Wright Medical Group, Inc. Reports Results for Third Quarter Ended September 30, 2009

http://www.businesswire.com/news/home/20091029006394/en

Net Sales and Adjusted EPS Exceed Previously Communicated Outlook Ranges;

Strong U.S. Extremities Growth Continues with 24% Increase Over Prior Year
ARLINGTON, Tenn.--(Business Wire)--
Wright Medical Group, Inc. (NASDAQ: WMGI), a global orthopaedic medical device
company specializing in the design, manufacture and marketing of reconstructive
joint devices and biologics, today reported financial results for its third
quarter ended September 30, 2009.

Net sales totaled $117.7 million during the third quarter ended September 30,
2009, representing a 6% increase over net sales of $111.1 million during the
third quarter of 2008. Foreign currency had no net impact on the Company`s third
quarter 2009 sales results.

For the third quarter of 2009, the Company recorded net income of $4.2 million,
or $0.11 per diluted share, compared to net income for the third quarter of 2008
of $4.2 million, or $0.11 per diluted share. Net income for the third quarter of
2009 included the after-tax effects of approximately $3.3 million of non-cash
stock-based compensation expense, $1.6 million of expenses related to the
ongoing U.S. governmental inquiries, and $131,000 of restructuring charges
related to the previously announced closure of the Company`s Toulon, France
operations. Net income for the third quarter of 2008 included the after-tax
effects of approximately $3.4 million of non-cash stock-based compensation
expense, $1.5 million of expenses related to the ongoing U.S. Governmental
inquiries, and $685,000 of restructuring charges related to the previously
announced closure of the Company`s Toulon, France operations.

Excluding those items previously mentioned, third quarter net income, as
adjusted, totaled $7.6 million in 2009 compared to $7.6 million in 2008, while
diluted earnings per share, as adjusted, totaled to $0.19 for both the third
quarter of 2009 and 2008. A reconciliation of U.S. GAAP to "as adjusted" results
is included in the attached financial tables.

Gary D. Henley, President and Chief Executive Officer commented, "Highlights for
the quarter were continued excellent sales performance by our U.S. extremities
franchise, significant improvement in our international business, and better
than expected foreign currency exchange rates. Together these helped us exceed
our top-line guidance range."

Mr. Henley continued, "We are also pleased with our operational execution again
this quarter as excellent expense control and working capital improvement drove
adjusted EPS results above our previously communicated earnings outlook range
and produced free cash flow of $8.8 million for the quarter. Additionally, we
continued to expand the underlying capabilities of our business, including the
further expansion of our product portfolios, the enhancement and expansion of
our sales force, and the continued improvement of our working capital
utilization."

Sales Review

Global net sales of the Company`s extremity, hip, and knee product lines
increased by 18%, 7%, and 5%, respectively, while the biologics product line
declined 4% during the third quarter of 2009 when compared to the third quarter
of 2008.

Domestic sales totaled $73.8 million during the third quarter of 2009,
representing an increase of 4% compared to prior year. Domestically, the Company
experienced growth in its extremity and knee product lines of 24% and 1%, while
its biologics and hip product lines declined 3% and 4%, respectively.

International sales, as reported, were $44.0 million for the third quarter of
2009, representing an increase of 9% compared to prior year, both as reported
and constant currency. There was no net impact of foreign currency during the
third quarter of 2009.

Outlook

The Company`s earnings targets, as communicated in the guidance ranges stated
below for the full year and the fourth quarter of 2009 exclude the effect of
possible future acquisitions, other material future business developments, the
impact of recording non-cash stock-based compensation and restructuring charges,
and costs associated with the Company`s ongoing U.S. governmental inquiries.

The Company has narrowed its sales target for the full year 2009 to a range of
$480 million to $485 million, representing the upper end of its
previously-communicated guidance range of $475 million to $485 million. This new
sales target represents annualized as-reported growth between approximately 3%
and 4% and constant-currency growth expectations of approximately 4% to 5%. The
Company is also narrowing its previously-communicated as-adjusted earnings per
share outlook to a target range for the full year of $0.80 to $0.84 per diluted
share compared to its previously communicated guidance range of $0.78 to $0.85
per share.

The Company`s anticipated targets for the fourth quarter of 2009 for net sales
are in the range of $122 million to $127 million, representing as-reported sales
growth objectives between approximately 2% and 6% and constant-currency growth
expectations of approximately 1% to 5%, with as-adjusted earnings per share
results ranging from $0.22 to $0.26 per diluted share.

As noted above, 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 $0.23 per diluted share for the full year 2009
and $0.06 to $0.07 per diluted share for the fourth quarter of 2009. With regard
to restructuring charges, the Company has restated its estimate of total pre-tax
charges related to the closing of the Toulon facilities to a range of
approximately $28 million to $32 million, of which $26.6 million have been
incurred to date. Additionally, we anticipate incurring pre-tax restructuring
charges related to the change in our French distribution and support model of $4
million to $5 million, with $3 million to $4 million of these charges in the
fourth quarter of 2009.

