UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2017
OR
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☐ |
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 INTERNATIONAL N.V.
(Exact name of registrant as specified in its charter)
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Curaçao |
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98-1340767 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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7 Abraham de Veerstraat Curaçao |
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Not applicable |
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(Address of principal executive offices) |
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(Zip Code) |
599-9-4658525
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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.
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Large Accelerated filer |
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Accelerated filer |
☐ |
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Non-Accelerated filer |
☐ (Do not check if a smaller reporting company) |
Smaller Reporting Company |
☐ |
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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 4, 2017, 18,170,923 shares of common stock were issued and outstanding.
Table of Contents
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PART I |
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Item 1. |
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4 |
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Condensed Consolidated Balance Sheets as of June 30, 2017, and December 31, 2016 |
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4 |
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5 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 |
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6 |
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Notes to the Unaudited Condensed Consolidated Financial Statements |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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13 |
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Item 3. |
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20 |
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Item 4. |
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20 |
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PART II |
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Item 1. |
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21 |
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Item 1A. |
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21 |
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Item 2. |
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21 |
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Item 3. |
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21 |
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Item 4. |
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21 |
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Item 5. |
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21 |
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Item 6. |
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22 |
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23 |
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2
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. 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 Part I, Item 1A under the heading Risk Factors in our Form 10-K for the year ended December 31, 2016, 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.
3
ORTHOFIX INTERNATIONAL N.V.
Condensed Consolidated Balance Sheets
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(U.S. Dollars, in thousands, except share data) |
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June 30, 2017 |
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December 31, 2016 |
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(Unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
44,330 |
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$ |
39,572 |
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Restricted cash |
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— |
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14,369 |
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Accounts receivable, net of allowances of $8,480 and $8,396, respectively |
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61,213 |
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57,848 |
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Inventories |
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75,869 |
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63,346 |
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Prepaid expenses and other current assets |
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17,192 |
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19,238 |
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Total current assets |
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198,604 |
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194,373 |
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Property, plant and equipment, net |
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46,651 |
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48,916 |
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Patents and other intangible assets, net |
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9,508 |
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7,461 |
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Goodwill |
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53,565 |
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53,565 |
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Deferred income taxes |
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42,685 |
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47,325 |
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Other long-term assets |
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16,664 |
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20,463 |
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Total assets |
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$ |
367,677 |
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$ |
372,103 |
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Liabilities and shareholders’ equity |
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Current liabilities |
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Accounts payable |
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$ |
14,245 |
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$ |
14,353 |
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Other current liabilities |
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50,858 |
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69,088 |
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Total current liabilities |
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65,103 |
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83,441 |
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Other long-term liabilities |
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25,627 |
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25,185 |
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Total liabilities |
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90,730 |
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108,626 |
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Contingencies (Note 6) |
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Shareholders’ equity |
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Common shares $0.10 par value; 50,000,000 shares authorized; 18,119,430 and 17,828,155 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively |
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1,812 |
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1,783 |
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Additional paid-in capital |
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211,990 |
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204,095 |
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Retained earnings |
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65,378 |
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64,179 |
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Accumulated other comprehensive loss |
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(2,233 |
