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Tornier Reports Financial Results for 2010 and Provides 2011 Outlook

March 1, 2011

Sales Growth of 13% in 2010 Drives Adjusted EBITDA Increase of 76%

Extremity Product Lines Record 15% 2010 Growth

AMSTERDAM, The Netherlands--(BUSINESS WIRE)-- Tornier N.V. (NASDAQ: TRNX), a global medical device company focused on providing surgical solutions to orthopaedic extremity specialists, reported full year sales of $227.4 million in 2010 compared to sales of $201.5 million in 2009, an increase of 13% as reported and 14% in constant currency over the prior year. The extremities product categories, which represent approximately 77% of company sales, were $176.0 million in 2010 compared to extremity sales of $152.5 million in 2009, an increase of 15% as reported and 16% in constant currency over the prior year. Tornier's sales in the fourth quarter of 2010 were $61.3 million compared to sales of $57.3 million in the fourth quarter of 2009, an increase of 7% as reported and 10% in constant currency. Fourth quarter 2010 sales of Tornier's extremity product lines increased by 9% as reported and 11% in constant currency over fourth quarter 2009.

Douglas W. Kohrs, President and Chief Executive Officer of Tornier, commented, "We are pleased to have delivered another year of solid double digit sales growth in 2010 as Tornier's new product momentum, global expansion, and strong position in the extremities market overcame a challenging economic environment for the healthcare industry and the orthopaedic market. We recently highlighted six already launched new products at the American Academy of Orthopaedic Surgeons meeting and we plan a total of 19 product launches for the full year. We are excited about the contribution that these new products will make to sustain balanced growth across our product lines and geographic markets."

Tornier's 2010 adjusted EBITDA, as defined in both our most recent Form S-1 and in the GAAP to non-GAAP reconciliation provided later in this release, was reported at $18.6 million or 8.2% of sales, an increase of 76% compared to $10.6 million, or 5.3% of sales, in 2009. The Company reported adjusted EBITDA of $5.2 million, or 8.5% of sales, for the fourth quarter of 2010 compared to $5.0 million for the fourth quarter of 2009.

Mr. Kohrs continued, "We are encouraged by the significant increase in adjusted EBITDA in 2010 which we believe evidences the margin expansion opportunity in our business model. As we look forward to 2011, our first year as a publicly traded company, we remain committed to continued improvement in profitability driven by above market top line growth."

Sales and Product Review

Sales of Tornier's extremity product lines recorded constant currency growth of 16% in 2010. This organic growth has resulted from Tornier's investments in product development, business development and geographic expansion in recent years. Within total extremities, upper extremities represent the Company's largest reported product category and include its pioneering shoulder arthroplasty products. The upper extremity product category recorded constant currency growth of 11% in 2010 with Tornier's core AEQUALIS® and newer AFFINITI and AEQUALIS ASCEND products all contributing to product line growth. Tornier's lower extremity product category recorded constant currency growth of 16% in 2010, aided by continued market share gains by the Company's market-leading SALTO® ankle arthroplasty system. Sports medicine and biologics represent Tornier's fastest growing reported product category, recording constant currency growth of approximately 100% in 2010. This category is benefitting from the expanding market acceptance of the Company's innovative rotator cuff repair products that include Piton® anchors, Conexa regenerative tissue matrix and the ArthroTunneler anchorless rotator cuff repair system.

On a geographic basis, Tornier's 2010 sales in the United States increased by 14% and represented 56% of global sales, while international sales increased by 12% as reported and 15% in constant currency, and represented 44% of global sales.

Outlook

The Company expects 2011 reported sales in the range of $255 to $262 million, representing growth of 12% to 15% based on recent exchange rates, and 10% to 14% in constant currency. The Company projects 2011 adjusted EBITDA, as described in both our most recently filed Form S-1 and in the GAAP to non-GAAP reconciliation provided later in this release, of 11% to 12% of sales, or $28 to $31 million. This would represent an increase in adjusted EBITDA of 51% to 67% over the adjusted EBITDA reported in 2010.

For the first quarter of 2011, the Company expects reported sales in the range of $65.5 to $66.5 million, representing growth of 6% to 8% based on recent currency exchange rates, and 7% to 9% in constant currency. Projected first quarter 2011 sales reflect the negative effect of four fewer selling days compared to the first quarter of 2010. The Company projects adjusted EBITDA for the first quarter of 2011 of 8% to 9% of sales, or $5.5 to $6.0 million.

Post Year End Events

On February 8, 2011, the Company completed its initial public offering by issuing 8,750,000 ordinary shares at $19.00 per share, raising approximately $155 million net of underwriters' discounts and commissions. As a result of its initial public offering, Tornier has strengthened its balance sheet and overall liquidity. Tornier's notes payable, including accrued interest, were paid in full, in the amount of approximately $116 million. At the time of the repayment of the notes, approximately $29 million of unamortized note discount remained and will be recorded as a pre-tax loss on the extinguishment of debt in the Company's first quarter 2011 financial results.

