Wright Medical Group's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.24.14 | About: Wright Medical (WMGI)

Wright Medical Group, Inc. (NASDAQ:WMGI)

Q4 2013 Earnings Conference Call

February 24, 2014 16:30 ET

Executives

Julie Tracy - Chief Communications Officer

Bob Palmisano - President and Chief Executive Officer

Lance Berry - Chief Financial Officer

Analysts

Kim Gailun - JPMorgan

Daniel Sollof - Barclays

Kayla Crum - William Blair

Rich Newitter - Leerink Partners

Matt Miksic - Piper Jaffray

Glenn Novarro - RBC Capital Markets

Jason Wittes - Brean Capital

Jeff Johnson - Robert Baird

Mike Matson - Needham & Company

Mark Landy - Summer Street Research Partners

Operator

Good day, ladies and gentlemen. Welcome to the Fourth Quarter 2013 Wright Medical Group Incorporated Earnings Conference Call. My name is Celia and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Julie Tracy. Please proceed.

Julie Tracy

Thank you, and good afternoon, everyone. Welcome to Wright Medical Group’s fourth quarter 2013 conference call. We appreciate you joining us. I am Julie Tracy, Wright’s Chief Communications Officer. With me on the call today are Bob Palmisano, Wright’s President and Chief Executive Officer; and Lance Berry, Wright’s Chief Financial Officer.

We issued a press release this afternoon regarding our fourth quarter results. A copy of that press release is available on our website at wmt.com. The agenda for this call will include a business update from Bob, a review of our financial results from Lance, followed by a question-and-answer session and conclude with closing comments from Bob.

Before we begin, I would like to remind you that this presentation contains forward-looking statements as defined under U.S. federal securities laws. These statements reflect management’s current knowledge, assumptions, beliefs, estimates and expectations and express management’s current views of future performance, events, results and trends and may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will and other similar terms.

Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to materially differ from those described in the forward-looking statements. You should not place undue reliance on forward-looking statements. Such statements are made as of the date of this presentation, and we undertake no obligation to update such statements after this date.

Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements are discussed in our publicly available filings with the Securities and Exchange Commission, including without limitation, our Annual Report on Form 10-K for the years ended December 31, 2012 and 2013 as supplemented by our quarterly reports on Form 10-Q. These risks include by way of example and without limitation, the risk that we will be unsuccessful in obtaining FDA approval for our Augment product and the risk that we will be unable to realize the anticipated benefits from recent acquisitions or from the divestiture of our OrthoRecon business.

Our earnings release includes certain non-GAAP financial measures that may be discussed on this call. Please refer to the reconciliations, which appear on the tables of today’s press release as well as on our website. Note further that our Form 8-K filed today provides a detailed narrative that describes the use of such measures.

With that introduction, it is now my pleasure to turn the call over to Bob Palmisano. Bob?

Bob Palmisano

Thanks, Julie and welcome to everyone joining us today. This past year can be summarized in a few words. We made significant progress and have transformed our company. While there is still work to do, we ended up 2013 much stronger and well-positioned for success. Today, our company is not only the recognized leader in foot and ankle, but a global high growth Extremities-Biologics pure-play poised for even bigger and better things. We are also one of the fastest growing companies in all of medical technology, not just orthopedics. I believe that this transformative year puts the new Wright in an excellent position for future growth, with a very long runway for growth and profitability.

As a stronger focused company, we can build deeper relationships with our customers, attract new customers, achieve our growth objectives and continue to deliver significant value to our shareholders. Our performance in the fourth quarter reflects continued strong execution with constant sales from continuing operations and global foot and ankle increasing 17% and 22% respectively. Notably, the eight consecutive quarters of strong double-digit global foot and ankle growth underscores a significant positive progress that we continue to make in our foot and ankle business by driving productivity gains in a large direct U.S. sales organization, introducing new products and increasing medical education programs. I would add that we were able to deliver these results while we successfully completed the transition activities to separate our business and close the MicroPort transaction which is a testament to our outstanding employees and the dedication and team work.

We continue to see good growth in all our foot and ankle product categories. In particular, our total ankle sales had another outstanding quarter with growth of 44%. Importantly, I would note that very little of that growth was due to competitive conversions, which we believe demonstrates the substantial potential of this product and long runway for growth. This is a very attractive opportunity and continues to grow at a very fast rate. As we are the recognized leader in foot and ankle this is something that I am 100% focused on.

During the fourth quarter we also completed the acquisition of Biotech International, which significantly expands our direct sales channel in France. In addition, our recent acquisition of Solana Surgical and OrthoPro add complementary foot and ankle products to our – to further accelerate growth opportunities and profitability. In summary, we believe that these fourth quarter results indicate we are on the right track with continued strong execution. During 2014, we look to continue – we look forward to continue to make investments to accelerate the foot and ankle growth and sales productivity, improving our gross margins and exiting the year with a positive adjusted EBITDA. I am confident that our Vital Few strategic programs will position us for future success and drive growth and shareholder value.

Before I discuss our new strategic priorities in more detail, I would like to provide a brief update on the status of the dispute resolution panel for Augment Bone Graft. The FDA has informed us that the panel will – is presently scheduled for the week of May 19, 2014. We look forward to making a strong case and believe we have good facts. However, as we have said in the past, we are not optimistic that we will be successful. We will continue to keep you informed through our normal communications channel.

Moving on to our strategic priorities and Vital Few initiatives for 2014, now that we have successfully made a transformation to a new Wright Medical, we are pursuing three key strategic priorities: First, to accelerate global revenue – global revenue growth. Second, improve gross margin and inventory. And third, improve EBITDA. With our goal to accelerate global revenue growth and continue to achieve top line growth rates in mid to high teens improving our U.S. foot and ankle sales productivity remains an important initiative. As of the fourth quarter sales productivity increased to approximately $820,000 per rep, up from approximately $780,000 per rep in the third quarter 2013. This increase is a result of our added focus and successful execution of our clear plan to increase selling effectiveness through improved rep training, disciplined sales management, aligned compensation plans and increased selling time. Given our sustained focus and attentions in this area, I expect we will be able to achieve our goal of $1 million per rep rate as we exist this year and believe that we can reach meaningfully higher level than that goal over time.

