First Quarter Highlights
-
Net sales of $102.7 million, an increase of 4.1% compared to prior
year or 4.6% on a constant currency basis
-
BioStim sales of $44.5 million, an increase of 8.5% compared to prior
year
-
Biologics sales of $15.0 million, an increase of 6.3% compared to
prior year
-
Spine Fixation sales of $19.3 million, an increase of 2.3% compared to
prior year
LEWISVILLE, Texas--(BUSINESS WIRE)--
Orthofix International N.V. (NASDAQ:OFIX) today reported its financial
results for the first quarter ended March 31, 2017. Net sales were
$102.7 million, loss per share from continuing operations was ($0.13)
and adjusted earnings per share from continuing operations was $0.27.
"We are very pleased with the top-line results for the first quarter
2017 and the momentum we achieved in each of our businesses," said Brad
Mason, President and Chief Executive Officer. "The solid execution of
our commercial strategies is delivering results as demonstrated by
another strong quarter in our BioStim business and an earlier than
expected return to growth in both Biologics and Spine Fixation. Although
each strategic business unit has its own commercial strategy, our
overriding corporate focus is on expanding distribution in underserved
markets, improving engagement of our legacy distributors and providing
our salesforce with a robust stream of new products. Our bottom-line
results reflect the investments we are making in these key strategies,
which are proving effective in driving our top line growth."
Financial Results Overview
The following table provides net sales by strategic business unit
("SBU"):
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2017
|
|
|
2016
|
|
Change
|
|
Constant
Currency
Change
|
|
BioStim
|
|
$
|
44,539
|
|
$
|
41,044
|
|
8.5
|
%
|
|
8.5
|
%
|
|
Biologics
|
|
|
14,987
|
|
|
14,094
|
|
6.3
|
%
|
|
6.3
|
%
|
|
Extremity Fixation
|
|
|
23,945
|
|
|
24,709
|
|
(3.1
|
%)
|
|
(1.0
|
%)
|
|
Spine Fixation
|
|
|
19,267
|
|
|
18,832
|
|
2.3
|
%
|
|
2.3
|
%
|
|
Net sales
|
|
$
|
102,738
|
|
$
|
98,679
|
|
4.1
|
%
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross profit increased $3.6 million to $80.2 million. Gross margin
increased slightly to 78.0% compared to 77.6% in the prior year period,
which was in line with our expectations. Net margin (gross profit less
sales and marketing expenses) was $31.6 million compared to $31.7
million in the prior year period. The decrease in net margin was
primarily due to higher sales and marketing expenses, driven by a higher
mix of sales from new distributors in our Biologics and Spine Fixation
SBUs, who typically receive higher commission rates in their first year.
Net loss from continuing operations was ($2.3) million, or ($0.13) per
share, compared to net income of $4.6 million, or $0.24 per share in the
prior year period. The net loss for the quarter was impacted by
strategic investments in the quarter of $7.1 million, including a
pre-tax impairment of $5.6 million on our eNeura investment. Adjusted
net income from continuing operations was $4.9 million, or $0.27 per
share, compared to adjusted net income of $5.2 million, or $0.28 per
share in the prior year period.
EBITDA was $6.6 million, compared to $13.8 million in the prior year
period. Adjusted EBITDA was $15.7 million or 15.3% of net sales for the
first quarter, compared to $15.5 million or 15.7% of net sales in the
prior year period.
Liquidity
As of March 31, 2017, cash and cash equivalents were $41.7 million
compared to $39.6 million as of December 31, 2016. As of March 31, 2017,
we had no outstanding indebtedness and borrowing capacity of $125
million. Cash flow from operations decreased $1.2 million to $3.5
million, while free cash flow increased $1.3 million to ($0.4) million.