As estimated for February 2011 month end, the Company currently holds approximately $58 million in cash and cash equivalents, has $50 million in debt and has an additional $16 million of available credit. At the end of February, the Company has approximately 38.3 million shares issued and outstanding.

Earnings Call Information

Tornier will host a conference call today at 5:00 p.m. eastern time to discuss its fourth quarter and fiscal year 2010 results. Those interested may join the call from within the U.S. by dialing 877-673-5355; outside the U.S., dial +1-760-666-3805. A replay of the call will be available through the Company's website at www.tornier.com for replay two hours after completion of the call.

Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained in this press release include the intent, belief or current expectations of the Company and members of its management team with respect to the Company's future business operations as well as the assumptions upon which such statements are based. Forward-looking statements include specifically, but are not limited to, the Company's market opportunities, future products, sales and financial results and such statements are subject to risks and uncertainties such as the timing and success of new product introductions, physician acceptance, endorsement, and use of the Company's products, regulatory matters, competitor activities, changes in and adoption of reimbursement rates, potential product recalls, effects of global economic conditions and changes in foreign currency exchange rates. Additional factors that could cause actual results to differ materially from those contemplated within this press release can also be found in the Company's Risk Factor disclosures in its Registration Statement on Form S-1, as amended, which was declared effective on February 2, 2011, and in the Company's other filings with the SEC. The Company disclaims any responsibility to update any 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 80 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 press release to the most comparable U.S. GAAP measures for the respective periods can be found in tables later in this release. 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
        January 2,   December 27,   January 2,   December 27,
        2011   2009   2011   2009
        (unaudited)       (unaudited)    
Revenue     $ 61,265     $ 57,321     $ 227,378     $ 201,462  
Cost of goods sold       17,883       15,828       63,437       54,859  
Gross profit       43,382       41,493       163,941       146,603  
                     
Operating expenses                  
  Sales and marketing       33,144       32,984       126,809       115,630  
  General and administrative       5,723       4,962       22,366       20,790  
  Research and development       5,182       3,713       17,896       18,120  
  Amortization of intangible assets       2,772       6,690       11,492       15,173  
  Special charges       -       815       306       1,864  
  Total operating expenses       46,821       49,164       178,869       171,577  
                     
Operating income (loss)       (3,439 )     (7,671 )     (14,928 )     (24,974 )
                     
Other income (expense)                  
 

Interest expense

      (5,535 )     (5,662 )     (21,582 )     (19,667 )
  Foreign currency transaction gain (loss)       1,304       751       (8,163 )     3,003  
  Other non-operating income (expense)       (301 )     (28,266 )     43       (28,461 )
                     
Loss before income taxes       (7,971 )     (40,848 )     (44,630 )     (70,099 )

Income tax (expense) benefit

      (125 )     10,157       5,121       14,413  
                     
Consolidated net loss       (8,096 )     (30,691 )     (39,509 )     (55,686 )
Net loss attributable to non-controlling interest       -       59       (695 )     (1,067 )
                     
Net loss attributable to Tornier N.V.       (8,096 )     (30,750 )     (38,814 )     (54,619 )
Accretion of non-controlling interest       -       -       (679 )     (1,127 )
                     
Net loss attributable to ordinary shareholders     $ (8,096 )   $ (30,750 )   $ (39,493 )   $ (55,746 )
                     
Net loss per share                  
  Basic and diluted     $ (0.27 )   $ (1.25 )   $ (1.42 )   $ (2.28 )
                     
Weighted average ordinary shares outstanding                  
  Basic and diluted       29,568       24,659       27,770       24,408  
                                     
           
Tornier N.V.
Condensed Consolidated Balance Sheets
(in thousands)
               
        January 2, 2011     December 27, 2009
        (unaudited)      
Assets            
  Current assets          
    Cash and cash equivalents   $ 24,838     $ 37,969
    Accounts receivable, net     42,758       40,447
    Inventories     77,525       68,621
    Deferred income taxes and other current assets     28,093       24,111
    Total current assets     173,214       171,148
               
  Instruments, net     42,378       40,450
  Property, plant and equipment, net     33,680       35,076
  Goodwill and intangibles, net     240,854       262,170
  Deferred taxes and other assets     1,052       11,343
  Total assets   $ 491,178     $ 520,187
               
Liabilities and shareholders' equity          
  Current liabilities          
    Short-term borrowing and current portion of long term debt   $ 28,392     $ 23,299
    Accounts payable     12,890       12,925
    Accrued liabilities and taxes     34,967       35,931
    Total current liabilities     76,249       72,155
               
  Notes payable     84,261       69,535
  Warrant liabilities     -       85,215
  Other long-term debt     25,467       22,889
  Other long-term liabilities     34,962       27,346
  Total liabilities     220,939       277,140
               
  Redeemable non-controlling interest     -       23,259
  Shareholders' equity     270,239       219,788
               
  Total liabilities and shareholders' equity   $ 491,178     $ 520,187
                 
                                     

Tornier N.V.

