BMET Biomet (MM)

Biomet, Inc. (NASDAQ:BMET) today reported record sales and earnings results for its first quarter ended August 31, 2005. Net sales increased 11% to $484,903,000. Operating income increased 41% to $151,410,000 from $107,232,000 and increased 8%, on an adjusted basis, from $140,254,000. Net income increased 66% to $100,299,000 from $60,433,000 and increased 10%, as adjusted, from $91,023,000. Diluted earnings per share increased 67% to $0.40 from $0.24 and increased 11%, on an adjusted basis, from $0.36. The Company's 2004 reported results reflect the acquisition of Merck KGaA's interest in the Biomet Merck joint venture on March 19, 2004, as well as the acquisition of Interpore International, Inc. on June 18, 2004. Adjusted results for last year, which are non-GAAP financial measures exclude amortization of inventory step-up and write-off of in-process research and development related to these acquisitions. A reconciliation to comparable GAAP measures is included in this press release. President and Chief Executive Officer Dane A. Miller, Ph.D., stated, "The Company's record first quarter results are attributable to continued strong sales of orthopedic reconstructive devices and dental reconstructive implants. We continue to invest in sales and marketing initiatives in order to solidify our long-term growth prospects in the musculoskeletal products marketplace." Excluding the impact of foreign currency, which increased first quarter sales by $3.7 million, net sales increased 10%. First quarter sales in the United States increased 7%, while international sales increased 16%, on a constant currency basis. During the first quarter of fiscal year 2006, worldwide reconstructive device sales increased 15% to $323,815,000. Excluding the effects of foreign currency, reconstructive device sales increased 14% worldwide during the quarter. Knee sales increased 17% worldwide and 16% in the United States during the first quarter. On a constant currency basis, knee sales increased 16% worldwide. Revenue growth for knees during the first quarter continued to be driven by strong demand for Biomet's recent product introductions for total and unicompartmental knee replacement procedures. Hip sales increased 12% worldwide and 7% in the United States during the first quarter. Worldwide hip sales increased 11%, constant currency. The Company's metal-on-metal acetabular systems, porous coated hip stems and second generation highly crosslinked polyethylene components experienced increased market penetration during the first quarter. Extremity sales increased 13% worldwide and 8% in the United States during the first quarter. Excluding the impact of foreign currency, worldwide extremity sales increased 12% during the quarter. Dental reconstructive implant sales increased 15% worldwide during the first quarter and 14% in the United States. On a constant currency basis, worldwide dental reconstructive implant sales increased 14%. Sales of bone cements and accessories increased 16% worldwide and 9% in the United States during the first quarter. Sales of bone cements and accessories increased 15% worldwide, constant currency. Worldwide fixation sales increased 2% to $64,179,000 during the first quarter of fiscal year 2006 and increased 2% worldwide, on a constant currency basis. Lorenz Surgical's craniomaxillofacial fixation sales increased 15% worldwide and increased 10% in the United States during the first quarter. Craniomaxillofacial fixation sales increased 14% worldwide, constant currency. Internal fixation sales increased 6% worldwide and in the United States during the first quarter. Excluding the effect of foreign currency, internal fixation sales increased 6% worldwide. Electrical stimulation device sales decreased 4% worldwide during the first quarter and decreased 2% in the United States. Worldwide external fixation sales decreased 5% and decreased 11% in the United States during the quarter. On a constant currency basis, worldwide external fixation sales decreased 5%. During the first quarter of fiscal year 2006, spinal product sales increased 5% worldwide to $55,326,000, while growth was flat in the United States. Spinal product sales increased 4% worldwide, on a constant currency basis. Sales of spinal implants and orthobiologics for the spine increased 14% worldwide and 8% in the United States, while spinal stimulation sales decreased 7% worldwide and in the United States during the first quarter. Worldwide sales of Biomet's "other products" increased 4% to $41,583,000 during the