10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 0-19961

ORTHOFIX MEDICAL INC.

(Exact name of registrant as specified in its charter)

Delaware	98-1340767
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3451 Plano Parkway, Lewisville, Texas	75056
(Address of principal executive offices)	(Zip Code)

(214) 937-2000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☒	Accelerated filer	☐
Non-Accelerated filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of August 2, 2019, 19,031,280 shares of common stock were issued and outstanding.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.10 par value per share	OFIX	Nasdaq Global Select Market

 Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2019, and December 31, 2018	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended  June 30, 2019, and 2018	5
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	7
	Notes to the Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36

2

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or other comparable terminology. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict, including the risks described Part I, Item 1A under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) and other Securities and Exchange Commission (“SEC”) filings. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. We undertake no obligation to further update any such statement, or the risk factors described in the 2018 Form 10-K and other SEC filings, to reflect new information, the occurrence of future events or circumstances or otherwise.

Trademarks

Solely for convenience, our trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ORTHOFIX MEDICAL INC.

Condensed Consolidated Balance Sheets

(U.S. Dollars, in thousands, except share data)	June 30, 2019		December 31, 2018
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	52,143	$	69,623
Restricted cash		—		2,566
Trade accounts receivable, net of allowances of $4,205 and $7,463, respectively		80,591		77,747
Inventories		79,141		76,847
Prepaid expenses and other current assets		20,954		17,856
Total current assets		232,829		244,639
Property, plant and equipment, net		64,402		42,835
Intangible assets, net		55,628		51,897
Goodwill		71,177		72,401
Deferred income taxes		37,566		33,228
Other long-term assets		27,204		21,641
Total assets	$	488,806	$	466,641
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	19,523	$	17,989
Current portion of finance lease liability		301		—
Other current liabilities		48,161		67,919
Total current liabilities		67,985		85,908
Long-term portion of finance lease liability		20,847		—
Other long-term liabilities		52,180		45,336
Total liabilities		141,012		131,244
Contingencies (Note 9)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized;    18,831,581 and 18,579,688 issued and outstanding as of June 30,    2019 and December 31, 2018, respectively		1,883		1,858
Additional paid-in capital		257,888		243,165
Retained earnings		86,561		87,078
Accumulated other comprehensive income		1,462		3,296
Total shareholders’ equity		347,794		335,397
Total liabilities and shareholders’ equity	$	488,806	$	466,641

The accompanying notes form an integral part of these condensed consolidated financial statements

4

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

	Three Months Ended June 30,						Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands, except share and per share data)	2019			2018			2019			2018
Net sales	$	115,850		$	111,547		$	224,962		$	220,256
Cost of sales		25,812			22,835			49,520			46,982
Gross profit		90,038			88,712			175,442			173,274
Sales and marketing		56,864			51,529			110,558			101,797
General and administrative		21,935			21,958			42,407			41,382
Research and development		8,980			7,891			18,209			14,828
Acquisition-related amortization and remeasurement (Note 13)		1,808			1,419			8,265			1,482
Operating income (loss)		451			5,915			(3,997	)		13,785
Interest income (expense), net		457			(251	)		200			(434	)
Other expense, net		(236	)		(3,643	)		(640	)		(731	)
Income (loss) before income taxes		672			2,021			(4,437	)		12,620
Income tax benefit (expense)		(1,219	)		(1,096	)		4,787			(6,469	)
Net income (loss)	$	(547	)	$	925		$	350		$	6,151
Net income (loss) per common share:
Basic	$	(0.03	)	$	0.05		$	0.02		$	0.33
Diluted		(0.03	)		0.05			0.02			0.32
Weighted average number of common shares:
Basic		18,834,886			18,413,756			18,790,612			18,409,331
Diluted		18,834,886			18,835,560			19,179,057			18,811,356
Other comprehensive income (loss), before tax
Unrealized gain (loss) on debt security		—			1,960			(2,593	)		1,960
Reclassification adjustment for amortization of historical unrealized gains on debt security		(689	)		—			(689	)		—
Currency translation adjustment		147			(1,175	)		(302	)		(478	)
Other comprehensive income (loss) before tax		(542	)		785			(3,584	)		1,482
Income tax related to other comprehensive income (loss)		171			(432	)		812			(432	)
Other comprehensive income (loss), net of tax		(371	)		353			(2,772	)		1,050
Comprehensive income (loss)	$	(918	)	$	1,278		$	(2,422	)	$	7,201

The accompanying notes form an integral part of these condensed consolidated financial statements

5

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited, U.S. Dollars, in thousands, except share data)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Total Shareholders’ Equity
At December 31, 2018		18,579,688	$	1,858	$	243,165		$	87,078		$	3,296		$	335,397
Cumulative effect adjustment from adoption of ASU 2016-02		—		—		—			71			—			71
Cumulative effect adjustment from adoption of ASU 2018-02		—		—		—			(938	)		938			—
Net income		—		—		—			897			—			897
Other comprehensive loss, net of tax		—		—		—			—			(2,401	)		(2,401	)
Share-based compensation		—		—		5,685			—			—			5,685
Common shares issued, net		211,081		21		4,012			—			—			4,033
At March 31, 2019		18,790,769	$	1,879	$	252,862		$	87,108		$	1,833		$	343,682
Net loss		—		—		—			(547	)		—			(547	)
Other comprehensive loss, net of tax		—		—		—			—			(371	)		(371	)
Share-based compensation		—		—		5,849			—			—			5,849
Common shares issued, net		40,812		4		(823	)		—			—			(819	)
At June 30, 2019		18,831,581	$	1,883	$	257,888		$	86,561		$	1,462		$	347,794

(Unaudited, U.S. Dollars, in thousands, except share data)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total Shareholders’ Equity
At December 31, 2017		18,278,833	$	1,828	$	220,591	$	70,402		$	3,787	$	296,608
Cumulative effect adjustment from adoption of ASU 2014-09		—		—		—		4,761			—		4,761
Cumulative effect adjustment from adoption of ASU 2016-16		—		—		—		(1,896	)		—		(1,896	)
Net income		—		—		—		5,226			—		5,226
Other comprehensive income, net of tax		—		—		—		—			697		697
Share-based compensation		—		—		3,916		—			—		3,916
Common shares issued, net		126,511		13		3,849		—			—		3,862
At March 31, 2018		18,405,344	$	1,841	$	228,356	$	78,493		$	4,484	$	313,174
Net income		—		—		—		925			—		925
Other comprehensive income, net of tax		—		—		—		—			353		353
Share-based compensation		—		—		5,215		—			—		5,215
Common shares issued, net		80,444		8		171		—			—		179
At June 30, 2018		18,485,788	$	1,849	$	233,742	$	79,418		$	4,837	$	319,846

The accompanying notes form an integral part of these condensed consolidated financial statements

6

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Cash Flows

	Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands)	2019			2018
Cash flows from operating activities
Net income	$	350		$	6,151
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization		11,905			8,923
Amortization of operating lease assets, debt costs and other assets		1,750			592
Provision for doubtful accounts		638			(360	)
Deferred income taxes		(2,316	)		724
Share-based compensation		11,534			9,131
Interest and gain on valuation of investment securities		(1,023	)		(1,399	)
Change in fair value of contingent consideration		5,870			1,109
Other		477			847
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable		(3,535	)		(363	)
Inventories		(2,389	)		5,251
Prepaid expenses and other current assets		(3,277	)		71
Accounts payable		1,626			(3,847	)
Other current liabilities		(8,138	)		(14,612	)
Payment of contingent consideration		(1,340	)		—
Other long-term assets and liabilities		(3,788	)		814
Net cash from operating activities		8,344			13,032
Cash flows from investing activities
Acquisition of business, net of cash acquired		—			(43,749	)
Capital expenditures for property, plant and equipment		(9,595	)		(5,782	)
Capital expenditures for intangible assets		(743	)		(870	)
Asset acquisitions and other investments		(6,400	)		(1,148	)
Net cash from investing activities		(16,738	)		(51,549	)
Cash flows from financing activities
Proceeds from issuance of common shares		6,523			5,416
Payments related to withholdings for share-based compensation		(3,309	)		(1,375	)
Payment of contingent consideration		(13,660	)		—
Payments related to finance lease obligation		(188	)		—
Other financing activities		(947	)		(356	)
Net cash from financing activities		(11,581	)		3,685
Effect of exchange rate changes on cash		(71	)		(639	)
Net change in cash, cash equivalents, and restricted cash		(20,046	)		(35,471	)
Cash, cash equivalents, and restricted cash at the beginning of period		72,189			81,157
Cash, cash equivalents, and restricted cash at the end of period	$	52,143		$	45,686
Components of cash, cash equivalents and restricted cash at the end of period
Cash and cash equivalents	$	52,143		$	45,686
Restricted cash		—			—
Cash, cash equivalents, and restricted cash at the end of period	$	52,143		$	45,686
Supplemental Disclosure of Cash Flow Information:
Noncash investing activities:
Purchase of intangible assets	$	—		$	1,181
Contingent consideration recognized at acquisition date		—			25,491

The accompanying notes form an integral part of these condensed consolidated financial statements

7

ORTHOFIX MEDICAL INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Business and basis of presentation

Orthofix Medical Inc., together with its subsidiaries (the “Company” or “Orthofix”) is a global medical device company focused on musculoskeletal products and therapies. Headquartered in Lewisville, Texas, the Company has two reporting segments: Global Spine and Global Extremities.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, 2018. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates including those related to revenue recognition; contractual allowances; allowance for doubtful accounts; inventories; valuation of intangible assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.

Prior period reclassifications

Certain amortization expense related to intangible assets previously reported in general and administrative expenses have been reclassified to acquisition-related amortization and remeasurement based on use of the underlying intangible asset. This reclassification resulted in decreases to general and administrative expenses of $0.3 million and $0.4 million for the three and six months ended June 30, 2018, respectively, and increases in acquisition related amortization and remeasurement expense of $0.3 million and $0.4 million for the three and six months ended June 30, 2018, respectively.

Additionally, as disclosed in the Company’s Form 10-K for the year ended December 31, 2018, the Company reclassified $1.1 million of previously reported expense during the second quarter of 2018 related to changes in fair value of contingent consideration from other expense, net, to acquisition-related amortization and remeasurement to conform to current period presentation.

Change in Reporting Segments

The Company has changed its reportable business segments beginning with the first quarter of 2019, to align with changes in how the Company manages its business, reviews operating performance and allocates resources.  The Company now reports results under two reportable segments: Global Spine and Global Extremities, and measures operating performance of these two reportable segments based on EBITDA. For additional discussion regarding segments, see Note 12.

2. Recently adopted accounting standards and recently issued accounting pronouncements

Adoption of ASU 2016-02, Leases (Topic 842)

In February 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which changes how lessees account for leases. For most leases, a liability will be recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. For leases classified as operating leases, the Company will recognize lease costs on a straight-line basis based on the combined amortization of the lease obligation and the right-of-use asset. Other leases will be accounted for as finance leases similar to capital leases under the previous accounting standard.  Effective January 1, 2019, the Company adopted ASU 2016-02 using a modified retrospective approach. Upon adoption, the Company elected a package of practical expedients permitted within the new standard. The practical expedients adopted allow the Company to carry forward its historical lease classification and to not separate and allocate the consideration paid between lease and non-lease components included within a contract. The Company also adopted an optional transition method that waives the requirement to apply the ASU to the comparative periods presented within the financial statements in the year of adoption. Therefore, results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and

8

continue to be reported in accordance with the Company’s historic accounting policies under Topic 840. See Note 5 for additional discussion of the Company’s adoption of Topic 842 and its lease accounting policies.

Adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, which allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act"). The Company adopted this guidance effective January 1, 2019, which resulted in an increase to accumulated other comprehensive income and a decrease in retained earnings of $0.9 million.

Other recently adopted accounting guidance

In August 2018, the Securities and Exchange Commission (the “SEC” or the “Commission”) issued SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification, which amends certain of the Commission’s disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. GAAP, or changes in the information environment. However, in certain instances, the amendments expanded disclosure requirements, including those related to interim disclosures about changes in shareholders’ equity. As amended in the final rule, registrants must now analyze changes in shareholders’ equity, in the form of a reconciliation for the current year-to-date interim periods, with subtotals for each interim period. The Company adopted Release No. 33-10532 during the first quarter of 2019, which resulted in changes in shareholders’ equity presented within the Condensed Consolidated Statements of Changes in Shareholders’ Equity.

Recently issued accounting pronouncements

Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Financial Instruments - Credit Losses (ASU 2016-13), and subsequent amendments	Requires that credit losses for certain types of financial instruments be estimated based on expected losses and also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. Applied using a modified retrospective approach, with early adoption permitted.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.
Goodwill (ASU 2017-04)	Eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. Applied on a prospective basis, with early adoption permitted.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements. However, the Company does not expect this ASU to have a significant impact on its financial statements or disclosures.
Fair value measurement (ASU 2018-13)	Eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and adds new disclosure requirements for Level 3 measurements. Certain of the provisions are to be applied retrospectively with other provisions  applied prospectively.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

9

Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Implementation costs in a cloud computing arrangement that is a service contract (ASU 2018-15)	Aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. Applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

3. Acquisitions

Acquisition of Spinal Kinetics, Inc.

On April 30, 2018, the Company completed the acquisition of Spinal Kinetics Inc. (“Spinal Kinetics”), a privately held developer and manufacturer of artificial cervical and lumbar discs for $45.0 million in net cash, subject to certain adjustments, plus potential milestone payments of up to $60.0 million in cash. The acquisition date fair value of the consideration transferred was $76.6 million. The results of operations for Spinal Kinetics have been included in the Company’s financial results since the acquisition date, April 30, 2018. For additional discussion regarding the valuation of the contingent consideration, see Note 7.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date. During the first quarter of 2019, the Company finalized its valuation of assets acquired and liabilities assumed, which resulted in an adjustment between deferred income taxes and goodwill.

(U.S. Dollars, in thousands)	Preliminary Acquisition Date Fair Value as Previously Reported		Adjustments			Final Acquisition Date Fair Value		Assigned Useful Life
Assets acquired
Cash and cash equivalents	$	6,785	$	—		$	6,785
Restricted cash		30		—			30
Accounts receivable		1,705		—			1,705
Inventories		8,175		—			8,175
Prepaid expenses and other current assets		315		—			315
Property, plant and equipment		2,285		—			2,285
Other long-term assets		320		—			320
Developed technology		12,400		—			12,400	10 years
In-process research and development ("IPR&D")		26,800		—			26,800	10 years
Tradename		100		—			100	2 years
Deferred income taxes		2,374		1,220			3,594
Total identifiable assets acquired	$	61,289	$	1,220		$	62,509
Liabilities assumed
Accounts payable	$	351	$	—		$	351
Other current liabilities		2,873		(4	)		2,869
Other long-term liabilities		301		—			301
Total liabilities assumed	$	3,525	$	(4	)	$	3,521
Goodwill		18,836		(1,224	)		17,612
Total fair value of consideration transferred	$	76,600	$	—		$	76,600

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On February 6, 2019, the Company obtained U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc for patients suffering from cervical disease degeneration and started amortizing IPR&D. The $17.6 million of goodwill recognized was assigned to the Global Spine reporting segment.

The Company did not recognize any acquisition related costs during the three and six months ended June 30, 2019 and recorded $1.5 million and $3.0 million of acquisition related costs during the three and six months ended June 30, 2018. These costs are included in the condensed consolidated statements of operations and comprehensive income (loss) within general and administrative expenses. The Company’s results of operations included net sales of $3.2 million and $2.3 million related to Spinal Kinetics for the three months ended June 30, 2019 and 2018, respectively, and net sales of $6.4 million and $2.3 million for the six months ended June 30, 2019 and 2018, respectively. Additionally, the Company’s results of operations included net losses of $3.4 million and $1.8 million related to Spinal Kinetics for the three months ended June 30, 2019 and 2018, respectively, and net losses of $7.4 million and $1.8 million for the six months ended June 30, 2019 and 2018, respectively.

The following table presents the unaudited pro forma results for the three and six months ended June 30, 2019 and 2018, which combines the historical results of operations of Orthofix and Spinal Kinetics as though the companies had been combined as of January 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time.

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018		2019		2018
	(unaudited)			(unaudited)		(unaudited)		(unaudited)
Net sales	$	115,850		$	115,129	$	224,962	$	227,584
Net income (loss)		(547	)		597		350		5,457

Options Medical, LLC Asset Acquisition

On January 31, 2019, the Company acquired certain assets of Options Medical, LLC, (“Options Medical”) a medical device distributor based in Florida. Under the terms of the acquisition, the parties agreed to terminate an existing exclusive sales representative agreement, employees of Options Medical became employees of the Company and the Company acquired all customer lists and customer information related to the sale of the Company’s products. As consideration for the assets acquired, the Company paid $6.4 million. Additionally, as an inducement to enter into employment with the Company, the Company provided 25,478 restricted stock units (“RSUs”), with a fair value of $1.4 million, to the Options Medical founder. These RSUs will vest in one-third annual increments beginning on the first anniversary of the grant date and are contingent upon continued employment. The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date.

(U.S. Dollars, in thousands)	Fair Value		Balance Sheet Classification	Assigned Useful Life
Assets acquired
Operating lease assets	$	175	Other long-term assets
Customer relationships		5,832	Intangible assets, net	10 years
Assembled workforce		568	Intangible assets, net	5 years
Total identifiable assets acquired	$	6,575
Liabilities assumed
Operating lease liability - short-term	$	69	Other current liabilities
Operating lease liability - long-term		106	Other long-term liabilities
Total liabilities assumed		175
Total fair value of consideration transferred	$	6,400

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4. Inventories

Inventories were as follows:

(U.S. Dollars, in thousands)	June 30, 2019		December 31, 2018
Raw materials	$	7,752	$	8,463
Work-in-process		11,421		13,478
Finished products		59,968		54,906
Inventories	$	79,141	$	76,847

5. Leases

As discussed in Note 2, the Company adopted ASU No. 2016-02—Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of $20.2 million and $20.5 million, respectively, as of January 1, 2019. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact and the elimination of historical prepaid or deferred rent, was recorded as an adjustment to retained earnings. The net impact of adoption to the Company’s balance sheet as of January 1, 2019 is presented in the table below. The standard did not have a material impact to the Company’s condensed consolidated statements of operations and comprehensive income (loss) or cash flows.

