updated 4/28/2011 7:46:30 AM ET 2011-04-28T11:46:30

PLAINSBORO, N.J., April 28, 2011 (GLOBE NEWSWIRE) -- Integra LifeSciences Holdings Corporation (Nasdaq:IART) today reported its financial results for the first quarter ending March 31, 2011. Total revenues for the first quarter were $181.0 million, reflecting an increase of $8.3 million, or 5%, over the first quarter of 2010. Excluding the impact of currency exchange rates, revenues increased 4.4% over the first quarter of 2010. We present revenues by product category in a table at the end of this press release.

"In the first quarter, we achieved another period of solid results in a challenging environment. We expect that our growth-driving investments will propel our business forward, including faster revenue growth in the second half of 2011," said Stuart Essig, Integra's Chief Executive Officer.

The Company reported GAAP net income of $11.5 million, or $0.38 per diluted share, for the first quarter of 2011, compared to GAAP net income of $15.2 million, or $0.50 per diluted share, for the first quarter of 2010.

Adjusted net income for the first quarter of 2011, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $20.0 million, or $0.66 per diluted share, compared to $19.0 million, or $0.63 per diluted share, in the first quarter of 2010.

Integra generated $21.3 million in cash flows from operations and used $5.9 million of cash on capital expenditures in the first quarter of 2011. During the quarter, Integra used $40 million of cash to pay down its revolving line of credit.

Adjusted EBITDA for the first quarter of 2011, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $36.6 million, an increase of 8% compared to the first quarter last year.

Adjusted EBITDA excluding stock-based compensation for the first quarter of 2011, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $40.7 million, also an increase of 8% compared to the first quarter last year.

Outlook for 2011

The Company is reiterating its revenue and earnings per share guidance for the full year 2011. The Company anticipates revenues between $765 million and $780 million. The Company is guiding to GAAP earnings per diluted share of between $1.97 and $2.12 and to adjusted earnings per diluted share of between $2.87 and $3.02. In accordance with our usual practice, expectations for financial performance do not include the impact of acquisitions or other strategic corporate transactions that have not yet closed.  

In the future, the Company may record, or expects to record, certain additional revenues, gains, expenses or charges as described in the Discussion of Adjusted Financial measures below that it will exclude in the calculation of adjusted EBITDA and adjusted earnings per share for historical periods and in providing adjusted earnings per share guidance.

Conference Call

Integra has scheduled a conference call for 8:30 AM ET on Thursday, April 28, 2011 to discuss financial results for the first quarter and forward-looking financial guidance. The conference call will be hosted by Integra's senior management team and will be open to all listeners.  Additional forward-looking information may be discussed in a question and answer session following the call.

Access to the live call is available by dialing 719-325-2138 and using the passcode 8305582. The call can also be accessed through a webcast via a link provided on the Investor Relations homepage of Integra's website at www.integralife.com. Access to the replay is available through May 12, 2011 by dialing 719-457-0820 and using the passcode 8305582. The webcast will also be archived on the website.

Integra LifeSciences, a world leader in medical devices, is dedicated to limiting uncertainty for surgeons, so they can concentrate on providing the best patient care. Integra offers innovative solutions in orthopedics, neurosurgery, spine, reconstructive and general surgery. For more information, please visit www.integralife.com.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and reflect the Company's judgment as of the date of this release. Forward-looking statements include, but are not limited to, statements concerning future financial performance, including projections for revenues, GAAP and adjusted net income, GAAP and adjusted earnings per diluted share, non-GAAP adjustments such as system implementations charges, acquisition-related charges, non-cash amortization of imputed interest  for convertible debt, intangible asset amortization, and income tax expense (benefit) related to non-GAAP adjustments. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted or expected results. Such risks and uncertainties include, but are not limited to: the Company's ability to maintain relationships with customers of acquired entities; physicians' willingness to adopt and third-party payors' willingness to provide reimbursement for the Company's recently launched and planned products; the Company's ability to manufacture sufficient quantities of its products to meet its customers' demand; initiatives launched by the Company's competitors; the Company's ability to secure regulatory approval for products in development; fluctuations in hospital spending for capital equipment; the Company's ability to comply with and obtain approvals for products of human origin and comply with recently enacted regulations regarding products containing materials derived from animal sources; difficulties in controlling expenses, including costs to procure and manufacture our products; the impact of changes in management or staff levels; the Company's ability to integrate acquired businesses; the Company's ability to leverage its existing selling organizations and administrative infrastructure; the Company's ability to increase product sales and gross margins, and control non-product costs; the amount and timing of acquisition and integration related costs; the geographic distribution of where the Company generates its taxable income; the effect of legislation effecting healthcare reform in the United States; fluctuations in foreign currency exchange rates; the amount of our convertible notes and bank borrowings outstanding, and the economic, competitive, governmental, technological and other risk factors and uncertainties identified under the heading "Risk Factors" included in Item 1A of Integra's Annual Report on Form 10-K for the year ended December 31, 2010 and information contained in subsequent filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Discussion of Adjusted Financial Measures

