Wright Medical 8-K Results of Operations and Financial Condition

FOR RELEASE 3:00 P.M. CENTRAL
Thursday, July 28, 2011
Contact: Lance Berry
(901) 867-4607

Wright Medical Group, Inc. Reports Results for Second
Quarter Ended June 30, 2011

US Knee Sales Grow Above Market Rates Driven By EVOLUTION^TM Knee System;
Company Delivers Double-Digit Year-over-Year Adjusted Earnings Per Share Growth and Reiterates 2011 Guidance

ARLINGTON, TN — July 28, 2011 — Wright Medical Group, Inc. (NASDAQ: WMGI), a global orthopaedic medical device company and a leading provider of surgical solutions for the foot and ankle market, today reported financial results for its second quarter ended June 30, 2011.

Net sales totaled $132.5 million during the second quarter ended June 30, 2011, representing a 4% increase over net sales of $127.7 million during the second quarter of 2010. Excluding the impact of foreign currency, net sales were flat in the second quarter of 2011, as compared to the same period last year.

Net income for the second quarter of 2011 totaled $6.1 million or $0.16 per diluted share, compared to net income of $4.8 million or $0.13 per diluted share in the second quarter of 2010.

Net income for the second quarter of 2011 included the after-tax effects of approximately $2.4 million of expenses associated with the Company’s deferred prosecution agreement (DPA) and $1.6 million of non-cash stock-based compensation expense. Net income for the second quarter of 2010 included the after-tax effects of approximately $4.1 million of non-cash stock-based compensation expense, $606,000 of expenses related to U.S. governmental inquiries, and $461,000 of restructuring charges.

Second quarter net income, as adjusted, increased to $9.0 million in 2011 from $8.3 million in 2010. Diluted earnings per share, as adjusted, increased 10% to $0.23 in the second quarter of 2011 from $0.21 in the second quarter of 2010. A reconciliation of U.S. GAAP to “as adjusted” results is included in the attached financial tables.

David D. Stevens, Interim Chief Executive Officer commented, “We continue to deliver double-digit year-over-year adjusted earnings per share growth as we execute on our strategic plan. Wright Medical remains committed to the highest standards of ethical conduct at every level of the business and having a robust compliance program.”

Mr. Stevens continued, “During the second quarter we continued to launch new products for the foot and ankle market including FUSIONFLEX Demineralized Moldable Scaffold and our INBONE^® II Total Ankle Replacement System, the only ankle replacement on the market in the United States that offers multiple implant options with different articular geometry, and we are pleased with the interest expressed by both existing and prospective customers. We are delivering results that are in line with our expectations. Our outlook remains positive and we are confident that we will achieve results in line with our previously announced 2011 guidance.”

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Outlook

The Company is reiterating its previously announced 2011 net sales outlook of $517 million to $535 million, representing sales that are in a range that is relatively flat to 3% growth as compared to 2010. This range includes the previously announced license agreement with KCI that is expected to have a negative impact on the Company’s 2011 revenue growth rate of approximately 1% to 2%. Excluding this negative impact, Wright Medical expects to achieve annualized revenue growth of approximately 1% to 5%. The Company is also reiterating its 2011 as-adjusted earnings per share outlook to a target range for the full year 2011 of $0.89 to $0.97 per diluted share, which was previously communicated on May 5, 2011. The Company’s current outlook for adjusted earnings per share represents annualized growth expectations of -1% to 8%.

The Company’s earnings target excludes the transaction costs and non-cash deferred financing fees associated with the Convertible Notes tendered, possible future acquisitions, other material future business developments, non-cash stock-based compensation expense, and costs associated with the Company’s DPA (including the associated independent monitor).

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 $0.19 per diluted share for the full year 2011. Therefore, the Company anticipates full year 2011 as-adjusted earnings per share including stock-based compensation to be in the range of $0.70 to $0.78 per diluted share, which represents relatively flat earnings to growth of 11%.

The Company’s anticipated ranges for net sales, adjusted earnings per share, and non-cash stock-based compensation charges are forward-looking statements. 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.

