--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 2007
WRIGHT MEDICAL GROUP, INC.
(Exact name of registrant as specified in charter)
Delaware 000-32883 13-4088127
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5677 Airline Road,
Arlington, Tennessee 38002
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (901) 867-9971
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
--------------------------------------------------------------------------------
Item 2.02. Results of Operations and Financial Condition.
On February 15, 2007, Wright Medical Group, Inc. issued a press release
announcing its consolidated financial results for the year ended December 31,
2006. A copy of the press release is furnished as Exhibit 99 to this report.
The attached press release includes the following non-GAAP measures: operating
income, as adjusted; net income, as adjusted; net income, as adjusted, per
diluted share; and effective tax rate, as adjusted.
These non-GAAP measures are not in accordance with, or an alternative for,
generally accepted accounting principles and may be different from non-GAAP
measures used by other companies. In addition, these non-GAAP measures are not
based on any comprehensive set of accounting rules or principles. We believe
that non-GAAP measures have limitations in that they do not reflect all of the
amounts associated with our results of operations as determined in accordance
with GAAP and that these measures should only be used to evaluate our results of
operations in conjunction with the corresponding GAAP measures.
For our internal budgeting and resource allocation process, our management uses
financial information that does not include: (a) non-cash stock-based
compensation expenses, (b) charges related to the termination of a distribution
agreement, (c) severance payments associated with management changes, (d)
significant litigation charges, (e) certain other income and expense items, (f)
the income tax effects of the foregoing, and (g) the resolution of certain
foreign income tax matters. We use these non-GAAP financial measures in making
operating decisions because we believe the measures provide meaningful
supplemental information regarding our core operational performance and give us
a better understanding of how we should invest in research and development
activities and how we should allocate resources to both ongoing and prospective
business initiatives. We use these measures to help make budgeting and spending
decisions, for example, as between product development expenses and research and
development, sales and marketing and general and administrative expenses.
Additionally, management is evaluated on the basis of these non-GAAP financial
measures when determining achievement of their incentive performance
compensation targets. Further, these non-GAAP financial measures facilitate
management's internal comparisons to both our historical operating results and
to our competitors' operating results.
As described above, we exclude the following items from one or more of our
non-GAAP measures:
Non-cash stock-based compensation expense. We exclude stock-based compensation
expenses from our non-GAAP measures primarily because they are non-cash
expenses. We believe that it is useful to investors to understand the
application of SFAS 123R and its impact on our operational performance,
liquidity, and our ability to invest in R&D and fund acquisitions and capital
expenditures. While stock-based compensation expense calculated in accordance
with SFAS 123R constitutes an ongoing and recurring expense, such expense is
excluded from our non-GAAP results because it is not an expense that requires
cash settlement and is not used by management to assess the core profitability
of our business operations. We further believe these measures are useful to
investors in that they allow for greater transparency to certain line items in
our financial statements. In addition, excluding this item from our non-GAAP
results facilitates comparisons to our competitors' operating results.
Charges related to the termination of a distribution agreement. During the
fourth quarter of 2005, we recognized charges associated with the early
termination of an agreement to distribute certain third party spinal products.
These charges are a result of writing down inventories and surgical instruments
to their net realizable value. We excluded those charges from our non-GAAP
results because these expenses are not reflective of our ongoing operating
results, and they are therefore not used by management to assess the core
profitability of our business operations. We further believe that these measures
are useful to investors in that they allow for period-over-period comparability.
1
Severance payments associated with management changes. During the fourth quarter
of 2005, we recognized severance-related expenses associated with management
changes in the Company's U.S. and European operations. These changes were the
result of, and included, the transition of the Company's chief executive
officer. The departure of principal management occurs infrequently. Therefore,
we excluded those charges from our non-GAAP results because they are not
reflective of our ongoing operating results, and they are not used by management
to assess the core profitability of our business operations. We further believe
that these measures are useful to investors in that they allow for
period-over-period comparability.
Significant litigation charges. During the fourth quarter of 2005, we recognized
charges related to a European distributor transition and the related legal
dispute. Those charges resulted from a legal settlement that was both
significant and not part of our on-going business. We excluded those charges
from our non-GAAP results because such charges are not used by management to
assess the core profitability of our business operations. We further believe
that these measures are useful to investors in that they allow for
period-over-period comparability.
