Orthofix International Announces Record Sales in Fourth Quarter 2007

HUNTERSVILLE, N.C.--(Business Wire)--
Orthofix International N.V., (NASDAQ:OFIX):

-- Record fourth quarter sales totaled $128.8 million, up 11%
from the fourth quarter of 2006 and in-line with Company
guidance

-- 2007 full-year sales totaled $490.3 million, an increase of
34% from 2006

-- Q4 reported net loss was $10.5 million, or $0.62 per diluted
share, including $21.0 million ($12.8 million net of tax, or
$0.76 per share) in non-cash write-downs of certain intangible
assets

-- 2007 full-year net income was $11.0 million, or $0.64 per
diluted share

-- Orthofix also announced it is exploring the divestiture of its
orthopedic fixation assets

Orthofix International N.V., (NASDAQ:OFIX) (the Company) announced
today that total revenue for the fourth quarter ended December 31,
2007 was $128.8 million, an increase of 11% over the fourth quarter of
2006.

Revenue for the full-year 2007 was $490.3 million, which was an
increase of 34% compared with 2006.

The reported fourth quarter net loss totaled $10.5 million, or
$0.62 per diluted share.

Additionally, adjusted net income, excluding specified non-cash
items was $7.6 million or $0.45 per diluted share in the fourth
quarter, as indicated in the table below.

Reported earnings for the full year 2007 were $11.0 million, or
$0.64 per diluted share.

Additionally, adjusted net income, excluding specified non-cash
items for the full year 2007 was $44.4 million, or $2.61 per share, as
indicated on the table in the Regulation G Supplemental Information
Schedule attached.

"In a quarter with mixed results, we were disappointed with our
fourth quarter earnings. However, we were pleased with the balanced
revenue growth across each of our core business units in the fourth
quarter and during the full-year of 2007," said CEO Alan Milinazzo.

Non-GAAP Performance Measures

The table below presents a reconciliation between net
income/(loss) calculated in accordance with generally accepted
accounting principles (GAAP) and one non-GAAP performance measure,
referred to as "adjusted net income, excluding specified non-cash
items," that excludes from net income/(loss) the items specified in
the table. Management believes it is important to provide investors
with the same non-GAAP metrics which it uses to supplement information
regarding the performance and underlying trends of Orthofix's business
operations, facilitate comparisons to its historical operating results
and internally evaluate the effectiveness of the Company's operating
strategies. A more detailed explanation of the items in the table
below that are excluded from GAAP net income, as well as why
management believes the non-GAAP measure is useful to them, is
included in the Regulation G Supplemental Information schedule
attached to this press release.

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*T
Reconciliation of Non-GAAP Performance Measures

-------------------------------------
Fourth Quarter Q407 Q406
----------------------------------------------------------------------
Impact Impact
Per Per
Diluted Diluted
($000's) Share ($000's) Share
---------------------------------

Reported GAAP net income ($10,515) ($0.62) $7,403 $0.44

Specified Non-Cash Items:
-------------------------------------
Non-cash write-down of certain
intangible assets 12,803 0.76 --- ---
Non-cash BREG amortization 861 0.05 826 0.05
Non-cash Blackstone amortization 1,796 0.11 1,927 0.11
Equity compensation expense (FAS
123R) 2,662 0.16 1,722 0.10
---------------------------------

Adj. net income, excluding specified
non-cash items $7,607 $0.45 $11,878 $0.70
=================================

NOTE: Some calculations may be impacted by rounding. See full-year
Reconciliation of Non-GAAP Performance Measure in the Regulation G
Supplemental Information Schedule included with this release.
*T

Revenue

Total fourth quarter sales in the Company's spine sector grew 10%
year-over-year, to $64.2 million. Implant and biologic revenue from
Blackstone Medical (Blackstone) was $30.5 million, including
international revenue, which was an increase of 8% compared with
fourth quarter sales in 2006. Implant and biologic revenue growth in
the fourth quarter was impacted by lower than expected levels of
Trinity bone growth matrix available for sale and the termination and
replacement of a large distributor during the quarter.

