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Wright Medical Group N.V. Reports 2016 Third Quarter Financial Results and Updates 2016 Guidance

  Third Quarter 2016 Net Sales From Continuing Operations of $157 Million As Reported

Third Quarter 2016 Global Extremities and Biologics Net Sales Increased 96%, Driven By Year over Year Impact from Tornier Merger, and 9% on a Non-GAAP Pro Forma Constant Currency Basis

Third Quarter 2016 Net Loss From Continuing Operations of $53 Million; Non-GAAP Adjusted EBITDA From Continuing Operations of $6 Million

Company Reaches Settlement Agreement in Metal-On-Metal Hip Litigation

AMSTERDAM, The Netherlands, Nov. 02, 2016 (GLOBE NEWSWIRE) -- Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial results for its third quarter ended September 25, 2016 and provided updated 2016 guidance.  As a result of the previously announced sale of the large joints (hip/knee) business to Corin Orthopaedics Holdings Limited (Corin), this business which was previously reported as a separate reporting segment is now reported as discontinued operations.

As a result of the merger between Wright Medical Group, Inc. and Tornier N.V. on October 1, 2015, legacy Wright’s historical results of operations replaced legacy Tornier’s historical results of operations for all periods prior to the merger and the results of the two legacy businesses have been consolidated only from that date forward in accordance with United States generally accepted accounting principles (GAAP).  This release and Wright’s website at ir.wright.com contain certain unaudited non-GAAP combined pro forma financial results for Wright Medical Group N.V. which give effect to the merger as if it had occurred on the first day of fiscal 2015, as well as reconciliations to the most comparable GAAP measures.

Net sales from continuing operations totaled $157.3 million during the third quarter ended September 25, 2016.  Combined pro forma net sales from continuing operations totaled $144.8 million during the third quarter of 2015.  Global extremities and biologics net sales grew 96% as reported, and on a non-GAAP pro forma constant currency basis, grew 9%.  Gross margins from continuing operations were 70.7% during the quarter ended September 25, 2016 and were 78.2% on a non-GAAP adjusted basis.  Reconciliations of all historical non-GAAP financial measures used in this release to the most comparable GAAP measures can be found in the attached financial tables.

Robert Palmisano, president and chief executive officer, commented, “As anticipated, our third quarter results were impacted by revenue dis-synergies; however, the underlying drivers of growth in our business remain strong as we continued to see excellent growth from new products, in particular our SIMPLICITI and AEQUALIS ASCEND FLEX shoulder systems, our INFINITY total ankle replacement system and the ongoing commercial activities for AUGMENT Bone Graft and the SALVATION limb salvage system.  Global extremities and biologics pro forma constant currency net sales growth of 9%, adjusted EBITDA from continuing operations of $5.7 million and adjusted gross margins from continuing operations of 78.2% reflect the strength of our markets and our unique position in them.” 

Net loss from continuing operations for the third quarter of 2016 totaled $53 million, or $(0.51) per diluted share.

The company’s net loss from continuing operations for the third quarter of 2016 included the after-tax effects of $10.3 million of inventory step-up amortization, $6.5 million of transaction and transition costs, a gain of $3.2 million related to mark-to-market adjustments on derivatives, $10.5 million of non-cash interest expense related to its convertible notes, a $2.2 million unrealized loss related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, and $1.6 million of non-cash inventory provisions associated with a product rationalization initiative.

The company's third quarter 2016 non-GAAP net loss from continuing operations, as adjusted for the above items, was $27 million.  The company's third quarter 2016 non-GAAP adjusted EBITDA from continuing operations, as defined in the non-GAAP to GAAP reconciliation provided later in this release, was $5.7 million. The attached financial tables include reconciliations of all historical non-GAAP measures to the most comparable GAAP measures.

Cash and cash equivalents totaled $314.3 million as of the end of the third quarter of 2016.

Company Reaches Settlement Agreement in Metal-On-Metal Hip Litigation and Enters into Settlement Agreement with Three of its Insurance Carriers

In a separate press release issued today, the company announced that it had reached a Master Settlement Agreement (MSA) in its metal-on-metal hip litigation and entered into a Settlement Agreement with three of its insurance carriers (Three Settling Insurers).  Under the terms of the MSA, the parties agreed to settle 1,292 specifically identified CONSERVE, DYNASTY or LINEAGE revision claims which meet the eligibility requirements of the MSA and are either pending in the multi-district litigation (MDL) and the consolidated proceeding pending in state court in California (JCCP), or are subject to tolling agreements approved in the MDL or JCCP, for a total settlement amount of $240 million, of which approximately $180 million will be funded from cash on hand and $60 million will be funded from insurance recoveries.  For additional information, please refer to Wright’s separate press release issued today and the disclosures in its third quarter 2016 quarterly report on Form 10-Q when filed.

