Earnings Call Excerpt
Biomet, Inc. (BMET)
Q3 2006 Earnings Conference Call
March 21, 2006, 10:00 a.m. EST
Executives:
Dane A. Miller, Ph.D., President and Chief Executive Officer
Bart J. Doedens, M.D., Vice President, Biomet, Inc., President, EBI, L.P.
Gregory D. Hartman, Senior Vice President and Chief Financial Officer
Analysts:
Taylor Harris, JP Morgan
Ashley Jarden, Bear Stearns
Bob Hawkins, Lehman Brothers
Katherine McNally, Merrill Lynch
Matt Miksic, Morgan Stanley
Jessica Gladstone, Harris Nesbitt
Presentation
Operator
Good day everyone and welcome to the Biomet Incorporated 3rd Quarter 2006 Earnings Conference Call. Today’s call is being recorded. At this time for opening remarks and introduction, I would like to turn the call over to President and Chief Executive Officer, Dr. Dane Miller. Please go ahead sir.
Dane Miller, President and Chief Executive Officer
Thank you Augusta. To address any forward-looking statements made during the course of this conference call, we refer you to the paragraph regarding forward-looking statements included in Biomet’s 3rd Quarter press release issued earlier this morning. The following discussion will focus on the company’s results on an as adjusted basis. Adjusted results exclude inventory stepdown from the March 2004 acquisition of Merck KGaA’s interest in the Biomet Merck joint venture and the June 2004 acquisition of Interpore. Net sales increased 5% to $506.3 million during the 3rd Quarter of Fiscal 2006, gross profit increased 3% to $363 million representing 71.7% of sales. Cost of goods sold was increased approximately $1.5 million during the Quarter due to the previously announced increase from the supplier of the company’s antibiotic delivery system in Europe. SG&A expenses increased 3% to $185 million, representing 36.6% of sales. Our national branding campaign increased SG&A expenses by approximately 60 basis points during the Quarter compared to the 3rd Quarter of fiscal 2005. R&D expenses increased 3% to $21.1 million or 4.2% of sales. Operating income increased 4% to $157 million with operating margins at 31% of sales. Net income increased 4% to $106 million while diluted earnings per share increased 8% to $0.43 per share.
Now looking at sales, excluding the impact of foreign currency, which did decrease 3rd Quarter revenues by approximately $13 million, net sales increased 8% worldwide. International sales for the Quarter increased 11% on a constant currency basis while domestic sales increased 6%.
Moving on to our core business reconstructive sales, we saw reconstructive sales increase 6% worldwide to $346.6 million during the 3rd Quarter with a 9% increase in the US. On a constant currency basis, reconstructive device sales increased 10% worldwide. Hip sales increased 11% in the US during the Quarter and 8% worldwide. The 3rd Quarter hip sales increased 11% worldwide, constant currency. If you would exclude the domestic sale of instrumentation, hip sales in the US increased 12%. Domestic sales of metal-on-metal acetabular systems increased 39% during the Quarter and currently represent 48% of Biomet’s hip articulation units. During the 3rd Quarter, the M2a-Magnum Biomet best selling metal-on-metal system in the US continued to experience excellent market demand. In addition, we now have 10 sites participating in the US clinical study for the ReCap Total Resurfacing System. During the 3rd Quarter, we received FDA approval for the C2-a Taper Acetabular System featuring a ceramic-on-ceramic articulation and our proven porous plasma spray coated technology. With this most recent edition to our alternative bearing line up, we believe Biomet currently offers the broadest range of hip articulation systems in the country.
Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, you can do so by pressing the ?*
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