EXHIBIT 99.1
NEWS RELEASE
CONTACTS:
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
MAUREEN B. BELLANTONI JOHN BOSTJANCIC
EXECUTIVE VICE PRESIDENT VICE PRESIDENT, CORPORATE DEVELOPMENT
AND CHIEF FINANCIAL OFFICER AND INVESTOR RELATIONS
(609) 936-6822 (609) 936-2239
maureen.bellantoni@integra-ls.com jbostjancic@integra-ls.com
INTEGRA LIFESCIENCES REPORTS 2006 FINANCIAL RESULTS
REVENUES FOR THE FOURTH QUARTER INCREASE 72% TO $125.4 MILLION
PLAINSBORO, NEW JERSEY, FEBRUARY 28, 2007 - INTEGRA LIFESCIENCES HOLDINGS
CORPORATION (NASDAQ: IART) TODAY REPORTED ITS FINANCIAL RESULTS FOR THE FOURTH
QUARTER ENDING DECEMBER 31, 2006. TOTAL REVENUES IN THE FOURTH QUARTER OF 2006
WERE $125.4 MILLION, REFLECTING AN INCREASE OF $52.4 MILLION, OR 72%, OVER THE
FOURTH QUARTER OF 2005. REVENUES FROM PRODUCTS ACQUIRED IN 2006 WERE $35.6
MILLION FOR THE QUARTER.
THE COMPANY REPORTED GAAP NET INCOME OF $10.1 MILLION, OR $0.34 PER DILUTED
SHARE, FOR THE FOURTH QUARTER OF 2006, COMPARED TO GAAP NET INCOME OF $10.6
MILLION, OR $0.33 PER DILUTED SHARE, IN THE FOURTH QUARTER OF 2005. REPORTED
EARNINGS FOR THE FOURTH QUARTER OF 2006 INCLUDED $3.8 MILLION OF SHARE-BASED
COMPENSATION EXPENSE RELATED TO THE IMPLEMENTATION OF SFAS 123R SHARE-BASED
PAYMENT IN JANUARY 2006. REPORTED EARNINGS FOR THE FOURTH QUARTER OF 2005 DO NOT
REFLECT THE IMPACT OF SHARE-BASED COMPENSATION EXPENSE.
"WE ACHIEVED RECORD REVENUES IN THE FOURTH QUARTER THROUGH STRONG GROWTH IN OUR
EXISTING PRODUCT LINES AND ACQUIRED PRODUCT SALES," SAID STUART M. ESSIG,
INTEGRA'S PRESIDENT AND CHIEF EXECUTIVE OFFICER. "DURING THE QUARTER, WE ALSO
COMPLETED THE INTEGRATION OF KINETIKOS MEDICAL, INC. (KMI) INTO OUR INTEGRA
EXTREMITY RECONSTRUCTION SALES CHANNEL, INITIATED THE PIVOTAL UNITED STATES
CLINICAL TRIAL FOR OUR DURAGEN PLUS(R) ADHESION BARRIER MATRIX -- THE LARGEST
CLINICAL STUDY UNDERTAKEN BY INTEGRA IN ITS HISTORY -- AND LAUNCHED A SALES
ORGANIZATION DEVOTED TO PRODUCTS FOR SPINE SURGERY."
TOTAL REVENUES FOR THE YEAR ENDED DECEMBER 31, 2006 WERE $419.3 MILLION,
REFLECTING AN INCREASE OF $141.4 MILLION, OR 51%, OVER 2005. REVENUES FROM
PRODUCTS ACQUIRED IN 2006 WERE $98.1 MILLION FOR THE YEAR ENDED DECEMBER 31,
2006. THE COMPANY REPORTED NET INCOME OF $29.4 MILLION, OR $0.97 PER DILUTED
SHARE, FOR THE FULL YEAR 2006, COMPARED TO NET INCOME OF $37.2 MILLION, OR $1.15
PER DILUTED SHARE IN 2005.
INTEGRA GENERATED $20.9 MILLION IN CASH FLOWS FROM OPERATIONS IN THE FOURTH
QUARTER OF 2006 AND $71.7 MILLION IN ALL OF 2006.
