Wright Medical Group, Inc. Reports Results for Fourth Quarter Ended December 31, 2006.Fourth Quarter Sales Exceed Communicated Outlook Range Quarterly Adjusted Net Income Increases 27%, Adjusted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Increases 24%; Operating Leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. and Earnings Growth Continues ARLINGTON, Tenn. -- Wright Medical Group, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : WMGI WMGI Wright Medical Group, Inc ), a global orthopaedic medical device company specializing in the design, manufacture and marketing of reconstructive re·con·struc·tive adj. 1. Relating to or characterized by reconstruction. 2. Serving to rebuild, restore, or correct the appearance and function of defective, damaged, or misshaped body structures or parts: joint devices and biologics, today reported financial results for its fourth quarter and full year ended December 31, 2006. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight totaled $86.6 million during the fourth quarter ended December 31, 2006, representing an 8% increase over net sales of $80.3 million during the fourth quarter of 2005, and exceeding its previously communicated outlook range. Excluding the impact of foreign currency, net sales increased 6% during the fourth quarter. For the full year 2006, the Company's net sales totaled a record $338.9 million, representing a 6% increase over net sales of $319.1 million in 2005. The impact of foreign currency on net sales was not material for the full year 2006. Net income for the fourth quarter of 2006 totaled $5.7 million or $0.16 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Net income for the fourth quarter of 2005 totaled $2.0 million, or $0.06 per diluted share. Net income for the full year 2006 totaled $14.4 million, or $0.41 per diluted share. For the full year 2005, net income totaled $21.1 million, or $0.60 per diluted share. Net income for the fourth quarter of 2006 included the after-tax effect of approximately $3.7 million of non-cash stock-based compensation related to FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting No. 123R and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. $1.1 million tax benefit related to the resolution of certain foreign income tax matters. For the full year 2006, net income included the after-tax effects of approximately $13.8 million of non-cash stock-based compensation and the $1.5 million gain on the sale of an investment in the third quarter of 2006, as well as this quarter's $1.1 million income tax benefit. Net income for the fourth quarter and full year 2005 included the after-tax effects of approximately $1.7 million of costs incurred related to management changes in our U.S. and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations, approximately $1.6 million of charges related to the termination of an agreement to distribute certain third party spinal spinal /spi·nal/ (spi´n'l) 1. pertaining to a spine or to the vertebral column. 2. pertaining to the spinal cord's functioning independently from the brain. spi·nal adj. products in Europe, approximately $1.5 million of charges related to a European distributor transition and the associated legal dispute, and approximately $700,000 of charges related to the disposal of a long-lived asset. Excluding those previously mentioned items, fourth quarter net income, as adjusted, increased 27% to $7.5 million in 2006 from $5.9 million in 2005, while fourth quarter diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , as adjusted, increased 24% to $0.21 in 2006 from $0.17 per diluted share in 2005. For the full year 2006, net income, as adjusted, totaled $22.7 million as compared to $25.2 million in 2005, while net income, as adjusted, per diluted share totaled $0.64 in 2006 compared to $0.72 in 2005. A reconciliation of U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). to "as adjusted" results is included in the attached financial tables. Gary D. Henley, President and Chief Executive Officer, commented, "We are pleased with our fourth quarter financial performance, which exceeded the upper end of our quarterly sales outlook range while meeting the midpoint mid·point n. 1. Mathematics The point of a line segment or curvilinear arc that divides it into two parts of the same length. 2. A position midway between two extremes. of our range of earnings expectations which we had revised upward in December. Our sales results were driven by the exceptional performance of our domestic hip business, which grew over prior year by 17%. Further, we continued to see improved sales results in our international markets, which grew 11% over prior year. This sales growth, combined with controlled spending, resulted in operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: expansion and an adjusted net income growth of 27%." Mr. Henley continued, "The fourth quarter marked the one year anniversary of the beginning of the Company's turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. plan. Throughout 2006, we maintained a steady focus on the execution of that plan and are now very pleased with the results. Our revenue growth rate accelerated modestly from each quarter to the next throughout 2006 while we over-achieved the original bottom line guidance range that we established at the beginning of the year. Most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , during the second half of 2006 we successfully reintroduced operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. leverage back into our business model, positioning ourselves for a continuation of earnings growth as we enter 2007." Sales Review Globally, the Company experienced growth in its hip, biologics and extremity extremity /ex·trem·i·ty/ (eks-trem´i-te) 1. the distal or terminal portion of elongated or pointed structures. 