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Integra LifeSciences Holdings Corp. (IART)
Q4 2008 Earnings Call
March 2, 2009 9:00 am ET
Stuart M. Essig - Chief Executive Officer, President
Gerard S. Carlozzi - Chief Operating Officer
John B. Henneman III - Chief Financial Officer
Glenn Novarro - RBC Capital Markets
Matt Miksic - Piper Jaffray
Raj Denhoy - Thomas Weisel Partners
David Roman - Morgan Stanley
Amit Bhalla – Citigroup
Tao Levy – Deutsche Bank Securities
Joshua Zable - Natixis Bleichroeder
William Plovanic - Canaccord Adams
Spencer Nam - Summer Street Research
Jayson Bedford - Raymond James
Previous Statements by IART
» Integra LifeSciences Holdings Corp. Q3 2008 Earnings Call Transcript
» Integra LifeSciences Holdings Corp Q2 2008 Earnings Call Transcript
» Integra LifeSciences Holdings Corp. Q4 2007 Earnings Call Transcript
Stuart M. Essig
Good morning everyone and thank you for joining us for the Integra LifeSciences fourth quarter and year end 2008 earnings release conference call. I am Stuart Essig, President and Chief Executive Officer of Integra LifeSciences Holdings Corporation. Gerry Carlozzi, Chief Operating Officer and Jack Henneman, Chief Financial Officer, join me today.
During this call, we will review our financial results for the fourth quarter and full year 2008 and our forward-looking guidance for the full year 2009 which we released this morning. At the conclusion of our prepared remarks, we will take questions from members of the telephonic audience.
Before we begin, Jack will make some remarks regarding the content of this call.
John B. Henneman III
This presentation is open to the general public and can be heard through telephone access or via live webcast. A replay of the conference call will be accessible starting one hour after the conclusion of the live event. Access to the replay is available through March 16, 2009, by dialing 719-457-0820, access code 1460424, or through the webcast accessible on the Investor Relations page of our website.
Today's call is a proprietary presentation of Integra LifeSciences Holdings Corporation and is being recorded by Integra. No recording, reproduction, transcript, transmission, or distribution of today's presentation is permitted without Integra's consent.
Because the content of this call is time sensitive, the information provided is accurate only as of the date of this live broadcast, March 2, 2009. Unless otherwise posted or announced by Integra, the information in this call should not be relied upon beyond March 16, 2009, the last date that an archived replay of the call authorized by Integra will be available.
Certain statements made during this call are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, among others statements concerning management's expectations of future financial results, new product launches, regulatory approval and market acceptance of these new products, future product development programs, and potential business acquisitions are forward-looking. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted results.
For a discussion of such risks and uncertainties, please refer to the Risk Factors included in Item 1A of Integra's annual report on Form 10-K for the year ended December 31, 2007, and the information contained in our subsequent filings with the Securities and Exchange Commission. These forward-looking statements are made based upon our current expectations and we undertake no duty to update information provided during this call.
Certain non-GAAP financial measures are disclosed in this presentation. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the press release we issued this morning which is available on our website in the press release section under Investor Relations.
Additionally, in this press release and in the current report on Form 8-K that we filed this morning, we provide explanations for why management believes that presentation of these non-GAAP financial measures provide useful information to investors regarding Integra's financial condition and results of operations and the reasons for which Integra's management uses the non-GAAP financial measures.
I will now turn the call over to Stuart.
Stuart M. Essig
Integra delivered its 11th consecutive year of high-teens or better revenue growth in 2008. Our 18% constant currency growth reflects the depth and breadth of our business, and the effectiveness of our strategy of balanced internal and acquired growth.
As with many other companies, 2008 presented us with unprecedented challenges including dramatic increases in the volatility of currencies as well as the deteriorating global economy which contracted sharply in the fourth quarter affecting in particular the ability and willingness of customers to purchase capital equipment.
Despite these significant challenges, Integra continues to focus on serving its critical markets, and indeed the strength and the balance in our business allowed us to deliver full year adjusted earnings per share of $2.09, right in the middle of the initial annual guidance range that we provided more than a year ago and ahead of the Street estimate of $2.04.
As we reported early in January, Integra’s total revenues in the fourth quarter of 2008 increased by $17 million to $174.4 million and 11% increase over revenues of $158 million in the fourth quarter of 2007. The strengthening in the US dollar led to a negative currency effect of $3.5 million on sales in the quarter. Excluding the effects of currency exchange rates, revenues increased 13% in the quarter.
For the full year 2008, revenues were $655 million, an increase of $104 million or 19% above 2007 revenues on a reported basis and 18% excluding the effect of the change in currency exchange rates. We are pleased with our revenue growth for the year.
At the beginning of 2008, we guided the sales of $635 million to $655 million for the full year, taking into account revenues from acquisitions which were not yet closed at the time that guidance was given. Our actual revenues came in roughly in line with the bottom of the original annual guidance range we presented. In addition, Integra’s orthopedic business which are both newly acquired and legacy products exceeded our expectations for the year. As you can see, despite the tough environment, we delivered on what we said we would do at the beginning of the year.
In the fourth quarter, US sales were up 16%. International revenues were down due to foreign currency effects and up only modestly in constant currency. To get a little more specific, Europe was up 3% in local currency, though down nearly 8% as reported. Rest of the world was up 5% on a constant currency basis despite capital freezes in several of our main markets. However, on a reported basis, rest of world sales was down almost 2% due to the strong US dollar.
Growth for the full year 2008 was reasonably balanced. The US posted a 19% increase, while Europe was up 15% on a reported basis and 9% in constant currency. Our business in the rest of world was up 27% on both a reported and a local currency basis. Approximately 18% of our revenues are denominated in foreign currencies.
As we discussed in January, our fourth quarter revenues were negatively affected by both exchange rates and a slow-down in spending for capital equipment. We have worked to further refine our assessment of the impact of the economy on hospital capital spending and are developing strategies to grow affected product lines despite these challenges. We believe that approximately 10% of our worldwide revenue can be categorized as capital products. So, more could be affected by a customer’s strategic decision such as to suspend expansion plans.
In the fourth quarter we saw significant decrease in our sales of capital products which were down from the prior year by approximately $3.5 million or 18%, and well below our prior expectations for growth. For the full year, sales of capital products were down slightly because of fourth quarter performance as we’ve previously seen growth in these products during the first 9 months.
We’ve seen the impact of reductions in our customers’ capital spending in both the US and in foreign markets. Indeed, as you may be aware, declines in capital spending are not only a US hospital phenomenon; in fact, freezes on capital expenditures in several foreign markets contributed heavily to our slower sales.
We reported our revenues in three categories; Integra neurosciences, Integra orthopedics, and Integra medical instruments.
The first revenue category, Integra neurosciences encompasses the products sold to the neurosurgeon and the neuro-nurse. The products in this category represented approximately 37% of Integra’s overall revenues in the quarter. Integra neurosciences revenues in the fourth quarter declined 2% to $64 million versus the prior year period. Neurosciences revenues were weak across all capital product lines declining from the prior year period. However, we continued to grow our disposable and implant lines with duraplasty products in particular recording growth rates in the upper single digit range interest eh quarter. From a geographic perspective, domestic sales held up reasonably well and were up over 5% in the quarter. Internationally, however, sales were weak predominantly in the sale of capital equipment. Of course, currency also negatively affected our neurosciences revenues.