"ONE OF OUR OBJECTIVES IS TO GROW OPERATING CASH FLOWS, WHICH HAVE ACCELERATED
SIGNIFICANTLY IN THE PAST YEAR," SAID MAUREEN B. BELLANTONI, INTEGRA'S EXECUTIVE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. "DURING THE PAST FIVE YEARS, WE HAVE
GENERATED IN EXCESS OF 35% AVERAGE ANNUAL GROWTH IN OUR OPERATING CASH FLOWS.
THIS HAS GREATLY IMPROVED OUR ACCESS TO DEBT CAPITAL, WHICH WE HAVE INCREASINGLY
USED TO SUPPORT OUR GROWTH."
IN ADDITION TO GAAP RESULTS, INTEGRA REPORTS ADJUSTED NET INCOME AND ADJUSTED
DILUTED EARNINGS PER SHARE. A FURTHER DISCUSSION OF THESE NON-GAAP FINANCIAL
MEASURES CAN BE FOUND BELOW, AND
RECONCILIATIONS OF GAAP NET INCOME TO ADJUSTED NET INCOME AND GAAP DILUTED
EARNINGS PER SHARE TO ADJUSTED DILUTED EARNINGS PER SHARE FOR THE QUARTERS AND
YEARS ENDED DECEMBER 31, 2006 AND 2005 APPEAR IN THE FINANCIAL STATEMENTS
ATTACHED TO THIS RELEASE.
ADJUSTED NET INCOME FOR THE FOURTH QUARTER OF 2006, COMPUTED WITH THE
ADJUSTMENTS TO GAAP REPORTING SET FORTH IN THE ATTACHED RECONCILIATION, WAS
$15.0 MILLION, OR $0.50 PER DILUTED SHARE. IN THE FOURTH QUARTER OF 2005
ADJUSTED NET INCOME WAS $12.1 MILLION, OR $0.37 PER DILUTED SHARE. ADJUSTED NET
INCOME WAS $52.5 MILLION, OR $1.67 PER DILUTED SHARE, FOR THE FULL YEAR 2006 AND
$42.1 MILLION, OR $1.29 PER DILUTED SHARE, FOR THE FULL YEAR 2005.
"2006 WAS A YEAR OF SIGNIFICANT PROGRESS FOR INTEGRA," SAID MR. ESSIG. "IN
ADDITION TO OUR FOURTH QUARTER ACCOMPLISHMENTS, WE ALSO INVESTED MORE THAN $220
MILLION TO ACQUIRE STRATEGIC PRODUCT LINES FOR EACH OF OUR THREE MAJOR SALES
CHANNELS, REINVIGORATED SALES GROWTH OF EXISTING PRODUCTS AND LAID THE
FOUNDATION FOR FURTHER GROWTH BY LAUNCHING MORE THAN 20 PRODUCTS, ADDING TO OUR
RICH PRODUCT PIPELINE."
INTEGRA LIFESCIENCES PRESENTS ITS REVENUES IN TWO CATEGORIES: A) NEUROSURGICAL
AND ORTHOPEDIC IMPLANTS AND B) MEDICAL SURGICAL EQUIPMENT.
THE COMPANY'S REVENUES FOR THE PERIODS WERE AS FOLLOWS:
Three Months Year
Ended December 31, Ended December 31,
2006 2005 2006 2005
---- ---- ---- ----
Revenue: ($ in thousands)
Neurosurgical and Orthopedic Implants $47,250 $35,365 $166,028 $134,583
Medical Surgical Equipment and other 78,144 37,620 253,269 143,352
-------- ------- ---------- -- -------
Total Revenue $125,394 $72,985 $419,297 $277,935
SALES OF OUR EXTREMITY RECONSTRUCTION IMPLANTS AND BONE GROWTH PRODUCTS LED
REVENUE GROWTH IN THE NEUROSURGICAL AND ORTHOPEDIC IMPLANTS CATEGORY. HIGHLIGHTS
IN THIS CATEGORY INCLUDED THE FOLLOWING: INTEGRA(TM) DERMAL REPAIR PRODUCT
REVENUES INCREASED 28% OVER THE FOURTH QUARTER OF 2005, NERVE REPAIR PRODUCT
REVENUES INCREASED BY 43% AND BONE GROWTH PRODUCTS INCREASED BY 39% OVER THE
FOURTH QUARTER OF 2005. SALES OF RECENTLY ACQUIRED ORTHOPEDIC IMPLANT PRODUCTS
CONTRIBUTED $2.4 MILLION TO THE INCREASE IN NEUROSURGICAL AND ORTHOPEDIC IMPLANT
SALES.