We continue to realize the benefits from our investment in medical education and training programs. Two years ago, we only trained about 600 physicians. Last year we trained approximately 2500 foot and ankle specialists in the U.S. which is almost 25% higher than the previous year. In 2014, we are now shifting our focus to optimizing our customer conversion process, excuse me, to significantly increase the adoption rate for those surgeons that attend our total ankle replacement training. Our medical education is best in class, but we need to better support the medical education with strong processes both on the front end and post the event to significantly improve the productivity of these events. Our new headquarters includes a state-of-the-art training facility with several cadaver labs and meeting areas that are fully equipped to onsite physician training and a convenient access to our R&D and marketing personnel.

Another critical factor to increasing adoption of our products is technology advancement. Including new products from our Solana and OrthoPro acquisitions, we will add approximately 25 new products to our already large and broad foot and ankle portfolio in 2014. We believe this expanded product portfolio will further support improvements in sales productivity and play an important role in driving the conversion from fusion to implants. In particular, this year, we will be launching our INFINITY total ankle replacement system, our third generation total ankle system. We believe INFINITY’s lower profile and approach expands our total ankle offerings and access to less complicated primary cases. Coupled with our PROPHECY pre-op navigation guides, INFINITY can be a much quicker procedure, which we believe will be a game changer for physicians and patients.

International expansion is another important Vital Few initiative. In 2013, our international sales grew 35%. Over the past year, we have strengthened our international leadership team to drive what we see as a significant international growth opportunity in extremities. We will be deliberately narrow in our approach and focus on selected countries in EU and other key markets in Australia, Brazil, Canada, China and Japan.

Shifting now to improving gross margins and inventory, our gross margins in the fourth quarter and full year for 2013 were 77%, which we believe are some of the highest gross margins for a publicly traded orthopedic company. We believe that this year will show some modest improvement in gross margins, but over time we anticipate that we can achieve gross margins of over 80% by further development and enhancing our supply chain and a few certain pricing activities.

From a cost of product standpoint, we have turned our focus back to improving the cost of our Extremities and Biologics products now, now that the MicroPort transaction and separation of the manufacturing operations has been complete. With regard to pricing, our focus has been on having greater control and discipline over pricing discounting. Our strategic pricing and contracting group has continued to execute the original plan and enhanced our policies and procedures related to pricing. These changes, combined with our direct U.S. foot and ankle sales force, position us well for improved pricing and contracting in 2014 and beyond.

We also expect to continue to benefit from the implementation of our inventory hub program. We made significant progress in 2013 with the rollout of our hubs and we exited the year with approximately 86% of our U.S. foot and ankle surgeries covered by hubs, which exceeded our goal, our target goal of 70%. Our unique hub network will allow us to better service our accounts and increase available selling time for our sales reps, while decreasing our inventory days on hand.

To achieve a high-level EBITDA, we would like to have M&A activity that will likely play a part, much as it did over the past year. For example, the recent acquisitions of Solana Surgical and OrthoPro are right in line with our stated strategy to pursue targeted M&A to accelerate growth opportunities and profitability. Both companies add a base of fast growing EBITDA accretive to extremities revenue and have specialized products that fit well with our current product portfolio. M&A activity will not only help us grow, but will also leverage our corporate costs and the investments that we continue to make in sales and marketing. We believe these approaches will enable us to generate EBITDA margins in excess of 20% over time.

Finally and very importantly, we will continue to execute the requirements of our Corporate Integrity Agreement and ensure that our compliance system continues to promote the highest standards of ethical and legal conduct in all the markets we serve. To sum up, we have multiple opportunities to drive growth and improve profitability in our business. We are focused on improving sales productivity and driving growth in key markets and making selective acquisitions to add technology and expand distribution. We expect these steps to further accelerate our global foot and ankle growth, expand gross margins and improve adjusted EBITDA. Our team is confident that our Vital Few initiatives will position us for future success and it is very positive about the opportunity we have to drive significant improvement again this year.

I would now like to turn this call over to Lance for a discussion of our fourth quarter financial results. Lance?

Lance Berry

Thanks Bob. As we get started, please note that unless otherwise stated, all of today’s discussions regarding our sales growth rates refer to our constant currency growth rates and our results of operations refer to our as adjusted results including stock-based compensation as described by Julie during the introduction of our call. As a reminder, as a result of the previously announced acquisition of our hip and knee business by MicroPort Scientific, all current and historical operating results for the OrthoRecon business are reflected in discontinued operations. Unless otherwise noted, today’s discussions refer to results from continuing operations.

Net sales from continuing operations for the fourth quarter of 2013 totaled $67.8 million, an increase of 16% as reported and 17% on a constant currency basis. Adjusted net loss from continuing operations for the quarter including stock-based expense totaled $7.9 million or $0.17 per diluted share compared to adjusted net loss from continuing operations of $0.05 per diluted share for the quarter ended December 31, 2012. Fourth quarter 2013 adjusted EBITDA from continuing operations was negative $3.2 million compared to positive $6.1 million in the same quarter of the prior year. For the full year 2013 adjusted EBITDA from continuing operations decreased to negative $5.9 million compared to positive $27.3 million for the prior year period.

Looking now at our sales results in detail, globally the foot and ankle business grew 22% driven by U.S. foot and ankle growth of 17% and international foot and ankle growth of 41%. The international foot and ankle growth was positively impacted by the Q4 close of the Biotech International acquisition. Excluding the impact of this acquisition international foot and ankle growth in Q4 was 28%. Global foot and ankle revenue growth excluding the Biotech acquisition was 19% in Q4. Our global biologics business grew 5% on a constant currency basis in the fourth quarter due to growth in our international biologics business driven primarily by sales of Augment Bone Graft in Australia.

Our global upper extremities business grew 21% on a constant currency basis. Excluding the effect of the Biotech International acquisition, upper extremities growth was 9.1% in Q4. In total our Q4 sales included approximately $1.9 million from the Biotech acquisition. As we move on to some detail below the sales line, please note that the expenses of the business are not really apple-to-apples to prior year as the prior year does not reflect any expense dis-synergies associated with the split of the business.

Beginning with our Q4 gross margins, overall we achieve 76.6% for the quarter, which was a decrease of 60 basis points over prior year driven primarily by increased inventory reserves. Q4 operating expenses totaled 90.7% of sales compared to 77.5% of sales in prior year. As for the line items making up our Q4 operating expenses, selling, general and administrative expenses totaled 83% of sales for the fourth quarter compared to 70% in the prior year period. The increase as a percentage of sales is driven primarily by BioMimetic expenses, the impact of the medical device tax and spending on Vital Few initiatives. R&D expense totaled $5.4 million in Q4 of 2013 and $3.6 million in Q4 of 2012. The increase was primarily driven by incremental expense due to the BioMimetic acquisition. And finally amortization expense was approximately $1.l million compared to $679,000 in prior year.

