UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 7, 2004
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 0-26224 51-0317849
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
311 Enterprise Drive
Plainsboro, NJ 08536
(Address of principal executive offices) (Zip Code)
(609) 275-0500 (Registrant's
telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
ITEM 2.02. Results of Operations and Financial Condition
On November 7, 2004, Integra LifeSciences Holdings Corporation issued a press
release announcing financial results for the quarter ended September 30, 2004. A
copy of the press release is attached as Exhibit 99.1 to this Current Report on
Form 8-K.
The information in this Form 8-K and the Exhibit attached hereto shall not be
deemed "filed" for purposes of Section 18 of the Securities Act of 1934, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, except as shall be expressly set forth by specific reference in
such filing.
ITEM 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description of Exhibit
- ------- ----------------------
99.1 Press release issued November 7, 2004 regarding earnings for the
quarter ended September 30, 2004
This exhibit is being furnished under Item 12, Results of Operations and
Financial Condition of this Form 8-K and shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of 1933,
except as shall be expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
Date: November 7, 2004 By: /s/ Stuart M. Essig
-----------------------------
Stuart M. Essig
President and Chief Executive Officer
Exhibit Index
-------------
Exhibit
Number Description of Exhibit
- ------- ----------------------
99.1 Press release issued November 7, 2004 regarding earnings for the
quarter ended September 30, 2004
Exhibit 99.1
News Release
Contacts:
Integra LifeSciences Holdings Corporation
John Bostjancic Maria Platsis
Senior Director of Finance Director of Corporate Development
(609) 936-2239 and Investor Relations
jbostjancic@integra-ls.com (609) 936-2333
mplatsis@integra-ls.com
Integra LifeSciences Announces Third Quarter 2004
Financial Results
Plainsboro, New Jersey, November 7, 2004 -- Integra LifeSciences Holdings
Corporation (NASDAQ: IART) today reported its third quarter revenues and
earnings. Total revenues in the third quarter of 2004 increased by $12.1 million
to $59.1 million, a 26% increase over the third quarter of 2003. Product
revenues increased by $15.4 million to $58.9, or 35%, over the prior year
period. Excluding recently acquired product lines, third quarter 2004 product
revenues increased by $9.6 million, or 22%, over the prior year period.
We reported a net loss of $7.6 million, or $0.25 per share, for the third
quarter of 2004, compared to net income of $6.8 million, or $0.23 per share, in
the third quarter of 2003. During the past quarter, we recorded a $23.9 million
share-based compensation charge on our grant of contract stock units to our
President and Chief Executive Officer in connection with the extension of his
employment agreement, a $1.4 million in-process research and development charge
in connection with our making of a milestone payment to a third-party developer,
a $0.8 million incremental tax pcharge incurred in connection with the
reorganization of certain European operations, and a $0.5 million charge
relating to a license payment for technology under development. Excluding these
special charges, net earnings for the third quarter of 2004 were $8.7 million,
or $0.28 per share.
"I am very pleased with our performance in the third quarter," said Stuart M.
Essig, Integra's President and Chief Executive Officer, "as we once again
produced organic revenue growth of over 20%, with particularly strong
performances from the DuraGen(R) and DuraGen Plus(TM) products, the INTEGRA(R)
Dermal Regeneration Template and the INTEGRA(TM) Bilayer Matrix Wound Dressing.
In addition, we have positioned ourselves for continued growth through our
recent introduction of new and innovative products, such as the DuraGen Plus(TM)
Adhesion Barrier Matrix, the NeuroSensor(R) Cerebral Blood Flow and IntraCranial
Pressure System, the NPH(TM) Low Flow Hydrocephalus Valve, the INTEGRA(TM)
Matrix Wound Dressing, the INTEGRA(TM) Dermal Regeneration Template - Terminally
Sterilized and the KraniOS(TM) Cranial Closure System."
Our revenues for the periods were as follows:
Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
---- ---- ---- ----
Product Revenue:
Neuromonitoring products $12,689 $11,679 $35,700 $32,763
Operating room products 20,823 13,555 58,566 38,976
Instruments 19,933 13,141 54,982 31,746
Private label products 5,412 5,092 17,480 16,349
------ ------ ------- ------
Total Product Revenue 58,857 43,467 166,728 119,834
Other revenue 273 3,591 1,286 6,740
------ ------ ------ ------
Total Revenue $59,130 $47,058 $168,014 $126,574
Increased sales of our intracranial monitoring products, including our Camino(R)
and LICOX(R) monitoring systems, provided most of the year-over-year growth in
neuromonitoring product revenues.