IN THE MEDICAL SURGICAL EQUIPMENT CATEGORY, ACQUIRED PRODUCTS, SURGICAL
INSTRUMENTS AND ULTRASONIC SURGICAL SYSTEMS PROVIDED MOST OF THE YEAR-OVER-YEAR
GROWTH IN PRODUCT REVENUES FOR THE FOURTH QUARTER. RADIONICS PRODUCTS, MILTEX
PRODUCTS AND PRODUCTS OF OTHER COMPANIES SOLD THROUGH OUR FORMER CANADIAN
DISTRIBUTOR (ALL ACQUIRED IN 2006) CONTRIBUTED $33.2 MILLION OF REVENUES DURING
THE QUARTER.
GROSS MARGIN ON TOTAL REVENUES IN THE FOURTH QUARTER OF 2006 WAS 59%. THE
COMPANY'S COST OF PRODUCT REVENUES INCLUDED $0.6 MILLION IN INVENTORY FAIR VALUE
PURCHASE ACCOUNTING ADJUSTMENTS FROM RECENT ACQUISITIONS. THESE CHARGES REDUCED
OUR GROSS MARGIN BY ONE HALF OF A PERCENTAGE POINT.
RESEARCH AND DEVELOPMENT EXPENSE INCREASED $2.5 MILLION IN THE FOURTH QUARTER OF
2006 TO $5.2 MILLION. THE QUARTER'S EXPENSE INCLUDED $1.0 MILLION ASSOCIATED
WITH THE RECENTLY ACQUIRED RADIONICS AND KMI PRODUCT LINES AND AN ADDITIONAL
$0.3 MILLION IN-PROCESS RESEARCH AND DEVELOPMENT CHARGE IN CONNECTION WITH THE
KMI ACQUISITION. IN THE FOURTH QUARTER OF 2006, WE INITIATED THE PIVOTAL UNITED
STATES CLINICAL TRIAL FOR OUR DURAGEN PLUS(R) ADHESION BARRIER MATRIX PRODUCT.
IN 2006, WE INCREASED RESEARCH AND DEVELOPMENT EXPENSES BY $13.8 MILLION, OR
115%, OVER THE PRIOR YEAR. THE 2006 AMOUNT INCLUDES A $5.9 MILLION OF IN-PROCESS
RESEARCH AND DEVELOPMENT CHARGES INCURRED IN THE THIRD AND FOURTH QUARTERS IN
CONNECTION WITH THE KMI ACQUISITION.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE INCREASED BY $20.3 MILLION TO $45.9
MILLION IN THE FOURTH QUARTER OF 2006, OR 37% OF REVENUE, AS COMPARED TO 35% IN
THE FOURTH QUARTER OF 2005. INCLUDED IN THIS INCREASE WAS SHARE-BASED
COMPENSATION EXPENSE OF $3.5 MILLION, OR 3% OF REVENUE, ATTRIBUTABLE TO THE
IMPACT OF ADOPTING FAS 123R.
OPERATING INCOME FOR THE FOURTH QUARTER OF 2006 WAS $20.1 MILLION, A 35%
INCREASE OVER THE PRIOR YEAR PERIOD.
WE REPORTED NET INTEREST EXPENSE OF $2.3 MILLION IN THE FOURTH QUARTER OF 2006.
OUR EFFECTIVE INCOME TAX RATE WAS 39.1% FOR 2006 AND 32.5% IN 2005. THE INCREASE
IN THE EFFECTIVE INCOME TAX RATE FOR 2006 WAS DRIVEN BY THE NONDEDUCTIBLE NATURE
OF THE $5.9 MILLION IN-PROCESS RESEARCH AND DEVELOPMENT CHARGE AND THE CHANGES
IN THE GEOGRAPHIC MIX OF TAXABLE INCOME ATTRIBUTABLE TO RECENTLY ACQUIRED
BUSINESSES. THE $5.9 MILLION IN-PROCESS RESEARCH AND DEVELOPMENT CHARGE
INCREASED OUR EFFECTIVE INCOME TAX RATE FOR 2006 BY 4.2 PERCENTAGE POINTS. WE
EXPECT AN EFFECTIVE INCOME TAX RATE OF APPROXIMATELY 34% FOR 2007.
