Exhibit 99
Wright Medical Group, Inc. Reports Results for Fourth Quarter
Ended December 31, 2005
ARLINGTON, Tenn.--(BUSINESS WIRE)--Feb. 9, 2006--
Fourth Quarter Sales and Adjusted Earnings Exceed Communicated
Outlook Range; Company Announces 2006 and 2007 Outlook
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 fourth quarter and full year ended December 31, 2005.
Net sales totaled $80.3 million during the fourth quarter ended December
31, 2005, representing a 3% increase over net sales of $77.7 million during the
fourth quarter of 2004. Excluding the impact of foreign currency, net sales
increased 6% during the fourth quarter. Net income for the fourth quarter of
2005 totaled $2.0 million or $.06 per diluted share, including the after-tax
effects of approximately $1.7 million of costs incurred related to management
changes in our U.S. and European operations, approximately $1.6 million of
charges related to the termination of an agreement to distribute certain third
party spinal products in Europe, approximately $1.5 million of charges related
to a European distributor transition and the associated legal dispute, and
approximately $700,000 of charges related to the disposal of a long-lived asset.
Excluding those costs, net income, as adjusted, totaled $5.9 million, or $.17
per diluted share, for the fourth quarter of 2005. Net income for the fourth
quarter of 2004 totaled $6.3 million, or $.18 per diluted share, including the
after-tax effect of approximately $2.9 million of charges associated with the
Company's transition to its own internally developed foot and ankle product
line. Excluding those charges, net income, as adjusted, totaled $8.2 million, or
$.23 per diluted share, for the fourth quarter of 2004. A reconciliation of GAAP
to "as adjusted" results is included in the attached financial tables.
For the full year 2005, the Company's net sales totaled a record $319.1
million, representing a 7% increase over net sales of $297.5 million in 2004.
The impact of foreign currency on net sales was not material for the full year
2005. Net income for the full year 2005 totaled $21.1 million, or $.60 per
diluted share, including the aforementioned fourth quarter 2005 charges. For the
full year 2004, net income totaled $24.0 million, or $.68 per diluted share,
including the after-tax effects of approximately $2.9 million of charges
associated with the Company's foot and ankle product line transition, as well as
approximately $800,000 of costs associated with the voluntary market withdrawal
of certain CONSERVE(R) hip components in the third quarter of 2004. Excluding
those previously mentioned items, net income, as adjusted, for the full year
totaled $24.9 million in 2005 as compared to $26.5 million in 2004, while
diluted earnings per share, as adjusted, totaled $.71 in 2005 compared to $.75
in 2004.
F. Barry Bays, interim President and Chief Executive Officer commented, "We
are pleased to announce that our sales results of $80.3 million and our net
income, as adjusted, of $.17 per diluted share for the fourth quarter of 2005
exceeded the upper ends of our previously communicated outlook ranges. These
fourth quarter results mark our first step toward restoring the predictability
of our business model and achieving our goal of consistent, predictable
financial results."
Mr. Bays continued, "While we are pleased with our results relative to our
fourth quarter outlook, we recognize that the Company's 2005 performance did not
meet our stated long-term financial performance objectives of low- to mid-teens
annualized sales growth accompanied by improving operating profitability. As
evidenced by the special charges incurred this quarter, we believe we have taken
appropriate actions to rationalize our expense base to better enable future
operating leverage. During 2006 we will continue to focus on controlling
spending, but we will also make strategic investments in sales and research and
development focused on reestablishing our sales growth objective. We remain
committed to returning the business to our long-term financial performance
objectives by the fourth quarter of 2006."
Sales Review
Globally, the Company experienced growth across all of its major product
lines during the fourth quarter of 2005. Specifically, global net sales of the
Company's extremity, knee, hip and biologics product lines increased by 13%, 3%,
2% and 2%, respectively, during the fourth quarter of 2005 when compared to the
fourth quarter of 2004.