Palmisano commented, “We are very pleased to have reached this settlement agreement, in particular the population of claims that the settlement covers as well as the required 95% opt-in rate for those claims.  With this clarity, we will continue to focus on accelerating growth opportunities in the extremities and biologics markets.  This settlement addresses approximately 85% of the known U.S. revision claims that do not have potential statute of limitations issues and removes a great deal of the uncertainty that has been associated with this litigation.”

Palmisano concluded, “One year post the close of the merger of Wright and Tornier, we are a stronger and more focused business.  With the closing of the sale of our large joints business, we are now completely focused on the extremities and biologics markets.  We have completed the integration of our sales forces globally with less revenue dis-synergies this year than we originally anticipated.  We are ahead of schedule on our integration activities and associated benefits.  We have improved our balance sheet and reached a Settlement Agreement for our metal-on-metal hip litigation.  Also, the guidance we are providing today is for sales and adjusted EBITDA well ahead of the expectations we provided at the beginning of the year.  While I am very pleased with what we have accomplished in our first year as a combined company, we are nowhere close to meeting our full potential, and we continue to have great opportunities for improvement.  I believe we are positioned well for future success and achieving our key financial goals of mid-teens constant currency net sales growth, gross margins in the high 70% range and non-GAAP adjusted EBITDA margins of approximately 20% three to four years post the close of the merger.”  

Outlook

The company is maintaining the existing midpoint of its net sales from continuing operations for full-year 2016 guidance but narrowing the range to approximately $677 million to $683 million from its previously provided guidance range of $675 million to $685.  The company previously stated it expected dis-synergies to be less than the original guidance of $25 million to $30 million for full-year 2016 and today is formally updating its expectation for dis-synergies to be approximately $15 million for full-year 2016, which is consistent with the assumptions the company used to update its second quarter of 2016 guidance. 

The company is also increasing its full-year 2016 non-GAAP adjusted EBITDA from continuing operations, as described in the non-GAAP reconciliation provided later in this release, to be in the range of $43 million to $48 million from its previous range of $40 million to $45 million.  This guidance assumes cost synergies of approximately $25 million for full-year 2016.

The company anticipates non-GAAP adjusted earnings per share from continuing operations, including share-based compensation, as described in the non-GAAP to GAAP reconciliation provided later in this release, for full-year 2016 of $(0.52) to $(0.47) per diluted share.   

The company estimates approximately 103.0 million diluted weighted-average ordinary shares outstanding for fiscal year 2016.

The company's non-GAAP adjusted EBITDA from continuing operations target is measured by adding back to net loss from continuing operations charges for interest, income taxes, depreciation and amortization expenses, non-cash share-based compensation expense and non-operating income and expense. Additionally, the company’s adjusted EBITDA from continuing operations target excludes possible future acquisitions; other material future business developments; due diligence, transaction and transition costs associated with acquisitions and divestitures; amortization of inventory step-up; and charges associated with product rationalization initiatives.  Further, this adjusted EBITDA from continuing operations target excludes any expenses, earnings or losses related to the divested large joints business, legacy Wright’s divested OrthoRecon business and legacy Tornier’s divested ankle replacement and silastic toe products.

The company’s non-GAAP adjusted earnings per share from continuing operations target is measured by adding back to net loss from continuing operations charges for non-cash amortization expenses, net of taxes. Note that as a result of the company’s relatively low effective tax rate due to the valuation allowance impacting a substantial portion of the company’s income/loss, the company is currently estimating the tax effect on amortization expense at 0%. Additionally, this adjusted earnings per share from continuing operations target excludes possible future acquisitions; other material future business developments; non-cash interest expense associated with the 2017, 2020 and 2021 convertible notes; due diligence, transaction and transition costs associated with acquisitions and divestitures; amortization of inventory step-up; charges associated with product rationalization initiatives; mark-to-market adjustments to CVRs; non-cash mark-to-market derivative adjustments; and non-cash write-offs of unamortized debt discount and deferred financing charges associated with the partial settlement of the 2017 convertible notes and 2020 convertible notes. Further, this adjusted earnings per share from continuing operations target excludes any expenses, earnings or losses related to the large joints business.

