Fourth Quarter Global Foot and Ankle Net
Sales Increase 33% As Reported and 34% Constant
Currency
Fourth Quarter Sales Increase 23% As
Reported and 25% Constant Currency
Wright Medical Group, Inc. (Nasdaq:WMGI) today reported financial
results for its fourth quarter and full-year ended December 31,
2014 and provided 2015 guidance. As a result of the completed sale
of the hip and knee business to MicroPort Medical B.V., a
subsidiary of MicroPort Scientific Corporation (MicroPort), this
business is reported as discontinued operations.
Net sales totaled $83.3 million during the fourth quarter ended
December 31, 2014, representing a 23% increase as reported and 25%
increase on a constant currency basis compared to the fourth
quarter of 2013.
Robert Palmisano, president and chief executive officer,
commented, "Our fourth quarter revenue was in-line with the
preliminary results we released in January and represents a
significant acceleration in our U.S. foot and ankle business,
driven by improved execution and strong contribution from acquired
products and new product launches. Gross margins of 77.1% were also
strong as we are beginning to see the benefits of our Vital Few
initiative. Our U.S. foot and ankle business grew 39%, up
significantly from 28% in the third quarter of this year. Notably,
we saw global total ankle growth of 38% for the quarter, which was
driven primarily by the ongoing launch of our INFINITY total ankle
replacement system. We also saw continued gains in U.S. foot and
ankle sales force productivity and achieved our goal of exiting
2014 at over $1 million per sales rep. Given our sustained focus
and attention in this area, I also believe that we can reach a
meaningfully higher level than that goal in the future."
Palmisano continued, "Our 2015 standalone guidance assumes
continued strong growth in our U.S. Foot and Ankle and
International businesses. Both our Upper Extremity and Biologics
businesses are expected to remain soft, but we believe both of
these areas will be addressed by the pending merger with Tornier
and anticipated final FDA approval of AUGMENT Bone Graft. We will
continue to focus on improving our execution to realize our full
potential and believe that the positive progress we saw exiting the
fourth quarter is setting us up well for accelerating growth and
margin expansion in the coming quarters."
Net loss from continuing operations for the fourth quarter of
2014 totaled $107.0 million or ($2.11) per diluted share, compared
to net loss of $135.2 million or ($2.88) per diluted share in the
fourth quarter of 2013.
Net loss from continuing operations for the fourth quarter of
2014 included the after-tax effects of a $73.7 million unrealized
loss related to mark-to-market adjustments on contingent value
rights (CVRs) issued in connection with the BioMimetic acquisition,
$11.9 million of Tornier merger costs, $2.4 million of non-cash
interest expense related to the 2017 Convertible Notes, $2.5
million of transaction and transition costs associated with recent
acquisitions, $1.4 million of transition costs associated with the
sale of the OrthoRecon business, $0.4 million of charges associated
with distributor conversions and non-competes, $0.1 million of
contingent consideration fair value adjustments and a $2.5 million
U.S. tax provision within continuing operations to offset the tax
benefit recorded within discontinued operations. Net loss from
continuing operations for the fourth quarter of 2013 included a
$119.6 million charge associated with valuation allowances on
deferred tax assets, $7.7 million of transition costs associated
with the sale of the OrthoRecon business, $2.3 million of
transaction and transition costs associated with the acquisition of
BioMimetic and Biotech International, $2.2 million of non-cash
interest expense related to the 2017 Convertible Notes, an
unrealized gain of $2.0 million related to mark-to-market
adjustments on derivatives, and $0.8 million of charges associated
with distributor conversions and non-competes.
The Company's fourth quarter 2014 net loss from continuing
operations, as adjusted for the above items, was $12.9 million, a
decline from a net loss of $7.9 million in 2013, while diluted loss
per share, as adjusted, decreased to ($0.25) in the fourth quarter
of 2014 from ($0.17) in the fourth quarter of 2013. The attached
financial tables include a reconciliation of U.S. GAAP to "as
adjusted" results.
The Company's fourth quarter 2014 adjusted EBITDA from
continuing operations, as defined in the GAAP to non-GAAP
reconciliation provided later in this release, was negative $0.8
million, compared to negative $3.2 million in the same quarter of
the prior year. The attached financial tables include a
reconciliation of U.S. GAAP to "as adjusted" results.
Cash and cash equivalents and marketable securities totaled
$229.9 million as of the end of the fourth quarter of 2014, an
increase of $46.8 million compared to the end of 2013, which was
driven by the closing of the MicroPort, Solana Surgical and
OrthoPro transactions.
