Attached files
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| 8-K/A - 8-K/A - WRIGHT MEDICAL GROUP INC | d657377d8ka.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated balance sheet and the unaudited pro forma condensed consolidated statement of operations are derived from, and should be read in conjunction with, the historical financial statements and notes thereto of Wright Medical Group, Inc. (“Wright”), as presented in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (SEC) on February 22, 2013.
The unaudited pro forma condensed consolidated financial statements have been prepared giving effect to the divestiture and sale of Wright’s OrthoRecon business (the “Transaction”) as if the Transaction occurred on September 30, 2013 for the unaudited pro forma condensed consolidated balance sheet and on January 1, 2010 for the unaudited pro forma condensed consolidated statements of operations. Historical operating information presented in the quarterly report on Form 10-Q for the period ended September 30, 2013 reflects Wright’s OrthoRecon business within discontinued operations.
The unaudited pro forma condensed consolidated financial statements are prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this report on Form 8-K.
The unaudited pro forma condensed consolidated financial statements do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the transaction occurred on the dates indicated. In addition, these unaudited pro forma condensed consolidated financial statements should not be considered to be indicative of our future financial performance.
WRIGHT MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2013
(In thousands)
| Company Historical |
OrthoRecon Disposition |
Company Pro Forma |
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| Assets: |
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| Current assets: |
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| Cash and cash equivalents |
272,793 | 280,590 | (a) | 553,383 | ||||||||||
| Marketable securities |
6,387 | — | 6,387 | |||||||||||
| Accounts receivable, net |
93,299 | (56,995 | ) | (b)(1) | 36,304 | |||||||||
| Inventories |
144,952 | (82,950 | ) | (b)(2) | 62,002 | |||||||||
| Prepaid expenses |
13,184 | (6,945 | ) | (b) | 6,239 | |||||||||
| Deferred income taxes |
32,253 | (17,184 | ) | (c) | 15,069 | |||||||||
| Other current assets |
56,892 | (19,056 | ) | (f) | 37,836 | |||||||||
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| Total current assets |
619,760 | 97,460 | 717,220 | |||||||||||
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| Property, plant and equipment, net |
137,977 | (87,139 | ) | (b)(3) | 50,838 | |||||||||
| Goodwill |
85,593 | (25,740 | ) | (b) | 59,853 | |||||||||
| Intangible assets, net |
26,119 | (1,331 | ) | (b) | 24,788 | |||||||||
| Marketable securities |
13,202 | — | 13,202 | |||||||||||
| Deferred income taxes |
54,533 | 6,071 | (d) | 60,604 | ||||||||||
| Other assets |
121,442 | (12,576 | ) | (b) | 108,866 | |||||||||
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| Total assets |
1,058,626 | (23,255 | ) | 1,035,371 | ||||||||||
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| Liabilities and Stockholder’s Equity: |
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| Current liabilities: |
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| Accounts payable |
19,761 | (9,238 | ) | (b)(4) | 10,523 | |||||||||
| Accrued expenses and other current liabilities |
96,899 | (30,016 | ) | (g) | 66,883 | |||||||||
| Current portion of long-term obligations |
133 | (76 | ) | (b) | 57 | |||||||||
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| Total current liabilities |
116,793 | (39,330 | ) | 77,463 | ||||||||||
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| Long-term debt and capital lease obligations |
264,989 | (37 | ) | (b) | 264,952 | |||||||||
| Deferred income taxes |
1,183 | (1,063 | ) | (e) | 120 | |||||||||
| Other noncurrent liabilities |
112,452 | (3,034 | ) | (b) | 109,418 | |||||||||
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| Total liabilities |
495,417 | (43,464 | ) | 451,953 | ||||||||||
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| Stockholder’s Equity: |
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| Common stock, $.01 par value, authorized: |
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| 100,000,000 shares; issued and outstanding: 47,088,476 shares at September 30, 2013 |
464 | — | 464 | |||||||||||
| Additional paid-in capital |
625,777 | — | 625,777 | |||||||||||
| Accumulated other comprehensive income |
17,421 | 2,083 | (h) | 19,504 | ||||||||||
| Retained earnings |
(80,453 | ) | 18,126 | (b)(6) | (62,327 | ) | ||||||||
