Biomet (NASDAQ:BMET)
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Biomet, Inc. (NASDAQ:BMET) reports record sales and
earnings results today for its third quarter ended February 28, 2006.
Net sales increased 5% to $506,254,000. Operating income increased 9%
to $156,993,000 from $144,270,000 and increased 4%, on an adjusted
basis, from $151,672,000. Net income increased 10% to $106,065,000
from $96,784,000 and increased 4%, as adjusted, from $101,615,000.
Diluted earnings per share increased 13% to $0.43 from $0.38 and
increased 8%, on an adjusted basis, from $0.40.
President and Chief Executive Officer Dane A. Miller, Ph.D.,
stated, "Biomet's record results during the third quarter of fiscal
year 2006 are attributable to continued solid sales growth for
orthopedic reconstructive devices, dental reconstructive implants and
internal fixation devices. Cost of goods sold was increased by
approximately $1.5 million during the quarter due to the previously
announced price increase from the supplier of Biomet's antibiotic
delivery system in Europe. Additionally, Biomet's national branding
campaign increased selling, general and administrative expenses by
approximately 60 basis points during the third quarter. We have chosen
to invest in Biomet's future growth through this awareness program and
we expect the expenses associated with the national branding campaign
to decrease in future quarters."
Excluding the impact of foreign currency, net sales increased 8%
worldwide. International revenues for the third quarter increased 11%,
while domestic revenues increased 6%.
Unless otherwise noted, all of the following percentages are
quoted on a constant-currency basis.
During the third quarter of fiscal year 2006, reconstructive
device sales increased 10% worldwide to $346,610,000. Knee sales
increased 8% in the United States during the third quarter and
increased 9% worldwide. Strong demand for Biomet's new knee products,
including total and unicompartmental systems, continued to drive
growth during the quarter.
Hip sales increased 11% worldwide and in the United States during
the third quarter. Biomet's metal-on-metal acetabular systems and
titanium porous coated hip stems, as well as second-generation highly
crosslinked polyethylene components, continued to receive excellent
market acceptance.
Extremity sales increased 20% worldwide during the third quarter
and 21% in the United States. Dental reconstructive implant sales
increased 16% worldwide and 13% in the United States during the
quarter. Sales of bone cements and accessories decreased 8% worldwide
during the third quarter and decreased 10% in the United States.
Fixation sales increased 2% worldwide during the third quarter of
fiscal year 2006 to $62,338,000. Domestic fixation sales increased 1%
during the quarter. Internal fixation sales increased 15% in the
United States and 7% worldwide during the third quarter. Lorenz
Surgical's craniomaxillofacial fixation sales increased 5% worldwide
during the third quarter and increased 7% in the United States.
Electrical stimulation device sales increased 1% worldwide and in the
United States during the quarter. External fixation sales decreased
10% worldwide during the third quarter and decreased 12% in the United
States.
Spinal product sales increased 3% worldwide to $53,914,000 during
the third quarter and increased 3% in the United States. Sales of
spinal implants and orthobiologics for the spine increased 9%
worldwide and in the United States during the third quarter, while
spinal stimulation sales decreased 4% worldwide and 3% in the United
States.
During the third quarter, sales of the Company's "other products"
increased 8% worldwide to $43,392,000 and increased 4% in the United
States. Arthroscopy sales increased 12% worldwide during the quarter
and increased 7% in the United States. Sales of softgoods and bracing
products increased 2% worldwide and 4% in the United States during the
third quarter.
Dr. Miller concluded, "Biomet continues to experience
market-leading growth in its reconstructive device products segment
despite extremely strong previous year growth comparisons in the
important knee product category. We are pleased with the momentum of
certain EBI product categories, particularly internal fixation. In
addition, electrical stimulation device sales exhibited positive
growth after several quarters of declining sales, while spinal
hardware and orthobiologic products for the spine experienced an
acceleration in growth. However, due to the continued strength of the
U.S. dollar, we estimate that foreign currency will negatively affect
fourth quarter sales by approximately $11 million. Consequently, we
remain comfortable with analysts' sales and earnings estimates of $530
million to $540 million and $0.45 to $0.46 per share for the fourth
quarter of fiscal year 2006."
