Financial – Page 71 – Selby Spine

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

_______________________________

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

LEESBURG, Va., Nov. 02, 2016 (GLOBE NEWSWIRE) — K2M Group Holdings, Inc. (Nasdaq:KTWO) (the “Company” or “K2M”), a global medical device company focused on designing, developing and commercializing innovative and proprietary complex spine and minimally invasive spine technologies and techniques, today reported financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Financial Summary:

Total reported revenue of $59.3 million, up 7.8% year-over-year. Total revenue increased 8.7% year-over-year on a constant currency basis.
Domestic revenue of $46.0 million, up 16.5% year-over-year
- S. Complex Spine growth of 15.8% year-over-year
- S. Minimally Invasive Surgery (MIS) growth of 6.7% year-over-year
- S. Degenerative growth of 21.1% year-over-year
International revenue of $13.3 million, down 14.3% year-over-year. International revenue decreased 11.8% year-over-year on a constant currency basis.
Net loss of $7.9 million for the three months ended September 30, 2016, compared to a net loss of $10.2 million last year.
Adjusted EBITDA of $2.8 million for the three months ended September 30, 2016, compared to Adjusted EBITDA of $1.1 million last year.

Third Quarter 2016 Highlights:

On August 8, 2016, the Company announced the pricing of a private offering of $50 million aggregate principal amount of 4.125% convertible senior notes (the “Notes”) due 2036.
On September 21, 2016, the Company announced at the Scoliosis Research Society (SRS) 51st Annual Meeting & Course in Prague, Czech Republic, that it has received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for screw and connector components toward a growing spine application for its MESA^®Spinal System. This clearance enables these screw and connector components to be used as a part of a growing rod construct designed to accommodate growth in patients under 10 years of age.

Highlights Subsequent to Quarter-End:

On October 6, 2016, the Company announced it has received 510(k) clearance from the FDA to expand its CASCADIA™ Lateral Interbody System featuring Lamellar 3D Titanium Technology™, the Company’s innovative technology that uses 3D printing with the goal of allowing for bony integration throughout an implant. The CASCADIA Lateral Interbody System line extension clearance strengthens K2M’s MIS portfolio and the Company’s leadership in the 3D printing of spinal devices, as evidenced by its having the most comprehensive 3D-printed spinal portfolio available on the market.
On October 26, 2016, the Company announced the U.S. launch of its award-winning CASCADIA Interbody Systems, featuring Lamellar 3D Titanium Technology, during the 31st North American Spine Society (NASS) Annual Meeting. K2M presented clinical background on its 3D-printed technologies and showcased the Company’s comprehensive CASCADIA product portfolio, which was recognized by Orthopedics This Weekwith a 2016 Spine Technology Award as one of the best new spine technologies of 2016.

“Our third quarter sales growth of 16.5% in the U.S. was consistent with both our near-term expectations, and our long-term objective of revenue growth in the mid-to-high teens,” said President and Chief Executive Officer, Eric Major. “U.S. sales this quarter were driven primarily by a strong summer deformity season and the contributions from new customers adopting K2M’s innovative technologies across our procedure categories, but most notably in our degenerative and minimally invasive categories, which are benefitting from sales of our Lamellar 3D Titanium Technology platform. K2M offers the most comprehensive portfolio of FDA-cleared 3D-printed spinal devices on the market today and the surgeon community continues to show increasing awareness of our leadership position in this important area of the market.”

Mr. Major continued: “U.S. sales have increased 15% over the first nine months of 2016, driven by strong growth in each of our procedure categories—complex, minimally invasive and degenerative—which have increased sales 12%, 16% and 17%, respectively, so far this year. We are pleased to be reporting improving profitability as the year progresses. In addition, we look forward to continued progress throughout the balance of 2016 and have updated our full-year guidance expectations accordingly.”

Third Quarter 2016 Financial Results

	Three Months Ended September 30,				Increase / Decrease
*($,thousands)*	2016		2015		$ Change			% Change			% Change
								*(as reported)*			*(constant currency)*
United States	$	45,978	$	39,459	$	6,519			16.5	%		16.5	%
International		13,332		15,550		(2,218	)		(14.3	%)		(11.8	%)
Total Revenue:	$	59,310	$	55,009	$	4,301			7.8	%		8.7	%

Total revenue for third quarter 2016 increased $4.3 million, or 7.8%, to $59.3 million, compared to $55.0 million in the third quarter of 2015. Total revenue increased 8.7% year-over-year on a constant currency basis. The increase in revenue was primarily driven by greater sales volume from new surgeon users and newer product offerings, partially offset by a decrease in existing customer usage and decreases in both international direct and distributor revenue compared to last year.

Revenue in the United States increased $6.5 million, or 16.5% year-over-year, to $46.0 million, and international revenue decreased $2.2 million, or 14.3% year-over-year, to $13.3 million. Third quarter 2016 international revenue decreased 11.8% year-over-year on a constant currency basis. Foreign currency exchange impacted third quarter international revenue by approximately $0.4 million, representing approximately 247 basis points of international growth year-over-year.

The following table represents domestic revenue by procedure category.

	Three Months Ended September 30,				Increase / Decrease
*($,thousands)*		2016		2015	$ Change		% Change
Complex Spine	$	19,516	$	16,852	$	2,664		15.8	%
Minimally Invasive		6,767		6,344		423		6.7	%
Degenerative		19,695		16,263		3,432		21.1	%
U.S Revenue:	$	45,978	$	39,459	$	6,519		16.5	%

By procedure category, U.S. revenue in the Company’s complex spine, MIS and degenerative categories represented 42.4%, 14.7% and 42.9% of U.S. revenue, respectively, for the three months ended September 30, 2016.

Gross profit for third quarter 2016 increased 5.8% to $39.8 million, compared to $37.6 million for third quarter 2015. Gross margin was 67.1% compared to 68.4% last year. Gross profit includes amortization expense on investments in surgical instruments of $3.5 million, or 5.8% of sales, for the three months ended September 30, 2016, compared to $3.1 million, or 5.7% of sales, last year. Third quarter of fiscal 2015 cost of goods sold included costs, net of recoveries, associated with medical device excise tax of $(0.1) million compared to no such expenses in the current period.

Operating expenses for third quarter 2016 decreased $1.7 million, or 3.6%, to $45.9 million, compared to $47.6 million for third quarter 2015. The decrease in operating expenses was driven primarily by a 15.0% decrease in general and administrative expenses offset partially by a 2.1% increase in sales and marketing expenses compared to last year.

Loss from operations for the third quarter of 2016 was $6.1 million, compared to a loss from operations of $10.0 million last year. Loss from operations included intangible amortization of $2.6 million and $2.5 million for the third quarters of 2016 and 2015, respectively.

Other expense for the third quarter of 2016 increased $1.8 million to $1.9 million, compared to $0.1 million last year. The increase in other expense, net was primarily attributable to interest expense incurred on the capital lease obligation related to our headquarters and operations facilities as well as the Notes issued in August 2016, and an increase of $0.5 million in unrealized losses from foreign currency re-measurement on intercompany payable balances. Foreign currency losses impacted operating results compared to last year due to changes in the average exchange rates of the U.S. Dollar, Pound Sterling and Euro applied to intercompany balances in both periods.

Net loss for the third quarter of 2016 was $7.9 million, or $(0.19) per diluted share, compared to a loss of $10.2 million, or $(0.25) per diluted share, for the third quarter of 2015.

