Wright Medical Group, Inc. Reports 2012 Second Quarter Financial Results

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 second quarter ended June 30, 2012 and updated guidance.

Net sales totaled $123.3 million during the second quarter ended June 30, 2012, representing a 7% decrease as reported and a 5% decrease on a constant currency basis compared to the second quarter of 2011. During the second quarter of 2012, U.S. sales were negatively affected by previously announced distributor transitions that occurred in the third quarter of 2011, challenges associated with implementing enhancements to the Company's compliance processes, and the impact of the previously announced agreement with KCI.

Robert Palmisano, President and Chief Executive Officer, commented, “During the second quarter, we made significant progress on implementing the important changes to transform our business and deliver significant shareholder return. Although we are early in the execution phase of our plan, we are very encouraged by the initial results on our key measures with global foot and ankle constant currency growth of 13% and outstanding free cash flow generation for the first half of the year. In addition to significant foot and ankle sales growth, the conversion of a major portion of our foot and ankle distributor territories to direct sales representation is ahead of schedule, and we are pleased with our execution to date. We believe this increase in U.S. direct foot and ankle sales representation, coupled with our large and growing product portfolio and our increased investment in medical education, will enable us to continue improving our foot and ankle growth rate throughout 2012 and to exit the year at well above market growth rates.”

Net income for the second quarter of 2012 totaled $0.7 million or $0.02 per diluted share, compared to net income of $6.1 million or $0.16 per diluted share in the second quarter of 2011.

Net income for the second quarter of 2012 included the after-tax effects of $3.4 million of non-cash stock-based compensation expense, $2.1 million of expenses associated with the Company's deferred prosecution agreement (DPA), $0.8 million of charges associated with distributor conversions and non-competes and $0.7 million of charges associated with the previously announced cost restructuring plan. Net income for the second quarter of 2011 included the after-tax effects of approximately $2.4 million of expenses associated with the Company’s deferred prosecution agreement (DPA) and $1.6 million of non-cash stock-based compensation expense.

The Company's second quarter 2012 net income, as adjusted for the above items, decreased to $5.3 million in 2012 from $9.0 million in 2011, while diluted earnings per share, as adjusted, decreased to $0.14 in the second quarter of 2012 from $0.23 in the second quarter of 2011. Including stock based expense, diluted earnings per share, as adjusted, totaled $0.08 in the second quarter of 2012. A reconciliation of U.S. GAAP to “as adjusted” results is included in the attached financial tables.

Cash and cash equivalents and marketable securities totaled $192.9 million as of the end of the second quarter of 2012, an increase of $25.6 million compared to the end of the fourth quarter of 2011. Net cash flow from operating activities was $22.0 million, which combined with capital expenditures of $4.0 million, resulted in free cash flow of $18.0 million in the second quarter of 2012 compared to $7.6 million in the second quarter of 2011.

Palmisano concluded, “We are pleased with our progress for the first half of the year, and we will continue to focus on executing our key strategic initiatives with excellence. During the second half of the year, we will make increased investments to accelerate foot and ankle growth, improve customer satisfaction in our Ortho-Recon business and increase cash generation capabilities. We also expect continued progress on our inventory reduction initiatives and on improving U.S. foot and ankle sales productivity, both of which we anticipate will accelerate in 2013. We are very enthusiastic about our execution so far in 2012 and believe we will continue to build momentum against our key priorities for the remainder of this year and beyond.”

Outlook

The Company has updated its anticipated full year 2012 net sales to be in the range of $476 million to $485 million, as compared with the previously announced guidance of $472 million to $489 million, and has updated its as-adjusted earnings per share excluding stock-based compensation guidance to be in the range of $0.32 to $0.36 per diluted share from the previously communicated range of $0.26 to $0.36. The Company's earnings target excludes non-compete and transition costs associated with converting a major portion of independent foot and ankle territories to direct, costs associated with the previously announced restructuring, possible future acquisitions, other material future business developments, non-cash stock-based compensation expense, and costs associated with the Company's DPA (including the associated independent monitor).

As noted above, the Company's earnings target excludes the impact of non-cash stock-based compensation charges. 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 $0.18 per diluted share for the full year 2012. Therefore, the Company now anticipates its full year 2012 as-adjusted earnings per share including stock-based compensation to be in the range of $0.14 to $0.18 per diluted share.

