Third Quarter Legacy Wright Global Foot
and Ankle Net Sales Increase 20% as Reported and
23% Constant Currency
Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial
results for Wright Medical Group, Inc. for its third quarter ended
September 30, 2015 and financial results for Tornier N.V. for
its third quarter ended September 27, 2015. As
previously announced, Wright and Tornier completed their merger on
October 1, 2015, subsequent to the end of each company’s third
quarter. Certain preliminary, unaudited non-GAAP pro forma
financial results for the combined Wright Medical Group N.V. can be
found on Wright’s website at ir.wright.com.
Wright Medical Group, Inc. Third Quarter 2015
Highlights
Net sales totaled $80.1 million during the third quarter ended
September 30, 2015, representing a 12% increase as reported and 16%
increase on a constant currency basis compared to the third quarter
of 2014.
Robert Palmisano, president and chief executive officer,
commented, “Third quarter results for our legacy Wright business
continued to demonstrate the strong growth of our U.S. foot and
ankle business and ongoing improvement in our international
business. Specifically, our U.S. foot and ankle business grew
24% in the quarter, which was another quarter of significant growth
driven by improved sales force execution, medical education and
strong contribution from new products, including the ongoing launch
of our INFINITY total ankle system, which drove 54% sales growth in
U.S. total ankle replacement. In addition, our U.S.
commercial launch activities for AUGMENT Bone Graft are off to a
positive start following final FDA approval in September. We
believe this product, coupled with continued strong growth in our
core U.S. foot and ankle business, will continue to fuel positive
momentum for the remainder of the year and beyond.”
Palmisano continued, “The close of our merger with Tornier
marked a significant milestone for our company, creating the
premier, high-growth Extremities and Biologics company uniquely
positioned with leading technologies and specialized sales forces
in three of the fastest growing areas of orthopaedics – Upper
Extremities, Lower Extremities and Biologics. Our focus now
is on bringing our organizations together to accelerate our
business momentum and minimize disruption, and we have gotten off
to a strong start. For the vast majority of the combined
company revenue, we anticipate little to no sales force disruption
due to integration. Given the relatively low level of revenue
that we anticipate will be directly impacted by the sales force
integration and the amount of dis-synergy that we have targeted in
our plan, we view the downside risk in this area to be low.
Like our dis-synergy plan, we view achieving our cost synergy
target of $40 million to $45 million in year three as also low
risk. We have multiple opportunities to extend our leadership
position in shoulder, accelerate our foot and ankle business
through market expansion, and increase our biologics business
through the launch of AUGMENT Bone Graft in the U.S. In
addition, I believe that our increased scale and scope will provide
an accelerated path to profitability that will enable us to achieve
our goal of adjusted EBITDA margins approaching 20% in three to
four years and generate long-term value for our
shareholders.”
Net loss from continuing operations for the third quarter of
2015 totaled $62.7 million, or $(1.22) per diluted share, compared
to net loss from continuing operations of $49.6 million, or $(0.99)
per diluted share, in the third quarter of 2014.
Net loss from continuing operations for the third quarter of
2015 included a $14.6 million unrealized loss related to
mark-to-market adjustments on contingent value rights (CVRs) issued
in connection with the BioMimetic acquisition, a gain of $4.7
million related to mark-to-market adjustments on derivatives, $6.8
million of non-cash interest expense related to the 2017
Convertible Notes and 2020 Convertible Notes, and $19.9 million of
transaction and transition costs. Net loss from continuing
operations for the third quarter of 2014 included an $18.5 million
unrealized loss related to mark-to-market adjustments on CVRs
issued in connection with the BioMimetic acquisition, $2.7 million
of transaction and transition costs, $2.3 million of non-cash
interest expense related to the 2017 Convertible Notes, $1.8
million of contingent consideration fair value adjustments, $1.2
million of costs associated with management changes, an unrealized
loss of $1.0 million related to mark-to-market adjustments on
derivatives, $0.9 million of patent dispute settlement costs, and
$0.5 million of charges associated with distributor conversions and
non-competes. These 2014 charges were offset by a $2.8
million U.S. tax benefit within continuing operations recorded as a
result of the U.S. pre-tax gain recognized within discontinued
operations due to the sale of the OrthoRecon business.
The company's third quarter 2015 net loss from continuing
operations, as adjusted for the above items, was $26.1 million, a
decline from an adjusted net loss of $17.7 million in 2014, while
diluted loss per share, as adjusted, decreased to $(0.51) in the
third quarter of 2015 from $(0.35) in the third quarter of
2014. The attached financial tables include a reconciliation
of U.S. GAAP to “as adjusted” results.
The company's third quarter 2015 adjusted EBITDA from continuing
operations, as defined in the GAAP to non-GAAP reconciliation
provided later in this release, was negative $(10.3) million,
compared to negative $(5.9) million in the same quarter of the
prior year. The attached financial tables include a
reconciliation of U.S. GAAP to “as adjusted” results.
Cash and cash equivalents and marketable securities totaled
$254.4 million as of the end of the third quarter of 2015, an
increase of $24.5 million compared to the end of the fourth quarter
of 2014, which was driven by completion of the 2020 convertible
debt offering, offset by the Augment® Bone Graft approval CVR
milestone payment and merger-related expenses.
Tornier N.V. Third Quarter 2015 Highlights
Tornier’s revenue for the third quarter of 2015 was $74.9
million compared to third quarter 2014 revenue of $76.7 million, a
decrease of 2% as reported and an increase of 4% in constant
currency. Foreign currency exchange rates negatively impacted third
quarter 2015 reported revenue by $4.7 million.
Third quarter 2015 revenue of Tornier's extremities product
categories totaled $66.1 million compared to $65.8 million during
the prior year period, an increase of 0.5% as reported and an
increase of 5% in constant currency.
- Revenue from the upper extremities joints and trauma category
was $52.6 million, an increase of 13% in constant currency over the
same quarter in 2014. Growth was led by the Aequalis Ascend® family
of shoulder joint replacement products, which continued to gain
global surgeon acceptance. The consistent performance of the
Tornier upper extremity joints and trauma category demonstrates the
success of the company's strategy to deliver superior products with
a differentiated sales force.
- Revenue from Tornier's lower extremity joints and trauma
category in the third quarter of 2015 was $10.9 million, a decrease
of 18% in constant currency. As anticipated, distractions from the
merger with Wright impacted Tornier’s lower extremities
business.
- Revenue from Tornier’s sports medicine and biologics product
category was $2.7 million in the third quarter of 2015, a decrease
of 4% in constant currency over the same quarter in 2014,
reflecting a decline in Tornier’s soft tissue anchor and biologics
products.
Tornier’s third quarter 2015 adjusted EBITDA, as defined in the
GAAP to non-GAAP reconciliation provided later in this release, was
$6.1 million, or 8.1% of reported revenue, compared to $4.0
million, or 5.3% of reported revenue, in the same quarter of the
prior year.
