Tornier Reports Fourth Quarter and Fiscal Year 2013 Results and Provides 2014 Outlook

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| Source: Tornier
  • Phase 1 of U.S. distribution channel transition complete; Phase 2 underway, with focus on sales force optimization and training
  • 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, Feb. 20, 2014 (GLOBE NEWSWIRE) -- 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.

Fourth Quarter 2013 Revenue Highlights

Extremities

  • 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 productswhich 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.

Large Joints

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.

Geographic Revenue

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.  

First Quarter 2014 Outlook

  • 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.

Fiscal Year 2014 Outlook

  • 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.

Conference Call

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.

Forward-Looking Statements

Statements contained in this release that relate to future, not past, events are forward-looking statements under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on current expectations of future events and often can be identified by words such as "expect," "should," "project," "anticipate," "intend," "will," "can," "may," "believe," "could," "should," "continue," "outlook," "guidance," "future," other words of similar meaning or the use of future dates.  Examples of forward-looking statements in this release include Tornier's financial guidance for the first quarter and full year 2014 and the expected timing of the launch of Aequalis Reversed in Japan.   Forward-looking statements by their nature address matters that are, to different degrees, uncertain.  Uncertainties and risks may cause Tornier's actual results to be materially different than those expressed in or implied by Tornier's forward-looking statements.  For Tornier, such uncertainties and risks include, among others, Tornier's future operating results and financial performance; Tornier's reliance on its independent sales agencies and distributors to sell its products and the effect on its business and operating results of agency and distributor changes, transitions to direct selling models in certain geographies and the recent transition of its U.S. sales channel towards focusing separately on upper and lower extremity products; risks associated with Tornier's acquisition of OrthoHelix and subsequent integration activities; fluctuations in foreign currency exchange rates; the effect of global economic conditions; the European sovereign debt crisis and austerity measures; risks associated with Tornier's international operations and expansion; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; the effect of regulatory actions, changes in and adoption of reimbursement rates 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.

About Tornier

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.

Use of Non-GAAP Financial Measures

To supplement Tornier's consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), Tornier uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable U.S. GAAP measures for the respective periods can be found in tables later in this release immediately following the detail of revenue by geography. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for Tornier's financial results prepared in accordance with GAAP.

Tornier N.V.
Consolidated Statements of Operations
(in thousands, except per share data)
         
  Three months ended Year ended
  (unaudited) (unaudited)
  December 29, 2013 December 30, 2012 December 29, 2013 December 30, 2012
Revenue  $ 83,392  $ 79,033  $ 310,959  $ 277,520
Cost of goods sold  20,803  22,435  80,264  76,964
Cost of goods sold - acquisition related  464  4,539  5,908  4,954
Gross profit  62,125  52,059  224,787  195,602
  74.5% 65.9% 72.3% 70.5%
Operating expenses        
Selling, general and administrative  56,451  46,290  206,851  170,447
Research and development  5,997  6,195  22,387  22,524
Amortization of intangible assets  4,288  3,708  15,885  11,721
Special charges  2,729  9,831  3,738  19,244
Total operating expenses  69,465  66,024  248,861  223,936
         
Operating loss  (7,340)  (13,965)  (24,074)  (28,334)
         
Other income (expense)        
Interest income  64  34  245  338
Interest expense  (1,502)  (2,303)  (7,256)  (3,733)
Foreign currency transaction loss  (749)  (278)  (1,820)  (473)
Loss on extinguishment of debt  --   (593)  (1,127)  (593)
Other non-operating (expense) income  (228)  62  (45)  116
         
Loss before income taxes  (9,755)  (17,043)  (34,077)  (32,679)
Income tax (expense) benefit  (944)  12,240  (2,349)  10,935
         
Consolidated net loss  $ (10,699)  $ (4,803)  $ (36,426)  $ (21,744)
         
Net loss per share        
Basic and diluted  $ (0.22)  $ (0.12)  $ (0.79)  $ (0.54)
         
Weighted average ordinary shares outstanding        
Basic and diluted  48,478  41,639  45,826  40,064
 
