Orthofix International N.V. announced on March 25, 2014 that net sales for 2011 and 2012 were $42.9 million less than previously reported.
When Brad Mason took over at Orthofix in 2013, the company announced it was reviewing previous revenue reports and would be restating financials in SEC filings. The restatement of revenues was primarily due to illegal sales of the company’s spine stimulation devices under previous management. Some of those sales became the target of a Department of Justice False Claims investigation, which concluded with the company settling with the government for $43 million and some former employees sentenced to jail.
That review process is now completed by the board and the company released a filing on March 25, 2013 with those restatements.
The restatement of the company’s previously issued consolidated financial statements resulted in, among others, the following changes:
- Reduction in net sales for the years ended December 31, 2012 and 2011 of $14.7 million and $28.2 million, respectively, and an increase in net sales for the year ended December 31, 2010 of $1.9 million
- Decrease in net income from continuing operations for the years ended December 31, 2012 and 2011 of $8.9 million and $14.5 million, respectively, and an increase in net income from continuing operations for the year ended December 31, 2010 of $3.2 million
- Decrease in opening retained earnings and total stockholders’ equity at January 1, 2010 of $8.3 million and $7.6 million, respectively.
“The Audit Committee, with the assistance of independent outside professionals, has conducted a thorough review of these matters, ” said Davey Scoon, chairman of the Audit Committee of the company’s board of directors. “The Audit Committee has concluded its review and is confident that the company is appropriately addressing the matters, including the internal control over financial reporting weaknesses that led to the restatement.”
Remediation
The company has also committed to putting systems in place to prevent future sales from coming under the same cloud, including implementing an internal audit program that will take into account the nature of the company’s business and the geographies in which the company conducts it. The company is also updating its code of conduct, and all its employees will be required to annually acknowledge their commitment to adhering to its provisions. The company also will inform all new employees and regularly remind all existing employees of the availability of its compliance hotline, through which employees at all levels can anonymously submit information or express concerns regarding accounting, financial reporting and other irregularities they may have become aware of or observed.
President and CEO Mason said, “The past year has presented us with a unique set of challenges, but we are confident Orthofix is emerging stronger and with a renewed energy to drive our business forward. We are committed to achieving and maintaining a strong control environment, high ethical standards and financial reporting integrity. This commitment has been and will continue to be communicated to every Orthofix employee. It is accompanied by renewed management focus on strategies and processes intended to drive long-term shareholder value.”
Mason is getting the company back to business.
