2.	Restatement of the Consolidated Financial Statements

Background

In July 2013, the Audit Committee (the “Audit Committee”) of the Company’s Board of Directors (the “Board”) commenced an independent review with the assistance of outside professionals into whether the Company had properly recognized revenue under U.S. generally accepted accounting principles (“GAAP”) in connection with certain revenue that had been recorded in 2012 and 2011 (the “Independent Review”). In conjunction with the Independent Review, the Company concluded that errors existed in the Company’s previously issued financial statements for the fiscal years ended December 31, 2012, 2011 and 2010 (as well as the interim quarterly periods within such years), as well as for the interim quarterly period ended March 31, 2013. In addition, the Company has identified and corrected errors occurring prior to January 1, 2010 by recognizing a cumulative adjustment to beginning retained earnings in the consolidated statements of changes in shareholders’ equity included in these consolidated financial statements.

In reaching these conclusions, the Company considered information obtained in the Independent Review, including emails, data and interviews with current and former employees that indicated (i) the existence of extra-contractual terms or arrangements at the onset of the sale and concessions agreed to subsequent to the initial sale, such as extended payment terms and return and exchange rights for sales to distributors with respect to certain transactions, (ii) that at the time of some sales collection was not reasonably assured, and (iii) that certain amounts previously characterized as commissions were paid to related parties of the applicable customer.

The Company assessed the information derived from the Independent Review in making determinations with respect to accounting adjustments reflected in these restated consolidated financial statements, and such determinations are consistent with the findings of the Independent Review. In addition to the matters that were the subject of the Independent Review, certain other adjustments identified by management, including revisions to inventory reserves and royalties, were made to the consolidated financial statements in connection with the restatement.

The correction of these errors had the following impact: decreased net sales by $14.7 million and $28.2 million for the years ended December 31, 2012 and 2011, respectively, and increased net sales by $1.9 million for the year ended December 31, 2010; decreased net income from continuing operations by $8.9 million and $14.5 million for the years ended December 31, 2012 and 2011, respectively, and increased net income from continuing operations by $3.2 million for the year ended December 31, 2010; and decreased opening retained earnings and total shareholders’ equity at January 1, 2010 by $8.3 million and $7.6 million, respectively. The following include descriptions of the significant adjustments to the Company’s financial position and results of operations from the previously reported consolidated financial statements.

Distributor Revenue Recognition

The Company has determined that it previously recognized revenue with respect to certain distributor relationships before all revenue recognition criteria were met. Specifically, the Company has determined that a fixed or determinable sales price did not exist, and/or collection was not reasonably assured, with respect to certain transactions where revenue had previously been recognized at the time of shipment. Specifically, the Company’s review revealed arrangements, or extra-contractual terms, with certain of the Company’s distributors regarding extended payment terms, return or exchange rights, and contingent payment obligations for sales to such distributors with respect to certain transactions. There were also concessions being made subsequent to the shipment of inventory to the distributors and the related revenue recognition. Based on the results of this review, it was determined that these arrangements were not appropriately evaluated under the appropriate revenue recognition criteria applicable under GAAP. Distributor sales represented approximately 11 – 13% of the Company’s net sales (prior to the restatement) of approximately $462 million, $470 million, and $461 million for the years ended December 31, 2012, 2011, and 2010, respectively.

The Company previously recognized distributor revenue as title and risk of loss passed at either shipment from the Company’s facilities or receipt at the distributor’s facility, assuming all other revenue recognition criteria had been achieved (the “sell-in method”). Based on review of all facts and circumstances related to the arrangements described above, the Company determined that in many instances the revenue recognition criteria under the sell-in method were not satisfied at the time of shipment or receipt; specifically, the existence of extra-contractual terms or arrangements caused the Company not to meet the fixed or determinable criteria for revenue recognition in some cases, and in others collectability had not been established. In situations where the Company is unable to reasonably estimate the effects of these extra-contractual terms, it is precluded from recognizing revenue relating to distributor arrangements until the product is delivered to the end customer. This method is commonly referred to as the “sell-through” revenue recognition method because the vendor does not recognize revenue until the transaction consideration is fixed or determinable, which coincides with the selling of the product through the distribution channel to the end customer. Because the Company does not have reliable information about when its distributors sell the product through to end customers, the Company will use cash collection from distributors as a basis for revenue recognition under the sell-through method. Although in many cases the Company is legally entitled to the accounts receivable at the time of shipment, since the revenue recognition criteria has not been met, the Company has not recognized accounts receivables or any corresponding deferred revenues associated with these transactions.