 
Tornier N.V.
Condensed Consolidated Balance Sheets
(in thousands)
     
  December 29, 2013 December 30, 2012
  (unaudited)  
Assets    
Current assets    
Cash and cash equivalents  $ 56,784  $ 31,108
Accounts receivable, net  55,555  54,192
Inventories  87,011  86,697
Deferred income taxes and other current assets  27,175  25,321
Total current assets  226,525  197,318
     
Instruments, net  63,055  51,394
Property, plant and equipment, net  43,494  37,151
Goodwill and intangibles, net  369,148  366,398
Deferred income taxes and other assets  3,204  1,966
Total assets  $ 705,426  $ 654,227
     
Liabilities and shareholders' equity    
Current liabilities    
Short-term borrowing and current portion of long-term debt  $ 1,438  $ 4,595
Accounts payable  17,326  11,526
Accrued liabilities, deferred income taxes and other current liabilities  57,552  44,505
Total current liabilities  76,316  60,626
     
Other long-term debt  67,643  115,457
Deferred income taxes and other long-term liabilities  35,659  42,065
Total liabilities  179,618  218,148
     
Shareholders' equity  525,808  436,079
     
Total liabilities and shareholders' equity  $ 705,426  $ 654,227
 
 
Tornier N.V.
Consolidated Statements of Cash Flow
(in thousands)
         
  Three months ended Year ended
  (unaudited) (unaudited)
         
  December 29, 2013 December 30, 2012 December 29, 2013 December 30, 2012
Cash flows from operating activities        
Consolidated net loss  $ (10,699)  $ (4,803)  $ (36,426)  $ (21,744)
         
Adjustments to reconcile consolidated net loss to net cash provided by operating activities        
Depreciation and amortization  9,763  8,834  36,566  30,232
Impairment of fixed assets  140  1,013  140  2,041
Lease termination costs  --   --   --   731
Impairment of intangible assets  --   4,737  --   4,737
Non-cash foreign currency loss (gain)   750  (278)  1,829  (495)
Deferred income taxes  1,637  (4,359)  3,566  (4,506)
Tax benefit from reversal of valuation allowance  (1,120)  (10,700)  (1,120)  (10,700)
Share-based compensation  3,547  1,722  8,300  6,830
Non-cash interest expense and discount amortization  213  524  969  524
Inventory obsolescence  2,065  5,258  8,447  8,171
Loss on extinguishment of debt  --   --   1,127  -- 
Lease incentives  --   1,400  --   1,400
Gain from reversal of contingent consideration liability  (193)  --   (5,140)  -- 
Inventory step up from acquisition  464  1,993  5,908  1,993
Other non-cash items affecting earnings  476  (308)  1,095  1,836
          
Changes in operating assets and liabilities        
Accounts receivable  (6,484)  (6,721)  (1,084)  (2,188)
Inventories  (3,344)  417  (9,186)  (3,057)
Accounts payable and accruals  7,110  3,516  7,421  87
Other current assets and liabilities  2,301  (209)  4,704  (1,526)
Other non-current assets and liabilities  35  1,259  (2,134)  65
Net cash provided by operating activities  6,661  3,295  24,982  14,431
         
Cash flows from investing activities        
Acquisition-related cash payments  (5,325)  (100,366)  (13,083)  (104,022)
Additions of instruments  (7,240)  (2,754)  (23,805)  (11,999)
Gain on sale of building  --   1,517  --   1,517
Purchases of property, plant and equipment  (3,307)  (3,405)  (10,825)  (11,291)
Net cash (used in) investing activities  (15,872)  (105,008)  (47,713)  (125,795)
         
Cash flows from financing activities        
Change in short-term debt  --   (17,359)  (1,000)  (8,009)
Repayments of long-term debt  (407)  (20,451)  (54,095)  (28,684)
Proceeds from issuance of long-term debt  1,796  115,873  1,796  121,045
Deferred financing costs  --   (5,396)  (111)  (5,396)
Issuance of ordinary shares  1,580  602  100,433  7,710
Net cash provided by financing activities  2,969  73,269  47,023  86,666
         
