News Release
Contacts:
Integra LifeSciences Holdings Corporation
David B. Holtz Maria Platsis
Senior Vice President, Finance Senior Director of Investor Relations
(609) 936-2334 and Corporate Development
dholtz@Integra-LS.com (609) 936-2333
mplatsis@Integra-LS.com
Integra LifeSciences Reports Record Revenues
for the First Quarter 2005
Plainsboro, New Jersey, May 8, 2005 - Integra LifeSciences Holdings Corporation
(NASDAQ: IART) today reported its first quarter financial results. Total
revenues in the first quarter of 2005 were $65.8 million, reflecting an increase
of $13.4 million, or 26%, over the first quarter of 2004.
We reported net income of $8.4 million, or $0.26 per diluted share, for the
first quarter of 2005, compared to net income of $7.4 million, or $0.23 per
diluted share in the first quarter of 2004.
When adjusted for certain acquisition and integration related charges, net
income for the first quarter of 2005 was $9.0 million, or $0.27 per diluted
share. These charges included costs associated with the closing of various
facilities and related transitions, foreign dealer terminations, and other
acquisition and integration related costs, including inventory fair value
purchase accounting adjustments.
Operating income for the period was $13.0 million.
"We achieved record revenues in the first quarter," said Stuart M. Essig,
Integra's President and Chief Executive Officer. "During the quarter, we began
the integration of the Newdeal group's international business with our existing
international sales and distribution network and established the domestic
infrastructure to initiate the direct sale, marketing and distribution of the
Newdeal products in the US. In addition, we expanded our domestic Reconstructive
Surgery salesforce with a focus on extremities, increased administrative
headcount and continued to consolidate certain of our operations. We also
recently announced our third generation duraplasty product, the Suturable
DuraGen(TM) Dural Regeneration Matrix."
Our revenues for the period were as follows:
<table>
<caption>
Three Months
Ended March 31, % Increase/
2005 2004 (Decrease)
---- ---- ----------
($ in thousands)
<s> <c> <c> <c>
Product Revenue:
Implants $25,888 $18,332 41%
Instruments 22,527 16,043 40%
Monitoring 11,374 11,198 2%
Private label 6,010 5,862 3%
----- ------ --
Total Product Revenue 65,799 51,435 28%
Other revenue 40 1,008 (96%)
------ ------ -----
Total Revenue $65,839 $52,443 26%
</table>
<page>
Rapid growth in the NeuraGen(TM) Nerve Guide, the INTEGRA(R) Dermal Regeneration
Template and the INTEGRA(TM) Bilayer Matrix Wound Dressing products, and new
sales of Newdeal products for the foot and ankle accounted for most of the
increase in implant product revenues. Sales of our NeuraGen(TM) and
NeuraWrap(TM) products increased 96% over the prior year period. Sales of our
dermal repair products, including the INTEGRA(R) Dermal Regeneration Template,
the INTEGRA(TM) Bilayer Matrix Wound Dressing, and the INTEGRA(TM) Matrix Wound
Dressing products, increased 56% over the first quarter of 2004. Newdeal product
revenues of $4.5 million met our expectations for the quarter. Sales of the
NPH(TM) Low Flow Hydrocephalus Valve that we introduced in late 2004 also
contributed to the growth in implant product revenues for the quarter. Our
DuraGen family of duraplasty products continued to grow, albeit at slower rates
than in recent years.
Increased sales of our JARIT(R) surgical instrument lines and recently acquired
product lines provided the year-over-year growth in instrument product revenues
for the first quarter. JARIT(R) sales grew 17% over the first quarter of 2004,
and we had our strongest quarter of Mayfield(R) product revenue since we
acquired the line in May 2004.
Year-over-year growth in monitoring product revenues was slower than expected
because of slower-than-expected acceptance of our LICOX(R) Brain Oxygen
Monitoring System in the United States and slower growth in external drainage
systems. We expect that the launch of Integra's NeuroSensor(R) cerebral blood
flow monitoring system later this year will improve the performance of this
category.