Nine-Months 2016 Financial Results

	Nine Months Ended September 30,				Increase / Decrease
*($,thousands)*		2016		2015	$ Change			% Change			% Change
								*(as reported)*			*(constant currency)*
United States	$	133,409	$	116,055	$	17,354			15.0	%		15.0	%
International		41,434		45,732		(4,298	)		(9.4	%)		(7.9	%)
Total Revenue:	$	174,843	$	161,787	$	13,056			8.1	%		8.6	%

For the nine months ended September 30, 2016, total revenue increased $13.0 million, or 8.1%, to $174.8 million, compared to $161.8 million for the nine months ended September 30, 2015. Total revenue increased 8.6% year-over-year on a constant currency basis. U.S. revenue increased $17.3 million, or 15.0%, to $133.4 million for the first nine months of 2016, compared to $116.1 million last year. International revenue decreased $4.3 million, or 9.4%, to $41.4 million for the first nine months of 2016, compared to $45.7 million last year. International revenue decreased 7.9% year-over-year on a constant currency basis.

	Nine Months Ended September 30,				Increase / Decrease
*($,thousands)*		2016		2015	$ Change		% Change
Complex Spine	$	53,981	$	48,204	$	5,777		12.0	%
Minimally Invasive		20,653		17,766		2,887		16.3	%
Degenerative		58,775		50,085		8,690		17.4	%
U.S Revenue:	$	133,409	$	116,055	$	17,354		15.0	%

Sales in our complex spine, MIS and degenerative categories represented 40.5%, 15.5% and 44.0% of U.S. revenue, respectively, for the first nine months of 2016.

As of September 30, 2016, we had cash and cash equivalents of $46.1 million as compared to $34.6 million as of December 31, 2015. We had working capital of $120.9 million as of as September 30, 2016 compared to $107.4 million as of December 31, 2015. At September 30, 2016, outstanding long-term indebtedness included the carrying value of the Notes of $36.4 million and the capital lease obligation of $35.2 million. In addition, we had no borrowings outstanding under our credit facility.

2016 Outlook

The Company is updating its fiscal year 2016 guidance expectations, which was recently reaffirmed on August 3, 2016.

The Company now expects:

Total revenue on an as reported basis in the range of $233.5 million to $235.0 million, representing growth of 8% to 9% year-over-year, compared to total revenue of $216.0 million in fiscal year 2015.
Total net loss of approximately $43.0 million to $39.0 million, compared to a total net loss of $39.4 million in fiscal year 2015.
Adjusted EBITDA in a range of ($2.0) million to $2.0 million, compared to Adjusted EBITDA of ($142) thousand in fiscal year 2015.

Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on November 2nd to discuss the results of the quarter, and to host a question and answer session. Those who would like to participate may dial 888-670-2254 (913-312-1510 for international callers) and provide access code 3362399 approximately 10 minutes prior to the start of the call. A live webcast of the call will also be provided on the investor relations section of the Company’s website at http://Investors.K2M.com/.

For those unable to participate, a replay of the call will be available for two weeks at 888-203-1112 (719-457-0820 for international callers); access code 3362399. The webcast will be archived on the investor relations section of the Company’s website.

About K2M Group Holdings, Inc.

K2M Group Holdings, Inc. is a global medical device company focused on designing, developing and commercializing innovative complex spine and minimally invasive spine technologies and techniques used by spine surgeons to treat some of the most difficult and challenging spinal pathologies. K2M has leveraged these core competencies to bring to market an increasing number of products for patients suffering from degenerative spinal conditions. These technologies and techniques, in combination with a robust product pipeline, enable the Company in the global spinal surgery market. Additional information is available online at www.K2M.com.

Forward-Looking Statements

This press release contains forward-looking statements that reflect current views with respect to, among other things, operations and financial performance. Forward-looking statements include all statements that are not historical facts such as our statements about our expected financial results and guidance and our expectations for future business prospects, including with respect to our international distribution partners in Australia and Japan. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties including, among other things: our ability to achieve or sustain profitability; our ability to successfully demonstrate the merits of our technologies; pricing pressure from our competitors, hospitals and changes in third-party coverage and reimbursement; competition and our ability to develop and commercialize new products; aggregation of hospital purchasing from collaboration and consolidation; hospitals and other healthcare providers may be unable to obtain adequate coverage and reimbursement for procedures performed using our products; the safety and efficacy of our products is not yet supported by long-term clinical data; our dependence on a limited number of third-party suppliers; our ability to maintain and expand our network of direct sales employees, independent sales agencies and international distributors and their level of sales or distribution activity with respect our products; the proliferation of physician-owned distributorships; concentration of sales from a limited number of spinal systems or products that incorporate these technologies; loss of the services of key members of our senior management, consultants or personnel; ability to enhance our product offerings through our research and development efforts; failure to properly manage our anticipated growth; acquisitions of or investments in new or complementary businesses, products or technologies; ability to train surgeons on the safe and appropriate use of our products; requirements to maintain high levels of inventory; impairment of our goodwill or intangible assets; disruptions in our information technology systems; any disruption or delays in operations at our facilities, including our new headquarter facility; or an ability to ship a sufficient number of our products to meet demand; ability to strengthen our brand; fluctuations in insurance cost and availability; extensive governmental regulation; in the United States and foreign jurisdictions; failure to obtain or maintain regulatory approvals and clearances; requirements for new 510(k) clearances, premarket approvals or new or amended CE Certificates of Conformity; medical device reporting regulations in the United States and foreign jurisdictions; voluntary corrective actions by us or our distribution or other business partners or agency enforcement actions; a recall of our products; withdrawal or restrictions on our products or the discovery of serious safety issues with our products; possible enforcement action if we engage in improper marketing or promotion of our products; the misuse or off-label use of our products; delays or failures in any future clinical trials; the results of clinical trials; procurement and use of allograft bone tissue; environmental laws and regulations; compliance by us or our sales representatives with FDA regulations or fraud and abuse laws; U.S. legislative or regulatory healthcare reforms; medical device tax provisions in the healthcare reform laws; our need to generate significant sales to become profitable; potential fluctuations in sales volumes and our results of operations may fluctuate over the course of the year; uncertainty in our future capital needs; failure to comply with restrictions in our revolving credit facility; continuing worldwide economic instability; our inability to protect our intellectual property rights; our reliance on patent rights that we either license from others or have obtained through assignments; our patent litigation; the outcome of potential claims that we, our employees, our independent sales agencies or our distributors have wrongfully used or disclosed alleged trade secrets or are in breach of non-competition or non-solicitation agreements with our competitors; potential product liability lawsuits; operating risks relating to our international operations; foreign currency fluctuations; our ability to comply with the Foreign Corrupt Practices Act and similar laws associated with our activities outside the United States; possible conflicts of interest with our large shareholders; increased costs and additional regulations and requirements as a result of becoming a public company; our ability to implement and maintain effective internal control over financial reporting in the future; the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make; and other risks and uncertainties, including those described under the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and our filings with the SEC.

We operate in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this release. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this press release relate only to events as of the date on which the statements are made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.


