EX-99.1 2 d722060dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

News Release

CONTACT:

Mark Quick

Investor Relations

Tel 214 937 2924

markquick@orthofix.com

Orthofix International Reports First Quarter 2014 Results

LEWISVILLE, TX. – May 7, 2014 – Orthofix International N.V. (NASDAQ:OFIX) today reported results for the first quarter ended March 31, 2014. Net sales were $101.3 million for the first quarter of 2014, decreasing 2.0% from net sales of $103.4 million in the first quarter of 2013. Net margin, which the Company calculates as gross profit less sales and marketing expenses, increased 6.5% during the period to $34.8 million, or 34.4% of sales, over $32.7 million, or 31.6% of sales in the first quarter 2013.

President and Chief Executive Officer Brad Mason commented on the Company’s financial results, “The first quarter results were better than expected and give us further confidence that our initiatives to improve and grow our business are appropriate and effective. Additionally, during the quarter we announced a number of Board and executive leadership changes that bring added experience and talent to help us drive improved results.”

First Quarter 2014 Sales Results

BioStim

Net sales in the Company’s BioStim strategic business unit, or SBU, increased 0.5% to $38.4 million in the first quarter of 2014 compared to $38.2 million for the same period in the prior year, an increase of $0.2 million. The BioStim revenue was driven by a stable performance in Spine Stimulation and a lower, yet improving performance in Physio-Stim, as the Company continued to transition the Physio-Stim sales force.

Biologics

Net sales in the Company’s Biologics SBU decreased $0.4 million, or 2.7%, to $13.0 in the first quarter of 2014 compared to $13.4 million for the same period in the prior year. This was due to a decrease in the Company’s marketing service fee rate with the Musculoskeletal Transplant Foundation (“MTF”) to 65% from 70% on April 1, 2013, for Trinity Evolution and Trinity Elite sales. Assuming no marketing fee rate decrease, sales in Biologics grew 4.0% year-over-year in the first quarter.

Extremity Fixation

Net sales in the Company’s Extremity Fixation SBU increased $0.9 million, or 3.3%, to $27.1 million in the first quarter of 2014 compared to $26.2 million for the same period last year. The sales improvement was driven primarily due to increased sales in the U.K. and France, offset somewhat by lower performance in the U.S. and Brazil due to ongoing restructuring activities.

Spine Fixation

Net sales in the Company’s Spine Fixation SBU decreased $2.7 million, or 10.6%, to $22.8 million in the first quarter of 2014 compared to $25.5 million for the same period last year. This decrease was primarily due to lower international sales.


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

First Quarter 2014 Net Margin and Earnings Results

First quarter 2014 consolidated net margin increased 6.5% to $34.8 million over $32.7 million in the first quarter of the prior year. As a percentage of sales, net margin improved to 34.4% in the first quarter 2014 from 31.6% in the first quarter 2013. This increase was primarily driven by Spine Fixation and Extremity Fixation, which was offset by a decrease in BioStim net margin. Spine Fixation net margin benefitted from cost reductions and lower commissions due to a higher international sales mix, while BioStim net margin was negatively impacted primarily by an increase in commission expense.

First quarter 2014 net income (loss) from continuing operations was ($0.2)million, or ($0.01) per diluted share, compared to net income of $7.6 million, or $0.39 per diluted share for the same period last year. First quarter 2014 and 2013 net income also included the specified items detailed below. When excluding these items, adjusted net income from continuing operations for the first quarter 2014 was $5.2 million, or $0.29 per diluted share, compared to $7.2 million, or $0.37 per diluted share, in the first quarter 2013.

