Second Quarter 2016 Net Sales From
Continuing Operations of $171 Million As Reported; Excludes $10
Million of Large Joint Sales, Which are Now Part of Discontinued
Operations
Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial
results for its second quarter ended June 26, 2016 and
provided updated 2016 guidance. As a result of the
previously announced binding offer under which Corin Orthopaedics
Holdings Limited (Corin) would acquire the large joints (hip/knee)
business from Wright, this business which was previously reported
as a separate reporting segment is now reported as discontinued
operations.
As previously announced, Wright Medical Group, Inc. and Tornier
N.V. completed their merger on October 1, 2015, and, in
accordance with Unites States generally accepted accounting
principles (GAAP), legacy Wright’s historical results of operations
replaced legacy Tornier’s historical results of operations for all
periods prior to the merger and the results of the two legacy
businesses have been consolidated only from that date forward. This
release and Wright’s website at ir.wright.com contain certain
unaudited non-GAAP combined pro forma financial results for Wright
Medical Group N.V. which give effect to the merger as if it had
occurred on the first day of fiscal 2014, as well as
reconciliations to the most comparable GAAP measure.
Net sales from continuing operations totaled $170.7 million
during the second quarter ended June 26, 2016. Combined pro
forma net sales from continuing operations totaled $150.2 million
during the second quarter of 2015. On pro forma constant
currency basis, global extremities and biologics net sales grew
14%. The second quarter 2016 net sales from continuing
operations excludes $10.2 million of large joint sales, which are
included in discontinued operations. Reconciliations of all
historical non-GAAP financial measures used in this release to the
most comparable GAAP measures can be found in the attached
financial tables.
Robert Palmisano, president and chief executive officer,
commented, “For the third consecutive quarter, all of our most
important financial results exceeded our expectations. Global
extremities and biologics pro forma constant currency net sales
growth of 14%, adjusted EBITDA from continuing operations of $12.2
million and adjusted gross margins from continuing operations of
78.5% reflect the strength of our markets and our unique position
in them. We continued to successfully execute our merger
integration plans and with this continued success, we believe we
are well positioned to continue our strong business momentum and to
deliver on our synergy commitments as we progress through the
remainder of 2016.”
Palmisano continued, “Highlights in the quarter included strong
contributions from the ongoing rollout of our SIMPLICITI and
AEQUALIS ASCEND FLEX shoulder systems, which drove 20% sales growth
in U.S. shoulders, and the ongoing launch of the INFINITY total
ankle replacement system, which drove 33% sales growth in U.S.
total ankle replacement. In addition, net sales of our U.S.
biologics business grew 52% in the quarter, driven by the ongoing
commercial activities for AUGMENT Bone Graft. Biologics is
now the fastest growing part of our business. We expect all
of these products, which are still early in commercial rollout,
will continue to be growth engines during the remainder of 2016 and
beyond.”
Palmisano further commented, “As anticipated, we began to see
the impact of revenue dis-synergies in the second quarter,
particularly in our U.S. lower extremities business. Although
it is still too early to determine the ultimate impact of
dis-synergies, where we stand today, combined with the strength of
our core upper extremities and lower extremities businesses, and
our anticipated ability to execute on cost synergies ahead of
schedule, gives us the confidence to increase our full-year
outlook. We intend to continue to focus on executing our
integration plans to realize our full potential and believe that
the positive progress we have made since the merger close sets us
up well for continued strong net sales growth and significant
margin expansion this year, next year and beyond.”
Net loss from continuing operations for the second quarter of
2016 totaled $42.0 million, or $(0.41) per diluted share.
The company’s net loss from continuing operations for the second
quarter of 2016 included the after-tax effects of $10.4 million of
inventory step-up amortization, $7.1 million of transition costs, a
gain of $16.6 million related to mark-to-market adjustments on
derivatives, $8.2 million of non-cash interest expense related to
its convertible notes,$12.3 million non-cash loss on extinguishment
of debt to write-off unamortized debt discount and deferred
financing fees associated with the partial settlement of 2017 and
2020 convertible notes, a $1.4 million unrealized loss related to
mark-to-market adjustments on contingent value rights (CVRs) issued
in connection with the BioMimetic acquisition, $2.0 million of
non-cash inventory provisions associated with a product
rationalization initiative, $1.3 million of costs associated with
executive management changes, $1.8 million related to a legal
settlement, and a $3.1 million interest and income tax benefit
related to the settlement of an IRS audit.
The company's second quarter 2016 net loss from continuing
operations, as adjusted for the above items, was $18.8
million. The company's second quarter 2016 adjusted EBITDA
from continuing operations, as defined in the non-GAAP to GAAP
reconciliation provided later in this release, was $12.2
million. The attached financial tables include reconciliations of
non-GAAP measures to the most comparable GAAP measures.
Cash and cash equivalents totaled $326.3 million as of the end
of the second quarter of 2016.
