Thursday, March 3, 2016

News: Wright Medical Group N.V. Reports 2015 Fourth Quarter and Full-Year Financial Results and Provides 2016 Guidance

  • Fourth Quarter 2015 Net Sales of $177 Million As Reported; $181 Million Pro-Forma
  • Full-Year 2015 Net Sales of $415 Million As Reported; Pro-Forma Full-Year 2015 Net Sales of $656 Million 
  • Exceeds High-End Of Company’s Previously Provided 2015 Guidance Range
  • Company Provides Full-Year 2016 Net Sales Guidance of $695 Million to $705 Million

Wright Medical TechnologyAMSTERDAM, The NetherlandsFeb. 23, 2016 (GLOBE NEWSWIRE) -- Wright Medical Group N.V.(NASDAQ:WMGI) today reported financial results for its fourth quarter and full-year ended December 27, 2015 and provided 2016 guidance.  Certain unaudited non-GAAP pro forma financial results for the combined Wright Medical Group N.V. which give effect to the Wright/Tornier merger as if it had occurred on the first day of fiscal 2014 can be found on Wright’s website at ir.wright.com.
As previously announced, Wright Medical Group, Inc. and Tornier N.V. completed their merger on October 1, 2015, and, in accordance with U.S. GAAP, legacy Wright’s historical results of operations replaced legacy Tornier’s historical results of operations for all periods prior to the merger and the results of the two legacy businesses have been consolidated only from that date forward. Since the legacy Tornier business began its fourth quarter on September 28, 2015, its financial results from the operating days between September 28, 2015 and September 30, 2015 are not included in the combined company’s as reported results of operations for the fourth quarter of 2015.
Following the closing of the merger, Wright adopted legacy Tornier’s fiscal calendar, which resulted in four fewer calendar days for the fourth quarter of 2015 than under the legacy Wright fiscal calendar.  Additionally, the Wright business conformed its methodology for recognizing revenue to legacy Tornier's methodology. 
Net sales totaled $177.0 million during the fourth quarter ended December 27, 2015.  Combined company pro forma net sales totaled $181.4 million during the fourth quarter ended December 27, 2015.  On a same sales day and constant currency basis and excluding the impact of conforming Wright’s methodology for recognizing revenue, combined pro forma global extremities and biologics revenue grew 14%. The attached financial tables include a reconciliation of U.S. GAAP to these non-GAAP financial measures.
Robert Palmisano, president and chief executive officer, commented, “In our first quarter as a newly merged Wright Medical, we delivered outstanding fourth quarter results that reflect the continued strong underlying growth and positive momentum in our legacy Wright lower extremities and legacy Tornier upper extremities businesses.  Our pro forma global extremities and biologics growth of 14% was a two percentage point acceleration from the third quarter of 2015, and combined with earlier than anticipated progress on capturing cost synergies, resulted in pro forma net sales and positive adjusted EBITDA results that significantly exceeded our expectations.  We also got off to a strong start on executing our merger integration plans and with the early success we are seeing, we believe we are well positioned to continue our strong business momentum and to deliver on our synergy commitments as we progress through 2016.”
Palmisano continued, “Highlights in the quarter included strong contributions from our new SIMPLICITI shoulder system and the ongoing rollout of the AEQUALIS ASCEND FLEX convertible shoulder system, a positive start to our U.S. commercial activities for AUGMENT Bone Graft, and the ongoing launch of the INFINITY total ankle replacement system, which drove over 40% sales growth in U.S. total ankle replacement for the fourth quarter of 2015 and over 45% growth for the full-year of 2015.”
Palmisano further commented, “Our 2016 guidance assumes mid-teens underlying combined pro forma constant currency growth in extremities and biologics, excluding the impact of anticipated revenue dis-synergies.  We also expect growth to accelerate in our biologics business due to the ongoing launch of AUGMENT Bone Graft in the U.S.  We will continue to focus on successfully executing our integration plans to realize our full potential and believe that the positive progress we saw in the fourth quarter is setting us up well for continued strong revenue growth and significant margin expansion in 2016 and beyond.”
Net loss from continuing operations for the fourth quarter of 2015 totaled $92.2 million, or $(0.90) per diluted share. Our combined pro forma net loss from continuing operations, as defined in the GAAP to non-GAAP reconciliation provided later in this release, for the fourth quarter of 2015 totaled $89.3 million.
