Saturday, November 14, 2015

News: Wright Medical Group N.V. Reports 2015 Third Quarter Financial Results -- Ctd 3 of 3

Legacy Tornier N.V.
Consolidated Statements of Operations
(in thousands, except per share data--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Revenue$74,944  $76,675  $246,257  $252,550 
Cost of goods sold16,427  17,853  55,100  61,124 
Cost of goods sold - acquisition related  157    577 
Gross profit58,517  58,665  191,157  190,849 
 78.1% 76.5% 77.6% 75.6%
Operating expenses:       
Selling, general and administrative55,416  57,127  174,622  178,479 
Research and development4,972  6,055  16,783  17,845 
Amortization of intangible assets4,004  4,274  12,051  12,928 
Special charges2,657  (4,366) 6,860  (994)
Total operating expenses67,049  63,090  210,316  208,258 
Operating (loss) income(8,532) (4,425) (19,159) (17,409)
Other (income) expense       
Interest income64  18  82  126 
Interest expense(1,419) (1,250) (4,171) (3,964)
Foreign currency transaction loss(315) (152) (410) (195)
Other non-operating income60  11  148  20 
Loss before income taxes(10,142) (5,798) (23,510) (21,422)
Income tax expense(652) 477  (1,743) 416 
Consolidated net loss$(10,794) $(5,321) $(25,253) $(21,006)
Net loss per share       
Basic and diluted$(0.22) $(0.11) $(0.51) $(0.43)
Weighted average ordinary shares outstanding       
Basic and diluted49,279  48,832  49,116  48,656 

Legacy Tornier N.V.
Selected Revenue Information
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 %
change
 September 27,
2015
 September 28,
2014
 %
change
Revenue by product category           
Upper extremity joints and trauma$52,582  $48,963  7.4% $166,542  $155,845  6.9%
Lower extremity joints and trauma10,851  13,814  (21.4%) 36,756  43,356  (15.2%)
Sports medicine and biologics2,680  3,009  (10.9%) 9,406  10,549  (10.8%)
Total extremities66,113  65,786  0.5% 212,704  209,750  1.4%
Large joints and other8,831  10,889  (18.9%) 33,553  42,800  (21.6%)
Total$74,944  $76,675  (2.3%) $246,257  $252,550  (2.5%)
            
Revenue by geography           
United States$48,838  $46,752  4.5% $151,912  $145,565  4.4%
International26,106  29,923  (12.8%) 94,345  106,985  (11.8%)
Total$74,944  $76,675  (2.3%) $246,257  $252,550  (2.5%)

Legacy Tornier N.V.
Reconciliation of Revenue to Non-GAAP Revenue on a Constant Currency Basis
(dollars in thousands--unaudited)
 
 Three Months Ended  
 September 27, 2015 September 28,
2014
   
 Revenue as
reported
 Foreign
exchange
impact as
compared to
prior period
 Revenue on a
constant
currency basis
 Revenue as
reported
 Percent
change on
a constant
currency
basis
Revenue by product category         
Upper extremity joints and trauma52,582  2,611  55,193  48,963  12.7%
Lower extremity joints and trauma10,851  432  11,283  13,814  (18.3)%
Sports medicine and biologics2,680  199  2,879  3,009  (4.3)%
Total extremities66,113  3,242  69,355  65,786  5.4%
Large joints and other8,831  1,433  10,264  10,889  (5.7)%
Total74,944  4,675  79,619  76,675  3.8%
          
Revenue by geography         
United States48,838    48,838  46,752  4.5%
International26,106  4,675  30,781  29,923  2.9%
Total74,944  4,675  79,619  76,675  3.8%

 Nine Months Ended  
 September 27, 2015 September 28,
2014
 Percent
change on
a constant
currency
basis
 Revenue as
reported
 Foreign
exchange
impact as
compared to
prior period
 Revenue on a
constant
currency basis
 Revenue as
reported
 
Revenue by product category         
Upper extremity joints and trauma166,542  9,412  175,954  155,845  12.9%
Lower extremity joints and trauma36,756  1,366  38,122  43,356  (12.1)%
Sports medicine and biologics9,406  756  10,162  10,549  (3.7)%
Total extremities212,704  11,534  224,238  209,750  6.9%
Large joints and other33,553  6,706  40,259  42,800  (5.9)%
Total246,257  18,240  264,497  252,550  4.7%
          
Revenue by geography         
United States151,912    151,912  145,565  4.4%
International94,345  18,240  112,585  106,985  5.2%
Total246,257  18,240  264,497  252,550  4.7%