Palmisano further commented, “Tornier’s third quarter
performance highlights the strong momentum in its legacy upper
extremities business, driven by an innovative product portfolio and
clinically superior sales team. Tornier’s U.S. upper
extremity growth of 15% was approximately twice the market rate,
driven by the AEQUALIS ASCEND FLEX shoulder system and the
U.S. launch of the SIMPLICITI shoulder system, which is now in full
market release. As expected, the legacy Tornier lower
extremities business experienced distractions related to our
merger. However, with the merger now closed, we can focus on
leveraging the strengths of both companies and believe we have a
very attractive combination of products and people to drive
long-term growth and profitability for the combined business.”
Outlook
The company today provided its pro forma full-year 2015 guidance
for Wright Medical Group N.V., which includes anticipated financial
results for both the legacy Wright and Tornier businesses giving
effect to the merger as if it had occurred on the first day of each
fiscal year. This combined guidance includes the impact of
conforming the combined company’s fiscal calendars; the full-year
impact of the divestiture of certain Tornier lower extremities
products to Integra LifeSciences; and anticipated revenue
dis-synergies and cost synergies related to the merger for
2015. As a result of conforming the combined company’s fiscal
calendars, the legacy Wright business will have four fewer selling
days in the fourth quarter of 2015.
The company anticipates pro forma net sales for 2015 of
approximately $636 million to $642 million.
The company anticipates 2015 pro forma adjusted EBITDA from
continuing operations, as described in the GAAP to non-GAAP
reconciliation provided later in this release, of negative $(13.0)
million to negative $(17.0) million.
Underlying this guidance is the assumption that prior to the
impact of conforming the combined company’s fiscal calendars and
the impact of anticipated revenue dis-synergies, the legacy Wright
U.S. foot and ankle business will continue to grow in the high
teens, the legacy Tornier U.S. upper extremity business will
continue to grow in the mid-teens, and the legacy Wright
international business growth rates will continue to accelerate, in
each case on a constant currency basis compared to fourth quarter
of 2014.
The company estimates approximately 103.7 million ordinary
shares outstanding for the fourth quarter of 2015.
The company continues to anticipate sales dis-synergies in the
first 12 to 18 months following the close of the merger to be in
the range of $25 million to $30 million and cost synergies in the
range of $40 million to $45 million to be fully realized by the
third year after completion of the merger. Expense synergy
opportunities include: public company expenses, overlapping support
function and systems costs, as well as process and vendor
consolidation opportunities across the business.
The company's pro forma adjusted EBITDA from continuing
operations target excludes possible future acquisitions; other
material future business developments; non-cash interest expense
associated with the 2017 and 2020 Convertible Notes; due diligence,
transaction and transition costs associated with acquisitions and
divestitures; impairment charges, mark-to-market adjustments to the
CVRs and non-cash mark-to-market derivative adjustments; charges
associated with the February 2015 refinancing of its convertible
debt; and the instrument use tax refund. Further, this
adjusted EBITDA target excludes any expenses, earnings or losses
related to Wright’s divested OrthoRecon business and Tornier’s
divested foot and ankle products.
The company's anticipated ranges for pro forma net sales and
adjusted EBITDA from continuing operations are forward-looking
statements, as are any other statements that anticipate or aspire
to future events or performance. They are subject to various
risks and uncertainties that could cause the company's actual
results to differ materially from the anticipated targets.
The anticipated targets are not predictions of the company's actual
performance. See the cautionary information about
forward-looking statements in the “Safe-Harbor Statement” section
of this press release. In addition, while pro forma data gives
effect to the merger as if it had occurred on the first day of each
fiscal year and enhances comparability of financial information
between periods, pro forma data is not indicative of the results
that actually would have been obtained if the merger had occurred
as of the beginning of the fiscal year.
Supplemental Financial Information
To view the third quarter of 2015 supplemental financial
information, visit ir.wright.com. For updated information on
Wright Medical Group N.V. revenue reporting changes and
preliminary, combined non-GAAP pro forma historical financials,
including third quarter of 2015, please refer to the presentation
posted on Wright’s website at ir.wright.com in the “Financial
Information” section.
Internet Posting of Information
Wright routinely posts information that may be important to
investors in the “Investor Relations” section of its website at
www.wright.com. The company encourages investors and
potential investors to consult Wright website regularly for
important information about Wright.
Conference Call and Webcast
As previously announced, Wright will host a conference call
starting at 3:30 p.m. Central Time today. The live dial-in
number for the call is 866-318-8617 (U.S.) / 617-399-5136
(International). The participant passcode for the call is
“Wright.” A simultaneous webcast of the call will be
available via Wright’s corporate website at www.wright.com.
A replay of the conference call by telephone will be available
starting at 5:30 p.m. Central Time today and continuing through
November 11, 2015. To hear this replay, dial 888-286-8010
(U.S.) or 617-801-6888 (International) and enter the passcode
88327442. A replay of the conference call will also be
available via the internet starting today and continuing for at
least 12 months. To access a replay of the conference call
via the internet, go to the “Investor Relations -
Presentations/Calendar” section of the company's website located at
www.wright.com.
The conference call may include a discussion of non-GAAP
financial measures. Reference is made to the most directly
comparable GAAP financial measures, the reconciliation of the
differences between the two financial measures, and the other
information included in this press release, the Current Report on
Form 8-K filed with the SEC today, or otherwise available in the
“Investor Relations - Supplemental Financial Information” section
of the company's website located at www.wright.com.
The conference call may include forward-looking
statements. See the cautionary information about
forward-looking statements in the “Cautionary Note Regarding
Forward-Looking Statements” section of this press release.
About Wright
Wright Medical Group N.V. is a global medical device company
focused on Extremities and Biologics. The company is
committed to delivering innovative, value-added solutions improving
quality of life for patients worldwide and is a recognized leader
of surgical solutions for the upper extremity (shoulder, elbow,
wrist and hand), lower extremity (foot and ankle) and biologics
markets, three of the fastest growing segments in
orthopedics. For more information about Wright, visit
www.wright.com.
Wright®, INFINITY®, Augment®, Tornier®, Aequalis®, Aequalis
Ascend®, Aequalis Ascend® Flex™, and Simpliciti® are trademarks of
Wright Medical Group 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.
Non-GAAP Financial Measures
To supplement the company’s consolidated financial statements
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), the company 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 press release. Wright’s non-GAAP financial measures, include
net sales, excluding the impact of foreign currency; operating
income, as adjusted; net income, as adjusted; EBITDA, as adjusted;
net income, as adjusted, per diluted share; effective tax rate, as
adjusted; and free cash flow. Tornier’s non-GAAP financial measures
include revenues on a constant currency basis; EBITDA; adjusted
EBITDA; adjusted EBITDA margin; adjusted net loss; adjusted net
loss per share; adjusted free cash flow; adjusted gross margin;
adjusted gross margin percentage; adjusted operating expenses; and
adjusted operating expenses as a percentage of revenue. In
addition, the company uses pro forma net sales and pro forma
adjusted EBITDA as non-GAAP financial measures in its financial
guidance for 2015. The company's management believes that the
presentation of these measures provides useful information to
investors. These measures may assist investors in evaluating
the company's operations, period over period. Wright’s
non-GAAP financial measures exclude such items as costs associated
with distributor conversions and non-competes, non-cash interest
expense related to the company's 2017 Convertible Notes and 2020
Convertible Notes, write-off of the pro rata unamortized deferred
financing costs and debt discount associated with the 2017
Convertible Notes, net gains and losses on mark-to-market
adjustments on and settlements of derivative assets and
liabilities, mark-to-market adjustments on CVRs, transaction and
transition costs, all of which may be highly variable, difficult to
predict and of a size that could have substantial impact on the
company's reported results of operations for a period.
