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Wright Medical Group, Inc. Reports 2012 Third Quarter Financial Results and Updated Guidance

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ARLINGTON, Tenn.--(BUSINESS WIRE)--

Wright Medical Group, Inc. (NASDAQ: WMGI), a global orthopaedic medical device company and a leading provider of surgical solutions for the foot and ankle market, today reported financial results for its third quarter ended September 30, 2012 and updated guidance.

Net sales totaled $110.4 million during the third quarter ended September 30, 2012, representing a 7% decrease as reported and a 5% decrease on a constant currency basis compared to the third quarter of 2011. During the third quarter of 2012, as anticipated, global sales were negatively affected by U.S. ortho-recon customer losses and price decreases in Japan that were effective in the second quarter of 2012, partially offset by strong growth in the global foot and ankle business.

Robert Palmisano, President and Chief Executive Officer, commented, “We continued to make excellent progress on implementing our transformational changes in our business during the third quarter. In addition to our third consecutive quarter of accelerating global foot and ankle growth, we continue to generate strong cash flow. We also completed the conversion of a major portion of our foot and ankle distributor territories to direct sales representation. With this conversion now complete, coupled with the favorable response to our recent new product launches and increased medical education programs, we believe we are well positioned to exit the year at well above market growth rates and improve sales productivity in our foot and ankle business.”

Net loss for the third quarter of 2012 totaled $5.3 million or $0.14 per diluted share, compared to net loss of $16.0 million or $0.42 per diluted share in the third quarter of 2011.

Net loss for the third quarter of 2012 included the after-tax effects of $2.7 million of non-cash stock-based compensation expense, $1.7 million of expenses associated with U.S. governmental inquiries and the Company's deferred prosecution agreement (DPA), $1.6 million of charges associated with distributor conversions and non-competes, $2.7 million of charges related to the write-off of deferred financing costs associated with the Company's Senior Credit Facility and 2014 Convertible Notes, a $1.8 million loss on the termination of the interest rate swap associated with the Company's Senior Credit Facility, $0.7 million of non-cash interest expense related to the 2017 Convertible Notes, and an unrealized gain of $2.3 million related to mark-to-market adjustments on derivatives. Net income for the third quarter of 2011 included the after-tax effects of $14.0 million of charges associated with the 2011 cost restructuring plan, a $13.2 million charge for management's estimate of the Company's total liability for claims associated with previous and estimated future fractures of its titanium PROFEMUR® long modular necks in North America, $5.0 million of expenses associated with the Company's DPA, $2.2 million of non-cash stock-based compensation expense, and $2.0 million of expenses related to the settlement of certain employment matters and the hiring of a new chief executive officer (CEO).

The Company's third quarter 2012 net income, as adjusted for the above items, decreased to $0.5 million in 2012 from $7.7 million in 2011, while diluted earnings per share, as adjusted, decreased to $0.01 in the third quarter of 2012 from $0.20 in the third quarter of 2011. Including stock-based expense, diluted loss per share, as adjusted, totaled $0.02 in the third quarter of 2012. A reconciliation of U.S. GAAP to “as adjusted” results is included in the attached financial tables.

Cash and cash equivalents and marketable securities totaled $317.6 million as of the end of the third quarter of 2012, an increase of $145.9 million compared to the end of the fourth quarter of 2011. Net cash flow from operating activities was $16.6 million, which combined with capital expenditures of $4.7 million, resulted in free cash flow of $11.9 million in the third quarter of 2012 compared to free cash outflow of $2.1 million in the third quarter of 2011.

Palmisano concluded, “During the fourth quarter, we will continue to make investments to accelerate foot and ankle growth, improve customer satisfaction in our Ortho-Recon business and increase cash generation capabilities. We also expect continued progress on our inventory reduction initiatives and accelerating U.S. foot and ankle sales productivity in 2013. In addition, our recently completed convertible debt offering provides us with significantly increased flexibility to pursue internal and external development opportunities that we believe will help us continue to drive the positive transformation of our business for the remainder of this year and beyond.”

