Biomet net sales increase 1% to $2.732 billion for fiscal year 2011

Biomet, Inc. announced today preliminary financial results for its fourth quarter and fiscal year ended May 31, 2011. The final results for the three and twelve months ended May 31, 2011 will be made available to the public with the filing of Biomet's Form 10-K for fiscal year 2011 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

Net sales increased 2% to $715.2 million during the fourth quarter of fiscal year 2011 compared to net sales of $702.5 million for the fourth quarter of fiscal year 2010. On a constant currency basis, net sales decreased 1% during the fourth quarter. U.S. net sales decreased 3% to $411.7 million during the fourth quarter, while Europe net sales increased 7% (flat at constant currency) to $198.7 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales increased 11% (3% constant currency) to $104.8 million.

Special items (pre-tax) totaled $1,063.6 million for the fourth quarter of fiscal year 2011, including a preliminary non-cash goodwill and intangible asset impairment charge of $941.4 million that was primarily related to the Company's Europe business due to the continued market slowdown in Europe relative to our original purchase accounting assumptions at the time of the Merger; $86.9 million of non-cash amortization and depreciation expense related to the Merger; and $35.3 million of non-Merger related special items that were principally comprised of costs associated with the Company's operational improvement program.

Reported operating loss was $847.3 million during the fourth quarter of fiscal year 2011, compared to operating income of $83.3 million for the fourth quarter of fiscal year 2010. Excluding special items in both quarters, adjusted operating income was $216.3 million, or 30.2% of net sales, compared to adjusted operating income of $215.3 million for the same period in fiscal year 2010.

On a reported basis, a preliminary net loss of $806.5 million was recorded during the fourth quarter of fiscal year 2011, compared to a net loss of $14.5 million during the fiscal fourth quarter of the prior year. Excluding special items in both quarters, adjusted net income for the fourth fiscal quarter totaled $30.9 million, compared to $50.2 million for the fourth quarter of fiscal year 2010.

Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") during the fourth quarter of fiscal year 2011 was $260.9 million, or 36.5% of net sales, compared to adjusted EBITDA for the fiscal fourth quarter of 2010 of $253.6 million, or 36.1% of net sales.

Interest expense was $125.2 million during the fiscal fourth quarter, compared to $126.8 million during the same period in fiscal year 2010, primarily as a result of lower interest rates on floating rate debt.

Reported cash flow from operations totaled $76.9 million during the fourth quarter of fiscal year 2011. Free cash flow (operating cash flow of $76.9 million minus capital expenditures of $40.1 million) totaled $36.8 million, reflecting $189.7 million of cash interest paid in the quarter.

Reported gross debt as of May 31, 2011 was $6.020 billion and cash and cash equivalents (which includes certain short-term investments), as defined in the Company's Credit Agreement dated September 25, 2007, totaled $361 million, which resulted in net debt of $5.659 billion. From May 31, 2008, the first fiscal year-end after the Merger, to May 31, 2011, net debt decreased by $514 million due to an increase in cash and cash equivalents, as defined by our credit agreement, of $233 million and a $281 million reduction of gross debt. The gross debt reduction includes a decrease of $109 million as a result of favorable foreign currency translation on the Company's euro-denominated debt.

As of May 31, 2011, Biomet's senior secured leverage ratio was 3.43 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 5.60 times LTM adjusted EBITDA at May 31, 2011, compared to 6.97 times as of May 31, 2008.

Biomet's President and Chief Executive Officer Jeffrey R. Binder stated, "During our fiscal fourth quarter, our sales results continued to be challenged by industry volume and price pressures that affected our sales throughout fiscal 2011. In addition, we have not been executing to our standard of above-market growth in most of our businesses. We are working hard to return to that standard as quickly as possible."

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

Reconstructive sales increased 4% (flat at constant currency) worldwide during the fourth quarter of fiscal year 2011 and were flat in the United States. Hip sales increased 3% (flat at constant currency) worldwide during the fourth quarter and were flat in the U.S. Knee sales increased 2% (decreased 1% at constant currency) worldwide and decreased 5% in the U.S. during the fourth quarter.

Extremity sales increased 17% (15% constant currency) worldwide during the fourth quarter and grew at a rate of 22% in the U.S. Strong market demand for the Comprehensive® Primary, Reverse, and Fracture Shoulder Systems continued to drive the growth in the extremity product category during the fourth quarter.

Dental sales increased 2% (decreased 2% at constant currency) worldwide during the fourth quarter, with 6% growth in the U.S.

Fixation sales decreased 8% (9% constant currency) worldwide and decreased 10% in the U.S. during the fourth quarter. Craniomaxillofacial fixation sales increased at a double digit rate during the fourth quarter, offset by decreased sales of internal fixation, external fixation, and electrical stimulation devices.

Spine sales decreased 10% (10% constant currency) worldwide and decreased 12% in the U.S. during the fourth quarter.

Sales of "other" products increased 10% (8% constant currency) worldwide and increased 1% in the U.S. during the fourth quarter. Sports medicine sales grew 13% (11% constant currency) worldwide during the quarter, with 8% growth in the U.S. Strong market acceptance for the JuggerKnot™ Soft Anchor, the ZipTight™ Fixation System for Ankle Syndesmosis, and the ToggleLoc™ Femoral Fixation Device with ZipLoop™ Technology contributed to the sports medicine sales growth during the fourth quarter.

Full Year Preliminary Financial Results

Net sales increased 1% during the twelve months ended May 31, 2011, to $2.732 billion. At constant currency, net sales increased 1% during fiscal year 2011.

Special items (pre-tax) during fiscal year 2011 totaled $1,414.6 million, including the previously mentioned $941.4 million preliminary non-cash goodwill and intangible asset impairment charge, $376.3 million of non-cash amortization and depreciation expense related to the Merger, and $96.9 million of non-Merger related special items that were primarily associated with our operational improvement initiatives.

Reported operating loss was $576.9 million during fiscal year 2011 compared to operating income of $356.6 million during fiscal year 2010. Excluding special items during fiscal year 2011, adjusted operating income totaled $837.7 million, or 30.7% of net sales.

On a reported basis, a preliminary net loss of $843.5 million was recorded during fiscal year 2011, compared to a net loss during fiscal year 2010 of $47.6 million. Excluding special items in both periods, adjusted net income totaled $211.5 million during fiscal year 2011 compared to adjusted net income of $241.5 million during fiscal year 2010.

Excluding special items, adjusted EBITDA increased 1% during fiscal year 2011 to $1.010 billion, or 37.0% of net sales.

Interest expense during fiscal year 2011 was $498.9 million, compared to $516.4 million for fiscal year 2010, principally due to lower interest rates on floating rate debt.

Free cash flow (operating cash flow minus capital expenditures) was $206.1 million for the twelve month period ended May 31, 2011, compared to free cash flow of $135.1 million for fiscal year 2010. Unlevered free cash flow (cash flow before debt service) totaled $679.3 million for the fiscal year ended May 31, 2011, compared to $639.6 million for fiscal year 2010.

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

Reclassifications

Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications were limited to net sales information by product and geographical category. Specifically, for the three and twelve months ended May 31, 2010, the Company reclassified $5.5 million and $21.9 million from Other product net sales to Reconstructive product net sales, respectively, and $1.0 million and $4.2 million from Spine product net sales to Fixation product net sales, respectively. For the three and twelve months ended May 31, 2010, the Company also reclassified $1.2 million and $4.3 million from Europe net sales to International net sales, respectively. The current presentation aligns with how the Company presently manages and markets its products.