Form 8-K WRIGHT MEDICAL GROUP For: Feb 25

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February 25, 2015 4:04 PM EST


 


 

UNITED STATES
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): February 25, 2015



WRIGHT MEDICAL GROUP, INC.
(Exact name of registrant as specified in charter)



Delaware
001-35823
13-4088127
(State or Other Jurisdiction
(Commission
(IRS Employer
of Incorporation)
File Number)
Identification No.)



1023 Cherry Road, Memphis, Tennessee
38117
(Address of principal executive offices)
(Zip Code)



Registrant's telephone number, including area code: (901) 867-9971


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)    
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)    
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))    
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





TABLE OF CONTENTS






Item 2.02. Results of Operations and Financial Condition.

On February 25, 2015, Wright Medical Group, Inc. issued a press release announcing its consolidated financial results for the year ended December 31, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Current Report and is not considered "filed" under the Exchange Act, and shall not be incorporated into any previous or future filings by Wright under the Securities Act or the Exchange Act.

The attached press release includes the following non-GAAP measures: net sales, excluding the impact of foreign currency; operating income, as adjusted; net income from continuing operations, as adjusted; net income, as adjusted; net income, as adjusted, per diluted share; net income from continuing operations, as adjusted, per diluted share; effective tax rate, as adjusted; EBITDA from continuing operations, as adjusted; and free cash flow.

These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

For our internal budgeting and resource allocation process, our management uses financial information that does not include:
1.
non-cash inventory step-up amortization,
2.
costs associated with distributor conversions and amortization of non-competes,
3.
non-cash interest expense related to the Convertible Notes due 2017 (2017 Convertible Notes),
4.
mark-to-market adjustments of derivative assets and liabilities,
5.
transition costs related to our OrthoRecon divestiture,
6.
due diligence, transition and transaction costs associated with acquisitions,
7.
patent dispute settlement costs,
8.
costs associated with management changes,
9.
BioMimetic impairment and other charges and CVR mark-to-market adjustments,
10.
contingent consideration fair value adjustment,
11.
Tornier merger costs,
12.
gain on previously held investment in BioMimetic,
13.
the income tax effects of the foregoing,
14.
the U.S. tax provision/benefit recognized in continuing operations resulting from the U.S. tax provision/benefit recognized in discontinued operations, and
15.
valuation allowance recorded against U.S. deferred tax assets.

Additionally, for our internal budgeting process and evaluation of net sales performance, our management uses net sales in constant currency. To measure our sales performance on a constant currency basis, it is necessary to remove the impact of changes in foreign exchange rates, which affects the comparability and trend of sales. Net sales, excluding the impact of foreign currency, is calculated by translating current year results at prior year average foreign currency exchange rates. For our internal budgeting and resource allocation process, management uses EBITDA, EBITDA as adjusted, and free cash flow. EBITDA is calculated by adding back to net income charges for interest, income taxes and depreciation and amortization expenses. EBITDA, as adjusted, is calculated by excluding non-cash stock based compensation expense and non-operating income and expense, as well as the applicable adjustments listed above from EBITDA. Free cash flow is calculated by subtracting capital expenditures from cash provided by operating activities.

We use these non-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding our core operational performance and give us a better understanding of how we should invest in research and development activities and how we should allocate resources to both ongoing and prospective business initiatives.  We use these measures to help make budgeting and spending decisions, for example, between product development expenses and research and development, sales and marketing and general and administrative expenses. Additionally, management is evaluated on the basis of these non-GAAP financial measures when determining achievement of their incentive performance compensation targets. Further, these non-GAAP financial measures facilitate management's internal comparisons to both our historical operating results and to our competitors' operating results.

As described above, we exclude the following items from one or more of our non-GAAP measures:

Foreign currency impact on net sales. We excluded the foreign currency impact on net sales compared to prior year from our non-GAAP measure, primarily because it is not reflective of our ongoing operating results, and it is not used by management for




our internal budgeting process and evaluation of net sales performance. We further believe that excluding this item from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.

Non-cash inventory step-up amortization. We excluded inventory step-up amortization associated with our acquisitions from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. Additionally, because these are non-cash expenses, they do not impact our operational performance, liquidity, or our ability to invest in research and development and fund acquisitions and capital expenditures. We further believe that excluding this item from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.

Distributor conversion costs and amortization of distributor non-competes. In connection with our initiative to convert a portion of our independent foot and ankle distributor territories to direct employee sales representation, we entered into conversion agreements with certain independent distributors, which included non-competition clauses. We excluded the distributor conversion costs and amortization of distributor non-competes from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Non-cash interest expense related to the 2017 Convertible Notes. We excluded the non-cash interest expense associated with the amortization of the debt discount related to our 2017 Convertible Notes from our non-GAAP measures, primarily because it is a non-cash expense. We believe that it is useful to investors to understand our operational performance, liquidity, and our ability to invest in research and development and fund acquisitions and capital expenditures. While interest expense associated with the amortization of the debt discount constitutes an ongoing and recurring expense, such expense is excluded from our non-GAAP results because it is not an expense that requires cash settlement and is not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.