Outlook

The Company continues to anticipate full year 2012 net sales to be in the range of $476 million to $485 million and has increased its as-adjusted earnings per share excluding stock-based compensation guidance to be in the range of $0.34 to $0.40 per diluted share from the previously communicated range of $0.32 to $0.36. The Company's earnings target excludes non-compete and transition costs associated with converting a major portion of independent foot and ankle territories to direct, costs associated with the previously announced restructuring, possible future acquisitions, other material future business developments, non-cash stock-based compensation expense, costs associated with the Company's DPA (including the associated independent monitor) and the U.S. government inquiry relating to the PROFEMUR® hip products, non-cash interest expense associated with the 2017 Convertible Notes, non-cash mark-to-market derivative adjustments, loss on termination of interest rate swap, and the write-off of unamortized deferred financing charges.

As noted above, the Company's earnings target excludes the impact of non-cash stock-based compensation charges. While the amount of the non-cash stock-based compensation charges will vary depending upon a number of factors, the Company currently estimates that the after-tax impact of those expenses will be approximately $0.18 per diluted share for the full year 2012. Therefore, the Company now anticipates its full year 2012 as-adjusted earnings per share including stock-based compensation to be in the range of $0.16 to $0.22 per diluted share.

From a cash flow perspective, the Company continues to anticipate significant improvement over 2011, and has upwardly revised its anticipated 2012 free cash flow to be in the range of $45 million to $50 million, as compared with the previously announced guidance of $40 million to $45 million. This new guidance range represents annualized growth of 211% to 245%.

The Company's anticipated ranges for net sales, adjusted earnings per share, non-cash stock-based compensation charges and free cash flow are forward-looking statements, as are any other statements which anticipate or aspire to future performance against key metrics. They are subject to various risks and uncertainties that could cause the Company's actual results to differ materially from the anticipated targets. The anticipated targets are not predictions of the Company's actual performance. See the cautionary information about forward-looking statements in the “Safe-Harbor Statement” section of this press release.

Conference Call

As previously announced, the Company will host a conference call starting at 3:30 p.m. Central Time today. The live dial-in number for the call is 800-688-0836 (U.S.) / 617-614-4072 (International). The participant passcode for the call is “Wright.” To access a simultaneous webcast of the conference call via the internet, go to the “Corporate - Investor Information” section of the Company's website located at www.wmt.com.

A replay of the conference call by telephone will be available starting at 5:30 p.m. Central Time today and continuing until November 12, 2012. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 67114673. 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 “Corporate - Investor Information - Audio Archives” section of the Company's website located at www.wmt.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 Form 8-K filed with the SEC today, or otherwise available in the “Corporate - Investor Information - Supplemental Financial Information” section of the Company's website located at www.wmt.com.

The conference call may include forward-looking statements. See the cautionary information about forward-looking statements in the “Safe-Harbor Statement” section of this press release.

About Wright Medical

Wright Medical Group, Inc. is a global orthopaedic medical device company and a leading provider of surgical solutions for the foot and ankle market. The Company specializes in the design, manufacture and marketing of devices and biologic products for extremity, hip and knee repair and reconstruction. The Company has been in business for more than 60 years and markets its products in over 60 countries worldwide. For more information about Wright Medical, visit the Company's website at www.wmt.com.

