EX-99.1 2 wmgi9252016exhibit991press.htm EXHIBIT 99.1 Exhibit


FOR IMMEDIATE RELEASE
logo09092016.jpg
Investors & Media:
Julie D. Tracy
Sr. Vice President, Chief Communications Officer
Wright Medical Group N.V.
(901) 290-5817
julie.tracy@wright.com

Wright Medical Group N.V. Reports 2016 Third Quarter Financial Results and Updates 2016 Guidance

Third Quarter 2016 Net Sales From Continuing Operations of $157 Million As Reported

Third Quarter 2016 Global Extremities and Biologics Net Sales Increased 96%, Driven By Year over Year Impact from Tornier Merger, and 9% on a Non-GAAP Pro Forma Constant Currency Basis

Third Quarter 2016 Net Loss From Continuing Operations of $53 Million; Non-GAAP Adjusted EBITDA From Continuing Operations of $6 Million

Company Reaches Settlement Agreement in Metal-On-Metal Hip Litigation

AMSTERDAM, The Netherlands - November 2, 2016 - Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial results for its third quarter ended September 25, 2016 and provided updated 2016 guidance.  As a result of the previously announced sale of the large joints (hip/knee) business to Corin Orthopaedics Holdings Limited (Corin), this business which was previously reported as a separate reporting segment is now reported as discontinued operations.

As a result of the merger between Wright Medical Group, Inc. and Tornier N.V. on October 1, 2015, legacy Wright’s historical results of operations replaced legacy Tornier’s historical results of operations for all periods prior to the merger and the results of the two legacy businesses have been consolidated only from that date forward in accordance with United States generally accepted accounting principles (GAAP). This release and Wright’s website at ir.wright.com contain certain unaudited non-GAAP combined pro forma financial results for Wright Medical Group N.V. which give effect to the merger as if it had occurred on the first day of fiscal 2015, as well as reconciliations to the most comparable GAAP measures.

Net sales from continuing operations totaled $157.3 million during the third quarter ended September 25, 2016. Combined pro forma net sales from continuing operations totaled $144.8 million during the third quarter of 2015. Global extremities and biologics net sales grew 96% as reported, and on a non-GAAP pro forma constant currency basis, grew 9%. Gross margins from continuing operations were 70.7% during the quarter ended September 25, 2016 and were 78.2% on a non-GAAP adjusted basis. Reconciliations of all historical non-GAAP financial measures used in this release to the most comparable GAAP measures can be found in the attached financial tables.

Robert Palmisano, president and chief executive officer, commented, “As anticipated, our third quarter results were impacted by revenue dis-synergies; however, the underlying drivers of growth in our business remain strong as we continued to see excellent growth from new products, in particular our SIMPLICITI and AEQUALIS ASCEND FLEX shoulder systems, our INFINITY total ankle replacement system and the ongoing commercial activities for AUGMENT Bone Graft and the SALVATION limb salvage system. Global extremities and biologics pro forma constant currency net sales growth of 9%, adjusted EBITDA from continuing operations of $5.7 million and adjusted gross margins from continuing operations of 78.2% reflect the strength of our markets and our unique position in them.”

Net loss from continuing operations for the third quarter of 2016 totaled $53 million, or $(0.51) per diluted share.





The company’s net loss from continuing operations for the third quarter of 2016 included the after-tax effects of $10.3 million of inventory step-up amortization, $6.5 million of transaction and transition costs, a gain of $3.2 million related to mark-to-market adjustments on derivatives, $10.5 million of non-cash interest expense related to its convertible notes, a $2.2 million unrealized loss related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, and $1.6 million of non-cash inventory provisions associated with a product rationalization initiative.

The company's third quarter 2016 non-GAAP net loss from continuing operations, as adjusted for the above items, was $27 million. The company's third quarter 2016 non-GAAP adjusted EBITDA from continuing operations, as defined in the non-GAAP to GAAP reconciliation provided later in this release, was $5.7 million. The attached financial tables include reconciliations of all historical non-GAAP measures to the most comparable GAAP measures.