Effect of currency exchange rates on cash and cash equivalents  474  1,053  1,384  1,100
         
(Decrease) increase in cash and cash equivalents  (5,768)  (27,391)  25,676  (23,598)
         
Cash and cash equivalents at beginning of period  62,552  58,499  31,108  54,706
         
Cash and cash equivalents at end of period  $ 56,784  $ 31,108  $ 56,784  $ 31,108
 
 
Tornier N.V.
Selected Revenue Information
(in thousands)
             
  Three months ended Year ended
  (unaudited)   (unaudited)  
  December 29,
2013
December 30,
2012
Percent
change
December 29,
2013
December 30,
2012
Percent
change
Revenue by product category            
Upper extremity joints and trauma  $ 48,199  $ 45,808 5.2%  $ 184,457  $ 175,242 5.3%
Lower extremity joints and trauma  16,233  14,776 9.9%  58,747  34,109 72.2%
Sports medicine and biologics  3,701  4,163 -11.1%  14,752  15,526 -5.0%
Total extremities  68,133  64,747 5.2%  257,956  224,877 14.7%
Large joints and other  15,259  14,286 6.8%  53,003  52,643 0.7%
Total  $ 83,392  $ 79,033 5.5%  $ 310,959  $ 277,520 12.0%
             
Revenue by geography            
United States  $ 47,861  $ 46,103 3.8%  $ 182,104  $ 156,750 16.2%
International  35,531  32,930 7.9%  128,855  120,770 6.7%
Total  $ 83,392  $ 79,033 5.5%  $ 310,959  $ 277,520 12.0%
 
 
Tornier N.V.
Reconciliation of Revenue to Non-GAAP Revenue on a Constant Currency Basis
(in thousands)
           
  Three months ended  
  (unaudited)  
  December 29, 2013 December 30, 2012  
  Revenue
as
reported
Foreign exchange
impact as compared
to prior period
Revenue
on a constant
currency basis
Revenue
as
reported
Percent change
on a constant
currency basis
Revenue by product category          
Upper extremity joints and trauma  $ 48,199  $ (238)  $ 47,961  $ 45,808 4.7%
Lower extremity joints and trauma  16,233  3  16,236  14,776 9.9%
Sports medicine and biologics  3,701  (34)  3,667  4,163 -11.9%
Total extremities  68,133  (269)  67,864  64,747 4.8%
Large joints and other  15,259  (614)  14,645  14,286 2.5%
Total  $ 83,392  $ (883)  $ 82,509  $ 79,033 4.4%
           
Revenue by geography          
United States  $ 47,861  $ --   $ 47,861  $ 46,103 3.8%
International  35,531  (883)  34,648  32,930 5.2%
Total  $ 83,392  $ (883)  $ 82,509  $ 79,033 4.4%
           
           
  Year ended  
  (unaudited)  
  December 29, 2013 December 30, 2012  
  Revenue
as
reported
Foreign exchange
impact as compared
to prior period
Revenue
on a constant
currency basis
Revenue
as
reported
Percent change
on a constant
currency basis
Revenue by product category          
Upper extremity joints and trauma  $ 184,457  $ (525)  $ 183,932  $ 175,242 5.0%
Lower extremity joints and trauma  58,747  (18)  58,729  34,109 72.2%
Sports medicine and biologics  14,752  (72)  14,680  15,526 -5.4%
Total extremities  257,956  (615)  257,341  224,877 14.4%
Large joints and other  53,003  (1,513)  51,490  52,643 -2.2%
Total  $ 310,959  $ (2,128)  $ 308,831  $ 277,520 11.3%
           
Revenue by geography          
United States  $ 182,104  $ --   $ 182,104  $ 156,750 16.2%
International  128,855  (2,128)  126,727  120,770 4.9%
Total  $ 310,959  $ (2,128)  $ 308,831  $ 277,520 11.3%
 
 
Tornier N.V.
Reconciliation of Revenue to Non-GAAP Pro Forma Revenue
(in thousands)
 
