UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): February 23, 2016
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WRIGHT MEDICAL GROUP N.V.
(Exact name of registrant as specified in its charter)
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The Netherlands | 1-35065 | 98-0509600 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
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Prins Bernhardplein 200 1097 JB Amsterdam The Netherlands | None |
(Address of principal executive offices) | (Zip Code) |
(+ 31) 20 675-4002
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On February 23, 2016, Wright Medical Group N.V. (Wright) issued a press release announcing financial results for the fiscal year ended December 27, 2015. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and the information set forth therein is incorporated herein by reference and constitutes a part of this report. Unless the context otherwise requires, references to "Wright," the "company," "we," "our" or "us" in this report refer to Wright Medical Group N.V. and its subsidiaries. References to "legacy Wright" refer to Wright Medical Group, Inc. and its subsidiaries and references to "legacy Tornier" refer to Tornier N.V. and its subsidiaries, in each case prior to the merger between Wright Medical Group, Inc. and Tornier N.V.
Wright is furnishing the information contained in this report, including Exhibit 99.1, pursuant to Item 2.02 of Form 8-K promulgated by the United States Securities and Exchange Commission (SEC). This information shall not be deemed to be filed with the SEC for the purposes of Section 18 of the United States Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the United States Securities Act of 1933, as amended (Securities Act), except as expressly set forth by specific reference in such filing. By filing this report and furnishing this information, Wright makes no admission as to the materiality of any information contained in this report, including Exhibit 99.1. This report shall not be incorporated into any future filings by Wright under the Securities Act or the Exchange Act.
To supplement our consolidated financial statements prepared in accordance with United States generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, several of which are included in the press release furnished as Exhibit 99.1 to this report. The press release includes the following non-GAAP financial measures: combined pro forma net sales, combined pro forma net sales, excluding the impact of foreign currency and revenue recognition conformance; combined pro forma net income from continuing operations, as adjusted; combined pro forma EBITDA from continuing operations, as adjusted; combined pro forma cash earnings, as adjusted; and combined pro forma cash earnings, as adjusted, per diluted share.
These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures 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. We believe that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.
For internal budgeting and resource allocation process, our management uses financial information that does not include:
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1. | non-cash inventory step-up amortization; |
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2. | costs associated with distributor conversions and amortization of non-competes; |
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3. | non-cash interest expense related to our convertible notes due 2017 and convertible notes due 2020 (2017 and 2020 convertible notes); |
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4. | write-off of unamortized debt discount and deferred financing fees associated with 2017 convertible notes; |
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5. | mark-to-market adjustments of derivatives; |
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6. | due diligence, transaction and transition costs; |
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7. | non-cash share-based compensation acceleration; |
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8. | BioMimetic contingent value right (CVR) mark-to-market adjustments; |
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9. | contingent consideration fair value adjustments; |
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10. | instrument use tax refund; and |
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11. | income tax effects of the foregoing. |
Additionally, for internal budgeting process and evaluation of net sales performance, management uses net sales on a constant currency basis. To measure net sales performance on a constant currency basis, it is necessary to remove the impact of changes in foreign currency exchange rates, which affects the comparability and trend of net sales. Net sales, excluding the impact of foreign currency exchange rates, is calculated by translating current period results at prior period average foreign currency exchange rates.
For internal budgeting and resource allocation process, management uses pro forma measures to evaluate performance when certain acquisitions or dispositions occur. Historical data reflects results of acquired businesses only after the acquisition dates,
while pro forma data enhances comparability of financial information between periods by adjusting the data as if the acquisitions or dispositions occurred at the beginning of the preceding year or period.
Further, in 2015, management evaluated net sales performance on a "same sales day" basis, due to our adoption of legacy Tornier’s fiscal calendar, which resulted in four fewer calendar days for the fourth quarter of 2015 than under legacy Wright's fiscal calendar. In order to calculate net sales growth on a same sales day basis, pro forma combined average sales per day ("ASPD") is calculated by dividing net sales for each legacy company by the respective number of selling days for the associated geographic region (U.S. or International), then adding each legacy company's ASPD together.
For internal budgeting and resource allocation process, management also uses combined pro forma EBITDA, combined pro forma EBITDA as adjusted, and combined pro forma cash earnings, as adjusted. EBITDA is calculated by adding back to net loss from continuing operations charges for interest, benefit (provision) from income taxes, depreciation, and amortization expenses. EBITDA, as adjusted, is calculated by excluding non-cash share-based compensation expense, non-operating income and expense, as well as the applicable adjustments numbered above, from EBITDA. Cash earnings, as adjusted, is calculated by adding back to net loss from continuing operations charges for non-cash amortization expenses, net of taxes, as well as the applicable adjustments numbered above.
We use these non-GAAP financial measures in making operating decisions because we believe these measures provide meaningful supplemental information regarding our core operational performance and give us a better understanding of how we should invest in research and development activities and how we should allocate resources to both ongoing and prospective business initiatives. We use these measures to help make budgeting and spending decisions, for example, between research and development and selling, general and administrative expenses. Additionally, management is evaluated on the basis of some of these non-GAAP financial measures when determining achievement of their performance incentive plan compensation targets. Further, these non-GAAP financial measures facilitate management’s internal comparisons to both our historical operating results and to our competitors’ operating results by factoring out potential differences caused by charges not related to our regular, ongoing business, including without limitation, non-cash charges, certain large and unpredictable charges, acquisitions and dispositions, legal settlements, and tax positions.
