EATONTOWN, N.J., March 31 /PRNewswire-FirstCall/ -- Osteotech, Inc.
(Nasdaq: OSTE) reported today that consolidated revenues for the year ended
December 31, 2005 increased 5% to $93.3 million as compared to 2004
consolidated revenues of $88.6 million. In 2005, domestic revenues increased
3% and international revenues increased 19%. The Company incurred a net loss
in 2005 of $21.1 million or $1.23 diluted net loss per share as compared to a
net loss in 2004 of $5.3 million or $.31 diluted net loss per share.
Sam Owusu-Akyaw, Osteotech's President and Chief Executive Officer,
stated, "We are very disappointed with our financial results in 2005. A
number of events in the second half of the year made it difficult for us to
achieve our anticipated revenue growth objectives. We had originally expected
earnings to be negatively impacted by the productivity and other initiatives
we had implemented. However, the second half events layered in incremental
costs and expenses and the lower than anticipated revenue levels negatively
impacted our gross margins."
Mr. Owusu-Akyaw continued, "In 2005, we successfully rejuvenated our
research and development activities by developing new technologies and
products. We began marketing the Xpanse(TM) Bone Insert in late 2005 and the
GraftCage(TM) TLX in the first quarter of 2006, and we have a number of
additional new technologies and products being introduced in 2006, 2007 and
2008. We have made outstanding progress on our productivity initiatives to
reduce inventory levels, lead times and costs, while increasing tissue
yields."
Mr. Owusu-Akyaw concluded, "I believe the progress necessary for Osteotech
to return to profitability is well underway. We will continue to pursue our
strategic initiatives in 2006 and I expect to see the benefits of these
turnaround activities as we proceed through 2006 and into 2007 and 2008."
Revenues for the fourth quarter of 2005 were $21.9 million, a 7% increase
over fourth quarter 2004 revenues of $20.4 million. Domestic revenues
increased 8% in the fourth quarter of 2005, while international revenues in
the fourth quarter of 2005 were relatively flat with international revenues in
the fourth quarter of 2004. The Company incurred a net loss of $11.6 million
or $.67 diluted net loss per share in the fourth quarter of 2005 and a net
loss of $4.6 million or $.27 diluted net loss per share in the fourth quarter
of 2004.
Earnings in 2005 have been impacted by lower gross margins, as more fully
discussed below, and an increase in operating expenses due to costs associated
with strengthening and diversifying domestic tissue sources, retirement and
severance costs associated with the retirement of the Company's former Chief
Executive Officer and Chief Financial Officer, the resignation of the
Company's former Chief Science Officer and certain other employees terminated
in the fourth quarter of 2005, and increased professional fees, including the
costs associated with an unsolicited proposal to acquire Osteotech. The
Company also incurred translation losses on transactions denominated in
foreign currency due to the strengthening of the U.S. dollar against the Euro
and recognized an income tax benefit on its 2005 losses at less than the
statutory rates due to its assessment of the recoverability of these tax
benefits.
Consolidated gross margins were 34% and 19% for the year and fourth
quarter ended December 31, 2005, respectively, as compared to 41% and 30% in
the same respective periods in 2004. Gross margins in 2005 were constrained
by unabsorbed fixed costs due to reduced unit production as compared to unit
sales to allow the Company to consume existing tissue inventories and directly
reduce overall tissue inventory levels. In addition, gross margins were
constrained by write-offs and reserves for excess, obsolete and expiring
tissue inventories, primarily in the Graftech(R) Bio-implant product line, as
a result of standard inventory policies and procedures and to address the
tissue inventory strategic initiatives.
DBM Segment revenues increased 14% and 10% to $52.1 million and $12.7
million for the year and fourth quarter ended December 31, 2005, respectively,
as compared to $45.8 million and $11.5 million in the same respective periods
in 2004. Domestic Grafton(R) DBM revenues increased 15% and 18% for the year
and three months ended December 31, 2005, respectively, substantially related
to the recognition of higher per unit selling prices as a result of the
continued implementation of the strategic initiative to distribute our
proprietary products directly to end users, for which the Company recognizes a
greater portion of the end user selling price. International Grafton(R) DBM
revenues increased 16% for the year ended December 31, 2005, but declined 23%
in the fourth quarter. The increase in international Grafton(R) DBM revenues
for 2005 is primarily due to increased unit volume, while the Company
experienced softness in its international markets in the fourth quarter of
2005. Private label DBM revenues declined 3% in 2005 and decreased 8% in the
fourth quarter of 2005 primarily due to a reduction in orders from one of the
Company's partners as they adjusted their ordering patterns and inventory
levels.
The DBM Segment generated an operating loss of $.3 million and $1.6
million for the year and fourth quarter ended December 31, 2005, respectively,
compared to operating income of $4.4 million and $1.1 million in the same
respective periods in 2004. The operating losses in 2005 are primarily a
result of lower gross profit margins and increased operating costs.