All of the historical non-GAAP financial measures used in this release are reconciled to the most directly comparable GAAP measures. With respect to the company’s 2016 financial guidance regarding non-GAAP adjusted EBITDA from continuing operations and non-GAAP adjusted earnings per share from continuing operations, however, the company cannot provide a quantitative reconciliation to the most directly comparable GAAP measures without unreasonable effort due to its inability to make accurate projections and estimates related to certain information needed to calculate some of the adjustments as described above. The anticipated differences between these non-GAAP financial measures and the most directly comparable GAAP measure are described above qualitatively.

The company's anticipated ranges for net sales from continuing operations, non-GAAP adjusted EBITDA from continuing operations, and non-GAAP adjusted earnings per share from continuing operations are forward-looking statements, as are any other statements that anticipate or aspire to future events or performance.  They are subject to various risks and uncertainties that could cause the company's actual results to differ materially from the anticipated targets.  The anticipated targets are not predictions of the company's actual performance.  See the cautionary information about forward-looking statements in the “Cautionary Note Regarding Forward-Looking Statements” section of this release.

Supplemental Financial Information

To view the third quarter of 2016 supplemental financial information, visit ir.wright.com.  For updated information on Wright Medical Group N.V. segment reporting changes and non-GAAP combined pro forma historical financial information, including third quarter of 2016, please refer to the presentation posted on Wright’s website at ir.wright.com in the “Financial Information” section.

Internet Posting of Information

Wright routinely posts information that may be important to investors in the “Investor Relations” section of its website at www.wright.com.  The company encourages investors and potential investors to consult the Wright website regularly for important information about Wright.

Conference Call and Webcast

As previously announced, Wright will host a conference call starting at 3:30 p.m. Central Time today.  The live dial-in number for the call is 844-295-9436 (U.S.) / 574-990-1040 (Outside U.S.).  The participant passcode for the call is “Wright.”  A simultaneous webcast of the call will be available via Wright’s corporate website at www.wright.com.   

A replay of the call will be available beginning at 5:30 p.m. Central Time on November 2, 2016 through November 9, 2016.  To hear this replay, dial 855-859-2056 (U.S.) / 404-537-3406 (Outside U.S.) and enter passcode 69669971.  A replay of the conference call will also be available via the internet starting today and continuing for at least 12 months.  To access a replay of the conference call via the internet, go to the Investor Relations -Presentations/Calendar” section of the company’s corporate website located at www.wright.com.

The conference call may include a discussion of non-GAAP financial measures.  Reference is made to the most directly comparable GAAP financial measures, the reconciliation of the differences between the two financial measures, and the other information included in this release, the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) today, or otherwise available in the “Investor Relations - Supplemental Financial Information” section of the company's corporate website located at www.wright.com.

The conference call may include forward-looking statements.  See the cautionary information about forward-looking statements in the “Cautionary Note Regarding Forward-Looking Statements” section of this release.

About Wright Medical Group N.V.

Wright Medical Group N.V. is a global medical device company focused on extremities and biologics products. The company is committed to delivering innovative, value-added solutions improving quality of life for patients worldwide and is a recognized leader of surgical solutions for the upper extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics markets, three of the fastest growing segments in orthopaedics.  For more information about Wright, visit www.wright.com.

™ and ® denote trademarks and registered trademarks of Wright Medical Group N.V. or its affiliates,  registered as indicated in the United States, and in other countries.  All other trademarks and trade names referred to in this release are the property of their respective owners.