Domestic sales totaled $50.3 million during the fourth quarter of 2005 and
$197.5 million for the full year 2005, representing increases of 7% and 10%,
compared to the respective year-ago periods. Fourth quarter domestic sales of
the Company's extremity, knee, hip and biologics product lines reflected growth
of 13%, 10%, 6% and 3%, respectively.
International sales totaled $30.0 million during the fourth quarter of
2005, a decrease of 3% compared to the fourth quarter of 2004. For the full year
2005, international sales reached $121.6 million, an increase of 4% compared to
2004. The Company's international sales results included an unfavorable foreign
currency impact totaling approximately $1.9 million during the fourth quarter of
2005 and a favorable foreign currency impact totaling $396,000 during the full
year 2005. Excluding the impact of foreign currency, international sales
increased by 3% during both the fourth quarter and full year 2005.
Outlook
The Company's earnings targets, as communicated in the guidance ranges
stated below for the full year 2006, the first quarter of 2006 and the full year
2007, exclude the effect of possible future acquisitions, other material future
business developments, and the impact of expensing non-cash stock-based
compensation pursuant to FASB Statement No. 123R.
Wright's anticipated targets for the full year 2006 for net sales are in
the range of $332 million to $340 million, representing an annual growth
objective of approximately 4% to 7%. The Company's profit objective for the full
year 2006 consists of an adjusted earnings per share target range of $0.55 to
$0.60. For the first quarter of 2006, the Company's anticipated target for net
sales is a range of $81 million to $83 million, and for adjusted earnings per
share is a range of $0.10 to $0.12 per diluted share. The Company continues to
anticipate a return to its targeted financial profile of low- to mid-teens
annualized sales growth accompanied by improving operating profitability by the
fourth quarter of 2006.
For 2007, the Company's financial objective calls for net sales in a range
of $370 million to $380 million, representing an annual growth objective (as
calculated from the mid-point of the Company's 2006 guidance) between 10% and
13% with anticipated profit targets for adjusted earnings per share of $0.69 to
$0.75, representing 20% to 30% annual growth over 2006 and a return to the
Company's targeted financial profile for the full year.
As noted above, the Company's financial targets exclude the impact of the
non-cash stock-based compensation charges associated with FASB Statement No.
123R. While the amount of such non-cash charges will vary depending upon a
number of factors, many of which not being within the Company's control, the
Company currently estimates that the after-tax impact of expenses associated
with FAS 123R will range from $0.40 to $0.42 per diluted share for the full year
2006 and $0.09 to $0.10 per diluted share for the first quarter of 2006.
The Company's anticipated targets for net sales, adjusted earnings per
share and 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.
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
800-289-0572 (domestic) or 913-981-5543 (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 at 7:30 p.m. (Central Time) today and continuing until 12:00 a.m.
(Central Time) on February 16, 2006. To hear this replay, dial 888-203-1112
(domestic) or 719-457-0820 (international) and enter the registration number
7069418. 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 sales, excluding
the impact of foreign currency, gross profit, as adjusted, operating income, as
adjusted, net income, 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, the financial impact of significant litigation, and
stock-based expense recorded pursuant to FASB Statement No. 123R, 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.
Safe-Harbor Statement
This press release contains "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, 2004 under
the heading, "Factors Affecting Future Operating Results," and in its quarterly
reports), 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 60 countries worldwide. For more information
about Wright Medical, visit the Company's website at www.wmt.com.
