SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 28, 2003
WRIGHT MEDICAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-32883 13-4088127
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
5677 Airline Road, Arlington, Tennessee 38002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 867-9971
--------------------------------------------------------------------------------
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following exhibit is included as part of this report:
Exhibit
Number Description
----------------- --------------------------------------------------------
99 Press release issued by Wright Medical Group, Inc. on
April 28, 2003.
Item 9. Regulation FD Disclosure
On April 28, 2003, Wright Medical Group, Inc. (the "Company") issued a press
release announcing its consolidated financial results for the quarter ended
March 31, 2003. A copy of the press release is furnished as Exhibit 99 to this
report. The information contained in this report, including the press release,
is furnished pursuant to Item 12 under Item 9 of Form 8-K in accordance with the
interim guidance provided by the Securities and Exchange Commission in Release
No. 34-47583.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 28, 2003
WRIGHT MEDICAL GROUP, INC.
By:/s/ F. Barry Bays
-------------------------------------
F. Barry Bays
President and Chief Executive Officer
2
EXHIBIT INDEX
Exhibit Number
Description
----------------- --------------------------------------------------------
99 Press release issued by Wright Medical Group, Inc. on
April 28, 2003.
Exhibit 99
FOR RELEASE 3:00 P.M. CENTRAL
MONDAY, APRIL 28, 2003
Contact: John K. Bakewell
(901) 867-4527
Wright Medical Group, Inc. Reports Results for
First Quarter Ended March 31, 2003
Quarter's Net Sales and Operating Income, Excluding Acquisition-related Charge,
are Highest in Company's History
ARLINGTON, TN - April 28, 2003 - Wright Medical Group, Inc. (NASDAQ: WMGI), a
global orthopaedic medical device company specializing in the design,
manufacture and marketing of reconstructive joint devices and bio-orthopaedic
materials, today reported record results for its first quarter ended March 31,
2003.
Net sales for the first quarter of 2003 totaled $58.6 million, representing a
13% increase over net sales of $51.7 million during the first quarter of 2002.
First quarter net sales achieved a record level for any quarter in the Company's
history. First quarter net sales benefited from a favorable foreign currency
impact totaling approximately $3.2 million. First quarter 2003 Generally
Accepted Accounting Principles ("GAAP") net income, totaled $2.0 million, or
$.06 per diluted share, including the after-tax effect of a $4.6 million
in-process research and development ("IPRD") charge which, as anticipated,
resulted from the Company's first quarter acquisition of certain ADCON(R) Gel
technology assets. Without this charge, net income for the first quarter of 2003
would have been $4.8 million, or $.14 per diluted share. First quarter 2002 GAAP
net income totaled $6.9 million or $.21 per diluted share, including the
favorable after-tax effect of a $4.2 million award from a commercial arbitration
proceeding with a former business services provider. Excluding the arbitration
settlement award, the Company's net income totaled $4.3 million, or $.13 per
diluted share for the prior-year first quarter.
First quarter GAAP income from operations, inclusive of the aforementioned 2003
IPRD charge and 2002 arbitration settlement award totaled $3.5 million and $10.3
million in 2003 and 2002, respectively. First quarter income from operations,
exclusive of these items, increased by 31% year-over-year, to an all-time
quarterly record of $8.0 million, or 14% of sales, during the first quarter of
2003, from $6.1 million, or 12% of sales, during the first quarter of 2002. A
reconciliation of GAAP to "as adjusted" results is included in the attached
financial tables.
F. Barry Bays, President and Chief Executive Officer commented, "We are very
pleased with our operating performance for the first quarter, which exceeded the
upper end of our outlook ranges for both net sales and income from operations,
excluding the impact of our IPRD charge related to the ADCON(R) Gel technology
acquisition. Domestic first quarter net sales results reflect the continued
exceptional performance of our growth-driving bio-orthopaedics and extremities
product lines. Additionally, within our domestic reconstructive joint business,
our knee results have shown improvement during the first quarter that is
consistent with our internal goals, while our hip product line posted an
exceptional 23% growth rate for the quarter, reflecting early success from the
recent launch of our LINEAGE(R) ceramic-on-ceramic hip system."
