Original and Further Restatement of the Consolidated Financial Statements (Tables)

3 Months Ended

Mar. 31, 2014

Schedule of Restatement to Previously Filed Consolidated Income Statements

Three Months Ended March 31, 2013
				Original Restatement Adjustments by Category
(U.S. Dollars, in thousands)	As Reported in the 2013 Form 10-Q Prior to Original Restatement			Distributor Revenue			Inventory Reserves			Royalties			Other			Total Original Restatement Adjustments			As Originally Restated in 2013 Form 10-Q/A
Net sales	$	100,254		$	2,963		$	—		$	—		$	156		$	3,119		$	103,373
Cost of sales		22,699			471			86			2,030			331			2,918			25,617

Gross profit		77,555			2,492			(86	)		(2,030	)		(175	)		201			77,756
Operating expenses
Sales and marketing		48,839			(2,073	)		—			(2,030	)		318			(3,785	)		45,054
General and administrative		18,788			—			—			—			(458	)		(458	)		18,330
Research and development		5,400			—			—			—			341			341			5,741
Amortization of intangible assets		504			—			—			—			40			40			544
Charges related to U.S. Government resolutions		—			—			—			—			—			—			—

		73,531			(2,073	)		—			(2,030	)		241			(3,862	)		69,669

Operating income		4,024			4,565			(86	)		—			(416	)		4,063			8,087
Other income and (expense)		4,204			—			—			—			—			—			4,204

Income before income taxes		8,228			4,565			(86	)		—			(416	)		4,063			12,291
Income tax expense		(3,320	)		(1,529	)		29			—			139			(1,361	)		(4,681	)

Net income from continuing operations	$	4,908		$	3,036		$	(57	)	$	—		$	(277	)	$	2,702		$	7,610

Further Restatement [Member]

Schedule of Restatement to Previously Filed Consolidated Income Statements

Three Months Ended March 31, 2014
				Further Restatement Adjustments by Category
(U.S. Dollars, in thousands)	Originally Reported in 2014 Form 10-Q			Co-Pay and Self-Pay Revenue			Bad Debt Timing		Accounts Receivable Reserve			Intercompany Profit			Inventory			Other			Total Further Restatement Adjustments			Restated
Net sales	$	101,342		$	(2,800	)	$	—	$	1,651		$	—		$	—		$	(179	)	$	(1,328	)	$	100,014
Cost of sales		22,632			—			—		—			2,966			2,564			(1,389	)		4,141			26,773

Gross profit		78,710			(2,800	)		—		1,651			(2,966	)		(2,564	)		1,210			(5,469	)		73,241
Operating expenses
Sales and marketing		43,871			(2,800	)		—		201			—			—			(101	)		(2,700	)		41,171
General and administrative		17,545			—			—		—			—			—			(269	)		(269	)		17,276
Research and development		5,939			—			—		—			—			—			(6	)		(6	)		5,933
Amortization of intangible assets		584			—			—		—			—			—			—			—			584
Costs related to the accounting review and restatement		8,306			—			—		—			—			—			—			—			8,306

		76,245			(2,800	)		—		201			—			—			(376	)		(2,975	)		73,270

Operating (loss) income		2,465			—			—		1,450			(2,966	)		(2,564	)		1,586			(2,494	)		(29	)
Other income and (expense)		(747	)		—			—		—			—			—			7			7			(740	)

Loss before income taxes		1,718			—			—		1,450			(2,966	)		(2,564	)		1,593			(2,487	)		(769	)
Income tax expense		(1,940	)		—			—		(508	)		1,039			898			(668	)		761			(1,179	)

Net loss from continuing operations	$	(222	)	$	—		$	—	$	942		$	(1,927	)	$	(1,666	)	$	925		$	(1,726	)	$	(1,948	)

Three Months Ended March 31, 2013
				Further Restatement Adjustments by Category
(U.S. Dollars, in thousands)	As Originally Restated in 2013 Form 10-Q/A			Co-Pay and Self-Pay Revenue			Bad Debt Timing			Accounts Receivable Reserve			Intercompany Profit			Inventory			Other			Total Further Restatement Adjustments			Restated
Net sales	$	103,373		$	(1,453	)	$	—		$	437		$	—		$	—		$	(78	)	$	(1,094	)	$	102,279
Cost of sales		25,617			—			—			—			(120	)		820			(476	)		224			25,841