Mark-to-market adjustment of the derivatives. We excluded the adjustment of the mark-to-market adjustments on the derivatives from our non-GAAP measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Transition costs associated with OrthoRecon divestiture. We excluded the transition costs associated with our OrthoRecon divestiture from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Due diligence, transaction and transition costs. We excluded the due diligence, transaction and transition costs associated with acquisitions from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Patent dispute settlement costs. We excluded the costs associated with the settlement of a patent dispute from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Cost associated with management changes. We excluded the costs associated with changes in management from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

BioMimetic impairment and other charges and CVR mark-to-market adjustments. We excluded the adjustment of the mark-to-market adjustments on the contingent value rights and the impairment and other charges associated with acquired assets and liabilities from our BioMimetic acquisition from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.






Contingent consideration fair value adjustment. We excluded the fair value adjustment of our contingent consideration from our non-GAAP measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Tornier merger costs. We excluded the costs associated with the Tornier merger from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Gain on previously held investment in BioMimetic. We excluded the gain recognized on the previously held investment in BioMimetic from our non-GAAP measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Income tax effects of the foregoing. This amount is used to present each of the amounts described above, except for foreign currency impact on net sales, on an after-tax basis consistent with the presentation of net income, as adjusted.

U.S. tax provision/benefit within continuing operations. We excluded the U.S. tax provision/benefit recorded within continuing operations recorded as a result of the first quarter 2014 and year-to-date U.S. pre-tax gain recognized within discontinued operations due to the sale of the OrthoRecon business from our non-GAAP measures, primarily because it is not reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

Valuation allowance on U.S. deferred tax assets. We excluded the valuation allowance recorded within our provision for income taxes from our non-GAAP measures, primarily because they are not reflective of our ongoing operating results, and they are not used by management to assess the core profitability of our business operations. We further believe that excluding this item from our non-GAAP results is useful to investors in that they allow for period-over-period comparability.

We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP and that these measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures, and that is why we qualify the use of non-GAAP financial information in a statement when non-GAAP information is presented.

We further believe that where the adjustments used in calculating net income from continuing operations, as adjusted; net income, as adjusted; net income from continuing operations, as adjusted, per diluted share; and net income, as adjusted, per diluted share are based on specific, identified amounts that impact different line items in our Condensed Consolidated Statements of Operations (including operating income and net income), that it is useful to investors to understand how these specific line items in our Condensed Consolidated Statements of Operations are affected by these adjustments for the following reasons:

Operating income. Excluding non-cash inventory step-up amortization from the calculation of operating income assists investors in evaluating period-over-period changes without giving effect to these charges which are non-cash in nature, in order to evaluate the results of the underlying operating activities for the periods presented. Excluding distributor conversion costs and amortization of distributor non-competes; due diligence, transaction, and transition costs associated with acquisitions; and transition costs related to our OrthoRecon divestiture from the calculation of operating income assists investors in evaluating period-over-period changes in this measure without giving effect to transactions that do not relate to the performance of our ongoing operations.

Net Income from Continuing Operations. Excluding the after tax impact of non-cash inventory step-up amortization, non-cash interest expense related to the 2017 Convertible Notes, and mark-to-market adjustments on the derivatives from the calculation of net income from continuing operations assists investors in evaluating period-over-period changes without giving effect to these charges which are non-cash in nature, in order to evaluate the results of the underlying operating activities for the periods presented. Excluding distributor conversion costs and amortization of distributor non-competes; due diligence, transaction and transition costs associated with acquisitions; transition costs related to our OrthoRecon divestiture, CVR mark-to-market adjustments, and the gain on previously held investment in BioMimetic from the calculation of net income from continuing operations and net income assists investors in evaluating period-over-period changes in these measures without giving effect to transactions that do not relate to the performance of our ongoing operations.





Effective Tax Rate. Excluding the income tax effect of the non-GAAP, pre-tax adjustments and the tax benefit on the sale of discontinued operations from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and our effective tax rate related to our ongoing operations.





Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
Number
 
Description
99.1
 
Press release issued by Wright Medical Group, Inc. on February 25, 2015.