DURING THE FOURTH QUARTER OF 2006, WE REPURCHASED 920,605 SHARES OF OUR COMMON
STOCK FOR AN AGGREGATE PURCHASE PRICE OF $38.2 MILLION. DURING 2006, WE
REPURCHASED A TOTAL OF 1.8 MILLION SHARES OF OUR COMMON STOCK FOR $70.0 MILLION.
AS OF DECEMBER 31, 2006, THERE WAS $36.8 MILLION AVAILABLE FOR REPURCHASES UNDER
OUR EXISTING SHARE REPURCHASE AUTHORIZATION, WHICH WILL EXPIRE ON DECEMBER 31,
2007.
AT DECEMBER 31, 2006, OUR CASH TOTALED $22.7 MILLION AND WE HAD OUTSTANDING
BORROWINGS OF $100.0 MILLION UNDER OUR CREDIT FACILITY. IN FEBRUARY 2007, WE
INCREASED THE BORROWING CAPACITY UNDER OUR CREDIT FACILITY TO $300 MILLION.
WE ARE UPDATING OUR GUIDANCE FOR THE FULL YEAR 2007 AND PROVIDING OUR INITIAL
GUIDANCE FOR 2008. WE ARE ALSO PROVIDING GUIDANCE FOR EACH QUARTERLY PERIOD OF
2007. OUR ESTIMATES ASSUME FOREIGN CURRENCY EXCHANGE RATES REMAIN UNCHANGED
THROUGHOUT 2007 AND 2008. IN ACCORDANCE WITH OUR USUAL PRACTICE, OUR
EXPECTATIONS FOR 2007 AND 2008 FINANCIAL PERFORMANCE DO NOT INCLUDE THE IMPACT
OF ACQUISITIONS OR OTHER STRATEGIC CORPORATE TRANSACTIONS THAT HAVE NOT YET
CLOSED.
OUR QUARTERLY AND FULL-YEAR REVENUE AND GAAP EARNINGS PER SHARE EXPECTATIONS ARE
AS FOLLOWS:
Revenue Earnings
Guidance Per Share
Period (in millions) Guidance
- ------------------------------ ---------------- ------------------
First Quarter 2007 $117 - $120 $0.32 - $0.34
Second Quarter 2007 $120 - $123 $0.34 - $0.36
Third Quarter 2007 $129 - $132 $0.46 - $0.49
Fourth Quarter 2007 $142 - $145 $0.58 - $0.61
2007 $508 - $520 $1.70 - $1.80
2008 $570 - $590 $2.05 - $2.25
ON A QUARTERLY BASIS, WE EXPECT TO INCUR APPROXIMATELY $3.7 MILLION, OR $0.08
PER SHARE, OF COMPENSATION EXPENSE ASSOCIATED WITH FAS 123R IN 2007 AND 2008.
THIS NON-CASH COMPENSATION EXPENSE IS INCLUDED IN THE GAAP EARNINGS PER SHARE
GUIDANCE FOR 2007 AND 2008 PROVIDED ABOVE.
ALTHOUGH WE ARE NOT PROVIDING ADJUSTED EARNINGS PER SHARE GUIDANCE FOR 2007 AND
2008, IN THE FUTURE WE MAY RECORD, OR EXPECT TO RECORD, CERTAIN REVENUES, GAINS,
EXPENSES OR CHARGES (SUCH AS ACQUISITION-RELATED CHARGES, FACILITY
CONSOLIDATION, MANUFACTURING TRANSFER AND SYSTEM INTEGRATION CHARGES, AND
CERTAIN EMPLOYEE TERMINATION AND RELATED COSTS) THAT WE WILL EXCLUDE IN THE
CALCULATION OF ADJUSTED EARNINGS PER SHARE FOR HISTORICAL PERIODS OR FOR
PROVIDING ADJUSTED EARNINGS PER SHARE GUIDANCE.