The company’s combined pro forma net loss from continuing operations for the fourth quarter of 2015 included the after-tax effects of $39.2 million of transaction and transition costs, $14.2 million of non-cash share-based compensation charges associated with the closing of the merger, $11.4 million of inventory step-up amortization, a loss of $2.3 million related to mark-to-market adjustments on derivatives, and $6.9 million of non-cash interest expense related to its 2017 convertible notes and 2020 convertible notes.
The company's fourth quarter 2015 combined pro forma net loss from continuing operations, as adjusted for the above items, was $17.5 million.  The company's fourth quarter 2015 combined pro forma adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $10.9 million. The attached financial tables include reconciliations of U.S. GAAP to non-GAAP measures.
Cash and cash equivalents and marketable securities for the combined business totaled $139.8 million as of the end of the fourth quarter of 2015. 
Palmisano concluded, “Following our merger, we have leading positions in the highest growth markets in orthopaedics with differentiated technologies and focused sales forces.  We have multiple opportunities through a robust new product pipeline to further accelerate our growth, continue to expand our markets and gain market share.  With the execution of our integration plans off to a positive and productive start, we are well positioned to continue to accelerate our business momentum and drive market leading growth and profitability.” 
Outlook
The company anticipates net sales for full-year 2016 of approximately $695 million to $705 million. This range assumes a negative impact from foreign currency exchange rates as compared to 2015 of approximately 2% and reflects approximately $25 million to $30 million of potential net sales dis-synergies expected to be realized throughout 2016 from the merger with Tornier.  The midpoint of this net sales guidance range assumes combined pro forma extremities and biologics constant currency growth of 14%, excluding the impact of revenue dis-synergies.
The company anticipates 2016 adjusted EBITDA from continuing operations, as described in the GAAP to non-GAAP reconciliation provided later in this release, of $20.0 million to $30.0 million.  This range reflects approximately $10 million to $15 million of potential cost synergies expected to be realized in 2016 from the merger with Tornier.
The company anticipates adjusted cash earnings per share from continuing operations, including share-based compensation, as described in the GAAP to non-GAAP reconciliation provided later in this release, for full-year 2016 of $(0.65) to $(0.71) per diluted share. 
The company estimates approximately 103 million diluted weighted average ordinary shares outstanding for fiscal year 2016.
The company's adjusted EBITDA from continuing operations target is measured by adding back to net income/loss from continuing operations charges for interest, income taxes, depreciation and amortization expenses, non-cash share-based compensation expense, and non-operating income and expense. Additionally, the company’s adjusted EBITDA from continuing operations target excludes possible future acquisitions; other material future business developments; and due diligence, transaction and transition costs associated with acquisitions and divestitures.  Further, this adjusted EBITDA from continuing operations target excludes any expenses, earnings or losses related to Wright’s divested OrthoRecon business and Tornier’s divested ankle and silastic toe products.
The company’s adjusted cash earnings per share from continuing operations target is measured by adding back to net income/loss from continuing operations charges for non-cash amortization expenses, net of taxes. Note that due to the company’s relatively low effective tax rate due to the valuation allowance impacting a substantial portion of the company’s income/loss, the company is currently estimating the tax effect on amortization expense at 0%. Additionally, this adjusted cash earnings per share from continuing operations target excludes possible future acquisitions; other material future business developments; non-cash interest expense associated with the 2017 and 2020 convertible notes; due diligence, transaction and transition costs associated with acquisitions and divestitures; mark-to-market adjustments to the CVRs; and non-cash mark-to-market derivative adjustments.
The company's anticipated ranges for net sales, adjusted EBITDA from continuing operations, and adjusted cash earnings per share from continuing operations are forward-looking statements, as are any other statements that anticipate or aspire to future events or performance.  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 “Cautionary Note Regarding Forward-Looking Statements” section of this press release.
Supplemental Financial Information
To view the fourth quarter of 2015 supplemental financial information, visit ir.wright.com.  For updated information on Wright Medical Group N.V. revenue reporting changes and preliminary, combined non-GAAP pro forma historical financial information, including fourth quarter of 2015, please refer to the presentation posted on Wright’s website at ir.wright.com in the “Financial Information” section.
Internet Posting of Information
Wright routinely posts information that may be important to investors in the “Investor Relations” section of its website at www.wright.com.  The company encourages investors and potential investors to consult the Wright website regularly for important information about Wright.
Conference Call and Webcast
As previously announced, Wright will host a conference call starting at 3:30 p.m. Central Time today.  The live dial-in number for the call is 800-237-9752 (U.S.) / 617-847-8706 (Outside U.S.).  The participant passcode for the call is “Wright.”  A simultaneous webcast of the call will be available via Wright’s corporate website at www.wright.com.