Palmisano concluded, "We are focused on our 2015 commitments,
including receiving final FDA approval of, and successfully
launching AUGMENT Bone Graft, and executing our Vital Few
initiatives, which will further strengthen and expand our
market-leading competitive position. In addition, we believe our
pending merger with Tornier will enhance shareholder value through
the creation of the premier high-growth Extremities-Biologics
company that is uniquely positioned with leading technologies and
specialized sales forces in three of the fastest growing areas of
orthopaedics."
Outlook
On a standalone basis and assuming final approval of Augment®
Bone Graft by the middle of the second quarter of 2015, the Company
anticipates net sales for 2015 of approximately $325 million to
$335 million, representing constant currency growth of 13% to 16%
from 2014. This range assumes U.S. Augment revenue of $10 million
to $12 million and a negative impact from currency of approximately
$12 million, or 4%, reflecting the recent strengthening of the U.S.
dollar as compared to 2014, and excludes any potential
dis-synergies from the pending merger with Tornier.
The Company anticipates 2015 adjusted EBITDA from continuing
operations, as described in the GAAP to non-GAAP reconciliation
provided later in this release, of negative $(22.0) million to
negative $(27.0) million.
The Company anticipates adjusted earnings per share from
continuing operations, including stock-based compensation, for
full-year 2015 of $(1.67) to $(1.77) per diluted share, based on
approximately 51.1 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 $0.24 per
diluted share for the full-year 2015.
The Company plans to provide updated guidance when the pending
merger with Tornier closes. From a timing standpoint, the Company
continues to believe a second quarter 2015 closing is still
possible, but is a best-case scenario.
The Company's earnings target and adjusted EBITDA from
continuing operations targets exclude possible future acquisitions;
other material future business developments; non-cash interest
expense associated with the 2017 and 2020 Convertible Notes; due
diligence, transaction and transition costs associated with
acquisitions and divestitures; impairment charges, mark-to-market
adjustments to the CVRs and non-cash mark-to-market derivative
adjustments; and charges associated with the February 2015
refinancing of our convertible debt. Further, this earnings target
and adjusted EBITDA target excludes any expenses, earnings or
losses related to the OrthoRecon business.
The Company's anticipated ranges for net sales, earnings and
adjusted EBITDA from continuing operations are forward-looking
statements, as are any other statements that anticipate or aspire
to future events or performance. They are subject to various risks
and uncertainties that could cause the Company's actual results to
differ materially from the anticipated targets. The anticipated
targets are not predictions of the Company's actual performance.
See the cautionary information about forward-looking statements in
the "Safe-Harbor Statement" section of this press release.
Internet Posting of Information
Wright routinely posts information that may be important to
investors in the "Investor Relations" section of its website at
www.wmt.com. Wright encourages investors and potential investors to
consult its website regularly for important information about the
company.
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 877-280-4959 (U.S.) / 857-244-7316 (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
March 4, 2015. To hear this replay, dial 888-286-8010 (U.S.) or
617-801-6888 (International) and enter the passcode 51724673. 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 specialty orthopaedic company
that provides extremity and biologic 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, one of the fastest growing
segments in medical technology, 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 derivative
assets and liabilities, mark-to-market adjustments on CVRs and
impairment and other charges to write down to fair value assets and
liabilities acquired in the BioMimetic acquisition, transaction and
transition costs, costs associated with management changes, fair
value adjustments of contingent consideration, patent dispute
settlement costs, and impacts from the sale of the OrthoRecon
business, 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 includes forward-looking
statements. These forward-looking statements generally can be
identified by the use of words such as "anticipate," "expect,"
"plan," "could," "may," "will," "believe," "estimate," "forecast,"
"goal," "project," and other words of similar
meaning. Forward-looking statements in this press release
include, but are not limited to, statements about our outlook for
our expected financial results for 2015; statements about the
approvable status and anticipated final PMA approval of Augment®
Bone Graft and the anticipated positive effects of such; and
statements about the timing and anticipated benefits of the
previously announced merger with Tornier. Each forward-looking
statement contained in this press release is subject to risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statement. Applicable
risks and uncertainties include, among others, uncertainties as to
the timing of the Tornier transaction; uncertainties as to whether
Tornier shareholders and Wright shareholders will approve the
