Third Quarter Highlights
-
Net sales of $105.2 million, an increase of 6.9% compared to prior
year or 6.0% on a constant currency basis
-
Increase in net sales for all four of our strategic business units,
with net sales for Spine Fixation increasing by 19.3%
-
Earnings per share of $0.18 and adjusted earnings per share of $0.42
from continuing operations
-
Company updates full year 2017 guidance
LEWISVILLE, Texas--(BUSINESS WIRE)--
Orthofix International N.V. (NASDAQ:OFIX) today reported its financial
results for the third quarter ended September 30, 2017. Net sales were
$105.2 million, diluted earnings per share from continuing operations
was $0.18 and adjusted earnings per share from continuing operations was
$0.42.
"We continue to execute on our strategy of increasing the organic growth
and profitability of each of our four strategic business units while
rationalizing corporate costs in all areas. This has resulted in an
accelerating sales growth rate each quarter thus far this year, and
positioned us for solid mid-single digit organic revenue growth and the
opportunity for meaningful margin expansion in the years to come," said
Brad Mason, President and Chief Executive Officer.
Financial Results Overview
The following table provides net sales by strategic business unit
("SBU"):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
Constant
Currency
Change
|
|
BioStim
|
|
|
|
$
|
44,427
|
|
|
$
|
42,956
|
|
|
3.4
|
%
|
|
|
3.4
|
%
|
|
Biologics
|
|
|
|
|
15,218
|
|
|
|
14,335
|
|
|
6.2
|
%
|
|
|
6.2
|
%
|
|
Extremity Fixation
|
|
|
|
|
25,447
|
|
|
|
24,314
|
|
|
4.7
|
%
|
|
|
1.4
|
%
|
|
Spine Fixation
|
|
|
|
|
20,155
|
|
|
|
16,892
|
|
|
19.3
|
%
|
|
|
19.1
|
%
|
|
Net sales
|
|
|
|
$
|
105,247
|
|
|
$
|
98,497
|
|
|
6.9
|
%
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit increased $2.9 million to $81.5 million. Gross margin
decreased to 77.5% compared to 79.8% in the prior year period due
primarily to sales mix, the impact of converting to stocking
distributors in Brazil in our Extremity Fixation SBU, and $0.6 million
of non-recurring expenses relating to our U.S. restructuring plan.
Non-GAAP net margin, an internal metric that we define as gross profit
less sales and marketing expenses, was $34.0 million compared to $36.9
million in the prior year period. The decrease in non-GAAP net margin
was primarily due to higher commission expenses from geographic mix in
Extremity Fixation and higher rates from Spine Fixation and Biologics
distributors, as well as increased sales and use tax benefits realized
in the third quarter of 2016.
Net income from continuing operations was $3.3 million, or $0.18 per
share, compared to $10.4 million, or $0.56 per share in the prior year
period. Adjusted net income from continuing operations was $7.7 million,
or $0.42 per share, compared to adjusted net income of $6.6 million, or
$0.36 per share in the prior year period.
EBITDA was $14.5 million, compared to $14.1 million in the prior year
period. Adjusted EBITDA was $21.1 million, or 20.1% of net sales, for
the third quarter, compared to $23.5 million, or 23.9% of net sales, in
the prior year period.
Liquidity
As of September 30, 2017, cash and cash equivalents were $53.9 million
compared to $39.6 million as of December 31, 2016. As of September 30,
2017, we had no outstanding indebtedness and borrowing capacity of $125
million. Cash flow from operations was $23.5 million, a decrease of
$14.9 million, and free cash flow was $10.2 million, a decrease of $13.9
million when compared to the prior year period.
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
|
|
|
|
$
|
422.0
|
|
|
$
|
425.0
|
|
|
$
|
428.0
|
|
(1)
|
|
|
$
|
431.0
|
|
(1)
|
|
Net income from continuing operations
|
|
|
|
$
|
17.7
|
|
|
$
|
21.4
|
|
|
$
|
14.2
|
|
(2)
|
|
|
$
|
17.0
|
|
(2)
|
|
Adjusted EBITDA
|
|
|
|
$
|
79.0
|
|
|
$
|
81.0
|
|
|
$
|
79.0
|
|
(3)
|
|
|
$
|
82.0
|
|
(3)
|
|
EPS from continuing operations
|
|
|
|
$
|
0.96
|
|
|
$
|
1.16
|
|
|
$
|
0.77
|
|
(4)
|
|
|
$
|
0.92
|
|
(4)
|
|
Adjusted EPS from continuing operations
|
|
|
|
$
|
1.54
|
|
|
$
|
1.60
|
|
|
$
|
1.54
|
|
(5)
|
|
|
$
|
1.63
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Represents a year-over-year increase of 4.4% to 5.2%
on a reported basis
2 Represents a year-over-year
increase of 306.1% to 386.1%
3 Represents a
year-over-year decrease of 0.4% to an increase of 3.4%
4 Represents
a year-over-year increase of 305.3% to 384.2%
5 Represents
a year-over-year increase of 5.5% to 11.6%
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to
discuss the Company's financial results for the third quarter of 2017.
