Third Quarter 2017 Net Sales of $170.5
Million
Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial
results for its third quarter ended September 24, 2017 and updated
2017 annual guidance.
Net sales from continuing operations totaled $170.5 million
during the third quarter ended September 24, 2017, representing 8%
as reported and constant currency growth. Gross margins from
continuing operations were 77.5% during the quarter ended September
24, 2017 and were 78.2% on a non-GAAP adjusted basis.
Reconciliations of all historical non-GAAP financial measures used
in this release to the most comparable GAAP measures can be found
in the attached financial tables.
Robert Palmisano, president and chief executive officer,
commented, “Our U.S. upper extremities business had an exceptional
quarter and grew 19%. However, in total, the third quarter
fell short of our expectations. The third quarter was
negatively impacted by the hurricanes. In addition, our U.S.
lower extremities business did not perform as we expected as the
benefit from the sales force additions is developing slower than we
originally anticipated. We have adjusted our net sales
guidance accordingly. Despite this impact, we made positive
progress on non-GAAP adjusted EBITDA margins, which improved
approximately 370 basis points over prior year.”
Palmisano continued, “Highlights in the quarter included 19%
sales growth in U.S. shoulders, led by the ongoing launch of our
PERFORM Reversed glenoid, which is on a strong growth trajectory,
and continued contributions from our SIMPLICITI shoulder
system. We anticipate that our PERFORM Reversed launch and
accelerating adoption of BLUEPRINT enabling technology will drive
strong shoulder revenue growth for the remainder of the year and
beyond as additional instrument sets are delivered to the U.S.
field.”
Palmisano further commented, “In U.S. lower extremities, our
technologically advanced products, which include AUGMENT Bone
Graft, SALVATION Limb Salvage and Total Ankle Replacement continued
to perform well, growing 16% or about twice the overall market
growth rate in the quarter. Growth in the core U.S. lower
extremities and core biologics portfolio was significantly lower
than our more technologically advanced products due to slower than
anticipated benefit from the sales rep additions that we made
earlier in the year. We expect to see improvement in the
fourth quarter and beyond as the larger footprint, new products and
new reps expanding relationships begin to take effect.”
Net loss from continuing operations for the third quarter of
2017 totaled $34.1 million, or $(0.33) per diluted share.
The company’s net loss from continuing operations for the third
quarter of 2017 included $3.3 million of transition costs, $11.5
million of non-cash interest expense related to its convertible
notes, an $8.9 million tax benefit related to the realizability of
net operating losses, an unrealized gain of $0.2 million related to
mark-to-market adjustments on derivatives, and a $4.5 million
unrealized loss related to mark-to-market adjustments on contingent
value rights (CVRs) issued in connection with the BioMimetic
acquisition.
The company's third quarter 2017 non-GAAP net loss from
continuing operations, as adjusted for the above items, was $23.8
million. The company's third quarter 2017 non-GAAP adjusted
EBITDA from continuing operations, as defined in the non-GAAP to
GAAP reconciliation provided later in this release, was a positive
$12.4 million. The attached financial tables include
reconciliations of all historical non-GAAP measures to the most
comparable GAAP measures.
Cash, cash equivalents and restricted cash totaled $277.8
million as of the end of the third quarter of 2017. This
amount includes $38.9 million classified as restricted cash on the
company’s balance sheet that is held in escrow to fund a portion of
the metal-on-metal hip litigation Master Settlement Agreement
(MSA).
Palmisano concluded, “I believe we are positioned well for
future success in both our upper and lower extremities
businesses. We have focused sales organizations, highly
differentiated products and robust future product development
pipelines. I believe that these advantages will enable us to
continue to drive high revenue growth rates, gross margins in the
high 70% range and non-GAAP adjusted EBITDA margins of
approximately 20% in the next two years.”
Outlook
The company is updating its previous net sales guidance range
for full-year 2017 of approximately $755 million to $765 million
and now anticipates net sales for full-year 2017 of approximately
$740 million to $745 million. This guidance range assumes an
approximate 1% tailwind from currency for the fourth quarter of
2017, which is approximately 1% of cushion as compared to current
rates. In addition, this range implies fourth quarter of 2017
constant currency net sales growth of 6% to 8%, excluding the
estimated $7 million impact of the four extra selling days in
fourth quarter of 2017.