As described above, we exclude the following items from one or more of our non-GAAP financial measures for the following reasons:
Impact on net sales of conforming methodology for revenue recognition. We excluded $3 million of additional net sales during fourth quarter of 2015 due to the impact of conforming our methodology for estimating unbilled revenue to legacy Tornier's methodology. While legacy Wright generally recognized revenue at the time that the product was surgically implanted, from a timing perspective, we now recognize revenue at the time the surgery and associated products used are reported, as opposed to previously when we received clerical documentation from the hospital. Management has excluded this impact on net sales compared to prior period from our non-GAAP measure, primarily because it is not reflective of our ongoing operating results, and it is not used by management for evaluation of net sales performance. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
Foreign currency impact on net sales. We excluded the foreign currency impact on net sales compared to prior period from our non-GAAP measure, primarily because it is not reflective of our ongoing operating results, and it is not used by management for internal budgeting process and evaluation of net sales performance. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
Non-cash inventory step-up amortization. We excluded inventory step-up amortization associated with our acquisitions from our non-GAAP measures, primarily because they are not reflective of ongoing operating results, and they are not used by management to assess the core profitability of our business operations. Additionally, because these are non-cash expenses, they do not impact our operational performance, liquidity, or our ability to invest in research and development and to fund acquisitions and capital expenditures. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
Distributor conversion costs and amortization of distributor non-competes. In connection with our initiative to convert a portion of our independent foot and ankle distributor territories to direct employee sales representation, we entered into conversion agreements with certain independent distributors, which included non-competition clauses. We excluded the distributor conversion costs and amortization of distributor non-competes from our non-GAAP financial measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in that such exclusion allows for period-over-period comparability.
Non-cash interest expense related to the 2017 and 2020 convertible notes. We excluded the non-cash interest expense associated with the amortization of the debt discount related to our 2017 and 2020 convertible notes from our non-GAAP financial measures, primarily because it is a non-cash expense. We believe that it is useful to investors to understand our operational performance, liquidity, and our ability to invest in research and development and to fund acquisitions and capital expenditures. While interest expense associated with the amortization of the debt discount constitutes an ongoing and recurring expense, such expense is excluded from our non-GAAP financial measures because it is not an expense that requires cash settlement and is not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
Non-cash write-off of unamortized debt discount and deferred financing fees associated with the 2017 convertible notes. We excluded the non-cash pro-rata write-off of unamortized debt discount and deferred financing fees from our non-GAAP financial measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding these items are useful to investors in that they allow for period-over-period comparability.
Mark-to-market adjustment of derivatives. We excluded the adjustment of the mark-to-market adjustments on derivatives from our non-GAAP financial measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
Due diligence, transaction and transition costs. We excluded the due diligence, transaction and transition costs associated with acquisitions and mergers, including the Wright/Tornier merger, and the divestitures of the OrthoRecon business from our non-GAAP financial measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
Non-cash share-based compensation acceleration. We excluded the share-based compensation acceleration charges associated with the Wright/Tornier merger from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. Additionally, because these are non-cash expenses, they do not impact our operational performance, liquidity, or our ability to invest in research and development and to fund acquisitions and capital expenditures. We further believe that excluding this item is useful to investors in that it allows for period-over-period comparability.
BioMimetic CVR mark-to-market adjustments. We excluded the adjustment of the mark-to-market adjustments on the contingent value rights associated with acquired assets and liabilities from our BioMimetic acquisition from our non-GAAP financial measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in that such exclusion allows for period-over-period comparability.
Contingent consideration fair value adjustments. We excluded the fair value adjustment of our contingent consideration from our non-GAAP financial measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in excluding this item allows for period-over-period comparability.
Instrument use tax refund. We excluded our instrument use tax refund from our non-GAAP financial measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item is useful to investors in that such exclusion allows for period-over-period comparability.
Income tax effects of the foregoing. This amount is used to present each of the amounts described above, except for foreign currency exchange rate impact on net sales, on an after-tax basis consistent with the presentation of net income, as adjusted.
For internal budgeting and resource allocation process, our management also uses certain pro forma financial information. We use pro forma data to evaluate performance when certain acquisitions or dispositions occur. Historical data reflects results of acquired businesses only after the acquisition dates while pro forma data enhances comparability of financial information between periods by adjusting the data as if the acquisitions or dispositions occurred at the beginning of the preceding year or period.
These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures 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. We believe that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.
We believe that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP and that these measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures, and that is we qualify the use of non-GAAP financial information in a statement when non-GAAP financial information is presented.
All of the historical non-GAAP financial measures used in our press release are reconciled to the most directly comparable GAAP measure in the press release. With respect to our 2016 financial guidance regarding adjusted EBITDA from continuing operations and adjusted cash earnings per share from continuing operations, including share-based compensation, we cannot provide a quantitative reconciliation to the most directly comparable GAAP measure without unreasonable effort due to an inability to make accurate projections and estimates related to certain information needed to calculate some of the adjustments. However, we have described in the press release the anticipated differences between such non-GAAP financial measures and the most directly comparable financial measure qualitatively.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit Number | | Description |
99.1 | | Press release issued by Wright Medical Group N.V. on February 23, 2016 announcing Wright Medical Group N.V.’s financial results for the year ended December 27, 2015 (furnished herewith) |
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K, including the exhibit hereto, 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,” “target,” “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 2016, including net sales, adjusted EBITDA from continuing operations and adjusted cash earnings per share from continuing operations; anticipated sales and cost synergies and dis-synergies, the timing thereof, and level of risk of achievement; the company’s expectations regarding the sales growth of its lower extremities, upper extremities, biologics, and international businesses; the benefits of its recently completed merger with Tornier and integration efforts and progress; and the company’s anticipated growth opportunities, accelerated path to profitability, adjusted EBITDA margin goal and ability to drive long-term growth and profitability and 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 net sales synergies and cost-savings from the recently completed merger with Tornier or delay in realization thereof; operating costs and business disruption as a result of the merger, 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 and need for additional financing; 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’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2015 filed with the SEC on November 5, 2015 and Annual Report on Form 10-K for the year ended December 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 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 23, 2016
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| WRIGHT MEDICAL GROUP N.V. | |
| By: /s/ Robert J. Palmisano | |
| Name: Robert J. Palmisano | |
| Title: President and Chief Executive Officer | |
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Exhibit Number | Description | Method of Filing |
99.1 | Press release issued by Wright Medical Group N.V. on February 23, 2016 announcing Wright Medical Group N.V.’s financial results for the fiscal year ended December 27, 2015 | Furnished herewith |
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FOR IMMEDIATE RELEASE | |
Investors and Media: |
Wright Medical Group N.V. Julie D. Tracy |
Chief Communications Officer (901) 290-5817 (office) julie.tracy@wright.com
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Wright Medical Group N.V. Reports 2015 Fourth Quarter and Full-Year Financial Results and Provides 2016 Guidance
Fourth Quarter 2015 Net Sales of $177 Million As Reported; $181 Million Pro-Forma
Full-Year 2015 Net Sales of $415 Million As Reported; Pro-Forma Full-Year 2015 Net Sales of $656 Million Exceeds High-End Of Company’s Previously Provided 2015 Guidance Range
Company Provides Full-Year 2016 Net Sales Guidance of $695 Million to $705 Million
AMSTERDAM, The Netherlands - February 23, 2016 - Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial results for its fourth quarter and full-year ended December 27, 2015 and provided 2016 guidance. Certain unaudited non-GAAP pro forma financial results for the combined Wright Medical Group N.V. which give effect to the Wright/Tornier merger as if it had occurred on the first day of fiscal 2014 can be found on Wright’s website at ir.wright.com.