Other income and expenses. We have excluded from our non-GAAP results certain
other income and expenses that are the result of unplanned events. Included in
this category for the year ended December 31, 2006, is a gain on the sale of an
investment. Included in this category for the year ended December 31, 2005, is
the write-down of a long-lived asset to its fair value. We assess our operating
performance excluding those items, as they relate to income and expenses that
were unplanned, are unrelated to the ongoing performance of our business and are
not expected to recur on a quarterly basis. Therefore, by providing this
information, we believe our management and investors are better able to assess
the core profitability of our business operations.
Income tax effects of the foregoing. This amount is used to present each of the
amounts described above on an after-tax basis consistent with the presentation
of net income, as adjusted.
Resolution of foreign income tax matters. We have excluded from our non-GAAP
results the resolution of certain foreign income tax matters. These resolutions
are not indicative of current or future operations or expenses. We assess our
operating performance excluding these items, as they are unrelated to the
ongoing performance of our business and are not expected to recur on a quarterly
basis. Therefore, by providing this information, we believe our management and
investors are better able to assess the core profitability of our business
operations. We further believe that these measures are useful to investors in
that they allow for period-over-period comparability.
We believe that non-GAAP measures have limitations in that they do not reflect
all of the amounts associated with our financial results as determined in
accordance with GAAP and that these measures should only be used to evaluate our
financial results in conjunction with the corresponding GAAP measures, and that
is why we qualify the use of non-GAAP financial information in a statement when
non-GAAP information is presented.
We further believe that where the adjustments used in calculating net income, as
adjusted, and net income, as adjusted, per diluted share are based on specific,
identified amounts that impact different line items in the Condensed
Consolidated Statements of Operations (including operating income and net
income), that it is useful to investors to understand how these specific line
items in the Condensed Consolidated Statements of Operations are affected by
these adjustments for the following reasons:
2
Operating income. Excluding non-cash stock-based compensation expense from the
calculation of operating income assists investors in evaluating
period-over-period changes without giving effect to these charges which are
non-cash in nature, in order to evaluate the results of the underlying operating
activities for the periods presented.
Net Income. Excluding non-cash stock-based compensation expense from the
calculation of net income assists investors in evaluating period-over-period
changes without giving effect to these charges which are non-cash in nature, in
order to evaluate the results of the underlying operating activities for the
periods presented. Excluding the investment gain from the calculation of net
income assists investors in evaluating period-over-period changes in this
measure without giving effect to transactions which do not relate to the
performance of our ongoing operations.
Effective Tax Rate. Excluding the income tax effect of the non-GAAP, pre-tax
adjustments from the provision for income taxes assists investors in
understanding the tax provision associated with those adjustments and our
effective tax rate related to our ongoing operations.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On February 13, 2007, our board of directors elected Lawrence W. Hamilton,
SPHR/CCP, to serve as a director. The board of directors has determined that Mr.
Hamilton is independent as defined in Nasdaq's listing standards.
Mr. Hamilton, age 49, was most recently Senior Vice President, Human Resources,
a corporate officer and member of the Executive Committee at Tech Data
Corporation in Clearwater, Florida. Mr. Hamilton joined Tech Data in 1993 as
Vice President, Human Resources, and was named Senior Vice President, Human
Resources, in 1996. Mr. Hamilton departed Tech Data in June 2006 to complete his
doctoral studies. Prior to joining Tech Data in 1993, Mr. Hamilton served in a
variety of human resource management positions with Bristol-Myers Squibb Company
in Evansville, Indiana; New York, New York; and Largo, Florida, during the
period of 1985-1993. Mr. Hamilton holds a bachelor's degree in political science
from Fisk University and a master's degree in public administration from the
University of Alabama. He has completed the course requirements for the
Executive Leadership Doctoral Program (Ed.D.) at George Washington University in
June 2002, and is in the dissertation phase of the program. Mr. Hamilton is a
certified Senior Professional in Human Resources and recently received the CCP
designation (Certified Compensation Professional) from the American Compensation
Association. Mr. Hamilton is a director of HomeBanc Corp., a public company.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
----------------- -----------------------------------------------------------
99 Press release issued by Wright Medical Group, Inc. on
February 15, 2007.
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 15, 2007
WRIGHT MEDICAL GROUP, INC.
By: /s/ Gary D. Henley
--------------------------------
Gary D. Henley
President and Chief Executive Officer
EXHIBIT INDEX
Exhibit
Number Description
----------------- -----------------------------------------------------------
99 Press release issued by Wright Medical Group, Inc. on
February 15, 2007.