PLAINSBORO, N.J., March 5, 2006 (PRIMEZONE) -- Integra LifeSciences Holdings Corporation (Nasdaq:IART) today reported its fourth quarter and full year 2005 revenues and earnings. Total revenues in the fourth quarter of 2005 were $73.0 million, reflecting an increase of $11.2 million, or 18%, over the fourth quarter of 2004. Total revenues for the full year ended December 31, 2005 increased by $48.1 million to $277.9 million, a 21% increase over the prior year.
We reported net income of $10.6 million, or $0.33 per diluted share, for the fourth quarter of 2005, compared to net income of $9.8 million, or $0.30 per diluted share in the fourth quarter of 2004. Net income for the year ended December 31, 2005 was $37.2 million, or $1.15 per diluted share, compared to $17.2 million, or $0.55 per diluted share for the year ended December 31, 2004.
When adjusted for certain restructuring related charges, net income for the fourth quarter of 2005 was $12.1 million, or $0.37 per diluted share, and net income for the full year 2005 was $42.1 million, or $1.29 per share. During the fourth quarter, these charges included costs associated with the closing of various facilities and related transitions, employee terminations, and other integration and restructuring related costs. In 2004, net income, when adjusted for certain charges set forth in the tables at the end of this release, was $9.9 million, or $0.30 per diluted share, in the fourth quarter, and $33.6 million, or $1.03 per share, for the full year.
Both our reported net income and our adjusted net income benefited from a reduction in our effective income tax rate, which decreased to 32.5% for the full year. This decline was primarily related to our ability to recognize net operating losses in a foreign jurisdiction due to the settlement of an income tax audit, tax credits that became recognizable in the fourth quarter and changes in the geographical mix of our pre-tax income.
"I am pleased with our performance in the fourth quarter and for the year," said Stuart M. Essig, Integra's President and Chief Executive Officer. "During the year, we achieved record revenues. We also completed the acquisition of the Newdeal companies and added their international business to our existing sales and distribution network. We substantially increased the headcount in both our European sales and marketing departments and our domestic Reconstructive Surgery sales force, and we launched several exciting new products for the treatment of wounds and the surgical reconstruction of the foot and ankle.
"During the third quarter, we agreed to acquire the assets of the Radionics Division of Tyco Healthcare Group LP. The transaction, which closed on March 3, 2006, represents an ideal strategic fit for Integra. We expect the Radionics acquisition to increase our revenues in 2006 by approximately 12 percent, enhance our cash flow and profitability, and increase the proportion of our business that comes from outside the United States.
"In 2005, we also accelerated product development, having launched new products in dural regeneration, adhesion prevention, nerve repair, cranial reconstruction and shunting for normal pressure hydrocephalus. Finally, we continued to cut costs and improve margins through plant consolidations, closing manufacturing sites in Texas and Germany, and restructuring our French manufacturing facility."
Our revenues for the period were as follows:
Three Months Year
Ended December 31, Ended December 31,
2005 2004 2005 2004
-------- -------- -------- -------
Revenue: ($ in thousands)
Implants $ 28,379 $ 19,851 $108,156 $ 78,418
Instruments 24,008 22,685 91,918 77,667
Monitoring 13,032 12,517 48,940 48,217
Private label
& other 7,566 6,758 28,921 25,523
-------- -------- -------- --------
Total Revenue $ 72,985 $ 61,811 $277,935 $229,825
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 most of the increase in implant product revenues. INTEGRA(TM) dermal repair product revenues increased approximately 86% over the fourth quarter of 2004, nerve repair product revenues increased by 55%, and our Newdeal foot and ankle products achieved record revenues of $4.8 million in the quarter. Our DuraGen(R) family of duraplasty products continued to grow, although at slower rates than in recent years. Sales of the DuraGen Plus(TM) and Suturable DuraGen(TM) Dural Regeneration products led the growth in sales of this group of products. Sales of the NPH(TM) Low Flow Hydrocephalus Valve also contributed to the growth in implant product revenues for the quarter.
Monitoring revenues grew at 4% over the fourth quarter of 2004, an improvement over the last several quarters. Increased sales of our intracranial monitoring products, drainage systems, and cranial access kits accounted for the increase in monitoring product revenues. Sales of our LICOX(R) Brain Oxygen Monitoring System product line increased approximately 39% over the prior-year period. We have developed a new targeted account sales and marketing strategy for products in this category, and we expect that it will contribute to improvements in the performance of our monitoring products in future periods.