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(6,580 |
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Total shareholders’ equity |
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276,947 |
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263,477 |
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Total liabilities and shareholders’ equity |
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$ |
367,677 |
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$ |
372,103 |
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The accompanying notes form an integral part of these condensed consolidated financial statements
4
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(Unaudited, U.S. Dollars, in thousands, except share and per share data) |
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2017 |
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2016 |
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2017 |
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2016 |
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Net sales |
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$ |
108,942 |
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$ |
104,075 |
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$ |
211,680 |
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$ |
202,754 |
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Cost of sales |
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23,177 |
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22,516 |
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45,758 |
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44,653 |
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Gross profit |
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85,765 |
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81,559 |
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165,922 |
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158,101 |
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Sales and marketing |
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50,471 |
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46,043 |
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99,003 |
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90,865 |
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General and administrative |
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20,409 |
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18,545 |
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38,691 |
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35,550 |
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Research and development |
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6,887 |
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6,796 |
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14,311 |
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14,436 |
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Charges related to U.S. Government resolutions |
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— |
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12,870 |
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— |
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12,870 |
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Operating income (loss) |
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7,998 |
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(2,695 |
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13,917 |
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4,380 |
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Interest income (expense), net |
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76 |
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(113 |
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121 |
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(151 |
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Other income (expense), net |
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585 |
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147 |
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(3,763 |
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1,980 |
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Income (loss) before income taxes |
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8,659 |
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(2,661 |
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10,275 |
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6,209 |
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Income tax expense |
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(3,924 |
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(3,685 |
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(7,848 |
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(7,979 |
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Net income (loss) from continuing operations |
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4,735 |
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(6,346 |
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2,427 |
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(1,770 |
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Discontinued operations (Note 6) |
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Loss from discontinued operations |
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(1,300 |
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(1,572 |
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(1,827 |
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(2,562 |
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Income tax benefit |
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418 |
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474 |
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599 |
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728 |
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Net loss from discontinued operations |
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(882 |
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(1,098 |
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(1,228 |
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(1,834 |
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Net income (loss) |
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$ |
3,853 |
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$ |
(7,444 |
) |
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$ |
1,199 |
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$ |
(3,604 |
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Net income (loss) per common share—basic |
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Net income (loss) from continuing operations |
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$ |
0.26 |
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$ |
(0.35 |
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$ |
0.13 |
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$ |
(0.10 |
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Net loss from discontinued operations |
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(0.05 |
) |
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(0.06 |
) |
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(0.06 |
) |
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(0.10 |
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Net income (loss) per common share—basic |
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$ |
0.21 |
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$ |
(0.41 |
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$ |
0.07 |
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$ |
(0.20 |
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Net income (loss) per common share—diluted |
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Net income (loss) from continuing operations |
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$ |
0.26 |
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$ |
(0.35 |
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$ |
0.13 |
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$ |
(0.10 |
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Net loss from discontinued operations |
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(0.05 |
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(0.06 |
) |
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(0.06 |
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(0.10 |