2017 Outlook
For the year ending December 31, 2017, the Company expects the following
results, assuming exchange rates are the same as those currently
prevailing.
|
|
|
|
|
|
|
|
|
Previous 2017 Outlook
|
|
Current 2017 Outlook
|
|
(Unaudited, U.S. Dollars, in millions, except per share data)
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Net sales
|
|
$
|
407.0
|
|
$
|
411.0
|
|
$
|
411.0
|
|
1
|
|
$
|
415.0
|
|
1
|
|
Net income from continuing operations
|
|
$
|
24.4
|
|
$
|
29.3
|
|
$
|
20.6
|
|
2
|
|
$
|
23.7
|
|
2
|
|
Adjusted EBITDA
|
|
$
|
76.0
|
|
$
|
79.0
|
|
$
|
76.0
|
|
3
|
|
$
|
79.0
|
|
3
|
|
EPS from continuing operations
|
|
$
|
1.33
|
|
$
|
1.59
|
|
$
|
1.12
|
|
4
|
|
$
|
1.29
|
|
4
|
|
Adjusted EPS from continuing operations
|
|
$
|
1.48
|
|
$
|
1.58
|
|
$
|
1.48
|
|
5
|
|
$
|
1.58
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents a year-over-year increase of 0.3% to 1.3% on a reported
basis
|
|
2 |
|
Represents a year-over-year increase of 489.1% to 577.7%
|
|
3 |
|
Represents a year-over-year decrease of 0.4% to 4.2%
|
|
4 |
|
Represents a year-over-year increase of 489.5% to 578.9%
|
|
5 |
|
Represents a year-over-year increase of 1.4% to 8.2%
|
|
|
|
|
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 2017.
Interested parties may access the conference call by dialing (888)
364-3109 in the U.S. and (719) 457-2631 outside the U.S., and
referencing the conference ID 9028875. 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 9028875. 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: BioStim, Biologics, Extremity
Fixation and Spine Fixation. Orthofix products are widely distributed
via the Company's sales representatives and distributors. In
addition, Orthofix is collaborating on research and development
activities with leading clinical organizations such as Brown University,
Sinai Hospital of Baltimore, Cleveland Clinic, Texas Scottish Rite
Hospital for Children, and the Musculoskeletal Transplant Foundation.
For more information, please visit www.orthofix.com.
Forward-Looking Statements
This communication contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended ("the Exchange Act"), and Section 27A of the Securities Act of
1933, as amended, relating to our business and financial outlook, which
are based on our current beliefs, assumptions, expectations, estimates,
forecasts and projections. In some cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"projects," "intends," "predicts," "potential," or "continue" or other
comparable terminology. These forward-looking statements are not
guarantees of our future performance and involve risks, uncertainties,
estimates and assumptions that are difficult to predict. Therefore, our
actual outcomes and results may differ materially from those expressed
in these forward-looking statements. You should not place undue reliance
on any of these forward-looking statements. Further, any forward-looking
statement speaks only as of the date hereof, unless it is specifically
otherwise stated to be made as of a different date. We undertake no
obligation to further update any such statement, or the risk factors
described in Part I, Item 1A under the heading Risk Factors in our Form
10-K for the year ended December 31, 2016, to reflect new information,
the occurrence of future events or circumstances or otherwise.