Wright Medical Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data--unaudited)
Three Months Ended Year Ended
------------------- -------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
---------- -------- --------- ---------
Net sales $ 80,268 $77,707 $319,137 $297,539
Cost of sales 24,342 22,416 91,740 84,183
---------- -------- --------- ---------
Gross profit 55,926 55,291 227,397 213,356
Operating expenses:
Selling, general and
administrative 46,020 39,685 166,916 151,144
Research and development 5,783 4,613 22,283 18,421
Amortization of intangible
assets 1,131 1,044 4,250 3,889
Stock-based expense (1) 71 329 467 1,489
---------- -------- --------- ---------
Total operating expenses 53,005 45,671 193,916 174,943
---------- -------- --------- ---------
Operating income 2,921 9,620 33,481 38,413
Interest (income) expense, net (85) 196 (176) 1,064
Other expense (income), net 31 (55) 237 (74)
---------- -------- --------- ---------
Income before income taxes 2,975 9,479 33,420 37,423
Provision for income taxes 932 3,189 12,355 13,401
---------- -------- --------- ---------
Net income $ 2,043 $ 6,290 $ 21,065 $ 24,022
========== ======== ========= =========
Net income per share, basic $ 0.06 $ 0.19 $ 0.62 $ 0.72
========== ======== ========= =========
Net income per share, diluted $ 0.06 $ 0.18 $ 0.60 $ 0.68
========== ======== ========= =========
Weighted-average number of
common shares outstanding,
basic 34,077 33,674 33,959 33,391
========== ======== ========= =========
Weighted-average number of
common shares outstanding,
diluted 35,026 35,191 35,199 35,317
========== ======== ========= =========
(1) Amounts presented as stock-based expense consist of; cost of sales totaling
$1 and $(7) for the three months ended December 31, 2005 and 2004,
respectively, and $12 and $68 for the year ended December 31, 2005 and
2004, respectively; selling, general and administrative expenses of $69 and
$339 for the three months ended December 31, 2005 and 2004, respectively,
and $449 and $1,364 for the year ended December 31, 2005 and 2004,
respectively; and research and development expenses of $1 and $(3) for the
three months ended December 31, 2005 and 2004, respectively, and $6 and $57
for the year ended December 31, 2005 and 2004, respectively.
Wright Medical Group, Inc.
Consolidated Sales Analysis
(dollars in thousands--unaudited)
Three Months Ended Year Ended
-------------------------- ----------------------------
Dec. 31, Dec. 31, % Dec. 31, Dec. 31, %
2005 2004 change 2005 2004 change
-------- -------- -------- --------- --------- --------
Geographic
- --------------
Domestic $50,270 $46,775 7.5% $197,547 $180,380 9.5%
International 29,998 30,932 (3.0%) 121,590 117,159 3.8%
-------- -------- -------- --------- --------- --------
Total net
sales $80,268 $77,707 3.3% $319,137 $297,539 7.3%
======== ======== ======== ========= ========= ========
Product Line
- --------------
Hip products $27,387 $26,766 2.3% $109,267 $99,133 10.2%
Knee products 23,262 22,626 2.8% 94,073 87,408 7.6%
Biologics
products 15,868 15,512 2.3% 62,358 62,070 0.5%
Extremity
products 10,680 9,434 13.2% 40,594 36,433 11.4%
Other 3,071 3,369 (8.8%) 12,845 12,495 2.8%
-------- -------- -------- --------- --------- --------
Total net
sales $80,268 $77,707 3.3% $319,137 $297,539 7.3%
======== ======== ======== ========= ========= ========
Wright Medical Group, Inc.
Reconciliation of Net Sales to Net Sales
Excluding the Impact of Foreign Currency
(dollars in thousands--unaudited)
Three Months Ended Year Ended
Dec. 31, Dec. 31,
2005 2005
------------------ ---------------
Net sales, as reported $ 80,268 $ 319,137
Currency impact as compared to
respective prior period 1,924 (396)
------------------ ---------------
Net sales, excluding the impact of
foreign currency $ 82,192 $ 318,741
================== ===============
Wright Medical Group, Inc.