Tornier’s non-GAAP financial measures exclude such items as
amortization of inventory step-up from acquisition; acquisition,
integration and distribution transition costs; reversal of
contingent consideration liability; instrument use tax refund;
restructuring charges; merger-related costs; and reversal of
valuation allowance from acquisition, all of which may be highly
variable, difficult to predict and of a size that could have
substantial impact on the company's reported results of operations
for a period. Management uses these measures internally for
evaluation of the performance of the business, including the
allocation of resources and the evaluation of results relative to
employee performance compensation targets. Investors should
consider these non-GAAP financial measures only as a supplement to,
not as a substitute for or as superior to, measures of financial
performance prepared in accordance with GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This press release includes forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “could,” “may,” “will,”
“believe,” “estimate,” “forecast,” “goal,” “project,” "continue,"
"outlook," “guidance,” "future,” other words of similar meaning and
the use of future dates. Forward-looking statements in this
press release include, but are not limited to, statements about the
company’s anticipated financial results for 2015, including pro
forma net sales and pro forma adjusted EBITDA from continuing
operations; anticipated cost synergies and dis-synergies, the
timing thereof and level of risk of achievement; the company’s
expectations regarding the sales growth of its legacy Wright U.S.
foot and ankle business, legacy Tornier U.S. upper extremity
business, and legacy Wright international business; the benefits of
its recently completed merger with Tornier; and the company’s
anticipated growth opportunities, path to profitability and
adjusted EBITDA margin goal and ability to generate long-term value
for shareholders. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain. Each
forward-looking statement contained in this press release is
subject to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied by such
statement. Applicable risks and uncertainties include, among
others, the failure to integrate the businesses and realize
synergies and cost-savings from the recently completed merger
transaction or delay in realization thereof; operating costs and
business disruption as a result of the transaction, including
adverse effects on employee retention and sales force productivity
and on business relationships with third parties; transaction and
integration costs; actual or contingent liabilities; the adequacy
of the company’s capital resources; the timing of regulatory
approvals and introduction of new products; physician acceptance,
endorsement, and use of new products; failure to achieve the
anticipated benefits from approval of Augment® Bone Graft; the
effect of regulatory actions, changes in and adoption of
reimbursement rates; product liability claims and product recalls;
pending and threatened litigation; risks associated with
international operations and expansion; fluctuations in foreign
currency exchange rates; other business effects, including the
effects of industry, economic or political conditions outside of
the company’s control; reliance on independent distributors and
sales agencies; competitor activities; changes in tax and other
legislation; and the risks identified under the heading “Risk
Factors” in Wright Medical Group, Inc.’s Annual Report on Form
10-K, which was filed with the SEC on February 26, 2015, and
Tornier’s Annual Report on Form 10-K, which was filed with the SEC
on February 24, 2015, as well as both companies’ subsequent
Quarterly Reports on Form 10-Q and other information filed by each
company with the SEC and a Quarterly Report on Form 10-Q for the
quarter ended September 27, 2015 to be filed by Wright with the
SEC. Investors should not place considerable reliance on the
forward-looking statements contained in this press release.
You are encouraged to read Wright’s and Tornier’s filings with the
SEC, available at www.sec.gov, for a discussion of these and other
risks and uncertainties. The forward-looking statements in this
press release speak only as of the date of this release, and Wright
undertakes no obligation to update or revise any of these
statements. Wright’s business is subject to substantial risks
and uncertainties, including those referenced above.
Investors, potential investors, and others should give careful
consideration to these risks and uncertainties.
--Tables Follow--
| |
| Legacy Wright
Medical Group, Inc. |
| Condensed
Consolidated Statements of Operations |
| (in thousands, except
per share data--unaudited) |
|
|
| |
Three
Months Ended |
|
Nine Months
Ended |
| |
|
September
30, 2015 |
|
|
|
September
30, 2014 |
|
|
|
September
30, 2015 |
|
|
|
September
30, 2014 |
|
| Net sales |
$ |
80,139 |
|
|
$ |
71,307 |
|
|
$ |
238,493 |
|
|
$ |
214,733 |
|
| Cost of sales |
23,052 |
|
|
16,703 |
|
|
63,812 |
|
|
54,126 |
|
| Gross profit |
57,087 |
|
|
54,604 |
|
|
174,681 |
|
|
160,607 |
|
| Operating expenses: |
|
|
|
|
|
|
|
| Selling, general and
administrative |
85,997 |
|
|
66,926 |
|
|
250,801 |
|
|