The company is increasing its full-year 2017 non-GAAP adjusted
EBITDA from continuing operations, as described in the non-GAAP
reconciliation provided later in this release, to be in the range
of $84 million to $88 million from its previous range of $78.5
million to $85.5 million.
The company is also increasing its non-GAAP adjusted earnings
per share from continuing operations, including share-based
compensation, as described in the non-GAAP to GAAP reconciliation
provided later in this release, for full-year 2017 to $(0.28) to
$(0.24) per diluted share from its previous range of $(0.33) to
$(0.26) per diluted share.
The company estimates approximately 104.5 million diluted
weighted average ordinary shares outstanding for fiscal year
2017.
The company's non-GAAP adjusted EBITDA from continuing
operations target is measured by adding back to net 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 the divested large joints business, legacy Wright’s divested
OrthoRecon business and legacy Tornier’s divested ankle replacement
and silastic toe products.
The company’s non-GAAP adjusted earnings per share from
continuing operations target is measured by adding back to net loss
from continuing operations non-cash interest expense associated
with the 2017, 2020 and 2021 convertible notes; due diligence,
transaction and transition costs associated with acquisitions and
divestitures; mark-to-market adjustments to CVRs; non-cash
mark-to-market derivative adjustments; and charges for non-cash
amortization expenses, net of taxes. Note that as a result of 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%. Further, this adjusted earnings per
share from continuing operations target excludes possible future
acquisitions; other material future business developments; and any
expenses, earnings or losses related to the divested large joints
business.
All of the historical non-GAAP financial measures used in this
release are reconciled to the most directly comparable GAAP
measures. With respect to the company’s 2017 financial guidance
regarding non-GAAP adjusted EBITDA from continuing operations and
non-GAAP adjusted earnings per share from continuing operations,
however, the company cannot provide a quantitative reconciliation
to the most directly comparable GAAP measures without unreasonable
effort due to its inability to make accurate projections and
estimates related to certain information needed to calculate some
of the adjustments as described above, including the market driven
fair value adjustments to CVRs and derivatives. The anticipated
differences between these non-GAAP financial measures and the most
directly comparable GAAP measure are described above
qualitatively.
The company's anticipated ranges for net sales from continuing
operations, non-GAAP adjusted EBITDA from continuing operations,
and non-GAAP adjusted 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 release.
Supplemental Financial Information
To view the third quarter of 2017 supplemental financial
information, visit ir.wright.com. For historical information
on Wright Medical Group N.V. segment reporting changes and non-GAAP
combined pro forma financial information, 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 (844) 295-9436 (U.S.) / (574) 990-1040
(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 call will be available beginning at 5:30 p.m.
Central Time on November 1, 2017 through November 8, 2017. To
hear this replay, dial (855) 859-2056 (U.S.) / (404) 537-3406
(Outside U.S.) and enter code 65776375. 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
corporate 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 release, the Current Report on Form
8-K filed with the U.S. Securities and Exchange Commission (SEC)
today, or otherwise available in the “Investor Relations -
Supplemental Financial Information” section of the company's
corporate website located at www.wright.com.
The conference call may include forward-looking
statements. See the cautionary information about
forward-looking statements in the “Cautionary Note Regarding
Forward-Looking Statements” section of this release.
About Wright Medical Group N.V.
Wright Medical Group N.V. is a global medical device company
focused on extremities and biologics products. The company is
committed to delivering innovative, value-added solutions improving
the quality of life for patients worldwide. Wright 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.
