Business segment information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Business segment information

14. Business segment information

We manage our business by our four SBUs: BioStim, Extremity Fixation, Spine Fixation, and Biologics. These SBUs represent the operating segments for which our Chief Executive Officer, who is also Chief Operating Decision Maker (the “CODM”), reviews financial information and makes resource allocation decisions among business units. The primary metric used by the CODM in managing the Company is non-GAAP net margin, an internal metric that the Company defines 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 reporting segment information has been prepared based on our four SBUs.

BioStim

The BioStim SBU manufactures, distributes, and provides support services of market leading bone growth stimulator 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). This SBU uses distributors and sales representatives to sell its devices to hospitals, healthcare providers, and patients, primarily in the U.S.

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 and sales representatives to sell orthopedic products to hospitals, and healthcare providers, globally.

Spine Fixation

The Spine Fixation SBU designs, develops and markets a broad portfolio of implant products used in surgical procedures of the spine. Spine Fixation distributes its products through a network of distributors and sales representatives to sell spine products to hospitals and healthcare providers, globally.

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 exclusive regeneration tissue forms and distributes its tissues to hospitals and healthcare providers, primarily in the U.S., through a network of employed and independent sales representatives. Our partnership with MTF allows us to exclusively market our Trinity Evolution and Trinity ELITE tissue forms for musculoskeletal defects to enhance bony fusion.

Corporate

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

The table below presents net sales by reporting segment:

	Year Ended December 31,
	2017					2016					2015
(U.S. Dollars, in thousands)	Net Sales		Percent of Total Net Sales			Net Sales		Percent of Total Net Sales			Net Sales		Percent of Total Net Sales
BioStim	$	185,900		42.9	%	$	176,561		43.1	%	$	164,955		41.6	%
Extremity Fixation		103,242		23.8	%		102,683		25.1	%		96,034		24.2	%
Spine Fixation		81,957		18.9	%		72,632		17.7	%		75,668		19.1	%
Biologics		62,724		14.4	%		57,912		14.1	%		59,832		15.1	%
Net sales	$	433,823		100.0	%	$	409,788		100.0	%	$	396,489		100.0	%

The following table presents Non-GAAP net margin, and internal metric that the Company defines as gross profit less sales and marketing expense, by reporting segment:

	Year Ended December 31,
(U.S. Dollars, in thousands)	2017			2016			2015
BioStim	$	77,369		$	75,469		$	67,878
Extremity Fixation		31,071			30,526			29,493
Spine Fixation		8,730			8,650			8,547
Biologics		25,692			26,891			27,226
Corporate		(446	)		(888	)		(1,260	)
Non-GAAP net margin	$	142,416		$	140,648		$	131,884
General and administrative		74,388			74,404			87,157
Research and development		29,700			28,803			26,389
SEC / FCPA matters and related costs		(2,483	)		2,005			9,083
Charges related to U.S. Government resolutions		—			14,369			—
Operating income	$	40,811		$	21,067		$	9,255
Interest income (expense), net		(416	)		763			(489	)
Other expense, net		(4,004	)		(2,806	)		(259	)
Income before income taxes	$	36,391		$	19,024		$	8,507

The following table presents depreciation and amortization by reporting segment:

	Year Ended December 31,
(U.S. Dollars, in thousands)	2017		2016		2015
BioStim	$	2,133	$	2,754	$	2,933
Extremity Fixation		6,040		5,742		6,636
Spine Fixation		6,949		8,118		10,050
Biologics		752		1,011		1,157
Corporate		4,250		3,216		147
Total	$	20,124	$	20,841	$	20,923

Geographical information

The following data includes net sales by geographic destination:

(U.S. Dollars, in thousands)	2017		2016		2015
U.S.	$	345,145	$	316,873	$	305,505
Italy		17,059		16,664		15,655
United Kingdom		8,725		10,362		11,376
Brazil		10,356		11,334		13,512
Others		52,538		54,555		50,441
Net sales	$	433,823	$	409,788	$	396,489

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

(U.S. Dollars, in thousands)	2017		2016
U.S.	$	34,008	$	38,398
Italy		7,658		7,013
United Kingdom		382		617
Brazil		475		769
Others		2,616		2,119
Total	$	45,139	$	48,916