K2M GROUP HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share and Per Share Data)

	September 30,			December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	46,117		$	34,646
Accounts receivable, net	43,215			38,773
Inventory, net	66,737			62,002
Prepaid expenses and other current assets	6,443			19,820
Total current assets	162,512			155,241
Property, plant and equipment, net	51,021			38,318
Goodwill	121,814			121,814
Intangible assets, net	25,340			33,123
Other assets, net	30,579			26,016
Total assets	$	391,266		$	374,512

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities under capital lease obligation	$	937		$	284
Accounts payable	14,528			22,483
Accrued expenses	13,789			13,559
Accrued payroll liabilities	12,318			11,507
Total current liabilities	41,572			47,833
Convertible senior notes	36,383			—
Capital lease obligation, net of current maturities	35,187			34,140
Deferred income taxes, net	5,009			5,042
Other liabilities	820			835
Total liabilities	118,971			87,850

Stockholders’ equity:
Common stock, $0.001 par value, 750,000,000 shares authorized; 42,206,258 and 41,337,692 shares issued and 42,197,647 and 41,337,692 shares outstanding, respectively	42			41
Additional paid-in capital	471,915			454,153
Accumulated deficit	(198,614		)	(169,421		)
Accumulated other comprehensive (loss) income	(914		)	1,889
Treasury stock, at cost, 8,611 and 0 shares, respectively	(134		)	—
Total stockholders’ equity	272,295			286,662
Total liabilities and stockholders’ equity	$	391,266		$	374,512


K2M GROUP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenue	$	59,310		$	55,009		$	174,843		$	161,787
Cost of revenue	19,512			17,390			58,747			53,507
Gross profit	39,798			37,619			116,096			108,280
Operating expenses:
Research and development	5,199			5,154			15,989			14,808
Sales and marketing	27,384			26,808			84,132			79,588
General and administrative	13,312			15,667			41,343			42,575
Total operating expenses	45,895			47,629			141,464			136,971
Loss from operations	(6,097		)	(10,010		)	(25,368		)	(28,691		)
Other expense, net:
Foreign currency transaction loss	(547		)	(12		)	(1,099		)	(1,552		)
Interest expense	(1,319		)	(110		)	(2,705		)	(354		)
Total other expense, net	(1,866		)	(122		)	(3,804		)	(1,906		)
Loss before income taxes	(7,963		)	(10,132		)	(29,172		)	(30,597		)
Income tax (benefit) expense	(53		)	83			21			125
Net loss	$	(7,910	)	$	(10,215	)	$	(29,193	)	$	(30,722	)
Basic and diluted	$	(0.19	)	$	(0.25	)	$	(0.70	)	$	(0.77	)
Weighted average shares outstanding:
Basic and diluted	41,940,370			41,074,245			41,639,609			39,892,068


K2M GROUP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)

	Nine Months Ended September 30,
	2016			2015
Operating activities
Net loss	$	(29,193	)	$	(30,722	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	21,452			18,396
Provision for allowance for doubtful accounts	(18		)	177
Provision for inventory reserves	2,817			1,128
Stock-based compensation expense	5,381			8,863
Accretion of discounts and amortization of issuance costs of convertible senior notes	558			—
Deferred income taxes	(33		)	—
Changes in operating assets and liabilities:
Accounts receivable	(5,292		)	(7,729		)
Inventory	(6,466		)	(6,839		)
Prepaid expenses and other assets	(7,636		)	(5,262		)
Accounts payable, accrued expenses, and accrued payroll liabilities	3,442			8,795
Net cash used in operating activities	(14,988		)	(13,193		)
Investing activities
Purchase of surgical instruments	(10,986		)	(6,595		)
Purchase of property, plant and equipment	(16,338		)	(2,424		)
Changes in cash restricted for leasehold improvements	6,153			—
Purchase of intangible assets	(1,282		)	(538		)
Net cash used in investing activities	(22,453		)	(9,557		)
Financing activities
Borrowings on bank line of credit	19,500			25,000
Payments on bank line of credit	(19,500		)	(25,000		)
Proceeds from issuances of convertible senior notes, net of issuance costs	47,575			—
Proceeds from issuances of common stock, net of issuance costs	—			54,401
Issuances and exercise of stock-based compensation benefit plans, net of income tax	1,262			925
Net cash provided by financing activities	48,837			55,326
Effect of exchange rate changes on cash and cash equivalents	75			(311		)
Net increase in cash and cash equivalents	11,471			32,265
Cash and cash equivalents at beginning of period	34,646			11,411
Cash and cash equivalents at end of period	$	46,117		$	43,676

Significant non-cash investing activities
Leasehold improvements, including property under capital lease	$	598		$	—

Significant non-cash financing activities
Deferred convertible senior notes issuance costs	$	486		$	—
Common stock offering costs	$	—		$	244

Cash paid for:
Income taxes	$	177		$	93
Interest	$	339		$	91

K2M GROUP HOLDINGS, INC.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In Thousands)

Use of Non-GAAP Financial Measures

This press release includes the non-GAAP financial measures of revenue in constant currency, Adjusted Gross Profit, and Adjusted EBITDA.

The Company presents these non-GAAP measures because it believes these measures are useful indicators of the Company’s operating performance. Management uses these non-GAAP measures principally as a measure of the Company’s operating performance and believes that these measures are useful to investors because they are frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The Company also believes that these measures are useful to our management and investors as a measure of comparative operating performance from period to period.

Constant currency information compares results between periods as if exchange rates had remained constant period-to-period. We calculate constant currency by converting the prior-year results using current-year foreign currency exchange rates.

Adjusted Gross Profit represents Gross Profit less amortization expense of surgical instruments and medical device excise tax expense. The Company presented Adjusted Gross Profit because it believes it is a useful measure of the Company’s gross profit and operating performance because the measure is not burdened by the timing impact of instrument purchases and related amortization as well as the medical device tax. The Company believes that Adjusted Gross Profit is useful to investors because it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry.

Adjusted EBITDA represents net loss plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense and foreign currency transaction loss. Adjusted EBITDA will also include a deduction for cash payments made for rent on the Company’s new headquarters and operations facilities under the capital lease agreement once rent payment commence in October 2016.

Adjusted EBITDA is presented because the Company believes it is a useful indicator of its operating performance. Management uses the measure principally as a measure of the Company’s operating performance and for planning purposes, including the preparation of the Company’s annual operating budget and financial projections. The Company believes Adjusted EBITDA is useful to investors because it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company believes Adjusted EBITDA is useful to its management and investors as a measure of comparative operating performance from period to period.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net loss as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and it should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, the measure is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of Adjusted EBITDA should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on the Company’s GAAP results in addition to using Adjusted EBITDA on a supplemental basis. The Company’s definition of this measure is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

The following table presents reconciliations of gross profit to adjusted gross profit and net loss to Adjusted EBITDA for the periods presented.


	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Reconciliation from Gross Profit to Adjusted Gross Profit
Gross profit	$	39,798	$	37,619		$	116,096		$	108,280
Surgical instrument amortization	3,454		3,142			10,150			9,146
Medical device excise tax	—		(51		)	(866		)	1,209
Adjusted gross profit (a Non-GAAP Measure)	$	43,252	$	40,710		$	125,380		$	118,635

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Reconciliations from Net Loss to Adjusted EBITDA
Net loss	$	(7,910	)	$	(10,215	)	$	(29,193	)	$	(30,722	)
Interest expense	1,319			110			2,705			354
Income tax (benefit) expense	(53		)	83			21			125
Depreciation and amortization	7,415			6,126			21,452			18,396
Stock-based compensation expense	1,527			4,954			5,381			8,863
Foreign currency transaction loss	547			12			1,099			1,552
Adjusted EBITDA (a Non-GAAP Measure)	$	2,845		$	1,070		$	1,465		$	(1,432	)

The following table presents a reconciliation of net loss to Adjusted EBITDA for our 2016 guidance:


	Year Ended December 31,
	2016
Net Loss	$	(41,000	)
Interest expense	4,225
Income tax expense	—
Depreciation and amortization	29,200
Stock-based compensation expense	7,200
Foreign currency transaction loss	1,200
Cash-based rent payments⁽¹⁾	(825		)
Adjusted EBITDA	$	–

The reconciliation assumes the midpoint of the Adjusted EBITDA range and the midpoint of each component of the reconciliation, corresponding to guidance of ($2.0) million to $2.0 million for 2016.

