Warsaw-based Biomet Inc. is reporting fiscal third quarter net income of $48.8 million, compared to a net loss of $65.9 million during the same period the previous year. The European Commission granted preliminary clearance last month for Zimmer Holdings Inc.'s (NYSE: ZMH) $13.4 billion deal to buy Biomet.
April 9, 2015
Warsaw, Ind. — Biomet, Inc. (“the Company”) announced today financial results for its third quarter ended February 28, 2015.
Third Quarter Financial Results
Consolidated net sales decreased 2.6% to $800.9 million worldwide during the third quarter of fiscal year 2015, compared to net sales of $822.5 million during the third quarter of fiscal year 2014. Excluding the effect of foreign currency, consolidated net sales increased 1.4% during the third quarter. U.S. net sales increased 1.1% during the third quarter to $514.8 million, while Europe net sales decreased 12.3% (decreased 0.7% constant currency) to $175.1 million and International (primarily Canada, Latin America and the Asia Pacific region) net sales decreased 2.5% (increased 6.3% constant currency) to $111.0 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 $69.0 million during the third quarter of fiscal year 2015, compared to $173.2 million during the third 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 $147.6 million during the third quarter of fiscal year 2015, compared to an operating income of $0.2 million during the third quarter of fiscal year 2014. Excluding special items, adjusted operating income totaled $243.4 million during the third quarter of fiscal year 2015, compared to $218.3 million during the prior year period.
Reported net income in the quarter was $48.8 million, compared to a net loss of $65.9 million during the third quarter of the prior year. Excluding special items, adjusted net income totaled $117.8 million during the third quarter of fiscal year 2015, compared to $107.3 million for the third quarter of fiscal year 2014.
Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) during the third quarter of fiscal year 2015 totaled $298.4 million, compared to $271.5 million for the third quarter of fiscal year 2014.
Reported cash flow from operations totaled $158.9 million during the third quarter of fiscal year 2015, compared to reported cash flow from operations of $154.7 million for the third quarter of fiscal year 2014. Free cash flow (operating cash flow minus capital expenditures) was $111.7 million, which included $92.7 million of cash interest paid in the quarter, compared to a free cash flow of $94.4 million during the third quarter of fiscal year 2014, including $100.4 million of cash interest paid.
At February 28, 2015, reported gross debt was $5,713.4 million, and cash and cash equivalents totaled $363.2 million, resulting in net debt of $5,350.2 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.
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.
Financial Schedule Presentation
The Company's unaudited condensed consolidated financial statements as of and for the three and nine months ended February 28, 2015 and 2014 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 2007 Acquisition and acquisitions referenced below.
*Non-GAAP Financial Measures:
Management uses non-GAAP financial measures, such as net sales excluding 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, interest expense as adjusted, other (income) expense as adjusted, provision (benefit) for income taxes as adjusted, net debt, 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, and/or exclude certain expenses, 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, loss on extinguishment of debt, certain non-cash charges, advisory fees paid to the Company's private equity owners, certain severance charges, acquisition costs including the 2012 Trauma Acquisition (as defined herein), the 2013 Spine Acquisition (as defined herein) and the Zimmer Merger (as defined herein), purchase accounting costs, certain litigation costs net of any probable recoveries from insurance carriers, including metal-on-metal, loss on swap liability 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.
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
Certain prior period amounts have been reclassified to conform to the current presentation. The current presentation aligns with how the Company presently reports sales and markets its products. The Company also reclassified instrument depreciation from cost of sales to selling, general and administrative expense.
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 i