With regard to restructuring charges, the Company has completed the cost restructuring plan announced in September 2011, incurring total charges of $18.5 million, which was in line with the previous estimate of $18 million to $20 million.

From a cash flow perspective, the Company continues to anticipate significant improvement over 2011, and has upwardly revised its anticipated 2012 free cash flow to be in the range of $40 million to $45 million, as compared with the previously announced guidance of $25 million to $30 million. This new guidance range represents annualized growth of 176% to 211%.

The Company's anticipated ranges for net sales, adjusted earnings per share, non-cash stock-based compensation charges, restructuring charges and free cash flow are forward-looking statements, as are any other statements which anticipate or aspire to future performance against key metrics. 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. The live dial-in number for the call is 800-299-7098 (U.S.) or 617-801-9715 (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 until August 8, 2012. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 52667395. 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.

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 global orthopaedic medical device company and a leading provider of surgical solutions for the foot and ankle market. The Company specializes in the design, manufacture and marketing of devices and biologic products for extremity, hip and knee repair and reconstruction. The Company has been in business for more than 60 years and markets its products in over 60 countries worldwide. For more information about Wright Medical, visit the Company's website at 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; 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 related to the U.S. governmental inquiries and the DPA, costs associated with distributor conversions and non-competes, restructuring charges, transaction costs, charges associated with the Company's liability for PROFEMUR ® long modular neck claims, costs related to settlement of certain employment matters and the hiring of a new CEO, and non-cash stock-based expense, 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.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” as defined under U.S. federal securities laws, including statements regarding potential actions by the USAO, independent monitor, OIG and other agencies or their potential impact. These statements reflect management's current knowledge, assumptions, beliefs, estimates, and expectations and express management's current views of future performance, results, and trends and may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to materially differ from those described in the forward-looking statements. The reader should not place undue reliance on forward-looking statements. Such statements are made as of the date of this press release, and we undertake no obligation to update such statements after this date. Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements include those discussed in our filings with the Securities and Exchange Commission (including those described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, under the heading “Risk Factors” and elsewhere); future actions of the FDA or any other regulatory body or government authority that could delay, limit or suspend product development, manufacturing or sale or result in seizures, injunctions, monetary sanctions or criminal or civil liabilities; the impact of any such future actions of the FDA or any other regulatory body or government authority on our settlement of the federal investigation into our consulting arrangements with orthopaedic surgeons relating to our hip and knee products in the United States; the impact of such settlement of the federal investigation into our consulting arrangements with orthopaedic surgeons relating to our hip and knee products in the United States, including our compliance with the Deferred Prosecution Agreement through September 2012 and the Corporate Integrity Agreement through September 2015; and compliance reviews, the results of which may be required to be disclosed to government authorities, and which may uncover violations of law, including strict liability provisions of the federal Food, Drug and Cosmetic Act, that could lead to adverse action by the FDA or others. Our failure to comply with the Deferred Prosecution Agreement or the Corporate Integrity Agreement could expose us to significant liability including, but not limited to, exclusion from federal healthcare program participation, including Medicaid and Medicare, which would have a material adverse effect on our financial condition, results of operations and cash flows, potential prosecution, including under the previously-filed criminal complaint, civil and criminal fines or penalties, and additional litigation cost and expense. In addition, a breach of the DPA or the CIA could result in an event of default under the Senior Credit Facility, which in turn could result in an event of default under the Indenture.

Additional risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements include the possibility of litigation brought by shareholders, including private securities litigation and shareholder derivative suits, which if initiated, could divert management's attention, harm our business and/or reputation and result in significant liabilities; demand for and market acceptance of our new and existing products; future actions of governmental authorities and other third parties; tax measures; business development and growth opportunities; product quality or patient safety issues; products liability claims; enforcement of our intellectual property rights; the geographic and product mix impact on our sales; retention of sales representatives and independent distributors; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; ability to realize the anticipated benefits of restructuring initiatives; impact of the commercial and credit environment on us and our customers and suppliers; and in the implementation of our new compliance enhancements, including the duration and severity of delays related to medical education, research and development and clinical studies, and the impact of any such delays on our relationships with customers.
       