For the full year, spine revenues totaled $243.2 million, a 68%
increase over the full year 2006. This increase reflects the
acquisition of Blackstone, which was completed at the end of September
2006. For the full year 2007 implant and biologic revenue grew 30%,
including international revenue, compared with full year 2006
(including the period prior to Orthofix's ownership).

Fourth quarter revenue from Orthofix's orthopedic business rose
21%, to $30.0 million, compared with the prior year.

Full-year orthopedic revenue was $111.9 million, up 17% from the
full year 2006.

In the fourth quarter Orthofix's sports medicine business grew 9%
year-over-year, to $23.0 million.

Sports medicine revenue for the full-year grew 11% compared with
2006, to $87.5 million.

Gross Margin

The gross margin percentage in the fourth quarter of 2007 was
73.2%, which was 100 basis points lower than the fourth quarter of
2006. The decrease is primarily attributable to the initial stocking
sale to a new European distributor, which was structured at lower than
normal gross margins.

The gross margin percentage for the full year 2007 was 73.7%, a
decrease of 70 basis points compared with the prior year.

Operating Expenses

Fourth quarter sales and marketing (S&M) expenses as a percent of
revenue decreased by 290 basis points year-over-year, to 37.3%. The
year-over-year decrease in the S&M ratio is primarily due to costs
incurred in the fourth quarter of 2006 in connection with the
Blackstone acquisition.

Fourth quarter general and administrative (G&A) expenses increased
by 350 basis points in the fourth quarter, to 18.1% of sales. The
increase in the G&A ratio reflected the impact of approximately $1.7
million ($1.2 million net of tax, or $0.07 per share) of employee
transition costs, which included the Company's previously announced
appointment of a new chief financial officer.

The higher G&A ratio also included the impact of approximately
$1.5 million ($944,000 net of tax, or $0.06 per share) of costs
incurred during the fourth quarter as part of the Company's strategic
initiatives. This primarily included the exploration of options
related to the potential divestiture of the fixation assets in its
orthopedic business unit. The Company has not yet identified a buyer
for these fixation assets, and no agreements have been signed.

Additionally, the higher G&A ratio included approximately $3.0
million of costs in excess of budgeted amounts that related to
professional fees associated with audit and tax planning projects, and
employment and employee benefit matters.

Research and development (R&D) expenses as a percent of revenues
were 4.6% in the fourth quarter of 2007. This was a decrease of 90
basis points year-over-year. Full-year 2007 R&D expenses decreased
$30.8 million, primarily due to a $40.0 million write-off of
in-process R&D associated with the acquisition of Blackstone.

Amortization expense in the fourth quarter of 2007 was $4.4
million, compared with $3.5 million in the fourth quarter of 2006.
Full year amortization expense was $18.2 million, an increase of $9.3
million over the prior year. The full-year increase was due primarily
to the amortization of expenses associated with the Blackstone
acquisition.

During the fourth quarter, the Company wrote down approximately
$21.0 million ($12.8 million, net of tax or $0.76 per share) of
certain intangible assets, primarily related to a trademark recorded
in connection with the acquisition of Blackstone.

Other Income and Expenses

Orthofix reported fourth quarter net interest expense of $6.5
million, compared with interest expense of approximately $5.7 million
in the fourth quarter of 2006. The higher expenses in the fourth
quarter of 2007 were primarily due to interest of approximately
$500,000 ($310,000 net of tax, or $0.02 per share) paid on short-term
indebtedness incurred in the Company's Italian operations as the
result of increased inventories of recently introduced internal
fixation devices. Full year 2007 interest expense of $23.7 million was
approximately $17.6 million higher than the prior year primarily as a
result of indebtedness incurred in association with the acquisition of
Blackstone.

Taxes

The tax rate in the fourth quarter of 2007 was approximately 28%.
Orthofix's tax rate during the fourth quarter was affected by tax rate
changes in various jurisdictions that resulted in a $1.3 million
write-down of deferred tax assets on the Company's balance sheet, with
the majority of the write-down related to a tax rate change in Italy.
The full year tax rate in 2007 was approximately 26%.