™ and ® denote trademarks and registered 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, the company uses certain non-GAAP financial measures in
this release. Reconciliations of the historical non-GAAP financial
measures used in this release to the most comparable GAAP measures
for the respective periods can be found in tables later in this
release. Wright’s non-GAAP financial measures include net sales,
excluding the impact of foreign currency; net income, as adjusted;
EBITDA, as adjusted; gross margin, as adjusted; earnings, as
adjusted; and earnings, as adjusted, per diluted share, in each
case, from continuing operations. 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. Wright’s
non-GAAP financial measures exclude such items as non-cash interest
expense related to the company's 2017 convertible notes, 2020
convertible notes and 2021 convertible notes, net gains and losses
on mark-to-market adjustments on and settlements of derivative
assets and liabilities, write-off of unamortized debt discount and
deferred financing charges following the partial settlement of 2017
convertible notes and 2020 convertible notes, mark-to-market
adjustments on CVRs, transaction and transition costs and tax
impacts from changes in the realizability of net operating losses,
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. It is for this reason
that the company cannot provide without unreasonable effort a
quantitative reconciliation to the most directly comparable GAAP
measures for its 2017 financial guidance regarding non-GAAP
adjusted EBITDA from continuing operations and non-GAAP adjusted
earnings per share from continuing operations. Management uses the
non-GAAP measures in this release 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 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 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,” “intend,”
“could,” “may,” “will,” “believe,” “estimate,” “look forward,”
“forecast,” “goal,” “target,” “project,” “continue,” “outlook,”
“guidance,” “future,” other words of similar meaning and the use of
future dates. Forward-looking statements in this release
include, but are not limited to, statements about the
company’s anticipated financial results for 2017, including
net sales from continuing operations, adjusted EBITDA
from continuing operations and adjusted earnings per share
from continuing operations; anticipated strong shoulder revenue
growth and growth in lower extremities and biologics products in
the fourth quarter and beyond; anticipated benefits from the
company’s expanded U.S. sales force, greater focus on its core
product portfolio, greater incentives to drive growth and
differentiated new products; and the company’s ability to achieve
its key financial goals. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain. Each
forward-looking statement contained in this 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 legacy Wright and Tornier businesses and
realize net sales synergies and cost savings from the 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; integration costs;
actual or contingent liabilities; failure of the company’s recent
U.S. sales force additions, focus on core product portfolio and
incentives to drive U.S. lower extremities and biologics sales or
delay in realization thereof; adverse effects of diverting
resources and attention to providing transition services to the
purchaser of the large joints business; 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 the
metal-on-metal master settlement agreement and the settlement
agreement with the three settling insurers; risks associated with
the subsequent metal-on-metal settlement agreements and ability to
obtain the additional new insurance proceeds contingent thereon;
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 Annual Report on Form
10-K for the year ended December 25, 2016 filed by Wright with the
SEC on February 23, 2017 and in other subsequent SEC filings by
Wright. Investors should not place considerable reliance on the
forward-looking statements contained in this release. Investors 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 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.
--Tables Follow--
|
Wright Medical Group N.V. |
Condensed Consolidated Statements of
Operations |
(dollars in thousands, except
per share data--unaudited) |
|
|
Three months ended |
|
Nine months ended |
|
September 24, 2017 |
|
September 25, 2016 |
|
September 24, 2017 |
|
September 25, 2016 |
Net sales |
$ |
170,503 |
|
|
$ |
157,332 |
|
|
$ |
527,387 |
|
|
$ |
497,339 |
|
Cost of sales 1 |
38,421 |
|
|
46,149 |
|
|
113,669 |
|
|
141,824 |
|
Gross
profit |
132,082 |
|
|
111,183 |
|
|
413,718 |
|
|
355,515 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling,
general and administrative |
131,421 |
|
|
129,840 |
|
|
392,073 |
|
|
401,069 |
|
Research
and development |
11,992 |
|
|
12,481 |
|
|
36,971 |
|
|
36,705 |
|
Amortization of intangible assets |
7,178 |
|
|
7,466 |
|
|
21,574 |
|
|
21,407 |
|
Total
operating expenses |
150,591 |
|
|
149,787 |
|
|
450,618 |
|
|
459,181 |
|
Operating
loss |
(18,509 |
) |
|
(38,604 |
) |
|
(36,900 |
) |
|
(103,666 |
) |
Interest expense,
net |
18,978 |
|
|
16,795 |
|
|
55,512 |
|
|
41,673 |
|
Other expense (income),
net |
5,457 |
|
|
(365 |
) |
|
6,875 |
|
|
(3,494 |
) |
Loss from
continuing operations before income taxes |
(42,944 |
) |
|
(55,034 |
) |
|
(99,287 |
) |
|
(141,845 |
) |
Benefit for income
taxes |
(8,822 |
) |
|
(2,325 |
) |
|
(7,498 |
) |
|
(6,913 |
) |
Net loss
from continuing operations |
$ |
(34,122 |
) |
|
$ |
(52,709 |
) |
|
$ |
(91,789 |
) |
|
$ |
(134,932 |
) |
Loss from discontinued
operations, net of tax |
(97,748 |
) |
|
$ |
(57,436 |
) |
|
$ |
(139,942 |
) |
|
$ |
(252,571 |
) |
Net
loss |
$ |
(131,870 |
) |
|
$ |
(110,145 |
) |
|
$ |
(231,731 |
) |
|
$ |
(387,503 |
) |
|
|
|
|
|
|
|
|
Net loss from
continuing operations per share, basic and diluted |
$ |
(0.33 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.88 |
) |
|
$ |
(1.31 |
) |
Net loss from
discontinued operations per share, basic and diluted |
$ |
(0.93 |
) |
|
$ |
(0.56 |
) |
|
$ |
(1.34 |
) |
|
$ |
(2.46 |
) |
|
|
|
|
|
|
|
|
Net loss per share,
basic and diluted |
$ |
(1.26 |
) |
|
$ |
(1.07 |
) |
|
$ |
(2.22 |
) |
|
$ |
(3.77 |
) |
|
|
|
|
|
|
|
|
Weighted-average number
of shares outstanding-basic and diluted |
104,836 |
|
|
103,072 |
|
|
104,292 |
|
|
102,854 |
|
___________________________1 Cost of sales
includes amortization of inventory step-up adjustment of $10.3
million and $30.9 million for the three and nine months ended
September 25, 2016, respectively.