Reconciliation of Non-GAAP Results of Operations
(in thousands, except per share data--unaudited)
Three Months Ended
Dec. 31, 2005
------------------------------
Non-GAAP
As Adjust- As
Reported ments (a) Adjusted
-------- ----------- --------
Net sales $80,268 $ - $80,268
Cost of sales 24,342 (1,497)(b) 22,845
-------- -------- --------
Gross profit 55,926 1,497 57,423
Operating expenses:
Selling, general and administrative 46,020 (3,915)(b) 42,105
Research and development 5,783 (161)(b) 5,622
Amortization of intangible assets 1,131 - 1,131
Stock-based expense 71 - 71
-------- -------- --------
Total operating expenses 53,005 (4,076) 48,929
-------- -------- --------
Operating income 2,921 5,573 8,494
Interest (income) expense, net (85) - (85)
Other expense (income), net 31 - 31
-------- -------- --------
Income before income taxes 2,975 5,573 8,548
Provision for income taxes 932 1,746 (d) 2,678
-------- -------- --------
Net income $ 2,043 $ 3,827 $ 5,870
======== ======== ========
Net income per share, basic $ 0.06 $ 0.11 $ 0.17
======== ======== ========
Net income per share, diluted $ 0.06 $ 0.11 $ 0.17
======== ======== ========
Weighted-average number of common
shares outstanding, basic 34,077 34,077
======== ========
Weighted-average number of common
shares outstanding, diluted 35,026 35,026
======== ========
Three Months Ended
Dec. 31, 2004
-----------------------------
Non-GAAP
As Adjust- As
Reported ments (a) Adjusted
-------- ----------- --------
Net sales $77,707 $ - $77,707
Cost of sales 22,416 (2,381)(c) 20,035
-------- -------- --------
Gross profit 55,291 2,381 57,672
Operating expenses:
Selling, general and administrative 39,685 (510)(c) 39,175
Research and development 4,613 - 4,613
Amortization of intangible assets 1,044 - 1,044
Stock-based expense 329 - 329
-------- -------- --------
Total operating expenses 45,671 (510) 45,161
-------- -------- --------
Operating income 9,620 2,891 12,511
Interest (income) expense, net 196 - 196
Other expense (income), net (55) - (55)
-------- -------- --------
Income before income taxes 9,479 2,891 12,370
Provision for income taxes 3,189 973 (d) 4,162
-------- -------- --------
Net income $ 6,290 $ 1,918 $ 8,208
======== ======== ========
Net income per share, basic $ 0.19 $ 0.05 $ 0.24
======== ======== ========
Net income per share, diluted $ 0.18 $ 0.05 $ 0.23
======== ======== ========
Weighted-average number of common shares
outstanding, basic 33,674 33,674
======== ========
Weighted-average number of common shares
outstanding, diluted 35,191 35,191
======== ========
Year Ended
Dec. 31, 2005
------------------------------
Non-GAAP
As Adjust- As
Reported ments (a) Adjusted
--------- ---------- ---------
Net sales $319,137 $ - $319,137
Cost of sales 91,740 (1,497)(b) 90,243
--------- -------- ---------
Gross profit 227,397 1,497 228,894
Operating expenses:
Selling, general and administrative 166,916 (3,915)(b) 163,001
Research and development 22,283 (161)(b) 22,122
Amortization of intangible assets 4,250 - 4,250
Stock-based expense 467 - 467
--------- -------- ---------
Total operating expenses 193,916 (4,076) 189,840
--------- -------- ---------
Operating income 33,481 5,573 39,054
Interest (income) expense, net (176) - (176)
Other expense (income), net 237 - 237
--------- -------- ---------
Income before income taxes 33,420 5,573 38,993
Provision for income taxes 12,355 1,746 (d) 14,101
--------- -------- ---------
Net income $ 21,065 $ 3,827 $ 24,892
========= ======== =========
Net income per share, basic $ 0.62 $ 0.11 $ 0.73
========= ======== =========
Net income per share, diluted $ 0.60 $ 0.11 $ 0.71
========= ======== =========
Weighted-average number of common
shares outstanding, basic 33,959 33,959
========= =========
Weighted-average number of common
shares outstanding, diluted 35,199 35,199
========= =========
Year Ended
Dec. 31, 2004
------------------------------
Non-GAAP
As Adjust- As
Reported ments (a) Adjusted
--------- ---------- ---------
Net sales $297,539 $ - $297,539