Non-GAAP Financial Measures  

To supplement the company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles, the company uses certain non-GAAP financial measures in this release. Reconciliations of the historical non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables later in this release. Wright’s non-GAAP financial measures include combined pro forma net sales; combined pro forma net sales, excluding the impact of foreign currency; net income, as adjusted; EBITDA, as adjusted; gross margin, as adjusted; earnings, as adjusted; and earnings, as adjusted, per diluted share, in each case, from continuing operations. The company's management believes that the presentation of these measures provides useful information to investors.  These measures may assist investors in evaluating the company's operations, period over period. While pro forma data gives effect to the merger with Tornier as if it had occurred on the first day of fiscal 2015 and enhances comparability of financial information between periods, pro forma data is not indicative of the results that actually would have been obtained if the merger had occurred as of the beginning of 2015. Wright’s non-GAAP financial measures exclude such items as non-cash interest expense related to the company's 2017 convertible notes, 2020 convertible notes and 2021 convertible notes, net gains and losses on mark-to-market adjustments on and settlements of derivative assets and liabilities, write-off of unamortized debt discount and deferred financing charges following the partial settlement of 2017 convertible notes and 2020 convertible notes, mark-to-market adjustments on CVRs, and transaction and transition costs, all of which may be highly variable, difficult to predict and of a size that could have substantial impact on the company's reported results of operations for a period.  It is for this reason that the company cannot provide without unreasonable effort a quantitative reconciliation to the most directly comparable GAAP measures for its 2016 financial guidance regarding non-GAAP adjusted EBITDA from continuing operations and non-GAAP adjusted earnings per share from continuing operations. Management uses the non-GAAP measures in this release internally for evaluation of the performance of the business, including the allocation of resources and the evaluation of results relative to employee performance compensation targets.  Investors should consider non-GAAP financial measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This release includes forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “intend,” “could,” “may,” “will,” “believe,” “estimate,” “look forward,” “forecast,” “goal,” “target,” “project,” “continue,” “outlook,” “guidance,” “future,” other words of similar meaning and the use of future dates. Forward-looking statements in this release include, but are not limited to, statements about the company’s anticipated financial results for 2016, including net sales from continuing operations, adjusted EBITDA from continuing operations and adjusted earnings per share from continuing operations; anticipated sales and cost synergies and dis-synergies and the timing thereof; the company’s expectations regarding the benefits of its merger with Tornier and integration efforts and progress; the effects of the MSA and settlement agreement with the Three Settling Insurers and the amount and funding of the settlement amounts; and the company’s ability to achieve its key financial goals. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Each forward-looking statement contained in this release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, the failure to integrate the businesses and realize net sales synergies and cost savings from the merger with Tornier or delay in realization thereof; operating costs and business disruption as a result of the merger, including adverse effects on employee retention and sales force productivity and on business relationships with third parties; integration costs; actual or contingent liabilities; adverse effects of diverting resources and attention to providing transition services to the purchaser of the large joints business; the adequacy of the company’s capital resources and need for additional financing; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; failure to achieve the anticipated benefits from approval of AUGMENT® Bone Graft; the effect of regulatory actions, changes in and adoption of reimbursement rates; product liability claims and product recalls; pending and threatened litigation; risks associated with the MSA and settlement agreement with the Three Settling Insurers; risks associated  international operations and expansion; fluctuations in foreign currency exchange rates; other business effects, including the effects of industry, economic or political conditions outside of the company’s control; reliance on independent distributors and sales agencies; competitor activities; changes in tax and other legislation; and the risks identified under the heading “Risk Factors” in Wright’s Annual Report on Form 10-K for the year ended December 27, 2015 filed by Wright with the SEC on February 23, 2016 and Wright’s Quarterly Report on Form 10- Q for the quarter ended September 25, 2016 anticipated to be filed by Wright with the SEC on November 2, 2016.  Investors should not place considerable reliance on the forward-looking statements contained in this release.  Investors are encouraged to read Wright’s filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking statements in this release speak only as of the date of this release, and Wright undertakes no obligation to update or revise any of these statements. Wright’s business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.                                     

--Tables Follow--

Wright Medical Group N.V.
Condensed Consolidated Statements of Operations
 (dollars in thousands, except per share data--unaudited)

  Three months ended   Nine months ended
  September 25, 2016   September 30, 2015   September 25, 2016   September 30, 2015
Net sales $ 157,332     $ 80,139     $ 497,339     $ 238,493  
Cost of sales 46,149     23,052     141,824     63,812  
Gross profit 111,183     57,087     355,515     174,681  
Operating expenses:              
Selling, general and administrative 129,840     85,997     401,069     250,801  
Research and development 12,481     9,570     36,705     24,644  
Amortization of intangible assets 7,466     2,562     21,407     7,741  
Total operating expenses 149,787     98,129     459,181     283,186  
Operating loss (38,604 )   (41,042 )   (103,666 )   (108,505 )
Interest expense, net 16,795     11,185     41,673     29,793  
Other (income) expense, net (365 )   10,236     (3,494 )   7,395  
Loss from continuing operations before income taxes (55,034 )   (62,463 )   (141,845 )   (145,693 )
(Benefit) provision for income taxes (2,325 )   187     (6,913 )   511  
Net loss from continuing operations $ (52,709 )   $ (62,650 )   $ (134,932 )   $ (146,204 )
Loss from discontinued operations, net of tax (57,436 )   $ (36,211 )   $ (252,571 )   $ (46,720 )
Net loss $ (110,145 )   $ (98,861 )   $ (387,503 )   $ (192,924 )
               