Below the operating income line, net interest expense and other expense totaled $2.1 million for Q4. Our Q4 effective tax rate as adjusted was approximately 39.5% for the quarter as compared to 8.4% in the prior year period. I also want to point out that during the quarter we recorded $119.6 million non-cash tax valuation allowance against our deferred tax assets in U.S. jurisdictions due to our recent as reported operating losses. Accounting rules require that a valuation be recorded if there are cumulative losses for the prior three year period generally regardless of future projections. Finally, for share count, our Q4 per share result as adjusted are based on average diluted shares of 46.9 million for Q4 of this year and average diluted shares of 39.3 million for Q4 2012.

Moving on to the balance sheet and cash flow we now carry a combined cash and marketable securities balance totaling $183.1 million as of December 31, 2013. However, this number is somewhat meaningless given the close of the MicroPort transaction and the two most recent acquisitions all of which occurred in January or the first week of February. I will provide you more clarity on our current cash situation in the guidance portion of the call.

On last thing to discuss before we move into the guidance portion of the call is our recent acquisitions. We are very pleased about our recent acquisitions of Biotech International, Solana Surgical and OrthoPro all high growth primarily foot and ankle companies. We have previously provided some information on Biotech but I’m going to provide some additional information on Solana and OrthoPro. These two companies had combined revenue in the range of $22 million for 2013 exiting the year with the combined growth rate well in excess of our corporate growth rate.

We expect some minor short term disruption in 2014 and then revenue growth in line with or greater than our corporate growth rate thereafter. We’re able to acquire these companies at a cost of approximately 5.5 times trailing sales right in line with market rates for these types of assets. Combined these acquisitions had products with minimal overlap to our current portfolio provide revenue that is neutral to accretive to our growth rate and has positive adjusted EBITDA in year one.

I’ll now provide some detail on our current sales and adjusted EBITDA outlook for full year 2014 including providing some color on the line items of our income statement to assist you with your modeling and providing some insight into the key drivers of the business in 2014. Consistent with past practice please note that our guidance ranges and assumptions for 2014 exclude any consideration for the effect of potential future acquisitions or any other possible material business developments. Additionally, it is important to note that we will be using a number of non-GAAP financial measures to describe our outlook for the business. In particular unless stated otherwise all of today’s discussions regarding results of operations refer to our as adjusted results of continuing operations. Our press release filed today notes those items that are excluded from our as adjusted results.

Starting now with sales, we anticipate net sales from continuing operations for 2014 in the range of $305 million to $312 million. This guidance anticipate some potential minor short term to dis-synergies due to the closing of the transactions with MicroPort, Biotech International, Solana Surgical, and OrthoPro and includes a negative impact from currency of approximately $3 million or 1% as compared to 2013. Our currency assumptions are slightly conservative to current levels and if rates were to remain constant at their current levels it would positively impact our as reported results but less than one percentage point as compared to our current guidance range.

Before moving into a more detailed discussion of individual line items, I’d like – first like to provide you with the primary assumptions that are driving our top line guidance. First, our guidance implies organic growth in the range of 13% to 15% as compared to 2013 sales of approximately $240 million excluding the Biotech acquisition. On an organic basis, this represents a very strong acceleration from 2% growth in 2012 and 13% in 2013. Additionally, we will benefit from acquired revenue associated with the Biotech, Solana Surgical and OrthoPro acquisitions in the range of $35 million to $36 million. Altogether including acquisitions, our guidance for 2014 as reported growth rate is in the range of 26% to 29%.

Keeping those comments in mind from an overall perspective here are some details on those expectations. We anticipate our global foot and ankle business to grow organically in the high teens to low 20s on a constant currency basis. Foot and ankle growth is anticipated to continue to accelerate in the U.S. as we execute on our customer conversion and sales force productivity initiatives and launched new products.

Global Bio is anticipated to grow organically in the low to mid single digits driven by international and upper extremities will continue to be roughly flat on an organic basis. To assist you with modeling the acquired revenue by product line and geographically I’ll provide some color on the expected mix of that revenue. Geographically it is split roughly 60%, 40% between the U.S. and the international, approximately 75% of this revenue is from foot and ankle products with the remaining 25% split between bio, upper extremities and other.

We’re providing you with a buildup of revenue today by providing organic growth commentary and acquired revenue commentary and we will provide you that visibility on our actual results as long as it is meaningful. I will say that the line between what is organic and what is acquired can get gray pretty quickly and acquisitions like these where you’re leveraging the products of the acquired business into your existing channel and vice versa. Our primary focus is on delivering total company revenue in line with the guidance we’re providing today. This completes my prepared comments on revenue.

Turning now to the P&L. Our outlook for full year 2014 adjusted EBITDA from continuing operations as described in the GAAP to non-GAAP reconciliation in the press release is in the range of negative $15 million to negative $20 million. We noted on our Q3 earnings call that we anticipate our second half 2013 adjusted EBITDA to be in the range of negative $10 million and that level annualized the trajectory of the go-forward business. In addition, there would be expense dis-synergies not fully reflected in our 2013 results that would impact earnings in 2014. These headwinds are partially offset by revenue growth in global foot and ankle and positive EBITDA from the Solana, OrthoPro and Biotech acquisitions. The total of these factors is the midpoint of our adjusted EBITDA guidance range.

Now, for some specifics on the individual line items on the P&L. First on gross margin, for 2014, we are expecting gross margins to improve slightly, as benefits from our Vital Few initiative to improve gross margins are partially offset by geographic mix. In total, we expect operating expenses to increase as a percent of sales for the full year 2014 as compared to full year 2013 due to expense dis-synergies related to the sale of the OrthoRecon business and increase in tangible amortization on our recent acquisitions. In total, SG&A as a percent of sales is expected to increase in the range of 500 basis points and R&D is expected to be flat as a percent of sales. Excluding any future acquisitions, amortization expense is expected to be in the range of approximately $3.5 million per quarter. We have not finalized the purchase price allocations for Biotech, Solana Surgical and OrthoPro and we will provide updated guidance for amortization in our Q1 earnings call.

Our assumptions for 2014 assume no Augment approval in the U.S. and maintaining a full year of the BioMimetic cost structure, which is in the range of $10 million to $15 million. As Bob stated, we are not optimistic about the ultimate outcome of Dispute Resolution Panel process, but until we have clarity on the outcome and can determine the best future course of action, we will be maintaining that infrastructure generally as it is.