As part of the review, the Company also considered the accounting treatment for the related cost of sales when distributor revenue is recognized on a sell-through basis. Previously, cost of sales were recognized upon shipment; however, the Company believes the matching of the recognition of costs of sales with revenue is preferred and therefore considered if such costs should be deferred until revenue is recognized on a sell-through basis. In making this assessment, the Company considered the financial viability of its distributors based on their creditworthiness to determine if collectability of amounts sufficient to realize the costs of the products shipped was reasonably assured at the time of shipment to these distributors. In instances where the distributor was determined to be financially viable, the Company determined that costs of sales should be deferred until the revenue is recognized. For those distributors where the Company has concluded that collectability was not reasonably assured, the Company has expensed the related cost of sales upon shipment.

Based on the results of the Independent Review, the Company determined that all distributor transactions should be transitioned to the sell-through method of accounting as of the dates described below:

•

For distributor transactions within the Company’s Orthopedics division, the Company has determined that sell-through accounting should be applied within the Brazil subsidiary for all prior periods given the frequency with which the Company conducted business under extra-contractual and undocumented terms, as well as the Company’s inability to fully access underlying transactional and other information that would be necessary to evaluate transactions under a sell-in basis. Adjustments from periods ending prior to January 1, 2010 are presented by recording a cumulative effect in opening retained earnings and total shareholders’ equity at January 1, 2010. For distributor transactions within the division outside the Brazil subsidiary, there were also sales to four distributors that did not meet the fixed or determinable or collectability revenue recognition criteria and therefore, such sales were adjusted to sell-through accounting in the restatement.

•

For distributor transactions within the Company’s U.S. Spine division, the Company has determined that sell-through accounting should be applied beginning January 1, 2011. Following its consideration of the information provided from the Independent Review, the Company believes that January 1, 2011 is the date extra-contractual terms became pervasive in the Company’s U.S. business, and it is unaware of circumstances existing prior to that date that would require it to broadly apply sell-through accounting to all distributor transactions within the U.S. Spine division. Additionally, there were sales in 2012 and 2011 for which revenue was previously recognized that did not meet the fixed or determinable criteria and the product associated with such sales was subsequently returned in 2013 (i) under the terms of negotiated agreements whereby the Company terminated its relationships with two distributors and (ii) by an additional distributor who returned certain product sold pursuant to a contingent sales arrangement. Such sales represented approximately $3.3 million and $4.1 million for the years ended December 31, 2012 and 2011, respectively. Due to the return of the product, no revenue will be recognized for these transactions.

•

The Company has determined that stimulation products sold to distributors within the Company’s U.S. Spine division during 2012 did not meet the fixed or determinable (and in some cases, collectability) revenue recognition criterion at the time of shipment. Therefore, the Company has determined that sell-through accounting should be applied for these sales. Management also determined that many of these distributors (or affiliates thereof) received commission payments as part of the sales transactions, which the Company previously recorded as sales and marketing expense. The Company has recorded adjustments in the restatement to net these commission expenses against revenue, as they represented product discounts.

•

The Company has determined that it will prospectively apply sell-through accounting for all remaining distributor arrangements (which entails arrangements within the Company’s Orthopedics division outside the Brazil subsidiary) beginning April 1, 2013, the earliest date for which financial statements have not previously been issued by the Company. Although the Independent Review did not provide information to indicate extra-contractual terms or that historical revenue recognition was inappropriate in these remaining instances, the Company believes the information from the Independent Review indicating that the Company has a history of extra-contractual arrangements for distributor transactions, as described above, provides additional information which should be considered in reassessing the application of sell-through accounting on a prospective basis, particularly given that the Company believes that there is a higher risk associated with distributor arrangements generally.

