May 6, 2009

Integra LifeSciences Reports First Quarter 2009 Financial Results

Revenues for the First Quarter Increase to $161 Million

Operating Cash Flow Increases to $37 Million

Repurchased $32 Million of 2.75 Percent 2010 Convertible Notes

May 6, 2009 (GlobeNewswire via COMTEX News Network) -- PLAINSBORO, N.J., May 6, 2009 (GLOBE NEWSWIRE) -- Integra LifeSciences Holdings Corporation (Nasdaq:IART) today reported its financial results for the first quarter ending March 31, 2009. Total revenues were $161.0 million, reflecting an increase of $4.9 million, or 3%, over the first quarter of 2008. Excluding the impact of currency exchange rates, revenues increased 6% for the quarter ended March 31, 2009. Revenues by product category are presented in a table at the end of this press release.

"Despite ongoing challenges in the global economy and the financial condition of hospitals, we are pleased with the underlying strength of our business, particularly our operating cash flow. We have reacted rapidly to the changes in our environment, reducing costs and reallocating resources toward our less economically sensitive markets," said Integra's President and Chief Executive Officer, Stuart Essig.

The Company reported GAAP net income of $9.6 million, or $0.32 per diluted share, for the first quarter of 2009, compared to GAAP net income of $9.1 million, or $0.32 per diluted share, for the first quarter of 2008.

Adjusted net income for the first quarter of 2009, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $13.8 million, or $0.47 per diluted share. Adjusted net income for the first quarter of 2008, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $14.4 million, or $0.50 per diluted share.

Integra generated $37.2 million in operating cash flow and used $3.0 million of cash on capital expenditures in the first quarter of 2009.

During the quarter, Integra repurchased $32.1 million par value of its 2.75% senior convertible notes due June 2010 for a total of $29.5 million. "We will continue to review our capital structure over the coming twelve months. Repurchasing our convertible notes at a discount is a good use of our cash, allowing us to reduce not only our interest expense, but also the ultimate cash principal payment," said Jack Henneman, Integra's Chief Financial Officer.

Adjusted EBITDA for the first quarter of 2009, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $33.8 million, an increase of 8% compared to the same period last year. Adjusted EBITDA excluding stock-based compensation, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $37.5 million, an increase of 8% compared to the same period last year.

GAAP net income per diluted share results stated above include the impact of the application of FSP APB 14-1, "Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (including Partial Cash Settlement)" and EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities," which were implemented on January 1, 2009 and require retrospective implementation. FSP APB 14-1 requires that we separately account for the liability and equity components of our convertible debt instruments, which may be settled in cash upon conversion, in a manner that reflects an applicable nonconvertible debt borrowing rate at the time that we issued such convertible debt instruments. The Company's previously reported GAAP earnings per diluted share have been adjusted to reflect the implementation of FSP APB 14-1.

EITF 03-6-1 requires unvested share-based payment awards, which have non-forfeitable dividend rights or dividend equivalents, to be considered participating securities and they are now required to be included in computing earnings per share under the two-class method. The Company's previously reported diluted shares outstanding, earnings per diluted share and adjusted earnings per diluted share have been adjusted to reflect the implementation of EITF 03-6-1.

Adjusted earnings per diluted share results stated above for the first quarters of both 2008 and 2009 exclude the impact of the implementation of FSP APB 14-1, but include the impact of the application EITF 03-6-1.

Integra is providing 2007 and 2008 quarterly results reflecting the implementation of FSP APB 14-1 in its Quarterly Financial Summary, which is located under Events & Presentations in the Investor Relations section of its website (www.Integra-LS.com) and in the Company's Current Report on Form 8-K filed this morning.

Outlook for 2009

The Company has reduced its revenue and earnings per share guidance for the full year 2009. The Company is now anticipating revenues between $680 million and $700 million, versus prior guidance of $720 million to $740 million. The Company is now guiding to GAAP earnings per diluted share of between $1.63 and $1.83 versus prior guidance of between $1.86 and $2.06, and to adjusted earnings per diluted share of between $2.00 and $2.20 versus prior guidance of between $2.20 and $2.40. We expect revenues in the fourth quarter of 2009 will be the strongest of the year. 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 (such as acquisition-related charges, facility consolidation, manufacturing and distribution transfer, and system integration charges, and non-cash interest expense related to the application of FSP APB 14-1) 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.

On a quarterly basis, the Company expects to incur approximately $3.7 million, or $0.08 per share, of share-based compensation expense associated with FAS 123R in 2009. This non-cash compensation expense is reflected in both the GAAP and adjusted earnings per share guidance for 2009 provided above.