Before we move to line items below the operating income line to assist you with modeling EBITDA, I do want to provide you with our outlook for depreciation expense, which for the full year 2014 is in the range of approximately $20 million to $22 million as compared to $14 million in 2013. Stock-based expense is anticipated to be in the range of $11 million.

Now, let’s touch briefly on the line items below the operating income line. Our expectation for interest and other is approximately $1.9 million per quarter. Due to the valuation allowance on our NOLs, we will not have an income tax benefit in 2014 and our effective tax rate will be roughly zero compared to 40.1% in 2013 per diluted share as we start the year with a diluted share count of 48.6 million. We are assuming that we would exit the year with diluted shares of 49.5 million, resulting in an average diluted share count of 49.2 million. Please note that while we are providing you the best information we have today as it relates to amortization, it is still very preliminary given the two very recent acquisitions and therefore we are not providing formal EPS guidance today. We expect to be in a position to provide full year EPS guidance on our Q1 earnings call.

From a cash perspective, it is important to provide some information on our cash position as of today. Following the close of the MicroPort, Solana and OrthoPro transactions, we have approximately $375 million of cash from marketable securities. We anticipate consuming approximately $45 million in cash in 2014 from our normal operations, plus an additional $45 million of cash on transition activities to complete the transition from the sale of the OrthoRecon business as well as to integrate our three recent acquisitions. These transition costs will be partially offset by expected exercises of stock options by employees that went to work for MicroPort. And absent any additional acquisitions or other significant developments, we would anticipate exiting 2014 with the cash and marketable securities balance of roughly $300 million.

CapEx for 2014 is anticipated to be in the range of $50 million, $25 million of which is related to normal operations and $25 million of which is related to transition in the integration activities. As it relates to quarterly guidance as was the case in 2013, for 2014, we will update our annual guidance each quarter, but we will not be giving guidance expectations for the current quarter. We do want to provide you with information on the expected cadence of our business to assist you in modeling our quarterly performance.

For U.S. revenue, we see a slight organic growth rate deceleration as compared to Q4 due to some minor disruption from the MicroPort close and some impact from the severe weather this winter. We would expect the U.S. growth rate to then improve throughout the year. For international, we anticipate growth rates generally in line with the full year except for Q2 when we annualized the large China stocking order in Q2 of 2013.

For the acquired revenue, if you were to straight line our full year expectations across the quarters, you would get approximately $9 million per quarter. We anticipate the first and second quarters to be below that level due to some short-term disruption immediately following the acquisition as well of having only two months of revenue from Solana and OrthoPro in Q1. In the second half of the year we expect to outpace the straight line number as we start to see the benefits of selling acquired products through a larger sales force. We would expect Q4 acquired revenue to be better than Q3 due to normal seasonality.

We expect adjusted EBITDA to improve throughout the year with most of the negative EBITDA for the full year occurring in the first half of the year. We expect to have meaningfully larger amounts of revenue in the second half of the year driving significant operating expense leverage. Additionally, we expect to see gross margins below the full year average in the first half of the year due to the impact of dis-synergies from the MicroPort transaction and inventory reserves. And gross margins in the second half that are better than our full year average as we begin to realize benefits from our gross margin Vital Few initiative. Altogether we anticipate that this will result in a fairly dramatic improvement in adjusted EBITDA from the first half to the second and drive us to be adjusted EBITDA positive as we exit 2014.

We would also like to announce that we will be realigning our reportable segments. These changes are designed to further align with the company’s recent divestiture of our OrthoRecon business and provide additional transparency of our financial performance. The new segments will be U.S., International, BioMimetic and Corporate related expenses. We will begin using this new format when we release of fourth – first quarter 2014 results. Generally, what you will see from this is a U.S. business that is nicely profitable and the international business that is closer to breakeven and corporate costs that are very significant.

In closing we are very pleased the overall results for 2013 and expect a continuation of the growth and momentum into 2014. For the past two years we have been executing above plan that has transformed our company into a focused higher growth business. As we turn our attention to 2014, we expect to have an extremities biologics business that is growing in the mid teens organically as well as adding high quality acquired revenue. Additionally we expect to exit the year with positive adjusted EBITDA and be positioned well for significant improvement in 2015 and beyond.

Operator, we would now like to open the call to take questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from the line of Kim Gailun, JPMorgan. Please proceed.

Kim Gailun - JPMorgan

Good afternoon. Thanks for taking the questions. I guess first one is for Bob just on the international side of the business, do you – following the Biotech deal do you feel like you have the distribution that you need for the foot and ankle business or do you think we see additional similar deals on that front?

Bob Palmisano

Yes, I am hopeful that we will see additional similar deals on that front. And we are focused on only a few countries. We are not going that broadly, but I think that we do have opportunities from a market perspective in additional countries, but we don’t have the distribution channel. Most of that went away with MicroPort. So if we could find something similar to Biotech in a few other countries, I think we will be happy to do that.

Kim Gailun - JPMorgan

Yes. And then I guess the follow-up for Lance on one of your last comments there, just a new kind of cost structure reporting, so the U.S., the international and the corporate, so how – I think on the corporate side is where most of my questions lie because the SG&A came in higher than even we would have expected and the guide for this year and so how much do you think of that particularly on the G&A side that you guys can start to work down say over the next kind of 6 to 12 months and what will be a more normalized level?

Lance Berry

Yes Kim this is idea of – I think we can make a lot of progress as a percent of sales on that as we try and keep that as flat as possible while we grow the business through both organic and inorganic means. I think really get into – actually go down in absolute dollars is something that will probably take a while. We will have to get further away from the actual split of the Recon business and we can make progress on those things that are really pretty much the same as they were when we had the Recon business. We can migrate those over time, but probably not in 6 to 12 months.

Kim Gailun - JPMorgan

Okay, thank you.

Operator

The next question comes from the line of Daniel Sollof, Barclays. Please proceed.

Daniel Sollof - Barclays

Hey thanks very much guys. Congratulations on a good quarter. Just wanted to first touch on guidance, so excluding the $30 million or I guess a little more than $30 million that you’re contemplating for the three acquisitions. Can you just help us understand like what needs to go right and what could go wrong to kind of get to that midpoint of the 14% revenue growth for the base business? And what I’m wondering is does that still contemplate the type of growth on the ankle side that we’ve seen in the back half of 2013 kind of that 40% plus range?