The effect of adjustments made to the Company’s previously filed consolidated statements of operations as a result of these matters are shown in the tables below. These adjustments also had the following effects on the Company’s previously filed consolidated balance sheets:

•

Accounts receivable decreased as of December 31, 2012 and December 31, 2011, by $41.3 million and $33.8 million, respectively, related to the de-recognition of receivables for which revenue has been deferred and will now be recognized on a sell-through basis, based on cash collections.

•

Inventory increased as of December 31, 2012 and December 31, 2011 by $11.0 million and $8.8 million, respectively, to recognize the costs of inventory shipments to distributors determined to be financially viable as discussed previously.

Inventory Reserves

The Company also identified material errors in inventory reserves. One error related to the Company recording an increase of $1.2 million to the Company’s excess and obsolete reserve in the second quarter of 2012 related to a product within the Spine business that was subsequently reversed by the Company in the fourth quarter of 2012. During the Company’s review, it was determined that removing the reserve in the fourth quarter of 2012 was not correct; therefore the reserve has been reinstated.

The Company has also determined that certain inconsistencies existed with respect to how the Company previously computed and recorded inventory reserves. As a result, the Company has reviewed the methodologies used to compute and record inventory reserves and determined that errors in the application of GAAP existed in prior periods, which required adjustment in these financial statements. Based on this review, the Company has determined that it previously made reductions to previously recorded reserves based on changes in forecasted demand, which it believes was contrary to guidance set forth in ASC Topic 330, Inventory (specifically ASC 330-10-35-14), which states that a write-down of inventory to the lower-of-cost-or-market value at the close of a fiscal year creates a new cost basis that subsequently should not be marked up based on changes in underlying circumstances. The restated consolidated financial statements contain several adjustments to reflect recomputed inventory reserves in each of the relevant periods.

These adjustments resulted in a decrease to inventory (due to an increase in reserves) as of December 31, 2012 and December 31, 2011, by $14.8 million and $8.8 million, respectively.

Royalties

The Company also reviewed the accounting for royalties and determined there were royalties classified as sales and marketing expense; however, such royalties were based on sales of products and were paid to doctors who consulted on development of those products. Given these amounts are attributable to the cost of producing our products, we determined they are correctly classified as cost of goods sold.

Other Adjustments

In addition to the adjustments recorded to address the Company’s errors in accounting for distributor revenue recognition, inventory reserves, and royalties, the Company has identified other errors that are generally not material, individually or in the aggregate, but have been recorded in connection with the restatement.

Included in Other Adjustments are adjustments to reclassify interest expense from continuing operations to discontinued operations of $3.9 million, and $4.9 million for the years ended December 31, 2011 and 2010, respectively. The reclassification was necessary as the Company used a portion of the proceeds from the sale of Breg, Inc. to repay in full the remaining $87.5 million balance on the Term Loan Facility and pay down $57.5 million of amounts outstanding under the Revolving Credit Facility.

There were no material impacts to the statements of cash flows for the items above other than to increase operating cash flows and decrease financing cash flows for $1 million for the year ended December 31, 2012. The results of the adjustments to the Company’s previously filed consolidated statements of operations detailed above are summarized in the tables below. The tax effect of the adjustments is estimated based on the Company’s effective tax rate.


	Year Ended December 31, 2012
				Adjustments by Category
(U.S. Dollars, in thousands)	Previously Reported			Distributor Revenue			Inventory Reserves			Royalties			Other			Total Adjustments			Restated
Net sales	$	462,320		$	(14,777	)	$	—		$	—		$	38		$	(14,739	)	$	447,581
Cost of sales		86,492			(2,032	)		5,647			8,190			(44	)		11,761			98,253

Gross profit		375,828			(12,745	)		(5,647	)		(8,190	)		82			(26,500	)		349,328
Operating expenses
Sales and marketing		200,343			(6,629	)		—			(8,190	)		1,607			(13,212	)		187,131
General and administrative		53,827			(2	)		—			—			(434	)		(436	)		53,391
Research and development		28,577			—			—			—			—			—			28,577
Amortization of intangibles assets		2,098			—			—			—			200			200			2,298
Charges related to U.S. Government resolutions		1,973			—			—			—			(678	)		(678	)		1,295