(U.S. Dollars, in thousands)	December 31, 2018		Impact of Adoption of ASC 842			January 1, 2019
Assets
Current assets
Cash, cash equivalents, and restricted cash	$	72,189	$	—		$	72,189
Accounts receivable, net		77,747		—			77,747
Inventories		76,847		—			76,847
Prepaid expenses and other current assets		17,856		(15	)		17,841
Total current assets		244,639		(15	)		244,624
Property, plant, and equipment, net		42,835		—			42,835
Intangible assets, net and goodwill		124,298		—			124,298
Deferred income taxes		33,228		71			33,299
Other long-term assets		21,641		20,209			41,850
Total assets	$	466,641	$	20,265		$	486,906
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	17,989	$	—		$	17,989
Other current liabilities		67,919		2,166			70,085
Total current liabilities		85,908		2,166			88,074
Other long-term liabilities		45,336		18,028			63,364
Total liabilities	$	131,244	$	20,194		$	151,438
Shareholders’ equity
Common shares		1,858		—			1,858
Additional paid-in capital		243,165		—			243,165
Retained earnings		87,078		71			87,149
Accumulated other comprehensive income		3,296		—			3,296
Total shareholders’ equity		335,397		71			335,468
Total liabilities and shareholders’ equity	$	466,641	$	20,265		$	486,906

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The Company determines if an arrangement is a lease at inception. The Company’s leases primarily relate to facilities, vehicles, and equipment. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.

The Company has made an accounting policy election for short-term leases, in that the Company will not recognize a lease liability or lease asset on the balance sheet for leases with a lease term of twelve months or less as of the commencement date. Rather, any short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

The Company has made a policy election for all classifications of leases to combine lease and nonlease components and to account for them as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

During the first quarter of 2019, the Company entered into an amendment for its corporate headquarters lease. As a result, the classification of this lease changed from an operating lease to a finance lease, resulting in an increase to both the lease liability and lease asset of approximately $8.0 million.

A summary of the Company’s lease portfolio as of June 30, 2019 is presented in the table below:

(U.S. Dollars, in thousands, except lease term and discount rate)	Classification	June 30, 2019
Assets
Operating leases	Other long-term assets	$	6,353
Finance leases	Property, plant and equipment, net		20,695
Total lease assets			27,048
Liabilities
Current
Operating leases	Other current liabilities		1,816
Finance leases	Current portion of finance lease liability		301
Long-term
Operating leases	Other long-term liabilities		4,609
Finance leases	Long-term portion of finance lease liability		20,847
Total lease liabilities		$	27,573
Weighted Average Remaining Lease Term
Operating leases		4.5 years
Finance leases		21.2 years
Weighted Average Discount Rate
Operating leases			2.46	%
Finance leases			4.38	%

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The components of lease costs were as follows:

(U.S. Dollars, in thousands)	Three Months ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease costs:
Amortization of right-of-use assets	$	245	$	484
Interest on finance lease liabilities		231		454
Operating lease costs		540		1,080
Short-term lease costs		72		134
Variable lease costs		176		328
Total lease costs	$	1,264	$	2,480

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,055
Operating cash flows from finance leases		454
Financing cash flows from finance leases		188
Right-of-use assets obtained in exchange for lease obligations
Operating leases		362
Finance leases		21,179

A summary of the Company’s remaining lease liabilities as of June 30, 2019 is included below:

(U.S. Dollars, in thousands)	Operating Leases			Finance Leases
2019	$	977		$	642
2020		1,808			1,013
2021		1,593			1,414
2022		1,312			1,443
2023		256			1,471
Thereafter		803			27,207
Total undiscounted value of lease liabilities	$	6,749		$	33,190
Less: Interest		(324	)		(12,042	)
Present value of lease liabilities	$	6,425		$	21,148
Current portion of lease liabilities		1,816			301
Long-term portion of lease liabilities		4,609			20,847
Total lease liabilities	$	6,425		$	21,148

6. Long-term debt

As of June 30, 2019, the Company had no borrowings under its five year $125 million secured revolving credit facility. In addition, the Company had no borrowings on its €5.5 million ($6.3 million) available lines of credit in Italy as of June 30, 2019.  The Company is in compliance with all required financial covenants as of June 30, 2019.

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7. Fair value measurements

The fair value of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

	June 30, 2019											December 31, 2018
(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Treasury securities	$	502	$	—		$	—		$	502		$	490
Bone Biologics equity warrants		—		—			—			—			—
Bone Biologics equity securities		—		219			—			219			219
eNeura debt security		—		—			—			—			17,820
eNeura warrant		—		—			491			491			—
Total	$	502	$	219		$	491		$	1,212		$	18,529
Liabilities
Contingent consideration	$	—	$	—		$	(19,430	)	$	(19,430	)	$	(28,560	)
Deferred compensation plan		—		(1,314	)		—			(1,314	)		(1,275	)
Total	$	—	$	(1,314	)	$	(19,430	)	$	(20,744	)	$	(29,835	)

Bone Biologics Equity Warrants and Securities

The Company holds investments in common stock and warrants to purchase shares of common stock of Bone Biologics. The Company’s common stock investments are recorded within other long-term assets while the warrants are considered to have a fair value of zero. The equity securities are considered investments that do not have readily determinable fair values. As such, the Company measures these investments at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018			2019		2018
Bone Biologics equity securities and warrants beginning balance	$	219	$	4,897		$	219	$	2,768
Impact of adoption of ASU 2016-01 recognized in other income (expense), net		—		—			—		1,629
Purchase of additional common stock		—		—			—		500
Fair value adjustments, expirations, and impairments recognized in other income (expense), net		—		(229	)		—		(229	)
Bone Biologics equity securities and warrants ending balance	$	219	$	4,668		$	219	$	4,668

eNeura Debt Security and Warrant

The Company holds a debt security of eNeura, Inc., a privately held medical technology company that is developing devices for the treatment of migraines. The debt security was originally set to mature on March 4, 2019. On March 1, 2019, the Company entered into an Amended and Restated Senior Secured Promissory Note with eNeura (the “Restructured Debt Security”) to restructure the debt security, which extended the maturity date to the earlier of (i) March 4, 2022, (ii) the effective date of a change in control, or (iii) the effective date of an initial public offering by eNeura and which also eliminated the conversion feature included within the original note. As consideration for the extension, eNeura issued to the Company a Warrant to Purchase Common Stock (the “Warrant”), exercisable at $0.01 per share over a ten year contractual term, for a number of shares equal to 10% of the sum of the outstanding principal and accrued interest on the Amended and Restated Debt Security as of March 1, 2019, divided by $1.00 (subject to certain anti-dilution provisions).

Prior to the restructuring on March 1, 2019, the debt security was accounted for as an available for sale debt security at fair value and included within other long-term assets. The fair value was based upon significant unobservable inputs, including the use of a discounted cash flow model and assumptions regarding the expected payback period for the debt security, requiring the Company to develop its own assumptions; therefore, the Company had categorized this asset as a Level 3 financial asset. Subsequent to the restructuring, the debt security is no longer classified as an available for sale debt security, but rather as a held to maturity debt security. As a result, the amounts included in accumulated other comprehensive income related to this debt security are now being amortized to interest

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income over the extended term of the Restructured Debt Security. For additional discussion regarding the Restructured Debt Security, see Note 8.

The Warrant is recorded at fair value and included in other long-term assets. The fair value of the Warrant is based on significant unobservable inputs, including the use of a discounted cash flow model and an option-pricing model, requiring the Company to develop its own assumptions; therefore, the Company has categorized this asset as a Level 3 financial asset. As of June 30, 2019, the estimated fair value of the Warrant was $0.5 million. The Warrant is considered an investment that does not have a readily determinable fair value. As such, the Company measures the Warrant at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

The following table provides a reconciliation of the beginning and ending balances for the eNeura debt security and Warrant measured and reflected in the condensed consolidated balance sheets at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2019			2018
eNeura debt security and Warrant at January 1	$	17,820		$	16,050
Gains or losses recorded for the period
Recognized in other comprehensive income (loss)		(2,593	)		1,960
Change in classification of debt security to held to maturity		(15,227	)		—
Issuance of warrant as consideration for extension		491			—
eNeura debt security and Warrant at June 30	$	491		$	18,010

Contingent Consideration

The contingent consideration at the acquisition date of Spinal Kinetics consisted of potential future milestone payments of up to $60.0 million in cash. The milestone payments included (i) up to $15.0 million if the FDA grants approval of Spinal Kinetics’ M6-C artificial cervical disc (the “FDA Milestone”) and (ii) revenue-based milestone payments of up to $45.0 million in connection with future sales of the M6-C artificial cervical disc and the M6-L artificial lumbar disc. Milestones must be achieved within five years of April 30, 2018 to trigger applicable payments.

On February 6, 2019, the Company obtained FDA approval of the M6-C artificial cervical disc. This approval triggered the Company’s payment obligation of $15.0 million for the achievement of the FDA Milestone and such obligation was paid on February 14, 2019. The fair value of the remaining contingent consideration was $19.4 million as of June 30, 2019; however, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration. The remaining liability attributable to the revenue-based milestones is included within other long-term liabilities. Any changes in fair value are recorded as an operating expense and included within acquisition-related amortization and remeasurement.

The Company estimated the fair value of the remaining potential future revenue-based milestone payments using a Monte Carlo simulation. This fair value measurement is based on significant inputs that are unobservable in the market, and thus represents a Level 3 measurement. The key assumptions in applying the Monte Carlo valuation model include the Company’s forecasted future revenues for Spinal Kinetics products, discount rate applied, and assumptions for potential volatility of the Company’s forecasted revenue. Significant changes in these assumptions could result in a significantly higher or lower fair value.

The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2019			2018
Contingent consideration at January 1	$	28,560		$	—
Acquisition date fair value		—			25,491
Increase in fair value recognized in acquisition-related amortization and remeasurement		5,870			1,109
Payment made		(15,000	)		—
Contingent consideration at June 30	$	19,430		$	26,600

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8. Investments

As a result of the restructuring of the eNeura debt security discussed in Note 7, the eNeura debt security was reclassified from an available for sale debt security to a held to maturity debt security at its fair value on the date of the restructuring. The unrealized gain included in accumulated other comprehensive income at the restructuring date continues to be included in accumulated other comprehensive income and is now being amortized to interest income over the remaining life of the Restructured Debt Security. The Restructured Debt Security will be evaluated for impairment based on management’s estimate of future cash collections discounted using the debt security’s original effective interest rate of 8%. Management’s estimate of future cash flows involves significant judgment regarding the timing, expected events, and amount of future cash collections. Decreases in management’s estimate of future cash collections could result in an other than temporary impairment. As of June 30, 2019, the Company’s amortized cost basis in the Restructured Note was $15.1 million, which also represents its carrying value, compared to an estimated fair value of $16.0 million and an unpaid principal balance of $15.0 million. During the three and six months ended June 30, 2019, the Company recognized $0.2 and $0.3 million in interest income related to the eNeura debt security. The Company did not recognize any interest income during the three and six months ended June 30, 2018.

9. Contingencies

In addition to the matters described below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses related to these matters are individually and collectively immaterial as to a possible loss and range of loss.

Italian Medical Device Payback (“IMDP”)

In 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System. The healthcare law is expected to impact the business and financial reporting of companies operating in the medical technology sector that sell medical devices in Italy. A key provision of the law is a ‘payback’ measure, requiring companies selling medical devices in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalization. The Company’s current assessment of the IMDP involves significant judgment regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. The Company accounts for the estimated cost of the IMDP as sales and marketing expense and recorded expense of $0.3 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively and $0.7 million and $0.5 million for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the Company has accrued $4.3 million related to the IMDP, which it has classified within other long-term liabilities; however, the actual liability could be higher or lower than the amount accrued once the law has been clarified by the Italian authorities.

Brazil

In July 2018, the Federal Prosecution Service in Rio de Janeiro and representatives from the Brazilian antitrust authority inspected the offices of more than 30 companies, including the Company’s office in São Paulo, as part of an investigation into tender irregularities in the medical device industry. Before doing so, the authorities obtained a court order affecting the Company’s (and other companies’) local bank accounts resulting in the freezing of approximately $2.5 million of the Company’s cash, which the Company reclassified to restricted cash. On April 3, 2019, the Company’s appeal regarding the freezing of its local bank accounts was heard by the Brazil Federal Court of Appeals of Rio de Janeiro, in which the Court ordered the unfreezing of the Company’s cash. The cash was then returned without any restrictions in April 2019. As such, this balance has been reclassified to cash and cash equivalents as of June 30, 2019.

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10. Accumulated other comprehensive income

The components of and changes in accumulated other comprehensive income were as follows:

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Debt Security			Accumulated Other Comprehensive Income
Balance at December 31, 2018	$	(2,386	)	$	5,682		$	3,296
Cumulative effect adjustment from adoption of ASU 2018-02		—			938			938
Other comprehensive loss		(302	)		(2,593	)		(2,895	)
Income taxes		—			641			641
Reclassification adjustment to:
Interest income (expense), net		—			(689	)		(689	)
Income taxes		—			171			171
Balance at June 30, 2019	$	(2,688	)	$	4,150		$	1,462

11. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments, which consist of Global Spine and Global Extremities.  Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants and Biologics.

The tables below present net sales by major product category by reporting segment:

	Three Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		Change
Bone Growth Therapies	$	50,109	$	48,211		3.9	%
Spinal Implants		23,226		23,880		-2.7	%
Biologics		16,744		14,668		14.2	%
Global Spine		90,079		86,759		3.8	%
Global Extremities		25,771		24,788		4.0	%
Net sales	$	115,850	$	111,547		3.9	%

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		Change
Bone Growth Therapies	$	97,392	$	94,374		3.2	%
Spinal Implants		46,129		44,587		3.5	%
Biologics		32,476		29,003		12.0	%
Global Spine		175,997		167,964		4.8	%
Global Extremities		48,965		52,292		-6.4	%
Net sales	$	224,962	$	220,256		2.1	%

Product Sales and Marketing Service Fees

The table below presents net sales, which includes product sales and marketing service fees, for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Product sales	$	99,865	$	97,453	$	193,799	$	192,342
Marketing service fees		15,985		14,094		31,163		27,914
Net sales	$	115,850	$	111,547	$	224,962	$	220,256

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Product sales primarily consist of the sale of bone growth therapy devices and internal and external fixation products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment. Revenues exclude any value added or other local taxes, intercompany sales and trade discounts. Shipping and handling costs for products shipped to customers are included in cost of sales.

Puerto Rico Settlement

In June 2019, the Company received a payment of $1.4 million from the Administration of Medical Services of Puerto Rico, a government-owned corporation, in settlement of approximately $2.5 million of outstanding accounts receivable. This $2.5 million of outstanding accounts receivable had previously been fully reserved between the Company’s allowances for doubtful accounts and contractual allowances. As a result of this settlement, and in accordance with the Company’s policy, the Company recorded the resulting adjustment to contractual allowances of $0.4 million within net sales and the recovery of the allowance for doubtful accounts as a credit to bad debt expense of $1.0 million.

Other Contract Assets

The Company’s contract assets, excluding trade accounts receivable (“other contract assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of the exclusive distribution of Orthofix products. Other contract assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled $3.9 million and $1.9 million as of June 30, 2019, and December 31, 2018, respectively.

12. Business segment information

During the first quarter of 2019, the Company changed its reporting segments from four reporting segments, previously reported as Bone Growth Therapies, Spinal Implants, Biologics, and Orthofix Extremities, to two reporting segments:  Global Spine and Global Extremities. Additionally, the Company changed the performance measure used to evaluate segment performance from Non-GAAP net margin to earnings before interest income (expense), net, income taxes, depreciation and amortization (“EBITDA”). These changes were made to align how the chief operating decision maker manages the business, reviews operating performance and allocates resources. The Company has revised its segment reporting to represent how the business is now managed and restated prior periods to conform to the current segment presentation. Corporate activities are comprised of the operating expenses and activities of the Company not necessarily identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions.

As part of the change in reporting segments, the Company performed a quantitative assessment of goodwill immediately prior to and subsequently following the change in reporting segments. The analysis did not result in an impairment. In addition, the net carrying value of goodwill that was previously reported under the prior reporting segments (i) Bone Growth Therapies (ii) Spinal Implants and (iii) Biologics have been consolidated and are included within the Global Spine reporting segment as of June 30, 2019.

As mentioned above, the primary metric used in managing the Company is EBITDA. The table below presents EBITDA by reporting segment:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			2019			2018
Global Spine	$	16,523		$	19,030		$	27,098		$	37,855
Global Extremities		2,750			488			2,577			3,816
Corporate		(12,880	)		(12,692	)		(22,407	)		(19,694	)
Total EBITDA	$	6,393		$	6,826		$	7,268		$	21,977
Depreciation and amortization		(6,178	)		(4,554	)		(11,905	)		(8,923	)
Interest income (expense), net		457			(251	)		200			(434	)
Income (loss) before income taxes	$	672		$	2,021		$	(4,437	)	$	12,620

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Geographical information

The table below presents net sales by geographic destination for each reporting unit and for the consolidated Company:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Global Spine
U.S.	$	84,601	$	81,722	$	164,127	$	159,760
International		5,478		5,037		11,870		8,204
Total Global Spine		90,079		86,759		175,997		167,964
Global Extremities
U.S.		6,844		7,023		13,442		13,939
International		18,927		17,765		35,523		38,353
Total Global Extremities		25,771		24,788		48,965		52,292
Consolidated
U.S.		91,445		88,745		177,569		173,699
International		24,405		22,802		47,393		46,557
Net sales	$	115,850	$	111,547	$	224,962	$	220,256

13. Acquisition-related amortization and remeasurement

Acquisition-related amortization and remeasurement consists of amortization related to intangible assets acquired through business combinations or asset acquisitions and the remeasurement of any related contingent consideration arrangement. Components of acquisition-related amortization and remeasurement for the three months and six months ended June 30, 2019 and 2018, respectively, are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Changes in fair value of contingent consideration	$	470	$	1,109	$	5,870	$	1,109
Amortization of acquired intangibles		1,338		310		2,395		373
Total	$	1,808	$	1,419	$	8,265	$	1,482

14. Share-based compensation

The following tables present the detail of share-based compensation by line item in the condensed consolidated statements of operations and comprehensive income (loss) as well as by award type:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Cost of sales	$	180	$	132	$	367	$	257
Sales and marketing		692		473		1,302		922
General and administrative		4,564		4,249		9,128		7,294
Research and development		413		361		737		658
Total	$	5,849	$	5,215	$	11,534	$	9,131

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	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Stock options	$	926	$	1,241	$	3,038	$	1,863
Time-based restricted stock awards and units		2,951		1,789		4,657		3,236
Performance-based restricted stock awards and units		—		270		—		759
Market-based restricted stock units		1,576		1,604		2,923		2,557
Stock purchase plan		396		311		916		716
Total	$	5,849	$	5,215	$	11,534	$	9,131

During the three months ended June 30, 2019 and 2018, the Company issued 40,812 and 80,444 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises and the vesting of restricted stock awards and units. During the six months ended June 30, 2019 and 2018, the Company issued 251,893 and 206,955 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises and the vesting of restricted stock awards and units.

