Third Quarter Highlights:
- Net Sales increased 18% (16% constant currency) to $338 million
- Earnings Per Share increased 32% over prior year pro forma* to $0.33
- Worldwide and Americas Reconstructive Sales increased 21% and 20%, respectively
- European Sales increased 38% (26% constant currency)
- YTD September Sales exceed $1 Billion
WARSAW, Ind., Oct 21, 2002 --Holdings, Inc. (NYSE: ZMH) today announced net sales and earnings for the
quarter and nine months ended September 30, 2002 exceeding First Call consensus
estimates.
Third Quarter Results
Net sales for the third quarter increased 18% (16% constant currency) to $338
million and net earnings increased 36% to $65 million over pro forma prior year
of $287 million and $48 million, respectively. Diluted earnings per share
increased 32% to $0.33 for the quarter versus pro forma earnings of $0.25 for
the prior year. First Call consensus estimates had projected net sales of $326
million and earnings per share of $0.30. On a reported basis, diluted earnings
per share increased 136% for the quarter over $0.14 reported last year.
"We believe that global reconstructive markets are growing by approximately 15%
and that Zimmer has again outpaced this growth by an estimated 40%", said Zimmer
Chairman, President and Chief Executive Officer Ray Elliott. "We also had an
impressive contribution from our European businesses, which increased sales by
38% in the quarter, or 26% in constant currency. Strong cash flow this quarter
has allowed us to continue to lead the industry, as planned, in Research and
Development investments as a percentage to sales, while at the same time reduce
debt by another $64 million.
Nine Month Results
Net sales for the nine months ended September 30, 2002 grew 16% (16% constant
currency) to $1,002 million from $867 million in 2001. Net earnings for the nine
months were $186 million, representing an increase of 34% over the pro forma
prior year of $139 million. Diluted earnings per share for the first nine months
of 2002 were $0.95, representing an increase of 34% over $0.71, pro forma, for
the first nine months of 2001. On a reported basis, diluted earnings per share
increased 73% over $0.55 last year.
Global Category Results
Global sales of reconstructive implants increased 21% for the third quarter (19%
constant currency) and increased 19% for the nine months (19% constant currency)
to $258 million and $772 million, respectively. Knee sales increased 22% for the
third quarter (20% constant currency) and increased 21% for the nine months (21%
constant currency) to $142 million and $426 million, respectively. Hip sales
increased 19% for the third quarter (17% constant currency) and increased 15%
for the nine months (16% constant currency) to $108 million and $321 million,
respectively. Sales of fracture management products increased 8% for the third
quarter (7% constant currency) and 5% for the nine months (6% constant currency)
to $34 million and $100 million, respectively. Sales of orthopaedic surgical
products increased 8% for the third quarter (7% constant currency) and 7% for
the nine months (8% constant currency) to $45 million and $131 million,
respectively.
Geographic Results
The Americas led the company in overall dollar sales growth, increasing 17% in
the third quarter and 18% for the nine months to $231 million and $689 million,
respectively. For the third quarter, knee sales increased 22% led by growth in
sales of the NexGen® Legacy® Posterior Stabilized Knee including the Flex
Knee, the NexGen Cruciate Retaining Knee and the M/G(TM) Unicompartmental Knee,
which features Minimally Invasive Solutions(TM) (MIS) Instrumentation. Hip sales
increased 16% in the third quarter, driven by continued conversion to porous
stems, Trabecular Metal acetabular cups, and increased sales of Trilogy®
Acetabular System cups incorporating Longevity® Crosslinked Polyethylene
Liners. Fracture management product sales increased 13% in the quarter in large
part due to increased sales of the Zimmer® Periarticular Plating System,
Zimmer® Plates and Screws internal fixation and TransFx(TM)** External
Fixation Systems.
Asia Pacific net sales increased 10% in the third quarter (8% constant currency)
and 4% for the nine months (8% constant currency) to $68 million and $195
million, respectively. For the third quarter, knee sales increased 11% (8%
constant currency), reflecting continuing strong sales of NexGen Legacy
Posterior Stabilized Flex Knee. Hip sales increased 19% in the third quarter
(16% constant currency) driven primarily by continued conversion to porous stems
and sales of Trilogy Acetabular System cups incorporating Longevity Crosslinked
Polyethylene Liners. Fracture management product sales decreased 8% (decreased
10% constant currency) reflecting a decline in M/DN® Intramedullary Fixation
and compression hip screw sales, primarily in Japan.