⁽¹⁾ Represents expected cash payments for rent on the Company’s new headquarters and operations facilities under the capital lease agreement, which begin in October 2016.

Investor Contact:

Westwicke Partners on behalf of K2M Group Holdings, Inc.

Mike Piccinino, CFA

443-213-0500

K2M@westwicke.com

AMSTERDAM, The Netherlands, Nov. 02, 2016 (GLOBE NEWSWIRE) — Wright Medical Group N.V.(NASDAQ:WMGI) today announced that on November 1, 2016, its wholly owned subsidiary Wright Medical Technology, Inc. (WMT) entered into a Master Settlement Agreement (MSA) with Court-appointed attorneys representing plaintiffs in the previously disclosed metal-on-metal hip multi-district litigation known as In Re: Wright Medical Technology, Inc., CONSERVE^® Hip Implant Products Liability Litigation, MDL No. 2329 (MDL) and the consolidated proceeding pending in state court in California known as In re: Wright Hip System Cases, Judicial Council Coordination Proceeding No. 4710 (JCCP). In addition, on October 28, 2016, the Company 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 MDL or 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.

Eligibility requirements of the MSA include that the claimant has a pending or tolled case in the MDL or JCCP, has undergone a revision surgery within eight years of the original implantation surgery, and that the claim has not been identified by WMT as having possible statute of limitation issues. Claimants who have had bilateral revision surgeries will be counted as two claims but only to the extent both claims separately satisfy all eligibility criteria.

The MSA includes a 95% opt-in requirement, meaning the MSA may be terminated by WMT prior to any settlement disbursement if claimants holding greater than 5% of eligible claims in the Final Settlement Poolelect to “opt-out” of the settlement. No funding of any individual plaintiff settlement will occur until the 95% opt-in requirement has been satisfied or waived.

Robert Palmisano, president and chief executive officer, 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.”

Wright will continue to vigorously defend metal-on-metal hip claims not settled pursuant to the MSA. As of September 25, 2016, the company estimates there were approximately 600 outstanding metal-on-metal hip revision claims that would not be included in the MSA settlement, including approximately 200 claims with an implant duration of more than eight years, approximately 300 claims subject to possible statute of limitations preclusion, approximately 30 claims pending in U.S. courts other than the MDL and JCCP, approximately 50 claims pending in non-U.S. courts, and approximately 20 claims that would be eligible for inclusion in the settlement but for the participation limitations contained in the MSA. The company also estimates that there were approximately 700 outstanding metal-on-metal hip non-revision claims as of September 25, 2016. These non-revision cases are excluded from the MSA.

The final MSA settlement amount (not to exceed $240 million), and the final number of claims settled under the MSA, will depend on, among other things, the number of claimants electing to participate in the settlement and the mix of products implanted in the settling claimant group. Claims which do not meet the eligibility requirements of the MSA, new claims, and claims which have opted-out of the settlement will not be settled under the MSA and the company will continue to defend these claims.

The company previously disclosed a loss range applicable to a substantial portion of revision cases of $150 million to $198 million and, in accordance with U.S. generally accepted accounting practices (US GAAP), recognized as a charge within discontinued operations in the second quarter of 2016 $150 million, the low end of the range of probable loss for these cases. During the third quarter of 2016, the company recorded charges of approximately $39 million to increase its accrual from the low end of its previous range of probable loss to the amounts in line with the final agreements and to record accruals for certain other revision cases. Please refer to the disclosures in the company’s third quarter 2016 quarterly report on Form 10-Q for a full discussion of our accruals and disclosures related to this matter.

WMT has agreed to escrow $150 million to secure its obligations under the MSA, and parent corporation Wright Medical Group N.V. has agreed to guaranty WMT’s obligations under the MSA.

The MSA will help bring to a close significant metal-on-metal litigation activity in the U.S. Some lawsuits, however, will remain and Wright will continue to defend against remaining claims and any future claims that could be filed. The ultimate cost to entirely resolve these matters will depend on many factors that are difficult to predict and may be materially different than the amounts accrued to date, including future revision claims and additional insurance recoveries. Further charges may need to be recorded in the future as additional information becomes available.

Internet Posting of Information

About Wright Medical Group N.V.

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 “will,” “may,” “continue,” “anticipate,” “expect,” “could,” “believe,” “estimate,” “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 effects of the settlement agreements and the amount and funding of the settlement amounts. 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, risks and uncertainties associated with the MSA and the settlement agreement with the Three Settling Insurers, including without limitation, the final MSA settlement amount and the final number of claims settled under the MSA, the possibility that the 95% opt-in requirement may not be achieved, the resolution of the remaining unresolved claims, the effect of the broad release of certain insurance coverage for present and future claims, the resolution of the company’s dispute with the remaining carriers; and the other 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.

Investors & Media:

Wright Medical Group N.V.

Julie D. Tracy

Sr. VP, Chief Communications Officer

(901) 290-5817 (office)

julie.tracy@wright.com

Wright Medical Group N.V.

CONTACT US

INVESTOR INFORMATION

NOVEMBER 2, 20164:00 P.M. ET

November 02, 2016

DUBLIN–(BUSINESS WIRE)–Research and Markets has announced the addition of the “World: Artificial Joints For Orthopedic Purposes – Market Report – Analysis and Forecast to 2020” report to their offering.

From 2007 to 2014, global exports of artificial joints for orthopedic purposes showed steady growth, increasing more than twofold over that period. However, it flattened in the last year, amounting to 8,253 million USD in 2015. There was an annual increase of 9.5% throughout the analyzed period.

USA continued its dominance in the global supplies of artificial joints for orthopedic purposes. In 2015, exports of artificial joints for orthopedic purposes from USA totaled 1,655 million USD, which accounted for a 20% share of global exports. Belgium, Germany, Ireland, and Switzerland were the other key global suppliers of artificial joints for orthopedic purposes in 2015, with a 55% combined share of global exports.

Belgium (+45.1% per year) and Germany (+13.3% per year) were the fastest growing exporters from 2007 to 2015. Belgium significantly strengthened its position in the global export structure, growing its share from 2% in 2007 to 17% in 2015.

On the other hand, USA (22%, based on value terms), Germany (10%), France (7%), Belgium (7%), and the UK (6%) were the leading destinations of imports of artificial joints for orthopedic purposes in 2015. Imports to Belgium grew at a rapid pace of +20.9% per year from 2007 to 2015. By contrast, the UK contracted its share of imports by -4 percentage points over the same period. Meanwhile, Belgium’s share of global imports increased by +4 percentage points.

Key Topics Covered:

1. Introduction

2. Executive Summary

3. Market Overview

4. Production

5. Imports

6. Exports

7. Profiles Of Major Manufacturers

For more information about this report visit http://www.researchandmarkets.com/research/ptw7qm/world_artificial

Contacts

Research and Markets
Laura Wood, Senior Manager
press@researchandmarkets.com
For E.S.T Office Hours Call 1-917-300-0470
For U.S./CAN Toll Free Call 1-800-526-8630
For GMT Office Hours Call +353-1-416-8900
U.S. Fax: 646-607-1907
Fax (outside U.S.): +353-1-481-1716
Related Topics: Orthopedic Devices

SAN FRANCISCO, CA – (November 2, 2016) – PeerWell, whose PreHab mobile platform helps patients prepare both physically and mentally for surgery to recover faster, announced today that it has raised $2.1 million in seed funding led by XSeed Capital.