Conference Call

Integra has scheduled a conference call for 9:00 AM ET on Wednesday, May 6, 2009 to discuss financial results for the first quarter of 2009 and forward-looking financial guidance. The conference call will be hosted by Stuart Essig, President and Chief Executive Officer of Integra, 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 719-325-4859 and using the passcode 4833677. The call can also be accessed through a webcast via a link provided on the Investor Relations homepage of Integra's website at www.Integra-LS.com. Access to a replay is available through May 20, 2009 by dialing 719-457-0820 and using the passcode 4833677, or through the webcast.

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 clinically relevant, innovative and cost-effective surgical implants and medical instruments. The Company's products are used to treat millions of patients every year, primarily in neurosurgery, orthopedics and general surgery. Integra's headquarters are in Plainsboro, New Jersey, and it has research and manufacturing facilities throughout the world. http://www.Integra-LS.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 acquisition-related charges, non-cash interest expense related to the application of FSP APB 14-1, and income tax expense (benefit) related to non-GAAP adjustments, and non-cash compensation expense associated with FAS 123R. 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; 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 of legal compliance matters or internal controls review, improvement and remediation; 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 timing and amount of share-based awards granted to employees; fluctuations in foreign currency exchange rates; the amount of our convertible notes 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, 2008 and information contained in subsequent filings with the Securities and Exchange Commission.

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. Adjusted EBITDA consists of net income, excluding: (i) income taxes, (ii) other income (expense), net, (iii) depreciation and amortization, (iv) interest income and expense, and (v) those operating expenses also excluded from adjusted net income. Adjusted net income consists of net income, excluding: (i) acquisition-related charges; (ii) facility consolidation, manufacturing and distribution transfer and system integration charges; (iii) certain employee termination and related costs; (iv) charges associated with discontinued or withdrawn product lines; (v) charges related to restructuring our European subsidiaries; (vi) charges related to litigation matters or disputes; (vii) intangible asset impairment charges; (viii) incremental professional and bank fees related to (a) the delayed filing of financial statements and (b) waivers or possibility of obtaining waivers under our revolving credit facility; (ix) charges recorded in connection with terminating defined benefit pension plans; (x) charges relating to the grant of restricted stock units in connection with the extension of the term of the CEO's employment agreement; (xi) gain related to the early extinguishment of convertible notes; (xii) non-cash interest expense related to the application of FSP APB 14-1; (xiii) the income tax expense/benefit related to these adjustments; (xiv) quarterly adjustments to income tax expense/benefit related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items; and (xv) income tax expenses or gains related to restructuring our European subsidiaries. Adjusted net income attributable to diluted shares is calculated by multiplying adjusted net income by the diluted share percentage shown in Note 10 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009. Adjusted earnings per diluted share are calculated by dividing adjusted net income attributable to diluted shares by adjusted diluted weighted average shares outstanding. Reconciliations of GAAP revenues to adjusted revenues, 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, 2009 and 2008 appear in the financial tables in this release.

Integra believes that the presentation of adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share 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.Integra-LS.com.


                INTEGRA LIFESCIENCES HOLDINGS CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)

 (In thousands, except per share amounts)
                                                    Three Months Ended
                                                        March 31,
                                                    ------------------
                                                      2009      2008
                                                    ------------------

 TOTAL REVENUES                                     $160,950  $156,008

 COSTS AND EXPENSES
 Cost of product revenues                             58,148    62,212
 Research and development                             10,643     7,798
 Selling, general and administrative                  66,451    62,489
 Intangible asset amortization                         3,456     2,973
                                                    ------------------

  Total costs and expenses                           138,698   135,472

 Operating income                                     22,252    20,536

 Interest income                                         247       687
 Interest expense                                     (6,684)   (8,567)
 Other income (expense), net                            (868)    1,507
                                                    ------------------

 Income before income taxes                           14,947    14,163

 Income tax expense (benefit)                          5,380     5,113
                                                    ------------------

 Net income                                            9,567     9,050

 Diluted share percentage*                                99%     98.3%
 Net income attributable to diluted shares*         $  9,471  $  8,896

 Diluted net income per share                       $   0.32  $   0.32

 Weighted average common shares outstanding for
  diluted net income per share                        29,252    28,199

 * See Note 10 of the Company's Quarterly Report on Form 10-Q for the
   quarterly period ended March 31, 2009.


 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.

