Wright Medical Group Inc. (WMGI, Financial) filed Quarterly Report for the period ended 2010-03-31.
Wright Medical Group Inc. has a market cap of $715.6 million; its shares were traded at around $18.46 with a P/E ratio of 34.2 and P/S ratio of 1.4. WMGI is in the portfolios of Stanley Druckenmiller of Duquesne Capital Management, LLC, PRIMECAP Management.
Net Sales. Overall, our net sales increased 9% in the first quarter of 2010 compared to the first quarter of 2009. We experienced continued growth in our extremity product line, which increased 16% over prior year, as well as growth in our hip and knee businesses of 10% and 7%, respectively, over the first quarter of 2009. Our biologics product line sales compared to the first quarter of 2009 were relatively flat. Geographically, our domestic net sales totaled $77.7 million in the first quarter of 2010 and $74.4 million in the first quarter of 2009, representing 59% and 61% of total net sales, respectively, and growth of 5% in 2010 compared to 2009. Our international net sales totaled $53.5 million in the first quarter of 2010, compared to $46.6 million in the first quarter of 2009, representing growth of 15%. This increase is primarily a result of increased sales in almost all of our European markets and Australia, as well as a $2.4 million favorable currency impact.
Selling, General and Administrative. Our selling, general and administrative expenses as a percentage of net sales totaled 58.2% in the first quarter of 2010, a 3.1 percentage point increase from 55.1% in the first quarter of 2009. Selling, general and administrative expense for the first quarter of 2010 included $2.3 million of non-cash, stock based compensation expense (1.7% of net sales) and $8.1 million of costs associated with U.S. government inquiries (6.1% of net sales), $8.0 million of which was for managements estimate of a monetary payment for the potential settlement of the ongoing investigation by the DOJ. During the first quarter of 2009, selling, general and administrative expense included $2.1 million of non-cash, stock based compensation expense (1.7% of net sales) and $4.1 million of costs, primarily legal fees, associated with U.S. government inquiries (3.4% of net sales). The remaining increase in selling, general and administrative expenses as a percentage of sales during the first quarter of 2010 is primarily due to increased expense relating to the expansion of our domestic foot and ankle sales force.
amount of our intangible assets became fully amortized at the end of 2009. Based on the intangible assets held as of March 31, 2010, we expect to recognize amortization expense of approximately $2.5 million for the full year of 2010, $2.3 million in 2011, $2.2 million in 2012, $1.9 million in 2013, and $1.7 million in 2014.
In 2007, we announced our plans to close our facilities in Toulon, France. This announcement came after a thorough evaluation in which it was determined that we had excess manufacturing capacity and redundant distribution and administrative resources that would be best eliminated through the closure of this facility. The majority of our restructuring activities were complete by the end of 2007, with production now conducted in our existing manufacturing facility in Arlington, Tennessee and the distribution activities being carried out from our European headquarters in Amsterdam, the Netherlands. We have estimated that total pre-tax restructuring charges will be approximately $28 million to $30 million, of which we have recognized $27.1 million through March 31, 2010. We anticipate that recording the remaining $1 million to $3 million of restructuring expenses could have a material impact on our results of operations in the period incurred, however we do not expect that the restructuring will have a material impact on our financial condition or liquidity. We began realizing the benefits from this restructuring within selling, general and administrative expenses in 2008. While we began realizing the benefits from this restructuring within cost of sales in 2009, unfavorable currency exchange rates and increased raw material and other manufacturing costs offset some of those benefits. See Note 9 to our condensed consolidated financial statements for further discussion of our restructuring charges.
During 2007, we issued $200 million of Convertible Senior Notes due 2014, which generated net proceeds of $193.5 million. The notes pay interest semiannually at an annual rate of 2.625%. The notes are convertible into shares of our common stock at an initial conversion rate of 30.6279 shares per $1,000 principal amount of the notes, which represents a conversion price of $32.65 per share. We will make scheduled interest payments in 2010 related to the notes totaling $5.3 million.
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Wright Medical Group Inc. has a market cap of $715.6 million; its shares were traded at around $18.46 with a P/E ratio of 34.2 and P/S ratio of 1.4. WMGI is in the portfolios of Stanley Druckenmiller of Duquesne Capital Management, LLC, PRIMECAP Management.