Founded in 2015 by Manish Shah, Navin Gupta and Evan Minamoto, PeerWell has been focused on its flagship PreHab program for hip and knee replacement patients. PeerWell PreHab helps hip and knee replacement candidates optimize their health before surgery. Leveraging evidence-based health science, the PeerWell app delivers patients customized daily lessons that are proven to improve the results of surgery and speed-up recovery. Pairing each patient with real people undergoing a joint replacement at the same time, support and mentorship are at the heart of PeerWell.

“Today the average surgery costs the same as living with diabetes for 33 years,” Manish Shah, CEO of PeerWell. “The best way to reduce costs is to enable patients to be as strong, healthy and prepared as possible before their procedure. Unfortunately, today most patients are given a 50 page hard copy book of pre-op instructions which is an outdated and ineffective method for preparing patients. At PeerWell, we are establishing pre-surgical PreHab as the standard of care for all patients, providing an easy to use mobile app tool for surgery preparation. We designed PeerWell to make clinical workflow more efficient by automating everything a patient needs to get done before surgery. This is rare a win for hospitals, physicians and patients.”

PeerWell’s system houses hundreds of evidence based patient modules that are personalized for patients by machine learning based program creation algorithms. Additionally, PeerWell allows patients to engage with others who are facing the same procedure and learn from patient mentors using its secure peer-to-peer communication technology.

The company will use the seed funding to enhance the platform by launching smartphone based tracking for key orthopedic outcomes including range-of-motion, sit/stand testing and six-minute walk tests. This round of funding will also allow PeerWell to continue its growth by accelerating the development of PreHab programs for other major procedures, establishing new distribution channels for its existing orthopedics business and investing in team growth at its San Francisco headquarters.

“Healthcare is moving toward outcome accountability and associated payment mechanisms, nowhere faster than in the move to bundled payments for procedures like hip and knee replacement. There is consequently a large and growing opportunity for entrepreneurs who recognize the change and can deliver what is needed: improve patients’ ability to go straight home after surgery, reduce length of stay, drop readmissions, and limit overall complications,” said Michael Borrus, Founding Partner of XSeed Capital. “PeerWell is at the forefront of this emerging field. Their PreHab platform is unique in that it aligns and dramatically benefits all stakeholders: patients, doctors, and hospitals. That is why we are excited to invest in Manish and the PeerWell team.”

About PeerWell

PeerWell is a healthcare technology company that helps patients prepare for and recover from major episodes of care with its PreHab mobile platform. Every year 50 million people undergo major procedures like joint replacement surgery, coronary bypass surgery and chemotherapy. Using PeerWell, patients complete personalized 4-5 item daily checklists that help them prepare mentally, physically and environmentally. Learn more about PeerWell’s fully automated perioperative patient solution at https://www.peerwell.co/.

SAN JOSE, Calif., Nov. 2, 2016 /PRNewswire/ — SI-BONE, Inc., a medical device company that pioneered the use of the iFuse Implant System^® (“iFuse”), a minimally invasive surgical (MIS) device indicated for fusion for certain disorders of the sacroiliac (SI) joint, reported that the Centers for Medicare & Medicaid Services (CMS) has issued its 2017 Final Hospital Outpatient Prospective Payment System (HOPPS) and Ambulatory Surgical Center (ASC) payment rule for MIS SI joint fusion. The final payment rule shows AMA CPT^® code 27279 has been assigned to APC 5116 and provides an increased Medicare national average hospital outpatient payment from $10,538to $14,698, representing an increase of $4,160 or 40% over the current payment amount. In the ASC, the new Medicare national average payment will increase from $7,887 to $12,553, representing an increase of $4,666 or 59% over the current payment amount. The new payments will become effective January 1, 2017.

“With these significant increases in facility payments, CMS continues to recognize the value of MIS SI joint fusion when billed using AMA CPT^® code 27279 and the importance of providing access to our procedure for all Medicare beneficiaries in the outpatient setting,” said Michael Mydra, Vice President of Health Outcomes & Reimbursement at SI-BONE. “We believe that iFuse fits strategically with the overall goals of the Affordable Care Act (ACA) by providing a safe and effective treatment of degenerative sacroiliitis and SI joint disruption, which has been demonstrated to improve pain, patient function and quality of life in a cost-effective manner.”

About SI-BONE, Inc.

SI-BONE, Inc. (San Jose, California) is a leading medical device company dedicated to the development, manufacture and commercialization of minimally invasive surgical devices for the treatment of patients with low back symptoms related to certain sacroiliac (SI) joint disorders. SI-BONE, Inc. first received 510(k) clearance to market its iFuse Implant System (“iFuse”) from the Food and Drug Administration (FDA) in November 2008. The CE mark for European commercialization was obtained in November 2010.

The iFuse Implant System provides a minimally invasive surgical solution to fuse the SI joint using patented triangular titanium implants inserted across the joint from the ilium to the sacrum. The triangular implant shape combined with an interference press fit is designed to provide immediate fixation by minimizing rotation and joint motion. The implants’ porous surface provides an ideal environment for bone ongrowth and ingrowth, facilitating long-term fusion of the joint. iFuse is the only commercially available SI joint fusion system in the United States with published evidence that demonstrates safety, effectiveness and economic benefits, including clinical results from three large multicenter prospective studies, two of which are randomized controlled trials. Currently, there are more than 45 peer-reviewed publications (www.si-bone.com/results). It is the only SI joint fusion system with an FDA clearance recognizing demonstrated improvements in pain, patient function and quality of life following treatment.

The iFuse Implant System is intended for sacroiliac fusion for conditions including sacroiliac joint dysfunction that is a direct result of sacroiliac joint disruption and degenerative sacroiliitis. This includes conditions whose symptoms began during pregnancy or in the peripartum period and have persisted postpartum for more than 6 months. Clinical studies have demonstrated that treatment with the iFuse Implant System improved pain, patient function, and quality of life. There are potential risks associated with the iFuse Implant System. It may not be appropriate for all patients and all patients may not benefit. For information about the risks, visit: www.si-bone.com/risks

SOURCE SI-BONE, Inc.

Contacts

DJO Investor/Media Contact:
DJO Global, Inc.
Matt Simons
SVP Business Development and Investor Relations
760-734-5548
matt.simons@DJOglobal.com

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October 31, 2016

LEWISVILLE, Texas–(BUSINESS WIRE)–Orthofix International N.V. (NASDAQ:OFIX) today reported its financial results for the third quarter ended September 30, 2016. For the third quarter of 2016, net sales were $98.5 million, earnings per share from continuing operations was $0.56 and adjusted earnings per share from continuing operations was $0.36.

“While we underperformed on the top-line during the quarter, primarily in our Spine Fixation business, I am very happy about where the company is today. We now have a solid infrastructure in place, a dominant position in the bone growth stimulation market, a strong balance sheet, improving free cash flow, and double-digit ROIC,” said President and Chief Executive Officer Brad Mason. “Although highly competitive, our markets remain very healthy, and we have plans in place to reinvigorate our top-line growth going forward.”

Third Quarter Financial Results

The following table provides net sales, net sales change and constant currency net sales change by strategic business unit (“SBU”) for the three months ended September 30, 2016 and 2015:


	Three Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)		2016		2015	Change		Constant Currency Change
BioStim	$	42,956	$	41,559	3.4	%	3.4	%
Biologics		14,335		14,639	(2.1	%)	(2.1	%)
Extremity Fixation		24,314		24,694	(1.5	%)	0.0	%
Spine Fixation		16,892		20,259	(16.6	%)	(16.7	%)
Total net sales	$	98,497	$	101,151	(2.6	%)	(2.3	%)

The growth in the BioStim SBU in the period was primarily driven by increased order counts from an expanding customer base and procedure volumes. The decrease in the Biologics SBU was due to underperformance in our largest of three sales regions, which has now been restructured, in addition to an increasing number of competitors in the stem cell allograft market and an associated reduction in average sales price. Trinity allograft tissue volumes and net sales increased slightly over prior year in the U.S. The decrease in the Extremity Fixation SBU was largely due to the negative impact of foreign currency translation. Excluding this impact, net sales were consistent with the prior year and up 5.4% on a trailing twelve month basis. The decrease in net sales in the Spine Fixation SBU was primarily due to the timing of international cash collections, the loss of several key surgeons early in the year in the U.S. and the exclusion from a large national hospital account in the second quarter.