Cash and cash equivalents totaled $314.3 million as of the end of the third quarter of 2016.

Company Reaches Settlement Agreement in Metal-On-Metal Hip Litigation and Enters into Settlement Agreement with Three of its Insurance Carriers

In a separate press release issued today, the company announced that it had reached a Master Settlement Agreement (MSA) in its metal-on-metal hip litigation and entered into a Settlement Agreement with three of its insurance carriers (Three Settling Insurers). Under the terms of the MSA, the parties agreed to settle 1,292 specifically identified CONSERVE, DYNASTY or LINEAGE revision claims which meet the eligibility requirements of the MSA and are either pending in the multi-district litigation (MDL) and the consolidated proceeding pending in state court in California (JCCP), or are subject to tolling agreements approved in the MDL or JCCP, for a total settlement amount of $240 million, of which approximately $180 million will be funded from cash on hand and $60 million will be funded from insurance recoveries. For additional information, please refer to Wright’s separate press release issued today and the disclosures in its third quarter 2016 quarterly report on Form 10-Q when filed.

Palmisano commented, “We are very pleased to have reached this settlement agreement, in particular the population of claims that the settlement covers as well as the required 95% opt-in rate for those claims. With this clarity, we will continue to focus on accelerating growth opportunities in the extremities and biologics markets. This settlement addresses approximately 85% of the known U.S. revision claims that do not have potential statute of limitations issues and removes a great deal of the uncertainty that has been associated with this litigation.”

Palmisano concluded, “One year post the close of the merger of Wright and Tornier, we are a stronger and more focused business. With the closing of the sale of our large joints business, we are now completely focused on the extremities and biologics markets. We have completed the integration of our sales forces globally with less revenue dis-synergies this year than we originally anticipated. We are ahead of schedule on our integration activities and associated benefits. We have improved our balance sheet and reached a Settlement Agreement for our metal-on-metal hip litigation. Also, the guidance we are providing today is for sales and adjusted EBITDA well ahead of the expectations we provided at the beginning of the year. While I am very pleased with what we have accomplished in our first year as a combined company, we are nowhere close to meeting our full potential, and we continue to have great opportunities for improvement. I believe we are positioned well for future success and achieving our key financial goals of mid-teens constant currency net sales growth, gross margins in the high 70% range and non-GAAP adjusted EBITDA margins of approximately 20% three to four years post the close of the merger.”

Outlook

The company is maintaining the existing midpoint of its net sales from continuing operations for full-year 2016 guidance but narrowing the range to approximately $677 million to $683 million from its previously provided guidance range of $675 million to $685. The company previously stated it expected dis-synergies to be less than the original guidance of $25 million to $30 million for full-year 2016 and today is formally updating its expectation for dis-synergies to be approximately $15 million for full-year 2016, which is consistent with the assumptions the company used to update its second quarter of 2016 guidance.





The company is also increasing its full-year 2016 non-GAAP adjusted EBITDA from continuing operations, as described in the non-GAAP reconciliation provided later in this release, to be in the range of $43 million to $48 million from its previous range of $40 million to $45 million. This guidance assumes cost synergies of approximately $25 million for full-year 2016.

The company anticipates non-GAAP adjusted earnings per share from continuing operations, including share-based compensation, as described in the non-GAAP to GAAP reconciliation provided later in this release, for full-year 2016 of $(0.52) to $(0.47) per diluted share.

The company estimates approximately 103.0 million diluted weighted-average ordinary shares outstanding for fiscal year 2016.