  Three months ended
  (unaudited)
  December 29, 2013 December 30, 2012  
 

Revenue as reported
Foreign exchange impact as compared to prior period
Revenue on a constant currency basis

* Pro forma adjustment for acquisitions
Pro forma revenue on a constant currency basis

Revenue as reported

* Pro forma adjustment for acquisitions
Pro forma revenue on a constant currency basis Percent change on a constant currency basis
Revenue by product category                  
Upper extremity joints and trauma  $ 48,199  $ (238)  $ 47,961  $ --   $ 47,961  $ 45,808  $ 11  $ 45,819 4.7%
Lower extremity joints and trauma  16,233  3  16,236  --   16,236  14,776  282  15,058 7.8%
Sports medicine and biologics  3,701  (34)  3,667  --   3,667  4,163  --   4,163 -11.9%
Total extremities  68,133  (269)  67,864  --   67,864  64,747  293  65,040 4.3%
Large joints and other  15,259  (614)  14,645  --   14,645  14,286  --   14,286 2.5%
Total  $ 83,392  $ (883)  $ 82,509  $ --   $ 82,509  $ 79,033  $ 293  $ 79,326 4.0%
                   
Revenue by geography                  
United States  $ 47,861  $ --   $ 47,861  $ --   $ 47,861  $ 46,103  $ 293  $ 46,396 3.2%
International  35,531  (883)  34,648  --   34,648  32,930  --   32,930 5.2%
Total  $ 83,392  $ (883)  $ 82,509  $ --   $ 82,509  $ 79,033  $ 293  $ 79,326 4.0%
                   
                   
  Year ended
  (unaudited)
  December 29, 2013 December 30, 2012  
 

Revenue as reported
Foreign exchange impact as compared to prior period
Revenue on a constant currency basis

* Pro forma adjustment for acquisitions
Pro forma revenue on a constant currency basis

Revenue as reported

* Pro forma adjustment for acquisitions
Pro forma revenue on a constant currency basis Percent change on a constant currency basis
Revenue by product category                  
Upper extremity joints and trauma  $ 184,457  $ (525)  $ 183,932  $ --   $ 183,932  $ 175,242  $ 807  $ 176,049 4.5%
Lower extremity joints and trauma  58,747  (18)  58,729  --   58,729  34,109  20,017  54,126 8.5%
Sports medicine and biologics  14,752  (72)  14,680  --   14,680  15,526  --   15,526 -5.4%
Total extremities  257,956  (615)  257,341  --   257,341  224,877  20,824  245,701 4.7%
Large joints and other  53,003  (1,513)  51,490  --   51,490  52,643  --   52,643 -2.2%
Total  $ 310,959  $ (2,128)  $ 308,831  $ --   $ 308,831  $ 277,520  $ 20,824  $ 298,344 3.5%
                   
Revenue by geography                  
United States  $ 182,104  $ --   $ 182,104  $ --   $ 182,104  $ 156,750  $ 20,824  $ 177,574 2.6%
International  128,855  (2,128)  126,727  --   126,727  120,770  --   120,770 4.9%
Total  $ 310,959  $ (2,128)  $ 308,831  $ --   $ 308,831  $ 277,520  $ 20,824  $ 298,344 3.5%
                   
Notes:                  
 * -- Represents Pro forma Revenue adjustment for OrthoHelix acquisition related to the respective period.
 
 
Tornier N.V.
Reconciliation of Net Loss to 
Non-GAAP Adjusted Earnings Before Interest, Taxes, Depreciation 
and Amortization (EBITDA)
(in thousands)
         
  Three months ended Year ended
  (unaudited) (unaudited)
  December 29,
2013
December 30,
2012
December 29,
2013
December 30,
2012
Revenue, as reported  $ 83,392  $ 79,033  $ 310,959  $ 277,520
         
Net loss, as reported  $ (10,699)  $ (4,803)  $ (36,426)  $ (21,744)
         
Interest income  (64)  (34)  (245)  (338)
Interest expense  1,502  2,303  7,256  3,733
Income tax expense (benefit)  944  (12,240)  2,349  (10,935)
Depreciation   5,475  5,126  20,681  18,511
Amortization  4,288  3,708  15,885  11,721
         
