Restatement of the Consolidated Financial Statements (Tables)

12 Months Ended

Dec. 31, 2013

Adjustments to Previously Filed Consolidated Income Statements

The results of the adjustments to the Company’s previously filed consolidated statements of operations detailed above are summarized in the tables below. The tax effect of the adjustments is estimated based on the Company’s effective tax rate.


	Year Ended December 31, 2012
				Adjustments by Category
(U.S. Dollars, in thousands)	Previously Reported			Distributor Revenue			Inventory Reserves			Royalties			Other			Total Adjustments			Restated
Net sales	$	462,320		$	(14,777	)	$	—		$	—		$	38		$	(14,739	)	$	447,581
Cost of sales		86,492			(2,032	)		5,647			8,190			(44	)		11,761			98,253

Gross profit		375,828			(12,745	)		(5,647	)		(8,190	)		82			(26,500	)		349,328
Operating expenses
Sales and marketing		200,343			(6,629	)		—			(8,190	)		1,607			(13,212	)		187,131
General and administrative		53,827			(2	)		—			—			(434	)		(436	)		53,391
Research and development		28,577			—			—			—			—			—			28,577
Amortization of intangible assets		2,098			—			—			—			200			200			2,298
Charges related to U.S. Government resolutions		1,973			—			—			—			(678	)		(678	)		1,295

		286,818			(6,631	)		—			(8,190	)		695			(14,126	)		272,692

Operating income		89,010			(6,114	)		(5,647	)		—			(613	)		(12,374	)		76,636
Other income and (expense)		(6,282	)		—			—			—			(166	)		(166	)		(6,448	)

Income before income taxes		82,728			(6,114	)		(5,647	)		—			(779	)		(12,540	)		70,188
Income tax expense		(28,792	)		1,782			1,645			—			227			3,654			(25,138	)

Net income from continuing operations	$	53,936		$	(4,332	)	$	(4,002	)	$	—		$	(552	)	$	(8,886	)	$	45,050


	Year Ended December 31, 2011
				Adjustments by Category
(U.S. Dollars, in thousands)	Previously Reported			Distributor Revenue			Inventory Reserves			Royalties			Other			Total Adjustments			Restated
Net sales	$	470,121		$	(29,135	)	$	—		$	—		$	985		$	(28,150	)	$	441,971
Cost of sales		92,619			(8,289	)		3,377			7,713			107			2,908			95,527

Gross profit		377,502			(20,846	)		(3,377	)		(7,713	)		878			(31,058	)		346,444
Operating expenses
Sales and marketing		200,145			(1,216	)		—			(7,713	)		2,295			(6,634	)		193,511
General and administrative		64,374			—			—			—			107			107			64,481
Research and development		22,861			—			—			—			—			—			22,861
Amortization of intangible assets		2,350			—			—			—			200			200			2,550
Charges related to U.S. Government resolutions		56,463			—			—			—			678			678			57,141

		346,193			(1,216	)		—			(7,713	)		3,280			(5,649	)		340,544

Operating income		31,309			(19,630	)		(3,377	)		—			(2,402	)		(25,409	)		5,900
Other income and (expense)		(11,868	)		—			—			—			3,915			3,915			(7,953	)

Income (loss) before income taxes		19,441			(19,630	)		(3,377	)		—			1,513			(21,494	)		(2,053	)
Income tax expense		(21,181	)		6,408			1,102			—			(494	)		7,016			(14,165	)

Net loss from continuing operations	$	(1,740	)	$	(13,222	)	$	(2,275	)	$	—		$	1,019		$	(14,478	)	$	(16,218	)

Effects of Restatements on Consolidated Balance Sheet

The effects of the restatements on the Company’s consolidated balance sheet as of December 31, 2012 are as follows:


	As of December 31, 2012
(U.S. Dollars, in thousands except share and per share data)	Previously Reported		Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	31,055	$	—		$	31,055
Restricted cash		21,314		—			21,314
Trade accounts receivable, less allowances of $13,543		150,316		(43,004	)		107,312
Inventories		88,744		(5,371	)		83,373
Deferred income taxes		16,959		16,491			33,450
Prepaid expenses and other current assets		32,056		2,023			34,079

Total current assets		340,444		(29,861	)		310,583
Property, plant and equipment, net		51,362		2,473			53,835
Patents and other intangible assets, net		6,880		410			7,290
Goodwill		74,388		—			74,388
Deferred income taxes		19,904		(1,023	)		18,881
Other long-term assets		11,303		(3,383	)		7,920

Total assets	$	504,281	$	(31,384	)	$	472,897

Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings	$	16	$	—		$	16
Trade accounts payable		21,812		763			22,575
Other current liabilities		46,969		(7,375	)		39,594

Total current liabilities		68,797		(6,612	)		62,185
Long-term debt		20,000		—			20,000
Deferred income taxes		11,456		—			11,456
Other long-term liabilities		4,930		6,494			11,424

Total liabilities		105,183		(118	)		105,065
Contingencies (Note 17)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 19,339,329 issued and outstanding		1,934		—			1,934
Additional paid-in capital		246,111		195			246,306
Retained earnings		148,549		(33,702	)		114,847
Accumulated other comprehensive income		2,504		2,241			4,745

Total shareholders’ equity		399,098		(31,266	)		367,832

Total liabilities and shareholders’ equity	$	504,281	$	(31,384	)	$	472,897

Effects of Restatements of Consolidated Statement of Operations and Comprehensive Income (Loss)