Cost of sales 84,183 (2,519)(c) 81,664
--------- -------- ---------
Gross profit 213,356 2,519 215,875
Operating expenses:
Selling, general and
administrative 151,144 (1,163)(c) 149,981
Research and development 18,421 - 18,421
Amortization of intangible assets 3,889 - 3,889
Stock-based expense 1,489 - 1,489
--------- -------- ---------
Total operating expenses 174,943 (1,163) 173,780
--------- -------- ---------
Operating income 38,413 3,682 42,095
Interest (income) expense, net 1,064 - 1,064
Other expense (income), net (74) - (74)
--------- -------- ---------
Income before income taxes 37,423 3,682 41,105
Provision for income taxes 13,401 1,253 (d) 14,654
--------- -------- ---------
Net income $ 24,022 $ 2,429 $ 26,451
========= ======== =========
Net income per share, basic $ 0.72 $ 0.07 $ 0.79
========= ======== =========
Net income per share, diluted $ 0.68 $ 0.07 $ 0.75
========= ======== =========
Weighted-average number of common
shares outstanding, basic 33,391 33,391
========= =========
Weighted-average number of common
shares outstanding, diluted 35,317 35,317
========= =========
(a) These Non-GAAP adjustments reconcile the Company's GAAP results of
operations to its as adjusted results of operations.
(b) These adjustments reflect the following (in thousands):
-- Charges of $1,582 within selling, general and administrative
expenses and $161 within research and development expenses for
severance costs associated with management changes in our U.S.
and European operations.
-- Charges of $1,497 within cost of sales and $139 within selling,
general and administrative expenses for the write-down of
inventory and instruments due to the termination of an agreement
to distribute certain third party spinal products in Europe.
-- Charges of $1,500 within selling, general and administrative
expenses for a European distributor transition and the associated
legal dispute.
-- Charges of $694 within selling, general and administrative
expenses for the write-down of a long-lived asset to its fair
value following its reclassification to assets held-for-sale.
(c) These adjustments reflect the following (in thousands):
-- Charges of $2,381 within cost of sales and $510 within selling,
general and administrative expenses for the write-down of
inventory and accelerated depreciation of instruments due to the
expiration of a distribution arrangement with a vendor for
certain foot and ankle products and the decision to transition to
our internally developed CHARLOTTE(TM) Foot and Ankle System.
-- For the year ended December 31, 2004, costs of $138 within cost
of sales and $653 within selling, general and administrative
expenses related to the voluntary market withdrawal of certain
CONSERVE(R) hip components.
(d) These adjustments reflect the estimated tax impact of the above noted
non-GAAP adjustments.
Wright Medical Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)
Dec. 31, Dec. 31,
2005 2004
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 51,277 $ 83,470
Marketable securities 25,000 -
Accounts receivable, net 61,729 61,662
Inventories 82,381 76,269
Prepaid expenses and other current assets 39,994 33,621
--------- ---------
Total current assets 260,381 255,022
--------- ---------
Property, plant and equipment, net 81,206 70,207
Intangible assets, net 20,553 25,985
Other assets 9,670 9,944
--------- ---------
Total assets $371,810 $361,158
========= =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 13,572 $ 13,969
Accrued expenses and other current liabilities 45,055 44,919
Current portion of long-term obligations 5,628 6,331
--------- ---------
Total current liabilities 64,255 65,219
--------- ---------
Long-term obligations 1,728 5,952
Other liabilities 13,819 13,918
--------- ---------
Total liabilities 79,802 85,089
--------- ---------
Stockholders' equity 292,008 276,069
--------- ---------
Total liabilities and stockholders' equity $371,810 $361,158
========= =========
CONTACT: Wright Medical Group, Inc., Arlington
John K. Bakewell, 901-867-4527