452
|
|
|
|
|
|
4,732
|
|
|
|
|
1,452
|
|
|
Legal judgment
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
1,066
|
|
|
|
|
—
|
|
|
Gain on sale of assets
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
(3,100
|
)
|
|
|
|
—
|
|
|
Puerto Rico |
|
|
|
2,024
|
|
|
|
|
—
|
|
|
|
|
|
2,024
|
|
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
|
$
|
15,858
|
|
|
|
$
|
17,621
|
|
|
|
|
$
|
41,425
|
|
|
|
$
|
48,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a % of net sales
|
|
|
|
15.7
|
%
|
|
|
|
17.4
|
%
|
|
|
|
|
14.2
|
%
|
|
|
|
16.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income from Continuing Operations
The following table reconciles reported net (loss) income from
continuing operations to adjusted net income from continuing operations
for the three and nine months ended September 30, 2015 and 2014. Amounts
are shown net of tax. Please refer to the Non-GAAP Performance Measures
section at the end of this press release for more information about the
specified items below.
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
Net (loss) income from continuing operations
|
|
|
$
|
(788
|
)
|
|
|
$
|
28
|
|
|
|
$
|
(4,448
|
)
|
|
|
$
|
1,346
|
|
Foreign exchange impact
|
|
|
|
1,068
|
|
|
|
|
850
|
|
|
|
|
2,125
|
|
|
|
|
648
|
|
Strategic investments
|
|
|
|
125
|
|
|
|
|
—
|
|
|
|
|
693
|
|
|
|
|
—
|
|
Restatements and related costs
|
|
|
|
723
|
|
|
|
|
1,465
|
|
|
|
|
5,844
|
|
|
|
|
8,164
|
|
Infrastructure investments
|
|
|
|
800
|
|
|
|
|
914
|
|
|
|
|
2,981
|
|
|
|
|
914
|
|
Legal judgment
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
672
|
|
|
|
|
—
|
|
Gain on sale of assets
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1,953
|
)
|
|
|
|
—
|
|
Puerto Rico:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt expense
|
|
|
|
2,024
|
|
|
|
|
—
|
|
|
|
|
2,024
|
|
|
|
|
—
|
|
Income tax valuation allowance
|
|
|
|
1,778
|
|
|
|
|
—
|
|
|
|
|
1,778
|
|
|
|
|
—
|
|
Adjusted net income from continuing operations
|
|
|
$
|
5,730
|
|
|
|
$
|
3,257
|
|
|
|
$
|
9,716
|
|
|
|
$
|
11,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings per Diluted Share from
Continuing Operations
The following table reconciles reported earnings per diluted share (EPS)
from continuing operations to adjusted EPS from continuing operations
for the three and nine months ended September 30, 2015 and 2014.
Calculations are shown net of tax. Please refer to the Non-GAAP
Performance Measures section at the end of this press release for more
information about the specified items below.
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, per diluted share)
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
EPS from continuing operations
|
|
|
$
|
(0.04
|
)
|
|
|
$
|
—
|
|
|
|
$
|
(0.24
|
)
|
|
|
$
|
0.07
|
|
Foreign exchange impact
|
|
|
|
0.06
|
|
|
|
|
0.04
|
|
|
|
|
0.11
|
|
|
|
|
0.03
|
|
Strategic investments
|
|
|
|
0.01
|
|
|
|
|
—
|
|
|
|
|
0.04
|
|
|
|
|
—
|
|
Restatements and related costs
|
|
|
|
0.04
|
|
|
|
|
0.08
|
|
|
|
|
0.31
|
|
|
|
|
0.45
|
|
Infrastructure investments
|
|
|
|
0.03
|
|
|
|
|
0.05
|
|
|
|
|
0.16
|
|
|
|
|
0.05
|
|
Legal judgment
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
0.04
|
|
|
|
|
—
|
|
Gain on sale of assets
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.10
|
)
|
|
|
|
—
|
|
Puerto Rico:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt expense
|
|
|
|
0.11
|
|
|
|
|
—
|
|
|
|
|
0.11
|
|
|
|
|
—
|
|
Income tax valuation allowance
|
|
|
|
0.09
|
|
|
|
|
—
|
|
|
|
|
0.09
|
|
|
|
|
—
|
|
Adjusted EPS from continuing operations
|
|
|
$
|
0.30
|
|
|
|
$
|
0.17
|
|
|
|
$
|
0.52
|
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
The following table reconciles net cash provided by operating activities
to free cash flow for the nine months ended September 30, 2015 and 2014.
Please refer to the Non-GAAP Performance Measures section at the end of
this press release for more information about the specified items below.