Europe net sales increased 38% in the third quarter (26% constant currency) and
26% for the nine months (23% constant currency) to $39 million and $119 million,
respectively. The third quarter increase was driven by higher sales in Central
and Eastern Europe, France, Germany, Holland, Italy, Scandinavia, Spain and the
United Kingdom. In the third quarter, knee sales increased 39% (26% constant
currency) driven by strong sales of the NexGen Legacy system of knee prostheses
as well as the M/G Unicompartmental Knee with MIS Instrumentation. Hip sales
increased 43% in the third quarter (31% constant currency) supported by
increased sales of Trilogy Acetabular System cups incorporating Longevity
Crosslinked Polyethylene Liners, the ZMR® Hip System and VerSys® porous
stems.
Guidance
The company has confirmed projections for the fourth quarter 2002 including
revenue in a range of $350 to $360 million and EPS of approximately $0.33,
implying $1.28 for the full year 2002. Additionally, company projections for the
full year 2003 include revenue growth of 13% to 15% and EPS growth of 15% to
17%, implying EPS at a minimum of $0.05 above the current 2003 full year First
Call consensus estimates of $1.42.
The company will discuss third quarter results during an investor conference
call to be held on Tuesday, October 22, 2002 at 8am EDT. A live audio webcast of
Zimmer's conference call will be accessible through the Zimmer website at
www.zimmer.com (Investor Relations section). The webcast will be archived for
future replay.
Individuals who wish to dial into the conference call may do so at (800)
406-1106. International callers should dial (706) 634-7075. A digital recording
will be available two hours after the completion of the conference from October
22, 2002 to November 5, 2002. To access the recording, US/Canada callers should
dial (800) 642-1687, or for International callers, dial (706) 645-9291, and
enter the Conference ID, 5639560.
Zimmer, based in Warsaw, Indiana, is a global leader in the design, development,
manufacture and marketing of reconstructive orthopaedic implants and fracture
management products. Orthopaedic reconstruction implants restore joint function
lost due to disease or trauma in joints such as knees, hips, shoulders and
elbows. Fracture management products are devices used primarily to reattach or
stabilize damaged bone and tissue to support the body's natural healing process.
Zimmer also manufactures and markets other products related to orthopaedic and
general surgery. Zimmer was founded in 1927 and has more than 3,600 employees
worldwide.
This press release contains forward-looking statements 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," "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, price and product
competition, rapid technological development, demographic changes, dependence on
new product development, the mix of our products and services, customer demand
for our products and services, our ability to successfully integrate acquired
companies, control of costs and expenses, our ability to form and implement
alliances, international growth, U.S. and foreign government regulation,
reimbursement levels from third-party payors, general industry and market
conditions and growth rates and general domestic and international economic
conditions including interest rate and currency exchange rate fluctuations. For
a further list and description of such risks and uncertainties, see the reports
filed by Zimmer with the Securities and Exchange Commission. Zimmer disclaims
any intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Visit Zimmer on the worldwide web at www.zimmer.com .
*2001 Pro forma earnings exclude costs of separation from the company's former
parent and include interest expense for all periods; pro forma reporting is
presented as a result of the Company's 2001 spin-off from its former parent.
**Trademark of Immedica, Inc.
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 and 2001
(in millions, except per share amounts)
(unaudited)
% Increase/
2001 (Decrease)
As Pro As Pro
2002 Reported Forma* Reported Forma*
Net Sales $337.5 $286.7 $286.7 17.7% 17.7%
Cost of products sold 85.1 75.0 71.3 13.5 19.4
Gross Profit 252.4 211.7 215.4 19.2 17.2
Research and development 20.6 18.3 17.2 12.6 19.8
Selling, general and administrative 133.7 142.6 118.7 (6.2) 12.6
Operating expenses 154.3 160.9 135.9 (4.1) 13.5
Operating Profit 98.1 50.8 79.5 93.1 23.4
Interest expense 3.0 3.0 4.5 0.0 (33.3)
Earnings before income taxes 95.1 47.8 75.0 99.0 26.8
Provision for income taxes 30.0 20.4 27.1 47.1 10.7
Net Earnings $65.1 $27.4 $47.9 137.6 35.9
Earnings Per Common Share
Basic $0.33 $0.14 $0.25 135.7 32.0
Diluted $0.33 $0.14 $0.25 135.7 32.0
Weighted Average Common
Shares Outstanding
Basic 194.7 193.7 193.7
Diluted 196.5 195.0 195.0
*2001 pro forma earnings exclude costs of separation from the Company's
former parent and include interest expense for all periods;
pro forma reporting is presented as a result of the Company's spin-off
from its former parent.