Cautionary Note Regarding Forward-Looking Statements

This Current Report on Form 8-K includes forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. Forward-looking statements in this press release include, but are not limited to, statements about our outlook for our expected financial results for 2015; statements about the approvable status and anticipated final PMA approval of Augment® Bone Graft and the anticipated positive effects of such; and statements about the timing and anticipated benefits of the previously announced merger with Tornier. 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, uncertainties as to the timing of the Tornier transaction; uncertainties as to whether Tornier shareholders and Wright shareholders will approve the transaction; the risk that competing offers will be made; the possibility that various closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction, or the terms of such approval; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, customers, vendors and other business partners; the risk that shareholder litigation in connection with the transaction may result in significant costs of defense, indemnification and liability; other business effects, including the effects of industry, economic or political conditions outside of Wright’s or Tornier’s control; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of Wright and Tornier may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; operating costs and business disruption following completion of the transaction, including adverse effects on employee retention and on Wright’s and Tornier’s respective business relationships with third parties; transaction costs; actual or contingent liabilities; the adequacy of the combined company’s capital resources; failure or delay in ultimately obtaining FDA approval of Wright’s Augment® Bone Graft for commercial sale in the United States, failure to achieve the anticipated benefits from approval of Augment® Bone Graft, and the risks identified under the heading “Risk Factors” in Wright’s Annual Report on Form 10-K, anticipated to be filed with the SEC on February 25, 2015, and Tornier’s Annual Report on Form 10-K, filed with the SEC on February 24, 2015, as well as both companies’ subsequent Quarterly Reports on Form 10-Q and other information filed by each company 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 and Tornier’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.

IMPORTANT ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER WITH TORNIER AND WHERE TO FIND IT

In connection with the proposed merger, Tornier has filed with the U.S. Securities and Exchange Commission (SEC) a registration statement on Form S-4 that includes a preliminary joint proxy statement of Wright and Tornier that also constitutes a preliminary prospectus of Tornier. The registration statement is not complete and will be further amended. Wright and Tornier will make the final joint proxy statement/prospectus available to their respective shareholders. Investors are urged to read the final joint proxy statement/prospectus when it becomes available, because it will contain important information. The registration statement, definitive joint proxy statement/prospectus and other documents filed by Tornier and Wright with the SEC will be available free of charge at the SEC’s website (www.sec.gov) and from Tornier and Wright. Requests for copies of the joint proxy statement/prospectus and other documents filed by Wright with the SEC may be made by contacting Julie D. Tracy, Senior Vice President and Chief Communications Officer by phone at (901) 290-5817 or by email at [email protected], and request for copies of the joint proxy statement/prospectus and other documents filed by Tornier may be made by contacting Shawn McCormick, Chief Financial Officer by phone at (952) 426-7646 or by email at [email protected].





Wright, Tornier, their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies from Wright’s and Tornier’s respective shareholders in connection with the proposed transaction. Information about the directors and executive officers of Wright and their ownership of Wright stock is set forth in Wright’s annual report on Form 10-K for the fiscal year ended December 31, 2014, which is anticipated to be filed with the SEC on February 25, 2015, and its proxy statement for its 2014 annual meeting of stockholders, which was filed with the SEC on March 31, 2014. Information regarding Tornier’s directors and executive officers is contained in Tornier’s annual report on Form 10-K for the fiscal year ended December 28, 2014, which was filed with the SEC on February 24, 2015, and its proxy statement for its 2014 annual general meeting of shareholders, which was filed with the SEC on May 16, 2014. These documents can be obtained free of charge from the sources indicated above. Certain directors, executive officers and employees of Wright and Tornier may have direct or indirect interest in the transaction due to securities holdings, vesting of equity awards and rights to severance payments. Additional information regarding the participants in the solicitation of Wright and Tornier shareholders will be included in the joint proxy statement/prospectus.




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: February 25, 2015

 
WRIGHT MEDICAL GROUP, INC.
 
 
By: /s/ Robert J. Palmisano
 
 
Robert J. Palmisano
 
 
President and Chief Executive Officer
 





EXHIBIT INDEX
Exhibit
Number
 
Description
99.1

 
Press release issued by Wright Medical Group, Inc. on February 25, 2015.










FOR IMMEDIATE RELEASE
Investors and Media:
Julie D. Tracy
Sr. Vice President, Chief Communications Officer
Wright Medical Group, Inc.
(901) 290-5817


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. - February 25, 2015 - 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

1


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

2


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.

Internet Posting of Information

Wright routinely posts information that may be important to investors in the “Investor Relations” section of its website at www.wmt.com. Wright encourages investors and potential investors to consult its website regularly for important information about the company.

Conference Call and Webcast
 
As previously announced, the Company will host a conference call starting at 3:30 p.m. Central Time today. The live dial-in number for the call is 877-280-4959 (U.S.) / 857-244-7316 (International). The participant passcode for the call is “Wright.” 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 at 5:30 p.m. Central Time today and continuing through March 4, 2015. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 51724673. 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, the Form 8-K filed with the SEC today, or otherwise available in the “Corporate - Investor Information - Supplemental Financial Information” section of the Company's website located at www.wmt.com.
 

