Biomet, Inc. (Biomet) has reported net sales of $630.1 million for the first quarter of fiscal 2010, up 4%, compared with the net sales of $607 million in the year-ago quarter. It has also reported a net loss of $22.8 million for the first quarter of fiscal 2010, compared with the net income of $59.9 million in the year-ago quarter.
US sales increased 9% to $400.2 million during the quarter; Europe sales of $154.8 million decreased 9% (increased 3% constant currency); and International (primarily Canada, South America, Mexico and the Pacific Rim) sales increased 9% to $75.1 million (13% constant currency). Excluding dental and the impact of foreign currency, net sales during the first quarter of fiscal 2010 increased 9% worldwide, 10% in the U.S., 7% in Europe, and 10% for International.
During the first quarter of fiscal 2010, Biomet reported $113.0 million of special items (pre-tax), including purchase accounting charges of $98.4 million. The purchase accounting charges primarily relate to amortization expense for established intangible assets and depreciation expense as a result of the step-up of property to fair value. The remaining $14.6 million of special items included costs primarily related to the Company’s Operational Improvement Program and $5.2 million of stock compensation expense.
On a reported basis, operating income for the first quarter totaled $79.1 million compared to operating income of $57.0 million for the first quarter of fiscal year 2009. Excluding special charges and stock compensation expense in both periods, adjusted operating income for the first quarter of fiscal year 2010 increased 12% to $192.1 million or 30.5% of net sales compared to $171.6 million or 28.3% of net sales for the prior year period.
During the first quarter of fiscal 2010, the company recorded a net loss of $22.8 million, on a reported basis, compared to a net loss of $59.9 million for the first quarter of fiscal 2009. Excluding special charges and stock compensation expense in both periods, adjusted net income totaled $49.2 million during the first quarter compared to $13.8 million for the same period last year.
The company’s interest expense for the first quarter of fiscal year 2010 was $131.5 million compared to $141.9 million for the first quarter of fiscal 2009.
Excluding special charges and stock compensation expense in both periods, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the first quarter increased 11% to $230.3 million, or 36.5% of sales, compared to adjusted EBITDA of $207.0 million, or 34.1% of sales, for the prior year period.
Free cash flow (operating cash flow minus capital expenditures) was $1.6 million for the first quarter of fiscal 2010. Unlevered free cash flow (cash flow before debt service) totaled $59.8 million. The company’s cash flow in the quarter was negatively impacted by $53 million related to a previously disclosed litigation settlement that is further described in Biomet’s 10-Q to be filed later today. Unlevered free cash flow in the first quarter of last year was $21.9 million.
The company’s reported net debt balance at August 31, 2009, was $6.010 billion, with cash on hand of $226.4 million. Since the transaction closing date of September 25, 2007, reported net debt has decreased $134.9 million despite a $46.0 million increase in our Euro denominated debt due to the unfavorable impact of foreign currency.
At the end of the first quarter of fiscal 2010, the company’s senior secured leverage ratio was 3.66 times the adjusted last twelve month’s (“LTM”) EBITDA (including run rate cost savings as defined in the Credit Agreement dated September 25, 2007), compared to 4.7 times at the merger date. As of August 31, 2009, the net debt leverage ratio was 6.12 times adjusted LTM EBITDA (including run rate cost savings) compared to 7.7 times at the merger date.
Biomet’s president and chief executive officer Jeffrey R. Binder commented, “We began fiscal year 2010 with an encouraging quarter. I’m particularly pleased with our global sales growth of 9% for orthopedic reconstructive devices, 10% growth for knees, 23% extremity sales growth and the 17% growth rate for spine. Additional product categories that recorded double–digit sales growth during the first quarter include craniomaxillofacial fixation, sports medicine devices and softgoods and bracing products. Further, we experienced another strong quarter of leveraged growth in adjusted EBITDA, for an increase of 11% compared to the first quarter of fiscal 2009.”
Biomet is a US-based designer, manufacturer and marketer of products used by musculoskeletal medical specialists.