		286,818			(6,631	)		—			(8,190	)		695			(14,126	)		272,692

Operating income		89,010			(6,114	)		(5,647	)		—			(613	)		(12,374	)		76,636
Other income and (expense)		(6,282	)		—			—			—			(166	)		(166	)		(6,448	)

Income before income taxes		82,728			(6,114	)		(5,647	)		—			(779	)		(12,540	)		70,188
Income tax expense		(28,792	)		1,782			1,645			—			227			3,654			(25,138	)

Net income from continuing operations, net of tax	$	53,936		$	(4,332	)	$	(4,002	)	$	—		$	(552	)	$	(8,886	)	$	45,050


	Year Ended December 31, 2011
				Adjustments by Category
(U.S. Dollars, in thousands)	Previously Reported			Distributor Revenue			Inventory Reserves			Royalties			Other			Total Adjustments			Restated
Net sales	$	470,121		$	(29,135	)	$	—		$	—		$	985		$	(28,150	)	$	441,971
Cost of sales		92,619			(8,289	)		3,377			7,713			107			2,908			95,527

Gross profit		377,502			(20,846	)		(3,377	)		(7,713	)		878			(31,058	)		346,444
Operating expenses
Sales and marketing		200,145			(1,216	)		—			(7,713	)		2,295			(6,634	)		193,511
General and administrative		64,374			—			—			—			107			107			64,481
Research and development		22,861			—			—			—			—			—			22,861
Amortization of intangibles assets		2,350			—			—			—			200			200			2,550
Charges related to U.S. Government resolutions		56,463			—			—			—			678			678			57,141

		346,193			(1,216	)		—			(7,713	)		3,280			(5,649	)		340,544

Operating income		31,309			(19,630	)		(3,377	)		—			(2,402	)		(25,409	)		5,900
Other income and (expense)		(11,868	)		—			—			—			3,915			3,915			(7,953	)

Income (loss) before income taxes		19,441			(19,630	)		(3,377	)		—			1,513			(21,494	)		(2,053	)
Income tax expense		(21,181	)		6,408			1,102			—			(494	)		7,016			(14,165	)

Net loss from continuing operations, net of tax	$	(1,740	)	$	(13,222	)	$	(2,275	)	$	—		$	1,019		$	(14,478	)	$	(16,218	)


	Year Ended December 31, 2010
				Adjustments by Category
(U.S. Dollars, in thousands)	Previously Reported			Distributor Revenue			Inventory Reserves			Royalties			Other			Total Adjustments			Restated
Net sales	$	460,629		$	2,088		$	—		$	—		$	(146	)	$	1,942		$	462,571
Cost of sales		90,461			(323	)		2,281			5,386			(712	)		6,632			97,093

Gross profit		370,168			2,411			(2,281	)		(5,386	)		566			(4,690	)		365,478
Operating expenses
Sales and marketing		200,835			(275	)		—			(5,386	)		939			(4,722	)		196,113
General and administrative		72,912			—			—			—			98			98			73,010
Research and development		27,958			—			—			—			—			—			27,958
Amortization of intangibles assets		2,213			—			—			—			200			200			2,413
Charges related to U.S. Government resolutions		—			—			—			—			—			—			—

		303,918			(275	)		—			(5,386	)		1,237			(4,424	)		299,494

Operating income		66,250			2,686			(2,281	)		—			(671	)		(266	)		65,984
Other income and (expense)		(15,886	)		—			—			—			4,930			4,930			(10,956	)

Income before income taxes		50,364			2,686			(2,281	)		—			4,259			4,664			55,028
Income tax expense		(22,606	)		(821	)		697			—			(1,301	)		(1,425	)		(24,031	)

Net income from continuing operations, net of tax	$	27,758		$	1,865		$	(1,584	)	$	—		$	2,958		$	3,239		$	30,997

The effects of the restatements on the Company’s consolidated balance sheet as of December 31, 2012 are as follows:


	As of December 31, 2012
(U.S. Dollars, in thousands except share and per share data)	Previously Reported		Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	31,055	$	—		$	31,055
Restricted cash		21,314		—			21,314
Trade accounts receivable, less allowances of $13,543		150,316		(43,004	)		107,312
Inventories		88,744		(5,371	)		83,373
Deferred income taxes		16,959		16,491			33,450
Escrow receivable		—		—			—
Prepaid expenses and other current assets		32,056		2,023			34,079
Assets held for sale		—		—			—

Total current assets		340,444		(29,861	)		310,583
Property, plant and equipment, net		51,362		2,473			53,835
Patents and other intangible assets, net		6,880		410			7,290
Goodwill		74,388		—			74,388
Deferred income taxes		19,904		(1,023	)		18,881
Other long-term assets		11,303		(3,383	)		7,920


Total assets	$	504,281	$	(31,384	)	$	472,897


Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings	$	16	$	—		$	16
Current portion of long-term debt		—		—			—
Trade accounts payable		21,812		763			22,575
Accrued charges related to U.S. Government resolutions		—		—			—
Other current liabilities		46,969		(7,375	)		39,594
Liabilities held for sale		—		—			—

Total current liabilities		68,797		(6,612	)		62,185
Long-term debt		20,000		—			20,000
Deferred income taxes		11,456		—			11,456
Other long-term liabilities		4,930		6,494			11,424

Total liabilities		105,183		(118	)		105,065
Contingencies (Note 17)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 19,339,329 issued and outstanding		1,934		—			1,934
Additional paid-in capital		246,111		195			246,306
Retained earnings		148,549		(33,702	)		114,847
Accumulated other comprehensive income		2,504		2,241			4,745

Total shareholders’ equity		399,098		(31,266	)		367,832

Total liabilities and shareholders’ equity	$	504,281	$	(31,384	)	$	472,897

The effects of the restatements on the Company’s consolidated balance sheet as of December 31, 2011 are as follows:


	As of December 31, 2011
(U.S. Dollars, in thousands except share and per share data)	Previously Reported		Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	33,207	$	—		$	33,207
Restricted cash		45,476		—			45,476
Trade accounts receivable, less allowances of $9,341		132,828		(32,940	)		99,888
Inventories		82,969		(1,441	)		81,528
Deferred income taxes		16,349		19,964			36,313
Escrow receivable		41,537		—			41,537
Prepaid expenses and other current assets		26,069		(4,070	)		21,999
Assets held for sale		171,185		—			171,185

Total current assets		549,620		(18,487	)		531,133
Property, plant and equipment, net		43,368		2,769			46,137
Patents and other intangible assets, net		8,236		610			8,846
Goodwill		73,094		—			73,094
Deferred income taxes		18,584		(1,843	)		16,741
Other long-term assets		11,570		(2,141	)		9,429


Total assets	$	704,472	$	(19,092	)	$	685,380


Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings	$	1,318	$	—		$	1,318
Current portion of long-term debt		17,500		—			17,500
Trade accounts payable		16,488		1,743			18,231
Accrued charges related to U.S. Government resolutions		82,500		638			83,138
Other current liabilities		45,327		(4,491	)		40,836
Liabilities held for sale		22,676		—			22,676

Total current liabilities		185,809		(2,110	)		183,699
Long-term debt		191,195		—			191,195
Deferred income taxes		9,778					9,778
Other long-term liabilities		2,519		6,115			8,634

Total liabilities		389,301		4,005			393,306
Contingencies (Note 17)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 18,465,444 issued and outstanding		1,846		—			1,846
Additional paid-in capital		214,310		195			214,505
Retained earnings		97,254		(25,245	)		72,009
Accumulated other comprehensive income		1,761		1,953			3,714

Total shareholders’ equity		315,171		(23,097	)		292,074

Total liabilities and shareholders’ equity	$	704,472	$	(19,092	)	$	685,380

The effects of the restatements on the Company’s consolidated statement of operations and comprehensive income for the year ended December 31, 2012 are as follows:


	Year Ended December 31, 2012
(U.S. Dollars, in thousands, except share and per share data)	Previously Reported			Adjustments			Restated
Product sales	$	415,850			(14,811	)	$	401,039
Marketing service fees		46,470			72			46,542