The company's non-GAAP adjusted EBITDA from continuing operations target is measured by adding back to net loss from continuing operations charges for interest, income taxes, depreciation and amortization expenses, non-cash share-based compensation expense and non-operating income and expense. Additionally, the company’s adjusted EBITDA from continuing operations target excludes possible future acquisitions; other material future business developments; due diligence, transaction and transition costs associated with acquisitions and divestitures; amortization of inventory step-up; and charges associated with product rationalization initiatives. Further, this adjusted EBITDA from continuing operations target excludes any expenses, earnings or losses related to the divested large joints business, legacy Wright’s divested OrthoRecon business and legacy Tornier’s divested ankle replacement and silastic toe products.

The company’s non-GAAP adjusted earnings per share from continuing operations target is measured by adding back to net loss from continuing operations charges for non-cash amortization expenses, net of taxes. Note that as a result of the company’s relatively low effective tax rate due to the valuation allowance impacting a substantial portion of the company’s income/loss, the company is currently estimating the tax effect on amortization expense at 0%. Additionally, this adjusted earnings per share from continuing operations target excludes possible future acquisitions; other material future business developments; non-cash interest expense associated with the 2017, 2020 and 2021 convertible notes; due diligence, transaction and transition costs associated with acquisitions and divestitures; amortization of inventory step-up; charges associated with product rationalization initiatives; mark-to-market adjustments to CVRs; non-cash mark-to-market derivative adjustments; and non-cash write-offs of unamortized debt discount and deferred financing charges associated with the partial settlement of the 2017 convertible notes and 2020 convertible notes. Further, this adjusted earnings per share from continuing operations target excludes any expenses, earnings or losses related to the large joints business.

All of the historical non-GAAP financial measures used in this release are reconciled to the most directly comparable GAAP measures. With respect to the company’s 2016 financial guidance regarding non-GAAP adjusted EBITDA from continuing operations and non-GAAP adjusted earnings per share from continuing operations, however, the company cannot provide a quantitative reconciliation to the most directly comparable GAAP measures without unreasonable effort due to its inability to make accurate projections and estimates related to certain information needed to calculate some of the adjustments as described above. The anticipated differences between these non-GAAP financial measures and the most directly comparable GAAP measure are described above qualitatively.

The company's anticipated ranges for net sales from continuing operations, non-GAAP adjusted EBITDA from continuing operations, and non-GAAP adjusted earnings per share 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 “Cautionary Note Regarding Forward-Looking Statements” section of this release.

Supplemental Financial Information





To view the third quarter of 2016 supplemental financial information, visit ir.wright.com. For updated information on Wright Medical Group N.V. segment reporting changes and non-GAAP combined pro forma historical financial information, including third quarter of 2016, please refer to the presentation posted on Wright’s website at ir.wright.com in the “Financial Information” section.

Internet Posting of Information

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

Conference Call and Webcast

As previously announced, Wright will host a conference call starting at 3:30 p.m. Central Time today. The live dial-in number for the call is 844-295-9436 (U.S.) / 574-990-1040 (Outside U.S.). The participant passcode for the call is “Wright.” A simultaneous webcast of the call will be available via Wright’s corporate website at www.wright.com.

A replay of the call will be available beginning at 5:30 p.m. Central Time on November 2, 2016 through November 9, 2016. To hear this replay, dial 855-859-2056 (U.S.) / 404-537-3406 (Outside U.S.) and enter passcode 69669971. 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 Investor Relations -Presentations/Calendar” section of the company’s corporate website located at www.wright.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 release, the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) today, or otherwise available in the “Investor Relations - Supplemental Financial Information” section of the company's corporate website located at www.wright.com.

The conference call may include forward-looking statements. See the cautionary information about forward-looking statements in the “Cautionary Note Regarding Forward-Looking Statements” section of this release.
 
About Wright Medical Group N.V.

Wright Medical Group N.V. is a global medical device company focused on extremities and biologics products. The company is committed to delivering innovative, value-added solutions improving quality of life for patients worldwide and is a recognized leader of surgical solutions for the upper extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics markets, three of the fastest growing segments in orthopaedics. For more information about Wright, visit www.wright.com.