Subtotal Non-GAAP EBITDA   1,446  (5,940)  9,500  948
         
Other non-operating expense (income)  228  (62)  45  (116)
Foreign currency transaction loss  749  278  1,820  473
Loss on extinguishment of debt  --   593  1,127  593
Share-based compensation  3,547  1,722  8,300  6,830
Inventory product rationalization due to acquisition  --   2,961  --   2,961
Inventory step-up from acquisition  464  1,578  5,908  1,993
Special charges:        
Acquisition, integration and distribution transition costs  2,401  3,122  7,143  4,920
Restructuring charges  521  1,111  521  6,357
Reversal of OrthoHelix contingent consideration liability  (193)  --   (5,140)  -- 
Impairment of intangibles  --   4,737  --   4,737
Italy bad debt expense  --   --   --   1,995
Legal settlements  --   --   1,214  -- 
Management exit costs  --   861  --   1,235
         
Non-GAAP adjusted EBITDA  $ 9,163  $ 10,961  $ 30,438  $ 32,926
         
Non-GAAP adjusted EBITDA margin  11.0% 13.9% 9.8% 11.9%
 
 
Tornier N.V.
Reconciliation of Net Loss and Net Loss per Share
to Non-GAAP Adjusted Net Loss and Non-GAAP Adjusted Net Loss per Share
(in thousands)
         
  Three months ended Year ended
  (unaudited) (unaudited)
  December 29,
2013
December 30,
2012
December 29,
2013
December 30,
2012
Net loss, as reported  $ (10,699)  $ (4,803)  $ (36,426)  $ (21,744)
         
Inventory step-up from acquisition, net of tax  369  1,534  5,540  1,869
Tax benefit due to reversal of valuation allowance from acquisition  (580)  (10,700)  (1,120)  (10,700)
Loss on extinguishment of debt, net of tax  --   479  1,127  479
Inventory product rationalization due to acquisition, net of tax  --   2,916  --   2,916
Special charges, net of tax:        
Acquisition, integration and distribution transition costs  2,363  3,118  7,048  4,908
Restructuring charges  521  1,119  521  6,097
Reversal of OrthoHelix contingent consideration liability  (193)  --   (5,140)  -- 
Italy bad debt expense  --   --   --   1,995
Impairment of intangibles  --   4,737  --   4,737
Legal settlements  --   --   1,214  -- 
Management exit costs  --   861  --   1,235
         
Non-GAAP adjusted net loss  (8,219)  (739)  (27,236)  (8,208)
         
Net loss per share, as reported        
Basic and diluted  $ (0.22)  $ (0.12)  $ (0.79)  $ (0.54)
         
Inventory step-up from acquisition, net of tax  0.01  0.04  0.12  0.05
Tax benefit due to reversal of valuation allowance from acquisition  (0.01)  (0.26)  (0.02)  (0.27)
Loss on extinguishment of debt  --   0.01  0.02  0.01
Inventory product rationalization due to acquisition, net of tax  --   0.07  --   0.07
Special charges, net of tax:        
Acquisition, integration and distribution transition costs  0.05  0.08  0.15  0.13
Restructuring charges  0.01  0.03  0.01  0.15
Reversal of OrthoHelix contingent consideration liability  (0.01)  --   (0.11)  -- 
Italy bad debt expense  --   --   --   0.05
Impairment of intangibles  --   0.11  --   0.12
Legal settlements  --   --   0.03  -- 
Management exit costs  --   0.02  --   0.03
         
Non-GAAP adjusted net loss per share        
Basic and diluted  $ (0.17)  $ (0.02)  $ (0.59)  $ (0.20)
         
Weighted average ordinary shares outstanding        
Basic and diluted  48,478  41,639  45,826  40,064
     
     
    Tornier N.V.
    Reconciliation of Net Cash Provided by Operating Activities
    to Non-GAAP Adjusted Free Cash Flow
    (in thousands)
 
      Three months ended Year ended
      (unaudited) (unaudited)
             