Net sales		462,320			(14,739	)		447,581
Cost of sales		86,492			11,761			98,253


Gross profit		375,828			(26,500	)		349,328
Operating expenses
Sales and marketing		200,343			(13,212	)		187,131
General and administrative		53,827			(436	)		53,391
Research and development		28,577			—			28,577
Amortization of intangible assets		2,098			200			2,298
Charges related to U.S. Government resolutions (Note 17)		1,973			(678	)		1,295


		286,818			(14,126	)		272,692


Operating income		89,010			(12,374	)		76,636
Other income and (expense)
Interest expense, net		(4,577	)		(166	)		(4,743	)
Other expense		(1,705	)		—			(1,705	)


		(6,282	)		(166	)		(6,448	)


Income before income taxes		82,728			(12,540	)		70,188
Income tax expense		(28,792	)		3,654			(25,138	)


Net income from continuing operations, net of tax		53,936			(8,886	)		45,050


Discontinued operations (Note 16)
Gain on sale of Breg, Inc., net of tax		1,345			—			1,345
Gain on sale of vascular operations, net of tax (Note 22)		—			—			—
Loss from discontinued operations		(4,012	)		1,018			(2,994	)
Income tax benefit (expense)		26			(589	)		(563	)


Net loss from discontinued operations, net of tax		(2,641	)		429			(2,212	)


Net income	$	51,295			(8,457	)	$	42,838


Net income (loss) per common share—basic:
Net income from continuing operations, net of tax	$	2.84			(0.47	)	$	2.37
Net loss from discontinued operations, net of tax		(0.14	)		0.02			(0.12	)


Net income per common share—basic	$	2.70			(0.45	)	$	2.25


Net income (loss) per common share—diluted:
Net income from continuing operations, net of tax	$	2.78			(0.46	)	$	2.32
Net loss from discontinued operations, net of tax		(0.14	)		0.03			(0.11	)


Net income per common share—diluted:	$	2.64			(0.43	)	$	2.21


Weighted average number of common shares:
Basic		18,977,263			—			18,977,263

Diluted		19,390,413			—			19,390,413

Other comprehensive income, before tax:
Translation adjustment	$	480			288		$	768
Unrealized gain on derivative instrument		416			—			416

Other comprehensive income, before tax		896			288			1,184
Income tax expense related to components of other comprehensive income		(153	)		—			(153	)

Other comprehensive income, net of tax		743			288			1,031

Comprehensive income	$	52,038			(8,169	)	$	43,869

The effects of the restatements on the Company’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2011 are as follows:


	Year Ended December 31, 2011
(U.S. Dollars, in thousands, except share and per share data)	Previously Reported			Adjustments			Restated
Product sales	$	432,975			(27,828	)	$	405,147
Marketing service fees		37,146			(322	)		36,824

Net sales		470,121			(28,150	)		441,971
Cost of sales		92,619			2,908			95,527


Gross profit		377,502			(31,058	)		346,444
Operating expenses
Sales and marketing		200,145			(6,634	)		193,511
General and administrative		64,374			107			64,481
Research and development		22,861			—			22,861
Amortization of intangible assets		2,350			200			2,550
Charges related to U.S. Government resolutions (Note 17)		56,463			678			57,141


		346,193			(5,649	)		340,544


Operating income		31,309			(25,409	)		5,900
Other income and (expense)
Interest expense, net		(9,456	)		3,915			(5,541	)
Other expense		(2,412	)		—			(2,412	)


		(11,868	)		3,915			(7,953	)


Income (loss) before income taxes		19,441			(21,494	)		(2,053	)
Income tax expense		(21,181	)		7,016			(14,165	)


Net loss from continuing operations, net of tax		(1,740	)		(14,478	)		(16,218	)


Discontinued operations (Note 16)
Gain on sale of Breg, Inc., net of tax		—			—			—
Gain on sale of vascular operations, net of tax (Note 22)		—			—			—
Income (loss) from discontinued operations		1,263			(3,968	)		(2,705	)
Income tax (expense) benefit		(596	)		1,409			813