Conference Call

Orthofix will host a conference call on Friday February 22nd at
10:00 AM Eastern time to discuss the Company's financial results for
the fourth quarter of 2007. Interested parties may access the
conference call by dialing (866) 626-7622 in the U.S., and (706)
758-3283 outside the U.S., and providing the conference ID 33891026. A
replay of the call will be available for one week by dialing (800)
642-1687 in the U.S., and (706) 645-9291 outside the U.S., and
entering the conference ID 33891026.

About Orthofix

Orthofix International, N.V., a global diversified orthopedic
products company, offers a broad line of minimally invasive surgical,
and non-surgical, products for the spine, orthopedic, and sports
medicine market sectors that address the lifelong bone-and-joint
health needs of patients of all ages-helping them achieve a more
active and mobile lifestyle. Orthofix's products are widely
distributed around the world to orthopedic surgeons and patients via
Orthofix's sales representatives and its subsidiaries, including BREG,
Inc. and Blackstone Medical, Inc., and via partnerships with other
leading orthopedic product companies. In addition, Orthofix is
collaborating in R&D partnerships with leading medical institutions
such as the Orthopedic Research and Education Foundation, Rutgers
University, the Cleveland Clinic Foundation, and National Osteoporosis
Institute. For more information about Orthofix, please visit
www.orthofix.com.

FORWARD-LOOKING STATEMENTS

This communication contains certain forward-looking statements
under the Private Securities Litigation Reform Act of 1995. These
forward-looking statements, which may include, but are not limited to,
statements concerning the projections, financial condition, results of
operations and businesses of Orthofix and its subsidiaries and are
based on management's current expectations and estimates and involve
risks and uncertainties that could cause actual results or outcomes to
differ materially from those contemplated by the forward-looking
statements.

Factors that could cause or contribute to such differences may
include, but are not limited to, risks relating to the expected sales
of its products, including recently launched products, unanticipated
expenditures, changing relationships with customers, suppliers and
strategic partners, risks relating to the protection of intellectual
property, changes to the reimbursement policies of third parties,
changes to and interpretation of governmental regulation of medical
devices, the impact of competitive products, changes to the
competitive environment, the acceptance of new products in the market,
conditions of the orthopedic industry and the economy, corporate
development and market development activities, including acquisitions
or divestitures, unexpected costs or operating unit performance
related to recent acquisitions and other factors described in our
annual report on Form 10-K and other periodic reports filed by the
Company with the Securities and Exchange Commission.

- Financial tables follow -

-0-
*T
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, U.S. Dollars, in thousands, except per share and share
data)

For the three months For the year
----------------------------------------------
ended December 31, ended December 31,
----------------------------------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------

Net sales $ 128,835 $ 116,140 $ 490,323 $ 365,359
Cost of sales 34,485 29,960 129,032 93,625
---------- ---------- ---------- ----------
Gross profit 94,350 86,180 361,291 271,734
---------- ---------- ---------- ----------

Operating expenses
(income)
Sales and marketing 48,036 46,722 186,984 145,707
General and
administrative 23,283 16,973 72,902 53,309
Research and
development 5,907 6,441 24,220 54,992
Amortization of
intangible assets 4,446 3,464 18,156 8,873
Impairment of certain
intangible assets 20,972 0 20,972 0
KCI settlement, net
of litigation costs 0 0 0 (1,093)

---------- ---------- ---------- ----------
102,644 73,600 323,234 261,788
---------- ---------- ---------- ----------

Operating income
(loss) (8,294) 12,580 38,057 9,946

Interest
income/(expense), net (6,478) (5,742) (23,677) (6,125)
Other
income/(expense), net 132 2,731 418 2,524
---------- ---------- ---------- ----------
Income (loss) before
minority interests
and income tax (14,640) 9,569 14,798 6,345

Minority interests (10) (26) (63) (26)
---------- ---------- ---------- ----------
Income (loss) before
income tax (14,650) 9,543 14,735 6,319