Update on Metal-On-Metal Hip Litigation and Related
Insurance Litigation
During the second and early third quarters of 2016, the company
believes it made meaningful progress toward resolution of the
legacy Wright metal-on-metal hip litigation and the related
insurance litigation. In June 2016, the company reached a
confidential settlement in principle with a subgroup of three
insurance carriers. Settlement discussions with the remaining
insurance carriers continue. In July 2016, the company and
plaintiffs continued with ongoing mediation discussions. As a
result of the July discussions, the company established a
reasonably possible loss range applicable to a substantial portion
of revision cases of $150 million to $198 million, net of expected
recoveries from the insurance settlement. Accordingly, the
company has recognized a $150 million charge within discontinued
operations in the accompanying condensed consolidated statement of
operations. Settlement discussions with the plaintiffs
continue. The company is continuing to actively work toward
its goal of securing a global settlement, although this is complex
and subject to significant uncertainties, which makes the ultimate
outcome and precise timing difficult to predict.
Palmisano concluded, “During the second half of the year, we
look forward to closing the transaction with Corin, completing our
merger integration activities and exiting the year as a
high-growth, pure-play extremities and biologics company.
Following our merger, our increased size and scale have allowed us
to leverage strong sales growth into even stronger EBITDA
growth. We have multiple opportunities through a robust new
product pipeline to further accelerate our growth, continue to
expand our markets and gain market share. In addition, we
intend to devote our full resources and attention on accelerating
growth opportunities in the high-growth extremities and biologics
markets and believe this will enhance our ability to create
significant shareholder value.”
Outlook
Following the previously announced transaction with Corin, the
company now anticipates net sales from continuing operations for
full-year 2016 of approximately $675 million to $685 million, an
increase from the company’s previous guidance range of $668 million
to $678 million.
The company is also increasing its full-year 2016 adjusted
EBITDA from continuing operations, as described in the non-GAAP
reconciliation provided later in this release, to be in the range
of $40 million to $45 million from its previous range of $30
million to $35 million, which included the negative impact from the
Corin transaction of approximately $5 million to $6 million.
Taking this into account, the company’s actual adjusted EBITDA
guidance increase is approximately $15 million from its previous
guidance issued on May 4, 2016. This increase to adjusted
EBITDA is driven by the company’s first half of 2016 financial
performance and the company’s ability to capture synergies earlier
and at a greater level than anticipated.
The company anticipates adjusted cash earnings per share from
continuing operations, including share-based compensation, as
described in the non-GAAP to GAAP reconciliation provided later in
this release, for full-year 2016 of $(0.54) to $(0.47) per diluted
share.
The company estimates approximately 103 million diluted
weighted-average ordinary shares outstanding for fiscal year
2016.
The company's adjusted EBITDA from continuing operations target
is measured by adding back to net loss from continuing operations
charges for interest, income taxes, depreciation and amortization
expenses, non-cash share-based compensation expense and
non-operating income and expense. Additionally, the company’s
adjusted EBITDA from continuing operations target excludes possible
future acquisitions; other material future business developments;
and due diligence, transaction and transition costs associated with
acquisitions and divestitures. Further, this adjusted EBITDA
from continuing operations target excludes any expenses, earnings
or losses related to the large joints business and legacy Wright’s
divested OrthoRecon business and legacy Tornier’s divested ankle
and silastic toe products.
The company’s adjusted cash earnings per share from continuing
operations target is measured by adding back to net loss from
continuing operations charges for non-cash amortization expenses,
net of taxes. Note that as a result of the company’s relatively low
effective tax rate due to the valuation allowance impacting a
substantial portion of the company’s income/loss, the company is
currently estimating the tax effect on amortization expense at 0%.
Additionally, this adjusted cash earnings per share from continuing
operations target excludes possible future acquisitions; other
material future business developments; non-cash interest expense
associated with the 2017, 2020 and 2021 convertible notes; due
diligence, transaction and transition costs associated with
acquisitions and divestitures; mark-to-market adjustments to CVRs;
non-cash mark-to-market derivative adjustments; and non-cash
write-offs of unamortized debt discount and deferred financing
charges associated with the partial settlement of the 2017
convertible notes and 2020 convertible notes. Further, this
earnings target excludes any expenses, earnings or losses related
to the large joints business.
The company's anticipated ranges for net sales from continuing
operations, adjusted EBITDA from continuing operations, and
adjusted cash earnings per share from continuing operations are
forward-looking statements, as are any other statements that
anticipate or aspire to future events or performance. They
are subject to various risks and uncertainties that could cause the
company's actual results to differ materially from the anticipated
targets. The anticipated targets are not predictions of the
company's actual performance. See the cautionary information
about forward-looking statements in the “Cautionary Note Regarding
Forward-Looking Statements” section of this release.
Supplemental Financial Information
To view the second quarter of 2016 supplemental financial
information, visit ir.wright.com. For updated information on
Wright Medical Group N.V. segment reporting changes and non-GAAP
combined pro forma historical financial information, including
second quarter of 2016, please refer to the presentation posted on
Wright’s website at ir.wright.com in the “Financial Information”
section.
