Integra LifeSciences Holdings Corp.
) reported adjusted earnings per share (EPS) of 39 cents in the
first quarter of 2013, declining 45.1% from the year-ago quarter,
as well as below the Zacks Consensus Estimate of 48 cents by
However, including some one-time items, the company reported
net loss of $4.1 million or 15 cents per share came in narrower
than net income of $6.7 million or 23 cents a share reported in
first quarter of 2013. Decline in the earnings is attributable to
product recall, from all the segments except Extremities, and
related product shortages.
Total revenue during the reported quarter increased marginally
by 0.2% year over year (flat at constant exchange rates or CER)
to $196.7 million. The revenue came in below the Zacks Consensus
Estimate of $200 million.
The revenue remained sluggish mainly due to the product recall
which hurt the topline by $2.9 million. Owing to this recall, the
company is estimated to have lost the opportunity to tap sales in
the range of $6 million and $7 million. Sales of DuraGen and few
selected products in the company's Private Label business were
adversely affected due to this recall.
Revenues from U.S. Neurosurgery declined 3.0% year over year
to $39 million. Within this segment, the product recall affected
the dural repair sales. Sales of tissue ablation, critical care
and cranial stabilization increased in mid-single digits.
U.S. Instruments revenue decreased 2.8% year over year to
$36.9 million. Low sales in Xenon lighting and alternate site
products led to the decline in revenues. Increase in LED
lighting, instruments and retractors sales to hospitals partially
offset the lower sales.
International segment revenue declined 1.7% year over year to
$45.8 million. Product recalls and product shortages drove the
decline within this segment.
Revenue in the U.S. Extremities segment surged 18% year over
year as the product recall did not affect this segment. Robust
demand in regenerative medicine, and foot and ankle business
drove the segment's revenue. Revenue of all the products
increased at about double-digits.
Revenue from U.S. Spine & Other decreased 2.8% year over
year to $43.5 million. Decline in the segment's revenue is
attributable to low sale of spinal hardware products. Sale of
spinal hardware products decreased mainly due to pricing pressure
and a challenging market. Within this segment Orthobiologics
sales increased while sales in the Private Label business
decreased due to the product recall.
Integra witnessed a 4.2% year over year decrease in gross
profit to $116.4 million. Gross margin during the quarter was
down 270 basis points (bps) to 59.2%. During the quarter,
research and development expenses increased 6.7% to $12.7 million
while selling, general and administrative expenses increased
14.6% year over year to $100.2 million. For the quarter, the
company incurred an operating loss of $44 million compared to
operating profit of $17.5 million.
Integra exited the first quarter of 2013 with $89.7 million in
cash and cash equivalents compared with $96.9 million at the end
of 2012. The company used $7.8 million in cash flow from
operations and invested $10.9 million in capital expenditures in
Integra lowered its fiscal 2013 guidance. The company expects
to generate revenues between $840 million and $852 million down
from the previously guided range of $865 million and $880
million. Adjusted EPS were guided in the range of $2.40-$2.70
from the previously guided $3.08−$3.27. The current Zacks
Consensus Estimate for revenues and EPS of $844 million and
$2.49, respectively, are in line with the company's guided
This quarter the financials of the company were adversely
affected owing to the product recalls. The product recall and
related product shortages hurt all its segments except
On the other hand, future company initiatives such as planned
product launches and acquisitions are expected to accelerate
sales growth for the next several quarters.
However, tighter capital spending and pricing pressure
continue to challenge the market. Moreover, the company believes
that the medical device excise tax and new depreciation on its
ERP system will temper its 2013 margin growth.
Currently, the company retains a Zacks Rank #5 (Strong
While we prefer to remain on the sidelines on Life
Technologies, other medical device stocks worth a look are
Anika Therapeutics Inc.
Aeterna Zentaris Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
AETERNA ZENTARS (AEZS): Free Stock Analysis
ANIKA THERAPEUT (ANIK): Free Stock Analysis
ATHERSYS INC (ATHX): Free Stock Analysis
INTEGRA LIFESCI (IART): Free Stock Analysis
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