Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 28, 2015 | Jul. 31, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 28, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | TRNX | |
Entity Registrant Name | Tornier N.V. | |
Entity Central Index Key | 1,492,658 | |
Current Fiscal Year End Date | --12-27 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 49,266,606 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 25,883 | $ 27,940 |
Accounts receivable (net of allowance of $6,613 and $5,779, respectively) | 68,046 | 63,583 |
Inventories | 85,074 | 88,662 |
Deferred income taxes | 5,957 | 6,817 |
Prepaid taxes | 11,766 | 12,858 |
Prepaid expenses | 4,205 | 4,613 |
Other current assets | 8,587 | 5,228 |
Total current assets | 209,518 | 209,701 |
Instruments, net | 60,351 | 62,888 |
Property, plant and equipment, net | 42,558 | 44,662 |
Goodwill | 238,905 | 244,782 |
Intangible assets, net | 83,796 | 95,120 |
Deferred income taxes | 639 | 128 |
Other assets | 1,732 | 1,294 |
Total assets | 637,499 | 658,575 |
Current liabilities: | ||
Short-term borrowings and current portion of long-term debt | 8,264 | 7,394 |
Accounts payable | 20,630 | 15,073 |
Accrued liabilities | 53,234 | 59,109 |
Income taxes payable | 1,432 | 887 |
Contingent consideration, current | 1,306 | 1,989 |
Deferred income taxes | 9 | 9 |
Total current liabilities | 84,875 | 84,461 |
Long-term debt | 77,308 | 68,105 |
Deferred income taxes | 17,431 | 18,498 |
Other non-current liabilities | 8,369 | 8,621 |
Total liabilities | 187,983 | 179,685 |
Shareholders' equity: | ||
Ordinary shares, €0.03 par value; authorized 175,000,000; issued and outstanding 49,263,429 and 48,974,449 at June 28, 2015 and December 28, 2014, respectively | 1,949 | 1,939 |
Additional paid-in capital | 789,716 | 783,335 |
Accumulated deficit | (316,088) | (301,629) |
Accumulated other comprehensive loss | (26,061) | (4,755) |
Total shareholders' equity | 449,516 | 478,890 |
Total liabilities and shareholders' equity | $ 637,499 | $ 658,575 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) $ in Thousands | Jun. 28, 2015USD ($)shares | Jun. 28, 2015€ / shares | Dec. 28, 2014USD ($)shares | Dec. 28, 2014€ / shares |
Statement of Financial Position [Abstract] | ||||
Accounts receivable, allowance | $ | $ 6,613 | $ 5,779 | ||
Ordinary shares, par value | € / shares | € 0.03 | € 0.03 | ||
Ordinary shares, authorized | 175,000,000 | 175,000,000 | ||
Ordinary shares, issued | 49,263,429 | 48,974,449 | ||
Ordinary shares, outstanding | 49,263,429 | 48,974,449 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $ 83,221 | $ 86,850 | $ 171,313 | $ 175,875 |
Cost of goods sold | 18,689 | 21,227 | 38,673 | 43,691 |
Gross profit | 64,532 | 65,623 | 132,640 | 132,184 |
Operating expenses: | ||||
Selling, general and administrative | 59,118 | 62,504 | 119,206 | 121,352 |
Research and development | 5,873 | 6,068 | 11,811 | 11,790 |
Amortization of intangible assets | 4,019 | 4,320 | 8,047 | 8,654 |
Special charges | 2,466 | 686 | 4,203 | 3,372 |
Total operating expenses | 71,476 | 73,578 | 143,267 | 145,168 |
Operating loss | (6,944) | (7,955) | (10,627) | (12,984) |
Other income (expense): | ||||
Interest income | 15 | 40 | 18 | 108 |
Interest expense | (1,455) | (1,365) | (2,752) | (2,714) |
Foreign currency transaction loss | (428) | (214) | (95) | (43) |
Other non-operating income | 27 | 7 | 88 | 9 |
Loss before income taxes | (8,785) | (9,487) | (13,368) | (15,624) |
Income tax expense | (558) | (961) | (1,091) | (61) |
Consolidated net loss | $ (9,343) | $ (10,448) | $ (14,459) | $ (15,685) |
Net loss per share: | ||||
Basic and diluted | $ (0.19) | $ (0.21) | $ (0.29) | $ (0.32) |
Weighted average shares outstanding: | ||||
Basic and diluted | 49,081 | 48,612 | 49,035 | 48,568 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive (Loss) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Consolidated net loss | $ (9,343) | $ (10,448) | $ (14,459) | $ (15,685) |
Foreign currency translation adjustments | 5,765 | (3,818) | (21,306) | (5,501) |
Comprehensive loss | $ (3,578) | $ (14,266) | $ (35,765) | $ (21,186) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 28, 2015 | Jun. 29, 2014 | |
Cash flows from operating activities: | ||
Consolidated net loss | $ (14,459) | $ (15,685) |
Adjustments to reconcile consolidated net loss to cash provided by operating activities: | ||
Depreciation and amortization | 20,432 | 20,262 |
Non-cash foreign currency loss | 62 | 39 |
Deferred income taxes | (2,876) | (2,435) |
Tax benefit from reversal of valuation allowance | (146) | |
Share-based compensation | 4,658 | 4,521 |
Non-cash interest expense and discount amortization | 436 | 354 |
Inventory obsolescence | 5,013 | 5,678 |
Fair value adjustment of contingent consideration liability | 769 | |
Acquired inventory step up | 420 | |
Other non-cash items affecting earnings | 251 | 326 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | (6,213) | (3,219) |
Inventories | (6,493) | (15,326) |
Accounts payable and accruals | 3,628 | 8,167 |
Other current assets and liabilities | (3,465) | (3,347) |
Other non-current assets and liabilities | (135) | 496 |
Net cash provided by operating activities | 1,608 | 105 |
Cash flows from investing activities: | ||
Acquisition-related cash payments | (360) | (7,602) |
Purchases of intangible assets | (20) | |
Additions of instruments | (9,281) | (14,535) |
Purchases of property, plant and equipment | (3,661) | (4,880) |
Net cash used in investing activities | (13,302) | (27,037) |
Cash flows from financing activities: | ||
Change in short-term debt | 1,000 | |
Repayments of long-term debt | (770) | (563) |
Proceeds from long-term debt | 10,067 | 477 |
Deferred financing costs | (114) | |
Contingent consideration payments | (1,452) | |
Issuance of ordinary shares from stock option exercises | 1,500 | 2,067 |
Proceeds from issuance of ordinary shares | 223 | 129 |
Net cash provided by financing activities | 10,454 | 2,110 |
Effect of exchange rate changes on cash and cash equivalents | (817) | (191) |
Decrease in cash and cash equivalents | (2,057) | (25,013) |
Cash and cash equivalents: | ||
Beginning of period | 27,940 | 56,784 |
End of period | $ 25,883 | $ 31,771 |
Business Description
Business Description | 6 Months Ended |
Jun. 28, 2015 | |
Accounting Policies [Abstract] | |
Business Description | 1. Business Description Tornier N.V. (Tornier or the Company) is a global medical device company focused on providing solutions to surgeons that treat musculoskeletal injuries and disorders of the shoulder, elbow, wrist, hand, ankle and foot, which are collectively referred to as “extremity joints.” The Company sells to this surgeon base a broad line of joint replacement, trauma, sports medicine and biologic products to treat extremity joints. In certain international markets, the Company also offers joint replacement products for the hip and knee. Tornier’s global corporate headquarters are located in Amsterdam, the Netherlands. The Company also has significant operations located in Bloomington, Minnesota (U.S. headquarters, sales, marketing and distribution and administration), Grenoble, France (OUS headquarters, manufacturing and research and development), Macroom, Ireland (manufacturing), Warsaw, Indiana (research and development) and Medina, Ohio (marketing, research and development). In addition, the Company conducts local sales and distribution activities across 12 sales offices throughout Europe, Asia, Australia and Canada. Pending Merger with Wright Medical Group, Inc. On October 27, 2014, the Company entered into an agreement and plan of merger with Wright Medical Group, Inc. (Wright). The merger agreement provides that, upon the terms and subject to the conditions set forth in the merger agreement, an indirect wholly-owned subsidiary of Tornier will merge with and into Wright, with Wright continuing as the surviving company and an indirect wholly-owned subsidiary of Tornier following the transaction. Following the closing of the transaction, the combined company will conduct business as Wright Medical Group N.V. and Robert J. Palmisano, Wright’s president and chief executive officer, will become president and chief executive officer of the combined company and