WARSAW, Ind., Oct 22, 2009 /PRNewswire-FirstCall via COMTEX News Network/ --
-- Net Sales of $976 million represents an increase of 2.4% reported (3.6%
constant currency)
-- Diluted EPS for the third quarter were $0.70 reported, a decrease of
26.3% from the prior year period, and $0.88 adjusted, a decrease of 9.3%
from the prior year period
-- Reaffirms full-year sales and adjusted EPS guidance
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported financial results for the quarter ended September 30, 2009. The Company reported third quarter net sales of $976 million, an increase of 2.4% reported and 3.6% constant currency over the third quarter of 2008. Diluted earnings per share for the quarter were $0.70 reported and $0.88 adjusted, a decrease of 9.3% adjusted from the prior year period. Third quarter 2008 adjusted earnings per share included a gain of $0.08 on the sale of certain equity holdings.
"We are pleased that our sales momentum continued to build in the third quarter as we achieved year-over-year constant currency growth in revenues in each of our three geographic segments," said David Dvorak, Zimmer President and CEO. "Further, we believe we are stabilizing our core knee and hip franchises and establishing a solid foundation for future growth."
Operating profit on an adjusted basis for the third quarter of $264 million was flat compared to the prior year's third quarter. Net earnings for the third quarter were $149.9 million on a reported basis and $188.3 million on an adjusted basis, a decrease of 13.9% adjusted from the prior year period. Operating cash flow for the third quarter was $352.3 million. Net earnings for the first nine months of 2009 were $562.2 million on a reported basis and $613.8 million on an adjusted basis, a decrease of 12.3% adjusted from the prior year period.
During the quarter, the Company utilized $67 million of cash to acquire 1.5 million shares under its $1.25 billion repurchase program. At the end of the quarter, $730 million of share repurchase authorization remained available. The Board of Directors has recently extended this program until December 31, 2010.
The Company also recorded a provision of $35.0 million in the quarter, or approximately $0.10 per share net of tax, for known and anticipated claims relating to the 2008 temporary suspension of marketing and distribution of the Durom(R) Acetabular Component in the U.S. Adjusted figures in this release exclude the impact of this provision.
Guidance
The Company reaffirmed its sales and earnings guidance. Full year revenues for 2009 are expected to increase between 1% and 3% on a constant currency basis. Assuming foreign currency exchange rates remain consistent with current levels, the Company estimates that foreign currency translation will reduce revenue for 2009 by approximately 1.6%. Full year 2009 adjusted diluted earnings per share are projected to be in a range of $3.85 to $4.00.
Conference Call
The Company will conduct its third quarter 2009 investor conference call today, October 22, 2009, 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 conference.
Individuals who wish to dial into the conference call may do so at (888) 881-6248. International callers should dial (706) 634-6422. A digital recording will be available two hours after the completion of the conference call from October 22, 2009 to November 5, 2009. To access the recording, U.S./Canada callers should dial (800) 642-1687, and International callers should dial (706) 645-9291, and enter the Conference ID,31978979. A copy of this press release and other financial and statistical information about the periods to be presented in the conference call will be accessible through the Zimmer website at http://investor.zimmer.com.
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. Beginning in 2009, the Company's Dental product category sales are no longer included within its Reconstructive products category. Prior year amounts related to Dental product category sales have been reclassified to conform to the 2009 presentation.
