Tornier Reports First Quarter 2013 Results

Tornier Reports First Quarter 2013 Results

  • Reiterates Revenue and Non-GAAP Adjusted EBITDA Outlook for 2013

  • Non-GAAP Adjusted Gross Margin Expands 200 Basis Points Year over Year, Excluding Acquisition Related Costs

AMSTERDAM--(BUSINESS WIRE)-- Tornier N.V. (NAS: TRNX) , a global medical device company focused on providing surgical solutions to orthopaedic extremity specialists, reported today its financial results for the first quarter ended March 31, 2013.

Revenue for the first quarter of 2013 reached $82.7 million compared to first quarter 2012 revenue of $74.5 million, an increase of 11.0% as reported and 10.9% in constant currency. Revenue for the first quarter of 2013 included $8.4 million of revenue from the acquisition of OrthoHelix Surgical Designs, Inc., which closed October 4, 2012.


First quarter 2013 revenue of Tornier's extremities product categories totaled $67.3 million compared to $58.2 million during the prior year period, representing growth of 15.7% both as reported and in constant currency.

Giving pro forma effect to the OrthoHelix acquisition to include OrthoHelix revenue in the prior year period, Tornier's 2013 first quarter constant currency revenue growth was 1.7%, and Tornier's first quarter extremities product constant currency revenue increased 3.6%.

Dave Mowry, President and Chief Executive Officer of Tornier, commented, "Our revenue growth during the first quarter was driven by our Ascend shoulder family and strong lower extremities contributions from OrthoHelix. We are pleased with a solid start to the fiscal year, which positions us well for returning to double-digit, constant currency revenue growth on a pro forma basis during the second half of 2013."

The Company's first quarter 2013 adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $9.1 million, or 11.0% of reported revenue, compared to $10.2 million, or 13.7% of revenue, in the same quarter of the prior year, a decrease of 10.2%.

Mr. Mowry added, "We continued to benefit from the OrthoHelix acquisition, favorable product mix and improved manufacturing efficiencies, and as a result, our non-GAAP adjusted gross margins expanded 200 basis points to 73.6%, compared to the same quarter last year. Looking to the remainder of the year, we believe that our focus on U.S. sales channel initiatives, international sales strategies, OrthoHelix revenue expansion, and key new product launches will enable us to accomplish our financial goals and to increase value for our shareholders."

First Quarter 2013 Revenue Highlights

Extremities

  • Revenue from the upper extremity joints and trauma category was $48.1 million, an increase of 2.3% in constant currency over the same quarter in 2012. This growth was primarily led by the Company's shoulder arthroplasty portfolio, including the Aequalis™ Reversed Shoulder and Aequalis™ Ascend™, which includes contribution from the limited launch of the Ascend Flex that began late in the fourth quarter of 2012.

  • Revenue from Tornier's lower extremity joints and trauma category in the first quarter of 2013 reached $15.1 million, an increase of 114.5% in constant currency. Giving pro forma effect to the OrthoHelix acquisition to include OrthoHelix revenue in the first quarter 2012, first quarter 2013 lower extremity revenue recorded constant currency growth of 11.4%. Pro forma growth was led by OrthoHelix products, particularly the new IFS Hammer Toe product line for toe deformities, and Tornier's Salto Tolaris total ankle.

  • Revenue from the sports medicine and biologics product category was $4.1 million, a decrease of 0.6% in constant currency over the same quarter in 2012 as strong growth in the Company's suture and BioFiber products was more than offset by decreases in our Conexa product and certain of our anchor product lines.

Large Joints

Revenue of the Company's large joints and other product lines was $15.4 million, a decrease of 6.0% over the same quarter in 2012 on a constant currency basis. In the first quarter, this product category decreased to 18.6% of the Company's reported global revenue compared to 21.9% during the prior year period.

Geographic Revenue

On a geographic basis as compared to the first quarter of 2012, Tornier's international revenue decreased 0.2% as reported and decreased 0.5% in constant currency, representing 42% of reported global revenue. Revenue in the United States increased by 20.9% and represented 58% of reported global revenue.

Second Quarter 2013 Outlook

  • For the second quarter of 2013, the Company projects constant currency revenue to be in the range of $76.0 to $79.0 million, inclusive of anticipated OrthoHelix revenue of $7.4 to $8.4 million, representing constant currency growth of 15.1% to 19.7% over second quarter 2012 revenue.

  • Based on recent currency exchange rates, second quarter 2013 reported revenue is projected to be in the range of $76.2 to $79.2 million, inclusive of anticipated OrthoHelix revenue, representing reported growth of 15.5% to 20.0% over second quarter 2012 revenue.

