Net income of Biomet increased 33.8% to $80.8M in first quarter of 2014

Biomet, Inc. announced today financial results for its first quarter ended August 31, 2013.

First Quarter Financial Results

• Consolidated net sales increased 3.3% (4.3% constant currency) worldwide to approximately $731 million
• Knee sales grew 3.5% (4.8% constant currency) worldwide, with U.S. growth of 5.0%
• Hip sales increased 1.9% (3.7% constant currency) worldwide and increased 2.9% in the U.S.
• S.E.T. sales grew 17.4% (18.8% constant currency) worldwide and grew 18.1% in the U.S., including the impact of two extra weeks of the Trauma Acquisition in the current fiscal quarter
• Reported net income totaled $31.1 million, compared to a net loss of $31.5 million in the prior year period
• Adjusted net income increased 33.8% to $80.8 million, benefiting from the Company's refinancing activities

Consolidated net sales of $730.7 million increased 3.3% in the quarter, compared to net sales of $707.4 million during the first quarter of fiscal year 2013. Excluding the effect of foreign currency, consolidated net sales increased 4.3% during the first quarter. U.S. net sales increased 3.9% during the fourth quarter to $469.9 million, while Europe net sales increased 6.0% (2.0% constant currency) to $151.5 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales decreased 2.6% (increased 8.8% constant currency) to $109.3 million. On a consolidated basis we had one less selling day during the first quarter of fiscal year 2014, compared to the prior year quarter.

Special items (pre-tax) totaled $99.7 million during the first quarter of fiscal year 2014, compared to $165.1 million during the first quarter of fiscal year 2013.

Reported operating income was $96.4 million during the first quarter of fiscal year 2014, compared to operating income of $69.0 million during the first quarter of fiscal year 2013. Excluding special items, adjusted operating income totaled $196.1 million during the first quarter of fiscal year 2014, compared to $191.7 million during the prior year period.

Reported net income in the quarter was $31.1 million, compared to a net loss of $31.5 million during the first quarter of the prior year. Excluding special items, adjusted net income totaled $80.8 million during the first quarter of fiscal year 2014, compared to $60.4 million for the first quarter of fiscal year 2013.

Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") during the first quarter of fiscal year 2014 totaled $246.3 million, or 33.7% of net sales, compared to $237.8 million, or 33.6% of net sales, for the first quarter of fiscal year 2013.

Interest expense decreased to $87.6 million during the first quarter of fiscal year 2014, compared to $117.1 million at the end of the first quarter of 2013, primarily due to lower average interest rates on our term loans and lower bond interest as a result of refinancing activities.

Reported cash flow from operations totaled $50.8 million during the first quarter of fiscal year 2014, compared to reported cash flow from operations of $85.5 million for the first quarter of fiscal year 2013. Free cash flow (operating cash flow minus capital expenditures) was $4.3 million, which reflected $101.3 million of cash interest paid in the quarter, compared to free cash flow of $32.4 million, reflecting $62.5 million of cash interest paid during the first quarter of fiscal year 2013. The increase in cash interest is a result of a change in timing of interest payments due to our debt refinancing activities.

At August 31, 2013, reported gross debt was $5,971.8 million, and cash and cash equivalents, as defined in the Company's Amended and Restated Credit Agreement dated August 2, 2012, totaled $345.4 million, resulting in net debt of $5,626.4 million, compared to $5,610.8 million at May 31, 2013, reflecting the impact of foreign currency translation on our euro-denominated debt and a slight decrease in cash and cash equivalents.

Biomet's senior secured leverage ratio as of August 31, 2013 was 2.73 times the last twelve months ("LTM") adjusted EBITDA, as defined by our credit agreement, compared to 4.01 times at May 31, 2008, the first fiscal year-end following the Merger. The total (net debt) leverage ratio was 5.18 times LTM adjusted EBITDA at August 31, 2013, compared to 6.97 times at May 31, 2008.

Biomet's President and Chief Executive Officer Jeffrey R. Binder commented, "We have had a great start to fiscal year 2014. We are very pleased with the uptick in our fiscal first quarter hip and knee sales with worldwide constant currency growth at 4% and 5%, respectively, despite having one less selling day in the quarter. Our sports, extremities and trauma sales remained strong during the quarter with double digit growth worldwide. And, we started this week on a high note with yesterday's press release announcing the signing of a definitive agreement to acquire Lanx, Inc., a leader in minimally invasive spine technologies. We look forward to sharing more about our fiscal first quarter highlights on today's call."

Recent Refinancing Activities

On September 10, 2013, Biomet retired €167.3 million ($221.4 million) principal amount of euro-denominated term loans using cash on hand. On September 25, 2013, Biomet completed an $870.5 million U.S. dollar-denominated term loan offering, the proceeds of which were used to retire the remaining euro-denominated term loan principal balance of €657.7 million ($870.2 million). Concurrently with the new $870.5 million U.S. dollar-denominated term loan offering, Biomet also completed a repricing of its existing $2,111.4 million extended U.S. dollar-denominated term loan to LIBOR + 3.50%. The terms of the new term loan offering are consistent with the existing extended U.S. dollar-denominated term loans. All U.S. dollar translation amounts were translated using the August 31, 2013 exchange rate of 1 euro to $1.3231.

Source: Biomet, Inc.