Integra LifeSciences (IART) reported EPS of 63 cents for the fourth quarter of fiscal 2010 compared with 53 cents in the year-ago quarter, up 18.9%. However, adjusted EPS (excluding one-time items) was 80 cents, surpassing the Zacks Consensus Estimate of 73 cents and 12.6% above the year-ago quarter.
For fiscal 2010, the company reported adjusted EPS of $2.97, beating the Zacks Consensus estimate of $2.78 and up 13.8% compared with 2009.
Strong earnings growth was attributable to a 5.8% year over year increase in revenues to $194.1 million in the quarter, which surpassed the Zacks Consensus Estimate of $184 million. Currency movements impacted the quarter’s sales by $1.3 million.
For the full year, Integra reported total revenue of $732.1 million, up 7.2% but missing the Zacks Consensus Estimate of $777 million.
Sales during the quarter reflected strong internal growth primarily in Integra’s two major segments, the Orthopedic ($74.1 million, up 8.1%), and Neurosurgery ($74.2 million, up 8.8%). However this strong sales performance has been partially offset by the decline in revenue in Instruments which reported revenue of $45.9, down 2.1% year over year.
However, Integra witnessed only a 2.7% year over year increase in gross profit to $122.8 million in the reported quarter, due to a huge 11.5% increase in cost of product revenue ($71.3 million). As a result, gross margin contracted 190 basis points (bps) to 63.2%.
Operating expenses increased 8.6% to $95.9 million, led by a rise in research and development expenses (12.9% to $13.3 million) and selling, general and administrative expenses (8% to $82.6 million). This in turn led to a 14% fall in operating income causing a drastic 318 bps decline in operating margin to 13.86%.
Integra generated $28.4 million of cash flow from operations and used up $18.2 million on capital expenditures in the quarter. The company exited the fourth quarter with cash and cash equivalents of $128.8 million, up 79.1% year over year.
Outlook
Based on a balanced quarter, Integra provided its fiscal 2011 revenue guidance range of $765–$780 million and adjusted EPS guidance range of $2.87–$3.02. The Zacks Consensus Estimates for revenue and EPS are $824 million and $2.98, respectively.
Integra is a global leader in regenerative medicine. The company’s products are used primarily in neurosurgery, extremity reconstruction, orthopedics, and general surgery to treat millions of patients in the U.S., Europe and the Asia Pacific every year.
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