First Quarter Highlights
-
Net sales of $98.7 million; an increase of 11.8% over prior year on
a constant currency basis
-
Adjusted EBITDA of $15.5 million, or 15.7% of net sales, an
increase of 83.6% over prior year
-
Company increases fiscal year 2016 guidance
LEWISVILLE, Texas--(BUSINESS WIRE)--
Orthofix International N.V. (NASDAQ:OFIX) today reported its financial
results for the first quarter ended March 31, 2016. For the first
quarter of 2016, net sales were $98.7 million, diluted earnings per
share from continuing operations was $0.25 and adjusted diluted earnings
per share from continuing operations was $0.28.
"Our first quarter showed a strong start to 2016, both in our financial
results as well as our operational improvements, and is our fourth
consecutive quarter of solid performance. As reflected in our updated
guidance, we believe there is opportunity to further improve our results
this year by maintaining our focus on executing initiatives that drive
both top line growth and margin improvement," said Brad Mason, President
and Chief Executive Officer.
First Quarter Financial Results
The following table provides net sales, net sales growth and constant
currency net sales growth by strategic business unit ("SBU") for the
three months ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
|
Reported
Change
|
|
|
Constant
Currency
Change
|
|
BioStim
|
|
|
|
$
|
41,044
|
|
|
$
|
37,700
|
|
|
8.9
|
%
|
|
|
8.9
|
%
|
|
Biologics
|
|
|
|
|
14,094
|
|
|
|
13,961
|
|
|
1.0
|
%
|
|
|
1.0
|
%
|
|
Extremity Fixation
|
|
|
|
|
24,709
|
|
|
|
21,815
|
|
|
13.3
|
%
|
|
|
20.9
|
%
|
|
Spine Fixation
|
|
|
|
|
18,832
|
|
|
|
16,286
|
|
|
15.6
|
%
|
|
|
15.8
|
%
|
|
Total net sales
|
|
|
|
$
|
98,679
|
|
|
$
|
89,762
|
|
|
9.9
|
%
|
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The commercial and operational improvements made over the last two years
continue to drive the net sales growth for the Company's BioStim and
Biologics SBUs. The increase in net sales in the Extremity Fixation SBU
was largely due to growth in the U.S. and Brazil as well as higher than
expected international cash collections, offset by a negative foreign
currency impact of $1.7 million. The increase in net sales in the Spine
Fixation SBU was primarily due to the continued success of its growth
strategy and higher than expected international cash collections.
Gross profit increased $6.1 million to $76.5 million, compared to $70.4
million in the prior year period. Gross margin decreased to 77.6%,
compared to 78.5% in the prior year period. The year-over-year decrease
in gross margin was driven primarily by an increase in the sales mix of
fixation products, which have a lower gross margin than the regenerative
products.
Total net margin (gross profit less sales and marketing expenses) was
$31.7 million, an increase of 21.4% compared to $26.1 million in the
prior year period. This improvement was driven by the increase in gross
profit, and a decrease in sales and marketing expenses as a percent of
net sales to 45.4% from 49.3% in the prior year due to increased
operating leverage of our fixed sales and marketing expenses as well as
a decrease in commission expense as a percent of net sales.
Operating expenses decreased by $8.2 million to $69.4 million, compared
to $77.6 million in the prior year period. This was driven by decreases
in general and administrative expenses and restatement and related
costs, offset by an increase in research and development costs.
Operating income was $7.1 million compared to an operating loss of
($7.2) million in the prior year period.
Adjusted EBITDA, which excludes share-based compensation, foreign
exchange impact, strategic investments, restatements and related costs,
infrastructure investments and gain on sale of assets, increased
to $15.5 million or 15.7% of net sales for the first quarter, compared
to $8.4 million or 9.4% of net sales in the prior year period.
Net income from continuing operations was $4.6 million, or $0.25 per
diluted share, compared to net loss of ($7.7) million, or ($0.41) per
diluted share in the prior year period.