Selected Revenue Information
(in thousands)
                                         
        Three Months Ended   Twelve Months Ended
        January 2,       December 27,       Percent   January 2,     December 27,     Percent
        2011       2009       change   2011     2009     change
        (unaudited)                   (unaudited)            
Revenue by product category                                    
  Upper extremity joints and trauma   $ 36,597       $ 34,091       7.4 %   $ 139,175     $ 125,454     10.9 %
  Lower extremity joints and trauma     6,223         5,964       4.3 %     23,629       20,417     15.7 %
  Sports medicine and biologics     3,523         2,359       49.3 %     13,210       6,593     100.4 %
    Total extremities     46,343         42,414       9.3 %     176,014       152,464     15.4 %
  Large joints and other     14,922         14,907       0.1 %     51,364       48,998     4.8 %
  Total   $ 61,265       $ 57,321       6.9 %   $ 227,378     $ 201,462     12.9 %
                                         
Revenue by geography                                    
  United States   $ 33,165       $ 30,348       9.3 %   $ 127,762     $ 112,588     13.5 %
  International     28,100         26,973       4.2 %     99,616       88,874     12.1 %
  Total   $ 61,265       $ 57,321       6.9 %   $ 227,378     $ 201,462     12.9 %
                                       
 
Tornier N.V.
Reconciliation of Revenue to Non-GAAP Revenue on a Constant Currency Basis
(in thousands)
                                   
          Three Months Ended      
                December 27,  
          January 2, 2011     2009  
          (unaudited)            
                Foreign                 Percent
                exchange     Net sales on a           change on a
                impact as     constant           constant
          Net sales as     compared to     currency     Net sales as     currency
          reported     prior period     basis     reported     basis
Revenue by product category                              
  Upper extremity joints and trauma     $ 36,597     $ 485     $ 37,082     $ 34,091     8.8 %
  Lower extremity joints and trauma       6,223       83       6,306       5,964     5.7 %
 

Sports medicine and biologics

      3,523       7       3,530       2,359     49.6 %
    Total extremities       46,343       575       46,918       42,414     10.6 %
  Large joints and other       14,922       1,329       16,251       14,907     9.0 %
  Total     $ 61,265     $ 1,904     $ 63,169     $ 57,321     10.2 %
                                   
Revenue by geography                              
  United States     $ 33,165     $ -     $ 33,165     $ 30,348     9.3 %
  International       28,100       1,904       30,004       26,973     11.2 %
  Total     $ 61,265     $ 1,904     $ 63,169     $ 57,321     10.2 %
                                   
                                   
          Twelve Months Ended      
                December 27,  
          January 2, 2011     2009  
          (unaudited)            
                Foreign                 Percent
                exchange     Net sales on a           change on a
                impact as     constant           constant
          Net sales as     compared to     currency     Net sales as     currency
          reported     prior period     basis     reported     basis
Revenue by product category                              
  Upper extremity joints and trauma     $ 139,175     $ 449     $ 139,624     $ 125,454     11.3 %
  Lower extremity joints and trauma       23,629       121       23,750       20,417     16.3 %
  Sports medicine and biologics       13,210       29       13,239       6,593     100.8 %
    Total extremities       176,014       599       176,613       152,464     15.8 %
  Large joints and other       51,364       2,203       53,567       48,998     9.3 %
  Total     $ 227,378     $ 2,802     $ 230,180     $ 201,462     14.3 %
                                   
Revenue by geography                              
  United States     $ 127,762     $ -     $ 127,762     $ 112,588     13.5 %
  International       99,616       2,802       102,418       88,874     15.2 %
  Total     $ 227,378     $ 2,802     $ 230,180     $ 201,462     14.3 %
                                           
                         
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
        January 2,     December 27,     January 2,     December 27,
        2011     2009     2011     2009
        (unaudited)           (unaudited)      
Net loss, as reported     $ (8,096 )     $ (30,691 )     $ (39,509 )     $ (55,686 )
                           
  Interest expense       5,535         5,662         21,582         19,667  
  Income tax benefit       125         (10,157 )       (5,121 )       (14,413 )
  Depreciation       4,424         4,270         15,546         14,559  
  Amortization       2,772         6,690         11,492         15,173  
                           
  Subtotal Non-GAAP EBITDA (Loss)       4,760         (24,226 )       3,990         (20,700 )
                           
  Non-operating (income) expense       301         28,266         (43 )       28,461  
  Foreign currency transaction (gain) loss       (1,304 )       (751 )       8,163         (3,003 )
  Share-based compensation       1,443         838         5,630         3,913  
  Special charges       -         815         306         1,864  
  Operating expenses from consolidated VIE       -         19         594         73  
                           
Non-GAAP Adjusted EBITDA     $ 5,200       $ 4,961       $ 18,640       $ 10,608  
                         

 

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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