Biomet third quarter net sales increase 5% to $708.9 million

Biomet, Inc. announced today financial results for its third fiscal quarter ended February 29, 2012.

• Net sales increased 5% (5% constant currency) worldwide to $709 million
• Large joint reconstructive sales increased 5% (5% constant currency) worldwide and increased 6% in the U.S.
• Sports medicine sales increased 22% (22% constant currency) worldwide, with 18% U.S. growth
• Extremity sales grew 18% (18% constant currency) worldwide, with a 21% increase in the U.S.
• Operating cash flow of $158 million
• Binding offer to acquire DePuy trauma business for $280 million

Third Quarter Financial Results

Net sales increased 5% during the third quarter of fiscal year 2012 to $708.9 million, compared to net sales of $678.0 million during the third quarter of fiscal year 2011. Compared to the prior year period, changes in foreign currency exchange rates had a negligible effect on consolidated sales growth rates. U.S. net sales increased 5% to $432.8 million during the third quarter, while Europe net sales increased 2% (4% constant currency) to $176.7 million and International (primarily Canada, South America, Mexico and the Pacific Rim) net sales increased 7% (6% constant currency) to $99.4 million.

Special items (pre-tax) for the third quarter totaled $108.0 million, including $82.1 million of non-cash amortization and depreciation expense related to the Merger and $25.9 million of non-Merger related special items.

Reported operating income during the third quarter of fiscal year 2012 was $108.1 million, compared to operating income of $94.9 million during the third quarter of fiscal year 2011. Adjusted operating income totaled $216.1 million during the third fiscal quarter, compared to adjusted operating income of $212.8 million in the same period of the prior fiscal year.

Reported net loss during the third quarter of fiscal year 2012 was $16.5 million, compared to a net loss of $11.6 million during the third quarter of fiscal year 2011. Adjusted net income was $55.1 million during the third fiscal quarter, compared to $63.8 million during the third quarter of fiscal year 2011.

Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") was $260.5 million, or 36.7% of net sales during the third quarter of fiscal year 2012, compared to adjusted EBITDA of $258.4 million during the third quarter of the prior fiscal year.

Interest expense during the third quarter totaled $117.2 million, compared to $124.0 million during the third quarter of fiscal year 2011, principally due to lower average interest rates on our term loans.

Reported cash flow from operations during the third quarter totaled $157.5 million, compared to $151.8 million for the third quarter of fiscal year 2011. Free cash flow (operating cash flow of $157.5 million minus capital expenditures of $41.5 million) was $116.0 million, which reflected $47.3 million of cash interest paid in the quarter. Free cash flow during the same quarter of fiscal year 2011 was $106.7 million.

Reported gross debt was $5.920 billion, and cash and cash equivalents, as defined in the Company's credit agreement dated September 25, 2007, totaled $496.0 million, resulting in net debt of $5.424 billion as of February 29, 2012. From May 31, 2008, the first fiscal year-end after the Merger, to February 29, 2012, net debt decreased by $749.1 million due to an increase in cash and cash equivalents, as defined by our credit agreement, of $368.4 million and a $380.7 million reduction of gross debt. The reduction of gross debt includes a $179.4 million decrease due to favorable foreign currency translation on the Company's euro-denominated debt.

The Company's senior secured leverage ratio as of February 29, 2012 was 2.83 times the last twelve months ("LTM") adjusted EBITDA, as defined by our credit agreement, compared to 4.01 times at May 31, 2008. The total leverage ratio was 5.35 times LTM adjusted EBITDA at February 29, 2012, compared to 6.97 times as of May 31, 2008.

Biomet's President and Chief Executive Officer Jeffrey R. Binder commented, "We reported strong and improving sales results across many of our product categories this quarter, with particularly good momentum in our Large Joint Reconstructive and S.E.T. product categories. I was particularly happy with the consistency of our performance across all geographies. In addition, we are very excited about our future opportunities in the trauma market given our pending acquisition of DePuy's worldwide trauma business."

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

Large Joint Reconstructive sales grew 5% (5% constant currency) worldwide to $422.7 million and increased 6% in the U.S. during the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011. Knee sales increased 4% (4% constant currency) worldwide and in the U.S. during the third quarter. Hip sales increased 6% (6% at constant currency) worldwide during the third quarter and grew 7% in the U.S.

Sports, Extremities and Trauma (S.E.T.) sales increased 16% (16% constant currency) worldwide to $92.7 million during the third quarter and increased 15% in the U.S. Sports medicine sales grew 22% worldwide and on a constant currency basis and increased 18% in the U.S. Extremity sales increased 18% (18% constant currency) worldwide during the quarter, with U.S. growth of 21%. Trauma sales increased 1% (1% constant currency) worldwide during the quarter and decreased 6% in the U.S.

During the third quarter, Spine and Bone Healing (non-invasive trauma stimulation and bracing) sales decreased 5% (5% constant currency) worldwide to $76.5 million, and decreased 5% in the U.S.

Worldwide Dental sales decreased 2% (2% constant currency) to $65.6 million and increased 12% in the U.S. during the third quarter.

Sales of Other products increased 8% (9% constant currency) worldwide to $51.4 million, and were flat in the U.S. during the quarter.