UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2003.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
Commission file Number 0-12515.
BIOMET, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1418342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
56 East Bell Drive, Warsaw, Indiana 46582
(Address of principal executive offices)
(574) 267-6639
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of February 28, 2003, the registrant had 258,000,777 common shares
outstanding.
BIOMET, INC.
CONTENTS
Pages
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets 1-2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Item 3. Quantitative and Qualitative Disclosure about
Market Risks 11
Item 4. Controls and Procedures 11
Part II. Other Information 12
Signatures 13
Certifications of Principal Executive Officer and Principal
Financial Officer regarding facts and circumstances relating
to quarterly reports 14-15
Index to Exhibits 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOMET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
at February 28, 2003 and May 31, 2002
(in thousands)
ASSETS
February 28, May 31,
2003 2002
---------- -------
(Unaudited)
Current assets:
Cash and cash equivalents $ 167,777 $ 154,297
Investments 38,251 30,973
Accounts and notes receivable, net 412,904 365,148
Inventories 363,805 335,348
Deferred income taxes 48,574 49,523
Prepaid expenses and other 20,065 17,655
--------- ---------
Total current assets 1,051,376 952,944
--------- ---------
Property, plant and equipment, at cost 452,734 389,454
Less, Accumulated depreciation 208,738 170,393
--------- ---------
Property, plant and equipment, net 243,996 219,061
--------- ---------
Investments 133,324 201,247
Intangible assets, net 11,995 8,532
Excess acquisition costs over fair value
of acquired net assets, net 125,511 125,157
Other assets 13,408 14,782
--------- ---------
Total assets $1,579,610 $1,521,723
========= =========
The accompanying notes are a part of the consolidated financial statements.
BIOMET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
at February 28, 2003 and May 31, 2002
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
February 28, May 31,
2003 2002
---------- -------
(Unaudited)
Current liabilities:
Short-term borrowings $ 115,556 $ 90,467
Accounts payable 28,758 36,318
Accrued income taxes 3,191 17,483
Accrued wages and commissions 37,300 35,106
Accrued litigation -- 5,864
Other accrued expenses 57,296 52,461
--------- ---------
Total current liabilities 242,101 237,699
Long-term liabilities:
Deferred income taxes 3,029 3,332
Other liabilities 378 406
--------- ---------
Total liabilities 245,508 241,437
--------- ---------
Minority interest 108,817 103,807
--------- ---------
Contingencies (Note 7)
Shareholders' equity:
Common shares 134,990 124,417
Additional paid-in capital 48,360 48,868
Retained earnings 1,054,051 1,054,020
Accumulated other comprehensive loss (12,116) (50,826)
--------- ---------
Total shareholders' equity 1,225,285 1,176,479
--------- ---------
Total liabilities and shareholders' equity $1,579,610 $1,521,723
========= =========
The accompanying notes are a part of the consolidated financial statements.
BIOMET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the nine and three month periods ended February 28, 2003 and 2002
(Unaudited, in thousands, except per share data)
Nine Months Ended Three Months Ended
----------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales $1,013,090 $866,018 $354,042 $304,609
Cost of sales 296,378 241,664 107,636 85,238
--------- ------- ------- -------
Gross profit 716,712 624,354 246,406 219,371
Selling, general and
administrative expenses 365,126 320,846 127,990 112,851
Research and development expense 40,262 35,845 14,555 12,190
------- ------- ------- -------
Operating income 311,324 267,663 103,861 94,330
Other income, net 15,947 11,807 9,145 2,872
------- ------- ------- -------
Income before income taxes and
minority interest 327,271 279,470 113,006 97,202
Provision for income taxes 113,307 94,800 39,169 32,924
------- ------- ------- -------
Income before minority interest 213,964 184,670 73,837 64,278
Minority interest 5,010 5,531 1,243 2,604
------- ------- ------- -------
Net income $208,954 $179,139 $ 72,594 $ 61,674
======= ======= ======= =======
Earnings per share:
Basic $.80 $.66 $.28 $.23
==== ==== ==== ====
Diluted $.80 $.66 $.28 $.23
==== ==== ==== ====
Shares used in the computation
of earnings per share:
Basic 259,895 269,554 257,929 269,388
======= ======= ======= =======
Diluted 261,597 272,543 259,824 272,265
======= ======= ======= =======
Cash dividends per common share $.10 $.09 $ -- $ --
==== ==== ==== ====
The accompanying notes are a part of the consolidated financial statements.
