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Business segment information | 12 Months Ended
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Dec. 31, 2018
Segment Reporting [Abstract] |
Business segment information |
16. | Business segment information
We manage our business by our four reporting segments: Bone Growth Therapies, Spinal Implants, Biologics, and Orthofix Extremities. These reporting segments represent the operating segments for which our Chief Executive Officer, who is also Chief Operating Decision Maker (the “CODM”), reviews financial information and makes resource allocation decisions among businesses. The primary metric used by the CODM in managing the Company is non-GAAP net margin, an internal metric that the Company defines 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 reporting segment information has been prepared based on our four reporting segments. Bone Growth Therapies The Bone Growth Therapies reporting segment manufactures, distributes, and provides support services of market leading bone growth stimulator devices that enhance bone fusion. These Class III medical devices are indicated as an adjunctive, noninvasive treatment to improve fusion success rates in cervical and lumbar spine as well as a therapeutic treatment for non-spine fractures that have not healed (non-unions). This reporting segment uses distributors and sales representatives to sell its devices to hospitals, healthcare providers, and patients, primarily in the U.S. Spinal Implants The Spinal Implants reporting segment 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 through a network of distributors and sales representatives to sell spine products to hospitals and healthcare providers, globally. Biologics The Biologics reporting segment provides a portfolio of regenerative products and tissue forms that allow physicians to successfully treat a variety of spinal and orthopedic conditions. This reporting segment specializes in the marketing of the Company’s exclusive regeneration tissue forms and distributes its tissues to hospitals and healthcare providers, primarily in the U.S., through a network of employed and independent sales representatives. Our partnership with MTF allows us to exclusively market the Trinity Evolution and Trinity ELITE tissue forms for musculoskeletal defects to enhance bony fusion. Orthofix Extremities The Orthofix Extremities reporting segment offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions unrelated to the spine. This reporting segment specializes in the design, development, and marketing of the Company’s orthopedic products used in fracture repair, deformity correction and bone reconstruction procedures. Orthofix Extremities distributes its products through a network of distributors and sales representatives to sell orthopedic products to hospitals, and healthcare providers, globally. Corporate Corporate activities are comprised of the operating expenses and activities of the Company not necessarily identifiable within the four reporting segments. The table below presents net sales by reporting segment:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
(U.S. Dollars, in thousands) |  | Net Sales |  |  | Percent of Total Net Sales |  |  | Net Sales |  |  | Percent of Total Net Sales |  |  | Net Sales |  |  | Percent of Total Net Sales |
Bone Growth Therapies |  | $ | 195,252 |  |  |  | 43.1 | % |  | $ | 185,900 |  |  |  | 42.9 | % |  | $ | 176,561 |  |  |  | 43.1 | %
Spinal Implants |  |  | 91,658 |  |  |  | 20.2 | % |  |  | 81,957 |  |  |  | 18.9 | % |  |  | 72,632 |  |  |  | 17.7 | %
Biologics |  |  | 59,684 |  |  |  | 13.2 | % |  |  | 62,724 |  |  |  | 14.4 | % |  |  | 57,912 |  |  |  | 14.1 | %
Orthofix Extremities |  |  | 106,448 |  |  |  | 23.5 | % |  |  | 103,242 |  |  |  | 23.8 | % |  |  | 102,683 |  |  |  | 25.1 | %
Net sales |  | $ | 453,042 |  |  |  | 100.0 | % |  | $ | 433,823 |  |  |  | 100.0 | % |  | $ | 409,788 |  |  |  | 100.0 | %
The following table presents Non-GAAP net margin, and internal metric that the Company defines as gross profit less sales and marketing expense, by reporting segment:
|  | Year Ended December 31, |
