14.

Business segment information

The Company’s segment information is prepared on the same basis that management reviews the financial information for operational decision making purposes. Beginning January 1, 2011, the Company began managing its business by its three GBUs, which are comprised of Spine, Orthopedics and Sports Medicine supported by Corporate activities. These GBUs represent the current segments for which the Company’s Chief Operating Decision Maker reviews financial information and makes resource allocation decisions among business units. Accordingly, the Company’s segment information (as provided below) has been prepared based on the Company’s three GBUs reporting segments. Prior year disclosures have been revised to conform to these new GBU reporting segments. These new segments are discussed below.

Spine

Spine provides a portfolio of non-invasive and implantable products that allow physicians to successfully treat a variety of spinal conditions. This global business unit specializes in the design, development and marketing of the Company’s spinal implant products along with bone growth stimulation and biologics products used in spine applications. Spine distributes its products through a network of distributors, sales representatives and affiliates. This global business unit uses both direct and distributor sales representatives to sell spine products to hospitals, doctors, and other healthcare providers, globally.

Orthopedics

Orthopedics provides a comprehensive portfolio of non-invasive and implantable products that allow physicians to successfully treat a variety of orthopedic conditions unrelated to spine. This global business unit specializes in the design, development and marketing of the Company’s orthopedic implant products along with bone growth stimulation and biologics products used in orthopedic applications. Orthopedics distributes its products through a network of distributors, sales representatives and affiliates. This global business unit uses both direct and distributor sales representatives to sell orthopedics products to hospitals, doctors, and other healthcare providers globally.

Sports Medicine

Sports Medicine designs, manufactures and distributes a portfolio of non-invasive products that allow physicians and clinicians to treat a variety of sports medicine related conditions in order to minimize pain and restore mobility to their patients. Sports Medicine distributes products through a network of domestic and international distributors, sales representatives, and affiliates to hospitals, doctors and other healthcare providers, primarily in the U.S.

Corporate

Corporate activities are comprised of the operating expenses of Orthofix International N.V. and its U.S. holding company subsidiary, Orthofix Holdings, Inc., along with activities not necessarily identifiable within the three GBUs.

Segment Information

The table below presents external net sales by market sector:


	External Net Sales by Market Sector
	Three Months Ended September 30,
(US$ in thousands)	2011		2010		Reported Growth			Constant Currency Growth
Spine Products
Implants and Biologics	$	36,769	$	34,127		8	%		8	%
Stimulation		39,734		43,251		(8	%)		(8	%)

Total Spine Products		76,503		77,378		(1	%)		(1	%)

Orthopedics Products		40,803		35,116		16	%		8	%

Sports Medicine Products		25,561		23,689		8	%		7	%


Total Strategic Products		142,867		136,183		5	%		3	%

Divested Products⁽¹⁾		1,880		2,723		(31	%)		(31	%)


Total Net Sales	$	144,747	$	138,906		4	%		2	%


	External Net Sales by Market Sector
	Nine Months Ended September 30,
(US$ in thousands)	2011		2010		Reported Growth			Constant Currency Growth
Spine Products
Implants and Biologics	$	107,608	$	97,572		10	%		10	%
Stimulation		118,012		130,139		(9	%)		(9	%)

Total Spine Products		225,620		227,711		(1	%)		(1	%)

Orthopedics Products		121,416		110,834		10	%		4	%

Sports Medicine Products		75,492		70,439		7	%		7	%


Total Strategic Products		422,528		408,984		3	%		2	%

Divested Products⁽¹⁾		4,934		11,589		(57	%)		(57	%)


Total Net Sales	$	427,462	$	420,573		2	%		0	%

(1)

Divested Products sales for the three and nine months ended September 30, 2011 include $1.9 million and $4.9 million, respectively, related to the vascular business which was divested in March 2010 (see Note 16). Divested Products sales for the three and nine months ended September 30, 2010 include $1.9 million and $6.6 million, respectively, related to the vascular business which was divested in March 2010 (see Note 16). This revenue represents amounts recognized in 2010 prior to the March 2010 sale date as well as revenue generated in the three and nine months ended September 30, 2011 and 2010 from the transition services supply agreement that commenced upon the sale of the business. In addition, Divested Products sales for the three and nine months ended September 30, 2010 also include $0.8 million and $5.0 million related to the anesthesia product line, respectively. The Company exited its anesthesia product line after the expiration of its distribution agreement in the United Kingdom during the second quarter of 2010.

