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Tornier Reports 2011 Financial Results and Provides 2012 Outlook

February 23, 2012

Fourth Quarter Sales and Adjusted EBITDA Exceeded Guidance

2012 Outlook Includes Double-Digit Constant Currency Extremities Growth

AMSTERDAM--(BUSINESS WIRE)-- Tornier N.V. (NASDAQ:TRNX), a global medical device company focused on providing surgical solutions to orthopaedic extremity specialists, reported its financial results for the fourth quarter and full year 2011 and provided its outlook for financial results in 2012.

As previously reported, sales for the fourth quarter of 2011 reached $69.0 million compared to fourth quarter 2010 sales of $61.3 million, increases of 12.7% as reported and 12.4% in constant currency. Also previously reported were full year 2011 sales of $261.2 million compared to 2010 sales of $227.4 million, increases of 14.9% as reported and 12.0% in constant currency. Fourth quarter 2011 sales of Tornier's extremity product categories increased 17.5% as reported and 17.1% in constant currency over the prior year's fourth quarter and represented 79% of reported global sales.

Douglas W. Kohrs, President and Chief Executive Officer of Tornier, commented, "We are pleased that our fourth quarter extremity product sales growth was the strongest of the year with each of our extremity lines recording double digit growth. This balanced growth across our extremity product portfolio can be attributed to our continued global focus on product innovation and commercialization."

The Company's fourth quarter 2011 adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $8.3 million or 12.1% of sales, compared to $5.2 million or 8.5% of sales in the same quarter of the prior year, an increase of 60%. Adjusted EBITDA for the full year 2011 reached $28.6 million or 11.0% of sales, compared to $18.6 million or 8.2% of sales in 2010, representing an increase of 53%.

Mr. Kohrs continued, "We are pleased with the continued expansion in our adjusted EBITDA margin both for the fourth quarter and for the full year. This significant earnings improvement, along with efficient working capital management, resulted in positive operating cash generation for both the quarter and the year. Looking ahead, we will continue to improve operating efficiencies while growing the business faster than the market in all our product categories."

Sales and Product Review

Tornier's fourth quarter 2011 constant currency sales growth of 12.4% was led by its extremity product line categories which together posted constant currency growth of 17.1% over the fourth quarter of 2010. Within the extremity products group, fourth quarter constant currency growth of the upper extremity category was 18.3%, led by the continued strength of shoulder arthroplasty products including the Aequalis Ascend™, the Aequalis® reverse, and the CortiLoc™ glenoid. Further positive contribution came from the launch of the Simpliciti™ stemless shoulder system in additional European markets. Tornier's lower extremity joints and trauma category grew 12.5% in constant currency with strong sales from both the market-leading Salto® ankle arthroplasty system and the Stabilis™ ankle fusion system. The sports medicine and biologics product category posted fourth quarter constant currency sales growth of 13.1% led by the Company's Piton® bone anchors and ArthroTunneler® anchor-less bone tunneling system. Several new market expanding sports medicine and biologic products underwent initial clinical evaluation in the fourth quarter including the Insite®FT bone anchor line and the Duo™ shoulder instability system. Sales of Tornier's large joints product category declined by 2.2% in the quarter, in line with expectations, as a result of lower shipments to distributors serving new international markets entered in 2010.

On a geographic basis as compared to the fourth quarter of 2010, Tornier's international sales increased 13.0% as reported and 12.3% in constant currency, representing 46% of global sales. Sales in the United States increased by 12.5% and represented 54% of global sales.

Outlook

The Company projects 2012 constant currency sales in the range of $282 to $290 million, representing constant currency growth of 8% to 11% over 2011 sales. Based on recent currency exchange rates, 2012 reported sales are projected in the range of $276 to $284 million, representing reported growth of 6% to 9% over 2011 sales. Sales of the Tornier extremities product categories in 2012 are expected to grow 10% to 13% in constant currency. The Company projects 2012 adjusted EBITDA, as described in the GAAP to non-GAAP reconciliation provided later in this release, of $35.5 to $41.5 million or 13% to 14.5% of reported sales, representing growth of 24% to 45% over 2011.

