Wright Medical Group, Inc. Reports 2014 Fourth Quarter And Full-Year Financial Results And Provides 2015 Guidance

Fourth Quarter Global Foot and Ankle Net Sales Increase 33% As Reported and 34% Constant Currency

Fourth Quarter Sales Increase 23% As Reported and 25% Constant Currency

MEMPHIS, Tenn., Feb. 25, 2015 (GLOBE NEWSWIRE) -- Wright Medical Group, Inc. (Nasdaq:WMGI) today reported financial results for its fourth quarter and full-year ended December 31, 2014 and provided 2015 guidance. As a result of the completed sale of the hip and knee business to MicroPort Medical B.V., a subsidiary of MicroPort Scientific Corporation (MicroPort), this business is reported as discontinued operations.

Net sales totaled $83.3 million during the fourth quarter ended December 31, 2014, representing a 23% increase as reported and 25% increase on a constant currency basis compared to the fourth quarter of 2013.

Robert Palmisano, president and chief executive officer, commented, "Our fourth quarter revenue was in-line with the preliminary results we released in January and represents a significant acceleration in our U.S. foot and ankle business, driven by improved execution and strong contribution from acquired products and new product launches. Gross margins of 77.1% were also strong as we are beginning to see the benefits of our Vital Few initiative. Our U.S. foot and ankle business grew 39%, up significantly from 28% in the third quarter of this year. Notably, we saw global total ankle growth of 38% for the quarter, which was driven primarily by the ongoing launch of our INFINITY total ankle replacement system. We also saw continued gains in U.S. foot and ankle sales force productivity and achieved our goal of exiting 2014 at over $1 million per sales rep. Given our sustained focus and attention in this area, I also believe that we can reach a meaningfully higher level than that goal in the future."

Palmisano continued, "Our 2015 standalone guidance assumes continued strong growth in our U.S. Foot and Ankle and International businesses. Both our Upper Extremity and Biologics businesses are expected to remain soft, but we believe both of these areas will be addressed by the pending merger with Tornier and anticipated final FDA approval of AUGMENT Bone Graft. We will continue to focus on improving our execution to realize our full potential and believe that the positive progress we saw exiting the fourth quarter is setting us up well for accelerating growth and margin expansion in the coming quarters."

Net loss from continuing operations for the fourth quarter of 2014 totaled $107.0 million or ($2.11) per diluted share, compared to net loss of $135.2 million or ($2.88) per diluted share in the fourth quarter of 2013.

Net loss from continuing operations for the fourth quarter of 2014 included the after-tax effects of a $73.7 million unrealized loss related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, $11.9 million of Tornier merger costs, $2.4 million of non-cash interest expense related to the 2017 Convertible Notes, $2.5 million of transaction and transition costs associated with recent acquisitions, $1.4 million of transition costs associated with the sale of the OrthoRecon business, $0.4 million of charges associated with distributor conversions and non-competes, $0.1 million of contingent consideration fair value adjustments and a $2.5 million U.S. tax provision within continuing operations to offset the tax benefit recorded within discontinued operations. Net loss from continuing operations for the fourth quarter of 2013 included a $119.6 million charge associated with valuation allowances on deferred tax assets, $7.7 million of transition costs associated with the sale of the OrthoRecon business, $2.3 million of transaction and transition costs associated with the acquisition of BioMimetic and Biotech International, $2.2 million of non-cash interest expense related to the 2017 Convertible Notes, an unrealized gain of $2.0 million related to mark-to-market adjustments on derivatives, and $0.8 million of charges associated with distributor conversions and non-competes.

The Company's fourth quarter 2014 net loss from continuing operations, as adjusted for the above items, was $12.9 million, a decline from a net loss of $7.9 million in 2013, while diluted loss per share, as adjusted, decreased to ($0.25) in the fourth quarter of 2014 from ($0.17) in the fourth quarter of 2013. The attached financial tables include a reconciliation of U.S. GAAP to "as adjusted" results.

The Company's fourth quarter 2014 adjusted EBITDA from continuing operations, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was negative $0.8 million, compared to negative $3.2 million in the same quarter of the prior year. The attached financial tables include a reconciliation of U.S. GAAP to "as adjusted" results.

Cash and cash equivalents and marketable securities totaled $229.9 million as of the end of the fourth quarter of 2014, an increase of $46.8 million compared to the end of 2013, which was driven by the closing of the MicroPort, Solana Surgical and OrthoPro transactions.

Palmisano concluded, "We are focused on our 2015 commitments, including receiving final FDA approval of, and successfully launching AUGMENT Bone Graft, and executing our Vital Few initiatives, which will further strengthen and expand our market-leading competitive position. In addition, we believe our pending merger with Tornier will enhance shareholder value through the creation of the premier high-growth Extremities-Biologics company that is uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopaedics."

Outlook

On a standalone basis and assuming final approval of Augment^® Bone Graft by the middle of the second quarter of 2015, the Company anticipates net sales for 2015 of approximately $325 million to $335 million, representing constant currency growth of 13% to 16% from 2014. This range assumes U.S. Augment revenue of $10 million to $12 million and a negative impact from currency of approximately $12 million, or 4%, reflecting the recent strengthening of the U.S. dollar as compared to 2014, and excludes any potential dis-synergies from the pending merger with Tornier.

The Company anticipates 2015 adjusted EBITDA from continuing operations, as described in the GAAP to non-GAAP reconciliation provided later in this release, of negative $(22.0) million to negative $(27.0) million.

The Company anticipates adjusted earnings per share from continuing operations, including stock-based compensation, for full-year 2015 of $(1.67) to $(1.77) per diluted share, based on approximately 51.1 million shares outstanding. While the amount of the non-cash stock-based compensation charges will vary depending upon a number of factors, the Company currently estimates that the after-tax impact of those expenses will be approximately $0.24 per diluted share for the full-year 2015.

The Company plans to provide updated guidance when the pending merger with Tornier closes. From a timing standpoint, the Company continues to believe a second quarter 2015 closing is still possible, but is a best-case scenario.

The Company's earnings target and adjusted EBITDA from continuing operations targets exclude 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; impairment charges, mark-to-market adjustments to the CVRs and non-cash mark-to-market derivative adjustments; and charges associated with the February 2015 refinancing of our convertible debt. Further, this earnings target and adjusted EBITDA target excludes any expenses, earnings or losses related to the OrthoRecon business.

The Company's anticipated ranges for net sales, earnings and adjusted EBITDA 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 "Safe-Harbor Statement" section of this press release.