Gross profit increased $1.3 million to $78.6 million. Gross margin increased to 79.8% as compared to 76.4% in the prior year period.

Sales and marketing expenses decreased primarily due to bad debt expense recorded for Puerto Rico in the third quarter of 2015 and a reduction of certain indirect tax liabilities in the current quarter.

Net margin (gross profit less sales and marketing expenses) was $36.9 million, an increase of 18.4% compared to $31.2 million in the prior year period.

General and administrative expenses decreased primarily due to a commercial litigation settlement whereby the Company will receive a $3.0 million cash payment and a decrease in other professional fees and consulting costs of $1.9 million, offset by an increase in share-based compensation expense of $5.8 million, which included $4.8 million in expense associated with the Company’s performance-based vesting restricted stock.

Charges related to U.S. Government resolutions were incurred during the quarter of $1.5 million relating to our ongoing settlement discussions with the SEC as further discussed in our Form 10-Q for the third quarter ended September 30, 2016.

Operating income was $9.3 million compared to operating income of $4.1 million in the prior year period.

Net income from continuing operations was $10.4 million, or $0.56 per share, compared to net loss of $0.8 million, or ($0.04) per share in the prior year period.

Adjusted net income from continuing operations was $6.6 million, or $0.36 per share, compared to adjusted net income of $5.3 million, or $0.28 per share in the prior year period.

EBITDA increased to $14.1 million, compared to $7.6 million in the prior year period. Adjusted EBITDA increased to $23.5 million or 23.9% of net sales for the third quarter, compared to $15.9 million or 15.7% of net sales in the prior year period.

As of September 30, 2016, cash and cash equivalents were $46.8 million compared to $63.7 million as of December 31, 2015. This change was primarily driven by share repurchases, partially offset by an increase in operating cash flows. As of September 30, 2016 the Company had no outstanding indebtedness and borrowing capacity of $125 million.

Share Repurchase Plan

As previously announced, the Company initiated a share repurchase plan in the fourth quarter of 2015 of up to $75 million of the Company’s common stock through the end of September 2017. As of September 30, 2016, the Company had repurchased a cumulative total of approximately 1,627,000 shares of common stock for $66.6 million under this plan, of which approximately 253,000 shares of common stock were repurchased for $11.1 million in the third quarter of 2016. From October 1, 2016, to October 28, 2016, the Company has made additional repurchases of 211,671 shares for an amount equal to $8.4 million to complete the share repurchase plan.

Fiscal 2016 Outlook

For the fiscal year ending December 31, 2016, the Company expects the following results, assuming exchange rates are the same as those currently prevailing.


	Previous 2016 Outlook				Current 2016 Outlook
(Unaudited, U.S. Dollars, in millions, except per share data)	Low		High		Low			High
Net sales	$	412.0	$	416.0	$	404.0	¹	$	408.0	¹
GAAP Net income from continuing operations	$	8.9	$	12.7	$	12.2	²	$	15.7	²
Adjusted EBITDA	$	69.0	$	72.0	$	76.0	³	$	79.0	³
GAAP EPS from continuing operations	$	0.48	$	0.68	$	0.65	⁴	$	0.85	⁴
Adjusted EPS from continuing operations	$	1.35	$	1.45	$	1.35	⁵	$	1.45	⁵

¹Represents a year-over-year increase of 1.9% to 2.9% on a reported basis.

²Represents a year-over-year increase of approximately $14.5 million to $18.0 million on a reported basis.

³Represents a year-over-year increase of 25.2% to 30.2%.

⁴Represents a year-over-year increase of approximately $0.77 to $0.97 per share.

⁵Represents a year-over-year increase of 28.6% and 38.1%.

Conference Call

Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the Company’s financial results for the third quarter of 2016. Interested parties may access the conference call by dialing (888) 576-4398 in the U.S. and (719) 457-2601 outside the U.S., and referencing the conference ID 9383336. A replay of the call will be available for two weeks by dialing (888) 203-1112 in the U.S. and (719) 457-0820 outside the U.S., and entering the conference ID 9383336. A webcast of the conference call may be accessed by going to the Company’s website at www.orthofix.com, by clicking on the Investors link and then the Events and Presentations page.

About Orthofix

Orthofix International N.V. is a diversified, global medical device company focused on improving patients’ lives by providing superior reconstructive and regenerative orthopedic and spine solutions to physicians worldwide. Headquartered in Lewisville, Texas, the Company has four strategic business units that include BioStim, Biologics, Extremity Fixation and Spine Fixation. Orthofix products are widely distributed via the Company’s sales representatives, distributors and its subsidiaries. In addition, Orthofix is collaborating on research and development activities with leading clinical organizations such as the Musculoskeletal Transplant Foundation and the Texas Scottish Rite Hospital for Children. For more information, please visit www.orthofix.com.

Forward-Looking Statements

This communication contains certain forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may include, but are not limited to, statements concerning the projections, financial condition, results of operations and businesses of Orthofix and its subsidiaries, are based on management’s current expectations and estimates and involve risks and uncertainties that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements.

The forward-looking statements in this release do not constitute guarantees or promises of future performance. Factors that could cause or contribute to such differences may include, but are not limited to, risks relating to: the expected sales of our products, including recently launched products; the continuation of our ongoing share repurchase program; our ongoing settlement discussions with the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) related to investigations that arose out of our prior accounting review and restatements of financial statements and our review of allegations of improper payments involving our Brazil-based subsidiary; the geographic concentration of certain of our sales and accounts receivable in countries or territories that are facing severe fiscal challenges; unanticipated expenditures; changing relationships with customers, suppliers, strategic partners and lenders; changes to and the interpretation of governmental regulations; the resolution of pending litigation matters (including our indemnification obligations with respect to certain product liability claims against our former sports medicine global business unit); our ongoing compliance obligations under a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services (and related terms of probation); risks relating to the protection of intellectual property; changes to the reimbursement policies of third parties; the impact of competitive products; changes to the competitive environment; the acceptance of new products in the market; conditions of the orthopedic and spine industry; credit markets and the global economy; corporate development and market development activities, including acquisitions or divestitures; unexpected costs or operating unit performance related to recent acquisitions; and other risks described in the “Risk Factors” section of our 2015 Annual Report on Form 10-K, as well as in other reports that we file in the future. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise the information contained in this press release.