Internet Posting of Information
Wright routinely posts information that may be important to
investors in the “Investor Relations” section of its website at
www.wright.com. The company encourages investors and
potential investors to consult the Wright website regularly for
important information about Wright.
Conference Call and Webcast
As previously announced, Wright will host a conference call
starting at 3:30 p.m. Central Time today. The live dial-in
number for the call is (877) 516-3529 (U.S.) / (281) 973-6135
(Outside U.S.). The participant passcode for the call is
“Wright.” A simultaneous webcast of the call will be
available via Wright’s corporate website at
www.wright.com.
A replay of the call will be available beginning at 5:30 p.m.
Central Time on August 2, 2016 through August 9, 2016. To
hear this replay, dial (855) 859-2056 (U.S.) / (404) 537-3406
(Outside U.S.) and enter code 68878522. A replay of the
conference call will also be available via the internet starting
today and continuing for at least 12 months. To access a
replay of the conference call via the internet, go to the “Investor
Relations - Presentations/Calendar” section of the company’s
corporate website located at www.wright.com.
The conference call may include a discussion of non-GAAP
financial measures. Reference is made to the most directly
comparable GAAP financial measures, the reconciliation of the
differences between the two financial measures, and the other
information included in this release, the Current Report on Form
8-K filed with the U.S. Securities and Exchange Commission (SEC)
today, or otherwise available in the “Investor Relations -
Supplemental Financial Information” section of the company's
corporate website located at www.wright.com.
The conference call may include forward-looking
statements. See the cautionary information about
forward-looking statements in the “Cautionary Note Regarding
Forward-Looking Statements” section of this release.
About Wright Medical Group N.V.
Wright Medical Group N.V. is a global medical device company
focused on extremities and biologics products. The company is
committed to delivering innovative, value-added solutions improving
quality of life for patients worldwide and is a recognized leader
of surgical solutions for the upper extremities (shoulder, elbow,
wrist and hand), lower extremities (foot and ankle) and biologics
markets, three of the fastest growing segments in
orthopaedics. For more information about Wright, visit
www.wright.com.
WRIGHT®, INFINITY®, AUGMENT®, TORNIER®, AEQUALIS®, AEQUALIS
ASCEND®, AEQUALIS ASCEND® FLEX™, and SIMPLICITI® are trademarks of
Wright Medical Group N.V. or its affiliates, registered as
indicated in the United States, and in other countries. All
other trademarks and trade names referred to in this release are
the property of their respective owners.
Non-GAAP Financial Measures
To supplement the company’s consolidated financial statements
prepared in accordance with U.S. generally accepted accounting
principles, the company uses certain non-GAAP financial measures in
this release. Reconciliations of the non-GAAP financial measures
used in this release to the most comparable GAAP measures for the
respective periods can be found in tables later in this release.
Wright’s non-GAAP financial measures include combined pro forma net
sales; combined pro forma net sales, excluding the impact of
foreign currency; net income, as adjusted; EBITDA, as adjusted;
gross margin, as adjusted; cash earnings, as adjusted; and cash
earnings, as adjusted, per diluted share, in each case, from
continuing operations. The company's management believes that the
presentation of these measures provides useful information to
investors. These measures may assist investors in evaluating
the company's operations, period over period. While pro forma data
gives effect to the merger with Tornier as if it had occurred on
the first day of fiscal 2015 and enhances comparability of
financial information between periods, pro forma data is not
indicative of the results that actually would have been obtained if
the merger had occurred as of the beginning of 2015. Wright’s
non-GAAP financial measures exclude such items as non-cash interest
expense related to the company's 2017 convertible notes, 2020
convertible notes and 2021 convertible notes, net gains and losses
on mark-to-market adjustments on and settlements of derivative
assets and liabilities, write-off of unamortized debt discount and
deferred financing charges following the partial settlement of 2017
convertible notes and 2020 convertible notes, mark-to-market
adjustments on CVRs, 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 financial
measures only as a supplement to, not as a substitute for or as
superior to, measures of financial performance prepared in
accordance with GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “intend,” “could,” “may,”
“will,” “believe,” “estimate,” “look forward,” “forecast,” “goal,”
“target,” “project,” “continue,” “outlook,” “guidance,” “future,”
other words of similar meaning and the use of future dates.