BIOMET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended February 28, 2003 and 2002
(Unaudited, in thousands)
2003 2002
---- ----
Cash flows from (used in) operating activities:
Net income $208,954 $179,139
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 31,003 25,509
Amortization 2,608 9,087
Gain on sale of investments, net (153) (300)
Minority interest 5,010 5,531
Deferred income taxes 646 4,050
Changes in current assets and liabilities,
excluding effects of acquisitions:
Accounts and notes receivable, net (32,675) (13,421)
Inventories (2,146) (40,138)
Prepaid expenses and other 3,749 4,642
Accounts payable (8,376) 10,441
Accrued income taxes (17,173) (9,712)
Accrued wages and commissions 2,194 (1,726)
Other accrued liabilities (9,263) (27,334)
------- -------
Net cash from operating activities 184,378 145,768
------- -------
Cash flows from (used in) investing activities:
Proceeds from sales and maturities of investments 104,717 87,728
Purchases of investments (43,899) (111,496)
Capital expenditures (41,766) (45,142)
Acquisitions, net of cash acquired -- (6,735)
Other (4,178) (885)
------- ------
Net cash from (used in) investing activities 14,874 (76,530)
------- ------
Cash flows from (used in) financing activities:
Increase in short-term borrowings, net 6,655 18,012
Issuance of common shares 13,897 13,896
Cash dividends (26,431) (24,268)
Purchase of common shares (187,115) (76,215)
------- ------
Net cash used in financing activities (192,994) (68,575)
------- ------
Effect of exchange rate changes on cash 7,222 (56)
------- ------
Increase in cash and cash equivalents 13,480 607
Cash and cash equivalents, beginning of year 154,297 235,091
------- -------
Cash and cash equivalents, end of period $167,777 $235,698
======= =======
The accompanying notes are a part of the consolidated financial statements.
BIOMET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION.
The accompanying consolidated financial statements include the accounts of
Biomet, Inc. and its subsidiaries (individually and collectively referred to as
the "Company"). The unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine-month period ended February 28, 2003 are not necessarily
indicative of the results that may be expected for the fiscal year ending
May 31, 2003. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 2002.
The accompanying consolidated balance sheet at May 31, 2002, has been derived
from the audited Consolidated Financial Statements at that date, but does not
include all disclosures required by accounting principles generally accepted
in the United States.
The Company operates in one business segment, musculoskeletal products, which
includes the designing, manufacturing and marketing of reconstructive products,
fixation devices, spinal products and other products. Other products consist
primarily of Arthrotek's arthroscopy products, EBI's softgoods and bracing
products, general instruments and operating room supplies. The Company manages
its business segment primarily on a geographic basis. These geographic markets
are comprised of the United States, Europe and other. The other geographic
market include Canada, South America, Mexico, Japan and the Pacific Rim.
Net sales of musculoskeletal products by product category are as follows for the
nine and three month periods ended February 28:
Nine Months Ended Three Months Ended
----------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
(in thousands)
Reconstructive $ 626,192 $520,831 $222,253 $184,765
Fixation 176,869 160,430 59,061 53,548
Spinal products 105,620 89,609 36,157 32,458
Other 104,409 95,148 36,571 33,838
--------- ------- ------- -------
$1,013,090 $866,018 $354,042 $304,609
========= ======= ======= =======
NOTE 2: COMPREHENSIVE INCOME.
Other comprehensive income includes foreign currency translation adjustments
and unrealized appreciation (depreciation) of available-for-sale securities,
net of taxes. Other comprehensive income (loss) for the three months ended
February 28, 2003 and 2002 was $22,034,000 and $(5,707,000), respectively.
Other comprehensive income for the nine months ended February 28, 2003 and
2002 was $38,710,000 and $(4,039,000), respectively. Total comprehensive
income combines reported net income and other comprehensive income. Total
comprehensive income for the three months ended February 28, 2003 and 2002
was $94,628,000 and $55,967,000, respectively. Total comprehensive income
for the nine months ended February 28, 2003 and 2002 was $247,664,000 and
$175,100,000, respectively.
NOTE 3: INVENTORIES.
