Wright Medical Group Inc. (Wright Medical), an orthopaedic medical device company, has reported total net sales of $120.9 million for the first quarter of 2009, up 4%, compared with the net sales of $115.87 million in the year-ago quarter. It has also reported a net income of $3.3 million, or $0.09 per diluted share, for the first quarter of 2009, compared with the net income of $4.1 million, or $0.11 per diluted share, in the year-ago quarter.
Net income for the first quarter of 2009 included the after-tax effects of approximately $2.8 million of non-cash stock-based compensation expense, $4.1 million of expenses related to US governmental inquiries, $66,000 of restructuring charges related to the closure of the company’s Toulon, France operations, and $30,000 inventory step-up amortization. Net income for the first quarter of 2008 included the after-tax effect of approximately $3.6 million of non-cash stock-based compensation expense, $1.8 million of restructuring charges, $1.7 million of expenses related to U.S. governmental inquiries, and $73,000 of inventory step-up amortization.
Excluding those items previously mentioned, first quarter net income, as adjusted, totaled $7.8 million in 2009 compared to $8.9 million in 2008, while diluted earnings per share, as adjusted, totaled $0.20 for the first quarter of 2009, exceeding the company’s previously-communicated outlook range of $0.17 to $0.19. Net income, as adjusted, totaled $0.23 per diluted share for the first quarter of 2008. A reconciliation of GAAP to “as adjusted” results is included in the attached financial tables.
Gary D. Henley, president and chief executive officer commented, “As we have been anticipating, global economic headwinds were indeed a factor during the first quarter. However, considering these challenges we are pleased with our first quarter financial results. First quarter net sales results of $120.9 million, representing constant currency global growth of 7% overall, were in line with our previously-communicated outlook range and among the industry’s best growth rate performances, due in large part to another exceptional performance in our extremities franchise which has demonstrated considerable resilience thus far in this economic cycle. At the same time, our adjusted earnings performance of $0.20 per share exceeded the upper end of our previously-communicated outlook range due to excellent operating expense control and leverage. Importantly, during the first quarter we also returned to generating positive cash flow; a significant improvement over recent quarterly performances and a noteworthy accomplishment given the operating climate.”
Henley continued, “While the current state of the global economy presents both operational challenges as well as a greater element of uncertainty related to short-term financial results, we are confident in our ability achieve our current year profitability goals, continue to grow our business, and appropriately position the company to produce sustained future growth.”
Global net sales of the company’s extremity, hip, and knee product lines increased by 27%, 5%, and 1%, respectively, while biologics declined 4% during the first quarter of 2009 when compared to the first quarter of 2008.
Domestic sales totaled $74.4 million during the first quarter of 2009, representing an increase of 11% compared to prior year. Domestically, the company experienced growth across all of its major product lines during the first quarter of 2009. Specifically, first quarter domestic sales of the company’s extremity, hip, knee, and biologics product lines reflected growth of 34%, 8%, 2% and 2%, respectively.
International sales, as reported, were $46.6 million for the first quarter of 2009, representing a decrease of 4% compared to prior year. The company’s international sales results included an unfavorable foreign currency impact totaling approximately $3.3 million during the first quarter of 2009. Excluding the impact of foreign currency, international sales increased by 3% during the first quarter of 2009.
The company’s earnings targets, as communicated in the guidance ranges stated below for the full year and the second quarter of 2009 exclude the effect of possible future acquisitions, other material future business developments, the impact of recording non-cash stock-based compensation expense, restructuring charges, and costs associated with the company’s ongoing U.S. governmental inquiries.
The company is reiterating its previously-communicated as-adjusted earnings per share outlook, representing a target range for the full year 2009 of $0.85 to $0.92 per diluted share, as well as its 2009 net sales outlook of $500 million to $510 million. The company continues to anticipate solid operating performance during 2009, with expectations continuing for full-year adjusted operating income growth of 8% to 16% despite expectations, as previously communicated, for the unfavorable impact of currency exchange rates on operating margins during the year.
The company’s anticipated targets for the second quarter of 2009 for net sales are in the range of $120.5 million to $123.5 million, representing as-reported sales growth objectives between approximately 2% and 4% and constant-currency growth expectations of approximately 6% to 8%, with as-adjusted earnings per share results ranging from $0.17 to $0.19 per diluted share.
The company’s financial targets exclude the impact of non-cash stock-based compensation charges as well as the impact of restructuring charges. While the amount of the non-cash stock-based compensation charges 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 those expenses will range from $0.22 to $0.24 per diluted share for the full year 2009 and $0.07 to $0.08 per diluted share for the second quarter of 2009. With regard to restructuring charges, the company continues to anticipate that total pre-tax charges related to the closing of the Toulon facilities will range from approximately $28 million to $32 million, of which $25.6 million have been incurred to date.