Forward-looking statements in this release include, but are not
limited to, statements about the company’s anticipated financial
results for 2016, including net sales from continuing operations,
adjusted EBITDA from continuing operations and adjusted cash
earnings per share from continuing operations; anticipated sales
and cost synergies and dis-synergies and the timing thereof; the
company’s expectations regarding the market size and continued
sales growth of its extremities and biologics products; the
benefits of its merger with Tornier and integration efforts and
progress; the anticipated closing of the sale of its large joints
business to Corin, the company’s expectations regarding legacy
Wright’s insurance and metal-on-metal litigation and the company’s
ability to create significant shareholder value.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. Each forward-looking
statement contained in this release is subject to risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statement. Applicable
risks and uncertainties include, among others, the failure to
integrate the businesses and realize net sales synergies and cost
savings from the merger with Tornier or delay in realization
thereof; operating costs and business disruption as a result of the
merger, including adverse effects on employee retention and sales
force productivity and on business relationships with third
parties; integration costs; actual or contingent liabilities;
adverse effects of diverting resources and attention to the
proposed sale of the large joints business; the adequacy of the
company’s capital resources and need for additional financing; the
timing of regulatory approvals and introduction of new products;
physician acceptance, endorsement, and use of new products; failure
to achieve the anticipated benefits from approval of AUGMENT® Bone
Graft; the effect of regulatory actions, changes in and adoption of
reimbursement rates; product liability claims and product recalls;
pending and threatened litigation; risks associated with
international operations and expansion; fluctuations in foreign
currency exchange rates; other business effects, including the
effects of industry, economic or political conditions outside of
the company’s control; reliance on independent distributors and
sales agencies; competitor activities; changes in tax and other
legislation; and the risks identified under the heading “Risk
Factors” in Wright’s Annual Report on Form 10-K for the year ended
December 27, 2015 filed by Wright with the SEC on February 23, 2016
and Wright’s Quarterly Report on Form 10-Q for the quarter ended
June 26, 2016 to be filed by Wright with the SEC on August 2,
2016. Investors should not place considerable reliance on the
forward-looking statements contained in this release.
Investors are encouraged to read Wright’s filings with the SEC,
available at www.sec.gov, for a discussion of these and other risks
and uncertainties. The forward-looking statements in this release
speak only as of the date of this release, and Wright undertakes no
obligation to update or revise any of these statements.
Wright’s business is subject to substantial risks and
uncertainties, including those referenced above. Investors,
potential investors, and others should give careful consideration
to these risks and uncertainties.
--Tables Follow--
Wright Medical Group N.V. |
Condensed Consolidated Statements of
Operations |
(dollars in thousands, except per share
data--unaudited) |
|
|
Three months ended |
|
Six months ended |
|
June 26, 2016 |
|
June 30, 2015 |
|
June 26, 2016 |
|
June 30, 2015 |
Net sales |
$ |
170,716 |
|
|
$ |
80,420 |
|
|
$ |
340,007 |
|
|
$ |
158,354 |
|
Cost of sales |
49,009 |
|
|
21,635 |
|
|
95,675 |
|
|
40,760 |
|
Gross profit |
121,707 |
|
|
58,785 |
|
|
244,332 |
|
|
117,594 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling, general and
administrative |
136,483 |
|
|
82,605 |
|
|
271,229 |
|
|
164,804 |
|
Research and development |
12,108 |
|
|
7,957 |
|
|
24,224 |
|
|
15,074 |
|
Amortization of intangible
assets |
7,484 |
|
|
2,565 |
|
|
13,941 |
|
|
5,179 |
|
Total operating expenses |