As previously announced, Wright Medical Group, Inc. and Tornier N.V. completed their merger on October 1, 2015, and, in accordance with U.S. GAAP, legacy Wright’s historical results of operations replaced legacy Tornier’s historical results of operations for all periods prior to the merger and the results of the two legacy businesses have been consolidated only from that date forward. Since the legacy Tornier business began its fourth quarter on September 28, 2015, its financial results from the operating days between September 28, 2015 and September 30, 2015 are not included in the combined company’s as reported results of operations for the fourth quarter of 2015.
Following the closing of the merger, Wright adopted legacy Tornier’s fiscal calendar, which resulted in four fewer calendar days for the fourth quarter of 2015 than under the legacy Wright fiscal calendar. Additionally, the Wright business conformed its methodology for recognizing revenue to legacy Tornier's methodology.
Net sales totaled $177.0 million during the fourth quarter ended December 27, 2015. Combined company pro forma net sales totaled $181.4 million during the fourth quarter ended December 27, 2015. On a same sales day and constant currency basis and excluding the impact of conforming Wright’s methodology for recognizing revenue, combined pro forma global extremities and biologics revenue grew 14%. The attached financial tables include a reconciliation of U.S. GAAP to these non-GAAP financial measures.
Robert Palmisano, president and chief executive officer, commented, “In our first quarter as a newly merged Wright Medical, we delivered outstanding fourth quarter results that reflect the continued strong underlying growth and positive momentum in our legacy Wright lower extremities and legacy Tornier upper extremities businesses. Our pro forma global extremities and biologics growth of 14% was a two
percentage point acceleration from the third quarter of 2015, and combined with earlier than anticipated progress on capturing cost synergies, resulted in pro forma net sales and positive adjusted EBITDA results that significantly exceeded our expectations. We also got off to a strong start on executing our merger integration plans and with the early success we are seeing, we believe we are well positioned to continue our strong business momentum and to deliver on our synergy commitments as we progress through 2016.”
Palmisano continued, “Highlights in the quarter included strong contributions from our new SIMPLICITI shoulder system and the ongoing rollout of the AEQUALIS ASCEND FLEX convertible shoulder system, a positive start to our U.S. commercial activities for AUGMENT Bone Graft, and the ongoing launch of the INFINITY total ankle replacement system, which drove over 40% sales growth in U.S. total ankle replacement for the fourth quarter of 2015 and over 45% growth for the full-year of 2015.”
Palmisano further commented, “Our 2016 guidance assumes mid-teens underlying combined pro forma constant currency growth in extremities and biologics, excluding the impact of anticipated revenue dis-synergies. We also expect growth to accelerate in our biologics business due to the ongoing launch of AUGMENT Bone Graft in the U.S. We will continue to focus on successfully executing our integration plans to realize our full potential and believe that the positive progress we saw in the fourth quarter is setting us up well for continued strong revenue growth and significant margin expansion in 2016 and beyond.”
Net loss from continuing operations for the fourth quarter of 2015 totaled $92.2 million, or $(0.90) per diluted share. Our combined pro forma net loss from continuing operations, as defined in the GAAP to non-GAAP reconciliation provided later in this release, for the fourth quarter of 2015 totaled $89.3 million.
The company’s combined pro forma net loss from continuing operations for the fourth quarter of 2015 included the after-tax effects of $39.2 million of transaction and transition costs, $14.2 million of non-cash share-based compensation charges associated with the closing of the merger, $11.4 million of inventory step-up amortization, a loss of $2.3 million related to mark-to-market adjustments on derivatives, and $6.9 million of non-cash interest expense related to its 2017 convertible notes and 2020 convertible notes.
The company's fourth quarter 2015 combined pro forma net loss from continuing operations, as adjusted for the above items, was $17.5 million. The company's fourth quarter 2015 combined pro forma adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $10.9 million. The attached financial tables include reconciliations of U.S. GAAP to non-GAAP measures.
Cash and cash equivalents and marketable securities for the combined business totaled $139.8 million as of the end of the fourth quarter of 2015.
Palmisano concluded, “Following our merger, we have leading positions in the highest growth markets in orthopaedics with differentiated technologies and focused sales forces. We have multiple opportunities through a robust new product pipeline to further accelerate our growth, continue to expand our markets and gain market share. With the execution of our integration plans off to a positive and productive start, we are well positioned to continue to accelerate our business momentum and drive market leading growth and profitability.”
