Exhibit 99
Wright Medical Group, Inc. Reports Results for Third Quarter
Ended September 30, 2003; Company Achieves Third Quarter
Records for Sales and Earnings
ARLINGTON, Tenn.--(BUSINESS WIRE)--Oct. 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 biologics, today reported financial
results for its third quarter ending September 30, 2003.
Net sales totaled $59.3 million for a record third quarter ended
September 30, 2003, representing a 29% increase over net sales of
$46.1 million during the third quarter of 2002. Excluding the impact
of foreign currency, net sales increased 25% during the third quarter.
Third quarter 2003 Generally Accepted Accounting Principles ("GAAP")
net income increased by 45% over the prior year period to a
third-quarter record of $3.7 million, or $.11 per diluted share,
compared to GAAP net income of $2.5 million, or $.07 per diluted share
in the same quarter of 2002. GAAP income from operations totaled a
third-quarter record $5.7 million during the third quarter of 2003,
representing an increase of 63% compared to $3.5 million during the
third quarter of 2002.
For the first nine months of 2003, the Company's net sales totaled
$180.0 million, representing a 21% increase over net sales of $148.6
million for the first nine months of 2002. Excluding the impact of
foreign currency, net sales increased 16% during the first nine months
of 2003. For the first nine months of 2003, GAAP net income totaled
$10.7 million, or $.31 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 nine months of 2003
would have been $13.5 million, or $.39 per diluted share. For the
first nine months of 2002, GAAP net income totaled $14.7 million, or
$.43 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 favorable after-tax effect
of approximately $800,000 related to resolving a royalty obligation in
the second quarter of 2002. Excluding these items, the Company's net
income for the first nine months of 2002 would have been $11.5
million, or $.34 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 third quarter performance, as evidenced
by our sales and operating income results, which exceeded the upper
ends of their respective outlook ranges. During the third quarter, net
sales grew at a faster annual rate than in any previous reporting
period since our December 1999 reorganization, accelerating to 29%
overall, with all product lines performing very well. Once again, our
growth-driving extremity and biologics product lines were major
contributors to our success, posting third-quarter sales growth rates
of 35% and 34% respectively. At the same time, we experienced
exceptional performance from our hip product line, particularly in the
domestic marketplace, where we posted growth of 68% over the year-ago
quarter. As anticipated, our hip business benefited during the third
quarter from the continued successful rollout of our LINEAGE(R)
ceramic-on-ceramic system; however we also experienced considerable
gains from the success of our CONSERVE(R) Total hip system with BFH(R)
Big Femoral Head technology as well as our PROFEMUR(R) line of primary
stems featuring innovative neck modularity."
Mr. Bays continued, "Our third quarter sales performance, in
combination with the continued leveraging of selling, general and
administrative expenses, enabled us to achieve operating income growth
totaling 63% for the quarter. The leverage we produced also allowed us
to heighten our investment in research and development while still
producing considerable expansion of our profitability. Altogether, we
believe we are well-positioned for continued success during the
remainder of this year and into 2004."
Sales Review
The Company experienced global growth across all its major product
lines during the third quarter, with the Company's hip, extremity, and
biologics product lines again posting exceptional growth rates.
Specifically, global net sales of the Company's hip, extremity,
biologics and knee product lines increased by 44%, 35%, 34% and 8%,
respectively, during the third quarter of 2003 when compared to the
third quarter of 2002.
Domestic sales totaled $39.3 million during the third quarter of
2003 and $111.9 million during the first nine months of 2003,
representing increases of 34% and 23%, compared to the respective
year-ago periods. Domestically, third quarter 2003 net sales of the
Company's hip, extremity, biologics, and knee product lines reflected
growth of 68%, 40%, 32% and 11%, respectively.
International sales totaled $20.0 million during the third
quarter, an increase of 19% compared to the third quarter of 2002. For
the first nine months of 2003, international sales reached $68.2
million, an increase of 19% compared to the first nine months of 2002.