™ and ® denote trademarks and registered trademarks of Wright Medical Group N.V. or its affiliates, registered as indicated in the United States, and in other countries. All other trademarks and trade names referred to in this release are the property of their respective owners.

Non-GAAP Financial Measures

To supplement the company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles, the company uses certain non-GAAP financial measures in this release. Reconciliations of the historical non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables later in this release. Wright’s non-GAAP financial measures include combined pro forma net sales; combined pro forma net sales, excluding the impact of foreign currency; net income, as adjusted; EBITDA, as adjusted; gross margin, as adjusted; earnings, as adjusted; and earnings, as adjusted, per diluted share, in each case, from continuing operations. 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. While pro forma data gives effect to the




merger with Tornier as if it had occurred on the first day of fiscal 2015 and enhances comparability of financial information between periods, pro forma data is not indicative of the results that actually would have been obtained if the merger had occurred as of the beginning of 2015. Wright’s non-GAAP financial measures exclude such items as non-cash interest expense related to the company's 2017 convertible notes, 2020 convertible notes and 2021 convertible notes, net gains and losses on mark-to-market adjustments on and settlements of derivative assets and liabilities, write-off of unamortized debt discount and deferred financing charges following the partial settlement of 2017 convertible notes and 2020 convertible notes, mark-to-market adjustments on CVRs, and transaction and transition costs, 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. It is for this reason that the company cannot provide without unreasonable effort a quantitative reconciliation to the most directly comparable GAAP measures for its 2016 financial guidance regarding non-GAAP adjusted EBITDA from continuing operations and non-GAAP adjusted earnings per share from continuing operations. Management uses the non-GAAP measures in this release 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 non-GAAP financial 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 release includes forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “intend,” “could,” “may,” “will,” “believe,” “estimate,” “look forward,” “forecast,” “goal,” “target,” “project,” “continue,” “outlook,” “guidance,” “future,” other words of similar meaning and the use of future dates. Forward-looking statements in this release include, but are not limited to, statements about the company’s anticipated financial results for 2016, including net sales from continuing operations, adjusted EBITDA from continuing operations and adjusted earnings per share from continuing operations; anticipated sales and cost synergies and dis-synergies and the timing thereof; the company’s expectations regarding the benefits of its merger with Tornier and integration efforts and progress; the effects of the MSA and settlement agreement with the Three Settling Insurers and the amount and funding of the settlement amounts; and the company’s ability to achieve its key financial goals. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Each forward-looking statement contained in this 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, the failure to integrate the businesses and realize net sales synergies and cost savings from the merger with Tornier or delay in realization thereof; operating costs and business disruption as a result of the merger, including adverse effects on employee retention and sales force productivity and on business relationships with third parties; integration costs; actual or contingent liabilities; adverse effects of diverting resources and attention to providing transition services to the purchaser of the large joints business; the adequacy of the company’s capital resources and need for additional financing; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; failure to achieve the anticipated benefits from approval of AUGMENT® Bone Graft; the effect of regulatory actions, changes in and adoption of reimbursement rates; product liability claims and product recalls; pending and threatened litigation; risks associated with the MSA and settlement agreement with the Three Settling Insurers; risks associated with international operations and expansion; fluctuations in foreign currency exchange rates; other business effects, including the effects of industry, economic or political conditions outside of the company’s control; reliance on independent distributors and sales agencies; competitor activities; changes in tax and other legislation; and the risks identified under the heading “Risk Factors” in Wright’s Annual Report on Form 10-K for the year ended December 27, 2015 filed by Wright with the SEC on February 23, 2016 and Wright’s Quarterly Report on Form 10- Q for the quarter ended September 25, 2016 anticipated to be filed by Wright with the SEC on November 2, 2016. Investors should not place considerable reliance on the forward-looking statements contained in this release. Investors are encouraged to read Wright’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 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.





