Zimmer Holdings, Inc. Reports Third Quarter 2013 Financial Results

WARSAW, Ind., Oct. 24, 2013 /PRNewswire/ --

• Net Sales of $1.07 billion represent an increase of 4.8% reported over the prior year period (an increase of 6.7% constant currency)                                                                   
• Diluted EPS for the third quarter were $0.90 reported, a decrease of 11.8% from the prior year period, and $1.25 adjusted, an increase of 8.7% over the prior year period
• Company updates sales and earnings guidance

Zimmer Holdings, Inc. (NYSE and SIX: ZMH) today reported financial results for the quarter ended September 30, 2013. The Company reported third quarter net sales of $1.07 billion, an increase of 4.8% reported and 6.7% constant currency over the third quarter of 2012. Diluted earnings per share for the quarter were $0.90 reported and $1.25 adjusted, an increase of 8.7% adjusted over the prior year period.

"Zimmer achieved accelerated top-line growth in the third quarter, fueled by our innovative new product offerings and the focused execution of our global sales teams," said David Dvorak, Zimmer President and CEO. "For the balance of 2013, we expect to continue building stockholder value through the ongoing execution of our growth, operational excellence and capital deployment strategies."

Net earnings for the third quarter were $154.4 million on a reported basis and $215.6 million on an adjusted basis, an increase of 6.7% adjusted over the prior year period. Operating cash flow for the third quarter was $292.7 million.  

In the quarter, the Company recorded pre-tax charges of $46.4 million in special items and $43.8 million in cost of products sold pertaining to global restructuring, quality and operational excellence initiatives, certain litigation and recent acquisitions. Adjusted 2013 figures in this release exclude the impact of these charges, which include $39.1 million associated with a broad based product rationalization program; $33.0 million related to quality and operational excellence initiatives in manufacturing, logistics and sales; $12.0 million connected with certain outstanding litigation matters; and $6.1 million in integration and other costs.

The Company recently announced the receipt of 510(k) clearance from the U.S. Food and Drug Administration (FDA) to market the Zimmer® Patient Specific Instruments (PSI) Shoulder system to complement its Trabecular Metal™ Reverse Shoulder system for reverse shoulder arthroplasty procedures. Additionally in the quarter, Zimmer Spine announced its entry into an exclusive global distribution agreement to market the Lateral Locking Cage (LLC), a first of its kind, minimally invasive lateral interbody cage for the treatment of degenerative disc disease and instability. Implanted through a unique minimally invasive approach, the LLC represents Zimmer Spine's entry into lateral access lumbar surgeries, a fast growing segment of the global spine market.

During the quarter, the Company utilized $17.5 million of cash to acquire 0.2 million shares. At the end of the third quarter, $536.4 million remained authorized under the current share repurchase program, which expires on December 31, 2014. Additionally, 1.6 million stock options were exercised in the quarter, resulting in $108.7 million of cash proceeds. Through the end of the third quarter, 5.0 million stock options had been exercised in 2013, resulting in $325.4 million of cash proceeds. As a result, the Company now estimates diluted weighted average common shares outstanding for the full year to be approximately 171.5 million shares. The Company also declared cash dividends of $33.9 million on its outstanding shares in the third quarter.

Guidance
The Company reaffirmed its full-year 2013 constant currency revenue guidance and updated its reported revenue and earnings guidance for 2013. Full-year revenues for 2013 are expected to increase approximately 4.5% on a constant currency basis from 2012. The Company now estimates that foreign currency translation will decrease revenues between 1.5% and 2.0% for the year, resulting in reported revenue growth between 2.5% and 3.0%. Previously, the Company had estimated foreign currency translation would decrease revenues by approximately 2.0%.

The Company now projects full-year 2013 diluted earnings per share to be approximately $4.40 on a reported basis and approximately $5.70 on an adjusted basis. Prior guidance for full-year 2013 reported and adjusted diluted earnings per share was $4.70 to $4.80 and $5.70 to $5.80, respectively. This updated guidance includes estimated charges for inventory step-up and other inventory and manufacturing related charges, certain claims and special items of $335 million on a pre-tax basis, or approximately $1.30 per diluted share, on an after-tax basis. Prior guidance reflected an estimate of $250 million, on a pre-tax basis, for these items.

Conference Call
The Company will conduct its third quarter 2013 investor conference call today, October 24, 2013, at 8:00 a.m. Eastern Time. The live audio webcast can be accessed via Zimmer's Investor Relations website at http://investor.zimmer.com. It will be archived for replay following the call.

Individuals who wish to dial into the conference call may do so at (888) 878-3901. International callers should dial (706) 634-9520. Conference ID 74602176 may be used to access the call. A digital recording will be available two hours after the completion of the conference call from October 24, 2013, to November 24, 2013. To access the recording, US/Canada callers should dial (855) 859-2056 or (800) 585-8367, or for International callers, dial (404) 537-3406, and enter the conference ID 74602176.

Sales Tables
The following tables provide sales results by geographic segment and product category, as well as the percentage change compared to the prior year quarter and nine months on both a reported and constant currency basis.

 

About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer designs, develops, manufactures and markets orthopaedic reconstructive, spinal and trauma devices, dental implants, and related surgical products Zimmer has operations in more than 25 countries around the world and sells products in more than 100 countries. Zimmer's 2012 sales were approximately $4.5 billion. The Company is supported by the efforts of more than 9,000 employees worldwide.

Website Information
We routinely post important information for investors on our website, www.zimmer.com, in the "Investor Relations" section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Note on Non-GAAP Financial Measures
As used in this press release, the term "adjusted" refers to operating performance measures that exclude inventory step-up and other inventory and manufacturing related charges, certain claims and special items. Included in special items are acquisition and integration costs and asset impairment charges related to prior acquisitions as well as employee termination benefits, consulting and professional fees, certain litigation matters, dedicated personnel expenses, certain contract terminations and asset impairment charges connected with global restructuring and operational excellence initiatives. The term "constant currency" refers to any financial measure that excludes the effect of changes in foreign currency exchange rates. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure are included in this press release.

Zimmer Safe Harbor Statement
This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 based on current expectations, estimates, forecasts and projections about the orthopaedics industry, management's beliefs and assumptions made by management.  Forward-looking statements may be identified by the use of forward-looking terms such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "assumes," "guides," "targets," "forecasts," and "seeks" or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to:  the success of our quality and operational improvement initiatives; price and product competition; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures, including the impact of the U.S. excise tax on medical devices, reductions in reimbursement levels by third-party payors and cost containment efforts of healthcare purchasing organizations; dependence on new product development, technological advances and innovation; shifts in the product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; our ability to obtain and maintain adequate intellectual property protection; our ability to successfully integrate acquired businesses; our ability to form and implement alliances; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration (FDA) and foreign government regulators, such as more stringent requirements for regulatory clearance of our products; our ability to remediate matters identified in any inspectional observations or warning letters issued by the FDA; changes in tax obligations arising from tax reform measures or examinations by tax authorities; product liability and intellectual property litigation losses; our ability to retain the independent agents and distributors who market our products; our dependence on a limited number of suppliers for key raw materials and outsourced activities; changes in general industry and market conditions, including domestic and international growth rates and general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the impact of the ongoing economic uncertainty affecting countries in the Euro zone on our ability to collect accounts receivable in affected countries. For a further list and description of such risks and uncertainties, see our periodic reports filed with the U.S. Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in our periodic reports. Readers of this document are cautioned not to place undue reliance on these forward-looking statements, since, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this document.

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE Zimmer Holdings, Inc.