Tornier Reports Fourth Quarter And Fiscal Year 2013 Results

The following excerpt is from the company's SEC filing.

  •   New product launches and pipeline on track, led by Aequalis Ascend Flex adoption and expected second quarter launch of Aequalis Reversed in Japan

AMSTERDAM, The Netherlands (February 20, 2014) — Tornier N.V. (NASDAQ:TRNX), a global medical device company focused on providing surgical solutions to orthopaedic extremity specialists, reported today its financial results for the fourth quarter and fiscal year ended December 29, 2013.

Revenue for the fourth quarter of 2013 was $83.4 million compared to fourth quarter 2012 revenue of $79.0 million, an increase of 5.5% as reported and 4.4% in constant currency. Revenue for the fiscal year ended December 29, 2013 totaled $311.0 million, compared to 2012 revenue of $277.5 million, an increase of 12.0% as reported and 11.3% in constant currency.

Fourth quarter 2013 revenue of Tornier’s extremities product categories totaled $68.1 million compared to $64.7 million a year ago, an increase of 5.2% as reported and 4.8% in constant currency. For the fiscal year 2013, revenue of Tornier’s extremities product categories was $258.0 million compared to $224.9 million a year ago, an increase of 14.7% as reported and 14.4% in constant currency.

Giving pro forma effect to Tornier’s fourth quarter 2012 acquisition of OrthoHelix Surgical Designs, Inc. to include OrthoHelix revenue in the full prior year period, Tornier’s 2013 fourth quarter constant currency revenue growth was 4.0%, and extremities products constant currency revenue increased 4.3%. Pro forma constant currency revenue growth for the fiscal year 2013 was 3.5%, and pro forma extremities products constant currency revenue increased 4.7%.

Dave Mowry, President and Chief Executive Officer of Tornier, commented, “We completed the first phase of our U.S. sales force transition during the fourth quarter, ahead of our original timeline. This now positions us to focus on the next phase of the transition – training and maximizing rep productivity to drive both market expansion and penetration.”

Mr. Mowry continued, “I am pleased with the progress we are making on developing and launching new products both in the U.S. and international markets. We now have over 150 physicians trained and using the Aequalis Ascend Flex convertible shoulder system, well ahead of our initial launch goal of 100 by year end 2013. In addition, we have recently received both product and reimbursement approval for the Aequalis Reversed shoulder in Japan and look forward to the launch in the second quarter of 2014.”

The Company’s fourth quarter 2013 adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $9.2 million, or 11.0% of reported revenue, compared to $11.0 million, or 13.9% of revenue, in the same quarter of the prior year. For the fiscal year ended December 29, 2013, adjusted EBITDA decreased to $30.4 million, or 9.8% of reported revenue, compared to $32.9 million, or 11.9% of revenue in 2012.

  •   Revenue from the upper extremities joints and trauma category was $48.2 million, an increase of 4.7% 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 family of products, which included continued contribution from the third quarter 2013 launch of the Aequalis Ascend Flex.

  •   Revenue from Tornier’s lower extremities joints and trauma category in the fourth quarter of 2013 reached $16.2 million, an increase of 9.9% in constant currency. Giving pro forma effect to the OrthoHelix acquisition to include OrthoHelix revenue for the full fourth quarter of 2012, fourth quarter 2013 lower extremities revenue recorded constant currency growth of 7.8%. This growth was led by increases across several of the Company’s foot and ankle product lines, along with continued international expansion of our lower extremities portfolio and sales force.

  •   Revenue from the sports medicine and biologics product category was $3.7 million in the fourth quarter of 2013, a decrease of 11.9% in constant currency over the same quarter in 2012, reflecting a decline in the Company’s anchor products, partially offset by growth in the Company’s suture and BioFiber products. The Company is in the early launch stage of its Insite FT bio anchor and unique Phantom Fiber high strength resorbable suture.

Revenue of the Company’s large joints and other product lines was $15.3 million, an increase of 2.5% in constant currency over the same quarter in 2012. In the fourth quarter of 2013, this product category represented 18.3% of the Company’s reported global revenue compared to 18.1% in the prior year period.

On a geographic basis as compared to the fourth quarter of 2012, Tornier’s international revenue increased 7.9% as reported and 5.2% in constant currency, representing 42.6% of reported global revenue. Revenue in the United States increased by 3.8% and represented 57.4% of reported global revenue. Giving pro forma effect to the OrthoHelix acquisition to include OrthoHelix revenue for the full fourth quarter of 2012, revenue in the United States increased by 3.2% during the fourth quarter of 2013 compared to the prior year quarter.

  •   The Company projects first quarter 2014 constant currency revenue to be in the range of $78 to $82 million, representing a change in constant currency of (5.7%) to (0.8%) over the same period last year.

  •   Based on recent currency exchange rates, first quarter 2014 reported revenue is projected to be in the range of $78.5 to $82.5 million, representing a change of (5.1%) to (0.3%) over the same period last year.