transaction; the risk that competing offers will be made; the
possibility that various closing conditions for the transaction may
not be satisfied or waived, including that a governmental entity
may prohibit, delay or refuse to grant approval for the
consummation of the transaction, or the terms of such approval; the
effects of disruption from the transaction making it more difficult
to maintain relationships with employees, customers, vendors and
other business partners; the risk that shareholder litigation in
connection with the transaction may result in significant costs of
defense, indemnification and liability; other business effects,
including the effects of industry, economic or political conditions
outside of Wright's or Tornier's control; the failure to realize
synergies and cost-savings from the transaction or delay in
realization thereof; the businesses of Wright and Tornier may not
be combined successfully, or such combination may take longer, be
more difficult, time-consuming or costly to accomplish than
expected; operating costs and business disruption following
completion of the transaction, including adverse effects on
employee retention and on Wright's and Tornier's respective
business relationships with third parties; transaction costs;
actual or contingent liabilities; the adequacy of the combined
company's capital resources; failure or delay in ultimately
obtaining FDA approval of Wright's Augment® Bone Graft for
commercial sale in the United States, failure to achieve the
anticipated benefits from approval of Augment® Bone Graft, and the
risks identified under the heading "Risk Factors" in Wright's
Annual Report on Form 10-K, anticipated to be filed with the SEC on
February 25, 2015, and Tornier's Annual Report on Form 10-K, filed
with the SEC on February 24, 2015, as well as both companies'
subsequent Quarterly Reports on Form 10-Q and other information
filed by each company with the SEC. Investors should not place
considerable reliance on the forward-looking statements contained
in this press release. You are encouraged to read Wright's and
Tornier's filings with the SEC, available at www.sec.gov, for a
discussion of these and other risks and uncertainties. The
forward-looking statements in this press release speak only as of
the date of this release, and Wright undertakes no obligation to
update or revise any of these statements. Wright's business is
subject to substantial risks and uncertainties, including those
referenced above. Investors, potential investors, and others
should give careful consideration to these risks and
uncertainties.
IMPORTANT ADDITIONAL INFORMATION ABOUT THE PROPOSED
MERGER WITH TORNIER AND WHERE TO FIND IT
In connection with the proposed merger, Tornier has filed with
the U.S. Securities and Exchange Commission (SEC) a registration
statement on Form S-4 that includes a preliminary joint proxy
statement of Wright and Tornier that also constitutes a preliminary
prospectus of Tornier. The registration statement is not complete
and will be further amended. Wright and Tornier will make the final
joint proxy statement/prospectus available to their respective
shareholders. Investors are urged to read the final joint
proxy statement/prospectus when it becomes available, because it
will contain important information. The registration
statement, definitive joint proxy statement/prospectus and other
documents filed by Tornier and Wright with the SEC will be
available free of charge at the SEC's website (www.sec.gov) and
from Tornier and Wright. Requests for copies of the joint proxy
statement/prospectus and other documents filed by Wright with the
SEC may be made by contacting Julie D. Tracy, Senior Vice President
and Chief Communications Officer by phone at (901) 290-5817 or by
email at julie.tracy@wmt.com, and request for copies of the joint
proxy statement/prospectus and other documents filed by Tornier may
be made by contacting Shawn McCormick, Chief Financial Officer by
phone at (952) 426-7646 or by email at
shawn.mccormick@tornier.com.
Wright, Tornier, their respective directors, executive officers
and employees may be deemed to be participants in the solicitation
of proxies from Wright's and Tornier's respective shareholders in
connection with the proposed transaction. Information about the
directors and executive officers of Wright and their ownership of
Wright stock is set forth in Wright's annual report on Form 10-K
for the fiscal year ended December 31, 2014, which is anticipated
to be filed with the SEC on February 25, 2015, and its proxy
statement for its 2014 annual meeting of stockholders, which was
filed with the SEC on March 31, 2014. Information regarding
Tornier's directors and executive officers is contained in
Tornier's annual report on Form 10-K for the fiscal year ended
December 28, 2014, which was filed with the SEC on February 24,
2015, and its proxy statement for its 2014 annual general meeting
of shareholders, which was filed with the SEC on May 16, 2014.
These documents can be obtained free of charge from the sources
indicated above. Certain directors, executive officers and
employees of Wright and Tornier may have direct or indirect
interest in the transaction due to securities holdings, vesting of
equity awards and rights to severance payments. Additional
information regarding the participants in the solicitation of
Wright and Tornier shareholders will be included in the joint proxy
statement/prospectus.
