Exhibit 99.1
Wright Medical Group, Inc. Reports Results for Second Quarter
Ended June 30, 2003; Company Posts Third Consecutive
Quarter of Record All-time Sales Performance
ARLINGTON, Tenn.--(BUSINESS WIRE)--July 28, 2003--Wright Medical
Group, Inc. (NASDAQ: WMGI), a global orthopaedic medical device
company specializing in the design, manufacture and marketing of
reconstructive joint devices and bio-orthopaedic materials, today
reported financial results for its second quarter ending June 30,
2003.
Net sales for the second quarter of 2003 totaled a record $62.2
million, representing a 22% increase over net sales of $50.8 million
during the second quarter of 2002. Net sales during the second quarter
reached a record level for any quarter in the Company's history,
representing Wright's third sequential quarter of all-time record
quarterly sales performance. Excluding the impact of foreign currency,
net sales increased 16% during the second quarter. Second quarter 2003
Generally Accepted Accounting Principles ("GAAP") net income, totaled
$5.0 million, or $.15 per diluted share, compared to GAAP net income
of $5.2 million, or $.15 per diluted share in the same quarter of
2002. Second quarter 2002 GAAP net income included approximately
$800,000 related to the favorable pre-tax effect of resolving a
royalty obligation, which contributed $.02 to the prior year second
quarter. Excluding this item, second quarter 2002 net income would
have totaled $4.7 million or $.13 per diluted share.
GAAP income from operations totaled $7.6 million during the second
quarter of 2003, representing an increase of 21% compared to $6.3
million during the second quarter of 2002 inclusive of the
aforementioned royalty resolution. Exclusive of this prior-year
benefit, second quarter income from operations would have increased by
38% from 2002 to 2003.
For the first six months of 2003, the Company's net sales totaled
$120.8 million, representing an 18% increase over net sales of $102.5
million for the first half of 2002. Excluding the impact of foreign
currency, net sales increased 11% during the first half of 2003. For
the first six months of 2003, GAAP net income totaled $7.0 million, or
$.21 per diluted share, including the after-tax effect of a first
quarter $4.6 million in-process research and development ("IPRD")
charge which resulted from the Company's first quarter 2003
acquisition of certain ADCON(R) Gel technology assets. Without this
charge, net income for the first six months of 2003 would have been
$9.8 million, or $.29 per diluted share. For the first six months of
2002, GAAP net income totaled $12.2 million, or $.36 per diluted
share, including the favorable after-tax effect of a $4.2 million
award from a commercial arbitration proceeding with a former business
services provider and the aforementioned second quarter 2002 royalty
resolution. Excluding these items, the Company's net income for the
first half of 2002 would have been $9.0 million, or $.27 per diluted
share. A reconciliation of GAAP to "as adjusted" results is included
in the attached financial tables.
F. Barry Bays, President and Chief Executive Officer commented,
"We are very pleased with our second quarter operating results and
with the levels of performance achieved by each of our major product
lines. Our record second quarter sales results were driven by
outstanding growth in our hip product line, reflecting the continued
exceptional success of our LINEAGE(R) ceramic-on-ceramic hip system as
well as our CONSERVE(R) Total hip system with BFH(TM) Big Femoral Head
technology, both launched during the first quarter. Our second quarter
growth also benefited from the continued outstanding progress of
Wright's traditional growth drivers, bio-orthopaedics and extremities,
which recorded global sales gains of 31% and 26%, respectively.
Operationally, we have modestly expanded our investment level in
research and development in order to accelerate our efforts to develop
and commercialize innovative new products and to enrich the body of
clinical evidence that supports our products' many benefits. Despite
this heightened level of investment, we continued to post excellent
operating results during the second quarter, as evidenced by our 21%
growth in GAAP income from operations over the prior year and 38%
growth exclusive of last year's favorable royalty resolution."
Mr. Bays continued, "One particularly noteworthy accomplishment
during the second quarter, and certainly a meaningful indicator of our
progress as a business, relates to our cash flow results. Operating
cash flow totaled a record $18.7 million during Q2 and $26.8 million
for the first half of 2003, resulting from the combination of our
growing profitability and outstanding working capital management.
After paying the remaining balance owed for the purchase of certain
ADCON(R) Gel technology assets, and making our scheduled debt payment
and necessary capital expenditure investments, our cash balance still
increased during the second quarter by almost $10 million to $62.5
million at quarter-end."
Sales Review
The Company experienced global growth across all its major product
lines during the second quarter, with the Company's hip, extremity,
and bio-orthopaedic product lines again posting exceptional growth
rates. Specifically, global net sales of the Company's hip,
bio-orthopaedic, extremity and knee product lines increased by 32%,
31%, 26% and 9%, respectively, during the second quarter of 2003 when
compared to the second quarter of 2002.
Domestic sales totaled $37.5 million during the second quarter of
2003 and $72.6 million during the first half of 2003, representing
increases of 20% and 17%, compared to the respective year-ago periods.
