EATONTOWN, N.J., Nov. 3 /PRNewswire-FirstCall/ -- Osteotech, Inc. reported today that net income was $.4 million or $.02 diluted earnings per share for the three months ended September 30, 2006 compared to a net loss of $6.8 million or $.40 diluted net loss per share for the three months ended September 30, 2005. Consolidated revenues in the third quarter of 2006 were $23.4 million, a 5% increase over consolidated revenues of $22.2 million in the third quarter of 2005. Gross margins increased to 49% in the third quarter of 2006 from 31% in the third quarter of 2005, mainly due to improved inventory and processing productivity.
Sam Owusu-Akyaw, Osteotech’s President and Chief Executive Officer, stated, “We have substantially completed the first part of Osteotech’s turnaround program by successfully achieving profitability for three consecutive quarters. We expect to continue to realize the benefits of our initiatives, which we believe will generate incremental profitability; however, we expect to utilize this additional profitability to fund our distribution channel effectiveness initiatives, the final activities in our turnaround program.”
Mr. Owusu-Akyaw concluded, “Although we expect to make additional investments in sales and marketing initiatives and personnel, we anticipate being profitable in the fourth quarter in a range similar to the first three quarters of 2006 and anticipate being profitable in 2007.”
Net income was $1.4 million or $.08 diluted earnings per share for the nine months ended September 30, 2006 compared to a net loss of $9.5 million or $.55 diluted net loss per share for the nine months ended September 30, 2005. Consolidated revenues for the nine months ended September 30, 2006 and 2005 were $73.8 million and $71.4 million, respectively. Gross margins increased to 48% for the first nine months of 2006 from 39% for the first nine months of 2005.
DBM Segment revenues were $12.8 million and $12.5 million for the three months ended September 30, 2006 and 2005, respectively. The improvement in DBM Segment revenues was substantially the result of increased domestic unit sales volume, partially offset by continued pricing pressures on our domestic sales efforts. We incurred an operating loss in the DBM Segment of $.2 million and $.6 million for the three months ended September 30, 2006 and 2005, respectively. The operating loss in the third quarter of 2006 was primarily from lower gross margins mainly resulting from lower average selling prices in our domestic business. The operating loss declined in the third quarter of 2006 compared to the third quarter of 2005 principally due to our ability to control operating expenses.
DBM Segment revenues increased 4% to $41.0 million for the nine months ended September 30, 2006 compared to revenues of $39.4 million in the corresponding period in 2005. The increase in DBM Segment revenues was substantially the result of increased unit sales volume, partially offset by pricing pressures on our domestic sales efforts. Operating income in the DBM Segment was $1.9 million and $1.3 million for the nine months ended September 30, 2006 and 2005, respectively. The improvement in operating income in the first nine months of 2006 was primarily due to the increase in revenues and our ability to control operating expenses in 2006 compared to 2005, partially offset by lower gross margins.
Base Tissue Segment revenues increased 7% to $10.0 million for the three months ended September 30, 2006 compared to $9.4 million in the corresponding period in 2005. Revenues from the worldwide distribution of traditional tissue increased 53% in the third quarter of 2006 compared to the third quarter of 2005, principally from increased unit sales volume. Third quarter Base Tissue Segment revenues were impacted by a 8% decline in service fees generated by processing allograft bone tissue for clients and a 20% decline in revenues from the distribution of Graftech(R) Bio-implants compared to the third quarter of 2005 primarily due to continued lower demand and increased competition from polymer based spinal implants. Base Tissue Segment revenues were $30.9 million for each of the nine months ended September 30, 2006 and 2005. Revenues from the worldwide distribution of traditional tissue increased 62% in the first nine months of 2006 compared to the first nine months of 2005, mainly from increased unit sales volume. Base Tissue Segment revenues were negatively impacted by a 29% decline in service fees generated by processing allograft bone tissue for clients and a 19% decline in revenues from the distribution of Graftech(R) Bio-implants for the nine months ended September 30, 2006 compared to the corresponding period in 2005.
Operating income in the Base Tissue Segment was $1.7 million in each of the three months and nine months ended September 30, 2006 compared to operating losses of $5.4 million and $10.3 million for the same respective periods in 2005. The improvement in operating income in both periods is primarily due to a substantial increase in gross margins resulting from improved inventory and processing productivity, which reduced the need for tissue inventory reserves in 2006 compared to 2005, and our ability to control operating expenses.