The tables below reconcile net sales by market sector to the Company’s GBU reporting segments:


	Sales by GBU for the Three Months Ended September 30, 2011
(US$ in thousands)	Spine		Orthopedics		Sports Medicine		Total
Spine Products
Implants and Biologics	$	36,769	$	—	$	—	$	36,769
Stimulation		39,734		—		—		39,734

Total Spine Products		76,503		—		—		76,503

Orthopedics Products		—		40,803		—		40,803

Sports Medicine Products		—		—		25,561		25,561


Total Strategic Products		76,503		40,803		25,561		142,867

Divested Products		—		—		1,880		1,880


Total Net Sales	$	76,503	$	40,803	$	27,441	$	144,747


	Sales by GBU for the Three Months Ended September 30, 2010
(US$ in thousands)	Spine		Orthopedics		Sports Medicine		Total
Spine Products
Implants and Biologics	$	34,127	$	—	$	—	$	34,127
Stimulation		43,251		—		—		43,251

Total Spine Products		77,378		—		—		77,378

Orthopedics Products		—		35,116		—		35,116

Sports Medicine Products		—		—		23,689		23,689


Total Strategic Products		77,378		35,116		23,689		136,183

Divested Products		—		822		1,901		2,723


Total Net Sales	$	77,378	$	35,938	$	25,590	$	138,906


	Sales by GBU for the Nine Months Ended September 30, 2011
(US$ in thousands)	Spine		Orthopedics		Sports Medicine		Total
Spine Products
Implants and Biologics	$	107,608	$	—	$	—	$	107,608
Stimulation		118,012		—		—		118,012

Total Spine Products		225,620		—		—		225,620

Orthopedics Products		—		121,416		—		121,416

Sports Medicine Products		—		—		75,492		75,492


Total Strategic Products		225,620		121,416		75,492		422,528

Divested Products		—		—		4,934		4,934


Total Net Sales	$	225,620	$	121,416	$	80,426	$	427,462


	Sales by GBU for the Nine Months Ended September 30, 2010
(US$ in thousands)	Spine		Orthopedics		Sports Medicine		Total
Spine Products
Implants and Biologics	$	97,572	$	—	$	—	$	97,572
Stimulation		130,139		—		—		130,139

Total Spine Products		227,711		—		—		227,711

Orthopedics Products		—		110,834		—		110,834

Sports Medicine Products		—		—		70,439		70,439


Total Strategic Products		227,711		110,834		70,439		408,984

Divested Products		—		5,023		6,566		11,589


Total Net Sales	$	227,711	$	115,857	$	77,005	$	420,573


Operating Income (Loss) by GBU (US$ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
Operating Income (Loss) by GBU (US$ in thousands)	2011			2010			2011			2010
Spine ⁽¹⁾	$	22,373		$	21,766		$	28,239		$	64,576
Orthopedics ⁽²⁾		4,501			(132	)		5,842			3,717
Sports Medicine ⁽³⁾		(580	)		3,078			35			19,598
Corporate ⁽⁴⁾		(3,279	)		(5,718	)		(18,591	)		(15,742	)

Total	$	23,015		$	18,994		$	15,525		$	72,149

(1)	For the nine months ended September 30, 2011, the operating income for the Spine GBU included $36.5 million of expenses in connection with charges related to U.S. Government inquiries.

(2)	For the nine months ended September 30, 2011, the operating income for the Orthopedics GBU included $6.5 million of expenses in connection with charges related to U.S. Government inquiries.

(3)

For the three and nine months ended September 30, 2011, the operating income for the Sports Medicine GBU included $2.5 million of litigation and settlement costs for certain product liability matters related to our Sports Medicine GBU. For the nine months ended September 30, 2011, the operating income for the Sports Medicine GBU included $2 million of insurance expense to cover additional product liability claims related to our Sports Medicine GBU. For the nine months ended September 30, 2010, the operating income for the Sports Medicine GBU included $12.3 million from the net gain on sale of vascular operations (see Note 16). For the nine months ended September 30, 2010, the operating income for the Sports Medicine GBU included $1.7 million of insurance expense to cover new product liability claims from its former pain management operations sold in 2008.

(4)	For the nine months ended September 30, 2011, the operating loss for the Corporate GBU included $3 million of expenses in connection with charges related to U.S. Government inquiries and $3.2 million of senior management succession charges.