News Release
Contacts:
Integra LifeSciences Holdings Corporation
John Bostjancic Maria Platsis
Vice President, Corporate Controller Senior Director of Investor Relations
(609) 936-2239 and Corporate Development
jbostjancic@Integra-LS.com (609) 936-2333
mplatsis@Integra-LS.com
Integra LifeSciences Reports Fourth Quarter and
Full Year 2004 Financial Results
Plainsboro, New Jersey, March 13, 2005 - Integra LifeSciences Holdings
Corporation (NASDAQ: IART) today reported its fourth quarter and full year 2004
revenues and earnings. Product revenues in the fourth quarter of 2004 were $61.8
million, reflecting an increase of $14.9 million, or 32%, over the fourth
quarter of 2003. Product revenues for the full year ended December 31, 2004
increased by $61.8 million to $228.5 million, a 37% increase over the prior
year.
Excluding recently acquired product lines, fourth quarter 2004 product revenues
increased by $9.2 million, or 20%, over the prior year period, and full year
2004 product revenues increased by $32.7 million, or 23%, over the prior year.
Total revenues for the quarter increased over the prior year period by $2.8
million to $61.8 million. Total revenues for the full year ended December 31,
2004 increased by $44.2 million to $229.8 million.
We reported net income of $9.8 million, or $0.30 per diluted share, for the
fourth quarter of 2004, compared to net income of $9.2 million, or $0.28 per
diluted share in the fourth quarter of 2003. Net income for the year ended
December 31, 2004 was $17.2 million, or $0.55 per diluted share, compared to
$26.9 million, or $0.86 per diluted share, for the year ended December 31, 2003.
"We are very pleased with our performance in the fourth quarter and for the
year," said Stuart M. Essig, Integra's President and Chief Executive Officer.
"Organic revenue growth exceeded our long-term objective of 18%, and our
corporate gross margin continued to build in keeping with our expectations. More
importantly, we transformed Integra LifeSciences this year in the area of
information technology. Our continuing implementation of an enterprise business
system will streamline our ability to grow both organically and through
acquisitions and strategic partnerships. We have made good on our ambition to
accelerate product development, having launched significant new products in
dural regeneration, adhesion prevention, nerve repair, neuromonitoring, cranial
reconstruction and shunting for normal pressure hydrocephalus. We continued to
cut costs and improve margins through plant consolidations. Finally, we have
focused our Reconstructive Surgery sales force on the extremities, with exciting
new products in the treatment of wounds and the surgical reconstruction of the
foot and ankle."
This quarter, as required by the recently adopted Emerging Issues Task Force
(EITF) Issue No. 04-08, The Effect of Contingently Convertible Debt on Diluted
Earnings per Share, we treated the unissued shares underlying our contingently
convertible notes issued in March 2003 as if such shares were issued and
outstanding, using the "if-converted" accounting method, for the purposes of
calculating earnings per share. As also required by EITF 04-08, we restated
diluted earnings per share for all prior periods back to the issuance of this
debt to conform to this new accounting standard.
<page>
The adoption of EITF 04-08 reduced earnings per share by $0.01 for the fourth
quarter ended December 31, 2004, and by $0.02 for both the fourth quarter and
year ended December 31, 2003. It had no impact on earnings per share for the
full year 2004.
Our revenues for the periods were as follows:
<table>
<caption>
Three Months Year
Ended December 31, Ended December 31,
2004 2003 2004 2003
---- ---- ---- ----
<s> <c> <c> <c> <c>
Product Revenue:
Monitoring products $12,517 $11,466 $48,217 $44,229
Implants 19,851 14,325 78,418 53,301
Instruments 22,685 15,422 77,667 47,168
Private label products 6,709 5,648 24,188 21,997
------ ------ ------- ------
Total Product Revenue 61,762 46,861 228,490 166,695
Other revenue 49 12,164 1,335 18,904
------ ------ ------- -------
Total Revenue $61,811 $59,025 $229,825 $185,599
</table>
Increased sales of our drainage systems and intracranial monitoring products,
including our Camino(R) and LICOX(R) monitoring systems, provided most of the
year-over-year growth in monitoring product revenues.
Continued strong year-over-year growth in sales of our DuraGen(R) Dural Graft
Matrix, DuraGen Plus(TM) Dural Regeneration Matrix, and our CSF management
products, and direct selling of the INTEGRA(R) Dermal Regeneration Template and
INTEGRA(TM) Bilayer Matrix Wound Dressing accounted for most of the increase in
implant product revenues.
Sales of recently acquired product lines contributed $5.7 million of the
year-over-year increase in instrument revenues for the fourth quarter. Increased
sales of our JARIT(R) and Ruggles(TM) surgical instrument lines provided the
remainder of the growth in instrument product revenues.
