Integra LifeSciences Holdings Corporation
) reported EPS of 30 cents in the second quarter of fiscal 2012,
significantly up from 2 cents in the year-ago quarter. Adjusted EPS
increased 5.7% year over year to 74 cents and comfortably beat the
Zacks Consensus Estimate of 68 cents.
Total revenue during the quarter increased 9% year over year
(10% at constant exchange rates or CER) to $210.2 million and came
ahead of the Zacks Consensus Estimate of $206 million. The healthy
revenue growth was primarily on the back of improved sales across
all the segments of Integra.
Segment wise, barring International revenues (down 4% year
over year to $45.7 million), all the other segments of Integra,
namely U.S. Spine & Other, U.S. Neurosurgery, U.S. Instruments
and U.S. Extremities recorded growth of 13% ($48.8 million), 2% (to
$42.3 million), 9% ($41.3 million) and 38% ($32.0 million)
respectively at CER.
Product category wise, worldwide Orthopedics sales increased 17%
year over year to $95.6 million (22% increase in US and 2% dip
outside US) in the quarter. However, the company also registered 1%
year-over-year drag in worldwide Neurosurgery sales to $67.8
million as 2% rise in US Neurosurgery revenues were more than
offset by a 5% dip in non-US revenues during the quarter. Worldwide
Instruments revenues were $46.7 million, up 7% year over year with
10% increase in US sales and 8% decline in non-US sales.
Integra witnessed a 9.5% year-over-year increase in gross profit
to $131.9 million. Gross margin during the quarter was up 40 basis
points (bps) to 62.7%. During the quarter, research and development
expenses rose 3.1% to $13.1 million but selling, general and
administrative expenses were almost flat year over year at $96.1
million. Operating margin during the quarter expanded a huge 450
bps to 10.8%.
Integra exited the quarter with $114.8 million in cash, cash
equivalents and short-term investments compared with $100.8 million
at the end of 2011. The company generated $2.3 million in cash flow
from operations and incurred capital expenditures of $14.2 million
in the quarter. Additionally, the company borrowed $155 million
from its credit facility to fund the maturity of its 2012 Senior
On the back of strong results in the second quarter, Integra
increased its revenue guidance to $828 - $838 million (earlier
guidance was $820-$835 million) at CER. However, the company
reiterated its fiscal 2012 adjusted EPS guidance at $2.97-$3.06.
The current Zacks Consensus revenues and EPS guidance of $830
million and $3.04 respectively are in line with the company's
We are encouraged by the company's balanced segmental growth in
the reported quarter amidst a challenging macroeconomic
environment. The company's focus on strategic initiatives to drive
growth and profitability in the orthopedic market is quite
encouraging. Several initiatives on the company's part like planned
product launches and acquisitions are expected to accelerate sales
growth for the next several quarters.
However, tighter capital spending continues to challenge the
surgical instruments market. Moreover, Integra faces direct
competition in the medical instruments & supplies industry from
major players like
). Currently, the company retains a short-term Zacks #3 Rank (Hold
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