Interested parties may access the conference call by dialing (844)
809-1992 in the U.S. and (612) 979-9886 outside the U.S., and
referencing the conference ID 2078866. A replay of the call will be
available for two weeks by dialing (855) 859-2056 in the U.S. and (404)
537-3406 outside the U.S., and entering the conference ID 2078866. 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.
|
|
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)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net sales
|
|
|
|
$
|
105,247
|
|
|
|
$
|
98,497
|
|
|
|
$
|
316,927
|
|
|
|
$
|
301,251
|
|
|
Cost of sales
|
|
|
|
|
23,717
|
|
|
|
|
19,880
|
|
|
|
|
69,475
|
|
|
|
|
64,533
|
|
|
Gross profit
|
|
|
|
|
81,530
|
|
|
|
|
78,617
|
|
|
|
|
247,452
|
|
|
|
|
236,718
|
|
|
Sales and marketing
|
|
|
|
|
47,493
|
|
|
|
|
41,717
|
|
|
|
|
146,496
|
|
|
|
|
132,582
|
|
|
General and administrative
|
|
|
|
|
18,068
|
|
|
|
|
19,272
|
|
|
|
|
56,759
|
|
|
|
|
54,822
|
|
|
Research and development
|
|
|
|
|
6,935
|
|
|
|
|
6,858
|
|
|
|
|
21,246
|
|
|
|
|
21,294
|
|
|
Charges related to U.S. Government resolutions
|
|
|
|
|
—
|
|
|
|
|
1,499
|
|
|
|
|
—
|
|
|
|
|
14,369
|
|
|
Operating income
|
|
|
|
|
9,034
|
|
|
|
|
9,271
|
|
|
|
|
22,951
|
|
|
|
|
13,651
|
|
|
Interest income (expense), net
|
|
|
|
|
(15
|
)
|
|
|
|
471
|
|
|
|
|
106
|
|
|
|
|
320
|
|
|
Other income (expense), net
|
|
|
|
|
479
|
|
|
|
|
(634
|
)
|
|
|
|
(3,284
|
)
|
|
|
|
1,346
|
|
|
Income before income taxes
|
|
|
|
|
9,498
|
|
|
|
|
9,108
|
|
|
|
|
19,773
|
|
|
|
|
15,317
|
|
|
Income tax benefit (expense)
|
|
|
|
|
(6,150
|
)
|
|
|
|
1,276
|
|
|
|
|
(13,998
|
)
|
|
|
|
(6,703
|
)
|
|
Net income from continuing operations
|
|
|
|
|
3,348
|
|
|
|
|
10,384
|
|
|
|
|
5,775
|
|
|
|
|
8,614
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
|
|
65
|
|
|
|
|
(1,018
|
)
|
|
|
|
(1,762
|
)
|
|
|
|
(3,580
|
)
|
|
Income tax benefit
|
|
|
|
|
43
|
|
|
|
|
530
|
|
|
|
|
642
|
|
|
|
|
1,258
|
|
|
Net income (loss) from discontinued operations
|
|
|
|
|
108
|
|
|
|
|
(488
|
)
|
|
|
|
(1,120
|
)
|
|
|
|
(2,322
|
)
|
|
Net income
|
|
|
|
$
|
3,456
|
|
|
|
$
|
9,896
|
|
|
|
$
|
4,655
|
|
|
|
$
|
6,292
|
|
|
Net income (loss) per common share—basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
|
$
|
0.18
|
|
|
|
$
|
0.57
|
|
|
|
$
|
0.32
|
|
|
|
$
|
0.47
|
|
|
Net income (loss) from discontinued operations
|
|
|
|
|
0.01
|
|
|
|
|
(0.02
|
)
|
|
|
|
(0.06
|
)
|
|
|
|
(0.13
|
)
|
|
Net income per common share—basic
|
|
|
|
$
|
0.19
|
|
|
|
$
|
0.55
|
|
|
|
$
|
0.26
|
|
|
|
$
|
0.34
|
|
|
Net income (loss) per common share—diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
|
$
|
0.18
|
|
|
|
$
|
0.56
|
|
|
|
$
|
0.31
|
|
|
|
$
|
0.46
|
|
|
Net income (loss) from discontinued operations
|
|
|
|
|
0.01
|
|
|
|
|
(0.02
|
)
|
|
|
|
(0.06
|
)
|
|
|
|
(0.12
|
)
|
|
Net income per common share—diluted
|
|
|
|
$
|
0.19
|
|
|
|
$
|
0.54
|
|
|
|
$
|
0.25
|
|
|
|
$
|
0.34
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
18,180,845
|
|
|
|
|
18,091,650
|
|
|
|
|
18,071,093
|
|
|
|
|
18,238,533
|
|
|
Diluted
|
|
|
|
|
18,572,791
|
|
|
|
|
18,382,118
|
|
|
|
|
18,394,542
|
|
|
|
|
18,569,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTHOFIX INTERNATIONAL N.V.
