Wright Medical Group, Inc. Reports 2013 Second Quarter Financial Results

Before you go, we thought you'd like these...
Before you go close icon

Wright Medical Group, Inc. Reports 2013 Second Quarter Financial Results

Global Foot and Ankle Net Sales Increase 29% As Reported and 30% Constant Currency

Second Quarter Sales from Continuing Operations Increase 17% As Reported and 17% Constant Currency


ARLINGTON, Tenn.--(BUSINESS WIRE)-- Wright Medical Group, Inc. (NAS: WMGI) today reported financial results for its second quarter ended June 30, 2013. As a result of the previously announced agreement to sell the hip and knee business to MicroPort Medical B.V., a subsidiary of MicroPort Scientific Corporation (MicroPort), this business is now reported as discontinued operations.

Net sales from continuing operations totaled $60.6 million during the second quarter ended June 30, 2013, representing a 17% increase as reported and on a constant currency basis compared to the second quarter of 2012.

Robert Palmisano, president and chief executive officer, commented, "Our second quarter results demonstrate the growth potential of the go forward business with sales from continuing operations increasing 17%. The global foot and ankle business grew an outstanding 30% driven by continued sales productivity gains in our U.S. foot and ankle business, positive progress and focus on international market development and continued strong uptake of recent new foot and ankle product launches."

Palmisano continued, "We also believe the previously announced agreement to sell our hip & knee business to MicroPort represents a significant growth opportunity for both businesses going forward. We are making good progress on transition activities to separate the businesses and expect the transaction to close by the end of the third quarter or early in the fourth quarter of 2013. Business continuity and a seamless customer experience are top priorities, and we are highly focused on ensuring that no business momentum is lost during the transition period."

Net loss from continuing operations for the second quarter of 2013 totaled ($15.5) million or ($0.34) per diluted share, compared to a net loss of ($1.4) million or ($0.04) per diluted share in the second quarter of 2012.

Net loss from continuing operations for the second quarter of 2013 included the after-tax effects of $1.1 million of charges associated with distributor conversions and non-competes, $2.2 million of non-cash interest expense related to the 2017 Convertible Notes, $2.6 million of transition costs associated with the sale of the OrthoRecon business, $1.4 million of transition costs associated with the acquisition of BioMimetic, an unrealized gain of $1.0 million related to mark-to-market adjustments on derivatives, and an unrealized loss of $5.8 million related to a mark-to-market adjustment on the contingent value rights (CVRs) issued in connection with the BioMimetic acquisition. Net loss for the second quarter of 2012 included the after-tax effects of $0.6 million of charges associated with distributor conversions and non-competes, and $0.3 million of charges associated with the previously announced cost-restructuring plan.

The Company's second quarter 2013 net loss from continuing operations, as adjusted for the above items, was ($5.8) million in 2013, a decline from a net loss of ($0.8) million in 2012, while diluted loss per share, as adjusted, increased to ($0.13) in the second quarter of 2013 from ($0.02) in the second quarter of 2012. The attached financial tables include a reconciliation of U.S. GAAP to "as adjusted" results.

Cash and cash equivalents and marketable securities totaled $304.6 million as of the end of the second quarter of 2013, a decrease of $28.4 million compared to the end of the fourth quarter of 2012, which was driven by the closing of the BioMimetic transaction. Net cash provided by operating activities was $10.9 million, which combined with capital expenditures of $6.0 million, resulted in free cash flow of $4.9 million in the second quarter of 2013 compared to free cash flow of $18.0 million in the second quarter of 2012.

Palmisano concluded, "During the second half of the year, we look forward to closing the transaction with MicroPort and exiting the year as a high-growth, pure play extremities and biologics company. As a smaller, high-growth Extremities company with breakthrough biologic opportunities, we will now be able to devote our full resources and attention on accelerating growth opportunities in this area, including increasing U.S. foot and ankle sales productivity, extending the global reach and penetration of our products in key international markets, and seeking to gain U.S. regulatory approval for Augment® Bone Graft. Additionally, we expect to be adjusted EBITDA positive in 2014 assuming a January 2014 launch of Augment, with the opportunity for significant adjusted EBITDA growth in 2015 and beyond. We believe this will enhance our ability to create significant shareholder value."

Outlook

As a result of the previously announced transaction with MicroPort, the Company anticipates net sales from continuing operations, or Extremity and Biologics revenue, for 2013 of approximately $235 million to $240 million, which anticipates some potential minor, short-term dis-synergies due to the transaction.

The Company anticipates adjusted earnings per share from continuing operations, including stock-based compensation, to be in the range of $(0.55) to $(0.59) per diluted share, based on approximately 45.3 million shares outstanding. 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 $0.14 per diluted share for the full-year 2013. 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, possible future acquisitions, other material future business developments, non-cash interest expense associated with the 2017 Convertible Notes, due diligence, transaction and transition costs associated with its BioMimetic acquisition, transition costs associated with the divestiture of the OrthoRecon business, mark-to-market adjustments to the contingent value rights (CVRs) issued as part of its BioMimetic acquisition, and non-cash mark-to-market derivative adjustments. Further, this earnings target excludes any expenses, earnings or losses related to the OrthoRecon business.