For the first quarter of 2012, the Company projects constant currency sales in the range of $75 to $77 million, representing constant currency growth of 8% to 11% over first quarter 2011 sales. Based on recent currency exchange rates, first quarter 2012 reported sales are projected in the range of $74 to $76 million, representing reported growth of 6% to 9% over first quarter 2011 sales. First quarter 2012 extremities product category sales are expected to grow 10% to 13% in constant currency. The Company projects adjusted EBITDA for the first quarter of 2012 of $9.5 to $11 million or 13% to 14% of reported sales.

Earnings Call Information

Tornier will host a conference call today at 5:30 p.m. eastern time to discuss its fourth quarter 2011 financial results and its initial outlook for 2012. 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 1-855-859-2056 for domestic participants and +1-404-537-3406 for international participants. When prompted, please enter the replay pin number 47132348. 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," 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 first quarter of 2012 and for the full year 2012 and its intent to improve operating efficiencies and grow its business. 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 and the European debt crisis, 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 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 and subsequent quarterly reports on Form 10-Q. 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 90 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   Twelve Months Ended
    (unaudited)   (unaudited)
    January 1, 2012   January 2, 2011   January 1, 2012   January 2, 2011
Revenue $ 69,042     $ 61,265     $ 261,191     $ 227,378  
Cost of goods sold   20,174       17,883       74,882       63,437  
Gross profit   48,868       43,382       186,309       163,941  
                 
Operating expenses              
  Sales and marketing   34,970       33,144       136,305       126,809  
  General and administrative   6,583       5,723       25,143       22,366  
  Research and development   5,231       5,182       19,839       17,896  
  Amortization of intangible assets   2,834       2,772       11,282       11,492  
  Special charges   704       -       892       306  
  Total operating expenses   50,322       46,821       193,461       178,869  
                 
Operating (loss)   (1,454 )     (3,439 )     (7,152 )     (14,928 )
                 
Other income (expense)              
  Interest income   135       81       550       223  
  Interest expense   (565 )     (5,616 )     (4,326 )     (21,805 )
  Foreign currency transaction gain (loss)   274       1,304       193       (8,163 )
  Loss on extinguishment of debt   -       -       (29,475 )     -  
  Other non-operating income (expense)   321       (301 )     1,330       43  
                 
Loss before income taxes   (1,289 )     (7,971 )     (38,880 )     (44,630 )
Income tax (expense) benefit   (692 )     (125 )     8,424       5,121  
                 
Consolidated net loss   (1,981 )     (8,096 )     (30,456 )     (39,509 )
Net loss attributable to non-controlling interest   -       -       -       (695 )
                 
Net loss attributable to Tornier N.V.   (1,981 )     (8,096 )     (30,456 )     (38,814 )
Accretion of non-controlling interest   -       -       -       (679 )
                 
Net loss attributable to ordinary shareholders $ (1,981 )   $ (8,096 )   $ (30,456 )   $ (39,493 )
                 
Net loss per share              
  Basic and diluted $ (0.05 )   $ (0.27 )   $ (0.80 )   $ (1.42 )
                 
Weighted average ordinary shares outstanding              
  Basic and diluted   39,261       29,568       38,227       27,770  
                                 
Tornier N.V.
Condensed Consolidated Balance Sheets
(in thousands)
           
      January 1, 2012   January 2, 2011
      (unaudited)    
Assets        
  Current assets      
    Cash and cash equivalents $ 54,706   $ 24,838
    Accounts receivable, net   45,908     42,758
    Inventories   79,883     77,525
    Deferred income taxes and other current assets   18,375     28,093
    Total current assets   198,872     173,214
           
  Instruments, net   49,347     42,378
  Property, plant and equipment, net   33,353     33,680
  Goodwill and intangibles, net   228,209     240,854
  Deferred income taxes and other assets   1,919     1,052
  Total assets $ 511,700   $ 491,178
           
Liabilities and shareholders' equity      
  Current liabilities      
    Short-term borrowing and current portion of long-term debt $ 18,011   $ 28,392
    Accounts payable   12,020     12,890
    Accrued liabilities and deferred income taxes   35,443     34,967
    Total current liabilities   65,474     76,249
           
  Notes payable   -     84,261
  Other long-term debt   21,900     25,467
  Deferred income taxes and other long-term liabilities   22,866     34,962
  Total liabilities   110,240     220,939
           
  Shareholders' equity   401,460     270,239
           
  Total liabilities and shareholders' equity $ 511,700   $ 491,178
             
Tornier N.V.
Consolidated Statements of Cash Flow
(in thousands)
                   