Conference Call

Orthofix will host a conference call to discuss first quarter results today, Wednesday, May 7, 2014 at 4:30 p.m. EDT (3:30 p.m. CDT). Interested parties may access the conference call by dialing (888) 267-2845 in the U.S. and (973) 413-6102 outside the U.S., and entering the conference ID 38220. A replay of the call will be available for two weeks by dialing (800) 332-6854 in the U.S. and (973) 528-0005 outside the U.S., and entering the conference ID 38220. 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, TX, the Company has four strategic business units that include BioStim, Biologics, Extremity Fixation and Spine Fixation. Orthofix products are widely distributed via the Company’s sales representatives, distributors and its subsidiaries. In addition, Orthofix is collaborating on research and development activities with leading clinical organizations such as the Musculoskeletal Transplant Foundation, the Orthopedic Research and Education Foundation and the Texas Scottish Rite Hospital for Children. For more information, please visit www.orthofix.com.

Forward-Looking Statements

This communication contains certain forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may include, but are not limited to, statements concerning the projections, financial condition, results of operations and businesses of Orthofix and its subsidiaries and are based on management’s current expectations and estimates and involve risks and uncertainties that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements.

The forward-looking statements in this release do not constitute guarantees or promises of future performance. Factors that could cause or contribute to such differences may include, but are not limited to: risks relating to our recent Audit Committee review and the recently filed restatement of our financial


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

statements for certain prior periods and related legal proceedings (including potential action by the Division of Enforcement of the SEC and pending securities class action litigation); the Company’s review of allegations of improper payments involving the Company’s Brazil-based subsidiary; the expected sales of the Company’s products, including recently launched products; unanticipated expenditures; changing relationships with customers, suppliers, strategic partners and lenders; changes to and the interpretation of governmental regulations; the resolution of pending litigation matters (including the Company’s indemnification obligations with respect to certain product liability claims against, and the government investigation of, the Company’s former sports medicine global business unit); the Company’s ongoing compliance obligations under a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services (and related terms of probation), a deferred prosecution agreement with the U.S. Department of Justice and a Consent Decree with the SEC; risks relating to the protection of intellectual property; changes to the reimbursement policies of third parties; the impact of competitive products; changes to the competitive environment, the acceptance of new products in the market, conditions of the orthopedic industry, credit markets and the economy; corporate development and market development activities, including acquisitions or divestitures, unexpected costs or operating unit performance related to recent acquisitions; and other risks described in Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as well as in other subsequent periodic reports filed by the Company with the SEC. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise the information contained in this press release.

The following tables are summaries of sales reconciled to constant currency sales growth for the quarters ended March 31, 2014, and 2013. Amounts shown are in millions and reflect unaudited figures. Some calculations may be impacted by rounding.

External net sales by strategic business unit

 

     Three Months Ended March 31,  
(U.S. Dollars in millions)    2014      2013      Reported
Growth
    Constant
Currency
Growth
 

BioStim

     38.4         38.2         1     1

Biologics

     13.0         13.4         -3     -3

Extremity Fixation

     27.1         26.2         3     4

Spine Fixation

     22.8         25.5         -11     -11
  

 

 

    

 

 

    

 

 

   

 

 

 

Total net sales

   $ 101.3       $ 103.4         -2     -2
  

 

 

    

 

 

    

 

 

   

 

 

 


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

The following tables are summaries of first quarter 2014 and 2013 net margins by strategic business unit. Amounts shown are in millions and reflect unaudited figures. Some calculations may be impacted by rounding.

ORTHOFIX INTERNATIONAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended March 31,  
(U.S. Dollars in millions)    2014     2013  

Net margin by Strategic Business Unit:

    

BioStim

   $ 14.2      $ 16.9   

Biologics

     6.7        6.0   

Extremity Fixation

     9.3        8.0   

Spine Fixation

     5.1        2.2   

Corporate

     (0.4     (0.4
  

 

 

   

 

 

 

Subtotal

     34.8        32.7   

Consolidated Expenses:

    

General and administrative expense

     (17.5     (18.3

Research and development expense

     (5.9     (5.7

Amortization of intangible assets

     (0.6     (0.5

Costs related to accounting review and restatement

     (8.3     —     
  

 

 

   

 

 

 

Consolidated Operating income

     2.5        8.1   
  

 

 

   

 

 

 

The following table reconciles reported operating income from continuing operations to adjusted operating income from continuing operations for the quarters ended March 31, 2014, and 2013. Some calculations may be impacted by rounding. Please refer to the Non-GAAP Performance Measures section at the end of this press release for more information about the specified items listed below.