  • Second quarter 2013 extremities product categories revenue, inclusive of anticipated OrthoHelix revenue, is expected to grow 19.7% to 24.4% in constant currency.

  • The Company projects adjusted EBITDA, as described in the GAAP to non-GAAP reconciliation provided later in this release, inclusive of OrthoHelix operations, for the second quarter of 2013 to be in the range of $5.3 to $6.6 million, or 7.0% to 8.3% of reported revenue.

Fiscal Year 2013 Outlook

  • The Company is reiterating its previous revenue guidance of 2013 constant currency revenue in the range of $310.0 to $322.0 million, inclusive of anticipated OrthoHelix revenue, representing constant currency growth of 11.7% to 16.0%.

  • Based on recent currency exchange rates, 2013 reported revenue is projected to be in the range of $311.0 to $323.0 million, inclusive of anticipated OrthoHelix revenue, representing reported growth of 12.0% to 16.4% over 2012 revenue.

  • Revenue of the Tornier extremities product categories in 2013, inclusive of anticipated OrthoHelix revenue, is expected to grow 15.5% to 20.2% in constant currency.

  • The Company is also reiterating projected 2013 adjusted EBITDA in the range of $33.0 to $38.0 million, or 10.6% to 11.8% of reported revenue. OrthoHelix is expected to have a slight positive impact on 2013 adjusted EBITDA.

Conference Call

Tornier will host a conference call today at 4:30 p.m. eastern time to discuss its first quarter 2013 financial results and its outlook for 2013. The conference call will be available to interested parties through a live audio webcast available through the Company's website at www.tornier.com. Those without internet access may join the call from within the U.S. by dialing 1-877-673-5355; outside the U.S., dial +1-760-666-3805.

A telephone replay will be available for two weeks following the call by dialing (855) 859-2056 for domestic participants and (404) 537-3406 for international participants. When prompted, please enter the replay pin number 30404284. For those who are not available to listen to the live webcast, the call will be archived for one year on Tornier's website.

Forward-Looking Statements

Statements contained in this release that relate to future, not past, events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations of future events and often can be identified by words such as "expect," "should," "project," "anticipate," "intend," "will," "may," "believe," "could," "would," "continue," "outlook," "guidance," "future," "prospects," other words of similar meaning or the use of future dates. Examples of forward-looking statements in this release include Tornier's financial guidance for the second quarter of 2013 and for the full year 2013, Tornier's financial goal to return to double-digit constant currency revenue growth on a pro forma basis and Tornier's focus on U.S. sales channel initiatives, international sales strategies, OrthoHelix revenue expansion and key new product launches. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Uncertainties and risks may cause Tornier's actual results to be materially different than those expressed in or implied by Tornier's forward-looking statements. For Tornier, such uncertainties and risks include, among others, Tornier's future operating results and financial performance, fluctuations in foreign currency exchange rates, the effect of global economic conditions, the European sovereign debt crisis and austerity measures, risks associated with Tornier's international operations and expansion, risks associated with Tornier's recent acquisition of OrthoHelix and subsequent integration activities, changes in Tornier's arrangements with its distributors and independent sales agencies and transition to direct selling models in certain geographies and territories, the timing of regulatory approvals and introduction of new products, physician acceptance, endorsement, and use of new products; the effect of regulatory actions, changes in and adoption of reimbursement rates, potential product recalls, competitor activities, Tornier's leverage and access to credit under its credit agreement, and the costs and effects of litigation and changes in tax and other legislation. More detailed information on these and other factors that could affect Tornier's actual results are described in Tornier's filings with the U.S. Securities and Exchange Commission, including its most recent annual report on Form 10-K. Tornier undertakes no obligation to update its forward-looking statements.

About Tornier

Tornier is a global medical device company focused on serving extremities specialists who treat orthopaedic conditions of the shoulder, elbow, wrist, hand, ankle and foot. The Company's broad offering of over 100 product lines includes joint replacement, trauma, sports medicine, and biologic products to treat the extremities, as well as joint replacement products for the hip and knee in certain international markets. Since its founding approximately 70 years ago, Tornier's "Specialists Serving Specialists" philosophy has fostered a tradition of innovation, intense focus on surgeon education, and commitment to advancement of orthopaedic technology stemming from its close collaboration with orthopaedic surgeons and thought leaders throughout the world. For more information regarding Tornier, visit www.tornier.com.

Use of Non-GAAP Financial Measures

To supplement Tornier's consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), Tornier uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable U.S. GAAP measures for the respective periods can be found in tables later in this release immediately following the detail of revenue by geography. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for Tornier's financial results prepared in accordance with GAAP.

Tornier N.V.