Net loss from continuing operations per share, basic (1) $ (0.51 )   $ (1.19 )   $ (1.31 )   $ (2.78 )
Net loss from continuing operations per share, diluted (1) $ (0.51 )   $ (1.19 )   $ (1.31 )   $ (2.78 )
               
Net loss per share, basic (1) $ (1.07 )   $ (1.87 )   $ (3.77 )   $ (3.67 )
Net loss per share, diluted (1) $ (1.07 )   $ (1.87 )   $ (3.77 )   $ (3.67 )
               
Weighted-average number of shares outstanding-basic (1) 103,072     52,750     102,854     52,607  
Weighted-average number of shares outstanding-diluted (1) 103,072     52,750     102,854     52,607  
                       

_______________________________

(1) The prior year balances were converted to meet post-merger valuations.

Wright Medical Group N.V.
Consolidated Net Sales Analysis
(dollars in thousands--unaudited)

  Three months ended   Nine months ended
  September 25, 2016   September 30, 2015   change   September 25, 2016   September 30, 2015   change
U.S.                      
Lower extremities 51,586     43,929     17.4 %   158,872     128,277     23.9 %
Upper extremities 46,207     3,654     1,164.6 %   146,117     11,703     1,148.5 %
Biologics 18,247     12,198     49.6 %   53,167     34,612     53.6 %
Sports med & other 2,025     613     230.3 %   6,326     1,558     306.0 %
Total U.S. $ 118,065     $ 60,394     95.5 %   $ 364,482     $ 176,150     106.9 %
                       
International                      
Lower extremities 14,201     10,917     30.1 %   45,984     35,313     30.2 %
Upper extremities 17,326     1,764     882.2 %   62,241     5,723     987.6 %
Biologics 4,739     5,260     (9.9 )%   13,804     15,070     (8.4 )%
Sports med & other 3,001     1,804     66.4 %   10,828     6,237     73.6 %
Total International $ 39,267     $ 19,745     98.9 %   $ 132,857     $ 62,343     113.1 %
                       
Global                      
Lower extremities 65,787     54,846     19.9 %   204,856     163,590     25.2 %
Upper extremities 63,533     5,418     1,072.6 %   208,358     17,426     1,095.7 %
Biologics 22,986     17,458     31.7 %   66,971     49,682     34.8 %
Sports med & other 5,026     2,417     107.9 %   17,154     7,795     120.1 %
Total net sales $ 157,332     $ 80,139     96.3 %   $ 497,339     $ 238,493     108.5 %
                                           

Wright Medical Group N.V.
Reconciliation of Non-GAAP Combined Pro Forma Net Sales to Net Sales
(dollars in thousands--unaudited)

  Three months ended
  September 30, 2015
  Standalone Wright Medical Group, Inc.   Standalone Tornier N.V., recast (1)   Discontinued net sales (2)   Non-GAAP combined pro forma net sales
U.S.              
Lower extremities $ 43,929     $ 8,675     $ (2,905 )   $ 49,699  
Upper extremities 3,654     37,908         41,562  
Biologics 12,198     412         12,610  
Sports med & other 613     1,810         2,423  
Total extremities & biologics 60,394     48,805     (2,905 )   106,294  
Large joint     33     (33 )    
Total U.S. $ 60,394     $ 48,838     $ (2,938 )   $ 106,294  
               
International              
Lower extremities $ 10,917     $ 2,275     $     $ 13,192  
Upper extremities 1,764     14,862         16,626  
Biologics 5,260     114         5,374  
Sports med & other 1,804     1,505         3,309  
Total extremities & biologics 19,745     18,756         38,501  
Large joint     7,350     (7,350 )    
Total International $ 19,745     $ 26,106     $ (7,350 )   $ 38,501  
               
Global              
Lower extremities $ 54,846     $ 10,950     $ (2,905 )   $ 62,891  
Upper extremities 5,418     52,770         58,188  
Biologics 17,458     526         17,984  
Sports med & other 2,417     3,315         5,732  
Total extremities & biologics 80,139     67,561     (2,905 )   144,795  
Large joint     7,383     (7,383 )    
Total net sales $ 80,139     $ 74,944     $ (10,288 )   $ 144,795  
                               

_______________________________

(1) Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting.

