UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 11, 2013
LVB ACQUISITION, INC.
BIOMET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware Indiana |
000-54505 001-15601 |
26-0499682 35-1418342 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
56 East Bell Drive
Warsaw, Indiana 46582
(Address of Principal Executive Offices, Including Zip Code)
(574) 267-6639
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
The accompanying press release includes the accounts of Biomet, Inc. and its subsidiaries (individually and collectively referred to as Biomet, the Company, we, us, or our). Biomet is a wholly owned subsidiary of LVB Acquisition, Inc. (LVB). LVB has no other operations beyond its ownership of Biomet. Intercompany accounts and transactions have been eliminated in consolidation.
On July 11, 2013, the Company issued a press release with respect to preliminary financial results for the fourth fiscal quarter of fiscal 2013 and fiscal year ended 2013. The press release attached hereto as Exhibit 99.1 is incorporated by reference herein.
The earnings release attached as Exhibit 99.1 includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP. Management exercises judgment in determining which types of charges or other items should be excluded from non-GAAP financial measures. Management uses this non-GAAP information internally to evaluate the performance of the core operations, establish operational goals and forecasts that are used in allocating resources and to evaluate the Companys performance period-over-period. Additionally, Biomets management is evaluated on the basis of some of these non-GAAP financial measures when determining achievement of their incentive compensation performance targets. The Company believes that its disclosure of these non-GAAP financial measures provides investors greater transparency to the information used by Biomet management for its financial and operational decision-making and enables investors to better understand the Companys period-to-period operating performance.
The non-GAAP financial measures included in the press release consist of net sales excluding the impact of Trauma Acquisition, Bracing Divestiture, certain Royalties and foreign currency (constant currency), operating income as adjusted, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), as adjusted (as defined by our credit agreement, the method to calculate this is likely to be different from methods used by other companies), net income as adjusted, gross profit as adjusted, selling, general and administrative expense as adjusted, research and development expense as adjusted, net debt, cash and cash equivalents (as defined by our credit agreement), senior secured leverage ratio, total leverage ratio, free cash flow, and unlevered free cash flow. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in the press release.
The term 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, other (income) expense, and/or exclude certain expenses as defined by our credit agreement, 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, certain non-cash charges, advisory fees paid to the private equity owners, certain severance charges, purchase accounting costs, stock-based compensation and payments, litigation costs, and other related charges.
The leverage ratios provide a measure of the Companys financial ability to meet its debt service obligations. The Company believes these ratios provide valuable insight to understanding how Biomet management manages its operations and financial position with respect to its debt obligations.
The following is an explanation of each of the items, as permitted by our credit agreement that management excluded from one or more of the non-GAAP financial measures used in this press release and the reasons for excluding each of these items:
Impact of Foreign Currency, Trauma Acquisition, Bracing Divestiture and certain Royalties. The Company excludes the foreign currency impact on net sales information compared to prior year results primarily because it is not reflective of the ongoing operating results and is not used by management in evaluation of net sales performance. The impact of foreign currency exchange rates is calculated by translating actual current period net sales at the prior year exchange rate. These results are used to determine year-over-year percentage increase or decrease that excludes the impact of changes in foreign currency exchange rates. The Company further believes this information is useful to investors in that it provides period-over-period comparability. The Company believes excluding the impact of the Trauma Acquisition, Bracing Divestiture and certain Royalties provides useful information to compare against periods.
Purchase Accounting Depreciation and Amortization. Depreciation and amortization related to the Merger and the Trauma Acquisition are excluded in non-GAAP financial measures as they are not reflective of the Companys ongoing operational performance or liquidity. The Company further believes the exclusion of this information in the applicable non-GAAP financial measure is useful to investors in that it provides period-over-period comparability.
Stock-Based Compensation Expense. Stock-based compensation expense is excluded from non-GAAP financial measures primarily because it is a non-cash expense. The Company further believes that excluding this item is useful to investors in that it facilitates comparisons to competitors operating results.
Litigation Settlements and Reserves and Other Legal Fees. The Company excludes certain litigation related expenses and settlements from non-GAAP financial measures that are not reflective of the Companys ongoing operational performance. The Company further believes this information is useful to investors in that it provides period-over-period comparability.
Trauma Acquisition Costs. On May 24, 2012, DePuy Orthopaedics, Inc. accepted the Companys binding offer to purchase certain assets representing substantially all of DePuys worldwide trauma business (the 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. The Company excludes acquisition-related expenses including inventory step-ups to fair value for the Trauma Acquisition from non-GAAP financial measures that are not reflective of the Companys ongoing operational performance. The Company further believes this information is useful to investors in that it provides period-over-period comparability.
Operational Restructuring and Consulting Expenses Related to Operational Improvement Initiatives. Restructuring charges relate principally to employee severance and facility consolidation costs resulting from the closure of facilities and other workforce reductions attributable to our efforts to reduce costs. Operational restructuring charges also include abnormal manufacturing variances related to temporary redundant overhead costs within the Companys plant network as the Company continues to rationalize and move production to its larger operating locations in order to increase manufacturing efficiency. The Company excludes these costs from non-GAAP financial measures primarily because they are not reflective of the ongoing operating results and they are not used by management to assess ongoing operational performance. The Company further believes the exclusion of this information in the applicable non-GAAP financial measure is useful to investors in that it provides period-over-period comparability.
Excess and obsolete inventory expense related to the Trauma Acquisition. The Company excludes expenses for excess and obsolete inventory charges related to the overlap of certain acquired DePuy trauma products with its current trauma products from non-GAAP financial measures that are not reflective of the Companys ongoing operational performance. The Company further believes this information is useful to investors in that it provides period-over-period comparability.
Loss on extinguishment of debt. Loss on extinguishment of debt charges include write off of deferred financing fees, dealer manager fees and tender/call premium on retirement of bonds. The Company excludes these charges from non-GAAP measures because they are not reflective of the Companys ongoing operational performance or liquidity. The Company further believes the exclusion of this information in the applicable non-GAAP financial measure is useful to investors in that it provides period-over-period comparability.
Product rationalization charge. The Company excludes expenses for product rationalization charges from non-GAAP financial measures that are not reflective of the Companys ongoing operational performance. The Company further believes this information is useful to investors in that it provides period-over-period comparability.
Sponsor Fee. Biomet, Inc. finalized the merger with LVB Acquisition Merger Sub, Inc., a wholly-owned subsidiary of LVB Acquisition, Inc., which we refer to in this Form 8-K as the Merger, 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 (each a Sponsor and collectively, the Sponsors). Upon completion of the Merger, the Company entered into a management services agreement with certain affiliates of the Sponsors, pursuant to which such affiliates of the Sponsors or their successors assigns, affiliates, officers, employees, and/or representatives and third parties (collectively, the Managers) provide management, advisory, and consulting services to the Company. Pursuant to such agreement, the Sponsors receive an annual monitoring fee equal to 1% of the Companys annual Adjusted EBITDA (as defined in our credit agreement) as compensation for the services rendered and reimbursement for out-of-pocket expenses incurred by the Managers in connection with the agreement. The Company excludes these costs from non-GAAP financial measures primarily because they are not reflective of the ongoing operating results and they are not used by management to assess ongoing operational performance. The Company further believes the exclusion of this information in the applicable non-GAAP financial measure is useful to investors in that it provides period-over-period comparability.