      Three Months Ended   Twelve Months Ended
      (unaudited)   (unaudited)
                   
      January 1, 2012   January 2, 2011   January 1, 2012   January 2, 2011
Cash flows from operating activities              
  Consolidated net loss $ (1,981 )   $ (8,096 )   $ (30,456 )   $ (39,509 )
                   
  Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities              
    Depreciation and amortization   7,279       7,196       28,317       27,038  
    Non-cash foreign currency (gain) loss   (89 )     (1,644 )     298       7,143  
    Deferred income taxes   (2,626 )     (978 )     (11,619 )     (6,548 )
    Share-based compensation   1,806       1,443       6,547       5,630  
    Non-cash interest expense and discount amortization   -       5,013       2,040       19,612  
    Inventory obsolescence   1,182       1,181       4,996       5,212  
    Change in fair value of warrant liability   -       -       29,475       -  
    Other non-cash items affecting earnings   161       954       (186 )     1,699  
                   
  Changes in operating assets and liabilities              
    Accounts receivable   (4,139 )     (4,450 )     (4,673 )     (3,790 )
    Inventories   3,076       (114 )     (7,939 )     (17,349 )
    Accounts payable and accruals   6,022       (2,242 )     2,573       2,348  
    Other current assets and liabilities   431       3,548       3,987       (307 )
    Other non-current assets and liabilities   1,083       1,583       (194 )     1,710  
  Net cash provided by (used in) operating activities   12,205       3,394       23,166       2,889  
                   
Cash flows from investing activities              
  Acquisition-related cash payments   (1,089 )     (336 )     (3,142 )     (2,328 )
  Additions of instruments   (4,692 )     (3,330 )     (19,734 )     (13,838 )
  Purchases of property, plant and equipment   (2,827 )     (1,147 )     (6,599 )     (6,687 )
  Net cash provided by (used in) investing activities   (8,608 )     (4,813 )     (29,475 )     (22,853 )
                   
Cash flows from financing activities              
  Change in short-term debt   (2,328 )     (661 )     (10,513 )     6,468  
  Repayments of long-term debt   (1,689 )     (2,684 )     (8,147 )     (7,687 )
  Proceeds from issuance of long-term debt   281       6,010       5,032       11,361  
  Deferred financing costs   -       (1,858 )     (2,731 )     (3,534 )
  Repayment of notes payable   -       -       (116,108 )     -  
  Issuance of ordinary shares   362       13       171,577       819  
  Net cash provided by (used in) financing activities   (3,374 )     820       39,110       7,427  
                   
Effect of currency exchange rates on cash and cash equivalents   (1,365 )     (65 )     (2,933 )     (594 )
                   
Increase (decrease) in cash and cash equivalents   (1,142 )     (664 )     29,868       (13,131 )
                   
Cash and cash equivalents at beginning of period   55,848       25,502       24,838       37,969  
                   
Cash and cash equivalents at end of period $ 54,706     $ 24,838     $ 54,706     $ 24,838  
                               
Tornier N.V.
Selected Revenue Information
(in thousands)
                           
      Three Months Ended   Twelve Months Ended
      (unaudited)       (unaudited)    
      January 1, 2012   January 2, 2011  

Percent
change

  January 1, 2012   January 2, 2011  

Percent
change

Revenue by product category                      
  Upper extremity joints and trauma $ 43,424   $ 36,598   18.7 %   $ 164,064   $ 139,175   17.9 %
  Lower extremity joints and trauma   7,011     6,223   12.7 %     26,033     23,629   10.2 %
  Sports medicine and biologics   4,010     3,523   13.8 %     14,779     13,210   11.9 %
    Total extremities   54,445     46,344   17.5 %     204,876     176,014   16.4 %
  Large joints and other   14,597     14,921   -2.2 %     56,315     51,364   9.6 %
  Total $ 69,042   $ 61,265   12.7 %   $ 261,191   $ 227,378   14.9 %
                           
Revenue by geography                      
  United States $ 37,299   $ 33,165   12.5 %   $ 141,496   $ 127,762   10.7 %
  International   31,743     28,100   13.0 %     119,695     99,616   20.2 %
  Total $ 69,042   $ 61,265   12.7 %   $ 261,191   $ 227,378   14.9 %
                                     
Tornier N.V.
Reconciliation of Revenue to Non-GAAP Revenue on a Constant Currency Basis
(in thousands)
                       