Bob Palmisano

Yes. I’ll start with that and Lance can jump in if you like. I think that the things that need to go right are we need to continue with that very strong performance in foot and ankle particularly in total ankle. I’m not sure that we’re going to get 44% each quarter but I think that we should be near there or somewhere in that – certainly in that neighborhood for the year. That’s a very under-penetrated market. We have great products in the market it’s growing very rapidly. So that needs to continue. Secondly is that we have to execute on our productivity goal is that we went from 780 to 820 from Q3 to Q4. If that continues on the trend that it’s been don’t forget we started this about year and a half or 18 months ago at $600,000. We will get to a $1 million per rep and that’s based in our guidance as well, but I feel very confident that we can get there.

Thirdly is that we need these acquisitions, all the three acquisitions Ortho performed as planned. We built in some dis-synergies because we acquired companies with distributed networks and some of those folks in those distributed networks will be joining us direct employees, some of you remaining as distributors and some won’t. So we just hope that the dis-synergies will be pretty much as planned; now we’re experienced in doing this. So I think that there is not a lot of risk there. So I think those are kind of the three things that I’m really concerned about is keeping up the foot and ankle growth particularly the total ankle. We have new products; we have INFINITY launching which will help. And then making sure that the acquisitions perform as planned I think that we should be right in that guidance area.

Daniel Sollof - Barclays

Great, thanks for that. And just a quick follow-up for Lance, as we think about the three recent acquisitions, is it fair to say that these tuck-ins are consistent part of the strategy to aim for continued above market growth? And if so is there a level or I guess a threshold of cash in the balance sheet you feel is necessary to just run the business? And I guess and for 2014 specifically with the bridge for kind of cash flow that you gave indicative that for 2014. We shouldn’t expect more acquisitions as you kind of digest the three currently you have?

Lance Berry

No, I think that those comments were absent in any additional acquisitions. Bob mentioned in his prepared remarks that we certainly would like to do additional M&A I think that, that’s important. With these style of acquisitions and sometimes we do use stock as well that can be actually helpful for us when then is – when there’s a competitive situation. We think we have adequate cash on our balance sheet to fund the operation of the business and do acquisitions. If we’re really successful with the acquisitions at some point you may have to revaluate whether we need to have additional funds. But right now we seem to be okay.

Daniel Sollof - Barclays

Thanks for all the color guys.

Bob Palmisano

Thank you.

Operator

The next question comes from the line of Matt O'Brien, William Blair. Please proceed.

Kayla Crum - William Blair

Hey guys. It’s Kayla in for Matt. Thanks for taking our questions.

Bob Palmisano

Okay.

Kayla Crum - William Blair

So you mentioned that Solana and then OrthoPro would help on the gross margin side in 2014, can you just help us better understanding that how that will contribute to the overall operating margin this year? And then if we should be expecting meaningful further accretion in 2015 from these deals?

Lance Berry

So in 2014 they are EBITDA positive but not significantly. It’s pretty minimal. But I think as we move into 2015 we think they can help quite a bit. So this is the basic answer.

Kayla Crum - William Blair

Okay. So you would say likely an acceleration, then, from 2014 levels?

Lance Berry

Yes, absolutely. I mean, we expect those to grow in line or better than our overall corporate rate in ‘15 and also we would have really all of the whatever integration activities we have, those will all be behind us and so we would expect them to contribute nicely in ‘15.

Kayla Crum - William Blair

Great, thank you.

Operator

The next question comes from the line of Rich Newitter, Leerink Partners. Please proceed.

Rich Newitter - Leerink Partners

Hi, thanks for taking the questions guys. Bob, maybe I could just start off on the total ankle replacement market and the performance, it sounds as if well, clearly you guys are having a lot of success in this area and we have heard from of few of your competitors who participate in this sub-segment that various assessments of what the market is growing at, your 44% kind of compared or contrasted to others saying it’s not growing or it’s a market that’s stable or flat. Just is there something going on specifically with your total ankle replacement product portfolio that just especially if you are not taking share, can you talk about what you think the market is growing and how much of this is Wright specific?

Bob Palmisano

There is no really good scientific ways of measuring market share. I mean, everybody has been saying 8% to 10%, where we had this 44% we had a similar kind of number in Q3. We anticipate being there. So I would kind of take issue with the folks that say it’s not a fast growing market, I think it’s – and I think we are kind of the leader in it. So if we are growing at 44%, it must be growing pretty fast, but what we are seeing is the focus that we have on being a pure-play in this area is really paying dividends. So we are not worried about other things, we are worried about this and we spend 24/7 on it. And so I think that is a little bit.

Secondly is that the technology is good and getting better. And what we have been focused on in from a technology development point of view as well as a medical education point of view is making this easier for doctors to convert to. This is still as you said a small subset of full treatments when you consider the market, which includes 90% fusions. So that technology has to get better and with our INBONE product, we think is a very successful product, but when we launch INFINITY we really see that, that’s going to have a double-barrel effect. It’s going to make the surgery easier for more doctors to convert to. It’s an easier product to use than is the INBONE product. And secondly, it’s going to be appropriate for more patients. Currently now, our products are mostly geared towards revisions or really complicated primaries, whereas the INFINITY product is really geared towards pretty regular kinds of primary procedures. So I think that is all part of it. So I think that a very strong focus from the top down in this company, we think about this everyday, secondly is technology, and thirdly is the big effort that we have in medical education.

Rich Newitter - Leerink Partners

Great, that’s helpful. And then just on the BioMimetic cost structure that you guys are keeping in place for right now, how big is that from a sales force standpoint? How many reps are you carrying? And what are they focused on right now until you get a final Augment….

Bob Palmisano

We don’t have any reps, because the product is not approved in the U.S., it is approved in Australia and that’s through a commissioned agent there. And that business is growing very, very well, but so there is no really cost associated with commercialization, if you will, in our number, it’s more infrastructure in our Franklin, Tennessee operation.

Rich Newitter - Leerink Partners

Thanks a lot.

Operator

The next question comes from the line of Matt Miksic, Piper Jaffray. Please proceed.

Matt Miksic - Piper Jaffray

Hi, thanks guys. I have one follow-up on BioMimetic and then one question on these acquisitions. And on BioMimetic, I think you said at the bottom, Lance that you are not optimistic about this meeting, I am assuming that that means that you have some mixed sort of plan in mind given those this – I don’t want to put words in your mouth but sort of the likely scenario that you don’t wrest any kind of approval out of this. We are hopeful that you can, but can you help us understand what the next out of the meeting is if it does go the way that you are expecting had no change if that is in fact what you are expecting. And then how long does that take to play out. And then as I mentioned I have one follow-up?