Goodwill and Intangible Asset Impairment Charge. During fiscal years 2013 and 2012 the Company recorded certain goodwill and intangible asset impairment charges. The Company excludes these charges from non-GAAP measures because they are not reflective of the Companys ongoing operational performance or liquidity. The Company further believes the exclusion of this information in the applicable non-GAAP financial measure is useful to investors in that it provides period-over-period comparability.
The following is an explanation of each of the other items that management excluded from one or more of the non-GAAP financial measures used in this press release and the reasons for excluding each of these items:
Tax Effect on Special and Purchase Accounting Items. This amount is used to present the impact of the above non-GAAP adjustments on net income, as adjusted.
Net Debt. Net debt is the sum of the Companys total debt less cash and cash equivalents (as defined by our credit agreement) and time deposits with maturities of less than two years. Net debt is a measure defined in the credit agreement that is used to calculate the senior secured leverage ratio and total leverage ratio.
The Company is furnishing the information contained in this report, including the Exhibit, pursuant to Item 2.02 of Form 8-K promulgated by the Securities and Exchange Commission (the SEC). This information shall not be deemed to be filed with the SEC or incorporated by reference into any other filing with the SEC.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. |
Document | |
99.1 | Press Release issued July 11, 2013. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
Date: July 11, 2013
LVB ACQUISITION, INC. | ||
/s/ Daniel P. Florin | ||
By: | Daniel P. Florin | |
Its: | Senior Vice President and Chief Financial Officer |
BIOMET, INC. | ||
/s/ Daniel P. Florin | ||
By: | Daniel P. Florin | |
Its: | Senior Vice President and Chief Financial Officer |
Exhibit 99.1
CORRECTING and REPLACING Biomet Announces Fourth Quarter and Fiscal Year 2013 Preliminary Financial Results
CORRECTION...by Biomet, Inc.
WARSAW, Ind.(BUSINESS WIRE)Please replace the release with the following corrected version.
The corrected release reads:
BIOMET ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2013 PRELIMINARY FINANCIAL RESULTS
WARSAW, Ind., July 11, 2013 Biomet, Inc. announced today preliminary financial results for its fourth quarter and fiscal year ended May 31, 2013. The final results for the three and twelve months ended May 31, 2013 will be made available to the public with the filing of Biomets Form 10-K for fiscal year 2013 and will include the finalization of a non-cash goodwill and intangible asset impairment charge as further described below and certain income tax accounts.
Fourth Quarter Preliminary Financial Results
| Consolidated net sales increased 6.0% (7.6% constant currency) worldwide to approximately $784 million |
| S.E.T. sales increased 62.1% (65.3% constant currency) worldwide to approximately $160 million |
| Excluding the Trauma Acquisition, S.E.T. sales increased 6.4% (8.1% constant currency) worldwide |
| Extremity sales grew 21.5% (22.3% constant currency) worldwide |
Consolidated net sales in the quarter grew 6.0% to $783.9 million, compared to net sales of $739.5 million during the fourth quarter of fiscal year 2012. Excluding the effect of foreign currency, consolidated net sales increased 7.6% during the fourth quarter. U.S. net sales increased 6.1% during the fourth quarter to $466.3 million, while Europe net sales increased 3.5% (4.9% constant currency) to $188.7 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales grew at a rate of 9.6% (17.2% constant currency) to $128.9 million. We recorded the same number of selling days on a consolidated company basis during the fourth quarter of fiscal year 2013 compared to the fourth quarter of fiscal year 2012.
Preliminary special items (pre-tax) totaled $135.4 million during the fourth quarter of fiscal year 2013, compared to $607.2 million during the fourth quarter of fiscal year 2012.
The Company recently completed its annual impairment testing for goodwill and intangibles. Upon completion of this analysis, the Company concluded that certain indicators were present that suggested impairment may exist for its Europe reporting units goodwill. The Company is in the process of performing additional valuation work to determine the potential impairment of goodwill and intangibles. As of May 31, 2013, the carrying value of goodwill and other intangible assets for the Europe reporting unit were approximately $237.9 million and $288.0 million, respectively. The Company expects to complete the valuation process and record any impairment charges prior to filing its annual report on Form 10-K for fiscal year 2013.
Preliminary reported operating income was $100.7 million during the fourth quarter of fiscal year 2013, compared to an operating loss of $378.0 million during the fourth quarter of fiscal year 2012. Excluding special items, adjusted operating income totaled $223.4 million during the fourth quarter of fiscal year 2013, compared to $229.2 million during the prior year period.
Preliminary reported net income in the quarter was $20.5 million, compared to a net loss of $389.1 million during the fourth quarter of the prior year. Excluding special items, adjusted net income totaled $133.0 million during the fourth quarter of fiscal year 2013, compared to $105.1 million for the fourth quarter of fiscal year 2012.
Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the fourth quarter of fiscal year 2013 totaled $275.9 million, or 35.2% of net sales, compared to $277.7 million, or 37.6% of net sales, for the fourth quarter of fiscal year 2012.
Interest expense decreased to $88.0 million during the fourth quarter of fiscal year 2013, compared to $116.4 million at the end of the fourth quarter of 2012, primarily due to lower average interest rates on our term loans and lower bond interest as a result of refinancing activities.
Reported cash flow from operations totaled $194.7 million during the fourth quarter of fiscal year 2013, compared to reported cash flow from operations of $86.0 million for the fourth quarter of fiscal year 2012. Free cash flow (operating cash flow minus capital expenditures) was $140.4 million, which reflected $73.1 million of cash interest paid in the quarter, compared to free cash flow of $29.4 million, reflecting $183.1 million of cash interest paid during the fourth quarter of fiscal year 2012.