Inventories at February 28, 2003 and May 31, 2002 are as follows:
February 28, May 31,
2003 2002
------------ -------
(in thousands)
Raw materials $ 37,346 $ 35,036
Work-in-process 37,668 45,476
Finished goods 149,038 135,842
Consigned inventory 139,753 118,994
------- -------
$363,805 $335,348
======= =======
NOTE 4: COMMON SHARES.
During the nine months ended February 28, 2003, the Company issued 1,360,585
Common Shares upon the exercise of outstanding stock options for proceed
aggregating $13,897,000. Purchases of Common Shares pursuant to the Common
Share Repurchase Programs aggregated 7,010,978 shares for $187,115,000 during
the nine months ended February 28, 2003.
NOTE 5: EARNINGS PER SHARE.
Earnings per common share amounts ("basic EPS") are computed by dividing net
income by the weighted average number of common shares outstanding and excludes
any potential dilution. Earnings per common share amounts assuming dilution
("diluted EPS") are computed by reflecting potential dilution from the
exercise of stock options.
NOTE 6: INCOME TAXES.
The difference between the reported provision for income taxes and a provision
computed by applying the federal statutory rate to pre-tax accounting income is
primarily attributable to state income taxes, tax benefits relating to
operations in Puerto Rico, tax-exempt income and tax credits.
NOTE 7: CONTINGENCIES.
In January 1996, a jury returned a verdict in a patent infringement matter
against the Company and in favor of Raymond G. Tronzo ("Tronzo"), which in
August 1998 was subsequently reversed and vacated by the United States Court
of Appeals for the Federal Circuit (the "Federal Circuit"). The Federal
Circuit then remanded the case to the District Court for the Southern
District of Florida (the "District Court") for further consideration on state
law claims only. On August 27, 1999, the District Court entered a final
judgment of $53,530 against the Company. Tronzo then appealed the District
Court's final judgment with the Federal Circuit and in January 2001 the Federal
Circuit reinstated a $20 million punitive damages award against the Company
while affirming the compensatory damage award of $520. The Federal Circuit's
decision was based principally on procedural grounds, and in March 2001 it
denied the Company's combined petition for panel rehearing petition and petition
for rehearing en banc. On November 13, 2001 the United States Supreme Court
("Supreme Court") denied the Company's petition to review the $20 million
punitive damage award against the Company given to Tronzo. The Company had
previously recorded a charge during the third quarter of fiscal 2001 of
$26.1 million, which represented the total damage award plus the maximum
amount of interest that, as calculated by the Company, could have been due
under the award and related expenses. The Company paid $20,236,000 out of
escrow. On February 12, 2003 the Federal Circuit ruled that the Company does
not owe post-judgment interest in connection with the damage award in this case.
As a result of this favorable ruling, the Company has recorded a pre-tax gain of
approximately $5.8 million in this quarter, and management considers this matter
fully concluded.
There are various other claims, lawsuits, disputes with third parties,
investigations and pending actions involving various allegations against the
Company incident to the operation of its business, principally product
liability and intellectual property cases. Each of these matters is subject
to various uncertainties, and it is possible that some of these matters may be
resolved unfavorably to the Company. The Company establishes accruals for
losses that are deemed to be probable and subject to reasonable estimate.
Based on the advice of counsel to the Company in these matters, management
believes that the ultimate outcome of these matters and any liabilities in
excess of amounts provided will not have a material adverse impact on the
Company's consolidated financial position or on its future business operations.
NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS.