|
|
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
(U.S. Dollars, in thousands except share data)
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
53,925
|
|
|
|
$
|
39,572
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
14,369
|
|
|
Accounts receivable, net of allowances of $8,925 and $8,396,
respectively
|
|
|
|
|
61,187
|
|
|
|
|
57,848
|
|
|
Inventories
|
|
|
|
|
80,124
|
|
|
|
|
63,346
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
18,172
|
|
|
|
|
19,238
|
|
|
Total current assets
|
|
|
|
|
213,408
|
|
|
|
|
194,373
|
|
|
Property, plant and equipment, net
|
|
|
|
|
46,678
|
|
|
|
|
48,916
|
|
|
Patents and other intangible assets, net
|
|
|
|
|
9,915
|
|
|
|
|
7,461
|
|
|
Goodwill |
|
|
|
|
53,565
|
|
|
|
|
53,565
|
|
|
Deferred income taxes
|
|
|
|
|
47,052
|
|
|
|
|
47,325
|
|
|
Other long-term assets
|
|
|
|
|
15,683
|
|
|
|
|
20,463
|
|
|
Total assets
|
|
|
|
$
|
386,301
|
|
|
|
$
|
372,103
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
13,352
|
|
|
|
$
|
14,353
|
|
|
Other current liabilities
|
|
|
|
|
60,718
|
|
|
|
|
69,088
|
|
|
Total current liabilities
|
|
|
|
|
74,070
|
|
|
|
|
83,441
|
|
|
Other long-term liabilities
|
|
|
|
|
26,920
|
|
|
|
|
25,185
|
|
|
Total liabilities
|
|
|
|
|
100,990
|
|
|
|
|
108,626
|
|
|
Contingencies
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
Common shares $0.10 par value; 50,000,000 shares authorized;
18,212,916 and
17,828,155 issued and outstanding as of September 30, 2017 and
December 31,
2016, respectively
|
|
|
|
|
1,821
|
|
|
|
|
1,783
|
|
|
Additional paid-in capital
|
|
|
|
|
215,778
|
|
|
|
|
204,095
|
|
|
Retained earnings
|
|
|
|
|
68,834
|
|
|
|
|
64,179
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(1,122
|
)
|
|
|
|
(6,580
|
)
|
|
Total shareholders' equity
|
|
|
|
|
285,311
|
|
|
|
|
263,477
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
$
|
386,301
|
|
|
|
$
|
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 ("EPS") 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," "Non-GAAP 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
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net income from continuing operations
|
|
|
|
$
|
3,348
|
|
|
|
$
|
10,384
|
|
|
|
$
|
5,775
|
|
|
|
$
|
8,614
|
|
|
Interest expense (income), net
|
|
|
|
|
15
|
|
|
|
|
(471
|
)
|
|
|
|
(106
|
)
|
|
|
|
(320
|
)
|
|
Income tax expense (benefit)
|
|
|
|
|
6,150
|
|
|
|
|
(1,276
|
)
|
|
|
|
13,998
|
|
|
|
|
6,703
|
|
|
Depreciation and amortization
|
|
|
|
|
4,974
|
|
|
|
|
5,480
|
|
|
|
|
15,421
|
|
|
|
|
15,483
|
|
|
EBITDA
|
|
|
|
$
|
14,487
|
|
|
|
$
|
14,117
|
|
|
|
$
|
35,088
|
|
|
|
$
|
30,480
|
|
|
Share-based compensation
|
|
|
|
|
3,632
|
|
|
|
|
7,862
|
|
|
|
|
9,124
|
|
|
|
|
11,874
|
|
|
Foreign exchange impact
|
|
|
|
|
(794
|
)
|
|
|
|