Legacy Tornier N.V.
Reconciliation of Net Loss to Non-GAAP Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Revenue, as reported$74,944  $76,675  $246,257  $252,550 
Net loss, as reported$(10,794) $(5,321) $(25,253) $(21,006)
Interest income(64) (18) (82) (126)
Interest expense1,419  1,250  4,171  3,964 
Income tax expense (benefit)652  (477) 1,743  (416)
Depreciation6,113  6,058  18,498  17,666 
Amortization4,004  4,274  12,051  12,928 
Subtotal Non-GAAP EBITDA1,330  5,766  11,128  13,010 
Other non-operating (income) expense(60) (11) (148) (20)
Foreign currency transaction loss (gain)315  152  410  195 
Share-based compensation1,854  2,348  6,512  6,869 
Inventory step-up from acquisition  157    577 
Special Charges:       
Acquisition, integration and distribution transition costs(127) 214  691  2,250 
Reversal of OrthoHelix contingent consideration liability  (5,000)   (5,000)
Instrument use tax refund    (2,000)  
Restructuring  420    1,431 
Proposed merger-related costs2,784    8,169   
Other      325 
Non-GAAP adjusted EBITDA$6,096  $4,046  $24,762  $19,637 
Non-GAAP adjusted EBITDA margin8.1% 5.3% 10.1% 7.8%

Legacy Tornier N.V.
Reconciliation of Net Loss and Loss per Share to Adjusted Net Loss and Adjusted Net Loss per Share
(in thousands, except per share data--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Net loss, as reported$(10,794) $(5,321) $(25,253) $(21,006)
Inventory step-up from acquisition, net of tax  (119)    284 
Reversal of valuation allowance from acquisition       (146)
Special charges, net of tax:       
Acquisition, integration and distribution transition costs(106) 200  691   2,236 
Reversal of OrthoHelix contingent consideration liability  (5,000)    (5,000)
Instrument use tax refund    (2,000)    
Restructuring  420     1,431 
Proposed merger-related costs2,772    8,157     
Other       325 
Non-GAAP adjusted net loss(8,128) (9,820) (18,405)  (21,876)
Net loss per share, as reported       
Basic and diluted$(0.22) $(0.11) $(0.51) $(0.43)
Inventory step-up from acquisition, net of tax       0.01 
Reversal of valuation allowance from acquisition       (0.01
Special charges, net of tax:       
Acquisition, integration and distribution transition costs  0.01  0.01   0.05 
Reversal of OrthoHelix contingent consideration liability  (0.11)    (0.11)
Instrument use tax refund    (0.04)  
Restructuring  0.01     0.03 
Proposed merger-related costs0.06    0.17   
Other       0.01 
Non-GAAP adjusted net loss per share       
Basic and diluted(0.16) (0.20) (0.37)  (0.45)
Weighted average ordinary shares outstanding       
Basic and diluted49,279  48,832  49,116   48,656 

Legacy Tornier N.V.
Reconciliation of Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Net cash provided by operating activities, as reported$11,299  $(4,622) $12,907  $(4,517)
Adjusted for:       
Additions of instruments, as reported(4,808) (4,214) (14,089) (18,749)
Purchases of property, plant and equipment, as reported(883) (3,248) (4,544) (8,128)
Non-GAAP adjusted free cash flow$5,608  $(12,084) $(5,726) $(31,394)

Legacy Tornier N.V.
Reconciliation of Gross Margin and Gross Margin % to Non-GAAP Adjusted Gross Margin and Gross Margin %
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Revenue, as reported$74,944  $76,675  $246,257  $252,550 
Gross margin, as reported$58,517  $58,665  $191,157  $190,849 
Gross margin %, as reported78.1% 76.5% 77.6% 75.6%
Adjusted for:       
Inventory step-up due to acquisition  157    577 
Non-GAAP adjusted gross margins58,517  58,822  191,157  191,426 
Non-GAAP adjusted gross margin %78.1% 76.7% 77.6% 75.8%

Legacy Tornier N.V.
Reconciliation of Operating Expenses to Non-GAAP Adjusted Operating Expenses
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Revenue, as reported$74,944  $76,675  $246,257  $252,550 
Operating Expenses, as reported67,049  63,090  210,316  208,258 
Operating expenses as a percentage of revenue, as reported89.5% 82.3% 85.4% 82.5%
Adjusted for:       
Amortization of intangible assets(4,004) (4,274) (12,051) (12,928)
Special charges(2,657) 4,366  (6,860) 994 
Total adjustments(6,661) 92  (18,911) (11,934)
Non-GAAP adjusted operating expenses$60,388  $63,182  $191,405  $196,324 
Non-GAAP adjusted operating expenses as a percentage of revenue80.6% 82.4% 77.7% 77.7%