Increased revenues of the Absorbable Collagen Sponge that we supply for use in
Medtronic's INFUSE(TM) bone graft product offset the removal of the Signature
Technologies revenues from our private label products category.
Excluding recently acquired product lines, first quarter 2005 product revenues
increased by $5.0 million, or 10%, over the prior year period. We continue to
expect organic revenue growth to accelerate in the second half of 2005.
Gross margin on total revenues in the first quarter of 2005 was 63%. Our gross
margin was positively affected by changes in the mix of our products sold during
the quarter. Our gross margin for the quarter includes inventory fair value
purchase accounting adjustments of $269,000 from the Newdeal acquisition, which
had a negative impact of 1% on our gross margin.
Research and development expense increased $536,000 to $3.4 million in the first
quarter of 2005.
Selling, general and administrative expense increased by $6.9 million to $23.9
million in the first quarter of 2005, increasing as a percentage of revenue to
36% from 32% in the prior year period. This increase was primarily attributable
to selling, general and administrative expense of acquired operations, as well
as accelerated hiring to support our growth, particularly in reconstructive
surgery.
We reported net interest income of $27,000 in the first quarter of 2005 compared
to $57,000 in the prior year period. Other expense in the first quarter of 2005
was $93,000 and included a $204,000 expense 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.
The Company generated $13.2 million in cash flows from operations in the first
quarter of 2005. Our cash and investments totaled $158 million at March 31,
2005.
We are updating our expectations for total revenues and earnings per share for
2005 and 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.
<page>
Total revenues in 2005 are expected to be between $283 million and $293 million.
Total revenues in 2006 are expected to be between $340 million and $350 million.
Our guidance for the second quarter of 2005 is for total revenues in the range
of $66 million to $69 million.
Excluding charges related to acquisitions and integrations, earnings per diluted
share in 2005 are expected to be within a range of $1.33 to $1.38 in the full
year and $0.28 to $0.30 in the second quarter.
On a GAAP reported basis, we expect earnings per share in 2005 to be within a
range of $1.31 to $1.36 in the full year and $0.27 to $0.29 in the second
quarter.
Earnings per diluted share in 2006 are expected to be within a range of $1.65 to
$1.75. Our expectation ranges for 2006 earnings per diluted share do not reflect
the impact of expensing stock options beginning January 1, 2006 under the
accounting standard recently issued by the Financial Accounting Standards Board
(FASB).
Our Board of Directors has authorized us to repurchase shares of our common
stock for an aggregate purchase price not to exceed $40 million through December
31, 2006. We may repurchase shares under this program either in the open market
or in privately negotiated transactions.
We have scheduled a conference call for 9:00 am EST tomorrow, May 9, 2005, to
discuss the financial results for the first quarter of 2005 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 May 23, 2005 by dialing (973) 341-3080 (access code
5937953) 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, 2004 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 "net income adjusted
for certain acquisition and integration charges", which are non-GAAP financial
measures. We believe that, given our on-going, active strategy of seeking
acquisitions, focusing on net income adjusted to exclude costs related to
acquisitions and integrations is a useful additional basis to measure the
performance of our business operations, both in this quarter and in future
periods. 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.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONSOLIDATED FINANCIAL RESULTS