NET SALES - THREE MONTHS ENDED SEPTEMBER 30, 2009
(in millions, unaudited)
Constant
Net Reported Currency
Sales % Growth % Growth
----- --------- --------
Geographic Segments
Americas $585 4% 4%
Europe 242 (3) 3
Asia Pacific 149 8 4
---
Total 976 2 4
Product Categories
Reconstructive
Americas 434 3 3
Europe 194 (6) -
Asia Pacific 110 8 4
---
Total 738 1 2
Knees
Americas 270 2 3
Europe 90 (5) 1
Asia Pacific 57 9 7
--
Total 417 2 3
Hips
Americas 138 - 1
Europe 99 (7) (1)
Asia Pacific 51 6 1
--
Total 288 (1) -
Extremities 33 19 20
Dental 48 (8) (6)
Trauma 58 6 6
Spine 62 24 26
OSP and other 70 8 7
NET SALES - NINE MONTHS ENDED SEPTEMBER 30, 2009
(in millions, unaudited)
Constant
Net Reported Currency
Sales % Growth % Growth
----- --------- --------
Geographic Segments
Americas $1,769 -% 1%
Europe 788 (11) 1
Asia Pacific 431 (3) (2)
---
Total 2,988 (3) -
Product Categories
Reconstructive
Americas 1,318 (1) -
Europe 638 (13) (2)
Asia Pacific 324 (2) (1)
---
Total 2,280 (5) (1)
Knees
Americas 818 (1) -
Europe 303 (11) 1
Asia Pacific 164 (3) 1
---
Total 1,285 (4) -
Hips
Americas 423 (3) (2)
Europe 319 (14) (4)
Asia Pacific 154 (2) (3)
---
Total 896 (7) (3)
Extremities 99 10 13
Dental 148 (13) (10)
Trauma 171 4 6
Spine 191 21 24
OSP and other 198 (5) (4)
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 2008 sales were approximately $4.1 billion. The Company is supported by the efforts of more than 8,000 employees worldwide.
For more information about Zimmer, visit www.zimmer.com
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, the provision for certain Durom Acetabular Component product claims in the U.S., acquisition, integration, realignment and other expenses, net curtailment and settlement, and the tax benefit related to the 2007 civil settlement. The provision related to the Durom Acetabular Component is classified as a non-recurring item that is different from the Company's routine product liability claims for a number of reasons, including that the provision is limited to revisions associated with surgeries that predate the Company's voluntary suspension and which also occur within
two years of the original surgery date. 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, our compliance with the Corporate Integrity Agreement through 2012; the success of our quality initiatives; the outcome of the informal investigation by the U.S. Securities and Exchange Commission into Foreign Corrupt Practices Act matters announced in October 2007; price and product competition; changes in customer demand for our products and services caused by demographic changes or other factors; 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 and foreign government regulators and tax obligations and risks; the impact of temporarily suspending U.S. distribution of one of our key hip replacement products; product liability and intellectual property litigation losses; health care reform measures in the U.S., reductions in reimbursement levels from third-party payors and cost-containment efforts of health care purchasing organizations; our ability to retain the independent agents and distributors who market our products; 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 costs of defending or resolving
putative class action securities litigation and lawsuits, investigations or other proceedings resulting from our September 2007 settlement with the U.S. government and other matters. 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.
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(in millions, except per share amounts, unaudited)
% Inc/
2009 2008 (Dec)
---- ---- ------
Net Sales $975.6 $952.2 2%
Cost of products sold 249.3 237.2 5
----- -----
Gross Profit 726.3 715.0 2
----- -----
Research and development 52.1 47.9 9
Selling, general and administrative 413.0 403.7 2
Certain claims 35.0 47.5 (26)
Acquisition, integration, realignment and
other 22.2 5.6 296
---- ---
Operating expenses 522.3 504.7 3
----- -----
Operating Profit 204.0 210.3 (3)
Interest and other, net (4.2) 28.2 (115)
---- ----
Earnings before income taxes 199.8 238.5 (16)
----- -----
Provision for income taxes 49.9 23.5 113
---- ----
Net Earnings 149.9 215.0 (30)
----- -----
Less: Net earnings attributable to
noncontrolling interest - (0.3) (100)
--- ----
Net Earnings of Zimmer Holdings, Inc. $149.9 $214.7 (30)
====== ======
Earnings Per Common Share
Basic $0.70 $0.96 (27)
Diluted $0.70 $0.95 (26)
Weighted Average Common Shares Outstanding
Basic 213.6 224.7
Diluted 214.5 225.6
Certain amounts in the 2008 consolidated statement of earnings have
been reclassified to conform to the 2009 presentation.