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands, except share and per
share data)
|
|
|
2017
|
|
|
|
2016
|
|
|
Net sales
|
|
$
|
102,738
|
|
|
$
|
98,679
|
|
|
Cost of sales
|
|
|
22,581
|
|
|
|
22,137
|
|
|
Gross profit
|
|
|
80,157
|
|
|
|
76,542
|
|
|
Sales and marketing
|
|
|
48,532
|
|
|
|
44,822
|
|
|
General and administrative
|
|
|
18,282
|
|
|
|
17,005
|
|
|
Research and development
|
|
|
7,424
|
|
|
|
7,640
|
|
|
Operating income
|
|
|
5,919
|
|
|
|
7,075
|
|
|
Interest income (expense), net
|
|
|
45
|
|
|
|
(38
|
)
|
|
Other income (expense), net
|
|
|
(4,348
|
)
|
|
|
1,833
|
|
|
Income before income taxes
|
|
|
1,616
|
|
|
|
8,870
|
|
|
Income tax expense
|
|
|
(3,924
|
)
|
|
|
(4,294
|
)
|
|
Net income (loss) from continuing operations
|
|
|
(2,308
|
)
|
|
|
4,576
|
|
|
Discontinued operations
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
(527
|
)
|
|
|
(990
|
)
|
|
Income tax benefit
|
|
|
181
|
|
|
|
254
|
|
|
Net loss from discontinued operations
|
|
|
(346
|
)
|
|
|
(736
|
)
|
|
Net income (loss)
|
|
$
|
(2,654
|
)
|
|
$
|
3,840
|
|
|
Net income (loss) per common share—basic
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
(0.13
|
)
|
|
$
|
0.25
|
|
|
Net loss from discontinued operations
|
|
|
(0.02
|
)
|
|
|
(0.04
|
)
|
|
Net income (loss) per common share—basic
|
|
$
|
(0.15
|
)
|
|
$
|
0.21
|
|
|
Net income (loss) per common share—diluted
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
(0.13
|
)
|
|
$
|
0.24
|
|
|
Net loss from discontinued operations
|
|
|
(0.02
|
)
|
|
|
(0.04
|
)
|
|
Net income (loss) per common share—diluted
|
|
$
|
(0.15
|
)
|
|
$
|
0.20
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
Basic
|
|
|
17,979,675
|
|
|
|
18,477,881
|
|
|
Diluted
|
|
|
17,979,675
|
|
|
|
18,758,751
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
(U.S. Dollars, in thousands except share data)
|
|
March 31,
2017
|
|
December 31,
2016
|
|
|
|
(unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
41,652
|
|
|
$
|
39,572
|
|
|
Restricted cash
|
|
|
—
|
|
|
|
14,369
|
|
|
Accounts receivable, net of allowances of $8,394 and $8,396,
respectively
|
|
|
59,443
|
|
|
|
57,848
|
|
|
Inventories
|
|
|
66,271
|
|
|
|
63,346
|
|
|
Prepaid expenses and other current assets
|
|
|
19,478
|
|
|
|
19,238
|
|
|
Total current assets
|
|
|
186,844
|
|
|
|
194,373
|
|
|
Property, plant and equipment, net
|
|
|
47,962
|
|
|
|
48,916
|
|
|
Patents and other intangible assets, net
|
|
|
8,530
|
|
|
|
7,461
|
|
|
Goodwill |
|
|
53,565
|
|
|
|
53,565
|
|
|
Deferred income taxes
|
|
|
41,431
|
|
|
|
47,325
|
|
|
Other long-term assets
|
|
|
16,413
|
|
|
|
20,463
|
|
|
Total assets
|
|
$
|
354,745
|
|
|
$
|
372,103
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable
|
|
$
|
16,555
|
|
|
$
|
14,353
|
|
|
Other current liabilities
|
|
|
46,316
|
|
|
|
69,088
|
|
|
Total current liabilities
|
|
|
62,871
|
|
|
|
83,441
|
|
|
Other long-term liabilities
|
|
|
24,740
|
|
|
|
25,185
|
|
|
Total liabilities
|
|
|
87,611
|
|
|
|
108,626
|
|
|
Contingencies
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
Common shares $0.10 par value; 50,000,000 shares authorized;
18,042,834 and
17,828,155 issued and outstanding as of March 31, 2017 and
December 31,
2016, respectively
|
|
|
1,804
|
|
|
|
1,783
|
|
|
Additional paid-in capital
|
|
|
208,686
|
|
|
|
204,095
|
|
|
Retained earnings
|
|
|
61,525
|
|
|
|
64,179
|
|
|
Accumulated other comprehensive loss
|
|
|
(4,881
|
)
|
|
|
(6,580
|
)
|
|
Total shareholders' equity
|
|
|
267,134
|
|
|
|
263,477
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
354,745
|
|
|
$
|
372,103
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
Non-GAAP Financial Measures
The following tables present reconciliations of net income (loss) from
continuing operations, earnings per share from continuing operations,
gross profit, and net cash from operating activities, in each case
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP"), to, as applicable, non-GAAP financial measures,
referred to as "EBITDA," "Adjusted EBITDA," "Adjusted net income from
continuing operations," "Adjusted earnings per 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 financial measures, as well as why
management believes the non-GAAP financial measures are useful to them,
is included following the reconciliations.