      Three Months Ended    
      (unaudited)    
      January 1, 2012   January 2, 2011    
     

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 trauma $ 43,424   $ (132 )   $ 43,292   $ 36,598   18.3 %
  Lower extremity joints and trauma   7,011     (8 )     7,003     6,223   12.5 %
  Sports medicine and biologics   4,010     (27 )     3,983     3,523   13.1 %
    Total extremities   54,445     (167 )     54,278     46,344   17.1 %
  Large joints and other   14,597     (7 )     14,590     14,921   -2.2 %
  Total $ 69,042   $ (174 )   $ 68,868   $ 61,265   12.4 %
                       
Revenue by geography                  
  United States $ 37,299   $ -     $ 37,299   $ 33,165   12.5 %
  International   31,743     (174 )     31,569     28,100   12.3 %
  Total $ 69,042   $ (174 )   $ 68,868   $ 61,265   12.4 %
                       
                       
      Twelve Months Ended    
      (unaudited)    
      January 1, 2012   January 2, 2011    
     

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 trauma $ 164,064   $ (3,170 )   $ 160,894   $ 139,175   15.6 %
  Lower extremity joints and trauma   26,033     (414 )     25,619     23,629   8.4 %
  Sports medicine and biologics   14,779     (301 )     14,478     13,210   9.6 %
    Total extremities   204,876     (3,885 )     200,991     176,014   14.2 %
  Large joints and other   56,315     (2,744 )     53,571     51,364   4.3 %
  Total $ 261,191   $ (6,629 )   $ 254,562   $ 227,378   12.0 %
                       
Revenue by geography                  
  United States $ 141,496   $ -     $ 141,496   $ 127,762   10.7 %
  International   119,695     (6,629 )     113,066     99,616   13.5 %
  Total $ 261,191   $ (6,629 )   $ 254,562   $ 227,378   12.0 %
                                 
Tornier N.V.
Reconciliation of Net Loss to
Non-GAAP Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA)
(in thousands)
                 
    Three Months Ended   Twelve Months Ended
    (unaudited)   (unaudited)
    January 1, 2012   January 2, 2011   January 1, 2012   January 2, 2011
Net loss, as reported $ (1,981 )   $ (8,096 )   $ (30,456 )   $ (39,509 )
                 
  Interest income   (135 )     (81 )     (550 )     (223 )
  Interest expense   565       5,616       4,326       21,805  
  Income tax expense (benefit)   692       125       (8,424 )     (5,121 )
  Depreciation   4,445       4,424       17,035       15,546  
  Amortization   2,834       2,772       11,282       11,492  
                 
  Subtotal Non-GAAP EBITDA (Loss)   6,420       4,760       (6,787 )     3,990  
                 
  Other non-operating (income) expense   (321 )     301       (1,330 )     (43 )
  Foreign currency transaction (gain) loss   (274 )     (1,304 )     (193 )     8,163  
  Share-based compensation   1,806       1,443       6,547       5,630  
  Loss on extinguishment of debt   -       -       29,475       -  
  Special charges   704       -       892       306  
  Operating expenses from consolidated VIE   -       -       -       594  
                 
Non-GAAP Adjusted EBITDA $ 8,335     $ 5,200     $ 28,604     $ 18,640  
                               
Tornier N.V.
Reconciliation of Net Cash Provided by (Used in) Operating Activities
to Non-GAAP Free Cash Flow
(in thousands)
                   
      Three Months Ended   Twelve Months Ended
      (unaudited)   (unaudited)
                   
      January 1, 2012   January 2, 2011   January 1, 2012   January 2, 2011
                   
Net cash provided by (used in) operating activities, as reported $ 12,205     $ 3,394     $ 23,166     $ 2,889  
                   
  Adjusted for:              
    Additions of instruments, as reported   (4,692 )     (3,330 )     (19,734 )     (13,838 )
    Purchases of property, plant and equipment, as reported   (2,827 )     (1,147 )     (6,599 )     (6,687 )
                   
Non-GAAP free cash flow $ 4,686     $ (1,083 )   $ (3,167 )   $ (17,636 )
                               

 

Tornier N.V.
Carmen Diersen
Chief Financial Officer
952-426-7646
cdiersen@tornier.com
or
Doug Kohrs
President and Chief Executive Officer
952-426-7606
dkohrs@tornier.com

Source: Tornier N.V.

 

 

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