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Wright Medical Group, Inc. (NASDAQ: WMGI), a global orthopaedic medical device company and a leading provider of surgical solutions for the foot and ankle market, today reported financial results for its third quarter ended September 30, 2012 and updated guidance.
Net sales totaled $110.4 million during the third quarter ended September 30, 2012, representing a 7% decrease as reported and a 5% decrease on a constant currency basis compared to the third quarter of 2011. During the third quarter of 2012, as anticipated, global sales were negatively affected by U.S. ortho-recon customer losses and price decreases in Japan that were effective in the second quarter of 2012, partially offset by strong growth in the global foot and ankle business.
Robert Palmisano, President and Chief Executive Officer, commented, “We continued to make excellent progress on implementing our transformational changes in our business during the third quarter. In addition to our third consecutive quarter of accelerating global foot and ankle growth, we continue to generate strong cash flow. We also completed the conversion of a major portion of our foot and ankle distributor territories to direct sales representation. With this conversion now complete, coupled with the favorable response to our recent new product launches and increased medical education programs, we believe we are well positioned to exit the year at well above market growth rates and improve sales productivity in our foot and ankle business.”
Net loss for the third quarter of 2012 totaled $5.3 million or $0.14 per diluted share, compared to net loss of $16.0 million or $0.42 per diluted share in the third quarter of 2011.
Net loss for the third quarter of 2012 included the after-tax effects of $2.7 million of non-cash stock-based compensation expense, $1.7 million of expenses associated with U.S. governmental inquiries and the Company’s deferred prosecution agreement (DPA), $1.6 million of charges associated with distributor conversions and non-competes, $2.7 million of charges related to the write-off of deferred financing costs associated with the Company’s Senior Credit Facility and 2014 Convertible Notes, a $1.8 million loss on the termination of the interest rate swap associated with the Company’s Senior Credit Facility, $0.7 million of non-cash interest expense related to the 2017 Convertible Notes, and an unrealized gain of $2.3 million related to mark-to-market adjustments on derivatives. Net income for the third quarter of 2011 included the after-tax effects of $14.0 million of charges associated with the 2011 cost restructuring plan, a $13.2 million charge for management’s estimate of the Company’s total liability for claims associated with previous and estimated future fractures of its titanium PROFEMUR
® long modular necks in North America, $5.0 million of expenses associated with the Company’s DPA, $2.2 million of non-cash stock-based compensation expense, and $2.0 million of expenses related to the settlement of certain employment matters and the hiring of a new chief executive officer (CEO).
The Company’s third quarter 2012 net income, as adjusted for the above items, decreased to $0.5 million in 2012 from $7.7 million in 2011, while diluted earnings per share, as adjusted, decreased to $0.01 in the third quarter of 2012 from $0.20 in the third quarter of 2011. Including stock-based expense, diluted loss per share, as adjusted, totaled $0.02 in the third quarter of 2012. A reconciliation of U.S. GAAP to “as adjusted” results is included in the attached financial tables.