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Net income (loss) per common share—diluted |
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$ |
0.21 |
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$ |
(0.41 |
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$ |
0.07 |
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$ |
(0.20 |
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Weighted average number of common shares: |
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Basic |
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18,050,551 |
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18,147,681 |
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18,015,308 |
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18,312,781 |
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Diluted |
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18,343,038 |
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18,147,681 |
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18,288,050 |
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18,312,781 |
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Other comprehensive income, before tax |
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Unrealized gain on derivative instrument |
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– |
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79 |
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– |
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127 |
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Unrealized loss on debt securities |
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– |
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(3,036 |
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(3,220 |
) |
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(3,860 |
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Reclassification adjustment for loss on debt securities in net income |
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– |
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– |
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5,585 |
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– |
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Currency translation adjustment |
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2,648 |
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(570 |
) |
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2,882 |
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|
651 |
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Other comprehensive income before tax |
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2,648 |
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(3,527 |
) |
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5,247 |
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(3,082 |
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Income tax related to items of other comprehensive loss |
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– |
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1,065 |
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(900 |
) |
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|
1,340 |
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Other comprehensive income, net of tax |
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2,648 |
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(2,462 |
) |
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4,347 |
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(1,742 |
) |
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Comprehensive income (loss) |
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$ |
6,501 |
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$ |
(9,906 |
) |
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$ |
5,546 |
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$ |
(5,346 |
) |
The accompanying notes form an integral part of these condensed consolidated financial statements
5
Condensed Consolidated Statements of Cash Flows
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Six Months Ended June 30, |
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(Unaudited, U.S. Dollars, in thousands) |
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2017 |
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2016 |
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Cash flows from operating activities |
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Net income (loss) |
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$ |
1,199 |
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$ |
(3,604 |
) |
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Adjustments to reconcile net income (loss) to net cash from operating activities |
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Depreciation and amortization |
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10,447 |
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|
10,003 |
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Amortization of debt costs and other assets |
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|
719 |
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|
941 |
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Provision for doubtful accounts |
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|
820 |
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|
957 |
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Deferred income taxes |
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|
4,284 |
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|
687 |
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Share-based compensation |
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5,492 |
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|
4,012 |
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Other-than-temporary impairment on debt securities |
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5,585 |
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— |
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Other |
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|
572 |
|
|
|
772 |
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Changes in operating assets and liabilities |
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Restricted cash |
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14,369 |
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|
— |
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Accounts receivable |
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(3,787 |
) |
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|
2,443 |
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Inventories |
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(11,119 |
) |
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(2,974 |
) |
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Prepaid expenses and other current assets |
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2,199 |
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|
340 |
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Accounts payable |
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(950 |
) |
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(2,879 |
) |
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Other current liabilities |
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|
(19,407 |
) |
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|
10,664 |
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Other long-term assets and liabilities |
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(696 |
) |
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|
11 |
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Net cash from operating activities |
|
|
9,727 |
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|
21,373 |
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Cash flows from investing activities |
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|
|
|
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Capital expenditures for property, plant and equipment |
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|
(7,035 |
) |
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(9,600 |
) |
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Capital expenditures for intangible assets |
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(1,558 |
) |
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(756 |
) |
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Other investing activities |
|
|
474 |