Mr. Bays continued, "Our solid revenue performance during the quarter, combined
with continued operating leverage, has again produced operating income results,
excluding our IPRD charge, that surpassed our expectations. Notably, in every
quarter reported since becoming a public company, we have met or exceeded our
performance expectations. The first quarter of 2003 now marks eight consecutive
quarters for such achievement. Our outlook for the remainder of 2003 is quite
encouraging as well, due, in part, to the continued expansion of our
bio-orthopaedics franchise to include additional technology platforms, the
initial success of our LINEAGE(R) ceramic-on-ceramic hip system, and what is
likely to be a favorable international currency environment."
(Page 2 of 6)
Sales Review
------------
The Company experienced global growth across all its major product lines during
the first quarter, with the Company's bio-orthopaedic and hip product lines
posting exceptional growth rates. Specifically, global net sales of the
Company's bio-orthopaedic, hip, extremity, and knee product lines increased by
25%, 24%, 11% and 2%, respectively, during the first quarter of 2003 when
compared to the first quarter of 2002.
Domestic sales totaled $35.1 million during the first quarter of 2003,
representing an increase of 13.5% compared to the respective year-ago period.
Domestically, net sales of the Company's bio-orthopaedic, hip, and extremities
product lines reflected growth of 29%, 23% and 19%, respectively, while knee
sales decreased by 2% as compared to the respective year-ago period.
International sales totaled $23.5 million during the first quarter of 2003,
representing an increase of 13% compared to the first quarter of 2002.
Outlook
-------
The Company has upwardly revised its previously communicated sales and operating
income targets for 2003 to reflect over-achievement experienced during the first
quarter of 2003 and an improved outlook for the remainder of the year. The
Company's anticipated net sales targets for the full year 2003 are now in the
range of $229 million to $234 million, representing annualized growth of
approximately 14% to 16.5%, with operating income targets now totaling $28 to
$30 million, exclusive of the Company's $4.6 million first quarter of 2003 IPRD
charge. The Company's anticipated targets for the second quarter of 2003 for net
sales are in the range of $57 million to $59 million, with operating income
results ranging from $7.2 to $7.9 million. These targets for both the upcoming
second quarter of 2003 and the full year of 2003 exclude the effect of possible
future acquisitions or other material future business developments.
The Company's anticipated targets for net sales and income from operations 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. 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 today and continuing
until 10:59 p.m. (Central Time) on May 5, 2003. To hear this replay, dial
1-800-428-6051 and enter the registration number 289932. 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" 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.
(Page 3 of 6)
Non-GAAP Financial Measures
---------------------------
The Company uses non-GAAP financial measures, such as net income, as adjusted,
income from operations, as adjusted, cash earnings, 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 and the financial impact
of significant litigation, 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 may contain "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, 2002),
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 bio-orthopaedic materials. The Company has been in business for more
than fifty years and markets its products in over 40 countries worldwide. For
more information about Wright Medical, visit our website at www.wmt.com.
--Tables Follow--
(Page 4 of 6)
Wright Medical Group, Inc.
Consolidated Condensed Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
---------------------------
March 31, March 31,
2003 2002
------------ ----------
Net sales $ 58,622 $ 51,706
Cost of sales 15,540 14,758
------------ ----------
Gross profit 43,082 36,948
Operating Expenses:
Selling, general and administrative 30,305 26,955
Research and development 3,535 2,561
Amortization of intangible assets 804 853
Stock-based expense 409 440
Arbitration settlement award - (4,200)
Acquired in-process research and
development costs 4,558 -
------------ ----------
Total operating expenses 39,611 26,609
------------ ----------
Income from operations 3,471 10,339
Interest expense, net 266 434
Other (income) expense, net (30) 16
------------ ----------
Income before income taxes 3,235 9,889
Provision for income taxes 1,234 2,970
------------ ----------
Net income $ 2,001 $ 6,919
============ ==========
Net income per common share--basic $ .06 $ .23
============ ==========
Net income per common share--diluted $ .06 $ .21
============ ==========
Weighted-average number of common shares
outstanding-basic 32,715 29,833
============ ==========
Weighted-average number of common shares
outstanding-diluted
34,059 32,229
============ ==========
Wright Medical Group, Inc.