Adjusted net income from continuing operations was $5.3 million, or
$0.28 per diluted share, compared to adjusted net income of $0.7
million, or $0.04 per diluted share in the prior year period.
As of March 31, 2016, cash and cash equivalents were $39.8 million
compared to $63.7 million as of December 31, 2015. This change in cash
was primarily driven by the execution of our stock repurchase program.
As of March 31, 2016 the Company had no outstanding indebtedness and
borrowing capacity of $125 million.
Share Repurchase Plan
As previously announced, the Company initiated a share repurchase plan
in the fourth quarter of 2015 of up to $75 million of the Company's
common stock through the end of September 2017. As of March 31, 2016,
the Company had repurchased a cumulative total of approximately 970,000
shares of common stock for $38.0 million, of which approximately 676,000
shares of common stock were repurchased for $26.5 million in the first
quarter of 2016.
Fiscal 2016 Outlook
For the fiscal year ending December 31, 2016, the Company expects the
following results, assuming exchange rates are the same as those
currently prevailing.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous
2016 Outlook
|
|
|
Current
2016 Outlook
|
|
Net Sales
|
|
|
|
$ 407 million — $ 412 million |
|
|
$ 412 million — $ 416 million1 |
|
Adjusted EBITDA
|
|
|
|
$ 67 million — $ 70 million |
|
|
$ 69 million — $ 72 million2 |
|
Adjusted EPS from continuing operations
|
|
|
|
$ 1.25 — $ 1.35 |
|
|
$ 1.35 — $ 1.453 |
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents a year-over-year increase of 3.9% to 4.9% on a reported
basis.
|
|
2 |
|
Represents a year-over-year increase of 13.7% to 18.6% on a reported
basis.
|
|
3 |
|
Represents a year-over-year increase of 28.6% to 38.1% using our
expected long-term effective tax rate of 38% and 18,700,000 shares
outstanding.
|
|
|
|
|
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to
discuss the Company's financial results for the first quarter of 2016.
Interested parties may access the conference call by dialing (888)
576-4387 in the U.S. and (719) 325-2323 outside the U.S., and
referencing the conference ID 6584788. 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 6584788. 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: the expected sales of our products, including
recently launched products; the continuation of our ongoing share
repurchase program; 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; 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 the "Risk Factors"
section of our 2015 Annual Report on Form 10-K, as well as in other
reports that we file in the future. Existing and prospective investors
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company
undertakes no obligation to update or revise the information contained
in this press release.
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands, except share and per
share data)
|
|
|
|
2016
|
|
|
2015
|
|
Product sales
|
|
|
|
$
|
85,625
|
|
|
|
$
|
76,832
|
|
|
Marketing service fees
|
|
|
|
|
13,054
|
|
|
|
|
12,930
|
|
|
Net sales
|
|
|
|
|
98,679
|
|
|
|
|
89,762
|
|
|
Cost of sales
|
|
|
|
|
22,136
|
|
|
|
|
19,339
|
|
|
Gross profit
|
|
|
|
|
76,543
|
|
|
|
|
70,423
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
|
44,816
|
|
|
|
|
44,285
|
|
|
General and administrative
|
|
|
|
|
16,718
|
|
|
|
|
21,569
|
|
|
Research and development
|
|
|
|
|
7,636
|
|
|
|
|
5,845
|
|
|
Restatements and related costs
|
|
|
|
|
245
|
|
|
|
|
5,916
|
|
|
|
|
|
|
|
69,415
|
|
|
|
|
77,615
|
|
|
Operating income
|
|
|
|
|
7,128
|
|
|
|
|
(7,192
|
)
|
|
Other income and expense
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
(38
|
)
|
|
|
|
(272
|
)
|
|
Other income, net
|
|
|
|
|
1,833
|
|
|
|
|
691
|
|
|
|
|
|
|
|