  •   Revenue from the Tornier extremities product categories in the first quarter of 2014 is expected to be in the range of $63.4 to $66.7 million, representing a change in constant currency of (5.9%) to (1.0%) over the same period last year.

  •   The Company projects first quarter 2014 adjusted EBITDA to be in the range of $4.0 to $6.0 million, or 5.1% to 7.3% of reported revenue.

  •   The Company projects 2014 constant currency revenue to be in the range of $302 to $317 million, representing a change in constant currency of (2.9%) to 1.9% over last year.

  •   Based on recent currency exchange rates, 2014 reported revenue is projected to be in the range of $304.2 to $319.1 million, representing a change of (2.2%) to 2.6% over last year.

  •   Revenue from the Tornier’s extremities product categories in 2014 is expected to be in the range of $252.6 to $265.5 million, representing a change in constant currency of (2.1%) to 2.9% over last year.

  •   The Company projects 2014 adjusted EBITDA to be in the range of $22.5 to $27.5 million, or 7.4% to 8.6% of reported revenue.

Tornier will host a conference call today at 4:30 p.m. eastern time to discuss its fourth quarter 2013 financial results and its initial outlook for 2014. 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 (877) 673-5355; outside the U.S., dial (760) 666-3805.

A telephone replay will be available for ten days 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 51024933. For those who are not available to listen to the live webcast, the call will be archived for one year on Tornier’s website.

products; physician acceptance, endorsement, and use of new products; the effect of regulatory actions, changes in and adoption of reimbursement rates and product recalls; competitor activities; Tornier’s leverage and access to credit under its credit agreement; 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 quarterly report on Form 10-Q and annual report on Form 10-K for the fiscal year ended December 29, 2013 anticipated to be filed shortly with the SEC. Tornier undertakes no obligation to update its forward-looking statements.

Tornier is a global medical device company focused on providing solutions to surgeons who treat musculoskeletal injuries and disorders of the shoulder, elbow, wrist, hand, ankle and foot. The Company’s broad offering of over 95 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.

Tornier®, Aequalis®, Aequalis Ascend®, Aequalis® Reversed™, Aequalis Ascend® Flex™, BioFiber®, Insite® FT™ and Phantom Fiber™ are trademarks of Tornier N.V and its subsidiaries, registered as indicated in the United States, and in other countries. All other trademarks and trade names referred to in this release are the property of their respective owners.

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 believes the non-GAAP financial measures presented above provide additional meaningful information for measuring Tornier’s financial performance and are measures frequently used by Tornier’s management, as well as securities analysts and investors. Tornier uses the non-GAAP financial measures as supplemental measures of its performance and believes such measures facilitate operating performance comparisons from period to period and company to company by factoring out potential differences caused by charges not related to Tornier’s regular, ongoing business, including non-cash charges, certain large and unpredictable charges, acquisitions, dispositions, litigation settlements and tax positions. Tornier’s management uses the non-GAAP financial measures to assess the performance of Tornier’s core operations, analyze underlying trends in Tornier’s businesses, establish operational goals and forecasts, and evaluate Tornier’s performance period over period and in relation to the operating results of its competitors. Tornier’s management uses the non-GAAP financial measures to help allocate its resources to both ongoing and prospective business initiatives and to help make budgeting and spending decisions, for example, between product development expenses, research and development expenses, and selling, general and administrative expenses. Tornier’s management is evaluated on the basis of several of these non-GAAP financial measures when determining achievement of performance incentive compensation goals.

Tornier believes that non-GAAP financial measures have limitations as analytical tools since they do not reflect all of the amounts associated with Tornier’s operating results as determined in accordance with GAAP and should only be used to evaluate Tornier’s operating results in conjunction with the corresponding GAAP measures. Accordingly, revenue on a constant currency basis should not be used as a substitute for revenue, EBITDA, adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per share should not be used as a substitute for net income or net income per share; adjusted EBITDA margin should not be used as a substitute for net margin or operating margin; free cash flow should not be used as a substitute for cash flows from operations; and adjusted gross margin and gross margin percentage should not be used as a substitute for gross margin or gross margin as a percentage of revenue, in each case as determined in accordance with GAAP. Neither EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per share, free cash flow, adjusted gross margin and gross margin as a percentage of revenue, should be an indication of whether cash flow will be sufficient to fund Tornier’s cash requirements. Additionally, the calculation of non-GAAP financial measures is not based on any comprehensive or standard set of accounting rules or principles. Accordingly, Tornier’s definitions of revenue on a constant currency basis, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per share, free cash flow, adjusted gross margin and gross margin as a percentage of revenue, may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes.

For further information regarding why Tornier believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Tornier’s current report on Form 8-K filed today with the Securities and Exchange Commission which attaches this release as an exhibit. This current report on Form 8-K is available on the SEC’s website at www.sec.gov or on Tornier’s website at www.tornier.com.

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. Tornier N.V. next reports earnings on February 20, 2014.

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