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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.
 
About Wright Medical

Wright Medical Group, Inc. is a specialty orthopaedic company that provides extremity and biologic solutions that enable clinicians to alleviate pain and restore their patients’ lifestyles. The company is the recognized leader of surgical solutions for the foot and ankle market, one of the fastest growing segments in medical technology, and markets its products in over 60 countries worldwide. For more information about Wright Medical, visit www.wmt.com.

Non-GAAP Financial Measures
 
The Company uses non-GAAP financial measures, such as net sales, excluding the impact of foreign currency; operating income, as adjusted; net income, as adjusted; EBITDA, as adjusted; net income, as adjusted, per diluted share; effective tax rate, as adjusted; and free cash flow. 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 costs associated with distributor conversions and non-competes, non-cash interest expense related to the Company's 2017 Convertible Notes, mark-to-market adjustments on derivative assets and liabilities, mark-to-market adjustments on CVRs and impairment and other charges to write down to fair value assets and liabilities acquired in the BioMimetic acquisition, transaction and transition costs, costs associated with management changes, fair value adjustments of contingent consideration, patent dispute settlement costs, and impacts from the sale of the OrthoRecon business, 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 measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP.

4


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS          

This press release includes forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. Forward-looking statements in this press release include, but are not limited to, statements about our outlook for our expected financial results for 2015; statements about the approvable status and anticipated final PMA approval of Augment® Bone Graft and the anticipated positive effects of such; and statements about the timing and anticipated benefits of the previously announced merger with Tornier. 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, uncertainties as to the timing of the Tornier transaction; uncertainties as to whether Tornier shareholders and Wright shareholders will approve the transaction; the risk that competing offers will be made; the possibility that various closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction, or the terms of such approval; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, customers, vendors and other business partners; the risk that shareholder litigation in connection with the transaction may result in significant costs of defense, indemnification and liability; other business effects, including the effects of industry, economic or political conditions outside of Wright’s or Tornier’s control; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of Wright and Tornier may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; operating costs and business disruption following completion of the transaction, including adverse effects on employee retention and on Wright’s and Tornier’s respective business relationships with third parties; transaction costs; actual or contingent liabilities; the adequacy of the combined company’s capital resources; failure or delay in ultimately obtaining FDA approval of Wright’s Augment® Bone Graft for commercial sale in the United States, failure to achieve the anticipated benefits from approval of Augment® Bone Graft, and the risks identified under the heading “Risk Factors” in Wright’s Annual Report on Form 10-K, anticipated to be filed with the SEC on February 25, 2015, and Tornier’s Annual Report on Form 10-K, filed with the SEC on February 24, 2015, as well as both companies’ subsequent Quarterly Reports on Form 10-Q and other information filed by each company 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 and Tornier’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.

IMPORTANT ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER WITH TORNIER AND WHERE TO FIND IT

In connection with the proposed merger, Tornier has filed with the U.S. Securities and Exchange Commission (SEC) a registration statement on Form S-4 that includes a preliminary joint proxy statement of Wright and Tornier that also constitutes a preliminary prospectus of Tornier. The registration statement is not complete and will be further amended. Wright and Tornier will make the final joint proxy statement/prospectus available to their respective shareholders. Investors are urged to read the final joint proxy statement/prospectus when it becomes available, because it will contain important information. The

5


registration statement, definitive joint proxy statement/prospectus and other documents filed by Tornier and Wright with the SEC will be available free of charge at the SEC’s website (www.sec.gov) and from Tornier and Wright. Requests for copies of the joint proxy statement/prospectus and other documents filed by Wright with the SEC may be made by contacting Julie D. Tracy, Senior Vice President and Chief Communications Officer by phone at (901) 290-5817 or by email at [email protected], and request for copies of the joint proxy statement/prospectus and other documents filed by Tornier may be made by contacting Shawn McCormick, Chief Financial Officer by phone at (952) 426-7646 or by email at [email protected].

Wright, Tornier, their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies from Wright’s and Tornier’s respective shareholders in connection with the proposed transaction. Information about the directors and executive officers of Wright and their ownership of Wright stock is set forth in Wright’s annual report on Form 10-K for the fiscal year ended December 31, 2014, which is anticipated to be filed with the SEC on February 25, 2015, and its proxy statement for its 2014 annual meeting of stockholders, which was filed with the SEC on March 31, 2014. Information regarding Tornier’s directors and executive officers is contained in Tornier’s annual report on Form 10-K for the fiscal year ended December 28, 2014, which was filed with the SEC on February 24, 2015, and its proxy statement for its 2014 annual general meeting of shareholders, which was filed with the SEC on May 16, 2014. These documents can be obtained free of charge from the sources indicated above. Certain directors, executive officers and employees of Wright and Tornier may have direct or indirect interest in the transaction due to securities holdings, vesting of equity awards and rights to severance payments. Additional information regarding the participants in the solicitation of Wright and Tornier shareholders will be included in the joint proxy statement/prospectus.