ORTHOFIX INTERNATIONAL N.V.
Condensed Consolidated Statements of Operations

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Unaudited, U.S. Dollars, in thousands, except share and per share data)		2016			2015			2016			2015
Product sales	$	84,997		$	87,761		$	261,490		$	251,461
Marketing service fees		13,500			13,390			39,761			40,406
Net sales		98,497			101,151			301,251			291,867
Cost of sales		19,880			23,865			64,533			65,114
Gross profit		78,617			77,286			236,718			226,753
Operating expenses
Sales and marketing		41,717			46,129			132,582			133,360
General and administrative		18,581			19,348			53,341			63,423
Research and development		6,858			6,523			21,294			18,819
Restatements and related costs		691			1,147			1,481			9,276
Charges related to U.S. Government resolutions		1,499			—			14,369			—
		69,346			73,147			223,067			224,878
Operating income		9,271			4,139			13,651			1,875
Other income and expense
Interest income (expense), net		471			(125	)		320			(323	)
Other income (expense), net		(634	)		(1,736	)		1,346			(192	)
		(163	)		(1,861	)		1,666			(515	)
Income before income taxes		9,108			2,278			15,317			1,360
Income tax benefit (expense)		1,276			(3,066	)		(6,703	)		(5,808	)
Net income (loss) from continuing operations		10,384			(788	)		8,614			(4,448	)
Discontinued operations
Loss from discontinued operations		(1,018	)		(804	)		(3,580	)		(2,315	)
Income tax benefit		530			221			1,258			585
Net loss from discontinued operations		(488	)		(583	)		(2,322	)		(1,730	)
Net income (loss)	$	9,896		$	(1,371	)	$	6,292		$	(6,178	)
Net income (loss) per common share—basic:
Net income (loss) from continuing operations	$	0.57		$	(0.04	)	$	0.47		$	(0.24	)
Net loss from discontinued operations		(0.02	)		(0.03	)		(0.13	)		(0.09	)
Net income (loss) per common share—basic	$	0.55		$	(0.07	)	$	0.34		$	(0.33	)
Net income (loss) per common share—diluted:
Net income (loss) from continuing operations	$	0.56		$	(0.04	)	$	0.46		$	(0.24	)
Net loss from discontinued operations		(0.02	)		(0.03	)		(0.12	)		(0.09	)
Net income (loss) per common share—diluted	$	0.54		$	(0.07	)	$	0.34		$	(0.33	)
Weighted average number of common shares:
Basic		18,091,650			18,855,533			18,238,533			18,785,696
Diluted		18,382,118			18,855,533			18,569,861			18,785,696


ORTHOFIX INTERNATIONAL N.V.
Condensed Consolidated Balance Sheets

	September 30,			December 31,
(U.S. Dollars, in thousands except share data)		2016			2015
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	46,824		$	63,663
Trade accounts receivable, less allowance for doubtful accounts of $8,840 and $8,923 at September 30, 2016 and December 31, 2015, respectively		52,893			59,839
Inventories		65,013			57,563
Prepaid expenses and other current assets		20,519			31,187
Total current assets		185,249			212,252
Property, plant and equipment, net		51,861			52,306
Patents and other intangible assets, net		8,020			5,302
Goodwill		53,565			53,565
Deferred income taxes		56,222			57,306
Other long-term assets		21,136			19,491
Total assets	$	376,053		$	400,222
Liabilities and shareholders’ equity
Current liabilities:
Trade accounts payable	$	14,375		$	16,391
Other current liabilities		68,900			65,597
Total current liabilities		83,275			81,988
Other long-term liabilities		19,598			27,923
Total liabilities		102,873			109,911
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 18,036,712 and 18,659,696 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively		1,804			1,866
Additional paid-in capital		208,109			232,126
Retained earnings		67,415			62,551
Accumulated other comprehensive loss		(4,148	)		(6,232	)
Total shareholders’ equity		273,180			290,311
Total liabilities and shareholders’ equity	$	376,053		$	400,222

ORTHOFIX INTERNATIONAL N.V.

Selected Financial Data

Non-GAAP Financial Measures

The following tables in this press release present reconciliations of net income (loss) from continuing operations, earnings per diluted share from continuing operations, gross profit, and net cash provided by operating activities, in each case calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), to, as applicable, non-GAAP financial measures, referred to as “EBITDA,” “Adjusted EBITDA,” “Adjusted net income from continuing operations,” “Adjusted diluted earnings per share from continuing operations,” “Net margin” and “Free cash flow” that exclude items specified in the tables. A more detailed explanation of the items excluded from these non-GAAP measures, as well as why management believes the non-GAAP measures are useful to them, is included following the reconciliations of non-GAAP financial measures below.


Adjusted EBITDA


	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)		2016			2015			2016			2015
Net income (loss) from continuing operations	$	10,384		$	(788	)	$	8,614		$	(4,448	)
Interest expense (income), net		(471	)		125			(320	)		323
Income tax (benefit) expense		(1,276	)		3,066			6,703			5,808
Depreciation and amortization		5,480			5,171			15,483			15,746
EBITDA	$	14,117		$	7,574		$	30,480		$	17,429
Share-based compensation¹		7,862			1,948			11,874			5,524
Foreign exchange impact		566			1,696			(1,434	)		3,374
Strategic investments		(62	)		199			342			1,100
Restatements and related costs		691			1,147			1,481			9,276
Infrastructure investments		827			1,270			3,073			4,732
Legal judgments/settlements		(3,000	)		—			(3,000	)		1,066
Gain on sale of assets		—			—			—			(3,100	)
Puerto Rico		—			2,024			—			2,024
Charges related to U.S. Government resolutions		1,499			—			14,369			—
Succession charges¹		1,026			—			1,026			—
Adjusted EBITDA	$	23,526		$	15,858		$	58,211		$	41,425

As a % of net sales		23.9	%		15.7	%		19.3	%		14.2	%

¹ The Succession charges adjustment includes $0.3 million of accelerated share-based compensation expense as a result of the termination of a former executive officer. This amount is not included within the Share-based compensation adjustment for adjusted EBITDA.


Adjusted Net Income from Continuing Operations

	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)		2016			2015			2016			2015
Net income (loss) from continuing operations	$	10,384		$	(788	)	$	8,614		$	(4,448	)
Income tax (benefit) expense as reported		(1,276	)		3,066			6,703			5,808
Income before income taxes from continuing operations		9,108			2,278			15,317			1,360
Foreign exchange impact		566			1,696			(1,434	)		3,374
Strategic investments		(62	)		199			342			1,100
Restatements and related costs		691			1,147			1,481			9,276
Infrastructure investments		827			1,270			3,073			4,732
Legal judgments/settlements		(3,000	)		—			(3,000	)		1,066
Gain on sale of assets		—			—			—			(3,100	)
Puerto Rico		—			2,024			—			2,024
Charges related to U.S. Government resolutions		1,499			—			14,369			—
Succession charges¹		1,026			—			1,026			—
Adjusted net income from continuing operations before income taxes		10,655			8,614			31,174			19,832
Income tax expense at 38%		(4,049	)		(3,273	)		(11,846	)		(7,536	)
Adjusted net income from continuing operations	$	6,606		$	5,341		$	19,328		$	12,296


Adjusted Earnings per Diluted Share from Continuing Operations

	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, per diluted share)		2016			2015			2016			2015
EPS from continuing operations	$	0.56		$	(0.04	)	$	0.46		$	(0.24	)
Income tax (benefit) expense as reported		(0.07	)		0.16			0.36			0.31
EPS before income taxes from continuing operations		0.49			0.12			0.82			0.07
Foreign exchange impact		0.03			0.09			(0.08	)		0.18
Strategic investments		—			0.01			0.02			0.06
Restatements and related costs		0.04			0.05			0.08			0.48
Infrastructure investments		0.04			0.07			0.17			0.25
Legal judgments/settlements		(0.16	)		—			(0.16	)		0.06
Gain on sale of assets		—			—			—			(0.16	)
Puerto Rico		—			0.11			—			0.11
Charges related to U.S. Government resolutions		0.08			—			0.77			—
Succession charges¹		0.06			—			0.06			—
Adjusted EPS from continuing operations before income taxes		0.58			0.45			1.68			1.05
Income tax expense at 38%		(0.22	)		(0.17	)		(0.64	)		(0.40	)
Adjusted EPS from continuing operations	$	0.36		$	0.28		$	1.04		$	0.65

