Biomet net sales increase 1% to $678 million for third fiscal quarter 2011

Biomet, Inc. announced today financial results for its third fiscal quarter ended February 28, 2011.

• Net sales increased 1% (2% constant currency) worldwide to $678 million
• Reconstructive sales increased 1% (1% constant currency) worldwide to $516 million
• Extremity sales grew 18% (18% constant currency) worldwide, with a 25% increase in the U.S.
• Dental sales increased 5% (6% constant currency) worldwide and increased 4% in the U.S.
• Sports medicine sales grew 20% (21% constant currency) worldwide, with 16% U.S. growth
• Operating cash flow of $151.8 million

Third Quarter Financial Results

Net sales increased 1% during the third quarter of fiscal year 2011 to $678.0 million compared to net sales of $669.8 million during the third quarter of fiscal year 2010. Excluding the effect of foreign currency, net sales increased 2% during the third quarter. U.S. net sales were flat at $412.4 million during the third quarter, while Europe net sales decreased 4% (flat at constant currency) to $173.0 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales increased 21% (14% constant currency) to $92.6 million.

Special items (pre-tax) for the third quarter totaled $117.9 million, including $95.7 million of non-cash amortization and depreciation expense related to the Merger and $22.2 million of non-Merger related special items.

Reported operating income during the third quarter of fiscal year 2011 was $94.9 million compared to operating income of $100.1 million during the third quarter of fiscal year 2010. Excluding special items in both periods, adjusted operating income totaled $212.8 million during the third fiscal quarter compared to adjusted operating income of $210.1 million in the same period of the prior fiscal year.

Reported net loss during the third quarter of fiscal year 2011 was $11.6 million compared to a net loss of $3.1 million during the third quarter of fiscal year 2010. Excluding special items in both periods, adjusted net income was $63.8 million during the third fiscal quarter, compared to $67.3 million during the third quarter of fiscal year 2010.

Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") was $258.4 million, or 38.1% of net sales during the third quarter of fiscal year 2011, compared to adjusted EBITDA of $250.7 million, or 37.4% of net sales during the third quarter of the prior fiscal year.

Interest expense during the third quarter totaled $124.0 million compared to $128.0 million during the third quarter of fiscal year 2010, principally due to lower interest rates on floating rate debt.

Reported cash flow from operations during the third quarter totaled $151.8 million. Free cash flow (operating cash flow of $151.8 million minus capital expenditures of $45.1 million) was $106.7 million, which reflected $53.6 million of cash interest paid in the quarter.

Reported gross debt was $5.985 billion and cash and cash equivalents, as defined in the Company's Credit Agreement dated September 25, 2007, totaled $332 million, resulting in net debt of $5.653 billion as of February 28, 2011. From May 31, 2008, the first fiscal year-end after the Merger, to February 28, 2011, net debt decreased by $521 million due to an increase in cash and cash equivalents, as defined by our credit agreement, of $205 million and a $316 million reduction of gross debt. The reduction of gross debt includes a $154 million decrease due to favorable foreign currency translation on the Company's euro-denominated debt.

Biomet's senior secured leverage ratio as of February 28, 2011 was 3.42 times the last twelve months ("LTM") adjusted EBITDA, as defined by our credit agreement, compared to 4.16 times at May 31, 2008. The net debt leverage ratio was 5.64 times LTM adjusted EBITDA at February 28, 2011, compared to 6.97 times as of May 31, 2008.

Biomet's President and Chief Executive Officer Jeffrey R. Binder stated, "Net sales increased 2% on a constant currency basis during our fiscal third quarter, but core orthopaedic reconstructive sales were flat. While we believe that the hip and knee market continued to remain sluggish during the quarter, with continued pressure on both volume and price, we did not meet our goal of sustainable above-market growth. Our focus is on improving our execution in new product introductions, and selling and marketing effectiveness so that we can regain the momentum that we have built over the past four years. On a positive note, we cleared our Warning Letter related to the Signature™ system* during the quarter and have resumed marketing that system. We have also launched two important new hip systems, the Arcos® Modular Femoral Revision System and our Active Articulation™ E1® Dual Mobility Hip System, both with excellent feedback from the market."

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

The following table provides third quarter net sales performance by product segment:

Reconstructive sales increased 1% (1% constant currency) worldwide during the third quarter of fiscal year 2011 and decreased 1% in the United States. Knee sales decreased 2% (decreased 1% constant currency) worldwide during the third quarter and decreased 5% in the U.S. Hip sales were flat (flat at constant currency) worldwide during the third quarter and were flat in the U.S.

Extremity sales increased 18% (18% constant currency) worldwide during the quarter, with 25% growth in the U.S. The Comprehensive® Primary and Reverse Shoulder Systems continued to drive strong growth for the extremity product category during the third quarter.

Dental sales increased 5% worldwide (6% constant currency) and increased at a rate of 4% in the U.S. during the third quarter. The Biomet 3i dental business is benefiting from new product and technology introductions and a market that appears to be showing some signs of recovery.

Fixation sales decreased 1% (decreased 1% constant currency) worldwide during the third quarter and decreased 2% in the U.S. During the third quarter, increased craniomaxillofacial fixation sales were offset by decreased sales of external fixation and electrical stimulation devices, while internal fixation sales were flat.

Spine sales increased 1% (1% constant currency) worldwide during the third quarter and decreased 1% in the U.S. Sales growth of spine hardware and orthobiologics was impacted by decreased sales of spinal stimulation devices during the third quarter.

Sales of "other" products increased 13% (increased 14% constant currency) worldwide during the third quarter and increased 11% in the U.S. Sports medicine sales grew 20% (21% constant currency) worldwide and increased 16% in the U.S. during the quarter, while sales of softgoods and bracing products decreased. Strong demand for procedure-specific devices, including the JuggerKnot™ Soft Anchor, the ToggleLoc™ Femoral Fixation Device with ZipLoop™ Technology and the Maxfire™ MarXmen™ Meniscal Repair Device continued to fuel sports medicine sales growth during the third quarter.