David H. Mowry, Tornier’s president and chief executive officer, will become executive vice president and chief operating officer of the combined company. Wright Medical Group N.V.’s board of directors will be comprised of five representatives from Wright’s existing board of directors and five representatives from Tornier’s existing board of directors, including Mr. Palmisano and Mr. Mowry. Subject to the terms and conditions of the merger agreement, at the effective time and as a result of the merger, each share of common stock of Wright issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 1.0309 Tornier ordinary shares. In addition, at the effective time and as a result of the merger, all outstanding options to purchase Wright shares and other equity awards based on Wright shares, which are outstanding immediately prior to the effective time of the merger, will become immediately vested and converted into and become, respectively, options to purchase Tornier ordinary shares and with respect to all other Wright equity awards, awards based on Tornier ordinary shares, in each case, on terms substantially identical to those in effect prior to the effective time of the merger, except for the vesting requirements and adjustments to the underlying number of shares and the exercise price based on the exchange ratio used in the merger and other adjustments as provided in the merger agreement. Upon completion of the merger, Tornier shareholders will own approximately 48% of the combined company on a fully diluted basis and Wright shareholders will own approximately 52%. On June 18, 2015, the Wright and Tornier shareholders approved the merger agreement and all transactions related thereto, including the merger, and all related proposals. The transaction remains subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) and other customary closing conditions. Under the HSR Act, Wright and Tornier must file notifications with the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice and observe a mandatory pre-merger waiting period before completing the merger. On January 28, 2015, Wright and Tornier each received a request for additional information and documentary materials, often referred to as a “second request,” from the FTC in connection with the merger relating to overlap in certain of Wright’s and Tornier’s lower extremity products. Issuance of the second request extends the waiting period under the HSR Act until 30 days after both parties have substantially complied with the second request, unless the waiting period is terminated earlier by the FTC. Both Wright and Tornier are cooperating with the FTC staff in the review of the merger. In connection with the resolution of the HSR review, Wright and Tornier currently expect to divest the Tornier Salto Talaris and Salto XT ankle replacement products and the Tornier silastic toe replacement products that generated revenue in the United States of less than $15 million in the 12 months ended September 30, 2014 and $15.5 million in the 12 months ended December 28, 2014. Both Wright and Tornier believe that the economic effect of and the strategic rationale for the merger will not materially be affected by the proposed divestiture. The transaction is expected to be completed in the third quarter of 2015. In the event that Tornier terminates the merger agreement under certain specified circumstances, Tornier may be required to pay Wright a $46 million termination fee. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 28, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and all of its wholly and majority owned subsidiaries. In consolidation, all material intercompany accounts and transactions are eliminated. Use of Estimates The consolidated financial statements are prepared in conformity with United States generally accepted accounting principles (U.S. GAAP) and include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates. Basis of Presentation The Company’s fiscal year-end is generally determined on a 52-week basis consisting of four 13-week quarters and always falls on the Sunday nearest to December 31. In the opinion of the Company’s management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring accruals, necessary for the fair presentation of the Company’s interim results. The results of operations for any interim period are not indicative of results for the full fiscal year. All amounts are presented in U.S. Dollar (“$”), except where expressly stated as being in other currencies, e.g. Euros (“€”). Seasonality The Company’s business is somewhat seasonal in nature, as many of its products are used in elective procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements ASC Topic 205 and Property, Plant, and Equipment Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity The Company has evaluated recent accounting pronouncements through ASU 2015-10 and believes that none of them, other than those described above, will have a material effect on the Company’s consolidated financial statements. The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 28, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | 3. Fair Value of Financial Instruments The Company applies ASC Topic 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. The Company measures certain assets and liabilities at fair value on a recurring or non-recurring basis. U.S. GAAP requires fair value measurements to be classified and disclosed in one of the following three categories: Level 1 Level 2 Level 3 A summary of the financial assets and liabilities that are measured at fair value on a recurring basis at June 28, 2015 and December 28, 2014 are as follows: June 28, 2015 Quoted Prices in Significant Significant Cash and cash equivalents $ 25,883 $ 25,883 $ — $ — Contingent consideration (1,306 ) — — (1,306 ) Derivative assets 280 — 280 — Total, net $ 24,857 $ 25,883 $ 280 $ (1,306 ) December 28, 2014 Quoted Prices in Significant Significant Cash and cash equivalents $ 27,940 $ 27,940 $ — $ — Contingent consideration (1,989 ) — — (1,989 ) Derivative liabilities (502 ) — (502 ) — Total, net $ 25,449 $ 27,940 $ (502 ) $ (1,989 ) As of June 28, 2015 and December 28, 2014, the Company had derivative assets of $0.3 million and derivative liabilities of $0.5 million, respectively, with recurring Level 2 fair value measurements. The derivative liabilities balance is included in the accruals line item on the consolidated balance sheet. The derivatives are foreign exchange forward contracts and their fair values are based on pricing for similar recently executed transactions. The amount of gain recognized in foreign currency transaction loss for the six months ended June 28, 2015 and June 29, 2014 related to these derivatives is $2.1 million and $0.2 million, respectively. Included in Level 3 fair value measurements as of June 28, 2015 was: (i) a $1.2 million contingent consideration liability related to potential earn-out payments for distributor acquisitions in the United States that occurred in 2013 and the first six months of 2014 and (ii) $0.1 million contingent consideration liability related to potential earn-out payments for the acquisition of a distributor in Australia that was completed in 2013. Contingent consideration liabilities are carried at fair value and are included in contingent consideration (short-term) on the consolidated balance sheets. The contingent consideration liabilities were determined based on discounted cash flow analyses that included revenue estimates and a discount rate, which are considered significant unobservable inputs as of June 28, 2015. The revenue estimates were based on current management expectations for these businesses and the discount rate used was between 8-11% and was based on the Company’s estimated weighted average cost of capital as adjusted for each transaction. To the extent that these assumptions were to change, the fair value of the contingent consideration liabilities could change significantly. The amount of interest related to the accretion of the contingent consideration included in interest expense on the consolidated statements of operations for the six months ended June 28, 2015 was immaterial, and for the six months ended June 29, 2014 was $0.3 million. There were