Bob Palmisano

I agree with you, it would be nice if this did turn out in a positive way, it’s just the way the process works. It seems like everything is geared against us, but what we would do and I think this is – I am pretty sure 99% sure this will be a public meeting. And we should know either at the meeting or shortly thereafter what the status is. We would then, if it goes in a negative way we will then very rapidly attack the expense basis that we have in our company. And I think that Lance said that’s somewhere between $10 million to $15 million. And I think that that would be what we – that probably we would keep some infrastructure because we still have a very growing business in Australia. But generally speaking, we would look to reduce our expense level significantly. And as I have said previously we would – we are not anticipating or entertaining I would say the idea of doing another study, so that would just be it.

Matt Miksic - Piper Jaffray

That’s helpful. And then a follow-up on the acquisitions, I appreciate the color and very detailed color I should say around guidance and what you are expecting this year if you could maybe elaborate a little bit on what the distribution structure looks like that you are kind of working through the integration of these smaller businesses. And on the international fronts for Lance comments about less profitable or sort of breakeven what can you do there is it driving new products into that distribution, what can you do to kind of start picking that up?

Bob Palmisano

Well, I think that on the international front the margins are significantly lower and that’s – so what we have to do is have more revenue similar to what we have at Biotech, which is a direct sales organization which gives us higher margins than you normally see in the rest of Europe which is mostly distributor – distributor margin. So we need to get a greater mix of direct business and more of it in international markets.

Lance Berry

What was the other question, well that is the other – on that too Matt you realize we are – that the business is pretty small and we are having to replace all the infrastructure that we sold to MicroPort. So I mean it just really needs some more scale as a high growth part of our business that’s trying to build infrastructure the same time, the near breakeven actually in my opinion is not bad and we over time is that growth we think we can get leverage and do better there. And I think the other part of your question Bob was around the distribution for the…?

Bob Palmisano

Yes, what we are working through with regard to Solana and OrthoPro distribution both of these companies came with a distributor network, a very good distributor network. We get I think by now met with practically all of the distributors if not we assume will, our intention is to invite a significant number of these distributors and their employees to become part of Wright on a direct basis, some others will continue as distributors. Not exactly certain of the number, but there will be some of those. But there may be some others that there is probably not a place for, but the dis-synergies that we talk about as happens when we try to maybe convert people from being a distributor to being a direct employee. Sometimes that’s not their career plan, that’s not their ambition. And as they go away and take you lose some revenue and then you have to over time build that up and replace it. So those are kinds of things you work through.

Matt Miksic - Piper Jaffray

Fair enough. Thanks for the color.

Operator

The next question comes from the line of Jeff Johnson, Robert Baird. Please proceed. Well, it looks like the next question is going to be from Glenn Novarro, RBC Capital. Sir, please proceed.

Glenn Novarro - RBC Capital Markets

Hi, thanks. Good afternoon guys.

Bob Palmisano

Hi, Glenn.

Operator

I apologize. The gentleman has – his line has dropped. So the next person in line would be Jason Wittes from Brean Capital. Please proceed.

Jason Wittes - Brean Capital

Hi, thanks. Can you hear me?

Bob Palmisano

Yes, I do.

Julie Tracy

Yes.

Jason Wittes - Brean Capital

Okay, great. I hope I don’t drop off. So, a couple questions. One, in terms of the INFINITY launch, can you just give us the timing parameters for this year and how we expect it to be rolled out?

Bob Palmisano

Yes, I believe a good bet is second half of the year, the earlier the better. We don’t want to launch it before it’s ready but I’m allover this pressuring everybody to get it launched as quickly as we can. So I think that’s a good safe bet. And the first way it would be launched out is first we do an extensive training with our sales force, then we will do extensive training with the physicians that want to be trained in our headquarters and then as we roll out regionally we’d be able to train people regionally. We feel that we will be able to have this thing completely launched this year and will – in a lot of instances be just new fertile ground for us because again this is a product that’s geared towards regular primary replacements and that’s a market that well into some extent but our primary market with our INBONE has been in more of the revisions and complicated primary.

Jason Wittes - Brean Capital

So, if you’re just going to start rolling it out second half, does that mean minimal impact for 2014 or is it still a big piece of what’s baked into 2014 assumptions?

Bob Palmisano

I wouldn’t describe it as a big piece but it’s really important. From a – we’re going to make sure that we do it right and the training is the most important thing. We don’t want people to have a unsuccessful experience with this. So we’re going to do it right and it’s a very important product and will have many years to have significant opportunities with this.

Jason Wittes - Brean Capital

Okay. And then just – I know you mentioned what the total ankle market was growing from your perspective. Could you give us an idea where you think the total foot and ankle market in its entirety is growing and within that how price and volume plays a role in terms of (indiscernible)?

Bob Palmisano

Well I think that’s what we’re talking about is 8% to 10% growth rate for the total ankle market, the best we can determine. I think that when you’re talking about the fusion end of the business, the plates and the screws and that kind of thing I think there is more pressure on price in that end of the market. There is less pressure on price in the total ankle replacement market. So the way I kind of look at it, it takes about five fusions to about one replacement, about – that’s about the revenue, you have to do five fusions to make at the revenue for one replacement. So doing these total ankle replacements are – has much math to it.

Jason Wittes - Brean Capital

Okay, but I guess just in a general sense I mean pricing you’re basically saying pricing is down on the fusion side?

Bob Palmisano

Yes. I wouldn’t say – I would say there is a lot more pressure there because it’s a very competitive market, there is some differentiation I think that one of the products that we’ve got with Solana was a very unique plating system, but the – generally speaking that’s very hard to be aggressive pricing lines in those products.

Jason Wittes - Brean Capital

Okay. And actually just my last question just a segue into Solana and OrthoPro, could you just give us a sense of what products you bought within a portfolio are truly differentiated kind of it sounds like the rationale for those acquisitions?

Bob Palmisano

There is a whole bunch of products I would say that there is a Cannulated Hammertoe product that we have envied for some time that we are now happy to have and that’s in OrthoPro. And then Solana also has a really unique kind of how much our product is a Resorbable Hammertoe and again as I mentioned….

Jason Wittes - Brean Capital

Yes, yes.

Bob Palmisano

Yes, it’s correct. And also as I mentioned this very unique plating system, which does have some differentiation to it as opposed to what we have and what our competitors have.

Jason Wittes - Brean Capital

Okay, great. Thank you very much guys.

Operator

The next question comes from the line of Jeff Johnson, Robert Baird. Please proceed.

