Integra LifeSciences Reports Second Quarter Earnings Per Share of $0.14 on Record Revenues of $26.4 Million
``The second quarter of 2002 marked another quarter of progress in all aspects of Integra's performance,'' said Stuart M. Essig, Integra's President and Chief Executive Officer. ``Our earnings of $0.14 per share were $0.01 above our expectations and the analyst consensus estimates of $0.13 per share. In the Integra NeuroSciences division, we are on track to meet our goal of adding a total of 19 neurospecialists in 2002, with 56 of 63 territories now filled in our domestic sales force. In the LifeSciences division, the FDA approved our pre-market approval application supplement to market INTEGRA® Dermal Regeneration Template for the repair of scar contractures, the first indication for the device outside of the treatment of severe burns.''
Net income for the second quarter of 2002 was $4.2 million, or $0.14 per share, as compared to net income of $2.8 million, or $0.10 per share, reported in the prior year's second quarter. In addition to the increase in revenues, results for the second quarter of 2002 benefited from a one percentage point improvement in consolidated gross margin on product sales to 62% in the second quarter of 2002, which is ahead of our previously announced guidance of 60% for the full year 2002.
Offsetting the improved gross margin results was an increase in the Company's effective tax rate from 13% in the second quarter of 2001 to a 35% rate recorded in 2002. The effective rate for the second quarter of 2001 reflects the utilization of the Company's net operating loss carryforwards during the period. In the fourth quarter of 2001, the Company reversed a portion of the valuation allowance recorded against the deferred tax assets related to these net operating loss carryforwards, which is expected to result in an ongoing effective tax rate of 35%. The Company's actual cash tax rate is expected to be in the 6% to 8% range in 2002. Had the Company's effective tax rate been 35% in 2001, reported earnings would have been $0.08 per share in the second quarter of 2001.
INTEGRA NEUROSCIENCES DIVISION:
Quarter Ended June 30, Six Months Ended June 30 2002 2001 2002 2001 -------- -------- -------- -------- Product sales $ 20,062 $ 17,032 $ 39,857 $ 32,818 Total revenues 20,090 17,310 39,913 33,374 Total operating expenses 14,818 12,799 29,424 24,657 Operating income 5,272 4,511 10,489 8,717
For the second quarter of 2002, Integra NeuroSciences product sales increased $3.0 million to $20.1 million, an 18% increase over the prior year quarter. This increase included $1.4 million in sales of products acquired since the end of the second quarter of 2001. The remaining sales growth was led by the DuraGen® Dural Graft Matrix. Gross margin on product sales remained consistent at 64% in both the second quarter of 2002 and 2001. Total other operating expenses increased $0.9 million to $7.6 million, with the division reporting a $5.3 million operating profit.
INTEGRA LIFESCIENCES DIVISION:
Quarter Ended June 30, Six Months Ended June 30 2002 2001 2002 2001 -------- -------- -------- -------- Product sales $ 4,641 $ 4,353 $ 9,276 $ 8,851 Total revenues 6,351 5,610 12,444 11,230 Total operating expenses 3,761 4,163 7,419 8,860 Operating income 2,590 1,447 5,025 2,370
For the second quarter of 2002, Integra LifeSciences division product sales increased $0.3 million to $4.6 million, a 7% increase over the prior year quarter. The increase in Integra LifeSciences division product sales was primarily related to increased sales to Wyeth of Absorbable Collagen Sponges that are used as a component in Medtronic's recently approved INFUSE™ Bone Graft for the treatment of certain types of spinal degenerative disc disease. Gross margin on product sales increased to 51% in the second quarter of 2002, as compared to 49% in the second quarter of 2001. Total other operating expenses decreased $0.4 million to $1.5 million, with the division reporting a $2.6 million operating profit.
Divisional financial results exclude corporate general and administrative expenses and intangible asset amortization. Corporate general and administrative expenses increased $0.2 million to $2.0 million in the second quarter of 2002. Amortization expense decreased $0.3 million in the second quarter of 2002 to $0.4 million as a result of the full implementation of Statement of Financial Accounting Standard No 142 in January 2002. The reduction in goodwill amortization related to the implementation of Statement 142 had a favorable impact on earnings of approximately $0.01 per share in the second quarter of 2002.
The Company reported operating earnings before interest, taxes, depreciation and amortization (EBITDA) of $6.7 million in the second quarter of 2002, as compared to $4.9 million in the prior year quarter. The Company's cash and investments totaled $139.3 million at June 30, 2002.
Following the acquisition of the NMT Neurosciences product lines, Integra has developed plans to rationalize certain of these acquired products along with certain of its own existing products. After the effect of these contemplated product line rationalizations, the Company expects sales of all recently acquired products to add approximately $12.5 million to Integra's consolidated product sales on an annual basis. The Company believes that sales of existing Integra products not affected by the product line rationalization will increase by approximately 18% per annum through 2003.
