Item 2.02. Results of Operations and Financial Condition.
On January 8, 2018, Wright Medical Group N.V. (Wright) issued a press release announcing preliminary, unaudited net sales for the fourth quarter and fiscal year ended December 31, 2017. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and the information set forth therein is incorporated herein by reference and constitutes a part of this report.
Wright is furnishing the information contained in this report, including Exhibit 99.1, pursuant to Item 2.02 of Form 8-K promulgated by the United States Securities and Exchange Commission (SEC). This information shall not be deemed to be filed with the SEC for purposes of Section 18 of the United States Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the United States Securities Act of 1933, as amended (Securities Act), except as expressly set forth by specific reference in such filing. By filing this report and furnishing this information, Wright makes no admission as to the materiality of any information contained in this report, including Exhibit 99.1. This report shall not be incorporated into any future filings by Wright under the Securities Act or the Exchange Act.
To supplement Wright’s consolidated financial statements prepared in accordance with United States generally accepted accounting principles (GAAP), Wright uses certain non-GAAP financial measures. In the press release furnished as Exhibit 99.1 to this report, Wright uses net sales from continuing operations, excluding the impact of foreign currency, often referred to as net sales on a constant currency basis, and net sales growth rates on a constant currency basis. Wright uses net sales on a constant currency basis for internal budgeting process and evaluation of net sales performance. To measure net sales on a constant currency basis, it is necessary to remove the impact of changes in foreign currency exchange rates, which affects the comparability and trend of net sales. Sales, on a constant currency basis, is calculated by translating current period results at prior period average foreign currency exchange rates and, in the case of the net sales growth rates on a constant currency basis, then calculating the growth rate.
Wright uses non-GAAP financial measures, such as net sales on a constant currency basis, in making operating decisions because Wright believes these measures provide meaningful supplemental information regarding its core operational performance and give it a better understanding of how it should invest in research and development activities and how it should allocate resources to both ongoing and prospective business initiatives. Wright uses these measures to help make budgeting and spending decisions, for example, between research and development and selling, general and administrative expenses. Additionally, management is evaluated on the basis of certain non-GAAP financial measures, including net sales on a constant currency basis, when determining achievement of performance incentive plan compensation targets. Further, non-GAAP financial measures facilitate management’s internal comparisons to both Wright’s historical operating results and to its competitors’ operating results by factoring out the foreign currency impact on net sales.
Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of Wright’s non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Wright’s financial results as determined in accordance with GAAP. These measures should only be used to evaluate Wright’s financial results in conjunction with the corresponding GAAP measures. Accordingly, Wright qualifies its use of non-GAAP financial information in a statement when non-GAAP financial information is presented.
All of the historical non-GAAP financial measures used in Wright’s press release are reconciled to the most directly comparable GAAP measure.