Biomet Profit Jumps Sharply

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Warsaw-based Biomet is reporting fiscal second quarter net income of $89.8 million, compared to $4.9 million in the same period the previous year. The company says sales in the United States, Canada, Latin America and the Asia Pacific region all increased. Biomet's $13.3 billion merger with Zimmer Holdings Inc. (NYSE: ZMH) is awaiting regulatory approval. January 6, 2014

News Release

WARSAW, Ind. - Biomet, Inc. ("the Company") announced today financial results for its second quarter ended November 30, 2014.

Second Quarter Financial Results

Consolidated net sales increased 2.2% (4.2% constant currency) worldwide to approximately $844 million

U.S. net sales grew 3.9% to $512 million

International net sales increased 3.7% (10.0% constant currency) to $125 million

Consolidated net sales increased 2.2% to $843.6 million worldwide during the second quarter of fiscal year 2015, compared to net sales of $825.7 million during the second quarter of fiscal year 2014. Excluding the effect of foreign currency, consolidated net sales increased 4.2% during the second quarter. U.S. net sales increased 3.9% during the second quarter to $512.4 million, while Europe net sales decreased 2.7% (increased 1.4% constant currency) to $206.1 million and International (primarily Canada, Latin America and the Asia Pacific region) net sales increased 3.7% (10.0% constant currency) to $125.1 million. On a consolidated basis, the Company had approximately the same number of selling days in the quarter compared to the prior year quarter.

Special items, after tax, totaled $43.8 million during the second quarter of fiscal year 2015, compared to $113.1 million during the second quarter of fiscal year 2014 primarily as a result of decreased litigation costs due to reaching favorable resolution with certain insurance carriers in regards to certain claims.

Reported operating income was $169.6 million during the second quarter of fiscal year 2015, compared to an operating income of $113.6 million during the second quarter of fiscal year 2014. Excluding special items, adjusted operating income totaled $241.7 million during the second quarter of fiscal year 2015, compared to $232.8 million during the prior year period.

Reported net income in the quarter was $89.8 million, compared to a net income of $4.9 million during the second quarter of the prior year. Excluding special items, adjusted net income totaled $133.6 million during the second quarter of fiscal year 2015, compared to $118.0 million for the second quarter of fiscal year 2014.

Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") during the second quarter of fiscal year 2015 totaled $294.6 million, compared to $285.4 million for the second quarter of fiscal year 2014.

Reported cash flow from operations totaled $160.3 million during the second quarter of fiscal year 2015, compared to reported cash flow from operations of $120.1 million for the second quarter of fiscal year 2014. Free cash flow (operating cash flow minus capital expenditures) was $89.0 million, which included $61.7 million of cash interest paid in the quarter, compared to a free cash flow of $68.1 million during the second quarter of fiscal year 2014, including $85.3 million of cash interest paid.

At November 30, 2014, reported gross debt was $5,714.7 million, and cash and cash equivalents totaled $276.5 million, resulting in net debt of $5,438.2 million, compared to reported gross debt of $5,720.4 million, and cash and cash equivalents of $247.6 million, resulting in net debt of $5,472.8 million at May 31, 2014.

About Biomet

Biomet, Inc. and its subsidiaries design, manufacture and market surgical and non-surgical products used primarily by orthopedic surgeons and other musculoskeletal medical specialists. Biomet's product portfolio includes hip and knee reconstructive products; sports medicine, extremities and trauma products; spine, bone healing and microfixation products; dental reconstructive products; and cement, biologics and other products. Headquartered in Warsaw, Indiana, Biomet and its subsidiaries currently distribute products in approximately 90 countries.

The 2007 Acquisition

Biomet, Inc. finalized the merger with LVB Acquisition Merger Sub, Inc., a wholly-owned subsidiary of LVB Acquisition, Inc., which it refers to in this press release as the “2007 Acquisition”, 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 Global.

2012 Trauma Acquisition

On May 24, 2012, DePuy Orthopaedics, Inc. accepted the Company’s binding offer to purchase certain assets representing substantially all of DePuy’s worldwide trauma business (the “2012 Trauma Acquisition”), which involves researching, developing, manufacturing, marketing, distributing and selling products to treat certain bone fractures or deformities in the human body, including certain intellectual property assets, and to assume certain liabilities, for approximately $280.0 million in cash. The Company acquired the DePuy worldwide trauma business to strengthen its trauma business and to continue to build a stronger presence in the global trauma market. On June 15, 2012, the Company announced the initial closing of the transaction. During the first and second quarters of fiscal year 2013, subsequent closings in various foreign countries occurred on a staggered basis, with the final closing occurring on December 7, 2012.

2013 Spine Acquisition

On October 5, 2013, the Company and its wholly-owned subsidiaries EBI Holdings, LLC, a Delaware limited liability company (“EBI”), and LNX Acquisition, Inc., a Delaware corporation (“Merger Sub Lanx”), entered into an Agreement and Plan of Merger (the “Merger Agreement Lanx”) with Lanx, Inc., a Delaware corporation (“Lanx”). On October 31, 2013, Merger Sub Lanx merged with and into Lanx and the separate corporate existence of Merger Sub Lanx ceased (the “2013 Spine Acquisition”). Upon the consummation of the 2013 Spine Acquisition, Lanx became a wholly-owned subsidiary of EBI and the Company. As of November 1, 2013 the activities of Lanx were included in the Company’s consolidated results. The aggregate purchase price for the acquisition was approximately $150.8 million on a debt-free basis.

Zimmer Merger

On April 24, 2014, LVB, a Delaware corporation, which owns all of the outstanding shares of common stock of Biomet, Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Zimmer, a Delaware corporation, and Owl Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Zimmer.

Under the Merger Agreement, LVB will be acquired for an aggregate purchase price based on a total enterprise value of $13.35 billion, which will consist of $10.35 billion in cash (which is subject to adjustment) and 32,704,677 shares of Zimmer common stock (which number of shares represents the quotient of $3.0 billion divided by $91.73, the volume weighted average price of Zimmer’s common stock on the New York Stock Exchange for the five trading days prior to the date of the Merger Agreement). According to Zimmer’s Form S-4/A filed on September 26, 2014, in connection with the merger, Zimmer expects to pay off all of the outstanding funded debt of LVB and its subsidiaries, and the aggregate cash merger consideration paid by Zimmer at the closing will be reduced by such amount. Zimmer is expected to fund the cash portion of the merger consideration and the repayment of the outstanding funded debt of LVB, totaling $5,714.7 million as of November 30, 2014, and its subsidiaries with a combination of new debt and cash on hand. The closing of the merger is not conditioned on the receipt of any debt financing by Zimmer. Zimmer, however, is not required to co