The Company's international sales results included favorable foreign
currency impacts totaling approximately $1.8 million and $8.4 million
during the third quarter and the first nine months of 2003,
respectively.
Outlook
The Company has upwardly revised its previously-communicated sales
target for the full year 2003 to a range of $243 million to $245
million, representing annualized growth of approximately 21% to 22%,
and has upwardly-revised its full year 2003 operating income target to
a range of $30.3 million to $31.3 million exclusive of the Company's
$4.6 million first quarter 2003 IPRD charge. The Company's anticipated
targets for the fourth quarter of 2003 for net sales are in the range
of $63 million to $65 million, with operating income results ranging
from $9.0 million to $10.0 million. These targets for both the full
year of 2003 and the upcoming fourth quarter of 2003 exclude the
effect of possible future acquisitions or other material future
business developments.
The Company also reiterates its stated long-term outlook for the
business, which calls for percentage annualized net sales growth in
the low- to mid-teens and percentage operating income growth in excess
of the respective annualized net sales growth. The Company's
preliminary outlook for 2004 is consistent with this stated range of
long-term objectives, with 2004 net sales growth rates likely reaching
the upper end of that range and operating income growth exceeding the
rate of net sales growth. The Company intends to communicate defined
ranges of net sales and profitability objectives for 2004 and to
assist investors in further developing their financial models during a
financial guidance conference call to be held after the Company has
completed its 2004 budget preparation process. The call is scheduled
to be held at 3:30 p.m. (Central Time) on Tuesday, December 9, 2003.
Dial-in and webcast access instructions will be provided in advance of
the call.
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 November 5, 2003. To hear this
replay, dial 1-800-428-6051 (domestic) or 973-709-2089 (international)
and enter the registration number 308932. 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 - 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.
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 biologics. The Company has been in
business for more than 50 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.
Condensed Consolidated Statements of Operations
(in thousands, except per share data - unaudited)
Three Months Ended Nine Months Ended
------------------ -------------------
Sept. Sept. Sept. Sept.
30, 30, 30, 30,
2003 2002 2003 2002
-------- -------- --------- ---------
Net sales $59,268 $46,086 $180,042 $148,563
Cost of sales 15,453 11,976 48,379 40,968
-------- -------- --------- ---------
Gross profit 43,815 34,110 131,663 107,595
Operating Expenses:
Selling, general and
administrative 32,292 26,338 94,560 79,625
Research and development 4,397 2,763 11,840 7,889
Amortization of intangible
assets 900 1,076 2,627 2,850
Stock-based expense 482 419 1,311 1,316
Acquired in-process research
and development costs - - 4,558 -
Arbitration settlement award - - - (4,200)
-------- -------- --------- ---------
Total operating expenses 38,071 30,596 114,896 87,480
-------- -------- --------- ---------
Income from operations 5,744 3,514 16,767 20,115
Interest expense (income), net 274 (79) 852 693
Other (income) expense, net (155) 145 (666) (988)
-------- -------- --------- ---------
Income before income taxes 5,625 3,448 16,581 20,410
Provision for income taxes 1,974 926 5,931 5,725
-------- -------- --------- ---------
Net income $ 3,651 $ 2,522 $ 10,650 $ 14,685
======== ======== ======== ========
Net income per common share,
basic $ 0.11 $ 0.08 $ 0.32 $ 0.46
======== ======== ========= =========
Net income per common share,
diluted $ 0.11 $ 0.07 $ 0.31 $ 0.43
======== ======== ========= =========
Weighted-average number of
common shares outstanding-basic 32,932 32,496 32,807 31,612
======== ======== ========= =========
Weighted-average number of
common shares outstanding-
diluted 34,695 34,745 34,378 34,025
======== ======== ========= =========
Wright Medical Group, Inc.
Consolidated Sales Analysis
(dollars in thousands - unaudited)
Three Months Ended Nine Months Ended
-------------------------- ----------------------------
Sept. Sept. Sept. Sept.