In June of 2001 the Financial Accounting Standards Board (FASB) approved the
issuance of Statement 142, "Goodwill and Other Intangible Assets". FASB
Statement 142, among other things, requires that goodwill not be amortized but
should be tested for impairment at least annually. The Company adopted this
statement during the first quarter of fiscal 2003 by discontinuing the
amortization of goodwill totaling $1.8 million per quarter ($1.6 million net
of tax). In addition, the Company was required to review its goodwill during
the first six months for possible impairment. Based on the Company's review,
no impairment charges have been recorded. The following tables show the
reported net income and earnings per share for the three and nine month
periods ended February 28, 2002, reconciles them to the adjusted net income
and earnings per share had the nonamortization provisions of Statement 142
been applied in that period and compares them to the three and nine month
periods ended February 28, 2003:
Nine Months Ended Three Months Ended
----------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
(in thousands, except per share data)
Reported net income $208,954 $179,139 $ 72,594 $ 61,674
Effect of goodwill amortization -- 4,800 -- 1,600
------- ------- ------- -------
As adjusted $208,954 $183,939 $ 72,594 $ 63,274
======= ======= ======= =======
Reported earnings per share $ .80 $ .66 $ .28 $ .23
Effect of goodwill amortization -- .02 -- --
---- ---- ---- ----
As adjusted $ .80 $ .68 $ .28 $ .23
==== ==== ==== ====
Reported diluted earnings per share $ .80 $ .66 $ .28 $ .23
Effect of goodwill amortization -- .01 -- --
---- ---- ---- ----
As adjusted $ .80 $ .67 $ .28 $ .23
==== ==== ==== ====
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AS OF February 28, 2003
The Company's cash and investments decreased $47,165,000 to $339,352,000 at
February 28, 2003. This decrease resulted from the $26,431,000 dividend paid
during the first quarter and the $187,115,000 used to purchase shares during
the first nine months pursuant to the share repurchase programs, offset by
positive cash flow from operations.
Cash flows provided by operating activities were $184,378,000 for the first
nine months of fiscal 2003 compared to $145,768,000 in 2002. The primary
sources of fiscal year 2003 cash flows from operating activities were net
income and depreciation. The primary uses were increases in accounts
receivable and a reduction in accrued income taxes and other accrued
liabilities. Over the last several quarters, the Company has experienced
a greater sales growth from its insurance billings verses its hospital
billings in the United States. These insurance billings historically have
had a longer collection cycle. In addition, accounts receivable continue
to increase as the Company's sales grow at a rapid rate. Accounts and notes
receivable and inventory balances were increased during the nine month period
by $15 million and $26 million, respectively, due to currency exchange rates.
Cash flows from investing activities were $14,874,000 for the first nine months
of fiscal 2003 compared to a use of $76,530,000 in 2002. The primary source of
cash flows from investing activities were sales and maturities of investments
offset by purchases of investments and capital equipment.
Cash flows used in financing activities were $192,994,000 for the first nine
months of fiscal 2003 compared to a use of $68,575,000 in 2002. The primary
use of cash flows from financing activities was the cash dividend paid in the
first quarter and the share repurchase program. In July 2002, the Company's
Board of Directors declared a cash dividend of ten cents ($.10) per share
payable to shareholders of record at the close of business on July 8, 2002.
Currently available funds, together with anticipated cash flows generated from
future operations, are believed to be adequate to cover the Company's
anticipated cash requirements, including capital expenditures and research and
development costs.
Pursuant to the terms of the Joint Venture Agreement with Merck KGaA ("Merck"),
the Company granted Merck a put option whereby Merck has the right to elect to
require the Company to purchase all, but not less than all, of Merck's interest
in the BioMer C.V. ("BioMer"). Merck may exercise the put option by giving
notice to the Company at any time during (a) the period beginning on May 1,
2001, and ending on May 10, 2008, or (b) a period of 180 days following receipt
by Merck of notice from the Company that a "change of control" of the Company
(as defined in the Joint Venture Agreement) has occurred prior to May 1, 2023.