|
|
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(3,613 |
) |
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Net cash from investing activities |
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(8,119 |
) |
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(13,969 |
) |
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Cash flows from financing activities |
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|
|
|
|
|
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Proceeds from issuance of common shares |
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|
5,282 |
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|
14,828 |
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Payments related to withholdings for share-based compensation |
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|
(2,851 |
) |
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|
(1,793 |
) |
|
Repurchase and retirement of common shares |
|
|
— |
|
|
|
(43,885 |
) |
|
Net cash from financing activities |
|
|
2,431 |
|
|
|
(30,850 |
) |
|
Effect of exchange rate changes on cash |
|
|
719 |
|
|
|
265 |
|
|
Net change in cash and cash equivalents |
|
|
4,758 |
|
|
|
(23,181 |
) |
|
Cash and cash equivalents at the beginning of the period |
|
|
39,572 |
|
|
|
63,663 |
|
|
Cash and cash equivalents at the end of the period |
|
$ |
44,330 |
|
|
$ |
40,482 |
|
The accompanying notes form an integral part of these condensed consolidated financial statements
6
Notes to the Unaudited Condensed Consolidated Financial Statements
Business and basis of presentation
Orthofix International N.V. (the “Company”) is a diversified, global medical device company focused on improving patients’ lives by providing superior reconstructive and regenerative orthopedic and spine solutions to physicians. The Company has four strategic business units (“SBUs”) that are also its reporting segments: BioStim, Biologics, Extremity Fixation, and Spine Fixation.
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, 2016. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2017. The operating results for the three and six months ended June 30, 2016 have been adjusted from previously reported amounts as a result of the adoption of Accounting Standards Update (“ASU”) 2016-09, which was adopted during the quarter ended September 30, 2016 with an effective date of January 1, 2016.
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, doubtful accounts, inventories, potential goodwill and intangible asset impairment, fair value measurements, litigation and contingent liabilities, income taxes, and share-based compensation. Actual results could differ from these estimates.
1. Recently issued accounting pronouncements
|
Topic |
|
Description of Guidance |
|
Effective Date |
|
Status of Company's Evaluation |
|
Revenue Recognition (ASU 2014-09, as amended) |
|
Requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Applied either retrospectively or as a cumulative effect adjustment as of the adoption date. |
|
January 1, 2018 |
|
The Company is continuing to evaluate the impact this ASU will have on its consolidated financial statements and disclosures. The Company completed an initial impact assessment and believes adopting this ASU will materially impact the timing of revenue recognition, primarily for Extremity Fixation and Spine Fixation product sales to stocking distributors, which are currently accounted for using the sell-through method. Specifically, the Company believes the revenue associated with these sales will be recorded at the time of the sale instead of deferring recognition until cash is received. The Company expects to adopt this new guidance using the modified retrospective transition method. |
|
Financial Instruments (ASU 2016-01) |
|
Requires entities to measure equity investments, except in limited circumstances, at fair value and recognize any changes in fair value in net income. Applied prospectively. |
|
January 1, 2018 |
|
The Company is currently evaluating the impact this ASU may have on its consolidated financial statements. |
7
|
Topic |
|
Description of Guidance |
|
Effective Date |
|
Status of Company's Evaluation |
|
(ASU 2016-02) |
|
Requires a lessee to recognize lease assets and lease liabilities for leases classified as operating leases. Applied using a modified retrospective approach. |
|
January 1, 2019 |
|
The Company is currently evaluating the impact this ASU may have on its consolidated financial statements; however, the Company expects this guidance will result in current operating lease obligations being reflected on the consolidated balance sheet. |
|
Income Taxes (ASU 2016-16) |
|
Reduces complexity by requiring current and deferred income taxes for intra-entity asset transfers, other than inventory, to be recognized when the transfer occurs. Applied using a modified retrospective approach. |
|
January 1, 2018 |
|
The Company is currently evaluating the impact this ASU may have on its consolidated financial statements. |
|
Statement of Cash Flows (ASU 2016-18) |
|
Reduces diversity in classification and presentation of restricted cash, including transfers between cash and restricted cash, on the statement of cash flows. Applied retrospectively. |
|
January 1, 2018 |
|
The Company is currently evaluating the impact this ASU may have on its consolidated statement of cash flows. |
2. Inventories
Inventories were as follows:
|
(U.S. Dollars, in thousands) |
|
June 30, 2017 |
|
|
December 31, 2016 |
|
||
|
Raw materials |
|
$ |
5,049 |
|
|
$ |
7,978 |
|
|
Work-in-process |
|
|
11,339 |
|
|
|
9,505 |
|
|
Finished products |
|
|
55,706 |
|
|
|
42,434 |
|
|
Deferred cost of sales |
|
|
3,775 |
|
|
|
3,429 |
|
|
|
|
$ |
75,869 |
|
|
$ |
63,346 |
|
3. Other current liabilities
In December 2016, the Company approved and initiated a planned restructuring, which primarily affects the Extremity Fixation SBU, to streamline costs, improve operational performance, and wind down a non-core business. The restructuring plan consists primarily of severance charges and the write-down of certain assets. The Company expects to incur total pre-tax expense of approximately $2.9 million in connection with this restructuring activity and has incurred cumulative costs to date of $2.0 million. The Company had an accrual of $1.5 million as of December 31, 2016 in other current liabilities related to the planned restructuring. In the six months ended June 30, 2017, the Company increased its estimate of costs to be incurred by approximately $0.1 million and made additional payments of $0.6 million, resulting in an ending accrual of $1.0 million as of June 30, 2017.
4. Long-term debt
As of June 30, 2017, the Company has not made any borrowings under its five year $125 million secured revolving credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent, and certain lenders party thereto. The Company has also not made any borrowings on its €5.8 million ($6.6 million) available line of credit in Italy at June 30, 2017. The Company is in compliance with all required financial covenants as of June 30, 2017.
8
The fair value of the Company’s financial assets and liabilities measured on a recurring basis were as follows:
|
|
|
June 30, 2017 |
|
|
December 31, 2016 |
|
||||||||||||||
|
(U.S. Dollars, in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Total |
|
|||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collective trust funds |
|
$ |
— |
|
|
$ |
1,574 |
|
|
$ |
— |
|
|
$ |
1,574 |
|
|
$ |
1,584 |
|
|
Treasury securities |
|
|
525 |
|
|
|
— |
|
|
|
— |
|
|
|
525 |
|
|
|
467 |
|
|
Certificates of deposit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
468 |
|
|
Debt security |
|
|
— |
|
|
|
— |
|
|
|
9,000 |
|
|
|
9,000 |
|
|
|
12,220 |
|
|
Total |
|
$ |
525 |
|
|
$ |
1,574 |
|
|
$ |
9,000 |
|
|
$ |
11,099 |
|
|
$ |
14,739 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan |
|
$ |
— |
|
|
$ |
(1,271 |
) |
|
$ |
— |
|
|
$ |
(1,271 |
) |
|
$ |
(1,452 |
) |
|
Total |
|
$ |
— |
|
|
$ |
(1,271 |
) |
|
$ |
— |
|
|
$ |
(1,271 |
) |
|
$ |
(1,452 |
) |
The fair value of the debt security, which is recorded within other long-term assets, is based upon significant unobservable inputs, including the use of a discounted cash flow 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, 2017, the Company reassessed its estimate of fair value based on current financial information and other assumptions, resulting in a fair value of $9.0 million, which is consistent with the Company’s estimated fair value from the first quarter of 2017. This compares to an amortized cost basis in the debt security of $18.0 million.