Wright Medical Group N.V. |
Consolidated Net Sales Analysis |
(dollars in thousands--unaudited) |
|
|
Three months ended |
|
Nine months ended |
|
September 24, 2017 |
|
September 25, 2016 |
|
%change |
|
September 24, 2017 |
|
September 25, 2016 |
|
%change |
U.S. |
|
|
|
|
|
|
|
|
|
|
|
Lower
extremities |
51,417 |
|
|
51,586 |
|
|
(0.3 |
)% |
|
161,228 |
|
|
158,872 |
|
|
1.5 |
% |
Upper
extremities |
54,788 |
|
|
46,207 |
|
|
18.6 |
% |
|
168,280 |
|
|
146,117 |
|
|
15.2 |
% |
Biologics |
18,640 |
|
|
18,247 |
|
|
2.2 |
% |
|
56,547 |
|
|
53,167 |
|
|
6.4 |
% |
Sports
med & other |
2,019 |
|
|
2,025 |
|
|
(0.3 |
)% |
|
5,899 |
|
|
6,326 |
|
|
(6.7 |
)% |
Total
U.S. |
$ |
126,864 |
|
|
$ |
118,065 |
|
|
7.5 |
% |
|
$ |
391,954 |
|
|
$ |
364,482 |
|
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
Lower
extremities |
13,963 |
|
|
14,201 |
|
|
(1.7 |
)% |
|
42,372 |
|
|
45,984 |
|
|
(7.9 |
)% |
Upper
extremities |
21,197 |
|
|
17,326 |
|
|
22.3 |
% |
|
66,606 |
|
|
62,241 |
|
|
7.0 |
% |
Biologics |
5,193 |
|
|
4,739 |
|
|
9.6 |
% |
|
15,492 |
|
|
13,804 |
|
|
12.2 |
% |
Sports
med & other |
3,286 |
|
|
3,001 |
|
|
9.5 |
% |
|
10,963 |
|
|
10,828 |
|
|
1.2 |
% |
Total
International |
$ |
43,639 |
|
|
$ |
39,267 |
|
|
11.1 |
% |
|
$ |
135,433 |
|
|
$ |
132,857 |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
|
|
|
|
|
Lower
extremities |
65,380 |
|
|
65,787 |
|
|
(0.6 |
)% |
|
203,600 |
|
|
204,856 |
|
|
(0.6 |
)% |
Upper
extremities |
75,985 |
|
|
63,533 |
|
|
19.6 |
% |
|
234,886 |
|
|
208,358 |
|
|
12.7 |
% |
Biologics |
23,833 |
|
|
22,986 |
|
|
3.7 |
% |
|
72,039 |
|
|
66,971 |
|
|
7.6 |
% |
Sports
med & other |
5,305 |
|
|
5,026 |
|
|
5.6 |
% |
|
16,862 |
|
|
17,154 |
|
|
(1.7 |
)% |
Total net
sales |
$ |
170,503 |
|
|
$ |
157,332 |
|
|
8.4 |
% |
|
$ |
527,387 |
|
|
$ |
497,339 |
|
|
6.0 |
% |
Wright Medical Group N.V. |
Supplemental Net Sales
Information |
(unaudited) |
|
|
Three months ended September 24, 2017 net
sales growth/(decline) |
|
U.S. as reported |
Int'l constant currency |
Int'l as reported |
Global constant currency |
Global as reported |
Product line |
|
|
|
|
|
Lower
extremities |
0 |
% |
(4 |
%) |
(2 |
%) |
(1 |
%) |
(1 |
%) |
Upper
extremities |
19 |
% |
18 |
% |
22 |
% |
19 |
% |
20 |
% |
Biologics |
2 |
% |
7 |
% |
10 |
% |
3 |
% |
4 |
% |
Sports
med & other |
0 |
% |
6 |
% |
9 |
% |
4 |
% |
6 |
% |
Total net
sales |
7 |
% |
8 |
% |
11 |
% |
8 |
% |
8 |
% |
|
Nine months ended September 24, 2017 net sales
growth/(decline) |
|
U.S. as reported |
Int'l constant currency |
Int'l as reported |
Global constant currency |
Global as reported |
Product line |
|
|
|
|
|
Lower
extremities |
1 |
% |
(6 |
%) |
(8 |
%) |
0 |
% |
(1 |
%) |
Upper
extremities |
15 |
% |