Jeff Johnson - Robert Baird

Thanks guys. Good evening. Can you hear me now?

Bob Palmisano

Yes, I hear you, Jeff. We are afraid you dropped off.

Jeff Johnson - Robert Baird

No, no, I don’t know what was going on there. Bob, so I wanted to start with you just on the acquisition pipeline, with those last comments you just made on some of the differentiated hammertoe products and that where are you from needing to fill out product gaps or there is other differentiated products out there that you covet or envy versus needing just geographic expansion, I guess where should we be looking most of your deals to happen?

Bob Palmisano

Yes, I think both. I think if you are looking at the international market, it’s the second thing is more gaining distribution, particularly if we can get direct organizations in these countries. So that’s a positive. In the U.S., there are – if we find companies that we can struck a deal with at a reasonable price that offer us technology advancements as did Solana and OrthoPro, we are all over that. So we intend to do both of those kinds of – be active in both of those areas. You never know though until you have one. So you can’t anticipate it and I can’t say where we are targeting this company or that company, but we are very interested in both of those kinds of transactions for different reasons, but we are interested in both of them.

Jeff Johnson - Robert Baird

Okay. I mean, I think we all think of you guys as having about the broadest product portfolio out there in foot and ankle, but it sounds like there are other things that you guys could go out there and get your hands on, not just the distribution and international channels?

Bob Palmisano

Yes. And have a such a strong sales organization to put products through is a real advantage.

Jeff Johnson - Robert Baird

Sure, okay. And then Lance, just two quick I guess modeling/follow-up questions for you. One, the 19% foot and ankle growth that you gave this quarter, ex the Biotech contribution, was that all organic, I thought there was some WG in there or anything else in there that I should be thinking about?

Lance Berry

Yes. So the WG has been there all year. We talked about at the beginning of the year that the acquired revenue there was about $1 million a quarter. So that’s been the case for every quarter this year.

Jeff Johnson - Robert Baird

Okay, but nothing else in that 19% other than the WG we can back out?

Lance Berry

No.

Jeff Johnson - Robert Baird

Okay. And then you made some comments on weather, I think we are all getting tired I am sure you guys included of talking about weather and it’s such a transient factor, but it’s been dominating these conversations. But is there something special about foot and ankle that’s impacting on those procedures different than maybe upper extremities or some of the procedures that are done in hospitals versus ASCs, anything at all or is weather just kind of impacting everything?

Bob Palmisano

I think that for us we had major impact in two of our larger markets, particularly Atlanta and Charlotte. Now, this is a temporary thing, because these procedures will get done.

Jeff Johnson - Robert Baird

Right, right.

Bob Palmisano

So whether they get done in Q1 or Q2 that’s what we don’t know, but it’s not a long-term effect at all.

Jeff Johnson - Robert Baird

Yes, fair enough. But it would kind of cover all of your procedures across foot and ankle shoulders things like that, there is nothing different between ASCs versus hospital-based versus anything else?

Bob Palmisano

They were just surgeries that were canceled due to weather regardless of where they were.

Jeff Johnson - Robert Baird

Okay.

Lance Berry

Jeff, I think if you were to think about different, I don’t know other companies that – more elective versus traumatic, right. So I mean the weather probably doesn’t have as much impact on a traumatic-driven, but if it’s a scheduled delivery it does and that’s mainly what our business is scheduled versus…

Jeff Johnson - Robert Baird

Right, no, that’s helpful. Thanks Lance. Thanks guys.

Operator

The next question comes from the line of Glenn Novarro, RBC Capital Markets. Please proceed.

Glenn Novarro - RBC Capital Markets

Thanks guys. I don’t know what happened I am struck in my office today.

Bob Palmisano

Okay.

Glenn Novarro - RBC Capital Markets

But my question was for Bob on U.S. distribution strategy, a two-parter. First in terms of the number of surgeons that will be trained for 2014, do you have a number in mind, I think you gave us a number you said it was up 25% for 2013, is there a number there that we should be thinking about for 2014. And then the second part is I think what I am hearing from you is a bigger goal in 2014 is to go deeper into the accounts that have already been trained and get more business from those accounts, so maybe talk about the strategy on how you go about getting more business from those accounts?

Bob Palmisano

Glenn, the first part of the question, we trained about 2500 foot and ankle physicians in 2013. We are not looking to increase that – to dramatically increase that in 2014. So I would think that in that same area is what we would do this year. The – what we are trying to do though is increase the productivity and effectiveness of our medical education, so that when doctors go through the process that they have the right kinds of expectations, so that before doctor goes there we want to make sure that after they get out of the training is that they have patients as best we can ready to that they can – ready for them to do surgery on. And we have a whole process, an adoption process geared towards making that transition to those first couple of cases very smooth and very comfortable for the physician.

So the objective is not so much to train X amount of surgeons, the objective is to train surgeons that will do a lot of cases and get comfortable doing cases quickly and so we have a whole Vital Few initiatives based upon this conversion process. And we think that this is a big deal, so it’s not so much going more in depth in current practices, although some of our new technology will help us to do that specifically the Infinity, but it’s more of getting into doctors who are intrigued to put the idea of our total ankle replacement so that their patients could have more mobility, but are still very cautious about making that transition. And so our efforts are going to be there to give that physician all the tools and support necessary to ease them into that transition.

Glenn Novarro - RBC Capital Markets

And that would assume a follow-up with those surgeons having that in the case and of that the hub strategy also helps more the rep to be with that surgeon in the case?

Bob Palmisano

That’s right. You are right the hub strategy frees up the – where our sale reps previous to the hub were all scrambling around like everybody’s sales reps getting inventory into cases, we don’t – we are not bothered with that anymore for the most cases and that those reps again the first part of the rollout of the new product is making sure that the reps are fully trained and certifying that they are trained. We have a whole process in place to do that. And secondly is then – is to make sure that as they go into cases is that the extra patients or the physician are properly set and then we can execute against them.

Glenn Novarro - RBC Capital Markets

Okay, great, thanks, very clear.

Operator

The next question comes from the line of Mike Matson, Needham & Company. Please proceed.

Mike Matson - Needham & Company

Thanks. I was wondering if you could just walk us through the current manufacturing arrangement or the way that you are manufacturing your products now that the MicroPort sales has been completed and then where the opportunities are there for cost savings?