The Company evaluated the decline in fair value recorded during the first quarter of 2017 to determine if the impairment was other-than-temporary. Based on this evaluation, the Company recorded an other-than-temporary impairment charge of $5.6 million before income taxes, which is recorded in other expense. In addition to the decrease in fair value, the other-than-temporary impairment included a reclassification of the amount that was previously considered temporary and included in accumulated other comprehensive loss.
The following table provides a reconciliation of the beginning and ending balances for debt securities measured at fair value using significant unobservable inputs (Level 3):
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
||
|
Balance at January 1 |
|
$ |
12,220 |
|
|
$ |
12,658 |
|
|
Accrued interest income |
|
|
— |
|
|
|
640 |
|
|
Gains or losses recorded for the period |
|
|
|
|
|
|
|
|
|
Recognized in net income |
|
|
(5,585 |
) |
|
|
— |
|
|
Recognized in other comprehensive income |
|
|
2,365 |
|
|
|
(3,860 |
) |
|
Balance at June 30 |
|
$ |
9,000 |
|
|
$ |
9,438 |
|
6. 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 losses with respect to these additional matters are individually and collectively immaterial as to a possible loss and range of loss.
Discontinued Operations – Matters Related to Breg and Possible Indemnification Obligations
On May 24, 2012, the Company sold Breg to an affiliate of Water Street Healthcare Partners II, L.P. (“Water Street”). Under the terms of the agreement, the Company indemnified Water Street and Breg with respect to certain specified matters, including the following:
|
|
• |
Breg was engaged in the manufacturing and sale of local infusion pumps for pain management from 1999 to 2008. Since 2008, numerous product liability cases have been filed in the United States alleging that the local anesthetic, when dispensed by such infusion pumps inside a joint, causes a rare arthritic condition called “chondrolysis.” One case remains outstanding for which the Company currently cannot reasonably estimate the possible loss, or range of loss. |
9
Charges incurred as a result of this indemnification are reflected as discontinued operations in the condensed consolidated statements of operations.
7. Accumulated other comprehensive loss
The components of and changes in accumulated other comprehensive loss were as follows:
|
(U.S. Dollars, in thousands) |
|
Currency Translation Adjustments |
|
|
Debt Security |
|
|
Accumulated Other Comprehensive Loss |
|
|||
|
Balance at December 31, 2016 |
|
$ |
(5,115 |
) |
|
$ |
(1,465 |
) |
|
$ |
(6,580 |
) |
|
Other comprehensive income (loss) |
|
|
2,882 |
|
|
|
(3,220 |
) |
|
|
(338 |
) |
|
Income taxes |
|
|
— |
|
|
|
1,223 |
|
|
|
1,223 |
|
|
Reclassification adjustments to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net |
|
|
— |
|
|
|
5,585 |
|
|
|
5,585 |
|
|
Income taxes |
|
|
— |
|
|
|
(2,123 |
) |
|
|
(2,123 |
) |
|
Balance at June 30, 2017 |
|
$ |
(2,233 |
) |
|
$ |
— |
|
|
$ |
(2,233 |
) |
8. Revenue recognition
The table below presents net sales, which includes product sales and marketing service fees, for both the three and six months ended June 30, 2017 and 2016.
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
Product sales |
|
$ |
93,908 |
|
|
$ |
90,868 |
|
|
$ |
182,309 |
|
|
$ |
176,493 |
|
|
Marketing service fees |
|
|
15,034 |
|
|
|
13,207 |
|
|
|
29,371 |
|
|
|
26,261 |
|
|
Net sales |
|
$ |
108,942 |
|
|
$ |
104,075 |
|
|
$ |
211,680 |
|
|
$ |
202,754 |
|
Product sales primarily consist of stimulation devices and fixation products. Marketing service fees are received from the Musculoskeletal Transplant Foundation (“MTF”) based on total sales of biologics tissues.