The effects of the restatements on the Company’s consolidated statement of operations and comprehensive income for the year ended December 31, 2012 are as follows:


	Year Ended December 31, 2012
(U.S. Dollars, in thousands, except share and per share data)	Previously Reported			Adjustments			Restated
Product sales	$	415,850			(14,811	)	$	401,039
Marketing service fees		46,470			72			46,542

Net sales		462,320			(14,739	)		447,581
Cost of sales		86,492			11,761			98,253

Gross profit		375,828			(26,500	)		349,328
Operating expenses
Sales and marketing		200,343			(13,212	)		187,131
General and administrative		53,827			(436	)		53,391
Research and development		28,577			—			28,577
Amortization of intangible assets		2,098			200			2,298
Charges related to U.S. Government resolutions (Note 17)		1,973			(678	)		1,295

		286,818			(14,126	)		272,692

Operating income		89,010			(12,374	)		76,636
Other income and (expense)
Interest expense, net		(4,577	)		(166	)		(4,743	)
Other expense		(1,705	)		—			(1,705	)

		(6,282	)		(166	)		(6,448	)

Income before income taxes		82,728			(12,540	)		70,188
Income tax expense		(28,792	)		3,654			(25,138	)

Net income from continuing operations		53,936			(8,886	)		45,050

Discontinued operations (Note 16)
Gain on sale of Breg, Inc.,		1,345			—			1,345
Loss from discontinued operations		(4,012	)		1,018			(2,994	)
Income tax benefit (expense)		26			(589	)		(563	)

Net loss from discontinued operations		(2,641	)		429			(2,212	)

Net income	$	51,295			(8,457	)	$	42,838

Net income (loss) per common share—basic:
Net income from continuing operations	$	2.84			(0.47	)	$	2.37
Net loss from discontinued operations		(0.14	)		0.02			(0.12	)

Net income per common share—basic	$	2.70			(0.45	)	$	2.25

Net income (loss) per common share—diluted:
Net income from continuing operations	$	2.78			(0.46	)	$	2.32
Net loss from discontinued operations		(0.14	)		0.03			(0.11	)

Net income per common share—diluted:	$	2.64			(0.43	)	$	2.21

Weighted average number of common shares:
Basic		18,977,263			—			18,977,263
Diluted		19,390,413			—			19,390,413
Other comprehensive income, before tax:
Translation adjustment	$	480			288		$	768
Unrealized gain on derivative instrument		416			—			416

Other comprehensive income, before tax		896			288			1,184
Income tax expense related to components of other comprehensive income		(153	)		—			(153	)

Other comprehensive income, net of tax		743			288			1,031

Comprehensive income	$	52,038			(8,169	)	$	43,869

The effects of the restatements on the Company’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2011 are as follows:


	Year Ended December 31, 2011
(U.S. Dollars, in thousands, except share and per share data)	Previously Reported			Adjustments			Restated
Product sales	$	432,975			(27,828	)	$	405,147
Marketing service fees		37,146			(322	)		36,824

Net sales		470,121			(28,150	)		441,971
Cost of sales		92,619			2,908			95,527

Gross profit		377,502			(31,058	)		346,444
Operating expenses
Sales and marketing		200,145			(6,634	)		193,511
General and administrative		64,374			107			64,481
Research and development		22,861			—			22,861
Amortization of intangible assets		2,350			200			2,550
Charges related to U.S. Government resolutions (Note 17)		56,463			678			57,141

		346,193			(5,649	)		340,544

Operating income		31,309			(25,409	)		5,900
Other income and (expense)
Interest expense, net		(9,456	)		3,915			(5,541	)
Other expense		(2,412	)		—			(2,412	)

		(11,868	)		3,915			(7,953	)

Income (loss) before income taxes		19,441			(21,494	)		(2,053	)
Income tax expense		(21,181	)		7,016			(14,165	)

Net loss from continuing operations		(1,740	)		(14,478	)		(16,218	)

Discontinued operations (Note 16)
Gain on sale of Breg, Inc.		—			—			—
Income (loss) from discontinued operations		1,263			(3,968	)		(2,705	)
Income tax (expense) benefit		(596	)		1,409			813

Net income (loss) from discontinued operations		667			(2,559	)		(1,892	)

Net loss	$	(1,073	)		(17,037	)	$	(18,110	)

Net income (loss) per common share—basic:
Net loss from continuing operations	$	(0.10	)		(0.79	)	$	(0.89	)
Net income (loss) from discontinued operations		0.04			(0.14	)		(0.10	)

Net loss per common share—basic	$	(0.06	)		(0.93	)	$	(0.99	)

Net income (loss) per common share—diluted:
Net loss from continuing operations	$	(0.10	)		(0.79	)	$	(0.89	)
Net income (loss) from discontinued operations		0.04			(0.14	)		(0.10	)

Net loss per common share—diluted:	$	(0.06	)		(0.93	)	$	(0.99	)

Weighted average number of common shares:
Basic		18,219,343			—			18,219,343
Diluted		18,219,343			—			18,219,343
Other comprehensive loss, before tax:
Translation adjustment	$	(3,192	)		913		$	(2,279	)
Unrealized loss on derivative instrument		(693	)		—			(693	)

Other comprehensive loss, before tax		(3,885	)		913			(2,972	)
Income tax benefit related to components of other comprehensive income		256			—			256

Other comprehensive loss, net of tax		(3,629	)		913			(2,716	)

Comprehensive loss	$	(4,702	)		(16,124	)	$	(20,826	)