Wright Medical Group, Inc.Condensed Consolidated Statements of Operations(in thousands, except per share data--unaudited)
 
Three Months Ended Six Months Ended
June 30, 2012     June 30, 2011 June 30, 2012     June 30, 2011
Net sales $ 123,280 $ 132,505 $ 249,936 $ 267,891
Cost of sales 38,434 41,504 75,240 80,272
Cost of Sales - restructuring     435  
Gross profit 84,846 91,001 174,261 187,619
Operating expenses:
Selling, general and administrative 72,862 70,821 145,210 145,646
Research and development 6,744 7,807 12,965 17,014
Amortization of intangible assets 1,254 677 1,996 1,367
Restructuring charges 710     1,153  
Total operating expenses 81,570   79,305   161,324   164,027
Operating income 3,276 11,696 12,937 23,592
Interest expense, net 1,887 1,475 3,694 3,310
Other (income) expense, net (153 ) 257   8   4,716
Income before income taxes 1,542 9,964 9,235 15,566
Provision for income taxes 832   3,817   3,964   5,827
Net income $ 710   $ 6,147   $ 5,271   $ 9,739
Net income per share, basic $ 0.02   $ 0.16   $ 0.14   $ 0.26
Net income per share, diluted $ 0.02   $ 0.16   $ 0.14   $ 0.25
Weighted-average number of shares outstanding-basic 38,715   38,240   38,604   38,137
Weighted-average number of shares outstanding-diluted 38,997   39,261   38,898   38,347
       

Wright Medical Group, Inc.Consolidated Sales Analysis(dollars in thousands--unaudited)
 
Three Months Ended Six Months Ended
June 30, 2012     June 30, 2011     %

change
June 30, 2012     June 30, 2011     %

change

Geographic
Domestic $ 69,216 $ 75,354 (8.1 %) $ 139,278 $ 153,296 (9.1 %)
International 54,064   57,151   (5.4 %) 110,658     114,595     (3.4 %)
Total net sales $ 123,280   $ 132,505   (7.0 %) $ 249,936     $ 267,891     (6.7 %)
 
Three Months Ended Six Months Ended
June 30, 2012 June 30, 2011 %

change
June 30, 2012   June 30, 2011   %

change

OrthoRecon
Hips $ 40,073 $ 45,544 (12.0 %) $ 81,573 $ 91,441 (10.8 %)
Knees 30,189 33,392 (9.6 %) 61,271 66,225 (7.5 %)
Other 1,054   1,329   (20.7 %) 2,255     2,618     (13.9 %)
Total OrthoRecon 71,316 80,265 (11.1 %) 145,099 160,284 (9.5 %)
 

Extremities
Foot and Ankle 28,880 25,804 11.9 % 58,507 52,529 11.4 %
Upper Extremity 6,349 6,949 (8.6 %) 12,894 14,497 (11.1 %)
Biologics 15,454 17,929 (13.8 %) 30,641 37,236 (17.7 %)
Other 1,281   1,558   (17.8 %) 2,795     3,345     (16.4 %)
Total Extremities 51,964 52,240 (0.5 %) 104,837 107,607 (2.6 %)
               
Total Sales $ 123,280   $ 132,505   (7.0 %) $ 249,936     $ 267,891     (6.7 %)
   

Wright Medical Group, Inc.Supplemental Sales Information(unaudited)
 
Second Quarter 2012 Sales Growth
Domestic

As

Reported
    Int'l

Constant

Currency
    Int'l

As

Reported
    Total

Constant

Currency
    Total

As

Reported

OrthoRecon
Hips (19%) (4%) (8%) (10%) (12%)
Knees (15%) 0% (3%) (8%) (10%)
Other (13%) (19%) (22%) (18%) (21%)
Total OrthoRecon (17%) (3%) (7%) (9%) (11%)
 

Extremities
Foot and Ankle 11% 23% 14% 13% 12%
Upper Extremity (10%) (1%) (4%) (8%) (9%)
Biologics (16%) 0% (3%) (13%) (14%)
Other 25% (27%) (32%) (14%) (18%)
Total Extremities (1%) 7% 1% 1% (1%)
         
Total Sales (8%) (1%) (5%) (5%) (7%)
    Sales as a % of Total Sales
Three Months Ended June 30, 2012     Six Months Ended June 30, 2012
Domestic     International     Total Domestic     International     Total

