February 27, 2017
LEWISVILLE, Texas–(BUSINESS WIRE)–
Orthofix International N.V. (OFIX) today reported its financial results for the fourth quarter and fiscal year ended December 31, 2016. For the fourth quarter of 2016, net sales were $108.5 million, loss per share from continuing operations was ($0.29) and adjusted earnings per share from continuing operations was $0.42. For fiscal year 2016, net sales were $409.8 million, earnings per share from continuing operations was $0.19 and adjusted earnings per share from continuing operations was $1.46. 
“We are very proud of what we accomplished in 2016 and are encouraged by our momentum at year-end,” commented Brad Mason, President and Chief Executive Officer. “We improved our performance during the year in almost every aspect of our business and exited an era of heavy investment with a rebuilt infrastructure, robust compliance program, rigorous financial controls, strong balance sheet, excellent free cash flow and great momentum in our BioStim and Extremity Fixation businesses. Looking ahead to the next chapter for Orthofix, we are now well positioned and committed to execute on both organic and inorganic strategic opportunities focused on accelerating shareholder value creation.”
Financial Results Overview
Fourth Quarter
The following table provides net sales by strategic business unit (“SBU”):
| Three Months Ended December 31, | ||||||||||||||||
| (Unaudited, U.S. Dollars, in thousands) | 2016 | 2015 | Change |
Constant |
||||||||||||
| BioStim | $ | 47,803 | $ | 44,993 | 6.2 | % | 6.2 | % | ||||||||
| Biologics | 15,227 | 15,958 | (4.6 | %) | (4.6 | %) | ||||||||||
| Extremity Fixation | 26,843 | 23,931 | 12.2 | % | 14.3 | % | ||||||||||
| Spine Fixation | 18,664 | 19,740 | (5.5 | %) | (5.6 | %) | ||||||||||
| Net sales | $ | 108,537 | $ | 104,622 | 3.7 | % | 4.2 | % | ||||||||
Gross profit increased $2.0 million to $85.2 million. Gross margin decreased to 78.5% compared to 79.5% in the prior year period, primarily due to an increase in the mix of net sales from our Extremity Fixation SBU, which have lower margins than our regenerative products. Net margin (gross profit less sales and marketing expenses) was $36.5 million, a decrease of 5.1% compared to $38.5 million in the prior year period. The decrease in net margin was primarily due to higher sales and marketing expenses, driven by higher compensation costs, including commissions.
Net loss from continuing operations was $5.1 million, or ($0.29) per share, compared to net income of $2.1 million, or $0.11 per share in the prior year period. Adjusted net income from continuing operations was $7.7 million, or $0.42 per share, compared to adjusted net income of $7.6 million, or $0.40 per share in the prior year period.
EBITDA was $8.6 million, compared to $12.5 million in the prior year period. Adjusted EBITDA was $21.1 million or 19.4% of net sales for the fourth quarter, compared to $19.3 million or 18.4% of net sales in the prior year period.
Fiscal Year 2016
The following table provides net sales by SBU:
| Year Ended December 31, | ||||||||||||||||
| (Unaudited, U.S. Dollars, in thousands) | 2016 | 2015 | Change |
Constant |
||||||||||||
| BioStim | $ | 176,561 | $ | 164,955 | 7.0 | % | 7.0 | % | ||||||||
| Biologics | 57,912 | 59,832 | (3.2 | %) | (3.2 | %) | ||||||||||
| Extremity Fixation | 102,683 | 96,034 | 6.9 | % | 9.6 | % | ||||||||||
| Spine Fixation | 72,632 | 75,668 | (4.0 | %) | (4.0 | %) | ||||||||||
| Net sales | $ | 409,788 | $ | 396,489 | 3.4 | % | 4.0 | % | ||||||||
Gross profit increased $12.0 million to $321.9 million and gross margin increased to 78.6% compared to 78.2% in the prior year period. The increase in gross profit and gross margin was driven by an increase in sales, an increase in sales mix for our BioStim products, and lower fixed costs. Net margin was $140.6 million, an increase of 6.6% compared to $131.9 million in the prior year period. The increase in net margin was due to the higher gross profit, partially offset by higher sales and marketing expenses, including an increase in commissions as a result of the increase in net sales.
Net income from continuing operations was $3.5 million, or $0.19 per share, compared to net loss of $2.3 million, or ($0.12) per share in the prior year. Adjusted net income from continuing operations was $27.0 million, or $1.46 per share, compared to adjusted net income of $19.9 million, or $1.05 per share in the prior year.
EBITDA was $39.1 million, compared to $29.9 million in the prior year. Adjusted EBITDA was $79.3 million or 19.4% of net sales for the year, compared to $60.7 million or 15.3% of net sales in the prior year.
Liquidity
As of December 31, 2016, cash and cash equivalents were $39.6 million compared to $63.7 million as of December 31, 2015. The decrease in cash and cash equivalents is due primarily to the repurchase of shares and funding the settlements with the SEC. As of December 31, 2016, we had no outstanding indebtedness and borrowing capacity of $125 million. Cash flow from operations increased $1.1 million to $44.7 million, while free cash flow increased $10.7 million to $26.4 million.
2017 Outlook
For the year ending December 31, 2017, the Company expects the following results, assuming exchange rates are the same as those currently prevailing.