207,629 |
|
| Research and development |
9,570 |
|
|
5,948 |
|
|
24,644 |
|
|
18,603 |
|
| Amortization of intangible
assets |
2,562 |
|
|
2,379 |
|
|
7,741 |
|
|
7,241 |
|
| Total operating expenses |
98,129 |
|
|
75,253 |
|
|
283,186 |
|
|
233,473 |
|
| Operating loss |
(41,042 |
) |
|
(20,649 |
) |
|
(108,505 |
) |
|
(72,866 |
) |
| Interest expense, net |
11,185 |
|
|
4,565 |
|
|
29,793 |
|
|
12,873 |
|
| Other (income) expense, net |
10,236 |
|
|
21,430 |
|
|
7,395 |
|
|
54,986 |
|
| Loss from continuing operations
before income taxes |
(62,463 |
) |
|
(46,644 |
) |
|
(145,693 |
) |
|
(140,725 |
) |
| Provision (benefit) for income taxes |
187 |
|
|
3,003 |
|
|
511 |
|
|
(7,197 |
) |
| Net loss from continuing
operations |
$ |
(62,650 |
) |
|
$ |
(49,647 |
) |
|
$ |
(146,204 |
) |
|
$ |
(133,528 |
) |
| Loss from discontinued operations, net of
tax |
(36,211 |
) |
|
(12,160 |
) |
|
(46,720 |
) |
|
(14,925 |
) |
| Net loss |
$ |
(98,861 |
) |
|
$ |
(61,807 |
) |
|
$ |
(192,924 |
) |
|
$ |
(148,453 |
) |
| |
|
|
|
|
|
|
|
| Net loss from continuing operations per share,
basic |
$ |
(1.22 |
) |
|
$ |
(0.99 |
) |
|
$ |
(2.86 |
) |
|
$ |
(2.70 |
) |
| Net loss from continuing operations per share,
diluted |
$ |
(1.22 |
) |
|
$ |
(0.99 |
) |
|
$ |
(2.86 |
) |
|
$ |
(2.70 |
) |
| |
|
|
|
|
|
|
|
| Net loss per share, basic |
$ |
(1.93 |
) |
|
$ |
(1.24 |
) |
|
$ |
(3.78 |
) |
|
$ |
(3.00 |
) |
| Net loss per share, diluted |
$ |
(1.93 |
) |
|
$ |
(1.24 |
) |
|
$ |
(3.78 |
) |
|
$ |
(3.00 |
) |
| |
|
|
|
|
|
|
|
| Weighted-average number of shares
outstanding-basic |
51,172 |
|
|
50,043 |
|
|
51,033 |
|
|
49,441 |
|
| Weighted-average number of shares
outstanding-diluted |
51,172 |
|
|
50,043 |
|
|
51,033 |
|
|
49,441 |
|
| Legacy Wright
Medical Group, Inc. |
| Consolidated
Sales Analysis |
| (dollars in
thousands--unaudited) |
|
|
| |
Three Months Ended |
|
Nine Months Ended |
| |
September 30,2015 |
|
September 30,2014 |
|
%change |
|
September 30,2015 |
|
September 30,2014 |
|
%change |
| U.S. |
|
|
|
|
|
|
|
|
|
|
|
| Foot and Ankle |
43,929 |
|
|
35,560 |
|
|
23.5 |
% |
|
128,277 |
|
|
102,599 |
|
|
25.0 |
% |
| Upper Extremity |
3,654 |
|
|
4,016 |
|
|
(9.0 |
%) |
|
11,703 |
|
|
11,420 |
|
|
2.5 |
% |
| Biologics |
12,198 |
|
|
11,162 |
|
|
9.3 |
% |
|
34,612 |
|
|
33,376 |
|
|
3.7 |
% |
| Other |
613 |
|
|
559 |
|
|
9.7 |
% |
|
1,558 |
|
|
2,196 |
|
|
(29.1 |
%) |
| Total U.S. |
$ |
60,394 |
|
|
$ |
51,297 |
|
|
17.7 |
% |
|
$ |
176,150 |
|
|
$ |
149,591 |
|
|
17.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| International |
|
|
|
|
|
|
|
|
|
|
|
| Foot and Ankle |
10,917 |
|
|
10,068 |
|
|
8.4 |
% |
|
35,313 |
|
|
35,882 |
|
|
(1.6 |
%) |
| Upper Extremity |
1,764 |
|
|
2,351 |
|
|
(25.0 |
%) |
|
5,723 |
|
|
8,875 |
|
|
(35.5 |
%) |
| Biologics |
5,260 |
|
|
5,860 |
|
|
(10.2 |
%) |
|
15,070 |
|
|
15,437 |
|
|
(2.4 |
%) |
| Other |
1,804 |
|
|
1,731 |
|
|
4.2 |
% |
|
6,237 |
|
|
4,948 |
|
|
26.1 |
% |
| Total International |
$ |
19,745 |
|
|
$ |
20,010 |
|
|
(1.3 |
%) |
|
$ |
62,343 |
|
|
$ |
65,142 |
|
|
(4.3 |
%) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Global |
|
|
|
|
|
|
|
|
|
|
|
| Foot and Ankle |
54,846 |
|
|
45,628 |
|
|
20.2 |
% |
|
163,590 |
|
|
138,481 |
|
|
18.1 |
% |
| Upper Extremity |
5,418 |
|
|
6,367 |
|
|
(14.9 |
%) |
|
17,426 |
|
|
20,295 |
|
|
(14.1 |
%) |
| Biologics |
17,458 |
|
|
17,022 |
|
|
2.6 |
% |
|
49,682 |
|
|
48,813 |
|
|
1.8 |
% |
| Other |
2,417 |
|
|
2,290 |
|
|
5.5 |
% |
|
7,795 |
|
|
7,144 |
|
|
9.1 |
% |
| Total Sales |
$ |
80,139 |
|
|
$ |
71,307 |
|
|
12.4 |
% |
|
$ |
238,493 |
|
|
$ |
214,733 |
|
|
11.1 |
% |
| Legacy Wright
Medical Group, Inc. |
| Supplemental
Sales Information |
| (unaudited) |
|
|
| |
Third Quarter 2015 Sales
Growth/(Decline) |
| |
DomesticAsReported |
Int'lConstantCurrency |
Int'lAsReported |
TotalConstantCurrency |
TotalAsReported |
| Product
Line |
|
|
|
|
|
| Foot and Ankle |
|
24 |
% |
|
23 |
% |
|
8 |
% |
|
23 |
% |
|
20 |
% |
| Upper Extremity |
|
(9 |
%) |
|
(14 |
%) |
|
(25 |
%) |
|
(11 |
%) |
|
(15 |
%) |
| Biologics |
|
9 |
% |
|
1 |
% |
|
(10 |
%) |
|
6 |
% |
|
3 |
% |
| Other |
|
10 |
% |
|
20 |
% |
|
4 |
% |
|
18 |
% |
|
6 |
% |
| Total Sales |
|
18 |
% |
|
12 |
% |
|
(1 |
%) |
|
16 |
% |
|
12 |
% |
| Legacy Wright
Medical Group, Inc. |
| Supplemental
Sales Information |
| (unaudited) |
|
|
| |
Nine Months Ended September 30, 2015 Sales
Growth/(Decline) |
| |
DomesticAsReported |
Int'lConstantCurrency |
Int'lAsReported |
TotalConstantCurrency |
TotalAsReported |
| Product
Line |
|
|
|
|
|
| Foot and Ankle |
|
25 |
% |
|
12 |
% |
|
(2 |
%) |
|
22 |
% |
|
18 |
% |
| Upper Extremity |
|
2 |
% |
|
(26 |
%) |
|
(36 |
%) |
|
(10 |
%) |
|
(14 |
%) |
| Biologics |
|
4 |
% |
|
8 |
% |
|
(2 |
%) |
|
5 |
% |
|
2 |
% |
| Other |
|
(29 |
%) |
|
48 |
% |
|
26 |
% |
|
25 |
% |
|
9 |
% |
| Total Sales |
|
18 |
% |
|
9 |
% |
|
(4 |
%) |
|
15 |
% |
|
11 |
% |
| Legacy Wright
Medical Group, Inc. |
| Reconciliation
of Net Sales to Net Sales Excluding the Impact of Foreign
Currency |
| (dollars in
thousands--unaudited) |
|
|
| |
Three Months Ended |
|
Nine Months Ended |
| |
September 30, 2015 |
|
September 30, 2015 |
| |
InternationalNet Sales |
|
TotalNet Sales |
|
InternationalNet Sales |
|
TotalNet Sales |
| Net sales, as reported |
