Orthofix CFO Quits after Five Months

The struggling company's shares lose a quarter of their value the day of the resignation.
Stephen Taub and David McCannApril 4, 2008

Orthofix International CFO Timothy Adams has resigned less than five months after taking the position, the company announced Friday. Shares of the orthopedic-products company took a big hit from the unexpected announcement, down about 25 percent in late-Friday trading.

No reason was provided for the abrupt departure. The company did not return a call, and Adams could not be reached. Executive vice president of finance Tom Hein, who served as Orthofix’s CFO for eight years before Adams came aboard, will take over during the search for a new finance chief.

The company also reiterated previously announced first-quarter revenue and profit guidance that was below Wall Street expectations. That guidance initially was made in late February, just days after results for the 2007 fourth quarter came in light as well.

With this third dose of bad news, many investors decided to put their money elsewhere. But the depth of the share plunge surprised David Turkaly, a medical-device analyst with Susquehanna Financial Group. “I can’t say I’ve ever seen ‘CFO Resigns’ as extremely bullish,” he told, “but I don’t know if I’ve seen a 25 percent move because of it. People may have been edgy given that he was there such a short amount of time.” But, he said, “value buyers” now may take a look at the stock, since it was about $60 a share a few months ago and has fallen to about half that. The drop in the stock price was among the three steepest for companies with less than $750 million market capitalization, reported.

On Wednesday Moody’s Investors Service downgraded ratings affecting about $375 million in Orthofix debt from Ba3 to B1, or highly speculative. The ratings agency maintains a negative outlook for the company, though Turkaly characterized the downgrade as a relatively minor matter.

When Orthofix announced Adams’s appointment back in November, CEO Alan Milinazzo lauded him for his “extensive background in managing global corporate financial operations, his experience with capital-market transactions as well as mergers and acquisition in the medical-device industry, and his established relationship with the investment community.”

Before joining Orthofix, Adams spent three years as CFO of Cytyc Corp., a medical device and diagnostics company. Prior to that, he served as CFO of Modus Media International Inc., a global supply chain management company.