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| Total stockholder’s equity |
563,209 | 20,209 | 583,418 | |||||||||||
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| Total liabilities and stockholder’s equity |
1,058,626 | (23,255 | ) | 1,035,371 | ||||||||||
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See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
WRIGHT MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013
(In thousands)
| Company Historical |
OrthoRecon Disposition |
Company Pro Forma |
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| Net Sales |
347,758 | (173,252 | ) | (b) | 174,506 | |||||||||
| Cost of sales |
(108,391 | ) | (66,093 | ) | (b) | 42,298 | ||||||||
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| Gross profit |
239,367 | (107,159 | ) | 132,208 | ||||||||||
| Operating expenses: |
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| Selling, general and administrative |
250,214 | (85,908 | ) | (b)(5) | 164,306 | |||||||||
| Research and development |
24,425 | (9,532 | ) | (b) | 14,893 | |||||||||
| Amortization of intangible assets |
7,007 | (1,281 | ) | (b) | 5,726 | |||||||||
| BioMimetic impairment charges |
206,249 | — | 206,249 | |||||||||||
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| Total operating expenses |
487,895 | (96,721 | ) | 391,174 | ||||||||||
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| Operating income |
(248,528 | ) | (10,438 | ) | (258,966 | ) | ||||||||
| Interest expense, net |
12,000 | (21 | ) | (b) | 11,979 | |||||||||
| Other expense |
(64,746 | ) | (545 | ) | (b) | (65,291 | ) | |||||||
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| Income (loss) before income taxes |
(195,782 | ) | (9,872 | ) | (205,654 | ) | ||||||||
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| Benefit (provision) for income taxes |
56,866 | 3,831 | 60,697 | |||||||||||
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| Net income (loss) |
(138,916 | ) | (6,041 | ) | (144,957 | ) | ||||||||
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| Net income (loss) per share: |
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| Basic |
(3.11 | ) | — | (3.24 | ) | |||||||||
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| Diluted |
(3.11 | ) | — | (3.24 | ) | |||||||||
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| Weighted-average number of shares outstanding: |
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| Basic |
44,721 | — | 44,721 | |||||||||||
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| Diluted |
44,721 | — | 44,721 | |||||||||||
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See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
WRIGHT MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(In thousands)
| Company Historical |
OrthoRecon Disposition |
Company Pro Forma |
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| Net Sales |
483,776 | (269,671 | ) | (b) | 214,105 | |||||||||
| Cost of sales |
149,978 | (101,739 | ) | (b) | 48,239 | |||||||||
| Cost of sales - restructuring |
435 | (435 | ) | (b) | — | |||||||||
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| Gross profit |
333,363 | (167,497 | ) | 165,866 | ||||||||||
| Operating expenses: |
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| Selling, general and administrative |
290,261 | (140,433 | ) | (b)(5) | 149,828 | |||||||||
| Research and development |
27,033 | (13,128 | ) | (b) | 13,905 | |||||||||
| Amortization of intangible assets |
5,772 | (1,355 | ) | (b) | 4,417 | |||||||||
| Depreciation expense adjustment |
— | 468 | (b) | 468 | ||||||||||
| Gain on sale of intellectual property |
(15,000 | ) | — | (15,000 | ) | |||||||||
| Restructuring charges |
1,153 | (722 | ) | (b) | 431 | |||||||||
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| Total operating expenses |
309,219 | (155,170 | ) | 154,049 | ||||||||||
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| Operating income |
24,144 | (12,327 | ) | 11,817 | ||||||||||
| Interest expense, net |
10,188 | (75 | ) | (b) | 10,113 | |||||||||
| Other expense |
5,395 | (306 | ) | (b) | 5,089 | |||||||||
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| Income (loss) before income taxes |
8,561 | (11,946 | ) | (3,385 | ) | |||||||||
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| Benefit (provision) for income taxes |
(3,277 | ) | 3,275 | (2 | ) | |||||||||
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| Net income (loss) |
5,284 | (8,671 | ) | (3,387 | ) | |||||||||
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| Net income (loss) per share: |
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| Basic |
0.14 | — | (0.09 | ) | ||||||||||
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| Diluted |