--Tables Follow--
Wright Medical Group,
Inc. |
Condensed Consolidated
Statements of Operations |
(in
thousands, except per share data--unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
December 31,
2014 |
December 31,
2013 |
December 31,
2014 |
December 31,
2013 |
Net sales |
$ 83,294 |
$ 67,824 |
$ 298,027 |
$ 242,330 |
Cost of sales |
19,097 |
17,423 |
73,223 |
59,721 |
Gross profit |
64,197 |
50,401 |
224,804 |
182,609 |
Operating expenses: |
|
|
|
|
Selling, general and
administrative |
81,991 |
66,479 |
289,620 |
230,785 |
Research and development |
6,360 |
5,412 |
24,963 |
20,305 |
Amortization of intangible
assets |
2,786 |
1,750 |
10,027 |
7,476 |
BioMimetic impairment
charges |
— |
— |
— |
206,249 |
Total operating expenses |
91,137 |
73,641 |
324,610 |
464,815 |
Operating loss |
(26,940) |
(23,240) |
(99,806) |
(282,206) |
Interest expense, net |
4,525 |
4,061 |
17,398 |
16,040 |
Other expense (income), net |
74,640 |
(2,552) |
129,626 |
(67,843) |
Loss from continuing operations
before income taxes |
(106,105) |
(24,749) |
(246,830) |
(230,403) |
Provision (benefit) for income taxes |
863 |
110,462 |
(6,334) |
49,765 |
Net loss from continuing
operations |
$ (106,968) |
$ (135,211) |
$ (240,496) |
$ (280,168) |
(Loss) income from discontinued operations,
net of tax |
$ (4,262) |
$ 182 |
$ (19,187) |
$ 6,223 |
Net loss |
$ (111,230) |
$ (135,029) |
$ (259,683) |
$ (273,945) |
|
|
|
|
|
Net loss from continuing operations per
share, basic |
$ (2.11) |
$ (2.88) |
$ (4.83) |
$ (6.19) |
Net loss from continuing operations per
share, diluted |
$ (2.11) |
$ (2.88) |
$ (4.83) |
$ (6.19) |
|
|
|
|
|
Net loss per share, basic |
$ (2.19) |
$ (2.88) |
$ (5.22) |
$ (6.05) |
Net loss per share, diluted |
$ (2.19) |
$ (2.88) |
$ (5.22) |
$ (6.05) |
|
|
|
|
|
Weighted-average number of shares
outstanding-basic |
50,698 |
46,897 |
49,758 |
45,265 |
Weighted-average number of shares
outstanding-diluted |
50,698 |
46,897 |
49,758 |
45,265 |
|
Wright Medical Group,
Inc. |
Consolidated Sales
Analysis |
(dollars in
thousands--unaudited) |
|
|
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
December 31,
2014 |
December 31,
2013 |
% change |
December 31,
2014 |
December 31,
2013 |
% change |
U.S. |
|
|
|
|
|
|
Foot and Ankle |
46,032 |
33,196 |
38.7% |
148,631 |
115,642 |
28.5% |
Upper Extremity |
3,891 |
4,519 |
(13.9)% |
15,311 |
17,423 |
(12.1)% |
Biologics |
12,118 |
11,042 |
9.7% |
45,494 |
42,561 |
6.9% |
Other |
445 |
492 |
(9.6)% |
2,641 |
2,022 |
30.6% |
Total U.S. |
$ 62,486 |
$ 49,249 |
26.9% |
$ 212,077 |
$ 177,648 |
19.4% |
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
Foot and Ankle |
11,119 |
9,840 |
13.0% |
47,001 |
35,020 |
34.2% |
Upper Extremity |
2,437 |
2,062 |
18.2% |
11,312 |
7,240 |
56.2% |
Biologics |
5,153 |
4,818 |
7.0% |
20,590 |
17,231 |
19.5% |
Other |
2,099 |
1,855 |
13.2% |
7,047 |
5,191 |
35.8% |
Total International |
$ 20,808 |
$ 18,575 |
12.0% |
$ 85,950 |
$ 64,682 |
32.9% |
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
Foot and Ankle |
57,151 |
43,036 |
32.8% |
195,632 |
150,662 |
29.8% |
Upper Extremity |
6,328 |
6,581 |
(3.8)% |
26,623 |
24,663 |
7.9% |
Biologics |
17,271 |
15,860 |
8.9% |
66,084 |
59,792 |
10.5% |
Other |
2,544 |
2,347 |
8.4% |
9,688 |
7,213 |
34.3% |
Total Sales |
$ 83,294 |
$ 67,824 |
22.8% |
$ 298,027 |
$ 242,330 |
23.0% |
|
Wright Medical Group,
Inc. |
Supplemental Sales
Information |
(unaudited) |
|
|
|
|
|
|
|
Fourth Quarter
2014 Sales Growth/(Decline) |
|
Domestic As
Reported |
Int'l Constant
Currency |
Int'l As