Outlook
The company anticipates net sales for full-year 2016 of approximately $695 million to $705 million. This range assumes a negative impact from foreign currency exchange rates as compared to 2015 of approximately 2% and reflects approximately $25 million to $30 million of potential net sales dis-synergies expected to be realized throughout 2016 from the merger with Tornier. The midpoint of this net sales guidance range assumes combined pro forma extremities and biologics constant currency growth of 14%, excluding the impact of revenue dis-synergies.
The company anticipates 2016 adjusted EBITDA from continuing operations, as described in the GAAP to non-GAAP reconciliation provided later in this release, of $20.0 million to $30.0 million. This range reflects approximately $10 million to $15 million of potential cost synergies expected to be realized in 2016 from the merger with Tornier.
The company anticipates adjusted cash earnings per share from continuing operations, including share-based compensation, as described in the GAAP to non-GAAP reconciliation provided later in this release, for full-year 2016 of $(0.65) to $(0.71) per diluted share.
The company estimates approximately 103 million diluted weighted average ordinary shares outstanding for fiscal year 2016.
The company's adjusted EBITDA from continuing operations target is measured by adding back to net income/loss from continuing operations charges for interest, income taxes, depreciation and amortization expenses, non-cash share-based compensation expense, and non-operating income and expense. Additionally, the company’s adjusted EBITDA from continuing operations target excludes possible future acquisitions; other material future business developments; and due diligence, transaction and transition costs associated with acquisitions and divestitures. Further, this adjusted EBITDA from continuing operations target excludes any expenses, earnings or losses related to Wright’s divested OrthoRecon business and Tornier’s divested ankle and silastic toe products.
The company’s adjusted cash earnings per share from continuing operations target is measured by adding back to net income/loss from continuing operations charges for non-cash amortization expenses, net of taxes. Note that due to the company’s relatively low effective tax rate due to the valuation allowance impacting a substantial portion of the company’s income/loss, the company is currently estimating the tax effect on amortization expense at 0%. Additionally, this adjusted cash earnings per share 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; mark-to-market adjustments to the CVRs; and non-cash mark-to-market derivative adjustments.
The company's anticipated ranges for net sales, adjusted EBITDA from continuing operations, and adjusted cash earnings per share 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 “Cautionary Note Regarding Forward-Looking Statements” section of this press release.
Supplemental Financial Information
To view the fourth 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 financial information, including fourth 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 the 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 800-237-9752 (U.S.) / 617-847-8706 (Outside U.S.). 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 March 1, 2016. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (Outside U.S.) and enter the passcode 70431489. 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 “Forward-Looking Statements Safe Harbor” 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 extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics markets, three of the fastest growing segments in orthopaedics. 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. or its affiliates, 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 combined pro forma net sales; combined pro forma net sales, excluding the impact of foreign currency and revenue recognition conformance; combined pro forma net income, as adjusted; combined pro forma EBITDA, as adjusted; combined pro forma cash earnings, as adjusted; and combined pro forma cash earnings, as adjusted, per diluted share. 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. While pro forma data gives effect to the merger as if it had occurred on the first day of fiscal 2014 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. 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. 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,” “target,” “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 2016, including net sales, adjusted EBITDA from continuing operations and adjusted cash earnings per share from continuing operations; anticipated sales and cost synergies and dis-synergies, the timing thereof, and level of risk of achievement; the company’s expectations regarding the sales growth of its lower extremities, upper extremities, biologics, and international businesses; the benefits of its recently completed merger with Tornier and integration efforts and progress; and the company’s anticipated growth opportunities, accelerated path to profitability, adjusted EBITDA margin goal and ability to drive long-term growth and profitability and 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 net sales synergies and cost-savings from the recently completed merger with Tornier or delay in realization thereof; operating costs and business disruption as a result of the merger, 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 and need for additional financing; 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’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2015 filed with the SEC on November 5, 2015 and Annual Report on Form 10-K for the year ended December 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 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--
Wright Medical Group N.V.
Condensed Consolidated Statements of Operations
(in thousands, except per share data--unaudited)
|
| | | | | | | | | | | | | | | |
| Three months ended | | Fiscal year ended |
| December 27, 2015 | | December 31, 2014 | | December 27, 2015 | | December 31, 2014 |
Net sales | $ | 176,968 |
| | $ | 83,294 |
| | $ | 415,461 |
| | $ | 298,027 |
|
Cost of sales | 55,443 |
| | 19,097 |
| | 119,255 |
| | 73,223 |
|
Gross profit | 121,525 |
|
| 64,197 |
|
| 296,206 |
|
| 224,804 |
|
Operating expenses: | | | | | | | |
Selling, general and administrative | 178,596 |
| | 81,991 |
| | 429,398 |
| | 289,620 |
|
Research and development | 15,211 |
| | 6,360 |
| | 39,855 |
| | 24,963 |
|
Amortization of intangible assets | 9,181 |
| | 2,786 |
| | 16,922 |
| | 10,027 |
|
Total operating expenses | 202,988 |
| | 91,137 |
| | 486,175 |
| | 324,610 |
|
Operating loss | (81,463 | ) | | (26,940 | ) | | (189,969 | ) | | (99,806 | ) |
Interest expense, net | 11,565 |
| | 4,525 |
| | 41,358 |
| | 17,398 |
|
Other expense (income), net | 3,489 |
| | 74,640 |
| | 10,884 |
| | 129,626 |
|
Loss from continuing operations before income taxes | (96,517 | ) | | (106,105 | ) | | (242,211 | ) | | (246,830 | ) |
Provision (benefit) for income taxes | (4,362 | ) | | 863 |
| | (3,851 | ) | | (6,334 | ) |
Net loss from continuing operations | $ | (92,155 | ) |
| $ | (106,968 | ) | | $ | (238,360 | ) | | $ | (240,496 | ) |
Loss from discontinued operations, net of tax | (13,621 | ) | | $ | (4,262 | ) | | $ | (60,341 | ) | | $ | (19,187 | ) |
Net loss | $ | (105,776 | ) | | $ | (111,230 | ) | | $ | (298,701 | ) | | $ | (259,683 | ) |
| | | | | | | |
Net loss from continuing operations per share, basic(1) | $ | (0.90 | ) | | $ | (2.05 | ) | | $ | (3.68 | ) | | $ | (4.69 | ) |
Net loss from continuing operations per share, diluted(1) | $ | (0.90 | ) | | $ | (2.05 | ) | | $ | (3.68 | ) | | $ | (4.69 | ) |
| | | | | | | |
Net loss per share, basic(1) | $ | (1.03 | ) | | $ | (2.13 | ) | | $ | (4.61 | ) | | $ | (5.06 | ) |
Net loss per share, diluted(1) | $ | (1.03 | ) | | $ | (2.13 | ) | | $ | (4.61 | ) | | $ | (5.06 | ) |
| | | | | | | |
Weighted-average number of shares outstanding-basic(1) | 102,659 |
| | 52,262 |
| | 64,808 |
| | 51,293 |
|
Weighted-average number of shares outstanding-diluted(1) | 102,659 |
| | 52,262 |
| | 64,808 |
| | 51,293 |
|
_______________________________
| |
(1) | The prior quarter and prior year balances were converted to meet post-merger valuations. |
Wright Medical Group N.V.