WE HAVE SCHEDULED A CONFERENCE CALL FOR 9:00 AM EST TODAY, FEBRUARY 28, 2007, TO
DISCUSS THE FINANCIAL RESULTS FOR THE FOURTH 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
(913) 312-1235 OR THROUGH A LISTEN-ONLY WEBCAST VIA A LINK PROVIDED ON THE
INVESTOR RELATIONS HOMEPAGE 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 14, 2007 BY DIALING (719)
457-0820 (ACCESS CODE 4583668) OR THROUGH THE WEBCAST ACCESSIBLE ON OUR HOME
PAGE.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION, A WORLD LEADER IN REGENERATIVE
MEDICINE, IS DEDICATED TO IMPROVING THE QUALITY OF LIFE FOR PATIENTS THROUGH THE
DEVELOPMENT, MANUFACTURING, AND MARKETING OF COST-EFFECTIVE SURGICAL IMPLANTS
AND MEDICAL INSTRUMENTS. OUR PRODUCTS, USED PRIMARILY IN NEUROSURGERY, EXTREMITY
RECONSTRUCTION, ORTHOPEDICS AND GENERAL SURGERY, ARE USED TO TREAT MILLIONS OF
PATIENTS EVERY YEAR. INTEGRA'S HEADQUARTERS ARE IN PLAINSBORO, NEW JERSEY, AND
WE HAVE RESEARCH AND MANUFACTURING FACILITIES THROUGHOUT THE WORLD. 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, EFFECTIVE INCOME TAX RATE, AND
GAAP EARNINGS PER DILUTED SHARE, AND THE NUMBER OF NEW PRODUCTS EXPECTED TO BE
LAUNCHED IN 2007. 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, INITIATIVES LAUNCHED BY
OUR COMPETITORS, OUR ABILITY TO SECURE REGULATORY APPROVAL FOR PRODUCTS IN
DEVELOPMENT AND OUR ABILITY TO COMPLY WITH NEWLY-ENACTED REGULATIONS REGARDING
PRODUCTS CONTAINING MATERIALS DERIVED FROM ANIMAL SOURCES MAY ADVERSELY AFFECT
OUR FUTURE PRODUCT REVENUES; THE GEOGRAPHIC MIX OF TAXABLE INCOME MAY AFFECT OUR
OVERALL EFFECTIVE INCOME TAX RATE; OUR ABILITY TO INTEGRATE ACQUIRED BUSINESSES,
INCREASE PRODUCT SALES AND GROSS MARGINS, AND CONTROL NON-PRODUCT COSTS MAY
AFFECT OUR EARNINGS, AND THE SUCCESS OF OUR PRODUCT DEVELOPMENT EFFORTS AND OUR
ABILITY TO SECURE REGULATORY APPROVAL FOR PRODUCTS IN DEVELOPMENT MAY AFFECT THE
NUMBER OF NEW PRODUCTS LAUNCHED IN 2007. 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.
DISCUSSION OF ADJUSTED FINANCIAL MEASURES
ADJUSTED NET INCOME CONSISTS OF NET INCOME EXCLUDING EQUITY-BASED COMPENSATION
CHARGES, ACQUISITION-RELATED CHARGES, CHARGES INCURRED IN CONNECTION WITH THE
EXCHANGE OFFER OF CONVERTIBLE NOTES AND THE TERMINATION OF THE INTEREST RATE
SWAP AGREEMENT, FACILITY CONSOLIDATION, MANUFACTURING TRANSFER AND SYSTEM
INTEGRATION CHARGES, CERTAIN EMPLOYEE TERMINATION AND RELATED COSTS, CHARGES
ASSOCIATED WITH DISCONTINUED PRODUCT LINES, AND, ON A QUARTERLY BASIS, INCOME
TAX EXPENSE ADJUSTMENTS RELATED TO SIGNIFICANT CHANGES IN THE EFFECTIVE INCOME
TAX RATE DURING THE YEAR. ADJUSTED EARNINGS PER DILUTED SHARE ARE CALCULATED BY
DIVIDING ADJUSTED NET INCOME FOR DILUTED EARNINGS PER SHARE BY ADJUSTED DILUTED
WEIGHTED AVERAGE SHARES OUTSTANDING. BECAUSE ALL EQUITY-BASED COMPENSATION
EXPENSE IS ADDED BACK IN THE CALCULATION OF ADJUSTED NET INCOME, THE CALCULATION
OF DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING IS ADJUSTED TO EXCLUDE THE
BENEFITS OF UNEARNED EQUITY-BASED COMPENSATION COSTS ATTRIBUTABLE TO FUTURE
SERVICES AND NOT YET RECOGNIZED IN THE FINANCIAL STATEMENTS. THESE UNEARNED
EQUITY-BASED COMPENSATION COSTS ARE TREATED AS PROCEEDS ASSUMED TO BE USED TO
REPURCHASE SHARES, BASED ON THE AVERAGE TRADING PRICE OF INTEGRA COMMON STOCK
DURING THE PERIOD REPORTED, IN THE CALCULATION OF GAAP DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING.