no transfers between levels during the periods presented. Included in Level 3 fair value measurements as of December 28, 2014 was: (i) a $0.5 million contingent consideration liability related to potential earn-out payments for the acquisition of OrthoHelix that was completed in October 2012, (ii) a $1.4 million contingent consideration liability related to potential earn-out payments for distributor acquisitions in the United States that occurred throughout 2013 and the first six months of 2014, and (iii) a $0.1 million contingent consideration liability related to potential earn-out payments for the acquisition of a distributor in Australia that was completed in 2013. A rollforward of the Level 3 contingent consideration liability for the six months ended June 28, 2015 is as follows (in thousands): Contingent consideration liability at December 28, 2014 $ 1,989 Additions — Fair value adjustments 769 Settlements (1,452 ) Interest accretion 9 Foreign currency translation (9 ) Contingent consideration liability at June 28, 2015 $ 1,306 The Company reviews the carrying amount of its long-lived assets other than goodwill for potential impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. During the six months ended June 28, 2015 and June 29, 2014, the Company recognized no impairments. As of June 28, 2015 and December 28, 2014, the Company had short-term and long-term debt of $85.6 million and $75.5 million, respectively, the vast majority of which was variable rate debt. The fair value of the Company’s debt obligations approximates carrying value as a result of its variable rate term and is considered a Level 2 fair value measurement. |
Inventories
Inventories | 6 Months Ended |
Jun. 28, 2015 | |
Inventory Disclosure [Abstract] | |
Inventories | 4. Inventories Inventory balances consist of the following (in thousands): June 28, 2015 December 28, 2014 Raw materials $ 6,876 $ 7,769 Work-in-process 11,125 9,197 Finished goods 67,073 71,696 Total $ 85,074 $ 88,662 |
Property, Plant and Equipment
Property, Plant and Equipment | 6 Months Ended |
Jun. 28, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | 5. Property, Plant and Equipment Property, plant and equipment balances consist of the following (in thousands): June 28, 2015 December 28, 2014 Land $ 1,358 $ 1,481 Building and improvements 12,665 12,828 Machinery and equipment 28,342 30,892 Furniture, fixtures and office equipment 26,350 27,649 Software 16,152 4,672 Construction in progress 681 10,663 Property, plant and equipment, gross 85,548 88,185 Accumulated depreciation (42,990 ) (43,523 ) Property, plant and equipment, net $ 42,558 $ 44,662 During the first quarter of 2015, the Company completed the implementation of its Enterprise Resource Planning system in the United States which resulted in a reclassification of construction in progress to software. |
Instruments
Instruments | 6 Months Ended |
Jun. 28, 2015 | |
Text Block [Abstract] | |
Instruments | 6. Instruments Instruments are included in long-term assets on the consolidated balance sheets and consist of the following (in thousands): June 28, 2015 December 28, 2014 Instruments $ 108,537 $ 106,788 Instruments in process 23,924 23,456 Accumulated depreciation (72,110 ) (67,356 ) Instruments, net $ 60,351 $ 62,888 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 6 Months Ended |
Jun. 28, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | 7. Goodwill and Other Intangible Assets The following table summarizes the changes in the carrying amount of goodwill (in thousands): Balance at December 28, 2014 $ 244,782 Foreign currency translation (5,877 ) Balance at June 28, 2015 $ 238,905 The components of identifiable intangible assets are as follows (in thousands): Gross value Accumulated amortization Net value Balances at June 28, 2015 Intangible assets subject to amortization: Developed technology $ 106,117 $ (53,992 ) $ 52,125 Customer relationships 52,328 (31,646 ) 20,682 Licenses 7,148 (5,723 ) 1,425 Other 6,378 (5,321 ) 1,057 Intangible assets not subject to amortization: Trade name 8,507 — 8,507 Total $ 180,478 $ (96,682 ) $ 83,796 Gross value Accumulated amortization Net value Balances at December 28, 2014 Intangible assets subject to amortization: Developed technology $ 108,868 $ (51,107 ) $ 57,761 Customer relationships 56,008 (31,656 ) 24,352 Licenses 6,827 (5,145 ) 1,682 Other 6,958 (4,410 ) 2,548 Intangible assets not subject to amortization: Trade name 8,777 — 8,777 Total $ 187,438 $ (92,318 ) $ 95,120 Estimated annual amortization expense for fiscal years ending 2015 through 2019 is as follows (in thousands): Amortization expense 2015 $ 16,029 2016 13,618 2017 12,526 2018 11,708 2019 10,331 During the six months ended June 29, 2014, the Company acquired intangible assets in the form of non-compete agreements and goodwill in the amounts of $2.5 million related to the acquisition of certain U.S. distributors and independent sales agencies. |
Debt
Debt | 6 Months Ended |
Jun. 28, 2015 | |
Debt Disclosure [Abstract] | |
Debt | 8. Debt A summary of debt is as follows (in thousands): June 28, 2015 December 28, 2014 Line of credit $ 7,000 $ 6,000 Mortgages 2,850 3,553 Bank term debt 73,687 63,743 Shareholder debt 2,035 2,203 Total debt 85,572 75,499 Less current portion (8,264 ) (7,394 ) Long-term debt $ 77,308 $ 68,105 Line of Credit On October 4, 2012, the Company, and one of its U.S. operating subsidiaries, Tornier, Inc. (Tornier USA), entered into a credit agreement with Bank of America, N.A., as Administrative Agent, SG Americas Securities, LLC, as Syndication Agent, BMO Capital Markets and JPMorgan Chase Bank, N.A., as Co-Documentation Agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated and SG Americas Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners, and the other lenders party thereto. The credit facility included a senior secured revolving credit facility to Tornier USA denominated at the election of Tornier USA, in U.S. dollars, Euros, pounds sterling, and yen in an aggregate principal amount of up to the U.S. dollar equivalent of $30.0 million. Funds available under the revolving credit facility may be used for general corporate purposes. Loans under the revolving credit facility bear interest at (a) the alternate base rate (if denominated in U.S. dollars), equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 1/2 of 1%, and (iii) the adjusted LIBO rate plus 1%, plus in the case of each of (i)-(iii) above, Mortgages The Company has mortgages secured by an office building in Montbonnot, France. These mortgages had an outstanding balance of $2.9 million and $3.6 million at June 28, 2015 and December 28, 2014, respectively, and bear fixed annual interest rates of 2.55%-4.9%. Bank Term Debt In addition to the senior secured revolving credit facility discussed above, the credit agreement entered into on October 4, 2012 also provided for an aggregate credit commitment to Tornier USA of $115.0 million, consisting of: (1) a senior secured term loan facility to Tornier USA denominated in U.S. dollars in an aggregate principal amount of up to $75.0 million (USD term facility); and (2) a senior secured term loan facility to Tornier USA denominated in Euros in an aggregate principal amount of up to the U.S. dollar equivalent of $40.0 million. The senior secured term loan facility denominated in Euros was repaid in full during 2013. The borrowings under the term loan facilities were used to pay the cash purchase consideration for the OrthoHelix acquisition, and fees, costs and expenses incurred in connection with the acquisition and the credit agreement and to repay prior existing indebtedness of the Company and its subsidiaries. On March 13, 2015, Tornier USA entered into an incremental term facility amendment. Under terms of the amendment, the senior secured term loan facility denominated in U.S. dollars available to Tornier was increased by an additional aggregate principal amount of $10.0 million with the amortization schedule revised to reflect the additional term loan advance. The proceeds will be used for general corporate purposes. The amendment provides for no other changes to covenants or events of default under the credit facility, and provides for no change to any guaranty or collateral relating to