The following table provides fourth quarter net sales performance by product category:
Fourth Quarter Net Sales Performance | ||||||||||||||||
(in millions, except percentages, unaudited) | ||||||||||||||||
Worldwide Reported Quarter 4 -FY 2013 |
Worldwide Reported Growth % |
Worldwide CC Growth %* |
United States Growth % |
|||||||||||||
Large Joint Reconstructive |
$ | 435.2 | (1.0 | )% | 0.7 | % | 0.7 | % | ||||||||
Knees |
(1.4 | )% | 0.1 | % | 0.1 | % | ||||||||||
Hips |
(0.3 | )% | 1.8 | % | 2.2 | % | ||||||||||
Bone Cement and Other |
(1.2 | )% | (0.7 | )% | (2.9 | )% | ||||||||||
Sports, Extremities, Trauma (S.E.T.) |
159.2 | 62.1 | % | 65.3 | % | 55.8 | % | |||||||||
Sports Medicine |
(0.2 | )% | 1.3 | % | (4.4 | )% | ||||||||||
Extremities |
21.5 | % | 22.3 | % | 28.2 | % | ||||||||||
Trauma |
257.9 | % | 267.2 | % | 249.1 | % | ||||||||||
Spine & Bone Healing** |
67.0 | (18.2 | )% | (17.8 | )% | (18.8 | )% | |||||||||
Spine |
(8.6 | )% | (8.1 | )% | (7.5 | )% | ||||||||||
Bone Healing** |
(48.1 | )% | (48.1 | )% | (48.3 | )% | ||||||||||
Dental |
68.5 | (1.0 | )% | 0.2 | % | 1.5 | % | |||||||||
Other |
54.0 | 6.7 | % | 6.8 | % | 1.7 | % | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 783.9 | 6.0 | % | 7.6 | % | 6.1 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales excluding Trauma Acquisition and Bracing Divestiture* ** |
(0.3 | )% | 1.1 | % | 0.9 | % | ||||||||||
Sports, Extremities, Trauma (S.E.T.) excluding Trauma Acquisition* |
6.4 | % | 8.1 | % | 10.1 | % | ||||||||||
Trauma excluding Trauma Acquisition* |
(11.2 | )% | (9.3 | )% | (8.5 | )% |
* | See Non-GAAP Financial Measures Disclosure |
** | The Bracing Divestiture closed on February 28, 2013 |
Full Year Preliminary Financial Results
| Consolidated net sales grew 7.6% (9.3% constant currency) worldwide to approximately $3.053 billion |
| S.E.T. sales increased 66.0% (68.4% constant currency) worldwide |
| Excluding the Trauma Acquisition, S.E.T. sales grew 9.1% (10.5% constant currency) worldwide |
| Extremity sales increased 18.9% (19.8% constant currency) worldwide |
Consolidated net sales increased 7.6% during the twelve months ended May 31, 2013 to $3,052.9 million, compared to net sales of $2,838.1 million for the year ended May 31, 2012. Excluding the effect of foreign currency, consolidated net sales increased 9.3% during the year ended May 31, 2013. U.S. net sales increased 8.7% to $1,862.2 million, while Europe net sales increased 1.1% (5.3% constant currency) to $710.2 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales increased 13.8% (18.4% constant currency) to $480.5 million for the year.
Preliminary special items (pre-tax) totaled $985.3 million during fiscal year 2013, including a $327.4 million non-cash goodwill and intangible asset impairment charge related to our dental reconstructive reporting unit, compared to $940.7 million during fiscal year 2012.
Preliminary reported operating income was $75.5 million during fiscal year 2013, compared to an operating loss of $93.4 million during fiscal year 2012. Excluding special items, adjusted operating income totaled $880.1 million during the fiscal year ended May 31, 2013, compared to $847.3 million for the year ended May 31, 2012.
Preliminary reported net loss during the year ended May 31, 2013 was $381.7 million, compared to a net loss of $458.8 million during the year ended May 31, 2012. Excluding special items, adjusted net income totaled $368.0 million during the fiscal year ended May 31, 2013, compared to $251.8 million for the year ended May 31, 2012.
Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $1,077.3 million, or 35.3% of net sales, during fiscal year 2013, compared to $1,031.1 million, or 36.3% of net sales, for fiscal year 2012.
Interest expense decreased to $398.8 million during fiscal year 2013, compared to $479.8 million during fiscal year 2012, primarily due to lower average interest rates on our term loans and lower bond interest as a result of refinancing activities.
Reported cash flow from operations totaled $468.5 million during the year ended May 31, 2013, compared to reported cash flow from operations of $377.3 million for the year ended May 31, 2012. Free cash flow (operating cash flow minus capital expenditures) was $264.5 million, which reflected $388.6 million of cash interest paid during fiscal year 2013, compared to free cash flow of $198.0 million during fiscal year 2012, which reflected $477.1 million of cash interest paid.
At May 31, 2013, reported gross debt was $5,966.4 million, and cash and cash equivalents, as defined in the Companys Amended and Restated Credit Agreement dated August 2, 2012, totaled $355.6 million, resulting in net debt of $5,610.8 million, compared to $5,335.4 million at May 31, 2012, reflecting the impact of the Trauma Acquisition, our debt refinancing activities and foreign currency translation on our Euro-denominated debt.
Biomets senior secured leverage ratio as of May 31, 2013 was 2.73 times the last twelve months (LTM) adjusted EBITDA, as defined by our credit agreement, compared to 4.01 times at May 31, 2008, the first fiscal year-end following the Merger. The total (net debt) leverage ratio was 5.21 times LTM adjusted EBITDA at May 31, 2013, compared to 6.97 times at May 31, 2008.
Biomets President and CEO Jeffrey R. Binder stated, Our consolidated net sales for fiscal 2013 increased 8% on a reported basis and grew 9% at constant currency, resulting in another record year of net sales. Our combined hip and knee constant currency growth of 2% for the year was generally in line with the market - not to our standard of clear above market growth, but were working on the product introductions that we believe will return us to that standard. We believe that our large joint reconstructive business provides us with a strong and stable base and we disagree strongly with those who believe that there are few opportunities for innovation and differentiation. Were working hard to prove the naysayers wrong.
Fiscal 2013 was a very important year for our SET franchise, which had a fabulous year. We began the phased closing of our trauma acquisition last June and the team did a great job with the execution of the integration throughout the year. Overall, S.E.T. sales reached $600 million for the full fiscal year, representing 20% of our worldwide consolidated net sales. Even if we exclude the trauma acquisition from our results, our full fiscal year S.E.T. sales still grew at a rate of greater than 10% at constant currency, led by continued strong double digit growth in our extremities product line. In fact, we believe that Biomet will be the number one shoulder replacement company in the United States in calendar 2013. Were encouraged by the momentum in our S.E.T. and Microfixation businesses during fiscal year 2013 and were excited by the growth potential we see in our Spine, Dental and Biologics businesses.
All in all, the teams strong performance enabled Biomet to pass the $3 billion sales mark this year and deliver $1,077 million of adjusted EBITDA (35.3% of net sales). Were also very pleased with our strong adjusted net income of $368 million this year, an increase of 46% compared to the prior fiscal year, largely due to a reduction in interest expense. As we look out into fiscal 2014 and beyond, were proud of having reached the $3 billion sales milestone and were optimistic about the opportunities that lie ahead.
About Biomet
Biomet, Inc. and its subsidiaries design, manufacture and market products used primarily by musculoskeletal medical specialists in both surgical and non-surgical therapy. Biomets product portfolio encompasses large joint reconstructive products, including orthopedic joint replacement devices, and bone cements and accessories; sports medicine, extremities and trauma products, including internal and external orthopedic fixation devices; spine and bone healing products, including spine hardware, spinal stimulation devices, and orthobiologics, as well as electrical bone growth stimulators; dental reconstructive products; and other products, including microfixation products and autologous therapies. Headquartered in Warsaw, Indiana, Biomet and its subsidiaries currently distribute products in approximately 90 countries.
Contacts
For further information contact Daniel P. Florin, Senior Vice President and Chief Financial Officer, at (574) 372-1687 or Barbara Goslee, Director, Investor Relations at (574) 372-1514.