8 |
% |
7 |
% |
13 |
% |
13 |
% |
Biologics |
6 |
% |
13 |
% |
12 |
% |
8 |
% |
8 |
% |
Sports
med & other |
(7 |
%) |
4 |
% |
1 |
% |
0 |
% |
(2 |
%) |
Total net
sales |
8 |
% |
4 |
% |
2 |
% |
6 |
% |
6 |
% |
Wright Medical Group N.V. |
Reconciliation of Adjusted Non-GAAP Earnings
Per Share to Net Loss from Continuing Operations Per
Share |
(dollars in thousands, except
per share data--unaudited) |
|
|
Three months ended |
|
Nine months ended |
|
September 24, 2017 |
|
September 25, 2016 |
|
September 24, 2017 |
|
September 25, 2016 |
Net loss from
continuing operations, as reported |
$ |
(34,122 |
) |
|
$ |
(52,709 |
) |
|
$ |
(91,789 |
) |
|
$ |
(134,932 |
) |
Net loss from
continuing operations per share, as reported |
$ |
(0.33 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.88 |
) |
|
$ |
(1.31 |
) |
Reconciling items: |
|
|
|
|
|
|
|
Inventory
step-up amortization |
— |
|
|
10,306 |
|
|
— |
|
|
30,922 |
|
Non-cash
interest expense on convertible notes 1 |
11,494 |
|
|
10,516 |
|
|
33,743 |
|
|
25,812 |
|
Non-cash
loss on extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
12,343 |
|
Derivatives mark-to-market adjustments 2 |
(199 |
) |
|
(3,187 |
) |
|
(4,163 |
) |
|
(26,460 |
) |
Transaction and transition costs |
3,311 |
|
|
8,105 |
|
|
9,485 |
|
|
27,952 |
|
Management changes |
— |
|
|
— |
|
|
— |
|
|
1,348 |
|
CVR
mark-to-market adjustments 2 |
4,485 |
|
|
2,243 |
|
|
6,721 |
|
|
8,968 |
|
Contingent consideration fair value adjustment 2 |
133 |
|
|
70 |
|
|
309 |
|
|
376 |
|
Legal
settlement |
— |
|
|
— |
|
|
— |
|
|
1,800 |
|
Costs
associated with 2021 Notes issuance |
— |
|
|
— |
|
|
— |
|
|
234 |
|
Tax
benefit related to realizability of net operating losses |
(8,928 |
) |
|
— |
|
|
(8,928 |
) |
|
— |
|
IRS
settlement 3 |
— |
|
|
— |
|
|
— |
|
|
(3,073 |
) |
Tax
effect of reconciling items 4 |
— |
|
|
(2,313 |
) |
|
(70 |
) |
|
(5,634 |
) |
Non-GAAP net
loss from continuing operations, as adjusted |
$ |
(23,826 |
) |
|
$ |
(26,969 |
) |
|
$ |
(54,692 |
) |
|
$ |
(60,344 |
) |
Add back
amortization of intangible assets |
7,178 |
|
|
7,466 |
|
|
21,574 |
|
|
21,407 |
|
Adjusted
non-GAAP earnings |
$ |
(16,648 |
) |
|
$ |
(19,503 |
) |
|
$ |
(33,118 |
) |
|
$ |
(38,937 |
) |
Weighted-average basic shares outstanding |
104,836 |
|
|
103,072 |
|
|
104,292 |
|
|
102,854 |
|
Adjusted
non-GAAP earnings per share |
$ |
(0.16 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.38 |
) |
_______________________________1 Impacting interest
expense, net2 Impacting other expense (income),
net3 IRS Settlement includes $0.8 million of interest
income and $2.3 million tax benefit.4 Determined based
upon the effective tax rate in the jurisdiction in which the
expense was incurred.