The put exercise price, which is payable in cash, is the greater of (i) a
formula based on earnings of BioMer and multiples, as defined in the Joint
Venture Agreement, or (ii) the net book value of all the assets of BioMer less
all liabilities of BioMer multiplied by Merck's 50% ownership percentage in
BioMer. The put option formula is a mechanism whereby the Company would pay a
fair market purchase price for Merck's 50% ownership interest in BioMer. If
Merck chooses to exercise its put option in the future, at the time of exercise
the transaction could be deemed a material transaction for the Company; however,
management believes that the transaction could be funded out of the Company's
current operations and, given the Company's current cash position and the
strength of its balance sheet, the transaction should not negatively impact the
financial strength of the Company or its ongoing operations. As of the close of
the Company's most recently completed fiscal quarter, the net book value
purchase price of BioMer would be approximately $106 million, which may or may
not reflect the fair market purchase price at the time of closing the put
transaction, should it occur.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED FEBRUARY 28, 2003
AS COMPARED TO THE NINE MONTHS ENDED FEBRUARY 28, 2002
Net sales increased 17% to $1,013,090,000 for the nine-month period ended
February 28, 2003, from $866,018,000 for the same period last year. Excluding
the impact of foreign currency which increased sales for the nine months by
$22.3 million, net sales increased 14% during the first nine months of fiscal
year 2003. The Company's U.S.-based revenue increased 14% to $711,538,000
during the first nine months of fiscal 2003, while foreign sales increased
25% to $301,552,000. Excluding the positive foreign exchange adjustment,
foreign sales in local currencies increased 16%. Biomet's worldwide sales
of reconstructive products during the first nine months of fiscal 2003 were
$626,192,000, representing a 20% increase compared to the first nine months
of last year. This increase came through balanced growth in all of the
reconstructive product categories. The Company's extensive line of
reconstructive products continues to gain market share in this rapidly
growing market. Sales of fixation products were $176,869,000 for the first
nine months of fiscal 2003, representing a 10% increase as compared to the
same period in 2002. Sales of spinal products were $105,620,000 for the
first nine months of fiscal 2003, representing an 18% increase as compared
to the same period in 2002. The increase is a result of continued market
acceptance of EBI's spinal stimulation systems and the expansion of EBI's
product portfolio into the hardware and biological segments of the spinal
markets. The Company's sales of other products totaled $104,409,000,
representing an 10% increase over the first nine months of fiscal year
2002, primarily as a result of increased sales of arthroscopy products
and softgoods and bracing products.
Cost of sales increased as a percentage of net sales to 29.3% for the first
nine months of fiscal 2003 from 27.9% for fiscal 2002. Following an internal
audit, the Company recorded a $4.2 million charge to cost of sales
(representing 0.5% as a percentage of net sales) during the third quarter as
a result of negative adjustments related primarily to the quantity of
work-in-process inventory at our United Kingdom operations. The remaining
increase in cost of sales as a percentage of net sales of 0.9% was primarily
as a result of higher growth rates in foreign sales, where gross margins are
lower, versus domestic sales. Selling, general and administrative expenses
as a percentage of net sales decreased to 36.0% compared to 37.0% for the
first nine months last year. This decrease in the percentage is a result
of the Company's continued emphasis on slowing its general and
administrative expense growth and adopting FASB 142 which discontinued the
amortization of goodwill ($4.8 million during the nine month period).
Research and development expenditures increased during the first nine months
to $40,262,000 reflecting the Company's continued emphasis on new product
introductions. Operating income rose 16% from $267,663,000 for the first
nine months of fiscal 2002, to $311,324,000 for the first nine months of
fiscal 2003. Other income increased 35%. On February 12, 2003, the United
States Court of Appeals for the Federal Circuit ruled that the Company does
not owe post-judgment interest in connection with the damage award paid in
the Tronzo litigation. As a result of this favorable ruling, the Company
has recorded a pre-tax gain of approximately $5.8 million in this quarter.
Excluding this gain, other income decreased approximately 14%. Over the
last five quarters, the Company has used $397,000,000 to purchase its
common stock which has reduced investable cash. In addition, as interest
rates fall, higher yielding investments are called and replaced with lower
yielding investments. The effective income tax rate increased to 34.6% for
the first nine months of fiscal year 2003 from 33.9% last year primarily
as a result of states increasing their tax rates.
These factors resulted in a 17% increase in net income to $208,954,000 for
the first nine months of fiscal 2003 as compared to $179,139,000 for the
same period in fiscal 2002. Basic and diluted earnings per share increased
21%, from $.66 to $.80 for the periods presented.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED FEBRUARY 28, 2003
AS COMPARED TO THE THREE MONTHS ENDED FEBRUARY 28, 2002
Net sales increased 16% to $354,042,000 for the third quarter of fiscal
2003, as compared to $304,609,000 for the same period last year. Excluding
the impact of foreign currency which increased third quarter sales by $10.9
million, net sales increased 13% during the third quarter of fiscal year
2003. Operating income increased 10% from $94,330,000 for the third
quarter of fiscal 2002, to $103,861,000 for the third quarter of fiscal
2003. During the third quarter, net income increased 18% to $72,594,000
as compared to $61,674,000 for the same period last year. Basic and
diluted earnings per share increased 22% from $.23 to $.28 for the
periods presented. The business factors resulting in these changes
and relevant trends affecting the Company's business during the periods
in question are comparable to those described in the preceding discussion
for the nine-month period.
Item 3. Quantitative and Qualitative Disclosures about Market Risks.