the credit agreement. The term loans mature in October 2017. The closing of our pending merger agreement with Wright will be considered an event of default under the credit agreement, thereby requiring all outstanding debt under the agreement be repaid upon closing. Borrowings under these facilities within the credit agreement as of June 28, 2015 and December 28, 2014 were as follows: June 28, 2015 December 28, 2014 Senior secured U.S dollar term loan $ 74,031 $ 64,031 Deferred financing cost (2,074 ) (2,315 ) Total $ 71,957 $ 61,716 The USD term facility bears interest at (a) the alternate base rate (if denominated in U.S. dollars), equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 1/2 of 1%, and (iii) the adjusted LIBO rate, with a floor of 1% (as defined in the new credit agreement) plus 1%, plus in the case of each of (i)-(iii) above, an applicable rate of 2.00% or 2.25% (depending on the Company’s total net leverage ratio as defined in the Company’s credit agreement), or (b) in the case of a Eurocurrency loan (as defined in the Company’s credit agreement), at the applicable adjusted LIBO rate for the relevant interest period plus an applicable rate of 3.00% or 3.25% (depending on the Company’s total net leverage ratio), plus the mandatory cost (as defined in the credit agreement) if such loan is made in a currency other than U.S. dollars or from a lending office in the United Kingdom or a participating member state (as defined in the credit agreement). The credit agreement, including the term loan and the revolving line of credit, contains covenants, including financial covenants which require the Company to maintain minimum interest coverage, annual capital expenditure limits and maximum total net leverage ratios, and customary events of default. The obligations under the credit agreement are guaranteed by the Company, Tornier USA and certain other specified subsidiaries of the Company, and subject to certain exceptions, are secured by a first priority security interest in substantially all of the assets of the Company and certain specified existing and future subsidiaries of the Company. Additionally, the credit agreement includes a restriction on the Company’s ability to pay dividends. The Company was in compliance with all covenants as of June 28, 2015. Also included in bank term debt is $0.4 million in a Euro loan and $1.3 million and $1.6 million related to capital leases at June 28, 2015 and December 28, 2014, respectively. Shareholder Debt In 2008, one of the Company’s 51%-owned and consolidated subsidiaries borrowed $2.2 million from a member of the Company’s board of directors who is also a 49% owner of the consolidated subsidiary. This loan was used to partially fund the purchase of real estate in Grenoble, France, to be used as a manufacturing facility. Interest on the debt is variable based on three-month Euro Libor rate plus 0.5% and has no stated term. The outstanding balance on this debt was $2.0 million and $2.2 million as of June 28, 2015 and December 28, 2014, respectively. The non-controlling interest in this subsidiary is deemed immaterial to the consolidated financial statements. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 28, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | 9. Share-Based Compensation Share-based awards are granted under the Tornier N.V. 2010 Amended and Restated Incentive Plan (the 2010 plan). This plan allows for the issuance of up to a maximum of 10.2 million ordinary shares in connection with the grant of share-based awards, including stock options, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate. To date, only options to purchase ordinary shares (options) and stock grants in the form of restricted stock units (RSUs) have been awarded under the plan. Both types of awards generally have graded vesting periods of four years and the options generally expire ten years after the grant date. Options are granted with exercise prices equal to the fair value of the Company’s ordinary shares on the date of grant. Under the terms of the merger agreement with Wright, the Company is prohibited from granting additional share-based awards under the 2010 Plan or otherwise. The Company recognizes compensation expense for these awards on a straight-line basis over the vesting period. Share-based compensation expense is included in cost of goods sold, selling, general and administrative expense, and research and development expense on the consolidated statements of operations. Below is a summary of the allocation of share-based compensation (in thousands): Six months ended June 28, 2015 June 29, 2014 (unaudited) (unaudited) Cost of goods sold $ 361 $ 304 Selling, general and administrative 3,883 3,900 Research and development 414 317 Total $ 4,658 $ 4,521 During the six months ended June 28, 2015, the Company did not grant options or RSUs due to the pending merger with Wright. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 28, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 10. Income Taxes The Company’s effective tax rate for the six months ended June 28, 2015 was 8.2%. During the six months ended June 28, 2015, the Company recognized $1.1 million of income tax expense on pre-tax losses of $13.4 million. The Company recognized $0.7 million of tax expense in certain European jurisdictions and $0.4 in the U.S during the six months ended June 28, 2015. Given the Company’s history of operating losses, the Company does not generally recognize a provision for income taxes in the United States and certain jurisdictions in Europe because it has established a valuation allowance for substantially all of the net deferred tax assets in these jurisdictions. The Company records tax expense or benefit in certain other international jurisdictions where a valuation allowance has not been established. The mix of pre-tax income or loss in these jurisdictions as well as in the jurisdictions in which valuation allowances are established are the primary drivers of the Company’s effective tax rate. The Company operates in multiple income tax jurisdictions both inside and outside the United States. Income tax authorities in these jurisdictions regularly perform audits of the Company’s income tax filings. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on current interpretations of complex income tax regulations. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments if changes to the income allocation are required between jurisdictions with different income tax rates. |
Capital Stock and Earnings Per
Capital Stock and Earnings Per Share | 6 Months Ended |
Jun. 28, 2015 | |
Earnings Per Share [Abstract] | |
Capital Stock and Earnings Per Share | 11. Capital Stock and Earnings Per Share The Company had 49.3 million and 49.0 million ordinary shares issued and outstanding as of both June 28, 2015 and December 28, 2014, respectively. The Company had options to purchase ordinary shares and RSUs outstanding of an aggregate 2.9 million and 3.1 million at June 28, 2015 and December 28, 2014, respectively. None of the options or RSUs were included in diluted earnings per share for the six months ended June 28, 2015 and June 29, 2014 because the Company recorded a net loss in those periods; and therefore, including these instruments would be anti-dilutive. |
Special Charges
Special Charges | 6 Months Ended |
Jun. 28, 2015 | |
Text Block [Abstract] | |
Special Charges | 12. Special Charges Special charges are recorded as a separate line item within operating expenses on the consolidated statements of operations and primarily include operating expenses directly related to business combinations and related integration activities, restructuring initiatives, management exit costs and certain other items that are typically infrequent in nature and that affect the comparability and trend of operating results. The table below summarizes amounts included in special charges for the related periods: Six months ended June 28, 2015 June 29, 2014 Acquisition, integration and distributor transition costs $ 818 $ 2,036 Wright merger-related charges 5,385 — OrthoHelix restructuring charges — 1,011 Instrument use tax refund (2,000 ) — Other — 325 Total $ 4,203 $ 3,372 Included in special charges for the six months ended June 28, 2015 were $0.8 million of expenses related to U.S. distributor transitions, $5.4 million of merger-related expenses related to the pending merger with Wright, and a credit of $2.0 million due to an instrument use tax refund. Included in special charges for the six months ended June 29, 2014 were $2.0 million of expenses related to U.S. distributor transitions and the integration of OrthoHelix and $1.0 million of OrthoHelix restructuring costs. |