On August 5, the Company entered into an employment agreement with its new President of Global Spine and awarded restricted stock units and stock options valued at approximately $1.5 million as inducement grants.

Share-Based Compensation Modifications

During the first quarter of 2019, the Company entered into a Transition and Retirement Agreement (the “Retirement Agreement”) with the Company’s President and Chief Executive Officer.  As part of the Retirement Agreement, certain time-based stock options and restricted stock awards were modified to accelerate the vesting to the retirement date. In addition, stock options were modified to extend the post-termination exercise period from 18 months under a standard qualified retirement to up to four years, dependent upon the remaining contractual term of the options. The Company recognized approximately $1.5 million and $3.7 million in share-based compensation expense during the three and six months ended June 30, 2019, related to the Retirement Agreement, which was charged to general and administrative expense in the condensed consolidated statements of operations and comprehensive income (loss).

15. Income taxes

Income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items.  As a result, the Company’s interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.

For the three months ended June 30, 2019 and 2018, the effective tax rate was 181.4% and 54.2%, respectively. For the six months ended June 30, 2019 and 2018, the effective tax rate was 107.9% and 51.3%, respectively. The primary factors affecting the Company’s effective tax rate for the three and six months ended June 30, 2019, were increased limitation of the deductibility of executive compensation, financial expenses not deductible for tax purposes, and benefits related to effective settlement of the 2015 federal tax examination and statute expirations.

During the first quarter of 2019, the Internal Revenue Service concluded an examination of the Company’s federal income tax return for 2015, which resulted in a benefit of $1.8 million. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state and foreign matters could be reduced by $13.0 million to $13.4 million as audits close and statutes expire.

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16. Earnings per share (“EPS”)

The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with nonforfeitable rights to dividends or dividend equivalents (referred to as participating securities). For the three and six months ended June 30, 2019 and 2018, no significant adjustments were made to net income for purposes of calculating basic and diluted EPS. The following is a reconciliation of the weighted average shares used in diluted EPS computations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Weighted average common shares-basic		18,834,886		18,413,756		18,790,612		18,409,331
Effect of dilutive securities
Unexercised stock options and stock purchase plan		—		327,171		259,967		318,047
Unvested restricted stock awards and units		—		94,633		128,478		83,978
Weighted average common shares-diluted		18,834,886		18,835,560		19,179,057		18,811,356

There were 1,987,907 and 413,296 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the three months ended June 30, 2019 and 2018, respectively, and 483,731 and 259,470 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the six months ended June 30, 2019 and 2018, respectively, because inclusion of these awards was anti-dilutive or, for performance-based and market-based restricted stock awards and units, all necessary conditions had not been satisfied by the end of the respective period.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Orthofix Medical Inc.’s (sometimes referred to as “we,” “us” or “our”) financial condition and results of our operations should be read in conjunction with the “Forward-Looking Statements” and our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-Q.

Executive Summary

We are a global medical device company focused on musculoskeletal products and therapies. Headquartered in Lewisville, Texas, we have two reporting segments: Global Spine and Global Extremities. Our products are widely distributed by our sales representatives and distributors.

Notable highlights and achievements in the second quarter of 2019 include the following:

• Net sales were $115.9 million, an increase of 3.9% on a reported basis and 5.0% on a constant currency basis

• Increase in Biologics net sales of 14.2% compared to the prior year period, as we believe we now have the #1 market-share position within the U.S. Cellular Allograft segment per SmartTRAK following strong performance in 2019

• Net loss was $0.5 million, a decrease of $1.5 million compared to the prior year period

• Decrease in earnings before interest, income taxes, depreciation, and amortization (“EBITDA”) of $0.4 million, or 6.3%

Results of Operations

The following table provides certain items in our condensed consolidated statements of operations and comprehensive income (loss) as a percent of net sales:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019 (%)			2018 (%)		2019 (%)			2018 (%)
Net sales		100.0			100.0		100.0			100.0
Cost of sales		22.3			20.5		22.0			21.3
Gross profit		77.7			79.5		78.0			78.7
Sales and marketing		49.1			46.2		49.1			46.2
General and administrative		18.9			19.7		18.9			18.8
Research and development		7.8			7.0		8.1			6.7
Acquisition-related amortization and remeasurement		1.5			1.3		3.7			0.7
Operating income (loss)		0.4			5.3		(1.8	)		6.3
Net income (loss)		(0.5	)		0.8		0.2			2.8

Net Sales by Product Category and Reporting Segment

The following tables provide net sales by major product category by reporting segment:

	Three Months Ended June 30,				Percentage Change
(U.S. Dollars, in thousands)	2019		2018		Reported			Constant Currency
Bone Growth Therapies	$	50,109	$	48,211		3.9	%		3.9	%
Spinal Implants		23,226		23,880		-2.7	%		-2.0	%
Biologics		16,744		14,668		14.2	%		14.2	%
Global Spine		90,079		86,759		3.8	%		4.0	%
Global Extremities		25,771		24,788		4.0	%		8.5	%
Net sales	$	115,850	$	111,547		3.9	%		5.0	%

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	Six Months Ended June 30,				Percentage Change
(U.S. Dollars, in thousands)	2019		2018		Reported			Constant Currency
Bone Growth Therapies	$	97,392	$	94,374		3.2	%		3.2	%
Spinal Implants		46,129		44,587		3.5	%		4.3	%
Biologics		32,476		29,003		12.0	%		12.0	%
Global Spine		175,997		167,964		4.8	%		5.0	%
Global Extremities		48,965		52,292		-6.4	%		-1.4	%
Net sales	$	224,962	$	220,256		2.1	%		3.5	%

Global Spine

Global Spine offers the following products categories:

- Bone Growth Therapies, which manufactures, distributes, sells, and provides support services for market leading devices that enhance bone fusion. Bone Growth Therapies uses distributors and sales representatives to sell its devices and provide associated services to hospitals, healthcare providers, and patients.

- Spinal Implants, which designs, develops and markets a broad portfolio of motion preservation and implant products used in surgical procedures of the spine. Spinal Implants distributes its products globally through a network of distributors and sales representatives to sell spine products to hospitals and healthcare providers.

- Biologics, which provides a portfolio of regenerative products and tissue forms that allow physicians to successfully treat a variety of spinal and orthopedic conditions. Biologics markets its tissues to hospitals and healthcare providers, primarily in the U.S., through a network of employed and independent sales representatives.

Three months ended June 30, 2019 compared to 2018

Net sales increased $3.3 million or 3.8%

• Bone Growth Therapies net sales increased $1.9 million or 3.9%, primarily driven by an increase in order volume in the quarter, partially offset by customer sales mix and product mix changes

• Spinal Implants net sales decreased $0.7 million or 2.7%, primarily driven by abnormally high pricing pressures and ongoing disruption in our legacy sales force in preparation of bringing on larger sales partners in key geographies, which is expected to be reduced as we gain traction with our new distributors, and partially offset by an increase in Motion Preservation sales of $0.8 million

• Biologics net sales increased $2.1 million or 14.2%, primarily due to distribution added during the last year and recovery in a previously underperforming region, as volume increased related to Trinity tissues by 17.3%, partially offset by a low single-digit price decline

Six months ended June 30, 2019 compared to 2018

Net sales increased $8.0 million or 4.8%

• Bone Growth Therapies net sales increased $3.0 million or 3.2%, primarily driven by an increase in order volume in the quarter, partially offset by customer sales mix and product mix changes

• Spinal Implants net sales increased $1.5 million or 3.5%, primarily driven by an increase of $3.9 million in Motion Preservation sales as we acquired Spinal Kinetics during the second quarter of 2018, and partially offset by a decrease in legacy U.S. sales of $2.4 million, primarily resulting from ongoing disruption in our legacy sales force in preparation of bringing on larger sales partners in key geographies, the impact of which is expected to be reduced as we gain traction with our new distributors and pricing pressures

• Biologics net sales increased $3.5 million or 12.0%, primarily due to distribution added during the last year and recovery in a previously underperforming region, as volume increased related to Trinity tissues by 18.4%, partially offset by a low single-digit price decline as well as a contractual reduction in the marketing services fee we receive from MTF Biologics, which became effective during the first quarter of 2018

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Global Extremities

Global Extremities offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions unrelated to the spine. Global Extremities distributes its products globally through a network of distributors and sales representatives to sell orthopedic products to hospitals and health providers.

Three months ended June 30, 2019 compared to 2018

Net sales increased $1.0 million or 4.0%

• Increase of $2.2 million largely attributed to variability in the timing of orders from our stocking distributors and growth in our direct-sales markets

• Partially offset by a decrease of $1.1 million due to the changes in foreign currency exchange rates, which had a negative impact on net sales

Six months ended June 30, 2019 compared to 2018

Net sales decreased $3.3 million or 6.4%

• Decrease of $2.6 million due to the changes in foreign currency exchange rates, which had a negative impact on net sales

• Decrease of $0.7 million largely attributed to variability in the timing of orders from our stocking distributors

Gross Profit

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
Net sales	$	115,850		$	111,547			3.9	%	$	224,962		$	220,256			2.1	%
Cost of sales		25,812			22,835			13.0	%		49,520			46,982			5.4	%
Gross profit	$	90,038		$	88,712			1.5	%	$	175,442		$	173,274			1.3	%
Gross margin		77.7	%		79.5	%		-1.8	%		78.0	%		78.7	%		-0.7	%

Three months ended June 30, 2019 compared to 2018

Gross profit increased $1.3 million

• Increase primarily due to the growth in net sales and partially offset by a decrease in gross margin, which decreased to 77.7% compared to 79.5% in the prior year period, largely due to higher than normal charges related to the buildup of Spinal Implants inventory to support sales growth from our new sales partners in key geographies

Six months ended June 30, 2019 compared to 2018

Gross profit increased $2.2 million

• Increase primarily due to the growth in net sales and partially offset by a decrease in gross margin, which decreased to 78.0% compared to 78.7% in the prior year period, largely due to higher than normal charges related to the buildup of Spinal Implants inventory to support sales growth from our new sales partners in key geographies

Sales and Marketing Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
Sales and marketing	$	56,864		$	51,529			10.4	%	$	110,558		$	101,797			8.6	%
As a percentage of net sales		49.1	%		46.2	%		2.9	%		49.1	%		46.2	%		2.9	%

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Three months ended June 30, 2019 compared to 2018

Sales and marketing expense increased $5.3 million

• Increase largely attributable to increases in headcount, training and education costs, and increased marketing efforts to support growth and the launch of the M6-C artificial cervical disc in the U.S.

• Further increases relate to higher variable compensation rates to support growth in our Biologics product category

Six months ended June 30, 2019 compared to 2018

Sales and marketing expense increased $8.8 million

• Increase largely attributable to increases in headcount, training and education costs, and increased marketing efforts to support growth and the launch of the M6-C artificial cervical disc in the U.S.

• Further increases related to higher variable compensation rates to support growth in our Biologics product category

General and Administrative Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
General and administrative	$	21,935		$	21,958			-0.1	%	$	42,407		$	41,382			2.5	%
As a percentage of net sales		18.9	%		19.7	%		-0.8	%		18.9	%		18.8	%		0.1	%

Three months ended June 30, 2019 compared to 2018

General and administrative expense decreased by less than $0.1 million

• Increase of $1.3 million attributable to transition and succession charges, including acceleration of certain share-based compensation expense, relating to retirement, transition, or termination of certain named executive officers

• Decrease of $0.7 million associated with other share-based compensation expenses, excluding the impact of succession charges described above

• Further offset by a decrease of $0.4 million in certain other compensation expenses

Six months ended June 30, 2019 compared to 2018

General and administrative expense increased $1.0 million

• Increase of $4.0 million attributable to transition and succession charges, including acceleration of certain share-based compensation expense, relating to retirement, transition, or termination of certain named executive officers

• Partially offset by a decrease of $1.7 million in expenses associated with strategic investments, largely due to diligence costs related to the acquisition of Spinal Kinetics and expenses associated with the Domestication in 2018

• Further offset by a decrease of $1.3 million associated with other share-based compensation expenses, excluding the impact of the succession charges described above

Research and Development Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
Research and development	$	8,980		$	7,891			13.8	%	$	18,209		$	14,828			22.8	%
As a percentage of net sales		7.8	%		7.0	%		0.7	%		8.1	%		6.7	%		1.4	%

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Three months ended June 30, 2019 compared to 2018

Research and development expense increased $1.1 million

• Increase largely due to additional headcount, the inclusion of one additional month of Motion Preservation expenses as Spinal Kinetics was acquired on April 30, 2018, and increased spend related to clinical trials within the Bone Growth Therapies product category

• Increase also related to costs to comply with recent medical device reporting regulations in the European Union

Six months ended June 30, 2019 compared to 2018

Research and development expense increased $3.4 million

• Increase largely attributable to the Spinal Kinetics acquisition and the regulatory efforts associated with the U.S. Food and Drug Administration (“FDA”) premarket approval of the M6 Cervical Disc, which was obtained in February of 2019

Acquisition-related Amortization and Remeasurement

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
Acquisition-related amortization and remeasurement	$	1,808		$	1,419			27.4	%	$	8,265		$	1,482			457.7	%
As a percentage of net sales		1.5	%		1.3	%		0.3	%		3.7	%		0.7	%		3.0	%

Acquisition-related amortization and remeasurement consists of amortization related to intangibles acquired through business combinations or asset acquisitions and the remeasurement of any related contingent consideration arrangement.

Three months ended June 30, 2019 compared to 2018

Acquisition-related amortization and remeasurment increased $0.4 million

• Increase of $1.0 million related to the amortization of intangible assets acquired through business combinations or asset acquisitions;  of this amount, $0.8 million is attributable to the Spinal Kinetics acquisition, which occurred during the second quarter of 2018 and includes amortization of acquired in-process research and development costs following achievement of the FDA approval milestone during the first quarter of 2019

• Partially offset by a decrease of $0.6 million related to changes in fair value recognized associated with the FDA milestone, which was achieved and paid during the first quarter of 2019, and potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition

Six months ended June 30, 2019 compared to 2018

Acquisition-related amortization and remeasurement increased $6.8 million

• Increase of $3.2 million related to the remeasurement of potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition

• Increase of $1.6 million related to the remeasurement of the FDA milestone associated with the Spinal Kinetics acquisition, which was achieved and paid during the first quarter of 2019

• Increase of $2.0 million related to the amortization of intangible assets acquired through business combinations or asset acquisitions;  of this amount, $1.5 million is attributable to the Spinal Kinetics acquisition, which occurred during the second quarter of 2018 and includes amortization of acquired in-process research and development costs following achievement of the FDA milestone during the first quarter of 2019

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Non-operating Income and Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
Interest income (expense), net	$	457		$	(251	)		-282.1	%	$	200		$	(434	)		-146.1	%
Other expense, net		(236	)		(3,643	)		-93.5	%		(640	)		(731	)		-12.4	%

Three months ended June 30, 2019 compared to 2018

Other income (expense) increased $3.4 million

• Increase of $3.5 million associated with changes in foreign currency rates, as we recorded a non-cash remeasurement gain of $0.3 million in the second quarter of 2019 compared to a loss of $3.3 million in the second quarter of 2018

Six months ended June 30, 2019 compared to 2018

Other income (expense) increased less than $0.1 million

• Increase of $1.6 million associated with changes in foreign currency rates, as we recorded a non-cash remeasurement loss of $0.6 million in the first half of 2019 compared to a loss of $2.2 million in the first half of 2018

• Partially offset by a decrease of $1.5 million related to net unrealized gains recorded in 2018 associated with the increase in fair value of our equity securities in Bone Biologics, Inc. (“Bone Biologics”) following the adoption of ASU 2016-01

Income Taxes

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			% Change			2019			2018			% Change
Income tax expense (benefit)	$	1,219		$	1,096			11.2	%	$	(4,787	)	$	6,469			-174.0	%
Effective tax rate		181.4	%		54.2	%		127.2	%		107.9	%		51.3	%		56.6	%

Three months ended June 30, 2019 compared to 2018

The increase in the effective tax compared to the prior year period rate was primarily a result of the following factors:

• Decrease in pre-tax earnings

• Increases in non-deductible executive compensation due to provisions of the Act

• Increases in financial expenses not deductible for tax purposes

The primary factors affecting our effective tax rate for the second quarter of 2019 are as follows:

• Increases in non-deductible executive compensation due to provisions of the Act

• Certain financial expenses not deductible for tax purposes

Six months ended June 30, 2019 compared to 2018

The increase in the effective tax rate compared to the prior year period was primarily a result of the following factors:

• Decrease in pre-tax earnings

• Increases in non-deductible executive compensation due to provisions of the Act

• Increases in financial expenses not deductible for tax purposes

• Benefits related to effective settlement of the 2015 IRS exam and statute expirations

The primary factors affecting our effective tax rate for the six months ended June 30, 2019 are as follows:

• Increases in non-deductible executive compensation due to provisions of the Act

• Certain financial expenses not deductible for tax purposes

• Benefits related to effective settlement of the 2015 IRS exam and statute expirations

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Segment Review

As discussed above, we changed the performance measure used to evaluate segment performance from Non-GAAP net margin to EBITDA during the first quarter of 2019. When compared to the prior year period, EBITDA decreased $0.4 million for the three months ended June 30, 2019 and decreased $14.7 million for the six months ended June 30, 2019. These changes are largely driven by the fluctuations discussed above. The $14.7 million decrease for the six months ended June 30, 2019 compared to the prior year period is largely driven by the changes in sales and marketing expense and acquisition-related amortization and remeasurement. The following table reconciles EBITDA to income (loss) before income taxes:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			2019			2018
Global Spine	$	16,523		$	19,030		$	27,098		$	37,855
Global Extremities		2,750			488			2,577			3,816
Corporate		(12,880	)		(12,692	)		(22,407	)		(19,694	)
Total EBITDA	$	6,393		$	6,826		$	7,268		$	21,977
Depreciation and amortization		(6,178	)		(4,554	)		(11,905	)		(8,923	)
Interest income (expense), net		457			(251	)		200			(434	)
Income (loss) before income taxes	$	672		$	2,021		$	(4,437	)	$	12,620

Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash at June 30, 2019, totaled $52.1 million compared to $72.2 million at December 31, 2018, with the decrease largely a result of $15.0 million in cash paid in connection with achievement of the Spinal Kinetics FDA Milestone and $6.4 million related to the acquisition of certain assets of Options Medical, LLC (“Options Medical”) in 2019.