Consolidated Sales Analysis
(dollars in thousands--unaudited)
|
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Fiscal year ended |
| December 27, 2015 | | December 31, 2014 | | % change | | December 27, 2015 | | December 31, 2014 | | % change |
U.S. | | | | | | | | | | | |
Lower extremities | 58,819 |
| | 46,032 |
| | 27.8 | % | | 187,096 |
| | 148,631 |
| | 25.9 | % |
Upper extremities | 47,053 |
| | 3,891 |
| | 1,109.3 | % | | 58,756 |
| | 15,311 |
| | 283.8 | % |
Biologics | 15,971 |
| | 12,118 |
| | 31.8 | % | | 50,583 |
| | 45,494 |
| | 11.2 | % |
Sports med & other | 1,830 |
| | 445 |
| | 311.2 | % | | 3,388 |
| | 2,641 |
| | 28.3 | % |
Total extremities & biologics | 123,673 |
| | 62,486 |
| | 97.9 | % | | 299,823 |
| | 212,077 |
| | 41.4 | % |
Large joint | 18 |
| | — |
| | N/A | | 18 |
| | — |
| | N/A |
Total U.S. | $ | 123,691 |
| | $ | 62,486 |
| | 97.9 | % | | $ | 299,841 |
| | $ | 212,077 |
| | 41.4 | % |
| | | | | | | | | | | |
International | | | | | | | | | | | |
Lower extremities | 15,887 |
| | 11,119 |
| | 42.9 | % | | 51,200 |
| | 47,001 |
| | 8.9 | % |
Upper extremities | 19,066 |
| | 2,437 |
| | 682.4 | % | | 24,789 |
| | 11,312 |
| | 119.1 | % |
Biologics | 4,582 |
| | 5,153 |
| | (11.1 | )% | | 19,652 |
| | 20,590 |
| | (4.6 | )% |
Sports med & other | 3,625 |
| | 2,099 |
| | 72.7 | % | | 9,862 |
| | 7,047 |
| | 39.9 | % |
Total extremities & biologics | 43,160 |
| | 20,808 |
| | 107.4 | % | | 105,503 |
| | 85,950 |
| | 22.7 | % |
Large joint | 10,117 |
| | — |
| | N/A | | 10,117 |
| | — |
| | N/A |
Total International | $ | 53,277 |
| | $ | 20,808 |
| | 156.0 | % | | $ | 115,620 |
| | $ | 85,950 |
| | 34.5 | % |
| | | | | | | | | | | |
Global | | | | | | | | | | | |
Lower extremities | 74,706 |
| | 57,151 |
| | 30.7 | % | | 238,296 |
| | 195,632 |
| | 21.8 | % |
Upper extremities | 66,119 |
| | 6,328 |
| | 944.9 | % | | 83,545 |
| | 26,623 |
| | 213.8 | % |
Biologics | 20,553 |
| | 17,271 |
| | 19.0 | % | | 70,235 |
| | 66,084 |
| | 6.3 | % |
Sports med & other | 5,455 |
| | 2,544 |
| | 114.4 | % | | 13,250 |
| | 9,688 |
| | 36.8 | % |
Total extremities & biologics | 166,833 |
| | 83,294 |
| | 100.3 | % | | 405,326 |
| | 298,027 |
| | 36.0 | % |
Large joint | 10,135 |
| | — |
| | N/A | | 10,135 |
| | — |
| | N/A |
Total sales | $ | 176,968 |
| | $ | 83,294 |
| | 112.5 | % | | $ | 415,461 |
| | $ | 298,027 |
| | 39.4 | % |
Wright Medical Group N.V.