First Quarter Adjusted Operating Income from Continuing Operations

 

     Q1 2014     Q1 2013  
     ($ 000’s)      % of Sales     ($ 000’s)      % of Sales  

Reported GAAP operating income

   $ 2,465         2.4   $ 8,087         7.8

Specified Items:

          

Costs related to accounting review and restatement

     8,306           —        

Succession and restructuring charges

     —             3,537      
  

 

 

      

 

 

    

Adjusted operating income

   $ 10,771         10.6   $ 11,624         11.2
  

 

 

      

 

 

    

The following table reconciles reported net income from continuing operations and net income from continuing operations per diluted share to adjusted net income from continuing operations and adjusted net income from continuing operations per diluted share for the quarters ended March 31, 2014, and 2013. Some calculations may be impacted by rounding. Please refer to the Non-GAAP Performance Measures section at the end of this press release for more information about the specified items listed below.

First Quarter Adjusted Net Income from Continuing Operations

 

     Q1 2014     Q1 2013      % Change  
     ($ 000’s)     EPS     ($000’s)     EPS      Earnings     EPS  

Reported GAAP net (loss) income and net (loss) income per diluted share

   $ (222   $ (0.01   $ 7,610      $ 0.39         -103     -103

Specified Items:

             

Costs related to accounting review and restatement

     5,482          —            

Succession and restructuring charges

     —            2,756          

Foreign exchange gain

     (53       (393       

Gain related to demutualization of a Mutual insurance company

     —            (2,776       
  

 

 

     

 

 

        

Adjusted net income and net income per diluted share

   $ 5,207      $ 0.29      $ 7,197      $ 0.37         -28     -22
  

 

 

     

 

 

      

 

 

   

 

 

 


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

ORTHOFIX INTERNATIONAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, U.S. Dollars, in thousands, except per share and share data)

 

     Three Months Ended March 31,  
     2014     2013  

Net sales

   $ 101,342      $ 103,373   

Cost of sales

     22,632        25,617   
  

 

 

   

 

 

 

Gross profit

     78,710        77,756   
  

 

 

   

 

 

 

Operating expenses

    

Sales and marketing

     43,871        45,054   

General and administrative

     17,545        18,330   

Research and development

     5,939        5,741   

Amortization of intangible assets

     584        544   

Costs related to the accounting review and restatement

     8,306        —     
  

 

 

   

 

 

 
     76,245        69,669   
  

 

 

   

 

 

 

Operating income

     2,465        8,087   

Other income and expense

    

Interest expense, net

     (486     (560

Other income (expense)

     (261     4,764   
  

 

 

   

 

 

 

Income before income taxes

     1,718        12,291   

Income tax expense

     (1,940     (4,681
  

 

 

   

 

 

 

Net income (loss) from continuing operations

     (222     7,610   
  

 

 

   

 

 

 

Discontinued operations

    

Loss from discontinued operations

     (794     (4,434

Income tax (expense) benefit

     234        1,324   
  

 

 

   

 

 

 

Net income (loss) from discontinued operations

     (560     (3,110
  

 

 

   

 

 

 

Net income (loss)

   $ (782   $ 4,500   
  

 

 

   

 

 

 

Net income (loss) per common share - basic

    

Net income (loss) from continuing operations

   $ (0.01   $ 0.39   

Net loss from discontinued operations

   $ (0.03   $ (0.16
  

 

 

   

 

 

 

Net income (loss) per common share - basic

   $ (0.04   $ 0.23   
  

 