Litigation
Litigation | 6 Months Ended |
Jun. 28, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | 13. Litigation From time to time, the Company is subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. These actions and proceedings may relate to, among other things, product liability, intellectual property, distributor, commercial and other matters. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where the Company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. On November 25, 2014, a class action complaint was filed in the Court of Chancery of the state of Delaware (Delaware Chancery Court), by a purported shareholder of Wright under the caption Paul Parshall v. Wright Medical Group, Inc., et al., C.A. No. 10400-CB Also on November 25, 2014, a second class action complaint was filed in the Chancery Court of Shelby County Tennessee, for the Thirtieth Judicial District, at Memphis (Tennessee Chancery Court), by a purported shareholder of Wright under the caption Anthony Marks as Trustee for Marks Clan Super v. Wright Medical Group, Inc., et al., CH-14-1721-1 Anthony Marks as Trustee for Marks Clan Super v. Wright Medical Group, Inc., et al., C.A. No. 10706-CB On March 2, 2015, the Delaware Chancery Court consolidated Paul Parshall v. Wright Medical Group, Inc., et al., C.A. No. 10400-CB Anthony Marks as Trustee for Marks Clan Super v. Wright Medical Group, Inc., et al., C.A. No. 10706-CB In re Wright Medical Group, Inc. Stockholders Litigation, C.A. No. 10400-CB On November 26, 2014, a third class action complaint was filed in the Circuit Court of Tennessee, for the Thirtieth Judicial District, at Memphis (the “Tennessee Circuit Court”), by a purported shareholder of Wright under the caption City of Warwick Retirement System v. Gary D. Blackford et al., CT-005015-14 On December 2, 2014, a fourth class action complaint was filed in the Tennessee Chancery Court by a purported shareholder of Wright under the caption Paulette Jacques v. Wright Medical Group, Inc., et al., CH-14-1736-1 On March 24, 2015, a fifth class action complaint was filed in the Delaware Chancery Court, by a purported shareholder of Wright under the caption Michael Prince v. Robert J. Palmisano, et al., C.A. No. 10829-CB Prince In an order dated March 31, 2015, the Tennessee Circuit Court transferred City of Warwick Retirement System v. Gary D. Blackford et al., CT-005015-14 Paulette Jacques v. Wright Medical Group, Inc., et al., CH-14-1736-1 On May 28, 2015, the parties to the Consolidated Delaware Action reached an agreement-in-principle to settle the cases, which has been memorialized in a memorandum of understanding. In connection with the contemplated settlement, Wright and the Company agreed to make certain supplemental disclosures in the Company’s publicly-filed Securities and Exchange Commission Form S-4 registration statement, which were sought by the plaintiffs in connection with the Consolidated Delaware Action. The parties to the Consolidated Delaware Action also expect that, in connection with the contemplated settlement, counsel for plaintiffs will make an application for an award of attorneys’ fees. The contemplated settlement will be subject to customary conditions, including completion of appropriate settlement documentation, approval by the court, notice to the class and a hearing, and consummation of the merger. There can be no assurance that the contemplated settlement will be finalized or that court approval will be granted. None of the lawsuits has formally specified an amount of alleged damages. As a result, the Company is unable to reasonably estimate the possible loss or range of losses, if any, arising from the lawsuits. If any injunctive relief sought in these lawsuits were to be granted, it could delay or prohibit the closing of the merger. The Company believes that these lawsuits are without merit. In the opinion of management, as of June 28, 2015, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations or financial position. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 28, 2015 | |
Accounting Policies [Abstract] | |
Consolidation | Consolidation The consolidated financial statements include the accounts of the Company and all of its wholly and majority owned subsidiaries. In consolidation, all material intercompany accounts and transactions are eliminated. |
Use of Estimates | Use of Estimates The consolidated financial statements are prepared in conformity with United States generally accepted accounting principles (U.S. GAAP) and include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates. |
Basis of Presentation | Basis of Presentation The Company’s fiscal year-end is generally determined on a 52-week basis consisting of four 13-week quarters and always falls on the Sunday nearest to December 31. In the opinion of the Company’s management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring accruals, necessary for the fair presentation of the Company’s interim results. The results of operations for any interim period are not indicative of results for the full fiscal year. All amounts are presented in U.S. Dollar (“$”), except where expressly stated as being in other currencies, e.g. Euros (“€”). |
Seasonality | Seasonality The Company’s business is somewhat seasonal in nature, as many of its products are used in elective procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements ASC Topic 205 and Property, Plant, and Equipment Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity The Company has evaluated recent accounting pronouncements through ASU 2015-10 and believes that none of them, other than those described above, will have a material effect on the Company’s consolidated financial statements. The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies ASC Topic 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. The Company measures certain assets and liabilities at fair value on a recurring or non-recurring basis. U.S. GAAP requires fair value measurements to be classified and disclosed in one of the following three categories: Level 1 Level 2 Level 3 A summary of the financial assets and liabilities that are measured at fair value on a recurring basis at June 28, 2015 and December 28, 2014 are as follows: June 28, 2015 Quoted Prices in Significant Significant Cash and cash equivalents $ 25,883 $ 25,883 $ — $ — Contingent consideration (1,306 ) — — (1,306 ) Derivative assets 280 — 280 — Total, net $ 24,857 $ 25,883 $ 280 $ (1,306 ) December 28, 2014 Quoted Prices in Significant Significant Cash and cash equivalents $ 27,940 $ 27,940 $ — $ — Contingent consideration (1,989 ) — — (1,989 ) Derivative liabilities (502 ) — (502 ) — Total, net $ 25,449 $ 27,940 $ (502 ) $ (1,989 ) As of June 28, 2015 and December 28, 2014, the Company had derivative assets of $0.3 million and derivative liabilities of $0.5 million, respectively, with recurring Level 2 fair value measurements. The derivative liabilities balance is included in the accruals line item on the consolidated balance sheet. The derivatives are foreign exchange forward contracts and their fair values are based on pricing for similar recently executed transactions. The amount of gain recognized in foreign currency transaction loss for the six months ended June 28, 2015 and June 29, 2014 related to these derivatives is $2.1 million and $0.2 million, respectively. Included in Level 3 fair value measurements as of June 28, 2015 was: (i) a $1.2 million contingent consideration liability related to potential earn-out payments for distributor acquisitions in the United States that occurred in 2013 and the first six months of 2014 and (ii) $0.1 million contingent consideration liability related to potential earn-out payments for the acquisition of a distributor in Australia that was completed in 