1,795
|
|
|
|
|
419
|
|
|
Income (loss) before income taxes
|
|
|
|
|
8,923
|
|
|
|
|
(6,773
|
)
|
|
Income tax expense
|
|
|
|
|
(4,294
|
)
|
|
|
|
(964
|
)
|
|
Net income (loss) from continuing operations
|
|
|
|
|
4,629
|
|
|
|
|
(7,737
|
)
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
(990
|
)
|
|
|
|
(781
|
)
|
|
Income tax benefit
|
|
|
|
|
254
|
|
|
|
|
139
|
|
|
Net income (loss) from discontinued operations
|
|
|
|
|
(736
|
)
|
|
|
|
(642
|
)
|
|
Net income (loss)
|
|
|
|
$
|
3,893
|
|
|
|
$
|
(8,379
|
)
|
|
Net income (loss) per common share—basic:
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
|
$
|
0.25
|
|
|
|
$
|
(0.41
|
)
|
|
Net income (loss) from discontinued operations
|
|
|
|
|
(0.04
|
)
|
|
|
|
(0.04
|
)
|
|
Net income (loss) per common share—basic
|
|
|
|
$
|
0.21
|
|
|
|
$
|
(0.45
|
)
|
|
Net income (loss) per common share—diluted:
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
|
$
|
0.25
|
|
|
|
$
|
(0.41
|
)
|
|
Net income (loss) from discontinued operations
|
|
|
|
|
(0.04
|
)
|
|
|
|
(0.04
|
)
|
|
Net income (loss) per common share—diluted
|
|
|
|
$
|
0.21
|
|
|
|
$
|
(0.45
|
)
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
18,477,881
|
|
|
|
|
18,731,985
|
|
|
Diluted
|
|
|
|
|
18,749,401
|
|
|
|
|
18,731,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
(Unaudited, U.S. Dollars, in thousands except share and per share
data)
|
|
|
|
2016
|
|
|
2015
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
39,846
|
|
|
|
$
|
63,663
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Trade accounts receivable, less allowance for doubtful accounts of
$9,680 and $8,923 at March 31, 2016 and December 31, 2015,
respectively
|
|
|
|
|
55,267
|
|
|
|
|
59,839
|
|
|
Inventories
|
|
|
|
|
59,787
|
|
|
|
|
57,563
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
19,067
|
|
|
|
|
31,187
|
|
|
Total current assets
|
|
|
|
|
173,967
|
|
|
|
|
212,252
|
|
|
Property, plant and equipment, net
|
|
|
|
|
53,645
|
|
|
|
|
52,306
|
|
|
Patents and other intangible assets, net
|
|
|
|
|
5,602
|
|
|
|
|
5,302
|
|
|
Goodwill |
|
|
|
|
53,565
|
|
|
|
|
53,565
|
|
|
Deferred income taxes
|
|
|
|
|
56,439
|
|
|
|
|
57,306
|
|
|
Other long-term assets
|
|
|
|
|
19,557
|
|
|
|
|
19,491
|
|
|
Total assets
|
|
|
|
$
|
362,775
|
|
|
|
$
|
400,222
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
|
$
|
13,524
|
|
|
|
$
|
16,391
|
|
|
Other current liabilities
|
|
|
|
|
45,472
|
|
|
|
|
65,597
|
|
|
Total current liabilities
|
|
|
|
|
58,996
|
|
|
|
|
81,988
|
|
|
Other long-term liabilities
|
|
|
|
|
28,308
|
|
|
|
|
27,923
|
|
|
Total liabilities
|
|
|
|
|
87,304
|
|
|
|
|
109,911
|
|
|
Contingencies
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
Common shares $0.10 par value; 50,000,000 shares authorized;
18,186,835 and 18,659,696 issued and outstanding as of March 31,
2016 and December 31, 2015, respectively
|
|
|
|
|
1,819
|
|
|
|
|
1,866
|
|
|
Additional paid-in capital
|
|
|
|
|
212,720
|
|
|
|
|
232,126
|
|
|
Retained earnings
|
|
|
|
|
66,444
|
|
|
|
|
62,551
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(5,512
|
)
|
|
|
|
(6,232
|
)
|
|
Total shareholders' equity
|
|
|
|
|
275,471
|
|
|
|
|
290,311
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
$
|
362,775
|
|
|
|
$
|
400,222
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
Selected Financial Data
Non-GAAP Performance Measures
The following tables in this press release present reconciliations of
net income (loss) from continuing operations and earnings per diluted
share from continuing operations calculated in accordance with U.S.
generally accepted accounting principles ("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," "Net margin" and "Free cash
flow" 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.
