15.10.2007 21:35:00
|
Biomet Announces Financial Results for First Quarter of Fiscal Year 2008
Biomet, Inc. (NASDAQ:BMET) announced today financial results for its
first fiscal quarter ended August 31, 2007.
Net sales increased 9% to $552.3 million Worldwide reconstructive device sales increased 13% reported (12%
constant currency, excluding instruments) Worldwide knee sales increased 13% reported (14% constant currency,
excluding instruments) Worldwide dental sales increased 20% reported (17% constant
currency)
On September 25, 2007, Biomet Inc. merged with LVB Acquisition Merger
Sub, Inc., a wholly-owned subsidiary of LVB Acquisition, Inc. LVB
Acquisition, Inc. is indirectly owned by investment partnerships
directly or indirectly advised or managed by The Blackstone Group L.P.,
Goldman Sachs & Co., Kohlberg Kravis Roberts & Co. L.P. and TPG Capital.
These financial results have been prepared in a manner that complies, in
all material respects, with generally accepted accounting principles in
the U.S. with the exception of the omission of all purchase accounting
adjustments relating to the merger and related transactions therewith,
as permitted by the debt documents governing our new senior secured
credit facilities and the notes issued on the closing date of the merger.
During the first quarter of fiscal year 2008, net sales increased 9% to
$552.3 million. Excluding the impact of foreign currency, net sales
increased 6% worldwide. Excluding instruments (which the Company
discontinued selling to distributors in the United States in the third
quarter of fiscal 2007) and the impact of foreign currency, worldwide
sales increased 7%.
During the first quarter of fiscal year 2008, the Company incurred
significant special charges (pre-tax), including: 1) $112.8 million of
additional compensation expense to settle in-the-money stock options of
employees, as required by the Merger agreement; 2) $38.4 million of
distributor fee expense associated with renegotiation of distribution
agreements; 3) $29.6 million of investment banker fees associated with
the Merger; 4) $26.9 million settlement with the Department of Justice;
and 5) $16.4 million of additional legal and merger-related fees.
Reported operating loss for the first quarter of fiscal year 2008 was
$60.2 million compared to operating income of $155.7 million for the
first quarter of fiscal year 2007. Adjusted operating income was $163.9
million for the first quarter of fiscal year 2008 compared to $159.2
million for the first quarter of fiscal year 2007. Reported net loss for
the first quarter of fiscal year 2008 was $42.9 million compared to net
income of $104.4 million for the first quarter of fiscal year 2007.
Adjusted net income for the first quarter of fiscal year 2008 was $109.2
million compared to adjusted net income for the first quarter of fiscal
year 2007 of $106.8 million. Adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA”)
for the first quarter of fiscal year 2008 was $192.8 million as compared
to $181.7 million in the first quarter of fiscal year 2007.
First Quarter Sales Performance Reconstructive Products
During the first quarter of fiscal year 2008, reconstructive device
sales increased 13% worldwide to $397.5 million compared to $351.8
million for the first quarter of fiscal year 2007. Reconstructive device
sales in the United States increased 9% (12% excluding instruments) and
international reconstructive device sales increased 18%. Excluding
instruments and on a constant currency basis, worldwide reconstructive
devices sales increased 12%. On a reported basis, knee sales increased
13% worldwide and increased 11% in the United States during the first
quarter as compared to the prior year. Excluding instruments and on a
constant currency basis, knee sales increased 14% worldwide and 15% in
the United States.
Biomet continued to experience excellent market demand during the first
quarter for its flagship knee products, including the Vanguard™
Complete Knee System, the Vanguard™ SSK
Revision Knee System and the Oxford®
Partial Knee System. The Vanguard™ Complete
Knee system is the most comprehensive total knee system on the market
and offers full interchangeability of the system’s
components, to provide a precise fit for each patient. The Vanguard™
SSK (Super Stabilized Knee) Revision System features various modular
options, offering surgeons the ability to customize the implant to
address complex bone defects often present in revision cases. The Oxford®
Partial Knee System, the only free-floating mobile-bearing partial knee
approved for sale in the United States, continues to receive excellent
market acceptance with more than 2,000 domestic surgeons trained to
date. Outside the United States, the Oxford®
System has experienced remarkable long-term clinical results, with 98%
success reported at 10 years1 follow-up, a 95%
success rate at 15 years2 and 92% success at 20
years3.