OrthoRecon
Hips 11% 22% 33% 10% 22% 33%
Knees 12% 12% 24% 12% 12% 25%
Other 0% 1% 1% 0% 1% 1%
Total OrthoRecon 23% 35% 58% 23% 35% 58%
 

Extremities
Foot and Ankle 19% 4% 23% 19% 4% 23%
Upper Extremity 4% 2% 5% 4% 2% 5%
Biologics 10% 3% 13% 10% 2% 12%
Other 0% 1% 1% 0% 1% 1%
Total Extremities 33% 9% 42% 33% 9% 42%
           
Total Sales 56% 44% 100% 56% 44% 100%
       

Wright Medical Group, Inc.Reconciliation of Net Sales to Net Sales Excluding the Impact of Foreign Currency(dollars in thousands--unaudited)
 
Three Months Ended Six Months Ended
June 30, 2012 June 30, 2012

InternationalNet Sales
   

TotalNet Sales

InternationalNet Sales
   

TotalNet Sales
Net sales, as reported $ 54,064 $ 123,280 $ 110,658 $ 249,936
Currency impact as compared to prior period 2,406 2,406 2,574   2,574
Net sales, excluding the impact

of foreign currency
$ 56,470 $ 125,686 $ 113,232 $ 252,510
       

Wright Medical Group, Inc.Reconciliation of As Reported Results to Non-GAAP Financial Measures(in thousands, except per share data--unaudited)
 
Three Months Ended   Six Months Ended
June 30, 2012     June 30, 2011   June 30, 2012     June 30, 2011
Operating Income
Operating income, as reported $ 3,276 $ 11,696 $ 12,937 $ 23,592
Reconciling items impacting Gross Profit:
Non-cash, stock-based compensation 348 360 694 707
Cost of sales - restructuring 435
Inventory step-up amortization 48     96    
Total 396   360   1,225   707  
Reconciling items impacting Selling, General and Administrative expenses:
Non-cash, stock-based compensation 2,805 1,300 4,691 3,368
DPA related 2,072 2,385 4,940 4,567
Distributor conversions 208       208      
Total 5,085   3,685     9,839     7,935  
Reconciling items impacting Research and Development expenses:
Non-cash, stock-based compensation 236 (53 ) 387 392
Reconciling items impacting Amortization of Intangible Assets:
Amortization of distributor non-competes 571 571
Other Reconciling Items:
Restructuring charges 710       1,153      
Operating income, as adjusted $ 10,274   $ 15,688     $ 26,112     $ 32,626  
Operating income, as adjusted, as a

percentage of net sales
8.3 % 11.8 %   10.4 %   12.2 %
       

Wright Medical Group, Inc.Reconciliation of As Reported Results to Non-GAAP Financial Measures(in thousands, except per share data--unaudited)
 
Three Months Ended   Six Months Ended
June 30, 2012     June 30, 2011   June 30, 2012     June 30, 2011
Net Income
Income before taxes, as reported $ 1,542 $ 9,964 $ 9,235 $ 15,566
Pre-tax impact of reconciling items:
Non-cash, stock-based compensation 3,389 1,607 5,772 4,467
DPA related 2,072 2,385 4,940 4,567
Restructuring charges 710 1,588
Inventory step-up amortization 48 96
Distributor conversion and non-competes 779 779
Deferred financing fees and transaction costs associated with Convertible Notes Tender Offer           4,099  
Income before taxes, as adjusted 8,540 13,956 22,410 28,699
 
Provision for income taxes, as reported 832 3,817 3,964 5,827
Non-cash, stock-based compensation 1,090 219 1,384 1,066
DPA related 681 930 2,149 1,782
Restructuring charges 276 620
Inventory step-up amortization 18 37
Distributor conversion and non-competes 339 339
Deferred financing fees and transaction costs associated with Convertible Notes Tender Offer           1,599  
Provision for income taxes, as adjusted $ 3,236   $ 4,966     $ 8,493     $ 10,274  
Effective tax rate, as adjusted 37.9 % 35.6 %   37.9 %   35.8 %
Net income, as adjusted $ 5,304   $ 8,990     $ 13,917     $ 18,425  
       

Wright Medical Group, Inc.Reconciliation of As Reported Results to Non-GAAP Financial Measures(continued)
 