first quarter of fiscal year 2006 and increased 3% in the United States. Excluding the effects of foreign currency, sales of "other products" increased 3% worldwide. Arthroscopy sales increased 17% worldwide and 14% in the United States during the first quarter. On a constant currency basis, arthroscopy sales increased 16% worldwide. During the first quarter, softgoods and bracing sales decreased 7% worldwide and decreased 6% in the United States. Softgoods and bracing sales decreased 7% worldwide, constant currency. Dr. Miller concluded, "We are pleased with Biomet's sales performance during the first quarter of fiscal year 2006. The Company experienced accelerating worldwide constant currency growth this quarter compared to last quarter in reconstructive products, internal fixation, craniomaxillofacial fixation and arthroscopy products. Additionally, we are pleased with the operational progress and new product line-up at our EBI subsidiary. Consequently, we remain comfortable with the range of analysts' sales and earnings estimates of $497 million to $506 million and $0.42 to $0.44 per share for the second 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. -0- *T Three Months Ended ------------------ 2005 2004 ---- ---- Net Sales $484,903 $438,160 Cost of Sales 134,495 118,970 Cost of Sales, current period impact of inventory step-up - 7,002 --------- --------- Gross Profit 350,408 312,188 S, G, & A 178,182 160,460 R & D 20,816 18,476 In-process research and development - 26,020 --------- --------- Operating Income 151,410 107,232 Other Income (Expense), Net 558 (728) --------- --------- Income Before Taxes And Minority Interest 151,968 106,504 Income Taxes 51,669 48,503 Income Taxes related to inventory step-up - (2,432) --------- --------- Net Income $100,299 $60,433 ========= ========= Earnings per Share Basic .40 .24 Diluted .40 .24 Basic Shares Outstanding 249,582 253,856 Diluted Shares Outstanding 250,656 255,950 U.S. sales $317,326 $296,304 Foreign sales 167,577 141,856 Reconstructive sales $323,815 $282,482 Fixation sales 64,179 62,713 Spinal product sales 55,326 52,909 Other product sales 41,583 40,056 Consolidated Balance Sheets August 31, 2005 May 31, 2005 Assets Cash and Investments $193,623 $177,074 Accounts and notes receivable, net 455,821 479,745 Inventories 471,659 469,791 Other current assets 110,624 108,712 Fixed Assets, net 326,820 322,887 Goodwill 432,255 435,621 Other Assets 101,602 102,747 ----------- ----------- Total Assets $2,092,404 $2,096,577 =========== =========== Liabilities and Stockholders' Equity Current Liabilities $518,375 $501,391 Other Liabilities 29,819 31,255 Stockholders' Equity 1,544,210 1,563,931 ----------- ----------- Total Liabilities and Stockholders' Equity $2,092,404 $2,096,577 =========== =========== *T 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 current period 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 Interpore International, Inc.; (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. -0- *T BIOMET, INC. Reconciliation of non-GAAP financial information to GAAP financial information RESULTS FOR THE QUARTERS ENDED AUGUST 31 (in thousands, except per share data) 2005 2004 ---- ---- Percent Percent Amount of Sales Amount of Sales --------- --------- --------- --------- Operating income, as reported $151,410 31.2% $107,232 24.5% Inventory step-up -- -- 7,002 1.6 In-process research and development -- -- 26,020 5.9 --------- --------- --------- --------- Operating income, as adjusted $151,440 31.2% $140,254 32.0% ========= ========= ========= ========= Net income, as reported $100,299 20.7% $60,433 13.8% Inventory step-up -- -- 7,002 1.5 In-process research and development -- -- 26,020 5.9 Tax effect of inventory step-up -- -- (2,432) (.4) --------- --------- --------- --------- Net income, as adjusted $100,299 20.7% $91,023 20.8% ========= ========= ========= ========= 2005 2004 ---- ---- Basic Diluted Basic Diluted --------- --------- --------- --------- Earnings per share, as reported $0.40 $0.40 $0.24 $0.24 Inventory step-up -- -- .03 .03 In-process research and development -- -- .10 .10 Tax effect of inventory step-up -- -- (.01) (.01) --------- --------- --------- --------- Earnings per share, as adjusted $0.40 $0.40 $0.36 $0.36 THREE MONTHS ENDED AUGUST 31, 2005 Sales Growth Sales Growth in Local As Reported FX Impact Currencies 2005 ---- U.S. sales 7% -% 7% Foreign sales 18 2 16 Total sales 11 1 10 Reconstructive sales 15% 1% 14% Fixation sales 2 - 2 Spinal product sales 5 1 4 Other product sales 4 1 3 *T