 

   

 

 

 

Net income (loss) per common share - diluted

    

Net income (loss) from continuing operations

   $ (0.01   $ 0.39   

Net loss from discontinued operations

   $ (0.03   $ (0.16
  

 

 

   

 

 

 

Net income (loss) per common share - diluted

   $ (0.04   $ 0.23   
  

 

 

   

 

 

 

Weighted average number of common shares outstanding - basic

     18,197,363        19,431,093   

Weighted average number of common shares outstanding - diluted

     18,197,363        19,691,141   


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

ORTHOFIX INTERNATIONAL N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, U.S. Dollars, in thousands)

 

     March 31,      December 31,  
     2014      2013  

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 26,747       $ 30,486   

Restricted cash

     19,270         23,761   

Trade accounts receivable, net

     76,917         75,567   

Inventories, net

     92,753         90,577   

Deferred income taxes

     33,956         33,947   

Prepaid expenses and other current assets

     28,781         25,906   
  

 

 

    

 

 

 

Total current assets

     278,424         280,244   

Property, plant and equipment, net

     52,532         54,606   

Patents and other intangible assets, net

     8,518         9,046   

Goodwill

     53,565         53,565   

Deferred income taxes

     18,758         18,336   

Other long-term assets

     6,743         7,385   
  

 

 

    

 

 

 

Total assets

   $ 418,540       $ 423,182   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Current liabilities:

     

Trade accounts payable

     14,022         20,674   

Other current liabilities

     41,467         46,146   
  

 

 

    

 

 

 

Total current liabilities

     55,489         66,820   

Long-term debt

     20,000         20,000   

Deferred income taxes

     13,307         13,132   

Other long-term liabilities

     12,487         12,736   
  

 

 

    

 

 

 

Total liabilities

     101,283         112,688   
  

 

 

    

 

 

 

Shareholders’ equity:

     

Common shares

     1,836         1,810   

Additional paid-in capital

     223,630         216,653   

Retained earnings

     88,550         89,332   

Accumulated other comprehensive income

     3,241         2,699   
  

 

 

    

 

 

 

Total shareholders’ equity

     317,257         310,494   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 418,540       $ 423,182   
  

 

 

    

 

 

 


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

ORTHOFIX INTERNATIONAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, U.S. Dollars, in thousands)

 

     Three Months Ended March 31,  
     2014     2013  

Cash flows from operating activities:

    

Net income (loss)

   $ (782   $ 4,500   

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

       —     

Depreciation and amortization

   $ 6,004      $ 5,029   

Other non-cash adjustments

   $ 4,523      $ 4,367   

Change in operating assets and liabilities:

    

Changes in working capital

   $ (19,923   $ 1,164   
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

   $ (10,178   $ 15,060   

Cash flows from investing activities:

    

Capital expenditures

     (3,737     (6,073
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,737     (6,073

Cash flows from financing activities:

    

Net proceeds from issuance of common shares

     5,542        2,143   

Repayment of bank borrowings, net

     —          (15

Change in restricted cash

     4,502        (8,141

Excess income tax benefit on employee stock-based awards

     29        78   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     10,073        (5,935

Effect of exchange rate changes on cash

     103        (431
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (3,739     2,620   

Cash and cash equivalents at the beginning of period

     30,486        31,055   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of period

     26,747        33,675   
  

 

 

   

 

 

 


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

Non-GAAP Performance Measures

The tables in this press release present reconciliations of operating income, net income and net income per diluted share, operating income and net cash provided by operating activities calculated in accordance with generally accepted accounting principles (GAAP) to non-GAAP performance measures, referred to as “adjusted operating income from continuing operations”, “adjusted net income from continuing operations and adjusted net income from continuing operations per diluted share”, that exclude the items specified in the tables. Management believes it is important to provide investors with the same non-GAAP metrics it uses to supplement information regarding the performance and underlying trends of Orthofix’s business operations in order to facilitate comparisons to its historical operating results and internally evaluate the effectiveness of the Company’s operating strategies. A more detailed explanation of the items in the tables above that are excluded from GAAP net sales and GAAP net income and net income per diluted share, as well as why management believes the non-GAAP measures are useful to them, is included in the Regulation G Supplemental Information below.