The Company`s anticipated targets for net sales, adjusted earnings per share,
stock-based compensation charges and restructuring charges are forward-looking
statements. 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
866-314-5050 (domestic) or 617-213-8051 (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 6:30 p.m. (Central
Time) today and continuing until November 5, 2009. To hear this replay, dial
888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode
71198224. 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 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, 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, costs related to the on-going U.S. governmental
inquiries, restructuring charges 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.

Safe-Harbor Statement

This press release contains "forward-looking statements" as defined under U.S.
federal securities laws. 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. Such risks and uncertainties
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, 2008, under the heading, "Risk Factors" and
our subsequently filed Exchange Act reports). Readers 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.

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.

--Tables Follow--

Wright Medical Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data--unaudited)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,

2009
2008
2009
2008

Net sales $ 117,742 $ 111,096 $ 357,580 $ 345,438
Cost of sales 35,880 32,038 110,646 99,287
Gross profit 81,862 79,058 246,934 246,151

Operating expenses:
Selling, general and administrative 63,703 61,897 196,133 197,361
Research and development 8,537 8,338 26,460 24,715
Amortization of intangible assets 1,274 1,287 3,899 3,604
Restructuring charges 131 685 991 5,595
Acquired in-process research and development - - - 2,490
Total operating expenses 73,645 72,207 227,483 233,765

Operating income 8,217 6,851 19,451 12,386
Interest expense, net 1,435 717 3,974 1,127
Other (income) expense, net 108 (284 ) (358 ) (907 )
Income before income taxes 6,674 6,418 15,835 12,166
Provision for income taxes 2,522 2,231 5,939 6,278
Net income $ 4,152 $ 4,187 $ 9,896 $ 5,888

Net income per share, basic $ 0.11 $ 0.11 $ 0.27 $ 0.16
Net income per share, diluted $ 0.11 $ 0.11 $ 0.26 $ 0.16
Weighted-average number of common shares outstanding, basic 37,431 37,095 37,331 36,845
Weighted-average number of common shares outstanding, diluted 37,551 38,037 37,395 37,536

Wright Medical Group, Inc.
Consolidated Sales Analysis
(dollars in thousands--unaudited)

Three Months Ended Nine Months Ended
September 30, September 30, % September 30, September 30, %
2009 2008 change 2009 2008 change
Geographic
Domestic $ 73,780 $ 70,883 4.1 % $ 221,280 $ 207,242 6.8 %
International 43,962 40,213 9.3 % 136,300 138,196 (1.4 %)
Total net sales $ 117,742 $ 111,096 6.0 % $ 357,580 $ 345,438 3.5 %

Product Line
Hip products $ 40,055 $ 37,562 6.6 % $ 123,030 $ 118,873 3.5 %
Knee products 30,114 28,692 5.0 % 90,727 90,116 0.7 %
Extremity products 25,546 21,706 17.7 % 77,116 64,070 20.4 %
Biologics products 19,437 20,197 (3.8 %) 58,672 61,548 (4.7 %)
Other 2,590 2,939 (11.9 %) 8,035 10,831 (25.8 %)
Total net sales $ 117,742 $ 111,096 6.0 % $ 357,580 $ 345,438 3.5 %

Wright Medical Group, Inc.
Reconciliation of Net Sales to Net Sales Excluding the Impact of Foreign Currency
(dollars in thousands--unaudited)

Three Months Ended Nine Months Ended
September 30, 2009 September 30, 2009
International Total International Total

Net Sales Net Sales
Net Sales Net Sales
Net sales, as reported $ 43,962 $ 117,742 $ 136,300 $ 357,580
Currency impact as compared to prior period 0 0 6,419 6,419
Net sales, excluding the impact of foreign currency $ 43,962 $ 117,742 $ 142,719 $ 363,999

Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(in thousands, except per share data--unaudited)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,

2009
2008
2009
2008
Operating Income
Operating income, as reported $ 8,217 $ 6,851 $ 19,451 $ 12,386
Reconciling items impacting Gross Profit:
Inventory step-up amortization 10 22 70 95
Non-cash, stock-based compensation 335 300 938 952
Total 345 322 1,008 1,047
Reconciling items impacting Selling, General and Administrative expenses:
Non-cash, stock-based compensation 2,517 2,623 7,822 8,440
U.S. governmental inquiries 1,585 1,546 7,659 4,732
Appellate court decision - - - 2,346
Total 4,102 4,169 15,481 15,518
Reconciling items impacting Research and Development expenses:
Non-cash, stock-based compensation 480 430 1,440 1,096
Other Reconciling Items:
Restructuring charges 131 685 991 5,595
Acquired in-process research and development - - - 2,490
Total 131 685 991 8,085
Operating income, as adjusted $ 13,275 $ 12,457 $ 38,371 $ 38,132
Operating income, as adjusted, as a percentage of net sales 11.3 % 11.2 % 10.7 % 11.0 %

Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(continued)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Net Income
Net income, as reported $ 4,152 $ 4,187 $ 9,896 $ 5,888
Pre-tax impact of reconciling items:
Non-cash, stock-based compensation 3,332 3,353 10,200 10,488
Restructuring charges 131 685 991 5,595
Inventory step-up amortization 10 22 70 95
U.S. governmental inquiries 1,585 1,546 7,659 4,732
Appellate court decision (including interest) - - - 2,638
Acquired in-process research and development - - - 2,490
Total 5,058 5,606 18,920 26,038
Tax effect of reconciling items:
Non-cash, stock-based compensation (968 ) (1,118 ) (3,005 ) (3,098 )
Restructuring charges (52 ) (437 ) (387 ) (2,167 )
Inventory step-up amortization (4 ) (9 ) (27 ) (37 )
U.S. governmental inquiries (624 ) (609 ) (2,997 ) (1,865 )
Appellate court decision - - - (1,039 )
Acquired in-process research and development - - - -
Total (1,648 ) (2,173 ) (6,416 ) (8,206 )
Net income, as adjusted $ 7,562 $ 7,620 $ 22,400 $ 23,720

Three Months Ended Three Months Ended
September 30, 2009 September 30, 2008
As Reported As Adjusted As Reported As Adjusted
Basic net income $ 4,152 $ 7,562 $ 4,187 $ 7,620
Interest expense on convertible notes N/A 935 N/A 937
Diluted net income $ 4,152 $ 8,497 $ 4,187 $ 8,557

Basic shares 37,431 37,431 37,095 37,095
Dilutive effect of stock options and restricted shares 120 120 942 942
Dilutive effect of convertible notes N/A 6,126 - 6,126
Diluted shares 37,551 43,677 38,037 44,163

Net income per share, diluted $ 0.11 $ 0.19 $ 0.11 $ 0.19

Wright Medical Group, Inc.
Reconciliation of As Reported Results to Non-GAAP Financial Measures
(continued)

Nine Months Ended Nine Months Ended
September 30, 2009 September 30, 2008
As Reported As Adjusted As Reported As Adjusted
Basic net income $ 9,896 $ 22,400 $ 5,888 $ 23,720
Interest expense on convertible notes N/A 2,805 N/A 2,811
Diluted net income $ 9,896 $ 25,205 $ 5,888 $ 26,531

Basic shares 37,331 37,331 36,845 36,845
Dilutive effect of stock options and restricted shares 64 64 691 691
Dilutive effect of convertible notes - 6,126 - 6,126
Diluted shares 37,395 43,521 37,536 43,662

Net income per share, diluted $ 0.26 $ 0.58 $ 0.16 $ 0.61

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Net Income per Diluted Share
Net income, as reported, per diluted share $ 0.11 $ 0.11 $ 0.26 $ 0.16
Interest expense on convertible notes 0.02 0.02 0.06 0.06
Dilutive effect of convertible notes (0.02 ) (0.02 ) (0.04 ) (0.02 )
Non-cash, stock-based compensation 0.05 0.05 0.17 0.17
Restructuring charges 0.00 0.01 0.01 0.08
Inventory step-up amortization 0.00 0.00 0.00 0.00
U.S. governmental inquiries 0.02 0.02 0.11 0.07
Appellate court decision - - - 0.04
Acquired in-process research and development - - - 0.06
Net income, as adjusted, per diluted share $ 0.19 $ 0.19 $ 0.58 $ 0.61

Wright Medical Group, Inc.
Reconciliation of Effective Tax Rate, As Reported, to Effective Tax Rate, As Adjusted
(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,

2009
2008
2009
2008
Effective tax rate, as reported 37.8 % 34.8 % 37.5 % 51.6 %
Non-cash, stock-based expense (2.6 %) (1.3 %) (2.6 %) (3.2 %)
Restructuring charges 0.0 % 2.8 % 0.1 % (4.1 %)
Inventory step-up amortization 0.0 % 0.0 % 0.0 % 0.0 %
U.S. governmental inquiries 0.3 % 0.3 % 0.5 % (0.3 %)
Appellate court decision - - - (0.3 %)
Acquired in-process research and development - - - (5.8 %)
Effective tax rate, as adjusted 35.5 % 36.6 % 35.5 % 37.9 %

Wright Medical Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)

September 30, December 31,
2009
2008

Assets
Current assets:
Cash and cash equivalents $ 121,234 $ 87,865
Marketable securities 40,440 57,614
Accounts receivable, net 110,288 102,046
Inventories 166,339 176,059
Prepaid expenses and other current assets 45,839 53,071
Total current assets 484,140 476,655

Property, plant and equipment, net 137,665 133,651
Goodwill and intangible assets, net 71,497 70,772
Other assets 12,054 11,052
Total assets $ 705,356 $ 692,130

Liabilities and stockholders` equity
Current liabilities:
Accounts payable $ 14,025 $ 15,877
Accrued expenses and other current liabilities 52,821 59,247
Current portion of long-term obligations 162 125
Total current liabilities 67,008 75,249
Long-term obligations 200,144 200,136
Other liabilities 3,939 5,117
Total liabilities 271,091 280,502

Stockholders` equity 434,265 411,628
Total liabilities and stockholders` equity $ 705,356 $ 692,130

Wright Medical Group, Inc.
John K. Bakewell, 901-867-4527

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