 (In thousands, except per share amounts)
 A. Growth in total revenues excluding the effects of currency exchange
    rates

                                                Three Months Ended
                                                    March 31,
                                          ----------------------------
                                            2009      2008     Change
                                          ----------------------------
 Integra NeuroSciences                    $ 59,731  $ 61,704       -3%
 Integra Orthopedics                      $ 64,366  $ 50,355       28%
 Integra Medical Instruments              $ 36,853  $ 43,949      -16%
                                          ----------------------------
 Net Sales                                $160,950  $156,008        3%

 FX impact                                $  5,170        --
                                          ----------------------------
 Growth in total revenues excluding the
  effects of currency exchange rates      $166,120  $156,008        6%


 B. Items included in GAAP net income

                                                     Three Months Ended
                                                          March 31,
                                                     -----------------
                                                       2009     2008
                                                     -----------------

 Acquisition-related charges (a)                     $ 2,007  $  3,208

 Employee termination and related costs (b)              450        --

 Facility consolidation, manufacturing and
  distribution transfer and system integration
  charges (c)                                            203       364

 Incremental professional and bank fees related to
  (i) the delayed filing of financial statements and
  (ii) waivers or possibility of obtaining waivers
  under our revolving credit facility (d)                350       548

 Charges related to restructuring European
  subsidiaries* (e)                                    1,876        --

 Gain related to early extinguishment of convertible
  notes (f)                                           (1,213)       --

 Non-cash interest expense related to the
  implementation of FSP APB 14-1 (g)                   2,762     4,352

 Income tax expense (benefit) related to above
  adjustments and to the cumulative impact of
  changes in state and foreign income tax rates and
  certain infrequently occurring items that affected
  the reported tax rate                               (2,244)   (3,161)

 FAS 123R Stock-based compensation                     3,760     3,478

 Depreciation and amortization expense                 8,676     7,073

 *Adjusted net income for the first quarter of 2009 excludes a $1,876
  foreign exchange loss associated with an intercompany loan set up in
  connection with the restructuring of a German subsidiary in the
  fourth quarter of 2008. Adjusted net income for the first quarter of
  2009 and the prior period include foreign exchange gains and losses
  associated with intercompany loans not related to the restructuring.

 (a) Q1 2009 -- all recorded in cost of product revenues.
     Q1 2008 -- all recorded in cost of product revenues.
 (b) Q1 2009 -- $57 recorded in cost of product revenues, $233 recorded
     in selling general and administrative, $160 recorded in research
     and development.
 (c) Q1 2009 -- $134 recorded in cost of product revenues, $69 recorded
     in selling general and administrative.
     Q1 2008 -- $235 recorded in cost of product revenues, $129
     recorded in selling general and administrative.
 (d) Q1 2009 -- $200 recorded in selling general and administrative,
     $150 recorded in interest expense.
     Q1 2008 -- $230 recorded in selling general and administrative,
     $318 recorded in interest expense.
 (e) Q1 2009 -- all recorded in other income (expense), net.
 (f) Q1 2009 -- all recorded in other income (expense), net.
 (g) Q1 2009 -- all recorded in interest expense.
     Q1 2008 -- all recorded in interest expense.

                INTEGRA LIFESCIENCES HOLDINGS CORPORATION
    RECONCILIATION OF NON-GAAP ADJUSTMENTS - NET INCOME TO ADJUSTED
     EBITDA AND ADJUSTED EBITDA EXCLUDING STOCK BASED COMPENSATION
                              (UNAUDITED)

 (In thousands)
                                                     Three Months Ended
                                                          March 31,
                                                     ------------------
                                                       2009      2008
                                                     ------------------

 GAAP net income                                      $ 9,567  $ 9,050
 Non-GAAP adjustments:

 Depreciation and amortization expense                  8,676    7,073

 Other income (expense), net                              868   (1,507)

 Interest expense                                       6,684    8,567

 Interest income                                         (247)    (687)

 Income tax expense (benefit)                           5,380    5,113

 Acquisition-related charges                            2,007    3,208

 Employee termination and related costs                   450       --

 Facility consolidation, manufacturing and
  distribution transfer and system integration
  charges                                                 203      364

 Incremental professional and bank fees related to
  (a) the delayed filing of financial statements and
  (b) waivers or possibility of obtaining waivers
  under our revolving credit facility (1)                 200      230
                                                      ----------------

  Total of non-GAAP adjustments                        24,221   22,361
                                                      ----------------

 Adjusted EBITDA                                      $33,788  $31,411

 FAS 123R Stock-based compensation                      3,760    3,478
                                                      ----------------

 Adjusted EBITDA excluding stock-based compensation   $37,548  $34,889
                                                      ================


 (1) Q1 2009 - This amount differs from Table B above, as $150 of the
     $350 expense is already in interest expense, which is a separate
     adjustment above.
     Q1 2008 - This amount differs from Table B above, as $318 of the
     $548 expense is already in interest expense, which is a separate
     adjustment above.