$ |
19,745 |
|
|
$ |
80,139 |
|
|
$ |
62,343 |
|
|
$ |
238,493 |
|
| Currency impact as compared to prior period |
2,656 |
|
|
2,656 |
|
|
8,394 |
|
|
8,394 |
|
| Net sales, excluding the impact of
foreign currency |
$ |
22,401 |
|
|
$ |
82,795 |
|
|
$ |
70,737 |
|
|
$ |
246,887 |
|
| Legacy Wright
Medical Group, Inc. |
| Reconciliation
of As Reported Results to Non-GAAP Financial Measures |
| (in
thousands--unaudited) |
|
|
| |
Three Months Ended |
|
Nine Months Ended |
| |
September 30,2015 |
|
September30,2014 |
|
September 30,2015 |
|
September 30,2014 |
| Operating Loss |
|
|
|
|
|
|
|
| Operating loss, as
reported |
$ |
(41,042 |
) |
|
$ |
(20,649 |
) |
|
$ |
(108,505 |
) |
|
$ |
(72,866 |
) |
| Reconciling items impacting Gross
Profit: |
|
|
|
|
|
|
|
| Inventory step-up amortization |
20 |
|
|
302 |
|
|
69 |
|
|
1,521 |
|
| Transaction and transition
costs |
2,423 |
|
|
— |
|
|
2,423 |
|
|
— |
|
| Total |
2,443 |
|
|
302 |
|
|
2,492 |
|
|
1,521 |
|
| Reconciling items impacting
Selling, General and Administrative expense: |
|
|
|
|
|
|
|
| Distributor conversions |
— |
|
|
16 |
|
|
— |
|
|
172 |
|
| Due diligence, transaction and
transition costs |
17,464 |
|
|
2,740 |
|
|
40,617 |
|
|
16,030 |
|
| Patent dispute settlement |
— |
|
|
900 |
|
|
— |
|
|
900 |
|
| Management changes (1) |
— |
|
|
1,203 |
|
|
— |
|
|
1,203 |
|
| Total |
17,464 |
|
|
4,859 |
|
|
40,617 |
|
|
18,305 |
|
| Reconciling items impacting
Amortization of Intangible Assets: |
|
|
|
|
|
|
|
| Amortization of distributor
non-competes |
16 |
|
|
462 |
|
|
65 |
|
|
1,526 |
|
| |
|
|
|
|
|
|
|
| Operating loss, as adjusted |
$ |
(21,119 |
) |
|
$ |
(15,026 |
) |
|
$ |
(65,331 |
) |
|
$ |
(51,514 |
) |
| Operating loss, as adjusted, as a
percentage of net sales |
(26.4 |
)% |
|
(21.1 |
)% |
|
(27.4 |
)% |
|
(24.0 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) For the three and nine months
ended September 30, 2014, amount includes $0.3 million of non-cash
stock-based compensation expense related to the management
changes. |
| Legacy Wright
Medical Group, Inc. |
| Reconciliation
of As Reported Results to Non-GAAP Financial Measures |
| (in
thousands--unaudited) |
|
|
| |
Three Months Ended |
|
Nine Months Ended |
| |
September 30,2015 |
|
September 30,2014 |
|
September 30,2015 |
|
September 30,2014 |
| EBITDA |
|
|
|
|
|
|
|
| Net loss from continuing
operations, as reported |
$ |
(62,650 |
) |
|
$ |
(49,647 |
) |
|
$ |
(146,204 |
) |
|
$ |
(133,528 |
) |
| Interest expense, net |
11,185 |
|
|
4,565 |
|
|
29,793 |
|
|
12,873 |
|
| Provision (benefit) for income
taxes |
187 |
|
|
3,003 |
|
|
511 |
|
|
(7,197 |
) |
| Depreciation |
6,268 |
|
|
4,654 |
|
|
16,966 |
|
|
13,494 |
|
| Amortization of intangible
assets |
2,562 |
|
|
2,379 |
|
|
7,741 |
|
|
7,241 |
|
| EBITDA |
(42,448 |
) |
|
(35,046 |
) |
|
(91,193 |
) |
|
(107,117 |
) |
| Reconciling items impacting
EBITDA |
|
|
|
|
|
|
|
| Non-cash stock-based compensation
expense (1) |
2,025 |
|
|
2,586 |
|
|
7,706 |
|
|
8,685 |
|
| Other expense, net |
10,236 |
|
|
21,430 |
|
|
7,395 |
|
|
54,986 |
|
| Inventory step-up amortization |
20 |
|
|
302 |
|
|
69 |
|
|
1,521 |
|
| Distributor conversions |
— |
|
|
16 |
|
|
— |
|
|
172 |
|
| Due diligence, transaction and
transition costs |
19,887 |
|
|
2,740 |
|
|
43,040 |
|
|
16,030 |
|
| Patent dispute settlement |
— |
|
|
900 |
|
|
— |
|
|
900 |
|
| Management changes |
— |
|
|
1,203 |
|
|
— |
|
|
1,203 |
|
| Adjusted EBITDA |
$ |
(10,280 |
) |
|
$ |
(5,869 |
) |
|
$ |
(32,983 |
) |
|
$ |
(23,620 |
) |
| Adjusted EBITDA as a percentage of net
sales |
(12.8 |
)% |
|
(8.2 |
)% |
|
(13.8 |
)% |
|
(11.0 |
)% |
| |
| (1) For the three and nine months
ended September 30, 2014, amount excludes $0.3 million of non-cash
stock-based compensation expense related to the management changes,
which is included in management changes. |
| Legacy Wright
Medical Group, Inc. |
| Reconciliation
of As Reported Results to Non-GAAP Financial Measures |
| (in thousands, except
per share data--unaudited) |
|
|
| |
Three Months Ended |
|
Nine Months Ended |
| |
September 30,2015 |
|
September 30,2014 |
|
September 30,2015 |
|
September 30,2014 |
| Net Income |
|
|
|
|
|
|
|
| Loss before taxes, as
reported |
$ |
(62,463 |
) |
|
$ |
(46,644 |
) |
|
$ |
(145,693 |
) |
|
$ |
(140,725 |
) |
| Pre-tax impact of reconciling
items: |
|
|
|
|
|
|
|
| Inventory step-up amortization |
20 |
|
|
302 |
|
|
69 |
|
|
1,521 |
|
| Distributor conversion and
non-competes |
16 |
|
|
478 |
|
|
65 |
|
|
1,698 |
|
| Non-cash interest expense on 2017
& 2020 Convertible Notes |
6,767 |
|
|
2,333 |
|
|
17,857 |
|
|
6,886 |
|
| Write-off of unamortized debt
discount and deferred financing fees |
(100 |
) |
|
— |
|
|
25,101 |
|
|
— |
|
| Derivatives mark-to-market
adjustment |
(4,652 |
) |
|
1,000 |
|
|
(12,021 |
) |
|
2,000 |
|
| Due diligence, transaction and
transition costs |
19,887 |
|
|
2,740 |
|
|
43,040 |
|
|
16,030 |
|
| Patent dispute settlement |
— |
|
|
900 |
|
|
— |
|
|
900 |
|
| Management changes (1) |
— |
|
|
1,203 |
|
|
— |
|
|
1,203 |
|
| CVR mark-to-market adjustments |
14,569 |
|
|
18,499 |
|
|
(7,350 |
) |
|
51,293 |
|
| Contingent consideration fair value
adjustment |
— |
|
|
1,750 |
|
|
155 |
|
|
1,750 |
|
| Loss before taxes, as
adjusted |
(25,956 |
