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): July 31, 2003
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware -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 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits.
Exhibit
Number Description of Exhibit
------- ----------------------
99.1 Press release issued July 31, 2003 regarding earnings for the quarter
ended June 30, 2003
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.
ITEM 12. Results of Operations and Financial Condition
On July 31, 2003, Integra LifeSciences Holdings Corporation issued a press
release announcing financial results for the quarter ended June 30, 2003. 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.
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: July 31, 2003 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 July 31, 2003 regarding earnings for the
quarter ended June 30, 2003
Exhibit 99.1
News Release
Contacts:
Integra LifeSciences Holdings Corporation
John B. Henneman, III John Bostjancic
Executive Vice President Senior Director of Finance
Chief Administrative Officer (609) 936-2239
(609) 936-2481 jbostjancic@integra-ls.com
jhenneman@integra-ls.com
Integra LifeSciences Reports Record Operating Earnings and
Revenues for the Second Quarter 2003
Cash Flows from Operations Totaled $14.2 Million
Plainsboro, NJ /July 31, 2003 / -- Integra LifeSciences Holdings Corporation
(Nasdaq: IART) today reported net income of $5.4 million, or $0.18 per share,
for the second quarter of 2003, as compared to net income of $4.2 million, or
$0.14 per share, in the second quarter of 2002.
Total revenues in the second quarter of 2003 increased $16.3 million to $42.7
million, a 62% increase over total revenues in the second quarter of 2002. This
growth was led by a $16.5 million increase in product revenues to $41.2 million
in the second quarter of 2003. Revenues from product lines acquired since the
beginning of the second quarter of 2002 accounted for $12.2 million, or 74%, of
the increase in product revenues. Excluding revenues attributable to product
lines acquired since the beginning of the second quarter of 2002, second quarter
2003 product revenues increased by $4.3 million, or 17%, over the prior year
period. Changes in foreign currency exchange rates accounted for $382,000 of
this increase.
Operating income for the period was $8.3 million, a 51% increase over the second
quarter of 2002.
"The second quarter was a period of strong growth for Integra," said Stuart M.
Essig, Integra's President and Chief Executive Officer. "We attained record
revenues and operating income while continuing to integrate our acquired
businesses and consolidate our operations. Excluding the impact of acquisitions,
we continue to generate strong organic product revenue growth, which has
averaged 18% year to date in 2003. While acquisitions are an important part of
our growth strategy, we remain very focused on growing our existing operations."
Our revenues were as follows:
Quarter Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Product Revenue:
Neuromonitoring products $ 10,552 $ 8,398 $ 21,084 $ 16,980
Operating room products 12,833 8,394 25,421 16,266
Instruments 12,358 3,682 18,605 7,505
Private label products 5,494 4,299 11,257 8,541
-------- -------- -------- --------
Total Product Revenue 41,237 24,773 76,367 49,292
Other revenues 1,499 1,668 3,149 3,065
-------- -------- -------- --------
Total Revenue $ 42,736 $ 26,441 $ 79,516 $ 52,357
Increased sales of intracranial monitoring products and drainage systems
provided most of the year-over-year revenue growth in neuromonitoring product
revenues. Sales of neurosurgical shunt products acquired in 2002 and the
continued growth in sales of DuraGen(R) Dural Graft Matrices and NeuraGen(TM)
Nerve Guides accounted for the increase in operating room product revenues.
Sales of the recently acquired JARIT(R) and Padgett surgical instrument lines
contributed $8.1 million of the year over year increase in instrument revenues.
Increased sales of our Selector(R) Ultrasonic Aspirator and Redmond-Ruggles(TM)
products lines contributed to the remainder of the growth in instrument product
revenues. Growth in our private label product revenues is primarily attributable
to sales of recently acquired product lines.
The decline in other revenue from the prior year period reflects the effect of a
$500,000 event payment received from Johnson & Johnson in the second quarter of
2002, which was partially offset by an increase in product development revenues
in 2003.
Acquisitions and new product launches continue to contribute significantly to
the Company's product revenue growth. The Company's product revenues in the
second quarter of 2003 included the following amounts in sales of acquired
product lines:
Total
Revenue From Product Acquired Product Total
Lines Acquired in Product Revenue: Product
2003 2002 Revenue All Other Revenue
------ ------ -------- --------- -------
Neuromonitoring products $ -- $ 845 $ 845 $ 9,707 $10,552
Operating room products -- 2,424 2,424 10,409 12,833
Instruments 7,010 1,099 8,109 4,249 12,358
Private label products -- 799 799 4,695 5,494
------ ------ -------- --------- -------
Total product revenue $7,010 $5,167 $12,177 $29,060 $41,237
Gross margin on product revenues in the second quarter of 2003 decreased three
percentage points from the second quarter of 2002 to 59%. This decline was
attributable to the negative impact of $514,000 of inventory fair value purchase
accounting adjustments from recent acquisitions and the change in product mix
caused by our acquisition of JARIT Instruments. Excluding inventory fair value
purchase accounting adjustments, gross margin on product revenues would have
been 60% in the second quarter of 2003. There were no inventory fair value
purchase accounting adjustments recorded in the second quarter of 2002.