Financial Schedule Presentation
The Companys unaudited condensed consolidated financial statements as of and for the three and twelve months ended May 31, 2013 and 2012 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 Merger referenced below and the Trauma Acquisition.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements are often indicated by the use of words such as will, intend, anticipate, estimate, expect, plan and similar expressions. Forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from those contemplated by the forward looking statements due to, among others, the following factors: the success of the Companys principal product lines; the results of the ongoing investigation by the United States Department of Justice; the ability to successfully implement new technologies; the Companys ability to sustain sales and earnings growth; the Companys success in achieving timely approval or clearance of its products with domestic and foreign regulatory entities; the impact to the business as a result of compliance with federal, state and foreign governmental regulations and with the Deferred Prosecution Agreement; the impact to the business as a result of the economic downturn in both foreign and domestic markets; the impact of federal health care reform; the impact of anticipated changes in the musculoskeletal industry and the ability of the Company to react to and capitalize on those changes; the ability of the Company to successfully implement its desired organizational changes and cost-saving initiatives; the ability of the Company to successfully integrate the Trauma Acquisition; the impact to the business as a result of the Companys significant international operations, including, among others, with respect to foreign currency fluctuations and the success of the Companys transition of certain manufacturing operations to China; the impact of the Companys managerial changes; the ability of the Companys customers to receive adequate levels of reimbursement from third-party payors; the Companys ability to maintain its existing intellectual property rights and obtain future intellectual property rights; the impact to the business as a result of cost containment efforts of group purchasing organizations; the Companys ability to retain existing independent sales agents for its products; the impact of product liability litigation losses; and other factors set forth in the Companys filings with the SEC, including the Companys most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or non-occurrence of future events. There can be no assurance as to the accuracy of forward-looking statements contained in this press release. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Companys objectives will be achieved. The Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements which speak only as of the date on which they were made.
*Non-GAAP Financial Measures:
Management uses non-GAAP financial measures, such as net sales excluding the impact of the Trauma Acquisition, Bracing Divestiture and certain Royalties, 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, cash and cash equivalents (as defined by our credit agreement), net debt, senior secured leverage ratio, total leverage ratio, 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, other (income) expense, and/or exclude certain expenses as defined by our credit agreement, 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 Companys private equity owners, certain severance charges, purchase accounting costs, stock-based compensation, litigation costs, 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.
Non-GAAP Reconciliation
A reconciliation of reported results to adjusted results is included in this press release, which is also posted on Biomets website: www.biomet.com
Reclassifications
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 Merger
Biomet, Inc. finalized the merger with LVB Acquisition Merger Sub, Inc., a wholly-owned subsidiary of LVB Acquisition, Inc., which we refer to in this press release as the Merger, 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.
Trauma Acquisition
On May 24, 2012, DePuy Orthopaedics, Inc. accepted the Companys binding offer to purchase certain assets representing substantially all of DePuys worldwide trauma business (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. 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. 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.
Bracing Divestiture
On February 28, 2013, the Company divested certain assets representing substantially all of the Companys bracing business (Bracing Divestiture).
Royalties
The Company is currently receiving royalty income related to a license agreement for certain Spine products (Royalties).
Biomet, Inc.
Product Net Sales
Three Month Period Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Large Joint Reconstructive |
$ | 435.2 | $ | 439.6 | (1.0 | )% | 0.7 | % | ||||||||
Sports, Extremities, Trauma (S.E.T.) |
159.2 | 98.2 | 62.1 | % | 65.3 | % | ||||||||||
Spine & Bone Healing** |
67.0 | 81.9 | (18.2 | )% | (17.8 | )% | ||||||||||
Dental |
68.5 | 69.2 | (1.0 | )% | 0.2 | % | ||||||||||
Other |
54.0 | 50.6 | 6.7 | % | 6.8 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 783.9 | $ | 739.5 | 6.0 | % | 7.6 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Sports, Extremities, Trauma (S.E.T.) excluding Trauma Acquisition* |
104.5 | 98.2 | 6.4 | % | 8.1 | % | ||||||||||
Net Sales, excluding Trauma Acquisition and Bracing Divestiture* ** |
729.1 | 731.5 | (0.3 | )% | 1.1 | % |
Three Months Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Three Months Ended May 31, 2013 Net Sales Growth in Local Currencies* |
||||||||||
Large Joint Reconstructive |
(1.0 | )% | 1.7 | % | 0.7 | % | ||||||
Knees |
(1.4 | )% | 1.5 | % | 0.1 | % | ||||||
Hips |
(0.3 | )% | 2.1 | % | 1.8 | % | ||||||
Bone Cement and Other |
(1.2 | )% | 0.5 | % | (0.7 | )% | ||||||
Sports, Extremities, Trauma (S.E.T.) |
62.1 | % | 3.2 | % | 65.3 | % | ||||||
Sports Medicine |
(0.2 | )% | 1.5 | % | 1.3 | % | ||||||
Extremities |
21.5 | % | 0.8 | % | 22.3 | % | ||||||
Trauma |
257.9 | % | 9.3 | % | 267.2 | % | ||||||
Spine & Bone Healing** |
(18.2 | )% | 0.4 | % | (17.8 | )% | ||||||
Spine |
(8.6 | )% | 0.5 | % | (8.1 | )% | ||||||
Bone Healing** |
(48.1 | )% | | % | (48.1 | )% | ||||||
Dental |
(1.0 | )% | 1.2 | % | 0.2 | % | ||||||
Other |
6.7 | % | 0.1 | % | 6.8 | % | ||||||
|
|
|
|
|
|
|||||||
Net Sales |
6.0 | % | 1.6 | % | 7.6 | % | ||||||
|
|
|
|
|
|
|||||||
Sports, Extremities, Trauma (S.E.T.) excluding Trauma Acquisition* |
6.4 | % | 1.7 | % | 8.1 | % | ||||||
Trauma excluding Trauma Acquisition* |
(11.2 | )% | 1.9 | % | (9.3 | )% | ||||||
Net Sales, excluding Trauma Acquisition and Bracing Divestiture* ** |
(0.3 | )% | 1.4 | % | 1.1 | % |
Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Spine & Bone Healing excluding Royalties and Bracing Divestiture* |
$ | 65.7 | $ | 70.1 | (6.3 | )% | (5.8 | )% |
Three Months Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Three Months Ended May 31, 2013 Net Sales Growth in Local Currencies* |
||||||||||
Spine & Bone Healing excluding Royalties and Bracing Divestiture* ** |
(6.3 | )% | 0.5 | % | (5.8 | )% | ||||||
Bone Healing excluding Bracing Divestiture* ** |
(14.6 | )% | | % | (14.6 | )% | ||||||
Spine excluding Royalties* |
(4.5 | )% | 0.5 | % | (4.0 | )% |
* | See Non-GAAP Financial Measures Disclosure |
** | The Bracing Divestiture closed on February 28, 2013 |
Biomet, Inc.