2. limb. ex·trem·i·ty n. 1. product lines of 15%, 10%, and 10% respectively and a decline of 2% in the Company's knee product line, during the fourth quarter of 2006 when compared to the fourth quarter of 2005. Domestic sales totaled $53.2 million during the fourth quarter of 2006 and $211.0 million for the full year 2006, representing increases of 6% and 7%, compared to the respective year-ago periods. Fourth quarter domestic sales of the Company's hip, extremity and biologics lines reflected growth of 17%, 9%, and 3%, respectively. Fourth quarter domestic sales of the Company's knee product line decreased by 5% compared to 2005. International sales totaled $33.3 million during the fourth quarter of 2006, an increase of 11% compared to the fourth quarter of 2005. For the full year 2006, international sales reached $127.9 million, an increase of 5% compared to 2005. The Company's international sales results included a favorable foreign currency impact totaling approximately $1.5 million during the fourth quarter of 2006 and an unfavorable foreign currency impact totaling $313,000 during the full year 2006. Excluding the impact of foreign currency, international sales increased 6% during the fourth quarter of 2006 and 5% during the full year 2006. Outlook The Company's earnings targets, as communicated in the guidance ranges stated below for the full year and the first quarter of 2007, exclude the effect of possible future acquisitions, other material future business developments, and the impact of expensing non-cash stock-based compensation pursuant to FASB Statement No. 123R. The Company has reiterated its previously-communicated sales target for the full year 2007 of a range of $366 million to $374 million, and its previously-communicated as-adjusted earnings per share outlook of a target range for the full year of $0.71 to $0.76 per diluted share, representing annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. growth between approximately 11% and 19% for the full year. The Company's anticipated targets for the first quarter of 2007 for net sales are in the range of $90 million to $92 million, representing sales growth objectives between approximately 4% and 7% for the quarter, with as-adjusted earnings per share results ranging from $0.15 to $0.17 per diluted share, representing annualized growth between approximately 7% and 21% for the quarter. As noted above, the Company's financial targets exclude the impact of the non-cash stock-based compensation charges associated with FASB Statement No. 123R. While the amount of such non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. will vary depending upon a number of factors, many of which not being within the Company's control, the Company currently estimates that the after-tax impact of expenses associated with FAS 123R will range from $0.31 to $0.35 per diluted share for the full year 2007 and $0.08 to $0.09 per diluted share for the first quarter of 2007. The Company's anticipated targets for net sales, adjusted earnings per share and stock-based compensation charges are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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 800-289-0572 (domestic) or 913-981-5543 (international). 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 7:30 p.m. (Central Time) today and continuing until 12:00 a.m. (Central Time) on February 22, 2007. To hear this replay, dial 888-203-1112 (domestic) or 719-457-0820 (international) and enter the registration number 4535069. 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, our Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 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. Non-GAAP Financial Measures The Company uses non-GAAP financial measures, such as net sales, excluding the impact of foreign currency, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , as adjusted, net income, as adjusted, net income, as adjusted, per diluted share, and effective tax rate, as adjusted. The Company's management believes that the presentation of these measures provides useful information to investors. These measures may assist investors in evaluating the Company's operations, period over period. The measures exclude such items as business development activities, including purchased in-process research and development, the financial impact of significant litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , 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 allocation of resources Apportionment of productive assets among different uses. The issue of resource allocation arises as societies seek to balance limited resources (capital, labour, land) against the various and often unlimited wants of their members. 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. All statements made in this press release, other than statements of historical fact, are forward-looking statements. Forward-looking statements reflect management's current knowledge, assumptions, beliefs, estimates, and expectations and express management's current views of future performance, results, and trends. The Company wishes to caution readers that actual results might differ materially from those described in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including the factors discussed in the Company's filings with the Securities and Exchange Commission (including the Company's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005 under the heading, "Risk Factors" and its quarterly reports), which could cause the Company's actual results to materially differ from those described in the forward-looking statements. Although the Company believes that the forward-looking statements are accurate, there can be no assurance that any forward-looking statement will prove to be accurate. A forward-looking statement should not be regarded as a representation by the Company that the results described therein will be achieved. The Company wishes to caution readers not to place undue reliance on any forward-looking statement. The forward-looking statements are made as of the date of this press release. The Company assumes no obligation to update any forward-looking statement after this date. Wright Medical Group, Inc. is a global orthopaedic medical device company specializing in the design, manufacture and marketing of reconstructive joint devices and biologics. The Company has been in business for more than 50 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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