Domestically, second quarter 2003 net sales of the Company's hip,
extremity, and bio-orthopaedic product lines reflected growth of 44%,
31% and 26%, respectively, while knee sales remained even with levels
achieved during the year-ago quarter.
International sales totaled $24.7 million during the second
quarter, an increase of 26% compared to the second quarter of 2002.
For the first half of 2003, international sales reached $48.2 million,
an increase of 19% compared to the first half of 2002. The Company's
international sales results included favorable foreign currency
impacts totaling approximately $3.4 million and $6.6 million during
the second quarter and the first half of 2003, respectively.
Outlook
The Company has upwardly revised its previously-communicated sales
target for the full year 2003 to a range of $234 million to $239
million, representing annualized growth of approximately 16.5% to 19%,
and has upwardly-revised its full year 2003 operating income target to
a range of $28.5 million to $30.5 million, exclusive of the Company's
$4.6 million first quarter 2003 IPRD charge. The Company's anticipated
targets for the third quarter of 2003 for net sales are in the range
of $52.5 million to $54.5 million, with operating income results
ranging from $4.7 million to $5.4 million. These targets for both the
full year of 2003 and the upcoming third quarter of 2003 exclude the
effect of possible future acquisitions or other material future
business developments.
The Company's anticipated targets for net sales and income from
operations 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.
Conference Call
As previously announced, the Company will host a conference call
starting at 3:30 p.m. (Central Time) today. The live dial-in number
for the call is 800-915-4836 (domestic)/ 973-317-5319 (international).
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 today and continuing
until 10:59 p.m. (Central Time) on August 5, 2003. To hear this
replay, dial 1-800-428-6051 (domestic) or 973-709-2089 (international)
and enter the registration number 300051. 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 or otherwise available in the "Corporate - Investor
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.
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures, such as net income,
as adjusted, income from operations, as adjusted, cash earnings, as
adjusted and net income, as adjusted, per diluted share. 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 business development activities
including purchased in-process research and development and the
financial impact of significant litigation, 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.
Safe-Harbor Statement
This press release may contain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements made in this press release, other than statements of
historical fact, are forward-looking statements. Forward-looking
statements reflect management's current knowledge, assumptions,
beliefs, estimates, and expectations and express management's current
views of future performance, results, and trends. The Company wishes
to caution readers that actual results might differ materially from
those described in the forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties,
including the factors discussed in the Company's filings with the
Securities and Exchange Commission (including the Company's annual
report on Form 10-K for the year ended December 31, 2002), which could
cause the Company's actual results to materially differ from those
described in the forward-looking statements. Although the Company
believes that the forward-looking statements are accurate, there can
be no assurance that any forward-looking statement will prove to be
accurate. A forward-looking statement should not be regarded as a
representation by the Company that the results described therein will
be achieved. The Company wishes to caution readers not to place undue
reliance on any forward-looking statement. The forward-looking
statements are made as of the date of this press release. The Company
assumes no obligation to update any forward-looking statement after
this date.
Wright Medical Group, Inc. is a global orthopaedic medical device
company specializing in the design, manufacture and marketing of
reconstructive joint devices and bio-orthopaedic materials. The
Company has been in business for more than fifty years and markets its
products in over 40 countries worldwide. For more information about
Wright Medical, visit our website at www.wmt.com.
Wright Medical Group, Inc.
Consolidated Condensed Statements of Operations
(in thousands, except per share data - unaudited)
Three Months Ended Six Months Ended
------------------ -------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
-------- -------- --------- ---------
Net sales $62,152 $50,771 $120,774 $102,477
Cost of sales 17,386 14,234 32,926 28,992
------- ------- ------- -------
Gross profit 44,766 36,537 87,848 73,485
Operating Expenses:
Selling, general and
administrative 31,963 26,332 62,268 53,287
Research and development 3,908 2,565 7,443 5,126
Amortization of intangible
assets 923 921 1,727 1,774
Stock-based expense 420 457 829 897
Acquired in-process research
and development costs - - 4,558 -
Arbitration settlement award - - - (4,200)
------- ------- ------- -------
Total operating expenses 37,214 30,275 76,825 56,884
------- ------- ------- -------
Income from operations 7,552 6,262 11,023 16,601
Interest expense, net 312 338 578 772
Other (income) expense, net (481) (1,149) (511) (1,133)
------- ------- ------- -------
Income before income taxes 7,721 7,073 10,956 16,962
Provision for income taxes 2,723 1,829 3,957 4,799
------- ------- ------- -------
Net income $ 4,998 $ 5,244 $ 6,999 $ 12,163
======= ======= ======= =======
Net income per common share,
basic $ .15 $ .16 $ .21 $ .39
======= ======= ======= =======
Net income per common share,
diluted $ .15 $ .15 $ .21 $ .36
======= ======= ======= =======
Weighted-average number of
common shares outstanding-
basic 32,772 32,447 32,744 31,163
======= ======= ======= =======
Weighted-average number of
common shares outstanding-
diluted 34,237 34,839 34,085 33,542
======= ======= ======= =======
Wright Medical Group, Inc.
