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IART > SEC Filings for IART > Form 8-K on 25-Feb-2014All Recent SEC Filings

Show all filings for INTEGRA LIFESCIENCES HOLDINGS CORP

Form 8-K for INTEGRA LIFESCIENCES HOLDINGS CORP


25-Feb-2014

Results of Operations and Financial Condition, Financial State


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 25, 2014, Integra LifeSciences Holdings Corporation (the "Company") issued a press release announcing financial results for the quarter and year ended December 31, 2013 (the "Press Release"). A copy of the Press Release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item. In the financial statements portion of the Press Release, the Company has included a reconciliation of GAAP revenues to adjusted revenues for the quarter and year ended December 31, 2013, and GAAP net
(loss)/income to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA excluding stock-based compensation, GAAP net (loss)/income to adjusted net income, and GAAP (losses)/earnings per diluted share to adjusted earnings per diluted share used by management for the quarters and years ended December 31, 2013 and 2012, as well as GAAP net income to adjusted net income and GAAP earnings per diluted share to adjusted earnings per diluted share used by management for guidance for the year ending December 31, 2014. In addition, the Company included a supplemental disclosure of revenue by reporting segments in the financial statements portion of the Press Release. The information contained in Item 2.02 of this Current Report on Form 8-K (including the Press Release and selected historical financial information) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information contained in Item 2.02 of this Current Report on Form 8-K (including the Press Release and selected historical financial information) shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

Discussion of Adjusted Financial Measures In addition to our GAAP results, we provide adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share. Adjusted revenues consist of growth in total revenues excluding the effects of currency exchange rates on the current period's revenues and the contribution of revenues from discontinued products in both the current and prior periods' revenues. The various measures of adjusted EBITDA consist of GAAP net (loss)/income, excluding: (i) depreciation and amortization, (ii) other income (expense), (iii) interest income and expense,
(iv) income taxes, (v) those operating expenses also excluded from adjusted net income and, as appropriate (vi) stock-based compensation expense. The measure of adjusted net income consists of GAAP net (loss)/income, excluding: (i) manufacturing facility remediation costs; (ii) global enterprise resource planning ("ERP") implementation charges; (iii) structural optimization charges;
(iv) certain employee termination charges; (v) discontinued product lines charges; (vi) acquisition-related charges; (vii) certain expenses associated with product recalls; (viii) impairment charges; (ix) intangible asset amortization expense; (x) convertible debt non-cash interest; and (xi) income tax impact from adjustments and other items. The adjusted earnings per diluted share measure is calculated by dividing adjusted net income attributable to diluted shares by diluted weighted average shares outstanding. Because the Company reported a GAAP net loss in the full year ended December 31, 2013, the calculation of GAAP diluted weighted average shares outstanding for the full year 2013 period excludes the effects of stock options and unvested restricted stock, as the effect of these equity awards would be anti-dilutive.

The Company believes that the presentation of adjusted revenues and the various adjusted EBITDA, adjusted net income and adjusted earnings per diluted share measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Management uses non-GAAP financial measures in the form of adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share when evaluating operating performance because we believe that the inclusion or exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company's acquisition, integration, and restructuring activities, for which the amounts are non-cash in nature, or for which the amounts are not expected to recur at the same magnitude as we implement certain tax planning strategies, provides a supplemental measure of our operating results that facilitates comparability of our operating performance from period to period, against our business model objectives, and against other companies in our industry. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our core business and the valuation of our Company.
Adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share are significant measures used by management for purposes of:

•         supplementing the financial results and forecasts reported to the
          Company's board of directors;


•         evaluating, managing and benchmarking the operating performance of the
          Company;

• establishing internal operating budgets;

• determining compensation under bonus or other incentive programs;

• enhancing comparability from period to period;

• comparing performance with internal forecasts and targeted business models; and

• evaluating and valuing potential acquisition candidates.

The measure of adjusted revenues that we report reflects the reduction in total revenues for the quarter and year ended December 31, 2013 adjusted for the effects of currency exchange rates on current period revenues. We provide this measure because changes


in foreign currency exchange rates can distort our revenue reduction favorably or unfavorably, depending upon the strength of the U.S. dollar in relation to the various foreign currencies in which we generate revenues. We generate significant revenues outside the United States in multiple foreign currencies including euros, British pounds, Swiss francs and Australian and Canadian dollars. We believe this measure provides useful information to determine the success of our international selling organizations in increasing sales of products in their local currencies without regard to fluctuations in currency exchanges rates, which we have no control over.

The measure of adjusted net income reflects GAAP net income adjusted for one or more of the following items, as applicable:

•         Manufacturing facility remediation costs. These costs represent
          expenses associated with remediation and related unplanned idle time
          and underutilization at the Plainsboro, NJ and Añasco, Puerto Rico
          manufacturing facilities. Management excludes this item when evaluating
          the Company's operating performance because of the infrequent nature
          and the magnitude of this item.


•         Global ERP implementation charges. Systems implementation charges
          consist of the non-capitalizable portion of internal labor and outside
          consulting costs related to the implementation of a global ERP system.
          We have inherited many diverse business processes and different
          information systems through our numerous acquisitions. Accordingly, we
          are undertaking this initiative in order to standardize business
          processes globally and to better integrate all of our existing and
          acquired operations using one information system. Although recurring in
          nature given the expected timeframe to complete the implementation for
          our existing operations and our expectation to continue to acquire new
          businesses and operations, management excludes these charges when
          evaluating the operating performance of the Company because the
          frequency and amount of such charges vary significantly based on the
          timing and magnitude of the Company's implementation activities. In
          addition, with the global ERP project continuing the application
          development phase and entering the testing phase, more costs of the
          project will be capitalized and, therefore, are not comparable to
          earlier periods.


•         Structural optimization charges. These charges, which include employee
          termination and other costs associated with exit or disposal of
          facilities, costs related to acquisition integration, costs related to
          transferring manufacturing and/or distribution activities to different
. . .


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

99.1 Press release with attachments, dated February 25, 2014, issued by Integra LifeSciences Holdings Corporation


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