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

Conference Call and Webcast

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 866-700-5192 (U.S.) / 617-213-8833 (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 through August 12, 2013. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 93381518. 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 company that provides solutions that enable clinicians to alleviate pain and restore their patients' lifestyles. The company is the recognized leader of surgical solutions for the foot and ankle market and markets its products in over 60 countries worldwide. For more information about Wright Medical, visit 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; EBITDA, 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 associated with distributor conversions and non-competes, non-cash interest expense related to the Company's 2017 Convertible Notes, mark-to-market adjustments on CVRs derivative assets and liabilities, restructuring charges, gains or losses on the sale of assets, and transaction and transition costs, all of which may be highly variable, difficult to predict and of a size that could have substantial impact on the Company's reported results of operations for a period. Management uses these measures internally for evaluation of the performance of the business, including the allocation of resources and the evaluation of results relative to employee performance compensation targets. Investors should consider these non-GAAP 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, 2012, and as may be supplemented in our Quarterly Reports on Form 10-Q). By way of example and without implied limitation, such risks and uncertainties include: failure to realize the anticipated financial and other benefits from the acquisition of BioMimetic Therapeutics, Inc. or a delay in realization thereof; failure to obtain, or a delay in obtaining, FDA approval of Augment Bone Graft, or a material limitation on the scope of such approval; lower than anticipated market acceptance of, or annual market demand for, Augment Bone Graft; failure to obtain necessary approvals, or other intervening events, which could delay or prevent the previously announced sale of our hip/knee business from closing; 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, including those resulting from increased scrutiny under the Foreign Corrupt Practices Act and similar laws, 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; failure to obtain the FDA or other regulatory clearances needed to market and sell our products; 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; recently enacted healthcare laws and changes in product reimbursement which could generate downward pressure on our product pricing; lack of suitable business development opportunities; inability to capitalize on 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 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 EndedSix Months Ended

June 30,
2013

  

June 30,
2012

June 30,
2013

  

June 30,
2012

Net sales$60,572$51,964$116,865 $104,837
Cost of sales14,564 11,779 28,261 23,213 
Gross profit46,00840,18588,60481,624
Operating expenses:
Selling, general and administrative50,54335,885101,25270,409
Research and development5,8683,4909,3756,851
Amortization of intangible assets2,7789824,3841,637
Restructuring charges 254  431 
Total operating expenses59,18940,611115,01179,328
Operating (loss) income(13,181)(426)(26,407)2,296
Interest expense, net3,9901,8877,9353,694
Other expense (income), net4,577 (321)(1,272)(334)
Loss from continuing operations before income taxes(21,748)(1,992)(33,070)(1,064)
Benefit for income taxes(6,209)(625)(12,613)(121)
Net loss from continuing operations$(15,539)$(1,367)$(20,457)$(943)
(Loss) income from discontinued operations, net of tax(1,792)2,077 11,561 6,214 
Net (loss) income$(17,331)$710 $(8,896)$5,271 
 
Net loss from continuing operations per share, basic$(0.34)$(0.04)$(0.47)$(0.02)
Net (loss) income from discontinued operations per share, basic$(0.04)$0.05 $0.26 $0.16 
(Loss) earnings per share - basic$(0.37)$0.02 $(0.20) $0.14 
 
Net loss from continuing operations per share, diluted$(0.34)$(0.04)$(0.47)$(0.02)
Net (loss) income from discontinued operations per share, diluted$(0.04)$0.05 $0.26 $0.16 
(Loss) earnings per share - diluted$(0.37)$0.02 $(0.20) $0.14 
 
Weighted-average number of shares outstanding-basic46,234 38,715 43,849 38,604 
Weighted-average number of shares outstanding-diluted46,234 38,715 43,849  38,604 
    

Wright Medical Group, Inc.

Consolidated Sales Analysis

(dollars in thousands--unaudited)

 
Three Months EndedSix Months Ended
June 30, 2013  June 30, 2012 %

change

June 30, 2013  June 30, 2012 %

change

Geographic
Domestic$42,640$40,7214.7%$85,401$81,6424.6%
International17,932 11,243 59.5%31,464 23,195 35.6%
Total net sales$60,572 $51,964 16.6%$116,865 $104,837 11.5%
 
Three Months EndedSix Months Ended
June 30, 2013June 30, 2012%

change

June 30, 2013June 30, 2012%

change

Product Line
Foot and Ankle37,31628,88029.2%72,39358,50723.7%
Upper Extremity6,0876,349(4.1%)12,14912,894(5.8%)
Biologics15,09115,454(2.3%)28,74830,641(6.2%)
Other2,078 1,281 62.2%3,575 2,795 27.9%
Total Sales$60,572 $51,964 16.6%$116,865 $104,837 11.5%
 
  

Wright Medical Group, Inc.

Supplemental Sales Information

(unaudited)

 
Second Quarter 2013 Sales Growth/(Decline)
Domestic

As

Reported

  Int'l

Constant

Currency

  Int'l

As

Reported

  Total

Constant

Currency

  Total

As

Reported

Product Line
Foot and Ankle15%94%92%30%29%
Upper Extremity1% Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Gift Finder Promo
More to Explore
Sun, Jan 22
Set Your Location
City, State, or Zip