Legacy Tornier N.V.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)
 
 September 27,
2015
 December 28,
2014
Assets   
Current assets:   
Cash and cash equivalents$30,111  $27,940 
Accounts receivable, net62,303  63,583 
Inventories83,668  88,662 
Deferred income taxes and other current assets26,902  29,516 
Total current assets202,984  209,701 
Instruments, net59,728  62,888 
Property, plant and equipment, net42,632  44,662 
Goodwill and intangible assets, net318,115  339,902 
Deferred income taxes and other assets1,819  1,422 
Total assets$625,278  $658,575 
Liabilities and stockholders' equity   
Current liabilities:   
Short-term borrowing and current portion of long-term debt$8,354  $7,394 
Accounts payable15,306  15,073 
Accrued liabilities, deferred income taxes and other current liabilities59,046  61,994 
Total current liabilities82,706  84,461 
Other long-term debt77,774  68,105 
Deferred income taxes and other long-term liabilities25,571  27,119 
Total liabilities186,051  179,685 
Stockholders' equity439,227  478,890 
Total liabilities and stockholders' equity$625,278  $658,575 

Legacy Tornier N.V.
Consolidated Statements of Cash Flow
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 27,
2015
 September 28,
2014
 September 27,
2015
 September 28,
2014
Cash flows from operating activities       
Consolidated net loss$(10,794) $(5,321) $(25,253) $(21,006)
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities       
Depreciation and amortization10,117  10,332  30,549  30,594 
Non-cash foreign currency loss325  137  387  176 
Deferred income taxes64  (2,673) (2,812) (5,254)
Share-based compensation1,854  2,348  6,512  6,869 
Non-cash interest expense and discount amortization297  211  733  565 
Inventory obsolescence3,555  2,711  8,568  8,389 
Fair value adjustment of contingent consideration liability(151) (5,327) 618  (5,327)
Inventory step up from acquisition  157    577 
Other non-cash items affecting earnings159  (14) 410  312 
        
Changes in operating assets and liabilities       
Accounts receivable5,439  2,204  (774) (1,015)
Inventories(2,823) (6,260) (9,316) (21,586)
Accounts payable and accruals(655) (3,954) 2,973  4,213 
Other current assets and liabilities3,494  634  29  (2,713)
Other non-current assets and liabilities418  193  283  689 
Net cash provided by (used in) operating activities11,299  (4,622) 12,907  (4,517)
Cash flows from investing activities       
Acquisition-related cash payments  (20) (360) (2,020)
Additions of instruments(4,808) (4,214) (14,089) (18,749)
Purchases of property, plant and equipment(883) (3,248) (4,544) (8,128)
Net cash used in investing activities(5,691) (7,482) (18,993) (28,897)
Cash flows from financing activities       
Contingent consideration payments(1,155) (1,171) (2,607) (6,793)
Change in short-term debt  6,000  1,000  6,000 
Repayments of long-term debt(277) (160) (1,047) (723)
Proceeds from issuance of long-term debt    10,067  477 
Deferred financing costs    (114)  
Issuance of ordinary shares235  932  1,958  3,128 
Net cash (used in) provided by financing activities(1,197) 5,601  9,257  2,089 
Effect of currency exchange rates on cash and cash equivalents(183) 662  (1,000) 471 
Decrease in cash and cash equivalents4,228  (5,841) 2,171  (30,854)
Cash and cash equivalents at beginning of period25,883  31,771  27,940  56,784 
Cash and cash equivalents at end of period$30,111  $25,930  $30,111  $25,930 

Wright Medical Group N.V.
Reconciliation of Estimated 2015 Net Sales to Estimated 2015 Pro Forma Net Sales
(dollars in millions--unaudited)
 
 Twelve Months Ended
 December 27, 2015
 Low-End of
Range
 High-End of
Range
Legacy Wright Medical Group year-to-date net sales$238.5  $238.5 
Estimated Wright Medical Group N.V. fourth quarter net sales161.0  167.0 
Estimated 2015 Net Sales$399.5  $405.5 
Legacy Tornier N.V. year-to-date net sales246.2  246.2 
Legacy Tornier N.V. sales of divested foot & ankle products (9.7)  (9.7)
Estimated 2015 Pro Forma Net Sales$636  $642 

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