Excluding the impact of foreign currency, net sales increased 7%.
During the third quarter of fiscal 2009, the company recorded $572.0 million of special items (pre-tax), including a preliminary goodwill and intangible asset impairment charge of $448.5 million associated with the dental reconstructive business unit. Key factors contributing to the non-cash impairment charge included disruptions in the credit and equity markets and decreased demand in the dental reconstructive market relative to our original assumptions at the time of the Merger. The amount of the charge will be finalized during the fourth quarter of fiscal year 2009. The special items also include purchase accounting charges related to the Merger of $98.9 million, which primarily relate to amortization expense for established intangible assets, along with depreciation expense as a result of the step-up of property to fair value. In addition, there were $24.6 million of other special items. A reconciliation of reported results to adjusted results is included in the schedules herein.
Operating loss for the third quarter of fiscal year 2009 was $378.1 million on a reported basis, compared to an operating loss of $5.0 million for the third quarter of fiscal year 2008. Excluding special charges in both periods, adjusted operating income increased 4% to $193.9 million for the third quarter compared to $186.8 million in the prior year period. Excluding special charges, Biomet had net income of $44.1 million during the quarter, in comparison to net income of $25.2 million for the prior year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of fiscal year 2009 increased 6.0% to $229.8 million, or 37.4% of net sales, compared to adjusted EBITDA of $217.1 million, or 36.0% of net sales, during the same period last year.
Net interest expense for the third quarter of fiscal year 2009 was $132.3 million compared to $142.9 million for the third quarter of fiscal year 2008.
Free cash flow (operating cash flow minus capital expenditures) for the third quarter of fiscal year 2009 was $114.3 million and $69.0 million for the fiscal year to date. Unlevered free cash flow was $171.7 million during the third quarter and $394.8 million for the nine months ended February 28, 2009.
As of February 28, 2009, Biomet’s reported net debt balance was $5.863 billion, including cash on hand of $339.3 million, representing a net debt reduction of nearly $300 million since the Merger date of September 25, 2007. Reflected in this net debt reduction is $91.0 million of favorable foreign currency translation on the company’s Euro denominated Term Loan.
Biomet’s senior secured leverage ratio at February 28, 2009, was at 3.77 times adjusted pro-forma EBITDA, compared to 4.7 times at the Merger date. The company’s total leverage ratio continues to improve at 6.54 times adjusted pro-forma EBITDA at February 28, 2009, compared to a ratio of 7.9 times as of the Merger date.
Biomet’s President and Chief Executive Officer Jeffrey R. Binder commented, “In addition to the strong third quarter sales growth we announced last week, I’m very pleased with the progress we continue to make with our cost reduction and value creation programs, enabling us to deliver another quarter of leveraged growth to the bottom line. Further, I’m pleased with the continued improvements in our cash flow position and debt ratios.”
Binder continued, “While the impact of the general economy on our dental implant business is resulting in a write-down of goodwill and intangible assets associated with the Merger, I have confidence in the long-term attractiveness of the dental reconstructive market and Biomet 3i’s competitiveness in that market.”