566
|
|
|
|
|
(2,425
|
)
|
|
|
|
(1,434
|
)
|
|
Strategic investments
|
|
|
|
|
293
|
|
|
|
|
(62
|
)
|
|
|
|
9,619
|
|
|
|
|
342
|
|
|
SEC / FCPA matters and related costs
|
|
|
|
|
1,150
|
|
|
|
|
691
|
|
|
|
|
1,851
|
|
|
|
|
1,481
|
|
|
Infrastructure investments
|
|
|
|
|
—
|
|
|
|
|
827
|
|
|
|
|
—
|
|
|
|
|
3,073
|
|
|
Legal judgments/settlements
|
|
|
|
|
179
|
|
|
|
|
(3,000
|
)
|
|
|
|
1,798
|
|
|
|
|
(3,000
|
)
|
|
Charges related to U.S. Government resolutions
|
|
|
|
|
—
|
|
|
|
|
1,499
|
|
|
|
|
—
|
|
|
|
|
14,369
|
|
|
Restructuring
|
|
|
|
|
2,160
|
|
|
|
|
—
|
|
|
|
|
2,242
|
|
|
|
|
—
|
|
|
Succession charges
|
|
|
|
|
—
|
|
|
|
|
1,026
|
|
|
|
|
—
|
|
|
|
|
1,026
|
|
|
Adjusted EBITDA
|
|
|
|
$
|
21,107
|
|
|
|
$
|
23,526
|
|
|
|
$
|
57,297
|
|
|
|
$
|
58,211
|
|
|
As a % of net sales
|
|
|
|
|
20.1
|
%
|
|
|
|
23.9
|
%
|
|
|
|
18.1
|
%
|
|
|
|
19.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net income from continuing operations
|
|
|
|
$
|
3,348
|
|
|
|
$
|
10,384
|
|
|
|
$
|
5,775
|
|
|
|
$
|
8,614
|
|
|
Foreign exchange impact
|
|
|
|
|
(794
|
)
|
|
|
|
566
|
|
|
|
|
(2,425
|
)
|
|
|
|
(1,434
|
)
|
|
Strategic investments
|
|
|
|
|
293
|
|
|
|
|
(62
|
)
|
|
|
|
9,619
|
|
|
|
|
342
|
|
|
SEC / FCPA matters and related costs
|
|
|
|
|
1,150
|
|
|
|
|
691
|
|
|
|
|
1,851
|
|
|
|
|
1,481
|
|
|
Infrastructure investments
|
|
|
|
|
—
|
|
|
|
|
827
|
|
|
|
|
—
|
|
|
|
|
3,073
|
|
|
Legal judgments/settlements
|
|
|
|
|
179
|
|
|
|
|
(3,000
|
)
|
|
|
|
1,798
|
|
|
|
|
(3,000
|
)
|
|
Charges related to U.S. Government resolutions
|
|
|
|
|
—
|
|
|
|
|
1,499
|
|
|
|
|
—
|
|
|
|
|
14,369
|
|
|
Restructuring
|
|
|
|
|
2,160
|
|
|
|
|
—
|
|
|
|
|
2,242
|
|
|
|
|
—
|
|
|
Succession charges
|
|
|
|
|
—
|
|
|
|
|
1,026
|
|
|
|
|
—
|
|
|
|
|
1,026
|
|
|
Long-term income tax rate adjustment
|
|
|
|
|
1,405
|
|
|
|
|
(5,325
|
)
|
|
|
|
1,512
|
|
|
|
|
(5,143
|
)
|
|
Adjusted net income from continuing operations
|
|
|
|
$
|
7,741
|
|
|
|
$
|
6,606
|
|
|
|
$
|
20,372
|
|
|
|
$
|
19,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings per Share from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, per diluted share)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
EPS from continuing operations
|
|
|
|
$
|
0.18
|
|
|
|
$
|
0.56
|
|
|
|
$
|
0.31
|
|
|
|
$
|
0.46
|
|
|
Foreign exchange impact
|
|
|
|
|
(0.04
|
)
|
|
|
|
0.03
|
|
|
|
|
(0.13
|
)
|
|
|
|
(0.08
|
)
|
|
Strategic investments
|
|
|
|
|
0.02
|
|
|
|
|
—
|
|
|
|
|
0.52
|
|
|
|
|
0.02
|
|
|
SEC / FCPA matters and related costs
|
|
|
|
|
0.06
|
|
|
|
|
0.04
|
|
|
|
|
0.10
|
|
|
|
|
0.08
|
|
|
Infrastructure investments
|
|
|
|
|
—
|
|
|
|
|
0.04
|
|
|
|
|
—
|
|
|
|
|
0.17
|
|
|
Legal judgments/settlements
|
|
|
|
|
0.01
|
|
|
|
|
(0.16
|
)
|
|
|
|
0.10
|
|
|
|
|
(0.16
|
)
|
|
