News Release
Contacts:
Integra LifeSciences Holdings Corporation
Maureen B. Bellantoni Maria Platsis
Executive Vice President Senior Director of Investor Relations
and Chief Financial Officer and Corporate Development
(609) 936-6822 (609) 936-2333
maureen.bellantoni@Integra-LS.com mplatsis@Integra-LS.com
Integra LifeSciences Reports First Quarter 2006 Financial Results
Plainsboro, New Jersey, May 8, 2006 - Integra LifeSciences Holdings Corporation
(NASDAQ: IART) today reported its first quarter financial results. Total
revenues in the first quarter of 2006 were $77.1 million, reflecting an increase
of $11.3 million, or 17%, over the first quarter of 2005.
We reported net income of $8.7 million, or $0.28 per diluted share, for the
first quarter of 2006, compared to net income of $8.4 million, or $0.26 per
diluted share in the first quarter of 2005. Reported earnings per share for the
first quarter of 2006 includes a $0.06 per diluted share impact related to the
implementation of SFAS 123(R), Share-Based Payment. We adopted this new
accounting standard using the modified-prospective method, so we are not
adjusting our historical financial statements to reflect the impact of
share-based compensation. Therefore, earnings per share for the first quarter of
2005 do not reflect the impact of share-based compensation.
When adjusted for certain acquisition and restructuring related charges, costs
related to systems integrations and the impact of share-based compensation, net
income for the first quarter of 2006 was $11.7 million, or $0.37 per diluted
share. Acquisition and restructuring related charges include costs associated
with the closing of various facilities and related transitions, employee
terminations, and other integration and restructuring related costs, including
inventory fair value purchase accounting adjustments. In the first quarter of
2005, net income, when adjusted for certain charges set forth in the tables at
the end of this release, was $8.9 million, or $0.27 per diluted share.
Operating income for the period was $13.6 million. Reported operating income
includes the impact of share-based compensation expense.
Excluding recently acquired product lines and changes in foreign currency
exchange rates, first quarter 2006 revenues increased by $9.1 million, or 14%,
over the prior-year period. Changes in foreign currency exchange rates had a
negative impact of $1.3 million on our quarterly year-over-year revenue growth.
"We achieved record revenues in the first quarter," said Stuart M. Essig,
Integra's President and Chief Executive Officer. "During the quarter, we
acquired the assets of the Radionics Division of Tyco Healthcare Group LP and
began the integration of that business into Integra. We also continued to cut
costs and improve margins. Last month, we announced our agreement to acquire the
Miltex group of companies, which we expect to close later this month. We are
excited to see an increase in our acquisition-related activities this year."
We are revising the manner in which we present our revenue. We continue to
manage our operations as a single operating segment - the development,
manufacturing, and distribution of medical devices. We will present our revenues
in two categories: Neurosurgical/Orthopedic Implants and Medical/Surgical
Equipment. For comparative purposes, we have also revised the prior period to
reflect this change.
Our revenues for the period were as follows:
Three Months
Ended March 31, % Increase/
2006 2005 (Decrease)
---- ---- ----------
($ in thousands)
<s> <c> <c> <c>
Revenue:
Neuro/Ortho Implants $36,746 $31,384 17%
MedSurg Equipment 40,389 34,455 17%
------ ------- ---
Total Revenue $77,135 $65,839 17%
In the Neuro/Ortho Implants category, sales of our Reconstructive Surgery
implant products grew particularly well. Rapid growth in the NeuraGen(TM) Nerve
Guide, the INTEGRA(TM) dermal repair products and sales of Newdeal products for
the foot and ankle accounted for much of the increase in implant product
revenues. INTEGRA(TM) dermal repair product revenues increased approximately 39%
over the first quarter of 2005, nerve repair product revenues increased by 42%,
and our Newdeal foot and ankle products increased approximately 24%. Our
DuraGen(R) family of duraplasty products continued to grow modestly. Sales of
the DuraGen Plus(TM) and Suturable DuraGen(TM) Dural Regeneration products led
the growth in sales of this group of products. Increased revenues of both the
Absorbable Collagen Sponge that we supply for use in Medtronic's INFUSE(TM) bone
graft product and the dental products we supply to Zimmer, also contributed to
the growth in implant revenues.
In the MedSurg Equipment category, increased sales of JARIT(R) surgical
instruments and ultrasonic aspirator products provided most of the
year-over-year growth in product revenues for the first quarter. Sales of
Radionics products contributed $3.4 million in the quarter.