|
|
|
|
|
EBITDA and Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2017
|
|
|
|
2016
|
|
|
Net income (loss) from continuing operations
|
|
$
|
(2,308
|
)
|
|
$
|
4,576
|
|
|
Interest expense (income), net
|
|
|
(45
|
)
|
|
|
38
|
|
|
Income tax expense
|
|
|
3,924
|
|
|
|
4,294
|
|
|
Depreciation and amortization
|
|
|
5,075
|
|
|
|
4,873
|
|
|
EBITDA
|
|
$
|
6,646
|
|
|
$
|
13,781
|
|
|
Share-based compensation
|
|
|
2,816
|
|
|
|
2,099
|
|
|
Foreign exchange impact
|
|
|
(1,013
|
)
|
|
|
(1,815
|
)
|
|
Strategic investments
|
|
|
7,100
|
|
|
|
198
|
|
|
SEC / FCPA matters and related costs
|
|
|
141
|
|
|
|
245
|
|
|
Infrastructure investments
|
|
|
—
|
|
|
|
962
|
|
|
Legal judgments/settlements
|
|
|
227
|
|
|
|
—
|
|
|
International restructuring
|
|
|
(239
|
)
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
$
|
15,678
|
|
|
$
|
15,470
|
|
|
As a % of net sales
|
|
|
15.3
|
%
|
|
|
15.7
|
%
|
|
|
|
|
|
Adjusted Net Income from Continuing Operations
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2017
|
|
|
|
2016
|
|
|
Net income (loss) from continuing operations
|
|
$
|
(2,308
|
)
|
|
$
|
4,576
|
|
|
Foreign exchange impact
|
|
|
(1,013
|
)
|
|
|
(1,815
|
)
|
|
Strategic investments
|
|
|
7,100
|
|
|
|
198
|
|
|
SEC / FCPA matters and related costs
|
|
|
141
|
|
|
|
245
|
|
|
Infrastructure investments
|
|
|
—
|
|
|
|
962
|
|
|
Legal judgments/settlements
|
|
|
227
|
|
|
|
—
|
|
|
International restructuring
|
|
|
(239
|
)
|
|
|
—
|
|
|
Long-term income tax rate adjustment
|
|
|
948
|
|
|
|
1,079
|
|
|
Adjusted net income from continuing operations
|
|
$
|
4,856
|
|
|
$
|
5,245
|
|
|
|
|
|
|
Adjusted Earnings per Share from Continuing Operations
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, per diluted share)
|
|
|
2017
|
|
|
|
2016
|
|
|
EPS from continuing operations
|
|
$
|
(0.13
|
)
|
|
$
|
0.24
|
|
|
Foreign exchange impact
|
|
|
(0.06
|
)
|
|
|
(0.10
|
)
|
|
Strategic investments
|
|
|
0.39
|
|
|
|
0.01
|
|
|
SEC / FCPA matters and related costs
|
|
|
0.01
|
|
|
|
0.01
|
|
|
Infrastructure investments
|
|
|
—
|
|
|
|
0.05
|
|
|
Legal judgments/settlements
|
|
|
0.01
|
|
|
|
—
|
|
|
International restructuring
|
|
|
(0.01
|
)
|
|
|
—
|
|
|
Long-term income tax rate adjustment
|
|
|
0.06
|
|
|
|
0.07
|
|
|
Adjusted EPS from continuing operations
|
|
$
|
0.27
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
Weighted average number of diluted common shares
|
|
|
18,235,660
|
|
|
|
18,758,751
|
|
|
|
|
|
|
Net Margin
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2017
|
|
|
|
2016
|
|
|
Gross profit
|
|
$
|
80,157
|
|
|
$
|
76,542
|
|
|
Sales and marketing
|
|
|
(48,532
|
)
|
|
|
(44,822
|
)
|
|
Net margin
|
|
$
|
31,625
|
|
|
$
|
31,720
|
|
|
|
|
|
|
|
|
BioStim
|
|
$
|
17,133
|
|
|
$
|
16,408
|
|
|
Biologics
|
|
|
6,171
|
|
|
|
6,104
|
|
|
Extremity Fixation
|
|
|
6,412
|
|
|
|
7,175
|
|
|
Spine Fixation
|
|
|
2,007
|
|
|
|
2,335
|
|
|
Corporate
|
|
|
(98
|
)
|
|
|
(302
|
)
|