--Tables Follow--

6


Wright Medical Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data--unaudited)

 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
Net sales
$
83,294

 
$
67,824

 
$
298,027

 
$
242,330

Cost of sales
19,097

 
17,423

 
73,223

 
59,721

Gross profit
64,197

 
50,401

 
224,804

 
182,609

Operating expenses:

 

 

 

Selling, general and administrative
81,991

 
66,479

 
289,620

 
230,785

Research and development
6,360

 
5,412

 
24,963

 
20,305

Amortization of intangible assets
2,786

 
1,750

 
10,027

 
7,476

BioMimetic impairment charges
—

 
—

 
—

 
206,249

Total operating expenses
91,137

 
73,641

 
324,610

 
464,815

Operating loss
(26,940
)
 
(23,240
)
 
(99,806
)
 
(282,206
)
Interest expense, net
4,525

 
4,061

 
17,398

 
16,040

Other expense (income), net
74,640

 
(2,552
)
 
129,626

 
(67,843
)
Loss from continuing operations before income taxes
(106,105
)
 
(24,749
)
 
(246,830
)
 
(230,403
)
Provision (benefit) for income taxes
863

 
110,462

 
(6,334
)
 
49,765

Net loss from continuing operations
$
(106,968
)
 
$
(135,211
)
 
$
(240,496
)
 
$
(280,168
)
(Loss) income from discontinued operations, net of tax
(4,262
)
 
$
182

 
$
(19,187
)
 
$
6,223

Net loss
$
(111,230
)
 
$
(135,029
)
 
$
(259,683
)
 
$
(273,945
)
 
 
 
 
 
 
 
 
Net loss from continuing operations per share, basic
$
(2.11
)
 
$
(2.88
)
 
$
(4.83
)
 
$
(6.19
)
Net loss from continuing operations per share, diluted
$
(2.11
)
 
$
(2.88
)
 
$
(4.83
)
 
$
(6.19
)
 
 
 
 
 
 
 
 
Net loss per share, basic
$
(2.19
)
 
$
(2.88
)
 
$
(5.22
)
 
$
(6.05
)
Net loss per share, diluted
$
(2.19
)
 
$
(2.88
)
 
$
(5.22
)
 
$
(6.05
)
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding-basic
50,698

 
46,897

 
49,758

 
45,265

Weighted-average number of shares outstanding-diluted
50,698

 
46,897

 
49,758

 
45,265



























7


Wright Medical Group, Inc.
Consolidated Sales Analysis
(dollars in thousands--unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2014
 
December 31, 2013
 
%
change
 
December 31, 2014
 
December 31, 2013
 
%
change
U.S.
 
 
 
 
 
 
 
 
 
 
 
Foot and Ankle
46,032

 
33,196

 
38.7
%
 
148,631

 
115,642

 
28.5
%
Upper Extremity
3,891

 
4,519

 
(13.9
%)
 
15,311

 
17,423

 
(12.1
%)
Biologics
12,118

 
11,042

 
9.7
%
 
45,494

 
42,561

 
6.9
%
Other
445

 
492

 
(9.6
%)
 
2,641

 
2,022

 
30.6
%
Total U.S.
$
62,486

 
$
49,249

 
26.9
%
 
$
212,077

 
$
177,648

 
19.4
%
 
 
 
 
 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
 
 
 
 
Foot and Ankle
11,119

 
9,840

 
13.0
%
 
47,001

 
35,020

 
34.2
%
Upper Extremity
2,437

 
2,062

 
18.2
%
 
11,312

 
7,240

 
56.2
%
Biologics
5,153

 
4,818

 
7.0
%
 
20,590

 
17,231

 
19.5
%
Other
2,099

 
1,855

 
13.2
%
 
7,047

 
5,191

 
35.8
%
Total International
$
20,808

 
$
18,575

 
12.0
%
 
$
85,950

 
$
64,682

 
32.9
%
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
 
 
 
 
 
 
 
 
 
 
Foot and Ankle
57,151

 
43,036

 
32.8
%
 
195,632

 
150,662

 
29.8
%
Upper Extremity
6,328

 
6,581

 
(3.8
%)
 
26,623

 
24,663

 
7.9
%
Biologics
17,271

 
15,860

 
8.9
%
 
66,084

 
59,792

 
10.5
%
Other
2,544

 
2,347

 
8.4
%
 
9,688

 
7,213

 
34.3
%
Total Sales
$
83,294

 
$
67,824

 
22.8
%
 
$
298,027

 
$
242,330

 
23.0
%


Wright Medical Group, Inc.
Supplemental Sales Information
(unaudited)
 
