Wright Medical Group, Inc. (WMGI) reported that it will incur a relocation cost of as much as $4 million for relocating its French distribution and supply operations to its European headquarters in Amsterdam. The relocation plan was first announced by the company in Oct 2009. Wright expects to complete the relocation by Dec 31, 2009.
Wright provided a detailed breakdown of these expenses that include: $1 million-$1.5 million for severance and other termination benefits; $1 million -$1.5 million for contract termination charges; $500,000 for external legal and professional fees; and $500,000 for other restructuring related costs. The company expects to report most of these expenses in the fourth quarter of 2009 and the rest in 2010.
We think that Wright Medical will be least affected by the relocation cost. The company reported strong fiscal third quarter 2009 results.
Earnings per share stood at 14 cents, beating the Zacks Consensus Estimate of 9 cents. However, earnings was flat on a year-over-year basis.
Wright Medical also reported sales growth of 6% year over year in the third quarter. Growth was registered in the company’s hip, knee and extremity products.
Wright Medical is a global orthopedic devices company specializing in the design, manufacture and marketing of reconstructive joint devices and bio-orthopedic materials. The orthopedic industry is highly competitive, and Wright Medical faces challenges from large players, such as, Zimmer Holdings Inc. (ZMH), Stryker Corp. (SYK), Johnson & Johnson/De Puy (JNJ), Smith & Nephew plc. (SNN) and Biomet.
Currently, we have a Neutral recommendation on Wright Medical.
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