Income tax benefit
(expense) 4,135 (2,140) (3,767) (13,361)
---------- ---------- ---------- ----------
Net income (loss) $ (10,515) $ 7,403 $ 10,968 $ (7,042)
========== ========== ========== ==========

Net income (loss) per
common share - basic $ (0.62) $ 0.45 $ 0.66 $ (0.44)

Net income (loss) per
common share -
diluted $ (0.62) $ 0.44 $ 0.64 $ (0.44)

Weighted average
number of common
shares outstanding -
basic 16,913,322 16,406,353 16,638,873 16,165,540

Weighted average
number of common
shares outstanding -
diluted 16,913,322 16,788,889 17,047,587 16,165,540
*T

-0-
*T
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars, in thousands)

As of As of
------------ ------------
December 31, December 31,
------------ ------------
2007 2006
------------ ------------

Assets
Current assets:
Cash and cash equivalents $ 25,064 $ 25,881
Restricted cash 16,453 7,300
Trade accounts receivable, net 108,900 104,662
Inventory, net 93,952 70,395
Deferred income taxes 11,373 6,971
Prepaid expenses and other current assets 25,035 18,759
------------ ------------
Total current assets 280,777 233,968

Securities and other investments 4,427 4,082
Property, plant and equipment, net 33,444 25,311
Goodwill and Intangible assets, net 550,243 574,229
Deferred taxes and other long-term assets 16,773 24,695
------------ ------------
Total assets $ 885,664 $ 862,285
============ ============

Liabilities and shareholders' equity
Current liabilities:
Bank borrowings $ 8,704 $ 78
Current portion of long-term debt 3,343 3,334
Trade accounts payable 24,715 23,544
Other current liabilities 36,544 34,084
------------ ------------
Total current liabilities 73,306 61,040

Long-term debt 294,588 312,055
Deferred income taxes 75,908 95,019
Other long-term liabilities 7,922 1,536
------------ ------------
Total liabilities 451,724 469,650
------------ ------------

Shareholders' equity
Common shares 1,704 1,645
Additional paid-in capital 157,349 128,297
------------ ------------
159,053 129,942

Retained earnings 258,201 248,433
Accumulated other comprehensive income 16,686 14,260
------------ ------------
Total shareholders' equity 433,940 392,635
------------ ------------

Total liabilities and shareholders'
equity $ 885,664 $ 862,285
============ ============
*T

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*T
ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, U.S. Dollars, in thousands)

For the year ended
December 31,
-------------------
2007 2006
-------- ---------

Cash flows from operating activities:
Net income (loss) $ 10,968 $ (7,042)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 28,531 16,457
Amortization of debt costs 1,085 501
Acquired in process research and development - 40,000
Provision for doubtful accounts 7,326 5,475
Deferred taxes (12,168) (12,363)
Stock-based compensation 11,913 7,912
Minority interest 10 26
Step up of fair value in inventory 2,718 1,001
Charge for impairment of certain intangible
assets 20,972 -
Other (5,826) (1,340)
Change in operating assets and liabilities:
Restricted cash (9,153) 6,582
Accounts receivable (8,685) (10,308)
Inventories (22,745) (13,868)
Prepaid expenses and other current assets (5,855) (4,521)
Accounts payable 303 6,448
Current liabilities 2,102 (26,789)
-------- ---------
Net cash provided by operating activities 21,496 8,171
-------- ---------

Cash flows from investing activities:
Investments in affiliates and subsidiaries (3,142) (342,290)
Capital expenditures - tangible (18,537) (11,225)
Capital expenditures - intangible (8,692) (1,388)
-------- ---------
Net cash used in investing activities (30,371) (354,903)
-------- ---------

Cash flows from financing activities:
Net proceeds from issuance of common stock 15,053 11,507
Tax benefit on non-qualified stock options 2,145 2,175
(Repayment of) proceeds from long-term debt (17,458) 330,000
Payment of debt issuance costs (184) (5,884)
Proceeds from bank borrowings 8,131 (29,974)
-------- ---------
Net cash provided by financing activities 7,687 307,824
-------- ---------