Gross margin on total revenues in the first quarter of 2006 was 64%. Although we
had strong sales growth in higher gross margin products, we recognized $464,000
in inventory fair value purchase accounting adjustments from the Radionics
acquisition as products were sold and $590,000 in restructuring and
manufacturing transfer and systems integration costs. These charges reduced our
gross margin by approximately 1%.
Research and development expense was $3.2 million in the first quarter of 2006.
Selling, general and administrative expense increased by $7.2 million to $31.1
million in the first quarter of 2006, increasing as a percentage of revenue to
40% from 36% in the prior year period. A large portion of the increase was
attributable to the impact of adopting SFAS 123(R), Share-Based Payment.
We reported net interest expense of $658,000 in the first quarter of 2006.
The Company generated $10.9 million in cash flows from operations in the first
quarter of 2006. The initial build of Radionics-related accounts receivable
impacted the operating cash flow for the quarter. Our cash and investments
totaled $97.9 million at March 31, 2006.
We are reiterating our guidance for total revenues for the full years 2006 and
2007, which we provided last month. We are also updating our expectations for
earnings per share and providing our initial guidance for the second quarter of
2006. In accordance with our usual practice, our expectations for 2006 and 2007
financial performance do not include the impact of acquisitions or other
strategic corporate transactions that have not yet closed, including the pending
acquisition of Miltex.
We expect total revenues in 2006 to be between $365 million and $380 million,
and total revenues in 2007 to be between $420 million and $440 million.
The Company may incur significant costs this year in connection with
restructuring and integration activities, including inventory purchase
accounting charges related to the Radionics acquisition. We currently expect
these charges to be approximately $5.0 million in 2006.
The Company also expects the impact of estimated share-based compensation
expense for 2006 and 2007 to be in the range of $0.26 to $0.28 per diluted
share.
We expect earnings per diluted share to be within a range of $1.30 to $1.39 in
2006 and within a range of $1.67 to $1.84 in 2007. Excluding restructuring and
integration charges and the impact of estimated share-based compensation
expense, we expect earnings per diluted share to be within a range of $1.69 to
$1.76 in 2006. Excluding the impact of estimated share-based compensation
expense, we expect earnings per diluted share to be within a range of $1.95 to
$2.10 in 2007.
Our guidance for the second quarter of 2006 is for total revenues in the range
of $87 million to $92 million, including a contribution of approximately $11.5
million from the Radionics acquisition, and earnings per diluted share of $0.27
to $0.30. We expect adjusted earnings per diluted share in the second quarter of
2006 to be within a range of $0.38 to $0.41, excluding restructuring and
integration charges of $0.04 and the impact of estimated share-based
compensation expense of $0.07.
We have scheduled a conference call for 9:00 am EST today, May 8, 2006, to
discuss the financial results for the first quarter of 2006 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
(719) 457-2618 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 22, 2006 by dialing (719) 457-0820 (access code
1481965) 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 1,400 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, third-party payors'
willingness to provide reimbursement for these 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; our future net income results and our
ability to effectively manage working capital may affect our future cash flows;
and our ability to complete our restructuring and integration activities may
affect our operating income. 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,
2005 and information contained in subsequent filings with the Securities and
Exchange Commission could affect actual results.
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 "adjusted net income" and "adjusted earnings
per share", which exclude share-based compensation expense, and charges related
to systems integrations and acquisitions and restructurings, and "growth in
revenues excluding recently acquired product lines and changes in foreign
currency exchange rates", which are non-GAAP financial measures. We also provide
guidance as to earnings per diluted share, excluding the impact of estimated
share-based compensation expense and restructuring and integration charges. We
believe that, given our on-going, active strategy of seeking acquisitions and
our current focus on rationalizing our existing manufacturing and distribution
infrastructure, and the extent of changes in foreign currency exchange rates,
focusing on these measures are useful additional bases to measure the
performance of our business operations, both in this quarter and in future
periods. In addition, excluding share-based compensation charges from our net