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Adjusted EBITDA to
Net Loss from Continuing Operations |
(dollars in
thousands--unaudited) |
|
|
Three months ended |
|
Nine months ended |
|
September 24, 2017 |
|
September 25, 2016 |
|
September 24, 2017 |
|
September 25, 2016 |
Net loss from
continuing operations |
$ |
(34,122 |
) |
|
$ |
(52,709 |
) |
|
$ |
(91,789 |
) |
|
$ |
(134,932 |
) |
Interest expense,
net |
18,978 |
|
|
16,795 |
|
|
55,512 |
|
|
41,673 |
|
Benefit from income
taxes |
(8,822 |
) |
|
(2,325 |
) |
|
(7,498 |
) |
|
(6,913 |
) |
Depreciation |
15,000 |
|
|
14,885 |
|
|
42,124 |
|
|
41,005 |
|
Amortization |
7,178 |
|
|
7,466 |
|
|
21,574 |
|
|
21,407 |
|
Non-GAAP
EBITDA |
$ |
(1,788 |
) |
|
$ |
(15,888 |
) |
|
$ |
19,923 |
|
|
$ |
(37,760 |
) |
Reconciling items
impacting EBITDA: |
|
|
|
|
|
|
|
Non-cash
share-based compensation expense |
5,445 |
|
|
3,528 |
|
|
14,131 |
|
|
9,901 |
|
Other
expense (income), net |
5,457 |
|
|
(365 |
) |
|
6,875 |
|
|
(3,494 |
) |
Inventory
step-up amortization |
— |
|
|
10,306 |
|
|
— |
|
|
30,922 |
|
Transaction and transition costs |
3,311 |
|
|
8,105 |
|
|
9,485 |
|
|
27,952 |
|
Management changes |
— |
|
|
— |
|
|
— |
|
|
1,348 |
|
Legal
settlement |
— |
|
|
— |
|
|
— |
|
|
1,800 |
|
Costs
associated with 2021 Notes issuance |
— |
|
|
— |
|
|
— |
|
|
234 |
|
Non-GAAP
adjusted EBITDA |
$ |
12,425 |
|
|
$ |
5,686 |
|
|
$ |
50,414 |
|
|
$ |
30,903 |
|
Net sales
from continuing operations |
170,503 |
|
|
157,332 |
|
|
527,387 |
|
|
497,339 |
|
Non-GAAP
adjusted EBITDA margin |
7.3 |
% |
|
3.6 |
% |
|
9.6 |
% |
|
6.2 |
% |
Wright Medical Group N.V. |
Reconciliation of Non-GAAP Adjusted Gross
Margins to Gross Margins from Continuing Operations |
(dollars in thousands--unaudited) |
|
|
Three months ended |
|
Nine months ended |
|
September 24, 2017 |
|
September 25, 2016 |
|
September 24, 2017 |
|
September 25, 2016 |
Gross profit
from continuing operations, as reported |
$ |
132,082 |
|
|
$ |
111,183 |
|
|
$ |
413,718 |
|
|
$ |
355,515 |
|
Gross margins
from continuing operations, as reported |
77.5 |
% |
|
70.7 |
% |
|
78.4 |
% |
|
71.5 |
% |
Reconciling items
impacting gross profit: |
|
|
|
|
|
|
|
Inventory
step-up amortization |
— |
|
|
10,306 |
|
|
— |
|
|
30,922 |
|
Transaction and transition costs |
1,310 |
|
|
1,573 |
|
|
1,995 |
|
|
3,651 |
|
Non-GAAP gross
profit from continuing operations, as adjusted |
$ |
133,392 |
|
|
$ |
123,062 |
|
|
$ |
415,713 |
|
|
$ |
390,088 |
|
Net sales
from continuing operations |
170,503 |
|
|
157,332 |
|
|
527,387 |
|
|
497,339 |
|
Non-GAAP
adjusted gross margins from continuing operations |
78.2 |
% |
|
78.2 |
% |
|
78.8 |
% |
|
78.4 |
% |
Wright Medical Group N.V. |
Reconciliation of Other Non-GAAP Financial
Measures to Other As Reported Results |
(dollars in thousands--unaudited) |
|
|
Three months ended |
|
Nine months ended |
|
September 24, 2017 |
|
September 25, 2016 |
|
September 24, 2017 |
|
September 25, 2016 |
Net
sales |
$ |
170,503 |
|
|
$ |
157,332 |
|
|
$ |
527,387 |
|
|
$ |
497,339 |