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001
(in millions, except per share amounts)
(unaudited)
% Increase/
2001 (Decrease)
As Pro As Pro
2002 Reported Forma* Reported Forma*
Net Sales $1,002.2 $867.0 $867.0 15.6% 15.6%
Cost of products sold 251.1 237.6 226.7 5.7 10.8
Gross Profit 751.1 629.4 640.3 19.3 17.3
Research and development 58.9 53.7 50.7 9.7 16.2
Selling, general and
administrative 402.4 399.4 357.2 0.8 12.7
Operating expenses 461.3 453.1 407.9 1.8 13.1
Operating Profit 289.8 176.3 232.4 64.4 24.7
Interest expense 9.9 3.0 17.0 230.0 (41.8)
Earnings before income taxes 279.9 173.3 215.4 61.5 29.9
Provision for income taxes 94.3 66.7 76.7 41.4 22.9
Net Earnings $185.6 $106.6 $138.7 74.1 33.8
Earnings Per Common Share
Basic $0.96 $0.55 $0.72 74.5 33.3
Diluted $0.95 $0.55 $0.71 72.7 33.8
Weighted Average Common
Shares Outstanding
Basic 194.3 193.6 193.6
Diluted 196.2 194.1 194.1
*2001 pro forma earnings exclude costs of separation from the Company's
former parent and include interest expense for all periods;
pro forma reporting is presented as a result of the Company's spin-off
from its former parent.
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC REGION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001
(in millions)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
% Increase % Increase
2002 2001 (Decrease) 2002 2001 (Decrease)
Americas $230.7 $196.9 17.2% $688.9 $584.9 17.8%
Asia Pacific 67.9 61.5 10.4 194.5 187.5 3.7
Europe 38.9 28.3 37.5 118.8 94.6 25.6
Total $337.5 $286.7 17.7 $1,002.2 $867.0 15.6
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001
(in millions)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
% Increase % Increase
2002 2001 (Decrease) 2002 2001 (Decrease)
Reconstructive
implants $258.4 $213.6 21.0% $771.7 $650.0 18.7%
Fracture
management 33.9 31.4 8.0 99.7 95.2 4.7
Orthopaedic
surgical products 45.2 41.7 8.4 130.8 121.8 7.4
Total $337.5 $286.7 17.7 $1,002.2 $867.0 15.6
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
(in millions)
September 30,
2002 December 31,
(unaudited) 2001
Assets
Current Assets:
Cash and equivalents $20.8 $18.4
Receivables, net 204.7 181.7
Inventories, net 253.2 200.0
Other current assets 133.8 108.5
Total Current Assets 612.5 508.6
Property, Plant and Equipment, net 154.9 148.2
Other Assets 96.0 88.2
Total Assets $863.4 $745.0
Liabilities and Shareholders' Equity
Current Liabilities $242.7 $223.1
Short-term Debt 150.0 150.0
Other Long-term Liabilities 85.4 79.3
Long-term Debt 98.9 213.9
Shareholders' Equity 286.4 78.7
Total Liabilities and Shareholders' Equity $863.4 $745.0
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001
(in millions)
(unaudited)
2002 2001
Cash flow provided by (used in)
operating activities:
Net earnings $185.6 $106.6
Depreciation 18.7 18.2
Income taxes 22.0 12.2
Receivables (17.6) (6.4)
Inventories (57.5) (37.4)
Accounts payable and accrued expenses (6.7) 41.5
Other assets and liabilities (7.5) (14.5)
Net cash provided by operating
activities 137.0 120.2
Cash flow provided by (used in)
investing activities:
Additions to property, plant and
equipment (23.7) (38.4)
Investments in other assets (2.0) -
(25.7) (38.4)
Free cash flow as reported $113.3 $81.8
Pro forma free cash flow * $105.7
* 2001 pro forma free cash flow excludes separation costs and includes
full interest expense in each period presented; pro forma reporting is
presented as a result of the Company's 2001 spin-off from its former
parent.
CONTACT: Media, Brad Bishop, +1-574-372-4291, or
[email protected], or Investors, Sam Leno, +1-574-372-4790, or
[email protected], both of Zimmer Holdings, Inc.
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