In addition to our GAAP results, we provide adjusted revenues, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share. Adjusted revenues consist of growth in total revenues excluding the effects of currency exchange rates on the current period's revenues. The various measures of adjusted EBITDA consist of GAAP net income, excluding: (i) depreciation and amortization, (ii) other income (expense), net, (iii) interest income and expense, (iv) income taxes, (v) those operating expenses also excluded from adjusted net income and, as appropriate (vi) stock-based compensation expense. The measure of adjusted net income consists of GAAP net income, excluding: (i) acquisition-related charges; (ii) certain employee termination and related charges; (iii) intangible asset impairment charges; (iv) charges associated with discontinued or withdrawn product lines; (v) systems implementation charges; (vi) facility consolidation, manufacturing and distribution transfer charges; (vii) charges related to restructuring European entities; (viii) expenses related to our Chief Operating Officer joining the Company; (ix) non-cash amortization of imputed interest for convertible debt; (x) intangible asset amortization expense; and (xi) income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate. The adjusted earnings per diluted share measure is calculated by dividing adjusted net income attributable to diluted shares by diluted weighted average shares outstanding. Reconciliations of GAAP revenues to adjusted revenues for the quarter ended March 31, 2011 and GAAP net income to adjusted EBITDA, adjusted EBITDA excluding stock-based compensation and adjusted net income, and GAAP earnings per diluted share to adjusted earnings per diluted share for the quarters ended March 31, 2011 and 2010 appear in the financial tables in this release.

Integra believes that the presentation of adjusted revenues and the various adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share measures provides important supplemental information to management and investors regarding 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.integralife.com .

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
     
(In thousands, except per share amounts)    
  Three Months Ended
  March 31,
  2011 2010
Total revenues $181,041 $172,698
     
Costs and expenses:    
Cost of product revenues 64,921 63,224
Research and development 12,153 11,301
Selling, general and administrative 80,084 72,511
Intangible asset amortization 3,011 3,019
     
Total costs and expenses 160,169 150,055
     
Operating income 20,872 22,643
     
Interest income 73 61
Interest expense (5,469) (4,541)
Other income (expense), net (643) 1,146
     
Income before income taxes 14,833 19,309
     
Income tax expense 3,346 4,087
     
Net income 11,487 15,222
     
Diluted net income per share * $0.38 $0.50
     
Weighted average common shares outstanding for diluted net income per share 30,185 29,982
     
     
* In accordance with the authoritative guidance related to determining whether instruments issued in share-based payment transactions are participating securities, certain of the Company's unvested restricted share units contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing earnings per share. The calculation of earnings per share for common stock shown above excludes the income attributable to the unvested restricted share units with dividend rights from the numerator and excludes the dilutive impact of those units from the denominator. This had an insignificant impact (less than $0.01 per share) on diluted net income per share for all periods shown above.

Listed below are the items included in GAAP revenues and GAAP 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.

Growth in total revenues excluding the effects of currency exchange rates      
(In thousands)      
       
  Three Months Ended
  March 31,
  2011 2010 Change
Orthopedics $72,234 $70,187 3%
Neurosurgery $68,358 $64,774 6%
Instruments $40,449 $37,737 7%
Total revenues $181,041 $172,698 5%
       
Impact of changes in currency exchange rates  $ (772) --  
Total revenues excluding the effects of currency exchange rates $180,269 $172,698 4%
Items included in GAAP net income and location where each item is recorded                
(In thousands)                
                 
Three Months Ended March 31, 2011
Item Total Amount COPR(a) R&D(b) SG&A(c) Amort.(d) Interest Exp(Inc)(e) Other Exp(Inc)(f) Tax(g)
Acquisition-related charges $942 $285 $300 $357 -- -- -- --
                 