Fourth Quarter 2014 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
39%
20%
13%
34%
33%
Upper Extremity
(14%)
27%
18%
(1%)
(4%)
Biologics
10%
12%
7%
10%
9%
Other
(10%)
21%
13%
14%
8%
Total Sales
27%
19%
12%
25%
23%


Wright Medical Group, Inc.
Supplemental Sales Information
(unaudited)
 
Full Year 2014 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
29%
34%
34%
30%
30%
Upper Extremity
(12%)
58%
56%
8%
8%
Biologics
7%
22%
20%
11%
11%
Other
31%
36%
36%
34%
34%
Total Sales
19%
34%
33%
23%
23%

8


Wright Medical Group, Inc.
Reconciliation of Net Sales to Net Sales Excluding the Impact of Foreign Currency
(dollars in thousands--unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2014
 
December 31, 2014
 
International Net Sales
 
Total
Net Sales
 
International Net Sales
 
Total
Net Sales
Net sales, as reported
$
20,808

 
$
83,294

 
$
85,950

 
$
298,027

Currency impact as compared to prior period
1,220

 
1,220

 
644

 
644

Net sales, excluding the impact
of foreign currency
$
22,028

 
$
84,514

 
$
86,594

 
$
298,671



Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands, except per share data--unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
Operating Income
 
 
 
 
 
 
 
Operating loss, as reported
$
(26,940
)
 
$
(23,240
)
 
$
(99,806
)
 
$
(282,206
)
Reconciling items impacting Gross Profit:
 
 
 
 

 

Inventory step-up amortization
14

 
278

 
1,535

 
777

BioMimetic inventory write-down
—

 
1,301

 
—

 
2,280

Total
14

 
1,579

 
1,535

 
3,057

Reconciling items impacting Selling, General and Administrative expense:
 
 
 
 
 
 
 
Distributor conversions
14

 
129

 
186

 
932

Transition costs - OrthoRecon divestiture
1,425

 
7,745

 
5,849

 
21,612

Due diligence, transaction and transition costs - acquisitions (1)
2,509

 
2,270

 
14,115

 
12,893

Patent dispute settlement
—

 
—

 
900

 
—

Management changes (2)
—

 
—

 
1,203

 
—

Tornier merger costs
11,900

 
—

 
11,900

 
—

Total
15,848

 
10,144

 
34,153

 
35,437

Reconciling items impacting Amortization of Intangible Assets:
 
 
 
 
 
 
 
Amortization of distributor non-competes
359

 
630

 
1,885

 
2,802

Other Reconciling Items:
 
 
 
 
 
 
 
BioMimetic impairment charges
—

 
—

 
—

 
206,249

Operating loss, as adjusted
$
(10,719
)
 
$
(10,887
)
 
$
(62,233
)
 
$
(34,661
)
Operating loss, as adjusted, as a percentage of net sales
(12.9
)%
 
(16.1
)%
 
(20.9
)%
 
(14.3
)%
_______________________________
(1) For the twelve months ended December 31, 2013, amount includes $2.3 million of non-cash stock-based compensation
expense related to the conversion of BioMimetic options to Wright Medical options.
(2) For the twelve months ended December 31, 2014, amount includes $0.3 million of non-cash stock-based compensation expense related to the management changes.



9


Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands, except per share data--unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
EBITDA
 
 
 
 
 
 
 
Net loss, as reported
$
(106,968
)
 
$
(135,211
)
 
$
(240,496
)
 
$
(280,168
)
Interest expense, net
4,525

 
4,061

 
17,398

 
16,040

Provision (benefit) for income taxes
863

 
110,462

 
(6,334
)
 
49,765

Depreciation
4,961

 
4,120

 
18,456

 
14,384

Amortization of intangible assets
2,786

 
1,750

 
10,027

 
7,476

EBITDA
(93,833
)
 
(14,818
)
 
(200,949
)
 
(192,503
)
Reconciling items impacting EBITDA
 
 
 
 
 
 
 
Non-cash stock-based compensation expense (1)(2)
2,519

 
2,481

 
11,204

 
9,658

Other expense (income), net
74,640

 
(2,552
)
 
129,626

 
(67,843
)
Inventory step-up amortization
14

 
278

 
1,535

 
777

Distributor conversions
14

 
129

 
186

 
932

Due diligence, transaction and transition costs
3,934

 
10,015

 
19,964

 
34,505

BioMimetic impairment and other charges
—

 
1,301

 
—

 
208,529

Patent dispute settlement
—

 
—

 
900

 
—

Management changes
—

 
—

 
1,203

 
—

Tornier merger costs
11,900

 
—

 
11,900

 
—

Adjusted EBITDA
$
(812
)
 
$
(3,166
)
 
$
(24,431
)
 
$
(5,945
)
Adjusted EBITDA as a percentage of net sales
(1.0
)%
 
(4.7
)%
 
(8.2
)%
 
(2.5
)%
_______________________________

(1) For the twelve months ended December 31, 2013, amount excludes $2.3 million of non-cash stock-based compensation
expense related to the conversion of BioMimetic options to Wright Medical options, which is included in due diligence, transaction and transition costs.
(2) For the twelve months ended December 31, 2014, amount excludes $0.3 million of non-cash stock-based compensation expense related to the management changes, which is included in management changes.




