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(in millions, except per share amounts, unaudited)
% Inc/
2009 2008 (Dec)
---- ---- ------
Net Sales $2,988.1 $3,090.9 (3)%
Cost of products sold 716.4 754.2 (5)
----- -----
Gross Profit 2,271.7 2,336.7 (3)
------- -------
Research and development 153.8 144.0 7
Selling, general and administrative 1,269.0 1,269.5 -
Certain claims 35.0 47.5 (26)
Acquisition, integration, realignment and
other 65.7 25.4 159
Net curtailment and settlement (32.1) - 100
----- ---
Operating expenses 1,491.4 1,486.4 -
------- -------
Operating Profit 780.3 850.3 (8)
Interest and other, net (11.9) 36.0 (133)
----- ----
Earnings before income taxes 768.4 886.3 (13)
Provision for income taxes 206.2 204.4 1
----- -----
Net Earnings 562.2 681.9 (18)
Less: Net earnings attributable to
noncontrolling interest - (0.8) (100)
----------------------------------- --- ----
Net Earnings of Zimmer Holdings, Inc. $562.2 $681.1 (17)
====== ======
Earnings Per Common Share
Basic $2.60 $2.98 (13)
Diluted $2.59 $2.97 (13)
Weighted Average Common Shares Outstanding
Basic 216.6 228.5
Diluted 217.4 229.7
Certain amounts in the 2008 consolidated statement of earnings have been
reclassified to conform to the 2009 presentation.
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
September 30, December 31,
2009 2008
---- ----
Assets
Current Assets:
Cash and cash equivalents $439.7 $212.6
Restricted cash 2.8 2.7
Receivables, net 743.2 732.8
Inventories, net 972.1 928.3
Other current assets 291.0 302.2
----- -----
Total current assets 2,448.8 2,178.6
Property, plant and
equipment, net 1,239.7 1,264.1
Goodwill 2,883.2 2,774.8
Intangible assets, net 873.9 872.1
Other assets 202.5 149.4
----- -----
Total Assets $7,648.1 $7,239.0
======== ========
Liabilities and Shareholders'
Equity
Current liabilities $676.7 $771.1
Other long-term liabilities 392.5 353.9
Long-term debt 600.2 460.1
Shareholders' equity 5,978.7 5,653.9
------- -------
Total Liabilities and
Shareholders' Equity $7,648.1 $7,239.0
======== ========
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(in millions, unaudited)
2009 2008
---- ----
Cash flows provided by (used in)
operating activities
Net earnings of Zimmer Holdings, Inc. $562.2 $681.1
Depreciation and amortization 249.6 196.0
Gain on sale of investments - (38.8)
Net curtailment and settlement (32.1) -
Share-based compensation 57.7 50.4
Inventory step-up 9.9 3.2
Income tax benefits from employee stock
compensation plans 0.7 10.6
Excess income tax benefits from employee
stock compensation plans (0.1) (6.5)
Changes in operating assets and liabilities
Income taxes (4.9) (66.2)
Receivables 10.9 (11.9)
Inventories (22.3) (106.5)
Accounts payable and accrued expenses (133.6) 141.3
Other assets and liabilities 34.0 (21.5)
---- -----
Net cash provided by operating activities 732.0 831.2
----- -----
Cash flows provided by (used in)
investing activities
Additions to instruments (102.7) (186.5)
Additions to other property, plant and
equipment (76.8) (189.2)
Acquisition of intellectual property
rights (32.9) -
Proceeds from sale of investments - 54.9
Investments in other assets (35.5) (18.6)
----- -----
Net cash used in investing activities (247.9) (339.4)
------ ------
Cash flows provided by (used in)
financing activities
Net borrowings under credit facilities 141.0 220.0