Biomet, Inc. and its subsidiaries design, manufacture and market
products used primarily by musculoskeletal medical specialists in both
surgical and non-surgical therapy. The Company's product portfolio
encompasses reconstructive products, including orthopedic joint
replacement devices, bone cements and accessories, and dental
reconstructive implants; fixation products, including electrical bone
growth stimulators, internal and external orthopedic fixation devices,
craniomaxillofacial implants and bone substitute materials; spinal
products, including spinal stimulation devices, spinal hardware and
orthobiologics; and other products, such as arthroscopy products and
softgoods and bracing products. Headquartered in Warsaw, Indiana,
Biomet and its subsidiaries currently distribute products in more than
100 countries.
For further information contact Greg W. Sasso, Vice President,
Corporate Development and Communications at (574) 372-1528 or Barbara
Goslee, Manager, Corporate Communications at (574) 372-1514.
This press release contains certain statements that are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, as amended. Although the Company believes that the
assumptions, on which the forward-looking statements contained herein
are based, are reasonable, any of those assumptions could prove to be
inaccurate given the inherent uncertainties as to the occurrence or
non-occurrence of future events. There can be no assurance that the
forward-looking statements contained in this press release will prove
to be accurate. Some of the factors that could cause actual results to
differ from those contained in forward-looking statements made in this
press release include the success of the Company's principal product
lines and reorganization efforts with respect to its EBI operations,
the Company's ability to develop and market new products and
technologies in a timely manner, government regulation, currency
exchange rate fluctuations, reimbursements from third party payors,
litigation, revenue and earnings estimates, and other risk factors as
set forth from time to time in the Company's filings with the SEC. The
inclusion of a forward-looking statement herein should not be regarded
as a representation by the Company that the Company's objectives will
be achieved. The Company undertakes no obligation to publicly update
forward-looking statements, whether as a result of new information,
future events or otherwise.
All of Biomet's financial information may be obtained on our
website at www.biomet.com or you may contact us by e-mail at
investor.relations@biometmail.com.
All trademarks are owned by Biomet, Inc., or one of its
subsidiaries.
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BIOMET, INC.
RESULTS FOR THE QUARTERS ENDED FEBRUARY 28
(in thousands, except per share data)
Three Months Ended Nine Months Ended
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net Sales $506,254 $482,023 $1,485,847 $1,376,857
Cost of Sales 143,061 130,666 417,167 373,349
Cost of Sales, current
period impact of
inventory step-up -- 7,402 -- 21,806
----------- ----------- ----------- -----------
Gross Profit 363,193 343,955 1,068,680 981,702
S, G, & A 185,137 179,224 544,772 505,989
R & D 21,063 20,461 63,182 58,543
In-process research
and development -- -- -- 26,020
----------- ----------- ----------- -----------
Operating Income 156,993 144,270 460,726 391,150
Other Income
(Expense), Net 2,262 2,641 2,575 2,157
----------- ----------- ----------- -----------
Income Before Taxes
And Minority Interest 159,255 146,911 463,301 393,307
Income Taxes 53,190 52,698 155,659 152,465
Income Taxes related
to inventory step-up -- (2,571) -- (7,574)
----------- ----------- ----------- -----------
Net Income 106,065 96,784 307,642 248,416
=========== =========== =========== ===========
Earnings per Share
Basic .43 .38 1.24 .98
Diluted .43 .38 1.23 .97
Basic Shares
Outstanding 246,859 252,182 248,270 253,000
Diluted Shares
Outstanding 247,772 253,993 249,202 255,029
U.S. sales $332,678 $313,204 $975,605 $918,514
Foreign sales 173,576 168,819 510,242 458,343
Reconstructive sales $346,610 $326,220 $1,006,764 $910,087
Fixation sales 62,338 62,090 187,192 185,131
Spinal product sales 53,914 52,615 164,267 158,756
Other product sales 43,392 41,098 127,624 122,883
Consolidated Balance Sheets February 28, 2006 May 31, 2005
Assets
Cash and Investments $169,836 $177,074