A conference call will be conducted by Sam Owusu-Akyaw, President and Chief Executive Officer, as well as other members of Osteotech management, on November 3, 2006 at 9:00 am Eastern Time to discuss second quarter results. You are invited to listen to the conference call by dialing 1-706-643-1624. The conference will also be simultaneously web cast at http://www.osteotech.com. Automated playback will be available two hours after completion of the live call, through midnight, November 17, 2006, by dialing 1-706-645-9291 and indicating access code 9681394.
Certain statements made throughout this press release that are not historical facts contain forward-looking statements (as such are defined in the Private Securities Litigation Reform Act of 1995) regarding the Company’s future plans, objectives and expected performance. Any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties and, therefore, there can be no assurance that actual results may not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to differences in anticipated and actual product and service introduction dates, the ultimate success of those products in the marketplace, the continued acceptance and growth of current products and services, the impact of competitive products and services, the availability of sufficient quantities of suitable donated tissue and the success of cost control and margin improvement efforts. Certain of these factors are detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission. All information in this press release is as of November 3, 2006 and the Company does not intend to update this information.
Osteotech, Inc., headquartered in Eatontown, New Jersey, is a leading provider of human bone and bone connective tissue for transplantation and an innovator in the development and marketing of biomaterial and implant products for musculoskeletal surgery. For further information regarding Osteotech, this press release or the conference call, please go to Osteotech’s website homepage at http://www.osteotech.com and to Osteotech’s Financial Information Request Form website page at http://www.osteotech.com/finrequest.htm.
OSTEOTECH, INC. and Subsidiaries CONSOLIDATED REVENUE DETAIL (dollars in thousands) Third Quarter Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 DBM Segment Domestic $10,777 $10,399 $34,476 $33,157 International 1,994 2,108 6,496 6,257 Total DBM Segment 12,771 12,507 40,972 39,414 Base Tissue Segment Domestic: Client Processing 2,223 2,388 6,226 9,029 Traditional Tissue 2,895 1,950 8,357 4,959 Graftech(R) Bio-Implants 3,118 3,893 10,649 13,164 8,236 8,231 25,232 27,152 International: Client Processing 66 110 451 357 Traditional Tissue 1,703 1,050 5,170 3,410 1,769 1,160 5,621 3,767 Total Base Tissue Segment 10,005 9,391 30,853 30,919 Other Product Lines 672 347 1,985 1,050 Net Revenues $23,448 $22,245 $73,810 $71,383 OSTEOTECH, INC. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data) Third Quarter Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 Net revenues: Service $22,776 $21,898 $71,825 $70,333 Product 672 347 1,985 1,050 23,448 22,245 73,810 71,383 Cost of services 10,961 15,107 36,736 43,280 Cost of products 917 132 1,865 397 11,878 15,239 38,601 43,677 Gross profit 11,570 7,006 35,209 27,706 Marketing, selling, general and administrative 9,751 11,607 29,856 33,180 Research and development 1,192 1,101 3,507 3,287 10,943 12,708 33,363 36,467 Operating income (loss) 627 (5,702) 1,846 (8,761) Interest expense and other, net (350) (419) (379) (1,393) Income (loss) before income taxes 277 (6,121) 1,467 (10,154) Income tax provision (benefit) (74) 676 105 (647) Net Income (loss) $351 $(6,797) $1,362 $(9,507) Earnings (loss) per share: Basic $.02 $(.40) $.08 $(.55) Diluted $.02 $(.40) $.08 $(.55) Shares used in computing earnings (loss) per share: Basic 17,295,314 17,199,004 17,281,703 17,187,865 Diluted 17,352,420 17,199,004 17,356,109 17,187,865 OSTEOTECH, INC. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) September 30, December 31, 2006 2005 Assets Cash and cash equivalents $14,892 $13,484 Accounts receivable, net 16,737 14,879 Deferred processing costs 28,458 28,805 Inventories 1,170 1,278 Other current assets 3,110 3,438 Total current assets 64,367 61,884 Property, plant and equipment, net 37,250 39,962 Other assets 8,521 9,176 $110,138 $111,022 Liabilities and Stockholders’ Equity Accounts payable and accrued expense $14,643 $16,320 Current maturities of capital lease obligation 708 655 Total current liabilities 15,351 16,975 Capital lease obligation 15,065 15,603 Other liabilities 7,270 7,689 Total liabilities 37,686 40,267 Stockholders’ equity 72,452 70,755 $110,138 $111,022
Osteotech, Inc.
CONTACT: Mark H. Burroughs, Osteotech, +1-732-542-2800
Web site: http://www.osteotech.com/
Company News On-Call: http://www.prnewswire.com/comp/668050.html/
