Apr 15 2010
Biomet, Inc. announced today financial results for its third fiscal quarter ended February 28, 2010.
- Net sales increased 9% (6% constant currency) to $670 million worldwide, with 6% growth in the U.S.
- Reconstructive sales, excluding dental, increased 13% (10% constant currency) worldwide, with U.S. growth of 11%
- Knee sales increased 17% (13% constant currency) worldwide and increased 13% in the U.S.
- Reported net loss of $3 million improved from a net loss of $479 million for the third quarter of fiscal year 2009
- Adjusted net income increased 53% to $67 million compared to $44 million for the third quarter of fiscal year 2009
- Adjusted EBITDA increased 9% to $251 million, or 37.4% of net sales
Net sales increased 9% to $669.8 million during the third fiscal quarter ended February 28, 2010 from $615.0 million during the third quarter of fiscal year 2009. Excluding the effect of foreign currency, net sales increased 6% during the third quarter of fiscal year 2010.
U.S. sales increased 6% during the third quarter to $412.6 million; Europe sales increased 8% (flat at constant currency) to $181.4 million; and International (primarily Canada, South America, Mexico and the Pacific Rim) sales increased 28% (16% constant currency) to $75.8 million. Excluding dental and the impact of foreign currency, net sales during the third quarter increased 6% worldwide, 7% in the U.S., 2% in Europe, and 17% for International.
Reported operating income totaled $100.1 million during the third quarter of fiscal year 2010 compared to an operating loss during the third quarter of fiscal 2009 of $378.1 million, which included a $448.5 million impairment charge related to the goodwill and intangibles associated with our dental reconstructive business. Excluding special items, which included stock compensation expense in both periods, adjusted operating income for the third quarter increased 8% to $210.1 million, or 31.4% of net sales, compared to adjusted operating income of $193.9 million for the third quarter of fiscal year 2009.
On a reported basis, the Company recorded a net loss of $3.1 million during the third quarter of fiscal 2010 compared to a net loss of $478.7 million during the third quarter of fiscal 2009. Excluding special items, which included stock compensation expense in both periods and the impairment charge in the prior year, adjusted net income totaled $67.3 million during the third quarter of fiscal 2010 compared to adjusted net income of $44.1 million during the third quarter of fiscal year 2009.
Interest expense was $128.0 million during the third quarter compared to $132.3 million during the third quarter of fiscal year 2009, primarily due to lower interest rates on floating rate debt.
Special items (pre-tax) totaled $110.0 million during the third quarter of fiscal 2010 and included $95.6 million of non-cash amortization and depreciation expense related to the merger. Of the $14.4 million of non-merger related special items recorded during the third quarter, $4.8 million was stock compensation expense. A reconciliation of reported results to adjusted results is included in this press release, which is also posted on Biomet's website: www.biomet.com
Excluding special items that included stock compensation expense in both periods, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of fiscal 2010 increased 9% to $250.7 million, or 37.4% of net sales, compared to adjusted EBITDA of $229.8 million during the third quarter of fiscal year 2009.
Free cash flow (operating cash flow minus capital expenditures) for the third quarter totaled $131.0 million compared to free cash flow of $114.3 million for the third quarter of fiscal year 2009. Unlevered free cash flow (cash flow before debt service) for the third quarter was $192.1 million compared to unlevered free cash flow for the same period last fiscal year of $171.7 million.
The Company's reported net debt balance at February 28, 2010, was $5.855 billion with cash on hand of $167 million. From the transaction closing date of September 25, 2007, to the quarter ended February 28, 2010, reported net debt decreased by $298 million due to debt repayments of $190 million, an increase in cash of $94 million, and a $14 million decrease due to favorable foreign currency translation on the Company's Euro denominated debt since the transaction closing date.
At February 28, 2010, the Company's senior secured leverage ratio was 3.43 times the last twelve month's ("LTM") adjusted EBITDA (including run rate cost savings as defined in the Company's Credit Agreement dated September 25, 2007), compared to 4.7 times at the merger date. At the end of the third quarter of fiscal year 2010, the net debt leverage ratio was 5.81 times LTM adjusted EBITDA (including run rate cost savings) compared to 7.7 times at the merger date.
