Integra LifeSciences Holdings (IART)
Q4 2012 Earnings Call
February 21, 2013 8:30 am ET
Peter J. Arduini - Chief Executive Officer, President, Director and Member of Special Award Committee
John B. Henneman - Chief Financial Officer and Executive Vice President of Finance & Administration
Matthew S. Miksic - Piper Jaffray Companies, Research Division
Christopher T. Pasquale - JP Morgan Chase & Co, Research Division
Raj Denhoy - Jefferies & Company, Inc., Research Division
David R. Lewis - Morgan Stanley, Research Division
Robert M. Goldman - CL King & Associates, Inc., Research Division
Spencer Nam - Janney Montgomery Scott LLC, Research Division
David H. Toung - Argus Research Company
Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division
Jayson T. Bedford - Raymond James & Associates, Inc., Research Division
Bruce D. Jackson - Northland Capital Markets, Research Division
Previous Statements by IART
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Good morning, and thank you for joining us for the Integra LifeSciences Fourth Quarter and Full Year 2012 Earnings Release Conference Call. Joining me today are Peter Arduini, President and Chief Executive Officer; and Jack Henneman, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the fourth quarter and full year.
Certain statements made during this call are forward-looking, and actual results might differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC. The forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Certain non-GAAP financial measures are disclosed in this presentation. A reconciliation of these non-GAAP financial measures is available on the Investors section of our website at integralife.com.
In an attempt to shorten our prepared remarks, we will reference the financial results in the press release and will not restate the individual numbers. As a result, you may want to keep a copy of the release handy during the call.
I will now turn the call over to Pete.
Peter J. Arduini
Thank you, Angela. Before we launch into discussing our quarterly results, let me give you a brief update of the recent warning letter. On Tuesday afternoon, we announced that we had received a warning letter relating to our Añasco, Puerto Rico facility. We furnished the warning letter in the Form-8K we filed Tuesday evening. The warning letter cites concerns relating to process validations, corrections and preventive actions in document controls. As we described in the 8K, we stopped distribution of the collagen products manufactured in Añasco in order to confirm that we had successful validation for all such products. We believe we have complete and successful validations for all of our collagen products made in Añasco. And as we speak, a third party expert is revealing every applicable validation and will confirm to us that our assessment is correct. Once we receive that confirmation, we will resume shipping.
We believe we're on track to begin shipping early next week, at which point, we'll file an 8K. At this time, we do not expect the warning letter Añasco to result in either materially higher costs or materially lower revenues. And the guidance we're providing today reflects our current expectations.
Further, this warning letter and its observations do not impact our progress and plans to remediate our Plainsboro, New Jersey manufacturing facility.
Turning to our quarterly financial results. We are pleased with our performance this quarter. Our revenues and earnings were in line with our guidance. For the year, we are at the high end of our guidance range that we provided a year ago and we're looking forward to another productive year. With as many as 25 new products launched, launches planned at 2013, our cost-saving initiatives are well underway, and a successful implementation of our new ERP system at the pilot site, we have strong momentum. However, there are also headwinds. The ERP implementation and other important initiatives require additional investments in 2013 to drive our long-term growth in cost savings. The Medical Device Tax hits us hard as any other company with a big portion of domestic revenues. And we've incorporated these considerations into our guidance for 2013, which Jack will walk through later in the call.
We're pleased with the revenue performance across the majority of our segments. To walk through a few fourth quarter highlights: U.S. Extremities grew almost 9% in the quarter; our Skin and Wound products lines led the growth in U.S. Extremities, increasing double digits. The shoulder line continues to perform in what is effectively a controlled market release, pending the availability of our modular reverse product to round out the offering.
Our Lower Extremity hardware products also performed well. Finally, we completed a small product line acquisition in the Extremities business in January. We look forward to giving you more details when we formally launch the product later this year.
U.S. Spine & Other, which includes our Spine Hardware, OrthoBiologics and Private Label products, increased 5% in the fourth quarter. Each of these components posted increases over prior year revenues, including Spine Hardware, which remains under significant pricing pressure. In Spine Hardware, new product introductions, including the Malibu minimally-invasive surgery system and the Daytona products for deformity correction, drove growth in the quarter. Demand remains for our Evo3 and Mozaik products, driving growth in our Orthobiologics franchise.
U.S. Neurosurgery revenues increased 5% over the fourth quarter of 2011. Sales of our market-leading duraplasty and Cranial Stabilization products continue to drive the majority of this segment's revenue growth, making up for some softness in tissue ablation.
U.S. Instruments posted a strong quarter, growing 7% over an admittedly disappointing Q4 last year. Alternate site instruments, acute care instruments and surgical lighting all grew well. International revenues increased 4% on a reported basis during the fourth quarter. Growth was driven by our rest of the world markets, which reported a 12% increase. We were pleased to see significant revenue growth in China, where early results of our transition to our new distribution network are having a positive effect.