The increase in revenues attributable to our remaining private label products,
including the Absorbable Collagen Sponge that we supply for use in Medtronic's
INFUSE(TM) bone graft product, more than offset the removal of INTEGRA(R) Dermal
Regeneration Template revenues from our private label products category.
Changes in foreign currency exchange rates contributed $0.7 million to our
quarterly year-over-year product revenue growth.
Gross margin on product revenues in the fourth quarter of 2004 was 62.4%. Our
gross margin was positively affected by changes in the mix of our products sold
during the quarter and by the resumption of direct sales of the INTEGRA(R)
Dermal Regeneration Template in 2004.
Research and development expense decreased from $4.8 million in the fourth
quarter of 2003 to $3.6 million in the current period. Selling, general and
administrative expense increased by $0.9 million to $20.3 million in the fourth
quarter of 2004, but decreased as a percentage of product revenues to 33% from
41% in the prior year period. Selling, general and administrative expense in the
fourth quarter of 2004 included costs associated with the closing of our
distribution facility in New Jersey and the transfer of distribution functions
to Nevada, and additional spending on Integra's enterprise business system
implementation and Sarbanes-Oxley 404 compliance activities.
<page>
We reported net interest income of $95,000 in the fourth quarter of 2004, as
compared to net interest income of $81,000 in the prior year period. Other
income in the fourth quarter of 2004 was $2.3 million and included a $1.4
million gain related to the change in the fair value of the foreign exchange
collar contract we executed in November 2004 upon agreeing to acquire Newdeal
Technologies SA.
Our cash and investments totaled $196.0 million at December 31, 2004.
We are updating our expectations for total revenues, gross margin and earnings
per share for 2005 and providing our initial guidance for 2006. In accordance
with our usual practice, our expectations for 2005 and 2006 financial
performance do not include the impact of acquisitions or other strategic
corporate transactions that have not yet closed.
Total revenues in 2005 are expected to be between $290 million and $300 million.
Total revenues in 2006 are expected to be between $345 million and $355 million.
Consolidated gross margin is expected to increase to 64% and 66% of total
revenues in 2005 and 2006, respectively. Earnings per diluted share are expected
to be within a range of $1.38 to $1.42 per share in 2005. Earnings per diluted
share are expected to be within a range of $1.65 to $1.75 per share in 2006. Our
guidance for the first quarter of 2005 is for total revenues in the range of $65
million to $68 million and earnings per diluted share of $0.29 to $0.31. Our
expectation ranges for full year 2005 and 2006 earnings per share do not reflect
the impact of expensing stock options beginning July 1, 2005 under the
accounting standard recently issued by the Financial Accounting Standards Board
(FASB).
We have scheduled a conference call for 9:00 am EST tomorrow, March 14, 2005, to
discuss the financial results for the fourth quarter of 2004 and forward-looking
financial guidance. The call is open to all listeners and will be followed by a
question and answer session. Access to the live call is available by dialing
(973) 935-8511 or through a listen-only webcast via a link provided on the home
page of Integra's website at www.Integra-LS.com. A replay of the conference call
will be accessible starting one hour following the live event. Access to the
replay is available through March 28, 2005 by dialing (973) 341-3080 (access
code 5630772) or through the webcast accessible on our home page.
Integra LifeSciences Holdings Corporation is a diversified medical technology
company that develops, manufactures, and markets medical devices for use in a
variety of applications. The primary applications for our products are
neuro-trauma and neurosurgery, reconstructive surgery and general surgery.
Integra is a leader in applying the principles of biotechnology to medical
devices that improve patients' quality of life. Our corporate headquarters are
in Plainsboro, New Jersey, and we have research, manufacturing and distribution
facilities located throughout the world. We have approximately 1,200 employees.
Please visit our website at (http://www.Integra-LS.com).
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements concerning future financial
performance, including projections for revenues, gross margins, earnings per
share and cash flows. Such forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from
predicted or expected results. Among other things, our ability to maintain
relationships with customers of acquired entities, physicians' willingness to
adopt our recently launched and planned products and our ability to secure
regulatory approval for products in development may adversely affect our future
product revenues; our ability to increase sales and product volumes may
adversely affect our future gross margins; our ability to integrate acquired
businesses, increase product sales and gross margins, and control non-product
costs may affect our earnings per share; and our future net income results and
our ability to effectively manage working capital may affect our future cash
flows. In addition, the economic, competitive, governmental, technological and
other factors identified under the heading "Factors That May Affect Our Future
Performance" included in the Business section of Integra's Annual Report on Form
10-K for the year ended December 31, 2003 and information contained in
subsequent filings with the Securities and Exchange Commission could affect
actual results.
<page>
Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other
provisions of the Securities Exchange Act of 1934, as amended, define and
prescribe the conditions for the use of certain non-GAAP financial information.
