Orthofix International N.V. (NASDAQ:OFIX) (the Company) today announced an internal reorganization designed to streamline operations within its three Global Business Units: Spine, Orthopedics and Sports Medicine. The Company expects to record a charge related to employee termination benefits of approximately $4.0 million ($2.4 million net of tax, or $0.13 per diluted share) in the fourth quarter of 2010 in connection with the reorganization. The Company expects the reorganization to result in annual savings of approximately $6 million to $7 million per year beginning in 2011.
“Additionally, we are very pleased to have come to what we believe is a mutually beneficial resolution to the patent matter related to Trinity Evolution.”
Settlement Ends Patent Infringement Suit
Orthofix also announced on behalf of itself and the Musculoskeletal Transplant Foundation that they have executed a comprehensive settlement agreement with NuVasive, Inc. and Osiris Therapeutics, Inc. concerning the Trinity® Evolution™ tissue allograft. The lawsuit was filed in April of this year in the United States District Court for the District of New Jersey alleging that Trinity Evolution infringes intellectual property owned by NuVasive and Osiris. As part of the comprehensive settlement the parties entered into a license agreement covering Trinity Evolution, the primary subject of which is U.S. Patent No. 6,355,239. In connection with this settlement Orthofix will record a charge of $2 million, ($1.2 million net of tax, or $0.07 per diluted share) in the fourth quarter of 2010. Additional specific terms of the settlement, including initial and ongoing financial terms, are confidential.
Q4 2010 Guidance
Orthofix has lowered its fourth quarter earnings expectations from $0.59 to $0.62 per share to $0.39 to $0.42 per share as a result of the fourth quarter charges totaling $0.20 per share that the Company expects to incur in connection with the reorganization and the legal settlement. Additionally, the Company revised its fourth quarter and full year 2010 revenue expectations to a new range of $142 million to $144 million, and $562.6 million to $564.6 million, respectively. The revision was primarily due to a slower growth rate in the Company's spine stimulation business.
"The global reorganization we announced today is another key step toward the achievement of our plan to improve our operating profit margin, and was facilitated in part by the recent consolidation of operations into our new facility in Lewisville, TX. This initiative will result in substantial annual savings after the initial fourth quarter charge," said President and CEO Alan Milinazzo. "Additionally, we are very pleased to have come to what we believe is a mutually beneficial resolution to the patent matter related to Trinity Evolution."
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