--Tables Follow--
Wright Medical Group N.V.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data--unaudited)
 
Three months ended
 
Nine months ended
 
September 25, 2016
 
September 30, 2015
 
September 25, 2016
 
September 30, 2015
Net sales
$
157,332

 
$
80,139

 
$
497,339

 
$
238,493

Cost of sales
46,149

 
23,052

 
141,824

 
63,812

Gross profit
111,183


57,087


355,515


174,681

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
129,840

 
85,997

 
401,069

 
250,801

Research and development
12,481

 
9,570

 
36,705

 
24,644

Amortization of intangible assets
7,466

 
2,562

 
21,407

 
7,741

Total operating expenses
149,787

 
98,129

 
459,181

 
283,186

Operating loss
(38,604
)
 
(41,042
)
 
(103,666
)
 
(108,505
)
Interest expense, net
16,795

 
11,185

 
41,673

 
29,793

Other (income) expense, net
(365
)
 
10,236

 
(3,494
)
 
7,395

Loss from continuing operations before income taxes
(55,034
)
 
(62,463
)
 
(141,845
)
 
(145,693
)
(Benefit) provision for income taxes
(2,325
)
 
187

 
(6,913
)
 
511

Net loss from continuing operations
$
(52,709
)

$
(62,650
)
 
$
(134,932
)
 
$
(146,204
)
Loss from discontinued operations, net of tax
(57,436
)
 
$
(36,211
)
 
$
(252,571
)
 
$
(46,720
)
Net loss
$
(110,145
)
 
$
(98,861
)
 
$
(387,503
)
 
$
(192,924
)
 
 
 
 
 
 
 
 
Net loss from continuing operations per share, basic (1)
$
(0.51
)
 
$
(1.19
)
 
$
(1.31
)
 
$
(2.78
)
Net loss from continuing operations per share, diluted (1)
$
(0.51
)
 
$
(1.19
)
 
$
(1.31
)
 
$
(2.78
)
 
 
 
 
 
 
 
 
Net loss per share, basic (1)
$
(1.07
)
 
$
(1.87
)
 
$
(3.77
)
 
$
(3.67
)
Net loss per share, diluted (1)
$
(1.07
)
 
$
(1.87
)
 
$
(3.77
)
 
$
(3.67
)
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding-basic (1)
103,072

 
52,750

 
102,854

 
52,607

Weighted-average number of shares outstanding-diluted (1)
103,072

 
52,750

 
102,854

 
52,607

_______________________________
(1) 
The prior year balances were converted to meet post-merger valuations.




Wright Medical Group N.V.
Consolidated Net Sales Analysis
(dollars in thousands--unaudited)
 
Three months ended
 
Nine months ended
 
September 25, 2016
 
September 30, 2015
 
%
change
 
September 25, 2016
 
September 30, 2015
 
%
change
U.S.
 
 
 
 
 
 
 
 
 
 
 
Lower extremities
51,586

 
43,929

 
17.4
 %
 
158,872

 
128,277

 
23.9
 %
Upper extremities
46,207

 
3,654

 
1,164.6
 %
 
146,117

 
11,703

 
1,148.5
 %
Biologics
18,247

 
12,198

 
49.6
 %
 
53,167

 
34,612

 
53.6
 %
Sports med & other
2,025

 
613

 
230.3
 %
 
6,326

 
1,558

 
306.0
 %
Total U.S.
$
118,065

 
$
60,394

 
95.5
 %
 
$
364,482

 
$
176,150

 
106.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
 
 
 
 
Lower extremities
14,201

 
10,917

 
30.1
 %
 
45,984

 
35,313

 
30.2
 %
Upper extremities
17,326

 
1,764

 
882.2
 %
 
62,241

 
5,723

 
987.6
 %
Biologics
4,739

 
5,260

 
(9.9
)%
 
13,804

 
15,070

 
(8.4
)%
Sports med & other
3,001

 
1,804

 
66.4
 %
 
10,828

 
6,237

 
73.6
 %
Total International
$
39,267

 
$
19,745

 
98.9
 %
 
$
132,857

 
$
62,343

 
113.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
 
 
 