Reported |
Total Constant
Currency |
Total As
Reported |
Product Line |
|
|
|
|
|
Foot and Ankle |
39% |
20% |
13% |
34% |
33% |
Upper Extremity |
(14%) |
27% |
18% |
(1%) |
(4%) |
Biologics |
10% |
12% |
7% |
10% |
9% |
Other |
(10%) |
21% |
13% |
14% |
8% |
Total Sales |
27% |
19% |
12% |
25% |
23% |
|
Wright Medical Group,
Inc. |
Supplemental Sales
Information |
(unaudited) |
|
|
|
|
|
|
|
Full Year 2014
Sales Growth/(Decline) |
|
Domestic As
Reported |
Int'l Constant
Currency |
Int'l As
Reported |
Total Constant
Currency |
Total As
Reported |
Product Line |
|
|
|
|
|
Foot and Ankle |
29% |
34% |
34% |
30% |
30% |
Upper Extremity |
(12%) |
58% |
56% |
8% |
8% |
Biologics |
7% |
22% |
20% |
11% |
11% |
Other |
31% |
36% |
36% |
34% |
34% |
Total Sales |
19% |
34% |
33% |
23% |
23% |
|
Wright Medical Group,
Inc. |
Reconciliation of Net
Sales to Net Sales Excluding the Impact of Foreign
Currency |
(dollars in
thousands--unaudited) |
|
|
|
|
|
|
Three
Months Ended December 31, 2014 |
Twelve Months Ended December 31, 2014 |
|
|
|
International Net
Sales |
Total Net Sales |
International Net
Sales |
Total Net Sales |
Net sales, as reported |
$ 20,808 |
$ 83,294 |
$ 85,950 |
$ 298,027 |
Currency impact as compared to prior
period |
1,220 |
1,220 |
644 |
644 |
Net sales, excluding the impact of
foreign currency |
$ 22,028 |
$ 84,514 |
$ 86,594 |
$ 298,671 |
|
Wright Medical Group,
Inc. |
Reconciliation of As
Reported Results to Non-GAAP Financial Measures |
(in thousands, except per share
data--unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
December 31,
2014 |
December 31,
2013 |
December 31,
2014 |
December 31,
2013 |
Operating Income |
|
|
|
|
Operating loss, as
reported |
$ (26,940) |
$ (23,240) |
$ (99,806) |
$ (282,206) |
Reconciling items impacting
Gross Profit: |
|
|
|
|
Inventory step-up
amortization |
14 |
278 |
1,535 |
777 |
BioMimetic inventory
write-down |
— |
1,301 |
— |
2,280 |
Total |
14 |
1,579 |
1,535 |
3,057 |
Reconciling items
impacting Selling, General and Administrative expense: |
|
|
|
Distributor conversions |
14 |
129 |
186 |
932 |
Transition costs - OrthoRecon
divestiture |
1,425 |
7,745 |
5,849 |
21,612 |
Due diligence, transaction and
transition costs - acquisitions (1) |
2,509 |
2,270 |
14,115 |
12,893 |
Patent dispute settlement |
— |
— |
900 |
— |
Management changes (2) |
— |
— |
1,203 |
— |
Tornier merger costs |
11,900 |
— |
11,900 |
— |
Total |
15,848 |
10,144 |
34,153 |
35,437 |
Reconciling items impacting
Amortization of Intangible Assets: |
|
|
|
|
Amortization of distributor
non-competes |
359 |
630 |
1,885 |
2,802 |
Other Reconciling Items: |
|
|
|
|
BioMimetic impairment
charges |
— |
— |
— |
206,249 |
Operating loss, as
adjusted |
$ (10,719) |
$ (10,887) |
$ (62,233) |
$ (34,661) |
Operating loss, as adjusted, as a
percentage of net sales |
(12.9)% |
(16.1)% |
(20.9)% |
(14.3)% |
|
|
|
|
|
_______________________________ |
|
|
|
|
(1) For the twelve
months ended December 31, 2013, amount includes $2.3 million of
non-cash stock-based compensation expense related to the conversion
of BioMimetic options to Wright Medical options. |
(2) For the twelve
months ended December 31, 2014, amount includes $0.3 million of
non-cash stock-based compensation expense related to the management
changes. |
|
Wright Medical Group,
Inc. |
Reconciliation of As
Reported Results to Non-GAAP Financial Measures |
(in thousands, except per share
data---unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
December 31,
2014 |
December 31,
2013 |
December 31,
2014 |
December 31,
