Wright Medical Group, Inc. (WMGI) posted a broader loss of $7.9 million or 17 cents per share for the fourth quarter of 2013 compared with $1.9 million or 5 cents in the same quarter of 2012. However, the loss was narrower than the Zacks Consensus Estimate by a penny.
Reported loss was $135.2 million or $2.88 per share in the quarter compared with earnings of $1.6 million or 4 cents per share in the fourth quarter of 2012.
For full-year 2013, Wright Medical Group posted a wider adjusted loss of $25.2 million or 48 cents per share compared with $3.8 million or 10 cents per share in 2012. It is also narrower than the Zacks Consensus Estimate of a loss of 57 cents per share.
Revenues
Revenues in the quarter went up 16.2% (17% in constant currency) to $67.8 million, exceeding the Zacks Consensus Estimate of $65.0 million. The revenue growth was driven by strong sales of foot and ankles product line.
On a geographic basis, international sales were strong with a 35.4% rise in revenues to $18.6 million. Revenues from domestic market rose 10.3% to $49.2 million in the quarter.
Revenues in the year grew 13.2% to $242.3 million, higher than the Zacks Consensus Estimate of $239 million, solely driven by higher foot and ankle, and other product line sales. Revenues went up 6.9% to $166.1 million in the domestic market and 34.8% to $48.0 million in the international market.
Margins
Gross profit rose 11.9% to $50.4 million from $45.1 million a year ago but gross margin decreased 290 basis points (bps) to 74.3% from 77.2% a year ago. Adjusted operating loss significantly increased to $10.9 million from $187 thousand a year ago. Adjusted operating (loss) margin rose to 16.1% from 0.3% a year ago.
For the full year, gross profit rose 10.1% to $182.6 million but gross margin ebbed 210 bps to 75.4% on a year-over-year basis. Wright Medical Group had adjusted operating loss of $34.6 million in the year compared with operating earnings of $2.2 million in 2012. Adjusted operating (loss) margin was 14.3% versus operating margin of 1.0% a year ago.
Financial Position
Wright Medical Group had cash and cash equivalents of $168.5 million as of Dec 31, 2013, down from $320.4 million as of Dec 31, 2012 due to the closing of the BioMimetic and Biotech transactions, and expenses associated with the MicroPort transaction. Long-term obligations rose to $275.4 million from $258.5 million as of Dec 31, 2012.
In 2013, cash flow from operations deteriorated significantly to the use of $74.1 million from an inflow of $49.5 million a year ago. Capital expenditures increased 94.2% to $37.5 million from $19.3 million a year ago.
Outlook
For 2014, Wright Medical Group expects revenues in the range of to $305–$312 million, reflecting a growth of 26 to 29% (including Solana, OrthoPro and Biotech acquisitions) and an organic growth of 13 to 15% (excluding Solana, OrthoPro and Biotech) over 2013. The current Zacks Consensus Estimate of $280 million lies below the guided range.
The expected range of revenues incorporates the effect of short-term dis-synergies due to the closing of the transactions with MicroPort, Biotech International, Solana Surgical and OrthoPro, and includes a negative year-over-year impact from currency of 1%. Wright Medical Group also projected adjusted EBITDA in the range of negative $20.0 million to negative $15.0 million for the year.
Our Take
Arlington, Tenn.-based Wright Medical Group is a global orthopaedic device company specializing in the design, manufacture and marketing of reconstructive joint devices and bio-orthopaedic materials. Currently, the company retains a Zacks Rank #4 (Sell).
Some better-ranked medical product stocks include Enzymotec Ltd. (ENZY), NuVasive, Inc. (NUVA), and Baxter International Inc. (BAX). Both Enzymotec and NuVasive carry a Zacks Rank #1 (Strong Buy), while Baxter International carries a Zacks Rank #2 (Buy).
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