There have been no material changes from the information provided in the
Company's Annual Report on Form 10-K for the year ended May 31, 2002.
Item 4. Controls and Procedures.
As of February 28, 2003, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures.
Based on that evaluation, the Company's management, including the CEO
and CFO, concluded that the Company's disclosure controls and procedures
were effective as of February 28, 2003. There have been no significant
changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to February
28, 2003.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings.
In January 1996, a jury returned a verdict in a patent infringement matter
against the Company and in favor of Raymond G. Tronzo ("Tronzo"), which in
August 1998 was subsequently reversed and vacated by the United States Court
of Appeals for the Federal Circuit (the "Federal Circuit"). The Federal
Circuit then remanded the case to the District Court for the Southern
District of Florida (the "District Court") for further consideration on state
law claims only. On August 27, 1999, the District Court entered a final
judgment of $53,530 against the Company. Tronzo then appealed the District
Court's final judgment with the Federal Circuit and in January 2001 the Federal
Circuit reinstated a $20 million punitive damages award against the Company
while affirming the compensatory damage award of $520. The Federal Circuit's
decision was based principally on procedural grounds, and in March 2001 it
denied the Company's combined petition for panel rehearing petition and petition
for rehearing en banc. On November 13, 2001 the United States Supreme Court
("Supreme Court") denied the Company's petition to review the $20 million
punitive damage award against the Company given to Tronzo. The Company had
previously recorded a charge during the third quarter of fiscal 2001 of
$26.1 million, which represented the total damage award plus the maximum
amount of interest that, as calculated by the Company, could have been due
under the award and related expenses. The Company paid $20,236,000 out of
escrow. On February 12, 2003 the Federal Circuit ruled that the Company does
not owe post-judgment interest in connection with the damage award in this case.
As a result of this favorable ruling, the Company has recorded a pre-tax gain of
approximately $5.8 million in this quarter, and management considers this matter
fully concluded.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Index to Exhibits.
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIOMET, INC.
------------
DATE: 4/14/2003 BY: /s/ Gregory D. Hartman
---------- -----------------------
Gregory D. Hartman
Senior Vice President - Finance
(Principal Financial Officer)
(Signing on behalf of the registrant
and as principal financial officer)
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL
OFFICER REGARDING FACTS AND CIRCUMSTANCES RELATING TO QUARTERLY REPORTS
I, Dane A. Miller, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Biomet, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: 4/14/2003 /s/ Dane A. Miller
---------- ------------------
Dane A. Miller, Ph.D.
President and Chief Executive Officer
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL
OFFICER REGARDING FACTS AND CIRCUMSTANCES RELATING TO QUARTERLY REPORTS
I, Gregory D. Hartman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Biomet, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: 4/14/2003 /s/ Gregory D. Hartman
---------- -----------------------
Gregory D. Hartman
Senior Vice President - Finance
and Chief Financial Officer
BIOMET, INC.
FORM 10-Q
INDEX TO EXHIBITS
Number Assigned
in Regulation
S-K Item 601 Exhibit No. Description of Exhibit
--------------- ----------- ----------------------------------------------
(2) No exhibit
(4) 4.1 Specimen certificate for Common Shares.
(Incorporated by reference to Exhibit 4.1 to
the registrant's Report on Form 10-K for the
fiscal year ended May 31, 1985.)
4.2 Rights Agreement between Biomet, Inc. and Lake
City Bank, as Rights Agent, dated as of
December 16, 1999. (Incorporated by reference
to Exhibit 4.01 to Biomet, Inc. Form 8-K
Current Report dated December 16, 1999,
Commission File No. 0-12515), as amended
September 1, 2002 to change rights agent to
American Stock Transfer & Trust Company.
(10) 10.1 Joint Venture Agreement between Biomet, Inc. and
Merck KGaA dated as of November 24, 1997
(Incorporated by reference to Exhibit 2.01 to
Biomet, Inc. Form 8-K Current Report dated
February 17, 1998, Commission File No. 0-12525).
(11) No exhibit.
(15) No exhibit.
(18) No exhibit.
(19) No exhibit.
(22) No exhibit.
(23) No exhibit.
(24) No exhibit.
(99) 99.1 Written Statement of Chief Executive Officer
and Chief Financial Officer Pursuant to Sections
906 and 302 of the Sarbanes-Oxley Act of 2002.