2013 |
EBITDA |
|
|
|
|
Net loss, as
reported |
$ (106,968) |
$ (135,211) |
$ (240,496) |
$ (280,168) |
Interest expense, net |
4,525 |
4,061 |
17,398 |
16,040 |
Provision (benefit) for income
taxes |
863 |
110,462 |
(6,334) |
49,765 |
Depreciation |
4,961 |
4,120 |
18,456 |
14,384 |
Amortization of intangible
assets |
2,786 |
1,750 |
10,027 |
7,476 |
EBITDA |
(93,833) |
(14,818) |
(200,949) |
(192,503) |
Reconciling items impacting
EBITDA |
|
|
|
|
Non-cash stock-based
compensation expense (1)(2) |
2,519 |
2,481 |
11,204 |
9,658 |
Other expense (income),
net |
74,640 |
(2,552) |
129,626 |
(67,843) |
Inventory step-up
amortization |
14 |
278 |
1,535 |
777 |
Distributor conversions |
14 |
129 |
186 |
932 |
Due diligence, transaction and
transition costs |
3,934 |
10,015 |
19,964 |
34,505 |
BioMimetic impairment and other
charges |
— |
1,301 |
— |
208,529 |
Patent dispute settlement |
— |
— |
900 |
— |
Management changes |
— |
— |
1,203 |
— |
Tornier merger costs |
11,900 |
— |
11,900 |
— |
Adjusted EBITDA |
$ (812) |
$ (3,166) |
$ (24,431) |
$ (5,945) |
Adjusted EBITDA as a percentage of
net sales |
(1.0)% |
(4.7)% |
(8.2)% |
(2.5)% |
|
|
|
|
|
_______________________________ |
|
|
|
|
|
|
|
|
|
(1) For the
twelve months ended December 31, 2013, amount excludes $2.3 million
of non-cash stock-based compensation expense related to the
conversion of BioMimetic options to Wright Medical options, which
is included in due diligence, transaction and transition
costs. |
(2) For the
twelve months ended December 31, 2014, amount excludes $0.3 million
of non-cash stock-based compensation expense related to the
management changes, which is included in management changes. |
|
Wright Medical Group,
Inc. |
Reconciliation of As
Reported Results to Non-GAAP Financial Measures |
(in thousands, except per share
data--unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
December 31,
2014 |
December 31,
2013 |
December 31,
2014 |
December 31,
2013 |
Net Income |
|
|
|
|
Loss before taxes, as
reported |
$ (106,105) |
$ (24,749) |
$ (246,830) |
$ (230,403) |
Pre-tax impact of reconciling
items: |
|
|
|
|
Inventory step-up
amortization |
14 |
278 |
1,535 |
777 |
Distributor conversion and
non-competes |
373 |
759 |
2,071 |
3,734 |
Non-cash interest expense on
2017 Convertible Notes |
2,371 |
2,222 |
9,257 |
8,678 |
Derivatives mark-to-market
adjustment |
— |
(2,000) |
2,000 |
1,000 |
Transition costs - OrthoRecon
divestiture |
1,425 |
7,745 |
5,849 |
21,612 |
Due diligence, transaction and
transition costs (1) |
2,509 |
2,270 |
14,115 |
12,893 |
BioMimetic impairment and other
charges and CVR mark-to-market adjustments |
73,718 |
460 |
125,011 |
147,381 |
Patent dispute settlement |
— |
— |
900 |
— |
Management changes (2) |
— |
— |
1,203 |
— |
Contingent consideration fair
value adjustment |
58 |
— |
1,808 |
— |
Tornier merger costs |
11,900 |
— |
11,900 |
— |
Gain on previously held
investment in BioMimetic |
— |
— |
— |
(7,798) |
Loss before taxes, as
adjusted |
(13,737) |
(13,015) |
(71,181) |
(42,126) |
|
|
|
|
|
Provision (benefit) for income taxes,
as reported |
$ 863 |
$ 110,462 |
$ (6,334) |
$ 49,765 |
U.S. tax impact resulting from
gain in discontinued operations |
(2,487) |
— |
5,453 |
— |
Valuation allowance |
— |
(119,623) |
— |
(119,623) |
Tax effect of all other
items |
755 |
4,025 |
755 |
52,952 |
Benefit for income taxes, as
adjusted |
$ (869) |
$ (5,136) |
$ (126) |
$ (16,906) |
Effective tax rate, as
adjusted |
6.3% |
39.5% |
0.2% |
40.1% |
Net loss, as adjusted |
$ (12,868) |
$ (7,879) |
