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Wright Medical Group, Inc. (WMGI)
Q1 2009 Earnings Call
April 27, 2009 4:30 pm ET
Gary D. Henley - President and Chief Executive Officer
John K. Bakewell - Chief Financial Officer and Executive Vice President
Taylor Harris - J.P. Morgan
Raj Denhoy - Thomas Weisel Partners
Matt Miksic - Piper Jaffray
Michael Matson - Wachovia Capital Markets
Glenn Navarro - RBC Capital Markets
William Plovanic - Canaccord Adams
Jeff Johnson - Robert W. Baird & Co.
Previous Statements by WMGI
» Wright Medical Group Inc. Q2 2009 Earnings Call Transcript
» Wright Medical Group, Inc. Q4 2008 Earnings Call Transcript
» Wright Medical Group Inc. Q3 2008 Earnings Call Transcript
This conference may contain forward-looking statements as defined in the Federal Securities Laws. In fact, every statement made during the call except for those of historical fact will be forward-looking statements. Forward-looking statements reflect the current knowledge, assumptions, beliefs, 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 defer 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 SEC filings include our 10-K for 2008 and our subsequent 10-Qs for 2009. These risks and uncertainties could cause our actual results to materially differ from those described in the forward-looking statements. Although we believe each forward-looking statement is accurate, there can be no assurance that it ultimately will prove to be so. You should not view a 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 statement after this date.
I would now like to turn the call over to Mr. Gary Henley, President and Chief Executive Officer.
Gary D. Henley
Thank you Geri, and good afternoon everyone, and welcome to our first quarter earnings call. I am pleased to share with you the details of our first quarter 2009 financial results, which reflect what we would judge as a good start to the year given the current operating climate. We delivered solid revenue growth, significant operating expense leverage, and net income results that exceeded our communicated range. While the year so far has given our industry plenty to deal with, we’ve had our share of successes. We’re pleased to be reporting global sales growth that is among our industry’s best again this quarter, with a relatively solid overall reconstructive joint growth rate and a continuation of truly outstanding growth within our extremities franchise.
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 first quarter results, the progress that we’ve been making in our business, and our latest outlook for the business going forward.
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 the 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.
As we have done in the past calls, 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 and share with you our guidance outlook, both for Q2 as well as our latest views on the full year 2009. Together we will wrap up our prepared section of today’s calls with some business updates before we begin taking your questions.
So, let’s get started. Net sales for the first quarter 2009 totaled $120.9 million representing a 4% increase over net sales of $115.9 million in the first quarter of 2008, finishing within our previously communicated guidance range of $120.0 million to $123.0 million. Excluding the unfavorable impact of foreign currency on our international revenues, which totaled approximately $3.3 million, global net sales increased 7% during the first quarter. As I mentioned, we were particularly pleased by the performance of our extremities business which despite the current environment in orthopedics continued to excel during the quarter posting a global growth rate of 27% as reported and 30% in constant currency.
Although our Q1 revenue performance didn’t finish in the upper end of our guidance range, our bottom line results were nonetheless excellent versus our expectations. We achieved adjusted net income of $7.8 million or $0.20 per diluted share for the quarter, exceeding the upper end of our guidance range of $0.17 to $0.19.
Our expense control was very good during the quarter enabling us to produce operating expense leverage of 290 basis points over the prior year. We were quite pleased to see our business model demonstrate this degree of versatility during the quarter producing such a solid bottom line outcome.
At the same time we were delighted by our cash flow performance for the quarter as our initiatives to improve the company’s cash flow profile paid off very nicely in Q1. Free cash flow was a positive $5.5 million for the first quarter representing a sequential improvement of $32 million from the fourth quarter 2008. This progress so early in the year makes us feel very good about achieving our objective of producing positive cash flow for the full year 2009 which represents a year over year $80 million plus improvement.