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Biomet Announces Fourth Quarter and Fiscal Year 2012 Preliminary Financial Results
WARSAW, Ind. --(Business Wire)--
Biomet, Inc. announced today preliminary financial results for its
fourth quarter and fiscal year ended May 31, 2012. The final results for
the three and twelve months ended May 31, 2012 will be made available to
the public with the filing of Biomet's Form 10-K for fiscal year 2012
and will include the finalization of a non-cash goodwill and intangible
asset impairment charge as further described below and certain income
tax accounts.
Fourth Quarter Preliminary Financial Results
Net sales totaled $739.5 million for the fourth quarter of fiscal year
2012, an increase of 3% compared to net sales reported during the fourth
quarter of fiscal year 2011 of $715.2 million. Excluding the effect of
foreign currency, net sales increased 5% during the fourth quarter. U.S.
net sales increased 7% to $439.5 million during the fourth quarter of
fiscal 2012, while Europe net sales decreased 8% (2% at constant
currency) to $182.4 million and International (primarily Canada, South
America, Mexico and the Pacific Rim) net sales increased 12% (14%
constant currency) to $117.6 million. During the fourth quarter, there
were the same number of billing days on a consolidated basis, compared
to the fourth quarter of fiscal year 2011.
Special items (pre-tax) totaled $607.2 million for the fourth quarter of
fiscal year 2012, including a non-cash goodwill and intangible asset
impairment charge of $529.8 million that was primarily related to the
Company's spine and bone healing reporting unit and dental reporting
unit principally driven by a reduction in management's expectations of
long-term industry growth rates compared to prior estimates; $72.9
million of non-cash amortization expense related to the Merger; and $4.5
million of non-Merger related special items.
Reported operating loss was $378.0 million during the fourth quarter of
fiscal year 2012, compared to an operating loss of $847.3 million for
the fourth quarter of fiscal year 2011. Excluding special items in both
quarters, adjusted operating income was $229.2 million, or 31.0% of net
sales, an increase of 6% compared to adjusted operating income of $216.3
million, or 30.2% of net sales, for the same period in fiscal year 2011.
On a reported basis, a net loss of $388.1 million was recorded during
the fourth quarter of fiscal year 2012, compared to a net loss of $812.8
million during the fiscal fourth quarter of the prior year. Excluding
special items in both quarters, adjusted net income for the fourth
fiscal quarter totaled $105.6 million, compared to adjusted net income
of $24.6 million for the fourth quarter of fiscal year 2011.
Adjusted earnings before interest, taxes, depreciation and amortization
("EBITDA") during the fourth quarter of fiscal year 2012 was $277.7
million, or 37.6% of net sales, an increase of 6% compared to adjusted
EBITDA for the fiscal fourth quarter of 2011 of $260.9 million, or 36.5%
of net sales.
Interest expense was $116.4 million during the fiscal fourth quarter,
compared to $125.2 million during the same period in fiscal year 2011,
primarily as a result of lower average interest rates on our term loans.
Free cash flow (reported cash flow from operations of $86.0 million less
capital expenditures of $56.6 million) was $29.4 million during the
fiscal fourth quarter, reflecting $183.1 million of cash interest paid
in the quarter.
Full Year Preliminary Financial Results
Net sales for the year ended May 31, 2012, increased 4% to $2,838.1
million from $2,732.2 million for fiscal year 2011. Excluding the effect
of foreign currency, net sales increased 3% during fiscal year 2012.
U.S. net sales increased 3% to $1,713.3 million during fiscal year 2012,
while Europe net sales increased 1% (flat constant currency) to $702.7
million. International (primarily Canada, South America, Mexico and the
Pacific Rim) net sales increased 13% (9% constant currency) to $422.1
million. During fiscal year 2012, there were the same number of billing
days on a consolidated basis, compared to fiscal year 2011.
Special items (pre-tax) during fiscal year 2012 totaled $940.7 million,
including the previously mentioned $529.8 million non-cash goodwill and
intangible asset impairment charge, $325.6 million of non-cash
amortization and depreciation expense related to the Merger, and $85.3
million of non-Merger related special items that were primarily
associated with our operational improvement initiatives.
Reported operating loss was $93.4 million during fiscal year 2012
compared to an operating loss of $576.9 million during fiscal year 2011.
Excluding special items in both periods, adjusted operating income
totaled $847.3 million, or 29.9% of net sales, an increase of 1%
compared to $837.7 million, or 30.7% of net sales, during fiscal year
2011.
On a reported basis, a net loss of $457.8 million was recorded during
fiscal year 2012, compared to a net loss during fiscal year 2011 of
$849.8 million. Excluding special items in both periods, adjusted net
income totaled $252.3 million during fiscal year 2012, an increase of
23% compared to adjusted net income of $205.2 million during fiscal year
2011.