0.14 | — | (0.09 | ) | ||||||||||
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| Weighted-average number of shares outstanding: |
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| Basic |
38,769 | — | 38,769 | |||||||||||
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| Diluted |
39,086 | — | 39,086 | |||||||||||
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See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
WRIGHT MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
| Company Historical |
OrthoRecon Disposition |
Company Pro Forma |
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| Net Sales |
512,947 | (302,193 | ) | (b) | 210,754 | |||||||||
| Cost of sales |
156,906 | (100,144 | ) | (b) | 56,762 | |||||||||
| Cost of sales - restructuring |
2,471 | (1,804 | ) | (b) | 667 | |||||||||
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| Gross profit |
353,570 | (200,245 | ) | 153,325 | ||||||||||
| Operating expenses: |
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| Selling, general and administrative |
301,588 | (169,817 | ) | (b)(5) | 131,771 | |||||||||
| Research and development |
30,114 | (14,692 | ) | (b) | 15,422 | |||||||||
| Amortization of intangible assets |
2,870 | (458 | ) | (b) | 2,412 | |||||||||
| Depreciation expense adjustment |
— | (160 | ) | (b) | (160 | ) | ||||||||
| Restructuring charges |
14,405 | (9,792 | ) | (b) | 4,613 | |||||||||
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| Total operating expenses |
348,977 | (194,919 | ) | 154,058 | ||||||||||
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| Operating income |
4,593 | (5,326 | ) | (733 | ) | |||||||||
| Interest expense, net |
6,529 | (148 | ) | (b) | 6,381 | |||||||||
| Other expense |
4,719 | (478 | ) | (b) | 4,241 | |||||||||
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| Income (loss) before income taxes |
(6,655 | ) | (4,700 | ) | (11,355 | ) | ||||||||
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| Benefit (provision) for income taxes |
1,512 | 2,449 | 3,961 | |||||||||||
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| Net income (loss) |
(5,143 | ) | (2,251 | ) | (7,394 | ) | ||||||||
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| Net income (loss) per share: |
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| Basic |
(0.13 | ) | — | (0.19 | ) | |||||||||
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| Diluted |
(0.13 | ) | — | (0.19 | ) | |||||||||
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| Weighted-average number of shares outstanding: |
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| Basic |
38,279 | — | 38,279 | |||||||||||
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| Diluted |
38,279 | — | 38,279 | |||||||||||
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See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
WRIGHT MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(In thousands)
| Company Historical |
OrthoRecon Disposition |
Company Pro Forma |
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| Net Sales |
518,973 | (310,484 | ) | (b) | 208,489 | |||||||||
| Cost of sales |
158,456 | (102,528 | ) | (b) | 55,928 | |||||||||
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| Gross profit |
360,517 | (207,956 | ) | 152,561 | ||||||||||
| Operating expenses: |
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| Selling, general and administrative |
282,413 | (158,069 | ) | (b)(5) | 124,344 | |||||||||
| Research and development |
37,300 | (20,292 | ) | (b) | 17,008 | |||||||||
| Amortization of intangible assets |
2,711 | (314 | ) | (b) | 2,397 | |||||||||
| Depreciation expense adjustment |
— | 360 | (b) | 360 | ||||||||||
| Restructuring charges |
919 | (859 | ) | (b) | 60 | |||||||||
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| Total operating expenses |
323,343 | (179,174 | ) | 144,169 | ||||||||||
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| Operating income |
37,174 | (28,782 | ) | 8,392 | ||||||||||
| Interest expense, net |
6,123 | (33 | ) | (b) | 6,090 | |||||||||
| Other expense |
130 | (11 | ) | (b) | 119 | |||||||||
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| Income (loss) before income taxes |
30,921 | (28,738 | ) | 2,183 | ||||||||||
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| Benefit (provision) for income taxes |
(13,080 | ) | 12,456 | (624 | ) | |||||||||
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| Net income (loss) |
17,841 | (16,282 | ) | 1,559 | ||||||||||
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| Net income (loss) per share: |
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| Basic |
0.47 | — | 0.04 | |||||||||||
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| Diluted |
