Wright Medical Group Inc. (NSDQ:WMGI) is cutting 80 positions, or about 6 percent of its total workforce, in a move aimed at raising its earnings per share, the Arlington, Tenn.-based orthopedic device maker said today.
The plan, initially slated to roll out over the next nine months, will see Wright try to re-shape its international operations, scaling back the products it offers overseas and “streamlining select aspects of its international selling and distribution operations,” according to a press release.
The initiative is aimed at raising WMGI’s adjusted EPS by up to 6 cents next year and about 8 cents after that – not including the $25 million to $30 million the plan is expected to cost. Most of that tab is expected to come due during the third and fourth quarters this year, with the rest unspooling during the first half of 2012.
“Our industry continues to face a challenging economic environment and, after extensive analysis and consideration, we believe this plan will enhance the company’s prospects for growth and value creation,” interim CEO David Stevens said in prepared remarks. “We are taking these actions now to better position the company to grow its earnings in 2012 and we are confident that this plan will result in a leaner, more cost-efficient operation, which is in the best interest of our business and all of our stakeholders. Additionally, the company continues to have a strong balance sheet and is positioned well for investments in acquisitions to drive future growth.”
In April, a surprise shakeup in Arlington saw the abrupt resignation – without severance – of former CEO Gary Henley and the outright firing of CTO Frank Bono, who was discharged “for failing to exhibit appropriate regard for the company’s ongoing compliance program.”Three other senior executives resigned the next month.
Speculation was rife at the time that the shakeup was due to a settlement with the U.S. Justice Dept. last year. Wright Medical agreed in October 2010 to pay nearly $8 million to settle charges that it ran a kickbacks scheme to drive up sales of its hip and knee implants. The feds had charged Wright with using consulting gigs with physicians to funnel alleged kickbacks to the docs – later, prosecutors accused the company of breaking the plea deal, after Wright revealed that an internal probe using outside counsel found “credible evidence of serious wrongdoing,” according to regulatory filings. The next day, the company said, the feds sent a reply alleging that Wright “knowingly and willfully committed at least two breaches of material provisions of the DPA.”