Non-GAAP Financial Measures

The Company uses non-GAAP financial measures, such as net sales, excluding the impact of foreign currency; operating income, as adjusted; net income, as adjusted; net income, as adjusted, per diluted share; effective tax rate, as adjusted; and free cash flow. 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. The measures exclude such items as costs related to the U.S. governmental inquiries and the DPA, costs associated with distributor conversions and non-competes, non-cash interest expense related to the Company's 2017 Convertible Notes, mark-to-market adjustments on derivative assets and liabilities, losses associated with the termination of derivative instruments, write-off of unamortized deferred financing costs, restructuring charges, transaction costs, changes in estimates associated with the Company's liability for PROFEMUR® long modular neck claims, costs related to settlement of certain employment matters and the hiring of a new CEO, and non-cash stock-based expense, 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 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 may contain “forward-looking statements” as defined under U.S. federal securities laws. These statements reflect management's current knowledge, assumptions, beliefs, estimates, and expectations and express management's current view of future performance, results, and trends. Forward-looking statements may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements. The reader should not place undue reliance on forward-looking statements. Such statements are made as of the date of this press release, and we undertake no obligation to update such statements after this date. Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements are discussed in our filings with the Securities and Exchange Commission (including those described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, in each case under the heading “Risk Factors” and elsewhere in such filings). By way of example and without implied limitation, such risks and uncertainties include: future actions of the United States Attorney's office, the FDA, the Department of Health and Human Services or other U.S. or foreign government authorities that could delay, limit or suspend our development, manufacturing, commercialization and sale of products, or result in seizures, injunctions, monetary sanctions or criminal or civil liabilities; any actual or alleged breach of the Corporate Integrity Agreement to which we are subject through September 2015 which could expose us to significant liability including exclusion from Medicare, Medicaid and other federal healthcare programs, potential criminal prosecution, and civil and criminal fines or penalties; adverse outcomes in existing product liability litigation; new product liability claims; inadequate insurance coverage; the possibility of private securities litigation or shareholder derivative suits; demand for and market acceptance of our new and existing products; potentially burdensome tax measures; lack of suitable business development opportunities; product quality or patient safety issues; challenges to our intellectual property rights; geographic and product mix impact on our sales; our inability to retain key sales representatives, independent distributors and other personnel or to attract new talent; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; inability to realize the anticipated benefits of restructuring initiatives; negative impact of the commercial and credit environment on us, our customers and our suppliers; and the potentially negative effect of our ongoing compliance enhancements on our relationships with customers, and on our ability to deliver timely and effective medical education, clinical studies, and new products.

     

Wright Medical Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data--unaudited)

 
Three Months Ended Nine Months Ended

September 30,
2012

 

September 30,
2011

September 30,
2012

 

September 30,
2011

Net sales $ 110,363 $ 118,184 $ 360,299 $ 386,075
Cost of sales 35,089 36,185 110,329 116,457
Cost of Sales - restructuring   1,900   435   1,900  
Gross profit 75,274 80,099 249,535 267,718
Operating expenses:
Selling, general and administrative 70,851 83,581 216,061 229,227
Research and development 6,612 6,769 19,577 23,783
Amortization of intangible assets 1,827 721 3,823 2,088
Restructuring charges   12,132   1,153   12,132  
Total operating expenses 79,290   103,203   240,614   267,230  
Operating (loss) income (4,016 ) (23,104 ) 8,921 488
Interest expense, net 2,574 1,464 6,268 4,774
Other expense, net 2,027   59   2,035   4,775  
(Loss) income before income taxes (8,617 ) (24,627 ) 618 (9,061 )
(Benefit) provision for income taxes (3,278 ) (8,582 ) 686   (2,755 )
Net loss $ (5,339 ) $ (16,045 ) $ (68 ) $ (6,306 )
Net loss per share, basic $ (0.14 ) $ (0.42 ) $ (0.00 ) $ (0.16 )
Net loss per share, diluted $ (0.14 ) $ (0.42 ) $ (0.00 ) $ (0.16 )
Weighted-average number of shares outstanding-basic 38,907   38,406   38,706   38,228  
Weighted-average number of shares outstanding-diluted 38,907   38,406   38,706   38,228  
     

Wright Medical Group, Inc.

Consolidated Sales Analysis

(dollars in thousands--unaudited)

 
Three Months Ended Nine Months Ended

September 30,
2012

 

September 30,
2011

  %

change

September 30,
2012

 

September 30,
2011

  %

change

Geographic
Domestic $ 65,751 $ 69,382 (5.2 %) $ 205,029 $ 222,678 (7.9 %)
International 44,612   48,802   (8.6 %) 155,270     163,397     (5.0 %)
Total net sales $ 110,363   $ 118,184   (6.6 %) $ 360,299     $ 386,075     (6.7 %)
 
Three Months Ended Nine Months Ended

September 30,
2012

September 30,
2011

%

change

September 30,
2012

 

September 30,
2011

  %

change

OrthoRecon
Hips $ 33,048 $ 39,045 (15.4 %) $ 114,621 $ 130,486 (12.2 %)
Knees 25,657 27,204 (5.7 %) 86,928 93,429 (7.0 %)
Other 770   1,464   (47.4 %) 3,025     4,082     (25.9 %)
Total OrthoRecon 59,475 67,713 (12.2 %) 204,574 227,997 (10.3 %)
 
Extremities
Foot and Ankle 29,030 25,681 13.0 % 87,537 78,210 11.9 %
Upper Extremity 6,207 6,692 (7.2 %) 19,101 21,189 (9.9 %)
Biologics 14,614 16,610 (12.0 %) 45,255 53,846 (16.0 %)
Other 1,037   1,488   (30.3 %) 3,832     4,833     (20.7 %)
Total Extremities 50,888 50,471 0.8 % 155,725 158,078 (1.5 %)
               
Total Sales $ 110,363   $ 118,184   (6.6 %) $ 360,299     $ 386,075     (6.7 %)
   

Wright Medical Group, Inc.