2013. Contingent consideration liabilities are carried at fair value and are included in contingent consideration (short-term) on the consolidated balance sheets. The contingent consideration liabilities were determined based on discounted cash flow analyses that included revenue estimates and a discount rate, which are considered significant unobservable inputs as of June 28, 2015. The revenue estimates were based on current management expectations for these businesses and the discount rate used was between 8-11% and was based on the Company’s estimated weighted average cost of capital as adjusted for each transaction. To the extent that these assumptions were to change, the fair value of the contingent consideration liabilities could change significantly. The amount of interest related to the accretion of the contingent consideration included in interest expense on the consolidated statements of operations for the six months ended June 28, 2015 was immaterial, and for the six months ended June 29, 2014 was $0.3 million. There were no transfers between levels during the periods presented. Included in Level 3 fair value measurements as of December 28, 2014 was: (i) a $0.5 million contingent consideration liability related to potential earn-out payments for the acquisition of OrthoHelix that was completed in October 2012, (ii) a $1.4 million contingent consideration liability related to potential earn-out payments for distributor acquisitions in the United States that occurred throughout 2013 and the first six months of 2014, and (iii) a $0.1 million contingent consideration liability related to potential earn-out payments for the acquisition of a distributor in Australia that was completed in 2013. A rollforward of the Level 3 contingent consideration liability for the six months ended June 28, 2015 is as follows (in thousands): Contingent consideration liability at December 28, 2014 $ 1,989 Additions — Fair value adjustments 769 Settlements (1,452 ) Interest accretion 9 Foreign currency translation (9 ) Contingent consideration liability at June 28, 2015 $ 1,306 The Company reviews the carrying amount of its long-lived assets other than goodwill for potential impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. During the six months ended June 28, 2015 and June 29, 2014, the Company recognized no impairments. As of June 28, 2015 and December 28, 2014, the Company had short-term and long-term debt of $85.6 million and $75.5 million, respectively, the vast majority of which was variable rate debt. The fair value of the Company’s debt obligations approximates carrying value as a result of its variable rate term and is considered a Level 2 fair value measurement. |
Fair Value of Financial Instr21
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Fair Value Disclosures [Abstract] | |
Summary of Financial Assets and Liabilities Measured at Fair Value | A summary of the financial assets and liabilities that are measured at fair value on a recurring basis at June 28, 2015 and December 28, 2014 are as follows: June 28, 2015 Quoted Prices in Significant Significant Cash and cash equivalents $ 25,883 $ 25,883 $ — $ — Contingent consideration (1,306 ) — — (1,306 ) Derivative assets 280 — 280 — Total, net $ 24,857 $ 25,883 $ 280 $ (1,306 ) December 28, 2014 Quoted Prices in Significant Significant Cash and cash equivalents $ 27,940 $ 27,940 $ — $ — Contingent consideration (1,989 ) — — (1,989 ) Derivative liabilities (502 ) — (502 ) — Total, net $ 25,449 $ 27,940 $ (502 ) $ (1,989 ) |
Summary of Contingent Consideration Liability | A rollforward of the Level 3 contingent consideration liability for the six months ended June 28, 2015 is as follows (in thousands): Contingent consideration liability at December 28, 2014 $ 1,989 Additions — Fair value adjustments 769 Settlements (1,452 ) Interest accretion 9 Foreign currency translation (9 ) Contingent consideration liability at June 28, 2015 $ 1,306 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Inventory Disclosure [Abstract] | |
Inventory Balances | Inventory balances consist of the following (in thousands): June 28, 2015 December 28, 2014 Raw materials $ 6,876 $ 7,769 Work-in-process 11,125 9,197 Finished goods 67,073 71,696 Total $ 85,074 $ 88,662 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment Balances | Property, plant and equipment balances consist of the following (in thousands): June 28, 2015 December 28, 2014 Land $ 1,358 $ 1,481 Building and improvements 12,665 12,828 Machinery and equipment 28,342 30,892 Furniture, fixtures and office equipment 26,350 27,649 Software 16,152 4,672 Construction in progress 681 10,663 Property, plant and equipment, gross 85,548 88,185 Accumulated depreciation (42,990 ) (43,523 ) Property, plant and equipment, net $ 42,558 $ 44,662 |
Instruments (Tables)
Instruments (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Text Block [Abstract] | |
Instruments Included in Long-Term Assets | Instruments are included in long-term assets on the consolidated balance sheets and consist of the following (in thousands): June 28, 2015 December 28, 2014 Instruments $ 108,537 $ 106,788 Instruments in process 23,924 23,456 Accumulated depreciation (72,110 ) (67,356 ) Instruments, net $ 60,351 $ 62,888 |
Goodwill and Other Intangible25
Goodwill and Other Intangible Assets (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes in Carrying Amount of Goodwill | The following table summarizes the changes in the carrying amount of goodwill (in thousands): Balance at December 28, 2014 $ 244,782 Foreign currency translation (5,877 ) Balance at June 28, 2015 $ 238,905 |
Components of Identifiable Intangible Assets | The components of identifiable intangible assets are as follows (in thousands): Gross value Accumulated amortization Net value Balances at June 28, 2015 Intangible assets subject to amortization: Developed technology $ 106,117 $ (53,992 ) $ 52,125 Customer relationships 52,328 (31,646 ) 20,682 Licenses 7,148 (5,723 ) 1,425 Other 6,378 (5,321 ) 1,057 Intangible assets not subject to amortization: Trade name 8,507 — 8,507 Total $ 180,478 $ (96,682 ) $ 83,796 Gross value Accumulated amortization Net value Balances at December 28, 2014 Intangible assets subject to amortization: Developed technology $ 108,868 $ (51,107 ) $ 57,761 Customer relationships 56,008 (31,656 ) 24,352 Licenses 6,827 (5,145 ) 1,682 Other 6,958 (4,410 ) 2,548 Intangible assets not subject to amortization: Trade name 8,777 — 8,777 Total $ 187,438 $ (92,318 ) $ 95,120 |
Estimated Annual Amortization Expense | Estimated annual amortization expense for fiscal years ending 2015 through 2019 is as follows (in thousands): Amortization expense 2015 $ 16,029 2016 13,618 2017 12,526 2018 11,708 2019 10,331 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Debt Disclosure [Abstract] | |
Summary of Debt | A summary of debt is as follows (in thousands): June 28, 2015 December 28, 2014 Line of credit $ 7,000 $ 6,000 Mortgages 2,850 3,553 Bank term debt 73,687 63,743 Shareholder debt 2,035 2,203 Total debt 85,572 75,499 Less current portion (8,264 ) (7,394 ) Long-term debt $ 77,308 $ 68,105 |
Summary of Borrowings | Borrowings under these facilities within the credit agreement as of June 28, 2015 and December 28, 2014 were as follows: June 28, 2015 December 28, 2014 Senior secured U.S dollar term loan $ 74,031 $ 64,031 Deferred financing cost (2,074 ) (2,315 ) Total $ 71,957 $ 61,716 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Allocation of Share-Based Compensation | Below is a summary of the allocation of share-based compensation (in thousands): Six months ended June 28, 2015 June 29, 2014 (unaudited) (unaudited) Cost of goods sold $ 361 $ 304 Selling, general and administrative 3,883 3,900 Research and development 414 317 Total $ 4,658 $ 4,521 |
Special Charges (Tables)
Special Charges (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Text Block [Abstract] | |
Schedule of Special Charges | The table below summarizes amounts included in special charges for the related periods: Six months ended June 28, 2015 June 29, 2014 Acquisition, integration and distributor transition costs $ 818 $ 2,036 Wright merger-related charges 5,385 — OrthoHelix restructuring charges — 1,011 Instrument use tax refund (2,000 ) — Other — 325 Total $ 4,203 $ 3,372 |