Consolidated Condensed Sales Analysis
(dollars in thousands - unaudited)
Three Months Ended
----------------------------------
March 31, March 31, %
2003 2002 change
---------- ----------- ----------
Geographic
--------------------------
Domestic $35,080 $30,914 13.5%
International 23,542 20,792 13.2%
---------- ----------- ----------
Total net sales $58,622 $51,706 13.4%
========== =========== ==========
Product Line
--------------------------
Knee products $19,664 $19,303 1.9%
Hip products 17,690 14,240 24.2%
Extremity products 7,430 6,695 11.0%
Bio-orthopaedic materials 11,409 9,162 24.5%
Other 2,429 2,306 5.3%
---------- ----------- ----------
Total net sales $58,622 $51,706 13.4%
========== =========== ==========
(Page 5 of 6)
Wright Medical Group, Inc.
Reconciliation of Income from Operations to Income from Operations,
As Adjusted (dollars in thousands - unaudited)
Three Months Ended
----------------------------
March 31, March 31,
2003 2002
------------ -------------
Income from Operations, as reported $ 3,471 $ 10,339
Add: Acquired in-process research and
development costs 4,558 -
Less: Arbitration settlement award - (4,200)
------------ -------------
Income from Operations, as adjusted $ 8,029 $ 6,139
============ =============
Wright Medical Group, Inc.
Reconciliation of Net Income to Net Income, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended
--------------------------
March 31, March 31,
2003 2002
------------ -----------
Net income, as reported: $2,001 $ 6,919
Add: Acquired in-process research and
development costs, net of tax 2,819 -
Less: Arbitration settlement award, net of tax - (2,604)
------------ -----------
Net income, as adjusted: $ 4,820 $ 4,315
Net income, as adjusted, per common share--basic $ .15 $ .14
============ ===========
Net income, as adjusted, per common
share--diluted $ .14 $ .13
============ ===========
Weighted-average number of common shares
outstanding-basic 32,715 29,833
============ ===========
Weighted-average number of common shares
outstanding-diluted 34,059 32,229
============ ===========
Wright Medical Group, Inc.
Reconciliation of Net Income to Cash Earnings and Cash Earnings, As Adjusted
(dollars in thousands - unaudited)
Three Months Ended
------------------------------
March 31, March 31,
2003 2002
------------ ------------
Net income, as reported $2,001 $ 6,919
Add: Stock-based expense 409 440
Add: Amortization of intangible assets 804 853
------------ ------------
Cash earnings 3,214 8,212
Add: Acquired in-process research and
development costs, net of tax 2,819 -
Less: Arbitration settlement award, net of tax - (2,604)
------------ ------------
Cash earnings, as adjusted $ 6,033 $ 5,608
============ ============
(Page 6 of 6)
Wright Medical Group, Inc.
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
March 31, December 31,
2003 2002
------------ ------------
Assets:
Current Assets:
Cash and cash equivalents $ 52,841 $ 51,373
Accounts receivable, net 44,747 39,571
Inventories 58,418 55,628
Prepaid expenses and other current assets 22,676 25,042
------------ ----------
Total current assets 178,682 171,614
------------ ----------
Property, plant and equipment, net 59,198 59,215
Intangible assets, net 29,288 26,908
Other assets 15,943 16,446
------------ ----------
$283,111 $274,183
============ ==========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 10,149 $ 9,878
Accrued expenses and other current liabilities 34,820 29,878
Current portion of long-term obligations 5,778 5,676
------------ ----------
Total current liabilities 50,747 45,432
------------ ----------
Long-term obligations 16,321 16,586
Other liabilities 6,679 7,166
------------ ----------
Total liabilities 73,747 69,184
------------ ----------
Stockholders' equity (deficit) 209,364 204,999
------------ ----------
$ 283,111 $ 274,183
============ ==========