156,075 |
|
|
93,127 |
|
|
309,394 |
|
|
185,057 |
|
Operating loss |
(34,368 |
) |
|
(34,342 |
) |
|
(65,062 |
) |
|
(67,463 |
) |
Interest expense,
net |
13,024 |
|
|
10,959 |
|
|
24,878 |
|
|
18,608 |
|
Other (income) expense,
net |
(2,061 |
) |
|
(8,153 |
) |
|
(3,129 |
) |
|
(2,841 |
) |
Loss from continuing operations
before income taxes |
(45,331 |
) |
|
(37,148 |
) |
|
(86,811 |
) |
|
(83,230 |
) |
(Benefit) provision for
income taxes |
(3,300 |
) |
|
158 |
|
|
(4,588 |
) |
|
324 |
|
Net loss from continuing
operations |
$ |
(42,031 |
) |
|
$ |
(37,306 |
) |
|
$ |
(82,223 |
) |
|
$ |
(83,554 |
) |
Loss from discontinued
operations, net of tax |
(187,329 |
) |
|
$ |
(7,009 |
) |
|
$ |
(195,135 |
) |
|
$ |
(10,509 |
) |
Net loss |
$ |
(229,360 |
) |
|
$ |
(44,315 |
) |
|
$ |
(277,358 |
) |
|
$ |
(94,063 |
) |
|
|
|
|
|
|
|
|
Net loss from
continuing operations per share, basic (1) |
$ |
(0.41 |
) |
|
$ |
(0.71 |
) |
|
$ |
(0.80 |
) |
|
$ |
(1.59 |
) |
Net loss from
continuing operations per share, diluted (1) |
$ |
(0.41 |
) |
|
$ |
(0.71 |
) |
|
$ |
(0.80 |
) |
|
$ |
(1.59 |
) |
|
|
|
|
|
|
|
|
Net loss per share,
basic (1) |
$ |
(2.23 |
) |
|
$ |
(0.84 |
) |
|
$ |
(2.70 |
) |
|
$ |
(1.79 |
) |
Net loss per share,
diluted (1) |
$ |
(2.23 |
) |
|
$ |
(0.84 |
) |
|
$ |
(2.70 |
) |
|
$ |
(1.79 |
) |
|
|
|
|
|
|
|
|
Weighted-average number
of shares outstanding-basic (1) |
102,785 |
|
|
52,631 |
|
|
102,745 |
|
|
52,535 |
|
Weighted-average number
of shares outstanding-diluted (1) |
102,785 |
|
|
52,631 |
|
|
102,745 |
|
|
52,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The prior
year balances were converted to meet post-merger valuations. |
Wright Medical Group N.V. |
Consolidated Net Sales Analysis |
(dollars in thousands--unaudited) |
|
|
Three months ended |
|
Six months ended |
|
June 26, 2016 |
|
June 30, 2015 |
|
%change |
|
June 26, 2016 |
|
June 30, 2015 |
|
%change |
U.S. |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
52,008 |
|
|
42,360 |
|
|
22.8 |
% |
|
107,286 |
|
|
84,348 |
|
|
27.2 |
% |
Upper extremities |
49,909 |
|
|
4,175 |
|
|
1,095.4 |
% |
|
99,910 |
|
|
8,049 |
|
|
1,141.3 |
% |
Biologics |
17,792 |
|
|
11,281 |
|
|
57.7 |
% |
|
34,920 |
|
|
22,414 |
|
|
55.8 |
% |
Sports med & other |
2,164 |
|
|
454 |
|
|
376.7 |
% |
|
4,301 |
|
|
945 |
|
|
355.1 |
% |
Total
U.S. |
$ |
121,873 |
|
|
$ |
58,270 |
|
|
109.2 |
% |
|
$ |
246,417 |
|
|
$ |
115,756 |
|
|
112.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
16,241 |
|
|
12,600 |
|
|
28.9 |
% |
|
31,783 |
|
|
24,396 |
|
|
30.3 |
% |
Upper extremities |
23,940 |
|
|
2,042 |
|
|
1,072.4 |
% |
|
44,915 |
|
|
3,959 |
|
|
1,034.5 |
% |
Biologics |
4,867 |
|
|
5,318 |
|
|
(8.5 |
)% |
|
9,065 |
|
|
9,810 |
|
|
(7.6 |
)% |
Sports med & other |
3,795 |
|
|
2,190 |
|
|
73.3 |
% |
|
7,827 |
|
|
4,433 |
|
|
76.6 |
% |
Total
International |
$ |
48,843 |
|
|
$ |
22,150 |
|
|
120.5 |
% |
|
$ |
93,590 |
|
|
$ |
42,598 |
|
|
119.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
68,249 |
|
|
54,960 |
|
|
24.2 |
% |
|
139,069 |
|
|
108,744 |
|
|
27.9 |
% |
Upper extremities |
73,849 |
|
|
6,217 |
|
|
1,087.9 |
% |
|
144,825 |
|
|
12,008 |
|
|
1,106.1 |
% |
Biologics |
22,659 |
|
|
16,599 |
|
|
36.5 |
% |
|
43,985 |
|
|
32,224 |
|
|
36.5 |
% |
Sports med & other |
5,959 |
|
|
2,644 |
|
|
125.4 |
% |
|
12,128 |
|
|
5,378 |
|
|
125.5 |
% |
Total net
sales |
$ |
170,716 |
|
|
$ |
80,420 |
|
|
112.3 |
% |
|
$ |
340,007 |
|
|
$ |
158,354 |
|
|
114.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Combined Pro Forma
Net Sales to Net Sales |
(dollars in thousands--unaudited) |
|
|
Three months ended |
|
June 30, 2015 |
|
Standalone Wright Medical Group,
Inc. |
|
Standalone Tornier N.V., recast
(1) |
|
Discontinued revenues (2) |
|
Non-GAAPcombined pro
formanet sales |
U.S. |
|
|
|
|
|
|
|
Lower extremities |
$ |
42,360 |
|
|
$ |
9,518 |
|
|
$ |
(2,930 |
) |
|
$ |
48,948 |
|
Upper extremities |
4,175 |
|
|
38,525 |
|
|
— |
|
|
42,700 |
|
Biologics |
11,281 |
|
|
415 |
|
|
— |
|
|
11,696 |
|
Sports med & other |
454 |
|
|
1,606 |
|
|
— |
|
|
2,060 |
|
Total
extremities & biologics |
58,270 |
|
|
50,064 |
|
|
(2,930 |
) |