9. Business segment information
The table below present net sales, which includes product sales and marketing service fees, by reporting segment:
|
|
|
Three Months Ended June 30, |
|
|||||||||
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
|
Change |
|
|||
|
BioStim |
|
$ |
47,174 |
|
|
$ |
44,758 |
|
|
|
5.4 |
% |
|
Biologics |
|
|
15,661 |
|
|
|
14,256 |
|
|
|
9.9 |
% |
|
Extremity Fixation |
|
|
24,747 |
|
|
|
26,817 |
|
|
|
-7.7 |
% |
|
Spine Fixation |
|
|
21,360 |
|
|
|
18,244 |
|
|
|
17.1 |
% |
|
Net sales |
|
$ |
108,942 |
|
|
$ |
104,075 |
|
|
|
4.7 |
% |
10
|
|
Six Months Ended June 30, |
|
||||||||||
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
|
Change |
|
|||
|
BioStim |
|
$ |
91,713 |
|
|
$ |
85,802 |
|
|
|
6.9 |
% |
|
Biologics |
|
|
30,648 |
|
|
|
28,350 |
|
|
|
8.1 |
% |
|
Extremity Fixation |
|
|
48,692 |
|
|
|
51,526 |
|
|
|
-5.5 |
% |
|
Spine Fixation |
|
|
40,627 |
|
|
|
37,076 |
|
|
|
9.6 |
% |
|
Net sales |
|
$ |
211,680 |
|
|
$ |
202,754 |
|
|
|
4.4 |
% |
The primary metric used in managing the Company is non-GAAP net margin, which is an internal metric that the Company defines as gross profit less sales and marketing expense. The table below presents non-GAAP net margin by reporting segment:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
BioStim |
|
$ |
19,469 |
|
|
$ |
18,575 |
|
|
$ |
36,602 |
|
|
$ |
34,983 |
|
|
Biologics |
|
|
6,470 |
|
|
|
6,718 |
|
|
|
12,641 |
|
|
|
12,822 |
|
|
Extremity Fixation |
|
|
6,766 |
|
|
|
8,161 |
|
|
|
13,178 |
|
|
|
15,336 |
|
|
Spine Fixation |
|
|
2,696 |
|
|
|
2,201 |
|
|
|
4,703 |
|
|
|
4,536 |
|
|
Corporate |
|
|
(107 |
) |
|
|
(139 |
) |
|
|
(205 |
) |
|
|
(441 |
) |
|
Non-GAAP net margin |
|
$ |
35,294 |
|
|
$ |
35,516 |
|
|
$ |
66,919 |
|
|
$ |
67,236 |
|
|
General and administrative |
|
|
20,409 |
|
|
|
18,545 |
|
|
|
38,691 |
|
|
|
35,550 |
|
|
Research and development |
|
|
6,887 |
|
|
|
6,796 |
|
|
|
14,311 |
|
|
|
14,436 |
|
|
Charges related to U.S. Government resolutions |
|
|
— |
|
|
|
12,870 |
|
|
|
— |
|
|
|
12,870 |
|
|
Operating income (loss) |
|
$ |
7,998 |
|
|
$ |
(2,695 |
) |
|
$ |
13,917 |
|
|
$ |
4,380 |
|
|
Interest income (expense), net |
|
|
76 |
|
|
|
(113 |
) |
|
|
121 |
|
|
|
(151 |
) |
|
Other income (expense), net |
|
|
585 |
|
|
|
147 |
|
|
|
(3,763 |
) |
|
|
1,980 |
|
|
Income (loss) before income taxes |
|
$ |
8,659 |
|
|
$ |
(2,661 |
) |
|
$ |
10,275 |
|
|
$ |
6,209 |
|
10. Share-based compensation
The following tables present the detail of share-based compensation by line item in the condensed consolidated statements of operations as well as by award type:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
Cost of sales |
|
$ |
137 |
|
|
$ |
109 |
|
|
$ |
286 |
|
|
$ |
226 |
|
|
Sales and marketing |
|
|
319 |
|
|
|
280 |
|
|
|
679 |
|
|
|
556 |
|
|
General and administrative |
|
|
2,005 |
|
|
|
1,376 |
|
|
|
4,107 |
|
|
|
2,934 |
|
|
Research and development |
|
|
215 |
|
|
|
148 |
|
|
|
420 |
|
|
|
296 |
|
|
|
|
$ |
2,676 |
|
|
$ |
1,913 |
|
|
$ |
5,492 |
|
|
$ |
4,012 |
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(U.S. Dollars, in thousands) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
Stock options |
|
$ |
523 |
|
|
$ |
467 |
|
|
$ |
1,118 |
|
|
$ |
942 |
|