Highlight of Business Operations:
Significant Quarterly Business Developments. Net sales increased 9% in the first quarter of 2010 to $131.2 million, compared to net sales of $120.9 million in the first quarter of 2009. In the first quarter of 2010, we recorded a net loss of $0.5 million, compared to net income of $3.3 million for the first quarter of 2009. In the first quarter of 2010 we recorded an estimate of a monetary payment for the potential settlement of the ongoing investigation by the U.S. Department of Justice (DOJ) for $8.0 million ($6.4 million, net of taxes).Net Sales. Overall, our net sales increased 9% in the first quarter of 2010 compared to the first quarter of 2009. We experienced continued growth in our extremity product line, which increased 16% over prior year, as well as growth in our hip and knee businesses of 10% and 7%, respectively, over the first quarter of 2009. Our biologics product line sales compared to the first quarter of 2009 were relatively flat. Geographically, our domestic net sales totaled $77.7 million in the first quarter of 2010 and $74.4 million in the first quarter of 2009, representing 59% and 61% of total net sales, respectively, and growth of 5% in 2010 compared to 2009. Our international net sales totaled $53.5 million in the first quarter of 2010, compared to $46.6 million in the first quarter of 2009, representing growth of 15%. This increase is primarily a result of increased sales in almost all of our European markets and Australia, as well as a $2.4 million favorable currency impact.
Selling, General and Administrative. Our selling, general and administrative expenses as a percentage of net sales totaled 58.2% in the first quarter of 2010, a 3.1 percentage point increase from 55.1% in the first quarter of 2009. Selling, general and administrative expense for the first quarter of 2010 included $2.3 million of non-cash, stock based compensation expense (1.7% of net sales) and $8.1 million of costs associated with U.S. government inquiries (6.1% of net sales), $8.0 million of which was for managements estimate of a monetary payment for the potential settlement of the ongoing investigation by the DOJ. During the first quarter of 2009, selling, general and administrative expense included $2.1 million of non-cash, stock based compensation expense (1.7% of net sales) and $4.1 million of costs, primarily legal fees, associated with U.S. government inquiries (3.4% of net sales). The remaining increase in selling, general and administrative expenses as a percentage of sales during the first quarter of 2010 is primarily due to increased expense relating to the expansion of our domestic foot and ankle sales force.
amount of our intangible assets became fully amortized at the end of 2009. Based on the intangible assets held as of March 31, 2010, we expect to recognize amortization expense of approximately $2.5 million for the full year of 2010, $2.3 million in 2011, $2.2 million in 2012, $1.9 million in 2013, and $1.7 million in 2014.
In 2007, we announced our plans to close our facilities in Toulon, France. This announcement came after a thorough evaluation in which it was determined that we had excess manufacturing capacity and redundant distribution and administrative resources that would be best eliminated through the closure of this facility. The majority of our restructuring activities were complete by the end of 2007, with production now conducted in our existing manufacturing facility in Arlington, Tennessee and the distribution activities being carried out from our European headquarters in Amsterdam, the Netherlands. We have estimated that total pre-tax restructuring charges will be approximately $28 million to $30 million, of which we have recognized $27.1 million through March 31, 2010. We anticipate that recording the remaining $1 million to $3 million of restructuring expenses could have a material impact on our results of operations in the period incurred, however we do not expect that the restructuring will have a material impact on our financial condition or liquidity. We began realizing the benefits from this restructuring within selling, general and administrative expenses in 2008. While we began realizing the benefits from this restructuring within cost of sales in 2009, unfavorable currency exchange rates and increased raw material and other manufacturing costs offset some of those benefits. See Note 9 to our condensed consolidated financial statements for further discussion of our restructuring charges.
During 2007, we issued $200 million of Convertible Senior Notes due 2014, which generated net proceeds of $193.5 million. The notes pay interest semiannually at an annual rate of 2.625%. The notes are convertible into shares of our common stock at an initial conversion rate of 30.6279 shares per $1,000 principal amount of the notes, which represents a conversion price of $32.65 per share. We will make scheduled interest payments in 2010 related to the notes totaling $5.3 million.
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