Biomet Reports Drop in First-Quarter Earnings

Net income at Biomet Inc. plummeted 77 percent year-over-year to $7.3 million as higher expenses offest revenue increases in nearly all divisions. Overall sales rose 6 percent to $774.8 million, led by gains in the company’s spine, bone healing and microfixation segment.

The Warsaw, Ind.-based manufacturer of artificial knees and hips, among other orthopedic devices, agreed in April to be acquired by rival Zimmer Holdings Inc. for about $13.35 billion in cash and stock, a bid to position the combined company as a leader in muscle and bone repair products. That move effectively ended Biomet’s plan for an initial public offering earlier this year.

Several weeks ago, European Union directors opened an in-depth probe into the deal, saying it could result in less innovation and higher prices. The decision raises a potential hurdle to the landmark deal, which has yet to be approved by U.S. regulators.

For the quarter ended Aug. 31, Biomet posted a profit of $7.3 million, down from a profit of $31.1 million a year earlier. Excluding items, adjusted net income rose to $94.6 million from $77.1 million a year earlier. Sales rose 6 percent, led by a 21 percent sales increase in its spine and bone healing division.

Revenue from Biomet’s knee division rose 4.3 percent to $234.7 million and hip division proceeds increased 3.8 percent to$155.3 million, according to the latest earnings statement. Sales from the company’s sports, extremities and trauma segment were up 3.4 percent year-over-year to $154.5 million, while revenue from spine, bone healing and microfixation products jumped 21 percent to $122.8 million.

Reported operating income fell 14.4 percent to $82.5 million; however, excluding special items, adjusted operating income rose 4.5 percent to $197.1 million.

Meanwhile, research and development costs rose 14 percent in the quarter, while selling and administrative expenses rose 15 percent.