Charges related to U.S. Government resolutions
|
|
|
|
|
—
|
|
|
|
|
0.08
|
|
|
|
|
—
|
|
|
|
|
0.77
|
|
|
Restructuring
|
|
|
|
|
0.12
|
|
|
|
|
—
|
|
|
|
|
0.12
|
|
|
|
|
—
|
|
|
Succession charges
|
|
|
|
|
—
|
|
|
|
|
0.06
|
|
|
|
|
—
|
|
|
|
|
0.06
|
|
|
Long-term income tax rate adjustment
|
|
|
|
|
0.07
|
|
|
|
|
(0.29
|
)
|
|
|
|
0.09
|
|
|
|
|
(0.28
|
)
|
|
Adjusted EPS from continuing operations
|
|
|
|
$
|
0.42
|
|
|
|
$
|
0.36
|
|
|
|
$
|
1.11
|
|
|
|
$
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of diluted common shares
|
|
|
|
|
18,572,791
|
|
|
|
|
18,382,118
|
|
|
|
|
18,394,542
|
|
|
|
|
18,569,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Gross profit
|
|
|
|
$
|
81,530
|
|
|
|
$
|
78,617
|
|
|
|
$
|
247,452
|
|
|
|
$
|
236,718
|
|
|
Sales and marketing
|
|
|
|
|
(47,493
|
)
|
|
|
|
(41,717
|
)
|
|
|
|
(146,496
|
)
|
|
|
|
(132,582
|
)
|
|
Non-GAAP net margin
|
|
|
|
$
|
34,037
|
|
|
|
$
|
36,900
|
|
|
|
$
|
100,956
|
|
|
|
$
|
104,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioStim
|
|
|
|
$
|
18,285
|
|
|
|
$
|
19,996
|
|
|
|
$
|
54,887
|
|
|
|
$
|
54,980
|
|
|
Biologics
|
|
|
|
|
6,010
|
|
|
|
|
6,821
|
|
|
|
|
18,651
|
|
|
|
|
19,642
|
|
|
Extremity Fixation
|
|
|
|
|
7,723
|
|
|
|
|
8,834
|
|
|
|
|
20,901
|
|
|
|
|
24,170
|
|
|
Spine Fixation
|
|
|
|
|
2,122
|
|
|
|
|
1,388
|
|
|
|
|
6,825
|
|
|
|
|
5,925
|
|
|
Corporate
|
|
|
|
|
(103
|
)
|
|
|
|
(139
|
)
|
|
|
|
(308
|
)
|
|
|
|
(581
|
)
|
|
Non-GAAP net margin
|
|
|
|
$
|
34,037
|
|
|
|
$
|
36,900
|
|
|
|
$
|
100,956
|
|
|
|
$
|
104,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Unaudited, U.S. Dollars, in thousands)
|
|
|
|
2017
|
|
|
2016
|
|
Net cash from operating activities
|
|
|
|
$
|
23,494
|
|
|
|
$
|
38,396
|
|
|
Capital expenditures
|
|
|
|
|
(13,290
|
)
|
|
|
|
(14,261
|
)
|
|
Free cash flow
|
|
|
|
$
|
10,204
|
|
|
|
$
|
24,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Outlook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous 2017 Outlook
|
|
|
Current 2017 Outlook
|
|
(Unaudited, U.S. Dollars, in millions)
|
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
Net income from continuing operations
|
|
|
|
$
|
17.7
|
|
|
|
$
|
21.4
|
|
|
|
$
|
14.2
|
|
|
|
$
|
17.0
|
|
|
Interest expense, net
|
|
|
|
|
0.2
|
|
|
|
|
0.1
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Income tax expense
|
|
|
|
|
15.7
|
|
|
|
|
15.5
|
|
|
|
|
16.7
|
|
|
|
|
17.0
|
|
|
Depreciation and amortization
|
|
|
|
|
20.0
|
|
|
|
|
20.0
|
|
|
|
|
20.2
|
|
|
|
|
20.2
|
|
|
EBITDA
|
|
|
|
$
|
53.6
|
|
|
|
$
|
57.0
|
|
|
|
$
|
51.1
|
|
|
|
$
|
54.2
|
|
|
Share-based compensation
|
|
|
|
|
13.0
|
|
|
|
|
13.0
|
|
|
|
|
13.0
|
|
|
|
|
13.0
|
|
|
Foreign exchange impact
|
|
|
|
|
(1.6
|
)
|
|
|
|
(1.6
|
)
|
|
|
|
(2.4
|
)
|
|
|
|
(2.4
|
)
|
|
Strategic investments