Business Description - Addition
Business Description - Additional Information (Detail) $ in Millions | Oct. 27, 2014USD ($)Representativesshares | Jun. 28, 2015Office | Dec. 28, 2014USD ($) | Sep. 30, 2014USD ($) |
Description Of Business [Line Items] | ||||
Local sales and distribution activities, number of offices | Office | 12 | |||
Revenue from assets divested | $ 15.5 | $ 15 | ||
Tornier N. V. [Member] | ||||
Description Of Business [Line Items] | ||||
Number of representatives for Wright Medical Group N.V.'s board of directors | Representatives | 5 | |||
Percentage of ownership | 48.00% | |||
Wright [Member] | ||||
Description Of Business [Line Items] | ||||
Number of representatives for Wright Medical Group N.V.'s board of directors | Representatives | 5 | |||
Common stock conversion | shares | 1.0309 | |||
Percentage of ownership | 52.00% | |||
Merger agreement termination fee | $ 46 |
Fair Value of Financial Instr30
Fair Value of Financial Instruments - Summary of Financial Assets and Liabilities Measured at Fair Value (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 | Jun. 29, 2014 | Dec. 29, 2013 |
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items] | ||||
Cash and cash equivalents | $ 25,883 | $ 27,940 | $ 31,771 | $ 56,784 |
Contingent consideration | (1,306) | (1,989) | ||
Fair Value, Measurements, Recurring [Member] | ||||
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items] | ||||
Cash and cash equivalents | 25,883 | 27,940 | ||
Contingent consideration | (1,306) | (1,989) | ||
Derivative assets | 280 | |||
Derivative liabilities | (502) | |||
Total, net | 24,857 | 25,449 | ||
Quoted Prices in Active Markets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | ||||
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items] | ||||
Cash and cash equivalents | 25,883 | 27,940 | ||
Total, net | 25,883 | 27,940 | ||
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | ||||
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items] | ||||
Derivative assets | 280 | |||
Derivative liabilities | (502) | |||
Total, net | 280 | (502) | ||
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member] | ||||
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items] | ||||
Contingent consideration | (1,306) | (1,989) | ||
Total, net | $ (1,306) | $ (1,989) |
Fair Value of Financial Instr31
Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Dec. 28, 2014 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Contingent consideration related to acquisition | $ 1,306,000 | $ 1,989,000 | |
Interest expense on the accretion of the contingent consideration | $ 300,000 | ||
Transfers between levels | 0 | 0 | |
Intangible impairment | 0 | 0 | |
Short-term and long-term debt | $ 85,600,000 | 75,500,000 | |
Maximum [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Discount rate, Percentage | 11.00% | ||
Minimum [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Discount rate, Percentage | 8.00% | ||
Significant Other Observable Inputs (Level 2) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Derivative asset, fair value | $ 300,000 | ||
Derivative liability, fair value | 500,000 | ||
Foreign currency gain (loss) related to derivatives | 2,100,000 | $ 200,000 | |
OrthoHelix [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Contingent consideration related to acquisition | 500,000 | ||
Distributor in Australia [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Contingent consideration related to acquisition | 100,000 | 100,000 | |
Distributor in the United States [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Contingent consideration related to acquisition | $ 1,200,000 | $ 1,400,000 |
Fair Value of Financial Instr32
Fair Value of Financial Instruments - Summary of Contingent Consideration Liability (Detail) $ in Thousands | 6 Months Ended |
Jun. 28, 2015USD ($) | |
Debt Instrument Fair Value Carrying Value [Abstract] | |
Contingent consideration liability at December 28, 2014 | $ 1,989 |
Additions | 0 |
Fair value adjustments | 769 |
Settlements | (1,452) |
Interest accretion | 9 |
Foreign currency translation | (9) |
Contingent consideration liability at June 28, 2015 | $ 1,306 |
Inventories - Inventory Balance
Inventories - Inventory Balances (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 6,876 | $ 7,769 |
Work-in-process | 11,125 | 9,197 |
Finished goods | 67,073 | 71,696 |
Total | $ 85,074 | $ 88,662 |
Property, Plant and Equipment -
Property, Plant and Equipment - Property, Plant and Equipment Balances (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Property Plant and Equipment Useful Life and Values [Abstract] | ||
Land | $ 1,358 | $ 1,481 |
Building and improvements | 12,665 | 12,828 |
Machinery and equipment | 28,342 | 30,892 |
Furniture, fixtures and office equipment | 26,350 | 27,649 |
Software | 16,152 | 4,672 |
Construction in progress | 681 | 10,663 |
Property, plant and equipment, gross | 85,548 | 88,185 |
Accumulated depreciation | (42,990) | (43,523) |
Property, plant and equipment, net | $ 42,558 | $ 44,662 |
Instruments - Instruments Inclu
Instruments - Instruments Included in Long-Term Assets (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Offsetting [Abstract] | ||
Instruments | $ 108,537 | $ 106,788 |
Instruments in process | 23,924 | 23,456 |
Accumulated depreciation | (72,110) | (67,356) |
Instruments, net | $ 60,351 | $ 62,888 |
Goodwill and Other Intangible36
Goodwill and Other Intangible Assets - Changes in Carrying Amount of Goodwill (Detail) $ in Thousands | 6 Months Ended |
Jun. 28, 2015USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill, Beginning balance | $ 244,782 |
Foreign currency translation | (5,877) |
Goodwill, Ending balance | $ 238,905 |
Goodwill and Other Intangible37
Goodwill and Other Intangible Assets - Components of Identifiable Intangible Assets (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Goodwill And Other Intangible Assets [Line Items] | ||
Gross Value | $ 180,478 | $ 187,438 |
Accumulated Amortization | (96,682) | (92,318) |
Net Value | 83,796 | 95,120 |
Developed Technology [Member] | ||
Goodwill And Other Intangible Assets [Line Items] | ||
Gross Value | 106,117 | 108,868 |
Accumulated Amortization | (53,992) | (51,107) |
Net Value | 52,125 | 57,761 |
Customer Relationships [Member] | ||
Goodwill And Other Intangible Assets [Line Items] | ||
Gross Value | 52,328 | 56,008 |
Accumulated Amortization | (31,646) | (31,656) |
Net Value | 20,682 | 24,352 |
Licenses [Member] | ||
Goodwill And Other Intangible Assets [Line Items] | ||
Gross Value | 7,148 | 6,827 |
Accumulated Amortization | (5,723) | (5,145) |
Net Value | 1,425 | 1,682 |
Other [Member] | ||
Goodwill And Other Intangible Assets [Line Items] | ||
Gross Value | 6,378 | 6,958 |
Accumulated Amortization | (5,321) | (4,410) |
Net Value | 1,057 | 2,548 |
Trade Name [Member] | ||
Goodwill And Other Intangible Assets [Line Items] | ||
Gross Value | 8,507 | 8,777 |
Net Value | $ 8,507 | $ 8,777 |
Goodwill and Other Intangible38
Goodwill and Other Intangible Assets - Estimated Annual Amortization Expense (Detail) $ in Thousands | Jun. 28, 2015USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2,015 | $ 16,029 |
2,016 | 13,618 |
2,017 | 12,526 |
2,018 | 11,708 |
2,019 | $ 10,331 |
Goodwill and Other Intangible39
Goodwill and Other Intangible Assets - Additional Information (Detail) - United States [Member] $ in Millions | 6 Months Ended |
Jun. 29, 2014USD ($) | |
Goodwill And Intangible Assets [Line Items] | |
Goodwill acquired | $ 2.5 |
Non-Compete Agreements [Member] | |
Goodwill And Intangible Assets [Line Items] | |
Intangible assets acquired | $ 2.5 |
Debt - Summary of Debt (Detail)
Debt - Summary of Debt (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Debt Disclosure [Abstract] | ||
Line of credit | $ 7,000 | $ 6,000 |
Mortgages | 2,850 | 3,553 |
Bank term debt | 73,687 | 63,743 |
Shareholder debt | 2,035 | 2,203 |
Total debt | 85,572 | 75,499 |
Total debt | 85,572 | 75,499 |
Less current portion | (8,264) | (7,394) |
Long-term debt | $ 77,308 | $ 68,105 |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) | 6 Months Ended | ||
Jun. 28, 2015 | Dec. 28, 2014 | Dec. 31, 2008 | |
Debt Disclosure [Line Items] | |||
