Integra LifeSciences Holdings Corporation (IART)

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Integra LifeSciences Holdings Corp. (IART)

Q2 2008 Earnings Call

August 12, 2008 9:00 am ET


Stuart Essig - President and Chief Executive Officer

Jack Henneman - Chief Financial Officer

Gerry Carlozzi – Executive Vice President and Chief Operating Officer


Tao Levy - Deutsche Bank

Amit Bala - Citi

Taylor Harris - JP Morgan

Matt - Piper Jaffray

Ameet Hasan - Oppenheimer

William Plovanic - Canaccord Adams

Jayson Bedford - Raymond James

Bruce Jackson - RBC Capital Markets

David Hug - Ford Equity Research

Dave Parr - FIG



Good day everyone and welcome to the Integra LifeSciences Q2 Financial Reporting Conference Call. As a reminder today’s call is being recorded.

At this time I would like to turn the call over to Mr. Stuart Essig, President and Chief Executive Officer. Please go ahead sir.

Stuart Essig - President and Chief Executive Officer

Thank you. Good morning, everyone and thank you for joining us for the Integra LifeSciences second quarter 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 second quarter of 2008, which we released last night and update our forward-looking guidance for the rest of the year. We will also take a few minutes later in the call to discuss the acquisition of Theken Company. 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 conference call.

Jack Henneman – Chief Financial Officer

This presentation is open to the general public and can be heard through telephone access or via a 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 August 26, 2008 by dialing 719-457-0820 access code 5425710, or through our 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, August 12, 2008 and unless otherwise posted or announced by Integra, the information in this call should not be relied upon beyond August 26, 2008, the last day 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 expectations of future financial results and product launches and regulatory approvals on 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 the 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 measure is provided in the press release we issued last morning, which is available on our website in the Press Release section under Investor Relations.

Additionally, in the press release and in the current report on Form 8-K that we filed yesterday, we provided explanation 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 to review the highlights of the quarter.

Stuart Essig - President and Chief Executive Officer

Thank you, Jack. The business delivered another strong performance. Total revenues in the second quarter for 2008 increased by $22 million to $157 million or 17% increase over revenues of $135 million in the second quarter of 2007, this was in line with our expectations. Importantly, for the first half of 2008, our revenues came in right within the range that we projected nine months ago when we gave our guidance after the IsoTis acquisition.

While organic growth calculated in the way we have done so historically was 7%, remember that we anticipated a difficult comparison in the first half of 2008. The reasons are unchanged from the prior quarter, underperformance in our ultrasonic aspirator business and the planned rationalization of certain of our medical surgical product lines. As we said last quarter, we anticipate an improvement in our core growth rates both in the medical and surgical products and overall in the second half of the year.

Our neuro ortho implant revenues in the second quarter increased over the prior year period by 37%. Organic growth in this category exceeded 16%. Extremity reconstruction implants grew in excess of 35% this quarter with strong growth from both metal and collagen-based implants.

Revenues from our Medical Surgical Equipment product line increased over the prior year period by 5%. Excluding acquisition, sales of products in the Medical Surgical Equipment category were slightly up over the prior year period. International sales were 27% of total sales this quarter, compared to 24% of revenue in the full year 2007. Foreign exchange had a favorable impact on revenues of $3.7 million.

Over the past year, our company has changed rather significantly. Our goal is to build Integra into one of the top multi division medical device company. We continue to strive to do so in four ways. First, we will innovate new products; second, we will start new businesses from scratch; third, we will grow through acquisitions and business development, and finally we will grow through entering new markets both domestically and internationally.

Last year we launched more than 35 new products. We are well on our way to launching a similar number this year. We continue to invest in our core tissue engineering technology. Our collagen-based products have grown over 25% annually over the past 10 years and we continue to add new products. In addition to our DuraGen Adhesion Barrier trial, we are planning on kicking off two new multi center clinical trials in the next 12 months. The first to expand our indication for Integra dermal regeneration template and the second to gain US approval of our Integra total ankle.

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