$ (71,055) |
$ (25,220) |
|
|
|
|
|
Weighted-average number of shares
outstanding-diluted |
$ 50,698 |
$ 46,897 |
$ 49,758 |
$ 45,265 |
Net loss from continuing operations,
as adjusted, per diluted share |
$ (0.25) |
$ (0.17) |
$ (1.43) |
$ (0.56) |
____________________________ |
|
|
|
|
(1) For the twelve
months ended December 31, 2013, amount includes $2.3 million of
non-cash stock-based compensation expense related to the conversion
of BioMimetic options to Wright Medical options. |
(2) For the twelve
months ended December 31, 2014, amount includes $0.3 million of
non-cash stock-based compensation expense related to the management
changes. |
|
Wright Medical Group,
Inc. |
Reconciliation of Free
Cash Flow |
(dollars in
thousands--unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
December 31,
2014 |
December 31,
2013 |
December 31,
2014 |
December 31,
2013 |
Net cash (used in) provided by operating
activities |
(29,850) |
(42,322) |
(116,002) |
(36,601) |
Capital expenditures |
(12,897) |
(15,018) |
(48,603) |
(37,530) |
Free cash flow |
(42,747) |
(57,340) |
(164,605) |
(74,131) |
|
Wright Medical Group,
Inc. |
Segment
Information |
(in
thousands, except per share data--unaudited) |
|
|
|
|
|
|
|
|
Three months
ended December 31, 2014 |
|
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
Sales |
$ 62,486 |
$ 20,808 |
$ — |
$ — |
$ — |
$ 83,294 |
Gross profit |
51,318 |
12,916 |
— |
(23) |
(14) |
64,197 |
Operating income (loss) |
10,161 |
(2,981) |
(2,648) |
(15,251) |
(16,221) |
(26,940) |
Operating income (loss) as a percent of net
sales |
16.3% |
(14.3%) |
N/A |
N/A |
N/A |
(32.3%) |
|
|
|
|
|
|
|
Depreciation Expense |
2,613 |
800 |
108 |
1,440 |
— |
4,961 |
Amortization Expense |
1,836 |
515 |
76 |
— |
359 |
2,786 |
Non-cash stock-based compensation
expense |
— |
— |
— |
2,519 |
— |
2,519 |
Other |
— |
— |
— |
— |
15,862 |
15,862 |
Adjusted EBITDA |
14,610 |
(1,666) |
(2,464) |
(11,292) |
— |
(812) |
_______________________________ |
|
|
|
|
|
|
(1) Other
consists exclusively of the reconciling items from Operating
Income, as reported, to Operating Income, as adjusted, as included
in the reconciliations above. |
|
|
|
Three months
ended December 31, 2013 |
|
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
Sales |
$ 49,249 |
$ 18,575 |
$ — |
$ — |
$ — |
$ 67,824 |
Gross profit |
40,816 |
11,279 |
— |
(115) |
(1,579) |
50,401 |
Operating income (loss) |
6,873 |
(787) |
(4,074) |
(12,899) |
(12,353) |
(23,240) |
Operating income (loss) as a percent of net
sales |
14.0% |
(4.2%) |
N/A |
N/A |
N/A |
(34.3%) |
|
|
|
|
|
|
|
Depreciation Expense |
2,467 |
638 |
119 |
896 |
— |
4,120 |
Amortization Expense |
647 |
396 |
77 |
— |
630 |
1,750 |
Non-cash stock-based compensation
expense |
— |
— |
— |
2,481 |
— |
2,481 |
Other |
— |
— |
— |
— |
11,723 |
11,723 |
Adjusted EBITDA |
9,987 |
247 |
(3,878) |
(9,522) |
— |
(3,166) |
_______________________________ |
|
|
|
|
|
|
(1) Other
consists exclusively of the reconciling items from Operating
Income, as reported, to Operating Income, as adjusted, as included
in the reconciliations above. |
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31, 2014 |
|
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
Sales |
$ 212,077 |
$ 85,950 |
$ — |
$ — |
$ — |
$ 298,027 |
Gross profit |
172,035 |
54,558 |
— |
(254) |
(1,535) |
224,804 |
Operating income (loss) |
23,074 |
(5,366) |
(12,033) |
(67,908) |
(37,573) |
(99,806) |
Operating income (loss) as a percent of net
sales |
10.9% |
(6.2%) |
N/A |
N/A |
N/A |
(33.5%) |
|
|
|
|
|
|
|