                INTEGRA LIFESCIENCES HOLDINGS CORPORATION
          RECONCILIATION OF NON-GAAP ADJUSTMENTS - HISTORICAL
                              (UNAUDITED)
 (In thousands, except per share amounts)
                                                     Three Months Ended
                                                         March 31,
                                                     -----------------
                                                       2009      2008
                                                     -----------------

 GAAP net income                                     $ 9,567   $ 9,050
 Non-GAAP adjustments:

 Acquisition-related charges                           2,007     3,208

 Employee termination and related costs                  450        --

 Facility consolidation, manufacturing and
  distribution transfer and system integration
  charges                                                203       364

 Incremental professional and bank fees related to
  (a) the delayed filing of financial statements and
  (b) waivers or possibility of obtaining waivers
  under our revolving credit facility                    350       548

 Charges related to restructuring European
  subsidiaries                                         1,876        --

 Gain related to early extinguishment of convertible
  notes                                               (1,213)       --

 Non-cash interest expense related to the
  Application of FSP APB 14-1                          2,762     4,352

 Income tax expense (benefit) related to above
  adjustments and to the cumulative impact of
  changes in state and foreign income tax rates and
  certain infrequently occurring items that affected
  the reported tax rate                               (2,244)   (3,161)
                                                     -----------------

  Total of non-GAAP adjustments                        4,191     5,311
                                                     -----------------

 Adjusted net income                                 $13,758   $14,361

 Diluted share percentage*                                99%     98.3%
 Adjusted net income attributable to diluted shares  $13,620   $14,117
 Weighted average common shares outstanding for
  diluted net income per share                        29,252    28,199
                                                     -----------------

 Adjusted diluted net income per share               $  0.47   $  0.50
                                                     =================

 * Calculated consistently with Note 10 of the Company's Quarterly
   Report on Form 10-Q for the quarterly period ended March 31, 2009



                      CONDENSED BALANCE SHEET DATA
                              (UNAUDITED)


 (In thousands)
                                                ----------------------
                                                March 31,  December 31,

                                                  2009         2008
                                                ----------------------

 Cash and cash equivalents                      $185,630      $183,546
 Accounts receivable, net                        101,610       112,417
 Inventory, net                                  141,582       146,103

 Bank line of credit                             260,000       260,000
 Convertible securities                          271,307       299,480*

 Stockholders' equity                            374,269       372,309*

 *Differs from previously reported values due to the retrospective
  adoption of APB 14-1



                INTEGRA LIFESCIENCES HOLDINGS CORPORATION
           RECONCILIATION OF NON-GAAP ADJUSTMENTS - GUIDANCE

  (In thousands, except per share amounts)
                                                  Projected Year Ended
                                                   December 31, 2009
                                                  --------------------
                                                     Low       High
                                                  --------------------
 GAAP net income                                  $  48,200  $  54,100

 Non-GAAP adjustments:

 Acquisition-related charges                          4,560      4,560

 Employee termination and related costs                 470        470

 Facility consolidation, manufacturing
  and distribution transfer, and
  system integration charges                            830        830

 Incremental professional and bank fees related
  to (a) the delayed filing of financial
  statements and (b) waivers or possibility of
  obtaining waivers under our revolving credit
  facility                                              350        350

 Charges related to restructuring European
  subsidiaries                                        1,880      1,880

 Gain related to early extinguishment of
  convertible notes                                  (1,210)    (1,210)

 Non-cash interest expense related to the
  application of FSP APB 14-1                        10,660     10,660

 Income tax expense (benefit) related to above
  adjustments                                        (6,740)    (6,740)
                                                  --------------------

 Total of non-GAAP adjustments                       10,800     10,800

 Adjusted net income                              $  59,000  $  64,900

 Weighted average common shares outstanding for
  diluted net income per share                       29,500     29,500

 GAAP diluted net income per share                $    1.63  $    1.83

 Non-GAAP adjustments detailed above (per share)  $    0.37  $    0.37
                                                  --------------------

 Adjusted diluted net income per share            $    2.00  $    2.20
                                                  ====================

IART-F

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Integra LifeSciences Holdings Corp.

Integra LifeSciences Holdings Corporation
          John B. Henneman, III, Executive Vice President,
           Finance and Administration, and Chief Financial Officer
            (609) 275-0500
            jhenneman@Integra-LS.com
          Angela Steinway, Manager, Investor Relations
            (609) 936-2268
            Angela.Steinway@Integra-LS.com

 

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