 
 
 
 
 
 
 
Lower extremities
65,787

 
54,846

 
19.9
 %
 
204,856

 
163,590

 
25.2
 %
Upper extremities
63,533

 
5,418

 
1,072.6
 %
 
208,358

 
17,426

 
1,095.7
 %
Biologics
22,986

 
17,458

 
31.7
 %
 
66,971

 
49,682

 
34.8
 %
Sports med & other
5,026

 
2,417

 
107.9
 %
 
17,154

 
7,795

 
120.1
 %
Total net sales
$
157,332

 
$
80,139

 
96.3
 %
 
$
497,339

 
$
238,493

 
108.5
 %






Wright Medical Group N.V.
Reconciliation of Non-GAAP Combined Pro Forma Net Sales to Net Sales
(dollars in thousands--unaudited)
 
Three months ended
 
September 30, 2015
 
Standalone Wright Medical Group, Inc.
 
Standalone Tornier N.V., recast (1)
 
Discontinued
net sales (2)
 
Non-GAAP
combined pro forma
net sales
U.S.
 
 
 
 
 
 
 
Lower extremities
$
43,929

 
$
8,675

 
$
(2,905
)
 
$
49,699

Upper extremities
3,654

 
37,908

 

 
41,562

Biologics
12,198

 
412

 

 
12,610

Sports med & other
613

 
1,810

 

 
2,423

Total extremities & biologics
60,394

 
48,805

 
(2,905
)
 
106,294

Large joint

 
33

 
(33
)
 

Total U.S.
$
60,394

 
$
48,838

 
$
(2,938
)
 
$
106,294

 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
Lower extremities
$
10,917

 
$
2,275

 
$

 
$
13,192

Upper extremities
1,764

 
14,862

 

 
16,626

Biologics
5,260

 
114

 

 
5,374

Sports med & other
1,804

 
1,505

 

 
3,309

Total extremities & biologics
19,745

 
18,756

 

 
38,501

Large joint

 
7,350

 
(7,350
)
 

Total International
$
19,745

 
$
26,106

 
$
(7,350
)
 
$
38,501

 
 
 
 
 
 
 
 
Global
 
 
 
 
 
 
 
Lower extremities
$
54,846

 
$
10,950

 
$
(2,905
)
 
$
62,891

Upper extremities
5,418

 
52,770

 

 
58,188

Biologics
17,458

 
526

 

 
17,984

Sports med & other
2,417

 
3,315

 

 
5,732

Total extremities & biologics
80,139

 
67,561

 
(2,905
)
 
144,795

Large joint

 
7,383

 
(7,383
)
 

Total net sales
$
80,139

 
$
74,944

 
$
(10,288
)
 
$
144,795

_______________________________
(1) 
Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting.
(2) 
To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products and the global sales associated with Tornier's Large Joint business.




Wright Medical Group N.V.
Reconciliation of Non-GAAP Combined Pro Forma Net Sales to Net Sales
(dollars in thousands--unaudited)
 
Nine months ended
 
September 30, 2015
 
Standalone Wright Medical Group, Inc.
 
Standalone Tornier N.V., recast (1)
 
Discontinued
net sales
(2)
 
Non-GAAP
combined pro forma
net sales
U.S.
 
 
 
 
 
 
 
Lower extremities
128,277

 
29,636

 
(9,732
)
 
148,181

Upper extremities
11,703

 
115,846

 

 
127,549

Biologics
34,612

 
1,290

 

 
35,902

Sports med & other
1,558

 
5,021

 

 
6,579

Total extremities & biologics
176,150

 
151,793

 
(9,732
)
 
318,211

Large joint

 
119

 
(119
)
 

Total U.S.
$
176,150

 
$
151,912

 
$
(9,851
)
 
$
318,211

 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
Lower extremities
35,313

 
7,402

 

 
42,715

Upper extremities
5,723

 
51,293

 