(U.S. Dollars, in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Bone Growth Therapies |  | $ | 86,252 |  |  | $ | 77,369 |  |  | $ | 75,469 |
Spinal Implants |  |  | 7,628 |  |  |  | 8,730 |  |  |  | 8,650 |
Biologics |  |  | 26,298 |  |  |  | 25,692 |  |  |  | 26,891 |
Orthofix Extremities |  |  | 31,391 |  |  |  | 31,071 |  |  |  | 30,526 |
Corporate |  |  | (682 | ) |  |  | (446 | ) |  |  | (888 | )
Non-GAAP net margin |  | $ | 150,887 |  |  | $ | 142,416 |  |  | $ | 140,648 |
General and administrative |  |  | 84,506 |  |  |  | 71,905 |  |  |  | 76,409 |
Research and development |  |  | 33,218 |  |  |  | 29,700 |  |  |  | 28,803 |
Changes in fair value of contingent consideration |  |  | 3,069 |  |  |  | — |  |  |  | — |
Charges related to U.S. Government resolutions |  |  | — |  |  |  | — |  |  |  | 14,369 |
Operating income |  | $ | 30,094 |  |  | $ | 40,811 |  |  | $ | 21,067 |
Interest income (expense), net |  |  | (828 | ) |  |  | (416 | ) |  |  | 763 |
Other expense, net |  |  | (6,381 | ) |  |  | (4,004 | ) |  |  | (2,806 | )
Income before income taxes |  | $ | 22,885 |  |  | $ | 36,391 |  |  | $ | 19,024 |
The following table presents depreciation and amortization by reporting segment:
|  | Year Ended December 31, |
(U.S. Dollars, in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Bone Growth Therapies |  | $ | 1,770 |  |  | $ | 2,133 |  |  | $ | 2,754 |
Spinal Implants |  |  | 7,294 |  |  |  | 6,949 |  |  |  | 8,118 |
Biologics |  |  | 448 |  |  |  | 752 |  |  |  | 1,011 |
Orthofix Extremities |  |  | 5,342 |  |  |  | 6,040 |  |  |  | 5,742 |
Corporate |  |  | 3,805 |  |  |  | 4,250 |  |  |  | 3,216 |
Total |  | $ | 18,659 |  |  | $ | 20,124 |  |  | $ | 20,841 |
Geographical information The following data includes net sales by geographic destination:
(U.S. Dollars, in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
U.S. |  | $ | 355,353 |  |  | $ | 345,145 |  |  | $ | 316,873 |
Italy |  |  | 19,331 |  |  |  | 17,059 |  |  |  | 16,664 |
Germany |  |  | 11,606 |  |  |  | 7,063 |  |  |  | 6,448 |
United Kingdom |  |  | 8,731 |  |  |  | 8,725 |  |  |  | 10,362 |
Brazil |  |  | 7,120 |  |  |  | 10,356 |  |  |  | 11,334 |
Others |  |  | 50,901 |  |  |  | 45,475 |  |  |  | 48,107 |
Net sales |  | $ | 453,042 |  |  | $ | 433,823 |  |  | $ | 409,788 |
The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:
(U.S. Dollars, in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Bone Growth Therapies |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 195,189 |  |  | $ | 185,853 |  |  | $ | 176,510 |
International |  |  | 63 |  |  |  | 47 |  |  |  | 51 |
Total Bone Growth Therapies |  |  | 195,252 |  |  |  | 185,900 |  |  |  | 176,561 |
Spinal Implants |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 72,137 |  |  |  | 69,704 |  |  |  | 57,772 |
International |  |  | 19,521 |  |  |  | 12,253 |  |  |  | 14,860 |
Total Spinal Implants |  |  | 91,658 |  |  |  | 81,957 |  |  |  | 72,632 |
Biologics |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 59,668 |  |  |  | 62,670 |  |  |  | 57,574 |
International |  |  | 16 |  |  |  | 54 |  |  |  | 338 |
Total Biologics |  |  | 59,684 |  |  |  | 62,724 |  |  |  | 57,912 |
Orthofix Extremities |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 28,359 |  |  |  | 26,918 |  |  |  | 25,017 |
International |  |  | 78,089 |  |  |  | 76,324 |  |  |  | 77,666 |
Total Orthofix Extremities |  |  | 106,448 |  |  |  | 103,242 |  |  |  | 102,683 |
Consolidated |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 355,353 |  |  |  | 345,145 |  |  |  | 316,873 |
International |  |  | 97,689 |  |  |  | 88,678 |  |  |  | 92,915 |
Net sales |  | $ | 453,042 |  |  | $ | 433,823 |  |  | $ | 409,788 |
The following data includes property, plant and equipment by geographic area:
(U.S. Dollars, in thousands) |  | 2018 |  |  | 2017 |
U.S. |  | $ | 31,344 |  |  | $ | 34,008 |
Italy |  |  | 7,732 |  |  |  | 7,658 |
Germany |  |  | 861 |  |  |  | 933 |
United Kingdom |  |  | 896 |  |  |  | 382 |
Brazil |  |  | 191 |  |  |  | 475 |
Others |  |  | 1,811 |  |  |  | 1,683 |
Total |  | $ | 42,835 |  |  | $ | 45,139 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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