Supplemental Sales Information

(unaudited)

 
Third Quarter 2012 Sales Growth
Domestic

As

Reported

    Int'l

Constant

Currency

    Int'l

As

Reported

    Total

Constant

Currency

    Total

As

Reported

OrthoRecon                
Hips (15%) (12%) (15%) (13%) (15%)
Knees (9%) 1% (2%) (4%) (6%)
Other (60%)     (42%)     (44%)     (46%)     (47%)
Total OrthoRecon (12%) (9%) (12%) (10%) (12%)
 
Extremities
Foot and Ankle 12% 23% 17% 14% 13%
Upper Extremity (8%) (4%) (6%) (7%) (7%)
Biologics (14%) (2%) (3%) (12%) (12%)
Other (46%)     (12%)     (19%)     (27%)     (30%)
Total Extremities 0% 7% 3% 2% 1%
                         
Total Sales (5%)     (5%)     (9%)     (5%)     (7%)
   

Wright Medical Group, Inc.

Supplemental Sales Information

(unaudited)

 
Sales as a % of Total Sales
Three Months Ended September 30, 2012     Nine Months Ended September 30, 2012
Domestic     International     Total Domestic     International     Total
OrthoRecon
Hips 11% 19% 30% 11% 21% 32%
Knees 12% 11% 23% 12% 12% 24%
Other 0%     1%     1% 0%     1%     1%
Total OrthoRecon 24% 30% 54% 23% 34% 57%
 
Extremities
Foot and Ankle 22% 5% 26% 20% 5% 24%
Upper Extremity 4% 2% 6% 4% 2% 5%
Biologics 10% 3% 13% 10% 3% 13%
Other 0%     1%     1% 0%     1%     1%
Total Extremities 36% 10% 46% 34% 10% 43%
                           
Total Sales 60%     40%     100% 57%     43%     100%
         

Wright Medical Group, Inc.

Reconciliation of Net Sales to Net Sales Excluding the Impact of Foreign Currency

(dollars in thousands--unaudited)

 
Three Months Ended Nine Months Ended
September 30, 2012       September 30, 2012

International
Net Sales

      Total

Net Sales

     

International
Net Sales

      Total

Net Sales

Net sales, as reported $ 44,612       $ 110,363 $ 155,270       $ 360,299
Currency impact as compared to prior period 1,739         1,739         4,313         4,313
Net sales, excluding the impact

of foreign currency

$ 46,351         $ 112,102         $ 159,583         $ 364,612
     

Wright Medical Group, Inc.

Reconciliation of As Reported Results to Non-GAAP Financial Measures

(in thousands, except per share data--unaudited)

 
Three Months Ended   Nine Months Ended

September 30,
2012

 

September 30,
2011

 

September 30,
2012

 

September 30,
2011

Operating (Loss) Income
Operating (loss) income, as reported $ (4,016 ) $ (23,104 ) $ 8,921 $ 488
Reconciling items impacting Gross Profit:
Non-cash, stock-based compensation 359 356 1,053 1,063
Cost of sales - restructuring 1,900 435 1,900
Inventory step-up amortization 48 144
Employment matters (1)   99     99  
Total 407   2,355   1,632   3,062  
Reconciling items impacting Selling, General and Administrative expenses:
Non-cash, stock-based compensation 2,188 1,715 6,879 5,083
U.S. governmental inquiries/DPA related 1,707 4,974 6,647 9,541
Distributor conversions 416 624
Employment matters 1,783 1,783
Product liability   13,199     13,199  
Total 4,311   21,671   14,150   29,606  
Reconciling items impacting Research and Development expenses:
Non-cash, stock-based compensation 147 150 534 542
Employment matters (1)   135     135  
Total 147   285   534   677  
Reconciling items impacting Amortization of Intangible Assets
Amortization of distributor non-competes 1,169 1,740
Other Reconciling Items:
Restructuring charges   12,132   1,153   12,132  
Operating income, as adjusted $ 2,018   $ 13,339   $ 28,130   $ 45,965  

Operating income, as adjusted, as a percentage of net sales

1.8 % 11.3 % 7.8 % 11.9 %
 

(1) Costs associated with settlement of certain employment matters and the hiring of a new CEO.

