Integra LifeSciences Holdings Corp. (IART) reported third quarter of fiscal 2010 EPS of 55 cents compared with 49 cents in the year-ago quarter, up 12.2%. However, adjusted EPS (excluding one-time items) was 73 cents, surpassing the Zacks Consensus Estimate of 66 cents and 14% above the year-ago quarter’s 64 cents.
Strong earnings growth was attributable to an 8.3% increase in revenues to $186.6 million, which surpassed the Zacks Consensus Estimate of $183 million. Currency movements impacted the quarter’s sales by $1.5 million, excluding which revenue would have been $188.1 (reflecting a 9% increase)
Sales during the quarter reflected strong internal growth across all segments, primarily the Orthopedic segment of the company. The three segments: Orthopedics ($72.9 million), Neurosurgery ($69.8 million) and Instruments ($43.9 million) grew 13.8%, 3.9% and 7.2%, respectively.
Gross profit in the reported quarter increased 7.4% year over year to $117.4 million. However, gross margin contracted 50 bps to 62.9%, primarily due to a 9.8% increase in the cost of product revenues ($69.2 million).
Integra reported an 8% increase in operating income ($27.8 million), although operating margins declined 130 bps to 14.8%. Operating expenses increased 600 basis points to $87.4 million, led by a rise in Research and development expenses (1.7% to $11.8 million) and selling, general and administrative expenses (8.2% to $75.7 million).
Integra generated $29.6 million of cash flow from operations and used up $7.2 million on capital expenditures in the quarter. The company exited the third quarter with cash and cash equivalents of $82.8 million, up 15.2% from $71.9 million at the end of December 2009. The company repurchased 859,000 shares amounting to $31.3 million.
During the reported quarter, Integra established a senior secured revolving credit facility worth $450 million and a term loan of $150, thereby replacing its old credit facility. The outstanding balance of convertible securities and bank credit stood at $153.5 million (down 32%) and $70 million (down 56.3%) as compared with $225.5 million and $160 million, respectively, at the end of December 2009.
Outlook
Integra reiterated its fiscal 2010 revenue guidance range of $715–$735 million. However, the company raised its adjusted EPS guidance range to $2.72 –$2.80 from the previous range of $2.60–$2.75. The Zacks Consensus Estimates for revenue and EPS are $727 million and $2.71, 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 every year.
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