income and earnings per share allows for comparability to historical periods
that did not reflect the impact of share-based compensation. 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)
Statement of Operations Data:
------------------------------------------------------ -----------------------
Three Months Ended
Three Months Ended March 31, 2006 March 31, 2005
------------------------------------------------------ -----------------------
Reported Adjustments As Adjusted Reported
<s> <c> <c> <c> <c>
Total revenues $77,135 $77,135 $65,839
Cost of product revenues 27,937 $1,054 (a) 26,883 24,496
Research and development 3,173 184 (b) 2,989 3,359
Selling, general and administrative 31,120 2,993 (c) 28,127 23,916
Amortization 1,281 1,281 1,112
----- ----- -----
Total costs and expenses 63,511 4,231 59,280 52,883
Operating income 13,624 4,231 17,855 12,956
Interest income (expense), net (658) (658) 27
Other income (expense), net 32 32 (93)
----- ---- ----
Income before income taxes 12,998 4,231 17,229 12,890
Provision for 4,293 1,260 (d) 5,553 4,447
income taxes ----- ----- -----
Net income $8,705 $2,971 $11,676 $ 8,443
Earnings per share calculation:
Add back of after tax interest 813 813 544
expense ----- ----- ----
Net income for diluted EPS $9,518 $12,489 $8,987
Diluted earnings per share $0.28 $0.37 $0.26
Diluted weighted average
Common shares outstanding 33,828 138 33,966 35,144
Notes:
(a) Inventory fair value purchase accounting adjustments, employee
terminations, manufacturing transfers and systems integrations
(b) Equity based compensation charge and employee terminations
(c) Equity based compensation charge, acquisition and integration related
costs, and employee terminations related costs
(d) Adjustment to provision for income taxes for above adjustments
Condensed Balance Sheet Data:
March 31, December 31,
2006 2005
----- ----
<s> <c> <c>
Cash and marketable securities,
including non-current portion $97,863 $143,384
Accounts receivable, net 56,607 49,007
Inventory, net 77,153 67,476
Total assets 491,631 448,432
Current liabilities 53,768 31,287
Long-term debt 118,169 118,378
Total liabilities 182,583 158,614
Stockholders' equity 309,048 289,818
Reconciliation of non-GAAP financial measures to the most comparable GAAP
measure:
A. Reconciliation of Net Income and Adjusted Net Earnings
Quarter Ended
March 31,
2006 2005
-------- --------
($ in thousands)
<s> <c> <c>
Net Income $ 8,705 $ 8,443
Employee termination and related costs 213 --
Equity-based compensation charge 3,036 --
Inventory fair value adjustments 464 269
Facility consolidation, acquisition integration,
manufacturing transfer, system integration,
and related costs 518 517
Tax effect on above adjustments (1,260) (283)
--------- --------
Adjusted Net Income $ 11,676 $ 8,946
Earnings per share calculation:
Add back of after tax interest expense 813 544
--------- --------
Adjusted Net Income for diluted EPS $ 12,489 $ 9,490
Adjusted Diluted earnings per share $0.37 $0.27
Diluted weighted average common shares outstanding 33,828 35,144
Increase in potentially dilutive securities "as if"
using intrinsic value method of accounting for
share-based payment 138 --
--------- --------
Diluted weighted average common shares outstanding
For Adjusted Diluted earnings per share calculation 33,966 35,144
The calculation of diluted earnings per share for the above periods is presented
in the table above.
B. Growth in product revenues excluding recently acquired product lines and
changes in foreign currency exchange rates
Quarter Ended Increase
March 31, (Decrease)
2006 2005 $ %
-------- -------- ------- -----
($ in thousands)
<s> <c> <c> <c> <c>
Total revenues, as reported $ 77,135 $ 65,839 $11,296 17%
Less: Revenues of product lines acquired
since the beginning of the
first quarter of 2006 3,415 -- 3,415 N/M
Plus: Impact of changes in foreign
currency exchange rates 1,260 -- 1,260 N/M
-------- -------- -------- -----
Revenues excluding recently acquired product
lines and changes in foreign
currency exchange rates $ 74,980 $ 65,839 $ 9,141 14%
C. Reconciliation of Projected Diluted EPS and Projected Adjusted Diluted EPS
Range
----------------------
Low High
------ ------
<s> <c> <c>
Projected three months ended June 30, 2006:
Diluted EPS $0.27 $0.30
Facility consolidation and acquisition integration
and related costs, including inventory
fair value adjustments, net of tax 0.04 0.04
Share-based compensation expense, net of tax 0.07 0.07
------ ------
Adjusted Diluted EPS $0.38 $0.41
Range
----------------------
Low High
------ ------
<s> <c> <c>
Projected year ended December 31, 2006:
Diluted EPS $1.30 $1.39
Inventory fair value adjustments, net of tax 0.04 0.04
Facility consolidation and acquisition integration
and related costs, net of tax 0.07 0.07
Share-based compensation expense, net of tax 0.28 0.26
------ ------
Adjusted Diluted EPS $1.69 $1.76
Range
----------------------
Low High
------ ------
<s> <c> <c>
Projected year ended December 31, 2007:
Diluted EPS $1.67 $1.84
Share-based compensation expense, net of tax 0.28 0.26
------ ------
Adjusted Diluted EPS $1.95 $2.10
Source: Integra LifeSciences Holdings Corporation