Update on Status of Investigation

As previously announced on May 5, 2011, the Company received a letter from the United States Attorney’s Office for the District of New Jersey (USAO) pursuant to Paragraph 50 of the Deferred Prosecution Agreement (DPA) stating that the USAO believes that the Company has knowingly and willfully breached material provisions of the DPA. As permitted under the terms of the DPA, the Company made a presentation to the USAO within three weeks of receipt of the letter. Since that presentation, there have been further communications, as well as confidential discussions with the USAO and the Office of the Inspector General of the United States Department of Health and Human Services (OIG) regarding the potential resolution of certain issues relating to the DPA and the Company’s Corporate Integrity Agreement (CIA) with the OIG. There can be no assurances about whether there will be consensual resolution, the terms or timing.

Conference Call

As previously announced, the Company will host a conference call starting at 3:30 p.m. (Central Time) today. The live dial-in number for the call is 866-713-8307 (domestic) or 617-597-5307 (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 6:30 p.m. (Central Time) today and continuing until August 4, 2011. To hear this replay, dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode 90077199. 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, our Form 8-K filed with the SEC today, or

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otherwise available in the “Corporate — Investor Information — Supplemental Financial Information” section of the Company’s website located atwww.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.

Non-GAAP Financial Measures

The Company uses non-GAAP financial measures, such as net sales, excluding the impact of foreign currency; operating income, as adjusted; net income, as adjusted; net income, as adjusted, per diluted share; effective tax rate, as adjusted; and free cash flow. The Company’s management believes that the presentation of these measures provides useful information to investors. These measures may assist investors in evaluating the Company’s operations, period over period. The measures exclude such items as costs related to the U.S. governmental inquiries and the DPA, restructuring charges, transaction costs and non-cash deferred financing fees associated with the Convertible Notes tendered and non-cash stock-based expense, all of which may be highly variable, difficult to predict and of a size that could have substantial impact on the Company’s reported results of operations for a period. Management uses these measures internally for evaluation of the performance of the business, including the allocation of resources and the evaluation of results relative to employee performance compensation targets. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” as defined under U.S. federal securities laws. These statements, including statements regarding potential actions by the USAO, independent monitor, OIG and other agencies or their potential impact, and statements about financial results for the quarter ended June 30, 2011, reflect management’s current knowledge, assumptions, beliefs, estimates, and expectations and express management’s current views of future performance, results, and trends and 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 our actual results to materially differ from those described in the forward-looking statements. Readers 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 include those 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, 2010, and our subsequently filed quarterly reports, under the heading “Risk Factors” and elsewhere), and the impact of our settlement of the federal investigation into our consulting arrangements with orthopaedic surgeons relating to our hip and knee products in the United States, including our compliance with the DPA through September 2011 (which could be extended) and the CIA through September 2015. Our failure to comply with the DPA or the CIA could expose us to significant liability including, but not limited to, extension of the term of the DPA, exclusion from federal healthcare program participation, including Medicaid and Medicare, which would have a material adverse effect on our financial condition, results of operations and cash flows, potential prosecution, including under the previously-filed criminal complaint, civil and criminal fines and penalties, and additional litigation cost and expense. A breach of the DPA or the CIA could result in an event of default under the Senior Credit Facility, which in turn could result in an event of default under the Indenture.

Additional risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements include the possibility of litigation brought by shareholders, including private securities litigation and shareholder derivative suits, which if initiated, could divert management’s attention, harm our business and/or reputation and result in significant liabilities; demand for and market acceptance of our new and existing products; future actions of governmental authorities and other third parties; tax measures; business development and growth opportunities; product quality or patient safety issues; products liability claims; enforcement of our intellectual property rights; the geographic and product mix impact on our sales; retention of sales representatives and independent distributors; inventory reductions or fluctuations in

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buying patterns by wholesalers or distributors; ability to realize the anticipated benefits of restructuring initiatives; and impact of the commercial and credit environment on us and our customers and suppliers.

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

—Tables Follow—

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Wright Medical Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data—unaudited)

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2011		2010			2011		2010
Net sales	$	132,505	$	127,734		$	267,891	$	258,978
Cost of sales		41,504		39,934			80,272		80,075
Gross profit		91,001		87,800			187,619		178,903
Operating expenses:
Selling, general and administrative		70,821		67,774			145,646		144,212
Research and development		7,807		9,784			17,014		19,619
Amortization of intangible assets		677		634			1,367		1,283
Restructuring charges		—		461			—		1,005
Total operating expenses		79,305		78,653			164,027		166,119
Operating income		11,696		9,147			23,592		12,784
Interest expense, net		1,475		1,510			3,310		3,018
Other expense (income), net		257		(175	)		4,716		(43	)
Income before income taxes		9,964		7,812			15,566		9,809
Provision for income taxes		3,817		2,965			5,827		5,487
Net income	$	6,147	$	4,847		$	9,739	$	4,322
Net income per share, basic	$	0.16	$	0.13		$	0.26	$	0.11
Net income per share, diluted	$	0.16	$	0.13		$	0.25	$	0.11
Weighted-average number of common shares outstanding, basic		38,240		37,764			38,137		37,652
Weighted-average number of common shares outstanding, diluted		39,261		37,960			38,347		37,884