Gross profit		77,756			(1,453	)		—			437			120			(820	)		398		$	(1,318	)		76,438
Operating expenses
Sales and marketing		45,054			(1,453	)		1,455			(8	)		—			—			796			790			45,844
General and administrative		18,330			—			—			—			—			—			(89	)		(89	)		18,241
Research and development		5,741			—			—			—			—			—			—			—			5,741
Amortization of intangible assets		544			—			—			—			—			—			—			—			544

		69,669			(1,453	)		1,455			(8	)		—			—			707			701			70,370

Operating income		8,087			—			(1,455	)		445			120			(820	)		(309	)		(2,019	)		6,068
Other income and (expense)		4,204			—			—			—			—			—			18			18			4,222

Income before income taxes		12,291			—			(1,455	)		445			120			(820	)		(291	)		(2,001	)		10,290
Income tax expense		(4,681	)		—			509			(156	)		(42	)		287			(281	)		317			(4,364	)

Net income from continuing operations	$	7,610		$	—		$	(946	)	$	289		$	78		$	(533	)	$	(572	)	$	(1,684	)	$	5,926

Effects of Further Restatement on Condensed Consolidated Balance Sheet

The effects of the Further Restatement on our condensed consolidated balance sheet as of March 31, 2014 are as follows:


	As of March 31, 2014
(Unaudited, U.S. Dollars, in thousands, except share data)	Originally Reported in 2014 Form 10-Q		Further Restatement Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	26,747	$	(1,630	)	$	25,117
Restricted cash		19,270		—			19,270
Trade accounts receivable, less allowances of $8,841 at March 31, 2014		76,917		(3,470	)		73,447
Inventories		92,753		(22,076	)		70,677
Deferred income taxes		33,956		6,051			40,007
Prepaid expenses and other current assets		28,781		2,269			31,050

Total current assets		278,424		(18,856	)		259,568
Property, plant and equipment, net		52,532		124			52,656
Patents and other intangible assets, net		8,518		—			8,518
Goodwill		53,565		—			53,565
Deferred income taxes		18,758		4,058			22,816
Other long-term assets		6,743		107			6,850

Total assets	$	418,540	$	(14,567	)	$	403,973

Liabilities and shareholders’ equity
Current liabilities:
Trade accounts payable	$	14,022	$	—		$	14,022
Other current liabilities		41,467		2,233			43,700

Total current liabilities		55,489		2,233			57,722
Long-term debt		20,000		—			20,000
Deferred income taxes		13,307		(106	)		13,201
Other long-term liabilities		12,487		—			12,487

Total liabilities		101,283		2,127			103,410
Contingencies (Note 16)
Shareholders’ equity:
Common shares $0.10 par value; 50,000,000 shares authorized; 18,365,910 issued and outstanding as of March 31, 2014		1,836		—			1,836
Additional paid-in capital		223,630		(274	)		223,356
Retained earnings		88,550		(17,161	)		71,389
Accumulated other comprehensive income		3,241		741			3,982

Total shareholders’ equity		317,257		(16,694	)		300,563

Total liabilities and shareholders’ equity	$	418,540	$	(14,567	)	$	403,973

The effects of the Further Restatement on our condensed consolidated balance sheet as of December 31, 2013 are as follows:


	As of December 31, 2013
(Unaudited, U.S. Dollars, in thousands, except share data)	Originally Reported in 2014 Form 10-Q		Further Restatement Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	30,486	$	(1,562	)	$	28,924
Restricted cash		23,761		—			23,761
Trade accounts receivable, less allowances of $9,111 at December 31, 2013		75,567		(4,756	)		70,811
Inventories		90,577		(17,899	)		72,678
Deferred income taxes		33,947		6,052			39,999
Prepaid expenses and other current assets		25,906		3,027			28,933