30, 30, % 30, 30, %
2003 2002 change 2003 2002 change
-------- -------- -------- --------- --------- --------
Geographic
- ----------
Domestic $39,283 $29,227 34.4% $111,857 $ 91,341 22.5%
International 19,985 16,859 18.5% 68,185 57,222 19.2%
-------- -------- -------- --------- --------- --------
Total net
sales $59,268 $46,086 28.6% $180,042 $148,563 21.2%
======== ======== ======== ========= ========= ========
Product Line
- ------------
Knee products $18,022 $16,651 8.2% $ 57,441 $ 54,161 6.1%
Hip products 18,032 12,514 44.1% 55,224 41,497 33.1%
Extremity
products 8,157 6,027 35.3% 23,392 18,911 23.7%
Biologics
products 12,392 9,280 33.5% 36,076 27,848 29.5%
Other 2,665 1,614 65.1% 7,909 6,146 28.7%
-------- -------- -------- --------- --------- --------
Total net
sales $59,268 $46,086 28.6% $180,042 $148,563 21.2%
======== ======== ======== ========= ========= ========
Wright Medical Group, Inc.
Reconciliation of Income from Operations
to Income from Operations, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Income from Operations, as
reported $5,744 $3,514 $16,767 $20,115
Add: Acquired in-process
research and development
costs - - 4,558 -
Less: Arbitration
settlement award - - - (4,200)
Less: Royalty resolution - - - (800)
--------- --------- --------- ---------
Income from Operations, as
adjusted $5,744 $3,514 $21,325 $15,115
========= ========= ========= =========
Wright Medical Group, Inc.
Reconciliation of Net Income to Net Income, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Net income, as reported $ 3,651 $ 2,522 $ 10,650 $ 14,685
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)
------- -------- -------- --------
Net income, as adjusted $ 3,651 $ 2,522 $ 13,469 $ 11,488
======= ======== ======== ========
Net income, as adjusted, per
common share--basic $ 0.11 $ 0.08 $ 0.41 $ 0.36
======= ======== ======== ========
Net income, as adjusted, per
common share--diluted $ 0.11 $ 0.07 $ 0.39 $ 0.34
======= ======== ======== ========
Weighted-average number of
common shares outstanding--
basic 32,932 32,496 32,807 31,612
======= ======== ======== ========
Weighted-average number of
common shares outstanding--
diluted 34,695 34,745 34,378 34,025
======= ======== ======== ========
Wright Medical Group, Inc.
Reconciliation of Net Income to Cash Earnings
and Cash Earnings, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Net income, as reported $3,651 $2,522 $10,650 $14,685
Add: Stock-based expense 482 419 1,311 1,316
Add: Amortization of
intangible assets 900 1,076 2,627 2,850
--------- --------- --------- ---------
Cash earnings $5,033 $4,017 $14,588 $18,851
========= ========= ========= =========
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)
--------- --------- --------- ---------
Cash earnings, as adjusted $5,033 $4,017 $17,407 $15,654
========= ========= ========= =========
Wright Medical Group, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share data - unaudited)
Sept. 30, Dec. 31,
2003 2002
--------- ---------
Assets
Current Assets:
Cash and cash equivalents $ 65,187 $ 51,373
Accounts receivable, net 45,267 39,571
Inventories 61,166 55,628
Prepaid expenses and other current assets 19,814 25,042
--------- ---------
Total current assets 191,434 171,614
--------- ---------
Property, plant and equipment, net 61,553 59,215
Intangible assets, net 29,132 26,908
Other assets 16,125 16,446
--------- ---------
$298,244 $274,183
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 11,657 $ 9,878
Accrued expenses and other current liabilities 35,965 29,878
Current portion of long-term obligations 5,778 5,676
--------- ---------
Total current liabilities 53,400 45,432
--------- ---------
Long-term obligations 13,828 16,586
Other liabilities 6,224 7,166
--------- ---------
Total liabilities 73,452 69,184
--------- ---------
Stockholders' equity 224,792 204,999
--------- ---------
$298,244 $274,183
========= =========
CONTACT: Wright Medical Group Inc., Arlington
John K. Bakewell, 901-867-4527