(2) To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products and the global sales associated with Tornier's Large Joint business.

Wright Medical Group N.V.
Reconciliation of Non-GAAP Combined Pro Forma Net Sales to Net Sales
(dollars in thousands--unaudited)

  Nine months ended
  September 30, 2015
  Standalone Wright Medical Group, Inc.   Standalone Tornier N.V., recast (1)   Discontinued net sales (2)   Non-GAAP combined pro forma net sales
U.S.              
Lower extremities 128,277     29,636     (9,732 )   148,181  
Upper extremities 11,703     115,846         127,549  
Biologics 34,612     1,290         35,902  
Sports med & other 1,558     5,021         6,579  
Total extremities & biologics 176,150     151,793     (9,732 )   318,211  
Large joint     119     (119 )    
Total U.S. $ 176,150     $ 151,912     $ (9,851 )   $ 318,211  
               
International              
Lower extremities 35,313     7,402         42,715  
Upper extremities 5,723     51,293         57,016  
Biologics 15,070     357         15,427  
Sports med & other 6,237     5,372         11,609  
Total extremities & biologics 62,343     64,424         126,767  
Large joint     29,921     (29,921 )    
Total International $ 62,343     $ 94,345     $ (29,921 )   $ 126,767  
               
Global              
Lower extremities 163,590     37,038     (9,732 )   190,896  
Upper extremities 17,426     167,139         184,565  
Biologics 49,682     1,647         51,329  
Sports med & other 7,795     10,393         18,188  
Total extremities & biologics 238,493     216,217     (9,732 )   444,978  
Large joint     30,040     (30,040 )    
Total sales $ 238,493     $ 246,257     $ (39,772 )   $ 444,978  
                               

_______________________________

(1) Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting.

(2) To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products and the global sales associated with Tornier's Large Joint business.

Wright Medical Group N.V.
Supplemental Combined Pro Forma Net Sales Information
(unaudited)

  Third Quarter 2016 net sales growth/(decline)
  U.S. combined pro forma Int'l combined pro forma constant currency Int'l combined pro forma Global combined pro forma constant currency Global combined pro forma
Product line          
Lower extremities   4 %   11 %   8 %   5 %   5 %
Upper extremities   11 %   5 %   4 %   9 %   9 %
Biologics   45 %   (10 %)   (12 %)   28 %   28 %
Sports med & other   (16 %)   (5 %)   (9 %)   (10 %)   (12 %)
Total net sales   11 %   4 %   2 %   9 %   9 %
                               


  Nine months ended September 25, 2016 net sales growth/(decline)
  U.S. combined pro forma Int'l combined pro forma constant currency Int'l combined pro forma Global combined pro forma constant currency Global combined pro forma
Product line          
Lower extremities   7 %   11 %   8 %   8 %   7 %
Upper extremities   15 %   11 %   9 %   13 %   13 %
Biologics   48 %   (7 %)   (11 %)   31 %   30 %
Sports med & other   (4 %)   (4 %)   (7 %)   (4 %)   (6 %)
Total net sales   15 %   7 %   5 %   12 %   12 %
                               


Wright Medical Group N.V.
Reconciliation of Non-GAAP Adjusted Gross Margins to Gross Margins from Continuing Operations
 (dollars in thousands--unaudited)

  Three months ended   Nine months ended
  September 25, 2016   September 25, 2016
Gross profit from continuing operations, as reported $ 111,183     $ 355,515  
Gross margins from continuing operations, as reported 70.7 %   71.5 %
Reconciling items impacting gross profit:      
Inventory step-up amortization 10,306     30,922  
Product rationalization 1,573     3,527  
Transaction and transition costs     124  
Non-GAAP gross profit from continuing operations, as adjusted $ 123,062     $ 390,088  
Net sales from continuing operations 157,332     497,339  
Non-GAAP adjusted gross margins from continuing operations 78.2 %   78.4 %
           

Wright Medical Group N.V.
Reconciliation of Adjusted Non-GAAP Earnings Per Share to Net Loss from Continuing Operations Per Share
 (dollars in thousands, except per share data--unaudited)