INTEGRA BELIEVES THAT THE PRESENTATION OF ADJUSTED NET INCOME AND ADJUSTED
EARNINGS PER DILUTED SHARE PROVIDES IMPORTANT SUPPLEMENTAL INFORMATION TO
MANAGEMENT AND INVESTORS REGARDING NON-CASH EXPENSES AND FINANCIAL AND BUSINESS
TRENDS RELATING TO THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FOR FURTHER INFORMATION REGARDING WHY INTEGRA BELIEVES THAT THESE NON-GAAP
FINANCIAL MEASURES PROVIDE USEFUL INFORMATION TO INVESTORS, THE SPECIFIC MANNER
IN WHICH MANAGEMENT USES THESE MEASURES, AND SOME OF THE LIMITATIONS ASSOCIATED
WITH THE USE OF THESE MEASURES, PLEASE REFER TO THE COMPANY'S CURRENT REPORT ON
FORM 8-K REGARDING THIS EARNINGS PRESS RELEASE FILED TODAY WITH THE SECURITIES
AND EXCHANGE COMMISSION. THIS CURRENT REPORT ON FORM 8-K IS AVAILABLE ON THE
SEC'S WEBSITE AT WWW.SEC.GOV OR ON OUR WEBSITE AT WWW.INTEGRA-LS.COM.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
TOTAL REVENUE $125,395 $72,985 $419,297 $277,935
COSTS AND EXPENSES
Cost of product revenues 51,446 28,644 168,314 107,052
Research and development 5,214 2,705 25,732 11,960
Selling, general and administrative 45,936 25,663 157,706 98,273
Intangible asset amortization 2,651 1,059 8,801 4,545
--------------- -------------- -------------- ---------------
Total costs and expenses 105,247 58,071 360,553 221,830
--------------- -------------- -------------- ---------------
Operating income 20,148 14,914 58,744 56,105
Interest income 201 1,087 2,194 3,900
Interest expense (2,503) (1,071) (10,620) (4,165)
Other income (expense), net (178) (101) (2,010) (739)
--------------- -------------- -------------- ---------------
Income before income taxes 17,668 14,829 48,308 55,101
Income tax expense 7,537 4,214 18,901 17,907
--------------- -------------- -------------- ---------------
Net income 10,131 10,615 29,407 37,194
Add back of after tax interest expense 2 608 2,254 2,440
--------------- -------------- -------------- ---------------
Net income for diluted earnings per share $ 10,133 $11,223 $ 31,661 $ 39,634
Diluted net income per share $ 0.34 $ 0.33 $ 0.97 $ 1.15
Weighted average common shares outstanding for
diluted net income per share 30,084 34,081 32,747 34,565
- -----------------------------------------------------------------------------------------------------------------------------
Listed below are the items included in net income that management excludes in
computing the adjusted financial measures referred to in the text of this press
release and further described under Discussion of Adjusted Financial Measures.