|
Net margin
|
|
$
|
31,625
|
|
|
$
|
31,720
|
|
|
|
|
|
|
Free Cash Flow
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
2017
|
|
|
|
2016
|
|
|
Net cash from operating activities
|
|
$
|
3,470
|
|
|
$
|
4,646
|
|
|
Capital expenditures
|
|
|
(3,905
|
)
|
|
|
(6,399
|
)
|
|
Free cash flow
|
|
$
|
(435
|
)
|
|
$
|
(1,753
|
)
|
|
|
|
|
|
|
|
2017 Outlook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous 2017 Outlook
|
|
Current 2017 Outlook
|
|
(Unaudited, U.S. Dollars, in millions)
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Net income from continuing operations
|
|
$
|
24.4
|
|
$
|
29.3
|
|
$
|
20.6
|
|
|
$
|
23.7
|
|
|
Interest expense, net
|
|
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
|
|
0.2
|
|
|
Income tax expense
|
|
|
16.2
|
|
|
15.7
|
|
|
13.6
|
|
|
|
14.3
|
|
|
Depreciation and amortization
|
|
|
20.0
|
|
|
20.0
|
|
|
20.0
|
|
|
|
20.0
|
|
|
EBITDA
|
|
$
|
60.7
|
|
$
|
65.2
|
|
$
|
54.3
|
|
|
$
|
58.2
|
|
|
Share-based compensation
|
|
|
11.8
|
|
|
11.8
|
|
|
11.8
|
|
|
|
11.8
|
|
|
Foreign exchange impact
|
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
|
(1.0
|
)
|
|
Strategic investments
|
|
|
1.2
|
|
|
0.7
|
|
|
8.6
|
|
|
|
8.1
|
|
|
SEC / FCPA matters and related costs
|
|
|
1.3
|
|
|
0.8
|
|
|
1.3
|
|
|
|
1.0
|
|
|
International restructuring
|
|
|
1.0
|
|
|
0.5
|
|
|
0.8
|
|
|
|
0.7
|
|
|
Legal judgments/settlements
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
|
0.2
|
|
|
Adjusted EBITDA
|
|
$
|
76.0
|
|
$
|
79.0
|
|
$
|
76.0
|
|
|
$
|
79.0
|
|
|
|
|
|
|
|
|
|
|
Previous 2017 Outlook
|
|
Current 2017 Outlook
|
|
(Unaudited, per diluted share)
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
EPS from continuing operations
|
|
$
|
1.33
|
|
|
$
|
1.59
|
|
|
$
|
1.12
|
|
|
$
|
1.29
|
|
|
Foreign exchange impact
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
Strategic investments
|
|
|
0.06
|
|
|
|
0.04
|
|
|
|
0.46
|
|
|
|
0.44
|
|
|
SEC / FCPA matters and related costs
|
|
|
0.07
|
|
|
|
0.04
|
|
|
|
0.07
|
|
|
|
0.05
|
|
|
International restructuring
|
|
|
0.05
|
|
|
|
0.03
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
Legal judgments/settlements
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
Long-term income tax rate adjustment
|
|
|
(0.03
|
)
|
|
|
(0.12
|
)
|
|
|
(0.17
|
)
|
|
|
(0.20
|
)
|
|
Adjusted EPS from continuing operations
|
|
$
|
1.48
|
|
|
$
|
1.58
|
|
|
$
|
1.48
|
|
|
$
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of diluted common shares
|
|
|
18,400,000
|
|
|
|
18,400,000
|
|
|
|
18,400,000
|
|
|
|
18,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency
Constant currency is a non-GAAP measure, which is calculated by using
foreign currency rates from the comparable, prior-year period, to
present net sales at comparable rates. Constant currency can be
presented for numerous GAAP measures, but is most commonly used by
management to analyze net sales without the impact of changes in foreign
currency rates.