Research and development expenses increased $476,000 in the second quarter of
2003 primarily as a result of increased spending on development of a next
generation ultrasonic aspirator product line and development programs associated
with recent acquisitions. Sales and marketing expense increased by $3.2 million
to $9.1 million in the second quarter of 2003, a slight decrease as a percentage
of product revenues from the prior year period. The decrease as a percentage of
product revenues in 2003 was primarily attributable to costs incurred in the
first half 2002 to recruit and train the expanded domestic Integra
NeuroSciences(TM) sales force. General and administrative expense increased by
$1.8 million over the second quarter of 2002 to $4.7 million, primarily as a
result of costs incurred in operating the businesses acquired in 2002 and 2003.
The Company reported net interest expense of $198,000 in the second quarter of
2003, as compared to net interest income of $1.0 million in the prior year
period, primarily as a result of $1.0 million of interest expense associated
with the Company's $120.0 million of contingent convertible subordinated notes.
Other income increased by $396,000 to $451,000 as a result of gains realized on
the sale of marketable securities and increased exchange rate gains on foreign
currency-based transactions.
The $835,000 increase in income tax expense in the second quarter of 2003
reflects an increase in the Company's expected effective tax rate to 36.5% for
2003 as compared to 35% reported for the second quarter of 2002.
The Company generated $14.2 million in cash flows from operations in the second
quarter of 2003, as compared to $6.8 million in the prior year quarter.
Operating cash flows improved in the second quarter of 2003 primarily as a
result of higher net income, improved inventory and accounts receivable
management, increased advances on product purchases received from distribution
partners, and a $2.7 million benefit from an increase in accrued expenses. The
majority of the cash flow benefit from the increase in accrued expenses is
expected to reverse in the third quarter of 2003, as many of the liabilities
associated with this increase, including interest accrued on the contingent
convertible subordinated notes, will be paid in the third quarter.
In the second quarter of 2003 the Company received $14.2 million in net proceeds
from the sale of an additional $15.0 million of its contingent convertible
subordinated notes. The Company's cash and investments totaled $202.0 million at
June 30, 2003.
Integra is updating its expectations for revenues and earnings for 2003 and
2004. We expect total revenues to increase to between $169 and $171 million in
2003 and $196 and $206 million in 2004. Gross margin is expected to be 60% and
62% of product revenues in 2003 and 2004. Excluding a potential in-process
research and development charge related to a $1.5 million milestone payment that
may become due in connection with a product development agreement, we expect our
earnings to be within a range of $0.78 to $0.82 per share in 2003 and $1.05 to
$1.10 per share in 2004. We currently anticipate making the $1.5 million
milestone payment in 2004. The Company's guidance for the third quarter of 2003
is for total revenues in the range of $43.0 to $44.0 million and earnings per
share of $0.18 to $0.19. The Company's third quarter guidance includes the
negative impact of approximately $400,000 of fair value inventory purchase
accounting adjustments from the JARIT acquisition as well as an additional
amount of severance and other charges from our expected third quarter
restructuring activities. Although we have not yet determined the amount of such
additional charges, we expect that it will not exceed $400,000. In accordance
with the Company's usual practices, management's expectations for 2003 and 2004
financial performance do not include the impact of acquisitions or other
strategic corporate transactions that have not yet closed.
The Company has scheduled a conference call for 9:00 am EST today, July 31,
2003, to discuss the financial results for the second quarter of 2003 and to
further discuss 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) 935-2100 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
August 14, 2003 by dialing (973) 341-3080 (access code 3609052) 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, general
surgery and soft tissue repair. 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 860 permanent employees. Please visit the Company's 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, income tax
rates, 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, the Company's
ability to maintain relationships with customers of acquired entities,
physicians' willingness to adopt the Company's recently launched and planned
products and the Company's ability to secure regulatory approval for products in
development may adversely affect the Company's future product revenues; the
Company's ability to increase sales and product volumes may adversely affect its
future gross margins; the geographic mix of the Company's taxable income may
adversely affect the Company's income tax rates; the Company's ability to
integrate acquired businesses, increase product sales and gross margins, and
control its non-product costs may affect its earnings per share; and the
Company's future net income results and its ability to effectively manage its
working capital may affect its future cash flows. 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, 2002 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" and "gross margin on product revenues excluding
inventory fair value purchase accounting adjustments", both of which are
non-GAAP financial measures. A reconciliation of these non-GAAP financial
measures to the most comparable GAAP measure is provided in the tables of
financial information contained at the end of this news release.