) |
|
(17,439 |
) |
|
(78,777 |
) |
|
(57,444 |
) |
| Provision (benefit) for income taxes, as
reported |
$ |
187 |
|
|
$ |
3,003 |
|
|
$ |
511 |
|
|
$ |
(7,197 |
) |
| U.S. tax impact resulting from gain
in discontinued operations |
— |
|
|
(2,776 |
) |
|
— |
|
|
7,940 |
|
| Tax effect of reconciling
items |
— |
|
|
— |
|
|
27 |
|
|
— |
|
| Provision (benefit) for income taxes, as
adjusted |
$ |
187 |
|
|
$ |
227 |
|
|
$ |
538 |
|
|
$ |
743 |
|
| Effective tax rate, as
adjusted |
(0.7 |
)% |
|
(1.3 |
)% |
|
(0.7 |
)% |
|
(1.3 |
)% |
| Net loss from continuing operations, as
adjusted |
$ |
(26,143 |
) |
|
$ |
(17,666 |
) |
|
$ |
(79,315 |
) |
|
$ |
(58,187 |
) |
| |
|
|
|
|
|
|
|
| Weighted-average number of shares
outstanding-diluted |
51,172 |
|
|
50,043 |
|
|
51,033 |
|
|
49,441 |
|
| Net loss from continuing operations, as
adjusted, per diluted share |
$ |
(0.51 |
) |
|
$ |
(0.35 |
) |
|
$ |
(1.55 |
) |
|
$ |
(1.18 |
) |
| |
| (1) For the three and nine months
ended September 30, 2014, amount includes $0.3 million of non-cash
stock-based compensation expense related to the management
changes. |
| Legacy Wright
Medical Group, Inc. |
| Reconciliation
of Free Cash Flow |
| (dollars in
thousands--unaudited) |
|
|
| |
Three Months Ended |
|
Nine Months Ended |
| |
September 30,2015 |
September 30,2014 |
|
September 30,2015 |
September 30,2014 |
| Net cash used in operating activities |
$ |
(90,839 |
) |
$ |
(34,562 |
) |
|
$ |
(141,839 |
) |
$ |
(86,152 |
) |
| Capital expenditures |
(8,259 |
) |
(11,422 |
) |
|
(34,013 |
) |
(35,706 |
) |
| Free cash flow |
$ |
(99,098 |
) |
$ |
(45,984 |
) |
|
$ |
(175,852 |
) |
$ |
(121,858 |
) |
| Legacy Wright
Medical Group, Inc. |
| Segment
Information |
| (in
thousands--unaudited) |
|
|
| |
Three Months Ended September 30,
2015 |
| |
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
| Sales |
$ |
60,394 |
|
$ |
19,745 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
80,139 |
|
| Gross profit |
46,874 |
|
12,673 |
|
— |
|
(17 |
) |
(2,443 |
) |
57,087 |
|
| Operating income (loss) |
2,219 |
|
(2,627 |
) |
(3,952 |
) |
(16,759 |
) |
(19,923 |
) |
(41,042 |
) |
| Operating income (loss) as a percent of net
sales |
3.7 |
% |
(13.3 |
%) |
N/A |
|
N/A |
|
N/A |
|
(51.2 |
%) |
| |
|
|
|
|
|
|
| Depreciation Expense |
3,500 |
|
827 |
|
46 |
|
1,895 |
|
— |
|
6,268 |
|
| Amortization Expense |
2,025 |
|
469 |
|
52 |
|
— |
|
16 |
|
2,562 |
|
| Non-cash stock-based compensation expense |
— |
|
— |
|
— |
|
2,025 |
|
— |
|
2,025 |
|
| Other |
— |
|
— |
|
— |
|
— |
|
19,907 |
|
19,907 |
|
| Adjusted EBITDA |
7,744 |
|
(1,331 |
) |
(3,854 |
) |
(12,839 |
) |
— |
|
(10,280 |
) |
| |
| (1) Other consists exclusively
of the reconciling items from Operating Income, as reported, to
Operating Income, as adjusted, as included in the
reconciliations above. |
| |
Three Months Ended September 30,
2014 |
| |
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
| Sales |
$ |
51,297 |
|
$ |
20,010 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
71,307 |
|
| Gross profit |
42,939 |
|
12,010 |
|
— |
|
(43 |
) |
(302 |
) |
54,604 |
|
| Operating income (loss) |
6,448 |
|
(3,213 |
) |
(2,601 |
) |
(15,660 |
) |
(5,623 |
) |
(20,649 |
) |
| Operating income (loss) as a percent of net
sales |
12.6 |
% |
(16.1 |
%) |
N/A |
|
N/A |
|
N/A |
|
(29.0 |
%) |
| |
|
|
|
|
|
|
| Depreciation Expense |
2,414 |
|
841 |
|
108 |
|
1,291 |
|
— |
|
4,654 |
|
| Amortization Expense |
1,293 |
|
547 |
|
77 |
|
— |
|
462 |
|
2,379 |
|
| Non-cash stock-based compensation expense |
— |
|
— |
|
— |
|
2,586 |
|
— |
|
2,586 |
|
| Other |
— |
|
— |
|
— |
|
— |
|
5,161 |
|
5,161 |
|
| Adjusted EBITDA |
10,155 |
|
(1,825 |
) |
(2,416 |
) |
(11,783 |
) |
— |
|
(5,869 |
) |
| |
| (1) Other consists exclusively
of the reconciling items from Operating Income, as reported, to
Operating Income, as adjusted, as included in the
reconciliations above. |
| Legacy Wright
Medical Group, Inc. |
| Segment
Information |
| (in
thousands--unaudited) |
|
|
| |
Nine Months Ended September 30,
2015 |
| |
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
| Sales |
$ |
176,150 |
|
$ |
62,343 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
238,493 |
|
| Gross profit |
138,850 |
|
38,351 |
|
— |
|
(28 |
) |
(2,492 |
) |
174,681 |
|
| Operating income (loss) |
8,021 |
|
(8,658 |
) |
(11,051 |
) |
(53,643 |
) |
(43,174 |
) |
(108,505 |
) |
| Operating income (loss) as a percent of net
sales |
4.6 |
% |
(13.9 |
%) |
N/A |
|
N/A |
|
N/A |
|
(45.5 |
%) |
| |
|
|
|
|
|
|
| Depreciation Expense |
9,693 |
|
2,330 |
|
127 |
|
4,816 |
|
— |
|
16,966 |
|
| Amortization Expense |
6,132 |
|
1,402 |
|
142 |
|
— |
|
65 |
|
7,741 |
|
| Non-cash stock-based compensation expense |
— |
|
— |
|
— |
|
7,706 |
|
— |
|
7,706 |
|
| Other |
— |
|
— |
|
— |
|
— |
|
43,109 |
|
43,109 |
|
| Adjusted EBITDA |
23,846 |
|
(4,926 |
) |
(10,782 |
) |
(41,121 |
) |
— |
|
(32,983 |
) |
| |
| (1) Other consists exclusively
of the reconciling items from Operating Income, as reported, to
Operating Income, as adjusted, as included in the
reconciliations above. |
| |
Nine Months Ended September 30,
2014 |
| |
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
| Sales |
$ |
149,591 |
|
$ |
65,142 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
214,733 |