Continued strong growth in sales of our DuraGen and DuraGen Plus Dural Graft
Matrix products and direct selling of the INTEGRA Dermal Regeneration Template
and INTEGRA Bilayer Matrix Wound Dressing accounted for most of the increase in
operating room product revenues.
Sales of recently acquired product lines contributed $5.8 million of the
year-over-year increase in instrument revenues for the third quarter. Increased
sales of our JARIT(R) and Ruggles(TM) surgical instrument lines provided the
remainder of the growth in instrument product revenues.
The increase in revenues attributable to our remaining private label products,
including the Absorbable Collagen Sponge that we supply for use in Medtronic's
INFUSE(TM) bone graft product, more than offset the removal of INTEGRA Dermal
Regeneration Template revenues from our private label products category.
Changes in foreign currency exchange rates contributed $0.6 million to our
year-over-year product revenue growth.
Gross margin on product revenues in the third quarter of 2004 was 62%. Our gross
margin was positively affected by changes in the mix of our products sold during
the quarter and by the resumption of direct sales of the INTEGRA Dermal
Regeneration Template.
General and administrative expense increased $26.3 million in the third quarter
of 2004 to $30.1 million, largely due to the share-based compensation charge
recorded with respect to the grant of contract stock units to our President and
Chief Executive Officer in connection with the renewal of his employment
agreement. Research and development expense increased from $2.6 million in the
third quarter of 2003 to $5.1 million in the current period primarily as a
result of a $1.4 million dollar in-process research and development charge in
connection with a milestone payment to a third-party developer and a $0.5
million license fee charge. Sales and marketing expense increased by $2.4
million to $12.5 million in the third quarter of 2004, but decreased as a
percentage of product sales to 21% from 23% in the prior year period.
We reported net interest income of $243,000 in the third quarter of 2004, as
compared to net interest expense of $188,000 in the prior year period. Third
quarter results also reflect an increase in our annual effective tax rate to
39%, largely attributable to an incremental tax charge recorded in the period.
We repurchased 500,000 shares of our common stock at an average price of $28.48
in the period and had cash and investments totaling $191.0 million at September
30, 2004.
We are updating our expectations for revenues, gross margin and earnings per
share for 2004 and 2005. In accordance with our usual practice, our expectations
for 2004 and 2005 financial performance do not include the impact of
acquisitions or other strategic corporate transactions that have not yet closed.
Subsequent to Integra's issuance of contingent convertible notes in 2003, the
Emerging Issues Task Force (EITF) Issue 04-08 proposed that the unissued shares
underlying contingent convertible notes be treated as if such shares were issued
and outstanding for the purposes of calculating earnings per share if such
impact would be dilutive. On October 13, 2004, the Financial Accounting
Standards Board (FASB) ratified this new accounting treatment for periods ending
after December 15, 2004. Consequently, Integra will reflect the dilutive effect
of its contingent convertible senior notes on earnings per share in the fourth
quarter of 2004.
It is important to note that our $120 million of contingent convertible senior
notes can convert into 3.5 million shares of our common stock at any time that
our common stock trades above $37.56 per share. The ratification of EITF Issue
04-08 will have no effect on Integra's operating results, revenues, net income
or cash position as reported in our fourth quarter 2004, and full year 2004 and
2005 guidance. Rather, it requires a revised method of calculating earnings per
share. In order to provide clarity, we are providing guidance both before and
after the effects of the new pronouncement.
Our guidance for the fourth quarter of 2004 is for total revenues in the range
of $60 million to $63 million and earnings per share of $0.29 to $0.31, before
giving effect to the change in accounting for our convertible contingent senior
notes and the increase in our effective tax rate to 39%. Including the effect of
the EITF Issue 04-08 and the increase in our effective tax rate for 2004,
earnings per diluted share are expected to be between $0.27 and $0.29.
We expect total revenues of between $270 million and $280 million in 2005.
Consolidated gross margin is expected to be 64%. We expect our earnings to be
within a range of $1.42 to $1.47 per share in 2005 before the change in
accounting for the company's contingent convertible notes. Including this
accounting change, earnings per diluted share for 2005 are expected to be
between $1.35 and $1.39.
We have scheduled a conference call for 9:00 am EDT tomorrow, November 8, 2004,
to discuss the financial results for the third quarter of 2004 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 (973) 582-2732 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 November 22, 2004 by dialing
(973) 341-3080 (access code 4865983) or through the webcast accessible on our
home page.