(In thousands)
Three Months Ended Year Ended
December 31, December 31,
--------------------------------- ---------------------------------
2006 2005 2006 2005
--------------- -------------- -------------- ---------------
Equity-based compensation $ 3,834 -- 14,116 --
Acquisition-related charges 903 -- 12,093 966
Facility consolidation, manufacturing transfer
and system integration charges -- 1,027 717 2,214
Employee termination and related costs 693 1,120 1,114 3,988
Charges associated with convertible
debt exchange offer -- -- 1,879 --
Charges associated with termination of
interest rate swap -- -- 1,425 --
Charges associated with discontinued product lines -- -- -- 478
Income tax expense (benefit) related to
above adjustments (1,767) (710) (8,256) (2,714)
Quarterly adjustment to income tax expense
related to significant changes in the
year-to-date expected effective income
tax rate (1) 1,246 -- -- --
(1) The above $1,246 reduction to income tax expense during the fourth quarter
of 2006 was made to reflect what the income tax expense would have been ($8,057)
based upon a 34.9% effective income tax rate. The 34.9% effective income tax
rate for the fourth quarter of 2006 approximates the year-to-date (full year)
effective income tax rate that would have been reported after excluding the 4.2
percentage point impact of the $5.9 million in-process research and development
expense recorded in 2006.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS - HISTORICAL
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
--------------- -------------- ------------- --------------
GAAP net income $ 10,131 $ 10,615 $ 29,407 $ 37,194
Non-GAAP adjustments:
Equity-based compensation 3,834 -- 14,116 --
Acquisition-related charges 903 12,093 966
Facility consolidation, manufacturing transfer
and system integration charges -- 1,027 717 2,214
Employee termination and related costs 693 1,120 1,114 3,988
Charges associated with convertible debt
exchange offer -- -- 1,879 --
Charges associated with termination of interest
rate swap -- -- 1,425 --
Charges associated with discontinued product
lines -- -- -- 478
Income tax expense (benefit) related to above
adjustments (1,767) (710) (8,256) (2,714)
Quarterly adjustment to income tax expense
related to significant changes in the
year-to-date expected effective income
tax rate (1) 1,246 -- -- --
--------------- -------------- ------------- --------------
Total of non-GAAP adjustments 4,909 1,437 23,088 4,932
--------------- -------------- ------------- --------------
Adjusted net income $ 15,040 $ 12,052 52,495 42,126
Add back of after tax interest expense 2 608 2,254 2,440
--------------- -------------- ------------- --------------
Adjusted net income for diluted earnings per share $ 15,042 $ 12,660 54,749 44,566
=============== ============== ============= ==============
Weighted average common shares
outstanding for diluted net income per share 30,084 34,081 32,747 34,565
Non-GAAP adjustment 86 -- 121 --
--------------- -------------- ------------- --------------
Adjusted weighted average common shares
outstanding for adjusted diluted net income
per share 30,170 34,081 32,868 34,565
=============== ============== ============= ==============
GAAP diluted net income per share $ 0.34 $ 0.33 $ 0.97 $ 1.15
Non-GAAP adjustments detailed
above (per share) $ 0.16 $ 0.04 $ 0.70 $ 0.14
--------------- -------------- ------------- --------------
Adjusted diluted net income per share $ 0.50 $ 0.37 $ 1.67 $ 1.29
=============== ============== ============= ==============
(1) The above $1,246 reduction to income tax expense during the fourth quarter
of 2006 was made to reflect what the income tax expense would have been ($8,057)
based upon a 34.9% effective income tax rate. The 34.9% effective income tax
rate for the fourth quarter of 2006 approximates the year-to-date (full year)
effective income tax rate that would have been reported after excluding the 4.2
percentage point impact of the $5.9 million in-process research and development
expense recorded in 2006.
Condensed Balance Sheet Data (in thousands):
December 31, December 31,
2006 2005
----- ----
Cash and marketable securities,
including non-current portion $ 22,697 $143,384
Accounts receivable, net 85,018 49,007
Inventory, net 94,387 67,476
Bank line of credit 100,000 --
Demand notes (1) 119,542 --
Long term debt (1) 508 118,378
Stockholders' equity 293,124 289,818
(1) The closing price of Integra's common stock on the issuance date of the
new convertible notes, which would be settled on a net share settlement
basis upon conversion, was higher than the market price trigger of the
new notes. Therefore, the new notes are considered demand debt and are
classified as current liabilities on the balance sheet because the
holders have the option to convert the new notes at any time.
SOURCE: INTEGRA LIFESCIENCES HOLDINGS CORPORATION