     

Wright Medical Group, Inc.

Reconciliation of As Reported Results to Non-GAAP Financial Measures

(in thousands, except per share data--unaudited)

 
Three Months Ended Nine Months Ended

September 30,
2012

 

September 30,
2011

September 30,
2012

 

September 30,
2011

Net (Loss) Income
(Loss) income before taxes, as reported $ (8,617 ) $ (24,627 ) $ 618 $ (9,061 )
Pre-tax impact of reconciling items:
Non-cash, stock-based compensation 2,694 2,221 8,466 6,688
U.S. governmental inquiries/DPA related 1,707 4,974 6,647 9,541
Restructuring charges 14,032 1,588 14,032
Inventory step-up amortization 48 144
Distributor conversion and non-competes 1,585 2,364
Loss on interest rate swap termination 1,769 1,769
Non-cash interest expense on 2017 Convertible Notes 687 687
Derivatives mark-to-market adjustment (2,330 ) (2,330 )
Write-off of deferred financing fees associated with Senior Credit Facility and 2014 Convertible Notes 2,721 2,721
Employment matters (1) 2,017 2,017
Product liability provision 13,199 13,199
Write-off of deferred financing fees and transaction costs associated with Convertible Notes Tender Offer           4,099  
Income before taxes, as adjusted 264 11,816 22,674 40,515
 
(Benefit) provision for income taxes, as reported (3,278 ) (8,582 ) 686 (2,755 )
Non-cash, stock-based compensation 1,305 744 2,689 2,093
U.S. governmental inquiries/DPA related 146 1,873 2,295 3,371
Restructuring charges 4,574 620 4,574
Inventory step-up amortization 19 56
Distributor conversion and non-competes 477 816
Loss on interest rate swap termination 691 691
Non-cash interest expense on 2017 Convertible Notes 268 268
Derivatives mark-to-market adjustment (910 ) (910 )
Write-off of deferred financing fees associated with Senior Credit Facility and 2014 Convertible Notes 1,063 1,063
Employment matters (1) 720 720
Product liability provision 4,740 4,740
Write-off of deferred financing fees and transaction costs associated with Convertible Notes Tender Offer           1,599  
(Benefit) provision for income taxes, as adjusted $ (219 ) $ 4,069     $ 8,274     $ 14,342  
Effective tax rate, as adjusted (83.0 %) 34.4 %   36.5 %   35.4 %
Net income, as adjusted $ 483   $ 7,747     $ 14,400     $ 26,173  
 

(1) Costs associated with settlement of certain employment matters and the hiring of a new CEO.

     

Wright Medical Group, Inc.

Reconciliation of As Reported Results to Non-GAAP Financial Measures

(continued)

 

 

Three Months Ended Three Months Ended
September 30, 2012 September 30, 2011
As Reported   As Adjusted As Reported   As Adjusted
Basic net (loss) income $ (5,339 ) $ 483 $ (16,045 ) $ 7,747
Interest expense on 2014 convertible notes N/A N/A N/A 137  
Diluted net (loss) income $ (5,339 ) $ 483 $ (16,045 ) $ 7,884
 
Basic shares 38,907 38,907 38,406 38,406
Dilutive effect of stock options and restricted shares N/A 379 130
Dilutive effect of 2014 convertible notes N/A N/A N/A 891  
Diluted shares 38,907 39,286 38,406 39,427
 
Net (loss) income per share, diluted $ (0.14 ) $ 0.01   $ (0.42 ) $ 0.20  
 
Nine Months Ended Nine Months Ended
September 30, 2012 September 30, 2011
As Reported As Adjusted As Reported As Adjusted
Basic net income (loss) $ (68 ) $ 14,400 $ (6,306 ) $ 26,173
Interest expense on 2014 convertible notes N/A N/A N/A 1,066  
Diluted net income (loss) $ (68 ) $ 14,400 $ (6,306 ) $ 27,239
 