Three Months Ended Three Months Ended
June 30, 2012 June 30, 2011
As Reported     As Adjusted As Reported     As Adjusted
Basic net income $ 710 $ 5,304 $ 6,147 $ 8,990
Interest expense on convertible notes   N/A   N/A   137     137  
Diluted net income $ 710 $ 5,304 $ 6,284 $ 9,127
 
Basic shares 38,715 38,715 38,240 38,240
Dilutive effect of stock options and restricted shares 282 282 130 130
Dilutive effect of convertible notes   N/A   N/A   891     891  
Diluted shares 38,997 38,997 39,261 39,261
 
Net income per share, diluted $ 0.02 $ 0.14 $ 0.16   $ 0.23  
 
Six Months Ended Six Months Ended
June 30, 2012 June 30, 2011
As Reported As Adjusted As Reported As Adjusted
Basic net income $ 5,271 $ 13,917 $ 9,739 $ 18,425
Interest expense on convertible notes   N/A   275   N/A     929  
Diluted net income $ 5,271 $ 14,192 $ 9,739 $ 19,354
 
Basic shares 38,604 38,604 38,137 38,137
Dilutive effect of stock options and restricted shares 294 294 210 210
Dilutive effect of convertible notes   N/A   891   N/A     2,927  
Diluted shares 38,898 39,789 38,347 41,274
 
Net income per share, diluted $ 0.14 $ 0.36 $ 0.25   $ 0.47  
 
Three Months Ended Six Months Ended
June 30, 2012 June 30, 2011   June 30, 2012 June 30, 2011
Net Income per Diluted Share

Net income, as reported, per diluted share
$ 0.02 $ 0.16 $ 0.14 $ 0.25
Interest expense on convertible notes N/A N/A 0.01 0.02
Effect of convertible notes on diluted shares N/A N/A (0.01 ) (0.02 )
Non-cash, stock-based compensation 0.06 0.04 0.11 0.08
DPA related 0.04 0.04 0.08 0.07
Restructuring charges 0.01 0.02
Inventory step-up amortization 0.00 0.00 0.00
Distributor conversion and non-competes 0.01 0.01
Deferred financing fees and transaction costs associated with Convertible Notes Tender Offer   N/A       N/A     0.06  

Net income, as adjusted, per diluted share
$ 0.14 $ 0.23   $ 0.36   $ 0.47  
       

Wright Medical Group, Inc.Reconciliation of Free Cash Flow(dollars in thousands--unaudited)
 
Three Months Ended Six Months Ended
June 30, 2012     June 30, 2011   June 30, 2012     June 30, 2011
Net cash provided by operating activities 22,033 20,868 41,113 39,016
Capital expenditures (4,042 ) (13,291 )   (8,573 ) (23,376 )
Free cash flow 17,991   7,577     32,540   15,640  
   

WRIGHT MEDICAL GROUP, INC.Segment Income Statement(In thousands, except share data)(unaudited)
 
Three Months Ended June 30, 2012
OrthoRecon     Extremities     Corporate     Other(1)     Total
Net sales $ 71,316 $ 51,964 $ $ $ 123,280
Cost of sales 26,485   11,553     396   38,434  
Gross profit 44,831 40,411 (396 ) 84,846
 
Operating expenses:
Selling, general and administrative 30,720 24,336 12,721 5,085 72,862
Research and development 3,141 3,367 236 6,744
Amortization of intangible assets 83 600 571 1,254
Restructuring charges       710   710  
Total operating expenses 33,944 28,303 12,721 6,602 81,570
         
Operating income $ 10,887   $ 12,108   $ (12,721 ) $ (6,998 ) $ 3,276  
 
Operating income as a percent of net sales 15.3 % 23.3 % N/A N/A 2.7 %
 
Three Months Ended June 30, 2012
OrthoRecon Extremities Corporate Other Total
Depreciation expense $ 6,175 $ 2,789 $ 588 $ $ 9,552
Amortization expense 83 600 571 1,254
Capital expenditures 680 2,277 1,085 4,042

______________________________

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

WRIGHT MEDICAL GROUP, INC.Segment Income Statement(continued)
 
Three Months Ended June 30, 2011
OrthoRecon     Extremities     Corporate     Other(1)     Total
Net sales $ 80,267 $ 52,238 $ $ $ 132,505
Cost of sales 25,865   15,279     360   41,504  
Gross profit 54,402 36,959 (360 ) 91,001
 