Certain employee termination and related charges 34 34 -- -- -- -- -- --
                 
Intangible asset impairment charges 248 97 -- -- 151 -- -- --
                 
Charges associated with discontinued or withdrawn product lines 100 100 -- -- -- -- -- --
                 
Systems implementation charges 2,655 -- -- 2,655 -- -- -- --
                 
Facility consolidation, manufacturing and distribution transfer charges 1,822 919 -- 903 -- -- -- --
                 
Charges related to restructuring European entities 262 -- -- 262 -- -- -- --
                 
Non-cash amortization of imputed interest for convertible debt 1,634 -- -- -- -- 1,634 -- --
                 
Intangible asset amortization expense* 4,242 1,382 -- -- 2,860 -- -- --
                 
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate (3,414) -- -- -- -- -- -- (3,414)
                 
Depreciation expense 5,468              
                 
Stock-based compensation expense 4,034              
                 
*For the period ending March 31, 2011, "Intangible asset amortization expense" excludes $248 already included in "Intangible asset impairment charges" above.
                 
a)  COPR – Cost of product revenues                
b)  R&D – Research and development                
c)  SG&A – Selling, general and administrative                
d)  Amort. – Intangible asset amortization                
e)  Interest Inc(Exp) – Interest income (expense), net                
f)  Other Inc(Exp) – Other income (expense), net                
g)  Tax – Income tax expense                
Three Months Ended March 31, 2010
Item Total Amount COPR R&D SG&A Amort. Interest Exp(Inc) Other Exp(Inc) Tax
Acquisition-related charges $555 $406 $28 $121 -- -- -- --
                 
Certain employee termination and related charges 628 -- -- 628 -- -- -- --
                 
Charges associated with discontinued or withdrawn product lines 74 74 -- -- -- -- -- --
                 
Systems implementation charges 136 -- -- 136 -- -- -- --
                 
Facility consolidation, manufacturing and distribution transfer charges 326 256 26 44 -- -- -- --
                 
Non-cash amortization of imputed interest for convertible debt  2,053 -- -- -- -- 2,053 -- --
                 
Intangible asset amortization expense 4,482 1,463 -- -- 3,019 -- -- --
                 
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate (4,458) -- -- -- -- -- -- (4,458)
                 
Depreciation expense 4,949              
                 
Stock-based compensation expense 3,843              
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GAAP NET INCOME TO ADJUSTED EBITDA AND ADJUSTED

EBITDA EXCLUDING STOCK BASED COMPENSATION
(UNAUDITED)
     
(In thousands)    
  Three Months Ended
  March 31,
  2011 2010
     
GAAP net income $11,487 $15,222
Non-GAAP adjustments:    
     
Depreciation and intangible asset amortization expense 9,710 9,431
     
Other (income) expense, net 643 (1,146)
     
Interest (income) expense, net 5,396 4,480
     
Income tax expense  3,346 4,087
     
Acquisition-related charges 942 555
     
Certain employee termination and related charges 34 628
     
Intangible asset impairment charges 248 --
     
Charges associated with discontinued or withdrawn product lines 100 74
     
Systems implementation charges 2,655 136
     
Facility consolidation, manufacturing and distribution transfer charges 1,822 326
     
Charges related to restructuring European entities 262 --
     
Total of non-GAAP adjustments 25,158 18,571
     
Adjusted EBITDA $36,645 $33,793
     
Stock-based compensation 4,034 3,843
     
Adjusted EBITDA excluding stock-based compensation $40,679 $37,636
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GAAP NET INCOME TO MEASURES OF ADJUSTED NET INCOME

AND ADJUSTED EARNINGS PER SHARE
(UNAUDITED)
(In thousands, except per share amounts)    
  Three Months Ended
  March 31,
  2011 2010
     
GAAP net income $11,487 $15,222
Non-GAAP adjustments:    
     
Acquisition-related charges 942 555
     
Certain employee termination and related charges 34 628
     
Intangible asset impairment charges 248 --
     
Charges associated with discontinued or withdrawn product lines 100 74
     
Systems implementation charges 2,655 136
     
Facility consolidation, manufacturing and distribution transfer charges 1,822 326
     
Charges related to restructuring European entities 262 --
     
Non-cash amortization of imputed interest for convertible debt 1,634 2,053
     
Intangible asset amortization expense 4,242 4,482
     
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate (3,414) (4,458)
     