Biomet's President and Chief Executive Officer Jeffrey R. Binder remarked, "Strong market demand for Biomet's orthopaedic reconstructive products continued to drive the Company's sales growth during the third quarter, most notably in our knee and extremity product categories. On a constant currency basis, knee sales increased 13% worldwide, while global extremity sales grew 27%. Additionally, we recorded very strong sales growth from our international division, as we continued to successfully penetrate key markets during the quarter."
During the third quarter of fiscal year 2010, Biomet's knee sales increased 13% worldwide on a constant currency basis and grew 13% in the U.S. Key products that continued to drive the strong knee sales growth included the primary and revision components of the Vanguard® Complete Knee System, E1™ Antioxidant Infused Tibial Bearings, the Signature™ Personalized Patient Care program, and Regenerex® Primary Tibial Trays.
Excluding the impact of currency, global hip sales increased 4% during the third quarter, with domestic sales growth of 3%. In the U.S., the fiscal 2010 third quarter hip sales were up against a strong growth rate from the third quarter of fiscal 2009 of 16%. Advanced technologies contributing to third quarter sales growth were E1™ Antioxidant Infused Bearings, Regenerex® Ringloc®+ Cups and Biolox delta™ Ceramic Femoral Heads, as well as Taperloc® Microplasty® Hip Stems. In Europe, the Exceed ABT™ Advanced Bearing Technologies System continued to receive strong market demand during the third quarter, driven primarily by its ceramic-on-ceramic and E1™ Antioxidant Infused Bearing options.
The Company's extremity sales increased 27% worldwide at constant currency and increased 45% in the U.S., as a result of excellent market demand for the Comprehensive® Primary, Reverse, and Fracture Shoulder Systems, the Discovery® Elbow and the ExploR® Modular Radial Head. Strong demand for the anatomical and reverse versions of the T.E.S.S. Shoulder System contributed to extremity sales in Europe.
Excluding the effect of currency, dental reconstructive device sales decreased 1% during the third quarter of fiscal 2010, while sales in the U.S. increased 1%. During the third quarter, dental reconstructive device sales continued to be impacted by pressure on the dental implant market due to the global economic climate, but to a lesser extent than the prior few quarters. The Encode® Complete System continued to receive favorable market acceptance worldwide during the quarter.
Fixation sales were flat worldwide on a constant currency basis during the third quarter and decreased 3% in the U.S. Double-digit growth for craniomaxillofacial fixation sales and the positive sales growth for internal fixation were offset by decreased sales of external fixation and electrical stimulation devices. The TraumaOne™ Fixation System continued to penetrate the craniomaxillofacial fixation market during the third quarter, while the OptiLock® Proximal Humeral Plating System was the key contributor to internal fixation sales growth.
During the third quarter, spine sales increased 4% worldwide at constant currency and increased 3% in the U.S. Sales growth in the spine hardware and orthobiologics product category was impacted by a slight decrease in spinal stimulation sales. Key spine products during the third quarter included the Solitaire™ PEEK Anterior Spine System, the C-Thru™ Small Stature PEEK-OPTIMA® Spacer, the ESL® PEEK-OPTIMA®4 Posterior Spacer, the Polaris™ Deformity System and the MaxAn™ Anterior Cervical Plate System; as well as the Synergy™ Spinal System in Europe.
Sales of "other" products decreased 9% worldwide at constant currency during the third quarter and decreased 7% in the U.S. High single-digit sales growth for sports medicine products was more than offset by decreased sales of softgoods and bracing products. Sports medicine products that contributed to sales growth during the quarter were the ToggleLoc™ Femoral Fixation Device with ZipLoop™ Technology, the ZipTight™ Fixation System, the ComposiTCP™ Interference Screw and the MicroMax™ Flex Suture Anchor.