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2015
|
|
|
2014
|
|
Net cash provided by operating activities
|
|
|
$
|
26,236
|
|
|
|
$
|
35,966
|
|
|
Less: capital expenditures
|
|
|
|
(21,199
|
)
|
|
|
|
(11,494
|
)
|
|
Free cash flow
|
|
|
$
|
5,037
|
|
|
|
$
|
24,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Margin
The following table reconciles gross profit to net margin for the three
and nine months ended September 30, 2015 and 2014. Please refer to the
Non-GAAP Performance Measures section at the end of this press release
for more information about the specified items below.
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars in thousands)
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
Gross profit
|
|
|
$
|
77,286
|
|
|
|
$
|
75,726
|
|
|
|
|
$
|
226,753
|
|
|
|
$
|
224,538
|
|
|
Less: sales and marketing
|
|
|
|
(46,129
|
)
|
|
|
|
(40,998
|
)
|
|
|
|
|
(133,360
|
)
|
|
|
|
(124,182
|
)
|
|
Total net margin
|
|
|
$
|
31,157
|
|
|
|
$
|
34,728
|
|
|
|
|
$
|
93,393
|
|
|
|
$
|
100,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Performance Measures
The tables in this press release present reconciliations of net (loss)
income from continuing operations and earnings per diluted share from
continuing operations calculated in accordance with U.S. GAAP to
non-GAAP performance measures, referred to as "EBITDA," "Adjusted
EBITDA," "Adjusted net income from continuing operations," "Adjusted
earnings per diluted share from continuing operations," "Free cash flow"
and "Net margin" that exclude items specified in the tables. A more
detailed explanation of the items excluded from these non-GAAP measures,
as well as why management believes the non-GAAP measures are useful to
them, is included in the Reconciliations of Non-GAAP Performance
Measures section below. Certain calculations for prior periods which
have been previously presented have been conformed to our current
calculation methodology.
Reconciliations of Non-GAAP Performance Measures
Reconciling Items for Adjusted EBITDA, Adjusted Net Income from
Continuing Operations and Adjusted Earnings per Diluted Share from
Continuing Operations
-
Shared-based compensation - costs related to the Company's
share-based compensation plans, which include stock options,
restricted stock awards, performance-based restricted stock awards (if
applicable), and the Company's stock purchase plan.
-
Foreign exchange impact - gains and losses related to foreign
exchange transactions.
-
Strategic investments - costs related to the Company's
strategic investments such as our investment in eNeura, Inc.
-
Restatements and related costs - legal, accounting, and other
professional costs related to the Company's accounting review and
restatements through March 2015, and legal fees associated with the
ongoing SEC Investigation, Securities Class Action Complaint and
Brazil subsidiary compliance review.
-
Infrastructure investments - costs associated with our
multi-year process and systems improvement effort, "Bluecore."
-
Legal judgment - judgment against the Company related to a
lawsuit filed by a former distributor.
-
Gain on sale of assets - gain on the sale of the Company's
Tempus™ Cervical Plate product line.
-
Puerto Rico- bad debt expense and an income tax valuation
allowance, in response to the recent fiscal and economic difficulties
experienced by the Puerto Rico Commonwealth.
Free cash flow
Free cash flow is a non-GAAP financial measure, which is calculated by
subtracting capital expenditures from cash flow from operating
activities. Free cash flow is an important indicator of how much cash is
generated or used by our normal business operations, including capital
expenditures. Management uses free cash flow as a measure of progress on
its capital efficiency and cash flow initiatives.
Net Margin
Net margin is a non-GAAP financial measure, which is calculated by
subtracting sales and marketing from gross profit. Net margin is the
primary metric used by the Company's Chief Operating Decision Maker in
managing the Company.
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. Management uses these non-GAAP measures as the basis for
assessing the ability of the underlying operations to generate cash. In
addition, management uses these non-GAAP measures to further its
understanding of the performance of the Company's business units.
Material Limitations Associated with the Use of Non-GAAP Measures
The non-GAAP measures used in this press release may have limitations as
analytical tools, and should not be considered in isolation or as a
replacement for U.S. 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, certain non-cash
expenses such as equity compensation expense does not directly impact
cash flows, but is part of total compensation costs accounted for under
U.S. 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 U.S. GAAP results to gain a complete
picture of the Company's performance. The U.S. 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 U.S.
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 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. 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 U.S. GAAP results with non-GAAP
performance measures.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151103006816/en/
Orthofix International N.V.
Mark Quick, 214-937-2924
[email protected]
Source: Orthofix International N.V.
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