  Three months ended   Nine months ended
  September 25, 2016   September 25, 2016
Net loss from continuing operations, as reported $ (52,709 )   $ (134,932 )
Net loss from continuing operations per share, as reported $ (0.51 )   $ (1.31 )
Reconciling items:      
Inventory step-up amortization (1) 10,306     30,922  
Product rationalization (1) 1,573     3,527  
Non-cash interest expense on convertible notes 10,516     25,812  
Non-cash loss on extinguishment of debt     12,343  
Derivatives mark-to-market adjustments (3,187 )   (26,460 )
Transaction and transition costs (3) 6,532     24,425  
Management changes (2)     1,348  
CVR mark-to-market adjustments 2,243     8,968  
Contingent consideration fair value adjustment 70     376  
Legal settlement (2)     1,800  
Costs associated with new convertible debt (2)     234  
IRS settlement (4)     (3,073 )
Tax effect of reconciling items (2,313 )   (5,634 )
Non-GAAP net loss from continuing operations, as adjusted $ (26,969 )   $ (60,344 )
Add back amortization of intangible assets 7,466     21,407  
Adjusted non-GAAP earnings $ (19,503 )   $ (38,937 )
Weighted-average basic shares outstanding 103,072     102,854  
Adjusted non-GAAP earnings per share $ (0.19 )   $ (0.38 )
               

_______________________________

(1) Impacting gross profit.
(2) Impacting selling, general, and administrative expense.
(3) Impacting selling, general, and administrative expense and research and development expense for $6.4 million and $0.2 million, respectively, for the three months ended September 25, 2016.  Impacting gross profit; selling, general, and administrative expense; and research and development expense for $0.1 million, $23.9 million, and $0.4 million, respectively, for the nine months ended September 25, 2016.
(4) IRS settlement includes $0.8 million of interest income and $2.3 million tax benefit.

Wright Medical Group N.V.
Reconciliation of Non-GAAP Adjusted EBITDA to Net Loss from Continuing Operations
 (dollars in thousands--unaudited)

  Three months ended   Nine months ended
  September 25, 2016   September 25, 2016
Net loss from continuing operations $ (52,709 )   $ (134,932 )
Interest expense, net 16,795     41,673  
Benefit from income taxes (2,325 )   (6,913 )
Depreciation 14,885     41,005  
Amortization 7,466     21,407  
Non-GAAP EBITDA $ (15,888 )   $ (37,760 )
Reconciling items impacting EBITDA:      
Non-cash share-based compensation expense 3,528     9,901  
Other income, net (365 )   (3,494 )
Inventory step-up amortization 10,306     30,922  
Product rationalization 1,573     3,527  
Transaction and transition costs 6,532     24,425  
Management changes     1,348  
Legal settlement     1,800  
Costs associated with new convertible debt     234  
Non-GAAP adjusted EBITDA $ 5,686     $ 30,903  
               


Wright Medical Group N.V.

Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)

  September 25, 2016   December 27, 2015
Assets      
Current assets:      
Cash and cash equivalents $ 314,314     $ 139,804  
Accounts receivable, net 121,794     131,050  
Inventories 170,819     210,701  
Prepaid expenses and other current assets 110,702     59,842  
Current assets held for sale 21,805     18,487  
Total current assets 739,434     559,884  
       
Property, plant and equipment, net 211,096     224,256  
Goodwill and intangible assets, net 1,103,571     1,117,917  
Other assets (1) 262,225     139,754  
Non-current assets held for sale     31,683  
Total assets (1) $ 2,316,326     $ 2,073,494  
       
Liabilities and shareholders' equity      
Current liabilities:      
Accounts payable $ 25,181     $ 30,904  
Accrued expenses and other current liabilities 399,985     171,171  
Current portion of long-term obligations 4,117     2,171  
Current liabilities held for sale 2,049     2,692  
Total current liabilities 431,332     206,938  
Long-term obligations (1) 769,333     561,201  
Other liabilities 370,556     250,329  
Total liabilities (1) 1,571,221     1,018,468  
       
Shareholders' equity 745,105     1,055,026  
Total liabilities and shareholders' equity (1) $ 2,316,326     $ 2,073,494  
               

                                               

(1) The prior year debt issuance costs were reclassified to account for adoption of ASU 2015-03 and ASU 2015-15.

Investors & Media:

Julie D. Tracy
Sr. Vice President, Chief Communications Officer
Wright Medical Group N.V.
(901) 290-5817
julie.tracy@wright.com                                               

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Wright Medical Group N.V.