Saturday, November 14, 2015

News: Wright Medical Group N.V. Reports 2015 Third Quarter Financial Results -- Ctd 2 of 3

Legacy Wright Medical Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data--unaudited)
 
 Three Months Ended Nine Months Ended
  September 30, 2015   September 30, 2014   September 30, 2015   September 30, 2014 
Net sales$80,139  $71,307  $238,493  $214,733 
Cost of sales23,052  16,703  63,812  54,126 
Gross profit57,087  54,604  174,681  160,607 
Operating expenses:       
Selling, general and administrative85,997  66,926  250,801  207,629 
Research and development9,570  5,948  24,644  18,603 
Amortization of intangible assets2,562  2,379  7,741  7,241 
Total operating expenses98,129  75,253  283,186  233,473 
Operating loss(41,042) (20,649) (108,505) (72,866)
Interest expense, net11,185  4,565  29,793  12,873 
Other (income) expense, net10,236  21,430  7,395  54,986 
Loss from continuing operations before income taxes(62,463) (46,644) (145,693) (140,725)
Provision (benefit) for income taxes187  3,003  511  (7,197)
Net loss from continuing operations$(62,650) $(49,647) $(146,204) $(133,528)
Loss from discontinued operations, net of tax(36,211) (12,160) (46,720) (14,925)
Net loss$(98,861) $(61,807) $(192,924) $(148,453)
        
Net loss from continuing operations per share, basic$(1.22) $(0.99) $(2.86) $(2.70)
Net loss from continuing operations per share, diluted$(1.22) $(0.99) $(2.86) $(2.70)
        
Net loss per share, basic$(1.93) $(1.24) $(3.78) $(3.00)
Net loss per share, diluted$(1.93) $(1.24) $(3.78) $(3.00)
        
Weighted-average number of shares outstanding-basic51,172  50,043  51,033  49,441 
Weighted-average number of shares outstanding-diluted51,172  50,043  51,033  49,441 


Legacy Wright Medical Group, Inc.
Consolidated Sales Analysis
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 30,
2015
 September 30,
2014
 %change September 30,
2015
 September 30,
2014
 %
change
U.S.           
Foot and Ankle43,929  35,560  23.5% 128,277  102,599  25.0%
Upper Extremity3,654  4,016  (9.0%) 11,703  11,420  2.5%
Biologics12,198  11,162  9.3% 34,612  33,376  3.7%
Other613  559  9.7% 1,558  2,196  (29.1%)
Total U.S.$60,394  $51,297  17.7% $176,150  $149,591  17.8%
            
International           
Foot and Ankle10,917  10,068  8.4% 35,313  35,882  (1.6%)
Upper Extremity1,764  2,351  (25.0%) 5,723  8,875  (35.5%)
Biologics5,260  5,860  (10.2%) 15,070  15,437  (2.4%)
Other1,804  1,731  4.2% 6,237  4,948  26.1%
Total International$19,745  $20,010  (1.3%) $62,343  $65,142  (4.3%)
            
Global           
Foot and Ankle54,846  45,628  20.2% 163,590  138,481  18.1%
Upper Extremity5,418  6,367  (14.9%) 17,426  20,295  (14.1%)
Biologics17,458  17,022  2.6% 49,682  48,813  1.8%
Other2,417  2,290  5.5% 7,795  7,144  9.1%
Total Sales$80,139  $71,307  12.4% $238,493  $214,733  11.1%

Legacy Wright Medical Group, Inc.
Supplemental Sales Information
(unaudited)
 
 Third Quarter 2015 Sales Growth/(Decline)
 Domestic
As
Reported
Int'l
Constant
Currency
Int'l
As
Reported
Total
Constant
Currency
Total
As
Reported
Product Line     
Foot and Ankle 24% 23% 8% 23% 20%
Upper Extremity (9%) (14%) (25%) (11%) (15%)
Biologics 9% 1% (10%) 6% 3%
Other 10% 20% 4% 18% 6%
Total Sales 18% 12% (1%) 16% 12%

Legacy Wright Medical Group, Inc.
Supplemental Sales Information
(unaudited)
 
 Nine Months Ended September 30, 2015 Sales Growth/(Decline)
 Domestic
As
Reported
Int'l
Constant
Currency
Int'l
As
Reported
Total
Constant
Currency
Total
As
Reported
Product Line     
Foot and Ankle 25% 12% (2%) 22% 18%
Upper Extremity 2% (26%) (36%) (10%) (14%)
Biologics 4% 8% (2%) 5% 2%
Other (29%) 48% 26% 25% 9%
Total Sales 18% 9% (4%) 15% 11%