10


Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands, except per share data--unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
Net Income
 
 
 
 
 
 
 
Loss before taxes, as reported
$
(106,105
)
 
$
(24,749
)
 
$
(246,830
)
 
$
(230,403
)
Pre-tax impact of reconciling items:
 
 

 

 

Inventory step-up amortization
14

 
278

 
1,535

 
777

Distributor conversion and non-competes
373

 
759

 
2,071

 
3,734

Non-cash interest expense on 2017 Convertible Notes
2,371

 
2,222

 
9,257

 
8,678

Derivatives mark-to-market adjustment
—

 
(2,000
)
 
2,000

 
1,000

Transition costs - OrthoRecon divestiture
1,425

 
7,745

 
5,849

 
21,612

Due diligence, transaction and transition costs (1)
2,509

 
2,270

 
14,115

 
12,893

BioMimetic impairment and other charges and CVR mark-to-market adjustments
73,718

 
460

 
125,011

 
147,381

Patent dispute settlement
—

 
—

 
900

 
—

Management changes (2)
—

 
—

 
1,203

 
—

Contingent consideration fair value adjustment
58

 
—

 
1,808

 
—

Tornier merger costs
11,900

 
—

 
11,900

 
—

Gain on previously held investment in BioMimetic
—

 
—

 
—

 
(7,798
)
Loss before taxes, as adjusted
(13,737
)
 
(13,015
)
 
(71,181
)
 
(42,126
)
 
 
 
 
 
 
 
 
Provision (benefit) for income taxes, as reported
$
863

 
$
110,462

 
$
(6,334
)
 
$
49,765

U.S. tax impact resulting from gain in discontinued operations
(2,487
)
 
—

 
5,453

 
—

Valuation allowance
—

 
(119,623
)
 
—

 
(119,623
)
Tax effect of all other items
755

 
4,025

 
755

 
52,952

Benefit for income taxes, as adjusted
$
(869
)
 
$
(5,136
)
 
$
(126
)
 
$
(16,906
)
Effective tax rate, as adjusted
6.3
%
 
39.5
%
 
0.2
%
 
40.1
%
Net loss, as adjusted
$
(12,868
)
 
$
(7,879
)
 
$
(71,055
)
 
$
(25,220
)
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding-diluted
$
50,698

 
$
46,897

 
$
49,758

 
$
45,265

Net loss from continuing operations, as adjusted, per diluted share
$
(0.25
)
 
$
(0.17
)
 
$
(1.43
)
 
$
(0.56
)
____________________________
(1) For the twelve months ended December 31, 2013, amount includes $2.3 million of non-cash stock-based compensation
expense related to the conversion of BioMimetic options to Wright Medical options.
(2) For the twelve months ended December 31, 2014, amount includes $0.3 million of non-cash stock-based compensation expense related to the management changes.

Wright Medical Group, Inc.
Reconciliation of Free Cash Flow
(dollars in thousands--unaudited)
 
Three Months Ended
Twelve Months Ended
 
December 31, 2014
December 31, 2013
 
December 31, 2014
December 31, 2013
Net cash (used in) provided by operating activities
(29,850
)
(42,322
)
 
(116,002
)
(36,601
)
Capital expenditures
(12,897
)
(15,018
)
 
(48,603
)
(37,530
)
Free cash flow
(42,747
)
(57,340
)
 
(164,605
)
(74,131
)



11


Wright Medical Group, Inc.
Segment Information
(in thousands, except per share data--unaudited)
 
Three months ended December 31, 2014
 
U.S.
International
BioMimetic
Corporate
Other (1)
Total
Sales
$
62,486

$
20,808

$
—

$
—

$
—

$
83,294

Gross profit
51,318

12,916

—

(23
)
(14
)
64,197

Operating income (loss)
10,161

(2,981
)
(2,648
)
(15,251
)
(16,221
)
(26,940
)
Operating income (loss) as a percent of net sales
16.3
%
(14.3
%)
N/A

N/A

N/A

(32.3
%)
 
 
 
 
 
 
 
Depreciation Expense
2,613

800

108

1,440

—

4,961

Amortization Expense
1,836

515

76

—

359

2,786

Non-cash stock-based compensation expense
—

—

—

2,519

—

2,519

Other
—

—

—

—

15,862

15,862

Adjusted EBITDA
14,610

(1,666
)
(2,464
)
(11,292
)
—

(812
)
_______________________________
(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 December 31, 2013
 