0.47 | — | 0.04 | |||||||||||
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| Weighted average number of shares outstanding: |
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| Basic |
37,802 | — | 37,802 | |||||||||||
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| Diluted |
37,961 | — | 37,961 | |||||||||||
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See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Disposition of OrthoRecon
The estimated net proceeds and gain on the divestiture and sale of the OrthoRecon business, based on the historical book balances of the OrthoRecon business as of September 30, 2013, are as follows (in thousands):
| Purchase price |
287,073 | |||
| Net assets sold to MicroPort |
(233,075 | ) | ||
| Transaction costs (1) |
(13,335 | ) | ||
| Write-off of Cumulative translation adjustment balance (h) |
(2,083 | ) | ||
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| Pre-tax estimated gain on sale |
38,580 | |||
| Income tax provision |
(24,632 | ) | ||
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| Gain on sale |
13,948 |
| (1) | Transaction costs include accounting, tax, valuation, consulting, legal and investment banking fees related to the divestiture and sale of the OrthoRecon business including $6.9 million of transaction costs expensed prior to September 30, 2013. |
Note 2 – Pro Forma Adjustments
The following are descriptions of the pro forma adjustments related to the divestiture and sale of the OrthoRecon business:
(a) Represents the estimated net proceeds of $287.1 million from the divestiture and sale of the OrthoRecon business, less transaction costs expensed subsequent to September 30, 2013.
(b) Represents adjustments to eliminate the historical balances of the OrthoRecon business.
(b)(1) Accounts receivable, net was allocated based on an approach utilizing days sales outstanding (DSO). OrthoRecon DSOs were calculated separately for US and each international entity and subsequently applied against each individual entity’s OrthoRecon sales in order to calculate the net accounts receivable balance.
(b)(2) Net inventories were identified based on specific product codes.
(b)(3) Property, plant and equipment, net was specifically identified as related to the OrthoRecon business. Instruments were identified using specific product codes. Instruments associated with shared product codes were allocated proportionately by country to the OrthoRecon business.
(b)(4) Accounts payable was allocated based on an approach utilizing days payable outstanding (DPO). Consolidated DPOs were calculated separately for US and international entities and those DPOs were subsequently applied against accounts payable related expenses for the OrthoRecon business only in order to calculate the accounts payable balance.
(b)(5) Direct selling, general, and administrative expenses associated with the OrthoRecon business were identified through the historical operating segment results. Further, during the periods presented, the OrthoRecon business functioned as part of the larger group of companies controlled by Wright Medical, and accordingly, Wright Medical performed certain corporate overhead functions for the OrthoRecon business. These functions include, but are not limited to, executive oversight, legal, finance, human resources, internal audit, financial reporting, and tax planning. The costs of such services included in the OrthoRecon business are based on costs associated with the corporate employees being transferred as part of the sale.
(b)(6) Represents the estimated gain on the divestiture and sale of the OrthoRecon business exclusive of $6.9 million of transaction costs expensed prior to September 30, 2013, net of related tax benefit of $2.7 million.
(c) Represents the disposal of OrthoRecon Japan deferred tax assets of $0.3 million and to record the net tax effect of the disposition of the OrthoRecon business, totaling $16.9 million.
(d) Represents the disposal of OrthoRecon Japan deferred tax assets of $1.7 million and to record the net tax effect of the disposition of the OrthoRecon business, totaling $7.8 million.
(e) To record the net tax effect of the disposition of the OrthoRecon business.
(f) Represents the disposal of OrthoRecon other current assets of $2.4 million and to record the net tax effect of the disposition of the OrthoRecon business, totaling $16.7 million.
(g) Represents the disposal of OrthoRecon accrued expenses and other current liabilities of $32.6 million and to record the net tax effect of the disposition of the OrthoRecon business, totaling $2.6 million.
(h) Elimination of the cumulative translation adjustment component of accumulated other comprehensive income for substantially liquidated subsidiaries.