 
57,016

Biologics
15,070

 
357

 

 
15,427

Sports med & other
6,237

 
5,372

 

 
11,609

Total extremities & biologics
62,343

 
64,424

 

 
126,767

Large joint

 
29,921

 
(29,921
)
 

Total International
$
62,343

 
$
94,345

 
$
(29,921
)
 
$
126,767

 
 
 
 
 
 
 
 
Global
 
 
 
 
 
 
 
Lower extremities
163,590

 
37,038

 
(9,732
)
 
190,896

Upper extremities
17,426

 
167,139

 

 
184,565

Biologics
49,682

 
1,647

 

 
51,329

Sports med & other
7,795

 
10,393

 

 
18,188

Total extremities & biologics
238,493

 
216,217

 
(9,732
)
 
444,978

Large joint

 
30,040

 
(30,040
)
 

Total sales
$
238,493

 
$
246,257

 
$
(39,772
)
 
$
444,978

_______________________________
(1) 
Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting.
(2) 
To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products, and the global sales associated with Tornier's Large Joint business.





Wright Medical Group N.V.
Supplemental Combined Pro Forma Net Sales Information
(unaudited)
 
Third Quarter 2016 net sales growth/(decline)
 
U.S. combined
pro
forma
Int'l combined pro forma
constant
currency
Int'l combined
pro
forma
Global combined pro
forma constant
currency
Global combined
pro
forma
Product line
 
 
 
 
 
Lower extremities
4%
11%
8%
5%
5%
Upper extremities
11%
5%
4%
9%
9%
Biologics
45%
(10%)
(12%)
28%
28%
Sports med & other
(16%)
(5%)
(9%)
(10%)
(12%)
Total net sales
11%
4%
2%
9%
9%

 
Nine months ended September 25, 2016 net sales growth/(decline)
 
U.S. combined
pro
forma
Int'l combined pro forma
constant
currency
Int'l combined
pro
forma
Global combined pro
forma constant
currency
Global combined
pro
forma
Product line
 
 
 
 
 
Lower extremities
7%
11%
8%
8%
7%
Upper extremities
15%
11%
9%
13%
13%
Biologics
48%
(7%)
(11%)
31%
30%
Sports med & other
(4%)
(4%)
(7%)
(4%)
(6%)
Total net sales
15%
7%
5%
12%
12%





Wright Medical Group N.V.
Reconciliation of Non-GAAP Adjusted Gross Margins to Gross Margins from Continuing Operations
(dollars in thousands--unaudited)
 
Three months ended
 
Nine months ended
 
September 25, 2016
 
September 25, 2016
Gross profit from continuing operations, as reported
$
111,183

 
$
355,515

Gross margins from continuing operations, as reported
70.7
%
 
71.5
%
Reconciling items impacting gross profit:
 
 
 
Inventory step-up amortization
10,306

 
30,922

Product rationalization
1,573

 
3,527

Transaction and transition costs

 
124

Non-GAAP gross profit from continuing operations, as adjusted
$
123,062

 
$
390,088

Net sales from continuing operations
157,332

 
497,339

Non-GAAP adjusted gross margins from continuing operations
78.2
%
 
78.4
%





Wright Medical Group N.V.
Reconciliation of Adjusted Non-GAAP Earnings Per Share to Net Loss from Continuing Operations Per Share
(dollars in thousands, except per share data--unaudited)
 
Three months ended
 
Nine months ended
 
September 25, 2016
 
September 25, 2016
Net loss from continuing operations, as reported
$
(52,709
)
 
$
(134,932
)
Net loss from continuing operations per share, as reported
$
(0.51
)
 
$
(1.31
)
Reconciling items:
 
 
 
Inventory step-up amortization (1)
10,306

 
30,922

Product rationalization (1)
1,573

 
3,527

Non-cash interest expense on convertible notes
10,516

 
25,812

Non-cash loss on extinguishment of debt

 
12,343

Derivatives mark-to-market adjustments
(3,187
)
 