In this news release, we provide "quarterly year-over-year growth in product
revenues excluding recently acquired product lines" and "annual year-over-year
growth in product revenues excluding recently acquired product lines", which are
non-GAAP financial measures. A reconciliation of these non-GAAP financial
measures to the most comparable GAAP measures is provided in the tables of
financial information contained at the end of this news release.
Non-GAAP financial measures should not be relied upon to the exclusion of GAAP
financial measures. Management believes that these non-GAAP financial measures
are important supplemental information to investors which reflect an additional
way of viewing aspects of our operations that, when viewed with our GAAP results
and the accompanying reconciliations, provides a more complete understanding of
factors and trends affecting our ongoing business and operations. Management
strongly encourages investors to review our financial statements and filed
reports in their entirety and to not rely on any single financial measure.
Because non-GAAP financial measures are not standardized, it may not be possible
to compare these financial measures with other companies' non-GAAP financial
measures having the same or similar names.
<page>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(In thousands, except per share data)
(UNAUDITED)
<table>
STATEMENT OF OPERATIONS DATA:
<caption>
Three Months
Ended December 31,
2004 2003
---- ----
<s> <c> <c>
Product revenue $61,762 $46,861
Other revenue 49 12,164
------ ------
Total revenue 61,811 59,025
Cost of product revenue 23,221 20,935
Research and development 3,556 4,772
Selling, general and administrative 20,264 19,354
Amortization 1,139 968
------ ------
Total costs and expenses 48,180 46,029
Operating income 13,631 12,996
Interest income, net 95 81
Other income, net 2,250 1,962
------ ------
Income before income taxes 15,976 15,039
Provision for income taxes 6,137 5,867
------ ------
Net income $9,839 $9,172
======= =======
Diluted earnings per share $0.30 $0.28
Diluted weighted average
common shares outstanding 34,842 34,174
</table>
<page>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(In thousands, except per share data)
(UNAUDITED)
<table>
STATEMENT OF OPERATIONS DATA:
<caption>
Year
Ended December 31,
2004 2003
---- ----
<s> <c> <c>
Product revenue $228,490 $166,695
Other revenue 1,335 18,904
------- -------
Total revenue 229,825 185,599
Cost of product revenue 87,299 70,598
Research and development 14,121 12,815
Selling, general and administrative 99,360 59,459
Amortization 4,266 3,080
------- -------
Total costs and expenses 205,046 145,952
Operating income 24,779 39,647
Interest income, net 555 471
Other income, net 2,674 3,071
------ ------
Income before income taxes 28,008 43,189
Provision for income taxes 10,811 16,328
------- -------
Net income $17,197 $26,861
======= =======
Diluted earnings per share $0.55 $0.86
Diluted weighted average
common shares outstanding 31,102 33,104
</table>
<page>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(In thousands, except per share data)
(UNAUDITED)
<table>
CONDENSED BALANCE SHEET DATA:
<caption>
December 31, December 31,
2004 2003
---- ----
<s> <c> <c>
Cash and marketable securities,
including non-current portion $195,982 $206,743
Accounts receivable, net 46,765 28,936
Inventory, net 55,947 41,046
Total assets 456,713 412,526
Current liabilities 24,234 20,618
Long-term debt 118,900 119,257
Total liabilities 148,890 143,996
Stockholders' equity 307,823 268,530
</table>
<page>
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO THE MOST COMPARABLE GAAP
MEASURE:
A. Quarterly year-over-year growth in product revenues excluding recently
acquired product lines
Excluding recently acquired product lines, fourth quarter 2004 product
revenues increased by $9.2 million, or 20%, over the prior year period.
<table>
<caption>
Quarter Ended
December 31, Increase
2004 2003 $ %
-------- -------- ------- -----
($ in thousands)
<s> <c> <c> <c> <c>
Total product revenues, as reported $ 61,762 $ 46,861 $14,901 32%
Less: Product revenues acquired in 2004 5,249 -- 5,249 N/A
Product revenues acquired in 2003 1,158 721 437 61%
-------- -------- ------- -----
Product revenues excluding
acquired products $ 55,355 $ 46,140 $ 9,215 20%
</table>
B. Annual year-over-year growth in product revenues excluding recently
acquired product lines
Excluding recently acquired product lines, full year 2004 product revenues
increased by $32.7 million, or 23%, over the prior year.
<table>
<caption>
Year Ended
December 31, Increase
2004 2003 $ %
-------- -------- ------- -----
($ in thousands)
<s> <c> <c> <c> <c>
Total product revenues, as reported $228,490 $166,695 $61,795 37%
Less: Product revenues acquired in 2004 13,633 -- 13,633 N/A
Product revenues acquired in 2003 39,897 24,476 15,421 63%
-------- -------- ------- -----
Product revenues excluding
acquired products $174,960 $142,219 $32,741 23%
</table>
Source: Integra LifeSciences Holdings Corporation