Wright Medical Group Inc. reported its net sales fell 8 percent to $126.9 million in the fourth quarter, compared to $138.3 million during the same period in 2010.
The Arlington-based orthopedic medical device company said U.S. sales in Q4 were negatively impacted by distributor transitions that occurred the previous quarter, as well as challenges associated with implementing enhancements to the company’s compliance processes.
Q4 net income totaled $1.2 million, or $0.03 per diluted share, compared to net income of $8.9 million, or $0.22 per diluted share, in Q4 2010.
Wright Medical’s net income for the quarter ended Dec. 31 included after-tax effects of $2.8 million of charges associated with the cost restructuring; $3.4 million in expenses associated with a deferred prosecution agreement; $2.4 million of non-cash, stock-based compensation expense; and a $1 million income tax provision for an estimated IRS audit liability, the company stated.
The company’s Q4 net income, as adjusted, was $6.7 million in 2011 compared to $11.8 million in 2010.
“Although our fourth quarter results were stronger than anticipated, we are not satisfied with our 2011 financial performance relative to the market opportunities,” Robert Palmisano, who was appointed as Wright Medical president and CEO in September, said in a statement, adding the company’s priorities over the next several months are to grow its foot and ankle business above market rates, run a more focused and efficient ortho-recon business and increase cash generation.”
Palmisano said the company plans to make significant changes over several months.
The first is to invest in converting a large portion of the company’s U.S. independent distributor foot and ankle territories to direct-sales representation, with the intent of maximizing growth opportunity and increasing sales productivity, benefiting its ortho-recon franchise, which continues to be an important part of the company’s business, it said in a statement.
Palmisano in the statement also said Wright Medical plans to significantly reduce inventories and increase investment in medical education and foot and ankle product development to drive market adoption of new products and technologies.
He said Wright will also pursue internal and external development opportunities to expand its extremities and biologic product portfolio.
“As our guidance implies, these transformational changes for our business will require significant investment in 2012, which will negatively impact our full-year 2012 results,” Palmisano said in the statement. “However, we believe these investments will generate significant future returns, including accelerating foot and ankle sales growth rates and improving inventory management and cash generation. We are enthusiastic about our plan and look forward to executing our current strategies and improving our performance.”
Wright Medical on Thursday said the company anticipates its full-year 2012 net sales to be in the range of $472 million to $489 million, as compared to $512.9 million in 2011.
With regard to restructuring charges, the company anticipates incurring pre-tax charges related to its cost restructuring plan, which was announced in September, to range from $18 million to $25 million.
Wright also anticipates significant improvement over 2011 with 2012 free cash flow expected in the range of $25 million to $30 million, an annualized growth of 73 percent to 107 percent.
In September, Wright announced plans to cut its workforce by 6 percent – or about 80 employees – as part of a cost restructuring plan to promote growth and profitability and build shareholder value.
Other steps to cut spending that were announced at that time included streamlining certain parts of its international selling and distribution operations, cutting the size of its international-product portfolio and adjusting plant operations.