Effect of exchange rate changes on cash 371 1,003
-------- ---------

Net decrease in cash and cash equivalents (817) (37,905)
Cash and cash equivalents at the beginning of
the year 25,881 63,786
-------- ---------
Cash and cash equivalents at the end of the
period $ 25,064 $ 25,881
======== =========
*T

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*T
Net sales by market sector for the periods ended December 31,
(In US$ millions)
Three Months Ended Year Ended December 31,
December 31,
----------------------- -----------------------
% %
2007 2006 Increase 2007 2006 Increase
------ ------ --------- ------ ------ ---------

Spine $ 64.2 $ 58.3 10% $243.2 $145.1 68%
Orthopedics 30.0 24.7 21% 111.9 95.8 17%
Sports Medicine 23.0 21.1 9% 87.5 79.1 11%

------ ------ --------- ------ ------ ---------
117.2 104.1 13% 442.6 320.0 38%

Vascular 4.6 5.8 -21% 19.9 21.2 -6%
Other 7.0 6.2 13% 27.8 24.2 15%
------ ------ --------- ------ ------ ---------

Total $128.8 $116.1 11% $490.3 $365.4 34%
====== ====== ========= ====== ====== =========
*T

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*T
Net sales by business segment for the periods ended December 31,
(In US$ millions)

Three Months Ended Year Ended December 31,
December 31,
----------------------- -----------------------
% %
2007 2006 Increase 2007 2006 Increase
------ ------ --------- ------ ------ ---------

Domestic $ 44.0 $ 39.4 12% $166.7 $152.6 9%

Blackstone 30.0 28.1 7% 115.9 28.1 n/m

Breg 21.9 20.3 8% 83.4 76.2 9%

International 32.9 28.3 16% 124.3 108.5 15%
------ ------ --------- ------ ------ ---------

Total $128.8 $116.1 11% $490.3 $365.4 34%
====== ====== ========= ====== ====== =========
*T

Regulation G Supplemental Information Schedule

The information in this schedule is set up in four sections
intended to address different aspects of Regulation G.

Section 1 includes a Reconciliation of a Non-GAAP Performance
Measure for the full-year 2007. A similar reconciliation for the
fourth quarter of 2007 appears in the body of the release to which
this Supplemental Schedule is attached.

Section 2 contains explanations of each of the specified items and
additional non-cash specified items listed in the Reconciliation of
Non-GAAP Performance Measures for the 4th quarters of 2007 and 2006,
included in the body of this release, and for the full years of 2007
and 2006 that is included in Section 1 of this Supplemental
Information Schedule.

Section 3 provides detailed disclosures indicating the reasons
management believes our non-GAAP measures are useful.

Section 1

-0-
*T
Reconciliation of Non-GAAP Performance Measures

-------------------------------------
Full year 2007 Full-Year 2007 Full-Year 2006
----------------------------------------------------------------------
Impact Impact
Per Per
Diluted Diluted
($000's) Share ($000's) Share
---------------------------------

Reported GAAP net income $10,968 $0.64 ($7,042) ($0.44)

Specified non-cash items:
-------------------------------------
Non-cash write-down of certain
intangible assets $12,803 0.75 --- ---
Write-off of in-process R&D related
to Blackstone acquisition --- --- 40,000 2.47
Non-cash BREG amortization 3,444 0.20 3,310 0.20
Non-cash Blackstone amortization 8,951 0.53 1,927 0.12
Equity compensation expense (FAS
123R) 8,276 0.49 4,724 0.29
---------------- ----------------

Adj. net income, excluding specified
non-cash items $44,442 $2.61 $42,919 $2.64
================ ================
*T

Section 2

Description of 4th Quarter Specified Non-Cash Items

-- Non-cash Write-down of Certain Intangible Assets - write-down
of intangible assets, primarily related to a trademark
recorded in connection with the acquisition of Blackstone.

-- Non-cash BREG amortization- non-cash amortization of purchase
accounting items associated with the acquisition of BREG, net
of tax.