|
| Gross profit |
120,717 |
|
41,642 |
|
— |
|
(231 |
) |
(1,521 |
) |
160,607 |
|
| Operating income (loss) |
12,914 |
|
(2,385 |
) |
(9,385 |
) |
(52,658 |
) |
(21,352 |
) |
(72,866 |
) |
| Operating income (loss) as a percent of net
sales |
8.6 |
% |
(3.7 |
%) |
N/A |
|
N/A |
|
N/A |
|
(33.9 |
%) |
| |
|
|
|
|
|
|
| Depreciation Expense |
7,093 |
|
2,246 |
|
324 |
|
3,831 |
|
— |
|
13,494 |
|
| Amortization Expense |
3,820 |
|
1,663 |
|
231 |
|
1 |
|
1,526 |
|
7,241 |
|
| Non-cash stock-based compensation expense |
— |
|
— |
|
— |
|
8,685 |
|
— |
|
8,685 |
|
| Other |
— |
|
— |
|
— |
|
— |
|
19,826 |
|
19,826 |
|
| Adjusted EBITDA |
23,827 |
|
1,524 |
|
(8,830 |
) |
(40,141 |
) |
— |
|
(23,620 |
) |
| |
| (1) Other consists exclusively
of the reconciling items from Operating Income, as reported, to
Operating Income, as adjusted, as included in the
reconciliations above. |
| Legacy Wright
Medical Group, Inc. |
| Condensed
Consolidated Balance Sheets |
| (dollars in
thousands--unaudited) |
| |
| |
September 30,2015 |
|
December 31,2014 |
| Assets |
|
|
|
| Current assets: |
|
|
|
| Cash and cash equivalents |
$ |
254,435 |
|
|
$ |
227,326 |
|
| Marketable securities |
— |
|
|
2,575 |
|
| Accounts receivable, net |
51,713 |
|
|
57,190 |
|
| Inventories |
111,064 |
|
|
88,412 |
|
| Prepaid expenses and other current
assets |
44,663 |
|
|
64,953 |
|
| Total current assets |
461,875 |
|
|
440,456 |
|
| |
|
|
|
| Property, plant and equipment, net |
122,450 |
|
|
104,235 |
|
| Goodwill and intangible assets, net |
258,876 |
|
|
259,991 |
|
| Other assets |
122,334 |
|
|
87,994 |
|
| Total assets |
$ |
965,535 |
|
|
$ |
892,676 |
|
| |
|
|
|
| Liabilities and stockholders'
equity |
|
|
|
| Current liabilities: |
|
|
|
| Accounts payable |
$ |
18,261 |
|
|
$ |
16,729 |
|
| Accrued expenses and other current
liabilities |
79,345 |
|
|
170,204 |
|
| Current portion of long-term
obligations |
784 |
|
|
718 |
|
| Total current liabilities |
98,390 |
|
|
187,651 |
|
| Long-term obligations |
565,556 |
|
|
280,612 |
|
| Other liabilities |
187,618 |
|
|
145,610 |
|
| Total liabilities |
851,564 |
|
|
613,873 |
|
| |
|
|
|
| Stockholders' equity |
113,971 |
|
|
278,803 |
|
| Total liabilities and stockholders'
equity |
$ |
965,535 |
|
|
$ |
892,676 |
|
| 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 sold |
16,427 |
|
|
17,853 |
|
|
55,100 |
|
|
61,124 |
|
| Cost of goods sold - acquisition
related |
— |
|
|
157 |
|
|
— |
|
|
577 |
|
| Gross profit |
58,517 |
|
|
58,665 |
|
|
191,157 |
|
|
190,849 |
|
| |
78.1 |
% |
|
76.5 |
% |
|
77.6 |
% |
|
75.6 |
% |
| Operating expenses: |
|
|
|
|
|
|
|
| Selling, general and
administrative |
55,416 |
|
|
57,127 |
|
|
174,622 |
|
|
178,479 |
|
| Research and development |
4,972 |
|
|
6,055 |
|
|
16,783 |
|
|
17,845 |
|
| Amortization of intangible
assets |
4,004 |
|
|
4,274 |
|
|
12,051 |
|
|
12,928 |
|
| Special charges |
2,657 |
|
|
(4,366 |
) |
|
6,860 |
|
|
(994 |
) |
| Total operating expenses |
67,049 |
|
|
63,090 |
|
|
210,316 |
|
|
208,258 |
|
| Operating (loss) income |
(8,532 |
) |
|
(4,425 |
) |
|
(19,159 |
) |
|
(17,409 |
) |
| Other (income) expense |
|
|
|
|
|
|
|
| Interest income |
64 |
|
|
18 |
|
|
82 |
|
|
126 |
|
| Interest expense |
(1,419 |
) |
|
(1,250 |
) |
|
(4,171 |
) |
|
(3,964 |
) |
| Foreign currency transaction
loss |
(315 |
) |
|
(152 |
) |
|
(410 |
) |
|
(195 |
) |
| Other non-operating income |
60 |
|
|
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 diluted |
49,279 |
|
|
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
trauma |
10,851 |
|
|
13,814 |
|
|
(21.4 |
%) |
|
36,756 |
|
|
43,356 |
|
|
(15.2 |
%) |
| Sports medicine and biologics |
2,680 |
|
|
3,009 |
|
|
(10.9 |
%) |
|
9,406 |
|
|
10,549 |
|
|
(10.8 |
%) |
| Total extremities |
66,113 |
|
|
65,786 |
|
|
0.5 |
% |
|
212,704 |
|
|
209,750 |
|
|
1.4 |
% |
| Large joints and other |
8,831 |
|
|
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 |
% |
| International |
26,106 |
|
|
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 asreported |
|
Foreignexchangeimpact ascompared toprior period |
|
Revenue on aconstantcurrency basis |
|
Revenue asreported |
|
Percentchange ona constantcurrencybasis |
| Revenue by product category |
|
|
|
|
|
|
|
|
|
| Upper extremity joints and
trauma |
52,582 |
|
|
2,611 |
|
|
55,193 |
|
|
48,963 |
|
|
12.7 |
% |
| Lower extremity joints and
trauma |
10,851 |
|
|
432 |
|
|
11,283 |
|
|
13,814 |
|
|
(18.3 |
)% |
| Sports medicine and biologics |
2,680 |
|
|
199 |
|
|
2,879 |
|
|
3,009 |
|
|
(4.3 |
)% |
| Total extremities |
66,113 |
|
|
3,242 |
|
|
69,355 |
|
|
65,786 |
|
|
5.4 |
% |
| Large joints and other |
8,831 |
|
|
1,433 |
|
|
10,264 |
|
|
10,889 |
|
|
(5.7 |
)% |
| Total |
74,944 |
|
|
4,675 |
|
|
79,619 |
|
|
76,675 |
|
|
3.8 |
% |
| |
|
|
|
|
|
|
|
|
|
| Revenue by
geography |
|
|
|
|
|
|
|
|
|
| United States |
48,838 |
|
|
— |
|
|
48,838 |
|
|
46,752 |
|
|
4.5 |
% |
| International |
26,106 |
|
|
4,675 |
|
|
30,781 |
|
|
29,923 |
|
|
2.9 |
% |
| Total |
74,944 |
|
|
4,675 |
|
|
79,619 |
|
|
76,675 |
|
|
3.8 |
% |
| |
Nine Months Ended |
|
|
| |
September 27, 2015 |
|
September 28,2014 |
|
Percentchange ona constantcurrencybasis |
| |
Revenue asreported |
|
Foreignexchangeimpact ascompared toprior period |
|