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			Change
Net cash from operating activities	$	8,344		$	13,032		$	(4,688	)
Net cash from investing activities		(16,738	)		(51,549	)		34,811
Net cash from financing activities		(11,581	)		3,685			(15,266	)
Effect of exchange rate changes on cash		(71	)		(639	)		568
Net change in cash, cash equivalents and restricted cash	$	(20,046	)	$	(35,471	)	$	15,425

The following table presents free cash flow, a non-GAAP financial measure, which is calculated by subtracting capital expenditures from net cash from operating activities.

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			Change
Net cash from operating activities	$	8,344		$	13,032		$	(4,688	)
Capital expenditures		(10,338	)		(6,652	)		(3,686	)
Free cash flow	$	(1,994	)	$	6,380		$	(8,374	)

Operating Activities

Cash flows from operating activities decreased $4.7 million

• Decrease in net income of $5.8 million

• Net increase of $9.3 million for non-cash gains and losses, largely related to changes in fair value of contingent consideration, depreciation and amortization, share-based compensation expense, and deferred income taxes

• Net decrease of $8.2 million relating to changes in working capital accounts, primarily attributable to changes in inventories

Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 63 days at June 30, 2019 compared to 61 days at June 30, 2018. Inventory turns improved to 1.3 times as of June 30, 2019 compared to 1.2 times as of June 30, 2018.

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Investing Activities

Cash flows from investing activities increased $34.8 million

• Increase of $43.7 million associated with cash paid in relation to the Spinal Kinetics acquisition in 2018, net of cash acquired

• Increase of $0.7 million associated with the acquisition of certain intangible assets in a transaction with a former distributor and by our additional investment of $0.5 million in Bone Biologics during the first quarter of 2018

• Partially offset by $6.4 million associated with cash paid in relation to the acquisition of certain assets of Options Medical, one of our former distributors, during the first quarter of 2019

• Further offset by $3.7 million attributable to increased capital expenditures compared to the prior year

Financing Activities

Cash flows from financing activities decreased $15.3 million

• Decrease of $13.7 million associated with our payment of the FDA Milestone associated with the Spinal Kinetics acquisition during the first quarter of 2019, which represents the acquisition-date fair value attributable to the FDA Milestone liability originally recognized

• Decrease in net proceeds of $0.8 million from the issuance of common shares

• Decrease of $0.2 million attributable to principal payments made during 2019 relating to our finance lease and $0.6 million attributable to other financing cash flows, which primarily relate to deferred payments made associated with the acquisition of certain intangible assets in transactions with former distributors

Credit Facilities

There have been no material changes to our credit facilities as disclosed in our Form 10-K for the year ended December 31, 2018.

Other

For information regarding Contingencies, see Note 9 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.

Spinal Kinetics Acquisition

As part of the consideration for the Spinal Kinetics acquisition, we agreed to milestone payments in the future of up to $60.0 million in cash. One milestone payment was for $15.0 million upon FDA approval of Spinal Kinetics’ M6-C artificial cervical disc (the “FDA Milestone”).  During the first quarter of 2019, we obtained FDA approval of the M6-C artificial cervical disc for patients suffering from cervical disease degeneration and the FDA Milestone payment was triggered.  We paid the $15.0 million FDA Milestone payment on February 14, 2019 from cash on hand.

Two other milestone payments are comprised of revenue-based milestone payments of up to $45.0 million in connection with future sales of the M6-C artificial cervical disc and the M6-L artificial lumbar disc. The fair value of the contingent consideration arrangement as of June 30, 2019 was $19.4 million; however, the actual amount ultimately paid could be higher or lower than the fair value of the contingent consideration. The remaining liability attributable to the revenue-based milestones is included within other long-term liabilities. For additional discussion of this matter, see Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

eNeura debt security

We hold a debt security of eNeura, Inc., a privately held medical technology company that is developing devices for the treatment of migraines. The debt security was originally set to mature on March 4, 2019. On March 1, 2019, we entered into an Amended and Restated Senior Secured Promissory Note with eNeura (the “Restructured Debt Security”) to restructure the debt security, which extended the maturity date to the earlier of (i) March 4, 2022, (ii) the effective date of a change in control, or (iii) the effective date of an initial public offering by eNeura. As consideration for the extension, eNeura issued to us a Warrant to Purchase Common Stock (the “Warrant”), exercisable at $0.01 per share over a ten year contractual term, for a number of shares equal to 10% of the sum of the outstanding principal and accrued interest on the Amended and Restated Debt Security as of March 1, 2019, divided by $1.00 (subject to certain anti-dilution provisions).

30

We considered the restructuring of the eNeura debt security to be a Troubled Debt Restructuring (“TDR”).  A TDR exists when a creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. In making this determination, we considered eNeura’s current financial condition and whether the restructuring of the debt security resulted in the granting of a concession after taking into account all the facts and circumstances surrounding the restructuring. The restructuring was undertaken to improve the likelihood of our effort to recover the investment in the original the debt security.

As a result of the restructuring, the eNeura debt security is no longer accounted for at fair value, but rather in accordance with the accounting required for TDRs. The fair value of the debt security immediately prior to the restructuring was reclassified to be the carrying amount of the debt security, as such amount approximates our estimate of future cash collections discounted using the debt security’s effective interest rate of 8%. Our estimate of future cash flows involves significant judgment regarding the timing, expected events, and amount of future cash collections. Decreases in our estimate of future cash collections could result in a significant other-than-temporary impairment. Interest income on the restructured eNeura debt security is recorded using the interest income method; therefore, the amortized cost basis is accreted up to the amount of expected future cash flows over the term of the Restructured Debt Security. For additional information, see Notes 7 and 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Brazil

On April 3, 2019, our appeal regarding the freezing of our local bank accounts in Brazil was heard by the Brazil Federal Court of Appeals of Rio de Janeiro, in which the Court ordered the unfreezing of the cash. Approximately $2.5 million was then returned without any restrictions in April 2019. As such, this balance has been reclassified to cash and cash equivalents as of June 30, 2019. For additional discussion regarding the matter, see Note 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Off-balance Sheet Arrangements

As of June 30, 2019, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, cash flows, liquidity, capital expenditures or capital resources that are material to investors.

Contractual Obligations

There have been no material changes in any of our material contractual obligations as disclosed in our Form 10-K for the year ended December 31, 2018.

Critical Accounting Estimates

Our discussion of operating results is based upon the condensed consolidated financial statements and accompanying notes. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our critical accounting estimates are detailed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes to our critical accounting estimates except for the following:

Leases

On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). We determine if an arrangement is a lease at inception. Lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, our incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have made a policy election for all classifications of leases to combine lease and nonlease components and to account for them as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred.

31

Recently Issued Accounting Pronouncements

See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status of recently issued accounting pronouncements.

Non-GAAP Financial Measures

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. We believe it is important to provide investors with the same non-GAAP metrics used to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to historical operating results and internally evaluate the effectiveness of the our operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.

The non-GAAP financial measures used in this filing may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost that can have a material effect on cash flows.

Constant Currency

Constant currency is calculated by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

EBITDA

EBITDA is a non-GAAP metric defined as earnings before interest income (expense), net, income taxes, depreciation, and amortization. EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business.

Free Cash Flow

Free cash flow is calculated by subtracting capital expenditures from net cash from operating activities. Free cash flow is an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks as disclosed in our Form 10-K for the year ended December 31, 2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of the President and Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019. Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2019.

32

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, known to the President and Chief Executive Officer or the Chief Financial Officer that occurred for the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

33

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 9 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein, which is incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We have not made any repurchases of our common stock during the second quarter of 2019.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There are no matters to be reported under this heading.

34

Item 6. Exhibits

10.1	Consulting Agreement, dated July 15, 2019, between Bradley V. Niemann and Orthofix Medical Inc. (filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 15, 2019 and incorporated herein by reference).
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1*	Section 1350 Certifications of each of the Chief Executive Officer and Chief Financial Officer.
101*	The following materials from this Form 10-Q, formatted in Inline eXtensible Business Reporting Language(“iXBRL”), filed herewith: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Changes in Shareholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to the Unaudited Condensed Consolidated Financial Statements.

* Filed herewith.

35

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ORTHOFIX MEDICAL INC.
Date: August 5, 2019	By:	/s/ BRADLEY R. MASON
	Name:	Bradley R. Mason
	Title:	President and Chief Executive Officer
Date: August 5, 2019	By:	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer

36

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Bradley R. Mason, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2019, of Orthofix Medical Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 5, 2019	By:	/s/ BRADLEY R. MASON
	Name:	Bradley R. Mason
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Doug Rice, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2019, of Orthofix Medical Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 5, 2019	By:	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Orthofix Medical Inc. (“Orthofix”) on Form 10-Q for the quarterly period ended June 30, 2019, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, Bradley R. Mason, Chief Executive Officer and President of Orthofix, and Doug Rice, Chief Financial Officer, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Orthofix.

Dated: August 5, 2019	/s/ BRADLEY R. MASON
	Name:	Bradley R. Mason
	Title:	President and Chief Executive Officer
Dated: August 5, 2019	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 02, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	OFIX
Entity Registrant Name	ORTHOFIX MEDICAL INC.
Entity Central Index Key	0000884624
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		19,031,280
Entity File Number	0-19961
Entity Tax Identification Number	981340767
Entity Address, Address Line One	3451 Plano Parkway
Entity Address, City or Town	Lewisville
Entity Address, State or Province	Texas
Entity Address, Postal Zip Code	75056
City Area Code	214
Local Phone Number	937-2000

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 52,143	$ 69,623
Restricted cash		2,566
Trade accounts receivable, net of allowances of $4,205 and $7,463, respectively	80,591	77,747
Inventories	79,141	76,847
Prepaid expenses and other current assets	20,954	17,856
Total current assets	232,829	244,639
Property, plant and equipment, net	64,402	42,835
Intangible assets, net	55,628	51,897
Goodwill	71,177	72,401
Deferred income taxes	37,566	33,228
Other long-term assets	27,204	21,641
Total assets	488,806	466,641
Current liabilities
Accounts payable	19,523	17,989
Current portion of finance lease liability	301
Other current liabilities	48,161	67,919
Total current liabilities	67,985	85,908
Long-term portion of finance lease liability	20,847
Other long-term liabilities	52,180	45,336
Total liabilities	141,012	131,244
Contingencies (Note 9)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 18,831,581 and 18,579,688 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	1,883	1,858
Additional paid-in capital	257,888	243,165
Retained earnings	86,561	87,078
Accumulated other comprehensive income	1,462	3,296
Total shareholders’ equity	347,794	335,397
Total liabilities and shareholders’ equity	$ 488,806	$ 466,641

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Trade accounts receivable, allowance for doubtful accounts	$ 4,205	$ 7,463
Common shares, par value	$ 0.10	$ 0.10
Common shares, authorized	50,000,000	50,000,000
Common shares, issued	18,831,581	18,579,688
Common shares, outstanding	18,831,581	18,579,688

XML

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Net sales	$ 115,850	$ 111,547	$ 224,962	$ 220,256
Cost of sales	25,812	22,835	49,520	46,982
Gross profit	90,038	88,712	175,442	173,274
Sales and marketing	56,864	51,529	110,558	101,797
General and administrative	21,935	21,958	42,407	41,382
Research and development	8,980	7,891	18,209	14,828
Acquisition-related amortization and remeasurement (Note 13)	1,808	1,419	8,265	1,482
Operating income (loss)	451	5,915	(3,997)	13,785
Interest income (expense), net	457	(251)	200	(434)
Other expense, net	(236)	(3,643)	(640)	(731)
Income (loss) before income taxes	672	2,021	(4,437)	12,620
Income tax benefit (expense)	(1,219)	(1,096)	4,787	(6,469)
Net income (loss)	$ (547)	$ 925	$ 350	$ 6,151
Net income (loss) per common share:
Basic	$ (0.03)	$ 0.05	$ 0.02	$ 0.33
Diluted	$ (0.03)	$ 0.05	$ 0.02	$ 0.32
Weighted average number of common shares:
Basic	18,834,886	18,413,756	18,790,612	18,409,331
Diluted	18,834,886	18,835,560	19,179,057	18,811,356
Other comprehensive income (loss), before tax
Unrealized gain (loss) on debt security		$ 1,960	$ (2,593)	$ 1,960
Reclassification adjustment for amortization of historical unrealized gains on debt security	$ (689)		(689)
Currency translation adjustment	147	(1,175)	(302)	(478)
Other comprehensive income (loss) before tax	(542)	785	(3,584)	1,482
Income tax related to other comprehensive income (loss)	171	(432)	812	(432)
Other comprehensive income (loss), net of tax	(371)	353	(2,772)	1,050
Comprehensive income (loss)	$ (918)	$ 1,278	$ (2,422)	$ 7,201

XML

Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Shares [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]
Beginning Balance at Dec. 31, 2017	$ 296,608	$ 1,828	$ 220,591	$ 70,402	$ 3,787
Balance, Shares at Dec. 31, 2017		18,278,833
Cumulative effect adjustment from adoption | ASU 2014-09 [Member]	4,761			4,761
Cumulative effect adjustment from adoption | ASU 2016-16 [Member]	(1,896)			(1,896)
Net income	5,226			5,226
Other comprehensive income (loss), net of tax	697				697
Share-based compensation	3,916		3,916
Common shares issued, net	3,862	$ 13	3,849
Common shares issued, net, Shares		126,511
Ending Balance at Mar. 31, 2018	313,174	$ 1,841	228,356	78,493	4,484
Balance, Shares at Mar. 31, 2018		18,405,344
Beginning Balance at Dec. 31, 2017	296,608	$ 1,828	220,591	70,402	3,787
Balance, Shares at Dec. 31, 2017		18,278,833
Net income	6,151
Other comprehensive income (loss), net of tax	1,050
Ending Balance at Jun. 30, 2018	319,846	$ 1,849	233,742	79,418	4,837
Balance, Shares at Jun. 30, 2018		18,485,788
Beginning Balance at Mar. 31, 2018	313,174	$ 1,841	228,356	78,493	4,484
Balance, Shares at Mar. 31, 2018		18,405,344
Net income	925			925
Other comprehensive income (loss), net of tax	353				353
Share-based compensation	5,215		5,215
Common shares issued, net	179	$ 8	171
Common shares issued, net, Shares		80,444
Ending Balance at Jun. 30, 2018	319,846	$ 1,849	233,742	79,418	4,837
Balance, Shares at Jun. 30, 2018		18,485,788
Beginning Balance at Dec. 31, 2018	$ 335,397	$ 1,858	243,165	87,078	3,296
Balance, Shares at Dec. 31, 2018	18,579,688	18,579,688
Cumulative effect adjustment from adoption | ASU 2016-02 [Member]	$ 71			71
Cumulative effect adjustment from adoption | ASU 2018-02 [Member]				(938)	938
Net income	897			897
Other comprehensive income (loss), net of tax	(2,401)				(2,401)
Share-based compensation	5,685		5,685
Common shares issued, net	4,033	$ 21	4,012
Common shares issued, net, Shares		211,081
Ending Balance at Mar. 31, 2019	343,682	$ 1,879	252,862	87,108	1,833
Balance, Shares at Mar. 31, 2019		18,790,769
Beginning Balance at Dec. 31, 2018	$ 335,397	$ 1,858	243,165	87,078	3,296
Balance, Shares at Dec. 31, 2018	18,579,688	18,579,688
Cumulative effect adjustment from adoption | ASU 2018-02 [Member]	$ 938
Net income	350
Other comprehensive income (loss), net of tax	(2,772)
Ending Balance at Jun. 30, 2019	$ 347,794	$ 1,883	257,888	86,561	1,462
Balance, Shares at Jun. 30, 2019	18,831,581	18,831,581
Beginning Balance at Mar. 31, 2019	$ 343,682	$ 1,879	252,862	87,108	1,833
Balance, Shares at Mar. 31, 2019		18,790,769
Net income	(547)			(547)
Other comprehensive income (loss), net of tax	(371)				(371)
Share-based compensation	5,849		5,849
Common shares issued, net	(819)	$ 4	(823)
Common shares issued, net, Shares		40,812
Ending Balance at Jun. 30, 2019	$ 347,794	$ 1,883	$ 257,888	$ 86,561	$ 1,462
Balance, Shares at Jun. 30, 2019	18,831,581	18,831,581

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities
Net income	$ 350	$ 6,151
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization	11,905	8,923
Amortization of operating lease assets, debt costs and other assets	1,750	592
Provision for doubtful accounts	638	(360)
Deferred income taxes	(2,316)	724
Share-based compensation	11,534	9,131
Interest and gain on valuation of investment securities	(1,023)	(1,399)
Change in fair value of contingent consideration	5,870	1,109
Other	477	847
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable	(3,535)	(363)
Inventories	(2,389)	5,251
Prepaid expenses and other current assets	(3,277)	71
Accounts payable	1,626	(3,847)
Other current liabilities	(8,138)	(14,612)
Payment of contingent consideration	(1,340)
Other long-term assets and liabilities	(3,788)	814
Net cash from operating activities	8,344	13,032
Cash flows from investing activities
Acquisition of business, net of cash acquired		(43,749)
Capital expenditures for property, plant and equipment	(9,595)	(5,782)
Capital expenditures for intangible assets	(743)	(870)
Asset acquisitions and other investments	(6,400)	(1,148)
Net cash from investing activities	(16,738)	(51,549)
Cash flows from financing activities
Proceeds from issuance of common shares	6,523	5,416
Payments related to withholdings for share-based compensation	(3,309)	(1,375)
Payment of contingent consideration	(13,660)
Payments related to finance lease obligation	(188)
Other financing activities	(947)	(356)
Net cash from financing activities	(11,581)	3,685
Effect of exchange rate changes on cash	(71)	(639)
Net change in cash, cash equivalents, and restricted cash	(20,046)	(35,471)
Cash, cash equivalents, and restricted cash at the beginning of period	72,189	81,157
Cash, cash equivalents, and restricted cash at the end of period	52,143	45,686
Components of cash, cash equivalents and restricted cash at the end of period
Cash and cash equivalents	52,143	45,686
Cash, cash equivalents, and restricted cash at the end of period	$ 52,143	45,686
Noncash investing activities:
Purchase of intangible assets		1,181
Contingent consideration recognized at acquisition date		$ 25,491

XML

Business and basis of consolidation

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Business and basis of consolidation

1. Business and basis of presentation

Orthofix Medical Inc., together with its subsidiaries (the “Company” or “Orthofix”) is a global medical device company focused on musculoskeletal products and therapies. Headquartered in Lewisville, Texas, the Company has two reporting segments: Global Spine and Global Extremities.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, 2018. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates including those related to revenue recognition; contractual allowances; allowance for doubtful accounts; inventories; valuation of intangible assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.