      December 29, 2013 December 30, 2012 December 29, 2013 December 30, 2012
             
    Net cash provided by operating activities, as reported  $ 6,661  $ 3,295  $ 24,982  $ 14,431
             
    Adjusted for:        
    Cash paid related to facilities consolidation initiative  --   2,216  --   4,811
    Additions of instruments, as reported  (7,240)  (2,754)  (23,805)  (11,999)
    Purchases of property, plant and equipment, as reported  (3,307)  (3,405)  (10,825)  (11,291)
    Purchases of property, plant and equipment, related to facilities consolidation initiative  --   636  --   2,997
             
    Non-GAAP adjusted free cash flow  $ (3,886)  $ (12)  $ (9,648)  $ (1,051)
 
 
Tornier N.V.
Reconciliation of Gross Margin and Gross Margin %
to Non-GAAP Adjusted Gross Margin and Gross Margin %
(in thousands)
         
  Three months ended Year ended
  (unaudited) (unaudited)
         
  December 29,
2013
December 30,
2012
December 29,
2013
December 30,
2012
         
Revenue, as reported  $ 83,392  $ 79,033  $ 310,959  $ 277,520
         
Gross margin, as reported  $ 62,125  $ 52,059  $ 224,787  $ 195,602
Gross margin %, as reported 74.5% 65.9% 72.3% 70.5%
         
Adjusted for:        
Inventory product rationalization due to acquisition  --   2,961  --   2,961
Inventory step-up due to acquisition  464  1,578  5,908  1,993
         
Non-GAAP adjusted gross margin  62,589  56,598  230,695  200,556
Non-GAAP adjusted gross margin % 75.1% 71.6% 74.2% 72.3%
 
 
Tornier N.V.
Reconciliation of Operating Expenses and Operating Expenses as a % of Revenue to 
Non-GAAP Adjusted Operating Expenses and Non-GAAP Adjusted Operating Expenses as a % of Revenue
         
         
  Three Months Ended Year ended
  (unaudited) (unaudited)
  December 29,
2013
December 30,
2012
December 29,
2013
December 30,
2012
         
Revenue, as reported  $ 83,392  $ 79,033  $ 310,959  $ 277,520
         
Operating expenses, as reported  69,465  66,024  248,861  223,936
Operating expenses as a percentage of revenue, as reported 83.3% 83.5% 80.0% 80.7%
         
Adjusted for:        
Amortization of intangible assets  (4,288)  (3,708)  (15,885)  (11,721)
Special charges  (2,729)  (9,831)  (3,738)  (19,244)
Total adjustments  (7,017)  (13,539)  (19,623)  (30,965)
         
Non-GAAP adjusted operating expenses  $ 62,448  $ 52,485  $ 229,238  $ 192,971
Non-GAAP adjusted operating expenses as a percentage of revenue 74.9% 66.4% 73.7% 69.5%
 
 
Tornier N.V.
Reconciliation of Projected 2013 Operating Loss
to Projected Non-GAAP Adjusted EBITDA
(in millions)
         
  Three months ended Year ended 
  (unaudited) (unaudited)
     
  March 30, 2014 December 28, 2014
  Low High Low High
         
Revenue  $ 78.5  $ 82.5  $ 304.2  $ 319.1
Operating Loss  $ (11.7)  $ (7.7)  $ (38.4)  $ (26.4)
         
Adjusted for:        
Inventory step-up due to acquisition  0.3  0.2  0.7  0.5
Depreciation and amortization expense  10.4  9.8  45.0  42.0
Share-based compensation  2.2  1.8  9.6  7.5
Special charges  2.8  1.9  5.6  3.9
Total adjustments  $ 15.7  $ 13.7  $ 60.9  $ 53.9
         
Non-GAAP adjusted EBITDA  $ 4.0  $ 6.0  $ 22.5  $ 27.5
Non-GAAP adjusted EBITDA margin 5.1% 7.3% 7.4% 8.6%

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.

Tornier N.V.
Shawn McCormick
Chief Financial Officer
(952) 426-7646