Depreciation Expense |
9,707 |
3,046 |
432 |
5,271 |
— |
18,456 |
Amortization Expense |
5,656 |
2,178 |
307 |
1 |
1,885 |
10,027 |
Non-cash stock-based compensation expense
(2) |
— |
— |
— |
11,204 |
— |
11,204 |
Other |
— |
— |
— |
— |
35,688 |
35,688 |
Adjusted EBITDA |
38,437 |
(142) |
(11,294) |
(51,432) |
— |
(24,431) |
_______________________________ |
|
|
|
|
|
|
(1) Other
consists exclusively of the reconciling items from Operating
Income, as reported, to Operating Income, as adjusted, as included
in the reconciliations above. |
(2) For the
twelve months ended December 31, 2014, amount excludes $0.3 million
of non-cash stock-based compensation expense related to the
management changes. |
|
|
|
Twelve Months
Ended December 31, 2013 |
|
U.S. |
International |
BioMimetic |
Corporate |
Other (1) |
Total |
Sales |
$ 177,648 |
$ 64,682 |
$ — |
$ — |
$ — |
$ 242,330 |
Gross profit |
146,541 |
39,630 |
— |
(505) |
(3,057) |
182,609 |
Operating income (loss) |
26,268 |
4,761 |
(12,741) |
(52,949) |
(247,545) |
(282,206) |
Operating income (loss) as a percent of net
sales |
14.8% |
7.4% |
N/A |
N/A |
N/A |
(116.5%) |
|
|
|
|
|
|
|
Depreciation Expense |
8,838 |
2,364 |
394 |
2,788 |
— |
14,384 |
Amortization Expense |
3,507 |
644 |
523 |
— |
2,802 |
7,476 |
Non-cash stock-based compensation expense
(2) |
— |
— |
— |
9,658 |
— |
9,658 |
Other |
— |
— |
— |
— |
244,743 |
244,743 |
Adjusted EBITDA |
38,613 |
7,769 |
(11,824) |
(40,503) |
— |
(5,945) |
_______________________________ |
|
|
|
|
|
|
(1) Other consists
exclusively of the reconciling items from Operating Income, as
reported, to Operating Income, as adjusted, as included in the
reconciliations above. |
(2) For the twelve months
ended December 31, 2013, amount excludes $2.3 million of non-cash
stock-based compensation expense related to the conversion of
BioMimetic options to Wright Medical options, which is included in
due diligence, transaction and transition costs. |
|
Wright Medical Group,
Inc. |
Condensed Consolidated
Balance Sheets |
(dollars in
thousands---unaudited) |
|
|
|
|
December 31,
2014 |
December 31,
2013 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 227,326 |
$ 168,534 |
Marketable securities |
2,575 |
6,898 |
Accounts receivable, net |
57,190 |
45,817 |
Inventories |
88,412 |
72,443 |
Prepaid expenses and other
current assets |
64,953 |
69,608 |
Current assets held for
sale |
— |
142,015 |
Total current assets |
440,456 |
505,315 |
|
|
|
Property, plant and equipment, net |
104,235 |
70,515 |
Goodwill and intangible assets, net |
259,991 |
157,683 |
Marketable securities |
— |
7,650 |
Other assets |
87,994 |
133,845 |
Other assets held for sale |
— |
132,443 |
Total assets |
$ 892,676 |
$ 1,007,451 |
|
|
|
Liabilities and stockholders'
equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 16,729 |
$ 3,913 |
Accrued expenses and other
current liabilities |
170,204 |
80,117 |
Current portion of long-term
obligations |
718 |
4,174 |
Current liabilities held for
sale |
— |
31,221 |
Total current liabilities |
187,651 |
119,425 |
Long-term obligations |
280,612 |
271,227 |
Other liabilities |
145,610 |
155,686 |
Other liabilities held for sale |
— |
1,399 |
Total liabilities |
613,873 |
547,737 |
|
|
|
Stockholders' equity |
278,803 |
459,714 |
Total liabilities and
stockholders' equity |
$ 892,676 |
$ 1,007,451 |
CONTACT: Investors & Media:
Julie D. Tracy
Sr. Vice President, Chief Communications Officer
Wright Medical Group, Inc.
(901) 290-5817
julie.tracy@wmt.com
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