Prior period reclassifications

Certain amortization expense related to intangible assets previously reported in general and administrative expenses have been reclassified to acquisition-related amortization and remeasurement based on use of the underlying intangible asset. This reclassification resulted in decreases to general and administrative expenses of $0.3 million and $0.4 million for the three and six months ended June 30, 2018, respectively, and increases in acquisition related amortization and remeasurement expense of $0.3 million and $0.4 million for the three and six months ended June 30, 2018, respectively.

Additionally, as disclosed in the Company’s Form 10-K for the year ended December 31, 2018, the Company reclassified $1.1 million of previously reported expense during the second quarter of 2018 related to changes in fair value of contingent consideration from other expense, net, to acquisition-related amortization and remeasurement to conform to current period presentation.

Change in Reporting Segments

The Company has changed its reportable business segments beginning with the first quarter of 2019, to align with changes in how the Company manages its business, reviews operating performance and allocates resources.  The Company now reports results under two reportable segments: Global Spine and Global Extremities, and measures operating performance of these two reportable segments based on EBITDA. For additional discussion regarding segments, see Note 12.

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Recently adopted accounting standards and recently issued accounting pronouncements

6 Months Ended

Jun. 30, 2019

Accounting Changes And Error Corrections [Abstract]

Recently adopted accounting standards and recently issued accounting pronouncements

2. Recently adopted accounting standards and recently issued accounting pronouncements

Adoption of ASU 2016-02, Leases (Topic 842)

In February 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which changes how lessees account for leases. For most leases, a liability will be recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. For leases classified as operating leases, the Company will recognize lease costs on a straight-line basis based on the combined amortization of the lease obligation and the right-of-use asset. Other leases will be accounted for as finance leases similar to capital leases under the previous accounting standard.  Effective January 1, 2019, the Company adopted ASU 2016-02 using a modified retrospective approach. Upon adoption, the Company elected a package of practical expedients permitted within the new standard. The practical expedients adopted allow the Company to carry forward its historical lease classification and to not separate and allocate the consideration paid between lease and non-lease components included within a contract. The Company also adopted an optional transition method that waives the requirement to apply the ASU to the comparative periods presented within the financial statements in the year of adoption. Therefore, results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and

continue to be reported in accordance with the Company’s historic accounting policies under Topic 840. See Note 5 for additional discussion of the Company’s adoption of Topic 842 and its lease accounting policies.

Adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, which allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act"). The Company adopted this guidance effective January 1, 2019, which resulted in an increase to accumulated other comprehensive income and a decrease in retained earnings of $0.9 million.

Other recently adopted accounting guidance

In August 2018, the Securities and Exchange Commission (the “SEC” or the “Commission”) issued SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification, which amends certain of the Commission’s disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. GAAP, or changes in the information environment. However, in certain instances, the amendments expanded disclosure requirements, including those related to interim disclosures about changes in shareholders’ equity. As amended in the final rule, registrants must now analyze changes in shareholders’ equity, in the form of a reconciliation for the current year-to-date interim periods, with subtotals for each interim period. The Company adopted Release No. 33-10532 during the first quarter of 2019, which resulted in changes in shareholders’ equity presented within the Condensed Consolidated Statements of Changes in Shareholders’ Equity.

Recently issued accounting pronouncements

Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Financial Instruments - Credit Losses (ASU 2016-13), and subsequent amendments	Requires that credit losses for certain types of financial instruments be estimated based on expected losses and also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. Applied using a modified retrospective approach, with early adoption permitted.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.
Goodwill (ASU 2017-04)	Eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. Applied on a prospective basis, with early adoption permitted.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements. However, the Company does not expect this ASU to have a significant impact on its financial statements or disclosures.
Fair value measurement (ASU 2018-13)	Eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and adds new disclosure requirements for Level 3 measurements. Certain of the provisions are to be applied retrospectively with other provisions  applied prospectively.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Implementation costs in a cloud computing arrangement that is a service contract (ASU 2018-15)	Aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. Applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

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Acquisitions

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisitions

3. Acquisitions

Acquisition of Spinal Kinetics, Inc.

On April 30, 2018, the Company completed the acquisition of Spinal Kinetics Inc. (“Spinal Kinetics”), a privately held developer and manufacturer of artificial cervical and lumbar discs for $45.0 million in net cash, subject to certain adjustments, plus potential milestone payments of up to $60.0 million in cash. The acquisition date fair value of the consideration transferred was $76.6 million. The results of operations for Spinal Kinetics have been included in the Company’s financial results since the acquisition date, April 30, 2018. For additional discussion regarding the valuation of the contingent consideration, see Note 7.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date. During the first quarter of 2019, the Company finalized its valuation of assets acquired and liabilities assumed, which resulted in an adjustment between deferred income taxes and goodwill.

(U.S. Dollars, in thousands)	Preliminary Acquisition Date Fair Value as Previously Reported		Adjustments			Final Acquisition Date Fair Value		Assigned Useful Life
Assets acquired
Cash and cash equivalents	$	6,785	$	—		$	6,785
Restricted cash		30		—			30
Accounts receivable		1,705		—			1,705
Inventories		8,175		—			8,175
Prepaid expenses and other current assets		315		—			315
Property, plant and equipment		2,285		—			2,285
Other long-term assets		320		—			320
Developed technology		12,400		—			12,400	10 years
In-process research and development ("IPR&D")		26,800		—			26,800	10 years
Tradename		100		—			100	2 years
Deferred income taxes		2,374		1,220			3,594
Total identifiable assets acquired	$	61,289	$	1,220		$	62,509
Liabilities assumed
Accounts payable	$	351	$	—		$	351
Other current liabilities		2,873		(4	)		2,869
Other long-term liabilities		301		—			301
Total liabilities assumed	$	3,525	$	(4	)	$	3,521
Goodwill		18,836		(1,224	)		17,612
Total fair value of consideration transferred	$	76,600	$	—		$	76,600

On February 6, 2019, the Company obtained U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc for patients suffering from cervical disease degeneration and started amortizing IPR&D. The $17.6 million of goodwill recognized was assigned to the Global Spine reporting segment.

The Company did not recognize any acquisition related costs during the three and six months ended June 30, 2019 and recorded $1.5 million and $3.0 million of acquisition related costs during the three and six months ended June 30, 2018. These costs are included in the condensed consolidated statements of operations and comprehensive income (loss) within general and administrative expenses. The Company’s results of operations included net sales of $3.2 million and $2.3 million related to Spinal Kinetics for the three months ended June 30, 2019 and 2018, respectively, and net sales of $6.4 million and $2.3 million for the six months ended June 30, 2019 and 2018, respectively. Additionally, the Company’s results of operations included net losses of $3.4 million and $1.8 million related to Spinal Kinetics for the three months ended June 30, 2019 and 2018, respectively, and net losses of $7.4 million and $1.8 million for the six months ended June 30, 2019 and 2018, respectively.

The following table presents the unaudited pro forma results for the three and six months ended June 30, 2019 and 2018, which combines the historical results of operations of Orthofix and Spinal Kinetics as though the companies had been combined as of January 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time.

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018		2019		2018
	(unaudited)			(unaudited)		(unaudited)		(unaudited)
Net sales	$	115,850		$	115,129	$	224,962	$	227,584
Net income (loss)		(547	)		597		350		5,457

Options Medical, LLC Asset Acquisition

On January 31, 2019, the Company acquired certain assets of Options Medical, LLC, (“Options Medical”) a medical device distributor based in Florida. Under the terms of the acquisition, the parties agreed to terminate an existing exclusive sales representative agreement, employees of Options Medical became employees of the Company and the Company acquired all customer lists and customer information related to the sale of the Company’s products. As consideration for the assets acquired, the Company paid $6.4 million. Additionally, as an inducement to enter into employment with the Company, the Company provided 25,478 restricted stock units (“RSUs”), with a fair value of $1.4 million, to the Options Medical founder. These RSUs will vest in one-third annual increments beginning on the first anniversary of the grant date and are contingent upon continued employment. The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date.

(U.S. Dollars, in thousands)	Fair Value		Balance Sheet Classification	Assigned Useful Life
Assets acquired
Operating lease assets	$	175	Other long-term assets
Customer relationships		5,832	Intangible assets, net	10 years
Assembled workforce		568	Intangible assets, net	5 years
Total identifiable assets acquired	$	6,575
Liabilities assumed
Operating lease liability - short-term	$	69	Other current liabilities
Operating lease liability - long-term		106	Other long-term liabilities
Total liabilities assumed		175
Total fair value of consideration transferred	$	6,400

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Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

4. Inventories

Inventories were as follows:

(U.S. Dollars, in thousands)	June 30, 2019		December 31, 2018
Raw materials	$	7,752	$	8,463
Work-in-process		11,421		13,478
Finished products		59,968		54,906
Inventories	$	79,141	$	76,847

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

5. Leases

As discussed in Note 2, the Company adopted ASU No. 2016-02—Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of $20.2 million and $20.5 million, respectively, as of January 1, 2019. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact and the elimination of historical prepaid or deferred rent, was recorded as an adjustment to retained earnings. The net impact of adoption to the Company’s balance sheet as of January 1, 2019 is presented in the table below. The standard did not have a material impact to the Company’s condensed consolidated statements of operations and comprehensive income (loss) or cash flows.

(U.S. Dollars, in thousands)	December 31, 2018		Impact of Adoption of ASC 842			January 1, 2019
Assets
Current assets
Cash, cash equivalents, and restricted cash	$	72,189	$	—		$	72,189
Accounts receivable, net		77,747		—			77,747
Inventories		76,847		—			76,847
Prepaid expenses and other current assets		17,856		(15	)		17,841
Total current assets		244,639		(15	)		244,624
Property, plant, and equipment, net		42,835		—			42,835
Intangible assets, net and goodwill		124,298		—			124,298
Deferred income taxes		33,228		71			33,299
Other long-term assets		21,641		20,209			41,850
Total assets	$	466,641	$	20,265		$	486,906
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	17,989	$	—		$	17,989
Other current liabilities		67,919		2,166			70,085
Total current liabilities		85,908		2,166			88,074
Other long-term liabilities		45,336		18,028			63,364
Total liabilities	$	131,244	$	20,194		$	151,438
Shareholders’ equity
Common shares		1,858		—			1,858
Additional paid-in capital		243,165		—			243,165
Retained earnings		87,078		71			87,149
Accumulated other comprehensive income		3,296		—			3,296
Total shareholders’ equity		335,397		71			335,468
Total liabilities and shareholders’ equity	$	466,641	$	20,265		$	486,906

The Company determines if an arrangement is a lease at inception. The Company’s leases primarily relate to facilities, vehicles, and equipment. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.

The Company has made an accounting policy election for short-term leases, in that the Company will not recognize a lease liability or lease asset on the balance sheet for leases with a lease term of twelve months or less as of the commencement date. Rather, any short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

The Company has made a policy election for all classifications of leases to combine lease and nonlease components and to account for them as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

During the first quarter of 2019, the Company entered into an amendment for its corporate headquarters lease. As a result, the classification of this lease changed from an operating lease to a finance lease, resulting in an increase to both the lease liability and lease asset of approximately $8.0 million.

A summary of the Company’s lease portfolio as of June 30, 2019 is presented in the table below:

(U.S. Dollars, in thousands, except lease term and discount rate)	Classification	June 30, 2019
Assets
Operating leases	Other long-term assets	$	6,353
Finance leases	Property, plant and equipment, net		20,695
Total lease assets			27,048
Liabilities
Current
Operating leases	Other current liabilities		1,816
Finance leases	Current portion of finance lease liability		301
Long-term
Operating leases	Other long-term liabilities		4,609
Finance leases	Long-term portion of finance lease liability		20,847
Total lease liabilities		$	27,573
Weighted Average Remaining Lease Term
Operating leases		4.5 years
Finance leases		21.2 years
Weighted Average Discount Rate
Operating leases			2.46	%
Finance leases			4.38	%

The components of lease costs were as follows:

(U.S. Dollars, in thousands)	Three Months ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease costs:
Amortization of right-of-use assets	$	245	$	484
Interest on finance lease liabilities		231		454
Operating lease costs		540		1,080
Short-term lease costs		72		134
Variable lease costs		176		328
Total lease costs	$	1,264	$	2,480

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,055
Operating cash flows from finance leases		454
Financing cash flows from finance leases		188
Right-of-use assets obtained in exchange for lease obligations
Operating leases		362
Finance leases		21,179

A summary of the Company’s remaining lease liabilities as of June 30, 2019 is included below:

(U.S. Dollars, in thousands)	Operating Leases			Finance Leases
2019	$	977		$	642
2020		1,808			1,013
2021		1,593			1,414
2022		1,312			1,443
2023		256			1,471
Thereafter		803			27,207
Total undiscounted value of lease liabilities	$	6,749		$	33,190
Less: Interest		(324	)		(12,042	)
Present value of lease liabilities	$	6,425		$	21,148
Current portion of lease liabilities		1,816			301
Long-term portion of lease liabilities		4,609			20,847
Total lease liabilities	$	6,425		$	21,148

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Long-term debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-term debt

6. Long-term debt

As of June 30, 2019, the Company had no borrowings under its five year $125 million secured revolving credit facility. In addition, the Company had no borrowings on its €5.5 million ($6.3 million) available lines of credit in Italy as of June 30, 2019.  The Company is in compliance with all required financial covenants as of June 30, 2019.

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Fair value measurements

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair value measurements

7. Fair value measurements

The fair value of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

	June 30, 2019											December 31, 2018
(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Treasury securities	$	502	$	—		$	—		$	502		$	490
Bone Biologics equity warrants		—		—			—			—			—
Bone Biologics equity securities		—		219			—			219			219
eNeura debt security		—		—			—			—			17,820
eNeura warrant		—		—			491			491			—
Total	$	502	$	219		$	491		$	1,212		$	18,529
Liabilities
Contingent consideration	$	—	$	—		$	(19,430	)	$	(19,430	)	$	(28,560	)
Deferred compensation plan		—		(1,314	)		—			(1,314	)		(1,275	)
Total	$	—	$	(1,314	)	$	(19,430	)	$	(20,744	)	$	(29,835	)

Bone Biologics Equity Warrants and Securities

The Company holds investments in common stock and warrants to purchase shares of common stock of Bone Biologics. The Company’s common stock investments are recorded within other long-term assets while the warrants are considered to have a fair value of zero. The equity securities are considered investments that do not have readily determinable fair values. As such, the Company measures these investments at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018			2019		2018
Bone Biologics equity securities and warrants beginning balance	$	219	$	4,897		$	219	$	2,768
Impact of adoption of ASU 2016-01 recognized in other income (expense), net		—		—			—		1,629
Purchase of additional common stock		—		—			—		500
Fair value adjustments, expirations, and impairments recognized in other income (expense), net		—		(229	)		—		(229	)
Bone Biologics equity securities and warrants ending balance	$	219	$	4,668		$	219	$	4,668

eNeura Debt Security and Warrant

The Company holds a debt security of eNeura, Inc., a privately held medical technology company that is developing devices for the treatment of migraines. The debt security was originally set to mature on March 4, 2019. On March 1, 2019, the Company entered into an Amended and Restated Senior Secured Promissory Note with eNeura (the “Restructured Debt Security”) to restructure the debt security, which extended the maturity date to the earlier of (i) March 4, 2022, (ii) the effective date of a change in control, or (iii) the effective date of an initial public offering by eNeura and which also eliminated the conversion feature included within the original note. As consideration for the extension, eNeura issued to the Company a Warrant to Purchase Common Stock (the “Warrant”), exercisable at $0.01 per share over a ten year contractual term, for a number of shares equal to 10% of the sum of the outstanding principal and accrued interest on the Amended and Restated Debt Security as of March 1, 2019, divided by $1.00 (subject to certain anti-dilution provisions).

Prior to the restructuring on March 1, 2019, the debt security was accounted for as an available for sale debt security at fair value and included within other long-term assets. The fair value was based upon significant unobservable inputs, including the use of a discounted cash flow model and assumptions regarding the expected payback period for the debt security, requiring the Company to develop its own assumptions; therefore, the Company had categorized this asset as a Level 3 financial asset. Subsequent to the restructuring, the debt security is no longer classified as an available for sale debt security, but rather as a held to maturity debt security. As a result, the amounts included in accumulated other comprehensive income related to this debt security are now being amortized to interest

income over the extended term of the Restructured Debt Security. For additional discussion regarding the Restructured Debt Security, see Note 8.