Wright Medical Group, Inc.
Consolidated Sales Analysis
(dollars in thousands—unaudited)

	Three Months Ended							Six Months Ended
	June 30,		June 30,		%			June 30,		June 30,		%
	2011		2010		change			2011		2010		change
Geographic
Domestic	$	75,354	$	76,484		(1.5	%)	$	153,296	$	154,209		(0.6	%)
International		57,151		51,250		11.5	%		114,595		104,769		9.4	%
Total net sales	$	132,505	$	127,734		3.7	%	$	267,891	$	258,978		3.4	%
Product Line
Hip products	$	45,544	$	44,177		3.1	%	$	91,441	$	90,462		1.1	%
Knee products		33,392		31,775		5.1	%		66,225		64,193		3.2	%
Extremity products		32,753		29,509		11.0	%		67,026		59,613		12.4	%
Biologics products		17,929		19,838		(9.6	%)		37,236		39,630		(6.0	%)
Other		2,887		2,435		18.6	%		5,963		5,080		17.4	%
Total net sales	$	132,505	$	127,734		3.7	%	$	267,891	$	258,978		3.4	%

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Wright Medical Group, Inc.
Supplemental Sales Information
(unaudited)

	Second Quarter 2011 Sales Growth
	Domestic			Int’l			Int’l			Total			Total
	As			Constant			As			Constant			As
	Reported			Currency			Reported			Currency			Reported
Hips		(13	%)		4	%		15	%		(3	%)		3	%
Knees		7	%		(3	%)		3	%		2	%		5	%
Extremities		8	%		10	%		22	%		9	%		11	%
Biologics		(11	%)		(9	%)		(3	%)		(11	%)		(10	%)
Total		(1	%)		2	%		12	%		0	%		4	%

	Sales as a % of Total Sales
	Three Months Ended									Six Months Ended
	June 30, 2011									June 30, 2011
	Domestic			International			Total			Domestic			International			Total
Hips		12	%		22	%		34	%		12	%		22	%		34	%
Knees		13	%		12	%		25	%		13	%		11	%		25	%
Extremities		20	%		5	%		25	%		20	%		5	%		25	%
Biologics		11	%		2	%		14	%		11	%		2	%		14	%
Total		57	%		43	%		100	%		57	%		43	%		100	%

Wright Medical Group, Inc.
Reconciliation of Net Sales to Net Sales Excluding the Impact of Foreign Currency
(dollars in thousands—unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2011						June 30, 2011
	International			Total			International			Total
	Net Sales			Net Sales			Net Sales			Net Sales
Net sales, as reported	$	57,151		$	132,505		$	114,595		$	267,891
Currency impact as compared to prior period		(4,824	)		(4,824	)		(6,566	)		(6,566	)
Net sales, excluding the impact of foreign currency	$	52,327		$	127,681		$	108,029		$	261,325

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Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands, except per share data—unaudited)

	Three Months Ended							Six Months Ended
	June 30,				June 30,			June 30,			June 30,
	2011			��	2010			2011			2010
Operating Income
Operating income, as reported	$	11,696			$	9,147		$	23,592		$	12,784
Reconciling items impacting Gross Profit:
Non-cash, stock-based compensation		360				326			707			666
Total		360				326			707			666
Reconciling items impacting Selling, General and Administrative expenses:
Non-cash, stock-based compensation		1,300				3,172			3,368			5,439
U.S. governmental inquiries/DPA related		2,385				606			4,567			8,677
Total		3,685				3,778			7,935			14,116
Reconciling items impacting Research and Development expenses:
Non-cash, stock-based compensation		(53	)			610			392			1,008
Other Reconciling Items:
Restructuring charges		—				461			—			1,005
Operating income, as adjusted	$	15,688			$	14,322		$	32,626		$	29,579
Operating income, as adjusted, as a percentage of net sales		11.8	%			11.2	%		12.2	%		11.4	%

