Reported third quarter net income totaled $6.2 million, or $0.36 per share. This compared with a reported loss of $237.3 million, or ($13.87) per share, in the third quarter of the prior year. Excluding certain items summarized in the table below, third quarter adjusted net income was $7.7 million, or $0.44 per share.

The Company's third quarter operating income was $17.8 million, or 13.1% of total revenue, compared with an operating loss of $289.5 million in the prior year. Excluding certain items summarized in the table below, third quarter adjusted operating income was $19.1 million, or 14.2% of revenue, compared to $14.4 million, or 11.1% of revenue in the prior year.

"Our third quarter results reflected continued growth in each of our core businesses on a constant currency basis. This included another strong performance from our spinal implants division, which generated 20% sales growth from our cervical and lumbar implant devices. This increase was driven primarily by the success of recent new product introductions, including the Firebird pedicle screw system and Pillar SA interbody device," said President and CEO Alan Milinazzo. "During the quarter the Musculoskeletal Transplant Foundation continued to increase its production capacity of our new stem cell-based allograft, Trinity® Evolution, to a point where it met, and exceeded, the production levels included in our original commercialization plans. Additionally, as a result of continued strong cash generation during the third quarter, this month we made another $5 million debt repayment ahead of schedule."

Guidance

As a result of certain items impacting Orthofix's actual third quarter and estimated fourth quarter tax rates, the Company raised its full-year tax rate guidance to a new range of 37%-39%. Additionally, the Company now expects to incur approximately $800,000 in fourth quarter legal costs associated with an ongoing investigation of the bone growth stimulation industry. The Company did not revise its operating expectations, and reiterated its full-year revenue guidance of $535-$545 million, its gross profit margin guidance of 74%-75%, its operating profit margin guidance of 11%-12%, and its EBITDA guidance of $93-98 million. Additionally, the Company reiterated its expectations for 8%-12% full-year revenue growth and fourth quarter operating profitability in its spinal implants division.

Non-GAAP Performance Measures

The first table below presents a reconciliation of third quarter net income calculated in accordance with generally accepted accounting principles (GAAP) to a non-GAAP performance measure, referred to as "adjusted net income", that excludes from net income the items specified in the table. The second table below presents a reconciliation of operating income calculated in accordance with GAAP to a non-GAAP measure, referred to as "adjusted operating income", that excludes from operating income the items specified in the table. Additionally a reconciliation between third quarter net income calculated in accordance with GAAP and a non-GAAP measure, referred to as "Consolidated EBITDA", are included in the Regulation G Supplemental Information Schedule attached to this release. Management believes it is important to provide investors with the same non-GAAP metrics it uses to supplement information regarding the performance and underlying trends of Orthofix's business operations in order to 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 measures are useful to them, is included in the Regulation G Supplemental Information schedule attached to this press release.

                                                                                               
 Third Quarter Adjusted Net Income                    Q309               Q308                  
                                                      ($000's)   EPS     ($000's)     EPS      
                                                                                               
                                                                                               
 Reported GAAP net income/(loss)                      $6,188     $0.36   ($237,251)   ($13.87) 
                                                                                               
 Specified Items:                                                                              
                                                                                               
 Strategic investments                                $450       $0.02   $320         $0.02    
 Reorganization/consolidation costs                   $376       $0.02   $1,501       $0.09    
 Foreign exchange loss                                $501       $0.03   $1,457       $0.08    
 Unrealized, non-cash loss on interest rate swap      $137       $0.01   ---          ---      
 Asset impairment & inventory reserve                 ---        ---     $237,689     $13.90   
 Credit agreement amendment costs                     ---        ---     $3,579       $0.21    
                                                                                               
 Adjusted net income                                  $7,652     $0.44   $7,295       $0.43    
                                                                                               
 NOTE: Some calculations may be impacted by rounding                                           


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 Third Quarter Adjusted Operating Income            Q309       Q308       
                                                    ($000's)   ($000's)   
                                                                          
                                                                          
 Reported GAAP operating income/(loss)              $17,751    ($289,517) 
                                                                          
 Specified Items:                                                         
                                                                          
 Strategic investments                              $750       $500       
 Reorganization/consolidation costs                 $627       $2,408     
 Asset impairment & inventory reserve               ---        $301,023   
                                                                          
 Adjusted operating income                          $19,128    $14,414    
                                                                          
 Adjusted operating income as a percent of revenue  14.2%      11.1%      


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Revenue

Total third quarter sales in the Company's spine sector were up 11% year-over-year, to $68.1 million. Spine stimulation revenue increased 12%, to $39.6 million due to the continued success of the Company's devices, which include the only FDA-approved stimulator for the cervical spine. Spinal implant and biologic revenue was $28.5 million, which was 10% higher than the third quarter of 2008. The year-over-year growth in spinal implant and biologic revenue was primarily due to a 20% increase in U.S. sales of lumbar and cervical spine implant devices, partially offset by a 19% decrease in revenue from biologics. The growth in sales of lumbar and cervical spine implant devices was driven primarily by the Company's recent introductions of the Firebird pedicle screw system and Pillar SA interbody device. The decrease in biologics revenue from the spinal implants division was a result of the transition to Trinity® Evolution from the Company's prior stem cell-based allograft. During the third quarter, sales of Trinity® Evolution in the spine division totaled approximately $3.5 million. While the average sales price for the new allograft is approximately the same as the previous product, under the terms of the Company's contractual arrangement with its new supplier, the Musculoskeletal Transplant Foundation (MTF), the Company records 70% of the sales price of the new Trinity® Evolution allograft versus previously recording 100% of the sales price of the prior product. The Company does not purchase inventory of Trinity® Evolution and so does not incur any associated cost of sales. As such, the gross profit margin for the new allograft is 100% of the recorded revenue, which compares favorably to the gross profit margin of approximately 50% for the prior allograft. Orthofix began the full market release of Trinity® Evolution, which was developed in collaboration with MTF, on July 1st of this year.

Reported third quarter revenue in the Company's orthopedic business was $33.3 million, which was a decrease of 2%, but represented growth of 6% on a constant currency basis, compared with the prior year. The constant currency revenue growth was driven primarily by increases in global sales of deformity correction and external fixation devices of 36% and 6%, respectively, as well as 15% growth in the global sales of Physio-Stim bone growth stimulation devices. Additionally, the Company reported approximately $640,000 in sales of Trinity® Evolution in its orthopedic business.

Sports medicine revenue in the third quarter grew 4% compared with 2008, to a record $24.7 million. This growth was driven by an 8% increase in U.S. revenue from the Company's core bracing and cold therapy products, which was a reflection of the recent expansion of certain product lines, including soft goods and spine bracing, as well as bracing for the upper extremities and the ankles and feet.

Gross Margin

The gross profit margin in the third quarter of 2009 was 76.3%, which was 13.4 percentage points higher than the third quarter of 2008. The year-over-year improvement is primarily due to an $11.5 million inventory reserve taken in the third quarter of 2008. Additionally, the gross margin in the third quarter of 2009 increased due to a higher mix of revenue from the Company's higher margin spine stimulation and spinal implants businesses.

Operating Expenses

Third quarter sales and marketing (S&M) expenses as a percent of revenue increased 190 basis points year-over-year, to 40.7%. The higher S&M ratio was due primarily to an increase in commission expenses reflecting the implementation of sales programs with new distributor partners.