Wright Medical Group N.V. (WMGI)

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Wright Medical Group Inc. (WMGI)

Q3 2008 Earnings Call

November 3, 2008 4:30 pm ET


Gary D. Henley – Chief Executive Officer, President

John K. Bakewell – Chief Financial Officer


Raj Denhoy – Thomas Weisel Partners

Taylor Harris – J.P. Morgan

Matt Miksic – Piper Jaffray

Michael Matson – Wachovia Capital Markets

Jeff Johnson – Robert W. Baird & Co., Inc.

William Plovanic – Canaccord Adams

[Anin Alva] – [Buoyant Advisors]



Good morning ladies and gentlemen and welcome to the third quarter 2008 Wright Medical Group Inc. earnings conference call. (Operator Instructions)

This conference call may contain forward-looking statements as defined in the Federal Securities Law. In fact every statement made during this call, except for those of historical fact will be forward looking statements.

Forward-looking statements reflect the current knowledge, assumption, belief, estimates and expectations of our management. They also express our management’s current views of future performance, results and trends. We caution you that actual results might differ materially from those described in these statements.

Forward-looking statements are subject to a number of risks and uncertainties, including those discussed in our filings with the Securities and Exchange Commission. These said filings include our 10-K for 2007 and our subsequent 10-Qs during 2008. These risks and uncertainties could cause our actual results to materially differ from those described in the forward-looking statements.

Although we believe that each forward-looking statement is accurate there can be no assurance that it ultimately will prove to be so. You should not view the forward-looking statement as a representation by us that the described results will be achieved. We caution you not to place undue reliance on any forward looking-statement.

All forward-looking statements are made as of today’s date and we assume no obligation to update any such statements after this date. I will now like to turn the presentation over to your host for today’s conference, Mr. Gary Henley, President and CEO of Wright Medical Group. Please proceed, sir.

Gary D. Henley

Good afternoon everyone and welcome to our third quarter earnings call. I’m very pleased to share with you the details of our third quarter 2008 financial results which reflect strong sales levels and operating leverage resulting in top and bottom line performance at the upper end of our communicated target guidance ranges.

With me on our call today is John Bakewell, our Executive Vice President and Chief Financial Officer. Together John and I will be discussing our third quarter results, the progress that we’ve been making in our business and the outlook going forward.

We’re quite pleased with our Q3 performance which reflects continued revenue momentum and significant operating leverage as we posted out third straight quarter of top line growth greater than 20%. And achieved adjusted operating income growth of 48% despite the short-term dilution created by our recent INBONE acquisition.

Before we begin I would like to note that we will be using a number of non-GAAP financial measures to describe our performance. Regarding that, I will refer you to reconciliations that appear in tables of today’s press release as well as on our website. Note further that our Form 8-K filed today provides a detailed narrative that describes our use of such measures. Please note that unless otherwise stated, all of today’s discussions regarding results of operations refer to our as adjusted results.

I’ll start today with a summary of our top and bottom line results and then move into a detailed review of our revenue performance. John will then address the other key line items that make up our financial performance. Together we will wrap up our prepared section of today’s call with some business updates before we begin taking your questions.

So with that, let’s get started. Net sales for the third quarter 2008 totaled $111.1 million representing a 22% increase over net sales of $91.4 million in the third quarter of 2007, finishing at the upper end of our previously communicated guidance range of $109 million to $111 million.

Excluding the favorable impact of foreign currency on our international revenues which totaled approximately $1.6 million, global net sales increased 20% during the third quarter. This sales performance included growth in excess of 20% both domestically and internationally and in three of our four major product lines.

Additionally we achieved adjusted income of $7.6 million or $0.19 per diluted share for the third quarter of 2008 finishing again at the upper end of our adjusted EPS guidance range of $0.17 to $0.19.

Our strong sales performance combined with excellent Q3 operating leverage resulted in adjusted operated income totally $12.5 million representing a year-over-year growth of an outstanding 48%.

Now looking at our sales results in detail first geographically, we had a strong third quarter both in the U.S. and in our international markets. Domestically our sales totaled $70.9 million, an increase of 22% over prior year period. Extremities and biologics led the way in the United States with extremities growing 45% and biologics 18%. Our large joint reconstructive business also had a strong performance, with a 16% domestic growth rate.

Internationally we had another strong quarterly sales performance as well. International sales totaled $40.2 million, representing an increase of 21% as reported and 16% before the favorable impact of currency. This growth was driven by double-digit growth in substantially all of our major international markets.

We’re also pleased with the early success of our recent acquisition of the total ankle replacement product line of INBONE Technologies, which alone contributed approximately two percentage points of growth to our domestic revenue performance this quarter.

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