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Net Income
Income before taxes, as reported	$	9,964		$	7,812		$	15,566		$	9,809
Pre-tax impact of reconciling items:
Non-cash, stock-based compensation		1,607			4,108			4,467			7,113
Restructuring charges		—			461			—			1,005
Deferred financing fees and transaction costs associated with Convertible Notes Tender Offer		—			—			4,099			—
U.S. governmental inquiries/DPA related		2,385			606			4,567			8,677
Income before taxes, as adjusted		13,956			12,987			28,699			26,604
Provision for income taxes, as reported		3,817			2,965			5,827			5,487
Non-cash, stock-based compensation		219			1,314			1,066			2,150
Restructuring charges		—			180			—			391
Deferred financing fees and transaction costs associated with Convertible Notes Tender Offer		—			—			1,599			—
U.S. governmental inquiries/DPA related		930			236			1,782			1,816
Provision for income taxes, as adjusted		4,966			4,695			10,274			9,844
Effective tax rate, as adjusted		35.6	%		36.2	%		35.8	%		37.0	%
Net income, as adjusted	$	8,990		$	8,292		$	18,425		$	16,760

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Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(continued)

	Three Months Ended				Three Months Ended
	June 30, 2011				June 30, 2010
	As Reported		As Adjusted		As Reported		As Adjusted
Basic net income	$	6,147	$	8,990	$	4,847	$	8,292
Interest expense on convertible notes		137		137		N/A		935
Diluted net income	$	6,284	$	9,127	$	4,847	$	9,227
Basic shares		38,240		38,240		37,764		37,764
Dilutive effect of stock options and restricted shares		130		130		196		196
Dilutive effect of convertible notes		891		891		N/A		6,126
Diluted shares		39,261		39,261		37,960		44,086
Net income per share, diluted	$	0.16	$	0.23	$	0.13	$	0.21

	Six Months Ended				Six Months Ended
	June 30, 2011				June 30, 2010
	As Reported		As Adjusted		As Reported		As Adjusted
Basic net income	$	9,739	$	18,425	$	4,322	$	16,760
Interest expense on convertible notes		N/A		929		N/A		1,870
Diluted net income	$	9,739	$	19,354	$	4,322	$	18,630
Basic shares		38,137		38,137		37,652		37,652
Dilutive effect of stock options and restricted shares		210		210		232		232
Dilutive effect of convertible notes		N/A		2,927		N/A		6,126
Diluted shares		38,347		41,274		37,884		44,010
Net income per share, diluted	$	0.25	$	0.47	$	0.11	$	0.42

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,			June 30,
	2011		2010			2011			2010
Net Income per Diluted Share
Net income, as reported, per diluted share	$	0.16	$	0.13		$	0.25		$	0.11
Interest expense on convertible notes		N/A		0.02			0.02			0.04
Dilutive effect of convertible notes		N/A		(0.02	)		(0.02	)		(0.02	)
Non-cash, stock-based compensation		0.04		0.06			0.08			0.11
Restructuring charges		—		0.01			—			0.01
Deferred financing fees and transaction costs associated with Convertible Notes Tender Offer		—		—			0.06			—
U.S. governmental inquiries/DPA related		0.04		0.01			0.07			0.16
Net income, as adjusted, per diluted share	$	0.23	$	0.21		$	0.47		$	0.42

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Wright Medical Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands—unaudited)

	June 30,		December 31,
	2011		2010
Assets
Current assets:
Cash and cash equivalents	$	159,427	$	153,261
Marketable securities		14,997		19,152
Accounts receivable, net		107,125		105,336
Inventories		171,544		166,339
Prepaid expenses and other current assets		51,307		53,502
Total current assets		504,400		497,590
Property, plant and equipment, net		164,709		158,247
Goodwill and intangible assets, net		70,273		70,673
Marketable securities		10,838		17,193
Other assets		10,649		11,536
Total assets	$	760,869	$	755,239
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	18,173	$	15,862
Accrued expenses and other current liabilities		55,314		54,409
Current portion of long-term obligations		8,627		1,033
Total current liabilities		82,114		71,304
Long-term obligations		171,104		201,766
Other liabilities		18,662		11,197
Total liabilities		271,880		284,267
Stockholders’ equity		488,989		470,972
Total liabilities and stockholders’ equity	$	760,869	$	755,239