Integra LifeSciences Holdings Corporation is a diversified medical technology
company that develops, manufactures, and markets medical devices for use in a
variety of applications. The primary applications for our products are
neuro-trauma and neurosurgery, plastic and 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, and we have research, manufacturing
and distribution facilities located throughout the world. We have approximately
1,200 employees. 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, increase product sales and gross margins, and control non-product
costs may affect our earnings per share; and our future net income results and
our ability to effectively manage working capital may affect our future cash
flows. 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, 2003 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 "growth in product revenues excluding recently
acquired product lines", which is a non-GAAP financial measure. A reconciliation
of this non-GAAP financial measure to the most comparable GAAP measure 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 this non-GAAP financial measure is
important supplemental information to investors which reflects 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
(In thousands, except per share data)
(UNAUDITED)
Statement of Operations Data:
Three Months
Ended September
Three Months Ended September 30, 2004 30, 2003
------------------------------------------------------ ---------------------
------------------------------------------------------ ---------------------
Reported Special Before Special Reported
Charges Charges
Product revenues $58,857 $58,857 $43,467
Other revenues 273 273 3,591
----- ----- -----
Total revenues 59,130 59,130 47,058
Cost of product revenues 22,412 22,412 18,870
Research and development 5,103 1,900 3,203 2,616
Sales and marketing 12,488 12,488 10,090
General and administrative 30,112 23,876 6,236 3,787
Amortization 1,195 1,195 773
----- ----- -----
Total costs and expenses 71,310 25,776 45,534 36,136
Operating income (loss) (12,180) 25,776 13,596 10,922
Interest income (expense), net 243 243 (188)
Other income (expense), net 306 306 309
---- ---- ----
Income (loss) before income taxes (11,631) 25,776 14,145 11,043
Provision (benefit) for income taxes (1) (4,034) 9,504 5,470 4,210
------ ------ ------ ------
Net income (loss) $(7,597) $16,272 $8,675 $6,833
Diluted earnings (loss) per share $(0.25) $0.28 $0.23
Diluted weighted average
common shares outstanding 30,326 31,256 30,286
(In thousands, except per share data)
(UNAUDITED)
Statement of Operations Data:
Nine Months
Ended September
Nine Months Ended September 30, 2004 30, 2003
------------------------------------------------------ ---------------------
------------------------------------------------------ ---------------------
Reported Special Before Special Reported
Charges Charges
Product revenues $166,728 $166,728 $119,834
Other revenues 1,286 1,286 6,740
----- ----- -----
Total revenues 168,014 168,014 126,574
Cost of product revenues 64,078 64,078 49,663
Research and development 10,565 1,900 8,665 8,043
Sales and marketing 36,799 36,799 26,748
General and administrative 42,297 23,876 18,421 13,357
Amortization 3,127 3,127 2,112
----- ----- -----
Total costs and expenses 156,866 25,776 131,090 99,923
Operating income 11,148 25,776 36,924 26,651
Interest income (expense), net 460 460 390
Other income (expense), net 424 424 1,109
--- --- -----
Income before income taxes 12,032 25,776 37,808 28,150
Provision for income taxes (1) 4,674 9,504 14,178 10,461
----- ----- ------ ------
Net income $7,358 $16,272 $23,630 $17,689
Diluted earnings per share $0.24 $0.76 $0.58
Diluted weighted average
common shares outstanding 31,026 31,026 30,404
(1) The income tax adjustment is the result of excluding the tax impact of the
special charges reflected above and the incremental tax charge recorded in
connection with the European reorganization. These adjustments resulted in
an annualized effective tax rate of 37.5%.
Condensed Balance Sheet Data:
September 30, December 31,
2004 2003
< ----- ----
Cash and marketable securities,
including non-current portion $190,998 $206,743
Accounts receivable, net 38,028 28,936
Inventory, net 52,400 41,046
Total assets 440,187 412,526
Current liabilities 23,766 20,618
Long-term debt 119,220 119,257
Total liabilities 147,552 143,996
Stockholders' equity 292,635 268,530
Reconciliation of non-GAAP financial measure to the most comparable GAAP
measure:
Growth in product revenues excluding recently acquired product lines
Excluding recently acquired product lines, third quarter 2004 product
revenues increased by $9.6 million, or 22%, over the prior year period.
Quarter Ended Increase
September 30, (Decrease)
2004 2003 $ %
-------- -------- ------- -----
($ in thousands)
Total product revenues, as reported $ 58,857 $ 43,467 $15,390 35%
Less: Product revenues acquired since the
beginning of the third quarter of 2003 5,833 21 5,812 NM
-------- -------- ------- -----
Product revenues excluding acquired products $ 53,024 $ 43,446 $9,578 22%
Source: Integra LifeSciences Holdings Corporation