On a reported basis, hip sales increased 8% worldwide and 7% in the
United States during the first quarter of fiscal year 2008 as compared
to the first quarter of fiscal year 2007. Excluding instruments and on a
constant currency basis, first quarter hip sales increased 7% worldwide
and 8% in the United States. Biomet’s broad
product offering of bearing systems, including metal-on-metal,
ceramic-on-ceramic, and highly crosslinked polyethylene options
continued to receive strong demand. During the first quarter, the
rollout for E-Poly™ hip cup liners was
initiated. Biomet’s E-Poly™
liners are the world’s first Vitamin E
stabilized highly crosslinked polyethylene products to be introduced to
the market. Also contributing to first quarter hip sales growth were
Biomet’s titanium press-fit hip stems, led by
the Taperloc®, Biomet’s
best-selling hip stem.
Extremity sales increased 17% worldwide during the first quarter of
fiscal year 2008 and increased 14% in the United States. Extremity
growth drivers for the first quarter included the Bio-Modular®
Shoulder System, the Copeland™ Humeral
Resurfacing Head and the Discovery®
Elbow.
Dental reconstructive device sales increased 20% worldwide (17% on a
constant currency basis) during the first quarter of fiscal year 2008
and increased 7% in the United States. Biomet 3i launched the NanoTite™
Tapered Implant System during the first quarter. The NanoTite™
technology incorporates a discrete crystalline deposition of nano-scale
hydroxyapatite, which is applied to the OSSEOTITE®
surface substructure and is designed to provide a more rapid and
predictable treatment for patients.
Sales of bone cements and accessories increased 6% worldwide during the
first quarter of fiscal year 2008 and increased 6% in the United States.
Fixation Products
During the first quarter of fiscal year 2008, fixation sales decreased
3% worldwide to $59.1 million compared to $60.9 million for the first
quarter of fiscal year 2007 and decreased 7% in the United States during
the first quarter. Craniomaxillofacial sales increased 18% worldwide and
16% in the United States during the first quarter. Internal fixation
sales increased 7% worldwide and 1% in the United States during the
first quarter, while external fixation sales decreased 15% worldwide and
8% in the United States. Electrical stimulation device sales decreased
20% both worldwide and in the United States during the first quarter.
Spinal Products
Spinal product sales increased 3% worldwide to $53.5 million during the
first quarter of fiscal year 2008 compared to $51.9 million for the
first quarter of fiscal year 2007. Spinal product sales decreased 2% in
the United States during the first quarter of fiscal year 2008. Sales of
spinal implants and orthobiologics for the spine increased 7% worldwide
and 7% in the United States during the first quarter, while spinal
stimulation sales decreased 12% both worldwide and in the United States.
Biomet Spine continued the rollout of the Polaris™
5.5 Spine System during the first quarter to complete the national
release. This system is a next generation pedicle screw system offered
in a 5.5mm diameter top-loading rod system, which utilizes patented
Helical Flange™ locking technology.
Other Products
Sales of the Company’s "other
products” decreased 3% worldwide to $42.2
million during the first quarter of fiscal year 2008 compared to $43.6
million during the first quarter of fiscal year 2007. Sales of "other
products” decreased 13% in the United States
during the first quarter of fiscal year 2008. Arthroscopy sales
increased 7% worldwide during the first quarter and decreased 2% in the
United States, while sales of softgoods and bracing products decreased
23% worldwide and 24% in the United States.
Biomet’s President and Chief Executive
Officer Jeffrey R. Binder stated, "Our first
quarter results reflect accelerated growth across virtually all
components of our reconstructive product category. I am particularly
pleased with the strong momentum in our global knee franchise.”
Mr. Binder further commented, "At the same
time, we are working vigorously toward bolstering those areas in our
business which are not performing to the same level. As we implement
changes to drive improvements in performance, we maintain the Company’s
ongoing commitment to the development and production of the highest
quality products for surgeons and their patients, delivered with
outstanding service.” 1Murray D.W., Goodfellow J.W., O'Connor J.J.