Adjusted EBITDA increased 2% during fiscal year 2012 to $1,031.1
million, or 36.3% of net sales, compared to $1,010.4 million, or 37.0%
of net sales, during fiscal year 2011.
Interest expense during fiscal year 2012 was $479.8 million, compared to
$498.9 million for fiscal year 2011, principally due to lower average
interest rates on our term loans.
Free cash flow (reported cash flow from operations less capital
expenditures) was $198.0 million for fiscal year 2012, compared to free
cash flow of $206.1 million for fiscal year 2011.
Reported gross debt as of May 31, 2012 was $5,827.8 million and cash and
cash equivalents, as defined in the Company's Credit Agreement dated
September 25, 2007, totaled $492.4 million, which resulted in net debt
of $5,335.4 million. From May 31, 2008, the first fiscal year-end after
the Merger, to May 31, 2012, net debt decreased by $837.8 million due to
an increase in cash and cash equivalents, as defined by our credit
agreement, of $364.8 million and a $473.0 million reduction of gross
debt. The gross debt reduction includes a decrease of $262.1 million as
a result of favorable foreign currency translation on the Company's
euro-denominated debt.
As of May 31, 2012, Biomet's senior secured leverage ratio was 2.70
times the last twelve months ("LTM") adjusted EBITDA, as defined by our
credit agreement, compared to 4.01 times at May 31, 2008. The total
leverage ratio was 5.17 times LTM adjusted EBITDA at May 31, 2012,
compared to 6.97 times as of May 31, 2008.
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
About Biomet
Biomet, Inc. and its subsidiaries design, manufacture and market
products used primarily by musculoskeletal medical specialists in both
surgical and non-surgical therapy. Biomet's product portfolio
encompasses large joint reconstructive products, including orthopedic
joint replacement devices, and bone cements and accessories; sports
medicine, extremities and trauma products, including internal and
external orthopedic fixation devices; spine and bone healing products,
including spine hardware, spinal stimulation devices, and
orthobiologics, as well as electrical bone growth stimulators and
softgoods and bracing; dental reconstructive products; and other
products, including microfixation products and autologous therapies.
Headquartered in Warsaw, Indiana, Biomet and its subsidiaries currently
distribute products in approximately 90 countries.
Contacts
For further information contact Daniel P. Florin, Senior Vice President
and Chief Financial Officer, at (574)�372-1687 or Barbara Goslee,
Director, Investor Relations at (574)�372-1514.
Financial Schedule Presentation
The Company's unaudited condensed consolidated financial statements as
of and for the three and twelve months ended May 31, 2012 and 2011 and
other financial data included in this press release have been prepared
in a manner that complies, in all material respects, with generally
accepted accounting principles in the United States (except with respect
to certain non-GAAP financial measures discussed below) and reflects
purchase accounting adjustments related to the Merger referenced below.
Forward-Looking Statements
This press release contains "forward-looking statements" within the
meaning of Section�27A of the Securities Act of 1933 and Section�21E of
the Securities Exchange Act of 1934, as amended. Those statements are
often indicated by the use of words such as "will," "intend,"
"anticipate," "estimate," "expect," "plan" and similar expressions.
Forward-looking statements involve certain risks and uncertainties.
Actual results may differ materially from those contemplated by the
forward looking statements due to, among others, the following factors:
the success of the Company's principal product lines; the results of the
ongoing investigation by the United States Department of Justice; the
ability to successfully implement new technologies; the Company's
ability to sustain sales and earnings growth; the Company's success in
achieving timely approval or clearance of its products with domestic and
foreign regulatory entities; the impact to the business as a result of
compliance with federal, state and foreign governmental regulations and
with the Deferred Prosecution Agreement and Corporate Integrity
Agreement; the impact to the business as a result of the economic
downturn in both foreign and domestic markets; the impact of federal
health care reform; the impact of anticipated changes in the
musculoskeletal industry and the ability of the Company to react to and
capitalize on those changes; the ability of the Company to successfully
implement its desired organizational changes and cost-saving
initiatives; the impact to the business as a result of the Company's
significant international operations, including, among others, with
respect to foreign currency fluctuations and the success of the
Company's transition of certain manufacturing operations to China; the
impact of the Company's managerial changes; the ability of the Company's
customers to receive adequate levels of reimbursement from third-party
payors; the Company's ability to maintain its existing intellectual
property rights and obtain future intellectual property rights; the
impact to the business as a result of cost containment efforts of group
purchasing organizations; the Company's ability to retain existing
independent sales agents for its products; and other factors set forth
in the Company's filings with the SEC, including the Company's most
recent annual report on Form 10-K and quarterly reports on Form 10-Q.