Bob Palmisano

Yes, prior to the actual closing Mike we separated manufacturing into a separate building in our – near our facility in Arlington. We have moved the headquarters to Memphis, but we kept one building in Arlington. And we moved all our foot and ankle manufacturing into that facility. And this we think affords us the opportunity that really cost reduce our products. And we have again one of our Vital Few is the whole supply chain piece of this. So I think that we have our layout or organization of our manufacturing facility is new, it’s geared towards what we’re doing in foot and ankle, we’re bringing some aspects of manufacturing in-house that we use to purchase and we think we have a big opportunity in terms of decreasing our cost.

Secondly is that we anticipate reducing our inventories. And having manufacturing facility that’s more responsive and quicker we can – we will not have to have these – some of these more in lead times that we were forced into which would help reduce our inventory. And inventories have a big effect on our margin too because you carry a lot of inventories, you have that reserves against that inventory and similar things to that. So all this I think is headed in the right direction and having a separate manufacturing organization is I think a terrific asset.

Mike Matson - Needham & Company

Okay. And then there was a comment made about 25 new products. And it wasn’t clear to me whether you were including the products from acquisitions or that was 25 that are internally developed?

Bob Palmisano

Well, that those do include the acquisitions, yes.

Mike Matson - Needham & Company

Okay. And then can you – other than the ones that you’ve purchased can you comment on anything besides that INFINITY ankle product, you’ve already talked quite a bit about?

Bob Palmisano

So we also plan and this could move some up but we also plan to have a revision system for INFINITY launched later in the year. And I think that would be a big advantage or give doctors more comfort to do the procedure. There are several other in terms of screws and plates that we always kind of do and in addition to the PRO-TOE, the Hammertoe products that we are acquiring from Solana and OrthoPro we have a – that is also been in process of – and R&D process and new PRO-TOE for Wright.

Mike Matson - Needham & Company

Alright, thanks. And then just one quick question for Lance, so the exiting of 2014 you’re expecting to be EBITDA positive, what about just cash flow because your $45 million is kind of a big number for this year, so do you think you can – you’ll be cash flow positive entering 2015?

Lance Berry

I think part of that depending on the timing of CapEx. I think what – we’ll be heading into I’d say we’ll be heading into 2015 on a really good trajectory we plan on making significant improvement from the beginning of the year to the end on EBITDA. And we’re also planning on significantly decreasing our inventory days on hand from the beginning of the year to the end. So they’re not in a position now to give thoughts on 2015 and I’d just say that our trends should be really good as we end the year and roll into 2015.

Bob Palmisano

Yes, I agree with Lance. It’s hard to understand the timing of this. But being cash flow positive is a real important objective for us. We’ll be focused on it and do as quick as we can.

Mike Matson - Needham & Company

Thanks a lot.

Operator

Our final question comes from the line of Mark Landy, Summer Street Research Partners. Please proceed.

Mark Landy - Summer Street Research Partners

Good evening guys.

Bob Palmisano

Good evening.

Mark Landy - Summer Street Research Partners

Hi, I guess something a little different, Bob. A number of your competitors in metal-on-metal have either renounced settlements with plaintiffs or I think have indicated that settlements are close to be reached with plaintiffs. Can you comment on your exposure there if you have any – because if I’m not mistaken I think some of the carrying costs in SG&A is insurance related to the existing (indiscernible) business?

Bob Palmisano

Yes, that’s right. We carry the liabilities prior to the sale date for any product liability issues. We are not close to any kind of a settlement. We have a – we have insurance that we think is will cover a lot – most of anything that we would need, but we don’t have anything to add on this. Do you, Lance?

Lance Berry

Yes, I think the other thing I would say, Mark, we have pretty extensive disclosures in our 10-Qs on this and we will on our 10-K, which hopefully be filed in fairly short order after this call.

Mark Landy - Summer Street Research Partners

I guess my question related to that, Lance, is the cost of insurance that you are carrying will be cost related to that, that’s included in SG&A, are you going to break that out? I guess I am just trying to get a sense of some more SG&A overhead that can dissipate as things get sorted out?

Lance Berry

Yes, I understand. No, we probably won’t be breaking that out. And the insurance is one of the easiest to understand, we are insuring not only the sales that we are – that we have this year, but also previous year sales and that is all-in continuing operations, because there is really not a way to differentiate what for what. And there are numerous things like that all across those corporate expenses that fall into the category somewhat of what Kim was asking about that we can make progress over time, but those things aren’t going to go away overnight. And there is a pretty significant portion of that corporate cost that would fall into the category, I would say, as being able to be optimized for strictly our current business over time and to be able to come down significantly as a percent of sales.

Mark Landy - Summer Street Research Partners

Lance, just with respect to the statutes here, how long in the business that you have to carry those policies for, because I think they are substantial, right?

Lance Berry

They are substantial. So that’s just it’s a year-by-year renewal and so we do roll into this year, we will have to reassess the nature and the extent of the insurance that we want to invest in for going forward. So it’s a year-by-year thing how much you choose to self-insure versus insure with a third-party. So we will have to evaluate that. And as you can imagine with the current environment, that’s a fairly fluid thing with the insurance, which is difficult to predict what we would do for going forward at this point in time. We’ll just have to evaluate as the renewal comes up.

Mark Landy - Summer Street Research Partners

And then I guess my last question, Lance, what was the med tech tax in the quarter end, I guess this is the last quarter where it really becomes meaningful on an apples to apples comparison?

Lance Berry

Yes, if you give me just a second, I will tell you what the – yes, med device tax runs just under $1 million a quarter is kind of what it normally runs.

Mark Landy - Summer Street Research Partners

Okay, thanks guys. I appreciate the time.

Lance Berry

Okay. Thanks Mark.

Operator

We will now turn the call back over to Mr. Robert Palmisano for closing comments. Please proceed.

Bob Palmisano

Thanks operator. Shortly after I joined the company two years ago, 60% of our customers would willingly recommend Wright to the colleagues and peers, 40% would not. In November of 2013 that score had increased to 90% of our customers would recommend Wright to their colleagues and the peers. This is a positive leading indicator that underscores the significant progress we have made. Our focus and strategy are clear to be the fastest growing highest margin Extremities-Biologics public company in the world. We believe this is well within our reach. We will continue to focus on accelerating growth opportunities in this area, including increasing U.S. foot and ankle sales productivity, extending the global reach and penetration of our products in key international markets, and focused M&A. We will do so while continuing to operate with the highest degree of ethics and compliance.

Let me close by thanking the entire Wright worldwide team for their efforts during the fourth quarter and for successfully completing the MicroPort transition activities. It is because of this team and their dedication that I have such great confidence in our future of our ability to achieve our goals. Thank you for being on the call today and your interest in the Wright Medical.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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