U.S.
International
BioMimetic
Corporate
Other (1)
Total
Sales
$
49,249

$
18,575

$
—

$
—

$
—

$
67,824

Gross profit
40,816

11,279

—

(115
)
(1,579
)
50,401

Operating income (loss)
6,873

(787
)
(4,074
)
(12,899
)
(12,353
)
(23,240
)
Operating income (loss) as a percent of net sales
14.0
%
(4.2
%)
N/A

N/A

N/A

(34.3
%)
 
 
 
 
 
 
 
Depreciation Expense
2,467

638

119

896

—

4,120

Amortization Expense
647

396

77

—

630

1,750

Non-cash stock-based compensation expense
—

—

—

2,481

—

2,481

Other
—

—

—

—

11,723

11,723

Adjusted EBITDA
9,987

247

(3,878
)
(9,522
)
—

(3,166
)
_______________________________
(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted,
as included in the reconciliations above.


12


 
Twelve Months Ended December 31, 2014
 
U.S.
International
BioMimetic
Corporate
Other (1)
Total
Sales
$
212,077

$
85,950

$
—

$
—

$
—

$
298,027

Gross profit
172,035

54,558

—

(254
)
(1,535
)
224,804

Operating income (loss)
23,074

(5,366
)
(12,033
)
(67,908
)
(37,573
)
(99,806
)
Operating income (loss) as a percent of net sales
10.9
%
(6.2
%)
N/A

N/A

N/A

(33.5
%)
 
 
 
 
 
 
 
Depreciation Expense
9,707

3,046

432

5,271

—

18,456

Amortization Expense
5,656

2,178

307

1

1,885

10,027

Non-cash stock-based compensation expense (2)
 
 
 
11,204

—

11,204

Other
 
 
 
—

35,688

35,688

Adjusted EBITDA
38,437

(142
)
(11,294
)
(51,432
)
—

(24,431
)
_______________________________
(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

(2) For the twelve months ended December 31, 2014, amount excludes $0.3 million of non-cash stock-based compensation expense related to the management changes.

 
Twelve Months Ended December 31, 2013
 
U.S.
International
BioMimetic
Corporate
Other (1)
Total
Sales
$
177,648

$
64,682

$
—

$
—

$
—

$
242,330

Gross profit
146,541

39,630

—

(505
)
(3,057
)
182,609

Operating income (loss)
26,268

4,761

(12,741
)
(52,949
)
(247,545
)
(282,206
)
Operating income (loss) as a percent of net sales
14.8
%
7.4
%
N/A

N/A

N/A

(116.5
%)
 
 
 
 
 
 
 
Depreciation Expense
8,838

2,364

394

2,788

 
14,384

Amortization Expense
3,507

644

523

 
2,802

7,476

Non-cash stock-based compensation expense (2)
 
 
 
9,658

 
9,658

Other
 
 
 
 
244,743

244,743

Adjusted EBITDA
38,613

7,769

(11,824
)
(40,503
)
—

(5,945
)
_______________________________
(1) Other consists exclusively of the reconciling items from Operating Income, as reported, to Operating Income, as adjusted, as included in the reconciliations above.

(2) For the twelve months ended December 31, 2013, amount excludes $2.3 million of non-cash stock-based compensation expense related to the conversion of BioMimetic options to Wright Medical options, which is included in due diligence, transaction and transition costs.











13


Wright Medical Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)
 
December 31, 2014
 
December 31, 2013
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
227,326

 
$
168,534

Marketable securities
2,575

 
6,898

Accounts receivable, net
57,190

 
45,817

Inventories
88,412

 
72,443

Prepaid expenses and other current assets
64,953

 
69,608

Current assets held for sale
—

 
142,015

Total current assets
440,456

 
505,315

 
 
 
 
Property, plant and equipment, net
104,235

 
70,515

Goodwill and intangible assets, net
259,991

 
157,683

Marketable securities
—

 
7,650

Other assets
87,994

 
133,845

Other assets held for sale
—

 
132,443

Total assets
$
892,676

 
$
1,007,451

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
16,729

 
$
3,913

Accrued expenses and other current liabilities
170,204

 
80,117

Current portion of long-term obligations
718

 
4,174

Current liabilities held for sale
—

 
31,221

Total current liabilities
187,651

 
119,425

Long-term obligations
280,612

 
271,227

Other liabilities
145,610

 
155,686

Other liabilities held for sale
—

 
1,399

Total liabilities
613,873

 
547,737

 
 
 
 
Stockholders' equity
278,803

 
459,714

Total liabilities and stockholders' equity
$
892,676

 
$
1,007,451


 



14

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