Gross margins for the third quarter of 2002 are expected to be adversely affected by the planned rationalization of the Company's product lines and by inventory fair market value adjustments to be recorded in connection with the recent acquisitions. After giving effect to these items and the lower gross margins associated with the recently acquired product lines, the Company expects consolidated gross margins to approximate 60% for the remainder of 2002 and 62% for the full year 2003. Accordingly, excluding certain anticipated special charges associated with the recent acquisitions such as personnel and transition-related costs, 2002 earnings are expected to be within a range of $0.55 to $0.56 per share, while 2003 earnings are expected to be within a range of $0.72 to $0.75 per share. Third quarter 2002 earnings are expected to be $0.13 per share, excluding any special charges.
The Company has scheduled a conference call for 9:00 am EST tomorrow, August 2, 2002, to discuss financial results for the second quarter ended June 30, 2002 and to update forward looking guidance for the remainder of 2002 and for 2003, including the effect of the recent acquisitions.
The upcoming conference call, which will be hosted by Stuart Essig, President and Chief Executive Officer of Integra, is open to all listeners and will be followed by a question and answer session. Additional forward-looking information may be discussed in the question and answer session following the call.
Access to the live call is available by dialing (973) 582-2729 or through a listen-only webcast via a link provided on the home page of Integra's website at http://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 August 16, 2002 by dialing 973-341-3080 or through the webcast accessible on our home page.
Integra LifeSciences Holdings Corporation develops, manufactures and markets medical devices, implants and biomaterials primarily used in the treatment of cranial and spinal disorders, soft tissue repair and orthopedics. Integra is a leader in applying the principles of biotechnology to medical devices that improve patients' quality of life. The Company has its corporate headquarters in Plainsboro, New Jersey, with manufacturing and research facilities located throughout the world. The Company has approximately 750 permanent employees.
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 the anticipated expansion in the direct sales force and statements concerning future financial performance, including projections for revenues, gross margins, income tax rates, and earnings per share. The accuracy of such forward-looking statements is necessarily subject to risks and uncertainties that could cause actual results to differ materially from predicted or expected results. Among other things, the Company's ability to find qualified candidates may affect its ability to expand its direct sales presence, the Company's ability to maintain existing customer relationships related to acquired product lines and the willingness of physicians to adopt the Company's recently launched products may affect growth in product sales, the Company's ability to increase sales and product volumes and the finalization of contemplated product rationalization plans may affect future gross margins, the geographic mix of taxable income may affect income tax rates, and the Company's ability to integrate acquired businesses, increase product sales and gross margins, and the Company's actual tax rate for 2002 may affect earnings per share. In addition, the economic, competitive, governmental, technological and other factors identified under the heading ``Risk Factors'' included in the Business section of Integra's Annual Report on Form 10-K for the year ended December 31, 2001 and information contained in subsequent filings with the Securities and Exchange Commission could affect actual results.
INFUSE™ Bone Graft is a trademark of Medtronic Sofamor Danek.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED FINANCIAL RESULTS (In thousands, except per share data) (UNAUDITED)
Statement of Operations Data:
Three Month Period Six Month Period Ended June 30 Ended June 30 2002 2001 2002 2001
Product sales $24,703 $21,385 $49,133 $41,669 Other revenue 1,738 1,535 3,224 2,935 ------- ------- ------- ------- Total revenue 26,441 22,920 52,357 44,604
Cost of product sales 9,465 8,310 18,993 16,904 Research and development 2,073 1,837 3,895 3,910 Selling and marketing 5,928 5,269 11,600 10,020 General and administrative 3,121 3,319 6,340 6,523 Amortization 364 729 714 1,409 ------- ------- ------- ------- Total costs and expenses 20,951 19,464 41,542 38,766
Operating income 5,490 3,456 10,815 5,838 Interest income (expense), net 993 (114) 1,986 (192) Other income (expense), net 55 (151) 32 (213) ------- ------- ------- -------
Income before income taxes 6,538 3,191 12,833 5,433
Provision for income taxes 2,289 429 4,493 675 ------- ------- ------- ------- Net income 4,249 2,762 8,340 4,758
Preferred stock dividends (24) (135) (159) (756) ------- ------- ------- ------- Net income available to common stockholders $ 4,225 $ 2,627 $ 8,181 $ 3,982
Diluted net income per share $ 0.14 $ 0.10 $ 0.27 $ 0.18
Weighted average common shares outstanding 30,849 25,049 30,783 22,211
Balance Sheet Data: 30-JUNE 31-DEC 2002 2001
Cash, cash equivalents & investments $139,320 $131,036 Total assets 234,389 227,588 Total debt -- 3,576 Total stockholders' equity 215,147 204,056
Contact:
Integra LifeSciences Holdings Corporation
John B. Henneman, III, Senior Vice President
Chief Administrative Officer
(609) 936-2481
jhenneman@integra-ls.com
John Bostjancic, Senior Director of Finance
(609) 936-2239
jbostjancic@integra-ls.com