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expense, as reported |
$ |
131,421 |
|
|
$ |
129,840 |
|
|
$ |
392,073 |
|
|
$ |
401,069 |
|
Selling, general and
administrative expense as a percentages of net sales, as
reported |
77.1 |
% |
|
82.5 |
% |
|
74.3 |
% |
|
80.6 |
% |
Reconciling items
impacting selling, general and administrative expense: |
|
|
|
|
|
|
|
Transaction and transition costs - selling, general and
administrative |
1,878 |
|
|
6,382 |
|
|
7,267 |
|
|
23,913 |
|
Management changes |
— |
|
|
— |
|
|
— |
|
|
1,348 |
|
Legal
settlement |
— |
|
|
— |
|
|
— |
|
|
1,800 |
|
Costs
associated with 2021 Notes issuance |
— |
|
|
— |
|
|
— |
|
|
234 |
|
Selling,
general and administrative expense, as adjusted |
$ |
129,543 |
|
|
$ |
123,458 |
|
|
$ |
384,806 |
|
|
$ |
373,774 |
|
Selling,
general and administrative expense as a percentage of net sales, as
adjusted |
76.0 |
% |
|
78.5 |
% |
|
73.0 |
% |
|
75.2 |
% |
|
|
|
|
|
|
|
|
Research &
development expense, as reported |
$ |
11,992 |
|
|
$ |
12,481 |
|
|
$ |
36,971 |
|
|
$ |
36,705 |
|
Research &
development expense as a percentages of net sales, as reported |
7.0 |
% |
|
7.9 |
% |
|
7.0 |
% |
|
7.4 |
% |
Reconciling items
impacting research & development expense: |
|
|
|
|
|
|
|
Transaction and transition costs - research & development |
122 |
|
|
150 |
|
|
222 |
|
|
389 |
|
Research &
development expense, as adjusted |
$ |
11,870 |
|
|
$ |
12,331 |
|
|
$ |
36,749 |
|
|
$ |
36,316 |
|
Research &
development expense as a percentage of net sales, as
adjusted |
7.0 |
% |
|
7.8 |
% |
|
7.0 |
% |
|
7.3 |
% |
Wright Medical Group N.V. |
Condensed Consolidated Balance
Sheets |
(dollars in thousands--unaudited) |
|
|
September 24, 2017 |
|
December 25, 2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
238,867 |
|
|
$ |
262,265 |
|
Restricted cash |
38,922 |
|
|
150,000 |
|
Accounts
receivable, net |
114,948 |
|
|
130,602 |
|
Inventories |
172,311 |
|
|
150,849 |
|
Prepaid
expenses and other current assets |
76,071 |
|
|
65,909 |
|
Total
current assets |
641,119 |
|
|
759,625 |
|
|
|
|
|
Property, plant and
equipment, net |
211,785 |
|
|
201,732 |
|
Goodwill and intangible
assets, net |
1,087,477 |
|
|
1,082,839 |
|
Other assets |
260,302 |
|
|
246,390 |
|
Total
assets |
$ |
2,200,683 |
|
|
$ |
2,290,586 |
|
|
|
|
|
Liabilities and
shareholders' equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
43,481 |
|
|
$ |
32,866 |
|
Accrued
expenses and other current liabilities |
387,561 |
|
|
407,704 |
|
Current
portion of long-term obligations |
56,783 |
|
|
33,948 |
|
Total
current liabilities |
487,825 |
|
|
474,518 |
|
Long-term
obligations |
818,873 |
|
|
780,407 |
|
Other liabilities |
355,469 |
|
|
348,797 |
|
Total
liabilities |
1,662,167 |
|
|
1,603,722 |
|
|
|
|
|
Shareholders'
equity |
538,516 |
|
|
686,864 |
|
Total
liabilities and shareholders' equity |
$ |
2,200,683 |
|
|
$ |
2,290,586 |
|
|
Investors & Media:
Julie D. TracySr. Vice President, Chief Communications
OfficerWright Medical Group N.V.(901)
290-5817julie.tracy@wright.com
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