Consolidated Condensed Sales Analysis
(dollars in thousands - unaudited)
Three Months Ended Six Months Ended
--------------------------- ----------------------------
June 30, June 30, % June 30, June 30, %
2003 2002 change 2003 2002 change
-------- -------- -------- --------- --------- --------
Geographic
- ----------
Domestic $37,494 $31,200 20.2% $72,574 $62,114 16.8%
International 24,658 19,571 26.0% 48,200 40,363 19.4%
-------- -------- -------- --------- --------- --------
Total net
sales $62,152 $50,771 22.4% $120,774 $102,477 17.9%
======== ======== ======== ========= ========= ========
Product Line
- ------------
Knee products $19,755 $18,207 8.5% $39,419 $37,510 5.1%
Hip products 19,502 14,743 32.3% 37,192 28,983 28.3%
Extremity
products 7,805 6,189 26.1% 15,235 12,884 18.2%
Bio-orthopaedic
materials 12,275 9,406 30.5% 23,684 18,568 27.6%
Other 2,815 2,226 26.5% 5,244 4,532 15.7%
-------- -------- -------- --------- --------- --------
Total net
sales $62,152 $50,771 22.4% $120,774 $102,477 17.9%
======== ======== ======== ========= ========= ========
Wright Medical Group, Inc.
Reconciliation of Income from Operations
to Income from Operations, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended Six Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
-------- --------- -------- --------
Income from Operations, as
reported $7,552 $6,262 $11,023 $16,601
Add: Acquired in-process
research and development
costs - - 4,558 -
Less: Arbitration settlement
award - - - (4,200)
Less: Royalty resolution - (800) - (800)
-------- --------- -------- --------
Income from Operations, as
adjusted $7,552 $5,462 $15,581 $11,601
======== ========= ======== ========
Wright Medical Group, Inc.
Reconciliation of Net Income to Net Income, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended Six Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
--------- -------- -------- --------
Net income, as reported: $4,998 $5,244 $6,999 $12,163
Add: Acquired in-process
research and development costs,
net of tax - - 2,819 -
Less: Arbitration settlement
award, net of tax - - - (2,604)
Less: Royalty resolution, net of
tax - (593) - (593)
--------- -------- -------- --------
Net income, as adjusted: $4,998 $4,651 $9,818 $8,966
========= ======== ======== ========
Net income, as adjusted, per
common share--basic $ .15 $ .14 $ .30 $ .29
========= ======== ======== ========
Net income, as adjusted, per
common share--diluted $ .15 $ .13 $ .29 $ .27
========= ======== ======== ========
Weighted-average number of common
shares outstanding-basic 32,772 32,447 32,744 31,163
========= ======== ======== ========
Weighted-average number of common
shares outstanding-diluted 34,237 34,839 34,085 33,542
========= ======== ======== ========
Wright Medical Group, Inc.
Reconciliation of Net Income
to Cash Earnings and Cash Earnings, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended Six Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Net income, as reported: $4,998 $5,244 $6,999 $12,163
Add: Stock-based expense 420 457 829 897
Add: Amortization of intangible
assets 923 921 1,727 1,774
-------- -------- -------- --------
Cash earnings $6,341 $6,622 $9,555 $14,834
======== ======== ======== ========
Add: Acquired in-process research
and development costs, net of tax - - 2,819 -
Less: Arbitration settlement
award, net of tax - - - (2,604)
Less: Royalty resolution,
net of tax - (593) - (593)
-------- -------- -------- --------
Cash earnings, as adjusted $6,341 $6,029 $12,374 $11,637
======== ======== ======== ========
Wright Medical Group, Inc.
Consolidated Condensed Balance Sheets
(in thousands, except per share data - unaudited)
June 30, Dec. 31,
2003 2002
--------- ---------
Assets:
Current Assets:
Cash and cash equivalents $ 62,525 $ 51,373
Accounts receivable, net 44,287 39,571
Inventories 59,163 55,628
Prepaid expenses and other current assets 18,276 25,042
-------- --------
Total current assets 184,251 171,614
-------- --------
Property, plant and equipment, net 60,276 59,215
Intangible assets, net 29,510 26,908
Other assets 15,969 16,446
-------- --------
$290,006 $274,183
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 11,480 $ 9,878
Accrued expenses and other current
liabilities 33,673 29,878
Current portion of long-term obligations 5,878 5,676
-------- --------
Total current liabilities 51,031 45,432
-------- --------
Long-term obligations 14,189 16,586
Other liabilities 6,241 7,166
-------- --------
Total liabilities 71,461 69,184
-------- --------
Stockholders' equity 218,545 204,999
-------- --------
$290,006 $274,183
======== ========
CONTACT: Wright Medical Group Inc., Arlington
John K. Bakewell, 901-867-4527