Increased revenues of the Absorbable Collagen Sponge that we supply for use in Medtronic's INFUSE(TM) bone graft product led the growth in revenues of our private-label products. In the fourth quarter of 2005, we recognized an additional $1.3 million of royalty revenue related to a change in the manner we use to estimate royalties based on Medtronic's sales of its INFUSE(TM) bone graft product.
Excluding recently acquired product lines and changes in foreign currency exchange rates, fourth quarter 2005 revenues increased by $7.2 million, or 12%, over the prior-year period. Changes in foreign currency exchange rates had a negative impact of $0.9 million on our quarterly year-over-year revenue growth.
Gross margin on total revenues in the fourth quarter of 2005 was 61%. Although we had strong growth in higher gross margin products, we incurred approximately $1.3 million in restructuring and manufacturing transfer costs. These charges reduced our gross margin by approximately 2%.
Research and development expense decreased from $3.6 million in the fourth quarter of 2004 to $2.7 million in the current period.
Selling, general and administrative expense increased by $5.4 million to $25.7 million in the fourth quarter of 2005, increasing as a percentage of revenue to 35% from 33% in the prior-year period. This increase was primarily attributable to expenses of acquired operations, as well as the further development of our European infrastructure. The increase included approximately $752,000 of charges associated with the closing of various facilities and related transitions, employee terminations and other acquisition, integration and restructuring related costs. These charges increased selling, general and administrative expense by 1% of revenues.
We reported net interest income of $16,000 in the fourth quarter of 2005 compared to $95,000 in the prior-year period.
The Company generated $15.1 million in cash flows from operations in the fourth quarter of 2005. We repurchased 900,000 shares of our common stock in the quarter at an average price of $35.21 per share for an aggregate purchase price of approximately $31.7 million. Our cash and investments totaled $143 million at December 31, 2005.
In December 2005, we established a $200 million, five-year, senior secured revolving credit facility. This new line of credit provides us with increased financial flexibility and access to capital to support the Company's continued growth. The credit facility currently allows for revolving credit borrowings in a principal amount of up to $200 million, which can be increased to $250 million should additional financing be required in the future. We plan to utilize the credit facility for working capital, capital expenditures, share repurchases, acquisitions and other general corporate purposes.
We are updating our expectations for total revenues, gross margin and earnings per share for 2006 and providing our initial guidance for 2007. Our expectations for 2006 and 2007 financial performance include the impact of the just closed Radionics acquisition, but, in accordance with our usual practice, do not include the impact of acquisitions or other strategic corporate transactions that have not yet closed.
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. We expect consolidated gross margin to increase to 65% and 66% of total revenues in 2006 and 2007, respectively, including the impact of purchase accounting related to the Radionics acquisition and share based compensation costs.
We expect that unfavorable foreign currency exchange rate movements will have a negative impact on our revenue growth rates in 2006. If foreign currency exchange rates hold at current levels, our forward looking guidance anticipates an unfavorable impact on net sales of approximately 2% in the first quarter of 2006 and an unfavorable impact on net sales of approximately 1% for the full year of 2006.
Our guidance includes both the direct impact of the Radionics acquisition and our assumption that our sales force will, in some situations, sell the CUSA EXcel(TM) ultrasonic aspiration system in lieu of our existing ultrasonic aspirator products.
The Company may incur significant costs this year in connection with restructuring and integration activities, including purchase accounting charges related to the Radionics acquisition. We currently expect these charges to be approximately $2.5 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 $0.27 to $0.29 per diluted share.
Earnings per diluted share are expected to be within a range of $1.69 to $1.76 in 2006, excluding restructuring and integration charges and the impact of estimated share based compensation expense. Earnings per diluted share are expected to be within a range of $1.95 to $2.10 in 2007, excluding the impact of estimated share based compensation expense. On a GAAP reported basis, we expect earnings per diluted share to be within a range of $1.35 to $1.44 in 2006 and within a range of $1.66 to $1.83 in 2007.
Our guidance for the first quarter of 2006 is for total revenues in the range of $78 million to $82 million including a contribution of approximately $4 million from the Radionics acquisition, and adjusted earnings per diluted share of $0.34 to $0.36, excluding restructuring and integration charges of $0.02 and the impact of estimated share based compensation expense of $0.07. On a GAAP reported basis, we expect earnings per diluted share to be within a range of $0.25 to $0.27 in the first quarter of 2006.