Weighted average number of diluted common shares		18,382,118			19,059,965			18,569,861			18,997,093


Net Margin

	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)		2016			2015			2016			2015
Gross profit	$	78,617		$	77,286		$	236,718		$	226,753
Sales and marketing		(41,717	)		(46,129	)		(132,582	)		(133,360	)
Total net margin	$	36,900		$	31,157		$	104,136		$	93,393

BioStim	$	19,996		$	16,834		$	54,980		$	47,634
Biologics		6,821			6,296			19,642			19,525
Extremity Fixation		8,834			6,442			24,170			22,607
Spine Fixation		1,388			1,938			5,925			4,582
Corporate		(139	)		(353	)		(581	)		(955	)
Total net margin	$	36,900		$	31,157		$	104,136		$	93,393


Free Cash Flow

	Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)		2016			2015
Net cash provided by operating activities	$	38,396		$	26,539
Capital expenditures		(14,261	)		(21,199	)
Free cash flow	$	24,135		$	5,340


Fiscal 2016 Outlook

	Previous 2016 Outlook						Current 2016 Outlook
(Unaudited, U.S. Dollars, in millions)	Low			High			Low			High
Net income from continuing operations	$	8.9		$	12.7		$	12.2		$	15.7
Interest (income) expense, net		0.3			0.2			(0.5	)		(0.4	)
Income tax expense		13.0			15.2			11.7			12.3
Depreciation and amortization		20.5			20.0			20.5			20.0
EBITDA	$	42.7		$	48.1		$	43.9		$	47.6
Share-based compensation¹		8.4			8.4			15.4			15.1
Foreign exchange impact		(2.0	)		(2.0	)		(1.4	)		(1.4	)
Strategic investments		0.5			0.4			0.5			0.4
Restatements and related costs		1.3			0.8			1.5			1.5
Infrastructure investments		2.8			2.5			3.7			3.4
Legal judgments/settlements		—			—			(3.0	)		(3.0	)
Charges related to U.S. Government resolutions		14.4			12.9			14.4			14.4
Succession charges¹		0.9			0.9			1.0			1.0
Adjusted EBITDA	$	69.0		$	72.0		$	76.0		$	79.0


	Previous 2016 Outlook						Current 2016 Outlook
(Unaudited, per diluted share)	Low			High			Low			High
EPS from continuing operations	$	0.48		$	0.68		$	0.65		$	0.85
Income tax expense as forecasted		0.70			0.82			0.63			0.66
Foreign exchange impact		(0.11	)		(0.11	)		(0.08	)		(0.08	)
Strategic investments		0.03			0.02			0.03			0.02
Restatements and related costs		0.07			0.04			0.08			0.08
Infrastructure investments		0.15			0.14			0.20			0.18
Legal judgments/settlements		—			—			(0.16	)		(0.16	)
Charges related to U.S. Government resolutions		0.77			0.70			0.78			0.78
Succession charges¹		0.05			0.05			0.05			0.05
Income tax expense at 38%		(0.79	)		(0.89	)		(0.83	)		(0.93	)
Adjusted EPS from continuing operations	$	1.35		$	1.45		$	1.35		$	1.45

Weighted average number of diluted common shares		18,700,000			18,500,000			18,500,000			18,500,000

Reconciling Items for Adjusted EBITDA, Adjusted Net Income from Continuing Operations and Adjusted Earnings per Diluted Share from Continuing Operations

Share-based compensation – costs related to the Company’s share-based compensation plans, which include stock options, restricted stock awards, performance-based restricted stock awards and the Company’s stock purchase plan
Foreign exchange impact – gains and losses related to foreign currency transactions; guidance presented does not include the impact of any future foreign exchange fluctuations and may be adjusted based on future foreign exchange fluctuations
Strategic investments – costs related to the Company’s strategic investments, including our investment in eNeura, Inc.
Restatements and related costs – legal, accounting, and other professional costs related to the Company’s accounting review and restatements through March 2015 and legal fees associated with the ongoing SEC Investigation and Securities Class Action Complaint and Brazil subsidiary compliance review
Infrastructure investments – costs associated with our multi-year process and systems improvement effort, “Bluecore”
Legal judgments/settlements – adverse or favorable legal judgments or negotiated legal settlements
Gain on sale of assets – gain on the sale of the Company’s Tempus^™ Cervical Plate product line
Puerto Rico – bad debt expense in response to the recent fiscal and economic difficulties experienced by the Puerto Rico Commonwealth
Charges related to U.S. Government resolutions – charges for potential payments related to ongoing settlement discussions with the Division of Enforcement of the SEC as further discussed in our Form 10-Q for the third quarter ended September 30, 2016
Succession charges – costs related to the succession of certain of the Company’s former named executive officers

Net Margin

Net margin is a non-GAAP financial measure, which is calculated by subtracting sales and marketing from gross profit. Net margin is the primary metric used by the Company’s Chief Operating Decision Maker in managing the Company.

Free Cash Flow

Free cash flow is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operating activities. Free cash flow is an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

Constant Currency

Constant currency measures actual performance using foreign currency rates from the comparable, prior-year period, to present actuals at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to compare revenues without the impact of changes in foreign currencies. When disclosed, constant currency measures are presented with the applicable GAAP measure for comparability.

Effective Tax Rate Used in Adjusted Net Income from Continuing Operations and Adjusted Earnings per Diluted Share from Continuing Operations

The Company believes using a 38% effective tax rate is meaningful given it reflects management’s expectation of its long-term normalized tax rate, which is based on current tax law and current expected income. The Company’s actual income tax expense will ultimately be based on its GAAP performance and may differ from the 38% rate used in the financial measures due to a variety of factors, including the jurisdictions in which profits are determined to be earned and taxed, the resolution of issues arising from tax audits with various tax authorities, and the ability to realize deferred tax assets.

Management use of, and economic substance behind, Non-GAAP Financial Measures

Management uses non-GAAP measures to evaluate performance period-over-period, to analyze the underlying trends in the Company’s business, to assess its performance relative to its competitors and to establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP measures as the basis for assessing the ability of the underlying operations to generate cash. In addition, management uses these non-GAAP measures to further its understanding of the performance of the Company’s business units.

Material Limitations Associated with the Use of Non-GAAP Measures

The non-GAAP measures used in this press release may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost to the Company and can have a material effect on cash flows. Similarly, certain non-cash expenses such as equity compensation expense does not directly impact cash flows, but is part of total compensation costs accounted for under GAAP.

Compensation for Limitations Associated with Use of Non-GAAP Measures

Orthofix compensates for the limitations of its non-GAAP financial measures by relying upon its GAAP results to gain a complete picture of the Company’s performance. The GAAP results provide the ability to understand the Company’s performance based on a defined set of criteria. The non-GAAP measures reflect the underlying operating results of the Company’s businesses, which management believes is an important measure of the Company’s overall performance. The Company provides a detailed reconciliation of the non-GAAP financial measures to their most directly comparable GAAP measures, and encourages investors to review this reconciliation.

Usefulness of Non-GAAP Measures to Investors

Orthofix believes that providing non-GAAP measures that exclude certain items provides investors with greater transparency to the information used by the Company’s senior management in its financial and operational decision-making. Management believes it is important to provide investors with the same non-GAAP metrics it uses to supplement information regarding the performance and underlying trends of Orthofix’s business operations in order to facilitate comparisons to its historical operating results and internally evaluate the effectiveness of the Company’s operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of Orthofix’s underlying operating performance with other companies in its industry that also supplement their GAAP results with non-GAAP financial measures.

Contacts

Orthofix International N.V.
Mark Quick, 214-937-2924
markquick@orthofix.com

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