(26,460
)
Transaction and transition costs (3)
6,532

 
24,425

Management changes (2)

 
1,348

CVR mark-to-market adjustments
2,243

 
8,968

Contingent consideration fair value adjustment
70

 
376

Legal settlement (2)

 
1,800

Costs associated with new convertible debt (2)

 
234

IRS settlement (4)

 
(3,073
)
Tax effect of reconciling items
(2,313
)
 
(5,634
)
Non-GAAP net loss from continuing operations, as adjusted
$
(26,969
)
 
$
(60,344
)
Add back amortization of intangible assets
7,466

 
21,407

Adjusted non-GAAP earnings
$
(19,503
)
 
$
(38,937
)
Weighted-average basic shares outstanding
103,072

 
102,854

Adjusted non-GAAP earnings per share
$
(0.19
)
 
$
(0.38
)
_______________________________
(1) 
Impacting gross profit.
(2) 
Impacting selling, general, and administrative expense.
(3) 
Impacting selling, general, and administrative expense and research and development expense for $6.4 million and $0.2 million, respectively, for the three months ended September 25, 2016. Impacting gross profit; selling, general, and administrative expense; and research and development expense for $0.1 million, $23.9 million, and $0.4 million, respectively, for the nine months ended September 25, 2016.
(4) 
IRS settlement includes $0.8 million of interest income and $2.3 million tax benefit.





Wright Medical Group N.V.
Reconciliation of Non-GAAP Adjusted EBITDA to Net Loss from Continuing Operations
(dollars in thousands--unaudited)
 
Three months ended
 
Nine months ended
 
September 25, 2016
 
September 25, 2016
Net loss from continuing operations
$
(52,709
)
 
$
(134,932
)
Interest expense, net
16,795

 
41,673

Benefit from income taxes
(2,325
)
 
(6,913
)
Depreciation
14,885

 
41,005

Amortization
7,466

 
21,407

Non-GAAP EBITDA
$
(15,888
)
 
$
(37,760
)
Reconciling items impacting EBITDA:
 
 
 
Non-cash share-based compensation expense
3,528

 
9,901

Other income, net
(365
)
 
(3,494
)
Inventory step-up amortization
10,306

 
30,922

Product rationalization
1,573

 
3,527

Transaction and transition costs
6,532

 
24,425

Management changes

 
1,348

Legal settlement

 
1,800

Costs associated with new convertible debt

 
234

Non-GAAP adjusted EBITDA
$
5,686

 
$
30,903






Wright Medical Group N.V.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)
 
September 25, 2016
 
December 27, 2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
314,314

 
$
139,804

Accounts receivable, net
121,794

 
131,050

Inventories
170,819

 
210,701

Prepaid expenses and other current assets
110,702

 
59,842

Current assets held for sale
21,805

 
18,487

Total current assets
739,434

 
559,884

 
 
 
 
Property, plant and equipment, net
211,096

 
224,256

Goodwill and intangible assets, net
1,103,571

 
1,117,917

Other assets (1)
262,225

 
139,754

Non-current assets held for sale

 
31,683

Total assets (1)
$
2,316,326

 
$
2,073,494

 
 
 
 
Liabilities and shareholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
25,181

 
$
30,904

Accrued expenses and other current liabilities
399,985

 
171,171

Current portion of long-term obligations
4,117

 
2,171

Current liabilities held for sale
2,049

 
2,692

Total current liabilities
431,332

 
206,938

Long-term obligations (1)
769,333

 
561,201

Other liabilities
370,556

 
250,329

Total liabilities (1)
1,571,221

 
1,018,468

 
 
 
 
Shareholders' equity
745,105

 
1,055,026

Total liabilities and shareholders' equity (1)
$
2,316,326

 
$
2,073,494

_______________________________
(1) 
The prior year debt issuance costs were reclassified to account for adoption of ASU 2015-03 and ASU 2015-15.