Total of non-GAAP adjustments 8,525 3,796
     
Adjusted net income $20,012 $19,018
     
Adjusted diluted net income per share * $0.66 $0.63
     
Weighted average common shares outstanding for diluted net income per share 30,185 29,982
     
* In accordance with the authoritative guidance related to determining whether instruments issued in share-based payment transactions are participating securities, certain of the Company's unvested restricted share units contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing earnings per share. The calculation of earnings per share for common stock shown above excludes the income attributable to the unvested restricted share units with dividend rights from the numerator and excludes the dilutive impact of those units from the denominator. This had an insignificant impact (less than $0.01 per share) on adjusted diluted net income per share for all periods shown above.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED BALANCE SHEET DATA
(UNAUDITED)
     
     
(In thousands)  
  March 31, December 31,
  2011 2010
     
 Cash and cash equivalents $104,354 $128,763
 Accounts receivable, net  106,117 106,005
 Inventory, net  154,601 146,928
     
Term loan 146,250 148,126
 Bank line of credit 60,000 100,000
 Convertible securities 156,824 155,154
     
 Stockholders' equity  527,586 499,963
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GUIDANCE
       
 (In thousands, except per share amounts)      
  Recorded Year to Date Projected Year Ended
  March 31, 2011 December 31, 2011
    Low High
GAAP net income $11,487 $59,708 $64,208
       
Non-GAAP adjustments:      
       
Acquisition-related charges 942 3,240 3,240
       
Certain employee termination and related charges 34 34 34
       
Intangible asset impairment charges 248 248 248
       
Charges associated with discontinued or withdrawn product lines 100 100 100
       
Systems implementation charges 2,655 13,000 13,000
       
Facility consolidation, manufacturing and distribution transfer charges 1,822 2,190 2,190
       
Charges related to restructuring European entities 262 720 720
       
Expenses related to our Chief Operating Officer joining the Company -- 200 200
       
Non-cash amortization of imputed interest for convertible debt  1,634 6,710 6,710
       
       
Intangible asset amortization expense 4,242 16,950 16,950
       
       
Income tax expense related to above adjustments and certain infrequently occurring items (3,414) (16,100) (16,100)
       
Total of non-GAAP adjustments 8,525 27,292 27,292 
       
Adjusted net income $20,012 $87,000 $91,500
       
GAAP diluted net income per share $0.38 $1.97 $2.12
       
Non-GAAP adjustments detailed above (per share) $0.28 $0.90 $0.90
       
Adjusted diluted net income per share $0.66 $2.87 $3.02
       
Weighted average common shares outstanding for diluted net income per share 30,185 30,300 30,300
Items included in GAAP net income guidance and location where each item is expected to be recorded
(In thousands)                
                 
Projected Year Ended December 31, 2011
Item Total Amount COPR R&D SG&A Amort. Interest Exp(Inc) Other Exp(Inc) Tax
Acquisition-related charges $3,240 $780 $300 $2,160 -- -- -- --
                 
Certain employee termination and related charges 34 34 -- -- -- -- -- --
                 
Intangible asset impairment charges 248 97 -- -- 151 -- -- --
                 
Charges associated with discontinued or withdrawn product lines 100 100 -- -- -- -- -- --
                 
Systems implementation charges 13,000 -- -- 13,000 -- -- -- --
                 
Facility consolidation, manufacturing and distribution transfer charges 2,190 1,120 -- 1,070 -- -- -- --
                 
Charges related to restructuring European entities 720 -- -- 720 -- -- -- --
                 
Expenses related to our Chief Operating Officer joining the Company 200 -- -- 200 -- -- -- --
                 
Non-cash amortization of imputed interest for convertible debt  6,710 -- -- -- -- 6,710 -- --
                 
Intangible asset amortization expense 16,950 5,980 -- -- 10,970 -- -- --
                 
Income tax expense related to above adjustments, quarterly adjustments to income tax expense related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items that affected the reported tax rate (16,100) -- -- -- -- -- -- (16,100)
CONTACT:  John B. Henneman, III
          Executive Vice President,
          Finance and Administration,
          and Chief Financial Officer
          (609) 275-0500
          jack.henneman@integralife.com
         
          Investor Relations:
          Angela Steinway
          (609) 936-2268
          angela.steinway@integralife.com

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