Business segment information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Business segment information

12. Business segment information

On July 1, 2013, we began certain organizational and executive leadership changes to align with how our Chief Executive Officer, who is also our Chief Operating Decision Maker (the “CODM”) reviews performance and makes decisions in managing the Company. We manage our business by our four strategic business units (“SBUs”), which are comprised of BioStim, Biologics, Extremity Fixation, and Spine Fixation supported by Corporate activities. These SBUs represent the segments for which our CODM reviews financial information and makes resource allocation decisions among business units. The primary metric used by the CODM in managing the Company is net margin, which is defined as gross profit less sales and marketing expense. The Company neither discretely allocates assets, other than goodwill, to its operating segments nor evaluates the operating segments using discrete asset information. Accordingly, our segment information has been prepared based on our four SBUs reporting segments. These four segments are discussed below.

BioStim

The BioStim SBU manufactures, distributes, and provides support services of market leading devices that enhance bone fusion. These Class III medical devices are indicated as an adjunctive, noninvasive treatment to improve fusion success rates in cervical and lumbar spine as well as a therapeutic treatment for non-spine fractures that have not healed (non-unions). These devices utilize Orthofix’s patented pulsed electromagnetic field (“PEMF”) technology, which is supported by strong basic mechanism of action data in the scientific literature and as well as strong level one randomized controlled clinical trials in the medical literature.  Current research and clinical studies are also underway to identify potential new clinical indications.  This SBU uses both distributors and independent sales representatives to sell its devices to hospitals, doctors and other healthcare providers, primarily in the U.S.

Biologics

The Biologics SBU provides a portfolio of regenerative products and tissue forms that allow physicians to successfully treat a variety of spinal and orthopedic conditions. This SBU specializes in the marketing of the Company’s regeneration tissue forms. Biologics markets its tissues through a network of distributors, independent sales representatives and affiliates to supply to hospitals, doctors, and other healthcare providers, primarily in the U.S. Our partnership with the Musculoskeletal Transplant Foundation (“MTF”) allows us to exclusively market our Trinity Evolution^® and Trinity ELITE^® tissue forms for musculoskeletal defects to enhance bony fusion.

Extremity Fixation

The Extremity Fixation SBU offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions unrelated to the spine. This SBU specializes in the design, development, and marketing of the Company’s orthopedic products used in fracture repair, deformity correction and bone reconstruction procedures. Extremity Fixation distributes its products through a network of distributors, independent sales representatives and affiliates. This SBU uses both independent distributors and direct sales representatives to sell orthopedic products to hospitals, doctors, and other health providers, globally.

Spine Fixation

The Spine Fixation SBU specializes in the design, development and marketing of a broad portfolio of implant products used in surgical procedures of the spine. Spine Fixation distributes its products through a network of distributors and affiliates. This SBU uses distributors and independent sales representatives to sell spine products to hospitals, doctors and other healthcare providers, globally.

Corporate

Corporate activities are comprised of the operating expenses, including share-based compensation of Orthofix International N.V. and its holding company subsidiaries, along with activities not necessarily identifiable within the four SBUs.

Net Sales by SBU:

The table below presents net sales for continuing operations by SBU reporting segment. Net sales include product sales and marketing service fees.

	Net Sales by SBU Year ended December 31,
(U.S. Dollars in thousands)	2014					2013					2012
	Net Sales		Percent of Total Net Sales			Net Sales		Percent of Total Net Sales			Net Sales		Percent of Total Net Sales
BioStim	$	154,676		38	%	$	145,085		36	%	$	174,562		40	%
Biologics		55,881		14	%		53,746		14	%		53,731		12	%
Extremity Fixation		109,678		27	%		103,359		26	%		112,011		25	%
Spine Fixation		82,042		21	%		95,421		24	%		99,885		23	%
Total Net Sales	$	402,277		100	%	$	397,611		100	%	$	440,189		100	%

The table below presents net margin, defined as gross profit less sales and marketing expenses from continuing operations by SBU reporting segment:

Net Margin by SBU	Year Ended December 31,
(U.S. Dollars in thousands)	2014			2013			2012
Net Margin
BioStim	$	66,096		$	63,847		$	88,788
Biologics		26,629			24,794			23,589
Extremity Fixation		31,586			23,704			34,554
Spine Fixation		14,243			4,329			15,256
Corporate		(1,736	)		(1,443	)		(1,495	)
Total net margin	$	136,818		$	115,231		$	160,692
General & administrative		76,790			64,830			53,650
Research and development		24,994			26,768			28,577
Amortization of intangible assets		2,284			2,687			2,298
Costs related to the accounting review and restatement		15,614			12,945			—
Impairment of goodwill		—			19,193			—
Charges related to U.S. Government resolutions		—			—			1,295
Operating income (loss)	$	17,136		$	(11,192	)	$	74,872

The following table presents depreciation and amortization for continuing operations by SBU reporting segment:

	Depreciation and amortization by SBU Year Ended December 31,
(U.S. Dollars in thousands)	2014			2013		2012
BioStim	$	1,623		$	1,979	$	1,659
Biologics		1,161			648		567
Extremity Fixation		8,442			7,265		5,201
Spine Fixation		11,711			12,834		10,800
Corporate		(59	)		96		70
Total	$	22,878		$	22,822	$	18,297

Geographical information

The following data includes net sales by geographic destination:

(U.S. Dollars in thousands)	2014		2013		2012
U.S.	$	294,682	$	293,032	$	327,228
Italy		19,573		16,755		18,742
U.K.		11,402		10,002		8,431
Brazil		19,633		26,786		31,166
Others		56,987		51,036		54,622
Total net sales	$	402,277	$	397,611	$	440,189

The following data includes property, plant and equipment by geographic area:

(U.S. Dollars in thousands)	2014		2013
U.S.	$	37,029	$	39,287
Italy		6,865		8,150
U.K.		1,368		1,871
Brazil		1,308		3,210
Others		1,979		1,854
Total	$	48,549	$	54,372