Biomet, Inc. announced financial results for its second fiscal quarter ended November 30, 2009.
* Net sales increased 8% (5% constant currency) to $696 million worldwide and increased 8% in the U.S.
* Reconstructive sales, excluding dental, increased 12% (9% constant currency) worldwide, with 10% U.S. growth
* Knee sales increased 15% (12% constant currency) worldwide, with U.S. growth of 11%
* Reported net loss of $7 million improved from a net loss of $40 million for the second quarter of fiscal 2009
* Adjusted net income increased 120% to $75 million compared to $34 million for the second quarter of fiscal 2009
* Adjusted EBITDA increased 7% to $265 million, or 38.2% of sales
Net sales increased 8% during the second fiscal quarter ended November 30, 2009, to $695.6 million from $642.8 million during the second quarter of fiscal year 2009. On a constant currency basis, net sales increased 5% during the second quarter of fiscal 2010.
U.S. sales increased 8% during the quarter to $408.2 million; Europe sales increased 6% (flat at constant currency) to $206.2 million; and International (primarily Canada, South America, Mexico and the Pacific Rim) sales increased 20% (10% constant currency) to $81.2 million. Excluding dental and the effect of foreign currency, net sales increased 7% worldwide, 9% in the U.S., 2% in Europe, and 12% for International during the second quarter of fiscal 2010.
Reported operating income totaled $94.1 million during the second quarter of fiscal year 2010 compared to $80.0 million for the second quarter of fiscal year 2009. Excluding special items, which included stock compensation expense in both periods, adjusted operating income for the second quarter of fiscal 2010 increased 5% to $221.1 million or 31.8% of net sales compared to $211.4 million for the same period in the prior fiscal year.
The Company recorded a net loss of $7.2 million, on a reported basis, during the second quarter of fiscal 2010 compared to a reported net loss of $39.7 million for the second quarter of fiscal 2009. Excluding special items, which included stock compensation expense in both periods, adjusted net income totaled $74.8 million during the second quarter of fiscal 2010 compared to adjusted net income of $34.0 million for the same period in the prior fiscal year.
During the second quarter of fiscal year 2010, interest expense was $130.1 million compared to $139.2 million during the second quarter of fiscal year 2009, primarily due to lower interest rates on floating rate debt.
The Company reported $127.0 million of special items (pre-tax) during the second quarter of fiscal 2010, including $112.9 million of non-cash special items. Of the non-cash amount, purchase accounting charges relating to the merger referenced below totaled $98.7 million, primarily related to amortization expense for established intangible assets and depreciation expense as a result of the step-up of property to fair value. The remaining $14.2 million of non-cash special items and $14.1 million of cash special items consisted primarily of costs associated with our Operational Improvement Program and $4.3 million of stock compensation expense.
Excluding special items, which included stock compensation expense in both periods, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter of fiscal 2010 increased 7% to $265.4 million, or 38.2% of sales, compared to adjusted EBITDA of $247.1 million, or 38.4% of sales, for the same period in the prior fiscal year.
Free cash flow (operating cash flow minus capital expenditures) for the second quarter was a use of $26.5 million compared to a use of $70.2 million for the same period in the prior fiscal year. Unlevered free cash flow (cash flow before debt service) for the quarter totaled $165.1 million compared to unlevered free cash flow for the same period last year of $132.1 million.
The Company’s reported net debt balance at November 30, 2009, was $6.105 billion with cash on hand of $117.6 million. From the transaction closing date of September 25, 2007, to the quarter ended November 30, 2009, reported net debt decreased by $40 million due to debt repayments of $104 million and an increase in cash of $45 million, partly offset by a $109 million increase due to the unfavorable foreign currency translation on the Company’s Euro denominated debt.
At November 30, 2009, the Company’s senior secured leverage ratio was 3.66 times the last twelve month’s (“LTM”) adjusted EBITDA (including run rate cost savings as defined in the Company’s Credit Agreement dated September 25, 2007), compared to 4.7 times at the merger date. At the end of the second quarter of fiscal year 2010, the net debt leverage ratio was 6.14 times LTM adjusted EBITDA (including run rate cost savings) compared to 7.7 times at the merger date.
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