Orthofix International N.V., (NASDAQ:OFIX) today reported results for the fourth quarter and full year ended Dec. 31, 2013. For full-year 2013, net sales were $400.5 million, decreasing 11 percent on a reported basis and constant currency basis from $447.6 million in the prior year. For the fourth quarter 2013, net sales were $106.1 million, decreasing 10 percent on a reported and constant currency basis from $117.4 million in the fourth quarter of the prior year.
Commenting on the Company's financial results, Orthofix President and Chief Executive Officer Brad Mason said, "Orthofix is clearly a company in transition. Over the course of 2013, we made a lot of headway in many areas, behind the scenes. We undertook a bottoms-up analysis of every aspect of the Company, which led us to implement numerous changes in people and business processes and to renew our focus on growth strategies."
Mr. Mason continued, "This past year has been challenging and the 2013 financial performance is not reflective of where the Company should be operating. However, we expect stronger financial results in 2014 and are laying the groundwork for further growth and profitability in 2015 and 2016. We are confident that the changes we have made and the initiatives currently underway are resulting in a stronger Company driven by integrity and with a renewed focus on delivering results that meet or exceed our stakeholders' expectations."
Strategic Plan to Improve Profitability and Performance
In 2013, Orthofix redefined its business segments to allow each business unit to focus on distinct attributes and opportunities that maximize their potential, as well as provide greater internal and external transparency. These strategic business units (SBUs) are: BioStim, Biologics, Extremity Fixation and Spine Fixation. To provide greater external transparency into these SBUs, the Company will provide SBU-specific net sales and "net margin," the latter of which is the measure of profit that best reflects the contribution margin of each of the SBUs. The Company calculates net margin as gross profit less sales and marketing expenses.
Furthermore, the Company has substantially enhanced its leadership team worldwide, including appointing a new Chairman of the Board and two additional highly qualified Board members. In addition to new leadership, the Company is implementing a number of key initiatives to strengthen its foundation and drive profitable growth. In addition to corporate initiatives, each SBU has developed and is executing individual key strategies, which will be discussed on the Company's earnings call later today.
2013 Results
BioStim
For full-year 2013, sales were $147.9 million, a 20 percent decrease on a constant currency basis over 2012. This decrease was primarily due to a decline in volume relating to turnover of spine and orthopedic distributors, and a one-time deferral of third-party payor revenue due to a change of methodology to our billing process.
Biologics
Total Biologics sales were $53.8 million for the full-year 2013, which increased slightly from $53.7 million for the full-year 2012. Total tissue usage for the full-year 2013 increased 5 percent compared to 2012, but was offset by a change in our marketing service fee from Musculoskeletal Transplant Foundation (MTF) from 70 to 65 percent in April 2013, which occurred at the time of our Trinity Elite new product launch.
Extremity Fixation
Full-year 2013 sales of Extremity Fixation products were $103.4 million, a 7 percent constant currency decline compared to 2012 sales. This decline was predominantly the result of deterioration of sales in Brazil, as well as the negative impact of transitioning to sell-through revenue recognition for international distributors beginning on April 1, 2013.
Spine Fixation
Full-year 2013 sales were $95.5 million, a 2 percent decrease on a constant currency basis compared to the prior year. This decrease was primarily due to a 6 percent decrease in our average selling prices due to price discounting, which was somewhat offset by increased international sales.
Full Year Earnings Results
Full-year 2013 operating income from continuing operations was a loss of $5.1 million compared to income of $76.6 million in the prior year. Full-year 2013 and 2012 operating income included certain specified items detailed below, including a $19.2 million non-cash charge related to an impairment of goodwill and $12.9 million of costs related to the Company's accounting review and restatement. When excluding these and the other specified items detailed below, adjusted operating income in full-year 2013 was $34.2 million compared to $84.0 million in full-year 2012. Full-year 2013 net income from continuing operations was a loss of $15.7 million compared to income of $45.1 million in the prior year. Full-year 2013 and 2012 net income also included the specified items detailed below. When excluding these items, adjusted net income from continuing operations for the full-year 2013 was $14.2 million compared to $49.7 million in full-year 2012.
Conference Call
Orthofix will host a conference call to discuss fourth quarter and full-year 2013 results today, Thursday, March 27, 2014 at 8:30 a.m. EST (7:30 a.m. CST). Interested parties may access the conference call by dialing (888) 267-2845 in the U.S. and (973) 413-6102 outside the U.S., and entering the conference ID 38220. A replay of the call will be available for two weeks by dialing (800) 332-6854 in the U.S. and (973) 528-0005 outside the U.S., and entering the conference ID 38220. A webcast of the conference call may be accessed by going to the Company's website at www.orthofix.com, by clicking on the Investors link and then the Events and Presentations page.
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