Adjusted EBITDA
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
Net income (loss) from continuing operations
|
|
|
|
$
|
4,629
|
|
|
|
$
|
(7,737
|
)
|
|
Interest expense, net
|
|
|
|
|
38
|
|
|
|
|
272
|
|
|
Income tax expense
|
|
|
|
|
4,294
|
|
|
|
|
964
|
|
|
Depreciation and amortization
|
|
|
|
|
4,873
|
|
|
|
|
5,308
|
|
|
EBITDA
|
|
|
|
$
|
13,834
|
|
|
|
$
|
(1,193
|
)
|
|
Share-based compensation
|
|
|
|
|
2,046
|
|
|
|
|
1,777
|
|
|
Foreign exchange impact
|
|
|
|
|
(1,815
|
)
|
|
|
|
2,403
|
|
|
Strategic investments
|
|
|
|
|
198
|
|
|
|
|
462
|
|
|
Restatements and related costs
|
|
|
|
|
245
|
|
|
|
|
5,916
|
|
|
Infrastructure investments
|
|
|
|
|
962
|
|
|
|
|
2,159
|
|
|
Gain on sale of assets
|
|
|
|
|
—
|
|
|
|
|
(3,099
|
)
|
|
Adjusted EBITDA
|
|
|
|
$
|
15,470
|
|
|
|
$
|
8,425
|
|
|
|
|
|
|
|
|
|
|
|
As a % of net sales
|
|
|
|
|
15.7
|
%
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income from Continuing Operations
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
Net income (loss) from continuing operations
|
|
|
|
$
|
4,629
|
|
|
|
$
|
(7,737
|
)
|
|
Income tax expense as reported
|
|
|
|
|
4,294
|
|
|
|
|
964
|
|
|
Income before income taxes from continuing operations
|
|
|
|
|
8,923
|
|
|
|
|
(6,773
|
)
|
|
Foreign exchange impact
|
|
|
|
|
(1,815
|
)
|
|
|
|
2,403
|
|
|
Strategic investments
|
|
|
|
|
198
|
|
|
|
|
462
|
|
|
Restatements and related costs
|
|
|
|
|
245
|
|
|
|
|
5,916
|
|
|
Infrastructure investments
|
|
|
|
|
962
|
|
|
|
|
2,159
|
|
|
Gain on sale of assets
|
|
|
|
|
—
|
|
|
|
|
(3,099
|
)
|
|
Adjusted net income from continuing operations before income taxes
|
|
|
|
|
8,513
|
|
|
|
|
1,068
|
|
|
Income tax expense at 38%
|
|
|
|
|
(3,235
|
)
|
|
|
|
(406
|
)
|
|
Adjusted net income from continuing operations
|
|
|
|
$
|
5,278
|
|
|
|
$
|
662
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings per Diluted Share from
Continuing Operations
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, per diluted share)
|
|
|
|
2016
|
|
|
2015
|
|
EPS from continuing operations
|
|
|
|
$
|
0.25
|
|
|
|
$
|
(0.41
|
)
|
|
Income tax expense as reported
|
|
|
|
|
0.23
|
|
|
|
|
0.05
|
|
|
EPS before income taxes from continuing operations
|
|
|
|
|
0.48
|
|
|
|
|
(0.36
|
)
|
|
Foreign exchange impact
|
|
|
|
|
(0.10
|
)
|
|
|
|
0.13
|
|
|
Strategic investments
|
|
|
|
|
0.01
|
|
|
|
|
0.02
|
|
|
Restatements and related costs
|
|
|
|
|
0.01
|
|
|
|
|
0.31
|
|
|
Infrastructure investments
|
|
|
|
|
0.05
|
|
|
|
|
0.12
|
|
|
Gain on sale of assets
|
|
|
|
|
—
|
|
|
|
|
(0.16
|
)
|
|
Adjusted EPS from continuing operations before income taxes
|
|
|
|
|
0.45
|
|
|
|
|
0.06
|
|
|
Income tax expense at 38%
|
|
|
|
|
(0.17
|
)
|
|
|
|
(0.02
|
)
|
|
Adjusted EPS from continuing operations
|
|
|
|
$
|
0.28
|
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of diluted common shares
|
|
|
|
|
18,749,401
|
|
|
|
|
18,914,251
|
|
|
|
|
|
|
|
|
|
|
Net Margin
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
Gross profit
|
|
|
|
$
|
76,543
|
|
|
|
$
|
70,423
|
|
|
Less: sales and marketing
|
|
|
|
|
(44,816
|
)
|
|
|
|
(44,285
|
)
|
|
Total net margin
|
|
|
|