Reconciliation of Net Sales to Non-GAAP Combined Pro Forma Net Sales
(unaudited)
|
| | | | | | | | | | | |
| Three months ended |
| December 27, 2015 |
| Net Sales As Reported | | Legacy Tornier
stub period
(September 28, 2015 - September 30, 2015)(1) | | Non-GAAP Combined Pro Forma Net Sales |
U.S. | | | | | |
Lower extremities | $ | 58,819 |
| | $ | 279 |
| | $ | 59,098 |
|
Upper extremities | 47,053 |
| | 1,773 |
| | 48,826 |
|
Biologics | 15,971 |
| | 66 |
| | 16,037 |
|
Sports med & other | 1,830 |
| | 4 |
| | 1,834 |
|
Total extremities & biologics | 123,673 |
| | 2,122 |
| | 125,795 |
|
Large joint | 18 |
| | — |
| | 18 |
|
Total U.S. | $ | 123,691 |
| | $ | 2,122 |
| | $ | 125,813 |
|
| | | | | |
International | | | | | |
Lower extremities | $ | 15,887 |
| | $ | 152 |
| | $ | 16,039 |
|
Upper extremities | 19,066 |
| | 1,260 |
| | 20,326 |
|
Biologics | 4,582 |
| | 13 |
| | 4,595 |
|
Sports med & other | 3,625 |
| | 132 |
| | 3,757 |
|
Total extremities & biologics | 43,160 |
| | 1,557 |
| | 44,717 |
|
Large joint | 10,117 |
| | 753 |
| | 10,870 |
|
Total International | $ | 53,277 |
| | $ | 2,310 |
| | $ | 55,587 |
|
| | | | | |
Global | | | | | |
Lower extremities | $ | 74,706 |
| | $ | 431 |
| | $ | 75,137 |
|
Upper extremities | 66,119 |
| | 3,033 |
| | 69,152 |
|
Biologics | 20,553 |
| | 79 |
| | 20,632 |
|
Sports med & other | 5,455 |
| | 136 |
| | 5,591 |
|
Total extremities & biologics | 166,833 |
| | 3,679 |
| | 170,512 |
|
Large joint | 10,135 |
| | 753 |
| | 10,888 |
|
Total sales | $ | 176,968 |
| | $ | 4,432 |
| | $ | 181,400 |
|
_______________________________
| |
(1) | To add revenues from Legacy Tornier's fourth quarter for the period prior to the merger closing date when operations became consolidated. |
Wright Medical Group N.V.
Reconciliation of Net Sales to Non-GAAP Combined Pro Forma Net Sales
(unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| Twelve months ended |
| December 27, 2015 |
| Net Sales As Reported | | Legacy Tornier N.V. standalone nine months ended September 27, 2015 (1) | | Legacy Tornier Net Sales Divested (2) | | Legacy Tornier
stub period
(September 28, 2015 - September 30, 2015) (3) | | Non-GAAP Combined Pro Forma Net Sales |
U.S. | | | | | | | | | |
Lower extremities | 187,096 |
| | 29,637 |
| | (9,733 | ) | | 279 |
| | 207,279 |
|
Upper extremities | 58,756 |
| | 115,846 |
| | — |
| | 1,773 |
| | 176,375 |
|
Biologics | 50,583 |
| | 1,290 |
| | — |
| | 66 |
| | 51,939 |
|
Sports med & other | 3,388 |
| | 5,021 |
| | — |
| | 4 |
| | 8,413 |
|
Total extremities & biologics | 299,823 |
| | 151,794 |
| | (9,733 | ) | | 2,122 |
| | 444,006 |
|
Large joint | 18 |
| | 119 |
| | — |
| | — |
| | 137 |
|
Total U.S. | $ | 299,841 |
| | $ | 151,913 |
| | $ | (9,733 | ) | | $ | 2,122 |
| | $ | 444,143 |
|
| | | | | | | | | |
International | | | | | | | | | |
Lower extremities | 51,200 |
| | 7,402 |
| | — |
| | 152 |
| | 58,754 |
|
Upper extremities | 24,789 |
| | 51,293 |
| | — |
| | 1,260 |
| | 77,342 |
|
Biologics | 19,652 |
| | 357 |
| | — |
| | 13 |
| | 20,022 |
|
Sports med & other | 9,862 |
| | 5,372 |
| | — |
| | 132 |
| | 15,366 |
|
Total extremities & biologics | 105,503 |
| | 64,424 |
| | — |
| | 1,557 |
| | 171,484 |
|
Large joint | 10,117 |
| | 29,921 |
| | — |
| | 753 |
| | 40,791 |
|
Total International | $ | 115,620 |
| | $ | 94,345 |
| | $ | — |
| | $ | 2,310 |
| | $ | 212,275 |
|
| | | | | | | | | |
Global | | | | | | | | | |
Lower extremities | 238,296 |
| | 37,039 |
| | (9,733 | ) | | 431 |
| | 266,033 |
|
Upper extremities | 83,545 |
| | 167,139 |
| | — |
| | 3,033 |
| | 253,717 |
|
Biologics | 70,235 |
| | 1,647 |
| | — |
| | 79 |
| | 71,961 |
|
Sports med & other | 13,250 |
| | 10,393 |
| | — |
| | 136 |
| | 23,779 |
|
Total extremities & biologics | 405,326 |
| | 216,218 |
| | (9,733 | ) | | 3,679 |
| | 615,490 |
|
Large joint | 10,135 |
| | 30,040 |
| | — |
| | 753 |
| | 40,928 |
|
Total sales | $ | 415,461 |
| | $ | 246,258 |
| | $ | (9,733 | ) | | $ | 4,432 |
| | $ | 656,418 |
|
_______________________________
| |
(1) | Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting. |
| |
(2) | To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products. |
| |
(3) | To add revenues from Legacy Tornier's fourth quarter for the period prior to the merger closing date when operations became consolidated. |
Wright Medical Group N.V.