Proceeds from employee stock compensation
plans 7.6 54.2
Excess income tax benefits from employee
stock compensation plans 0.1 6.5
Repurchase of common stock (404.4) (688.9)
Acquisition of noncontrolling interest (8.6) -
---- ----
Net cash used in financing activities (264.3) (408.2)
------ ------
Effect of exchange rates on cash and cash
equivalents 7.3 (5.1)
--- ----
Increase in cash and cash equivalents 227.1 78.5
Cash and cash equivalents, beginning of
period 212.6 463.9
----- -----
Cash and cash equivalents, end of period $439.7 $542.4
====== ======
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(in millions, unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2009 2008 %Inc/(Dec) 2009 2008 %(Dec)
---- ---- ---------- ---- ---- ----------
Americas $584.5 $563.3 4 % $1,768.7 $1,764.9 - %
Europe 242.4 251.0 (3) 787.9 882.3 (11)
Asia
Pacific 148.7 137.9 8 431.5 443.7 (3)
------ ------ -------- --------
Total $975.6 $952.2 2 $2,988.1 $3,090.9 (3)
====== ====== ======== ========
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(in millions, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ----------------------------
2009 2008 %Inc/(Dec) 2009 2008 %Inc/(Dec)
Reconstructive $738.2 $731.0 1 % $2,279.8 $2,387.6 (5) %
Dental 48.0 51.8 (8) 148.1 170.9 (13)
Trauma 57.6 54.6 6 171.2 165.2 4
Spine 61.7 49.7 24 190.5 158.0 21
OSP and other 70.1 65.1 8 198.5 209.2 (5)
------ ------ ------- -------
Total $975.6 $952.2 2 $2,988.1 $3,090.9 (3)
====== ====== ======== ========
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
For the Three Months Ended
September 30, 2009
------------------
Foreign Constant
Reported Exchange Currency
% Growth Impact % Growth
-------- ------ --------
Geographic Segments
Americas 4% -% 4%
Europe (3) (6) 3
Asia Pacific 8 4 4
Total 2 (2) 4
Product Categories
Reconstructive
Americas 3 - 3
Europe (6) (6) -
Asia Pacific 8 4 4
Total 1 (1) 2
Knees
Americas 2 (1) 3
Europe (5) (6) 1
Asia Pacific 9 2 7
Total 2 (1) 3
Hips
Americas - (1) 1
Europe (7) (6) (1)
Asia Pacific 6 5 1
Total (1) (1) -
Extremities 19 (1) 20
Dental (8) (2) (6)
Trauma 6 - 6
Spine 24 (2) 26
OSP and other 8 1 7
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
For the Nine Months Ended
September 30, 2009
------------------
Foreign Constant
Reported Exchange Currency
% Growth Impact % Growth
-------- ------ --------
Geographic Segments
Americas -% (1)% 1%
Europe (11) (12) 1
Asia Pacific (3) (1) (2)
Total (3) (3) -
Product Categories
Reconstructive
Americas (1) (1) -
Europe (13) (11) (2)
Asia Pacific (2) (1) (1)
Total (5) (4) (1)
Knees
Americas (1) (1) -
Europe (11) (12) 1
Asia Pacific (3) (4) 1
Total (4) (4) -
Hips
Americas (3) (1) (2)
Europe (14) (10) (4)
Asia Pacific (2) 1 (3)
Total (7) (4) (3)
Extremities 10 (3) 13
Dental (13) (3) (10)
Trauma 4 (2) 6
Spine 21 (3) 24
OSP and other (5) (1) (4)
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Three Months Ended September 30, 2009 and 2008
(in millions, unaudited)
Three Months
Ended September 30,
-----------
2009 2008
---- ----
Net Earnings $149.9 $214.7
Inventory step- up 2.9 1.4
Certain claims 35.0 47.5
Acquisition, integration, realignment
and other 22.2 5.6
Taxes on inventory step-up, certain
claims and acquisition, integration,
realignment and other (21.7) (19.9)
Tax benefit from civil settlement - (30.8)