Total current assets		280,244		(15,138	)		265,106
Property, plant and equipment, net		54,606		(234	)		54,372
Patents and other intangible assets, net		9,046		—			9,046
Goodwill		53,565		—			53,565
Deferred income taxes		18,336		4,058			22,394
Other long-term assets		7,385		107			7,492

Total assets	$	423,182	$	(11,207	)	$	411,975

Liabilities and shareholders’ equity
Current liabilities:
Trade accounts payable	$	20,674	$	—		$	20,674
Other current liabilities		46,146		3,530			49,676

Total current liabilities		66,820		3,530			70,350
Long-term debt		20,000		—			20,000
Deferred income taxes		13,132		(106	)		13,026
Other long-term liabilities		12,736		—			12,736

Total liabilities		112,688		3,424			116,112
Contingencies (Note 16)
Shareholders’ equity:
Common shares $0.10 par value; 50,000,000 shares authorized; 18,102,335 issued and outstanding as of December 31, 2013		1,810		—			1,810
Additional paid-in capital		216,653		—			216,653
Retained earnings		89,332		(15,435	)		73,897
Accumulated other comprehensive income		2,699		804			3,503

Total shareholders’ equity		310,494		(14,631	)		295,863

Total liabilities and shareholders’ equity	$	423,182	$	(11,207	)	$	411,975

Effects of Further Restatement of Consolidated Statement of Operations and Comprehensive Income (Loss)

The effects of the Further Restatement on our condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2014 are as follows:


	Three Months Ended March 31, 2014
(Unaudited, U.S. Dollars, in thousands, except share and per share data)	Originally Reported in 2014 Form 10-Q			Further Restatement Adjustments			Restated
Product sales	$	89,684		$	(1,384	)	$	88,300
Marketing service fees		11,658			56			11,714

Net sales		101,342			(1,328	)		100,014
Cost of sales		22,632			4,141			26,773

Gross profit		78,710			(5,469	)		73,241
Operating expenses
Sales and marketing		43,871			(2,700	)		41,171
General and administrative		17,545			(269	)		17,276
Research and development		5,939			(6	)		5,933
Amortization of intangible assets		584			—			584
Costs related to the accounting review and restatement		8,306			—			8,306

		76,245			(2,975	)		73,270

Operating income (loss)		2,465			(2,494	)		(29	)
Other income and expense
Interest expense, net		(486	)		18			(468	)
Other (loss) income		(261	)		(11	)		(272	)

		(747	)		7			(740	)

Income (loss) before income taxes		1,718			(2,487	)		(769	)
Income tax expense		(1,940	)		761			(1,179	)

Net loss from continuing operations		(222	)		(1,726	)		(1,948	)

Discontinued operations (Note 15)
Loss from discontinued operations		(794	)		—			(794	)
Income tax benefit		234			—			234

Net loss from discontinued operations		(560	)		—			(560	)

Net loss	$	(782	)	$	(1,726	)	$	(2,508	)

Net loss per common share—basic:
Net loss from continuing operations	$	(0.01	)	$	(0.10	)	$	(0.11	)
Net loss from discontinued operations		(0.03	)		—			(0.03	)

Net loss per common share—basic	$	(0.04	)	$	(0.10	)	$	(0.14	)

Net loss per common share—diluted:
Net loss from continuing operations	$	(0.01	)	$	(0.10	)	$	(0.11	)
Net loss from discontinued operations		(0.03	)		—			(0.03	)

Net loss per common share—diluted	$	(0.04	)	$	(0.10	)	$	(0.14	)

Weighted average number of common shares:
Basic		18,197,363			—			18,197,363
Diluted		18,197,363			—			18,197,363
Other comprehensive income:
Unrealized gain (loss) on cross-currency swap, net of tax		103			—			103
Foreign currency translation adjustment		439			(63	)		376

Comprehensive loss	$	(240	)	$	(1,789	)	$	(2,029	)

The effects of the Original Restatement and the Further Restatement on our condensed consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2013 are as follows:


	Three Months Ended March 31, 2013
(U.S. Dollars, in thousands, except share and per share data)	As Reported in the 2013 Form 10-Q Prior to Original Restatement			Original Restatement Adjustments			As Originally Restated in the 2013 Form 10- Q/A			Further Restatement Adjustments			Restated
Product sales	$	88,358		$	2,978		$	91,336			(1,095	)	$	90,241
Marketing service fees		11,896			141			12,037			1			12,038

Net sales		100,254			3,119			103,373			(1,094	)		102,279
Cost of sales		22,699			2,918			25,617			224			25,841

Gross profit		77,555			201			77,756			(1,318	)		76,438
Operating expenses
Sales and marketing		48,839			(3,785	)		45,054			790			45,844
General and administrative		18,788			(458	)		18,330			(89	)		18,241
Research and development		5,400			341			5,741			—			5,741
Amortization of intangible assets		504			40			544			—			544

		73,531			(3,862	)		69,669			701			70,370

Operating income		4,024			4,063			8,087			(2,019	)		6,068
Other income and (expense)
Interest expense, net		(560	)		—			(560	)		18			(542	)
Other income		4,764			—			4,764			—			4,764

		4,204			—			4,204			18			4,222

Income before income taxes		8,228			4,063			12,291			(2,001	)		10,290
Income tax expense		(3,320	)		(1,361	)		(4,681	)		317			(4,364	)

Net income from continuing operations		4,908			2,702			7,610			(1,684	)		5,926

Discontinued operations (Note 15)
Loss from discontinued operations		(4,432	)		(2	)		(4,434	)		474			(3,960	)
Income tax benefit (expense)		1,640			(316	)		1,324			157			1,481

Net loss from discontinued operations		(2,792	)		(318	)		(3,110	)		631			(2,479	)

Net income		2,116		$	2,384		$	4,500			(1,053	)	$	3,447

Net income (loss) per common share—basic:
Net income from continuing operations	$	0.25		$	0.14		$	0.39			(0.09	)	$	0.30
Net loss from discontinued operations		(0.14	)		(0.02	)		(0.16	)		0.04			(0.12	)

Net income per common share—basic	$	0.11		$	0.12		$	0.23			(0.05	)	$	0.18

Net income (loss) per common share—diluted:
Net income from continuing operations	$	0.25		$	0.14		$	0.39			(0.09	)	$	0.30
Net loss from discontinued operations		(0.14	)		(0.02	)		(0.16	)		0.04			(0.12	)

Net income per common share—diluted:	$	0.11		$	0.12		$	0.23			(0.05	)	$	0.18

Weighted average number of common shares:
Basic		19,431,093			—			19,431,093			—			19,431,093
Diluted		19,691,141			—			19,691,141			—			19,691,141
Other comprehensive (loss) income, before tax:
Unrealized gain on derivative instrument		(318	)		—			(318	)		—			(318	)
Translation adjustment		(2,814	)		106			(2,708	)		29			(2,679	)

Comprehensive (loss) income	$	(1,016	)	$	2,490		$	1,474		$	(1,024	)	$	450

Effects of Further Restatement of Condensed Consolidated Statement of Cash Flow

The effects of the Further Restatement on our condensed consolidated statement of cash flows for the three months ended March 31, 2014 are as follows:


	Three Months Ended March 31, 2014
(Unaudited, U.S. Dollars, in thousands)	Originally Reported in 2014 Form 10-Q			Further Restatement Adjustments			Restated
Cash flows from operating activities:
Net loss	$	(782	)	$	(1,726	)	$	(2,508	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,004			(258	)		5,746
Amortization of debt costs		180			—			180
Amortization of exclusivity agreements		346			—			346
Provision for doubtful accounts		2,579			(2,471	)		108
Deferred income taxes		(246	)		—			(246	)
Share-based compensation		1,461			(274	)		1,187
Excess income tax benefit on employee stock-based awards		(29	)		—			(29	)
Other		166			(152	)		14
Change in operating assets and liabilities:
Trade accounts receivable		(3,780	)		1,173			(2,607	)
Inventories		(1,690	)		4,177			2,487
Prepaid expenses and other current assets		(2,806	)		(658	)		(3,464	)
Trade accounts payable		(6,670	)		—			(6,670	)
Other current liabilities		(4,761	)		155			(4,606	)
Long-term assets		130			—			130
Long-term liabilities		(280	)		—			(280	)