Product Net Sales
Year Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
Year Ended May 31, 2013 |
Year Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Large Joint Reconstructive |
$ | 1,696.3 | $ | 1,698.8 | (0.1 | )% | 1.7 | % | ||||||||
Sports, Extremities, Trauma (S.E.T.) |
600.1 | 361.6 | 66.0 | % | 68.4 | % | ||||||||||
Spine & Bone Healing** |
291.3 | 306.8 | (5.1 | )% | (4.6 | )% | ||||||||||
Dental |
257.0 | 267.7 | (4.0 | )% | (1.9 | )% | ||||||||||
Other |
208.2 | 203.2 | 2.5 | % | 3.7 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 3,052.9 | $ | 2,838.1 | 7.6 | % | 9.3 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Sports, Extremities, Trauma (S.E.T.) excluding Trauma Acquisition* |
394.5 | 361.6 | 9.1 | % | 10.5 | % | ||||||||||
Net Sales, excluding Trauma Acquisition and Bracing Divestiture* ** |
2,825.3 | 2,803.8 | 0.8 | % | 2.4 | % |
Year Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Year Ended May 31, 2013 Net Sales Growth in Local Currencies* |
||||||||||
Large Joint Reconstructive |
(0.1 | )% | 1.8 | % | 1.7 | % | ||||||
Knees |
(0.2 | )% | 1.6 | % | 1.4 | % | ||||||
Hips |
| % | 2.1 | % | 2.1 | % | ||||||
Hip and Knee |
(0.1 | )% | 1.8 | % | 1.7 | % | ||||||
Bone Cement and Other |
(0.3 | )% | 1.8 | % | 1.5 | % | ||||||
Sports, Extremities, Trauma (S.E.T.) |
66.0 | % | 2.4 | % | 68.4 | % | ||||||
Sports Medicine |
6.0 | % | 1.6 | % | 7.6 | % | ||||||
Extremities |
18.9 | % | 0.9 | % | 19.8 | % | ||||||
Trauma |
252.3 | % | 6.3 | % | 258.6 | % | ||||||
Spine & Bone Healing** |
(5.1 | )% | 0.5 | % | (4.6 | )% | ||||||
Spine |
0.7 | % | 0.7 | % | 1.4 | % | ||||||
Bone Healing** |
(21.2 | )% | 0.1 | % | (21.1 | )% | ||||||
Dental |
(4.0 | )% | 2.1 | % | (1.9 | )% | ||||||
Other |
2.5 | % | 1.2 | % | 3.7 | % | ||||||
|
|
|
|
|
|
|||||||
Net Sales |
7.6 | % | 1.7 | % | 9.3 | % | ||||||
|
|
|
|
|
|
|||||||
Sports, Extremities, Trauma (S.E.T.) excluding Trauma Acquisition* |
9.1 | % | 1.4 | % | 10.5 | % | ||||||
Trauma excluding Trauma Acquisition* |
(3.7 | )% | 1.6 | % | (2.1 | )% | ||||||
Net Sales, excluding Trauma Acquisition and Bracing Divestiture* ** |
0.8 | % | 1.6 | % | 2.4 | % |
Year Ended May 31, 2013 |
Year Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Spine & Bone Healing excluding Royalties and Bracing Divestiture* ** |
$ | 260.0 | $ | 265.7 | (2.1 | )% | (1.6 | )% |
Year Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Year Ended May 31, 2013 Net Sales Growth in Local Currencies* |
||||||||||
Spine & Bone Healing excluding Royalties and Bracing Divestiture* ** |
(2.1 | )% | 0.5 | % | (1.6 | )% | ||||||
Bone Healing excluding Bracing Divestiture* ** |
(10.5 | )% | | % | (10.5 | )% | ||||||
Spine excluding Royalties* |
(0.4 | )% | 0.7 | % | 0.3 | % |
* | See Non-GAAP Financial Measures Disclosure |
** | The Bracing Divestiture closed on February 28, 2013 |
Biomet, Inc.
Geographic Net Sales
Three Month Period Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Geographic Sales: |
||||||||||||||||
United States |
$ | 466.3 | $ | 439.5 | 6.1 | % | 6.1 | % | ||||||||
Europe |
188.7 | 182.4 | 3.5 | % | 4.9 | % | ||||||||||
International |
128.9 | 117.6 | 9.6 | % | 17.2 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 783.9 | $ | 739.5 | 6.0 | % | 7.6 | % | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Three Months Ended May 31, 2013 Net Sales Growth Local Currencies* |
||||||||||
United States |
6.1 | % | | % | 6.1 | % | ||||||
Europe |
3.5 | % | 1.4 | % | 4.9 | % | ||||||
International |
9.6 | % | 7.6 | % | 17.2 | % | ||||||
|
|
|
|
|
|
|||||||
Total |
6.0 | % | 1.6 | % | 7.6 | % | ||||||
|
|
|
|
|
|
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Geographic Net Sales excluding Trauma Acquisition and Bracing Divestiture*
Three Month Period Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Geographic Sales excluding Trauma Acquisition and Bracing Divestiture*: |
||||||||||||||||
United States |
$ | 435.4 | $ | 431.8 | 0.8 | % | 0.8 | % | ||||||||
Europe |
175.1 | 182.0 | (3.8 | )% | (2.6 | )% | ||||||||||
International |
118.5 | 117.6 | 0.8 | % | 7.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 729.0 | $ | 731.4 | (0.3 | )% | 1.1 | % | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Three Months Ended May 31, 2013 Net Sales Growth Local Currencies* |
||||||||||
United States |
0.8 | % | | % | 0.8 | % | ||||||
Europe |
(3.8 | )% | 1.2 | % | (2.6 | )% | ||||||
International |
0.8 | % | 6.6 | % | 7.4 | % | ||||||
|
|
|
|
|
|
|||||||
Total |
(0.3 | )% | 1.4 | % | 1.1 | % | ||||||
|
|
|
|
|
|
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Geographic Net Sales
Year Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
Year Ended May 31, 2013 |
Year Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Geographic Sales: |
||||||||||||||||
United States |
$ | 1,862.2 | $ | 1,713.3 | 8.7 | % | 8.7 | % | ||||||||
Europe |
710.2 | 702.7 | 1.1 | % | 5.3 | % | ||||||||||
International |
480.5 | 422.1 | 13.8 | % | 18.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 3,052.9 | $ | 2,838.1 | 7.6 | % | 9.3 | % | ||||||||
|
|
|
|
|
|
|
|
Year Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Year Ended May 31, 2013 Net Sales Growth Local Currencies* |
||||||||||
United States |
8.7 | % | | % | 8.7 | % | ||||||
Europe |
1.1 | % | 4.2 | % | 5.3 | % | ||||||