EBITDA
EBITDA is a non-GAAP financial measure, which is calculated by adding
interest income (expense), net; income tax expense; and depreciation and
amortization to net income (loss) from continuing operations. EBITDA
provides management with additional insight to its results of operations.
Adjusted EBITDA, Adjusted Net Income from Continuing Operations and
Adjusted Earnings per Share from Continuing Operations
These non-GAAP financial measures provide management with additional
insight to its results of operations and are calculated using the
following adjustments:
-
Share-based compensation - costs related to our share-based
compensation plans, which include stock options, restricted stock
awards, performance-based restricted stock awards, market-based
restricted stock awards and our stock purchase plan
-
Foreign exchange impact - gains and losses related to foreign
currency transactions; guidance presented does not include the impact
of any future foreign exchange fluctuations
-
Strategic investments - costs related to our strategic
investments, including our investment in eNeura, Inc.
-
SEC / FCPA matters and related costs - legal and other
professional fees associated with the 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," which
was completed in 2016
-
Legal judgments/settlements - adverse or favorable legal
judgments or negotiated legal settlements
-
International restructuring - costs related to a planned
restructuring, primarily consisting of severance charges and the
write-down of certain assets
-
Long-term income tax rate adjustment - reflects management's
expectation of a long-term normalized effective tax rate of 38%, which
is based on current tax law and current expected income; actual tax
expense will ultimately be based on GAAP performance and may differ
from the 38% effective tax rate due to a variety of factors, including
the jurisdictions in which profits are determined to be earned and
taxed, the resolutions of issues arising from tax audits with various
tax authorities, and the ability to realize deferred tax assets
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 our Chief Operating Decision Maker in managing
our business.
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.
Usefulness and Limitations of Non-GAAP Financial Measures
Management uses non-GAAP measures to evaluate performance
period-over-period, to analyze the underlying trends in our business, to
assess performance relative to 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 our business units.
Material Limitations Associated with the Use of Non-GAAP Financial
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 financial measures. Some of the limitations
associated with the use of these non-GAAP financial measures are that
they exclude items that reflect an economic cost and can have a material
effect on cash flows. Similarly, certain non-cash expenses, such as
equity compensation, do not directly impact cash flows, but are part of
total compensation costs accounted for under GAAP.
Compensation for Limitations Associated with Use of Non-GAAP
Financial Measures
We compensate for the limitations of our non-GAAP financial measures by
relying upon GAAP results to gain a complete picture of our performance.
The GAAP results provide the ability to understand our performance based
on a defined set of criteria. The non-GAAP measures reflect the
underlying operating results of our businesses, which we believe is an
important measure of our overall performance. We provide a detailed
reconciliation of the non-GAAP financial measures to our most directly
comparable GAAP measures, and encourage investors to review this
reconciliation.
Usefulness of Non-GAAP Financial Measures to Investors
We believe that providing non-GAAP financial measures that exclude
certain items provides investors with greater transparency to the
information used by 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 our business operations in order to facilitate comparisons to its
historical operating results and internally evaluate the effectiveness
of our operating strategies. Disclosure of these non-GAAP financial
measures also facilitates comparisons of our underlying operating
performance with other companies in the industry that also supplement
their GAAP results with non-GAAP financial measures.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170504006403/en/
Orthofix International N.V.
Mark Quick, 214-937-2924
markquick@orthofix.com
Source: Orthofix International N.V.
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