(In thousands, except per share data)
(UNAUDITED)
<table>
Statement of Operations Data:
<caption>
------------------------------------------------------ -----------------------
Three Months Ended
Three Months Ended March 31, 2005 March 31, 2004
------------------------------------------------------ -----------------------
Reported Adjustments As Adjusted Reported
<s> <c> <c> <c> <c>
Total revenues $65,839 $65,839 $52,443
Cost of product revenues 24,133 $269 (a) 23,864 20,001
Research and development 3,359 3,359 2,823
Selling, general and administrative 23,916 517 (b) 23,399 17,007
Amortization 1,475 1,475 883
----- ------ ------
Total costs and expenses 52,883 786 52,097 40,714
Operating income 12,956 786 13,742 11,729
Interest income (expense), net 27 27 57
Other income (expense), net (93) (93) (17)
------ ------ ------
Income before income taxes 12,890 786 13,676 11,769
Provision for 4,447 283 (c) 4,730 4,331
income taxes ------ ------ -----
Net income $8,443 $503 $8,946 $ 7,438
Earnings per share calculation:
Add back of after tax interest 544 544 520
expense ----- ----- -----
Net income for diluted EPS $8,987 $9,490 $7,958
Diluted earnings per share $0.26 $0.27 $0.23
Diluted weighted average
Common shares outstanding 35,144 35,144 34,373
</table>
Notes:
(a) Inventory fair value purchase accounting adjustments
(b) Acquisition and integration related costs, including costs associated
with the closing of various facilities and related transitions and
foreign dealer terminations
(c) Adjustment to provision for income taxes for above adjustments
<table>
Condensed Balance Sheet Data:
<caption>
March 31, December 31,
2005 2004
----- ----
<s> <c> <c>
Cash and marketable securities,
Including non-current portion $157,931 $195,982
Accounts receivable, net 51,261 46,765
Inventory, net 65,335 55,947
Total assets 470,407 456,713
Current liabilities 30,979 24,234
Long-term debt 118,631 118,900
Total liabilities 156,062 148,890
Stockholders' equity 314,345 307,823
</table>
Reconciliation of non-GAAP financial measures to the most comparable GAAP
measure:
A. Growth in product revenues excluding recently acquired product lines
<table>
<Caption>
Quarter Ended Increase
March 31, (Decrease)
2005 2004 $ %
-------- -------- ------- -----
($ in thousands)
<s> <c> <c> <c> <c>
Total product revenues, as reported $ 65,799 $ 51,435 $14,364 28%
Less: Product revenues acquired in
2004 and 2005 9,372 -- 9,372 N/A
-------- -------- ------- -----
Product revenues excluding acquired products $ 56,427 $ 51,435 $ 4,992 10%
</table>
B. Reconciliation of Net Earnings and Adjusted Net Earnings
<table>
<caption>
Quarter Ended
March 31,
2005 2004
-------- --------
($ in thousands)
<s> <c> <c>
Net Income $ 8,443 $ 7,438
Inventory fair value adjustments 269 --
Acquisition and integration related costs 517 --
Tax effect on above adjustments (283) --
-------- --------
Adjusted Net Income $ 8,946 $ 7,438
</table>
C. Reconciliation of Diluted EPS and Adjusted Diluted EPS
<table>
<caption>
Quarter Ended
March 31,
2005 2004
-------- --------
<s> <c> <c>
Diluted EPS $0.26 $0.23
Inventory fair value adjustments 0.01 --
Acquisition and integration related costs 0.01 --
Tax effect on above adjustments (0.01) --
------ ------
Adjusted Diluted EPS $0.27 $0.23
</table>
<page>
D. Reconciliation of Projected Diluted EPS and Projected Adjusted Diluted EPS
<table>
<caption>
Range
---------------------
<s> <c> <c>
Projected three months ended June 30, 2005:
Diluted EPS $0.27 $0.29
Inventory fair value adjustments, net of tax 0.01 0.01
----- -----
Adjusted Diluted EPS $0.28 $0.30
Projected twelve months ended December 31, 2005:
Diluted EPS $1.31 $1.36
Inventory fair value adjustments 0.02 0.02
Acquisition and integration related costs 0.01 0.01
Tax effect on above adjustments (0.01) (0.01)
------ ------
Adjusted Diluted EPS $1.33 $1.38
</table>
"MAYFIELD" is a registered trademark of SM USA, Inc., a wholly owned subsidiary
of Schaerer Mayfield USA, Inc.
Source: Integra LifeSciences Holdings Corporation
<page>