Consolidated Statements of Operations

(in thousands, except per share data)

Three months ended

(unaudited)

March 31, 2013

April 1, 2012

Revenue

$

82,685

$

74,458

Cost of goods sold

21,869

21,116

Cost of goods sold - acquisition related

1,755

-

Gross profit

59,061

53,342

71.4

%

71.6

%

Operating expenses

Selling, general and administrative

52,136

43,838

Research and development

6,182

5,623

Amortization of intangible assets

3,837

2,647

Special charges

1,519

-

Total operating expenses

63,674

52,108

Operating (loss) income

(4,613

)

1,234

Other income (expense)

Interest income

39

113

Interest expense

(2,218

)

(487

)

Foreign currency transaction (loss) gain

(81

)

25

Other non-operating income

17

1

(Loss) income before income taxes

(6,856

)

886

Income tax expense

(42

)

(1,062

)

Consolidated net loss

$

(6,898

)

$

(176

)

Net loss per share

Basic and diluted

$

(0.17

)

$

(0.00

)

Weighted average ordinary shares outstanding

Basic and diluted

41,754

39,327

Tornier N.V.

Condensed Consolidated Balance Sheets

(in thousands)

March 31, 2013

December 30, 2012

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

35,845

$

31,108

Accounts receivable, net

55,179

54,192

Inventories

84,397

86,697

Deferred income taxes and other current assets

26,515

25,321

Total current assets

201,936

197,318

Instruments, net

52,575

51,394

Property, plant and equipment, net

36,352

37,151

Goodwill and intangibles, net

359,816

366,398

Deferred income taxes and other assets

570

1,966

Total assets

$

651,249

$

654,227

Liabilities and shareholders' equity

Current liabilities

Short-term borrowing and current portion of long-term debt

$

4,337

$

4,595

Accounts payable

15,297

11,526

Accrued liabilities, deferred income taxes and other current liabilities

56,394

44,505

Total current liabilities

76,028

60,626

Other long-term debt

113,361

115,457

Deferred income taxes and other long-term liabilities

34,581

42,065

Total liabilities

223,970

218,148

Shareholders' equity

427,279

436,079

Total liabilities and shareholders' equity

$

651,249

$

654,227

Tornier N.V.

Consolidated Statements of Cash Flow

(in thousands)

Three months ended

(unaudited)

March 31, 2013

April 1, 2012

Cash flows from operating activities

Consolidated net loss

$

(6,898

)

$

(176

)

Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities

Depreciation and amortization

8,831

6,987

Non-cash foreign currency (gain) loss

81

(243

)

Deferred income taxes

1,212

(699

)

Share-based compensation

1,633

1,944

Non-cash interest expense and discount amortization

289

-

Inventory obsolescence

2,360

1,490

Inventory step up from acquisition

1,755

-

Other non-cash items affecting earnings

1,218

556

Changes in operating assets and liabilities

Accounts receivable

(1,611

)

(4,774

)

Inventories

(1,148

)

373

Accounts payable and accruals

8,797

4,685

Other current assets and liabilities

(1,202

)

(880

)

Other non-current assets and liabilities

1,101

(424

)

Net cash provided by (used in) operating activities

16,418

8,839

Cash flows from investing activities

Acquisition-related cash payments

(3,032

)

(350

)

Additions of instruments

(4,879

)

(3,922

)

Purchases of property, plant and equipment

(2,829

)

(1,156

)

Net cash (used in) investing activities

(10,740

)

(5,428

)

Cash flows from financing activities

Change in short-term debt

-

2,991

Repayments of long-term debt

(2,379

)

(2,042

)

Proceeds from issuance of long-term debt

-

5,343

Deferred financing costs

(52

)

-

Issuance of ordinary shares

2,642

3,120

Net cash provided by financing activities

211

9,412

Effect of currency exchange rates on cash and cash equivalents

(1,152

)

1,538

Increase in cash and cash equivalents

4,737

14,361

Cash and cash equivalents at beginning of period

31,108

54,706

Cash and cash equivalents at end of period

$

35,845

$

69,067

Tornier N.V.

Selected Revenue Information

(in thousands)

Three Months Ended

(unaudited)

Percent

March 31, 2013

April 1, 2012

change

Revenue by product category

Upper extremity joints and trauma

$

48,117

$

47,018

2.3

%

Lower extremity joints and trauma

15,073

7,029

114.4

%

Sports medicine and biologics

4,111

4,131

-0.5

%

Total extremities

67,301

58,178

15.7

%

Large joints and other

15,384

16,280

-5.5

%

Total

$

82,685

$

74,458

11.0

%

Revenue by geography

United States

$

47,988

$

39,701

20.9

%

International

34,697

34,757

-0.2

%

Total

$

82,685

$

74,458

11.0

%