|
|
|
|
|
10.3
|
|
|
|
|
9.3
|
|
|
|
|
10.2
|
|
|
|
|
10.2
|
|
|
SEC / FCPA matters and related costs
|
|
|
|
|
1.2
|
|
|
|
|
1.0
|
|
|
|
|
2.4
|
|
|
|
|
2.4
|
|
|
Legal judgments/settlements
|
|
|
|
|
1.6
|
|
|
|
|
1.6
|
|
|
|
|
1.8
|
|
|
|
|
1.8
|
|
|
Restructuring
|
|
|
|
|
0.9
|
|
|
|
|
0.7
|
|
|
|
|
2.9
|
|
|
|
|
2.8
|
|
|
Adjusted EBITDA
|
|
|
|
$
|
79.0
|
|
|
|
$
|
81.0
|
|
|
|
$
|
79.0
|
|
|
|
$
|
82.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous 2017 Outlook
|
|
|
Current 2017 Outlook
|
|
(Unaudited, per diluted share)
|
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
EPS from continuing operations
|
|
|
|
$
|
0.96
|
|
|
|
$
|
1.16
|
|
|
|
$
|
0.77
|
|
|
|
$
|
0.92
|
|
|
Foreign exchange impact
|
|
|
|
|
(0.09
|
)
|
|
|
|
(0.09
|
)
|
|
|
|
(0.13
|
)
|
|
|
|
(0.13
|
)
|
|
Strategic investments
|
|
|
|
|
0.56
|
|
|
|
|
0.51
|
|
|
|
|
0.55
|
|
|
|
|
0.55
|
|
|
SEC / FCPA matters and related costs
|
|
|
|
|
0.07
|
|
|
|
|
0.05
|
|
|
|
|
0.13
|
|
|
|
|
0.13
|
|
|
Legal judgments/settlements
|
|
|
|
|
0.09
|
|
|
|
|
0.09
|
|
|
|
|
0.10
|
|
|
|
|
0.10
|
|
|
Restructuring
|
|
|
|
|
0.05
|
|
|
|
|
0.04
|
|
|
|
|
0.16
|
|
|
|
|
0.15
|
|
|
Long-term income tax rate adjustment
|
|
|
|
|
(0.10
|
)
|
|
|
|
(0.16
|
)
|
|
|
|
(0.04
|
)
|
|
|
|
(0.09
|
)
|
|
Adjusted EPS from continuing operations
|
|
|
|
$
|
1.54
|
|
|
|
$
|
1.60
|
|
|
|
$
|
1.54
|
|
|
|
$
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of diluted common shares
|
|
|
|
|
18,400,000
|
|
|
|
|
18,400,000
|
|
|
|
|
18,400,000
|
|
|
|
|
18,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures:
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
-
Charges related to U.S. Government resolutions - charges
related to the settlement with the SEC as further discussed in our
Form 10-K for the year ended December 31, 2016
-
Restructuring - costs related to a planned
restructuring, primarily consisting of severance charges and the
write-down of certain assets
-
Succession charges - costs related to the succession of certain
of our former named executive officers
-
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
jurisdictions in which profits are determined to be earned and taxed,
and discrete items, such as the resolutions of issues arising from tax
audits with various tax authorities and the ability to realize
deferred tax assets
Non-GAAP Net Margin
Non-GAAP net margin is an internal non-GAAP metric, which we define as
gross profit less sales and marketing expense. Non-GAAP 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
share-based 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/20171030005999/en/
Orthofix International N.V.
Mark Quick, 214-937-2924
markquick@orthofix.com
Source: Orthofix International N.V.
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