Net income (loss) from discontinued operations, net of tax		667			(2,559	)		(1,892	)


Net loss	$	(1,073	)		(17,037	)	$	(18,110	)


Net income (loss) per common share—basic:
Net loss from continuing operations, net of tax	$	(0.10	)		(0.79	)	$	(0.89	)
Net income (loss) from discontinued operations, net of tax		0.04			(0.14	)		(0.10	)


Net loss per common share—basic	$	(0.06	)		(0.93	)	$	(0.99	)


Net income (loss) per common share—diluted:
Net loss from continuing operations, net of tax	$	(0.10	)		(0.79	)	$	(0.89	)
Net income (loss) from discontinued operations, net of tax		0.04			(0.14	)		(0.10	)


Net loss per common share—diluted:	$	(0.06	)		(0.93	)	$	(0.99	)


Weighted average number of common shares:
Basic		18,219,343			—			18,219,343

Diluted		18,219,343			—			18,219,343

Other comprehensive loss, before tax:
Translation adjustment	$	(3,192	)		913		$	(2,279	)
Unrealized loss on derivative instrument		(693	)		—			(693	)

Other comprehensive loss, before tax		(3,885	)		913			(2,972	)
Income tax benefit related to components of other comprehensive income		256			—			256

Other comprehensive loss, net of tax		(3,629	)		913			(2,716	)

Comprehensive loss	$	(4,702	)		(16,124	)	$	(20,826	)

The effects of the restatements on the Company’s consolidated statement of operations and comprehensive income for the year ended December 31, 2010 are as follows:


	Year Ended December 31, 2010
(U.S. Dollars, in thousands, except share and per share data)	Previously Reported			Adjustments			Restated
Product sales	$	430,783			2,062		$	432,845
Marketing service fees		29,846			(120	)		29,726

Net sales		460,629			1,942			462,571
Cost of sales		90,461			6,632			97,093


Gross profit		370,168			(4,690	)		365,478
Operating expenses
Sales and marketing		200,835			(4,722	)		196,113
General and administrative		72,912			98			73,010
Research and development		27,958			—			27,958
Amortization of intangible assets		2,213			200			2,413
Charges related to U.S. Government resolutions (Note 17)		—			—			—


		303,918			(4,424	)		299,494


Operating income		66,250			(266	)		65,984
Other income and (expense)
Interest expense, net		(16,217	)		4,930			(11,287	)
Other expense		331			—			331


		(15,886	)		4,930			(10,956	)


Income before income taxes		50,364			4,664			55,028
Income tax expense		(22,606	)		(1,425	)		(24,031	)


Net income from continuing operations, net of tax		27,758			3,239			30,997


Discontinued operations (Note 16)
Gain on sale of Breg, Inc., net of tax		—			—			—
Gain on sale of vascular operations, net of tax (Note 22)		12,019			(3,498	)		8,521
Income from discontinued operations		10,015			(4,926	)		5,089
Income tax expense		(5,584	)		5,273			(311	)


Net income from discontinued operations, net of tax		16,450			(3,151	)		13,299


Net income	$	44,208			88		$	44,296


Net income per common share—basic:
Net income from continuing operations, net of tax	$	1.58			0.18		$	1.76
Net income from discontinued operations, net of tax		0.93			(0.17	)		0.76


Net income per common share—basic	$	2.51			0.01		$	2.52


Net income per common share—diluted:
Net income from continuing operations, net of tax	$	1.55			0.18		$	1.73
Net income from discontinued operations, net of tax		0.92			(0.18	)		0.74


Net income per common share—diluted:	$	2.47			—		$	2.47


Weighted average number of common shares:
Basic		17,601,956			—			17,601,956

Diluted		17,913,545			—			17,913,545

Other comprehensive income (loss), before tax:
Translation adjustment	$	(1,710	)		393		$	(1,317	)
Unrealized loss on derivative instrument		(126	)		—			(126	)

Other comprehensive loss, before tax		(1,836	)		393			(1,443	)
Income tax benefit related to components of other comprehensive income		36			—			36

Other comprehensive loss, net of tax		(1,800	)		393			(1,407	)

Comprehensive income	$	42,408			481		$	42,889