Biomet first quarter net sales increase 6% to $707.4 million

Oct 10 2012

Biomet, Inc. announced today financial results for its first fiscal quarter ended August 31, 2012.

• Initial close of the Trauma Acquisition was announced June 15, 2012; substantially completed
• Net sales increased 6% (10% constant currency) worldwide to approximately $707 million
• Net sales, excluding the Trauma Acquisition, increased 1% (4% constant currency) worldwide
• Large Joint Reconstructive sales decreased 1% (grew 2% constant currency) worldwide, with 1% growth in the U.S.
• S.E.T. sales increased 56% (59% constant currency) worldwide and increased 52% in the U.S.
• Excluding the Trauma Acquisition, S.E.T. sales increased 8% (10% constant currency) and increased 11% in the U.S.
• Initiated refinancing activities to reduce cost of overall debt capital structure

First Quarter Financial Results

Net sales increased 6% during the first quarter of fiscal year 2013 to $707.4 million compared to net sales of $664.6 million during the first quarter of fiscal year 2012. Excluding the effect of foreign currency, net sales increased 10% during the first quarter. U.S. net sales increased 9% to $452.2 million during the first quarter, while Europe net sales decreased 4% (increased 9% constant currency) to $142.9 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales increased 11% (14% constant currency) to $112.3 million.

Special items (pre-tax) for the fiscal first quarter totaled $122.7 million, including $74.7 million of non-cash amortization expense related to the 2007 Merger and $48.0 million of special items, primarily associated with the Trauma Acquisition and the Company's stock-based compensation modification.

Reported operating income during the first quarter of fiscal year 2013 was $69.0 million compared to operating income of $72.7 million during the first quarter of fiscal year 2012. Excluding special items, adjusted operating income totaled $191.7 million during the first quarter of fiscal year 2013, compared to $182.3 million for the first quarter of fiscal year 2012.

Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") was $237.8 million, or 33.6% of net sales during the first quarter of fiscal year 2013, compared to $226.6 million, or 34.1% of net sales for the first quarter of fiscal year 2012.

Interest expense during the first quarter of fiscal year 2013 totaled $117.1 million compared to $125.4 million during the first quarter of the prior year, primarily due to lower average interest rates on our term loans.

Reported cash flow from operations totaled $85.5 million for the first quarter of fiscal year 2013, as compared to reported cash flow from operations of $123.1 million for the first quarter of fiscal year 2012. Free cash flow (operating cash flow of $85.5 million minus capital expenditures of $53.1 million) was $32.4 million, which reflected $62.5 million of cash interest paid in the quarter compared to free cash flow (operating cash flow of $123.1 million minus capital expenditures of $39.2 million) of $83.9 million during the first quarter of fiscal year 2012, which reflected $55.0 million of cash interest paid.

During the first quarter of fiscal year 2013, the Company utilized cash on hand of $280 million to fund the Trauma Acquisition. In addition, we initiated various debt refinancing activities during the quarter, which are expected to be completed during our fiscal second quarter of 2013. At August 31, 2012, reported gross debt was approximately $6.282 billion, and cash and cash equivalents, as defined in the Company's Credit Agreement dated September 25, 2007, totaled $619.2 million, resulting in net debt of $5.663 billion, compared to $5.335 billion at May 31, 2012.

Biomet's senior secured leverage ratio as of August 31, 2012 was 2.55 times the last twelve months ("LTM") adjusted EBITDA, as defined by our credit agreement, compared to 2.70 times at May 31, 2012 and 4.01 times at May 31, 2008. The total (net debt) leverage ratio was 5.43 times LTM adjusted EBITDA at August 31, 2012, compared to 5.17 times at May 31, 2012 and 6.97 times at May 31, 2008.

Biomet's President and Chief Executive Officer Jeffrey R. Binder stated, "Overall, I'm generally pleased with our results for the first quarter of fiscal year 2013. The completion of the trauma acquisition bolsters our S.E.T. product category to annualized sales in excess of $500 million in an attractive segment of the orthopaedic market. The team has executed well on the integration and our investment in building a great S.E.T. business is paying off. We did experience some deceleration in growth for our hip and knee business, but until others report their results we won't know whether market growth has slowed or our growth has come back to market."

The following table provides first quarter net sales performance by product category:

Large Joint Reconstructive sales decreased 1% (increased 2% constant currency) worldwide to $393.0 million and increased 1% in the U.S. during the first quarter of fiscal year 2013 compared to the first quarter of fiscal year 2012. Knee sales decreased 1% (increased 2% constant currency) worldwide during the first quarter and increased 1% in the U.S. Hip sales decreased 1% (increased 2% constant currency) worldwide during the first quarter and increased 1% in the U.S.

S.E.T. sales increased 56% (59% constant currency) worldwide to $127.3 million during the first quarter, and increased 52% in the U.S. Excluding the Trauma Acquisition, S.E.T. sales increased 8% (10% constant currency) worldwide and increased 11% in the U.S. Sports medicine sales increased 9% (12% constant currency) worldwide during the quarter and increased 8% in the U.S. Extremity sales grew 13% (15% constant currency) worldwide during the quarter, with a growth rate of 20% in the U.S. Trauma sales increased 192% (199% constant currency) worldwide during the quarter and increased 190% in the U.S. Trauma sales, excluding the Trauma Acquisition, decreased 2% (flat at constant currency) worldwide and were flat in the U.S.

Spine and Bone Healing (non-invasive trauma stimulation and bracing) sales increased 4% (5% constant currency) worldwide to $77.9 million during the first quarter and increased 5% in the U.S.

Dental sales decreased 4% (increased 1% constant currency) worldwide to $57.0 million and increased 4% in the U.S. during the first quarter.

Sales of Other products increased 1% (4% constant currency) worldwide to $52.2 million during the first quarter and increased 1% in the U.S.

Source: Biomet