Borrowings | $ 7,000,000 | $ 6,000,000 | |
Euro loan | 71,957,000 | 61,716,000 | |
Senior Secured Revolving Credit Facility [Member] | |||
Debt Disclosure [Line Items] | |||
Senior secured revolving credit facility denominated in Dollars, Euros, Pounds, Sterling and Yen aggregate principal amount | 30,000,000 | ||
Borrowings | $ 7,000,000 | 6,000,000 | |
Additional Interest rate on unfunded balance | 0.50% | ||
Term Debt [Member] | |||
Debt Disclosure [Line Items] | |||
Interest spread on LIBOR | 1.00% | ||
Debt interest rate description | The USD term facility bears interest at (a) the alternate base rate (if denominated in U.S. dollars), equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 1/2 of 1%, and (iii) the adjusted LIBO rate, with a floor of 1% (as defined in the new credit agreement) plus 1%, plus in the case of each of (i)-(iii) above, an applicable rate of 2.00% or 2.25% (depending on the Company’s total net leverage ratio as defined in the Company’s credit agreement), or (b) in the case of a Eurocurrency loan (as defined in the Company’s credit agreement), at the applicable adjusted LIBO rate for the relevant interest period plus an applicable rate of 3.00% or 3.25% (depending on the Company’s total net leverage ratio), plus the mandatory cost (as defined in the credit agreement) if such loan is made in a currency other than U.S. dollars or from a lending office in the United Kingdom or a participating member state (as defined in the credit agreement). | ||
Credit agreement amount | $ 115,000,000 | ||
Capital leases included in term debt | 1,300,000 | 1,600,000 | |
Term Debt [Member] | European Subsidiaries [Member] | |||
Debt Disclosure [Line Items] | |||
Euro loan | $ 400,000 | ||
Term Debt [Member] | Senior secured term loan facility one [Member] | |||
Debt Disclosure [Line Items] | |||
Debt maturity date | October 2,017 | ||
Term Debt [Member] | Senior secured term loan facility two [Member] | |||
Debt Disclosure [Line Items] | |||
Debt maturity date | October 2,017 | ||
Shareholder Debt [Member] | |||
Debt Disclosure [Line Items] | |||
Loan payable | $ 2,000,000 | 2,200,000 | |
Interest rate description | Interest on the debt is variable based on three-month Euro Libor rate plus 0.5% and has no stated term. | ||
Shareholder Debt [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Debt Disclosure [Line Items] | |||
Interest spread on LIBOR | 0.50% | ||
Line of Credit [Member] | Senior Secured Revolving Credit Facility [Member] | |||
Debt Disclosure [Line Items] | |||
Interest spread on LIBOR | 1.00% | ||
Debt maturity date | October 2,017 | ||
Debt interest rate description | Funds available under the revolving credit facility may be used for general corporate purposes. Loans under the revolving credit facility bear interest at (a) the alternate base rate (if denominated in U.S. dollars), equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 1/2 of 1%, and (iii) the adjusted LIBO rate plus 1%, plus in the case of each of (i)-(iii) above, an applicable rate of 2.00% or 2.25% (depending on the Company’s total net leverage ratio as defined in its credit agreement), or (b) in the case of a Eurocurrency loan (as defined in the credit agreement), at the applicable adjusted LIBO rate for the relevant interest period plus an applicable rate of 3.00% or 3.25% (depending on the Company’s total net leverage ratio), plus the mandatory cost (as defined in the credit agreement) if such loan is made in a currency other than U.S. dollars or from a lending office in the United Kingdom or a participating member state (as defined in the credit agreement). Additionally, the Company is subject to a 0.5% interest rate related to the unfunded balance on the line of credit. | ||
Denominated in Dollars [Member] | Term Debt [Member] | Senior secured term loan facility one [Member] | |||
Debt Disclosure [Line Items] | |||
Euro loan | $ 75,000,000 | ||
Additional senior secured loan | 10,000,000 | ||
Denominated in Euros [Member] | Term Debt [Member] | Senior secured term loan facility two [Member] | |||
Debt Disclosure [Line Items] | |||
Euro loan | $ 40,000,000 | ||
Parent [Member] | Shareholder Debt [Member] | |||
Debt Disclosure [Line Items] | |||
Percentage of ownership interest by parent | 51.00% | ||
Director [Member] | Shareholder Debt [Member] | |||
Debt Disclosure [Line Items] | |||
Percentage of ownership interest by board of directors | 49.00% | ||
Borrowings from board of director | $ 2,200,000 | ||
Mortgages on Office Buildings [Member] | |||
Debt Disclosure [Line Items] | |||
Mortgage outstanding amount | $ 2,900,000 | $ 3,600,000 | |
Minimum [Member] | Mortgages on Office Buildings [Member] | |||
Debt Disclosure [Line Items] | |||
Mortgage bears fixed annual interest rate | 2.55% | ||
Maximum [Member] | Mortgages on Office Buildings [Member] | |||
Debt Disclosure [Line Items] | |||
Mortgage bears fixed annual interest rate | 4.90% |
Debt - Summary of Borrowings (D
Debt - Summary of Borrowings (Detail) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Debt And Capital Lease Obligations [Line Items] | ||
Total Term Debt, net of deferred financing costs | $ 71,957 | $ 61,716 |
U.S. Dollar Term Loan [Member] | ||
Debt And Capital Lease Obligations [Line Items] | ||
Senior secured U.S dollar term loan | 74,031 | 64,031 |
Deferred financing cost | $ (2,074) | $ (2,315) |
Share-Based Compensation - Addi
Share-Based Compensation - Additional Information (Detail) - Jun. 28, 2015 - shares | Total |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based awards authorized under the Tornier NV 2010 Incentive Plan | 10,200,000 |
Service period | 4 years |
Options expire period | 10 years |
Options granted | 0 |
Restricted Stock Units [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Restricted stock unit, Granted | 0 |
Share-Based Compensation - Summ
Share-Based Compensation - Summary of Allocation of Share-Based Compensation (Detail) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 28, 2015 | Jun. 29, 2014 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation expense | $ 4,658 | $ 4,521 |
Cost of Goods Sold [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation expense | 361 | 304 |
Selling, General and Administrative [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation expense | 3,883 | 3,900 |
Research and Development [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated share-based compensation expense | $ 414 | $ 317 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Income Taxes [Line Items] | ||||
Effective tax rate | 8.20% | |||
Pre-tax losses | $ 13,400 | |||
Income tax expense | $ 558 | $ 961 | 1,091 | $ 61 |
European Jurisdiction [Member] | ||||
Income Taxes [Line Items] | ||||
Income tax expense | 700 | |||
U.S [Member] | ||||
Income Taxes [Line Items] | ||||
Income tax expense | $ 400 |
Capital Stock and Earnings Pe46
Capital Stock and Earnings Per Share - Additional Information (Detail) - shares | 6 Months Ended | 12 Months Ended |
Jun. 28, 2015 | Dec. 28, 2014 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Ordinary shares, issued | 49,263,429 | 48,974,449 |
Ordinary shares, outstanding | 49,263,429 | 48,974,449 |
Purchase ordinary shares outstanding | 2,900,000 | 3,100,000 |
Special Charges - Schedule of S
Special Charges - Schedule of Special Charges (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Special Charges [Line Items] | ||||
Acquisition, integration and distributor transition costs | $ 818 | $ 2,036 | ||
Instrument use tax refund | $ (2,000) | (2,000) | ||
Other | 325 | |||
Total | $ 2,466 | $ 686 | 4,203 | 3,372 |
Wright [Member] | ||||
Special Charges [Line Items] | ||||
Merger related charges | $ 5,385 | |||
OrthoHelix [Member] | ||||
Special Charges [Line Items] | ||||
Restructuring charges | $ 1,011 |
Special Charges - Additional In
Special Charges - Additional Information (Detail) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 28, 2015 | Jun. 29, 2014 | |
Special Charges [Line Items] | ||
Instrument use tax refund | $ 2,000 | |
OrthoHelix [Member] | ||
Special Charges [Line Items] | ||
Acquisition and Integration cost | 800 | $ 2,000 |
Restructuring costs | $ 1,000 | |
Wright [Member] | ||
Special Charges [Line Items] | ||
Merger related charges | $ 5,385 |