|
105,404 |
|
Large joint |
— |
|
|
40 |
|
|
(40 |
) |
|
— |
|
Total
U.S. |
$ |
58,270 |
|
|
$ |
50,104 |
|
|
$ |
(2,970 |
) |
|
$ |
105,404 |
|
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
Lower extremities |
$ |
12,600 |
|
|
$ |
2,525 |
|
|
$ |
— |
|
|
$ |
15,125 |
|
Upper extremities |
2,042 |
|
|
18,316 |
|
|
— |
|
|
20,358 |
|
Biologics |
5,318 |
|
|
127 |
|
|
— |
|
|
5,445 |
|
Sports med & other |
2,190 |
|
|
1,684 |
|
|
— |
|
|
3,874 |
|
Total
extremities & biologics |
22,150 |
|
|
22,652 |
|
|
— |
|
|
44,802 |
|
Large joint |
— |
|
|
10,465 |
|
|
(10,465 |
) |
|
— |
|
Total
International |
$ |
22,150 |
|
|
$ |
33,117 |
|
|
$ |
(10,465 |
) |
|
$ |
44,802 |
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
|
Lower extremities |
$ |
54,960 |
|
|
$ |
12,043 |
|
|
$ |
(2,930 |
) |
|
$ |
64,073 |
|
Upper extremities |
6,217 |
|
|
56,841 |
|
|
— |
|
|
63,058 |
|
Biologics |
16,599 |
|
|
542 |
|
|
— |
|
|
17,141 |
|
Sports med & other |
2,644 |
|
|
3,290 |
|
|
— |
|
|
5,934 |
|
Total
extremities & biologics |
80,420 |
|
|
72,716 |
|
|
(2,930 |
) |
|
150,206 |
|
Large joint |
— |
|
|
10,505 |
|
|
(10,505 |
) |
|
— |
|
Total net
sales |
$ |
80,420 |
|
|
$ |
83,221 |
|
|
$ |
(13,435 |
) |
|
$ |
150,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Legacy
Tornier product line sales have been recast to reflect the
reclassification of cement, instruments and freight from the
historical Tornier product line "Large Joints and Other" to the
product line associated with those revenues that will be utilized
for future revenue reporting. |
|
(2) To reduce
from Tornier’s historical sales the U.S. sales associated with
Tornier’s Salto Talaris and Salto XT ankle replacement products and
silastic toe replacement products, and the global sales associated
with Tornier's Large Joint business. |
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Combined Pro Forma
Net Sales to Net Sales |
(dollars in thousands--unaudited) |
|
|
Six months ended |
|
June 30, 2015 |
|
Standalone Wright Medical Group,
Inc. |
|
Standalone Tornier N.V., recast
(1) |
|
Discontinued revenues (2) |
|
Non-GAAP combined pro forma net
sales |
U.S. |
|
|
|
|
|
|
|
Lower extremities |
84,348 |
|
|
20,961 |
|
|
(6,827 |
) |
|
98,482 |
|
Upper extremities |
8,049 |
|
|
77,938 |
|
|
— |
|
|
85,987 |
|
Biologics |
22,414 |
|
|
878 |
|
|
— |
|
|
23,292 |
|
Sports med & other |
945 |
|
|
3,211 |
|
|
— |
|
|
4,156 |
|
Total
extremities & biologics |
115,756 |
|
|
102,988 |
|
|
(6,827 |
) |
|
211,917 |
|
Large joint |
— |
|
|
86 |
|
|
(86 |
) |
|
— |
|
Total
U.S. |
$ |
115,756 |
|
|
$ |
103,074 |
|
|
$ |
(6,913 |
) |
|
$ |
211,917 |
|
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
Lower extremities |
24,396 |
|
|
5,127 |
|
|
— |
|
|
29,523 |
|
Upper extremities |
3,959 |
|
|
36,431 |
|
|
— |
|
|
40,390 |
|
Biologics |
9,810 |
|
|
243 |
|
|
— |
|
|
10,053 |
|
Sports med & other |
4,433 |
|
|
3,867 |
|
|
— |
|
|
8,300 |
|
Total
extremities & biologics |
42,598 |
|
|
45,668 |
|
|
— |
|
|
88,266 |
|
Large joint |
— |
|
|
22,571 |
|
|
(22,571 |
) |
|
— |
|
Total
International |
$ |
42,598 |
|
|
$ |
68,239 |
|
|
$ |
(22,571 |
) |
|
$ |
88,266 |
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
|
Lower extremities |
108,744 |
|
|
26,088 |
|
|
(6,827 |
) |
|
128,005 |
|
Upper extremities |
12,008 |
|
|
114,369 |
|
|
— |
|
|
126,377 |
|
Biologics |
32,224 |
|
|
1,121 |
|
|
— |
|
|
33,345 |
|
Sports med & other |
5,378 |
|
|
7,078 |
|
|
— |
|
|
12,456 |
|
Total
extremities & biologics |
158,354 |
|
|
148,656 |
|
|
(6,827 |
) |
|
300,183 |
|
Large joint |
— |
|
|
22,657 |
|
|
(22,657 |
) |
|
— |
|
Total
sales |
$ |
158,354 |
|
|
$ |
171,313 |
|
|
$ |
(29,484 |
) |
|
$ |
300,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Legacy
Tornier product line sales have been recast to reflect the
reclassification of cement, instruments and freight from the
historical Tornier product line "Large Joints and Other" to the
product line associated with those revenues that will be utilized
for future revenue reporting. |
|
(2) To reduce
from Tornier’s historical sales the U.S. sales associated with
Tornier’s Salto Talaris and Salto XT ankle replacement products and