Basic shares 38,706 38,706 38,228 38,228
Dilutive effect of stock options and restricted shares N/A 374 149
Dilutive effect of 2014 convertible notes N/A N/A N/A 2,249  
Diluted shares 38,706 39,080 38,228 40,626
 
Net income (loss) per share, diluted $ (0.00 ) $ 0.37   $ (0.16 ) $ 0.67  
 
Three Months Ended Nine Months Ended

September 30,
2012

September 30,
2011

September 30,
2012

September 30,
2011

Net (Loss) Income per Diluted Share
Net (loss) income, as reported, per

diluted share

$ (0.14 ) $ (0.42 ) $ (0.00 ) $ (0.16 )
Interest expense on convertible notes N/A 0.00 0.03
Effect of convertible notes on diluted shares N/A 0.01 0.00 0.01
Non-cash, stock-based compensation 0.04 0.04 0.15 0.11
U.S. governmental inquiries/DPA related 0.04 0.08 0.12 0.15
Restructuring charges 0.24 0.02 0.23
Inventory step-up amortization 0.00 0.00
Distributor conversion and non-competes 0.03 0.04
Loss on interest rate swap termination 0.03 0.03
Non-cash interest expense on 2017 Convertible Notes 0.01 0.01
Derivatives mark-to-market adjustment (0.04 ) (0.04 )
Write-off deferred financing fees associated with Senior Credit Facility and 2014 Convertible Notes 0.04 0.04
Employment matters (1) 0.03 0.03
Product liability provision 0.22 0.21
Write-off deferred financing fees and transaction costs associated with Convertible Notes Tender Offer      

 

0.06  

Net income, as adjusted, per diluted share

$ 0.01   $ 0.20   $ 0.37   $ 0.67  
       

Wright Medical Group, Inc.

Reconciliation of Free Cash Flow

(dollars in thousands--unaudited)

 
Three Months Ended Nine Months Ended

September 30,
2012

   

September 30,
2011

 

September 30,
2012

   

September 30,
2011

Net cash provided by operating activities 16,639 9,770 57,752 48,786
Capital expenditures (4,718 ) (11,822 )   (13,291 ) (35,198 )
Free cash flow 11,921   (2,052 )   44,461   13,588  
   

Wright Medical Group, Inc.

Segment Income Statement

(In thousands, except share data)

(unaudited)

 
Three Months Ended September 30, 2012
OrthoRecon   Extremities   Corporate   Other(1)   Total
Net sales $ 59,475 $ 50,888 $ $ $ 110,363
Cost of sales 23,219     11,463         407     35,089  
Gross profit 36,256 39,425 (407 ) 75,274
 
Operating expenses:
Selling, general and administrative 28,948 25,512 12,080 4,311 70,851
Research and development 3,125 3,340 147 6,612
Amortization of intangible assets 58 600 1,169 1,827
Restructuring charges                  
Total operating expenses 32,131 29,452 12,080 5,627 79,290
                 
Operating income (loss) $ 4,125     $ 9,973     $ (12,080 )   $ (6,034 )   $ (4,016 )
 
Operating income (loss) as a percent of net sales 6.9 %   19.6 %   N/A   N/A   (3.6 )%
 
Three Months Ended September 30, 2012
OrthoRecon Extremities Corporate Other(1) Total
Depreciation expense $ 5,834 $ 2,841 $ 611 $ $ 9,286
Amortization expense 58 600 1,169 1,827
Capital expenditures 1,711 1,464 1,543 4,718

_____________________

(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

   

Wright Medical Group, Inc.

Segment Income Statement

(continued)

 
Three Months Ended September 30, 2011
OrthoRecon   Extremities   Corporate   Other(1)   Total
Net sales $ 67,713 $ 50,471 $ $ $ 118,184
Cost of sales 21,332     14,398         2,355     38,085  
Gross profit 46,381 36,073 (2,355 ) 80,099
 
Operating expenses:
Selling, general and administrative 29,385 22,078 10,447 21,671 83,581
Research and development 3,056 3,428 285 6,769
Amortization of intangible assets 132 589 721
Restructuring charges             12,132     12,132  
Total operating expenses 32,573 26,095 10,447 34,088 103,203
                 
Operating income (loss) $ 13,808     $ 9,978     $ (10,447 )   $ (36,443 )   $ (23,104 )
 
Operating income (loss) as a percent of net sales 20.4 %   19.8 %   N/A   N/A   (19.5 )%
 
Three Months Ended September 30, 2011
OrthoRecon Extremities Corporate Other(1) Total
Depreciation expense $ 6,600 $ 2,793 $ 583 $ $ 9,976
Amortization expense 132 589 721
Capital expenditures 2,722 4,689 4,411 11,822

_____________________

(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

   

Wright Medical Group, Inc.