Operating expenses:
Selling, general and administrative 32,125 21,499 13,512 3,685 70,821
Research and development 4,552 3,308 (53 ) 7,807
Amortization of intangible assets 106   571       677  
Total operating expenses 36,783 25,378 13,512 3,632 79,305
         
Operating income $ 17,619   $ 11,581   $ (13,512 ) $ (3,992 ) $ 11,696  
 
Operating income as a percent of net sales 22.0 % 22.2 % N/A N/A 8.8 %
 
Three Months Ended June 30, 2011
OrthoRecon Extremities Corporate Other Total
Depreciation expense $ 6,629 $ 2,640 $ 527 $ $ 9,796
Amortization expense 106 571 677
Capital expenditures 6,197 2,535 4,559 13,291

____________________________

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

WRIGHT MEDICAL GROUP, INC.Segment Income Statement(continued)
 
Six Months Ended June 30, 2012
OrthoRecon     Extremities     Corporate     Other(1)     Total
Net sales $ 145,099 $ 104,837 $ $ $ 249,936
Cost of sales 51,688   22,762     1,225   75,675
Gross profit 93,411 82,075 (1,225 ) 174,261
 
Operating expenses:
Selling, general and administrative 62,060 48,422 24,889 9,839 145,210
Research and development 5,927 6,651 387 12,965
Amortization of intangible assets 217 1,208 571 1,996
Restructuring charges       1,153   1,153
Total operating expenses 68,204 56,281 24,889 11,950 161,324
         
Operating income $ 25,207   $ 25,794   $ (24,889 ) $ (13,175 ) $ 12,937
 
Operating income as a percent of net sales 17.4% 24.6% N/A N/A 5.2%
 
Six Months Ended June 30, 2012
OrthoRecon Extremities Corporate Other Total
Depreciation expense $ 12,572 $ 5,653 $ 1,671 $ $ 19,896
Amortization expense 217 1,208 571 1,996
Capital expenditures 2,574 4,450 1,549 8,573

______________________________

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

WRIGHT MEDICAL GROUP, INC.Segment Income Statement(continued)
 
Six Months Ended June 30, 2011
OrthoRecon     Extremities   Corporate     Other(1)     Total
Net sales $ 160,284 $ 107,607 $ $ $ 267,891
Cost of sales 51,510   28,055     707   80,272  
Gross profit 108,774 79,552 (707 ) 187,619
 
Operating expenses:
Selling, general and administrative 65,570 45,968 26,173 7,935 145,646
Research and development 9,200 7,422 392 17,014
Amortization of intangible assets 192   1,175       1,367  
Total operating expenses 74,962 54,565 26,173 8,327 164,027
         
Operating income $ 33,812   $ 24,987   $ (26,173 ) $ (9,034 ) $ 23,592  
 
Operating income as a percent of net sales 21.1 % 23.2 % N/A N/A 8.8 %
 
Six Months Ended June 30, 2011
OrthoRecon Extremities Corporate Other Total
Depreciation expense $ 13,002 $ 5,170 $ 1,066 $ $ 19,238
Amortization expense 192 1,175 1,367
Capital expenditures 11,286 5,136 6,954 23,376

______________________________

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

WRIGHT MEDICAL GROUP, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share data)(unaudited)
 
June 30, 2012

December 31,2011
Assets:
Current assets:
Cash and cash equivalents $ 176,591 $ 153,642
Marketable securities 16,297 13,597
Accounts receivable, net 102,591 98,995
Inventories 157,123 164,600
Prepaid expenses and other current assets 58,641 69,699
Total current assets 511,243 500,533
 
Property, plant and equipment, net 147,032 160,284
Goodwill and intangible assets, net 79,247 75,651
Marketable securities 4,502
Other assets 14,471 13,610
Total assets $ 751,993 $ 754,580
 
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable $ 9,385 $ 11,651
Accrued expenses and other current liabilities 57,514 55,831
Current portion of long-term obligations 10,346 8,508
Total current liabilities 77,245 75,990
Long-term obligations 150,679 166,792
Other liabilities 45,539 43,334
Total liabilities $ 273,463 $ 286,116
   
Stockholders’ equity: 478,530 468,464
Total liabilities and stockholders’ equity $ 751,993 $ 754,580

Copyright Business Wire 2010

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