Legacy Wright Medical Group, Inc.
Reconciliation of Net Sales to Net Sales Excluding the Impact of Foreign Currency
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 30, 2015 September 30, 2015
 International
Net Sales
 Total
Net Sales
 International
Net Sales
 Total
Net Sales
Net sales, as reported$19,745  $80,139  $62,343  $238,493 
Currency impact as compared to prior period2,656  2,656  8,394  8,394 
Net sales, excluding the impact of foreign currency$22,401  $82,795  $70,737  $246,887 

Legacy Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September
30,
2015
 September
30,
2014
 September
30,
2015
 September
30,
2014
Operating Loss       
Operating loss, as reported$(41,042) $(20,649) $(108,505) $(72,866)
Reconciling items impacting Gross Profit:       
Inventory step-up amortization20  302  69  1,521 
Transaction and transition costs2,423    2,423   
Total2,443  302  2,492  1,521 
Reconciling items impacting Selling, General and Administrative expense:       
Distributor conversions  16    172 
Due diligence, transaction and transition costs17,464  2,740  40,617  16,030 
Patent dispute settlement  900    900 
Management changes (1)  1,203    1,203 
Total17,464  4,859  40,617  18,305 
Reconciling items impacting Amortization of Intangible Assets:       
Amortization of distributor non-competes16  462  65  1,526 
        
Operating loss, as adjusted$(21,119) $(15,026) $(65,331) $(51,514)
Operating loss, as adjusted, as a percentage of net sales(26.4)% (21.1)% (27.4)% (24.0)%
                
(1) For the three and nine months ended September 30, 2014, amount includes $0.3 million of non-cash stock-based compensation expense related to the management changes.

Legacy Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
EBITDA       
Net loss from continuing operations, as reported$(62,650) $(49,647) $(146,204) $(133,528)
Interest expense, net11,185  4,565  29,793  12,873 
Provision (benefit) for income taxes187  3,003  511  (7,197)
Depreciation6,268  4,654  16,966  13,494 
Amortization of intangible assets2,562  2,379  7,741  7,241 
EBITDA(42,448) (35,046) (91,193) (107,117)
Reconciling items impacting EBITDA       
Non-cash stock-based compensation expense (1)2,025  2,586  7,706  8,685 
Other expense, net10,236  21,430  7,395  54,986 
Inventory step-up amortization20  302  69  1,521 
Distributor conversions  16    172 
Due diligence, transaction and transition costs19,887  2,740  43,040  16,030 
Patent dispute settlement  900    900 
Management changes  1,203    1,203 
Adjusted EBITDA$(10,280) $(5,869) $(32,983) $(23,620)
Adjusted EBITDA as a percentage of net sales(12.8)% (8.2)% (13.8)% (11.0)%
 
(1) For the three and nine months ended September 30, 2014, amount excludes $0.3 million of non-cash stock-based compensation expense related to the management changes, which is included in management changes.

Legacy Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands, except per share data--unaudited)
 
 Three Months Ended Nine Months Ended
 September 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
Net Income       
Loss before taxes, as reported$(62,463) $(46,644) $(145,693) $(140,725)
Pre-tax impact of reconciling items:       
Inventory step-up amortization20  302  69  1,521 
Distributor conversion and non-competes16  478  65  1,698 
Non-cash interest expense on 2017 & 2020 Convertible Notes6,767  2,333  17,857  6,886 
Write-off of unamortized debt discount and deferred financing fees(100)   25,101   
Derivatives mark-to-market adjustment(4,652) 1,000  (12,021) 2,000 
Due diligence, transaction and transition costs19,887  2,740  43,040  16,030 
Patent dispute settlement  900    900 
Management changes (1)  1,203    1,203 
CVR mark-to-market adjustments14,569  18,499  (7,350) 51,293 
Contingent consideration fair value adjustment  1,750  155  1,750 
Loss before taxes, as adjusted(25,956) (17,439) (78,777) (57,444)
Provision (benefit) for income taxes, as reported$187  $3,003  $511  $(7,197)
U.S. tax impact resulting from gain in discontinued operations  (2,776)   7,940 
Tax effect of reconciling items    27   
Provision (benefit) for income taxes, as adjusted$187  $227  $538  $743 
Effective tax rate, as adjusted(0.7)% (1.3)% (0.7)% (1.3)%
Net loss from continuing operations, as adjusted$(26,143) $(17,666) $(79,315) $(58,187)
        
Weighted-average number of shares outstanding-diluted51,172  50,043  51,033  49,441 
Net loss from continuing operations, as adjusted, per diluted share$(0.51) $(0.35) $(1.55) $(1.18)
 
(1) For the three and nine months ended September 30, 2014, amount includes $0.3 million of non-cash stock-based compensation expense related to the management changes.

