On February 23, 2017 Integra LifeSciences Holdings Corporation (NASDAQ:IART) reported its financial results for the fourth quarter and full year ending December 31, 2016 (Press release, Integra LifeSciences, FEB 23, 2017, View Source [SID1234517844]).
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Highlights:
Full-year 2016 revenue increased 12.4% to $992.1 million, while organic revenue increased 9.0% over the prior year;
Fourth quarter revenue increased 6.0% over the prior-year quarter to $255.7 million, with organic revenues up 7.0%;
Fourth quarter GAAP gross margin increased to 66.6% or 390 basis over the prior-year period; adjusted gross margin in the fourth quarter reached a record high of 70.2%, a 190 basis point increase over the prior year period;
Fourth quarter GAAP earnings per diluted share (EPS) amounted to $0.35, a 75% increase over the prior year period; adjusted EPS amounted to $0.52, or an increase of 18%;
Full-year 2016 cash flow from operations was $116.4 million, a decrease from $117.1 million over the prior year. Excluding $42.8 million for the accreted interest payment associated with the convertible notes, cash flow from operations was $159.2 million, above the high end of our guidance range.
Total revenues for the full year 2016 were $992.1 million, an increase of $109.3 million, or 12.4%, over the full year 2015. Total revenues for the fourth quarter were $255.7 million, representing an increase of $14.5 million, or 6.0%, over the fourth quarter of 2015.
Organic revenues, computed by adjusting GAAP revenues as set forth in the attached reconciliation, increased over 2015 by 9.0% in the full year, and 7.0% in the fourth quarter.
"We were pleased with our performance in 2016, which resulted in full-year organic revenue growth of 9% and full-year adjusted gross margin of 69.5%," said Peter Arduini, Integra’s President and Chief Executive Officer. "We look forward to a transformative 2017 as we integrate two of the largest acquisitions in the Company’s history."
The Company reported GAAP net income of $74.6 million, or $0.94 per diluted share, for the full year 2016, compared to GAAP net income of $6.9 million, or $0.10 per diluted share in 2015. Results in 2015 included a $35.6 million non-cash tax charge to establish a valuation allowance for certain deferred tax assets associated with the SeaSpine separation. The Company reported GAAP net income of $28.2 million, or $0.35 per diluted share, in the fourth quarter of 2016 compared to GAAP net income of $15.0 million, or $0.20 per diluted share, in the fourth quarter of 2015.
Adjusted measures discussed below are computed with the adjustments to GAAP reporting set forth in the attached reconciliation.
Adjusted EBITDA for the full year 2016 was $231.7 million, or 23.4% of revenue, an increase from $195.6 million, or 22.2% of revenue, in the prior year. Adjusted EBITDA for the fourth quarter of 2016 was $66.5 million, or 26.0% of revenue, an increase from $56.7 million, or 23.5% of revenue, in the fourth quarter of the prior year.
Adjusted net income for the full year 2016 was $135.3 million, or $1.76 per diluted share, compared to $108.6 million, or $1.54 per diluted share in 2015. Adjusted net income for the fourth quarter of 2016 was $40.7 million, or $0.52 per diluted share, compared to adjusted net income of $32.8 million, or $0.44 per diluted share, in the fourth quarter of 2015.
For the year ended December 31, 2016, cash flows from operations totaled $159.2 million, excluding a $42.8 million accreted interest payment. Cash invested in capital expenditures was $47.3 million. Adjusted free cash flow conversion for the trailing twelve months ended December 31, 2016 was 82.7% versus 77.0% for the twelve months ended December 31, 2015. Integra generated $49.3 million of cash flows from operations, excluding a $42.8 million accreted interest payment, and invested $21.2 million in capital expenditures in the fourth quarter of 2016.
Outlook for 2017
The Company expects full year 2017 revenues to be between $1.12 billion and $1.14 billion, including the Derma Sciences acquisition, and organic sales growth to be between 7% and 8.5%. The Company expects its GAAP EPS for the full year to be between $0.49 and $0.55, and adjusted EPS to be between $1.88 and $1.94.
"In 2016, faster growth in higher margin products resulted in meeting or exceeding the high-end of our earnings and operating cash flow targets," said Glenn Coleman, Chief Financial Officer. "The Derma Sciences tender offer has been completed and we expect the transaction to close shortly. We are now including Derma Sciences into our 2017 guidance, while the assumptions underlying our base business remain unchanged."
Full-year 2017 revenue and EPS guidance includes the expected financial impact of Derma Sciences. Our GAAP EPS and cash flow guidance also reflect the estimated expense and cash impact of estimates for pre-close costs associated with the Codman Neurosurgery acquisition. The post-closing financial impact of the Codman Neurosurgery acquisition is excluded from guidance and will be updated later in the year.
In the future, the Company may record, or expect to record, certain additional revenues, gains, expenses or charges as described in the Discussion of Adjusted Financial Measures below that it will exclude in the calculation of organic revenue growth, adjusted EBITDA and adjusted EPS for historical periods and in providing adjusted EPS guidance.