Segment Income Statement

(continued)

 
Nine Months Ended September 30, 2012
OrthoRecon   Extremities   Corporate   Other(1)   Total
Net sales $ 204,574 $ 155,725 $ $ $ 360,299
Cost of sales 74,907     34,225         1,632     110,764  
Gross profit 129,667 121,500 (1,632 ) 249,535
 
Operating expenses:
Selling, general and administrative 91,008 73,934 36,969 14,150 216,061
Research and development 9,052 9,991 534 19,577
Amortization of intangible assets 275 1,808 1,740 3,823
Restructuring charges             1,153     1,153  
Total operating expenses 100,335 85,733 36,969 17,577 240,614
                 
Operating income (loss) $ 29,332     $ 35,767     $ (36,969 )   $ (19,209 )   $ 8,921  
 
Operating income as a percent of net sales 14.3 %   23.0 %   N/A   N/A   2.5 %
 
Nine Months Ended September 30, 2012
OrthoRecon Extremities Corporate Other(1) Total
Depreciation expense $ 18,406 $ 8,494 $ 2,282 $ $ 29,182
Amortization expense 275 1,808 1,740 3,823
Capital expenditures 4,285 5,914 3,092 13,291

_____________________

(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

   

Wright Medical Group, Inc.

Segment Income Statement

(continued)

 
Nine Months Ended September 30, 2011
OrthoRecon   Extremities   Corporate   Other(1)   Total
Net sales $ 227,997 $ 158,078 $ $ $ 386,075
Cost of sales 72,842     42,453         3,062     118,357  
Gross profit 155,155 115,625 (3,062 ) 267,718
 
Operating expenses:
Selling, general and administrative 94,955 68,046 36,620 29,606 229,227
Research and development 12,256 10,850 677 23,783
Amortization of intangible assets 324 1,764 2,088
Restructuring charges             12,132     12,132  
Total operating expenses 107,535 80,660 36,620 42,415 267,230
                 
Operating income (loss) $ 47,620     $ 34,965     $ (36,620 )   $ (45,477 )   $ 488  
 
Operating income as a percent of net sales 20.9 %   22.1 %   N/A   N/A   0.1 %
 
Nine Months Ended September 30, 2011
OrthoRecon Extremities Corporate Other(1) Total
Depreciation expense $ 19,602 $ 7,963 $ 1,649 $ $ 29,214
Amortization expense 324 1,764 2,088
Capital expenditures 14,008 9,825 11,365 35,198

_____________________

(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

       

Wright Medical Group, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)

 

September 30,
2012

December 31,
2011

Assets:
Current assets:
Cash and cash equivalents $ 304,009 $ 153,642
Marketable securities 13,613 13,597
Accounts receivable, net 96,516 98,995
Inventories 153,176 164,600
Prepaid expenses and other current assets 69,767   69,699
Total current assets 637,081 500,533
 
Property, plant and equipment, net 143,277 160,284
Goodwill and intangible assets, net 81,115 75,651
Marketable securities 4,502
Other assets 91,520   13,610
Total assets $ 952,993   $ 754,580
 
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 13,369 $ 11,651
Accrued expenses and other current liabilities 63,592 55,831
Current portion of long-term obligations 975   8,508
Total current liabilities 77,936   75,990
Long-term obligations 256,477 166,792
Other liabilities 103,696   43,334
Total liabilities $ 438,109 $ 286,116
   
Stockholders' equity: 514,884   468,464
Total liabilities and stockholders' equity $ 952,993   $ 754,580

Wright Medical Group, Inc.
Julie D. Tracy, 901-290-5817
Sr. Vice President, Chief Communications Officer
julie.tracy@wmt.com

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