Reconciliations of Non-GAAP Performance Measures

Adjusted Operating Income From Continuing Operations Reconciling Items

 

    Costs related to accounting review and restatement - legal, accounting, and other professional costs related to the Company’s accounting review and restatement.

 

    Succession and restructuring charges - In 2013 these costs relate to the cessation of employment of certain of the Company’s officers.

Adjusted Net Income From Continuing Operations and Adjusted Net Income from Continuing Operations Per Diluted Share Reconciling Items

Note: The reconciling items were tax affected in the current period at the prevailing rate within the respective jurisdictions.

 

    Costs related to accounting review and restatement - legal, accounting, and other professional costs related to the Company’s accounting review and restatement.

 

    Succession and restructuring charges - In 2013 these costs relate to the cessation of employment of certain of the Company’s former executive officers.

 

    Foreign exchange loss (gain) - due to translation adjustments resulting from the weakening or strengthening of the U.S. Dollar against various foreign currencies. A number of Orthofix’s foreign subsidiaries have intercompany and third party trade accounts receivables and payables that are held in currencies, most notably the U.S. Dollar, other than their local currency, and movements in the relative values of those currencies result in foreign exchange gains and losses.

 

    Gain related to demutualization of a mutual insurance company - the Company received cash related to the demutualization of a mutual insurance company, in which the Company was an eligible member to share in such proceeds.

Management use of, and economic substance behind, Non-GAAP Performance Measures

Management uses non-GAAP measures to evaluate performance period over period, to analyze the underlying trends in the Company’s business, to assess its performance relative to its competitors and to establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP measures as the basis for assessing the ability of the underlying operations to generate cash.


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

In addition, management uses these non-GAAP measures to further its understanding of the performance of the Company’s business units. The items excluded from Orthofix’s non-GAAP measures are also excluded from the profit or loss reported by the Company’s business units for the purpose of analyzing their performance.

Material Limitations Associated with the Use of Non-GAAP Measures

The non-GAAP measures used in this press release may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP performance measures. Some of the limitations associated with the use of these non-GAAP performance measures are that they exclude items that reflect an economic cost to the Company and can have a material effect on cash flows. Similarly, equity compensation expense does not directly impact cash flows, but is part of total compensation costs accounted for under GAAP.

Compensation for Limitations Associated with Use of Non-GAAP Measures

Orthofix compensates for the limitations of its non-GAAP performance measures by relying upon its GAAP results to gain a complete picture of the Company’s performance. The GAAP results provide the ability to understand the Company’s performance based on a defined set of criteria. The non-GAAP measures reflect the underlying operating results of the Company’s businesses, excluding non-cash items, which management believes is an important measure of the Company’s overall performance. The Company provides a detailed reconciliation of the non-GAAP performance measures to their most directly comparable GAAP measures, and encourages investors to review this reconciliation.

Usefulness of Non-GAAP Measures to Investors

Orthofix believes that providing non-GAAP measures that exclude certain items provides investors with greater transparency to the information used by the Company’s senior management in its financial and operational decision-making. Management believes that providing this information enables investors to better understand the performance of the Company’s ongoing operations and to understand the methodology used by management to evaluate and measure such performance. Disclosure of these non-GAAP performance measures also facilitates comparisons of Orthofix’s underlying operating performance with other companies in its industry that also supplement their GAAP results with non-GAAP performance measures.


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Orthofix International N.V.

3451 Plano Parkway

Lewisville, TX 75056 USA

Tel 214 937 2000

Orthofix.com

 

Source:

Orthofix International N.V.