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Business segment information
 9 Months Ended
Sep. 30, 2013
Segment Reporting [Abstract]  
Business segment information

14. Business segment information

On July 1, 2013, we began certain organizational and executive leadership changes to align with how our Chief Operating Decision Maker (the “CODM”) reviews performance and makes decisions in managing the Company. We manage our business by our four strategic business units (“SBUs”), which are comprised of BioStim, Biologics, Spine Fixation, and Extremity Fixation supported by Corporate activities. These SBUs represent the segments for which our CODM reviews financial information and makes resource allocation decisions among business units. The primary metric used by the Chief Operating Decision Maker in managing the Company is net margin, which is defined as gross profit less sales and marketing expense. The Company neither discretely allocates assets, other than goodwill, to its operating segments nor evaluates the operating segments using discrete asset information. Accordingly, our segment information has been prepared based on our four SBUs reporting segments. These four segments are discussed below.

BioStim

The BioStim Strategic Business Unit manufactures, distributes, and provides support services for a portfolio of market leading devices for enhancing bone fusion that utilize Orthofix’s patented pulsed electromagnetic (PEMF) technology. These Food and Drug Administration-approved Class 3 medical devices are indicated as an adjunctive treatment to enhance fusion success in cervical and lumbar spine as well as a therapeutic treatment for non-healing fractures outside of the spine (non-unions). The PEMF technology is supported by a strong clinical background on mechanism of action in the scientific literature and current research and clinical studies are underway to identify potential new clinical indications.

Biologics

Biologics provides a portfolio of regenerative products that allow physicians to successfully treat a variety of spinal and orthopedic conditions. This SBU specializes in the marketing of the Company’s regeneration tissue forms. Biologics distributes its tissues through a network of distributors, sales representatives and affiliates to market to hospitals, doctors, and other healthcare providers, primarily in the U.S. Our partnership with MTF allows us to exclusively market our Trinity Evolution® and Trinity Elite™ tissue forms for musculoskeletal defects to enhance bony fusion.

Spine Fixation

The Spine Fixation strategic business unit specializes in the design, development and marketing of a portfolio of implant products used in surgical procedures of the spine. Spine Fixation distributes its products through a network of distributors and affiliates. This strategic business unit uses distributor sales representatives to sell spine products to hospitals, doctors and other healthcare providers, globally.

Extremity Fixation

Extremity Fixation offers products that allow physicians to successfully treat a variety of orthopedic conditions unrelated to the spine. This strategic business unit specializes in the design, development, and marketing of the Company’s orthopedic products used in fracture repair, deformity correction and bone reconstruction. Extremity Fixation distributes its products through a network of distributors, sales representatives, and affiliates. This strategic business units uses both direct and distributor sales representatives to sell orthopedics products to hospitals, doctors, and other health providers, globally.

Corporate

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

The accounting policies of the segments are the same as those described in the business segment information found in Note 13, “Business segment information” to the Consolidated Financial Statements included in the 2012 Form 10-K/A.

 

The table below presents external net sales by SBU reporting segment (amounts reported for prior periods have been reclassified to conform to our new segment reporting structure). Net sales include product sales and marketing service fees. Marketing service fees, which are recorded on a net basis, are comprised of fees earned for the marketing of Trinity Evolution®, Trinity ELITE™ and Versashield® in our Biologics segment.

 

     External Net Sales by SBU  
     Three Months Ended September 30,  

(US$ in thousands)

    2013      2012      Reported
Growth		     Constant
Currency
Growth		  
            (Restated)      (Restated)     (Restated)  

BioStim

    $ 31,604       $ 42,310         (25 )%      (28 )% 

Biologics

      13,212         12,951         2  %      2  % 

Spine Fixation

      23,221         25,001         (7 )%      (7 )% 

Extremity Fixation

      24,701         27,595         (10 )%      (9 )% 
  

 

 

     

 

 

     

 

 

    

 

 

  

Total Net Sales

    $ 92,738       $ 107,857         (14 )%      (15 )% 
  

 

 

     

 

 

     

 

 

    

 

 

  
     External Net Sales by SBU  
     Nine Months Ended September 30,  

(US$ in thousands)

    2013      2012      Reported
Growth		     Constant
Currency
Growth		  
            (Restated)      (Restated)     (Restated)  

BioStim

    $ 108,445       $ 134,741         (20 )%      (20 )% 

Biologics

      39,827         39,792         —    %      —    % 

Spine Fixation

      71,994         72,972         (1 )%      (1 )% 

Extremity Fixation

      74,125         82,711         (10 )%      (8 )% 
  

 

 

     

 

 

     

 

 

    

 

 

  

Total Net Sales

    $ 294,391       $ 330,216         (11 )%      (11 )% 
  

 

 

     

 

 

     

 

 

    

 

 

  

The table below presents net margin, defined as gross profit less sales and marketing expenses, from continuing operations by SBU reporting segment:

 

Net margin by SBU    Three Months Ended
September 30,		     Nine Months Ended
September 30,		  

(US$ in thousands)

    2013     2012     2013     2012  
           (Restated)           (Restated)  

Net margin:

         

BioStim

    $ 10,614      $ 19,367      $ 45,911      $ 66,354   

Biologics

      6,743        5,664        18,472        16,524   

Spine Fixation

      1,227        4,693        7,489        13,379   

Extremity Fixation

      8,321        11,145        21,766        24,508   

Corporate

      (469 )      (418 )      (1,376 )      (1,083 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total net margin

      26,436        40,451        92,262        119,682   
  

 

 

    

 

 

    

 

 

    

 

 

  

General and administrative

      13,202        13,850        46,736        42,715   

Research and development

      6,361        6,858        20,653        23,160   

Amortization of intangible assets

      616        565        1,725        1,725   

Costs related to the accounting review and restatement

      2,664          2,664     

Impairment of goodwill

      19,193        —          19,193        —     

Charges related to U.S. Government resolutions

      —          373        —          1,059   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

    $ (15,600 )    $ 18,805      $ 1,291      $ 51,023