The Oxford® medial
unicompartmental arthroplasty: a ten-year survival study. Journal of
Bone and Joint Surgery (British). 80(6): 983-989, 1998.
2Price A.J., Svard U. The Oxford®
Medial Unicompartmental Knee Arthroplasty Fifteen-Year Survival Results
From an independent series B.O.A. Meeting 2000, London
3Price, A., Svard U. 20-year survival & 10 year
clinical results of the Oxford®
medical UKA. In: Proceedings of the American Academy of Orthopedic
Surgeons Annual Meeting; March 22-26, 2006: Chicago, Ill.538.
Helical Flange™ is a trademark of the
Jackson Group. About Biomet
Biomet, Inc. and its subsidiaries design, manufacture and market
products used primarily by musculoskeletal medical specialists in both
surgical and non-surgical therapy. Biomet’s
product portfolio encompasses reconstructive products, including
orthopedic joint replacement devices, bone cements and accessories,
autologous therapies 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 70 countries.
Contacts
For further information contact Daniel P. Florin, Senior Vice President
and Chief Financial Officer at (574) 372-1687 or Barbara Goslee,
Director, Corporate Communications at (574) 372-1514.
Forward-Looking Statements
The is press release contains "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. Those statements are often indicated by the use
of words such as "will,” "intend,” "anticipate,” "estimate,” "expect,” "plan” and similar
expressions. Forward-looking statements involve certain risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward looking statements due to, among others, the
following factors: the results of ongoing investigations by the United
States Department of Justice; the ability to successfully implement new
technologies; the Company’s ability to
sustain sales and earnings growth; the Company’s
success in achieving timely approval or clearance of its products with
domestic and foreign regulatory entities; the stability of certain
foreign economic markets; the impact of anticipated changes in the
musculoskeletal industry and the ability of the Company to react to and
capitalize on those changes; the ability of the Company to successfully
implement its desired organizational changes; the impact of the Company’s
managerial changes; and other factors set forth in the Company’s
filings with the SEC, including the Company’s
most recent annual report on Form 10-K (as amended) and quarterly
reports on Form 10-Q. 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 as to the accuracy of
forward-looking statements contained in this press release. 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
update publicly or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Accordingly, the
reader is cautioned not to place undue reliance on forward-looking
statements which speak only as of the date on which they were made.
Use of non-GAAP Financial Information
To supplement Biomet’s consolidated financial
statements presented on a GAAP basis, the Company discloses certain
non-GAAP measures that exclude certain charges, including non-GAAP
operating income, non-GAAP net income and non-GAPP net income per
diluted share. These non-GAAP measures are not in accordance with, or an
alternative for, generally accepted accounting principles in the United
States. Biomet management believes that these non-GAAP measures provide
useful information to investors; however, this additional non-GAAP
financial information is not meant to be considered in isolation or as a
substitute for financial information prepared in accordance with GAAP. A
reconciliation of the non-GAAP financial measures to the corresponding
GAAP measure is included in the tables below.
BIOMET, INC.
