Orthofix International ($OFIX) is confronting major fallout following its disclosure earlier this month that it has to restate its financials for two previous fiscal years and the most recent quarter. The beleaguered company, barely past a 2012 Medicare kickback scandal, missed filing its 2013 second-quarter financials on time, and now Nasdaq officials are warning the company to get its reporting in line.
Even worse, Orthofix now also faces a class-action lawsuit for the revenue snafu.
Investors have punished the company for a while now. Orthofix's stock price is down from a high of $45.52 in early October 2012 to $22.03 in early trading Aug. 19, a price itself down just under 1% in early trading.
Earlier this month, the orthopedic device maker disclosed it had misstated revenue for fiscal 2011, fiscal 2012 and the 2013 first quarter. The board of directors' audit committee continues to investigate, but it now says that Orthofix either claimed revenue it shouldn't have, or booked it in the wrong financial period. Officials aren't yet disclosing a final amount or offering further details beyond saying they expect to note "one or more material details" concerning weaknesses over their internal financial reporting controls in future disclosures.
Enter Nasdaq. The stock market slapped Orthofix with a noncompliance notice because the company didn't file its 2013 second-quarter numbers on a timely basis, apparent fallout from the investigation into how the company has reported its revenue. Orthofix is essentially under two months of probation, with a deadline of Oct. 15 to submit a plan showing how it can regain compliance with Nasdaq rules. The company said in a statement that it will submit an action plan by that deadline, but there's a chance of an extension until Feb. 10 if the company needs one and if Nasdaq likes the proposed solution.
And then there's the class-action shareholder lawsuit. The law firm Glancy Binkow & Goldberg announced recently that it had filed a suit relating to the case, alleging that the company misrepresented its revenue during 2011, 2012 and the 2013 first quarter.
All of this, of course, follows a nasty Medicare kickback case that the company resolved in December 2012. The company pleaded guilty to a single felony count of obstructing an audit and paid a $7.6 million fine, in a case where it and some top managers had been charged with using kickbacks to encourage doctors to use its bone growth stimulator products, essentially leading to Medicare fraud. The company also settled a number of civil claims relating to the matter, in a deal that cost $34.2 million plus interest.
And in January 2013, ex-Orthofix manager Derrick Field was sentenced to 5 months home confinement as part of a two-year probation sentence in the case. He was also ordered to pay $4,000 in fines and forfeit $40,000 after admitting he falsified patient medical records to enable Medicare payments of more than $250,000 for bogus medical device claims.
- here's the company's Nasdaq release
- check out news about the class-action shareholder lawsuit
- and here's Orthofix's earnings issue disclosure