Wright Medical Group Inc. (WMGI, Financial) filed Quarterly Report for the period ended 2009-03-31.
Wright Medical Group Inc. is a global orthopaedic device company specializing in the design manufacture and marketing of reconstructive joint devices and bio-orthopaedic materials. Reconstructive joint devices are used to replace knee hip and other joints that have deteriorated through disease or injury. Bio-orthopaedic materials are used to replace damaged or diseased bone and to stimulate natural bone growth. Wright Medical Group Inc. has a market cap of $581.5 million; its shares were traded at around $15.3 with a P/E ratio of 24.3 and P/S ratio of 1.3.
Selling, General and Administrative. Our selling, general and administrative expenses as a percentage of net sales totaled 55.1% in the first quarter of 2009, a 2.4 percentage point decrease from 57.5% in the first quarter of 2008. Our 2009 and 2008 selling, general and administrative expenses include $4.1 million (3.4% of net sales) and $1.7 million (1.5% of net sales), respectively, of costs, primarily legal fees, associated with the ongoing U.S. government inquiries. In addition, $2.1 million and $3.0 million of non-cash, stock-based compensation expense was recognized in the first quarter of 2009 and 2008, respectively, representing 1.7% and 2.6% of net sales in each of the years, respectively. The remaining decrease in selling, general and administrative expenses as a percentage of sales was driven by expense savings, primarily in our European subsidiaries, and lower levels of cash incentive compensation.
Amortization of Intangible Assets. Charges associated with the amortization of intangible assets in the first quarter of 2009 increased to $1.3 million from $1.0 million in the first quarter of 2008. Based on the intangible assets held at March 31, 2009, we expect to recognize amortization expense of approximately $5.1 million for the full year of 2009, $2.3 million in 2010, $2.2 million in 2011, $2.1 million in 2012, and $1.8 million in 2013.
Investing Activities. Our capital expenditures totaled approximately $9.8 million and $9.9 million in the first quarter of 2009 and 2008, respectively. Our industry is capital intensive, particularly as it relates to surgical instrumentation. Historically, our capital expenditures have consisted of purchased manufacturing equipment, research and testing equipment, computer systems, office furniture and equipment, and surgical instruments. We expect to incur capital expenditures of approximately $40 million in 2009 for routine capital expenditures, as well as approximately $3 million for the expansion of facilities in Arlington, Tennessee.
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 2009 related to the notes totaling $5.3 million.
Although it is difficult for us to predict our future liquidity requirements, we believe that our current cash and cash equivalents balance of $96.8 million, our marketable securities balance of $51.7 million, our existing available credit line of $100 million, and our expected cash flow from our 2009 operations will be sufficient for the foreseeable future to fund our working capital requirements and operations, permit anticipated capital expenditures in 2009 of approximately $43 million, and meet our contractual cash obligations in 2009.
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Wright Medical Group Inc. is a global orthopaedic device company specializing in the design manufacture and marketing of reconstructive joint devices and bio-orthopaedic materials. Reconstructive joint devices are used to replace knee hip and other joints that have deteriorated through disease or injury. Bio-orthopaedic materials are used to replace damaged or diseased bone and to stimulate natural bone growth. Wright Medical Group Inc. has a market cap of $581.5 million; its shares were traded at around $15.3 with a P/E ratio of 24.3 and P/S ratio of 1.3.
Highlight of Business Operations:
Net Sales. Our overall net sales growth of 4% in the first quarter of 2009 was attributable to our continued success in our extremity product line, which increased 27% over prior year, and expansion in our hip product line. Geographically, our domestic net sales totaled $74.4 million in the first quarter of 2009 and $67.2 million in the first quarter of 2008, representing 61% and 58% of total net sales, respectively, and growth of 11% in 2009 compared to 2008. Our international net sales totaled $46.6 million in the first quarter of 2009, compared to $48.6 million in the first quarter of 2008. International sales in 2009 include an unfavorable currency impact of $3.3 million, principally resulting from the performance of the euro against the U.S. dollar in the first quarter of 2009 compared to the same period of 2008. Additionally, increased sales in most of our international markets were offset by declines in the United Kingdom, France, and Turkey.Selling, General and Administrative. Our selling, general and administrative expenses as a percentage of net sales totaled 55.1% in the first quarter of 2009, a 2.4 percentage point decrease from 57.5% in the first quarter of 2008. Our 2009 and 2008 selling, general and administrative expenses include $4.1 million (3.4% of net sales) and $1.7 million (1.5% of net sales), respectively, of costs, primarily legal fees, associated with the ongoing U.S. government inquiries. In addition, $2.1 million and $3.0 million of non-cash, stock-based compensation expense was recognized in the first quarter of 2009 and 2008, respectively, representing 1.7% and 2.6% of net sales in each of the years, respectively. The remaining decrease in selling, general and administrative expenses as a percentage of sales was driven by expense savings, primarily in our European subsidiaries, and lower levels of cash incentive compensation.
Amortization of Intangible Assets. Charges associated with the amortization of intangible assets in the first quarter of 2009 increased to $1.3 million from $1.0 million in the first quarter of 2008. Based on the intangible assets held at March 31, 2009, we expect to recognize amortization expense of approximately $5.1 million for the full year of 2009, $2.3 million in 2010, $2.2 million in 2011, $2.1 million in 2012, and $1.8 million in 2013.
Investing Activities. Our capital expenditures totaled approximately $9.8 million and $9.9 million in the first quarter of 2009 and 2008, respectively. Our industry is capital intensive, particularly as it relates to surgical instrumentation. Historically, our capital expenditures have consisted of purchased manufacturing equipment, research and testing equipment, computer systems, office furniture and equipment, and surgical instruments. We expect to incur capital expenditures of approximately $40 million in 2009 for routine capital expenditures, as well as approximately $3 million for the expansion of facilities in Arlington, Tennessee.
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 2009 related to the notes totaling $5.3 million.
Although it is difficult for us to predict our future liquidity requirements, we believe that our current cash and cash equivalents balance of $96.8 million, our marketable securities balance of $51.7 million, our existing available credit line of $100 million, and our expected cash flow from our 2009 operations will be sufficient for the foreseeable future to fund our working capital requirements and operations, permit anticipated capital expenditures in 2009 of approximately $43 million, and meet our contractual cash obligations in 2009.
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