$
|
31,727
|
|
|
|
$
|
26,138
|
|
|
|
|
|
|
|
|
|
|
|
As a % of net sales
|
|
|
|
|
32.2
|
%
|
|
|
|
29.1
|
%
|
|
|
|
|
|
|
|
|
|
Net Margin by SBU
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
BioStim
|
|
|
|
$
|
16,411
|
|
|
|
$
|
14,013
|
|
|
Biologics
|
|
|
|
|
6,104
|
|
|
|
|
5,944
|
|
|
Extremity Fixation
|
|
|
|
|
7,178
|
|
|
|
|
7,016
|
|
|
Spine Fixation
|
|
|
|
|
2,336
|
|
|
|
|
(529
|
)
|
|
Corporate
|
|
|
|
|
(302
|
)
|
|
|
|
(306
|
)
|
|
Total net margin
|
|
|
|
$
|
31,727
|
|
|
|
$
|
26,138
|
|
|
|
|
|
|
|
|
|
|
|
As a % of net sales
|
|
|
|
|
32.2
|
%
|
|
|
|
29.1
|
%
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
Net cash provided by operating activities
|
|
|
|
$
|
4,424
|
|
|
|
$
|
2,543
|
|
|
Less: capital expenditures
|
|
|
|
|
(6,399
|
)
|
|
|
|
(5,113
|
)
|
|
Free cash flow
|
|
|
|
$
|
(1,975
|
)
|
|
|
$
|
(2,570
|
)
|
|
|
|
|
|
|
|
|
|
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 and Securities Class Action Complaint and
Brazil subsidiary compliance review.
-
Infrastructure investments - costs associated with our
multi-year process and systems improvement effort, "Bluecore."
-
Gain on sale of assets - gain on the sale of the Company's
Tempus™ Cervical Plate product line in the first quarter of
2015.
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.
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.
Constant Currency
Constant currency measures actual performance using foreign currency
rates from the comparable, prior-year period, to present actuals at
comparable rates. Constant currency can be presented for numerous GAAP
measures, but is most commonly used by management to compare revenues
with and without the impact of changes in foreign currencies. When
disclosed, constant currency measures are presented with the applicable
GAAP measure for comparability.
Effective Tax Rate Used in Adjusted Net Income from Continuing
Operations and Adjusted Earnings per Diluted Share from Continuing
Operations
The Company believes presenting the information using a 38% effective
tax rate is meaningful given it reflects management's expectation of its
long-term normalized tax rate, which is based on current tax law and
current expected income. The Company's actual income tax expense will
ultimately be based on its GAAP performance and may differ from the 38%
rate used in the financial measures due to a variety of factors,
including the jurisdictions in which profits are determined to be earned
and taxed; the resolution of issues arising from tax audits with various
tax authorities; and the ability to realize deferred tax assets.
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 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
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, 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 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 GAAP results with non-GAAP
performance measures.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160428006763/en/
Orthofix International N.V.
Mark Quick, 214-937-2924
markquick@orthofix.com
Source: Orthofix International N.V.
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