Last week Orthofix announced the company would delay releasing second quarter financial reports until they were able to adjust issues with their calculations. Today, the company said it would restate the prior period's financial statements for the 2011, 2012 and 2013 fiscal statements as well as the first quarter ending in March, 2014.
The company advises not to rely on previous filings from these periods and will restate these financial statements in amendments. The company is working on the revised financial statements and plans to amend the 2013 Form 10-K and amended 2014 first quarter Forum 10-Q with the delayed quarterly report for the second quarter of 2014 before September ends.
The company found its historical method of accounting for certain revenue adjustments — uncollectible patient co-pay and self-pay amounts — as bad debt expense instead of contra-revenue was incorrect and the company plans to reduce its historical net sales and sales and marketing expense by around $6 million for 2011, $9 million for 2012, $2 million for 2014 and $3 million for the first quarter of 2014.
These changes aren't expected to impact pretax income from continuing operations. Additional updates include:
• Certain bad debt reverses in 2011 and 2012 were reversed in incorrect periods
• Intercompany profit in inventory was not fully estimated in the subsidiary consolidation process
• Around $0.5 million of interest expense was classified under continuing operations in 2012 but should have been classified as discontinued operations
The company expects continuing operations to increase by $2 million for 2011 but decrease by $1 million in 2012 and $2.5 million for both 2013 and the first quarter of 2014.
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