Reconciliation of Total Extremities & Biologics Net Sales to
Adjusted Combined Pro Forma Total Extremities & Biologics Net Sales
Average Sales per Day
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended |
| December 27, 2015 | | December 31, 2014 |
| U.S. | | International | | Global | | U.S. | | International | | Global |
Legacy Wright | $ | 72,121 |
| | $ | 21,444 |
| | $ | 93,565 |
| | $ | 62,486 |
| | $ | 20,808 |
| | $ | 83,294 |
|
Legacy Tornier | 51,552 |
| | 21,716 |
| | 73,268 |
| | N/A |
| | N/A |
| | N/A |
|
Net sales, as reported | $ | 123,673 |
| | $ | 43,160 |
| | $ | 166,833 |
| | $ | 62,486 |
| | $ | 20,808 |
| | $ | 83,294 |
|
| | | | | | | | | | | |
Standalone Tornier N.V. recast (1) | — |
| | — |
| | — |
| | 53,607 |
| | 24,588 |
| | 78,195 |
|
Revenues divested (2) | — |
| | — |
| | — |
| | (4,214 | ) | | — |
| | (4,214 | ) |
Legacy Tornier stub period (September 28, 2015 - September 30, 2015) (3) | 2,122 |
| | 1,557 |
| | 3,679 |
| | — |
| | — |
| | — |
|
Legacy Tornier impact of FX (4) | — |
| | 2,951 |
| | 2,951 |
| | — |
| | — |
| | — |
|
Pro forma legacy Tornier, excluding the impact of FX | $ | 53,674 |
| | $ | 26,224 |
| | $ | 79,898 |
| | $ | 49,393 |
| | $ | 24,588 |
| | $ | 73,981 |
|
| | | | | | | | | | | |
Legacy Wright impact of revenue recognition (5) | (2,994 | ) | | — |
| | (2,994 | ) | | — |
| | — |
| | — |
|
Legacy Wright impact of FX (4) | — |
| | 2,155 |
| | 2,155 |
| | — |
| | — |
| | — |
|
Adjusted legacy Wright, excluding the impact of FX | $ | 69,127 |
| | $ | 23,599 |
| | $ | 92,726 |
| | $ | 62,486 |
| | $ | 20,808 |
| | $ | 83,294 |
|
| | | | | | | | | | | |
Legacy Tornier selling days | 61 |
| | 65 |
| | | | 61 |
| | 65 |
| | |
Legacy Wright selling days | 58 |
| | 62 |
| | | | 62 |
| | 66 |
| | |
| | | | | | | | | | | |
Adjusted combined pro forma average sales per day, excluding the impact of FX (6) | $ | 2,072 |
| | $ | 784 |
| | $ | 2,856 |
| | $ | 1,818 |
| | $ | 694 |
| | $ | 2,512 |
|
| | | | | | | | | | | |
Adjusted pro forma average sales per day constant currency growth % (7) | 14.0 | % | | 13.0 | % | | 13.7 | % | | | | | | |
_______________________________
| |
(1) | Legacy Tornier's product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting. |
| |
(2) | To reduce from Legacy Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products. |
| |
(3) | To add revenues from Legacy Tornier's fourth quarter for the period prior to Merger closing date when operations became consolidated. |
| |
(4) | The impact of FX on net sales is calculated by translating current year results at prior year average foreign currency exchange rates. |
| |
(5) | Legacy Wright recognized approximately $3 million during the fourth quarter of 2015, as result of conforming its methodology for revenue recognition with Legacy Tornier. |
| |
(6) | Legacy Wright and Legacy Tornier have historically operated on different fiscal periods. In order to calculate Pro Forma sales growth, we have calculated average sales per day ("ASPD") based on the respective legacy company and the associated geographic region, then added the legacy company ASPD together. |
[Example: Q4 2015 Pro Forma Legacy Tornier U.S. Sales / Legacy Tornier U.S. Selling Days = $880K. Q4 2015 Adjusted Legacy Wright U.S. Sales / Legacy Wright U.S. Selling Days = $1,191K. Adjusted Pro Forma Combined Average Sales per Day = $2,072K]
| |
(7) | Reflects growth of Pro Forma ASPD over comparable period. International Sales and Global Sales growth excludes the impact of FX (see Note 4). |
Wright Medical Group N.V.
Reconciliation of Non-GAAP Combined Pro Forma Cash Earnings Per Share to Net Loss from Continuing Operations
(in thousands, except per share data--unaudited)
|
| | | | | | | |
| Three Months Ended | | Twelve Months Ended |
| December 27, 2015 | | December 27, 2015 |
Net loss from continuing operations, as reported | $ | (92,155 | ) | | $ | (238,360 | ) |
Standalone Tornier N.V. nine months ended September 27, 2015 | — |
| | (25,253 | ) |
Impact of divested products(1) | — |
| | (5,414 | ) |
Impact of purchase accounting adjustments(2) | — |
| | (2,919 | ) |
Impact of legacy Tornier stub period (September 28, 2015 - September 30, 2015)(3) | 2,882 |
| | 2,882 |
|
Non-GAAP combined pro forma net loss from continuing operations | $ | (89,273 | ) | | $ | (269,064 | ) |
Other reconciling items: | | | |
Inventory step-up amortization | 11,377 |
| | 11,446 |
|
Distributor conversions and non-competes | — |
| | 65 |
|
Non-cash interest expense on 2017 & 2020 convertible notes | 6,910 |
| | 24,767 |
|
Write-off of unamortized debt discount and deferred financing fees | — |
| | 25,101 |
|
Derivatives mark-to-market adjustments | 2,257 |
| | (9,764 | ) |
Due diligence, Transaction and transition costs | 39,155 |
| | 82,195 |
|
Share-based compensation acceleration | 14,190 |
| | 14,190 |
|
CVR mark-to-market adjustments | (280 | ) | | (7,630 | ) |
Contingent consideration fair value adjustment | — |
| | 155 |
|
Standalone Tornier N.V. transaction and transition costs | — |
| | 8,860 |
|
Standalone Tornier N.V. instrument use tax refund | — |
| | (2,000 | ) |
Tax effect of reconciling items | (1,827 | ) | | (1,854 | ) |
Non-GAAP combined pro forma net loss from continuing operations, as adjusted | $ | (17,491 | ) | | $ | (123,533 | ) |
Add back amortization of intangible assets | 9,181 |
| | 16,856 |
|
Add back Tornier N.V. amortization nine months ended September 27, 2015 | — |
| | 12,057 |
|
Non-GAAP combined pro forma cash earnings | $ | (8,310 | ) | | $ | (94,620 | ) |
Pro forma weighted-average basic shares outstanding | 102,659 |
| | 101,959 |
|
Non-GAAP combined pro forma cash earnings per share | $ | (0.08 | ) | | $ | (0.93 | ) |
_______________________________
| |
(1) | To reduce from Legacy Tornier’s historical results the net income impact of the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products. |
| |
(2) | To reflect the pro forma impact of preliminary purchase accounting adjustments for estimated depreciation, amortization, interest and taxes associated with the preliminary purchase price allocation identified as part of Wright Medical Group N.V.’s Form 8-K/A filed on November 17, 2015. |
| |
(3) | To add net income from Legacy Tornier's fourth quarter for the period prior to Merger closing date when operations became consolidated. |
Wright Medical Group N.V.