RESULTS FOR THE QUARTERS ENDED AUGUST 31, 2007 AND 2006
(in thousands, except per share data)
Three Months Ended
2007
2006
Net Sales
$ 552.3
$ 508.2
Cost of sales
184.4
138.7
Gross profit
367.9
369.5
Selling, general and administrative expenses
381.0
189.5
Research and development expense
47.1
24.3
Operating (loss) income
(60.2
)
155.7
Other income, net
4.4
1.1
(Loss) income before income taxes
(55.8
)
156.8
Provision for income taxes
(12.9 ) 52.4
Net (loss) income
$ (42.9 ) $ 104.4
Net (loss) income per share:
Basic
$ (.17
)
$ .43
Diluted
$ (.17
)
$ .43
Shares used in the computation of earnings per share:
Basic
245.8
244.9
Diluted
245.8
244.9
Cash dividends per common share
$ --
$ .30
U.S. sales
$ 336.8
$ 325.9
Foreign sales
215.5
182.3
Reconstructive sales
$ 397.5
$ 351.8
Fixation sales
59.1
60.9
Spinal product sales
53.5
51.9
Other product sales
42.2
43.6
Consolidated Balance Sheets
August 31, 2007
(Unaudited)
May 31, 2007
Current assets:
Cash and cash equivalents
$ 138.2
$ 228.7
Investments
0.9
2.2
Accounts and notes receivable, net
488.5
498.7
Inventories
561.5
540.4
Refundable income taxes
35.8
--
Deferred income taxes
125.2
136.8
Prepaid expenses and other
39.0 45.0
Total current assets
1,389.1 1,451.8
Property, plant and equipment, at cost
840.8
781.9
Less, Accumulated depreciation
379.6 354.5
Property, plant and equipment, net
461.2 427.4
Investments
30.8
43.0
Goodwill
456.9
448.4
Intangible assets, net
72.9
74.6
Other assets
18.1 12.7
Total Assets
$ 2,429.0 $ 2,457.9
Liabilities and Shareholder Equity
Current liabilities:
Short-term borrowings
$ 48.2
81.8
Accounts payable
71.7
68.7
Accrued income taxes
--
11.6
Accrued wages and commissions
71.3
80.4
Other accrued expenses
149.1 103.3
Total current liabilities
340.3
345.8
Long-term liabilities:
Deferred income taxes
3.7
21.3
Employee related obligations
41.6
41.6
Other long-term liabilities
43.3 --
Total liabilities
428.9 408.7
Shareholders’ equity:
Common shares
236.6
229.6
Additional paid-in capital
132.0
138.9
Retained earnings
1,582.6
1,634.7
Accumulated other comprehensive income
48.9 46.0
Total shareholders’ equity
2,000.1 2,049.2
Total Liabilities and Shareholders’ Equity
$ 2,429.0 $ 2,457.9
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 earnings per share as adjusted. The
term "as adjusted", a non-GAAP financial measure, refers to financial
performance measures that exclude the following charges for the first
quarter of fiscal year 2008: 1) $112.8 million of additional
compensation expense to settle in-the-money stock options of employees,
as required by the Merger agreement; 2) $38.4 million of distributor fee
expense associated with renegotiation of distribution agreements; 3)
$29.6 million of investment banker fees associated with the Merger; 4)
$26.9 million settlement with the Department of Justice; and 5) $16.4
million of additional legal and merger-related fees. These expenses
incurred during the first quarter of fiscal year 2008 were current
period expenses and are 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 AUGUST 31, 2007 AND 2006
(in thousands, except per share data)
2007
2006
Operating income (loss) as reported
$ (60.2
)
$ 155.7
Share-based payment
--
3.5
Additional compensation expense
112.8
--
Distributor agreements
38.4
--
Investment banker fee
29.6
--
DOJ settlement
26.9
--
Additional legal/merger related fees
16.4
--
Operating income, as adjusted
$ 163.9
$ 159.2
Net income (loss) as reported
(42.9
)
$ 104.4
Share-based payment, net of tax
--
3.5
Additional compensation expense
112.8
--
Distributor agreements
38.4
--
Investment banker fee
29.6
--
DOJ settlement
26.9
--
Additional legal/merger related fees
16.4
--
Tax effect of above items
(72.0 ) (1.1 )
Net income, as adjusted
$ 109.2
$ 106.8
Diluted EPS
$ (.17
)
$ .43
Share-based payment, net of tax
--
.01
Additional compensation expense
.46
--
Distributor agreements
.15
--
Investment banker fee
.12
--
DOJ settlement
.11
--
Additional legal/merger related fees
.06
--
Tax effect of above items
(.29 ) --
Diluted EPS, as adjusted
$ 0.44
$ 0.44
For the Three Months Ended August 31, 2007
Sales Growth As Reported
FX
Impact
Sales Growth in LocalCurrencies
U.S. sales
3
%
0
%
3
%
Foreign sales
18
6
12
Total sales
9
3
6
Reconstructive sales
13
%
3
%
10
%
Fixation sales
(3
)
1
(4
)
Spinal product sales
3
1
2
Other product sales
(3
)
3
(5
)
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