A replay of the conference call by telephone will be available starting at 5:30 p.m. Central Time today and continuing through March 1, 2016.  To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (Outside U.S.) and enter the passcode 70431489.  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 “Investor Relations - Presentations/Calendar” section of the company's website located at www.wright.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, the Current Report on Form 8-K filed with the SEC today, or otherwise available in the “Investor Relations - Supplemental Financial Information” section of the company's website located at www.wright.com.
The conference call may include forward-looking statements.  See the cautionary information about forward-looking statements in the “Forward-Looking Statements Safe Harbor” section of this press release.
About Wright
Wright Medical Group N.V. is a global medical device company focused on Extremities and Biologics.  The company is committed to delivering innovative, value-added solutions improving quality of life for patients worldwide and is a recognized leader of surgical solutions for the upper extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics markets, three of the fastest growing segments in orthopaedics.  For more information about Wright, visit www.wright.com.
WRIGHT®, INFINITY®, AUGMENT®, TORNIER®, AEQUALIS®, AEQUALIS ASCEND®, AEQUALIS ASCEND® FLEX™, and SIMPLICITI® are trademarks of Wright Medical Group N.V. or its affiliates, registered as indicated in the United States, and in other countries.  All other trademarks and trade names referred to in this release are the property of their respective owners.
Non-GAAP Financial Measures  
To supplement the company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), the company uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable U.S. GAAP measures for the respective periods can be found in tables later in this press release. Wright’s non-GAAP financial measures, include combined pro forma net sales; combined pro forma net sales, excluding the impact of foreign currency and revenue recognition conformance; combined pro forma net income, as adjusted; combined pro forma EBITDA, as adjusted; combined pro forma cash earnings, as adjusted; and combined pro forma cash earnings, 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. While pro forma data gives effect to the merger as if it had occurred on the first day of fiscal 2014 and enhances comparability of financial information between periods, pro forma data is not indicative of the results that actually would have been obtained if the merger had occurred as of the beginning of the fiscal year. Wright’s non-GAAP financial measures exclude such items as costs associated with distributor conversions and non-competes, non-cash interest expense related to the company's 2017 convertible notes and 2020 convertible notes, write-off of the pro rata unamortized deferred financing costs and debt discount associated with the 2017 convertible notes, net gains and losses on mark-to-market adjustments on and settlements of derivative assets and liabilities, mark-to-market adjustments on CVRs, transaction and transition costs, 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 financial 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 includes forward-looking statements under the Private Securities Litigation Reform Act of 1995.  These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “target,” “project,” "continue," "outlook," “guidance,” "future,” other words of similar meaning and the use of future dates.  Forward-looking statements in this press release include, but are not limited to, statements about the company’s anticipated financial results for 2016, including net sales, adjusted EBITDA from continuing operations and adjusted cash earnings per share from continuing operations; anticipated sales and cost synergies and dis-synergies, the timing thereof, and level of risk of achievement; the company’s expectations regarding the sales growth of its lower extremities, upper extremities, biologics, and international businesses;  the benefits of its recently completed merger with Tornier and integration efforts and progress; and the company’s anticipated growth opportunities, accelerated path to profitability, adjusted EBITDA margin goal and ability to drive long-term growth and profitability and generate long-term value for shareholders.  Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement.  Applicable risks and uncertainties include, among others, the failure to integrate the businesses and realize net sales synergies and cost-savings from the recently completed merger with Tornier or delay in realization thereof; operating costs and business disruption as a result of the merger, including adverse effects on employee retention and sales force productivity and on business relationships with third parties; transaction and integration costs; actual or contingent liabilities; the adequacy of the company’s capital resources and need for additional financing; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; failure to achieve the anticipated benefits from approval of AUGMENT® Bone Graft; the effect of regulatory actions, changes in and adoption of reimbursement rates; product liability claims and product recalls; pending and threatened litigation; risks associated with international operations and expansion; fluctuations in foreign currency exchange rates; other business effects, including the effects of industry, economic or political conditions outside of the company’s control; reliance on independent distributors and sales agencies; competitor activities; changes in tax and other legislation; and the risks identified under the heading “Risk Factors” in Wright’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2015 filed with the SEC on November 5, 2015and Annual Report on Form 10-K for the year ended December 27, 2015 to be filed by Wright with the SEC.  Investors should not place considerable reliance on the forward-looking statements contained in this press release.  You are encouraged to read Wright’s filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking statements in this press release speak only as of the date of this release, and Wright undertakes no obligation to update or revise any of these statements.  Wright’s business is subject to substantial risks and uncertainties, including those referenced above.  Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

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