International |
13.8 | % | 4.6 | % | 18.4 | % | ||||||
|
|
|
|
|
|
|||||||
Total |
7.6 | % | 1.7 | % | 9.3 | % | ||||||
|
|
|
|
|
|
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Geographic Net Sales excluding Trauma Acquisition and Bracing Divestiture*
Year Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
Year Ended May 31, 2013 |
Year Ended May 31, 2012 |
Reported Growth % |
Constant Currency* Growth % |
|||||||||||||
Geographic Sales excluding Trauma Acquisition and Bracing Divestiture*: |
||||||||||||||||
United States |
$ | 1,723.9 | $ | 1,680.2 | 2.6 | % | 2.6 | % | ||||||||
Europe |
659.4 | 701.4 | (6.0 | )% | (2.1 | )% | ||||||||||
International |
441.9 | 422.1 | 4.7 | % | 8.8 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 2,825.2 | $ | 2,803.7 | 0.8 | % | 2.4 | % | ||||||||
|
|
|
|
|
|
|
|
Year Ended May 31, 2013 Net Sales Growth As Reported |
Currency Impact* |
Year Ended May 31, 2013 Net Sales Growth Local Currencies* |
||||||||||
United States |
2.6 | % | | % | 2.6 | % | ||||||
Europe |
(6.0 | )% | 3.9 | % | (2.1 | )% | ||||||
International |
4.7 | % | 4.1 | % | 8.8 | % | ||||||
|
|
|
|
|
|
|||||||
Total |
0.8 | % | 1.6 | % | 2.4 | % | ||||||
|
|
|
|
|
|
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Reconciliation of Reported Consolidated Statements of Operations to Consolidated Statements of Operations, as adjusted*
Three Months and Years Ended May 31, 2013 and 2012
(in millions, except percentages, unaudited)
(Preliminary) Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 | |||||||||||||||||||||||
Reported | Special Items* | As Adjusted* | Reported | Special Items* | As Adjusted* | |||||||||||||||||||
Net sales |
$ | 783.9 | $ | | $ | 783.9 | $ | 739.5 | $ | | $ | 739.5 | ||||||||||||
Cost of sales |
260.5 | (28.5 | ) | 232.0 | 224.5 | (5.8 | ) | 218.7 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
523.4 | 28.5 | 551.9 | 515.0 | 5.8 | 520.8 | ||||||||||||||||||
Gross profit percentage |
66.8 | % | 70.4 | % | 69.6 | % | 70.4 | % | ||||||||||||||||
Selling, general and administrative expense |
302.7 | (18.8 | ) | 283.9 | 252.4 | 1.9 | 254.3 | |||||||||||||||||
Research and development expense |
43.1 | (1.9 | ) | 41.2 | 33.6 | (0.6 | ) | 33.0 | ||||||||||||||||
Amortization |
83.6 | (80.2 | ) | 3.4 | 77.2 | (72.9 | ) | 4.3 | ||||||||||||||||
Goodwill and intangible assets impairment charge |
(6.7 | ) | 6.7 | | 529.8 | (529.8 | ) | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
100.7 | 122.7 | 223.4 | (378.0 | ) | 607.2 | 229.2 | |||||||||||||||||
Percentage of Net Sales |
12.8 | % | 28.5 | % | (51.1 | )% | 31.0 | % | ||||||||||||||||
Interest expense |
88.0 | | 88.0 | 116.4 | | 116.4 | ||||||||||||||||||
Other (income) expense |
5.4 | (12.7 | ) | (7.3 | ) | 8.3 | | 8.3 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
7.3 | 135.4 | 142.7 | (502.7 | ) | 607.2 | 104.5 | |||||||||||||||||
Provision (benefit) for income taxes |
(13.2 | ) | 22.9 | 9.7 | (113.6 | ) | 113.0 | (0.6 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | 20.5 | $ | 112.5 | $ | 133.0 | $ | (389.1 | ) | $ | 494.2 | $ | 105.1 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Percentage of Net Sales |
2.6 | % | 17.0 | % | (52.6 | )% | 14.2 | % |
(Preliminary) Year Ended May 31, 2013 |
Year Ended May 31, 2012 | |||||||||||||||||||||||
Reported | Special Items* | As Adjusted* | Reported | Special Items* | As Adjusted* | |||||||||||||||||||
Net sales |
$ | 3,052.9 | $ | | $ | 3,052.9 | $ | 2,838.1 | $ | | $ | 2,838.1 | ||||||||||||
Cost of sales |
996.5 | (94.0 | ) | 902.5 | 894.4 | (48.0 | ) | 846.4 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
2,056.4 | 94.0 | 2,150.4 | 1,943.7 | 48.0 | 1,991.7 | ||||||||||||||||||
Gross profit percentage |
67.4 | % | 70.4 | % | 68.5 | % | 70.2 | % | ||||||||||||||||
Selling, general and administrative expense |
1,189.4 | (76.5 | ) | 1,112.9 | 1,053.3 | (45.8 | ) | 1,007.5 | ||||||||||||||||
Research and development expense |
150.3 | (7.1 | ) | 143.2 | 126.8 | (2.2 | ) | 124.6 | ||||||||||||||||
Amortization |
313.8 | (299.6 | ) | 14.2 | 327.2 | (314.9 | ) | 12.3 | ||||||||||||||||
Goodwill and intangible assets impairment charge |
327.4 | (327.4 | ) | | 529.8 | (529.8 | ) | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
75.5 | 804.6 | 880.1 | (93.4 | ) | 940.7 | 847.3 | |||||||||||||||||
Percentage of Net Sales |
2.5 | % | 28.8 | % | (3.3 | )% | 29.9 | % | ||||||||||||||||
Interest expense |
398.8 | | 398.8 | 479.8 | | 479.8 | ||||||||||||||||||
Other (income) expense |
177.8 | (180.7 | ) | (2.9 | ) | 17.6 | | 17.6 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(501.1 | ) | 985.3 | 484.2 | (590.8 | ) | 940.7 | 349.9 | ||||||||||||||||
Provision (benefit) for income taxes |
(119.4 | ) | 235.6 | 116.2 | (132.0 | ) | 230.1 | 98.1 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Tax rate |
23.8 | % | 24.0 | % | 22.3 | % | 28.0 | % | ||||||||||||||||
Net income (loss) |
$ | (381.7 | ) | $ | 749.7 | $ | 368.0 | $ | (458.8 | ) | $ | 710.6 | $ | 251.8 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Percentage of Net Sales |
(12.5 | )% | 12.1 | % | (16.2 | )% | 8.9 | % |
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Other Financial Information
Reconciliation of Operating Income, as reported, to EBITDA, as adjusted*