Accounts and notes receivable,
net 498,761 479,745
Inventories 523,323 469,791
Other current assets 117,402 108,712
Fixed Assets, net 340,872 322,887
Goodwill 432,966 435,621
Other Assets 94,807 102,747
----------------- -----------------
Total Assets $2,177,967 $2,096,577
================= =================
Liabilities and Stockholders'
Equity
Current Liabilities $506,202 $501,391
Other Liabilities 29,195 31,255
Stockholders' Equity 1,642,570 1,563,931
----------------- -----------------
Total Liabilities and
Stockholders' Equity $2,177,967 $2,096,577
================= =================
Management uses non-GAAP financial measures, such as net sales,
excluding the impact of foreign currency, operating income as
adjusted, net income as adjusted, and diluted earning per share as
adjusted. The term "as adjusted", a non-GAAP financial measure, refers
to financial performance measures that exclude the following charges:
(a) the impact of inventory step-up related to the acquisition of the
interest of Merck KGaA in the Biomet Merck joint venture and Interpore
International, Inc.; (b) in-process research and development written
off as of the closing date related to the acquisition of the interest
of Merck KGaA in the Biomet Merck joint venture and Interpore
International, Inc.; and (c) tax effect of item (a) above. Inventory
stepped-up to its current fair market value in an acquisition and
subsequently sold, results in a higher cost of goods sold during the
periods in which the stepped-up inventory is sold, thus overstating
cost of goods sold and understating gross margins versus historical
and future periods in which the inventory sold represents the actual
cost of products manufactured. In-process research and development
written off as of the closing date of an acquisition is a one-time
event that is not indicative of future results. The Company's
management believes that the presentation of these measures provides
useful information to investors. These measures may assist investors
in evaluating the Company's operations, period over period. Management
uses these measures internally for evaluation of the performance of
the business, including the allocation of resources and the evaluation
of results relative to team member performance compensation targets.
Investors should consider these non-GAAP measures only as a supplement
to, not as a substitute for or as superior to, measures of financial
performance prepared in accordance with GAAP.
BIOMET, INC.
Reconciliation of non-GAAP financial information to GAAP
financial information
RESULTS FOR THE QUARTERS ENDED FEBRUARY 28, 2005 (last year)
(in thousands, except per share data)
Three Months Nine Months
--------------------- ---------------------
Percent of Percent of
Amount Sales Amount Sales
---------- ---------- ---------- ----------
Operating income, as
reported $144,270 29.9% $391,150 28.4%
Inventory step-up (a) 7,402 1.5 21,806 1.6
In-process research and
development (b) -- -- 26,020 1.9
---------- ---------- ---------- ----------
Operating income, as
adjusted $151,672 31.4% $438,976 31.9%
Net income, as reported $96,784 20.1% $248,416 18.0%
Inventory step-up (a) 7,402 1.5 21,806 1.6
In-process research and
development (b) -- -- 26,020 1.9
Tax effect of inventory
step-up (c) (2,571) (0.5) (7,574) (0.5)
---------- ---------- ---------- ----------
Net income, as adjusted $101,615 21.1% $288,668 21.0%
Three Months Nine Months
--------------------- ---------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
Earnings per share, as
reported $0.38 $0.38 $0.98 $0.97
Inventory step-up (a) 0.03 0.03 0.09 0.09
In-process research and
development (b) -- -- 0.10 0.10
Tax effect of inventory
step-up (c) (0.01) (0.01) (0.03) (0.03)
---------- ---------- ---------- ----------
Earnings per share, as
adjusted $0.40 $0.40 $1.14 $1.13
Current year sales growth as reported and in local currencies is as
follows:
Sales Sales Sales Sales
Growth Growth in Growth Growth in
As FX Local As FX Local
Reported Impact Currencies Reported Impact Currencies
Three Months Nine Months
--------------------------- ---------------------------
U.S. sales 6% 0% 6% 6% 0% 6%
Foreign sales 3 8 11 11 2 13
Total sales 5 3 8 8 1 9
Reconstructive
sales 6% 4% 10% 11% 0% 11%
Fixation sales 0 2 2 1 0 1
Spinal product
sales 2 1 3 3 0 3
Other product
sales 6 2 8 4 0 4
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