--- -----
Adjusted Net Earnings $188.3 $218.5
====== ======
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Nine Months Ended September 30, 2009 and 2008
(in millions, unaudited)
Nine Months
Ended September 30,
------------
2009 2008
---- ----
Net Earnings $562.2 $681.1
Inventory step-up 9.9 3.2
Certain claims 35.0 47.5
Acquisition, integration, realignment
and other 65.7 25.4
Net curtailment and settlement (32.1) -
Taxes on inventory step-up, certain
claims, acquisition, integration,
realignment and other and net
curtailment and settlement (26.9) (26.7)
Tax benefit from civil settlement - (30.8)
--- -----
Adjusted Net Earnings $613.8 $699.7
====== ======
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Three Months Ended September 30, 2009 and 2008
(unaudited)
Three Months
Ended September 30,
-----------
2009 2008
---- ----
Diluted EPS $0.70 $0.95
Inventory step-up 0.02 0.01
Certain claims 0.16 0.21
Acquisition, integration,
realignment and other 0.10 0.03
Taxes on inventory step-up, Certain
claims and acquisition, integration,
realignment and other (0.10) (0.10)
Tax benefit from civil settlement - (0.13)
--- -----
Adjusted Diluted EPS $0.88 $0.97
===== =====
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Nine Months Ended September 30, 2009 and 2008
(unaudited)
Nine Months
Ended September 30,
-----------
2009 2008
---- ----
Diluted EPS $2.59 $2.97
Inventory step-up 0.04 0.01
Certain claims 0.16 0.21
Acquisition, integration,
realignment and other 0.30 0.11
Net curtailment and settlement (0.15) -
Taxes on inventory step-up,
certain claims, acquisition,
integration, realignment and
other and net curtailment
and settlement (0.12) (0.12)
Tax benefit from civil settlement - (0.13)
--- -----
Adjusted Diluted EPS $2.82 $3.05
===== =====
ZIMMER HOLDINGS, INC.
Reconciliation of Operating Profit to Adjusted Operating Profit
For the Three Months Ended September 30, 2009 and 2008
(unaudited)
Three Months
Ended September 30,
------------
2009 2008
---- ----
Operating Profit $204.0 $210.3
Inventory step-up 2.9 1.4
Certain claims 35.0 47.5
Acquisition, integration, realignment and other 22.2 5.6
---- ---
Adjusted Operating Profit $264.1 $264.8
====== ======
ZIMMER HOLDINGS, INC.
Reconciliation of Operating Profit to Adjusted Operating Profit
For the Nine Months Ended September 30, 2009 and 2008
(unaudited)
Nine Months
Ended September 30,
-----------
2009 2008
---- ----
Operating Profit $780.3 $850.3
Inventory step-up 9.9 3.2
Certain claims 35.0 47.5
Acquisition, integration, realignment and other 65.7 25.4
Net curtailment and settlement (32.1) -
----- -----
Adjusted Operating Profit $858.8 $926.4
====== ======
ZIMMER HOLDINGS, INC.
Reconciliation of 2009 Projected Diluted EPS
and Projected Adjusted Diluted EPS
(unaudited)
Projected Twelve Months Ended December 31, 2009: Low High
--- ----
Diluted EPS $3.59 $3.74
Inventory step-up 0.05 0.05
Certain claims 0.16 0.16
Acquisition, integration, realignment and other 0.35 0.35
Net curtailment and settlement (0.15) (0.15)
Taxes on inventory step-up, certain claims,
acquisition, integration, realignment and other
and net curtailment and settlement (0.15) (0.15)
----- -----
Adjusted Diluted EPS $3.85 $4.00
===== =====
SOURCE Zimmer Holdings, Inc.
http://www.zimmer.com
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