Reconciliation of Non-GAAP Combined Pro Forma Adjusted EBITDA to Net Loss from Continuing Operations
(in thousands, except per share data--unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Twelve Months Ended |
| December 27, 2015 | | December 27, 2015 |
| Wright Medical Group N.V. | | Wright Medical Group N.V. (reported) | | Standalone legacy Tornier N.V. | | Pro forma combined |
Net loss from continuing operations | $ | (92,155 | ) | | $ | (238,360 | ) | | $ | (25,253 | ) | | $ | (263,613 | ) |
Impact of divested products(1) | — |
| | — |
| | (5,414 | ) | | (5,414 | ) |
Impact of purchase accounting adjustments(2) | — |
| | — |
| | (2,919 | ) | | (2,919 | ) |
Impact of legacy Tornier stub period (September 28, 2015 - September 30, 2015)(3) | 2,882 |
| | — |
| | 2,882 |
| | 2,882 |
|
Non-GAAP combined pro forma net loss from continuing operations | $ | (89,273 | ) | | $ | (238,360 | ) | | $ | (30,704 | ) | | $ | (269,064 | ) |
Interest expense, net(4) | 11,565 |
| | 41,358 |
| | 1,352 |
| | 42,710 |
|
Benefit (provision) from income taxes(4) | (4,362 | ) | | (3,851 | ) | | 577 |
| | (3,274 | ) |
Depreciation(4) | 12,542 |
| | 29,508 |
| | 23,702 |
| | 53,210 |
|
Amortization(4) | 9,181 |
| | 16,922 |
| | 13,419 |
| | 30,341 |
|
Non-GAAP combined pro forma EBITDA | $ | (60,347 | ) | | $ | (154,423 | ) | | $ | 8,346 |
| | $ | (146,077 | ) |
Reconciling items impacting EBITDA: | | | | | | | |
Non-cash share-based compensation expense | 17,259 |
| | 24,965 |
| | 6,512 |
| | 31,477 |
|
Other expense, net | 3,489 |
| | 10,884 |
| | 262 |
| | 11,146 |
|
Inventory step-up amortization | 11,377 |
| | 11,446 |
| | — |
| | 11,446 |
|
Due diligence, transaction and transition costs | 39,155 |
| | 82,195 |
| | 8,860 |
| | 91,055 |
|
Instrument use tax refund | — |
| | — |
| | (2,000 | ) | | (2,000 | ) |
Non-GAAP combined pro forma adjusted EBITDA | $ | 10,933 |
| | $ | (24,933 | ) | | $ | 21,980 |
| | $ | (2,953 | ) |
_______________________________
| |
(1) | To add net income from Legacy Tornier's fourth quarter for the period prior to Merger closing date when operations became consolidated. |
| |
(2) | To reflect the pro forma impact of preliminary purchase accounting adjustments for estimated depreciation, amortization, interest and taxes associated with the preliminary purchase price allocation identified as part of Wright Medical Group N.V.’s Form 8-K/A filed on November 17, 2015. |
| |
(3) | To reduce from Legacy Tornier’s historical results the net income impact of the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products. |
| |
(4) | Amounts for Standalone Legacy Tornier N.V. include estimated depreciation, amortization, interest and taxes associated with the preliminary purchase price allocation (see Note 2). |
Wright Medical Group N.V.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)
|
| | | | | | | |
| December 27, 2015 | | December 31, 2014 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 139,804 |
| | $ | 227,326 |
|
Marketable securities | — |
| | 2,575 |
|
Accounts receivable, net | 131,050 |
| | 57,190 |
|
Inventories | 229,109 |
| | 88,412 |
|
Prepaid expenses and other current assets(1) | 59,921 |
| | 61,516 |
|
Total current assets(1) | 559,884 |
| | 437,019 |
|
| | | |
Property, plant and equipment, net | 240,769 |
| | 104,235 |
|
Goodwill and intangible assets, net | 1,133,087 |
| | 259,991 |
|
Other assets(1) | 155,935 |
| | 88,828 |
|
Total assets(1) | $ | 2,089,675 |
| | $ | 890,073 |
|
| | | |
Liabilities and shareholders' equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 30,904 |
| | $ | 16,729 |
|
Accrued expenses and other current liabilities(1) | 173,863 |
| | 169,614 |
|
Current portion of long-term obligations | 2,171 |
| | 718 |
|
Total current liabilities(1) | 206,938 |
| | 187,061 |
|
Long-term obligations | 577,382 |
| | 280,612 |
|
Other liabilities(1) | 250,329 |
| | 143,597 |
|
Total liabilities(1) | 1,034,649 |
| | 611,270 |
|
| | | |
Shareholders' equity | 1,055,026 |
| | 278,803 |
|
Total liabilities and shareholders' equity(1) | $ | 2,089,675 |
| | $ | 890,073 |
|
_______________________________
| |
(1) | The prior year deferred tax balances were reclassified to account for early adoption of ASU 2015-17. |
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