These 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, provide a more complete
understanding of factors and trends affecting our ongoing business and
operations. Management strongly encourages investors to review our financial
statements and publicly-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 Month Period Six Month Period
Ended June 30 Ended June 30
2003 2002 2003 2002
Product revenue $41,237 $24,773 $76,367 $49,292
Other revenue 1,499 1,668 3,149 3,065
Total revenue 42,736 26,441 79,516 52,357
Cost of product revenues 17,090 9,465 30,793 18,993
Research and development 2,777 2,301 5,427 4,379
Selling and marketing 9,082 5,928 16,658 11,600
General and administrative 4,736 2,893 9,570 5,856
Amortization 762 364 1,339 714
Total costs and expenses 34,447 20,951 63,787 41,542
Operating income 8,289 5,490 15,729 10,815
Interest (expense) income, net (198) 993 578 1,986
Other income (expense), net 451 55 800 32
Income before income taxes 8,542 6,538 17,107 12,833
Provision for income taxes 3,124 2,289 6,251 4,493
Net income $5,418 $4,249 $10,856 8,340
Diluted earnings per share $ 0.18 $ 0.14 $ 0.36 $ 0.27
Diluted weighted average common
shares outstanding 30,061 30,849 30,463 30,783
Condensed Balance Sheet Data:
June 30 December 31
2003 2002
Cash and marketable securities,
Including non-current portion $ 202,013 $ 132,311
Accounts receivable, net 23,722 19,412
Inventory, net 39,077 28,502
Total assets 392,533 274,668
Current liabilities 29,539 21,921
Long-term debt 119,653 --
Total liabilities 154,446 27,071
Stockholders' equity 238,087 247,597
Reconciliation of non-GAAP financial measures to the most comparable GAAP
measure:
A. Growth in product revenues excluding recently acquired product lines
Excluding revenues attributable to product lines acquired since the beginning of
the second quarter of 2002, second quarter 2003 product revenues increased by
$4.3 million, or 17%, over the prior year period.
Quarter Ended June 30, Increase
2003 2002 $ %
-------- -------- ------- -----
($ in thousands)
Total product revenues, as reported $ 41,237 $ 24,773 $16,464 66%
Less: Sales of products acquired in 2003 7,010 -- 7,010 N/A
Sales of products acquired in 2002 5,167 -- 5,167 N/A
-------- -------- ------- -----
Product revenues excluding acquired products $ 29,060 $ 24,773 $ 4,287 17%
Excluding the impact of acquisitions, we continue to generate strong organic
product revenue growth, which has averaged 18% year to date in 2003.
Six Months Ended June 30, Increase
2003 2002 $ %
-------- -------- ------- -----
($ in thousands)
Total product revenues, as reported $ 76,367 $ 49,292 $27,075 55%
Less: Sales of products acquired in 2003 8,142 -- 8,142 N/A
Sales of products acquired in 2002 10,210 -- 10,210 N/A
-------- -------- ------- -----
Product revenues excluding acquired products $ 58,015 $ 49,292 $ 8,723 18%
B. Gross margin on product revenues excluding inventory fair value purchase
accounting adjustments
Excluding inventory fair value purchase accounting adjustments, gross margin on
product revenues would have been 60% in the second quarter of 2003.
Three Months
Ended
June 30, 2003
-------------
($ in thousands)
Total cost of product revenues, as reported $ 17,090
Less: Inventory fair value purchase accounting adjustments 514
--------
Total cost of product revenues excluding inventory fair
value purchase accounting adjustments $ 16,576
Total product revenues, as reported $ 41,237
Less: Total cost of product revenues, as reported 17,090
--------
Gross margin on product revenues, as reported 24,147
Gross margin as % of product revenues, as reported 59%
Total product revenues, as reported $ 41,237
Less: Total cost of product revenues excluding inventory fair
value purchase accounting adjustments 16,576
--------
Gross margin on product revenues, adjusted to exclude inventory
fair value purchase accounting adjustments 24,661
Gross margin as % of product revenues, adjusted to exclude inventory
fair value purchase accounting adjustments 60%
Source: Integra LifeSciences Holdings Corporation