Legacy Wright Medical Group, Inc.
Reconciliation of Free Cash Flow
(dollars in thousands--unaudited)
 
 Three Months Ended Nine Months Ended
 September 30,
2015
September 30,
2014
 September 30,
2015
September 30,
2014
Net cash used in operating activities$(90,839)$(34,562) $(141,839)$(86,152)
Capital expenditures(8,259)(11,422) (34,013)(35,706)
Free cash flow$(99,098)$(45,984) $(175,852)$(121,858)

Legacy Wright Medical Group, Inc.
Segment Information
(in thousands--unaudited)
 
 Three Months Ended September 30, 2015
 U.S.InternationalBioMimeticCorporateOther (1)Total
Sales$60,394 $19,745 $ $ $ $80,139 
Gross profit46,874 12,673  (17)(2,443)57,087 
Operating income (loss)2,219 (2,627)(3,952)(16,759)(19,923)(41,042)
Operating income (loss) as a percent of net sales3.7%(13.3%)N/A N/A N/A (51.2%)
       
Depreciation Expense3,500 827 46 1,895  6,268 
Amortization Expense2,025 469 52  16 2,562 
Non-cash stock-based compensation expense   2,025  2,025 
Other    19,907 19,907 
Adjusted EBITDA7,744 (1,331)(3,854)(12,839) (10,280)
 
(1)  Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

 Three Months Ended September 30, 2014
 U.S.InternationalBioMimeticCorporateOther (1)Total
Sales$51,297 $20,010 $ $ $ $71,307 
Gross profit42,939 12,010  (43)(302)54,604 
Operating income (loss)6,448 (3,213)(2,601)(15,660)(5,623)(20,649)
Operating income (loss) as a percent of net sales12.6%(16.1%)N/A N/A N/A (29.0%)
       
Depreciation Expense2,414 841 108 1,291  4,654 
Amortization Expense1,293 547 77  462 2,379 
Non-cash stock-based compensation expense   2,586  2,586 
Other    5,161 5,161 
Adjusted EBITDA10,155 (1,825)(2,416)(11,783) (5,869)
 
(1)  Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

Legacy Wright Medical Group, Inc.
Segment Information
(in thousands--unaudited)
 
 Nine Months Ended September 30, 2015
 U.S.InternationalBioMimeticCorporateOther (1)Total
Sales$176,150 $62,343 $ $ $ $238,493 
Gross profit138,850 38,351  (28)(2,492)174,681 
Operating income (loss)8,021 (8,658)(11,051)(53,643)(43,174)(108,505)
Operating income (loss) as a percent of net sales4.6%(13.9%)N/A N/A N/A (45.5%)
       
Depreciation Expense9,693 2,330 127 4,816  16,966 
Amortization Expense6,132 1,402 142  65 7,741 
Non-cash stock-based compensation expense   7,706  7,706 
Other    43,109 43,109 
Adjusted EBITDA23,846 (4,926)(10,782)(41,121) (32,983)
 
(1)  Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

 Nine Months Ended September 30, 2014
 U.S.InternationalBioMimeticCorporateOther (1)Total
Sales$149,591 $65,142 $ $ $ $214,733 
Gross profit120,717 41,642  (231)(1,521)160,607 
Operating income (loss)12,914 (2,385)(9,385)(52,658)(21,352)(72,866)
Operating income (loss) as a percent of net sales8.6%(3.7%)N/A N/A N/A (33.9%)
       
Depreciation Expense7,093 2,246 324 3,831  13,494 
Amortization Expense3,820 1,663 231 1 1,526 7,241 
Non-cash stock-based compensation expense   8,685  8,685 
Other    19,826 19,826 
Adjusted EBITDA23,827 1,524 (8,830)(40,141) (23,620)
 
(1)  Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

Legacy Wright Medical Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)
 
 September 30,
2015
 December 31,
2014
Assets   
Current assets:   
Cash and cash equivalents$254,435  $227,326 
Marketable securities  2,575 
Accounts receivable, net51,713  57,190 
Inventories111,064  88,412 
Prepaid expenses and other current assets44,663  64,953 
Total current assets461,875  440,456 
    
Property, plant and equipment, net122,450  104,235 
Goodwill and intangible assets, net258,876  259,991 
Other assets122,334  87,994 
Total assets$965,535  $892,676 
    
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable$18,261  $16,729 
Accrued expenses and other current liabilities79,345  170,204 
Current portion of long-term obligations784  718 
Total current liabilities98,390  187,651 
Long-term obligations565,556  280,612 
Other liabilities187,618  145,610 
Total liabilities851,564  613,873 
    
Stockholders' equity113,971  278,803 
Total liabilities and stockholders' equity$965,535  $892,676 

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