The Warrant is recorded at fair value and included in other long-term assets. The fair value of the Warrant is based on significant unobservable inputs, including the use of a discounted cash flow model and an option-pricing model, requiring the Company to develop its own assumptions; therefore, the Company has categorized this asset as a Level 3 financial asset. As of June 30, 2019, the estimated fair value of the Warrant was $0.5 million. The Warrant is considered an investment that does not have a readily determinable fair value. As such, the Company measures the Warrant at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

The following table provides a reconciliation of the beginning and ending balances for the eNeura debt security and Warrant measured and reflected in the condensed consolidated balance sheets at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2019			2018
eNeura debt security and Warrant at January 1	$	17,820		$	16,050
Gains or losses recorded for the period
Recognized in other comprehensive income (loss)		(2,593	)		1,960
Change in classification of debt security to held to maturity		(15,227	)		—
Issuance of warrant as consideration for extension		491			—
eNeura debt security and Warrant at June 30	$	491		$	18,010

Contingent Consideration

The contingent consideration at the acquisition date of Spinal Kinetics consisted of potential future milestone payments of up to $60.0 million in cash. The milestone payments included (i) up to $15.0 million if the FDA grants approval of Spinal Kinetics’ M6-C artificial cervical disc (the “FDA Milestone”) and (ii) revenue-based milestone payments of up to $45.0 million in connection with future sales of the M6-C artificial cervical disc and the M6-L artificial lumbar disc. Milestones must be achieved within five years of April 30, 2018 to trigger applicable payments.

On February 6, 2019, the Company obtained FDA approval of the M6-C artificial cervical disc. This approval triggered the Company’s payment obligation of $15.0 million for the achievement of the FDA Milestone and such obligation was paid on February 14, 2019. The fair value of the remaining contingent consideration was $19.4 million as of June 30, 2019; however, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration. The remaining liability attributable to the revenue-based milestones is included within other long-term liabilities. Any changes in fair value are recorded as an operating expense and included within acquisition-related amortization and remeasurement.

The Company estimated the fair value of the remaining potential future revenue-based milestone payments using a Monte Carlo simulation. This fair value measurement is based on significant inputs that are unobservable in the market, and thus represents a Level 3 measurement. The key assumptions in applying the Monte Carlo valuation model include the Company’s forecasted future revenues for Spinal Kinetics products, discount rate applied, and assumptions for potential volatility of the Company’s forecasted revenue. Significant changes in these assumptions could result in a significantly higher or lower fair value.

The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2019			2018
Contingent consideration at January 1	$	28,560		$	—
Acquisition date fair value		—			25,491
Increase in fair value recognized in acquisition-related amortization and remeasurement		5,870			1,109
Payment made		(15,000	)		—
Contingent consideration at June 30	$	19,430		$	26,600

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Investments

6 Months Ended

Jun. 30, 2019

Investments Debt And Equity Securities [Abstract]

Investments

8. Investments

As a result of the restructuring of the eNeura debt security discussed in Note 7, the eNeura debt security was reclassified from an available for sale debt security to a held to maturity debt security at its fair value on the date of the restructuring. The unrealized gain included in accumulated other comprehensive income at the restructuring date continues to be included in accumulated other comprehensive income and is now being amortized to interest income over the remaining life of the Restructured Debt Security. The Restructured Debt Security will be evaluated for impairment based on management’s estimate of future cash collections discounted using the debt security’s original effective interest rate of 8%. Management’s estimate of future cash flows involves significant judgment regarding the timing, expected events, and amount of future cash collections. Decreases in management’s estimate of future cash collections could result in an other than temporary impairment. As of June 30, 2019, the Company’s amortized cost basis in the Restructured Note was $15.1 million, which also represents its carrying value, compared to an estimated fair value of $16.0 million and an unpaid principal balance of $15.0 million. During the three and six months ended June 30, 2019, the Company recognized $0.2 and $0.3 million in interest income related to the eNeura debt security. The Company did not recognize any interest income during the three and six months ended June 30, 2018.

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Contingencies

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Contingencies

9. Contingencies

In addition to the matters described below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses related to these matters are individually and collectively immaterial as to a possible loss and range of loss.

Italian Medical Device Payback (“IMDP”)

In 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System. The healthcare law is expected to impact the business and financial reporting of companies operating in the medical technology sector that sell medical devices in Italy. A key provision of the law is a ‘payback’ measure, requiring companies selling medical devices in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalization. The Company’s current assessment of the IMDP involves significant judgment regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. The Company accounts for the estimated cost of the IMDP as sales and marketing expense and recorded expense of $0.3 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively and $0.7 million and $0.5 million for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the Company has accrued $4.3 million related to the IMDP, which it has classified within other long-term liabilities; however, the actual liability could be higher or lower than the amount accrued once the law has been clarified by the Italian authorities.

Brazil

In July 2018, the Federal Prosecution Service in Rio de Janeiro and representatives from the Brazilian antitrust authority inspected the offices of more than 30 companies, including the Company’s office in São Paulo, as part of an investigation into tender irregularities in the medical device industry. Before doing so, the authorities obtained a court order affecting the Company’s (and other companies’) local bank accounts resulting in the freezing of approximately $2.5 million of the Company’s cash, which the Company reclassified to restricted cash. On April 3, 2019, the Company’s appeal regarding the freezing of its local bank accounts was heard by the Brazil Federal Court of Appeals of Rio de Janeiro, in which the Court ordered the unfreezing of the Company’s cash. The cash was then returned without any restrictions in April 2019. As such, this balance has been reclassified to cash and cash equivalents as of June 30, 2019.

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Accumulated other comprehensive Income

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Accumulated other comprehensive Income

10. Accumulated other comprehensive income

The components of and changes in accumulated other comprehensive income were as follows:

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Debt Security			Accumulated Other Comprehensive Income
Balance at December 31, 2018	$	(2,386	)	$	5,682		$	3,296
Cumulative effect adjustment from adoption of ASU 2018-02		—			938			938
Other comprehensive loss		(302	)		(2,593	)		(2,895	)
Income taxes		—			641			641
Reclassification adjustment to:
Interest income (expense), net		—			(689	)		(689	)
Income taxes		—			171			171
Balance at June 30, 2019	$	(2,688	)	$	4,150		$	1,462

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Revenue recognition and accounts receivable

6 Months Ended

Jun. 30, 2019

Revenue Recognition And Accounts Receivable [Abstract]

Revenue recognition and accounts receivable

11. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments, which consist of Global Spine and Global Extremities.  Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants and Biologics.

The tables below present net sales by major product category by reporting segment:

	Three Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		Change
Bone Growth Therapies	$	50,109	$	48,211		3.9	%
Spinal Implants		23,226		23,880		-2.7	%
Biologics		16,744		14,668		14.2	%
Global Spine		90,079		86,759		3.8	%
Global Extremities		25,771		24,788		4.0	%
Net sales	$	115,850	$	111,547		3.9	%

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		Change
Bone Growth Therapies	$	97,392	$	94,374		3.2	%
Spinal Implants		46,129		44,587		3.5	%
Biologics		32,476		29,003		12.0	%
Global Spine		175,997		167,964		4.8	%
Global Extremities		48,965		52,292		-6.4	%
Net sales	$	224,962	$	220,256		2.1	%

Product Sales and Marketing Service Fees

The table below presents net sales, which includes product sales and marketing service fees, for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Product sales	$	99,865	$	97,453	$	193,799	$	192,342
Marketing service fees		15,985		14,094		31,163		27,914
Net sales	$	115,850	$	111,547	$	224,962	$	220,256

Product sales primarily consist of the sale of bone growth therapy devices and internal and external fixation products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment. Revenues exclude any value added or other local taxes, intercompany sales and trade discounts. Shipping and handling costs for products shipped to customers are included in cost of sales.

Puerto Rico Settlement

In June 2019, the Company received a payment of $1.4 million from the Administration of Medical Services of Puerto Rico, a government-owned corporation, in settlement of approximately $2.5 million of outstanding accounts receivable. This $2.5 million of outstanding accounts receivable had previously been fully reserved between the Company’s allowances for doubtful accounts and contractual allowances. As a result of this settlement, and in accordance with the Company’s policy, the Company recorded the resulting adjustment to contractual allowances of $0.4 million within net sales and the recovery of the allowance for doubtful accounts as a credit to bad debt expense of $1.0 million.

Other Contract Assets

The Company’s contract assets, excluding trade accounts receivable (“other contract assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of the exclusive distribution of Orthofix products. Other contract assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled $3.9 million and $1.9 million as of June 30, 2019, and December 31, 2018, respectively.

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Business segment information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Business segment information

12. Business segment information

During the first quarter of 2019, the Company changed its reporting segments from four reporting segments, previously reported as Bone Growth Therapies, Spinal Implants, Biologics, and Orthofix Extremities, to two reporting segments:  Global Spine and Global Extremities. Additionally, the Company changed the performance measure used to evaluate segment performance from Non-GAAP net margin to earnings before interest income (expense), net, income taxes, depreciation and amortization (“EBITDA”). These changes were made to align how the chief operating decision maker manages the business, reviews operating performance and allocates resources. The Company has revised its segment reporting to represent how the business is now managed and restated prior periods to conform to the current segment presentation. Corporate activities are comprised of the operating expenses and activities of the Company not necessarily identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions.

As part of the change in reporting segments, the Company performed a quantitative assessment of goodwill immediately prior to and subsequently following the change in reporting segments. The analysis did not result in an impairment. In addition, the net carrying value of goodwill that was previously reported under the prior reporting segments (i) Bone Growth Therapies (ii) Spinal Implants and (iii) Biologics have been consolidated and are included within the Global Spine reporting segment as of June 30, 2019.

As mentioned above, the primary metric used in managing the Company is EBITDA. The table below presents EBITDA by reporting segment:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			2019			2018
Global Spine	$	16,523		$	19,030		$	27,098		$	37,855
Global Extremities		2,750			488			2,577			3,816
Corporate		(12,880	)		(12,692	)		(22,407	)		(19,694	)
Total EBITDA	$	6,393		$	6,826		$	7,268		$	21,977
Depreciation and amortization		(6,178	)		(4,554	)		(11,905	)		(8,923	)
Interest income (expense), net		457			(251	)		200			(434	)
Income (loss) before income taxes	$	672		$	2,021		$	(4,437	)	$	12,620

Geographical information

The table below presents net sales by geographic destination for each reporting unit and for the consolidated Company:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Global Spine
U.S.	$	84,601	$	81,722	$	164,127	$	159,760
International		5,478		5,037		11,870		8,204
Total Global Spine		90,079		86,759		175,997		167,964
Global Extremities
U.S.		6,844		7,023		13,442		13,939
International		18,927		17,765		35,523		38,353
Total Global Extremities		25,771		24,788		48,965		52,292
Consolidated
U.S.		91,445		88,745		177,569		173,699
International		24,405		22,802		47,393		46,557
Net sales	$	115,850	$	111,547	$	224,962	$	220,256

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Acquisition-Related Amortization and Remeasurement

6 Months Ended

Jun. 30, 2019

Acquisition Related Amortization And Remeasurement [Abstract]

Acquisition-Related Amortization and Remeasurement

13. Acquisition-related amortization and remeasurement

Acquisition-related amortization and remeasurement consists of amortization related to intangible assets acquired through business combinations or asset acquisitions and the remeasurement of any related contingent consideration arrangement. Components of acquisition-related amortization and remeasurement for the three months and six months ended June 30, 2019 and 2018, respectively, are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Changes in fair value of contingent consideration	$	470	$	1,109	$	5,870	$	1,109
Amortization of acquired intangibles		1,338		310		2,395		373
Total	$	1,808	$	1,419	$	8,265	$	1,482

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Share-based compensation

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-based compensation

14. Share-based compensation

The following tables present the detail of share-based compensation by line item in the condensed consolidated statements of operations and comprehensive income (loss) as well as by award type:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Cost of sales	$	180	$	132	$	367	$	257
Sales and marketing		692		473		1,302		922
General and administrative		4,564		4,249		9,128		7,294
Research and development		413		361		737		658
Total	$	5,849	$	5,215	$	11,534	$	9,131

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Stock options	$	926	$	1,241	$	3,038	$	1,863
Time-based restricted stock awards and units		2,951		1,789		4,657		3,236
Performance-based restricted stock awards and units		—		270		—		759
Market-based restricted stock units		1,576		1,604		2,923		2,557
Stock purchase plan		396		311		916		716
Total	$	5,849	$	5,215	$	11,534	$	9,131

During the three months ended June 30, 2019 and 2018, the Company issued 40,812 and 80,444 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises and the vesting of restricted stock awards and units. During the six months ended June 30, 2019 and 2018, the Company issued 251,893 and 206,955 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises and the vesting of restricted stock awards and units.

On August 5, the Company entered into an employment agreement with its new President of Global Spine and awarded restricted stock units and stock options valued at approximately $1.5 million as inducement grants.

Share-Based Compensation Modifications

During the first quarter of 2019, the Company entered into a Transition and Retirement Agreement (the “Retirement Agreement”) with the Company’s President and Chief Executive Officer.  As part of the Retirement Agreement, certain time-based stock options and restricted stock awards were modified to accelerate the vesting to the retirement date. In addition, stock options were modified to extend the post-termination exercise period from 18 months under a standard qualified retirement to up to four years, dependent upon the remaining contractual term of the options. The Company recognized approximately $1.5 million and $3.7 million in share-based compensation expense during the three and six months ended June 30, 2019, related to the Retirement Agreement, which was charged to general and administrative expense in the condensed consolidated statements of operations and comprehensive income (loss).

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Income taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income taxes

15. Income taxes

Income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items.  As a result, the Company’s interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.

For the three months ended June 30, 2019 and 2018, the effective tax rate was 181.4% and 54.2%, respectively. For the six months ended June 30, 2019 and 2018, the effective tax rate was 107.9% and 51.3%, respectively. The primary factors affecting the Company’s effective tax rate for the three and six months ended June 30, 2019, were increased limitation of the deductibility of executive compensation, financial expenses not deductible for tax purposes, and benefits related to effective settlement of the 2015 federal tax examination and statute expirations.

During the first quarter of 2019, the Internal Revenue Service concluded an examination of the Company’s federal income tax return for 2015, which resulted in a benefit of $1.8 million. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state and foreign matters could be reduced by $13.0 million to $13.4 million as audits close and statutes expire.

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Earnings per share ("EPS")

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings per share ("EPS")

16. Earnings per share (“EPS”)

The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with nonforfeitable rights to dividends or dividend equivalents (referred to as participating securities). For the three and six months ended June 30, 2019 and 2018, no significant adjustments were made to net income for purposes of calculating basic and diluted EPS. The following is a reconciliation of the weighted average shares used in diluted EPS computations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Weighted average common shares-basic		18,834,886		18,413,756		18,790,612		18,409,331
Effect of dilutive securities
Unexercised stock options and stock purchase plan		—		327,171		259,967		318,047
Unvested restricted stock awards and units		—		94,633		128,478		83,978
Weighted average common shares-diluted		18,834,886		18,835,560		19,179,057		18,811,356

There were 1,987,907 and 413,296 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the three months ended June 30, 2019 and 2018, respectively, and 483,731 and 259,470 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the six months ended June 30, 2019 and 2018, respectively, because inclusion of these awards was anti-dilutive or, for performance-based and market-based restricted stock awards and units, all necessary conditions had not been satisfied by the end of the respective period.

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Recently adopted accounting standards and recently issued accounting pronouncements (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Changes And Error Corrections [Abstract]

Recently adopted accounting standards and recently issued accounting pronouncements

Adoption of ASU 2016-02, Leases (Topic 842)

In February 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which changes how lessees account for leases. For most leases, a liability will be recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. For leases classified as operating leases, the Company will recognize lease costs on a straight-line basis based on the combined amortization of the lease obligation and the right-of-use asset. Other leases will be accounted for as finance leases similar to capital leases under the previous accounting standard.  Effective January 1, 2019, the Company adopted ASU 2016-02 using a modified retrospective approach. Upon adoption, the Company elected a package of practical expedients permitted within the new standard. The practical expedients adopted allow the Company to carry forward its historical lease classification and to not separate and allocate the consideration paid between lease and non-lease components included within a contract. The Company also adopted an optional transition method that waives the requirement to apply the ASU to the comparative periods presented within the financial statements in the year of adoption. Therefore, results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and

continue to be reported in accordance with the Company’s historic accounting policies under Topic 840. See Note 5 for additional discussion of the Company’s adoption of Topic 842 and its lease accounting policies.

Adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, which allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act"). The Company adopted this guidance effective January 1, 2019, which resulted in an increase to accumulated other comprehensive income and a decrease in retained earnings of $0.9 million.

Other recently adopted accounting guidance

In August 2018, the Securities and Exchange Commission (the “SEC” or the “Commission”) issued SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification, which amends certain of the Commission’s disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. GAAP, or changes in the information environment. However, in certain instances, the amendments expanded disclosure requirements, including those related to interim disclosures about changes in shareholders’ equity. As amended in the final rule, registrants must now analyze changes in shareholders’ equity, in the form of a reconciliation for the current year-to-date interim periods, with subtotals for each interim period. The Company adopted Release No. 33-10532 during the first quarter of 2019, which resulted in changes in shareholders’ equity presented within the Condensed Consolidated Statements of Changes in Shareholders’ Equity.

Recently issued accounting pronouncements

Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Financial Instruments - Credit Losses (ASU 2016-13), and subsequent amendments	Requires that credit losses for certain types of financial instruments be estimated based on expected losses and also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. Applied using a modified retrospective approach, with early adoption permitted.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.
Goodwill (ASU 2017-04)	Eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. Applied on a prospective basis, with early adoption permitted.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements. However, the Company does not expect this ASU to have a significant impact on its financial statements or disclosures.
Fair value measurement (ASU 2018-13)	Eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and adds new disclosure requirements for Level 3 measurements. Certain of the provisions are to be applied retrospectively with other provisions  applied prospectively.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Implementation costs in a cloud computing arrangement that is a service contract (ASU 2018-15)	Aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. Applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.	January 1, 2020	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2019

Business Acquisition [Line Items]

Summary of Unaudited Pro forma Results

The following table presents the unaudited pro forma results for the three and six months ended June 30, 2019 and 2018,

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018		2019		2018
	(unaudited)			(unaudited)		(unaudited)		(unaudited)
Net sales	$	115,850		$	115,129	$	224,962	$	227,584
Net income (loss)		(547	)		597		350		5,457

Spinal Kinetics [Member]

Business Acquisition [Line Items]

Summary of Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date. During the first quarter of 2019, the Company finalized its valuation of assets acquired and liabilities assumed, which resulted in an adjustment between deferred income taxes and goodwill.