Although the Company believes that the assumptions on which the
forward-looking statements contained herein are based are reasonable,
any of those assumptions could prove to be inaccurate given the inherent
uncertainties as to the occurrence or non-occurrence of future events.
There can be no assurance as to the accuracy of forward-looking
statements contained in this press release. The inclusion of a
forward-looking statement herein should not be regarded as a
representation by the Company that the Company's objectives will be
achieved. The Company undertakes no obligation to update publicly or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Accordingly, the reader is
cautioned not to place undue reliance on forward-looking statements
which speak only as of the date on which they were made.
*Non-GAAP Financial Measures:
Management uses non-GAAP financial measures, such as net sales excluding
the impact of foreign currency (constant currency), operating income as
adjusted, Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) as adjusted, net income as adjusted, gross profit as adjusted,
selling, general and administrative expense as adjusted, research and
development expense as adjusted, cash and cash equivalents (as defined
by our credit agreement), net debt, senior secured leverage ratio, total
leverage ratio, free cash flow, and unlevered free cash flow.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP measures are included elsewhere in the press
release.
The term "adjusted" or "as adjusted," a non-GAAP financial measure,
refers to financial performance measures that exclude certain income
statement line items, such as interest, taxes, depreciation or
amortization, other (income) expense, and/or exclude certain expenses as
defined by our credit agreement, such as restructuring charges, non-cash
impairment charges, integration and facilities opening costs or other
business optimization expenses, new systems design and implementation
costs, certain start-up costs and costs related to consolidation of
facilities, certain non-cash charges, advisory fees paid to the
Company's private equity owners, certain severance charges, purchase
accounting costs, stock-based compensation, litigation costs, and other
related charges.
These non-GAAP financial measures are not in accordance with, or an
alternative for, GAAP in the United States. Biomet management believes
that these non-GAAP financial measures provide useful information to
investors; however, this additional non-GAAP financial information is
not meant to be considered in isolation or as a substitute for financial
information prepared in accordance with GAAP.
Non-GAAP Reconciliation
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
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current presentation. Such reclassifications were limited to net sales
information by product and geographic categories. The current
presentation aligns with how the Company presently reports sales and
markets its products.
The Merger
Biomet, Inc. finalized the merger with LVB Acquisition Merger Sub, Inc.,
a wholly-owned subsidiary of LVB Acquisition, Inc., which we refer to in
this press release as the "Merger", on September�25, 2007. LVB
Acquisition, Inc. is indirectly owned by investment partnerships
directly or indirectly advised or managed by The Blackstone Group,
Goldman Sachs�& Co., Kohlberg Kravis Roberts�& Co. and TPG Capital.
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Biomet, Inc.
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Product Net Sales
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Three Month Period Ended May 31, 2012 and 2011
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(in millions, except percentages, unaudited)
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Constant
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Three Months Ended
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Three Months Ended
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Reported
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Currency*
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May 31, 2012
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May 31, 2011
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Growth %
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Growth %
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Large Joint Reconstructive
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$
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439.6
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$
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425.5
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3
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%
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6
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%
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Sports, Extremities, Trauma (S.E.T.)
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96.2
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84.3
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14
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%
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16
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%
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Spine & Bone Healing
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83.9
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80.2
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5
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%
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5
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%
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Dental
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69.2
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74.0
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(6
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%
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(4
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%
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Other
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50.6
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51.2
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(1
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)
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%
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1
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%
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Net Sales
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$
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739.5
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�
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$
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715.2
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3
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�
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%
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5
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%
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Three Months Ended
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Three Months Ended
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May 31, 2012
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May 31, 2012
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Net Sales Growth
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Currency
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Net Sales Growth in
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As Reported
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Impact*
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Local Currencies*
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Large Joint Reconstructive
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3
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%
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3
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%
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6
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%
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Knees
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4
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%
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2
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%
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6
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%
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Hips
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3
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%
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3
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%
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6
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%
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Bone Cement and Other
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1
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%
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3
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%
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4
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%
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Sports, Extremities, Trauma (S.E.T.)
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14
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%
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2
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%
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16
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%
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Sports Medicine
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19
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%
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2
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%
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21
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%
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Extremities
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20
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%
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2
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%
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22
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%
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Trauma
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(5
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)
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%
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1
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%
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(4
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)
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%
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Spine & Bone Healing
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5
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%
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-
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%
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5
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%
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Spine
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9
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%
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-
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%
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9
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%
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Bone Healing
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(5
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)
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%
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-
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%
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(5
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%
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Dental
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(6
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)
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%
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2
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%
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(4
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%
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Other
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�
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(1
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%
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�
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2
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%
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1
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�
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%
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Net Sales
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�
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3
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%
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�
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2
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%
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5
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%
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* See Non-GAAP Financial Measures Disclosure
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