silastic toe replacement products, and the global sales associated
with Tornier's Large Joint business. |
Wright Medical Group N.V. |
Supplemental Combined Pro Forma Net Sales
Information |
(unaudited) |
|
|
Second Quarter 2016 sales
growth/(decline) |
|
U.S. combined |
Int'l combined pro forma |
Int'l combined |
Global combined
pro |
Global combined |
pro |
constant |
pro |
forma constant |
pro |
forma |
currency |
forma |
currency |
forma |
Product line |
|
|
|
|
|
Lower extremities |
|
6 |
% |
|
9 |
% |
|
7 |
% |
|
7 |
% |
|
7 |
% |
Upper extremities |
|
17 |
% |
|
17 |
% |
|
18 |
% |
|
17 |
% |
|
17 |
% |
Biologics |
|
52 |
% |
|
(7 |
%) |
|
(11 |
%) |
|
33 |
% |
|
32 |
% |
Sports med & other |
|
5 |
% |
|
(1 |
%) |
|
(2 |
%) |
|
1 |
% |
|
— |
% |
Total net
sales |
|
16 |
% |
|
10 |
% |
|
9 |
% |
|
14 |
% |
|
14 |
% |
|
|
|
Six months ended June 26, 2016 sales
growth/(decline) |
|
U.S. combined |
Int'l combined pro forma |
Int'l combined |
Global combined pro |
Global combined |
pro |
constant |
pro |
forma constant |
pro |
forma |
currency |
forma |
currency |
forma |
Product line |
|
|
|
|
|
Lower extremities |
|
9 |
% |
|
10 |
% |
|
8 |
% |
|
9 |
% |
|
9 |
% |
Upper extremities |
|
16 |
% |
|
13 |
% |
|
11 |
% |
|
15 |
% |
|
15 |
% |
Biologics |
|
50 |
% |
|
(6 |
%) |
|
(10 |
%) |
|
33 |
% |
|
32 |
% |
Sports med & other |
|
3 |
% |
|
(3 |
%) |
|
(6 |
%) |
|
(1 |
%) |
|
(3 |
%) |
Total net
sales |
|
16 |
% |
|
8 |
% |
|
6 |
% |
|
14 |
% |
|
13 |
% |
|
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Adjusted Gross
Margins to Gross Profit from Continuing Operations |
(dollars in thousands--unaudited) |
|
|
Three months ended |
|
Six months ended |
|
June 26, 2016 |
|
June 26, 2016 |
Gross profit
from continuing operations, as reported |
$ |
121,707 |
|
|
$ |
244,332 |
|
Reconciling items
impacting gross profit: |
|
|
|
|
|
Inventory step-up amortization |
10,387 |
|
|
20,616 |
|
Product rationalization |
1,954 |
|
|
1,954 |
|
Transaction and transition
costs |
— |
|
|
124 |
|
Non-GAAP gross
profit from continuing operations, as adjusted |
$ |
134,048 |
|
|
$ |
267,026 |
|
Net sales from continuing
operations |
170,716 |
|
|
340,007 |
|
Adjusted gross
margins from continuing operations |
78.5 |
% |
|
78.5 |
% |
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Cash Earnings Per
Share to Net Loss from Continuing Operations |
(dollars in thousands, except per share
data--unaudited) |
|
|
Three months ended |
|
Six months ended |
|
June 26, 2016 |
|
June 26, 2016 |
Net loss from
continuing operations, as reported |
$ |
(42,031 |
) |
|
$ |
(82,223 |
) |
Other reconciling
items: |
|
|
|
Inventory step-up amortization
(1) |
10,387 |
|
|
20,616 |
|
Product rationalization (1) |
1,954 |
|
|
1,954 |
|
Non-cash interest expense on
convertible notes |
8,240 |
|
|
15,296 |
|
Non-cash loss on extinguishment of
debt |
12,343 |
|
|
12,343 |
|
Derivatives mark-to-market
adjustments |
(16,632 |
) |
|
(23,273 |
) |
Transaction and transition costs
(3) |
7,060 |
|
|
17,893 |
|
Management changes (2) |
1,348 |
|
|
1,348 |
|
CVR mark-to-market adjustments |
1,401 |
|
|
6,725 |
|
Contingent consideration fair value
adjustment |
306 |
|
|
306 |
|
Legal settlement (2) |
1,800 |
|
|
1,800 |
|
Costs associated with new
convertible debt (2) |
234 |
|
|
234 |
|
IRS settlement (4) |
(3,073 |
) |
|
(3,073 |
) |
Tax effect of reconciling
items |
(2,132 |
) |
|
(3,321 |
) |
Non-GAAP net
loss from continuing operations, as adjusted |
$ |
(18,795 |
) |
|
$ |
(33,375 |
) |
Add back amortization of intangible
assets |
7,484 |
|
|
13,941 |
|
Non-GAAP cash
earnings |
$ |
(11,311 |
) |
|
$ |
(19,434 |
) |
Weighted-average basic shares
outstanding |
102,785 |
|
|
102,745 |
|
Non-GAAP cash
earnings per share |
$ |
(0.11 |
) |
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
(1) Impacting Gross
Profit. |
|
|
|
|
|
|
|
(2) Impacting Selling,
General, and Administrative expense. |
|
|
|
|
|
|
|
(3) Impacting
Selling, General, and Administrative expense and Research and
Development expense for $7.0 million and $0.1 million,
respectively, for the three months ended June 26, 2016.