(in millions, except percentages, unaudited)
(Preliminary) Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 |
(Preliminary) Year Ended May 31, 2013 |
Year Ended May 31, 2012 |
|||||||||||||
Operating income (loss), as reported |
$ | 100.7 | $ | (378.0 | ) | $ | 75.5 | $ | (93.4 | ) | ||||||
Special items from operations* |
122.7 | 607.2 | 804.6 | 940.7 | ||||||||||||
Depreciation and amortization from operations |
52.5 | 48.5 | 197.2 | 183.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA, as adjusted* |
$ | 275.9 | $ | 277.7 | $ | 1,077.3 | $ | 1,031.1 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ | 783.9 | $ | 739.5 | $ | 3,052.9 | $ | 2,838.1 | ||||||||
EBITDA, as adjusted, as percentage of Net Sales* |
35.2 | % | 37.6 | % | 35.3 | % | 36.3 | % |
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Other Financial Information
Special Items detail*
(in millions, unaudited)
(Preliminary) Three Months Ended May 31, 2013 |
Three Months Ended May 31, 2012 |
(Preliminary) Year Ended May 31, 2013 |
Year Ended May 31, 2012 |
|||||||||||||
Purchase accounting amortization and depreciation |
$ | 81.1 | $ | 72.9 | $ | 302.7 | $ | 325.6 | ||||||||
Stock-based compensation expense |
7.3 | 3.8 | 39.6 | 16.0 | ||||||||||||
Litigation settlements and reserves and other legal fees |
25.5 | (12.7 | ) | 57.9 | 8.6 | |||||||||||
Trauma Acquisition costs |
1.9 | 4.6 | 12.2 | 4.6 | ||||||||||||
Operational restructuring and consulting expenses related to operational initiatives (severance, building impairments, abnormal manufacturing variances and other related costs) and other |
23.5 | 6.0 | 40.3 | 45.8 | ||||||||||||
Product rationalization charges |
| | 23.1 | | ||||||||||||
Sponsor fee |
2.8 | 2.8 | 11.0 | 10.3 | ||||||||||||
Loss on extinguishment of debt |
| | 171.1 | | ||||||||||||
Goodwill and intangible assets impairment charge |
(6.7 | ) | 529.8 | 327.4 | 529.8 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Special items, pre-tax* |
$ | 135.4 | $ | 607.2 | $ | 985.3 | $ | 940.7 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Tax effect |
22.9 | 113.0 | 235.6 | 230.1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Special items, after tax* |
$ | 112.5 | $ | 494.2 | $ | 749.7 | $ | 710.6 | ||||||||
|
|
|
|
|
|
|
|
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Condensed Consolidated Balance Sheets
(in millions, unaudited)
(Preliminary) May 31, 2013 |
May 31, 2012 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 355.6 | $ | 492.4 | ||||
Accounts receivable, net |
531.8 | 491.6 | ||||||
Short-term investments |
| 2.5 | ||||||
Inventories |
624.0 | 543.2 | ||||||
Current deferred income taxes |
119.9 | 52.5 | ||||||
Prepaid expenses and other |
167.3 | 129.1 | ||||||
Property, plant and equipment, net |
665.2 | 593.6 | ||||||
Intangible assets, net |
3,630.2 | 3,930.4 | ||||||
Goodwill |
3,839.2 | 4,114.4 | ||||||
Other assets |
125.8 | 70.7 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 10,059.0 | $ | 10,420.4 | ||||
|
|
|
|
|||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities, excluding debt |
$ | 523.8 | $ | 474.9 | ||||
Current portion of long-term debt |
40.3 | 35.6 | ||||||
Long-term debt, net of current portion |
5,926.1 | 5,792.2 | ||||||
Deferred income taxes, long-term |
1,130.9 | 1,257.8 | ||||||
Other long-term liabilities |
206.1 | 177.8 | ||||||
Shareholders equity |
2,231.8 | 2,682.1 | ||||||
|
|
|
|
|||||
Total Liabilities and Shareholders Equity |
$ | 10,059.0 | $ | 10,420.4 | ||||
|
|
|
|
|||||
Net Debt (a)* |
$ | 5,610.8 | $ | 5,335.4 |
(a) | Net debt is the sum of total debt less cash and cash equivalents, as defined by the credit agreement. |
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Other Financial Information
Reconciliation of Senior Secured Leverage Ratio and Total Leverage Ratio*
(in millions, except ratios, unaudited)
May 31, 2013 | May 31, 2008 | |||||||
Senior Secured Debt: |
||||||||
USD Term Loan |
$ | 2,221.1 | $ | 2,328.3 | ||||
EUR Term Loan |
1,074.3 | 1,355.2 | ||||||
Asset Based Revolver |
| | ||||||
Cash Flow Revolvers |
| | ||||||
|
|
|
|
|||||
Consolidated Senior Secured Debt |
3,295.4 | A | 3,683.5 | E | ||||
Senior Notes |
2,662.7 | 2,570.7 | ||||||
Asian Ops Facility |
6.0 | | ||||||
European Facilities |
2.3 | 46.6 | ||||||
|
|
|
|
|||||
Consolidated Total Debt |
5,966.4 | 6,300.8 | ||||||
Cash and Cash Equivalents* ** |
(355.6 | ) B | (127.6 | ) F | ||||
|
|
|
|
|||||
Net Debt* |
$ | 5,610.8 | C | $ | 6,173.2 | G | ||
|
|
|
|
|||||
LTM Adjusted EBITDA |
||||||||
Quarter 1 Fiscal 2013 Adjusted EBITDA |
237.8 | |||||||
Quarter 2 Fiscal 2013 Adjusted EBITDA |
288.2 | |||||||
Quarter 3 Fiscal 2013 Adjusted EBITDA |
275.4 | |||||||
Quarter 4 Fiscal 2013 Adjusted EBITDA |
275.9 | |||||||
Run Rate Cost Savings** |
| |||||||
|
|
|||||||
Quarter 4 2013 LTM Adjusted EBITDA* |
$ | 1,077.3 | D | |||||
|
|
|||||||
Fiscal 2008 LTM Adjusted EBITDA |
829.1 | |||||||
Run Rate Cost Savings** |
57.0 | |||||||
|
|
|||||||
Fiscal 2008 LTM Adjusted EBITDA* |
$ | 886.1 | H | |||||
|
|
|||||||
Senior Secured Leverage Ratio* |
2.73 | A+B / D | 4.01 | E+F / H | ||||
Total Leverage Ratio* |
5.21 | C / D | 6.97 | G / H |
* | See Non-GAAP Financial Measures Disclosure |
** | As defined by the Amended and Restated Credit Agreement dated August 2, 2012 |
Biomet, Inc.