(U.S. Dollars, in thousands)	Preliminary Acquisition Date Fair Value as Previously Reported		Adjustments			Final Acquisition Date Fair Value		Assigned Useful Life
Assets acquired
Cash and cash equivalents	$	6,785	$	—		$	6,785
Restricted cash		30		—			30
Accounts receivable		1,705		—			1,705
Inventories		8,175		—			8,175
Prepaid expenses and other current assets		315		—			315
Property, plant and equipment		2,285		—			2,285
Other long-term assets		320		—			320
Developed technology		12,400		—			12,400	10 years
In-process research and development ("IPR&D")		26,800		—			26,800	10 years
Tradename		100		—			100	2 years
Deferred income taxes		2,374		1,220			3,594
Total identifiable assets acquired	$	61,289	$	1,220		$	62,509
Liabilities assumed
Accounts payable	$	351	$	—		$	351
Other current liabilities		2,873		(4	)		2,869
Other long-term liabilities		301		—			301
Total liabilities assumed	$	3,525	$	(4	)	$	3,521
Goodwill		18,836		(1,224	)		17,612
Total fair value of consideration transferred	$	76,600	$	—		$	76,600

Options Medical [Member]

Business Acquisition [Line Items]

Summary of Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date.

(U.S. Dollars, in thousands)	Fair Value		Balance Sheet Classification	Assigned Useful Life
Assets acquired
Operating lease assets	$	175	Other long-term assets
Customer relationships		5,832	Intangible assets, net	10 years
Assembled workforce		568	Intangible assets, net	5 years
Total identifiable assets acquired	$	6,575
Liabilities assumed
Operating lease liability - short-term	$	69	Other current liabilities
Operating lease liability - long-term		106	Other long-term liabilities
Total liabilities assumed		175
Total fair value of consideration transferred	$	6,400

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Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories were as follows:

(U.S. Dollars, in thousands)	June 30, 2019		December 31, 2018
Raw materials	$	7,752	$	8,463
Work-in-process		11,421		13,478
Finished products		59,968		54,906
Inventories	$	79,141	$	76,847

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Summary of Lease Portfolio

A summary of the Company’s lease portfolio as of June 30, 2019 is presented in the table below:

(U.S. Dollars, in thousands, except lease term and discount rate)	Classification	June 30, 2019
Assets
Operating leases	Other long-term assets	$	6,353
Finance leases	Property, plant and equipment, net		20,695
Total lease assets			27,048
Liabilities
Current
Operating leases	Other current liabilities		1,816
Finance leases	Current portion of finance lease liability		301
Long-term
Operating leases	Other long-term liabilities		4,609
Finance leases	Long-term portion of finance lease liability		20,847
Total lease liabilities		$	27,573
Weighted Average Remaining Lease Term
Operating leases		4.5 years
Finance leases		21.2 years
Weighted Average Discount Rate
Operating leases			2.46	%
Finance leases			4.38	%

Summary of Components of Lease Costs

The components of lease costs were as follows:

(U.S. Dollars, in thousands)	Three Months ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease costs:
Amortization of right-of-use assets	$	245	$	484
Interest on finance lease liabilities		231		454
Operating lease costs		540		1,080
Short-term lease costs		72		134
Variable lease costs		176		328
Total lease costs	$	1,264	$	2,480

Summary of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,055
Operating cash flows from finance leases		454
Financing cash flows from finance leases		188
Right-of-use assets obtained in exchange for lease obligations
Operating leases		362
Finance leases		21,179

Summary of Remaining Lease Liabilities

A summary of the Company’s remaining lease liabilities as of June 30, 2019 is included below:

(U.S. Dollars, in thousands)	Operating Leases			Finance Leases
2019	$	977		$	642
2020		1,808			1,013
2021		1,593			1,414
2022		1,312			1,443
2023		256			1,471
Thereafter		803			27,207
Total undiscounted value of lease liabilities	$	6,749		$	33,190
Less: Interest		(324	)		(12,042	)
Present value of lease liabilities	$	6,425		$	21,148
Current portion of lease liabilities		1,816			301
Long-term portion of lease liabilities		4,609			20,847
Total lease liabilities	$	6,425		$	21,148

ASU 2016-02 [Member]

Summary of Net Impact of Adoption Balance Sheet

The net impact of adoption to the Company’s balance sheet as of January 1, 2019 is presented in the table below. The standard did not have a material impact to the Company’s condensed consolidated statements of operations and comprehensive income (loss) or cash flows.

(U.S. Dollars, in thousands)	December 31, 2018		Impact of Adoption of ASC 842			January 1, 2019
Assets
Current assets
Cash, cash equivalents, and restricted cash	$	72,189	$	—		$	72,189
Accounts receivable, net		77,747		—			77,747
Inventories		76,847		—			76,847
Prepaid expenses and other current assets		17,856		(15	)		17,841
Total current assets		244,639		(15	)		244,624
Property, plant, and equipment, net		42,835		—			42,835
Intangible assets, net and goodwill		124,298		—			124,298
Deferred income taxes		33,228		71			33,299
Other long-term assets		21,641		20,209			41,850
Total assets	$	466,641	$	20,265		$	486,906
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	17,989	$	—		$	17,989
Other current liabilities		67,919		2,166			70,085
Total current liabilities		85,908		2,166			88,074
Other long-term liabilities		45,336		18,028			63,364
Total liabilities	$	131,244	$	20,194		$	151,438
Shareholders’ equity
Common shares		1,858		—			1,858
Additional paid-in capital		243,165		—			243,165
Retained earnings		87,078		71			87,149
Accumulated other comprehensive income		3,296		—			3,296
Total shareholders’ equity		335,397		71			335,468
Total liabilities and shareholders’ equity	$	466,641	$	20,265		$	486,906

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Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The fair value of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

	June 30, 2019											December 31, 2018
(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Treasury securities	$	502	$	—		$	—		$	502		$	490
Bone Biologics equity warrants		—		—			—			—			—
Bone Biologics equity securities		—		219			—			219			219
eNeura debt security		—		—			—			—			17,820
eNeura warrant		—		—			491			491			—
Total	$	502	$	219		$	491		$	1,212		$	18,529
Liabilities
Contingent consideration	$	—	$	—		$	(19,430	)	$	(19,430	)	$	(28,560	)
Deferred compensation plan		—		(1,314	)		—			(1,314	)		(1,275	)
Total	$	—	$	(1,314	)	$	(19,430	)	$	(20,744	)	$	(29,835	)

Schedule of Changes in Valuation of Securities

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018			2019		2018
Bone Biologics equity securities and warrants beginning balance	$	219	$	4,897		$	219	$	2,768
Impact of adoption of ASU 2016-01 recognized in other income (expense), net		—		—			—		1,629
Purchase of additional common stock		—		—			—		500
Fair value adjustments, expirations, and impairments recognized in other income (expense), net		—		(229	)		—		(229	)
Bone Biologics equity securities and warrants ending balance	$	219	$	4,668		$	219	$	4,668

Schedule of Reconciliation For Contingent Consideration Measured At Fair Value Using Significant Unobservable Inputs

The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2019			2018
Contingent consideration at January 1	$	28,560		$	—
Acquisition date fair value		—			25,491
Increase in fair value recognized in acquisition-related amortization and remeasurement		5,870			1,109
Payment made		(15,000	)		—
Contingent consideration at June 30	$	19,430		$	26,600

Fair Value, Inputs, Level 3 [Member]

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Schedule of Reconciliation of Debt Security and Warrant

The following table provides a reconciliation of the beginning and ending balances for the eNeura debt security and Warrant measured and reflected in the condensed consolidated balance sheets at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2019			2018
eNeura debt security and Warrant at January 1	$	17,820		$	16,050
Gains or losses recorded for the period
Recognized in other comprehensive income (loss)		(2,593	)		1,960
Change in classification of debt security to held to maturity		(15,227	)		—
Issuance of warrant as consideration for extension		491			—
eNeura debt security and Warrant at June 30	$	491		$	18,010

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Accumulated other comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Components of Changes in Accumulated Other Comprehensive Income (Loss)

The components of and changes in accumulated other comprehensive income were as follows:

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Debt Security			Accumulated Other Comprehensive Income
Balance at December 31, 2018	$	(2,386	)	$	5,682		$	3,296
Cumulative effect adjustment from adoption of ASU 2018-02		—			938			938
Other comprehensive loss		(302	)		(2,593	)		(2,895	)
Income taxes		—			641			641
Reclassification adjustment to:
Interest income (expense), net		—			(689	)		(689	)
Income taxes		—			171			171
Balance at June 30, 2019	$	(2,688	)	$	4,150		$	1,462

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Revenue recognition and accounts receivable (Tables)

6 Months Ended

Jun. 30, 2019

Revenue Recognition And Accounts Receivable [Abstract]

Schedule of Net Sales by Major Product Category by Reporting Segment

The tables below present net sales by major product category by reporting segment:

	Three Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		Change
Bone Growth Therapies	$	50,109	$	48,211		3.9	%
Spinal Implants		23,226		23,880		-2.7	%
Biologics		16,744		14,668		14.2	%
Global Spine		90,079		86,759		3.8	%
Global Extremities		25,771		24,788		4.0	%
Net sales	$	115,850	$	111,547		3.9	%

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		Change
Bone Growth Therapies	$	97,392	$	94,374		3.2	%
Spinal Implants		46,129		44,587		3.5	%
Biologics		32,476		29,003		12.0	%
Global Spine		175,997		167,964		4.8	%
Global Extremities		48,965		52,292		-6.4	%
Net sales	$	224,962	$	220,256		2.1	%

Schedule of Net Sales

The table below presents net sales, which includes product sales and marketing service fees, for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Product sales	$	99,865	$	97,453	$	193,799	$	192,342
Marketing service fees		15,985		14,094		31,163		27,914
Net sales	$	115,850	$	111,547	$	224,962	$	220,256

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Business segment information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Summary of EBITDA by Reporting Segment

As mentioned above, the primary metric used in managing the Company is EBITDA. The table below presents EBITDA by reporting segment:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019			2018			2019			2018
Global Spine	$	16,523		$	19,030		$	27,098		$	37,855
Global Extremities		2,750			488			2,577			3,816
Corporate		(12,880	)		(12,692	)		(22,407	)		(19,694	)
Total EBITDA	$	6,393		$	6,826		$	7,268		$	21,977
Depreciation and amortization		(6,178	)		(4,554	)		(11,905	)		(8,923	)
Interest income (expense), net		457			(251	)		200			(434	)
Income (loss) before income taxes	$	672		$	2,021		$	(4,437	)	$	12,620

Summary of Net Sales by Geographic Destination for each Reporting Segment

Geographical information

The table below presents net sales by geographic destination for each reporting unit and for the consolidated Company:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Global Spine
U.S.	$	84,601	$	81,722	$	164,127	$	159,760
International		5,478		5,037		11,870		8,204
Total Global Spine		90,079		86,759		175,997		167,964
Global Extremities
U.S.		6,844		7,023		13,442		13,939
International		18,927		17,765		35,523		38,353
Total Global Extremities		25,771		24,788		48,965		52,292
Consolidated
U.S.		91,445		88,745		177,569		173,699
International		24,405		22,802		47,393		46,557
Net sales	$	115,850	$	111,547	$	224,962	$	220,256

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Acquisition-Related Amortization and Remeasurement (Tables)

6 Months Ended

Jun. 30, 2019

Acquisition Related Amortization And Remeasurement [Abstract]

Components of Acquisition-Related Amortization and Remeasurement

Components of acquisition-related amortization and remeasurement for the three months and six months ended June 30, 2019 and 2018, respectively, are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Changes in fair value of contingent consideration	$	470	$	1,109	$	5,870	$	1,109
Amortization of acquired intangibles		1,338		310		2,395		373
Total	$	1,808	$	1,419	$	8,265	$	1,482

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Share-based compensation (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Share-Based Compensation by Line Item in Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

The following tables present the detail of share-based compensation by line item in the condensed consolidated statements of operations and comprehensive income (loss) as well as by award type:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Cost of sales	$	180	$	132	$	367	$	257
Sales and marketing		692		473		1,302		922
General and administrative		4,564		4,249		9,128		7,294
Research and development		413		361		737		658
Total	$	5,849	$	5,215	$	11,534	$	9,131

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2019		2018		2019		2018
Stock options	$	926	$	1,241	$	3,038	$	1,863
Time-based restricted stock awards and units		2,951		1,789		4,657		3,236
Performance-based restricted stock awards and units		—		270		—		759
Market-based restricted stock units		1,576		1,604		2,923		2,557
Stock purchase plan		396		311		916		716
Total	$	5,849	$	5,215	$	11,534	$	9,131

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Earnings per share ("EPS") (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Reconciliation of Weighted Average Shares Used in Diluted EPS

The following is a reconciliation of the weighted average shares used in diluted EPS computations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Weighted average common shares-basic		18,834,886		18,413,756		18,790,612		18,409,331
Effect of dilutive securities
Unexercised stock options and stock purchase plan		—		327,171		259,967		318,047
Unvested restricted stock awards and units		—		94,633		128,478		83,978
Weighted average common shares-diluted		18,834,886		18,835,560		19,179,057		18,811,356

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Business and Basis of Presentation - Additional Information (Detail) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2019 Segment	Jun. 30, 2018 USD ($)
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number Of Reporting Units | Segment		2
General and Administrative Expenses [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Prior period reclassification adjustment	$ (0.3)		$ (0.4)
Acquisition Related Amortization and Remeasurement Expense [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Prior period reclassification adjustment	0.3		0.4
Other Expense [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Prior period reclassification adjustment	$ 1.1		$ 1.1

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Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements - Additional Information (Detail) $ in Millions	Jan. 01, 2019 USD ($)
ASU 2018-02 [Member]
Summary Of Significant Accounting Policies [Line Items]
Increase to accumulated other comprehensive income and a decrease in retained earnings	$ 0.9

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Acquisitions - Additional Information (Detail) - USD ($) shares in Millions			3 Months Ended		6 Months Ended
	Jan. 31, 2019	Apr. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Feb. 06, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Goodwill			$ 71,177,000		$ 71,177,000			$ 72,401,000
Consideration for the assets acquired	$ 6,400,000
Options Medical Founder [Member]
Business Acquisition [Line Items]
Share based compensation, grant of restricted stock units	25,478
Share based compensation, grant fair value of restricted stock units	$ 1,400,000
Share based compensation, vesting rights of RSUs	33.33%
Spinal Kinetics [Member]
Business Acquisition [Line Items]
Business acquisition date		Apr. 30, 2018
Business acquisition conversion of shares into net cash subject to adjustments		$ 45,000,000.0
Fair value of the consideration transferred		76,600,000
Goodwill		17,612,000
Acquisition related costs			0	$ 1,500,000	0	$ 3,000,000.0
Net sales from acquisition			3,200,000	2,300,000	6,400,000	2,300,000
Net loss from Acquisition			$ 3,400,000	$ 1,800,000	$ 7,400,000	$ 1,800,000
Spinal Kinetics [Member] | Global Spine [Member]
Business Acquisition [Line Items]
Goodwill							$ 17,600,000
Spinal Kinetics [Member] | Maximum [Member]
Business Acquisition [Line Items]
Future milestone payments		$ 60,000,000.0

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Acquisitions - Summary of Fair Values of Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Thousands	Jan. 31, 2019	Apr. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Goodwill			$ 71,177	$ 72,401
Spinal Kinetics [Member]
Business Acquisition [Line Items]
Cash and cash equivalents		$ 6,785
Restricted cash		30
Accounts receivable		1,705
Inventories		8,175
Prepaid expenses and other current assets		315
Property, plant and equipment		2,285
Other long-term assets		320
Deferred income taxes		3,594
Total identifiable assets acquired		62,509
Accounts payable		351
Other current liabilities		2,869
Other long-term liabilities		301
Total liabilities assumed		3,521
Goodwill		17,612
Total fair value of consideration transferred		76,600
Spinal Kinetics [Member] | Previously Reported [Member]
Business Acquisition [Line Items]
Cash and cash equivalents		6,785
Restricted cash		30
Accounts receivable		1,705
Inventories		8,175
Prepaid expenses and other current assets		315
Property, plant and equipment		2,285
Other long-term assets		320
Deferred income taxes		2,374
Total identifiable assets acquired		61,289
Accounts payable		351
Other current liabilities		2,873
Other long-term liabilities		301
Total liabilities assumed		3,525
Goodwill		18,836
Total fair value of consideration transferred		76,600
Spinal Kinetics [Member] | Adjustments [Member]
Business Acquisition [Line Items]
Deferred income taxes		1,220
Total identifiable assets acquired		1,220
Other current liabilities		(4)
Total liabilities assumed		(4)
Goodwill		(1,224)
Options Medical [Member]
Business Acquisition [Line Items]
Total identifiable assets acquired	$ 6,575
Total liabilities assumed	175
Total fair value of consideration transferred	6,400
Options Medical [Member] | Operating Lease Liability - Short-term [Member]
Business Acquisition [Line Items]
Other current liabilities	69
Options Medical [Member] | Operating Lease Liability - Long-term [Member]
Business Acquisition [Line Items]
Other long-term liabilities	106
Options Medical [Member] | Operating Lease Assets [Member]
Business Acquisition [Line Items]
Other long-term assets	175
Developed Technology [Member] | Spinal Kinetics [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired		$ 12,400
Assigned Useful Life		10 years
Developed Technology [Member] | Spinal Kinetics [Member] | Previously Reported [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired		$ 12,400
In-process Research and Development ("IPR&D") [Member] | Spinal Kinetics [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired		$ 26,800
Assigned Useful Life		10 years
In-process Research and Development ("IPR&D") [Member] | Spinal Kinetics [Member] | Previously Reported [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired		$ 26,800
Tradename [Member] | Spinal Kinetics [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired		$ 100
Assigned Useful Life		2 years
Tradename [Member] | Spinal Kinetics [Member] | Previously Reported [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired		$ 100
Customer Relationships [Member] | Options Medical [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired	$ 5,832
Assigned Useful Life	10 years
Assembled Workforce [Member] | Options Medical [Member]
Business Acquisition [Line Items]
Finite lived intangible assets, net acquired	$ 568
Assigned Useful Life	5 years