Revenue on aconstantcurrency basis |
|
Revenue asreported |
|
| Revenue by product category |
|
|
|
|
|
|
|
|
|
| Upper extremity joints and
trauma |
166,542 |
|
|
9,412 |
|
|
175,954 |
|
|
155,845 |
|
|
12.9 |
% |
| Lower extremity joints and
trauma |
36,756 |
|
|
1,366 |
|
|
38,122 |
|
|
43,356 |
|
|
(12.1 |
)% |
| Sports medicine and biologics |
9,406 |
|
|
756 |
|
|
10,162 |
|
|
10,549 |
|
|
(3.7 |
)% |
| Total extremities |
212,704 |
|
|
11,534 |
|
|
224,238 |
|
|
209,750 |
|
|
6.9 |
% |
| Large joints and other |
33,553 |
|
|
6,706 |
|
|
40,259 |
|
|
42,800 |
|
|
(5.9 |
)% |
| Total |
246,257 |
|
|
18,240 |
|
|
264,497 |
|
|
252,550 |
|
|
4.7 |
% |
| |
|
|
|
|
|
|
|
|
|
| Revenue by
geography |
|
|
|
|
|
|
|
|
|
| United States |
151,912 |
|
|
— |
|
|
151,912 |
|
|
145,565 |
|
|
4.4 |
% |
| International |
94,345 |
|
|
18,240 |
|
|
112,585 |
|
|
106,985 |
|
|
5.2 |
% |
| Total |
246,257 |
|
|
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 expense |
1,419 |
|
|
1,250 |
|
|
4,171 |
|
|
3,964 |
|
| Income tax expense (benefit) |
652 |
|
|
(477 |
) |
|
1,743 |
|
|
(416 |
) |
| Depreciation |
6,113 |
|
|
6,058 |
|
|
18,498 |
|
|
17,666 |
|
| Amortization |
4,004 |
|
|
4,274 |
|
|
12,051 |
|
|
12,928 |
|
| Subtotal Non-GAAP EBITDA |
1,330 |
|
|
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 compensation |
1,854 |
|
|
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 costs |
2,784 |
|
|
— |
|
|
8,169 |
|
|
— |
|
| Other |
— |
|
|
— |
|
|
— |
|
|
325 |
|
| Non-GAAP
adjusted EBITDA |
$ |
6,096 |
|
|
$ |
4,046 |
|
|
$ |
24,762 |
|
|
$ |
19,637 |
|
| Non-GAAP
adjusted EBITDA margin |
8.1 |
% |
|
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 costs |
2,772 |
|
|
— |
|
|
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 costs |
0.06 |
|
|
— |
|
|
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 diluted |
49,279 |
|
|
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 reported |
78.1 |
% |
|
76.5 |
% |
|
77.6 |
% |
|
75.6 |
% |
| Adjusted for: |
|
|
|
|
|
|
|
| Inventory step-up due to
acquisition |
— |
|
|
157 |
|
|
— |
|
|
577 |
|
| Non-GAAP
adjusted gross margins |
58,517 |
|
|
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 reported |
67,049 |
|
|
63,090 |
|
|
210,316 |
|
|
208,258 |
|
| Operating
expenses as a percentage of revenue, as reported |
89.5 |
% |
|
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
revenue |
80.6 |
% |
|
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, net |
62,303 |
|
|
63,583 |
|
| Inventories |
83,668 |
|
|
88,662 |
|
| Deferred income taxes and other
current assets |
26,902 |
|
|
29,516 |
|
| Total current assets |
202,984 |
|
|
209,701 |
|
| Instruments, net |
59,728 |
|
|
62,888 |
|
| Property, plant and equipment,
net |
42,632 |
|
|
44,662 |
|
| Goodwill and intangible assets,
net |
318,115 |
|
|
339,902 |
|
| Deferred income taxes and other
assets |
1,819 |
|
|
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 payable |
15,306 |
|
|
15,073 |
|
| Accrued liabilities, deferred
income taxes and other current liabilities |
59,046 |
|
|
61,994 |
|
| Total current liabilities |
82,706 |
|
|
84,461 |
|
| Other long-term debt |
77,774 |
|
|
68,105 |
|
| Deferred income taxes and other
long-term liabilities |
25,571 |
|
|
27,119 |
|
| Total liabilities |
186,051 |
|
|
179,685 |
|
| Stockholders' equity |
439,227 |
|
|
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 amortization |
10,117 |
|
|
10,332 |
|
|
30,549 |
|
|
30,594 |
|
| Non-cash foreign currency loss |
325 |
|
|
137 |
|
|
387 |
|
|
176 |
|
| Deferred income taxes |
64 |
|
|
(2,673 |
) |
|
(2,812 |
) |
|
(5,254 |
) |
| Share-based compensation |
1,854 |
|
|
2,348 |
|
|
6,512 |
|
|
6,869 |
|
| Non-cash interest expense and
discount amortization |
297 |
|
|
211 |
|
|
733 |
|
|
565 |
|
| Inventory obsolescence |
3,555 |
|
|
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
earnings |
159 |
|
|
(14 |
) |
|
410 |
|
|
312 |
|
| |
|
|
|
|
|
|
|
| Changes in operating assets and
liabilities |
|
|
|
|
|
|
|
| Accounts receivable |
5,439 |
|
|
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
liabilities |
3,494 |
|
|
634 |
|
|
29 |
|
|
(2,713 |
) |
| Other non-current assets and
liabilities |
418 |
|
|
193 |
|
|
283 |
|
|
689 |
|
| Net cash provided by (used in)
operating activities |
11,299 |
|
|
(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 shares |
235 |
|
|
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
equivalents |
4,228 |
|
|
(5,841 |
) |
|
2,171 |
|
|
(30,854 |
) |
| Cash and cash equivalents at beginning of
period |
25,883 |
|
|
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 ofRange |
|
High-End ofRange |
| Legacy Wright Medical Group year-to-date net
sales |
$ |
238.5 |
|
|
$ |
238.5 |
|
| Estimated Wright Medical Group N.V. fourth
quarter net sales |
161.0 |
|
|
167.0 |
|
| Estimated 2015 Net Sales |
$ |
399.5 |
|
|
$ |
405.5 |
|
| Legacy Tornier N.V. year-to-date net sales |
246.2 |
|
|
246.2 |
|
| Legacy Tornier N.V. sales of divested foot &
ankle products |
|
(9.7 |
) |
|
|
(9.7 |
) |
| Estimated 2015 Pro Forma Net
Sales |
$ |
636 |
|
|
$ |
642 |
|
Investors & Media:
Wright Medical Group N.V.
Julie D. Tracy
Chief Communications Officer
(901) 290-5817 (office)
julie.tracy@wmt.com
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