-- Non-cash Blackstone amortization- non-cash amortization of
purchase accounting items associated with the acquisition of
Blackstone, net of tax. This includes amortization related to
intangible assets as well as the step-up of inventory being
amortized as a part of the cost of goods sold in 2006.

-- Equity Compensation Expense - equity compensation expense
related to FAS 123R.

Description of Full Year Specified Non-Cash Items

-- Non-cash Write-down of Certain Intangible Assets - write-down
of intangible assets, primarily related to a trademark
recorded in connection with the acquisition of Blackstone.

-- Write-off of In-process R&D associated with Blackstone
acquisition- the write-off of approximately $40 million of
in-process R&D as part of the purchase accounting associated
with the Blackstone acquisition.

-- Non-cash BREG amortization- non-cash amortization of purchase
accounting items associated with the acquisition of BREG, net
of tax.

-- Non-cash Blackstone amortization- non-cash amortization of
purchase accounting items associated with the acquisition of
Blackstone, net of tax. This includes amortization related to
intangible assets as well as the step-up of inventory being
amortized as a part of the cost of goods sold in 2006.

-- Equity Compensation Expense - equity compensation expense
related to FAS 123R.

Section 3

Management use of, and economic substance behind, Non-GAAP
Performance Measure

Management uses a non-GAAP measure, referred to as "adjusted net
income, excluding additional specified non-cash items," to evaluate
performance period over period, to analyze the underlying trends in
the Company's business, to assess its performance relative to its
competitors, and to establish operational goals and forecasts that are
used in allocating resources. In addition, following the Company's
acquisition of Blackstone, and the related increase in Orthofix's
debt, management has increased its focus on cash generation and debt
reduction. Management uses this non-GAAP measure as the basis for
assessing the ability of the underlying operations to generate cash
for use in paying down debt. In addition, management uses this
non-GAAP measure to further its understanding of the performance of
the Company's business segments. The items excluded from Orthofix's
non-GAAP measure are also excluded from the profit or loss reported by
the Company's business segments for the purpose of analyzing their
performance.

Material Limitations Associated with the Use of Non-GAAP Measures

Non-GAAP adjusted net income, excluding additional specified
non-cash items, and the per share amounts based on this measure, may
have limitations as analytical tools, and this non-GAAP measure should
not be considered in isolation or as a replacement for GAAP
performance measures. Some of the limitations associated with the use
of this non-GAAP performance measure are that it excludes items that
reflect an economic cost to the Company and can have a material effect
on cash flows. For example, the amortization of purchased intangible
assets does not directly affect Orthofix's cash flows, however, it
does represent the reduction in value of those assets over time, and
the expense associated with this reduction in value is not included in
the Company's non-GAAP measures. Similarly, stock compensation expense
does not directly impact cash flows, but is part of total compensation
costs accounted for under GAAP.

Compensation for Limitations Associated with Use of Non-GAAP
Measures

Orthofix compensates for the limitations of its non-GAAP
performance measure by relying upon its GAAP results to gain a
complete picture of the Company's performance. The GAAP results
provide the ability to understand the Company's performance based on a
defined set of criteria. The non-GAAP numbers reflect the underlying
operating results of the Company's businesses, excluding non-cash
items, which management believes is an important measure of the
Company's overall performance.

The Company provides a detailed reconciliation of the non-GAAP
performance measure to its most directly comparable GAAP measure, and
encourages investors to review this reconciliation.

Usefulness of Non-GAAP Measures to Investors

Orthofix believes that providing a non-GAAP measure that excludes
certain items provides investors with greater transparency to the
information used by the Company's senior management in its financial
and operational decision-making. Management believes that providing
this information enables investors to better understand the
performance of the Company's ongoing operations and to understand the
methodology used by management to evaluate and measure such
performance. Disclosure of this non-GAAP performance measure also
facilitates comparisons of Orthofix's underlying operating performance
with other companies in its industry that also supplement their GAAP
results with a non-GAAP performance measure.

Orthofix International N.V.
Dan Yarbrough, 704-948-2617
Vice President of Investor Relations
danyarbrough@orthofix.com

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