| ITEM 7.01 | REGULATION FD DISCLOSURE |
On August 18, 2022, Integra LifeSciences Holdings Corporation (the “Company”), after consultation with the U.S. Food and Drug Administration and other regulatory authorities outside of the United States, initiated an immediate voluntary global product removal of all CereLink® intracranial pressure monitors as a result of customer reports about monitors whose pressure readings were out of range. The Company believes that the out-of-range readings are principally caused by electrical interference from the external environment and/or interference from a component on the circuit board of the monitor. These out-of-range readings have occurred at a low incidence rate and at a limited number of sites; however, out of an abundance of caution, the Company has decided to remove all CereLink monitors from the field.
The Company is continuing its investigation into the matter in order to remedy the observed issue and plans to resume shipment of the CereLink monitors as soon as any such issues have been resolved.
The Company does not currently expect that this voluntary action will have a material adverse effect on the Company’s business, financial condition or results of operations. Nevertheless, as a result of the voluntary action, the Company estimates a returns provision of approximately $9 million in the third quarter of 2022 and has adjusted its third quarter and full year 2022 guidance accordingly. Updated guidance estimates are shown below.
| | | | | | | | | | | | | | | | |
| | | Revenue ($ millions) | | | Adj. EPS ($) | |
| | | Low | | | High | | | Low | | | High | |
Third Quarter | | | | | | | | | | | | | | | | |
July guidance | | | 383 | | | | 391 | | | | 0.78 | | | | 0.82 | |
Cerelink returns provision estimate | | | (9 | ) | | | (9 | ) | | | (0.09 | ) | | | (0.09 | ) |
Updated guidance | | | 374 | | | | 382 | | | | 0.69 | | | | 0.73 | |
Full Year | | | | | | | | | | | | | | | | |
July guidance | | | 1,557 | | | | 1,575 | | | | 3.21 | | | | 3.29 | |
Cerelink returns provision estimate | | | (9 | ) | | | (9 | ) | | | (0.09 | ) | | | (0.09 | ) |
Updated guidance | | | 1,548 | | | | 1,566 | | | | 3.12 | | | | 3.20 | |
The adjusted earnings per diluted share measure is calculated by dividing adjusted net income attributable to diluted shares by diluted weighted average shares outstanding. The measure of adjusted net income consists of GAAP net income, excluding: (i) structural optimization charges; (ii) divestiture, acquisition and integration-related charges; (iii) EU Medical Device Regulation-related charges; (iv) intangible asset amortization expense; and (v) income tax impact from adjustments.
The Company believes that the presentation of adjusted earnings per diluted share measure provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Management uses such non-GAAP financial measure when evaluating operating performance because we believe that the inclusion or exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company’s divestiture, acquisition, integration, and restructuring activities, for which the amounts are non-cash in nature, or for which the amounts are not expected to recur at the same magnitude, provides a supplemental measure of our operating results that facilitates comparability of our financial condition and operating performance from period to period, against our business model objectives, and against other companies in our industry. This measure should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
The Company provided the foregoing forward-looking guidance regarding adjusted earnings per diluted share but has not provided a reconciliation to GAAP earnings per share, because certain GAAP expense items are highly variable and management is unable to predict them with reasonable certainty and without unreasonable effort. Specifically, the financial impact and timing of divestitures, acquisitions, integrations, structural optimization and efforts to comply with the EU Medical Device Regulation are uncertain, depend on various dynamic factors and are not reasonably ascertainable at this time. These expense items could have a material impact on GAAP results.