Our Board of Directors has authorized us to repurchase shares of our common stock for an aggregate purchase price not to exceed $50 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, March 6, 2006, to discuss the financial results for the fourth 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 (913) 312-1295 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 20, 2006 by dialing (719) 457-0820 (access code 3248191) or through the webcast accessible on our home page.
Integra LifeSciences Holdings Corporation is a diversified medical technology company. We develop, manufacture, and market medical devices for use in 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. We have 1,400 employees located in our research, manufacturing and distribution 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, 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 (including the Radionics business), 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 the 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, 2004 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 charges related to acquisitions, integrations and restructurings, and "growth in revenues excluding recently acquired product lines and changes in foreign currency exchange rates", all of which are non-GAAP financial measures. 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, net income and earnings per share adjusted to exclude costs related to acquisitions, integrations and restructurings, and growth in revenues excluding recently acquired product lines and changes in foreign currency exchange rates, are useful additional bases to measure the performance of our business operations, both in this quarter and in future periods. In addition, excluding future share based compensation charges from our projected adjusted earnings per share allows for comparability of our guidance to historical 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)
Statement of Operations Data:
----------------------------------- --------------
Three Months
Ended
Three Months Ended December 31,
December 31, 2005 2004
----------------------------------- --------------
Reported Adjustments As Adjusted Reported
Total revenues $ 72,985 $ 72,985 $ 61,811
Cost of revenues 28,252 $ 1,295 (a) 26,957 23,221
Research and
development 2,704 100 (b) 2,604 3,556
Selling, general
and
administrative 25,663 752 (b) 24,911 20,264
Amortization 1,452 1,452 1,139
-------- -------- --------
Total costs and
expenses 58,071 55,924 48,180
Operating income 14,914 17,061 13,631
Interest income,
net 16 16 95
Other income
(expense), net (101) (101) 2,250
-------- -------- --------
Income before
income taxes 14,829 16,976 15,976
Provision for
income taxes 4,214 711 (c) 4,925 6,137
-------- -------- --------
Net income (loss) $ 10,615 $ 12,051 $ 9,839
Earnings per
share
calculation:
Add back of
after tax
interest expense 608 608 598
-------- -------- --------
Net income
(loss) for
diluted EPS $ 11,223 $ 12,659 $ 10,437
Diluted earnings
(loss) per share $ 0.33 $ 0.37 $ 0.30
Diluted weighted
average 34,081 34,081 34,842
Common shares
outstanding
Notes:
(a) Costs associated with the closing of various manufacturing
facilities and related employee terminations and manufacturing
transfers
(b) Costs associated with the closing of various manufacturing
facilities and related employee terminations
(c) Adjustment to provision for income taxes for above adjustments
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONSOLIDATED FINANCIAL RESULTS
(In thousands, except per share data)
(UNAUDITED)
Statement of Operations Data:
------------------------------------ ------------
Twelve Months
Ended
Twelve Months Ended December 31,
December 31, 2005 2004
------------------------------------ ------------
Reported Adjustments As Adjusted Reported
Total revenues $277,935 $277,935 $ 229,825
Cost of revenues 105,536 $4,214 (a) 101,322 87,299
Research and
development 11,960 735 (b) 11,225 14,121
Selling, general
and administrative 98,273 2,480 (c) 95,793 99,359
Amortization 6,061 216 (d) 5,845 4,266
----- ----- -----
Total costs
and expenses 221,830 214,185 205,045
Operating income 56,105 63,750 24,780
Interest income
(expense), net (265) (265) 555
Other income
(expense), net (739) (739) 2,674
----- ----- -----
Income before
income taxes 55,101 62,746 28,009
Provision for
income taxes 17,907 2,715 (e) 20,622 10,811
------ ------ ------
Net income $37,194 $42,124 $17,198
Earnings per
share calculation:
Add back of after
tax interest
expense 2,440 2,440 --
----- ----- -----
Net income for
diluted EPS $39,634 $44,564 $17,198
Diluted earnings
per share $1.15 $1.29 $0.55
Diluted weighted
average 34,565 34,565 31,102
Common shares
outstanding
Notes:
(a) Inventory fair value purchase accounting adjustments,
discontinued product lines, costs associated with the closing
of various manufacturing facilities, employee terminations,
and manufacturing transfers
(b) In-process research and development charge
and facility closings and related employee terminations
(c) Acquisition and integration related costs, including costs
associated with the closing of various facilities, foreign
dealer terminations, and employee terminations
(d) Amortization for discontinued product lines
(e) Adjustment to provision for income taxes for above adjustments
Condensed Balance Sheet Data:
December 31, December 31,
2005 2004
----- ----
Cash and marketable securities,
including non-current portion $143,384 $195,982
Accounts receivable, net 49,007 46,765
Inventory, net 67,476 55,947
Total assets 448,432 456,713
Current liabilities 31,287 24,234
Long-term debt 118,378 118,900
Total liabilities 158,614 148,890
Stockholders' equity 289,818 307,823
Reconciliation of non-GAAP financial measures to the most comparable
GAAP measure:
A. Reconciliation of Net Income and Adjusted Net Earnings
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
($ in thousands)
Net Income $ 10,615 $ 9,839 $ 37,194 $ 17,198
Employee termination costs 1,120 -- 3,861 --
Equity based compensation
charge -- -- -- 23,876
Inventory fair value
adjustments -- 67 466 270
Facility consolidation,
acquisition integration,
manufacturing transfer,
system integration, and
related costs 1,027 -- 2,340 --
In-process R&D charge and
technology licensee fee -- -- 500 1,855
Discontinued product lines -- -- 478 --
Tax effect on above
adjustments (710) (26) (2,715) (10,893)
Tax charge incurred in
connection with the
reorganization of certain
European operations -- -- -- 1,300
-------- -------- -------- --------
Adjusted Net Income $ 12,052 $ 9,880 $ 42,124 $ 33,606
Earnings per share
calculation:
Add back of after tax
interest expense 608 598 2,440 2,066
-------- -------- -------- --------
Adjusted Net Income for
diluted EPS $ 12,660 $ 10,478 $ 44,564 $ 35,672
Adjusted Diluted earnings
per share $ 0.37 $ 0.30 $ 1.29 $ 1.03
Diluted weighted average
common shares outstanding 34,081 34,842 34,565 34,616
Shares added for
contingently convertible
debt and impact of
dilutive stock options -- -- -- --
-------- -------- -------- --------
Diluted weighted average
common shares outstanding
For Adjusted Diluted
earnings per share
calculation 34,081 34,842 35,565 34,616
The calculation of diluted earnings (loss) per share for the above
periods is presented in the tables above.
B. Growth in product revenues excluding recently acquired product
lines and changes in foreign currency exchange rates
Quarter Ended Increase
December 31, (Decrease)
2005 2004 $ %
------- ------- ------- -------
($ in thousands)
Total revenues, as reported $72,985 $61,811 $11,174 18%
Less: Revenues of product lines
acquired since the beginning
of the fourth quarter of 2004 4,808 -- 4,808 N/M
Plus: Impact of changes in
foreign currency exchange rates 854 -- 854 N/M
------- ------- ------- -------
Revenues excluding recently
acquired product lines and
changes in foreign currency
exchange rates $69,031 $61,811 $ 7,220 12%
D. Reconciliation of Projected Diluted EPS and Projected Adjusted
Diluted EPS
Range
----------------------
Low High
------ ------
Projected three months ended March 31, 2006:
Diluted EPS $ 0.25 $ 0.27
Facility consolidation and acquisition
integration and related costs,
including inventory fair value
adjustments, net of tax 0.02 0.02
Share based compensation expense, net of
tax 0.07 0.07
------ ------
Adjusted Diluted EPS $ 0.34 $ 0.36
Range
----------------------
Low High
------ ------
Projected year ended December 31, 2006:
Diluted EPS $ 1.35 $ 1.44
Inventory fair value adjustments, net of
tax 0.02 0.02
Facility consolidation and acquisition
integration and related costs, net of
tax 0.03 0.03
Share based compensation expense, net of
tax 0.29 0.27
------ ------
Adjusted Diluted EPS $ 1.69 $ 1.76
Range
----------------------
Low High
------ ------
Projected year ended December 31, 2007:
Diluted EPS $ 1.66 $ 1.83
Share based compensation expense, net of
tax 0.29 0.27
------ ------
Adjusted Diluted EPS $ 1.95 $ 2.10