Impacting Gross Profit; Selling, General, and Administrative
expense; and Research and Development expense for $0.1 million,
$17.5 million, and $0.2 million, respectively, for the six months
ended June 26, 2016. |
(4) IRS settlement includes
$0.8 million of interest income and $2.3 million tax benefit. |
|
|
|
|
|
|
|
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Adjusted EBITDA to
Net Loss from Continuing Operations |
(dollars in thousands --unaudited) |
|
|
Three months ended |
|
Six months ended |
|
June 26, 2016 |
|
June 26, 2016 |
Net loss from
continuing operations |
$ |
(42,031 |
) |
|
$ |
(82,223 |
) |
Interest expense,
net |
13,024 |
|
|
24,878 |
|
Benefit from income
taxes |
(3,300 |
) |
|
(4,588 |
) |
Depreciation |
13,270 |
|
|
26,120 |
|
Amortization |
7,484 |
|
|
13,941 |
|
Non-GAAP
EBITDA |
$ |
(11,553 |
) |
|
$ |
(21,872 |
) |
Reconciling items
impacting EBITDA: |
|
|
|
Non-cash share-based compensation
expense |
3,056 |
|
|
6,373 |
|
Other income, net |
(2,061 |
) |
|
(3,129 |
) |
Inventory step-up amortization |
10,387 |
|
|
20,616 |
|
Product rationalization |
1,954 |
|
|
1,954 |
|
Transaction and transition
costs |
7,060 |
|
|
17,893 |
|
Management changes |
1,348 |
|
|
1,348 |
|
Legal settlement |
1,800 |
|
|
1,800 |
|
Costs associated with new
convertible debt |
234 |
|
|
234 |
|
Non-GAAP
adjusted EBITDA |
$ |
12,225 |
|
|
$ |
25,217 |
|
|
Wright
Medical Group N.V. |
Condensed
Consolidated Balance Sheets |
(dollars in
thousands--unaudited) |
|
|
June 26, 2016 |
|
December 27, 2015 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
326,251 |
|
|
$ |
139,804 |
|
Accounts receivable, net |
125,350 |
|
|
131,050 |
|
Inventories |
182,995 |
|
|
210,701 |
|
Prepaid expenses and other current
assets |
127,297 |
|
|
59,842 |
|
Current assets held for sale |
23,305 |
|
|
18,487 |
|
Total current assets |
785,198 |
|
|
559,884 |
|
|
|
|
|
Property, plant and equipment, net |
216,041 |
|
|
224,256 |
|
Goodwill and intangible assets, net |
1,115,290 |
|
|
1,117,917 |
|
Other assets (1) |
127,436 |
|
|
139,754 |
|
Non-current assets held
for sale |
|
— |
|
|
|
31,683 |
|
Total assets (1) |
$ |
2,243,965 |
|
|
$ |
2,073,494 |
|
|
|
|
|
Liabilities and shareholders'
equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
28,104 |
|
|
$ |
30,904 |
|
Accrued expenses and other current
liabilities |
368,124 |
|
|
171,171 |
|
Current portion of long-term
obligations |
2,009 |
|
|
2,171 |
|
Current liabilities held for
sale |
1,799 |
|
|
2,692 |
|
Total current liabilities |
400,036 |
|
|
206,938 |
|
Long-term obligations
(1) |
759,461 |
|
|
561,201 |
|
Other liabilities |
242,099 |
|
|
250,329 |
|
Total liabilities (1) |
1,401,596 |
|
|
1,018,468 |
|
|
|
|
|
Shareholders' equity |
842,369 |
|
|
1,055,026 |
|
Total liabilities and shareholders'
equity (1) |
$ |
2,243,965 |
|
|
$ |
2,073,494 |
|
|
(1) The prior
year debt issuance costs were reclassified to account for adoption
of ASU 2015-03 and ASU 2015-15. |
|
|
Investors & Media:
Wright Medical Group N.V.
Julie D. Tracy
Sr. VP, Chief Communications Officer
(901) 290-5817 (office)
julie.tracy@wright.com
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