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Acquisitions - Summary of Unaudited Pro forma Results (Detail) - Spinal Kinetics [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition [Line Items]
Net sales	$ 115,850	$ 115,129	$ 224,962	$ 227,584
Net income (loss)	$ (547)	$ 597	$ 350	$ 5,457

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Inventories - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 7,752	$ 8,463
Work-in-process	11,421	13,478
Finished products	59,968	54,906
Inventories	$ 79,141	$ 76,847

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Leases - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2019	Jan. 01, 2019
Leases [Abstract]
Additional lease assets		$ 20.2
Additional lease liabilities		$ 20.5
Increase in finance lease liability	$ 8.0
Increase in finance lease asset	$ 8.0

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Leases - Summary of Net Impact of Adoption Balance Sheet (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Current assets
Cash, cash equivalents, and restricted cash	$ 52,143			$ 72,189	$ 45,686		$ 81,157
Accounts receivable, net	80,591			77,747
Inventories	79,141			76,847
Prepaid expenses and other current assets	20,954			17,856
Total current assets	232,829			244,639
Property, plant, and equipment, net	64,402			42,835
Intangible assets, net and goodwill				124,298
Deferred income taxes	37,566			33,228
Other long-term assets	27,204			21,641
Total assets	488,806			466,641
Current liabilities
Accounts payable	19,523			17,989
Other current liabilities	48,161			67,919
Total current liabilities	67,985			85,908
Other long-term liabilities	52,180			45,336
Total liabilities	141,012			131,244
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 18,831,581 and 18,579,688 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	1,883			1,858
Additional paid-in capital	257,888			243,165
Retained earnings	86,561			87,078
Accumulated other comprehensive income	1,462			3,296
Total shareholders’ equity	347,794	$ 343,682		335,397	$ 319,846	$ 313,174	$ 296,608
Total liabilities and shareholders’ equity	$ 488,806			466,641
ASU 2016-02 [Member]
Current assets
Cash, cash equivalents, and restricted cash			$ 72,189
Accounts receivable, net			77,747
Inventories			76,847
Prepaid expenses and other current assets			17,841
Total current assets			244,624
Property, plant, and equipment, net			42,835
Intangible assets, net and goodwill			124,298
Deferred income taxes			33,299
Other long-term assets			41,850
Total assets			486,906
Current liabilities
Accounts payable			17,989
Other current liabilities			70,085
Total current liabilities			88,074
Other long-term liabilities			63,364
Total liabilities			151,438
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 18,831,581 and 18,579,688 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively			1,858
Additional paid-in capital			243,165
Retained earnings			87,149
Accumulated other comprehensive income			3,296
Total shareholders’ equity			335,468
Total liabilities and shareholders’ equity			$ 486,906
ASU 2016-02 [Member] | Impact of Adoption of ASC 842 [Member]
Current assets
Prepaid expenses and other current assets				(15)
Total current assets				(15)
Deferred income taxes				71
Other long-term assets				20,209
Total assets				20,265
Current liabilities
Other current liabilities				2,166
Total current liabilities				2,166
Other long-term liabilities				18,028
Total liabilities				20,194
Shareholders’ equity
Retained earnings				71
Total shareholders’ equity				71
Total liabilities and shareholders’ equity				$ 20,265

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Leases - Summary of Lease Portfolio (Detail) $ in Thousands	Jun. 30, 2019 USD ($)
Assets
Operating leases	$ 6,353
Operating lease, right-of-use asset, statement of financial position [Extensible List]	us-gaap:OtherAssetsNoncurrent
Finance leases	$ 20,695
Finance lease, right-of-use asset, statement of financial position [Extensible List]	us-gaap:PropertyPlantAndEquipmentNet
Total lease assets	$ 27,048
Current
Operating leases	$ 1,816
Operating lease, liability, current, statement of financial position [Extensible List]	us-gaap:OtherLiabilitiesCurrent
Finance leases	$ 301
Long-term
Operating leases	$ 4,609
Operating lease, liability, noncurrent, statement of financial position [Extensible List]	us-gaap:OtherLiabilitiesNoncurrent
Finance leases	$ 20,847
Total lease liabilities	$ 27,573
Weighted Average Remaining Lease Term
Operating leases	4 years 6 months
Finance leases	21 years 2 months 12 days
Weighted Average Discount Rate
Operating leases	2.46%
Finance leases	4.38%

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Leases - Summary of Components of Lease Costs (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Finance lease costs:
Amortization of right-of-use assets	$ 245	$ 484
Interest on finance lease liabilities	231	454
Operating lease costs	540	1,080
Short-term lease costs	72	134
Variable lease costs	176	328
Total lease costs	$ 1,264	$ 2,480

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Leases - Summary of Supplemental Cash Flow Information Related to Leases (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 2,055
Operating cash flows from finance leases	454
Financing cash flows from finance leases	188
Right-of-use assets obtained in exchange for lease obligations
Operating leases	362
Finance leases	$ 21,179

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Leases - Summary of Remaining Lease Liabilities (Detail) $ in Thousands	Jun. 30, 2019 USD ($)
Operating Leases
2019	$ 977
2020	1,808
2021	1,593
2022	1,312
2023	256
Thereafter	803
Total undiscounted value of lease liabilities	6,749
Less: Interest	(324)
Present value of lease liabilities	6,425
Current portion of lease liabilities	1,816
Long-term portion of lease liabilities	4,609
Total lease liabilities	6,425
Finance Leases
2019	642
2020	1,013
2021	1,414
2022	1,443
2023	1,471
Thereafter	27,207
Total undiscounted value of lease liabilities	33,190
Less: Interest	(12,042)
Present value of lease liabilities	21,148
Current portion of lease liabilities	301
Long-term portion of lease liabilities	20,847
Total lease liabilities	$ 21,148

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Long-Term Debt - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 EUR (€)	Aug. 31, 2015 USD ($)
Italy [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 6,300,000	€ 5,500,000
Amount outstanding under lines of credit	$ 0
2015 Credit Agreement [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Debt instrument term (in years)	5 years
Maximum borrowing capacity			$ 125,000,000
Amount outstanding under lines of credit	$ 0

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Fair Value Measurements - Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	$ 500
Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	1,212	$ 18,529
Contingent consideration	(19,430)	(28,560)
Deferred compensation plan, Liabilities	(1,314)	(1,275)
Liabilities fair value, Total	(20,744)	(29,835)
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	502
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	219
Deferred compensation plan, Liabilities	(1,314)
Liabilities fair value, Total	(1,314)
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	491
Contingent consideration	(19,430)
Liabilities fair value, Total	(19,430)
Fair Value, Measurements, Recurring [Member] | Treasury Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	502	490
Fair Value, Measurements, Recurring [Member] | Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	502
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member] | Bone Biologics Inc [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	219	219
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Bone Biologics Inc [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	219
Fair Value, Measurements, Recurring [Member] | Debt Security [Member] | eNeura Inc [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value		$ 17,820
Fair Value, Measurements, Recurring [Member] | Warrant [Member] | eNeura Inc [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	491
Fair Value, Measurements, Recurring [Member] | Warrant [Member] | Fair Value, Inputs, Level 3 [Member] | eNeura Inc [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	$ 491

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)				6 Months Ended
	Mar. 01, 2019	Feb. 14, 2019	Apr. 30, 2018	Jun. 30, 2019	Feb. 06, 2019
Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Milestone achievement period			5 years
Spinal Kinetics [Member] | Other Long-term Liabilities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Contingent consideration				$ 19,400,000
Maximum [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments			$ 60,000,000.0
US Food And Drug Administration [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments			15,000,000.0		$ 15,000,000.0
Payments obligation for contigent consideration		$ 15,000,000.0
Revenue Milestone [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments			$ 45,000,000.0
eNeura Inc [Member] | Amended and Restated Senior Secured Promissory Note [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Debt maturity date				Mar. 04, 2019
Debt securities, maturity date description				Amended and Restated Senior Secured Promissory Note with eNeura (the “Restructured Debt Security”) to restructure the debt security, which extended the maturity date to the earlier of (i) March 4, 2022, (ii) the effective date of a change in control, or (iii) the effective date of an initial public offering by eNeura and which also eliminated the conversion feature included within the original note.
Warrant exercisable price per share	$ 0.01
Warrant contractual term	10 years
Percentage of number of warrant issued equal to outstanding principal and accrued interest on debt security	10.00%
Debt security subject to certain anti-dilution provision price per share	$ 1.00
Equity Warrants [Member] | Bone Biologics Inc [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of warrants				$ 0
Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of warrant				$ 500,000

XML

Fair Value Measurements - Schedule of Change in Valuation of Securities (Detail) - Bone Biologics Inc [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Equity securities and warrants beginning balance	$ 219	$ 4,897	$ 219	$ 2,768
Purchase of additional common stock	0	0	0	500
Fair value adjustments, expirations, and impairments recognized in other income (expense), net	0	(229)	0	(229)
Equity securities and warrants ending balance	219	4,668	219	4,668
ASU 2016-01 [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Impact of adoption of ASU 2016-01 recognized in other income (expense), net	$ 0	$ 0	$ 0	$ 1,629

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Fair Value Measurements - Schedule of Reconciliation of Debt Security and Warrant (Detail) - eNeura Inc [Member] - Debt Security and Warrant [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 17,820	$ 16,050
Gains or losses recorded for the period
Recognized in other comprehensive income (loss)	(2,593)	1,960
Change in classification of debt security to held to maturity	(15,227)	0
Issuance of warrant as consideration for extension	491	0
Ending balance	$ 491	$ 18,010

XML

Fair Value Measurements - Schedule of Reconciliation For Contingent Consideration Measured At Fair Value Using Significant Unobservable Inputs (Level 3) (Detail) - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Contingent consideration at January 1	$ 28,560
Acquisition date fair value		$ 25,491
Increase in fair value recognized in acquisition-related amortization and remeasurement	5,870	1,109
Payment made	(15,000)
Contingent consideration at June 30	$ 19,430	$ 26,600

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Investments - Additional Information (Detail) - ENeura Restructured Debt Security [Member] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt Instrument [Line Items]
Original effective interest rate of debt security	8.00%		8.00%
Restructured Note, amortized cost	$ 15,100,000		$ 15,100,000
Estimated fair value of debt securities	16,000,000.0		16,000,000.0
Unpaid principal balance of debt securities	15,000,000.0		15,000,000.0
Interest income	$ 200,000	$ 0	$ 300,000	$ 0

XML

Contingencies - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jul. 31, 2018
Commitments And Contingencies Disclosure [Abstract]
Accrued other long-term liabilities	$ 4.3		$ 4.3
Estimated sales and marketing expense	$ 0.3	$ 0.3	$ 0.7	$ 0.5
Freezing amount in cash resulted from court pending legal action issued					$ 2.5

XML

Accumulated Other Comprehensive Income - Components of Changes in Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 343,682	$ 335,397	$ 313,174	$ 296,608	$ 335,397	$ 296,608
Other comprehensive loss					(2,895)
Income taxes					641
Interest income (expense), net	457		(251)		200	(434)
Income taxes	1,219		1,096		(4,787)	6,469
Ending Balance	347,794	343,682	319,846	313,174	347,794	319,846
Reclassification Adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Interest income (expense), net					(689)
Income taxes					171
ASU 2018-02 [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Cumulative effect adjustment from adoption of ASU 2018-02					938
Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		(2,386)			(2,386)
Other comprehensive loss					(302)
Ending Balance	(2,688)				(2,688)
Debt Security [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		5,682			5,682
Other comprehensive loss					(2,593)
Income taxes					641
Ending Balance	4,150				4,150
Debt Security [Member] | Reclassification Adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Interest income (expense), net					(689)
Income taxes					171
Debt Security [Member] | ASU 2018-02 [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Cumulative effect adjustment from adoption of ASU 2018-02					938
Accumulated Other Comprehensive Income [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	1,833	3,296	4,484	3,787	3,296	3,787
Ending Balance	$ 1,462	1,833	$ 4,837	$ 4,484	$ 1,462	$ 4,837
Accumulated Other Comprehensive Income [Member] | ASU 2018-02 [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Cumulative effect adjustment from adoption of ASU 2018-02		$ 938

XML

Revenue Recognition and Accounts Receivable - Schedule of Net Sales Major Product Category by Reporting Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 115,850	$ 111,547	$ 224,962	$ 220,256
Change	3.90%		2.10%
Bone Growth Therapies [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 50,109	48,211	$ 97,392	94,374
Change	3.90%		3.20%
Spinal Implants [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 23,226	23,880	$ 46,129	44,587
Change	(2.70%)		3.50%
Biologics [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 16,744	14,668	$ 32,476	29,003
Change	14.20%		12.00%
Global Spine [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 90,079	86,759	$ 175,997	167,964
Change	3.80%		4.80%
Global Extremities [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 25,771	$ 24,788	$ 48,965	$ 52,292
Change	4.00%		(6.40%)

XML

Revenue Recognition and Accounts Receivable - Schedule of Net Sales (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue Recognition [Abstract]
Product sales	$ 99,865	$ 97,453	$ 193,799	$ 192,342
Marketing service fees	15,985	14,094	31,163	27,914
Net sales	$ 115,850	$ 111,547	$ 224,962	$ 220,256

XML

Revenue Recognition and Accounts Receivable - Additional Information (Detail) - USD ($) $ in Millions	1 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Other Long-Term Assets or Other Current Assets [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Other contract assets	$ 3.9	$ 1.9
Puerto Rico [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Proceeds from settlement of trade accounts receivable	1.4
Accounts receivable	2.5
Contractual allowances	0.4
Recovery of the allowance for doubtful accounts	$ 1.0

XML

Business Segment Information - Additional Information (Detail) - Segment	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Segment Reporting [Abstract]
Number of reporting segments	2	4

XML

Business Segment Information - Summary of EBIDTA by Reporting Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Total EBITDA	$ 6,393	$ 6,826	$ 7,268	$ 21,977
Depreciation and amortization	(6,178)	(4,554)	(11,905)	(8,923)
Interest income (expense), net	457	(251)	200	(434)
Income (loss) before income taxes	672	2,021	(4,437)	12,620
Operating Segments [Member] | Global Spine [Member]
Segment Reporting Information [Line Items]
Total EBITDA	16,523	19,030	27,098	37,855
Operating Segments [Member] | Global Extremities [Member]
Segment Reporting Information [Line Items]
Total EBITDA	2,750	488	2,577	3,816
Corporate, Non-Segment [Member]
Segment Reporting Information [Line Items]
Total EBITDA	$ (12,880)	$ (12,692)	$ (22,407)	$ (19,694)

XML

Business Segment Information - Summary of Net Sales by Geographic Destination for Each Reporting Unit (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	$ 115,850	$ 111,547	$ 224,962	$ 220,256
Global Spine [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	90,079	86,759	175,997	167,964
Global Extremities [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	25,771	24,788	48,965	52,292
U.S. [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	91,445	88,745	177,569	173,699
U.S. [Member] | Global Spine [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	84,601	81,722	164,127	159,760
U.S. [Member] | Global Extremities [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	6,844	7,023	13,442	13,939
International [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	24,405	22,802	47,393	46,557
International [Member] | Global Spine [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	5,478	5,037	11,870	8,204
International [Member] | Global Extremities [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Net sales	$ 18,927	$ 17,765	$ 35,523	$ 38,353

XML

Acquisition-Related Amortization and Remeasurement - Components of Acquisition-Related Amortization and Remeasurement (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Acquisition Related Amortization And Remeasurement [Abstract]
Changes in fair value of contingent consideration	$ 470	$ 1,109	$ 5,870	$ 1,109
Amortization of acquired intangibles	1,338	310	2,395	373
Total	$ 1,808	$ 1,419	$ 8,265	$ 1,482

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Share-based Compensation - Schedule of Share-Based Compensation by Line Item in Condensed Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 5,849	$ 5,215	$ 11,534	$ 9,131
Stock options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	926	1,241	3,038	1,863
Time-based Restricted Stock Awards and Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	2,951	1,789	4,657	3,236
Performance-based Restricted Stock Awards and Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense		270		759
Market-based Restricted Stock Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	1,576	1,604	2,923	2,557
Stock purchase plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	396	311	916	716
Cost of sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	180	132	367	257
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	692	473	1,302	922
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	4,564	4,249	9,128	7,294
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 413	$ 361	$ 737	$ 658

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Share-based Compensation - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Aug. 05, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Shares issued under stock purchase plan, stock option exercises and restricted stock awards and units		40,812	80,444	251,893	206,955
Share-based compensation expense		$ 5,849	$ 5,215	$ 11,534	$ 9,131
Transition and Retirement Agreement [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share based compensation, post-termination exercise period original term				18 months
Maximum [Member] | Transition and Retirement Agreement [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share based compensation, post-termination exercise period revised term				4 years
President and Chief Executive Officer [Member] | Transition and Retirement Agreement [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense		$ 1,500		$ 3,700
Subsequent Event [Member] | Employment Agreement [Member] | Global Spine [Member] | Inducement Grants [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share issued under restricted stock units and stock options, value	$ 1,500

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Components Of Income Tax Expense Benefit [Line Items]
Income tax effective rate	181.40%		54.20%	107.90%	51.30%
Income taxes	$ 1,219		$ 1,096	$ (4,787)	$ 6,469
Internal Revenue Service [Member]
Components Of Income Tax Expense Benefit [Line Items]
Income taxes		$ (1,800)
Minimum [Member]
Components Of Income Tax Expense Benefit [Line Items]
Decrease in unrecognized tax benefits	13,000			13,000
Maximum [Member]
Components Of Income Tax Expense Benefit [Line Items]
Decrease in unrecognized tax benefits	$ 13,400			$ 13,400

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Earnings Per Share ("EPS") - Schedule of Reconciliation of Weighted Average Shares Used in Diluted EPS (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Line Items]
Weighted average common shares-basic	18,834,886	18,413,756	18,790,612	18,409,331
Effect of dilutive securities
Weighted average common shares-diluted	18,834,886	18,835,560	19,179,057	18,811,356
Stock Options And Stock Purchase Plan [Member]
Effect of dilutive securities
Effect of diluted securities		327,171	259,967	318,047
Restricted Stock Units [Member]
Effect of dilutive securities
Effect of diluted securities		94,633	128,478	83,978

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Earnings Per Share ("EPS") - Additional Information (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restricted Stock Units [Member] | Outstanding Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Weighted average outstanding options, awards and units not included in diluted earnings per share	1,987,907	413,296	483,731	259,470