Consolidated Statement of Cash Flows and GAAP Operating Cash Flow Reconciled to Free Cash Flow*
& Unlevered Free Cash Flow*
(in millions, unaudited)
Fiscal 2013 | ||||||||
(Preliminary) Three Months Ended May 31, 2013 |
(Preliminary) Year Ended May 31, 2013 |
|||||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: |
||||||||
Net income (loss) |
$ | 20.5 | $ | (381.7 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
130.6 | 495.4 | ||||||
Amortization and write off of deferred financing costs |
3.7 | 31.0 | ||||||
Stock-based compensation expense |
6.0 | 38.3 | ||||||
Loss on extinguishment of debt |
| 155.2 | ||||||
Provision for doubtful accounts receivable |
(4.5 | ) | (4.9 | ) | ||||
Realized gain on investments |
| (0.2 | ) | |||||
Goodwill and intangible assets impairment charge |
(6.7 | ) | 327.4 | |||||
Deferred income taxes |
(25.9 | ) | (191.3 | ) | ||||
Other |
11.8 | 17.7 | ||||||
Changes in operating assets and liabilities, net of acquired assets: |
||||||||
Accounts receivable |
12.7 | (40.4 | ) | |||||
Inventories |
(2.3 | ) | (35.9 | ) | ||||
Prepaid expenses |
0.8 | (7.1 | ) | |||||
Accounts payable |
24.6 | (3.4 | ) | |||||
Income taxes |
(32.3 | ) | (26.8 | ) | ||||
Accrued interest |
12.3 | (0.3 | ) | |||||
Accrued expenses and other |
43.4 | 95.5 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
194.7 | 468.5 | ||||||
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: |
||||||||
Proceeds from sales/maturities of investments |
| 5.5 | ||||||
Purchases of investments |
| (6.4 | ) | |||||
Proceeds from sale of assets |
| 14.0 | ||||||
Capital expenditures |
(54.3 | ) | (204.0 | ) | ||||
Acquisitions, net of cash acquired - Trauma Acquisition |
| (280.0 | ) | |||||
Other acquisitions, net of cash acquired |
(0.5 | ) | (17.7 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(54.8 | ) | (488.6 | ) | ||||
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: |
||||||||
Debt: |
||||||||
Payments under European facilities |
(0.3 | ) | (1.3 | ) | ||||
Payments under senior secured credit facilities |
(8.3 | ) | (33.5 | ) | ||||
Proceeds under revolvers/facility |
6.6 | 86.6 | ||||||
Payments under revolvers/facility |
(0.6 | ) | (80.6 | ) | ||||
Proceeds from senior and senior subordinated notes due 2020 and term loans |
| 3,396.2 | ||||||
Tender/retirement of Senior notes due 2017 and term loans |
| (3,423.0 | ) | |||||
Payment of fees related to refinancing activities |
(1.2 | ) | (79.0 | ) | ||||
Equity: |
||||||||
Repurchase of LVB Acquisition, Inc. shares |
| (0.1 | ) | |||||
|
|
|
|
|||||
Net cash used in financing activities |
(3.8 | ) | (134.7 | ) | ||||
Effect of exchange rate changes on cash |
2.1 | 18.0 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
138.2 | (136.8 | ) | |||||
Cash and cash equivalents, beginning of period |
217.4 | 492.4 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 355.6 | $ | 355.6 | ||||
|
|
|
|
|||||
Free Cash Flow*(1) |
$ | 140.4 | $ | 264.5 | ||||
Add back: cash paid for interest |
73.1 | 388.6 | ||||||
|
|
|
|
|||||
Unlevered Free Cash Flow* (2) |
$ | 213.5 | $ | 653.1 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 73.1 | $ | 388.6 | ||||
|
|
|
|
|||||
Income taxes |
$ | 32.5 | $ | 81.5 | ||||
|
|
|
|
(1) | Defined as cash flow from operations less capital expenditures |
(2) | Defined as Free Cash Flow plus cash paid for interest. Commonly used by companies that are highly leveraged to show how assets perform before interest payments. |
* | See Non-GAAP Financial Measures Disclosure |
Biomet, Inc.
Consolidated Statement of Cash Flows and GAAP Operating Cash Flow Reconciled to Free Cash Flow*
& Unlevered Free Cash Flow*
(in millions, unaudited)
Fiscal 2012 | ||||||||
Three Months Ended May 31, 2012(1) |
Year Ended May 31, 2012(1) |
|||||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (388.1 | ) | $ | (457.8 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
121.4 | 509.4 | ||||||
Amortization and write off of deferred financing costs |
2.8 | 11.1 | ||||||
Goodwill and intangible assets impairment charge |
529.8 | 529.8 | ||||||
Stock-based compensation expense |
3.8 | 16.0 | ||||||
Recovery of doubtful accounts receivable |
(2.7 | ) | (5.3 | ) | ||||
Realized gain on investments |
(0.1 | ) | (2.0 | ) | ||||
Loss on impairment of investments |
0.8 | 20.1 | ||||||
Property, plant and equipment impairment charge |
| 0.4 | ||||||
Deferred income taxes |
(84.6 | ) | (205.3 | ) | ||||
Other |
(2.5 | ) | (4.5 | ) | ||||
Changes in operating assets and liabilities, net of acquired assets: |
||||||||
Accounts receivable |
1.8 | (36.6 | ) | |||||
Inventories |
3.8 | 13.4 | ||||||
Prepaid expenses |
(11.1 | ) | (12.3 | ) | ||||
Accounts payable |
33.1 | 28.9 | ||||||
Income taxes |
(48.1 | ) | (29.0 | ) | ||||
Accrued interest |
(69.3 | ) | (7.6 | ) | ||||
Accrued expenses and other |
(4.8 | ) | 8.6 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
86.0 | 377.3 | ||||||
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: |
||||||||
Proceeds from sales/maturities of investments |
0.1 | 42.1 | ||||||
Purchases of investments |
(0.1 | ) | (0.4 | ) | ||||
Proceeds from sale of property and equipment |
1.0 | 14.7 | ||||||
Capital expenditures |
(56.6 | ) | (179.3 | ) | ||||
Acquisitions, net of cash acquired |
(6.7 | ) | (21.1 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(62.3 | ) | (144.0 | ) | ||||
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: |
||||||||
Debt: |
||||||||
Payments under European facilities |
(0.3 | ) | (1.4 | ) | ||||
Payments under senior secured credit facilities |
(8.8 | ) | (35.4 | ) | ||||
Equity: |
||||||||
Repurchase of LVB Acquisition, Inc. shares |
(0.1 | ) | (1.3 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(9.2 | ) | (38.1 | ) | ||||
Effect of exchange rate changes on cash |
(18.1 | ) | (30.6 | ) | ||||
|
|
|
|
|||||
Increase in cash and cash equivalents |
(3.6 | ) | 164.6 | |||||
Cash and cash equivalents, beginning of period |
496.0 | 327.8 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 492.4 | $ | 492.4 | ||||
|
|
|
|
|||||
Free Cash Flow*(2) |
$ | 29.4 | $ | 198.0 | ||||
Add back: cash paid for interest |
183.1 | 477.1 | ||||||
|
|
|
|
|||||
Unlevered Free Cash Flow* (3) |
$ | 212.5 | $ | 675.1 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 183.1 | $ | 477.1 | ||||
|
|
|
|
|||||
Income taxes |
$ | 18.1 | $ | 95.0 | ||||
|
|
|
|
(1) | Certain amounts have been adjusted to conform to the current presentation. |
(2) | Defined as cash flow from operations less capital expenditures |
(3) | Defined as Free Cash Flow plus cash paid for interest. Commonly used by companies that are highly leveraged to show how assets perform before interest payments. |
* | See Non-GAAP Financial Measures Disclosure |
['8T[P]Y&VR;1
M^Y7^8B]'95]LZC9H;OM#FGQ#/I-_SG;T5,QUGTWM;FXUN('F&V/AS)_==967
M;%!G72:6Y-F';7BF-UY+"UH)V[W-:[?M;_55_+KIMQK67QZ1:=\]A'TO[*S^
MF7X]70L;[41Z5H])TB0?4<6>_P#DNE!3>S,VK$Q_7<"^2&UL;JY[G:,8S^LJ
M_P"T '!A8VME="!B96=I;CTB[[N_(B!I9#TB5S5-,$UP0V5H
M:4AZSU/U:Q963]4\BT/93]6.EXV46S5G49=E3*[`/9=6S&PZ,ENRSW^G7L_P"-
M7=I)*>/ZY]5>I9CN@NL91UH=*INKS&9ECJ?7?;734R_[Z+T`OLGX/?%@_?NG[#4:ITWZYT=X^B\973*F*JV]64,8RH.:ICB]U>LJ
M)*^X0,3Z0""`B'70\UN;4,#JZ^:EZTZI45[C37/"6.\04B5<+/)R$IU=9L@L
MKYPF=%Q(6N16(XEK5(KHJF(=Q(KNECE,("80$>9`J&0_#7XR,F6F5O$WJ%C>
MO7"=7.YF['BQW;<*R