Net cash used in operating activities		(10,178	)		(34	)		(10,212	)
Cash flows from investing activities:
Capital expenditures for property, plant and equipment		(3,691	)		—			(3,691	)
Capital expenditures for intangible assets		(46	)		—			(46	)
Sale of other investments		—			32			32

Net cash used in investing activities		(3,737	)		32			(3,705	)
Cash flows from financing activities:
Net proceeds from issuance of common shares		5,542			—			5,542
(Repayment of) proceeds from bank borrowings, net		—			—			—
Changes in restricted cash		4,502			—			4,502
Excess income tax benefit on employee stock-based awards		29			—			29

Net cash provided by financing activities		10,073			—			10,073
Effect of exchange rate changes on cash		103			(66	)		37

Net decrease in cash and cash equivalents		(3,739	)		(68	)		(3,807	)
Cash and cash equivalents at the beginning of the period		30,486			(1,562	)		28,924

Cash and cash equivalents at the end of the period	$	26,747		$	(1,630	)	$	25,117

The effects of the Original Restatement and the Further Restatement on our condensed consolidated statement of cash flows for the three months ended March 31, 2013 are as follows:


	Three Months Ended March 31, 2013
(Unaudited, U.S. Dollars, in thousands)	As Reported in the 2013 Form 10-Q Prior to Original Restatement			Original Restatement Adjustments			As Originally Restated in the 2013 Form 10-Q/A			Further Restatement Adjustments			Restated
Cash flows from operating activities:
Net income	$	2,116		$	2,384		$	4,500		$	(1,053	)	$	3,447
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,995			34			5,029			38			5,067
Amortization of debt costs		180			—			180			—			180
Amortization of exclusivity agreements		311			—			311			—			311
Provision for doubtful accounts		3,227			(1,853	)		1,374			(6	)		1,368
Deferred income taxes		(744	)		738			(6	)		—			(6	)
Share-based compensation		1,943			—			1,943			—			1,943
Excess income tax benefit on employee stock-based awards		(78	)		—			(78	)		—			(78	)
Other		(345	)		736			391			30			421
Change in operating assets and liabilities:
Trade accounts receivable		13,779			(5,190	)		8,589			1,076			9,665
Inventories		(4,230	)		2,130			(2,100	)		(6	)		(2,106	)
Prepaid expenses and other current assets		(179	)		2,874			2,695			2,148			4,843
Trade accounts payable		(7,242	)		(5	)		(7,247	)		—			(7,247	)
Other current liabilities		4,478			(2,408	)		2,070			(2,232	)		(162	)
Long-term assets		(2,014	)		461			(1,553	)		—			(1,553	)
Long-term liabilities		(743	)		(296	)		(1,039	)		—			(1,039	)

Net cash provided by operating activities		15,454			(395	)		15,059			(5	)		15,054
Cash flows from investing activities:
Capital expenditures for property, plant and equipment		(6,029	)		—			(6,029	)		—			(6,029	)
Capital expenditures for intangible assets		(439	)		395			(44	)		—			(44	)
Purchase of other investments		—			—			—			(506	)		(506	)

Net cash used in investing activities		(6,468	)		395			(6,073	)		(506	)		(6,579	)
Cash flows from financing activities:
Net proceeds from issuance of common shares		2,143			—			2,143			—			2,143
(Repayment of) proceeds from bank borrowings, net		(15	)		—			(15	)		—			(15	)
Changes in restricted cash		(8,141	)		—			(8,141	)		—			(8,141	)
Excess income tax benefit on employee stock-based awards		78			—			78			—			78

Net cash used in financing activities		(5,935	)		—			(5,935	)		—			(5,935	)
Effect of exchange rate changes on cash		(431	)		—			(431	)		(2	)		(433	)

Net increase in cash and cash equivalents		2,620			—			2,620			(513	)		2,107
Cash and cash equivalents at the beginning of the period		31,055			—			31,055			(288	)		30,767

Cash and cash equivalents at the end of the period	$	33,675		$	—		$	33,675			(801	)	$	32,874