Biomet Q1 sales gains wiped out by rising expenses

Biomet reported a steep 76.5% decline in its first-quarter earnings for fiscal 2015 as rising expenses eliminated gains from higher sales across nearly all segments.

The Warsaw, Ind.-based maker of musculoskeletal and biotechnology products, which is set to be acquired early next year by Zimmer Holdings, saw its net sales increase 6% to $774.8 million during the quarter ended Aug. 31. That was helped by a 4.3% growth in knee sales, a 3.8% increase in hip sales, and a 3.4% rise in sports, extremities and trauma sales. But Biomet's spine and bone-healing division accounted for most of the company's top-line growth, with a 20.9% increase in sales.

Yet higher expenses stripped away sales growth. Selling, general and administrative costs rose 15.4% and research and development was up 14.1%. As a result, operating income fell to $82.5 million, down 14.4% from $96.4 million in the year-ago period. And without the boost of a $24.5 million income tax benefit posted in the first quarter of its last fiscal year, Biomet's net income for the period dropped from $31.1 million to $7.3 million.

In April, Biomet agreed to be acquired by rival company Zimmer Holdings for a total of $13.35 billion in cash and stock. Though the deal remains subject to approval by regulators, the companies announced at the time that it is expected to close in the first quarter of 2015.

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