Base Tissue Segment revenues increased 1% and 4% to $39.8 million and $8.9
million for the year and fourth quarter ended December 31, 2005, respectively,
as compared to $39.3 million and $8.6 million in the corresponding periods in
2004. The increase in Base Tissue Segment revenues in both periods is
primarily due to an increase in the world-wide distribution of traditional
tissue of 86% and 32% for the year and three months ended December 31, 2005,
mainly from increased unit sales volume as the Company continues to expand its
world-wide presence in this market and, in the fourth quarter of 2005, from a
17% increase in revenues generated from processing donors for clients.
Partially offsetting these increases in revenues is a decline in revenues from
the distribution of Graftech(R) Bio-implants of 14% and 16% for the year and
three months ended December 31, 2005, primarily due to lower demand and
increased competition from non-allograft bone spinal implants, and a decline
in service fees generated by processing allograft bone tissue for clients of
14% in 2005, primarily due to processing 916 fewer donors for clients,
although the Company realized a 22% increase in the average processing fee per
donor in 2005.
The Base Tissue Segment generated an operating loss of $20.1 million and
$9.8 million for the year and fourth quarter ended December 31, 2005,
respectively, compared to an operating loss of $9.3 million and $7.3 million
in the same respective periods in 2004. The operating losses in 2005 are
primarily a result of lower gross profit margins and increased operating
costs.
Mr. Owusu-Akyaw will host a conference call on March 31, 2006 at 9:00 am
Eastern Time to discuss full year and fourth quarter results. You are invited
to listen to the conference call by dialing 706-634-5453. 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, April 14, 2006, by dialing 706-645-9291 and indicating
access code 7016143.
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 market place, 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 March 31, 2006 and
the Company undertakes no duty 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)
Three Months Year Ended
Ended December 31, December 31,
2005 2004 2005 2004
DBM Segment
Domestic:
Grafton(R) DBM $ 10,471 $8,837 $ 40,669 $ 35,282
Private Label 961 1,047 3,920 4,059
11,432 9,884 44,589 39,341
International:
Grafton(R) DBM 1,220 1,590 7,477 6,449
Total DBM Segment 12,652 11,474 52,066 45,790
Base Tissue Segment
Domestic:
Traditional Tissue:
Processing 1,864 1,593 11,057 12,972
Direct Distribution 1,850 1,518 6,645 2,851
Graftech(R) Bio-
implants 3,785 4,531 16,949 19,820
7,499 7,642 34,651 35,643
International:
Traditional Tissue:
Processing 62 52 419 401
Direct Distribution 1,355 912 4,765 3,286
1,417 964 5,184 3,687
Total Base Tissue
Segment 8,916 8,606 39,835 39,330
Other Product Lines 356 363 1,406 3,457
Net Revenues $ 21,924 $ 20,443 $ 93,307 $ 88,577
Three Months Year Ended
Ended December 31, December 31,
2005 2004 2005 2004
Domestic $19,138 $17,639 $79,957 $77,317
International 2,786 2,804 13,350 11,260
$21,924 $20,443 $93,307 $88,577
OSTEOTECH, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Three Months Year Ended
Ended December 31, December 31,
2005 2004 2005 2004
Net revenues:
Service $21,568 $20,080 $91,901 $85,120
Product 356 363 1,406 3,457
21,924 20,443 93,307 88,577
Cost of services 17,665 14,860 60,945 49,686
Cost of products 103 (599) 500 2,816
17,768 14,261 61,445 52,502
Gross profit 4,156 6,182 31,862 36,075
Marketing, selling,
general and
administrative 13,729 10,259 46,909 38,127
Research and development 1,734 1,390 5,021 4,578
15,463 11,649 51,930 42,705
Operating loss (11,307) (5,467) (20,068) (6,630)
Interest expense, net (228) (18) (774) (377)
Gain on sale of patents 575 575
Other 56 292 (790) 302
Loss before income
taxes (11,479) (4,618) (21,632) (6,130)
Income tax provision
(benefit) 132 5 (515) (847)
Net loss $(11,611) $ (4,623) $(21,117) $(5,283)
Loss per share:
Basic $(.67) $(.27) $(1.23) $(.31)
Diluted $(.67) $(.27) $(1.23) $(.31)
Shares used in computing loss per share:
Basic 17,219,856 17,165,606 17,195,868 17,146,127
Diluted 17,219,856 17,165,606 17,195,868 17,146,127
OSTEOTECH, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
December 31
2005 2004
Assets
Cash and cash equivalents $13,484 $13,391
Accounts receivable, net 14,879 14,795
Deferred processing costs 28,805 36,049
Inventories 1,278 1,202
Other current assets 3,438 5,595
Total current assets 61,884 71,032
Property, plant and equipment, net 39,962 37,447
Other assets 9,176 7,925
$111,022 $116,404
Liabilities and Stockholders' Equity
Accounts payable and accrued expense $16,320 $11,532
Current maturities of capital lease obligation 655
Current maturities of long-term debt 2,661
Total current liabilities 16,975 14,193
Capital lease obligation 15,603
Long-term debt 10,076
Other liabilities 7,689 740
Total liabilities 40,267 25,009
Stockholders' equity 70,755 91,395
$111,022 $116,404
SOURCE Osteotech, Inc.
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Related links:
http://www.osteotech.com
Company News On-Call:
http://www.prnewswire.com/comp/668050.html
CONTACT:
Mark H. Burroughs, Osteotech, Inc.,
+1-732-542-2800
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